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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 0-26977
------------------------
LUMINANT WORLDWIDE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 75-2783690
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
13737 NOEL ROAD, SUITE 1400, DALLAS, 75240-7367
TEXAS (zip code)
(Address of principal executive
offices)
(972) 581-7000
Registrant's telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of each class)
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. /X/ Yes / / No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
At April 1, 2001, the registrant had 27,845,886 shares of common stock
(including non-voting common stock) outstanding. The aggregate market value of
the voting and non-voting equity held by non-affiliates of the registrant as of
April 1, 2001 was approximately $10.8 million (based on the closing sale price
of the common stock on the Nasdaq National Market on that date).
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LUMINANT WORLDWIDE CORPORATION
FORM 10-K/A
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
INDEX
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 3
Item 11. Executive Compensation...................................... 6
Security Ownership of Certain Beneficial Owners and 15
Item 12. Management..................................................
Item 13. Certain Relationships and Related Transactions.............. 18
2
EXPLANATORY NOTE
This amendment on Form 10-K/A (the "Amendment") amends the Registrant's
Annual Report on Form 10-K filed by the Registrant on April 17, 2001 (the
"Annual Report"), and is being filed solely to amend and restate in its entirety
Part III of the Annual Report. The Amendment does not amend or alter the
information set forth in Parts I, II or IV of the Annual Report.
The items amended are as follows:
Part III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Part III Item 11. EXECUTIVE COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
Part III Item 12. MANAGEMENT
Part III Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is certain information relating to the Company's executive
officers and directors. The information set forth is as of April 10, 2001 unless
otherwise indicated.
NAME AGE POSITION DIRECTOR SINCE
- ---- -------- ------------------------------------ --------------
Michael H. Jordan(2)................ 64 Chairman of the Board of Directors 1999
Randolph L. Austin(1)(2)............ 36 Director 1999
Thomas G. Bevivino.................. 45 Chief Financial Officer and --
Secretary
James R. Corey...................... 47 President, Chief Executive Officer 1999
and Director
Michael J. Dolan(2)................. 57 Director 1999
Donald S. Perkins(1)(2)............. 74 Director 1999
K. David Quackenbush, Jr............ 39 Chief Operating Officer --
Richard M. Scruggs.................. 45 Vice Chairman, Executive Vice 1999
President of Corporate Development
and Director
Michael E. Smith.................... 44 Executive Vice President of Strategy --
Services
George P. Stamas(3)................. 49 Director 1999
- ------------------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Non-voting member of Compensation Committee
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.
3
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.
THOMAS G. BEVIVINO has been our Chief Financial Officer and Secretary since
December 1999 and served as our Vice President of Finance from July 1999 until
December 1999. From March 1999 until July 1999, Mr. Bevivino performed financial
and accounting services for us through ARC Group LLC, his specialist financial
advisory and transactions support firm. From June 1986 to June 1988,
Mr. Bevivino served as a staff accountant at Kreischer Miller & Co., an
accounting, auditing and financial advisory firm. After receiving his CPA in
June 1988, Mr. Bevivino served as a Senior Accountant at Kreischer Miller from
June 1988 to August 1990. From August 1990 to December 1991, Mr. Bevivino served
as the corporate controller of Realen Homes, a real estate developer. In
December 1991, Mr. Bevivino rejoined Kreischer Miller where he worked until
March 1999, departing as a Senior Engagement Manager. Mr. Bevivino is a member
of the American Institute of Certified Public Accountants and the Pennsylvania
Institute of Certified Public Accountants.
JAMES R. COREY has been our Chief Executive Officer since September 2000 and
our President and a director since the closing of our initial public offering in
September 1999. Mr. Corey also served as our Chief Operating Officer from the
closing of our initial public offering until December 2000. 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.
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 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.
K. DAVID QUACKENBUSH, JR. has served as our Chief Operating Officer since
March 2001. Mr. Quackenbush served as our Executive Vice President of
Implementation Services from October 2000 until March 2001, served as Managing
Director, Central Region from January 2000 until September 2000 and has led our
Central Region since November 1999. From July 1998 until November 1999,
Mr. Quackenbush served as Principal in charge of the Houston and Energy Business
Units of Align, one of the eight companies acquired by Luminant simultaneously
with our initial public offering. From August 1993 until July 1998,
Mr. Quackenbush was Director of Per-Se Technologies, a provider of software and
information system services to the healthcare industry.
4
RICHARD M. SCRUGGS has been our Vice Chairman and a director since the
closing of our initial public offering in September 1999, and served as our
Executive Vice President of Corporate Development since September 2000.
Mr. Scruggs also served as our Executive Vice President of Client Development
from September 1999 through September 2000. 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.
MICHAEL E. SMITH has served as our Executive Vice President of Strategy
Services since October 2000, served as our Managing Director, Strategy since
February 2000 and has led the strategy practice since September 1999. From
January 1996 until September 1999, Mr. Smith served as a Vice President of
Mercer Management Consulting, a corporate strategy consulting firm. From
January 1991 until January 1996, Mr. Smith served as a Vice President for Visa
International, a full-service payment card provider.
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.
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, 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, 2000, except that (1) Mr. Dolan failed to file a
Form 4 for one transaction (in 1999) in which he acquired shares of common
stock, (2) Mr. Jordan failed to file Form 4s for two transactions (including one
in 1999) in which he beneficially acquired shares of common stock, and one
transaction in which his wife disposed of shares of common stock,
(3) Mr. Perkins did not file a Form 4 on a timely basis for one transaction in
which he acquired shares of common stock, (4) Mr. Bevivino failed to file a
Form 4 for two transactions (in 1999) in which he and his son acquired shares of
common stock, (5) Mr. Corey did not file a Form 4 on a timely basis for one
transaction in which he acquired shares of common stock, (6) Mr. Quackenbush did
not file a Form 4 on a timely basis for one transaction in which he acquired
shares of common stock, and did not file a Form 4 for one transaction in which
he acquired options to purchase common stock, one transaction in which he
acquired common stock through an option exercise, and one transaction in which
he disposed of shares of common stock, (7) Mr. Smith did not file a Form 3 on a
timely basis upon becoming an executive officer of Luminant and did not file a
Form 4 on a timely basis for one transaction in which he acquired shares of
common stock, and (8) Messrs. Morris Markel and Scott Williamson, each of whom
served as an executive officer during part of 2000, each failed to file a
Form 3 on a timely basis upon becoming an executive officer of Luminant and did
not file a Form 4 on
5
a timely basis for one transaction in which such person acquired shares of
common stock. Each of the reports described above have subsequently been filed.
ITEM 11. EXECUTIVE COMPENSATION
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, another individual who served as our
Chief Executive Officer during part of 2000, our four other most highly
compensated executive officers who were serving as executive officers as of
December 31, 2000 and whose salary and bonus for services rendered in all
capacities to Luminant for the fiscal year ended December 31, 2000 exceeded
$100,000, and two additional individuals for whom disclosure would have been
provided as one of Luminant's most highly compensated executive officers but for
the fact that such individual was no longer serving as an executive officer as
of December 31, 2000. We will use the term "named executive officers" to refer
to these people elsewhere in this Annual Report.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION (1) LONG-TERM COMPENSATION
------------------------------------------------ -----------------------
AWARDS
-----------------------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING
COMPENSATION STOCK OPTIONS/
NAME & PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($) AWARD(S) SARS (#)
- ------------------------- -------- ---------- --------- ------------ ---------- ----------
James R. Corey, .................. 2000 222,407 -- --(2) -- 23,460
PRESIDENT & CHIEF EXECUTIVE 1999 76,313 34,375 -- --
OFFICER(3)
Richard M. Scruggs, .............. 2000 258,333 -- --(2) -- 261,970
VICE CHAIRMAN & EXECUTIVE VICE 1999 61,016 26,000 -- 50,934(4)
PRESIDENT OF CORPORATE
DEVELOPMENT(4)
Thomas G. Bevivino, .............. 2000 213,358 -- -- -- 229,815
CHIEF FINANCIAL OFFICER & 1999 57,788 101,063 80,000(5) -- 60,000
SECRETARY(5)
Michael E. Smith, ................ 2000 260,000 110,000 (2) -- 264,630
EXECUTIVE VICE PRESIDENT OF
STRATEGY SERVICES(6)
K. David Quackenbush, ............ 2000 287,500 -- (2) -- 263,970
CHIEF OPERATING OFFICER(7)
Guillermo G. Marmol, ............. 2000 200,850 -- --(2) -- 28,200
FORMER CHIEF EXECUTIVE 1999 112,692 125,000 -- 1,195,115
OFFICER(8)
Scott A. Williamson, ............. 2000 245,000 -- (2) -- 261,970
VICE PRESIDENT OF ENABLING
SOLUTIONS(9)
Morris W. Markel, ................ 2000 239,583 -- (2) -- 26,470
FORMER MANAGING DIRECTOR OF
EASTERN REGION(10)
LONG-TERM COMPENSATION
---------------------------
PAYOUTS
---------------------------
LONG-TERM
INCENTIVE ALL OTHER
PLAN PAYOUTS COMPENSATION
NAME & PRINCIPAL POSITION ($) ($)
- ------------------------- ------------ ------------
James R. Corey, .................. -- --
PRESIDENT & CHIEF EXECUTIVE -- --
OFFICER(3)
Richard M. Scruggs, .............. -- --
VICE CHAIRMAN & EXECUTIVE VICE -- 372
PRESIDENT OF CORPORATE
DEVELOPMENT(4)
Thomas G. Bevivino, .............. -- --
CHIEF FINANCIAL OFFICER & -- --
SECRETARY(5)
Michael E. Smith, ................ -- --
EXECUTIVE VICE PRESIDENT OF
STRATEGY SERVICES(6)
K. David Quackenbush, ............ -- --
CHIEF OPERATING OFFICER(7)
Guillermo G. Marmol, ............. -- 87,361
FORMER CHIEF EXECUTIVE -- --
OFFICER(8)
Scott A. Williamson, ............. -- --
VICE PRESIDENT OF ENABLING
SOLUTIONS(9)
Morris W. Markel, ................ -- 10,417
FORMER MANAGING DIRECTOR OF
EASTERN REGION(10)
6
(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. Mr. Corey was also appointed our
Chief Executive Officer in September 2000.
(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 of Client Development.
The number of securities under the heading "Securities Underlying
Options/SARS" represents the number of Luminant shares underlying options
issued to Mr. Scruggs in 1999 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
in 1999 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 from
June 1999 until December 1999, when he was appointed our Chief Financial
Officer and Secretary. The amounts set forth for Mr. Bevivino for 1999 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 for 1999 in the column titled "Other Annual Compensation"
reflects amounts paid to Mr. Bevivino during 1999 as a result of financial
advisory and consulting services provided to Luminant by ARC Group LLC, a
firm in which Mr. Bevivino held a 50% ownership interest.
(6) Mr. Smith was appointed Executive Vice President of Strategy Services in
February 2000.
(7) Mr. Quackenbush was appointed Executive Vice President of Implementation
Services in February 2000 and was appointed Chief Operating Officer in
March 2001.
(8) Mr. Marmol served as our Chief Executive Officer from August 1998 until
September 2000. The amount set forth in the column titled "All Other
Compensation" represents severance payments, payments for accrued vacation,
and health insurance premiums paid by Luminant during 2000. Mr. Marmol is
entitled to additional severance amounts as described in "--Severance
Agreements" below.
(9) Mr. Williamson was appointed Managing Director of the Western Region in
February 2000. The Managing Director position was removed from the
executive officer level as part of Luminant's September 2000 restructuring.
Accordingly, Mr. Williamson was no longer an executive officer after
September 2000. Mr. Williamson is currently Vice President of Enabling
Solutions.
(10) Mr. Markel was appointed Managing Director of the Eastern Region in
February 2000. Mr. Markel terminated his employment with Luminant in
December 2000. The amount set forth in the column titled "All Other
Compensation" represents severance payments paid by Luminant during 2000.
Mr. Markel is entitled to additional severance amounts as described in
"--Severance Agreements" below.
EMPLOYMENT AGREEMENTS
As of September 16, 1999, we entered into an employment agreement with James
R. Corey, our Chief Executive Officer and President, for the period through
September 16, 2002. Mr. Corey currently receives an annual salary of $300,000
plus a bonus of up to the same amount. Mr. Corey receives 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,
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
7
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 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 September 16, 1999, we entered into an employment agreement with
Richard M. Scruggs, our Vice Chairman and Executive Vice President of Corporate
Development, for the period through September 16, 2002. Mr. Scruggs currently
receives an annual salary of $290,000 plus a bonus of up to the same amount.
Mr. Scruggs receives 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 currently receives an annual salary of $287,000 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 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. Mr. Bevivino will
receive the same benefits as our other employees and will be eligible to receive
options under Luminant's long-term incentive plan. 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. If Mr. Bevivino resigns or we
terminate his employment with or without cause or because 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.
As of September 16, 1999, we entered into an employment agreement with
Michael E. Smith, our Executive Vice President of Strategy Services, for the
period through September 16, 2002. Mr. Smith
8
currently receives an annual salary of $290,000 plus a bonus of up to the same
amount. Mr. Smith will receive the same benefits as our other employees and will
be eligible to receive options under Luminant's long-term incentive plan. We may
terminate Mr. Smith's agreement for cause or upon death or disability. Cause
includes a material breach of Mr. Smith's obligations or Mr. Smith's gross
negligence, conviction for, or plea of no contest to, a charge of commission of
a felony, a breach by Mr. Smith of his non-compete or confidentiality agreement,
or if Mr. Smith interfered with our relationship with any client, supplier or
other person. Mr. Smith 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 his primary
office as of December 31, 1998. If Mr. Smith resigns or we terminate his
employment with or without cause or because of death or disability, we will pay
Mr. Smith 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. Smith's
employment without cause or he resigns for good reason, Mr. Smith 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. Smith 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 September 16, 1999, we entered into an employment agreement with K.
David Quackenbush, our Chief Operating Officer, for the period through
September 16, 2002. Mr. Quackenbush currently receives an annual salary of
$400,000 plus a bonus of up to forty percent of that amount. Mr. Quackenbush
will receive the same benefits as our other employees and will be eligible to
receive options under Luminant's long-term incentive plan. We may terminate
Mr. Quackenbush's agreement for cause or upon death or disability. Cause
includes a material breach of Mr. Quackenbush's obligations or
Mr. Quackenbush's gross negligence, conviction for, or plea of no contest to, a
charge of commission of a felony, a breach by Mr. Quackenbush of his non-compete
or confidentiality agreement, or if Mr. Quackenbush interfered with our
relationship with any client, supplier or other person. Mr. Quackenbush 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 outside of Harris County, Texas and the surrounding counties. If
Mr. Quackenbush resigns or we terminate his employment with or without cause or
because of death or disability, we will pay Mr. Quackenbush 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. Quackenbush's employment without
cause or he resigns for good reason, Mr. Quackenbush 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. Quackenbush 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.
SEVERANCE AGREEMENTS
Mr. Marmol served as our Chief Executive Officer and director until his
resignation from both capacities in September 2000. Mr. Marmol was party to an
employment agreement with us during his tenure as our Chief Executive Officer
and entered into a severance agreement with us upon termination of his
employment with us. Under the severance agreement, Mr. Marmol is receiving
monthly payments of $27,500 from November 1, 2000 through December 31, 2001 and
bonuses of $330,000 on each of February 28, 2001 and 2002. His outstanding
options (including those exercisable at the initial public offering price plus
those exercisable at the market price on the date of each subsequent grant)
became fully exercisable and will remain exercisable until October 2003.
Mr. Marmol is subject to covenants intended to bar his competition through
December 2001 and solicitation of clients or employees through December 2002.
9
Mr. Markel served as our Managing Director of the Eastern Region until his
resignation in December 2000. As per the employment agreement Mr. Markel had
entered into with us, he is receiving monthly severance payments of $20,833 from
December 2000 through September 2001.
OPTION GRANTS
The following table provides information on options granted to the named
executive officers during 2000:
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS
OPTIONS/ GRANTED TO
SARS EMPLOYEES IN EXERCISE OR GRANT DATE
GRANTED FISCAL YEAR BASE PRICE EXPIRATION PRESENT
NAME (#) (1) ($/SHARE) DATE VALUE (2)
- ---- ---------- ------------ ----------- ---------- ----------
James R. Corey................... 12,000(3) 0.13% $18.375 3/15/10 $159,600
11,460(3) 0.12% $ 8.50 7/05/10 $ 72,083
Richard M. Scruggs............... 9,000(3) 0.10% $18.375 3/15/10 $119,700
2,970(3) 0.03% $ 8.50 7/05/10 $ 18,681
250,000(4) 2.72% $0.9375 11/30/10 $180,000
Thomas G. Bevivino............... 15,000(3) 0.16% $ 35.56 1/14/10 $385,650
5,500(3) 0.06% $18.375 3/15/10 $ 73,150
9,315(3) 0.10% $ 8.50 7/05/10 $ 58,591
200,000(5) 2.17% $0.9375 11/30/10 $144,000
Michael E. Smith................. 11,000(3) 0.12% $18.375 3/15/10 $146,300
3,630(3) 0.04% $ 8.50 7/05/10 $ 22,833
250,000(4) 2.72% $0.9375 11/30/10 $180,000
K. David Quackenbush............. 9,000(3) 0.10% $18.375 3/15/10 $119,700
2,000(3) 0.02% $ 11.03 6/05/10 $ 16,160
2,970(3) 0.03% $ 8.50 7/05/10 $ 18,681
250,000(4) 2.72% $0.9375 11/30/10 $180,000
Guillermo G. Marmol.............. 15,000(6) 0.16% $18.375 10/31/03 $199,500
13,200(6) 0.14% $ 8.50 10/31/03 $ 83,028
Scott A. Williamson.............. 9,000(3) 0.10% $18.375 3/15/10 $119,700
2,970(3) 0.03% $ 8.50 7/05/10 $ 18,681
250,000(4) 2.72% $0.9375 11/30/10 $180,000
Morris W. Markel................. 13,000(7) 0.14% $18.375 3/15/01(7) $172,900
500(7) 0.01% $ 8.06 3/15/01(7) $ 2,905
2,970(7) 0.03% $ 8.50 3/15/01(7) $ 18,681
10,000(7) 0.11% $0.9375 3/15/01(7) $ 7,200
- ------------------------
(1) The percentages in the table above are based on options to purchase
9,202,712 shares of common stock granted under our stock option plan in the
year ended December 31, 2000 to our employees.
(2) In the table above, the value of options granted is based on a Black-Scholes
pricing model with a weighted average volatility of 121.41%, a risk-free
rate of return of 5.71%, 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 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-
10
Scholes valuation method, see Note 12 in the Notes to Consolidated Financial
Statements in the Luminant's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000.
(3) One-sixth of the options granted become exercisable six months after the
date of grant and an additional one-sixth of the options granted become
exercisable every following six months.
(4) Approximately 16,666 of the options granted become exercisable six months
after the date of grant and approximately 16,666 of the options granted
become exercisable every following six months. 150,000 of the options
granted become exercisable on November 30, 2003.
(5) One-sixth of the options granted become exercisable six months after the
date of grant and an additional one-sixth of the options granted become
exercisable every following six months. 100,000 of the options granted
become exercisable on November 30, 2003.
(6) 100% of options granted became excercisable on October 31, 2000, per a
severance agreement entered into with Mr. Marmol. For details of this
agreement, please refer to "Severance Agreements."
(7) Mr. Markel left Luminant's employment effective December 15, 2000. At such
time, all of Mr. Markel's options which were then exercisable or which would
have become exercisable within six months of such date, became immediately
exercisable, for a 90 day period ending March 15, 2001.
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, 2000 and the number of shares subject to both exercisable and
unexercisable stock options as of that date. The table also shows values for
unexercised "in-the-money" options as of December 31, 2000.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES DECEMBER 31, 2000 DECEMBER 31, 2000
ACQUIRED VALUE EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
NAME ON EXERCISE (#) REALIZED ($) (#)(1) ($)(2)
- ---- --------------- ------------ ------------------------- -------------------------
James R. Corey............ -- -- 2,000/21,460 $0/$0
Richard M. Scruggs........ -- -- 26,887/286,017 $6,862/$3,180
Thomas G. Bevivino........ -- -- 23,416/266,399 $0/$0
Michael E. Smith.......... -- -- 11,833/282,797 $0/$0
K. David Quackenbush...... 3,000 $22,433(3) 8,320/276,813 $0/$0
Guillermo G. Marmol....... -- -- 1,422,094/0 $0/$0
Scott A. Williamson....... -- -- 13,832/278,789 $2,439/$3,310
Morris W. Markel.......... -- -- 6,660/0 $0/$0
- ------------------------
(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, 2000.
(2) Includes only "in-the-money" options as of December 31, 2000. Value is based
on the closing price of Luminant's common stock on the Nasdaq National
Market on December 31, 2000 ($0.813) minus the per-share exercise price,
multiplied by the number of shares issuable upon exercise of the option.
(3) Based on the fair market value of Luminant's common stock as represented by
the closing price of Luminant's common stock on the Nasdaq National Market
on the exercise date, minus the per-share exercise price, multiplied by the
number of shares acquired. The closing price of Luminant's common stock on
September 5, 2000, the exercise date, was $8.563 per share.
11
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.
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 is 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. Each of these options has 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 are also 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. The
following table describes all option grants, including both formula grants and
discretionary grants, made to our non-employee directors during the fiscal year
ended December 31, 2000. With respect to each specific grant of options
described below, (1) one-sixth of the options granted are exercisable beginning
six months after the date of grant and an additional one-sixth of the options
granted are exercisable every following six months, and (2) each of the options
granted expires on the tenth anniversary of the applicable grant date.
NUMBER OF SHARES
OF COMMON STOCK
NAME GRANT DATE EXERCISE PRICE UNDERLYING OPTIONS GRANTED
- ---- ---------- -------------- --------------------------
Randolph L. Austin............................ 3/15/00 $18.375/share 6,000
7/05/00 $ 8.50/share 1,320
11/30/00 $ .9375/share 50,000
Michael J. Dolan.............................. 3/15/00 $18.375/share 6,000
7/05/00 $ 8.50/share 1,320
11/30/00 $ .9375/share 50,000
Michael H. Jordan............................. 3/15/00 $18.375/share 6,000
7/05/00 $ 8.50/share 1,320
11/30/00 $ .9375/share 50,000
Donald S. Perkins............................. 3/15/00 $18.375/share 6,000
7/05/00 $ 8.50/share 1,320
11/30/00 $ .9375/share 50,000
George P. Stamas.............................. 3/15/00 $18.375/share 6,000
7/05/00 $ 8.50/share 1,320
11/30/00 $ .9375/share 50,000
12
Mr. Dolan, who is Chairman and Chief Executive Officer 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.
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. 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 the executive
officers' 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.
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 will determine the cash bonus of the executive
officers on an annual basis. Cash bonuses are based on many factors which
include, but are not limited to, the Committee's overall qualitative evaluation
of the performance and accomplishments of each executive officer for the year,
the company's performance, cash requirements, market conditions, economic
factors, service capacity, expected growth, and financial performance.
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, 2000, the Committee or the Board granted employees options to
purchase 9,202,712 shares of Common Stock. Named executive officers received
options with respect to 1,360,485 shares of Common Stock.
CHIEF EXECUTIVE OFFICER'S COMPENSATION. Mr. James R. Corey 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, the Committee, in
2000, increased Mr. Corey's base salary from $275,000 to $300,000 and granted
him options to purchase 23,460 shares of the Company's common stock. In doing
so, it
13
considered the successful completion of Luminant's restructuring plan and the
continuing progress in developing new opportunities for Luminant with existing
and prospective clients.
Mr. Guillermo Marmol, who ceased to be the Chief Executive Officer as of
September 26, 2000, received severance and acceleration of option exercisability
on an agreed basis in accordance with his pre-existing employment agreement.
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 2000 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 Annual
Report, unless the report is specifically incorporated by reference.
Randolph L. Austin
Michael J. Dolan
Michael H. Jordan
Donald S. Perkins
George P. Stamas
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 2000, 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.
George P. Stamas, a director of Luminant, and a member of the Compensation
Committee and the Audit Committee, serves as a Vice Chair of Deutsche Banc Alex.
Brown, an investment bank that provides administrative and consulting services
to Luminant.
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, 2000, 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.
14
COMPARE CUMULATIVE TOTAL RETURN
AMONG LUMINANT WORLDWIDE CORPORATION,
NASDAQ MARKET INDEX AND PEER GROUP INDEX(1)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
LUMINANT WORLD WIDE CORPORATION NASDAQ MARKET INDEX PEER GROUP INDEX
9/16/99 100.00 100.00 100.00
9/30/99 116.59 100.00 104.89
12/31/99 172.51 147.69 229.35
3/31/00 63.03 168.04 158.48
6/30/00 33.89 144.54 119.97
9/29/00 11.26 133.38 68.93
12/29/00 3.08 89.63 17.24
(1) The peer group is composed of the following companies that we compete with
on a worldwide basis in the internet professional services industry: Braun
Consulting, Inc., Cambridge Technology Partners, iXL Enterprises, Inc.,
Marchfirst, Inc., Proxicom, Inc., Razorfish, Inc., Sapient Corp., Scient
Corp., U.S. Interactive, Inc., and Viant Corp.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF OUR PREVIOUS OR
FUTURE FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE THIS ANNUAL REPORT OR
FUTURE FILINGS MADE BY THE COMPANY UNDER THOSE STATUTES, THE COMPENSATION
COMMITTEE REPORT AND THE STOCK PERFORMANCE GRAPH ARE NOT DEEMED FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION AND SHALL NOT BE DEEMED INCORPORATED BY
REFERENCE INTO ANY OF THOSE PRIOR FILINGS OR INTO ANY FUTURE FILINGS MADE BY US
UNDER THOSE STATUTES.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below shows the number and percentage of outstanding shares of our
common stock beneficially owned as of April 10, 2001 by:
- all persons known by us to own beneficially more than 5% of Luminant's
common stock;
- each director, director nominee and named executive officer; and
15
- all directors, director nominees and executive officers as a group.
NUMBER OF
SHARES OF PERCENT OF
BENEFICIALLY COMMON STOCK
NAME OF BENEFICIAL OWNER (1) OWNED (2) (%)(2)(3)
- ---------------------------- ------------ ------------
Young & Rubicam............................................. 7,385,393(4) 26.50%
James R. Corey GRAT dated July 9, 1999...................... 1,492,283(5) 5.36%
Randolph L. Austin.......................................... 15,552(6) *
Thomas G. Bevivino.......................................... 56,851(7) *
James R. Corey.............................................. 3,092,703(8) 9.99%
Michael J. Dolan............................................ 21,052(9) *
Michael H. Jordan........................................... 132,733(10) *
Guillermo G. Marmol......................................... 1,422,094(11) 4.86%
Donald S. Perkins........................................... 64,828(12) *
K. David Quackenbush........................................ 55,374(13) *
Richard M. Scruggs.......................................... 940,118(14) 3.37%
Michael E. Smith............................................ 77,404(15) *
George P. Stamas............................................ 27,552(16) *
Michael R. Alsup............................................ 1,432,917(17) 5.14%
Scott A. Williamson......................................... 145,599(18) *
Morris W. Markel............................................ 527,691(19) 1.89%
All directors and executive officers as a group (10
persons).................................................. 4,484,167(20) 15.63%
- ------------------------
An asterisk (*) indicates ownership of less than one percent (1%) of the
outstanding common stock.
(1) Unless otherwise indicated, the address for our 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 10, 2001. 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 percentage of beneficial ownership for each stockholder is based on
27,865,288 shares of common stock outstanding as of April 10, 2001.
(4) 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. Young & Rubicam, Inc.
maintains its principal business address at 285 Madison Avenue, New York,
New York 10017.
(5) Such information as to beneficial ownership is derived from a Report on
Schedule 13D/A filed on December 13, 2000. The James R. Corey GRAT dated
July 9, 1999 (the "GRAT") may be entitled to additional contingent
consideration under the terms of the acquisition agreement by which we
acquired Potomac Partners Management Consultants LLC in September 1999. The
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. James R. Corey, our President and Chief Executive Officer, is
trustee of the GRAT.
16
(6) Includes 15,052 shares underlying options as to which Mr. Austin has the
right to acquire beneficial ownership within 60 days after April 10, 2001.
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.
(7) Includes 55,051 shares underlying options as to which Mr. Bevivino has the
right to acquire beneficial ownership within 60 days after April 10, 2001.
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.
(8) Such information as to beneficial ownership is derived from a Report on
Schedule 13D/A filed on December 13, 2000. Includes 1,492,283 shares of
common stock held by the Corey GRAT, which Mr. Corey may be deemed to
beneficially own by virtue of his position as trustee of the GRAT.
Mr. Corey may be entitled to additional contingent consideration under the
terms of the acquisition agreement by which we acquired Potomac Partners
Management Consultants LLC, of which Mr. Corey was a member, in
September 1999. The 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. Includes 5,910 shares underlying options as to which
Mr. Corey has the right to acquire beneficial ownership within 60 days
after April 10, 2001. On September 21, 2000, Mr. Corey acquired from the
Company debentures immediately convertible into 800,000 shares of Company
common stock and warrants immediately exercisable for 183,150 shares of
Company common stock. Among other terms applicable to these securities,
Mr. Corey cannot exercise or convert these debentures or warrants to the
extent Mr. Corey and his affiliates would, as a result of the exercise or
conversion, own more than 9.999% of the then-outstanding shares of our
common stock. Mr. Corey may waive this restriction, but only upon not less
than 61 days prior notice to us. As a result, the number of shares of
common stock shown in the table above as beneficially owned by Mr. Corey
only includes the number of shares of common stock underlying these
convertible debentures and warrants that would not cause his beneficial
ownership of our common stock to exceed 9.999% of the total number of
shares of our common stock outstanding on April 10, 2001. As such, the
number of shares of our common stock shown in the table above as
beneficially owned excludes 496,327 shares underlying convertible
debentures and warrants that Mr. Corey has the right to acquire subject to
the 9.999% restriction.
(9) Includes 15,052 shares underlying options as to which Mr. Dolan has the
right to acquire beneficial ownership within 60 days after April 10, 2001.
Does not include any shares beneficially owned by Young & Rubicam, Inc., of
which Mr. Dolan is Chairman and Chief Executive Officer. 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 and
sale by him of the underlying shares.
(10) Includes 75,053 shares underlying options as to which Mr. Jordan has the
right to acquire beneficial ownership within 60 days after April 10, 2001.
Does not include any shares beneficially owned by Young & Rubicam, Inc.,
of which Mr. Jordan is a director.
(11) Since Mr. Marmol is no longer employed with the Company, the information
presented is based solely on the Company's information and belief as to
Mr. Marmol's beneficial ownership. Includes 1,422,094 shares underlying
options as to which Mr. Marmol has the right to acquire beneficial
ownership within 60 days after April 10, 2001.
(12) Includes 15,052 shares underlying options as to which Mr. Perkins has the
right to acquire beneficial ownership within 60 days after April 10, 2001.
Mr. Perkins may be entitled to additional contingent consideration under
the terms of the acquisition agreement by which we acquired Potomac
Partners Management Consultants LLC, of which Mr. Perkins was a member, in
September 1999. The number of shares of common stock that could be issued
as payment of
17
additional contingent consideration are not now determinable and no
assumptions regarding those issuances have been included in the table
above.
(13) Includes 30,938 shares underlying options as to which Mr. Quackenbush has
the right to acquire beneficial ownership within 60 days after April 10,
2001.
(14) Includes 54,309 shares underlying options as to which Mr. Scruggs has the
right to acquire beneficial ownership within 60 days after April 10, 2001.
Includes 639,109 shares held jointly with Mr. Scruggs' spouse, Cynthia K.
Scruggs, 30,000 shares held by Cynthia K. Scruggs, 10,000 shares held by
the Julia Katerina Scruggs 1999 GST Trust, of which Mr. Scruggs' daughter,
Julia Katerina Scruggs, is the sole beneficiary and Mr. Scruggs' brother,
David Scruggs, is the sole trustee, 10,000 shares held by the Heather
Christine Scruggs 1999 GST Trust, of which Mr. Scruggs' daughter, Heather
Christine Scruggs, is the sole beneficiary and Mr. Scruggs' brother, David
Scruggs, is the sole trustee, 600 shares held by Mr. Scruggs as custodian
for his daughter under the Uniform Gifts to Minors Act, and 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. Mr. Scruggs disclaims beneficial ownership of the securities
described in the next preceding sentence, and this disclosure should not
be deemed an admission that Mr. Scruggs is the beneficial owner of such
securities for any purpose.
(15) Includes 35,937 shares underlying options as to which Mr. Smith has the
right to acquire beneficial ownership within 60 days after April 10, 2001.
(16) Includes 27,552 shares as to which Mr. Stamas has the right to acquire
beneficial ownership within 60 days after April 10, 2001.
(17) Based on information set forth in a Report on Schedule 13G filed on
October 20, 2000. Includes 122,910 shares held by the 1996 Alsup Issue
Trusts, which Mr. Alsup has the option to acquire. Includes 4,734 shares
underlying options as to which Mr. Alsup has the right to acquire
beneficial ownership within 60 days after April 10, 2001.
(18) Includes 38,752 shares underlying options as to which Mr. Williamson has
the right to acquire beneficial ownership within 60 days after April 10,
2001.
(19) Since Mr. Markel is no longer employed with the Company, the information
presented is based solely on the Company's information and belief as to
Mr. Markel's beneficial ownership. Includes 25,477 shares held by the
Joseph H. Markel Charitable Trust DTD, of which Mr. Markel is a trustee.
(20) See footnotes 6-17.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
OUR FORMATION
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 eight
companies, except that we accomplished the acquisition of Brand Dialogue-New
York by an asset purchase (we refer to these companies in this Annual Report as
the "eight companies"). In addition to the consideration paid at the closing of
the acquisitions, 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.
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In March 2000, we issued 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 approximately $0.06 million in cash and
1,661,392 shares of common stock. Except as set forth in the next paragraph, we
owe no additional contingent consideration to the former owners of the eight
companies under the terms of the acquisition agreements by which we acquired the
eight companies.
Certain former owners of one of the eight companies, Potomac Partners
Management Consulting, LLC, are still eligible to receive additional contingent
consideration through June 30, 2002, based upon the amount of certain types of
revenues we receive from a particular client. During the period from July 1,
1999 through December 31, 1999, the amount earned by these former owners
resulting from the aforementioned revenues totaled approximately $170,000. On
May 10, 2000, we issued an aggregate of 14,645 shares in payment of this
contingent consideration. During the period from January 1, 2000 through
December 31, 2000, the amount of contingent consideration earned by these former
owners totaled approximately $3.3 million, payable no later than thirty days
after completion of our audit for the fiscal year 2000. We currently intend to
pay all of the contingent consideration earned during the aforementioned period
in shares of Luminant common stock. The number of shares to be issued will be
determined based on the average trading price of our common stock during the
thirty-day period preceding issuance of the shares.
James R. Corey, our President and Chief Executive Officer and a director,
was a Managing Director and an owner of Potomac Partners. In addition to the
consideration paid to Mr. Corey at the closing of the acquisitions, he received
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, valued at $8,140,639, as contingent consideration based on the financial
performance of Potomac Partners from July 1, 1999 through December 31, 1999. In
May 2000, Mr. Corey and one of his affiliates received an aggregate of 6,835
shares, valued at $79,414, as contingent consideration based on revenues
received by us from a particular client during the period from July 1, 1999
through December 31, 1999. The contingent consideration Mr. Corey and this
affiliate will earn in connection with the contingent consideration based on the
revenues we received from this client during the period from January 1, 2000
through December 31, 2000 has not yet been determined. This contingent
consideration is payable no later than thirty days after completion of our audit
for the fiscal year 2000. 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. In addition to the consideration paid to Mr. Perkins at the closing of
the acquisitions, he received the right to receive contingent consideration, as
described above. In March 2000, Mr. Perkins received 2,829 shares, valued at
$80,249, as contingent consideration based on the financial performance of
Potomac Partners from July 1, 1999 through December 31, 1999. In May 2000,
Mr. Perkins received 67 shares, valued at $783, as contingent consideration
based on revenues received by us from a particular client during the period from
July 1, 1999 through December 31, 1999. The contingent consideration
Mr. Perkins will earn in connection with the contingent consideration based on
the revenues we received from this client during the period from January 1, 2000
through December 31, 2000 has not yet been determined. This contingent
consideration is payable no later than thirty days after completion of our audit
for the fiscal year 2000. Under the terms of the acquisition agreement by which
we acquired Potomac Partners, Mr. Perkins received registration rights with
respect to the shares of common stock he received in exchange for his interest
in Potomac Partners. In November 2000, we registered 19,776 shares of common
stock for Mr. Perkins under the Securities Act of 1933, as amended, pursuant to
this agreement.
Richard M. Scruggs, our Vice Chairman, Executive Vice President of Corporate
Development and a director, was President, Chief Executive Officer and Chairman
of the Board and an owner of Align
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Solutions Corp., one of the eight companies we acquired simultaneously with our
initial public offering. In March 2000, Mr. Scruggs received 12,426 shares,
valued at $352,483, as contingent consideration based on the financial
performance of Align from July 1, 1999 through December 31, 1999. 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. In November 2000, we registered 639,109 shares of common stock for
Mr. Scruggs under the Securities Act of 1933, as amended, pursuant to this
agreement.
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. In
March 2000, Young & Rubicam received 558,032 shares of common stock as
contingent consideration based on the financial performance of Brand
Dialogue-New York from July 1, 1999 through December 31, 1999.
As of April 10, 2001, Young & Rubicam beneficially owned approximately
26.50% of our outstanding common stock. 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 Chairman and Chief
Executive Officer of Young & Rubicam.
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
provided us with specified services including accounting and administrative
services in connection with our use of this space. Effective April 2001, the
Transition Services Agreement was terminated. Fees paid to Young & Rubicam for
the leased space and the provision of specified services in 2000 were $613,307.
OTHER TRANSACTIONS
We have entered into employment agreements with each of Messrs. Corey,
Bevivino, Scruggs, Smith and Quackenbush. For the details of these agreements,
please refer to "Employment Agreements."
Mr. Alsup, a greater than 5% shareholder, is employed by Luminant. During
2000, he was paid $171,400 and was granted options to purchase 9,823 shares of
common stock. Mr. Alsup currently earns an annual salary of $157,000 and is
eligible for participation in the Luminant bonus program.
In October 2000 we entered into a severance agreement with Mr. Marmol. For
details of this agreement, please refer to "Severance Agreement."
George P. Stamas, a director of Luminant, and a member of the Compensation
Committee, serves as a Vice Chair of Deutsche Banc Alex. Brown, an investment
bank that provides administrative and consulting services to Luminant.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Amendment No. 1 on
Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly
authorized.
LUMINANT WORLDWIDE CORPORATION
(Registrant)
April 30, 2001 By: /s/ JAMES R. COREY
-----------------------------------------
James R. Corey
PRESIDENT AND CHIEF EXECUTIVE OFFICER
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