SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934, as amended
(Amendment No._)
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 (S) 240.14a-11(c) or (S) 240.14a-12
ASCENDANT SOLUTIONS, INC.
- --------------------------------------------------------------------------------
(Name of 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)(4) 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:*
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
*Set forth amount on which the filing is calculated and state how it was
determined.
[_] 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:
-------------------------------------------------------------------------
Your vote is important
ASCENDANT SOLUTIONS, INC.
Proxy Statement
2001 ANNUAL MEETING OF SHAREHOLDERS
Ascendant Solutions, Inc.
13727 Noel Road
Suite 500
Dallas, Texas 75240
469-374-6200
May 4, 2001
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 31, 2001
----------------
Ascendant Solutions will hold its Annual Meeting of Shareholders at the
Addison Conference and Theatre Centre, 15650 Addison Road, Addison, Texas 75001
on May 31, 2001 at 10:00 a.m.
We are holding this meeting:
. To elect one Class B director to serve until the 2004 Annual Meeting of
Shareholders;
. To ratify the appointment of Ernst & Young LLP as our independent
auditors; and
. To transact any other business that properly comes before the meeting.
Your board of directors recommends that you vote in favor of the two
proposals outlined in this proxy statement.
Your board of directors has selected April 20, 2001 as the record date for
determining shareholders entitled to vote at the meeting. A list of
shareholders on that date will be available for inspection at Ascendant
Solutions, 13727 Noel Road, Suite 500, Dallas, Texas, for at least ten days
before the meeting.
This notice of annual meeting, proxy statement, proxy and our 2000 Annual
Report to Shareholders are being distributed on or about May 4, 2001.
By Order of the Board of Directors,
James H. McAlister
Corporate Secretary
TABLE OF CONTENTS
QUESTIONS AND ANSWERS...................................................... 1
ITEM 1. ELECTION OF DIRECTORS.............................................. 3
Nominee for Election to a Three Year Term Ending with the 2004 Annual
Meeting................................................................. 3
Directors Continuing in Office Until the 2003 Annual Meeting............. 4
Directors Continuing in Office Until the 2002 Annual Meeting............. 5
Compensation of Directors................................................ 5
Committees of the Board of Directors; Meetings........................... 5
STOCK OWNERSHIP............................................................ 7
Beneficial Ownership of Certain Shareholders, Directors and Executive
Officers................................................................ 7
Section 16(a) Beneficial Ownership Reporting Compliance.................. 8
MANAGEMENT................................................................. 9
Executive Officers....................................................... 9
Executive Compensation................................................... 11
Long-Term Incentive Plan................................................. 13
401(k) Plan.............................................................. 13
Employment Contracts and Change in Control Arrangements.................. 14
Compensation Committee Interlocks and Insider Participation.............. 15
Certain Transactions..................................................... 15
COMPENSATION COMMITTEE REPORT.............................................. 16
Compensation Policy...................................................... 16
2000 Company Performance................................................. 16
2000 Executive Compensation.............................................. 16
2000 Chief Executive Compensation........................................ 17
Company Policy on Qualifying Compensation................................ 17
AUDIT COMMITTEE REPORT..................................................... 18
PERFORMANCE GRAPH.......................................................... 20
ITEM 2. RATIFICATION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS.......... 21
ANNUAL MEETING ADVANCE NOTICE REQUIREMENTS................................. 22
AUDIT COMMITTEE CHARTER.................................................... A-1
YOUR VOTE IS IMPORTANT. PLEASE REMEMBER TO PROMPTLY RETURN YOUR PROXY CARD.
QUESTIONS AND ANSWERS
Q1: Who is soliciting my proxy?
A: We, the board of directors of Ascendant Solutions, are sending you this
proxy statement in connection with our solicitation of proxies for use at
the 2001 Annual Meeting of Shareholders. Certain directors, officers and
employees of Ascendant Solutions also may solicit proxies on our behalf by
mail, phone, fax or in person.
Q2: Who is paying for this solicitation?
A: Ascendant Solutions will pay for the solicitation of proxies. Ascendant
Solutions will also reimburse banks, brokers, custodians, nominees and
fiduciaries for their reasonable charges and expenses in forwarding our
proxy materials to the beneficial owners of Ascendant Solutions common
stock.
Q3: What am I voting on?
A: Two items: (1) the election of Kevin P. Yancy to the board of directors; and
(2) the ratification of Ernst & Young LLP as our independent auditors for
the current fiscal year.
Q4: Who can vote?
A: Only those who owned common stock at the close of business on April 20,
2001, the record date for the Annual Meeting, can vote. If you owned common
stock on the record date, you have one vote per share for each matter
presented at the Annual Meeting.
Q5: How do I vote?
A: You may vote your shares either in person or by proxy. To vote by proxy, you
should mark, date, sign and mail the enclosed proxy in the enclosed prepaid
envelope. Giving a proxy will not affect your right to vote your shares if
you attend the Annual Meeting and want to vote in person--by voting you
automatically revoke your proxy. You also may revoke your proxy at any time
before the voting by giving the Secretary of Ascendant Solutions written
notice of your revocation or by submitting a later-dated proxy. If you
execute, date and return your proxy but do not mark your voting preference,
the individuals named as proxies will vote your shares FOR the election of
both nominees for director and FOR ratification of E&Y as our independent
auditors.
Q6: What constitutes a quorum?
A: Voting can take place at the Annual Meeting only if shareholders owning a
majority of the voting power of the common stock (that is a majority of the
total number of votes entitled to be cast) are present in person or
represented by effective proxies. On the record date, we had 21,230,900
shares of common stock outstanding. Both abstentions and broker non-votes
are counted as present for purposes of establishing the quorum necessary for
the meeting to proceed. A broker non-vote results from a situation in which
a broker holding your shares in "street" or "nominee" name indicates to us
on a proxy that you have not voted and it lacks discretionary authority to
vote your shares.
Q7: What vote of the shareholders will result in the matters being passed?
A: Election of Directors. Directors need the affirmative vote of holders of a
plurality of the voting power present to be elected. Neither abstentions nor
broker non-votes will have any effect on the election of directors.
Ratification of E&Y. To ratify the appointment of Ernst & Young as our
independent auditors for the current fiscal year, shareholders holding a
majority of the shares represented in person or by proxy at the upcoming
Annual Meeting must affirmatively vote in favor of this action. Abstentions
have the same effect as votes "against" the proposal and broker non-votes
have no effect at all.
1
Q8.What does it mean if I get more than one proxy card?
A: If your shares are registered differently and are in more than one account,
you will receive more than one proxy card. Sign and return ALL proxy cards
to ensure that your shares are voted. We encourage you to have all accounts
registered in the same name and address whenever possible. You can
accomplish this by contacting our transfer agent, The Bank of New York, at
800.524.4458.
Q9:How does the board recommend that I vote on the matters proposed?
A: The board of directors of Ascendant Solutions, Inc. unanimously recommends
that shareholders vote FOR each of the proposals submitted at this year's
Annual Meeting.
Q10:Will there be other matters proposed at the 2001 Annual Meeting?
A: Ascendant Solutions' amended and restated bylaws limit the matters
presented at the upcoming Annual Meeting to those in the notice of the
meeting (or any supplement thereto), those otherwise properly presented by
the board of directors and those presented by shareholders so long as the
shareholder gives the Secretary written notice of the matter on or before
April 10, 2001. Please refer to the section of this proxy statement
encaptioned "Annual Meeting Advance Notice Requirements" for a description
of the information to be contained in the Secretary's notice. We do not
expect any other matter to come before the Annual Meeting. However, if any
other matter is presented, your signed proxy gives the individuals named as
proxies authority to vote your shares in their discretion.
Q11: When are 2002 shareholder proposals due if they are to be included in the
Company's proxy materials?
A: To be considered for presentation at Ascendant Solutions' 2002 Annual
Meeting of Shareholders and included in our proxy statement, a shareholder
proposal must be received at the Ascendant Solutions' offices no later than
December 10, 2001. To curtail controversy as to the date on which a
proposal was received by the company, we suggest that proponents submit
their proposals by certified mail, return receipt requested.
2
ITEM 1.
ELECTION OF DIRECTORS
The board of directors of Ascendant Solutions has currently set the number
of directors constituting the whole board at four. As established by our
amended and restated bylaws, these directors are divided into three classes
serving staggered three-year terms. During 2000, certain directors were
reclassified as a result of the resignation of a director and resultant
reduction in the number of directors. At the upcoming Annual Meeting, you and
the other shareholders will elect one individual to serve as a Class B director
whose term expires at the 2004 Annual Meeting. Mr. Kevin Yancy has been
nominated to serve in this capacity. Mr. Yancy is an acting member of the board
and currently serves as Chairman of the Board of Directors.
The persons designated as proxies will vote the enclosed proxy for the
election of the nominee unless you direct them to withhold your votes. If the
nominee becomes unable to serve as a director before the meeting (or decides
not to serve), the individuals named as proxies may vote for a substitute or we
may reduce the number of members of the board. We recommend a vote FOR the
nominee.
Below are the names and ages of the nominee for Class B director, the Class
A directors, and the Class C director, the years they became directors, their
principal occupations or employment for at least the past five years and
certain of their other directorships, if any.
Nominee for Election to a Three Year Term Ending with the 2004 Annual
Meeting
Class B Director
.Kevin P. Yancy Age 48, a director since March 1999 and Chairman
since June 2000.
Mr. Yancy has served as President of Spyglass
Equities, Inc. (a private equity investments
affiliate of The Staubach Company) since June
1999. From July 1997 through June 1999, he served
as Senior Vice President of Staubach Financial
Services, Inc. (a real estate financial services
firm) where he specialized in private equity
investments. From November 1995 through June
1997, Mr. Yancy managed his personal investments.
From 1991 through October 1995, Mr. Yancy served
as Chairman, CEO and President of InterNational
Bank of McAllen, Texas. Mr. Yancy currently
serves on the board of directors of several
private companies, including Aeris
Communications, Inc. of San Jose, California;
eInstruction Corporation of Denton, Texas;
Momentx of Dallas, Texas; and Lone Star Bank of
Dallas, Texas. Mr. Yancy earned his B.B.A. in
accounting from Baylor University, Waco, Texas
and practiced as a Certified Public Accountant
with Coopers and Lybrand from 1975 through 1983.
3
Directors Continuing in Office Until the 2003 Annual Meeting
Class A Directors
.Jonathan R. Bloch Age 47, a director since March 1999.
Mr. Bloch has served as Managing Director of
Gerard Klauer Mattison & Co., Inc. (an investment
banking firm) since January 2000. From June 1997
until January 2000, Mr. Bloch served as either
Senior Vice President or Managing Director of the
technology division of Chanin Capital Partners
(an investment bank and financial advisor). He
has served as the Chairman of the Board of
Directors of Old Tucson Co. (an amusement park)
since January 1997. From September 1995 to June
1997, Mr. Bloch served as Chief Executive Officer
of Resource Recovery Techniques of Arizona (a
water treatment company), where he was
responsible for general administration. From
August 1995 to June 1997, Mr. Bloch was the
Managing Member and General Manager of Santa
Monica Amusements, Inc. (an amusement park on the
Santa Monica pier). From April 1992 to August
1995, Mr. Bloch was Chief Executive Officer of
the California Fertility Associates (a medical
clinic), where he was responsible for general
administration and management. He received a B.A.
from the University of California at Berkeley and
a J.D. from the University of San Diego School of
Law.
.David E. Bowe Age 42, director since May 2000 and CEO since
June 2000.
Mr. Bowe has served as our President since March
2000 and as our Chief Executive Officer since
June 2000. Prior to accepting the position of
President and Chief Executive Officer, Mr. Bowe
acted as our Executive Vice President and Chief
Financial Officer from September 1999. Before
joining us, Mr. Bowe served as President of U.S.
Housewares Corporation (a consumer products
company) from September 1998 to September 1999.
Prior to that, Mr. Bowe was Executive Vice
President of Heartland Capital Partners L.P. (a
private equity firm) from 1993 to 1997 where he
was responsible for making private equity
investments. From 1987 to 1992, Mr. Bowe served
in various executive capacities for The Thompson
Company (a private investment firm) where he
participated in the acquisition, development and
operation of several portfolio companies. From
1980 to 1987, Mr. Bowe held various executive
positions with Brown Brothers Harriman & Co. (a
Wall Street private bank). Mr. Bowe is a
Chartered Financial Analyst and received a BSBA
in Finance from Georgetown University.
4
Directors Continuing in Office Until the 2002 Annual Meeting
Class C Director
.Paul G. Sherer Age 42, a director since August 1999.
Mr. Sherer is a partner of VantagePoint Venture
Partners (a venture capital firm focused on the
Internet, data networking and communications
services). Prior to joining VantagePoint, Mr.
Sherer was Managing Director, Investment Banking
and Head of Telecom and Enterprise Communication
Technology for Robertson, Stephens & Company from
May 1990 to June 1998, where he was responsible
for worldwide relationship management. Prior to
that, Mr. Sherer was Robertson, Stephens' Senior
Research Analyst for Telecom and Enterprise
Communication Technology. Mr. Sherer received an
A.B. from Duke University and an MBA from
Stanford Graduate School of Business.
Compensation of Directors
We do not provide cash compensation to our directors but do reimburse our
directors for reasonable expenses incurred in traveling to and from board
meetings (or a committee thereof). Our directors are eligible to receive stock
option grants under our 1999 Long-Term Incentive Plan.
Committees of the Board of Directors; Meetings
Ascendant Solutions has four standing committees.
The Audit Committee
. Makes recommendations to the full board of directors with respect to
appointment of the Company's independent auditors.
. Meets periodically with our independent auditors to review the general
scope of audit coverage, including consideration of our accounting
practices and procedures, our system of internal accounting controls and
financial reporting.
Kevin Yancy, Paul Sherer and Jonathan Bloch are the members of the Audit
Committee. The Audit Committee met four times in 2000.
The Compensation Committee
. Recommends to the board of directors annual salaries for senior
management.
. Reviews all Company benefit plans.
The current members of the Compensation Committee are Kevin Yancy, Paul
Sherer, and Jonathan Bloch. During the year ended December 31, 2000, the
Compensation Committee met once.
The Long-Term Incentive Plan Committee
. Maintains authority to administer the Long-Term Incentive Plan, including
making determinations concerning the persons to whom and the size and
nature of stock options granted to all eligible persons, other than
executive officers and directors.
The current members of the Long-Term Incentive Plan Committee are Kevin
Yancy and David Bowe. The Long-Term Incentive Plan Committee did not meet in
2000 but acted by unanimous written consent.
5
The Special Long-Term Incentive Plan Committee
. Maintains authority to administer the Long-Term Incentive Plan, including
making determinations concerning the persons to whom and the size and
nature of stock options granted to all eligible persons constituting
executive officers and directors.
The current members of the Special Long-Term Incentive Plan Committee are
Kevin Yancy and Paul Sherer. The Special Long-Term Incentive Plan Committee did
not meet in 2000 but acted by unanimous written consent.
Entire Board
During the year ended December 31, 2000, the entire board of directors of
Ascendant Solutions met four times and acted by consent an additional five
times. During fiscal 2000, each director attended at least 75% of the total of
all meetings of the board of directors and any committee on which he served.
6
STOCK OWNERSHIP
Beneficial Ownership of Certain Shareholders, Directors and Executive Officers
The following table sets forth information with respect to the beneficial
ownership of our common stock at March 29, 2001, by:
. each of our named executive officers and directors;
. all of our executive officers and directors as a group; and
. each person, or group of affiliated persons, known to us to own
beneficially more than 5% of our common stock.
In accordance with the rules of the SEC, the table gives effect to the
shares of common stock that could be issued upon the exercise of outstanding
options and common stock purchase warrants within 60 days of March 29, 2001.
Unless otherwise noted in the footnotes to the table, and subject to community
property laws where applicable, the following individuals have sole voting and
investment control with respect to the shares beneficially owned by them. The
address of each executive officer and director is c/o Ascendant Solutions,
Inc., 13727 Noel Road, Suite 500, Dallas, Texas 75240. We have calculated the
percentages of shares beneficially owned based on 21,230,900 shares of common
stock outstanding at March 29, 2001.
Shares
beneficially
owned
-----------------
Person or group Number Percent
--------------- --------- -------
Named Executive Officers and Directors:
Norman Charney(1)(10)....................................... 2,242,984 10.6
Kevin P. Yancy(2)........................................... 348,087 1.6
David E. Bowe(3)............................................ 260,250 1.2
Jonathan R. Bloch(4)........................................ 815,000 3.8
Paul G. Sherer(5)........................................... 4,847,400 22.8
Ted I. Bilke(6)............................................. 89,950 *
Andy Morrow................................................. 4,000 *
James H. McAlister(7)....................................... 7,750 *
Rick Troberman.............................................. -- --
Gregg L. Young(8)........................................... 78,550 *
Paul M. Jennings............................................ -- --
All executive officers and directors as a group (11
persons)(9)................................................ 8,693,971 38.5
Beneficial Owners of 5% or More of
Our Outstanding Common Stock:
VantagePoint Venture Partners III(Q), L.P.(5)............... 3,231,600 15.2
VantagePoint Communications Partners, L.P.(5)............... 1,615,800 7.6
CCLP, Ltd.(10).............................................. 2,469,460 14.0
- --------
* Less than one percent (1%).
(1) Norman Charney is the father of David Charney. See footnote 10.
(2) Includes net options to purchase 263,087 shares of common stock from third
parties and options to purchase an additional 10,000 shares of common stock
granted to Mr. Yancy.
(3) Includes 130,000 shares of common stock acquirable upon exercise of stock
options granted to Mr. Bowe.
(4) Includes (1) 800,000 shares of common stock acquirable upon exercise of
warrants held by CKM Software Partners at the following exercise prices:
400,000 shares of common stock exercisable for $1.00 per share; 240,000
shares of common stock exercisable for $2.00 per share; and 160,000 shares
of common stock exercisable for $3.00 per share and (2) options to purchase
an additional 10,000 shares of common stock at an exercise price of $1.00
per share. CKM Software Partners is a California general
7
partnership held by Jonathan Bloch and Larry Barels. The address of each
of these persons and entities is 11100 Santa Monica Blvd., Suite 830, Los
Angeles, California 90825.
(5) Represents the 3,231,600 shares held by VantagePoint Venture Partners
III(Q), L.P. and 1,615,800 shares held by VantagePoint Communications
Partners, L.P. Mr. Sherer is a partner of these funds. Mr. Sherer
disclaims beneficial ownership of the shares held by the VantagePoint
funds other than those in which he may own a pecuniary interest. The
general partner of VantagePoint Venture Partners III(Q), L.P. is
VantagePoint Venture Associates III, L.L.C. The general partner of
VantagePoint Communications Partners, L.P. is VantagePoint Communications
Associates, L.L.C. The address for the VantagePoint funds is c/o
VantagePoint Venture Partners, 1001 Bayhill Drive, Suite 100, San Bruno,
California 94066.
(6) Includes 69,950 shares of common stock acquirable upon exercise of stock
options granted to Mr. Bilke.
(7) Includes 7,750 shares of common stock acquirable upon exercise of stock
options granted to Mr. McAlister.
(8) Includes 76,600 shares of common stock acquirable upon exercise of stock
options granted to Mr. Young.
(9) Includes the shares of common stock acquirable upon exercise of the stock
options and warrants discussed in notes 2, 3, 4, 6, 7, and 8.
(10) Represent securities held by CCLP, Ltd., a Texas limited partnership, of
which David Charney, the son of Norman Charney, is the sole general
partner. Norman Charney and David Charney disclaim each others'
beneficial ownership. The address for CCLP, Ltd. is 6014 Yorkville Court,
Dallas, Texas 75248.
Section 16(a) Beneficial Ownership Reporting Compliance
Under U.S. securities laws, directors, certain executive officers and
persons holding more than 10% of our common stock must report their initial
ownership of the common stock, and any changes in that ownership, to the SEC.
The SEC has designated specific due dates for these reports. Based solely on
our review of copies of the reports filed with the SEC and written
representations of our directors and executive offers, Mr. Morrow filed a Form
4 one month late and Mr. Bloch filed a Form 4 two months late.
8
MANAGEMENT
Executive Officers
Below are the names and ages of the executive officers of Ascendant
Solutions as of March 29, 2001 and a brief description of their prior
experience and qualifications.
. Kevin P. Yancy Age 48, Chairman of the Board since 2000.
See the biography of Mr. Yancy under "Item 1.
Election of Directors."
. David E. Bowe Age 42, CEO since June 2000, President since
March 2000, and Chief Financial Officer since
September 1999. Mr. Bowe also served as our
Executive Vice President from September 1999
until March 2000.
See the biography of Mr. Bowe under "Item 1.
Election of Directors."
. Ted I. Bilke Age 39, Chief Operating Officer since December
1999.
Before joining us, Mr. Bilke served as Business
Development Manager for Navigator Systems (a
professional services company focused on
technology) in 1999. From 1998 to 1999, Mr. Bilke
served as Director, LAN Management Services, with
MCI Systemhouse (provider of remote server and
desktop management services). From 1995 to 1998,
Mr. Bilke worked at Bell & Howell Mail Processing
Systems, Inc. rising to Vice President,
Integrations Services Group. From 1993 to 1995,
Mr. Bilke served as General Manager, Workflow
Automation with Duplex Products, Inc. (workflow
and forms automation solutions). From 1983 to
1993, Mr. Bilke worked at Electronic Data Systems
Corporation rising to the position of Senior
Technical Sales Support. Mr. Bilke holds a B.S.
degree in Business Administration, Finance and
Marketing from Missouri Southern State College.
. Andy Morrow Age 48, Vice President of Sales since July 2000.
Before joining us, Mr. Morrow served as Regional
Sales Manager for Yantra Corporation from
November 1998. From January 1998 until November
1998, he was a Director and a Major Account
Executive for BAAN Company and prior thereto,
from January 1996, he held positions in sales and
account management for Oracle Corporation. Mr.
Morrow graduated from Williams College in
Williamstown, MA, with a BA in Fine Arts. He also
holds a Masters degree in Architectural Design
and a Masters of Business Administration degree
from Washington University in St. Louis, MO.
. Britta Steele Age 42 , Vice President of Marketing since March
2001.
Before joining us, Ms. Steele was Vice President
of Marketing for Coreintellect, a business
information provider. Prior to Coreintellect, Ms.
Steele was Senior Director of Global Marketing
for Personic, a
9
global provider of e-solutions for professional
recruiters and hiring managers. Ms. Steele was
also Director of Worldwide Marketing for Oracle
Corporation from May 1994 through June 1999. Ms.
Steele holds a Bachelor's Degree in Business
Administration from Concordia University in
Montreal, Canada.
. James H. McAlister Age 43, Vice President--Finance since April 1999
and Treasurer and Secretary since September 1999.
From July 1993 through August 1998, Mr. McAlister
was the Controller for MilBrands, Inc. (a
privately held military food broker) where he was
responsible for supervising that company's
accounting, computer systems and customer service
departments. MilBrands was sold in August 1998.
From the date of sale through February 1999, Mr.
McAlister was responsible for the transition of
the business of MilBrands to the new owner. Mr.
McAlister is a Certified Public Accountant and
received a B.B.A. degree in Accounting from the
University of Iowa.
10
Executive Compensation
Summary compensation. The following table provides summary information
concerning compensation paid by us to our named executive officers, which are
our Chief Executive Officer and our other executive officer who earned more
than $100,000 in salary and bonus for all services rendered in all capacities
during the fiscal year ended December 31, 2000. We may refer to these officers
as our named executive officers in other parts of this proxy statement. For a
list of our current executive officers, see "Executive Officers."
Long-term
compensation
awards
------------
Annual
Compensation Securities
Name and Principal ------------ underlying All other
Position(s) Year Salary options (#) compensation(1)
------------------ ---- ------------ ------------ ---------------
Norman Charney(2)............... 2000 $260,910 0 $9,781(2)
Former Chief Executive Officer 1999 250,000 0 1,600
(to June 2000), 1998 247,500 0 625
Founder and Chairman Emeritus
(August 2000-March 2001)
David E. Bowe................... 2000 $256,419 400,000 $1,470
Chief Executive Officer (June 1999 43,380 50,000 0
2000), 1998 0 0 0
President (March 2000), and
Chief Financial Officer
Ted I. Bilke.................... 2000 $167,944 275,000 $ 750
Chief Operating Officer 1999 6,417 0 0
1998 0 0 0
Andy Morrow..................... 2000 $122,500 225,000 0
Vice President-Sales (July 1999 0 0 0
2000) 1998 0 0 0
James H. McAlister.............. 2000 $102,500 15,000 $1,025
Vice President-Finance, 1999 64,600 0 0
Treasurer and Secretary 1998 0 0 0
Rick Troberman(3)............... 2000 $166,667 0 0
Executive Vice President- Sales 1999 0 0 0
and 1998 0 0 0
Marketing (May- October 2000)
Gregg L. Young(4)............... 2000 $196,410 300,000 $ 333
Chief Information Officer 1999 0 0 0
(January 2000) 1998 0 0 0
Paul M. Jennings(5)............. 2000 $293,919 0 $8,642(5)
Chief Technology Officer 1999 165,200 957,500 0
(through May 2000) 1998 153,125 0 0
- --------
(1) Except as specifically described below, "All other compensation" consists
of matching 401(k) contributions made by Ascendant Solutions on behalf of
the named executive officers. In accordance with the rules of the SEC,
other compensation in the form of perquisites and other personal benefits
has been omitted for the named executive officers because the aggregate
amount of these perquisites and other personal benefits was less than the
lesser of $50,000 or 10% of the total of annual salary and bonuses for each
of the named executive officers in 2000.
(2) Consists of $2,609 of matching 401(k) contributions and $7,172 in medical
insurance reimbursements. Mr. Charney resigned as Founder and Chairman
Emeritus in March 2001.
(3) Mr. Troberman resigned as an officer of the Company in October 2000.
(4) Mr. Young resigned as an officer of the Company in February 2001.
(5) Mr. Jennings resigned as an officer of the Company in May 2000. "All other
compensation" consists of $1,470 of matching 401(k) contributions and
$7,172 in medical insurance reimbursements.
11
Stock options granted during the year ended December 31, 2000. The following
table provides information regarding the grant of stock options during fiscal
2000 to the named executive officers.
Individual Grants
-------------------------------
Potential realizable value
% of total at assumed annual rates of
Number of options stock price appreciation for
securities granted to option term(1)
underlying employees Exercise ----------------------------
options in fiscal price per Expiration
Name granted year share date 5% ($) 10% ($)
---- ---------- ---------- --------- ---------- ------- ---------
Norman Charney.......... -- -- -- -- -- --
David E. Bowe........... 400,000 19.5 (/2/) (/2/) 900,637 3,405,706
Ted Bilke............... 275,000 13.4 (/3/) (/3/) 536,953 1,725,525
Andy Morrow............. 225,000 10.9 (/4/) (/4/) 148,877 392,790
James H. McAlister...... 15,000 0.7 2.66 5/12/10 25,816 68,111
Rick Troberman.......... -- -- -- -- -- --
Paul M. Jennings........ -- -- -- -- -- --
Gregg Young............. 300,000 14.6 (/5/) (/5/) 601,201 1,997,985
- --------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date. The gains shown are net of the option exercise
price, but do not include deductions for taxes or other expenses associated
with the exercise of the option or the sale of the underlying shares. The
actual gains, if any, on the exercise of the stock options will depend on
the future performance of the common stock, and the date on which the
options are exercised.
(2) Mr. Bowe was issued options to purchase 100,000 shares and 300,000 shares
on March 22 and May 12, 2000, at an exercise price of $5.94 and $2.66 per
share, respectively. These options expire on March 22 and May 12, 2010,
respectively.
(3) Mr. Bilke was issued options to purchase 30,000 shares and 245,000 shares
on March 22 and May 12, 2000, at an exercise price of $5.94 and $2.66 per
share, respectively. These options expire on March 22 and May 12, 2010,
respectively.
(4) Mr. Morrow was issued options to purchase 60,000 shares and 165,000 shares
on July 27 and November 16, 2000, at an exercise price of $1.91 and $0.70
per share, respectively. These options expire on July 27 and November 16,
2010, respectively.
(5) Mr. Young was issued options to purchase 40,000 shares and 260,000 shares
on March 22 and May 12, 2000, at an exercise price of $5.94 and $2.66 per
share, respectively. These options expire on March 22 and May 12, 2010,
respectively.
12
Year-end option values. None of the named executive officers exercised any
stock options during the year ended December 31, 2000. The following table
provides information regarding the number of shares covered by both exercisable
and unexercisable stock options as of December 31, 2000, and the values of "in-
the-money" options, which values represent the positive spread between the
exercise price of any such option and the fiscal year-end value of our common
stock.
Number of securities
underlying unexercised Value of the unexercised
options at fiscal year- in-the-money options at
end fiscal year-end
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
Norman Charney............. -- -- -- --
David E. Bowe.............. 130,000 320,000 -0- -0-
Ted Bilke.................. 69,950 275,000 -0- -0-
Andy Morrow................ -- 275,000 -0- -0-
James H. McAlister......... 7,750 25,000 -0- -0-
Rick Troberman............. -- -- -- --
Paul M. Jennings........... -- -- -- --
Gregg Young................ 76,600 350,000 -0- -0-
Long-Term Incentive Plan
Our 1999 Long-Term Incentive Plan, approved by the board of directors on May
12, 1999, and subsequently amended, currently provides for the issuance to
qualified participants of up to 2,500,000 shares of our common stock pursuant
to the grant of stock options. The purpose of our Long-Term Incentive Plan is
to promote our interests and the interests of our shareholders by using
investment interests in Ascendant Solutions, Inc. to attract, retain and
motivate eligible persons, to encourage and reward their contributions to the
performance of Ascendant Solutions and to align their interests with the
interests of our shareholders. As of March 29, 2001, unexercised options to
purchase 1,617,000 shares of common stock had been awarded to current
employees, having a weighted average exercise price of $2.20 per share, under
the Long-Term Incentive Plan. Of these, options to purchase 210,000 shares of
common stock have been awarded to current employees and are intended to qualify
as Incentive Stock Options, or ISO's, under Section 422 of the Internal Revenue
Code. The remaining options to purchase 1,407,000 shares of common stock are
nonqualified stock options, or NQSO's. As of March 29, 2001, options
exercisable for 76,000 shares had been exercised and options exercisable for an
additional 132,900 shares had vested under the terms of the Long-Term Incentive
Plan and the applicable option agreements.
401(k) Plan
Our employees are eligible to participate in the Ascendant Solutions 401(k)
plan adopted by us in October of 1998. Pursuant to the 401(k) plan, employees
may elect to reduce their current compensation by up to the lesser of 20% of
eligible compensation or the statutorily prescribed annual limit and contribute
this amount to the 401(k) plan. For the year ended December 31, 2000, the
statutorily prescribed annual limit was $10,000. The trustee under the 401(k)
plan, at the direction of each participant, invests the assets of the 401(k)
plan in up to 12 different investment funds. The 401(k) plan is intended to
qualify under Section 401(a) of the Internal Revenue Code so that contributions
by employees to the 401(k) plan, and income earned on plan contributions, are
not taxable to employees until withdrawn, and so that the contributions by
employees will be deductible by us when made. We will make matching
contributions to the 401(k) plan in an amount equal to 25% of the first 4% of
an employee's pretax contributions. An employee becomes eligible for the
matching contribution only if he or she makes a pretax contribution.
Additionally, we may make annual discretionary profit sharing contributions in
amounts to be determined annually by our board of directors. We elected not to
make a discretionary profit sharing contribution in 2000.
13
Employment Contracts and Change-in-Control Arrangements
As of March 29, 2001, we had entered into the following employment contracts
with our executive officers.
David E. Bowe. On August 8, 2000, we entered into an employment agreement
with David E. Bowe to serve as our Chief Executive Officer and President. The
agreement is effective through May 31, 2004 and will automatically renew for
successive one-year periods unless either Mr. Bowe or we give written notice of
termination at least 30 days prior to the expiration date of the agreement.
Under the agreement, Mr. Bowe receives a base salary of $200,000 per year. In
addition, Mr. Bowe is entitled to receive a bonus of up to $100,000 per year,
one half of which is guaranteed to be paid each year as long as Mr. Bowe is not
in breach of his agreement, and one half of which is subject to certain
performance vesting criteria imposed by the board of directors.
The agreement with Mr. Bowe may be terminated by us at any time for cause.
However, if the executive's employment is terminated by the Company without
cause or by the executive for "good reason" (as such term is similarly defined
in the employment agreements including, upon a change in control) at any time
on or prior to February 8, 2002 then, the Company is obligated to pay Mr. Bowe
an amount equal to 18 months of his salary in addition to base salary and any
bonuses earned or accrued through the termination date. This amount decreases
to 12 months of salary after February 8, 2002. In addition, Mr. Bowe shall be
permitted to fully exercise all stock options then held by him, whether or not
then vested.
Ted Bilke. Effective August 8, 2000, we entered into an employment agreement
with Ted Bilke to serve as our Chief Operating Officer. This agreement is
effective through December 31, 2002 and will automatically renew for successive
one-year periods unless Mr. Bilke or we give written notice of termination at
least 30 days prior to the expiration of the agreement. Mr. Bilke is entitled
to a base salary of $150,000 per year. In addition, he is entitled to receive a
bonus of up to $50,000 per year, one half of which is guaranteed to be paid
each year as long as Mr. Bilke is not in breach of his agreement, and one half
of which is subject to certain performance vesting criteria imposed by the
board of directors.
Andy Morrow. Effective January 2, 2001, we entered into an employment
agreement with Andy Morrow to serve as our Vice President of Sales. This
agreement is effective through December 31, 2002 and will automatically renew
for successive one-year periods unless Mr. Morrow or we give written notice of
termination at least 30 days prior to the expiration of the agreement. Mr.
Morrow is entitled to a base salary of $180,000 per year. In addition, he is
entitled to receive a bonus of up to $100,000 per year, one half of which is
guaranteed to be paid each year as long as Mr. Morrow is not in breach of his
agreement, and one half of which is subject to certain performance vesting
criteria imposed by the board of directors.
The agreements with Messrs. Bilke and Morrow may be terminated by us at any
time for cause. However, if the executive's employment with the Company is
terminated by the Company without cause or by the executive for "good reason"
(as such term is similarly defined in the employment agreements, including upon
a change in control) at any time during the respective term of employment, then
the Company is obligated to pay the relevant executive an amount equal to six
months of his salary in addition to base salary and any bonuses earned or
accrued through the termination date. In addition, each executive shall be
permitted to fully exercise all stock options then held by him, whether or not
then vested.
The board of directors has also established a bonus plan arrangement for its
senior executive officers. Under this plan, executive officers will receive
predetermined cash bonuses upon the attainment of specified performance vesting
thresholds. Executive officers are also eligible to receive additional bonuses
at the discretion of the board of directors.
Separation with Paul Jennings. In May 2000, we entered into a separation
agreement with Paul Jennings, our former Chief Technology Officer. As part of
this agreement, we received certain customary
14
releases, non-competition covenants and other agreements from Mr. Jennings,
including the agreement to provide certain consulting services to us during the
first year after his separation. The agreement provides for aggregate cash
payments to Mr. Jennings of $276,040.
Separation with Gregg Young. In March 2001, we entered into a separation
agreement with Gregg Young, our former Chief Information Officer. As part of
this agreement, we received certain customary releases, confidentiality, non-
competition and non-solicitation covenants, and other agreements from
Mr. Young. The agreement provides for the continued payments of Mr. Young's
salary through April 30, 2001.
As part of Mr. Young's original offer of employment, we loaned Mr. Young an
aggregate of $145,000, represented by two promissory notes dated January 11,
2000. The separation agreement provides for forgiveness of the first note
(original principal amount of $80,000), at a rate of $5,000 per month over
twelve months (principal and interest), and for a revised payment schedule of
the second note (original principal amount of $65,000).
Norman Charney. Mr. Charney resigned from the board of directors of the
company as of August 28, 2000. On December 14, 1998, we entered into an
employment agreement with Norman Charney to serve as our Chief Executive
Officer. Effective June 9, 2000, Mr. Charney resigned as our Chief Executive
Officer and Mr. Bowe was elected to this position. Effective August 7, 2000, we
agreed with Mr. Charney to amend the terms of his employment agreement to
provide that, as of such date, he would be employed as Founder and Chairman
Emeritus. In these capacities, Mr. Charney provided certain management,
consulting, marketing and customer development services to the company. Mr.
Charney resigned from such position during March 2001.
Compensation Committee Interlocks and Insider Participation
The Board of Directors has appointed a Compensation Committee consisting of
Messrs. Yancy (Chairman), Sherer and Bloch. The Compensation Committee had one
formal meeting during 2000. The Compensation Committee studies, advises and
consults with management respecting the compensation of officers of the
Company, and administers the Company's stock-based compensation plans. It also
recommends for the Board's consideration any plan for additional compensation
that it deems appropriate.
Certain Transactions
Call Center/Data Center Facility. During 2000, we leased a 20,000 square
foot facility from our former Chief Executive Officer, Norman Charney, that we
used for our internal call center and data center. Our annual rental expense
for this facility was $100,000. The lease expired with the sale of the call
center in February 2001.
Guarantees of Indebtedness and Guarantee Fees. Mr. Charney has executed a
limited guarantee with respect to amounts that we owe under the lease for our
former corporate headquarters and fulfillment center. Mr. Charney presently
guarantees up to $300,000 of amounts due under such lease, with such guarantee
decreasing by the amount of $100,000 each year. Mr. Charney receives no
compensation for this guarantee.
Employment and Indemnification Agreements. We have entered into employment
agreements and indemnification agreements with Messrs. Charney, Bowe, Morrow,
and Bilke who are directors and/or named executive officers. We have also
entered into indemnification agreements with the remainder of our directors,
and separation agreements with Mr. Jennings and Mr. Young, as disclosed above.
We believe that each of the transactions described above was made on terms
no less favorable to us than could have been obtained from unaffiliated third-
parties.
15
COMPENSATION COMMITTEE REPORT
Ascendant Solutions' executive compensation program is administered by the
Compensation Committee of the Board. The Compensation Committee, which is
composed of non-employee directors, is responsible for approving and reporting
to the Board on all elements of compensation for the elected corporate
officers. The Compensation Committee has furnished the following report on
executive compensation for fiscal year 2000.
Compensation Policy
Our goal is to attract, retain and reward a highly competent and productive
employee group. To do so, we have determined that it is in the best interests
of Ascendant Solutions to provide a total compensation package that competes
favorably with those offered within the Internet service industry, general
industry and geographic areas in which we operate. Our current compensation
package includes a mix of base salary and long-term incentive opportunities and
other employee benefits. Changes in compensation are based on the individual's
performance, Ascendant Solutions' financial performance and the competitive
marketplace. We consider the median level of the market as competitive.
Base Salary. The base salary provides for compensation at competitive
levels. Increases in executive base salary are awarded for individual
performance based on the executive's performance. We do not utilize any formal
mathematical formulae or objective thresholds in determining base salary
adjustments. We believe that specific formulae restrict flexibility and are too
rigid at this stage of our development. We also believe that in order for
Ascendant Solutions to succeed, we must attract and retain qualified executives
who can not only perform satisfactorily on an individual basis but who can also
retain and manage a quality staff of other executive officers and/or key
employees. Thus, in addition to applying the criteria generally applicable to
all executive officers, in determining the compensation of the Chief Executive
Officer, we may also be influenced by the overall performance of the other
executives and key employees.
Long-Term Incentive Plan. The purpose of the Long Term-Incentive Plan is to
promote our interests and the interests of our shareholders by using common
stock to attract, retain and motivate eligible persons, to encourage and reward
their contributions to the performance of Ascendant Solutions and to align
their interests with the interests of our shareholders. Our directors,
officers, employees, consultants and advisors are eligible to receive grants
under this plan. With respect to all of our employees other than directors and
executive officers, the Long-Term Incentive Plan Committee (consisting of
Messrs. Yancy and Bowe) has the authority to administer the plan, including the
discretion to determine which eligible persons will be granted stock options,
the number of shares subject to options, the period of exercise of each option
and the terms and conditions of such options. The entire board of directors
administers the plan for directors and executive officers.
2000 Company Performance
In 2000, our diluted net loss per common share was $0.92, compared to a 1999
diluted net loss per share of $1.39. Net revenues were approximately $8.4
million in 2000, compared to approximately $12.3 million in 1999. Net loss for
2000 was $19.5 million, compared to a 1999 net loss of $8.8 million.
2000 Executive Compensation
The base salaries of the executive officers were adjusted pursuant to the
terms of their employment agreements, as applicable. The timing and the amount
of the increases were functions of the contractual provisions of the employment
agreements and required no discretionary action on the part of the board, as
were the awards of cash bonus compensation. Such compensation and bonuses are
reflected in the compensation table above. Stock options were awarded by the
Special Long Term Incentive Committee as an incentive for the future
performance of the Company.
16
2000 Chief Executive Compensation
The compensation of the Chief Executive Officer and President David Bowe,
consisted of base salary pursuant to the terms of Mr. Bowe's employment
agreement. The terms of the employment agreement were determined by the board
of directors based on base salary of similarly sized companies within the
Internet service industry. Mr. Bowe's salary was increased in 2000, when he
assumed the duties of Chief Executive Officer and President, and he was awarded
a cash bonus at year-end, in accordance with his employment agreement. Stock
options were awarded by the Special Long Term Incentive Committee as an
incentive for the future performance of the Company.
Company Policy on Qualifying Compensation
The board has reviewed the applicability of Section 162(m) of the Internal
Revenue Code, which disallows a tax deduction for compensation to an executive
officer in excess of $1.0 million per year. The board does not anticipate that
compensation subject to this threshold will be paid to any executive officer in
the foreseeable future. The board intends to periodically review the potential
consequences of Section 162(m) and may in the future structure the performance-
based portion of its executive officer compensation to comply with certain
exemptions provided in Section 162(m).
Compensation Committee
Kevin Yancy (Chairman)
Paul Sherer
Jonathan Bloch
17
AUDIT COMMITTEE REPORT
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors and operates under a written charter adopted
by the Board of Directors, a copy of which is attached to this proxy statement
as APPENDIX A. Each of the Audit Committee members satisfies the definition of
independent director as established in the Nasdaq Stock Market, Inc.
Marketplace Rules except for Mr. Bloch, who is not considered independent
because he is a partner of a company which received "payments (other than those
arising solely from investments in the corporation's securities)" under NASD
Rule 4200(a)(14). The Board of Directors deemed his membership on the Audit
Committee to have unique value due to (i) his background and experience with
the Company and (ii) his investment banking experience.
Management has the primary responsibility for the financial statements and
the reporting process including the systems of internal controls. In fulfilling
its oversight responsibilities, the committee reviewed the audited financial
statements in the Annual Report with management including a discussion of 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 committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting principles, their 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 with the committee under
generally accepted auditing standards. In addition, the committee has discussed
with the independent auditors the auditor's independence from management and
the Company including the matters in the written disclosures required by the
Independence Standards Board, which included the auditors' non-audit related
tax work.
The committee discussed with the Company's independent auditors the overall
scope and plans for their audit. The committee meets with the independent
auditors, with and without management present, to discuss the results of their
examinations, their evaluations of the Company's internal controls and the
overall quality of the Company's financial reporting. The committee held four
meetings during fiscal 2000.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors (and the Board has approved)
that the audited financial statements be included in the Annual Report on Form
10-K for the fiscal year ended December 31, 2000 for filing with the Securities
and Exchange Commission. The committee and the board have also recommended the
selection of the Company's independent auditors.
Audit Committee
Kevin Yancy (Chairman)
Paul Sherer
Jonathan Bloch
In accordance with the rules of the Securities and Exchange Commission (the
"SEC"), the foregoing information, which is required by paragraphs (a) and (b)
of Regulation S-K Item 306, shall not be deemed to be "soliciting material" or
to be "filed" with the Commission or subject to the Commission's Regulation
14A, other than as provided in that Item, or to the liabilities of Section 18
of the Securities Exchange Act of 1934, except to the extent that the Company
specifically requests that the information be treated as soliciting material or
specifically incorporates it by reference into a document filed under the
Securities Act of 1933, or the Securities Exchange Act of 1934.
Audit Fees
For the nine-month period ended September 30, 2000 and the year ended
December 31, 2000, Ernst & Young, LLP, the Company's independent public
accountants, billed the Company an aggregate of $22,000 and
18
$117,500 respectively for professional services rendered for the audit of the
Company's financial statements for such period and the reviews of the financial
statements included in the Company's Quarterly Reports on Form 10-Q during such
period.
Financial Information Systems Design and Implementation Fees.
There were no financial information systems design and implementation
services rendered for the year ended December 31, 2000.
All Other Fees
For the nine-month period ended September 30, 2000 and the year ended
December 31, 2000, Ernst & Young, LLP billed the Company an aggregate of
$19,220 and $20,120 respectively for all other services not described above
under the captions "Audit Fees" and "Financial Information Systems Design and
Implementation Fees" during such periods.
The Audit Committee has determined that the provision of the services
covered in the preceding paragraphs of this section is compatible with
maintaining the independence of Ernst & Young, LLP.
19
PERFORMANCE GRAPH
The following performance graph compares the performance of the Ascendant
Solutions common stock to the Nasdaq Market Index and an industry peer group,
selected in good faith, for the period from November 11, 1999, the first day of
trading for our shares, through December 31, 2000. The graph assumes that the
value of the investment in our common stock and each index was $100.00 at
November 11, 1999, and that all dividends were reinvested. The graph is based
on the initial public offering price of our shares on November 11, 1999 of
$8.00 per share. We have not paid any dividends. Performance data is provided
for the last trading day closest to each calendar year end.
[GRAPH APPEARS HERE]
November 11, December 31, December 31,
Company 1999 1999 2000
- ------- ------------ ------------ ------------
Ascendant Solutions, Inc................ $100 $221.88 $ 3.51
Peer Group(1)........................... $100 $128.65 $77.42
Nasdaq Market Index..................... $100 $146.88 $36.55
- --------
(1) The peer group selected by us for this comparison (Media General Industry
Group 852) consists of 247 Internet software and services companies.
We received a Nasdaq Staff Determination on March 27, 2001 that the Company
failed to comply with the minimum bid price requirement for continued listing
set forth in Marketplace Rule 4450(a)(b), and that its securities are,
therefore subject to delisting from The Nasdaq National Market. Further, on
March 16, the Company received notification from Nasdaq that it failed to meet
the Market Value of Public Float requirement for continued listing also set
forth in Marketplace Rule 4450(a)(b) and that the Company has until June 14,
2001 to comply with this requirement. We have requested a hearing before a
Nasdaq Listing Qualifications Panel to review the Staff Determination. The
hearing date has been set for May 11, 2001, and our stock will continue to
trade on The Nasdaq National Market pending the Panel's decision. There can be
no assurance the Panel will grant our request for continued listing or that we
will be able to timely comply with the various maintenance requirements for
continued listing. If we are unable to reach a successful conclusion with
regard to continued listing on The Nasdaq National Market, we intend for our
stock to be traded via the OTC Bulletin Board (OTCBB). The inability to
maintain listing of our stock on the Nasdaq National Market would likely
adversely affect the ability or willingness of investors to purchase our stock.
In addition, the market liquidity of our securities would likely be severely
affected.
20
ITEM 2. RATIFICATION OF ERNST AND YOUNG LLP AS INDEPENDENT AUDITORS
The board of directors of Ascendant Solutions has appointed Ernst & Young
LLP as independent auditors to examine our consolidated financial statements
for the fiscal year ending December 31, 2001 and to render other professional
services as required.
We are submitting the appointment of Ernst & Young LLP to shareholders to
obtain your ratification. Ernst & Young LLP has served as independent auditors
to the company since inception. Representatives of Ernst & Young LLP will be
present at the meeting, will have the opportunity to make a statement if they
desire to do so, and are expected to be available to respond to questions.
We recommend a vote FOR the ratification of Ernst & Young LLP as the
independent auditors for the current fiscal year.
[remainder of page intentionally left blank]
21
ANNUAL MEETING ADVANCE NOTICE REQUIREMENTS
Shareholder Proposals. Our bylaws provide that shareholder proposals and
director nominations by shareholders may be made in compliance with certain
advance notice, informational and other applicable requirements. With respect
to shareholder proposals (concerning matters other than the nomination of
directors), the individual submitting the proposal must file a written notice
with the Secretary of Ascendant Solutions at 13727 Noel Road, Suite 500,
Dallas, Texas 75240 setting forth certain information, including the following:
. a brief description of the business desired to be brought before the
meeting and the reasons for conducting that business at the meeting;
. the name and address of the proposing shareholder;
. the number of shares of common stock beneficially owned by the proposing
shareholder; and
. any material interest of the proposing shareholder in such business.
The notice must be delivered to the Secretary (1) at least 30, but no more
than 60, days before any scheduled meeting or (2) if less than 40 days notice
or prior public disclosure of the meeting is given, by the close of business on
the 10th day following the giving of notice or the date public disclosure was
made, whichever is earlier.
Board Nominations. A shareholder may recommend a nominee to become a
director of Ascendant Solutions by giving the Secretary of the Company (at the
address set forth above) a written notice setting forth certain information,
including the following:
As to each person whom the shareholder proposes to nominate:
. the name, age, business address and residence of the person;
. the principal occupation or employment of the person;
. the number of shares of common stock beneficially owned by the person;
and
. any other information relating to the person that is required to be
disclosed in solicitations for proxies for election of directors pursuant
to the rules of the SEC.
As to the proposing shareholder:
. the name and record address of the proposing shareholder; and
. the number of shares of common stock beneficially owned by the proposing
shareholder.
Such nominations must be made pursuant to the same advance notice
requirements for shareholder proposals set forth in the preceding section. We
do not maintain a formal nominating committee.
Generally. Our annual meetings are customarily held during May each year.
Copies of our bylaws are available upon written request made to the Secretary
of Ascendant Solutions at the above address. The requirements described above
do not supersede the requirements or conditions established by the Securities
and Exchange Commission for shareholder proposals to be included in our proxy
materials for a meeting of shareholders. The chairman of the meeting may refuse
to bring before a meeting any business not brought in compliance with
applicable law and our bylaws.
22
Appendix A
Audit Committee Charter
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
I. Audit Committee Purpose.
The Audit Committee is appointed by the Board of Directors to assist the
Board in fulfilling its oversight responsibilities. The Audit Committee's
primary duties and responsibilities are to:
. Make recommendations to the full Board of Directors with respect to the
Company's independent auditors;
. Meet periodically with our independent auditors to review the general
scope of audit coverage;
. Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting, and legal
compliance;
. Monitor the independence and performance of the Company's independent
auditors and internal auditing department; and
. Provide an avenue of communication among the independent auditors,
management, the internal auditing department and the Board of Directors.
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and it shall at all times have
direct access to the independent auditors as well as anyone in the Company. The
Audit 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.
II. Audit Committee Composition and Meetings.
The Audit Committee and its members shall meet the requirements of the rules
of the National Association of Securities Dealers, Inc. and The Nasdaq Stock
Market, Inc. On or prior to June 14, 2001, the Audit Committee shall be
comprised of three or more directors as determined by the Board, each of whom
shall be independent, non-executive directors, free from any relationship that
would interfere with the exercise of his or her independent judgment. All
members of the Committee shall have a basic understanding of finance and
accounting and be able to read and understand fundamental financial statements,
and at least one member of the Committee shall have accounting or related
financial management expertise.
Audit Committee members shall be appointed by the Board of Directors. If an
Audit Committee Chair is not designated or present, the members of the
Committee may designate a Chair by majority vote of the Committee membership.
The Audit Committee shall meet at least three times annually, or more
frequently as circumstances dictate. The Audit Committee Chair shall prepare
and/or approve an agenda in advance of each meeting. The Committee should meet
privately at least annually with management, the director of the internal
auditing department, the independent auditors, and as a committee to discuss
any matters that the Committee or each of these groups believe should be
discussed. In addition, the Committee, or at least its Chair, should
communicate with management and the independent auditors quarterly to review
the Company's financial statements and significant findings based upon the
auditors limited review procedures.
A-1
III. Audit Committee Responsibilities and Duties.
Review Procedures
1. Review and reassess the adequacy of this Charter at least annually.
Submit the Charter to the Board of Directors for approval and have the
document published at least every three years in accordance with SEC
regulations.
2. Review the Company's annual audited financial statements prior to
filing or distribution. Review should include discussion with management
and independent auditors of significant issues regarding accounting
principles, practices, and judgments.
3. In consultation with management, the independent auditors, and the
internal auditors, consider the integrity of the Company's financial
reporting processes and controls. Discuss significant financial risk
exposures and the steps management has taken to monitor, control, and
report such exposures. Review significant findings prepared by the
independent auditors and the internal auditing department together with
management's responses.
4. Review with financial management and the independent auditors the
Company's quarterly financial results prior to the release of earnings
and/or prior to filing or distribution of the Company's quarterly financial
statements. Discuss any significant changes to the Company's accounting
principles and any items required to be communicated by the independent
auditors in accordance with SAS 61 (see Item 9). The Chair of the Committee
may represent the entire Audit Committee for purposes of this review.
Independent Auditors
5. The independent auditors are ultimately accountable to the Audit
Committee and the Board of Directors. The Audit Committee shall review the
independence and performance of the auditors and annually recommend to the
Board of Directors the appointment of the independent auditors or approve
any discharge of auditors when circumstances warrant.
6. Approve the fees and other significant compensation to be paid to the
independent auditors.
7. On an annual basis, the Committee should review and discuss with the
independent auditors all significant relationships they have with the
Company that could impair the auditors' independence.
8. Review the independent auditors' audit plan, discuss scope, staffing,
locations, reliance upon management, and internal audit and general audit
approach.
9. Prior to releasing the year-end earnings, discuss the results of the
audit with the independent auditors. Discuss certain matters required to be
communicated to audit committees in accordance with AICPA SAS 61.
10. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.
11. Obtain from the independent auditor assurance that Section 10A of
the Securities Exchange Act of 1934 has not been implicated.
Internal Audit Department and Legal Compliance
12. Review the budget, plan, changes in plan, activities, organizational
structure, and qualifications of the internal audit department, as needed.
13. Review the appointment, performance, and replacement of the senior
internal audit executive.
14. Review significant reports prepared by the internal audit department
together with management's response and follow-up to these reports.
A-2
15. On at least an annual basis, review with the Company's counsel, any
legal matters that could have a significant impact on the organization's
financial statements, the Company's compliance with applicable laws and
regulations, and inquiries received from regulators or governmental
agencies.
Other Audit Committee Responsibilities
16. Annually prepare a report to shareholders as required by the
Securities and Exchange Commission. The report should be included in the
Company's annual proxy statement.
17. Perform any other activities consistent with this Charter, the
Company's by-laws, and governing law, as the Committee or the Board deems
necessary or appropriate.
18. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
These are the responsibilities of management and the independent auditor. Nor
is it the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor or to
assure compliance with laws and regulations.
Date Adopted: April 2000
A-3
ASCENDANT SOLUTIONS, INC.
REVOCABLE PROXY
Annual Meeting of Shareholders May 31, 2001
This Proxy is solicited on behalf of the Board of Directors
The undersigned, as a holder of Common stock of Ascendant Solutions, Inc. (the
"Company"), hereby appoints David E. Bowe and James H. McAlister as Proxies,
with full power of substitution, to represent and to vote as designated on this
card, all of the shares of Common Stock of the Company which the undersigned is
entitled to vote at the Annual Meeting of Shareholders to be held on May 31,
2001, or any adjournment thereof.
Unless otherwise marked, this Proxy will be voted FOR the election of the Board
of Directors' nominee as Class B Director and FOR the ratification of Ernst &
Young LLP as independent auditors. If any other business is presented at the
Annual Meeting of Shareholders, the Proxy will be voted in accordance with the
discretion of the Proxies named above.
The Board of Directors recommends a vote "FOR" the nominee listed below and
"FOR" the ratification of Ernst & Young LLP as independent auditors.
ASCENDANT SOLUTIONS, INC.
P.O. BOX 11474
NEW YORK, NY 10203-0474
1. ELECTION OF DIRECTORS: FOR the nominee WITHHOLD AUTHORITY to vote
listed below [_] for the nominee listed below [_]
Nominee: Kevin P. Yancy (to hold office until the 2004 Annual Meeting or
until his successor has been duly elected and qualified.)
2. Ratification of Ernst & Young LLP as 3. In their discretion, upon
independent auditors for the year ending any other matter that may
December 31, 2001. properly come before the
Annual Meeting of Shareholders
or any adjournment thereof.
FOR [_] AGAINST [_] ABSTAIN [_] FOR [_] AGAINST [_] ABSTAIN [_]
Change of Address or comments
Mark Here [_]
Please mark, date and sign as your
name appears. If acting as
executor, administrator, trustee,
guardian, etc., you should so
indicate when signing. If signer
is a corporation, please sign the
full corporate name, by a duly
authorized officer and include the
title of such officer. If shares
are held jointly, each shareholder
named should sign. If you receive
more than one proxy card, please
date and sign each card and return
all proxy cards in the enclosed
envelope.
Dated ______________________, 2001
____________________________
Signature
____________________________
Signature
PLEASE DATE, SIGN AND MAIL THIS PROXY IN THE
ENCLOSED ENVELOPE. Votes must be indicated
(x) in Black or Blue ink. [X]