SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934, as amended
(Amendment No. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.
240.14a-12
ASD SYSTEMS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:*
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
*Set forth amount on which the filing is calculated and state
how it was determined.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
YOUR VOTE IS IMPORTANT
ASD SYSTEMS, INC.
Notice of Special Meeting of Shareholders
and
Proxy Statement
[ASCENDANT SOLUTIONS LOGO]
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD _________ __, 2000
<PAGE>
[ASCENDANT SOLUTIONS LOGO]
ASD Systems, Inc.
d/b/a Ascendant Solutions
3737 Grader Street, Suite 110
Garland, Texas 75041
214.348.7200
August ___, 2000
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held ____________, 2000
ASD Systems, Inc. will hold a Special Meeting of Shareholders at
___________________________________________, ________ , Texas
______ on __________, ____________, 2000 at 10:00 a.m.
We are holding this meeting:
* To approve the merger of the company into a wholly-owned
subsidiary organized under the laws of the State of Delaware to
effect the change of the company's state of incorporation from
Texas to Delaware. Upon consummation of the merger, we will
continue our operations as a Delaware corporation under the name
"Ascendant Solutions, Inc."
* 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 50,000 to 450,000 shares).
* To ratify the grant of stock options to certain senior executive
officers of the company exercisable for a total of 1,425,000
shares of common stock.
Your board of directors recommends that you vote in favor of the
three proposals outlined in this proxy statement.
Your board of directors has selected August ___, 2000, as the
record date for determining shareholders entitled to vote at the
meeting. A list of shareholders on that date will be available
for inspection at ASD Systems, 3737 Grader Street, Suite 110,
Garland, Texas, 75041 for at least ten days before the meeting.
This notice of special meeting, proxy statement and proxy are
being distributed on or about August ___, 2000.
By Order of the Board of Directors,
James H. McAlister
Corporate Secretary
YOUR VOTE IS IMPORTANT.
PLEASE REMEMBER TO PROMPTLY
RETURN YOUR PROXY CARD.
<PAGE>
TABLE OF CONTENTS
QUESTIONS AND ANSWERS.......................................... 1
CAUTIONARY STATEMENTS.......................................... 3
STOCK OWNERSHIP................................................ 4
Beneficial Ownership of Certain Shareholders, Directors and
Executive Officers...........................................4
EXECUTIVE COMPENSATION..........................................5
Executive Compensation.........................................5
Long-Term Incentive Plan...................................... 7
401(k) Plan................................................... 7
Employment Contracts and Change-in-Control Arrangements....... 8
Compensation of Directors..................................... 8
Compensation Committee Interlocks and Insider Participation... 8
BOARD REPORT ON EXECUTIVE COMPENSATION......................... 9
Compensation Policy........................................... 9
1999 Company Performance...................................... 9
1999 Executive Compensation................................... 9
1999 Chief Executive Compensation.............................10
Company Policy on Qualifying Compensation.....................10
PERFORMANCE GRAPH..............................................11
ITEM 1. REINCORPORATION OF ASD SYSTEMS, INC. FROM TEXAS TO
DELAWARE.............................................12
General.......................................................12
Principal Features of the Reincorporation.....................12
Name Change...................................................13
Trading Symbol................................................13
Principal Reasons for the Reincorporation.....................13
Possible Disadvantages of Reincorporation.....................14
Amendment, Deferral or Termination of the Reincorporation
Merger Agreement............................................14
Federal Income Tax Consequences of the Reincorporation........14
Exchange of Stock Certificates................................15
Effect on Long-Term Incentive Plan and Other Employee
Benefit Plans.................................................15
Securities Act Consequences...................................15
ITEM 2. AMENDMENT TO 1999 LONG-TERM INCENTIVE PLAN,
AS AMENDED............................................16
General.......................................................16
Amendment to the Plan.........................................16
New Plan Benefits............................................ 17
Material Terms................................................17
Federal Income Tax Consequences...............................18
ITEM 3. APPROVAL OF STOCK OPTIONS EXERCISABLE FOR A TOTAL OF
1,425,000 SHARES OF COMMON STOCK GRANTED TO CERTAIN
SENIOR EXECUTIVE OFFICERS OF THE COMPANY..............19
DEADLINE FOR SHAREHOLDER PROPOSALS.............................20
EXHIBITS
Certificate of Incorporation of Ascendant
Solutions, Inc......................................Exhibit A
Bylaws of Ascendant Solutions, Inc......................Exhibit B
Comparison of Texas and Delaware Corporation Law........Exhibit C
Ascendant Solutions -- 1999 Long-Term Incentive
Plan, as amended.....................................Exhibit D
Forms of Stock Option Agreements.......................Exhibit E
<PAGE>
QUESTIONS AND ANSWERS
Q1: When and where is the Special Meeting?
A: The Special Meeting will take place on __________
________, 2000, at 10:00 a.m., local time, at
_______________ _______________________________,
__________, Texas ______.
Q2: Who is soliciting my proxy?
A: We, the board of directors of the company, are sending you
this proxy statement. Certain directors, officers and
employees of ASD Systems, Inc. also may solicit proxies
on our behalf by mail, phone, fax or in person.
Q3: Who is paying for this solicitation?
A: The company will pay for the solicitation of proxies. We
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 our common stock.
Q4: What am I voting on?
A: Three items:
* A proposal to redomesticate the company in Delaware by
merging the company into a newly created subsidiary named
Ascendant Solutions, Inc. The Certificate of Incorporation
and Bylaws of the new entity, as well as a comparison of
applicable Texas and Delaware law, are attached to this
proxy statement as Exhibits A, B and C, respectively.
* 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 50,000 to 450,000. The 1999 Long-Term
Incentive Plan, as proposed to be amended, is attached to
this proxy statement as Exhibit D.
* A proposal to ratify the grant of stock options to certain
senior executive officers of the company exercisable for a
total of 1,425,000 shares of common stock. The forms of
stock option agreements used in connection with these grants
has been attached to this proxy statement as Exhibit E.
Shareholders are urged to carefully read this entire
proxy statement, together with all of the Exhibits
attached hereto, before deciding how to vote on the
matters proposed herein.
Q5: Who can vote?
A: Only shareholders who owned common stock at the close of
business on August ___, 2000, the record date for the
Special Meeting, can vote. If you owned common stock on
the record date, you have one vote per share for each
matter presented at the Special Meeting.
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<PAGE>
Q6: 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 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 ASD Systems 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 proposal to
redomesticate the company in Delaware, FOR the proposal
to amend the 1999 Long-Term Incentive Plan and FOR the
proposal to ratify the grant of stock options to
certain senior executive officers of the company.
Q7: Can I vote shares at the meeting that are held by a
broker as nominee?
A: If you would like to attend the Special Meeting and your
shares are held by a broker, bank or other nominee, you
must bring to the Special Meeting a recent brokerage
statement or letter from the nominee confirming the
beneficial ownership of the shares of common stock. You
must also bring a form of personal identification. Most
importantly, in order to vote your shares at the
Special Meeting you must obtain from each nominee a
proxy issued in your name.
Q8: What constitutes a quorum?
A: Voting can take place at the Special Meeting only if
shareholders owning a majority of the voting power of
the common stock (that is a majority of the total
number of votes entitled to be cast) are present in
person. On the record date, we had ___________ shares
of common stock outstanding. Both abstentions and
broker non-votes are counted as present for purposes
of establishing the quorum necessary for the meeting
to proceed. A broker non-vote results from a situation
in which a broker holding your shares in "street" or
"nominee" name indicates to us on a proxy that you
have not voted and it lacks discretionary authority to
vote your shares.
Q9: What vote of the shareholders will result in the
matters being passed?
A: Reincorporation. Approval of the company's merger into a
wholly owned subsidiary organized under the laws of
the State of Delaware for the purpose of
reincorporating the company in Delaware requires the
affirmative vote by shareholders holding at least 66-
2/3% of the issued and outstanding shares of the
company's common stock. Both abstentions and broker
non-votes have the effect of a vote "against" the
proposal.
Amendment to the 1999 Long-Term Incentive Plan. To approve
this proposal, shareholders 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 a vote "against" the proposal, while
broker non-votes have no effect at all.
Grant of Stock Options. To approve the company's proposal
to ratify the grant to certain senior executive
officers of stock options exercisable for a total of
1,425,000 shares requires the affirmative vote of
shareholders holding a majority of the shares
represented in person or by proxy at the meeting. As
with proposal number 2, abstentions have the same
effect as a vote "against" the proposal, and broker non-
votes have no effect at all.
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<PAGE>
Q10: How does the board recommend that I vote on the matters
proposed?
A: The board of directors of the company unanimously
recommends that the shareholders vote FOR all of the
proposals to be submitted at the upcoming Special
Meeting.
Q11: Will there be other matters proposed at the Special
Meeting?
A. No. Pursuant to the applicable provisions of Texas law
and our bylaws, only business within the purposes
described in the notice may be conducted at this
Special Meeting.
Q12: Will I have the right to dissent from the proposal to
merge the company into a Delaware subsidiary?
A: No. The dissenters rights provisions of Texas law are
inapplicable to the proposed redomestication merger.
Q13: Will I be asked to send in my company stock
certificate?
A: No. It will not be necessary for shareholders of the
company to exchange their existing stock certificates
for stock certificates of the new Delaware entity.
Delivery of the stock certificates currently in your
possession will constitute "good delivery" for
transactions following the redomestication.
Q14. Where can I find more information about the company?
A: We file periodic reports and other information with the
Securities and Exchange Commission. You may read and
copy this information at the Commission's public
reference facilities. Please call the Commission at 1-
800-SEC-0330 for information about these facilities.
This information is also available at the Internet
website maintained by the Commission at
http:\\www.sec.gov and the offices of The Nasdaq Stock
Market.
Q15. Who can help answer my questions?
A: If you have questions about this proxy statement or the
proposals discussed herein, you should contact Paul
Streiber, our Director of Investor Relations, at
214.348.7200, ext. 298.
CAUTIONARY STATEMENTS
Certain of the matters discussed in this proxy statement
contain forward-looking statements which involve known and
unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the company,
or industry results, to be materially different from any future
results, performance or achievement expressed or implied by such
forward-looking statements. The company expressly disclaims any
obligation to update this information or publicly release any
revision or reflect events or circumstances after the date of
this proxy statement. Such factors include, among others: our
ability to achieve or sustain profitable; our limited operating
history; the risks associated with the failure of our systems and
services to achieve widespread market acceptance or meet with
specific client needs; significant client concentration; the fact
that our client contracts are either short-term or terminable
with minimal notice; systems risks and uncertainties, including
rapid technological change; risks related to the possible
inability of our system to connect to and manage a larger number
of clients; business conditions in the fulfillment industry
generally; the impact of market competitors and their service
offerings; and such other factors that are more fully described
in our Form 10-K for the year ended December 31, 1999. To obtain
a copy of our Form 10-K, please contact the company's Corporate
Secretary at 3737 Grader Street, Suite 110, Garland, Texas, 75041
or, by telephone, at 214.348.7200.
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<PAGE>
STOCK OWNERSHIP
Beneficial Ownership of Certain Shareholders, Directors and
Executive Officers
The following table sets forth information with respect to
the beneficial ownership of our common stock at June 30, 2000,
by:
* each of our named executive officers (as that term is defined on
page 5) 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 Commission, 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 June 30, 2000. Unless
otherwise noted in the footnotes to the table, and subject to
community property laws where applicable, the following
individuals have sole voting and investment control with respect
to the shares beneficially owned by them. The address of each
executive officer and director is c/o ASD Systems, Inc., 3737
Grader Street, Suite 110, Garland, Texas, 75041. We have
calculated the percentages of shares beneficially owned based on
21,153,400 shares of common stock outstanding at June 30, 2000.
Shares beneficially owned
-------------------------
Person or group Number Percent
---------------------------------- ------------- ---------
Named Executive Officers and
Directors:
Norman Charney(1)(8) 6,000,000 28.4%
Paul M. Jennings(2) 957,500 4.3
Jonathan R. Bloch(3) 810,000 3.7
Alan E. Salzman(4) 4,847,400 22.9
Paul G. Sherer(4) 4,847,400 22.9
Kevin P. Yancy(5) 348,087 1.6
David E. Bowe(6) 70,250 *
All executive officers and directors
as a group (10 persons)(7) 12,094,687 55.0
Beneficial Owners of 5% or More of
Our Outstanding Common Stock:
ASD Partners, Ltd.(8) 6,000,000 28.4
VantagePoint Venture Partners
III(Q), L.P.(9) 3,231,600 15.3
VantagePoint Communications
Partners, L.P.(9)
________________ 1,615,800 7.6
*Less than one percent (1%).
(1) Represents shares of common stock held by ASD Partners, Ltd.,
a Texas limited partnership.
(2) Represents options to purchase 957,500 shares of common stock
at an exercise price of $1.00 per share.
(3) Includes (1) 800,000 shares of common stock acquirable upon
exercise of warrants held by CKM Software Partners at the
following exercise prices: 400,000 shares of common stock
exercisable for $1.00 per share; 240,000 shares of common
stock exercisable for $2.00 per share; and 160,000 shares of
common stock exercisable for $3.00 per share and (2) options
to purchase an additional 10,000 shares of common stock at
an exercise price of $1.00 per share. CKM Software Partners
is a California general partnership held by Jonathan Bloch
and Larry Barels. The address of each of these persons and
entities is 11150 Santa Monica Blvd., Suite 800, Los
Angeles, California, 90025.
(4) Represents 3,231,600 shares held by VantagePoint Venture
Partners III(Q), L.P. and 1,615,800 shares held by
VantagePoint Communications Partners, L.P. Mr. Salzman is
the managing member of the general partner of each of these
funds and Mr. Sherer is a partner of these funds.
Messrs. Salzman and Sherer each disclaim beneficial
ownership of the shares held by the VantagePoint funds other
than those in which he may own a pecuniary interest.
(5) Includes net options to purchase 263,087 shares of common
stock from third parties and options to purchase an
additional 10,000 shares of common stock from the company at
an exercise price of $1.00 per share.
(6) Includes 10,000 shares of common stock acquirable upon
exercise of stock options granted by the company at an
exercise price of $1.00 per share.
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<PAGE>
(7) Includes the shares of common stock acquirable upon exercise
of the stock options and warrants discussed in notes 3, 5
and 6 as well as 2,000 shares of common stock acquirable
upon exercise of stock options granted by the company to
other executive officers not separately listed. Does not
include shares held or acquirable by Mr. Jennings above
because Mr. Jennings was not an executive officer or
director at June 30, 2000.
(8) The general partner of ASD Partners, Ltd. is ASD Partners GP,
Inc. Mr. Charney is the sole shareholder and President of
ASD Partners GP, Inc. The address of ASD Partners, Ltd. and
ASD Partners GP, Inc. is c/o ASD Systems, Inc., 3737 Grader
Street, Suite 110, Garland, Texas, 75041.
(9) 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.
Mr. Salzman is a managing member of the general partner of
each of the VantagePoint funds. The address for the
VantagePoint funds is c/o VantagePoint Venture Partners,
1001 Bayhill Drive, Suite 100, San Bruno, California, 94066.
EXECUTIVE COMPENSATION
Executive Compensation
Summary compensation - Executives as of December 31, 1999.
The following table provides summary information concerning
compensation paid by us to our named executive officers at
December 31, 1999, which were our Chief Executive Officer and our
Chief Technology Officer. These were our only executive officers
who earned more than $100,000 in salary and bonus for all
services rendered in all capacities during the fiscal year ended
December 31, 1999. We refer to these officers as our named
executive officers in other parts of this proxy statement.
Long-term
compensation
awards
------------
Annual
Compensation Securities All other
Name and Principal ------------- underlying compen-
Position(s) Year Salary options (#) sation
---- -------------- ------------ ---------
Norman Charney 1999 $250,000 0 $1,600
Former Chief 1998 247,500 0 625
Executive Officer
Paul M. Jennings 1999 $165,200 957,500 0
Former Chief
Technology Officer 1998 153,125 0 0
"All other compensation" consists of matching 401(k)
contributions made by ASD Systems on behalf of the named
executive officers. In accordance with the rules of the
Commission, other compensation in the form of perquisites and
other personal benefits has been omitted for the named executive
officers because the aggregate amount of these perquisites and
other personal benefits was less than the lesser of $50,000 or
10% of the total of annual salary and bonuses for each of the
named executive officers in 1999.
Mr. Charney resigned as our Chief Executive Officer
effective June 9, 2000 (although he retains the titles of Founder
and Chairman Emeritus). Mr. Jennings resigned as our Chief
Technology Officer, together with all other positions of
authority with the company, effective May 31, 2000. See
"Employment Contracts and Change-In-Control Arrangements."
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<PAGE>
Summary compensation - Recently retained executives. We
have recently retained four senior executive officers whose
compensation has not been included in the previous chart in
accordance with applicable Commission rules. Compensation paid or
payable to these senior executive officers over the course of
2000 can be summarized as follows:
Long-term
compensation
awards
---------------
Name, Principal 2000 Potential Securities
Position(s) and Start Annualized Cash underlying
Date Salary Bonus(1) options(#)(2)
------------------------- ---------- --------- --------------
David E. Bowe $200,000 $100,000 450,000(3)
Chief Executive
Officer (June 2000),
President (March
2000) and Chief
Financial Officer
(September 1999)
Gregg L. Young (January 160,000 50,000 300,000
2000)
Chief Information
Officer
Ted I. Bilke (December 150,000 50,000 275,000
1999)
Chief Operating Officer
Rick Troberman (May 2000) 200,000 125,000 450,000
Executive Vice
President - Sales and
Marketing
_______________________
(1) Senior executive officers are eligible to receive additional
cash and/or stock bonuses during 2000 at the discretion of
the board. In the case of Mr. Troberman, one half of the
potential cash bonus is guaranteed to be paid during 2000
and the other one half is subject to certain performance
vesting criteria imposed by the board of directors. In the
case of Messrs. Bowe, Young and Bilke, the board has not
presently decided upon the performance vesting criteria to
be applied to the bonuses indicated.
(2) Represents the number of shares of common stock underlying
stock options granted as of June 30, 2000. Except as
expressly noted, (1) the stock options were granted under
the terms of our Long-Term Incentive Plan at an exercise
price equal to the fair market value of the shares
underlying the stock option on the date of grant, (2) the
options vest as to 25% of the underlying number of shares on
the first anniversary of the grant date and 2% per month
thereafter until fully vested and (3) the options remain
exercisable for 10 years.
(3) Stock options exercisable for 10,000 shares were fully vested
as of June 30, 2000, and stock options exercisable for
40,000 shares vest 20% per year on the first five
anniversaries of the grant date.
Stock options granted during the year ended December 31,
1999. The following table provides information regarding the
grant of stock options during fiscal 1999 to the named executive
officers:
<TABLE>
Individual Grants
-------------------------------------------- Potential realizable value
% of total at assumed
Number of options annual rates of stock
securities granted to price appreciation
underlying employees Exercise for option term (1)
options in fiscal price per Expiration------------------------
Name gramted year share date 5% ($) 10%($)
------------------- ----------- ---------- --------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Norman Charney..... 0 -- -- -- -- --
Paul M. Jennings... 957,500(2) 52.1% $1.00 2/10/04 $264,762 $585,634
</TABLE>
(1) Amounts represent hypothetical gains that could be achieved
for the respective options if exercised at the end of the
option term. These gains are based on assumed rates of
stock price appreciation of 5% and 10% compounded annually
from the date the respective options were granted to their
expiration date. The gains shown are net of the option
exercise price, but do not include deductions for taxes or
other expenses associated with the exercise of the option or
the sale of the underlying shares. The actual gains, if
any, on the exercise of the stock options will depend on the
future performance of the common stock, and the date on
which the options are exercised.
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<PAGE>
(2) Represents non-qualified stock option granted to Mr. Jennings
on February 10, 1999, outside of our 1999 Long-Term
Incentive Plan. The option terminates February 10, 2004.
The option was fully vested upon the grant date. The
exercise price of the option was determined to be equal to
or greater than the deemed fair market value per share of
the common stock on the grant date.
Year-end option values. Neither of the named executive
officers exercised any stock options during the year ended
December 31, 1999. The following table provides information
regarding the number of shares covered by both exercisable and
unexercisable stock options as of December 31, 1999, 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.
<TABLE>
Number of securities underlying Value of the unexercised in-the-money
unexercised options at fiscal options at fiscal year-end
year-end
------------------------------ ------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
----------------- -------------- ----------------- ------------------ ---------------
<S> <C> <C> <C> <C>
Norman Charney... 0 0 -- --
Paul M. Jennings.. 957,500 0 $16,038,125 --
</TABLE>
Long-Term Incentive Plan
Our 1999 Long-Term Incentive Plan, approved by the board of
directors on May 12, 1999, and subsequently amended, currently
provides for the issuance to qualified participants of up to
2,500,000 shares of our common stock pursuant to the grant of
stock options. The purpose of our Long-Term Incentive Plan is to
promote our interests and the interests of our shareholders by
using investment interests in ASD Systems to attract, retain and
motivate eligible persons, to encourage and reward their
contributions to the performance of ASD Systems and to align
their interests with the interests of our shareholders. As of
June 30, 2000, unexercised options to purchase 2,163,000 shares
of common stock had been awarded to current employees, having a
weighted average exercise price of $3.15 per share, under the
Long-Term Incentive Plan. Of these, options to purchase 423,500
shares of common stock have been awarded to current employees and
are intended to qualify as Incentive Stock Options, or ISO's,
under Section 422 of the Internal Revenue Code. The remaining
options to purchase 1,739,500 shares of common stock are
nonqualified stock options, or NQSO's. As of June 30, 2000,
options exercisable for 56,000 shares had been exercised and
options exercisable for an additional 84,000 shares had vested
under the terms of the Long-Term Incentive Plan and the
applicable option agreements.
401(k) Plan
Our employees are eligible to participate in the ASD Systems
401(k) plan adopted by us in October of 1998. Pursuant to the
401(k) plan, employees may elect to reduce their current
compensation by up to the lesser of 20% of eligible compensation
or the statutorily prescribed annual limit and contribute this
amount to the 401(k) plan. For the year ended December 31, 1999,
the statutorily prescribed annual limit was $10,000. The trustee
under the 401(k) plan, at the direction of each participant,
invests the assets of the 401(k) plan in up to 20 different
investment funds. The 401(k) plan is intended to qualify under
Section 401(a) of the Internal Revenue Code so that contributions
by employees to the 401(k) plan, and income earned on plan
contributions, are not taxable to employees until withdrawn, and
so that the contributions by employees will be deductible by us
when made. We will make matching contributions to the 401(k) plan
in an amount equal to 25% of the first 4% of an employee's pretax
contributions. An employee becomes eligible for the matching
contribution only if he or she makes a pretax contribution.
Additionally, we may make annual discretionary profit sharing
contributions in amounts to be
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<PAGE>
determined annually by our board of directors. We elected
not to make a discretionary profit sharing contribution in 1999.
Employment Contracts and Change-in-Control Arrangements
Norm Charney. On December 14, 1998, we entered into an
employment agreement with Norman Charney to serve as our Chief
Executive Officer and President. Effective June 9, 2000,
Mr. Charney resigned as our Chief Executive Officer and Mr. Bowe
was elected to this position. Mr. Charney currently retains the
titles of Founder and Chairman Emeritus. The agreement with
Mr. Charney is effective through December 31, 2001, and will
automatically renew for successive one-year periods unless either
Mr. Charney or we give written notice of termination at least 30
days prior to the expiration date of the agreement. Under the
agreement, Mr. Charney receives a base salary of $250,000 per
year plus an automatic annual increase of $10,000 effective each
December 14. We are currently negotiating an amendment to
Mr. Charney's employment agreement.
Pursuant to the agreement, Mr. Charney may be terminated by
us at any time for cause. "Cause" generally is defined in the
agreement to include (1) the gross negligence or willful
misconduct by Mr. Charney in the performance of his services,
(2) the failure by Mr. Charney to perform his duties as assigned
to him by the board of directors, (3) any violation by
Mr. Charney of the confidentiality or non-interference provisions
of the agreement and (4) Mr. Charney's mental or physical
incapacitation to such an extent that he is unable to perform his
duties for an extended period of time.
Rick Troberman. On April 28, 2000, we entered into an
employment agreement with Rick Troberman, our Executive Vice
President-Sales and Marketing. The agreement is effective
through April 30, 2004, unless terminated earlier pursuant to the
terms of the agreement. Under the agreement, Mr. Troberman is
entitled to a base salary of $200,000 per year.
The agreement with Mr. Troberman may be terminated by us at
any time for "cause." However, if the executive's employment
with the company is terminated by the company without cause or by
the executive for "good reason" (as such term is defined in the
employment agreement, including, upon a change of control) then,
the company is obligated to pay Mr. Troberman an amount equal to
18 months of his salary, whereupon the executive is entitled only
to base salary and any bonuses earned or accrued through the
termination date. This amount decreases to 12 months of salary
on or after October 29, 2000. In addition, Mr. Troberman shall
be permitted to fully exercise all stock options then held by
him, whether or not then vested.
The board of directors has also established a bonus plan
arrangement for its senior executive officers. Under this plan,
executive officers will receive predetermined cash bonuses upon
the attainment of specified performance vesting thresholds. See
"Summary compensation - Recently retained executives" on page 6
of this proxy statement for further information concerning cash
bonuses potentially payable to the senior executive officers.
Executive officers are also eligible to receive additional
bonuses at the discretion of the board of directors.
Separation with Paul Jennings. On May 30, 2000, we entered
into a separation agreement with Paul Jennings, our former Chief
Technology Officer. As part of this agreement, we received
certain customary releases, non-competition covenants and other
agreements from Mr. Jennings, including the agreement to provide
certain consulting services to us during the first year after his
separation. The agreement provides for aggregate cash payments to
Mr. Jennings of $276,040.
Compensation of Directors
We do not provide cash compensation to our directors but do
reimburse for reasonable expenses incurred in traveling to and
from board and committee meetings. Our directors are eligible to
receive stock option grants under our 1999 Long-Term Incentive
Plan.
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Compensation Committee Interlocks and Insider Participation
Prior to August 25, 1999, we did not have a compensation
committee or other committee of the board of directors performing
similar functions. Commencing with calendar year 2000, decisions
concerning compensation of executive officers are made by our
Compensation Committee. Currently, the Compensation Committee
consists of Messrs. Salzman and Bloch.
BOARD REPORT ON EXECUTIVE COMPENSATION
Compensation Policy
We did not have a Compensation Committee during most of
1999. Accordingly, compensation decisions for the executive
officers of ASD Systems, Inc. (other than Norm Charney) for
compensation paid during the year ended December 31, 1999, were
generally made by Mr. Charney in consultation with other members
of the board of directors. Mr. Charney's compensation was set by
the whole board. The Compensation Committee began recommending
annual salaries for senior management with fiscal year 2000.
As a board, our goal is to attract, retain and reward a
highly competent and productive employee group. To do so, we
have determined that it is in the best interests of ASD Systems
to provide a total compensation package that competes favorably
with those offered within the Internet service and fulfillment
provider industry, general industry and geographic areas in which
we operate. Our current compensation package includes a mix of
base salary and long-term incentive opportunities and other
employee benefits. Changes in compensation are based on the
individual's performance, ASD Systems' financial performance and
the competitive marketplace. We consider the median level of the
market as competitive.
Base Salary. The base salary provides for compensation at
competitive levels. Increases in executive base salary are
awarded for individual performance based on the executive's
performance. We do not utilize any formal mathematical formulae
or objective thresholds in determining base salary adjustments.
We believe that specific formulae restrict flexibility and are
too rigid at this stage of our development. We also believe that
in order for ASD Systems to succeed, we must attract and retain
qualified executives who can not only perform satisfactorily on
an individual basis but who can also retain and manage a quality
staff of other executive officers and/or key employees. Thus, in
addition to applying the criteria generally applicable to all
executive officers, in determining the compensation of the Chief
Executive Officer, we may also be influenced by the overall
performance of the other executives and key employees.
Long-Term Incentive Plan. The purpose of the Long Term-
Incentive Plan is to promote our interests and the interests of
our shareholders by using common stock to attract, retain and
motivate eligible persons, to encourage and reward their
contributions to the performance of ASD Systems and to align
their interests with the interests of our shareholders. Our
directors, officers, employees, consultants and advisors are
eligible to receive grants under this plan. With respect to all
of our employees other than directors and executive officers, the
Long-Term Incentive Plan Committee (consisting of Messrs. Charney
and Yancy) 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. A separate subcommittee of the board
of directors consisting solely of outside board members
administers the plan for directors and executive officers.
1999 Company Performance
In 1999, our diluted net loss per common share was $1.39,
compared to a 1998 diluted net loss per share of $0.43. Net
revenues grew to $12,313,038 in 1999, compared to $8,020,021 in
1998. Operating loss for 1999 was $8,904,794, compared to a 1998
operating loss of $2,373,050. Accordingly, although we
demonstrated a notable increase in revenues, our operating loss
was such that discretionary increases in base salaries and
bonuses were deemed to be inappropriate.
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1999 Executive Compensation
The base salary of Mr. Paul Jennings increased in 1999,
pursuant to the terms of his employment agreement. The timing
and the amount of the increase were functions of the contractual
provisions of the employment agreement and required no
discretionary action on the part of the board. No bonus was
awarded to executives in 1999 nor were stock options issued to
any of them under the Long-Term Incentive Plan. However, Mr.
Jennings was awarded a stock option exercisable for 957,500
shares of our common stock in connection with his role in
transitioning the company's solution to service the needs of
Internet retailers. This award, which was approved by the entire
board of directors, terminates upon the earlier of 180 days
following the cessation of Mr. Jennings' employment as a result
of death or the expiration date, whichever occurs earlier. The
option maintains an exercise price of $1.00 per share and was
fully vested on the date of grant.
1999 Chief Executive Compensation
The compensation of Norman Charney consisted of base salary
pursuant to the terms of Mr. Charney's employment agreement. The
terms of the employment agreement were determined by the board of
directors based on base salary of similarly sized companies
within the Internet service and fulfillment provider industry.
Mr. Charney's salary was not increased in 1999. No bonus was
awarded to Mr. Charney in 1999 nor were stock options issued to
him under the Long-Term Incentive Plan.
Company Policy on Qualifying Compensation
The board has reviewed the applicability of Section 162(m)
of the Internal Revenue Code, which disallows a tax deduction for
compensation to an executive officer in excess of $1.0 million
per year. The board does not anticipate that compensation
subject to this threshold will be paid to any executive officer
in the foreseeable future. The board intends to periodically
review the potential consequences of Section 162(m) and may in
the future structure the performance-based portion of its
executive officer compensation to comply with certain exemptions
provided in Section 162(m).
Board of Directors*
Norman Charney Alan E. Salzman
Jonathan R. Bloch Paul G. Sherer
Paul M. Jennings Kevin P. Yancy
____________
* As of December 31, 1999.
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PERFORMANCE GRAPH
The following performance graph compares the performance of
the ASD Systems 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, 1999. 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.
Comparison of Cumulative Total Returns
[PICTURE OF PERFORMANCE GRAPH]
November 11 December 31
Company 1999 1999
--------------- -------- -----------
ASD Systems, Inc. $100 $200
Peer Group (1) $100 $162
Nasdaq Market $100 $137
Index
________________
(1) The peer group selected by us for this comparison (Media
General Industry Group 852) consists of 135 Internet
software and services companies.
Our stock closed at $_______ per share on The Nasdaq Stock
Market's National Market on August ___, 2000, the last trading
day prior to the printing of this proxy statement.
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ITEM 1.
REINCORPORATION OF ASD SYSTEMS, INC.
FROM TEXAS TO DELAWARE
General
Your board of directors has approved and recommends that the
shareholders approve the proposed merger of the company into a
wholly owned subsidiary incorporated under the laws of the State
of Delaware for the purpose of changing our state of
incorporation from the State of Texas to the State of Delaware.
We believe that the redomestication will result in significant
advantages as more fully described below. As part of the
redomestication merger, we intend to change our corporate name to
"Ascendant Solutions, Inc." Prior to the merger, Ascendant
Solutions will not have any operating history, assets or
liabilities. In this discussion, the terms "company" or "ASD
Systems" refer to the existing Texas corporation and the term
"Ascendant Solutions" refers to the new Delaware corporation
which is the proposed successor to ASD Systems.
The following discussion summarizes certain aspects of our
proposed redomestication into the State of Delaware. This summary
is not intended to be complete and is subject to, and qualified
in its entirety by, reference to the following:
* the Certificate of Incorporation of Ascendant Solutions,
a copy of which is attached as Exhibit A to this Proxy
Statement;
* the Bylaws of Ascendant Solutions, a copy of which is
attached as Exhibit B to this Proxy Statement; and
* the "Comparison of Texas and Delaware Corporation Law"
attached as Exhibit C to this Proxy Statement.
Copies of our current Articles of Incorporation and Bylaws
are available for inspection at our principal executive offices
and copies will be sent to shareholders, without charge, upon
oral or written request directed to ASD Systems, Inc., 3737
Grader Street, Suite 110, Garland, Texas, 75041, Attention:
Corporate Secretary, 214.348.7200.
Principal Features of the Reincorporation
The reincorporation will be effected by the merger of ASD
Systems with and into Ascendant Solutions, which has been
incorporated under the Delaware General Corporation Law ("DGCL")
for purposes of the merger. Ascendant Solutions will be the
surviving corporation in the merger. The separate existence of
ASD Systems will cease to exist as a result of the merger.
Upon completion of the merger, each outstanding share of
common stock of ASD Systems will be converted into one share of
common stock of Ascendant Solutions. As a result, the existing
shareholders of ASD Systems will automatically become
shareholders of Ascendant Solutions. ASD Systems stock
certificates will be deemed to represent the same number of
Ascendant Solutions shares as were represented by such ASD
Systems stock certificates prior to the merger. See " - Exchange
of Stock Certificates."
Our redomestication in Delaware will not result in any
change to the daily business operations of the company or the
present location of the principal executive offices or company-
owned call center or fulfillment center in Garland, Texas. The
financial condition and results of operations of Ascendant
Solutions immediately after the consummation of this transaction
will be identical to that of ASD Systems immediately prior to the
consummation of the reincorporation. In addition, at the
effective time of the merger, the board of directors of
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Ascendant Solutions will consist of those persons who were
directors of ASD Systems immediately prior to the merger; namely,
Kevin P. Yancy (Chairman of the Board), Jonathan R. Bloch, David
E. Bowe, Norm Charney, Alan E. Salzman and Paul G. Sherer. In
addition, the individuals serving as executive officers of ASD
Systems immediately prior to the merger will serve as executive
officers of Ascendant Solutions upon the completion of the
merger.
Name Change
As part of our redomestication in Delaware, we have elected
to change our name to Ascendant Solutions, Inc. We began using
the name Ascendant Solutions as a trade name for the company on
May 12, 2000. The board of directors believes, and marketing
consultants have confirmed, that changing our formal corporate
name will further help create a corporate identity and brand that
is tied to the new business model revealed by management at the
company's 2000 Annual Meeting of Shareholders. Specifically, the
new name more clearly reflects our vision for the future of the
company as a progressive customer relationship manager and order
management and fulfillment solutions provider for Internet
retailers, catalogers and others. We believe that the continued
use of our trade name without modification of our corporate name
will create unnecessary confusion among clients and dilute the
effectiveness of our marketing efforts. We further believe that
the negative effects of a name change (i.e., the costs to change
the corporate logo, marketing materials and corporate signage)
are largely inapplicable in this situation in light of the fact
that the company has already incurred a majority of these costs
in connection with its decision to begin doing business under a
trade name.
Trading Symbol
We do not anticipate changing our common stock trading
symbol as part of the redomestication. Accordingly, our shares
are expected to continue to trade on The Nasdaq Stock Market's
National Market under the symbol "ASDS."
Principal Reasons for the Reincorporation
As the company plans for the future, the board of directors
and management believe that it is essential to be able to draw
upon well established principles of corporate governance in
making legal and business decisions. The prominence and
predictability of Delaware corporate law provide a reliable
foundation on which our governance decisions can be based. We
believe that the shareholders will benefit from the
responsiveness of Delaware corporate law to their needs and to
those of the corporation they own.
For many years, the State of Delaware has followed a policy
of encouraging incorporation in that state and, in furtherance of
that policy, has adopted comprehensive, modern and flexible
corporate laws which are periodically updated and revised to meet
changing business needs. As a result, many corporations have been
initially incorporated in Delaware or have subsequently
reincorporated in Delaware in a manner similar to that proposed
by us. Because of Delaware's prominence as a state of
incorporation for many corporations, the Delaware courts have
developed considerable expertise in dealing with corporate issues
and a substantial body of case law has developed construing the
DGCL and establishing public policies with respect to
corporations incorporated in Delaware. Consequently, the DGCL is
comparatively well known and understood. It is anticipated that,
as in the past, the DGCL will continue to be interpreted and
explained in a number of significant court decisions. We believe
that reincorporation in Delaware should provide greater
predictability with respect to our corporate affairs.
In addition, the Delaware Secretary of State is particularly
flexible, expert and responsive in its administration of the
filings required for mergers, acquisitions and other corporate
transactions. Delaware has become a preferred domicile for most
major corporations in the United States and Delaware law and
administrative practices have become comparatively well-known and
widely understood. As a result of these factors, it is
anticipated that Delaware law will provide greater efficiency,
predictability and flexibility in our legal affairs than
presently available under Texas law.
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We believe that the proposed reincorporation under Delaware
law will enhance our ability to attract and retain qualified
directors and officers as well as encourage directors and
officers to continue to make independent decisions in good faith
on behalf of the company. The law of Delaware offers greater
certainty and stability from the perspective of those who serve
as corporate officers and directors. To date, we have not
experienced difficulty in retaining directors or officers.
However, as a result of the significant potential liability and
lack of compensation associated with service as a director, we
believe that the better understood, and comparatively more
stable, corporate environment afforded by Delaware will enable us
to compete more effectively with other public companies, most of
which are incorporated in Delaware, in the recruitment of
talented and experienced directors and officers. The parameters
of director and officer liability are more extensively addressed
in Delaware court decisions and therefore are better defined and
better understood than under Texas law.
We believe that Delaware law strikes an appropriate balance
with respect to personal liability of directors and officers, and
that the proposed reincorporation under Delaware law will enhance
our ability to recruit and retain directors and officers in the
future, while providing appropriate protection for shareholders
from possible abuses by directors and officers. Delaware law
permits a corporation to eliminate or limit the personal
liability of its directors to the corporation or any of its
shareholders for monetary damages for breach of fiduciary duty as
a director of the corporation; however, directors' personal
liability is not, and can not be, eliminated under Delaware law
for intentional misconduct, bad faith conduct or any transaction
from which the director derives an improper personal benefit, or
for violations of federal laws such as federal securities laws.
We have not viewed the increased protections permitted under
the DGCL as a reason for recommending the reincorporation.
Shareholders should note, however, that since members of the
board of directors will receive the benefit of expanded
indemnification provisions and limitations on liability, the
board of directors may be viewed as having a personal interest in
the approval of the reincorporation at the potential expense of
shareholders.
Possible Disadvantages of Reincorporation
The DGCL has been publicly criticized on the grounds that it
does not afford minority shareholders all the same substantive
rights and protections that are available under the laws of a
number of other states (including Texas). For information
regarding those and other material differences between the Texas
Business Corporation Act (the "TBCA") and the DGCL, see Exhibit C
attached to this Proxy Statement. We believe that the advantages
of the reincorporation to the company and its shareholders
outweigh its possible disadvantages.
SHAREHOLDERS ARE STRONGLY URGED TO READ THE SUMMARY OF CERTAIN
SIGNIFICANT DIFFERENCES IN THE PROVISIONS OF THE TBCA AND THE
DGCL AFFECTING THE RIGHTS AND INTERESTS OF SHAREHOLDERS SET FORTH
IN EXHIBIT C ATTACHED TO THIS PROXY STATEMENT.
Amendment, Deferral or Termination of the Reincorporation Merger
Agreement
If approved by the shareholders at the Special Meeting, it
is anticipated that the reincorporation will become effective at
the earliest practicable date. However, the applicable merger
agreement provides that it may be amended, modified or
supplemented before or after approval by the shareholders of the
company; but no such amendment, modification or supplement may be
made if it would have a material adverse effect upon the rights
of the company's shareholders unless it has been approved by the
shareholders. The merger agreement also provides that the company
may terminate and abandon the merger or defer its consummation
for a reasonable period, notwithstanding shareholder approval, if
in the opinion of the board of directors or, in the case of
deferral, of an authorized officer, such action would be in the
best interests of the company and its shareholders.
Federal Income Tax Consequences of the Reincorporation
We believe that, for federal income tax purposes, no gain or
loss will be recognized by the holders of common stock of ASD
Systems as a result of the consummation of the reincorporation
and no gain or loss will be recognized by ASD Systems or
Ascendant Solutions. Each holder of common stock of ASD Systems
will have the same tax basis in the Ascendant Solutions common
stock received pursuant to the reincorporation as such
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shareholder had in the common stock of ASD Systems held
immediately prior to the reincorporation, and the shareholder's
holding period with respect to the Ascendant Solutions common
stock will include the period during which such shareholder held
the corresponding common stock, so long as the common stock was
held as a capital asset at the time of consummation of the
reincorporation.
ALTHOUGH IT IS NOT ANTICIPATED THAT STATE OR LOCAL INCOME
TAX CONSEQUENCES TO SHAREHOLDERS WILL VARY FROM THE FEDERAL
INCOME TAX CONSEQUENCES DESCRIBED ABOVE, SHAREHOLDERS SHOULD
CONSULT THEIR OWN TAX ADVISORS AS TO THE EFFECT OF THE
REINCORPORATION UNDER STATE, LOCAL OR FOREIGN INCOME TAX LAWS.
We also believe that Ascendant Solutions will succeed
without adjustment to the federal tax attributes of ASD Systems.
Shareholders should be aware that franchise taxes in the State of
Delaware are likely to be higher than those in the State of Texas
and that the net operating less carry forwards currently
benefiting the company for Texas franchise tax purposes are
likely to be eliminated as a consequence of the merger. However,
we are currently evaluating our tax planning alternatives in this
regard.
Exchange of Stock Certificates
The redomestication will not affect the validity of the
currently outstanding stock certificates. Consequently, it will
not be necessary for shareholders of the company to exchange
their existing stock certificates for stock certificates of
Ascendant Solutions. Delivery of ASD Systems common stock
certificates will constitute "good delivery" for transactions
following the merger.
Effect on Long-Term Incentive Plan and Other Employee Benefit
Plans
Our Long-Term Incentive Plan will be continued by Ascendant
Solutions and each option with respect to ASD Systems issued
pursuant to the plan will automatically be converted into an
option with respect to the same number of shares of Ascendant
Solutions, upon the same terms and subject to the same conditions
as set forth in the plan. Other employee benefit plans and
arrangements of ASD Systems will be continued by Ascendant
Solutions upon the terms and subject to the conditions currently
in effect.
Securities Act Consequences
The shares of Ascendant Solutions to be issued in exchange
of shares of ASD Systems are not being registered under the
Securities Act of 1933, as amended. In that respect, Ascendant
Solutions is relying on Rule 145(a)(2) of the Securities and
Exchange Commission under the 1933 Act, which provides that a
merger which has as its sole purpose a change in the domicile of
the corporation does not involve the sale of securities for
purposes of that act. After the merger, Ascendant Solutions will
be a publicly-held company, its common stock will be traded and
it will file with the Commission and provide to its shareholders
the same type of information that ASD Systems has previously
filed and provided. Shareholders whose stock in ASD Systems is
freely tradeable before the merger will continue to have freely
tradeable shares of Ascendant Solutions. Shareholders holding
restricted securities of ASD Systems will be subject to the same
restrictions on transfer as those to which their present shares
of stock in ASD Systems are subject. In summary, Ascendant
Solutions and its shareholders will be in the same respective
positions under the federal securities laws after the merger as
were ASD Systems and its shareholders prior to the merger.
The board of directors recommends that shareholders vote FOR
Item 1.
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ITEM 2.
AMENDMENT TO 1999 LONG-TERM INCENTIVE PLAN, AS AMENDED
General
Our 1999 Long-Term Incentive 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 Long-Term Incentive Plan is to promote our
interests and the interests of our shareholders by using
investment interests in ASD Systems to attract, retain and
motivate eligible persons to encourage and reward their
contributions to the performance of ASD Systems and to align
their interests with the interests of our shareholders.
Qualified participants include directors, officers, employees,
consultants and advisors of ASD Systems. As of June 30, 2000,
approximately 224 persons were eligible to participate in the
plan and approximately 91 of them have been granted options to
purchase an aggregate of 2,163,000 shares under the plan.
Amendment to the Plan
In April 2000, our board of directors approved, subject to
shareholder approval, an amendment to our 1999 Long-Term
Incentive 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 Internal Revenue Code of 1986, as amended.
The amendment increased the maximum number of shares that may be
covered by options granted to a plan participant in any calendar
year from 50,000 shares to 450,000 shares. The board 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 Internal Revenue 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 Long-Term Incentive 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 50,000 shares. The
amendment proposes to increase this limit to 450,000 shares.
We have granted the following stock options, excisable for a
total of 1,355,000 shares of our common stock, to the senior
executive officers indicated, each of which exceeds the 50,000
share limitation previously contained in our 1999 Long-Term
Incentive Plan:
* a nonqualified stock option granted to David E. Bowe, our Chief
Executive Officer and President, on March 22, 2000, which (1) is
exercisable for 100,000 shares of common stock, (2) carries an
exercise price of $5.94 per share and (3) vests as to 25% of the
underlying number of shares on the first anniversary of the grant
date and 2% per month thereafter until fully vested;
* a nonqualified stock option granted to David E. Bowe on May 12,
2000, which (1) is exercisable for 300,000 shares of common
stock, (2) carries an
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exercise price of $2.66 per share and (3) vests as to
25% of the underlying number of shares on the first
anniversary of the grant date and 2% per month
thereafter until fully vested;
* a nonqualified stock option granted to Gregg L. Young, our Chief
Information Officer, on May 12, 2000, which (1) is exercisable
for 260,000 shares of common stock, (2) carries an exercise price
of $2.66 per share and (3) vests as to 25% of the underlying
number of shares on the first anniversary of the grant date and
2% per month thereafter until fully vested;
* a nonqualified stock option granted to Ted I. Bilke, our Chief
Operating Officer, on May 12, 2000, which (1) is exercisable for
245,000 shares of common stock, (2) carries an exercise price of
$2.66 per share and (3) vests as to 25% of the underlying number
of shares on the first anniversary of the grant date and 2% per
month thereafter until fully vested; and
* a nonqualified stock option granted to Rick Troberman, our
Executive Vice President-Sales and Marketing, on April 28, 2000,
which (1) is exercisable for 450,000 shares of common stock, (2)
carries an exercise price of $2.72 per share and (3) vests as to
25% of the underlying number of shares on the first anniversary
of the grant date and 2% per month thereafter until fully vested.
Each of these options was granted pursuant to the terms of our
1999 Long-Term Incentive Plan and has been specifically
conditioned on the receipt of shareholder approval to this Item 2
prior to the vesting of any portion of the option. To the extent
shareholder approval is not timely obtained, the grants shall be
deemed withdrawn and the options forfeited with the consent of
the optionees. Pursuant to applicable sections of the Internal
Revenue Code, inclusion of this risk of forfeiture ensures
continued compliance with Section 162(m), notwithstanding the
fact that such grants exceeded the 50,000 share limitation. If
the shareholders 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).
New Plan Benefits
Because the modifications proposed to be made to the 1999
Long-Term Incentive 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. However, for illustrative purposes only,
the following chart provides information concerning options
granted to certain groups as of June 30, 2000.
1999 Long-Term Incentive Plan
------------------------------------------------------------------
Range of Shares Underlying
Exercise Options Granted
Group Prices Through June 30, 2000
--------------------------- -------------- ---------------------
Executive Group $1.00 to $5.94 1,500,000
Non-Executive Director
Group $1.00 20,000
Non-Executive Officer $1.00 to $8.25 643,000
Employee Group
The 1999 Long-Term Incentive Plan, as amended, has been attached
as Exhibit D to this Proxy Statement.
The board of directors recommends that shareholders vote FOR
Item 2.
Material Terms
The material terms of our 1999 Long-Term Incentive Plan are
outlined below:
Administration. Our Long-Term Incentive Plan Committee is
authorized to administer the plan with respect to all persons not
classified as Section 16 insiders of ASD Systems and/or persons
subject to the limitations imposed by Section 162(m) of the
Internal Revenue 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. A separate
subcommittee of the board of directors named the Special
Long-Term Incentive Plan Committee has the power to administer
the Long-Term Incentive Plan for (1) persons who are Section 16
insiders (generally, all directors and executive officers of ASD
Systems) for purposes of ensuring compliance with the profit
disgorgement rules of Section 16 applicable to such persons
and/or (2) persons
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who are subject to Section 162(m) of the Internal Revenue 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 our plan, we may grant ISO's or
NQSO's. However, only our employees are eligible to receive
ISO's. A stock option may have a term of not more than ten years.
The administrators of our Long-Term Incentive 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 ISO 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
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 its closing price on The
Nasdaq National Market.
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 Long-Term Incentive Plan
provides that, in the event of certain changes of control
involving the liquidation of ASD Systems, the disposition of all
or substantially all of our assets, certain reorganizations,
mergers or consolidations of ASD Systems or the acquisition by
any person (other than Norm Charney or the Staubach affiliated
shareholders) of more than 50% of ASD Systems' 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 of control.
Termination. The Long-Term Incentive Plan will terminate on
May 12, 2009.
Federal Income Tax Consequences
Incentive Stock Options. The federal income tax
consequences, in general, of the grant and exercise of an ISO
under our Long-Term Incentive Plan are as follows:
In general, an employee will not recognize taxable income
upon the grant or exercise of an ISO and we will not be entitled
to any business expense deduction with respect to the grant or
exercise of an ISO.
* If the employee holds the shares for at least two years after
the date of grant and for at least one year after the date of
exercise, the difference, if any, between the sales price of the
shares and the exercise price of the option will be treated as
long-term capital gain or loss upon subsequent disposition of the
shares.
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<PAGE>
* If the employee disposes of the shares prior to satisfying the
holding period requirements, the employee will recognize ordinary
income at the time of the disposition, generally in an amount
equal to the excess of the fair market value of the shares at the
time the option was exercised over the exercise price of the
option. Generally, we will be allowed a business expense
deduction to the extent an employee recognizes ordinary income.
The balance of the gain realized, if any, will be short-term or
long-term capital gain, depending upon whether the shares have
been held for at least one year after the date of exercise.
Non-qualified Stock Options. The federal income tax
consequences, in general, of the grant and exercise of an NQSO
under our Long-Term Incentive Plan are as follows:
* In general, a recipient who receives a NQSO will recognize no
income at the time of the grant of the option.
* Upon exercise of an NQSO, a recipient will recognize ordinary
income in an amount equal to the excess of the fair market value
of the shares on the date of exercise over the exercise price of
the option. Generally, we will be entitled to a business expense
deduction in the amount and at the time the recipient recognizes
ordinary income.
* The basis in shares acquired upon exercise of an NQSO will equal
the fair market value of such shares at the time of exercise, and
the holding period of the shares, for capital gain purposes, will
begin on the date of exercise.
Potential Limitation on Company Deductions. Section 162(m)
of the Internal Revenue 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 Long-Term 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.
ITEM 3.
APPROVAL OF STOCK OPTIONS EXERCISABLE FOR A TOTAL OF 1,425,000
SHARES OF COMMON STOCK GRANTED TO CERTAIN SENIOR EXECUTIVE
OFFICERS OF THE COMPANY
In addition to the executive options described in "Item 2.
Amendment to 1999 Long-Term Incentive Plan, as amended," we have
also granted the following stock options to certain of the same
senior executive officers which did not exceed the 50,000 share
limitation previously contained in our 1999 Long-Term Incentive
Plan:
* a nonqualified stock option granted to Gregg L. Young on
March 22, 2000 which (1) is exercisable for 40,000 shares of
common stock, (2) carries an exercise price of $5.94 per share
and (3) vests as to 25% of the underlying number of shares on the
first anniversary of the grant date and 2% per month thereafter;
and
* a nonqualified stock option granted to Ted I. Bilke on March 22,
2000 which (1) is exercisable for 30,000 shares of common stock,
(2) carries an exercise price of $5.94 per share and (3) vests as
to 25% of the underlying number of shares on the first
anniversary of the grant date and 2% per month thereafter.
As required for compliance with Section 162(m) of the Code, all
of these options, exercisable for a total of 1,425,000 shares of
common stock (collectively, the "Executive Options"), were
granted by a committee of the board of directors meeting the
definition of "outside directors." However, the senior executive
officers receiving the options are also subject to the "short-
swing profit" recovery provisions of Section 16b of the
Securities Exchange
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<PAGE>
Act of 1934, as amended. Accordingly, the company desires to
structure the grant of such Executive Options so as to be exempt
from these provisions.
Rule 16b-3 provides an exemption from the operation of these
provisions with respect to the acquisition of options if one of
the following conditions is met:
* the transaction is approved by the whole board of directors;
* the transaction is approved by a committee of the board of
directors that is composed solely of two or more "non-employee
directors" (defined generally to include any director who (1) is
not currently an officer or employee of the company; (2) is not a
consultant to the company that receives annual compensation of
$60,000 or more; and (3) does not maintain an interest in any
transaction, and is not engaged in a business relationship,
requiring disclosure in the company's annual proxy statement);
* the transaction is approved or ratified by the shareholders of
the company; or
* at least six months elapse form the date of acquisition of the
option to the date of disposition of the option or the underlying
security.
Therefore, in order to maintain maximum flexibility under
Rule 16b-3 and to ensure compliance with Section 162(m), we are
proposing that the shareholders of the company specifically
ratify the grant of the Executive Options. To the extent
shareholder ratification of this Item 3 is not obtained at the
Special Meeting, the Executive Options shall nevertheless remain
outstanding; however such Executive Options may be subject to the
short-swing profit recovery provisions of Section 16 depending
upon the applicability of other available exemptions.
The material terms of the Executive Options are described
under "Item 2. Amendment to 1999 Long-Term Incentive Plan, as
amended - Material Terms." Additionally, the forms of
nonqualified stock option agreements used in connection with the
Executive Options have been attached as Exhibit E hereto.
The board of directors recommends that shareholders vote FOR
Item 3.
DEADLINE FOR SHAREHOLDER PROPOSALS
We currently anticipate that our next Annual Meeting of
Shareholders will be held on May 10, 2001. Any proposal by a
shareholder of the company intended to be presented at the 2001
Annual Meeting of Shareholders and included in the company's
proxy statement is required to be received at our principal
executive offices no later than December 15, 2000. To curtail
controversy as to the date on which a proposal was received by
us, we suggest that proponents submit their proposals by
certified mail, return receipt requested.
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<PAGE>
Exhibit A
CERTIFICATE OF INCORPORATION
OF
ASCENDANT SOLUTIONS, INC.
FIRST:The name of the corporation is Ascendant Solutions,
Inc. (the "Corporation").
SECOND:The address of the registered office of the
Corporation in the State of Delaware is 919 N. Market Street,
Suite 600, in the City of Wilmington, County of New Castle 19801.
The name of its registered agent at such address is SR Services,
LLC.
THIRD:The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware ("DGCL").
FOURTH:The aggregate number of shares of all classes of
stock which the Corporation shall have authority to issue is
Fifty One Million (51,000,000) shares, consisting of (A) Fifty
Million (50,000,000) shares of common stock, par value $0.0001
per share (the "Common Stock"), and (B) One Million (1,000,000)
shares of preferred stock, par value $0.0001 per share (the
"Preferred Stock").
The designations, powers, preferences and relative,
participating, optional and other special rights, and the
qualifications, limitations and restrictions thereof with respect
to the Common Stock and the Preferred Stock are as follows:
(A)Common Stock. Each holder of the Common Stock of the
Corporation shall be entitled to one vote for every share of
Common Stock outstanding in his name on the books of the
Corporation. Except for and subject to those rights expressly
granted to the holders of the Preferred Stock or except as may be
provided by the laws of the State of Delaware, the holders of
Common Stock shall have exclusively all other rights of
stockholders including, without limitation, (i) the right to
receive dividends, when and as declared by the Board of Directors
out of assets legally available therefor, and (ii) in the event
of any distribution of assets upon liquidation, dissolution or
winding up of the Corporation or otherwise, the right to receive
ratably and equally with all holders of all Common Stock all the
assets and funds of the Corporation remaining after the payment
to the holders of the Preferred Stock of the specific amounts
that they are entitled to receive upon such liquidation,
dissolution or winding up of the Corporation, if any.
(B)Preferred Stock. Preferred Stock may be issued from time to
time in one or more series, each of such series to have such
terms as stated in the resolution or resolutions providing for
the establishment of such series adopted by the Board of
Directors of the Corporation as hereinafter provided. Except as
otherwise expressly stated in the resolution or resolutions
providing for the establishment of a series of Preferred Stock,
any shares of Preferred Stock that may be redeemed, purchased or
acquired by the Corporation may be reissued except as otherwise
expressly provided by law. Different series of Preferred Stock
shall not be construed to constitute different classes of stock
for the purpose of voting by classes unless expressly provided in
the resolution or resolutions providing for the establishment
thereof. The Board of Directors of the Corporation is hereby
expressly authorized to issue, from time to time, shares of
Preferred Stock in one or more series, and, in connection with
the establishment of any such series by resolution or
resolutions, to determine and fix the number of shares
constituting that series and the distinctive designation of that
series and to determine and fix such voting powers, full or
limited, or no voting powers, and such other powers,
designations, preferences and relative, participating, optional
and other rights, and the qualifications, limitations and
restrictions thereof, including, without limitation, dividend
rights, conversion rights, redemption privileges and liquidation
preferences, as shall be stated in such resolution or
resolutions, all to the fullest extent permitted by the DGCL.
Without limiting the generality of the foregoing, the resolution
or resolutions providing for the establishment of any series of
Preferred Stock may, to the extent permitted by law, provide that
such series shall be superior to, rank equally with or be junior
to the Preferred Stock of any other series. Except as otherwise
expressly provided in the resolution or resolutions providing for
the
<PAGE>
establishment of any series of Preferred Stock, no vote of
the holders of shares of Preferred Stock or Common Stock
shall be a prerequisite to the issuance of any shares of any
series of the Preferred Stock authorized by and complying
with the conditions of this Certificate of Incorporation.
FIFTH:For the management of the business and for the conduct
of the affairs of the Corporation, and in further definition,
limitation and regulation of the powers of the Corporation and of
its directors and stockholders, it is further provided:
(A)Powers and Authorities of Board of Directors. In furtherance
and not in limitation of the powers conferred by the laws of the
State of Delaware, the Board of Directors is expressly authorized
and empowered:
(i) to make, alter, amend or repeal the
Bylaws in any manner not inconsistent with the laws of
the State of Delaware or this Certificate of
Incorporation;
(ii) without the assent or vote of the
stockholders, to authorize and issue securities and
obligations of the Corporation, secured or unsecured,
and to include therein such provisions as to
redemption, conversion or other terms thereof as the
Board of Directors in its sole discretion may
determine, and to authorize the mortgaging or pledging,
as security therefor, of any property of the
Corporation, real, personal or mixed, including after-
acquired property;
(iii) to determine whether any, and if
any, what part, of the net profits of the Corporation
or of its surplus shall be declared in dividends and
paid to the stockholders, and to direct and determine
the use and disposition of any such net profits or such
surplus; and
(iv) to fix from time to time the amount
of net profits of the Corporation or of its surplus to
be reserved as working capital or for any other lawful
purpose.
In addition to the powers and authorities herein or by
statute expressly conferred upon it, the Board of Directors
may exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation, subject,
nevertheless, to the provisions of the laws of the State of
Delaware, this Certificate of Incorporation and the Bylaws
of the Corporation.
(B) Director or Officer Removal. Any director
or any officer elected or appointed by the stockholders or
by the Board of Directors may be removed at any time in such
manner as shall be provided in the Bylaws of the
Corporation.
(C) Amendment to Certificate of Incorporation.
From time to time any of the provisions of this Certificate
of Incorporation may be altered, amended or repealed, and
other provisions authorized by the laws of the State of
Delaware at the time in force may be added or inserted, in
the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the
Corporation by this Certificate of Incorporation are granted
subject to the provisions of this paragraph (C).
SIXTH: The members of the Board of Directors shall
be classified, with respect to the time for which they severally
hold office, into three (3) classes, as nearly equal in number as
possible, as shall be provided in the manner specified in the
Corporation's Bylaws, one class to hold office initially for a
term expiring at the Annual Meeting of Stockholders to be held in
2001, another to hold office initially for a term expiring at the
Annual Meeting of Stockholders to be held in 2002, and another to
hold office initially for a term expiring at the Annual Meeting
of Stockholders to be held in 2003, with the members of each new
class to hold office until their successors have been duly
elected and have qualified. At each Annual Meeting of the
Stockholders of the Corporation, the successors to the class of
directors whose term expires at the meeting shall be elected to
hold office for a term expiring at the Annual Meeting held in the
third year following the year of their election. Election of
directors need not be by written ballot unless the Bylaws of the
Corporation shall so provide.
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<PAGE>
SEVENTH: No director of the Corporation shall be
personally liable to the Corporation or any of its stockholders
for monetary damages for breach of fiduciary duty as a director
of the Corporation; PROVIDED, HOWEVER, that the foregoing is not
intended to eliminate or limit the liability of a director of the
Corporation for (i) any breach of a director's duty of loyalty to
the Corporation or its stockholders, (ii) acts or omissions not
in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) a violation of Section 174 of the
DGCL, or (iv) any transaction from which the director derived an
improper personal benefit. If the DGCL is hereafter amended to
authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest
extent permitted by the DGCL, as so amended. No amendment to or
repeal of this Article SEVENTH shall apply to or have any effect
on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal.
EIGHTH: The Corporation shall, to the fullest
extent permitted by Section 145 of the DGCL, as that Section may
be amended and supplemented from time to time, indemnify any
director or officer of the Corporation (and any director, trustee
or officer of any corporation, business trust or other entity to
whose business the Corporation shall have succeeded) which it
shall have power to indemnify under that Section against any
expenses, liabilities or other matter referred to in or covered
by that Section. The indemnification provided for in this
Article EIGHTH (a) shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any
Bylaw, agreement or vote of stockholders or disinterested
directors or otherwise, both as to action in their official
capacities and as to action in another capacity while holding
such office, (b) shall continue as to a person who has ceased to
be a director or officer and (c) shall inure to the benefit of
the heirs, executors and administrators of such a person. To
assure indemnification under this Article of all such persons who
are determined by the Corporation or otherwise to be or to have
been "Fiduciaries" of any employee benefit plan of the
Corporation that may exist from time to time and that is governed
by the Act of Congress entitled "Employee Retirement Income
Security Act of 1974," as amended from time to time, such Section
145 shall, for the purposes of this Article, be interpreted as
follows: an "other enterprise" shall be deemed to include such
an employee benefit plan; the Corporation shall be deemed to have
requested a person to serve an employee benefit plan where the
performance by such person of his duties to the Corporation also
imposes duties on, or otherwise involves services by, such person
to the plan or participants or beneficiaries of the plan; excise
taxes assessed on a person with respect to an employee benefit
plan pursuant to such Act of Congress shall be deemed "fines;"
and action taken or omitted by a person with respect to an
employee benefit plan in the performance of such person's duties
for a purpose reasonably believed by such person to be in the
interest of the participants and beneficiaries of the plan shall
be deemed to be for a purpose that is not opposed to the best
interests of the Corporation.
NINTH: No action required to be taken or which may
be taken at any annual or special meeting of stockholders of the
Corporation may be taken without a meeting, and the power of
stockholders to consent in writing, without a meeting, to the
taking of any action is specifically denied.
TENTH: Notwithstanding anything contained in this
Certificate of Incorporation to the contrary, the affirmative
vote of at least 66 2/3% of the outstanding shares of the Common
Stock of the Corporation shall be required to amend or repeal
Article SIXTH, EIGHTH, NINTH or TENTH of this Certificate of
Incorporation or to adopt any provision inconsistent therewith.
Further, the affirmative vote of at least 66 2/3% of the
outstanding shares of the Common Stock of the Corporation shall
be required to amend or repeal the Bylaws of the Corporation, if
the stockholders of the Corporation are required by the DGCL, the
Certificate of Incorporation or the Bylaws to vote thereon.
ELEVENTH: Except as provided herein, the Corporation
reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by the laws of the State of
Delaware, and all rights herein conferred are granted subject to
this reserve power. Notwithstanding the foregoing, the provisions
set forth in Articles SIXTH, EIGHTH, NINTH and TENTH of this
Certificate of Incorporation may not be repealed or amended in
any respect unless such repeal or amendment is approved as
specified in Article TENTH herein.
-3-
<PAGE>
TWELFTH: Whenever a compromise or arrangement is
proposed between the Corporation and its creditors or any class
of them and/or between the Corporation and its stockholders or
any class of them, any court of equitable jurisdiction within the
State of Delaware may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the
Corporation under the provisions of Section 291 of the DGCL or on
the application of trustees in dissolution or of any receiver or
receivers appointed for the Corporation under the provisions of
Section 279 of the DGCL, order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be
summoned in such manner as said court directs. If a majority in
number representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement,
the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of
creditors, and/or on all the stockholders or class of
stockholders, of the Corporation as the case may be, and also on
the Corporation.
THIRTEENTH: Meetings of stockholders may be held within or
without the State of Delaware as the Bylaws may provide. The
books of the Corporation may be kept (subject to any provision
contained in the DGCL) outside the State of Delaware at such
place or places as may be designated form time to time by the
Board of Directors or in the Bylaws of the Corporation.
FOURTEENTH: The name and mailing address of the
Incorporator of the Corporation is J. David Washburn, c/o Arter &
Hadden LLP, 1717 Main Street, Suite 4100, Dallas, Texas 75201.
IN WITNESS WHEREOF, I have hereunto set my hand this _____
day of ____________, 2000, and affirm the statements contained
therein as true under penalties of perjury.
/s/ J. DAVID WASHBURN
----------------------------
J. David Washburn
Incorporator
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<PAGE>
Exhibit B
================================================================
BYLAWS
OF
ASCENDANT SOLUTIONS, INC.
(A Delaware corporation)
===========================================================
<PAGE>
BYLAWS
of
ASCENDANT SOLUTIONS, INC.
(a Delaware corporation)
ARTICLE I
Offices
SECTION 1.1.The registered office of the Corporation shall
be in the City of Wilmington, County of New Castle, State of
Delaware.
SECTION 1.2.The Corporation may also have offices at such
other places both within and without the State of Delaware as the
Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
SECTION 2.1.Annual Meetings. The annual meeting of the
stockholders for the election of directors and for the
transaction of such other business as may properly come before
the meeting shall be held at such place within or without the
State of Delaware, and on such date and at such hour of the day
as the Board of Directors shall determine.
SECTION 2.2.Special Meetings. Special meetings of the
stockholders for any purpose or purposes, unless otherwise
prescribed by statute or by the Certificate of Incorporation, may
be called by order of the President, and shall be called by the
President or Secretary at the request in writing of a majority of
the Board of Directors or the whole Executive Committee. Special
meetings of the stockholders of the Corporation may not be called
by any other person or persons. Special meetings of the
stockholders shall be held at such place within or without the
State of Delaware, on such date, and at such time as may be
designated by the person or persons calling the meeting.
SECTION 2.3.Notice of Meetings. Written notice of every
meeting of stockholders, stating the time, place and purposes
thereof, shall be given personally or by mail at least ten (10),
but not more than sixty (60), days (except as otherwise provided
by law) before the date of such meeting to each person who
appears on the stock transfer books of the Corporation as a
stockholder and who is entitled to vote at such meeting. If such
notice is mailed, it shall be directed to such stockholder at his
address as it appears on the stock transfer books of the
Corporation.
<PAGE>
SECTION 2.4.Quorum. At any meeting of the stockholders the
holders of a majority of the shares of the Corporation entitled
to vote at such meeting, present in person or represented by
proxy, shall constitute a quorum for all purposes, except where
otherwise provided by law or in the Certificate of Incorporation.
A quorum, once established, shall not be broken by the withdrawal
of enough votes to leave less than a quorum and the votes present
may continue to transact business until adjournment, provided
that any action (other than adjournment) is approved by at least
a majority of the shares required to constitute a quorum.
SECTION 2.5.Adjournments. If at any meeting of stockholders
a quorum shall fail to attend in person or by proxy, the holders
of a majority of the shares present in person or by proxy and
entitled to vote at such meeting may adjourn the meeting from
time to time until a quorum shall attend, and thereupon any
business may be transacted which might have been transacted at
the meeting as originally called. Notice need not be given of
the adjourned meeting if the time and place thereof are announced
at the meeting at which the adjournment is taken; provided,
however, that if the adjournment is for more than thirty (30)
days or if after the adjournment a new record date is fixed,
notice of the adjourned date shall be given.
SECTION 2.6.Organization; Meeting Rules. The Chairman of
the Board, if one is elected, and in his absence the President,
and in their absence the Vice President, shall call meetings of
the stockholders to order and shall act as chairman thereof. The
Secretary or an Assistant Secretary of the Corporation shall act
as secretary at all meetings of the stockholders when present,
and, in the absence of both, the presiding officer may appoint
any person to act as secretary. The chairman of any meeting of
stockholders shall determine the order of business and the rules
and procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as he may deem
appropriate in his discretion.
SECTION 2.7.Voting. At each meeting of the stockholders,
each holder of the shares of Common Stock shall be entitled to
one vote on such matter for each such share and may exercise such
voting right either in person or by proxy appointed by an
instrument in writing subscribed by such stockholder or his duly
authorized attorney. No such proxy shall be voted or acted upon
after eleven (11) months from its date unless the proxy provides
for a longer period. Voting need not be by ballot. All
elections of directors shall be decided by a plurality vote and
all questions decided and actions authorized by a majority vote,
except as otherwise required by law.
SECTION 2.8.Inspectors. At any meeting of stockholders,
inspectors of election may be appointed by the presiding officer
of the meeting for the purpose of opening and closing the polls,
receiving and taking charge of the proxies, and receiving and
counting the ballots or the vote of stockholders otherwise given.
The inspectors shall be appointed by the presiding officer of the
meeting, shall be sworn to faithfully perform their duties, and
shall in writing certify to the returns. No candidate for
election as director shall be appointed or act as inspector.
SECTION 2.9.Stockholder List. At least ten (10) days before
every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder
and the number of shares registered in the name of such
stockholder, shall be prepared and held open to the examination
of any stockholder, for any purpose germane to the meeting,
during ordinary business hours for said ten (10) days either at a
place within the city where the meeting is to be held, which
place shall
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<PAGE>
be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The
list shall also be produced and kept at the meeting during the
whole time thereof, and may be inspected by any stockholder who
is present.
SECTION 2.10.Business to be Transacted at Meetings. At a
meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting.
To be properly brought before a special meeting, business must be
specified in the notice of the meeting (or any supplement
thereto). To be properly brought before an annual meeting,
business must be (a) specified in the notice of the meeting (or
any supplement thereto) given by or at the direction of the Board
of Directors, (b) otherwise properly brought before the meeting
by or at the direction of the Board of Directors or (c) otherwise
properly brought before the meeting by a stockholder. For
business to be properly brought before an annual meeting by a
stockholder, the stockholder must, in addition to any
requirements imposed by federal securities law or other laws,
have given timely notice thereof in writing to the secretary of
the Corporation. To be timely for an annual meeting, a
stockholder's notice must be delivered to or mailed and received
at the principal executive offices of the Corporation not less
than 30 days nor more than 60 days prior to the meeting;
provided, however, that in the event that less than 40 day's
notice or prior public disclosure of the date of the meeting is
given or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business
on the 10th day following the day on which such notice of the
date of the annual meeting was mailed or such public disclosure
was made. A stockholder's notice to the Secretary shall set
forth as to each matter the stockholder proposes to bring before
the annual meeting, (i) a brief description of the business
desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name
and record address of the stockholder proposing such business,
(iii) the class and number of shares of the Corporation that are
beneficially owned by the stockholder, and (iv) any material
interest of the stockholder in such business. The Chairman of the
meeting may refuse to bring before a meeting any business not
properly brought before the meeting in compliance with this
section.
ARTICLE III
Directors
SECTION 3.1.Functions and Number. The property, business
and affairs of the Corporation shall be managed and controlled by
a Board of Directors, who need not be stockholders, citizens of
the United States or residents of the State of Delaware. The
number of members which shall constitute the Board of Directors
shall be determined from time to time by resolution of the Board
of Directors or by the stockholders at an annual or special
meeting held for that purpose, but no decrease in the Board of
Directors shall have the effect of shortening the term of an
incumbent director. Upon approval of these Bylaws, the Board of
Directors shall consist of six (6) members, such number to
constitute the whole Board. The use of the phrase "whole Board"
herein refers to the total number of directors which the
Corporation would have if there were no vacancies. Except as
otherwise provided by law or in these Bylaws or in the
Certificate of Incorporation, the directors shall be elected by
the stockholders entitled to vote at the annual meeting of
stockholders of the Corporation. Subject to law, to the
Certificate of Incorporation and to the other provisions of these
Bylaws, each director shall hold office until his or her term of
office expires and until his or her successor shall have been
elected and qualified. The directors shall be divided, with
respect to the terms for which they severally hold office, into
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three (3) classes, hereby designated as Class A, Class B and
Class C. Each class shall have at least two (2) directors and the
three (3) classes shall be as nearly equal in number as possible.
The initial term of office of the Class A, Class B and Class C
directors, appointed by the incorporator of the Corporation by
instrument of organization, shall expire at the 2003 annual
meeting of stockholders, the 2001 annual meeting of stockholders
and the 2002 annual meeting of stockholders, respectively. At
each annual meeting of stockholders, the successors of the class
of directors whose term expires at that meeting shall be elected
to hold office for a term expiring at the annual meeting of
stockholders to be held in the third year following the year of
their election.
SECTION 3.2.Removal. Any director may be removed by the
affirmative vote of the holders of a majority of the then
outstanding shares of Common Stock only for cause.
SECTION 3.3.Vacancies. Unless otherwise provided in the
Certificate of Incorporation or in these Bylaws, vacancies among
the directors, whether caused by resignation, death,
disqualification, removal, an increase in the authorized number
of directors or otherwise, may be filled by a majority of the
directors then in office, although less than a quorum, or by a
sole remaining director. Vacancies that occur on the Board of
Directors during the year may be filled by the Board of Directors
as hereinabove provided for the unexpired term of the vacating
directors predecessor in office.
SECTION 3.4.Place of Meeting. The directors may hold their
meetings and may have one or more offices and keep the books of
the Corporation (except as otherwise may at any time be provided
by law) at such place or places within or without the State of
Delaware as the Board may from time to time determine.
SECTION 3.5.Annual Meeting. The newly elected Board may
meet for the purpose of organization, the election of officers
and the transaction of other business, at such time and place
within or without the State of Delaware as shall be fixed as
provided in Section 3.7 of this Article for special meetings of
the Board of Directors.
SECTION 3.6.Regular Meetings. Regular meetings of the Board
of Directors shall be held at such time and place within or
without the State of Delaware as the Board of Directors shall
from time to time by resolution determine and no notice of such
regular meetings shall be required.
SECTION 3.7.Special Meetings. Special meetings of the Board
of Directors shall be held whenever called by the direction of
the President or of one-third of the directors then in office.
The Secretary or some other officer or director of the
Corporation shall give notice to each director of the time and
place of each special meeting by mailing the same at least three
(3) days before the meeting or by telexing, telegraphing or
telephoning the same not later than the day before the meeting,
at the residence address of each director or at his usual place
of business. Special meetings of the Board shall be held at such
place within or without the State of Delaware as shall be
specified in the call for the meeting. Unless expressly required
by statute, by the Certificate of Incorporation or by the Bylaws,
neither the business to be transacted at, nor the purpose of, any
special meeting of the Board of Directors need be specified in
the notice of a meeting.
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SECTION 3.8.Quorum. Except as otherwise provided by law or
in the Certificate of Incorporation, a majority of the directors
in office shall constitute a quorum for the transaction of
business. A majority of those present at the time and place of
any regular or special meeting, if less than a quorum be present,
may adjourn from time to time without notice, until a quorum be
had. The act of a majority of directors present at any meeting
at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise provided by law or in the
Certificate of Incorporation.
SECTION 3.9.Compensation. The Board of Directors shall have
the authority to fix by resolution the compensation of directors.
SECTION 3.10.Organization. At all meetings of the Board of
Directors, the President, or in his absence the Vice President if
he is a member of the Board, or in their absence, a chairman
chosen by the directors shall preside. The Secretary or an
Assistant Secretary of the Corporation shall act as secretary at
all meetings of the Board of Directors when present, and, in the
absence of both, the presiding officer may appoint any person to
act as secretary.
SECTION 3.11.Telephone Meetings. Any member of the Board of
Directors may participate in any meeting of such Board by means
of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear
each other, and participation in any meeting pursuant to this
provision shall constitute presence in person at such meeting.
SECTION 3.12.Informal Action. Any action required or
permitted to be taken at any meeting of the Board of Directors,
or any committee thereof, may be taken without a meeting if all
the members of the Board consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of
the Board.
SECTION 3.13.Nomination of Director Candidates. Subject to
the rights of the holders of Preferred Stock or any other class
of capital stock of the Corporation (other than Common Stock) or
any series of any of the foregoing that has been outstanding,
nominations for the election of directors may be made by the
Board of Directors, by any duly appointed committee thereof or by
any stockholder entitled to vote for the election of directors.
Any stockholder entitled to vote for the election of directors at
any meeting may nominate persons for election as directors only
if written notice of such stockholder's intent to make such
nomination is given, either by personal delivery or by United
States Mail, postage prepaid, to the Secretary of the Corporation
not less than 30 days nor more than 60 days prior to the meeting;
provided, however, that in the event that less than 40 days'
notice or prior public disclosure of the date of the meeting is
given or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business
on the 10th day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was
made. Such stockholder's notice shall set forth (a) as to each
person whom the stockholder proposes to nominate for election or
re-election as a Director, (i) the name, age, business address
and residence address of the person, (ii) the principal
occupation or employment of the person, (iii) the class and
number of shares of the Corporation beneficially owned by the
person, and (iv) any other information relating to the person
that is required to be disclosed in solicitations for proxies for
election of Directors pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended; and (b) as to the
stockholder giving the notice, (i) the name and record address of
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the stockholder, and (ii) the class and number of shares of the
Corporation beneficially owned by the stockholder. The
Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the
Corporation to determine the eligibility of such proposed nominee
to serve as a Director of the Corporation. The Chairman of the
meeting may refuse to acknowledge the nomination of any person
not made in compliance with this section.
ARTICLE IV
Committees
SECTION 4.1.Executive Committee. The Board of Directors, by
a resolution passed by a vote of a majority of the whole Board,
may appoint an Executive Committee of one or more directors,
which to the extent permitted by law and in said resolution
shall, during the intervals between the meetings of the Board of
Directors, in all cases where special directions shall not have
been given by the Board, have and exercise the powers of the
Board of Directors, including those powers enumerated in these
Bylaws which are not specifically reserved to the Board of
Directors, in the management of the property, business and
affairs of the Corporation; provided, however, that the Executive
Committee shall not have any power or authority to amend the
Certificate of Incorporation, to adopt any agreement of merger or
consolidation, to recommend to the stockholders the sale, lease
or exchange of all or substantially all of the Corporation's
property and assets, to recommend to the stockholders a
dissolution of the Corporation or a revocation of dissolution, to
amend the Bylaws of the Corporation, to declare a dividend, to
authorize the issuance of stock or to adopt a certificate of
ownership and merger. The Executive Committee shall have power
to authorize the seal of the Corporation to be affixed to all
papers which may require it. The Board of Directors shall
appoint the Chairman of the Executive Committee. The members of
the Executive Committee shall receive such compensation and fees
as from time to time may be fixed by the Board of Directors.
SECTION 4.2.Alternates and Vacancies. The Board of
Directors may designate one or more directors as alternate
members of the Executive Committee who may replace any absent or
disqualified member at any meeting of the Executive Committee.
In the absence or disqualification of a member of the Executive
Committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any
such absent or disqualified member. All other vacancies in the
Executive Committee shall be filled by the Board of Directors in
the same manner as original appointments to such Committee.
SECTION 4.3.Committees to Report to Board. The Executive
Committee shall keep regular minutes of its proceedings and all
action by the Executive Committee shall be reported to the Board
of Directors at its meeting next succeeding such action.
SECTION 4.4.Procedure. The Executive Committee shall fix
its own rules of procedure, and shall meet where and as provided
by such rules or by resolution of the Board of Directors. The
presence of a majority of the then appointed number of each
committee created pursuant to this Article IV shall constitute a
quorum and in every case an affirmative vote by a majority of the
members of the committee present and not disqualified from voting
shall be the act of the committee.
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SECTION 4.5.Other Committees. From time to time the Board
of Directors by a resolution adopted by a majority of the whole
Board may appoint any other committee or committees for any
purpose or purposes, to the extent lawful, which shall have such
powers as shall be determined and specified by the Board of
Directors in the resolution of appointment.
SECTION 4.6.Termination of Committee Membership. In the
event any person shall cease to be a director of the Corporation,
such person shall simultaneously therewith cease to be a member
of any committee appointed by the Board of Directors, or any
subcommittee thereof.
ARTICLE V
Officers
SECTION 5.1.Executive Officers. The executive officers of
the Corporation may consist of a Chairman of the Board, a
President and Chief Executive Officer, one or more Vice
Presidents, a Treasurer and a Secretary, all of whom shall be
elected annually by the Board of Directors. Unless otherwise
provided in the resolution of election, each officer shall hold
office until the next annual election of directors and until his
successor shall have been qualified. Any two of such offices may
be held by the same person.
SECTION 5.2.Subordinate Officers. The Board of Directors
may appoint one or more Assistant Secretaries, one or more
Assistant Treasurers and such other subordinate officers and
agents as it may deem necessary or advisable, for such term as
the Board of Directors shall fix in such appointment, who shall
have such authority and perform such duties as may from time to
time be prescribed by the Board.
SECTION 5.3.Compensation. The Board of Directors shall have
the power to fix the compensation of all officers, agents and
employees of the Corporation, which power, as to other than
elected officers, may be delegated as the Board of Directors
shall determine.
SECTION 5.4.Removal. All officers, agents and employees of
the Corporation shall be subject to removal, with or without
cause, at any time by affirmative vote of the majority of the
whole Board of Directors whenever, in the judgment of the Board
of Directors, the best interests of the Corporation will be
served thereby. The power to remove agents and employees, other
than officers or agents elected or appointed by the Board of
Directors, may be delegated as the Board of Directors shall
determine.
SECTION 5.5.Chairman of the Board. If a Chairman of the
Board is elected, he shall be chosen from among the members of
the Board of Directors and shall preside at all meetings of the
directors and the stockholders of the Corporation. The Chairman
of the Board shall, in general, have supervisory power over the
Chief Executive Officer and all other officers of the
Corporation.
SECTION 5.6.The Chief Executive Officer. The Chief
Executive Officer shall be the chief operating officer of the
Corporation and shall be responsible for insuring that the
President of the Corporation is capable of fulfilling his duties
to the Corporation and shall perform such other duties as the
Board of Directors shall prescribe.
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SECTION 5.7.The President. The President shall have the
general powers and duties of supervision and management of the
Corporation, shall report directly to the Chief Executive
Officer, and shall see that all orders and resolutions of the
Board of Directors are carried into effect. The President shall
preside at all meetings of the stockholders and directors at
which he is present. The President shall also perform such other
duties as may from time to time be assigned to him by the Board
of Directors.
SECTION 5.8.Vice Presidents. Each Vice President shall
perform such duties and shall have such authority as from time to
time may be assigned to him by the Board of Directors or the
President.
SECTION 5.9.The Treasurer. The Treasurer shall have the
general care and custody of all the funds and securities of the
Corporation which may come into his hands and shall deposit the
same to the credit of the Corporation in such bank or banks or
depositaries as from time to time may be designated by the Board
of Directors or by an officer or officers authorized by the Board
of Directors to make such designation, and the Treasurer shall
pay out and dispose of the same under the direction of the Board
of Directors. He shall have general charge of all securities of
the Corporation and shall in general perform all duties incident
to the position of Treasurer.
SECTION 5.10.The Secretary. The Secretary shall keep the
minutes of all proceedings of the Board of Directors and the
minutes of all meetings of the stockholders and also, unless
otherwise directed by such committee, the minutes of each
standing committee, in books provided for that purpose, of which
he shall be the custodian; he shall attend to the giving and
serving of all notices for the Corporation; he shall have charge
of the seal of the Corporation, of the stock certificate books
and such other books and papers as the Board of Directors may
direct; and he shall in general perform all the duties incident
to the office of Secretary and such other duties as may be
assigned to him by the Board of Directors.
SECTION 5.11.Vacancies. All vacancies among the officers
for any cause shall be filled only by the Board of Directors.
SECTION 5.12.Bonding. The Board of Directors shall have
power to require any officer or employee of the Corporation to
give bond for the faithful discharge of his duties in such form
and with such surety or sureties as the Board of Directors may
deem advisable.
ARTICLE VI
Stock
SECTION 6.1.Form and Execution of Certificates. The shares
of stock of the Corporation shall be represented by certificates
in such form as shall be approved by the Board of Directors;
provided that the Board of Directors of the Corporation may
provide by resolution that some or all of any or all classes or
series of its stock (other than the Common stock of the
Corporation) shall be uncertificated shares. Any such resolution
shall not apply to shares represented by a certificate until such
certificate is surrendered to the Corporation; and,
notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock represented by certificates and
every holder of uncertificated shares shall be entitled to a
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certificate or certificates representing his shares upon delivery
of a written request therefor to the Secretary of the
Corporation. The certificates shall be signed by the President
or the Vice President and the Treasurer or the Secretary or an
Assistant Treasurer or Assistant Secretary, except that where any
such certificates shall be countersigned by a transfer agent and
by a registrar, the signatures of any of the officers above
specified, and the seal of the Corporation upon such
certificates, may be facsimiles, engraved or printed. In case
any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon such certificate shall
have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of its issue.
SECTION 6.2.Regulations. The Board of Directors may make
such rules and regulations consistent with any governing statute
as it may deem expedient concerning the issue, transfer and
registration of certificates of stock and concerning certificates
of stock issued, transferred or registered in lieu or replacement
of any lost, stolen, destroyed or mutilated certificates of
stock.
SECTION 6.3.Fixing of Record Date. For the purpose of
determining the stockholders entitled to notice of, and to vote
at, any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting,
or for the purpose of determining stockholders entitled to
receive payment of any dividend or other distribution or
allotment of any rights, or to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose
of any other lawful action, the Board of Directors may fix, in
advance, a date as the record date for any such determination of
stockholders, and all persons who are stockholders of record on
the date so fixed, and no others, shall be entitled to notice of,
and to vote at, such meeting or any adjournment thereof, or to
express consent to corporate action in writing without a meeting,
or to receive payment of any dividend or other distribution or
allotment of any rights, or to exercise any rights in respect of
any change, conversion or exchange of stock or to take any other
lawful action, as the case may be. Such record date shall not be
more than sixty (60) days nor less than ten (10) days before the
date of any such meeting, nor more than sixty (60) days prior to
any other action, provided that any record date established by
the Board of Directors may not precede the date of the resolution
establishing the record date. The record date for determining
stockholders entitled to consent to corporate actions in writing
shall not be more than ten (10) days after the date upon which
the resolution fixing the record date was adopted. If no record
date is established prior to an action undertaken by consent, the
record date shall be, if no action of the Board of Directors is
required, the first date on which a signed written consent
setting forth the action taken is delivered to the corporation.
If action by the Board of Directors is required, the record date
shall be the close of business on the day the board adopts the
resolution taking the prior action.
Section 6.4.Transfer Agent and Registrar. The Board of
Directors may appoint a transfer agent or transfer agents and a
registrar or registrars for any or all classes of the capital
stock of the Corporation, and may require stock certificates of
any or all classes to bear the signature of either or both.
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ARTICLE VII
Seal
SECTION 7.1.Seal. The seal of the Corporation shall be
circular in form and contain the name of the Corporation, the
year of its organization, and the words "CORPORATE SEAL,
DELAWARE", which seal shall be in charge of the Secretary to be
used as directed by the Board of Directors.
ARTICLE VIII
Fiscal Year
SECTION 8.1.Fiscal Year. The fiscal year of the Corporation
shall be the calendar year unless otherwise fixed by resolution
of the Board of Directors.
ARTICLE IX
Waiver of Notice
SECTION 9.1.Waiver of Notice. Any person may waive any
notice required to be given by law, in the Certificate of
Incorporation or under these Bylaws by attendance in person, or
by proxy if a stockholder, at any meeting, except when such
person attends a meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened, or by a
writing signed by the person or persons entitled to said notice,
whether before or after the time stated in said notice, which
waiver shall be deemed equivalent to such notice. Neither the
business to be transacted at, nor the purpose of, any regular or
special meeting of the stockholders, directors, or members of a
committee appointed by the Board of Directors need be specified
in any written waiver of notice.
ARTICLE X
Checks, Notes, Drafts, Contracts, Voting of Securities, Etc.
SECTION 10.1.Checks, Notes, Drafts, Etc. All checks, notes,
drafts or other orders for the payment of money of the
Corporation shall be signed, endorsed or accepted in the name of
the Corporation by such officer, officers, person or persons as
from time to time may be designated by the Board of Directors or
by an officer or officers authorized by the Board of Directors to
make such designation.
SECTION 10.2.Execution of Contracts, Deeds, Etc. The Board
of Directors may authorize any officer or officers, agent or
agents, in the name and on behalf of the Corporation, to enter
into or execute and deliver any and all deeds, bonds, mortgages,
contracts and other obligations or instruments, and such
authority may be general or confined to specific instances.
SECTION 10.3.Provision Regarding Conflicts of Interests. No
contract or transaction between the Corporation and one or more
of its directors or officers, or between the Corporation and any
other corporation, partnership, association, or other
organization in which one or more of its directors or officers
are directors or officers, or have a financial interest, shall
be void or voidable solely for this reason, or solely because the
director or officer is present at or
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participates in the meeting of the Board of Directors or
committee thereof which authorizes the contract or transaction,
or solely because his or their votes are counted for such
purpose, if:
(a) The material facts as to his relationship
or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the
committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative
votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or
(b) The material facts as to his relationship
or interest and as to the contract or transaction are
disclosed or are known to the shareholders entitled to vote
thereon, and the contract or transaction is specifically
approved in good faith by vote of the shareholders; or
(c) The contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or
ratified by the Board of Directors, a committee thereof, or
the shareholders.
Common or interested directors may be counted in determining
the presence of a quorum at a meeting of the Board of Directors
or of a committee which authorizes the contract or transaction.
SECTION 10.4.Voting of Securities Owned by the Corporation.
Subject always to the specific directions of the Board of
Directors, any share or shares of stock or other securities
issued by any other corporation and owned or controlled by the
Corporation may be voted, whether by written consent as set forth
hereinbelow or at any meeting of such other corporation, by the
President of the Corporation, or in the absence of the President,
by any Vice President of the Corporation who may be present at
such meeting or available to sign such written consent. Whenever
in the judgment of the President, or in his absence, of any Vice
President, it shall be desirable for the Corporation to execute a
proxy or give a consent with respect to any share or shares of
stock or other securities issued by any other corporation and
owned by the Corporation, such proxy or consent shall be executed
in the name of the Corporation by the President or one of the
Vice Presidents of the Corporation without necessity of any
authorization by the Board of Directors. Any person or persons
so designated as the proxy or proxies of the Corporation shall
have full right, power and authority to vote the share or shares
of stock or other securities issued by such other corporation and
owned by the Corporation.
ARTICLE XI
Indemnification and Insurance
SECTION 11.1.Third-Party Actions. The Corporation shall
indemnify and hold harmless any person who was or is a party or
is threatened to be made a party to any threatened, pending or
completed proceeding (other than an action by or in the right of
the Corporation) by reason of the fact that he or she is or was a
director or officer of the Corporation, against expenses
(including reasonable attorneys' fees), judgments, fines,
liabilities, losses and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such
proceeding if he or she acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best
interests of the Corporation and, with respect to any criminal
proceeding, had no reasonable cause to believe his or her conduct
was unlawful. The termination of any proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere
or its equivalent, shall not, of itself, create a presumption
that the person did not act in good faith and in a manner he or
she reasonably believed to be in,
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or not opposed to, the best interest of the Corporation, and, with
respect to any criminal proceeding, had reasonable cause to believe
that his or her conduct was unlawful.
SECTION 11.2.Derivative Actions. The Corporation shall
indemnify and hold harmless any person who was or is a party or
is threatened to be made a party to any threatened, pending or
completed proceeding by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he or
she is or was a director or officer of the Corporation, against
expenses (including reasonable attorneys' fees) actually and
reasonably incurred by him or her in connection with the defense
or settlement of such proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the Corporation and except that
no indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the
court in which such proceeding was brought shall determine upon
application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses that the
court shall deem proper.
SECTION 11.3.Right to Indemnification of Expenses. To the
extent that a director or officer of the Corporation has been
successful on the merits or otherwise in defense of any
proceeding referred to in Sections 11.1 and 11.2 or in defense of
any claim, issue or matter therein, he or she shall be
indemnified against expenses (including reasonable attorneys'
fees) actually and reasonably incurred by him or her in
connection therewith.
SECTION 11.4Determination of Indemnification. Any
indemnification under Sections 11.1 and 11.2 (unless ordered by a
court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the
director or officer is proper in the circumstances because he or
she has meet the applicable standards of conduct set forth in
Sections 11.1 and 11.2. Such determination shall be made (A) by
the Board of Directors by a majority vote of a quorum consisting
of directors who were not parties to such action, suit or
proceeding, (B) if such a quorum is not obtainable, or, even if
obtainable, if a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion or (C) by the
stockholders.
SECTION 11.5Expenses of Contested Indemnification Claims.
If a claim under Section 11.1 or 11.2 is not paid in full by the
Corporation within thirty (30) days after a written claim has
been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the
unpaid amount of the claim and, if successful in whole or in
part, the claimant shall also be entitled to be paid the expenses
of prosecuting such claim.
SECTION 11.6Advancement of Expenses. Expenses (including
reasonable attorneys' fees) incurred by a director or officer in
defending any proceeding or prosecuting a claim under Section
11.5 shall be paid by the Corporation in advance of the final
disposition of such proceeding or suit upon receipt of a written
affirmation by the director or officer of his or her
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good faith belief that he or she has met the standard of conduct
necessary for indemnification and a written undertaking by or on
behalf of the director or officer to repay such amount if it
shall ultimately be determined that he or she is not entitled to
be indemnified by the Corporation as authorized in this Article.
SECTION 11.7Indemnification Not Exclusive. The
indemnification and advancement of expenses provided by, or
granted pursuant to, this Article shall not be deemed exclusive
of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under the Certificate of
Incorporation, any other bylaw, agreement, vote of stockholders
or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity
while holding such office.
SECTION 11.8Survival of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article shall, unless
otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director or officer and shall inure
to the benefit of the heirs, executors and administrators of such
person.
SECTION 11.9Employees, Agents and Others. The Corporation
may, to the fullest extent of the provisions of this Article with
respect to directors and officers and to the extent authorized
from time to time by the Board of Directors, grant rights of
indemnification and advancement of expenses to any employee or
agent of the Corporation or any other person who is or was
serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
SECTION 11.10Contract Right. Each of the rights of
indemnification and advancement of expenses provided by, or
granted pursuant to, this Article shall be a contract right and
any repeal or amendment of the provisions of this Article shall
not adversely affect any such right of any person existing at the
time of such repeal or amendment with respect to any act or
omission occurring prior to the time of such repeal or amendment,
and further, shall not apply to any proceeding, irrespective of
when the proceeding is initiated, arising from the service of
such person prior to such repeal or amendment.
SECTION 11.11Insurance. The Corporation shall have power to
purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the Corporation or
is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her
in any such capacity, or arising out of his or her status as
such, whether or not the Corporation would have the power to
indemnify him or her against such liability under the provisions
of this Article.
SECTION 11.12Certain References Under Article XI. For
purposes of this Article, the following references shall have the
following meanings:
(A) "the Corporation" shall include, in
addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed
in a consolidation or merger that, if its separate existence had
continued, would have had power and authority to indemnify its
directors, officers, employees or agents so that any person who
is or
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was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or
other enterprise shall stand in the same position under the
provisions of this Article with respect to the resulting or
surviving corporation as he or she would have with respect to
such constituent corporation if its separate existence had
continued;
(B) "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan;
(C) a person who acted in good faith and in a
manner he or she reasonably believed to be in the best interest
of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the
best interests of the corporation;"
(D) "other enterprises" shall include employee
benefit plans;
(E) "proceeding" shall include any pending or
completed action, suit or proceeding, whether formal or informal
or civil, criminal, administrative, arbitrative or investigative,
any appeal in such an action, suit or proceeding, and any inquiry
or investigation that could lead to such an action, suit or
proceeding;
(F) "serving at the request of the
Corporation" shall include any service as a director, officer,
employee or agent of the Corporation that imposes duties on, or
involves services by, such director, officer, employee or agent
with respect to an employee benefit plan, its participants or
beneficiaries.
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Exhibit C
COMPARISON OF TEXAS AND DELAWARE CORPORATION LAW
After the reincorporation, the shareholders of ASD Systems,
Inc., a Texas corporation d/b/a Ascendant Solutions ("Ascendant-
Texas"), will become stockholders of Ascendant Solutions, Inc., a
Delaware corporation ("Ascendant-Delaware"). Some of the
differences between the Texas and Delaware corporation laws, as
well as differences between the charter ("Texas Articles") and
bylaws ("Texas Bylaws") of Ascendant-Texas and the charter
("Delaware Certificate") and bylaws ("Delaware Bylaws") of
Ascendant-Delaware are set forth below. This description of
differences is a summary only and does not purport to be a
complete description of all differences.
Right of Shareholders to Vote on Certain Mergers
Under Texas law, shareholders have the right to vote on all
mergers to which the corporation is a party (except for the
merger into the surviving corporation of subsidiaries owned 90%
or more by the surviving corporation, for which a shareholder
vote also is not required under Delaware law). In certain
circumstances, different classes of securities may be entitled to
vote separately as classes with respect to such transactions.
Unless the articles of incorporation provide otherwise, approval
of the holders of at least two-thirds of all outstanding shares
entitled to vote is required by Texas law to approve a merger,
while under Delaware law, approval by the holders of a majority
of all outstanding shares is required to approve a merger, unless
the certificate of incorporation provides otherwise. Unless the
articles of incorporation provide otherwise, the approval of the
shareholders of the corporation in a merger is not required under
Texas law if (1) the corporation is the sole surviving
corporation in the merger; (2) there is no amendment to the
corporation's articles of incorporation; (3) each shareholder
holds the same number of shares after the merger as before, with
identical designations, preferences, limitations and relative
rights; (4) the voting power of the shares outstanding after the
merger plus the voting power of the shares issuable as a result
of the merger (taking into account convertible securities and
warrants, options or other rights to purchase securities issued
pursuant to the merger) does not exceed the voting power of the
shares outstanding prior to the merger by more than 20%; (5) the
number of participating shares (that is, shares whose holders are
entitled to participate without limitation in dividends or other
distributions) outstanding after the merger plus the
participating shares issuable as a result of the merger (taking
into account convertible securities and warrants, options or
other rights to purchase securities issued pursuant to the
merger) does not exceed the number of participating shares
outstanding prior to the merger by more than 20%; and (6) the
board of directors of the corporation adopts a resolution
approving the plan of merger. Under Delaware law, unless the
certificate of incorporation provides otherwise, stockholders of
the surviving corporation in a merger have no right to vote,
except under limited circumstances, on the acquisition by merger
directly into the surviving corporation in cases where (1) the
agreement of merger does not amend in any respect the certificate
of incorporation of such corporation; (2) each share of stock of
such corporation outstanding immediately prior to the effective
date of the merger is to be an identical outstanding or treasury
share of the corporation after the effective date of the merger;
and (3) either no shares of common stock of the surviving
corporation, and no shares, securities or obligations convertible
into such stock are to be issued or delivered under the plan of
merger, or the authorized unissued shares or the treasury shares
of common stock of the surviving corporation to be issued or
delivered under the plan of merger plus those initially issuable
upon conversion of any other shares, securities or obligations to
be issued or delivered under such plan do not exceed 20% of the
shares of common stock of such corporation outstanding
immediately prior to the effective date of the merger. The Texas
Articles and the Delaware Certificate do not alter the statutory
rules described above.
Sales, Leases, Exchanges or Other Dispositions
The sale, lease, exchange or other disposition (not
including any pledge, mortgage, deed of trust or trust indenture,
unless otherwise provided in the articles of incorporation) of
all, or substantially all, of the property and assets of a Texas
corporation, if not made in the usual and regular course of its
business, requires the approval of the holders of at least two-
thirds of the outstanding shares of the corporation. Under Texas
law, a transaction shall be in the usual and regular course of
business if the corporation shall, directly or indirectly,
continue to engage in one or
<PAGE>
more businesses or apply a portion of the consideration received
in connection with the transaction to the conduct of the business
in which it engages following the transaction. A Delaware
corporation may sell, lease or exchange all or substantially all
of its property and assets when and as authorized by a majority
of the outstanding stock of the corporation entitled to vote
thereon, unless the certificate of incorporation provides to the
contrary. The Delaware Certificate does not provide to the
contrary.
Appraisal Rights
Except for the limited classes of mergers, share exchanges,
sales and asset dispositions for which no shareholder approval is
required under Texas law, and as set forth hereunder,
shareholders of Texas corporations have appraisal rights in the
event of a merger, share exchange, sale, lease, exchange or other
disposition of all, or substantially all, the property and assets
of the corporation if special authorization of the shareholders
is required by Texas law. Notwithstanding the foregoing, a
shareholder of a Texas corporation has no appraisal rights with
respect to any plan of merger in which there is a single
surviving or new domestic or foreign corporation, or with respect
to any plan of exchange, if (1) the shares held by the
shareholder are part of a class of shares which are (a) listed on
a national securities exchange, (b) listed on The Nasdaq Stock
Market (or successor quotation system) or designated as a
national market security on an interdealer quotation system by
the National Association of Securities Dealers, Inc. ("NASD") or
successor entity or (c) are held of record by not less than 2,000
holders, on the record date for the plan of merger or the plan of
exchange; and (2) the shareholder is not required by the terms of
the plan of merger or exchange to accept for his shares any
consideration that is different than the consideration (other
than cash in lieu of fractional shares that the shareholder would
otherwise be entitled to receive) to be provided to any holder of
shares of the same class or series; (3) the shareholder is not
required by the terms of the plan of merger or exchange to accept
any consideration other than (a) shares of a corporation that,
immediately after the merger or exchange, will be part of a class
or series of shares which are (i) listed, or authorized for
listing upon official notice of issuance, on a national
securities exchange, (ii) approved for quotation as a national
market security on an interdealer quotation system by the NASD or
successor entity, or (iii) held of record by not less than 2,000
holders, and (b) cash in lieu of fractional shares otherwise
entitled to be received or (c) any combination of (a) and (b).
Stockholders of a Delaware corporation have no appraisal rights
in the event of a merger or consolidation of the corporation if
the stock of the Delaware corporation is listed on a national
securities exchange or designated as a national market system
security on an interdealer quotation system by the NASD, or such
stock is held of record by more than 2,000 shareholders, or in
the case of a merger in which a Delaware corporation is the
surviving corporation, if: (1) the agreement of merger does not
amend the certificate of incorporation of the surviving
corporation; (2) each share of stock of the surviving corporation
outstanding immediately prior to the effective date of the merger
is to be an identical outstanding share of the surviving
corporation after the effective date of the merger; and (3) the
increase in the outstanding shares as a result of the merger does
not exceed 20% of the shares of the surviving corporation
outstanding immediately prior to the merger. Even if appraisal
rights would not otherwise be available under Delaware law in the
cases described in the preceding sentence, stockholders would
have appraisal rights nevertheless if they are required by the
terms of the agreement of merger or consolidation to accept for
their stock anything other than (1) shares of stock (a) of the
surviving corporation, (b) of any other corporation whose shares
will be either listed on a national securities exchange or
designated as a national market system security on an interdealer
quotation system by the National Association of Securities
Dealers, Inc., or (c) held of record by more than 2,000
stockholders; (2) cash in lieu of fractional shares; or (3) a
combination of such shares and cash. Otherwise, stockholders of a
Delaware corporation have appraisal rights in consolidations and
mergers. Under Delaware law, any corporation may provide in its
certificate of incorporation that appraisal rights will also be
available as a result of an amendment to its certificate of
incorporation or the sale of all or substantially all of the
assets of the corporation. Ascendant-Delaware currently has no
such provisions in the Delaware Certificate.
Shareholder Consent to Action Without a Meeting
Under Texas law, any action required by Texas law to be
taken at an annual or special meeting of the shareholders may be
taken without a meeting if written consent thereto is signed by
all the holders of shares entitled to vote thereon. Texas law
permits the charter of a Texas corporation to provide that action
by written consent in lieu of a meeting may be taken by the
holders of that number of shares which, under Texas law and the
charter, would be required to take the action which is the
subject of the consent at a meeting at which the holders of all
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<PAGE>
shares entitled to vote thereon were present and voted. The Texas
Articles do not provide for the shareholders of Ascendant-Texas
to act by written consent except upon the consent in writing
signed by the holders of all shares entitled to vote with respect
to such action. Under Delaware law, unless otherwise provided in
the certificate of incorporation, any action that can be taken at
a stockholder meeting can be taken without a meeting if written
consent thereto is signed by the holders of outstanding stock
having the minimum number of votes necessary to authorize or take
such action at a meeting of the stockholders. The Delaware
Certificate provides that no action required to be taken or which
may be taken at any annual or special meeting of stockholders may
be taken without a meeting, and the power of stockholders to
consent in writing, without a meeting, to the taking of any
action is specifically denied.
Procedures For Filling Vacant Directorships
Under Texas law, any vacancy occurring in the board of
directors may be filled by the shareholders or by the affirmative
vote of a majority of the remaining directors, although less than
a quorum. The Texas Bylaws provide that if a vacancy occurring in
the Board of Directors will be filled by the remaining directors,
it shall be filled by the affirmative vote of 60% of the remaining
directors. A directorship to be filled by reason of an increase
in the number of directors may be filled by the shareholders or
by the board of directors for a term of office continuing only
until the next election of one or more directors by the shareholders,
provided that the board of directors may not fill more than two such .
directorships during the period between any two successive annual
meetings of shareholders. Under Delaware law, unless the certificate
of incorporation or bylaws provide otherwise, vacancies and newly
created directorships resulting from any increase in the authorized
number of directors may be filled by a majority of the directors
then in office, although less than a quorum. The Delaware Certificate
and Delaware Bylaws do not provide otherwise.
Right to Call Meetings
Under Texas law, holders of not less than 10% of all of the
shares entitled to vote have the right to call a special
shareholders' meeting, unless the articles of incorporation
provide for a number of shares greater than or less than 10%, in
which event, special meetings of the shareholders may be called
by the holders of at least the percentage of shares so specified
in the articles of incorporation, but in no event may the
articles of incorporation provide for a number of shares greater
than 50% that would be required to call a special meeting. The
Texas Articles provide that a special meeting of the shareholders
may only be called by the President, Chief Executive Officer, or
Board of Directors or such other person as may be authorized by
the Texas Bylaws or by the holders of not less than 25% of all
shares entitled to vote at such meeting. Delaware law provides
that special meetings of the stockholders may be called by the
board of directors or such other persons as are authorized in the
certificate of incorporation or bylaws. The Delaware Bylaws
eliminate any authority for the stockholders of Ascendant-
Delaware to call special meetings for any reason.
Charter Amendments
Under Texas law, an amendment to the articles of
incorporation requires the approval of the holders of at least
two-thirds of the outstanding shares of the corporation, unless
any class or series is entitled to vote thereon as a class, in
which event the proposed amendment shall be adopted upon
receiving the affirmative vote of the holders of at least two
thirds of the shares within each class or series entitled to vote
thereon as a class and at least two thirds of the total
outstanding shares entitled to vote thereon. Shares of a class
are entitled to vote, whether or not entitled to vote thereon by
the articles of incorporation, if the amendment would: (1)
increase or decrease the aggregate number of authorized shares of
such class or series; (2) increase or decrease the par value of
the shares of such class; (3) effect an exchange,
reclassification or cancellation of all or part of the shares of
such series; (4) effect an exchange, or create a right of
exchange of all or part of the shares of such class or series;
(5) change the designations, preferences, limitations or relative
rights of such class or series; (6) change the shares of such
class or series into the same or a different number of shares of
the same class or another class or series; (7) create a new class
or series of shares having rights and preferences equal, prior or
superior to the shares of such class or series, or increase the
rights and preferences of any class or series having rights and
preferences equal, prior or superior to the shares of such class
or series, or increase the rights and preferences of any class or
series having rights or preferences later or inferior to the
shares of such class or series in such a manner as to become
equal, prior or superior to the shares of such class or series;
(8) divide the shares of such class into series; (9) limit or
change the
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<PAGE>
existing preemptive rights of the shares of such class or series;
(10) cancel or otherwise affect dividends on the shares of such
class or series which had accrued but had not been declared; or
(11) include or delete any provision required or permitted as to
close corporations.
Delaware law provides that amendments to the certificate of
incorporation must be approved by the holders of a majority of
the corporation's stock entitled to vote thereon, unless the
certificate of incorporation provides for a greater number, and
that holders of the outstanding shares of a class shall be
entitled to vote as a class upon a proposed amendment, whether or
not entitled to vote by the certificate of incorporation, if the
amendment would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par
value of the shares of such class, or alter or change the powers,
preferences, or special rights of the shares of such class so as
to affect them adversely. The Delaware Certificate provides that
the affirmative vote of at least 66-2/3% of the outstanding
shares of common stock of Ascendant-Delaware shall be required to
amend or repeal the following provisions of the Delaware
Certificate: (i) classification of the board of directors, (ii)
indemnification of officers and directors of Ascendant-Delaware
to the fullest extent permitted by Delaware law and (iii) no
action may be taken by stockholders without a meeting and the
power of stockholders to consent in writing without a meeting to
the taking of any action is denied.
Bylaw Amendments
Under Texas law, the Board of Directors may amend, repeal or
adopt a corporation's bylaws unless the articles of incorporation
reserve this power exclusively to the shareholders, or the
shareholders in amending, repealing or adopting a particular
bylaw expressly provide that the Board of Directors may not amend
or repeal that bylaw. The Texas Articles provide that the power
to amend or repeal the Texas Bylaws and to adopt new bylaws is
reserved exclusively to the Board of Directors. Under Delaware
law, the right to amend, repeal or adopt the bylaws is permitted
to the stockholders of the corporation and the corporation's
Board of Directors, if the corporation's certificate of
incorporation so provides. The Delaware Certificate provides that
the Delaware Bylaws may be amended, repealed or adopted by the
Board of Directors. Under Delaware law, the power to amend,
repeal or adopt the bylaws so conferred upon the Board of
Directors of Ascendant-Delaware will not divest its stockholders
of the power, or limit their power, to amend, repeal or adopt
such bylaws.
Class Voting
Under Texas law, class voting is required in connection with
certain amendments of a corporation's articles of incorporation
(see "Charter Amendments"), a merger or consolidation requiring
shareholder approval if the plan of merger or consolidation
contains any provision which, if contained in a proposed
amendment to a corporation's articles of incorporation, would
require class voting or certain sales of all or substantially all
of the assets of a corporation. In contrast, under Delaware law
class voting is not required in connection with such matters,
except in the case of an amendment of a corporation's certificate
of incorporation which increases or decreases the authorized
shares of a class, increases or decreases the par value of the
shares of a class or adversely affects a class of shares.
Removal of Directors
A Texas corporation may provide for the removal of a
director with or without cause in its charter or bylaws. The
Texas Bylaws currently provide that directors may be removed,
with or without cause, by the vote of a majority of the shares
entitled to vote thereon. Under Delaware law, a majority of
stockholders may remove a director with or without cause except
(i) if the board of directors of a Delaware corporation is
classified (i.e. elected for staggered terms), in which case a
director may only be removed for cause, unless the corporation's
certificate of incorporation provides otherwise and (ii) in the
case of a corporation which possesses cumulative voting, if less
than the entire board is to be removed, no director may be
removed without cause if the votes cast against his removal would
be sufficient to elect him if then cumulatively voted at an
election of the entire board of directors, or, if there be
classes of directors, at an election of the class of directors of
which he is a part. The Delaware Certificate provides for a
classified Board of Directors and does not provide for removal of
a director other than for cause. The Delaware Certificate does
not provide for cumulative voting. The Delaware Bylaws provide
that a director may be removed by the affirmative vote of the
holders of a majority of the then outstanding shares of common
stock only
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for cause.
Distributions and Dividends
Under Texas law, a distribution is defined as a transfer of
money or other property (except a corporation's shares or rights
to acquire its shares), or an issuance of indebtedness, by a
corporation to its shareholders in the form of (i) a dividend on
any class or series of the corporation's outstanding shares; (ii)
a purchase, redemption or other acquisition by the corporation,
directly or indirectly, of its shares; or (iii) a payment in
liquidation of all or a portion of its assets. Under Texas law, a
corporation may make a distribution, subject to restrictions in
its charter, if it does not render the corporation unable to pay
its debts as they become due in the course of its business, and
if it does not exceed the corporation's surplus. Surplus is
defined under Texas law as the excess of net assets (essentially,
the amount by which total assets exceed total debts) over stated
capital (the aggregate par value of the issued shares having a
par value plus consideration paid for shares without par value
that have been issued), as such stated capital may be adjusted by
the board. This limitation does not apply to distributions
involving a purchase or redemption of shares to eliminate
fractional shares, collect or compromise indebtedness, pay
dissenting shareholders or effect the purchase or redemption of
redeemable shares if net assets equal or exceed the proposed
distribution.
Under Delaware law, a corporation may, subject to any
restrictions contained in its certificate of incorporation, pay
dividends out of surplus and, if there is not surplus, out of net
profits for the current and/or the preceding fiscal year, unless
the net assets of the corporation are less than the capital
represented by issued and outstanding stock having a preferences
on asset distributions. Surplus is defined under Delaware law as
the excess of the net assets (essentially, the amount by which
total assets exceed total liabilities) over capital (essentially,
the aggregate par value of the shares of the corporation having a
par value that have been issued plus consideration paid for
shares without par value that have been issued), as such capital
may be adjusted by the board.
Stock Redemption and Repurchase
As noted above, under Texas law, the purchase or redemption
by a corporation of its shares constitutes a distribution.
Accordingly, the discussion above relating to distributions is
applicable to stock redemptions and repurchases. Under Delaware
law, a corporation may purchase or redeem shares of any class
except when its capital is impaired or would be impaired by such
purchase or redemption. A corporation may, however, purchase or
redeem out of capital shares that are entitled upon any
distribution of its assets to a preference over another class or
series of its stock, or, if no shares entitled to such a
preference are outstanding, any of its own shares, if such shares
are to be retired and the capital reduced.
Indemnification of Directors and Officers
Texas and Delaware law have different provisions and
limitations regarding indemnification by a corporation of its
officers, directors, employees and agents. The following is a
summary comparison of the indemnification provisions of Texas and
Delaware law:
Scope
Under Texas law, a corporation is permitted to provide
indemnification or advancement of expenses, by articles of
incorporation or bylaw provision, resolution of the shareholders
or directors, agreement, or otherwise, against judgments,
penalties, fines, settlements and reasonable expenses actually
incurred by a person who was, is, or is threatened to be made a
named defendant or respondent in a proceeding because the person
is or was a director if it is determined that the person (1)
conducted himself in good faith; (2) reasonably believed that (a)
in the case of conduct in his official capacity as a director of
the corporation that his conduct was in the corporation's best
interest and (b) in all other cases, that his conduct was at
least not opposed to the corporation's best interest; and (3) in
the case of any criminal proceeding, had no reasonable cause to
believe his conduct was unlawful. However, if the person is found
liable to the corporation, or if the person is found liable on
the basis he received an improper personal benefit,
indemnification under Texas law is limited to the reimbursement
of reasonable expenses and no indemnification will be available
if the person is found liable for willful or intentional
misconduct.
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Delaware law permits a corporation to indemnify directors,
officers, employees, or agents against judgments, fines, amounts
paid in settlement, and reasonable costs, expenses and counsel
fees paid or incurred in connection with any proceeding, other
than an action by or in the right of the corporation, to which
such director, officer, employee or agent may be a party,
provided such a director, officer, employee or agent shall have
acted in good faith and shall have reasonably believed (1) in the
case of a civil proceeding, that his conduct was in or not
opposed to the best interests of the corporation; or (2) in the
case of a criminal proceeding, that he had no reasonable cause to
believe his conduct was unlawful. In connection with an action by
or in the right of the corporation against a director, officer,
employee or agent, the corporation has the power to indemnify
such director, officer, employee or agent for reasonable expenses
incurred in connection with such suit (1) if such person acted in
good faith and in a manner not opposed to the best interests of
the corporation; and (2) if found liable to the corporation, only
if ordered by a court of law. Delaware law provides that the
statutorily permitted indemnification rights are not exclusive of
any other indemnification rights which may be granted by a
corporation to its directors, officers, employees or agents. The
Delaware Certificate provides for mandatory indemnification of
directors and officers to the fullest extent permitted by
Delaware law. The Texas Articles also provide for mandatory
indemnification of directors and officers to the fullest extent
permitted by Texas law.
Advancement of Expenses
Under Texas law, expenses, including reasonable court costs
and attorneys' fees, incurred by a director who was, is, or is
threatened to be made a named defendant or respondent in a
proceeding because the person is or was a director of such
corporation may be paid or reimbursed by the corporation in
advance of the final disposition of the proceeding after the
corporation receives (i) a written affirmation by the director of
his good faith belief that he has met the standard of conduct
necessary for indemnification under Texas law and (ii) a written
undertaking by or on behalf of the director to repay the amount
paid or reimbursed if it is ultimately determined that he has not
met those requirements or if it is ultimately determined that
indemnification for such expenses is prohibited under Texas law.
The Texas Articles provide for advancement of expenses to the
fullest extent permitted by Texas law.
Delaware law provides for the advancement of expenses for
such proceedings upon receipt of a similar undertaking, such
undertaking, however, need not be in writing. Delaware law does
not require that such director give an affirmation regarding his
conduct in order to receive an advance of expenses. The Delaware
Bylaws provide for the advancement of expenses to the fullest
extent permitted by Delaware law.
Procedure for Indemnification
Texas law provides that a determination that indemnification
is appropriate shall be made (1) by a majority vote of a quorum
consisting of directors who, at the time of the vote, are not
named defendants or respondents to the proceeding; (2) if such a
quorum cannot be obtained, by a majority vote of a special
committee of the board of directors consisting solely of two or
more directors, who at the time of the vote, are not named
defendants or respondents to the proceeding; (3) by special legal
counsel appointed by the board or a special committee by vote as
set forth in (1) or (2) or, if such a quorum cannot be obtained
and such committee cannot be established, by a majority vote of
all directors; or (4) by vote of all shareholders, but
excluding from the vote those shares held by directors who, at
the time of the vote, are named defendants or respondents to the
proceeding.
Similar to Texas law, Delaware law provides that a
determination that indemnification is appropriate shall be made
(1) by a majority vote of directors who are not party to the
proceeding, even though less than a quorum; (2) if there are no
such directors or if such directors so direct, by independent
legal counsel in a written opinion; or (3) by stockholder vote.
Mandatory Indemnification
Under Texas law, indemnification by the corporation is
mandatory only if the director is wholly successful on the merits
or otherwise, in the defense of the proceeding.
Delaware law requires indemnification with respect to any
claim, issue or matter on which the director is
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successful on the merits or otherwise, in the defense of the
proceeding.
Insurance
Texas and Delaware law both allow a corporation to purchase
and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation or any
person who is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation or
enterprise against any liability asserted against such person and
incurred by such person in such a capacity or arising out of his
status as such a person, whether or not the corporation would
otherwise have the power to indemnify him against that liability.
Under Texas law, a corporation may also establish and maintain
arrangements, other than insurance, to protect these individuals,
including a trust fund or surety arrangement.
Persons Covered
Texas law expressly and separately addresses the
indemnification of officers, employees and agents. The
protections afforded to these persons under Texas law resemble
those provided to directors. Delaware law provides the same
indemnification rights to officers, employees and agents as it
provides for directors.
Standard of Care
The standard of care required under Texas and Delaware law
is substantially the same. In general, directors are charged with
the duty in their decision-making process and oversight
responsibilities to act as would a reasonably prudent person in
the conduct of such person's own affairs.
Continuity of Indemnification
Texas law does not contain a provision that expressly
provides indemnification after a directorship has terminated for
acts or omissions which took place prior to such termination.
Delaware law on the other hand does contain a provision which
expressly provides that the statutory indemnification provisions
(1) apply to a director after the termination of the directorship
with respect to acts performed while a director; and (2) inure to
the benefit of the estate and personal representatives of the
director.
Shareholder Report
Texas law requires a written report to the shareholders upon
indemnification or advancement of expense. Delaware law does not
have a similar reporting requirement.
Limited Liability of Directors
Texas law permits a corporation to eliminate in its charter
all monetary liability of a director to the corporation or its
shareholders for conduct in the performance of such director's
duties. However, Texas law does not permit any limitation of the
liability of a director for (1) breaching the duty of loyalty to
the corporation or its shareholders; (2) failing to act in good
faith; (3) engaging in intentional misconduct or a known
violation of law; (4) engaging in a transaction from which the
director receives an improper benefit; or (5) violating
applicable statutes which expressly provide for the liability of
a director.
Delaware law similarly permits the adoption of a charter
provision limiting or eliminating the monetary liability of a
director to a corporation or its stockholders by reason of a
director's breach of the fiduciary duty of care. Delaware law
does not permit any limitation of the liability of a director for
(1) breaching the duty of loyalty to the corporation or its
stockholders; (2) failing to act in good faith; (3) engaging in
intentional misconduct or a known violation of law; (4) obtaining
an improper personal benefit from the corporation; or (5)
declaring an improper dividend or approving an illegal stock
purchase or redemption.
The Texas Articles and the Delaware Certificate both
eliminate the monetary liability of a director to the
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<PAGE>
fullest extent permitted by applicable law.
Business Combinations
The Texas Business Combination Law (the "TBCL") prohibits an
issuing public corporation1 from, directly or indirectly,
entering into, or engaging in, certain business combinations with
any person who is the beneficial owner of 20% or more of the
outstanding voting securities of the issuing public corporation,
or any affiliate or associate of such person, during the three-
year period immediately following the date on which such person
was deemed to beneficially own at least 20% of the voting
securities unless:
(1)the business combination, or the purchase or acquisition
of shares made by such person to become a 20% holder, is approved
by the board of directors of the issuing public corporation prior
to the date such person is deemed to beneficially own at least
20% of the outstanding voting securities of the issuing public
corporation; or
(2)the business combination is approved, by the affirmative
vote of the holders of at least two-thirds of the outstanding
voting shares of the issuing public corporation not beneficially
owned by such person, or an affiliate or associate, at a meeting
of the shareholders, and not by written consent, duly called for
that purpose not less than six months after the date such person
is deemed to beneficially own at least 20% of the outstanding
voting securities of the issuing public corporation.
As a Delaware corporation, Ascendant-Delaware will be
subject to the provisions of Section 203 of the Delaware General
Corporation Law (the "Delaware Business Combinations Statute").
The Delaware Business Combinations Statute prohibits certain
transactions between a Delaware corporation and an "interested
stockholder," which is broadly defined as a person (including the
affiliates and associates of such person) that is directly or
indirectly a beneficial owner of 15% or more of the voting power
of the outstanding voting stock of a Delaware corporation. This
provision prohibits certain business combinations (defined
broadly to include mergers, consolidations, sales or other
dispositions of assets having an aggregate market value of 10% or
more of either the consolidated assets or the outstanding stock
of such Delaware corporation, and certain transactions that would
increase the interested stockholder's proportionate share of
ownership in such Delaware corporation or grant the interested
stockholder disproportionate financial benefits) between an
interested stockholder and such Delaware corporation for a period
of three years after the date the interested stockholder acquired
its stock, unless (i) the business combination or the transaction
in which the stockholder became an interested stockholder is
approved by such Delaware corporation's board of directors prior
to the date the interested stockholder becomes an interested
stockholder, (ii) the interested stockholder acquired at least
85% of the voting stock of such Delaware corporation in the
transaction in which it became an interested stockholder, or
(iii) the business combination is approved by a majority of the
board of directors and the affirmative vote of two-thirds of the
votes entitled to be cast by disinterested stockholders at an
annual or special meeting.
____________________________
(1) An "issuing public corporation" is a domestic corporation
that has (a) 100 or more shareholders, (b) any class or series
of its voting shares, i.e. shares of capital stock entitled to
vote in the election of directors, registered under the
Securities Exchange Act of 1934, as amended, or similar
successor statute, or (c) any class or series of its voting
shares qualified for trading in a national market system.
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<PAGE>
EXHIBIT D
ASCENDANT SOLUTIONS
1999 LONG TERM INCENTIVE PLAN,
as amended
Adopted Effective: May 12, 1999
<PAGE>
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 .................................... 2
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 ................................. 5
4.6 Plan Binding on Successors ............................... 5
4.7 References to Successor Statutes, Regulations and Rules... 5
4.8 Issuances for Compensation Purposes Only.................. 6
4.9 Invalid Provisions........................................ 6
4.10 Governing Law............................................ 6
ARTICLE V GENERAL AWARD PROVISIONS............................. 6
5.1 Participation in the Plan ................................ 6
5.2 Stock Option Documents ................................... 6
5.3 Exercise of Stock Options ................................ 7
5.4 Payment For Stock Options................................. 7
5.5 No Employment Rights...................................... 7
5.6 Restrictions Under Applicable Laws and Regulations ....... 8
5.7 Additional Conditions..................................... 9
5.8 No Privileges of Stock Ownership.......................... 9
5.9 Nonassignability ......................................... 9
5.10 Information to Optionees ................................10
5.11 Withholding Taxes........................................10
5.12 Legends on Stock Options and Stock Certificates..........10
5.13 Effect of Termination of Employment on Stock Options.....11
5.14 Limits on Stock Options to Certain Eligible Persons......12
ARTICLE VI STOCK OPTIONS ......................................12
6.1 Nature of Stock Options ..................................12
6.2 Option Exercise Price ....................................12
6.3 Option Period and Vesting.................................12
6.4 Special Provisions Regarding Incentive Stock Options......12
ARTICLE VII REORGANIZATIONS ...................................13
7.1 Corporate Transactions Not Involving a Change
in Control...............................................13
7.2 Corporate Transactions Involving a Change in Control......13
ARTICLE VIII DEFINITIONS.......................................14
<PAGE>
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
<PAGE>
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
2
<PAGE>
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 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.
3
<PAGE>
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 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
4
<PAGE>
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.
5
<PAGE>
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
6
<PAGE>
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 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
7
<PAGE>
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.
(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
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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 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
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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.
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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 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.
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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 450,000 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 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
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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.
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
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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 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
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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; or
(c) 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 ASD SYSTEMS, INC., a Texas corporation doing
business as Ascendant Solutions, 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
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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 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
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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 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
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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).
"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.
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Exhibit E
NONQUALIFIED STOCK OPTION AGREEMENT
(subject to risk of forfeiture)
pursuant to the
ASCENDANT SOLUTIONS 1999 LONG-TERM INCENTIVE PLAN
This NONQUALIFIED STOCK OPTION AGREEMENT (the "Agreement")
is made and entered into by and between ASD SYSTEMS, INC., a
Texas corporation d/b/a ASCENDANT SOLUTIONS (the "Company"), and
_______________ (the "Optionee"), effective as of ____________,
2000 (the "Date of Grant").
1. Grant of Option. The Company hereby grants to the Optionee
and the Optionee hereby accepts, subject to the terms and
conditions hereof, a nonqualified stock option (the "Option") to
purchase up to shares of Company's Common Stock ("Option
Shares") at the Exercise Price per share set forth in Section 4
below; provided, however, that if the shareholders of the Company
have not approved an amendment to the Company's 1999 Long-Term
Incentive Plan (the "Plan"), providing for the increase in the
number of shares of Common Stock issuable to any one Eligible
Person (as defined in the Plan) during any one calendar year to
450,000 shares of Common Stock from 50,000 shares of Common
Stock, as currently provided in Section 5.14 of the Plan prior to
the vesting of any portion of this Option, then, in such event,
the grant made hereby shall be deemed withdrawn, and the Option
forfeited with the consent of the Optionee, whereupon, this
Agreement shall be deemed void and of no further force and
effect. The parties hereto expressly acknowledge that the intent
of the foregoing proviso is to ensure continued compliance with
Section 162(m) of the Internal Revenue Code of 1986, as amended.
2. Governing Plan. This Option is granted pursuant to the
Company's Plan, a copy of which is attached to the Prospectus
supplied by the Company and relating to the Plan. Capitalized
terms used but not otherwise defined herein have the meanings as
set forth in the Plan. The Optionee agrees to be bound by the
terms and conditions of the Plan, which are incorporated herein
by reference and which control in case of any conflict with this
Agreement.
3. Expiration of the Option. The Option (to the extent not
earlier exercised or terminated due to cessation of the
Optionee's employment or otherwise in accordance with the Plan)
will expire at the end of business on ___________, 2010, ten (10)
years from the Date of Grant of the Option. The option may
terminate sooner under certain circumstances, including, without
limitation, termination of the Optionee's employment, death,
retirement, disability and termination for other reasons, as set
forth in Section 5.13 of the Plan. The Option may not be
exercised after its expiration or termination.
4. Exercise Price. The "Exercise Price" of the Option is
$______ per share of Common Stock. The Exercise Price is subject
to adjustment as set forth in Section 6.2 of the Plan.
5. Vesting. Subject to the provisions of the Plan providing
for the cessation or acceleration of vesting, the termination or
expiration of the Option and the other provisions thereof, the
Option shall vest and become exercisable as to 25% of the Option
Shares as of the first anniversary of the Date of Grant (the
"Anniversary Date") and shall vest and become exercisable as to
2% of the Option Shares on each month following such Anniversary
Date on the same day of such month as the actual day of the
Anniversary Date, until fully vested. The "Vested Portion" of the
Option as of any particular date shall be the cumulative total of
all shares for which the Option has become exercisable as of that
date. Notwithstanding the foregoing, in the event the Optionee's
employment with the Company and/or its subsidiaries is terminated
within one (1) year after a "Change in Control" then, immediately
prior to the effective date of such termination, all Options
which have not lapsed, shall become fully vested and exercisable
(if not already vested and exercisable) by Optionee for a period
of ninety (90) days thereafter.
<PAGE>
In addition, upon a Change in Control, pursuant to Section 7.2 of
the Plan, this Option shall be automatically converted into the
right to receive, and thereafter shall be exercisable for, in
accordance with the Plan and this Agreement, the securities, cash
and/or other consideration that a holder of the shares underlying
the Options would have been entitled to receive upon consummation
of a 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 appropriate exercise prices). The
phrase "Change in Control" used but not otherwise defined herein
has the meaning set forth in Article 8 of the Plan.
6. Exercise of the Option. The Vested Portion (as herein
defined) of the Option may be exercised, to the extent not
previously exercised, in whole or in part, at any time or from
time to time prior to the expiration or termination of the
Option, except that no Option shall be exercisable except in
respect to whole shares, and not less than one hundred (100)
shares may be purchased at one time unless the number purchased
is the total number at the time available for purchase under the
terms of the Option. Exercise shall be accomplished by providing
the Company with written notice in the form of Exhibit A hereto,
which notice shall be irrevocable when delivered and effective
upon payment in full of the Option Price in accordance with
Section 5.4 of the Plan and any amounts required in accordance
with Section 5.11 of the Plan for withholding taxes, and the
satisfaction of all other conditions to exercise imposed under
the Plan.
7. Payment of Exercise Price. Upon any exercise of the Option,
the Exercise Price for the number of Option Shares for which the
Option is then being exercised and the amount of any federal,
state and local withholding shall be paid in full to the Company
in cash or with shares of Common Stock that have been owned for
at least six months, or a combination thereof, or in such other
form as the Administering Body deems acceptable at the time of
exercise.
8. Nontransferability of Option. The Option shall not be
transferable or assignable by the Optionee, other than in
accordance with Section 5.9 of the Plan or by will or the laws of
descent and distribution (or as otherwise permitted by the
Administering Body in its sole discretion), and shall be
exercisable during the Optionee's lifetime only by him or her or
by his or her legal representative(s) or guardian(s).
9. Administration. The Plan and this Agreement shall be
administered and may be definitively interpreted by the
Administering Body, and the Optionee agrees to accept and abide
by the decisions of such Administering Body concerning
administration and interpretation of the Plan and this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed on
behalf of the Company by its duly authorized officer, and by the
Optionee in acceptance of the above-mentioned Option, subject to
the terms and conditions of the Plan and of this Agreement, all
as of the day and year first above written.
ASD SYSTEM, INC.
d/b/a ASCENDANT SOLUTIONS
By:
---------------------------
Name:
-------------------------
Title:
-------------------------
OPTIONEE
--------------------------------
2
<PAGE>
NOTICE OF EXERCISE
under
NONQUALIFIED STOCK OPTION AGREEMENT
pursuant to the
ASCENDANT SOLUTIONS 1999 LONG-TERM INCENTIVE PLAN
To: ASCENDANT SOLUTIONS (the "Company")
From:
-------------------------
Date:
-------------------------
Pursuant to the Ascendant Solutions 1999 Long-Term Incentive
Plan (the "Plan") and the Nonqualified Stock Option Agreement
(the "Agreement") between the Company and myself effective
______________________, I hereby exercise my Option as follows:
Number of shares of Common Stock I wish to
purchase under the Option
Exercise Price per share $
Total Exercise Price $
"Vested Portion" of Option (see definition in
Section 5 of the Agreement)
Number of shares I have previously purchased by
exercising the Option
Expiration Date of the Option
I hereby represent, warrant, and covenant to the Company
that:
a. I am acquiring the Common Stock for my own account, for
investment, and not for distribution or resale, and I will make
no transfer of such Common Stock except in compliance with
applicable federal and state securities laws and in accordance
with the provisions of the Plan.
b. I can bear the economic risk of the investment in the Common
Stock resulting from this exercise of the Option, including a
total loss of my investment.
c. I am experienced in business and financial matters and am
capable of (i) evaluating the merits and risks of an investment
in the Company Stock; (ii) making an informed investment decision
regarding exercise of the Option; and (iii) protecting my
interests in connection therewith.
I acknowledge that I must pay the Exercise Price in full and
make appropriate arrangements for the payment of all federal,
state and local tax withholdings due with respect to the Option
exercised herein, before the stock certificate evidencing the
shares of Common Stock resulting from this exercise of the Option
will be issued to me.
Attached in full payment of the exercise price for the
Option exercised herein is ( ) a check made payable to the
Company in the amount of $___________________ and/or ( ) a
stock certificate for _______ shares of Common Stock that have
been owned for at least six months with a duly completed stock
power attached.
OPTIONEE
------------------------------
(Signature)
Name:
-------------------------
Address:
--------------------
<PAGE>
Schedule of Differences
-----------------------
Each of the Executive Options referred to in the Company's
Proxy Statement have been issued pursuant to the terms of the
Company's 1999 Long-Term Incentive Plan, as amended, and a
Nonqualified Stock Option Agreement by and between the Company
and the respective executive (the "Option Agreements"); provided,
however, the Option Agreements differ in the following respects:
Optionee Option Differences
--------------- ---------------------------- -----------
David E. Bowe 100,000 shares dated 3/22/00 (1)
David E. Bowe 300,000 shares dated 5/12/00 (1)
Rick Troberman 450,000 shares dated 4/28/00 (1)
Gregg Young 40,000 shares dated 3/22/00 (2)
Ted Bilke 30,000 shares dated 3/22/00 (2)
--------------------
(1) Contains additional provisions concerning (A) the vesting of
all shares underlying the option upon the termination of the
optionee's employment without "cause" or for "good reason"
(as each is defined in the applicable employment agreement),
(B) expanded cashless exercise provisions and (C) the
Company's obligation to maintain the effectiveness of its
presently effective S-8 registration statement.
(2) Executive Option not subject to forfeiture. Accordingly,
proviso contained in Section 1 has been eliminated in its
entirety.
