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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-20789
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PRIMIX SOLUTIONS INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 04-3249618
(State of Incorporation) (I.R.S. Employer Identification No.)
</TABLE>
ONE ARSENAL MARKETPLACE,
WATERTOWN, MA 02472
(Address of principal executive offices)
Telephone: (617) 923-6500
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Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
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Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information incorporated
by reference in Part III of this Form 10-K or any amendment to this Form
10-K. / /
The aggregate market value of the voting stock of the registrant held by
non-affiliates of the registrant on March 20, 2000 was $64,681,401.
The number of shares of the registrant's Common Stock outstanding on March
20, 2000 was 15,339,164.
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STATEMENTS MADE OR INCORPORATED INTO THIS FORM 10-K INCLUDE A NUMBER OF
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934. FORWARD
LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION, STATEMENTS CONTAINING THE WORDS
"ANTICIPATES," "BELIEVES," "EXPECTS," "INTENDS," "FUTURE," AND WORDS OF SIMILAR
IMPORT WHICH EXPRESS MANAGEMENT'S BELIEFS, EXPECTATIONS OR INTENTIONS REGARDING
THE COMPANY'S FUTURE PERFORMANCE. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE SET FORTH IN THE FORWARD-LOOKING STATEMENTS. CERTAIN
FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE ARE DISCUSSED IN THE SECTION ENTITLED
"CERTAIN FACTORS THAT MIGHT AFFECT FUTURE RESULTS" ON PAGE 15 OF THIS ANNUAL
REPORT.
PART I
ITEM 1. BUSINESS
Primix Solutions Inc. ("Primix" or the "Company"), a Delaware corporation,
was incorporated in January 1994. Since its inception, Primix has helped
organizations use information technology to solve business problems and
capitalize on new business opportunities. Primix' customers have included large,
globally recognized corporations such as Apple Computer, The Gillette Company,
Lucent Technologies and Rockwell Collins; leading international companies such
as A.T. Cross, Data General Corporation, Pergo and Standard & Poor's; and
venture-funded Internet startups including QuickTake.com, Student Universe, and
Inka.net.
Since the first quarter of 1998, the Company has focused exclusively on
e-Business consulting services. The Company defines "e-Business" as A TOOL KIT
OF INTERNET-ENABLED STRATEGIES, TECHNOLOGIES AND DESIGN APPROACHES TO MANAGE THE
NETWORK OF RELATIONSHIPS THAT DEFINE A BUSINESS. Better managing these
relationships--between and among customers, vendors, suppliers, distributors and
employees--can help businesses achieve superior business results by increasing
sales, cutting costs and improving productivity, better leveraging assets,
promoting customer loyalty, and accelerating business processes.
Companies wishing to leverage the potential of e-Business often face a mix
of strategic, technical, and creative challenges for which they require
outsourced services. In competing to deliver those services, large,
well-established professional services firms such as management consultancies,
systems integrators and advertising agencies face great operational and cultural
challenges in trying to address the unique inter-disciplinary requirements of
such projects.
During 1998, Primix began to narrow its focus on the e-Business opportunity.
Having made strategic investments in developing the Company's fixed-time /
fixed-price delivery methodology, corporate identity, consulting, and sales
organizations, Primix added executives with deep experience in cross-media brand
development, Web site design, and strategic and business process consulting to
its management team during the first quarter of 1999. This expertise added to
the Company's established strength in e-Business consulting, systems integration
and solution development has allowed the Company to build a balanced approach to
strategy, design and technology on a foundation of technical excellence.
On December 31, 1998, Primix acquired Advis, Inc., a privately held
Boston-based e-Business consulting company, which augmented the depth and
breadth of the Company's capabilities in developing highly advanced systems
architectures that support e-Business solutions. In addition to adding
approximately 25 highly skilled technical consultants, the Advis acquisition
brought valuable existing customer relationships.
On December 3, 1999, Primix acquired Black Bean Studios, Inc., a privately
held Boston-based design boutique specializing in digital media, which augmented
the depth and breadth of the Company's capabilities in developing highly
effective user interfaces at the front end of e-Business solutions. In
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addition to adding 11 highly skilled creative consultants, the Black Bean
acquisition brought a portfolio of world-class design work and a reputation for
excellence among the Internet design community.
Primix now combines:
- THE STRATEGIC INSIGHT OF A MANAGEMENT CONSULTING FIRM. The Company's
strategic consultants bring intellectual capital and insight to client
development teams, define and drive consensus on a client business case,
capture and distill the primary inputs for design and development, manage
change within the client organization, and measure results to drive a
cycle of continuous improvement.
- THE CREATIVE TALENT, BRAND INSIGHT AND GRAPHIC DESIGN EXPERTISE OF AN
ADVERTISING AGENCY. The Company's creative and branding consultants bring
target focus, brand stewardship and human factors to the development team.
They ensure the usability and aesthetic quality of Primix-developed
applications, using rational and emotional communication to achieve
business results.
- THE TECHNICAL DEPTH OF A SYSTEMS INTEGRATOR. The Company's technical
consultants bring specific technical expertise and generalized integration
experience to the development team. They architect flexible, scale-able IT
solutions, develop code, and manage successful integration and rollout.
These core competencies--combined through a carefully defined methodology
and supported by extensive program management experience--help clients define,
develop and deploy e-Business solutions that deliver real business results.
Primix' essential focus is the delivery of business results to commercial
enterprises. In the final analysis the Company is in the business of selling a
return-on-investment to clients. Primix maintains this focus through an approach
to sales and delivery it calls "essential e-business-TM-." Essential e-business
is Primix' approach to developing Internet solutions, and it informs every
aspect of the company:
- OUR CULTURE--Where people with a PASSION FOR BUSINESS RESULTS thrive.
- OUR INSIGHT--Which defines e-business in a way that makes sense to
managers, as a toolkit to manage the network of relationships that define
their business.
- OUR APPROACH--Marrying strategy, technology and design to build consensus
on objectives, integrate new systems with established ones, and create
user experiences that encourage adoption.
- OUR PROCESS--An iterative methodology that focuses investments where they
prove to deliver returns.
- OUR ACCOUNTABILITY--A discipline of defining the business case for
e-business initiatives, and of measuring those results to learn and
improve.
MARKET OPPORTUNITY
The development of the Internet--a ubiquitous "network of networks" governed
by universally accepted technical standards--presents opportunities and threats
to most businesses.
Companies use the Internet to:
- INCREASE SALES, through the development of new channels, new customers,
and new offerings
- CUT COSTS and INCREASE PRODUCTIVITY, by automating business processes, and
streamlining flows of work and information
- BETTER LEVERAGE ASSETS, by focusing most valuable assets on most valuable
functions
- PROMOTE LOYALTY, by changing the economics of customer service
- ACCELERATE BUSINESS PROCESSES, by reducing time-to-market and fulfillment
processes
- ESTABLISH A COMPETITIVE ADVANTAGE, through any of the above.
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Forrester Research, Inc., a technology industry research firm, estimates the
market for Internet and electronic commerce services will grow from
$5.4 billion in 1998 to $32.7 billion by 2002. International Data Corp., another
technology industry research firm, forecasts that the market for Internet and
electronic commerce services worldwide will grow from $4.6 billion in 1997 to
$43.7 billion by 2002. These projections represent a compound annual growth rate
of more than 55% over these periods. The Company believes organizations are
increasingly searching for a single-source professional services firm that can
deliver integrated strategic, technical and creative design skills coordinated
to deliver Internet-based business solutions.
For this reason, the Company believes that there is a strong demand for
consulting services that help companies to develop e-Business strategies and to
design and implement innovative e-Business solutions that transform key business
processes and provide competitive advantage. The Company further believes that
few companies today have exactly the right combination of expertise in
e-Business strategy development, creative design and on-line branding, and
complex system integration required for building such solutions.
E-SOLUTIONS PRACTICES
Primix focuses its efforts to capitalize on this opportunity through the
definition of four functional market segments, or "e-Solutions Practices":
- E-COMMERCE: Selling products to customers and tracking orders through the
cycle of ordering, validation, payment, scheduling, shipment, tracking and
delivery
- KNOWLEDGE MANAGEMENT (KM): Enabling more effective decision-making by
internal and external customers by capturing, categorizing, and
disseminating useful information
- CUSTOMER RELATIONSHIP MANAGEMENT (CRM): Managing customer interaction and
providing personalized service to create long-term, mutually-beneficial
customer/vendor relationships
- SUPPLY CHAIN MANAGEMENT (SCM): Responding to customer demand with
increased speed and customization by more efficiently managing
relationships with suppliers and distributors
This segmentation enables the Company to track immediate returns on its
investments--in intellectual property, technical expertise, asset development,
partnerships and marketing--through success in sales and delivery to specific
target markets. It enables an entrepreneurial approach to the pursuit of the
e-Business opportunity, establishing profit centers to which authority and
accountability can be delegated while ensuring the optimization of staff across
the entire Company.
The Company's pre-defined e-Business service offerings are defined in these
practices, then rolled out across a growing network of regional offices through
a program of formal and informal training, asset transfer, and sales support.
OFFERINGS
Primix' list of service offerings includes the following:
QUICKSTART-TM- is an accelerated, fixed-price / fixed-time e-Commerce
solution development process that lets companies launch a complete, integrated
e-Commerce site in just 90 days, for less than the cost of a fully custom
implementation. It combines strategic e-Business consulting services to build
consensus on a business case, brand-driven creative design to leverage and
support an established brand identity, and custom systems integration services
to extend established business processes, ERP and legacy systems to the
Internet. To deliver QUICKSTART, Primix employs pre-built frameworks based on
the Microsoft Windows NT-Registered Trademark- platform and Microsoft
BackOffice-Registered Trademark-components, including Site Server Commerce
Edition, Internet Information Server and SQL Server 7.0.
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KNOWLEDGECORE-TM- offers customers a fully functional, individualized Web
portal site built around best-of-breed business practices and technologies. The
portal makes it easier for organizations to generate, gather, store, connect and
apply knowledge where and when it's needed. It is a complete knowledge
management package that is designed, developed and delivered in a modular
fashion to facilitate rapid integration with customers' existing business
systems and processes. KnowledgeCORE includes services and technologies from a
number of leading KM vendors. The offering is designed to add value to companies
in any number of industries, even those as diverse as insurance and
pharmaceuticals.
E-CATALYST provides funded startups a comprehensive suite of services
including strategic e-business consulting, technology, branding, marketing and
site design, development and deployment. Clients of the e-Catalyst program also
have access to the Primix incubator, which includes office space, furnishings
and equipment in a collaborative work environment as well as access to business
development, information technology, finance and human resource professionals.
The Primix team will co-locate with the select startups, helping the client
achieve its own business goals with the integration of Primix' and its partners'
services. The result is a full suite of tools and methodologies available to
dot-coms over a longer period of time than is usually addressed by incubators.
CRM 360 DEG. combines strategic e-business consulting, systems integration,
interactive design expertise and online branding to deliver improved customer
service across all points of contact in a company. The program uses e-business
"middleware" technology--sometimes referred to as enterprise application
integration (EAI) software--to enable the real-time communication of customer
information across multiple enterprise systems. This enables the creation of a
unified customer information model critical for a company-wide CRM initiative.
Primix then works with the client to build a set of customized business process
templates that identify how customer-related tasks and metrics can be employed
more effectively. Finally, marketing and design professionals ensure the
creation of a consistent brand experience across all customer channels.
SUPPLY CHAIN MANAGEMENT. SCM helps clients optimize supply and demand
processes through collaboration and integration with trading partners. Primix
works with clients to improve communication along a company's value chain, and
to help lower supply chain costs, transaction times, inventories and other
inefficiencies.
CUSTOM SERVICES. Primix also offers fully custom solution development
services for clients, including integrated e-Business solution development and
"a la carte" services in e-Business Strategy, Creative Services, e-Branding, and
emerging Internet technologies.
METHODOLOGY--THE PRIMIX PROCESS
The five-step Primix Process divides client engagements into smaller, more
manageable stages that can be scoped and priced properly according to the
Company's fixed time / fixed price approach. It is a framework under which
offering-specific methodologies are defined, ensuring that e-Business best
practices are incorporated in every client engagement.
- DEFINITION--Consists of distilling actionable business objectives from the
client organization, gathering inputs required by the development team,
and building foundation of consensus on key issues across each client
department represented in the project.
- IDEATION--Generating, evaluating and harvesting "Big Ideas", strategic,
technical or creative. The Ideation process is really the "magic" that
separates e-Business projects that deliver documents, code and graphics
from those that deliver results.
- EXPLORATION--Bounding scope through an iterative process of prioritizing
functional specifications and designing technical architectures.
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- EXECUTION--Development of the finished solutions. Typically characterized
by a team across companies, disciplines, departments and geographies
pulling hard in the same direction toward the same endpoint.
- OBSERVATION--Finally, Primix has established a formal process of tracking
performance against a solution's intended business goals. Insights gained
in the process provide fuel for the process of continuous improvement in
Internet time.
The customer benefits of this approach include that it is fast and
iterative, that it is modular, and that the fixed time/fixed price it enables
aligns the incentives of Primix and the client. For Primix, the process ensures
continuity of the customer relationship, reduces the barrier-to-trial for new
customers, and engenders a culture of project management discipline within the
Company.
STRATEGIC RELATIONSHIPS
To reach a broad potential customer base, the Company believes that it must
develop partnerships with software and hardware vendors and complementary
consulting services companies. Software and hardware vendors that advance the
objectives of Primix customers include those that provide e-Business
infrastructures, development tools, platforms and applications. Increasingly,
packaged software applications are emerging that address client needs for
standard e-Business processes. Primix intends to partner with these vendors, as
appropriate, to deliver solutions efficiently and cost effectively to its
clients. Consulting partners that fit with Primix' partnering strategy are those
that either provide strategic consulting services but not implementation
services, or services that do not overlap with Primix services. Many consulting
firms, hardware vendors and software vendors currently offer e-Business
solutions and therefore the Company believes that even partners may be
competitors, depending on the circumstance. This duality of partner
relationships is common in the high technology field.
COMPETITION
The market for consulting is intensely competitive. Primix expects
competition to persist and intensify in the future. Primix has experienced and
expects to continue to experience increased competition from current and future
competitors, many of whom have significantly greater financial, technical,
marketing resources, name recognition and customer base. Primix' current and
potential competitors include, among others: consulting divisions of leading
software system providers and hardware manufacturers; solution services
companies; and software vendors whose packaged applications can be used or
customized to support e-Business processes.
Primix' competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements or devote greater resources to
the promotion and sale of their consulting services than the Company. Also, the
Company's current and potential competitors generally have greater financial or
management resources, name recognition, or more extensive customer bases that
could be leveraged, thereby potentially limiting Primix' market share. Primix
expects to face additional competition as other established and emerging firms
enter the market for customized e-Business system integration services.
Increased competition could result in price reductions, fewer consulting
engagements, reduced gross margins and loss of market share, any of which could
materially and adversely affect the Company's business, operating results and
financial condition. In addition, current and potential competitors may make
strategic acquisitions or establish cooperative relationships among themselves
or with third parties, thereby increasing the ability to address the needs of
Primix' prospective customers. Such competition could materially and adversely
affect Primix' ability to obtain and retain support for its services. There can
be no assurance that Primix will be able to compete successfully against current
and future competitors, and the failure to do so could have a material adverse
effect upon the Company's business, operating results and financial condition.
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The principal factors affecting the market for Primix' services are
expertise in vertical market and horizontal process strategies, creative design
and on-line branding capabilities, system integration and implementation skills,
price, customer support, and project management. The failure to compete
successfully could have a material adverse effect upon the Company's business,
operating results and financial condition.
RESEARCH AND DEVELOPMENT
Historically, the Company has made substantial investments in product
development and technology integration. The Company believes that its investment
in developing proprietary technology has resulted in considerable expertise in
software development methodologies, back-end integration techniques and Internet
application development tools, as well as the intrinsic value of the technology
itself. This expertise serves to differentiate Primix from other companies
offering solution services. The Company is currently not developing software to
be sold independently from its service offerings. The Company's expenditures for
research and development of its former software products during 1997, 1998 and
1999 were $1,921,000, $309,000 and $0, respectively.
For the year ended December 31, 1999, research and development expenses
consisted primarily of compensation and benefits for employees in our Core
Technology group. This group enhances the knowledge and expertise of the
strategic, technical, and creative design disciplines. For the year ended
December 31, 1999, research and development expenses totaled $131,000.
PROPRIETARY RIGHTS
Primix relies on a combination of trademark, copyright and trade secret
laws, employee and third-party nondisclosure agreements and other means to
protect its proprietary rights in its technology and intellectual property. The
Company has filed applications for registration of its various trademarks. There
can be no assurance that any trademark applications will result in registered
trademarks or that, if issued, such trademarks would be upheld if challenged.
There can be no assurance that the Company's competitors will not
independently develop technologies or methodologies that are substantially
equivalent or superior to the Company's technology or methodologies, or that the
measures taken by the Company to protect its proprietary rights will be adequate
to prevent misappropriation of its technology or methodologies or independent
development by others of similar technology or methodologies. In addition, the
laws of various countries in which the Company's services may be sold may not
protect the Company's intellectual property rights to the same extent as the
laws of the United States.
There can be no assurance that third parties will not assert intellectual
property infringement claims against the Company or that any such claims will
not require the Company to enter into royalty arrangements or result in costly
litigation. The Company is not the subject of any legal action alleging the
infringement of any copyright or trademark rights of any person or of any
violation of trade secrets or other proprietary rights claimed by any third
party relating to the Company or the Company's technology or methodologies, nor
is the Company aware of any threatened litigation with regard thereto. However,
the computer software market is characterized by frequent and substantial
intellectual property litigation. Intellectual property litigation is complex
and expensive, and the outcome of such litigation is difficult to predict.
The Company believes that, due to the rapid pace of technological
innovation, its ability to establish and maintain a position of leadership in
the industry is dependent more upon the skills of its consulting and development
personnel than upon the legal protections afforded to its existing technology
and methodology.
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EMPLOYEES
As of March 20, 2000, Primix had a total of 152 employees. The Company's
future success depends in significant part upon the continued service of its key
technical, consulting, and senior management personnel, and its continuing
ability to attract and retain highly qualified technical, services, and
managerial personnel. Competition for highly qualified personnel is intense, and
there can be no assurance that the Company will be able to retain its technical
and managerial employees or that it will be able to attract and retain such
personnel in the future. None of the Company's employees is represented by a
labor union. The Company has not experienced any work stoppages and considers
its relations with its employees to be generally good.
In order for Primix to fully exploit the market opportunity for its
services, an effective planning and management process is required. The
industry's rapid rate of change has placed, and is expected to continue to
place, a significant strain on managerial, operational and financial resources.
Many of the Company's consulting staff were only recently hired. To manage
potential future growth, Primix must continue to implement and improve its
operational and financial systems and to expand, train and manage its employee
base. The Company's future operating results also will depend on its ability to
expand and train its sales and marketing organizations and implement and manage
new distribution channels to penetrate different and broader markets. If Primix
is unable to manage growth effectively, the Company's business, operating
results and financial condition could be materially adversely affected.
ITEM 2. PROPERTIES
The Company leases approximately 26,000 square feet of office space in
Watertown, Massachusetts under a five-year lease agreement, which commenced in
March 1996. This facility is being fully utilized. In April 2000, the Company
expects to enter into a lease agreement for a new headquarters location and
expects to move into those new offices in Watertown, Massachusetts in the third
quarter of 2000. The Company will lease approximately 70,000 square feet. The
Company's field operations occupy leased facilities in three locations
throughout the United States.
In connection with the Advis acquisition, the Company assumed two leases for
office space in Boston, Massachusetts that expire in August 2002. The Company
will sublease both locations through August 2002.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of its operations, the Company is subject to
performance under contracts and has certain legal actions and contingencies
pending. However, in management's opinion, no such outstanding matters should
have a material adverse effect on the Company's financial position, results of
operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders through solicitation of
proxies or otherwise.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's Common Stock, $.001 par value ("Common Stock"), has been
traded on the NASDAQ National Market ("Nasdaq") since the Company's initial
public offering on July 3, 1996 and currently trades under the symbol "PMIX".
The following table sets forth the high and low closing prices for the Company's
Common Stock as reported by Nasdaq for the periods indicated:
<TABLE>
<CAPTION>
MARKET
PRICES(1)
-------------------
1998 FISCAL QUARTERS HIGH LOW
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<S> <C> <C>
First....................................................... $2.75 $1.09
Second...................................................... $4.78 $2.19
Third....................................................... $3.09 $1.75
Fourth...................................................... $2.38 $1.38
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<TABLE>
<CAPTION>
MARKET PRICES(1)
-------------------
1999 FISCAL QUARTERS HIGH LOW
- -------------------- -------- --------
<S> <C> <C>
First....................................................... $ 2.84 $1.75
Second...................................................... $ 3.47 $2.28
Third....................................................... $ 3.25 $2.28
Fourth...................................................... $13.25 $2.38
</TABLE>
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(1) The prices listed reflect inter-dealer prices without retail mark-up,
mark-down or commission and may not necessarily represent actual
transactions.
HOLDERS
The number of record holders of the Company's Common Stock as of March 20,
2000 was approximately 119.
DIVIDENDS
The Company did not pay cash dividends on its Common Stock during the years
ended December 31, 1998 and December 31, 1999. The Company does not intend to
pay cash dividends on its Common Stock in the foreseeable future.
RECENT SALES OF UNREGISTERED SECURITIES
In connection with the acquisition of Advis, Inc., a Boston-based e-Business
consulting company, on December 31, 1998, the Company issued 171,000 shares of
Common Stock to David W. Buck, the sole stockholder of Advis. Such shares were
valued at $1.875 per share, the fair market value of the Common Stock on such
date. Such shares were issued pursuant to Section 4(2) of the Securities Act of
1933, as amended, and Rule 506 of Regulation D promulgated thereunder. See Note
2 to the Consolidated Financial Statements.
In connection with the acquisition of Black Bean Studios, Inc., a
Boston-based multi-disciplinary design firm, on December 3, 1999, the Company
issued 100,000 shares of Common Stock to the stockholders of Black Bean. Such
shares were valued at $10.75 per share, the fair market value of the Common
Stock on such date. Such shares were issued pursuant to Section 4(2) of the
Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated
thereunder. See Note 2 to the Consolidated Financial Statements.
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ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of the Company, including
the Notes thereto, included elsewhere in this Annual Report on
Form 10-K. The consolidated statement of operations data set forth below for the
fiscal years ended December 31, 1997, 1998 and 1999, and the consolidated
balance sheet data as of December 31, 1998 and 1999, are derived from the
Company's audited financial statements which have been audited by Arthur
Andersen LLP, independent public accountants, and which are included elsewhere
in this report. The consolidated statement of operations data for the years
ended December 31, 1995 and 1996, as well as the consolidated balance sheet data
as of December 31, 1995, 1996, and 1997 are derived from audited consolidated
financial statements not included in this Annual Report on Form 10-K. The
historical results may not be indicative of the results of operations to be
expected in the future.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1995 1996 1997 1998(1) 1999(2)
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue:
Professional services....................................... $ 3,919 $ 5,098 $ 4,399 $ 4,605 $ 11,989
Software license and maintenance............................ 2,151 8,106 1,248 211 --
-------- -------- -------- -------- --------
Total revenue............................................... 6,070 13,204 5,647 4,816 11,989
Operating expenses:
Professional services....................................... 2,646 3,735 3,570 4,010 9,406
Software license and maintenance costs...................... 717 1,472 555 -- --
Sales and marketing......................................... 378 6,211 2,403 2,197 3,442
General and administrative.................................. 1,815 5,048 4,695 4,124 6,309
Research and development.................................... 3,135 3,146 1,921 309 131
Amortization of goodwill.................................... -- -- -- -- 241
Restructuring charge........................................ -- -- 1,782 -- --
Compensation to former chief executive Officer.............. -- 6,794 227 -- --
-------- -------- -------- -------- --------
Total operating expenses.................................... 8,691 26,406 15,153 10,640 19,529
-------- -------- -------- -------- --------
Operating loss.............................................. (2,621) (13,202) (9,506) (5,824) (7,540)
Interest (expense) income, net.............................. (77) 953 1,885 1,622 1,117
-------- -------- -------- -------- --------
Loss before provision for income taxes...................... (2,698) (12,249) (7,621) (4,202) (6,423)
Provision for income taxes.................................. -- 95 15 -- --
-------- -------- -------- -------- --------
Net loss.................................................... $ (2,698) $(12,344) $ (7,636) $ (4,202) $ (6,423)
======== ======== ======== ======== ========
Basic and diluted net loss per common share................. $ (.28) $ (1.03) $ (.52) $ (.29) $ (.44)
======== ======== ======== ======== ========
Shares used in computing net loss per common share.......... 9,492 12,560 14,560 14,398 14,626
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------
1995 1996 1997 1998(1) 1999(2)
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and marketable securities............ $ 105 $40,050 $33,713 $26,693 $18,540
Working capital (deficit)................................... (1,967) 36,471 31,836 26,511 19,860
Total assets................................................ 2,626 46,151 36,266 33,155 27,336
Total stockholders' equity.................................. (2,804) 39,737 33,405 29,617 24,453
</TABLE>
- ------------------------------
(1) The Company acquired Advis, Inc. on December 31, 1998. The total
consideration consisted of: 171,000 shares of the Company's common stock,
which was valued at $1.875 per share, the fair market value of the stock, a
note payable of $203,748 paid in January 1999 and the assumption of
$1,593,536 of net liabilities. Included in the net liabilities are accounts
receivable of $637,805, prepaid expenses and other current assets of $38,899
and computer and office equipment of $55,816. In December 1998, the Company
advanced Advis $1,543,174 to satisfy certain obligations. This advance is
included in the net liabilities acquired. See Note 2 of the Consolidated
Financial Statements.
(2) The Company acquired Black Bean Studios, Inc. on December 3, 1999. The total
consideration consisted of: approximately $806,000 cash and 100,000 shares
of the Company's common stock, which was valued at $10.75 per share, the
fair market value of the stock at the date of the acquisition. In addition,
the Company assumed Black Bean's net liabilities of approximately $14,000.
See Note 2 of the Consolidated Financial Statements.
There were no cash dividends declared per common share for any of the years
shown above.
9
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Primix Solutions Inc. ("Primix" or the "Company"), a Delaware corporation,
was incorporated in January 1994. Since its inception, Primix has helped
organizations use information technology to solve business problems and
capitalize on new business opportunities. Primix' customers have included large,
globally recognized corporations, leading international middle-market companies
and venture-funded Internet startups.
Since the first quarter of 1998, the Company has focused exclusively on
e-Business consulting services. The Company defines "e-Business" as A TOOL KIT
OF INTERNET-ENABLED STRATEGIES, TECHNOLOGIES AND DESIGN APPROACHES TO MANAGE THE
NETWORK OF RELATIONSHIPS THAT DEFINE A BUSINESS. Better managing these
relationships--between and among customers, vendors, suppliers, distributors and
employees--can help businesses achieve superior business results by increasing
sales, cutting costs and improving productivity, better leveraging assets,
promoting customer loyalty, and accelerating business processes.
Companies wishing to leverage the potential of e-Business often face a mix
of strategic, technical, and creative challenges for which they require
outsourced services. In competing to deliver those services, large,
well-established professional services firms such as management consultancies,
systems integrators and advertising agencies face great operational and cultural
challenges in trying to address the unique inter-disciplinary requirements of
such projects.
During 1998, Primix began to narrow its focus on the e-Business opportunity.
Having made strategic investments in developing the Company's
fixed-time/fixed-price delivery methodology, corporate identity, consulting, and
sales organizations, Primix added executives with deep experience in cross-media
brand development, Web site design, and strategic and business process
consulting to its management team during the first quarter of 1999. This
expertise added to the Company's established strength in e-Business consulting,
systems integration and solution development has allowed the Company to build a
balanced approach to strategy, design and technology on a foundation of
technical excellence.
On December 31, 1998, Primix acquired Advis, Inc., a privately held
Boston-based e-Business consulting company, which augmented the depth and
breadth of the Company's capabilities in developing highly advanced systems
architectures that support e-Business solutions. In addition to adding
approximately 25 highly skilled technical consultants, the Advis acquisition
brought valuable existing customer relationships.
On December 3, 1999, Primix acquired Black Bean Studios, Inc., a privately
held Boston-based design boutique specializing in digital media, which augmented
the depth and breadth of the Company's capabilities in developing highly
effective user interfaces at the front end of e-Business solutions. In addition
to adding 11 highly skilled creative consultants, the Black Bean acquisition
brought a portfolio of world-class design work and a reputation for excellence
among the Internet design community.
10
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of
total revenue represented by certain items reflected in the Company's
consolidated statements of operations:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Revenue:
Professional services................................... 78% 96% 100%
Software license and maintenance........................ 22 4 --
---- ----- ----
Total revenue..................................... 100 100 100
Operating expenses:
Professional services..................................... 63 83 78
Software license and maintenance costs.................... 10 -- --
Sales and marketing....................................... 43 46 29
General and administrative................................ 83 86 53
Research and development.................................. 34 6 1
Amortization of goodwill.................................. -- -- 2
Restructuring charge...................................... 31 -- --
Compensation to former chief executive officer............ 4 -- --
---- ----- ----
Total operating expenses.................................. 268 221 163
Operating loss............................................ (168) (121) (63)
Interest income, net...................................... 33 34 9
---- ----- ----
Net loss.................................................. (135)% (87)% (54)%
==== ===== ====
</TABLE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
REVENUE
Total revenue increased by $7.4 million to $12.0 million in 1999 from $4.6
million in 1998. For the year ended December 31, 1999, all revenue was derived
from consulting services, while in the prior year consulting services revenue
represented 96% of total revenue with the remaining 4% derived from software
license and maintenance revenue. The increase was due to an increase in the
number of consulting engagements serviced during 1999 compared to 1998. The
decrease in software license and maintenance revenue was due to the fact that
the Company ceased to market its software products in 1998 as it focused on its
new business plan of providing only professional services.
PROFESSIONAL SERVICES
The cost of professional services consists primarily of compensation and
benefits for employees engaged in the delivery of professional services as well
as fees to third party consultants and non-reimbursable expenses related to
client projects. Professional services expenses increased by $5.4 million to
$9.4 million, or 78% of total revenue, in 1999 from $4.0 million, or 83% of
total revenue, in 1998. The absolute dollar increase is primarily due to
increased headcount-related costs, an increased usage of third party consultants
and increased travel costs. Professional services headcount increased from 31 at
December 31, 1998 to 90 at December 31, 1999. The decrease as a percentage of
total revenue is primarily the result of increased utilization of the
professional staff. The Company expects professional services expenses to
increase in 2000 as the Company seeks to hire additional professional services
personnel.
11
<PAGE>
SALES AND MARKETING
Sales and marketing expenses consist primarily of compensation and benefits
for sales and marketing personnel and costs for advertising and marketing. Sales
and marketing expenses increased by $1.2 million to $3.4 million, or 29% of
total revenue, in 1999 from $2.2 million, or 46% of total revenue, in 1998. The
absolute dollar increase is primarily due to increased headcount-related costs,
commissions as a result of higher revenue levels, and increases in direct
mailing and collateral costs. Sales and marketing headcount increased from 11 at
December 31, 1998 to 15 at December 31, 1999.
The Company expects to increase its spending associated with its brand
awareness through direct mail and advertising campaigns during 2000. There can
be no assurance that related increased expenditures will result in increased
revenue or improvement in the effectiveness of the sales organization.
GENERAL AND ADMINISTRATIVE
General and administrative expenses consist primarily of compensation and
benefits for executive, finance, information technology, human resource,
recruiting and administrative personnel, rent expense, depreciation expense,
professional fees, recruiting fees, and system support costs. General and
administrative expenses increased by $2.2 million to $6.3 million, or 53% of
total revenue, in 1999 from $4.1 million, or 86% of total revenue, in 1998. The
absolute dollar increase is primarily due to increased headcount-related costs,
recruiting fees, rent expense, and consulting fees slightly offset by a decrease
in professional fees. General and administrative headcount increased from 12 at
December 31, 1998 to 30 at December 31, 1999. The Company expects general and
administrative expenses to increase during 2000 to support the Company's
expanding business and due to the growth in management systems and
administrative infrastructure. In April 2000, the Company expects to enter into
a ten-year lease commitment for 70,000 square feet, effective August 1, 2000 at
an annual rental rate of approximately $1.8 million. Consequently, rent expense
will increase in 2000.
RESEARCH AND DEVELOPMENT
Research and development expenses consist primarily of compensation and
benefits for research and development personnel. This group develops reusable
code and other assets for the use within its solutions practice and the
knowledge and expertise of the strategic, technical, and creative design
disciplines. Research and development expenses decreased to $131,000, or 1% of
total revenue, in 1999 from $309,000, or 6% of total revenue, in 1998. The
decrease is primarily due to decreased headcount-related costs. Research and
development headcount decreased from 7 at December 31, 1998 to 3 at December 31,
1999, which is directly related to the fact that the Company discontinued its
research and development efforts associated with its former software product
offerings in 1998.
AMORTIZATION OF GOODWILL
Amortization of goodwill of $241,000 for the year ended December 31, 1999 is
mainly attributable to the acquisition of Advis, Inc. in December 1998. The
excess purchase price over the net assets acquired of $2.2 million was recorded
as goodwill in December 1998 and is being amortized over its estimated useful
life of 10 years, beginning January 1, 1999. The excess purchase price over the
net assets acquired of $1.9 million related to the December 3, 1999 acquisition
of Black Bean Studios, Inc. was recorded as goodwill in December 1999 and is
being amortized over its estimated useful life of 10 years. $16,000 was
amortized in December 1999.
INTEREST INCOME, NET
Interest income, net is comprised primarily of interest income from cash,
cash equivalents and marketable securities. Interest income, net decreased to
$1.1 million in 1999 from $1.6 million in 1998. The
12
<PAGE>
decrease in interest income is primarily the result of a decline in the average
combined daily balances of the Company's cash, cash equivalents and marketable
securities.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
REVENUE
Total revenue decreased by $800,000 to $4.8 million in 1998 from $5.6
million in 1997. The decrease was due to decreases in the volume of sales of the
Company's software products, offset by an increase in consulting revenue. For
the year ended December 31, 1998, software license and maintenance revenue
represented 4% of total revenue with the remaining 96% derived from professional
services, compared with 22% and 78%, respectively, for the comparable prior
year.
In early 1998, the Company decided to unify its two business units into a
single consulting services organization focused on delivering business and
information technology solutions on a fixed-price/fixed-time basis. As a result,
the Company ceased marketing its stand-alone software product offerings and does
not anticipate future revenues to be generated from software product sales. The
Company had no re-sales of third-party software license and maintenance revenue
in 1998, compared to $121,000 in 1997.
PROFESSIONAL SERVICES
Professional services expenses increased by $400,000 to $4.0 million, or 83%
of total revenue, in 1998 from $3.6 million, or 63% of total revenue, in 1997.
The increase is primarily due to increased headcount-related costs. Professional
services headcount increased from 27 at December 31, 1997 to 31 at December 31,
1998.
SOFTWARE LICENSE AND MAINTENANCE COSTS
Software license and maintenance costs decreased to $0 in 1998 from $555,000
in 1997. The decrease was due to the fact that the Company ceased to market its
software products in 1998 as it focused on its new business plan of providing
only professional services.
SALES AND MARKETING
Sales and marketing expenses decreased by $200,000 to $2.2 million, or 46%
of total revenue, in 1998 from $2.4 million, or 43% of total revenue, in 1997.
The decrease in expenses is directly related to the reduction of
headcount-related costs and decreased commissions as a result of the decrease in
revenue.
GENERAL AND ADMINISTRATIVE
General and administrative expenses decreased by $600,000 to $4.1 million,
or 86% of total revenue, in 1998 from $4.7 million, or 83% of total revenue, in
1997. The absolute dollar decrease is directly related to the reduction of
salary and benefit costs associated with a reduction of the general and
administrative headcount.
RESEARCH AND DEVELOPMENT
Research and development expenses decreased to $309,000, or 6% of total
revenue, in 1998 from $1.9 million, or 34% of total revenue, in 1997. The
decrease was the result of the Company's change in focus at the end of the first
quarter of 1998, which resulted in the Company discontinuing its research and
development efforts associated with its former software product offerings.
13
<PAGE>
INTEREST INCOME, NET
For the year ended December 31, 1998, the Company recorded net interest
income of $1.6 million. The interest income is derived from interest earned on
the unused net proceeds received by the Company from its initial public offering
in July 1996. For the year ended December 31, 1997, the Company recorded net
interest income of $1.9 million. The decrease was the result of the Company's
declining cash and investment balances.
RESTRUCTURING CHARGE
On June 9, 1997, the Company announced that it had implemented a plan (the
"Restructuring Plan") to restructure the Company's operations. The Restructuring
Plan included write-offs and write-downs of certain assets and included accruing
the costs related to a significant reduction in the Company's work force. The
implementation of the Restructuring Plan resulted in a one-time charge of $1.8
million. See Note 1(n) of Notes to the Consolidated Financial Statements.
COMPENSATION TO FORMER CHIEF EXECUTIVE OFFICER
In connection with the 960,000 shares of Common Stock purchased by the
Company's former Chief Executive Officer (the "Former CEO") in 1996, the Company
agreed to loan the Former CEO up to $2,560,000 for payment of his anticipated
income tax liability resulting from such purchase. The Company funded $2,507,000
under the loan agreement in April 1997. The loan was secured by a first priority
pledge of the purchased shares. In June 1997, the Former CEO surrendered the
purchased shares in satisfaction of the loan. For the year ended December 31,
1997, the Company recorded an expense of $227,000 to reflect the difference
between the amount of the loan and the market value of the shares surrendered to
the Company. The Company has classified the shares acquired as treasury stock
with an initial carrying value of $2,280,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities utilized approximately $6.8 million for
the year ended December 31, 1999, resulting primarily from the net loss and the
growth in accounts receivable, prepaid expenses and other current assets.
The Company's investing activities, which consisted of net purchases of
short-term marketable securities, cash outflows associated with the acquisition
of Black Bean Studios, Inc., purchases of property and equipment, and funding of
loans to officers of the Company, utilized approximately $14.3 million for the
year ended December 31, 1999.
In March 1999, the Company issued two separate promissory notes, each in the
amount of $75,000 to two new employees of the Company who were subsequently
appointed as officers of the Company. The promissory notes are due on December
31, 2001 and bear interest at a rate of 6.75% per annum. On September 20, 1999,
one of the $75,000 notes was cancelled and a new promissory note totaling
$250,000 was issued. The note bears interest at a rate of 7% per annum until
September 30, 2002 when the interest rate will convert to the Prime rate plus
two percentage points for the remainder of the term. The outstanding principal
balance is payable quarterly in arrears in equal installments beginning on
January 1, 2005. The note is due on September 30, 2029. In January 2000, the
remaining $75,000 note was cancelled and a new promissory note totaling $250,000
was issued. The note bears interest at a rate of 7% per annum until December 31,
2002 when the interest rate will convert to the Prime rate plus two percentage
points for the remainder of the term. The outstanding principal balance is
payable quarterly in arrears in equal installments beginning on January 1, 2005.
The note is due on December 31, 2029.
14
<PAGE>
The Company's financing activities, which mainly consisted of payment of the
note payable to a related party, payment of the capital lease obligations, and
proceeds from the exercise of stock options, provided approximately $100,000 for
the year ended December 31, 1999.
In April 2000, the Company expects to enter into a ten-year lease commitment
for 70,000 square feet, effective August 1, 2000 at an annual rental rate of
approximately $1.8 million.
The Company currently anticipates that the existing cash, cash equivalents
and marketable securities balances will be sufficient to meet its anticipated
working capital and capital expenditure requirements for at least the next
twelve months. Thereafter, the Company may need to raise additional funds. The
Company may in the future seek to expand its business through possible
acquisitions or the opening of additional offices. The Company, however, has no
commitments or agreements with respect to any future acquisition and no
assurances can be given with respect to the likelihood or financial or business
effect of any future acquisition. Future acquisitions could be financed by
internally generated funds, bank borrowings, public offerings or private
placements of equity or debt securities, or a combination of the foregoing.
There can be no assurance that additional financing will be available when
needed on terms favorable to the Company or at all.
YEAR 2000 READINESS
To date, the Company has not experienced any problems with its computer
systems relating to the Year 2000 issue. The Company also is unaware of any
material Year 2000 problems with its clients or vendors. Accordingly, the
Company does not anticipate incurring material expenses or experiencing any
material operational disruptions as a result of any Year 2000 problems.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
Statements made or incorporated into this Form 10-K include a number of
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward
looking statements include, without limitation, statements containing the words
"anticipates," "believes," "expects," "intends," "future," and words of similar
import which express management's beliefs, expectations or intentions regarding
the Company's future performance. The Company's actual results could differ
materially from its historical results and from those set forth in the
forward-looking statements and may fluctuate between operating periods. Factors
that might cause such differences and fluctuations include the following: the
Company's ability to efficiently consolidate the operations of Black Bean
Studios Inc., the Company's ability to attract, train and retain qualified
strategic, creative and technical personnel, the Company's ability to retain its
sales and consulting staffs, the Company's ability to close sales, risks related
to the management of growth, development and promotional expenses related to the
introduction of new service offerings, changes in technology and industry
standards, limited operating history, changes in the market for the Company's
services, the rate of acceptance of the Company's services, dependence of the
Company's business on the Internet, increased competition, changing of pricing
policies by the Company or its competitors, the timing of receipt of orders from
major customers, development of Internet and Intranet products or enhancements
by vendors of existing client/ server or legacy software systems that compete
with the Company's consulting services, dependence on key personnel, proprietary
technology and the inherent difficulties in protecting intellectual property,
dependence on third-party technology, and exposure for product and professional
services liability. The market price of the Company's common stock has been, and
in the future will likely be, subject to significant fluctuations in response to
variations in quarterly operating results and other factors, such as
announcements of technological innovations or new products and services by the
Company or its competitors, or other events.
The Company has a limited operating history upon which to base an evaluation
of the Company and its prospects. The Company and its prospects must be
considered in light of the risks, expenses and
15
<PAGE>
difficulties frequently encountered by companies in early stages of development,
particularly companies in new and rapidly evolving markets and technologies. To
address these risks, the Company must, among other things, grow the consulting
business, respond to competitive developments, successfully adjust the Company's
strategy to changes in the marketplace, identify channels for the Company's
services, continue to attract, retain and motivate qualified management and
other employees, and remain knowledgeable with new and emerging technologies.
There can be no assurance that the Company will be successful in addressing such
risks. The Company has achieved only limited revenues to date and its ability to
generate significant revenues is subject to substantial uncertainty. The limited
operating history of the Company makes the prediction of future results of
operations difficult and therefore, there can be no assurance that the Company
will sustain revenue growth or achieve profitability. The Company has incurred
net losses since inception and expects to continue to incur losses on a
quarterly basis for the foreseeable future. Due to all of the foregoing factors,
it is possible that in some future quarter, the Company's operating results may
be below the expectations of public market analysts and investors. In such
event, the price of the Company's common stock may be materially adversely
affected.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company owns financial instruments that are sensitive to market risks as
part of its investment portfolio. The investment portfolio is used to preserve
the Company's capital until it is required to fund operations. All of these
market-risk sensitive instruments are classified as held-to-maturity and are not
held for trading purposes. The Company does not own derivative financial
instruments in its investment portfolio. The investment portfolio contains
instruments that are subject to the risk of a decline in interest rates.
The Company's investment portfolio includes investment grade debt
instruments. These bonds are subject to interest rate risk, and could decline in
value if interest rates fluctuate. Due to the short duration and conservative
nature of these instruments, the Company does not believe that it has a material
exposure to interest rate risk.
16
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PRIMIX SOLUTIONS INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Report of Independent Public Accountants.................... 18
Consolidated Balance Sheets as of December 31, 1998 and
1999...................................................... 19
Consolidated Statements of Operations for the Years Ended
December 31, 1997, 1998 and 1999.......................... 20
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1997, 1998 and 1999.............. 21
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1998 and 1999.......................... 22
Notes to Consolidated Financial Statements.................. 23
</TABLE>
17
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Primix Solutions Inc.:
We have audited the accompanying consolidated balance sheets of Primix
Solutions Inc. (a Delaware corporation) as of December 31, 1998 and 1999 and the
related consolidated statements of operations, and stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Primix
Solutions Inc. as of December 31, 1998 and 1999 and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 4, 2000
18
<PAGE>
PRIMIX SOLUTIONS INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $26,693 $ 5,685
Marketable securities..................................... -- 12,855
Accounts receivable, net of allowance of $92 and $50 in
1998 and 1999, respectively............................. 2,871 3,552
Prepaid expenses and other current assets................. 443 501
Note receivable from related party--current portion....... -- 150
------- -------
Total current assets.................................... 30,007 22,743
------- -------
Property and equipment, at cost:
Computer and office equipment............................. 2,432 2,752
Furniture and fixtures.................................... 488 457
Leasehold improvements.................................... 60 60
------- -------
2,980 3,269
Less--accumulated depreciation and amortization........... 2,160 2,813
------- -------
Property and equipment, net............................. 820 456
------- -------
Goodwill, net of accumulated amortization of $0 and $241 in
1998 and 1999, respectively............................... 2,178 3,812
Notes receivable from related parties....................... 150 325
------- -------
Total assets............................................ $33,155 $27,336
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of capital lease obligation............... $ 83 $ --
Accounts payable.......................................... 965 967
Accrued expenses.......................................... 2,161 1,916
Note payable to related party............................. 204 --
Deferred revenue.......................................... 83 --
------- -------
Total current liabilities............................... 3,496 2,883
------- -------
Capital lease obligation, net of current portion............ 42 --
------- -------
Total liabilities....................................... 3,538 2,883
------- -------
Commitments (Note 7)
Stockholders' equity:
Preferred stock, par value $1.00 per share; 5,000 shares
authorized; no shares issued and outstanding............ -- --
Common stock, par value $.001 per share; 50,000 shares
authorized; 15,239 and 15,339 shares issued and
outstanding in 1998 and 1999, respectively.............. 15 15
Treasury stock............................................ (1,516) (1,296)
Additional paid-in capital................................ 59,180 60,219
Accumulated deficit....................................... (28,062) (34,485)
------- -------
Total stockholders' equity.............................. 29,617 24,453
------- -------
Total liabilities and stockholders' equity.............. $33,155 $27,336
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
19
<PAGE>
PRIMIX SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Revenue:
Professional services..................................... $ 4,399 $ 4,605 $11,989
Software license and maintenance.......................... 1,248 211 --
------- ------- -------
Total revenue........................................... 5,647 4,816 11,989
------- ------- -------
Operating expenses:
Professional services..................................... 3,570 4,010 9,406
Software license and maintenance costs.................... 555 -- --
Sales and marketing....................................... 2,403 2,197 3,442
General and administrative................................ 4,695 4,124 6,309
Research and development.................................. 1,921 309 131
Amortization of goodwill.................................. -- -- 241
Restructuring charge...................................... 1,782 -- --
Compensation to former chief executive officer............ 227 -- --
------- ------- -------
Total operating expenses................................ 15,153 10,640 19,529
------- ------- -------
Operating loss.............................................. (9,506) (5,824) (7,540)
Interest income, net........................................ 1,885 1,622 1,117
------- ------- -------
Loss before provision for income taxes...................... (7,621) (4,202) (6,423)
Provision for income taxes.................................. 15 -- --
------- ------- -------
Net loss.................................................... $(7,636) $(4,202) $(6,423)
======= ======= =======
Basic and diluted net loss per common share................. $ (.52) $ (.29) $ (.44)
======= ======= =======
Basic and diluted weighted average shares outstanding....... 14,560 14,398 14,626
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
20
<PAGE>
PRIMIX SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NOTE
RECEIVABLE
COMMON STOCK TREASURY STOCK FROM
-------------------- -------------------- FORMER
NUMBER ADDITIONAL CHIEF TOTAL
OF $.001 NUMBER OF PAID-IN EXECUTIVE ACCUMULATED STOCKHOLDERS'
SHARES PAR VALUE SHARES AMOUNT CAPITAL OFFICER DEFICIT EQUITY
-------- --------- --------- -------- ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1996.................... 14,908 $15 -- $ -- $58,505 $(2,560) $(16,224) $39,736
Adjustment to note
receivable from former
chief executive
officer............... -- -- -- -- -- 53 -- 53
Surrender of shares in
satisfaction of note
receivable from former
chief executive
officer............... -- -- 960 (2,280) -- 2,507 -- 227
Issuance of common stock
from stock option
exercises............. 132 -- (261) 621 278 -- -- 899
Issuance of common stock
for employee stock
purchase plan......... 28 -- (2) 3 123 -- -- 126
Net loss................ -- -- -- -- -- -- (7,636) (7,636)
------- --- ---- ------- ------- ------- -------- -------
Balance, December 31,
1997.................... 15,068 15 697 (1,656) 58,906 -- (23,860) 33,405
Issuance of common stock
from stock option
exercises............. -- -- (12) 29 (1) -- -- 28
Issuance of common stock
for employee stock
purchase plan......... -- -- (47) 111 (46) -- -- 65
Issuance of common stock
for the purchase of
Advis, Inc............ 171 -- -- -- 321 -- -- 321
Net loss................ -- -- -- -- -- -- (4,202) (4,202)
------- --- ---- ------- ------- ------- -------- -------
Balance, December 31,
1998.................... 15,239 15 638 (1,516) 59,180 -- (28,062) 29,617
Repurchase of common
stock for settlement
of Advis, Inc......... -- -- 93 (244) -- -- -- (244)
Issuance of common stock
from stock option
exercises............. -- -- (136) 325 11 -- -- 336
Issuance of common stock
for employee stock
purchase plan......... -- -- (58) 139 (47) -- -- 92
Issuance of common stock
for the purchase of
Black Bean Studios,
Inc................... 100 -- -- -- 1,075 -- -- 1,075
Net loss................ -- -- -- -- -- -- (6,423) (6,423)
------- --- ---- ------- ------- ------- -------- -------
Balance, December 31,
1999.................... 15,339 $15 537 $(1,296) $60,219 $ -- $(34,485) $24,453
======= === ==== ======= ======= ======= ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
21
<PAGE>
PRIMIX SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(7,636) $(4,202) $(6,423)
Adjustments to reconcile net loss to net cash used in
operating activities --
Depreciation and amortization........................... 1,104 877 968
Compensation expense to former chief executive
officer............................................... 228 -- --
Non-cash restructuring charge........................... 1,304 -- --
Changes in operating assets and liabilities --
Accounts receivable................................... 1,000 (1,450) (681)
Prepaid expenses and other current assets............. 523 24 (302)
Due from affiliates................................... 56 -- --
Accounts payable...................................... (655) (316) (6)
Accrued expenses...................................... (467) 207 (270)
Deferred revenue...................................... (58) (407) (84)
------- ------- -------
Net cash used in operating activities............... (4,601) (5,267) (6,798)
------- ------- -------
Cash flows from investing activities:
Sales (purchases) of marketable securities, net........... 4,272 22,909 (12,855)
Purchases of property and equipment....................... (253) (74) (363)
Loan to former chief executive officer.................... (2,507) -- --
Purchase of Advis, Inc.................................... -- (1,623) 20
Purchase of Black Bean Studios, Inc....................... -- -- (787)
Increase in other assets.................................. -- (150) (325)
------- ------- -------
Net cash provided by (used in) investing
activities........................................ 1,512 21,062 (14,310)
------- ------- -------
Cash flows from financing activities:
Payment of note payable to related party.................. -- -- (204)
Proceeds from the exercise of stock options............... 899 28 336
Proceeds from common stock purchased through employee
stock purchase plan..................................... 126 65 92
Payment of capital lease obligations...................... -- -- (124)
------- ------- -------
Net cash provided by financing activities........... 1,025 93 100
------- ------- -------
Net (decrease) increase in cash and cash equivalents........ (2,064) 15,889 (21,008)
Cash and cash equivalents, beginning of year................ 12,868 10,804 26,693
------- ------- -------
Cash and cash equivalents, end of year...................... $10,804 $26,693 $ 5,685
======= ======= =======
Supplemental disclosure of cash flow information:
Cash paid for interest.................................... $ 8 $ -- $ 8
======= ======= =======
Cash paid for income taxes................................ $ 22 $ 40 $ --
======= ======= =======
Supplemental disclosure of noncash financing activities:
Issuance of note receivable from former chief executive
officer................................................. $ 53 $ -- $ --
======= ======= =======
Acquisition of shares for satisfaction of note
receivable.............................................. $ 2,507 $ -- $ --
======= ======= =======
Acquisition of Advis, Inc. and Black Bean Studios, Inc. in
1998 and 1999, respectively (Note 2)
Fair value of assets acquired......................... $ -- $ 733 $ 1,895
Liabilities assumed and incurred...................... -- (2,035) (33)
Common stock issued................................... -- (321) (1,075)
------- ------- -------
Cash paid for acquisition............................. $ -- $ 1,623 $ 787
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
22
<PAGE>
PRIMIX SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
(A) ORGANIZATION
Primix Solutions Inc. ("Primix" or the "Company"), a Delaware corporation,
was incorporated in January 1994. Primix is a strategic Internet services firm
that helps clients define, develop and deploy
e-business solutions that deliver superior business results. On December 31,
1998 and December 3, 1999, respectively, the Company acquired Advis, Inc.
("Advis") and Black Bean Studios, Inc. ("Black Bean") (see Note 2).
(B) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, OneWave Securities Corporation and Advis.
Intercompany accounts and transactions are eliminated in consolidation.
(C) USE OF ESTIMATES IN THE PREPARATION OF THE 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 the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
(D) REVENUE RECOGNITION
The Company formerly generated software and maintenance revenue from
licensing the rights to use its software products. The Company currently only
generates professional service revenue.
Professional services revenue is recognized upon customer acceptance or over
the period in which services are provided if customer acceptance is not required
and the revenues are fixed or determinable. Revenue pursuant to fixed fee
contracts is generally recognized on the percentage of completion method of
accounting (based on the ratio of costs incurred to total estimated project
costs). The cumulative impact of any revision in estimates of the percent
complete is reflected in the period in which the changes become known. Losses on
projects in progress are recognized when known. Revenue excludes reimbursable
expenses charged to and collected from customers.
Revenue from software license fees is recognized upon delivery, net of
estimated returns, provided there are no significant post delivery obligations,
and payment is due within one year and is probable of collection. If acceptance
is required, software license revenue is recognized upon customer acceptance.
Maintenance revenue is deferred at the time of billing and recognized ratably
over the term of the support period, which is typically one year.
Deferred revenue primarily relates to prepaid maintenance and consulting
services fees.
(E) COST OF REVENUES
Professional services expenses consist primarily of compensation and
benefits of employees and fees to third party service providers engaged in the
delivery of professional services and non-reimbursable expenses related to
client projects. Cost of software license and maintenance revenue consists of
the cost of
23
<PAGE>
PRIMIX SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
software and maintenance purchased for resale from a related party, distribution
costs, and support personnel costs.
(F) CASH AND CASH EQUIVALENTS
The Company classifies all short-term, highly liquid investments with
original maturities of three months or less as cash equivalents. The Company
held the following cash and cash equivalents at December 31 (in thousands):
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Corporate debt instruments......................... $13,958 $3,301
Cash and money market accounts..................... 12,735 2,384
------- ------
$26,693 $5,685
======= ======
</TABLE>
(G) MARKETABLE SECURITIES
Marketable securities consist of marketable financial instruments with
original maturities greater than 90 days. The Company has established guidelines
relative to concentration, maturities, and credit ratings that maintain safety
and liquidity.
In accordance with Statement of Financial Accounting Standard ("SFAS") No.
115 ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, the
Company has classified its investments in marketable securities as
"Held-to-Maturity" Securities. Accordingly, marketable securities as of December
31, 1999 are recorded at amortized cost, which approximates market. The Company
had no investments in marketable securities at December 31, 1998.
The Company held the following marketable securities at December 31, 1999
(in thousands):
<TABLE>
<S> <C>
U.S. Government and Government Agency Securities (average
maturity of 93 days at December 31, 1999)................ $ 2,003
Commercial Paper (average maturity of 118 days at December
31, 1999)................................................ 10,852
-------
$12,855
=======
</TABLE>
(H) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS,
requires disclosure about fair value of financial instruments. Financial
instruments consist of cash and cash equivalents, marketable securities,
accounts receivable, accounts payable, capital lease obligations and notes
payable. The estimated fair value of these financial instruments approximates
their carrying value.
(I) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization
expense is computed using the straight-line method over the estimated useful
lives of the assets (three to five years).
24
<PAGE>
PRIMIX SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(J) RESEARCH AND DEVELOPMENT AND SOFTWARE DEVELOPMENT COSTS
In accordance with SFAS No. 86, ACCOUNTING FOR THE COSTS OF SOFTWARE TO BE
SOLD, LEASED OR OTHERWISE MARKETED, the Company has evaluated the establishment
of technological feasibility of its various products during the development
phase. Due to the dynamic changes in the market, the Company concluded that it
cannot determine technological feasibility until a fully functional working
model is complete. The time period during which costs could be capitalized from
the point of reaching technological feasibility until the time of general
product release was very short and, consequently, the amounts that could be
capitalized were generally not material to the Company's financial position or
result of operations. Therefore, the Company has charged all internally
generated research and development expenses to operations in the period
incurred. The Company is currently not developing software to be sold
independently from its service offerings. In 1999, research and development
expenses consist of costs incurred to develop reusable code and other assets for
use within the Company's solutions practice and to develop the knowledge and
expertise of the strategic, technical and creative design disciplines.
Since inception, the Company has incurred various charges associated with
the purchase of third-party developed technology. During 1996, the Company
contracted with a third-party to develop applications to be integrated with the
Company's product. The Company capitalized approximately $321,000 of cost
associated with the development of this product. The Company amortized the cost
of this product over its expected useful life of fifteen months. The unamortized
cost of approximately $150,000 was charged to expense in connection with the
Company's restructuring in 1997 (see Note 1(n)).
(K) POST-RETIREMENT BENEFITS
The Company has no obligations for post-retirement benefits.
(L) SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISK
SFAS No. 105, DISCLOSURE OF INFORMATION ABOUT FINANCIAL INSTRUMENTS WITH
OFF-BALANCE-SHEET RISK AND FINANCIAL INSTRUMENTS WITH CONCENTRATIONS OF CREDIT
RISK, requires disclosure of any significant off-balance-sheet and credit risk
concentrations. Financial instruments that potentially subject the Company to
concentrations of credit risk are accounts receivable, cash equivalents and
marketable securities. At December 31, 1998, four customers accounted for
approximately 11%, 29%, 17% and 12% of total accounts receivable. At December
31, 1999, one customer accounted for approximately 42% of total accounts
receivable. Two customers accounted for approximately 26% and 11% of total
revenue for the year ended December 31, 1997. Three customers accounted for
approximately 35%, 20% and 10% of total revenue for the year ended December 31,
1998 and one customer accounted for approximately 33% of total revenue for the
year ended December 31, 1999.
For the years ended December 31, 1997, 1998 and 1999, sales outside the
United States accounted for approximately 3%, 1% and 0% of total revenue,
respectively. To reduce accounts receivable credit risk, the Company routinely
assesses the financial strength of its customers and, as a consequence, believes
that its accounts receivable credit risk exposure is limited. The Company
maintains an allowance for potential credit losses but has not experienced any
significant losses related to individual customers or groups of customers in any
particular industry or geographic area. To reduce cash equivalent and marketable
securities credit risk, the Company invests in highly liquid U.S. Government and
commercial paper obligations with maturities of less than one year. The Company
limits the amount of holdings with any one particular financial institution or
government agency.
25
<PAGE>
PRIMIX SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(M) NET LOSS PER COMMON SHARE
In accordance with SFAS No. 128, EARNINGS PER SHARE, basic net loss per
share is computed by dividing reported net loss by the weighted average common
shares outstanding, with no consideration given for any potentially dilutive
securities. Diluted net loss per share is the same as basic net loss per share
because the inclusion of common stock issuable pursuant to stock options and
warrants (number of antidilutive shares were 138,777, 305,520 and 613,778 as of
December 31, 1997, 1998 and 1999, respectively) would be antidilutive.
(N) RESTRUCTURING CHARGE
On June 9, 1997, the Company announced that it had implemented a plan (the
"Plan") to restructure the Company's operations. The Plan included write-offs
and writedowns of certain assets and included accruing the costs related to a
significant reduction in the Company's work force. The implementation of the
Plan resulted in a one time charge of approximately $1,782,000.
The following are the significant components of the charge for restructuring
(in thousands):
<TABLE>
<S> <C>
Write-off and write-down of assets to net realizable
value..................................................... $1,117
Employee severance, benefits and related costs.............. 650
Other....................................................... 15
------
$1,782
======
</TABLE>
(O) GOODWILL
Goodwill, representing the excess of the cost over the net tangible and
identifiable intangible assets of acquired businesses, is stated at cost and is
amortized on a straight-line basis over the estimated future periods to be
benefited (ten years). Approximately $241,000 of amortization was charged to
expense for the year ended December 31, 1999 related to the Advis and Black Bean
acquisitions. No amortization expense was incurred for the years ended December
31, 1998 and 1997. On an annual basis, the Company evaluates whether changes
have occurred that would require revision of the remaining estimated useful life
of the assigned goodwill or render the goodwill not recoverable. The Company
measures the potential impairment of recorded goodwill by the undiscounted value
of expected future operating cash flows in relation to its net capital
investment in the acquired company. No impairment losses have been recognized to
date.
(P) COMPREHENSIVE INCOME
During 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, REPORTING OF COMPREHENSIVE INCOME. SFAS No. 130 is effective for fiscal
years beginning after December 15, 1997. Comprehensive income (loss) refers to
the change in an entity's equity during a period, exclusive of investment by and
distributions to owners. Comprehensive income (loss) includes net income (loss)
and other comprehensive income (loss) items. The Company has no other
comprehensive income (loss) items as defined in SFAS No. 130 and, therefore,
reported net loss is equal to comprehensive loss for all periods presented.
26
<PAGE>
PRIMIX SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Q) SEGMENT REPORTING
In June 1997, the FASB issued SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION. SFAS No. 131 establishes standards for the
way that public business enterprises report information and operating segments
in annual and interim financial statements and requires that enterprises report
selected information about operating segments in financial reports issued to
stockholders. The Company adopted this statement in the year ended December 31,
1998. Based on a review of SFAS No. 131, the Company believes that it currently
operates in one segment.
(R) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. The statement is effective for the year
ended December 31, 2001. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives) and for
hedging activities. The Company does not expect adoption of this statement to
have a material impact on its consolidated financial position or results of
operations.
(S) RECLASSIFICATION OF FINANCIAL STATEMENTS
Certain prior year amounts have been reclassified to conform to the current
year presentation.
2. ACQUISITIONS
(A) ADVIS, INC.
On December 31, 1998, the Company acquired Advis, a privately held
Boston-based e-Business consulting company, which augmented the depth and
breadth of the Company's capabilities in developing highly advanced systems
architectures that support e-Business solutions.
The total consideration consisted of: 171,000 shares of the Company's common
stock, which was valued at $1.875 per share, the fair market value of the stock,
a note payable of $204,000 paid in January 1999 and the assumption of $1,594,000
of net liabilities. Included in the net liabilities are accounts receivable of
$638,000, prepaid expenses and other current assets of $39,000 and computer and
office equipment of $56,000. In December 1998, the Company advanced Advis
$1,543,000 to satisfy certain obligations. This advance is included in the net
liabilities acquired. The excess purchase price over the net assets acquired of
approximately $2.2 million has been recorded as goodwill and is being amortized
over its estimated useful life of 10 years, beginning in January 1999.
To the extent that the Advis accounts receivable were uncollectible as of
June 30, 1999, the sole stockholder of Advis was required to tender shares to
the Company with a fair market value equal to the amount by which the difference
between the adjusted purchase price and the December 31, 1998 purchase price
exceeded the cash escrow account of approximately $100,000. As of June 30, 1999,
$138,000 of accounts receivable was uncollectible; therefore, the sole
stockholder tendered 92,963 of the 171,000 shares of the Company's common stock,
which was valued at $2.625, the average closing price for the five business days
preceding June 30, 1999. The 92,963 shares were classified as treasury stock
with a total cost of $244,000.
27
<PAGE>
PRIMIX SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(B) BLACK BEAN STUDIOS, INC.
On December 3, 1999, the Company acquired Black Bean, a privately held
Boston-based design boutique specializing in digital media.
The Company purchased all of the outstanding stock of Black Bean for
approximately $806,000 cash and 100,000 shares of the Company's common stock,
which was valued at $10.75 per share, the fair market value of the stock at the
acquisition date. In addition, the Company assumed Black Bean's net liabilities
of approximately $14,000. The excess purchase price over the net assets acquired
of approximately
$1.9 million has been recorded as goodwill and is being amortized over its
estimated useful life of 10 years, beginning in December 1999.
Both transactions have been accounted for as a purchase in accordance with
Accounting Principles Board Opinion ("APB") No. 16, BUSINESS COMBINATIONS.
Accordingly, the operating results of the acquired businesses are included in
the Company's consolidated financial statements from the dates of acquisition.
Proforma disclosure of combined operating results prior to the acquisitions has
not been disclosed herein as the acquisitions were not material.
3. STOCKHOLDERS' EQUITY
(A) AUTHORIZED CAPITAL STOCK
As of December 31, 1999, the Company's authorized capital stock consisted of
50,000,000 shares of common stock, $.001 par value per share, and 5,000,000
shares of preferred stock, $1.00 par value per share.
(B) TREASURY STOCK
In April 1997, the Company funded $2,507,000 under a loan agreement with its
then Chief Executive Officer. The loan was secured by a first priority pledge of
960,000 shares of the Company's common stock. In June 1997, the then Chief
Executive Officer resigned from the Company and surrendered these shares in
satisfaction of the loan agreement. The market price of $2.375 on the date the
shares were surrendered was used to determine the cost of the treasury stock.
The 960,000 shares were classified as treasury stock with a total cost of
$2,280,000. The $227,000 difference between the amount of the loan and the cost
of the treasury stock was recorded as a charge to operations and is classified
as compensation to former chief executive officer.
To the extent that the Advis accounts receivable were uncollectible as of
June 30, 1999, the sole stockholder of Advis was required to tender shares to
the Company with a fair market value equal to the amount by which the difference
between the adjusted purchase price and the December 31, 1998 purchase price
exceeded the cash escrow account of approximately $100,000. As of June 30, 1999,
$138,000 of accounts receivable was uncollectible; therefore, the sole
stockholder tendered 92,963 of the 171,000 shares of the Company's common stock,
which was valued at $2.625 per share, the average closing price for the five
business days preceding June 30, 1999. The 92,963 shares were classified as
treasury stock with a total cost of $244,000.
As of December 31, 1999, the Company has issued approximately 515,000 shares
from treasury for the Company's employee stock option and the employee stock
purchase plans.
28
<PAGE>
PRIMIX SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(C) STOCK OPTIONS
1995 STOCK PLAN
The Company's Stock Plan ("the 1995 Plan") provides for the issuance of
incentive stock options (ISOs), nonqualified stock options and shares of common
stock. Under the terms of the 1995 Plan, nonqualified options may be granted at
a price not less than the lesser of (i) the book value per share of common stock
as of the end of the fiscal year of the Company immediately preceding the date
of such grant or (ii) 50% of the fair market value per share of common stock on
the date of such grant and, in the case of ISOs not less than the fair market
value per share at the date of grant.
1996 STOCK PLAN
On May 17, 1996, the Board of Directors and stockholders approved the
Company's 1996 Stock Plan ("the 1996 Plan"). Each nonemployee director will
receive an initial option grant to purchase 7,000 shares of common stock, with
an exercise price at the then fair market value, when such director is first
appointed to the Board of Directors. In addition, each nonemployee director will
receive an option grant to purchase 1,700 shares of common stock, with an
exercise price at the then fair market value, on each January 1 that such
director is a member of the Board of Directors.
In June 1999, the 1996 Plan was amended to increase the authorized number of
shares of common stock available for issuance to 3,500,000 shares.
The Company has reserved approximately 5,904,000 shares of common stock for
issuance under the 1995 Plan and the 1996 Plan. As of December 31, 1999, there
were approximately 1,774,000 shares available for grant. Generally, the options
granted under both Plans vest annually over four years and expire after ten
years. In 1999, the Company amended the vesting period so that all options
granted in 1999 and thereafter generally vest 25% after one year of service and
quarterly for the three years thereafter.
29
<PAGE>
PRIMIX SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table summarizes incentive and nonqualified stock option
activity under the 1995 and 1996 Stock Plans (in thousands, except per share
data):
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER PRICE PRICE
OF SHARES PER SHARE PER SHARE
--------- ------------- ---------
<S> <C> <C> <C>
Outstanding, December 31, 1996............. 2,610 $1.50 - 16.00 $10.42
Options granted............................ 2,356 1.94 - 2.88 2.36
Options exercised.......................... (394) 1.50 - 7.50 2.28
Options canceled........................... (3,676) 1.50 - 16.00 6.44
------ ------------- ------
Outstanding, December 31, 1997............. 896 1.50 - 16.00 2.97
------ ------------- ------
Options granted............................ 1,070 1.25 - 3.06 2.11
Options exercised.......................... (12) 1.50 - 2.50 2.29
Options canceled........................... (212) 1.25 - 16.00 3.01
------ ------------- ------
Outstanding, December 31, 1998............. 1,742 1.25 - 16.00 2.46
------ ------------- ------
Options granted............................ 2,586 2.44 - 10.81 4.72
Options exercised.......................... (136) 1.25 - 4.50 2.47
Options canceled........................... (822) 1.25 - 4.50 2.52
------ ------------- ------
Outstanding, December 31, 1999............. 3,370 $1.25 - 16.00 $ 4.18
====== ============= ======
Exercisable, December 31, 1999............. 590 $1.25 - 16.00 $ 2.68
====== ============= ======
Exercisable, December 31, 1998............. 282 $1.25 - 16.00 $ 2.96
====== ============= ======
Exercisable, December 31, 1997............. 115 $1.50 - 16.00 $ 3.40
====== ============= ======
</TABLE>
The following detail pertains to outstanding options of the Company at
December 31, 1999 (in thousands, except per share data):
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER EXERCISE PRICE RANGE EXERCISE PRICE PER WEIGHTED AVERAGE
OF PER SHARE SHARE NUMBER OF EXERCISE PRICE PER
SHARES OUTSTANDING OUTSTANDING SHARES EXERCISABLE SHARE EXERCISABLE
--------------------- -------------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
65 $ 1.25 - $ 1.60 $1.32 33 $1.39
2,531 1.60 - 3.20 2.51 529 2.42
16 3.20 - 4.80 4.50 16 4.50
74 4.80 - 6.40 5.94 -- --
5 6.40 - 8.00 7.83 2 7.81
139 8.00 - 9.60 8.63 -- --
526 9.60 - 11.20 10.77 -- --
14 14.40 - 16.00 16.00 10 16.00
--------------------- --------------- ----- --- -----
3,370 $ 1.25 - $16.00 $4.18 590 $2.68
===================== =============== ===== === =====
</TABLE>
In October 1995, the FASB issued SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION. SFAS No. 123 requires the measurement of the fair value of stock
options, including stock purchase plans, or warrants granted to employees to be
included in the statement of operations or disclosed in the notes to financial
statements. The Company has determined that it will continue to account for
stock-based compensation for employees under Accounting Principles Board Opinion
No. 25 and elect the disclosure-
30
<PAGE>
PRIMIX SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
only alternative under SFAS No. 123. The Company has computed the pro forma
disclosures required under SFAS No. 123 for options granted in 1997, 1998 and
1999 using the Black-Scholes option pricing model prescribed by SFAS No. 123.
The weighted average assumptions used for 1997, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
1997 1998 1999
------------------- ------------------- -------------------
<S> <C> <C> <C>
Risk-free interest rate...... 5.80%--6.40% 4.18%--5.63% 4.60%--6.19%
Expected dividend yield...... -- -- --
Expected life................ 5 years 5 years 5 years
Expected volatility.......... 100% 100% 100%
</TABLE>
The Black-Scholes option pricing model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option-pricing models require the input of
highly subjective assumptions including expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
The total fair value of the options granted during 1997, 1998 and 1999 was
computed as approximately $4,392,000, $1,793,000 and $9,440,000, respectively.
Of these amounts, approximately $1,355,000, $1,177,000 and $5,916,000 would have
been charged to operations for the years ended December 31, 1997, 1998 and 1999,
respectively. The remaining amount would be amortized over the remaining vesting
periods.
The pro forma net loss and pro forma basic and diluted net loss per common
share presented below have been computed assuming no tax benefit. The effect of
a tax benefit has not been considered since a substantial portion of the stock
options granted are incentive stock options and the Company does not anticipate
a future deduction associated with the exercise of these stock options.
The pro forma effect of SFAS No. 123 for the years ended December 31, 1997,
1998 and 1999 is as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
1997 1998 1999
----------------------- ----------------------- -----------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net loss............................ $(7,637) $(8,992) $(4,202) $(5,379) $(6,423) $(12,339)
Basic and diluted net loss per
common share...................... $ (.52) $ (.62) $ (.29) $ (.37) $ (.44) $ (.84)
</TABLE>
(D) WARRANTS
In February 1996, the Company issued a warrant to purchase 23,333 shares of
common stock at a price of $8.31 per share in connection with a financing
agreement. The warrant is exercisable in whole or in part at any time on or
before February 15, 2003.
(E) EMPLOYEE STOCK PURCHASE PLAN
On May 17, 1996, the stockholders approved the Company's Employee Stock
Purchase Plan ("ESPP"). The Company has reserved 150,000 shares for issuance
under the ESPP. The ESPP permits eligible employees of the Company to purchase
common stock through payroll deductions of up to 10% of
31
<PAGE>
PRIMIX SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
their total compensation. The price of common stock purchased under the ESPP is
85% of the lower of the fair market value of the common stock on the first or
last day of each six-month purchase period. During 1998 and 1999, the Company
issued approximately 47,000 and 58,000 shares of common stock under the ESPP,
respectively.
4. INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
ACCOUNTING FOR INCOME TAXES. Under SFAS No. 109, a deferred tax asset or
liability is measured by the enacted tax rates expected to be in effect when the
differences between the financial statement and tax bases of assets and
liabilities reverse.
As of December 31, 1999, the Company had available net operating loss
carryforwards of approximately $29,003,000 to reduce future federal and state
income taxes, if any. These carryforwards expire through 2019 and are subject to
review and possible adjustment by the Internal Revenue Service. The Tax Reform
Act of 1986 contains provisions that may limit the amount of net operating loss
carryforwards that the Company may utilize in any one year in the event of
certain cumulative changes in ownership over a three year period in excess of
50%, as defined. The Company has completed several financings since it's
inception and believes that an ownership change as defined by The Tax Reform Act
of 1986 has occurred. The Company has not yet determined the extent of any net
operating loss carryforward limitations.
The approximate income tax effect of each type of temporary difference and
carryforward is as follows (in thousands):
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Net operating loss carryforwards......................... $10,376 $11,601
Other temporary differences.............................. 980 745
Credit carryforwards..................................... 217 217
------- -------
11,573 12,563
Valuation allowance...................................... (11,573) (12,563)
------- -------
Net deferred tax asset................................... $ -- $ --
======= =======
</TABLE>
It is the Company's objective to become a profitable enterprise and to
realize the benefits of its deferred tax assets. However, in evaluating the
realizability of these deferred tax assets, management has considered the
Company's short operating history, the volatility of the market in which it
competes and the operating losses incurred to date, and believes that, given the
significance of this evidence, a full valuation reserve against its deferred tax
asset is required as of December 31, 1998 and 1999, respectively.
5. RELATED-PARTY TRANSACTIONS
(A) NOTES RECEIVABLE
In February 1998, the Company loaned $150,000 to one of the Company's
executive officers. Interest was payable quarterly at an annual rate of 6.5%.
The note was secured by 100,000 shares of common stock of the Company owned by
the executive officer. The note was paid in full in January 2000.
In March 1999, the Company issued two separate promissory notes, each in the
amount of $75,000, to two employees of the Company who were subsequently
appointed as officers of the Company. The promissory notes are due on December
31, 2001 and bear interest at a rate of 6.75% per annum. On September 20, 1999,
one of the $75,000 notes was cancelled and a new promissory note totaling
$250,000
32
<PAGE>
PRIMIX SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
was issued. The note bears interest at a rate of 7% per annum until September
30, 2002 when the interest rate will convert to the prime rate plus two
percentage points for the remainder of the term. The outstanding principal
balance is payable quarterly in arrears in equal installments beginning on
January 1, 2005. This note is due on September 30, 2029. In January 2000, the
remaining $75,000 note was cancelled and a new promissory note totaling $250,000
was issued. The note bears interest at a rate of 7% per annum until December 31,
2002 when the interest rate will convert to the Prime rate plus two percentage
points for the remainder of the term. The outstanding principal balance is
payable quarterly in arrears in equal installments beginning on January 1, 2005.
The note is due on December 31, 2029.
(B) AVIX VENTURES, L.P.
The Company's Chairman and Chief Executive Officer is a general partner of
Avix Associates, L.P., which is in turn the general partner of Avix Ventures,
L.P., a principal stockholder of the Company. The Chairman and Chief Executive
Officer received no compensation for the services he provided to the Company
during 1998 and 1999 other than a stock option to purchase 300,000 shares of the
Company's common stock granted on September 16, 1999.
6. EMPLOYEE BENEFIT PLAN
The Company's employees participate in an employee benefit plan under
Section 401(k) of the Internal Revenue Code ("the 401(k) Plan"). The 401(k) Plan
is available to substantially all employees. The 401(k) Plan allows for
employees to make contributions up to a specified percentage of their
compensation. For all participants, the Company contributes 25% of the first 6%
of employees' pay contributed to the 401(k) Plan. The Company contributed
approximately $58,000, $38,000, and $92,000 under these plans during the years
ended December 31, 1997, 1998 and 1999, respectively.
Advis had a separate 401(k) profit sharing plan, which covered substantially
all employees who met minimum service requirements. As of January 1, 1999, all
Advis employees meeting the minimum service requirements were eligible to
participate in the Company's 401(k) plan. The Company merged the assets of the
Advis plan with their plan in May 1999.
7. LEASE COMMITMENTS
The Company leases its office facilities and certain office equipment under
operating leases expiring at various dates through 2002. Rent expense totaled
approximately $590,000, $483,000 and $795,000 for the years ended December 31,
1997, 1998 and 1999, respectively. In connection with the acquisition of Advis
(see Note 2), the Company is responsible for Advis' lease of its office facility
which expires in August 2002. Prior to the acquisition, Advis subleased a
portion of their office facility through May 1999. During 1999, the Company
entered into additional subleases expiring in August 2002 for the space
previously occupied by Advis.
In addition, the Company acquired certain equipment under capital leases in
the Advis acquisition. These leases were paid in full in 1999.
33
<PAGE>
PRIMIX SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following is a summary of future minimum payments under operating leases
with noncancelable terms with a remaining term in excess of one year as of
December 31, 1999 (in thousands):
<TABLE>
<CAPTION>
DEDUCT
SUBLEASE NET RENTAL
COMMITMENTS RENTALS COMMITMENTS
----------- -------- -----------
<S> <C> <C> <C>
2000...................................... $ 789 $188 $601
2001...................................... 331 198 133
2002...................................... 126 126 --
------ ---- ----
Total minimum lease payments.............. $1,246 $512 $734
====== ==== ====
</TABLE>
34
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
INFORMATION REGARDING DIRECTORS
Set forth below is certain information regarding the Directors of the
Company based on information furnished by them to the Company.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
- ---- -------- ------------
<S> <C> <C>
CLASS I--TERM EXPIRES 2000
Ofer Nemirovsky.......................................... 40 March 1996
Lennart Mengwall......................................... 57 May 1997
CLASS II--TERM EXPIRES 2001
Kevin Azzouz............................................. 40 May 1997
CLASS III--TERM EXPIRES 2002
Robert Hedges............................................ 42 October 1998
</TABLE>
The principal occupation and business experience for at least the last five
years of each Director of the Company is set forth below.
Lennart Mengwall has served as Chairman of the Board and Chief Executive
Officer since May 1997. Mr. Mengwall was President from May 1997 until
December 1999. Mr. Mengwall is presently a general partner of Avix Associates,
L.P., which is in turn the general partner of Avix Ventures, L.P., a principal
stockholder of the Company.
Kevin Azzouz has served as a Director of the Company since May 1997. From
1994 to March 1996, Mr. Azzouz served as the President and Chief Operating
Officer of Arcada Software. Mr. Azzouz is presently a general partner of Avix
Associates, L.P., which is in turn the general partner of Avix Ventures, L.P., a
principal stockholder of the Company.
Robert Hedges has served as a Director of the Company since October 1998.
Mr. Hedges is the Managing Director of the Retail Distribution Group at Fleet
Financial Group ("Fleet"). From 1995 to 1997, Mr. Hedges served as Fleet's
Director of Direct Financial Services Group.
Ofer Nemirovsky has served as a Director of the Company since March 1996.
Mr. Nemirovsky is a Managing Director of HarbourVest Partners, LLC and Hancock
Venture Partners, Inc. ("HVP"). Prior to joining HVP in 1986, Mr. Nemirovsky
held various computer sales and marketing positions at Hewlett-Packard. He is
currently a director of Ultimate Software and Paradigm Geophysical and several
privately held companies.
34
<PAGE>
INFORMATION REGARDING EXECUTIVE OFFICERS
Set forth below is certain information regarding each of the current
executive officers of the Company including their principal occupation and
business experience for at least the last five years.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- --------------------------------------------------------
<S> <C> <C>
Lennart Mengwall....................... 57 Chairman of the Board and Chief Executive Officer
Michael D. Troiano..................... 33 President
Joseph W. Seebach...................... 38 Executive Vice President
David W. Chapman....................... 36 Chief Financial Officer, Treasurer and Secretary
Byung C. Choi.......................... 41 Senior Vice President of Operations
</TABLE>
The principal occupation and business experience for the last five years of
the Company's executive officers, other than such officers who also served as
Directors, is set forth below.
Michael D. Troiano was appointed as the Company's President in
December 1999 and served as Senior Vice President of Business Development from
January 1999 to December 1999. Mr. Troiano co-founded a strategic Internet
services firm, Brandscape, in 1996, acting as the firm's CEO from 1996 to
December 1998. He was named CEO of Ogilvy & Mather Direct Interactive Marketing
Group in 1994, and led the re-launch of the group as Ogilvy & Mather Interactive
in 1995.
Joseph W. Seebach joined the Company as Senior Vice President in July 1997
and assumed the position of President of Software Products Group in
October 1997. After the Company consolidated its operations to one business
unit, Mr. Seebach was appointed to Senior Vice President of Sales & Marketing
and in March 1998 to the position of Executive Vice President. Prior to joining
the Company, Mr. Seebach served as General Manager, Consumer Products Division
of Seagate Software from January 1997 to July 1997, Vice President, Strategic
Accounts of Seagate Software from 1996 to 1997, and Vice President, Strategic
Business of Arcada Software from 1994 to 1996.
David W. Chapman was appointed as the Company's Chief Financial Officer in
March 1998 and had previously served as the Controller of the Company since
September 1995. Mr. Chapman was appointed as Secretary of the Company in
February 1998. From December 1993 to August 1995, Mr. Chapman was the Accounting
Manager of Astrum International.
Byung C. Choi joined the Company in January 1999 as the Senior Vice
President of Operations and was appointed as officer in December 1999. Mr. Choi
co-founded a strategic Internet services firm, Brandscape, in 1996, acting as
the firm's Chief Operating Officer from 1996 to December 1998. Mr. Choi was the
Chief Operating Officer of Ogilvy & Mather Interactive in 1995.
Each of the officers holds his respective office until the regular annual
meeting of the Board of Directors following the annual meeting of stockholders
and until his successor is elected and qualified or until his earlier
resignation or removal.
35
<PAGE>
The Company's directors and executive officers and their principal
occupations are set forth below:
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION
- ---- -------------------------------------------------------------------------
<S> <C>
Kevin Azzouz................. Partner, Avix Associates, L.P.
Robert Hedges................ Managing Director, Retail Distribution Group, Fleet Financial Group
Ofer Nemirovsky.............. Managing Director, HVP Partners, LLC
Lennart Mengwall............. Chairman and Chief Executive Officer, Primix Solutions Inc. and Partner,
Avix Associates, L.P.
Michael D. Troiano........... President, Primix Solutions Inc.
Joseph Seebach............... Executive Vice President, Primix Solutions Inc.
David Chapman................ Chief Financial Officer, Treasurer and Secretary, Primix Solutions Inc.
Byung C. Choi................ Senior Vice President of Operations, Primix Solutions Inc.
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and Directors, and persons who own more than 10% of the Company's
outstanding shares of Common Stock (collectively, "Section 16 Persons"), to file
initial reports of ownership and reports of changes in ownership with the
Commission and Nasdaq. Section 16 Persons are required by Commission regulations
to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain Section 16 Persons that no Section 16(a)
reports were required for such persons, the Company believes that during its
fiscal year 1999, the Section 16 Persons complied with all Section 16(a) filing
requirements applicable to them, with the exception of Robert Hedges and Ofer
Nemirovsky who did not timely file Forms 5 with respect to the annual grant of
options to purchase 1,700 shares of Common Stock on January 1, 1999, and Lennart
Mengwall, Michael Troiano, David Chapman, and Joseph Seebach who also did not
timely file Form 5 with respect to their grant of options to purchase the
Company's Common Stock.
ITEM 11. EXECUTIVE COMPENSATION
DIRECTOR COMPENSATION
Directors who are officers or employees of the Company receive no
compensation for service as Directors. Generally, Directors who are not officers
or employees of the Company receive such compensation for their services as the
Board may from time to time determine. Each of Ofer Nemirovsky and Robert Hedges
(a "Non-Employee Directors") received fees of $2,550 and $1,300, respectively
for meetings attended during the Company's fiscal year. Each continuing
Non-Employee Director also automatically receives on January 1 of each year an
option to purchase 1,700 shares of Common Stock at an exercise price per share
equal to the fair market value of the underlying Common Stock as determined
under the Company's 1996 Plan. Each of these options vests annually in equal
installments over a four-year period and expires ten years from the date of
grant. All Directors are reimbursed for expenses incurred in connection with
attendance at meetings.
36
<PAGE>
EXECUTIVE COMPENSATION
The following sections set forth and describe the compensation paid or
awarded to the Company's Chief Executive Officer and the other most highly
compensated executive officers who earned in excess of $100,000 during Fiscal
1999 ("named executive officers").
SUMMARY COMPENSATION. The following summary compensation table sets forth
information concerning compensation for services rendered in all capacities
awarded to, earned by or paid to the Company's Chief Executive Officer and the
other named executive officers during each of the fiscal years ended
December 31, 1999, 1998 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)(1)
- --------------------------- -------- --------- -------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Lennart Mengwall, Chairman of the Board,
Chief Executive Officer and President...... 1999 -- -- -- --
1998 -- -- -- --
1997 -- -- -- --
Michael D. Troiano, President (3)............ 1999 120,192 66,583 -- 12,505
Joseph W. Seebach, Executive Vice
President.................................. 1999 150,481 112,375 -- --
1998 161,654 62,560 -- --
1997 83,078 75,000 350,000 --
David W. Chapman, Chief Financial Officer,
Treasurer and Secretary (2)................ 1999 115,369 46,640 -- 2,331
1998 112,654 16,705 1,941
Byung C. Choi, Senior Vice President of
Operations (3)............................. 1999 120,192 66,583 -- 84,491
</TABLE>
- ------------------------
(1) Represents Company contributions to the Company's 401(k) plan on behalf of
the executives.
(2) Mr. Chapman was not an executive officer of the Company during 1997.
(3) Mr. Troiano and Mr. Choi joined the Company during 1999. Included in All
Other Compensation are relocation expenses totaling $10,433 and $82,419 for
Mr. Troiano and Mr. Choi, respectively.
OPTION GRANTS. The following table sets forth certain information
concerning the individual grant of options to purchase Common Stock of the
Company to the named executive officers of the Company who received options
during Fiscal 1999.
37
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------
PERCENT OF
TOTAL
OPTIONS POTENTIAL REALIZABLE
NUMBER OF GRANTED EXERCISE VALUE AT ASSUMED
SECURITIES TO RATES APPRECIATION FOR
UNDERLYING EMPLOYEES OR BASE OPTION TERM(1)
OPTIONS IN FISCAL PRICE ---------------------
NAME GRANTED(#) YEAR ($/SH) EXPIRATION DATE 5%($) 10%($)
- ---- ---------- ---------- -------- --------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Lennart Mengwall........... 300,000 11.6% $2.94 9/16/09 $546,489 $1,392,275
Michael D. Troiano......... 70,000 2.7 2.44 3/11/09 107,327 271,988
7,500 0.3 2.44 4/8/09 11,499 29,142
22,500 0.9 2.56 5/14/09 36,267 91,907
100,000 3.9 10.56 12/17/09 735,484 1,796,817
Joseph W. Seebach.......... 50,000 1.9 2.44 3/11/09 76,662 194,277
David W. Chapman........... 32,493 1.3 2.44 3/11/09 49,820 126,253
Byung C. Choi.............. 70,000 2.7 2.44 3/11/09 107,327 271,988
7,500 0.3 2.44 4/8/09 11,499 29,142
22,500 0.9 2.56 5/14/09 36,267 91,907
</TABLE>
- ------------------------
(1) This column shows the hypothetical gain or option spreads of the options
granted based on assumed annual compound stock appreciation rates of 5% and
10% for the exercise price of such options over the full 10-year term of the
options. The 5% and 10% assumed rates of appreciation are mandated by the
rules of the Securities and Exchange Commission and do not represent the
Company's estimate or projection of future Common Stock prices.
OPTION EXERCISES AND OPTION VALUES. The following table sets forth
information concerning the number of underlying shares and value of unexercised
options to purchase Common Stock of the Company held by the named executive
officers as of December 31, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 31, 1999 (#) AT DECEMBER 31, 1999 ($) (1)
ACQUIRED ON VALUE --------------------------- ------------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lennart Mengwall...... $ -- $ -- -- 300,000 $ -- $1,687,500
Michael D. Troiano.... -- -- -- 200,000 -- 609,688
Joseph Seebach........ 20,000 148,130 120,625 159,375 716,271 955,719
David Chapman......... 12,000 91,712 12,175 50,825 74,320 310,934
Byung C. Choi......... -- -- -- 100,000 -- 609,688
</TABLE>
- ------------------------
(1) Based on the last reported sale price on the Nasdaq National Market on
December 31, 1999 of $8.563 less the option exercise price. Options are
in-the-money if the fair market value of the shares covered thereby is
greater than the option exercise price.
38
<PAGE>
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS
The Company has entered into offer letter agreements with each of its
executive officers (other than Lennart Mengwall, the Company's Chairman and
Chief Executive Officer), providing for base salary, bonus, incentive
compensation and relocation expense reimbursement, as applicable.
Under an agreement dated in September 1999, Lennart Mengwall is entitled to
the acceleration of all options, in the event of (i) a termination of employment
for any reason other than gross misconduct or (ii) a "change in control" of the
Company, as defined in the agreement.
Under an agreement dated July 8, 1997, Joseph Seebach is entitled to receive
certain severance benefits, including base salary for one year and the
acceleration of certain options, in the event of a termination of employment
within eighteen months of a change of control. In March 1999, new options were
granted to Mr. Seebach and the previous options were amended to be accelerated
in the event of (i) a termination of employment for any reason other than gross
misconduct or (ii) a "change in control" of the Company, as defined in the
agreement.
Under an agreement dated February 26, 1998, David W. Chapman is entitled to
receive his base salary and continued medical and dental benefits for six months
after termination of his employment for any reason other than gross misconduct.
Under an agreement dated in March 1999, Mr. Chapman is entitled to the
acceleration of all options, in the event of (i) a termination of employment for
any reason other than gross misconduct or (ii) a "change in control" of the
Company, as defined in the agreement.
Under an agreement dated in January 1999, Byung C. Choi is entitled to
receive his base salary for six months after termination of his employment for
any reason other than gross misconduct.
Under an agreement dated in January 1999, Michael D Troiano is entitled to
receive his base salary for six months after termination of his employment for
any reason other than gross misconduct.
Under the Company's standard Employee Agreement, each of the executives is
subject to provisions concerning the ownership, use and disclosure of the
Company's confidential information and intellectual property, and a one-year
restriction on competition with the Company following termination of employment
for any reason.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Since May 10, 1996 all executive officer compensation decisions have been
made by the Compensation Committee or the full Board of Directors. The
Compensation Committee reviews and makes recommendations regarding the
compensation for top management and key employees of the Company, including
salaries and bonuses. No member of the Compensation Committee is an officer of
the Company. The current members of the Compensation Committee are Ofer
Nemirovsky and Kevin Azzouz.
Kevin Azzouz was the Acting Chief Executive Officer, President and Treasurer
of the Company from June 1997 to October 1997. All Directors participated in
deliberations of the Company's Board of Directors concerning executive
compensation during the Company's fiscal year 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, to the best knowledge and belief of the
Company, certain information regarding the beneficial ownership of the Company's
Common Stock as of the date indicated by (i) each person known by the Company to
be the beneficial owner of more than 5% of the outstanding Common Stock as of
December 31, 1999, (ii) each of the Company's Directors as of March 20, 2000,
(iii) each of the named executive officers as of March 20, 2000 and (iv) the
Company's executive officers and Directors as a group as of March 20, 2000.
39
<PAGE>
OWNERSHIP(2)
<TABLE>
<CAPTION>
BENEFICIAL
--------------------
NAME OF BENEFICIAL OWNER(1) SHARES(1) PERCENT
- --------------------------- --------- --------
<S> <C> <C>
Avix Ventures, L.P.(3)...................................... 7,748,871 50.5%
160 West 66th Street
New York, NY 10023
Officers and Directors:
Lennart Mengwall (4)........................................ 8,048,871 52.5%
Michael D. Troiano (5)...................................... 30,875 *
Joseph W. Seebach (6)....................................... 354,056 2.3%
David W. Chapman (7)........................................ 34,189 *
Byung C. Choi (8)........................................... 29,875 *
Robert Hedges (9)........................................... 3,156 *
Ofer Nemirovsky (10)........................................ 489,359 3.2%
Kevin Azzouz (11)........................................... 7,748,871 50.5%
All directors and executive officers as a group (8 persons) 8,990,381 58.6%
(12)......................................................
</TABLE>
- ------------------------
* Represents less than 1% of the outstanding shares.
(1) Information with respect to beneficial owners of more than 5% of the
outstanding shares of Common Stock is based solely on information provided
to the Company and reported to the Commission on Schedules 13G filed as of
February 14, 2000.
(2) All percentages have been determined as of March 20, 2000, in accordance
with Rule 13d-3 under the Securities Exchange Act of 1934, as amended. As
of March 20, 2000, a total of approximately 15,339,164 shares of Common
Stock were issued and outstanding and options to acquire a total of 622,634
shares of Common Stock were exercisable within 60 days.
(3) As reported on Schedule 13D/A filed with the Securities and Exchange
Commission on June 24, 1997 by Avix Ventures, L.P., of which Avix
Associates, L.P. is the general partner, of which Lennart Mengwall and
Kevin Azzouz are general partners.
(4) Represents 7,748,871 shares held by Avix Ventures, L.P. and 300,000 shares
beneficially owned by Mr. Mengwall. Mr. Mengwall is a general partner of
Avix Associates, L.P., the general partner of Avix Ventures, L.P.
(5) Includes 29,375 shares that Mr. Troiano may acquire upon exercise of stock
options within 60 days of March 20, 2000.
(6) Includes 102,656 shares that Mr. Seebach may acquire upon exercise of stock
options within 60 days of March 20, 2000.
(7) Includes 10,520 shares that Mr. Chapman may acquire upon exercise of stock
options within 60 days of March 20, 2000.
(8) Includes 29,875 shares that Mr. Choi may acquire upon exercise of stock
options within 60 days of March 20, 2000.
(9) Includes 3,156 shares that Mr. Hedges may acquire upon exercise of stock
options within 60 days of March 20, 2000.
(10) Includes (i) 457,280 shares held by Hancock Venture Partners IV-Direct
Fund L.P. and 24,067 shares held by Falcon Ventures II, L.P., the
respective general partners of which Mr. Nemirovsky is a general partner,
but as to which Mr. Nemirovsky disclaims beneficial ownership, and
(ii) 8,012 shares of
40
<PAGE>
which Mr. Nemirovsky may acquire upon exercise of stock options within
60 days after March 20, 2000.
(11) Represents shares held by Avix Ventures, L.P. Mr. Azzouz is a general
partner of Avix Associates, L.P., the general partner of Avix Ventures,
L.P.
(12) Includes 183,594 shares that may be acquired upon exercise of stock
options within 60 days of March 20, 2000.
MARKET VALUE
On December 31, 1999, the closing price of a share of the Company's Common
Stock on the Nasdaq National Market was $8.563.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 3, 1998, the Company issued a promissory note in the amount of
$150,000 to Joseph W. Seebach, the Company's Executive Vice President. The
promissory note was secured by a perfected, first priority security interest in
100,000 shares of the Company's common stock owned by Mr. Seebach. The
promissory note was payable on December 31, 1999 and bore interest at a rate of
six and one-half percent per annum. The note was paid in full in January 2000.
In March 1999, the Company issued two separate promissory notes, each in the
amount of $75,000, to Michael D. Troiano, who was appointed as the Company's
President in December 1999, and to Byung C. Choi, the Company's Senior Vice
President of Operations, who was appointed as executive officer in
December 1999. The promissory notes were due on December 31, 2001 and bore
interest at a rate of 6.75% per annum. On September 20, 1999, the $75,000 note
to Mr. Choi was cancelled and a new promissory note totaling $250,000 was
issued. The note bears interest at a rate of 7% per annum until September 30,
2002 when the interest rate will convert to the prime rate plus two percentage
points for the remainder of the term. The outstanding principal balance is
payable quarterly in arrears in equal installments beginning on January 1, 2005.
This note is due on September 30, 2029. In January 2000, the $75,000 note to
Mr. Troiano was cancelled and a new promissory note totaling $250,000 was
issued. The note bears interest at a rate of 7% per annum until December 31,
2002 when the interest rate will convert to the Prime rate plus two percentage
points for the remainder of the term. The outstanding principal balance is
payable quarterly in arrears in equal installments beginning on January 1, 2005.
The note is due on December 31, 2029.
Mr. Hedges is the Managing Director of the Retail Distribution Group at
Fleet. During 1999, Fleet paid to Primix approximately $318,900 for professional
services rendered in the normal course of business.
41
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS:
Reference is made to the Index set forth on page 17 of this Annual Report on
Form 10-K.
(a)(2) FINANCIAL STATEMENTS SCHEDULES:
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Schedule II--Valuation and Qualifying Accounts.............. S-2
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are not applicable and therefore have been omitted.
(a)(3) EXHIBITS. Exhibits 10.1 through 10.3, 10.19 through 10.23, and 10.25
through 10.32 constitute all of the management contracts and compensation plans
and arrangements of the Company required to be filed as exhibits to this Annual
Report. The following is a complete list of Exhibits filed or incorporated by
reference as part of this Annual Report.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------------------- -----------
<S> <C>
3.1 Third Amended and Restated Certificate of Incorporation(2)
3.2 Amended and Restated By-laws(2)
4.1 Specimen Common Stock Certificate(6)
10.1 1995 Stock Plan, as amended(1)
10.1A Form of Incentive Stock Option Agreement under the 1995
Stock Plan(4)
10.1B Form of Non-Qualified Stock Option Agreement under the 1995
Stock Plan(4)
10.2 1996 Stock Plan, as amended(2)
10.2A Form of Incentive Stock Option Agreement under the 1996
Stock Plan(4)
10.2B Form of Non-Qualified Stock Option Agreement under the 1996
Stock Plan(4)
10.3 Employee Stock Purchase Plan(2)
10.4 Lease for One Arsenal Marketplace, Watertown,
Massachusetts(1)
10.10 Warrant Purchase Agreement dated as of February 16, 1996
between the Company and SSB Investments, Inc.(2)
10.11 Common Stock Purchase Warrant dated as of February 16, 1996
issued to SSB Investments, Inc.(2)
10.12 Series B Convertible Preferred Stock Purchase Agreement
dated February 27, 1996 between the Company and
Hewlett-Packard Company(1)
10.13 Amendment to Series B Convertible Preferred Stock Purchase
Agreement dated as of March 6, 1996 between the Company and
Hewlett-Packard Company(1)
10.13A Amendment No. 1 to Series B Convertible Preferred Stock
Purchase Agreement dated as of June 7, 1996 between the
Company and Hewlett-Packard Company(3)
10.14 Series B Convertible Preferred Stock Purchase Agreement
dated March 6, 1996 among the Company and the purchasers
named therein(1)
10.15 Registration Rights Agreement dated March 6, 1996 among the
Company and the investors named therein(1)
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------------------- -----------
<S> <C>
10.16 Series C Convertible Preferred Stock Purchase Agreement
dated as of March 29, 1996 among the Company and the
purchasers named therein(1)
10.17 Registration Rights Agreement dated as of March 29, 1996
among the Company and the investors named therein(1)
10.18 Stock Purchase Agreement dated as of April 22, 1997 by and
among Avix Ventures, L.P. and the named Sellers therein(5)
10.19 Letter agreement dated as of July 8, 1997 by and between the
Company and Joseph Seebach.(9)
10.20 Promissory Note for $150,000 dated as of February 3, 1998
from Joseph Seebach for the benefit of the Company.(9)
10.21 Stock Pledge Agreement dated as of February 3, 1998 by and
between the Company and Joseph Seebach.(9)
10.22 Letter agreement dated as of February 9, 1998 by and between
the Company and Peter Marton.(9)
10.23 Severance Agreement dated as of February 26, 1998 by and
between the Company and David W. Chapman.(9)
10.24 Agreement and Plan of Merger dated as of December 31, 1998
by and among the Company, Advis Acquisition Corporation,
Advis, Inc. and David S. Buck. (7)
10.25* Promissory Note for $250,000 dated as of September 20, 1999
from Byung C. Choi for the benefit of the Company.
10.26* Stock Pledge Agreement dated as of September 20, 1999 by and
between the Company and Byung C. Choi.
10.27* Amendment to Stock Option Agreement dated as of March 11,
1999 by and between the Company and David Chapman.
10.28* Incentive Stock Option Agreement dated as of March 11, 1999
by and between the Company and David Chapman.
10.29* Incentive Stock Option Agreement dated as of March 11, 1999
by and between the Company and Joseph Seebach.
10.30* Non-Qualified Stock Option Agreement dated as of March 11,
1999 by and between the Company and Joseph Seebach.
10.31* Incentive Stock Option Agreement dated as of September 16,
1999 by and between the Company and Lennart Mengwall.
10.32* Non-Qualified Stock Option Agreement dated as of
September 16, 1999 by and between the Company and Lennart
Mengwall.
10.33 Agreement and Plan of Merger dated as of December 3, 1999 by
and among the Company, Black Bean Studios, Inc., Claudio
Luis Vera and Alisha Haydn Vera.(8)
21 List of Subsidiaries(9)
23* Consent of Arthur Andersen LLP
27* Financial Data Schedule
</TABLE>
- ------------------------
(1) Filed as an exhibit to the Company's Registration Statement on Form S-1
filed with the Securities and Exchange Commission on May 22, 1996 (File
No. 333-04235) and incorporated herein by reference thereto.
43
<PAGE>
(2) Filed as an exhibit to Amendment No. 1 to the Company's Registration
Statement on Form S-1 filed with the Securities and Exchange Commission on
June 13, 1996 (File No. 333-04235) and incorporated herein by reference
thereto.
(3) Filed as an exhibit to Amendment No. 2 to the Company's Registration
Statement on Form S-1 filed with the Securities and Exchange Commission on
June 25, 1996 (File No. 333-04235) and incorporated herein by reference
thereto.
(4) Filed as an exhibit to the Company's Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 28, 1997 (File
No. 000-20789) and incorporated herein by reference thereto.
(5) Filed as an exhibit to Schedule 13D filed with the Securities and Exchange
Commission on May 2, 1997 (File No. 005-47827) and incorporated herein by
reference thereto.
(6) Filed as an exhibit to the Company's Current Report on Form 8-K filed with
the Securities and Exchange Commission on September 22, 1998.
(7) Filed as an exhibit to the Company's Current Report on Form 8-K filed with
the Securities and Exchange Commission on January 14, 1999.
(8) Filed as an exhibit to the Company's Current Report on Form 8-K filed with
the Securities and Exchange Commission on December 15, 1999.
(9) Filed as an exhibit to the Company's Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 30, 1999 (File
No. 000-20789) and incorporated herein by reference thereto.
* Filed herewith.
A COPY OF ANY EXHIBIT TO THIS ANNUAL REPORT MAY BE OBTAINED WITHOUT CHARGE
BY WRITTEN REQUEST TO THE COMPANY'S SECRETARY, DAVID W. CHAPMAN, PRIMIX
SOLUTIONS, INC., ONE ARSENAL MARKETPLACE, WATERTOWN, MA 02472.
(b) REPORTS ON FORM 8-K. On December 15, 1999, the Registrant filed a report
on Form 8-K.
(c) EXHIBITS. The response to this portion of Item 14 is submitted as a
separate section of this Annual Report beginning on page 42.
(d) FINANCIAL STATEMENT SCHEDULES. The response to this portion of Item 14
is submitted as a separate section of this Annual Report beginning on
page S-1.
44
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C> <C>
PRIMIX SOLUTIONS INC.
By: /s/ LENNART MENGWALL
-----------------------------------------
Lennart Mengwall
Chairman of the Board and
Chief Executive Officer
</TABLE>
Dated: March 30, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Chairman and Chief
/s/ LENNART MENGWALL Executive Officer
------------------------------------------- (Principal Executive March 30, 2000
Lennart Mengwall Officer & Director)
Chief Financial Officer,
/s/ DAVID W. CHAPMAN Treasurer and Secretary
------------------------------------------- (Principal Financial and March 30, 2000
David W. Chapman Accounting Officer)
/s/ KEVIN AZZOUZ Director March 30, 2000
-------------------------------------------
Kevin Azzouz
/s/ ROBERT HEDGES Director March 30, 2000
-------------------------------------------
Robert Hedges
/s/ OFER NEMIROVSKY Director March 30, 2000
-------------------------------------------
Ofer Nemirovsky
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To Primix Solutions Inc.:
We have audited, in accordance with generally accepted auditing standards,
the consolidated balance sheets of Primix Solutions Inc. as of December 1998 and
1999 and the related consolidated statements of operations, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1999, included in this Form 10-K, and have issued our report thereon dated
February 4, 2000. Our audits were made for the purpose of forming an opinion on
the basic financial statements taken as a whole. The attached schedule is the
responsibility of the Company's management and is presented for the purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, fairly states in all material respects, the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 4, 2000
S-1
<PAGE>
SCHEDULE II
PRIMIX SOLUTIONS INC.
VALUATION OF QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING OF BAD DEBT BALANCE AT
ALLOWANCE FOR DOUBTFUL ACCOUNTS PERIOD EXPENSE RECOVERIES END OF PERIOD
- ------------------------------- ------------ -------- ---------- -------------
<S> <C> <C> <C> <C>
Year ended December 31, 1997...................... $ 283 $ -- $(233) $ 50
Year ended December 31, 1998...................... 50 42 -- 92
Year ended December 31, 1999...................... 92 -- (42) 50
<CAPTION>
BALANCE AT CHARGED
BEGINNING OF TO BALANCE AT
RESTRUCTURING RESERVE PERIOD EXPENSE PAYMENTS END OF PERIOD
- --------------------- ------------ -------- ---------- -------------
<S> <C> <C> <C> <C>
Year ended December 31, 1997...................... $ -- $665 $(478) $ 187
Year ended December 31, 1998...................... 187 -- (187) --
Year ended December 31, 1999...................... -- -- -- --
</TABLE>
S-2
<PAGE>
Exhibit 10.25
PROMISSORY NOTE
$250,000.00 As of September 20, 1999
FOR VALUE RECEIVED, Byung C. Choi, an individual with an address of 12
Canterbury Lane, Hopkinton, Massachusetts 01748 (the "Borrower"), promises to
pay to the order of Primix Solutions, Inc., a Delaware corporation (together
with any successor holder or holders of this Note, the "Lender") at its office
at One Arsenal Marketplace, Watertown, Massachusetts 02472, or such other place
as Lender may designate, the principal sum of Two Hundred Fifty Thousand and
00/100 Dollars ($250,000.00), or so much thereof as shall be advanced hereunder,
together with interest thereon, as hereinafter set forth.
Interest on the principal balance of this Note from time to time
outstanding shall accrue from the date hereof until September 30, 2002 at the
rate of seven percent (7.00%) per year. Interest only shall be payable quarterly
in arrears in equal installments of Four Thousand Four Hundred Twenty-Three and
61/100 Dollars ($4,423.61) on the first day of the first month of each quarter
(a "Payment Date") of each year (a "Loan Year") beginning October 1 and ending
September 30, beginning with the first day of January, 2000. Interest shall be
computed on the basis of a three hundred and sixty (360)-day year and shall be
paid for the actual number of days on which principal is outstanding. On January
1, 2000, the Borrower shall pay Lender, in addition to the installment due for
the first quarter of the first Loan Year, an amount equal to the interest on the
principal balance of this Note that shall have accrued from the date hereof
through September 30, 1999 at the rate of seven percent (7.00%) per year.
Interest on the principal balance of this Note from time to time
outstanding from October 1, 2002 until September 30, 2004 (the "P&I Date") shall
accrue at a variable annual rate which shall equal the "Prime Rate," as
hereinafter defined, plus two percentage points (2%) (the "Base Rate"). Subject
to any change in the Prime Rate, interest only shall be payable quarterly in
arrears in equal installments on each Payment Date of each Loan Year, beginning
with the first day of January, 2003. Interest shall be computed on the basis of
a three hundred and sixty (360)-day year and shall be paid for the actual number
of days on which principal is outstanding.
Beginning on the day immediately following the P&I Date, interest on
the principal balance of this Note shall accrue at the Base Rate. Subject to any
change in the Prime Rate, interest shall be payable quarterly in arrears in
equal installments on each Payment Date of each Loan Year, beginning with the
first day of January, 2005. Interest shall be computed on the basis of a three
hundred and sixty (360)-day year and shall be paid for the actual number of days
on which principal is outstanding. In addition, beginning on the day immediately
following the P&I Date, the outstanding principal balance of this Note shall be
payable quarterly in arrears in equal installments of Two Thousand Five Hundred
and 00/100 Dollars ($2,500.00) on each Payment Date of each Loan Year, beginning
with the first day of January, 2005.
<PAGE>
In any event, the entire outstanding principal balance of this Note,
together with any accrued interest and other charges as may be due hereunder,
shall be paid on September 30, 2029 (the "Maturity Date").
In the event that any regularly scheduled payment due hereunder is not
paid within fifteen (15) days after the date it is due, Lender shall have the
right, in addition to any other rights hereunder, to collect a late charge as
compensation for increased costs of administering such late payment. Such late
charge shall be in an amount equal to five percentage points (5%) of the amount
of such late payment, and shall be due and payable upon demand.
In the event that (i) any payment due hereunder is not paid within
fifteen (15) days after the date it is due or upon a default under the mortgage
securing this Note (the "Mortgage"), that certain Amended and Restated Stock
Pledge Agreement dated the date hereof or under any other instrument executed by
Borrower in connection with the loan evidenced by this Note (together with this
Note and the Mortgage, the "Loan Documents") which default is not cured within
the applicable grace period, if any, or (ii) the termination, for any reason or
no reason, of Borrower's employment with Lender, Lender, at its option, may
declare immediately due and payable the entire outstanding balance of principal
and interest, together with all other charges which Lender may be entitled. If
this Note is so accelerated or any amounts due hereunder are not paid on the
Maturity Date, all amounts due hereunder shall, after such acceleration or such
Maturity Date, as the case may be, bear interest at the Prime Rate plus five
percentage points (5%) per year, until paid.
On any interest payment date, the outstanding balance of principal due
hereunder may be prepaid in whole or in part in multiples of One Thousand
Dollars ($1,000.00), provided that at least thirty (30) days' prior written
notice of such prepayment shall have been given to Lender.
As used herein, the term "Prime Rate" shall mean the rate of interest
announced or published by Lender's primary bank as its prime rate on the first
day of the first month of each quarter of each Loan Year, beginning with the
first day of October, 1999. In the event that the Prime Rate changes from
quarter to quarter, the interest rate under this Note shall be adjusted to
reflect any change in the Prime Rate as of the date of such change, and the
amount of the equal quarterly payments of interest subsequently becoming due
under this Note shall be adjusted accordingly to provide, as nearly as possible,
for the full amortization of the remaining principal amount hereof over the
remaining term of this Note. In the event the Prime Rate is no longer published
or announced or becomes unascertainable for any reason, Lender shall designate a
comparable reference rate which shall be deemed the Prime Rate hereunder.
Any notice required or permitted to be delivered hereunder shall be in
writing and shall be deemed to be delivered on the earlier of (i) the date
received, or (ii) the date of delivery, refusal, or non-delivery indicated on
the return receipt, if deposited in a United States Postal Service depository,
postage prepaid, sent registered or certified mail, return receipt requested,
addressed to the party to receive the same at the address of such party set
forth at the beginning of this Note, or at such other address as may be
designated in a notice delivered or mailed as herein provided.
3
<PAGE>
Borrower agrees to pay all charges (including reasonable attorneys'
fees) of Lender in connection with the collection and/or enforcement of this
Note or any other Loan Document or in protecting or preserving the security for
this Note, whether or not suit is brought against Borrower.
The failure of Lender at any time to exercise any option or right
hereunder shall not constitute a waiver of Lender's right to exercise such
option or right at any other time.
Borrower hereby waives presentment, demand, notice, protest and all
other suretyship defenses generally and agrees that (i) any renewal, extension
or postponement of the time of payment or any other indulgence, (ii) any
modification, supplement or alteration of any of the Borrower's obligations
undertaken in connection with this Note or any of the other Loan Documents, or
(iii) any substitution, exchange or release of collateral or the addition or
release of any person or entity primarily or secondarily liable, may be effected
without notice to Borrower and without releasing Borrower from any liability
hereunder.
This Note shall be governed by, construed, and enforced in accordance
with the laws of The Commonwealth of Massachusetts. If any provision of this
Note is held to be invalid or unenforceable by a court of competent
jurisdiction, the other provisions of this Note shall remain in full force and
effect. If the payment of any interest due hereunder would subject Lender to any
penalty under applicable law, then the payments due hereunder shall be
automatically reduced to what they would be at the highest rate authorized under
applicable law.
This Note is secured by, among other things, a mortgage of real estate
located at 12 Canterbury Lane, Hopkinton, Middlesex County, Massachusetts, and
recorded with Middlesex County Registry of Deeds.
This Note shall have the effect of an instrument under seal.
Witness: Borrower:
- ---------------------------------- ----------------------------------
Byung C. Choi
4
<PAGE>
Exhibit 10.26
AMENDED AND RESTATED STOCK PLEDGE AGREEMENT
THIS AMENDED AND RESTATED STOCK PLEDGE AGREEMENT (this "Agreement") is
made as of September 20, 1999, between Byung Choi ("Pledgor") and Primix
Solutions Inc., a Delaware corporation ("Pledgee").
Section 1. PLEDGE OF STOCK. Pledgor hereby assigns to Pledgee, and
grants to Pledgee a first priority security interest in, the Options (as
hereinafter defined) and the Stock (as hereinafter defined), to be held by
Pledgee subject to the terms and conditions hereinafter set forth, the option
agreements and/or certificates for which, accompanied by stock powers or other
appropriate instruments of assignment thereof duly executed by Pledgor, have
been delivered to Pledgee and, as to Options and Stock hereafter acquired, shall
be delivered to Pledgee. Pledgor agrees to immediately deliver any certificates
evidencing the Options and Stock upon receipt.
Section 2. DEFINITIONS.
(a) The term "OPTIONS" as used herein includes the stock
option to purchase 100,000 shares of Common Stock of Primix Solutions Inc. and
any additional stock options to purchase shares of capital stock of Primix
Solutions Inc. hereafter acquired.
(b) The term "STOCK" as used herein includes any shares of
Common Stock of Primix Solutions Inc. issued or issuable under the Options and
any additional shares of capital stock of Primix Solutions Inc. hereafter
acquired. The term "Stock" shall further include all cash or non-cash income
from the shares of Stock pledged hereunder, all increases therein and proceeds
thereof, other than income, increases or proceeds received by Pledgor pursuant
to Section6 hereof, and any dividend paid in respect of the Stock in the form of
additional shares of stock, options to purchase stock, warrants or convertible
securities (a "NON-CASH DIVIDEND").
(b) The term "OBLIGATIONS" as used herein means all
indebtedness, obligations and liabilities of Pledgor to Pledgee, whether now
existing or hereafter arising, under that certain Promissory Note in the face
amount of TWO HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS ($250,000.00) made by
Pledgee in favor of Pledgor as of September 20, 1999 (the "Note") and all future
advances or loans given by Pledgee to Pledgor under any other arrangements.
(c) The term "Event of Default" as used herein shall mean the
occurrence of any of the following events: (i) an assignment for the benefit of
creditors or commencement of any proceeding under any bankruptcy or insolvency
law by or against the Maker, (ii) the termination, for any reason, of the
Maker's employment with the Payee, (iii) a material breach of this Agreement,
(iv) the Maker shall have failed to pay the full amount of principal and accrued
<PAGE>
interest then outstanding on the Maturity Date (as defined in the Note), or (v)
an event of default under the Mortgage (as defined in the Note).
Section 3. SECURITY FOR OBLIGATIONS. This Agreement, the pledge of the
Options and Stock hereunder and the Mortgage are made in favor of Pledgee as
security for the Obligations.
Section 4. LIQUIDATION, RECAPITALIZATION, ETC. Any sums paid upon or
with respect to any of the Stock upon the liquidation or dissolution of the
issuer thereof shall be paid over to Pledgee to be held by it as security for
the Obligations; and in case any distribution of capital shall be made on or in
respect of any of the Stock or any property shall be distributed upon or with
respect to any of the Stock pursuant to the recapitalization or reclassification
of the capital of the issuer thereof or pursuant to the reorganization thereof,
the capital or property so distributed shall be delivered to Pledgee to be held
by it as security for the Obligations. All sums of money and property paid or
distributed in respect of the Stock upon such a liquidation, dissolution,
recapitalization or reclassification which are received by Pledgor shall, until
paid or delivered to Pledgee, be held in trust for Pledgee as security for the
Obligations.
Section 5. WARRANTY OF TITLE. Pledgor warrants that: (a) Pledgor is the
lawful, record and beneficial owner of the Options and Stock; (b) the Options
and Stock are not subject to any pledge, lien, security interest, charge,
option, restrictions or other encumbrances except the security interest created
by this Agreement; (c) Pledgor has the power, authority and legal right to
pledge all of such Options and Stock pursuant to this Agreement; (d) no person
has any present or future right (conditional, preemptive or otherwise) to
acquire, vote, register or restrict the transfer of the Options and Stock; and
(e) the execution and delivery of this Agreement and the pledging of the Options
and Stock hereunder do not contravene any law or any rule or regulation
thereunder or any judgment, decree or order of any tribunal, or conflict with,
or result in a breach of or default under, or give rise to acceleration under,
any agreement or instrument to which Pledgor is a party or any of Pledgor's
property is bound.
Section 6. DIVIDENDS, VOTING, ETC., PRIOR TO MATURITY. So long as no
Event of Default has occurred and is continuing, Pledgor shall be entitled to
receive all cash dividends, if any, paid in respect of the Stock, and to vote
outstanding shares of the Stock and to give consents, waivers and ratifications
in respect of the Stock, PROVIDED that no vote shall be cast, or consent, waiver
or ratification given or action taken which would be inconsistent with or
violate any provisions of this Agreement, and PROVIDED FURTHER, that upon an
Event of Default, Pledgee may cause the Options and Stock to be transferred into
its own name as collateral security. All such rights of Pledgor to receive cash
dividends shall cease in case an Event of Default shall have occurred and be
continuing. All such rights of Pledgor to vote and give consents, waivers and
ratifications with respect to the Stock shall, at Pledgee's option, as evidenced
by Pledgee notifying Pledgor of such election, cease in case an Event of Default
shall have occurred and be continuing. In the event that a Non-Cash Dividend
shall be paid in respect of the Stock, Pledgor shall promptly
2
<PAGE>
deliver to Pledgee the certificates issued in connection with such Non-Cash
Dividend, if any, together with stock powers or other appropriate instruments of
assignment thereof duly executed by Pledgor.
Section 7. REMEDIES. If an Event of Default shall have occurred and be
continuing, Pledgee shall thereafter have the following rights and remedies (to
the extent permitted by applicable law) in addition to the rights and remedies
of a secured party under the Uniform Commercial Code of Massachusetts, all such
rights and remedies being cumulative, not exclusive, and enforceable
alternatively, successively or concurrently, at such time or times as Pledgee
deems expedient:
(a) if Pledgee so elects and gives notice of such election to
Pledgor, Pledgee may vote any or all outstanding shares of the Stock and give
all consents, waivers and ratifications in respect of the Stock and otherwise
act with respect thereto as though it were the outright owner thereof (Pledgor
hereby irrevocably constituting and appointing Pledgee the proxy and
attorney-in-fact of Pledgor, with full power of substitution, to do so);
(b) Pledgee may demand, sue for, collect or make any
compromise or settlement Pledgee deems suitable in respect of the Options and
Stock;
(c) Pledgee may sell, resell, assign and deliver, or otherwise
dispose of any or all of the Stock, for cash and/or credit and upon such terms
at such place or places and at such time or times and to such persons, firms,
companies or corporations as Pledgee thinks expedient, all without demand for
performance by Pledgor or any notice or advertisement whatsoever except such as
may be required by law; and
(d) Pledgee may cause all or any part of the Stock held by it
to be transferred into its name or the name of its nominee or nominees or cancel
all or any part of the Options.
Pledgee may enforce its rights hereunder without any other notice and
without compliance with any other condition precedent now or hereunder imposed
by statute, rule of law or otherwise (all of which are hereby expressly waived
by Pledgor, to the fullest extent permitted by law). Pledgor acknowledges that
ten (10) calendar days' notice of any public sale or of that date on or after
which a private sale may be effected is reasonable notice. Pledgee may buy any
part or all of the Stock at any public sale, and if any part or all of the Stock
is of a type customarily sold in a recognized market or is of the type which is
the subject of widely- distributed standard price quotations, Pledgee may buy at
a private sale and may make payments thereof by any means. Pledgee may apply the
cash proceeds actually received from any sale or other disposition of the Stock
to the reasonable expenses of retaking, holding, preparing for sale, selling and
the like, to reasonable attorneys' fees, and all legal expenses, travel and
other expenses which may be incurred by Pledgee in attempting to collect the
Obligations or to enforce
3
<PAGE>
this Agreement or in the prosecution or defense of any action or proceeding
related to the subject matter of this Agreement; and then to the Obligations,
and any surplus shall be paid to Pledgor.
Pledgor recognizes that Pledgee may be unable to effect a public sale
of the Stock by reason of certain prohibitions contained in the Securities Act
of 1933, as amended, but may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers or to a public sale which is
restricted to residents of the Commonwealth of Massachusetts. Pledgor agrees
that any such private sales or such restricted public sales may be at prices and
other terms less favorable to the seller than if sold at public sales and that
such private sales or such restricted public sales shall not by reason thereof
be deemed not to have been made in a commercially reasonable manner. Pledgee
shall be under no obligation to delay a sale of any of the Stock for the period
of time necessary to permit the issuer of such securities to register such
securities for public sale under the Securities Act of 1933, as amended, even if
the issuer would agree to do so.
In all events, Pledgee shall give Pledgor not less than ten (10)
calendar days' written notice of any proposed disposition of the Stock or
cancellation of the Options.
Section 8. MARSHALLING. Pledgee shall not be required to marshal any
present or future security for (including but not limited to this Agreement and
the Options and Stock pledged hereunder), or guarantees of, the Obligations, or
to resort to such security or guarantees in any particular order; and all of its
rights hereunder and in respect of such security and guarantees shall be
cumulative and in addition to all other rights, however existing or arising. To
the extent that he lawfully may, Pledgor hereby agrees that he will not invoke
any law relating to the marshalling of collateral which might cause delay in or
impede the enforcement of Pledgee's rights under this Agreement or under any
other instrument evidencing any of the Obligations or under which any of the
Obligations is outstanding or by which any of the Obligations is secured or
guaranteed, and to the extent that it lawfully may Pledgor hereby irrevocably
waives the benefits of all such laws.
Section 9. PLEDGOR'S OBLIGATIONS NOT AFFECTED. The obligations of
Pledgor hereunder shall remain in full force and effect without regard to, and
shall not be impaired by: (a) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or the like of Pledgee; (b)
any exercise or nonexercise, or any waiver, by Pledgee of any right, remedy,
power or privilege under or in respect of the Obligations or any of any security
therefor (including this Agreement); (c) any amendment to or modification of any
instrument (other than this Agreement) securing any of the Obligations; or (d)
the taking of additional security for, or any guaranty of, any of the
Obligations or the release or discharge or termination of any security or
guaranty for any of the Obligations; whether or not Pledgor shall have notice or
knowledge of any of the foregoing.
4
<PAGE>
Section 10. TRANSFER, ETC., BY PLEDGOR. Without the prior written
consent of Pledgee, Pledgor will not sell, assign, transfer or otherwise dispose
of, grant any option with respect to, or pledge or grant any security interest
in or otherwise encumber any of the Options and Stock or any interest therein,
except for the pledge thereof provided for in this Agreement.
Section 11. FURTHER ASSURANCES. Pledgor will, from time to time,
execute and deliver to Pledgee all such other and further instruments and
documents and take or cause to be taken all such other and further action as
Pledgee may reasonably request in order to effect and confirm more securely in
Pledgee all rights contemplated in this Agreement.
Section 12. PLEDGEE'S EXONERATION. Under no circumstances shall Pledgee
be deemed to assume any responsibility for or obligation or duty with respect to
the Options and Stock or any matter or proceedings arising out of or relating
thereto, other than to exercise reasonable care in the physical custody of the
Options and Stock. Pledgee shall not be required to take any action of any kind
to collect, preserve or protect its or Pledgor's rights in the Options and Stock
or against other parties thereto, other than to exercise reasonable care in the
physical custody of the Options and Stock.
Section 13. NO WAIVER, ETC. No act, failure or delay by Pledgee shall
constitute a waiver of its rights and remedies hereunder or otherwise. No single
or partial waiver by Pledgee of any default or right or remedy which it may have
shall operate as a waiver of any other default, right or remedy or of the same
default, right or remedy on a future occasion. Pledgor hereby waives
presentment, notice of dishonor and protest of all instruments, included in or
evidencing any of the Obligations, and any and all other notices and demands
whatsoever (except as expressly provided herein).
Section 14. NOTICE, ETC. All communications herein provided shall be in
writing and shall be sufficient if sent by United States mail, registered or
certified, postage prepaid, delivered by messenger, overnight delivery service
or telecopier, addressed as follows:
If to Pledgor, at the address set forth below Pledgor's signature.
If to Pledgee: Primix Solutions Inc.
One Arsenal Marketplace, 2nd Floor
Watertown, MA 02472
Telecopier: (617) 923-6565
Attention: Chief Financial Officer
or to such other address as the party to receive any such communication or
notice may have designated by written notice to the other party.
5
<PAGE>
Any notice given pursuant to this Section shall be deemed to have been
given and received when actually delivered, upon receipt of electronic
confirmation if by telecopier, one business day after dispatch by a recognized
overnight delivery service, or three business days after mailing by certified or
registered mail with proper postage affixed and return receipt requested.
Section 15. TERMINATION. This Agreement shall terminate at such time as
all of the Obligations shall have been paid in full, and upon such termination,
Pledgor shall be entitled to the return of such Options and Stock in the
possession or control of Pledgee as has not theretofore been disposed of
pursuant to the provisions hereof and as to which Pledgee has not received
notice of a junior pledge, together with any moneys and other property of
Pledgor at the time held by Pledgee hereunder.
Section 16. MISCELLANEOUS PROVISIONS.
(a) Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated except by a written instrument expressly
referring to this Agreement and to the provisions so modified or limited, and
executed by the party to be charged.
(b) This Agreement is personal and may not be assigned by
Pledgor. This Agreement and all obligations of Pledgor hereunder shall be
binding upon his heirs, executors and administrators. Pledgee shall have the
right to assign this Agreement, without any restriction, and Pledgee's rights
and remedies under this Agreement shall inure to the benefit of its assigns and
successors by way of merger, consolidation or sale of substantially all of the
assets or stock of Pledgee.
(c) This Agreement and the obligations of Pledgor hereunder
shall be governed by and construed in accordance with the laws of The
Commonwealth of Massachusetts.
(d) The descriptive section headings have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
If any term of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity of all other terms hereof shall be in no way
affected thereby, and this Agreement shall be construed and be enforceable as if
such invalid, illegal or unenforceable term had not been included herein.
(e) This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which together shall be deemed to
be one and the same instrument.
(f) To the extent permitted by applicable law, Pledgor hereby
waives trial by jury in any proceeding brought for the interpretation or
enforcement of this Agreement or for a determination of the rights of the
parties hereunder.
6
<PAGE>
Section 17. CONSENT TO JURISDICTION. PLEDGOR AND PLEDGEE IRREVOCABLY
CONSENT AND SUBMIT TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
THE DISTRICT OF MASSACHUSETTS, AND THE COURTS OF THE COMMONWEALTH OF
MASSACHUSETTS IN CONNECTION WITH ANY ACTION, PROCEEDING OR CLAIM ARISING OUT OF
OR RELATING TO THIS AGREEMENT AND/OR ANY INSTRUMENT OR DOCUMENT REQUIRED HEREBY
OR INCIDENT OR COLLATERAL HERETO.
[NO FURTHER TEXT ON THIS PAGE]
7
<PAGE>
IN WITNESS WHEREOF, Pledgor and Pledgee have caused this Agreement to
be duly executed as of the date first above written.
"PLEDGOR"
------------------------------------
Byung Choi
Address: 12 Canterbury Lane
Hopkinton, Massachusetts 01748
"PLEDGEE"
PRIMIX SOLUTIONS INC.
By:
-----------------------------------
Name:
Title:
8
<PAGE>
EXHIBIT 10.27
AMENDMENT TO STOCK OPTION AGREEMENTS
THIS AMENDMENT dated as of March 11, 1999 amends each of the Incentive
Stock Option Agreements listed in APPENDIX A (collectively, the "Option
Agreements") by and between the undersigned optionee (the "Optionee") and Primix
Solutions Inc. (f/k/a OneWave, Inc., the "Company") under the Company's 1995
Stock Plan and 1996 Stock Plan (the "Stock Plans"). Capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the Option
Agreements or if not defined therein shall have the meanings ascribed to them in
the respective Stock Plans.
WHEREAS, the Company desires to provide for the acceleration of the
vesting of certain stock options in the event of certain transactions or
termination of employment without cause.
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
agree that Section 1 of each of the Option Agreements be and hereby is amended
by deleting in its entirety the second paragraph of Section 1 and adding the
following:
"(a) EFFECT OF CERTAIN TRANSACTIONS. In the case of (a) the dissolution
or liquidation of the Company, (b) a merger, reorganization or consolidation in
which a majority of the outstanding voting power of the Company is acquired by
another person or entity (other than a holding company formed by the Company),
(c) the sale of all or substantially all of the assets of the Company to another
person or entity, or (d) the sale of fifty percent (50%) or more of the
outstanding stock of the Company to an unrelated person or entity (in each case,
a "Transaction"), other than a merger transaction to be accounted for as a
"pooling of interests" under APB No. 16 in which the surviving entity assumes
this Stock Option (a "Pooling Transaction"), this Stock Option shall be deemed
fully vested and exercisable as of the closing or consummation of such
Transaction, provided that such acceleration and any notice of exercise of
options that become vested as of such closing or consummation shall in all cases
be subject to and contingent upon such closing or consummation. From and after
the closing or consummation of any such Transaction, other than a Pooling
Transaction, this Stock Option shall terminate and no longer be exercisable as
to any Option Shares unexercised on or prior to the closing or consummation date
of such Transaction, unless provision is made in such Transaction in the sole
discretion of the parties thereto for the assumption of this Stock Option or the
substitution for this Stock Option of a new stock option of the successor person
or entity or a parent or subsidiary thereof, if any, with such adjustment as to
the number and kind of shares and the per share exercise price as such parties
shall agree to. In the event of a Pooling Transaction, this Stock Option shall
remain in effect in accordance with its terms as provided herein and shall
become an obligation of the surviving entity, with appropriate adjustments to
the number and kind of shares and the per share exercise price as contemplated
by the Stock Plans. In the event of any Transaction subject to this Section, the
Company shall give to the Optionee written notice thereof at least fifteen (15)
days prior to the closing or anticipated consummation date, or the record date
for such transaction, if earlier.
(b) EFFECT OF TERMINATION OF EMPLOYMENT WITHOUT CAUSE. Notwithstanding
anything herein to the contrary, this Stock Option shall be deemed vested and
exercisable in full upon the date on which the Optionee's employment with the
Company and its Related Corporations is
<PAGE>
terminated by the Company without Cause (as hereinafter defined) or by the
Optionee for Good Reason. For purposes hereof, "cause" for termination shall
mean: (i) dishonest statements or acts of the Optionee with respect to the
Company or any Related Corporation or acting in a manner that discredits or is
detrimental to the reputation, character or standing of the Company or any
Related Corporation; (ii) the commission by or indictment of the Optionee for
(A) a felony or (B) any misdemeanor involving moral turpitude, deceit,
dishonesty or fraud, including, without limitation, any form of harassment
("indictment," for these purposes, means an indictment, probable cause hearing
or any other procedure pursuant to which an initial determination of probable or
reasonable cause with respect to such offense is made); (iii) the Optionee shall
commit a breach of any of the covenants, terms or provisions of the standard
Company employee agreements regarding inventions, proprietary rights,
confidentiality and non-competition; (iv) the Optionee shall have failed to
comply with written instructions from the Company's President or shall have
substantially failed to perform the Optionee's duties; or (v) gross negligence,
willful misconduct or insubordination of the Optionee with respect to the
Company or any Related Corporation. As used herein, the term "Good Reason" shall
mean the occurrence of any of the following events: (a) a substantial adverse
change in the nature or scope of the Optionee's responsibilities, authorities,
powers, functions or duties; (c) a reduction in the Optionee's annual base
salary except for across-the-board salary reductions similarly affecting all, or
substantially all, management employees; or (c) the relocation of the offices at
which the Optionee is principally employed to a location more than fifty (50)
miles from such offices."
Except as otherwise set forth herein, all other terms and conditions of
the Option Agreements shall remain in full force and effect.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, without regard to its conflict of laws
principles.
For the convenience of the parties and to facilitate execution, this
Amendment may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which shall constitute one and the same document.
PRIMIX SOLUTIONS INC.
By: /s/ LENNART MENGWAL
-----------------------------------
Name: Lennart Mengwall
Title:Chief Executive Officer and President
-2-
<PAGE>
The foregoing Agreement is hereby accepted and the terms and conditions
thereof hereby agreed to by the undersigned.
Dated as of March 11, 1999 OPTIONEE:
/s/ DAVID W. CHAPMAN
-------------------------------
Name: David W. Chapman
Optionee's Address:
c/o Primix Solutions Inc.
One Arsenal Marketplace
Watertown, MA 02472
Designated Beneficiary:
-------------------------------
Beneficiary's Address:
-----------------------------
------------------------------
-3-
<PAGE>
APPENDIX A
Incentive Stock Option Agreement between David W. Chapman and the Company dated
September 30, 1996, with EXHIBIT A thereto as follows:
1. EXHIBIT A dated as of March 26, 1997 granting 10,000 shares under the 1996
Stock Plan;
2. EXHIBIT A dated as of October 1, 1997 granting 3,703 shares under the 1995
Stock Plan;
3. EXHIBIT A dated as of March 15, 1997 granting 2,222 shares under the 1995
Stock Plan;
4. EXHIBIT A dated as of October 23, 1996 granting 1,563 shares under the 1996
Stock Plan;
5. Exhibit A dated as of September 30, 1996 granting 19 shares under the 1996
Stock Plan; and
6. EXHIBIT A dated as of November 17, 1997 granting 25,000 shares under the
1996 Stock Plan.
-4-
<PAGE>
EXHIBIT 10.28
INCENTIVE STOCK OPTION AGREEMENT
UNDER THE PRIMIX SOLUTIONS, INC.
1995 STOCK PLAN
Pursuant to the Primix Solutions Inc. 1995 Stock Plan, as amended
through the date hereof (the "Plan"), Primix Solutions Inc. (the "Company")
hereby grants to the Optionee named in EXHIBIT A attached hereto an option (the
"Stock Option") to purchase on or prior to the Expiration Date specified in
EXHIBIT A all or part of the number of shares ("Option Shares") of Common Stock,
par value $.001 per share (the "Stock"), of the Company specified in EXHIBIT A
at the Option Exercise Price per Share specified in EXHIBIT A subject to the
terms and conditions set forth herein and in the Plan.
1. VESTING SCHEDULE. No portion of this Stock Option may be exercised
until such portion shall have vested. Except as set forth below, and subject to
the discretion of the Committee (as defined in paragraph 2 of the Plan) to
accelerate the vesting schedule hereunder, for so long as the Optionee is a
director of, or employed as an employee or officer of, or retained to render
services as a consultant of, the Company or a Related Corporation, this Stock
Option shall vest in accordance with such other vesting schedule as may be
specified in EXHIBIT A.
(a) EFFECT OF CERTAIN TRANSACTIONS. In the case of (a) the
dissolution or liquidation of the Company, (b) a merger, reorganization or
consolidation in which a majority of the outstanding voting power of the Company
is acquired by another person or entity (other than a holding company formed by
the Company), (c) the sale of all or substantially all of the assets of the
Company to another person or entity, or (d) the sale of fifty percent (50%) or
more of the outstanding stock of the Company to an unrelated person or entity
(in each case, a "Transaction"), other than a merger transaction to be accounted
for as a "pooling of interests" under APB No. 16 in which the surviving entity
assumes this Stock Option (a "Pooling Transaction"), this Stock Option shall be
deemed fully vested and exercisable as of the closing or consummation of such
Transaction, provided that such acceleration and any notice of exercise of
options that become vested as of such closing or consummation shall in all cases
be subject to and contingent upon such closing or consummation. From and after
the closing or consummation of any such Transaction, other than a Pooling
Transaction, this Stock Option shall terminate and no longer be exercisable as
to any Option Shares unexercised on or prior to the closing or consummation date
of such Transaction, unless provision is made in such Transaction in the sole
discretion of the parties thereto for the assumption of this Stock Option or the
substitution for this Stock Option of a new stock option of the successor person
or entity or a parent or subsidiary thereof, if any, with such adjustment as to
the number and kind of shares and the per share exercise price as such parties
shall agree to. In the event of a Pooling Transaction, this Stock Option shall
remain in effect in accordance with its terms as provided herein and shall
become an obligation of the surviving entity, with appropriate adjustments to
the number and kind of shares and the per share exercise price as contemplated
by the Stock Plans. In the event of any Transaction subject to this Section, the
Company shall give to the Optionee written notice
<PAGE>
thereof at least fifteen (15) days prior to the closing or anticipated
consummation date, or the record date for such transaction, if earlier.
(b) EFFECT OF TERMINATION OF EMPLOYMENT WITHOUT CAUSE.
Notwithstanding anything herein to the contrary, this Stock Option shall be
deemed vested and exercisable in full upon the date on which the Optionee's
employment with the Company and its Related Corporations is terminated by the
Company without Cause (as hereinafter defined) or by the Optionee for Good
Reason. For purposes hereof, "cause" for termination shall mean: (i) dishonest
statements or acts of the Optionee with respect to the Company or any Related
Corporation or acting in a manner that discredits or is detrimental to the
reputation, character or standing of the Company or any Related Corporation;
(ii) the commission by or indictment of the Optionee for (A) a felony or (B) any
misdemeanor involving moral turpitude, deceit, dishonesty or fraud, including,
without limitation, any form of harassment ("indictment," for these purposes,
means an indictment, probable cause hearing or any other procedure pursuant to
which an initial determination of probable or reasonable cause with respect to
such offense is made); (iii) the Optionee shall commit a breach of any of the
covenants, terms or provisions of the standard Company employee agreements
regarding inventions, proprietary rights, confidentiality and non-competition;
(iv) the Optionee shall have failed to comply with written instructions from the
Company's President or shall have substantially failed to perform the Optionee's
duties; or (v) gross negligence, willful misconduct or insubordination of the
Optionee with respect to the Company or any Related Corporation. As used herein,
the term "Good Reason" shall mean the occurrence of any of the following events:
(a) a substantial adverse change in the nature or scope of the Optionee's
responsibilities, authorities, powers, functions or duties; (c) a reduction in
the Optionee's annual base salary except for across-the-board salary reductions
similarly affecting all, or substantially all, management employees; or (c) the
relocation of the offices at which the Optionee is principally employed to a
location more than fifty (50) miles from such offices.
2. MANNER OF EXERCISE.
(a) The Optionee may exercise this Stock Option only in the
following manner: from time to time on or prior to the Expiration Date of this
Stock Option, the Optionee may give written notice to the Company of his or her
election to purchase some or all of the vested Option Shares purchasable at the
time of such notice. This notice shall specify the number of Option Shares to be
purchased.
Payment of the purchase price for the Option Shares may be made in
cash, by certified or bank check or other instrument acceptable to the
Committee.
The delivery of certificates representing the Option Shares will be
contingent upon the Company's receipt from the Optionee of full payment for the
Option Shares, as set forth above and any agreement, statement or other evidence
that the Company may require to satisfy itself that the issuance of Stock to be
purchased pursuant to the exercise of Stock Options under the Plan and any
subsequent resale of the shares of Stock will be in compliance with applicable
laws and regulations.
<PAGE>
(b) Certificates for the shares of Stock purchased upon
exercise of this Stock Option shall be issued and delivered to the Optionee upon
compliance to the satisfaction of the Committee with all requirements under
applicable laws or regulations in connection with such issuance and with the
requirements hereof and of the Plan. The determination of the Committee as to
such compliance shall be final and binding on the Optionee. The Optionee shall
not be deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares of Stock subject to this Stock Option unless and until
this Stock Option shall have been exercised pursuant to the terms hereof, the
Company shall have issued and delivered the shares of Stock to the Optionee, and
the Optionee's name shall have been entered as the stockholder of record on the
books of the Company. Thereupon, the Optionee shall have full voting, dividend
and other ownership rights with respect to such shares of Stock.
(c) The minimum number of shares with respect to which this
Stock Option may be exercised at any one time shall be 100 shares, unless the
number of shares with respect to which this Stock Option is being exercised is
the total number of shares subject to exercise under this Stock Option at the
time.
(d) Notwithstanding any other provision hereof or of the Plan,
no portion of this Stock Option shall be exercisable after the Expiration Date
hereof.
3. TERMINATION OF EMPLOYMENT. If the Optionee's employment with the
Company or a Related Corporation (as defined in the Plan) is terminated, this
Stock Option shall no longer vest and the period within which to exercise the
Stock Option to the extent then vested and exercisable may be subject to earlier
termination as set forth below.
(a) TERMINATION DUE TO DEATH. If the Optionee's employment
with the Company or Related Corporation terminates by reason of death, any Stock
Option held by the Optionee, to the extent exercisable, may thereafter be
exercised by the Optionee's personal representative or beneficiary who has
acquired the Stock Option by will or by the laws of descent and distribution for
a period of 360 days from the date of death or until the Expiration Date, if
earlier.
(b) TERMINATION DUE TO DISABILITY. If the Optionee's
employment with the Company or Related Corporation terminates by reason of
disability (as defined in Paragraph 10 of the Plan), any Stock Option held by
the Optionee shall become fully exercisable and may thereafter be exercised by
the Optionee for a period of 360 days from the date of termination or until the
Expiration Date, if earlier.
(c) TERMINATION OF EMPLOYMENT. If the Optionee's employment
with the Company or Related Corporation terminates for any reason other than
death or disability (as defined in paragraph 10 of the Plan), and unless
otherwise determined by the Committee, any Stock Option held by the Optionee may
be exercised, to the extent exercisable on the date of termination, for a period
of fifteen (15) days from the date of termination or until the Expiration
<PAGE>
Date, if earlier. Any Stock Option that is not exercisable at such time shall
terminate immediately and be of no further force or effect.
4. INCORPORATION OF PLAN. Notwithstanding anything herein to the
contrary, this Stock Option shall be subject to and governed by the general
terms and conditions of the Plan. Capitalized terms in this Agreement shall have
the meaning specified in the Plan, unless a different meaning is specified
herein or in EXHIBIT A attached hereto and incorporated herein.
5. TRANSFERABILITY. This Agreement is personal to the Optionee, is
non-assignable and is not transferable in any manner, by operation of law or
otherwise, other than by will or the laws of descent and distribution. This
Stock Option is exercisable, during the Optionee's lifetime, only by the
Optionee, and thereafter, only by the Optionee's personal representative or
beneficiary.
6. STATUS OF THE STOCK OPTION. This Stock Option is intended to qualify
as an "Incentive Stock Option" under Section 422 of the Code, but the Company
does not represent or warrant that this Stock Option qualifies as such. The
Optionee should consult with his or her own tax advisors regarding the tax
effects of this Stock Option and the requirements necessary to obtain favorable
income tax treatment under Section 422 of the Code, including, but not limited
to, holding period requirements. If the Optionee intends to dispose or does
dispose (whether by sale, gift, transfer or otherwise) of any Option Shares
within the one-year period beginning on the date after the transfer of such
shares to him or her, or within the two-year period beginning on the day after
the grant of this Stock Option, he or she will notify the Company within 30 days
after such disposition.
7. MISCELLANEOUS.
(a) Notice hereunder shall be given to the Company at its
principal place of business, and shall be given to the Optionee at the address
set forth below, or in either case at such other address as one party may
subsequently furnish to the other party in writing.
(b) This Stock Option does not confer upon the Optionee any
rights with respect to continuance of employment by the Company or any Related
Corporation.
(c) Pursuant to paragraph 16 of the Plan, the Committee may at
any time amend or cancel any outstanding portion of this Stock Option, but no
such action may be taken which adversely affects the Optionee's rights under
this Agreement without the Optionee's consent.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
EXECUTED as of the date set forth below.
PRIMIX SOLUTIONS INC.
Dated: MARCH 11, 1999 By: /s/ LENNART MENGWALL
-------------------------- ------------------------------
Name: Lennart Mengwall
Title: Chairman and CEO
The foregoing Agreement is hereby accepted and the terms and conditions thereof
hereby agreed to by the undersigned.
Dated: MARCH 11, 1999 /s/ DAVID CHAPMAN
--------------------------- -----------------------------
Optionee's Signature
Optionee's Name:DAVID W. CHAPMAN______
Optionee's Address:
c/o Primix Solutions Inc.
One Arsenal Marketplace
Watertown, MA 02474
<PAGE>
PRIMIX SOLUTIONS INC.
INCENTIVE STOCK OPTION AGREEMENT (1995 STOCK PLAN)
EXHIBIT A
Optionee: DAVID CHAPMAN
-------------------------------------
Option Grant Date: MARCH 11, 1999
-------------------------------------
Option Shares: 1,620
-------------------------------------
Option Exercise Price per Share: $ 2.438
-------------------------------------
Expiration Date: TEN (10) YEARS FROM OPTION GRANT DATE
Vesting: This Option shall vest and become
exercisable as follows:
7.143% shall vest on December 11, 1999
The remainder shall vest in thirteen
equal quarterly installments of
7.143% each, with the first such
installment vesting on March 11,
2000, and with the remaining 12
installments vesting on the
subsequent June 11, September 11,
and December 11 of each year.
Special Terms: Options detailed on this exhibit are subject
to certain conditions as outlined in the
attached amendment.
This Exhibit A is made a part of, and is subject to the terms and conditions of,
the attached Incentive Stock Option Agreement between Primix Solutions, Inc. and
the Optionee signing below. In the event of any inconsistency between the terms
of this Exhibit A and the terms of the Incentive Stock Option Agreement, the
terms of this Exhibit A shall control.
By signing below, the parties acknowledge and agree to the foregoing terms and
conditions.
Primix Solutions Inc. Optionee
By: /s/ LENNART MENGWALL By: /s/ DAVID CHAPMAN
------------------------- ---------------------------
Name: LENNART MENGWALL Name: DAVID CHAPMAN
--------------------- --------------------------
Title: CHAIRMAN & CEO Date: 3/11/99
------------------- -------------------------
Date: 3/11/99
--------------------
<PAGE>
PRIMIX SOLUTIONS INC.
INCENTIVE STOCK OPTION AGREEMENT (1995 STOCK PLAN)
EXHIBIT A
Optionee: DAVID CHAPMAN
----------------------------------------
Option Grant Date: MARCH 11, 1999
----------------------------------------
Option Shares: 23,140
----------------------------------------
Option Exercise Price per Share: $ 2.438
----------------------------------------
Expiration Date: TEN (10) YEARS FROM OPTION GRANT DATE
Vesting: This Option shall vest and become exercisable
over four years, as follows:
25% shall vest on March 11, 2000
75% shall vest in twelve equal quarterly
installments of 6.25% each, with the first
such installment vesting on June 11, 2000, and
with the remaining 11 installments vesting on
the subsequent September 11, December 11, and
March 11 of each year.
Special Terms: Options detailed on this exhibit are subject
to certain conditions as outlined in the
attached amendment.
This Exhibit A is made a part of, and is subject to the terms and conditions of,
the attached Incentive Stock Option Agreement between Primix Solutions, Inc. and
the Optionee signing below. In the event of any inconsistency between the terms
of this Exhibit A and the terms of the Incentive Stock Option Agreement, the
terms of this Exhibit A shall control.
By signing below, the parties acknowledge and agree to the foregoing terms and
conditions.
Primix Solutions, Inc. Optionee
By: /s/ LENNART MENGWALL By: /s/ DAVID CHAPMAN
----------------------- -------------------------
Name: LENNART MENGWALL Name: DAVID CHAPMAN
--------------------- ----------------------
Title: CHAIRMAN & CEO Date: 3/11/99
-------------------- ----------------------
Date: 3/11/99
-------------------
<PAGE>
PRIMIX SOLUTIONS INC.
INCENTIVE STOCK OPTION AGREEMENT (1995 STOCK PLAN)
EXHIBIT A
Optionee: DAVID CHAPMAN
-------------------------------------
Option Grant Date: MARCH 11, 1999
-------------------------------------
Option Shares: 6
-------------------------------------
Option Exercise Price per Share: $ 2.438
-------------------------------------
Expiration Date: TEN (10) YEARS FROM OPTION GRANT DATE
Vesting: This Option shall vest and become
exercisable over four years, as
follows:
10.00% shall vest on December 11,
2000
The remainder shall vest in nine
equal quarterly installments of
10.00% each, with the first such
installment vesting on March 11,
2001, and with the remaining 8
installments vesting on the
subsequent June 11, September 11,
and December 11 of each year.
Special Terms: Options detailed on this exhibit are
subject to certain conditions as
outlined in the attached amendment.
This Exhibit A is made a part of, and is subject to the terms and conditions of,
the attached Incentive Stock Option Agreement between Primix Solutions, Inc. and
the Optionee signing below. In the event of any inconsistency between the terms
of this Exhibit A and the terms of the Incentive Stock Option Agreement, the
terms of this Exhibit A shall control.
By signing below, the parties acknowledge and agree to the foregoing terms and
conditions.
Primix Solutions Inc. Optionee
By:/s/ LENNART MENGWALL By: /s/ DAVID CHAPMAN
------------------------- ------------------------
Name: LENNART MENGWALL Name: DAVID CHAPMAN
------------------------ ------------------------
Title: CHAIRMAN & CEO Date: 3/11/99
------------------------ ------------------------
Date: 3/11/99
<PAGE>
PRIMIX SOLUTIONS INC.
INCENTIVE STOCK OPTION AGREEMENT (1995 STOCK PLAN)
EXHIBIT A
Optionee: DAVID CHAPMAN
-------------------------------------
Option Grant Date: MARCH 11, 1999
-------------------------------------
Option Shares: 488
-------------------------------------
Option Exercise Price per Share: $ 2.438
-------------------------------------
Expiration Date: TEN (10) YEARS FROM OPTION GRANT DATE
Vesting: This Option shall vest and become
exercisable over four years, as
follows:
10.00% shall vest on December 11,
2000
The remainder shall vest in nine
equal quarterly installments of
10.00% each, with the first such
installment vesting on March 11,
2001, and with the remaining 8
installments vesting on the
subsequent June 11, September 11,
and December 11 of each year.
Special Terms: Options detailed on this exhibit are
subject to certain conditions as
outlined in the attached amendment.
This Exhibit A is made a part of, and is subject to the terms and conditions of,
the attached Incentive Stock Option Agreement between Primix Solutions, Inc. and
the Optionee signing below. In the event of any inconsistency between the terms
of this Exhibit A and the terms of the Incentive Stock Option Agreement, the
terms of this Exhibit A shall control.
By signing below, the parties acknowledge and agree to the foregoing terms and
conditions.
Primix Solutions Inc. Optionee
By: /s/ LENNART MENGWALL By: /s/ DAVID CHAPMAN
----------------------------- ------------------------------
Name: LENNART MENGWALL Name: DAVID CHAPMAN
----------------------------- -----------------------------
Title: CHAIRMAN & CEO Date: 3/11/99
----------------------------- -----------------------------
Date: 3/11/99
-----------------------------
<PAGE>
PRIMIX SOLUTIONS INC.
INCENTIVE STOCK OPTION AGREEMENT (1995 STOCK PLAN)
EXHIBIT A
Optionee: DAVID CHAPMAN
-------------------------------------
Option Grant Date: MARCH 11, 1999
-------------------------------------
Option Shares: 3,906
-------------------------------------
Option Exercise Price per Share: $ 2.438
-------------------------------------
Expiration Date: TEN (10) YEARS FROM OPTION GRANT DATE
Vesting: This Option shall vest and become
exercisable over four years, as
follows:
20.00% shall vest on March 11, 2002
The remainder shall vest in four
equal quarterly installments of
20.00% each, with the first such
installment vesting on June 11,
2002, and with the remaining 3
installments vesting on the
subsequent September 11, December
11, and March 11.
Special Terms: Options detailed on this exhibit are
subject to certain conditions as
outlined in the attached amendment.
This Exhibit A is made a part of, and is subject to the terms and conditions of,
the attached Incentive Stock Option Agreement between Primix Solutions, Inc. and
the Optionee signing below. In the event of any inconsistency between the terms
of this Exhibit A and the terms of the Incentive Stock Option Agreement, the
terms of this Exhibit A shall control.
By signing below, the parties acknowledge and agree to the foregoing terms and
conditions.
Primix Solutions Inc. Optionee
By: /s/ LENNART MENGWALL By: /s/ DAVID CHAPMAN
------------------------- ----------------------------
Name: LENNART MENGWALL Name: DAVID CHAPMAN
------------------------- -------------------------
Title: CHAIRMAN & CEO Date: 3/11/99
------------------------- -------------------------
Date: 3/11/99
-------------------------
<PAGE>
PRIMIX SOLUTIONS INC.
INCENTIVE STOCK OPTION AGREEMENT (1995 STOCK PLAN)
EXHIBIT A
Optionee: DAVID CHAPMAN
-------------------------------------
Option Grant Date: MARCH 11, 1999
-------------------------------------
Option Shares: 833
-------------------------------------
Option Exercise Price per Share: $ 2.438
-------------------------------------
Expiration Date: TEN (10) YEARS FROM OPTION GRANT DATE
Vesting: This Option shall vest and become
exercisable over four years, as
follows:
8.333% shall vest on June 11, 2000
The remainder shall vest in eleven
equal quarterly installments of
8.333% each, with the first such
installment vesting on September 11,
2000, and with the remaining 10
installments vesting on the
subsequent December 11, March 11,
and June 11 of each year.
Special Terms: Options detailed on this exhibit are
subject to certain conditions as
outlined in the attached amendment.
This Exhibit A is made a part of, and is subject to the terms and conditions of,
the attached Incentive Stock Option Agreement between Primix Solutions, Inc. and
the Optionee signing below. In the event of any inconsistency between the terms
of this Exhibit A and the terms of the Incentive Stock Option Agreement, the
terms of this Exhibit A shall control.
By signing below, the parties acknowledge and agree to the foregoing terms and
conditions.
Primix Solutions Inc. Optionee
By: /s/ LENNART MENGWALL By: /s/ DAVID CHAPMAN
------------------------- -------------------------
Name: LENNART MENGWALL Name: DAVID CHAPMAN
------------------------- -------------------------
Title: CHAIRMAN & CEO Date: 3/11/99
------------------------- -------------------------
Date: 3/11/99
-------------------------
<PAGE>
PRIMIX SOLUTIONS INC.
INCENTIVE STOCK OPTION AGREEMENT (1995 STOCK PLAN)
EXHIBIT A
Optionee: DAVID CHAPMAN
-------------------------------------
Option Grant Date: MARCH 11, 1999
-------------------------------------
Option Shares: 2,500
-------------------------------------
Option Exercise Price per Share: $ 2.438
-------------------------------------
Expiration Date: TEN (10) YEARS FROM OPTION GRANT DATE
Vesting: This Option shall vest and become
exercisable over four years, as
follows:
12.50% shall vest on June 11, 2001
The remainder shall vest in seven
equal quarterly installments of
12.50% each, with the first such
installment vesting on September 11,
2001, and with the remaining 6
installments vesting on the
subsequent December 11, March 11,
and June 11 of each year.
Special Terms: Options detailed on this exhibit are
subject to certain conditions as
outlined in the attached amendment.
This Exhibit A is made a part of, and is subject to the terms and conditions of,
the attached Incentive Stock Option Agreement between Primix Solutions, Inc. and
the Optionee signing below. In the event of any inconsistency between the terms
of this Exhibit A and the terms of the Incentive Stock Option Agreement, the
terms of this Exhibit A shall control.
By signing below, the parties acknowledge and agree to the foregoing terms and
conditions.
Primix Solutions Inc. Optionee
By: /s/ LENNART MENGWALL By: /s/ DAVID CHAPMAN
------------------------- -------------------------
Name: LENNART MENGWALL Name: DAVID CHAPMAN
------------------------- -------------------------
Title: CHAIRMAN & CEO Date: 3/11/99
Date: 3/11/99
-------------------------
<PAGE>
NOTICE OF EXERCISE
DATE:
------------
Primix Solutions Inc.
One Arsenal Marketplace
Watertown, MA 02472
ATTENTION: JOAN REILLY GRIFFIN
- -------------------------------
Dear Ms. Reilly Griffin:
Pursuant to my Incentive Stock Option Agreement and Exhibit A dated as
of ,I hereby elect to exercise this Option to the extent indicated:
<TABLE>
<CAPTION>
- ----------------------- --------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
Grant Date No. of shares which I X Per share price = Total Price
elect to purchase
- ----------------------- --------------------------- ---------------------------- ----------------------------
$ $
- ----------------------- --------------------------- ---------------------------- ----------------------------
$ $
- ----------------------- --------------------------- ---------------------------- ----------------------------
$ $
- ----------------------- --------------------------- ---------------------------- ----------------------------
$ $
- ----------------------- --------------------------- ---------------------------- ----------------------------
</TABLE>
Enclosed with this letter is full payment of the total price of the
shares described above in the following form;
- - a check in the amount of $ _____________ payable to the order of the
Corporation.
I agree to promptly provide you with a copy of the written confirmation
when I sell the shares which are being purchased pursuant to the option
exercise, indicating the date of sale and the net sale proceeds to me.
Kindly issue a certificate or certificates to me representing the
shares which I am acquiring by this exercise, and deliver it to my address.
Very truly yours,
-------------------------------
Name (Print):
------------------
<PAGE>
EXHIBIT 10.29
INCENTIVE STOCK OPTION AGREEMENT
UNDER THE PRIMIX SOLUTIONS, INC.
1995 STOCK PLAN
Pursuant to the Primix Solutions Inc. 1995 Stock Plan, as amended
through the date hereof (the "Plan"), Primix Solutions Inc. (the "Company")
hereby grants to the Optionee named in EXHIBIT A attached hereto an option (the
"Stock Option") to purchase on or prior to the Expiration Date specified in
EXHIBIT A all or part of the number of shares ("Option Shares") of Common Stock,
par value $.001 per share (the "Stock"), of the Company specified in EXHIBIT A
at the Option Exercise Price per Share specified in EXHIBIT A subject to the
terms and conditions set forth herein and in the Plan.
1. VESTING SCHEDULE. No portion of this Stock Option may be exercised
until such portion shall have vested. Except as set forth below, and subject to
the discretion of the Committee (as defined in paragraph 2 of the Plan) to
accelerate the vesting schedule hereunder, for so long as the Optionee is a
director of, or employed as an employee or officer of, or retained to render
services as a consultant of, the Company or a Related Corporation, this Stock
Option shall vest in accordance with such other vesting schedule as may be
specified in EXHIBIT A.
(a) EFFECT OF CERTAIN TRANSACTIONS. In the case of (a) the
dissolution or liquidation of the Company, (b) a merger, reorganization or
consolidation in which a majority of the outstanding voting power of the Company
is acquired by another person or entity (other than a holding company formed by
the Company), (c) the sale of all or substantially all of the assets of the
Company to another person or entity, or (d) the sale of fifty percent (50%) or
more of the outstanding stock of the Company to an unrelated person or entity
(in each case, a "Transaction"), other than a merger transaction to be accounted
for as a "pooling of interests" under APB No. 16 in which the surviving entity
assumes this Stock Option (a "Pooling Transaction"), this Stock Option shall be
deemed fully vested and exercisable as of the closing or consummation of such
Transaction, provided that such acceleration and any notice of exercise of
options that become vested as of such closing or consummation shall in all cases
be subject to and contingent upon such closing or consummation. From and after
the closing or consummation of any such Transaction, other than a Pooling
Transaction, this Stock Option shall terminate and no longer be exercisable as
to any Option Shares unexercised on or prior to the closing or consummation date
of such Transaction, unless provision is made in such Transaction in the sole
discretion of the parties thereto for the assumption of this Stock Option or the
substitution for this Stock Option of a new stock option of the successor person
or entity or a parent or subsidiary thereof, if any, with such adjustment as to
the number and kind of shares and the per share exercise price as such parties
shall agree to. In the event of a Pooling Transaction, this Stock Option shall
remain in effect in accordance with its terms as provided herein and shall
become an obligation of the surviving entity, with appropriate adjustments to
the number and kind of shares and the per share exercise price as contemplated
by the Stock Plans. In the event of any Transaction subject to this Section, the
Company shall give to the Optionee written notice
<PAGE>
thereof at least fifteen (15) days prior to the closing or anticipated
consummation date, or the record date for such transaction, if earlier.
(b) EFFECT OF TERMINATION OF EMPLOYMENT WITHOUT CAUSE.
Notwithstanding anything herein to the contrary, this Stock Option shall be
deemed vested and exercisable in full upon the date on which the Optionee's
employment with the Company and its Related Corporations is terminated by the
Company without Cause (as hereinafter defined) or by the Optionee for Good
Reason. For purposes hereof, "cause" for termination shall mean: (i) dishonest
statements or acts of the Optionee with respect to the Company or any Related
Corporation or acting in a manner that discredits or is detrimental to the
reputation, character or standing of the Company or any Related Corporation;
(ii) the commission by or indictment of the Optionee for (A) a felony or (B) any
misdemeanor involving moral turpitude, deceit, dishonesty or fraud, including,
without limitation, any form of harassment ("indictment," for these purposes,
means an indictment, probable cause hearing or any other procedure pursuant to
which an initial determination of probable or reasonable cause with respect to
such offense is made); (iii) the Optionee shall commit a breach of any of the
covenants, terms or provisions of the standard Company employee agreements
regarding inventions, proprietary rights, confidentiality and non-competition;
(iv) the Optionee shall have failed to comply with written instructions from the
Company's President or shall have substantially failed to perform the Optionee's
duties; or (v) gross negligence, willful misconduct or insubordination of the
Optionee with respect to the Company or any Related Corporation. As used herein,
the term "Good Reason" shall mean the occurrence of any of the following events:
(a) a substantial adverse change in the nature or scope of the Optionee's
responsibilities, authorities, powers, functions or duties; (c) a reduction in
the Optionee's annual base salary except for across-the-board salary reductions
similarly affecting all, or substantially all, management employees; or (c) the
relocation of the offices at which the Optionee is principally employed to a
location more than fifty (50) miles from such offices.
2. MANNER OF EXERCISE.
(a) The Optionee may exercise this Stock Option only in the
following manner: from time to time on or prior to the Expiration Date of this
Stock Option, the Optionee may give written notice to the Company of his or her
election to purchase some or all of the vested Option Shares purchasable at the
time of such notice. This notice shall specify the number of Option Shares to be
purchased.
Payment of the purchase price for the Option Shares may be made in
cash, by certified or bank check or other instrument acceptable to the
Committee.
The delivery of certificates representing the Option Shares will be
contingent upon the Company's receipt from the Optionee of full payment for the
Option Shares, as set forth above and any agreement, statement or other evidence
that the Company may require to satisfy itself that the issuance of Stock to be
purchased pursuant to the exercise of Stock Options under the Plan and any
subsequent resale of the shares of Stock will be in compliance with applicable
laws and regulations.
<PAGE>
(b) Certificates for the shares of Stock purchased upon
exercise of this Stock Option shall be issued and delivered to the Optionee upon
compliance to the satisfaction of the Committee with all requirements under
applicable laws or regulations in connection with such issuance and with the
requirements hereof and of the Plan. The determination of the Committee as to
such compliance shall be final and binding on the Optionee. The Optionee shall
not be deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares of Stock subject to this Stock Option unless and until
this Stock Option shall have been exercised pursuant to the terms hereof, the
Company shall have issued and delivered the shares of Stock to the Optionee, and
the Optionee's name shall have been entered as the stockholder of record on the
books of the Company. Thereupon, the Optionee shall have full voting, dividend
and other ownership rights with respect to such shares of Stock.
(c) The minimum number of shares with respect to which this
Stock Option may be exercised at any one time shall be 100 shares, unless the
number of shares with respect to which this Stock Option is being exercised is
the total number of shares subject to exercise under this Stock Option at the
time.
(d) Notwithstanding any other provision hereof or of the Plan,
no portion of this Stock Option shall be exercisable after the Expiration Date
hereof.
3. TERMINATION OF EMPLOYMENT. If the Optionee's employment with the
Company or a Related Corporation (as defined in the Plan) is terminated, this
Stock Option shall no longer vest and the period within which to exercise the
Stock Option to the extent then vested and exercisable may be subject to earlier
termination as set forth below.
(a) TERMINATION DUE TO DEATH. If the Optionee's employment
with the Company or Related Corporation terminates by reason of death, any Stock
Option held by the Optionee, to the extent exercisable, may thereafter be
exercised by the Optionee's personal representative or beneficiary who has
acquired the Stock Option by will or by the laws of descent and distribution for
a period of 360 days from the date of death or until the Expiration Date, if
earlier.
(b) TERMINATION DUE TO DISABILITY. If the Optionee's
employment with the Company or Related Corporation terminates by reason of
disability (as defined in Paragraph 10 of the Plan), any Stock Option held by
the Optionee shall become fully exercisable and may thereafter be exercised by
the Optionee for a period of 360 days from the date of termination or until the
Expiration Date, if earlier.
(c) TERMINATION OF EMPLOYMENT. If the Optionee's employment
with the Company or Related Corporation terminates for any reason other than
death or disability (as defined in paragraph 10 of the Plan), and unless
otherwise determined by the Committee, any Stock Option held by the Optionee may
be exercised, to the extent exercisable on the date of termination, for a period
of fifteen (15) days from the date of termination or until the Expiration
<PAGE>
Date, if earlier. Any Stock Option that is not exercisable at such time shall
terminate immediately and be of no further force or effect.
4. INCORPORATION OF PLAN. Notwithstanding anything herein to the
contrary, this Stock Option shall be subject to and governed by the general
terms and conditions of the Plan. Capitalized terms in this Agreement shall have
the meaning specified in the Plan, unless a different meaning is specified
herein or in EXHIBIT A attached hereto and incorporated herein.
5. TRANSFERABILITY. This Agreement is personal to the Optionee, is
non-assignable and is not transferable in any manner, by operation of law or
otherwise, other than by will or the laws of descent and distribution. This
Stock Option is exercisable, during the Optionee's lifetime, only by the
Optionee, and thereafter, only by the Optionee's personal representative or
beneficiary.
6. STATUS OF THE STOCK OPTION. This Stock Option is intended to qualify
as an "Incentive Stock Option" under Section 422 of the Code, but the Company
does not represent or warrant that this Stock Option qualifies as such. The
Optionee should consult with his or her own tax advisors regarding the tax
effects of this Stock Option and the requirements necessary to obtain favorable
income tax treatment under Section 422 of the Code, including, but not limited
to, holding period requirements. If the Optionee intends to dispose or does
dispose (whether by sale, gift, transfer or otherwise) of any Option Shares
within the one-year period beginning on the date after the transfer of such
shares to him or her, or within the two-year period beginning on the day after
the grant of this Stock Option, he or she will notify the Company within 30 days
after such disposition.
7. MISCELLANEOUS.
(a) Notice hereunder shall be given to the Company at its
principal place of business, and shall be given to the Optionee at the address
set forth below, or in either case at such other address as one party may
subsequently furnish to the other party in writing.
(b) This Stock Option does not confer upon the Optionee any
rights with respect to continuance of employment by the Company or any Related
Corporation.
(c) Pursuant to paragraph 16 of the Plan, the Committee may at
any time amend or cancel any outstanding portion of this Stock Option, but no
such action may be taken which adversely affects the Optionee's rights under
this Agreement without the Optionee's consent.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
EXECUTED as of the date set forth below.
PRIMIX SOLUTIONS INC.
Dated: MARCH 11, 1999 By: /S/ LENNART MENGWALL
------------------------------------- -------------------------
Name: Lennart Mengwall
Title: Chairman and CEO
The foregoing Agreement is hereby accepted and the terms and conditions thereof
hereby agreed to by the undersigned.
Dated: MARCH 11, 1999 /S/ JOSEPH SEEBACH
-------------------------------------- --------------------------------
Optionee's Signature
Optionee's Name:JOSEPH SEEBACH
---------------
Optionee's Address:
c/o Primix Solutions Inc.
One Arsenal Marketplace
Watertown, MA 02472
<PAGE>
PRIMIX SOLUTIONS INC.
INCENTIVE STOCK OPTION AGREEMENT (1995 STOCK PLAN)
EXHIBIT A
Optionee: JOSEPH SEEBACH
-------------------------------------
Option Grant Date: MARCH 11, 1999
-------------------------------------
Option Shares: 12,812
-------------------------------------
Option Exercise Price per Share: $ 2.438
-------------------------------------
Expiration Date: TEN (10) YEARS FROM OPTION GRANT DATE
Vesting: This Option shall vest and become
exercisable as follows:
2,562 options shall vest on March 11,
2002
2,563 options shall vest on June 11,
2002
2,562 options shall vest on September
11, 2002
2,562 options shall vest on December
11, 2002
2,563 options shall vest on March 11,
2003
Special Terms: Options detailed on this exhibit are
subject to certain conditions as
outlined in the attached amendment.
This Exhibit A is made a part of, and is subject to the terms and conditions of,
the attached Incentive Stock Option Agreement between Primix Solutions, Inc. and
the Optionee signing below. In the event of any inconsistency between the terms
of this Exhibit A and the terms of the Incentive Stock Option Agreement, the
terms of this Exhibit A shall control.
By signing below, the parties acknowledge and agree to the foregoing terms and
conditions.
Primix Solutions Inc. Optionee
By: /s/ LENNART MENGWALL By: /s/ JOSEPH SEEBACH
------------------------------- -------------------------------
Name: LENNART MENGWALL Name: JOSEPH SEEBACH
------------------------------- -------------------------------
Title: CHAIRMAN & CEO Date: 3/11/99
------------------------------- ------------------------------
Date: 3/11/99
-------------------------------
<PAGE>
PRIMIX SOLUTIONS INC.
INCENTIVE STOCK OPTION AGREEMENT (1995 STOCK PLAN)
EXHIBIT A
Optionee: JOSEPH SEEBACH
-------------------------------------
Option Grant Date: MARCH 11, 1999
-------------------------------------
Option Shares: 26,251
-------------------------------------
Option Exercise Price per Share: $ 2.438
-------------------------------------
Expiration Date: TEN (10) YEARS FROM OPTION GRANT DATE
Vesting: This Option shall vest and become
exercisable as follows:
5,250 options shall vest on March 11,
2002
5,250 options shall vest on June 11,
2002
5,251 options shall vest on September
11, 2002
5,250 options shall vest on December
11, 2002
5,250 options shall vest on March 11,
2003
Special Terms: Options detailed on this exhibit are
subject to certain conditions as
outlined in the attached amendment.
This Exhibit A is made a part of, and is subject to the terms and conditions of,
the attached Incentive Stock Option Agreement between Primix Solutions, Inc. and
the Optionee signing below. In the event of any inconsistency between the terms
of this Exhibit A and the terms of the Incentive Stock Option Agreement, the
terms of this Exhibit A shall control.
By signing below, the parties acknowledge and agree to the foregoing terms and
conditions.
Primix Solutions Inc. Optionee
By: /s/ LENNART MENGWALL By: /s/ JOSEPH SEEBACH
------------------------------- -------------------------------
Name: LENNART MENGWALL Name: JOSEPH SEEBACH
------------------------------- -------------------------------
Title: CHAIRMAN & CEO Date: 3/11/99
------------------------------- -------------------------------
Date: 3/11/99
-------------------------------
<PAGE>
PRIMIX SOLUTIONS INC.
INCENTIVE STOCK OPTION AGREEMENT (1995 STOCK PLAN)
EXHIBIT A
Optionee: JOSEPH SEEBACH
-------------------------------------
Option Grant Date: MARCH 11, 1999
-------------------------------------
Option Shares: 977
-------------------------------------
Option Exercise Price per Share: $ 2.438
-------------------------------------
Expiration Date: TEN (10) YEARS FROM OPTION GRANT DATE
Vesting: This Option shall vest and become
exercisable as follows:
195 options shall vest on March 11,
2002
196 options shall vest on June 11,
2002
195 options shall vest on September
11, 2002
195 options shall vest on December
11, 2002
196 options shall vest on March 11,
2003
Special Terms: Options detailed on this exhibit are
subject to certain conditions as
outlined in the attached amendment.
This Exhibit A is made a part of, and is subject to the terms and conditions of,
the attached Incentive Stock Option Agreement between Primix Solutions, Inc. and
the Optionee signing below. In the event of any inconsistency between the terms
of this Exhibit A and the terms of the Incentive Stock Option Agreement, the
terms of this Exhibit A shall control.
By signing below, the parties acknowledge and agree to the foregoing terms and
conditions.
Primix Solutions Inc. Optionee
By: /s/ LENNART MENGWALL By: /s/ JOSEPH SEEBACH
------------------------------- -------------------------------
Name: LENNART MENGWALL Name: JOSEPH SEEBACH
------------------------------- ------------------------------
Title: CHAIRMAN & CEO Date: 3/11/99
------------------------------- -------------------------------
Date: 3/11/99
-------------------------------
<PAGE>
NOTICE OF EXERCISE
DATE:
---------------
Primix Solutions Inc.
One Arsenal Marketplace
Watertown, MA 02472
ATTENTION: JOAN REILLY GRIFFIN
- -------------------------------
Dear Ms. Reilly Griffin:
Pursuant to my Incentive Stock Option Agreement and Exhibit A dated as
of ,I hereby elect to exercise this Option to the extent indicated:
<TABLE>
<CAPTION>
- ----------------------- --------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
Grant Date No. of shares which I X Per share price = Total Price
elect to purchase
- ----------------------- --------------------------- ---------------------------- ----------------------------
$ $
- ----------------------- --------------------------- ---------------------------- ----------------------------
$ $
- ----------------------- --------------------------- ---------------------------- ----------------------------
$ $
- ----------------------- --------------------------- ---------------------------- ----------------------------
$ $
- ----------------------- --------------------------- ---------------------------- ----------------------------
</TABLE>
Enclosed with this letter is full payment of the total price of the
shares described above in the following form;
- - a check in the amount of $ _____________ payable to the order of the
Corporation.
I agree to promptly provide you with a copy of the written confirmation
when I sell the shares which are being purchased pursuant to the option
exercise, indicating the date of sale and the net sale proceeds to me.
Kindly issue a certificate or certificates to me representing the
shares which I am acquiring by this exercise, and deliver it to my address.
Very truly yours,
-------------------------------
Name (Print):
-------------------------
<PAGE>
EXHIBIT 10.30
NON-QUALIFIED STOCK OPTION AGREEMENT
UNDER THE PRIMIX SOLUTIONS INC.
1995 STOCK PLAN
Pursuant to the Primix Solutions Inc. 1995 Stock Plan as amended
through the date hereof (the "Plan"), Primix Solutions Inc. (the "Company")
hereby grants to the Optionee named in EXHIBIT A attached hereto an option (the
"Stock Option") to purchase on or prior to the Expiration Date specified in
EXHIBIT A all or part of the number of shares ("Option Shares") of Common Stock,
par value $.001 per share (the "Stock"), of the Company specified in EXHIBIT A
at the Option Exercise Price per Share specified in EXHIBIT A subject to the
terms and conditions set forth herein and in the Plan.
1. VESTING SCHEDULE. No portion of this Stock Option may be exercised
until such portion shall have vested. Except as set forth below, and subject to
the discretion of the Committee (as defined in paragraph 2 of the Plan) to
accelerate the vesting schedule hereunder, for so long as the Optionee is a
director of, or employed as an employee or officer of, or retained to render
services as a consultant of, the Company or a Related Corporation, this Stock
Option shall vest in accordance with such other vesting schedule as may be
specified in EXHIBIT A.
(a) EFFECT OF CERTAIN TRANSACTIONS. In the case of (a) the
dissolution or liquidation of the Company, (b) a merger, reorganization or
consolidation in which a majority of the outstanding voting power of the Company
is acquired by another person or entity (other than a holding company formed by
the Company), (c) the sale of all or substantially all of the assets of the
Company to another person or entity, or (d) the sale of fifty percent (50%) or
more of the outstanding stock of the Company to an unrelated person or entity
(in each case, a "Transaction"), other than a merger transaction to be accounted
for as a "pooling of interests" under APB No. 16 in which the surviving entity
assumes this Stock Option (a "Pooling Transaction"), this Stock Option shall be
deemed fully vested and exercisable as of the closing or consummation of such
Transaction, provided that such acceleration and any notice of exercise of
options that become vested as of such closing or consummation shall in all cases
be subject to and contingent upon such closing or consummation. From and after
the closing or consummation of any such Transaction, other than a Pooling
Transaction, this Stock Option shall terminate and no longer be exercisable as
to any Option Shares unexercised on or prior to the closing or consummation date
of such Transaction, unless provision is made in such Transaction in the sole
discretion of the parties thereto for the assumption of this Stock Option or the
substitution for this Stock Option of a new stock option of the successor person
or entity or a parent or subsidiary thereof, if any, with such adjustment as to
the number and kind of shares and the per share exercise price as such parties
shall agree to. In the event of a Pooling Transaction, this Stock Option shall
remain in effect in accordance with its terms as provided herein and shall
become an obligation of the surviving entity, with appropriate adjustments to
the number and kind of shares and the per share exercise price as contemplated
by the Stock Plans. In the event
1
<PAGE>
of any Transaction subject to this Section, the Company shall give to the
Optionee written notice thereof at least fifteen (15) days prior to the closing
or anticipated consummation date, or the record date for such transaction, if
earlier.
(b) EFFECT OF TERMINATION OF EMPLOYMENT WITHOUT CAUSE.
Notwithstanding anything herein to the contrary, this Stock Option shall be
deemed vested and exercisable in full upon the date on which the Optionee's
employment with the Company and its Related Corporations is terminated by the
Company without Cause (as hereinafter defined) or by the Optionee for Good
Reason. For purposes hereof, "cause" for termination shall mean: (i) dishonest
statements or acts of the Optionee with respect to the Company or any Related
Corporation or acting in a manner that discredits or is detrimental to the
reputation, character or standing of the Company or any Related Corporation;
(ii) the commission by or indictment of the Optionee for (A) a felony or (B) any
misdemeanor involving moral turpitude, deceit, dishonesty or fraud, including,
without limitation, any form of harassment ("indictment," for these purposes,
means an indictment, probable cause hearing or any other procedure pursuant to
which an initial determination of probable or reasonable cause with respect to
such offense is made); (iii) the Optionee shall commit a breach of any of the
covenants, terms or provisions of the standard Company employee agreements
regarding inventions, proprietary rights, confidentiality and non-competition;
(iv) the Optionee shall have failed to comply with written instructions from the
Company's President or shall have substantially failed to perform the Optionee's
duties; or (v) gross negligence, willful misconduct or insubordination of the
Optionee with respect to the Company or any Related Corporation. As used herein,
the term "Good Reason" shall mean the occurrence of any of the following events:
(a) a substantial adverse change in the nature or scope of the Optionee's
responsibilities, authorities, powers, functions or duties; (c) a reduction in
the Optionee's annual base salary except for across-the-board salary reductions
similarly affecting all, or substantially all, management employees; or (c) the
relocation of the offices at which the Optionee is principally employed to a
location more than fifty (50) miles from such offices.
2. MANNER OF EXERCISE.
(a) The Optionee may exercise this Stock Option only in the
following manner: from time to time on or prior to the Expiration Date of this
Stock Option, the Optionee may give written notice to the Company of his or her
election to purchase some or all of the vested Option Shares purchasable at the
time of such notice. This notice shall specify the number of Option Shares to be
purchased.
Payment of the purchase price for the Option Shares may be made in
cash, by certified or bank check or other instrument acceptable to the
Committee.
The delivery of certificates representing the Option Shares will be
contingent upon the Company's receipt from the Optionee of full payment for the
Option Shares, as set forth above and any agreement, statement or other evidence
that the Company may require to satisfy itself that the issuance of Stock to be
purchased pursuant to the exercise of Stock Options under the Plan and any
subsequent resale of the shares of Stock will be in compliance with applicable
laws
2
<PAGE>
and regulations.
(b) Certificates for the shares of Stock purchased upon
exercise of this Stock Option shall be issued and delivered to the Optionee upon
compliance to the satisfaction of the Committee with all requirements under
applicable laws or regulations in connection with such issuance and with the
requirements hereof and of the Plan. The determination of the Committee as to
such compliance shall be final and binding on the Optionee. The Optionee shall
not be deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares of Stock subject to this Stock Option unless and until
this Stock Option shall have been exercised pursuant to the terms hereof, the
Company shall have issued and delivered the shares of Stock to the Optionee, and
the Optionee's name shall have been entered as the stockholder of record on the
books of the Company. Thereupon, the Optionee shall have full voting, dividend
and other ownership rights with respect to such shares of Stock.
(c) The minimum number of shares with respect to which this
Stock Option may be exercised at any one time shall be 100 shares, unless the
number of shares with respect to which this Stock Option is being exercised is
the total number of shares subject to exercise under this Stock Option at the
time.
3. TERMINATION OF EMPLOYMENT. If the Optionee's employment or service
relationship as a director or consultant ("Service Relationship") with the
Company or a Related Corporation (as defined in the Plan) is terminated, this
Stock Option shall no longer vest and the period within which to exercise the
Stock Option to the extent then vested and exercisable may be subject to earlier
termination as set forth below.
(a) TERMINATION DUE TO DEATH. If the Optionee's Service
Relationship with the Company or a Related Corporation terminates by reason of
death, any Stock Option held by the Optionee, to the extent exercisable, may
thereafter be exercised by the Optionee's personal representative or beneficiary
who has acquired the Stock Option by will or by the laws of descent and
distribution for a period of 360 days from the date of death or until the
Expiration Date, if earlier.
(b) TERMINATION DUE TO DISABILITY. If the Optionee's Service
Relationship with the Company or a Related Corporation terminates by reason of
disability (as defined in Paragraph 10 of the Plan), any Stock Option held by
the Optionee shall become fully exercisable and may thereafter be exercised by
the Optionee for a period of 360 days from the date of termination or until the
Expiration Date, if earlier.
(c) TERMINATION OF SERVICE RELATIONSHIP. If the Optionee's
Service Relationship with the Company or a Related Corporation terminates for
any reason other than death or disability (as defined in paragraph 10 of the
Plan), and unless otherwise determined by the Committee, any Stock Option held
by the Optionee may be exercised, to the extent exercisable on the date of
termination, for a period of fifteen (15) days from the date of
3
<PAGE>
termination or until the Expiration Date, if earlier. Any Stock Option that is
not exercisable at such time shall terminate immediately and be of no further
force or effect.
(d) Notwithstanding any other provision hereof or of the Plan,
no portion of this Stock Option shall be exercisable after the Expiration Date
hereof.
4. INCORPORATION OF PLAN. Notwithstanding anything herein to the
contrary, this Stock Option shall be subject to and governed by the terms and
conditions of the Plan. Capitalized terms in this Agreement shall have the
meaning specified in the Plan, unless a different meaning is specified herein or
in EXHIBIT A attached hereto and incorporated herein.
5. TRANSFERABILITY. This Agreement is personal to the Optionee, is
non-assignable and is not transferable in any manner, by operation of law or
otherwise, other than by will or the laws of descent and distribution. This
Stock Option is exercisable, during the Optionee's lifetime, only by the
Optionee, and thereafter, only by the Optionee's personal representative or
beneficiary.
6. TAX WITHHOLDING. No later than the date as of which part or all of
the value of any shares of Stock received under the Plan first becomes
includible in the Optionee's gross income for Federal tax purposes, the Optionee
shall make arrangements with the Company in accordance with paragraph 20 of the
Plan regarding payment of any Federal, state or local taxes required to be
withheld with respect to such income.
7. MISCELLANEOUS.
(a) Notice hereunder shall be given to the Company at its
principal place of business, and shall be given to the Optionee at the address
set forth below, or in either case at such other address as one party may
subsequently furnish to the other party in writing.
(b) This Stock Option does not confer upon the Optionee any
rights with respect to continuance of employment by the Company or any Related
Corporation.
(c) Pursuant to paragraph 16 of the Plan, the Committee may at
any time amend or cancel any outstanding portion of this Stock Option, but no
such action may be taken which adversely affects the Optionee's rights under
this Agreement without the Optionee's consent.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
4
<PAGE>
EXECUTED as of the date set forth below.
PRIMIX SOLUTIONS INC.
Dated: MARCH 11, 1999 By: /s/ LENNART MENGWALL
-------------------------- ------------------------------------
Name: Lennart Mengwall
Title: Chairman and CEO
The foregoing Agreement is hereby accepted and the terms and conditions thereof
hereby agreed to by the undersigned.
Dated: MARCH 11, 1999 /s/ JOSEPH SEEBACH
--------------------------- --------------------------------
Optionee's Signature
Optionee's Name: JOSEPH SEEBACH________
Optionee's Address:
c/o Primix Solutions Inc.
One Arsenal Marketplace
Watertown, MA 02472
5
<PAGE>
PRIMIX SOLUTIONS INC.
NON-QUALIFIED STOCK OPTION AGREEMENT (1995 STOCK PLAN)
EXHIBIT A
Optionee: JOSEPH SEEBACH
-------------------------------------
Option Grant Date: MARCH 11, 1999
-------------------------------------
Option Shares: 2,562
-------------------------------------
Option Exercise Price per Share: $ 2.438
-------------------------------------
Expiration Date: TEN (10) YEARS FROM OPTION GRANT DATE
Vesting: This Option shall vest and become
exercisable as follows:
2,562 options shall vest on December
11, 2001
Special Terms: Options detailed on this exhibit are
subject to certain conditions as
outlined in the attached amendment.
This Exhibit A is made a part of, and is subject to the terms and conditions of,
the attached Non-Qualified Stock Option Agreement between Primix Solutions, Inc.
and the Optionee signing below. In the event of any inconsistency between the
terms of this Exhibit A and the terms of the Non-Qualified Stock Option
Agreement, the terms of this Exhibit A shall control.
By signing below, the parties acknowledge and agree to the foregoing terms and
conditions.
Primix Solutions Inc. Optionee
By: /s/ LENNART MENGWALL By: /s/ JOSEPH SEEBACH
--------------------------- ---------------------------
Name: LENNART MENGWALL Name: JOSEPH SEEBACH
--------------------------- ---------------------------
Title: CHAIRMAN & CEO Date: 3/11/99
--------------------------- ---------------------------
Date: 3/11/99
---------------------------
6
<PAGE>
PRIMIX SOLUTIONS INC.
NON-QUALIFIED STOCK OPTION AGREEMENT (1995 STOCK PLAN)
EXHIBIT A
Optionee: JOSEPH SEEBACH
------------------------------------
Option Grant Date: MARCH 11, 1999
-------------------------------------
Option Shares: 5,250
-------------------------------------
Option Exercise Price per Share: $ 2.438
-------------------------------------
Expiration Date: TEN (10) YEARS FROM OPTION GRANT DATE
Vesting: This Option shall vest and become
exercisable as follows:
5,250 options shall vest on December
11, 2001
Special Terms: Options detailed on this exhibit are
subject to certain conditions as
outlined in the attached amendment.
This Exhibit A is made a part of, and is subject to the terms and conditions of,
the attached Non-Qualified Stock Option Agreement between Primix Solutions, Inc.
and the Optionee signing below. In the event of any inconsistency between the
terms of this Exhibit A and the terms of the Non-Qualified Stock Option
Agreement, the terms of this Exhibit A shall control.
By signing below, the parties acknowledge and agree to the foregoing terms and
conditions.
Primix Solutions Inc. Optionee
By: /s/ LENNART MENGWALL By: /s/ JOSEPH SEEBACH
--------------------------- ---------------------------
Name: LENNART MENGWALL Name: JOSEPH SEEBACH
--------------------------- ---------------------------
Title: CHAIRMAN & CEO Date: 3/11/99
--------------------------- ---------------------------
Date: 3/11/99
---------------------------
7
<PAGE>
PRIMIX SOLUTIONS INC.
NON-QUALIFIED STOCK OPTION AGREEMENT (1995 STOCK PLAN)
EXHIBIT A
Optionee: JOSEPH SEEBACH
-------------------------------------
Option Grant Date: MARCH 11, 1999
-------------------------------------
Option Shares: 2,148
-------------------------------------
Option Exercise Price per Share: $ 2.438
-------------------------------------
Expiration Date: TEN (10) YEARS FROM OPTION GRANT DATE
Vesting: This Option shall vest and become
exercisable as follows:
781 options shall vest on
March 11, 2000
195 options shall vest on
June 11, 2000
195 options shall vest on
September 11, 2000
196 options shall vest on
December 11, 2000
195 options shall vest on
March 11, 2001
195 options shall vest on
June 11, 2001
196 options shall vest on
September 11, 2001
195 options shall vest on
December 11, 2001
Special Terms: Options detailed on this exhibit are
subject to certain conditions as
outlined in the attached amendment.
This Exhibit A is made a part of, and is subject to the terms and conditions of,
the attached Non-Qualified Stock Option Agreement between Primix Solutions, Inc.
and the Optionee signing below. In the event of any inconsistency between the
terms of this Exhibit A and the terms of the Non-Qualified Stock Option
Agreement, the terms of this Exhibit A shall control.
By signing below, the parties acknowledge and agree to the foregoing terms and
conditions.
Primix Solutions Inc. Optionee
By: /s/ LENNART MENGWALL By: /s/ JOSEPH SEEBACH
--------------------------- ---------------------------
Name: LENNART MENGWALL Name: JOSEPH SEEBACH
--------------------------- ---------------------------
Title: CHAIRMAN & CEO Date: 3/11/99
--------------------------- ---------------------------
Date: 3/11/99
---------------------------
8
<PAGE>
NOTICE OF EXERCISE
DATE:
------------
Primix Solutions Inc.
One Arsenal Marketplace
Watertown, MA 02472
ATTENTION: JOAN REILLY GRIFFIN
- -------------------------------
Dear Ms. Reilly Griffin:
Pursuant to my Incentive Stock Option Agreement and Exhibit A dated as
of ,I hereby elect to exercise this Option to the extent indicated:
<TABLE>
<CAPTION>
- ----------------------- --------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
Grant Date No. of shares which I X Per share price = Total Price
elect to purchase
- ----------------------- --------------------------- ---------------------------- ----------------------------
$ $
- ----------------------- --------------------------- ---------------------------- ----------------------------
$ $
- ----------------------- --------------------------- ---------------------------- ----------------------------
$ $
- ----------------------- --------------------------- ---------------------------- ----------------------------
$ $
- ----------------------- --------------------------- ---------------------------- ----------------------------
</TABLE>
Enclosed with this letter is full payment of the total price of the
shares described above in the following form;
- - a check in the amount of $ _____________ payable to the order of the
Corporation.
I agree to promptly provide you with a copy of the written confirmation
when I sell the shares which are being purchased pursuant to the option
exercise, indicating the date of sale and the net sale proceeds to me.
Kindly issue a certificate or certificates to me representing the
shares which I am acquiring by this exercise, and deliver it to my address.
Very truly yours,
---------------------------
Name (Print):
-------------------------
9
<PAGE>
EXHIBIT 10.31
INCENTIVE STOCK OPTION AGREEMENT
UNDER THE PRIMIX SOLUTIONS, INC.
1996 STOCK PLAN
Pursuant to the Primix Solutions Inc. 1996 Stock Plan, as amended
through the date hereof (the "Plan"), Primix Solutions Inc. (the "Company")
hereby grants to the Optionee named in EXHIBIT A attached hereto an option (the
"Stock Option") to purchase on or prior to the Expiration Date specified in
EXHIBIT A all or part of the number of shares ("Option Shares") of Common Stock,
par value $.001 per share (the "Stock"), of the Company specified in EXHIBIT A
at the Option Exercise Price per Share specified in EXHIBIT A subject to the
terms and conditions set forth herein and in the Plan.
1. VESTING SCHEDULE. No portion of this Stock Option may be exercised
until such portion shall have vested. Except as set forth below, and subject to
the discretion of the Committee (as defined in paragraph 2 of the Plan) to
accelerate the vesting schedule hereunder, for so long as the Optionee is a
director of, or employed as an employee or officer of, or retained to render
services as a consultant of, the Company or a Related Corporation, this Stock
Option shall vest in accordance with such other vesting schedule as may be
specified in EXHIBIT A.
(a) EFFECT OF CERTAIN TRANSACTIONS. In the case of (a) the
dissolution or liquidation of the Company, (b) a merger, reorganization or
consolidation in which a majority of the outstanding voting power of the Company
is acquired by another person or entity (other than a holding company formed by
the Company), (c) the sale of all or substantially all of the assets of the
Company to another person or entity, or (d) the sale of fifty percent (50%) or
more of the outstanding stock of the Company to an unrelated person or entity
(in each case, a "Transaction"), other than a merger transaction to be accounted
for as a "pooling of interests" under APB No. 16 in which the surviving entity
assumes this Stock Option (a "Pooling Transaction"), this Stock Option shall be
deemed fully vested and exercisable as of the closing or consummation of such
Transaction, provided that such acceleration and any notice of exercise of
options that become vested as of such closing or consummation shall in all cases
be subject to and contingent upon such closing or consummation. From and after
the closing or consummation of any such Transaction, other than a Pooling
Transaction, this Stock Option shall terminate and no longer be exercisable as
to any Option Shares unexercised on or prior to the closing or consummation date
of such Transaction, unless provision is made in such Transaction in the sole
discretion of the parties thereto for the assumption of this Stock Option or the
substitution for this Stock Option of a new stock option of the successor person
or entity or a parent or subsidiary thereof, if any, with such adjustment as to
the number and kind of shares and the per share exercise price as such parties
shall agree to. In the event of a Pooling Transaction, this Stock Option shall
remain in effect in accordance with its terms as provided herein and shall
become an obligation of the surviving entity, with appropriate adjustments to
the number and kind of shares and the per share exercise price as contemplated
by the Stock Plans. In the event of any Transaction subject to this Section, the
Company shall give to the Optionee written notice
<PAGE>
thereof at least fifteen (15) days prior to the closing or anticipated
consummation date, or the record date for such transaction, if earlier.
(b) EFFECT OF TERMINATION OF EMPLOYMENT WITHOUT CAUSE.
Notwithstanding anything herein to the contrary, this Stock Option shall be
deemed vested and exercisable in full upon the date on which the Optionee's
employment with the Company and its Related Corporations is terminated by the
Company without Cause (as hereinafter defined) or by the Optionee for Good
Reason. For purposes hereof, "cause" for termination shall mean: (i) dishonest
statements or acts of the Optionee with respect to the Company or any Related
Corporation or acting in a manner that discredits or is detrimental to the
reputation, character or standing of the Company or any Related Corporation;
(ii) the commission by or indictment of the Optionee for (A) a felony or (B) any
misdemeanor involving moral turpitude, deceit, dishonesty or fraud, including,
without limitation, any form of harassment ("indictment," for these purposes,
means an indictment, probable cause hearing or any other procedure pursuant to
which an initial determination of probable or reasonable cause with respect to
such offense is made); (iii) the Optionee shall commit a breach of any of the
covenants, terms or provisions of the standard Company employee agreements
regarding inventions, proprietary rights, confidentiality and non-competition;
(iv) the Optionee shall have failed to comply with written instructions from the
Company's President or shall have substantially failed to perform the Optionee's
duties; or (v) gross negligence, willful misconduct or insubordination of the
Optionee with respect to the Company or any Related Corporation. As used herein,
the term "Good Reason" shall mean the occurrence of any of the following events:
(a) a substantial adverse change in the nature or scope of the Optionee's
responsibilities, authorities, powers, functions or duties; (c) a reduction in
the Optionee's annual base salary except for across-the-board salary reductions
similarly affecting all, or substantially all, management employees; or (c) the
relocation of the offices at which the Optionee is principally employed to a
location more than fifty (50) miles from such offices.
2. MANNER OF EXERCISE.
(a) The Optionee may exercise this Stock Option only in the
following manner: from time to time on or prior to the Expiration Date of this
Stock Option, the Optionee may give written notice to the Company of his or her
election to purchase some or all of the vested Option Shares purchasable at the
time of such notice. This notice shall specify the number of Option Shares to be
purchased.
Payment of the purchase price for the Option Shares may be made in
cash, by certified or bank check or other instrument acceptable to the
Committee.
The delivery of certificates representing the Option Shares will be
contingent upon the Company's receipt from the Optionee of full payment for the
Option Shares, as set forth above and any agreement, statement or other evidence
that the Company may require to satisfy itself that the issuance of Stock to be
purchased pursuant to the exercise of Stock Options under the Plan and any
subsequent resale of the shares of Stock will be in compliance with applicable
laws and regulations.
2
<PAGE>
(b) Certificates for the shares of Stock purchased upon
exercise of this Stock Option shall be issued and delivered to the Optionee upon
compliance to the satisfaction of the Committee with all requirements under
applicable laws or regulations in connection with such issuance and with the
requirements hereof and of the Plan. The determination of the Committee as to
such compliance shall be final and binding on the Optionee. The Optionee shall
not be deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares of Stock subject to this Stock Option unless and until
this Stock Option shall have been exercised pursuant to the terms hereof, the
Company shall have issued and delivered the shares of Stock to the Optionee, and
the Optionee's name shall have been entered as the stockholder of record on the
books of the Company. Thereupon, the Optionee shall have full voting, dividend
and other ownership rights with respect to such shares of Stock.
(c) The minimum number of shares with respect to which this
Stock Option may be exercised at any one time shall be 100 shares, unless the
number of shares with respect to which this Stock Option is being exercised is
the total number of shares subject to exercise under this Stock Option at the
time.
(d) Notwithstanding any other provision hereof or of the Plan,
no portion of this Stock Option shall be exercisable after the Expiration Date
hereof.
3. TERMINATION OF EMPLOYMENT. If the Optionee's employment with the
Company or a Related Corporation (as defined in the Plan) is terminated, this
Stock Option shall no longer vest and the period within which to exercise the
Stock Option to the extent then vested and exercisable may be subject to earlier
termination as set forth below.
(a) TERMINATION DUE TO DEATH. If the Optionee's employment
with the Company or Related Corporation terminates by reason of death, any Stock
Option held by the Optionee, to the extent exercisable, may thereafter be
exercised by the Optionee's personal representative or beneficiary who has
acquired the Stock Option by will or by the laws of descent and distribution for
a period of 360 days from the date of death or until the Expiration Date, if
earlier.
(b) TERMINATION DUE TO DISABILITY. If the Optionee's
employment with the Company or Related Corporation terminates by reason of
disability (as defined in Paragraph 11 of the Plan), any Stock Option held by
the Optionee shall become fully exercisable and may thereafter be exercised by
the Optionee for a period of 360 days from the date of termination or until the
Expiration Date, if earlier.
(c) TERMINATION OF EMPLOYMENT. If the Optionee's employment
with the Company or Related Corporation terminates for any reason other than
death or disability (as defined in paragraph 11 of the Plan), and unless
otherwise determined by the Committee, any Stock Option held by the Optionee may
be exercised, to the extent exercisable on the date of termination, for a period
of fifteen (15) days from the date of termination or until the Expiration
3
<PAGE>
Date, if earlier. Any Stock Option that is not exercisable at such time shall
terminate immediately and be of no further force or effect.
4. INCORPORATION OF PLAN. Notwithstanding anything herein to the
contrary, this Stock Option shall be subject to and governed by the general
terms and conditions of the Plan. Capitalized terms in this Agreement shall have
the meaning specified in the Plan, unless a different meaning is specified
herein or in EXHIBIT A attached hereto and incorporated herein.
5. TRANSFERABILITY. This Agreement is personal to the Optionee, is
non-assignable and is not transferable in any manner, by operation of law or
otherwise, other than by will or the laws of descent and distribution. This
Stock Option is exercisable, during the Optionee's lifetime, only by the
Optionee, and thereafter, only by the Optionee's personal representative or
beneficiary.
6. STATUS OF THE STOCK OPTION. This Stock Option is intended to qualify
as an "Incentive Stock Option" under Section 422 of the Code, but the Company
does not represent or warrant that this Stock Option qualifies as such. The
Optionee should consult with his or her own tax advisors regarding the tax
effects of this Stock Option and the requirements necessary to obtain favorable
income tax treatment under Section 422 of the Code, including, but not limited
to, holding period requirements. If the Optionee intends to dispose or does
dispose (whether by sale, gift, transfer or otherwise) of any Option Shares
within the one-year period beginning on the date after the transfer of such
shares to him or her, or within the two-year period beginning on the day after
the grant of this Stock Option, he or she will notify the Company within 30 days
after such disposition.
7. MISCELLANEOUS.
(a) Notice hereunder shall be given to the Company at its
principal place of business, and shall be given to the Optionee at the address
set forth below, or in either case at such other address as one party may
subsequently furnish to the other party in writing.
(b) This Stock Option does not confer upon the Optionee any
rights with respect to continuance of employment by the Company or any Related
Corporation.
(c) Pursuant to paragraph 16 of the Plan, the Committee may at
any time amend or cancel any outstanding portion of this Stock Option, but no
such action may be taken which adversely affects the Optionee's rights under
this Agreement without the Optionee's consent.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
4
<PAGE>
EXECUTED as of the date set forth below.
PRIMIX SOLUTIONS INC.
Dated: SEPTEMBER 16, 1999 By: /s/ DAVID W. CHAPMAN
---------------------------- ---------------------------------
Name: David W. Chapman
Title: Chief Financial Officer
The foregoing Agreement is hereby accepted and the terms and conditions thereof
hereby agreed to by the undersigned.
Dated: SEPTEMBER 16, 1999 /s/ LENNART MENGWALL
----------------------------- --------------------------------
Optionee's Signature
Optionee's Name:LENNART MENGWALL
----------------
Optionee's Address:
c/o Primix Solutions Inc.
One Arsenal Marketplace
Watertown, MA 02472
5
<PAGE>
PRIMIX SOLUTIONS INC.
INCENTIVE STOCK OPTION AGREEMENT (1996 STOCK PLAN)
EXHIBIT A
Optionee: LENNART MENGWALL
-------------------------------------
Option Grant Date: SEPTEMBER 16, 1999
-------------------------------------
Option Shares: 136,144
-------------------------------------
Option Exercise Price per Share: $ 2.938
-------------------------------------
Expiration Date: TEN (10) YEARS FROM OPTION GRANT DATE
Vesting: This Option shall vest and become
exercisable as follows:
34,036 options shall vest on
September 16, 2000
18,750 options shall vest on
March 16, 2001
15,286 options shall vest on
June 16, 2001
18,750 options shall vest on
March 16, 2002
15,286 options shall vest on
June 16, 2002
18,750 options shall vest on
March 16, 2003
15,286 options shall vest on
June 16, 2003
Special Terms: Options detailed on this exhibit are
subject to certain conditions as
outlined in the attached amendment.
This Exhibit A is made a part of, and is subject to the terms and conditions of,
the attached Incentive Stock Option Agreement between Primix Solutions, Inc. and
the Optionee signing below. In the event of any inconsistency between the terms
of this Exhibit A and the terms of the Incentive Stock Option Agreement, the
terms of this Exhibit A shall control.
By signing below, the parties acknowledge and agree to the foregoing terms and
conditions.
Primix Solutions Inc. Optionee
By: /s/ DAVID W. CHAPMAN By: /s/ LENNART MENGWALL
--------------------------- ---------------------------
Name: DAVID W. CHAPMAN Name: LENNART MENGWALL
--------------------------- ---------------------------
Title: CHIEF FINANCIAL OFFICER Date: 9/16/99
--------------------------- ---------------------------
Date: 9/16/99
---------------------------
6
<PAGE>
NOTICE OF EXERCISE
DATE:
---------------
Primix Solutions Inc.
One Arsenal Marketplace
Watertown, MA 02472
ATTENTION: JOAN REILLY GRIFFIN
- -------------------------------
Dear Ms. Reilly Griffin:
Pursuant to my Incentive Stock Option Agreement and Exhibit A dated as
of ,I hereby elect to exercise this Option to the extent indicated:
<TABLE>
<CAPTION>
- ----------------------- --------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
Grant Date No. of shares which I X Per share price = Total Price
elect to purchase
- ----------------------- --------------------------- ---------------------------- ----------------------------
$ $
- ----------------------- --------------------------- ---------------------------- ----------------------------
$ $
- ----------------------- --------------------------- ---------------------------- ----------------------------
$ $
- ----------------------- --------------------------- ---------------------------- ----------------------------
$ $
- ----------------------- --------------------------- ---------------------------- ----------------------------
</TABLE>
Enclosed with this letter is full payment of the total price of the
shares described above in the following form;
- - a check in the amount of $ _____________ payable to the order of the
Corporation.
I agree to promptly provide you with a copy of the written confirmation
when I sell the shares which are being purchased pursuant to the option
exercise, indicating the date of sale and the net sale proceeds to me.
Kindly issue a certificate or certificates to me representing the
shares which I am acquiring by this exercise, and deliver it to my address.
Very truly yours,
---------------------------
Name (Print):
------------------------
7
<PAGE>
EXHIBIT 10.32
NON-QUALIFIED STOCK OPTION AGREEMENT
UNDER THE PRIMIX SOLUTIONS INC.
1996 STOCK PLAN
Pursuant to the Primix Solutions Inc. 1996 Stock Plan as amended
through the date hereof (the "Plan"), Primix Solutions Inc. (the "Company")
hereby grants to the Optionee named in EXHIBIT A attached hereto an option (the
"Stock Option") to purchase on or prior to the Expiration Date specified in
EXHIBIT A all or part of the number of shares ("Option Shares") of Common Stock,
par value $.001 per share (the "Stock"), of the Company specified in EXHIBIT A
at the Option Exercise Price per Share specified in EXHIBIT A subject to the
terms and conditions set forth herein and in the Plan.
1. VESTING SCHEDULE. No portion of this Stock Option may be exercised
until such portion shall have vested. Except as set forth below, and subject to
the discretion of the Committee (as defined in paragraph 2 of the Plan) to
accelerate the vesting schedule hereunder, for so long as the Optionee is a
director of, or employed as an employee or officer of, or retained to render
services as a consultant of, the Company or a Related Corporation, this Stock
Option shall vest in accordance with such other vesting schedule as may be
specified in EXHIBIT A.
(a) EFFECT OF CERTAIN TRANSACTIONS. In the case of (a) the
dissolution or liquidation of the Company, (b) a merger, reorganization or
consolidation in which a majority of the outstanding voting power of the Company
is acquired by another person or entity (other than a holding company formed by
the Company), (c) the sale of all or substantially all of the assets of the
Company to another person or entity, or (d) the sale of fifty percent (50%) or
more of the outstanding stock of the Company to an unrelated person or entity
(in each case, a "Transaction"), other than a merger transaction to be accounted
for as a "pooling of interests" under APB No. 16 in which the surviving entity
assumes this Stock Option (a "Pooling Transaction"), this Stock Option shall be
deemed fully vested and exercisable as of the closing or consummation of such
Transaction, provided that such acceleration and any notice of exercise of
options that become vested as of such closing or consummation shall in all cases
be subject to and contingent upon such closing or consummation. From and after
the closing or consummation of any such Transaction, other than a Pooling
Transaction, this Stock Option shall terminate and no longer be exercisable as
to any Option Shares unexercised on or prior to the closing or consummation date
of such Transaction, unless provision is made in such Transaction in the sole
discretion of the parties thereto for the assumption of this Stock Option or the
substitution for this Stock Option of a new stock option of the successor person
or entity or a parent or subsidiary thereof, if any, with such adjustment as to
the number and kind of shares and the per share exercise price as such parties
shall agree to. In the event of a Pooling Transaction, this Stock Option shall
remain in effect in accordance with its terms as provided herein and shall
become an obligation of the surviving entity, with appropriate adjustments to
the number and kind of shares and the per share exercise price as contemplated
by the Stock Plans. In the event of any Transaction subject to this Section, the
Company shall give to the Optionee written notice
1
<PAGE>
thereof at least fifteen (15) days prior to the closing or anticipated
consummation date, or the record date for such transaction, if earlier.
(b) EFFECT OF TERMINATION OF EMPLOYMENT WITHOUT CAUSE.
Notwithstanding anything herein to the contrary, this Stock Option shall be
deemed vested and exercisable in full upon the date on which the Optionee's
employment with the Company and its Related Corporations is terminated by the
Company without Cause (as hereinafter defined) or by the Optionee for Good
Reason. For purposes hereof, "cause" for termination shall mean: (i) dishonest
statements or acts of the Optionee with respect to the Company or any Related
Corporation or acting in a manner that discredits or is detrimental to the
reputation, character or standing of the Company or any Related Corporation;
(ii) the commission by or indictment of the Optionee for (A) a felony or (B) any
misdemeanor involving moral turpitude, deceit, dishonesty or fraud, including,
without limitation, any form of harassment ("indictment," for these purposes,
means an indictment, probable cause hearing or any other procedure pursuant to
which an initial determination of probable or reasonable cause with respect to
such offense is made); (iii) the Optionee shall commit a breach of any of the
covenants, terms or provisions of the standard Company employee agreements
regarding inventions, proprietary rights, confidentiality and non-competition;
(iv) the Optionee shall have failed to comply with written instructions from the
Company's President or shall have substantially failed to perform the Optionee's
duties; or (v) gross negligence, willful misconduct or insubordination of the
Optionee with respect to the Company or any Related Corporation. As used herein,
the term "Good Reason" shall mean the occurrence of any of the following events:
(a) a substantial adverse change in the nature or scope of the Optionee's
responsibilities, authorities, powers, functions or duties; (c) a reduction in
the Optionee's annual base salary except for across-the-board salary reductions
similarly affecting all, or substantially all, management employees; or (c) the
relocation of the offices at which the Optionee is principally employed to a
location more than fifty (50) miles from such offices.
2. MANNER OF EXERCISE.
(a) The Optionee may exercise this Stock Option only in the
following manner: from time to time on or prior to the Expiration Date of this
Stock Option, the Optionee may give written notice to the Company of his or her
election to purchase some or all of the vested Option Shares purchasable at the
time of such notice. This notice shall specify the number of Option Shares to be
purchased.
Payment of the purchase price for the Option Shares may be made in
cash, by certified or bank check or other instrument acceptable to the
Committee.
The delivery of certificates representing the Option Shares will be
contingent upon the Company's receipt from the Optionee of full payment for the
Option Shares, as set forth above and any agreement, statement or other evidence
that the Company may require to satisfy itself that the issuance of Stock to be
purchased pursuant to the exercise of Stock Options under the Plan and any
subsequent resale of the shares of Stock will be in compliance with applicable
laws and regulations.
2
<PAGE>
(b) Certificates for the shares of Stock purchased upon
exercise of this Stock Option shall be issued and delivered to the Optionee upon
compliance to the satisfaction of the Committee with all requirements under
applicable laws or regulations in connection with such issuance and with the
requirements hereof and of the Plan. The determination of the Committee as to
such compliance shall be final and binding on the Optionee. The Optionee shall
not be deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares of Stock subject to this Stock Option unless and until
this Stock Option shall have been exercised pursuant to the terms hereof, the
Company shall have issued and delivered the shares of Stock to the Optionee, and
the Optionee's name shall have been entered as the stockholder of record on the
books of the Company. Thereupon, the Optionee shall have full voting, dividend
and other ownership rights with respect to such shares of Stock.
(c) The minimum number of shares with respect to which this
Stock Option may be exercised at any one time shall be 100 shares, unless the
number of shares with respect to which this Stock Option is being exercised is
the total number of shares subject to exercise under this Stock Option at the
time.
3. TERMINATION OF EMPLOYMENT. If the Optionee's employment or service
relationship as a director or consultant ("Service Relationship") with the
Company or a Related Corporation (as defined in the Plan) is terminated, this
Stock Option shall no longer vest and the period within which to exercise the
Stock Option to the extent then vested and exercisable may be subject to earlier
termination as set forth below.
(a) TERMINATION DUE TO DEATH. If the Optionee's Service
Relationship with the Company or a Related Corporation terminates by reason of
death, any Stock Option held by the Optionee, to the extent exercisable, may
thereafter be exercised by the Optionee's personal representative or beneficiary
who has acquired the Stock Option by will or by the laws of descent and
distribution for a period of 360 days from the date of death or until the
Expiration Date, if earlier.
(b) TERMINATION DUE TO DISABILITY. If the Optionee's Service
Relationship with the Company or a Related Corporation terminates by reason of
disability (as defined in Paragraph 11 of the Plan), any Stock Option held by
the Optionee shall become fully exercisable and may thereafter be exercised by
the Optionee for a period of 360 days from the date of termination or until the
Expiration Date, if earlier.
(c) TERMINATION OF SERVICE RELATIONSHIP. If the Optionee's
Service Relationship with the Company or a Related Corporation terminates for
any reason other than death or disability (as defined in paragraph 11 of the
Plan), and unless otherwise determined by the Committee, any Stock Option held
by the Optionee may be exercised, to the extent exercisable on the date of
termination, for a period of fifteen (15) days from the date of termination or
until the Expiration Date, if earlier. Any Stock Option that is not exercisable
at such time shall terminate immediately and be of no further force or effect.
3
<PAGE>
(d) Notwithstanding any other provision hereof or of the Plan,
no portion of this Stock Option shall be exercisable after the Expiration Date
hereof.
4. INCORPORATION OF PLAN. Notwithstanding anything herein to the
contrary, this Stock Option shall be subject to and governed by the terms and
conditions of the Plan. Capitalized terms in this Agreement shall have the
meaning specified in the Plan, unless a different meaning is specified herein or
in EXHIBIT A attached hereto and incorporated herein.
5. TRANSFERABILITY. This Agreement is personal to the Optionee, is
non-assignable and is not transferable in any manner, by operation of law or
otherwise, other than by will or the laws of descent and distribution. This
Stock Option is exercisable, during the Optionee's lifetime, only by the
Optionee, and thereafter, only by the Optionee's personal representative or
beneficiary.
6. TAX WITHHOLDING. No later than the date as of which part or all of
the value of any shares of Stock received under the Plan first becomes
includible in the Optionee's gross income for Federal tax purposes, the Optionee
shall make arrangements with the Company in accordance with paragraph 20 of the
Plan regarding payment of any Federal, state or local taxes required to be
withheld with respect to such income.
7. MISCELLANEOUS.
(a) Notice hereunder shall be given to the Company at its
principal place of business, and shall be given to the Optionee at the address
set forth below, or in either case at such other address as one party may
subsequently furnish to the other party in writing.
(b) This Stock Option does not confer upon the Optionee any
rights with respect to continuance of employment by the Company or any Related
Corporation.
(c) Pursuant to paragraph 16 of the Plan, the Committee may at
any time amend or cancel any outstanding portion of this Stock Option, but no
such action may be taken which adversely affects the Optionee's rights under
this Agreement without the Optionee's consent.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
4
<PAGE>
EXECUTED as of the date set forth below.
PRIMIX SOLUTIONS INC.
Dated: SEPTEMBER 16, 1999 By: /s/ DAVID W. CHAPMAN
--------------------------- -------------------------
Name: David W. Chapman
Title: Chief Financial Officer
The foregoing Agreement is hereby accepted and the terms and conditions thereof
hereby agreed to by the undersigned.
Dated: SEPTEMBER 16, 1999 /s/ LENNART MENGWALL
--------------------------- -------------------------------
Optionee's Signature
Optionee's Name:LENNART MENGWALL
---------------
Optionee's Address:
c/o Primix Solutions Inc.
One Arsenal Marketplace
Watertown, MA 02472
5
<PAGE>
PRIMIX SOLUTIONS INC.
NON-QUALIFIED STOCK OPTION AGREEMENT (1996 STOCK PLAN)
EXHIBIT A
Optionee: LENNART MENGWALL
-------------------------------------
Option Grant Date: SEPTEMBER 16, 1999
-------------------------------------
Option Shares: 163,856
-------------------------------------
Option Exercise Price per Share: $ 2.938
-------------------------------------
Expiration Date: TEN (10) YEARS FROM OPTION GRANT DATE
Vesting: This Option shall vest and become
exercisable as follows:
40,964 options shall vest on
September 16, 2000
18,750 options shall vest on
December 16, 2000
3,464 options shall vest on
June 16, 2001
18,750 options shall vest on
September 16, 2001
18,750 options shall vest on
December 16, 2001
3,464 options shall vest on
June 16, 2002
18,750 options shall vest on
September 16, 2002
18,750 options shall vest on
December 16, 2002
3,464 options shall vest on
June 16, 2003
18,750 options shall vest on
September 16, 2003
Special Terms: Options detailed on this exhibit are
subject to certain conditions as
outlined in the attached amendment.
This Exhibit A is made a part of, and is subject to the terms and conditions of,
the attached Non-Qualified Stock Option Agreement between Primix Solutions, Inc.
and the Optionee signing below. In the event of any inconsistency between the
terms of this Exhibit A and the terms of the Non-Qualified Stock Option
Agreement, the terms of this Exhibit A shall control.
By signing below, the parties acknowledge and agree to the foregoing terms and
conditions.
Primix Solutions Inc. Optionee
By: /s/ DAVID W. CHAPMAN By: /s/ LENNART MENGWALL
--------------------------- ---------------------------
Name: DAVID W. CHAPMAN Name: LENNART MENGWALL
--------------------------- ---------------------------
Title: CHIEF FINANCIAL OFFICER Date: 9/16/99
--------------------------- ---------------------------
Date: 9/16/99
---------------------------
6
<PAGE>
NOTICE OF EXERCISE
DATE:
------------------
Primix Solutions Inc.
One Arsenal Marketplace
Watertown, MA 02472
ATTENTION: JOAN REILLY GRIFFIN
- -------------------------------
Dear Ms. Reilly Griffin:
Pursuant to my Incentive Stock Option Agreement and Exhibit A dated as
of ,I hereby elect to exercise this Option to the extent indicated:
<TABLE>
<CAPTION>
- ----------------------- --------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
Grant Date No. of shares which I X Per share price = Total Price
elect to purchase
- ----------------------- --------------------------- ---------------------------- ----------------------------
$ $
- ----------------------- --------------------------- ---------------------------- ----------------------------
$ $
- ----------------------- --------------------------- ---------------------------- ----------------------------
$ $
- ----------------------- --------------------------- ---------------------------- ----------------------------
$ $
- ----------------------- --------------------------- ---------------------------- ----------------------------
</TABLE>
Enclosed with this letter is full payment of the total price of the
shares described above in the following form;
- - a check in the amount of $ _____________ payable to the order of the
Corporation.
I agree to promptly provide you with a copy of the written confirmation
when I sell the shares which are being purchased pursuant to the option
exercise, indicating the date of sale and the net sale proceeds to me.
Kindly issue a certificate or certificates to me representing the
shares which I am acquiring by this exercise, and deliver it to my address.
Very truly yours,
-----------------------------
Name (Print):
-----------------
7
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports included in this Form 10-K, into the Company's previously
filed Registration Statement File No. 333-09101.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 30, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 5,685
<SECURITIES> 12,855
<RECEIVABLES> 3,602
<ALLOWANCES> 50
<INVENTORY> 0
<CURRENT-ASSETS> 22,743
<PP&E> 3,269
<DEPRECIATION> 2,813
<TOTAL-ASSETS> 27,336
<CURRENT-LIABILITIES> 2,883
<BONDS> 0
0
0
<COMMON> 15
<OTHER-SE> 24,438
<TOTAL-LIABILITY-AND-EQUITY> 27,336
<SALES> 0
<TOTAL-REVENUES> 11,989
<CGS> 0
<TOTAL-COSTS> 9,406
<OTHER-EXPENSES> 10,123
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8
<INCOME-PRETAX> (6,423)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,423)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,423)
<EPS-BASIC> (.44)
<EPS-DILUTED> (.44)
</TABLE>
