As filed with the Securities and Exchange Commission on January 31, 2000
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------------
CLICKACTION INC.
(Exact name of registrant as specified in its charter)
Delaware 77-0195362
(State of Incorporation) (I.R.S. Employer Identification No.)
2197 EAST BAYSHORE ROAD
PALO ALTO, CA 94303
(650) 473-3600
(Address, including zip code, and telephone number, including area code of
Registrant's principal executive offices)
--------------
GREGORY W. SLAYTON
CLICKACTION INC.
2197 EAST BAYSHORE ROAD
PALO ALTO, CA 94303
(650) 473-3600
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
--------------
Copies to:
JAMES C. KITCH, ESQ.
COOLEY GODWARD LLP
FIVE PALO ALTO SQUARE
3000 EL CAMINO REAL
PALO ALTO, CA 94306
(650) 843-5000
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number
of the earlier effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Title of
Class of Proposed Maximum Proposed Maximum
Securities to Amount to be Offering Price Aggregate Offering Amount of
be Registered Registered per Share (1) Price (1) Registration Fee
- ------------- ------------ ---------------- ------------------ ----------------
Common stock, 363,402 $29.062 $10,561,188.92 $2,788.15
$.001 par
value
- ------------- ------------ ---------------- ------------------ ----------------
(1) Estimated solely for the purpose of calculating the registration fee
based on the average of the high and low sales prices of the Common stock on
the Nasdaq National Market on January 25, 2000.
===============================================================================
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
SUBJECT TO COMPLETION, DATED JANUARY 31, 2000
PROSPECTUS
363,402 SHARES
CLICKACTION INC.
COMMON STOCK
OFFERED BY CERTAIN SELLING STOCKHOLDERS
The Selling Stockholders: The selling stockholders identified in this
prospectus are selling 363,402 shares of our
common stock. All of these shares of common stock
were issued to the selling stockholders by us in
connection with our acquisition of MarketHome.
We are not selling any shares of our common stock
under this prospectus and will not receive any of
the proceeds from the sale of shares by the
selling stockholders.
Offering Price: The selling stockholders may sell the shares of
common stock described in this prospectus in a
number of different ways and at varying prices.
We provide more information about how the selling
shareholders may sell their shares in the section
titled "Plan of Distribution" on page 11.
Trading Market: Our common stock is listed on the Nasdaq National
Market under the symbol "CLAC." On January 25, 2000,
the closing sale price of our common stock, as
reported on the Nasdaq National Market, was $29.00.
Risks: Investing in our common stock involves a high
degree of risk. See "Risk Factors" beginning on
page 3.
The shares offered or sold under this prospectus have not been approved by the
Securities and Exchange Commission or any state securities commission, nor
have these organizations determined that this prospectus is accurate or
complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is January 31, 2000
[FN] The information in this prospectus is not complete and may be changed.
These securities may not be sold nor may offers to buy be accepted until the
registration statement filed with the Securities and Exchange Commission becomes
effective. This prospectus is not an offer to sell these securities and is not
soliciting offers to buy these securities in any state where the offer or sale
is not permitted. The information in this prospectus is not complete and may be
changed. These securities may not be sold nor may offers to buy be accepted
until the registration statement filed with the Securities and Exchange
Commission becomes effective. This prospectus is not an offer to sell these
securities and is not soliciting offers to buy these securities in any state
where the offer or sale is not permitted.
<PAGE>
TABLE OF CONTENTS
PAGE
PROSPECTUS SUMMARY 1
RISK FACTORS 1
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 9
WHERE YOU CAN GET MORE INFORMATION 9
USE OF PROCEEDS 9
SELLING STOCKHOLDERS 10
PLAN OF DISTRIBUTION 11
LEGAL MATTERS 11
EXPERTS 11
INDEX TO CONSOLIDATED FINANCIAL STATMENTS F-1
Our web site address is www.clickaction.com. Information contained in our
web site is not a part of this prospectus
********************************************************************************
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from
that contained in this prospectus. The selling stockholders are offering to
sell and seeking offers to buy the shares only in jurisdictions where offers
and sales are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus.
<PAGE>
PROSPECTUS SUMMARY
The following is a short summary of our business. You should carefully read
the "Risk Factors" section of this prospectus and our Annual Report on
Form 10-KSB for the year ended December 31, 1998 for more information on our
business and the risks involved in investing in our stock. In addition to the
historical information contained in this prospectus, this prospectus contains
forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act that involve risks and
uncertainties. Our actual results could differ materially from our
expectations. Factors that could cause or contribute to such differences are
discussed in "Risk Factors" below and in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business" in
our Annual Report.
ClickAction 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. In August 1999, ClickAction
acquired Market Home, an Internet e-mail marketing campaign management
company, and started to shift our focus to web-based email marketing products
and services. Headquartered in Palo Alto, California, we were founded in
1986 and completed our initial public offering in June 1995. We changed our
name from MySoftware Company to ClickAction Inc. in September 1999.
We are a Delaware corporation. Our principal offices are located at 2197
East Bayshore Road, Palo Alto, CA 94303, and our telephone number is
(650) 473-3600. In this prospectus, "ClickAction," "we" and "our" refer to
ClickAction Inc. unless the context otherwise requires.
RISK FACTORS
You should carefully consider the following risk factors and warnings before
making an investment decision. The risks described below are not the only
risks we face. Additional risks that we do not yet know of or that we
currently think are immaterial may also impair our business operations. If
any of the events or circumstances described in the following risks actually
occurs, our business, financial condition, or results of operations could be
materially adversely affected. In such case, the trading price of our common
stock could decline, and you may lose all or part of your investment. You
should also refer to the other information set forth in this prospectus,
including our financial statements and the related notes.
WE COMPETE IN AN EMERGING MARKET AND WE DO NOT KNOW IF OUR EXISTING OR FUTURE
PRODUCTS AND SERVICES WILL BE ACCEPTED
Our success depends on the market acceptance of our new and existing products
and services. The majority of our current revenues derive from the sale of
task-specific software applications for small businesses through the retail
channel. The emergence of the Internet and on-line e-commerce makes it
difficult to predict with any assurance the future size of this market. Our
focus on a small number of core products heightens exposure to market
development and product acceptance risks. In addition, there also can be no
assurance that our existing products will achieve broad-based market
acceptance, that sales of such products will continue at historical rates or
that we will introduce new products that achieve significant market
acceptance in the future.
Our success increasingly depends upon our ability to secure arrangements
with OEM partners that distribute our products and services as well
as provide us other strategic benefits. These relationships allow us to
generate additional revenues, expand our target market for our products
and services, and build awareness of the ClickAction and MySoftware
brands. The market for these relationships is highly competitive, and
there can be no assurance that we will be successful in sustaining
existing relationships or creating new relationships in the future.
Our strategy of transitioning ClickAction to an e-mail marketing campaign
management company is very risky and untested due to the limited operating
history of the management team and the emerging nature of the emarketing
industry. The Internet market is highly competitive with many well-funded
companies and this service is relatively new to most of our clients.
There is no assurance that we can successfully execute our plan of
continuously developing new technology ahead of our competitors,
retaining our existing enterprise clients, or acquiring new clients.
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OUR SUCCESS DEPENDS ON OUR TIMELY DEVELOPMENT OF NEW PRODUCTS AND SEVICES
We believe that our future success depends in large part upon our
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 our existing
products and services and introducing new products and services on a
timely basis. If we are unable to develop such products or services
in a timely manner due to resource constraints or technological or
other reasons, this inability could have a material adverse effect on
our business. Failure to develop and introduce new products and services
in a timely fashion could have a material adverse effect on our business.
OUR SUCCESS DEPENDS ON POSTAL REGULATIONS AND AVAILABILITY OF POSTAL
INFORMATION
Our line of mailing products, which in the aggregate accounted for 15%
of our net revenues in 1998, have been developed based on current 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 our operating results. We license 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 we will be able to maintain
or renew our relationship with this third party or that the code and
information we license will be error free or perform to our specifications
or in accordance with Postal Service regulations. Significant changes
in Postal Service regulations or the inability to maintain or renew
our relations with the independent party on acceptable terms or at all
could have a material adverse effect on our business and prospects. We
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
we 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 our business.
FLUCTUATIONS IN OPERATING RESULTS MAY AFFECT OUR BUSINESS
We have historically experienced, and may continue to experience,
significant fluctuations in the operating results of our desktop
software products 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;
* the timing and number of product enhancements and new product and
services introductions by us and our competitors;
* the timing and delivery of partnership arrangements;
* product returns;
* changes in pricing policies by us and our 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.
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We believe that revenue fluctuations with respect to our new email
marketing services will follow the revenue fluctuations of the
traditional direct marketing industry. However, our management has
limited operating history and is not able to predict the effects of
these fluctuations on our quarterly operating results. Furthermore, a
significant portion of our 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 our expectations
in any given quarter, operating results may be materially adversely
affected. In response to competitive pressure, we may also take certain
pricing or marketing actions that could have a material adverse effect
on our business. There can be no assurance that we will achieve consistent
profitability on a quarterly or annual basis.
WE EXPECT TO INCUR SIGNIFICANT FUTURE OPERATING LOSSES AS A RESULT OF OUR
STRATEGIC TRANSITION
Following the MarketHome acquisition in August 1999, we began to shift
our strategic focus to web-based email marketing products and
services. We intend to invest in the development, sales and marketing
of such e-marketing web-based products and services. Due to the such
shift in strategy and investment in the web-based products and services,
our management is anticipating operating losses in the near future. Our
management does not have past experience in email marketing. There is
no assurance that we can grow the email marketing revenues as planned
or that we will achieve profitability in the future. In addition, we
expect that our development, sales and marketing, system and administrative
expenses will increase significantly in the future. Failure to increase
our revenues to achieve or sustain profitability in the future could
have a material adverse effect on our business and operations.
As a result of our recent acquisition and our investment in the new
web-based products and services, we have experienced negative cash
flows from operations in fiscal year 1999. We are currently in the
process of evaluating various financing options and our overall financing
strategy. The failure to establish a solid financing strategy could
adversely affect the execution of our new strategy and could have a
material adverse effect on our operations.
WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY
The market for our 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.
Our desktop products compete with the task-specific products sold by several
other companies of varying size and financial and marketing strength, including:
* Avery's labeling software;
* Intuit's invoicing and estimating software; and
* Mattel's business card, labeling and marketing material software.
Our desktop 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. We believe
that we would face increased competition from such general purpose programs
if such programs were designed for greater ease-of-use of task-specific
functions. There can be no assurance that we 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 our
business and financial performance.
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Our prospecting web services compete with the similar services provided
by some large data providers, such as InfoUSA, iMarketinc, I-Rent-America,
and Dun & Bradstreet. We believe that we will face increased competition
from similar web services provided by other data companies like Acxiom,
First Data and Experian. We started offering our prospecting web
services in December 1998 and expect to see increased competition from
other larger data companies in the very near future. There can be no
assurance that we will have the resources required to successfully
drive traffic to our prospecting web site or to convert such web site
traffic into revenues.
We have experienced and expect to continue to face intense competition
in the email marketing campaign services. The current competitors
include but are not limited to: Digital Impact, MessageMedia, Kana
Communications, Exactis.com, Media Synergy and Responsys.com, as well
as in-house information technology departments of existing and
prospective clients. Potentially, we may compete in the future with
Internet service providers, advertising and direct marketing agencies
and other large established companies like Double Click, America Online,
Microsoft and Yahoo!. Many of the companies with which we currently
compete, 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 we do. These potential
competitors may also choose to enter the market by acquiring one of the
existing competitors or by forming strategic alliances with these
competitors, which could adversely affect our ability to compete.
OUR SUCCESS DEPENDS ON LIMITED DISTRIBUTION AND RETAIL CHANNELS FOR DESKTOP
SOFTWARE
Sales to a limited number of distributors and retailers have constituted,
and are anticipated to continue to constitute, a significant share of our
net revenues from desktop software. Some distributors control access to
shelf space of certain retailers, and termination of our relationship
with a particular distributor may prevent us from obtaining shelf space
in some retail outlets. There can be no assurance that such retailers
will continue to purchase our products or provide our products with high
quality and adequate levels of shelf space and promotional support. We
have nonexclusive arrangements with our distributors and retailers which
generally do not require minimum purchases of our 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. Our success with the desktop software will depend, in part,
upon our ability to maintain access to existing channels of distribution
and gain access to new channels if and when they develop.
OUR SUCCESS DEPENDS ON THE INTERNET
The success of our new emarketing strategy and Internet services may rely
on the demand for such new evolving services. Our email marketing services
are very different from the traditional direct marketing methods that
many of our clients have used. Demand for our email marketing services
may not materialize because:
* businesses may not adopt the email marketing strategy and method due
to their substantial investment and resources in their traditional and
established marketing methods;
* consumers may not accept email emarketing messages;
* the consumer confusion between permission-based email services and
unsolicited commercial email may influence businesses not to use
emarketing services as a marketing tool;
* The effectiveness of email marketing campaign may diminish significantly
if the volume of email direct marketing saturates consumers.
The failure to grow our email marketing services could result in lower
revenues and could have a material adverse effect on our financial position.
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OUR SUCCESS DEPENDS ON SALES TO A LIMITED NUMBER OF RETAILERS AND DISTRIBUTORS
AND OUR ABILITY TO COLLECT RECEIVABLES
We sell our desktop 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 our
net revenues. In 1998, one distributor accounted for 37% of net revenues,
and one retailer accounted for 15% of net revenues. None of our
distributors or retailers has a minimum purchase obligation. The loss
of, or significant reduction in, sales volume attributable to any of our
principal distributors or retail accounts could materially and adversely
affect our business. In addition, a majority of our software sales are
made through retailers. We could be adversely affected if an alternative
channel for distribution of software were to become a major vehicle for
distributing software.
Our sales are made on credit terms, and we do not hold collateral to
secure payment. Although we currently maintain accounts receivable insurance
that covers a portion of its accounts, there can be no assurance that we 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 our financial results.
OUR BUSINESS COULD SUFFER IF THERE ARE SIGNIFICANT PRODUCT RETURNS
We have various stock balancing terms with distributors and retailers that
allow distributors and retailers certain rights to return our desktop
products. There can be no assurance that retailers and distributors will not
seek and obtain additional return and credit rights. We also provide end-users
with a 30-day money-back guarantee. Accordingly, we are 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. We establish
allowances based on estimated future returns of products, taking into account
promotional activities, the timing of new product introductions, distributor
and retailer inventories of our products, and other factors. Product returns
that exceed our allowances could adversely affect our operating results and
financial condition.
OUR BUSINESS DEPENDS ON EXTERNAL CODING CONTRACTORS AND LICENSORS
We generally develop internally the specifications for both new products and
updates of our existing products. From time to time, we also license
third-party products that are complementary to our core product line strategy.
In addition to our own development team, we also use an independent firm to
help the coding on our email marketing system. While we generally own the
code that is developed by these firms, the base code used in developing our
brochures and business cards products is owned by the third-party coder.
With respect to these products, we hold 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 our interests or that
third-party coders will not develop or market products that compete
with our products or services. As independent coders are in high demand,
there can be no assurance that independent coders, including those who
have developed products for us in the past, will be available to
provide coding services to us in the future. There can be no assurance
that we will be able to obtain or renew such coding or licensing
agreements on favorable terms, or at all.
We are highly dependent on technologies we license from companies
like Oracle and others which enable us to send email through the
Internet and allow us to offer a variety of data base management and
targeted marketing capabilities. The emarketing is rapidly evolving,
we may need to license additional technologies to remain competitive.
There is no assurance that we may be able to license these
technologies on commercially reasonable terms or at all. The failure
to license such technologies could adversely affect our business
and operations.
OUR BUSINESS DEPENDS ON THIRD-PARTY SERVICE PROVIDERS, SUPPLIES AND FACILITIES
For our desktop products, we rely on external service providers to
perform most of our customer technical support and product assembly
functions. One independent firm provides substantially all customer
technical support for our software products. Our 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
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factors will not result in termination by such contractor of our
relationship. The unavailability of such firm to perform customer
technical support for us would result in significant disruption to
our operations, could lead to customer dissatisfaction and could have
a material adverse effect on our business and operations. We rely
on two printers for packaging and two assembly houses to assemble
and package our products and have only limited sources for some of
our supplies. We do not have contracts with such assembly houses or
suppliers. All of our inventory of packaging components is maintained
at third-party facilities. Our ability to assemble and package our
products depends on continued relationships with these third parties.
The failure of such third-party vendors to continue to provide
supplies and services to us on a timely basis could adversely
affect our business.
Our email marketing data center and hardware system, which is
critical to our email campaign management operations, is located at
facilities provided by a third party. Our operations rely on the
third party's ability to protect our data center and hardware system
from damage or interruption caused by human error, computer viruses,
sabotage, break-ins, intentional acts and other similar incidents.
There is no assurance that this third party is able to adequately
protect our data center and hardware system or prevent interruptions
of delivering our email campaign services. Failure to maintain and
protect our data center and hardware system will have a material
adverse effect on our business and we may lose our clients. Furthermore,
our data center and hardware system are vulnerable to damage caused
by natural disaster like earthquakes, flood, fire, power loss,
telecommunication failures, and other similar events. There is no
assurance that we can execute a timely repair from the damage caused
by any of these events so that clients' email campaign will not be
interrupted. Failure to provide the uninterrupted email services under
this circumstance may have a material adverse effect on our business
and may cause us to lose clients. Finally, there is no assurance that
we are able to safeguard the data confidential information in our data
center and prevent unauthorized individuals from gaining access to this
data center. Failure to prevent unauthorized access to our servers
could cause misappropriation of confidential customer information and
could have a material adverse effect on our reputation and business.
OUR BUSINESS COULD SUFFER AS A RESULT OF OUR CLIENTS' EMARKETING ACTIVITIES
To the extent that our clients' promotion of their products and
services are not compliant with Federal, state and local laws, we
may be exposed to liability under such laws. In addition, our email
marketing services involve the transmission of information designed
by our clients through Internet. There is no assurance that we may
not be exposed to the transmission of any offensive or negative messages,
harmful applications, unauthorized reproduction of copyrighted material,
inaccurate information or computer viruses to end-users in the
transmission process. Failure to prevent transmitting any kind of
this data or information could expose us to major legal claims and
liability and could have a material adverse effect on our reputation
and business.
WE ARE AT RISK OF UNCERTAINITIES AND CHANGES OF THE LAW AND REGULATIONS IN
EMARKETING
Several states have passed legislation to restrict the sending
of unsolicited commercial email. The federal government and several
other states are considering, or have considered, adopting similar
legislation. Presently, we have been sending out the permission,
opt-in emails only. However, due to the increasing use of the Internet and
emarketing promotion, it is likely that additional laws and regulations may
be enacted to cover additional issues including copyrights, content,
privacy and consumer protection. There is no assurance that the
adoption of any additional laws or regulations may not affect the
growth of our emarketing business and operations or that such adoption
may not have a material adverse effect on our financial results.
OUR SUCCESS DEPENDS ON KEY PERSONNEL
Our success depends to a significant extent on the performance and
continued service of our 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 we will be successful in
attracting and retaining such personnel. In addition, there can be
no assurance that our employees will not leave or, after leaving,
compete against us. Our failure to attract additional qualified
employees or to retain the services of key personnel could have a
material adverse effect on our performance.
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WE MAY NOT BE ABLE TO MANAGE OUR GROWTH AND IMPLEMENT OUR NEW STRATEGY
We have experienced periods of growth that have placed, and could
continue to place, a significant strain on our financial,
management, and other resources. We may attempt to hire additional
key personnel in high level management positions in the future.
Our ability to manage growth and execute our new strategy into the
email marketing business effectively will require us to continue
to improve our operations and financial management information
systems, and to attract, train, motivate, manage, and retain key
employees. If our management is unable to manage growth or execute
our emarketing strategy effectively, our business operations could
be adversely affected.
The success of our emarketing strategy relies on our ability to provide
satisfactory services to our clients and keep pace with their demands.
There is no assurance that we are able to add client services personnel to
enhance our services. Failure to meet our clients' demands for the emarketing
services will have a material adverse effect on our business. In addition,
the success of our emarketing strategy also depends on our ability to
successfully deliver emails over the Internet through Internet service
providers and recipients in major corporations. There is no assurance that
our email delivery will not be blocked or our email delivery technology will
be compatible with the technologies of the Internet service providers. The
failure to successfully deliver the email messages for our clients may cause
our clients to discontinue their use of our email campaign services and will
have a material adverse effect on our emarketing strategy and business.
OUR LIMITED PROTECTION OF INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS MAY
AFFECT OUR BUSINESS
We rely primarily on a combination of trademarks, copyright and trade
secret laws, employee and third-party nondisclosure agreements and other
methods to protect our proprietary rights. We do not include in our 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 our products were to occur, our business 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 us 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
our third-party coders or licensors were to use infringing code
in our products, we could be required to pay damages or be subject
to an injunction to prevent us from shipping our products. The
third-party coders' liability to us for any infringement of copyrights, trade
secrets, or patents is contractually limited to amounts received from us.
Although we have 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 in our
industry. 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 our business and prospects. Adverse determinations in such
claims or litigation could also have a material adverse effect our business.
WE ARE AT RISK OF YEAR 2000 ISSUES
As of January 21, 2000, we had not experienced any Year 2000-related
disruption in the operation of our systems. Although most Year 2000 problems
should have become evident on January 1, 2000, additional Year 2000-related
problems may become evident only after that day.
WE ARE AT RISK OF POTENTIAL STOCK PRICE VOLATILITY
We believe factors such as the following may cause the market price of our
common stock to fluctuate, perhaps substantially:
* quarterly fluctuations in our revenues or results of operations;
* general conditions in the computer hardware, software and
Internet industries;
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* announcements of new products and services by us or by or
competitors; and
* announcements of alliance or partnership by us or by our
competitors.
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 our common stock.
WE HAVE IMPLEMENTED ANTI-TAKEOVER PROVISIONS THAT COULD DELAY OR PREVENT A
CHANGE IN CONTROL
Our 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 our 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 our outstanding voting stock. In addition, we
are subject to anti-takeover provisions of Section 203 of the Delaware
General Corporation Law, which prohibits us 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 ClickAction. Certain other provisions of
our certificate of incorporation may have the effect of delaying or
preventing changes in control or management, which could adversely
affect the market price of our common stock. In addition, in June 1998 our
board of directors adopted a share purchase rights plan, or poison pill. This
poison pill could have the effect of discouraging, delaying or preventing an
acquisition of ClickAction.
8
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus and the documents incorporated by
reference are forward-looking statements. These statements involve known and
unknown risks, uncertainties, and other factors that may cause our or our
industry's results, levels of activity, performance, or achievements to be
materially different from any future results, levels of activity, performance,
or achievements expressed or implied by such forward-looking statements.
These factors include, among others, those listed under "risk factors" and in
the documents incorporated by reference.
In some cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "expects," "plans," "anticipates," "believes,
" "estimates," "predicts," "potential," "or "continue" or the negative of
such terms or other comparable terminology. Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, events, levels of activity, performance
or achievements. We do not assume responsibility for the accuracy and
completeness of the forward-looking statements. We do not intend to update
any of the forward-looking statements after the date of this prospectus to
conform them to actual results.
WHERE YOU CAN GET MORE INFORMATION
We are a reporting company and file annual, quarterly and current reports,
proxy statements and other information with the Securities and Exchange
Commission (the "SEC"). You may read and copy these reports, proxy statements
and other information at the SEC's public reference rooms in Washington, DC,
New York, NY and Chicago, IL. You can request copies of these documents by
writing to the SEC and paying a fee for the copying cost. Please call the SEC
at 1-800-SEC-0330 for more information about the operation of the public
reference rooms. Our SEC filings are also available at the SEC's web site at
"http://www.sec.gov." In addition, you can read and copy our SEC filings at
the office of the National Association of Securities Dealers, Inc. at 1735
"K" Street, Washington, DC 20006.
The SEC allows us to "incorporate by reference" information that we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference
is an important part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings
we will make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
* Annual Report on Form 10-KSB for the year ended December 31, 1998;
* Proxy Statement for the annual meeting of stockholders held on May 19, 1999;
* Current Report on Form 8-K filed September 21, 1999; and
* The description of the common stock contained in ClickAction's Registration
Statement on Form S-1, as filed on June 6, 1995 with the SEC under the
Securities Exchange Act of 1934.
You may request a copy of these filings at no cost, by writing, telephoning or
e-mailing us at the following address:
ClickAction Inc.
2197 East Bayshore Road
Palo Alto, CA 94303
(650) 473-3600
This prospectus is part of a Registration Statement we filed with the SEC.
You should rely only on the information incorporated by reference or provided
in this prospectus and the Registration Statement.
USE OF PROCEEDS
We will not receive any proceeds from the sale of common stock by the
selling shareholders in the offering.
9
<PAGE>
SELLING STOCKHOLDERS
In connection with our acquisition of MarketHome, we sold to the selling
stockholders common stock and agreed to register the common stock to those
selling stockholders for resale. Our registration of the shares of common
stock does not necessarily mean that the selling stockholders will sell all
or any of the shares.
The following table sets forth certain information regarding the beneficial
ownership of the common stock, as of December 15, 1999, by each of the selling
stockholders.
The information provided in the table below with respect to each selling
stockholder has been obtained from such selling stockholder. Except as
otherwise disclosed below, none of the selling stockholders has, or within
the past three years has had, any position, office or other material
relationship with ClickAction. Because the selling stockholders may sell all
or some portion of the shares of common stock beneficially owned by them, we
cannot estimate the number of shares of common stock that will be beneficially
owned by the selling stockholders after this offering. In addition, the
selling stockholders may have sold, transferred or otherwise disposed of, or
may sell, transfer or otherwise dispose of, at any time or from time to time
since the date on which they provided the information regarding the shares of
common stock beneficially owned by them, all or a portion of the shares of
common stock beneficially owned by them in transactions exempt from the
registration requirements of the Securities Act of 1933.
Beneficial ownership is determined in accordance with Rule 13d-3(d)
promulgated by the SEC under the Securities Exchange Act of 1934, as amended.
Shares of common stock issuable pursuant to options, warrants and convertible
securities, to the extent such securities are currently exercisable or
convertible within 60 days of December 15, 1999, are treated as outstanding
for computing the percentage of the person holding such securities but are
not treated as outstanding for computing the percentage of any other person.
Unless otherwise noted, each person or group identified possesses sole voting
and investment power with respect to shares, subject to community property
laws where applicable. Shares not outstanding but deemed beneficially owned
by virtue of the right of a person or group to acquire them within 60 days
are treated as outstanding only for purposes of determining the number of and
percent owned by such person or group. Applicable percentages are based on
5,309,559 shares outstanding on December 15, 1999 adjusted as required by rules
promulgated by the SEC.
<TABLE>
<CAPTION>
Shares Beneficially Owned
Prior to Offering
Shares
Selling Stockholder Owned Percent Shares Being Offered
- ----------------------------- -------- --------- --------------------
<S> <C> <C> <C>
Jim Williams 218,100 4.1% 109,050
Gregory Slyaton (1) 217,057 3.9% 4,434
Interactive Minds Ventures LP 135,244 2.8% 67,622
Love Captial Partners, L.P. 98,295 1.9% 49,148
Trilogy Limited, L.P. 78,335 1.5% 39,168
David Hehman 64,909 1.2% 32,455
Slayton Capital 28,982 * 14,491
Robertson Stephens Premium
Partners L.P. 23,556 * 11,778
Peterson Ventures I, LLC 21,062 * 10,531
Robertson Stephens Emerging
Growth Partners L.P. 18,569 * 9,284
Bozena and Serge Ivashenko 13,143 * 6,572
Howard Love (2) 8,870 * 4,435
Stuart Knowles and Ann Knowles 8,869 * 4,434
(1) Includes 208,188 shares exercisable within 60 days from Decembe 15, 1999.
(2) Includes 2,916 shares exercisable within 60 days from Decemeber 15, 1999.
</TABLE>
10
<PAGE>
PLAN OF DISTRIBUTION
The shares of common stock offered by the selling stockholders or by
their pledgees, transferees, or other successors in interest, may be sold
from time to time to purchasers directly by any of the selling stockholders
acting as principal for its own account in one or more transactions at a
fixed price, which may be changed, or at varying prices determined at the
time of sale or at negotiated prices. Alternatively, any of the selling
stockholders may from time to time offer the common stock through
underwriters, dealers or agents who may receive compensation in the form of
underwriting discounts, commissions or concessions from the selling
stockholders and/or the purchasers of shares for whom they may act as agent.
Sales may be made on the Nasdaq National Market or in private transactions.
In addition to sales of common stock pursuant to the registration statement
of which this prospectus is a part, the selling stockholders may sell such
common stock in compliance with Rule 144 promulgated under the Securities Act
of 1933, as amended (the "Act").
The selling stockholders and any agents, broker-dealers or underwriters
that participate in the distribution of the common stock offered hereby may
be deemed to be underwriters within the meaning of the Act, and any discounts,
commissions or concessions received by them and any profit on the resale of
the common stock purchased by them might be deemed to be underwriting discounts
and commissions under the Act.
In order to comply with the securities laws of certain states, if
applicable, the common stock may be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states
the common stock may not be sold unless it has been registered or qualified
for sale or an exemption from registration or qualification requirements is
available and is complied with.
In connection with our acquisition of MarketHome, we have agreed to
register the selling stockholders' common stock under applicable federal and
state securities laws under certain circumstances and at certain times. We
will pay substantially all of the expenses incident to the offering and sale
of the common stock to the public, other than commissions, concessions and
discounts of underwriters, dealers or agents. Such expenses (excluding such
commissions and discounts) are estimated to be $52,556.15. The agreements
related to the above referenced acquisition provide for cross-indemnification of
the selling stockholders and ClickAction to the extent permitted by law, for
losses, claims, damages, liabilities and expenses arising, under certain
circumstances, out of any registration of the common stock.
LEGAL MATTERS
The validity of the issuance of the common stock offered hereby will be
passed upon for ClickAction by Cooley Godward LLP, Palo Alto, California.
EXPERTS
The consolidated financial statements of ClickAction Inc.(formerly known as
MySoftware Company) and subsidiary as of December 31, 1998 and 1997, and for
each of the years in the three year period ended December 31, 1998 have been
included in this registration statement in reliance upon the report of KPMG
LLP, independent certified public accountants, appearing elsewhere herein, and
upon the authority of said firm as experts in accounting and auditing.
11
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
The financial statements included in this section are as follows:
Sequentially
Numbered
Financial Statement Description Page
- ------------------------------- ------------
Independent Auditors' Report F-2
Consolidated Balance Sheets F-3
December 31, 1998 and 1997
Consolidated Statements of Operations F-4
Years Ended December 31, 1998, 1997 and 1996
Consolidated Statements of Stockholders' Equity F-5
Years Ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows F-6
Years Ended December 31, 1998, 1997, and 1996
Notes to Financial Statements F-7
F-1
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
ClickAction Inc. and subsidiary:
We have audited the accompanying consolidated balance sheets of ClickAction Inc.
(formerly known as MySoftware Company). and subsidiary as of December 31, 1998
and 1997 and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ClickAction Inc. and
subsidiary as of December 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the years in the three-year period ended
December 31, 1998, in conformity with generally accepted accounting principles.
/s/KPMG LLP
--------------
Mountain View, California
January 31, 2000
F-2
<PAGE>
<TABLE>
<CAPTION>
ClickAction Inc. and Subsidiary
Consolidated Balance Sheets
December 31,
---------------------
1998 1997
----------- ----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 5,440,445 $ 5,035,828
Accounts receivable, net 3,361,373 1,031,286
Inventories 265,605 620,781
Other current assets 132,523 1,019,089
----------- -----------
Total current assets 9,199,946 7,706,984
Property and equipment, net 217,360 278,287
Other assets 619,265 674,131
----------- -----------
Total assets $10,036,571 $ 8,659,402
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,126,587 $ 852,737
Accrued compensation 459,663 464,379
Other accrued liabilities 2,189,320 2,656,621
Deferred revenue 599,006 ----
----------- -----------
Total current liabilities 4,374,576 3,973,737
Stockholders' equity:
Preferred stock: $0.001 par value; 2,132,399
shares authorized; 132,399 and none issued and
outstanding, respectively 132 ----
Common stock: $0.001 par value; 20,000,000
shares authorized; 4,741,959 and 4,453,966
shares issued and outstanding, respectively 4,742 4,454
Deferred compensation (249,375) ----
Additional paid-in capital 9,573,778 8,568,393
Accumulated deficit (3,667,282) (3,887,182)
------------ -----------
Total stockholders' equity 5,661,995 4,685,665
------------ -----------
Total liabilities and stockholders' equity $10,036,571 $ 8,659,402
=========== ===========
<FN> See accompanying notes to consolidated financial statements.
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
ClickAction Inc. and Subsidiary
Consolidated Statements of Operations
Years Ended December 31,
------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net revenues $15,044,637 $12,353,090 $12,872,575
Cost of revenues 4,200,746 5,737,570 3,951,241
----------- ----------- -----------
Gross profit 10,843,891 6,615,520 8,921,334
----------- ----------- -----------
Operating expenses:
Product development 1,997,355 2,221,712 1,988,881
Sales and marketing 6,149,935 6,356,201 6,270,939
General and administrative 2,678,934 2,190,461 1,831,183
Restructuring charge ----- 193,000 ----
Write-off of acquired technology ----- ---- 255,000
----------- ----------- -----------
Total operating expenses 10,826,224 10,961,374 10,346,003
----------- ----------- -----------
Operating income (loss) 17,667 (4,345,854) (1,424,669)
Interest income, net 238,860 309,240 397,586
----------- ----------- -----------
Income (loss) before taxes 256,527 (4,036,614) (1,027,083)
Income tax expense (benefit) 36,627 ---- ( 72,000)
----------- ----------- -----------
Net income (loss) $ 219,900 $(4,036,614) $ (955,083)
=========== ============ ===========
Basic net income (loss) per share $ 0.05 $ (0.94) $ (0.23)
=========== ============ ===========
Shares used in computing basic net
income (loss) per share 4,653,020 4,287,898 4,233,486
=========== ============ ===========
Diluted net income (loss) per share $ 0.04 $ (0.94) $ (0.23)
=========== ============ ===========
Shares used in computing diluted net
income (loss) per share 5,075,715 4,287,898 4,233,486
=========== ============ ===========
<FN> See accompanying notes to consolidated financial statements.
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
ClickAction Inc. and Subsidiary
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 1998, 1997 and 1996
Addit- Retained Total
Preferred Common ioanl Deferred Earnings Stock-
Stock Stock Paid-in Compen- (Accumulated holders'
Shares Amount Shares Amount Capital sation Deficit) Equity
- -------------------------------------------------------------------------------
<S> <C> <C> <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
Issuance of common stock
--- --- 218,100 218 --- --- --- 218
Exercise of stock options
--- --- 2,500 2 6,890 --- --- 6,892
Net loss
--- --- --- --- --- --- (4,036,614) (4,036,614)
------------------------------------------------------------------------
Balances as of December 31, 1997
--- --- 4,453,966 $4,454 8,568,393 --- (3,887,182) $4,685,665
Issuance of common stock
--- --- 64,909 65 15,352 --- --- 15,417
Issuance of preferred stock
132,399 $132 --- --- 299,868 --- --- 300,000
Exercise of stock options
--- --- 223,084 223 427,030 --- --- 427,253
Deferred compensation related to
officer stock bonus
--- --- --- --- 263,135 (263,135) --- ---
Amortization of deferred compensation
--- --- --- --- --- 13,760 --- 13,760
Net income
--- --- --- --- --- --- 219,900 219,900
----------------------------------------------------------------------------
Balances as of December 31, 1998
132,399 $132 4,741,959 $4,742 $9,573,778 $(249,375)$(3,667,282)$5,661,995
==============================================================================
<FN> See accompanying notes to consolidated financial statements.
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
ClickAction Inc. and Subsidiary
Consolidated Statements of Cash Flows
Years Ended December 31,
----------------------------------
Cash flows from operating activities: 1998 1997 1996
---------- ------------ ---------
<S> <C> <C> <C>
Net income (loss) $ 219,900 $(4,036,614) $(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 (1,726,321) 35,023 595,256
Inventories 355,176 (24,645) (147,623)
Other assets 878,919 (199,001) (667,438)
Accounts payable 273,850 123,270 (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 81,191 364,146 238,766
--------- ---------- ---------
Net cash provided by (used for)
operating activities 310,128 (1,344,023) 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 427,253 6,892 2
Proceeds from the sale of common stock 15,417 218 ---
Proceeds from the sale of preferred stock 300,000 --- ---
--------- ---------- ---------
Net cash provided by financing activities 742,670 7,110 2
--------- ---------- ---------
Net increase (decrease) in cash
and cash equivalents 404,617 (2,682,613) (75,883)
Cash and cash equivalents at
beginning of year 5,035,828 7,718,441 7,794,324
----------- ----------- ----------
Cash and cash equivalents at end of year $ 5,440,445 $ 5,035,828 $7,718,441
=========== =========== ==========
Noncash financing activities:
Deferred compensation related to
officer stock bonus $ 263,135 --- ---
=========== =========== ==========
<FN> See accompanying notes to consolidated financial statements.
</TABLE>
F-6
<PAGE>
ClickAction Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 1998, 1997 and 1996
1. Summary of Significant Accounting Policies
Nature of Business
ClickAction Inc. (formerly known as MySoftware Company) develops, manufactures
and markets small business application programs and internet services. The
Company sells its desktop products primarily through distributors and retail
dealers. In addition, the Company's wholly-owned subsidiary, Market Home,
provides email marketing services.
Principles of Presentation and Preparation
The accompanying consolidated financial statements include the accounts of
ClickAction and its wholly-owned subsidiary, Market Home (herein and after
Referred to as "the Company"). All significant intercompany accounts and
transactions have been eliminated in the consolidated financial statements.
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.
Business Combination
On August 5, 1999, ClickAction issued 726,803 shares of its common stock in
exchange for all outstanding common and preferred stock of Market Home. In
addition, options to acquire Market Home common stock were exchanged for
options to acquire 158,776 shares of ClickAction common stock. The business
combination has been accounted for as a pooling-of-interests combination and
accordingly the consolidated financial statements for period prior to the
combination have been restated to include the accounts and results of
operations of Market Home.
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.
F-7
<PAGE>
ClickAction Inc.
Notes to Consolidated Financial Statements, Continued
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.
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 typically
expenses the development costs related to its internet services and system
development.
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, estimted 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 $1,466,846 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 expense 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 of 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.
F-8
<PAGE>
ClickAction Inc.
Notes to Consolidated Financial Statements, Continued
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.
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 potential common stock using the treasury stock method, when dilutive.
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 4,653,020 4,287,898 4,233,486
Preferred stock (as converted) 66,200 --- ---
Stock options 356,495 --- ---
--------- --------- ---------
Weighted-average common shares used to
calculate diluted net income(loss) per share 5,075,715 4,287,898 4,233,486
========= ========= =========
</TABLE>
Market Home common and preferred shares are reported pursuant to the 13.7551 to
1 and 10.0704 to 1 exchange ratios, respectively, as specified in the July 2,
1999 merger agreement for all periods presented.
F-9
<PAGE>
ClickAction Inc.
Notes to Consolidated Financial Statements, Continued
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.
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.
2. Balance Sheet Components
Accounts Receivable
A summary of accounts receivable follows:
<TABLE>
<CAPTION>
December 31,
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
Accounts receivable $ 4,036,659 $ 2,310,338
Allowance for returns and doubtful accounts ( 675,286) (1,279,052)
------------ ------------
$ 3,361,373 $ 1,031,286
============ ============
</TABLE>
Other Current Assets
Other current assets consisted of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------
1998 1997
------------- ------------
<S> <C> <C>
Prepaid income taxes ---- $ 958,151
Other 132,523 60,938
------------- ------------
$ 132,523 $ 1,019,089
============= ============
</TABLE>
F-10
<PAGE>
ClickAction Inc.
Notes to Consolidated Financial Statements, Continued
Property and Equipment
Property and equipment are as follows:
<TABLE>
<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>
Other Assets
Other assets consisted of the following:
<TABLE>
<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>
Other Accrued Liabilities
A summary of other accrued liabilities follows:
<TABLE>
<CAPTION>
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 831,068 885,471
----------- ------------
$ 2,189,320 $ 2,656,621
=========== ============
</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 to the CEO as of December 31, 1998, the shares
have been disclosed as outstanding stock options with a zero exercise price in
the table below.
F-11
<PAGE>
ClickAction Inc.
Notes to Consolidated Financial Statements, Continued
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 under the NOSOP.
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.
F-12
<PAGE>
ClickAction Inc.
Notes to Consolidated Financial Statements, Continued
In 1999, The Company adopted the Market Home 1997 Stock Option Plan ("Market
Home Plan") through the Market Home acquisition. The Market Home Plan offered
the grant of incentive and non-qualified options to employees and consultants of
the Company. Options granted under the Market Home Plan generally vest over four
years and expire 10 years from the grant date. The Company granted 9,450 and
81,178 shares, respectively in 1997 and 1998 under the Market Home Plan.
Market Home common stock options, converted to ClickAction options following
the August 5, 1999 merger, the number and per share prices are reported
pursuant to the 13.7551 to 1.0 exchange ratio as specified in the merger
agreement for all periods presented.
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 593,450 2.44
Expired or canceled (103,557) 3.73
Exercised ( 2,500) 1.50
----------
Outstanding as of December 31, 1997 1,046,150 2.89
Granted 821,178 3.65
Expired or canceled (334,717) 4.30
Exercised (223,084) 1.95
----------
Outstanding as of December 31, 1998 1,309,527 3.16
==========
Available for grant at:
December 31, 1998 258,822
=========
</TABLE>
F-13
<PAGE>
ClickAction Inc.
Notes to Consolidated Financial Statements, Continued
The following table summarizes information about stock bonus and stock options
outstanding as of December 31, 1998:
<TABLE>
<CAPTION>
Outstanding Exercisable
- -------------------------------------- -------------------------------------
Weighted-Avg. Weighted- Weighted-
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Price Outstanding Life Price Exercisable Price
- ----------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$ 0.00 60,000 9.50 years $ 0.00 6,000 $ 0.00
0.28 9,450 8.75 0.28 2,951 0.28
1.50 46,000 6.50 1.50 46,000 1.50
1.80 - 2.75 549,314 8.90 2.49 200,824 2.52
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 1,309,527 9.05 $ 3.14 380,578 $ 3.17
</TABLE>
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 $ 219,900 $( 4,036,614) $ ( 955,083)
Pro forma (632,020) ( 4,522,946) (1,276,711)
Basic net income (loss) per share:
As reported $ 0.05 $ ( 0.94) $ ( 0.23)
Pro forma (0.14) ( 1.05) ( 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 $1.80, $1.26, 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.
F-14
<PAGE>
ClickAction Inc.
Notes to Consolidated Financial Statements, Continued
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.
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
Retail Annuity Retail Retail OEM Other Total
-------- ------- -------- -------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues $ 2,254 $ 1,790 $ 4,820 $ 2,681 $ 2,088 $ 1,411 $15,044
Cost of revenues 705 253 1,335 800 388 720 4,201
------- ------- ------- ------- ------- ------- --------
Gross profit 1,549 1,537 3,485 1,881 1,700 691 10,843
Segment operating
expenses 1,521 1,371 1,640 1,099 813 1,432 7,876
------- ------- ------- ------- ------- ------- --------
Segment profit (loss) $ 28 $ 166 $ 1,845 $ 782 $ 887 $ (741) 2,967
======= ======= ======= ======= ======= ========
General and administrative expenses (2,679)
Bonus expense not allocated to segments ( 270)
Interest income, net 238
--------
Income before taxes, as reported $ 256
========
</TABLE>
<TABLE>
<CAPTION>
Segment Information
For the year ended December 31, 1997
---------------------------------------------------
Mailing Mail Other
Retail Annuity Retail OEM Other Total
-------- -------- -------- -------- ------- --------
<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 (2,191)
Restructuring charges ( 193)
Interest income, net 309
--------
Loss before taxes, as reported $(4,037)
========
</TABLE>
F-15
<PAGE>
ClickAction Inc.
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
Segment Information
For the year ended December 31, 1996
---------------------------------------------------------
Mailing Mail Other
Retail Annuity Retail OEM Other Total
-------- ------- -------- ------- -------- ----------
<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
--------
Loss before taxes, as reported $(1,027)
========
</TABLE>
<PAGE>
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 that were released in 1998 and
are sold through the direct retail channel products.
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>
F-16
<PAGE>
ClickAction Inc.
Notes to Consolidated 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 2,427 --- ---
Foreign 13,426 --- ---
------- ---------- ----------
Total current 36,627 (282,345) (221,459)
------- ---------- ----------
Deferred:
Federal --- 282,345 43,482
State --- --- 105,977
------- --------- ---------
Total deferred --- 282,345 149,459
------- --------- ---------
Total income tax expense
(benefit) $36,627 $ --- $ (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) $ 87,219 $(1,372,449) $(349,208)
State income taxes, net of federal tax effect 2,154 --- 70,473
Change in valuation allowance (99,981) 284,553 281,600
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) $ 36,627 $ --- $ (72,000)
========= =========== ==========
</TABLE>
F-17
<PAGE>
ClickAction Inc.
Notes to Consolidated 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 carryforward 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 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,
-----------------------
<S> <C>
1999 $ 523,161
2000 163,707
---------
$ 686,868
=========
</TABLE>
F-18
<PAGE>
ClickAction Inc.
Notes to Consolidated Financial Statements, Continued
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.
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.
F-19
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by ClickAction in connection with the sale
of the common stock being registered. All the amounts shown are estimates
except for the registration fee.
Registration fee $ 2,788.15
Legal fees and expenses. 20,000.00
Accounting Fees and Expenses 20,000.00
Miscellaneous 2,500.00
Nasdaq Additional Listing fee 7,268.00
-----------
Total $ 52,556.15
===========
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Under Section 145 of the Delaware General Corporation law ClickAction has
broad powers to indemnify its directors and officers against liabilities they
may incur in such capacities, including liabilities under the Securities Act.
Our By-laws require us to indemnify our directors and executive officers, and
permit us to indemnify our other officers, employees and other agents, to the
extent permitted by Delaware law. Under our By-laws, indemnified parties are
entitled to indemnification for negligence, gross negligence and other wise
to the fullest extent permitted by law. The By-laws also require us to
advance litigation expenses in the case of stockholder derivative actions or
other actions, against an undertaking by the indemnified party to repay such
advances if it is ultimately determined that the indemnified party is not
entitled to indemnification.
We have entered into indemnity agreements with each of our directors and
executive officers. Such indemnity agreements contain provisions which are
in some respects broader than the specific indemnification provisions
contained in Delaware law. We also maintain an insurance policy for our
directors and executive officers insuring against certain liabilities arising
in their capacities as such.
II-1
<PAGE>
ITEM 16. EXHIBITS
(a) Exhibits.
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ---------- --------------------------------------------------------------
2.1* Agreement and Plan of Merger and Reorganization, dated as of
July 2, 1999, among MySoftware Company, MyMarket Acquisition
Corp., MarketHome, and the shareholders of MarketHome.
4.1 Escrow Agreement, dated as of August 5, 1999, among
MySoftware Company, Norwest Bank Minnesota, National
Association, as Escrow Agent, and Jim Williams as
shareholders' agent.
4.2 Registration Rights Agreement, dated as of August 5, 1999
among MySoftware Company, MarketHome and the shareholders
of MarketHome.
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of KPMG LLP.
23.2 Consent of Cooley Godward LLP. Reference is made to
Exhibit 5.1.
24.1 Power of Attorney is contained on the signature page hereto.
__________
* Previously filed with Registrant's Current Report on Form 8-K (file No.
000-26008), filed August 19, 1999.
ITEM 17. UNDERTAKINGS.
(a) Rule 415 offerings.
The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement,
and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports
filed by the issuer pursuant to section 13 or section 15(d) of the
Exchange Act that are incorporated by reference herein.
II-2
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) to remove the registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Filings incorporating subsequent Exchange Act documents by reference.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d)
of the Exchange Act that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(e) Incorporated annual and quarterly reports.
The undersigned Registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the
prospectus is sent or given, the latest annual report to security
holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3
or Rule 14c-3 under the Exchange Act; and, where interim financial
information required to be presented by Article 3 of Regulation S-X
are not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial
information.
(h) Request for acceleration of effective date.
(1) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
(i) Registration Statement Permitted by Rule 430A
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall
be deemed to be part of this Registration Statement as of the time
it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, ClickAction duly certifies that it has reasonable grounds
to believe that it meets all of the requirements for filing on
Form S-3 and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the
City of Palo Alto, County of Santa Clara, State of California, on
January 31, 2000.
CLICKACTION INC.
/S/ Gregory W. Slayton
------------------------
Gregory W. Slayton
President, Chief Executive Officer
and Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Gregory W. Slayton and
Sharon Chiu and each or any one of them, as his true and lawful
attorney-in-fact and agents with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and
thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
II-4
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ----------------------- ----------------------------------- --------------------
/s/ Gregory W. Slayton President, Chief Executive Officer January 31, 2000
- ---------------------- and Director (Principal Executive
Gregory W. Slayton Officer)
/s/ Sharon Chiu Vice President, Chief Financial
- ---------------------- Officer and Secretary (Principal January 31, 2000
Sharon Chiu Financial and Accounting Officer)
/s/ David P. Mans Director January 31, 2000
- ----------------------
David P. Mans
/s/ Edward Neihaus Director January 31, 2000
- ----------------------
Edward Neihaus
/s/ John K. Katsaros Director January 31, 2000
- ----------------------
John K. Katsaros
/s/ Donald F. Wood Director January 31, 2000
- ----------------------
Donald F. Wood
/s/ Emerick M. Woods Director January 31, 2000
- ----------------------
Emerick M. Woods
/s/ Howard Love Director January 31, 2000
- ----------------------
Howard Love
II-5
<PAGE>
INDEX TO EXHIBITS
ITEM 16. EXHIBITS
(a) Exhibits.
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------- -----------------------------------------------------------------
2.1* Agreement and Plan of Merger and Reorganization, dated as of
July 2, 1999, among MySoftware Company, MyMarket Acquisition
Corp., MarketHome, and the shareholders of MarketHome.
4.1 Escrow Agreement, dated as of August 5, 1999, among MySoftware
Company, Norwest Bank Minnesota, National Association, as Escrow
Agent, and Jim Williams as shareholders' agent.
4.2 Registration Rights Agreement, dated as of August 5, 1999 among
MySoftware Company, MarketHome and the shareholders of MarketHome.
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of KPMG LLP.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney is contained on the signature page hereto.
__________
* Previously filed with Registrant's Current Report on Form 8-K (file No.
000-26008), filed August 19, 1999.
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EXHIBIT 4.1
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made and entered into as
of August 5, 1999 by and among MYSOFTWARE COMPANY, a Delaware
corporation ("Parent"), JIM WILLIAMS, as Shareholders' Agent pursuant
to Section 10.1 of the below-defined Merger Agreement ("Shareholders'
Agent"), and Norwest Bank Minnesota, National Association (the
"Escrow Agent"; which term shall also include any successor agent
appointed in accordance with Section 9 hereof).
RECITALS
A. Parent, MyMarket Acquisition Corp., a California corporation
("Merger Sub") and MarketHome, a California corporation (the "Company")
have entered into an Agreement and Plan of Merger and Reorganization
dated as of July 2, 1999 (the "Merger Agreement"), pursuant to which
Merger Sub will be merged with and into the Company and the Company will
become a wholly owned subsidiary of Parent, and the Merger Shareholders
will receive shares of common stock of Parent.
B. The Merger Agreement contemplates the establishment of an escrow
arrangement to secure the indemnification obligations of the Merger
Shareholders under the Merger Agreement.
C. By virtue of the approval by the Merger Shareholders of the
Company of the Merger Agreement, the Merger Shareholders have appointed
the Shareholders' Agent as their agent and attorney-in-fact, to act
on their behalf to the extent set forth in Section 9 of the Merger
Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
Section 1. DEFINED TERMS. Capitalized terms used in this Agreement
and not otherwise defined herein shall have the meanings given to
them in the Merger Agreement, a copy of which is attached hereto.
Section 2. ESCROW AND INDEMNIFICATION.
2.1 Escrowed Shares to be Placed in Escrow Account. On the date hereof,
Parent shall issue and deliver to the Escrow Agent certificates
registered in the name of each of the Merger Shareholders for that
number of shares of Parent Common Stock set forth opposite such Merger
Shareholder's name on Exhibit A (the "Holdback Shares") with stock
powers executed in blank and medallion guaranteed by each of such
Merger Shareholders attached thereto. The Escrow Agent shall acknowledge
receipt of such certificates in writing to Parent and the Shareholders'Agent.
The Holdback Shares, together with any stock dividends or stock distributions
or any securities of Parent issued in respect thereof that are excluded from
the Merger Shareholders' gross income under Section 305(a) of the Internal
Revenue Code (including, without limitation, any shares issued pursuant to
any stock dividend, stock split, reverse stock split, combination or
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reclassification thereof that are excluded from the Merger Shareholders'
gross income under Section 305(a) of the Internal Revenue Code) shall become
part of, and are hereinafter referred to collectively as, the "Escrowed
Shares"). The Escrow Agent shall establish a segregated account (the "Escrow
Account") at its office located at its address set forth in Section 10(b) in
which to hold the Escrowed Shares. The Escrow Account shall be held as a trust
fund and shall not be subject to any lien, attachment, trustee process
or any other judicial process of any creditor of any party hereto.
The Escrow Agent agrees to accept delivery of the Escrow Account and to
hold the Escrow Account in escrow (the "Escrow"), subject to the terms
and conditions of this Agreement.
2.2 Indemnification. Pursuant to the Merger Agreement the Escrowed
Shares shall be used to compensate and reimburse each of Parent and the
other Indemnitees for indemnifiable claims as set forth therein. The
Escrow Account shall be security for such indemnity obligation, subject
to the limitations, and in the manner provided, in this Agreement and
the Merger Agreement and the reimbursement of expenses of the
Shareholders' Agent as provided in, and to the extent allowed by, the
Merger Agreement and this Agreement.
2.3 Shareholder Rights.
(a) Except as expressly provided otherwise herein, each Merger
Shareholder shall at all times retain and have the full and absolute right to
exercise all voting and consensual rights with respect to the Escrowed Shares
owned by such Merger Shareholder; provided, however, that the Merger
Shareholders shall have no right to transfer, pledge or encumber or otherwise
dispose in any manner whatsoever any Escrowed Shares that are held in the
Escrow Account.
(b) The Escrow Agent shall be under no duty to preserve, protect or
exercise rights in the Escrowed Shares, and shall be responsible only
for reasonable measures to maintain the physical safekeeping thereof,
and otherwise to perform such duties on its part as are expressly set
forth in this Agreement, except that it will, at the written request of
the Shareholders' Agent given to the Escrow Agent at least five (5)
business days prior to the date on which the Escrow Agent is requested
therein to take any action, deliver to the Shareholders' Agent a proxy
or other instrument in the form supplied to it by the Shareholders' Agent
for voting or otherwise exercising any right of consent with respect to
any of the Escrowed Shares held by it hereunder. The Escrow Agent will
not be responsible for authenticating the right of the Merger Shareholders
to exercise voting or consent-giving authority in respect of Escrowed
Shares held by it hereunder.
2.4 Dividends, Etc. Parent and Shareholders' Agent agree among themselves,
for the benefit of Parent and the Escrow Agent, that any cash,
securities or other property distributable (whether by way of dividend,
stock split or otherwise) in respect of or in exchange for any Escrowed
Shares that are excluded from the Merger Shareholders' gross income
under Section 305(a) of the Internal Revenue Code shall not be
distributed to the record owners of such Escrowed Shares, but rather
shall be distributed to and held by the Escrow Agent in the Escrow Account.
Unless and until the Escrow Agent shall actually receive such cash,
securities or other property, it may assume without inquiry that the
Escrowed Shares currently being held by it in the Escrow Account are
all that the Escrow Agent is required to hold. At the time any
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Escrowed Shares are required to be released from the Escrow Account to
an Indemnitee pursuant to this Agreement, any cash, securities or
other property previously received by the Escrow Agent in exchange for
such Escrowed Shares shall be released from the Escrow to such
Indemnitee. At the time any Escrowed Shares are required to be released
from the Escrow Account to a Merger Shareholder pursuant to this
Agreement, any cash, securities or other property previously received
by the Escrow Agent in respect for or in exchange for such Escrowed
Shares shall be released from the Escrow to such Merger Shareholder.
2.5 Transferability. The interests of the Merger Shareholders in the
Escrow Account and in the Escrowed Shares shall not be assignable or
transferable, other than by operation of law. No transfer of any of
such interests by operation of law shall be recognized or given effect
until Parent and the Escrow Agent shall have received written notice
of such transfer.
2.6 Fractional Escrowed Shares. No fractional shares of Parent Common
Stock shall be retained in or released from the Escrow pursuant to
this Agreement. In connection with any release of Escrowed Shares from
the Escrow Account, Parent and the Escrow Agent shall "round down" in
order to avoid retaining any fractional share in the Escrow Account and
in order to avoid releasing any fractional share from the Escrow Account.
When shares are "rounded down", no cash-in-lieu payments need to be
made.
Section 3. ADMINISTRATION OF ESCROW ACCOUNT. Except as otherwise provided
herein, the Escrow Agent shall administer the Escrow Account as follows:
3.1 If any Indemnitee has or claims to have incurred or suffered
Damages for which it is or may be entitled to indemnification,
compensation or reimbursement under Section 9.2 of the Merger Agreement,
such Indemnitee may, on or prior to the first anniversary of the date
hereof (the "Termination Date"), deliver a claim notice (a "Claim
Notice") to the Shareholders' Agent and to the Escrow Agent. Each
Claim Notice shall state that such Indemnitee believes in good faith
that there is or has been a breach of a representation, warranty or
covenant contained in the Merger Agreement or that such Indemnitee
is otherwise entitled to indemnification, compensation or reimbursement
under the Merger Agreement and contain a brief description of the
circumstances supporting such Indemnitee's belief that there is or has
been such a breach or that such Indemnitee is so entitled to
indemnification, compensation or reimbursement and shall, to the extent
possible, contain a non-binding, preliminary estimate of the amount
of Damages such Indemnitee claims to have so incurred or suffered
(the "Claimed Amount").
3.2 Within twenty (20) business days after receipt by the Escrow Agent
of a Claim Notice or such longer period of time as shall be consented
to by Parent in its discretion (the "Response Notice Period"), the
Shareholders' Agent may deliver to the Indemnitee who delivered the
Claim Notice and to the Escrow Agent a written response (the "Response
Notice") in which the Shareholders' Agent: (i) agrees that a whole
number of Escrowed Shares having a "Stipulated Value" (as defined below)
equal to the full Claimed Amount may be released from the Escrow
Account to the Indemnitee; (ii) agrees that Escrowed Shares having a
Stipulated Value equal to part, but not all, of the Claimed Amount
(the "Agreed Amount") may be released from the Escrow Account to the
Indemnitee or (iii) indicates that no part of the Claimed Amount
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<PAGE>
may be released from the Escrow Account to the Indemnitee. Any part
of the Claimed Amount that is not to be released to the Indemnitee shall
be the "Contested Amount." If a Response Notice is not received by
the Escrow Agent prior to the expiration of the Response Notice Period,
then the Shareholders' Agent shall be deemed to have agreed that
Escrowed Shares having a Stipulated Value equal to the full Claimed
Amount may be released to the Indemnitee from the Escrow Account.
3.3 If the Shareholders' Agent delivers a Response Notice agreeing
that Escrowed Shares having a Stipulated Value equal to the full
Claimed Amount may be released from the Escrow Account to the
Indemnitee, or if the Shareholders' Agent does not deliver a Response
Notice in accordance with Section 3(b), the Escrow Agent shall
promptly following the receipt of the Response Notice (or, if the
Escrow Agent has not received a Response Notice, promptly following
the expiration of the Response Notice Period, deliver to such
Indemnitee such Escrowed Shares.
3.4 If the Shareholders' Agent delivers a Response Notice agreeing
that Escrowed Shares having a Stipulated Value equal to part, but
not all, of the Claimed Amount may be released from the Escrow
Account to the Indemnitee, the Escrow Agent shall promptly following
the receipt of the Response Notice deliver to such Indemnitee
Escrowed Shares having a Stipulated Value equal to the Agreed Amount.
3.5 If the Shareholders' Agent delivers a Response Notice indicating
that there is a Contested Amount, the Shareholders' Agent and the
Indemnitee shall attempt in good faith to resolve the dispute related
to the Contested Amount. If the Indemnitee and the Shareholders'
Agent shall resolve such dispute, such resolution shall be binding
on all of the Merger Shareholders and a settlement agreement shall
be signed by the Indemnitee and the Shareholders' Agent and sent to
the Escrow Agent, who shall, upon receipt thereof, release Escrowed
Shares from the Escrow Account in accordance with such agreement.
3.6 If the Shareholders' Agent and the Indemnitee are unable to
resolve the dispute relating to any Contested Amount within ten (10)
business days after the expiration of the Response Notice Period,
then the claim described in the Claim Notice shall be settled by
binding arbitration in the San Francisco office of Judicial Arbitration
Mediation and Service/Endispute ("JAMS"). The parties agree to use
all reasonable efforts to cause the arbitration hearing to be
conducted within 60 calendar days after the selection of the arbitrator
and to use all reasonable efforts to cause the arbitrators' decision
to be furnished within 95 calendar days after the selection of the
arbitrator. The parties further agree that discovery shall be
completed at least twenty (20) business days prior to the date of
the arbitration hearing. The final decision of the arbitrators
shall be furnished to the Shareholders' Agent, the Indemnitee and the
Escrow Agent in writing and shall constitute a conclusive determination
of the issue in question, binding upon the Merger Shareholders, the
Indemnitee and the Escrow Agent and shall not be contested by any of
them. The non-prevailing party in any arbitration shall pay the reasonable
expenses (including attorneys' fees) of the prevailing party, any additional
reasonable fees and expenses (including reasonable legal fees) of the
Escrow Agent, and the fees and expenses associated with the arbitration
(including the arbitrators' fees and expenses). For purposes of this
Section 3(f), the non-prevailing party shall be deemed to be the Indemnitee
if it is entitled to recover less than 50% of the Contested Amount; otherwise
it shall be the Merger Shareholders'.
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3.7 The Escrow Agent shall release Escrowed Shares from the Escrow Account
in connection with any Contested Amount within five (5) business days after
the delivery to it of: (i) a copy of a settlement agreement executed by the
Indemnitee and the Shareholders' Agent setting forth instructions to the
Escrow Agent as to the number of Escrowed Shares, if any, to be released from
the Escrow Account, with respect to such Contested Amount or (ii) a copy of
the award of the arbitrators referred to and as provided in Section 3(f)
setting forth instructions to the Escrow Agent as to the number of Escrowed
Shares, if any, to be released from the Escrow Account, with respect to such
Contested Amount.
Section 4. RELEASE OF ESCROWED SHARES. The Escrow Agent is not the stock
transfer agent for Parent Common Stock. Any distribution of all or a portion
of the Escrowed Shares in the Escrow Account to the Merger Shareholders shall
be made in accordance with the percentages set forth opposite such holders'
respective names on Exhibit A. If the Escrow Agent becomes obligated to
transfer to an Indemnitee, the Shareholders' Agent or any Merger Shareholder,
any Escrowed Shares in accordance with the terms of this Agreement, the
Escrow Agent shall deliver certificates representing such shares together
with a completed stock power to such Indemnitee, the Shareholders' Agent or
Merger Shareholder, as the case may be, or to their respective designee.
Parent agrees to issue, or cause its transfer agent to issue, one or more
certificates representing each Merger Shareholder's pro rata portion of the
Escrowed Shares and to deliver such certificates or to cause its transfer
agent to deliver such certificate to each respective Merger Shareholder at
the address set forth on the transfer agent's books and records or, at the
request of the Merger Shareholder, and upon submission of evidence
satisfactory to Parent of such designation, to deliver such certificate to the
Merger Shareholder's designee. Within ten (10) business days after the
Termination Date, the Escrow Agent shall distribute or Parent shall cause the
stock transfer agent for Parent Common Stock to distribute to each of the
Merger Shareholders in accordance with the preceding sentences of this
Section 4; provided, however, that notwithstanding the foregoing, if, prior
to the Termination Date, any Indemnitee has given a Claim Notice containing a
claim which has not been resolved prior to the Termination Date in accordance
with Section 3, the Escrow Agent shall retain in the Escrow Account after
the Termination Date Escrowed Shares having a Stipulated Value equal to 110%
of the Claimed Amount or Contested Amount, as the case may be, with respect
to all claims which have not then been resolved.
Section 5. VALUATION OF ESCROWED SHARES, ETC.
5.1 Stipulated Value. For purposes of this Agreement, the "Stipulated
Value" of each Escrow Share shall be deemed to be equal to $16.92.
5.2 Stock Splits. All numbers contained in, and all calculations required
to be made pursuant to, this Agreement shall be adjusted as appropriate to
reflect any stock split, reverse stock split, stock dividend or similar
transaction effected by Parent after the date hereof; provided, however, that
the Escrow Agent shall have received notice of such stock split or other
action and shall have received the appropriate number of additional shares of
Parent Common Stock or other property pursuant to Section 2(c) hereof. In
the event of any such stock split or other similar occurrence, Parent shall
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deliver to the Shareholders' Agent and the Escrow Agent a revised version of
Exhibit A setting forth the new number of Escrowed Shares held in the Escrow
Account. Unless and until the Escrow Agent receives the certificates
representing additional shares of Parent Common Stock or other property
pursuant to Section 2(c), the Escrow Agent may assume without inquiry that no
such stock or other property has been or is required to be issued with
respect to Escrowed Shares.
5.3 Exclusive Remedy. Subject to Section 9.3 of the Merger Agreement, from
and after the Closing, the Escrowed Shares shall be the sole and exclusive
remedy of Parent and the other Indemnitees for monetary damages for any
inaccuracy in or breach of any representation or warranty contained in the
Merger Agreement.
Section 6. FEES AND EXPENSES. Upon the execution of this Agreement
by all parties hereto and the initial deposit of the Escrowed Shares in the
Escrow Account, fees and expenses, in accordance with Exhibit B attached
hereto, will be payable to the Escrow Agent. This annual Escrow Agent fee
will cover the first twelve months of the escrow. In accordance with Exhibit
B attached hereto, the Escrow Agent will also be entitled to reimbursement
for reasonable and documented out-of-pocket expenses including those of its
counsel, incurred by the Escrow Agent in the performance of its duties
hereunder and the execution and delivery of this Agreement. All such fees
and expenses shall be paid by Parent.
Section 7. LIMITATION OF ESCROW AGENT'S LIABILITY.
7.1 The Escrow Agent undertakes to perform such duties as are specifically
set forth in this Agreement only and shall have no duty under any other
agreement or document notwithstanding their being referred to herein or
attached hereto as an exhibit. The Escrow Agent shall not be liable except
for the performance of such duties as are specifically set forth in this
Agreement, and no implied covenants or obligations shall be read into this
Agreement against the Escrow Agent. The Escrow Agent shall incur no
liability with respect to any action taken by it or for any inaction on its
part in reliance upon any notice, direction, instruction, consent, statement
or other document believed by it to be genuine and duly authorized, nor for any
other action or inaction except for its own willful misconduct or negligence.
In all questions arising under this Agreement, the Escrow Agent may rely on the
advice of counsel, and for anything done, omitted or suffered in good faith
by the Escrow Agent based upon such advice the Escrow Agent shall not be
liable to anyone. The Escrow Agent shall not be required to take any action
hereunder involving any expense unless the payment of such expense is made or
provided for in a manner reasonably satisfactory to it. In no event shall the
Escrow Agent be liable for incidental, punitive or consequential damages.
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7.2 Parent hereby agrees to indemnify the Escrow Agent for, and hold
it harmless against, any loss, liability or expense incurred without
negligence or willful misconduct on the part of Escrow Agent, arising
out of or in connection with its carrying out of its duties hereunder.
This right of indemnification shall survive the termination of this
Agreement, and the resignation of the Escrow Agent. The costs and
expenses of enforcing this right of indemnification shall also be
paid by Parent.
Section 8. TERMINATION. This Agreement shall terminate on the
Termination Date or, if earlier, upon the release by the Escrow
Agent of all of the Escrowed Shares in accordance with this Agreement;
provided, however, that if the Escrow Agent has received from any
Indemnitee a Claim Notice setting forth a claim that has not been
resolved by the Termination Date, then this Agreement shall continue
in full force and effect until the claim has been resolved and the
Escrowed Shares released in accordance with this Agreement.
Section 9. SUCCESSOR ESCROW AGENT. In the event the Escrow Agent
becomes unavailable or unwilling to continue as escrow agent under
this Agreement, the Escrow Agent may resign and be discharged from
its duties and obligations hereunder by giving its written resignation
to the parties to this Agreement. Such resignation shall take effect
not less than thirty (30) calendar days after it is given to all
parties hereto. Parent may appoint a successor Escrow Agent only
with the consent of the Shareholder's Agent (which consent shall
not be unreasonably withheld or delayed). If a successor Escrow
Agent is not appointed with the 30-day period following such notice,
Escrow Agent may petition any court of competent jurisdiction to
name a successor Escrow Agent. The Escrow Agent shall act in accordance
with written instructions from Parent and the Shareholders' Agent
as to the transfer of the Escrow Account to a successor escrow agent.
Section 10. MISCELLANEOUS.
(a) Attorneys' Fees. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is
brought against any party hereto, the prevailing party shall be
entitled to recover reasonable attorneys' fees, costs and disbursements
(in addition to any other relief to which the prevailing party may be
entitled).
(b) Notices. Any notice or other communication required or permitted
to be delivered to any party under this Agreement shall be in writing
and shall be deemed given (i) when received by the addressee if
delivered personally or sent by nationally recognized overnight
courier, (ii) when received by the addressee if sent by registered
or certified mail, return receipt requested and postage prepaid,
or (iii) when sent by telecopier, provided that a confirmation copy
thereof is sent the same day by postage prepaid U.S. mail to
Parent, the Shareholders' Agent or the Escrow Agent at the address
or facsimile telephone number set forth below (or to such other
address or facsimile telephone number as such party shall have
specified in a written notice given to the other parties hereto):
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If to Parent to:
MySoftware Company
2197 E. Bayshore Road
Palo Alto, CA 94303
Attention: David Mans
Facsimile: (650) 325-0873
If to Shareholders' Agent to:
Trilogy Asset Management, Inc.
550 Hartz Avenue, Suite 200
Danville, CA 94526
Attention: Jim Williams
Facsimile: (925) 855-9429
If to Escrow Agent to:
Norwest Bank Minnesota, National Association
Routing Number: N9303-120
Sixth and Marquette
Minneapolis, MN 55479-0069
Attn: Rogene Pendleton
Phone: (612) 667-2245
Fax: (612) 667-9825
(c) Headings. The underlined headings contained in this Agreement
are for convenience of reference only, shall not be deemed to be a
part of this Agreement and shall not be referred to in connection
with the construction or interpretation of this Agreement.
(d) Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all
of which, when taken together, shall constitute one agreement.
(e) Governing Law. This Agreement shall be construed in accordance
with, and governed in all respects by, the internal laws of the
State of California (without giving effect to principles of conflicts
of laws).
(f) Successors and Assigns. This Agreement shall be binding upon
each of the parties hereto and each of their respective permitted
successors and assigns, if any. No Merger Shareholder may assign
its rights under this Agreement without the express prior written
consent of Parent, provided, however, that (i) upon the death of
a Merger Shareholder, such Merger Shareholder's rights under this
Agreement shall be transferred to the person(s) who receive such
Merger Shareholder's Escrowed Shares under the laws of descent and
distribution, and (ii) a Merger Shareholder may assign its rights
under this Agreement to any organization qualified under Section
501(c)(3) of the Internal Revenue Code to which such Merger Shareholder
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transfers Escrowed Shares or in connection with an estate planning
transaction. Nothing in this Agreement is intended to confer, or
shall be deemed to confer, any rights or remedies upon any person
or entity other than the parties hereto and their permitted successors
and assigns. This Agreement shall inure to the benefit of: the
Merger Shareholders, Parent, the Shareholders' Agent, the Escrow
Agent and the respective successors and assigns, if any, of the
foregoing.
(g) Waiver. No failure on the part of any party hereto to exercise
any power, right, privilege or remedy under this Agreement, and no
delay on the part of any party hereto in exercising any power, right,
privilege or remedy under this Agreement, shall operate as a waiver of
such power, right, privilege or remedy; and no single or partial
exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right,
privilege or remedy. No Person shall be deemed to have waived any
claim arising out of this Agreement, or any power, right, privilege
or remedy under this Agreement, unless the waiver of such claim,
power, right, privilege or remedy is expressly set forth in a written
instrument duly executed and delivered on behalf of such Person;
and any such waiver shall not be applicable or have any effect
except in the specific instance in which it is given.
(h) Amendments. This Agreement may not be amended, modified,
altered or supplemented other than by means of a written instrument
duly executed and delivered on behalf of Parent and the Shareholders'
Agent; provided, however, that, if an amendment affects a right or creates
an obligation of the Escrow Agent, such amendment shall not become
effective unless consented to in writing by the Escrow Agent.
Any amendment duly executed and delivered by the Shareholders'
Agent shall be deemed to have been duly executed and delivered by
all of the Merger Shareholders.
(i) Severability. In the event that any provision of this
Agreement, or the application of any such provision to any party
hereto or set of circumstances, shall be determined to be invalid,
unlawful, void or unenforceable to any extent, the remainder of
this Agreement, and the application of such provision to Persons
or circumstances other than those as to which it is determined to
be invalid, unlawful, void or unenforceable, shall not be impaired
or otherwise affected and shall continue to be valid and enforceable
to the fullest extent permitted by law.
(j) Parties in Interest. None of the provisions of this Agreement
is intended to provide any rights or remedies to any Person other
than the parties hereto, the Merger Shareholders and their respective
successors and assigns, if any.
(k) Entire Agreement. This Agreement and the other agreements
referred to herein set forth the entire understanding of the parties
hereto relating to the subject matter hereof and thereof and supersede
all prior agreements and understandings among or between any of the
parties relating to the subject matter hereof and thereof.
(l) Waiver of Jury Trial. Each of the parties hereto hereby
irrevocably waives any and all right to trial by jury in any Legal
Proceeding arising out of or related to this Agreement or the transactions
contemplated hereby.
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(m) Tax Reporting Information and Certification of Tax Identification
Numbers.
(i) The parties hereto agree that, for tax reporting purposes, all
interest on or other income, if any, attributable to the Escrowed Shares
or any other amount held in escrow by the Escrow Agent pursuant to this
Agreement shall be allocable in equal shares to the Merger Shareholders
of the Company in accordance with their percentage interests in the
Escrow Account.
(ii) Parent and, by virtue of the approval by the Merger Shareholders
of the Company of the Merger Agreement, each of the Merger Shareholders
agree to provide the Escrow Agent with certified tax identification
numbers for each of them by furnishing appropriate forms W-9 (or Forms
W-8, in the case of non-U.S. persons) and other forms and documents
that the Escrow Agent may reasonably request (collectively, "Tax
Reporting Documentation") to the Escrow Agent within thirty (30) days
after the date hereof. The parties hereto understand that, if such
Tax Reporting Documentation is not so certified to the Escrow Agent,
the Escrow Agent may be required by the Internal Revenue Code, as it
may be amended from time to time, to withhold a portion of any
interest or other income earned on the investment of monies or other
property held by the Escrow Agent pursuant to this Agreement.
(n) Construction.
(i) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the
feminine gender shall include the masculine and neuter genders; and
the neuter gender shall include the masculine and feminine genders.
(ii) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party
shall not be applied in the construction or interpretation of this
Agreement.
(iii) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation,
but rather shall be deemed to be followed by the words "without
limitation."
(o) Investment of Cash Pending Distribution. Any cash received by
the Escrow Agent pursuant to Section 2(c) or otherwise for inclusion
in the Escrow Account shall be invested by the Escrow Agent (i) in
the U.S. Treasury Money Market Fund or (ii) in another money market
mutual fund registered under the Investment Company Act of 1940, the
principal of which is invested in obligations issued or guaranteed
by the United States government, jointly chosen by Parent and the
Shareholders' Agent confirmed in writing and reasonably acceptable
to the Escrow Agent.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first above written.
MYSOFTWARE COMPANY
/s/ MySoftware Company
----------------------------
SHAREHOLDERS' AGENT:
/s/ Jim Williams
----------------------------
JIM WILLIAMS
ESCROW AGENT
Norwest Bank Minnesota, National Association
/s/ Norwest Bank Minnesota, N.A.
--------------------------------------------
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EXHIBIT A
NAME NUMBER OF PERCENTAGE OF ESCROWED SHARES
- ----- ESCROWED SHARES -----------------------------
---------------
12
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EXHIBIT B
ESCROW FEES AND EXPENSES
13
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EXHIBIT 4.2
MYSOFTWARE COMPANY
REGISTRATION RIGHTS AGREEMENT
AUGUST 5, 1999
<PAGE>
MYSOFTWARE COMPANY
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into
as of the 5th day of August, 1999, by and among MYSOFTWARE COMPANY, a
Delaware corporation (the "Parent"), and the shareholders of MARKETHOME,
a California corporation (the "Company") listed on the signature page
hereto (collectively, the "Shareholders" and, each individually, a
"Shareholder").
RECITALS
WHEREAS, pursuant to and in accordance with that certain Agreement and
Plan of Merger and Reorganization dated as of July 2, 1999, by and
among Parent, MY MARKET ACQUISITION CORP., a California corporation
and a wholly owned subsidiary of the Parent ("Merger Sub"), the
Company and certain shareholders of the Company (the "Merger Agreement"),
the Parent and the Company intend to effect a merger of Merger Sub
with and into the Company (the "Merger") and upon consummation of
the Merger, Merger Sub will cease to exist, and the Company will become
a wholly owned subsidiary of Parent;
WHEREAS, the Shareholders hold shares of the Company's Common Stock
and/or Preferred Stock and shall receive shares of Parent Common
Stock upon consummation of the Merger pursuant to the Merger Agreement,
in exchange for their shares of the Company's Common Stock or
Preferred Stock, as applicable;
WHEREAS, the parties set forth on Exhibit A of the Merger Agreement
(the "Shareholders"), as a condition of completion of the Merger,
have requested that the Parent extend to the Shareholders registration
rights, information rights and other rights as set forth below;
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and
in the Merger Agreement, the parties mutually agree as follows:
GENERAL
1.1 Definitions. As used in this Agreement the following terms shall
have the following respective meanings:
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Form S-3" means such form under the Securities Act as in effect on the
date hereof or any successor registration form under the Securities
Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other
documents filed by the Parent with the SEC.
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"Holder" means any person owning of record Registrable Securities that
have not been sold to the public or any assignee of record of such
Registrable Securities in accordance with Section 2.10 hereof.
"Public Offering" means a firm commitment underwritten public offering
of its Common Stock registered under the Securities Act.
"Register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance
with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
"Registrable Securities" means (a) Common Stock of the Parent issued
or issuable to Shareholders pursuant to the Merger Agreement in
exchange for the Company's Common Stock or Preferred Stock; and (b)
any Common Stock of the Parent issued as (or issuable upon the conversion
or exercise of any warrant, right or other security which is issued as)
a dividend or other distribution with respect to, or in exchange for
or in replacement of, such above-described securities. Notwithstanding
the foregoing, Registrable Securities shall not include any securities
sold by a person to the public either pursuant to a registration
statement or Rule 144 or sold in a private transaction in which the
transferor's rights under Section 2 of this Agreement are not assigned.
"Registrable Securities then outstanding" shall mean the total number
of shares of the Parent's Common Stock that are Registrable Securities
as of the date of determination.
"Registration Expenses" shall mean all expenses incurred by the Parent
in complying with Sections 2.2 and 2.3 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel for the Parent, fees and disbursements of
a single special counsel for the Holders, blue sky fees and expenses
and the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular employees
of the Parent which shall be paid in any event by the Parent).
"SEC" means the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"Shares" shall mean the Parent's Common Stock issued pursuant to the
Merger Agreement and held by the Shareholders and their permitted
assigns.
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER
2.1 Restrictions on Transfer.
(a) Each Holder agrees not to make any disposition of all or any
portion of the Shares or Registrable Securities unless and until:
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(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be bound by the
terms of this Agreement, (B) such Holder shall have notified the Parent
of the proposed disposition and shall have furnished the Parent with
a detailed statement of the circumstances surrounding the proposed
disposition, and (C) if reasonably requested by the Parent, such Holder
shall have furnished the Parent with an opinion of counsel, reasonably
satisfactory to the Parent, that such disposition will not require
registration of such shares under the Securities Act. It is agreed
that the Parent will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
(iii) Notwithstanding the provisions of paragraphs (i) and (ii) above,
no such registration statement or opinion of counsel shall be
necessary for a transfer by a Holder which is (A) a partnership to
its partners or former partners in accordance with partnership interests,
(B) a corporation to its shareholders in accordance with their interest
in the corporation, (C) a limited liability company to its members or
former members in accordance with their interest in the limited
liability company, or (D) to the Holder's family members or a trust
for the benefit of an individual Holder; provided that in each case
the transferee will be subject to the terms of this Agreement to
the same extent as if the transferee were an original Holder
hereunder.
(b) Each certificate representing Shares or Registrable Securities
shall (unless otherwise permitted by the provisions of the Agreement)
be stamped or otherwise imprinted with a legend substantially
similar to the following (in addition to any legend required under
applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE PARENT
HAS RECEIVED AN OPINION OF COUNSEL OR OTHER WRITTEN EVIDENCE
SATISFACTORY TO THE PARENT AND ITS COUNSEL THAT SUCH REGISTRATION
IS NOT REQUIRED.
(c) The Parent shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the holder
shall have obtained an opinion of counsel (which counsel may be
counsel to the Parent) or, in the case of a transfer made pursuant
to Rule 144, other written evidence, reasonably acceptable to the
Parent to the effect that the securities proposed to be disposed
of may lawfully be so disposed of without registration, qualification
or legend.
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<PAGE>
(d) Any legend endorsed on an instrument pursuant to applicable
state securities laws and the stop-transfer instructions with respect
to such securities shall be removed upon receipt by the Parent of
an order of the appropriate blue sky authority authorizing such
removal.
(e) Each Holder severally and not jointly represents and warrants
to the Parent as follows:
(i) Holder Bears Economic Risk. Holder is capable of evaluating
the merits and risks of its investment in the Parent and has the
capacity to protect its own interests. Holder must bear the economic
risk of this investment indefinitely unless the Registrable
Securities are registered pursuant to the Securities Act, or an
exemption from registration is available.
(ii) Acquisition for Own Account. Holder is acquiring the
Registrable Securities for Holder's own account for investment only, and not
with a view towards their distribution in violation of the Securities
Act.
(iii) Holder Can Protect Its Interest. Holder represents that by
reason of its, or of its management's, business or financial
experience, Holder has the capacity to protect its own interests
in connection with the transactions contemplated in this Agreement,
and the Merger Agreement. Further, Holder is aware of no publication of any
advertisement in connection with the transactions contemplated in the Merger
Agreement.
(iv) Accredited Investor. Holder represents that it is an accredited
investor within the meaning of Regulation D under the Securities Act.
(v) Residence. If the Holder is an individual, then the Holder
resides in the state or province identified in the address of the Holder
set forth on Exhibit A; if the Holder is a partnership, corporation,
limited liability company or other entity, then the office or offices
of the Holder in which its investment decision was made is located
at the address or addresses of the Holder set forth on Exhibit A.
2.2 Piggyback Registrations. If the Parent at any time proposes
for any reason to file a registration statement under the Securities
Act for purposes of a public offering of securities of the Parent
(including, but not limited to, registration statements relating
to a secondary offering of securities of the Parent, but excluding
registration statements relating to employee benefit plans or with
respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act), it shall at least fifteen (15)
days prior to the filing give written notice to the Holders of
Registrable Securities and will afford each such Holder an opportunity
to include in such registration up to twenty-five percent (25%) of
the Registrable Securities held by such Holder. Each Holder
desiring to include in any such registration statement up to
twenty-five percent (25%) of the Registrable Securities held by
such Holder shall, within ten (10) days after the above-described
notice from the Parent, so notify the Parent in writing (the
"Participation Notice"). The Participation Notice shall state
the number of Registrable Securities to be included in the
registration statement and the intended method of disposition of
the Registrable Securities by such Holder. If a Holder fails to
timely notify the Parent by returning the Participation Notice
4
<PAGE>
(in which case, such Holder shall be deemed to have elected not
to include any of such Holder's Registrable Securities in such
registration statement) or the Participation Notice specifies less
than the entire twenty-five percent (25%) of such Holder's
Registrable Securities (the amount of such deficiency with respect
to all Holders being referred to herein as the "Shortfall"),
then the Parent shall so notify all other Holders of Registrable
Securities of the number of shares constituting the Shortfall
and each Holder shall, within five (5) days after such notice from
the Parent, notify the Parent of any desire to include additional
Registrable Securities in such registration statement. Such other
Holders of Registrable Securities shall have the right to include
in the registration statement up to the number of Registrable
Securities constituting, in the aggregate, the Shortfall (determine
pro rata based on the number of Registrable Securities held by
each Holder that desires to include shares to make up the Shortfall
or such other method as may be agreed upon by all Holders entitled
to make up the Shortfall). Any Holder electing not to include the
full number of shares which such Holder is entitled to include in
the registration statement shall nevertheless continue to have the
right to include Registrable Securities in any subsequent
registration statement or registration statements as may be filed
by the Parent with respect to offerings of its securities, all
upon the terms and conditions set forth herein. Parent may in its
sole discretion offer all or certain of the Holders the opportunity
to include additional Registrable Securities in such registration;
provided, however, that in no event shall any Holder have an
obligation to do so. This Section 2.2 shall terminate on the first
anniversary of the date hereof.
(a) Underwriting. If the registration statement under which the
Parent gives notice under this Section 2.2 is for an underwritten
offering, the Parent shall so advise the Holders of Registrable
Securities. In such event, the right of any such Holder to be
included in a registration pursuant to this Section 2.2 shall be
conditioned upon such Holder's participation in such underwriting
and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing
to distribute their Registrable Securities through such underwriting
shall enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting by
the Parent. Notwithstanding any other provision of the Agreement,
if the underwriter determines in good faith that marketing factors
require a limitation of the number of shares to be underwritten, the
number of shares that may be included in the underwriting shall be
allocated, first, to the Parent; second, to the Holders on a pro
rata basis based on the total number of Registrable Securities held
by the Holders; and third, to any shareholder of the Parent (other
than a Holder) on a pro rata basis. No such reduction shall reduce
the securities being offered by the Parent for its own account to
be included in the registration and underwriting. In no event will
shares of any other selling shareholder be included in such registration
which would reduce the number of shares which may be included by
Holders below twenty-five percent (25%) of the Registrable Securities
held by each Holder (or such lesser number as each Holder notifies
Parent of its intent to include in such registration) without the
written consent of Holders of not less than fifty percent (50%) of
the Registrable Securities proposed to be sold in the offering. If
any Holder disapproves of the terms of any such underwriting, such
Holder may elect to withdraw therefrom by written notice to the
Parent and the underwriter, delivered at least ten (10) business days
prior to the effective date of the registration statement. Any
Registrable Securities excluded or withdrawn from such underwriting
shall be excluded and withdrawn from the registration. For any
Holder which is a partnership or corporation, the partners, retired
partners and shareholders of such Holder, or the estates and family
members of any such partners and retired partners and any trusts for
5
<PAGE>
the benefit of any of the foregoing person shall be deemed to be a
single "Holder," and any pro rata reduction with respect to such
"Holder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included
in such "Holder," as defined in this sentence.
(b) Right to Terminate Registration. The Parent shall have the right
to terminate or withdraw any registration initiated by it under
this Section 2.2 prior to the effectiveness of such registration
whether or not any Holder has elected to include securities in such
registration. The Registration Expenses of such withdrawn registration
shall be borne by the Parent in accordance with Section 2.4 hereof.
2.3 Form S-3 Registration. In the event that the Parent has not
completed a Public Offering (or Public Offerings) prior to
December 15, 1999 in which each Holder has been offered the opportunity
and has elected to sell an aggregate total of fifty percent (50%)
of the Registrable Securities such Holder received pursuant to the
Merger Agreement (it being agreed that this Section 2.3 shall apply
even if such Holder was offered, but declined, an opportunity to
include an aggregate of fifty percent (50%) of such Holder's
Registrable Securities in a registration statement pursuant to
Section 2.2), then the Parent will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all Holders of
Registrable Securities; and
(b) file by the later to occur of (i) the expiration of the market
stand-off period pursuant to Section 2.13 hereof if the applicable
underwriting agreement prohibits the filing of a registration statement
during such market stand-off period, or (ii) December 31, 1999, a
shelf registration on Form S-3 (or any successor to Form S-3) or any
similar short-form registration statement pursuant to Rule 415 under
the Securities Act (or any successor rule to Rule 415) and any related
qualification or compliance with respect to fifty percent (50%) of the
Registrable Securities received by such Holder or Holders pursuant
to the Merger Agreement minus any shares of such Holder's or Holders
Registrable Securities registered pursuant to Section 2.2 (including,
for purposes of this calculation, but subject to a limitation of
twenty five percent (25%) of the Registrable Securities held by each
Holder, shares which such Holder was offered but elected not to
include in a registration under Section 2.2) prior to December 15, 1999
(the "S-3 Shares") together with all such qualifications and compliances
as would permit or facilitate the sale and distribution of the S-3 Shares.
The Parent agrees that any Holder may increase the number of such
Holder's S-3 Shares to include S-3 Shares which another Holder is
entitled to register under this Section 2.3 but elects not to do so
(a "Non-Participating Holder") provided that such Holder provides
the Parent with an irrevocable waiver signed by the Non-Participating
Holder, which waiver shall state that the Non-Participating Holder
is waiving all rights under this Section 2.3 and assigning such rights
to the Holder(s) named in such waiver with respect to all or a
specified portion of the Registrable Shares held by such
Non-Participating Holder. Notwithstanding the foregoing, the Parent
shall not be obligated to effect any such registration, qualification
or compliance pursuant to this Section 2.3:
(i) if Form S-3 (or any successor or similar form) is not available
for such offering by the Holders (provided that Parent shall be
obligated to effect any such registration, qualification or compliance
pursuant to this Section 2.3 as soon as practicable if Form S-3
6
<PAGE>
(or any successor or similar form) subsequently becomes available
for such offering by the Holders), or
(ii) if the Registrable Securities which the Holders elect to include
in such registration, together with any other securities of the Parent
which the holder thereof is entitled to include in such registration
and any securities that the Parent elects to include in such registration,
have an aggregate price to the public of less than One Million Dollars
($1,000,000), or
(iii) if, on or prior to December 31, 1999, the Parent shall furnish
to the Holders a certificate signed by the Chairman of the Board of
Directors of the Parent stating that in the good faith judgment of
the Board of Directors of the Parent, it would be seriously detrimental
to the Parent and its shareholders for such Form S-3 registration to
be effected at such time (a "Board Certificate"), in which event the
Parent shall have the right to defer the filing of the Form S-3
registration statement until such time as the filing of such Form
S-3 registration would not be seriously detrimental to the Parent and
its shareholders, but in no event shall the Parent have the right to
defer such filing beyond March 31, 2000 (the "Deferral Period") and,
unless such registration has been effected, the Parent shall provide
the Holders with updated Board Certificates dated January 31, 2000
and February 29, 2000; or
(iv) in any particular jurisdiction in which the Parent would be
required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or
compliance.
(c) Parent shall not be required to effect more than one registration
pursuant to this Section 2.3.
2.4 Holders Rights Subject to Affiliate Agreements. If any Holder has
executed an Affiliate Agreement in connection with the Merger Agreement,
then such Holder's rights under this Agreement shall be subject to such
Holder's obligations pursuant to such Affiliate Agreement.
2.5 Expenses of Registration. Except as specifically provided herein,
all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 of this Agreement
shall be borne by the Parent. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant
to Section 2.3 of this Agreement shall be borne by the holders of
securities so registered pro rata on the basis of the number of shares
so registered; provided however, that if Parent sells any shares in
such Registration, Parent shall bear its pro rata portion of Registration
Expenses incurred in connection therewith. All Selling Expenses incurred
in connection with any registrations hereunder, shall be borne by the
holders of the securities so registered pro rata on the basis of the
number of shares so registered.
2.6 Obligations of the Parent. Whenever required to effect the
registration of any Registrable Securities, the Parent shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with respect
to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective, and, upon the request
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<PAGE>
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to ninety
(90) days or, if earlier, until the Holder or Holders have completed
the distribution related thereto.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with
such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement for the period
set forth in paragraph (a) above.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements
of the Securities Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities
owned by them.
(d) Use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders; provided that the Parent shall not be required
in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such
states or jurisdictions.
(e) Cause all such Registrable Securities to be approved for listing
(subject to notice of official issuance) on the Nasdaq National Market.
(f) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering.
Each Holder participating in such underwriting shall also enter into
and perform its obligations under such an agreement.
(g) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing and, at the request of any Holder of
Registrable Securities, the Parent will promptly prepare a supplement
or amendment to such prospectus so that, as thereafter delivered to
purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(h) Use its best efforts to furnish to each Holder, on the date that
such Registrable Securities are delivered to the underwriters for sale,
if such securities are being sold through underwriters, (i) an opinion,
dated as of such date, of the counsel representing the Parent for the
purposes of such registration, in form and substance as is customarily
given to underwriters in an underwritten public offering, addressed to
the underwriters, if any, and the Holders and (ii) a letter dated as of
such date, from the independent certified public accountants of the Parent,
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in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering
addressed to the underwriters and the Holders.
2.7 Termination of Registration Rights. All registration rights granted
under this Section 2 shall terminate and be of no further force and
effect after the second anniversary of the date hereof. In addition, a
Holder's registration rights shall expire the earlier of such time as
(i) all Registrable Securities held by and issuable to such Holder (and
its affiliates, partners, former partners, members and former members)
may be sold under Rule 144 during any ninety (90) day period, or (ii)
at least fifty percent (50%) of such Holder's Registrable Securities
have been disposed of pursuant to a registration statement filed
pursuant to Section 2 of this Agreement.
2.8 Delay of Registration; Furnishing Information.
(a) No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result
of any controversy that might arise with respect to the interpretation
or implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of the Parent
to take any action pursuant to Section 2.2 or 2.3 that the selling
Holders shall furnish to the Parent such information regarding themselves,
the Registrable Securities held by them and the intended method of
disposition of such securities as shall be required to effect the
registration of their Registrable Securities.
(c) The Parent shall have no obligation with respect to any
registration requested pursuant to Section 2.3 if the anticipated aggregate
offering price of the Registrable Securities to be included in the
registration does not equal or exceed the anticipated aggregate offering
price required to originally trigger the Parent's obligation to initiate
such registration as specified in Section 2.3.
2.9 Indemnification. In the event any Registrable Securities are
included in a registration statement under Sections 2.2 or 2.3:
(a) To the extent permitted by law, the Parent will indemnify and hold
harmless each Holder, the partners, officers and directors of each
Holder, any underwriter (as defined in the Securities Act) for such
Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Exchange Act, against
any losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the Securities Act, the Exchange
Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or
are based upon any of the following statements, omissions or violations
(collectively a "Violation") by the Parent: (i) any untrue statement
or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto,
(ii) the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by
the Parent of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities
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Act, the Exchange Act or any state securities law in connection with
the offering covered by such registration statement; and the Parent
will pay as incurred to each such Holder, partner, officer, director,
underwriter or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided however,
that the indemnity agreement contained in this Section 2.9(a) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent
of the Parent, which consent shall not be unreasonably withheld, nor
shall the Parent be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity
with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director,
underwriter or controlling person of such Holder.
(b) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to
which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Parent, each of its directors, its
officers and each person, if any, who controls the Parent within the
meaning of the Securities Act, any underwriter and any other Holder
selling securities under such registration statement or any of such
other Holder's partners, directors or officers or any person who controls
such Holder, against any losses, claims, damages or liabilities (joint
or several) to which the Parent or any such director, officer,
controlling person, underwriter or other such Holder, or partner,
director, officer or controlling person of such other Holder may become
subject under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation,
in each case to the extent (and only to the extent) that such Violation
occurs in reliance upon and in conformity with written information
furnished by such Holder under an instrument duly executed by such
Holder and stated to be specifically for use in connection with such
registration; and each such Holder will pay as incurred any legal or
other expenses reasonably incurred by the Parent or any such director,
officer, controlling person, underwriter or other Holder, or partner,
officer, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action if it is judicially determined that there was such
a Violation; provided, however, that the indemnity agreement contained
in this Section 2.9(b) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement
is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided further, that in no event shall
any indemnity under this Section 2.9 exceed the proceeds from the
offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
2.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section
2.9, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right
to participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties;
provided, however, that an indemnified party shall have the right to
retain its own counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due
to actual or potential differing interests between such indemnified
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party and any other party represented by such counsel in such proceeding.
The failure to deliver written notice to the indemnifying party within
a reasonable time of the commencement of any such action, if materially
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this
Section 2.9, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may
have to any indemnified party otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is held by
a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred
to herein, the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall to the extent permitted by applicable
law contribute to the amount paid or payable by such indemnified party
as a result of such loss, claim, damage or liability in such proportion
as is appropriate to reflect the relative fault of the indemnifying party
on the one hand and of the indemnified party on the other in connection
with the Violation(s) that resulted in such loss, claim, damage or
liability, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party
shall be determined by a court of law by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission; provided, that in no event shall any
contribution by a Holder hereunder exceed the proceeds from the offering
received by such Holder.
(e) The obligations of the Parent and Holders under this Section 2.9
shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this Agreement. No
Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include
as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to
such claim or litigation.
2.10 Assignment of Registration Rights. The rights to cause the Parent
to register Registrable Securities pursuant to this Section 2 may be
assigned by a Holder to a transferee or assignee of Registrable Securities
which (a) is a subsidiary, parent, general partner, limited partner,
retired partner, member or retired member of a Holder, (b) is a Holder's
family member or trust for the benefit of an individual Holder, or (c)
acquires at least fifty thousand (50,000) shares of Registrable Securities
(as adjusted for stock' splits and combinations); provided, however, (i)
the transferor shall, within twenty (20) days after such transfer, furnish
to the Parent written notice of the name and address of such transferee
or assignee and the securities with respect to which such registration
rights are being assigned and (ii) such transferee shall agree to be
subject to all restrictions set forth in this Agreement.
2.11 Amendment of Registration Rights. Any provision of this Section 2
may be amended and the observance thereof may be waived (either generally
or in a particular instance and either retroactively or prospectively),
only with the written consent of the Parent and the Holders of at least
sixty-six and two-thirds percent (66-2/3%) of the Registrable Securities
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then outstanding. Any amendment or waiver effected in accordance with
this Section 2.11 shall be binding upon each Holder and the Parent. By
acceptance of any benefits under this Section 2, Holders of Registrable
Securities hereby agree to be bound by the provisions hereunder.
2.12 Limitation on Subsequent Registration Rights. After the date of
this Agreement, the Parent shall not, without the prior written consent
of the Holders of sixty-six and two-thirds percent (66-2/3%) of the
Registrable Securities then outstanding, enter into any agreement with
any holder or prospective holder of any securities of the Parent that
would conflict with or impair the registration rights granted to the
Holders hereunder.
2.13 "Market Stand-Off" Agreement; Agreement to Furnish Information.
If requested by the Parent and an underwriter of the Parent's Common
Stock (or other securities), each Holder hereby agrees that such Holder
shall not sell, transfer, make any short sale of, grant any option for
the purchase of, or enter into any hedging or similar transaction with
the same economic effect as a sale, any Common Stock (or other
securities) of the Parent held by such Holder (other than those included
in the registration) for a period specified by the representative of
the underwriters of Common Stock (or other securities) of the Parent
not to exceed ninety (90) days following the effective date of a
registration statement of the Parent filed under the Securities Act;
provided that all officers and directors of the Parent enter into similar
agreements.
Each Holder agrees to execute and deliver such other agreements as may
be reasonably requested by the Parent or the underwriter which are
consistent with the foregoing or which are necessary to give further
effect thereto. In addition, if requested by the Parent or the
representative of the underwriters of Common Stock (or other securities)
of the Parent, each Holder shall provide, within ten (10) days of such
request, such information as may be required by the Parent or such
representative in connection with the completion of any public offering
of the Parent's securities pursuant to a registration statement filed
under the Securities Act. The obligations described in this Section 2.13
shall not apply to a registration relating solely to employee benefit
plans on Form S-1 or Form S-8 or similar forms that may be promulgated
in the future, or a registration relating solely to a SEC Rule 145
transaction on Form S-4 or similar forms that may be promulgated in the
furore. The Parent may impose stop-transfer instructions with respect
to the shares of Common Stock (or other securities) subject to the
foregoing restriction until the end of said ninety (90) day period.
2.14 Rule 144 Reporting. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may
permit: the sale of the Registrable Securities to the public without
registration, the Parent agrees to use its best efforts to:
(a) At all times, make and keep public information available, as those
terms are understood and defined in SEC Rule 144 or any similar or
analogous rule promulgated under the Securities Act;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Parent under the Exchange Act; and
(c) So long as a Holder owns any Registrable Securities, furnish to
such Holder forthwith upon request: a written statement by the Parent as
to its compliance with the reporting requirements of said Rule 144 of the
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Securities Act, and of the Exchange Act; a copy of the most recent annual
or quarterly report of the Parent; and such other reports and documents
as a Holder may reasonably request in availing itself of any rule or
regulation of the SEC allowing it to sell any such securities without
registration.
2.15 Sales through Designated Market Makers. In connection with any sale
of Registrable Securities pursuant to Section 2.3, each Holder agrees to
effect such sale through a "market maker" (as such term is defined in
Section 3(a)(38) of the Securities Exchange Act of 1934) designated by
the Parent, provided that the Parent has designated at least two such
market makers and provided that such market makers use their good faith
efforts to effect all sales as directed by the applicable Holder. The
parties agree that the initial market makers shall be First Security Van
Kasper and Volpe Brown Whelan & Company. The Parent agrees to notify
each Holder in writing at least fifteen (15) days prior to any change in
the initial market makers.
SECTION 3. MISCELLANEOUS
3.1 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely
within California.
3.2 Survival. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by any Holder and the
closing of the transactions contemplated by this Agreement and the Merger
Agreement. All statements as to factual matters contained in any
certificate or other instrument delivered by or on behalf of the Parent
pursuant hereto in connection with the transactions contemplated hereby
shall be deemed to be representations and warranties by the Parent hereunder
solely as of the date of such certificate or instrument.
3.3 Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon,
the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by
each person who shall be a holder of Registrable Securities from time to
time; provided, however, that prior to the receipt by the Parent of
adequate written notice of the transfer of any Registrable Securities
specifying the full name and address of the transferee, the Parent may
deem and treat the person listed as the holder of such shares in its
records as the absolute owner and holder of such shares for all purposes,
including the payment of dividends or any redemption price.
3.4 Entire Agreement. This Agreement, the Exhibits hereto, the Merger
Agreement and the other documents delivered pursuant thereto constitute
the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound
to any other in any manner by any representations, warranties, covenants
and agreements except as specifically set forth herein and therein.
3.5 Severability. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provisions of this
Agreement, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein.
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3.6 Amendment and Waiver.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Parent and
the holders of at least fifty percent (50%) of the Registrable
Securities.
(b) Except as otherwise expressly provided, the obligations of the
Parent and the rights of the Holders under this Agreement may be
waived only with the written consent of the holders of at least fifty
percent (50%) of the Registrable Securities.
3.7 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon
any breach, default or noncompliance of the Parent under this Agreement
shall impair any such right, power, or remedy, nor shall it be
construed to be a waiver of any such breach, default or noncompliance,
or any acquiescence therein, or of any similar breach, default or
noncompliance thereafter occurring. It is further agreed that any
waiver, permit, consent, or approval of any kind or character on any
Holder's part of any breach, default or noncompliance under the
Agreement or any waiver on such Holder's part of any provisions or
conditions of this Agreement must be in writing and shall be effective
only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, by law, or otherwise afforded
to Holders, shall be cumulative and not alternative.
3.8 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal
delivery to the party to be notified, (b) when sent by confirmed telex
or facsimile if sent during normal business hours of the recipient;
If not, then on the next business day, (c) five (5) days after having
been sent by registered or certified mail, return receipt requested,
postage prepaid, or (d) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent
to the party to be notified at the address as set forth on the
signature pages hereof or Exhibit A hereto or at such other address
as such party may designate by ten (10) days advance written notice
to the other parties hereto.
3.9 Attorneys' Fees. In the event that any suit or action is instituted
to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all
fees, costs and expenses of enforcing any right of such prevailing
party under or with respect to this Agreement, including without
limitation, such reasonable fees and expenses of attorneys and
accountants, which shall include, without limitation, all fees, costs
and expenses of appeals.
3.10 Titles and Subtitles. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
3.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this REGISTRATION
RIGHTS AGREEMENT as of the date set forth in the first paragraph hereof.
MYSOFTWARE COMPANY,
a Delaware corporation
/s/ David Mans
-------------------------
David Mans
Chairman of the Board
/s/ Jim Williams
-------------------------
JIM WILLIAMS
/s/ David Hehman
-------------------------
DAVID HEHMAN
/s/ Bozena Ivanshenko
-------------------------
BOZENA IVANSHENKO
/s/ Serge Ivanshenko
-------------------------
SERGE IVANSHENKO
TRILOGY ASSET MANAGEMENT, INC.,
GENERAL PARTNER OF TRILOGY LIMITED, LP
Signature:/s/ Trilogy Asset Management, Inc.
PETERSON VENTURES I, L.L.C.
Signature:/s/ Peterson Ventures I, L.L.C.
LOVE CAPITAL PARTNERS, L.P.
Signature:/s/ Love Capital Partners, L.P.
SLAYTON CAPITAL
Signature:/s/ Slayton Capital
<PAGE>
ROBERTSON STEPHENS EMERGING GROWTH PARTNERS L.P.
Signature:/s/ Robertson Stephens Emerging Growth Partners L.P.
INTERACTIVE MINDS VENTURES L.P.
Signature: /s/ Interactive Minds Ventures L.P.
/S/ Carl Nichols
-------------------------
CARL NICHOLS
/s/ Gregory W. Slayton
-------------------------
GREGORY W. SLAYTON
/s/ Stuart A. Knowles
-------------------------
STUART A. KNOWLES
/s/ Howard Love
-------------------------
HOWARD LOVE
<PAGE>
EXHIBIT 5.1
January 31, 2000
JAMES C. KITCH
(650) 843-5027 [email protected]
ClickAction Inc.
2197 East Bayshore Road
Palo Alto, California 94303
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in
connection with the filing by ClickAction Inc. (the "Company") of a
Registration Statement on Form S-3 (the "Registration Statement") with
the Securities and Exchange Commission covering the offering of
363,402 shares of the Company's common stock, $.001 par value
(the "Shares"), to be sold by certain stockholders as described in
the Registration Statement. Defined terms used herein shall have the
meanings attributed to such terms in the Registration Statement
unless otherwise stated herein.
In connection with this opinion, we have examined the Registration
Statement, the Company's Certificate of Incorporation and Bylaws,
and such other documents, records, certificates, memoranda and other
instruments as we deem necessary as a basis for this opinion. We
have assumed the genuineness and authenticity of all documents submitted
to us as originals, the conformity to originals of all documents
submitted to us as copies thereof, and the due execution and delivery
of all documents where due execution and delivery are a prerequisite
to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of
the opinion that the Shares are validly issued, fully paid, and
nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the
caption "Legal Matters" in the prospectus included in the Registration
Statement.
Very truly yours,
Cooley Godward LLP
By: /s/ James C. Kitch
-------------------
James C. Kitch
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EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
ClickAction Inc. and subsidiary
We consent to the inclusion in the registration statement dated January 31, 2000
on Form S-3 of ClickAction Inc. of our report dated January 31, 2000, relating
to the consolidated balance sheets of ClickAction Inc (formerly known as
MySoftware Company) and subsidiary as of December 31, 1998, and 1997, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1998
and to the reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
------------------
Mountain View, California
January 31, 2000
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