SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only (as permitted
by Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to 240.14a-12
NOVO NETWORKS, INC.
(Name of the Registrant as specified in its charter)
_____________________________________________________
(Name of person(s) filing Proxy Statement,
if other than the Registrant)
Payment of filing fee (check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies:
________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11
(Set forth the amount on which the filing is calculated
and state how it was determined):
________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________
(5) Total fee paid:
________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously.
Identify the previous filing by registration statement
number, or the form or schedule and the date of its
filing.
(1) Amount previously paid:
________________________________________________________
(2) Form, schedule or registration statement no.:
________________________________________________________
(3) Filing party:
________________________________________________________
(4) Date filed:
________________________________________________________
[LOGO]
October 27, 2003
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders (the "Annual Meeting") of Novo Networks, Inc. (the
"Company"), which is to be held at the Crescent Club, 200
Crescent Court, 17th Floor, Dallas, Texas 75201, on Monday,
December 8, 2003, commencing at 1:00 PM (Central Standard Time).
The Company urges you to be present in person or to be
represented by proxy at the Annual Meeting.
The Notice of Annual Meeting and the Proxy Statement fully
describe the purposes for the Annual Meeting, which include the
following: (i) to elect one Class I director to serve until the
2006 Annual Meeting, and until his or her successor is duly
elected and qualified; (ii) to ratify the selection of Grant
Thornton, LLP as independent auditor of the Company for the
fiscal year ending June 30, 2004; and (iii) to transact any other
business that may properly be brought before the Annual Meeting
or any adjournment or postponement thereof.
The Company's Board of Directors (the "Board") believes that
a favorable vote on each of the matters to be considered at the
Annual Meeting is in the best interest of the Company and its
stockholders, and the Board unanimously recommends a vote "FOR"
each of those matters. Accordingly, the Company urges you to
review the accompanying material carefully and to return the
enclosed proxy promptly.
The Board has fixed Friday, October 24, 2003, as the record
date for the determination of the stockholders who will be
entitled to notice of and to vote at the Annual Meeting.
Accordingly, only stockholders of record at the close of business
on that date will be entitled to vote at the Annual Meeting. A
list of such stockholders will be available for inspection during
ordinary business hours at least 10 days prior to the Annual
Meeting at the Company's offices, 2311 Cedar Springs Road, Suite
400, Dallas, Texas 75201, and it also will be available for
inspection at the Annual Meeting.
Officers of the Company will be present to help host the
Annual Meeting and to respond to any questions from stockholders.
Regardless of whether or not you expect to attend the Annual
Meeting, please mark, sign, date and return the enclosed proxy
without delay. You may vote in person even if you have previously
returned a proxy.
Sincerely,
Barrett N. Wissman
Chairman
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 8, 2003
Notice is hereby given that the Annual Meeting of
Stockholders (the "Annual Meeting") of Novo Networks, Inc. (the
"Company"), a Delaware corporation, will be held at the Crescent
Club, 200 Crescent Court, 17th Floor, Dallas, Texas 75201, on
Monday, December 8, 2003, commencing at 1:00 PM (Central Standard
Time).
The Annual Meeting will be convened for the following
purposes:
1. to elect one Class I director to serve until the 2006
Annual Meeting and until his or her successor is duly
elected and qualified;
2. to ratify the selection of Grant Thornton, LLP as
independent auditor of the Company for the fiscal year
ending June 30, 2004; and
3. to transact any other business that may properly be
brought before the Annual Meeting or any adjournment or
postponement thereof.
The foregoing items of business are more fully described in
the Proxy Statement accompanying this notice. A copy of the
Company's 2003 Annual Report to Stockholders, which includes
audited financial statements, is also enclosed with this notice.
Only stockholders of record on Friday, October 24, 2003, are
entitled to notice of and to vote at the Annual Meeting. A list
of such stockholders will be available for inspection during
ordinary business hours at least 10 days prior to the Annual
Meeting in the Company's offices at 2311 Cedar Springs Road,
Suite 400, Dallas, Texas 75201, and it will also be available for
inspection at the Annual Meeting.
Each vote is important. To ensure that it is cast, the
enclosed proxy should be marked, signed, dated and returned as
promptly as possible in the postage-prepaid envelope that has
been enclosed for that purpose. A stockholder may vote in person
even if he or she has previously returned a proxy.
By Order of the Board of
Directors,
Steven W. Caple
President
Dallas, Texas
October 27, 2003
NOVO NETWORKS, INC.
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 8, 2003
DATE, TIME AND PLACE OF MEETING
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors (the "Board") of Novo
Networks, Inc., a Delaware corporation (the "Company"), of
proxies from the holders of the Company's common stock, par value
$.00002 per share (the "Common Stock"), for use at the Company's
2003 Annual Meeting of Stockholders (the "Annual Meeting") or at
any postponement or adjournment thereof, for the purposes set
forth herein and in the Notice of Annual Meeting of Stockholders.
The Annual Meeting is to be held at the Crescent Club, 200
Crescent Court, 17th Floor, Dallas, Texas 75201, on Monday,
December 8, 2003, commencing at 1:00 PM (Central Standard Time).
This Proxy Statement and the enclosed form of proxy are
first being sent to stockholders on or about October 27, 2003.
Stockholders should review the information provided herein in
conjunction with the Company's 2003 Annual Report to Stockholders
(the "Annual Report"), which accompanies this Proxy Statement.
The Company's principal executive offices are located at
2311 Cedar Springs Road, Suite 400, Dallas, Texas 75201, and its
telephone number is (214) 777-4100.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Board. The
giving of a proxy does not preclude the right to vote in person
should any stockholder giving a proxy so desire. Stockholders
have the unconditional right to revoke their proxy at any time
prior to the exercise thereof, either in person at the Annual
Meeting or by filing with the Company's Secretary, at the
Company's headquarters, a written revocation or duly executed
proxy bearing a later date. However, no such revocation will be
effective until written notice of the revocation is received by
the Company at or prior to the Annual Meeting.
All shares represented by valid proxies at the Annual
Meeting, unless the stockholder otherwise specifies, will be
voted "FOR" the proposals (1) and (2) described in the Notice of
Annual Meeting and at the discretion of the proxy holders with
respect to any matter not known to the Board on the date of
mailing this Proxy Statement that may properly come before the
Annual Meeting or any adjournment or postponement thereof. Where
a stockholder has appropriately specified how a proxy is to be
voted, it will be cast accordingly.
The cost of preparing, assembling and mailing this Proxy
Statement, the Notice of Annual Meeting and the enclosed proxy is
to be borne by the Company. In addition to the use of mail,
employees of the Company may solicit proxies personally and by
telephone. The Company's employees will receive no compensation
for soliciting proxies other than their regular salaries. The
Company may request banks, brokers and other custodians, nominees
and fiduciaries to forward copies of the proxy material to their
principals and to request authority for the execution of proxies.
The Company may reimburse such persons for their expenses in so
doing. In addition, the Company expects to retain the services
of Georgeson Shareholder Communications, Inc. to act as the
Company's exclusive outside proxy solicitor in connection with
the 2003 Annual Meeting. The fee for Georgeson's services is
expected to be approximately $5,000 plus reimbursement of certain
expenses relating to the proxy solicitation.
RECORD DATE AND OUTSTANDING VOTING SECURITIES
October 24, 2003, is the record date (the "Record Date") for
determining the stockholders who will be entitled to vote at the
Annual Meeting. As of the Record Date, the Company had issued and
outstanding approximately:
* 52,323,701 shares of issued and outstanding Common Stock
held by approximately 1,217 stockholders of record;
* No shares of issued and outstanding Series A Convertible
Preferred Stock (the "Preferred A Stock");
* 4,500 shares of issued and outstanding Series B
Convertible Preferred Stock (the "Preferred B Stock")
held by approximately 18 stockholders of record;
* 14,570 shares of Series C Convertible Preferred Stock
(the "Preferred C Stock") held by approximately seven
stockholders of record; and
* 8,578 shares of Series D Convertible Preferred Stock (the
"Preferred D Stock") held by approximately two
stockholders of record.
An additional 326,087, 813,966 and 1,225,429 shares of
Common Stock are issuable upon the conversion of the outstanding
Preferred B Stock, Preferred C Stock and Preferred D Stock,
respectively.
Each share of Common Stock is entitled to one vote. The
Common Stock constitutes the only outstanding securities of the
Company that can vote at the Annual Meeting.
QUORUM, ABSTENTIONS AND BROKER NON-VOTES
The presence at the Annual Meeting, either in person or by
proxy relating to any matter, of the holders of a majority of the
outstanding shares of Common Stock is necessary to constitute a
quorum. If less than a majority of the outstanding shares of
Common Stock entitled to vote are represented at the Annual
Meeting, a majority of the shares of Common Stock so represented
may adjourn the Annual Meeting to another date, time or place,
and notice need not be given of the new date, time or place if
the new date, time or place is announced at the meeting before an
adjournment is taken.
Prior to the Annual Meeting, the Company will select an
inspector of elections for the Annual Meeting, who will be a
designee of the Company's transfer agent. Such inspector will
determine the number of shares of Common Stock represented at the
meeting, the existence of a quorum and the validity and effect of
proxies, and shall receive, count and tabulate ballots and votes
and determine the results thereof.
Under Delaware law, abstentions and broker "non-votes,"
which are proxies from brokers or nominees indicating that such
person has not received instructions from the beneficial owner or
other person entitled to vote such shares on a particular matter
with respect to which the broker or nominee does not have
discretionary voting power, will be counted for determining
whether a quorum is present, but will not be counted as votes
cast.
VOTE REQUIRED
The nominee receiving the greatest number of votes cast by
those entitled to vote will be elected. For all other matters
submitted at the meeting, an affirmative vote of the majority of
the shares present in person or by proxy is necessary.
-2-
PROPOSAL 1
ELECTION OF DIRECTORS
The Board is divided into three classes designated Class I,
Class II and Class III. Directors in each class serve for a term
of three years and until their successors are duly elected and
qualified. There are two director seats in Class I and a single
director seat in each of Class II and Class III. The second
Class I director seat is currently vacant as a result of the
resignation of Jan Robert Horsfall on August 13, 2003. The term
of one class expires at each successive Annual Meeting.
At the Annual Meeting, one individual will be elected as a
Class I director, to serve until the Annual Meeting in 2006 and
until his successor is duly elected and qualified. The nominee
for election at the Annual Meeting as a Class I director of the
Board is Russell W. Beiersdorf. Mr. Beiersdorf currently serves
as a director of the Company.
Under the Company's bylaws, directors are elected by a
majority of the outstanding shares of Common Stock present in
person or represented by proxy at the Annual Meeting. Proxy
holders may not vote proxies for a greater number of individuals
than the nominee named. Unless otherwise instructed, proxy
holders will vote proxies for the nominee.
If elected, Mr. Beiersdorf will serve as a director until
the 2006 Annual Meeting and until his successor is duly elected
and qualified or until his earlier resignation or removal.
Information about the nominee is set forth in the following
section regarding current directors.
The Board unanimously recommends a vote "FOR" the election
of Mr. Beiersdorf as a Class I director.
INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS
The following table and biographical descriptions set forth
certain information with respect to the nominee for election as a
Class I director at the Annual Meeting and the continuing
directors whose terms expire at the 2004 and 2005 Annual
Meetings.
Director
Name Age Principal Occupation Since
--------------------------------------------------- --- --------------------------- -----------
<s> <c> <c> <c>
CLASS I NOMINEE FOR ELECTION AT 2003 ANNUAL MEETING
(TERM EXPIRES IN 2006)
Russell W. Beiersdorf 37 President of Alyn, Inc. 2002
CLASS II CONTINUING DIRECTOR
(TERM EXPIRES IN 2004)
John Stevens Robling, Jr. 53 Managing Director of the 2001
Liati Group, LLC
CLASS III CONTINUING DIRECTOR
(TERM EXPIRES IN 2005)
Barrett N. Wissman 41 Chairman of the Board of the 1999
Company
CLASS I NOMINEE FOR ELECTION AT 2003
ANNUAL MEETING - TERM EXPIRES IN 2006
RUSSELL W. BEIERSDORF, 37, has been one of the Company's
directors since December 12, 2002. Since 1997, he has been
President of Alyn, Inc. and a private investor. Mr. Beiersdorf
was formerly a professional golfer on the PGA and Ben Hogan
Tours. He received his Bachelor of Science degree from Southern
Methodist University.
CLASS II CONTINUING DIRECTOR - TERM EXPIRES IN 2004
JOHN STEVENS ROBLING, JR., 53, has been one of the Company's
directors since June 5, 2001. He is Managing Director of the
Liati Group. He also served in various capacities, including as
the Company's Vice President, Chief Financial Officer, Treasurer
and Assistant Secretary, from September 22, 1999, through
August 31, 2000. Prior to his appointment to these positions,
Mr. Robling was Chief Financial Officer of AxisTel
Communications, Inc., one of the Company's subsidiaries, and
PhoneFree.com, Inc. (now Gemini Voice Solutions, Inc.), one of
the Company's minority interests. Before joining AxisTel in
1998, Mr. Robling was an independent financial advisor and
specialized in offering private equity investment services to
various clients. From 1992 to 1997, Mr. Robling was a principal,
board member and investment committee member of Hamilton Lane
Advisors, Inc. Hamilton Lane is a private equity consulting firm
headquartered in Philadelphia. Prior to joining Hamilton Lane,
Mr. Robling was a Vice President at Lazard Freres & Co. in its
International and Mergers and Acquisitions Departments. He was
also a member of the Country Advisory Group, an informal
partnership among Lazard Freres, S.G. Warburg and Lehman
Brothers, which advised the sovereign governments of developing
countries. In connection with these engagements, Mr. Robling
provided financial advisory services to national
telecommunications authorities and multi-national telecommunications
-3-
companies. Mr. Robling received a Master of Business Administration
degree from the University of Chicago and graduated with distinction
from Georgetown University.
CLASS III CONTINUING DIRECTOR - TERM EXPIRES IN 2005
BARRETT N. WISSMAN, 41, has been one of the Company's
directors since September 22, 1999. He served as Chief Executive
Officer from September of 1999 through April of 2000 and
President from September of 1999 until January of 2003, at which
time Mr. Wissman resigned as an officer and accepted the position
of non-executive Chairman of the Board. He manages several
financial management and investment advisory companies.
Mr. Wissman holds Bachelor of Arts degrees, cum laude, in
economics and political science from Yale University and a Master
of Arts degree in music from Southern Methodist University.
EXECUTIVE OFFICERS
STEVEN W. CAPLE, 38, serves as the Company's President. He
previously served in the capacities of Senior Vice President,
General Counsel and Secretary and Vice President of Legal Affairs
and Assistant General Counsel. Mr. Caple joined the Company from
GTE Corporation (now Verizon Communications, Inc.), where he was
an Assistant General Counsel. Prior to GTE, he served as
Assistant General Counsel and Director of Legal Affairs for
Chancellor Media Corporation (now Clear Channel Communications,
Inc.). Mr. Caple joined Chancellor Media from Marcus Cable, LP
(now Charter Communications, Inc.), where he also was Assistant
General Counsel and Director of Legal Affairs. Prior to Marcus
Cable, Mr. Caple practiced law with the firm of Patton, Haltom,
Roberts, McWilliams & Greer. He received his Bachelor of Arts
degree from the University of Texas at Dallas and his Doctor of
Jurisprudence degree, cum laude, from the University of Arkansas,
where he also served as Managing Editor of the Arkansas Law
Review.
SUSIE C. HOLLIDAY, 38, served as the Company's Senior Vice
President of Accounting until her resignation on August 1, 2003.
She was responsible for the Company's accounting activities. Ms.
Holliday was formerly Vice President of Regulatory Compliance and
Planning for Charter Communications, Inc., the fifth largest
cable company in the United States. She specialized in federal
communications regulation, internal budgeting and reporting.
Prior to Charter Communications, she had similar responsibilities
with Marcus Cable, LP. Ms. Holliday worked in the cable industry
for seven years. Prior to joining Marcus Cable, Ms. Holliday
worked for KPMG, LLP for six years in the Accounting and Audit
Practice. She received her Bachelor of Science degree in
accounting from the College of William and Mary and is a
Certified Public Accountant.
PATRICK G. MACKEY, 57, currently serves as the Company's
Senior Vice President of Accounting, a role he assumed upon the
resignation of Susie C. Holliday on August 1, 2003. He previously
served as the Company's Senior Vice President of Administration.
Mr. Mackey was formerly the Executive Vice President and Chief
Financial Officer of Internet Global Services, Inc., one of the
Company's subsidiaries. From December 1998 to March 2000, he was
a partner with Tatum CFO Partners, LLP, which assigned him to the
Internet Global account. Mr. Mackey was an independent financial
consultant from July 1996 to December 1998 working with various
start-up companies in the healthcare and software industries.
From January 1990 to July 1996, he was a founder and Executive
Vice President, Chief Financial Officer and Chief Operating
Officer of MultiTechnology Services, Inc., a provider of
telephony and cable television in multi-family residential
communities. Mr. Mackey received his Bachelor of Science degree
in accounting from Louisiana Tech University and is a Certified
Public Accountant.
-4-
SECURITY OWNERSHIP OF DIRECTORS,
MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to
the beneficial ownership of the Company's Common Stock as of the
Record Date by: (i) each person who is a beneficial owner of more
than 5% of the Company's Common Stock; (ii) each director of the
Company; (iii) the Named Executive Officers; and (iv) all
executive officers and directors of the Company as a group.
Unless otherwise indicated, the address of each listed
stockholder is in care of the Company at 2311 Cedar Springs Road,
Suite 400, Dallas, Texas 75201. All of the shares indicated in
the table below are of Common Stock:
NUMBER OF SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
HOLDERS OWNED (1) OWNED (1)
- --------------------------------- ---------------- ------------
<s> <c> <c>
Russell W. Beiersdorf (2)........ 45,000 *
Steven W. Caple (3).............. 256,385 *
Susie C. Holliday (4)............ 489,800 *
Patrick G. Mackey (5)............ 579,657 1.1%
John Stevens Robling, Jr. (6).... 145,000 *
Barrett N. Wissman (7)........... 4,594,419 8.4%
Officers and Directors as a
Group (10 Persons)(8).......... 6,110,261 10.9%
Hunt Asset Management, LLC (9)... 10,316,200 19.7%
IEO Investments Limited (10)..... 10,316,200 19.7%
__________________
* Represents less than one percent.
(1) For purposes of this table, a person is deemed to have
beneficial ownership of the number of shares of Common Stock
that such person has the right to acquire within 60 days of
the Record Date. Percentages have been based on the Company
having 52,323,701 shares of Common Stock issued and
outstanding. For purposes of computing the percentage of
outstanding shares of Common Stock held by any individual
listed in this table, any shares of Common Stock which such
person has the right to acquire pursuant to the exercise of
a stock option exercisable within 60 days 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) Includes vested option to purchase 25,000 shares of Common
Stock.
(3) Includes (a) 26,385 shares of Common Stock owned directly
and (b) vested options to purchase 230,000 shares of Common
Stock.
(4) Includes (a) 14,800 shares of Common Stock owned directly
and (b) vested options to purchase 475,000 shares of Common
Stock.
(5) Includes (a) 17,157 shares of Common Stock owned directly
and (b) vested options to purchase 562,500 shares of Common
Stock.
(6) Includes (a) 120,000 shares of Common Stock owned directly
and (b) vested options to purchase 25,000 shares of Common
Stock.
(7) Includes (a) 25,000 shares of Common Stock owned directly,
(b) vested options to purchase 2,691,760 shares of Common
Stock, (c) 1,741,659 shares of Common Stock held by Sienna
Continuity Trust, for which Mr. Wissman is a beneficiary,
and (d) 136,000 shares of Common Stock held by Sandera
Partners, LP, in which Mr. Wissman has shared control. The
address for Mr. Wissman is Post Office Box 1011,
Fredriksted, St. Croix, United States Virgin Islands 00841.
(8) Includes vested options to purchase 4,009,260 shares of
Common Stock.
(9) This information is based on information reported by the
stockholder in filings made with the Securities and Exchange
Commission (the "Commission"). The address of Hunt Asset
Management, LLC is 1601 Elm Street, 40th Floor, Dallas,
Texas 75201.
(10) This information is based on information reported by the
stockholder in filings made with the Commission. The address
of IEO Investments Limited is Hunkins Waterfront Plaza, Main
Street Post Office Box 556, Charlestown, Nevis, West Indies.
IEO Investments Limited is owned by Hunt Asset Management,
LLC.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the
"Exchange Act"), requires the Company's directors, executive
officers, and individuals who own more than 10% of a registered
class of the Company's equity securities to file initial
-5-
reports of ownership and changes in ownership of Common Stock
with the Commission. Such persons are required by applicable
regulations to furnish us with copies of all Section 16(a)
reports that they file.
To the Company's knowledge, based solely on the review of
the copies of such reports furnished to the Company, all of the
Company's directors, officers and 10% stockholders have complied
with the applicable Section 16(a) reporting requirements for the
fiscal year ended June 30, 2003, except for the late filing of a
Form 3 for Patrick G. Mackey.
THE BOARD AND ITS COMMITTEES
The business of the Company is managed under the direction
of the Board. The Board interacts with management and meets on a
regular basis during the Company's fiscal year to review
significant developments affecting the Company and to act on
matters requiring Board approval. It also holds special meetings
or acts by unanimous written consent when an important matter
requires Board action between scheduled meetings. During the
fiscal year ended June 30, 2003, the Board had three special
meetings and acted by unanimous written consent on two occasions.
Each member of the Board participated in at least 75% of such
Board and applicable committee meetings held during the fiscal
year and the period during which he was a director.
The Board has established Audit and Compensation Committees
to devote attention to specific subjects and to assist the Board
in the discharge of its responsibilities. The functions of those
committees and their current members are set forth below.
The Audit Committee recommends to the Board the appointment
of the firm selected to serve as the independent auditor for the
Company and its subsidiaries and monitors the performance of any
such firm. It also reviews and approves the scope of the audit
and evaluates, with the independent auditor, the Company's audit
and annual financial statements, reviews with management the
status of internal accounting controls, evaluates issues having a
potential financial impact on the Company, which may be brought
to the Audit Committee's attention by management, the independent
auditors, or the Board and evaluates public financial reporting
documents of the Company. The Audit Committee currently includes
Russell W. Beiersdorf and John Stevens Robling, Jr. During the
fiscal year ended June 30, 2003, the Audit Committee met four
times. Mr. Robling currently serves as Chairman of the Audit
Committee.
The Company does not currently have an Executive Committee,
a Compensation Committee or a Nominating Committee. The functions
customarily attributable to an Executive Committee, a
Compensation Committee and a Nominating Committee are performed
by the Board as a whole. Nominees that are intended to be
presented by stockholders at the next Annual Meeting must be
received by us at 2311 Cedar Springs Road, Suite 400, Dallas,
Texas 75201, by June 30, 2004, in order for them to be considered
for inclusion in the Proxy Statement for that Annual Meeting.
COMPENSATION OF DIRECTORS
Each non-employee director receives $1,000 for each Board
meeting and committee meeting attended in person and $500 for
each Board meeting and committee meeting attended by conference
call, with the exception of members of the Audit Committee, who
receive $750 for each meeting attended by conference call.
REPORT OF AUDIT COMMITTEE
The Audit Committee is made up of the following members:
Russell W. Beiersdorf and John Stevens Robling, Jr. The Audit
Committee operates pursuant to a charter approved and adopted by
the Board on September 7, 2000, a copy of which is attached as
Appendix A. In accordance with the charter, all of the members of
the Audit Committee are independent pursuant to Rule 4200(a)(15)
of the National Association of Securities Dealers' listing
standards and are financially literate and at least one member of
the Audit Committee has accounting or related financial
management expertise.
The Audit Committee, on behalf of the Board, oversees the
Company's financial reporting process. In fulfilling its
oversight responsibilities, the Audit Committee reviewed with the
Company the audited financial statements and the footnotes
thereto in the Annual Report and discussed with the Company the
quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgments and the
clarity of disclosures in the financial statements.
The Company's outside auditor is responsible for expressing
an opinion on the conformity of the Company's audited financial
statements to generally accepted accounting principles. The Audit
Committee reviewed and discussed with the outside auditor its
judgments as to the quality, not just the acceptability, of the
Company's accounting principles and such other matters as are
required to be discussed by the Audit Committee with the
Company's outside auditor under generally accepted auditing
standards.
-6-
The Audit Committee discussed with the outside auditor the
outside auditor's independence from management and the Company,
and received the written disclosures concerning the outside
auditor's independence required by the Independence Standards
Board to be made by the outside auditor to the Company.
The Audit Committee discussed with the Company's outside
auditor the overall scope and plans for its audit. The Audit
Committee also met with the outside auditor to discuss the
results of its examination, its evaluation of the Company's
internal controls and the overall quality of the Company's
financial reporting.
In reliance on the reviews and discussions referred to
above, the Audit Committee recommended to the Board that the
audited financial statements be included in the Annual Report on
Form 10-K, as filed with the Commission.
AUDIT COMMITTEE
Russell W. Beiersdorf
John Stevens Robling, Jr.
SUMMARY COMPENSATION TABLE
The following table sets forth information regarding the
compensation awarded of those persons (i) who served or acted as
the Company's principal executive officer, (ii) who were the
Company's other four most highly compensated executive officers
and (iii) two persons who would have been one of the most highly
compensated executive officers had they been employed by the
Company as of June 30, 2003 (the "Named Executive Officers") for
the past three fiscal years.
ANNUAL
COMPENSATION LONG TERM
-------------------------------- COMPENSATION
OTHER SECURITIES
ANNUAL UNDERLYING OTHER
COMPEN- OPTIONS/ COMPEN-
NAME YEAR SALARY ($) BONUS SATION SARS (#) SATION (5)
- ------------------------------ ------ ---------- --------- --------- ------------- ----------
<s> <c> <c> <c> <c> <c> <c>
Steven W. Caple 2003 160,000 45,000 -- 500,000(1) 7,321
President 2002 127,500 30,000 -- -- --
2001 122,308 15,000 -- 60,000(2) --
Susie C. Holliday (3) 2003 158,380 -- -- 500,000(1) 14,883
Former Senior Vice President 2002 117,908 9,375 -- -- --
of Accounting 2001 150,000 45,938 -- 200,000(2) --
Patrick G. Mackey 2003 180,000 -- -- 500,000(1) 19,310
Senior Vice President of 2002 180,000 -- -- -- --
Accounting 2001 180,000 20,000 -- 250,000(2) --
Barrett N. Wissman 2003 95,000 -- 50,000 25,000(1) 8,635
Chairman and Former 2002 190,000 -- -- -- --
President (4) 2001 190,000 -- -- 1,400,000(2) --
(1) Represents stock options granted under the 1999 Omnibus
Plan.
(2) Represents stock options granted under the 2001 Equity
Incentive Plan.
(3) Ms. Holliday resigned from her position on August 1, 2003.
(4) Mr. Wissman resigned as the Company's President, effective
on December 31, 2002, and began serving as its Chairman of
the Board, commencing on January 1, 2003. The compensation
reported in the table includes $95,000 for his services as
President and $50,000 for his services as Chairman of the
Board.
(5) Represents payments made by the Company for health and life
insurance premiums and allocations of forfeitures in the
Company's 401(k) plan for the six months ended June 30,
2003.
OPTION GRANTS DURING FISCAL YEAR 2003
The Company has never granted any stock appreciation rights
("SARs"). No options to acquire shares of Common Stock were
granted to the Named Executive Officers during the fiscal year
ended June 30, 2003.
-7-
AGGREGATED OPTION EXERCISES AND YEAR-END
OPTION VALUES IN FISCAL YEAR 2003
There were no options exercised by the Named Executive
Officers during the fiscal year ended June 30, 2003, and none of
the outstanding options were in-the-money as of that date. The
following table describes the number of shares covered by
exercisable and unexercisable options held by the Named Executive
Officers as of June 30, 2003.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF
SHARES OPTIONS/SARS AT FISCAL UNEXERCISED
ACQUIRED YEAR END (#) IN THE MONEY
ON VALUE ------------------------------- OPTIONS/SAR AT
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE FISCAL YEAR END
- ------------------ ------------ --------- --------------- -------------- --------------------
<s> <c> <c> <c> <c> <c>
Steven W. Caple -- -- 230,000 390,000
Susie C. Holliday -- -- 475,000 425,000
Patrick G. Mackey -- -- 562,500 437,500
Barrett N. Wissman -- -- 2,691,760 233,240
(1) Under the terms of the 1999 Omnibus Securities Plan, the
2001 Equity Incentive Plan and Non-Plan Grant, Ms.
Holliday's vested and unvested options will be forfeited on
October 29, 2003, except for 125,000 vested options under
the 1999 Omnibus Plan that expire on August 1, 2008.
EMPLOYMENT AGREEMENTS
STEVEN W. CAPLE. Mr. Caple currently serves as the Company's
President. On October 5, 2001, the Company entered into a
retention agreement with Mr. Caple, whereby he received an annual
base salary of $130,000 and two bonuses of not less than $30,000
each, which were payable in April and October of each year, to
stay on as the Company's Senior Vice President, General Counsel
and Secretary. When Mr. Caple was appointed to the position of
President on January 24, 2003, his compensation was changed to an
annual base salary of $190,000. He was granted options to
purchase 60,000 shares of Common Stock under the 1999 Omnibus
Securities Plan. These options have an exercise price of $16.88
per share and vested as follows: 20,000 vested on June 26, 2001;
20,000 vested on June 26, 2002; and 20,000 vested on June 26,
2003. In addition, Mr. Caple was granted options to purchase
60,000 shares of Common Stock under the 2001 Equity Incentive
Plan. These options have an exercise price of $4.63 per share and
vest as follows: 15,000 vested on June 26, 2001; 15,000 vested on
June 26, 2002; 15,000 vested on June 26, 2003; and 15,000 will
vest on June 26, 2004. Finally, Mr. Caple was granted options to
purchase an additional 500,000 shares of Common Stock under the
1999 Omnibus Plan. These options have an exercise price of
$0.055 per share and vest as follows: 125,000 shares vested on
February 21, 2003; 125,000 will vest on February 21, 2004;
125,000 will vest on February 21, 2005; and 125,000 will vest on
February 21, 2006. If the Company terminates Mr. Caple's
employment without cause or if he terminates his employment with
good reason, Mr. Caple will be entitled to the cash equivalent of
his salary for six months.
SUSIE C. HOLLIDAY. On April 17, 2000, the Company entered
into an employment agreement with Ms. Holliday, pursuant to which
she served as the Company's Senior Vice President of Accounting.
The employment agreement was to expire on April 17, 2004. Ms.
Holliday received an annual base salary of $150,000, and was
entitled to participate in the Company's incentive bonus plan,
payable by us on such terms and conditions as determined by the
Board and the Compensation Committee, in any event not to exceed
25% of her base salary. Ms. Holliday's employment agreement also
granted to her options to purchase 200,000 shares of Common
Stock. These options have an exercise price of $18.00 per share
and vested as follows: 66,667 vested on April 17, 2001; 66,667
vested on April 17, 2002; and 66,666 vested on April 17, 2003. In
addition, Ms. Holliday was granted options to purchase 200,000
shares of Common Stock under the Company's 2001 Equity Incentive
Plan. These options have an exercise price of $4.63 per share
with vesting as follows: 50,000 vested on April 17, 2001; 50,000
vested on April 17, 2002; 50,000 vested on April 17, 2003; and
50,000 were to vest on April 17, 2004. Finally, Ms. Holliday was
granted options to purchase an additional 500,000 shares of
Common Stock under the 1999 Omnibus Plan. These options have an
exercise price of $0.055 per share and vest as follows: 125,000
shares vested on February 21, 2003; 125,000 would have vested on
February 21, 2004; 125,000 would have vested on February 21,
2005; and 125,000 would have vested on February 21, 2006. If Ms.
Holliday does not exercise her vested options before October 29,
2003, they will expire, except for 125,000 shares under the 1999
Omnibus Plan that will expire on August 1, 2008. If the Company
terminated Ms. Holliday's employment without cause or if she
terminated her employment for good reason, Ms. Holliday would
have been entitled to payment of all base salary earned but
unpaid (including any incentive bonus earned for the applicable
fiscal year) plus equal monthly payments equal to her monthly
rate of base salary plus the amount of any incentive bonus paid
to her during the prior fiscal year, divided by 12, for a period
of
-8-
the greater of six months or the remaining term of her employment
agreement. Ms. Holliday resigned from her position with the
Company on August 1, 2003.
PATRICK G. MACKEY. Mr. Mackey currently serves the Company's
Senior Vice President of Accounting, a position he assumed upon
the resignation of Susie Holliday on August 1, 2003. On March 10,
2000, the Company entered into an employment agreement with an
initial term expiring on March 10, 2004. The agreement
automatically renews for successive 12-month periods unless
either party gives the other party written notice of non-renewal
at least 90 days before the end of the then current employment
term. Mr. Mackey receives an annual base salary of $180,000,
with increases in base salary and awards of bonuses at the
discretion of the Board. Mr. Mackey was granted options to
purchase 250,000 shares of Common Stock under the 1999 Omnibus
Securities Plan. These options have an exercise price of $28.50
per share and vested as follows: 83,334 vested on March 16, 2001;
83,333 vested on March 16, 2002; and 83,333 vested on March 16,
2003. In addition, Mr. Mackey was granted an option to purchase
250,000 shares of Common Stock under the 2001 Equity Incentive
Plan. These options have an exercise price of $4.63 per share to
vest as follows: 62,500 vested on March 16, 2001; 62,500 vested
on March 16, 2002; 62,500 vested on March 16, 2003; and 62,500
will vest on March 16, 2004. Finally, Mr. Mackey was granted
options to purchase an additional 500,000 shares of Common Stock
under the 1999 Omnibus Plan. These options have an exercise
price of $0.055 per share and vest as follows: 125,000 shares
vested on February 21, 2003; 125,000 will vest on February 21,
2004; 125,000 will vest on February 21, 2005; and 125,000 will
vest on February 21, 2006. If the Company terminates Mr. Mackey's
employment without cause or he terminates his employment for good
reason, then Mr. Mackey is entitled to receive an amount of his
base salary then in effect for the longer of the remainder of his
employment term or six months.
BARRETT N. WISSMAN. The Company entered into an employment
agreement with Mr. Wissman, whereby he served as the Company's
President and received an annual base salary of $190,000. The
agreement commenced on April 3, 2000, and was to expire on
April 2, 2004. However, it was modified, effective December 31,
2002, to reflect Mr. Wissman's resignation as President and
appointment as Chairman of the Board, a position that had been
vacant since Jeffrey A. Marcus resigned on June 5, 2001.
Pursuant to the modification, Mr. Wissman receives annual
compensation as a director of $100,000, and the agreement may be
terminated by either Mr. Wissman or the Board, upon the delivery
by either party of thirty days prior written notice. He was
granted options to purchase 1,400,000 shares of Common Stock.
These options have an exercise price of $23.00 per share and
vested as follows: 350,000 vested on July 2, 2000; 350,000 vested
on April 2, 2001; 350,000 vested on April 2, 2002; and 350,000
shares vested on April 2, 2003. In addition, the Company granted
Mr. Wissman options to purchase 1,400,000 shares of Common Stock
under the 2001 Equity Incentive Plan. These options have an
exercise price of $4.63 per share and vest as follows: 350,000
shares vested on January 10, 2001; 350,000 vested on April 2,
2001; 233,333 vested on April 2, 2002; 233,333 vested on April 2,
2003; and the remaining 233,334 will vest on April 2, 2004.
Finally, Mr. Wissman was granted options to purchase 125,000
shares of Common Stock under the 1999 Omnibus Plan. These
options are fully vested, and 100,000 of them have an exercise
price of $10.00 per share, while the remaining 25,000 have an
exercise price of $ .055 per share.
REPORT OF BOARD REGARDING EXECUTIVE COMPENSATION
The Board is responsible for reviewing the compensation paid
to the Company's executive officers and determining such
compensation. The Board approves all compensation paid to
executive officers, with the exception of grants of stock
options, which are made by the Option Subcommittee, subject to
Board approval, as provided in the Company's 1999 Omnibus
Securities Plan and the 2001 Equity Incentive Plan. During the
fiscal year ended June 30, 2003, the Board made all compensation
related determinations.
PRINCIPAL COMPONENTS OF EXECUTIVE COMPENSATION,
INCLUDING PRINCIPAL EXECUTIVE OFFICER COMPENSATION
The Company's compensation strategies are designed to
attract and to retain the best possible executive talent under
the circumstances. Compensation packages to executive officers
include a base salary that recognizes individual performance and
cash and equity-based incentives designed to align the financial
interests of executives with those of the stockholders. The
Company maintains agreements with its executive officers. Each
such arrangement provides for a base salary, annual discretionary
cash incentive bonus and the award of an option to purchase
Common Stock. The Company also provides its executive officers
with medical, retirement and other fringe benefits generally
available to other Company employees. However, certain of the
premiums are paid by the Company on behalf of the executive
officers. Base salary for the Company's executive officers under
their respective agreements was determined by evaluating the
responsibilities of the position held by, and the personal
experience level of, the specific individual. In entering into
these arrangements, the Board also considers such factors as each
executive's role in carrying out the Company's business strategy
and the potential for increasing value to the Company's
stockholders. The Board based its determination of the base
salary and incentive compensation levels for Steven W. Caple,
Susie C. Holliday and Patrick G. Mackey based upon their
respective responsibilities and levels of business experience.
-9-
MEMBERS OF BOARD ACTING ON BEHALF OF COMPENSATION COMMITTEE
Russell W. Beiersdorf
John Stevens Robling, Jr.
Barrett N. Wissman
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended June 30, 2003, compensation
matters were handled by the Board as a whole, and no member of
the Board was an officer or employee of the Company other than
Barrett N. Wissman. No member of the Compensation Committee
serves as a member of the board of directors or compensation
committee of any entity that has one or more of its executive
officers serving as a member of the Company's Board or
Compensation Committee, except for Mr. Wissman, who is a director
of PhoneFree.com, Inc. (now Gemini Voice Solutions, Inc.), of
which Jan Robert Horsfall is a former executive officer. Mr.
Horsfall was a member of the Company's Board of Directors until
his resignation on August 13, 2003.
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total stockholder
return on the Company's Common Stock from the effective date of
the Company's Form 10 on February 18, 2000, through June 30,
2002, with the cumulative total return on the NASDAQ Composite
Index and the NASDAQ Telecommunications Index over the same
period (assuming an investment of $100 in the Company's Common
Stock, the NASDAQ Composite Index and the NASDAQ
Telecommunications Index on February 18, 2000, and reinvestment
of all dividends).
NOVO NETWORKS, NASDAQ NASDAQ
INC. (NVNW) COMPOSITE TELECOM
-------------- --------- --------
2/18/00 $100.00 $100.00 $100.00
3/31/00 125.00 103.65 102.95
6/30/00 67.39 89.90 81.34
9/30/00 55.43 83.25 68.19
12/31/00 19.84 56.00 43.29
3/31/01 7.88 41.71 31.03
6/30/01 1.52 48.99 29.11
9/30/01 0.00* 33.97 18.97
12/31/01 0.00* 44.21 22.11
3/31/02 0.57 41.83 16.23
6/30/02 0.22 33.17 9.67
9/30/02 0.22 26.57 8.26
12/31/02 0.26 30.27 10.16
3/31/03 0.22 31.04 11.35
6/30/03 0.20 36.78 13.69
* Trading halted by NASDAQ.
-10-
[PERFORMANCE GRAPH OMITTED]
PROPOSAL 2
APPOINTMENT OF INDEPENDENT AUDITOR
Grant Thornton, LLP, independent certified public
accountants, audited the financial statements of the Company for
the fiscal year ended June 30, 2003. The Audit Committee and the
Board have also selected Grant Thornton as the independent
auditors of the Company for the fiscal year ending June 30, 2004.
The ratification of the appointment of Grant Thornton will be
determined by the vote of the holders of a majority of the shares
present in person or represented by proxy at the Annual Meeting.
If the foregoing appointment of Grant Thornton is not ratified by
stockholders, the Board will appoint other independent
accountants whose appointment for any period subsequent to the
2003 Annual Meeting of Stockholders will be subject to the
approval of stockholders at the meeting. No member of Grant
Thornton or any of its associates has any financial interest in
the Company or its affiliates.
Grant Thornton's opinion on the Company's financial
statements for the year ended June 30, 2003, indicates that it
was prepared based on the assumption that the Company continues
as a going concern, but that substantial doubt exists concerning
the Company's ability to do so. During the period from July 30,
2003, to the present (i) there have been no disagreements with
Grant Thornton on any matters of accounting principles or
practices, financial statement disclosure or auditing scope or
procedure which, if not resolved to the satisfaction of Grant
Thornton, would have caused the independent accountants to make
reference to such matters in connection with its report; and (ii)
there have been no reportable events, as described in Regulation
S-K Item 304(a)(i). Representatives of Grant Thornton are
expected to attend the Annual Meeting and will have the
opportunity to make a statement if they desire to do so and are
expected to be available to answer appropriate questions.
AUDIT FEES
Fiscal Year 2003. The aggregate fees billed for professional
services rendered by Grant Thornton for the audit of the
Company's annual financial statements for the fiscal year ended
June 30, 2003, together with its review of the financial
statements included in the Company's quarterly reports on Form
10-Q and the audit of a subsidiary and review of financial
statements included in the Company's reports on Form 8-K,
amounted to $70,625. Grant Thornton did not perform any non-
audit services for the Company during fiscal year 2003, including
those defined in Rule 2-11(c)(4)(ii) of Regulation S-X.
Fiscal Year 2002. The aggregate fees billed for
professional services rendered by Grant Thornton for the audit of
the Company's annual financial statements for the fiscal year
ended June 30, 2002, amounted to $36,500. The aggregate fees
billed for professional services rendered by the Company's prior
auditor, Arthur Andersen, LLP, for review of the financial
statements included in the Company's quarterly reports on Form 10-
Q amounted to $89,913. In addition, BDO Seidman, LLP, the
Company's auditor prior to Arthur Andersen, was paid a total of
$109,580 for professional services rendered during fiscal year
2002, primarily for tax related services and consents. Neither
Grant Thornton nor Arthur Andersen performed any non-audit
services for the Company during fiscal year 2002, including those
defined in Rule 2-11(c)(4)(ii) of Regulation S-X.
-11-
AUDIT RELATED FEES
FY 2003 FY 2002
--------------- ------------
Audit Fees
Grant Thornton, LLP $ 70,625 $ 36,500
Arthur Andersen, LLP - 72,304
BDO Seidman, LLP 14,335 33,496
Audit Related Fees
Grant Thornton, LLP - -
Arthur Andersen, LLP (1) - 17,609
BDO Seidman, LLP - -
Tax Fees
BDO Seidman, LLP 109,012 76,084
Other Fees
Grant Thornton, LLP - -
Arthur Andersen, LLP - -
BDO Seidman, LLP - -
--------------- ------------
$ 193,972 $ 235,993
=============== ============
__________________
(1) Represents fees associated with liquidation and
bankruptcy accountings.
FORMER AUDITORS
Arthur Andersen audited the financial statements of the
Company for the fiscal year ended June 30, 2001. On July 30,
2002, the Company's Audit Committee and Board unanimously
recommended the dismissal of Arthur Andersen as the Company's
independent accountant. Arthur Andersen had served as the
Company's outside auditor since January 2, 2001. For the year
ended June 30, 2001, the Arthur Andersen audit report did not
contain any adverse opinion or a disclaimer of opinion nor was it
qualified or modified as to audit scope or accounting principles,
except that such report did state that substantial doubt existed
that the Company could continue as a going concern. During the
period from January 2, 2001, through the end of the Company's
fiscal year ended June 30, 2001, and the subsequent interim
period from July 1, 2001, to July 30, 2002 (the date of the
referenced dismissal), there were no disagreements between the
Company and Arthur Andersen on any matter of accounting
principles or practices, financial statement disclosure or
auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of Arthur Andersen, would have caused it to
make reference to the subject matter of the disagreement in its
report. During the period from January 2, 2001, through the end
of the Company's fiscal year ended June 30, 2001, and the
subsequent interim period from July 1, 2001, to July 30, 2002
(the date of the referenced dismissal), there have been no
reportable events (as defined in regulation S-K Item
304(a)(l)(v)).
Representatives of Grant Thornton are expected to attend the
Annual Meeting. Neither representatives of Arthur Andersen nor
BDO Seidman are expected to attend the Annual Meeting.
The Board unanimously recommends a vote "FOR" the
ratification of the appointment of Grant Thornton as the
independent auditor of the Company.
OTHER MATTERS TO BE ACTED UPON AT THE ANNUAL MEETING
The Company knows of no other matters to be presented at the
Annual Meeting. Should any other matter requiring a vote of the
stockholders arise at the Annual Meeting, the persons named in
the proxies will vote them in accordance with their best
judgment.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Stockholders are entitled to present proposals for action at
the next Annual Meeting if they comply with the requirements of
the proxy rules established by the Commission and the terms of
the Company's bylaws. Proposals that are intended to be presented
by stockholders at the 2004 Annual Meeting must be received by
the Company at 2311 Cedar Springs Road, Suite 400, Dallas, Texas
75201, by June 29, 2004, in order for them to be considered for
inclusion in the Proxy Statement for the 2004 Annual Meeting. In
the case of other stockholder proposals not submitted in time to
be included in the Company's proxy materials, the Company may
generally exercise discretionary voting authority as conferred by
proxies at the 2004 Annual Meeting.
-12-
APPENDIX A
NOVO NETWORKS, INC.
AUDIT COMMITTEE CHARTER
Approved and Adopted on September 7, 2000
GENERAL
The Audit Committee of the Board of Directors of Novo
Networks, Inc. shall consist of at least three independent
directors. Members of the Committee shall be considered
independent if they meet the independent director criteria of
Rule 4200(a)(15) of the Nasdaq Stock Market, Inc. As determined
by the Board of Directors, the Members of the Committee will be
able to read and understand fundamental financial statements,
including a company's balance sheet, income statement, and cash
flow statement or will become able to do so within a reasonable
period of time after his or her appointment to the Audit
Committee. Additionally, at least one member of the Audit
Committee must have past employment experience in finance or
accounting, requisite professional certification in accounting,
or any other comparable experience or background which results in
the individual's financial sophistication, including being or
having been a chief executive officer, chief financial officer or
other senior officer with financial oversight responsibilities.
Company management, independent auditors and the Company's
General Counsel may attend each meeting or portions thereof as
required by the Committee. The Committee shall meet as scheduled
by the Chairperson selected by the Board of Directors, as
frequently as circumstances dictate.
RESPONSIBILITIES
The Audit Committee's role is one of oversight whereas the
Company's management is responsible for preparing the Company's
financial statements and the independent auditors are responsible
for auditing those financial statements. In particular, the
Committee will not plan or conduct the Company's audit or
determine whether the Company's financial statements are complete
and accurate and are in accordance with generally accepted
accounting principles. The Committee recognizes that the
Company's financial management and the independent auditors have
more time, knowledge and more detailed information on the Company
than do the members of the Committee; consequently, the Audit
Committee is not providing any expert or special assurance as to
the Company's financial statements or any professional
certification as to the independent auditor's work, and is not
responsible for resolving disagreements, if any, between the
Company's management and the independent auditors. Additionally,
it is not the responsibility of the Committee to ensure that the
Company complies with all laws and regulations. The following
functions shall be the key responsibilities of the Audit
Committee in carrying out its oversight function.
1. Provide an open avenue of communications among the
independent auditors, Company management and the Board
of Directors, including private sessions with the
independent auditors, and/or Company management to
discuss any matters that the Committee may deem
appropriate or that either of these groups believes
should be discussed.
2. Provide open communication with Company management
relating to the quality and adequacy of the Company's
financial reporting process, published financial
statements and/or major disclosures and the adequacy of
the Company's system of internal controls.
3. Provide open communication with Company management and
General Counsel relating to legal and regulatory
matters that may have a material impact on the
Company's financial statements and Company compliance
policies.
4. Meet with Company management and independent auditors
regarding the appropriateness of accounting principles
followed by the Company, changes in accounting
principles and their impact on the financial
statements.
5. The Committee and Board of Directors shall be
ultimately responsible for the approval (subject to
ratification by the shareholders), evaluation, and
replacement of the independent auditors. The Committee
will:
* Monitor the independence and performance of the
independent auditors and their audit of the
Company's financial statements.
* Recommend annually the appointment of the
independent auditors to the Board for its approval.
-13-
* In accordance with The Independence Standards Board
Statement No.1, request from the independent
auditors a formal written statement delineating all
relationships between the independent auditors and
the Company, including all non-audit services and
fees.
* Discuss with the independent auditors if any
disclosed relationship or service could impact the
auditors' objectivity and independence.
* Recommend that the Board of Directors take
appropriate action in response to the auditors'
statement to ensure the independence of the
independent auditors.
* Approve the fees and other significant compensation
to be paid to the independent auditors.
6. Meet with the independent accountants and Company
management to review the scope of the proposed external
audit for each fiscal year. The external audit scope
shall include a requirement that the independent
accountants inform the Committee of any significant
changes in the independent accountant's original audit
plan and that the independent accountants will conduct
a review on interim financial information prior to the
Company's filing of each quarterly report to
shareholders (Form 10-Q).
7. Review with Company management and the independent
auditors the Company's quarterly financial results
prior to the release of earnings and/or the Company's
quarterly financial statements prior to filing or
distribution.
8. Meet with independent auditors, Company management and
internal auditors and review their report to the
Committee including comments relating to the system of
internal controls, published financial statements and
related disclosures, the adequacy of the financial
reporting process and the scope of the independent
audit. The Board of Directors and the Committee are in
place to represent the Company's stockholders;
accordingly, the independent auditors are ultimately
accountable to the Board of Directors and the Committee
on all such matters.
9. Review the Company's annual audited financial
statements (including results thereof) prior to filing
or distribution (which review should include discussion
with management and independent auditors of significant
issues regarding accounting principles, practices and
judgments).
10. Prepare a Report, for inclusion in the Company's proxy
statement, disclosing that the Committee reviewed and
discussed the audited financial statements with
management and discussed certain other matters with the
independent auditors. Based upon these discussions,
state in the Report whether the Committee recommended
to the Board of Directors that the audited financial
statements be included in the Annual Report.
11. Approve and monitor a code of conduct for the Company.
12. Review and advise the Board on potential conflicts of
interest regarding the Company and its officers and
directors.
13. Review and reassess the adequacy of the Audit
Committee's charter annually. If any revisions therein
are deemed necessary or appropriate, submit the same to
the Board for its consideration and approval.
14. Monitor the performance of the internal auditing
department.
15. Perform any other activities consistent with this
charter, the Company's bylaws and governing law, as the
Committee or the Board of Directors deems necessary or
appropriate.
16. Maintain minutes of meetings and periodically report to
the Board of Directors on significant results of the
foregoing activities.
The Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities and it has direct
access to the independent auditors as well as anyone in the
organization and full access to all books, records, facilities
and personnel of the Company. The Committee has the ability to
retain, at the Company's expense, special legal, accounting or
other consultants or experts it deems necessary in the
performance of its duties.
-14-
QUORUM
For the transaction of business at any meeting of the Audit
Committee, the presence of no less than 50% of the members shall
constitute a quorum.
Nothing contained in this charter is intended to, or should
be construed as, creating any responsibility or liability of the
members of the Committee except to the extent otherwise provided
under Federal securities laws or the Delaware General Corporation
law which shall continue to set the legal standard for the
conduct of the members of the Committee.
-15-
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD AS SOON AS POSSIBLE
ANNUAL MEETING OF SHAREHOLDERS
NOVO NETWORKS, INC.
DECEMBER 8, 2003
Please Detach and Mail in the Envelope Provided
<s> <c> <c> <c> <c>
A [ X ] Please mark your votes
as in this example
WITHHOLD AUTHORITY
FOR to vote for the
the nominee nominee listed
listed below
below
FOR AGAINST ABSTAIN
1. PROPOSAL [ ] [ ] 2. PROPOSAL NO. [ ] [ ] [ ]
NO. 1-ELECTION 2-RATIFICATION OF
OF DIRECTOR SELECTION OF GRANT
THORNTON LLP
Nominee: The undersigned acknowledges receipt of (a) Notice of Annual
Meeting of Stockholders, (b) the accompanying Proxy Statement, and
Russell W. Beiersdorf (c) the Company's 2003 Annual Report to Stockholders.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND
WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE ABOVE. YOU
ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THIS PROXY IN THE
ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. IF YOU DECIDE TO ATTEND THE MEETING, YOU MAY, IF SO
DESIRED, REVOKE THE PROXY AND VOTE YOUR SHARES IN PERSON.
PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD AS SOON AS POSSIBLE.
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED.
SIGNATURE 1:______________ DATE _________, 2003 SIGNATURE 2:__________________ DATE _______________, 2003
PROXY INSTRUCTIONS: Please sign exactly as the name or names appear on your stock certificate (as indicated
hereon). If the shares are issued in the name of two or more persons, all of them must sign the proxy. A proxy
executed by a corporation must be signed in its name by an authorized officer. Executors, administrators, trustees
and partners should indicate their capacity when signing.
NOVO NETWORKS, INC.
ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 8, 2003
The undersigned, having received the notice and accompanying
Proxy Statement for the Annual Meeting of Stockholders of Novo
Networks, Inc. (the "Company") to be held on Monday, December 8,
2003 (the "Annual Meeting"), hereby appoints Steven W. Caple and
Patrick G. Mackey, and each of them, with full power of
substitution, as the undersigned's proxies and attorneys-in-fact
to vote at the Annual Meeting, or any adjournment thereof, all
shares of voting stock of the Company, which the undersigned may
be entitled to vote. The above proxies are hereby instructed to
vote at the Annual Meeting or any adjournment thereof, as shown
below.
(Continued and to be signed on reverse side)