SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
TSET, INC.
(Name of Registrant as Specified in Its Charter)
Commission File Number: 000-30191
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which
transaction applies: _________________
2) Aggregate number of securities to which
transaction applies: _________________
3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
___________________________
4) Proposed maximum aggregate value of transaction:
_____________
5) Total fee paid:
___________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:______________________________________
2) Form, Schedule or Registration Statement No.:____________________
3) Filing Party:_______________________________________________
4) Date Filed:________________________________________________
TSET, Inc.
Two Centerpointe Drive, Suite 580
Lake Oswego, OR 97035
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 15, 2000
The Annual Meeting of Stockholders (the "Annual Meeting") of TSET,Inc., a
Nevada corporation (the"Company"), will be held at the Harbor Club, 777 108th
Avenue N.E., Suite 2500, Bellevue, Washington 98004, at 9:00 a.m., local time,
on Friday, December 15, 2000, for the following purposes:
(1) To elect four (4) directors.
(2) To ratify the selection of Grant Thornton LLP as independent
accountants for the fiscal year ended June 30, 2000.
(3) To act upon such other business as may properly come before the
Annual Meeting.
Only holders of record of shares of the Company's common stock at the
close of business on November 22, 2000 will be entitled to vote at the Annual
Meeting or any adjournment or postponement thereof.464 COMMON STREET, SUITE 301
BELMONT, MASSACHUSETTS 02478
Dear Shareholder:
You are cordially invited to attend the Annual Meeting. WhetherMeeting of Shareholders
of TSET, Inc. The annual meeting will be held on Wednesday, November 20, 2002,
at 11:00 a.m., local time, at Caesar's Palace, 3570 Las Vegas Boulevard South,
Las Vegas, Nevada.
Your vote is important and I urge you to vote your shares by proxy,
whether or not you plan to attend the Annual Meeting,meeting. After you read this proxy
statement, please indicate on the proxy card the manner in which you want to
have your shares voted. Then date, sign date, and promptlymail the proxy card in the
postage-paid envelope that is provided. If you sign and return your Proxyproxy card
without indicating your choices, it will be understood that you wish to have
your shares voted in accordance with the Company. Your cooperation in signing and returningrecommendations of the Proxy will
help avoid further solicitation expense.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Jeffrey D. Wilson
ChairmanCompany's Board
of Directors.
We hope to see you at the meeting.
Sincerely,
Daniel R. Dwight
President and Chief Executive Officer
November 27, 2000
Lake Oswego, Oregon
2October ___, 2002
TSET, INC.
Two Centerpointe Drive, Suite 580
Lake Oswego, OR 97035
PROXY STATEMENT464 COMMON STREET, SUITE 301
BELMONT, MASSACHUSETTS 02478
NOTICE OF ANNUAL MEETING OF STOCKHOLDERSSHAREHOLDERS
TO BE HELD ON DECEMBER 15, 2000
This Proxy Statement is being furnished to Stockholders
in connection with the solicitation of proxies by and in
behalf of the Board of Directors of TSET, Inc., a Nevada
corporation (the "Company"), for their use atNOVEMBER 20, 2002
NOTICE IS HEREBY GIVEN that the Annual Meeting of StockholdersShareholders (the
"Annual Meeting""ANNUAL MEETING") toof TSET, Inc. (the "Company"), will be held on Wednesday,
November 20, 2002, at Harbor Club, 777 108th Avenue N.E., Suite 2500, Bellevue,
Washington 98004, on Friday, December 15, 2000, at 9:11:00 a.m., local time, and at any adjournments thereof,Caesar's Palace, 3570 Las Vegas
Boulevard South, Las Vegas, Nevada, for the purpose
of considering and voting upon the matters set forthfollowing purposes, as more fully
described in the accompanying Notice of Annual Meeting of Stockholders. Thisattached Proxy Statement andStatement:
1. To elect five directors, each until the accompanying form of Proxy, together
with a copynext annual meeting of the
Company's annual report on Form 10-K forshareholders or until their successors are duly elected and qualified;
2. To approve an amendment to the fiscal year ended June 30, 2000, filed withCompany's Articles of Incorporation
to change the Securitiesname of the Company to "Kronos Advanced Technologies, Inc."; and
Exchange Commission on October 24, 2000, are
first being mailed to Stockholders on or about November 27,
2000. The cost of soliciting proxies for3. To consider any other matters that may properly come before the
Annual Meeting is being borne byor any adjournment thereof.
The Board of Directors has fixed the Company.
The close of business on NovemberOctober 22,
2000 has been
fixed2002, as the record date (the "Record Date") for determining the determination of Stockholdersshareholders entitled to notice of
and to vote at the Annual Meeting andor at any adjournment thereof. AsA complete list
of the Record Date, there were 29,097,801 shares of the
Company's common stock, par value $0.001 per share, issued
and outstanding and entitled to vote at the Annual Meeting.
The presence, in person or by proxy, of a majority of
the total outstanding shares of common stock on the Record
Date is necessary to constitute a quorum at the Annual
Meeting.
Each share is entitled to one vote on all issues
requiring a Stockholder vote at the Annual Meeting. Each
nominee for Director named in item 1 of the accompanying
Notice must receive a majority of the common stock votes
cast in person or by proxy in order to be elected.
Stockholders may not cumulate their votes for the election
of Directors.
The affirmative vote of a majority of shares of common
stock present or represented by proxy andshareholders entitled to vote at the Annual Meeting is required for the approval of item 2
set forth in the accompanying Notice.
All shares represented by properly executed proxies,
unless such proxies previously have been revoked, will be votedopen for
examination by any shareholder during ordinary business hours for a period of
ten days prior to the Annual Meeting at the offices of the Company's transfer
agent and registrar, Merit Transfer Company, at 68 South Main Street, Suite 708,
Salt Lake City, Utah 84101.
IMPORTANT
You are cordially invited to attend the Annual Meeting in person. In
order to ensure your representation at the meeting, however, please promptly
complete, date, sign and return the enclosed proxy in the accompanying envelope.
If you should decide to attend the Annual Meeting and vote your shares in
person, you may revoke your proxy at that time.
By Order of the Board of Directors,
Daniel R. Dwight
President and Chief Executive Officer
October ___, 2002
TABLE OF CONTENTS
PAGE NO.
ABOUT THE MEETING.............................................................1
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?...............................1
WHO IS ENTITLED TO VOTE?.................................................1
WHO CAN ATTEND THE MEETING?..............................................1
WHAT CONSTITUTES A QUORUM?...............................................1
HOW DO I VOTE?...........................................................1
WHAT IF I DO NOT SPECIFY HOW MY SHARES ARE TO BE VOTED?..................2
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?.......................2
WHAT ARE THE BOARD'S RECOMMENDATIONS?....................................2
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?..............................2
STOCK OWNERSHIP...............................................................3
BENEFICIAL OWNERS........................................................3
PROPOSAL 1 - ELECTION OF DIRECTORS............................................4
DIRECTORS STANDING FOR ELECTION..........................................4
RECOMMENDATION OF THE BOARD OF DIRECTORS.................................4
DIRECTORS - PRESENT TERM EXPIRES AT THE ANNUAL MEETING...................4
MEETINGS ................................................................7
COMMITTEES OF THE BOARD OF DIRECTORS.....................................7
COMPENSATION OF DIRECTORS................................................8
EXECUTIVE COMPENSATION...................................................8
STOCK OPTION PLAN.......................................................11
EMPLOYMENT AGREEMENTS...................................................11
EXECUTIVE SEVERANCE AGREEMENTS..........................................13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..........................13
PROPOSAL 2 - AMENDMENT TO THE ARTICLES OF INCORPORATION......................15
RECOMMENDATION OF THE BOARD OF DIRECTORS................................15
DESCRIPTION OF CAPITAL STOCK.................................................16
COMMON STOCK............................................................16
PREFERRED STOCK.........................................................16
OPTIONS ...............................................................16
WARRANTS 18
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE ARTICLES OF
INCORPORATION, BYLAWS AND FLORIDA LAW.................................18
TRANSFER AGENT AND REGISTRAR............................................18
OTHER MATTERS...........................................................19
INDEPENDENT ACCOUNTANTS.................................................19
ADDITIONAL INFORMATION..................................................19
i
TSET, INC.
464 COMMON STREET, SUITE 301
BELMONT, MASSACHUSETTS 02478
---------------------
PROXY STATEMENT
OCTOBER ___, 2002
-------------------------
This proxy statement contains information related to the annual meeting
of shareholders of TSET, Inc., to be held on Wednesday, November 20, 2002, at
11:00 a.m., local time, at Caesar's Palace, 3570 Las Vegas Boulevard South, Las
Vegas, Nevada, and any postponements or adjournments thereof. The Company is
making this proxy solicitation.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the Company's annual meeting, shareholders will act upon the matters
outlined in the notice of meeting on the cover page of this proxy statement,
including the election of directors and the approval of an amendment to the
Company's Articles of Incorporation to change the name of the Company to Kronos
Advanced Technologies, Inc. In addition, the Company's management will report on
the performance of the Company during fiscal 2002 and respond to questions from
shareholders.
WHO IS ENTITLED TO VOTE?
Only shareholders of record on the close of business on the record
date, October 22, 2002, are entitled to receive notice of the annual meeting and
to vote the shares of common stock that they held on that date at the meeting,
or any postponements or adjournments of the meeting. Each outstanding share of
common stock will be entitled to one vote on each matter to be voted upon at the
meeting.
WHO CAN ATTEND THE MEETING?
All shareholders as of the record date, or their duly appointed
proxies, may attend the meeting, and each may be accompanied by one guest.
Seating, however, is limited. Admission to the meeting will be on a first-come,
first-serve basis. Registration will begin at 10:00 a.m., and seating will begin
at 10:30 a.m. Each shareholder may be asked to present valid picture
identification, such as a driver's license or passport. Cameras, recording
devices and other electronic devices will not be permitted at the meeting.
Please note that if you hold your shares in "street name" (that is,
through a broker or other nominee), you will need to bring a copy of a brokerage
statement reflecting your stock ownership as of the record date and check in at
the registration desk at the meeting.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the record date will
constitute a quorum, permitting the meeting to conduct its business. As of the
record date, 46,891,293 shares of common stock of the Company were outstanding.
Proxies received but marked as abstentions and broker non-votes will be included
in the calculation of the number of shares considered to be present at the
meeting.
HOW DO I VOTE?
If you complete and properly sign the accompanying proxy card and
return it to the Company, it will be voted as you direct. If you are a
registered shareholder and attend the meeting, you may deliver your completed
proxy card in person or vote by ballot at the meeting. "Street name"
1
shareholders who wish to vote at the meeting will need to obtain a proxy form
from the institution that holds their shares.
WHAT IF I DO NOT SPECIFY HOW MY SHARES ARE TO BE VOTED?
If you submit a proxy but do not indicate any voting instructions, then
your shares will be voted in accordance with the directions onBoard's recommendations.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy card, you may change your
vote at any time before the proxies. If no directionproxy is indicated,exercised by filing with the shares represented by such proxiesSecretary of
the Company either a notice of revocation or a duly executed proxy bearing a
later date. The powers of the proxy holders will be voted (A) FOR
THE ELECTION OF THE DIRECTOR NOMINEES
3
NAMED HEREIN AND (B) FOR THE RATIFICATION OF GRANTTHORNTON LLP AS
INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDED JUNE 30, 2000.
The Board of Directors is unaware of any other matters
to be presented for actionsuspended if you attend the
meeting in person and so request, although attendance at the Annual Meeting; however,
if anymeeting will not by
itself revoke a previously granted proxy.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other matter is properly presented at the Annual
Meeting,instructions on your proxy card, the persons
named inas proxy holders on the enclosed Proxy intend toproxy card will vote in accordance with their best judgment on such matters.the
recommendation of the Board of Directors. The enclosed Proxy, even though executed and returned
toBoard's recommendation is set
forth together with the Company, may be revoked at any time prior todescription of each item in this proxy statement. In
summary, the voting thereof by (a) execution and submissionBoard recommends a vote:
o FOR the election of a revised
proxy, (b) written noticethe nominated slate of directors (see page 4);
o FOR the approval of an amendment to the Company's Secretary, or (c)
voting in person atArticles of
Incorporation to change the Annual Meeting.
Item 1 - ELECTION OF FOUR DIRECTORS FOR THE ENSUING YEAR
Nominees for Directors
The persons named inname of the enclosed Proxy have been
selectedCompany to Kronos Advanced
Technologies, Inc. (see page 16).
With respect to any other matter that properly comes before the
meeting, the proxy holders will vote as recommended by the Board of Directors
or, if no recommendation is given, in their own discretion.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
ELECTION OF DIRECTORS. The affirmative vote of a plurality of the votes
cast at the meeting is required for the election of directors. This means that
the five nominees will be elected if they receive more affirmative votes than
any other person. A properly executed proxy marked "Withheld" with respect to
the election of any director will not be voted with respect to such director
indicated, although it will be counted for purposes of determining whether there
is a quorum.
COMPANY NAME CHANGE. For the approval of an amendment to the Company's
Articles of Incorporation to change the name of the Company to Kronos Advanced
Technologies, Inc. and any other item that properly comes before the meeting,
the affirmative vote of the holders of a majority of the outstanding shares, as
of the record date, will be required for approval. A properly executed proxy
marked "Abstain" with respect to any such matter will not be voted, although it
will be counted for purposes of determining whether there is a quorum.
Accordingly, an abstention will have the effect of a negative vote.
If you hold your shares in "street name" through a broker or other
nominee, your broker or nominee may not be permitted to exercise voting
discretion with respect to some of the matters to be acted upon. Thus, if you do
not give your broker or nominee specific instructions, your shares may not be
voted on those matters and will not be counted in determining the number of
shares necessary for approval. Shares represented by such "broker non-votes,"
however, will be counted in determining whether there is a quorum.
2
STOCK OWNERSHIP
BENEFICIAL OWNERS
The following table presents certain information regarding the
beneficial ownership of all shares of common stock at October 14, 2002 for each
executive officer and director of our company and for each person known to us
who owns beneficially more than 5% of the outstanding shares of our common
stock. The percentage ownership shown in such table is based upon the 46,891,293
common shares issued and outstanding at October 14, 2002 and ownership by these
persons of options or warrants exercisable within 60 days of such date. Also
included is beneficial ownership on a fully diluted basis showing all
authorized, but unissued, shares of our common stock at October 14, 2002 as
issued and outstanding. Unless otherwise indicated, each person has sole voting
and investment power over such shares.
COMMON STOCK
BENEFICIALLY OWNED
------------------
NAME AND ADDRESS NUMBER PERCENT
- ---------------- ------ -------
Daniel R. Dwight 3,215,818(1) 6.9%
464 Common Street
Suite 301
Belmont, MA 02478
Richard F. Tusing 1,717,118(2) 3.8%
464 Common Street
Suite 301
Belmont, MA 02478
Richard A. Papworth 822,114(3) 1.8%
464 Common Street
Suite 301
Belmont, MA 02478
Jeffrey D. Wilson 310,000(4) *
464 Common Street
Suite 301
Belmont, MA 02478
Erik Black 272,983(5) *
464 Common Street
Suite 301
Belmont, MA 02478
Charles D. Strang 100,000(6) *
464 Common Street
Suite 301
Belmont, MA 02478
James P. McDermott 294,118 *
464 Common Street
Suite 301
Belmont, MA 02478
All Officers and Directors of TSET 6,732,151(7) 14.1%
- ---------------
* Less than 1%.
(1) Includes options to purchase 1,321,700 shares of common stock that can
be acquired within sixty days of October 14, 2002
(2) Includes options to purchase 473,000 shares of common stock that can be
acquired within sixty days of October 14, 2002.
(3) Includes options to purchase 448,475 shares of common stock that can be
acquired within sixty days of October 14, 2002.
(4) Includes options to purchase 310,000 shares of common stock that can be
acquired within sixty days of October 14, 2002.
(5) Includes options to purchase 50,000 shares of common stock that can be
acquired within sixty days of October 14, 2002.
(6) Includes options to purchase 100,000 shares of common stock that can be
acquired within sixty days of October 14, 2002.
(7) Includes options to purchase 2,703,175 shares of common stock that can
be acquired within sixty days of October 14, 2002.
3
PROPOSAL 1 - ELECTION OF DIRECTORS
DIRECTORS STANDING FOR ELECTION
The Board of Directors of the Company consists of eight seats. Each
director holds office until the first annual meeting of shareholders following
their election or appointment and until their successors have been duly elected
and qualified.
The Board of Directors has nominated Daniel R. Dwight, Richard A.
Papworth, Richard F. Tusing, James P. McDermott and Erik W. Black for election
as directors. The accompanying proxy will be voted for the election of these
nominees, unless authority to vote for one or more nominees is withheld. In the
event that any of the nominees is unable or unwilling to serve as Proxies anda director for
any reason (which is not anticipated), the proxy will votebe voted for the shares representedelection
of any substitute nominee designated by valid proxies at the Annual Meeting and any adjournments thereof. TheyBoard of Directors. The nominees for
directors have indicated that, unless otherwise specified in the Proxy,
they intend to electpreviously served as Directors the nominees listed below.
All the nominees are presently members of the Board of Directors. Each duly elected Director will hold office
until his successor shall have been elected and qualified.
Unless otherwise instructed or authority to vote is
withheld, the enclosed Proxy for the electionDirectors of the
Board
of Directors will be voted FOR election of the nominees
listed below. Although the Board of Directors does not
contemplate that any of the nominees will be unableCompany and have consented to serve if such a situation arises prior to the Annual
Meeting, the persons named in the enclosed Proxy will vote
FOR the election of such other person(s) as may be nominated
by the Board of Directors.term.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR"FOR" THE ELECTION
OF EACH OF THE NOMINEES
LISTED BELOW.
Jeffrey D. Wilson, 45,DIRECTORS - PRESENT TERM EXPIRES AT THE ANNUAL MEETING
DANIEL R. DWIGHT Daniel R. Dwight has served as a Director
PRESIDENT AND CHIEF EXECUTIVE of TSET since November 2000, and as a
OFFICER Director and Chief Executive Officer of
AGE 42 Kronos Air Technologies since January
2001. Effective October 16, 2001, Mr.
Dwight was appointed ChairmanPresident and Chief
Executive Officer of the Company on April 20, 1999. Mr.
Wilson has had extensive international transactions
experience in Asia, Europe, Latin America, Africa, and the
U.S., having represented clients in a wide range of joint
venture, corporate finance, public and private securities,
regulatory, asset acquisition, licensing, investment,
technology, mergers and acquisitions, leveraged buy-out, and
other transactions, and has assisted clients in gaining
access to foreign markets and in government lobbying
activities. Mr. Wilson speaks Japanese fluently. From 1992-
1999, Mr. Wilson maintained a private international
consulting practice for select clients and engaged in
entrepreneurial ventures. From 1990-1992, he served as
international legal advisor for GGS Co., Ltd., a Tokyo-based
Japanese investment company (and including its Hong Kong,
Australian, Canadian, and U.S.
4
affiliates), having primary responsibility for its
international projects. From 1982-1990, he engaged in the
private practice of law. Mr. Wilson received a B.A. from
Brigham Young University in 1979 and a J.D. from the
University of Kansas in 1982, where he was also associate
editor of the Kansas Law Review and president of the
International Law Society.
Charles D. Strang, 79, has served as a director of the
Company since September 2000. Mr. Strang was named national
commissioner of NASCAR (National Association for Stock Car
Racing) in 1998 and continues to serve in that capacity. In
1989 Mr. Strang received President Bush's American Vocation
Success Award; in 1992 was elected to the Hall of Fame of
the National Marine Manufacturers Association; in 1990 was
awarded the Medal of Honor of the Union for International
Motorboating; and is a life member of the Society of
Automotive Engineers.Company. He also currently serves as a
director of the American Power Boat Association (the U.S.
governing body for powerboat racing) and senior vice
president of the Union for International Motorboating (the
world governing body for powerboat racing, with
approximately 60 member nations). He joined Outboard Marine
Corporation ("Outboard Marine") as director of marine
engineering in 1966, and retired as chief executive office
in 1990 and as chairman in 1993 after a more than 40-year
career in the marine industry. Mr. Strang's accomplishments
during this period include the invention of the modern-day
stern-drive (inboard/outboard) power system, the evolution
of high horsepower outboard motors, dozens of patents in the
field of engine design, marine propulsion devices, and
powerboats, and the movement of the marine industry to
vertically integrate engine manufacturers with boat
builders; these efforts have accelerated the consolidation
of the marine industry and the trend to "packaged" boat and
motor marketing. Under his leadership, Outboard Marine was
transformed into a vertically-integrated producer of
complete, factory-rigged and -powered boats; his engineering
and management leadership has had a lasting, substantial
influence on the marine industry. Mr. Strang graduated with
a degree in mechanical engineering from Polytechnic
University in 1943 and worked for several years in the
aerospace industry (including research and testing projects
on aircraft engines) and served on the mechanical
engineering staff of Massachusetts Institute of Technology.
He spent 13 years with Kiekhaefer Corporation (manufacturer
of Mercury outboard motors), rising from director of
research to executive vice president, and was also
proprietor of U.S. Executives, Inc., a management consulting
firm, and Hydro-Mechanical Development, an engineering firm.
Richard F. Tusing, 43, has served as a director of the
Company since October 2000, having been appointed to fill
the vacancy resulting from the resignation of Weijing Li.
Mr. Tusing has had extensive experience in developing new
enterprises, negotiating the licensing of intellectual
property rights, and managing technical and financial
organizations, and has more than 20 years of business
development, operations, and consulting experience in the
technology and telecommunications industries. He has spent
four years in executive management with several emerging
technology companies, 14 years in various managerial and
executive positions with MCI Communications Corporation
("MCI"), and three additional years in managerial
consulting. While acting as an independent management
consultant from 1996 to the present, Mr. Tusing's
5
experience with emerging technology companies includes
serving as chief executive officer and chief technology
officer for Avalon Media Group (a turnkey advertising
services company); primary responsibility for technology
planning, licensing, and strategic technology architecture
relationships for ICU, Inc. (a mobile video conferencing
company); and executive vice president, chief technology
officer, and director of Entertainment Made Convenient
(Emc3) International, Inc. (a video and data downloading
services company). Through his private consultancy, Mr.
Tusing provides, among other things, managerial, financial
planning, technical, and strategic planning services. From
1982-1996, Mr. Tusing held multiple managerial and executive
positions with MCI. From 1994-1996, he served as MCI's
director of strategy and technology, managing MCI's emerging
technologies division (having primary responsibility for
evaluating, licensing, investing in, and acquiring third-
party technologies deemed of strategic importance to MCI),
and also oversaw the development of several early-stage and
venture-backed software and hardware companies; in this
capacity, Mr. Tusing managed more than 100 scientists and
engineers developing state-of-the-art technologies. From
1992-1994, Mr. Tusing founded MCI Metro, MCI's entree into
the local telephone services business and, as MCI Metro's
managing director, managed telecommunications operations,
developed financial and ordering systems, and led all
efforts in designing its marketing campaigns. From 1990-
1992, he served as director of finance and business
development for MCI's western region, overseeing
$1,000,000,000 in annual revenue and a $90,000,000 operating
budget. From 1982-1990, Mr. Tusing held other management
and leadership positions within MCI, including service as
MCI's Pacific division's regional financial controller,
manager of MCI's western region's information technology
division, and led MCI's national corporate financial systems
development organization. Mr. Tusing received B.S. degrees
in business management and psychology from the University of
Maryland in 1979.
Daniel R. Dwight, 40, has
extensive experience in private equity and
operations in a wide variety of high
growth and core industrial businesses.
From February 2000 to October 2001, Mr.
Dwight is
currentlywas an independent management
consultant who providesprovided business
development, strategic consulting,
financial planning, merchant banking, and
operational execution services to a wide
range of clients. Prior to starting his
consulting practice, Mr. Dwight spent 17
years with General Electric including 10
years of operations, manufacturing, and
business development experience with GE's
industrial businesses, and seven years of
international investment and private
equity experience with GE Capital. He has
had responsibility for over a $1 billion in
merger and acquisition and private equity
transactions at GE. Most recently, Mr.
Dwight initiated GE Capital's entry in the
Asia private equity market. Between 1995
and 1999, the Asian equity portfolio grew
to include consolidations, leveraged
buyouts, growth capital and minority
investments in diverse industries,
including information technology,
telecommunications services, consumer
products, services and distribution, and
contract manufacturing. Mr. Dwight led
deal teams with responsibility for the
execution of transactions, monitoring of
portfolio companies and realization of
investments. Since 1982, Mr. Dwight has
held other leadership positions
domestically and internationally with GE
Capital, as well as senior positions with
GE Corporate Business Development
(1989-1992) and GE Corporate Audit Staff
(1984-1987). His responsibilities included
identifying, analyzing and implementing
6
reorganizations, restructurings,
consolidating acquisitions, and
divestitures of GE businesses. He also had
responsibility for the development of new
business ventures and commercialization of
new technologies strategic to GE's
industrial businesses. Mr. Dwight holds an
MBA in Finance and Marketing with Honors
from Thethe University of Chicago in 1989 and
a B.S. in Accounting with Honors from the
University of Vermont in 1982.
Executive Officers
In addition to Mr. Wilson, who is an executive officer4
RICHARD A. PAPWORTH Richard A. Papworth became a Director of
CHIEF FINANCIAL OFFICER the Company in June 2001, was appointed
AGE 44 Chief Financial Officer of the Company Richard A. Papworth servesin
May 2000, and has served as a Director,
Chief Financial Officer, and Treasurer of
Kronos Air Technologies since January
2001, and as Assistant Secretary of Kronos
Air Technologies since December 2000. Mr.
Papworth has had diverse finance, tax, and
accounting experience in a range of
industries, including real estate
development/construction, software
development, publishing, distribution,
financial institutions, and investment
companies. From 1997-2000, he was
Vice-President and Controller of the U.S.
and European operations of Wilshire
Financial Services Group, a Portland,
Oregon-based publicly held specialty loan
servicing and investment company with more
than $2 billion under management. In this
capacity, Mr. Papworth was responsible for
accounting and control system, financial
reporting and analysis, and business
decision support for the worldwide
organization. From 1996-97, he was Chief
Financial Officer of First Bank of Beverly
Hills, a $550 million banking subsidiary
of WFSG. From 1995-96, Mr. Papworth was
Treasurer for Maintenance Warehouse
America Corporation in which capacity he
successfully negotiated more than $50
million of real estate and working capital
financing, and was responsible for
management of Maintenance Warehouse
America Corporation's insurance program
and tax compliance. From 1994-95, he
maintained a private management and
finance consulting practice for select
clients. From 1989-94, Mr. Papworth worked
for Morrison Homes, the U.S. home building
division of U.K.-based George Wimpey Plc.,
during which period he held various
positions including Chief Financial
Officer, Treasurer, and Assistant
Treasurer. From 1985-89, he engaged in tax
consulting with Deloitte and Touche, a Big
Five accounting firm. He received a B.S.
in accounting (with minors in business,
economics, and Spanish) and a Macc
(Masters of Accountancy) with emphasis in
tax law, from Brigham Young University in
1984. Mr. Papworth became licensed as a
certified public accountant in the State
of California in 1987. Mr. Papworth speaks
Spanish fluently.
5
RICHARD F. TUSING Richard F. Tusing has served as a Director
CHIEF OPERATING OFFICER of TSET since October 2000 and as a
AGE 45 Director of Kronos Air Technologies since
January 2001 and was appointed Chief
Operating Officer on January 1, 2002. Mr.
Tusing has had extensive experience in
developing new enterprises, negotiating
the licensing of intellectual property
rights, and managing technical and
financial organizations, and has more than
20 years of business development,
operations, and consulting experience in
the technology and telecommunications
industries. He has spent four years in
executive management with several emerging
technology companies, 14 years in various
managerial and executive positions with
MCI Communications Corporation, and three
additional years in managerial consulting.
While acting as an independent management
consultant from 1996 to the present, Mr.
Tusing's experience with emerging
technology companies includes serving as
Chief Executive Officer and Chief
Technology Officer for Avalon Media Group
(a turnkey advertising services company);
primary responsibility for technology
planning, licensing, and strategic
technology architecture relationships for
ICU, Inc. (a mobile video conferencing
company); and Executive Vice-President,
Chief Technology Officer, and Director of
Entertainment Made Convenient (Emc3)
International, Inc. (a video and data
downloading services company). Through his
private consultancy, Mr. Tusing provides,
among other things, managerial, financial
planning, technical, and strategic
planning services. From 1982-1996, Mr.
Tusing held multiple managerial and
executive positions with MCI
Communications Corporation. From
1994-1996, he served as MCI's Director of
Strategy and Technology, managing MCI's
emerging technologies division (having
primary responsibility for evaluating,
licensing, investing in, and acquiring
third-party technologies deemed of
strategic importance to MCI), and also
oversaw the development of several
early-stage and venture-backed software
and hardware companies; in this capacity,
Mr. Tusing managed more than 100
scientists and engineers developing
state-of-the-art technologies. From
1992-1994, Mr. Tusing founded MCI Metro,
MCI's entree into the local telephone
services business and, as MCI Metro's
Managing Director, managed
telecommunications operations, developed
financial and ordering systems, and led
efforts in designing its marketing
campaigns. From 1990-1992, he served as
Director of Finance and Business
Development for MCI's western region,
overseeing $1,000,000,000 in annual
revenue and a $90,000,000 operating
budget. From 1982-1990, Mr. Tusing held
other management and leadership positions
within MCI, including service as MCI's
Pacific Division's Regional Financial
Controller, Manager of MCI's Western
Region's Information Technology Division,
and led MCI's National Corporate Financial
Systems Development Organization. Mr.
Tusing received B.S. degrees in business
management and psychology from the
University of Maryland in 1979.
6
ERIK W. BLACK Erik W. Black serves asbecame a Director of the
AGE 32 Company in June 2001, was appointed
Executive Vice
PresidentVice-President - Business
Development of the Company.
INFORMATION CONCERNINGCompany in May 2000,
and also served as Chairman of the Board
of Directors of Atomic Soccer from
November 2000 until the sale of Atomic
Soccer in April 2001. Mr. Black resigned
as Executive Vice-President - Business
Development of the Company effective
December 31, 2001. Before joining TSET,
Mr. Black served from 1997-2000 as a
business and corporate strategy consultant
to the office of the Chairman on Funding
Selection, Inc., an investment banking and
mergers and acquisitions company. He also
developed, launched, and managed GI Bill
Express.com LLP from February 1999 until
its acquisition by Military.com in April
2000. Mr. Black has also worked as an
e-business associate consultant for IBM
Global Services in Phoenix, Arizona, from
March 1999 until April 2000. In addition,
Mr. Black was the sole proprietor of E.B.
Web Designs, an Internet development
services and consulting company founded in
1998. Mr. Black worked as the
communications coordinator for the
Synthetic Organic Chemical Manufacturers
Association in Washington, D.C. from
1996-97 and as an associate consultant for
Robert Charles Lesser & Co., a real estate
consulting firm, from 1995-96. He received
an M.B.A. and a Masters of Information
Management degrees from Arizona State
University in 2000 (where he received the
ASU MBA Kiplinger Foundation Prize for
outstanding scholarship, service, and
contribution, and served as Vice-President
- communications of the ASU MBA Student
Body Association in 1999-2000), a Global
Leadership Certificate from Thunderbird -
The American Graduate School of
International Management in 2000, and a
B.A. from Pomona College in 1995, where he
graduated magna cum laude and was elected
to Phi Beta Kappa. Mr. Black speaks
Russian fluently.
JAMES P. MCDERMOTT James P. McDermott became a Director of
AGE 40 the Company in July 2001. Mr. McDermott
has over 18 years of financial and
operational problem-solving experience.
Mr. McDermott is a co-founder and is
currently a Managing Director of Eagle
Rock Advisors, LLC, the Manager for The
Eagle Rock Group, LLC. From 1992 through
2000, Mr. McDermott held various
managerial and executive positions with
PennCorp Financial Group, Inc. and its
affiliates. From 1998 through 2000, Mr.
McDermott was Executive Vice-President and
Chief Financial Officer of PennCorp
Financial Group. While serving in this
position, Mr. McDermott was one-third of
the executive management team that was
responsible for developing and
implementing operational stabilization,
debt reduction and recapitalization plans
for the company. From 1995 through 1998,
Mr. McDermott served as Senior
Vice-President of PennCorp Financial
Group. Mr. McDermott worked closely with
the Audit Committee of the Board of
Directors on evaluating the PennCorp's
accounting and actuarial practices. In
addition, Mr. McDermott was responsible
for developing a corporate-wide technology
management program resulting in technology
convergence and cost savings to the
company's technology budget. From 1994
through 1998, Mr. McDermott was a
principal in Knightsbridge Capital Fund I,
LP, a $92 million investment fund
specializing in leverage-equity
acquisitions of insurance and
insurance-related businesses. Mr.
McDermott was also the founding Chairman
of the e-business Internet service
provider, Kivex.com, and a senior manager
of one of the world's leading public
accounting firms, KPMG. Mr. McDermott
received a B.S. Degree in Business
Administration from the University of
Wisconsin, Madison.
MEETINGS
During the Company's fiscal year ending June 30, 2002 ("FISCAL 2002")
the Board of Directors met on 10 occasions. Each director attended more than 75%
of the total number of meetings of the Board and Committees on which he served.
COMMITTEES OF THE BOARD OF DIRECTORS
AND ITS COMMITTEES
Jeffrey D. Wilson isAUDIT COMMITTEE. We currently do not have an Audit Committee.
7
COMPENSATION. On September 11, 2001, the only director who is also an
executive officer of the Company. There is no family
relationship between or among any of the Company's directors
and executive officers.
The Board of Directors held noestablished
a Compensation Committee consisting of two independent members of the Board of
Directors. The Compensation Committee currently consists of James P. McDermott
and Charles D. Strang. The Compensation Committee and Chairman will be
designated annually by the Board of Directors. The Compensation Committee is
charged with reviewing and making recommendations concerning the Company's
general compensation strategy, reviewing salaries for officers, reviewing
employee benefit plans, and administering TSET's stock incentive plan.
COMPENSATION OF DIRECTORS
CASH COMPENSATION. Our Bylaws provide that, by resolution of the Board
of Directors, each director may be reimbursed his expenses of attendance at
meetings duringof the fiscal year ended June 30, 2000, but took action by
unanimous written consent during that period.Board of Directors; likewise, each director may be paid a fixed
sum or receive a stated salary as a director. As of the date of this Proxy Statement, the Company has
not constitutedprospectus,
no director receives any nominatingsalary or other committeesform of cash compensation for such
service. No director is precluded from serving our Company in any other capacity
and receiving compensation from us in connection therewith.
SHARE-BASED COMPENSATION. Each director is entitled to receive annually
50,000 restricted shares of our common stock, either granted as shares or in the
Boardform of Directors. All director nominees were selected by
the entirefully-vested options, as compensation for their services as members of
our Board of Directors. The officersChairman of our Board of Directors is entitled to
receive annually an additional 50,000 shares of our common stock, either granted
as shares or directorsin the form of fully-vested options, as compensation for his
services as Chairman of our Board of Directors. As of the Company inadvertently
failed to file indate of this
prospectus, Messrs. Wilson and Strang have been granted 200,000 and 50,000
options, respectively as compensation for Mr. Wilson's services as Chairman of
our Board of Directors and Mr. Strang's services as a timely manner Forms 3, 4, or 5member of our Board of
Directors. Messrs. Tusing and Dwight have each been granted 50,000 shares of our
common stock as required by Section 16(a)compensation for their services as members of the Securities Exchange Actour Board of
1934, as amended,Directors.
EXECUTIVE COMPENSATION
The following table sets forth compensation for the fiscal year ended
June 30, 2000.
Jeffrey D. Wilson, the Company's chairman and chief2002 for our executive officer, and Richard A. Papworth, the Company's
chief financial officer, have each since filed Form 3 with
the Securities and Exchange Commission.
EXECUTIVE COMPENSATION
The following summarizes compensation paid to each of
the named executive officers of the Company for the fiscal
year ended June 30, 2000:
7
officers:
SUMMARY COMPENSATION TABLE
Annual Compensation Long-term Compensation
Restricted All
Other Stock Other
Name and Principal Fiscal Salary Bonus Compensation Awards Compensation
Position Year
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------------- ---------------------------------------------------
AWARDS PAYOUTS
------ -------
RESTRICTED SECURITIES ALL
OTHER STOCK UNDERLYING LTIP OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS/SAR'S PAYOUTS COMPENSATION
FISCAL POSITION YEAR $ $ $ $ # $ $
- ------------------- ------- --------- --------- -------------- ----------- ------------- --------- --------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- ------------------- ------- --------- --------- -------------- ----------- ------------- --------- --------------
Daniel R. Dwight, 2002 112,500 -- 7,620 -- 2,600,000 -- --
President and 2001 -- -- -- -- -- -- --
Chief Executive 2000 -- -- -- -- -- -- --
Officer(1)
Richard F. Tusing, 2002 -- -- -- -- -- -- --
Chief Operating 2001 -- -- -- -- -- -- --
Officer(2) 2000 -- -- -- -- -- -- --
Richard A. Papworth, 2002 120,000(3) -- -- -- 300,000 -- --
Chief Financial 2001 120,000 -- 2,000 -- 448,475(4) -- --
Officer 2000 10,000(5) -- -- 50,000(6) -- -- --
Jeffrey D. Wilson, 2002 70,000 -- 3,500 -- 50,000 -- --
Former Chairman of 2001 180,000 -- 12,000 -- 600,000(8) -- --
the Board of 2000 155,000(9) 30,000(10) 2,670(11) 700,000(12) -- -- --
Directors and
Chief Executive
Officer 2000 155,000 30,000 2,670 700,000 528,497
Richard A. Papworth,
Chief Financial Officer 2000 10,000 0 0 47,230 1,027,732Officer(7)
Erik W. Black, 2002 60,000(14) -- 6,000 -- -- -- --
Former Executive Vice
President2001 100,000 -- 6,000 -- 50,000(15) -- --
Vice-President - 2000 4,167(16) -- 4,500(17) -- -- -- --
Business
Development 2000 4,167 0 4,500 0 0Development(13)
_________________________________
(c) Salary
1.8
- --------------------
(1) Mr. Dwight became President and Chief Executive Officer of TSET
effective October 16, 2001.
(2) Mr. Tusing became Chief Operating Officer of TSET effective January 1,
2002. Mr. Tusing continues to be compensated pursuant to his consulting
agreement with TSET until an employment agreement is entered into by
the parties.
(3) TSET accrued $45,000 of Mr. Papworth's 2002 salary.
(4) Mr. Papworth was granted an option to purchase 398,475 restricted
shares of our common stock pursuant to a letter agreement dated April
10, 2001 amending Mr. Papworth's employment agreement, dated May 19,
2000. The options were fully vested as of April 10, 2001 and the
exercise price is equal to $0.885 per share, which was the closing
price of our common stock as quoted on the Over-the-Counter Bulletin
Board on April 9, 2001. In addition, Mr. Papworth was granted 50,000
options on April 9, 2001. These options are fully vested and the
exercise price is equal to $0.885 per share.
(5) Mr. Papworth joined our Company in May 2000. He is compensated $120,000
annually.
(6) As a signing bonus to his employment agreement, Mr. Papworth received
14,815 restricted shares of our common stock. The $50,000 value is
determined by multiplying the number of such shares with the closing
market price of our Company's unrestricted common stock ($3.374 per
share) on the date such shares were granted (May 19, 2000).
(7) Effective October 10, 2001, Mr. Wilson resigned as Chairman of the
Board of Directors and Chief Executive Officer of TSET pursuant to a
mutual agreement between TSET and Mr. Wilson.
(8) Mr. Wilson was granted 350,000 options pursuant to a letter agreement
dated April 10, 2001 amending Mr. Wilson's employment agreement, dated
April 16, 1999. 125,000 options were fully vested as of April 10, 2001
and the remaining 225,000 options were to vest upon the achievement of
certain performance objectives. The exercise price was equal to $0.885
per share, which was the closing price of our Company's common stock as
quoted on the Over-the-Counter Bulletin Board on April 9, 2001. TSET
has determined that the options to purchase 350,000 shares of common
stock granted to Mr. Wilson pursuant to the letter agreement are void
as of April 10, 2001, the effective date of the letter agreement. Mr.
Wilson was granted 50,000 options on April 9, 2001. These options are
fully vested and the exercise price is equal to $0.885 per share. In
addition, Mr. Wilson, was granted 200,000 options on May 3, 2001, in
connection with his service as Chairman of the Board of Directors in
1999 and 2000. These options are fully vested and the exercise price is
equal to $0.71 per share.
(9) Mr. Wilson's 2000 salary of $155,000 salary consisted of ten months at $12,500
and two months at $15,000. Mr. Wilson deferred all salary during fiscal
yearyears 1999 and 2000 and iswas entitled to receive 12% annual interest on
all deferred amounts. 2.Pursuant to an agreement between TSET and Mr.
Papworth joinedWilson effective October 10, 2001, TSET issued a promissory note in the
Companyamount of $350,000 and will pay $30,000 in May 2000. He is compensated
$120,000 annually,cash within sixty days of
October 15, 2001, which $10,000 was received in fiscal year 2000.
3.represents all of Mr. Black joined the Company in May 2000. He is compensated
$100,000 annually, of which $4,167 was received in fiscal year 2000.
(d) Bonus
1.Wilson's accrued salary,
bonus and interest. In addition, TSET will also pay Mr. Wilson his
unpaid reimbursable expenses.
(10) Under the terms of his employment agreement, Mr. Wilson was to receive
a cash bonus of $30,000 on or before May 1, 2000; however, Mr. Wilson
deferred his cash bonus during fiscal year 2000 and iswas entitled to
receive 12% annual interest on all deferred compensation. (e) Other Compensation
1.Pursuant to
an agreement between TSET and Mr. Wilson isdated October 10, 2001, TSET
issued a promissory note in the amount of $350,000 and will pay $30,000
in cash within sixty days of October 15, 2001, which represents all of
Mr. Wilson's accrued salary, bonus and interest. In addition, TSET will
pay Mr. Wilson his unpaid reimbursable expenses.
(11) Mr. Wilson was entitled to an automobile allowance of $1,000 per month,
of which $2,670 was received in fiscal year 2000.
2. Mr. Black is entitled to an automobile allowance of $500 per
month, and a one-time relocation allowance of $5,000, of which $0
and $4,500 was received, respectively, in fiscal year 2000.
(f) Restricted Stock Awards
1.(12) As a signing bonus to his employment agreement, Mr. Wilson's nominee,
The Pangaea Group LLC, received 1,000,000 restricted shares of the Company'sour
common stock. Such stock
8
vested at a rate of 100,000 shares per month
over a 10-month period; 700,000 shares vested during fiscal year 2000.
The $700,000 value iswas obtained by multiplying the vested shares with
the closing market price of the Company'sour unrestricted common stock ($1.00 per
share) on the date such shares were granted (April 20, 1999).
Notwithstanding the above calcula
tion,the Companycalculation, we expensed such stock
transaction at a value of $300,000, or $0.30 per share. At June 30, 2000, Mr. Wilson owns orTSET has
determined that the right to own
1,301,332 restrictedissuance of the 1,000,000 shares of the Company's common stock (1,000,000 issued and outstandingis
void as of suchApril 16, 1999, the effective date 201,322
restricted shares authorized (but not yet issued) to prevent
dilution of Mr. Wilson's
3.98% ownership interestemployment agreement.
(13) Mr. Black resigned as Executive Vice-President - Business Development
of TSET effective December 31, 2001.
(14) TSET accrued $60,000 of Mr. Black's 2002 salary.
(15) Mr. Black was granted 50,000 options on April 9, 2001. These options
are fully vested and the exercise price is equal to $0.885 per share.
(16) Mr. Black joined our Company in the
Company,May 2000. He was compensated $100,000
annually, of which $4,167 was received in fiscal year 2000.
(17) Mr. Black was entitled to an automobile allowance of $500 per month,
and 100,000 restricted shares authorized (but not
yet issued) as compensation for his service as the chairmana one-time relocation allowance of $5,000, of which $4,500 was
received in fiscal year 2000.
9
AGGREGATED OPTIONS/SAR EXERCISES
IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTIONS/SAR VALUES(1)
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED ON VALUE OPTIONS/SAR'S AT OPTIONS/SAR'S AT
NAME EXERCISE REALIZED ($) FISCAL YEAR END(1) FISCAL YEAR END(2)
---- -------- ------------ ------------------ ------------------
Daniel R. Dwight -0- -0- Exercisable: 1,321,700 $0
President and Unexercisable: 1,600,000 $0
Chief Executive Officer(3)
Richard F. Tusing -0- -0- Exercisable: 473,000 $0
Chief Operating Officer(4) Unexercisable: 950,000 $0
Richard A. Papworth -0- -0- Exercisable: 448,475 $0
Chief Financial Officer Unexercisable: 300,000 $0
Jeffrey D. Wilson -0- -0- Exercisable: 310,000(6) $0
Former Chairman of the Board Unexercisable: 350,000(6) $0
of Directors and
Chief Executive Officer(5)
Erik W. Black -0- -0- Exercisable: 50,000 $0
Former Executive Vice-President Unexercisable: 0 $0
Business Development(7)
- ---------------------------------
(1) These grants represent options to purchase common stock. No SAR's have
been granted.
(2) The value of the Company's board of directors) with an aggregateunexercised in-the-money options were calculated by
determining the difference between the fair market value of $3,415,997 (calculated by multiplying the closing marketcommon
stock underlying the options and the exercise price of the Company's unrestrictedoptions as
of June 30, 2002.
(3) Mr. Dwight became President and Chief Executive Officer of TSET
effective November 15, 2001.
(4) Mr. Tusing became Chief Operating Officer of TSET effective January 1,
2002.
(5) Effective October 10, 2001, Mr. Wilson resigned as Chairman of the
Board of Directors and Chief Executive Officer of TSET pursuant to a
mutual agreement between TSET and Mr. Wilson.
(6) TSET has determined that the options to purchase 350,000 shares of
common stock on June 30, 2000 ($2.625 per share) by 1,301,332).
2. Asgranted to Mr. Wilson pursuant to a signing bonusletter agreement dated
April 10, 2001 are void as of April 10, 2001, the effective date of the
letter agreement. Of these options to his employment agreement, Mr.
Papworth received 14,815 restrictedpurchase 350,000 shares of common
stock, options to purchase 125,000 shares of common stock were
exercisable at fiscal year end 2001 and 225,000 options were
unexercisable at fiscal year end 2001.
(7) Mr. Black resigned as Executive Vice President - Business Development
of TSET effective as of December 31, 2001.
10
OPTION/SAR GRANTS TABLE
% TOTAL
NO. OF SECURITIES OPTIONS/SAR'S
UNDERLYING GRANTED TO
OPTIONS/SAR'S EMPLOYEES IN EXERCISE OR BASE PRICE
NAME GRANTED (#) FISCAL YEAR (%) ($ PER SHARE) EXPIRATION DATE
---- ----------- --------------- ------------- ---------------
Daniel R. Dwight 93,600(2) 1.5% $0.960 November 15, 2004
President and 1,000,000 16.4% $0.680 February 12, 2012
Chief Executive Officer(1) 600,000 9.9% $0.250 February 12, 2012
500,000(3) 8.2% $0.420 November 15, 2011
250,000(3) 4.1% $0.660 November 15, 2011
250,000(3) 4.1% $0.560 November 15, 2011
Richard F. Tusing 246,500(5) 4.1% $0.960 June 30, 2005
Chief Operating Officer(4) 600,000 9.9% $0.680 February 12, 2012
350,000 5.8% $0.250 February 12, 2012
Jeffrey D. Wilson 50,000 0.8% $0.885 April 9, 2006
Former Chairman of the Board 10,000 0.1% $0.210 March 31, 2005
of Directors and
Chief Executive Officer(6)
Richard A. Papworth 100,000 1.6% $0.680 February 12, 2012
Chief Financial Officer 200,000 3.3% $0.250 February 12, 2012
- ---------------------------------
(1) Mr. Dwight became President and Chief Executive Officer of TSET
effective October 16, 2001.
(2) Represents options granted pursuant to Mr. Dwight's Consulting
Agreements dated August 11, 2000 (individual agreement) and January 1,
2001 (Dwight Tusing & Associates' agreement), as amended April 12,
2001.
(3) Represents options granted pursuant to Mr. Dwight's Employment
Agreement effective November 15, 2001 and Stock Option Agreement dated
April 1, 2002.
(4) Mr. Tusing became Chief Operating Officer of TSET effective January 1,
2002.
(5) Represents options granted pursuant to Mr. Tusing's Consulting
Agreements dated August 11, 2000 (individual agreement) and January 1,
2001 (Dwight Tusing & Associates' agreement), as amended April 12,
2001.
(6) Effective October 10, 2001, Mr. Wilson resigned as Chairman of the
Board of Directors and Chief Executive Officer of TSET pursuant to a
mutual agreement between TSET and Mr. Wilson.
STOCK OPTION PLAN
On February 12, 2002, the Board of Directors approved the TSET, Inc.
Stock Option Plan under which the Company's key employees, consultants,
independent contractors, officers and directors are eligible to receive grants
of stock options. The Company has reserved a total of 6,250,000 shares of common
stock. The $47,230 valuestock under the Stock Option Plan. It is deter
minedpresently administered by multiplyingthe Company's
Board of Directors. Subject to the provisions of the Stock Option Plan, the
Board of Directors has full and final authority to select the individuals to
whom options will be granted, to grant the options and to determine the terms
and conditions and the number of such shares with
the closing market price of the Company's unrestric
ted common stock ($3.188 per share) on the date such
shares were granted(May 19,2000). The Company expensed
the transaction at a value of $50,000, or $3.374 per
share.
At June 30, 2000, Mr. Papworth owns or has the right to
own 406,332 restricted shares of the Company's common
stock (14,815 shares issued and outstanding, and 391,517
shares authorized (but not yet issued) to prevent dilution
of Mr. Papworth's 1.25% ownership interest in the Company
with an aggregate market value of $1,066622 (calculated by
multiplying the closing market price of the Company's unre
stricted common stock on June 30, 2000 ($2.625) by 406,332).
(i) All Other Compensation
1.pursuant thereto.
EMPLOYMENT AGREEMENTS
The $528,497 value is obtained by multiplying the closing
market price of the Company's common stock on June 30, 2000
($2.625) by the 201,332 shares that accrued (but are not yet
issued) in accordance with Mr. Wilson's employment agreement,
whereby he maintains ownership of 3.98% of the Company's issued
and outstanding common stock.
2. The $1,027,732 value is obtained by multiplying the closing
market price of the Company's common stock on June 30, 2000
($2.625) by the 391,517 shares that accrued (but are not yet
issued) in accordance with Mr. Papworth's employment agreement,
whereby he maintains ownership of 1.25% of the Company's issued
and outstanding common stock.
Employment Agreements
The employment agreementAgreement of Jeffrey D. Wilson, the Company's
chairmanour former Chairman and
chief executive officer, is effectiveChief Executive Officer, was dated as of April 20, 1999 and continuescontinued for an
"evergreen" term of five years unless Mr. Wilson providesprovided at least 60 days'
prior written notice of his resignation. Such agreement providesprovided for base cash
compen
sationcompensation during the first 12-month period in the amount of $12,500 per
month, plus a cash bonus in the amount of $30,000 to be paid in one lump sum on
or before May 1, 2000. During the second 12-
month12-month period, Mr. Wilson's base cash
compensation increaseswas to increase to $15,000 per month, and during the third 12-month
period such base cash compensation increaseswas to increase to $20,000 per month. Mr.
Wilson
has deferred all cash and bonus compensation from April 1999 through August
2000; however, commencing in September 2000, Mr. Wilson began receiving cash
compensation in the amount of $17,500 per month, approved by the Board 9
of
Directors, in consideration of his previous deferral of such compensation. The Company isWe
were obligated to pay interest at the rate of 12% annually on all compensation
deferred by Mr. Wilson until all such amounts have been paid in full. Mr.
Wilson's nominee, The Pangaea Group, LLC, ("Pangaea"), received a signing bonus of 100,000
fully vested and non-forfeitable restricted shares of the
Company'sour common stock; The
11
Pangaea Group, LLC received an additional 900,000 restricted shares of the Company'sour
common stock, which vested at the rate of 100,000 shares per month over the
9-month period following Mr. Wilson's acceptance of the terms of his employment
agreement. As of the date of this Proxy Statement, all such
shares are fully vested and have been accounted for in the
Company's financial books. Mr. Wilson's then-existing percentage
share ownership in the Company (approximately 3.98% of the Company's
issued and outstanding shares as of the date of his employment
agreement) is not subject to dilution during any period of his
employment. Accordingly, the Company shall, from time to time,
issue such additional shares of common stock as may be necessary
to prevent such dilution from occurring. As of the date of this
Proxy Statement, no such additional shares have yet been issued,
but the Company remains obligated to do so. Mr. Wilson will
bewas entitled to fully participate in any and all 401(k),
stock option, stock bonus, savings, profit-sharing, insurance, and other similar
plans and benefits of employment; however, as of the date of this Proxy Statement, the Company hasprospectus, we
have not adopted or implemented any such plans. Mr. Wilson hashad "piggyback"
registration rights with respect to all restricted shares owned by him, as well
as "demand" registration rights with respect thereto exercisable two times
during each 5-year term of his employment. The cost of exercising such piggyback
and demand registration rights shallwas to be borne by the Company.us. As of the date of this
Proxy Statement,prospectus, Mr. Wilson hashad not exercised such registration rights. Mr. Wilson is
entitled to be indemnified, defended, and held harmless by the Companyus from and against
any and all costs, losses, damages, penalties, fines, or expenses (including,
without limitation, reasonable attorneys' fees, court costs, and associated
expenses) suffered, imposed upon, or incurred by him in any manner in connection
with his service as our Chairman and Chief Executive Officer.
On April 10, 2001, we entered into a Letter Agreement with Mr. Wilson
amending Mr. Wilson's Employment Agreement. Pursuant to the Company's chairmanLetter Agreement,
Mr. Wilson waived the anti-dilution provision of his Employment Agreement in
consideration for options to purchase 350,000 shares of our restricted common
stock. The option to purchase 125,000 shares of common stock was fully vested as
of April 10, 2001 and chief executive officer.the remaining 225,000 share option was to vest upon the
achievement of certain performance objectives. The exercise price of these
options was equal to $0.885 per share, which was the closing price of our common
stock as quoted on the Over-the-Counter Bulletin Board on April 9, 2001.
In September 2001, we determined that, among other things, our Board of
Directors never validly approved Mr. Wilson's Employment Agreement. Accordingly,
we determined that Mr. Wilson's Employment Agreement and the Letter Agreement
are null and void from their inception. As a consequence, we have determined
that the issuance of 1,000,000 shares of common stock pursuant to Mr. Wilson's
Employment Agreement and the grant of options to purchase 350,000 shares of
common stock pursuant to the Letter Agreement were void as of the effective
dates of the Employment Agreement and Letter Agreement, respectively, and that
these shares of common stock and options are treated as if they were never
issued or granted, as the case may be. Effective October 10, 2001, Mr. Wilson
resigned as Chairman of the Board of Directors and Chief Executive Officer of
the Company. Mr. Wilson remains as a director of the Company.
Daniel R. Dwight, our President and Chief Executive Officer, and our
company entered into an Employment agreement effective as of November 15, 2001.
The initial term of Mr. Dwight's Employment Agreement is for 2 years and will
automatically renew for successive 1 year terms unless the Company or Mr. Dwight
provide the other party with written notice within 3 months of the end of the
initial term or any subsequent renewal term. Mr. Dwight's Employment Agreement
provides for base cash compensation of $180,000 per year. Mr. Dwight is eligible
for annual incentive bonus compensation in an amount equal to Mr. Dwight's
annual salary based on the achievement of certain bonus objectives. In addition,
the Company granted Mr. Dwight 1,000,000 immediately vested and exercisable,
ten-year stock options at various exercise prices. Mr. Dwight will be entitled
to fully participate in any and all 401(k), stock option, stock bonus, savings,
profit-sharing, insurance, and other similar plans and benefits of employment.
Mr. Dwight is entitled to be indemnified, defended, and held harmless by us from
and against any and all costs, losses, damages, penalties, fines, or expenses
(including, without limitation, reasonable attorneys' fees, court costs, and
associated expenses) suffered, imposed upon, or incurred by him in any manner in
connection with his service as our Chief Executive Officer.
Richard A. Papworth, the Company's chief financial
officer,our Chief Financial Officer, has an employment agreement effectiveEmployment
Agreement dated as of May 19, 2000, which continues for an "evergreen" term of
two years, unless Mr. Papworth provides at least 90 days' prior written notice
of his resignation. Mr. Papworth's employment
agreementEmployment Agreement provides for base cash
compensation in the amount of $10,000 per month, a signing bonus of $50,000
worth of fully vested and non-forfeitable restricted shares of the
Company'sour common stock,
plus a year-end bonus payable in cash and additional shares, in a "blended"
amount to be determined. Mr. Papworth will be entitled to fully participate in
any and all 401(k), stock option, stock bonus, savings, profit-sharing,
insurance, and other similar plans and benefits of employment; however, as of
the date of this Proxy Statement, the Company hasprospectus, we have not adopted or implemented any such plans.
Mr. Papworth is entitled to be indemnified, defended, and held harmless by the Companyus
from and against any and all costs, losses, damages, penalties, fines, or
expenses (including, without limitation, reasonable attorneys' fees, court
costs, and associated expenses) suffered, imposed upon, or incurred by him in
any manner in connection with his service as the Company's chief
financial officer.our Chief Financial Officer.
On April 10,
As of the date of this Proxy Statement, the Company has
not2001, we entered into a written employment agreementLetter Agreement with Erik W.
Black, executive vice president - business development.
Information regarding Mr. Black's compensation is set forth
elsewherePapworth
amending Mr. Papworth's Employment Agreement. Pursuant to the Letter Agreement,
Mr. Papworth waived the anti-dilution provision of his Employment Agreement in
this Proxy Statement.
Executive Severance Agreements
The employment agreement of Jeffrey D. Wilson, the
Company's chairman and chief executive officer, provides
that upon the occurrence of any "change of control
transaction" (as defined therein), anyconsideration for an option to purchase 398,475 shares of our restricted common
stock. The option was fully vested as of April 10, 2001 and the Company'sexercise price
is equal to $0.885 per share, which was the closing price of our common stock to which Mr. Wilson is entitled
through any directors' compensation, stock option, or other
stock ownership plan shall immediately vest and, if such
transaction results in termination of his employment, Mr.
Wilson will be entitled to receive allas
quoted on the compensation and
benefits of employment that he would have received for the
full term of his employment but for such termination (i.e.,
given the 5-year "evergreen" term of his employment, Mr.
Wilson would therefore receive five years' worth of such
compensation), the immediate vesting of shares in any stock
option or other stock ownership plan, and the immediate
vesting of all matching contributions made by the Company in
any 401(k), savings, profit-sharing, or other similar plan
or benefit program (such entitlement also applies in the
event of any termination of Mr. Wilson's employment for
reasons other than certain "termination events" described in
his employment agreement). For purposes of Mr. Wilson's
employment agreement, a change in control transaction is
defined as a merger, sale, share exchange, consolidation,
change of control, or other acquisition of the Company.Over-the-Counter Bulletin Board on April 9, 2001.
12
EXECUTIVE SEVERANCE AGREEMENTS
The employment agreementEmployment Agreement of Richard A. Papworth, the
Company's chief financial officer,our Chief Financial
Officer, provides that upon the occurrence of any transaction involving a change
of control of the CompanyTSET pursuant to which his employment is terminated, any shares of
the Company'sour common stock to which Mr. Papworth is entitled through any stock option or
other stock ownership plan shall immediately vest and Mr. Papworth will be
entitled to receive all the compensation and benefits of employment that he
would have received for the full term of his employment but for such termination
(i.e., given the 2-year "evergreen" term of his employment, Mr. Papworth would
therefore receive two years' worth of such compensation), the immediate vesting
of shares in any stock option or other stock ownership plan, and the immediate
vesting of all matching contributions made by the
Companyus in any 401(k), savings,
profit-sharing, or other similar plan or benefit program.
The Employment Agreement of Daniel R. Dwight, our Chief Executive
Officer, provides that, upon the occurrence of any transaction as defined as a
"change of control" of TSET, Mr. Dwight shall receive his salary and benefits
for a period of time that is the greater of (i) one year or (ii) the remainder
of Mr. Dwight's employment term.
As of the record date, of this Proxy Statement, the Company haswe have not adopted any separate executive
severance agreements.
Director Compensation
The Company's bylaws provide that, by resolution of the board
of directors, each director may be reimbursed their expenses of
attendance at meetings of the Board of Directors; likewise, each
director may be paid a fixed sum or receive a stated salary as a
11
director. As of the date of this Proxy Statement, no
director receives any salary or other form of cash
compensation for such service; however, Messrs. Wilson,
Strang, Tusing, and Dwight are entitled to receive
restricted shares of the Company's common stock, either
granted or in the form of options (to be determined), as
compensation for their services as members of the Board of
Directors. As of the date of this Proxy Statement, Mr.
Wilson is entitled to receive 100,000 shares and Messrs.
Strang, Tusing, and Dwight are each entitled to receive
50,000 shares, of the Company's common stock as such
compensation. No director is precluded from serving the
Company in any other capacity and receiving compensation
from the Company in connection therewith.
Stock Option Plans
As of the date of this Proxy Statement, the Company has
not adopted or implemented any stock option plan, but
intends to do so in the near future.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERSRELATIONSHIPS AND MANAGEMENT
The following table presents certain information
regarding the beneficial ownership of all shares of common
stock at November 22, 2000 for each executive officer and
director of the Company and for each person known to the
Company who owns beneficially more than 5% of the
outstanding shares of the Company's common stock. The
percentage ownership shown in such table is based upon the
29,097,801 common shares issued and outstanding at November
22, 2000 and ownership by these persons of options or
warrants exercisable within 60 days of such date. Also
included is beneficial ownership on a fully diluted basis
showing all authorized (equaling 32,898,107) but unissued
(equaling 3,800,306) shares of the Company's common stock at
November 22, 2000 as issued and outstanding. Unless
otherwise indicated, each person has sole voting and
investment power over such shares.
Name and Number of Percent Percent of
Address of Shares of of Class
Directors and Common Class Fully after
Officers Stock Diluted Dilution
Jeffrey D. Wilson 1,000,000 (1) 3.44% 1,301,332 (1) 3.95%
Two Centerpointe
DriveSuite 580
Lake Oswego, Oregon
97035
Charles D. Strang 0 0 50,000 (2) 0.15%
Two Centerpointe
Drive, Suite 580
Lake Oswego, Oregon
97035
Richard F. Tusing 0 0 50,000 (2) 0.15%
Two Centerpointe
Drive, Suite 580
Lake Oswego, Oregon
97035
12
Daniel R. Dwight 50,000 (2) 0.15%
Two Centerpointe
Drive, Suite 580
Lake Oswego, Oregon
97035
Richard A. Papworth 14,815 0.05% 406,332 (3) 1.24%
Two Centerpointe
Drive, Suite 580
Lake Oswego, Oregon
97035
Erik W. Black 0 0 122,699 0.37%
Two Centerpointe
Drive, Suite 580
Lake Oswego, Oregon
97035
DIRECTORS AND 1,014,815 3.49% 1,980,363 6.02%
OFFICERS AS A
GROUP: SIX PERSONS
(1) The 1,000,000 shares are owned of record by The
Pangaea Group, LLC; of which, Mr. Wilson is the principal
owner. The fully diluted 1,301,332 shares represent Mr.
Wilson's right to receive an additional 100,000 restricted
shares (annually) in consideration for his service as
chairman of the Board of Directors and 201,000 restricted
shares to maintain his 3.98% nondilutible stock ownership in
the Company.
(2) Mr. Strang, Mr. Tusing and Mr. Dwight are each
entitled to receive 50,000 restricted shares (annually) in
consideration for their services as a members of the Board
of Directors.
(3) The fully diluted 391,517 shares represent Mr.
Papworth's right to receive an additional 376,702 restricted
shares to maintain his 1.25% nondilutible stock ownership in
the Company.
Management of the Company is unaware of any arrangement or
understanding that may, at a subsequent date, result in a
change of control of the Company.
Certain Relationships and Related Transactions
Management believesRELATED TRANSACTIONS
We believe that all prior related party transactions have been entered
into upon terms no less favorable to the Companyus than those that could be obtained from
unaffiliated third parties. Management'sOur reasonable belief of fair value is based upon
proximate similar transactions with third parties or attempts to obtain the
consideration from third parties. All ongoing and future transactions with such
persons, including any loans or compensation to such persons, will be approved
by a majority of disinterested members of the Board of Directors.
In connection with his employment agreement,Employment Agreement, Jeffrey D. Wilson's
nominee, The Pangaea Group LLC, received a signing bonus of 100,000 restricted
shares of the Company'sour common stock; such shares were fully vested and non-forfeitable
upon issuance. In addition, The Pangaea Group LLC received an additional 900,000
restricted shares of the Company'sour common stock, vesting at the rate of 100,000 shares per
month over the 9-
month9-month period ended January 2000. In September 2001, the Company
determined that, among other things, our Board of Directors never validly
approved Mr. Wilson's Employment Agreement. Accordingly, the Company has
determined that Mr. Wilson's Employment agreement was null and void from its
inception. As a consequence, the Company has determined that the issuance of
1,000,000 shares of common stock pursuant to Mr. Wilson's Employment Agreement
is void as of the effective date of this
Proxy Statement, all suchthe Employment Agreement, and that these
shares of common stock are fully vested and have
been accounted for in the Company's financial books.
13
treated as if they were never issued.
On August 11, 2000, the Company entered into a Finders
Agreement with Richard F. Tusing and Daniel R. Dwight,
pursuant to which Messrs. Tusing and Dwight will introduce
the Company to prospective investors and brokers that would
thereafter make similar introductions, and otherwise assist
the Company in corporate finance matters. The Company
approved the list of prospective investors and brokers
provided by Messrs. Tusing and Dwight contemporaneously with
the execution and delivery of the Finders Agreement. The
Company will pay to Messrs. Tusing and Dwight a finders fee
equal to 1% of the total investment value realized from
investors introduced by them that provide equity or debt
capital to the Company. In the case of provision of equity
or debt capital by investors introduced by brokers
introduced by Messrs. Tusing and Dwight, the finders fee
will be equal to 0.25% of the total investment value
realized from such investors. The Company retains the right
to negotiate the specific terms of any financing transaction
arising out of any such introductions and is not obligated
to accept any financing offered by any such investors or
through any such brokers. Out-of-pocket expenses incurred
by Messrs. Tusing and Dwight in connection with provision of
their services under the Finders Agreement will be
reimbursed by the Company up to $15,000, unless expenses in
excess of this limit are approved in writing by the Company.
The Finders Agreement was entered into prior to Messrs.
Tusing's and Dwight's appointment as directors of the
Company in October 2000 and was negotiated at arm's length.
The Company intends that the Finders Agreement remain in
place. Management believes that the compensation and other
provisions of the Finders Agreement are fair, reasonable,
customary, and favorable to the Company.
On August 11, 2000, the Companywe entered into a Consulting Agreement with Richard
F. Tusing and Daniel R. Dwight, pursuant to which Messrs. Tusing and Dwight will
provide management, financial, strategic, and other consulting services to the Companyus in
exchange for consulting fees payable in cash and sharesoptions of the Company'sour common stock.
Out-of-pocket expenses incurred by Messrs. Tusing and Dwight in connection with
provision of their services under the FindersConsulting Agreement will also be
reimbursed by the Company.us. The Consulting Agreement was entered into prior to Messrs.
Tusing's and Dwight's appointment as directorsmembers of the Companyour Board of Directors in
October 2000 and was negotiated at arm's length. Management believesWe believe that the
compensation and other provisions of the Consulting Agreement are fair,
reasonable, customary, and favorable to us. The Consulting Agreement was renewed
with Dwight, Tusing & Associates on similar terms and conditions with a rate
adjustment as of January 1, 2001, and was amended on April 12, 2001 to decrease
the Company.
Item 2 - RATIFICATION OF SELECTION OF GRANT THORNTON LLP AS
INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDED JUNE 30,
2000
The Boardstrike price of Directors has selected Grant Thornton LLP
("Grant Thornton")the options granted as partial compensation thereunder.
Pursuant to the Company's independent accountants
forCompany and Mr. Dwight entering into his Employment Agreement,
effective November 15, 2001, Mr. Dwight's Consulting Agreement is no longer in
effect. Pursuant to his Consulting Agreement, Mr. Dwight earned $208,400 and
$179,600, respectively, in the fiscal yearyears ended June 30, 2000,2001 and now seeks
ratification from Stockholders2002, respectively.
Of the aggregate amount of such appointment. Such
ratification requires$388,000, we have paid $202,400 to Mr. Dwight and the
affirmative votebalance of a majority$185,600 remains payable. Mr. Tusing's Consulting Agreement is
currently in effect. The initial term of Mr. Tusing's Consulting Agreement was
six months and is automatically renewed for successive terms of six months,
unless our company or Mr. Tusing terminate the agreement upon 30 days' prior
written notice. Mr. Tusing performs management and business consulting services
under the Consulting Agreement. Pursuant to the agreement, Mr. Tusing is
compensated $150 per hour for his services and the number of hours worked is
mutually determined by our company and Mr. Tusing. At Mr. Tusing's discretion,
he may elect to convert his unpaid hourly cash compensation for an option to
purchase restricted shares of the Company's common stock present or
representedat one hundred option
shares for each hour of consulting services. Such option, once elected, is
exercisable for three years at an exercise price of $2.00 per share. Pursuant to
his Consulting Agreement, Mr. Tusing earned $207,400 and $377,750, respectively,
in the years ended June 30, 2001 and 2002 and $30,750 through July 31, 2002. Of
the aggregate amount of $615,900, we have paid $294,000 to Mr. Tusing and the
balance of $331,900 remains payable.
13
Effective October 15, 2001, we entered into a Consulting Agreement with
Jeffrey D. Wilson, pursuant to which Mr. Wilson will provide thirty-five hours
per month of management and other consulting services to us in exchange for
consulting fees payable in cash and options of our common stock. The term of Mr.
Wilson's Consulting Agreement is one year. Mr. Wilson is compensated $150 per
hour for his services. Pursuant to his Consulting Agreement, Mr. Wilson earned
$51,200 in the year ended June 30, 2002 and $8,700 through October 15, 2002. Of
the aggregate amount of $56,500, we have paid $5,200 to Mr. Wilson and the
balance of $51,300 remains payable. In addition, our company granted Mr. Wilson
an option to purchase 100,000 shares of the Company's common stock upon the
successful conclusion of the Company's legal proceedings against W. Alan
Thompson, Ingrid T. Fuhriman, Robert L. Fuhriman II and Weihao Long. The option
is for three years and fully vests and becomes exercisable immediately upon the
grant thereof. The exercise price of the option will be the closing price of the
Company's common stock on the option's date of grant. Out-of-pocket expenses
incurred by proxyMr. Wilson in connection with provision of his services under the
Consulting Agreement will also be reimbursed by us. The Consulting Agreement was
negotiated at arm's length. We believe that the compensation and other
provisions of the Consulting Agreement are fair, reasonable, customary, and
favorable to us. Mr. Wilson's Consulting Agreement was in effect until October
15, 2002.
Pursuant to Daniel R. Dwight's Employment Agreement, effective November
15, 2001, our company and Mr. Dwight agreed that the Consulting Agreement, dated
January 1, 2001, between our company and Mr. Dwight and the Finders Agreement,
dated August 11, 2000, between our company and Mr. Dwight were terminated
effective November 15, 2001. We acknowledged and agreed that pursuant to the
terms of the Consulting Agreement, we owe Mr. Dwight past-due amounts equal to
$250,582. We agreed that this past-due amount will accrue interest at 1% per
month until paid in full. Payments from our company to Mr. Dwight shall be
allocated first to out-of-pocket expenses, second to salary, and third to
repayment of the past-due amount. In addition, we acknowledged and agreed that,
pursuant to the Consulting Agreement and the Finders Agreement, Mr. Dwight has
earned 271,700 options that are fully vested and exercisable under the terms and
conditions of the Consulting Agreement, the Finders Agreement and a Letter
Agreement, dated April 12, 2001 between our company and Mr. Dwight.
14
PROPOSAL 2 - AMENDMENT TO THE ARTICLES OF INCORPORATION
Our Company's Board of Directors proposes an amendment to our Company's
Articles of Incorporation to change the name of our Company to Kronos Advanced
Technologies, Inc.
If the amendment to our Company's Articles of Incorporation is adopted,
Articles of Amendment shall be filed with the Nevada Secretary of State so that
the first paragraph of Article I of the Articles of Incorporation shall be as
follows:
"That the name of said corporation shall be Kronos Advanced
Technologies, Inc."
Our Company is focused on the development and commercialization of the
air-movement and purification technology known as KronosTM. Our Company's Board
of Directors believes that it is desirable to change the name of our Company to
Kronos Advanced Technologies, Inc., as it more directly associates our Company
with our KronosTM technology.
RECOMMENDATION OF THE BOARD OF DIRECTORS
Our Board of Directors unanimously recommends a vote "FOR" the approval
of an amendment to our Company's Articles of Incorporation to change the name of
our Company to Kronos Advanced Technologies, Inc.
15
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 500,000,000 shares of common
stock, par value $0.001 per share, and 50,000,000 shares of preferred stock, no
par value. As of October 14, 2002, 46,891,293 shares of common stock were issued
and outstanding; no shares of our preferred stock are issued and outstanding.
The rights and preferences of the preferred stock will be determined upon
issuance by our Board of Directors. The following description is a summary of
our capital stock and contains the material terms thereof. Additional
information can be found in our Articles of Incorporation and Bylaws, which were
filed as exhibits to our Registration Statement on Form S-1 filed on August 7,
2001 with the Securities and Exchange Commission.
COMMON STOCK
Holders of our common stock are entitled to one vote for each share
held on all matters submitted to a vote of stockholders, including the election
of directors. Accordingly, holders of a majority of our common stock entitled to
vote atin any election of directors may elect all of the Annual
Meeting.directors standing for
election should they choose to do so. Neither our Articles of Incorporation nor
our Bylaws provide for cumulative voting for the election of directors. Holders
of our common stock are entitled to receive their pro rata share of any
dividends declared from time to time by the Board of Directors out of funds
legally available therefor. Holders of our common stock have no preemptive,
subscription, conversion, sinking fund, or redemption rights. All outstanding
shares of our common stock are fully paid and non-assessable. In the event of
liquidation, dissolution, or winding up of the Company, the holders of common
stock are entitled to share ratably in all assets remaining after payment of
liabilities, subject to prior distribution rights of preferred stock (if any)
then outstanding.
PREFERRED STOCK
Our Articles of Incorporation authorizes 50,000,000 shares of preferred
stock, no par value. No shares of preferred stock are issued and outstanding as
of the date of this appointmentprospectus. The Board of Directors is not ratifiedauthorized, subject to
any limitations prescribed by tockholders,the Nevada Revised Statutes, or the rules of any
quotation system or national securities exchange on which our stock may be
quoted or listed, to provide for the issuance of shares of preferred stock in
one or more series; to establish from time to time the number of shares to be
included in each such adverseseries; to fix the rights, powers, preferences, and
privileges of the shares of such series, without further vote willor action by the
stockholders. Depending upon the terms of the preferred stock established by the
Board of Directors, any or all series of preferred stock could have preference
over the common stock with respect to dividends and other distributions and upon
liquidation of the Company or could have voting or conversion rights that could
adversely affect the holders of the outstanding common stock. As of the date of
this prospectus, the voting and other rights associated with the preferred stock
have yet to be considered as a
14
directive todetermined by the Board of Directors. There are no present plans
by the Board of Directors to selectissue preferred shares or address the rights to be
assigned thereto.
OPTIONS
In April 2001, we entered into agreements with employees, consultants
and directors for the grant of stock options to purchase shares of our common
stock. All stock option grants are exercisable at the fair market value of the
shares on the date of grant, except for those options granted to the
consultants. The exercise price in the consulting agreements is fixed and in
excess of the fair market value on the date of grants. On April 10, 2001,
Messrs. Jeffrey D. Wilson and Richard A. Papworth were granted options to
acquire, collectively, 748,475 shares of common stock in consideration for their
relinquishment of the anti-dilution clauses in their employment agreements. We
have determined that the options to purchase 350,000 shares of common stock
granted to Mr. Wilson on April 10, 2001 are void as of that date, and these
options are treated as if they were never granted. On April 10, 2001, members of
our management team and Board of Directors were granted stock options totaling
450,000 shares. On May 4, 2001, two members of the Board of Directors were
granted stock options for 250,000 shares of common stock. On February 12, 2002,
eight employees of the Company were granted stock options for 4,580,000 shares
of common stock. On November 15, 2001, Daniel R. Dwight was granted stock
options for 1,000,000 shares of common stock as a signing bonus in connection
with Mr. Dwight's Employment Agreement.
As of October 9, 2002, the following options had been granted in the
amounts and to the individuals shown below; as of the date hereof, none of such
options has been exercised:
16
- --------------------------------- -------------------- ------------------ ------------------- ------------------
NUMBER
NAME OF OPTIONS STRIKE PRICE DATE OF GRANT EXPIRATION
- --------------------------------- -------------------- ------------------ ------------------- ------------------
Daniel R. Dwight 50,000 $0.885 04/09/01 04/09/06
178,100(1) $0.960 05/07/01 05/07/04
93,600(1) $0.960 11/15/01 11/15/04
1,000,000 $0.680 02/12/02 02/12/12
600,000 $0.250 12/12/02 02/12/12
500,000(2) $0.420 11/15/01 11/15/11
250,000(2) $0.560 11/15/01 11/15/11
250,000(2) $0.660 11/15/01 11/15/11
Richard F. Tusing 50,000 $0.885 04/09/01 04/09/06
176,500(3) $0.960 05/07/01 05/07/04
246,500(3) $0.960 06/30/02 06/30/05
600,000 $0.680 02/12/02 02/12/12
350,000 $0.250 02/12/02 02/12/12
Richard A. Papworth 50,000 $0.885 04/09/01 04/09/06
398,475 $0.885 04/09/01 04/09/11
100,000 $0.680 02/12/02 02/12/12
200,000 $0.250 02/12/02 02/12/12
Igor Krichtafovitch 50,000 $0.885 04/09/01 04/09/06
600,000 $0.680 02/12/02 02/12/12
400,000 $0.250 02/12/02 02/12/12
J. Alexander Chriss 50,000 $0.885 04/09/01 04/09/06
104,000(4) $1.120 04/30/01 04/30/04
104,800(4) $1.120 12/31/01 12/31/04
350,000 $0.680 02/12/02 02/12/12
300,000 $0.250 02/12/02 02/12/12
Jeffrey D. Wilson 50,000 $0.885 04/09/01 04/09/06
200,000(5) $0.710 05/03/01 05/03/11
50,000(6) $0.360 10/10/01 10/10/04
10,000 $0.210 03/31/02 03/31/05
Charles D. Strang 50,000 $0.885 04/09/01 04/09/06
50,000(7) $0.710 05/03/01 05/03/11
Erik W. Black 50,000 $0.885 04/09/01 04/09/06
Charles H. Wellington, Jr. 50,000 $0.885 04/09/01 04/09/06
Vladimir Gorobets 30,000 $0.250 02/12/02 02/12/12
17
- --------------------------------- -------------------- ------------------ ------------------- ------------------
NUMBER
NAME OF OPTIONS STRIKE PRICE DATE OF GRANT EXPIRATION
- --------------------------------- -------------------- ------------------ ------------------- ------------------
Bruce Long 20,000 $0.250 02/12/02 02/12/12
Jacob Oharah 30,000 $0.250 02/12/02 02/12/12
- ---------------
(1) Pursuant to consulting agreements dated as of August 11, 2000
(individually) and January 1, 2001 (as Dwight Tusing & Associates), as
amended April 12, 2001.
(2) Pursuant to an employment agreement dated November 15, 2001 and a
corresponding stock option agreement dated November 15, 2001.
(3) Pursuant to consulting agreements dated as of August 11, 2000
(individually) and January 1, 2001 (as Dwight Tusing & Associates), as
amended April 12, 2001.
(4) Pursuant to a consulting agreement dated as of March 18, 2001; option
grant effective as of April 30, 2001.
(5) Mr. Wilson was granted options to purchase 100,000 shares of common
stock annually for his service as Chairman of TSET's Board of
Directors. Options shown reflect such options for such service for
years 1999 and 2000, respectively.
(6) Pursuant to an agreement dated October 10, 2001 between TSET and Mr.
Wilson, Mr. Wilson was granted an option to purchase 50,000 shares of
common stock in consideration of Mr. Wilson's service in year 2001,
prior to his resignation, as Chairman of TSET's Board of Directors.
(7) Mr. Strang is entitled to receive 50,000 restricted shares of common
stock annually for his service as a member of TSET's Board of
Directors.
WARRANTS
On August 7, 2001, we entered into a Warrant Agreement with The Eagle
Rock Group, LLC, pursuant to which The Eagle Rock Group was granted a ten-year
warrant to acquire 1,400,000 shares of our common stock at an exercise price of
$0.68 per share (the fair market value on the date of grant). The shares
underlying the warrant have piggyback and demand registration rights, as well as
subscription rights in the event that we issue any rights to all of our
stockholders to subscribe for shares of our common stock. In addition, the
warrant contains redemption rights in the event that we enter into a transaction
that results in a change of control of our company. We registered all of the
shares underlying The Eagle Rock Group's warrant in a Form S-1 Registration
Statement filed with the U.S. Securities & Exchange Commission on August 16,
2002.
Effective March 11, 2002, we entered into an agreement with The Eagle
Rock Group extending our relationship with The Eagle Rock Group until March 1,
2003. Pursuant to the agreement, we agreed to grant to The Eagle Rock Group a
ten-year warrant for the right to purchase 2,000,000 shares of our common stock.
Five hundred thousand (500,000) warrant shares are earned over a 12-month period
and will fully vest on March 1, 2003. The remainder of the shares may be earned,
contingent upon the occurrence of various events, including a successful capital
raise, securing contracts with the U.S. military, securing contracts with
consumer-oriented distribution organizations, and the adoption of a
branding/marketing campaign principally developed by The Eagle Rock Group. The
exercise price of these warrant shares will be equal to our common stock's
closing price as of the day an initial letter of intent or term sheet related to
such transaction is executed.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE ARTICLES OF INCORPORATION, BYLAWS AND
FLORIDA LAW
The following provisions of the Articles of Incorporation and Bylaws of
our Company could discourage potential acquisition proposals and could delay or
prevent a change in control of our Company. Such provisions may also have the
effect of preventing changes in the management of our Company, and preventing
shareholders from receiving a premium on their common stock.
AUTHORIZED BUT UNISSUED STOCK. The authorized but unissued shares of
common stock and preferred stock are available for future issuance without
shareholder approval. These additional shares may be utilized for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions and employee benefit plans.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is Merit Transfer
Company, 68 South Main Street, Suite 708, Salt Lake City, UT 84101, Telephone
(801) 531-7558.
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OTHER MATTERS
As of the date of this proxy statement, our Company knows of no
business that will be presented for consideration at the meeting other than the
items referred to above. If any other matter is properly brought before the
meeting for action by shareholders, proxies in the enclosed form returned to our
Company will be voted in accordance with the recommendation of our Board of
Directors or, in the absence of such a recommendation, in accordance with the
judgment of the proxy holder.
INDEPENDENT ACCOUNTANTS
The firm of Grant Thornton, LLP served as our Company's independent
accountants for Fiscal 2002. Representatives of the fiscal year ended June 30,
2000.
A representative of Grant Thornton is expected to be
present andfirm will be givenavailable by
telephone to respond to questions at the Annual Meeting of the Shareholders.
These representatives will have an opportunity to make a statement atif they
desire to do so. The Company has not selected its independent accounts for
Fiscal 2003.
AUDIT FEES. The aggregate fees billed for professional services
rendered was $62,400 for the Annual Meeting. Such representative is expected to
be available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
RATIFICATION OF GRANT THORNTON LLP AS INDEPENDENT ACCOUNTANTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2000.
Grant Thornton, certified public accountants,audit of
Portland, Oregon, audited the Company's consolidatedannual financial statements
for the fiscal year ended June 30, 2000. The report2002 and the reviews of Grant Thornton on suchthe financial statements
dated October 18,
2000 did not contain any adverse opinion or disclaimerincluded in the Company's Forms 10-Q for that fiscal year.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. None of
opinion,the professional services described in Paragraphs (c)(4)(ii) of Rule 2-01 of
Regulation S-X were rendered by the principal accountant for the year ended June
30, 2002.
ALL OTHER FEES. Other than the services described above under the
captions "Audit Fees" and with"Financial Information Systems Design and
Implementation Fees," the exception of "going concern" qualification becauseaggregate fees billed for services rendered by the
principal accountant was $105,000 for the year ended June 30, 2002. These fees
related to the review of the Company's dependence upon outside sourcesRegistration Statements and the
preparation of financing for
continuationfederal and state income-tax returns.
ADDITIONAL INFORMATION
ADVANCE NOTICE PROCEDURES. Under our Company's Bylaws, no business may
be brought before an annual meeting unless it is specified in the notice of operations, was not qualifiedthe
meeting (which includes shareholder proposals that our Company is required to
include in its proxy statement pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934) or modified asis otherwise brought before the meeting by or at the
discretion of the Board or by a shareholder entitled to uncertainty, audit scope, or accounting principles.
During the preceding two years, there have been no
changes in or disagreements with accountants on accounting
or financial disclosure matters. In order to work with
accountants more conveniently situatedvote who has delivered
notice to the Company the
relationship with the Company's principal auditor, Randy
Simpson CPA, P.C., was discontinued as of September 6, 2000
and on that same day the Company engaged Grant Thornton as
independent accountants, all as reported on Form 8-K filed
by the Company with the Securities and Exchange Commission
on September 15, 2000.
Item 3 - OTHER MATTERS
The Board of Directors is unaware of any other matters
to be presented for action at the Annual Meeting; however,
if any other matter is properly presented at the Annual
Meeting, the persons named(containing certain information specified in the enclosed Proxy intendbylaws)
not less than 120 days nor more than 180 days prior to votethe first anniversary of
the preceding year's annual meeting. These requirements are separate from and in
accordance with their best judgment on such matters.
FUTUREaddition to the SEC's requirements that a shareholder must meet in order to have
a shareholder proposal included in our Company's proxy statement.
SHAREHOLDER PROPOSALS BY STOCKHOLDERS
The deadline for Stockholders to submit proposals to be
consideredFOR THE 2003 ANNUAL MEETING. Shareholders
interested in submitting a proposal for inclusion in the Proxy Statementproxy materials for the Year
2001our
2003 Annual Meeting of Stockholdersthe Shareholders may do so by following the procedures
prescribed in SEC Rule 14a-8. To be eligible for inclusion, shareholder
proposals must be received by our Company's Secretary no later than July 1,
2003. Any shareholder proposals should be addressed to our Company's Secretary,
464 Common Street, Suite 301, Belmont, Massachusetts 02478.
PROXY SOLICITATION COSTS. Our Company is January 15, 2001.soliciting the enclosed
proxies. The cost of soliciting proxies in the enclosed form will be borne by
our Company. Officers and regular employees of our Company has tentatively scheduledmay, but without
compensation other than their regular compensation, solicit proxies by further
mailing or personal conversations, or by telephone, telex, facsimile or
electronic means. Our Company will, upon request, reimburse brokerage firms for
their reasonable expenses in forwarding solicitation materials to the Year 2001beneficial
owners of stock.
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INCORPORATION BY REFERENCE. Certain financial and other information
required pursuant to Item 13 of the Proxy Rules is incorporated by reference to
the Company's Annual MeetingReport, which is being delivered to the shareholders with
this proxy statement. In order to facilitate compliance with Rule 2-02(a) of
Stockholders for May 25, 2001.Regulation S-X, one copy of the definitive proxy statement will include a
manually signed copy of the accountant's report.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Jeffrey D. Wilson
ChairmanDaniel R. Dwight
President and
Chief Executive Officer
Lake Oswego, Oregon
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PROXY
TSET, INC.
Two Centerpointe Drive, Suite 580
Lake Oswego, OR 97035
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Jeffrey D. Wilson, Charles
D. Strang, Richard F. Tusing, and Daniel R. Dwight as Proxies, each
with the power to appoint his substitute, and hereby authorizes each
of them to represent and to vote, as designated below, all the shares
of Common Stock of TSET, Inc., a Nevada corporation (the "Company")
held of record by the undersigned on November 22, 2000, at the Annual
Meeting of Stockholders to be held on Friday, December 15, 2000, and
at any adjournment or postponement thereof.
Proposal No. 1 To elect the following directors to serve for a term
of one year or until their successors are duly elected and qualified:
(1) Jeffrey D.Wilson (3) Richard F. Tusing
(2) Charles D.Strang (4) Daniel R. Dwight
o For all nominees
o Withhold all nominees
Withhold authority to vote for any individual nominee.
Write number(s) of nominee(s) _______
Proposal No. 2 Ratification of the appointment of Grant Thornton LLP
as the Company's independent accountants for the fiscal year
June 30, 2000.
o For o Against o Abstain
Note The proxies are authorized to vote in accordance with
their judgment on any matters other than those referred
to herein that are properly presented for consideration
and action at the Special Meeting.
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. If no direction
is given, this proxy will be voted for Proposal No.'s 1, and 2.
All other proxies heretofore given by the undersigned to
vote shares of stock of the Company, which the undersigned
would be entitled to vote if personally present at the
Special Meeting or any adjournment or postponement thereof,
are hereby expressly revoked.
Dated: ___________________________________________, 2000
Signature: _____________________________________________
Printed Name: __________________________________________
Please sign it exactly as name appears hereon. When shares
are held by joint tenants, both should sign. When signing
as attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation or
partnership, please sign in full corporate or partnership
name by an authorized officer or person.
Please mark, sign, date and promptly return the proxy card
using the enclosed envelope. If your address is incorrectly
shown, please print changes.Belmont, Massachusetts
October ___, 2002
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