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As filed with the Securities and Exchange Commission on July 25, 2000
Registration 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
PRIMUS KNOWLEDGE SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Washington 7372 91-1350484
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
1601 Fifth Avenue
Seattle, Washington 98101
(206) 292-1000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Michael A. Brochu
President, Chief Executive Officer and Chairman of the Board
Primus Knowledge Solutions, Inc.
1601 Fifth Avenue
Seattle, WA 98101
(206) 292-1000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies to:
Andrew Bor
Daniel F. Vaughn
Perkins Coie LLP
1201 Third Avenue, 48th Floor
Seattle, Washington 98101-3099
(206) 583-8888
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [_] ____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_] ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
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================================================================================================
Proposed maximum Proposed Maximum
Title of Each Class Amount to be offering price Aggregate Amount of
of Securities to Be Registered Registered per unit(1) Offering Price(1) Registration Fee
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.025 par
value per share........ 2,412,877 $31.0625 $74,949,991 $19,786.80
================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933, based on the
high and low sales prices of the common stock on July 24, 2000.
---------------
The registrant hereby undertakes to amend this Registration Statement on
such date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. The +
+selling shareholders may not sell these securities until the registration +
+statement filed with the Securities Exchange Commission is effective. This +
+prospectus is not an offer to sell securities and is not soliciting offers to +
+buy securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, Dated July 25, 2000
[LOGO OF PRIMUS]
2,412,877 Shares
Common Stock
-----------
The selling shareholders listed beginning on page 11 may offer for sale up to
2,412,877 shares of Primus' common stock from time to time. We will not receive
any of the proceeds from the sale of shares by the selling shareholders. The
selling shareholders may sell the shares in transactions on the Nasdaq National
Market, in privately negotiated transactions or otherwise.
Our common stock is quoted on the Nasdaq National Market under the symbol
"PKSI." On July 24, 2000, the last reported sale price for the common stock on
the Nasdaq National Market was $30.50 per share.
Primus was incorporated in the state of Washington in 1986. Our principal
offices are located at 1601 Fifth Avenue, Seattle, Washington 98101, and our
phone number is (206) 292-1000.
Investing in the common stock involves risks.
See "Risk Factors" beginning on page 3.
-----------
Neither the Securities and Exchange Commission nor any state securities
regulators has approved or disapproved of these securities, or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
-----------
The date of this prospectus is , 2000
<PAGE>
We have not authorized any person to give you any information or to make any
representations other than those contained in this prospectus. You should not
rely on any information or representations other than this prospectus. This
prospectus is not an offer to sell or a solicitation of an offer to buy any
securities other than the common stock. It is not an offer to sell or a
solicitation of an offer to buy securities if the offer or solicitation would
be unlawful. The affairs of Primus may have changed since the date of this
prospectus. You should not assume that the information in this prospectus is
correct at any time subsequent to its date.
----------------
TABLE OF CONTENTS
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Page
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Risk Factors............................................................... 3
Selling Shareholders....................................................... 11
Plan of Distribution....................................................... 13
Validity of Common Stock................................................... 13
Experts.................................................................... 13
Additional Information..................................................... 13
Special Note Regarding Forward-Looking Statements.......................... 14
</TABLE>
1
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[THIS PAGE INTENTIONALLY LEFT BLANK]
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RISK FACTORS
You should carefully consider the risks and uncertainties described below
before making an investment decision. They are not the only ones we face.
Additional risks and uncertainties that we are not aware of or that we
currently deem immaterial also may impair our business.
If any of the following risks actually occur, our business, financial
condition and operating results could be materially adversely affected, the
trading price of our common stock could decline, and you might lose all or part
of your investment.
We have incurred operating losses and we may not be profitable in the future.
We have incurred net losses in each quarter since inception and we could
continue to incur net losses for the foreseeable future. As of June 30, 2000,
we had an accumulated deficit of $62.3 million. We expect to continue to devote
substantial resources to expand our product development, sales and marketing
and our customer support and professional service groups. As a result, we will
need to generate significant revenues to achieve and maintain profitability. We
may not be profitable in any future period.
Quarterly fluctuations in our operating results may adversely affect our stock
price.
Our license revenues have fluctuated substantially from quarter to quarter
in the past and are likely to continue to fluctuate substantially in the
future. In addition, the fiscal or quarterly budget cycles of our users can
cause our revenues to fluctuate from quarter to quarter and applicable
accounting policies may cause us to report new license agreements as deferred
revenue until implementation begins. As a result, we believe that period-to-
period comparisons of our operating results are not meaningful, and you should
not rely on such comparisons to predict our future performance. We will
continue to base our decisions regarding our operating expenses on anticipated
revenue trends. To the extent these expenses are not followed by increased
revenues, our operating results will suffer. Fluctuations in our operating
results, particularly compared to the expectations of market analysts or
investors, could cause severe volatility in the price of our common stock.
Our quarterly operating results depend on a small number of large orders.
We derive a significant portion of our product license revenues in each
quarter from a small number of relatively large orders. Our operating results
for a particular fiscal quarter could be materially adversely affected if we
are unable to complete one or more substantial license sales or implementations
planned for that quarter.
Factors outside our control may cause the timing of our license revenues to
vary from quarter-to-quarter, possibly adversely affecting our operating
results.
Under applicable accounting rules, we may experience further variability in
our license revenues from quarter to quarter due to factors outside our
control, including:
. whether we are providing implementation services
. whether implementation is delayed or takes longer than expected
. variability in the mix of new and existing customers
Where we are implementing the software, we will account for the agreement as
an item of deferred revenue and will recognize the license revenue over the
period of implementation. Most of our new customers begin implementation within
30 to 60 days of signing a license agreement. Once commenced, implementation of
our products typically ranges from 30 to 45 days, an improvement from prior
years when installations took 60 to 90 days. We can't, however, guarantee that
customers will begin implementation or that we will always be able to implement
our software within those time periods. Thus, all of our deferred license
revenue may not be recognized within the originally expected time period.
3
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Seasonality may adversely affect our quarterly operating results.
We expect to experience seasonality in our license revenue. To date, we
believe that seasonality has been masked by other factors, such as large orders
and the timing of personnel changes in our sales staff. Our customers' purchase
decisions are often affected by fiscal budgetary factors and by efforts of our
direct sales force to meet or exceed sales quotas. As a result, we expect new
business in the last quarter of a year to be greater than new business in the
first quarter of the following year. One effect of our revenue recognition
policy, however, is that revenue recognized in a quarter will typically not
reflect all of the new license agreements signed and shipped in that quarter.
Because revenue recognized in a given quarter may be primarily associated with
new business in prior quarters, revenue in the first quarter may be higher than
revenue recognized in the previous fourth quarter.
The limited sales history of our products makes it difficult to evaluate our
business and prospects.
We released our first eCRM product in August 1996. Accordingly, the basis
upon which you can evaluate our prospects in general, and market acceptance of
our products in particular, is limited. For our business to succeed, the market
for eCRM software will have to grow significantly, and we will have to achieve
broad market acceptance of our products.
If e-business sales and marketing solutions are not widely adopted, we may not
be successful.
We are broadening our current product suite to integrate with various
aspects of e-business solutions. These products address a new and emerging
market for e-business sales and marketing solutions. The failure of this market
to develop, or a delay in the development of this market, would seriously harm
our business. The success of e-business sales and marketing solutions depends
substantially upon the continued growth and the widespread adoption of the
Internet as a primary medium for commerce and business applications. The
Internet infrastructure may not be able to support the demands placed on it by
the continued growth upon which our success depends. Moreover, reliability,
cost, accessibility, security and quality of service remain unresolved and may
negatively affect the growth of Internet use or the attractiveness of commerce
and business communication over the Internet.
We rely on sales of only one product family.
Product license revenues and related services from our Primus eServer and
Primus eSupport products accounted for over 90% of our total revenues through
June 30, 2000, and we expect these products to continue to account for a
substantial portion of our revenues for the remainder of 2000. As a result,
factors adversely affecting the demand for these products and our eCRM products
in general, such as competition, pricing or technological change, could
materially adversely affect our business, financial condition and operating
results. Our future financial performance will substantially depend on our
ability to sell current versions of our entire suite of eCRM products and our
ability to develop and sell enhanced versions of our eCRM products.
Factors outside our control may make our products less useful.
The effectiveness of our eCRM products depends in part on widespread
adoption and effective use of our software by an enterprise's personnel,
partners and customers and the value derived by each such usage. In addition,
the effectiveness of our knowledge-enabled approach is dependent upon a current
database. If customer-support personnel do not adopt and effectively use our
products, necessary solutions will not be added to the database, and the
database will be inadequate. If an enterprise deploying our software fails to
maintain a current database, the value of our eCRM products to our users will
be impaired. Thus, successful deployment and broad acceptance of our eCRM
products will depend in part on the quality of the users' existing database of
solutions, which is outside our control.
4
<PAGE>
The high level of competition in our market may result in pricing pressures,
reduced margins or the failure of our products to achieve market acceptance.
The market for our products is new and rapidly evolving, and is expected to
become increasingly competitive as current competitors expand their product
offerings and new companies enter the market. Our suite of products competes
against various vendor software tools designed to address a specific or
elements of the complete set of eCRM processes, including Internet
communications, esupport, esales and emarketing. We also face competition from
in-house designed products and third-party custom development efforts.
In addition, companies providing e-commerce and traditional customer
relationship management solutions that may compete with us include Broadvision,
Clarify, Oracle, Peoplesoft, Siebel and Vignette.
The principal competitive factors in our industry include:
. vendor and product reputation . product ease-of-use
. customer referenceability . the quality of customer
support services,
. measurable economic return documentation and training
. product quality, performance and price . the quality, speed and
effectiveness of application
. breadth of product functionality and development services
features
. the effectiveness of sales and
. product scalability marketing efforts
. the availability of products on the . product intergration with
Internet and multiple operating platforms other enterprise applications
As the market for eCRM software matures, it is possible that new and larger
companies will enter the market, existing competitors will form alliances or
current and potential competitors could acquire, be acquired by or establish
cooperative relationships with third parties. The resulting organizations could
have greater technical, marketing and other resources and improve their
products to address the needs of our existing and potential users, thereby
increasing their market share. Increased competition could result in pricing
pressures, reduced margins or the failure of our products to achieve or
maintain market acceptance.
If we do not integrate Imparto's and 2order.com's technology quickly and
effectively, many of the potential benefits of these acquisitions may not be
realized.
We intend to integrate Imparto's and 2order.com's technology into our own
products. We cannot assure you that we will be able to integrate Imparto's and
2order.com's technology quickly and effectively. In order to obtain the
benefits of these acquisitions, we must make Imparto's and 2order.com's
technology, products and services operate together with our technology,
products and services. We may be required to spend additional time or money on
integration which would otherwise be spent on developing our business and
services or other matters. If we do not integrate these technologies
effectively or if management and technical staff spend too much time on
integration issues, it could harm our business, financial condition and results
of operations. In addition, the success of these acquisitions will also depend
on our ability to successfully integrate and manage the acquired operations and
retain or replace the key employees of the companies we acquired.
The loss of access to, or a problem with, Versant's database could adversely
affect our business.
Historically, we incorporated a database licensed from Versant into our
products. Presently, our products support Microsoft SQL Server, Oracle and
Versant databases. Because most of the products we have shipped to date,
however, rely on Versant's database, we continue to depend on Versant's ability
to support the database in a timely and effective manner.
5
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Failure to sufficiently expand our sales and marketing infrastructure would
adversely affect our sales.
To date, we have licensed our products primarily through our direct sales
force. Our future revenue growth will depend in large part on our ability to
recruit, train and manage additional sales and marketing personnel and to
expand our indirect distribution channels. We have experienced and continue to
experience difficulty in recruiting qualified sales and marketing personnel and
in establishing third-party relationships. We may not be able to successfully
expand our direct sales force or other distribution channels and any such
expansion may not result in increased revenues. Our business, financial
condition and operating results will be materially adversely affected if we
fail to expand our sales and marketing resources.
Our inability to expand sufficiently our implementation and consulting
capabilities would limit our ability to grow.
If sales of new licenses increased rapidly or if we were to sign a license
agreement for a particularly large or complex implementation, our customer
support and professional services personnel may be unable to meet the demand
for implementation services. In that case, if we were unable to retain or hire
highly trained consulting personnel or establish relationships with third-party
systems-integrators and consultants to implement our products, we would be
unable to meet customer demands for implementation and educational services
related to our products.
Our failure to attract and retain skilled technical personnel in a tight labor
market may adversely affect our product development, sales and customer
satisfaction.
Qualified technical personnel are in great demand throughout the software
industry. The demand for qualified technical personnel is particularly acute in
the Pacific Northwest, due to the large number of software companies and the
low unemployment in the region. Our success depends in large part upon our
continued ability to attract and retain highly skilled technical employees,
particularly software architects and engineers. Our failure to attract and
retain the highly-trained technical personnel that are integral to our direct
sales, product development and customer support teams may limit the rate at
which we can generate sales and develop new products or product enhancements.
This could have a material adverse effect on our business, financial condition
and operating results.
The market price of our common stock has been volatile since our initial
public offering in July 1999. Consequently, potential employees may perceive
our equity incentives such as stock options as less attractive. In that case,
our ability to attract and retain employees will be adversely affected.
Acquisitions could disrupt our business and harm our financial condition.
In order to remain competitive, we may find it necessary to acquire
additional businesses, products and technologies. In the event that we do
complete an acquisition, we could be required to do one or more of the
following:
. issue equity securities, which would dilute current shareholders'
percentage ownership
. assume contingent liabilities
. incur a one-time charge
. amortize goodwill and other intangible assets
We may not be able to successfully integrate any technologies, products,
personnel or operations of companies that we acquire. These difficulties could
disrupt our ongoing business, divert management resources and increase our
expenses.
6
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Failure to properly integrate our management team would adversely affect our
business.
In the last year we added three new members to our senior management team,
none of whom worked together prior to joining Primus. Our success depends on
the performance of our senior management and their ability to work together.
Failure to properly integrate them would harm our business. Much of our success
also depends on Michael A. Brochu, our president and chief executive officer.
The loss of Mr. Brochu's services would harm our business.
Our international operations are subject to additional risks.
Revenues from customers outside the United States represented approximately
$6.2 million in the 6 months ended June 30, 2000, or 26.6% of our total revenue
for the same period. We currently customize our products for the Japanese
market. In the future, we plan to develop additional localized versions of our
products. Localization of our products will create additional costs and would
cause delays in new product introductions. In addition, our international
operations will continue to be subject to a number of other risks, including:
. costs of customizing products for foreign countries
. laws and business practices favoring local competition
. compliance with multiple, conflicting and changing laws and regulations
. longer sales cycles
. greater difficulty or delay in accounts receivable collection
. import and export restrictions and tariffs
. difficulties in staffing and managing foreign operations
. political and economic instability
Our international operations also face foreign-currency-related risks. To
date, substantially all of our revenues have been denominated in U.S. dollars,
but we believe that in the future, an increasing portion of our revenues will
be denominated in foreign currencies, including the Euro. The Euro is an
untested currency and may be subject to economic risks that are not currently
contemplated. Fluctuations in the value of the Euro or other foreign currencies
may have a material adverse effect on our business, operating results and
financial condition.
Our failure to adapt to technology trends and evolving industry standards would
hinder our competitiveness.
Our market is susceptible to rapid changes due to technology innovation,
evolving industry standards, and frequent new service and product
introductions. New services and products based on new technologies or new
industry standards expose us to risks of technical or product obsolescence. We
will need to use leading technologies effectively, continue to develop our
technical expertise and enhance our existing products on a timely basis to
compete successfully in this industry. We cannot be certain that we will be
successful in using new technologies effectively, developing new products or
enhancing existing products on a timely basis or that any new technologies or
enhancements used by us or offered to our customers will achieve market
acceptance.
Our inability to continue integration of our products with other third-party
software could adversely affect market acceptance of our products.
Our ability to compete successfully also depends on the continued
compatibility and interoperability of our products with products and systems
sold by various third parties, including traditional CRM software sold by
Clarify, Onyx, Remedy, Siebel and Peoplesoft. Currently, these vendors have
open applications program
7
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interfaces, which facilitate our ability to integrate with their systems. If
any one of them should close their programs' interface or if they should
acquire one of our competitors, our ability to provide a close integration of
our products could become more difficult and could delay or prevent our
products' integration with future systems.
Our stock price has been volatile and could fluctuate in the future.
The market price of our common stock has been highly volatile and is subject
to wide fluctuations. We expect our stock price to continue to fluctuate:
. in response to quarterly variations in operating results
. in response to announcements of technological innovations or new
products by us or our competitors
. because of market conditions in the enterprise software industry
. in reaction to changes in financial estimates by securities analysts,
and our failure to meet or exceed the expectations of analysts or
investors
. in response to our announcements of significant acquisitions, strategic
relationships or joint ventures
. in response to sales of our common stock
Our efforts to protect our proprietary rights may be inadequate.
Our success depends in part on our ability to protect our proprietary
rights. To protect our proprietary rights, we rely primarily on a combination
of copyright, trade secret and trademark laws, confidentiality agreements with
employees and third parties, and protective contractual provisions such as
those contained in license agreements with consultants, vendors and customers.
We have not signed such agreements in every case. Despite our efforts to
protect our proprietary rights, unauthorized parties may copy aspects of our
products and obtain and use information that we regard as proprietary. Other
parties may breach confidentiality agreements and other protective contracts we
have entered into. We may not become aware of, or have adequate remedies in the
event of, such breaches.
We pursue the registration of some of our trademarks and service marks in
the United States and in certain other countries, but we have not secured
registration of all our marks. A significant portion of our marks include the
word "Primus." Other companies use "Primus" in their marks alone or in
combination with other words, and we cannot prevent all third-party uses of the
word "Primus." We license certain trademark rights to third parties. Such
licensees may not abide by compliance and quality control guidelines with
respect to such trademark rights and may take actions that would adversely
affect our trademarks.
Other companies may claim that we infringe their intellectual property or
proprietary rights.
If any of our products violate third party proprietary rights, we may be
required to reengineer our products or seek to obtain licenses from third
parties, and such efforts may not be successful. We do not conduct
comprehensive patent searches to determine whether the technology used in our
products infringes patents held by third parties. Product development is
inherently uncertain in a rapidly evolving technological environment in which
there may be numerous patent applications pending, which are confidential when
filed, with regard to similar technologies. In addition, other companies have
filed trademark applications for marks similar to the names of our products.
Although we believe that our products do not infringe the proprietary rights of
any third parties, third parties could assert infringement claims against us in
the future. The defense of any such claims would require us to incur
substantial costs and would divert management's attention and resources to
defend against any claims relating to proprietary rights, which could
materially and adversely affect our financial condition and operations. Parties
making such claims could secure a judgment awarding them substantial damages,
as well as injunctive or equitable relief that could effectively block our
ability to sell our products and services. Any such outcome could have a
material adverse effect on our business, financial condition and operating
results.
8
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Control by inside shareholders of a large percentage of our voting stock may
permit them to influence us in a way that adversely affects our stock price.
Our officers, directors and affiliated entities together beneficially own
approximately one-third of the outstanding shares of our common stock. As a
result, these shareholders are able to influence all matters requiring
shareholder approval and, thereby, our management and affairs. Some matters
that typically require shareholder approval include:
. election of directors
. certain amendments to our articles of incorporation
. merger or consolidation
. sale of all or substantially all our assets
This concentration of ownership may delay, deter or prevent acts that would
result in a change of control, which in turn could reduce the market price of
our common stock.
Our articles of incorporation and bylaws and Washington law contain provisions
that could discourage a takeover.
Specific provisions of our articles of incorporation and bylaws and
Washington law could make it more difficult for a third party to acquire us,
even if doing so would be beneficial to our shareholders.
Our articles of incorporation and bylaws establish a classified board of
directors, eliminate the ability of shareholders to call special meetings,
eliminate cumulative voting for directors and establish procedures for advance
notification of shareholder proposals. The presence of a classified board and
the elimination of cumulative voting may make it more difficult for an acquirer
to replace our board of directors. Further, the elimination of cumulative
voting substantially reduces the ability of minority shareholders to obtain
representation on the board of directors.
Our board of directors has the authority to issue up to 5,000,000 shares of
preferred stock and to determine the price, rights, preferences, privileges and
restrictions, including voting rights, of those shares without any further vote
or action by our shareholders. The issuance of preferred stock could have the
effect of delaying, deferring or preventing a change of control of Primus and
may adversely affect the market price of the common stock and the voting and
other rights of the holders of common stock.
Washington law imposes restrictions on some transactions between a
corporation and significant shareholders. Chapter 23B.19 of the Washington
Business Corporation Act prohibits a target corporation, with some exceptions,
from engaging in particular significant business transactions with an acquiring
person, which is defined as a person or group of persons that beneficially owns
10% or more of the voting securities of the target corporation, for a period of
five years after the acquisition, unless the transaction or acquisition of
shares is approved by a majority of the members of the target corporation's
board of directors prior to the acquisition. Prohibited transactions include,
among other things:
. a merger or consolidation with, disposition of assets to, or issuance or
redemption of stock to or from, the acquiring person
. termination of 5% or more of the employees of the target corporation
. allowing the acquiring person to receive any disproportionate benefit as
a shareholder
A corporation may not opt out of this statute. This provision may have the
effect of delaying, deterring or preventing a change in control of Primus.
The foregoing provisions of our charter documents and Washington law could
have the effect of making it more difficult or more expensive for a third party
to acquire, or could discourage a third party from attempting
9
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to acquire Primus. These provisions may therefore have the effect of limiting
the price that investors might be willing to pay in the future of our common
stock.
Changes in accounting standards could affect the calculation of our future
operating results.
In October 1997, the American Institute of Certified Public Accountants
issued its Statement of Position 97-2, "Software Revenue Recognition," and
later amended its position by its Statement of Position 98-4. We adopted
Statement of Position 97-2 effective January 1, 1998. Based on our
interpretation of the AICPA's position, we believe our current revenue
recognition policies and practices are consistent with Statement of Position
97-2 and Statement of Position 98-4. The AICPA has also issued Statement of
Position 98-9, which is effective for transactions we enter into beginning
January 1, 2000 and the Securities and Exchange Commission has issued Staff
Accounting Bulletin No. 101 "Revenue Recognition," which has a deferred
effective date under SAB 101B until October 1, 2000. However, full
implementation guidelines for these standards have not yet been issued. Once
available, such implementation guidelines could lead to unanticipated changes
in our current revenue accounting practices which could materially adversely
affect our business, financial condition and operating results. Additionally,
the accounting standard setters, including the Securities and Exchange
Commission and the Financial Accounting Standards Board (FASB), are continuing
to review the accounting standards related to stock-based compensation.
Recently the FASB issued FASB Interpretation No. 44 "Accounting for Certain
Transactions involving Stock Compensation." Any changes to these standards or
any other accounting standards could materially adversely affect our business,
financial condition and operating results.
10
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SELLING SHAREHOLDERS
The following table provides information regarding the selling shareholders
and the number of shares of common stock they are offering. The percentage
ownership data is based on 17,742,745 shares of our common stock outstanding as
of June 30, 2000. Under the rules of the Securities and Exchange Commission,
beneficial ownership includes shares over which the indicated beneficial owner
exercises voting and/or investment power. The information regarding shares
beneficially owned after the offering assumes the sale of all shares offered by
each of the selling shareholders.
Except as described in the footnotes to the table, none of the selling
shareholders has held a position or office or had a material relationship with
Primus or any of its affiliates within the past three years other than as a
result of the ownership of Primus's common stock.
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Shares
Number of Number Beneficially
Shares of Owned After
Beneficially Shares Offering
Owned Prior Being --------------
Name of Shareholder to Offering Offered Number Percent
------------------- ------------ ------- ------ -------
<S> <C> <C> <C> <C>
David C. Arnold............................ 4,273 4,273 -- --
Evelyn Ashley.............................. 170 170 -- --
Aspen Ventures West II, L.P. .............. 206,309 206,309 -- --
Athena Venture Fund, L.P. ................. 123,962 123,962 -- --
Gerardo M. Balboni......................... 170 170 -- --
Opinder Bawa............................... 75 75 -- --
Tim Bernstein.............................. 396 396 -- --
David Black................................ 4,273 4,273 -- --
Douglas and Nancy Boling................... 1,185 1,185 -- --
Jeffrey S. Brown........................... 11,848 11,848 -- --
Sheila Christofalos........................ 4,273 4,273 -- --
Andrea Corney.............................. 343 343 -- --
GC Technologies Fund, L.P. ................ 123,962 123,962 -- --
Donna F. Geller Irrevocable Trust.......... 23,076 23,076 -- --
Scott D. Geller............................ 427,336 427,336 -- --
Mark Goines................................ 2,962 2,962 -- --
Kimberly L. Graf........................... 1,162 1,162 -- --
Lawrence and Beth Greenberg................ 85,467 85,467 -- --
Nandita Gupta.............................. 38,097 38,097 -- --
Vipul Gupta................................ 38,097 38,097 -- --
Russ and Debbie Hall....................... 5,924 5,924 -- --
Deborah Henken............................. 75 75 -- --
Lynn Herbert............................... 2,962 2,962 -- --
Donald L. House............................ 25,640 25,640 -- --
Intelligent Systems........................ 66,431 66,431 -- --
Kurt R. Jaggers............................ 4,147 4,147 -- --
William L. Johnston........................ 1,905 1,905 -- --
Pascal Khawand............................. 63 63 -- --
Pierre Khawand............................. 38,097 38,097 -- --
David Knudsen.............................. 2,016 2,016 -- --
Live Oak Equity Partners................... 304,538 304,538 -- --
Stephen J. Loosley/R.L. Briggs Loosley..... 20,243 20,243 -- --
M. John Loosley Revocable Trust............ 2,962 2,962 -- --
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Shares
Number of Number Beneficially
Shares of Owned After
Beneficially Shares Offering
Owned Prior Being -----------------
Name of Shareholder to Offering Offered Number Percent
------------------- ------------ ------- --------- -------
<S> <C> <C> <C> <C>
S. Jean Loosley Revocable Trust..... 2,962 2,962 -- --
Stephen T. Mack..................... 761 761 -- --
Hitesh Merchant..................... 3,003 3,003 -- --
Moria Merriweather(1)............... 65 65 -- --
Morrison & Foerster LLP............. 204 204 -- --
Dave Mullarkey...................... 152 152 -- --
Mike S. Nauman...................... 221 221 -- --
Robert Nees(2)...................... 8,546 8,546 -- --
James B. Nothan..................... 4,273 4,273 -- --
Oak Investment Partners VII,
L.P.(3)............................ 3,321,188 545,945(4) 2,775,243 15.64%
Quattrone Family Trust UTA dated
9/4/91............................. 5,359 5,359 -- --
Red Rock Ventures, L.P. ............ 206,309 206,309 -- --
Leanne M. Reim...................... 69 69 -- --
Kim Ruby............................ 36,509 36,509 -- --
Rudolph Brothers Partnership........ 1,600 1,600 -- --
Alexander Rudolph................... 762 762 -- --
Daniel N. Rudolph................... 6,609 6,609 -- --
Jack E. Russell..................... 2,666 2,666 -- --
Gary Schwartz/Cindy Shaffran........ 1,523 1,523 -- --
Lee Schweichler..................... 1,523 1,523 -- --
Cleston Shaffran.................... 3,809 3,809 -- --
Cleston Shaffran/Edward Shaffran.... 3,809 3,809 -- --
Chris Stark......................... 1,709 1,709 -- --
Al L. Toon, Jr. .................... 1,905 1,905 -- --
Vivek S. Vaidya..................... 114 114 -- --
Mary Kay Vance...................... 31 31 -- --
</TABLE>
--------
(1) Ms. Merriweather currently serves as an employee of Imparto Software
Corporation, a wholly owned subsidiary of Primus.
(2) Mr. Nees currently serves as an employee of 2order.com, Inc., a wholly
owned subsidiary of Primus.
(3) Represents the following: (a) 2,739,294 shares owned by Oak Investment
Partners VI, L.P.; (b) 35,949 shares owned by Oak Affiliates Fund L.P.;
(c) 532,570 shares owned by Oak Investment Partners VII, L.P.; and (d)
13,375 shares owned by Oak VII Affiliates Fund L.P.
(4) Includes 532,570 shares offered by Oak Investment Partners VII, L.P. and
13,375 shares offered by Oak VII Affiliates Fund L.P.
The selling shareholders have represented to us that they purchased their
shares for their own account, for investment only and not with a view toward
publicly selling or distributing them, except in sales either registered under
the Securities Act of 1933 or exempt from registration. In recognition of the
fact that the selling shareholders, even though purchasing their shares for
investment, may wish to be legally permitted to sell their shares when they
deem appropriate, we agreed with the selling shareholders to file a
registration statement to register the shares for resale and to prepare and
file all amendments and supplements necessary to keep the registration
statement effective for 120 days.
12
<PAGE>
PLAN OF DISTRIBUTION
We are registering the shares on behalf of the selling shareholders and
their successors, including donees and pledgees who may sell shares they
receive from the selling shareholders after the date of this prospectus. The
selling shareholders or their successors may sell the shares of common stock
offered by this prospectus from time to time, in one or more transactions. The
selling shareholders may sell the shares at fixed prices that may change, at
market prices at the time of sale or at negotiated prices. The selling
shareholders may sell the shares
. in the over-the-counter market through the Nasdaq National Market or any
other national securities exchange;
. in privately negotiated transactions; or
. through a combination of these.
The selling shareholders may sell the shares to or through broker-dealers,
who may receive compensation in the form of discounts, concessions or
commissions from the selling shareholders or the purchasers. Any broker-dealer
may act as a broker-dealer on behalf of a selling shareholder in connection
with the offering of the shares. We will not receive any proceeds from the sale
of the shares by the selling shareholders.
The selling shareholders may sell any shares covered by this prospectus that
qualify for sale under Rule 144 of the Securities Act in transactions complying
with Rule 144, rather than through this prospectus.
If required, we will distribute a supplement to this prospectus to describe
material changes in the terms of the offering.
Any broker-dealers who assist in the sale of the shares covered by this
prospectus may be considered "underwriters" within the meaning of Section 2(11)
of the Securities Act. Any commissions they receive or profits they earn on the
resale of the shares may be underwriting discounts and commissions under the
Securities Act. Subject to limited exceptions, we have agreed to bear all
expenses in connection with the registration and sale of the shares being
offered by the selling shareholders. We have also agreed to indemnify the
selling shareholders against liabilities they incur in connection with an
actual or alleged untrue statement or omission of a material fact in the
registration statement, including liabilities under the Securities Act.
The selling shareholders may be unable to sell any or all of the shares
covered by this prospectus.
VALIDITY OF COMMON STOCK
Perkins Coie LLP, Seattle, Washington will provide Primus with an opinion
that the shares of common stock offered by this prospectus are duly authorized,
validly issued, fully paid and nonassessable.
EXPERTS
The consolidated financial statements and financial statement schedule of
Primus Knowledge Solutions, Inc. as of December 31, 1999 and 1998 and for each
of the years in the three-year period ended December 31, 1999, have been
incorporated by reference herein and in the registration statement in reliance
upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference herein and upon the authority of said firm as experts
in accounting and auditing.
ADDITIONAL INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's website at http://www.sec.gov. The SEC's website contains
reports, proxy statements and other information regarding issuers, such as
Primus, that file
13
<PAGE>
electronically with the SEC. You may also read and copy any document we file
with the SEC at its Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may also obtain copies of the documents at
prescribed rates by writing to the Public Reference Section of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-
0330 for further information on the operation of its Public Reference Room.
The SEC allows us to "incorporate by reference" into this prospectus the
information we have filed with the SEC. The information incorporated by
reference is an important part of this prospectus and is considered to be part
of this prospectus. The information that we file subsequently with the SEC
will automatically update this prospectus. We incorporate by reference the
documents listed below and any filings we make with the SEC under Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, after the
initial filing of the registration statement that contains this prospectus and
before the time that all the securities offered by this prospectus are sold:
. Our annual report on Form 10-K for the fiscal year ended December 31,
1999;
. Our quarterly report on Form 10-Q for the quarter ended March 31, 2000;
. Our current reports on Form 8-K filed January 21, 2000, February 4, 2000
and June 30, 2000 (which report contains the Company's annual
consolidated financial statements as of December 31, 1999 and 1998 and
for each of the years in the three year period ended December 31, 1999
and related consolidated financial statement schedule, which have been
restated to reflect the merger of 2order.com as a pooling-of-interests
business combination);
. Our amended current reports on Form 8-K filed February 24, 2000 and
April 3, 2000; and
. The description of our capital stock contained in our registration
statement on Form 8-A, effective as of June 4, 1999, including any
amendment or report we have filed to update that description.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Primus Knowledge Solutions, Inc.
Attention: Investor Relations
1601 Fifth Avenue, Suite 1900
Seattle, Washington 98101
(206) 292-1000
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
We make forward-looking statements in this prospectus and in the documents
that are incorporated by reference into this prospectus. These forward-looking
statements, which include statements concerning our possible or assumed future
business success or financial results, are subject to risks and uncertainties.
Our actual results could differ materially from those anticipated in these
forward-looking statements as a result of events that we are unable to predict
accurately or over which we have no control, including those described in
"Risk Factors" and elsewhere in this prospectus.
We undertake no obligation to publicly update any forward-looking
statements for any reason, even if new information becomes available or
unexpected events occur.
14
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2,412,877 Shares
PRIMUS KNOWLEDGE SOLUTIONS, INC.
Common Stock
----------------
PROSPECTUS
----------------
, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than the
underwriting discounts and commissions, payable by the registrant in connection
with the sale of the common stock being registered hereby. None of the costs or
expenses will be incurred by the selling shareholders. All amounts shown are
estimates, except the Securities and Exchange Commission registration fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $19,786.80
Printing and engraving expenses.................................. 1,500
Legal fees and expenses.......................................... 50,000
Accounting fees and expenses..................................... 5,000
Transfer Agent and Registrant fees............................... 1,000
----------
Total.......................................................... $77,286.80
==========
</TABLE>
Item 15. Indemnification of Directors and Officers
Sections 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act (the "WBCA") authorize a court to award, or a corporation's
board of directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"). Section 10 of the registrant's Second Restated Bylaws
provides for indemnification of the registrant's directors, officers, employees
and agents to the maximum extent permitted by Washington law. The directors and
officers of the registrant also may be indemnified against liability they may
incur for serving in that capacity pursuant to a liability insurance policy
maintained by the registrant for such purpose.
Section 23B.08.320 of the WBCA authorizes a corporation to limit a
director's liability to the corporation or its shareholders for monetary
damages for acts or omissions as a director, except in certain circumstances
involving intentional misconduct, knowing violations of law or illegal
corporate loans or distributions, or any transaction from which the director
personally receives a benefit in money, property or services to which the
director is not legally entitled. Section 5.2 of the registrant's Fourth
Amended and Restated Articles of Incorporation contains provisions
implementing, to the fullest extent permitted by Washington law, such
limitations on a director's liability to the registrant and its shareholders.
Item 16. Exhibits
<TABLE>
<C> <S>
4.1 Registration Rights Agreement, dated February 9, 1996, as amended, by
and among the registrant, TransCosmos USA Inc., TransCosmos Inc.,
Encompass Group, Inc., Oak Investment Partners VI L.P., Oak VI
Affiliates Fund, L.P., Norwest Equity Partners, V, Piper Jaffray, Inc.
and Snowden L.P. (filed as Exhibit 10.1 to Primus's Registration
Statement on Form S-1 dated as of April 30, 1999 and incorporated
herein by reference).
4.2 Third Amendment to Registration Rights Agreement, dated December 12,
1999, by and among the registrant, TransCosmos USA Inc., TransCosmos
Inc., Encompass Group, Inc., Oak Investment Partners VI L.P., Oak VI
Affiliates Fund, L.P. and the Investors listed on Schedule A thereto
(filed as Exhibit 4.3 to Primus's Annual Report on Form 10-K dated as
of March 23, 2000 and incorporated herein by reference).
4.3 Registration Rights Agreement, dated January 21, 2000, by and among the
registrant and the Investors listed on Schedule A thereto (filed as
Exhibit 4.3 to Primus's Annual Report on Form 10-K dated as of March
23, 2000 and incorporated herein by reference).
5.1 Opinion of Perkins Coie LLP as to the validity of the common stock.
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
23.1 Consent of KPMG LLP, independent auditors.
23.2 Consent of Perkins Coie LLP (contained in the opinion filed as Exhibit
5.1).
24.1 Power of Attorney (contained on signature page).
</TABLE>
Item 17. Undertakings
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not
previously disclosed in this registration statement or any material change
to such information in this registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned registrant hereby undertakes that, for the purpose of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
D. The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona bide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunder duly authorized, in the city of Seattle, state of Washington, on the
25th day of July, 2000.
PRIMUS KNOWLEDGE SOLUTIONS, INC.
/s/ Michael A. Brochu
By: _________________________________
Michael A. Brochu
President, Chief Executive
Officerand Chairman of the Board
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes and
appoints Michael A. Brochu and Elizabeth J. Huebner, or either of them, his or
her attorney-in-fact, for him or her in any and all capacities, to sign any
amendments to this registration statement and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that the attorney-in-
fact, or his or her substitute, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed by the following persons in the
capacities indicated below on the 25th day of July, 2000.
<TABLE>
<S> <C>
/s/ Michael A. Brochu President, Chief Executive Officer and Chairman of
____________________________________ the Board (Principal Executive Officer)
Michael A. Brochu
/s/ Elizabeth J. Huebner Executive Vice President, Chief Financial Officer,
____________________________________ Secretary and Treasurer (Principal Financial and
Elizabeth J. Huebner Accounting Officer)
/s/ Antonio M. Audino Director
____________________________________
Antonio M. Audino
/s/ John Connors Director
____________________________________
John Connors
/s/ Promod Haque Director
____________________________________
Promod Haque
/s/ Fredric W. Harman Director
____________________________________
Fredric W. Harman
/s/ Yasuki Matsumoto Director
____________________________________
Yasuki Matsumoto
/s/ Janice C. Peters Director
____________________________________
Janice C. Peters
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number
-------
<C> <S>
4.1 Registration Rights Agreement, dated February 9, 1996, as amended, by
and among the registrant, TransCosmos USA Inc., TransCosmos Inc.,
Encompass Group, Inc., Oak Investment Partners VI L.P., Oak VI
Affiliates Fund, L.P., Norwest Equity Partners, V, Piper Jaffray, Inc.
and Snowden L.P. (filed as Exhibit 10.1 to Primus's Registration
Statement on Form S-1 dated as of April 30, 1999 and incorporated
herein by reference).
4.2 Third Amendment to Registration Rights Agreement, dated December 12,
1999, by and among the registrant, TransCosmos USA Inc., TransCosmos
Inc., Encompass Group, Inc., Oak Investment Partners VI L.P., Oak VI
Affiliates Fund, L.P. and the Investors listed on Schedule A thereto
(filed as Exhibit 4.3 to Primus's Annual Report on Form 10-K dated as
of March 23, 2000 and incorporated herein by reference).
4.3 Registration Rights Agreement, dated January 21, 2000, by and among
the registrant and the Investors listed on Schedule A thereto (filed
as Exhibit 4.3 to Primus's Annual Report on Form 10-K dated as of
March 23, 2000 and incorporated herein by reference).
5.1 Opinion of Perkins Coie LLP as to the validity of the common stock
23.1 Consent of KPMG LLP, independent auditors
23.2 Consent of Perkins Coie LLP (contained in the opinion filed as Exhibit
5.1)
24.1 Power of Attorney (contained on signature page)
</TABLE>
