AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 25, 2001
Registration No. 333-
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-----------
HA-LO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3573412
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5980 WEST TOUHY AVENUE, NILES, ILLINOIS 60714
(847) 647-2300
(Address, including zip code and telephone
number, including area code, of registrant's
principal executive offices)
GREGORY J. KILREA
CHIEF FINANCIAL OFFICER
HA-LO INDUSTRIES, INC.
5980 WEST TOUHY AVENUE, NILES, ILLINOIS 60714
(847) 647-2300
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-----------
With copies to:
BARRY J. SHKOLNIK, ESQ.
NEAL, GERBER & EISENBERG
TWO NORTH LASALLE STREET
CHICAGO, ILLINOIS 60602
(312) 269-8000
-----------
Approximate date of commencement of proposed sale to the public:
FROM TIME TO TIME AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
-----------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box: /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
TITLE OF EACH CLASS OF AMOUNT TO PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) OFFERING PRICE AGGREGATE REGISTRATION FEE
PER SHARE(2) OFFERING PRICE(2)
- -----------------------------------------------------------------------------------------------------------------------------
Common Stock, $0.001 par value per share...... 6,545,378 (3) shares $3.125 $20,454,306.25 $5,114.00
- -----------------------------------------------------------------------------------------------------------------------------
(1) Pursuant to Rule 416, this registration statement also covers such
indeterminate number of shares of the Company's Common Stock as may be
issued as a result of stock dividends, stock splits or similar
transactions prior to the termination of this registration statement.
(2) Estimated solely for the purpose of calculating the registration fee
and based upon the average of the high and low prices of the Company's
Common Stock as reported on the New York Stock Exchange on January 18,
2001.
(3) Includes not less than 1,030,918 shares and not more than 2,580,365
shares of the Company's Common Stock issuable upon the conversion of
Series A convertible participating preferred stock.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
THE SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED JANUARY 25, 2001
PROSPECTUS
- ----------
6,545,378 SHARES
HA-LO INDUSTRIES, INC.
COMMON STOCK
($0.001 PAR VALUE PER SHARE)
This prospectus relates to 6,545,378 shares of HA-LO common stock that
may be offered for sale or otherwise transferred from time to time by the
selling stockholders identified in this prospectus. The shares include not less
than 1,030,918 shares and not more than 2,580,365 shares of common stock
issuable upon the conversion of HA-LO Series A convertible participating
preferred stock. The aggregate net proceeds to the selling stockholders from the
sale of the shares of common stock will equal the sales price of such shares of
common stock, less any commissions. See "Plan of Distribution." We will not
receive any of the proceeds from the sale of the shares of common stock by the
selling stockholders. The expenses incurred in registering the 6,545,378 shares
of common stock, including legal and accounting fees, will be paid by us.
All of the shares of common stock covered by this prospectus, including
the 2,580,365 shares issuable upon the conversion of convertible preferred
stock, were acquired by the selling stockholders from us in connection with our
May 2000 acquisition of Starbelly.com, Inc., an online custom-decorated
merchandise business. See "Selling Stockholders."
Our common stock is listed on the New York Stock Exchange under the
symbol "HMK." The last reported sale price of our common stock on January 24,
2001 on the New York Stock Exchange was $3 5/8 per share.
Our principal executive offices are located at 5980 West Touhy Avenue,
Niles, Illinois 60714, and our telephone number is (847) 647-2300.
INVESTING IN OUR COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE 5.
-----------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-----------
The date of this Prospectus is , 2001.
===============================================
YOU SHOULD RELY ONLY ON INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. NEITHER WE NOR THE SELLING STOCKHOLDERS HAVE
AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. THE SELLING
STOCKHOLDERS ARE NOT OFFERING THESE SECURITIES IN ANY STATE WHERE THE OFFER IS
NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION PROVIDED BY THE
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS
PROSPECTUS.
-----------
TABLE OF CONTENTS
OUR COMPANY.......................................................................................................3
RISK FACTORS......................................................................................................5
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS.......................................................15
USE OF PROCEEDS..................................................................................................16
SELLING STOCKHOLDERS.............................................................................................17
PLAN OF DISTRIBUTION.............................................................................................21
LEGAL MATTERS....................................................................................................22
EXPERTS..........................................................................................................22
WHERE TO FIND MORE INFORMATION...................................................................................22
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..................................................................23
2
OUR COMPANY
We are a full service, innovative brand marketing organization whose
diverse marketing disciplines, or competency groups, are centered around our
clients' brands. Brand marketing builds the value of the brand by connecting it
with target audiences to achieve strategic marketing objectives.
Our competency groups are organized into three operating segments:
promotional products, marketing services and telemarketing. The marketing
services segment is further divided into promotion marketing, brand strategy and
identity, presence marketing and consumer event marketing segments or divisions.
Each one of the segments has similar products and services, production
processes, types of customers, distribution methods and regulatory environments.
Our competency groups include:
PROMOTIONAL PRODUCTS, offered by HALO Branded Solutions, a division of
ours, physically connects brands with identified target markets and individuals
through repeated exposure to merchandise that builds brand awareness, enhances
brand recognition and creates brand loyalty.
PROMOTION MARKETING, offered by UPSHOT, a subsidiary of ours, connects
brands with consumers at strategic points of contact through consumer and retail
promotion, merchandising and sponsorship activation.
BRAND STRATEGY AND IDENTITY, offered by LAGA, a subsidiary of ours,
connects a company product, service or image with a target audience by creating,
revitalizing, or leveraging a brand through brand identity, design, and
integrated communication programs.
PRESENCE MARKETING, offered by our HA-LO Sports & Entertainment and
Events By HA-LO divisions, connects brands with target audiences through sports
and corporate sponsorships, licensing, corporate meetings, events and sales
incentive programs.
RELATIONSHIP MARKETING, offered by UPSHOT and Market USA, subsidiaries
of ours, connects brands with target audiences through consumer events,
including new product sampling and brand awareness programs, and through a range
of telemarketing services.
On May 3, 2000, we acquired Starbelly.com, Inc. The stockholders of
Starbelly.com (including holders of stock options) received the following
consideration in exchange for their stock held in Starbelly.com:
(1) approximately $19 million in cash (of which approximately $2.5
million was paid toward the merger expenses of Starbelly.com
and its stockholders); and
(2) the issuance of:
(a) 17 million shares of HA-LO common stock; and
(b) 5.1 million shares of HA-LO convertible preferred stock.
We intend to create a leading business to business e-commerce
marketplace for the custom-decorated merchandise industry. The
business-to-business e-commerce marketplace facilitates transactions between
users that either utilize the goods or services acquired to produce additional
goods or services, or sell such goods or services directly to consumers via the
Internet or otherwise. This is in
3
contrast to the business-to-consumer e-commerce marketplace that facilitates
transactions between businesses and traditional "retail" consumers through the
Internet medium. We intend to redefine the traditional market for customized
soft and hard goods with an interactive marketplace that allows our customers to
customize decorations on any product in real-time from any Internet web browser.
HALO Branded Solutions coordinates key aspects of the custom-decorated
merchandise supply chain. Fulfillment systems act together as a single interface
between the end-user and the suppliers to the industry, such as suppliers of
undecorated merchandise (referred to as "blanks" by sellers of custom-decorated
merchandise), decorators, customer service representatives, offsite producers
and shippers. Our systems are geared to add efficiencies to several links in the
traditional supply chain, providing our customers with exceptional convenience,
a simplified customizing and ordering process, faster delivery, status tracking,
lower costs and a more enjoyable customer experience. In addition, by accessing
the national distribution network directly, we are developing a virtual
distribution network with key distributors that provides us with inventory on a
just-in-time basis of a large selection of soft and hard goods, minimizing
inventory requirements for us and our customers.
We intend to implement our custom-decorated merchandise marketplace so
as to provide multiple customized interfaces for three different distribution
channels. The custom-decorated merchandise marketplace includes those industries
which create, sell or otherwise produce promotional products, marketing
services, and advertising specialties, including novelty items and uniforms. The
customized interfaces to which we refer are three separately designed e-commerce
mediums which facilitate order placement for these three distribution channels:
- the "BUSINESS-TO-BUSINESS" market, where our business
customers can set up customizable virtual storefronts carrying
merchandise they select and purchase through HALO Branded
Solutions;
- the "INTERNET PROPERTIES" market, where we provide third-party
Internet websites such as Internet portals with virtual
storefronts offering merchandise with those third parties' own
logos and brands; and
- the "BUSINESS-TO-CONSUMER" market, where consumers will be
able to access our website to interactively design, customize
and order products.
Our principal executive offices are located at 5980 West Touhy Avenue,
Niles, Illinois 60714, and our telephone number at that address is (847)
647-2300.
4
RISK FACTORS
Before deciding to invest in shares of our common stock, you should
consider carefully all of the information contained in this prospectus,
including the following factors which relate to the combined businesses of HA-LO
and Starbelly.com. All of the identified risks can be substantial and many of
these risks could materially and adversely affect our results of operations,
financial condition, business and prospects, as well as the market price of our
common stock.
RISKS RELATED TO HA-LO
WE MAY HAVE DIFFICULTIES IN MANAGING GROWTH
We have experienced growth over the past several years as a result of
internal growth and acquisitions; continued growth can be expected to place
significant demands on our management and resources. If we are unable to manage
growth effectively, our business, results of operations or financial condition
could be materially adversely affected. We can give you no assurance that we
will be able to successfully integrate acquired businesses into our existing
operations, realize the intended benefits of such acquisitions, or retain sales
representatives and key employees previously associated with acquired
businesses.
WE MAY EXPERIENCE QUARTERLY FLUCTUATIONS IN SALES AND EARNINGS; FOURTH QUARTER
CONCENTRATION
Some of our customers tend to utilize a greater portion of their
advertising and promotional budgets in the latter half of the year, which
historically has resulted and may continue to result in a disproportionately
large share of our net sales being recognized in the fourth quarter. We incur
general and administrative expenses evenly throughout the year, which
historically has resulted and may continue to result in a disproportionate share
of our net income being reported in the fourth quarter. In addition, the timing
of and method of accounting used to report the results of operations of acquired
businesses may cause substantial fluctuations in our operating results from
quarter to quarter. Therefore, the operating results for one quarter may not be
a reliable indicator of the results to be expected in any future quarter.
DEPENDENCE UPON SALES REPRESENTATIVES AND KEY PERSONNEL
Our success is largely attributable to our ability to attract, motivate
and retain high quality sales representatives. We are not dependent upon any one
or any affiliated group of sales representatives for a material amount of our
revenues; however, when a sales representative's relationship with us
terminates, customers serviced by such representative may cease to purchase our
products. We can give you no assurance that we will not experience a significant
turnover rate in the future. In addition, our success has been the result, in
large part, of the skills and efforts of our senior management. Our success and
continued growth will depend on our ability to recruit, hire, motivate and
retain other highly qualified managerial personnel, including personnel
previously employed by or associated with businesses acquired by us. The loss of
several members of our senior management or our inability to attract and retain
highly qualified managerial personnel could have a material adverse effect on
our business, future growth, results of operations or financial condition.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
We currently have offices in North America, Europe and Asia, and an
important component of our growth strategy is to expand our international
distribution capabilities. There are certain risks inherent in conducting
international business, including exposure to currency fluctuations, longer
5
collection cycles, compliance with foreign laws, unexpected changes in
regulatory requirements, staffing and managing foreign operations, political
instability, currency control laws and potentially adverse tax consequences. We
can give you no assurance that one or more of such factors will not have a
material adverse effect on our existing international operations and on our
international expansion plans.
RISKS ASSOCIATED WITH COMPETITION
The promotional products industry is highly fragmented and competitive,
with few barriers to entry. We believe that our national and international
distribution capabilities, professional sales force and complementary,
value-added marketing services provide us with a competitive advantage; however,
these capabilities also may result in higher administrative costs than those
incurred by certain of our smaller competitors. In addition, certain of our
competitors are manufacturers as well as distributors and may enjoy an advantage
over us with respect to the cost of the goods they manufacture. Our existing
competitors, and companies that may enter the market, may have substantially
greater financial and other resources than we do. We also compete for
advertising dollars with other media, such as television, radio, newspapers,
magazines and billboards. We can give you no assurance that we will be able to
continue to compete successfully against current and future competitors or that
competitive pressures faced by us will not materially adversely affect our
business, operating results and financial condition.
VOLATILITY OF STOCK PRICE
Our common stock historically has been subject to significant price
fluctuations in response to a variety of factors, including quarterly variations
in operating results, announcing acquisitions, strategic alliances and joint
ventures, general conditions in the promotional products industry, and general
economic and market conditions. In addition, the stock market has experienced
significant price and volume fluctuations that have adversely affected the
market prices of equity securities of some companies and that often have been
unrelated to the operating performance of such companies.
RISKS RELATING TO THE HA-LO CONVERTIBLE PREFERRED STOCK
At any time during the 30-day period commencing on May 3, 2001, the
holders of the convertible preferred stock issued in the Starbelly.com merger
and upon exercise of assumed options will have the right to require us to redeem
all or any part of their shares at a price per share in cash equal to the
liquidation preference of $10.00 per share, plus any accrued and unpaid
dividends. If holders of a significant number of shares of convertible preferred
stock elect to have their shares redeemed and if such funds are not available,
we may be required to borrow the funds necessary to pay the redemption price or
to raise such funds through the public or private sale of debt or equity
securities. As of January 24, 2001, the closing price of our common stock on the
NYSE was $3 5/8 per share. There can be no assurance that adequate financing
will be available to pay the redemption price or that the terms of any such
financing will be satisfactory to us.
If we default on our obligation to redeem any shares of convertible
preferred stock, for so long as we are in default, the shares of convertible
preferred stock that we failed to redeem will accrue dividends, at a rate of 8%
of the liquidation price per annum on the $10.00 per share issuance price of
such shares, beginning on the first date on which we failed to redeem such
shares of convertible preferred stock until the redemption price has been paid
in full. The rate at which dividends accrue will increase by 4% of the
liquidation price per annum on each six month anniversary of the date of default
until the redemption price (including accrued dividends) has been paid in full.
6
STARBELLY.COM'S EXTREMELY LIMITED OPERATING HISTORY MAKES FUTURE FORECASTING
DIFFICULT
Starbelly.com was incorporated in March 1999. From March until June
1999 Starbelly.com focused on developing its business model, technology and
operations, hiring personnel and raising capital. Since June 1999, Starbelly.com
has been selling products and offering services in the business-to-business
channel and through the Internet, both on a limited basis. As a result of
Starbelly.com's extremely limited operating history, it is difficult to
accurately forecast our revenues, to predict our operating expenses or to
predict the timing or effectiveness of our contemplated interactive Web site.
Our prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in an early stage of
development, particularly companies engaged in new and rapidly evolving markets
such as electronic commerce.
STARBELLY.COM'S BUSINESS SYSTEM IS NEW AND UNPROVEN
Starbelly.com designed a new business system that redefines the process
of ordering custom-decorated merchandise and the fulfillment process with
respect to those orders. Starbelly.com has only been delivering products under
this system since June 1999 on a limited basis. Our success depends upon our
ability to implement Starbelly.com's system on the Internet. Moreover, the
volume of orders we have filled is substantially below designed capacity and the
levels that are necessary for us to achieve profitability. As a result, the
success of our system on the Internet and in a high volume order environment has
yet to be proven. Refinements or modifications to our business systems and
technologies may be necessary or advisable as we evaluate its continuing
operations.
OUR POTENTIAL CUSTOMERS MAY NOT ACCEPT OUR SOLUTIONS OR SYSTEMS
Many of the new customers we intend to pursue have long-standing
business relationships and personal ties to their existing distributors or other
suppliers of decorated products. Those customers may be reluctant to disrupt
these relationships. Customers are also often reluctant to change their existing
ordering habits, or to adopt new technologies, such as Internet ordering, to
replace existing relationships. To successfully market our products through the
Internet, we will generally be required to educate potential customers on the
use and benefits of our system, which may require us to incur substantial
expense. Although we believe our new method for providing customized decorated
products will provide significant cost and time savings for our existing and
potential customers, there can be no assurance that such customers will accept
it. If they do not, our future operating results would be materially and
adversely affected. Our success depends substantially on our ability to
initiate, manage and expand our relationships with customers, and our failure to
do this could limit our anticipated growth in revenues and seriously harm our
business.
STARBELLY.COM INCURRED SIGNIFICANT LOSSES SINCE INCEPTION, AND WE ANTICIPATE
THAT WE WILL CONTINUE TO INCUR FUTURE LOSSES
Starbelly.com has incurred significant losses since inception and we
expect to continue to incur losses in the future. We expect to continue to incur
significant marketplace development, technology, sales and marketing and
administrative expenses for our business. We will need to generate significant
revenue to achieve and maintain profitability, and we cannot be certain that we
will achieve this. Even if we do reach profitability, we may not be able to
sustain or increase our profitability.
OUR OPERATING RESULTS ARE EXPECTED TO BE VOLATILE AND DIFFICULT TO PREDICT
Our operating results may fluctuate significantly, due to a variety of
factors, many of which are outside of our control. Factors that may harm our
business or cause our operating results to fluctuate
7
include the size, timing, and variance of customer orders, particularly large
orders from a limited number of customers; our ability to retain existing
customers, attract new customers and maintain customer satisfaction; the ability
to successfully launch our HALO Branded Solutions Web site and customer virtual
storefront websites, and the level of traffic to such sites; changes in
inventory availability from third-party suppliers; general economic conditions
and economic conditions specific to the Internet, electronic commerce or the
custom-decorated merchandise industry, the level of use of the Internet and
acceptance of the Internet and commercial online services for the purchase of
custom-decorated products; our ability to upgrade and develop systems and
infrastructure and to attract new personnel in a timely and effective manner,
technical difficulties, system downtime or Internet brownouts; the amount and
timing of operating costs and capital expenditures relating to expansion of our
business, operations and infrastructure; potential governmental regulation;
unforeseen events affecting the custom-decorated merchandise industry; decreases
in the prices at which we can sell our products; the timing of the introduction
or enhancement of products by us, our customers and our competitors; and defects
and other quality problems with our products. Any change in one or more of these
factors, as well as others, could cause our operating results to fluctuate.
A number of factors will also cause gross margins for our products to
fluctuate in future periods. As the markets for our products mature, and as we
face additional competition, it is likely that the average unit prices of such
products will decrease in response to competitive pricing pressures, increased
sales discounts, new product introductions by our competitors or other factors.
In response, we believe we will likely need to reduce the cost of our products
through increased efficiencies and reductions in the amount we pay for materials
or labor. At the same time, we will likely also seek to increase sales of higher
margin products. If these efforts are not successful, our revenue and gross
margins will decline, significantly harming our operating results and financial
condition.
WE DEPEND ON THIRD PARTIES TO PROVIDE RELIABLE SOFTWARE, SYSTEMS AND RELATED
SERVICES
We depend on certain third-party service and software providers. We
depend on these third-party providers to continue to offer, maintain and update
our software infrastructure. Any discontinuation of such services, or any
reduction in performance that requires us to replace such services, would be
disruptive to our business. We depend on our software providers for the
development and maintenance of electronic commerce processing systems. The
failure of such systems could have a material adverse effect on our business and
operations.
In the past, certain of our third-party service providers have
experienced interruptions or failures in their system or services. If such
failures were to occur in the future, our customers could be prevented from
accessing or purchasing products through our Web site. Any reduction in
performance, disruption in Internet or online access or discontinuation of
services provided by any of our Internet service providers could have a material
adverse effect on our business, operating results and financial condition.
Some of our agreements with third-party service and software providers
have terms of, or expire within, one year or less and in some cases are subject
to cancellation for any reason or no reason upon short notice. Any cancellation
of services by any those third-party providers, or failure to renew services
upon expiration, without notice sufficient to allow us to transition to a new
service provider in a timely and cost-effective manner would have a material
adverse effect on our business, operating results and financial condition.
8
IF DEMAND EXCEEDS THE CAPACITY CONSTRAINTS OF OUR INTERNET TECHNOLOGY SYSTEMS OR
FULFILLMENT SYSTEMS OR IF WE DO NOT CONTINUE TO DEVELOP THESE SYSTEMS PROPERLY,
OUR BUSINESS COULD BE ADVERSELY AFFECTED
A portion of our revenues depends on the number of businesses and
consumers who use our Web site or Web sites we have designed for purchase of
custom-decorated merchandise. Accordingly, the satisfactory performance,
reliability and availability of these Web sites, transaction-processing systems
and network infrastructure are critical to our operating results, as well as our
ability to attract and retain customers and maintain adequate customer service
levels. Any system interruptions that result in the unavailability of our Web
sites or reduced performance of the transaction system would reduce the volume
of sales, which could have a material adverse effect on our business, operating
results and financial condition.
We use an internally developed system for our Web site and those Web
sites which we develop for our customers. Our developed customer Web sites
handle substantially all aspects of transaction processing, including product
customization, customer profiling and confirmations. We may experience periodic
system interruptions from time to time. A substantial increase in the volume of
traffic on our Web sites, or the number of orders placed by customers in excess
of projected amounts will require us to expand and upgrade further our
technology, transaction-processing systems and network infrastructure. We may
also experience temporary capacity constraints due to sharply increased traffic
during sales or other promotions, which could cause unanticipated system
disruptions, slower response times, degradation in levels of customer service,
impaired quality and delays in reporting accurate financial information. There
can be no assurance that our transaction-processing system and network
infrastructure will be able to accommodate our system traffic in the future, or
that we will, in general, be able to accurately project the rate or timing of
such increases or upgrade our system and infrastructure to accommodate future
traffic levels on our Web sites and those we develop for our customers.
In the future, we intend to upgrade and expand our system and to
integrate newly developed or purchased modules with our existing systems in
order to improve our accounting, control and reporting methods and support
increased transaction volume. Our inability to add additional software and
hardware or to develop and upgrade further our existing technology, transaction
processing systems or network infrastructure to accommodate increased traffic on
our Web site or those Web sites we develop for our customers or our inability to
handle increased sales volume through our transaction-processing systems may
cause unanticipated system disruptions, slower response times, degradation in
levels of customer service, impaired quality and speed of order fulfillment, and
delays in reporting accurate financial information. There can be no assurance
that we will be able, in a timely manner, to effectively upgrade and expand our
transaction-processing systems or to integrate smoothly any newly developed or
purchased modules with our existing systems. Any inability to do so could have a
material effect on our business, operating results and financial condition.
A SYSTEM FAILURE WOULD ADVERSELY AFFECT OUR BUSINESS
Our ability to successfully receive and transmit orders online and
provide high-quality customer service largely depends on the efficient and
uninterrupted operation of our computer and communications hardware systems.
Some of our systems or their components are untested in high-volume operations.
Some of our intranet and database systems are located in Chicago, Illinois.
These systems and operations are vulnerable to damage or interruption from fire,
flood, power loss, telecommunications failure, break-ins and similar events. The
failure of our intranet and database systems could have a material adverse
effect on our business, operating results and financial condition.
Our servers and related technology are currently housed on-site with
redundant systems located off-site. Despite the implementation of network
security measures, our servers are vulnerable to
9
computer viruses, physical or electronic break-ins and similar disruptions,
which could lead to interruptions, delays, loss of data or the inability to
accept and confirm customer orders or to provide orders to distributors or
decorators. The occurrence of any of the foregoing risks could have a material
adverse effect on our business, operating results and financial condition. Any
virus infecting our system or other damage to our system could adversely affect
the computer systems of a third party. Such an event could expose us to a risk
of loss or litigation or possible liability.
FEDERAL, STATE AND LOCAL ENVIRONMENTAL LAWS AND REGULATIONS, AND FAILURE TO
COMPLY WITH THEM COULD HARM OUR BUSINESS
Our vendors, who perform decorating services, including those residing
in one of our Chicago locations, are subject to a variety of federal, state, and
local environmental laws and regulations related to the use, storage, discharge
and disposal of wastewater and other chemicals used in their processes. They may
incur significant costs to comply with current or future environmental laws and
regulations, or be adversely affected by the cost of compliance with these laws
and regulations, which would effectively increase our costs. In addition, we may
be directly responsible for the remediation of any environmental contamination
caused by decorators residing on our properties. Any such liability could have a
material adverse effect on our operations.
RISKS RELATED TO THE INTEGRATION OF THE BUSINESSES
UNCERTAINTIES IN ACHIEVING BENEFITS OF MERGER
We cannot assure you that we will realize any of the anticipated
benefits of the Starbelly.com merger. Whether we achieve these benefits will
depend in part upon our ability to integrate our businesses in an efficient
manner. We cannot be certain that this will occur. To achieve the merger
benefits, we will incur significant costs, expend significant capital and fund
substantial anticipated operating losses. Our costs could be higher than
anticipated and we may have to expend additional capital and fund
higher-than-expected operating losses to achieve the anticipated benefits of the
merger.
MANAGEMENT MAY HAVE DIFFICULTY INTEGRATING THE BUSINESS AND CORPORATE CULTURES
OF HA-LO AND STARBELLY.COM
The merger and related transactions involve the integration of two
business organizations that have previously operated independently. We may
encounter difficulties in integrating the operations of the two businesses. We
may not be able to successfully blend our products, services and technology to
create the advantages which the merger was intended to create. Also, our client
base may not be willing to shift significant portions of their promotional
product purchasing to the Internet. Furthermore, any delays or unexpected
obstacles or costs in connection with such integration could have a material
adverse effect our business, operating results or financial condition and the
expected value of the merger.
There is also the risk that the operations, management and personnel of
the two companies may not be compatible, and either HA-LO or Starbelly.com may
experience the loss of key personnel for that reason. We may also experience a
disruption in our employee base as a result of uncertainty following the merger
and during the integration process. As a result, key employees may seek
employment elsewhere, including with competitors.
COMBINING THE COMPANIES COULD HAVE AN ADVERSE IMPACT
The integration of HA-LO's business and Starbelly.com's business
requires substantial attention from management. The diversion of management's
attention and any difficulties encountered in the
10
transition and integration process could have a material adverse effect our
revenues, levels of expenses and operating results.
RISK FACTORS GENERALLY AFFECTING ALL E-COMMERCE BUSINESSES AND INTERNET
BUSINESSES
WE DEPEND ON THE CONTINUED GROWTH OF ELECTRONIC COMMERCE
Our viability is substantially dependent upon the widespread acceptance
and use of the Internet as an effective medium for commerce. The use of the
Internet as a means of effecting transactions, particularly in the market for
custom-decorated products, is at an early stage of development. For us to be
successful, businesses and consumers must accept and utilize new ways of
conducting business and exchanging information. Convincing businesses and
consumers to evaluate and purchase custom-decorated products online may be
particularly difficult, as such these parties have traditionally relied on
advertising specialty retailers and specialty catalogs to purchase such
products. Advertising specialty retailers are retailers who focus their efforts
on selling to customers merchandise that is custom-decorated with the customer's
brands, which those customers use for the promotion of their brands. Rapid
growth in the use of and interest in the Web, the Internet and commercial online
services is a recent phenomenon, and there can be no assurance that acceptance
and use will continue to develop or that a sufficiently broad base of customers
will adopt, and continue to use, the Internet and commercial online services as
a medium of commerce, particularly for evaluating and purchasing
custom-decorated products.
Demand for recently introduced services and products over the Internet
and commercial online services is subject to a high level of uncertainty. A
minority of these services and products have proved to be profitable. The
development of the Internet and commercial online services into a viable
commercial marketplace is subject to a number of factors, including continued
growth in the number of users of such services, concerns about transaction
security, continued development of the necessary technological infrastructure,
development of enabling technologies, uncertain and increasing government
regulation and the development of complementary services and products.
To the extent that the Internet and other online services continue to
experience growth in the number of users, their frequency of use or increase in
their bandwidth requirements, there can be no assurance that the infrastructure
for the Internet and other online services will be able to support the demands
placed upon them. In addition, the Internet or other online services could lose
their viability due to delays in the development or adoption of new standards
and protocols required to handle increased levels of Internet or other online
service activity, or due to increased governmental regulation. Changes in or
insufficient availability of telecommunications services to support the Internet
or other online services also could result in slower response times and
adversely affect usage of the Internet and other online services generally and
us in particular. If the use of the Internet and other online services does not
continue to grow or grows more slowly than expected, if the infrastructure for
the Internet and other online services do not effectively support growth that
may occur or if the Internet and other online services do not become a viable
commercial marketplace, our business operating results and financial condition
would be materially and adversely affected.
RAPID TECHNOLOGICAL CHANGE COULD MATERIALLY AFFECT US
The Internet and the electronic commerce industry are characterized by
rapid technological change, changes in user and customer requirements and
preferences, frequent new product and service introductions embodying new
technologies and the emergence of new industry standards and practices that
could render our existing technology and systems obsolete. The emerging nature
of these products and services and their rapid evolution will require us to
continually improve the performance, features and reliability of our e-commerce
services, particularly in response to competitive offerings. Our success will
11
depend, in part on our ability to enhance existing services and to develop and
license new services and technologies that address the increasingly
sophisticated and varied needs of our prospective customers. We will also need
to respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis. The development or licensing of
online sites and other proprietary technology entails significant technical and
business risks and requires substantial expenditures and lead time. There can be
no assurance that we will use new technologies effectively or adapt our Web
site, proprietary technology and transaction processing systems to customer
requirements or emerging industry standards. If we are unable, for technical,
legal, financial or other reasons, to adapt in a timely manner in response to
changing market conditions or customer requirements, our business, operating
results and financial condition could be materially and adversely affected.
OUR MARKETPLACE OR DATABASE MAY BE SUSCEPTIBLE TO SECURITY BREACHES
A fundamental requirement for electronic commerce and communications is
the secure transmission of confidential information over public networks. We
will rely on encryption and authentication technology licensed from third
parties to provide the security and authentication necessary to effect secure
transmission of confidential information, such as customer credit card numbers.
In addition, we intend to maintain an extensive, confidential database of
customer profiles and transaction information. There can be no assurance that
advances in computer capabilities, new discoveries in the field of cryptography,
or other events or developments will not result in a compromise or breach of the
algorithms we use to protect customer transaction data contained in our customer
database. Further, our servers may be vulnerable to computer viruses, physical
or electronic break-ins and similar disruptions. If any such compromise of our
security were to occur, it could have a material adverse effect on our
reputation, business, operating results and financial condition. A party who is
able to circumvent our security measures could misappropriate proprietary
information or cause interruptions in its operations. We may be required to
expend significant capital and other resources to protect against such security
breaches or to alleviate problems caused by such breaches. Concerns over the
security of transactions conducted on the Internet and commercial online
services and the privacy of users may also inhibit the growth of the Internet
and commercial online services, especially as a means of conducting commercial
transactions. To the extent that our activities or those of third-party
contractors involve the storage and transmission of proprietary information,
such as credit card numbers or other personal information, security breaches
could expose us to a risk of loss or litigation and possible liability. There
can be no assurance that our security measures will prevent security breaches or
that failure to prevent such security breaches will not have a material adverse
effect on our business, operating results and financial condition.
WE MAY HAVE LIABILITY FOR INTERNET CONTENT IN OUR MARKETPLACE
As a publisher and distributor of online content, we face potential
liability for defamation, negligence, copyright, patent or trademark
infringement and other claims based on the nature and content of the materials
that it receives, stores, publishes or distributes. Such claims have been
brought and sometimes successfully pressed, against online services. There is a
risk that we may be exposed to these claims in connection with the future
operations of our various Web sites. In addition, we do not and cannot
practically screen all of the content generated by our users, and we could be
exposed to liability with respect to such content. Although we carry general
liability insurance, our insurance may not cover claims of these types or may
not be adequate to indemnify us for all liability that may be imposed. Any
imposition of liability, particularly liability that is not covered by insurance
or is in excess of insurance coverage, could have a material adverse effect on
our reputation, business, operating results and financial condition.
12
FUTURE GOVERNMENTAL REGULATION OF THE INTERNET MAY RESTRICT OUR BUSINESS
There are currently few laws or regulations that specifically regulate
communications or commerce on the Internet. Laws and regulations may be adopted
in the future, however, that address issues including user privacy, pricing and
the characteristics and quality of products and services. An increase in
regulation or the application of existing laws to the Internet could
significantly increase our costs of operations and harm our business. For
example, the Communications Decency Act of 1996 sought to prohibit the
transmission of certain types of information and content over the Web.
Additionally, several telecommunications companies have petitioned the Federal
Communications Commission to regulate Internet service providers and online
service providers in a manner similar to long distance telephone carriers and to
impose access fees on these companies. Imposition of access fees could increase
the cost of transmitting data over the Internet.
WE RELY ON INTELLECTUAL PROPERTY RIGHTS THAT MAY NOT ADEQUATELY PROTECT US UNDER
CURRENT LAWS
To establish and protect our trademarks, services marks and other
proprietary rights in our products and services, we rely on a combination of
copyright, unfair competition, trademark, service mark and trade secret laws;
confidentiality agreements with licensees and other third parties; and
confidentiality agreements and policies covering employees. We cannot assure you
that these measures will be adequate, that we will be able to secure
registrations for all of our marks in the U.S. or internationally or that third
parties will not infringe upon or misappropriate our proprietary rights. Any
infringement, misappropriation or litigation relating to intellectual property
rights may divert our management's attention and our funds to litigate such
claims. Provisions in our license agreements with our customers protecting
against unauthorized use, copying, transfer and disclosure of our licensed
products may be unenforceable under the laws of specific jurisdictions and
foreign countries. In addition, the laws of some foreign countries do not
protect proprietary rights to the same extent, as do the laws of the United
States. We cannot assure you that our methods of protecting our proprietary
rights in the United States or abroad will be adequate. We also cannot assure
you that competing companies will not independently develop technology similar
to our proprietary technology.
Legal standards relating to the validity, enforceability and scope of
protection of certain property rights in Internet-related businesses are
uncertain and evolving. In particular, new domain name registration and
ownership property procedures may be adopted that may make it more difficult for
us and other Internet-related businesses to retain or obtain desirable domain
names.
Companies in our industry and other electronic commerce-based
industries have been the subject of claims that their Web site content, method
of doing business and processes for conducting on-line transactions violate the
patent, trademark, copyright and other intellectual property rights of their
competitors or other third parties. Although we believe that our proprietary
rights do not infringe on the intellectual property rights of others, other
parties may assert infringement claims against us or claims that we have
violated a patent or infringed a copyright, trademark or other intellectual
property right belonging to such other parties. We may be subject to claims of
this type in the future as we develop and introduce new products and methods of
doing business in the future. Any infringement claims, even if not meritorious,
could result in our expenditure of significant financial and managerial
resources, which could harm our business.
13
We also intend to continue to strategically license certain content for
our Web site from third parties, including content which is integrated with
internally developed content and used on our Web site to provide key services.
There can be no assurance that these third party content licenses will be
available to us on commercially reasonable terms or that we will be able to
successfully integrate such third-party content. Such content licenses may
expose us to increased risks, including risks associated with the assimilation
of new content, the diversion of resources from the development of on-line
content and functionality, the inability to generate revenues from new content
sufficient to offset associated acquisition costs and the maintenance of
uniform, appealing content. The inability to obtain any of these licenses could
result in delays in Web site development or services until equivalent content
can be identified, licensed and integrated. Any such delays in development or
services could have a material adverse effect on our business, operating results
and financial condition.
Companies in our industry whose employees accept positions with
competitors frequently claim that their competitors have engaged in unfair
hiring practices or have assisted the employee in breaching noncompetition or
nondisclosure agreements. We may be subject to claim of this type in the future
as we seek to hire qualified employees. We could incur substantial costs in
defending ourselves against these claims or litigation associated with these
claims, regardless of their merit. On the other hand, courts have taken a
restrictive view with regard to the enforcement of noncompetition and
nonsolicitation covenants and nondisclosure and secrecy agreements, particularly
with respect to Internet-related businesses. Therefore, we may not be able to
enforce the agreements we have with our employees regarding restrictions on
their ability to compete against us.
14
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this prospectus constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. The forward-looking statements relate to anticipated financial
performance, management's plans and objectives for future operations, business
prospects, outcome of regulatory proceedings, market conditions and other
matters. The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward-looking statements in certain circumstances. The following
discussion is intended to identify the forward-looking statements and certain
factors that could cause future outcomes to differ materially from those set
forth in the forward-looking statements.
Forward-looking statements include the information concerning our
possible or assumed future results of operations, as well as other future events
set forth under "Risk Factors-Risks Related to the Integration of the
Businesses" and other statements in this prospectus identified by words such as
"anticipate," "estimate," "expect," "intend," "believe," and "objective," and
include, in particular, the statements as to:
1. the ability of the combined company to compete effectively in
our markets;
2. the ability to convince customers to use our services and
systems;
3. the anticipated manner in which identified merger benefits
will be achieved;
4. the estimated amount of costs and capital expenditures
necessary to achieve the merger benefits;
5. the estimated future costs, operating losses and capital
expenditures associated with our business;
6. the ability to attract and retain qualified employees; and
7. the ability of sales people who quit to take customers
with them.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which involve known and unknown risks, uncertainties
and other factors that may cause the actual results, performance or achievements
of the combined company to be materially different from any future results,
performance or achievements expressed or implied by the forward-looking
statements. These factors may affect our operations, markets, products, services
and prices. In addition to any assumptions and other factors referred to
specifically in connection with forward-looking statements, factors that could
cause our actual results to differ materially from those contemplated in any
forward-looking statement include, among others, the following:
1. general economic and business conditions;
2. industry capacity;
3. changes in technology;
4. changes in political, social and economic conditions;
5. regulatory matters, including the possibility of new
regulations affecting e-commerce;
15
6. challenges associated with the integration of the operations
of HA-LO and Starbelly.com;
7. adverse regulatory treatment;
8. the ability of HA-LO and Starbelly.com to implement and
realize anticipated cost savings and revenue enhancements from
the merger;
9. the actual costs required to effect the merger and to realize
anticipated cost savings and revenue enhancements;
10. the actual duration of our continuing operating losses;
11. the loss of any significant customers;
12. changes in business strategy or development plans;
13. actual future costs of operating expenses;
14. actual costs of continuing investments in technology;
15. the availability of capital to finance possible acquisitions
and to refinance debt;
16. the ability of management to implement the strategy of
acquisitions and process improvements;
17. changes in the capital markets affecting the ability
to finance capital requirements; and
18. the other factors listed in our annual report on Form 10-K or
in other reports previously or hereafter filed by us with the
Securities and Exchange Commission, which are incorporated by
reference herein.
Other factors and assumptions not identified above were also involved
in the derivation of these forward-looking statements, and the failure of these
other assumptions to be realized, as well as other factors, may also cause
actual results to differ materially from those projected. We do not assume any
obligation to update any forward-looking statements to reflect actual results,
changes in assumptions or changes in other factors affecting those
forward-looking statements.
USE OF PROCEEDS
All of the 6,545,378 shares of common stock (the "Shares") are being
offered by the stockholders named below (the "Selling Stockholders"). We will
not receive any of the proceeds from the sale of Shares by the Selling
Stockholders.
16
SELLING STOCKHOLDERS
The following table sets forth with respect to the Selling Stockholders
(i) the number of Shares beneficially owned as of January 23, 2001 and prior to
the offering contemplated hereby, (ii) the maximum number of Shares which may be
sold in the offering pursuant to this Prospectus and (iii) the number of Shares
which will be beneficially owned after the offering, assuming the sale of all
Shares set forth in (ii) above:
BENEFICIAL OWNERSHIP SHARES TO BE BENEFICIAL OWNERSHIP
PRIOR TO OFFERING OFFERED AFTER OFFERING
----------------- ------- --------------
SELLING STOCKHOLDERS SHARES(1) PERCENTAGE SHARES PERCENTAGE
-------------------- --------- ---------- ------ ----------
Chase Venture Capital Associates, L.P......... 2,926,919(2) 4.3% 975,640 1,951,279 2.9%
Flatiron Fund 1998/99, LLC.................... 203,143 * 67,714 135,429 *
Flatiron Associates, LLC...................... 20,729 * 6,910 13,819 *
Kenneth G. Pigott............................. 82,916(3) * 27,639 55,277 *
David A. Ramon................................ 82,916(4) * 27,639 55,277 *
Carramore Limited Partnership................. 2,826,525(5) 4.4% 942,175 1,884,350 2.9%
Richard A. Heise, Jr.......................... 94,387(6) * 31,462 62,925 *
Minotaur Partners, L.P........................ 153,058(7) * 74,555 78,503 *
Delphic Financial Holdings, Ltd............... 52,188(8) * 17,396 34,792 *
GCWF Investment Partners...................... 34,777(9) * 12,426 22,351 *
Thomas W. Furlong............................. 7,456(10) * 2,485 4,971 *
Thaddeus G. Stephens.......................... 2,982(11) * 994 1,988 *
M. Catherine Jaros............................ 202,895(12) * 90,176 112,719 *
Altheimer & Gray.............................. 8,324(13) * 2,775 5,549 *
Peter H. Lieberman............................ 8,324(14) * 2,775 5,549 *
Mohanbir Sawhney.............................. 29,620(15) * 13,873 15,747 *
Coventry Partners Family Limited Partnership.. 5,434,136(16) 8.4% 1,872,879 3,561,257 5.5%
Bloomfield Partners Family Limited Partnership 5,826,734(17) 9.0% 1,942,245 3,884,489 6.0%
Silicon Valley Bancshares..................... 11,770(18) * 6,539 5,231 *
Lefkofsky Family Limited Liability Company I.. 166,478(19) * 55,493 110,985 *
Steven Lefkofsky.............................. 20,810(20) * 6,937 13,873 *
Jodi Neff..................................... 20,810(21) * 6,937 13,873 *
Andrew Parkinson.............................. 33,696(22) * 11,232 22,464 *
Bruce A. Zivian............................... 6,795(23) * 2,265 4,530 *
Carlos Perez.................................. 33,696(24) * 11,232 22,464 *
Clair Heise................................... 67,392(25) * 22,464 44,928 *
Cohan Investment Partnership.................. 13,497(26) * 4,499 8,998 *
Dara Khosrowshahi............................. 47,194(27) * 15,731 31,463 *
Ingram Capital, Inc. ......................... 67,392(28) * 22,464 44,928 *
Dennis Archer, Jr. ........................... 33,696(29) * 11,232 22,464 *
Donald Wilson................................. 33,696(30) * 11,232 22,464 *
Ellen Havdala................................. 13,497(31) * 4,499 8,998 *
Frank Torre Jr. .............................. 33,696(32) * 11,232 22,464 *
Jeffrey McClusky.............................. 33,696(33) * 11,232 22,464 *
James L. & Laurie A. Jerue.................... 18,199(34) * 6,733 11,466 *
Joseph Madonia................................ 13,497(35) * 4,499 8,998 *
Kenneth A. Steel.............................. 26,995(36) * 8,998 17,997 *
Kevork Derderian.............................. 20,199(37) * 6,733 13,466 *
Mark Birringer................................ 20,199(38) * 6,733 13,466 *
Mark Seruya IRA............................... 20,199(39) * 6,733 13,466 *
Randall Abrahams.............................. 13,497(40) * 4,499 8,998 *
Richard Melman Revocable Trust................ 67,392(41) * 22,464 44,928 *
Richard Porter................................ 5,195(42) * 2,265 2,930 *
Richard Porter IRA............................ 13,497(43) * 4,499 8,998 *
17
BENEFICIAL OWNERSHIP SHARES TO BE BENEFICIAL OWNERSHIP
PRIOR TO OFFERING OFFERED AFTER OFFERING
----------------- ------- --------------
SELLING STOCKHOLDERS SHARES(1) PERCENTAGE SHARES PERCENTAGE
-------------------- --------- ---------- ------ ----------
Robert Levin.................................. 13,497(44) * 4,499 8,998 *
Robert & Jennifer Steel....................... 27,089(45) * 9,030 18,059 *
Ronald Lott................................... 25,272(46) * 11,232 14,040 *
Stewart Flink................................. 20,218(47) * 11,232 8,986 *
Todd Pines.................................... 33,696(48) * 11,232 22,464 *
Jeffrey Wolf.................................. 33,696(49) * 11,232 22,464 *
Thomas Parkinson.............................. 33,696(50) * 11,232 22,464 *
Thomas Bindley Revocable Trust................ 223,665(51) * 74,555 149,110 *
..................
* Less than 1%.
(1) For purposes of this table, a person is deemed to have "beneficial
ownership" of any shares of common stock which such person has the
right to acquire within 60 days after the date of this prospectus. For
purposes of computing the percentage of outstanding shares of common
stock held by each person named above, any security which such person
has the right to acquire from us within 60 days after the date of this
prospectus is deemed to be outstanding, but is not deemed to be
outstanding for the purpose of computing the percentage ownership of
any other person.
(2) Consists of 2,926,919 shares of common stock issuable upon the
conversion of convertible preferred stock.
(3) Consists of 82,916 shares of common stock issuable upon the conversion
of convertible preferred stock.
(4) Consists of 82,916 shares of common stock issuable upon the conversion
of convertible preferred stock.
(5) Includes 268,363 shares of common stock issuable upon the conversion
of convertible preferred stock.
(6) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 8,962 shares of common stock issuable upon the conversion of
convertible preferred stock.
(7) Includes 21,236 shares of common stock issuable upon the conversion of
convertible preferred stock.
(8) Includes 4,955 shares of common stock issuable upon the conversion of
convertible preferred stock.
(9) Includes 3,539 shares of common stock issuable upon the conversion of
convertible preferred stock.
(10) Includes 708 shares of common stock issuable upon the conversion of
convertible preferred stock.
(11) Includes 283 shares of common stock issuable upon the conversion of
convertible preferred stock.
(12) Includes 25,685 shares of common stock issuable upon the conversion of
convertible preferred stock.
(13) Includes 790 shares of common stock issuable upon the conversion of
convertible preferred stock.
(14) Includes 790 shares of common stock issuable upon the conversion of
convertible preferred stock.
(15) Includes 3,952 shares of common stock issuable upon the conversion of
convertible preferred stock.
(16) Includes 533,458 shares of common stock issuable upon the conversion
of convertible preferred stock.
(17) Includes 553,216 shares of common stock issuable upon the conversion
of convertible preferred stock.
18
(18) Includes 1,863 shares of common stock issuable upon the conversion of
convertible preferred stock.
(19) Includes 15,806 shares of common stock issuable upon the conversion of
convertible preferred stock.
(20) Includes 1,976 shares of common stock issuable upon the conversion of
convertible preferred stock.
(21) Includes 1,976 shares of common stock issuable upon the conversion of
convertible preferred stock.
(22) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 3,199 shares of common stock issuable upon the conversion of
convertible preferred stock.
(23) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 645 shares of common stock issuable upon the conversion of
convertible preferred stock.
(24) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 3,199 shares of common stock issuable upon the conversion of
convertible preferred stock.
(25) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 6,400 shares of common stock issuable upon the conversion of
convertible preferred stock.
(26) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 1,281 shares of common stock issuable upon the conversion of
convertible preferred stock.
(27) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 4,481 shares of common stock issuable upon the conversion of
convertible preferred stock.
(28) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 6,400 shares of common stock issuable upon the conversion of
convertible preferred stock.
(29) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 3,199 shares of common stock issuable upon the conversion of
convertible preferred stock.
(30) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 3,199 shares of common stock issuable upon the conversion of
convertible preferred stock.
(31) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 1,281 shares of common stock issuable upon the conversion of
convertible preferred stock.
(32) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 3,199 shares of common stock issuable upon the conversion of
convertible preferred stock.
(33) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 3,199 shares of common stock issuable upon the conversion of
convertible preferred stock.
(34) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 1,918 shares of common stock issuable upon the conversion of
convertible preferred stock.
(35) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 1,281 shares of common stock issuable upon the conversion of
convertible preferred stock.
(36) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 2,563 shares of common stock issuable upon the conversion of
convertible preferred stock.
(37) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 1,918 shares of common stock issuable upon the conversion of
convertible preferred stock.
19
(38) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 1,918 shares of common stock issuable upon the conversion of
convertible preferred stock.
(39) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 1,918 shares of common stock issuable upon the conversion of
convertible preferred stock.
(40) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 1,281 shares of common stock issuable upon the conversion of
convertible preferred stock.
(41) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 6,400 shares of common stock issuable upon the conversion of
convertible preferred stock.
(42) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 645 shares of common stock issuable upon the conversion of
convertible preferred stock.
(43) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 1,281 shares of common stock issuable upon the conversion of
convertible preferred stock.
(44) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 1,281 shares of common stock issuable upon the conversion of
convertible preferred stock.
(45) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 2,572 shares of common stock issuable upon the conversion of
convertible preferred stock.
(46) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 3,199 shares of common stock issuable upon the conversion of
convertible preferred stock.
(47) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 3,199 shares of common stock issuable upon the conversion of
convertible preferred stock.
(48) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 3,199 shares of common stock issuable upon the conversion of
convertible preferred stock.
(49) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 3,199 shares of common stock issuable upon the conversion of
convertible preferred stock.
(50) Consists of shares received as a dividend from Zebra Investments, L.P.,
including 3,199 shares of common stock issuable upon the conversion of
convertible preferred stock.
(51) Includes 21,236 shares of common stock issuable upon the conversion of
convertible preferred stock.
All of the Shares offered hereby were acquired by the Selling
Stockholders listed in the table above from us in connection with our
acquisition in May 2000 of Starbelly.com, and have been registered under the
Securities Act of 1933, as amended, for resale by such Selling Stockholders in
accordance with the provisions of the merger agreement. Following completion of
the merger, Bradley Keywell, who, with his family, through various interests in
limited partnerships, holds majority economic interests in Bloomfield Partners
Family Limited Partnership, became our President and one of our directors.
Following completion of the merger, Eric Lefkofsky, who, with his family,
through various interests in limited partnerships, holds majority economic
interests in Coventry Partners Family Limited Partnership, became our chief
operating officer, vice president and one of our directors and also has the
right to request our board of directors to nominate his designee for election to
our board. Pursuant to Mr. Lefkofsky's request in June 2000, our board elected
Richard A. Heise, Jr. as a director and nominated Mr. Heise for re-election to
our board at our 2000 Annual Meeting of Shareholders (where he was re-elected).
20
PLAN OF DISTRIBUTION
The Company is registering the Shares on behalf of the Selling
Stockholders. The Shares covered by this prospectus may be offered and sold by
the Selling Stockholders, or by purchasers, transferees, donees, pledgees or
other successors in interest, directly or through brokers, dealers, agents or
underwriters who may receive compensation in the form of discounts, commissions
or similar selling expenses paid by the Selling Stockholders or by a purchaser
of the Shares on whose behalf such broker-dealer may act as agent. Sales and
transfers of the Shares may be effected from time to time in one or more
transactions, in private or public transactions, on the New York Stock Exchange
(the "NYSE"), in the over-the-counter market, in negotiated transactions or
otherwise, at a fixed price or prices that may be changed, at market prices
prevailing at the time of sale, at negotiated prices, without consideration or
by any other legally available means. Any or all of the Shares may be sold from
time to time by means of (a) a block trade, in which a broker or dealer attempts
to sell the Shares as agent but may position and resell a portion of the Shares
as principal to facilitate the transaction; (b) purchases by a broker or dealer
as principal and the subsequent sale by such broker or dealer into the public
market in any manner permitted by the Selling Stockholders under this
prospectus; (c) ordinary brokerage transactions (which may include long or short
sales) in which the broker solicits purchasers or executes unsolicited orders;
(d) the writing (sale) or settlement of non-traded or exchange-traded put or
call option contracts, and by means of the establishment or settlement of other
hedging transactions, including forward sale transactions; (e) the pledging of
the Shares as collateral to a broker/dealer or other pledgee to secure loans,
credit or other financing arrangements or obligations and, upon any subsequent
default, the disposition of the shares so pledged; and (f) any other legally
available means. In addition, the Selling Stockholders may loan their shares to
broker/dealers who are counterparties to hedging transactions and such
broker/dealers may sell the shares so borrowed into the public market.
To the extent required with respect to a particular offer or sale of
the Shares, a prospectus supplement will be filed pursuant to Section 424(b)(3)
of the Securities Act and will accompany this prospectus, to disclose (a) the
number of Shares to be sold, (b) the purchase price, (c) the name of any broker,
dealer or agent effecting the sale or transfer and the amount of any applicable
discounts, commissions or similar selling expenses, and (d) any other relevant
information.
The Selling Stockholders may transfer the Shares by means of gifts,
donations and contributions. This prospectus may be used by the recipients of
such gifts, donations and contributions to offer and sell the Shares received by
them, directly or through brokers, dealers or agents and in private or public
transactions; however, if sales pursuant to this prospectus by any such
recipient could exceed 500 Shares, then a prospectus supplement would need to be
filed pursuant to Section 424(b)(3) of the Securities Act to identify the
recipient as the Selling Stockholders and disclose any other relevant
information. Such prospectus supplement would be required to be delivered,
together with this prospectus, to any purchaser of such Shares.
In connection with distributions of the Shares or otherwise, the
Selling Stockholders may enter into hedging transactions with brokers, dealers
or other financial institutions. In connection with such transactions, brokers,
dealers or other financial institutions may engage in short sales of our common
stock in the course of hedging the positions they assume with the Selling
Stockholders. To the extent permitted by applicable law, the Selling
Stockholders also may sell the Shares short and redeliver the Shares to close
out such short positions.
The Selling Stockholders and any broker-dealers who participates in the
distribution of the Shares may be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act and any discounts, commissions or similar
selling expenses they receive and any profit on the resale of the Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
21
As a result, we have informed the Selling Stockholders that Regulation M,
promulgated under the Securities Exchange Act of 1934, as amended, may apply to
sales by the Selling Stockholders in the market. The Selling Stockholders may
agree to indemnify any broker, dealer or agent that participates in transactions
involving the sale of the Shares against certain liabilities, including
liabilities arising under the Securities Act. The aggregate net proceeds to the
Selling Stockholders from the sale of the Shares will be the purchase price of
such Shares less any discounts, concessions or commissions.
The Selling Stockholders are acting independently of us in making
decisions with respect to the timing, price, manner and size of each sale. No
broker, dealer or agent has been engaged by us in connection with the
distribution of the Shares. There is no assurance, therefore, that the Selling
Stockholders will sell any or all of the Shares. In connection with the offer
and sale of the Shares, we have agreed to make available to the Selling
Stockholders copies of this prospectus and any applicable prospectus supplement
and have informed the Selling Stockholders of the need to deliver copies of this
prospectus and any applicable prospectus supplement to purchasers at or prior to
the time of any sale of the Shares offered hereby.
The Shares covered by this prospectus may qualify for sale pursuant to
Section 4(1) of the Securities Act or Rule 144 promulgated thereunder, and may
be sold pursuant to such provisions rather than pursuant to this prospectus.
We will not receive any proceeds from the sale of the Shares covered by
this prospectus and have agreed to pay all of the expenses incident to the
registration of the Shares, other than discounts and selling concessions or
commissions, if any, and fees and expenses of counsel for the Selling
Stockholders, if any.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon for us by
Neal, Gerber & Eisenberg, Chicago, Illinois. Certain partners of, attorneys with
and/or of counsel to Neal, Gerber & Eisenberg, counsel to the Company,
beneficially own shares of our common stock and/or serve as Assistant Secretary
of the Company.
EXPERTS
The Annual Report incorporated by reference in this prospectus has been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
such report, and is incorporated by reference herein in reliance upon the
authority of said firm as experts in auditing and accounting in giving said
reports.
WHERE TO FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy our filed reports,
statements or other information at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Our
public filings are also available from commercial document retrieval services
and at the Internet World Wide Web site maintained by the SEC at
"http://www.sec.gov." Reports, proxy statements and other information about us
also may be inspected at the NYSE offices at 20 Broad Street, 17th Floor, New
York, New York 10005.
The Company has filed with the SEC a Registration Statement on Form S-3
under the Securities Act with respect to the securities offered hereby. This
prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement,
22
certain items of which are contained in schedules and exhibits to the
Registration Statement as permitted by the rules and regulations of the SEC.
Statements made in this prospectus as to the contents of any contract, agreement
or other document referred to are not necessarily complete. With respect to each
such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. Items and information omitted from
this prospectus but contained in the Registration Statement may be inspected and
copied at the Public Reference Room of the SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important business and financial
information by referring you to another document separately filed with the SEC.
The information incorporated by reference is deemed to be part of this
prospectus, except for any information superseded by information contained
directly in this prospectus. This prospectus incorporates by reference the
following documents previously filed by us with the SEC. These documents contain
important information about our company and its business and finances.
SEC FILINGS PERIOD
----------- ------
Annual Report on Form 10-K............................. Year ended December 31, 1999
Quarterly Report on Form 10-Q.......................... Quarter ended September 30, 2000
Quarterly Report on Form 10-Q.......................... Quarter ended June 30, 2000
Quarterly Report on Form 10-Q.......................... Quarter ended March 31, 2000
Current Report on Form 8-K............................. Dated September 1, 2000
Current Report on Form 8-K............................. Dated May 12, 2000
Current Report on Form 8-K............................. Dated January 21, 2000
Description of common stock contained in
Registration Statement, and amendments
and reports updating this description ................. Dated October 20, 1992
All documents subsequently filed by us pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the offering
of the Shares, shall be deemed to be incorporated by reference herein and to be
a part hereof from the date of filing of such documents. Any statement contained
herein or in any document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for the purposes of this
prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed to constitute a part of this
prospectus, except as so modified or superseded. We will provide without charge
to each person, including any beneficial owner, to whom a copy of this
prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the information that has been incorporated by reference in this
prospectus (excluding exhibits to such information which are not specifically
incorporated by reference into such information). Requests for such information
should be directed to HA-LO Industries, Inc., 5980 West Touhy Avenue, Niles,
Illinois 60714, Attention: Gregory J. Kilrea, Chief Financial Officer, Telephone
(847) 647-2300.
23
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with
the sale and distribution of securities being registered, other than discounts,
concessions and brokerage commissions:
SEC registration fee.................................................................... $5,114
Legal fees and expenses................................................................. 4,000*
Accounting fees and expenses............................................................ 4,000*
Miscellaneous........................................................................... 3,886*
-----
Total............................................................................. $17,000*
-------
* Estimated
We will bear all of the foregoing expenses.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under the Delaware General Corporation Law, as amended (the
"DGCL"), a corporation has the authority to indemnify any person who
was or is a party or is threatened to be made a party to an action
(other than an action by or in the right of the corporation) by reason
of such person's service as a director of officer of the corporation,
or such person's service, at the corporation's request, as a director,
officer, employee or agent of another corporation or other enterprise,
against amounts paid and expenses incurred in connection with the
defense or settlement of such action, if such person acted in good
faith and in a manner such person reasonably believed to be in or not
opposed to the corporation's best interests and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that
such person's conduct was unlawful. If such person has been judged
liable to the corporation in any action or proceeding brought by or in
the right of the corporation, however, indemnification is only
permitted to the extent that the adjudicating court (or the court in
which the action was brought) determines, despite the adjudication of
liability, that such indemnification is proper.
In addition, the certificate of incorporation of the
Corporation requires the Corporation to indemnify all current and
former officers and directors of the Corporation to the fullest extent
permitted by the DGCL. The Corporation maintains officers' and
directors' liability insurance which insures against liabilities that
officers and directors of the Corporation may incur in such capacities.
The Corporation has also entered into indemnity agreements with each of
its directors and officers pursuant to which it has agreed to indemnify
such persons against any and all losses and expenses to the fullest
extent permitted under the Corporation's certificate of incorporation
and by-laws and the DGCL and to advance to such persons any and all
expenses arising in connection therewith.
II-1
ITEM 16. EXHIBITS.
(a) Exhibits
EXHIBIT NO. DESCRIPTION
- ----------- -----------
4.1 Specimen certificates representing Common Stock (incorporated by reference to the Company's Current
Report on Form 8-K by the Company on September 1, 2000 under the Securities Exchange Act of 1934, as
amended).
5.1 Opinion of Neal, Gerber & Eisenberg.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Neal, Gerber & Eisenberg (included in Exhibit 5.1).
24.1 Powers of Attorney of certain officers and directors of the Company (included on signature page).
(b) Supplemental Financial Statement Schedules: None.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the Registration Statement or any material change to such
information in the Registration Statement.
PROVIDED, HOWEVER, that paragraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
II-2
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than insurance payments and the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, State of Illinois, on January 23, 2001.
HA-LO INDUSTRIES, INC.
(Registrant)
By: /s/ JOHN R. KELLEY, JR.
--------------------------
John R. Kelley, Jr.
CHIEF EXECUTIVE OFFICER
We, the undersigned officers and directors of HA-LO Industries, Inc.,
hereby severally constitute John R. Kelley, Jr. and Gregory J. Kilrea, and each
of them singly, our true and lawful attorneys with full power to them, and each
of them singly, to sign for us and in our names in the capacities indicated
below, any and all amendments, including post-effective amendments, to this
registration statement, and generally to do all such things in our name and
behalf in such capacities to enable HA-LO Industries, Inc. to comply with the
applicable provisions of the Securities Act of 1933, as amended, and all
requirements of the Securities and Exchange Commission, and we hereby ratify and
confirm our signatures as they may be signed by our said attorneys, or any of
them, to any and all such amendments.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below on January 23, 2001, by the
following persons in the capacities indicated:
NAME TITLE
---- -----
/s/ JOHN R. KELLEY, JR. Chief Executive Officer and Director
------------------------ (Principal Executive Officer)
John R. Kelley, Jr.
/s/ LOU WEISBACH Chairman of the Board
------------------------
Lou Weisbach
/s/ LINDEN D. NELSON Vice Chairman
------------------------
Linden D. Nelson
/s/ GREGORY J. KILREA Chief Financial Officer
------------------------ (Principal Financial Officer and
Gregory J. Kilrea Principal Accounting Officer)
/s/ BRADLEY A. KEYWELL President and Director
------------------------
Bradley A. Keywell
II-4
/s/ ERIC LEFKOFSKY Chief Operating Officer, Vice President
------------------------ and Director
Eric Lefkofsky
/s/ THOMAS HERSKOVITS Director
------------------------
Thomas Herskovits
/s/ MARSHALL J. KATZ Director
------------------------
Marshall J. Katz
/s/ BRIAN M. HERMELIN Director
------------------------
Brian M. Hermelin
/s/ RICHARD A. HEISE, JR. Director
------------------------
Richard A. Heise, Jr.
II-5
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
4.1 Specimen certificates representing Common Stock (incorporated by reference to the Company's
Current Report on Form 8-K by the Company on September 1, 2000 under the Securities Exchange Act
of 1934, as amended).
5.1 Opinion of Neal, Gerber & Eisenberg.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Neal, Gerber & Eisenberg (included in Exhibit 5.1).
24.1 Powers of Attorney of certain officers and directors of the Company (included on signature page).
II-6