<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check Appropriate Box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement (R) Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ORGANIC, INC.
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(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)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which the 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> 2
[Organic logo]
Organic, Inc.
510 Third Street
San Francisco, California 94107
June 23, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Organic, Inc. that will be held on Tuesday, July 25, 2000, at 10:00 a.m., at The
Argent Hotel, 50 Third Street, San Francisco, California 94103.
The formal notice of the Annual Meeting and the Proxy Statement have been
made a part of this invitation.
After reading the Proxy Statement, please mark, date, sign and return, at
your earliest convenience, the enclosed proxy in the enclosed prepaid envelope,
to ensure that your shares will be represented. YOUR SHARES CANNOT BE VOTED
UNLESS YOU SIGN, DATE AND RETURN THE ENCLOSED PROXY OR ATTEND THE ANNUAL MEETING
IN PERSON.
A copy of Organic's 1999 Annual Report on Form 10-K is also enclosed.
The Board of Directors and management look forward to seeing you at the
meeting.
Sincerely yours,
/s/JONATHAN NELSON
---------------
Jonathan Nelson
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
ORGANIC, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 25, 2000
------------------------
To the Stockholders of Organic, Inc.:
The Annual Meeting of Stockholders of Organic, Inc., a Delaware
corporation, will be held at The Argent Hotel, 50 Third Street, San Francisco,
California 94103 on Tuesday, July 25, 2000, at 10 a.m., Pacific Daylight Time.
Organic is holding this meeting to:
- elect five directors to the Organic Board, each to serve for a term of
one to three years;
- ratify the selection of the independent auditor; and
- transact any other business that properly comes before the meeting.
The Board of Directors has selected June 12, 2000 as the record date for
determining stockholders entitled to vote at the meeting. A list of stockholders
on that date will be available for inspection at our corporate Secretary's
office, 510 Third Street, San Francisco, California 94107, for ten days before
the meeting.
This proxy statement, proxy and our 1999 Annual Report on Form 10-K are
being distributed on or about June 23, 2000.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THIS MEETING. EVEN IF
YOU PLAN TO ATTEND THE MEETING, WE HOPE THAT YOU WILL PROMPTLY MARK, SIGN, DATE
AND RETURN THE ENCLOSED PROXY. THIS WILL NOT LIMIT YOUR RIGHT TO ATTEND OR VOTE
AT THE MEETING.
By Order of the Board of Directors,
/s/MARGARET MAXWELL ZAGEL
-----------------------
Margaret Maxwell Zagel
Secretary
June 23, 2000
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
General Information......................................... 1
Election of Directors....................................... 3
Nominee for Election for a One-Year Term Ending with the
2001 Annual Meeting of
Stockholders........................................... 3
Nominees for Election for a Two-Year Term Ending with the
2002 Annual Meeting of Stockholders.................... 3
Nominees for Election for a Three-Year Term Ending with
the 2003 Annual Meeting of Stockholders................ 3
Committees of the Board of Directors; Meetings............ 4
Stock Ownership............................................. 4
Section 16(a) Beneficial Ownership Reporting Compliance... 5
Compensation of Directors and Named Executive Officers...... 6
Option Grants During Fiscal Year 1999..................... 7
Aggregate Option Exercises in Fiscal Year 1999 and Fiscal
Year-End Option Values................................. 7
Employment Agreements..................................... 8
Director Compensation..................................... 9
Compensation Committee Interlocks and Insider
Participation.......................................... 9
Legal Proceedings......................................... 9
Certain Related Transactions.............................. 10
Ratification of Selection of Independent Auditor............ 11
</TABLE>
<PAGE> 5
GENERAL INFORMATION
Q: Who is soliciting my proxy?
A: We -- the Board of Directors of Organic, Inc. -- are sending you this
Proxy Statement in connection with our solicitation of proxies for use
at Organic's 2000 Annual Meeting of stockholders. Certain directors,
officers and employees of Organic also may solicit proxies on our behalf
by mail, phone, fax or in person.
Q: Who is paying for this solicitation?
A: Organic will pay for the solicitation of proxies. Organic also will
reimburse banks, brokers, custodians, nominees and fiduciaries for the
reasonable charges and expenses that they incur to forward our proxy
materials to the beneficial owners of Organic common stock.
Q: What am I voting on?
A: The election of Jonathan Nelson, Michael Hudes, Gerald Bruce Redditt,
Gary F. Hromadko and Peter Rip to the Board of Directors and the
ratification of the selection of PricewaterhouseCoopers LLP as
independent auditor.
Q: Who can vote?
A: Only those who owned common stock at the close of business on June 12,
2000, the record date for the Annual Meeting, can vote. If you
beneficially owned common stock on the record date, you have one vote
per share at the Annual Meeting.
Q: What does "beneficially owned" mean?
A: Under the Securities and Exchange Commission's definition, "beneficial
ownership" of shares means shares over which a person has sole or shared
voting or investment power.
Q: How do I vote and can I revoke my proxy?
A: You may vote your shares either in person or by proxy. To vote by proxy,
you should mark, date, sign and mail the enclosed proxy in the prepaid
envelope at your earliest convenience. Giving a proxy will not affect
your right to vote your shares if you attend the Annual Meeting and want
to vote in person. By voting in person, you automatically revoke your
proxy. You also may revoke your proxy at any time before the voting by
giving the Secretary written notice of your revocation or by submitting
a later-dated proxy. If you return your proxy but do not mark your
voting preference, the individuals named as proxies will vote your
shares FOR the election of the nominees for director and FOR the
ratification of the selection of independent auditor.
Q: What constitutes a quorum?
A: On the record date, Organic had 87,761,442 shares of common stock,
$0.0001 par value, outstanding. Voting can take place at the Annual
Meeting only if stockholders owning a majority of the voting power of
the common stock (that is, a majority of the total number of votes
entitled to be cast) are present either in person or by proxy. If you do
not vote, or if a broker holding your shares in "street" or "nominee"
name indicates to us on a proxy that you have not voted and it lacks
discretionary authority to vote your shares, we will not consider your
shares as present or entitled to vote for the purpose of determining
whether stockholder approval has been obtained, but they will be counted
for the purposes of determining whether there is a quorum.
Directors need the affirmative vote of holders of a majority of the
voting power present and entitled to vote to be elected. Ratification
of the selection of independent auditor also requires the affirmative
vote of holders of a majority of the voting power present and entitled
to vote.
1
<PAGE> 6
Q: What happens if I withhold my vote for an individual director?
A: Withheld votes are counted as "no" votes for the individual director.
Q: When are stockholder proposals for the 2001 Annual Meeting due?
A: To be considered for inclusion in management's proxy statement for
Organic's 2001 Annual Meeting of stockholders, a stockholder proposal
must be received at Organic's offices by February 23, 2001. All
stockholder proposals must meet the requirements of Rule 14a-8 of the
Securities Exchange Act of 1934.
Q: What matters may be presented to the stockholders at an Annual Meeting?
A: Organic's bylaws specify the matters that may be presented to
stockholders at an Annual Meeting as:
- matters listed in the notice of meeting;
- matters presented by the Board of Directors; and
- matters properly presented by stockholders. See the next question.
Q: If I do not submit a stockholder proposal to Organic by the deadline for
inclusion in the 2001 proxy statement, how do I present matters to
stockholders at the 2001 Annual Meeting?
A: Under Organic's bylaws, a stockholder must give written notice to the
Secretary between 60 and 90 days prior to the first anniversary of the
preceding year's Annual Meeting of the matter to be presented at that
year's Annual Meeting. To present a matter at the 2001 Annual Meeting,
the stockholder must give written notice to the Secretary no earlier
than April 26, 2001 and no later than May 26, 2001.
Q: If any other matter is presented at the Annual Meeting, who has
authority to vote on the matter?
A: We do not expect any matters, other than those included in the proxy
statement, to be presented at the 2000 Annual Meeting. If other matters
are presented, the individuals named as proxies will have discretionary
authority to vote your shares on the matter unless you direct otherwise
in your proxy instructions.
Q: How do I recommend someone to be a nominee for Organic director?
A: A stockholder may recommend nominees for director to the Board of
Directors by giving the Secretary a written notice by February 23, 2001
in order to be considered for presentation at the 2001 Annual Meeting of
stockholders. The notice must include the full name, age, business and
residence addresses, and principal occupation or employment of the
nominee. It must also include the number of shares of Organic common
stock the nominee beneficially owns, any other information about the
nominee that must be disclosed in proxy solicitations under Rule 14(a)
of the Securities Exchange Act of 1934 and the nominee's written consent
to the nomination and agreement to serve, if elected. In order to be
considered for the 2001 Annual Meeting of stockholders, a stockholder
must give written notice to the Secretary no earlier than April 26, 2001
and no later than May 26, 2001.
2
<PAGE> 7
ELECTION OF DIRECTORS
(Proposal One on the Proxy Card)
Organic's Board of Directors is divided into three classes, each serving
staggered three-year terms. Five directors currently comprise our Board. At the
Annual Meeting, you and the other stockholders will elect a total of five
individuals to serve on the Board of Directors: one Class I director, whose term
will expire at the 2001 Annual Meeting of stockholders; two Class II directors,
whose terms will expire at the 2002 Annual Meeting of stockholders; and two
Class III directors, whose terms will expire at the 2003 Annual Meeting of
stockholders. Each of the nominees listed below is currently a member of the
Board of Directors.
The individuals named as proxies will vote the enclosed proxy FOR the
election of all nominees unless you direct them to withhold your votes. If any
nominee becomes unable to serve as a director before the meeting (or decides not
to serve), the individuals named as proxies may vote for a substitute or we may
reduce the number of members of the Board.
WE RECOMMEND A VOTE FOR EACH NOMINEE.
Below are the names and ages of the directors, the years they became
directors, their principal occupations or employment for at least the past five
years and certain of their other directorships.
NOMINEE FOR ELECTION FOR A ONE-YEAR TERM ENDING WITH THE 2001 ANNUAL MEETING OF
STOCKHOLDERS
Jonathan Nelson, age 32, co-founded the company in 1993 and has served as
Organic's Chief Executive Officer and Chairman of the Board since January 1995.
From February 1996 to May 1996, Mr. Nelson served as President and Chief
Executive Officer of Accrue Software, a developer of network based tools for
measuring Web site performance. Mr. Nelson also served as Chairman of the Board
of Accrue from February 1996 to November 1999.
NOMINEES FOR ELECTION FOR A TWO-YEAR TERM ENDING WITH THE 2002 ANNUAL MEETING OF
STOCKHOLDERS
Michael Hudes, age 38, has served as Organic's President and as a member of
Organic's Board of Directors since October 1995, and until August 1999 he also
served as Organic's Chief Operating Officer. From October 1993 to September
1995, Mr. Hudes was the Director of Marketing for daVinci Time & Space, an
interactive media company.
Gerald Bruce Redditt, age 48, has served as a member of Organic's Board of
Directors since October 1998. Since May 1998, Mr. Redditt has served as an
Executive Vice President of Omnicom Group Inc., a strategic and financial
holding company. From July 1995 to May 1998, Mr. Redditt served as an Executive
Vice President of Sony Pictures Entertainment, a creator and distributor of
entertainment products, services and technology. From March 1991 to July 1995,
Mr. Redditt served as a Corporate Vice President of GTE Corporation, a
telecommunications company. Since January 1999, Mr. Redditt has served as a
director of AGENCY.COM, Ltd.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM ENDING WITH THE 2003 ANNUAL MEETING
OF STOCKHOLDERS
Gary F. Hromadko, age 47, has served as a member of Organic's Board of
Directors since January 1997 and has served as a director of Organic Online,
Ltd., one of Organic's wholly owned subsidiaries, since February 1999. Since
1993, Mr. Hromadko has been a private venture investor in early stage technology
companies.
Peter Rip, age 46, has served as a member of Organic's Board of Directors
since June 2000. Since February 2000, Mr. Rip has served as managing director of
Leapfrog Ventures LLC, a private venture capital firm, and from February 1992
until February 2000, he acted as a private venture investor in several early
stage technology companies. From September 1997 to February 1999, Mr. Rip was
managing director of Knight Ridder Ventures, an affiliate of Knight Ridder, Inc.
From
3
<PAGE> 8
March 1996 to September 1997, he was general manager of Infoseek Corporation, an
Internet search company.
At each Annual Meeting of stockholders after the initial classification,
the successors to the directors whose terms have expired will be elected to
serve from the time of election and qualification until the third Annual Meeting
following their election, or until their successors have been duly elected and
qualified, or until their earlier resignation or removal, if any. Organic's
bylaws authorize the number of directors to be not fewer than five nor more than
nine. Any additional directorships resulting from an increase in the number of
directors will be distributed among the three classes so that, as nearly as
possible, each class will consist of an equal number of directors. The
classification of our Board of Directors could have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
acquiring, control of Organic.
COMMITTEES OF THE BOARD OF DIRECTORS; MEETINGS
The Board of Directors recently established an audit committee and a
compensation committee. No meetings of these committees were held during 1999.
The audit committee meets with and considers suggestions from members of
management and our internal accounting personnel, as well as our independent
accountants, concerning our financial operations. The audit committee also has
the responsibility to review our audited financial statements and consider and
recommend the employment of, and approve the fee arrangements with, our
independent accountants for both audit functions and advisory and other
consulting services. The members of the audit committee are Gary F. Hromadko and
Gerald Bruce Redditt, both of whom were elected to the committee in November
1999, and Peter Rip, who was appointed to the committee on June 9, 2000 and
replaced Michael Hudes on the audit committee.
The compensation committee, which was established in February 2000, reviews
and approves the compensation and benefits payable to our key executive
officers, administers our equity incentive plans and makes recommendations to
our Board of Directors regarding such matters. The members of the compensation
committee are Gary F. Hromadko and Gerald Bruce Redditt.
STOCK OWNERSHIP
The following table sets forth the beneficial ownership of Organic's common
stock as of March 31, 2000 by each person or entity known by us to own
beneficially more than five percent of Organic's common stock; by each of
Organic's executive officers named in the Summary Compensation Table; by each of
our directors; and by Organic's executive officers and directors as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (SEC) and generally includes voting or
investment power with respect to securities. Unless otherwise indicated, each
person or entity named in the table has sole voting power and investment power,
or shares voting and investment power with his or her spouse, with respect to
all shares of capital stock listed as owned by such person. Shares subject to
options which are exercisable within 60 days of March 31, 2000 are deemed to be
outstanding and to be beneficially owned by the person holding such options for
the purpose of computing the percentage ownership of such person, but are not
deemed to be outstanding and to be beneficially owned for the purpose of
computing the percentage ownership of any other person.
4
<PAGE> 9
The address of each of the executive officers and directors is c/o Organic,
Inc., 510 Third Street, San Francisco, California 94107.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE
SHARES OF SHARES
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OWNED OWNED(1)
---------------- ------------ ------------
<S> <C> <C>
Organic Holdings, Inc...................................... 51,954,975 59.3%
c/o Organic, Inc.
510 Third Street
San Francisco, CA 94107
Omnicom Group, Inc......................................... 14,983,101 17.1%
437 Madison Avenue
New York, NY 10022
Jonathan Nelson(2)......................................... 51,954,975 59.3%
Michael Hudes(3)........................................... 1,014,750 1.2%
Janis Nakano Spivack(4).................................... 239,063 *
Susan Field(5)............................................. 75,000 *
Matthew Bernardini(6)...................................... 154,164 *
Gary F. Hromadko........................................... -- *
Bruce Redditt.............................................. -- *
Peter Rip.................................................. -- *
All executive officers and directors as a group (15
persons)(7).............................................. 55,721,040 63.5%
</TABLE>
---------------
* Represents beneficial ownership of less than one percent of the common
stock.
(1) Computed on the basis of 87,553,746 shares outstanding as of March 31, 2000
and, with respect to each officer and director, shares subject to options
exercisable within 60 days of March 31, 2000.
(2) Shares beneficially owned by Mr. Nelson consist of 51,974,975 shares owned
by Organic Holdings, Inc., of which Mr. Nelson is the majority stockholder.
(3) As of March 31, 2000, 369,000 shares held by Mr. Hudes were subject to a
right of repurchase by us which lapses over time.
(4) Includes 55,781 shares subject to options exercisable within 60 days of
March 31, 2000, of which 39,843 shares were vested and 15,938 shares were
unvested as of March 31, 2000.
(5) Includes 75,000 shares subject to options exercisable within 60 days of
March 31, 2000, of which 75,000 were vested as of March 31, 2000.
(6) Includes 10,311 shares subject to options exercisable within 60 days of
March 31, 2000, of which 4,686 shares were vested and 5,625 shares were
unvested as of March 31, 2000. As of March 31, 2000, 74,478 shares held by
Mr. Bernardini were subject to a right of repurchase by us which lapses over
time.
(7) Includes 159,180 shares subject to options exercisable within 60 days of
March 31, 2000, of which 131,367 shares were vested and 27,813 shares were
unvested as of March 31, 2000. As of March 31, 2000, 1,549,480 shares held
by such persons were subject to a right of repurchase by us which lapses
over time.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Organic's
directors, executive officers and holders of more than 10% of a registered class
of Organic's equity securities to file reports of ownership on a Form 3 and
changes in ownership on a Form 4 or a Form 5 with the SEC and the Nasdaq
National Market. Such persons are also required by the SEC regulations to
furnish us with copies of all Section 16(a) forms that they file. Because
Organic was not a reporting
5
<PAGE> 10
company during fiscal year 1999, no reports were required during that year.
Accordingly, we believe that Organic's directors, officers and holders of more
than 10% of Organic's common stock are in full compliance with the reporting
requirements of the Exchange Act.
COMPENSATION OF DIRECTORS AND NAMED EXECUTIVE OFFICERS
The following table contains information in summary form concerning the
compensation paid to Organic's chief executive officer and each of Organic's
four most highly compensated executive officers whose total salary, bonus and
other compensation exceeded $100,000 during the fiscal years ended December 31,
1997, 1998 and 1999. In accordance with the rules of the SEC, the compensation
described below does not include perquisites and other personal benefits
received by the executive officers named in the table below which do not exceed
the lesser of $50,000 or 10% of the total salary and bonus reported for these
officers.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS OPTIONS COMPENSATION(2)
--------------------------- ---- ---------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Jonathan Nelson..................... 1999 $183,072 $ 54,922 -- $2,520
Chief Executive Officer and 1998 94,947 -- -- 2,520
Chairman of the Board 1997 87,484 -- -- 2,730
Michael Hudes....................... 1999 225,352 75,000 -- --
President and Director 1998 165,792 65,000 1,476,000 --
1997 137,086 -- -- --
Janis Nakano Spivack(3)............. 1999 171,250 47,500 67,500 --
Vice President, Chief 1998 132,500 11,000 -- --
Creative Officer 1997 15,875 -- 382,500 --
Susan Field(4)...................... 1999 130,773 150,000 1,755,000 --
Executive Vice President and 1998 -- -- -- --
Chief Financial Officer 1997 -- -- -- --
Matthew Bernardini(5)............... 1999 166,967 40,000 382,500 --
Vice President, Chief Technology 1998 110,417 15,000 45,000 --
Officer 1997 22,529 -- 90,000 --
</TABLE>
---------------
(1) Salary includes amounts deferred under our 401(k) Plan.
(2) Represents term life insurance premiums paid by us on Mr. Nelson's behalf.
(3) Ms. Spivack commenced employment with us in November 1997.
(4) Ms. Field commenced employment with us in June 1999.
(5) Mr. Bernardini commenced employment with us in October 1997.
6
<PAGE> 11
OPTION GRANTS DURING FISCAL YEAR 1999
The following table sets forth certain information concerning grants of
stock options to each of the executive officers named in the table above during
the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM (1)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ---------------------
NAME GRANTED FISCAL YEAR 1999(2) SHARE(3) DATE 5% 10%
---- ---------- -------------------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Jonathan Nelson....... -- -- -- -- -- --
Michael Hudes......... -- -- -- -- -- --
Janis Nakano
Spivack............. 67,500 0.4% $2.6667 11/22/09 $113,202 $ 286,877
Susan Field........... 1,755,000 11.5% $0.8333 6/23/09 $919,722 $2,330,755
Matthew Bernardini.... 382,500 2.5% $1.3333 7/13/09 $320,736 $ 812,809
</TABLE>
---------------
(1) Potential realizable values are net of exercise price, but before taxes
associated with exercise. Amounts represent hypothetical gains that could be
achieved for the options if exercised at the end of the option term. These
gains are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date. These numbers are calculated based on SEC
requirements and do not reflect our estimate or projection of the future
common stock price.
(2) The percentage of total options is based on an aggregate of 15,309,525
options granted to employees during fiscal 1999.
(3) All options were granted at a fair market value as determined by our Board
of Directors on the date of grant.
AGGREGATE OPTION EXERCISES IN FISCAL YEAR 1999 AND FISCAL YEAR-END OPTION VALUES
The following table sets forth for each of the executive officers named in
the table above the shares acquired and the value realized on each exercise of
stock options during the year ended December 31, 1999 and the year-end number
and value of exercisable and unexercisable options.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 31, 1999(1) AT DECEMBER 31, 1999(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jonathan Nelson....... -- -- -- -- -- --
Michael Hudes......... -- -- 553,500 922,500 $1,421,880 $2,369,800
Janis Nakano
Spivack............. 183,282 $409,737 15,937 250,781 $ 40,940 $ 470,829
Susan Field........... -- -- -- 1,755,000 $ -- $3,217,500
Matthew Bernardini.... 16,989 $ 40,095 43,949 456,562 $ 112,899 $ 690,706
</TABLE>
---------------
(1) Although options are immediately exercisable for all the option shares, any
shares purchased under such an option are subject to repurchase by us, at
the exercise price paid per share, in the event the optionee ceases to
provide services to us prior to vesting in those shares. Accordingly, the
table reflects such option shares as to which the repurchase right has
lapsed under the "exercisable" column and such option shares subject to the
repurchase right under the "unexercisable" column.
(2) Value of exercised in-the-money options represents the positive spread
between the option exercise price and the deemed fair market value of our
common stock at December 31, 1999, which our Board of Directors determined
was $2.6667 per share.
7
<PAGE> 12
EMPLOYMENT AGREEMENTS
Jonathan Nelson
On January 29, 1997, Mr. Nelson entered into an employment agreement with
Organic to serve as Organic's Chief Executive Officer. Mr. Nelson currently
serves as Organic's Chief Executive Officer and as Chairman of our Board of
Directors. As amended on February 24, 1997, the employment agreement provides
Mr. Nelson with an annual base salary of $90,000. In addition, Mr. Nelson is
eligible to receive discretionary bonus compensation in an amount determined by
the Board of Directors. Under the terms of his agreement, Mr. Nelson's
employment shall continue until either party gives the other party 90 days
advance written notice of the expiration of the employment agreement. Should
Organic terminate Mr. Nelson's employment for cause, Organic must pay Mr. Nelson
all compensation due on the date of termination. If Organic terminates Mr.
Nelson's employment without cause and without 90 days advance written notice,
Mr. Nelson is entitled to receive from us, so long as Mr. Nelson is not in
breach of the non-competition and protection of confidential information
provisions of his employment agreement,
- his applicable salary compensation less any income earned from subsequent
employment, limited to 90 days once written notice is given, and
- any unpaid reimbursable expenses outstanding, and any unused accrued
vacation, as of the date of termination.
Michael Hudes
On January 29, 1997, Mr. Hudes entered into an employment agreement with
Organic to serve as Organic's President. Mr. Hudes currently serves as Organic's
President and a member of our Board of Directors. As amended on February 24,
1997, the employment agreement provides Mr. Hudes with an annual base salary of
$140,000. In addition, Mr. Hudes is eligible to receive discretionary bonus
compensation in an amount determined by the Board of Directors. Under the terms
of his agreement, Mr. Hudes's employment shall continue until either party gives
the other party 90 days advance written notice of the expiration of the
employment agreement. Should Organic terminate Mr. Hudes's employment for cause,
Organic must pay Mr. Hudes all compensation due on the date of termination. If
Organic terminates Mr. Hudes's employment without cause and without 90 days
advance written notice, Mr. Hudes is entitled to receive from us, so long as Mr.
Hudes is not in breach of the non-competition and protection of confidential
information provisions of his employment agreement,
- his applicable salary compensation less any income earned from subsequent
employment, limited to 90 days once written notice is given, and
- any unpaid reimbursable expenses outstanding, and any unused accrued
vacation, as of the date of termination.
Susan L. Field
On June 22, 1999, Ms. Field entered into an employment agreement with
Organic to serve as Organic's Executive Vice President and Chief Financial
Officer. The employment agreement provides Ms. Field with an annual base salary
of $250,000 and a bonus of up to 40% of her base salary upon achievement of
specific goals and objectives. Additionally, Ms. Field was paid a signing bonus
of $50,000 in connection with her entering the employment agreement.
Ms. Field's employment agreement also provides her with an incentive stock
option for the purchase of 480,000 shares of Organic's common stock pursuant to
Organic's 1997 stock option plan at an exercise price of $0.8333 per share, and
a nonstatutory stock option for the purchase of 1,125,000 shares of Organic's
common stock pursuant to Organic's 1997 stock option plan, at an exercise price
of $0.8333 per share. These options contain a four year vesting period, with 25%
8
<PAGE> 13
vesting after the first continuous year of employment and the remaining option
shares vesting in equal monthly portions through the fourth year. Also, Ms.
Field is entitled to an additional nonstatutory stock option grant of 150,000
shares of common stock pursuant to Organic's 1997 stock option plan, at an
exercise price of $0.8333 per share. Of these shares, 75,000 vested upon the
closing of the initial public offering on February 18, 2000 and 75,000 will vest
upon Organic's hiring employees to fill at least two key management positions
and Organic's retaining these employees for nine continuous months of
employment.
Under the terms of her agreement, Ms. Field's employment may be terminated
by either party at any time with or without cause and with or without notice.
Should Organic terminate Ms. Field's employment for cause or should she
voluntarily resign, she will not be entitled to severance pay, pay in lieu of
notice, or any other compensation or benefits, other than payment of accrued
salary and vacation. In the event Ms. Field's employment is terminated without
cause, Organic will provide her with
- a payment equal to three months of her salary, less standard withholdings
and deductions and
- a one-year acceleration of vesting of the common stock subject to
purchase pursuant to the options granted to her as of the date of the
employment agreement.
DIRECTOR COMPENSATION
We granted Mr. Rip, one of our nonemployee directors, options to purchase
up to 10,000 shares of Organic common stock upon his appointment to the Board of
Directors on June 9, 2000. The options are fully vested and the exercise price
of those options was the closing price of Organic's common stock on the date of
the grant.
We have not adopted a policy with respect to compensation of Organic's
directors, and apart from the grant of stock options to Mr. Rip, we have not
previously compensated our directors. In the future, we intend to compensate our
nonemployee directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee makes all compensation decisions. Gary F.
Hromadko and Gerald Bruce Redditt have served as the only members of the
compensation committee since we formed the committee in February 2000. No member
of our compensation committee has served as a member of the board of directors
or compensation committee of any entity that has one or more executive officers
serving as a member of our Board of Directors or compensation committee. No
member of our compensation committee is or was one of Organic's officers or
employees.
There are no family relationships among any of Organic's directors or
executive officers other than between Michael Hudes and Daniel J. Lynch, who are
brothers-in-law.
LEGAL PROCEEDINGS
On February 17, 2000, a former employee filed an action against Organic
Holdings, Inc., Organic, Inc., and Jonathan Nelson, the Company's Chief
Executive Officer and Chairman of the Board, in the California Superior Court in
San Francisco. (Haig v. Organic Holdings, Inc., et al.) An amended complaint was
filed on March 22, 2000. The amended complaint asserts several claims based on
allegations that the former employee was prevented from exercising stock options
in Organic Holdings. The amended complaint seeks substantial actual and
exemplary damages apparently based on the substantial increase in the value of
Organic Holdings stock after the initial public offering of two companies in
which it owned substantial stakes in, including Organic, Inc. The case is in its
earliest stages, and no discovery has been taken. The defendants believe that
these claims lack any merit, and intend to contest them vigorously.
9
<PAGE> 14
On May 16, 2000, an individual real estate broker and former employee of a
real estate brokerage company which had performed some work for Organic filed
suit in United States District Court in New York City seeking recovery from
Organic and others for broker's commissions he claims due. (Kades v. Organic,
Inc., et al.) The complaint alleges claims for violation of the Racketeering
Influenced Corrupt Organizations (RICO) Act, misrepresentation, interference
with contractual relations and other causes of action and seeks compensatory and
punitive damages against all defendants. The lawsuit is in its initial stages.
We believe the complaint is without merit and intend to contest the claims
vigorously.
CERTAIN RELATED TRANSACTIONS
Omnicom Group
In February 1999, we issued 1,488,000 shares of our Series B preferred
stock at $7.2067 per share to Omnicom Group for net cash proceeds of $7.7
million plus the settlement of a $3.0 million short-term bridge loan that we
obtained from Omnicom Group in January 1999. Omnicom Group beneficially owns
more than five percent of our common stock.
On August 27, 1999, we entered into a revolving credit facility with
Omnicom Group, which allowed us to borrow up to $30.0 million at the lender's
commercial paper rate plus 3.0% until the closing of our initial public
offering. Thereafter, we may borrow up to $15.0 million from Omnicom Group at
the lender's commercial paper rate plus 1.25% through September 30, 2002.
Additionally, in connection with the revolving credit facility, we issued a
warrant to purchase 2,249,076 shares of our common stock to Omnicom Group at an
exercise price of $0.0033 per share.
One of our directors, Gerald Bruce Redditt, has served as Executive Vice
President of Omnicom Group since 1998.
Officer Loan
On March 31, 1999, we entered into a promissory note agreement for $200,000
with Michael Hudes. This loan was secured by a pledge of Mr. Hudes' shares of
Organic common stock. This note bears an annual interest rate of 7% with
principal and interest payments due every other year beginning on March 31,
2001. On April 11, 2000, Mr. Hudes repaid the outstanding principal amount due.
On April 27, 2000, Organic entered into another promissory note agreement
for $3.0 million bearing an annual interest rate of 9% with Michael Hudes. All
amounts due including interest were fully repaid on May 5, 2000.
Registration Rights
We have entered into an investor's rights agreement with Organic Holdings,
Inc., which beneficially owns more than five percent of our common stock, and
Omnicom Group. This agreement provides that, subject to specified limitations,
if we propose to register any of our common stock under the Securities Act,
Organic Holdings, Inc., Omnicom Group and their permitted transferees have the
right to include their shares of common stock in the registration. Furthermore,
subject to specified limitations, Organic Holdings, Inc., Omnicom Group and
their permitted transferees may require us to register all or part of the common
stock they hold. These demand rights apply during the period commencing on
August 11, 2000 and ending on August 11, 2005. The number of shares included in
any underwritten offering can be limited by the underwriters of that offering.
We believe that all of the transactions set forth above were made on terms
no less favorable to us than could have been obtained from unaffiliated third
parties. We intend that all future transactions, including loans, between us and
our officers, directors, principal stockholders and their affiliates will be
approved by a majority of the Board of Directors, including a majority of the
10
<PAGE> 15
independent and disinterested outside directors on the Board of Directors, and
will be on terms no less favorable to us than could be obtained from
unaffiliated third parties.
------------------------
We have not included a report of Organic's compensation committee on
executive compensation or a stock performance graph for 1999 because Organic's
common stock was not publicly traded at any time prior to or during 1999.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITOR
(Proposal Two on the Proxy Card)
WE RECOMMEND A VOTE FOR THIS PROPOSAL.
We selected PricewaterhouseCoopers LLP as the independent auditor for
Organic for 2000 and recommend that the stockholders ratify the selection. If
the stockholders do not ratify PricewaterhouseCoopers LLP, we will consider the
selection of another independent auditor.
PricewaterhouseCoopers LLP and its predecessors, independent certified
public accountants, have been the auditor for Organic for five years, since the
company was incorporated.
Representatives of PricewaterhouseCoopers LLP will be present at the Annual
Meeting and available to answer questions. They will also have an opportunity to
make a statement.
11
<PAGE> 16
[Organic logo]
<PAGE> 17
ORGANIC, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
for Annual Meeting -- July 25, 2000
JONATHAN NELSON, MICHAEL HUDES, SUSAN L. FIELD and MARGARET MAXWELL
ZAGEL, or any of them, each with the power of substitution, are hereby
authorized to represent as proxies and vote with respect to the proposals set
forth below and in the discretion of such proxies on all other matters that may
be properly presented for action all shares of Organic, Inc. (the "Company")
that the undersigned is entitled to vote at the Annual Meeting of Stockholders
of the Company to be held at The Argent Hotel, 50 Third Street, San Francisco,
California on Tuesday, July 25, 2000 at 10 a.m. or at any postponement or
adjournment thereof, and instructs said proxies to vote as follows:
Shares represented by this proxy will be voted as directed by the
stockholder.
IF NO SUCH DIRECTIONS ARE INDICATED, THE PROXIES WILL HAVE THE AUTHORITY
TO VOTE FOR THE ELECTION OF DIRECTORS AND FOR ITEM 2.
(continued and to be signed on reverse side)
FOLD AND DETACH HERE
<PAGE> 18
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS
AND FOR ITEM 2.
Please mark your votes as indicated in this example: [X].
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C> <C>
[ ] FOR [ ] WITHHOLD
all nominees AUTHORITY
listed below to vote for all
(except as marked nominees listed
to the contrary below
below)
</TABLE>
<TABLE>
<CAPTION>
Nominees: Class I Class II Class III
------- -------- ---------
<S> <C> <C> <C>
Jonathan Michael Hudes Gary Hromadko
Nelson Gerald Bruce Redditt Peter Rip
</TABLE>
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
the nominee's name in the space provided below.)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
2. To ratify the selection of [ ] FOR [ ] AGAINST [ ] ABSTAIN
PricewaterhouseCoopers LLP as independent
auditors
3. In their discretion, upon such other [ ] FOR [ ] AGAINST [ ] ABSTAIN
business as may properly come before the
meeting.
</TABLE>
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.
Dated:
------------------------------
Sign name exactly as imprinted
hereon. If signing as an attorney, ------------------------------------
executor, administrator, trustee or Signature of Stockholder
guardian, give full title as such.
If signer is a corporation, give
full corporate name and sign by duly
authorized officer, showing the
officer's title.
For joint accounts, both owners
should sign.
------------------------------------
Signature of Stockholder
