UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
SCHEDULE
14A
(RULE
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed
by
the registrant
x
Filed
by
a Party other than the registrant
o
Check
the
appropriate box:
|
o
|
Preliminary
proxy statement.
|
|
o
|
Confidential,
for use of the Commission only (as permitted by
Rule 14a-6(e)(2)).
|
|
x
|
Definitive
proxy statement.
|
|
o
|
Definitive
additional materials.
|
|
o
|
Soliciting
material pursuant to § 240.14a-11(c) of
§ 240.14a-12.
|
THERMOENERGY
CORPORATION
(Name
of Registrant as Specified in its Charter)
_______________________________________________________________
(Name
of
Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment
of filing fee (check the appropriate box):
|
o
|
Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
|
|
|
(1)
|
Title
of each class of securities to which transaction applies:
__________________
|
|
|
(2)
|
Aggregate
number of securities to which transaction applies:
__________________
|
|
|
(3)
|
Per
unit price of other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
__________________
|
|
|
(4)
|
Proposed
maximum aggregate value of transaction:
__________________
|
|
|
(5)
|
Total
fee paid: __________________
|
|
o
|
Fee
paid previously with preliminary
materials.
|
|
o
|
Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its
filing.
|
|
|
(1)
|
Amount
Previously Paid: __________
|
|
|
(2)
|
Form,
Schedule or Registration Statement No.:
__________
|
|
|
(3)
|
Filing
Party: __________
|
|
|
(4)
|
Date
Filed: __________
|
EXPLANATORY
NOTE
We
are filing this revised Schedule 14A to append, at
the end of the filing, the correct form of proxy.
THERMOENERGY
CORPORATION
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
Notice
is
hereby given that the Annual Meeting of Shareholders of ThermoEnergy Corporation
(“ThermoEnergy”), will be held Thursday, June 26, 2008 at 10:00 a.m., local
time, at the Hyatt Regency Boston, One Avenue de Lafayette, Boston, MA, USA,
for
these purposes:
|
1.
|
To
elect two directors to serve on ThermoEnergy’s Board of Directors, to
serve a term of three years until the 2011 Annual Meeting of Shareholders
and until their respective successors are duly elected and
qualified;
|
|
2.
|
To
approve the 2008 Incentive Stock
Plan;
|
|
3.
|
To
ratify the appointment of Kemp & Company, ThermoEnergy’s independent
registered public accounting firm, for the fiscal year ending
December 31, 2008; and
|
|
4.
|
To
consider and act upon such other business as may be properly presented
to
the meeting or any postponement or adjournment
thereof.
|
The
foregoing items of business are more fully described in the Proxy Statement
accompanying this notice. The Board of Directors has fixed the close of business
on May 21, 2008, as the record date for the determination of the shareholders
entitled to notice of, and to vote at, the meeting or any postponement or
adjournment.
A
Proxy
Card, ThermoEnergy’s Proxy Statement and its amended Annual Report on
Form 10-KSB/A for the fiscal year ended December 31, 2007, are
enclosed with this Notice of Annual Meeting of Shareholders. ThermoEnergy’s
Board of Directors recommends that you vote
FOR
election
of the nominees for director named in the Proxy Statement,
FOR
approval
of the 2008 Incentive Stock Plan, and
FOR
ratification of the appointment of Kemp & Company as independent public
accountants for fiscal year 2008.
All
shareholders are cordially invited to attend the meeting in person. However,
to
assure your representation at the meeting, you are urged to mark, sign, date
and
return the enclosed Proxy Card as promptly as possible in the postage prepaid
envelope provided for that purpose. Any shareholder attending the meeting may
vote in person even if he or she returned a proxy.
|
|
By
order of the Board of Directors,
|
|
|
|
|
|
/s/
Dennis C. Cossey
|
|
|
Dennis
C. Cossey,
|
|
|
Chairman
and Chief Executive Officer
|
May
23,
2008
Little
Rock, Arkansas
TABLE
OF CONTENTS
|
Questions and Answers about the Annual Meeting and Voting
|
1
|
|
Proposal I
|
|
5
|
|
Proposal II
|
Approval of the 2008 Incentive Stock Plan
|
20
|
|
Proposal III
|
Ratification
of Appoinment of Independent Registered Public Accounting
Firm
|
27
|
|
Annex A
|
ThermoEnergy Corporation 2008 Incentive Stock Plan
|
A-1
|
THERMOENERGY
CORPORATION
124
W.
Capitol Avenue, Suite 880
Little
Rock, Arkansas 72201
Telephone
501.376.6477
Facsimile
501.375.5249
May
23,
2008
PROXY
STATEMENT
QUESTIONS
AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
Why
did I receive this proxy statement?
|
|
A:
|
The
Board of Directors of ThermoEnergy Corporation (“ThermoEnergy”) is
soliciting your proxy to vote at the Annual Meeting of Shareholders
because you were a shareholder of ThermoEnergy as of the close of
business
on May 21, 2008, the record date, and are therefore entitled to vote
at
the meeting.
|
This
Proxy Statement and Proxy Card, along with the amended Annual Report on
Form 10-KSB/A for the fiscal year ended December 31, 2007, are being mailed
to shareholders as of the record date beginning on or about May 23, 2008. The
Proxy Statement summarizes the information you need to know to vote at the
meeting. You do not need to attend the meeting to vote your shares.
What
am I voting on?
|
|
A:
|
●
Election of two directors: Andrew T. Melton and Alexander G. Fassbender,
each of whom is an incumbent director, have been nominated to serve
three-year terms until the 2011 Annual Meeting of Shareholders, or
until
their respective successors are elected or appointed.
|
●
Approval of the ThermoEnergy Corporation 2008 Incentive Stock Plan, which was
adopted by the Board of Directors on May 7, 2008.
●
Ratification of the appointment of Kemp & Company, ThermoEnergy’s
independent registered public accounting firm for the fiscal year ending
December 31, 2008.
The
Board
of Directors recommends a vote
FOR
election
of the nominees to the Board of Directors,
FOR
approval
of the 2008 Incentive Stock Plan, and
FOR
ratification of the appointment of Kemp & Company as ThermoEnergy’s
independent registered public accounting firm for the fiscal year ending
December 31, 2008.
What
is the voting requirement to elect the directors. What is the voting requirement
to approve the 2008 Incentive Stock Plan and to ratify the appointment of Kemp
& Company as independent public accountants?
|
|
A:
|
For
the election of the directors, the nominees, must receive the affirmative
vote of a plurality of the votes cast. The proposals to approve the
2008
Incentive Stock Plan and to ratify the appointment of Kemp & Company
as independent public accountants requires the affirmative vote of
a
majority of the votes cast. The voting requirements given in this
answer
assume that a quorum is present.
|
How
many votes do I have?
|
|
A:
|
You
are entitled to one vote for each share of ThermoEnergy’s common stock or
Series A convertible preferred stock that you hold. Shareholders
do not
have cumulative voting rights.
|
How
do I vote?
|
|
A:
|
You
may vote using any of the following
methods:
|
|
|
(1)
|
Complete,
sign and date the Proxy Card you receive and return it in the prepaid
envelope; or
|
|
|
(2)
|
Attend
the Annual Meeting of Shareholders to vote in
person.
|
If
you
return your signed Proxy Card but do not indicate your voting preferences,
the
persons named in the Proxy Card will vote
FOR
the
election
of the nominees for director,
FOR
approval
of the 2008 Incentive Stock Plan, and
FOR
ratification of Kemp & Company as independent public accountants for 2008.
What
can I do if I change my mind after I vote my shares?
|
|
A:
|
You
may revoke your proxy at any time before it is voted at the Annual
Meeting
of Shareholders by:
|
|
|
(1)
|
Sending
written notice of revocation to the Secretary of
ThermoEnergy;
|
|
|
(2)
|
Submitting
a new paper ballot, after the date of the revoked proxy;
or
|
|
|
(3)
|
Attending
the Annual Meeting of Shareholders and voting in
person.
|
You
may
also be represented by another person at the meeting by executing a proper
proxy
designating that person.
What
constitutes a quorum?
|
|
A:
|
As
of the record date, 43,769,857 shares of common stock and 5,260,002
shares
of Series A Convertible Preferred Stock were outstanding. Except
as
otherwise required by law or the Certificate of Incorporation,
the holders
of the common stock and the holders of the Series A Convertible
Preferred
Stock vote together as a single class, with each share of common
stock and
each share of Series A Convertible Preferred Stock entitling the
holder
thereof to one vote. The holders of a majority of the outstanding
shares
(or 24,514,930 shares), present in person or represented by proxy,
constitute a quorum for the purpose of adopting proposals at the
meeting.
If you submit a properly executed proxy, then you will be considered
part
of the quorum. If you are present or represented by proxy at the
meeting,
you will count toward a
quorum.
|
Who
can attend the Annual Meeting of Shareholders?
|
|
A:
|
All
shareholders as of the record date may attend the Annual Meeting
of
Shareholders.
|
Are
there any shareholders that own more than 5% of ThermoEnergy’s outstanding
common stock?
|
|
A:
|
As
of May 21, 2008, Dennis C. Cossey, Alexander G. Fassbender, Martin
A.
Roenigk, the Estate of P.L. Montesi, Security Management, Quercus
Trust,
Robert Trump, The Focus Fund and Kevin Kimberlin each beneficially
owned
more than 5% of ThermoEnergy’s outstanding common
stock.
|
When
are the shareholder proposals due for the 2009 Annual Meeting of
Shareholders?
|
|
A:
|
In
order to be considered for inclusion in next year’s proxy statement,
shareholder proposals must be submitted in writing by December 31,
2008, to Dennis Cossey, Chairman and Chief Executive Officer, ThermoEnergy
Corporation, 124 W. Capitol Avenue, Suite 880, Little Rock, Arkansas
72201.
|
If
you
notify us after March 1, 2009 of an intent to present a proposal at
ThermoEnergy’s 2009 Annual Meeting of Shareholders, we will have the right to
exercise discretionary voting authority with respect to your proposal, if
presented at the meeting, without including information regarding it in our
proxy materials.
What
happens if the nominees for director are unable to serve as
directors?
|
|
A:
|
If
a nominee becomes unavailable for election, which we do not expect,
votes
will be cast for the substitute nominee or nominees who may be designated
by the Board of Directors.
|
Who
will be responsible for soliciting proxies?
|
|
A:
|
ThermoEnergy
has neither hired nor paid for assistance in the distribution of
proxy
materials and solicitation of votes. Employees, officers and directors
of
ThermoEnergy may solicit proxies, but will not be separately compensated
for such solicitation. We will reimburse brokerage houses and other
custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses for forwarding proxy and solicitation materials to the owners
of
common stock.
|
PROPOSAL
I
ELECTION
OF DIRECTORS
Unless
otherwise directed in the proxy, the person named in the enclosed proxy card,
or
his substitute, will vote the proxy FOR the election of Andrew T. Melton and
Alexander G. Fassbender to the Board of Directors.
The
Board
of Directors has set the number of directors constituting the Board of Directors
at seven. Six members of the Board of Directors serve staggered three-year
terms
with two members standing for election each year. One member serves a five-year
term. At the Annual Meeting of Shareholders, two directors are to be elected.
Andrew T. Melton and Alexander G. Fassbender both currently serve on the Board
of Directors and are being nominated for another three-year term, expiring
in
2011.
Nominees
Andrew T.
Melton
,
age 61,
has served as a director of ThermoEnergy since September 1997, and has served
as
Executive Vice President and Chief Financial Officer since September 2005.
Mr. Melton is a certified public accountant and received an MBA in finance
and a Bachelor of Science degree in economics from Louisiana Tech University.
From 1986 to 1994, Mr. Melton served as Executive Vice President, Chief
Financial Officer and Treasurer of Worthen Banking Corporation, Little Rock,
Arkansas. From 1995 to 1998, Mr. Melton was Vice President with Merrill
Lynch Capital Markets in Little Rock, Arkansas. From January 1997 to January
1999, Mr. Melton served as Chief Executive Officer and the principal
shareholder of Solomon Financial Inc., a company specializing in financing
Canadian imports to the US. Mr. Melton most recently was President and
principal shareholder of Solomon Equities, Inc., located in Irving, Texas that
he started in January 1999. On August 26, 2004, Solomon Equities Inc., d/b/a
Trail Dust Steak House of Denton and Grapevine filed for Chapter 11 bankruptcy
protection in the United States Bankruptcy Court for the Northern District
of
Texas, and during 2005 the bankruptcy was converted to a Chapter 7 liquidation
and the company was dissolved. Mr. Melton is a Vietnam veteran and received
an
Honorable Discharge from the United States Marine Corps.
Alexander G.
Fassbender
,
age 54,
has served as a director of ThermoEnergy since June 2005 and has served as
Executive Vice President and Chief Technology Officer since November 1998.
Prior
to joining the Company, Mr. Fassbender was Manager of Technology
Commercialization at Battelle Memorial Institute (BMI) Pacific Northwest
Laboratories. He had held various positions with BMI since 1976.
Mr. Fassbender received his BS (Chemical Engineering) in 1976 from the
University of California, Berkeley and his MBA in 1980 and his MS (Chemical
Engineering) in 1988, both from the University of Washington,
Seattle.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR
ELECTION
OF THE NOMINEES.
Directors
Whose Terms Expire in 2009
Lowell
E. Faulkenberry,
age
56,
has served as a director of ThermoEnergy since June 2006. Mr. Faulkenberry
serves as chairman of the Audit Committee and as a member of the Compensation
and Benefits Committee. Mr. Faulkenberry is a certified public accountant and
received a BA in Accounting from the University of Texas at Arlington. Since
2007, Mr. Faulkenberry has served as Director of Finance with Flight Safety
International. At Flight Safety International, Mr. Faulkenberry is responsible
for the achievement of their financial objectives. Prior to his current
position, Mr. Faulkenberry performed financial consulting services primarily
for
American Electric Power and its subsidiaries. From 1986 to 2000, Mr.
Faulkenberry served as Senior Vice President and Director of Internal Audit/Risk
Management for BOK Financial Corporation, a large multi-bank and multi-state
bank holding company headquartered in Tulsa, Oklahoma. Prior to joining BOK,
Mr.
Faulkenberry was a senior auditor with KPMG Peat Marwick. Mr. Faulkenberry
is a
veteran who served with the U.S. Air Force during the Viet Nam conflict, and
received an Honorable Discharge.
Dr.
Paul A. Loeffler,
age
60,
has served as a director of ThermoEnergy since September 1997. Dr. Loeffler
also
serves as the Chairman of the Compensation and Benefits Committee, and as a
member of the Audit Committee. Since 1985, Dr. Loeffler has been a professor
of
chemistry at Sam Houston State University, Huntsville, Texas, and has been
with
the University’s chemistry department of Sam Houston University since 1975. Dr.
Loeffler received his Ph.D. and MA in inorganic chemistry from Rice University.
Dr. Loeffler also serves as a member of the Board of Directors of the Texas
Regional Institute for Environmental Studies in Huntsville, Texas, where he
was
associate director from 1992 until 2002.
Directors
Whose Terms Expire in 2010
Dr. Louis J.
Ortmann, DDS
,
age 70,
has served as a director of ThermoEnergy since 1991. Dr. Ortmann also
serves as a member of the Audit Committee and the Compensation and Benefits
Committee. Dr. Ortmann is an associate dentist with Louis J. Ortmann
Dental Clinic, Inc., in Festus, Missouri. Dr. Ortmann is a graduate of the
University of St. Louis.
Martin
A. Roenigk,
age
65,
has served as a director of ThermoEnergy since 2007. From 1995 to 2007, Mr.
Roenigk served as the Chairman and CEO of CompuDyne Corporation.
Mr. Roenigk and his wife own two National Register listed historic hotels
in Eureka Springs, Arkansas, The Crescent Hotel & Spa and the Basin Park
Hotel.
Director
Whose Term Expires in 2011
Dennis
C. Cossey,
age
62,
has served as Chairman of the Board of Directors since 1990. Mr. Cossey has
been
the Chief Executive Officer and a director of the Company since 1988. Prior
to
joining the Company, Mr. Cossey served in executive and sales positions at
a
number of companies, including IBM and Peter Kiewit and Sons Engineering. Mr.
Cossey is a member of several industry professional groups including the
American Society of Naval Engineers, the US Naval Institute, the Society of
Naval Architects and Marine Engineers and the Association of Energy Engineers.
Mr. Cossey has testified before congress on various environmental
issues.
Committees
of the Board of Directors
Compensation
and Benefits Committee
.
The
Compensation and Benefits Committee consists of Dr. Loeffler, as Chairman,
Mr.
Faulkenberry and Mr. Roenigk. This committee makes recommendations to the Board
of Directors on compensation generally, executive officer salaries, bonus
awards, stock option grants, special awards and supplemental compensation.
The
Compensation and Benefits Committee consults generally with management on
matters concerning executive compensation and other compensation issues where
Board of Directors or shareholder action is contemplated. The Company has
commissioned a study of directors and executives compensation by a firm of
independent experts to be presented to the Compensation and Benefits Committee.
The Board has determined that all of the members of the Compensation and
Benefits Committee are independent.
Audit
Committee
.
The
Audit Committee consists of Mr. Faulkenberry, as Chairman, Dr. Loeffler and
Dr.
Ortmann. This committee oversees the Company’s financial reporting process and
internal controls. The Audit Committee is governed by a written charter approved
by the Board of Directors. The charter sets out the Audit Committee’s membership
requirements and responsibilities. A copy of the Audit Committee charter was
provided to shareholders as Annex A to the Company’s 2007 proxy statement. As
part of its duties, the Audit Committee consults with management and the
Company’s independent registered public accounting firm during the year on
matters related to the annual audit, internal controls, the published financial
statements and the accounting principles and auditing procedures being applied.
The Audit Committee selects the Company’s registered public accounting firm,
reviews the independent registered public accounting firm’s audit fees,
discusses relationships with the auditor, and reviews and approves in advance
non-audit services to ensure no compromise of independence. The Board has
determined that all of the members of the Audit Committee are independent and
that Mr. Faulkenberry is an audit committee financial expert (as defined in
Item
407(d)(5)(ii) of Regulation S-B).
Nominating
Committee
.
The
Nominating Committee consists of Mr. Cossey, as Chairman, Dr. Loeffler and
Mr.
Roenigk. The Nominating Committee identifies the individuals to be nominated
for
election to the Board of Directors and selects those candidates to be presented
for shareholder approval at the Annual Meeting of Shareholders. In considering
candidates, the Nominating Committee seeks to assure that the Board of Directors
will include persons with a variety of skills and experience, including at
least
one director with expertise in the areas of science and technology in which
the
Company operates and at least one director who qualifies as an audit committee
financial expert. The Nominating Committee does not have a charter.
The
Nominating Committee will consider director candidates recommended by the
shareholders if a nominating shareholder complies with the following
requirements. If a shareholder wishes to recommend a candidate to the Nominating
Committee for consideration as a candidate for election to the Board of
Directors, the shareholder must submit in writing to the Nominating Committee
the nominee’s name and a brief resume setting forth the nominee’s business and
educational background and qualifications for service, and a notarized consent
signed by the recommended candidate stating the recommended candidate’s
willingness to be nominated and to serve. This information must be delivered
to
the Chairman of the Nominating Committee at the following address: ThermoEnergy
Corporation, 124 W. Capitol Avenue, Suite 880, Little Rock, Arkansas 72201,
and
must be received no later than December 31 in any year to be considered as
a potential director nominee at the Annual Meeting of Shareholders for the
following year. The Nominating Committee may request additional information
if
it determines a potential candidate may be an appropriate
nominee.
Shareholder
Communications
The
Board
of Directors does not have a formal policy for shareholder communications to
the
Board of Directors. The small size of the Board of Directors and the simple
administrative structure of ThermoEnergy permits shareholders to have easy
access to ThermoEnergy’s management and its directors for any communications,
including those pertaining to director nominations as set forth above.
Shareholder inquiries, suggestions and other communications may be directed
to
ThermoEnergy’s Chairman and Chief Executive Officer at ThermoEnergy Corporation,
124 W. Capitol Avenue, Suite 880, Little Rock, Arkansas 72201.
Code
of Ethics
A
copy of
the Company’s Code of Business Conduct and Ethics, including additional
provisions which apply to the chief executive officer and senior financial
officers, may be obtained free of charge by making a written request to Investor
Relations, ThermoEnergy Corporation, 124 W. Capitol Avenue, Suite 880, Little
Rock, Arkansas 72201.
Board
Determination
of Independence
The
Company’s securities are not listed on a national securities exchange or on an
inter-dealer quotation system which has requirements that a majority of the
board of directors be independent. In determining which directors and which
members of committees are “independent,” the Board of Directors has applied the
definition of independence set forth in Rule 4200(a)(15) of the Nasdaq
Marketplace Rules and has determined that each of Mr. Faulkenberry, Dr.
Loeffler, Dr. Ortmann and Mr. Roenigk does not have a relationship which would
interfere with the exercise of independent judgment in carrying out the
responsibilities of a director and that, consequently, each of these directors
is an “independent director.”
Attendance
at the Annual Meeting and at Board and Committee Meetings
Although
the Company does not have a requirement that all members of the Board of
Directors attend the Annual Meeting of Shareholders, such attendance is strongly
encouraged. All of the directors then in office attended the 2007 Annual Meeting
of Shareholders and the Company anticipates that all of the current directors
will be present for the 2008 Annual Meeting of Shareholders. During the fiscal
year ended December 31, 2007, the Board of Directors held three meetings
and every director attended at least 75% of those meetings. During 2007, the
Audit Committee held three meetings and the Compensation and Benefits Committee
held one meeting, and all members of those committees attended at least 75%
of the meetings of their respective committees. The Nominating Committee was
not
established until late 2007, and did not hold any meetings during the fiscal
year ended December 31, 2007.
Compensation
of
the
Board
Directors
do not receive cash compensation for serving on the Board or its committees.
Non-employee directors are awarded annual grants of non-qualified stock options.
All directors are reimbursed for their reasonable expenses incurred in attending
all board meetings. We maintain directors and officers liability
insurance.
The
following table shows compensation for the fiscal year ended December 31, 2007
to our directors who are not also named executive officers:
Director
Compensation (1)
|
|
|
Fees Earned or
|
|
Option Awards
|
|
|
|
|
Name
|
|
Paid in Cash ($)
|
|
($) (2)
|
|
Total ($)
|
|
|
Lowell
E. Faulkenberry (3)
|
|
|
none
|
|
$
|
39,460
|
(3)
|
$
|
39,460
|
|
|
Paul
A. Loeffler PhD (4)
|
|
|
none
|
|
$
|
29,420
|
(4)
|
$
|
29,420
|
|
|
Louis
J. Ortmann DDS (5)
|
|
|
none
|
|
$
|
29,420
|
(5)
|
$
|
29,420
|
|
|
Martin
A. Roenigk (6)
|
|
|
none
|
|
$
|
29,420
|
(6)
|
$
|
29,420
|
|
|
(1)
|
Certain
columnar information required by Item 402(f)(2) of Regulation S-B
has been
omitted for categories where there was no compensation awarded to,
or paid
to, the named directors during the fiscal year ended December 31,
2007.
|
|
(2)
|
The
reported amounts reflect the dollar amounts recognized for financial
statement reporting purposes for the fiscal year ended December 31,
2007,
in accordance with FAS 123R, and may include amounts from awards
granted
both in and prior to the fiscal year ended December 31, 2007. As
required,
the amounts shown exclude the impact of any forfeiture related to
service-based vesting conditions. The actual amount realized by the
director will likely vary based on a number of factors, including
the
Company’s performance, stock price fluctuations and applicable
vesting.
|
|
(3)
|
An
option to purchase 40,000 shares at an exercise price of $0.43 per
share
was granted to Mr. Faulkenberry on March 21, 2007. This option has
a
termination date of March 22, 2012. An option to purchase 50,000
shares at
an exercise price of $1.25 per share was granted to Mr. Faulkenberry
on
June 14, 2007. This option has a termination date of June 15, 2010.
At
December 31, 2007, Mr. Faulkenberry held options for the purchase
of an
aggregate of 90,000 shares, all of which were
exercisable.
|
|
(4)
|
An
option to purchase 50,000 shares at an exercise price of $1.25 per
share
was granted to Dr. Loeffler on June 14, 2007. This option has a
termination date of June 15, 2010. At December 31, 2007, Dr. Loeffler
held
options for the purchase of an aggregate of 111,900 shares, all of
which
were exercisable.
|
|
(5)
|
An
option to purchase 50,000 shares at an exercise price of $1.25 per
share
was granted to Dr. Ortmann on June 14, 2007. This option has a termination
date of June 15, 2010. At December 31, 2007, Dr. Ortmann held options
for
the purchase of an aggregate of 111,900 shares, all of which were
exercisable.
|
|
(6)
|
An
option to purchase 50,000 shares at an exercise price of $1.25 per
share
was granted to Mr. Roenigk on June 14, 2007. This option has a termination
date of June 15, 2010. At December 31, 2007, Mr. Roenigk held options
for
the purchase of an aggregate of 50,000 shares, all of which were
exercisable.
|
Security
Ownership by Certain Beneficial Owners, Directors and Executive
Officers
The
following table sets forth certain information as of April 29, 2008 with respect
to beneficial ownership of our common stock by each shareholder known by the
Company to be the beneficial owner of more than 5% of our common stock and
by
each of our directors and executive officers and by all of the directors,
nominees for election as director, and executive officers as a
group.
|
Beneficial Owners (1)
|
|
Amount and Nature
of Beneficial
Ownership (2)
|
|
Percent of
Class (3)
|
|
|
|
|
|
|
|
|
|
Directors,
Nominees and Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dennis
C. Cossey
|
|
|
3,428,549
|
(4)
|
|
7.5
|
%
|
|
|
|
|
|
|
|
|
|
|
Alexander
G. Fassbender
|
|
|
2,247,712
|
(5)
|
|
5.0
|
%
|
|
|
|
|
|
|
|
|
|
|
Lowell
E. Faulkenberry
|
|
|
95,000
|
(6)
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Shawn
R. Hughes
|
|
|
702,500
|
(7)
|
|
1.6
|
%
|
|
|
|
|
|
|
|
|
|
|
Paul
A. Loeffler
|
|
|
116,900
|
(8)
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Andrew
T. Melton
|
|
|
792,500
|
(9)
|
|
1.8
|
%
|
|
|
|
|
|
|
|
|
|
|
Louis
J. Ortmann
|
|
|
584,241
|
(10)
|
|
1.3
|
%
|
|
|
|
|
|
|
|
|
|
|
Martin
A. Roenigk
|
|
|
4,669,589
|
(11)
|
|
9.7
|
%
|
|
|
|
|
|
|
|
|
|
|
All
executive officers, directors and nominees as a group (8
persons)
|
|
|
12,574,481
|
(12)
|
|
23.7
|
%
|
|
|
|
|
|
|
|
|
|
|
5%
Beneficial Owners
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quercus
Trust
1835
Newport Blvd.
A109-PMC
467
Costa
Mesa, CA 92627
|
|
|
35,333,335
|
(13)
|
|
44.9
|
%
|
|
|
|
|
|
|
|
|
|
|
Security
Management
Security
Benefit Place
Topeka,
Kansas 66636
|
|
|
7,250,000
|
(14)
|
|
14.3
|
%
|
|
|
|
|
|
|
|
|
|
|
Robert
Trump
167
E. 61
st
Street
New
York, NY 10021
|
|
|
10,184,560
|
(15)
|
|
21.3
|
%
|
|
|
|
|
|
|
|
|
|
|
Estate
of P.L. Montesi
|
|
|
2,976,150
|
(16)
|
|
6.6
|
%
|
|
The
Focus Fund
PO
Box 389
Ponte
Vedra, FL 32004
|
|
|
3,298,095
|
(17)
|
|
7.5
|
%
|
|
|
|
|
|
|
|
|
|
|
Kevin
Kimberlin
c/o
Spencer Trask Ventures
535
Madison Avenue
New
York, NY 10022
|
|
|
7,599,318
|
(18)
|
|
16.1
|
%
|
*
Less
than 1%
(1)
Except as otherwise indicated in the beneficial ownership table, the address
for
each person listed is: c/o ThermoEnergy Corporation, 124 West Capitol Avenue,
Suite 880, Little Rock, Arkansas 72201.
(2)
Includes shares as to which such person directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise, has or shares
voting power and/or investment power, as these terms are defined in
Rule 13d-3(a) of the Exchange Act. Shares of common stock underlying
options to purchase shares of common stock and securities convertible into
shares of common stock, which are exercisable or convertible on, or become
exercisable or convertible within 60 days after, April 29, 2008 are deemed
to be
outstanding with respect to a person or entity for the purpose of computing
the
outstanding shares of common stock owned by the particular person and by the
group, but are not deemed outstanding for any other purpose.
(3)
Based
on 43,384,859 shares of common stock issued and outstanding on April 29, 2008,
plus, with respect to each individual or entity (but not with respect to other
individuals or entities), the number of shares of common stock underlying
options to purchase shares of common stock and securities convertible into
shares of common stock, held by such individual or entity which are exercisable
or convertible on, or become exercisable or convertible within 60 days after,
April 29, 2008.
(4)
Includes 1,391,049 shares owned directly by Mr. Cossey or jointly with the
estate of P.L. Montesi. Also includes 2,035,000 shares issuable upon the
exercise of options.
(5)
Includes 677,712 shares owned directly by Mr. Fassbender. Also includes
1,565,000 shares issuable upon the exercise of options.
(6)
Includes 5,000 shares owned directly by Mr. Faulkenberry. Also includes 90,000
shares issuable upon the exercise of options.
(7)
Includes 102,500 shares owned directly by Mr. Hughes. Also includes 600,000
shares issuable upon the exercise of options.
(8)
Includes 5,000 shares owned directly by Dr. Loeffler. Also includes 111,900
shares issuable upon the exercise of options.
(9)
Includes 95,500 shares owned directly by Mr. Melton. Also includes 697,500
shares issuable upon the exercise of options.
(10)
Includes 472,431 shares owned directly by Dr. Ortmann and his wife and
beneficially through the Dr. Louis J. Ortmann Dental Clinic, Inc.,
Profit Sharing Plan. Also includes 111,900 shares issuable upon the exercise
of
options.
(11)
Includes 119,589 shares owned directly by Mr. Roenigk, 4,500,000 shares issuable
upon the exercise of warrants and conversion of convertible debt held by Mr.
Roenigk, and 50,000 shares issuable upon exercise of options.
(12)
Includes 5,131,300 shares issuable upon the exercise of options, and 4,500,000
shares issuable upon exercise of warrants and conversion of convertible debt.
(13)
This
beneficial ownership information is based on information contained in a
Schedule 13D dated December 17, 2007 and filed with the U.S. Securities and
Exchange Commission on December 18, 2007. Includes 6,666,667 shares owned
directly by Quercus Trust and 10,000,000 shares issuable upon exercise of a
warrant held by Quercus Trust. Also includes 9,333,334 shares which Quercus
Trust has the right to purchase and 9,333,334 shares issuable upon excercise
of
a warrant that will be issued to Quercus Trust when such shares are
purchased.
(14)
This
beneficial ownership information is based on information contained in a
Schedule 13G dated July 14, 2005 and filed with the U.S. Securities and
Exchange Commission on August 5, 2005. Includes 5,000,000 shares of common stock
issuable upon conversion of shares of Series A convertible preferred stock
owned
directly by Security Management. Also includes 2,250,000 shares of common stock
issuable upon the exercise of warrants.
(15)
This
beneficial ownership information is based, in part, on information contained
in
a Schedule 13D/A dated December 1, 2004 and filed with the U.S. Securities
and Exchange Commission on December 2, 2004. Includes 5,823,456 shares of common
stock owned directly by Mr. Trump and 4,361,104 shares issuable upon the
exercise of warrants.
(16)
Includes 1,251,150 shares of common stock owned directly by the estate of
Mr. Montesi, by various members of Mr. Montesi’s family or jointly with
ThermoEnergy’s Chief Executive Officer, Dennis Cossey. Also includes 1,725,000
shares of common stock issuable upon the exercise of options.
(17)
Includes 2,798,095 shares of common stock owned directly by the Focus Fund
and
500,000 shares issuable upon exercise of warrants held by the Focus
Fund.
(18)
Includes 3,699,637 shares of common stock owned directly by Spencer
Trask, 3,899,681 shares issuable upon conversion of convertible debt owned
by Spencer Trask.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)
requires our executive officers and directors and persons who own more than
10%
of our common stock to file reports of ownership and changes in ownership with
the SEC. Such executive officers, directors and stockholders are also required
by SEC rules to furnish us with copies of all Section 16(a) forms they file.
Based on information supplied to the Company and filings made with the SEC,
during the fiscal year ended December 31, 2007, the following Section 16(a)
filings were not made in a timely manner by a director or officer or a
beneficial owner of 10% or more of our common stock:
(i)
On
February 14, 2007, Dennis C. Cossey, the Company’s Chairman and CEO, purchased
shares of common stock in an open market transaction. He was five days late
in filing a Form 4 to report this acquisition.
(ii)
On
June 14, 2007, stock options were granted to each of the Company’s non-employee
directors. Neither Paul A. Loeffler nor Louis J. Ortmann filed
Form 4 to report the receipt of these options.
(iii)
On
July 2, 2007, Kevin Kimberlin, through his beneficial ownership of the Spencer
Trask funds, became a 10% beneficial owner of the Company’s Common Stock. He did
not file a Form 3 with respect to this acquisition until March 27,
2008.
(iv)
On
December 18, 2007 Quercus Trust became a 10% beneficial owner of the Company’s
common stock. The Trust was one day late in filing a Form 3 with respect to
this
acquisition.
Executive
Compensation
Summary
Compensation Table
The
table
set forth below summarizes the compensation earned by our named executive
officers in 2007 and 2006.
|
Name and Principal Position
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Option Awards
(a)
|
|
All Other
Compensation (b)
|
|
Securities
Underlying
Options (#)
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dennis
C. Cossey
Chairman
of the Board,
President
and Chief
Executive
Officer
|
|
|
2007
2006
|
|
$
$
|
250,000
250,000
|
|
|
$194,375
(c)
$60,000
|
|
|
$176,667
$82,110
|
|
|
$28,000
$28,000
|
|
|
350,000
150,000
|
|
$
$
|
649,042
420,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew
T. Melton
Executive
Vice President,
Treasurer
and Chief
Financial
Officer
|
|
|
2007
2006
|
|
$
$
|
200,000
200,000
|
|
|
$194,375
(c)
$50,000
|
|
|
$176,667
$82,110
|
|
|
$35,500
$39,260
|
|
|
350,000
150,000
|
|
$
$
|
571,042
371,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alexander
G. Fassbender
Executive
Vice President
and
Chief Technology
Officer
|
|
|
2007
2006
|
|
$
$
|
281,400
281,400
|
|
|
$194,375
(c)
$55,000
|
|
|
$176,667
$82,100
|
|
|
$33,000
$9,000
|
|
|
350,000
150,000
|
|
$
$
|
652,442
427,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shawn
R. Hughes (d)
President
and Chief
Operating
Officer
|
|
|
2007
|
|
$
|
137,500
|
|
|
$131,875
(e)
|
|
|
$245,760
|
|
|
$6,000
|
|
|
600,000
|
|
$
|
521,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey
L. Powell (d)
President
and CEO
CASTion
Corporation
|
|
|
2007
|
|
$
|
186,250
|
|
|
$320,000
|
|
|
$108,833
|
|
|
$0
|
|
|
300,000
|
|
$
|
615,083
|
|
|
(a)
|
The
amounts in the column “Options Award” reflect the dollar amount recognized
for financial statement reporting purposes in accordance with FAS
123R,
for option awards granted pursuant to grants made by the Board of
Directors. Assumptions used in the calculation of these amounts are
included in Note 9 and Note 10 to the Company’s consolidated financial
statements for the year ended December 31,
2007.
|
|
(b)
|
The
amounts in the column “All Other Compensation” reflect the following
items: automobile expense, medical and insurance reimbursement, temporary
living expense and moving relocation expense
reimbursement.
|
|
(c)
|
Includes
a cash bonus of $125,000. Also includes a grant of 62,500 shares
of common
stock valued at $69,375.
|
|
(d)
|
In
the fiscal year ended December 31, 2006, the Company had only three
named
executive officers. Messrs. Hughes and Powell were appointed in
2007 and
the information with respect to their compensation during the year
ended
December 31, 2007 reflects partial-year
information.
|
|
(e)
|
Includes
a cash bonus of $62,500. Also includes a grant of 62,500 shares
of common
stock valued at $69,375.
|
Certain
columnar information required by Item 402(a)(2) of Regulation S-B has been
omitted for categories where there has been no compensation awarded to, or
paid
to, the named executive officers required to be reported in the table during
2007.
Outstanding
Equity Awards at December 31, 2007
The
following table summarizes information concerning outstanding equity awards
held
by the named executive officers at December 31, 2007. No named executive officer
exercised options in the fiscal year ended December 31, 2007.
|
|
|
S
tock
Option Awards
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
Option
|
|
|
|
|
Options
(#)
|
|
Options
(#)
|
|
Exercise
|
|
Expiration
|
|
|
Name
|
|
Exercisable
|
|
Unexerciable
|
|
Price
($)
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dennis
C. Cossey
|
|
|
165,000
|
|
none
|
|
|
|
|
12/31/2008
|
|
|
|
|
|
275,000
|
|
none
|
|
|
|
|
12/31/2008
|
|
|
|
|
|
165,000
|
|
none
|
|
|
|
|
12/31/2008
|
|
|
|
|
|
82,500
|
|
none
|
|
|
|
|
12/31/2008
|
|
|
|
|
|
110,000
|
|
none
|
|
|
|
|
12/31/2008
|
|
|
|
|
|
250,000
|
|
none
|
|
|
|
|
06/10/2010
|
|
|
|
|
|
560,000
|
|
none
|
|
|
|
|
09/15/2010
|
|
|
|
|
|
150,000
|
|
none
|
|
|
|
|
01/20/2011
|
|
|
|
|
|
350,000
|
|
none
|
|
|
|
|
01/02/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew
T. Melton
|
|
|
5,500
|
|
none
|
|
|
|
|
12/31/2008
|
|
|
|
|
|
2,000
|
|
none
|
|
|
|
|
12/31/2008
|
|
|
|
|
|
150,000
|
|
none
|
|
|
|
|
06/10/2010
|
|
|
|
|
|
40,000
|
|
none
|
|
|
|
|
09/15/2010
|
|
|
|
|
|
150,000
|
|
none
|
|
|
|
|
01/20/2011
|
|
|
|
|
|
350,000
|
|
none
|
|
|
$1.11
|
|
01/02/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alexander
G. Fassbender
|
|
|
110,000
|
|
none
|
|
|
|
|
12/31/2008
|
|
|
|
|
|
110,000
|
|
none
|
|
|
|
|
12/31/2008
|
|
|
|
|
|
82,500
|
|
none
|
|
|
|
|
12/31/2008
|
|
|
|
|
|
110,000
|
|
none
|
|
|
|
|
12/31/2008
|
|
|
|
|
|
250,000
|
|
none
|
|
|
|
|
06/10/2010
|
|
|
|
|
|
440,000
|
|
none
|
|
|
|
|
09/15/2010
|
|
|
|
|
|
150,000
|
|
none
|
|
|
|
|
01/20/2011
|
|
|
|
|
|
350,000
|
|
none
|
|
|
$1.11
|
|
01/02/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shawn
R. Hughes
|
|
|
600,000
|
|
none
|
|
|
|
|
12/15/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey
L. Powell
|
|
|
300,000
|
|
none
|
|
|
|
|
07/02/2013
|
|
Equity
Compensation Plan Information
The
following table sets forth the securities that are authorized for issuance
under
the equity compensation plans of ThermoEnergy as of December 31,
2007:
|
Plan Category
|
|
(A)
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
|
|
(B)
Weighted-average exercise
price of outstanding
options, warrants and
rights
|
|
(C)
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column A)
|
|
|
Equity
Compensation plans approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1997
Stock Option Plan
|
|
|
55,100
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Compensation plans not approved by security
holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
7,626,900
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
7,682,000
|
|
|
|
|
|
0
|
|
Employment
Contracts and Agreements
The
Company has written employment agreements with each of its senior executives.
The material terms of the employment agreements with Dennis C. Cossey, the
Chairman and Chief Executive Officer, Shawn R. Hughes, the President and Chief
Operating Officer, and Andrew T. Melton, the Executive Vice President and Chief
Financial Officer, are substantially similar and are described below.
The
employment agreements with Messrs. Cossey, Hughes and Melton provide for a
contract term of five years (extended, each month for an additional month),
with
a beginning base compensation of $200,000 (in 2005) for Mr. Cossey, $275,000
(in
2007) for Mr. Hughes and $200,000 (in 2005) for Mr. Melton and minimum annual
15% increases in compensation of 15% capped at $1,500,000, after which annual
increases will be determined on the basis of changes in the consumer price
index. Messrs. Cossey and Melton waived the right to receive the automatic
annual increase in base salary scheduled for 2007. The employment
agreements also provide that each officer will be eligible for discretionary
incentive compensation of up to 100% of his base salary, as determined by the
Compensation and Benefits Committee. The employment agreements also entitle
each
officer to periodic performance-based compensation if certain unusual, but
significant, events occur, including but not limited to the acquisition of
new
technology, the execution of new contracts in excess of 20% of existing revenues
and other events as determined by the Compensation and Benefits Committee.
In
addition, the employment agreements provide that, upon the occurrence of a
change in control of the Company, each officer will be entitled to receive
a
lump sum payment of five years’ base compensation from the date of such change
of control, as well as an immediate vesting of all unvested stock options and/or
restricted stock grants. The employment agreements also contain certain
restrictive covenants protecting trade secrets and prohibiting each officer
from
competing with the Company or soliciting Company customers or employees for
a
period of one year after the termination of his employment.
The
employment agreement with Alexander G. Fassbender, the Executive Vice President
and Chief Technology Officer, provides for a continuous three-year term (subject
to the Company’s right to terminate the annual extensions upon 60 days’ written
notice), with a beginning base compensation of $135,000 (in 1998) with 15%
annual increases, capped at $250,000, after which annual increases will be
determined on the basis of changes in the consumer price index.
Mr. Fassbender waived the right to recieve the automatic annual
increase in base salary scheduled for 2007. Mr. Fassbender is also eligible
for discretionary incentive compensation of up to 50% of his base salary, as
determined by the Compensation and Benefits Committee. Upon the occurrence
of a
change in control of the Company, Mr. Fassbender shall be entitled to a
lump sum payment equal to 2.99 years’ base compensation in effect on the date of
such change of control. The employment agreement also contains certain
restrictive covenants protecting trade secrets and prohibiting Mr. Fassbender
from competing with the Company or soliciting Company customers or employees
for
a period of one year after the termination of his employment.
The
employment agreement with Jeffrey L. Powell, the Executive Vice President and
President of CASTion, has a term of three years, with a beginning base
compensation of $200,000. The employment agreement also provides that Mr. Powell
will be eligible for discretionary incentive compensation of up to 100% of
his
base salary, as determined by the Compensation and Benefits Committee, and
entitles him to receive periodic performance-based compensation if certain
unusual, but significant, events occur, including but not limited to the
acquisition of new technology, the execution of new contracts in excess of
20%
of existing revenues and other events as determined by the Compensation and
Benefits Committee. In addition, the employment agreement provides that, upon
the occurrence of a change in control of the Company, Mr. Powell will be
entitled to receive a lump sum payment equal to three years’ base compensation
on the date of such change of control, as well as immediate vesting of all
unvested stock options and/or restricted stock grants. The employment agreement
also contains certain restrictive covenants protecting trade secrets and
prohibiting Mr. Powell from competing with the Company or soliciting Company
customers or employees for a period of one year after the termination of his
employment. Mr. Powell resigned as of January 31, 2008.
ThermoEnergy
is the sole beneficiary of $1,500,000 key man life insurance policies on the
lives of Messrs. Melton and Fassbender.
Certain
Relationships a
nd
Related Transactions
In
October 2003, we entered into a license agreement with Alexander
G. Fassbender, the Executive Vice President for Technology, as the inventor
of certain patents and patent applications. This agreement formalized the
arrangements under which ThermoEnergy and Mr. Fassbender had been operating
for a number of years. Under this license agreement, Mr. Fassbender granted
to us an exclusive license in the patents and patent applications for ThermoFuel
and Enhanced Biogas Production in the United States and the foreign countries
in
which applications were pending. We are required to pay to Mr. Fassbender a
royalty of 1% of net sales after the cumulative sales of all licensed products
exceed $20,000,000. In December 2007, Mr. Fassbender waived certain termination
rights under the license agreement, agreed that we can assign or transfer the
license without his consent in connection with a merger or a sale of all or
a
portion of our business and assets, and agreed that he would not transfer his
interest in the license agreement without our consent.
During
2000, the Board of Directors approved the formation of ThermoEnergy Power
Systems, LLC, a Delaware limited liability company (“ThermoEnergy Power
Systems”) for the purpose of transferring ThermoEnergy’s rights and interests in
the TIPS technology. The organizational documents for ThermoEnergy Power Systems
indicate that ThermoEnergy will have an 85% ownership interest and Alexander
G.
Fassbender, as the inventor of the technology, will have a 15% ownership
interest. As of December 31, 2007, ThermoEnergy Power Systems had not been
capitalized by the Company.
The
Board
of Directors have adopted a policy whereby all future transactions between
us
and any of our affiliates, officers, directors, principal shareholders and
any
affiliates of the foregoing must be approved in advance by the disinterested
members of the Board of Directors based on a determination that the terms of
such transactions are no less favorable to us than would prevail in arm’s-length
transactions with independent third parties.
Audit
Committee Report
During
2007, the Audit Committee of the Board of Directors was comprised of the
following three independent directors: Lowell E. Faulkenberry, Chairman,
Dr. Louis J. Ortmann and Dr. Paul A. Loeffler. The Audit Committee
serves at the pleasure of the Board of Directors. It held four meetings during
fiscal year 2007, and its report for the year 2007 follows:
The
Audit
Committee oversees the financial reporting process on behalf of the Board
of
Directors. Management has primary responsibility for the financial statements
and the reporting process, including internal control systems. Kemp &
Company, the Company’s independent public accountants, is responsible for
expressing an opinion as to the conformity of the Company’s audited financial
statements with generally accepted accounting principles.
The
Committee is comprised of three directors: Lowell Faulkenberry, who serves
as
Chairman, Dr. Paul Loeffler and Dr. Louis Ortmann. The Committee acts pursuant
to a written charter that has been adopted by the Board of Directors. The
Committee met four times during 2007.
The
Committee has discussed and reviewed with the independent public accountants
all
matters required to be discussed pursuant to the Statement on Auditing Standards
No. 61 (Communication with Audit Committees).
The
Committee has met with representatives of Kemp & Company, with and without
management present, to discuss the overall scope of their firm’s audit, the
results of their examinations, their evaluations of the Company’s internal
controls and the overall quality of the Company’s financial reporting. The
Committee has reviewed and discussed the audited financial statements with
management.
The
Committee has received assurances from Kemp & Company that they are
independent accountants with respect to the Company and its management. The
Committee has determined that the non-accounting services performed by Kemp
& Company during 2007 were compatible with maintaining that firm’s
independence. Kemp & Company has provided the Committee with the written
disclosures and letter required by the Independence Standards Board Standard
No.
1 (Independence Discussions with Audit Committees).
As
of
December 31, 2007, three material weaknesses in the Company's internal control
over financial reporting were identified. The material weaknesses were disclosed
in the Company's Annual Report on Form 10-KSB for the fiscal year ended December
31, 2007. The December 31, 2007 financial statements have been restated to
reflect items of executive compensation for 2007 which were not reflected
in the
Company’s financial statements for the year ended December 31, 2007 as included
in the Annual Report on Form 10-KSB as originally filed.
Management
concluded that the Company did not maintain effective internal control over
financial reporting as of December 31, 2007. Specifically, management has
determined that internal controls as of December 31, 2007 were deficient
in that
(i) management had not adequately allocated resources to ensure that necessary
internal controls were implemented and followed throughout the Company, (ii)
the
period-end reporting process did not provide sufficiently timely financial
statements and required disclosures for review by the Committee; and (iii)
contract administration and accounting procedures were deficient. Management
has
discussed its conclusions regarding the inadequacy of internal controls with
the
Committee and with representatives of Kemp & Company and has assured the
Committee that it will take corrective measures during the quarter ending
June
30, 2008. The Committee intends to monitor the development and implementation
of
these corrective actions closely.
Audit
Committee
Lowell
E.
Faulkenberry, Chairman
Dr. Louis J.
Ortmann
Dr.
Paul
Loeffler
PROPOSAL
II
APPROVAL
OF THE 2008 INCENTIVE STOCK PLAN
The
1997
Stock Option Plan expired on December 31, 2007, and the Company is no longer
able to grant options or other stock awards to our employees, directors and
consultants under that plan. The Company believes that equity-based incentives
play a pivotal role in its efforts to attract and retain the key personnel
essential to its long-term growth and financial success. Accordingly, the
ThermoEnergy Corporation 2008 Incentive Stock Plan (the “2008 Plan”) was adopted
by the Board on May 7, 2008. The 2008 Plan will provide flexibility to the
Company in designing equity-based compensation arrangements for its officers
and
employees and will also enhance the automatic grant program for the non-employee
Board members pursuant to which they will receive equity-based awards at
periodic intervals in accordance with the express guidelines set forth in the
2008 Plan.
The
following is a brief summary of the 2008 Plan, a copy of which is attached
hereto as Appendix A. The following summary is qualified in its entirety by
reference to the 2008 Plan.
Types
of Awards
The
2008
Plan provides for the grant of non-statutory stock options, restricted stock,
stock appreciation rights, incentive stock options intended to qualify under
Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) and
other stock-based awards.
Incentive
Stock Options and Non-Statutory
Stock
Options
.
Optionees receive the right to purchase a specified number of shares of common
stock at a specified option price and subject to such other terms and conditions
as are specified in connection with the option grant. Options may not be granted
at an exercise price less than the fair market value of the common stock on
the
date of grant. Options may not be granted for a term in excess of ten years.
Outstanding options may not be amended to provide an exercise price per share
which is lower than the then current exercise price per share of such
outstanding options. The Board of Directors may not cancel any outstanding
options and grant in substitution new options under the 2008 Plan covering
the
same or a different number of shares of common stock and having an exercise
price per share lower than the then current exercise price per share of the
cancelled options.
Restricted
Stock Awards.
Restricted
stock awards entitle recipients to acquire shares of common stock, subject
to
the Company’s right to repurchase all or part of such shares from the recipient
in the event that the conditions specified in the applicable award are not
satisfied prior to the end of the applicable restriction period established
for
such award. Restricted stock awards granted under the 2008 Plan may vest based
upon the achievement of specific performance goals, time-based restrictions
on
vesting following the attainment of the performance goals, time-based
restrictions, and/or restrictions under applicable federal or state securities
laws. Performance criteria for each restricted stock award are intended to
qualify for purposes of Section 162(m) of the Code and will be based on one
or
more of the performance measures specified in Article 10 of the 2008
Plan.
Stock
Appreciation Rights.
A stock
appreciation right (a “SAR”) is an award entitling the holder to exercise to
receive, at the election of the Board of Directors, an amount in cash or common
stock, or combination thereof determined in whole or in part by reference to
the
appreciation, from and after the date of grant, in the fair market value of
a
share of common stock. SARs may be based solely on appreciation in the fair
market value of common stock or on a comparison of such appreciation with some
other measure of market growth such as (but not limited to) appreciation in
a
recognized market index.
Other
Stock-Based Awards.
Under
the 2008 Plan, the Board of Directors has the right to grant other awards of
common stock or awards otherwise based upon common stock or other property,
including without limitation rights to purchase shares of common stock, having
such terms and conditions as the board may determine.
Eligibility
to Receive Awards
Employees,
officers, directors, consultants, advisors and other service providers of the
Company (“Participants”) are eligible to be granted awards under the 2008 Plan.
The maximum number of shares for stock options, restricted stock, and SAR awards
to any one participant under the 2008 Plan is 500,000 shares per calendar year.
The maximum aggregate grant with respect to awards of Performance Shares made
in
any one calendar year to any one participant shall be equal to the fair market
value (measured on the date of grant) of 500,000 shares. The maximum aggregate
amount awarded with respect to Performance Units in such circumstances may
not
exceed $250,000.
Stock
Available for Awards
Subject
to adjustment in connection with stock splits, reverse splits and the like
as
provided in the 2008 Plan, the number of shares of our common stock reserved
for
issuance to Participants under the 2008 Plan shall is 10,000,000. Any shares
covered by an award (or portion of an award)granted under the 2008 Plan which
is
forfeited or canceled or expires shall be deemed not to have been delivered
for
purposes of determining the maximum number of shares available for delivery
under the 2008 Plan.
Awards
to Non-Employee Directors
Although
the granting of awards under the 2008 Plan is generally at the discretion of
the
Compensation Committee of the Board of Directors, the 2008 Plan provides for
automatic grants of stock options to the members of the Board of Directors
who
are not employees of the Company. Each non-employee Director who is elected
or
appointed to the Board for the first time shall automatically be granted a
Nonqualified Stock Option to purchase 30,000 shares of common stock. Thereafter,
at each subsequent annual meeting of stockholders, each non-employee
Director who is re-elected to the Board of Directors or continues to serve
a
term that has not expired will receive an Option grant to purchase an
additional 30,000 shares. All Options granted to non-employee Directors shall
vest and become fully exercisable on the date of the first annual meeting of
stockholders occurring after the end of the fiscal year of the Company during
which such Option was granted and shall have a term of ten years.
Administration
The
2008
Plan is administered by the Compensation and Benefits Committee of the
Board of Directors. The Committee has the authority to adopt, amend and repeal
the administrative rules, guidelines and practices relating to the 2008 Plan
and
to interpret its provisions. To the extent permitted by law, the Committee
may
delegate authority under the 2008 Plan to one or more officers, except that
no
officer will be authorized to grant awards to himself or
herself.
Subject
to any applicable delegation by the Committee and any applicable limitations
contained in the 2008 Plan, the Committee selects the recipients of awards
and
determines:
|
|
(i)
|
the
number of shares of common stock covered by options and the dates
upon
which such options become
exercisable;
|
|
|
(ii)
|
the
exercise price of options, which may not be less than 100% of the
fair
market value of the common stock;
|
|
|
(iii)
|
the
duration of the options, which may not exceed 10
years;
|
|
|
(iv)
|
the
terms of the stock appreciation rights and the dates or conditions
upon
which such stock appreciation rights become exercisable;
and
|
|
|
(v)
|
the
number of shares of common stock subject to any restricted stock
or other
stock-based awards and the terms and conditions of such awards, including,
if applicable, conditions for repurchase, issue price and repurchase
price.
|
Termination
or Amendment
No
award
may be made under the 2008 Plan after the completion of ten years from the
date
on which the plan is approved by the Company’s stockholders, but awards
previously granted may extend beyond that date. The Board of Directors may
at
any time, suspend or terminate the 2008 Plan, except that no award designated
as
subject to Section 162(m) of the Code by the Board of Directors after the date
of such amendment shall become exercisable, realizable or vested, to the extent
such amendment was required to grant such award, unless and until such amendment
shall have been approved by our stockholders. In addition, without approval
of
our stockholders, no amendment may:
|
|
(i)
|
increase
the number of authorized shares under the 2008
Plan;
|
|
|
(ii)
|
change
the designation of the class of participation eligible to receive
Incentive Stock Options under the 2008 Plan;
or
|
|
|
(iii)
|
make
any other changes which require stockholder approval requires shareholder
approval under applicable law or the rules of a stock exchange or
trading
system on which shares of the Company’s common stock are
traded.
|
No
award
may be made that is conditioned on the approval of the Company’s stockholders of
any amendment to the 2008 Plan.
Federal
Income Tax Consequences
The
following generally summarizes the United States federal income tax consequences
that generally will arise with respect to awards granted under the 2008 Plan.
This summary is based on the tax laws in effect as of the date of this Proxy
Statement. Changes to these laws could alter the tax consequences described
below.
Incentive
Stock Options -
A
participant will not have income upon the grant of an incentive stock option.
Also, except as described below, a participant will not have income upon
exercise of an incentive stock option if the participant has been employed
by
the Company or any 50% or more-owned corporate subsidiary at all times beginning
with the option grant date and ending three months before the date the
participant exercises the option. If the participant has not been employed
during that time, then the participant will be taxed as described below under
“Non-statutory Stock Options.” The exercise of an incentive stock option may
subject the participant to the alternative minimum tax.
A
participant will have income upon the sale of the stock acquired under an
incentive stock option at a profit if sales proceeds exceed the exercise price.
The type of income will depend on when the participant sells the stock. If
a
participant sells the stock more than two years after the option was granted
and
one year after the option was exercised, then all the profit will be long-term
capital gain. If the participant sells the stock prior to satisfying these
waiting periods, then the participant will have engaged in a disqualifying
event
and a portion of the profit will be ordinary income and a portion may be capital
gain. This capital gain will be long term if the participant has held the stock
for more than one year and otherwise will be short-term. If a participant sells
the stock at a loss (sales proceeds are less than the exercise price), then
the
loss will be a capital loss. The capital loss will be long term if the
participant held the stock for more than one year and otherwise will be short
term.
Non-statutory
Stock Options -
A
participant will not have income upon the grant of a non-statutory stock option.
A participant will have compensation income upon the exercise of a non-statutory
stock option equal to the value of the stock on the day the participant
exercised the option less the exercise price. Upon the sale of the stock, the
participant will have capital gain or loss equal to the difference between
the
sales proceeds and the value of the stock on the day the option was exercised.
This capital gain or loss will be long-term if the participant has held the
stock for more than one year or otherwise will be short-term.
Restricted
Stock -
A
participant will not have income upon the grant of restricted stock unless
an
election under Section 83(b) of the Code is made within 30 days of the date
of
grant. If a timely Section 83(b) election is made, then a participant will
have
compensation income equal to the value of the stock less the purchase price.
When the stock is sold, the participant will have a capital gain or loss equal
to the difference between the sales proceeds and the value of the stock on
the
date of grant. If the participant does not make an 83(b) election, then when
the
stock vests, the participant will have compensation income equal to the value
of
the stock on the vesting date less the purchase price. When the stock is sold,
the participant will have a capital gain or loss equal to the sales proceeds
less the value of the stock on the vesting date. Any capital gain or loss will
be long-term if the participant held the stock for more than one year from
the
vesting date and otherwise will be short-term.
Stock
Appreciation Rights and Other Stock-Based Awards -
The
tax
consequences associated with stock appreciation rights and any other stock-based
awards granted under the 2008 Plan will vary depending on the specific terms
of
any such award. Among the relevant factors are whether or not the award has
a
readily ascertainable fair market value, whether or not the award is subject
to
forfeiture provisions or restrictions on transfer, the nature of the property
to
be received by the participant under the award and the participant’s holding
period and tax basis for award or underlying common stock.
Tax
Consequences to the Company.
There
will be no tax consequences to the Company except that the Company will be
entitled to a deduction when a participant has compensation income. Any such
deduction will be subject to the limitations of Section 162(m) of the
Code.
Outstanding
Stock Awards.
No
option
grants, awards of restricted stock or other stock-based awards have been made
under the 2008 Plan. Except for the automatic grants of options to non-employee
directors, the granting of future awards under the 2008 Plan is discretionary
and we cannot now determine the number or type of awards to be granted in the
future to any particular person or group. Each non-employee director will
receive an option for 30,000 shares upon his or her election to the Board of
Directors and additional grants of options for 30,000 shares at each annual
meeting thereafer. We currently have four non-employee directors: Lowell E.
Faulkenberry, Paul A. Loeffler, Louis J. Ortmann and Martin A.
Roenigk.
General
Provisions
Change
in Control.
In
the
event of a Change in Control, unless otherwise specifically prohibited under
applicable laws, or by the rules and regulations of any governing governmental
agencies or national securities exchange or trading system, or unless the
Committee shall otherwise specify in the Award Agreement, the Board, in its
sole
discretion, may:
(a)
elect
to
terminate Options or SARs in exchange for a cash payment equal to the amount
by
which the Fair Market Value of the Shares subject to such Option or SAR to
the
extent the Option or SAR has vested exceeds the exercise price with respect
to
such Shares;
(b)
elect
to
terminate Options or SARs provided that each Participant is first notified
of
and given the opportunity to exercise his or her vested Options or SARs for
a
specified period of time (of not less than 15 days) from the date of
notification and before the Option or SAR is terminated;
(c)
permit
Awards to be assumed by a new parent corporation or a successor corporation
(or
its parent) and replaced with a comparable Award of the parent corporation
or
successor corporation (or its parent);
(d)
amend
an
Award Agreement or take such other action with respect to an Award that it
deems
appropriate; or
(e)
implement
any combination of the foregoing.
A
change
in control shall be deemed to have occurred under any one or more of the
following conditions:
(i)
if,
within one year of any merger, consolidation, sale of a substantial part of
the
Company’s assets, or contested election, or any combination of the foregoing
transactions (a “Transaction”), the persons who were directors of the Company
immediately before the Transaction shall cease to constitute a majority of
the
Board of Directors (x) of the Company or (y) of any successor to the Company,
or
(z) if the Company becomes a subsidiary of or is merged into or consolidated
with another corporation, of such corporation (the Company shall be deemed
a
subsidiary of such other corporation if such other corporation owns or controls,
directly or indirectly, a majority of the combined voting power of the
outstanding shares of the capital stock of the Company entitled to vote
generally in the election of directors (“Voting Stock”));
(ii)
if,
as a
result of a Transaction, the Company does not survive as an entity, or its
shares are changed into the shares of another corporation unless the
stockholders of the Company immediately prior to the Transaction own a majority
of the outstanding shares of such other corporation immediately following the
Transaction;
(iii)
if
any
Person becomes, after the date the 2008 Plan is adopted, a beneficial owner
directly or indirectly of securities of the Company representing 50% or more
of
the combined voting power of the Company’s Voting Stock;
(iv)
if
the
dissolution or liquidation of the Company is approved by its stockholders;
or
(v)
if
the
members of the Board as of the date the 2008 Plan is adopted (the “Incumbent
Board”) cease to represent at least two-thirds of the Board; provided, that any
person becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company’s stockholders, was approved by at least
two-thirds of the members comprising the Incumbent Board (either by a specific
vote or by approval of the proxy statement in which such person is named as
a
nominee for director without objection to such nomination) shall be, for
purposes of this paragraph (v), treated as though such person were a member
of
the Incumbent Board.
Changes
in Capitalization.
In the
event any change is made to the outstanding shares of the Company’s common stock
by reason of any recapitalization, stock dividend, stock split, combination
of
shares, exchange of shares or other change in corporate structure effected
without the Company’s receipt of consideration, appropriate adjustments will be
made to: (i) the maximum number and/or class of securities issuable under the
2008 Plan; (ii) the maximum number and/or class of securities for which any
one
person may be granted stock options, restricted stock and restricted stock
units
under the 2008 Plan per year, (iii) the maximum number and/or class of
securities for which grants may subsequently be made under the automatic grant
program for the non-employee Board members, (iv) the number and/or class of
securities and the exercise price per share in effect under each outstanding
option under the 2008 Plan and (v) the number and/or class of securities subject
to each outstanding restricted stock or restricted stock award under the 2008
Plan and the issue price (if any) payable per share. Such adjustments will
be
designed to preclude any dilution or enlargement of benefits under the 2008
Plan
or the outstanding awards thereunder.
Valuation.
The fair
market value per share of the Company’s common stock on any relevant date under
the 2008 Plan will be determined as follows:
|
|
(i)
|
if
the shares are listed on a national exchange, then the closing price
of
the share of such stock exchange on such date will be determinative
of
fair market value, or
|
|
|
(ii)
|
if
the shares are not at the time listed on a national exchange, then
the
last reported sales price for the share in the over-the-counter market
on
such date, as reported by the National Association of Securities
Dealers,
Inc. OTC Bulletin Board, the National Quotation Bureau Incorporated
or any
similar organization or agency reporting prices in the over-the-counter
market will determine the fair market
value.
|
Stockholder
Rights and Transferability
.
No
optionee will have any stockholder rights with respect to the option shares
until such optionee has exercised the option and paid the exercise price for
the
purchased shares. Options are not assignable or transferable other than by
will
or the laws of inheritance following optionee’s death, and during the optionee’s
lifetime, the option may only be exercised by the optionee.
An
individual whose shares of restricted stock are awarded under the Plan will
have
certain stockholder rights with respect to those unvested shares. Accordingly,
the participant will have the right to vote such shares and to receive regular
cash dividends paid on such shares, but will not have the right to transfer
such
shares prior to vesting.
Amendment
and Termination.
The
Board may modify the Plan at any time, subject to any stockholder approval
requirements under applicable law or regulation or pursuant to the listing
standards of the stock exchange (or trading system) on which the Company’s
common stock is at the time primarily traded. Unless sooner terminated by the
Board, the 2008 Plan will terminate on the earliest of: (i) December 31, 2018,
(ii) the date on which all shares available for issuance under the 2008 Plan
have been issued as fully-vested shares or (iii) the termination of all
outstanding options and awards in connection with certain changes in control
or
ownership.
Deductibility
of Executive Compensation
.
Any
compensation deemed paid by the Company in connection with the disqualifying
disposition of incentive stock option shares or the exercise of non-statutory
options granted under the 2008 Plan should qualify as performance-based
compensation for purposes of Internal Revenue Code Section 162(m) and will
not
have to be taken into account for purposes of the $1 million limitation per
covered individual on the deductibility of compensation paid to certain of
the
Company’s executive officers. Accordingly, the compensation deemed paid with
respect to options granted under the 2008 Plan should be deductible by the
Company without limitation under section 162(m). However, any compensation
deemed paid by the Company in connection with certain option grants made under
the Plan prior to the 2008 Plan will not qualify as performance-based
compensation and will be subject to the $1 million limitation. In addition,
the
compensation attributable to the restricted stock awards or restricted stock
units will also be subject to the $1 million limitation, unless the vesting
of
the shares is tied solely to one or more of the performance milestones described
above.
Accounting
Treatment
.
Stock
options granted to the Company’s employees and non-employee board members,
whether vesting is tied to service requirements or performance milestones,
are
valued as of the grant date under an appropriate valuation formula, and that
value is charged as a direct compensation expense against the Company’s reported
earnings over the designated vesting period of the award in accordance with
Financial Accounting Standards Board (“FASB”) released Statement of Financial
Accounting Standards No. 123R. Option grants made to non-employee consultants
under the Plan also result in a direct charge to the Company’s reported earnings
based upon the fair value of the underlying option shares. Such charge will
accordingly include the appreciation of the fair value of the option over the
period between the grant date of the option and the vesting date of each
installment of that option for non-employee consultant awards. For shares
issuable upon the vesting of restricted stock awards, the Company recognizes
compensation cost equal to the excess of the fair market value of the shares
on
the date of the award over the cash consideration (if any) paid for such shares.
The accounting treatment for restricted stock awards is applicable whether
vesting is tied to service periods or performance goals.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR
APPROVAL
OF THE 2008 PLAN.
PROPOSAL
III
RATIFICATION
OF APPOINTMENT OF INDEPENDENT
REGISTERED
PUBLIC
ACCOUNTING
FIRM
The
Audit
Committee has, subject to ratification by the shareholders at the 2008 Annual
Meeting, appointed Kemp & Company to serve as ThermoEnergy’s independent
public accountants for fiscal year 2008.
Kemp
& Company served in this capacity for fiscal year 2007, and has reported on
ThermoEnergy’s financial statements for the year ended December 31,
2007.
A
representative of Kemp & Company is expected to be present at the Annual
Meeting of Shareholders. The representative will have the opportunity to make
a
statement at the meeting if he desires to do so and is expected to be available
to respond to appropriate questions.
Policy
on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services
of
Independent Public Accountants
The
Audit
Committee reviews and approves in advance any audit and permitted non-audit
services to be provided by ThermoEnergy’s independent public accountants. The
Audit Committee has the sole authority to make these approvals.
The
following describes the current policies and procedures of the Audit Committee
with respect to pre-approval of audit and permissible non-audit services:
Audit
Services
.
All
audit services must be pre-approved by the Audit Committee. The Audit Committee
approves the annual audit services engagement and, if necessary, any changes
in
terms, conditions, and fees resulting from changes in audit scope, company
structure, or other matters. Pre-approval is generally provided for up to one
year and any pre-approval is detailed as to the particular service or category
of services and is generally subject to a specific budget. The Audit Committee
may also grant pre-approval for other audit services, which are those services
that only the independent public accountant reasonably can provide.
Non-Audit
Services
.
The
Audit Committee's policy is to pre-approve all permissible non-audit services
provided by the independent public accountants. These services may include
audit-related services, tax services and other services. The independent public
accountants and management are required to periodically report to the Audit
Committee regarding the extent of services provided by the independent public
accountants in accordance with this pre-approval, and the fees for the services
performed to date. The Audit Committee may also pre-approve particular services
on a case-by-case basis.
Fees
billed to the Company by Kemp & Company, our independent public accountants
for fiscal years 2007 and 2006, all of which were approved by the Audit
Committee, were comprised of the following:
Audit
Fees
.
Kemp
& Company’s fee for its audit of the Company’s annual financial statements,
its review of the financial statements included in the Company’s quarterly
reports on Form 10−QSB, audits of statutory filings, comfort letter procedures
and review of other regulatory filings for 2007 and 2006 were $80,000 and
$62,000, respectively.
Audit
Related Fees
.
No fees
were billed to the Company for audit related services in 2006 or 2007.
Tax
Fees.
Kemp
& Company’s fees for tax services provided to the Company, including tax
compliance, tax advice and planning, totaled $500 in 2006 and $1,000 in 2007.
All
Other Fees.
No other
fees were billed to the Company by Kemp & Company in 2006 or 2007 for “other
services.”
In
accordance with the Audit Committee’s pre-approval policy, all audit services
performed by Kemp & Company, the Company’s independent public accountants,
during 2007 and 2006 were approved at the time such firm was engaged to serve
as
the Company’s independent public accounts for such fiscal years. The Audit
Committee reviewed and approved, as consistent with the Company’s policies and
procedures, the tax services performed for the Company in 2007 and 2007 by
Kemp
& Company.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR
RATIFICATION
OF THE APPOINTMENT OF KEMP & COMPANY.
OTHER
MATTERS
The
Board
of Directors is not aware of any other matters to come before the meeting.
However, if any other matters properly come before the meeting, it is the
intention of the persons named in the enclosed proxy to vote the proxy in
accordance with their judgment in such matters.
May
23,
2008
Little
Rock, Arkansas
Annex
A
ThermoEnergy
Corporation
2008
Incentive
Stock
Plan
TABLE
OF CONTENTS
|
|
|
|
|
Page
|
|
|
|
|
|
|
|
Article
1.
|
|
Establishment,
Objectives, and Duration
|
|
A-1
|
|
|
|
|
|
|
|
Article
2.
|
|
Definitions
|
|
A-1
|
|
|
|
|
|
|
|
Article
3.
|
|
Administration
|
|
A-5
|
|
|
|
|
|
|
|
Article
4.
|
|
Shares
Subject to the Plan and Maximum Awards
|
|
A-5
|
|
|
|
|
|
|
|
Article
5.
|
|
Eligibility
and Participation
|
|
|
|
|
|
|
|
|
|
Article
6.
|
|
Stock
Options
|
|
A-7
|
|
|
|
|
|
|
|
Article
7.
|
|
Stock
Appreciation Rights
|
|
A-9
|
|
|
|
|
|
|
|
Article
8.
|
|
Restricted
Stock
|
|
A-10
|
|
|
|
|
|
|
|
Article
9.
|
|
Performance
Units and Performance Shares
|
|
A-11
|
|
|
|
|
|
|
|
Article
10.
|
|
Performance
Measures
|
|
A-12
|
|
|
|
|
|
|
|
Article
11.
|
|
Rights
of Participants
|
|
A-13
|
|
|
|
|
|
|
|
Article
12.
|
|
Termination
of Employment/Directorship
|
|
A-13
|
|
|
|
|
|
|
|
Article
13.
|
|
Change
in Control
|
|
A-14
|
|
|
|
|
|
|
|
Article
14.
|
|
Amendment,
Modification, and Termination
|
|
A-14
|
|
|
|
|
|
|
|
Article
15.
|
|
Withholding
|
|
A-15
|
|
|
|
|
|
|
|
Article
16.
|
|
Successors
|
|
A-15
|
|
|
|
|
|
|
|
Article
17.
|
|
General
Provisions
|
|
A-15
|
Article
1. Establishment, Objectives, and Duration
1.1
Establishment
of the Plan
.
ThermoEnergy Corporation, a Delaware
corporation
(the “Company”), hereby adopts the “ThermoEnergy Corporation 2008 Incentive
Stock Plan” (hereinafter referred to as the “Plan”), as set forth in this
document. The Plan permits the grant of Nonqualified Stock Options,
Incentive Stock Options, Stock Appreciation Rights, Restricted Stock,
Performance Shares and Performance Units.
1.2
Objectives
of the Plan
.
The
objectives of the Plan are to optimize the profitability and growth of the
Company through incentives that are consistent with the Company’s goals and that
link the personal interests of Participants to those of the Company’s
stockholders, to provide Participants with an incentive for excellence in
individual performance, and to promote teamwork among Participants.
The
Plan
is further intended to provide flexibility to the Company and its
Subsidiaries in their ability to motivate, attract, and retain the services
of
Participants who make significant contributions to the Company’s success and to
allow Participants to share in that success.
1.3
Duration
of the Plan
.
The
Plan shall remain in effect, subject to the right of the Committee to amend
or
terminate the Plan at any time pursuant to Article 14 hereof, until all
Shares subject to it shall have been purchased or acquired according to the
Plan’s provisions. However, in no event may an Award of an Incentive Stock
Option be granted under the Plan on or after the tenth (10
th
)
anniversary of the Effective Date.
Article
2. Definitions
Whenever
used in this Plan, the following terms shall have the meanings set forth below,
and when the meaning is intended, the initial letter of the word shall be
capitalized:
2.1
“Award”
means,
individually or collectively, a grant under this Plan of Nonqualified Stock
Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock,
Performance Shares or Performance Units.
2.2
“Award
Agreement”
means a
written or electronic agreement entered into by the Company and a Participant
setting forth the terms and provisions applicable to an Award granted under
this
Plan.
2.3
“Beneficial
Owner”
or
“Beneficial
Ownership”
shall
have the meaning ascribed to such term in Rule 13d-3 of the General Rules and
Regulations under the Exchange Act.
2.4
“Board”
or
“Board
of Directors”
means
the Board of Directors of the Company.
2.5
“Change
in Control”
shall
be
deemed to have occurred under any one or more of the following
conditions:
|
|
i.
|
if,
within one year of any merger, consolidation, sale of a substantial
part
of the Company’s assets, or contested election, or any combination of the
foregoing transactions (a “Transaction”), the persons who were directors
of the Company immediately before the Transaction shall cease to
constitute a majority of the Board of Directors (x) of the Company
or (y)
of any successor to the Company, or (z) if the Company becomes a
subsidiary of or is merged into or consolidated with another corporation,
of such corporation (the Company shall be deemed a subsidiary of
such
other corporation if such other corporation owns or controls, directly
or
indirectly, a majority of the combined voting power of the outstanding
shares of the capital stock of the Company entitled to vote generally
in
the election of directors (“Voting
Stock”));
|
|
|
ii.
|
if,
as a result of a Transaction, the Company does not survive as an
entity,
or its shares are changed into the shares of another corporation
unless
the stockholders of the Company immediately prior to the Transaction
own a
majority of the outstanding shares of such other corporation immediately
following the Transaction;
|
|
|
iii.
|
if
any Person becomes, after the date this Plan is adopted, a beneficial
owner directly or indirectly of securities of the Company representing
50%
or more of the combined voting power of the Company’s Voting
Stock;
|
|
|
iv.
|
the
dissolution or liquidation of the Company is approved by its stockholders;
or
|
|
|
v.
|
if
the members of the Board as of the date this Plan is adopted (the
“Incumbent Board”) cease to represent at least two-thirds of the Board;
provided, that any person becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company’s
stockholders, was approved by at least two-thirds of the members
comprising the Incumbent Board (either by a specific vote or by approval
of the proxy statement in which such person is named as a nominee
for
director without objection to such nomination) shall be, for purposes
of
this paragraph (v), treated as though such person were a member of
the
Incumbent Board.
|
2.6
“Code”
means
the Internal Revenue Code of 1986, as amended from time to time.
2.7
“Committee”
means
the Compensation Committee of the Company’s Board of Directors, or such other
committee appointed from time to time by the Board of Directors to administer
the Plan. The full Board of Directors, in its discretion, may act as the
Committee under the Plan, whether or not a Committee has been appointed, and
shall do so with respect to grants of Awards to non-employee Directors. The
Committee may delegate to one or more members of the Committee or officers
of
the Company, individually or acting as a committee, any portion of its
authority, except as otherwise expressly provided in the Plan. In the event
of a
delegation to a member of the Committee, officer or a committee thereof, the
term "Committee" as used herein shall include the member of the Committee,
officer or committee with respect to the delegated authority. Notwithstanding
any such delegation of authority, the Committee comprised of members of the
Board of Directors and appointed by the Board of Directors shall retain overall
responsibility for the operation of the Plan.
2.8
“Company”
means
ThermoEnergy Corporation, a Delaware corporation, together will all subsidiaries
thereof, and any successor thereto as provided in Article 16 hereof.
2.9
“Covered
Employee”
means a
Participant who, as of the date of vesting and/or payout of an Award, or the
date the Company or any of its Subsidiaries is entitled to a tax deduction
as a
result of the Award, as applicable, is one of the group of “covered employees,”
as defined in the regulations promulgated under Code Section 162(m), or any
successor statute.
2.10
“Director”
means
any individual who is a member of the Board of Directors of the Company;
provided, however, that any Director who is employed by the Company shall be
treated as an Employee under the Plan.
2.11
“Disability”
shall
mean a condition whereby the Participant is unable to engage in any substantial
gainful activity by reason of any medically determinable physical impairment
which can be expected to result in death or which is or can be expected to
last
for a continuous period of not less than twelve months, all as verified by
a
physician acceptable to, or selected by, the Company.
2.12
“Effective
Date”
shall
have the meaning ascribed to such term in Section 1.1 hereof.
2.13
“Employee”
means
any employee of the Company or its Subsidiaries.
2.14
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended from time to time, or any
successor act thereto.
2.15
“Fair
Market Value”
as of
any date and in respect of any Share means the then most recent closing price
of
a Share reported by the exchange or other trading system on which Shares are
primarily traded or, if deemed appropriate by the Committee for any reason,
the
fair market value of Shares shall be as determined by the Committee in such
other manner as it may deem appropriate. In no event shall the fair market
value
of any Share be less than its par value.
2.16
“Incentive
Stock Option”
or
“ISO”
means an
option to purchase Shares granted under Article 6 hereof and that is designated
as an Incentive Stock Option and that is intended to meet the requirements
of Code Section 422.
2.17
“Insider”
shall
mean an individual who is, on the relevant date, an executive officer, director
or ten percent (10%) beneficial owner of any class of the Company’s equity
securities that is registered pursuant to Section 12 of the Exchange Act,
all as defined under Section 16 of the Exchange Act.
2.19
“Non-Employee
Director
”
shall
mean any member of the Board of who is neither (i) an employee of the Company
nor (ii) a member of the immediate family of an employee of the
Company
.
2.20
“Nonqualified
Stock Option”
or
“NQSO”
means
an option to purchase Shares granted under Article 6 hereof that is
not intended to meet the requirements of Code Section 422, or that
otherwise does not meet such requirements.
2.21
“Option”
means an
Incentive Stock Option or a Nonqualified Stock Option.
2.22
“Option
Price”
means
the price at which a Share may be purchased by a Participant pursuant to an
Option.
2.23
“Participant”
means an
Employee, Director or consultant who has been selected to receive an Award
or
who has an outstanding Award granted under the Plan.
2.24
“Performance-Based
Exception”
means
the performance-based exception from the tax deductibility limitations of Code
Section 162(m).
2.25
“Performance
Share”
means an
Award granted to a Participant, as described in Article 9
hereof.
2.26
“Performance
Unit”
means an
Award granted to a Participant, as described in Article 9 hereof.
2.27
“Period
of Restriction”
means
the period during which the transfer of Shares of Restricted Stock is limited
in
some way (based on the passage of time, the achievement of performance goals,
or
upon the occurrence of other events as determined by the Committee, at its
discretion), and the Shares are subject to a substantial risk of forfeiture,
pursuant to the Restricted Stock Award Agreement, as provided in Article 8
hereof.
2.28
“Person”
shall
have the meaning ascribed to such term in Section 3(a)(9) of the Exchange
Act and used in Sections 13(d) and 14(d) thereof and the rules promulgated
thereunder, including a “group” as defined in Section 13(d) thereof and the
rules promulgated.
2.29
“Restricted
Stock”
means an
Award granted to a Participant pursuant to Article 8 hereof.
2.30
“Shares”
means
shares of the Company’s common stock, par value $0.001 per share.
2.31
“Stock
Appreciation Right”
or
“SAR”
means an
Award, granted alone or in connection with a related Option, designated as
an
SAR, pursuant to the terms of Article 7 hereof.
2.32
“Subsidiary”
means
any corporation, partnership, joint venture, or other entity in which the
Company, directly or indirectly, has a majority voting interest. With respect
to
Incentive Stock Options, “Subsidiary” means any entity, domestic or foreign,
whether or not such entity now exists or is hereafter organized or acquired
by
the Company or by a Subsidiary that is a “subsidiary corporation” within the
meaning of Code Section 424(d) and the rules thereunder.
2.33
“Ten
Percent Shareholder”
means an
employee who at the time an ISO is granted owns Shares possessing more than
ten
percent of the total combined voting power of all classes of Shares of the
Company or any Subsidiary, within the meaning of Code Section 422.
Article
3. Administration
3.1
General
.
Subject
to the terms and conditions of the Plan, the Plan shall be administered by
the
Committee. The members of the Committee shall be appointed from time to time
by,
and shall serve at the discretion of, the Board of Directors. The Committee
shall have the authority to delegate administrative duties to officers of the
Company. For purposes of making Awards intended to qualify for the Performance
Based Exception under Code Section 162(m), to the extent required under such
Code Section, the Committee shall be comprised solely of two or more individuals
who are “outside directors”, as that term is defined in Code Section 162(m) and
the regulations thereunder.
3.2
Authority
of the Committee
.
Except
as limited by law or by the Certificate of Incorporation or Bylaws of the
Company, and subject to the provisions hereof, the Committee shall have full
power to select Employees, Directors and consultants who shall be offered the
opportunity to participate in the Plan; determine the sizes and types of Awards;
determine the terms and conditions of Awards in a manner consistent with the
Plan; construe and interpret the Plan and any agreement or instrument entered
into under the Plan; establish, amend, or waive rules and regulations for the
Plan’s administration; and amend the terms and conditions of any outstanding
Award as provided in the Plan. Further, the Committee shall make all other
determinations that it deems necessary or advisable for the administration
of
the Plan. As permitted by law and the terms of the Plan, the Committee may
delegate its authority herein. No member of the Committee shall be liable for
any action taken or decision made in good faith relating to the Plan or any
Award granted hereunder.
3.3
Decisions
Binding
.
All
determinations and decisions made by the Committee pursuant to the provisions
of
the Plan and all related orders and resolutions of the Committee shall be final,
conclusive, and binding on all persons, including the Company, its stockholders,
Directors, Employees, Participants, and their estates and beneficiaries, unless
changed by the Board.
Article
4. Shares Subject to the Plan and Maximum Awards
4.1
Number
of Shares Available for Grants
.
Subject
to adjustment as provided in Section 4.2 hereof, the number of Shares
hereby reserved for issuance to Participants under the Plan shall be Ten Million
Shares (10,000,000). Any Shares covered by an Award (or portion of an Award)
granted under the Plan which is forfeited or canceled or expires shall be deemed
not to have been delivered for purposes of determining the maximum number of
Shares available for delivery under the Plan. Shares may be authorized, unissued
shares or Treasury shares. The Committee shall determine the appropriate
methodology for calculating the number of Shares issued pursuant to the Plan.
The
following limitations shall apply to the grant of any Award to a Participant
in
a fiscal year:
|
|
(a)
|
Stock
Options
:
The maximum aggregate number of Shares that may be granted in the
form of
Stock Options pursuant to Awards granted in any one fiscal year to
any one
Participant shall be 500,000.
|
|
|
(b)
|
SARs
:
The maximum aggregate number of Shares that may be granted in the
form of
Stock Appreciation Rights pursuant to Awards granted in any one fiscal
year to any one Participant shall be
500,000.
|
|
|
(c)
|
Restricted
Stock
:
The maximum aggregate of Shares that may be granted with respect
to Awards
of Restricted Stock granted in any one fiscal year to any one Participant
shall be 250,000.
|
|
|
(d)
|
Performance
Shares/Performance Units Awards
:
The maximum aggregate grant with respect to Awards of Performance
Shares
made in any one fiscal year to any one Participant shall be equal
to the
Fair Market Value of
250,000
Shares
(measured on the date of grant); the maximum aggregate amount awarded
with
respect to Performance Units to any one Participant in any one fiscal
year
may not exceed $250,000.
|
4.2
Adjustments
in Authorized Shares
.
Upon a
change in corporate capitalization, such as a stock split, stock dividend or
a
corporate transaction, such as any merger, consolidation, combination,
exchange of shares or the like, separation, including a spin-off, or other
distribution of stock or property of the Company, any reorganization (whether
or
not such reorganization comes within the definition of such term in Code Section
368) or any partial or complete liquidation of the Company, (i) the number
and
class of Shares reserved for issuance to Participants under the Plan, (ii)
the
number and class of and/or price of Shares subject to outstanding Awards granted
under the Plan, and (iii) the Award limits set forth in Section 4.1, shall
be
proportionately adjusted in such manner as may be determined to be appropriate
and equitable by the Committee, in its sole discretion, to prevent dilution
or
enlargement of rights.
4.3
Adjustment
of Awards Upon the Occurrence of Certain Unusual or Nonrecurring
Events
.
The
Committee may make adjustments in the terms and conditions of, and the criteria
included in, Awards in recognition of unusual or nonrecurring events (including,
without limitation, the events described in Section 4.2 hereof) affecting the
Company or the financial statements of the Company or of changes in applicable
laws, regulations, or accounting principles, whenever the Committee determines
that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan; provided that (i) no such adjustment shall be authorized if,
and
to the extent that, such adjustment would result in an accounting charge for
any
affected outstanding Awards in accordance with Financial Accounting Standard
No.
123R (Accounting for Share Based Compensation) or (ii) unless the Committee
determines otherwise at the time such adjustment is considered, no such
adjustment shall be authorized to the extent inconsistent with the Plan’s or any
Award’s meeting the requirements of Section 162(m) of the Code, as from time to
time amended.
Article
5. Eligibility and Participation
5.1
Eligibility
.
Persons
eligible to participate in this Plan include all Employees, Directors and
consultants of the Company and its Subsidiaries.
5.2
Actual
Participation
.
Subject
to the provisions of the Plan, the Committee may, from time to time, select
from
all eligible Employees, Directors and consultants, those to whom Awards shall
be
granted and shall determine the nature and amount of each Award, provided that
Incentive Stock Options shall only be awarded to Employees of the Company or
its
Subsidiaries.
5.3
Stock
Options for Non-Employee Directors.
|
|
(a)
|
Each
person who, subsequent to the Effective Date, is for the first time
elected or appointed to the Board and who qualifies, at such time,
as a
Non-Employee Director, shall automatically be granted a Nonqualified
Stock
Option to purchase 3
0,000
Shares, effective as of the date of his or her election or appointment
to
the Board, on the terms and conditions set forth in the Plan, at
an Option
Price equal to the Fair Market Value of a Share on the date of grant
or,
if the date of the grant is not a business day on which the Fair
Market
Value can be determined, on the last business day preceding the date
of
grant on which the Fair Market Value can be determined.
|
|
|
(b)
|
Each
Non-Employee Director who is re-elected as a director at an annual
meeting
of stockholders or who continues to serve a term that has not
expired shall be granted an additional Nonqualified Stock Option to
purchase 3
0,000
Shares,
on the terms and conditions set forth in the Plan, at an option price
per
share equal to the Fair Market Value of a Share on the date of such
annual
meeting.
|
|
|
(c)
|
All
Options granted to Non-Employee Directors pursuant to this Section
5.3
shall vest and become fully exercisable on the date of the first
annual
meeting of stockholders occurring after the end of the fiscal year
of the
Company during which such Option was granted. All Options granted
to
Non-Employee Directors pursuant to this Section 5.3 shall expire
on the
tenth (10
th
)
anniversary of the date of grant, subject to earlier termination
as
provided in Article 12.
|
Article
6. Stock Options
6.1
Grant
of Options
.
Subject
to the terms and provisions of the Plan, Options may be granted to Participants
in such number, and upon such terms, and at any time and from time to time
as shall be determined by the Committee.
6.2
Award
Agreement
.
Each
Option grant shall be evidenced by an Award Agreement that shall specify the
Option Price, the duration of the Option, the number of Shares to which the
Option pertains, and such other provisions as the Committee shall determine
which are not inconsistent with the terms of the Plan.
6.3
Option
Price
.
The
Option Price for each grant of an Option under this Plan shall be as determined
by the Committee; provided, however, the per-share exercise price shall not
be
less than the Fair Market Value of the Shares on the date of grant.
The
Option Price for each Option shall equal the Fair Market Value of the Shares
at
the time such option is granted. If an ISO is granted to a Ten Percent
Shareholder the Option Price shall be at least 110 percent (110%) of the Fair
Market Value of the Shares subject to the ISO.
6.4
Duration
of Options
.
Except
as otherwise provided in this Plan, each Option granted to a Participant shall
expire at such time as the Committee shall determine at the time of grant,
provided that an ISO must expire no later than the tenth (10
th
)
anniversary of the date the ISO was granted. However, in the case of an ISO
granted to a Ten Percent Shareholder, the ISO by its terms shall not be
exercisable after the expiration of five (5) years from the date such ISO is
granted.
6.5
Exercise
of Options
.
Options
shall be exercisable at such times and be subject to such restrictions and
conditions as the Committee shall in each instance approve, which need not
be
the same for each grant or for each Participant.
6.6
Payment
.
Options
shall be exercised by the delivery of a written, electronic or telephonic notice
of exercise to the Company or its designated agent, setting forth the number
of
Shares with respect to which the Option is to be exercised, accompanied by
full
payment of the Option Price for the Shares.
Upon
the
exercise of any Option, the Option Price for the Shares being purchased pursuant
to the Option shall be payable to the Company in full either: (a) in cash
or its equivalent; or
(b) subject
to the Committee’s approval, by delivery of previously acquired Shares having an
aggregate Fair Market Value at the time of exercise equal to the total Option
Price (provided that the Shares that are delivered must have been held by the
Participant for at least six (6) months prior to their delivery to satisfy
the
Option Price); or (c) by a combination of (a) and (b); or (d) by any
other method approved by the Committee in its sole discretion. Unless otherwise
determined by the Committee, the delivery of previously acquired Shares may
be
done through attestation. No fractional shares may be tendered or accepted
in
payment of the Option Price.
Unless
otherwise determined by the Committee, cashless exercises are permitted pursuant
to Federal Reserve Board’s Regulation T, subject to applicable securities
law restrictions, or by any other means which the Committee determines to be
consistent with the Plan’s purpose and applicable law.
Subject
to any governing rules or regulations, as soon as practicable after receipt
of
notification of exercise and full payment, the Company shall deliver to the
Participant, in the Participant’s name, Share certificates in an appropriate
amount based upon the number of Shares purchased pursuant to the
Option(s).
Unless
otherwise determined by the Committee, all payments under all of the methods
indicated above shall be paid in United States dollars.
6.7
Restrictions
on Share Transferability
.
The
Committee may impose such restrictions on any Shares acquired pursuant to the
exercise of an Option granted under this Article 6 as it may deem advisable,
including, without limitation, restrictions under applicable federal securities
laws, under the requirements of any stock exchange or market upon which such
Shares are then listed and/or traded, or under any blue sky or state
securities laws applicable to such Shares.
6.8
Nontransferability
of Options
.
|
|
(a)
|
Incentive
Stock Options
.
No ISO granted under the Plan may be sold, transferred, pledged,
assigned,
encumbered or otherwise alienated or hypothecated, other than by
will or
by the laws of descent and distribution. Further, all ISOs granted
to a
Participant under the Plan shall be exercisable during such Participant’s
lifetime only by such Participant.
|
|
|
(b)
|
Nonqualified
Stock Options
.
Except as otherwise provided in the applicable Award Agreement, no
NQSO
may be sold, transferred, pledged, assigned, encumbered or otherwise
alienated or hypothecated, other than by will or by the laws of descent
and distribution. Further, except as otherwise provided in the applicable
Award Agreement, all NQSOs granted to a Participant shall be exercisable
during such Participant’s lifetime only by such
Participant.
|
6.9
Special
Limitation on Grants of Incentive Stock Options.
No
ISO
shall be granted to an Employee under the Plan or any other ISO plan of the
Company or its Subsidiaries to purchase Shares as to which the aggregate Fair
Market Value (determined as of the date of grant) of the Shares which first
become exercisable by the Employee in any calendar year exceeds $100,000. To
the
extent an Option initially designated as an ISO exceeds the value limit of
this
Section 6.9 or otherwise fails to satisfy the requirements applicable to
ISOs, it shall be deemed a NQSO and shall otherwise remain in full force and
effect.
Article
7. Stock Appreciation Rights
7.1
Grant
of SARs
.
Subject
to the terms and conditions of the Plan, SARs may be granted to Participants
at
any time and from time to time as shall be determined by the
Committee.
Subject
to the terms and conditions of the Plan, the Committee shall have complete
discretion in determining the number of SARs granted to each Participant and,
consistent with the provisions of the Plan, in determining the terms and
conditions pertaining to such SARs.
The
grant
price of a SAR shall equal the Fair Market Value of a Share on the date of
grant.
7.2
SAR
Agreement
.
Each
SAR grant shall be evidenced by an Award Agreement that shall specify the grant
price, the term of the SAR, and such other provisions as the Committee shall
determine.
7.3
Term
of SARs
.
The
term of an SAR granted under the Plan shall be determined by the Committee,
in
its sole discretion.
7.4
Exercise
of SARs
.
SARs
may be exercised upon whatever terms and conditions the Committee, in its sole
discretion, imposes upon them.
7.6
Payment
of SAR Amount
.
Upon
exercise of an SAR, a Participant shall be entitled to receive payment from
the
Company in an amount determined by multiplying:
|
|
(a)
|
The
amount by which the Fair Market Value of a Share on the date of exercise
exceeds the grant price of the SAR;
by
|
|
|
(b)
|
The
number of Shares with respect to which the SAR is
exercised.
|
The
payment upon SAR exercise shall be in Shares. Any Shares delivered in payment
shall be deemed to have a value equal to the Fair Market Value on the date
of
exercise of the SAR.
7.7
Nontransferability
of SARs
.
Except
as otherwise provided in a Participant’s Award Agreement, no SAR granted under
the Plan may be sold, transferred, pledged, assigned, encumbered, or
otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution. Further, except as otherwise provided in a
Participant’s Award Agreement, all SARs granted to a Participant under the Plan
shall be exercisable during such Participant’s lifetime only by such
Participant.
Article
8. Restricted Stock
8.1
Grant
of Restricted Stock
.
Subject
to the terms and provisions of the Plan, the Committee, at any time and from
time to time, may grant Shares of Restricted Stock to Participants in such
amounts as the Committee shall determine.
8.2
Restricted
Stock Agreement
.
Each
Restricted Stock grant shall be evidenced by a Restricted Stock Award Agreement
that shall specify the Period(s) of Restriction, the number of Shares of
Restricted Stock granted, and such other provisions as the Committee shall
determine which are not inconsistent with the terms of this Plan.
8.3
Transferability
.
Except
as provided in the Award Agreement, the Shares of Restricted Stock granted
herein may not be sold, transferred, pledged, assigned, encumbered, or otherwise
alienated or hypothecated until the end of the applicable Period of Restriction
established by the Committee and specified in the Restricted Stock Award
Agreement, or upon earlier satisfaction of any other conditions, as specified
by
the Committee in its sole discretion and set forth in the Restricted Stock
Award
Agreement. All rights with respect to the Restricted Stock granted to a
Participant under the Plan shall be available during such Participant’s lifetime
and prior to the end of the Period of Restriction only to such
Participant.
8.4
Other
Restrictions
.
The
Committee may impose such other conditions and/or restrictions on any Shares
of
Restricted Stock granted pursuant to the Plan as it may deem advisable
including, without limitation, a requirement that Participants pay a stipulated
purchase price for each Share of Restricted Stock, restrictions based upon
the
achievement of specific performance goals, time-based restrictions on vesting
following the attainment of the performance goals, time-based restrictions,
and/or restrictions under applicable federal or state securities
laws.
To
the
extent deemed appropriate by the Committee, the Company may retain the
certificates representing Shares of Restricted Stock in the Company’s possession
until such time as all conditions and/or restrictions applicable to such Shares
have been satisfied.
Except
as
otherwise provided in the Award Agreement, Shares of Restricted Stock covered
by
each Restricted Stock grant made under the Plan shall become freely transferable
by the Participant after the last day of the applicable Period of
Restriction.
8.5
Voting
Rights
.
Unless
the Committee determines otherwise at the time of grant, Participants holding
Shares of Restricted Stock granted hereunder shall have the right to exercise
full voting rights with respect to those Shares during the Period of
Restriction.
8.6
Dividends
and Other Distributions
.
During
the Period of Restriction, Participants holding Shares of Restricted Stock
granted hereunder (whether or not the Company holds the certificate(s)
representing such Shares) shall, unless the Committee determines otherwise
at
the time of grant, be credited with dividends paid with respect to the
underlying Shares while they are so held. The Committee may apply any
restrictions to the dividends that the Committee deems appropriate. Without
limiting the generality of the preceding sentence, if the grant or vesting
of
Restricted Shares granted to a Covered Employee is designed to comply with
the requirements of the Performance-Based Exception, the Committee may apply
any
restrictions it deems appropriate to the payment of dividends declared with
respect to such Restricted Shares, such that the dividends and/or the Restricted
Shares maintain eligibility for the Performance-Based Exception.
Article
9. Performance Units and Performance Shares
9.1
Grant
of Performance Units/Shares Awards
.
Subject
to the terms of the Plan, Performance Units and/or Performance Shares
Awards may be granted to Participants in such amounts and upon such terms,
and
at any time and from time to time, as shall be determined by the
Committee.
9.2
Award
Agreement
.
At the
Committee’s discretion, each grant of Performance Units/Shares Awards may be
evidenced by an Award Agreement that shall specify the initial value, the
duration of the Award, the performance measures, if any, applicable to the
Award, and such other provisions as the Committee shall determine which are
not
inconsistent with the terms of the Plan.
9.3
Value
of Performance Units/Shares Awards
.
Each
Performance Unit shall have an initial value that is established by the
Committee at the time of grant. Each Performance Share shall have an initial
value equal to the Fair Market Value of a Share on the date of grant. The
Committee shall set performance goals in its discretion which, depending on
the
extent to which they are met, will determine the number and/or value of
Performance Units/Shares Awards that will be paid out to the Participant. For
purposes of this Article 9, the time period during which the performance goals
must be met shall be called a “Performance Period.”
9.4
Earning
of Performance Units/Shares Awards
.
Subject
to the terms of this Plan, after the applicable Performance Period has
ended, the holder of Performance Units/Shares Awards shall be entitled to
receive a payout based on the number and value of Performance Units/Shares
Awards earned by the Participant over the Performance Period, to be determined
as a function of the extent to which the corresponding performance goals
have been achieved.
9.5
Form
and Timing of Payment of Performance Units/Shares Awards
.
Payment
of earned Performance Units/Shares Awards shall be as determined by the
Committee and, if applicable, as evidenced in the related Award Agreement.
Subject to the terms of the Plan, the Committee, in its sole
discretion, may pay earned Performance Units/Shares Awards in the form of
cash or in Shares (or in a combination thereof) that have an aggregate Fair
Market Value equal to the value of the earned Performance Units/Shares Awards
at
the close of the applicable Performance Period. Such Shares may be delivered
subject to any restrictions deemed appropriate by the Committee. No fractional
shares will be issued. The determination of the Committee with respect to the
form of payout of such Awards shall be set forth in the Award Agreement
pertaining to the grant of the Award or the resolutions establishing the
Award.
Unless
otherwise provided by the Committee, Participants holding Performance
Units/Shares shall be entitled to receive dividend units with respect to
dividends declared with respect to the Shares represented by such Performance
Units/Shares. Such dividends may be subject to the same accrual, forfeiture,
and
payout restrictions as apply to dividends earned with respect to Shares of
Restricted Stock, as set forth in Section 8.6 hereof, as determined by the
Committee.
9.6
Nontransferability
.
Except
as otherwise provided in a Participant’s Award Agreement, Performance
Units/Shares Awards may not be sold, transferred, pledged, assigned, encumbered,
or otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution.
Article
10. Performance Measures
Unless
and until the Committee proposes for shareholder vote and the Company’s
shareholders approve a change in the general performance measures set forth
in
this Article 10, the attainment of which may determine the degree of payout
and/or vesting with respect to Awards to Covered Employees that are designed
to
qualify for the Performance-Based Exception, the performance measure(s) to
be
used for purposes of such grants shall be chosen from among:
|
(a)
|
Earnings
per share;
|
|
|
|
|
(b)
|
Net
income (before or after taxes);
|
|
|
|
|
(c)
|
Cash
flow (including, but not limited to, operating cash flow and free
cash
flow);
|
|
|
|
|
(d)
|
Gross
revenues;
|
|
|
|
|
(e)
|
Gross
margins;
|
|
|
|
|
(f)
|
EBITDA;
and
|
|
|
|
|
(g)
|
Any
of the above measures compared to peer or other
companies.
|
Performance
measures may be set either at the corporate level, subsidiary level, division
level, or business unit level.
Awards
that are designed to qualify for the Performance-Based Exception, and that
are
held by Covered Employees, may not be adjusted upward (the Committee shall
retain the discretion to adjust such Awards downward).
If
applicable tax and/or securities laws change to permit Committee discretion
to
alter the governing performance measures without obtaining shareholder approval
of such changes, the Committee shall have sole discretion to make such changes
without obtaining shareholder approval.
Article
11. Rights of Participants
11.1
Employment
.
Nothing
in the Plan shall confer upon any Participant any right to continue in the
Company’s or its Subsidiaries’ employ, or as a Director, or interfere with or
limit in any way the right of the Company or its Subsidiaries to terminate
any
Participant’s employment or directorship at any time.
11.2
Participation
.
No
Employee, Director or consultant shall have the right to be selected to receive
an Award under this Plan, or, having been so selected, to be selected to receive
a future Award.
11.3
Rights
as a Stockholder
.
Except
as provided in Sections 8.5, 8.6 and 9.5 or in applicable Award Agreement
consistent with such Sections, a Participant shall have none of the rights
of a
shareholder with respect to shares of Common Stock covered by any Award until
the Participant becomes the record holder of such Shares, or the Period of
Restriction has expired, as applicable.
Article
12. Termination of Employment/Directorship
Upon
termination of the Participant's employment or directorship for any reason
other
than Disability or death, an Award granted to the Participant may be exercised
by the Participant or permitted transferee at any time on or prior to the
earlier of the expiration date of the Award or the expiration of three (3)
months after the date of termination but only if, and to the extent that, the
Participant was entitled to exercise the Award at the date of termination.
All
Awards or any portion thereof not yet vested or exercisable or whose Period
of
Restriction has not expired as of the date of termination (other than a
termination by reason of Disability or death) shall terminate and be forfeited
immediately on the date of termination. If the employment or directorship of
a
Participant terminates by reason of the Participant's Disability or death,
all
Awards or any portion thereof not yet vested or exercisable or whose Period
of
Restriction has not expired as of the date of a Participant’s Disability or
death shall become immediately vested and/or exercisable on the date of
termination due to Disability or death. If the employment or directorship of
a
Participant terminates by reason of the Participant's Disability or death,
the
Participant (or, if appropriate, the Participant's legal representative or
permitted transferee) may exercise such Participant’s rights under any
outstanding Award at any time on or prior to the earlier of the expiration
date
of the Award or the expiration of six (6) months after the date of Disability
or
death.
Unless
otherwise determined by the Committee, an authorized leave of absence pursuant
to a written agreement or other leave entitling an Employee to reemployment
in a
comparable position by law or rule shall not constitute a termination of
employment for purposes of the Plan unless the Employee does not return at
or
before the end of the authorized leave or within the period for which
re-employment is guaranteed by law or rule. For purposes of this Article, a
“termination” includes an event which causes a Participant to lose his
eligibility to participate in the Plan (e.g., an individual is employed by
a
company that ceases to be a Subsidiary). In the case of a consultant, the
meaning of “termination” or “termination of employment” includes the date that
the individual ceases to provide services to the Company or its Subsidiaries.
In
the case of a nonemployee director, the meaning of “termination” includes the
date that the individual ceases to be a director of the Company or its
Subsidiaries.
Notwithstanding
the foregoing, the Committee shall have the authority to prescribe different
rules that apply upon the termination of employment of a particular Participant,
which shall be memorialized in the Participant’s original or amended Award
Agreement or similar document.
An
Award
that remains unexercised after the latest date it could have been exercised
under any of the foregoing provisions or under the terms of the Award shall
be
forfeited.
Article
13. Change in Control
In
the
event of a Change in Control, unless otherwise specifically prohibited under
applicable laws, or by the rules and regulations of any governing governmental
agencies or national securities exchange or trading system, or unless the
Committee shall otherwise specify in the Award Agreement, the Board, in its
sole
discretion, may:
|
(a)
|
elect
to terminate Options or SARs in exchange for a cash payment equal
to the
amount by which the Fair Market Value of the Shares subject to such
Option
or SAR to the extent the Option or SAR has vested exceeds the exercise
price with respect to such Shares;
|
|
|
|
|
(b)
|
elect
to terminate Options or SARs provided that each Participant is first
notified of and given the opportunity to exercise his or her vested
Options or SARs for a specified period of time (of not less than
15 days)
from the date of notification and before the Option or SAR is
terminated;
|
|
|
|
|
(c)
|
permit
Awards to be assumed by a new parent corporation or a successor
corporation (or its parent) and replaced with a comparable Award
of the
parent corporation or successor corporation (or its
parent);
|
|
|
|
|
(d)
|
amend
an Award Agreement or take such other action with respect to an Award
that
it deems appropriate; or
|
|
|
|
|
(e)
|
implement
any combination of the foregoing.
|
Article
14. Amendment, Modification, and Termination
14.1
Amendment,
Modification, and Termination
.
Subject
to the terms of the Plan, the Board may at any time and from time to time,
alter, amend, suspend, or terminate the Plan in whole or in
part.
14.2
Awards
Previously Granted
.
Notwithstanding any other provision of the Plan to the contrary, no termination,
amendment, or modification of the Plan shall adversely affect in any
material way any Award previously granted under the Plan, without the written
consent of the Participant holding such Award.
14.3
Shareholder
Approval Required for Certain Amendments
.
Shareholder
approval will be required for any amendment of this Plan that does any of the
following: (a) increases the maximum number of Shares subject to this Plan;
(b)
changes the designation of the class of persons eligible to receive ISOs under
this Plan; or (c) modifies this Plan in a manner that requires shareholder
approval under applicable law or the rules of a stock exchange or trading system
on which Shares are traded.
Article
15. Withholding
The
Company shall have the power and the right to deduct or withhold, or require
a
Participant to remit to the Company, an amount sufficient to satisfy any
applicable taxes (including social security or social charges), domestic or
foreign, required by law or regulation to be withheld with respect to any
taxable event arising as a result of this Plan.
The
Participant may satisfy, totally or in part, such Participant’s obligations
pursuant to this Section 15 by electing to have Shares withheld, to redeliver
Shares acquired under an Award, or to deliver previously owned Shares that
have
been held for at least six (6) months, provided that the election is made in
writing on or prior to (i) the date of exercise, in the case of Options and
SARs, (ii) the date of payment, in the case of Performance Units/Shares, and
(iii) the expiration of the Period of Restriction in the case of Restricted
Stock. Any election made under this Section 15 may be disapproved by the
Committee at any time in its sole discretion. If an election is disapproved
by
the Committee, the Participant must satisfy his obligations pursuant to this
paragraph in cash.
Article
16. Successors
All
obligations of the Company under the Plan with respect to Awards granted
hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
through merger, consolidation, or otherwise, of all or substantially all of
the
business, stock and/or assets of the Company.
Article
17. General Provisions
17.1
Gender
and Number
.
Except
where otherwise indicated by the context, any masculine term used herein also
shall include the feminine; the plural shall include the singular and the
singular shall include the plural.
17.2
Severability
.
If any
provision of the Plan shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts of the Plan,
and
the Plan shall be construed and enforced as if the illegal or invalid provision
had not been included.
17.3
Requirements
of Law
.
The
granting of Awards and the issuance of Shares under the Plan shall be subject
to
all applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.
17.4
Securities
Law Compliance
.
With
respect to Insiders, transactions under this Plan are intended to comply with
all applicable conditions of Rule 16b-3 or its successors under the
Exchange Act, unless determined otherwise by the Board. To the extent any
provision of the Plan or action by the Committee fails to so comply, it shall
be
deemed null and void, to the extent permitted by law and deemed advisable by
the
Board.
17.5
Listing
.
The
Company may use reasonable endeavors to register Shares issued pursuant to
Awards with the United States Securities and Exchange Commission or to effect
compliance with the registration, qualification, and listing requirements of
any
state or foreign securities laws, stock exchange, or trading
system.
17.6
Inability
to Obtain Authority
.
The
inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company’s counsel to be necessary
to the lawful issuance and sale of any Shares hereunder, shall relieve the
Company of any liability in respect of the failure to issue or sell such Shares
as to which such requisite authority shall not have been obtained.
17.7
No
Additional Rights
.
Neither
the Award nor any benefits arising under this Plan shall constitute part of
an
employment contract between the Participant and the Company or any Subsidiary,
and accordingly, subject to Section 14.2, this Plan and the benefits
hereunder may be terminated at any time in the sole and exclusive discretion
of
the Committee without giving rise to liability on the part of the Company for
severance payments.
17.8
Noncertificated
Shares
.
To the
extent that the Plan provides for issuance of certificates to reflect the
transfer of Shares, the transfer of such Shares may be effected on a
noncertificated basis, to the extent not prohibited by applicable law or the
rules of any stock exchange or trading system.
17.9
Governing
Law
.
The
Plan and each Award Agreement shall be governed by the laws of Delaware,
excluding any conflicts or choice of law rule or principle that might otherwise
refer construction or interpretation of the Plan to the substantive law of
another jurisdiction. Unless otherwise provided in the Award Agreement,
recipients of an Award under the Plan are deemed to submit to the exclusive
jurisdiction and venue of the federal or state courts whose jurisdiction covers
Little Rock, Arkansas, to resolve any and all issues that may arise out of
or
relate to the Plan or any related Award Agreement.
17.10
Compliance
with Code Section 409A
.
No
Award that is subject to Section 409A of the Code shall provide for deferral
of
compensation that does not comply with Section 409A of the Code, unless the
Board, at the time of grant, specifically provides that the Award is not
intended to comply with Section 409A of the Code. Notwithstanding any provision
in the Plan to the contrary, with respect to any Award subject to Section 409A,
distributions on account of a separation from service may not be made to Key
Employees before the date which is six (6) months after the date of separation
from service (or, if earlier, the date of death of the employee).
|
Dated
as of May 7, 2008
|
ThermoEnergy
Corporation
|
|
|
|
|
|
|
|
|
By:
|
/s/
Andrew T. Melton
|
|
|
|
|
Andrew
T. Melton, Secretary
|
|
Date
of
Shareholder Approval: __________
ThermoEnergy (CE) (USOTC:TMEN)
Historical Stock Chart
From Jul 2024 to Aug 2024
ThermoEnergy (CE) (USOTC:TMEN)
Historical Stock Chart
From Aug 2023 to Aug 2024
