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As filed with the Securities and Exchange Commission on October 26, 2000
Registration No. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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LUMINANT WORLDWIDE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 7379 75-2783690
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Identification
organization) Number) Number)
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13737 NOEL ROAD, SUITE 1400
DALLAS, TEXAS 75240-7367
(972) 581-7000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
JAMES R. COREY
PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHIEF OPERATING OFFICER
13737 NOEL ROAD, SUITE 1400
DALLAS, TEXAS 75240-7367
(972) 581-7000
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
---------------
With a copy to:
JOHN B. WATKINS, ESQ.
WILMER, CUTLER & PICKERING
2445 M STREET, N.W.
WASHINGTON, D.C. 20037
(202) 663-6000
Approximate date the registrant proposes to begin selling securities to
the public: From time to time after the effective date of this registration
statement.
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<PAGE>
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 in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Amount Proposed maximum Proposed maximum Amount of
Title of securities to be offering price per aggregate offering registration
to be registered registered share(1) price(1) fee
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<S> <C> <C> <C> <C>
Common Stock, $.01 par value per 24,800,225 $1.75 $43,400,393 $11,458
share(2)
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) under the Securities Act of 1933 on the basis of the average
of the high and low reported sales prices for the registrant's common
stock, as reported on the Nasdaq National Market on October 20, 2000.
(2) The shares of common stock are being registered for resale from time to
time by the selling stockholders. The shares of common stock consist of (a)
7,080,000 shares issuable upon the conversion of principal and interest on
outstanding convertible debentures, (b) 1,373,626 shares issuable upon the
exercise of outstanding warrants, (c) 7,080,000 shares reserved for
issuance pursuant to antidilution, default and put provisions of the
securities mentioned in (a) above, (d) 8,760,803 shares issued as
consideration in connection with the registrant's acquisition of certain
businesses, and (e) 505,796 shares issued to certain of the registrant's
founding stockholders. In addition to the shares described in the table
above, the amount to be registered includes an indeterminate number of
shares issuable upon conversion of or in respect of the convertible
debentures, and exercise of the warrants, as that number may be adjusted as
a result of stock splits, stock dividends and similar transactions in
accordance with Rule 416 under the Securities Exchange Act of 1934, as
amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT FILES
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
IS TO BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OR
UNTIL THE REGISTRATION STATEMENT BECOMES EFFECTIVE ON THE DATE THE SEC, ACTING
UNDER SECTION 8(a), DETERMINES.
===============================================================================
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SUBJECT TO COMPLETION, DATED OCTOBER 26, 2000
PROSPECTUS
LUMINANT WORLDWIDE CORPORATION
24,800,225 SHARES OF COMMON STOCK
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 6.
The selling stockholders are offering up to 24,800,225 shares of
common stock. The shares offered by the selling stockholders consist of the
following:
- shares that may be issued from time to time upon conversion of
debentures and exercise of warrants which we sold in September 2000 in
a transaction exempt from the registration requirements of the
Securities Act of 1933, as amended;
- shares issued as consideration for businesses we have acquired; and
- shares issued to our founding stockholders.
When we refer to the "selling stockholders" in this prospectus, we mean those
persons referred to in the section titled "Plan of Distribution," as well as
the pledgees, donees, assignees, transferees and others who later hold the
selling stockholders' interests.
We will not receive any of the proceeds from the sale of common stock
in this offering. We will, however, receive proceeds if the selling
stockholders who hold warrants pay cash to exercise their warrants.
The selling stockholders will decide if and when they will offer and
sell all or a portion of the shares of common stock and the terms of those
offers and sales. The selling stockholders may sell shares under this
prospectus on the Nasdaq National Market at prevailing market prices, in
negotiated transactions, or otherwise. See the section titled "Plan of
Distribution."
Our common stock is quoted on the Nasdaq National Market under the
symbol "LUMT." On October 20, 2000, the last sale price of our common stock,
as reported on the Nasdaq National Market, was $1.75 per share.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES
COMMISSION NOR ANY OTHER REGULATORY BODY 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.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
3
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TABLE OF CONTENTS
<TABLE>
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PAGE
NUMBER
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<S> <C>
ABOUT LUMINANT WORLDWIDE CORPORATION.................................. 5
RISK FACTORS.......................................................... 6
USE OF PROCEEDS....................................................... 12
PLAN OF DISTRIBUTION.................................................. 13
SELLING STOCKHOLDERS.................................................. 15
LEGAL MATTERS......................................................... 19
EXPERTS............................................................... 19
WHERE YOU CAN FIND MORE INFORMATION................................... 19
</TABLE>
You should rely only on the information contained or incorporated by
reference in this prospectus and in any accompanying prospectus supplement. No
one has been authorized to provide you with different information.
The shares of common stock are not being offered in any jurisdiction where
the offer is not permitted.
You should not assume that the information in this prospectus or any
prospectus supplement is accurate as of any date other than the date on the
front of the documents.
4
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ABOUT LUMINANT WORLDWIDE CORPORATION
OUR SERVICES
We provide professional services to Fortune 500 companies, Internet
and electronic commerce-based companies and other organizations which use or
want to use the Internet and electronic commerce in their business. We provide
the following Internet and electronic commerce professional services:
- strategy consulting, which helps clients understand how to use the
Internet and electronic commerce to operate their businesses more
competitively and interact with their customers and suppliers more
effectively;
- creative solutions, which involve web site designing, creating
marketing programs for attracting customers to web sites, and
developing a web site "look and feel" that projects a client's identity
and serves a client's business goals;
- technology solutions, which involve the actual building and
installation of Internet and electronic commerce software applications,
including web sites and interfaces to mainframes and existing systems;
and
- ongoing services, which are continuing services we provide that support
and complement our clients' Internet and electronic commerce
businesses, such as ongoing Internet site management.
We perform services for more than 100 clients diversified across many
industries, including technology, financial, retailing, media and
communications. We also work with companies that do business primarily over
the Internet. As of October 1, 2000, our 976 employees were located throughout
the United States in 23 different states.
OUR MARKET OPPORTUNITY
The Internet is continuing to develop as an interactive platform
through which companies market, operate and manage their businesses and
conduct transactions. The explosive growth of the Internet and its potential
to create new opportunities and pose fundamental threats to the competitive
positions of traditional businesses present enormous challenges for the
managers of companies. This is leading to the rapid growth of, and demand for,
professional services relating to the Internet and electronic commerce. The
need for organizations to quickly and effectively act has led to the demand
for coordinated strategic, creative and technology solutions. Many traditional
professional services firms can typically provide expert services in strategy
consulting, creative solutions or technology solutions. The need to integrate
these disciplines exceeds the capabilities of most traditional service firms,
however, especially given the rapid time frames needed for developing Internet
and electronic commerce businesses. As a result, we believe there is great
demand for professional services firms that can effectively and timely provide
integrated services and client focus in all three disciplines.
OUR STRATEGY
We intend to expand our position as a leading provider of Internet
and electronic commerce professional services to Fortune 500 companies,
Internet-based companies and other organizations. Our strategy for achieving
this objective is to:
- leverage our three main practice areas;
- expand long-term client relationships;
- operate as a single, fully-integrated firm;
- maintain leading edge professional capabilities and technologies;
- expand our breadth of services and geographic scope; and
- provide ongoing services.
OUR OFFICES AND HISTORY
We have leased offices located in:
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<S> <C> <C>
- Atlanta, Georgia - Dallas, Texas - Denver, Colorado
- Houston, Texas - Herndon, Virginia - Larchmont, New York
- New York, New York - Philadelphia, Pennsylvania - Poughkeepsie, New York
metropolitan area
- Raleigh, North Carolina - Reston, Virginia - San Francisco, California
- Seattle, Washington
</TABLE>
We were incorporated on August 21, 1998 under the laws of the State
of Delaware. Our principal executive offices are located at 13737 Noel Road,
Suite 1400, Dallas Texas 75240-7367 and our telephone number is (972)
581-7000. We maintain a website at www.luminant.com. The information contained
on our web site is not a part of this prospectus. As used in this prospectus,
"we," "us," "our" and "Luminant" refer to Luminant Worldwide Corporation and
its wholly-owned subsidiaries.
RISK FACTORS
This offering involves a high degree of risk. You should carefully
consider the following risks and the other information contained in this
prospectus before you decide to buy any of our common stock. If any of these
risks occur, the trading price of our common stock could decline, and you may
lose all or part of your investment.
WE HAVE A HISTORY OF OPERATING LOSSES. IF THESE LOSSES CONTINUE, WE MAY NEVER
BE PROFITABLE.
We have a history of operating losses. If we do not consistently
generate higher revenues, we may never be profitable. By way of example, we
incurred historical, consolidated net losses of approximately $.076 million
for the year ended December 31, 1998, $45.14 million for the year ended
December 31, 1999 and $58.77 million for the six months ended June 30, 2000.
Our accumulated deficit as of September 30, 2000 was approximately $172.90
million. Luminant was founded in August 1998 to acquire a group of existing
Internet and electronic commerce professional services businesses. In
September 1999, we acquired Align Solutions Corp., Free Range Media, Inc.,
Integrated Consulting, Inc., InterActive8, Inc., Multimedia Resources, LLC,
Potomac Partners Management Consulting, LLC, RSI Group, Inc. and its
subsidiaries, and the assets of Brand Dialogue-New York, and in June 2000, we
acquired New York Consulting Partners, LLC. Our costs of operations as a
combined, public company have significantly increased compared to the
historical costs of operations of the companies we have acquired, and we
expect to continue investing heavily in sales and marketing, infrastructure
development and general and administrative expenses until we have fully
integrated the companies we acquired. In addition, we expect our expenses to
increase as we seek to grow our business. As a result, we will need to
generate substantially higher revenues to achieve profitability. If our
revenues grow more slowly than anticipated, or if our operating expenses
exceed our expectations, we may never achieve profitability. Even if we do
achieve profitability, we may not be able to sustain or increase it in the
future.
OUR CASH FROM OPERATIONS IS CURRENTLY NOT SUFFICIENT TO MEET OUR NEEDS. WE MAY
NEED TO OBTAIN ADDITIONAL FINANCING IN THE FUTURE IN ORDER TO MEET OUR WORKING
CAPITAL AND CAPITAL EXPENDITURE REQUIREMENTS OR TO ACQUIRE ADDITIONAL
COMPANIES.
We currently do not generate sufficient cash to cover our operating
costs and investment activities and, as a result, we may need to raise
additional financing in the future. We cannot be certain that we will be able
to obtain additional financing on favorable terms, if at all, which could
adversely affect our operations. We expect that our current cash, cash
equivalents and lines of credit will be sufficient to meet our working capital
and capital expenditure needs for at least the next 12 months. After that, we
may need to raise additional funds. Our limited combined operating history
makes it difficult to predict whether our future financial condition, revenues
and profitability will be sufficient to obtain financing on reasonable terms
or at all. If we need additional capital and cannot raise it on acceptable
terms, we may not be able to acquire additional companies, open or expand
offices in the United States and abroad, make capital expenditures, hire and
train additional personnel or expand our business.
THE SALE OR AVAILABILITY FOR SALE OF ADDITIONAL SHARES OF OUR COMMON STOCK
AFTER THIS OFFERING COULD ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON
STOCK.
As of October 15, 2000, approximately 27,168,480 shares of our common
stock were outstanding. Once the registration statement of which this
prospectus is a part becomes effective, approximately 13,931,599 of the
currently outstanding shares will be freely transferable without restriction
or further registration under the Securities Act, except to the extent these
shares are held by "affiliates" as defined under Rule 144 under the Securities
Act. In addition, this registration statement registers 7,080,000 shares
issuable upon the conversion of outstanding debentures, including interest,
7,080,000 shares issuable pursuant to antidilution, default
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and put provisions of such debentures, and 1,373,626 shares issuable upon the
exercise of outstanding warrants. The remainder of these shares outstanding
are "restricted securities" which may be sold subject to the applicable
limitations of Rule 144. As of October 15, 2000, options, warrants and
debentures convertible or exercisable into approximately 13,301,726 shares of
common stock were outstanding and we had reserved an additional 2,411,742
shares of common stock under our stock option plans and employee stock
purchase plan. In addition, we are proposing to our shareholders that they
approve an increase in the number of shares issuable under our 1999 Long Term
Incentive Plan to 40% of the number of shares of our common stock issued and
outstanding on a floating basis. If our stockholders sell substantial amounts
of our common stock in the public market, the market price of our common
stock could fall. A reduction in the price of our common stock could reduce
the value of your investment in us and impair our ability to raise capital
through the sale of additional equity securities or our ability to use shares
as a currency to make acquisitions.
WE MAY NOT BE ABLE TO HIRE, TRAIN AND RETAIN SKILLED EMPLOYEES, WHICH COULD
IMPEDE OUR ABILITY TO COMPETE SUCCESSFULLY.
As a services company, our future profitability and growth depends in
large part on our ability to hire, train and retain skilled consulting,
creative, technical and other professionals. If we cannot hire, train and
retain a sufficient number of qualified employees, we may not be able to
adequately staff projects, our expenses could increase and we may be unable to
expand our business as quickly as we would like. Skilled personnel are in
short supply and competition for these people is intense. In addition, to
maintain our competitive position and to grow our business, we must make sure
our employees maintain and develop their technical expertise and business
skills to satisfy the increasingly sophisticated needs of our clients. This
process could be time consuming and expensive and may not be successful.
Even if we do hire and retain a sufficient number of employees, the
expense necessary to compensate them may adversely affect our operating
results. We typically grant stock options to attract and retain qualified
employees. The decline in the trading price of our stock has adversely
affected the incentive value of these stock options and has made it more
difficult and expensive for us to hire and retain qualified personnel.
IF WE DO NOT EFFECTIVELY INTEGRATE EACH OF THE COMPANIES WE HAVE ACQUIRED AND
MAY ACQUIRE IN THE FUTURE, OUR FINANCIAL RESULTS WILL SUFFER.
We are combining the operations of the companies we have acquired
into a single company. We have spent substantial resources:
- standardizing our operational, financial and control systems;
- deploying common equipment and telecommunications facilities;
- implementing and integrating new and existing marketing and sales
efforts; and
- creating a unified brand identity.
Our future profitability depends heavily on how effectively we integrate the
operations and management of the companies we have acquired and any other
companies we acquire in the future. Failure to effectively integrate any of
the companies we acquire may cause significant operating inefficiencies and
adversely affect our profitability. We have no current plans or agreements to
acquire any specific companies or businesses. If we acquire additional
companies in the future as expected, however, we will face integration risks
similar to those described above.
In addition, during our beginning stage of development and operation,
we have encountered and may continue to encounter expenses and difficulties
that are unexpected or beyond our control. We may not be able to achieve or
maintain profitability for any of the companies we have acquired or for
ourselves as a whole.
WE DEPEND ON THE SERVICES OF OUR SENIOR MANAGEMENT AND OTHER KEY PERSONNEL.
THE LOSS OF SENIOR MANAGEMENT OR OTHER KEY PERSONNEL COULD ADVERSELY AFFECT
OUR BUSINESS.
The loss of management personnel, other key personnel or client
relationships could seriously harm our business and adversely affect our
growth. We believe that our ability to effectively serve our clients and
expand our business in the future will depend on our continued employment of
senior management and key strategic, creative and technical personnel.
Competition for qualified management personnel and other key personnel is
intense. In addition, personal relationships are critical in obtaining and
maintaining client engagements in our industry. Our personnel could join with
a competitor or start a new business and compete with
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us, which may result in the loss of client relationships or business
opportunities. Guillermo G. Marmol, our former chief executive officer,
resigned that position in September 2000.
OUR REVENUES ARE DIFFICULT TO PREDICT AND WE MAY NOT BE ABLE TO REDUCE
EXPENSES IF REVENUES DECLINE.
Our operating expenses are relatively fixed and we incur costs based
on our expectation of future revenues. We generally cannot reduce our expenses
on short notice to compensate for unanticipated variations in the number or
size of engagements in progress. As a result, our failure to accurately
predict our revenues may result in unnecessary expenses and adversely affect
our profitability and financial condition.
Most of our client engagements are under short-term contracts. If a
client defers, modifies or cancels an engagement or chooses not to retain us
for additional phases of a project, we may not be able to rapidly redeploy our
employees or other resources to other engagements. Under these engagements,
the client can generally reduce the scope of or cancel our services without
penalty and with little or no notice. A number of factors unrelated to our
work product or the progress of the project, such as general business
conditions, the client's financial state or changes in the client's management
structure, could cause cancellations or delays.
UNDERUTILIZATION OF OUR EMPLOYEE RESOURCES MAY ALSO ADVERSELY AFFECT OUR
OPERATING REVENUES.
We generally establish our personnel levels based on our expectations
of client demand. If we hire more employees than our engagements require, or
if we are unable to effectively redeploy our employees from project to
project, our operating margins may decline and we may suffer losses. We have
hired a large number of administrative and support personnel to support our
anticipated growth. Personnel costs and expenses constitute the substantial
majority of our operating expenses.
WE MAY NOT SUCCESSFULLY DEVELOP BRAND AWARENESS OF OUR SERVICES, AND OUR BRAND
REPUTATION MAY DEPEND UPON THE SUCCESS OR FAILURE OF OUR CLIENTS.
Developing awareness of the "Luminant Worldwide Corporation" brand
name is an important element of our business strategy. If we do not
successfully develop our brand name without significant expense, our operating
margins and growth may decline. Our brand name has replaced the historical
brand names of the companies we have acquired, which may adversely affect our
revenues and profitability. In addition, the public may closely associate our
brand with the business success or failure of some of our high-profile
clients, many of whom are pursuing unproven business models in competitive
markets. As a result, the failure or difficulties of one or more of our
high-profile clients may damage our brand name.
OUR LIMITED COMBINED OPERATING HISTORY MAKES IT DIFFICULT TO PREDICT HOW WE
WILL PERFORM IN THE FUTURE.
We have a limited combined operating history upon which you can
evaluate our business and prospects. We have combined the operations of nine
businesses into a new company, and we may not be able to achieve or maintain
profitability of any of our businesses or overall. As a result, our historical
results of operations and pro forma financial information may not give you an
accurate indication of our future results of operations or prospects. In
addition, companies like us in an early stage of development frequently
encounter risks, expenses and difficulties associated with starting a new
business, many of which may be unexpected or beyond our control.
OUR PROFITABILITY MAY SUFFER IF SEASONAL FACTORS CAUSE OUR REVENUES TO
FLUCTUATE AND WE ARE NOT ABLE TO ADJUST OUR EXPENSES ACCORDINGLY.
Our industry is affected by seasonal factors. Our revenues and income
are generally higher in the first and second calendar quarters, and lower
during the third and fourth calendar quarters as a result of the summer and
end-of-year holiday seasons. As a result of these factors, we believe that
period-to-period comparisons of our results of operations will not reliably
indicate our future performance. Our operating results in the third quarter of
2000 were below the expectations of public market analysts, and it is likely
that in some future quarter or quarters our operating results will be below
the expectations of public market analysts or investors. These shortfalls may
significantly affect the market price of our common stock. Several other
factors may cause our revenues and operating results to vary from
quarter-to-quarter, including:
- the number, size and type of client engagements we commence and
complete during a quarter;
- modification or termination of material contracts;
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- the amount and timing of expenditures by our clients for Internet and
electronic commerce professional services;
- our ability to adequately staff our projects and effectively utilize
our employees;
- the fixed personnel and other costs we incur in advance of the quarter;
- the number, type, timing and costs of acquisitions completed during a
quarter;
- our ability to manage costs, including personnel costs and support
services costs; and
- our introduction of new services.
WE MAY INCUR UNEXPECTED OR UNQUANTIFIABLE LIABILITIES AND EXPENSES ARISING
FROM THE OPERATION OF A COMPANY BEFORE WE ACQUIRED IT.
When we acquire companies, we may acquire liabilities and expenses
that we did not know about at the time we negotiated these acquisitions. We
may also acquire contingent liabilities that become realized, or liabilities
that prove to be larger than anticipated. Because our recourse against the
former owners of the companies for these liabilities is generally limited as
described below, the realization of any of these liabilities may increase our
expenses and reduce our cash reserves.
THE INDEMNIFICATION PROVISIONS OF THE ACQUISITION AGREEMENTS BY WHICH WE HAVE
ACQUIRED COMPANIES MAY NOT FULLY PROTECT US AND MAY RESULT IN UNEXPECTED
LIABILITIES.
Some of the former owners of the companies we have acquired are
required to indemnify us against liabilities related to the operation of their
company before we acquired it. The acquisition agreements by which have
acquired companies all include provisions for the indemnification of Luminant
by former owners of each company for breaches of their representations and
warranties in the acquisition agreements, and inaccuracy of the information
provided by them for use in the prospectus relating to our initial public
offering. In most of these agreements, however, the liability of each former
owner is limited to the total amount of the purchase price, including
contingent consideration, that the former owner received. Additionally, in
some cases these former owners may not have the financial ability to meet
their indemnification responsibilities. We cannot assure you that any of the
former owners of the companies we have acquired will satisfy their
indemnification obligations, if any.
IF WE HAVE TO PAY ADDITIONAL CONSIDERATION TO THE FORMER OWNERS OF ANY OF THE
COMPANIES WE HAVE ACQUIRED, YOUR INVESTMENT IN US MAY BE DILUTED.
We have agreed to pay the former owners of two of the companies we
have acquired additional consideration upon satisfaction of specified
financial and operational conditions. The consideration payable to the former
owners of one of these companies must be paid in stock, and the consideration
payable to the former owners of the other company may be paid in stock or
cash, at our discretion. Payment of these obligations in cash may
substantially deplete our cash reserves or require us to borrow funds. Payment
of these obligations in our common stock will dilute the value of your
investment in us. Regardless of the form of payment, any additional
consideration will create additional goodwill and increase the related
amortization expense. We cannot predict the amount of additional consideration
that we will have to pay to the former owners of the companies we have
acquired. The total amount of additional consideration payable after the date
of this prospectus to the former owners of one of the companies will not
exceed approximately 154,000 shares of common stock.
WE INTEND TO EXPAND OUR BUSINESS ABROAD. INTERNATIONAL EXPANSION COULD RESULT
IN FINANCIAL LOSSES DUE TO SEVERAL FACTORS, INCLUDING FAILURE TO COMPLY WITH
FOREIGN REGULATORY REQUIREMENTS, CHANGES IN FOREIGN ECONOMIC CONDITIONS AND
FLUCTUATIONS IN FOREIGN CURRENCIES.
We intend to expand our business by providing Internet and electronic
commerce professional services to companies operating outside of the United
States. An inability to successfully establish and expand our international
operations could seriously harm our growth and place us at a competitive
disadvantage. We intend to acquire existing companies and open offices in
foreign markets and otherwise market our business abroad. We may be unable to
successfully market, sell, deliver and support our services internationally.
In addition to other risks described in this section, international expansion
poses additional risks, including:
- intense competition for qualified personnel outside of the United
States;
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- international legal and regulatory requirements;
- problems in collecting accounts receivable and longer payment
cycles;
- the impact of recessions in economies outside the United States;
- higher marketing costs;
- fluctuations in currency exchange rates;
- restrictions on the import and export of certain technologies;
- reduced protection for intellectual property rights in some
countries;
- potentially adverse tax consequences; and
- increases in tariffs, duties, price controls, restrictions on
foreign currencies and other trade barriers.
WE PROVIDE SERVICES THAT ARE OFTEN CRITICAL TO OUR CUSTOMERS' BUSINESSES; ANY
DEFECTS IN OUR SERVICES COULD EXPOSE US TO SIGNIFICANT LIABILITY.
We create, implement and maintain Internet and electronic commerce
systems and other applications that are critical to our clients' businesses.
Any defects or errors in these systems or applications or failure to meet
clients' expectations could result in:
- delayed or lost client revenues;
- rendering additional services to a client at no charge;
- negative publicity regarding us and our services; and
- claims for substantial damages against us, regardless of fault.
The successful assertion of a large claim against us could seriously
harm our business, financial condition and operating results. Our contracts
generally limit our damages arising from negligent acts, errors, mistakes or
omissions in rendering services to our clients. However, we cannot be sure
that these contractual provisions will protect us from liability for damages
in the event we are sued. Our general liability insurance coverage may not
cover one or more large claims, or the insurer may disclaim coverage as to any
future claim. In addition, our general liability insurance coverage may not
continue to be available on reasonable terms or at all.
OUR FAILURE TO PROTECT OR MAINTAIN OUR INTELLECTUAL PROPERTY RIGHTS COULD COST
US MONEY, PLACE US AT A COMPETITIVE DISADVANTAGE AND RESULT IN LOSS OF REVENUE
AND HIGHER EXPENSES.
The steps we have taken to protect our proprietary intellectual
property rights may not prevent or deter someone else from using or claiming
rights to our intellectual property. Third party infringement or
misappropriation of our trade secrets, copyrights, trademarks or other
proprietary information could seriously harm our business. We also cannot
assure you that we will be able to prevent the unauthorized disclosure or use
of our proprietary knowledge, practices and procedures if any of our officers
or other employees leave us. In addition, although we believe that our
proprietary rights do not infringe on the intellectual property rights of
others, other parties may claim that we have violated their intellectual
property rights. These claims, even if not true, could result in significant
legal and other costs and may distract our management.
FROM TIME TO TIME WE AGREE NOT TO PERFORM SERVICES FOR THE COMPETITORS OF
PARTICULAR CLIENTS, WHICH COULD REDUCE THE NUMBER OF OUR PROSPECTIVE CLIENTS.
Non-competition agreements that we enter into occasionally with some
of our clients may constrain our business opportunities and reduce our
potential revenue and profitability. Many of the services we perform for our
clients are competitively sensitive. We occasionally agree not to perform any
services for a client's competitors or in a particular field for a limited
period of time. Even if we are not contractually prohibited from servicing
competitors of our existing clients, we risk alienating these clients if we
provide services to any of their competitors. Because these contractual
restrictions and other considerations may preclude our access to potential
clients, they could adversely affect our revenue.
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A SIGNIFICANT PORTION OF OUR ASSETS ARE INTANGIBLE. WE MUST AMORTIZE OUR
INTANGIBLE ASSETS OVER A FIXED PERIOD EVEN IF WE NEVER REALIZE THEIR FULL
VALUE. THE AMORTIZATION CHARGES WE INCUR IN EACH PERIOD WILL REDUCE OUR NET
INCOME.
Our acquisition of companies has created significant goodwill on our
financial statements. We are amortizing this goodwill over a period of three
years, which negatively affects our operating results in those periods. We
have also paid to the former owners of the companies we have acquired a total
of $47.34 million in contingent consideration through the date of this
prospectus, resulting in additional goodwill of $47.34 million on our
financial statements which we are amortizing over a period of three years. We
have agreed to pay the former owners of two of the companies we have acquired
additional consideration after the date of this prospectus if specified
conditions are met. Any additional consideration will create additional
goodwill and increase the related amortization expense. At September 30,
2000, we had goodwill net of accumulated amortization of approximately $249
million.
WE FACE INTENSE COMPETITION IN OUR INDUSTRY AND LOW BARRIERS TO ENTRY MAY
ENCOURAGE ADDITIONAL COMPETITORS IN THE FUTURE, WHICH MAY NEGATIVELY IMPACT
OUR OPERATING RESULTS.
In light of the resources of our existing competitors and the
likelihood that new competitors will enter the market, we cannot assure you
that we will compete successfully in the Internet and electronic commerce
services market. Our failure to compete successfully could reduce our revenues
and our profitability. Competition in the Internet and electronic commerce
professional services market is intense. We expect competition to persist and
intensify in the future. We compete against companies selling Internet and
electronic commerce software and services, and the in-house development
efforts of companies seeking to engage in electronic commerce. Our current
competitors include, and may in the future include, the following:
- Internet consulting firms and online agencies, including AGENCY.COM,
Diamond Technology Partners Incorporated, iXL Enterprises, MarchFirst
Inc., Proxicom, Razorfish, Sapient, Scient, US Interactive, and Viant;
- general management consulting firms, including Bain & Company, Boston
Consulting Group, Booz Allen & Hamilton and McKinsey & Company, Inc.;
- the professional services groups of computer equipment companies,
including Compaq, Hewlett-Packard and IBM;
- systems integrators, including Andersen Consulting and consulting arms
of the "Big Five" accounting firms; and
- internally developed solutions of current and potential clients.
Because barriers to entry in our market are low, we also expect other
companies to enter our market. In addition, current and potential competitors
have established, or may establish, cooperative relationships among themselves
or with vendors. Accordingly, new competitors or alliances among competitors
may emerge and rapidly acquire significant market share.
Most of our current competitors have longer operating histories than
us. Many of our competitors have larger client bases, larger professional
staffs, greater brand recognition and greater financial, technical, marketing
and other resources than us. Many of our competitors also have
well-established relationships with our current and potential clients and
vendors and may be able to respond more quickly to new or emerging
technologies and changes in customer requirements. Each of these factors may
place us at a disadvantage in responding to our competitors' pricing
strategies, technological advances, marketing campaigns, strategic
partnerships and other initiatives.
WE MAY LOSE MONEY ON FIXED FEE CONTRACTS IF WE MISCALCULATE THE RESOURCES
REQUIRED TO COMPLETE A PROJECT.
We occasionally enter into contracts with our clients on a fixed-fee,
fixed timeframe basis. A miscalculation of the resources or time needed to
complete fixed-fee engagements could substantially reduce our profitability.
The risk of these miscalculations for us is high because we work with complex
technologies in compressed time frames.
TECHNOLOGY IN THE INTERNET AND ELECTRONIC COMMERCE INDUSTRY CHANGES RAPIDLY.
IF WE FAIL TO KEEP UP WITH THESE CHANGES, WE WILL NOT BE ABLE TO MEET OUR
CLIENTS' NEEDS AND OUR BUSINESS WILL SUFFER.
Rapid technological change and frequent introductions of new products
and services characterize our market and the technologies our clients use. Our
failure to successfully respond to these technological developments or to
respond in a timely or cost-effective way could substantially reduce our
revenues and adversely affect our profitability. Our success will depend on
our ability to
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rapidly master and develop an evolving set of capabilities and to offer
services that keep pace with continuing changes in technology, industry
standards and client preferences.
OUR GROWTH AND PROFITABILITY DEPEND ON CONTINUED AND EXPANDING DEMAND FOR OUR
SERVICES. THE DEMAND FOR OUR SERVICES DEPENDS ON THE CONTINUED GROWTH OF THE
INTERNET AND ELECTRONIC COMMERCE INDUSTRY.
If a viable and sustainable market for our Internet and electronic
commerce services does not continue to develop, or if we cannot differentiate
our services from those of our competitors, our revenue and operating margins
may decline and we may continue to experience losses. We cannot be certain
that the market for Internet and electronic commerce services will continue to
grow. Consumers and businesses may reject the Internet or electronic commerce
as viable commercial mediums for a number of reasons, including:
- inadequate network infrastructure;
- insufficiency of telecommunications services to support electronic
commerce and the Internet;
- delays in the development of technologies that facilitate use, and
improve the security, of the Internet and electronic commerce;
- delays in the development of new conventions to handle increased levels
of Internet activity;
- increased governmental regulation;
- changes in sales tax laws; and
- failure of companies to meet their customers' expectations and service
requirements in delivering goods and services via electronic commerce
and over the Internet.
NEW LAWS OR REGULATIONS AFFECTING THE INTERNET, ELECTRONIC COMMERCE OR
COMMERCE IN GENERAL COULD REDUCE OUR REVENUES AND ADVERSELY AFFECT OUR GROWTH.
Congress and other domestic and foreign governmental authorities have
adopted and are considering legislation affecting use of the Internet,
including laws relating to the use of the Internet for commerce and
distribution. The adoption or interpretation of laws regulating the Internet,
or of existing laws governing such things as consumer protection, libel,
property rights and personal privacy, could hamper the growth of the Internet
and its use as a communications and commercial medium. If this occurs,
companies may decide not to use our services and our business and operating
results would suffer.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT MAY NOT PROVE TO BE
ACCURATE OR COMPLETE.
This prospectus contains or incorporates both historical and
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Words such as "anticipates", "believes", "expects",
"intends", "future", and similar expressions identify forward-looking
statements. Any "forward-looking" statements in this prospectus reflect our
current views with respect to future events and financial performance, and are
subject to a variety of factors that could cause the actual results or
performance to differ materially from historical results or from the
anticipated results or performance expressed or implied by the forward-looking
statements. Because of these factors, we cannot assure you that the actual
results or developments that we anticipate will be realized or, even if
substantially realized, that they will have the anticipated results. The risks
and uncertainties that may affect our business include, but are not limited
to, those set forth in this Risk Factors section. Readers should not place
undue reliance on the forward-looking statements, which speak only as of the
date hereof, and should be aware that except as the law may otherwise require,
we undertake no obligation to publicly revise any forward-looking statements
to reflect events or circumstances that may arise after the date of this
prospectus.
USE OF PROCEEDS
All net proceeds from the sale of the common stock covered by this
prospectus will go to the selling stockholders who offer and sell their
shares. We will not receive any proceeds from the sale of common shares by the
selling stockholders, except with respect to
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the exercise price of the warrants or the elimination of our indebtedness upon
the conversion of the convertible debentures. We expect to use any funds
received upon exercise of the warrants for general corporate purposes,
including working capital.
PLAN OF DISTRIBUTION
On September 21, 2000, we entered into a convertible debenture
purchase agreement with Montrose Investments Ltd., Strong River Investments
Inc. and James R. Corey, our Chief Executive Officer, President, Chief
Operating Officer and Director. Under the terms of the agreement, we sold to
Montrose and Strong River warrants to purchase up to 1,373,626 shares of our
common stock at $2.73 per share, as well as convertible debentures in an
aggregate principal amount equal to $15 million convertible into a total of
6,000,000 shares of our common stock. Under the same agreement, we sold to
Mr. Corey warrants to purchase up to 183,150 shares of our common stock at
$2.73 per share, as well as convertible debentures in an aggregate principal
amount equal to $2 million, convertible into a total of 800,000 shares of our
common stock. The number of shares into which the debentures may be
converted, the exercise price of the warrants and in some cases the number of
warrants, will be adjusted if we issue shares of common stock at a price
lower than the conversion price or exercise price, as applicable, or if we
conduct a stock split, stock dividend or similar transaction. Under certain
circumstances, the holders of the debentures have the right to put to us any
outstanding debentures, including any interest or other amounts outstanding
thereunder, in return for cash or our common stock, at our election, at the
lower of (1) the then prevailing conversion price of the debentures, or (2)
the average closing price of our common stock for the five trading days
preceding the date such right is exercised. In connection with the purchase
agreement described above, we also entered into a registration rights
agreement with Montrose and Strong River. Under the terms of the agreement,
we agreed to register for resale the shares underlying the debentures and
warrants we sold to Montrose and Strong River.
We have issued an aggregate of 12,988,612 shares of our common
stock, and paid approximately $59 million in cash, to the former owners of
the companies we have acquired. The former owners of two of these companies
are still eligible to receive additional cash and/or common stock in the
future as contingent consideration. Under these agreements, we also granted
to these former owners piggyback registration rights. These rights permit the
former owners to include the shares of common stock which they received as
consideration in specified share registrations that we conduct for ourselves
or other persons under the Securities Act. These former owners have requested
that we register 8,760,803 of these shares of common stock under this
registration statement.
In August and September 1998, we sold an aggregate of 1,831,800
shares of common stock to our founding stockholders, Commonwealth Principals
II, LLC and Guillermo G. Marmol. Under the terms of a registration rights
agreement we entered into with Commonwealth and Mr. Marmol in September 1999,
we granted to these founding stockholders piggyback registration rights. These
rights permit these founding stockholders to include the shares of common
stock which they received in specified share registrations that we conduct for
ourselves or other persons under the Securities Act. These founding
stockholders have requested that we register 505,796 of these shares of common
stock under this registration statement.
We have agreed to use our best efforts to maintain the effectiveness
of this registration statement with respect to the shares offered hereby until
the earlier of the date all shares have been sold, or two years from the date
of this prospectus. No sales may be made under this prospectus after that date
unless we amend or supplement this prospectus to indicate that we have agreed
to extend the period of effectiveness.
The selling stockholders may, from time to time, sell any or all of
their shares of common stock on the Nasdaq National Market or any other stock
exchange, market or trading facility on which the shares are traded or in
private transactions. These sales may be at fixed or negotiated prices. The
selling stockholders may use any one or more of the following methods when
selling shares:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer attempts to sell the shares as
agent but may position and resell a portion of the block as principal
to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
- an exchange distribution in accordance with the rules of the applicable
exchange;
- privately negotiated transactions;
- with respect to Montrose and Strong River, short sales;
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<PAGE>
- agreements with broker-dealers to sell a specified number of shares at
a stipulated price per share;
- a combination of any of the above methods of sale; and
- any other method permitted under applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Montrose and Strong River may also engage in short sales against the
box, puts and calls and other transactions in securities of Luminant or
derivatives of Luminant securities and may sell or deliver shares in
connection with these trades. The selling stockholders may pledge their shares
to their brokers under the margin provisions of customer agreements. If a
selling stockholder defaults on a margin loan, the broker may, from time to
time, offer and sell the pledged shares. Montrose and Strong River have
advised us that they have not entered into any agreements, understandings or
arrangements with any underwriters or broker-dealers regarding the sale of
their shares other than ordinary course brokerage arrangements, and that there
is no underwriter or coordinating broker acting in connection with the
proposed sale of shares by Montrose or Strong River.
Broker-dealers engaged by the selling stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling stockholders (or, if any
broker-dealer acts as agent for the purchaser of shares, from the purchaser)
in amounts to be negotiated. None of the selling stockholders have advised us
that they expect these commissions and discounts to exceed what is customary
in the types of transactions involved.
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with these sales. In such event,
any commissions received by such broker-dealers or agents and any profit on
the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
In addition, the selling stockholders and any other persons
participating in the sale or distribution of the shares will be subject to the
provisions of the Exchange Act and the rules and regulations under the
Exchange Act, including without limitation Regulation M. These provisions may
restrict the activities of, and limit the timing of purchases and sales of
shares by, the selling stockholders and these other participating persons. In
addition, Regulation M prohibits persons engaging in a distribution of
securities from simultaneously engaging in market making activities with
respect to the common stock for a specified period of time prior to the start
of the distribution. These factors may affect the marketability of the shares.
We will pay all expenses of registering the shares for resale by the
selling stockholders, including fees and disbursements of counsel to the
selling stockholders, but the selling stockholders will pay any discounts,
commissions or concessions associated with the sale of the shares. We have
agreed to indemnify the selling stockholders against specified liabilities,
including specified liabilities under the Securities Act.
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<PAGE>
SELLING STOCKHOLDERS
All of the shares of common stock registered for sale under this
prospectus are owned by, or otherwise issuable to the selling stockholders,
or the pledgees, donees, assignees, transferees and others who later hold the
selling stockholders' interests. All of the shares offered by the selling
stockholders:
- are issuable upon conversion or exercise of the warrants and
debentures which we sold to Montrose and Strong River in
September 2000, or issuable pursuant to anti-dilution, default
and put provisions of such securities;
- were issued as consideration for one of the companies we have
acquired; or
- were sold to one of our founding stockholders in August or
September 1998.
On September 21, 2000, Montrose and Strong River acquired convertible
debentures of the Company and certain common stock purchase warrants. The
holder of such securities is, among other things, prohibited from using them
to acquire shares of our common stock to the extent that such acquisition
would result in such holder, together with any affiliate thereof, beneficially
owning in excess of 4.999% of the outstanding shares of our common stock
following such acquisition. This restriction may be waived by a holder on not
less than 61 days' notice to us. The number of shares of our common stock
listed in the table below as being beneficially owned by Montrose and Strong
River includes the shares of our common stock that are issuable to them,
subject to the 4.999% limitation, upon exercise of the warrants or conversion
of the debentures (as applicable). However, the 4.999% limitation would not
prevent the holder thereof from acquiring and selling in excess of 4.999% of
shares of our common stock through a series of acquisitions and sales under
the warrant or debentures while never beneficially owning more than 4.999% at
any one time.
The registration rights agreement that we entered into with Montrose
and Strong River requires us to register (1) all shares of common stock
issuable upon exercise in full of the warrants, and (2) 200% of the number of
shares of common stock issuable upon conversion of the convertible debentures,
assuming the debentures remain outstanding for three years and all interest on
the debentures is paid in shares of common stock, thus the number of shares of
our common stock listed in the table below as being registered for sale by
Montrose and Strong River includes such number of shares of our common stock.
The following table sets forth information known to us with respect
to beneficial ownership of our common stock as of October 15, 2000 by each
selling stockholder. The following table assumes that the selling stockholders
sell all of the shares registered for sale under this prospectus. We cannot
determine the exact number of shares that will be sold. Except as set forth in
the footnotes below, none of the selling stockholders has had a material
relationship with us or any of our predecessors or affiliates in the past
three years.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES SHARES PERCENTAGE OF
BENEFICIALLY NUMBER OF SHARES BENEFICIALLY OUTSTANDING
OWNED PRIOR TO REGISTERED FOR OWNED AFTER SHARES AFTER
SELLING STOCKHOLDERS THE OFFERING(1) SALE HEREBY THE OFFERING(1) OFFERING(2)
-------------------- --------------- ----------- --------------- -----------
<S> <C> <C> <C> <C>
Michael R. Alsup (3) 1,416,421(3) 588,411 828,010 3.0%
Nancy S. Bratic(4) 15,473(4) 15,140 333 *
Carolyn A. Brown(5) 180,418(5) 179,418 1,000 *
Michael S. Brownfield(6) 15,618(6) 15,618 0 *
Calvin W. Carter(7) 335,823(7) 335,157 666 *
Elizabeth B. Carls(8) 395,582(8) 370,770 24,812 *
Norman L. Dawley(9) 111,234(9) 89,997 21,237 *
David Debbs(10) 338,977(10) 327,086 11,891 *
John B. Dimmer (11) 312,357(11) 312,357 0 *
John C. Dimmer (12) 915,922(12) 615,922 300,000 1.1%
Donald F. Eshelman(13) 2,840(13) 2,840 0 *
Andrew L. Fry(14) 263,457(14) 263,457 0 *
Richard Galanti(15) 11,713(15) 11,713 0 *
Bruce Grant(16) 149,237(16) 148,653 584 *
Charles Harrison(17) 326,005(17) 326,005 0 *
Eliot W. Hawkes(18) 297,881(18) 297,215 666 *
Joseph F. Holton(19) 1,952(19) 1,952 0 *
H. David Kenyon(20) 11,713(20) 11,713 0 *
Meredith W. Kenyon(21) 3,904(21) 3,904 0 *
Amy Looper(22) 394,068(22) 370,770 23,298 *
Morris W. Markel(23) 539,940(23) 537,691 2,249 *
Guillermo G. Marmol (24) 1,404,632(24) 505,796 898,836 3.2%
Ellen Marram (25) 19,776(25) 19,776 0 *
Ben Mayberry (26) 130,704(26) 130,704 0 *
Wylie W. McDonald (27) 14,713(27) 14,059 654 *
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David T. McGee(28) 70,264(28) 70,264 0 *
Benjamin R. McLemore IV(29) 617,971(29) 337,915 280,056 1.0%
Brian Methvin(30) 553,395(30) 552,046 1,349 *
Montrose Investments Ltd. 1,429,619(31) 10,355,751 0 *
Paul Moulton(32) 4,880(32) 2,928 1,952 *
Donald S. Perkins (33) 23,442(33) 19,776 3,666 *
Todd Perri(34) 174,735(34) 120,183 54,552 *
David Pool(35) 181,899(35) 181,899 0 *
Eric Reed (36) 424,570(36) 424,570 0 *
Douglas M. Rice(37) 1,082,727(37) 1,080,478 2,249 *
John M. Richman(38) 19,766(38) 19,766 0 *
John Perry Scroggie(39) 101,501(39) 94,435 7,066 *
Richard Scruggs(40) 815,996(40) 789,109 26,887 *
Michael J. Secor (41) 54,512(41) 48,512 6,000 *
Strong River Investments, Inc. 1,429,619(42) 5,177,875 0 *
Edward W Wagner(43) 36,894(43) 28,594 8,300 *
</TABLE>
----------
* Represents less than 1%.
(1) We have determined the number and percentage of shares beneficially
owned in accordance with Rule 13d-3 of the Securities Exchange Act of
1934, as amended, and this information does not necessarily indicate
beneficial ownership for any other purpose. In determining the number
of shares beneficially owned by a person and the percentage ownership
of that person, we include any shares as to which the individual has
sole or shared voting power or investment power, as well as any shares
of common stock subject to options, warrants or other derivative
securities held by that person that are currently exercisable or
exercisable within 60 days after October 15, 2000. We do not consider
these shares underlying options, warrants and other derivative
securities outstanding in computing the percentage ownership of any
other person, however. To our knowledge, the persons named in the table
above have sole voting and investment power with respect to all shares
of common stock shown as beneficially owned by them, subject to
community property laws where applicable and except as otherwise
indicated in these footnotes.
(2) Based on 27,168,480 shares of common stock outstanding as of October
15, 2000.
(3) Mr. Alsup is an employee of Luminant and a former owner of one of the
companies Luminant has acquired. Includes 357 shares of common stock
issuable upon the exercise of options at an exercise price of $1.52 per
share, 541 shares of common stock issuable upon the exercise of options
at an exercise price of $18.38 per share, and 83 shares of common stock
issuable upon the exercise of options at an exercise price of $11.03
per share. The number of shares given also includes 122,910 shares held
by the 1996 Alsup Issue Trusts, which Mr. Alsup has the power to
reacquire.
(4) Ms. Bratic is an employee of Luminant and a former owner of one of the
companies Luminant has acquired. Includes 333 shares of common stock
issuable upon the exercise of options at an exercise price of $18.00
per share.
(5) Ms. Brown is a former owner, President and director of one of the
companies Luminant has acquired. Includes 1,000 shares held by her
husband, Neil Comeford.
(6) Mr. Brownfield is a former owner of one of the companies Luminant has
acquired.
(7) Mr. Carter is an employee of Luminant and a former owner of one of the
companies Luminant has acquired. Includes 666 shares of common stock
issuable upon the exercise of options at an exercise price of $18.38
per share.
(8) Ms. Carls is a former owner of one of the companies Luminant has
acquired.
(9) Mr. Dawley is a former owner of one of the companies Luminant has
acquired.
(10) Mr. Debbs is an employee of Luminant and a former owner of one of the
companies Luminant has acquired. Includes 8,296 shares of common stock
issuable upon the exercise of options at an exercise price of $0.25 per
share, 2,096 shares of common stock issuable upon the exercise of
options at an exercise price of $1.52 per share, 1,166 shares of common
stock issuable upon the exercise of options at an exercise price of
$18.38 per share, and 333 shares of common stock issuable upon the
exercise of options at an exercise price of $11.03 per share.
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(11) Mr. John B. Dimmer is a former owner and President of one of the
companies Luminant has acquired.
(12) Mr. John C. Dimmer is a former owner and Chairman of the Board of one
of the companies Luminant has acquired. Includes 7,099 shares held by
the James H. Morton Trust of which Mr. Dimmer is the trustee.
(13) Mr. Eshelman is a former owner of one of the companies Luminant has
acquired.
(14) Mr. Fry is a former owner of one of the companies Luminant has
acquired.
(15) Mr. Galanti is a former owner of one of the companies Luminant has
acquired.
(16) Mr. Grant is an employee of Luminant and a former owner of one of the
companies Luminant has acquired. Includes 500 shares of common stock
issuable upon the exercise of options at an exercise price of $18.38
per share, and 83 shares of common stock issuable upon the exercise of
options at an exercise price of $8.06 per share.
(17) Mr. Harrison is a former owner and Chief Executive Officer of one of
the companies Luminant has acquired.
(18) Mr. Hawkes is an employee of Luminant and a former owner of one of the
companies Luminant has acquired. Includes 583 shares of common stock
issuable upon the exercise of options at an exercise price of $18.38
per share, and 83 shares of common stock issuable upon the exercise of
options at an exercise price of $11.03 per share.
(19) Mr. Holton is a former owner of one of the companies Luminant has
acquired. Includes 1,952 shares held by the Joseph F. Holton Trust.
(20) Mr. Kenyon is a former director of one of the companies Luminant has
acquired. Includes 7,809 shares held jointly with Meredith W. Kenyon.
(21) Ms. Kenyon also holds 7,809 shares jointly with H. David Kenyon.
(22) Ms. Looper is an employee of Luminant and a former owner of one of the
companies Luminant has acquired. Includes 597 shares of common stock
issuable upon the exercise of options at an exercise price of $0.25 per
share, 408 shares of common stock issuable upon the exercise of options
at an exercise price of $1.52 per share, 702 shares of common stock
issuable upon the exercise of options at an exercise price of $18.38
per share, and 83 shares of common stock issuable upon the exercise of
options at an exercise price of $11.03 per share.
(23) Mr. Markel is an employee of Luminant and a former owner of one of the
companies Luminant has acquired. Includes 2,166 shares of common stock
issuable upon the exercise of options at an exercise price of $18.38
per share, and 83 shares of common stock issuable upon the exercise of
options at an exercise price of $8.06 per share.
(24) Mr. Marmol is a former Chief Executive Officer and director of
Luminant. Includes 896,335 shares of common stock issuable upon the
exercise of options at an exercise price of $18.00 per share, and 2,500
shares of common stock issuable upon the exercise of options at an
exercise price of $18.38 per share.
(25) Ms. Marram is a former owner of one of the companies Luminant has
acquired.
(26) Mr. Mayberry is a former owner of one of the companies Luminant has
acquired.
(27) Mr. McDonald is a former owner of one of the companies Luminant has
acquired.
(28) Mr. McGee is a former owner of one of the companies Luminant has
acquired.
(29) Mr. McLemore is a former owner, Chief Executive Officer and board
member of one of the companies Luminant has acquired. Includes 231,277
shares of common stock issuable upon the exercise of options at an
exercise price of $2.86 per share, and 1,333 shares of common stock
issuable upon the exercise of options at an exercise price of $18.38
per share.
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<PAGE>
(30) Mr. Methvin is an employee of Luminant and a former owner of one of the
companies Luminant has acquired. Includes 414,046 shares held by the
Brian Methvin Irrevocable Trust and 1,333 shares of common stock
issuable upon the exercise of options at an exercise price of $18.38
per share.
(31) Excludes 3,486,132 shares that are not beneficially owned because of
the restriction on beneficially owning in excess of 4.999% of the
outstanding shares of our common stock as described in the second
paragraph above.
(32) Mr. Moulton is a former owner of one of the companies Luminant has
acquired.
(33) Mr. Perkins is a director of Luminant and a former owner of one of the
companies Luminant has acquired. Includes 3,000 shares of common stock
issuable upon the exercise of options at an exercise price of $38.38
per share, and 666 shares of common stock issuable upon the exercise of
options at an exercise price of $18.38 per share.
(34) Mr. Perri is a former owner of one of the companies Luminant has
acquired.
(35) Mr. Pool is a former owner of one of the companies Luminant has
acquired.
(36) Mr. Reed is a former owner of one of the companies Luminant has
acquired.
(37) Mr. Rice is an employee of Luminant and a former owner of one of the
companies Luminant has acquired. Includes 2,166 shares of common stock
issuable upon the exercise of options at an exercise price of $18.38
per share, and 83 shares of common stock issuable upon the exercise of
options at an exercise price of $8.06 per share.
(38) Mr. Richman is a former owner of one of the companies Luminant has
acquired.
(39) Mr. Scroggie is an employee of Luminant and a former owner of one of
the companies Luminant has acquired. Includes 1,194 shares of common
stock issuable upon the exercise of options at an exercise price of
$0.23 per share, 437 shares of common stock issuable upon the exercise
of options at an exercise price of $1.52 per share, and 666 shares of
common stock issuable upon the exercise of options at an exercise price
of $18.38 per share.
(40) Mr. Scruggs is Vice Chairman, Executive Vice President and a director
of Luminant and a former Chief Executive Officer, President and
chairman of the board of one of the companies Luminant has acquired.
Includes 803,209 shares held jointly with Cynthia K. Scruggs and 12,239
shares of common stock issuable upon the exercise of options at an
exercise price of $0.25 per share, 13,148 shares of common stock
issuable upon the exercise of options at an exercise price of $1.52 per
share, and 1,500 shares of common stock issuable upon the exercise of
options at an exercise price of $18.38 per share.
(41) Mr. Secor is an employee of Luminant and a former owner of one of the
companies Luminant has acquired. Includes 4,004 shares of common stock
issuable upon the exercise of options at an exercise price of $0.23 per
share, 213 shares of common stock issuable upon the exercise of options
at an exercise price of $18.38 per share, and 52 shares of common stock
issuable upon the exercise of options at an exercise price of $11.03
per share.
(42) Excludes 1,028,256 shares that are not beneficially owned because of
the restriction on beneficially owning in excess of 4.999% of the
outstanding shares of our common stock as described in the second
paragraph above.
(43) Mr. Wagner is a former owner of one of the companies Luminant has
acquired.
18
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon by Wilmer, Cutler & Pickering, Washington, D.C.
EXPERTS
The financial statements and schedule incorporated by reference in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
- Government Filings. This prospectus is part of a registration statement
on Form S-3 that we filed with the SEC. Some of the information in the
registration statement has been omitted from this prospectus in
accordance with the rules of the SEC. We file annual, quarterly and
special reports, proxy statements and other information with the SEC.
You can inspect and copy the registration statement as well as reports,
proxy statements and other information we have filed with the SEC at
the public reference room maintained by the SEC at 450 Fifth Street,
NW, Washington, D.C. 20549, and at the following Regional Offices of
the SEC: Seven World Trade Center, New York, New York 10048, and
Northwest Atrium Center, 500 West Madison Street, Chicago, Illinois
60661. You can obtain copies from the public reference room of the SEC
at 450 Fifth Street, NW, Washington, D.C. 20549 upon payment of certain
fees. You can also call the SEC at 1-800-732-0330 for further
information about the public reference room. We are also required to
file electronic versions of these documents with the SEC, which you may
access through the SEC's World Wide Web site at http://www.sec.gov.
- Information Incorporated by Reference. The SEC allows us to
"incorporate by reference" certain of our publicly-filed documents into
this prospectus, which means that information included in these
documents is considered part of this prospectus. Information that we
file with the SEC subsequent to the date of this prospectus will
automatically update and supersede previously filed information,
including information contained in this document.
We incorporate by reference the documents listed below and any future
filings we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act, until this offering has been completed:
1. Our Annual Report on Form 10-K for the year ended December 31, 1999
(File No.000-26977).
2. Our Quarterly Report on Form 10-Q for the quarter ended March 31,
2000 (File No. 000-26977).
3. Our definitive Proxy Statement dated April 19, 2000, filed in
connection with our May 22, 2000 Annual Meeting of stockholders.
4. Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2000
(File No. 000-26977).
5. Our Current Report on Form 8-K dated October 11, 2000.
6. The description of our common stock which is incorporated by
reference in our registration statement on Form 8-A/A, filed with the SEC on
September 14, 1999 (File No. 000-26977).
We will furnish without charge to you, on written or oral request, a copy
of any or all of the documents incorporated by reference in this prospectus.
You should direct any requests for documents to:
Corporate Secretary
Luminant Worldwide Corporation
13737 Noel Road, Suite 1400
Dallas, Texas 75240-7367
(972) 581-7000
19
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Luminant is paying all of the selling stockholders' expensed related to
this offering, except the selling stockholders will pay any applicable
broker's commissions and expenses. The following table sets forth the
approximate amount of fees and expenses payable by the Registrant in
connection with this Registration Statement and the distribution of the shares
registered hereby. All of the amounts shown are estimates except the SEC
registration fee and the Nasdaq National Market listing fee.
<TABLE>
<S> <C>
SEC registration fee......................................... $11,458
Legal fees and expenses...................................... 25,000
Accounting fees and expenses................................. 25,000
Nasdaq listing fee........................................... 17,000
Miscellaneous expenses....................................... $ 6,542
-----
Total............................................. $85,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware,
as amended (the "DGCL"), provides that under certain circumstances a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation or is or was serving at its request in such capacity
in another corporation or business association, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful.
The certificate of incorporation and by-laws of the Registrant
provide for the indemnification of the Registrant's directors and officers to
the fullest extent authorized by, and subject to the conditions set forth in,
the DGCL, except that the Registrant will indemnify a director or officer in
connection with a proceeding (or part thereof) initiated by the person only if
the proceeding (or part thereof) was authorized by the Registrant's Board of
Directors. The indemnification provided under the certificate of incorporation
and by-laws includes the right to be paid by the Registrant the expenses
(including attorneys' fees) in advance of any proceeding for which
indemnification may be had in advance of its final disposition, provided that
the payment of such expenses (including attorneys' fees) incurred by a
director or officer in advance of the final disposition of a proceeding may be
made only upon delivery to the Registrant of an undertaking by or on behalf of
the director or officer to repay all amounts so paid in advance if it is
ultimately determined that the director or officer is not entitled to be
indemnified.
As permitted by the DGCL, the Registrant's Certificate of
Incorporation also provides that directors of the Registrant shall not be
liable to the Registrant or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the Registrant or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the DGCL, relating to
unlawful payment of dividends or unlawful stock purchase or redemption or (iv)
for any transaction from which the director derived an improper personal
benefit. As a result of this provision, the Registrant and its stockholders
may be unable to obtain monetary damages from a director for breach of his or
her duty of care.
The Registrant has purchased a directors' and officers' liability
insurance policy that provides, within stated limits, reimbursement either to
a director or officer whose actions in his capacity as a director or officer
result in liability, or to the Registrant in the event it has indemnified the
director or officer.
In connection with this offering, certain of the selling stockholders
have agreed to indemnify Luminant, each person who controls Luminant, and each
of their respective directors, officers, agents and employees, against certain
liabilities, including certain liabilities under the Securities Act of 1933,
as amended. Reference is made to the Registration Rights Agreement filed as
Exhibit 10.12 hereto.
ITEM 16. EXHIBITS.
20
<PAGE>
EXHIBITS.
---------
4.1 Convertible Debenture Purchase Agreement dated as of September 21, 2000
by and among Luminant Worldwide Corporation, Montrose Investments Ltd.
and Strong River Investments, Inc. (incorporated herein by reference
from Exhibit 99.1 to the Current Report on Form 8-K filed by Luminant
Worldwide Corporation on October 11, 2000 (SEC File No. 000-26977).
4.2 6% Convertible Debenture issued to Montrose Investments Ltd. in the
principal amount of $10,000,000 due September 21, 2003 (incorporated
herein by reference from Exhibit 99.2 to the Current Report on Form 8-K
filed by Luminant Worldwide Corporation on October 11, 2000 (SEC File
No. 000-26977).
4.3 6% Convertible Debenture issued to Strong River Investments, Inc. in
the principal amount of $5,000,000 due September 21, 2003 (incorporated
herein by reference from Exhibit 99.3 to the Current Report on Form 8-K
filed by Luminant Worldwide Corporation on October 11, 2000 (SEC File
No. 000-26977).
4.4 6% Convertible Debenture issued to James R. Corey in the principal
amount of $2,000,000 due September 21, 2003 (incorporated herein by
reference from Exhibit 99.4 to the Current Report on Form 8-K filed by
Luminant Worldwide Corporation on October 11, 2000 (SEC File No.
000-26977).
4.5 Form of Common Stock Purchase Warrant (incorporated herein by reference
from Exhibit 99.5 to the Current Report on Form 8-K filed by Luminant
Worldwide Corporation on October 11, 2000 (SEC File No. 000-26977).
4.6 Asset Purchase Agreement dated as of May 31, 2000 by and among
InterActive8, Inc., Luminant Worldwide Corporation, New York Consulting
Partners, LLC and the members of New York Consulting Partners, LLC.
5.1 Opinion of Wilmer, Cutler & Pickering.
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants
23.2 Consent of Wilmer, Cutler & Pickering (included in Exhibit 5.1)
24.1 Power of Attorney (included on signature pages of this Registration
Statement)
21
<PAGE>
ITEM 17. UNDERTAKINGS.
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:
(a) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(b) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective Registration
Statement; and
(c) To include any additional or changed material
information on the plan of distribution;
PROVIDED, HOWEVER, that paragraphs (1)(a) and (1)(b) shall
not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, 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.
(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.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, 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 therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, 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
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933, as amended, 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 whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933, as amended, and will be
governed by the final adjudication of such issue.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Luminant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Dallas, State of Texas, on October
26, 2000.
LUMINANT WORLDWIDE CORPORATION
By: /s/ James R. Corey
-------------------------------------------
Name: James R. Corey
Title: Chief Executive Officer, President,
Chief Operating Officer and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James R. Corey or Thomas G. Bevivino, his or
her attorney-in-fact, for him or her in any and all capacities, to sign any
amendments to this registration statement and sign any registration statement
for the same offering covered by this registration statement that is to be
effective upon filing pursuant to Rule 462 promulgated under the Securities
Act of 1933, as amended, 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 said attorney-in-fact, or
his 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 and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ James R. Corey Chief Executive Officer, President, Chief October 26, 2000
------------------------------ Operating Officer and Director (Principal
James R. Corey Executive Officer)
/s/ Thomas G. Bevivino Chief Financial Officer (Principal Financial October 26, 2000
------------------------------ Officer and Principal Accounting Officer)
Thomas G. Bevivino
/s/ Michael H. Jordan Chairman of the Board and Director October 26, 2000
------------------------------
Michael H. Jordan
/s/ Randolph L. Austin Director October 26, 2000
------------------------------
Randolph L. Austin
------------------------------ Director October 26, 2000
Michael J. Dolan
/s/ Donald S. Perkins Director October 26, 2000
------------------------------
Donald S. Perkins
/s/ Richard M. Scruggs Director October 26, 2000
------------------------------
Richard M. Scruggs
/s/ George P. Stamas Director October 26, 2000
------------------------------
George P. Stamas
</TABLE>
23
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -----------
4.1 Convertible Debenture Purchase Agreement dated as of September 21, 2000
by and among Luminant Worldwide Corporation, Montrose Investments Ltd.
and Strong River Investments, Inc. (incorporated herein by reference
from Exhibit 99.1 to the Current Report on Form 8-K filed by Luminant
Worldwide Corporation on October 11, 2000 (SEC File No. 000-26977).
4.2 6% Convertible Debenture issued to Montrose Investments Ltd. in the
principal amount of $10,000,000 due September 21, 2003 (incorporated
herein by reference from Exhibit 99.2 to the Current Report on Form 8-K
filed by Luminant Worldwide Corporation on October 11, 2000 (SEC File
No. 000-26977).
4.3 6% Convertible Debenture issued to Strong River Investments, Inc. in
the principal amount of $5,000,000 due September 21, 2003 (incorporated
herein by reference from Exhibit 99.3 to the Current Report on Form 8-K
filed by Luminant Worldwide Corporation on October 11, 2000 (SEC File
No. 000-26977).
4.4 6% Convertible Debenture issued to James R. Corey in the principal
amount of $2,000,000 due September 21, 2003 (incorporated herein by
reference from Exhibit 99.4 to the Current Report on Form 8-K filed by
Luminant Worldwide Corporation on October 11, 2000 (SEC File No.
000-26977).
4.5 Form of Common Stock Purchase Warrant (incorporated herein by reference
from Exhibit 99.5 to the Current Report on Form 8-K filed by Luminant
Worldwide Corporation on October 11, 2000 (SEC File No. 000-26977).
4.6 Asset Purchase Agreement dated as of May 31, 2000 by and among
InterActive8, Inc., Luminant Worldwide Corporation, New York Consulting
Partners, LLC and the members of New York Consulting Partners, LLC.
5.1 Opinion of Wilmer, Cutler & Pickering.
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants
23.2 Consent of Wilmer, Cutler & Pickering (included in Exhibit 5.1)
24.1 Power of Attorney (included on signature pages of this Registration
Statement)
24
