TSET,SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant To Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material under Rule 14a-12
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2)
Kronos Advanced Technologies, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on the table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] 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:
KRONOS ADVANCED TECHNOLOGIES, INC.
464 COMMON STREET, SUITECommon Street, Suite 301
BELMONT, MASSACHUSETTSBelmont, Massachusetts 02478
Dear Shareholder:
You are cordially invitedStockholder:
On behalf of the Board of Directors, it is my pleasure to attend theinvite you to
Kronos' Annual Meeting of Shareholders
of TSET, Inc.Stockholders. The annual meeting will be held on Wednesday,
NovemberDecember 20, 2002,2005, at 11:9:00 a.m., local time, at Caesar's Palace, 3570 Las Vegas Boulevard South,
Las Vegas, Nevada.the offices of Kirkpatrick &
Lockhart Nicholson Graham, 75 State Street, Boston, Massachusetts.
You will find information regarding the matters to be voted on in the
attached Notice of Annual Meeting of Stockholders and Proxy Statement. A copy of
our Annual Report on Form 10-KSB and Quarterly Report on Form 10-QSB are
enclosed with these materials.
This meeting is for Kronos stockholders. If you attend the meeting in
person, you will need to present proper photo identification and an account
statement showing your ownership of Kronos stock. If you have any questions
regarding your ownership, you may contact our transfer agent, American Stock
Transfer & Trust Company, at 1.212.936.5100 or www.amstock.com.
Your vote is important and I urge you to vote your shares by proxy,
whether or not you plan to attend the 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 and mail the proxy card in the
postage-paid envelope that is provided. If you sign and return your proxy card
without indicating your choices, it will be understood that you wish to have
your shares voted in accordance with the recommendations of the Company's Board
of Directors.
We hope to see you at the meeting.
Sincerely,
/s/ Daniel R. Dwight
-------------------------------------
Daniel R. Dwight
President and Chief Executive Officer
October ___, 2002November 21, 2005
TSET,KRONOS ADVANCED TECHNOLOGIES, INC.
464 COMMON STREET, SUITECommon Street, Suite 301
BELMONT, MASSACHUSETTSBelmont, Massachusetts 02478
NOTICE OF ANNUAL MEETING OF SHAREHOLDERSSTOCKHOLDERS
TO BE HELD NOVEMBERDECEMBER 20, 20022005
NOTICE IS HEREBY GIVEN that the Annual Meeting of ShareholdersStockholders (the
"ANNUAL MEETING""Annual Meeting") of TSET,Kronos Advanced Technologies, Inc. (the "Company"), will be
held on Wednesday, NovemberDecember 20, 2002,2005, at 11:9:00 a.m., local time, at Caesar's Palace, 3570 Las Vegas
Boulevard South, Las Vegas, Nevada,the offices
of Kirkpatrick & Lockhart Nicholson Graham, 75 State Street, Boston,
Massachusetts, for the following purposes, as more fully described in the
attached Proxy Statement:
1. To elect fivefour directors, each until the next annual meeting of
the Company's shareholdersstockholders or until their successors are duly
elected and qualified;
2. To approve an amendment to the Company's Articles of Incorporation
to change the name of the Company to "Kronos Advanced Technologies, Inc."; and
3. To consider any other matters that may properly come before
the Annual Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on October 22,
2002,November 17,
2005, as the record date for determining the shareholdersstockholders entitled to notice of
and to vote at the Annual Meeting or at any adjournment thereof. A complete list
of the shareholdersstockholders entitled to vote at the Annual Meeting will be open for
examination by any shareholderstockholder 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, MeritAmerican Stock Transfer & Trust Company, at 68 South Main Street, Suite 708,
Salt Lake City, Utah 84101.59 Maiden Lane,
New York, NY 10038.
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,
/s/ Daniel R. Dwight
-------------------------------------
Daniel R. Dwight
President and Chief Executive Officer
October ___, 2002November 21, 2005
TABLE OF CONTENTS
PAGE NO.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 DOWhat 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 IFvote?.......................................................1
What if I DO NOT SPECIFY HOW MY SHARES ARE TO BE VOTED?..................2
CANdo not specify how my shares are to be voted?..............2
Can I CHANGE MY VOTE AFTERchange my vote after I RETURN MY PROXY CARD?.......................2
WHAT ARE THE BOARD'S RECOMMENDATIONS?....................................2
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?..............................2return 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........................................................3Beneficial Owners....................................................3
PROPOSAL 1 - ELECTION OF DIRECTORS............................................4
DIRECTORS STANDING FOR ELECTION..........................................4
RECOMMENDATION OF THE BOARD OF DIRECTORS.................................4
DIRECTORSDirectors 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................................15Present Term Expires at the Annual Meeting...............4
Meetings.............................................................6
Committees of the Board of Directors.................................7
Compensation of Directors............................................7
Executive Compensation...............................................8
Stock Option Plan....................................................9
Employment Agreements................................................9
Executive Severance Agreements......................................10
Certain Relationships and Related Transactions......................10
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..................................................19STOCK.................................................11
Common Stock........................................................11
Preferred Stock.....................................................11
Options ...........................................................11
Warrants ...........................................................13
Anti-Takeover Effects of Provisions of the Articles of
Incorporation, Bylaws and Florida Law...............................14
Transfer Agent And Registrar........................................14
Other Matters.......................................................14
Independent Accountants.............................................14
Additional Information..............................................14
i
TSET,KRONOS ADVANCED TECHNOLOGIES, INC.
464 COMMON STREET, SUITECommon Street, Suite 301
BELMONT, MASSACHUSETTSBelmont, Massachusetts 02478
---------------------
PROXY STATEMENT
OCTOBER ___, 2002December 20, 2005
-------------------------
This proxy statement contains information related to the annual meetingAnnual Meeting
of shareholdersStockholders of TSET,Kronos Advanced Technologies, Inc. (the "Company"), to be
held on Wednesday, NovemberDecember 20, 2002,2005, at 11:9:00 a.m., local time, at Caesar's Palace, 3570 Las Vegas Boulevard South, Las
Vegas, Nevada,the offices
of Kirkpatrick & Lockhart Nicholson Graham, 75 State Street, Boston,
Massachusetts, and any postponements or adjournments thereof. The Company is
making this proxy solicitation.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?What is the purpose of the annual meeting?
At the Company's annual meeting, shareholdersstockholders 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.directors. In addition, the Company's management will
report on the performance of the Company during fiscal 20022005 and respond to
questions from shareholders.
WHO IS ENTITLED TO VOTE?stockholders.
Who is entitled to vote?
Only shareholdersstockholders of record on the close of business on the record
date, October 22, 2002,November 17, 2005, 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?Who can attend the meeting?
All shareholdersstockholders as of the record date, or their duly appointed
proxies, may attend the meeting, and each may be accompanied by one guest.meeting. Seating, however, is limited. Admission to the
meeting will be on a first-come, first-serve basis. Registration will begin at
10:9:00 a.m., and seating will begin at 10:9:30 a.m. Each shareholderstockholder 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?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, 46,891,29381,758,067 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 DOHow do I VOTE?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 shareholderstockholder and attend the meeting, you may deliver your completed
proxy card in person or vote by ballot at the meeting. "Street name"
1
shareholdersstockholders who wish to vote at the meeting will need to obtain a proxy form
from the institution that holds their shares.
WHAT IF1
What if I DO NOT SPECIFY HOW MY SHARES ARE TO BE VOTED?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 Board's recommendations.
CANCan I CHANGE MY VOTE AFTERchange my vote after I RETURN MY PROXY CARD?return my proxy card?
Yes. Even after you have submitted your proxy card, you may change your
vote at any time before the proxy is exercised by filing with the Secretary 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 suspended if you attend the
meeting in person and so request, although attendance at the meeting will not by
itself revoke a previously granted proxy.
WHAT ARE THE BOARD'S RECOMMENDATIONS?What are the Board's recommendations?
Unless you give other instructions on your proxy card, the persons
named as proxy holders on the proxy card will vote in accordance with the
recommendation of the Board of Directors. The Board's recommendation is set
forth together with the description of each item in this proxy statement. In
summary, the Board recommends a vote:
o FORFor the election of the nominated slate of directors (see page
4);
o 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. (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.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 fivefour 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 OWNERSBeneficial Owners
The following table presents certain information regarding the
beneficial ownership of all shares of common stock at October 14, 2002November 17, 2005 for each
executive officer and director of our companyCompany 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 46,891,29381,758,067
common shares issued and outstanding at October 14, 2002November 17, 2005 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 PERCENTCommon Stock
Beneficially Owned
-------------------------------
Name and Address Number Percent
- ---------------- ------ ------------------------------------------------------- -------------------------------
HoMedics, Inc. 40,000,000(1) 32.9%
3000 Pontiac Trail
Commerce Township, MI 48390
Cornell Capital Partners, LP 6,750,000 7.6%
101 Hudson Street - Suite 3700
Jersey City, NJ 07302
Daniel R. Dwight 3,215,818(1) 6.9%5,988,132(2) 6.8%
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) *3,401,208(3) 4.0%
464 Common Street
Suite 301
Belmont, MA 02478
James P. McDermott 294,118 *797,077(4) 1.0%
464 Common Street
Suite 301
Belmont, MA 02478
All Officers and Directors of TSET 6,732,151(7) 14.1%Milton M. Segal 388,000(5) 0.5%
464 Common Street
Suite 301
Belmont, MA 02478
57,324,417(6) 44.1%
- ---------------
* Less than 1%.-----------------------
(1) Includes optionswarrants to purchase 1,321,70040,000,000 shares of common stock that can be
acquired within sixty days of October 14, 2002November 17, 2005
(2) Includes options to purchase 473,0004,786,206 shares of common stock that can be
acquired within sixty days of October 14, 2002.November 17, 2005.
(3) Includes options to purchase 448,4752,548,456 shares of common stock that can be
acquired within sixty days of October 14, 2002.November 17, 2005.
(4) Includes options to purchase 310,000502,959 shares of common stock that can be
acquired within sixty days of October 14, 2002.November 17, 2005.
(5) Includes options to purchase 50,000388,000 shares of common stock that can be
acquired within sixty days of October 14, 2002.November 17, 2005.
(6) Includes warrants and options to purchase 100,00048,225,621 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.November 17, 2005.
3
PROPOSAL 1 - ELECTION OF DIRECTORS
DIRECTORS STANDING FOR ELECTIONDirectors Standing for Election
The Board of Directors of the Company consists of eight seats. Each
director holds office until the first annual meeting of shareholdersstockholders 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. BlackMilton J. Segal 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 a director for any reason (which
is not anticipated), the proxy will be voted for the election of any substitute
nominee designated by the Board of Directors. The nominees for directors have
previously served as members of the Board of Directors of the Company and have
consented to serve such term.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTERecommendation Of The Board Of Directors
The Board of Directors unanimously recommends a vote "FOR" THE ELECTION
OF EACH OF THE NOMINEES
DIRECTORSthe election
of each of the nominees
Directors - PRESENT TERM EXPIRES AT THE ANNUAL MEETING
DANIELPresent Term Expires at the Annual Meeting
Daniel R. DWIGHTDwight Daniel R.R Dwight has served as a Director
PRESIDENT AND CHIEF EXECUTIVEPresident and Chief Executive of TSETKronos since NovemberDecember 2000, and as
Officer a
OFFICER Director and Chief Executive Officer of
AGE 42Age 45 Kronos Air Technologies since January
2001. Effective October 16, 2001, Mr.
Dwight was appointed President and Chief
Executive Officer of the Company.Kronos. Effective
January 1, 2004, Mr. Dwight was appointed
Acting Chief Financial Officer of Kronos.
He 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 was an independent management
consultant who provided 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
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 1989Graduate School of Business and
a B.S. in Accounting with Honors from the
University of Vermont in 1982.and is a member of
the Association of Heating, Ventilation,
Air conditioning and Refrigeration
Engineers, Inc. (ASHRAE).
4
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 in
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. TUSINGTusing Richard F. Tusing has served as a Director
CHIEF OPERATING OFFICERChief Operating Officer of TSETKronos since October 2000 and as a
AGE 45Age 47 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 hasPrior to his services to
Kronos, Mr. Tusing 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.region. 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 became a Director of the
AGE 32 Company in June 2001, was appointed
Executive Vice-President - Business
Development of the Company 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.
JAMESJames P. MCDERMOTTMcDermott James P. McDermott became a Director of
AGE 40 the CompanyAge 43 Kronos in July 2001. Mr. McDermott has
over 1822 years of financial and operational
problem-solving experience. Mr. McDermott
is currently President and CEO AF&L, Inc.
and its wholly-owned subsidiaries. Through
its wholly-owned subsidiaries, AF&L
provides speciality insurance products to
the seniors market place. Mr. McDermott is
a co-founder and is also 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
5
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.
MEETINGSMilton J. Segal Milton J. Segal became a Director of
Age 60 Kronos in September 2003. Mr. Segal has
over 35 years of corporate governance,
entrepreneurial and investment banking
expertise. Mr. Segal founded the
investment banking firm of M.J. Segal
Associates in 1987. Since 1992, the firm
has specialized in researching private
equity opportunities in both private and
emerging growth public companies. The
Segal group caters primarily to
institutional clients, private investment
partnerships and professional money
managers. After starting his career as a
stockbroker and financial planner in 1966
with Philadelphia based New York Stock
Exchange firm, Robinson & Company, Mr.
Segal joined Josephthal & Co. Inc., a
leading full-service investment banking
and brokerage firm in New York. Mr. Segal
has served as senior vice president of the
congressionally charted National
Corporation for Housing Partnerships in
Washington, D. C. and president of its
investment banking subsidiary and has
qualified as a NASD broker/dealer
financial principal. Originally from
Philadelphia, Mr. Segal attended the
Wharton School of the University of
Pennsylvania and is a graduate of The New
York Institute of Finance.
Meetings
During the Company's fiscal year ending June 30, 20022005 ("FISCAL 2002"Fiscal 2005")
the Board of Directors met on 10ten 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
AUDIT COMMITTEE. We currently do not have6
Committees of the Board of Directors
Audit Committee. On September 10, 2003, the Board of Directors
established an Audit Committee consisting of at least two independent members of
the Board of Directors. The Audit Committee is charged with providing
independent and objective oversight of the accounting functions and internal
controls of the Company and its subsidiaries to ensure the objectivity of the
Company's financial statements. Messrs. McDermott and Segal are the current
members of the Audit Committee. 7
COMPENSATION.During the year the Audit Committee held three
meetings. Each member attended at least 75% of the meetings.
Compensation. On September 11, 2001, the Board of Directors established
a Compensation Committee consisting of at least 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'sKronos' general compensation strategy,
reviewing salaries for officers, reviewing employee benefit plans, and
administering TSET'sKronos' stock incentive plan.
COMPENSATION OF DIRECTORS
CASH COMPENSATION.plan, once adopted and implemented.
Messrs. McDermott and Segal are the current members of the Compensation
Committee. During the year the Compensation Committee held two meetings. Each
member attended at least 75% of the meetings.
Executive Committee. On September 4, 2003, the Board of Directors
established an Executive Committee. The purpose of the Executive Committee is to
exercise all the powers and authority of the Board of Directors in the
management of the property, affairs and business of the Company. The Committee
shall consist of no fewer than three members, including the Chief Executive
Officer of the Company. Messrs. Dwight, McDermott, Segal and Tusing are the
current members of the Executive Committee.
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 of the 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 prospectus,filing, no
director receives any salary or other form 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.Share Based Compensation. Each non-executive director is entitled to
receive annually 50,000 restricted shares70,000 fully-vested stock option grants, 7,000 stock option
grants per meeting attended via conference call, 14,000 option grants per
meeting attended in person, 3,500 option grants per meeting for participation on
a committee or 5,000 stock option grants per meeting for chairing a committee,
as compensation for their services as members of our commonBoard of Directors.
Effective August 6, 2003, executive directors, including Messrs. Dwight and
Tusing are not being compensated separately for their services as members of our
Board of Directors.
For the twelve month period ending June 30, 2005, Messrs. McDermott and
Segal have earned 189,000, each stock either granted as shares or in the
form of fully-vested options as compensation for their services
as members of our Board of Directors.
The Chairman of our Board of Directors is entitled to
receive annually an additional 50,000 shares of our common stock, either granted
as shares or in the form of fully-vested options, as compensation for his
services as Chairman of our Board of Directors. As of the date 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 member of our Board of
Directors. Messrs. Tusing and Dwight have each been granted 50,000 shares of our
common stock as compensation for their services as members of our Board of
Directors.
EXECUTIVE COMPENSATION7
Executive Compensation
The following table sets forth compensation for the fiscal year ended
June 30, 20022005 for our executive officers:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------------- ---------------------------------------------------
AWARDS PAYOUTS
------ -------
RESTRICTED SECURITIES ALL
OTHER STOCK UNDERLYINGAnnual Compensation Long-Term Compensation
--------------------------------------- --------------------------------------------------------
Restricted Securities
Name and Other Stock Underlying LTIP OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS/SAR'S PAYOUTS COMPENSATION
FISCAL POSITION YEARAll Other
Principal Salary Bonus Compensation Awards Options/SARS Payouts Compensation
Fiscal Position Year $ $ $ $ # $ $
- ------------------- ----------------------- ----- --------- ------------------- -------------- ----------- ------------- ------------------------ -------- --------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- ------------------- ----------------------- ----- --------- ------------------- -------------- ----------- ------------- ------------------------ -------- --------------
Daniel R. 2005 180,000 67,500(4) 14,689 -- 750,000 -- --
Dwight, 2002 112,5002004 180,000 -- 7,62014,292 -- 2,600,000726,206 -- --
President and 20012003 180,000 118,800(5) 12,288 -- 660,000 -- --
Chief
Executive
Officer(1)
Richard F. 2005 160,000 37,530(4) -- -- 450,000 -- --
Tusing, Chief 2004 160,000 -- -- -- 971,756 -- --
Operating 2003 80,000 -- -- -- -- -- --
Officer(2)
Richard A. 2005 -- -- -- -- -- -- --
Papworth Chief Executive 20002004 120,000 -- -- -- -- -- --
--
Officer(1)
Richard F. Tusing, 2002 -- -- -- -- -- -- --
Chief Operating 2001 -- -- -- -- -- -- --
Officer(2) 2000 -- -- -- -- -- -- --
Richard A. Papworth, 2002 120,000(3) --Financial 2003 120,000 21,000(5) -- -- 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(7)
Erik W. Black, 2002 60,000(14) -- 6,000 -- -- -- --
Former Executive 2001 100,000 -- 6,000 -- 50,000(15) -- --
Vice-President - 2000 4,167(16) -- 4,500(17) -- -- -- --
Business
Development(13)Officer(3)
8
- --------------------
(1) Mr. Dwight became President and Chief Executive Officer of TSETKronos effective
October 16, 2001. He executed a two year employment contract on December 15,
2001. His contract was renewed on August 13, 2003 and again on August 15,
2004 and August 15, 2005 by the Board of Directors. His annual salary is
$180,000.
(2) Mr. Tusing became Chief Operating Officer of TSETKronos effective January 1,
2002. Mr. Tusing continues to be compensated pursuant to his consulting
agreement with TSET untilexecuted an employment agreementcontract effective January 1, 2003.
The Board of Directors renewed Mr. Tusing's Employment Agreement on October
1, 2004 and again on October 1, 2005. Prior to this date, Mr. Tusing was
compensated as a consultant to the Company. His annual salary is entered into by
the parties.$160,000.
(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, datedthe Company's Chief Financial Officer from May 19, 2000. The options were fully vested as of April 10, 2001 and the
exercise price is equal to $0.885 per share, which2000
until January 1, 2004. His annual salary was the closing
price of our common stock as quoted on the Over-the-Counter Bulletin
Board on April 9, 2001. In addition,$120,000. On July 1, 2004 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 toended his employment agreement, Mr. Papworth received
14,815 restricted shares of our common stock. The $50,000 value is
determined by multiplyingwith Kronos.
(4) Cash Bonuses earned in 2005 were paid through 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 sharesissuance of common stock
granted to Mr. Wilson pursuant toat the letter agreement are void
as of April 10, 2001, the effective date of the letter agreement. Mr.
Wilson was granted 50,000 optionsmarket closing price 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,June 30, 2005.
(5) Cash Bonuses earned in connection with his service as Chairman of the Board of Directors2003 have been included 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 consisted of ten months at $12,500
and two months at $15,000. Mr. Wilson deferred all salary during fiscal
years 1999 and 2000 and was entitled to receive 12% annual interest on
all deferred amounts. Pursuant to an agreement between TSET and Mr.
Wilson effective 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 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 was entitled to
receive 12% annual interest on all deferred compensation. Pursuant to
an agreement between TSET and Mr. Wilson dated 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.
(12) As a signing bonus to his employment agreement, Mr. Wilson's nominee,
The Pangaea Group LLC, received 1,000,000 restricted shares of our
common stock. Such stock 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 was obtained by multiplying the vested shares with
the closing market price of our unrestricted common stock ($1.00 per
share) on the date such shares were granted (April 20, 1999).
Notwithstanding the above calculation, we expensed such stock
transaction at a value of $300,000, or $0.30 per share. TSET has
determined that the issuance of the 1,000,000 shares of common stock is
void as of April 16, 1999, the effective date of Mr. Wilson's
employment 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 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 a one-time relocation allowance of $5,000, of which $4,500 was
received in fiscal year 2000.
9
Notes Payable.
AGGREGATED OPTIONS/SAR EXERCISES
IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTIONS/SAR VALUES(1)
VALUE OF
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES ACQUIRED ON VALUE OPTIONS/SAR'SSARS AT FISCAL OPTIONS/SAR'SSARS AT
NAME ON EXERCISE VALUE REALIZED ($) FISCAL YEAR END(1) FISCAL YEAR END(2)
---- -------- ------------ ------------------ ------------------- ------------------- ----------------- ----------------- -------------------------- ---------------------
Daniel R. Dwight, -0- -0- Exercisable: 1,321,700 $04,786,206 -0-
President and Unexercisable: 1,600,000 $0-0- -0-
Chief Executive
Officer(3)
Richard F. Tusing -0- -0- Exercisable: 473,000 $02,548,456 -0-
Tusing, 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 $0
Business Development(7)Operating
Officer(4)
- ---------------------------------8
(1) These grants represent options to purchase common stock. No SAR's have been
granted.
(2) The value of the unexercised in-the-money options were calculated by
determining the difference between the fair market value of the common
stock underlying the options and the exercise price of the options as of
June 30, 2002.2005.
(3) Mr. Dwight became President and Chief Executive Officer of TSETKronos effective
November 15,October 16, 2001.
(4) Mr. Tusing became Chief Operating Officer of TSETKronos effective January 1,
2002.
(5) Effective October 10, 2001, Mr. Wilson resigned as Chairman of the
Board of Directors and Chief Executive Officer of TSET pursuant to a
mutual agreement between TSET and Mr. Wilson.
(6) TSET has determined that the options to purchase 350,000 shares of
common stock granted to Mr. Wilson pursuant to a letter agreement dated
April 10, 2001 are void as of April 10, 2001, the effective date of the
letter agreement. Of these options to purchase 350,000 shares of common
stock, options to purchase 125,000 shares of common stock were
exercisable at fiscal year end 2001 and 225,000 options were
unexercisable at fiscal year end 2001.
(7) Mr. Black resigned as Executive Vice President - Business Development
of TSET effective as of December 31, 2001.
10
OPTION/Option/SAR GRANTS TABLEGrants Table
% TOTAL
NO. OF SECURITIES OPTIONS/SAR'S
UNDERLYING GRANTED TO
OPTIONS/SAR'S EMPLOYEES IN EXERCISE OR BASE PRICE
NAME GRANTEDTotal
No. of Securities Options/SAR's
Underlying Granted to
Options/SAR's Employees in Exercise or Base Price
Name Granted (#) FISCAL YEARFiscal Year (%) ($ PER SHARE) EXPIRATION DATE
---- ----------- --------------- ------------- ---------------per Share) Expiration Date
- -------------------------- ----------------- ---------------- ---------------------- --------------------
Daniel R. Dwight 93,600(2)50,000 1.5% $0.960 November 15, 2004$0.890 April 9, 2006
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)500,000 8.2% $0.420 NovemberDecember 15, 2011
250,000(3)250,000 4.1% $0.660 NovemberDecember 15, 2011
250,000(3)250,000 4.1% $0.560 NovemberDecember 15, 2011
660,000 26.0% $0.190 March 21, 2013
726,206 22.4% $0.180 March 22, 2014
750,000 43.5% $0.125 June 30, 2015
Richard F. Tusing 246,500(5) 4.1% $0.960 June 30, 200550,000 1.5% $0.890 April 9, 2006
Chief Operating Officer(4)Officer(2) 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 9,126,700 5.0% $0.960 June 30, 2006
Former Chairman of the Board 10,000 0.1% $0.210971,756 30.0% $0.180 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, 201222, 2014
450,000 26.1% $0.125 June 30, 2015
- ----------------------------------------------------------------
(1) Mr. Dwight became President and Chief Executive Officer of TSETKronos Advanced
Technologies 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 TSETKronos Advanced Technologies
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 PLANStock Option Plan
On February 12, 2002, the Board of Directors approved the TSET, Inc.
Stock Option Plan under which the Company'sKronos' key employees, consultants, independent
contractors, officers and directors are eligible to receive grants of stock
options. The CompanyKronos has reserved and issued a total of 6,250,000 shares of common
stock under the Stock Option Plan. It is presently administered by the Company'sKronos' 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 shares issued pursuant thereto.
EMPLOYMENT AGREEMENTS
The Employment Agreement of Jeffrey D. Wilson, our former Chairman and
Chief Executive Officer, was dated as of April 20, 1999 and continued for an
"evergreen" term of five years unless Mr. Wilson provided at least 60 days'
prior written notice of his resignation. Such agreement provided for base cash
compensation 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-month period, Mr. Wilson's base cash
compensation was to increase to $15,000 per month, and during the third 12-month
period such base cash compensation was to increase to $20,000 per month. Mr.
Wilson 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 of
Directors, in consideration of his previous deferral of such compensation. We
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, received a signing bonus of 100,000
fully vested and non-forfeitable restricted shares of our common stock; The
11
Pangaea Group, LLC received an additional 900,000 restricted shares of our
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. Mr. Wilson was 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 prospectus, we
have not adopted or implemented any such plans. Mr. Wilson had "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 was to be borne by us. As of the date of this
prospectus, Mr. Wilson had not exercised such registration rights. Mr. Wilson 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 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 Letter 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 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.Agreements
Daniel R. Dwight, our President and Chief Executive Officer, and our
companyCompany entered into an Employment agreement effective as of NovemberDecember 15, 2001.
The initial term of Mr. Dwight's Employment Agreement iswas for 2 years and will
automatically renew for successive 1 year terms unless the CompanyKronos 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. The Board of Directors renewed Mr.
Dwight's Employment Agreement on August 13, 2003 and again on August 15, 2004
and August 15, 2005. 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 CompanyKronos 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 as9
Richard F. Tusing, our Chief Executive Officer.
Richard A. Papworth,Operating Officer, and our Chief Financial Officer, hasCompany entered
into an Employment Agreement datedagreement effective as of May 19, 2000, which continues for an "evergreen"January 1, 2003. The initial term
of twoMr. Tusing's Employment Agreement is for 2 years and will automatically renew
for successive 1 year terms unless Kronos or Mr. Papworth provides at least 90 days' priorTusing provide the other party
with written notice within 3 months of his resignation.the end of the initial term or any
subsequent renewal term. The Board of Directors renewed Mr. Papworth'sTusing's Employment
Agreement on October 1, 2004 and again on October 1, 2005. Mr. Tusing's
Employment Agreement provides for base cash compensation in the amount of $10,000$160,000 per month, a signing bonus of $50,000
worth of fully vested and non-forfeitable restricted shares of our common stock,
plus a year-end bonus payable in cash and additional shares, in a "blended"
amount to be determined.year.
Mr. PapworthTusing 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 prospectus, we have not adopted or implemented any such plans.
Mr. Papworth 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 Financial Officer.
On April 10, 2001, we entered into a Letter Agreement with Mr. Papworth
amending Mr. Papworth's Employment Agreement. Pursuant to the Letter Agreement,
Mr. Papworth waived the anti-dilution provision of his Employment Agreement in
consideration 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 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.
12
EXECUTIVE SEVERANCE AGREEMENTS
The Employment Agreement of Richard A. Papworth, our Chief Financial
Officer, provides that upon the occurrence of any transaction involving a change
of control of TSET pursuant to which his employment is terminated, any shares of
our 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 us in any 401(k), savings,
profit-sharing, or other similar plan or benefit program.employment.
Executive Severance Agreements
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,Kronos, 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.
AsThe Employment Agreement of Richard F. Tusing, our Chief Operating
Officer, provides that, upon the record date, we haveoccurrence of any transaction as defined as a
"change of control" of Kronos that is not adopted any separate executive
severance agreements.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSapproved by the Board of Directors,
Mr. Tusing 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. Tusing's employment
term.
Certain Relationships and Related Transactions
We believe that all prior related party transactions have been entered
into upon terms no less favorable to us than those that could be obtained from
unaffiliated third parties. Our 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, Jeffrey D. Wilson's
nominee, The Pangaea Group LLC, received a signing bonus of 100,000 restricted
shares of our 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 our common stock, vesting at the rate of 100,000 shares per
month over the 9-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 the Employment Agreement, and that these
shares of common stock are treated as if they were never issued.
On August 11, 2000,March 31, 2004, we entered into a Consulting Agreementpromissory notes (the "Notes") with
Daniel R. Dwight and Richard F. Tusing and Daniel R. Dwight, pursuant to which Messrs. Tusing and Dwight will
provide management, financial, strategic, and other consulting services to us in exchange for consulting feespast due compensation,
expenses and interest due and payable for $363,139 and $485,883, respectively.
The Notes bear a simple interest rate 1% per month and call for aggregate
monthly principal and interest payments $6,718 and $8,989, respectively, for
each month in which the Company's beginning cash balance equals or exceeds
$200,000. Subject to certain conditions, including default, these Notes become
payable in cash and optionsfull. In the event of our common stock.
Out-of-pocket expenses incurred by Messrs. Tusing and Dwight in connection with
provision of their services under the Consulting Agreement will also be
reimbursed by us. The Consulting Agreement was entered into prior to Messrs.
Tusing's and Dwight's appointment as members of our Board of Directors in
October 2000 and was negotiated at arm's length. We believe that the
compensation and other provisionsa debt or equity financing, 20% of the Consulting Agreement are fair,
reasonable, customary,proceeds
derived from the financing will be used to pay down the outstanding interest and
favorable to us. The Consulting Agreement was renewedprincipal obligations. As a result of a Cornell Capital financing, 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 strike price of the options granted as partial compensation thereunder.
Pursuant to the
Company on March 7, 2005, the Notes are due and Mr. Dwight entering into his Employment Agreement,
effective November 15, 2001, Mr. Dwight's Consulting Agreement is no longerpayable in effect. Pursuant to his Consulting Agreement, Mr. Dwight earned $208,400 and
$179,600, respectively, in the years endedfull. As of June 30,
2001 and 2002, respectively.
Of the aggregate amount of $388,000, we have paid $202,400 to Mr. Dwight and the
balance of $185,600 remains payable. Mr. Tusing's Consulting Agreement is
currently in effect. The initial term of Mr. Tusing's Consulting Agreement2005, $348,513 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 servicesstill outstanding 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 at 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 Mr. 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.
15Notes.
10
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, 46,891,293November 17, 2005 81,758,067 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 STOCKCommon 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 in any election of directors may elect all of the 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 STOCKPreferred 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 prospectus. The Board of Directors is authorized, subject to
any limitations prescribed by 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 series; to fix the rights, powers, preferences, and
privileges of the shares of such series, without further vote or 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 determined by the Board of Directors. There are no
present plans by the Board of Directors to issue 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.Options
As of October 9, 2002,November 17, 2005, 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:
1611
- --------------------------------- -------------------- ------------------------------------------------------- ------------------- ------------------ NUMBER
NAME OF OPTIONS STRIKE PRICE DATE OF GRANT EXPIRATION-------------------------- -------------------------
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 11/15/04April 9, 2001 April 9, 2006
1,000,000 $0.680 02/12/02 02/12/February 12, 2002 February 12, 2012
600,000 $0.250 12/12/02 02/12/February 12, 500,000(2)2002 February 12, 2012
500,000 $0.420 11/15/01 11/15/11
250,000(2)December 15, 2001 December 15, 2011
250,000 $0.660 December 15, 2001 December 15, 2011
250,000 $0.560 11/15/01 11/15/11
250,000(2) $0.660 11/15/01 11/15/11December 15, 2001 December 15, 2011
660,000 $0.185 March 21, 2003 March 21, 2013
726,206 $0.180 March 22, 2004 March 22, 2014
750,000 $0.125 June 30, 2005 June 30, 2015
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 06/30/05April 9, 2001 April 9, 2006
600,000 $0.680 02/12/02 02/12/February 12, 2002 February 12, 2012
350,000 $0.250 02/12/02 02/12/February 12, 2002 February 12, 2012
126,700 $0.960 June 30, 2006 June 30, 2006
971,756 $0.180 March 22, 2004 March 22, 2014
450,000 $0.125 June 30, 2005 June 30, 2015
Igor Krichtafovitch 50,000 $0.885 April 9, 2001 April 9, 20/06
600,000 $0.680 February 12, 2002 February 12, 2012
400,000 $0.250 February 12, 2003 February 12, 2012
600,000 $0.185 March 21, 2003 March 21, 2013
500,000 $0.150 May 7, 2003 May 7, 2013
180,726 $0.180 March 22, 2004 March 22, 2014
525,000 $0.125 June 30, 2005 June 30, 2015
Wall Street Group 476,190 $0.070 July 15, 2005 July 15, 2015
J. Alexander Chriss 50,000 $0.885 April 9, 2001 April 9, 2006
350,000 $0.680 February 12, 2002 February 12, 2012
300,000 $0.250 February 12, 2002 February 12, 2012
405,000 $0.185 March 21, 2003 March 21, 2013
247,834 $0.180 March 22, 2004 March 22, 2014
Richard A. Papworth 50,000 $0.885 04/09/01 04/09/06April 9, 2001 April 9, 2006
398,475 $0.885 04/09/01 04/09/11April 9, 2001 April 9, 2011
100,000 $0.680 02/12/02 02/12/February 12, 2002 February 12, 2012
200,000 $0.250 02/12/02 02/12/February 12, Igor Krichtafovitch 50,000 $0.885 04/09/01 04/09/06
600,000 $0.680 02/12/02 02/12/2002 February 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 02/12/122012
300,000 $0.250 02/12/02 02/12/12$0.185 March 21, 2003 March 21, 2013
Jeffrey D. Wilson 50,000 $0.885 04/09/01 04/09/06
200,000(5)April 9, 2001 April 9, 2006
200,000 $0.710 05/03/01 05/03/11
50,000(6) $0.360 10/10/01 10/10/04May 3, 2001 May 3, 2011
23,014 $0.590 October 15, 2001 Ocotber 15, 2006
10,000 $0.210 03/31/02 03/31/05March 31, 2002 March 31, 2007
50,000 $0.410 April 30, 2002 April 30, 2007
10,000 $0.190 June 30, 2002 June 30, 2007
10,000 $0.140 Septemner 30, 2002 September 30, 2007
42,000 $0.220 October 15, 2002 Ocotber 15, 2007
33,425 $0.180 December 30, 2002 December 30, 2007
50,000 $0.185 June 30, 2003 June 30, 2008
James P. McDermott 50,000 $0.280 July 30, 2001 July 30, 2006
20,959 $0.150 December 30, 2002 December 30, 2007
30,000 $0.150 August 6, 2003 August 6, 2008
213,000 $0.200 July 1, 2004 July 1, 2009
189,000 $0.125 July 1, 2005 July 1, 2010
Spencer Browne 213,000 $0.200 July 1, 2004 July 1, 2009
154,000 $0.125 July 1, 2005 July 1, 2010
Milton J. Segal 199,000 $0.200 July 1, 2004 July 1, 2009
189,000 $0.125 July 1, 2005 July 1, 2010
Charles D. Strang 50,000 $0.885 04/09/01 04/09/06
50,000(7)April 9, 2001 April 9, 2006
50,000 $0.710 05/03/01 05/03/11May 3, 2001 May 3, 2011
50,000 $0.280 August 14, 2002 August 14, 2007
18,904 $0.150 December 30, 2002 December 30, 2007
21,000 $0.150 August 6, 2003 August 6, 2008
50,000 $0.200 July 1, 2004 July 1, 2009
50,000 $0.125 July 1, 2005 July 1, 2010
Erik W. Black 50,000 $0.885 04/09/01 04/09/06April 9, 2001 April 9, 2006
29,041 $0.160 June 1, 2001 June 1, 2006
50,000 $0.380 December 30, 2002 December 30, 2007
30,000 $0.150 August 6, 2003 August 6, 2008
39,667 $0.200 October 6, 2003 October 6, 2008
12
- ------------------------------------- ------------------- ------------------ -------------------------- -------------------------
Number
Name of Options Strike Price Date of Grant Expiration
- ------------------------------------- ------------------- ------------------ -------------------------- -------------------------
William Poster 35,000 $0.280 July 30, 2002 July 30, 2007
35,575 $0.150 July 30, 2003 July 30, 2008
50,000 $0.200 July 1, 2004 July 1, 2009
50,000 $0.125 July 1, 2005 July 1, 2010
Vladimir Gorobets 30,000 $0.250 February 12, 2002 February 12, 2012
100,000 $0.185 March 21, 2003 March 21, 2013
Jacob Oharah 30,000 $0.250 February 12, 2002 February 12, 2012
50,000 $0.185 March 21, 2003 March 31, 2013
Sergey Karpov 30,000 $0.200 April 7, 2004 April 7, 2014
Vladimir Bibikov 25,000 $0.220 June 30, 2004 June 30, 2014
Terence Tam 25,000 $0.200 April 21, 2004 April 21, 2014
Maciej Ziomkowski 25,000 $0.130 Novermber 1, 2004 December 1, 2014
Christopher Martin 25,000 $0.130 Novermber 1, 2004 December 1, 2014
Charles H. Wellington, Jr. 50,000 $0.885 04/09/01 04/09/06
Vladimir GorobetsApril 9, 2001 April 9, 2006
Capitol Partners 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$0.360 December 27, 2001 December 27, 2011
Daniel Gladkowski 18,000 $0.100 April 1, 2003 April 1, 2008
- ---------------
(1) Pursuant to consulting agreements dated as ofWarrants
In 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.
EffectiveIn 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 2,000,000500,000 shares of our common stock.
Five hundred thousand (500,000)In May 2003, Kronos entered into a Master Loan and Investment Agreement
with a strategic customer, HoMedics, Inc., for $2.5 million in financing,
including $2.4 million in secured debt financing and $100,000 for the purchase
of warrants. In connection with this Agreement, we agreed to grant HoMedics a
ten-year warrant for the right to purchase 13.4 million 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.our common
stock. The exercise price was set at the market price at the time of theseclosing
($0.10).
In October 2004, in connection with the First Amendment to Master Loan
and Investment Agreement with HoMedics, agreed to grant to HoMedics a ten-year
warrant for the right to purchase 26.5 million shares will beof our common stock. The
exercise price is $0.10 per share. In consideration for the warrant, HoMedics
delivered to Kronos $75,000 by funding the closing fees owed by Kronos and
HoMedics agreed to amend two (2) warrants to purchase 13.4 million shares of
Kronos' common stock previously issued by Kronos by removing the anti-dilution
protection previously granted to HoMedics. Kronos agreed to include new
anti-dilution protection in the new warrant. HoMedics is entitled, under certain
circumstances, to anti-dilution protection in order to maintain beneficial
ownership of Kronos equal to our common stock's
closing price as30%. HoMedics may not be diluted below 30% for any
funds raised at less than $0.20 per share, excluding options or shares issued to
management, directors, and consultants in the normal course of business or
shares issued to Cornell Capital in repayment of the day an initial lettertwo promissory notes. There
are no anti-dilution measures for funds raised at greater than $0.20 per share.
In addition, Kronos agreed to grant HoMedics piggy-back registration rights and
one (1) demand registration right with respect to any shares of intent or term sheet relatedcommon stock of
Kronos that HoMedics may acquire pursuant to such transaction is executed.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE ARTICLES OF INCORPORATION, BYLAWS AND
FLORIDA LAWthe two (2) previously issued
warrants and the warrant issued in October 2004 in connection with the First
Amendment to Master Loan and Investment Agreement. HoMedics also agreed not to
exercise any warrants until one year after the effective date of the
registration statement to be filed pursuant to the Investor Registration Rights
Agreement with Cornell Capital.
13
Anti-Takeover Effects of Provisions of the Articles of Incorporation, Bylaws and
Nevada 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
shareholdersstockholders from receiving a premium on their common stock.
AUTHORIZED BUT UNISSUED STOCK.Authorized but Unissued Stock. The authorized but unissued shares of
common stock and preferred stock are available for future issuance without
shareholderstockholder 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 REGISTRARTransfer Agent And Registrar
The transfer agent and registrar for our common stock is MeritAmerican Stock
Transfer & Trust Company, 68 South Main Street, Suite 708, Salt Lake City, UT 84101,59 Maiden Lane, New York, NY 10038, Telephone
(801) 531-7558.
18
OTHER MATTERS1.212.936.5100.
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,stockholders, 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 ACCOUNTANTSIndependent Accountants
The firm of Grant Thornton,Sherb & Co., LLP served as our Company's independent
accountants for Fiscal 2002.2005. Representatives of the firm will be available by
telephone to respond to questions at the Annual Meeting of the Shareholders.Stockholders.
These representatives will have an opportunity to make a statement if they
desire to do so.
The Company has not selected its independent accounts for
Fiscal 2003.
AUDIT FEES.Audit Fees. The aggregate fees billed for professional services
rendered was $62,400$62,500 for the audit of the Company's annual financial statements
for the year ended June 30, 20022005 and the reviews of the financial statements
included in the Company's Forms 10-Q10-QSB for that fiscal year.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES.Financial Information Systems Design and Implementation Fees. None of
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.2005.
All Other Fees. Other than the services described above under the
captions "Audit Fees" and "Financial Information Systems Design and
Implementation Fees," the aggregate fees billed for services rendered by the
principal accountant was $105,000$76,665 for the year ended June 30, 2002.2005. These fees
related to the review of the Company's Registration Statements and the
preparation of federal and state income-tax returns.
ADDITIONAL INFORMATION
ADVANCE NOTICE PROCEDURES.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 the
meeting (which includes shareholderstockholder 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 is otherwise brought before the meeting by or at the
discretion of the Board or by a shareholderstockholder entitled to vote who has delivered
notice to the Company (containing certain information specified in the bylaws)
not less than 120 days nor more than 180 days prior to the first anniversary of
the preceding year's annual meeting. These requirements are separate from and in
addition to the SEC's requirements that a shareholderstockholder must meet in order to have
a shareholderstockholder proposal included in our Company's proxy statement.
SHAREHOLDER PROPOSALS FOR THE 2003 ANNUAL MEETING. ShareholdersStockholder Proposals for the 2006 Annual Meeting. Stockholders
interested in submitting a proposal for inclusion in the proxy materials for our
2003 Annual Meeting of the ShareholdersStockholders may do so by following the procedures
prescribed in SEC Rule 14a-8. To be eligible for inclusion, shareholderstockholder
proposals must be received by our Company's Secretary no later than July 1,
2003.22,
2006. Any shareholderstockholder proposals should be addressed to our Company's Secretary,
464 Common Street, Suite 301, Belmont, Massachusetts 02478.
PROXY SOLICITATION COSTS.14
Proxy Solicitation Costs. Our Company is 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 may, 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 beneficial
owners of stock.
19
INCORPORATION BY REFERENCE.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 Report, which is being delivered to the shareholdersstockholders with
this proxy statement. In order to facilitate compliance with Rule 2-02(a) of
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 DIRECTORSBy Order of the Board of Directors
/s/ Daniel R. Dwight
-------------------------------------
Daniel R. Dwight
President and Chief Executive Officer
Belmont, Massachusetts
October ___, 2002
20November 21, 2005