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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
LUMINANT WORLDWIDE CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment of Filing Fee (Check the appropriate box):
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/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:
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(2) Aggregate number of securities to which transaction
applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Michael H. Jordan Luminant Worldwide Corporation
Chairman of the Board of Directors 13737 Noel Road, Suite 1400
Dallas, Texas 75240
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[LOGO]
April 19, 2000
Dear Stockholder:
On behalf of the Board of Directors and employees of Luminant Worldwide
Corporation, I cordially invite you to attend the 2000 Annual Meeting of
Luminant Worldwide Corporation's stockholders. We will be holding the Annual
Meeting on Monday, May 22, 2000 at 1:00 p.m. Eastern Time at 285 Madison Avenue,
New York, New York.
Enclosed with this letter is a Notice of the Annual Meeting, a Proxy
Statement, a proxy card, and a return envelope. Both the Notice of Annual
Meeting and the Proxy Statement provide details of the business that we will
conduct at the Annual Meeting and other information about Luminant Worldwide
Corporation.
Whether or not you plan to attend the Annual Meeting, please sign, date and
promptly return the proxy card in the enclosed prepaid return envelope. Your
shares will be voted at the Annual Meeting in accordance with your proxy
instructions. Of course, if you attend the Annual Meeting you may vote in
person. If you plan to attend the meeting, please mark the appropriate box on
the enclosed proxy card.
Sincerely,
/s/ Michael H. Jordan
Michael H. Jordan
Chairman of the Board of Directors
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LUMINANT WORLDWIDE CORPORATION
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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Date: Monday, May 22, 2000
Place: 285 Madison Ave.
New York, New York
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April 19, 2000
Dear Stockholders:
At the 2000 Annual Meeting, we will ask you to:
- Elect eight directors;
- Ratify the selection of Arthur Andersen, LLP as our independent
accountants for the fiscal year ending December 31, 2000;
- Approve an employee stock purchase plan; and
- Transact any other business that is properly presented at the Annual
Meeting.
You will be able to vote your shares at the Annual Meeting if you were a
stockholder of record at the close of business on April 12, 2000.
By Order of the Board of Directors:
Thomas G. Bevivino
SECRETARY
YOUR VOTE IS IMPORTANT
Please indicate your vote on the enclosed proxy card and return it in the
enclosed envelope as
soon as possible, even if you plan to attend the meeting. If you attend the
meeting, you will be
able to revoke your proxy and vote in person. If you have any questions about
voting your shares,
please contact:
Thomas G. Bevivino, 13737 Noel Rd., Suite 1400, Dallas, Texas 75240,
telephone number (972) 581-6256
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LUMINANT WORLDWIDE CORPORATION
13737 NOEL ROAD, SUITE #1400
DALLAS, TEXAS 75240
APRIL 19, 2000
PROXY STATEMENT FOR ANNUAL MEETING
This Proxy Statement provides information that you should read before you
vote on the proposals that will be presented to you at the 2000 Annual Meeting
(the "Annual Meeting") of the stockholders of Luminant Worldwide Corporation.
The 2000 Annual Meeting will be held on Monday, May 22, 2000 at 1:00 p.m.
Eastern Time at 285 Madison Avenue, New York, New York. Unless the context
requires otherwise, all references in this Proxy Statement to the "Company,"
"Luminant," "us," "we" and "our" refer to Luminant Worldwide Corporation and its
subsidiaries. Except as otherwise indicated, all share and per-share data has
been adjusted to reflect a 16,653-for-one stock split we completed on
September 14, 1999.
This Proxy Statement provides detailed information about the Annual Meeting,
the proposals you will be asked to vote on at the Annual Meeting, and other
relevant information.
On or about April 19, 2000, we began mailing information to people who,
according to our records, owned shares of our common stock at the close of
business on April 12, 2000.
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TABLE OF CONTENTS
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INFORMATION ABOUT THE 2000 ANNUAL MEETING AND VOTING........ 1
PROPOSALS TO BE PRESENTED AT THE ANNUAL MEETING............. 3
ITEM 1: ELECTION OF DIRECTORS............................. 3
ITEM 2: RATIFICATION OF ARTHUR ANDERSEN LLP AS INDEPENDENT
ACCOUNTANTS............................................. 7
ITEM 3: APPROVAL OF LUMINANT 2000 EMPLOYEE STOCK PURCHASE
PLAN.................................................... 7
STOCK OWNERSHIP............................................. 10
EXECUTIVE COMPENSATION AND RELATED MANNERS.................. 13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 22
OTHER INFORMATION........................................... 27
APPENDIX A: LUMINANT WORLDWIDE CORPORATION EMPLOYEE STOCK
PURCHASE PLAN............................................... A-1
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INFORMATION ABOUT THE 2000 ANNUAL MEETING AND VOTING
THE ANNUAL MEETING
The Annual Meeting will be held on Monday, May 22, 2000 at 1:00 p.m. Eastern
Time at 285 Madison Avenue, New York, New York. On or about April 19, 2000 we
began mailing this Proxy Statement to people who, according to our records,
owned shares of our common stock at the close of business on April 12, 2000.
THIS PROXY SOLICITATION
We are sending you this Proxy Statement because our Board of Directors is
seeking a proxy to vote your shares at the Annual Meeting. This Proxy Statement
is intended to assist you in deciding how to vote your shares.
Luminant is paying the cost of requesting these proxies, estimated at
approximately $7,000 in the aggregate. Our directors, officers and employees may
request proxies in person or by telephone, mail, telecopy or letter. Such
persons will receive no additional compensation for such services, but we will
reimburse them for their reasonable out-of-pocket expenses. We will also provide
copies of proxy materials to fiduciaries, custodians, nominees and brokerage
houses for forwarding to beneficial owners of our common stock, and we will
reimburse them as well for their reasonable out-of-pocket expenses.
RECORD DATE AND QUORUM
The record date for the Annual Meeting was April 12, 2000. If you held
shares of our common stock as of the record date, you may attend and vote at the
Annual Meeting. On the record date, 26,370,249 shares of our common stock were
issued and outstanding. Each share of our common stock is entitled to one vote
at the Annual Meeting, except that 875,248 shares of our common stock held by
Young & Rubicam, Inc. are designated "non-voting common stock" and are not
entitled to vote at the Annual Meeting.
A "quorum" must be present at the Annual Meeting to transact business. A
quorum will be present if a majority of the outstanding shares of the Company's
common stock entitled to vote generally in the election of directors are
represented at the Annual Meeting either in person by the holders of the shares
or by proxy. If a quorum is not present, a vote cannot occur.
If you indicate on a proxy or ballot that you abstain from voting or that
your shares are not to be voted on a particular proposal, your shares will not
be counted as having been voted on that proposal, but those shares will be
counted as in attendance at the Annual Meeting for purposes of determining a
quorum. Broker non-votes (i.e., proxies from brokers or nominees indicating that
such persons have not received instructions from the beneficial owners or other
persons entitled to vote shares as to a matter with respect to which brokers or
nominees do not have discretionary power to vote) will also be counted as shares
that are represented at the Annual Meeting for quorum purposes. If you hold your
shares with a broker and you do not tell your broker how to vote, your broker
has the authority to vote on all of the proposals scheduled to be presented at
the Annual Meeting.
VOTING YOUR SHARES
You have one vote for each share of Luminant common stock (excluding
non-voting common stock) that you owned of record at the close of business on
April 12, 2000. The number of shares you own (and may vote at the Annual
Meeting) is listed on the enclosed proxy card. You may not cumulate your votes
in voting for directors.
You may vote your shares at the Annual Meeting either in person or by proxy.
To vote in person, you must attend the Annual Meeting and obtain and submit a
ballot. Ballots for voting in person will
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be available at the Annual Meeting. To vote by proxy, you must complete and
return the enclosed proxy card. By completing and returning the proxy card, you
will be directing the persons designated on the proxy card to vote your shares
at the Annual Meeting in accordance with the instructions you give on the proxy
card.
If you decide to vote by proxy, your proxy card will be valid only if you
sign, date and return it before the Annual Meeting. If you complete the proxy
card except for the voting instructions, then your shares will be voted FOR the
proposed election of directors and FOR ratification of the selection of Arthur
Andersen LLP as the independent accountants of Luminant for the 2000 fiscal year
and FOR the approval of the 2000 Employee Stock Purchase Plan.
REVOKING YOUR PROXY
If you decide to change your vote, you may revoke your proxy at any time
before it is voted. You may revoke your proxy in any one of three ways:
- You may notify the Secretary of Luminant in writing that you wish to
revoke your proxy.
- You may submit a proxy dated later than your original proxy.
- You may attend the Annual Meeting and vote. Merely attending the Annual
Meeting will not by itself revoke a proxy; you must obtain a ballot and
vote your shares to revoke the proxy.
VOTE REQUIRED FOR APPROVAL
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PROPOSAL 1: ELECTION OF EIGHT DIRECTORS The eight nominees for director who receive the most
votes will be elected. If you indicate "withhold
authority to vote" for a particular nominee on your
proxy card, your vote will not count either for or
against the nominee.
PROPOSAL 2: RATIFICATION OF SELECTION OF Ratification of the selection of our independent
INDEPENDENT ACCOUNTANTS accountants requires the affirmative vote of a majority
of the votes cast at the Annual Meeting. If you abstain
from voting, it has the same effect as if you voted
against this proposal.
PROPOSAL 3: APPROVAL OF EMPLOYEE STOCK Approval of the Luminant 2000 Employee Stock Purchase
PURCHASE PLAN Plan requires the affirmative vote of a majority of the
votes cast at the Annual Meeting. If you abstain from
voting, it has the same effect as if you voted against
this proposal.
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ADDITIONAL INFORMATION ABOUT LUMINANT
We are mailing our Annual Report on Form 10-K for the fiscal year ended
December 31, 1999, including consolidated financial statements, to all
stockholders entitled to vote at the Annual Meeting together with this Proxy
Statement. The Annual Report on Form 10-K does not constitute a part of the
proxy solicitation material.
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PROPOSALS TO BE PRESENTED AT THE ANNUAL MEETING
We will present the following three proposals at the Annual Meeting. We do
not expect anyone to present any other proposals. If anyone validly presents any
other proposal, we will use your proxy to vote on those proposals as we believe
appropriate.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR EACH OF THE
DIRECTOR NOMINEES AND FOR EACH OF THE OTHER PROPOSALS.
ITEM 1: ELECTION OF DIRECTORS
Holders of proxies solicited by this proxy statement will vote the proxies
received by them as directed on the proxy card or, if there is no direction on
the proxy card, for the Board of Director nominees listed below. Nominees for
election to our Board of Directors are:
Randolph L. Austin
James R. Corey
Michael J. Dolan
Michael H. Jordan
Guillermo G. Marmol
Donald S. Perkins
Richard M. Scruggs
George P. Stamas
Each director will be elected to serve for a one-year term, or thereafter
until his replacement is elected and qualified or until his earlier resignation
or removal. Each of the eight nominees is presently a member of the Board of
Directors and has indicated a willingness to serve as a director if re-elected.
More detailed information about each of the nominees is available below.
If any of the nominees cannot or will not serve for any reason (which we do
not anticipate), our Board of Directors may designate a substitute nominee or
nominees. If a substitute is nominated, we will vote all valid proxies for the
election of the substitute nominee or nominees. Our Board of Directors may also
decide to leave the seat or seats open until a suitable candidate or candidates
are located, or it may decide to reduce the size of the Board of Directors.
Proxies for the Annual Meeting may not be voted for more than eight nominees.
THE DIRECTOR NOMINEES
The following table and biographical descriptions set forth the name, age,
and principal occupation during the past five years for each nominee for our
Board of Directors, as well as the positions they currently hold with Luminant.
The information is as of April 1, 2000 unless otherwise indicated. If you elect
them, they will hold office until our next annual meeting or until their
successors have been elected. As of the date of this Proxy Statement, we are not
aware that any nominee for our Board of Directors would be unable to or would
decline to serve if elected.
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NAME AGE POSITION DIRECTOR SINCE
- ---- -------- ------------------------------------ --------------
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Michael H. Jordan(1)(2)............. 63 Chairman of the Board of Directors 1999
Randolph L. Austin(1)(2)............ 35 Director 1999
James R. Corey...................... 46 President, Chief Operating Officer 1999
and Director
Michael J. Dolan(1)(2).............. 56 Director 1999
Guillermo G. Marmol................. 47 Chief Executive Officer and Director 1999
Donald S. Perkins(1)(2)............. 73 Director 1999
Richard M. Scruggs.................. 44 Vice Chairman, Executive Vice 1999
President and Director
George P. Stamas(1)(3).............. 48 Director 1999
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(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Non-voting member of Compensation Committee
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MICHAEL H. JORDAN has been our Chairman since the closing of our initial
public offering in September 1999 and has served as an advisor to us since
January 1, 1999. Mr. Jordan retired in December 1998 as Chairman and Chief
Executive Officer of CBS Corporation, formerly Westinghouse Electric
Corporation, positions he held since June 1993. Prior to joining Westinghouse,
he was a principal with the investment firm of Clayton, Dubilier & Rice, Inc.
from September 1992 through June 1993. From 1974 until 1992, Mr. Jordan held
various management positions at PepsiCo, Inc., his last position being Chief
Executive Officer of PepsiCo International. From 1964 to 1974, Mr. Jordan held
various positions, including Partner at McKinsey & Company, Inc., an
international management consulting firm. Mr. Jordan is also a member of the
Boards of Directors of Aetna, Inc., Dell Computer Corp. and Marketwatch.com.
Mr. Jordan is a member of the President's Export Council, Chairman of the
U.S.-Japan Business Council, Chairman of The College Fund/UNCF and Chairman of
the Policy Board of the Americans for the Arts.
RANDOLPH L. AUSTIN has been a director since the closing of our initial
public offering in September 1999. From January 1999 until present, Mr. Austin
has also been an advisor to Bertelsmann Ventures. From January 1998 to
December 1998, Mr. Austin was President and Chief Executive Officer of BOL,
Bertelsmann Online, Bertelsmann's global electronic commerce business. From
November 1995 to December 1997, Mr. Austin held various positions with
Prodigy, Inc., his last position being Senior Vice President, Sales & Business
Development. From September 1990 to November 1995, Mr. Austin served in various
capacities, including Senior Engagement Manager, at McKinsey & Company, Inc.
JAMES R. COREY has been our President and Chief Operating Officer and a
director since the closing of our initial public offering in September 1999.
Mr. Corey served as Managing Director of Potomac Partners from September 1997
until September 1999. Prior to joining Potomac Partners, Mr. Corey served as
Co-Chief Operating Officer of AT&T Solutions and Managing Partner of their
Consulting Division from June 1995 until September 1997. From June 1994 to
June 1995, Mr. Corey served as President of the Worldwide Services Organization
of Unisys Corporation. From December 1989 until June 1994 Mr. Corey was a
partner in the Los Angeles office of McKinsey & Company, Inc. Previously,
Mr. Corey was a Partner at Andersen Consulting in Chicago.
MICHAEL J. DOLAN has been a director since the closing of our initial public
offering in September 1999. Since July 1996, Mr. Dolan has also served as Vice
Chairman, Chief Financial Officer and a director of Young & Rubicam Inc., an
international marketing and communications services firm. From August 1991 to
July 1996, Mr. Dolan was President and Chief Executive Officer of the joint
venture, Snack Ventures Europe, between PepsiCo Foods International and General
Mills.
GUILLERMO G. MARMOL has been our Chief Executive Officer since August 1998,
a director since June 1999 and also served as our President from August 1998
until September 1999. Previously, Mr. Marmol was a Vice President of Perot
Systems, Inc., Chairman of its Operating Committee and responsible for corporate
development from January 1996 to May 1998. Prior to joining Perot Systems,
Mr. Marmol held a variety of positions during an 18-year career with McKinsey &
Company, Inc. He was elected a director and senior partner in 1991 and most
recently held leadership positions in the firm's senior partner election
committee, its Dallas, Texas office and its global organization practice.
DONALD S. PERKINS has been a director since November 1999. From 1953 through
June 1983, Mr. Perkins served in various positions with Jewel Companies, Inc., a
diversified retailer, including service as Chairman of the Board and Chief
Executive Officer from 1970 to 1980 and as Chairman of the Executive Committee
from 1980 until his retirement in 1983. From 1959 through the present,
Mr. Perkins has served on the Boards of Directors of various public, private and
non-profit institutions, including past service on the Board of Directors of
each of American Telephone & Telegraph Company, Eastman Kodak Company, Firestone
Tire & Rubber, Kmart Corporation, Lucent
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Technologies Inc. and Time Warner Inc. Mr. Perkins is currently a member of the
Board of Directors of each of AON Corporation, Nanophase Technologies
Corporation and LaSalle Hotel Properties.
RICHARD M. SCRUGGS has been our Vice Chairman and Executive Vice President
and a director since the closing of our initial public offering in
September 1999. Mr. Scruggs served as President, Chief Executive Officer and
Chairman of the Board of Align from October 1996 until September 1999. From
January 1996 until October 1996, Mr. Scruggs served as Chief Operating Officer
of Rothwell Systems, which was later purchased by Perot Systems, Inc. From
May 1990 until January 1996, Mr. Scruggs served in a variety of capacities at
BSG Alliance/IT, including Managing Director of Business Development and
Managing Director of the Houston office. BSG Alliance/IT is a firm specializing
in client server systems integration.
GEORGE P. STAMAS has been a director since May 1999. Since January 2000,
Mr. Stamas has served as a Vice Chair of Deutsche Banc Alex. Brown, an
investment bank. From April 1996 through January 2000, Mr. Stamas was a partner
with the law firm of Wilmer, Cutler & Pickering and now serves as a consultant
to Wilmer, Cutler & Pickering. From 1983 until April 1996, Mr. Stamas was a
partner at Piper & Marbury L.L.P. Mr. Stamas is general counsel to and a limited
partner of, the Baltimore Orioles baseball team. Mr. Stamas also serves on the
Board of Directors of FTI Consulting, Inc., a provider of litigation support
services, Aether Systems Inc., a provider of wireless data services, and
Metrocall, Inc., a provider of messaging services.
Our Board of Directors consists of eight directors, which number may be
changed by the Board of Directors. Mr. Dolan was appointed to our Board of
Directors pursuant to an agreement between us and Young & Rubicam. If the size
of the Board is increased to eleven or more, Young & Rubicam will have the right
to nominate an additional director to our Board. Messrs. Corey and Scruggs were
appointed to our Board of Directors pursuant to the agreements by which we
acquired Potomac Partners Management Consulting, LLC and Align Solutions Corp.,
respectively, two of the eight businesses we acquired in connection with our
initial public offering (we will refer to these eight businesses in this Proxy
Statement as the "eight companies" or "eight businesses").
Our Board of Directors met twice during 1999. Each of the current directors
attended, either in person or by telephone, at least 75% of the aggregate number
of meetings of the Board of Directors and meetings of the committees of the
Board of Directors on which such director served.
COMMITTEES OF THE BOARD OF DIRECTORS
Our Board of Directors has established an Audit Committee comprised solely
of independent directors, consisting of Messrs. Austin, Dolan, Jordan, Perkins
and Stamas. The responsibilities of the Audit Committee include:
(1) recommending to our board of directors the independent public
accountants to conduct the annual audit of our books and records;
(2) reviewing the proposed scope of the audit;
(3) approving the audit fees to be paid;
(4) reviewing accounting and financial controls with the independent public
accountants and our financial and accounting staff; and
(5) reviewing and approving transactions between us and our directors,
officers and affiliates.
The Audit Committee did not meet during 1999.
Our Board of Directors has also established a Compensation Committee
comprised solely of non-employee directors, consisting of Messrs. Austin, Dolan,
Jordan, Perkins and Stamas. Mr. Stamas is a non-voting member of the
compensation committee. The Compensation Committee (1) provides a
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general review of our compensation plans to ensure that they meet corporate
objectives and (2) administers our stock plans. When compensation is not
determined under the terms of an employment agreement, the Compensation
Committee will: determine the compensation of senior executive officers (such as
the Chief Executive Officer and Chief Financial Officer); determine the
compensation for other officers or delegate such determination to the Chief
Executive Officer; grant options, stock or other equity interests under our
stock option or other equity-based incentive plans; and administer those plans
and, where such plans specify, our other employee benefit plans. The
Compensation Committee met once during 1999.
DIRECTOR COMPENSATION
Directors who are also our employees do not receive additional compensation
for serving as directors. Upon joining the Board of Directors, non-employee
directors receive an option to purchase 9,000 shares of common stock under our
long-term incentive plan at an exercise price equal to the market value per
share of common stock on the date of grant. In addition, under our long-term
incentive plan, each non-employee director will be granted an annual option to
purchase 6,000 shares at each annual meeting of our stockholders at which the
director is re-elected or remains a director, beginning with the 2000 annual
meeting. Each of these options will have an exercise price equal to the market
value per share of common stock on the date of grant. A director who receives
formula options can generally exercise them beginning six months after receipt,
as to one-sixth of the shares and as to an additional one-sixth every following
six months. Directors will also be reimbursed for out-of-pocket expenses
incurred in attending meetings of the Board of Directors or committees of the
Board of Directors, in their capacity as directors.
Directors may also receive additional, discretionary option grants. In
September 1999, Mr. Jordan was also granted options to purchase 120,000 shares
of common stock in consideration for services rendered and exercisable at a
price equal to the initial public offering price per share. In September 1999,
Mr. Stamas was also granted options to purchase 25,000 shares of common stock in
consideration for services rendered and exercisable at a price equal to the
initial public offering price per share. One-sixth of these additional options
granted to Messrs. Jordan and Stamas will become exercisable every six months
over 36 months from the date of grant. Mr. Dolan, who is Vice Chairman, Chief
Financial Officer and a director of Young & Rubicam, has agreed to serve on our
Board of Directors at the request of Young & Rubicam. Mr. Dolan has assigned to
Young & Rubicam the net proceeds received by him in connection with any exercise
of options we grant to him for serving on our Board of Directors and sale by him
of the underlying shares.
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ITEM 2: RATIFICATION OF ARTHUR ANDERSEN LLP
AS INDEPENDENT ACCOUNTANTS
We are requesting that you ratify our Board's selection of Arthur
Andersen LLP as our independent accountants for 2000. Arthur Andersen LLP has
been our independent accountant since Luminant's initial public offering in
1999. Our Board and Audit Committee believe that Arthur Andersen's experience
with and knowledge of Luminant is important and we would like to continue this
relationship.
Although the selection of independent accountants does not require
ratification, we are submitting this proposal to you because we believe this
matter is significant enough to warrant your participation. If you do not ratify
the appointment of Arthur Andersen LLP, our Board of Directors, after review by
the Audit Committee, will consider the appointment of other independent
accountants. Representatives from Arthur Andersen will be available at the
Annual Meeting to answer your questions and make a statement if they desire.
ITEM 3: APPROVAL OF LUMINANT 2000 EMPLOYEE STOCK PURCHASE PLAN
As of April 14, 2000, the Board of Directors adopted the Luminant 2000
Employee Stock Purchase Plan (the "ESPP"), and reserved seven hundred fifty
thousand (750,000) shares of common stock for issuance under the ESPP, subject
to stockholder approval within 12 months of Board approval.
At the annual meeting, you are being asked to approve the ESPP and the
Board's reservation of shares under the ESPP for the purpose of qualifying such
shares for special tax treatment under Internal Revenue code section 423.
RECOMMENDATION
Our Board of Directors recommends a vote "FOR" the approval of the Luminant
2000 Employee Stock Purchase Plan and the reservation of shares for issuance
under that plan.
SUMMARY OF THE ESPP
The ESPP will provide our employees with an opportunity to become owners of
Luminant through a convenient arrangement for purchasing shares of common stock.
If approved by our stockholders, the ESPP will become effective when the Board's
Compensation Committee decides it should. The following is a summary of the
ESPP. For more detailed information, you should read the full text of the ESPP,
which is included as Appendix A at the end of this booklet.
GENERAL
PURPOSE. The ESPP offers eligible employees the opportunity to purchase
shares of our common stock through after-tax payroll withholding. The ESPP is
intended to permit our employees to acquire an equity interest in Luminant
thereby providing them with an incentive to work for the growth and success of
Luminant. We may use the funds we receive under the ESPP for any general
corporate purpose.
ELIGIBILITY. All of our employees are eligible to participate in the ESPP,
except (1) employees who have not satisfied whatever waiting period the
Compensation Committee sets at the beginning of the payroll deduction period and
(2) employees who hold more than 5% of our common stock. Employees' benefits
will vary depending upon their election as to level of participation. No
non-employee directors are eligible to participate in the ESPP. As of April 1,
1999, there were approximately 800 employees who would be eligible to
participate in the ESPP if it had then been in effect, and if the Compensation
Committee did not require any waiting period.
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SHARES AVAILABLE UNDER THE ESPP. If approved, the ESPP would authorize us
to issue up to seven hundred fifty thousand (750,000) shares of common stock
from authorized but unissued shares or from stock owned by Luminant, including
stock purchased on the market. The number of shares we may issue under the ESPP
automatically adjusts for stock dividends, stock splits, reclassifications and
other changes affecting the common stock.
ADMINISTRATION. The Compensation Committee of our Board of Directors
administers the ESPP. The Compensation Committee may delegate this authority.
The Compensation Committee has the authority and discretion to specify the terms
and conditions of stock purchases by employees under the ESPP (within the
limitations of the ESPP) and to otherwise interpret and construe the terms of
the ESPP and any related agreements. Under the ESPP, the Compensation Committee
(or the Board of Directors) can lengthen or shorten the payroll deduction
periods, increase the purchase price for shares, or make other administrative
adjustments. The ESPP also specifically provides for indemnification of the
Compensation Committee, other directors, and agents for actions taken with
respect to the ESPP.
OPTIONS GRANTED UNDER THE ESPP
HOW OPTIONS ARE GRANTED. On the first day of each payroll deduction period,
a participating employee will automatically receive options to purchase a number
of shares of our common stock with money that is withheld from his or her
paycheck. The number of shares available to the participating employee will be
determined at the end of the payroll deduction period by dividing (1) the total
amount of money withheld during the payroll deduction period by (2) the exercise
price of the options (as described below). Options granted under the ESPP to
employees will be automatically exercised to purchase shares on the last day of
the payroll deduction period, unless the participating employee has, at least
thirty days earlier or by such other deadline as the Compensation Committee
sets, requested that his or her payroll contributions stop. The Compensation
Committee will determine the treatment of fractional shares. Any cash
accumulated in an employee's account for a period in which an employee elects
not to participate will be distributed to the employee.
EXERCISE PRICE. The initial exercise price for options under the ESPP will
be 85% of the lesser of the fair market value of the common stock as of the
first day of the payroll deduction period and as of the last day of that period.
The Compensation Committee may increase the exercise price before a payroll
deduction period begins. No participant can purchase more than $25,000 worth of
our common stock in all payroll deduction periods ending during the same
calendar year. The closing price of a share of our common stock, as reported on
April 12, 2000, was $12 3/8.
ELECTION TO PARTICIPATE. Participating employees must elect before the
beginning of a given payroll deduction period to participate, although a prior
election will carry over until revoked.
TERMINATION OF SERVICE. If an employee's employment ends for any reason,
including death, any cash accumulated in the employee's account will be
distributed, and the employee will immediately cease to participate in the ESPP,
unless the Compensation Committee specifies some other treatment.
OTHER INFORMATION. All options granted under the ESPP will be evidenced by
participation agreements or other approved documentation. The Compensation
Committee has broad discretion to determine the timing, amount, exercisability,
and other terms and conditions of options granted to employees. No options
granted or funds accumulated under the ESPP are assignable or transferable other
than by will or in accordance with the laws of descent and distribution. The
Compensation Committee may impose restrictions on sale of the stock or require
the stock to be held at a particular broker.
8
<PAGE>
AMENDMENT OR TERMINATION OF THE ESPP
The Board of Directors may amend or terminate the ESPP at any time and from
time to time. Stockholder approval is required for any changes if such approval
is required to preserve the ESPP's status as a plan under section 423 of the
Internal Revenue Code. Absent extension by the Board with stockholder approval,
no payroll deduction period will end after April 14, 2010.
TAX CONSEQUENCES
The following summarizes the material federal income tax consequences of
participation in the ESPP. It does not cover employment taxes except as
specified, nor does it cover other federal, state, local, or foreign tax
consequences, if any.
We designed the ESPP to qualify for the favorable federal income tax
treatment provided under Section 423 of the Internal Revenue Code.
A participant's withheld compensation will be post-tax. In other words, the
participant will be taxed on amounts withheld for the purchase of shares of our
common stock as if he or she had instead received his or her full salary or
wages. Other than this, no income will be taxable to a participant until
disposition of the shares acquired, and the method of taxation will depend upon
how long the shares were held before disposition.
If the purchased shares of common stock are disposed of more than two years
after the beginning of the applicable payroll deduction period and more than one
year after the exercise date, or if the participant dies at any time while
holding the stock, then the lesser of (a) the excess of the fair market value of
the stock at the time of such disposition or death over the purchase price or
(b) the discount element (up to 15% of fair market value) of the stock as the
beginning of the applicable offering period will be treated as ordinary income.
Any further gain or any loss will be taxed as a long-term capital gain or loss.
Net long-term capital gains for individuals are currently subject to a maximum
marginal federal income tax rate that is less than the maximum marginal rate for
ordinary income.
If the participant sells or disposes of the stock before the expiration of
either of the holding periods described above (a "disqualifying disposition"),
then the excess of the fair market value of the stock on the exercise date over
the exercise price will be treated as ordinary income at the time of such
disposition. Luminant may, in the future, be required to withhold income taxes
relating to such ordinary income from other payments made to the participant.
The balance of any gain on a sale will be treated as capital gain. Even if the
stock is sold for less than its fair market value on the exercise date, the same
amount of ordinary income is attributed to the participant, and a capital loss
is recognized equal to the difference between the sales price and the fair
market value of the stock on the exercise date. Any capital gain or loss will be
long- or short-term depending on whether the stock has been held for more than
one year.
There are no federal income tax consequences to Luminant by reason of the
grant or exercise of rights under the ESPP. We will, in general, be entitled to
a deduction to the extent amounts are taxed as ordinary income to a participant
by reason of a disqualifying disposition of the purchased shares of stock, but
will not be entitled to a deduction in respect of the ordinary income realized
by a participant upon later disposition, or realized upon death. Luminant's
deduction may be limited under Internal Revenue Code Section 162(m) and may be
subject to disallowance for failure to report the optionee's income (which could
arise if an optionee does not notify Luminant of the sale of stock in a
disqualifying disposition).
INCORPORATION BY REFERENCE
The foregoing is only a summary of the ESPP and is qualified in its entirety
by reference to its full text, a copy of which is attached as Appendix A.
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<PAGE>
NEW PLAN BENEFITS
Benefits to be awarded under the ESPP to employees vary depending upon the
elections of the participants as to their level of participation. Participation
will not begin in the ESPP until after the stockholders approve the plan.
STOCK OWNERSHIP
The table below shows the number and percentage of outstanding shares of our
common stock beneficially owned as of April 1, 2000 by:
- all persons known by us to own beneficially more than 5% of Luminant's
common stock;
- each director and each named executive officer; and
- all directors and executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF PERCENT OF
BENEFICIALLY COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED(2)(3) STOCK(%)(2)(4)
- --------------------------------------- ------------- --------------
<S> <C> <C>
Young & Rubicam............................................. 7,385,393(5) 26.2%
James R. Corey GRAT dated July 9, 1999...................... 1,487,157(6) 5.6%
Randolph L. Austin.......................................... 2,000(7) *
Joseph W. Autem............................................. 205,270(8) *
Thomas G. Bevivino.......................................... 11,800(9) *
James R. Corey.............................................. 1,982,876(10) 7.5%
Michael J. Dolan............................................ 1,500(11) *
Michael H. Jordan........................................... 130,861(12) *
Guillermo G. Marmol......................................... 804,575(13) 3.0%
Donald S. Perkins........................................... 19,709(14) *
Derek R. Reisfield.......................................... 348,884(15) 1.3%
Richard M. Scruggs.......................................... 810,152(16) 3.1%
George P. Stamas............................................ 5,667(17) *
All directors and executive officers as a group
(15 persons) 5,498,559 20.4%
</TABLE>
- ------------------------
An asterisk (*) indicates ownership of less than one percent (1%) of the
outstanding common stock.
(1) Unless otherwise indicated, the address for our executive officers,
directors and 5% or greater stockholders is c/o Luminant Worldwide
Corporation, 13737 Noel Road, Suite 1400, Dallas, Texas 75240-7367.
(2) We have determined beneficial ownership in accordance with the rules of the
Securities and Exchange Commission. In determining the number of shares
beneficially owned by a person and the percentage ownership of that person,
we include shares of common stock subject to options or warrants held by
that person that are currently exercisable or exercisable within 60 days
after April 1, 2000. We do not consider these shares outstanding in
computing the percentage ownership of any other person, however. To our
knowledge, the persons named in the table below 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 below.
(3) The former owners of the eight companies we acquired in connection with our
initial public offering, including Messrs. Perkins, Corey, Scruggs, the
James R. Corey GRAT dated July 9, 1999 and certain of our other executive
officers, may be entitled to additional contingent consideration under the
terms of the acquisition agreements by which we acquired these companies.
The
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<PAGE>
number of shares of common stock that could be issued as payment of
additional contingent consideration are not now determinable and no
assumptions regarding those issuances have been included in the table
above.
(4) The percentage of beneficial ownership for each stockholder is based on
26,369,841 shares of common stock outstanding as of April 1, 2000.
(5) Such information as to beneficial ownership is derived from a Report on
Schedule 13G filed by Young & Rubicam, Inc. on February 14, 2000. Includes
875,248 shares of non-voting common stock and 1,800,000 shares of common
stock subject to a currently exercisable option. Also includes 558,032
shares issued in March 2000 as contingent consideration under the terms of
the acquisition agreement by which we acquired from Young & Rubicam, Inc.
certain assets of Brand Dialogue-New York, a division of Young &
Rubicam, Inc. The number of shares issued as contingent consideration was
based on the financial performance of Brand Dialogue-New York from July 1,
1999 through December 31, 2000. These shares have been delivered to an
escrow agent pending agreement between us and Young & Rubicam, Inc.
regarding the amount of contingent consideration payable under the terms of
the acquisition agreement. The actual number of shares issued to Young &
Rubicam, Inc. as contingent consideration in respect of the performance of
Brand Dialogue-New York during the aforementioned period may increase or
decrease depending on the agreement reached. Young & Rubicam, Inc.
maintains its principal business address at 285 Madison Avenue, New York,
New York 10017.
(6) Includes 215,234 shares issued in March 2000 as contingent consideration
under the terms of an acquisition agreement by which we acquired Potomac
Partners Management Consulting, LLC. The number of shares issued as
contingent consideration was based on the financial performance of Potomac
Partners Management Consulting, LLC from July 1, 1999 through December 31,
2000.
(7) Includes 1,500 shares as to which Mr. Austin has the right to acquire
beneficial ownership within 60 days after April 1, 2000. Also includes 500
shares owned by I-Hatch LLC. Mr. Austin is a managing principal and has
one-third ownership of I-Hatch LLC, and therefore may be deemed to be a
beneficial owner of the shares held by I-Hatch LLC.
(8) Mr. Autem served as our Chief Financial Officer from January 1999 until
July 1999. Includes 191,381 shares of common stock held by Autem Technology
Partners, L.P., of which Autem LLC, of which Mr. Autem is the managing
partner, is general partner.
(9) Includes 10,000 shares as to which Mr. Bevivino has the right to acquire
beneficial ownership within 60 days after April 1, 2000. Also includes 800
shares owned by Vincente V. Bevivino, Mr. Bevivino's son. Mr. Bevivino may
be deemed a beneficial owner of the shares owned by his son.
(10) Such information as to beneficial ownership is derived from a Report on
Schedule 13D filed on October 1, 1999. Includes 1,487,157 shares of common
stock held by the James R. Corey GRAT dated July 9, 1999 (the "GRAT"),
which Mr. Corey may be deemed to beneficially own by virtue of his
position as trustee of the GRAT. Also includes 71,745 shares issued to
Mr. Corey in March 2000 as contingent consideration under the terms of an
acquisition agreement by which we acquired Potomac Partners Management
Consulting, LLC. The number of shares issued as contingent consideration
was based on the financial performance of Potomac Partners Management
Consulting, LLC from July 1, 1999 through December 31, 2000.
(11) Includes 1,500 shares as to which Mr. Dolan has the right to acquire
beneficial ownership within 60 days after April 1, 2000. Does not include
7,385,393 shares beneficially owned by Young & Rubicam, Inc., of which
Mr. Dolan is Vice Chairman, Chief Financial Officer and a director.
11
<PAGE>
(12) Includes 21,500 shares as to which Mr. Jordan has the right to acquire
beneficial ownership within 60 days after April 1, 2000. Does not include
7,385,393 shares beneficially owned by Young & Rubicam, Inc., of which
Mr. Jordan is a director.
(13) Includes 298,779 shares as to which Mr. Marmol has the right to acquire
beneficial ownership within 60 days after April 1, 2000.
(14) Includes 2,829 shares issued in March 2000 as contingent consideration
under the terms of an acquisition agreement by which we acquired Potomac
Partners Management Consulting, LLC. The number of shares issued as
contingent consideration was based on the financial performance of Potomac
Partners Management Consulting, LLC from July 1, 1999 through
December 31, 2000.
(15) Mr. Reisfield served as a Vice Chairman and Executive Vice President from
April 1999 until March 31, 2000. Includes 239,023 shares as to which
Mr. Reisfield has the right to acquire beneficial ownership within
60 days after April 1, 2000. Also includes 500 shares owned by I-Hatch
LLC, of which Mr. Reisfield is a managing principal and has one-third
ownership. Also includes 54,681 shares owned by R4 Venture Partners I.
Mr. Reisfield is a general partner and has 31.25% ownership of R4 Venture
Partners I, and therefore may be deemed to be a beneficial owner of the
shares held by R4 Venture Partners I.
(16) Includes 21,043 shares as to which the owner has the right to acquire
beneficial ownership within 60 days after April 1, 2000. Also includes
150,000 shares held by RSCS Holdings LTD. Mr. Scruggs is the sole member
of RS Resources LLC, which is a general partner of RSCS Holdings LTD, and
therefore Mr. Scruggs may be deemed a beneficial owner of the shares held
by RSCS Holdings LTD. Also includes 12,426 shares issued to Mr. Scruggs in
March 2000 as contingent consideration under the terms of an acquisition
agreement by which we acquired all of the outstanding equity interest of
Align Solutions Corp., of which Mr. Scruggs is a former owner. The number
of shares issued as contingent consideration was based on the financial
performance of Align Solutions Corp. from July 1, 1999 through
December 31, 2000.
(17) Includes 5,667 shares as to which Mr. Stamas has the right to acquire
beneficial ownership within 60 days after April 1, 2000.
12
<PAGE>
EXECUTIVE COMPENSATION AND RELATED MATTERS
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of Luminant's Board of Directors consists solely
of five non-employee directors, of whom one is a non-voting member. The
Compensation Committee is responsible for determining all compensation paid or
awarded to Luminant's key executive officers for periods after Luminant became a
public company. However, substantially all of the compensation Luminant paid to
executive officers for 1999 was established under employment agreements Luminant
negotiated and executed before becoming a public company. Therefore, the
following sections on Philosophy, Base Salary, Cash Bonus and Stock Options
describe the framework, which have guided or will guide the Compensation
Committee regarding decisions not covered by employment agreements.
PHILOSOPHY. The Compensation Committee's goal is to recruit and retain an
executive team of superior talent. To do so, the Committee attempts to offer
competitive and fair compensation that rewards executives for exceptional
performance and holds them accountable for Luminant's performance. Particular
objective factors that the Committee believes are important in assessing
performance include growth in the number of customers for Luminant's services,
growth in revenue, earnings before interest expense, taxes, depreciation, and
amortization, and earnings per share. More subjective factors the Committee
believes are important in evaluating performance include success in integrating
newly acquired companies and hiring and retention of key employees.
In establishing appropriate levels for base salary, the Compensation
Committee will consider the market for senior executives of public companies in
businesses comparable to Luminant's, based on their own business experience. The
Committee will also consider the particular officer's overall contributions to
Luminant over the past year and since its inception. Annual performance bonuses
are based on the Compensation Committee's evaluation of the executive's
performance in achieving several specified annual goals. Option grants are
designed to reward an executive officer for his overall contribution to Luminant
and to serve as an incentive to achieve Luminant's goal of increasing
shareholder value.
Executive officers' compensation consists primarily of three components:
(i) base salary, (ii) cash bonus, and (iii) stock options.
BASE SALARY. The Committee will establish base salaries after considering a
variety of factors that determine an executive's value to Luminant, including
the individual's knowledge, experience, and accomplishments and the level of
responsibility assumed. The Committee also will set base salaries at levels it
considers necessary to retain key employees.
CASH BONUS. The Committee determined Mr. Marmol's cash bonus for the fiscal
year ended December 31, 1999. Cash bonuses are based on the Committee's overall
qualitative evaluation of the performance and accomplishments of each executive
officer for the year.
STOCK OPTIONS. The Committee believes achievement of Luminant's goals may
be fostered by a stock option program that is tailored to employees who
significantly enhance Luminant's value. Accordingly, during the fiscal year
ended December 31, 1999, the Committee or the Board granted employees options to
purchase 5,462,602 shares of Common Stock. Named executive officers received
options with respect to 1,545,072 shares of Common Stock.
CHIEF EXECUTIVE OFFICER'S COMPENSATION. Mr. Guillermo Marmol is one of
Luminant's largest stockholders. His financial well-being is therefore directly
tied to Luminant's performance as reflected in the price per share of Common
Stock. For his services as Luminant's Chief Executive Officer, Mr. Marmol
received an amount of compensation for 1999 determined in accordance with his
pre-public employment agreement. The Committee awarded Mr. Marmol a bonus of
$125,000 for the fiscal year ended December 31, 1999. In doing so, it considered
the successful
13
<PAGE>
completion of Luminant's initial public offering, the integration of the
acquired businesses, and the continuing progress in developing new opportunities
for Luminant and in recruiting and market development.
COMPENSATION DEDUCTION LIMIT. The Securities and Exchange Commission
requires that this report comment on Luminant's policy with respect to a special
rule under the tax laws, section 162(m) of the Internal Revenue Code. That
section limits, with exceptions described below, the compensation that a
corporation can deduct for payments to a chief executive officer and the four
other most highly compensated executive officers to $1 million per officer per
year. A company can deduct compensation (including from exercising options) in
excess of $1 million if it pays the compensation under a plan that its
shareholders approve and that is performance-related. Option exercises are
typically deductible under such a plan if granted with exercise prices at or
above the market price when granted or if grandfathered because granted before
the public offering. The Committee's policy with respect to the compensation
deduction limit is to make every reasonable effort to ensure that compensation
likely to be received by a senior executive is deductible under section 162(m),
while at the same time giving Company executives incentives to stay with and
enhance Luminant's value. The Committee believes, however, that compensation
exceeding the $1 million deduction limit should not be ruled out where such
compensation is justified based on the executive's value to Luminant and its
shareholders. The Committee believes that no executive compensation expenses
paid in 1999 will be non-deductible under section 162(m).
This Report should not be considered incorporated by reference in any document
previously or subsequently filed with the Securities and Exchange Commission
that incorporates by reference all or any portion of this proxy statement,
unless the report is specifically incorporated by reference.
Randolph L. Austin
Michael J. Dolan
Michael H. Jordan
Donald S. Perkins
George P. Stamas
14
<PAGE>
EXECUTIVE COMPENSATION
We were founded in August 1998, did not conduct any operations in 1998 and,
accordingly, did not pay any compensation to our executive officers for the year
ended December 31, 1998. The following table summarizes the compensation paid to
or earned by our Chief Executive Officer, all other executive officers who were
serving as executive officers as of December 31, 1999 and whose salary and bonus
for services rendered in all capacities to Luminant for the fiscal year ended
December 31, 1999 exceeded $100,000, and two additional individuals who served
as executive officers during the fiscal year ended December 31, 1999 and whose
salary and bonus for services rendered in all capacities to Luminant for the
fiscal year ended December 31, 1999 exceeded $100,000. We will use the term
"named executive officers" to refer to these people elsewhere in this proxy
statement.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1) LONG-TERM COMPENSATION
------------------------------------------------ -------------------------------------------------------
AWARDS PAYOUTS
----------------------- -----------------------------
SECURITIES
OTHER RESTRICTED UNDERLYING LONG-TERM
NAME & PRINCIPAL ANNUAL STOCK OPTIONS/ INCENTIVE PLAN ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION AWARD(S) SARS (#) PAYOUTS ($) COMPENSATION
- ---------------- -------- -------- -------- ------------ ---------- ---------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Guillermo G. Marmol.... 1999 $112,692 $125,000 (2) -- 1,195,115 $ -- $ --
CHIEF EXECUTIVE OFFICER
James R. Corey......... 1999 76,313(3) 34,375 (2) -- -- -- --
PRESIDENT & CHIEF
OPERATING OFFICER
Richard M. Scruggs..... 1999 61,016(4) 26,000 (2) -- 50,934(4) -- 372(4)
VICE CHAIRMAN &
EXECUTIVE VICE
PRESIDENT
Thomas G. Bevivino..... 1999 57,788(5) 101,063 80,000(5) -- 60,000 -- --
CHIEF FINANCIAL OFFICER
& SECRETARY
Joseph W. Autem(6)..... 1999 140,280 -- (2) -- 13,889 -- 69,444(6)
Derek R.
Reisfield(7)......... 1999 307,850 -- (2) -- 239,023 -- --
</TABLE>
- --------------------------
(1) Amounts shown reflect compensation earned in the period presented, although
payments earned in prior periods may have been paid in the period presented
and compensation earned in the period presented may have been paid in a
subsequent period.
(2) The amount does not equal or exceed the lesser of $50,000 or 10% of
compensation.
(3) Prior to September 1999, Mr. Corey was a Managing Director and owner of
Potomac Partners Management Consulting LLC. Upon our acquisition of Potomac
Partners Management Consulting in September 1999, Mr. Corey was appointed
our President and Chief Operating Officer at an effective annual salary of
$275,000.
(4) Prior to September 1999, Mr. Scruggs was President, Chief Executive Officer,
Chairman of the Board and an owner of Align Solutions Corp. Upon our
acquisition of Align Solutions Corp. in September 1999, Mr. Scruggs was
appointed Vice Chairman and Executive Vice President at an effective annual
salary of $250,000. The number of securities under the heading "Securities
Underlying Options/SARS" represents the number of Luminant shares underlying
options issued to Mr. Scruggs to replace options he held in Align Solutions
Corp. at the time of acquisition by Luminant. The amount set forth in the
column titled "All Other Compensation" represents premiums paid by Luminant
for life insurance policies held by Mr. Scruggs.
(5) Mr. Bevivino performed financial advisory and consulting services for us
from March 1999 until June 1999, when he was appointed our Vice President of
Finance. Mr. Bevivino served as our Vice President of Finance
15
<PAGE>
from June 1999 until December 1999, when he was appointed our Chief
Financial Officer and Secretary. The amounts set forth for Mr. Bevivino in
the columns titled "Salary" and "Bonus" reflect all amounts paid to
Mr. Bevivino for his services to Luminant as a Vice President of Finance,
Chief Financial Officer and Secretary during 1999. The amount set forth for
Mr. Bevivino in the column titled "Other Annual Compensation" reflects
amounts paid to Mr. Bevivino as a result of financial advisory and
consulting services provided to Luminant by ARC Group LLC, a firm in which
Mr. Bevivino holds a 50% ownership interest.
(6) Mr. Autem served as our Chief Financial Officer from January 1999 until
July 1999 and has entered into an agreement to continue providing consulting
services to us. The amount set forth for Mr. Autem under the column "All
Other Annual Compensation" includes consulting fees paid to Mr. Autem
following his resignation as Chief Financial Officer in accordance with the
terms of a severance agreement we entered into with Mr. Autem in connection
with his resignation.
(7) Mr. Reisfield served as a Vice Chairman and Executive Vice President from
April 1999 until March 31, 2000.
EMPLOYMENT AGREEMENTS
On September 1, 1998, we entered into an employment agreement with
Mr. Marmol, our Chief Executive Officer, for a term of three years and four
months. The agreement will automatically renew for successive one-year periods
beginning January 1, 2002, unless we or Mr. Marmol provides the other with
written notice that the Agreement will not renew within 90 days of the
expiration date. This agreement provides that Mr. Marmol will devote
substantially all of his time to the operation of our business. The agreement
establishes his initial base salary at $300,000 and eligibility for up to an
equal annual bonus. Under the agreement, in connection with our initial public
offering we granted to Mr. Marmol options to purchase 1,195,115 shares of common
stock, at an exercise price equal to the initial public offering price of $18.00
per share. 25% of these options are currently exercisable and one-third of the
remainder will become exercisable on each of the first, second and third
anniversaries of the date of grant. These options will remain exercisable for up
to 10 years after the date of grant unless Mr. Marmol's employment is earlier
terminated, in which case the options will remain exercisable for up to
36 months after his employment ends. We may terminate the agreement for cause or
upon death or disability. Cause means a final non-appealable conviction for, or
plea of no contest to, a charge of commission of a felony, the good faith
determination by the Board of Directors that Mr. Marmol has committed any act in
the course of employment constituting fraud or dishonesty on 20 days' notice, or
a determination by a court of competent jurisdiction that Mr. Marmol has
breached his non-compete agreement; his confidentiality agreement; or interfered
with our relationship with any client, supplier or other person. In the case of
a termination due to disability we will continue to pay Mr. Marmol his salary
and benefits for a period of six months. Mr. Marmol has the right to terminate
his employment with us at any time for any reason. If we terminate Mr. Marmol's
agreement for any reason other than for cause, or Mr. Marmol terminates his
employment for good reason, Mr. Marmol will be entitled to receive severance pay
equal to his base salary for a period of 18 months following the termination and
maximum bonus for the period remaining under the term of the agreement,
continuation of benefits for that period and automatic exercisability of all
stock options. Good reason includes a change of control; material breach of the
employment agreement by us; relocation of our principal business office to more
than 35 miles outside Dallas; or Mr. Marmol's duties are diminished. Mr. Marmol
is subject to covenants intended to bar his competition and solicitation of
clients or employees through one year after his employment ends for any reason.
As of September 16, 1999, we entered into an employment agreement with James
R. Corey, our President and Chief Operating Officer, for the period through
September 16, 2002. Mr. Corey will receive an annual salary of $275,000 plus a
bonus of up to the same amount. Mr. Corey will receive the same benefits as our
other employees and will be eligible to receive options under Luminant's
long-term incentive plan. Upon a change of control of Luminant, all of
Mr. Corey's options will become immediately exercisable. We may terminate
Mr. Corey's agreement for cause or upon death or disability. Cause includes a
material breach of Mr. Corey's obligations or Mr. Corey's gross negligence,
16
<PAGE>
conviction for, or plea of no contest to, a charge of commission of a felony, a
breach by Mr. Corey of his non-compete or confidentiality agreement, or if
Mr. Corey interfered with our relationship with any client, supplier or other
person. Mr. Corey may terminate his employment with us with or without good
reason. Good reason means if we materially violate the employment agreement or
if we relocate his primary office by more than 35 miles from Herndon, Virginia.
If Mr. Corey resigns or we terminate his employment with or without cause or
because of death or disability, we will pay Mr. Corey any unpaid portion of his
salary pro-rated through the date of actual termination, reimburse business
expenses, pay accrued vacation and pay health insurance premiums for that
period. In addition, if we terminate Mr. Corey's employment without cause or he
resigns for good reason, Mr. Corey will receive a severance payment equal to his
base salary for a period of 18 months following the termination, the pro rata
share of the bonus for the year of his termination, continuation of his benefits
and acceleration of the next sixth of his options. Mr. Corey will be subject to
covenants intended to bar his competition and solicitation of clients or
employees during his employment and for one year after his employment ends for
any reason.
As of September 16, 1999, we entered into an employment agreement with
Richard M. Scruggs, our Vice Chairman and Executive Vice President, for the
period through September 16, 2002. Mr. Scruggs will receive an annual salary of
$250,000 plus a bonus of up to the same amount. Mr. Scruggs will receive the
same benefits as our other employees and will be eligible to receive options
under Luminant's long-term incentive plan. Upon a change of control of Luminant,
all of Mr. Scruggs's options will become immediately exercisable. We may
terminate Mr. Scruggs's agreement for cause or upon death or disability. Cause
includes a material breach of Mr. Scruggs's obligations or Mr. Scruggs's gross
negligence, conviction for, or plea of no contest to, a charge of commission of
a felony, a breach by Mr. Scruggs of his non-compete or confidentiality
agreement, or if Mr. Scruggs interfered with our relationship with any client,
supplier or other person. Mr. Scruggs may terminate his employment with us with
or without good reason. Good reason means if we materially violate the
employment agreement or if we relocate his primary office by more than 35 miles
from Harris County, Texas. If Mr. Scruggs resigns or we terminate his employment
with or without cause or because of death or disability, we will pay
Mr. Scruggs any unpaid portion of his salary pro-rated through the date of
actual termination, reimburse business expenses, pay accrued vacation and pay
health insurance premiums for that period. In addition, if we terminate
Mr. Scruggs's employment without cause or he resigns for good reason,
Mr. Scruggs will receive a severance payment equal to his base salary for a
period of 18 months following the termination, the pro rata share of the bonus
for the year of his termination, continuation of his benefits and acceleration
of the next sixth of his options. Mr. Scruggs is subject to covenants intended
to bar his competition and solicitation of clients or employees during his
employment and for one year after his employment ends for any reason.
As of June 28, 1999, we entered into an employment agreement with Thomas G.
Bevivino, our Chief Financial Officer and Secretary, for the period through
June 28, 2002. Mr. Bevivino will receive an annual salary of $150,000 plus a
bonus of up to the same amount. Under the agreement, in connection with our
initial public offering we granted Mr. Bevivino options to acquire 60,000 shares
of common stock under our long-term incentive plan, exercisable at the initial
public offering price of $18.00 per share. The options will become exercisable
in sixths every sixth months after the date we granted them and will remain
exercisable for up to 10 years after the date of the grant. We may terminate
Mr. Bevivino's agreement with or without cause or upon death or disability.
Cause includes a material breach of Mr. Bevivino's obligations or
Mr. Bevivino's gross negligence, conviction for, or plea of no contest to, a
charge of commission of a felony, a breach by Mr. Bevivino of his non-compete or
confidentiality agreement, or if Mr. Bevivino interfered with our relationship
with any client, supplier or other person. Mr. Bevivino may terminate his
employment with us with or without good reason. Good reason means if we
materially violate the employment agreement or if within the first anniversary
of the initial public offering we relocate his primary office by more than 35
miles from Horsham, Pennsylvania. If Mr. Bevivino resigns or we terminate his
employment with or without cause or because
17
<PAGE>
of death or disability, we will pay Mr. Bevivino any unpaid portion of his
salary pro-rated through the date of actual termination, reimburse business
expenses, pay accrued vacation and pay health insurance premiums for that
period. In addition, if we terminate Mr. Bevivino's employment without cause or
he resigns for good reason, Mr. Bevivino will receive a severance payment equal
to his base salary for a period of 18 months following the termination and the
pro rata share of the bonus for the year of his termination, continuation of his
benefits and acceleration of the next sixth of his options. Mr. Bevivino is
subject to covenants intended to bar his competition and solicitation of clients
or employees during his employment and for one year after his employment ends
for any reason.
Mr. Reisfield was also party to an employment agreement with us during his
tenure as one of our executive officers. The employment agreement terminated
when he left his employment with us.
SEVERANCE AGREEMENT
Joseph Autem resigned as our Chief Financial Officer effective as of
July 23, 1999. In connection with Mr. Autem's resignation, we entered into a
severance agreement with him effective July 23, 1999. Under the severance
agreement. Mr. Autem is serving as a financial consultant to Luminant for a
period of six years. He is being compensated at the rate of $13,888.89 per month
and will receive an acquisition fee if we acquire any company Mr. Autem refers
to us as an acquisition candidate after July 23, 1999. Upon the closing of our
initial public offering, we granted Mr. Autem immediately exercisable and fully
vested options to purchase 13,889 shares of our common stock at an exercise
price of $0.01 per share. Mr. Autem exercised these options in December 1999. We
paid $56,249.75 as reimbursement of Mr. Autem's fees and expenses incurred in
furtherance of our business, and an additional $25,000 in deferred consulting
fees.
OPTION GRANTS
The following table provides information on options granted to the named
executive officers during 1999:
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/
UNDERLYING SARS MARKET
OPTIONS/ GRANTED TO EXERCISE OR PRICE ON GRANT DATE
SARS EMPLOYEES IN BASE PRICE DATE OF EXPIRATION PRESENT VALUE
NAME GRANTED(#) FISCAL YEAR(1) ($/SHARE) GRANT DATE $(2)
- ---- ----------- -------------- ----------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Guillermo G. Marmol(3)............ 1,195,115 21.97% $18.00 $18.00 9/15/09 $13,617,234
James R. Corey.................... -- -- -- -- -- --
Richard M. Scruggs................ 17,910(4) .33% $ .25 $18.00 6/30/07 $ 319,136
22,540(5) .41% $ 1.52 $18.00 4/30/08 $ 382,622
10,484(6) .19% $ 2.86 $18.00 2/28/09 $ 169,989
Thomas G. Bevivino(7)............. 60,000 1.10% $18.00 $18.00 9/15/09 $ 683,645
Joseph W. Autem(8)................ 13,889 .25% $ .01 $18.00 9/15/09 $ 249,901
Derek R. Reisfield(9)............. 239,023 4.4% $18.00 $18.00 9/15/09 $ 2,723,447
</TABLE>
- ------------------------
(1) The percentages in the table above are based on options to purchase
5,462,602 shares of common stock granted under our stock option plan in the
year ended December 31, 1999 to our employees.
(2) In the table above, the value of options granted is based on a Black-Scholes
pricing model with a volatility of 70%, a risk-free rate of return of 6.43%,
a dividend yield of 0%, and exercise of options five years from date of
grant. The actual value, if any, that an executive officer may realize will
depend on the excess of the market price over the exercise price on the date
the option is
18
<PAGE>
exercised so there is no assurance that the value realized by an executive
officer will be at or near the value estimated by the Black-Scholes model,
which is based on assumptions as to the variables of stock price to
volatility, future dividend yield and interest rate. For an estimate of the
impact of all stock option grants on Luminant's financial results using the
Black-Scholes valuation method, see Note 10 in the Notes to Consolidated
Financial Statements in the Luminant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999.
(3) Of the options for 1,195,115 shares granted to Mr. Marmol on September 15,
1999, 25% were exercisable immediately. One-third of the remainder will
become exercisable on each of the first, second, and third anniversaries of
the date of grant. Exercisable options will remain exercisable for up to 10
years after the date of grant or, upon the earlier termination of Mr.
Marmol's employment for up to thirty-six months after his employment ends.
(4) 40% of the options granted to Mr. Scruggs became exercisable on July 1,
1999, and the remaining become exercisable at the rate of one-thirty sixth
per month each month thereafter. The options will remain exercisable for up
to 10 years after the date of the grant. 9,552 of these options were
exercisable as of April 1, 2000.
(5) 40% of the options granted to Mr. Scruggs became exercisable on January 1,
2000, and the remaining become exercisable at the rate of one-thirty sixth
per month each month thereafter. The options will remain exercisable for up
to 10 years after the date of the grant. 10,143 of these options were
exercisable as of April 1, 2000.
(6) 40% of the options granted to Mr. Scruggs become exercisable on
February 28, 2001, with the remaining 60% becoming exercisable 1/36 each
month thereafter. The options will remain exercisable for up to 10 years
after the date of the grant. None of these options were exercisable as of
April 1, 2000.
(7) Of the options granted to Mr. Bevivino on September 15, 1999 one-sixth will
become exercisable every six months after the date of grant and will remain
exercisable for up to 10 years after the date of grant.
(8) Mr. Autem was granted options for 13, 889 shares on September 15, 1999.
These options were immediately exercisable and fully vested. Mr. Autem
exercised these options in December 1999.
(9) Mr. Reisfield was granted options for 239,023 shares on September 15, 1999.
The options were immediately exercisable and will remain exercisable for up
to 10 years after the date of grant, or until we terminate all options under
the long-term incentive plan if earlier than 10 years after the date of
grant.
19
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR, AND FISCAL YEAR-END STOCK
OPTION VALUES
The following table sets forth for each of the named executive officers
certain information concerning options exercised during the fiscal year ended
December 31, 1999 and the number of shares subject to both exercisable and
unexercisable stock options as of that date. The table also shows values for
"in-the-money" options as of December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED VALUE DECEMBER 31, 1999 DECEMBER 31, 1999
ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
NAME (#) ($) (#) (1) ($)(2)
- ---- ----------- ---------- ------------------------------- -------------------------
<S> <C> <C> <C> <C>
Guillermo G. Marmol... -- -- 298,779/896,336 $8,216,423/$24,649,240
James R. Corey........ -- -- -- --
Richard M. Scruggs.... -- -- 19,695/31,239 $878,277/$1,370,398
Thomas G. Bevivino.... -- -- 0/60,000 $0/$1,650,000
Joseph W. Autem....... 13,889 $534,588(3) -- --
Derek R. Reisfield.... -- -- 239,023/0 $6,573,133/$0
</TABLE>
- ------------------------
(1) Includes both "in-the-money" and "out-of-the-money" options. "In-the-money"
options are options with exercise prices below the market price of
Luminant's common stock on December 31, 1999.
(2) Includes only "in-the-money" options as of December 31, 1999. Value is based
on the closing price of Luminant's common stock on December 31, 1999
($45.50) minus the exercise price of the options.
(3) Based on the fair market value of Luminant's common stock as represented by
the closing price on the exercise date, minus the exercise price and
multiplied by the number of shares acquired. The closing price of Luminant's
common stock on December 9, 1999, the exercise date, was $38.50 per share.
LIMITATION OF LIABILITY; INDEMNIFICATION OF OFFICERS AND DIRECTORS
As the Delaware General Corporation Law permits, we have included in our
certificate of incorporation a provision to eliminate the personal liability of
our directors for or with respect to any acts or omissions in the performance
the director's duties as a director. In addition, our charter and bylaws provide
that we must indemnify our officers and directors to the full extent permitted
by the Delaware General Corporation Law subject to specific exceptions,
including circumstances in which indemnification would be discretionary under
applicable law. We are also required to advance expenses to our officers and
directors as incurred in connection with proceedings against them for which they
may be indemnified. At present, we are not aware of any pending or threatened
litigation or proceeding involving any of our directors, officers, employees or
agents in which we would be required or permitted to indemnify them. We believe
that these charter provisions and indemnification agreements are necessary to
attract and retain qualified persons as directors and officers.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 1999, the Compensation Committee of the
Board of Directors consisted of Messrs. Austin, Dolan, Jordan, Perkins and
Stamas. None of these members of the Compensation Committee has ever been an
officer or employee of Luminant. No interlocking relationship exists or has
existed between any of these members of the Compensation Committee or any other
member of our Board of Directors and any members of the board of directors or
compensation committee of any other company.
20
<PAGE>
Michael H. Jordan, our Chairman and a director and member of the
Compensation Committee, acquired a membership interest in Commonwealth
Principals II, LLC, a Virginia-based merchant banking firm, in December 1998 for
a purchase price of $400,000. Commonwealth founded, and provided the initial
capitalization for, Luminant. In connection with our organization in
August 1998, we issued 1,665,273 shares of common stock to Commonwealth in
exchange for consulting, financial advisory and capital raising services
provided by members of Commonwealth, and Commonwealth's commitment to advance
necessary funds, in connection with our initial public offering and the related
acquisitions of the eight companies. In September 1999 Commonwealth distributed
all of its shares of Luminant common stock to its members and Mr. Jordan
received 109,361 shares. See "Certain Relationships and Related
Transactions--Our Formation."
Luminant retained the law firm of Wilmer, Cutler & Pickering, Washington,
D.C., in connection with its initial public offering and acquisition of the
eight companies and has continued to retain Wilmer, Cutler & Pickering as its
outside legal counsel. George P. Stamas, a director of Luminant and a non-voting
member of the Compensation Committee, was a partner with Wilmer, Cutler &
Pickering until January 2000 and remains a consultant to the firm. Since
January 2000, Mr. Stamas has served as a Vice Chair of Deutsche Banc Alex.
Brown, an investment bank which served as lead underwriter in Luminant's initial
public offering. See "Certain Relationships and Related Transactions--Other
Transactions."
21
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
OUR FORMATION
Luminant was formed on August 22, 1998. Luminant was initially capitalized
by Commonwealth Principals II, LLC, a Virginia-based merchant banking firm. In
connection with our organization in August 1998, we issued 1,665,273 shares of
common stock to Commonwealth in exchange for consulting, financial advisory and
capital raising services provided by members of Commonwealth, and Commonwealth's
commitment to advance necessary funds, in connection with Luminant's initial
public offering and the related acquisitions of the eight companies. In
addition, Guillermo G. Marmol, our Chief Executive Officer, purchased 166,527
shares of our common stock in September 1998 for a purchase price of $200,000 in
cash.
Out of the proceeds of our initial public offering, we reimbursed
Commonwealth for the approximately $3.9 million in funds advanced to us together
with interest at the prime rate. Immediately following our initial public
offering, Commonwealth owned approximately 6.97% of the then-issued and
outstanding shares of Luminant common stock. Following our initial public
offering in September 1999, Commonwealth distributed all of its shares of
Luminant common stock to its members. The management committee of Commonwealth
during the time in which Commonwealth held shares of Luminant common stock,
which committee had the power to vote and make decisions regarding the
disposition of the Luminant shares, consisted of J. Marshall Coleman, Sean
Coleman, and Santanu Sarkar.
Some of our current and former executive officers and directors acquired
direct and/or indirect interests in Commonwealth between September 1998 and
May 1999 and received shares of Luminant common stock when Commonwealth
distributed its Luminant shares to its members. Guillermo G. Marmol, our Chief
Executive Officer and a director, acquired a membership interest in Commonwealth
in September 1998 for a purchase price of $1.00 and received 339,269 shares of
Luminant common stock from Commonwealth in September 1999 following our initial
public offering. Michael H. Jordan, our Chairman and a director, acquired a
membership interest in Commonwealth in December 1998 for a purchase price of
$400,000 and received 109,361 shares of Luminant common stock from Commonwealth
in September 1999 following our initial public offering. Derek R. Reisfield, our
former Vice Chairman and Executive Vice President, acquired a membership
interest in Commonwealth in April 1999 for a purchase price of $200,000 and
received 54,680 shares of Luminant common stock from Commonwealth in
September 1999 following our initial public offering. In addition, R4 Venture
Partners I, of which Mr. Reisfield is a general partner and holds a 31.25%
pecuniary interest, acquired a membership interest in Commonwealth in May 1999
for a purchase price of $200,000 and received 54,681 shares of Luminant common
stock from Commonwealth in September 1999 following our initial public offering.
Autem Technology Partners, L.P. acquired a membership interest in Commonwealth
in May 1999 for a purchase price of $500,000 and received 191,381 shares of
Luminant common stock from Commonwealth in September 1999 following our initial
public offering. To our knowledge, Joseph W. Autem, our former Chief Financial
Officer, is the managing partner of Autem LLC which in turn is general partner
of Autem Technology Partners, L.P.
ACQUISITION OF THE EIGHT COMPANIES
Simultaneously with the closing of our initial public offering, we acquired
by merger all of the issued and outstanding stock and interests of the eight
companies, except that we accomplished the acquisition of Brand Dialogue-New
York by an asset purchase. Upon acquisition, each of the eight companies became
a wholly-owned subsidiary of Luminant. At the closing of the acquisitions, we
paid to the owners of the eight companies aggregate consideration equal to
$422.0 million, including $59.1 million in cash, assumption of $9.4 million of
debt, issuance of 16,602,462 shares of common stock, the issuance of options to
purchase 1,800,000 shares of common stock to Young & Rubicam,
22
<PAGE>
Inc., and the issuance of options to purchase an aggregate of 2,202,510 shares
of Luminant common stock to replace then outstanding options and participation
rights issued by some of the eight companies. In addition, the owners of the
eight companies received the right to earn contingent payments as described
below. The consideration paid for the eight companies was determined through
arm's-length negotiations between Luminant Worldwide Corporation and the
representatives of the eight companies. In determining how much consideration to
pay for the eight companies, we considered, among other factors, the historical
operating results, the net worth, the liabilities and indebtedness and the
future prospects of each of the eight companies. Independent counsel represented
each of the eight companies in the negotiation of the terms and conditions by
which they were acquired.
Under the terms of the acquisition agreements by which we acquired the eight
companies, we issued in March 2000 approximately $47.2 million in contingent
consideration to the former owners of five of the eight companies as a result of
the operations of the individual companies during the period from July 1, 1999
through December 31, 1999, including $.055 million in cash and 1,663,343 shares
of common stock. 558,032 of the 1,663,343 shares issued as contingent
consideration are being held by an escrow agent pending agreement between us and
a former owner of one of the eight companies regarding the amount of contingent
consideration payable under the terms of the acquisition agreement. The former
owners of the eight companies are eligible to receive additional contingent
consideration based on Luminant's combined results during the period from
January 1, 2000 through June 30, 2000, as well as certain other amounts based on
revenues derived from a particular client from contracts we enter into with that
client between July 1, 1999 and June 30, 2002.
James R. Corey, our President and Chief Operating Officer and a director,
was a Managing Director and an owner of Potomac Partners Management
Consulting, LLC, one of the eight companies we acquired simultaneously with our
initial public offering. Mr. Corey received an aggregate of 1,695,777 shares of
common stock and approximately $5.6 million in cash for his ownership interest
in Potomac Partners, as well as the right to receive contingent consideration as
described above. In March 2000, Mr. Corey and one of his affiliates received an
aggregate of 286,979 shares as contingent consideration based on the financial
performance of Potomac Partners from July 1, 1999 through December 31, 1999.
Mr. Corey is eligible to receive additional contingent consideration based on
Luminant's combined results during the period from January 1, 2000 through
June 30, 2000, as well as certain other amounts based on revenues derived from a
particular client from contracts we enter into with that client between July 1,
1999 and June 30, 2002. Under the terms of the acquisition agreement by which we
acquired Potomac Partners, Mr. Corey was also appointed to our board of
directors and received registration rights with respect to the shares of common
stock he received in exchange for his interest in Potomac Partners.
Donald S. Perkins, one of our directors, was also an owner of Potomac
Partners. Mr. Perkins received 16,880 shares of common stock and approximately
$.056 million in cash for his ownership interest in Potomac Partners, as well as
the right to receive contingent consideration as described above. In March 2000
Mr. Perkins received 2,829 shares as contingent consideration based on the
financial performance of Potomac Partners from July 1, 1999 through
December 31, 1999. Mr. Perkins is eligible to receive additional contingent
consideration based on Luminant's combined results during the period from
January 1, 2000 through June 30, 2000, as well as certain other amounts based on
revenues derived from a particular client from contracts we enter into with that
client between July 1, 1999 and June 30, 2002.
Richard M. Scruggs, our Vice Chairman, Executive Vice President and a
director, was President, Chief Executive Officer and Chairman of the Board and
an owner of Align Solutions Corp., one of the eight companies we acquired
simultaneously with our initial public offering. Mr. Scruggs received 776,660
shares of common stock and approximately $3.4 million in cash for his ownership
interest in Align, as well as the right to receive contingent consideration as
described above. In addition,
23
<PAGE>
Mr. Scruggs received options to purchase 50,934 shares of our common stock at
exercise prices ranging from $.25 to $2.86 per share in exchange for outstanding
options for Align shares. In March 2000, Mr. Scruggs received 12,426 shares
issued as contingent consideration based on the financial performance of Align
from July 1, 1999 through December 31, 1999. Mr. Scruggs is eligible to receive
additional contingent consideration based on Luminant's combined results during
the period from January 1, 2000 through June 30, 2000. Under the terms of the
acquisition agreement by which we acquired Align, Mr. Scruggs was also appointed
to our board of directors and received registration rights with respect to the
shares of common stock he received in exchange for his interest in Align.
Under the terms of the acquisition agreements by which we acquired the eight
companies, the former owners of the eight companies, including Messrs. Corey,
Scruggs, and Perkins have the right to cause us to register under the Securities
Act of 1933 any shares of Luminant common stock which they received pursuant to
the acquisition agreements, whenever we propose to register under the Securities
Act of 1933 any shares of common stock for our own or another's account in a
public offering, other than:
- any shelf registration of shares of common stock to be used as
consideration for acquisitions of additional businesses;
- registrations relating to employee benefits plans; and
- registrations relating to rights offerings made to our stockholders.
We have agreed to pay all costs of this registration (other than
underwriting discounts) and to keep the registration effective for at least
120 days, or whatever shorter period may be required to sell the registered
shares.
YOUNG & RUBICAM, INC.
Simultaneously with the closing of our initial public offering, we acquired
assets of Brand Dialogue-New York, a division of Young & Rubicam, Inc. for a
purchase price of approximately $75.5 million, which we paid through the
issuance of 4,192,361 shares of common stock and immediately exercisable options
to purchase 1,800,000 shares of our common stock at an exercise price equal to
the $18.00 per share initial public offering price. Under the terms of the
agreement by which we acquired the assets of Brand Dialogue-New York, Young &
Rubicam also purchased 835,000 shares of non-voting common stock directly from
us at the initial public offering price of $18.00 per share.
In March 2000, we issued 558,032 shares of common stock as contingent
consideration under the terms of the acquisition agreement by which we acquired
assets of Brand Dialogue-New York from Young & Rubicam. The number of shares
issued as contingent consideration was based on the financial performance of
Brand Dialogue-New York from July 1, 1999 through December 31, 1999. These
shares have been delivered to an escrow agent pending agreement between us and
Young & Rubicam regarding the amount of contingent consideration payable under
the terms of the acquisition agreement. The actual number of shares issued to
Young & Rubicam as contingent consideration in respect of the performance of
Brand Dialogue-New York during the aforementioned period may increase or
decrease depending on the agreement reached between us and Young & Rubicam.
As of April 1, 2000, Young & Rubicam owns approximately 19% of our
outstanding common stock, or approximately 26% if the Young & Rubicam option is
exercised in full. Michael J. Dolan became a director of Luminant upon the
closing of our initial public offering under the terms of our acquisition
agreement with Young & Rubicam. Mr. Dolan is Vice Chairman, Chief Financial
Officer and a director of Young & Rubicam.
Under the terms of the agreement by which we acquired Brand Dialogue-New
York, Young & Rubicam has agreed that it will ask AT&T, the United States Postal
Service, Citigroup,
24
<PAGE>
Dr. Pepper/7-Up, Inc., Sony Corporation, Showtime Networks, Inc., Phillip Morris
Companies Inc. and Pfizer Inc., as well as other clients who may be identified
in the future by Luminant and Young & Rubicam together or by Young & Rubicam
under the procedures set forth in the Brand Dialogue-New York acquisition
agreement, to select us to perform services in connection with on-going
engagements and future engagements substantially similar to the type of work
performed by Brand Dialogue-New York prior to the closing of our initial public
offering. Young & Rubicam has the right not to recommend us or to terminate our
involvement in an existing engagement if in its judgment recommending or
retaining us is not in the best interests of its clients or if we fail to
perform our obligations or default under the terms of any client engagement. A
Young & Rubicam client can also cancel the engagement. We and Young & Rubicam
intend to cooperate in marketing our respective services to each others' clients
in order to increase the range, breadth and depth of services available to such
clients.
In addition, upon the closing of our initial public offering we entered into
a Transition Services Agreement with Young & Rubicam under which Young & Rubicam
granted us a license to use, for a term not to exceed 12 months, office space
used by Brand Dialogue-New York prior to our initial public offering. Young &
Rubicam also agreed to provide us with specified services in connection with our
use of this space. Additional fees will be paid to Young & Rubicam for the
provision of specified services.
OTHER TRANSACTIONS
In September 1998, we entered into a management services agreement with
Commonwealth to provide us with consulting and financial advisory services. The
agreement terminated at the closing of our initial public offering. For the year
ended December 31, 1998, we paid $49,000 to Commonwealth under that agreement.
For the year ended December 31, 1999, $3.9 million was paid to Commonwealth
under this agreement.
We have entered into employment agreements with each of Messrs. Marmol,
Bevivino, Corey and Scruggs. For the details of these agreements, please refer
to "Executive Compensation and Related Matters--Employment Agreements." In
addition, in July 1999 we entered into a severance agreement with Mr. Autem. For
details of this agreement, please refer to "Executive Compensation and Related
Matters--Severance Agreement."
We entered into an agreement with ARC Group LLC and Commonwealth, dated
March 8, 1999, under which ARC Group LLC agreed to provide consulting services
to us in exchange for a payment of $80,000, an additional payment of $240,000
upon closing of our initial public offering and reimbursement of their fees and
expenses. Commonwealth agreed to guarantee our performance under this agreement.
Mr. Bevivino, our Chief Financial Officer and Secretary holds a 50% ownership
interest in and is a managing member of ARC Group LLC.
Luminant retained the law firm of Wilmer, Cutler & Pickering,
Washington, D.C., in connection with its initial public offering and acquisition
of the eight companies and has continued to retain Wilmer, Cutler & Pickering as
its outside legal counsel. George P. Stamas, a director of Luminant, was a
partner with Wilmer, Cutler & Pickering until January 2000 and remains a
consultant to the firm. Since January 2000, Mr. Stamas has served as a Vice
Chair of Deutsche Banc Alex. Brown, an investment bank that served as lead
underwriter in Luminant's initial public offering.
In September 1999 we entered into a registration rights agreement with
Commonwealth and Mr. Marmol under which we granted to Commonwealth and
Mr. Marmol piggyback registration rights. Under the terms of the agreement,
Commonwealth and Mr. Marmol have the right to cause us to register under the
Securities Act of 1933 any shares of Luminant common stock which they hold or
which they have a right to acquire under options granted in connection with our
initial public offering,
25
<PAGE>
whenever we propose to register under the Securities Act of 1933 any shares of
common stock for our own or another's account in a public offering, other than:
- any shelf registration of shares of common stock to be used as
consideration for acquisitions of additional businesses;
- registrations relating to employee benefits plans; and
- registrations relating to rights offerings made to our stockholders.
We have agreed to pay all costs of this registration (other than
underwriting discounts) and to keep the registration effective for at least
120 days, or whatever shorter period may be required to sell the registered
shares.
26
<PAGE>
OTHER INFORMATION
STOCK PERFORMANCE
The following graph compares total stockholder return on our common stock
with the cumulative total return of the Nasdaq Market Index and the cumulative
return of the peer group described in footnote (1) below for the period from
September 16, 1999, the date that Luminant's common stock began trading on the
Nasdaq National Market following our initial public offering, through
December 31, 1999, the end of our most recent fiscal year. The graph plots the
growth in value of an initial $100 investment over the indicated time period,
assuming the reinvestment of dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG LUMINANT WORLDWIDE
CORPORATION, NASDAQ MARKET INDEX AND PEER GROUP INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
LUMINANT WORLDWIDE CORPORATION PEER GROUP INDEX NASDAQ MARKET INDEX
<S> <C> <C> <C>
9/16/99 100 100 100
9/30/99 116.59 104.11 100
10/31/99 148.34 148.09 107.74
11/30/99 121.33 162.22 120.49
12/31/99 172.51 224.26 147.32
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ASSUMES $100 INVESTED ON SEPT. 16, 1999
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 1999
(1) The peer group is composed of the following companies that we compete with
on a worldwide basis in the internet professional services industry:
Appnet, Inc., Braun Consulting, Inc., iXL Enterprises, Inc.,
Proxicom, Inc., Razorfish, Inc., Sapient Corp., Scient Corp., U.S.
Interactive, Inc., Viant Corp., and Marchfirst, Inc.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that our
directors and executive officers, and persons who own more than ten percent
(10%) of our common stock, file with the SEC initial reports of ownership and
reports of changes in ownership of our common stock. Our officers,
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directors and greater-than-ten-percent stockholders are required to furnish us
with copies of all Section 16(a) reports they file.
Based solely on our review of the Section 16(a) reports furnished to us and
written representations that no other reports were required, we believe that our
directors, officers and greater-than-ten-percent stockholders reported all
transactions in Luminant common stock and options on a timely basis during the
fiscal year ended December 31, 1999, except that Mr. Austin and Mr. Reisfield (a
former officer) did not timely file Form 4s reporting the purchase of shares of
Luminant common stock in the initial public offering, and Mr. Perkins did not
timely file a Form 3 upon his appointment as a director. These reports have
subsequently been filed.
PROPOSALS FOR THE 2001 ANNUAL MEETING
If you want to include a proposal in the proxy statement for Luminant's 2001
Annual Meeting, please send the proposal to us at 13737 Noel Road, Suite 1400,
Dallas, Texas 75240, Attention: Thomas G. Bevivino, Secretary. Proposals must be
received on or before December 19, 2000 to be included in next year's proxy
statement. Please note that proposals must comply with all of the requirements
of Rule 14a-8 under the Securities Exchange Act of 1934, as well as the
requirements of our certificate of incorporation and bylaws. Under Rule 14a-4 as
promulgated under the Securities Exchange Act of 1934, we will be able to use
proxies given to us for the 2001 Annual Meeting to vote for or against any
stockholder proposal submitted other than pursuant to Rule 14a-8 at our
discretion unless the proposal is submitted to us on or before 90 days before
next year's annual meeting.
OTHER MATTERS
Although our management is not aware of any other matters that may come
before the Annual Meeting, if any such matters should be presented, the persons
named in the accompanying proxy card intend to vote such proxy in accordance
with their best judgment.
You may obtain a copy of our Annual Report on Form 10-K for the fiscal year
ended December 31, 1999 at no cost by writing to Thomas G. Bevivino, Secretary,
Luminant Worldwide Corporation, 13737 Noel Road, Suite 1400, Dallas, Texas
75240.
By Order of the Board of Directors
/s/ Michael H. Jordan
Michael H. Jordan
CHAIRMAN OF THE BOARD
April 19, 2000
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APPENDIX A
LUMINANT WORLDWIDE CORPORATION
2000 EMPLOYEE STOCK PURCHASE PLAN
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PURPOSE.............................. The Luminant Worldwide Corporation 2000 Employee Stock
Purchase Plan (the "2000 ESPP" or the "PLAN") provides
employees of Luminant Worldwide Corporation (the "COMPANY")
and selected Company Subsidiaries with an opportunity to
become owners of the Company through purchasing shares of
the Company's common stock (the "COMMON STOCK"). The Company
intends this Plan to qualify as an employee stock purchase
plan under Section 423 of the Internal Revenue Code of 1986,
as amended (the "CODE"), and its terms should be construed
accordingly. The Plan is effective as of July 1, 2000.
ELIGIBILITY.......................... An Employee whom the Company or an Eligible Subsidiary
employs as of the first day of a Payroll Deduction Period
(and has employed for such prior waiting period, initially
set at 90 days, as the Committee determines) is eligible to
participate in the 2000 ESPP for that Payroll Deduction
Period. However, an Employee may not make a purchase under
the 2000 ESPP if such purchase would result in the
Employee's owning Common Stock possessing 5% or more of the
total combined voting power or value of the Company's
outstanding stock. In determining an individual's amount of
stock ownership, any options to acquire shares of Company
Common Stock are counted as shares of stock, and the
attribution rules of Section 424(d) of the Code apply.
EMPLOYEE means any person employed as a common law employee
of the Company or an Eligible Subsidiary. EMPLOYEE excludes
anyone who, with respect to any particular period of time,
was not treated initially on the payroll records as a common
law employee, unless the Committee determines that including
the person is necessary to preserve tax treatment.
ADMINISTRATOR........................ The Compensation Committee of the Board of Directors (the
"BOARD") of the Company, or such other committee as the
Board designates (the "COMMITTEE"), will administer the 2000
ESPP. The Committee is vested with full authority and
discretion to make, administer, and interpret such rules and
regulations as it deems necessary to administer the 2000
ESPP (including rules and regulations deemed necessary in
order to comply with the requirements of Section 423 of the
Code). Any determination or action of the Committee in
connection with administering or interpreting the 2000 ESPP
will be final and binding upon each Employee, Participant,
and all persons claiming under or through any Employee or
Participant.
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Without shareholder consent and without regard to whether
the actions might adversely affect Participants, the
Committee (or the Board) may
establish and change the Payroll Deduction Periods,
limit or increase the frequency and/or number of changes in
the amounts withheld during a Payroll Deduction Period,
establish the exchange ratio applicable to amounts withheld
in a currency other than U.S. dollars,
lengthen or shorten the waiting period before an Employee
becomes eligible to participate, so long as the change
applies uniformly,
permit payroll withholding in excess of the amount the
Participant designated to adjust for delays or mistakes
in the Company's processing of properly completed
withholding elections,
establish reasonable waiting and adjustment periods and/or
accounting and crediting procedures to ensure that
amounts applied toward the purchase of Common Stock for
each Participant properly correspond with amounts
withheld from the Participant's Compensation,
delegate its functions (other than those with respect to
setting Payroll Deduction Periods or determining the price
of stock and the number of shares to be offered under
the Plan) to officers or employees of the Company; and
establish such other limitations or procedures as it
determines in its sole discretion advisable and consistent
with the Plan.
The Committee may also increase the price provided in Step 2
under GRANTING OF OPTIONS (by decreasing the discount and/or
by designating that the price is determined as of either the
beginning or the ending date of a Payroll Deduction Period
or the higher of both rather than as of the lower) for
Payroll Deduction Periods beginning after Committee action.
PAYROLL DEDUCTION PERIOD............. PAYROLL DEDUCTION PERIODS are the periods during which the
Company collects payroll deductions for a particular
purchase. Unless the Committee specifies otherwise, the
Payroll Deduction Periods will be successive three month
periods, beginning when the Committee determines they should
begin.
PARTICIPATION........................ An eligible Employee may become a "PARTICIPANT" for a
Payroll Deduction Period by completing an authorization
notice and delivering it to the Committee through the
Company's Human Resources professionals within a reasonable
period of time before the first day of such Payroll
Deduction Period. All Participants receiving options under
the 2000 ESPP will have the same rights and privileges.
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METHOD OF PAYMENT.................... A Participant may contribute to the 2000 ESPP solely through
payroll deductions as follows:
The Participant must elect on an authorization notice or
other required documentation to have deductions made from
his Compensation for each payroll period during the Payroll
Deduction Period at or above a minimum rate and under terms
the Committee determines. COMPENSATION under the Plan means
an Employee's regular compensation, including overtime,
bonuses, and commissions (but expressly excluding income
from stock options or other noncash compensation), from the
Company or an Eligible Subsidiary paid during a Payroll
Deduction Period.
All payroll deductions will be credited to the Participant's
account under the 2000 ESPP. No interest will accrue on the
account.
Payroll deductions will begin on the first payday coinciding
with or following the first day of each Payroll Deduction
Period and will end with the last payday preceding or
coinciding with the end of that Payroll Deduction Period,
unless the Participant sooner withdraws as authorized under
WITHDRAWALS below.
A Participant may not alter the rate of payroll deductions
during the Payroll Deduction Period.
The Company may use the consideration it receives for
general corporate purposes.
GRANTING OF OPTIONS.................. On the first day of each Payroll Deduction Period, a
Participant will receive options to purchase a number of
shares of Common Stock with funds withheld from his or her
Compensation. Such number of shares will be determined at
the end of the Payroll Deduction Period according to the
following procedure:
STEP 1--Determine the amount the Company withheld from
Compensation since the beginning of the Payroll
Deduction Period;
STEP 2--Determine the "PURCHASE PRICE" to be the amount that
represents 85% of the lower of the Fair Market Value of
a share of Common Stock on the first day of the Payroll
Deduction Period and the last day of the Payroll
Deduction Period (provided that the Committee can
increase the price before a Payroll Deduction Period
begins); and
STEP 3--Divide the amount determined in Step 1 by the amount
determined in Step 2.
The Committee will determine the treatment of any fractional
shares from among the following:
The results of Step 3 will be used to purchase whole and
fractional shares,
Any amounts in Step 3 not used to purchase whole shares will
be refunded to the Participant,
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Any amounts in Step 3 not used to purchase whole shares will
be carried forward to the next Payment Deduction Period,
or
Such other treatment as the Committee approves.
FAIR MARKET VALUE.................... The FAIR MARKET VALUE of a share of Common Stock for
purposes of the Plan as of each date described in Step 2
will be determined as follows:
if the Company has no publicly-traded stock, the Committee
will determine the Fair Market Value for purposes of the
Plan using any measure of value it determines in good
faith to be appropriate;
if the Common Stock trades on a national securities
exchange, the closing sale price on that date;
if the Common Stock does not trade on any such exchange, the
closing sale price as reported by the National
Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") for such date;
if no such closing sale price information is available, the
average of the closing bid and asked prices that Nasdaq
reports for such date; or
if there are no such closing bid and asked prices, the
average of the closing bid and asked prices as reported by
any other commercial service for such date.
For any date described in Step 2 that is not a trading day,
the Fair Market Value of a share of Common Stock for such
date shall be determined by using the closing sale price or
the average of the closing bid and asked prices, as
appropriate, for the immediately following trading day when
determining the price for the first day of the Payroll
Deduction Period and the immediately preceding trading day
when determining the price on the last day. The Committee
can substitute a particular time of day or other measure of
"closing sale price" if appropriate because of changes in
exchange or market procedures.
The Committee has sole discretion to determine the Fair
Market Value for purposes of this Plan, and all
participation is conditioned on the participant's agreement
that the Committee's determination is conclusive and binding
even though others might make a different and also
reasonable determination.
No Participant shall receive options:
if, immediately after the grant, that Participant would own
shares, or hold outstanding options to purchase shares,
or both, possessing 5% or more of the total combined
voting power or value of all classes of shares of the
Company or any Subsidiaries (as defined below); or
that permit the Participant to purchase shares under all
employee stock purchase plans of the Company and any
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Subsidiary with a Fair Market Value (determined at the
time the options are granted) that exceeds $25,000 in
any calendar year.
EXERCISE OF OPTION................... Unless a Participant effects a timely withdrawal under the
WITHDRAWAL paragraph below, his option for the purchase of
shares of Common Stock during a Payroll Deduction Period
will be automatically exercised as of the last day of the
Payroll Deduction Period for the purchase of the maximum
number of shares (including, if the Committee so provides,
fractional shares) that the sum of the payroll deductions
credited to the Participant's account during such Payroll
Deduction Period can purchase under the formula specified in
GRANTING OF OPTIONS.
DELIVERY OF COMMON STOCK............. As soon as administratively feasible after the options are
used to purchase Common Stock, the Company will credit to
each Participant or, in the alternative, to an agent or
custodian that the Committee designates, the shares of
Common Stock the Participant purchased upon the exercise of
the option. If delivered to an agent or custodian, the agent
or custodian may hold the shares in nominee name and may
commingle shares held in its custody in a single account or
stock certificate without identification as to individual
Participants. Unless the Committee determines otherwise,
Participants who are holding shares and any persons to whom
they transfer part or all of their shares other than by sale
must retain those shares with a Company specified broker or
agent until the second anniversary of the first day of the
Payroll Deduction Period in which they bought the shares.
Unless the Committee determines otherwise, a Participant may
sell the shares despite the foregoing restriction but may
not transfer them to another broker until the foregoing two
year period (the "ACCOUNT RESTRICTION PERIOD") ends. The
Committee may require that the specified agent or custodian
hold the shares of Common Stock for a minimum period of time
after receipt (including through and beyond the
Participant's active employment) and reinvest any dividends
received in additional shares of Common Stock. The Committee
may, in its discretion, establish a program for cashless
sales of Common Stock received under the 2000 ESPP.
SUBSEQUENT OFFERINGS................. A Participant will be deemed to have elected to participate
in each subsequent Payroll Deduction Period following his
initial election to participate in the 2000 ESPP, unless the
Participant files a written withdrawal notice with the Human
Resources Department at corporate headquarters (or such
other recipient as the Department designates) at least
10 days before the beginning of the Payroll Deduction Period
as of which the Participant desires to withdraw from the
2000 ESPP.
WITHDRAWAL FROM THE PLAN............. A Participant may withdraw all, but not less than all,
payroll deductions credited to his account for a Payroll
Deduction Period before the end of such Payroll Deduction
Period by delivering a written notice to the Human Resources
Department or its designee on behalf of the Committee at
least 30 days before the end of such
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Payroll Deduction Period (or by such other deadline as the
Committee determines). A Participant who for any reason,
including retirement, termination of employment, or death,
ceases to be an Employee before the last day of any Payroll
Deduction Period will be deemed to have withdrawn from the
2000 ESPP as of the date of such cessation, unless the
Committee establishes other procedures.
When a Participant withdraws from the 2000 ESPP, his or her
outstanding options under the 2000 ESPP will immediately
terminate.
Unless the Committee determines otherwise, if a Participant
withdraws from the 2000 ESPP for any reason, the Company
will pay to the Participant all payroll deductions credited
to his account or, in the event of death, to the persons
designated as provided in Designation of Beneficiary, as
soon as administratively feasible after the date of such
withdrawal and no further deductions will be made from the
Participant's Compensation.
A Participant who has elected to withdraw from the 2000 ESPP
may resume participation in the same manner and under the
same rules as any Employee making an initial election to
participate in the 2000 ESPP (i.e., he may elect to
participate in the next following Payroll Deduction Period
so long as he or she files the authorization form by the
deadline for that Payroll Deduction Period). Any Participant
who is subject to Section 16 of the Securities Exchange Act
of 1934, as amended (the "EXCHANGE ACT"), and who withdraws
from the 2000 ESPP for any reason will only be permitted to
resume participation in a manner that will permit
transactions under the 2000 ESPP to continue to be exempt
within the meaning of Rule 16b-3, as issued under the
Exchange Act.
STOCK SUBJECT TO PLAN................ The shares of Common Stock that the Company will sell to
Participants under the 2000 ESPP will be shares of
authorized but unissued Common Stock, shares held as
treasury stock, and shares purchased on the market. The
maximum number of shares made available for sale under the
2000 ESPP will be 750,000, subject to the provisions in
ADJUSTMENTS UPON CHANGES IN CAPITAL STOCK below. If the
total number of shares for which options are to be exercised
in a Payroll Deduction Period exceeds the number of shares
then available under the 2000 ESPP, the Company will make,
so far as is practicable, a pro rata allocation of the
shares available.
A Participant will have no interest in shares covered by his
participation until the last day of the applicable Payroll
Deduction Period.
After the end of the Account Restriction Period, shares that
a Participant purchases under the ESPP will be registered in
the name of the Participant or, at the Participant's
election, in street name.
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ADJUSTMENTS UPON CHANGES IN CAPITAL
STOCK.............................. Subject to any required action by the Company (which it will
promptly take) or its stockholders, and subject to the
provisions of applicable corporate law, if, during a Payroll
Deduction Period,
the outstanding shares of Common Stock increase or decrease
or change into or are exchanged for a different number
or kind of security because of any recapitalization,
reclassification, stock split, reverse stock split,
combination of shares, exchange of shares, stock
dividend, or other distribution payable in capital
stock, or
some other increase or decrease in such Common Stock occurs
without the Company's receiving consideration
(excluding, unless the Committee determines otherwise,
stock repurchases),
the Committee must make a proportionate and appropriate
adjustment in the number of shares of Common Stock
underlying the options, so that the proportionate interest
of the Participant immediately following such event will, to
the extent practicable, be the same as immediately before
such event. Any such adjustment to the options will not
change the total price with respect to shares of Common
Stock underlying the Participant's election but will include
a corresponding proportionate adjustment in the price of the
Common Stock, to the extent consistent with Section 424 of
the Code.
The Board or the Committee may take any actions described in
the ADJUSTMENTS UPON CHANGES IN CAPITAL STOCK section
without any requirement to seek optionee consent.
The Committee will make a commensurate change to the maximum
number and kind of shares provided in the STOCK SUBJECT TO
PLAN section.
Any issue by the Company of any class of preferred stock, or
securities convertible into shares of common or preferred
stock of any class, will not affect, and no adjustment by
reason thereof will be made with respect to, the number of
shares of Common Stock subject to any options or the price
to be paid for stock except as this ADJUSTMENTS section
specifically provides. The grant of an option under the Plan
will not affect in any way the right or power of the Company
to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure, or to merge or
to consolidate, or to dissolve, liquidate, sell, or transfer
all or any part of its business or assets.
SUBSTANTIAL CORPORATE CHANGE......... Upon a Substantial Corporate Change, the Plan and the
offering will TERMINATE and all accumulated funds will be
distributed as though the Participants had elected to
withdraw unless either (i) such termination would prevent
use of "pooling of interest" accounting for a
reorganization, merger, or consolidation of the Company that
the Board approves or (ii) unless provision is made in
writing in connection with such transaction for
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the assumption or continuation of outstanding elections, or
the substitution for such options or grants of any options
covering the stock or securities of a successor employer
corporation, or a parent or subsidiary of such
successor, with appropriate adjustments as to the number
and kind of shares of stock and prices, in which event
the options will continue in the manner and under the
terms so provided.
A SUBSTANTIAL CORPORATE CHANGE means the
sale of all or substantially all of the assets of the
Company to one or more individuals, entities, or groups
(other than an "Excluded Owner" as defined below),
complete or substantially complete dissolution or
liquidation of the Company;
a person, entity, or group (other than an Excluded Owner)
acquires or attains ownership of 100% of the undiluted
total voting power of the Company's then-outstanding
securities eligible to vote to elect members of the
Board ("COMPANY VOTING SECURITIES");
completion of a merger or consolidation of the Company with
or into any other entity (other than an Excluded Owner)
unless the holders of the Company Voting Securities
outstanding immediately before such completion, together
with any trustee or other fiduciary holding securities
under a Company benefit plan, retain control because
they hold securities that represent immediately after
such merger or consolidation more than 20% of the
combined voting power of the then outstanding voting
securities of either the Company or the other surviving
entity or its ultimate parent, or
any other transaction (including a merger or reorganization
in which the Company survives) approved by the Board that
results in any person or entity (other than an Excluded
Owner) owning 100% of Company Voting Securities.
An "EXCLUDED OWNER" consists of the Company, any Company
Subsidiary, any Company benefit plan, or any underwriter
temporarily holding securities for an offering of such
securities.
DESIGNATION OF BENEFICIARY........... A Participant may file with the Committee a written
designation of a beneficiary who is to receive any payroll
deductions credited to the Participant's account under the
2000 ESPP or any shares of Common Stock owed to the
Participant under the 2000 ESPP if the Participant dies. A
Participant may change a beneficiary at any time by filing a
notice in writing with the Human Resources professionals on
behalf of the Committee.
Upon the death of a Participant and upon receipt by the
Committee of proof of the identity and existence of the
Participant's designated beneficiary, the Company will
deliver such cash or shares, or both, to the beneficiary. If
a Participant dies and
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is not survived by a beneficiary that the Participant
designated in accordance with the immediate preceding
paragraph, the Company will deliver such cash or shares, or
both, to the personal representative of the estate of the
deceased Participant. If, to the knowledge of the Committee,
no personal representative has been appointed within
90 days following the date of the Participant's death, the
Committee, in its discretion, may direct the Company to
deliver such cash or shares, or both, to the surviving
spouse of the deceased Participant, or to any one or more
dependents or relatives of the deceased Participant, or if
no spouse, dependent, or relative is known to the Committee,
then to such other person as the Committee may designate.
No designated beneficiary may acquire any interest in such
cash or shares before the death of the Participant.
SUBSIDIARY EMPLOYEES................. Employees of Eligible Subsidiaries will be entitled to
participate in the 2000 ESPP, except as the Committee
otherwise designates.
ELIGIBLE SUBSIDIARY means each of the Company's
Subsidiaries, except as the Board or Committee otherwise
specifies. SUBSIDIARY means any corporation (other than the
Company) in an unbroken chain of corporations including the
Company if, at the time an option is granted to a
Participant under the 2000 ESPP, each of the corporations
(other than the last corporation in the unbroken chain) owns
stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other
corporations in such chain. Subsidiary includes any single
member limited liability company with its corporate member
in the foregoing chain.
TRANSFERS, ASSIGNMENTS, AND
PLEDGES............................ A Participant may not assign, pledge, or otherwise dispose
of payroll deductions credited to the Participant's account
or any rights to exercise an option or to receive shares of
Common Stock under the 2000 ESPP other than by will or the
laws of descent and distribution or under a qualified
domestic relations order, as defined in the Employee
Retirement Income Security Act. Any other attempted
assignment, pledge or other disposition will be without
effect, except that the Company may treat such act as an
election to withdraw under the WITHDRAWAL section.
AMENDMENT OR TERMINATION OF PLAN..... The Board of Directors of the Company or the Committee may
at any time terminate or amend the 2000 ESPP. Any amendment
of the 2000 ESPP that (i) materially increases the benefits
to Participants, (ii) materially increases the number of
securities that may be issued under the 2000 ESPP, or
(iii) materially modifies the eligibility requirements for
participation in the 2000 ESPP must be approved by the
shareholders of the Company to take effect. The Company will
refund to each Participant the amount of payroll deductions
credited to his account as of the date of termination as
soon as administratively feasible following the effective
date of the termination.
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EFFECT ON OTHER PLANS................ Whether exercising or receiving an option causes the
participant to accrue or receive additional benefits under
any pension or other plan is governed solely by the terms of
such other plan.
NOTICES.............................. All notices or other communications by a Participant to the
Committee or the Company shall be deemed to have been duly
given when the Human Resources Department or local Human
Resources professionals of the Company receive them or when
any other person or entity the Company designates receives
the notice or other communication in the form the Company
specifies.
GENERAL ASSETS....................... Any amounts the Company invests or otherwise sets aside or
segregates to satisfy its obligations under this 2000 ESPP
will be solely the Company's property (except as otherwise
required by Federal or state wage laws), and the optionee's
claim against the Company under the 2000 ESPP, if any, will
be only as a general creditor. The optionee will have no
right, title, or interest whatever in or to any investments
that the Company may make to aid it in meeting its
obligations under the 2000 ESPP. Nothing contained in the
2000 ESPP, and no action taken under its provisions, will
create or be construed to create an implied or constructive
trust of any kind or a fiduciary relationship between the
Company and any Employee, Participant, former Employee,
former Participant, or any beneficiary.
PRIVILEGES OF STOCK OWNERSHIP........ No Participant and no beneficiary or other person claiming
under or through such Participant will have any right,
title, or interest in or to any shares of Common Stock
allocated or reserved under the Plan except as to such
shares of Common Stock, if any, that have been issued to
such Participant.
TAX WITHHOLDING...................... To the extent that a Participant realizes ordinary income or
wages for employment tax purposes in connection with a sale
or other transfer of any shares of Common Stock purchased
under the Plan or the crediting of interest to an account,
the Company may withhold amounts needed to cover such taxes
from any payments otherwise due to the Participant. Any
Participant who sells or otherwise transfers shares
purchased under the Plan within two years after the
beginning of the Payroll Deduction Period in which he
purchased the shares must, within 30 days of such transfer,
notify the Company's Payroll Department in writing of such
transfer. Each Participant, as a condition of participation,
agrees that the Company may treat the purchase of shares
and/or their disposition as taxable events requiring the
withholding or other collection of income and employment
taxes and further agrees to pay any such taxes for which the
Company cannot reasonably withhold.
LIMITATIONS ON LIABILITY............. Notwithstanding any other provisions of the 2000 ESPP, no
individual acting as a director, employee, or agent of the
Company shall be liable to any Employee, Participant, former
Employee, former Participant, or any spouse or beneficiary
for any claim, loss, liability, or expense incurred in
connection with the 2000 ESPP, nor
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shall such individual be personally liable because of any
contract or other instrument he executes in such other
capacity. The Company will indemnify and hold harmless each
director, employee, or agent of the Company to whom any duty
or power relating to the administration or interpretation of
the 2000 ESPP has been or will be delegated, against any
cost or expense (including attorneys' fees) or liability
(including any sum paid in settlement of a claim with the
Board's approval) arising out of any act or omission to act
concerning this 2000 ESPP unless arising out of such
person's own fraud or bad faith.
NO EMPLOYMENT CONTRACT............... Nothing contained in this Plan constitutes an employment
contract between the Company or an Eligible Subsidiary and
any Employee. The 2000 ESPP does not give an Employee any
right to be retained in the Company's employ, nor does it
enlarge or diminish the Company's right to terminate the
Employee's employment.
DURATION OF ESPP..................... Unless the Company's Board extends the Plan's term, no
Payroll Deduction Period will end after April 14, 2010.
APPLICABLE LAW....................... The laws of the State of Delaware (other than its choice of
law provisions) govern the 2000 ESPP and its interpretation.
LEGAL COMPLIANCE..................... The Company will not issue any shares of Common Stock under
the Plan until the issuance satisfies all applicable
requirements imposed by Federal and state securities and
other laws, rules, and regulations, and by any applicable
regulatory agencies or stock exchanges. To that end, the
Company may require the optionee to take any reasonable
action to comply with such requirements before issuing such
shares. No provision in the Plan or action taken under it
authorizes any action that Federal or state laws otherwise
prohibit.
The Plan is intended to conform to the extent necessary with
all provisions of the Securities Act of 1933, as amended,
("SECURITIES ACT") and the Securities Exchange Act of 1934,
as amended, and all regulations and rules the Securities and
Exchange Commission issues under those laws, including
specifically Rule 16b-3. Notwithstanding anything in the
Plan to the contrary, the Committee and the Board must
administer the Plan, and Participants may purchase Common
Stock, only in a way that conforms to such laws, rules, and
regulations. To the extent applicable law permits, the Plan
and any offers will be deemed amended to the extent
necessary to conform to such laws, rules, and regulations.
APPROVAL OF STOCKHOLDERS............. The ESPP must be submitted to the shareholders of the
Company for their approval within 12 months after the Board
adopts the ESPP. The adoption of the ESPP is conditioned
upon the approval of the shareholders of the Company, and
failure to receive their approval will render the ESPP and
any outstanding options thereunder void and of no effect.
</TABLE>
A-11
<PAGE>
Please Detach and Mail in the Envelope Provided
- -------------------------------------------------------------------------------
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS OF
LUMINANT WORLDWIDE CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
AND MAY BE REVOKED PRIOR TO ITS EXERCISE
The undersigned stockholder(s) of Luminant Worldwide Corporation (the
"Company") hereby appoint(s) Messrs. Guillermo G. Marmol and Thomas G. Bevivino,
and each of them singly, as proxies, each with full power of substitution,
for and in the name of the undersigned at the Annual Meeting of stockholders
of the Company to be held on Monday, May 22, 2000 and at any and all
adjournments thereof, to vote all common shares of said Company held of record
by the undersigned on April 12, 2000, as if the undersigned were present and
voting the shares.
Election of Directors Nominees:
Randolph L. Austin, James R. Corey, Michael J. Dolan, Michael H. Jordan,
Guillermo G. Marmol, Donald S. Perkins, Richard M. Scruggs, and George P.
Stamas.
(SEE REVERSE SIDE)
<PAGE>
Please Detach and Mail in the Envelope Provided
- -------------------------------------------------------------------------------
PLEASE MARK YOUR
/X/ VOTES AS IN THIS
EXAMPLE
LUMINANT'S BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2, AND 3.
FOR WITHHELD
1. Election of / / / /
Directors
(See reverse.)
To withhold authority to vote for any individual nominee
or nominees, mark the "FOR" box above and write the
name of any such nominee below.
FOR AGAINST ABSTAIN
2. Ratification of / / / / / /
appointment of
independent
Auditors
FOR AGAINST ABSTAIN
3. Approval of Employee Stock Purchase Plan / / / / / /
If this card is properly executed, shares will be
voted in the manner directed herein by the
undersigned. If no direction is made, shares will
be voted FOR each nominee named in Proposal 1
and FOR Proposals 2 and 3, and in accordance
with the discretion of the proxies' on such other
business that may properly come before the
meeting, to the extent permitted by law.
------------------ ------------------- Date: , 2000
Signature(s) ----------------
Please sign exactly as name appears to the left. Joint owners should
each sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
