SCHEDULE 14A INFORMATION
Proxy Statement Pursuant To Section 14(A) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-12
THERMODYNETICS, INC.
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(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:
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(4) Date Filed:
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Preliminary Copy
[Thermodynetics logo]
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THERMODYNETICS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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October 22, 2002
The Annual Meeting of Stockholders of Thermodynetics, Inc. (the "Company")
for fiscal year ended March 31, 2002 will be held at the Company's principal
offices at 651 Day Hill Road, Windsor, Connecticut 06095 on Tuesday, October 22,
2002 at 9:30 A.M. (EST) for the purpose of considering and acting upon the
following matters:
1. Election of three (3) directors (Proposal One).
2. Approval of the Company's 2002 Incentive Stock Option Plan
(Proposal Two).
3. Approval of the Company's 2002 Non-Qualified Stock Incentive
Plan (Proposal Three).
4. Such other business as may properly come before the meeting or
any adjournment thereof.
Pursuant to the provisions of the By-Laws, the Board of Directors has
fixed the close of business on September 13, 2002 as the record date for
determining the stockholders of the Company entitled to notice of, and to vote
at the meeting or any adjournment thereof.
Stockholders who do not expect to be present in person at the meeting are
urged to date and sign the enclosed proxy and promptly mail it in the
accompanying postage-paid envelope. A prompt response will avoid the cost to the
Company of additional mailings of proxy solicitations.
By Order of the Board of Directors
Thermodynetics, Inc.
Robert A. Lerman
President
September 20, 2002
Windsor, Connecticut 06095
PLEASE COMPLETE AND PROMPTLY RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE.
THIS WILL NOT PREVENT YOU FROM VOTING IN PERSON AT THE MEETING BUT WILL,
HOWEVER, HELP TO ASSURE A QUORUM AND AVOID ADDED PROXY SOLICITATION COSTS.
[Thermodynetics logo]
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THERMODYNETICS, INC.
PROXY STATEMENT
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This Proxy Statement is first being mailed to Stockholders on or about
September 20, 2002 in connection with the solicitation of proxies by the Board
of Directors to be used at the Annual Meeting of Stockholders of Thermodynetics,
Inc., a Delaware corporation (the "Company"), to be held on Tuesday, October 22,
2002 at the Company's principal offices at 651 Day Hill Road, Windsor,
Connecticut 06095 at 9:30 A.M. (EST).
Accompanying this Proxy Statement is a Notice of Annual Meeting of
Stockholders, a form of Proxy for such meeting and the Company's Annual Report
for the fiscal year ended March 31, 2002 including financial statements with
respect to such year. All proxies which are properly filled in, signed and
returned to the Company in time will be voted in accordance with the
instructions thereon. Such proxies may be revoked by any stockholder prior to
the exercise thereof and stockholders who are present at the meeting may
withdraw their proxies and vote in person if they so desire. The Board of
Directors has fixed the close of business on September 13, 2002 as the record
date for the determination of stockholders who are entitled to notice of, and to
vote at the meeting or any adjournment thereof.
The expense of preparing, assembling, printing and mailing the form of
proxy and the material used in solicitation of proxies will be borne by the
Company. In addition to the solicitation of proxies by use of the mails, the
Company may utilize the services of some of its officers and regular employees
(who will receive no additional compensation therefor) to solicit proxies
personally, and by telephone and other communication mediums. The Company has
requested banks, brokers and other custodians, nominees and fiduciaries to
forward copies of the proxy material to their principals and to request
authority for the execution of proxies and may reimburse such persons for their
services in doing so.
Vote required, Principal Stockholders and Stockholdings of Management -
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock of the Company is necessary to constitute a
quorum at the meeting. Election of directors (Proposal One) requires the
affirmative vote of a majority of the votes cast by the holders of Common Stock
present in person or by proxy at the meeting.
As of the record date, the Company had 17,751,178 shares of its Common
Stock issued and outstanding, the holders of which are entitled to one vote per
share.
The following table sets forth, as of the record date, the number of
shares of the Company's Common Stock owned beneficially to the knowledge of the
Company, by each beneficial owner of more than 5% of such Common Stock, by each
director, and by all officers and directors of the Company as a group. The
shares underlying the incentive stock options held by two officer/directors and
one officer which are presently exercisable are deemed as outstanding.
Name and Address(1) Amount and Nature Percent of
of Beneficial Owner of Beneficial Ownership Class Owned
------------------- ----------------------- -----------
Directors and Officers
Robert A. Lerman 4,379,108 shs (2) 24.7%
John F. Ferraro 4,081,573 shs (2)(6) 23.0%
Anthony C. Mirabella 241,790 shs(3) 1.4%
Robert I. Lieberman 272,853 shs (4) 1.5%
All officers and
directors as a group
(four persons) 8,805,210 shs (5) 49.6%
Other 5% Shareholders
None
- ----------
(1) The address of all officers and directors is c/o the Company, 651
Day Hill Road, Windsor, CT 06095.
(2) Includes 75,411 shares held for Mr. Ferraro and 116,966 shares held
for Mr. Lerman in trust under the Company's 401(k) Plan,
respectively; includes 244,525 shares held by the spouse of Mr.
Lerman, and 33,360 shares held by the spouse of Mr. Ferraro,
respectively; excludes the aggregate 1,220,005 shares held in trust
by the trustees of the 401(k) Plan for all of the participating
employees.
(3) Excludes the aggregate 1,220,005 shares held in trust by the
trustees of the 401(k) Plan for all of the participating employees.
(4) Includes options exercisable to acquire 170,114 shares; includes
16,939 shares held in trust under the Company's 401(k) Plan.
(5) Includes options exercisable to acquire 170,114 shares; includes an
aggregate 209,316 shares held in trust under the Company's 401(k)
Plan for each respective officer's account; excludes the aggregate
1,220,005 shares held in trust by the trustees of the 401(k) Plan
for all of the participating employees. Includes 244,525 shares held
by the spouse of Mr. Lerman, and 33,360 shares held by the spouse of
Mr. Ferraro.
(6) The aggregate holdings of Company stock now owned by the John F.
Ferraro Defined Benefit Pension Plan and Trust established in 1984
equals 1,370,000 shares; Mr. Ferraro, as Trustee of that pension
plan, has full voting authority over that such shares which have
been included in Mr. Ferraro's aggregate beneficial ownership
calculation.
Holders of an aggregate of 17,751,178 shares of the Company's Common Stock
are entitled to notice of and to vote at the Annual Meeting of Stockholders. The
Company's officers and directors, who have the right to vote an aggregate
8,805,210 shares representing forty-nine and six-tenths of one percent (49.6%)
of all shares which are entitled to be voted, have stated their intentions to
vote their shares FOR Proposals One, Two and Three.
ACTIONS TO BE TAKEN AT THE MEETING
ELECTION OF DIRECTORS
(Proposal One)
All directors shall serve until his successor is elected and is qualified.
The shares represented by proxies will be voted in favor of the election as
directors of the persons named below who are nominees for election and authority
to vote for the election of directors shall be deemed granted unless
specifically withheld. The Board of Directors has no reason to believe that any
of the nominees for the office of director will not be available for election as
a director. However, should any of them become unwilling or unable to accept
nomination for election, it is intended that the individuals named in the
enclosed proxy may vote for the election of such other person as the Board of
Directors may recommend. The Company does not have a nominating, an audit or a
compensation committee. During the fiscal year ended March 31, 2002 the
Company's Board of Directors held a total of three (3) meetings.
Nominees for Election as Directors
Director
Name of Nominee Age Position with the Company Since
- --------------- --- ------------------------- -----
Robert A. Lerman 67 President, Chief Executive Officer
and Director 1979
John F. Ferraro 68 Chairman of the Board, Secretary
and Director 1979
Anthony C. Mirabella 61 Director 1985
Principal Occupations of Directors and Nominees During the Past Five Years
Robert A. Lerman holds the degrees of Bachelor of Mechanical Engineering,
College of the City of New York (1957), Master of Science in Mathematics,
Adelphi College (1961), and Master of Science in Electrical Engineering,
University of Connecticut (1964). In 1979, Mr. Lerman was elected a Director and
in 1980 President of the predecessor to the Company. Since 1981, Mr. Lerman has
been President and a Director of the Company, and was appointed Chief Executive
Officer in June, 2002. In 1988, Mr. Lerman, along with Mr. Ferraro, founded
Pioneer Capital Corp., of which Mr. Lerman is Secretary, Treasurer and a
Director, a privately held venture capital corporation. Mr. Lerman co-authored
the text book, Nonlinear Systems Dynamics, which was published in 1992 by Van
Nostrand Reinhold, New York, New York. In 1997, Mr. Lerman became President and
a Director of Pioneer Ventures Corp. ("PVC") and a manager of Ventures
Management Partners LLC ("VMP"), the general partner of Pioneer Ventures
Associates Limited Partnership ("PVALP"), a partnership formed for the purpose
of providing venture capital financing to other companies. In 1998, Mr. Lerman
became a director of Initio, Inc., Tristar Corporation, and Energy Brands, Inc.;
Mr. Lerman resigned his position as a director of Tristar in 2002. Mr. Lerman
also serves as a consultant to other companies none of which are competitive
with the Company. See "Certain Transactions".
John F. Ferraro holds the degree of Bachelor of Science in
Industrial Engineering, New York University (1962). In 1979, Mr. Ferraro was
elected Secretary and a Director of the predecessor to the Company. Since the
Company's 1981 merger, Mr. Ferraro has been Chairman of the Board of the
Company. In 1988, Mr. Ferraro, along with Mr. Lerman, founded Pioneer Capital
Corp. of which Mr. Ferraro is President and a Director. In 1997, Mr. Ferraro
became Secretary and a Director of PVC and a manager of VMP, the general partner
of PVALP. In 1998 Mr. Ferraro became a director of American Interactive Media,
Inc.; in 1999 he became a director of America's Shopping Mall, Inc.; and during
the year 1998, and later reappointed in 2000, Mr. Ferraro became a director of
Fidelity First Financial Corp. See "Certain Transactions".
Anthony C. Mirabella holds the degrees of Bachelor of Mechanical
Engineering, Stevens Institute of Technology (1962) and Master in Business
Administration, Western New England College (1969). He was elected a Director of
the Company in 1985. Mr. Mirabella was employed by Connecticut Natural Gas
Corporation from 1971 to 2000, and last served as a Senior Vice President of
said concern, responsible for the Energy Network, Inc. and its district heating
and cooling operations. Mr. Mirabella has been engaged as a consultant to the
Company at the rate of $750 per day to assist the Company in developing an
overseas HVAC project; no material amounts have accrued or been paid at August
30, 2002.
Executive Officers who are not Nominees for Director
Robert I. Lieberman is a certified public accountant. He holds the
degree of Bachelor of Science in Accounting and Business Administration from the
State University of New York (1975). Mr. Lieberman joined the Company as
corporate controller in 1986, in 1987 was elected Controller and Chief Financial
Officer, and in 1992 was elected Treasurer. In 1995 Mr. Lieberman was elected
President of Turbotec Products, Inc., the Company's principal operating
subsidiary.
Certain Rights to Proceeds
Two of the Company's three directors, Messrs. Ferraro and Lerman,
currently own 656,334 shares in which the Company has certain rights to the
proceeds to be received upon the sale of such shares which they received
pursuant to
1984 stock subscription agreements, as amended in 1988 and in 1994. Upon the
sale of any of these shares, the selling director shall pay directly to the
Company at the time of receipt of the net proceeds of such sale, an amount equal
to (i) such net sales proceeds (up to a maximum of $0.40 per share) less (ii)
the purchase price paid by the subscriber for each share sold (approximately
$0.21 per-share). The directors retain full voting and dispositive control over
these shares. The Company has no other rights with respect to such shares.
Section 16(a) Beneficial Ownership Reporting Compliance
At the fiscal year end and through the date hereof, the Company had not
received any reports from any director, officer or principal shareholder which
indicated on the report, or by calculation based on the transaction and receipt
dates, that any report was not filed on a timely basis.
Remuneration of Officers and Directors
The following table sets forth on an accrual basis for the three most
recent fiscal years, the remuneration of each of the Company's officers whose
remuneration exceeded $100,000 and for all officers of the Company as a group.
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual -----------------------------------------
Compensation Awards Payouts Other
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Company
Other Stock Options/ LTIP 401(k)
Name/Position Fiscal Year Salary/Bonus Compensation Awards SARS Payouts Contrib.
- ------------- ----------- ------------ ------------ ------ ---- ------- --------
John F. Ferraro (1) 2002 $193,113(2) $3,575 $9,741 0 shs $0 $837
Chairman of the Board, 2001 $173,207(2) $3,575 $0 0 shs $0 $489
Secretary & Director 2000 $170,760(2) $3,210 $0 0 shs $0 $518
Robert A. Lerman(1) 2002 $193,113(2) $3,612 $9,741 0 shs $0 $967
President & Director 2001 $173,207(2) $4,726 $0 0 shs $0 $1,099
2000 $176,852(2) $4,125 $0 0 shs $0 $1,096
Robert I. Lieberman(3) 2002 $131,819 $7,238 $0 0 shs $0 $0
Treasurer and CFO & 2001 $127,788 $7,978 $0 0 shs $0 $0
President of Turbotec 2000 $130,509 $11,878 $0 0 shs $0 $0
- ----------
(1) Messrs. Ferraro and Lerman entered into five-year employment
contracts with the Company effective April 1, 1996, which agreements
were each extended for an additional five-year term under the
provisions of the 1996 agreements. Each employment contract provides
for a basic salary with an annual increase at April 1st of each year
based on increases in the Consumer Price Index. Each employment
contract requires the Company to provide medical insurance coverage
for the employee as well as $50,000 of group term insurance, and
$1,500,000 of additional life insurance. During the fiscal year
ended March 31, 2002, the Company paid $108,909 in net premiums on
the two life insurance policies which provide that upon death or
surrender of the policy, the Company will be repaid by the insurer
and/or the insured the greater of the aggregate net premiums paid by
the Company or death benefit proceeds in excess of $1,500,000. At
March 31, 2002, the amount receivable for premiums paid on the
policies was $813,742. In addition, each employment contract
contained a provision providing that in the event of disability, the
employee will receive disability payments of $100,000 per year for
ten years (with proportional reductions in the event of partial
disability); and $6,500 per year for tax planning services. The
contract may be terminated by the employee on 120 days prior written
notice. The contract may also be terminated by the Company in which
event the employee will be paid termination compensation equal to
each employee's then current salary for either the longer of the
remainder of the un-renewed term or three years; in the event there
is a change in control of the Company and the employee is
terminated, the employee shall receive twice the amount of
termination compensation which would otherwise be due.
(2) In 2002, 2001, and 2000 Messrs. Ferraro and Lerman each received
cash bonuses of $25,000, $10,000, and $12,500, respectively.
(3) Mr. Lieberman entered into a 5 year employment contract with the
Company's primary operating subsidiary effective April 1, 1996 which
has been renewed on a year-to-year basis. The contract provides for
a base salary and bonus pay based on performance targets established
by the board of directors. The employment contract requires the
Company to provide certain other benefits including life and
disability insurance, subject to a maximum cost per year. The
contract provides termination for "cause" immediately or by the
employee on 90 days prior written notice. The contract also provides
for termination by the Company in which event the employee would be
paid termination compensation for 180 days.
- ----------
For the fiscal year ending March 31, 2003, the Company anticipates paying
aggregate direct remuneration (based on current salaries and anticipated
bonuses) of approximately $540,000 to all officers as a group (three persons) of
which Mr. Ferraro and Mr. Lerman will each be paid approximately $200,000, Mr.
Lieberman will be paid approximately $140,000.
During the fiscal year ended March 31, 2002, directors' fees of $3,900
were paid to the Company's one director who is not an officer or employee. It is
anticipated that such director will be paid an aggregate of approximately $5,000
in directors' fees in the fiscal year ending March 31, 2003. The non-employee
director has also been engaged as a consultant to the Company at the rate of
$750 per day to assist the Company in developing an overseas HVAC project; no
material amounts have accrued or been paid at August 30, 2002.
Incentive Stock Options
1992 Incentive Stock Option Plan. The Company's 1992 Incentive Stock
Option Plan (the "1992 Plan") expired on December 31, 2001 with no options
outstanding.
Non-Qualified Stock Incentive Plan
1995 Stock Options. On May 15, 1995, the Company's Board of Directors
approved the adoption of the 1995 Stock Options ("1995 Options") and
subsequently granted such stock options to purchase 4,920,000 shares of the
Company's Common Stock. The purchase price for the exercise of the options
equaled the fair market value ("FMV") on the effective date of the option, May
19, 1995. Options to purchase an aggregate of 3,903,068 shares of the Company's
Common Stock were exercised on December 5, 2001. Messrs. Ferraro and Lerman each
borrowed $107,150.01 from the Company as evidenced by Commercial Promissory
Notes each dated December 5, 2001; such notes bear interest at the variable-rate
of interest published in The Wall Street Journal, Eastern Edition, under the
designation "Money Rates" and shown as the "Prime Rate" or "base rate on
corporate loans at large U.S. money-center commercial banks". The entire
principal balance plus interest of the notes is due on January 15, 2007; the
notes may be prepaid in whole or in part without penalty. The amount owed under
the notes at August 1, 2002 for Mr. Ferraro was $82,150, and for Mr. Lerman was
$82,150. The expiration date of the remaining options to purchase 340,228 shares
is September 30, 2002. See also "Aggregated Exercises" and "Certain
Transactions".
The compensation values of the stock incentives and stock bonuses received
by the named executive officers and directors of the Company during the last
three fiscal years are reflected in the Summary Compensation Table at the column
labeled "Restricted Stock Awards".
Option Grants in Last Fiscal Year. No options were granted in the last
fiscal year.
Aggregated Exercises
Aggregated Option/SAR Exercises and Fiscal Year End Option/SAR Values -
Options were exercised during fiscal year ended March 31, 2002 to purchase a
total of 3,903,068 shares of common stock of the Company. See also "1995 Stock
Options", "Option Grants in Last Fiscal Year", and "Certain Transactions". The
following table reflects the aggregated option exercise values at fiscal
year-end held by the executive officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
- -----------------------------------------------------------------------------------------------------
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Shares Options at Options at
Acquired FY-End FY-End ($)
Name of on Value Exercisable ("E") Exercisable ("E")
Officer or Director Exercise Realized Unexercisable ("U") Unexercisable ("U")
- -----------------------------------------------------------------------------------------------------
John F. Ferraro 1,948,182 $9,741 0 $0
Robert A. Lerman 1,948,182 $9,741 0 $0
Anthony C. Mirabella 6,704 $34 0 $0
Robert I. Lieberman 0 $0 170,114 E $4,253 E
The compensation values of stock incentives and stock bonuses, if any were
issued or awarded, received by the named executive officers and directors of the
Company during the last three fiscal years are reflected in the Summary
Compensation Table at the column labeled "Restricted Stock Awards".
Employee Retirement Savings Plan
Effective April 1, 1991, the Company adopted the Thermodynetics, Inc.
401(k) Retirement Savings Plan (the "401(k) Plan"). The Company has determined
its matching contributions to the 401(k) Plan for the plan year ending December
31, 2002 will equal a maximum of 300,000 shares of the Company's common stock,
provided that the value of such grant does not exceed $35,000 at a one-third
valuation of the market price. See Note 18 of Notes to Consolidated Financial
Statements. The assets of the 401(k) Plan are held in trust for the exclusive
benefit of the participants by the trustees of the Plan, Messrs. Ferraro, Lerman
and Mirabella are the trustees of the 401(k) Plan.
The compensation value of the 401(k) participation received by the below
listed officers and directors is reflected in the Summary Compensation Table at
the column labeled "Company 401(k) Contribution" at the section labeled
"Remuneration of Officers and Directors". The following table sets forth the
number of shares of Common Stock contributed to the below referenced persons or
groups of persons during the 401(k) Plan year ended December 31, 2001, Column
(1), and for all years from inception of the Plan through Plan year ended
December 31, 2001 Column (2).
Shares Contributed by the Company
Name and Held in Trust Under 401(k) Plan
---- -----------------------------------
Officers and Directors Column (1) Column (2)
---------------------- ---------- ----------
(Aggregate)
John F. Ferraro(a) 15,215 75,411
Robert A. Lerman(a) 17,582 116,966
Robert I. Lieberman -0- 16,939
Anthony C. Mirabella(a) -0- -0-
All officers and directors as a group(a)
(4 persons) 32,797 209,316
Total Matching Contribution
to all employees (35 persons) 200,000 1,220,005
- ----------
(a) Trustees of the 401(k) Plan. Excludes the aggregate shares held in
trust by the trustees of the 401(k) Plan for all participating
employees.
Other Plans
The Company does not have any pension or similar plan. See footnotes (1)
and (4) to the cash compensation table as to the Company's employment contracts
with Messrs. Ferraro, Lerman and Lieberman containing disability and termination
payment provisions.
CERTAIN TRANSACTIONS
During the last two (2) fiscal years, the Company has not been engaged in
transaction(s) with any officers, directors, beneficial holders of more than 5%
of its outstanding voting securities and entities with which they were
affiliated, except as presented below. None of the officers and directors of the
Company are currently engaged in businesses competitive to the business of the
Company. The Company's transactions with these individuals and entities in the
fiscal year most recently ended are described below.
With Directors and Officers, and Related Persons. A total of 3,903,068
shares of common stock were issued to two officers/directors and one director
upon the exercise and purchase of the shares underlying their 1995 stock
options. The two officers/directors issued promissory notes evidencing the
obligation and such notes bear interest at the Prime Rate. See "Non-Qualified
Stock Incentive Plan: Aggregated Exercises" and "1995 Stock Options" and "Option
Grants in Last Fiscal Year".
Legal Proceedings
There are no material legal proceedings known or threatened against the
Company.
Information Concerning Independent Public Auditors
The firm of DiSanto Bertoline & Company, P.C., certified public
accountants, audited the consolidated financial statements of the Company and
its subsidiaries for the fiscal year ended March 31, 2000. DiSanto Bertoline &
Company, P.C. was first appointed to serve as the Company's auditors in
February, 1991. Representatives of such firm are not expected to be present at
the Annual Meeting of Stockholders.
On November 30, 2000, the Registrant replaced its principal accountant,
DiSanto, Bertoline & Company, P.C., 628 Hebron Avenue, Glastonbury, Connecticut
06033 with Mahoney Sabol & Company, LLP, One State Street, 17th floor, Hartford,
Connecticut 06103. The former accountant's reports on the Registrant's financial
statements for each of the past two years contained no adverse opinion or a
disclaimer of opinion, nor were such reports qualified or modified as to
uncertainty, audit scope, or accounting principles. The decision to change
accountants was approved by the Registrant's board of directors. During the
Registrant's two most recent fiscal years ending March 31, 2002, and during the
period from April 1, 2000 through and including November 30, 2000, there were no
disagreements between the Registrant and the former accountant on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure. During the Registrant's two most recent fiscal years ending
March 31, 2002, and during the period from April 1, 2000 through and including
November 30, 2000, the former accountants did not advise the Registrant that:
(a) internal controls necessary for the Registrant to develop reliable financial
statements did not exist; (b) information had come to the former accountant's
attention that led it to no longer be able to rely on management's
representation or that made it unwilling to be associated with the financial
statements prepared by management; (c) the former accountant needed to expand
significantly the scope of its audit, or that information had come to the former
accountant's attention that, if further investigated might have materially
impacted the fairness or reliability of a previously issued audit report or the
underlying financial statements, or the financial statements issued or to be
issued covering the fiscal period subsequent to the date of the most recent
audited financial statements, and the issue was not resolved to the former
accountant's satisfaction prior to its dismissal.
On November 30, 2000 the Registrant engaged Mahoney Sabol & Company, LLP,
One State Street, 17th floor, Hartford, Connecticut 06103 to be its principal
accountant. During the Registrant's two most recent fiscal years ending March
31, 2000 and during the period from April 1, 2000 through and including November
30, 2000, the Registrant had not consulted the newly engaged accountant
regarding: (a) either the application of accounting principles to a modified
transaction, completed or proposed, or the type of audit opinion that might be
rendered on the Registrant's financial statements, and no written report or oral
advice was provided that the new accountant concluded was an important factor
considered by the Registrant in reaching a decision as to the accounting,
auditing or financial reporting issue; or (b) any matter that was either the
subject of a disagreement with the former accountant or a reportable event.
Representatives of Mahoney Sabol & Company, LLP are not expected to be present
at the Annual Meeting of Stockholders.
Audit and Non-Audit Fees. Fees for professional audit services rendered by
Mahoney Sabol & Company, LLP, for the audit of the Company's annual financial
statements for the year ended March 31, 2002, the reviews of the financial
statements included in the quarterly reports for that fiscal year and for tax
provision preparation assistance, aggregated $34,000. All other fees for
professional services rendered by Mahoney Sabol & Company, LLP consisting of
research and federal and state tax return preparation, tax due diligence, and
miscellaneous tax matters, aggregated $10,000.
Stockholder Proposals for Next Annual Meeting
Under current rules of the Securities and Exchange Commission,
stockholders wishing to submit proposals for inclusion in the Proxy Statement of
the Board of directors for the 2003 fiscal year end Annual Meeting of
Stockholders must submit such proposals so as to be received by the Company at
651 Day Hill Road, Windsor, Connecticut 06095 on or before July 1, 2003.
Form 10-KSB Annual Report
A copy of the Company's Annual Report on Form 10-KSB for the year ended
March 31, 2002 as filed with the Securities and Exchange Commission may be
obtained by any stockholder entitled to vote at the October 22, 2002 Annual
Meeting of Stockholders by addressing a written request to the Secretary,
Thermodynetics, Inc., 651 Day Hill Road, Windsor, Connecticut 06095.
APPROVAL OF THE COMPANY'S
2002 INCENTIVE STOCK OPTION PLAN
(Proposal Two)
Thermodynetics, Inc. 2002 Incentive Stock Option Plan ("Plan") was adopted
by the Board of Directors as of August 22, 2002, subject to approval by the
stockholders. The Board of Directors believes that adoption of the Plan would
further the Company's growth and development by providing, through stock
ownership in the Company, an incentive to key employees ("Optionees") who are in
a position to contribute materially to the prosperity of the Company, to
increase such person's interests in the Company's welfare, and to aid in
recruiting outstanding candidates for service to the Company. Only key employees
chosen by the Board shall be eligible to participate in the Plan; approximately
four persons are currently eligible to participate in the Plan.
A copy of the Plan is attached as Exhibit A to this Proxy Statement and
should be reviewed in its entirety as to all of its terms. A Stock Option is the
right awarded to the Optionee to purchase shares of common stock of the Company
in the future at a specified price. Upon exercise and payment by the Optionee,
subject to the terms and conditions of this Plan, the Optionee receives the
number of shares underlying the stock option.
Under the Plan: (i) an aggregate of 500,000 shares of common stock, $.01
par value, of the Company have been reserved for issuance by the Company or
transfer from the Company's treasury for the exercise of options; (ii) options
may be granted through December 31, 2012; (iii) options granted will be
exercisable one year after the date of grant as to 50% of the total shares
granted and shall be exercisable for an additional 25% of the total number of
shares granted after the end of each consecutive year thereafter until fully
exercisable; (iv) the purchase price for the exercise of shares subject to any
option shall not be less than 100% of the fair market value ("FMV") of the
shares of common stock of the Company on the effective date of the option and in
no event shall be less than the par value of the common stock; (v) each option
is non-transferable by the Employee during his lifetime but may be exercised by
his heirs or devisees within one year after date of death; (vi) each option is
protected against certain dilution; (vii) the Board of Directors of the Company,
or a committee if the board so delegates, will be responsible for administering
the Plan and may modify or terminate the Plan at any time provided termination
or modification shall not adversely affect any option then outstanding without
the consent of the Employee; (viii) the shares to be issued or transferred under
the Plan are to bear a legend restrictive as to transfer of the shares; (ix) no
option may be granted to holders of more than 10% of the
Company's issued and outstanding common stock (except for options of not more
than five year terms granted at an exercise price of at least 110% of the FMV of
the common stock on the date of the grant); (x) the aggregate FMV of the stock
with respect to which an option is exercisable for the first time by the grantee
during any calendar year shall not exceed $100,000.
Estimate of Benefits. The number of stock options that would be awarded to
the Company's Chief Executive Officer and the other two most highly compensated
executive officers of the Company pursuant to either Plan are not currently
determinable. In the most recently completed fiscal year, no stock options were
granted to any executive officers or directors.
Market Price of the Company's Common Stock. The average of the high and
low market price of the Company's Common Stock as reported in the
over-the-counter market on the NASD OTC Bulletin Board system under the symbol
"TDYN" for August 20, 2002, was $0.09 per share.
Federal Tax Consequences
The following discussion of the federal tax consequences associated with
the Plan is necessarily general and does not include all aspects of federal
income tax laws which may be relevant to any participant in the Plan.
Accordingly, the Company recommends that each participant consult a tax advisor
to determine all tax affects.
Options granted under the ISO Plan are intended to qualify as incentive
stock options under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"). Under current federal tax laws, an optionee who is granted an
option does not realize income either upon receiving the option or upon
exercising the option. However, the excess of the FMV of the stock over the
option price at the time of exercise will be treated as a tax preference item
for purposes of the alternative minimum tax. When the shares acquired by
exercise of the option are sold, any gain will be taxed as a capital gain,
provided that the optionee has not sold the shares within two years from the
date the option was granted or within one year after the shares acquired
pursuant to the option were transferred to the optionee, whichever is later.
Under current federal tax laws, short-term capital gain is taxed at the same
rate as ordinary income and long-term capital gain is taxed at a 20% rate. The
Company is not entitled to claim any deduction in connection with either the
grant or the exercise of an option.
If an optionee disposes of stock acquired pursuant to the exercise of an
option before the expiration of the requisite holding period, the employee will
realize ordinary income in the year of the disqualifying disposition in an
amount equal to the difference between the option price and the FMV of the stock
on the date the option was exercised (or FMV on the date on the date of
disposition, if lower), and the Company is entitled to a tax deduction in an
equivalent amount.
The Board of Directors unanimously recommends a vote FOR Proposal Two. The
Company's officers and directors hold an aggregate 8,805,210 shares representing
49.6% of outstanding stock of the Company.
APPROVAL OF THE COMPANY'S
2002 NON-QUALIFIED STOCK INCENTIVE PLAN
(Proposal Three)
Thermodynetics, Inc. 2002 Non-Qualified Stock Incentive Plan ("Plan") was
adopted by the Board of Directors as of August 22, 2002, subject to approval by
the stockholders. The Board of Directors believes that adoption of the Plan
would further the Company's growth and development by providing, through stock
ownership in the Company, an incentive to key employees and directors
("Contributors") who are in a position to contribute materially to the
prosperity of the Company, to increase such person's interests in the Company's
welfare, and to aid in recruiting outstanding candidates for service to the
Company. Only key employees chosen by the Board and directors shall be eligible
to participate in the Plan; approximately four persons are currently eligible to
participate in the Plan.
A copy of the Plan is attached as Exhibit B to this Proxy Statement and
should be reviewed in its entirety as to all of its terms.
A Stock Option is the right awarded to the Contributor to purchase shares
of common stock of the Company in the future at a specified price. Upon exercise
and payment by the Contributor, subject to the terms and conditions of this
Plan, the Contributor receives the number of shares underlying the stock option.
A Stock Bonus is an award of stock entitling the Contributor to receive
the amount of shares of common stock of the Company awarded as a Bonus, subject
to the terms and conditions of the Plan.
A Stock Appreciation Right ("SAR") is the right of the Contributor to
receive an amount of shares of common stock of the Company corresponding to an
increase in value of the underlying shares measured from the date of award,
subject to the terms and conditions of the Plan.
Under the Plan: (i) an aggregate of 500,000 shares of common stock, $.01
par value, of the Company have been reserved for issuance by the Company or
transfer from the Company's treasury for the exercise of options or SARs or
award as bonuses; (ii) options and SARs may be granted and bonuses may be
awarded through December 31, 2012; (iii) options and SARs granted will be
exercisable at any time immediately after the date of grant as to 50% of the
total shares granted and shall be exercisable for an additional 25% of the total
number of shares granted after the end of each consecutive year thereafter until
fully exercisable; (iv) bonuses may be awarded such that the shares are
deliverable concurrently with the award or on a cumulative basis as to
percentages of the total number of shares awarded on specified dates, as
determined by the Board; (v) the purchase price for the exercise of shares
subject to any option shall not be less than 33.33% of the fair market value
("FMV") of the shares of common stock of the Company on the effective date of
the option and in no event shall be less than the par value of the common stock;
(vi) the value of the shares subject to any bonus shall be equal in value to a
fixed dollar amount and such value shall not be less than 33.33% of the FMV of
the shares of common stock of the Company on the effective date of the bonus and
in no event shall be less than the par value of the common stock; (vii) the
value of an SAR award of stock is equal to or less than (as the Board may
determine) the excess of the FMV of one share of stock on the date of the
exercise of the SAR less the FMV of one share of stock on the effective date of
the award, the result of which is multiplied by the number of shares with
respect to which the SAR shall have been exercised; (viii) each bonus, option or
SAR is non-transferable by the Contributor during his lifetime but may be
exercised by his heirs or devisees within one year after date of death; (ix)
each bonus, option and SAR is protected against certain dilution; (x) the Board
of Directors of the Company, or a committee if the board so delegates, will be
responsible for administering the Plan and may modify or terminate the Plan at
any time provided termination or modification shall not adversely affect any
bonus, option or SAR then outstanding without the consent of the Contributor;
(xi) the shares to be issued or transferred under the Plan are to bear a legend
restrictive as to transfer of the shares; (xii) the Company reserves the right
to collect monies directly for payment of withholding taxes.
Estimate of Benefits. The number of stock options that would be awarded to
the Company's Chief Executive Officer and the other two most highly compensated
executive officers of the Company pursuant to either Plan are not currently
determinable. In the most recently completed fiscal year, no stock options were
granted and no awards were made to any executive officers or directors.
Market Price of the Company's Common Stock. The average of the high and
low market price of the Company's Common Stock as reported in the
over-the-counter market on the NASD OTC Bulletin Board system under the symbol
"TDYN" for August 20, 2002, was $0.09 per share.
Federal Tax Consequences
The following discussion of the federal tax consequences associated with
the Plan is necessarily general and does not include all aspects of federal
income tax laws which may be relevant to any participant in the Plan.
Accordingly, the Company recommends that each participant consult a tax advisor
to determine all tax affects.
An optionee will not realize any taxable income upon the grant of a
non-qualified option, nor will the Company be entitled to a deduction. However,
an optionee will realize ordinary taxable income at the time of exercise in an
amount equal to the excess of the FMV of the stock acquired over the option
price, and the Company will be entitled to a corresponding deduction. The FMV of
the stock on the date of exercise becomes the optionee's tax basis in the stock
to be used for purposes of computing gain or loss on any subsequent disposition.
When the shares acquired by exercise of a non-qualified option are sold, any
gain will be taxed as capital gain. Under current federal tax laws, short-term
capital gain is taxed at the same rate as ordinary income, and long-term capital
gains tax at a 20% rate. The optionee may realize ordinary taxable income at the
time of the grant in the event that the option price is below the FMV of the
stock on the date of the grant.
The grant of SARs will not produce taxable income to the participant or a
deduction for the Company. Upon exercise of SARs, the amount of any cash
received and the FMV of any shares of common stock received will be taxable to
the participant as ordinary income, and the Company ordinarily will be entitled
to a corresponding deduction. The participant may realize ordinary taxable
income at the time of the grant in the event that the value of the SAR award is
below the FMV of the stock on the date of the grant.
The Board of Directors unanimously recommends a vote FOR Proposal Three.
The Company's officers and directors hold an aggregate 8,805,210 shares
representing 49.6% of outstanding stock of the Company.
OTHER MATTERS
Management does not know of any other matters which are likely to be
brought before the Meeting. However, in the event that any other matters
properly come before the Meeting, the persons named in the enclosed proxy will
vote said proxy in accordance with their judgment on said matters.
By Order of the Board of Directors
Thermodynetics, Inc.
Robert A. Lerman
President
Windsor, Connecticut 06095
September 20, 2002
EXHIBIT A
THERMODYNETICS, INC.
2002 INCENTIVE STOCK OPTION PLAN
Article I. PURPOSE
The purpose of the Thermodynetics, Inc. 2002 Incentive Stock Plan ("Plan")
is to further the growth and development of Thermodynetics, Inc. (the "Company")
and its subsidiaries by providing, through ownership of common stock of the
Company, an incentive to key employees ("Employees") as selected by the Board of
Directors and who are in a position to contribute materially to the prosperity
of the Company. The benefits under the Plan reward the Employees for their
diligence and effort in attaining objectives beneficial to the Company, and
increase such persons' interests in the Company's welfare. The Plan is designed
to encourage these Employees to continue their services to the Company or its
subsidiaries, and aid in the recruitment of others of outstanding ability to
serve the Company or its subsidiaries.
Article II. INCENTIVE STOCK OPTIONS
Incentive stock options ("Incentive Stock Option", "Option" or "ISO")
qualify under Section 422 of the Internal Revenue Code of 1986, as amended
("Code").
Article III. ADMINISTRATION BY BOARD
Subject to Article IV, the Plan shall be administered by the Board of
Directors of the Company ("Board"). Subject to the provisions of the Plan, the
Board shall have authority to construe and interpret the Plan, to promulgate,
amend, and rescind rules and regulations relating to its administration, from
time to time to select from among the eligible Employees (as determined pursuant
to Articles V and VI herein) of the Company and its subsidiaries those Employees
("Employee" or "Optionee") to whom options will be granted, to determine the
timing and manner of the grant and exercise of options, the number of shares to
be granted as options to each Employee, to determine the exercise price, to
determine all of the terms of the options, to determine the duration and purpose
of leaves of absence which may be granted to Employees without constituting
termination of their employment for purpose of the Plan, and to make all of the
determinations necessary or advisable for administration of the Plan. The
interpretation and construction by the Board of any provisions of the Plan, or
of any agreement issued and executed under the Plan, shall be final and binding
upon all parties. All actions taken and permitted to be taken in accordance with
this Plan shall be taken on a uniform and nondiscriminatory basis. No member of
the Board shall be liable for any action or determination undertaken or made in
good faith with respect to the Plan or any option granted pursuant to the Plan.
Article IV. ADMINISTRATION BY COMMITTEE
The Board may, in its sole discretion, delegate any or all of its
administrative duties to a committee (the "Committee") of not less than three
individuals, at least two of whom shall be members of the Board, to be appointed
by and serve at the pleasure of the Board. From time to time, the Board may
increase or decrease (to not less than three members) the size of the Committee,
and add additional members to, or remove members from, the Committee. The
Committee shall act pursuant to a majority vote, or the written consent of a
majority of its members, and minutes shall be kept of all of its meetings and
copies thereof shall be provided to the Board. Subject to the provisions of the
Plan and the directions of the Board, the Committee may establish and follow
such rules and regulations for the conduct of its business as it may deem
advisable. All actions taken and permitted to be taken in accordance with this
Plan shall be taken on a uniform and nondiscriminatory basis. No member of the
Committee shall be liable for any action or determination undertaken or made in
good faith with respect to the Plan or any option granted pursuant to the Plan.
2002 Incentive Stock Option Plan
Page 2
Article V. ELIGIBILITY
Any employee of the Company or any of its subsidiaries shall be eligible
to receive an option under the Plan. Any employee (including any officer who is
an employee) of the Company or any of its subsidiaries who does not own stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any of its parent or subsidiary corporations shall be
eligible to receive an incentive stock option under the Plan; provided, however,
that, notwithstanding the foregoing, any employee of the Company who owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any of its parent or subsidiary corporations shall be
eligible to receive an incentive stock option under the Plan if at the time such
option is granted the option price (determined in the manner provided in
paragraph 8.3 is at least 110% of the fair market value ("FMV") of the shares
subject to the option and such option by its terms is not exercisable after the
expiration of five years form the date such option is granted. An employee may
receive more than one option under the Plan.
Article VI. CRITERIA
The Board, in its sole discretion, shall determine the criteria for the
grant of an option. The specific guidelines, criteria or measures of performance
or eligibility may, but need not, be defined prior to the grant of an option;
the specific guidelines, criteria or measures of performance or eligibility may
but need not be applied on different bases for each employee or class of
employees.
Article VII. SHARES SUBJECT TO OPTIONS
The shares available for grant of options under the Plan shall be shares
of the Company's authorized but unissued common stock, par value $.01, or shares
of common stock, par value $.01, which have been reacquired and are held in its
treasury. The aggregate number of shares which may be issued by the Company or
transferred from the Company's treasury as pursuant to exercise of options
granted under the Plan shall not exceed 500,000 shares of common stock (subject
to adjustment as provided in paragraph 8.14) which are hereby reserved. In the
event that any outstanding option under the Plan for any reason expires or
terminates or is forfeited, the shares of common stock allocable to the
unexercised portion of the option shall again be available for options under the
Plan as if no option had been granted with respect to such shares.
Article VIII. TERMS AND CONDITIONS OF OPTIONS
Options granted under the Plan shall be issued no later than ten years
from the date the Plan ed or the date the Plan is approved by the shareholders
of the Company, whichever is earlier. Options granted under the Plan shall be
evidenced by agreements, which agreements need not be identical. Options shall
be exercised in accordance therewith upon proper notice to the Company. The
agreements shall be in such form and containing such provisions which are
consistent with the Plan as the Board or committee shall from time to time
approve. Such agreements may incorporate all or any of the terms hereof by
reference and shall comply with and be subject to the following terms and
conditions:
8.1 Optionee's Employment
Each optionee shall agree to remain in the employ of, and to render
services to, the Company or its subsidiaries for a period of one year from
the date the option is granted, but such agreement shall not obligate the
Company or any of its subsidiaries to continue to employ the optionee for
any period.
8.2 Number of Shares Subject to Options
Each option agreement shall specify the number of shares subject to the
option.
8.3 Valuation
2002 Incentive Stock Option Plan
Page 3
(a) Option Price for Employees. The purchase price for the shares subject
to any option for employees shall not be less than 100% of the FMV of the
shares of common stock of the Company on the effective date of the grant
of the option. In no event shall the purchase price for the shares subject
to any option be less than the par value of the common stock.
(b) Option Price for 10% Shareholder/Employees. The purchase price for the
shares subject to any option for eligible employees who, directly or
constructively, own more than 10% of the outstanding common stock of the
Company such that such employee possess more than 10% of the total
combined voting power of all classes of stock of the Company or any of its
parent or subsidiary corporations shall not be less than 110% of the FMV
of the shares of common stock of the Company on the effective date of the
grant of the option. Employee shall be required to meet the eligibility
requirements set forth in Article V.
(d) Fair Market Value ("FMV"). The shares subject to the option grant will
be issued under an exemption from the registration requirements of the
Securities Act of 1933, as amended, and will not be registered thereunder.
For purposes of the Plan, the FMV of any share of common stock of the
Company underlying an option shall be determined as of the time the option
is granted, and shall be calculated by means of the applicable section of
8.3(d) i, ii, iii or iv and then multiplied by either a minimum factor of
1.00 in the event the valuation equals 100% of FMV, or by a minimum factor
of 1.10 in the event the valuation equals 110% of FMV, in accord with
paragraphs 8.3(a) or (b), as applicable:
i. if the common stock is listed on an established stock exchange or
exchanges, the last reported sale price per share on the day prior
to such date on the principal exchange on which it is traded, or if
no sale was made on such day on such principal exchange, at the
closing reported bid price on such day on such exchange, or
ii. if the common stock is not listed on an exchange, the average of
the closing bid and asked prices per share for the common stock in
the over-the-counter market as quoted on the National Association of
Securities Dealers Automated Quotations System ("NASDAQ") on the day
prior to such date, or
iii. if the common stock is not listed on an exchange or quoted on
NASDAQ and is traded in the over-the-counter market, the average of
the closing bid and asked prices per share for the common stock as
supplied to the Company from The Pink Sheets, LLC or an independent
source, or
iv. if the common stock is not listed on an exchange, quoted on
NASDAQ, or traded in the over-the-counter market, an amount
determined in good faith by the Board or the Committee.
8.4 No Transfer of Options
No option shall be transferable by any Employee otherwise than by will or
the laws of descent and distribution.
8.5 Limit on Incentive Stock Options
The aggregate FMV (determined at the time the option is granted) of the
stock with respect to which incentive stock options are exercisable for
the first time by such Employee during any calendar year (under all such
plans of the Company or any subsidiary or parent corporation of the
Company) shall not exceed $100,000. For purposes of calculating the
aggregate FMV, the FMV of Options shall be accounted for in the order in
which they were granted.
2002 Incentive Stock Option Plan
Page 4
8.6 Restriction on Issuance and Transfer of Shares
The issuance of options, and shares underlying options shall be subject to
compliance with all of the applicable requirements of law with respect to
the issuance and sale of securities.
To qualify for the preferential tax treatment of an ISO, the Employee may
not dispose of the shares acquired by exercise of the ISO within two years
from the date of the ISO grant nor within one year after the transfer of
the shares to Employee by the Company.
8.7 Investment Representation
Any Employee will be required, as a condition of issuance of shares
covered by his or her option, to represent that the shares to be acquired
pursuant to the option will be acquired for investment and without a view
to distribution thereof; and in such case, the Company may place a legend
on the certificate evidencing the shares reflecting the fact that they
were acquired for investment and cannot be sold or transferred unless
registered under the Securities Act of 1933, as amended, or unless counsel
for the Company is satisfied that the circumstances of the proposed
transfer do not require such registration.
8.8 Term of Options
No option shall be exercisable after the expiration of the earliest of:
(a) ten years after the date the option is granted; or
(b) three months after the date of termination of the Employee's
employment with the Company and/or its subsidiaries if such
termination is for any reason other than total and permanent
disability, death, or cause; or
(c) the date the Employee's employment with the Company and/or its
subsidiaries terminates if such termination is for cause, as
determined by the Board or the Committee, in its sole discretion; or
(d) one year after the date of termination of the Employee's
rendering of services to the Company and its subsidiaries if such
termination is a result of total and permanent disability;
provided however, that the agreement for any option may provide for shorter
periods in each of the foregoing instances. For the purposes of this paragraph
8.8, "permanent disability" shall mean a disability of the type defined in the
applicable section of Code.
8.9 Medium and Time of Payment
The purchase price for any shares purchased pursuant to exercise of an
option granted under the Plan shall be paid in full upon exercise of the
option in cash, or by check, or, at the discretion of the Board or the
Committee, upon such terms and conditions as the Board or the Committee
shall approve, including but not limited to payment by surrender at FMV to
the Company for redemption of common stock of the Company owned by the
Employee. Shares of common stock transferred to the Company upon exercise
of an option shall not increase the number of shares available for
issuance under the Plan. Notwithstanding the foregoing, the Company may
extend and maintain, or arrange for the extension and maintenance of,
credit to any Employee to finance the Employee's purchase of shares
pursuant to exercise of any option, on such terms as may be approved by
the Board or the Committee, subject to applicable regulations of any
regulatory authority or any other laws or regulations in effect at the
time such credit is extended.
8.10 Exercise of Options
2002 Incentive Stock Option Plan
Page 5
No option shall be exercisable during the lifetime of the Employee by any
person other than the Employee. Unless otherwise provided by the Board or
the Committee, each option under the Plan shall become exercisable on a
cumulative basis as to 50% of the total number of shares covered thereby
at any time after one year from the date the option is granted and 25% of
such total number of shares after the end of each consecutive year
thereafter until the option has become exercisable as to all of such total
number of shares. To the extent that Employee has the right to exercise an
option and purchase shares pursuant thereto, the option may be exercised
from time to time by written notice to the Company, stating the number of
shares being exercised and, accompanied by payment in full of the purchase
price for such shares.
If shares of common stock of the Company are used in part or full payment
for the shares to be acquired upon exercise of the option the shares
tendered shall be valued for the purpose of such exchange as of the date
of exercise of the option in accordance with the provisions of paragraph
8.3 hereof provided such transaction does not violate Section 16(b) or any
other applicable section of the Securities Exchange Act of 1934, as
amended, or regulation promulgated thereunder. Any certificate(s) for
shares of outstanding common stock of the Company used to pay the purchase
price shall be accompanied by stock power(s) duly endorsed in blank by the
registered holder of the certificate(s) (with the signature thereon
guaranteed) along with instructions to the Company and such other
documents as may be required by the Company's counsel. In the event the
certificate(s) tendered by the Employee in such payment cover more shares
than are required for such payment, the certificate(s) shall also be
accompanied by instructions from the Employee to the Company with respect
to disposition of the balance of the shares covered thereby.
8.11 Rights as a Shareholder or Employee
Employee shall have NO RIGHTS as a shareholder of the Company with respect
to any shares covered or by an option until the date of the issuance of a
share certificate for such shares. No adjustment shall be made for
dividends (ordinary or extraordinary, whether cash, securities, or other
property) or distributions or other rights for which the record date is
prior to the date such share certificate is issued, except as provided in
paragraph 8.14 in this Plan.
Nothing in the Plan or in any option agreement shall confer upon any
Employee any right to continue in the employ of the Company or any of its
subsidiaries or interfere in any way with any right of the Company or any
subsidiary to terminate his or her employment at any time.
8.12 No Fractional Shares
In no event shall the Company issue fractional shares upon the grant or
exercise of an option. Any fractional amounts shall be rounded down and
shall again be available for options under the plan as if no option had
been granted with respect to such fractional shares.
8.13 Termination of Employment, Disability, or Death
In the event Employee ceases to be an employee of the Company and/or its
subsidiaries or affiliates for any reason while still living, any option
or unexercised portion thereof granted to the Employee may, to the extent
such option would have been exercisable by the Employee on the date on
which he or she ceases to be an employee, be exercised by the Employee
within three months of the date on which he or she ceases to be an
employee, but in any event not later than the date of the expiration of
the option as defined herein or as defined in the Agreement, whichever is
sooner. In the event of the death or disability (as defined in the
applicable section of the Code) of the Employee while he or she is an
employee of the Company or any of its subsidiaries or within not more than
three months after the date on which he or she ceased to be an employee,
any option or unexercised portion thereof granted to the Employee, to the
extent exercisable by him or her on the date of death or disability, may
be exercised by Employee, or, if the Employee is then deceased, the
Employee's personal representatives, heirs, legatees, at any time prior to
the expiration of one year from the date on which the Employee ceased to
be an employee, but in any event no later than the
2002 Incentive Stock Option Plan
Page 6
date of expiration of the option. Notwithstanding the foregoing, if
Employee's relationship with the Company and its subsidiaries is
terminated for cause, as determined by the Board or the Committee, in its
sole discretion, all options held by such Employee shall expire on the
date of termination of employment and thereafter shall not be exercisable
in whole or in part.
8.14 Dilution, Recapitalization or Reorganization of Company
Except as otherwise provided herein, appropriate and proportionate
adjustment shall be made in the number and class of shares subject to the
Plan and to the option rights granted under the Plan, and the exercise
price of such option rights, in the event of a stock dividend (but only on
common stock), stock split, reverse stock split, recapitalization,
reorganization, merger, consolidation, separation, or like change in the
capital structure of the Company by the Board. In the event of a
liquidation, merger, reorganization or consolidation of the Company with
any other corporation in which the Company is not the surviving
corporation or the Company becomes a wholly-owned subsidiary of another
corporation, any unexercised options theretofore granted under the Plan
shall be deemed cancelled unless the surviving corporation in any such
merger, reorganization, or consolidation elects to assume the options
under the Plan or to issue substitute options in place thereof; provided,
however, that, notwithstanding the foregoing, the Employee shall have the
right, exercisable during a ten day period ending on the fifth business
day prior to such liquidation, merger, or consolidation, to exercise the
Employee's option in whole or in part without regard to any installment
exercise provisions in the Employee's option agreement. Such adjustments
shall be made by the Board or the Committee, the determination of which in
that respect shall be final, binding and conclusive, provided that each
option granted pursuant to the Plan shall not be adjusted in a manner that
causes the option to fail to qualify as an incentive stock option within
the meaning of Section 422 of the Code.
8.15 Modifications, Extension, and Renewal of Options
Subject to the terms and conditions and within the limitations of the
Plan, the Board or Committee may modify, extend, or renew outstanding
options granted under the Plan, accept the surrender of outstanding
options (to the extent not theretofore exercised), and authorize the
granting of new options in substitution therefore (to the extent not
theretofore exercised). The Board or Committee shall not, however, modify
an outstanding incentive stock option in any manner which would cause the
option not to qualify as an incentive stock option within the meaning of
Section 422 of the Code. Notwithstanding the foregoing, no modification of
an option shall, without the consent of the Employee, alter or impair any
rights of the Employee under any option agreement or the Plan.
8.16 Other Provisions
Each option agreement may contain such terms, provisions, and conditions
not inconsistent with the Plan as may be determined by the Board or
Committee.
Article IX. TERMINATION OR AMENDMENT OF PLAN
The Board may at any time terminate or amend the Plan; provided that,
without approval of the shareholders of the Company, there shall be, except by
operation of the provisions of paragraph 8.14, no increase in the total number
of shares covered by the Plan, no change in the class of persons eligible to
receive options granted under the Plan, no reduction in the exercise price of
options granted under the Plan, and no extension of the latest date upon which
options may be exercised; and provided further that, without the consent of the
Employee, no amendment may adversely affect any then outstanding option or
unexercised portion thereof.
Article X. INDEMNIFICATION
In addition to such other rights of indemnification as they may have, each
and every member of the Board and each and every member of the Committee
administering the Plan shall be indemnified by the
2002 Incentive Stock Option Plan
Page 7
Company against reasonable expenses, including attorney's fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any option granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any action, suit, or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit, or
proceeding that such member is liable for negligence or misconduct in the
performance of his duties, provided that within 60 days after institution of any
such action, suit, or proceeding, the member shall in writing offer the Company
the opportunity, at its own expense, to handle and defend the same.
Article XI. SHAREHOLDER APPROVAL AND TERM OF PLAN
The plan shall be effective as of January 1, 2003 but subject to
shareholder approval either on October 22, 2002 or within one year prior to
December 31, 2003. Unless sooner terminated by the Board in its sole discretion,
the Plan shall expire on July 31, 2012.
EXHIBIT B
THERMODYNETICS, INC.
2002 NON-QUALIFIED STOCK INCENTIVE PLAN
ss. 1. PURPOSE
The purpose of the Thermodynetics, Inc. 2002 Non-Qualified Stock
Incentive Plan ("Plan") is to further the growth and development of
Thermodynetics, Inc. (the "Company") and its subsidiaries by
providing, through ownership of common stock of the Company, an
incentive to key employees as selected by the Board of Directors
("Key Employees") and members of its Board of Directors
("Directors") and who are in a position to contribute materially to
the prosperity of the Company (collectively or individually
"Contributors"). The benefits under the Plan reward the Contributors
for their diligence and effort in attaining objectives beneficial to
the Company, and increase such persons' interests in the Company's
welfare. The Plan is designed to encourage these individuals to
continue their services to the Company or its subsidiaries, and aid
in the recruitment of others of outstanding ability to serve the
Company or its subsidiaries.
ss. 2. DEFINITIONS
(a) A Stock Option is the right awarded to the Contributor to
purchase shares of common stock of the Company in the future at a
specified price. Upon exercise and payment by the Contributor,
subject to the terms and conditions of this Plan, the Contributor
receives the number of shares underlying the stock option.
(b) A Stock Bonus is an award of stock entitling the Contributor to
receive the amount of shares of common stock of the Company awarded
as a Bonus, subject to the terms and conditions of this Plan.
(c) A Stock Appreciation Right ("SAR") is the right of the
Contributor to receive an amount of shares of common stock of the
Company corresponding to an increase in value of the underlying
shares measured from the date of award, subject to the terms and
conditions of this Plan.
ss. 3. ADMINISTRATION BY BOARD
Subject to Section 4, the Plan shall be administered by the Board of
Directors of the Company ("Board"). Subject to the provisions of the
Plan, the Board shall have authority to construe and interpret the
Plan, to promulgate, amend, and rescind rules and regulations
relating to its administration, from time to time to select from
among the eligible individuals (as determined pursuant to Section 5
and 6 herein) of the Company and its subsidiaries those Contributors
to whom bonuses will be awarded or to whom options and/or SARs will
be granted, to determine the timing and manner of the award of the
bonuses or the grant and exercise of options and/or SARs, the number
of shares to be awarded as bonuses or granted as options and/or SARs
to each Contributor, to determine the duration and purpose of leaves
of absence which may be granted to Contributors without constituting
termination of their employment for purpose of the Plan, and to make
all of the determinations necessary or advisable for administration
of the Plan. The
Non-Qualified Stock Incentive Plan
Page 2
interpretation and construction by the Board of any provisions of
the Plan, or of any agreement issued and executed under the Plan,
shall be final and binding upon all parties. All actions taken and
permitted to be taken in accordance with this Plan shall be taken on
a uniform and nondiscriminatory basis. No member of the Board shall
be liable for any action or determination undertaken or made in good
faith with respect to the Plan or any bonus awarded or option and/or
SAR granted pursuant to the Plan.
ss. 4. ADMINISTRATION BY COMMITTEE
The Board may, in its sole discretion, delegate any or all of its
administrative duties to a committee (the "Committee") of not less
than three individuals, at least two or whom shall be members of the
Board, to be appointed by and serve at the pleasure of the Board.
From time to time, the Board may increase or decrease (to not less
than three members) the size of the Committee, and add additional
members to, or remove members from, the Committee. The Committee
shall act pursuant to a majority vote, or the written consent of a
majority of its members, and minutes shall be kept of all of its
meetings and copies thereof shall be provided to the Board. Subject
to the provisions of the Plan and the directions of the Board, the
Committee may establish and follow such rules and regulations for
the conduct of its business as it may deem advisable. All actions
taken and permitted to be taken in accordance with this Plan shall
be taken on a uniform and nondiscriminatory basis. No member of the
Committee shall be liable for any action or determination undertaken
or made in good faith with respect to the Plan or any bonus awarded
or option and/or SAR granted pursuant to the Plan.
ss. 5. ELIGIBILITY
Any Contributor shall be eligible to receive a bonus and/or an
option and/or an SAR under the Plan. A Contributor may receive more
than one bonus and/or more than one option and/or more than one SAR
under the Plan. Participation in any other benefit plan of the
Company shall not make the individual ineligible to participate in
this Plan.
ss. 6. CRITERIA
The Board, in its sole discretion, shall determine the criteria for
the award of a bonus or grant of an option and/or an SAR. The
specific guidelines, criteria or measures of performance or
eligibility may, but need not, be defined prior to the award of a
bonus, option or SAR; the specific guidelines, criteria or measures
of performance or eligibility may but need not be applied on
different bases for each Contributor or class of Contributors.
ss. 7. SHARES SUBJECT TO BONUS AND SARs
The shares available for award of bonuses or grant of options and/or
SARs under the Plan shall be restricted shares of the Company's
authorized but unissued common stock, par value $.01, or shares of
common stock, par value $.01, which have been acquired and are held
in its treasury. The aggregate number of shares which may be issued
by the Company or transferred from the Company's treasury as bonuses
awarded or options and/or SARs granted under the Plan shall not
exceed 500,000 shares of common stock (subject to adjustment as
provided in Section 8.14) which are hereby reserved. In the event
that any outstanding bonus or option and/or SAR under the Plan for
any reason expires or terminates or is forfeited or reacquired, the
shares of common stock allocable to the unaccepted, expired or
terminated portion of the bonus or option and/or SAR shall again be
available for bonuses or Options and/or SARs under the Plan as if no
bonus or option and/or SAR had been awarded or granted with respect
to such shares.
Non-Qualified Stock Incentive Plan
Page 3
ss. 8. TERMS AND CONDITIONS OF BONUSES AND OPTIONS AND/OR SARS
Bonuses awarded and options and/or SARs granted under the Plan shall
be evidenced by agreements, which agreements need not be identical.
Options and/or SARs shall be exercised in accordance therewith upon
proper notice to the Company and bonuses shall be accepted and
delivered in accordance therewith. The agreements shall be in such
form and containing such provisions which are consistent with the
Plan as the Board or committee shall from time to time approve. Such
agreements may incorporate all or any of the terms hereof by
reference and shall comply with and be subject to the following
terms and conditions:
ss. 8.1 Number of Shares Subject to Bonus, Option or SAR Awards
Each bonus and/or each option and/or each SAR agreement
shall specify the number of shares subject to the bonus
and/or option and/or SAR award.
ss. 8.2 Valuation
(a) Option Price
The purchase price for the shares subject to any option
shall not be less than 33.33% of the fair market value
("FMV") of the shares of common stock of the Company on
the effective date of the option and in no event shall
be less than the par value of the common stock.
(b) Bonus Value
The value of the shares subject to any bonus shall be
equal in value to a fixed dollar amount and such value
shall not be less than 33.33% of the FMV of the shares
of common stock of the Company on the date the bonus is
awarded and in no event shall be less than the par value
of the common stock.
(c) SAR Value
The value of an SAR award of stock is equal to the
excess of the FMV of one share of stock on the date of
the exercise of the SAR less the FMV of one share of
stock on the effective date of the award, the result of
which is multiplied by the number of shares with respect
to which the SAR shall have been exercised.
(d) Fair Market Value ("FMV")
The shares subject to the bonus award or the option or
SAR grant will be issued under an exemption from the
registration requirements of the Securities Act of 1933,
as amended, and will not be registered thereunder and
will not be freely tradeable. Prices quoted or listed as
described in paragraphs 8.2(d)i, ii, iii or iv are
therefore not strictly applicable to the determination
of FMV for the shares subject to the Plan. The valuation
of the shares must take into account such factors as the
restricted nature of the shares being acquired, the
requirement that the shares may not be resold without an
available exemption from the registration requirements
of federal and state securities laws, and are subject to
a required holding period before they can be resold.
Non-Qualified Stock Incentive Plan
Page 4
For purposes of the Plan, the FMV of any share of common
stock of the Company at any date shall be calculated by
means of the applicable section of 8.2(d) i, ii, iii or
iv and then reduced by an amount to reflect the
considerations of the opening paragraph and 8.2(d) in
accord with paragraphs 8.2(a), (b) and/or (c):
i. if the common stock is listed on an established
stock exchange or exchanges, the last reported
sale price per share on the day prior to such date
on the principal exchange on which it is traded,
or if no sale was made on such day on such
principal exchange, at the closing reported bid
price on such day on such exchange, or
ii. if the common stock is not listed on an exchange,
the average of the closing bid and asked prices
per share for the common stock in the
over-the-counter market as quoted on the National
Association of Securities Dealers Automated
Quotations System ("NASDAQ") on the day prior to
such date, or
iii. if the common stock is not listed on an exchange
or quoted on NASDAQ and is traded in the
over-the-counter market, the average of the
closing bid and asked prices per share for the
common stock as supplied to the Company from The
Pink Sheets, LLC or an independent source, or
iv. if the common stock is not listed on an exchange,
quoted on NASDAQ, or traded in the
over-the-counter market, an amount determined in
good faith by the Board or the Committee.
ss. 8.3 Additional Agreements of Contributor
(a) Each Contributor shall agree to render services to
the Company or its subsidiaries or affiliates for a
period of one year from the date a bonus, option or SAR
is awarded, but such agreement shall not obligate the
Company or any of its subsidiaries or affiliates to
continue to retain the services of the Contributor for
any period.
(b) Each Contributor shall enter into a confidentiality
agreement with the Company prior to the award of a bonus
and/or the grant of an option and/or an SAR in addition
to the confidentiality agreement entered into upon
employment. The additional confidentiality agreement
shall contain a clause that upon its breach by the
Contributor, the Contributor shall be obligated to
return and sell to the Company all shares purchased upon
exercise, granted or awarded under this Plan at a price
of $.01 per share; the additional confidentiality
agreement shall be in a form acceptable to the Board of
Directors.
ss. 8.4 No Transfer of Bonuses or Options and/or SARs
No bonus, option or SAR shall be transferable by a
Contributor otherwise than by will or the laws of
descent and distribution.
ss. 8.5 Restriction on Issuance of Shares
Non-Qualified Stock Incentive Plan
Page 5
The issuance of options and/or SARs, shares awarded as
bonuses and shares underlying options and/or SARs shall
be subject to compliance with all of the applicable
requirements of law with respect to the issuance and
sale of securities.
ss. 8.6 Investment Representation
Any Contributor will be required, as a condition of
issuance of shares covered by his or her bonus and/or
option and/or SAR, to represent that the shares to be
acquired pursuant to acceptance of the bonus or option
or SAR will be acquired for investment and without a
view to distribution thereof; and in such case, the
Company may place a legend on the certificate evidencing
the shares reflecting the fact that they were acquired
for investment and cannot be sold or transferred unless
registered under the Securities Act of 1933, as amended,
or unless counsel for the Company is satisfied that the
circumstances of the proposed transfer do not require
such registration.
ss. 8.7 Term of Bonus Award or Options or SAR
No bonus shall be receivable and no option or SAR shall
be exercisable after the expiration of the earliest of:
(a) ten years after the date the bonus is awarded or
the option or SAR is granted; or
(b) three months after the date of termination of the
Contributor's rendering of services to the Company
and/or its subsidiaries if such termination is for
any reason other than total and permanent
disability, death, or cause; or
(c) the date of termination for cause; if a
Contributor's relationship with the Company and
its subsidiaries is terminated for cause, as
determined by the Board or the Committee, in its
sole discretion, all bonuses, options and/or SARs
held by such Contributor shall expire on the date
of termination of employment and thereafter shall
not be exercisable in whole or in part; or
(d) one year after the date of termination of the
Contributor's rendering of services to the Company
and its subsidiaries if such termination is a
result of total and permanent disability;
provided however, that the agreement for any bonus or
option or SAR may provide for shorter periods in each of
the foregoing instances. For the purposes of this
Section 8.7, "permanent disability" shall mean a
disability of the type defined in the applicable section
of the Internal Revenue Code of 1986, as amended (the
"Code").
ss. 8.8 Medium and Time of Payment
The purchase price for any shares purchased pursuant to
exercise of an option or SAR granted under the Plan
shall be paid in full upon exercise of the option or SAR
in cash, or by check, or, at the discretion of the Board
or the Committee, upon such terms and conditions as the
Board or the Committee shall approve, including but not
limited to payment by surrender to the Company of the
common stock of the Company. Notwithstanding the
foregoing, the Company may extend and maintain, or
arrange for the extension and maintenance of, credit to
any Contributor to finance the Contributor's purchase of
shares pursuant to exercise of any option or SAR, on
such terms as may be
Non-Qualified Stock Incentive Plan
Page 6
approved by the Board or the Committee, subject to
applicable regulations of any regulatory authority or
any other laws or regulations in effect at the time such
credit is extended.
ss. 8.9 Exercise of Options and/or SARs and Award of Bonuses
No option or SAR shall be exercisable during the
lifetime of an Contributor by any person other than the
Contributor. Unless otherwise provided by the Board or
the Committee, each option or SAR under the Plan shall
become exercisable on a cumulative basis as to 50% of
the total number of shares covered thereby at any time
immediately after the date the option or SAR is granted
and 25% of such total number of shares after the end of
each consecutive year thereafter until the option or SAR
has become exercisable as to all of such total number of
shares. To the extent that a Contributor has the right
to exercise an option or SAR and purchase shares
pursuant thereto, the option or SAR may be exercised
from time to time by written notice to the Company,
stating the number of shares being exercised and, (a) if
an exercise for an option, accompanied by payment in
full of the purchase price for such shares and, (b) if
an exercise of an SAR, the notice shall state the amount
of the SAR being returned for the proportionate share
award.
If shares of common stock of the Company are used in
part or full payment for the shares to be acquired upon
exercise of the option or SAR, such shares shall be
valued for the purpose of such exchange as of the date
of exercise of the option or SAR in accordance with the
provisions of Section 8.2 hereof provided such
transaction does not violate Section 16(b) or any other
applicable section of the Securities Exchange Act of
1934, as amended, or regulation promulgated thereunder.
A certificate(s) for shares of outstanding common stock
of the Company used to pay the purchase price shall be
accompanied by stock power(s) duly executed and endorsed
in blank by the registered holder of the certificate(s)
(with the signature thereon guaranteed) and instructions
to the Company and such other documents as may be
required by the Company's counsel. In the event the
certificate(s) tendered by the Contributor in such
payment cover more shares than are required for such
payment, the certificate(s) shall also be accompanied by
instructions from the Contributor to the Company with
respect to disposition of the balance of the shares
covered thereby.
Bonuses may be awarded such that the shares are
deliverable concurrently with the award or on a
cumulative basis as to percentages of the total number
of shares awarded on specified dates, as determined by
the Board.
ss. 8.10 Stock Appreciation Rights
Under the Plan, the Board of Directors or the Committee
may, but need not, award SARs independent of, instead of
or in addition to any or all of the bonuses that may be
awarded or options that may be granted. SARs permit the
Contributor to receive any appreciation in the value of
the shares of common stock underlying the SAR directly
from the Company in shares of additional common stock.
Under the Plan, a Contributor who has received an SAR
may exercise that right, in whole or in part, at any
time as provided herein whether or not a bonus has been
awarded or an option has been granted.
Non-Qualified Stock Incentive Plan
Page 7
The amount payable on exercise of an SAR is measured by
the increase, on the date of exercise, of the market
value of the underlying stock measured from the date of
the award.
Upon written notice of exercise of an SAR, in accordance
with this Plan, the Company shall pay to the Contributor
an amount equal to the increase in the FMV of the shares
underlying the SAR award on the date of exercise
measured from the FMV of the shares underlying the SAR
award on the effective date of the SAR award, multiplied
by the number of shares with respect to which the SAR
shall have been exercised; said amount shall be payable
in shares of the common stock of the Company. FMV of the
shares shall be determined in accordance with Section
8.2(d) hereof.
ss. 8.11 No Rights as a Shareholder or Employee
A Contributor shall have NO rights as a shareholder of
the Company with respect to any shares covered by a
bonus or by an option or by an SAR until the date of the
issuance of a share certificate for such shares. No
adjustment shall be made for dividends (ordinary or
extraordinary, whether cash, securities, or other
property) or distributions or other rights for which the
record date is prior to the date such share certificate
is issued, except as provided in Section 8.14 or for
SARs as provided for in this Plan.
Nothing in the Plan or in any bonus or option or SAR
agreement shall confer upon any Contributor any right to
continue in the employ of the Company or any of its
subsidiaries or interfere in any way with any right of
the Company or any subsidiary to terminate his or her
employment at any time.
ss. 8.12 No Fractional Shares
In no event shall the Company issue fractional shares
upon the award of a bonus or grant or exercise of an
option or an SAR. Any fractional amounts shall be
rounded down and shall again be available for bonuses or
options or SARs under the plan as if no bonus, option or
SAR had been awarded or granted with respect to such
fractional shares.
ss. 8.13 Termination of Rendering of Services, Disability, or
Death
In the event a Contributor ceases to provide substantial
services to the Company and/or its subsidiaries or
affiliates for any reason while still living, any bonus,
option or SAR or undelivered portion thereof granted to
the Contributor may, to the extent such bonus, option or
SAR would have been receivable by the Contributor on the
date on which he or she ceases to provide such services,
be received by the Contributor within 30 days of the
date on which he or she ceases to provide such services,
but in any event not later than the date of the
expiration or termination of the bonus, option or SAR as
defined herein or as defined in the Agreement, whichever
is sooner. In the event of the death or disability (as
defined in the applicable section of the Code) of the
Contributor while he or she is providing substantial
services to the Company or any of its subsidiaries or
within not more than three months after the date on
which he or she ceased to provide such services, any
bonus awarded or option or SAR granted to the
Contributor or planned to be awarded or granted by the
Board to him or her on the date of death or disability,
may be awarded or granted by the Board to the
Contributor or, if the Contributor is then deceased, the
Contributor's personal representatives, heirs, legatees,
at any time prior to the expiration of three months
after the date on which the Contributor ceased to
provide such services.
Non-Qualified Stock Incentive Plan
Page 8
If a Contributor's relationship with the Company and its
subsidiaries is terminated for cause, as determined by
the Board or the Committee, in its sole discretion, all
bonuses, options and/or SARs held by such Contributor
shall expire on the date of termination of employment
and thereafter shall not be exercisable in whole or in
part.
ss. 8.14 Dilution, Recapitalization or Reorganization of Company
Except as otherwise provided herein, appropriate and
proportionate adjustment shall be made in the number and
class of shares subject to the Plan as bonuses, options
or SARs to be awarded or granted under the Plan in the
event of a stock dividend (but only on common stock),
stock split, reverse stock split, recapitalization,
reorganization, merger, consolidation, separation, or
like change in the capital structure of the Company by
the Board. In the event of a liquidation, merger,
reorganization or consolidation of the Company with any
other corporation in which the Company is not the
surviving corporation or the Company becomes a
wholly-owned subsidiary of another corporation, any
bonuses, options or SARs theretofore not awarded or
granted under the Plan shall be deemed cancelled unless
the surviving corporation in any such merger,
reorganization, or consolidation elects to assume the
bonuses, options or SARs under the Plan or to issue
substitute bonuses, options or SARs in place thereof;
provided, however, that, notwithstanding the foregoing,
if such bonuses, options or SARs would otherwise be
cancelled in accordance with the foregoing, the
Contributor shall have the right, during a ten day
period ending on the fifth business day prior to such
liquidation, merger, or consolidation, to accept the
Contributor's bonus, option or SAR in whole or in part
without regard to any installment provisions in the
Contributor's bonus, option or SAR agreement. Such
adjustments shall be made by the Board or the Committee,
the determination of which in that respect shall be
final, binding and conclusive.
ss. 8.15 Modifications, Extension, and Renewal of Bonuses or
Options and/or SARs
Subject to the terms and conditions and within the
limitations of the Plan, the Board or Committee may
modify, extend, or renew outstanding bonuses awarded or
options and/or SARs granted under the Plan, accept the
surrender of outstanding bonuses or options and/or SARs
(to the extent not theretofore exercised), and authorize
the awarding of new bonuses or granting of new options
and/or SARs in substitution therefor (to the extent not
theretofore exercised). Notwithstanding the foregoing,
no modification of a bonus, option or SAR shall, without
the consent of the Contributor, alter or impair any
rights of the Contributor under the bonus, option or SAR
agreement.
ss. 8.16 Withholding Taxes
The Company shall have the right, at its option, to
collect monies in cash or cash equivalents directly from
the Contributor for payment of withholding taxes,
provided the Company has an obligation to collect any
federal or state withholding taxes. In the event the
Contributor has paid or made provision for payment of
all applicable withholding tax obligations, to the
satisfaction of the Board, then the Company may waive
its rights of collection in accordance herewith.
THE COMPANY RECOMMENDS THAT EACH CONTRIBUTOR CONSULT A
TAX ADVISOR TO DETERMINE ALL TAX AFFECTS.
ss. 8.17 Other Provisions
Non-Qualified Stock Incentive Plan
Page 9
Each bonus, option or SAR agreement may contain such
terms, provisions, and conditions not inconsistent with
the Plan as may be determined by the Board or Committee.
ss. 9. TERMINATION OR AMENDMENT OF PLAN
The Board may at any time terminate or amend the Plan;
provided that, without approval of the shareholders of
the Company, there shall be, except by operation of the
provisions of Section 8.14, no increase in the total
number of shares covered by the Plan, no change in the
class of persons eligible to receive bonuses awarded or
options and/or SARs granted under the Plan, and provided
further that, without the consent of the Contributor, no
amendment may adversely affect any then outstanding
bonus, option or SAR.
ss. 10. INDEMNIFICATION
In addition to such other rights of indemnification as
they may have, each and every member of the Board and
each and every member of the Committee administering the
Plan shall be indemnified by the Company against
reasonable expense, including attorney's fees, actually
and necessarily incurred in connection with the defense
of any action, suit or proceeding, or in connection with
any appeal therein, to which they or any of them may be
a party by reason of any action taken or failure to act
under or in connection with the Plan or any bonus,
option or SAR awarded or granted thereunder, and against
all amounts paid by them in settlement thereof (provided
such settlement is approved by independent legal counsel
selected by the Company) or paid by them in satisfaction
of a judgment in any action, suit, or proceeding, except
in relation to matters as to which it shall be adjudged
in such action, suit, or proceeding that such member is
liable for negligence or misconduct in the performance
of his duties, provided that within 60 days after
institution of any such action, suit, or proceeding, the
member shall in writing offer the Company the
opportunity, at its own expense, to handle and defend
the same.
ss. 11. SHAREHOLDER APPROVAL AND TERM OF PLAN
The plan shall be effective as of January 1, 2003 but
subject to shareholder approval on either October 22,
2002 or within one year prior to December 31, 2003.
Unless sooner terminated by the Board in its sole
discretion, the Plan will expire on December 31, 2012.
PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS PROXY
Please Sign and Return this Proxy Promptly
THERMODYNETICS, INC.
Annual Meeting of Stockholders - October 22, 2002
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints John
F. Ferraro and Robert A. Lerman, or any one of them acting in the absence of the
other, as attorneys and proxies of the undersigned with full power of
substitution, for and in the name of the undersigned, to represent the
undersigned at the Annual Meeting of Stockholders of Thermodynetics, Inc., a
Delaware corporation, to be held at the Company's principal offices at 651 Day
Hill Road, Windsor, Connecticut 06095 at 9:30 A.M. (EST) on Tuesday, October 22,
2002 and at any adjournments thereof, and to vote all shares of stock of said
Company standing in the name of the undersigned with all the powers which the
undersigned would possess if personally present at such meeting. The undersigned
directs that this Proxy be voted as follows:
1. To elect three (3) directors (Proposal One).
FOR |_| all nominees listed below
(except as marked to the contrary below)
WITHHOLD AUTHORITY |_|
(to vote for all nominees listed below)
Nominees: John F. Ferraro, Robert A. Lerman, Anthony C. Mirabella
If it is desired to withhold authority to vote for any individual
nominee, check the FOR box above and strike out the name of the
nominee for whom you desire to withhold voting authority.
2. Approval of the Company's 2002 Incentive Stock Option Plan (Proposal Two).
FOR |_| AGAINST |_| ABSTAIN |_|
3. Approval of the Company's 2002 Non-Qualified Stock Incentive Plan
(Proposal Three).
FOR |_| AGAINST |_| ABSTAIN |_|
4. In their discretion, on all other matters that may properly come before
the meeting.
AUTHORITY GRANTED |_| AUTHORITY WITHHELD |_|
(Continued and to be signed on other side)
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE GIVEN FOR
ANY ITEM, THIS PROXY WILL BE VOTED FOR THAT ITEM. DISCRETIONARY AUTHORITY IS
HEREBY CONFERRED AS TO ALL OTHER MATTERS THAT MAY COME BEFORE THE MEETING.
STOCKHOLDERS WHO ARE PRESENT AT THE MEETING MAY WITHDRAW THEIR PROXY AND VOTE IN
PERSON IF THEY SO DESIRE.
Dated:____________________________ 2002
_______________________________________
_______________________________________
(Signature of Stockholder)
Please sign exactly as name appears on
this Proxy. If shares are registered in
more than one name, the signatures of
all such persons are required. A
corporation should sign in its full
corporate name by a duly authorized
officer, stating his title. Trustees,
guardians, executors and administrators
should sign in their official capacity,
giving their full title as such. If a
partnership, please sign in partnership
name by authorized person.
PLEASE SIGN AND RETURN THIS PROXY PROMPTLY
No postage is required if returned in the enclosed envelope and mailed in the
United States
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS