<PAGE>
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
proxy statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
[_] Confidential, for Use of the
Check the appropriate box: Commission Only (as Permitted by
Rule 14a-6(e)(2))
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
PRIMUS KNOWLEDGE SOLUTIONS, INC.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
- -------------------------------------------------------------------------------
<PAGE>
[LETTERHEAD OF PRIMUS KNOWLEDGE SOLUTIONS, INC.]
April 17, 2000
Dear Shareholder:
You are cordially invited to attend the 2000 Annual Meeting of Shareholders
of Primus Knowledge Solutions, Inc., which will be held on May 10, 2000, at
9:00 a.m., local time, at the Hotel Monaco, 1101 Fourth Avenue, Seattle,
Washington.
At the annual meeting, you will be asked to elect seven directors to the
Primus Board of Directors.
THE PRIMUS BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF
THE NOMINEES FOR DIRECTOR.
You should read carefully the accompanying Notice of Annual Meeting of
Shareholders and the proxy statement for additional information.
Whether or not you plan to attend the annual meeting, please complete, sign
and date the enclosed proxy card and return it promptly in the enclosed
postage-prepaid envelope. Your shares will be voted in accordance with the
instructions you give in your proxy. If you attend the annual meeting, you may
vote in person if you wish, even if you previously returned your proxy card.
Your prompt cooperation is greatly appreciated.
Sincerely,
/s/ Michael A. Brochu
Michael A. Brochu
President, Chief Executive Officer
and Chairman of the Board
This document is being first mailed to shareholders on or about April 17, 2000
<PAGE>
PRIMUS KNOWLEDGE SOLUTIONS, INC.
1601 Fifth Avenue, Suite 1900
Seattle, Washington 98101
----------------
Notice of the 2000 Annual Meeting of Shareholders
to be held May 10, 2000
----------------
TO THE SHAREHOLDERS OF PRIMUS KNOWLEDGE SOLUTIONS, INC.:
We will hold the 2000 Annual Meeting of Shareholders of Primus Knowledge
Solutions, Inc. on May 10, 2000, at 9:00 a.m., local time, at the Hotel
Monaco, 1101 Fourth Avenue, Seattle, Washington, for the following purposes:
1. To elect two Class 1 directors to hold office until the 2001 Annual
Meeting of Shareholders or until their successors are elected and
qualified; to elect two Class 2 directors to hold office until the 2002
Annual Meeting of Shareholders or until their successors are elected
and qualified; to elect three Class 3 directors to hold office until
the 2003 Annual Meeting of Shareholders or until their successors are
elected and qualified; and
2. To transact such other business as may properly come before the annual
meeting or any adjournments or postponements of the annual meeting.
These items of business are more fully described in the proxy statement
accompanying this notice. The Board of Directors has fixed the close of
business on March 10, 2000, as the record date for the determination of
shareholders entitled to notice of, and to vote at, the annual meeting. Only
shareholders of record on the record date are entitled to notice of, and to
vote at, the annual meeting and any adjournments or postponements.
The directors elected will be the seven candidates receiving the greatest
number of votes cast, in person or by proxy, at the annual meeting.
All shareholders are cordially invited to attend the annual meeting.
However, to assure your representation at the annual meeting, you are urged to
complete, sign, date and return the enclosed proxy card as promptly as
possible in the postage prepaid envelope enclosed for that purpose. Your stock
will be voted in accordance with the instructions you give in your proxy. Your
proxy may be revoked at any time before it is voted by signing and returning a
proxy bearing a later date for the same shares, by filing with the Secretary
of Primus a written revocation bearing a later date or by attending and voting
in person at the annual meeting.
By order of the Board of Directors
/s/ Elizabeth J. Huebner
Elizabeth J. Huebner
Executive Vice President, Chief
Financial Officer and Secretary
Seattle, Washington
April 17, 2000
<PAGE>
PRIMUS KNOWLEDGE SOLUTIONS, INC.
----------------
PROXY STATEMENT
This proxy statement is being furnished to holders of shares of common
stock, par value $.025 per share, of Primus Knowledge Solutions, Inc., a
Washington corporation, in connection with the solicitation of proxies by
Primus' Board of Directors for use at the 2000 Annual Meeting of Shareholders
and at any adjournments or postponements of the annual meeting. The annual
meeting will be held on May 10, 2000, at 9:00 a.m., local time, at the Hotel
Monaco, 1101 Fourth Avenue, Seattle, Washington. The approximate date of the
mailing of this proxy statement and the accompanying proxy is April 17, 2000.
Matters to Be Considered at the Annual Meeting
At the annual meeting, shareholders of record of Primus as of the close of
business on March 10, 2000 will consider and vote on:
(1) the election to Primus' Board of Directors of two Class 1 directors, to
hold office until the 2001 Annual Meeting of Shareholders or until their
successors are elected and qualified; two Class 2 directors, to hold office
until the 2002 Annual Meeting of Shareholders or until their successors are
elected and qualified; and three Class 3 directors, to hold office until
the 2003 Annual Meeting of Shareholders or until their successors are
elected and qualified; and
(2) such other business as may properly come before the annual meeting or
any adjournments or postponements of the annual meeting.
The Board recommends that Primus' shareholders vote "FOR" election of the
nominees for director.
Record Date; Shares Entitled to Vote; Vote Required
Only the shareholders of record at the close of business on the record date,
March 10, 2000, are entitled to notice of, and to vote at, the annual meeting.
Primus has one class of voting securities outstanding that is designated as
common stock, and each share of common stock is entitled to one vote. On March
10, 2000, there were 17,560,480 shares of common stock outstanding held of
record by 245 shareholders. All share numbers in this proxy statement reflect
a one-for-three reverse stock split effective May 3, 1999.
Holders of a majority of the outstanding shares of Primus' common stock,
present in person or represented by proxy, will constitute a quorum for the
transaction of business at the annual meeting. The directors elected at the
annual meeting will be the seven candidates receiving the greatest number of
votes cast by the holders of shares of common stock present, in person or by
proxy, at the annual meeting. Holders of shares of common stock are not
entitled to cumulate votes in the election of directors. As of the record
date, directors and executive officers of Primus and their affiliates may be
deemed to be the beneficial owners of approximately 30.16% of the outstanding
shares of common stock. Each of the directors and executive officers of Primus
plans to vote or direct the vote of all shares of common stock over which he
or she has voting control in favor of the election of the nominees for
director.
Abstention and broker non-votes will have no effect on the election of
directors since they will not represent votes cast at the annual meeting for
the purpose of voting on that proposal.
Proposals by Primus Shareholders
Shareholder proposals intended to be presented at the annual meeting must
have been received by Primus not later than March 16, 2000 for inclusion in
the proxy materials for the annual meeting. We are not aware of any matters to
be voted on at the annual meeting except those listed on the accompanying
notice of annual
<PAGE>
meeting of shareholders. The accompanying proxy gives discretionary authority
to the persons named to vote the shares in their best judgement if any other
matters are properly brought before the annual meeting.
Proxies
Shares of common stock represented by properly executed proxies received at
or before the annual meeting that have not been revoked will be voted at the
annual meeting in accordance with the instructions contained in the proxy.
Shares of common stock represented by properly executed proxies for which no
instruction is given will be voted "FOR" the election of the nominees for
director. Primus requests that shareholders complete, sign, date and return
promptly the enclosed proxy card in the postage-prepaid envelope provided for
this purpose, to ensure that their shares are voted. Your stock will be voted
in accordance with the instructions you give in your proxy. Your proxy may be
revoked at any time before it is voted by signing and returning a proxy
bearing a later date for the same shares, by filing with the Secretary of
Primus a written revocation bearing a later date or by attending and voting in
person at the annual meeting.
If the annual meeting is postponed or adjourned for any reason, at any
subsequent reconvening of the annual meeting, all proxies will be voted in the
same manner as the proxies would have been voted at the original convening of
the annual meeting, except for any proxies that have at that time been
effectively revoked or withdrawn, notwithstanding that they may have been
effectively voted on the same or any other matter at a previous meeting.
Proxy Solicitation
The proxy accompanying this proxy statement is solicited by Primus' Board of
Directors. Primus will bear the cost of soliciting proxies. Officers,
directors, and regular supervisory executive employees of Primus may solicit
proxies; none of these solicitors will receive any additional compensation for
their services, but some may be reimbursed for out-of-pocket expenses they
incur. Primus has retained ChaseMellon Shareholder Services, Seattle,
Washington, to aid in the solicitation of proxies at an estimated cost of
$4,000 plus reasonable expenses. Solicitation of proxies may be made
personally or by mail, telephone, facsimile, messenger or otherwise. Brokerage
firms, fiduciaries and other custodians who forward soliciting material to the
beneficial owners of shares of common stock held of record by them will be
reimbursed for the reasonable expenses they incur in forwarding the material.
ELECTION OF DIRECTORS
In accordance with the Second Restated Bylaws of Primus, as amended, the
Board of Directors shall be composed of seven directors. At present, Primus
has seven directors. The bylaws provide that at this annual meeting, the first
annual meeting after the amendment of Primus' articles of incorporation in
connection with its initial public offering, the Primus Board shall be divided
into three classes, as nearly equal in number as possible. The directors in
Class 1 will serve an initial term of one year, the directors in Class 2 will
serve an initial term of two years, and the directors in Class 3 will serve an
initial term of three years. After this first election of directors to the
classified board, every director elected to the board will serve for a term of
three years or until such time as his or her successor is elected and
qualified, and one class will be elected each year by Primus' shareholders. If
a director resigns from the Board before the expiration of his or her term,
however, the director elected or appointed to fill the resulting vacancy may
be designated to a class such that he or she initially must be elected to a
shorter term.
Promod Haque and Janice Peters have been nominated for election to the Board
as Class 1 directors. Yasuki Matsumoto and Antonio Audino have been nominated
for election to the Board as Class 2 directors. Michael Brochu, Fredric Harman
and John Connors have been nominated for election to the Board as Class 3
directors. Primus intends to cast votes in accordance with the accompanying
proxy for the election of these nominees unless contrary instructions are
received. If any nominee should become unavailable for any reason, Primus
2
<PAGE>
intends to cast votes for a substitute nominee designated by the Board. The
Board has no reason to believe that any of the nominees named will be unable
to serve if elected.
NOMINEES
<TABLE>
<CAPTION>
Name and Age Proposed term expiration date Director Since
<S> <C> <C>
Janice C. Peters, age 48 2001 Annual Meeting 2000
</TABLE>
Ms. Peters has served as one of our directors since March 2000. Since
October 1997, Ms. Peters has been the President and Chief Executive Officer of
MediaOne, a broadband services provider. She was the President of Wireless
Operations of MediaOne Group (formerly US West Media Group), a wireless
services provider, from May 1995 to October 1997, and Managing Director of
One2One, a wireless network, from June 1996 to October 1997. Ms. Peters holds
a B.S. in Education from Wayne State University and an M.S. in Management from
Stanford University. Ms. Peters is a member of the board of directors of Mail-
Well, Inc., a publicly traded printing consolidator.
<TABLE>
<CAPTION>
Name and Age Proposed term expiration date Director Since
<S> <C> <C>
Promod Haque, age 51 2001 Annual Meeting 1996
</TABLE>
Mr. Haque has served as one of our directors since February 1996. Mr. Haque
joined Norwest Venture Partners in November 1990 and is currently Managing
General Partner of Norwest Venture Partners VII, General Partner of Norwest
Venture Partners VI and General Partner of Norwest Equity Partners V and IV.
Mr. Haque holds a B.S. in electrical engineering from the University of Dehli,
India and an M.S. and a Ph.D. in electrical engineering and an M.B.A. from
Northwestern University . Mr. Haque is a member of the board of directors of
Information Advantage, Inc., Prism Solutions, Inc., and Transaction Systems
Architects, Inc., as well as several private companies.
<TABLE>
<CAPTION>
Name and Age Proposed term expiration date Director Since
<S> <C> <C>
Yasuki Matsumoto, age 46 2002 Annual Meeting 1994
</TABLE>
Mr. Matsumoto has served as one of our directors since October 1994. Since
March 1997, Mr. Matsumoto has been the President and Chief Executive Officer
of EnCompass Group, Inc., an information technology venture capital investment
firm. Mr. Matsumoto holds an M.S. in computer engineering from Portland State
University. Mr. Matsumoto serves on the boards of several privately held
companies.
<TABLE>
<CAPTION>
Name and Age Proposed term expiration date Director Since
<S> <C> <C>
Antonio M. Audino, age 41 2002 Annual Meeting 1995
</TABLE>
Mr. Audino has served as one of our directors since April 1995. Since
September 1996, Mr. Audino has been a managing director of Voyager Capital, a
venture capital firm. In 1994, Mr. Audino founded Ally Ventures. Mr. Audino
holds a B.S. in accounting and a B.A. in philosophy from Creighton University.
Mr. Audino is a member of the board of Captura Software and GoAhead Software,
each a privately held software company.
<TABLE>
<CAPTION>
Name and Age Proposed term expiration date Director Since
<S> <C> <C>
Michael A. Brochu, age 46 2003 Annual Meeting 1997
</TABLE>
Mr. Brochu has served as our President and Chief Executive Officer since
November 1997 and was named Chairman of our Board, December 1998. Mr. Brochu
was President and Chief Operating Officer of Sierra On-Line, Inc., an
interactive software publisher, from June 1994 until October 1997. Mr. Brochu
is also a member of the board of directors of Primus KK and is chairman of the
board of directors of OnHealth Network Company, a publicly traded Internet
content provider of public-health information. Mr. Brochu received his B.B.A.
in accounting and finance from the University of Texas at El Paso.
3
<PAGE>
<TABLE>
<CAPTION>
Name and Age Proposed term expiration date Director Since
<S> <C> <C>
Fredric W. Harman, age 39 2003 Annual Meeting 1996
Mr. Harman has served as one of our directors since February 1996. Since
1994, Mr. Harman has served as a managing member of the general partner of
venture capital funds affiliated with Oak Investment Partners. Mr. Harman
holds a B.S. and an M.S. in electrical engineering from Stanford University
and an M.B.A. from the Harvard School of Business. Mr. Harman is a director of
ILOG, S.A., Inktomi Corporation and several privately held companies.
<CAPTION>
Name and Age Proposed term expiration date Director Since
<S> <C> <C>
John G. Connors, age 41 2003 Annual Meeting 2000
</TABLE>
Mr. Connors has served as one of our directors since April 2000. Since
January 2000, Mr. Connors has served as Senior Vice President, Finance and
Administration and Chief Financial Office for Microsoft Corporation. From
April 1999 to January 2000, Mr. Connors served as Microsoft's Vice President--
Worldwide Enterprise Group and from July 1996 to April 1999 he served as
Microsoft's Vice President--Chief Information Officer. From April 1994 to July
1996, Mr. Connors served as Microsoft's Corporate Controller. Mr. Connors
holds a B.A. in Business from the University of Montana. Mr. Connors is a
director of Montana Power.
Director Compensation
Members of our Board of Directors do not receive any fee for their services
as directors. Directors are eligible to participate in our 1999 stock
incentive plan, which was adopted by our Board of Directors and our
shareholders in April 1999.
Committees of the Board and Meetings
During the last fiscal year, there were five meetings of the Board of
Directors. All directors attended at least 90% of all board and committee
meetings of which they were a member.
The Board of Directors has an Audit Committee and a Compensation Committee.
The Audit Committee, currently composed of Promod Haque, Fredric Harman and
John Connors, makes recommendations to the Board of Directors regarding the
selection of independent auditors, reviews the results and scope of the audit
and other services provided by our independent auditors, and reviews and
evaluates our audit and control functions. During the last fiscal year, there
was one meeting of the Audit Committee.
The Compensation Committee, currently composed of Antonio Audino and Fredric
Harman reviews and approves the compensation and benefits for our executive
officers and makes recommendations to the Board of Directors regarding
compensation and benefits matters. During the last fiscal year, there were
three meetings of the Compensation Committee.
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended December 31, 1999, Messrs. Brochu, Audino,
Haque and Harman served on the compensation committee of our Board of
Directors, as did Kenneth L. Block, a former director of Primus. None of our
executive officers serves as a member of the compensation committee or board
of directors of any entity that has an executive officer serving as a member
of our compensation committee or board of directors.
In March 1999, Messrs. Brochu and Audino purchased 1,000 and 5,556 shares,
respectively, of our common stock at a price per share of $9.00. Block Capital
LLC, an entity controlled by Mr. Block, purchased 16,667 shares of our common
stock at a price per share of $9.00.
4
<PAGE>
EXECUTIVE OFFICERS
The following are executive officers of Primus who will serve in the
capacities noted until their successors are appointed:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Michael A. Brochu........... 46 President, Chief Executive Officer and Chairman
of the Board
Elizabeth J. Huebner........ 42 Chief Financial Officer, Executive Vice
President, Secretary and Treasurer
Patricia L. Cox............. 39 Vice President of Customer Services
Norman S. Guadagno.......... 36 Vice President of Worldwide Marketing
Kim M. Nelson............... 44 Vice President of Worldwide Sales and Services
Edward L. Walter............ 50 Vice President of Product Development and
Technology
Diana K. Wong............... 49 Vice President of Human Resources
</TABLE>
For a biographical summary of Mr. Brochu, see "ELECTION OF DIRECTORS."
Elizabeth J. Huebner has served as our Executive Vice President since August
1999 and our Chief Financial Officer since June 1998. Ms. Huebner was named
Secretary and Treasurer in April 1999. From June 1998 to August 1999 Ms.
Huebner was a Vice President of Primus. From March 1996 to July 1998, Ms.
Huebner was the Chief Financial Officer of Fluke Corporation, a manufacturer
of electronic test tools. From March 1992 until March 1996, Ms. Huebner was a
Vice President of Finance for AT&T Wireless. Ms. Huebner received her B.S. in
accounting from the University of Utah.
Patricia L. Cox. has served as our Vice President of Customer Services since
March 1998. From January 1997 to March 1998, Ms. Cox was a Regional Services
Manager for Lawson Software. From April 1993 to December 1996, Ms. Cox was a
Regional Consulting Manager for Platinum Software Corporation. Ms. Cox
received her B.S. in computer information systems from Bentley College.
Norman S. Guadagno has served as our Vice President of Worldwide Marketing
since June 1999. From February 1999 to June 1999, Mr. Guadagno was Vice
President of Product Management of MyGeek.com, a privately held electronic
commerce company. From April 1998 to February 1999, Mr. Guadagno was Vice
President of Marketing and General Manager of Pentawave, a software electronic
commerce company. Mr. Guadagno held several marketing and product management
positions at Oracle Corporation from February 1994 to February 1996 and
February 1997 to April 1998. From August 1996 to February 1997, he held a
senior product marketing and management position with Portal Software. Mr.
Guadagno received his B.A. in psychology from the University of Rochester and
his M.A. in psychology from Rice University.
Kim M. Nelson has served as our Vice President of Worldwide Sales and
Services since January 1999. From June 1993 to December 1998, Mr. Nelson held
several positions at Oracle Corporation, including Area Vice President of
Sales, Vice President of Field Operations and Vice President of Sales for
Oracle Business Online. Mr. Nelson received his B.S. in business from the
University of Colorado.
Edward L. Walter has served as our Vice President of Product Development and
Technology since February 1999. Mr. Walter founded Simplications, LLC, a
developer of seminars on interactive product creations in June 1998 and served
as its managing partner until December 1998. From October 1995 to May 1998,
Mr. Walter was the Vice President of Engineering of Lexant, a software
company. From March 1991 to October 1994, he was the Vice President of
Engineering of Aldus Corporation, a software company. Mr. Walter currently
serves as an associate professor for the Institute of Design at the Illinois
Institute of Technology. Mr. Walter received his B.S. in psychology from Duke
University.
Diana K. Wong has served as our Vice President of Human Resources since
October 1999. From December 1998 to October 1999, Ms. Wong was the Executive
Vice President of Human Resources for Data Dimensions, a technical consulting
firm. From February 1993 to November 1998, Ms. Wong was a Vice President of
Human Resources for AT&T Wireless. Ms. Wong received her B.A. from California
State University Sacramento and her M.B.A. from the University of Washington.
5
<PAGE>
EXECUTIVE COMPENSATION
Compensation Summary
The following table lists all compensation earned during the year ended
December 31, 1999 by Primus' chief executive officer and four other executive
officers whose salary and bonus exceeded $100,000 for the year ended December
31, 1999 (our "named executive officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
----------------------- -------------------
Name and Principal Securities All Other
Position Salary Bonus Underlying Options Compensation
------------------ ---------- --------- ------------------- ------------
<S> <C> <C> <C> <C>
Michael A. Brochu....... $ 225,000 $ 44,167 228,666 --
President and Chief
Executive Officer
Elizabeth J. Huebner.... 142,271 18,750 111,666 --
Chief Financial Officer
and Executive Vice
President
Patricia L. Cox......... 124,992 16,434 58,333 --
Vice President of
Customer Services
Kim M. Nelson........... 134,471 -- 218,332 $93,938(1)
Vice President of
Worldwide Sales and
Services
Edward L. Walter........ 118,040(2) -- 218,332 --
Vice President of
Product Development
and Technology
</TABLE>
- --------
(1) Represents commission.
(2) Mr. Walter joined Primus in February 1999.
Option Grants in Fiscal 1999
The following table provides information regarding options granted during
the year ended December 31, 1999 to the named executive officers.
Option Grants in Fiscal 1999
<TABLE>
<CAPTION>
Potential Realizable
Individual Grants Value at Assumed
-------------------------------------------------- Annual Rates of
Number of Stock Price
Shares Percent of Total Appreciation for
Underlying Options Granted to Exercise Option Term(2)
Options Employees in last Price Expiration --------------------
Name Granted Fiscal Year(1) ($/Share) Date 5%($) 10%($)
- ---- ---------- ------------------ --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael A. Brochu....... 78,666 3.89% 8.25 2/4/09 $ 408,149 $1,034,330
150,000 7.42 20.41 8/13/09 1,925,007 4,878,346
Elizabeth J. Huebner.... 36,666 1.81 8.25 2/4/09 $190,237 482,098
75,000 3.71 20.41 8/13/09 962,503 2,439,173
Patricia L. Cox......... 33,333 1.65 8.25 2/4/09 172,944 438,275
25,000 1.24 20.41 8/13/09 320,834 813,058
Kim M. Nelson........... 126,666 6.27 6.00 1/1/09 477,957 1,211,238
16,666 .82 8.25 2/4/09 86,469 219,131
75,000 3.71 20.41 8/13/09 962,503 2,439,173
Edward L. Walter........ 143,332 7.09 8.25 2/4/09 745,661 1,884,583
75,000 3.71 20.41 8/13/09 962,503 2,439,173
</TABLE>
- --------
For all options granted to the named executive officers during fiscal year
1999, 25% vest and become exercisable one year from the date of grant and
approximately 2% vest and become exercisable each month after that date.
(1) Based on a total of 2,021,359 option shares granted to employees in
fiscal 1999.
(2) The dollar amounts under these columns are calculated based on assumed
rates of 5% and 10% and are not intended to forecast future appreciation.
The named executive officers will realize no value if the stock price
does not exceed the exercise price of the options.
6
<PAGE>
Fiscal Year-End Option Values
The following table provides information regarding options held as of
December 31, 1999 by each of the named executive officers. None of our named
executive officers exercised any options during 1999.
<TABLE>
<CAPTION>
Total Number of Value of Unexercised
Unexercised Options at In-the-Money Options
Fiscal Year-End(#) At Fiscal Year-End($)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Michael A. Brochu..... 306,248 510,417 $12,556,168 $17,903,163
Elizabeth J.
Huebner.............. 40,000 178,332 1,580,000 5,713,648
Patricia L. Cox....... 43,750 114,583 1,793,750 4,087,748
Kim M. Nelson......... 0 218,332 0 7,178,649
Edward L. Walter...... 0 218,332 0 6,893,650
</TABLE>
- --------
(1) For the fiscal year ended December 31, 1999. The average of the high and
low trades of Primus' common stock on that date as reported on the Nasdaq
National Market was $44.00 per share.
Change in Control Arrangements
Primus has entered into an agreement with each of Michael A. Brochu,
Elizabeth J. Huebner, Patricia L. Cox, Norman S. Guadagno, Kim M. Nelson,
Edward L. Walter, and Diana K. Wong that provides for certain compensation
arrangements upon and following a change of control of the company. The
agreements expire one year following a change of control. A change of control
occurs under the agreements when
. Primus completes a merger, consolidation or share exchange after which
its prior shareholders own less than a majority of the surviving
corporation
. Primus sells substantially all of its assets not in the ordinary course
of business, or
. one person or entity acquires a majority of Primus' outstanding shares
Immediately upon a change of control, 50% of the unvested options of each
executive become exercisable. Our 1995 and 1999 stock incentive compensation
plans also provide for vesting of all unvested options in certain
circumstances involving a merger, sale or liquidation of Primus.
If one of our executives is terminated by us without cause or terminates his
or her employment due to a substantial change in his or her position or
responsibilities during the year following a change of control, he or she will
be entitled to his or her accrued annual base salary, bonus and commissions
through the date of termination plus severance pay equal to one-half of annual
base salary. Further, all of his or her outstanding options will become
immediately exercisable. To the extent the employee regularly receives
commissions as part of his or her compensation, we will also pay commissions
to the terminated employee for sales to his or her former accounts that occur
during the six months following termination.
7
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Primus' executive compensation program is administered by the compensation
committee, which is comprised of two non-employee directors. Primus' executive
compensation policy is designed to
. assist Primus in attracting and retaining key executives critical to the
company's success
. align the interests of the executives with the interests of Primus'
shareholders
. reflect Primus' overall performance, and
. reward executives individually
Executive compensation consists of three major components: base salary,
bonuses and stock options.
Base Salary. The committee sets the base salary of the chief executive
officer at an amount it believes is competitive with the salaries paid to
executives of other high-growth companies in the software industry located
within the local area. The committee relies on surveys and on knowledge of
local pay practices as reported in financial periodicals or otherwise
accessible to the committee. Additionally, the committee reviews the chief
executive officer's performance and the company's financial and stock price
performance generally. The committee reviews base salary for executive
officers annually. The chief executive officer's base salary was increased
from $200,000 to $225,000 effective January 1, 1999.
Bonus. Under a bonus plan established in February 1999, Primus executives
may be eligible for annual bonuses. Each executive's potential bonus is set as
a percentage of his or her base salary; bonuses are based 50% on the company's
revenue, 30% on its operating results and 20% on achievement of the
executive's individual goals and objectives as set by the chief executive
officer (the committee sets the chief executive officer's goals). The Vice
President of Worldwide Sales and Services received a commission based on
revenue in lieu of a bonus. Bonus payments are presented in the Summary
Compensation Table under the heading "Bonus."
Stock Option Grants. Primus provides its executives with long-term
incentives through the 1999 Stock Incentive Compensation Plan. The objective
of the 1999 plan is to enhance long-term profitability and shareholder value.
The committee determines the number and terms of options granted to Primus'
chief executive officer, other executive officers and all other employees. The
committee relies on surveys and general familiarity with the number and
proportion of shares available for grant pursuant to stock options in similar
companies to determine appropriate grant level. To encourage stock retention,
all options are granted as incentive stock options to the maximum extent
possible under the Internal Revenue Code. Options are typically granted at the
then-current market price and generally have a four-year vesting period to
encourage key employees to continue their employment with Primus.
Section 162(m) of the Internal Revenue Code limits the tax deductibility by
a corporation of compensation in excess of $1 million paid to the chief
executive officer and any other of its four most highly compensated executive
officers. However, compensation which qualifies as "performance-based" is
excluded from the $1 million limit. The committee does not presently expect
total cash compensation payable for salaries to exceed the $1 million limit
for any individual executive. Primus' stock option plans are designed to
qualify as performance-based compensation that is fully deductible by Primus
for income tax purposes.
The committee believes that our compensation policies have been successful
in attracting and retaining qualified employees and in linking compensation
directly to corporate performance relative to our goals. The committee will
continue to monitor the compensation levels potentially payable under Primus'
other compensation programs, but intends to retain the flexibility necessary
to provide total compensation in line with competitive practice, Primus'
compensation philosophy and Primus' best interests.
Compensation Committee
Antonio M. Audino
Fredric W. Harman
8
<PAGE>
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total shareholder
return for Primus, the Chase H&Q Internet Index and the Nasdaq Stock Market-
U.S. Index. The graph shows the value of $100 invested on July 1, 1999 (the
date of Primus' initial public offering) in our common stock, the Chase H&Q
Internet Index and the Nasdaq Stock Market-U.S Index.
Cumulative Total Shareholder Return on $100 Investment
Since Initial Public Offering
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
July 1 July Aug. Sep. Oct. Nov. Dec.
1999 1999 1999 1999 1999 1999 1999
------ ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Primus Knowledge Solutions, Inc. 100.00 218.75 224.43 250.57 273.86 436.36 411.93
Chase H&Q Internet 100.00 87.62 92.25 102.12 112.91 142.30 197.67
Nasdaq Stock Market-U.S. 100.00 97.69 101.56 101.39 108.76 120.37 146.33
</TABLE>
Comparison of Cumulative Total Return for Primus Knowledge Solutions, Inc.,
Chase H&Q Internet Index and Nasdaq Stock Market-U.S.
<TABLE>
<CAPTION>
July 1, 1999 Dec. 31, 1999
=======================================
<S> <C> <C>
Primus $100 $411.93
---------------------------------------
Chase H&Q
Internet $100 $197.67
---------------------------------------
Nasdaq Stock
Market-U.S. $100 $146.33
</TABLE>
9
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table provides information with respect to the beneficial
ownership of shares of common stock as of December 31, 1999 by
. each person or group who we know owns more than 5% of our common stock
. each of the named executive officers
. each of our directors
. all of our directors and executive officers as a group
Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission and includes shares over which the
indicated beneficial owner exercises voting and/or investment power. Shares of
our common stock subject to options exercisable as of December 31, 1999 or
within 60 days of that date are deemed outstanding for computing the
percentage ownership of the person holding the options but are not deemed
outstanding for computing the percentage ownership of any other person. Except
as otherwise indicated, we believe the beneficial owners of the common stock
listed below, based on information furnished by them, have sole voting and
investment power with respect to the number of shares listed opposite their
names.
<TABLE>
<CAPTION>
Amount and
Nature Percentage of
of Beneficial Common Stock
Name of Beneficial Owner(1) Ownership Outstanding
--------------------------- ------------- -------------
<S> <C> <C>
Principal Shareholders
Entities affiliated with TransCosmos,
Inc.(2)..................................... 1,810,291 11.6%
Entities affiliated with Oak Investment
Partners VI, L.P.(3)........................ 1,751,771 11.2%
Norwest Equity Partners, V, L.P.............. 1,441,166 9.2%
Nevis Capital Management, Inc................ 1,308,159 8.4%
Directors
Michael A. Brochu(4)......................... 354,916 2.2%
Antonio M. Audino............................ 99,720 *
John G. Connors.............................. 3,500 *
Promod Haque(5).............................. 1,449,499 9.3%
Fredric W. Harman(6)......................... 1,760,104 11.3%
Yasuki Matsumoto(7).......................... 1,421,161 9.1%
Executive Officers
Elizabeth J. Huebner(8)...................... 56,610 *
Patricia L. Cox(11).......................... 66,750 *
Norman S. Guadagno........................... 500 *
Kim M. Nelson(9)............................. 40,972 *
Edward L. Walter(10)......................... 42,334 *
Diana K. Wong................................ 1,000 *
Directors and executive officers as a
group(12 persons)........................... 5,297,066 32.9%
</TABLE>
- --------
* Less than 1%.
(1) The address of Trans Cosmos, Inc. and Mr. Matsumoto is 777-108th Avenue,
N.E., Suite 2300, Bellevue, WA 98004. The address of Oak Investment
Partners VI, Limited Partnership and Mr. Harman is Suite 1300, 525
University Avenue, Palo Alto, CA 94301. The address of Norwest Equity
Partners V, L.L.P. and Mr. Haque is Suite 250, 245 Lyton Avenue, Palo
Alto, CA 94301. The address of Nevis Capital Management is 1119 St. Paul
Street, Baltimore, MD 21202. The address of Messrs. Brochu, Nelson,
Guadagno and Walter and Mesdames Huebner, Cox and Wong is c/o Primus
Knowledge Solutions, Inc., 1601 Fifth Avenue, Suite 1900, Seattle WA
98101.
(2) Represents the following: (a) 459,735 shares owned by Trans Cosmos,
Inc.; (b) 493,225 shares owned by Trans Cosmos USA, Inc.; and (c)
857,331 shares owned by U.S. Information Technology Financing, L.P.
10
<PAGE>
TransCosmos USA, Inc. is a wholly owned subsidiary of Trans Cosmos, Inc.
U.S. Information Technology Financing, L.P. is a limited partnership
whose sole general partner is Trans Cosmos USA, Inc. Yasuki Matsumoto, a
director of Primus, is the President and CEO of Trans Cosmos USA, Inc.
(3) Represents the following: (a) 1,711,832 shares owned by Oak Investment
Partners VI, L.P.; and (b) 39,939 shares owned by Oak VI Affiliates
Fund, L.P. Fredric W. Harman, a director of Primus, is a Managing Member
of Oak Associates VI, L.L.C., the general partner of Oak Investment
Partners VI, L.P. and a Managing Member of Oak VI Affiliates, L.L.C.,
the general partner of Oak VI Affiliates Fund, L.P.
(4) Represents the following: (a) 2,500 shares held directly by Mr. Brochu;
(b) 2,000 shares held by Mr. Brochu's minor children and (c) 350,416
shares issuable pursuant to options that were exercisable on December
31, 1999 or within 60 days of December 31, 1999. Mr. Brochu disclaims
beneficial ownership of 2,000 shares held in the names of his minor
children.
(5) Represents the following: (a) 8,333 shares issuable pursuant to options
that were exercisable on December 31, 1999 or within 60 days of December
31, 1999 and (b) 1,441,166 shares owned by Norwest Equity Partners V,
L.P. Mr. Haque is a partner in Norwest Venture Partners, an affiliate of
Norwest Equity Partners V, L.P. Mr. Haque disclaims beneficial ownership
of the shares held by Norwest Equity Partners, V, L.P. except to the
extent of his pecuniary interest arising from his interest in Norwest
Venture Partners.
(6) Represents the following: (a) 1,711,832 shares owned by Oak Investment
Partners VI, L.P.; (b) 39,939 shares owned by Oak VI Affiliates Fund,
L.P; and (c) 8,333 shares issuable pursuant to options to purchase
common stock held by Mr. Harman that were exercisable on December 31,
1999 or within sixty days of December 31, 1999. Mr. Harman is a Managing
Member of Oak Associates VI, L.L.C., the general partner of Oak
Investment Partners VI, L.P. and a Managing Member of Oak VI Affiliates,
L.L.C., the general partner of Oak VI Affiliates Fund, L.P. Mr. Harman
disclaims beneficial ownership of the shares held by Oak Investment
Partners VI and Oak VI Affiliates Fund, except to the extent of his
pecuniary interest arising from his interest in Oak Associates VI,
L.L.C.
(7) Represents the following: (a) 493,225 shares owned by Trans Cosmos USA,
Inc.; (b) 857,331 shares owned by U.S. Information Technology Financing,
L.P.; (c) 9,999 shares issuable pursuant to options to purchase common
stock held by Mr. Matsumoto that were exercisable on December 31, 1999
or within 60 days of December 31, 1999; and (d) 60,606 shares owned by
Mr. Matsumoto's spouse. TransCosmos USA, Inc. is a wholly owned
subsidiary of Trans Cosmos, Inc. U.S. Information Technology Financing,
L.P. is a limited partnership whose sole general partner is Trans Cosmos
USA, Inc. Mr. Matsumoto is President and CEO of Trans Cosmos USA, Inc.
(8) Includes 53,610 shares issuable pursuant to options that were
exercisable on December 31, 1999 or within 60 days of December 31, 1999.
(9) Includes 38,472 shares issuable pursuant to options that were
exercisable on December 31, 1999 or within 60 days of December 31, 1999.
(10) Includes 35,834 shares issuable pursuant to options that were
exercisable on December 31, 1999 or within 60 days of December 31, 1999.
(11) Includes 56,250 shares issuable pursuant to options that were
exercisable on December 31, 1999 or within 60 days of December 31, 1999.
Certain Relationships and Related Transactions
In June 1999, we issued an aggregate of 18,400 shares to an employee of
Primus KK. On April 30, 1999, we granted fully vested options to purchase an
aggregate of 10,000 shares of common stock to Primus KK employees.
11
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
Primus' executive officers, directors and holders of more than 10% of a
registered class of Primus' equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Executive
officers, directors and greater than 10% shareholders are required by SEC
regulations to furnish Primus with copies of all Section 16(a) forms they file
with the SEC.
Based solely on its review of the copies of these forms that it receives, or
written representations from certain reporting persons that no such forms were
required for those persons, Primus believes that during calendar year 1999 its
executive officers, directors and greater than 10% shareholders complied with
all applicable filing requirements.
CHANGE IN PRINCIPAL ACCOUNTANT
On December 14, 1999, the Audit Committee of our Board of Directors accepted
the resignation of Ernst & Young LLP as its principal accountants. Ernst &
Young was not independent under applicable accounting and auditing rules as to
Imparto Software Corporation, a California corporation acquired by Primus on
December 14, 1999. As a result of the acquisition, Ernst & Young was no longer
independent as to Primus. Ernst & Young's reports, issued prior to the
acquisition, on Primus' financial statements for each of the two fiscal years
that preceded the acquisition (the fiscal years ended December 31, 1997 and
December 31, 1998), were unqualified. During those fiscal years, and in the
period beginning January 1, 1999 and ending on the date the Audit Committee
accepted Ernst & Young's resignation, there were no disagreements between
Primus and Ernst & Young on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Ernst & Young, would
have caused it to make reference to the subject matter of the disagreements in
its reports issued prior to the acquisition of Imparto.
On January 17, 2000, Primus engaged KPMG LLP as its principal accountants.
Management had not consulted with KPMG on any accounting or financial or
reporting matters before the engagement.
INDEPENDENT AUDITORS
Representatives of KPMG LLP, Primus' principal accountants, are expected to
attend the annual meeting and will have an opportunity to make a statement and
to respond to appropriate questions from shareholders.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Under the Commission's proxy rules, shareholder proposals that meet certain
conditions may be included in Primus' proxy statement and form of proxy for a
particular annual meeting. Shareholders who intend to present a proposal at
Primus' 2001 Annual Meeting must give notice of the proposal to Primus no
later than December 18, 2000 to be considered for inclusion in the proxy
statement and form of proxy relating to that meeting. Shareholders who intend
to present a proposal that will not be included in the proxy statement and
form of proxy must give notice of the proposal to Primus no fewer than 90 or
more than 120 days prior to the one-year anniversary date of the 2000 Annual
Meeting. Receipt by Primus of any such proposal from a qualified shareholder
in a timely manner will not guarantee its inclusion in Primus' proxy materials
or its presentation at the 2001 Annual Meeting, because there are other
requirements in the proxy rules.
12
<PAGE>
OTHER BUSINESS
The Board does not intend to present any business at the annual meeting
other than as set forth in the accompanying Notice of Annual Meeting of
Shareholders, and has no present knowledge that any others intend to present
business at the annual meeting. If, however, other matters requiring the vote
of the shareholders properly come before the annual meeting or any adjournment
or postponement of the annual meeting, the persons named in the accompanying
form of proxy will have discretionary authority to vote the proxies held by
them in accordance with their judgment as to such matters.
ANNUAL REPORT AND FORM 10-K
Copies of Primus' 1999 Annual Report to Shareholders and Annual Report on
Form 10-K are being mailed with this proxy statement to each shareholder of
record. Primus shareholders not receiving a copy of such Annual Report or Form
10-K may obtain one without charge by writing or calling Investor Relations,
Primus Knowledge Solutions, Inc., 1601 Fifth Avenue, Suite 1900, Seattle,
Washington 98101, (206) 292-1000.
13
<PAGE>
- --------------------------------------------------------------------------------
_____
Please mark | |
your votes | X |
as indicated |_____|
WITHHOLD
AUTHORITY
FOR the to vote for
nominees the Nominees
1. ELECTION OF DIRECTORS: _____ _____
Nominees: | | | |
Class I (for a term to expire in 2001) | | | |
Janice C. Peters |_____| |_____|
Promod Haque
Class II (for a term to expire in 2002)
Yasuki Matsumoto
Antonio M. Audino
Class III (for a term to expire in 2003)
Michael A. Brochu
Fredric W. Harman
John G. Connors
WITHHOLD for the following only: (write the name of the nominee in the space
below)
- ------------------------------------------------------------
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
SHAREHOLDER IN THE SPACE PROVIDED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED "FOR THE NOMINEES" IN ITEM 1.
The Board of Directors recommends a vote "FOR the Nominees" in Item 1.
____
I plan to attend the annual meeting. | |
|____|
_________
|
|
|
|
Signature(s) Signature(s) Dated
----------------------- ----------------- ---------
Please sign exactly as your name appears hereon. Attorneys, trustees, executors
and other fiduciaries acting in a representative capacity should sign their
names and give their titles. An authorized person should sign on behalf of
corporations, partnerships, associations, etc. and give his or her title. If
your shares are held by two or more persons, each person must sign. Receipt of
the notice of meeting and proxy statement is hereby acknowledged.
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
<PAGE>
PRIMUS KNOWLEDGE SOLUTIONS, INC.
This Proxy is solicited by the Primus' Board of Directors for the Annual
Meeting of Shareholders to be held on May 10, 2000
The undersigned hereby appoint(s) Michael A. Brochu and Elizabeth J.
Huebner, and each of them, as proxies, with full power of substitution, to
represent and vote as designated all shares of common stock of Primus Knowledge
Solutions, Inc. held of record by the undersigned on March 10, 2000 at the
Annual Meeting of Shareholders of Primus to be held at the Hotel Monaco, 1101
Fourth Avenue, Seattle, Washington, at 9:00 a.m. on May 10, 2000, with authority
to vote upon the matters listed below and with discretionary authority as to any
matters that may properly come before the meeting or any adjournment or
postponement thereof.
IMPORTANT--PLEASE DATE AND SIGN ON THE OTHER SIDE
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
