SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934, as amended
(Amendment No. __)
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ASCENDANT SOLUTIONS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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Your vote is important
[LOGO]
ASCENDANT SOLUTIONS/SM/
ASCENDANT SOLUTIONS, INC.
Proxy Statement
2002 ANNUAL MEETING OF STOCKHOLDERS
Ascendant Solutions, Inc.
16250 Dallas Parkway, Suite 102
Dallas, Texas 75248
972-250-0945
April 25, 2002
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 23, 2002
Ascendant Solutions, Inc. ("Ascendant Solutions" or the "Company") will hold
its Annual Meeting of Stockholders at its new corporate headquarters located at
16250 Dallas Parkway, Suite 102, Dallas, Texas 75248 on May 23, 2002 at 11:00
a.m.
We are holding this meeting:
1. To elect three directors: one Class C director to hold office until the
annual meeting of stockholders in the year 2005 and until her successor
is elected and qualified and two Class B directors to hold office until
the annual meeting of stockholders in the year 2004 and until their
successors are elected and qualified;
2. To approve a proposal to amend our 1999 Long-Term Incentive Plan to
increase the maximum number of shares underlying stock options that can
be granted to an eligible participant in any one year from 450,000 to
750,000;
3. To approve and adopt the Ascendant Solutions, Inc. 2002 Equity Incentive
Plan;
4. To ratify the appointment of Ernst & Young LLP as our independent
auditors for the fiscal year ending December 31, 2002; and
5. To transact any other business that properly comes before the meeting.
Your board of directors recommends that you vote in favor of the four
proposals outlined in this proxy statement.
Your board of directors has selected April 12, 2002 as the record date for
determining stockholders entitled to vote at the meeting. A list of
stockholders on that date will be available for inspection at Ascendant
Solutions, Inc., 16250 Dallas Parkway, Suite 102, Dallas, Texas, for at least
ten days before the meeting.
This notice of annual meeting, proxy statement, proxy and our 2002 Annual
Report to Stockholders are being distributed on or about April 25, 2002.
You are cordially invited to attend the meeting in person. However, to
ensure your representation at the meeting, you are urged to mark, sign, date
and return the enclosed Proxy as soon as possible in the envelope enclosed for
that purpose. Any stockholder attending the meeting may vote in person even if
he or she previously returned a Proxy.
By Order of the Board of Directors,
Susan K. Olson
Assistant Corporate Secretary
TABLE OF CONTENTS
QUESTIONS AND ANSWERS........................ 1
ITEM 1. ELECTION OF DIRECTORS............... 4
Nominee for Election for Term Ending with
the 2005 Annual Meeting................. 4
Nominees for Election for Term Ending
with the 2004 Annual Meeting............ 4
Directors Continuing in Office Until the
2003 Annual Meeting..................... 5
Compensation of Directors................. 6
Committees of the Board of Directors;
Meetings................................ 7
Voting Agreement.......................... 7
STOCK OWNERSHIP.............................. 8
Beneficial Ownership of Certain
Stockholders, Directors and Executive
Officers................................ 8
Section 16(a) Beneficial Ownership
Reporting Compliance.................... 9
Nasdaq Delisting.......................... 9
MANAGEMENT................................... 10
Executive Officers........................ 10
Executive Compensation.................... 10
1999 Long-Term Incentive Plan............. 11
2002 Equity Incentive Plan................ 11
401(k) Plan............................... 11
Employment Contracts...................... 11
Compensation Committee Interlocks and
Insider Participation................... 11
Certain Relationships and Related
Transactions............................ 11
COMPENSATION COMMITTEE REPORT................ 13
AUDIT COMMITTEE REPORT....................... 15
PERFORMANCE GRAPH............................ 17
ITEM 2. AMENDMENT TO 1999 LONG-TERM
INCENTIVE PLAN, AS AMENDED................. 18
ITEM 3. 2002 EQUITY INCENTIVE PLAN.......... 23
ITEM 4. RATIFICATION OF ERNST & YOUNG LLP
AS INDEPENDENT AUDITORS.................... 30
ANNUAL MEETING ADVANCE NOTICE REQUIREMENTS... 30
OTHER MATTERS................................ 31
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, Inc., are sending you
this proxy statement in connection with our solicitation of proxies for
use at the 2002 Annual Meeting of Stockholders. Certain directors,
officers and employees of Ascendant Solutions also may solicit proxies on
our behalf by mail, e-mail, phone, fax or in person. We have retained
Morrow & Co., Inc., a firm specializing in the solicitation of proxies, to
assist in the solicitation at a fee estimated to be $5,000 plus expenses.
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: Four items:
. A proposal to elect Melissa F. Crane as a Class C director and Messrs.
James C. Leslie and Richard L. Bloch as Class B directors;
. A proposal to amend our 1999 Long-Term Incentive Plan to increase the
maximum number of shares underlying stock options that may be issued to an
individual during any one year period from 450,000 to 750,000;
. A proposal to approve and adopt the Ascendant Solutions, Inc. 2002 Equity
Incentive Plan; and
. A proposal to ratify 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 12,
2002, 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 the nominees for director, FOR the amendment to our
1999 Long-Term Incentive Plan, FOR the adoption of the 2002 Equity
Incentive Plan, and FOR ratification of Ernst & Young LLP as our
independent auditors.
Q6: What constitutes a quorum?
A: Voting can take place at the Annual Meeting only if stockholders 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
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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 stockholders will result in the matters being passed?
A: Election of Directors. Directors require a plurality of the votes cast in
person or by proxy by the stockholders to be elected. Accordingly,
abstentions and broker non-votes will have no effect on the outcome of the
election of directors assuming a quorum is present or represented by proxy
at the Annual Meeting.
Amendment to the 1999 Long-Term Incentive Plan. To approve this proposal,
stockholders holding a majority of the shares represented in person or by
proxy at the meeting must vote in favor of the proposal. Abstentions have
the same effect as votes "against" the proposal and broker non-votes have
no effect at all.
Approval of the 2002 Equity Incentive Plan. To approve this proposal,
stockholders holding a majority of the shares represented in person or by
proxy at the meeting must vote in favor of the proposal. Abstentions have
the same effect as votes "against" the proposal and broker non-votes have
no effect at all.
Ratification of Ernst & Young LLP. To ratify the appointment of Ernst &
Young LLP as our independent auditors for the current fiscal year,
stockholders holding a majority of the shares represented in person or by
proxy at the meeting must 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.
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 all 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 unanimously recommends that
stockholders vote FOR each of the proposals submitted at this year's
Annual Meeting.
Q10: Will there be other matters proposed at the 2002 Annual Meeting?
A: Ascendant Solutions' 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 stockholders so long as the stockholder gives the
Secretary written notice of the matter on or before April 1, 2002 since no
annual meeting of stockholders was held last year. 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 2003 stockholder proposals due if they are to be included in the
Company's proxy materials?
A: To be considered for presentation at Ascendant Solutions' 2003 Annual
Meeting of Stockholders and included in our proxy statement, a stockholder
proposal must be received at Ascendant Solutions' offices no later than
December 26, 2002. Such proposals must comply with the Company's bylaws
and the requirements of Regulation 14A (including Rule 14a-8) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). To
curtail controversy as to the date on which a proposal was received by
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the Company, we suggest that proponents submit their proposals by
certified mail, return receipt requested.
In addition, pursuant to Rule 14a-4 of the Exchange Act, the Company may
exercise discretionary voting authority at the 2003 Annual Meeting under
proxies it solicits to vote on a proposal made by a stockholder that the
stockholder does not seek to include in the Company's proxy statement
pursuant to Rule 14a-8, unless the Company is notified about the proposal
no later than March 11, 2003 (assuming that the Company's 2003 Annual
Meeting of Stockholders is held on a date that is within 30 days from the
date on which the 2002 Annual Meeting was held), and the stockholder
satisfies the other requirements of Rule 14a-4(c).
Q12: Where can I get a copy of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2001?
A: We will provide without charge a copy of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2001, including the
financial statements and the financial statement schedules, to each
stockholder upon written request to Susan K. Olson, Ascendant Solutions,
Inc., 16250 Dallas Parkway, Suite 102, Dallas, Texas 75248.
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ITEM 1.
ELECTION OF DIRECTORS
The board of directors of Ascendant Solutions has currently set the number
of directors constituting the whole board at five. As established by our
amended and restated bylaws, these directors are divided into three classes
serving staggered three-year terms. One Class C director will hold office until
her three-year term expires in 2005. The nominee for Class C director is
Melissa F. Crane. Since the last annual meeting in May of 2000, certain
directors have been reclassified as a result of various resignations and
vacancies occurring on the board of directors. The board of directors filled
one such vacancy by electing Melissa F. Crane as a Class C director in June of
2001. Because we did not hold an annual meeting in 2001, two Class B directors
will also be elected at the annual meeting. The nominees for Class B directors
will be elected to serve until the 2004 annual meeting. The nominees for Class
B directors are James C. Leslie and Richard L. Bloch. Mr. Leslie was elected by
the board of directors in July of 2001 to fill a vacancy and Mr. Bloch was
elected in March 2002 to fill a vacancy. Mr. Leslie currently serves as
Chairman of the Board. Mr. Richard L. Bloch is the father of Mr. Jonathan R.
Bloch, a director of Ascendant Solutions.
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. The board of directors
recommends that stockholders vote FOR the nominees.
Below are the names and ages of the nominee for Class C director and the
nominees for Class B directors, 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 for Term Ending with the 2005 Annual Meeting
Class C Director
... Melissa F. Crane Age 37, a director since June 2001.
Ms. Crane has been a partner of VantagePoint Venture Partners (a
venture capital firm focused on emerging networking,
communications, semiconductor and Internet infrastructure
companies) since January 2001. Prior to joining VantagePoint, Ms.
Crane was a co-founder and served in various positions including
Chief Executive Officer of Silicon Bandwidth, Inc., a developer of
opto-electronic and high-density, high-speed semiconductor
interconnect products. Ms. Crane began her career in investment
banking at Prudential Securities, where she successfully led more
than $2 billion in structured financing and IPO transactions. She
attended Wellesley College and earned a BS in Finance from The
University of Florida.
Nominees for Election for Term Ending with the 2004 Annual Meeting
Class B Directors
... James C. Leslie Age 46, a director since July 2001 and Chairman of the Board since
March 2002.
From 1996 through March 2001, Mr. Leslie served as President and
Chief Operating Officer of The Staubach Company, a full-service
international real estate strategy and services firm. From 1988
4
through March 2001, Mr. Leslie also served as a director of The
Staubach Company. Mr. Leslie was President of Staubach Financial
Services from January 1992 until February 1996. From 1982 until
January 1992, Mr. Leslie served as Chief Financial Officer of The
Staubach Company. Since March 2001, Mr. Leslie has focused on
managing his personal investments. Mr. Leslie is President and a
board member of Wolverine Holding Company, and serves on the
boards of Stratus Properties, Inc. and the North Texas Chapter of the
Arthritis Foundation and is a member of the Board of Trust
Managers of Amresco Capital Trust. Mr. Leslie holds a B.S. degree
from The University of Nebraska and an M.B.A. degree from The
University of Michigan Graduate School of Business.
... Richard L. Bloch Age 72, a director since March 2002.
Mr. Bloch has served as President of Pinon Farm, Inc., a show-horse
breeding and training farm since 1982. Mr. Bloch is a manager of
CLB Holdings, LLC, the general partner of CLB Partners, Ltd., a
real estate development limited partnership. Mr. Bloch served as
Chairman of the Board of Columbus Realty Trust from 1993 to
1997. Mr. Bloch is a board member of the City National Bank of
Beverly Hills and the Scripps Cancer Center. Mr. Bloch is a trustee
of the La Jolla Playhouse and of the Museum of New Mexico
Foundation. In January of 2001, Mr. Bloch was appointed by
California Governor Gray Davis to the Board of Directors of the
22nd District Agricultural Association and he was appointed by
President Bill Clinton to the President's Foreign Intelligence
Advisory Board, on which he served from 1995 to 1998. He received
a B.S. from the University of Chicago. Richard L. Bloch is the father
of Jonathan R. Bloch.
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. Mr. Bloch served as Chairman of the Board of Ascendant
Solutions from May 2001 to March 2002. 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
5
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. Mr. Bloch is the son of Richard L.
Bloch.
... David E. Bowe Age 43, director since 2000
Mr. Bowe has served as our Chief Executive Officer since August,
2000, President since March 2000 and as our Chief Financial Officer
since September 1999. Prior to accepting the position of President,
Mr. Bowe also acted as our Executive Vice President 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.
Compensation of Directors
Non-Employee Directors of Ascendant Solutions will be compensated $500.00
for each board meeting attended in person or $250.00 for each board meeting
attended telephonically, in addition to reimbursement of out-of-pocket
expenses. Our directors are eligible to receive stock option grants under our
1999 Long-Term Incentive Plan. If the adoption of the 2002 Equity Incentive
Plan as set forth in Item 3 is approved by the stockholders, then our directors
will also be eligible for grants under such plan. For descriptions of the 1999
Long-Term Incentive Plan and the 2002 Equity Incentive Plan, please see the
discussions under Item 2 and Item 3.
On March 14, 2002, in an attempt to further align the interests of
management and members of its Board of Directors with its stockholders, options
to purchase 75,000 shares of common stock were granted to each of Jonathan R.
Bloch, Richard L. Bloch and Melissa F. Crane, each directors of Ascendant
Solutions, under our 1999 Long-Term Incentive Plan for an exercise price of
$0.24 per share. Jonathan R. Bloch was also granted options to purchase an
additional 150,000 shares of common stock under such plan for an exercise price
of $0.24 per share. In addition, we granted under our 1999 Long-Term Incentive
Plan 1,000,000 performance based options, 400,000 to James C. Leslie, Chairman
of the Board, and 600,000 to David E. Bowe, President and Chief Executive
Officer and director, for an exercise price of $0.24 per share, with 150,000 of
such options conditioned upon the stockholders' amendment to the 1999 Long-Term
Incentive Plan as described in Item 2. Additionally, in March 2002, the Board
of Directors authorized the cancellation of an aggregate 450,000 options
previously granted to Mr. Bowe in consideration for the issuance of 425,000
shares of restricted stock under our 2002 Equity Incentive Plan. See "Certain
Relationships and Related Transactions," Item 2. Amendment to 1999 Long-Term
Incentive Plan, as amended, and Item 3. 2002 Equity Incentive Plan.
6
Committees of the Board of Directors; Meetings
Ascendant Solutions has two standing committees.
The Audit Committee
. Makes recommendations to the full board of directors with respect to
appointment of our 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.
During the year ended December 31, 2001, the Audit Committee met one time,
in February 2001. At that time, the Audit Committee was comprised of Kevin
Yancy, Paul Sherer, and Jonathan R. Bloch. Jonathan R. Bloch, Richard L. Bloch
and Melissa F. Crane are the current members of the Audit Committee.
The Compensation Committee
. Recommends to the board of directors annual salaries for senior
management.
. Reviews all company benefit plans.
During the year ended December 31, 2001, the Compensation Committee had no
formal meetings. The current members of the Compensation Committee are Jonathan
R. Bloch, Richard L. Bloch and Melissa F. Crane.
Meetings of the Board
During the year ended December 31, 2001, the entire board of directors of
Ascendant Solutions met nine times and acted by consent an additional ten
times. During fiscal 2001, no director attended fewer than 75% of the aggregate
number of meetings of the board and committees on which such director served.
Voting Agreement
On July 24, 2001, James C. Leslie, Richard L. Bloch, Will Cureton, and CLB
Partners, Ltd., a Texas limited partnership ("CLB") whose general partner is
controlled by Mr. Bloch and Mr. Cureton, entered into a Voting Agreement.
Pursuant to the Voting Agreement, the parties agreed to vote all of the shares
of stock of Ascendant Solutions held by them in the manner designated by the
affirmative vote of at least a majority of Messrs. Leslie, Bloch and Cureton,
each with one vote, subject to certain other provisions set forth in the Voting
Agreement.
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STOCK OWNERSHIP
Beneficial Ownership of Certain Stockholders, Directors and Executive Officers
The following table sets forth information with respect to the beneficial
ownership of our common stock at April 15, 2002, by:
. each of our named executive officer 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 April 15, 2002.
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.
Unless otherwise noted in the footnotes to the table, the address of each
executive officer and director is c/o Ascendant Solutions, Inc., 16250 Dallas
Parkway, Suite 102, Dallas, Texas 75248. We have calculated the percentages of
shares beneficially owned based on 21,230,900 shares of common stock
outstanding at April 15, 2002.
Shares beneficially owned
-------------------------
Person or group Number Percent
- --------------- ---------- -------
David E. Bowe (1)............................................... 545,250 2.6%
Jonathan R. Bloch (2)........................................... 965,000 4.5%
James C. Leslie (3)(4).......................................... 2,625,000 12.4%
Richard L. Bloch (4)(5)(6)...................................... 3,000,000 14.1%
Melissa F. Crane (7)(8)......................................... 4,847,400 55.7%
CLB Partners, Ltd. (4)(6)....................................... 3,000,000 14.1%
Will Cureton (4)(6)(9).......................................... 3,076,000 14.5%
VantagePoint Venture Partners III(Q), L.P. (8).................. 3,231,600 15.2%
VantagePoint Communications Partners, L.P. (8).................. 1,615,800 7.6%
All executive officers and directors as a group (5 persons) (10) 11,982,650 54.0%
- --------
(1) Includes 425,000 shares of restricted stock issued under our 2002 Equity
Incentive Plan and subject to vesting in equal installments over a
three-year period beginning in 2002. These shares of restricted stock were
issued in exchange for the cancellation of options to purchase an aggregate
450,000 shares of common stock.
(2) Includes (1) 800,000 shares of common stock that may be acquired upon
exercise of currently exercisable warrants held by CKM Software Partners at
the following exercise prices: 400,000 shares of common stock issuable
pursuant to warrants exercisable for $1.00 per share; 240,000 shares of
common stock issuable pursuant to warrants exercisable for $2.00 per share;
and 160,000 shares of common stock issuable pursuant to warrants
exercisable for $3.00 per share and (2) 160,000 shares of common stock that
may be acquired upon exercise of currently exercisable options. CKM
Software Partners is a California general partnership held by Jonathan R.
Bloch and Larry Barels. The address of each of these persons and entities
is 11150 Santa Monica Blvd., Los Angeles, California 90825.
(3) Includes 40,000 shares held by James C. Leslie as custodian for minor
children.
(4) James C. Leslie, CLB, Richard L. Bloch, and Will Cureton are parties to a
Voting Agreement that provides that the parties vote all of the shares of
stock of Ascendant Solutions held by them in the manner designated by the
affirmative vote of at least a majority of Messrs. Leslie, Bloch and
Cureton, each with one vote. Each such entity or individual has sole voting
and investment power with respect to their shares of common stock, except
to the extent voting power is shared pursuant to the Voting Agreement. As a
result of the voting
8
provisions contained in the Voting Agreement, each of James C. Leslie, CLB,
Richard L. Bloch and Will Cureton may be deemed an indirect beneficial
owner of the shares owned by the other parties thereto. Each party,
however, disclaims beneficial ownership of such shares. The beneficial
ownership information contained in this table for each of James C. Leslie,
CLB, Richard L. Bloch and Will Cureton does not reflect shares owned by any
of the other parties to the Voting Agreement except as otherwise specified
in the footnotes.
(5) Represents 3,000,000 shares owned of record by CLB Partners, Ltd.
(6) CLB Holdings LLC, a Texas limited liability company, is the general partner
of CLB Partners, Ltd. Richard L. Bloch, a director, and Will Cureton are
the managers of CLB Holdings LLC and the Richard and Nancy Bloch Family
Trust and Will Cureton are the members of CLB Holdings LLC. Richard L.
Bloch is a co-trustee of The Richard and Nancy Bloch Family Trust. The
address of CLB Partners, Ltd. is 15301 Dallas Parkway, Suite 730, Addison,
Texas 75001.
(7) 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. Ms. Crane is a partner of these funds. Ms. Crane disclaims
beneficial ownership of the shares held by the VantagePoint funds other
than those in which she may own a pecuniary interest.
(8) 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 300, San Bruno,
California 94066.
(9) Includes 3,000,000 shares owned of record by CLB Partners, Ltd. Mr.
Cureton's address is 15301 Dallas Parkway, Suite 730, Addison, Texas 75001.
(10) Includes 960,000 shares of common stock that may be acquired upon exercise
of currently exercisable stock options and warrants.
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 officers, we believe that all
persons subject to reporting filed the required reports on time in 2001.
Nasdaq Delisting
On May 11, 2001, our stock was delisted from the Nasdaq National Market for
failure to satisfy the minimum bid price requirement for continued listing set
forth in Marketplace Rule 4450(a) or (b) and commenced trading on the OTC
Bulletin Board.
9
MANAGEMENT
Executive Officers
Below is the name and age of our sole executive officer and our Chairman of
the Board as of March 31, 2002 and a brief description of their prior
experience and qualifications.
. David E. Bowe Age 43. Mr. Bowe has served as the Chief Executive Officer since
August 2000, President since March 2000 and Chief Financial
Officer since September 1999. Mr. Bowe also served as an Executive
Vice President of the Company from September 1999 until March
2000.
See "Item 1.--Election of Directors" for the biography of Mr. Bowe.
. James C. Leslie Age 46, a director since July 2001 and Chairman of the Board since
March 2002.
See "Item 1.--Election of Directors" for the biography of Mr. Leslie.
Executive Compensation
Summary compensation. The following table provides summary information
concerning compensation paid by us to our Chief Executive Officer (the "named
executive officer"). In 2001, no other person who served as an executive
officer of Ascendant Solutions at any time during the year had total annual
salary and bonus in excess of $100,000. In 2002, David E. Bowe's salary was
reduced and he was awarded certain performance-based options and restricted
stock, in part, in exchange for the reduction in salary to be paid to him. See
"Compensation Committee Report--Chief Executive Compensation." For a list of
our current executive officers, see "--Executive Officers."
Long-Term
Annual Compensation Compensation Awards
-------------------- ---------------------
Salary Bonus Securities Underlying
Name and Principal Position(s) Year ($) ($) Options (#)
- ------------------------------ ---- ------- ------- ---------------------
David E. Bowe..................... 2001 200,000 270,000(1) --
President, Chief Executive Officer 2000 181,419 75,000(2) 400,000
and Chief Financial Officer 1999 43,380 -- 50,000
- --------
(1) Represents amount of bonus paid under Mr. Bowe's Executive Retention
Agreement dated May 11, 2001. See "Certain Relationships and Related
Transactions."
(2) Represents $50,000 paid to Mr. Bowe in connection with the guaranteed bonus
provisions of the employment agreement dated August 8, 2000. The remaining
$25,000 represents bonus amounts paid to Mr. Bowe in fiscal 2000 for his
service to the Company in 1999.
Option Grants in Last Fiscal Year. There were no stock options granted to
the named executive officer during the fiscal year ended December 31, 2001.
Year-end option values. The named executive officer did not exercise any
stock options during the year ended December 31, 2001. The following table
provides information regarding the number of shares covered by both exercisable
and unexercisable stock options as of December 31, 2001, 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.
10
Number of securities Value of the unexercised
underlying unexercised in-the-money
options at fiscal year-end options at fiscal year-end
-------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
David E. Bowe 192,000 258,000 -- --
1999 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 1999 Long-Term Incentive Plan
is to promote our interests and the interests of our stockholders 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 stockholders. As of March 31, 2002, unexercised options to
purchase 1,415,000 shares of common stock were outstanding, having a weighted
average exercise price of $0.27 per share, under the 1999 Long-Term Incentive
Plan. Of these, options to purchase 10,000 shares of common stock are intended
to qualify as Incentive Stock Options under Section 422 of the Code. The
remaining options to purchase 1,405,000 shares of common stock are nonqualified
stock options.
2002 Equity Incentive Plan
The board of directors adopted the 2002 Equity Incentive Plan on March 14,
2002, which is subject to approval by the stockholders at the 2002 Annual
Meeting. The 2002 Equity Incentive Plan is further discussed in Item 3 of this
proxy statement.
401(k) Plan
The 401(k) Plan was terminated during 2001. In April 2001, we entered into
an agreement with Administaff Companies, Inc. to provide personnel management
services to us. Our employees are eligible to participate in Administaff's
401(k) plan.
Employment Contracts
On May 11, 2001, we entered into an Executive Retention Agreement with David
E. Bowe, which such agreement superseded and terminated his prior Employment
Agreement with us dated August 8, 2000. The Executive Retention Agreement
terminated on December 31, 2001. See "Certain Relationships and Related
Transactions" and "Compensation Committee Report--Chief Executive Officer
Compensation."
Compensation Committee Interlocks and Insider Participation
The board of directors has appointed a Compensation Committee consisting of
Jonathan R. Bloch, Richard L. Bloch and Melissa F. Crane. The Compensation
Committee had no formal meetings during 2001; instead the full board performed
those functions. The Compensation Committee studies, advises and consults with
management respecting the compensation of our officers, and administers our
stock-based compensation plans. It also recommends for the board's
consideration any plan for additional compensation that it deems appropriate.
During the last fiscal year, no executive officer or employee of Ascendant
Solutions served as a member of the Compensation Committee.
Certain Relationships and Related Transactions
On July 24, 2001, James C. Leslie and CLB Partners, Ltd. purchased an
aggregate 5,000,000 shares of the Company's common stock at $0.08 per share
from Norman Charney (former Chairman and Chief Executive
11
Officer) and CCLP, Ltd., a Texas limited partnership, of which David Charney
(son of Norman Charney) is the sole general partner, for an aggregate purchase
price of $400,000.
On July 24, 2001, James C. Leslie, Richard L. Bloch, Will Cureton, and CLB,
entered into a Voting Agreement. Pursuant to the Voting Agreement, the parties
agreed to vote all of the shares of stock of the Company held by them in the
manner designated by the affirmative vote of at least a majority of Messrs.
Leslie, Bloch and Cureton, each with one vote, subject to certain other
provisions set forth in the Voting Agreement.
After the Company reviewed its preliminary operating results for the first
quarter of 2001, as well as the overall economic and market environment for
e-commerce businesses, the Company determined that the capital requirements
under its existing business plan for fiscal year 2001 were greater than the
capital resources then currently available. As a result, in May 2001, the
Company reduced the size and scope of its operations and implemented a plan to
preserve assets and reduce its expenditures, liabilities and commitments. In
connection with this action, the Company effected a reduction in workforce,
whereby 58 employees were terminated during May and June 2001. Additional
reductions in personnel and overhead were made throughout the remainder of
2001. The Company effected a 98% reduction in its workforce through December
31, 2001. The Company currently has two remaining full time employees.
In connection with the Company's implementation of its plan to preserve
assets, the Company entered into an Executive Retention Agreement with Mr. Bowe
on May 11, 2001 in which the Company agreed to pay to Mr. Bowe an initial
retention bonus in the amount of $125,000 and an aggregate monthly base salary
of $16,666 per month. In addition to the initial retention bonus and the base
salary, the Company agreed to pay to Mr. Bowe a monthly retention bonus in the
amount of $20,715 per month. Pursuant to the terms of the Executive Retention
Agreement, Mr. Bowe and the Company also agreed to release each other from all
potential claims. The Executive Retention Agreement terminated on December 31,
2001. See "Compensation Committee Report--Chief Executive Officer Compensation."
On March 14, 2002, in an attempt to further align the interests of
management and members of its Board of Directors with its stockholders, the
Company granted to each of Jonathan R. Bloch, Richard L. Bloch and Melissa F.
Crane, each directors of the Company, options to purchase 75,000 shares of
common stock under the Company's 1999 Long-Term Incentive Plan for an exercise
price of $0.24 per share. Jonathan R. Bloch was also granted an additional
150,000 shares of common stock under such plan for an exercise price of $0.24
per share. In addition, the Company granted an aggregate 1,000,000
performance-based options under its 1999 Long-Term Incentive Plan, 400,000 to
James C. Leslie, Chairman of the Board and 600,000 to David E. Bowe, President
and Chief Executive Officer and director of the Company for an exercise price
of $0.24 per share. These management options, having an exercise price of $0.24
per share, are intended to provide an incentive to management by vesting upon
achievement of certain levels of cash flow generated by the Company.
Additionally, in March 2002, the Board of Directors authorized the cancellation
of an aggregate 450,000 options previously granted to Mr. Bowe in consideration
for the issuance of 425,000 shares of restricted stock under the Company's 2002
Equity Incentive Plan. The award of performance-based options and restricted
stock to Mr. Bowe and the award of performance-based options to Mr. Leslie was
made, in part, in exchange for a reduction of salary paid to Mr. Bowe and for a
nominal salary to be paid to Mr. Leslie for his service as Chairman of the
Board.
The Company intends to occupy new lease space starting in May 2002 in a
building owned by a partnership in which James C. Leslie, the Company's
Chairman of the Board, has a controlling interest. The Company believes that
such lease arrangement has been on terms no less favorable to the Company than
could have been obtained in a transaction with an independent third party.
In September 2001, the Company paid The Staubach Company, of which James C.
Leslie is the former President and Chief Operating Officer, $71,500 for real
estate services rendered in connection with the negotiation and termination of
the lease for the Company's previous corporate office. The Company believes
that such services were on terms no less favorable to the Company than could
have been obtained in a transaction with an independent third party.
12
COMPENSATION COMMITTEE REPORT
Ascendant Solutions' executive compensation program is administered by the
Compensation Committee of the Board of Directors. 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.
General
In May 2001, the Company reduced the size and scope of its operations and
implemented a plan to preserve assets and reduce its expenditures, liabilities
and commitments. In connection with this action, the Company effected a
reduction in workforce throughout the remainder of fiscal 2001 with the result
that David E. Bowe, President, Chief Executive Officer and Chief Financial
Officer, was the sole executive officer serving throughout fiscal year 2001.
Because Mr. Bowe's compensation was approved by the entire Board of Directors
in 2001, the Compensation Committee did not meet during the fiscal year 2001.
Executive compensation packages for former executive officers who have since
left the Company were determined pursuant to previously approved employment
agreements and our existing policies.
In December 2001, the Company revised its strategic direction to seek
acquisition possibilities throughout the United States to make acquisitions or
enter into other business endeavors. In connection with this action, the
Company will evaluate its need to hire additional executive officers in fiscal
2002. To the extent that the Company makes a determination to hire additional
executive officers, a compensation package will be offered that is consistent
with the policies of the Compensation Committee. The general policies of the
Compensation Committee are set forth below.
Compensation Policy
Base Salary. Our goal is to attract, retain and reward a highly competent
and productive employee group. Currently, David E. Bowe is our sole executive
officer. See "Chief Executive Officer Compensation" below for a discussion of
Mr. Bowe's compensation package. We expect that any future executive officers
of the Company would be eligible to receive compensation packages that include
a mix of base salary and long-term incentive opportunities and other employee
benefits. Changes in compensation are typically based on the individual's
performance, Ascendant Solutions' financial performance, and the competitive
marketplace. Currently, we do not utilize any formal mathematical formulae or
objective thresholds in determining base salary adjustments. We believe that
strict formulae restrict flexibility and are too rigid as the Company continues
working through its asset preservation plan and acquisition and other business
strategies.
1999 Long-Term Incentive Plan. The purpose of the 1999 Long-Term Incentive
Plan is to promote our interests and the interests of our stockholders 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 stockholders. 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 Compensation Committee 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.
2002 Equity Incentive Plan. The 2002 Equity Incentive Plan was approved by
the Board on March 14, 2002 and is subject to a stockholder approval at this
Annual Meeting. The purpose of the Equity Incentive Plan is to provide a means
by which selected employees of and consultants to the Company and its
subsidiaries may be given an opportunity to acquire an equity interest in
Ascendant Solutions. Our employees, officers, directors, consultants and other
persons deemed to have contributed or to have the potential to contribute to
our success.
13
The Equity Incentive Plan is administered by our Compensation Committee. If
from time to time no Compensation Committee is so designated, then the Equity
Incentive Plan will be administered by the Board.
Executive Compensation
Because of the Company's reduction in workforce in 2001, David E. Bowe was
the sole executive officer serving throughout fiscal year 2001. See "Chief
Executive Officer Compensation" below for a discussion of Mr. Bowe's
compensation package.
In March 2002, the Board of Directors appointed James C. Leslie to serve as
the Chairman of the Board. In connection with such service, Mr. Leslie will be
paid an annual salary of $50,000 and will receive 400,000 performance-based
options under the Company's 1999 Long-Term Incentive Plan. The award of options
to Mr. Leslie was made, in part, in exchange for a nominal salary to be paid to
Mr. Leslie for his services as Chairman of the Board.
Chief Executive Officer Compensation
In connection with the Company's implementation of its plan to preserve
assets, the Company entered into an Executive Retention Agreement with David E.
Bowe, President, Chief Executive Officer, and Chief Financial Officer, on May
11, 2001 in which the Company agreed to continue to pay a salary of
approximately $200,000 and retention bonuses of approximately $270,000 in
return for Mr. Bowe's service during the Company's implementation of such plan.
The Executive Retention Agreement terminated on December 31, 2001. No grants of
stock options were made during fiscal 2001 to Mr. Bowe pursuant to the 1999
Long-Term Incentive Plan.
Mr. Bowe's salary is not currently covered by an employment agreement but on
March 14, 2002, the Board approved a salary in the amount of $118,750 be paid
to Mr. Bowe during 2002 in order that Mr. Bowe continue his efforts with the
Company's asset preservation plan and acquisition and other business strategies
on behalf of the Company. In addition, in an attempt to further align the
interests of management and members of the Board of Directors with the
Company's stockholders, the Company granted to Mr. Bowe 600,000
performance-based options under its 1999 Long-Term Incentive Plan for an
exercise price of $0.24 per share and 425,000 shares of restricted stock under
the Company's 2002 Equity Incentive Plan. The award of these performance-based
options and restricted stock to Mr. Bowe was made, in part, in exchange for a
reduction in salary paid to Mr. Bowe.
Company Policy on Qualifying Compensation
The Board of Directors periodically reviews the applicability of Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), which
disallows a tax deduction for compensation to an executive officer in excess of
$1.0 million per year. In connection with the Board's periodical review of the
potential consequences of Section 162(m), the Board may, in the future,
structure the performance-based portion of its executive officer compensation
to comply with certain exemptions provided in Section 162(m).
The information contained in the Compensation Committee Report shall not be
deemed to be "soliciting material" or to be "filed" with SEC, nor shall such
information be incorporated by reference into any future filing under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, except to the extent that the Company specifically incorporates it by
reference into such filing.
Compensation Committee
Jonathan R. Bloch
Richard L. Bloch
Melissa F. Crane
14
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. Each of the Audit Committee members satisfies the
definition of independent director as established in the NASDAQ Stock Exchange
Listing Standards.
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. The committee has discussed with the
independent auditors the matters required to be discussed by Statement of
Auditing Standards No. 61. The Committee has received the written disclosures
and the letter from the independent auditors required by the Independence
Standards Board No. 1, which included the independent auditors' non-audit
related tax work, and has discussed with the independent auditors the auditor's
independence from management and the Company.
The committee discussed with the Company's internal and independent auditors
the overall scope and plans for their respective audits. The committee meets
with the internal and 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 one meeting during the fiscal year ended 2001.
In reliance on the reviews and discussions referred to above, the 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, 2001 for filing with the Securities and
Exchange Commission. The committee and the board of directors have also
recommended the selection of the Company's independent auditors.
In accordance with the rules of the Securities and Exchange Commission, 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, as amended, 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, as amended, or the Securities Exchange Act of
1934, as amended.
Audit Fees
For the year ended December 31, 2001, Ernst & Young LLP, the Company's
independent public accountants, billed the Company an aggregate $63,500 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 Forms 10-Q during such period.
15
Financial Information Systems Design and Implementation Fees.
There were no financial information systems design and implementation
services rendered for the year ended December 31, 2001.
All Other Fees
For the year ended December 31, 2001, Ernst & Young LLP billed the Company
an aggregate $39,075 for all other services not described above under the
captions "Audit Fees" and "Financial Information Systems Design and
Implementation Fees" during such period.
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.
Audit Committee
Jonathan R. Bloch
Richard L. Bloch
Melissa F. Crane
16
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, 2001. 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. We have not paid any
dividends. Performance data is provided for the last trading day closest to
each calendar year end.
On May 11, 2001 Ascendant Solutions' stock was delisted from The Nasdaq
National Market for failure to satisfy the minimum bid price requirement for
continued listing set forth in Marketplace Rule 4450(a) or (b) and commenced
trading on the OTC Bulletin Board.
Comparison of 25 Month Cumulative Total Return*
Among Ascendant Solutions, Inc.,
The NASDAQ Stock Market (U.S.) Index and a Peer Group
[CHART]
ASCENDANT NASDAQ STOCK
SOLUTIONS, INC. MARKET (U.S.) PEER GROUP
--------------- ------------- ----------
11/10/99 $100.00 $100.00 $100.00
12/99 $221.88 $145.87 $128.65
12/2000 $3.51 $36.55 $77.42
12/2001 $1.81 $21.47 $61.40
- --------
* $100 Invested on 11/10/99 in stock or index including reinvestment of
dividends. Fiscal year ending December 31.
November 11, December 31, December 31, December 31,
Company 1999 1999 2000 2001
------- ------------ ------------ ------------ ------------
Ascendant Solutions, Inc. $100 $221.88 $ 3.51 $ 1.81
Peer Group (1)........... $100 $128.65 $77.42 $61.40
Nasdaq Market Index...... $100 $145.87 $36.55 $21.47
- --------
(1) The peer group selected by us for this comparison (Media General Industry
Group 852) consists of 170 Internet software and services companies.
17
ITEM 2.
AMENDMENT TO 1999 LONG-TERM INCENTIVE PLAN, AS AMENDED
General
Our 1999 Long-Term Incentive Plan ("1999 Plan") 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 1999 Plan is
to promote our interests and the interests of our stockholders by using
investment interests in Ascendant Solutions 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
stockholders.
Qualified participants include directors, officers, employees, consultants
and advisors of Ascendant Solutions. As of April 2, 2002, approximately six
persons are eligible to participate in the 1999 Plan and they have been granted
options to purchase an aggregate 1,395,000 shares under the 1999 Plan.
Amendment to the Plan
In March 2002, our board of directors approved, subject to stockholder
approval, an amendment to our 1999 Plan intended to enhance the flexibility of
the administrators in granting stock options to our employees and to preserve
our tax deductions on stock options as permitted by Section 162(m) of the Code.
The amendment increased the maximum number of shares that may be covered by
options granted to a plan participant in any calendar year from 450,000 shares
to 750,000 shares. The board of directors adopted this amendment to ensure that
we can continue to grant stock options to employees at levels determined
appropriate by the plan administrators.
Section 162(m) of the Code generally denies a corporate income tax deduction
to publicly held corporations for taxable compensation paid to the chief
executive officer and the four other highest paid officers of the corporation
to the extent that individual compensation paid exceeds $1.0 million. Gains on
the exercise of a stock option may be considered compensation subject to
Section 162(m). An exception to this tax law applies for compensation that is
considered "performance based." For purposes of the exception, gains on stock
options (that we granted with a fair market value exercise price) that are
granted pursuant to a plan that limits the number of shares of the
corporation's common stock that are covered by a stock option granted in any
one year may be considered performance based. Our 1999 Plan currently limits
the number of shares of common stock that may be issued pursuant to a stock
option in any one calendar year to 450,000 shares. The amendment proposes to
increase this limit to 750,000 shares.
We granted a nonqualified stock option to David E. Bowe, our President and
Chief Executive Officer, on March 14, 2002 that is exercisable for 600,000
shares, which exceeds the 450,000 share limitation previously contained in our
1999 Plan. This option carries an exercise price of $0.24 and vests over a
period of six years to be accelerated upon a change of control or upon the
occurrence of the events set forth in the agreement governing the grant. These
options were granted pursuant to the terms of our 1999 Plan and 150,000 of such
options have been specifically conditioned on the receipt of stockholder
approval to this Item 2 prior to the vesting of that portion of the option. To
the extent stockholder approval is not timely obtained, 150,000 shares of the
grant shall be deemed withdrawn and the options forfeited. Inclusion of this
risk of forfeiture ensures continued compliance with Section 162(m),
notwithstanding the fact that such grant exceeded the 450,000 share limitation.
If the stockholders approve this Item 2 at the Special Meeting, any gains on
the executive options will continue to be considered performance based for
purposes of Section 162(m).
Material Terms
The material terms of our 1999 Plan are outlined below:
Administration. Our Compensation Committee (currently comprised of Jonathan
R. Bloch, Richard L. Bloch and Melissa F. Crane) is authorized to administer
the 1999 Plan with respect to all persons not classified as
18
Section 16 insiders of Ascendant Solutions and/or persons subject to the
limitations imposed by Section 162(m) of the Code and has 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 board of directors, in its sole discretion,
may appoint a separate committee of the board of directors to administer the
1999 Plan for (1) persons who are Section 16 insiders (generally, all directors
and executive officers of the Company) for purposes of ensuring compliance with
the profit disgorgement rules of Section 16 applicable to such persons and/or
(2) persons who are subject to Section 162(m) of the Code (the chief executive
officer and the four other highest paid officers of the Company) for purposes
of ensuring that any grants of stock options to such persons are deemed
"performance based."
Stock Options. Under the 1999 Plan, we may grant incentive stock options
("Incentive Stock Options") or nonqualified stock options ("Nonqualified Stock
Options"). However, only our employees are eligible to receive Incentive Stock
Options. A stock option may have a term of not more than ten years. The
administrators of our 1999 Plan determine the exercise price per share for each
option which cannot be less than the fair market value of our common stock on
the date of the grant. In the case of an Incentive Stock Option granted to an
employee who, at the time of the grant, owns common stock with more than 10% of
the total combined voting power of our outstanding common stock, the exercise
price per share of common stock cannot be less than 110% of the fair market
value of our common stock on the date of grant. The fair market value of our
common stock is the average of the high and low sales prices on the OTC
Bulletin Board.
Effect of Termination. Generally, if a participant's service to us is
terminated for reasons other than just cause dismissal, retirement, permanent
disability or death, then the participant's options, whether or not vested,
shall expire and become unexercisable as of the earlier of the date the options
would expire in accordance with their terms had the participant remained in our
service, or 30 days after the date of employment or relationship termination.
Upon retirement, permanent disability or death, the participant's unexercised
options shall, whether or not vested, expire and become unexercisable as of the
earlier of the date the options would expire in accordance with their terms had
the participant remained in our service, or 90 days after the date of
employment or relationship termination. In the event of a just cause dismissal
of a participant, all of such participant's options, whether or not vested,
shall expire and become unexercisable as of the date of such dismissal.
Effect of a Change in Control. Our 1999 Plan provides that, in the event of
certain changes of control involving the liquidation of Ascendant Solutions,
the disposition of all or substantially all of our assets, certain
reorganizations, mergers or consolidations of Ascendant Solutions or the
acquisition by any person (other than Norm Charney (a former director) or the
Staubach affiliated shareholders) of more than 50% of Ascendant Solutions'
combined voting power, one of the following shall occur with respect to the
plan and any unexercised options:
. they may be assumed or substituted by the successor corporation;
. our board of directors may provide for adjustments in the terms and
conditions of the unexercised options, such as acceleration of their
vesting or their automatic conversion into the underlying shares or other
consideration; or
. they shall automatically terminate, provided that any unexercised options
shall be immediately exercisable prior to the change in control.
Termination. The 1999 Plan will terminate on May 12, 2009.
Federal Income Tax Consequences
The following discussion of the principal federal income tax consequences of
participation in the 1999 Plan is based on statutory authority, as well as
judicial and administrative interpretations as of the date of this Proxy
Statement, all of which are subject to change at any time (possibly with
retroactive effect). As the law is
19
technical and complex, the discussion below necessarily represents only a
general summary. The 1999 Plan is not qualified under Section 401(a) of the
Code.
Incentive Stock Options. Incentive Stock Options granted under the 1999
Plan are intended to meet the definitional requirements of Section 422(b) of
the Code for "incentive stock options."
Any employee who receives an Incentive Stock Option does not recognize any
taxable income upon the grant of such Incentive Stock Option. Similarly, the
exercise of an Incentive Stock Option generally does not give rise to federal
income tax to the employee, provided that (i) the federal "alternative minimum
tax," which depends on the employees' particular tax situation, does not apply
and (ii) the employee is employed by the Company from the date of grant of the
option until 3 months prior to the exercise thereof, except where such
employment terminates by reason of disability (where the 3 month period is
extended to 1 year) or death (where this requirement does not apply). If an
employee exercises an Incentive Stock Option after these requisite periods, the
Incentive Stock Option will be treated as a Nonqualified Stock Option and will
be subject to the rules set forth below under the caption "Nonqualified Stock
Options."
Further, if after exercising an Incentive Stock Option, an employee disposes
of the shares so acquired more than two years from the date of grant and more
than one year from the date of receipt of the shares upon exercise of such
Incentive Stock Option (the "applicable holding period"), the employee will
normally recognize a capital gain or loss equal to the difference, if any,
between the amount received for the shares and the employee's tax basis in such
shares.
If, however, an employee does not hold the shares so acquired for the
applicable holding period, thereby making a "disqualifying disposition," the
employee would realize ordinary income on the excess of the fair market value
of the shares at the time the Incentive Stock Option was exercised over the
exercise price and the balance, if any, would be short-term or long-term
capital gain depending on the length of the employee's holding period and
provided that the employee held such shares as a capital asset at such time. If
the sales price of the stock sold in a disqualifying disposition is less than
its fair market value on the exercise date, the ordinary income is limited to
the amount of the gain (if any) realized on the sale. If the sales price of the
stock sold in a disqualifying disposition is less than the exercise price, the
employee will recognize a capital loss.
An employee who exercises an Incentive Stock Option by delivering shares
previously acquired pursuant to the exercise of an Incentive Stock Option is
treated as making a "disqualifying disposition" of his or her shares if the
employee delivers them before the expiration of their applicable holding
period. Upon the exercise of an Incentive Stock Option with previously-acquired
shares as to which no disqualifying disposition occurs, despite some
uncertainty, it appears that the employee would not recognize gain or loss with
respect to such previously-acquired shares.
Nonqualified Stock Options. Nonqualified Stock Options granted under the
1999 Plan are options that do not qualify as Incentive Stock Options. An
individual who receives a Nonqualified Stock Option generally will not
recognize any taxable income upon the grant of such Nonqualified Stock Option.
However, the individual generally will recognize ordinary income upon exercise
of a Nonqualified Stock Option in an amount equal to the excess of (i) the fair
market value of the shares at the time of exercise over (ii) the exercise price.
The ordinary income recognized with respect to the receipt of shares upon
exercise of a Nonqualified Stock Option will be subject to both wage
withholding and employment taxes.
As a result of Section 16(b) of the Exchange Act, any individual who is an
officer or director of the Company or a beneficial owner of more than ten
percent (10%) of any class of equity securities of the Company should consult
with his or her tax advisor as to whether the timing of income recognition is
deferred for any period following the exercise of a Nonqualified Stock Option
(i.e., the "Deferral Period"). Absent an election pursuant to Section 83(b) of
the Code filed with the Internal Revenue Service within 30 days after the date
of
20
transfer of such shares pursuant to the option (the "Section 83(b) election"),
recognition of income by such an individual will be deferred until the
expiration of the Deferral Period, if any.
An individuals' tax basis in the shares received on exercise of a
Nonqualified Stock Option will be equal to the amount of any cash paid on
exercise, plus the amount of ordinary income recognized by such individual as a
result of the receipt of such shares. The holding period for such shares would
begin just after the transfer of the shares or, in the case of an officer,
director or beneficial owner of more than 10% of any class of equity securities
of the Company who does not make a Section 83(b) election, just after the
expiration of the Deferral Period, if any.
If an individual exercises a Nonqualified Stock Option by delivering shares
to the Company, other than shares previously acquired pursuant to the exercise
of an Incentive Stock Option which is treated as a "disqualifying disposition"
as described above, the individual will not recognize gain or loss with respect
to the exchange of such shares, even if their then fair market value is
different from the individual's tax basis. The individual, however, will be
taxed as described above with respect to the exercise of the Nonqualified Stock
Option as if he or she had paid the exercise price in cash. So long as the
individual receives a separate identifiable stock certificate therefor, the tax
basis and the holding period for that number of shares received on such
exercise that is equal to the number of shares surrendered on such exercise
will be equal to the tax basis and include the holding period of those shares
surrendered. The individual's tax basis and holding period for the additional
shares received on exercise of a Nonqualified Stock Option paid for, in whole
or in part, with shares will be the same as if the individual had exercised the
Nonqualified Stock Option solely for cash.
Upon a change of control of the Company, some or all of the then-outstanding
stock options may immediately become exercisable. In general, if the total
amount of payments to an individual that are contingent upon a "change of
control" of the Company (as defined in Section 280G of the Code), including
payments under the 1999 Plan that vest upon a change of control, equals or
exceeds three times the individual's "base amount" (generally, such
individual's average annual compensation for the five complete years preceding
the "change of control"), then, subject to certain exceptions, the payments may
be treated as "parachute payments" under the Code, in which case the individual
would be subject to a 20% excise tax on a portion of such payments.
Potential Limitation on Company Deductions. Section 162(m) of the Code
denies a deduction to any publicly held corporation for compensation paid to
certain employees in a taxable year to the extent that compensation exceeds
$1.0 million for a covered employee. It is possible that compensation
attributable to awards previously granted or granted in the future under the
1999 Plan, combined with all other types of compensation received by a covered
employee from the Company, may cause this limitation to be exceeded in any
particular year.
New Plan Benefits
Because the modifications proposed to be made to the 1999 Plan do not, in
and of themselves, affect the number or dollar value of the benefits to be
received by participants thereunder, it is not possible to determine the dollar
value or the number of shares that will be received under the plan as so
amended. During the fiscal year ended December 31, 2001, we granted an
aggregate 335,000 options to purchase common stock to certain executive
officers, not including David E. Bowe (who did not receive any grants during
such fiscal year), and all of such options have terminated. For illustrative
purposes only, the following chart provides information concerning options
granted to certain groups from the end of the last fiscal year through March
31, 2002. See "Certain Relationships and Related Transactions."
21
1999 Long-Term Incentive Plan
Range of Exercise Shares Underlying
Name and Position Prices Options
- ----------------- ----------------- -----------------
David E. Bowe................................................................ $0.24 600,000
President and Chief Executive Officer
All current executive officers as a group.................................... $0.24 1,000,000(1)
All current directors who are not executive officers, as a group............. $0.24 375,000(2)
All employees, including all current officers who are not executive officers,
as a group................................................................. $0.24 10,000
- --------
(1) Includes the Chairman of the Board
(2) Does not include the Chairman of the Board
The 1999 Plan, as amended, has been attached as Exhibit A to this Proxy
Statement and incorporated herein by reference.
The board of directors recommends that stockholders vote FOR Item 2.
22
ITEM 3.
2002 EQUITY INCENTIVE PLAN
The 2002 Equity Incentive Plan ("Equity Incentive Plan"), which was adopted
and approved prior to the date hereof by the board of directors, is required to
be submitted for stockholder approval at the Annual Meeting. The board of
directors unanimously approved the adoption of the Equity Incentive Plan.
The Equity Incentive Plan is intended to provide a means by which employees,
officers, directors, and consultants of Ascendant Solutions and its
subsidiaries may be given an opportunity to acquire an equity interest in
Ascendant Solutions. We, by means of the Equity Incentive Plan, will seek to
retain the services of persons who are or become employees of or consultants to
Ascendant Solutions and its subsidiaries, and to provide incentives for such
persons to exert maximum efforts for the success of Ascendant Solutions and its
subsidiaries.
Material Terms
Administration. The Equity Incentive Plan is administered by our
Compensation Committee. The Compensation Committee will have two or more
members, each of whom will be an "outside director" within the meaning of
Treasury Regulation Section 1.162-27(e)(3). In addition, such committee members
will also be non-employee directors within the meaning of Rule 16b-3
promulgated under the Exchange Act. If from time to time no Compensation
Committee is so designated, then the Equity Incentive Plan will be administered
by the board of directors. The Committee has full authority, subject to the
provisions of the Equity Incentive Plan, to award (i) stock options, (ii) stock
appreciation rights, (iii) restricted stock, (iv) deferred stock, (v) stock
reload options and/or (vi) other stock-based awards (collectively, "Awards").
Subject to the provisions of the Equity Incentive Plan, the Committee
determines, among other things, the persons to whom from time to time Awards
may be granted ("Holders"), the specific type of Awards to be granted (e.g.,
stock option, restricted stock, etc.), the number of shares subject to each
Award, share prices, any restrictions or limitations on such Awards and any
vesting, exchange, surrender, cancellation, acceleration, termination, exercise
or forfeiture provisions related to such Awards. The interpretation and
construction by the Compensation Committee of any provisions of, and the
determination of any questions arising under the Equity Incentive Plan or any
rule or regulation established by the Compensation Committee pursuant to the
Equity Incentive Plan will be final, conclusive and binding on all Holders of
Awards.
Shares Subject to the Equity Incentive Plan, General Terms. The Equity
Incentive Plan authorizes the granting of Awards which would allow up to an
aggregate 2,000,000 shares of common stock to be acquired by the Holders and
provides that a maximum of 1,500,000 shares of common stock may be issued to
any one Holder. In order to prevent the dilution or enlargement of the rights
of Holders under the Equity Incentive Plan, the number of shares of common
stock authorized by the Equity Incentive Plan is subject to adjustment by the
board of directors in the event of any increase or decrease in the number of
shares of outstanding common stock resulting from a stock split, reverse stock
split, stock dividend, combination, reclassification, merger, reorganization,
consolidation, recapitalization or other change in corporate structure
affecting the common stock. If any shares granted under the Equity Incentive
Plan are forfeited or terminated, such shares will again be available for
distribution in connection with Awards subsequently granted under the Equity
Incentive Plan.
Eligibility. Subject to the provisions of the Equity Incentive Plan, Awards
may be granted to employees, officers, directors, and consultants who are
deemed to have rendered or to be able to render services to us or our
subsidiaries and are deemed to have contributed or to have the potential to
contribute to the our success. Incentive Stock Options may be awarded only to
persons who, at the time of such awards, are employees of Ascendant Solutions
or its subsidiaries.
23
Types of Awards
Stock Options. Options granted under the Equity Incentive Plan may be
either options that are intended to qualify for treatment as "incentive stock
options" under Section 422 of the Code or options that do not so qualify.
Options may be granted under the Equity Incentive Plan to any person who is an
officer or other employee (including an officer or other employee who is also a
director) or consultants of the Company or any of its subsidiaries. The
exercise price of Incentive Stock Options must be at least the fair market
value of a share of the common stock on the date of grant (and not less than
110% of the fair market value in the case of an Incentive Stock Option granted
to a Holder owning 10% or more of the common stock). The exercise price of
Nonqualified Stock Options may be less than 100% of the fair market value of a
share of the common stock on the date of grant.
The term of an option may not exceed ten years (five years in the case of an
Incentive Stock Option granted to a Holder owning 10% or more of the common
stock). However, options may be granted that provide that at any time after the
date of the grant of the option, in the event of (i) any person or group of
persons becoming for the first time the beneficial owner, directly or
indirectly, of more than 50% of the total voting stock of the Company, other
than as a result of a transfer or series of related transfers of voting stock
from a person or group of persons who immediately prior to such transfer or
transfers was the beneficial owner, and who after giving effect to such
transfer or transfers continues to be the beneficial owner, of more than 50% of
the voting stock of the Company; (ii) a merger or consolidation of the Company
as a result of which the holders of all of the voting stock of the Company
prior to such event do not continue to hold either directly or indirectly at
least a majority of the Company voting stock after such event, (iii) a sale of
all or substantially all of the assets of the Company to any person or group of
persons other than to a person or group of persons which owns a majority or
more of common stock of the Company or to a subsidiary of the Company or (iv)
certain changes in the majority of the board of directors of the Company during
any 12 consecutive month period any portion of which is after the date of the
grant of the option, the option may be exercised in whole or in part without
regard to any provisions thereof. The accelerated vesting of outstanding
options upon the occurrence of such a "change of control" transaction could
have the effect of delaying, deferring, or preventing a change in control of
the Company.
Stock Appreciation Rights. The Compensation Committee may grant Stock
Appreciation Rights ("SARs" or singularly "SAR") in conjunction with all or
part of any option granted under the Equity Incentive Plan or may grant SARs on
a free-standing basis. In conjunction with Nonqualified Stock Options, SARs may
be granted either at or after the time of the grant of such Nonqualified Stock
Options. In conjunction with Incentive Stock Options, SARs may be granted only
at the time of the grant of such Incentive Stock Options. A SAR entitles the
Holder thereof to receive an amount (payable in cash and/or common stock, as
determined by the Compensation Committee) equal to the fair market value of one
share of common stock over the SAR price or the exercise price of the related
option, multiplied by the number of shares subject to the SAR.
Restricted Stock Awards. The Compensation Committee may award shares of
restricted stock ("Restricted Stock") either alone or in addition to other
Awards granted under the Equity Incentive Plan. The Compensation Committee
shall determine the restricted period during which the shares of stock may be
forfeited if, for example, the Holder's employment is terminated. In order to
enforce the forfeiture provisions, the Equity Incentive Plan requires that all
shares of Restricted Stock awarded to the Holder remain in the physical custody
of the Company until the restrictions on such shares have terminated.
Deferred Stock. The Compensation Committee may award shares of deferred
stock ("Deferred Stock") either alone or in addition to other Awards granted
under the Equity Incentive Plan. The Compensation Committee shall determine the
deferral period during which time the receipt of the stock is deferred. The
Award may specify, for example, that the Holder must remain employed by the
Company during the entire deferral period in order to be issued the stock.
Stock Reload Options. The Compensation Committee may grant Stock Reload
Options in conjunction with any option granted under the Equity Incentive Plan.
In conjunction with Incentive Stock Options, Stock Reload
24
Options may be granted only at the time of the grant of such Incentive Option.
In conjunction with Nonqualified Stock Options, Stock Reload Options may be
granted either at or after the time of the grant of such Nonqualified Stock
Options. A Stock Reload Option permits a Holder who exercises an option by
delivering already owned stock (i.e., the stock-for-stock method) to receive
back from the Company a new option (at the current market price) for the same
number of shares delivered to exercise the option, which new option may not be
exercised until one year after it was granted and expires on the date the
original option would have expired (had it not been previously exercised).
Other Stock-Based Awards. The Compensation Committee may grant performance
shares and shares of stock valued with reference to the performance of the
Company, either alone or in addition to or in tandem with other Awards. Subject
to the terms of the Equity Incentive Plan, the Compensation Committee has
complete discretion to determine the terms and conditions applicable to any
such stock-based awards. Such terms and conditions may require, among other
things, continued employment and/or the attainment of specified performance
objectives.
Director Fee Investment Option Grant Program
The Board has complete discretion in implementing the director fee
investment option grant program for one or more calendar years in which
non-employee directors may participate. As a condition to such participation,
each non-employee director must, prior to the start of the calendar year of
participation, file with the Company's Chief Financial Officer an election
directing us to apply all or a portion of his or her cash retainer fee for the
upcoming calendar year to the acquisition of an option grant under the program.
Each non-employee director who files such a timely election will
automatically be granted a Nonqualified Stock Option on the first trading day
in January of the calendar year for which that retainer fee election is to be
in effect.
The number of shares subject to each such option will be determined by
dividing the amount of the retainer fee for the calendar year to be applied to
the program by two-thirds of the fair market value per share of our common
stock on the grant date, and the exercise price will be equal to one-third of
the fair market value of the option shares on the grant date. As a result, the
total spread on the option shares at the time of grant (the fair market value
of the option shares on the grant date less the aggregate exercise price
payable for those shares) will be equal to the portion of the retainer fee that
optionee has elected to be applied to the program. In effect, the portion of
the annual retainer fee otherwise payable in cash serves as an immediate
prepayment, as of the time of the option grant, of two-thirds of the then
current market price of the shares of common stock subject to the option.
The option will become exercisable in a series of 12 equal monthly
installments upon the Holder's completion of each month of Board service in the
calendar year for which such retainer fee election is in effect and may be
subject to full and immediate vesting upon certain changes of control. Each
option shall have a maximum term of ten years measured from the grant date.
We have not yet implemented the director fee investment option grant program.
Term and Termination of the Equity Incentive Plan
The Equity Incentive Plan became effective upon approval of the plan by the
Board of Directors on March 14, 2002 (the "Effective Date"); provided that the
continuance of the plan is conditioned on receipt of stockholder approval at
the Annual Meeting. Unless terminated by the board of directors, the Equity
Incentive Plan shall continue to remain effective until such time as no further
Awards may be granted and all Awards granted under the Equity Incentive Plan
are no longer outstanding. Notwithstanding the foregoing, grants of Incentive
Stock Options may only be made during the ten-year period following the
Effective Date.
25
Amendments to the Plan
The Equity Incentive Plan provides that the board of directors may amend or
terminate the Equity Incentive Plan in any respect whatsoever, provided that
any such amendment or termination will not affect Awards previously granted. If
required by Rule 16b-3 under the Exchange Act, or any Code or NASD
requirements, the board of directors will not amend or terminate the Equity
Incentive Plan without stockholder approval.
Federal Income Tax Consequences
The following discussion of the principal federal income tax consequences of
participation in the Equity Incentive Plan is based on statutory authority, as
well as judicial and administrative interpretations as of the date of this
Proxy Statement, all of which are subject to change at any time (possibly with
retroactive effect). As the law is technical and complex, the discussion below
necessarily represents only a general summary. The Equity Incentive Plan is not
qualified under Section 401(a) of the Code.
Incentive Stock Options. Incentive Stock Options granted under the Equity
Incentive Plan are intended to meet the definitional requirements of Section
422(b) of the Code for "incentive stock options."
Any employee who receives an Incentive Stock Option does not recognize any
taxable income upon the grant of such Incentive Stock Option. Similarly, the
exercise of an Incentive Stock Option generally does not give rise to federal
income tax to the employee, provided that (i) the federal "alternative minimum
tax," which depends on the employees' particular tax situation, does not apply
and (ii) the employee is employed by the Company from the date of grant of the
option until 3 months prior to the exercise thereof, except where such
employment terminates by reason of disability (where the 3 month period is
extended to 1 year) or death (where this requirement does not apply). If an
employee exercises an Incentive Stock Option after these requisite periods, the
Incentive Stock Option will be treated as a Nonqualified Stock Option and will
be subject to the rules set forth below under the caption "Nonqualified Stock
Options."
Further, if after exercising an Incentive Stock Option, an employee disposes
of the shares so acquired more than two years form the date of grant and more
than one year from the date of receipt of the shares upon exercise of such
Incentive Stock Option (the "applicable holding period"), the employee will
normally recognize a capital gain or loss equal to the difference, if any,
between the amount received for the shares and the employee's tax basis in such
shares.
If, however, an employee does not hold the shares so acquired for the
applicable holding period, thereby making a "disqualifying disposition," the
employee would realize ordinary income on the excess of the fair market value
of the shares at the time the Incentive Stock Option was exercised over the
exercise price and the balance, if any, would be short-term or long-term
capital gain depending on the length of the employee's holding period and
provided that the employee held such shares as a capital asset at such time. If
the sales price of the stock sold in a disqualifying disposition is less than
its fair market value on the exercise date, the ordinary income is limited to
the amount of the gain (if any) realized on the sale. If the sales price of the
stock sold in a disqualifying disposition is less than the exercise price, the
employee will recognize a capital loss.
An employee who exercises an Incentive Stock Option by delivering shares
previously acquired pursuant to the exercise of an Incentive Stock Option is
treated as making a "disqualifying disposition" of his or her shares if the
employee delivers them before the expiration of their applicable holding
period. Upon the exercise of an Incentive Stock Option with previously-acquired
shares as to which no disqualifying disposition occurs, despite some
uncertainty, it appears that the employee would not recognize gain or loss with
respect to such previously-acquired shares.
Nonqualified Stock Options. Nonqualified Stock Options granted under the
Equity Incentive Plan are options that do not qualify as Incentive Stock
Options. An individual who receives a Nonqualified Stock Option
26
generally will not recognize any taxable income upon the grant of such
Nonqualified Stock Option. However, the individual generally will recognize
ordinary income upon exercise of a Nonqualified Stock Option in an amount equal
to the excess of (i) the fair market value of the shares at the time of
exercise over (ii) the exercise price.
The ordinary income recognized with respect to the receipt of shares upon
exercise of a Nonqualified Stock Option will be subject to both wage
withholding and employment taxes.
As a result of Section 16(b) of the Exchange Act, any individual who is an
officer or director of the Company or a beneficial owner of more than ten
percent (10%) of any class of equity securities of the Company should consult
with his or her tax advisor as to whether the timing of income recognition is
deferred for any period following the exercise of a Nonqualified Stock Option
(i.e., the "Deferral Period"). Absent an election pursuant to Section 83(b) of
the Code filed with the Internal Revenue Service within 30 days after the date
of transfer of such shares pursuant to the option (i.e., a "Section 83(b)
election"), recognition of income by such an individual will be deferred until
the expiration of the Deferral Period, if any.
An individuals' tax basis in the shares received on exercise of a
Nonqualified Stock Option will be equal to the amount of any cash paid on
exercise, plus the amount of ordinary income recognized by such individual as a
result of the receipt of such shares. The holding period for such shares would
begin just after the transfer of the shares or, in the case of an officer,
director or beneficial owner of more than 10% of any class of equity securities
of the Company who does not make a Section 83(b) election, just after the
expiration of the Deferral Period, if any.
If an individual exercises a Nonqualified Stock Option by delivering shares
to the Company, other than shares previously acquired pursuant to the exercise
of an Incentive Stock Option which is treated as a "disqualifying disposition"
as described above, the individual will not recognize gain or loss with respect
to the exchange of such shares, even if their then fair market value is
different from the individual's tax basis. The individual, however, will be
taxed as described above with respect to the exercise of the Nonqualified Stock
Option as if he or she had paid the exercise price in cash. So long as the
individual receives a separate identifiable stock certificate therefor, the tax
basis and the holding period for that number of shares received on such
exercise that is equal to the number of shares surrendered on such exercise
will be equal to the tax basis and include the holding period of those shares
surrendered. The individual's tax basis and holding period for the additional
shares received on exercise of a Nonqualified Stock Option paid for, in whole
or in part, with shares will be the same as if the individual had exercised the
Nonqualified Stock Option solely for cash.
Upon a change of control of the Company, some or all of the then-outstanding
stock options may immediately become exercisable. In general, if the total
amount of payments to an individual that are contingent upon a "change of
control" of the Company (as defined in Section 280G of the Code), including
payments under the Equity Incentive Plan that vest upon a change of control,
equals or exceeds three times the individual's "base amount" (generally, such
individual's average annual compensation for the five complete years preceding
the "change of control"), then, subject to certain exceptions, the payments may
be treated as "parachute payments" under the Code, in which case the individual
would be subject to a 20% excise tax on a portion of such payments.
Stock Appreciation Rights. Recipients of SARs do not recognize income upon
the grant of such rights. When a Holder elects to receive payment of a SAR, the
Holder recognizes ordinary income in an amount equal to the cash and fair
market value of the stock received.
Restricted Stock Awards. In the absence of a Section 83(b) election,
grantees of Restricted Stock do not recognize income at the time of the grant
of such stock. When shares of Restricted Stock are no longer subject to a
substantial risk of forfeiture, grantees recognize ordinary income in an amount
equal to the fair market value of the stock less the amount paid, if any, for
the stock. Alternatively, the recipient may elect under Section 83(b) to report
the fair market value of the Restricted Stock as income on the date the stock
is transferred to the recipient.
27
Deferred Stock. A recipient of an award of Deferred Stock under the Equity
Incentive Plan will be taxed at ordinary income rates on the fair market value
of the award at the later of the time when the Deferred Stock is transferred to
the recipient or when the recipient's rights in such Deferred Stock become
vested.
Stock Reload Options. A recipient who receives Stock Reload Options under
the Equity Incentive Plan will be taxed on such options in the manner described
above under the heading "Incentive Stock Options" or "Nonqualified Options," as
appropriate. The recipient will not be taxed on the grant of the Stock Reload
Options, but will be taxed upon their exercise or on a later sale of the
underlying Stock, depending on the nature of the options.
Other Stock-Based Awards. The tax consequences arising from the issuance of
Other Stock-Based Awards will depend on the specific terms of the Award, but in
most cases the recipient will be taxed at ordinary income rates on the fair
market value of the Award at the later of the time when cash or stock is
transferred to the recipient pursuant to the Award or when the recipient's
rights in the subject of the Award become vested.
Potential Limitation on Company Deductions. Section 162(m) of the Code
denies a deduction to any publicly held corporation for compensation paid to
certain employees in a taxable year to the extent that compensation exceeds
$1.0 million for a covered employee. It is possible that compensation
attributable to awards previously granted or granted in the future under the
Equity Incentive Plan, combined with all other types of compensation received
by a covered employee from the Company, may cause this limitation to be
exceeded in any particular year.
New Plan Benefits
The chart below shows the Incentive Awards that have been allocated to our
named executive officer or Directors as a Group, our Executive Officers as a
group, and all employees as a group excluding our executive officers.
Ascendant Solutions, Inc. 2002 Equity Incentive Plan
Name and Position Dollar Value ($) Number of Units
- ----------------- ---------------- ---------------
David E. Bowe..................................................................... $148,750 425,000(1)
President, Chief Executive Officer and Chief Financial Officer
All current executive officers as a group......................................... $148,750 425,000(1)
All current directors who are not executive officers, as a group.................. $ 0 0
All employees, including all current officers who are not executive officers, as a
group........................................................................... $ 3,500 10,000(2)
- --------
(1) Represents shares of restricted stock that were issued in exchange for the
cancellation of options to purchase an aggregate of 450,000 shares of
common stock.
(2) Represents shares of restricted stock that were issued in exchange for the
cancellation of options to purchase an aggregate of 10,000 shares of common
stock.
Except as set forth in the New Plan Benefits table above, there are no other
awards that are presently proposed to be granted to any executive officers,
other employees, or directors under the Equity Incentive Plan. The type,
number, and value of additional awards that may be granted in the future under
the Equity Incentive Plan are not yet determinable, however, for a discussion
on the options granted to our officers, directors and employees during the
fiscal year ended December 31, 2001, see Item 2. Amendment to 1999 Long-Term
Incentive Plan, as amended--New Plan Benefits.
28
See "--Certain Federal Income Tax Consequences" above for a discussion of
the federal income tax consequences to the Company and optionees of the
issuance and exercise of options or other awards under the Equity Incentive
Plan.
A copy of the Equity Incentive Plan is attached as Exhibit B to this Proxy
Statement and incorporated herein by reference.
The board of directors recommends that stockholders vote FOR Item 3.
29
ITEM 4.
RATIFICATION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
The board of directors of Ascendant Solutions has appointed Ernst & Young
LLP ("Ernst & Young") as independent auditors to examine our consolidated
financial statements for the fiscal year ending December 31, 2002 and to render
other professional services as required.
We are submitting the appointment of Ernst & Young to stockholders to obtain
your ratification. Ernst & Young has served as independent auditors to the
company since inception. Representatives of Ernst &Young 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.
The board of directors recommend that stockholders vote FOR Item 4.
ANNUAL MEETING ADVANCE NOTICE REQUIREMENTS
Stockholder Proposals. Our bylaws provide that stockholder proposals and
director nominations by stockholders may be made in compliance with certain
advance notice, informational and other applicable requirements. With respect
to stockholder 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 16250 Dallas Parkway, Suite 102,
Dallas, Texas 75248 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 stockholder;
. the number of shares of common stock beneficially owned by the proposing
stockholder; and
. any material interest of the proposing stockholder in such business.
The notice must be received by the Secretary no later than December 26, 2002
(assuming that the Company's 2003 Annual Meeting of Stockholders is held on a
date that is within 30 days from the date on which the 2002 Annual Meeting was
held) for inclusion in the proxy statement and form of proxy relating to that
meeting.
Board Nominations. A stockholder 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 stockholder 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 stockholder:
. the name and record address of the proposing stockholder; and
. the number of shares of common stock beneficially owned by the proposing
stockholder.
30
Such nominations must be made pursuant to the same advance notice
requirements for stockholder 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 stockholder proposals to be included in our proxy
materials for a meeting of stockholders. The chairman of the meeting may refuse
to bring before a meeting any business not brought in compliance with
applicable law and our bylaws.
OTHER MATTERS
The board of directors knows of no matters other than those described in
this Proxy Statement which are likely to come before the Annual Meeting. If any
other matters properly come before the Annual Meeting, or any adjournment
thereof, the persons named in the accompanying form of proxy intend to vote the
proxies in accordance with their best judgment, and in accordance with Rule
14a-4 promulgated under the Exchange Act.
In addition, pursuant to Rule 14a-4 of the Exchange Act, the Company may
exercise discretionary voting authority at the 2003 Annual Meeting under
proxies it solicits to vote on a proposal made by a stockholder that the
stockholder does not seek to include in the Company's proxy statement pursuant
to Rule 14a-8, unless the Company is notified about the proposal no later than
March 11, 2003 (assuming that the Company's 2003 Annual Meeting of Stockholders
is held on a date that is within 30 days from the date on which the 2002 Annual
Meeting was held), and the stockholder satisfies the other requirements of Rule
14a-4(c).
The Company will provide without charge a copy of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2001, including the
financial statements, to each stockholder upon written request to Susan K.
Olson, Ascendant Solutions, Inc., 16250 Dallas Parkway, Suite 102, Dallas,
Texas 75248.
31
EXHIBIT A
ASCENDANT SOLUTIONS
1999 LONG TERM INCENTIVE PLAN,
as amended
Adopted Effective: May 12, 1999
TABLE OF CONTENTS
ARTICLE I PURPOSE OF PLAN................................... 1
ARTICLE II EFFECTIVE DATE AND TERM OF PLAN.................. 1
2.1 Term of Plan............................................ 1
2.2 Effect on Stock Options................................. 1
2.3 Shareholder Approval.................................... 1
ARTICLE III SHARES SUBJECT TO PLAN.......................... 1
3.1 Number of Shares........................................ 1
3.2 Source of Shares........................................ 1
3.3 Availability of Unused Shares........................... 1
3.4 Adjustment Provisions................................... 1
3.5 Reservation of Shares................................... 2
ARTICLE IV ADMINISTRATION OF PLAN........................... 2
4.1 Administering Body...................................... 2
4.2 Authority of Administering Body......................... 3
4.3 No Liability............................................ 4
4.4 Amendments.............................................. 4
4.5 Other Compensation Plans................................ 4
4.6 Plan Binding on Successors.............................. 4
4.7 References to Successor Statutes, Regulations and Rules. 4
4.8 Issuances for Compensation Purposes Only................ 5
4.9 Invalid Provisions...................................... 5
4.10 Governing Law.......................................... 5
ARTICLE V GENERAL AWARD PROVISIONS.......................... 5
5.1 Participation in the Plan............................... 5
5.2 Stock Option Documents.................................. 5
5.3 Exercise of Stock Options............................... 5
5.4 Payment For Stock Options............................... 6
5.5 No Employment Rights.................................... 6
5.6 Restrictions Under Applicable Laws and Regulations...... 6
5.7 Additional Conditions................................... 7
5.8 No Privileges of Stock Ownership........................ 7
5.9 Nonassignability........................................ 7
5.10 Information to Optionees............................... 8
5.11 Withholding Taxes...................................... 8
5.12 Legends on Stock Options and Stock Certificates........ 8
5.13 Effect of Termination of Employment on Stock Options... 8
5.14 Limits on Stock Options to Certain Eligible Persons.... 9
ARTICLE VI STOCK OPTIONS.................................... 9
6.1 Nature of Stock Options................................. 9
6.2 Option Exercise Price................................... 9
6.3 Option Period and Vesting............................... 10
6.4 Special Provisions Regarding Incentive Stock Options.... 10
ARTICLE VII REORGANIZATIONS................................. 10
7.1 Corporate Transactions Not Involving a Change in Control 10
7.2 Corporate Transactions Involving a Change in Control.... 11
ARTICLE VIII DEFINITIONS.................................... 11
i
ASCENDANT SOLUTIONS
1999 LONG TERM INCENTIVE PLAN
-----------------
ARTICLE I
PURPOSE OF PLAN
The Company has adopted this Plan to promote the interests of the Company
and its shareholders by using investment interests in the Company to attract,
retain and motivate its management and other persons, to encourage and reward
their contributions to the performance of the Company and to align their
interests with the interests of the Company's shareholders. Capitalized terms
not otherwise defined herein shall have the meanings ascribed to them in
Article VIII.
ARTICLE II
EFFECTIVE DATE AND TERM OF PLAN
2.1 Term of Plan. This Plan became effective as of the Effective Date and
shall continue in effect until the Expiration Date, at which time this Plan
shall automatically terminate.
2.2 Effect on Stock Options. Stock Options may be granted during the Plan
Term, but no Stock Options may be granted after the Plan Term. Notwithstanding
the foregoing, each Stock Option properly granted under this Plan during the
Plan Term shall remain in effect after termination of this Plan until such
Stock Option has been exercised, terminated or expired in accordance with its
terms and the terms of this Plan.
2.3 Shareholder Approval. This Plan shall be approved by the Company's
shareholders within 12 months after the Effective Date. The effectiveness of
any Stock Options granted prior to such shareholder approval shall be subject
to such shareholder approval.
ARTICLE III
SHARES SUBJECT TO PLAN
3.1 Number of Shares. The maximum number of shares of Common Stock that
may be issued pursuant to Stock Options granted under this Plan shall be
2,500,000, subject to adjustment as set forth in Section 3.4.
3.2 Source of Shares. The Common Stock to be issued under this Plan will
be made available, at the discretion of the Board, either from authorized but
unissued shares of Common Stock or from previously issued shares of Common
Stock reacquired by the Company, including without limitation shares purchased
on the open market.
3.3 Availability of Unused Shares. Shares of Common Stock subject to
unexercised portions of any Stock Option granted under this Plan that expire,
terminate or are canceled, and shares of Common Stock issued pursuant to Stock
Options under this Plan that are reacquired by the Company pursuant to the
terms of the Stock Options under which such shares were issued, will again
become available for the grant of further Stock Options under this Plan.
3.4 Adjustment Provisions.
(a) If the outstanding shares of Common Stock of the Company are
increased, decreased or exchanged for a different number or kind of shares or
other securities, or if additional shares or new or different shares or
other securities are distributed in respect of such shares of Common Stock (or
any stock or securities received with respect to such Common Stock), through
merger, consolidation, sale or exchange of all or substantially all of the
assets of the Company, reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split, spin-off or other
distribution with respect to such shares of Common Stock (or any stock or
securities received with respect to such Common Stock), an appropriate and
proportionate adjustment may be made in (1) the maximum number and kind of
shares subject to this Plan as provided in Section 3.1, (2) the number and kind
of shares or other securities subject to then outstanding Stock Options and/or
(3) the price for each share or other unit of any other securities subject to
the then outstanding Stock Options.
(b) No fractional interests will be issued under this Plan resulting
from any adjustments.
(c) To the extent any adjustments relate to stock or securities of the
Company, such adjustments shall be made by the Administering Body (as defined
in Article VIII hereof), whose determination in that respect shall be final,
binding and conclusive.
(d) The grant of Stock Options pursuant to this Plan shall not affect in
any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or to consolidate or to dissolve, liquidate or sell, or
transfer all or any part of its business or assets.
(e) No adjustment to the terms of an Incentive Stock Option shall be
made unless such adjustment either (i) would not cause such Option to lose its
status as an Incentive Stock Option or (ii) is agreed to in writing by the
Administering Body and the Recipient.
3.5 Reservation of Shares. The Company will at all times reserve and keep
available such number of shares of Common Stock as shall equal at least the
number of shares of Common Stock subject to then outstanding Stock Options
issuable in shares of Common Stock under this Plan.
ARTICLE IV
ADMINISTRATION OF PLAN
4.1 Administering Body.
(a) Subject to the provisions of Section 4.1(b), this Plan shall be
administered by the Board or the Long Term Incentive Plan Committee of the
Board appointed pursuant to Section 4.1(b)(i) with respect to all Eligible
Persons who are not Designated Eligible Persons or the Special Long Term
Incentive Plan Committee of the Board appointed pursuant to Section 4(b)(ii)
with respect to all Designated Eligible Persons.
(b) (i) The Board, in its sole discretion, may from time to time
appoint a Long Term Incentive Plan Committee of not less than two Board members
to administer this Plan with respect to all Eligible Persons who are not
Designated Eligible Persons and, subject to applicable law, to exercise all of
the powers, authority and discretion of the Board under this Plan with respect
to all Eligible Persons who are not Designated Eligible Persons. The Board may
from time to time increase or decrease (but not below two) the number of
members of the Long Term Incentive Plan Committee, remove from membership on
the Long Term Incentive Plan Committee all or any portion of its members,
and/or appoint such person or persons as it desires to fill any vacancy
existing on the Long Term Incentive Plan Committee, whether caused by removal,
resignation or otherwise. The Board may disband the Long Term Incentive Plan
Committee at any time and revest in the Board the administration of this Plan
with respect to all Eligible Persons who are not Designated Eligible Persons.
(ii) (A) The Board, in its sole discretion, may from time to time
appoint a Special Long Term Incentive Plan Committee of not less than two
Board members to administer this Plan with respect to all
2
Designated Eligible Persons and, subject to applicable law, to exercise all
of the powers, authority and discretion of the Board under this Plan with
respect to all Designated Eligible Persons. The Board may from time to time
increase or decrease (but not below two) the number of members of the
Special Long Term Incentive Plan Committee, remove from membership on the
Special Long Term Incentive Plan Committee all or any portion of its
members, and/or appoint such person or persons as it desires to fill any
vacancy existing on the Special Long Term Incentive Plan Committee, whether
caused by removal, resignation or otherwise. The Board may disband the
Special Long Term Incentive Plan Committee at any time and revest in the
Board the administration of this Plan with respect to all Designated
Eligible Persons.
(B) Notwithstanding the foregoing provisions of Section
4.1(b)(ii)(A) to the contrary, so long as the Company remains an Exchange
Act Registered Company, if the Board of Directors shall include two or more
directors each of whom is a Non-employee Director and, in addition, also is
an Outside Director, then the Board shall appoint the Special Long Term
Incentive Plan Committee and each member of the Special Long Term Incentive
Plan Committee shall be a Non-employee Director and, in addition, also shall
be an Outside Director.
(iii) The Long Term Incentive Plan Committee and the Special Long
Term Incentive Plan Committee shall report to the Board the names of
Eligible Persons granted Stock Options, the number of shares of Common Stock
covered by each Stock Option and the terms and conditions of each such Stock
Option.
4.2 Authority of Administering Body.
(a) Subject to the express provisions of this Plan, the Administering
Body shall have the power to interpret and construe this Plan and any Stock
Option Documents or other documents defining the rights and obligations of the
Company and Optionees hereunder and thereunder, to determine all questions
arising hereunder and thereunder, to adopt and amend such rules and regulations
for the administration hereof and thereof as it may deem desirable, and
otherwise to carry out the terms of this Plan and such Stock Option Documents
and other documents. The interpretation and construction by the Administering
Body of any provisions of this Plan or of any Stock Option shall be conclusive
and binding. Any action taken by, or inaction of, the Administering Body
relating to this Plan or any Stock Options shall be within the absolute
discretion of the Administering Body and shall be conclusive and binding upon
all persons. Subject only to compliance with the express provisions hereof, the
Administering Body may act in its absolute discretion in matters related to
this Plan and any and all Stock Options.
(b) Subject to the express provisions of this Plan, the Administering
Body may from time to time in its discretion select the Eligible Persons to
whom, and the time or times at which, Stock Options shall be granted, the
nature of each Stock Option, the number of shares of Common Stock that make up
or underlie each Stock Option, the period for the exercise of each Stock
Option, and such other terms and conditions applicable to each individual Stock
Option as the Administering Body shall determine. The Administering Body may
grant at any time new Stock Options to an Eligible Person who has previously
received Stock Options whether such prior Stock Options are still outstanding,
have previously been exercised as a whole or in part, or are canceled in
connection with the issuance of new Stock Options. The Administering Body may
grant Stock Options singly, in combination or in tandem with other Stock
Options, as it determines in its discretion. Any and all terms and conditions
of the Stock Options, including exercise price, may be established by the
Administering Body without regard to existing Stock Options.
(c) Any action of the Administering Body with respect to the
administration of this Plan shall be taken pursuant to a majority vote of the
authorized number of members of the Administering Body or by the unanimous
written consent of its members; provided, however, that (i) if the
Administering Body is the Long Term Incentive Plan Committee or the Special
Long Term Incentive Plan Committee and consists of two
3
members, then actions of the Administering Body must be unanimous and (ii) if
the Administering Body is the Board, actions taken at a meeting of the Board
shall be valid if approved by directors constituting a majority of the required
quorum for such meeting.
4.3 No Liability. No member of the Board or the Long Term Incentive Plan
Committee or the Special Long Term Incentive Plan Committee or any designee
thereof will be liable for any action or inaction with respect to this Plan or
any Stock Option or any transaction arising under this Plan or any Stock
Option, except in circumstances constituting bad faith of such member.
4.4 Amendments.
(a) The Administering Body may, insofar as permitted by applicable law,
rule or regulation, from time to time suspend or discontinue this Plan or
revise or amend it in any respect whatsoever, and this Plan as so revised or
amended will govern all Stock Options hereunder, including those granted before
such revision or amendment; provided, however, that no such revision or
amendment shall alter, impair or diminish any rights or obligations under any
Stock Option previously granted under this Plan, without the written consent of
the Optionee. Without limiting the generality of the foregoing, the
Administering Body is authorized to amend this Plan to comply with or take
advantage of amendments to applicable laws, rules or regulations, including
amendments to the Securities Act, Exchange Act or the IRC or any rules or
regulations promulgated thereunder. No shareholder approval of any amendment or
revision shall be required unless (i) such approval is required by applicable
law, rule or regulation or (ii) an amendment or revision to this Plan would
materially increase the number of shares subject to this Plan (as adjusted
under Section 3.4), materially modify the requirements as to eligibility for
participation in this Plan, extend the final date upon which Stock Options may
be granted under this Plan, or otherwise materially increase the benefits
accruing to Recipients in a manner not specifically contemplated herein, or
affect this Plan's compliance with Rule 16b-3 or applicable provisions of or
regulations under the IRC, and shareholder approval of the amendment or
revision is required to comply with Rule 16b-3 or applicable provisions of or
rules under the IRC.
(b) The Administering Body may, with the written consent of an Optionee,
make such modifications in the terms and conditions of a Stock Option as it
deems advisable. Without limiting the generality of the foregoing, the
Administering Body may, in its discretion with the written consent of Optionee,
at any time and from time to time after the grant of any Stock Option
accelerate or extend the vesting or exercise period of any Stock Option as a
whole or in part, and adjust or reduce the exercise price of Stock Options held
by such Optionee by cancellation of such Stock Options and granting of Stock
Options at lower or exercise prices or by modification, extension or renewal of
such Stock Options. In the case of Incentive Stock Options, Recipients
acknowledge that extensions of the exercise period may result in the loss of
the favorable tax treatment afforded incentive stock options under Section 422
of the IRC.
(c) Except as otherwise provided in this Plan or in the applicable Stock
Option Document, no amendment, revision, suspension or termination of this Plan
will, without the written consent of the Optionee, alter, terminate, impair or
adversely affect any right or obligation under any Stock Option previously
granted under this Plan.
4.5 Other Compensation Plans. The adoption of this Plan shall not affect
any other stock option, incentive or other compensation plans in effect for the
Company, and this Plan shall not preclude the Company from establishing any
other forms of incentive or other compensation for employees, directors,
advisors or consultants of the Company, whether or not approved by shareholders.
4.6 Plan Binding on Successors. This Plan shall be binding upon the
successors and assigns of the Company.
4.7 References to Successor Statutes, Regulations and Rules. Any reference
in this Plan to a particular statute, regulation or rule shall also refer to
any successor provision of such statute, regulation or rule.
4
4.8 Issuances for Compensation Purposes Only. This Plan constitutes an
"employee benefit plan" as defined in Rule 405 promulgated under the Securities
Act. Stock Options to eligible employees or directors shall be granted for any
lawful consideration, including compensation for services rendered, promissory
notes or otherwise. Stock Options to consultants and advisors shall be granted
only in exchange for bona fide services rendered by such consultants or
advisors and such services must not be in connection with the offer and sale of
securities in a capital-raising transaction.
4.9 Invalid Provisions. In the event that any provision of this Plan is
found to be invalid or otherwise unenforceable under any applicable law, such
invalidity or unenforceability shall not be construed as rendering any other
provisions contained herein invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same extent as though
the invalid and unenforceable provision were not contained herein.
4.10 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the internal laws of the State of Texas, without giving effect
to the principles of the conflicts of laws thereof.
ARTICLE V
GENERAL AWARD PROVISIONS
5.1 Participation in the Plan.
(a) A person shall be eligible to receive grants of Stock Options under
this Plan if, at the time of the grant of the Stock Option, such person is an
Eligible Person.
(b) Incentive Stock Options may be granted only to Eligible Persons
meeting the employment requirements of Section 422 of the IRC.
(c) Notwithstanding anything to the contrary herein, the Administering
Body may, in order to fulfill the purposes of this Plan, modify grants of Stock
Options to Recipients who are foreign nationals or employed outside of the
United States to recognize differences in applicable law, tax policy or local
custom.
5.2 Stock Option Documents.
(a) Each Stock Option granted under this Plan shall be evidenced by an
agreement duly executed on behalf of the Company and by the Recipient or, in
the Administering Body's discretion, a confirming memorandum issued by the
Company to the Recipient, setting forth such terms and conditions applicable to
the Stock Option as the Administering Body may in its discretion determine.
Stock Option Documents may but need not be identical and shall comply with and
be subject to the terms and conditions of this Plan, a copy of which shall be
provided to each Recipient and incorporated by reference into each Stock Option
Document. Any Stock Option Document may contain such other terms, provisions
and conditions not inconsistent with this Plan as may be determined by the
Administering Body.
(b) In case of any conflict between this Plan and any Stock Option
Document, this Plan hall control.
5.3 Exercise of Stock Options. No Stock Option shall be exercisable except
in respect of whole shares, and fractional share interests shall be
disregarded. Not less than 100 shares of Common Stock (or such other amount as
is set forth in the applicable Stock Option Documents) may be purchased at one
time and Stock Options must be exercised in multiples of 100 unless the number
purchased is the total number at the time available for purchase under the
terms of the Stock Option. A Stock Option shall be deemed to be exercised when
the Secretary or other designated official of the Company receives written
notice of such exercise from the Optionee, together with payment of the
exercise price made in accordance with Section 5.4 and any amounts required
under Section 5.11. Notwithstanding any other provision of this Plan, the
Administering Body may impose, by rule
5
and/or in Stock Option Documents, such conditions upon the exercise of Stock
Options (including without limitation conditions limiting the time of exercise
to specified periods) as may be required to satisfy applicable regulatory
requirements, including without limitation Rule 16b-3 and Rule 10b-5 under the
Exchange Act, and any amounts required under Section 5.12 or other applicable
section of or regulation under the IRC.
5.4 Payment For Stock Options.
(a) The exercise price or other payment for a Stock Option shall be
payable upon the exercise of a Stock Option pursuant to a Stock Option granted
hereunder by cash or such other terms as the Administering Body may approve.
(b) [intentionally omitted].
(c) The Administering Body may, in the exercise of its discretion, (i)
allow exercise of Stock Options in a broker- assisted or similar transaction in
which the exercise price is not received by the Company until promptly after
exercise, and/or (ii) allow the Company to loan the exercise price to the
Optionee, if the exercise will be followed by a prompt sale of some or all of
the underlying shares and a portion of the sale proceeds is dedicated to full
payment of the exercise price and amounts required pursuant to Section 5.11.
5.5 No Employment Rights. Nothing contained in this Plan (or in Stock
Option Documents or in any other documents related to this Plan or to Stock
Options granted hereunder) shall confer upon any Eligible Person or Recipient
any right to continue in the employ of the Company or any Affiliated Entity or
constitute any contract or agreement of employment or engagement, or interfere
in any way with the right of the Company or any Affiliated Entity to reduce
such person's compensation or other benefits or to terminate the employment or
engagement of such Eligible Person or Recipient, with or without cause. Except
as expressly provided in this Plan or in any statement evidencing the grant of
Stock Options pursuant to this Plan, the Company shall have the right to deal
with each Recipient in the same manner as if this Plan and any such statement
evidencing the grant of Stock Options pursuant to this Plan did not exist,
including without limitation with respect to all matters related to the hiring,
discharge, compensation and conditions of the employment or engagement of the
Recipient. Any questions as to whether and when there has been a termination of
a Recipient's employment or engagement, the reason (if any) for such
termination, and/or the consequences thereof under the terms of this Plan or
any statement evidencing the grant of Stock Options pursuant to this Plan shall
be determined by the Administering Body and the Administering Body's
determination thereof shall be final and binding, provided such determination
is in accordance with the applicable provisions of any employment agreement
with the Recipient.
5.6 Restrictions Under Applicable Laws and Regulations.
(a) All Stock Options granted under this Plan shall be subject to the
requirement that, if at any time the Company shall determine, in its
discretion, that the listing, registration or qualification of the shares
subject to Stock Options granted under this Plan upon any securities exchange
or under any federal, state or foreign law, or the consent or approval of any
government regulatory body, is necessary or desirable as a condition of, or in
connection with, the granting of such Stock Options or the issuance, if any, or
purchase of shares in connection therewith, such Stock Options may not be
exercised as a whole or in part unless and until such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Company. During the term of this Plan, the
Company will use its reasonable efforts to seek to obtain from the appropriate
regulatory agencies any requisite qualifications, consents, approvals or
authorizations in order to issue and sell such number of shares of its Common
Stock as shall be sufficient to satisfy the requirements of this Plan. The
inability of the Company to obtain from any such regulatory agency having
jurisdiction thereof the qualifications, consents, approvals or authorizations
deemed by the Company to be necessary for the lawful issuance and sale of any
shares of its Common Stock hereunder shall relieve the Company of any liability
in respect of the nonissuance or sale of such stock as to which such requisite
authorization shall not have been obtained.
6
(b) Unless the Company otherwise agrees, the Company shall be under no
obligation to register or qualify the issuance of Stock Options or underlying
shares under the Securities Act or applicable state securities laws. Unless the
issuance of Stock Options and underlying shares have been registered under the
Securities Act and qualified or registered under applicable state securities
laws, the Company shall be under no obligation to issue any Stock Options or
underlying shares of Common Stock covered by any Stock Options unless the Stock
Options and underlying shares may be issued pursuant to applicable exemptions
from such registration or qualification requirements. In connection with any
such exempt issuance, the Administering Body may require the Optionee to
provide a written representation and undertaking to the Company, satisfactory
in form and scope to the Company and upon which the Company may reasonably
rely, that such Optionee is acquiring such Stock Options and underlying shares
for such Optionee's own account as an investment and not with a view to, or for
sale in connection with, the distribution of any such shares of stock, and that
such person will make no transfer of the same except in compliance with any
rules and regulations in force at the time of such transfer under the
Securities Act and other applicable law, and that if shares of stock are issued
without such registration, a legend to this effect (together with any other
legends deemed appropriate by the Administering Body) may be endorsed upon the
securities so issued. The Company may also order its transfer agent to stop
transfers of such shares. The Administering Body may also require the Optionee
to provide the Company such information and other documents as the
Administering Body may request in order to satisfy the Administering Body as to
the investment sophistication and experience of the Optionee and as to any
other conditions for compliance with any such exemptions from registration or
qualification.
5.7 Additional Conditions. Any Stock Option may also be subject to such
other provisions (whether or not applicable to any other Stock Option or
Optionee) as the Administering Body determines appropriate including without
limitation provisions to assist the Optionee in financing the purchase of
Common Stock through the exercise of Stock Options, provisions for the
forfeiture of or restrictions on resale or other disposition of shares of
Common Stock acquired under any form of benefit, provisions giving the Company
the right to repurchase shares of Common Stock acquired under any form of
benefit in the event the Optionee elects to dispose of such shares, and
provisions to comply with federal and state securities laws and federal and
state income tax withholding requirements.
5.8 No Privileges of Stock Ownership. Except as otherwise set forth
herein, an Optionee shall have no rights as a shareholder with respect to any
shares issuable or issued in connection with the Stock Option until the date of
the receipt by the Company of all amounts payable in connection with exercise
of the Stock Option and performance by the Optionee of all obligations
thereunder. Status as an Eligible Person shall not be construed as a commitment
that any Stock Option will be granted under this Plan to an Eligible Person or
to Eligible Persons generally. No person shall have any right, title or
interest in any fund or in any specific asset (including shares of capital
stock) of the Company by reason of any Stock Option granted hereunder. Neither
this Plan (or any documents related hereto) nor any action taken pursuant
hereto (or thereto) shall be construed to create a trust of any kind or a
fiduciary relationship between the Company and any Person. To the extent that
any Person acquires a right to receive Stock Options hereunder, such right
shall be no greater than the right of any unsecured general creditor of the
Company.
5.9 Nonassignability. No Stock Option granted under this Plan shall be
assignable or transferable except (a) by will or by the laws of descent and
distribution, or (b) subject to the final sentence of this paragraph of Section
5.9, upon dissolution of marriage pursuant to a qualified domestic relations
order or, in the discretion of the Administering Body and under circumstances
that would not adversely affect the interests of the Company, pursuant to a
nominal transfer that does not result in a change in beneficial ownership;
provided, however, that the Administering Body may in the applicable Stock
Option Document evidencing Stock Options granted hereunder or at any time
thereafter provide that Stock Options granted hereunder may be transferred
without consideration by the Recipient, subject to such rules as the
Administering Body may adopt to preserve the purposes of the Plan, to one or
more Permitted Transferees; provided further, that the Recipient gives the
Administering Body advance written notice describing the terms and conditions
of the proposed transfer and the Administering Body notifies the Recipient in
writing that such transfer would comply with the requirements of
7
the Plan and any applicable Stock Option Document. The terms of any Stock
Option transferred to Permitted Transferees in accordance with the immediately
preceding sentence shall apply to the Permitted Transferee, except that (a)
Permitted Transferees shall not be entitled to transfer any Stock Options,
other than by will or the laws of descent and distribution; and (b) Permitted
Transferees shall not be entitled to exercise any transferred Stock Options
unless there shall be in effect a registration statement on an appropriate form
covering the shares of Common Stock to be acquired pursuant to the exercise of
such Stock Option if the Administering Body determines that such a registration
statement is necessary or appropriate. During the lifetime of an Optionee,
Stock Options shall be exercisable only by the Optionee or such person's
guardian or legal representative.
Notwithstanding the foregoing, (a) no Stock Option owned by an Optionee
subject to Section 16 of the Exchange Act may be assigned or transferred in any
manner inconsistent with Rule 16b- 3, and (b) Incentive Stock Options (or other
Stock Options subject to transfer restrictions under the IRC) may not be
assigned or transferred in violation of Section 422(b)(5) of the IRC (or any
comparable or successor provision) or the regulations thereunder, and nothing
herein is intended to allow such assignment or transfer.
5.10 Information to Optionees.
(a) The Administering Body in its sole discretion shall determine what,
if any, financial and other information shall be provided to Optionees and when
such financial and other information shall be provided after giving
consideration to applicable federal and state laws, rules and regulations,
including without limitation applicable federal and state securities laws,
rules and regulations.
(b) The furnishing of financial and other information that is
confidential to the Company shall be subject to the Optionee's agreement that
the Optionee shall maintain the confidentiality of such financial and other
information, shall not disclose such information to third parties, and shall
not use the information for any purpose other than evaluating an investment in
the Company's securities under this Plan. The Optionee expressly acknowledges
that the number of shares exercisable under options granted hereunder, and the
terms thereof, shall be confidential. The Administering Body may impose other
restrictions on the access to and use of such confidential information and may
require an Optionee to acknowledge the Optionee's obligations under this
Section 5.10(b) (which acknowledgment shall not be a condition to the
Optionee's obligations under this Section 5.10(b)).
5.11 Withholding Taxes. Whenever the granting, vesting or exercise of any
Stock Option granted under this Plan, or the transfer of any shares issued upon
exercise of any Stock Option, gives rise to tax or tax withholding liabilities
or obligations, the Administering Body shall have the right to require the
Optionee to remit to the Company an amount sufficient to satisfy any federal,
state and local withholding tax requirements prior to issuance of such shares.
The Administering Body may, in the exercise of its discretion, allow
satisfaction of tax withholding requirements by accepting delivery of stock of
the Company (or by withholding a portion of the stock otherwise issuable in
connection with Stock Options).
5.12 Legends on Stock Options and Stock Certificates. Each Stock Option
Document and each certificate representing shares acquired upon exercise of
Stock Options shall be endorsed with all legends, if any, required by
applicable federal and state securities and other laws to be placed on the
Stock Option Document and/or the certificate. The determination of which
legends, if any, shall be placed upon Stock Option Documents or the
certificates shall be made by the Administering Body in its sole discretion and
such decision shall be final and binding.
5.13 Effect of Termination of Employment on Stock Options.
(a) Termination for Just Cause. Subject to Section 5.13(c), and except
as otherwise provided in a written agreement between the Company and the
Optionee which may be entered into at any time before or after
8
termination of employment of the Recipient, in the event of a Just Cause
Dismissal of a Recipient, all of the Optionee's unexercised Stock Options,
whether or not vested, shall expire and become unexercisable as of the date of
such Just Cause Dismissal.
(b) Termination Other than for Just Cause Dismissal. Subject to Section
5.13(c) and except as otherwise provided in a written agreement between the
Company and the Optionee, which may be entered into at any time before or after
termination of employment, (or if Optionee is not an employee of the Company,
Optionee's status as a director, consultant or advisor to the Company), in the
event of a Recipient's termination of employment or relationship with the
Company for:
(i) any reason other than for Just Cause Dismissal, death, Permanent
Disability or normal retirement, then the Optionee's Stock Options, whether
or not vested, shall expire and become unexercisable as of the earlier of
(A) the date such Stock Options would expire in accordance with their terms
had the Recipient remained employed and (B) thirty days after the date of
employment termination,
(ii) death, Permanent Disability or normal retirement, then the
Optionee's unexercised Stock Options shall, whether or not vested, expire
and become unexercisable as of the earlier of (A) the date such Stock
Options would expire in accordance with their terms had the Recipient
remained employed (or otherwise been affiliated with the Company as a
director, consultant or advisor), and (B) ninety days after the date of
employment or relationship termination.
(c) Alteration of Vesting and Exercise Periods. Notwithstanding
anything to the contrary in Section 5.13(a) or Section 5.13(b), the
Administering Body may in its discretion designate shorter or longer periods to
exercise Stock Options following a Recipient's termination of employment;
provided, however, that any shorter periods determined by the Administering
Body shall be effective only if provided for in the instrument that evidences
the grant to the Optionee of such Stock Options or if such shorter period is
agreed to in writing by the Optionee. Notwithstanding anything to the contrary
herein (unless otherwise provided in an option agreement), Stock Options shall
be exercisable by a an Optionee following such Optionee's termination of
employment only to the extent that installments thereof had become exercisable
on or prior to the date of such termination; and provided, further, that the
Administering Body may, in its discretion, elect to accelerate the vesting of
all or any portion of any Stock Options that had not become exercisable on or
prior to the date of such termination.
(d) Leave of Absence. In the case of any employee on an approved leave
of absence, the Administering Body may make such provision respecting
continuance of Stock Options as the Administering Body in its discretion deems
appropriate, except that in no event shall a Stock Option be exercisable after
the date such Stock Option would expire in accordance with its terms had the
Recipient remained continuously employed.
5.14 Limits on Stock Options to Certain Eligible Persons. Notwithstanding
any other provision of this Plan, in order for the compensation attributable to
Stock Options hereunder to qualify as Performance-Based Compensation, no one
Eligible Person shall be granted any Stock Options with respect to more than
750,000 shares of Common Stock in any one calendar year. The limitation set
forth in this Section 5.14 shall be subject to adjustment as provided in
Section 3.4 or under Article VII.
ARTICLE VI
STOCK OPTIONS
6.1 Nature of Stock Options. Stock Options may be Incentive Stock Options
or Non-qualified Stock Options.
6.2 Option Exercise Price. The exercise price for each Stock Option shall
be determined by the Administering Body as of the date such Stock Option is
granted. The exercise price shall be no less than the Fair
9
Market Value of the Common Stock subject to the Option. The Administering Body
may, with the consent of the Optionee and subject to compliance with statutory
or administrative requirements applicable to Incentive Stock Options, amend the
terms of any Stock Option to provide that the exercise price of the shares
remaining subject to the Stock Option shall be reestablished at a price not
less than 100% of the Fair Market Value of the Common Stock on the effective
date of the amendment. No modification of any other term or provision of any
Stock Option that is amended in accordance with the foregoing shall be
required, although the Administering Body may, in its discretion, make such
further modifications of any such Stock Option as are not inconsistent with
this Plan.
6.3 Option Period and Vesting. Stock Options granted hereunder shall vest
and may be exercised as determined by the Administering Body, except that
exercise of such Stock Options after termination of the Recipient's employment
shall be subject to Section 5.13. Without limiting the provisions hereof, no
option may be exercised to the extent not vested. Each Stock Option granted
hereunder and all rights or obligations thereunder shall expire on such date as
shall be determined by the Administering Body, but not later than 10 years
after the date the Stock Option is granted and shall be subject to earlier
termination as provided herein or in the Stock Option Document. The
Administering Body may, in its discretion at any time and from time to time
after the grant of a Stock Option, accelerate vesting of such Option as a whole
or in part by increasing the number of shares then purchasable, provided that
the total number of shares subject to such Stock Option may not be increased.
Except as otherwise provided herein, a Stock Option shall become exercisable,
as a whole or in part, on the date or dates specified by the Administering Body
and thereafter shall remain exercisable until the expiration or earlier
termination of the Stock Option.
6.4 Special Provisions Regarding Incentive Stock Options.
(a) Notwithstanding anything in this Article VI to the contrary, the
exercise price and vesting period of any Stock Option intended to qualify as an
Incentive Stock Option shall comply with the provisions of Section 422 of the
IRC and the regulations thereunder. As of the Effective Date, such provisions
require, among other matters, that (i) the exercise price must not be less than
the Fair Market Value of the underlying stock as of the date the Incentive
Stock Option is granted, and not less than 110% of the Fair Market Value as of
such date in the case of a grant to a Significant Shareholder; and (ii) that
the Incentive Stock Option not be exercisable after the expiration of five
years from the date of grant in the case of an Incentive Stock Option granted
to a Significant Shareholder.
(b) The aggregate Fair Market Value (determined as of the respective
date or dates of grant) of the Common Stock for which one or more Options
granted to any Recipient under this Plan (or any other option plan of the
Company or any of its subsidiaries or affiliates) may for the first time become
exercisable as Incentive Stock Options under the federal tax laws during any
one calendar year shall not exceed $100,000.
(c) Any Options granted as Incentive Stock Options pursuant to this Plan
that for any reason fail or cease to qualify as such shall be treated as
Non-qualified Stock Options.
ARTICLE VII
REORGANIZATIONS
7.1 Corporate Transactions Not Involving a Change in Control. If the
Company shall consummate any Reorganization not involving a Change in Control
in which holders of shares of Common Stock are entitled to receive in respect
of such shares any securities, cash or other consideration (including without
limitation a different number of shares of Common Stock), each Stock Option
outstanding under this Plan shall thereafter be exercisable, in accordance with
this Plan, only for the kind and amount of securities, cash and/or other
consideration receivable upon such Reorganization by a holder of the same
number of shares of Common Stock as are subject to that Stock Option
immediately prior to such Reorganization, and any adjustments will be made to
the terms of the Stock Option in the sole discretion of the Administering Body
as it may deem appropriate to give effect to the Reorganization.
10
7.2 Corporate Transactions Involving a Change in Control. As of the
effective time and date of any Change in Control, this Plan and any then
outstanding Stock Options (whether or not vested) shall automatically terminate
unless (a) provision is made in writing in connection with such transaction for
the continuance of this Plan and for the assumption of such Stock Options, or
for the substitution for such Stock Options of new awards covering the
securities of a successor entity or an affiliate thereof, with appropriate
adjustments as to the number and kind of securities and exercise prices, in
which event this Plan and such outstanding Stock Options shall continue or be
replaced, as the case may be, in the manner and under the terms so provided; or
(b) the Board otherwise has provided or shall provide in writing for such
adjustments as it deems appropriate in the terms and conditions of the
then-outstanding Stock Options (whether or not vested), including without
limitation (i) accelerating the vesting of outstanding Stock Options and/or
(ii) providing for the cancellation of Stock Options and their automatic
conversion into the right to receive the securities, cash and/or other
consideration that a holder of the shares underlying such Stock Options would
have been entitled to receive upon consummation of such Change in Control had
such shares been issued and outstanding immediately prior to the effective date
and time of the Change in Control (net of the appropriate option exercise
prices). If, pursuant to the foregoing provisions of this Section 7.2, this
Plan and the Stock Options shall terminate by reason of the occurrence of a
Change in Control without provision for any of the actions described in clause
(a) or (b) hereof, then any Optionee holding outstanding Stock Options shall
have the right, at such time immediately prior to the consummation of the
Change in Control as the Board shall designate, to exercise the Optionee's
Stock Options to the full extent not theretofore exercised, including any
installments which have not yet become vested.
ARTICLE VIII
DEFINITIONS
Capitalized terms used in this Plan and not otherwise defined shall have the
meanings set forth below:
"Administering Body" shall mean the Board as long as no Long Term Incentive
Plan Committee or Special Long Term Incentive Plan Committee has been appointed
and is in effect and shall mean the Long Term Incentive Plan Committee with
respect to the administration of this Plan with respect to all Eligible Persons
who are not Designated Eligible Persons as long as the Long Term Incentive Plan
Committee is appointed and in effect and shall mean the Special Long Term
Incentive Plan Committee with respect to the administration of this Plan with
respect to all Designated Eligible Persons so long as the Special Long Term
Incentive Plan Committee is appointed and in effect.
"Affiliated Entity" means any Parent Corporation or Subsidiary Corporation.
"Board" means the Board of Directors of the Company.
"Change in Control" means the following and shall be deemed to occur if any
of the following events occur:
(a) Any Person (other than Norm Charney or the Preferred Shareholders or
the Staubach Affiliated Shareholders (each as defined in that certain Amended
and Restated Shareholders Agreement dated as of August 23, 1999 among the
Company and certain of its shareholders) or any of their respective affiliates)
becomes after the Effective Date the beneficial owner (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the combined
voting power of the Company's then outstanding securities entitled to vote
generally in the election of directors; or
(b) Consummation by the Company of the sale or other disposition by the
Company of all or substantially all of the Company's assets or a reorganization
or merger or consolidation of the Company with any other person, entity or
corporation, other than
(i) a reorganization or merger or consolidation that would result in
the voting securities of the Company outstanding immediately prior thereto
continuing to represent, either by remaining outstanding or
11
by being converted into voting securities of another entity, more than fifty
percent (50%) of the combined voting power of the voting securities of the
Company or such other entity outstanding immediately after such
reorganization or merger or consolidation (or series of related transactions
involving such a reorganization or merger or consolidation), or
(ii) a reorganization or merger or consolidation effected to
implement a recapitalization or reincorporation of the Company (or similar
transaction) that does not result in a material change in beneficial
ownership of the voting securities of the Company or its successor;
(c) or Approval by the shareholders of the Company or any order by a
court of competent jurisdiction of a plan of liquidation of the Company.
Notwithstanding the foregoing, a Change in Control of the type described in
paragraph (b) or (c) shall be deemed to be completed on the date it occurs, and
a Change in Control of the type described in paragraph (a) shall be deemed to
be completed as of the date the entity or group attaining 50% or greater
ownership has elected its representatives to the Company's Board of Directors
and/or caused its nominees to become officers of the Company.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Common Stock of the Company, par value $0.0001 per
share, as constituted upon the effectiveness of the Restated Articles of
Incorporation of the Corporation executed August 23, 1999, and as thereafter
adjusted as a result of any one or more events requiring adjustment of
outstanding Stock Options under Section 3.4 above.
"Company" means Ascendant Solutions, Inc., a Delaware corporation, and any
successor corporation thereto.
"Designated Eligible Person" means an Eligible Person who files, or is
otherwise required to file, reports with the Commission under Section 16(a) of
the Exchange Act or who is, or is likely to be, subject to Section 162(m) of
the IRC.
"Effective Date" means May 12, 1999, which is the date this Plan was adopted
by the Board.
"Eligible Person" shall include directors, officers, employees, consultants
and advisors of the Company or of any Affiliated Entity, with the group of
persons constituting
"Designated Eligible Persons" being a subset of Eligible Persons hereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Act Registered Company" means that the Company has any class of
any equity security registered pursuant to Section 12 of the Exchange Act.
"Expiration Date" means the tenth anniversary of the Effective Date.
"Fair Market Value" of a share of the Company's capital stock as of a
particular date shall be: (a) if the stock is listed on an established stock
exchange or exchanges (including for this purpose, the Nasdaq National Market),
the average of the highest and lowest sale prices of the stock quoted for such
date as reported in the Transactions Index of each such exchange, as published
in The Wall Street Journal and determined by the Administering Body, or, if no
sale price was quoted in any such Index for such date, then as of the next
preceding
12
date on which such a sale price was quoted; or (b) if the stock is not then
listed on an exchange or the Nasdaq National Market, the average of the closing
bid and asked prices per share for the stock in the over-the-counter market as
quoted on The Nasdaq Small Cap Market on such date (in the case of (a) or (b),
subject to adjustment as and if necessary and appropriate to set an exercise
price not less than 100% of the Fair Market Value of the stock on the date an
option is granted); or (c) if the stock is not then listed on an exchange or
quoted in the over-the-counter market, an amount determined in good faith by
the Administering Body; provided, however, that (i) when appropriate, the
Administering Body, in determining Fair Market Value of capital stock of the
Company, may take into account such other factors as it may deem appropriate
under the circumstances and (ii) if the stock is traded on the Nasdaq Small Cap
Market and both sales prices and bid and asked prices are quoted or available,
the Administering Body may elect to determine Fair Market Value under either
clause (i) or (ii) above. Notwithstanding the foregoing, the Fair Market Value
of capital stock for purposes of grants of Incentive Stock Options shall be
determined in compliance with applicable provisions of the IRC.
"Immediate Family" means the Recipient's spouse, children or grandchildren
(including adopted and stepchildren and grandchildren).
"Incentive Stock Option" means a Stock Option that qualifies as an incentive
stock option under Section 422 of the IRC, or any successor statute thereto.
"IRC" means the Internal Revenue Code of 1986, as amended.
"Just Cause Dismissal" shall mean a termination of a Recipient's employment
for any of the following reasons: (a) the Recipient violates any reasonable
rule or regulation of the Board, the Company's Chief Executive Officer or the
Recipient's superiors that results in damage to the Company or which, after
written notice to do so, the Recipient fails to correct within a reasonable
time; (b) any willful misconduct or gross negligence by the Recipient in the
responsibilities assigned to the Recipient; (c) any willful failure to perform
the Recipient's job as required to meet Company objectives; (d) any wrongful
conduct of a Recipient which has an adverse impact on the Company or which
constitutes a misappropriation of Company assets; (e) the Recipient's
performing services for any other person or entity that competes with the
Company while the Recipient is employed by the Company, without the written
approval of the Chief Executive Officer of the Company; or (f) any other
conduct that the Administering Body determines constitutes Just Cause for
Dismissal; provided, however, that if a Recipient is party to an employment
agreement with the Company providing for just cause dismissal (or some
comparable notion) of Recipient from Recipient's employment with the Company,
"Just Cause Dismissal" for purposes of this Plan shall have the same meaning as
ascribed thereto or to such comparable notion in such employment agreement.
"Long Term Incentive Plan Committee" means the committee appointed by the
Board pursuant to Section 4.1(b)(i) to administer this Plan with respect to
Eligible Persons who are not Designated Eligible Persons.
"Non-employee Director" means any director of the Company who qualifies as
"non-employee director" within the meaning of Rule 16b-3.
"Non-qualified Stock Option" means a Stock Option that is not an Incentive
Stock Option.
"Optionee" means a Recipient or the Recipient's successor in interest.
"Outside Director" means an "outside director" as defined in the regulations
adopted under Section 162(m) of the IRC.
"Parent Corporation" means any Parent Corporation as defined in Section
424(e) of the IRC.
"Performance-Based Compensation" means performance-based compensation as
described in Section 162(m) of the IRC. If the amount of compensation a
Designated Eligible Person will receive under any
13
Stock Option is not based solely on an increase in the value of Common Stock
after the date of grant or award, the Special Long Term Incentive Plan
Committee (or other Administering Body, as the case may be), in order to
qualify Stock Options as performance-based compensation under Section 162(m) of
the IRC, can condition the grant, award, vesting or exercisability of such
Stock Options on the attainment of a preestablished, objective performance
goal. For this purpose, a preestablished, objective performance goal may
include one or more of the following performance criteria: (a) book value; (b)
earnings per share (including earnings before interest, taxes and
amortization); (c) cash flow; (d) return on equity; (e) total shareholder
return; (f) return on capital; (g) return on assets or net assets; (h) income
or net income; (i) operating income or net operating income; (j) net interest
income; (k) net margin; (l) operating margin; (m) return on operating revenue;
(n) attainment of stated goals related to the Company's capitalization, costs,
financial condition or results of operations; and (o) any other similar
performance criteria.
"Person" means any person, entity or group, within the meaning of Section
13(d) or 14(d) of the Exchange Act, but excluding (a) the Company and any
Affiliated Entity, (b) any employee stock ownership or other employee benefit
plan maintained by the Company that is qualified under ERISA and (c) an
underwriter or underwriting syndicate that has acquired the Company's
securities solely in connection with a public offering thereof.
"Permanent Disability" shall mean that the Recipient becomes physically or
mentally incapacitated or disabled so that the Recipient is unable to perform
substantially the same services as the Recipient performed prior to incurring
such incapacity or disability (the Company, at its option and expense, being
entitled to retain a physician to confirm the existence of such incapacity or
disability, and the determination of such physician to be binding upon the
Company and the Recipient), and such incapacity or disability continues for a
period of three consecutive months or six months in any 12-month period or such
other period(s) as may be determined by the appropriate Administering Body with
respect to any Stock Option, provided that for purposes of determining the
period during which an Incentive Stock Option may be exercised pursuant to
Section 5.13(b)(ii) hereof, Permanent Disability shall mean "permanent and
total disability" as defined in Section 22(e) of the IRC; provided, however,
that if a Recipient is party to an employment agreement with the Company
providing for permanent disability (or some comparable notion) of Recipient
from Recipient's employment with the Company, "Permanent Disability" for
purposes of this Plan shall have the same meaning as ascribed thereto or to
such comparable notion in such employment agreement.
"Permitted Transferee" means (a) the Recipient's Immediate Family; (b) a
trust solely for the benefit of the Recipient and/or his or her Immediate
Family; or (c) a partnership or limited liability company the partners or
shareholders of which are limited to the Recipient and his or her Immediate
Family.
"Plan" means this 1999 Long Term Incentive Plan of the Company.
"Plan Term" means the period during which this Plan remains in effect
(commencing on the Effective Date and ending on the Expiration Date).
"Recipient" means a person who has received Stock Options under this Plan.
"Reorganization" means any merger, consolidation or other reorganization.
"Rule 16b-3" means Rule 16b-3 under the Exchange Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Significant Shareholder" is an individual who, at the time a Stock Option
is granted to such individual under this Plan, owns more than 10% of the
combined voting power of all classes of stock of the Company or of any Parent
Corporation or Subsidiary Corporation (after application of the attribution
rules set forth in Section 424(d) of the IRC).
14
"Special Long Term Incentive Plan Committee" means the committee appointed
by the Board pursuant to Section 4.1(b)(ii) to administer this Plan with
respect to Designated Eligible Persons.
"Stock Option" means a right to purchase stock of the Company granted under
Article VI of this Plan to an Eligible Person.
"Stock Option Document" means the agreement or confirming memorandum setting
forth the terms and conditions of Stock Options.
"Subsidiary Corporation" means any Subsidiary Corporation as defined in
Section 425(f) of the IRC.
15
EXHIBIT B
ASCENDANT SOLUTIONS, INC.
2002 EQUITY INCENTIVE PLAN
Adopted March 14, 2002
1. PURPOSE OF THE PLAN.
The purpose of the Plan is to provide a means by which selected Employees of
and Consultants to the Company and its Affiliates may be given an opportunity
to acquire a proprietary interest in the Company. Under the Plan, the Company
may provide various types of long-term incentive awards, including Options,
Stock Appreciation Rights, Restricted Stock, Deferred Stock, Stock Reload
Options and Other Stock-Based Awards, in order to retain the services of
Persons who are now Employees of or Consultants to the Company and its
Affiliates, to secure and retain the services of new Employees and Consultants,
and to provide incentives for such Persons to exert maximum efforts for the
success of the Company and its Affiliates. Options granted under the Plan may
be Incentive Stock Options or Nonqualified Stock Options, as determined by the
Committee at the time of grant of an Option and subject to the applicable
provisions of Section 422 of the Code and the regulations promulgated
thereunder.
2. DEFINITIONS.
As used herein, the following definitions shall apply:
(a) "Affiliate" means, with respect to any Person, any Parent or Subsidiary
of such Person, whether such Parent or Subsidiary is now or hereafter existing.
(b) "Agreement" means the agreement (including an Option Agreement) between
the Company and the Holder setting forth the terms and conditions of an Award
under the Plan.
(c) "Applicable Laws" means all applicable federal, state, local or foreign
laws, statutes, regulations and legal requirements, including without
limitation the requirements of the Stock Exchange and the legal requirements
relating to the administration of stock option plans and equity incentive plans
(and the issuance of shares of capital stock thereunder) under U.S. state
corporate laws, U.S. federal and state securities laws, the Code and the
applicable laws of any foreign country or jurisdiction where any Awards are, or
will be, granted under the Plan.
(d) "Award" means an award of Options, Stock Appreciation Rights, Restricted
Stock, Deferred Stock, Stock Reload Options or Other Stock-Based Awards under
the Plan.
(e) "Beneficial Owner" means a "beneficial owner" as such term is used in
Rule 13d-3 promulgated under the Exchange Act.
(f) "Board" means the Board of Directors of the Company.
(g) "Change of Control" means, with respect to any Award, the occurrence at
any time after the date of grant of such Award of (i) any Person or Group of
Persons becoming for the first time the Beneficial Owner, directly or
indirectly, of more than fifty percent (50%) of the total combined voting power
of all classes of capital stock of the Company normally entitled to vote for
the election of directors of the Company ("Voting Stock"), other than as a
result of a transfer or series of related transfers of Voting Stock from a
Person or Group of Persons who immediately prior to such transfer or transfers
was the Beneficial Owner, and who after giving
1
effect to such transfer or transfers continues to be the Beneficial Owner, of
more than fifty percent (50%) of the Voting Stock of the Company; (ii) a merger
or consolidation of the Company with or into another Person or the merger of
another Person into the Company as a consequence of which those Persons who
held all of the Voting Stock of the Company immediately prior to such merger or
consolidation do not hold either directly or indirectly a majority of the
Voting Stock of the Company (or, if applicable, the surviving company of such
merger or consolidation) after the consummation of such merger or
consolidation; (iii) the sale of all or substantially all of the assets of the
Company to any Person or Group of Persons (other than to (A) a Person or Group
of Persons which owns, directly or indirectly, a majority or more of the Common
Stock of the Company, (B) a Subsidiary of the Company, or (C) a Person all of
whose equity interests are owned directly or indirectly by the Company); or
(iv) any event or series of events (which event or series of events must
include a proxy fight or proxy solicitation with respect to the election of
directors of the Company made in opposition to the nominees recommended by the
Continuing Directors) during any period of 12 consecutive months, as a result
of which a majority of the Board consists of individuals other than Continuing
Directors.
(h) "Code" means the Internal Revenue Code of 1986, as amended.
(i) "Committee" means (a) the compensation committee (the "Compensation
Committee") of the Board (or in the event that there is not a Compensation
Committee, then the Board) with respect to Awards granted to all Employees and
Consultants of the Company (other than Non-Employee Directors of the Company)
and (b) the entire Board (regardless of whether there is a Compensation
Committee) with respect to Awards granted to Non-Employee Directors of the
Company. During any period of time in which the Company is subject to the
reporting requirements of the Exchange Act, the Compensation Committee shall be
comprised solely of not less than two members, each of whom shall be (i) a
Non-Employee Director and (ii) unless otherwise determined by the Board, an
"outside director" within the meaning of Treasury Regulation Section
1.162-27(e)(3) under Section 162(m) of the Code. Appointment of Compensation
Committee members shall be effective upon acceptance of appointment.
Compensation Committee members may be removed by the Board at any time and may
resign at any time. Vacancies in the Compensation Committee shall be filled by
the Board.
(j) "Common Stock" means the common stock, par value $.0001 per share, of
the Company.
(k) "Company" means Ascendant Solutions, Inc., a Delaware corporation.
(l) "Consultant" means (i) any Person who is engaged by the Company or any
Affiliate of the Company to render consulting or advisory services and is
compensated for such services and (ii) any Director of the Company, whether
such Director is compensated for such services or not.
(m) "Continuing Directors of the Company" means, with the respect to any
period of 12 consecutive months, (i) any members of the Board on the first day
of such period, (ii) any members of the Board elected after the first day of
such period at any annual meeting of shareholders who were nominated by the
Board or a committee thereof, if a majority of the members of the Board or such
committee were Continuing Directors of the Company within the meaning of clause
(i) above at the time of such nomination, and (iii) any members of the Board
elected to succeed Continuing Directors of the Company by the Board or a
committee thereof, if a majority of the members of the Board or such committee
were Continuing Directors of the Company within the meaning of clause (i) or
(ii) above at the time of such election.
(n) "Continuous Status as an Employee or Consultant" means that the
employment or consulting relationship that an Employee or Consultant has with
the Company or any Affiliate is not interrupted or terminated. Continuous
Status as an Employee or Consultant shall not be considered interrupted in the
case of (i) any leave of absence approved in writing by the Company or any
Affiliate or (ii) transfers between locations of the Company or between the
Company or any Affiliate or any successor. A leave of absence approved by the
Company shall include sick leave, military leave, or any other personal leave
approved by an authorized representative of the Company or any Affiliate. For
purposes of Incentive Stock Options, no such leave may
2
exceed 90 days, unless reemployment upon expiration of such leave is guaranteed
by statute or contract. If reemployment upon expiration of a leave of absence
approved by the Company or any Affiliate is not so guaranteed, on the 91st day
of such leave any Incentive Stock Option held by the Holder shall cease to be
treated for tax purposes as an Incentive Stock Option and shall be treated for
tax purposes as a Nonqualified Stock Option.
(o) "Corporate Affiliate" means, with respect to any Person, any Parent
Corporation or Subsidiary Corporation of such Person, whether such Parent
Corporation or Subsidiary Corporation is now or hereafter existing.
(p) "Deferred Stock" means the Shares of Common Stock to be received at the
end of a specified deferral period under an Award made pursuant to Section 10
below.
(q) "Director" means a member of the Board.
(r) "Director Fee Investment Option Grant Program" means the director fee
investment option grant program in effect under Section 11 of the Plan.
(s) "Disability" shall have the meaning given it or any similar term in the
employment agreement of the Holder with the Company or an Affiliate; provided,
however, that if that Holder has no such employment agreement or if the
employment agreement applicable to the Holder does not specify the meaning of
such term, "Disability" shall mean "disability" as such term is defined in
Section 22(e)(3) of the Code.
(t) "Employee" means any individual Person, including Officers and
Directors, employed by the Company or any Affiliate of the Company. The payment
of a Director's fee or the reimbursement of a Director's expenses by the
Company shall not be sufficient to constitute "employment" by the Company.
(u) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(v) "Fair Market Value" means the value of a Share of Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock exchange or
quoted on a national market system, including without limitation The Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for a Share of Common
Stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system on the date of determination, as reported in The Wall
Street Journal or such other source as the Committee deems reliable;
(ii) If the Common Stock is not listed on any established stock exchange
or quoted on a national market system, but is regularly quoted by a
recognized securities dealer (whose selling prices are not reported), its
Fair Market Value shall be the mean between the high bid andlow asked prices
for the Common Stock on the last market trading day prior to the date of
determination; or
(iii) In the absence of an established market for the Common Stock, the
Fair Market Value thereof shall be the value determined in good faith by the
Committee.
(w) "Group" means a "group" as such term is used in Section 13(d)(3) of the
Exchange Act.
(x) "Holder" means a Person who has received an Award under the Plan.
(y) "Immediate Family Members" means (a) the children, grandchildren,
spouse, siblings (and their spouses) or parents of the Holder or (b) any bona
fide trusts, partnerships or other entities controlled by the Holder or one or
more Immediate Family Members, or whose beneficiaries are the Holder and/or one
or more Immediate Family Members of the Holder.
3
(z) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(aa) "IPO Date" means the closing date of the first sale to the public of
the Company's Common Stock pursuant to an effective registration statement
under the Securities Act of 1933, as amended.
(bb) "Non-Employee Director" means a "Non-Employee Director" within the
meaning of Rule 16b-3.
(cc) "Nonqualified Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(dd) "Officer" means an individual Person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(ee) "Option" means any option to purchase Shares of Common Stock which is
granted pursuant to the Plan (including any options granted pursuant to Section
11 hereof).
(ff) "Option Agreement" means the written option agreement, substantially in
the form attached hereto as Exhibit A or Exhibit B (or such other form as may
be approved by the Committee for use under the Plan pursuant to Section 3(b)(v)
hereof), between the Company and Holder evidencing the grant of an Option.
(gg) "Option Exchange Program" means a program whereby outstanding Options
are surrendered in exchange for new Options with a lower exercise price.
(hh) "Optioned Stock" means the Shares of Common Stock subject to an Option.
(ii) "Other Stock-Based Awards" means Awards (other than Options, Stock
Appreciation Rights, Restricted Stock, Deferred Stock and Stock Reload Options)
denominated or payable in, valued in whole or in part by reference to, or
otherwise based on or related to Shares of Common Stock.
(jj) "Parent" means any Person (other than the Company) in an unbroken chain
of Persons ending with the Company if, at the time an Award is granted, each of
the Persons other than the Company owns stock (or other equity interests)
possessing 50% or more of the total combined voting power of all classes of
stock (or other equity interests) in one or more of the other Persons in such
chain.
(kk) "Parent Corporation" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(ll) "Person" means any individual, corporation, partnership, limited
liability company, joint venture, estate, trust, unincorporated association, or
any other entity.
(mm) "Plan" means this Ascendant Solutions, Inc. 2002 Equity Incentive Plan.
(nn) "Restricted Stock" means Shares of Common Stock received under an Award
made pursuant to Section 9 below that is subject to restrictions under Section
9.
(oo) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or any
successor rule thereto.
(pp) "SAR Value" means, with respect to an individual Stock Appreciation
Right, the excess of the Fair Market Value of one Share over the exercise price
per share specified in a related Option in the case of a Tandem Stock
Appreciation Right, or over the Stock Appreciation Right price per share in the
case of a Stock Appreciation Right awarded on a free standing basis.
4
(qq) "Share" means a share of Common Stock.
(rr) "Stock Appreciation Right" means the right, pursuant to an Award
granted under Section 8 hereof, to recover an amount equal to the SAR Value.
(ss) "Stock Exchange" means, at any point in time, any established stock
exchange on which the Common Stock is then listed or any national market
system, including without limitation The Nasdaq Stock Market or The Nasdaq
SmallCap Market of The Nasdaq Stock Market, on which the Common Stock is then
quoted.
(tt) "Stock Reload Option" means any option granted under Section 7(e) as a
result of the payment of the exercise price of an Option and/or the withholding
tax related thereto in the form of Common Stock owned by the Holder or the
withholding of Common Stock by the Company.
(uu) "Subsidiary" means any Person (other than the Company) in any unbroken
chain of Persons beginning with the Company if, at the time of granting of an
Award, each of the Persons (other than the last Person in the unbroken chain)
owns stock (or other equity interests) possessing 50% or more of the total
combined voting power of all classes of stock (or other equity interests) in
one of the other Persons in such chain.
(vv) "Subsidiary Corporation" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
(ww) "Tandem Stock Appreciation Right" means a Stock Appreciation Right
granted in tandem with all or part of any Option granted under the Plan.
(xx) "Voting Stock" shall have the meaning set forth in the definition of
"Change of Control" above.
3. ADMINISTRATION OF THE PLAN.
(a) Plan Administration. The Plan at all times shall be administered by the
Committee. The Committee shall act by a majority of its members in office. The
Committee may act either by vote at a meeting or by a memorandum or other
written instrument signed by a majority of the Committee. Members of the
Committee shall receive such compensation for their services as members as may
be determined by the Board. All expenses and liabilities incurred by members of
the Committee in connection with the administration of the Plan shall be borne
by the Company. The Committee may employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Company and its
Officers and Directors shall be entitled to rely upon the advice, opinions or
valuations of any such persons.
(b) Powers of the Committee. Subject to the provisions of the Plan and
subject to the approval of any relevant authorities, including the approval, if
required, of the Stock Exchange, the Committee shall have the full authority to
award: (i) Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock,
(iv) Deferred Stock, (v) Stock Reload Options and/or (vi) Other Stock-Based
Awards. For purposes of illustration and not of limitation, the Committee shall
have the authority (subject only to the express provisions of the Plan):
(i) to determine the Fair Market Value of the Common Stock;
(ii) to select the Consultants and Employees to whom Awards may from time
to time be granted hereunder;
(iii) to determine whether and to what extent Awards or any combination
thereof are granted hereunder;
(iv) to determine the number of Shares to be covered by each such Award
granted hereunder;
(v) to approve the forms of Agreements (including Option Agreements) for
use under the Plan;
5
(vi) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any Award granted hereunder, which terms and
conditions may include, but will not be limited to, the exercise price of an
Option; any specified performance goals or other criteria which must be
attained for the vesting of an Award; any restrictions or limitations
applicable to any Awards, including, without limitation, any rights of first
refusal, repurchase rights or other restrictions on transfer applicable to
such Award as may be set forth in the Agreement evidencing such Award; and
any vesting, exchange, surrender, cancellation, acceleration, termination,
exercise or forfeiture provisions applicable to any Awards;
(vii) to reduce the exercise price of any Award to the then current Fair
Market Value if the Fair Market Value of the Common Stock covered by such
Award shall have declined since the date the Award was granted;
(viii) to institute an Option Exchange Program; and
(ix) to construe and interpret the terms of the Plan and the Awards
granted pursuant to the Plan.
(c) Effect of Committee's Decision. All decisions, determinations and
interpretations of the Committee shall be final and binding on all Holders of
any Awards. No member of the Board or any Committee administering the Plan
shall be liable for any action taken or determination made in good faith with
respect to the Plan or any Award granted hereunder, and all members of the
Board or any Committee administering the Plan shall be fully protected by the
Company in respect of any such action or determination.
4. STOCK SUBJECT TO THE PLAN.
(a) The maximum aggregate number of Shares that may be acquired by Holders
of Awards granted under the Plan is 2,000,000 Shares. The Shares may be
authorized but unissued Shares of Common Stock or may be reacquired Shares of
Common Stock.
If any Shares of Common Stock that are subject to an Option granted
hereunder cease to be subject to such Option, or if any Shares of Common Stock
that are subject to any other Award granted hereunder are forfeited or any such
Award otherwise terminates without a payment being required to be made to the
Holder in the form of Common Stock, such Shares shall again be available for
distribution in connection with future grants of Options and other Awards under
the Plan. Only net Shares issued upon a stock-for-stock exercise (including
Common Stock used for withholding taxes) shall be counted against the number of
Shares available under the Plan.
(b) The maximum number of Shares with respect to which Options or Stock
Appreciation Rights may be granted under the Plan during any fiscal year of the
Company to any Employee or Consultant shall not exceed 1,500,000 (in each case
subject to adjustment as provided in Section 13 of the Plan).
If an Option or Stock Appreciation Right is cancelled in the same fiscal
year of the Company in which it was granted (other than in connection with a
transaction described in Section 13 of the Plan), the cancelled Option or Stock
Appreciation Right will be counted against the limit set forth this Section
4(b). For this purpose, if the exercise price of an Option or the base amount
on which a Stock Appreciation Right is calculated is reduced, the transaction
will be treated as a cancellation of the Option or Stock Appreciation Right, as
applicable, and the grant of a new Option or new Stock Appreciation Right, as
applicable.
5. ELIGIBILITY.
(a) Awards may be made or granted to Employees (including Officers and
Directors) and Consultants of the Company and its Affiliates who, in the sole
and unreviewable determination of the Committee, are deemed to have rendered or
to be able to render services to the Company or its Affiliates and who are
deemed to have contributed or to have the potential to contribute to the
success of the Company or its Affiliates. No Incentive Stock Option shall be
granted to any Person who is not an Employee of the Company or a Corporate
Affiliate of the Company at the time of grant.
6
(b) Each Option shall be designated in the applicable Option Agreement as
either an Incentive Stock Option or a Nonqualified Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Holder during any calendar year (under
all plans of the Company or any Affiliate) exceeds $100,000, such Options shall
be treated for tax purposes as Nonqualified Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the order
in which they were granted. For purposes of this Section 5(b), the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.
(c) Neither the Plan nor any Award shall confer upon any Holder any right
with respect to continuation of his or her employment or consulting
relationship with the Company or any Affiliate, nor shall it interfere in any
way with his or her right or the Company's or an Affiliate's right to terminate
his or her employment or consulting relationship at any time, with or without
cause.
6. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per share exercise price for the Shares to be issued upon exercise
of an Option shall be such price as is determined by the Committee; provided
that the exercise price for Options granted under the Director Fee Investment
Option Grant Program shall be determined pursuant to Section 11 hereof; and
provided further that in the case of an Incentive Stock Option (which in all
cases shall be subject to the Code):
(i) granted to an Employee who, at the time of grant of such Option, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Corporate Affiliate, the per share
exercise price shall not be less than 110% of the Fair Market Value per
Share on the date of grant; and
(ii) granted to any other Employee, the per share exercise price shall
not be less than 100% of the Fair Market Value per Share on the date of
grant.
(b) The type of consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Committee (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant and shall be subject to the Code). Such
consideration shall be paid, to the extent permitted by Applicable Laws at the
time the Option is exercised, either (i) in cash or check, or (ii) at the
discretion of the Committee, in one or a combination of the following ways
(which may be in combination with or in lieu of payment by cash or check): (A)
by delivery to the Company of other Shares of Common Stock of the Company that
(x) in the case of Shares acquired upon exercise of an Option, have been owned
by the Holder for more than six months on the date of surrender or such other
period as may be required to avoid a charge to the Company's earnings for
financial reporting purposes, and (y) have a Fair Market Value on the exercise
date equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised, (B) according to a deferred payment or other
arrangement with the Person to whom the Option is granted or to whom the Option
is transferred pursuant to Section 16, (C) a reduction in the amount of any
Company liability to the Holder, including any liability attributable to the
Holder's participation in any Company-sponsored deferred compensation program
or arrangement, (D) when permitted by Applicable Laws, through a "same day
sale" commitment from the Holder (and if applicable a broker-dealer that is a
member of the National Association of Securities Dealers (a "NASD Dealer")),
whereby the Holder irrevocably elects to exercise the Option and to sell at
least that number of Shares so purchased to pay the aggregate exercise price of
all of the Shares so purchased, and the Holder (or, if applicable, the NASD
Dealer) commits upon sale (or, in the case of the NASD Dealer, upon receipt) of
such Shares to forward an amount equal to the aggregate exercise price of such
Shares directly to the Company, with any sale proceeds in excess of such amount
being for the benefit of the Holder, or (E) in any other form of legal
consideration that may be acceptable to the Committee. In making its
determination as to the type of consideration to accept, the Committee may
consider if acceptance of such consideration may be reasonably expected to
benefit the Company. In addition, such consideration shall be accompanied by
the delivery by the Holder of a properly executed exercise notice together with
such other documentation as the
7
Committee and a broker, if applicable, shall require to effect an exercise of
the Option and delivery to the Company of the sale or loan proceeds required to
pay the exercise price.
7. EXERCISE OF OPTION.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Committee, including performance criteria with respect to the
Company and/or the Holder, and as shall be permissible under the terms of the
Plan. At the discretion of the Committee, the Option Agreement may, but need
not, include a provision whereby the Holder may elect at any time before the
Holder's Continuous Status as an Employee or Consultant terminates to exercise
the Option as to any part or all of the Shares subject to the Option prior to
the full vesting of the Option. Any unvested Shares so purchased shall (unless
otherwise set forth in the Option Agreement evidencing such Options) be subject
to (i) terms and conditions similar to those applicable to Restricted Stock
under Section 9(b) hereof, (ii) a repurchase option in favor of the Company,
and (iii) any other restrictions the Committee determines to be appropriate.
The total number of Shares subject to an Option may, but need not, be
allotted in periodic installments (which may, but need not, be equal). The
Option Agreement may provide that from time to time during each of such
installment periods, the Option may become exercisable with respect to some or
all of the Shares allotted to that period and may be exercised with respect to
some or all of the Shares allotted to such period and/or any prior period as to
which the Option became vested but was not fully exercised.
An Option may not be exercised for a fraction of a Share. Exercise of an
Option in any manner shall result in a decrease in the number of Shares that
thereafter may be available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
Subject to Section 19, an Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance
with the terms of the Option Agreement by the Person entitled to exercise the
Option and full payment for the Shares with respect to which the Option is
exercised has been received by the Company. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote, receive dividends or any other rights as a shareholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. The Company shall issue (or cause to be issued) such stock certificate
promptly upon exercise of the Option. No adjustment shall be made for a
dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 13 hereof.
(b) Termination of Employment or Consulting Relationship. Subject to
Section 7(c) and Section 7(d) below and the applicable Option Agreement, in the
event of termination of a Holder's Continuous Status as an Employee or
Consultant, such Holder may exercise his or her Option to the extent that the
Holder was entitled to exercise it at the date of such termination; provided,
however, that such Option may be exercised only within such period of time as
is determined by the Committee at the date of grant. Such time period shall
not, in the case of an Incentive Stock Option, exceed three (3) months after
the date of such termination and shall not, in any case, be later than the
expiration date of the term of such Option as set forth in the Option
Agreement. To the extent that the Holder was not entitled to exercise the
Option at the date of such termination, or if the Holder does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate and the Shares covered by such Option shall revert to the Plan.
A Holder's Continuous Status as an Employee or Consultant shall not be
terminated in the event of Holder's change of status from an Employee to a
Consultant or from a Consultant to an Employee; provided, however, that in the
event of a Holder's change of status from an Employee to a Consultant, any
Incentive Stock Option granted to such Employee shall automatically cease to be
treated for tax purposes as an Incentive Stock Option and shall be treated for
tax purposes as a Nonqualified Stock Option on the day that is three months and
one day following such change of status.
8
Further, the Committee may provide in the Option Agreement evidencing a
grant of Options that upon termination of a Holder's Continuous Status as an
Employee or Consultant, the Committee may elect in its sole discretion that the
portion of any Option unexercised as of the date of termination shall be
exercisable for Shares of Common Stock or, in lieu thereof, for an amount in
cash equal to the excess of the Fair Market Value of the Common Stock over the
exercise price, times the number of Shares of Common Stock for which the Option
is being exercised. Such exercise shall be effected in the manner set forth in
Section 6(b) hereof, except that in the event that the Committee elects
pursuant to this Section 7(b) to deliver cash instead of Shares of Common
Stock, the Holder shall not be required to pay the exercise price to the
Company. In the event that the Committee elects pursuant to this Section 7(b)
to deliver cash instead of Shares of Common Stock and, on the date of such
exercise, the Fair Market Value of the Common Stock is less than or equal to
the applicable exercise price, then the Holder shall not be entitled to any
cash, stock or other property upon such exercise, and the Holder shall have no
further rights with respect to the portion of the Option so exercised.
(c) Disability of Holder. In the event of termination of a Holder's
Continuous Status as an Employee or Consultant as a result of his or her
Disability, the Holder may, but only within twelve (12) months from the date of
such termination (and in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), exercise the Option to the
extent he or she otherwise was entitled to exercise it at the date of such
termination. If such Disability is not a "disability" as such term is defined
in Section 22(e)(3) of the Code, then in the case of an Incentive Stock Option
such Incentive Stock Option shall automatically cease to be treated for tax
purposes as an Incentive Stock Option and shall be treated for tax purposes as
a Nonqualified Stock Option on the day that is three months and one day
following such termination. To the extent that the Holder was not entitled to
exercise the Option at the date of termination, or if the Holder does not
exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate and the Shares covered by such Option shall
revert to the Plan.
(d) Death of Holder. In the event of the death of a Holder, the Option may
be exercised at any time within twelve (12) months following the date of death
(but in no event later than the expiration date of the term of such Option as
set forth in the Option Agreement) by the Holder's estate or by any Person who
acquired the right to exercise the Option by bequest or inheritance (the
"Option Beneficiary"), but only to the extent that the Holder was entitled to
exercise the Option on the date of death. To the extent that, at the time of
death, the Holder was not entitled to exercise the Option, or if the Option
Beneficiary does not exercise the Option within the time specified herein, the
Option shall terminate and the Shares covered by such Option shall revert to
the Plan.
(e) Stock Reload Option. The Committee may also grant to the Holder
(concurrently with the grant of an Incentive Stock Option and at or after the
time of grant in the case of a Nonqualified Stock Option) a Stock Reload Option
exercisable for a number of shares up to (but not exceeding) the amount of
Shares of Common Stock (i) held by the Holder for at least six months and (ii)
used to pay all or part of the exercise price of an Option or withheld by the
Company as payment for withholding taxes. Such Stock Reload Option shall have
an exercise price of the Fair Market Value as of the date of the Stock Reload
Option grant. Unless the Committee determines otherwise, (i) a Stock Reload
Option may be exercised commencing one year after it is granted and shall
expire on the date of expiration of the Option to which the Stock Reload Option
is related and (ii) shall otherwise be treated as an Option for all purposes
under the Plan.
(f) Tax Withholding.
(i) As a condition of the exercise of an Option granted under the Plan,
the Holder (or in the case of the Holder's death, the Option Beneficiary)
shall make such arrangements as the Committee may require for the
satisfaction of any applicable federal, state, local or foreign withholding
tax obligations that may arise in connection with the exercise of an Option
and the issuance of Shares. The Company shall not be required to issue any
Shares under the Plan until such obligations are satisfied.
(ii) In the case of an Employee and in the absence of any other
arrangement, the Employee shall be deemed to have directed the Company to
withhold or collect from his or her compensation an amount
9
sufficient to satisfy such tax obligations from the next payroll payment
otherwise payable after the date of an exercise of the Option.
(iii) If permitted by the Committee, in its discretion, in the case of a
Holder other than an Employee (or in the case of an Employee where the next
payroll payment is not sufficient to satisfy such tax obligations, with
respect to any remaining tax obligations), in the absence of any other
arrangement and to the extent permitted under Applicable Laws, the Holder
shall be deemed to have elected to have the Company withhold from the Shares
to be issued upon exercise of the Option that number of Shares having a Fair
Market Value determined as of the applicable Tax Date (as defined below)
equal to the minimum statutory withholding rates for federal and state tax
purposes, including payroll taxes, applicable to the exercise. For purposes
of this Section 7(f)(iii), the Fair Market Value of the Shares to be
withheld shall be determined on the date that the amount of tax to be
withheld is to be determined under the Applicable Laws (the "Tax Date").
(iv) If permitted by the Committee, in its discretion, a Holder may
satisfy his or her tax withholding obligations upon exercise of an Option by
any method of payment and form of consideration allowable under Section 6(b)
hereof.
(v) Any election or deemed election by a Holder to have Shares withheld
to satisfy tax withholding obligations under Section 7(f)(iii) or (iv) above
shall be irrevocable as to the particular Shares as to which the election is
made and shall be subject to the consent or disapproval of the Committee.
Any election by a Participant under Section 7(f)(iv) above must be made on
or prior to the applicable Tax Date.
8. STOCK APPRECIATION RIGHTS.
(a) Grant and Exercise. Stock Appreciation Rights may be granted in tandem
with (i.e., Tandem Stock Appreciation Right) or in conjunction with all or part
of any Option granted under the Plan or may be granted on a free-standing
basis. In the case of a Nonqualified Stock Option, a Tandem Stock Appreciation
Right may be granted either at or after the time of the grant of such
Nonqualified Stock Option. In the case of an Incentive Stock Option, a Tandem
Stock Appreciation Right may be granted only at the time of the grant of such
Incentive Stock Option, and will be subject to the Code.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject to the
following terms and conditions:
(i) Exercise. Tandem Stock Appreciation Rights shall be exercisable only
at such time or times and to the extent that the Options to which they
relate shall be exercisable in accordance with the provisions of Section 7
hereof and this Section 8 and shall be subject to the Code with respect to
related Incentive Stock Options and such additional limitations on exercise
as shall be determined by the Committee and set forth in the Agreement. A
Tandem Stock Appreciation Right may be exercised only when the Fair Market
Value of the Shares underlying the Option to which it relates exceeds the
Option's exercise price. Other Stock Appreciation Rights shall be
exercisable at such time or times and subject to such terms and conditions
as shall be determined by the Committee and set forth in the Agreement.
(ii) Termination. A Tandem Stock Appreciation Right shall terminate and
shall no longer be exercisable upon the termination or exercise of the
related Option, except that, unless otherwise determined by the Committee at
the time of grant, a Tandem Stock Appreciation Right granted with respect to
less than the full number of Shares covered by a related Option shall not be
reduced until after the number of Shares remaining under the related Option
equals the number of Shares covered by the Tandem Stock Appreciation Right.
Other Stock Appreciation Rights shall terminate and shall no longer be
exercisable upon such terms and conditions as shall be determined by the
Committee and as set forth in the Agreement.
(iii) Method of Exercise. A Tandem Stock Appreciation Right may be
exercised by a Holder by surrendering the applicable portion of the related
Option. Other Stock Appreciation Rights may be exercised by a Holder upon
surrender thereof, or upon such terms and conditions as shall be determined
by the
10
Committee and as set forth in the Agreement. Upon such exercise and
surrender, the Holder shall be entitled to receive such amount in the form
determined pursuant to Section 8(b)(iv) below. Options which have been so
surrendered, in whole or in part, shall no longer be exercisable to the
extent the related Tandem Stock Appreciation Rights have been exercised.
(iv) Receipt of SAR Value. Upon the exercise of each individual Stock
Appreciation Right covered by an Award of Stock Appreciation Rights, a
Holder shall be entitled to receive up to, but not more than, an amount in
cash and/or Shares of Common Stock equal to the SAR Value for such
individual Stock Appreciation Right, with the Committee having the right to
determine the form of payment.
(v) Shares Affected Upon Plan. Upon the exercise of a Tandem Stock
Appreciation Right, the Option or part thereof to which such Tandem Stock
Appreciation Right is related shall be deemed to have been exercised for the
purpose of the limitation set forth in Section 4 hereof on the number of
Shares of Common Stock to be issued under the Plan, but only to the extent
of the number of Shares, if any, issued under the Tandem Stock Appreciation
Right at the time of exercise based upon the SAR Value.
9. RESTRICTED STOCK.
(a) Grant. Shares of Restricted Stock may be awarded either alone or in
addition to other Awards granted under the Plan. The Committee shall determine
the Employees and/or Consultants to whom, and the time or times at which,
grants of Restricted Stock will be awarded, the number of Shares to be awarded,
the price (if any) to be paid by the Holder, the time or times within which
such Awards may be subject to forfeiture ("Restriction Period"), the vesting
schedule and rights to acceleration thereof, and all other terms and conditions
of the Awards.
(b) Terms and Conditions. Each Award of Restricted Stock shall be subject
to the following terms and conditions:
(i) Certificates. Restricted Stock, when issued, will be represented by a
stock certificate or certificates registered in the name of the Holder to
whom such Restricted Stock shall have been awarded. During the Restriction
Period, certificates representing the Restricted Stock and any securities
constituting Retained Distributions (as defined below) shall bear a legend
to the effect that ownership of the Restricted Stock (and such Retained
Distributions), and the enjoyment of all rights appurtenant thereto, are
subject to the restrictions, terms and conditions provided in the Plan and
the Agreement. Such certificates shall be deposited by the Holder with the
Company, together with stock powers or other instruments of assignment, each
endorsed in blank, which will permit transfer to the Company of all or any
portion of the Restricted Stock and any securities constituting Retained
Distributions that shall be forfeited or that shall not become vested in
accordance with the Plan and the Agreement.
(ii) Rights of Holder. Restricted Stock shall constitute issued and
outstanding Shares of Common Stock for all corporate purposes. The Holder
will have the right to vote such Restricted Stock, to receive and retain all
regular cash dividends and other cash equivalent distributions as the Board
may in its sole discretion designate, pay or distribute on such Restricted
Stock and to exercise all other rights, powers and privileges of a holder of
Common Stock with respect to such Restricted Stock, with the exceptions that
(A) the Holder will not be entitled to delivery of the stock certificate or
certificates representing such Restricted Stock until the Restriction Period
shall have expired and unless all other vesting requirements with respect
thereto shall have been fulfilled; (B) the Company will retain custody of
the stock certificate or certificates representing the Restricted Stock
during the Restriction Period; (C) other than regular cash dividends and
other cash equivalent distributions as the Board may in its sole discretion
designate, pay or distribute, the Company will retain custody of all
distributions ("Retained Distributions") made or declared with respect to
the Restricted Stock (and such Retained Distributions will be subject to the
same restrictions, terms and conditions as are applicable to the Restricted
Stock) until such time, if ever, as the Restricted Stock with respect to
which such Retained Distributions shall have been made, paid or declared
shall have become vested and with respect to which the Restriction Period
shall have expired; and (D) a
11
breach of any of the restrictions, terms or conditions contained in this
Plan or the Agreement or otherwise established by the Committee with respect
to any Restricted Stock or Retained Distributions will cause a forfeiture of
such Restricted Stock and any Retained Distributions with respect thereto.
(iii) Vesting: Forfeiture. Upon the expiration of the Restriction Period
with respect to each Award of Restricted Stock and the satisfaction of any
other applicable restrictions, terms and conditions (A) all such Restricted
Stock shall become vested in accordance with the terms of the Agreement, and
(B) any Retained Distributions with respect to such Restricted Stock shall
become vested to the extent that the Restricted Stock related thereto shall
have become vested. Any such Restricted Stock and Retained Distributions
that do not vest shall be forfeited to the Company and the Holder shall not
thereafter have any rights with respect to such Restricted Stock and
Retained Distributions that shall have been so forfeited.
10. DEFERRED STOCK.
(a) Grant. Shares of Deferred Stock may be awarded either alone or in
addition to other Awards granted under the Plan. The Committee shall determine
the Employees and/or Consultants to whom, and the time or times at which,
grants of Deferred Stock shall be awarded, the number of shares of Deferred
Stock to be awarded, the duration of the period ("Deferral Period") during
which, and the conditions under which, receipt of the Shares will be deferred,
and all the other terms and conditions of the Awards.
(b) Terms and Conditions. Each Award of Deferred Stock shall be subject to
the following terms and conditions:
(i) Certificates. At the expiration of the Deferral Period (or the
Additional Deferral Period referred to in Section 10(b)(iii) below, where
applicable), share certificates shall be delivered to the Holder, or his
legal representative, representing the number of Shares equal to the Shares
covered by the Award of Deferred Stock.
(ii) Vesting; Forfeiture. Upon the expiration of the Deferral Period (or
the Additional Deferral Period, where applicable) with respect to each Award
of Deferred Stock and the satisfaction of any other applicable limitations,
terms or conditions, such Deferred Stock shall become vested in accordance
with the terms of the Agreement. Any Deferred Stock that does not vest shall
be forfeited to the Company and the Holder shall not thereafter have any
rights with respect to such Deferred Stock that has been so forfeited. Prior
to the expiration of the Deferral Period (or the Additional Deferral Period,
where applicable), such Deferred Stock shall not be treated as issued and
outstanding Shares of the Company.
(iii) Additional Deferral Period. A Holder may request to, and the
Committee may at any time, defer the receipt of an Award (or an installment
of an Award) for an additional specified period or until the occurrence of a
specified event ("Additional Deferral Period"). Subject to any exceptions
adopted by the Committee, such request must be made at least one year prior
to expiration of the Deferral Period for such Award of Deferred Stock (or
such installment).
11. DIRECTOR FEE INVESTMENT OPTION GRANT PROGRAM.
(a) Grant. A Director Fee Investment Option Grant Program may be (but is
not required to be) implemented by the Board as of the first day of any
calendar year beginning after the IPO Date. Upon such implementation, each
Non-Employee Director who at such time receives an annual retainer fee payable
in cash for his or her service on the Board may elect to apply all or any
portion of such annual retainer fee to the acquisition of an Option grant under
this Director Fee Investment Option Grant Program. Such election must be filed
with the Company's Chief Financial Officer prior to the first day of the
calendar year for which the election is to be in effect. Each Non-Employee
Director who files such a timely election with respect to his or her annual
retainer fee shall automatically be granted an Option under this Director Fee
Investment Option Grant Program on the first trading day in January in the
calendar year for which that fee would otherwise be payable.
12
(b) Terms and Conditions. Each Option shall be a Nonqualified Stock Option
governed by the terms and conditions specified below:
(i) Exercise Price. The exercise price per Share shall be thirty-three
and one-third percent (33 1/3%) of the Fair Market Value per Share on the
Option grant date. The exercise price shall become immediately due upon
exercise of the Option and shall be payable in one or more of the
alternative forms authorized under Section 6(b) hereof.
(ii) Number of Option Shares. The number of Shares subject to the Option
shall be determined pursuant to the following formula (rounded down to the
nearest whole number):
X = A / (B x 66 2/3%), where
X is the number of Option shares,
A is the dollar amount of the annual retainer fee subject to the
Non-Employee Director's election, and
B is the Fair Market Value per Share on the Option grant date.
(iii) Exercise. If granted, the Option shall become exercisable in a
series of twelve (12) successive equal monthly installments upon the
Holder's completion of each month of Board service during the calendar year
in which the Option is granted. Each Option shall have a maximum term of ten
(10) years measured from the Option grant date.
(iv) Remaining Terms. Each Option granted under this Director Fee
Investment Option Grant Program shall be subject to (x) the terms and
conditions of Section 7 hereof to the extent such terms and conditions are
not inconsistent with this Section 11(b) and (y) such other terms and
conditions as may be determined by the Board and set forth in the Option
Agreement evidencing such Options.
12. OTHER STOCK-BASED AWARDS.
(a) Grant and Exercise. Other Stock-Based Awards may be awarded, subject to
limitations under Applicable Laws, that are denominated or payable in, valued
in whole or in part by reference to, or otherwise based on or related to Shares
of Common Stock, as deemed by the Committee to be consistent with the purposes
of the Plan, including, without limitation, purchase rights, Shares of Common
Stock awarded which are not subject to any restrictions or conditions,
convertible or exchangeable debentures, or other rights convertible into or
exchangeable for Shares of Common Stock and Awards valued by reference to the
value of securities of or the performance of specified Subsidiaries or the
Parent of the Company. Other Stock-Based Awards may be awarded either alone or
in addition to or in tandem with any other Awards under this Plan or any other
plan of the Company or any Affiliate.
(b) Eligibility For Other Stock-Based Awards. The Committee shall determine
the Employees and/or Consultants to whom, and the time or times at which,
grants of such Other Stock-Based Awards shall be made, the number of Shares of
Common Stock to be awarded pursuant to such Awards, and all other terms and
conditions of the Awards.
(c) Terms and Conditions. Each Other Stock-Based Award shall be subject to
such terms and conditions as may be determined by the Committee and set forth
in the Agreement evidencing such Award.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, (i) the number of Shares of Common Stock covered
by each outstanding Award, (ii) the number of Shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Awards have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Award, and (iii) the price per share
13
of Common Stock covered by each such outstanding Award, shall be
proportionately adjusted for any increase or decrease in the number of issued
Shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company. The conversion of any
convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Committee, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of capital stock of any class, or securities convertible into or
exchangeable for shares of capital stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or
exercise price of Shares of Common Stock subject to an Award.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Committee shall notify each Holder of an
outstanding Award granted hereunder at least fifteen (15) days prior to such
proposed action. To the extent it has not been previously exercised, the Award
shall terminate immediately prior to the consummation of such proposed action;
provided, however, that the Committee may, in the exercise of its sole and
unreviewable discretion in such instances, declare that any Award shall
terminate as of an earlier date fixed by the Committee and give each Holder the
right to exercise his or her rights as to all or any part of the Award,
including Shares as to which the Award would not otherwise be exercisable.
(c) Merger or Asset Sale. Subject to Section 13(d), in the event of the
merger of the Company into, or the consolidation of the Company with, another
Person in which the shareholders of the Company receive cash or securities of
another issuer, or any combination thereof, in exchange for their Shares of
Common Stock, or the sale of all or substantially all of the assets of the
Company, each outstanding Award shall be assumed or an equivalent option or
right substituted by the successor Person or an Affiliate of the successor
Person. In the event that the successor Person refuses to assume or substitute
for the Award, the Holder shall fully vest in and have the right to exercise
the Award (provided it has not already terminated), including Shares as to
which it would not otherwise be vested or exercisable. If an Award becomes
fully vested and exercisable in lieu of assumption or substitution in the event
of a merger, consolidation or sale of assets, the Committee shall notify the
Holder that the Award shall be fully exercisable for a period of fifteen (15)
days from the date of such notice, and the Award shall terminate upon the
expiration of such period. For the purposes of this Section 13(c), the Award
shall be considered assumed if, following the merger, consolidation or sale of
assets, the option or right substituted for such Award confers the right to
purchase or receive, for each Share of Common Stock subject to the Award
immediately prior to the merger, consolidation or sale of assets, the per share
consideration (whether stock, cash, or other securities or property) received
in the merger, consolidation or sale of assets by holders of Common Stock (and
if holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger, consolidation or
sale of assets is not solely common stock of the successor Person or its Parent
(if any), the Committee may, with the consent of the successor Person, provide
for the consideration to be received upon the exercise of the Award, for each
Share of Common Stock subject to the Award, to be solely common stock of the
successor Person or its Parent (if any) equal in fair market value to the per
share consideration received by holders of Common Stock in the merger,
consolidation or sale of assets.
(d) Change of Control. Notwithstanding anything to the contrary, the
Committee may grant Awards which provide for the acceleration of the vesting of
Shares subject to the Award upon a Change of Control. Such provisions shall be
set forth in the Agreement evidencing such Award.
(e) Further Adjustments. In the event of any change of a type described in
Section 13(a) or Section 13(c) above, the Committee shall make any further
adjustment to the maximum number of Shares which may be acquired under the Plan
pursuant to the exercise of Awards, the maximum number of Shares for which
Awards may be granted to any one Employee or Consultant and the number of
Shares and price per Share subject to outstanding Awards as shall be equitable
to prevent dilution or enlargement of rights under such Awards, and the
determination of the Committee as to these matters shall be conclusive and
binding on the Holder; provided,
14
however, that (i) each such adjustment with respect to an Incentive Stock
Option shall comply with the rules of Section 424(a) of the Code (or any
successor provision) and (ii) in no event shall any adjustment be made which
would cause any Incentive Stock Option granted hereunder to no longer be an
"incentive stock option" as defined in Section 422 of the Code.
(f) No Limitation on Right to Merge, Etc. The grant of Awards pursuant to
the Plan shall not restrict in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations or changes of its capital
or business structure or to merge, consolidate, dissolve, liquidate, or sell or
transfer all or any part of its business or assets.
14. TERM OF PLAN.
The Plan shall become effective upon the earlier to occur of its adoption by
the Board or its approval by the shareholders of the Company, as described in
Section 22 of the Plan. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 18 of the Plan.
15. TERM OF OPTIONS.
The term of each Option and other Award shall be the term stated in the
applicable Agreement; provided, however, that the term shall be no more than
ten (10) years from the date of grant thereof; and provided further that in the
case of an Incentive Stock Option granted to a Holder who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Corporate Affiliate,
the term of the Option shall be no more than five (5) years from the date of
grant thereof.
16. NON-TRANSFERABILITY OF AWARDS.
An Incentive Stock Option shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime
of the Holder to whom the Incentive Stock Option is granted only by such
Holder. Any other Award, including a Nonqualified Stock Option, shall not be
transferable except by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order, as defined by the Code or by
Title I of the Employee Retirement Income Security Act of 1974, as amended, or
the rules thereunder (a "QDRO"), and shall be exercisable during the lifetime
of the Holder to whom the Option is granted only by such Holder or any
transferee pursuant to a QDRO; provided, however, that the Committee, in its
discretion, may allow for transferability of Nonqualified Stock Options by a
Holder to Immediate Family Members. Any Nonqualified Stock Option grants that
are transferable are further conditioned on the Holder and the applicable
Immediate Family Members agreeing to abide by the Company's then current stock
option transfer guidelines. A Tandem Stock Appreciation Right may not be
transferred except when the corresponding Option is transferred as permitted by
this Section 16 and, when the corresponding Option is transferred, the Tandem
Stock Option Appreciation Right must be transferred to the same permitted
transferee to whom the Option is transferred.
17. TIME OF GRANTING AWARDS.
The date of grant of an Award shall, for all purposes, be the date on which
the Committee makes the determination granting such Award, or such other date
as is determined by the Committee. Notice of the determination shall be given
to each Employee or Consultant to whom an Award is so granted within a
reasonable time after the date of such grant.
18. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may amend or terminate the Plan in any respect whatsoever,
provided that any such amendment or termination of the Plan shall not affect
Award already granted and such Award shall remain in full force and effect as
if the Plan had not been amended or terminated. In addition, to the extent
necessary and desirable to
15
comply with Rule 16b-3 (or any other Applicable Law or regulation, including
the requirements of the National Association of Securities Dealers or the Stock
Exchange), the Company shall obtain shareholder approval of any Plan amendment
in such a manner and to such a degree as required.
19. CONDITIONS UPON ISSUANCE OF SHARES.
Shares shall not be issued pursuant to an Award unless the issuance and
delivery of such Shares pursuant thereto shall comply with all relevant
Applicable Laws, including, without limitation, the Securities Act of 1933, as
amended (the "Securities Act"), the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of the Stock Exchange, and shall
be further subject to the approval of counsel for the Company with respect to
such compliance.
The Company may require any Holder, as a condition of receiving Shares
pursuant to an Award, (i) to give written assurances satisfactory to the
Company as to the Holder's knowledge and experience in financial and business
matters and/or to employ a purchaser representative reasonably satisfactory to
the Company who is knowledgeable and experienced in financial and business
matters, and that he or she is capable of evaluating, alone or together with
the purchaser representative, the merits and risks of exercising the Award;
(ii) to give written assurances satisfactory to the Company stating that such
Holder is acquiring the Shares subject to the Award for such Holder's own
account and not with any present intention of selling or otherwise distributing
such Shares; (iii) to deliver such other documentation as may be necessary to
comply with federal and state securities laws and all other Applicable Laws;
and (iv) to sign a counterpart to and agree to be bound by all of the terms and
conditions of the Company's shareholders' agreement as then in effect. These
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (i) the issuance of the Shares upon the exercise of or pursuant
to the Award has been registered under a then currently effective registration
statement under the Securities Act and all applicable state securities laws, or
(ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under
the then applicable securities laws and other Applicable Laws. The Company may,
upon advice of counsel to the Company, place legends on stock certificates
issued under the Plan as such counsel deems necessary or appropriate in order
to comply with the Plan, applicable securities laws and other Applicable Laws,
including, but not limited to, legends restricting the transfer of the Shares,
and may enter stop-transfer orders against the transfer of the Shares issued
upon the exercise of or pursuant to an Award.
The inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
20. RESERVATION OF SHARES.
The Company, during the term of the Plan, shall at all times reserve and
keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
21. AGREEMENTS.
Options shall be evidenced by Option Agreements, and other Awards shall be
evidenced by other Agreements, each in such form as the Committee shall approve
from time to time.
22. SHAREHOLDER APPROVAL.
Continuance of the Plan shall be subject to approval by the shareholders of
the Company within twelve (12) months before or after the date the Plan is
adopted by the Board. Such shareholder approval shall be obtained to the extent
and in manner required under Applicable Laws and the rules of the Stock
Exchange.
16
23. USE OF PROCEEDS FROM STOCK.
The proceeds, if any, from the sale of Common Stock pursuant to Options or
other Awards shall constitute general funds of the Company.
24. MISCELLANEOUS.
(a) Acceleration of Vesting. The Committee shall have the power to
accelerate the time at which an Award may first be exercised or the time during
which an Award or any part thereof will vest, notwithstanding the provisions in
the Agreement evidencing the Award stating the time at which it may first be
exercised or the time during which it will vest.
(b) Rule 16b-3. With respect to Persons subject to Section 16 of the
Exchange Act, transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3 and with respect to such Persons all
transactions shall be subject to such conditions regardless of whether they are
expressly set forth in the Plan or the Agreement. To the extent any provision
of the Plan or action by the Committee fails to so comply, it shall not apply
to such Persons or their transactions and shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Committee.
(c) Grants Exceeding Allotted Shares. If the number of Shares of Common
Stock subject to an Award granted pursuant to the Plan exceeds, as of the date
of grant, the number of Shares that may be issued under the Plan without
additional shareholder approval, such Award shall be void with respect to such
excess Shares, unless shareholder approval of an amendment sufficiently
increasing the number of Shares subject to the Plan is timely obtained in
accordance with Section 18 of the Plan.
(d) Notice. Any written notice to the Company required by any of the
provisions of the Plan shall be addressed to the Secretary of the Company at
15455 North Dallas Parkway, Suite 500, Addison, Texas 75001, Attn: Secretary
and shall become effective when it is received. Any written notice to Holders
required by any provisions of the Plan shall be addressed to the Holder at the
address on file with the Company and shall become effective three days after it
is mailed by certified mail, postage prepaid to such address or at the time of
delivery if delivered sooner by messenger or overnight courier.
(e) Savings Clause. Notwithstanding any other provision hereof, the Plan is
intended to qualify as a plan pursuant to which Incentive Stock Options may be
issued under Section 422 of the Code. If the Plan or any provision of the Plan
shall be held to be invalid or to fail to meet the requirements of Section 422
of the Code or the regulations promulgated thereunder, such invalidity or
failure shall not affect the remaining parts of the Plan or such provisions
which apply only to Nonqualified Stock Options, but rather it shall be
construed and enforced as if the Plan or the affected provision thereof, as the
case may be, complied in all respects with the requirements of Section 422 of
the Code.
(f) Governing Law. The Plan and all rights and obligations thereunder shall
be construed in accordance with and governed by the laws of the State of Texas
without regard to its conflict of laws rules.
[THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK.]
17
Exhibit A to 2002 Equity Incentive Plan
ASCENDANT SOLUTIONS, INC.
2002 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
(Standard Exercise)
[Optionee's name and address]
This Stock Option Agreement (this "Option Agreement") is entered into as of
______ ______, 2002, by and between you ("Optionee") and Ascendant Solutions,
Inc., (the "Company"). Unless otherwise defined herein, all defined terms used
herein shall have the meanings set forth in the 2002 Equity Incentive Plan of
the Company (the "Plan").
1. Grant of Option. The Company hereby grants to Optionee an option (the
"Option") to purchase the number of shares (the "Shares") of the Common Stock,
par value $.0001 per share (the "Common Stock"), of the Company set forth below
at the exercise price and on the other terms and conditions set forth below,
subject to the terms and conditions of this Option Agreement and the Plan
(which is incorporated herein by reference), including the provisions thereof
relating to increases in the number of shares covered by this Option upon the
occurrence of certain specified events, as follows:
Grant Number
-------------------------------------
Date of Grant ("Date of
Grant")
-------------------------------------
Vesting Commencement Date
-------------------------------------
Exercise Price per Share
("Exercise
Price Per Share")
-------------------------------------
Total Number of Shares
Granted
-------------------------------------
Total Exercise Price
-------------------------------------
Type of Option:
____ Incentive Stock
Option
____ Nonqualified
Stock Option
Term/Expiration Date:
(No more than 10 years
from date of grant,
5 years for certain
grants)
If designated above as an Incentive Stock Option, this Option is intended
(subject to Section 5(b) of the Plan) to qualify as an Incentive Stock Option
as defined in Section 422 of the Code; provided, however, the Company has not
made, and will not be deemed to make hereby, any representations or warranties
to Optionee with respect to such qualification.
2. Vesting Schedule.
(a) This Option may be exercised, in whole or in part, in accordance
with the following schedule. Except only as specifically provided elsewhere
herein or in the Plan, this Option shall be exercisable in the following
cumulative installments as follows:
[Note: the vesting schedule is to be completed upon grant of the Option]
(b) Notwithstanding the vesting schedule set forth above, in the event
of Optionee's death, Disability or other termination of Optionee's Continuous
Status as an Employee or Consultant (regardless of the reason), Options that
have not become vested and exercisable under Section 2(a) shall cease vesting,
shall not be exercisable and shall automatically be forfeited and cancelled on
the date of such termination.
18
(c) Notwithstanding the vesting schedule set forth above, and so long as
the Option has not been terminated, in the event of a "Change of Control" as
defined in the Plan, the vesting schedule above shall be accelerated such that
the Option shall be deemed to be fully vested immediately prior to such event.
[Note: delete the foregoing paragraph if the Option does not automatically
accelerate upon a change of control.]
3. Exercise of Option.
(a) This Option shall be exercisable, with respect to any or all of the
Shares, during its term in accordance with the vesting schedule set out in
Section 2 hereof and in accordance with the applicable provisions of the Plan
and this Option Agreement. In the event of Optionee's death, Disability or
other termination of Optionee's Continuous Status as an Employee or Consultant
(regardless of the reason), this Option shall be exercisable only in accordance
with the applicable provisions of the Plan and this Option Agreement (including
Section 2(b) and Section 4 hereof).
(b) To exercise this Option, Optionee must deliver to the Company an
executed exercise agreement in the form attached hereto as Exhibit A (the
"Exercise Agreement") which shall state the election to exercise the Option,
the number of Shares in respect of which the Option is being exercised (this
Option may be exercised in one or more installments, provided that this Option
may not be exercised as to fewer than one-hundred (100) Shares), any
restrictions (including restrictions on transfer) imposed on the Shares, and
such other representations and agreements as to the Optionee's investment
intent with respect to such shares of Common Stock as may be required by the
Company pursuant to the provisions of the Plan. The Exercise Agreement shall be
signed by the Optionee and shall be delivered in person or by certified mail to
the Secretary of the Company. The Exercise Agreement shall be accompanied by
payment of the Exercise Price Per Share multiplied by the number of Shares in
respect of which the Option is being exercised (the "Exercise Price"). This
Option shall be deemed to be exercised upon receipt by the Company of such
executed Exercise Agreement accompanied by the Exercise Price.
(c) The Optionee shall, upon notification of the amount due (if any) as
a result of the exercise of the Option and prior to or concurrent with delivery
of the certificate representing the Shares, pay to the Company as provided in
the Plan amounts necessary to satisfy applicable federal, state and local tax
withholding requirements.
(d) No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with this Option Agreement
and Section 19 of the Plan. Assuming such compliance, for income tax purposes
the Shares shall be considered transferred to the Optionee on the date on which
the Option is exercised with respect to such Shares.
4. Termination Period. Optionee may exercise that portion of the Option
that is vested on the date of termination (or becomes vested by reason of such
termination pursuant to this Agreement) for three months (or such shorter
period provided for elsewhere herein or in the Plan) after termination of
Optionee's Continuous Status as an Employee or Consultant, or for such longer
period upon Optionee's death or Disability as provided in the Plan. If the
Optionee's status changes from Employee to Consultant or Consultant to
Employee, this Option Agreement shall remain in effect. In no event may
Optionee exercise this Option after the Term/Expiration Date as provided above
in Section 1. Notwithstanding the foregoing, in the event that Optionee's
Continuous Status as an Employee or Consultant is terminated by the Company for
Cause, this Option (both the vested and unvested portions thereof) will
terminate on the date of such termination and will not be exercisable
thereafter. For purposes of this Option Agreement, "Cause" means the occurrence
of any of the following events or reasons:
(a) Optionee's conviction for a felony offense or commission by Optionee
of any act abhorrent to the community that the Company considers materially
damaging to or tending to discredit the reputation of the Company;
19
(b) Dishonesty, fraud, willful misconduct, unlawful discrimination or
theft on the part of Optionee;
(c) Optionee's using for Optionee's own benefit any confidential or
proprietary information of the Company, or willfully or negligently divulging
any such information to third parties without the prior written consent of the
Company;
(d) Optionee's public drunkenness, public use of illegal substances or
drugs or the use, possession, distribution or being under the influence of
alcohol or illegal substances or drugs in the workplace (the only exception is
that Optionee may consume alcohol reasonably and responsibly, if he or she so
chooses, at legitimate business events and functions where alcohol is legally
available);
(e) the determination by the Company that Optionee has continually
failed or refused to comply, after notice of and a reasonable opportunity to
cure such failure or refusal, with the policies, standards, regulations,
instructions, or directions of the Company as they currently exist or as they
may be modified from time to time; or
(f) any violation by the Optionee of any Noncompetition, Nondiversion,
or Nondisclosure Agreement between the Optionee and the Company (the
"Noncompetition Agreement"), or any part of any noncompetition, nondiversion,
nondisclosure or similar agreement that amends, extends, supplements, modifies
or supersedes the Noncompetition Agreement.
5. Method of Payment. The purchase price of Shares acquired pursuant to the
Option shall be paid as set forth in the Plan. THE USE OF SHARES OF STOCK
ACQUIRED OR TO BE ACQUIRED TO PAY FOR EXERCISED SHARES MAY HAVE INCOME TAX
CONSEQUENCES FOR THE OPTIONEE.
6. Restrictions on Exercise. This Option may not be exercised until such
time as the Plan has been approved by the shareholders of the Company, and may
not be exercised if the issuance of such Shares upon such exercise or the
method of payment of consideration for such shares would constitute a violation
of any applicable federal or state securities or other law or regulation,
including any rule under Part 221 of Title 12 of the Code of Federal
Regulations as promulgated by the Federal Reserve Board.
7. Non-Transferability of Option. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution or as
otherwise set forth in the Plan and may be exercised during the lifetime of
Optionee only by Optionee or a permitted transferee as set forth in the Plan.
The terms of the Plan and this Option Agreement shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.
8. Term of Option. This Option may be exercised only within the term set
out in Section 1 hereof, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement. The
limitations set forth in Sections 5, 6 and 15 of the Plan regarding Options
designated as Incentive Stock Options and Options granted to more than ten
percent (10%) shareholders shall apply to this Option.
9. Changes in Capital Structure. The Optionee agrees and acknowledges that
the Company shall have the right at any time and from time to time after the
date of this Option Agreement to authorize additional classes or series of
capital stock, some of which may entitle the holders thereof to greater rights
than the holders of the Common Stock into which this Option is convertible, and
to issue shares thereunder, subject only to the limits imposed by Applicable
Laws.
10. Tax Consequences. The grant and/or exercise of the Option will have
federal and state income tax consequences. THE OPTIONEE SHOULD CONSULT A TAX
ADVISER UPON THE GRANT OF THE OPTION AND BEFORE EXERCISING THE OPTION OR
DISPOSING OF THE SHARES ACQUIRED UPON EXERCISE, PARTICULARLY WITH RESPECT TO
HIS OR HER STATE'S TAX LAWS.
20
11. Entire Agreement. The Plan is incorporated herein by reference. The
Plan and this Option Agreement constitute the entire agreement of the parties
with respect to the subject matter hereof and supersede in their entirety all
prior undertakings and agreements of the Company and Optionee with respect to
the subject matter hereof, and this Option Agreement may not be amended except
by means of a writing signed by the Company and Optionee. If any inconsistency
should exist between the terms and conditions of this Option Agreement and the
Plan, the Plan shall govern and control.
12. Governing Law. This Option Agreement is governed by Texas law except
for that body of law pertaining to conflict of laws.
13. Warranties, Representations and Covenants. The undersigned Optionee
warrants and represents that he or she has reviewed the Plan and this Option
Agreement in their entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Option Agreement and fully understands all of
the provisions of the Plan and this Option Agreement. Optionee hereby agrees to
accept as binding, conclusive and final all decisions or interpretations of the
Committee upon any questions relating to the Plan and this Option Agreement.
Optionee further agrees to notify the Company upon any change in the residence
address indicated below. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF
SHARES PURSUANT TO THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY
OR EMPLOYMENT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED,
BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS OPTION AGREEMENT, NOR IN THE PLAN,
WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT
WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR
SHALL IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
14. Relation to Other Benefits; Termination of Employment. Any economic or
other benefit to the Optionee under this Option Agreement or the Plan will not
be taken into account in determining any benefits to which the Optionee may be
entitled under any profit-sharing, retirement or similar benefit or
compensation plan maintained by the Company and will not affect the amount of
any life insurance coverage available to any beneficiary under any life
insurance plan covering employees of the Company. No provision of this Option
Agreement will limit in any way whatsoever any right that the Company may
otherwise have to terminate the employment or adjust the compensation of the
Optionee at any time.
21
[Note: If applicable, insert here any other terms and conditions of the
Option as determined by the Committee, such as any specified performance goals
or other criteria which must be attained for the vesting of the Option; any
additional restrictions or limitations applicable to the Option; and any
additional vesting, exchange, surrender, cancellation, acceleration,
termination, exercise or forfeiture provisions applicable to the Option.]
THE COMPANY:
ASCENDANT SOLUTIONS, INC.
By: _______________________________
Name: _____________________________
Title: ____________________________
OPTIONEE:
--------------------------------------
Signature
--------------------------------------
Print Name
--------------------------------------
Residence Address
--------------------------------------
Area Code/Telephone Number
22
Exhibit A to Stock Option Agreement
(Standard Exercise)
ASCENDANT SOLUTIONS, INC.
2002 EQUITY INCENTIVE PLAN
EXERCISE AGREEMENT
(Standard Exercise)
Ascendant Solutions, Inc.
15455 North Dallas Parkway
Suite 500
Addison, Texas 75001
Attention: Secretary
1. Exercise of Option. Effective as of today, __________, 200_, the
undersigned ("Purchaser") hereby elects, pursuant to this Exercise Agreement
(this "Exercise Agreement"), to exercise ______ options (the "Options") to
purchase __________ shares (the "Shares") of the Common Stock of Ascendant
Solutions, Inc., (the "Company") under and pursuant to the 2002 Equity
Incentive Plan (the "Plan") and the Stock Option Agreement dated ____________,
200_ (the "Option Agreement"). The purchase price for the Shares shall be
$______, as specified in the Option Agreement. Unless otherwise defined herein,
all defined terms used herein shall have the meanings set forth in the Plan.
2. Delivery of Payment. Purchaser herewith delivers to the Company the full
purchase price for the Shares of ______________________________. THE USE OF
SHARES OF STOCK ACQUIRED OR TO BE ACQUIRED FOR EXERCISED SHARES MAY HAVE INCOME
TAX CONSEQUENCES FOR THE PURCHASER.
3. Representations and Warranties of Purchaser; Compliance with Securities
Laws. Purchaser represents and warrants to the Company that:
(a) Agrees to Terms of the Plan. Purchaser has received a copy of the
Plan and the Option Agreement, has read and understands the terms of the Plan
and the Option Agreement, and agrees to be bound by their terms and conditions.
Purchaser acknowledges that there may be adverse tax consequences upon exercise
of the Options or disposition of the Shares, and that Purchaser should consult
a tax adviser prior to such exercise or disposition.
(b) Purchase for Own Account for Investment. Purchaser is purchasing
the Shares for Purchaser's own account for investment purposes only and not
with a view to, or for sale in connection with, a distribution of the Shares
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"). Purchaser has no present intention of selling or otherwise disposing of
all or any portion of the Shares and no one other than Purchaser has any
beneficial ownership of any of the Shares.
(c) Access to Information. Purchaser has had access to all information
regarding the Company and its present and prospective business, assets,
liabilities and financial condition that Purchaser reasonably considers
important in making the decision to purchase the Shares and Purchaser has had
ample opportunity to ask questions of the Company's representatives concerning
such matters and this investment.
(d) Understanding of Risks. Purchaser is fully aware of: (i) the highly
speculative nature of the investment in the Shares; (ii) the financial hazards
involved; (iii) the lack of liquidity of the Shares and the
23
restrictions on transferability of the Shares (e.g., that Purchaser may not be
able to sell or dispose of the Shares or use them as collateral for loans);
(iv) the qualifications and backgrounds of the management of the Company; and
(v) the tax consequences of investment in the Shares. Purchaser is capable of
evaluating the merits and risks of this investment, has the ability to protect
Purchaser's own interests in this transaction and is financially capable of
bearing a total loss of this investment.
(e) No General Solicitation. At no time was Purchaser presented with or
solicited by any publicly issued or circulated newspaper, mail, radio,
television or other form of general advertising or solicitation in connection
with the offer sale and purchase of the Shares.
(f) Compliance with U.S. Federal Securities Laws and State Securities
Laws. Purchaser understands and acknowledges that the Shares have not been
registered with the Securities and Exchange Commission (the "SEC") under the
Securities Act and that, notwithstanding any other provision of this Exercise
Agreement to the contrary, the exercise of any rights to purchase any Shares is
expressly conditioned upon compliance with the Securities Act and all
applicable state securities laws. Purchaser agrees to cooperate with the
Company to ensure compliance with such laws.
4. Restricted Securities; Restrictions on Transfers.
(a) No Transfer Unless Registered or Exempt. Purchaser understands that
Purchaser may not transfer any Shares except pursuant to this Exercise
Agreement and unless such Shares are registered under the Securities Act or
qualified under applicable state securities laws or unless, in the opinion of
counsel to the Company, exemptions from such registration and qualification
requirements are available. Purchaser understands that only the Company may
file a registration statement with the SEC and that the Company is under no
obligation to do so with respect to the Shares. Purchaser has also been advised
that exemptions from registration and qualification may not be available or may
not permit Purchaser to transfer all or any of the Shares in the amounts or at
the times proposed by Purchaser.
(b) SEC Rule 144. In addition, Purchaser has been advised that SEC Rule
144 promulgated under the Securities Act, which permits certain limited sales
of unregistered securities, is not presently available with respect to the
Shares and, in any event, requires that the Shares be held for a minimum of one
(1) year, and in certain cases two (2) years, after they have been purchased
and paid for (within the meaning of Rule 144). Purchaser understands that Rule
144 may indefinitely restrict transfer of the Shares so long as Purchaser
remains an "affiliate" of the Company or if "current public information" about
the Company (as defined in Rule 144) is not publicly available.
(c) Disposition of Shares. Purchaser hereby agrees that Purchaser shall
make no disposition of the Shares unless and until:
(i) Purchaser shall have complied with all requirements of this
Exercise Agreement applicable to the disposition of the Shares;
(ii) Purchaser shall have provided the Company with written
assurances, in form and substance satisfactory to counsel for the Company,
that (i) the proposed disposition does not require registration of the
Shares under the Securities Act or (ii) all appropriate action necessary for
compliance with the registration requirements of the Securities Act or any
exemption from registration available under the Securities Act (including
Rule 144) has been taken; and
(iii) Purchaser shall have provided the Company with such other
written assurances and agreements, in form and substance satisfactory to the
Company, as may be requested by the Company pursuant to the Plan.
24
(d) Restrictions on Transfer. Subject to Section 6(f) below, Purchaser
shall not sell, transfer, assign, grant a lien or security interest in, pledge,
hypothecate, encumber, gift or otherwise dispose of ("Transfer") any Shares
without the prior written consent of the Company. In addition, any proposed
Transfer shall be subject to the Company's Right of First Refusal (as defined
below) pursuant to Section 6 below.
(e) Transferee Obligations. Each person (other than the Company) to
whom the Shares are Transferred by means of one of the permitted Transfers
specified in Section 6(f) of this Exercise Agreement must, as a condition
precedent to the validity of such Transfer, acknowledge in writing to the
Company that such person is bound by the provisions of this Exercise Agreement
and that the transferred Shares are subject to (i) the Company's Right of First
Refusal granted hereunder and (ii) the market stand-off provisions of Section
5, to the same extent such Shares would be so subject if retained by the
Purchaser.
5. Market Standoff Agreement. Purchaser agrees in connection with any
registration of the Company's securities that, upon the request of the Company
or the underwriters managing any public offering of the Company's securities,
Purchaser will not sell or otherwise dispose of any Shares without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time (not to exceed 180 days) after the effective date of such
registration requested by such managing underwriters and subject to all
restrictions as the Company or the underwriters may specify.
6. Company's Right of First Refusal. Before any Shares acquired by
Purchaser hereunder and held by Purchaser or any permitted transferee of such
Shares (either being sometimes referred to herein as the "Purchaser") may be
Transferred, the Company and/or its assignee(s) shall have an assignable right
of first refusal to purchase the Shares proposed to be Transferred (the
"Offered Shares") on the terms and conditions set forth in this Section 6 (the
"Right of First Refusal").
(a) Notice of Proposed Transfer. The Purchaser of the Offered Shares
shall deliver to the Company a written notice (the "Notice") stating: (i) the
Purchaser's bona fide intention to Transfer the Offered Shares; (ii) the name
of each proposed bona fide purchaser or other transferee ("Proposed
Transferee"); (iii) the number of Offered Shares to be Transferred to each
Proposed Transferee; (iv) the bona fide cash price or other consideration for
which the Purchaser proposes to Transfer the Offered Shares (the "Offered
Price") and (v) that the Purchaser will offer to Transfer the Offered Shares to
the Company and/or its assignee(s) at the Offered Price as provided in this
Section 6.
(b) Exercise of Right of First Refusal: At any time within thirty (30)
days after the date of the Notice, the Company and/or its assignee(s) may, by
giving written notice to the Purchaser, elect to purchase all (or, with the
consent of the Purchaser, less than all) the Offered Shares proposed to be
Transferred to any one or more of the Proposed Transferees named in the Notice,
at the purchase price determined as specified below.
(c) Purchase Price: The purchase price for the Offered Shares purchased
under this Section 6 will be the Offered Price. If the Offered Price includes
consideration other than cash, then the cash equivalent value of the non-cash
consideration shall conclusively be deemed to be the value of such non-cash
consideration as determined in good faith by the Board.
(d) Payment: Payment of the Offered Price will be payable, at the
option of the Company and/or its assignee(s) (as applicable), by check or by
cancellation of all or a portion of any outstanding indebtedness of the
Purchaser to the Company (or to such assignee, in the case of a purchase of
Offered Shares by such assignee) or by any combination thereof. The Offered
Price will be paid without interest within sixty (60) days after the Company's
receipt of the Notice, or, at the option of the Company and/or its assignee(s),
in the manner and at the time(s) set forth in the Notice.
(e) Transfer. If all of the Offered Shares proposed in the Notice to be
Transferred to a given Proposed Transferee are not purchased by the Company
and/or its assignee(s) as provided in this Section 6, then the Purchaser may
Transfer such Offered Shares to that Proposed Transferee at the Offered Price
or at a higher price;
25
provided that such Transfer is consummated within 120 days after the date of
the Notice, and provided further, that (i) any such Transfer is effected in
compliance with all applicable securities laws and (ii) the Proposed Transferee
agrees in writing that the provisions of this Section 6 will continue to apply
to the Offered Shares in the hands of such Proposed Transferee. If the Offered
Shares described in the Notice are not Transferred to the Proposed Transferee
within such 120 day period, then a new Notice must be given to the Company, and
the Company will again be offered the Right of First Refusal before any Shares
held by the Purchaser may be Transferred.
(f) Exempt Transfers: Notwithstanding anything to the contrary in
Section 4(d) or in this Section 6, the following Transfers of Offered Shares
will be exempt from the Right of First Refusal: (i) the Transfer of any or all
of the Offered Shares during Purchaser's lifetime by gift or on Purchaser's
death by will or intestacy to any Immediate Family Member (as such term is
defined in the Plan) of Purchaser, provided that each transferee or other
recipient agrees in a writing satisfactory to the Company that the provisions
of this Section 6 will continue to apply to the Transferred Shares in the hands
of such transferee or other recipient; (ii) any Transfer of Shares made
pursuant to a statutory merger or statutory consolidation of the Company with
or into another corporation or corporations (except that the Right of First
Refusal will continue to apply thereafter to such Shares, in which case the
surviving corporation of such merger or consolidation shall succeed to the
rights of the Company under this Section 6 unless the agreement of merger or
consolidation expressly otherwise provides); or (iii) any Transfer of Shares
pursuant to the winding up and dissolution of the Company.
(g) Termination of Right of First Refusal: The Company's Right of First
Refusal will terminate on the IPO Date.
7. Rights as Shareholder. The Purchaser shall not be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any Shares
for which such Option is exercised including, but not limited to, rights to
vote or to receive dividends unless and until the Purchaser has satisfied all
requirements for exercise of the Option pursuant to its terms, the certificates
evidencing such Shares have been issued and the Purchaser has become a record
holder of such Shares. A share certificate for the number of Shares so acquired
shall be issued to the Purchaser as soon as practicable after exercise of the
Option. No adjustment will be made for a dividend or other right for which the
record date is prior to the date all the conditions set forth above are
satisfied, except as provided in Section 13 of the Plan.
8. Tax Consultation. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
9. Legends. Purchaser understands and agrees that the Company will cause a
legend regarding the Company's Right of First Refusal to be placed upon any
certificate(s) or other documents or instruments evidencing ownership of the
Shares by the Purchaser, in addition to any other legends required under
federal and state securities laws including the following legends:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THE SHARES MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES
UNDER SUCH ACT, (II) A 'NO ACTION' LETTER OF THE SECURITIES AND EXCHANGE
COMMISSION WITH RESPECT TO SUCH SALE OR OFFER, OR (III) AN OPINION OF
COUNSEL SATISFACTORY TO THE CORPORATION THAT REGISTRATION UNDER SUCH ACT IS
NOT REQUIRED WITH RESPECT TO SUCH SALE OR OFFER."
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN
26
COMPLIANCE WITH THE TERMS OF WRITTEN AGREEMENTS BETWEEN THE CORPORATION AND
THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE
SHARES). SUCH AGREEMENTS GRANT CERTAIN RIGHTS OF FIRST REFUSAL TO THE
CORPORATION. THE SECRETARY OF THE CORPORATION WILL UPON WRITTEN REQUEST
FURNISH A COPY OF SUCH AGREEMENTS TO THE HOLDER HEREOF WITHOUT CHARGE."
10. Entire Agreement. The Plan and the Option Agreement are incorporated
herein by reference. This Exercise Agreement, the Plan and the Option Agreement
constitute the entire agreement of the parties with respect to the subject
matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and this Exercise Agreement may not be amended except by means of a
writing signed by the Company and Purchaser. If any inconsistency should exist
between the terms and conditions of this Exercise Agreement and the terms of
the Option Agreement, the terms of the Option Agreement shall govern and
control. If any inconsistency should exist between the terms and conditions of
this Exercise Agreement and the terms of the Plan, the terms of the Plan shall
govern and control.
11. Governing Law. This Exercise Agreement is governed by Texas law except
for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
PURCHASER: THE COMPANY:
ASCENDANT SOLUTIONS, INC.
_________________________ By: ___________________
Signature
_________________________ Its: __________________
Print Name
Address: Address:
-------- --------
_________________________ 15455 North Dallas Parkway
Suite 500
_________________________ Addison, Texas 75001
Attn: Secretary
27
Exhibit B to 2002 Equity Incentive Plan
ASCENDANT SOLUTIONS, INC.
2002 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
(Immediately Exercisable)
[Optionee's name and address]
This Stock Option Agreement (this "Option Agreement") is entered into as of
______ ______, 2002, by and between you ("Optionee") and Ascendant Solutions,
Inc. (the "Company"). Unless otherwise defined herein, all defined terms used
herein shall have the meanings set forth in the 2002 Equity Incentive Plan of
the Company (the "Plan").
1. Grant of Option. The Company hereby grants to Optionee an option (the
"Option") to purchase the number of shares (the "Shares") of the Common Stock,
par value $.0001 per share (the "Common Stock"), of the Company set forth below
at the exercise price and on the other terms and conditions set forth below,
subject to the terms and conditions of this Option Agreement and the Plan
(which is incorporated herein by reference), including the provisions thereof
relating to increases in the number of shares covered by this Option upon the
occurrence of certain specified events, as follows:
Grant Number
---------------------------------
Date of Grant ("Date of Grant")
---------------------------------
Vesting Commencement Date
---------------------------------
Exercise Price per Share ("Exercise Price Per Share")
---------------------------------
Total Number of Shares Granted
---------------------------------
Total Exercise Price
---------------------------------
Type of Option:
____ Incentive Stock Option
____ Nonqualified Stock Option
Term/Expiration Date:
(No more than 10 years from date of grant,
5 years for certain grants)
If designated above as an Incentive Stock Option, this Option is intended
(subject to Section 5(b) of the Plan) to qualify as an Incentive Stock Option
as defined in Section 422 of the Code; provided, however, the Company has not
made, and will not be deemed to make hereby, any representations or warranties
to Optionee with respect to such qualification.
2. Vesting Schedule.
(a) Except only as specifically provided elsewhere herein or in the
Plan, the Shares issuable upon exercise of this Option shall become vested, in
whole or in part, in cumulative installments in accordance with the following
vesting schedule:
[Note: the vesting schedule is to be completed upon grant of the Option]
Shares that are vested pursuant to the schedule set forth in this Section 2(a)
are "Vested Shares." Shares that are not vested pursuant to the schedule set
forth in this Section 2(a) are "Unvested Shares."
28
(b) Notwithstanding the vesting schedule set forth above, in the event
of Optionee's death, Disability or other termination of Optionee's Continuous
Status as an Employee or Consultant (regardless of the reason), Shares that
have not become vested under Section 2(a) shall cease vesting and shall
automatically become subject to the Company's Repurchase Option pursuant to
Section 6 of the Exercise Agreement (as defined below) on the date of such
termination.
(c) Notwithstanding the vesting schedule set forth above, and so long as
the Option has not been terminated, in the event of a "Change of Control" as
defined in the Plan, the vesting schedule above shall be accelerated such that
the Shares issuable upon exercise of this Option shall be deemed to be fully
vested immediately prior to such event.
[Note: delete the foregoing paragraph if the Option does not automatically
accelerate upon a change of control.]
3. Exercise of Option.
(a) This Option is immediately exercisable with respect to any or all of
the Vested and Unvested Shares, during its term and in accordance with the
applicable provisions of the Plan and this Option Agreement. However, any
Unvested Shares issued upon exercise of this Option will be subject to the
restrictions set forth in Section 6 of the Exercise Agreement until such Shares
become Vested Shares in accordance with the schedule set forth in Section 2
hereof. In the event of Optionee's death, Disability or other termination of
Optionee's Continuous Status as an Employee or Consultant (regardless of the
reason), this Option shall be exercisable only in accordance with the
applicable provisions of the Plan and this Option Agreement (including Section
3(b) and Section 4 hereof).
(b) Notwithstanding anything in Section 3(a) to the contrary, in the
event of Optionee's death, Disability or other termination of Optionee's
Continuous Status as an Employee or Consultant (regardless of the reason), this
Option, to the extent not already exercised, shall cease to be exercisable as
to any Unvested Shares and shall automatically be forfeited and cancelled with
respect to such Unvested Shares.
(c) To exercise this Option, Optionee must deliver to the Company an
executed exercise agreement in the form attached hereto as Exhibit A (the
"Exercise Agreement") which shall state the election to exercise the Option,
the number of Shares in respect of which the Option is being exercised (this
Option may be exercised in one or more installments, provided that this Option
may not be exercised as to fewer than one-hundred (100) Shares), any
restrictions (including restrictions on transfer) imposed on the Shares, and
such other representations and agreements as to the Optionee's investment
intent with respect to such shares of Common Stock as may be required by the
Company pursuant to the provisions of the Plan. The Exercise Agreement shall be
signed by the Optionee and shall be delivered in person or by certified mail to
the Secretary of the Company. The Exercise Agreement shall be accompanied by
payment of the Exercise Price Per Share multiplied by the number of Shares in
respect of which the Option is being exercised (the "Exercise Price"). This
Option shall be deemed to be exercised upon receipt by the Company of such
executed Exercise Agreement accompanied by the Exercise Price.
(d) The Optionee shall, upon notification of the amount due (if any) as
a result of the exercise of the Option and prior to or concurrent with delivery
of the certificate representing the Shares, pay to the Company as provided in
the Plan amounts necessary to satisfy applicable federal, state and local tax
withholding requirements.
(e) No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with this Option Agreement
and Section 19 of the Plan. Assuming such compliance, for income tax purposes
the Shares shall be considered transferred to the Optionee on the date on which
the Option is exercised with respect to such Shares.
29
4. Termination Period. Optionee may exercise that portion of the Option
covering Vested Shares on the date of termination (or that covers Shares that
become Vested Shares by reason of such termination pursuant to this Agreement)
for three months (or such shorter period provided for elsewhere herein or in
the Plan) after termination of Optionee's Continuous Status as an Employee or
Consultant, or for such longer period upon Optionee's death or Disability as
provided in the Plan. If the Optionee's status changes from Employee to
Consultant or Consultant to Employee, this Option Agreement shall remain in
effect. In no event may Optionee exercise this Option after the Term/Expiration
Date as provided above in Section 1. Notwithstanding the foregoing, in the
event that Optionee's Continuous Status as an Employee or Consultant is
terminated by the Company for Cause, this Option (both the portion covering
Vested Shares and the portion covering Unvested Shares), to the extent not
already exercised, will terminate on the date of such termination and will not
be exercisable thereafter. For purposes of this Option Agreement, "Cause" means
the occurrence of any of the following events or reasons:
(a) Optionee's conviction for a felony offense or commission by Optionee
of any act abhorrent to the community that the Company considers materially
damaging to or tending to discredit the reputation of the Company;
(b) Dishonesty, fraud, willful misconduct, unlawful discrimination or
theft on the part of Optionee;
(c) Optionee's using for Optionee's own benefit any confidential or
proprietary information of the Company, or willfully or negligently divulging
any such information to third parties without the prior written consent of the
Company;
(d) Optionee's public drunkenness, public use of illegal substances or
drugs or the use, possession, distribution or being under the influence of
alcohol or illegal substances or drugs in the workplace (the only exception is
that Optionee may consume alcohol reasonably and responsibly, if he or she so
chooses, at legitimate business events and functions where alcohol is legally
available);
(e) the determination by the Company that Optionee has continually
failed or refused to comply, after notice of and a reasonable opportunity to
cure such failure or refusal, with the policies, standards, regulations,
instructions, or directions of the Company as they currently exist or as they
may be modified from time to time; or
(f) any violation by the Optionee of any Noncompetition, Nondiversion,
or Nondisclosure Agreement between the Optionee and the Company (the
"Noncompetition Agreement"), or any part of any noncompetition, nondiversion,
nondisclosure or similar agreement that amends, extends, supplements, modifies
or supersedes the Noncompetition Agreement.
5. Method of Payment. The purchase price of Shares acquired pursuant to the
Option shall be paid as set forth in the Plan. THE USE OF SHARES OF STOCK
ACQUIRED OR TO BE ACQUIRED TO PAY FOR EXERCISED SHARES MAY HAVE INCOME TAX
CONSEQUENCES FOR THE OPTIONEE.
6. Restrictions on Exercise. This Option may not be exercised until such
time as the Plan has been approved by the shareholders of the Company, and may
not be exercised if the issuance of such Shares upon such exercise or the
method of payment of consideration for such shares would constitute a violation
of any applicable federal or state securities or other law or regulation,
including any rule under Part 221 of Title 12 of the Code of Federal
Regulations as promulgated by the Federal Reserve Board.
7. Non-Transferability of Option. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution or as
otherwise set forth in the Plan and may be exercised during the lifetime of
Optionee only by Optionee or a permitted transferee as set forth in the Plan.
The terms of the Plan and
30
this Option Agreement shall be binding upon the executors, administrators,
heirs, successors and assigns of the Optionee.
8. Term of Option. This Option may be exercised only within the term set
out in Section 1 hereof, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement. The
limitations set forth in Sections 5, 6 and 15 of the Plan regarding Options
designated as Incentive Stock Options and Options granted to more than ten
percent (10%) shareholders shall apply to this Option.
9. Changes in Capital Structure. The Optionee agrees and acknowledges that
the Company shall have the right at any time and from time to time after the
date of this Option Agreement to authorize additional classes or series of
capital stock, some of which may entitle the holders thereof to greater rights
than the holders of the Common Stock into which this Option is convertible, and
to issue shares thereunder, subject only to the limits imposed by Applicable
Laws.
10. Tax Consequences. The grant and/or exercise of the Option and/or the
lapse of restrictions on the Shares will have federal and state income tax
consequences. THE OPTIONEE SHOULD CONSULT A TAX ADVISER UPON THE GRANT OF THE
OPTION AND BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES ACQUIRED
UPON EXERCISE, PARTICULARLY WITH RESPECT TO HIS OR HER STATE'S TAX LAWS.
11. Entire Agreement. The Plan is incorporated herein by reference. The
Plan and this Option Agreement constitute the entire agreement of the parties
with respect to the subject matter hereof and supersede in their entirety all
prior undertakings and agreements of the Company and Optionee with respect to
the subject matter hereof, and this Option Agreement may not be amended except
by means of a writing signed by the Company and Optionee. If any inconsistency
should exist between the terms and conditions of this Option Agreement and the
Plan, the Plan shall govern and control.
12. Governing Law. This Option Agreement is governed by Texas law except
for that body of law pertaining to conflict of laws.
13. Warranties, Representations and Covenants. The undersigned Optionee
warrants and represents that he or she has reviewed the Plan and this Option
Agreement in their entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Option Agreement and fully understands all of
the provisions of the Plan and this Option Agreement. Optionee hereby agrees to
accept as binding, conclusive and final all decisions or interpretations of the
Committee upon any questions relating to the Plan and this Option Agreement.
Optionee further agrees to notify the Company upon any change in the residence
address indicated below. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF
SHARES PURSUANT TO THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY
OR EMPLOYMENT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED,
BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS OPTION AGREEMENT, NOR IN THE PLAN,
WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT
WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR
SHALL IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
14. Relation to Other Benefits; Termination of Employment. Any economic or
other benefit to the Optionee under this Option Agreement or the Plan will not
be taken into account in determining any benefits to which the Optionee may be
entitled under any profit-sharing, retirement or similar benefit or
compensation plan maintained by the Company and will not affect the amount of
any life insurance coverage available to any beneficiary under any life
insurance plan covering employees of the Company. No provision of this Option
Agreement will limit in any way whatsoever any right that the Company may
otherwise have to terminate the employment or adjust the compensation of the
Optionee at any time.
31
[Note: If applicable, insert here any other terms and conditions of the
Option as determined by the Committee, such as any specified performance goals
or other criteria which must be attained for the vesting of the Shares; any
additional restrictions or limitations applicable to the Option or Shares; and
any additional vesting, exchange, surrender, cancellation, acceleration,
termination, exercise or forfeiture provisions applicable to the Option or
Shares.]
THE COMPANY:
ASCENDANT SOLUTIONS, INC.
By:________________________________
Name:______________________________
Title:_____________________________
OPTIONEE:
--------------------------------------
Signature
--------------------------------------
Print Name
--------------------------------------
Residence Address
--------------------------------------
Area Code/Telephone Number
32
Exhibit A to Stock Option Agreement
(Immediately Exercisable)
ASCENDANT SOLUTIONS, INC.
2002 EQUITY INCENTIVE PLAN
EXERCISE AGREEMENT
(Immediately Exercisable)
Ascendant Solutions, Inc.
15455 North Dallas Parkway
Suite 500
Addison, Texas 75001
Attention: Secretary
1. Exercise of Option. Effective as of today, ________, 200__, the
undersigned ("Purchaser") hereby elects, pursuant to this Exercise Agreement
(this "Exercise Agreement"), to exercise _____ options (the "Options") to
purchase ______ shares (the "Shares") of the Common Stock of Ascendant
Solutions, Inc. (the "Company") under and pursuant to the 2002 Equity Incentive
Plan (the "Plan") and the Stock Option Agreement dated _______, 200__ (the
"Option Agreement"). The purchase price for the Shares shall be $_____, as
specified in the Option Agreement. Unless otherwise defined herein, all defined
terms used herein shall have the meanings set forth in the Plan. Shares that
are vested pursuant to the schedule set forth in Section 2(a) of the Option
Agreement are referred to herein as "Vested Shares." Shares that are not vested
pursuant to the schedule set forth in Section 2(a) of the Option Agreement are
referred to herein as "Unvested Shares."
2. Delivery of Payment. Purchaser herewith delivers to the Company the full
purchase price for the Shares of _____________________________________________.
THE USE OF SHARES OF STOCK ACQUIRED OR TO BE ACQUIRED FOR EXERCISED SHARES MAY
HAVE INCOME TAX CONSEQUENCES FOR THE PURCHASER.
3. Representations and Warranties of Purchaser; Compliance with Securities
Laws. Purchaser represents and warrants to the Company that:
(a) Agrees to Terms of the Plan. Purchaser has received a copy of the
Plan and the Option Agreement, has read and understands the terms of the Plan
and the Option Agreement, and agrees to be bound by their terms and conditions.
Purchaser acknowledges that there may be adverse tax consequences upon exercise
of the Options or disposition of the Shares, and that Purchaser should consult
a tax adviser prior to such exercise or disposition.
(b) Purchase for Own Account for Investment. Purchaser is purchasing
the Shares for Purchaser's own account for investment purposes only and not
with a view to, or for sale in connection with, a distribution of the Shares
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"). Purchaser has no present intention of selling or otherwise disposing of
all or any portion of the Shares and no one other than Purchaser has any
beneficial ownership of any of the Shares.
33
(c) Access to Information. Purchaser has had access to all information
regarding the Company and its present and prospective business, assets,
liabilities and financial condition that Purchaser reasonably considers
important in making the decision to purchase the Shares and Purchaser has had
ample opportunity to ask questions of the Company's representatives concerning
such matters and this investment.
(d) Understanding of Risks. Purchaser is fully aware of: (i) the highly
speculative nature of the investment in the Shares; (ii) the financial hazards
involved; (iii) the lack of liquidity of the Shares and the restrictions on
transferability of the Shares (e.g., that Purchaser may not be able to sell or
dispose of the Shares or use them as collateral for loans); (iv) the
qualifications and backgrounds of the management of the Company; and (v) the
tax consequences of investment in the Shares. Purchaser is capable of
evaluating the merits and risks of this investment, has the ability to protect
Purchaser's own interests in this transaction and is financially capable of
bearing a total loss of this investment.
(e) No General Solicitation. At no time was Purchaser presented with or
solicited by any publicly issued or circulated newspaper, mail, radio,
television or other form of general advertising or solicitation in connection
with the offer sale and purchase of the Shares.
(f) Compliance with U.S. Federal Securities Laws and State Securities
Laws. Purchaser understands and acknowledges that the Shares have not been
registered with the Securities and Exchange Commission (the "SEC") under the
Securities Act and that, notwithstanding any other provision of this Exercise
Agreement to the contrary, the exercise of any rights to purchase any Shares is
expressly conditioned upon compliance with the Securities Act and all
applicable state securities laws. Purchaser agrees to cooperate with the
Company to ensure compliance with such laws.
4. Restricted Securities; Restrictions on Transfers.
(a) No Transfer Unless Registered or Exempt. Purchaser understands that
Purchaser may not transfer any Shares except pursuant to this Exercise
Agreement and unless such Shares are registered under the Securities Act or
qualified under applicable state securities laws or unless, in the opinion of
counsel to the Company, exemptions from such registration and qualification
requirements are available. Purchaser understands that only the Company may
file a registration statement with the SEC and that the Company is under no
obligation to do so with respect to the Shares. Purchaser has also been advised
that exemptions from registration and qualification may not be available or may
not permit Purchaser to transfer all or any of the Shares in the amounts or at
the times proposed by Purchaser.
(b) SEC Rule 144. In addition, Purchaser has been advised that SEC Rule
144 promulgated under the Securities Act, which permits certain limited sales
of unregistered securities, is not presently available with respect to the
Shares and, in any event, requires that the Shares be held for a minimum of one
(1) year, and in certain cases two (2) years, after they have been purchased
and paid for (within the meaning of Rule 144). Purchaser understands that Rule
144 may indefinitely restrict transfer of the Shares so long as Purchaser
remains an "affiliate" of the Company or if "current public information" about
the Company (as defined in Rule 144) is not publicly available.
(c) Disposition of Shares. Purchaser hereby agrees that Purchaser shall
make no disposition of the Shares unless and until:
(i) Purchaser shall have complied with all requirements of this
Exercise Agreement applicable to the disposition of the Shares;
(ii) Purchaser shall have provided the Company with written
assurances, in form and substance satisfactory to counsel for the
Company, that (i) the proposed disposition does not require registration
34
of the Shares under the Securities Act or (ii) all appropriate action
necessary for compliance with the registration requirements of the
Securities Act or any exemption from registration available under the
Securities Act (including Rule 144) has been taken; and
(iii) Purchaser shall have provided the Company with such other
written assurances and agreements, in form and substance satisfactory to
the Company, as may be requested by the Company pursuant to the Plan.
(d) Restrictions on Transfer. Subject to Section 7(f) below, Purchaser
shall not sell, transfer, assign, grant a lien or security interest in, pledge,
hypothecate, encumber, gift or otherwise dispose of ("Transfer") any Vested
Shares without the prior written consent of the Company. In addition, any
proposed Transfer of Vested Shares shall be subject to the Company's Right of
First Refusal (as defined below) pursuant to Section 7 below. None of the
Unvested Shares may be Transferred by Purchaser.
(e) Transferee Obligations. Each person (other than the Company) to
whom the Vested Shares are Transferred by means of one of the permitted
Transfers specified in Section 7(f) of this Exercise Agreement must, as a
condition precedent to the validity of such Transfer, acknowledge in writing to
the Company that such person is bound by the provisions of this Exercise
Agreement and that the transferred Vested Shares are subject to (i) the
Company's Right of First Refusal granted hereunder and (ii) the market
stand-off provisions of Section 5, to the same extent such Vested Shares would
be so subject if retained by the Purchaser.
5. Market Standoff Agreement. Purchaser agrees in connection with any
registration of the Company's securities that, upon the request of the Company
or the underwriters managing any public offering of the Company's securities,
Purchaser will not sell or otherwise dispose of any Vested Shares without the
prior written consent of the Company or such underwriters, as the case may be,
for such period of time (not to exceed 180 days) after the effective date of
such registration requested by such managing underwriters and subject to all
restrictions as the Company or the underwriters may specify.
6. Unvested Shares.
(a) Repurchase Option. In the event of termination of Purchaser's
Continuous Status as an Employee or Consultant for any reason or no reason,
with or without Cause (as defined in the Option Agreement), or if Purchaser,
the Purchaser's legal representative, or any other holder of Unvested Shares
acquired upon exercise of the Option attempts to Transfer any Unvested Shares
prior to the Shares becoming Vested Shares in accordance with Section 2 of the
Option Agreement, the Company shall have the right to repurchase the Unvested
Shares under the terms and subject to the conditions set forth herein (the
"Repurchase Option"). The Company may exercise its Repurchase Option by written
notice to the Purchaser (i) with respect to any event of termination of
Purchaser's Continuous Status as an Employee or Consultant for any reason or no
reason, with or without Cause, within sixty (60) days after termination of
Purchaser's Continuous Status as an Employee or Consultant and (ii) with
respect to any attempted Transfer of Unvested Shares prior to termination of
Purchaser's Continuous Status as an Employee or Consultant, within the period
beginning on the day the Purchaser, the Purchaser's legal representative, or
any other holder of Unvested Shares acquired upon exercise of the Option
attempts to Transfer any Unvested Shares and ending on the earlier of (A) sixty
(60) days after the Company receives written notice from the Purchaser, the
Purchaser's legal representative, or any other holder of Unvested Shares of
such attempted Transfer and (B) sixty (60) days after termination of
Purchaser's Continuous Status as an Employee or Consultant. If the Company
fails to give notice within such sixty (60) day period, the Repurchase Option
shall terminate unless the Company and the Purchaser have extended the time for
the exercise of the Repurchase Option. The purchase price per share being
repurchased by the Company under the Repurchase Option shall be an amount equal
to the Purchaser's Exercise Price (as defined in the Option Agreement), as
adjusted in the event of any stock split, reverse stock split, subdivision,
combination or similar recapitalization of the Common Stock (the "Repurchase
Price"). The Company shall pay the aggregate Repurchase Price to the Purchaser
in cash within thirty (30) days after the date of the written notice to the
Purchaser of the Company's exercise of the
35
Repurchase Option. The Company shall have the right to assign the Repurchase
Option at any time, whether or not such option is then exercisable, to one or
more persons as may be selected by the Company.
(b) Escrow of Unvested Shares. Upon issuance, the certificates for the
Unvested Shares will be deposited in escrow with the Secretary of the Company.
Each deposited certificate will be accompanied by a duly executed Assignment
Separate from Certificate in the form of Exhibit A attached hereto. The
deposited certificates, together with any other assets or securities from time
to time deposited with the Company pursuant to the requirements of this
Exercise Agreement, will remain in escrow until such time or times as the
certificates (or other assets and securities) are to be released or otherwise
surrendered for cancellation in accordance herewith.
(c) Voting and Dividend Rights. The Unvested Shares shall constitute
issued and outstanding shares of Common Stock for all corporate purposes.
Purchaser will have the right to vote such Unvested Shares, to receive and
retain all regular cash dividends and other cash equivalent distributions as
the Board may in its sole discretion designate, pay or distribute on such
Unvested Shares and to exercise all other rights, powers and privileges of a
holder of Common Stock with respect to such Unvested Shares, with the
exceptions that (A) the Purchaser will not be entitled to delivery of the stock
certificate or certificates representing any Unvested Shares until such Shares
become Vested Shares in accordance with Section 2 of the Option Agreement
(unless earlier repurchased pursuant to the Company's Repurchase Option); (B)
the Company will retain custody of the stock certificate or certificates
representing the Unvested Shares on the terms set forth in this Section 6; and
(C) other than regular cash dividends and other cash equivalent distributions
as the Board may in its sole discretion designate, pay or distribute, the
Company will retain custody of all distributions ("Retained Distributions")
made or declared with respect to the Unvested Shares (and such Retained
Distributions will be subject to the same restrictions, terms and conditions as
are applicable to the Unvested Shares).
(d) Release of Shares from Escrow. Should the Company elect to exercise
its Repurchase Option under this Section 6 with respect to any Unvested Shares,
then the escrowed certificates for such Unvested Shares (together with any
other assets or securities issued with respect thereto) will be delivered to
the Company for cancellation, concurrently with the payment to the Purchaser of
an amount equal to the Repurchase Price for such Unvested Shares, and the
Purchaser will cease to have any further rights or claims with respect to such
Unvested Shares (or other assets or securities). If such Repurchase Option is
not exercised by the Company, then on the date such Shares become Vested Shares
in accordance with Section 2 of the Option Agreement, the certificates for such
Shares (as well as all other vested assets and securities) will be released
from escrow and delivered to the Purchaser.
7. Company's Right of First Refusal. Before any Vested Shares acquired by
Purchaser hereunder and held by Purchaser or any permitted transferee of such
Vested Shares (either being sometimes referred to herein as the "Purchaser")
may be Transferred, the Company and/or its assignee(s) shall have an assignable
right of first refusal to purchase the Vested Shares proposed to be Transferred
(the "Offered Shares") on the terms and conditions set forth in this Section 7
(the "Right of First Refusal").
(a) Notice of Proposed Transfer. The Purchaser of the Offered Shares
shall deliver to the Company a written notice (the "Notice") stating: (i) the
Purchaser's bona fide intention to Transfer the Offered Shares; (ii) the name
of each proposed bona fide purchaser or other transferee ("Proposed
Transferee"); (iii) the number of Offered Shares to be Transferred to each
Proposed Transferee; (iv) the bona fide cash price or other consideration for
which the Purchaser proposes to Transfer the Offered Shares (the "Offered
Price") and (v) that the Purchaser will offer to Transfer the Offered Shares to
the Company and/or its assignee(s) at the Offered Price as provided in this
Section 7.
(b) Exercise of Right of First Refusal: At any time within thirty (30)
days after the date of the Notice, the Company and/or its assignee(s) may, by
giving written notice to the Purchaser, elect to purchase all (or, with the
consent of the Purchaser, less than all) the Offered Shares proposed to be
Transferred to any one or more of the Proposed Transferees named in the Notice,
at the purchase price determined as specified below.
36
(c) Purchase Price: The purchase price for the Offered Shares purchased
under this Section 7 will be the Offered Price. If the Offered Price includes
consideration other than cash, then the cash equivalent value of the non-cash
consideration shall conclusively be deemed to be the value of such non-cash
consideration as determined in good faith by the Board.
(d) Payment: Payment of the Offered Price will be payable, at the
option of the Company and/or its assignee(s) (as applicable), by check or by
cancellation of all or a portion of any outstanding indebtedness of the
Purchaser to the Company (or to such assignee, in the case of a purchase of
Offered Shares by such assignee) or by any combination thereof. The Offered
Price will be paid without interest within sixty (60) days after the Company's
receipt of the Notice, or, at the option of the Company and/or its assignee(s),
in the manner and at the time(s) set forth in the Notice.
(e) Transfer. If all of the Offered Shares proposed in the Notice to be
Transferred to a given Proposed Transferee are not purchased by the Company
and/or its assignee(s) as provided in this Section 7, then the Purchaser may
Transfer such Offered Shares to that Proposed Transferee at the Offered Price
or at a higher price; provided that such Transfer is consummated within 120
days after the date of the Notice, and provided further, that (i) any such
Transfer is effected in compliance with all applicable securities laws and (ii)
the Proposed Transferee agrees in writing that the provisions of this Section 7
will continue to apply to the Offered Shares in the hands of such Proposed
Transferee. If the Offered Shares described in the Notice are not Transferred
to the Proposed Transferee within such 120 day period, then a new Notice must
be given to the Company, and the Company will again be offered the Right of
First Refusal before any Vested Shares held by the Purchaser may be Transferred.
(f) Exempt Transfers: Notwithstanding anything to the contrary in
Section 4(d) or in this Section 7, the following Transfers of Offered Shares
will be exempt from the Right of First Refusal: (i) the Transfer of any or all
of the Offered Shares during Purchaser's lifetime by gift or on Purchaser's
death by will or intestacy to any Immediate Family Member (as such term is
defined in the Plan) of Purchaser, provided that each transferee or other
recipient agrees in a writing satisfactory to the Company that the provisions
of this Section 7 will continue to apply to the Transferred Shares in the hands
of such transferee or other recipient; (ii) any Transfer of Vested Shares made
pursuant to a statutory merger or statutory consolidation of the Company with
or into another corporation or corporations (except that the Right of First
Refusal will continue to apply thereafter to such Vested Shares, in which case
the surviving corporation of such merger or consolidation shall succeed to the
rights of the Company under this Section 7 unless the agreement of merger or
consolidation expressly otherwise provides); or (iii) any Transfer of Vested
Shares pursuant to the winding up and dissolution of the Company.
(g) Termination of Right of First Refusal: The Company's Right of First
Refusal will terminate on the IPO Date.
8. Rights as Shareholder. The Purchaser shall not be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any Shares
for which such Option is exercised including, but not limited to, rights to
vote or to receive dividends unless and until the Purchaser has satisfied all
requirements for exercise of the Option pursuant to its terms, the certificates
evidencing such Shares have been issued and the Purchaser has become a record
holder of such Shares. A share certificate for the number of Vested Shares so
acquired shall be issued to the Purchaser as soon as practicable after exercise
of the Option. No adjustment will be made for a dividend or other right for
which the record date is prior to the date all the conditions set forth above
are satisfied, except as provided in Section 13 of the Plan.
9. Section 83(b) Election. Purchaser understands that under Section 83 of
the Internal Revenue Code of 1986, as amended (the "Code"), the difference
between the exercise price paid for any Unvested Shares and their fair market
value on the date any forfeiture restrictions applicable to such shares lapse
will be reportable as ordinary income at that time. For this purpose, the term
"forfeiture restrictions" includes the right of the Company to repurchase the
Unvested Shares pursuant to its Repurchase Option under Section 6 hereof.
37
Purchaser understands that Purchaser may elect to be taxed at the time the
Unvested Shares are acquired hereunder to the extent the fair market value of
the Unvested Shares differs from the Exercise Price, rather than when and as
such Unvested Shares cease to be subject to such forfeiture restrictions, by
filing an election under Section 83(b) of the Code with the I.R.S. within
thirty (30) days after the date of purchase hereunder (a "Section 83(b)
Election"). If the fair market value of the Unvested Shares at the date of
purchase equals the Exercise Price paid (and thus no tax is payable), a Section
83(b) Election must be made to avoid adverse tax consequences in the future. An
example of the form for making this Section 83(b) Election is attached as
Exhibit B hereto. Purchaser understands that failure to make this Section 83(b)
Election filing within the thirty (30) day period may result in the recognition
of ordinary income by the Purchaser as the forfeiture restrictions lapse.
PURCHASER ACKNOWLEDGES THAT IT IS PURCHASER'S SOLE RESPONSIBILITY, AND NOT THE
COMPANY'S, TO FILE A TIMELY SECTION 83(b) ELECTION, EVEN IF PURCHASER REQUESTS
THAT THE COMPANY OR ITS REPRESENTATIVES MAIL THIS FILING ON PURCHASER'S BEHALF.
PURCHASER FURTHER ACKNOWLEDGES THAT COMPANY HAS MADE NO REPRESENTATIONS
REGARDING THE APPLICATION OF SECTION 83 OF THE CODE TO THE RESTRICTED SHARES.
PURCHASER IS RELYING SOLELY ON PURCHASER'S ADVISORS WITH RESPECT TO THE
APPLICABILITY OF SECTION 83 OF THE CODE AND THE DECISION AS TO WHETHER OR NOT
TO FILE A SECTION 83(b) ELECTION
10. Tax Consultation. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
11. Legends. Purchaser understands and agrees that the Company will cause a
legend regarding the Company's Repurchase Option and Right of First Refusal to
be placed upon any certificate(s) or other documents or instruments evidencing
ownership of the Shares by the Purchaser, in addition to any other legends
required under federal and state securities laws including the following
legends:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THE SHARES MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES
UNDER SUCH ACT, (II) A 'NO ACTION' LETTER OF THE SECURITIES AND EXCHANGE
COMMISSION WITH RESPECT TO SUCH SALE OR OFFER, OR (III) AN OPINION OF
COUNSEL SATISFACTORY TO THE CORPORATION THAT REGISTRATION UNDER SUCH ACT IS
NOT REQUIRED WITH RESPECT TO SUCH SALE OR OFFER."
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE
WITH THE TERMS OF WRITTEN AGREEMENTS BETWEEN THE CORPORATION AND THE
REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE
SHARES). SUCH AGREEMENTS GRANT CERTAIN REPURCHASE RIGHTS AND RIGHTS OF FIRST
REFUSAL TO THE CORPORATION. THE SECRETARY OF THE CORPORATION WILL UPON
WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENTS TO THE HOLDER HEREOF
WITHOUT CHARGE."
12. Entire Agreement. The Plan and the Option Agreement are incorporated
herein by reference. This Exercise Agreement, the Plan and the Option Agreement
constitute the entire agreement of the parties with respect to the subject
matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and this Exercise Agreement may not be amended except by means of a
writing signed by the Company and Purchaser. If any inconsistency should exist
between the terms and conditions of this Exercise Agreement and the terms of
the Option Agreement, the terms of the Option Agreement shall govern and
control. If any inconsistency should exist between the terms and conditions of
this Exercise Agreement and the terms of the Plan, the terms of the Plan shall
govern and control.
38
13. Governing Law. This Exercise Agreement is governed by Texas law except
for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
PURCHASER: THE COMPANY:
ASCENDANT SOLUTIONS, INC.
_________________________ By:____________________________________
Signature
_________________________ Its:___________________
Print Name
Address: Address:
_________________________ 15455 North Dallas
Parkway Suite
_________________________ 500 Addison, Texas
75001 Attn: Secretary
39
Exhibit A to Exercise Agreement
(Immediately Exercisable)
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED __________________________ hereby sells, assigns and
transfers unto [__________________________], a [________________________]
corporation (the "Company"), ____________________ (____________) shares of the
Capital Stock of ____________ standing in __________________________ name on
the books of said ______________ represented by Certificate No. ______________
herewith and does hereby irrevocably constitute and appoint ______________
Attorney to transfer the said stock on the books of the within named Company
with full power of substitution in the premises.
Dated:______________________________
Signature________________________
Signature________________________
40
Exhibit B to Exercise Agreement
(Immediately Exercisable)
FORM OF 83(b) ELECTION
This statement is being made under Section 83(b) of the Internal Revenue
Code, pursuant to Treas. Reg. Section 1.83-2.
(1) The person who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
Taxable Year: Calendar Year 200[__]
(2) The property with respect to which the election is being made is
_________ shares of the common stock of [___________], Inc.
(3) The property was transferred on [__________], 200[__].
(4) The property is subject to a repurchase option pursuant to which the
issuer has the right to acquire the property at the original purchase
price if for any reason [___________'s] services for the issuer
terminates.
(5) The fair market value at the time of transfer (determined without regard
to any restriction other than a restriction which by its terms will
never lapse) is $[_______] per share.
(6) The amount paid for such property is $[___________]per share.
(7) A copy of this statement was furnished to [_____________], Inc. for whom
the undersigned rendered the service underlying the transfer of property.
(8) This statement is executed as of: [______________].
__________________________________
41
/\ DETACH PROXY CARD HERE /\
- --------------------------------------------------------------------------------
[ ] PLEASE DATE, SIGN AND [X]
MAIL THIS PROXY IN Votes must be indicated (x)
THE ENCLOSED ENVELOPE. in Black or Blue ink.
1. ELECTION OF DIRECTORS:
FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ] *EXCEPTIONS [ ]
listed below for all nominees listed below
Nominees: Melissa F. Crane - Class C Director (to hold office until 2005 Annual
Meeting or until her successor has been elected and qualified) and
James C. Leslie, Chairman and Richard L. Bloch - Class B Directors (to
hold office until the 2004 Annual Meeting or until their successors
have been elected and qualified).
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below).
*Exceptions ____________________________________________________________________
FOR AGAINST ABSTAIN
2. To amend the 1999 Long-Term [ ] [ ] [ ]
Incentive Plan.
FOR AGAINST ABSTAIN
3. To approve and adopt the 2002 [ ] [ ] [ ]
Equity Incentive Plan.
4. Ratification of Ernst & Young [ ] [ ] [ ]
LLP as independent auditors for
the year ending December 31, 2002.
5. In their discretion, upon any other
matter that may properly come before
the Annual Meeting of Stockholders
or any adjournment thereof.
To change your address, please mark this box. [ ]
Please mark, date and sign as your name appears hereon. If acting as executor,
administrator, trustee, guardian, etc., you should so indicate when signing. If
the signer is a corporation, please sign the full corporate name, by a duly
authorized officer and indicate the title of such officer. If shares are held
jointly, each stockholder 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.
Date Stock Owner sign here Co-Owner sign here
_____________ ________________________________ _____________________________
- --------------------------------------------------------------------------------
ASCENDANT SOLUTIONS, INC.
REVOCABLE PROXY
Annual Meeting of Stockholders - May 23, 2002
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 Susan K. Olson 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 Stockholders to be held on May 23,
2002, or any adjournment thereof.
Unless otherwise marked, this Proxy will be voted FOR the election of the
Board of Directors' nominees Class C and Class B, FOR the approval of the
amendment to the 1999 Long-Term Incentive Plan, FOR the approval and adoption of
the 2002 Equity Incentive Plan, and FOR the ratification of Ernst & Young LLP as
independent auditors. If any other business is presented at the Annual Meeting
of Stockholders, the Proxy will be voted in accordance with the discretion of
the Proxies named above.
The Board of Directors recommends a vote "FOR" the nominees listed below
"FOR" the approval of the amendment to the 1999 Long-Term Incentive Plan, "FOR"
the approval and adoption of the 2002 Equity Incentive Plan, and "FOR" the
ratification of Ernst & Young LLP as independent auditors.
ASCENDANT SOLUTIONS, INC.
P.O. BOX 11474
NEW YORK, N.Y. 10203-0474