<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
__X__ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended April 30, 1996
_____ Transition report pursuant to Section 13 or 15(d) of the Exchange Act
For the transition period from to
Commission file number 0-20303
----------------------------------------------------
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
- - ---------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 13-2846796
- - ----------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 382, Fields Lane, Brewster, New York 10509
- - ---------------------------------------------------------------------------
(Address of principal executive offices)
(914) 277-8100
- - ---------------------------------------------------------------------------
(Issuer's telephone number, including area code)
- - ---------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes ____X____ No _________
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court.
Yes ________ No _________
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: As of June 11, 1996:
7,604,322 shares of Common Stock, par value $.0001 per share.
Transitional Small Business Disclosure Format (check one):
Yes _________ No ____X____
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The financial statements for the Company's fiscal quarter ended
April 30, 1996 are attached to this Report, commencing at page F-1.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company's revenues are derived from: the sale of its Degrees
of Reading Power Tests ("DRP") and Degrees of Word Meaning Tests ("DWM"), the
sale of ancillary materials, and test scoring and reporting services. Tests
are sold pursuant to specific contracts with state and local governments and
through catalog sales.
RESULTS OF OPERATIONS
Revenues. For the three-month period ended April 30, 1996, the
Company's total net revenues decreased 17.4% versus the comparable 1995 period
($509,470 in 1996 versus $616,573 in 1995). For the six-month period ended
April 30, 1996, the Company's total net revenues increased 1.2% versus the
comparable 1995 period ($1,285,086 in 1996 versus $1,270,116 in 1995). The
overall increase in total net revenues for the six-month period ended April
30, 1996 represents the net of the significant increase in catalog sales over
the decrease in contract sales.
For the three-month period ended April 30, 1996, contract revenues
decreased 76.7% versus the comparable 1995 period ($60,000 in 1996 versus
$257,785 in 1995). For the six-month period ended April 30, 1996, contract
revenues decreased 27.7% versus the comparable 1995 period ($527,480 in 1996
versus $729,215 in 1995). Contract income now represents 11.8% of second
quarter sales versus 41.8% of second quarter sales in 1995. The Company had
projected this decrease since the second half of fiscal year 1994, when the
New York City contract was not renewed for fiscal year 1996; the Company
believes that contract revenues as a percentage of total revenues will
continue to decline for the full fiscal year 1996.
For the three-month period ended April 30, 1996, catalog revenues
for shelf tests and associated products increased 25.3% versus the comparable
1995 quarter ($449,470 in 1996 versus $358,788 in 1995). For the six-month
period ended April 30, 1996, catalog revenues increased 40.1% versus the
comparable 1995 period ($757,606 in 1996 versus $540,901 in 1995). Catalog
sales now represent 88.2% of second quarter sales versus 58.2% of second
quarter sales in 1995. This dramatic increase is the result of the Company's
decision in early 1995 to invest heavily in new marketing initiatives.
Costs and expenses. For the three-month period ended April 30,
1996, cost of goods sold was essentially flat versus the comparable 1995
period ($160,615 in 1996 versus $161,875 in 1995). For the six-month period
ended April 30, 1996, cost of goods sold increased 3.4% versus the comparable
1995 period ($363,961 in 1996 versus $351,986 in 1995). Costs of goods sold
as a percentage of sales for the three-month period ended April 30, 1996
increased 5.2% versus the comparable 1995 period (31.5% in 1996 versus 26.3%
in 1995). This increase is primarily due to the change in the Company's sales
patterns.
For the three-month period ended April 30, 1996, selling expenses
were essentially flat versus the comparable 1995 period ($165,792 in 1996
versus $166,141 in 1995). For the six-month period ended April 30, 1996,
selling expenses increased 13.1% versus the comparable 1995 period ($319,820
in 1996 versus $282,796 in 1995). This increase is attributable to the
Company's decision in early 1995 to increase marketing expenditures
significantly.
For the three-month period ended April 30, 1996, general and
administrative expenses increased 12.8% versus the comparable 1995 period
($225,254 in 1996 versus $199,684 in 1995). For the six-month period ended
April 30, 1996, general and administrative expenses increased 10.1% versus the
comparable 1995 period ($403,724 in 1996 versus $366,712 in 1995). Certain
labor costs were reassigned to general and administrative when management
decided to abandon certain hardware and software projects in the fourth
quarter of fiscal year 1994. As the Company continues to reconfigure,
management believes that this rate of increase will decrease in the future.
In the three-month period ended April 30, 1996, the Company spent
$21,180 on product development. The Company is currently working on a new
product that is not yet ready for commercial distribution. There were no
comparable expenditures in 1995. This expenditure is consistent with one of
the Company's core strategies of expanding the Company's revenue opportunities
outside the Company's current marketplace.
For the three-month period ended April 30, 1996, interest expense
decreased 25.7% versus the comparable 1995 period ($13,260 in 1996 versus
$17,856 in 1995). For the six-month period ended April 30, 1996, interest
expense decreased 7.9% versus the comparable 1995 period ($31,060 in 1996
versus $33,715 in 1995). This decrease was due to the reduction of long-term
debt as well as decreased interest rates.
For the three-month period ended April 30, 1996, investment income
increased 15.6% versus the comparable 1995 period ($46,104 in 1996 versus
$39,890 in 1995). For the six-month period ended April 30, 1996, interest
income decreased 1.8% versus the comparable 1995 period ($81,900 in 1996
versus $83,379 in 1995).
Net Income and Earnings per Share. For the three-month period
ended April 30, 1996, net after-tax income decreased 108.4% versus the
comparable 1995 period (($6,438) in 1996 versus $76,812 in 1995). For the
six-month period ended April 30, 1996, net after-tax income decreased 27.3%
versus the comparable 1995 period ($160,111 in 1996 versus $220,296 in 1995).
This decrease was primarily due to increased operating expenses in 1996,
including new marketing initiatives and product development, and the loss of
the New York City contract.
For the three-month period ended April 30, 1996, earnings per
share decreased to $.00 from $.01 in the comparable 1995 period. For the six-
month period ended April 30, 1996, earnings per share were flat versus the
comparable 1995 period ($.02 in 1996 versus $.02 in 1995).
LIQUIDITY AND CAPITAL RESOURCES
Working capital, which consists principally of cash, cash
equivalents, marketable securities and accounts receivable, was $3,457,716 on
April 30, 1996 versus $2,923,276 on October 31, 1995. The increase in working
capital was primarily due to an increase in paid-in capital from the exercise
of options and warrants by unaffiliated third parties, as well as to profits
from operations.
For the three-month period ended April 30, 1996, net cash flows
from operations increased by $221,787, from ($177,297) in 1995 to $44,490 in
1996. For the six-month period ended April 30, 1996, net cash flows from
operations increased by $279,803, from $142,292 in 1995 to $422,095 in 1996.
Additionally, for the six-month period ended April 30, 1996, the Company
invested $166,168 to increase the size of its Test Passage Bank (versus
$156,310 in the comparable 1995 period), $28,835 in property, plant and
equipment (versus $113,512 in the comparable 1995 period) and $56,023 readying
its new DRP-->BookLink software product for market (versus no expenditures for
such product development in the comparable 1995 period). As this new product
was shipped in the second quarter of 1996, these software development costs
will begin to be amortized over the next five years. In the six-month period
ended April 30, 1996, the Company purchased $106,102 in marketable debt
securities (versus $77,433 in the comparable 1995 period).
For the three-month period ended April 30, 1996, the Company had a
net cash inflow from financing activities of $89,721 versus a net cash outflow
from financing activities of ($42,969) in the comparable 1995 period. For the
six-month period ended April 30, 1996, the Company had a net cash inflow from
financing activities of $412,485, as compared to a net cash outflow from
financing activities of ($84,684) for the comparable 1995 period. The change
was due to the receipt of proceeds from the exercise of warrants and stock
options, less deferred offering costs and principal payments on its industrial
development bond.
In May 1996, the Company will have a balloon payment of $250,000
for the addition to its facility which was completed in 1991. The Company
currently has a refinancing proposal which has been approved by its Board of
Directors. The deadline for the balloon payment has been extended while the
bank and the Company negotiate the refinancing. The Company is current on all
interest payments. The Company anticipates closing on this new loan within
the next 90 days. The Company has no other material commitments for capital
or other capital expenditures and is not party to any arrangement that would
adversely impact the Company's liquidity.
<PAGE> 3
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
As of March 12, 1996, the Company lowered the exercise price for
the 300,000 outstanding Redeemable Class B Common Stock Purchase Warrants (the
"Warrants") to purchase up to an aggregate of 900,000 shares of Common Stock
of the Company from $8.00 per Warrant (for the purchase of three shares of
Common Stock) to $6.50 per Warrant (for the purchase of three shares of Common
Stock). There were 8,000 Warrants exercised for an aggregate purchase price
of $52,000. On March 31, 1996, the balance of the Warrants expired.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
The Company held its annual meeting of stockholders on March 29,
1996. At the meeting, the stockholders:
(i) elected Andrew L. Simon, Linda G. Straley, Stephen H. Ivens,
Steven R. Berger and Michael Milone as directors of the Company by
a vote (as to each nominee) of 11,885,021 votes in favor of his or
her election, with 35,000 votes withheld, each to serve until the
next annual meeting of stockholders;
(ii) ratified the appointment of Lazar, Levine & Company LLP as the
Company's independent auditors by a vote of 11,882,371 votes in
favor of the proposal, with 15,400 votes against and 22,250 votes
abstaining;
(iii) approved the Amended and Restated 1991 Stock Option
Incentive Plan by a vote of 7,298,503 votes in favor of the
proposal, with 234,308 votes against, 104,500 votes abstaining
and 4,282,710 broker non-votes; and
(iv) approved the Directors Stock Option Plan by a vote of 7,316,998
votes in favor of the proposal, with 269,358 votes against,
96,900 votes abstaining and 4,236,765 broker non-votes.
ITEM 5. OTHER INFORMATION
On March 1, 1996, the Company entered into an employment agreement
with each of Andrew L. Simon, Linda G. Straley and Stephen H. Ivens, pursuant
to which the Company agreed to employ Mr. Simon, Ms. Straley and Mr. Ivens,
and each of Mr. Simon, Ms. Straley and Mr. Ivens agreed to remain, as the
Company's President and Chief Executive Officer, Vice President and Vice
President, respectively, for a term of three years, subject to automatic
yearly extensions and certain rights of termination as provided in each such
agreement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 10.1 -- Amended and Restated 1991 Stock Option
Incentive Plan
Exhibit 10.2 -- Directors Stock Option Plan
Exhibit 10.3 -- Employment Agreement with Andrew L. Simon
Exhibit 10.4 -- Employment Agreement with Linda G. Straley
Exhibit 10.5 -- Employment Agreement with Stephen H. Ivens
Exhibit 11 -- Computation of Earnings per Common Share
Exhibit 27 -- Financial Data Schedule
(b) Reports on Form 8-K
Current Report on Form 8-K, filed March 15, 1996 (reporting
the reduction of the exercise price for the Company's
outstanding Warrants from $8.00 per Warrant to $6.50 per
Warrant).
<PAGE> 4
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
INDEX TO FINANCIAL STATEMENTS (UNAUDITED)
FOR THE QUARTER ENDED APRIL 30, 1996
Balance Sheets F-1
Statements of Income F-3
Statements of Cash Flows F-4
Notes to Financial Statements F-5
<PAGE> 5
<TABLE>
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC. (F-1)
BALANCE SHEETS (1 of 2)
(UNAUDITED)
<CAPTION>
April 30, October 31,
1996 1995
-------------- --------------
<S> <C> <C>
ASSETS
- - ------
Current assets:
Cash and temporary investments $1,094,757 $ 617,305
Marketable securities 2,230,740 2,114,243
Accounts receivable 299,989 351,491
Inventories 199,238 152,296
Prepaid expenses and other current
assets 94,585 214,021
----------- ----------
Total current assets 3,919,309 3,449,356
Property, plant and equipment - net of
accumulated depreciation of
$1,647,565 and $1,593,208,
respectively 1,829,046 1,869,141
Other assets:
Deferred offering costs -- 236,624
Loan receivable 400,000 400,000
Test passage bank, net of accumulated
amortization of $790,340 and
$673,626, respectively 2,484,942 2,435,488
Software development costs 56,023 --
Other assets 21,575 26,123
----------- -----------
Total assets $8,710,895 $8,416,732
=========== ===========
<FN>
See notes to financial statements.
</FN>
</TABLE>
<PAGE> 6
<TABLE>
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC. (F-2)
BALANCE SHEETS (2 of 2)
(UNAUDITED)
<CAPTION>
April 30, October 31,
1996 1995
------------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
Current liabilities:
Current portion of obligation under
industrial revenue bond $ 315,000 $ 315,000
Accounts payable and accrued expenses 146,130 210,649
Corporation taxes payable 463 431
---------- ----------
Total current 461,593 526,080
Long-term debt:
Obligation under industrial revenue bond,
less current portion 533,750 571,250
Deferred income taxes 561,692 602,162
---------- ----------
Total liabilities 1,557,035 1,699,492
---------- ----------
Stockholders' equity:
Preferred stock, $.0001 par value, 5,000,000
authorized, 1,500 issued and outstanding -- --
Common stock, $.0001 par value, 20,000,000
authorized, 7,604,322 and 6,899,400 shares
issued and outstanding, respectively 760 690
Additional paid-in capital 3,876,019 3,609,978
Unrealized holding loss (30,429) (40,824)
Retained earnings 3,307,510 3,147,396
---------- ----------
Total stockholders' equity 7,153,860 6,717,240
---------- ----------
Total liabilities & stockholders' equity $8,710,895 $8,416,732
========== ==========
<FN>
See notes to financial statements.
</FN>
</TABLE>
<PAGE> 7
<TABLE>
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC. (F-3)
STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Six Months Ended Three Months Ended
April 30, April 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Contract income $ 527,480 $ 729,215 $ 60,000 $ 257,785
Catalog sales 757,606 540,901 449,470 358,788
---------- ---------- --------- ----------
Total net revenue 1,285,086 1,270,116 509,470 616,573
Cost of goods sold 363,961 351,986 160,615 161,875
---------- ---------- ---------- ----------
Gross profit 921,125 918,130 348,855 454,698
---------- ---------- ---------- ----------
Operating expenses:
Selling expenses 319,820 282,796 165,792 166,141
General and administrative
expenses 403,724 366,712 225,254 199,684
Product development 21,180 -- 21,180 --
---------- ---------- ---------- ----------
Total operating expenses 744,724 649,508 412,226 365,825
---------- ---------- ---------- ----------
Income (loss) from operations 176,401 268,622 (63,371) 88,873
Other income (expense):
Interest expense (31,060) (33,715) (13,260) (17,856)
Investment income 81,900 83,379 46,104 39,890
---------- ---------- ---------- ----------
Income (loss) before income taxes 227,241 318,286 (30,527) 110,907
Income taxes (benefit) 67,130 97,990 (24,089) 34,095
---------- ---------- ---------- ----------
Net income (loss) $ 160,111 $ 220,296 $ (6,438) $ 76,812
========== ========== ========== ==========
Weighted average shares
outstanding
Primary 7,827,429 10,339,150 7,604,322 10,339,150
Fully diluted 7,827,429 10,339,150 7,604,322 10,339,150
Earnings per share
Primary $ .02 $ .02 $ -- $ .01
Fully diluted $ .02 $ .02 $ -- $ .01
<FN>
See notes to financial statements.
</FN>
</TABLE>
<PAGE> 8
<TABLE>
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC. (F-4)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six Months Ended
April 30,
1996 1995
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 160,111 $ 220,296
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 190,192 162,383
Deferred income taxes (40,470) (46,524)
Financial advisory services 52,750 52,750
Changes in operating assets and liabilities:
Accounts receivable 51,502 (230,781)
Inventories (46,942) (102,131)
Other current assets 119,439 155,804
Accounts payable (64,487) (69,505)
---------- ----------
NET CASH FLOWS FROM OPERATING ACTIVITIES 422,095 142,292
---------- ----------
INVESTING ACTIVITIES
Acquisition of property, plant and equipment (28,835) (113,512)
Test passage bank (166,168) (156,310)
Software development costs (56,023) --
Purchase of marketable debt securities (106,102) (77,433)
---------- ----------
NET CASH FLOWS FROM INVESTING ACTIVITIES (357,128) (347,255)
---------- ----------
FINANCING ACTIVITIES
Principal payments on industrial revenue
bond obligation (37,500) (37,500)
Proceeds from exercise of options 542,167 --
Deferred offering costs (144,182) (47,184)
Proceeds from exercise of warrants 52,000 --
---------- ----------
NET CASH FLOWS FROM FINANCING ACTIVITIES 412,485 (84,684)
---------- ----------
NET CHANGE IN CASH AND TEMPORARY
INVESTMENTS 477,452 (289,647)
Cash and temporary investments
at beginning of period 617,305 984,435
---------- ----------
CASH AND TEMPORARY INVESTMENTS
AT END OF PERIOD $1,094,757 $ 694,788
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 31,557 $ 32,832
========== ==========
Income taxes paid $ 25,000 $ 1,464
========== ==========
<FN>
See notes to financial statements.
</FN>
</TABLE>
<PAGE> 9
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC. (F-5)
NOTES TO FINANCIAL STATEMENTS
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
- - ---------------------------------------------------------
In the opinion of management, the accompanying financial statements of
Touchstone Applied Science Assoc., Inc. contain all adjustments necessary to
present fairly the Company's financial position as of April 30, 1996 and
October 31, 1995 and the results of operations for the six and three months
ended April 30, 1996 and 1995 and cash flows for the six months ended April
30, 1996 and 1995.
The accounting policies followed by the Company are set forth in Note A to the
Company's financial statements included in its Annual Report on Form 10-KSB for
the year ended October 31, 1995.
The results of operations for the six and three months ended April 30, 1996 and
1995 are not necessarily indicative of the results to be expected for the full
year.
NOTE B - STOCKHOLDERS' EQUITY
- - -----------------------------
INCENTIVE STOCK OPTIONS
In April 1996, 23,641 incentive stock options were exercised into 70,922 shares
of common stock for $1.41 per share. In April 1996, options exercisable into
499,428 shares of common stock for this former President, Chief Executive
Officer and Chairman of the Board of Directors were canceled.
In April 1996, 3,333 incentive stock options were exercised into 10,000 shares
of common stock for $1.41 per share. In April 1996, options exercisable into
102,000 shares of common stock for this former employee were canceled.
B WARRANTS
In March 1996, 8,000 B warrants were exercised into 24,000 shares of common
stock for $6.5 per warrant. The remaining 292,000 warrants expired in March
1996.
NOTE C - SUBSEQUENT EVENT
- - -------------------------
In May 1996, the Company secured an extension on the additional mortgage
balloon payment until June 1996.
<PAGE> 10
SIGNATURE
In accordance with the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
By /s/ ANDREW L. SIMON
------------------------------------------------
Andrew L. Simon
President, Chief Executive Officer and Treasurer
(principal financial officer)
Date: June 12, 1996
Exhibit 10.1
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
AMENDED AND RESTATED 1991 STOCK OPTION INCENTIVE PLAN
-----------------------------------------------------
1. PURPOSE. The purpose of the Amended and Restated 1991
Stock Option Incentive Plan (the "Plan") is to aid the Company in
attracting, retaining and motivating officers, consultants, key employees
and directors who are also officers or employees of the Company by
providing them with incentives for making significant contributions to the
growth and profitability of the Company. The Plan is designed to
accomplish this goal by offering stock options and other incentive awards,
thereby providing Participants with a proprietary interest in the growth,
profitability and success of the Company.
2. DEFINITIONS.
(a) AWARD. Any form of stock option, stock
appreciation right, stock or cash award granted under the Plan,
whether granted singly, in combination or in tandem, pursuant to such
terms, conditions and limitations as the Committee may establish in
order to fulfill the objectives, and in accordance with the terms and
conditions, of the Plan.
(b) AWARD AGREEMENT. An agreement between the Company
and a Participant setting forth the terms, conditions and limitations
applicable to an Award.
(c) BOARD. The Board of Directors of Touchstone Applied Science
Associates, Inc.
(d) CODE. The Internal Revenue Code of 1986, as amended from
time to time.
(e) COMMITTEE. Such committee of the Board as may be
designated from time to time by the Board to administer the Plan or any
subplan under the Plan. Any such committee shall consist of not less than
two members of the Board who are not officers or employees of the Company.
(f) COMPANY. Touchstone Applied Science Associates, Inc. and
its direct and indirect parents and subsidiaries.
(g) FAIR MARKET VALUE. If the Stock is listed on the New York
Stock Exchange (or other national exchange), the average of the high and low
sale prices as reported on the New York Stock Exchange (or such other
exchange) or, if the Stock is not listed on a national exchange, the average
of the high and low sale prices of the Stock in the over-the-counter market,
as reported by the National Association of Securities Dealers through its
Automated Quotation System or otherwise, in either case for the date in
question; PROVIDED that if no transactions in the Stock are reported for that
date, the average of the high and low sale prices as so reported for the
preceding day on which transactions in the Stock were effected.
(h) PARTICIPANT. An officer, consultant, key employee or
director who is also an officer or employee of the Company to whom an Award
has been granted.
(i) STOCK. Authorized and issued or unissued shares of Common
Stock, par value $.0001 per share, of TASA or any security issued in exchange
or substitution therefor.
(j) TASA. Touchstone Applied Science Associates, Inc.
3. ELIGIBILITY. Only officers, key employees, and directors
who are also officers or employees of the Company or who have been
designated by the Board as eligible to receive Awards and consultants who
have been so designated by the Committee are eligible to receive Awards
under the Plan. Key employees are those employees who hold positions of
responsibility or whose performance, in the judgment of the Committee, can
have a significant effect on the growth and profitability of the Company.
4. STOCK AVAILABLE FOR AWARDS. Subject to Section 14
hereof, a total of 2,500,000 shares of Stock shall be available for
issuance pursuant to Awards granted under the Plan; PROVIDED, HOWEVER, that
the aggregate number of shares of Stock subject to options and upon which
stock appreciation rights are based pursuant to Awards hereunder shall not
exceed 200,000 shares for any Participant during any fiscal year. From
time to time, the Board and appropriate officers of TASA shall file such
documents with governmental authorities and, if the Stock is listed on the
New York Stock Exchange (or other national exchange), with such stock
exchange, as are required to make shares of Stock available for issuance
pursuant to Awards and publicly tradeable. Shares of Stock related to
Awards, or portions of Awards, that are forfeited, canceled or terminated,
expire unexercised, are surrendered in exchange for other Awards, or are
settled in cash in lieu of Stock or in such manner that all or some of the
shares of Stock covered by an Award are not and will not be issued to a
Participant, shall be restored to the total number of shares of Stock
available for issuance pursuant to Awards.
5. ADMINISTRATION.
(a) GENERAL. The Plan shall be administered by the
Committee, which shall have full and exclusive power to (i) authorize and
grant Awards to persons eligible to receive Awards under the Plan; (ii)
establish the terms, conditions and limitations of each Award or class of
Awards; (iii) construe and interpret the Plan and all Award Agreements;
(iv) grant waivers of Plan restrictions; (v) adopt and amend such rules,
procedures, regulations and guidelines for carrying out the Plan as it may
deem necessary or desirable; and (vi) take any other action necessary for
the proper operation and administration of the Plan, all of which powers
shall be exercised in a manner consistent with the objectives, and in
accordance with the terms and conditions, of the Plan. The Committee's
powers shall include, but shall not be limited to, the authority to (A)
adopt such subplans as may be necessary or appropriate (1) to provide for
the authorization and granting of Awards to promote specific goals or for
the benefit of specific classes of Participants, (2) to provide for grants
of Awards by means of formulae, standardized criteria or otherwise, or (3)
for any other purposes as are consistent with the objectives of the Plan,
and to segregate shares of Stock available for issuance under the Plan
generally as being available specifically for the purposes of one or more
subplans, and (B) subject to Section 11 hereof, adopt modifications,
amendments, rules, procedures, regulations, subplans and the like as may be
necessary or appropriate (1) to comply with provisions of the laws of other
countries in which the Company may operate in order to assure the
effectiveness of Awards granted under the Plan and to enable Participants
employed in such other countries to receive advantages and benefits under
the Plan and such laws, (2) to effect the continuation, acceleration or
modification of Awards under certain circumstances, including events which
might constitute a Change in Control (as set forth in Section 7 hereof) of
TASA, or (3) for any other purposes as are consistent with the objectives
of the Plan. All such modifications, amendments, rules, procedures,
regulations and subplans shall be deemed to be a part of the Plan as if
stated herein.
(b) COMMITTEE ACTIONS. All actions of the Committee with
respect to the Plan shall require the vote of a majority of its members or,
if there are only two members, by the vote of both. Any action of the
Committee may be taken by a written instrument signed by a majority (or
both members) of the Committee, and any action so taken shall be as
effective as if it had been taken by a vote at a meeting. All determi-
nations and acts of the Committee as to any matters concerning the Plan,
including interpretations or constructions of the Plan and any Award
Agreement, shall be conclusive and binding on all Participants and on any
parties validly claiming through any Participants.
6. DELEGATION OF AUTHORITY. The Committee may delegate to
the Chief Executive Officer of TASA and to other executive officers of the
Company certain of its administrative duties under the Plan, pursuant to
such conditions or limitations as the Committee may establish, except that
the Committee may not delegate its authority with respect to (a) the
selection of eligible persons as Participants in the Plan, (b) the granting
or timing of Awards, (c) establishing the amount, terms and conditions of
any such Award, (d) interpreting the Plan, any subplan or any Award
Agreement or (e) amending or otherwise modifying the terms or provisions of
the Plan, any subplan or any Award Agreement.
7. AWARDS. Subject to Section 4, the Committee shall
determine the types and timing of Awards to be made to each Participant and
shall set forth in the related Award Agreement the terms, conditions and
limitations applicable to each Award. Awards may include, but are not
limited to, those listed below in this Section 7. Awards may be granted
singly, in combination or in tandem, or in substitution for Awards
previously granted under the Plan. Awards may also be made in combination
or in tandem with, in substitution for, or as alternatives to, grants or
rights under any other benefit plan of the Company, including any such plan
of any entity acquired by, or merged with or into, the Company. Any such
Awards made in substitution for, or as alternatives to, grants or rights
under a benefit plan of an entity acquired by, or merged with or into, the
Company in order to give effect to the transaction shall be deemed to be
issued in accordance with the terms and conditions of the Plan. Awards
shall be effected through Award Agreements executed by the Company in such
forms as are approved by the Committee from time to time.
All or part of any Award may be subject to conditions
established by the Committee and set forth in the Award Agreement, which
conditions may include, without limitation, achievement of specific
business objectives, increases in specified indices, attainment of growth
rates and other measurements of Company performance.
The Committee may determine to make any or all of the following Awards:
(a) STOCK OPTIONS. A grant of a right to purchase a
specified number of shares of Stock at an exercise price not less
than 100% of the Fair Market Value of the Stock on the date of grant,
during a specified period, all as determined by the Committee.
Without limitation, a stock option may be in the form of (i) an
incentive stock option which, in addition to being subject to such
terms, conditions and limitations as are established by the
Committee, complies with Section 422 of the Code or (ii) a non-qualified
stock option subject to such terms, conditions and limitations
as are established by the Committee.
(b) STOCK APPRECIATION RIGHTS. A right to receive a
payment, in cash or Stock, equal to the excess of the Fair Market
Value (or other specified valuation) of a specified number of shares
of Stock on the date the stock appreciation right ("SAR") is
exercised over the Fair Market Value (or other specified valuation)
on the date of grant of the SAR, except that if an SAR is granted in
tandem with a stock option, valuations on the grant and exercise
dates shall be no less than as determined on the basis of Fair Market
Value. The eventual amount, vesting or issuance of an SAR may be
subject to future service, performance standards and such other
restrictions and conditions as may be established by the Committee.
(c) STOCK AWARDS. An Award made in Stock or denominated in
units of Stock. The eventual amount, vesting or issuance of a Stock
Award may be subject to future service, performance standards and such
other restrictions and conditions as may be established by the Committee.
Stock Awards may be based on Fair Market Value or another specified
valuation.
(d) CASH AWARDS. An Award made or denominated in cash.
The eventual amount of a cash Award may be subject to future service,
performance standards and such other restrictions and conditions as
may be established by the Committee.
Dividend equivalency rights, on a current or deferred basis,
may be extended to and be made part of any Award denominated in whole or in
part in Stock or units of Stock, subject to such terms, conditions and
restrictions as the Committee may establish.
Notwithstanding the provisions of the paragraphs of this
Section 7, Awards may be subject to acceleration of exercisability or
vesting in the event of a Change in Control of TASA (i) as set forth in
agreements between TASA and certain of its officers, directors and key
employees which provide for certain protections and benefits in the event of
a change in control (as defined in such agreements) or (ii) as may otherwise
be determined by the Committee under and in accordance with the terms
and conditions of the Plan. "Change in Control" for purposes of the Plan
shall mean a change in control of TASA under such circumstances as shall be
specified by (x) the Committee or (y) where applicable to any Awards
granted under the Plan by such agreements between TASA and a Participant as
(1) may have been entered into prior to the effective date of the Plan or
(2) shall be entered into after the effective date of the Plan with, to the
extent such an agreement is applicable to an Award, the approval of the
Committee. A "Change in Control" may, without limitation, be deemed to
have occurred if (A) any "person" or "group" of persons (as the terms
"person" and "group" are used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended, and the rules thereunder) is or becomes
the beneficial owner, directly or indirectly, of securities of TASA
representing 30% or more of the combined voting power of the then
outstanding securities of TASA, or (B) a change of more than 25% in the
composition of the Board occurs within a two-year period, unless such
change in composition was approved in advance by at least two-thirds of the
previous directors.
8. PAYMENT UNDER AWARDS. Payment by the Company pursuant to
Awards may be made in the form of cash, Stock or combinations thereof and
may be subject to such restrictions as the Committee determines, including,
in the case of Stock, restrictions on transfer and forfeiture provisions.
Stock subject to transfer restrictions or forfeiture provisions is referred
to herein as "Restricted Stock". The Committee may provide for payments to
be deferred, such future payments to be made in installments or by lump-sum
payment. The Committee may permit selected Participants to elect to defer
payments of some or all types of Awards in accordance with procedures
established by the Committee to assure that such deferrals comply with
applicable requirements of the Code.
The Committee may also establish rules and procedures for the
crediting of interest on deferred cash payments and of dividend
equivalencies on deferred payments to be made in Stock or units of Stock.
At the discretion of the Committee, a Participant may be
offered an election to substitute an Award for another Award or Awards, or
for awards made under any other benefit plan of the Company, of the same or
different type.
9. STOCK OPTION EXERCISE. The price at which shares of
Stock may be purchased upon exercise of a stock option shall be paid in
full at the time of the exercise, in cash or, if permitted by the
Committee, by (a) tendering Stock or surrendering another Award, including
Restricted Stock, or an option or other award granted under another benefit
plan of the Company, in each case valued at, or on the basis of, Fair
Market Value on the date of exercise, (b) delivery of a promissory note
issued by a Participant to the Company in a form determined by the
Committee, or (c) any other means acceptable to the Committee. The
Committee shall determine acceptable methods for tendering Stock or
surrendering other Awards or grants and may impose such conditions on the
use of Stock or other Awards or grants to exercise a stock option as it
deems appropriate. If shares of Restricted Stock are tendered as
consideration for the exercise of a stock option, the Committee may require
that the number of shares issued upon exercise of the stock option equal to
the number of shares of Restricted Stock used as consideration therefor be
subject to the same restrictions as the Restricted Stock so surrendered and
any other restrictions as may be imposed by the Committee. The Committee
may also permit Participants to exercise stock options and simultaneously
sell some or all of the shares of Stock so acquired pursuant to a brokerage
or similar arrangement which provides for the payment of the exercise price
substantially concurrently with the delivery of such shares.
10. TAX WITHHOLDING. The Company shall have the right to
deduct applicable taxes from any Award payment or shares of Stock
receivable under an Award and to withhold an appropriate number of shares
of Stock for payment of taxes required by law or to take such other action
as may be necessary in the opinion of the Company to satisfy all tax
withholding obligations. In addition, the Committee may permit Participants
to elect to (a) have the Company deduct applicable taxes resulting from any
Award payment to, or exercise of an Award by, such Participant by
withholding an appropriate number of shares of Stock for payment of tax
obligations or (b) tender to the Company for the purpose of satisfying tax
payment obligations other Stock held by the Participant. If the Company
withholds shares of Stock to satisfy tax payment obligations, the value of
such Stock in general shall be its Fair Market Value on the date of the
Award payment or the date of exercise of an Award, as the case may be. If
a Participant tenders shares of Stock pursuant to clause (b) above to
satisfy tax payment obligations, the value of such Stock shall be the Fair
Market Value on the date the Participant tenders such Stock to the Company.
11. AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION OF THE PLAN.
The Board may amend, modify, suspend or terminate the Plan, or adopt
subplans under the Plan, (a) for the purpose of meeting or addressing any
changes in any applicable tax, securities or other laws, rules or
regulations or (b) for any other purpose permitted by law. Subject to
changes in law or other legal requirements which would permit otherwise,
the Plan may not be amended without the approval of the holders of a
majority of the shares of Stock voting on such amendment to (i) materially
increase the aggregate number of shares of Stock that may be issued under
the Plan (except for any increase resulting from adjustments pursuant to
Section 14 hereof), (ii) materially increase the benefits accruing to
Participants (except that the limit on the aggregate number of shares that
may be issued to any individual participant during any fiscal year pursuant
to option, or which are used as a basis of SARs, may not be amended at all
without the approval of stockholders) or (iii) materially modify the
requirements as to eligibility for participation in the Plan. In addition,
no subplan which provides for the granting of Awards by a formula whose
provisions fix the selection of Participants, the granting and timing of
Awards and the terms and conditions of such Awards, shall be amended with
respect to such provisions more frequently than once every six months
(other than to comport with changes in the Code or the Employee Retirement
Income Security Act, as amended, or the rules thereunder). Further, the
Plan may not be amended in a manner that would alter, impair, amend,
modify, suspend or terminate any rights of a Participant or obligation of
the Company under any Awards theretofore granted, in any manner adverse to
any such affected Participant, without the consent of such affected
Participant.
12. TERMINATION OF EMPLOYMENT. Except as otherwise set forth
in an applicable Award Agreement or determined by the Committee, or as
otherwise provided in paragraph (a) or (b) of this Section 12, if a
Participant's employment or association with the Company terminates, all
unexercised, deferred and unpaid Awards (or portions of Awards) shall be
canceled immediately.
(a) RETIREMENT, RESIGNATION OR OTHER TERMINATION. If a
Participant's employment or association with the Company terminates
by reason of the Participant's retirement or resignation, or for any
other reason (other than the Participant's death or disability), the
Committee may, under circumstances in which it deems an exception
from the provisions of the first sentence of this Section 12 to be
appropriate to carry out the objectives of the Plan and to be
consistent with the best interests of the Company, permit Awards to
continue in effect and be exercisable or payable beyond the date of
such termination, up until the expiration date specified in the
applicable Award Agreement and otherwise in accordance with the terms
of the applicable Award Agreement, and may accelerate the exercisability
or vesting of any Award, in either case, in whole or in part.
(b) DEATH OR DISABILITY.
(i) In the event of a Participant's death, the
Participant's estate or beneficiaries shall have a period, not
extending beyond the expiration date specified in the applicable
Award Agreement (except as otherwise provided in such Award Agreement),
within which to exercise any outstanding Award held by the
Participant, as may be specified in the Award Agreement or as may
otherwise be determined by the Committee. All rights in respect of
any such outstanding Awards shall pass in the following order: (A) to
beneficiaries so designated in writing by the Participant; or if
none, then (B) to the legal representative of the Participant; or if
none, then (C) to the persons entitled thereto as determined by a
court of competent jurisdiction. Awards so passing shall be exercised
or paid at such times and in such manner as if the Participant
were living, except as otherwise provided in the applicable Award
Agreement or as determined by the Committee.
(ii) If a Participant ceases to be employed or
associated with the Company because the Participant is deemed by the
Company to be disabled, outstanding Awards held by the Participant
may be paid to or exercised by the Participant, if legally competent,
or by a committee or other legally designated guardian or representative
if the Participant is legally incompetent, for a period,
not extending beyond the expiration date specified in the applicable
Award Agreement (except as otherwise provided in such Award
Agreement), following the termination of his employment or
association with the Company, as may be specified in the Award
Agreement or as may otherwise be determined by the Committee.
(iii) After the death or disability of a Participant, the
Committee may at any time (A) terminate restrictions with respect to
Awards held by the Participant, (B) accelerate the vesting or
exercisability of any or all installments and rights of the
Participant in respect of Awards held by the Participant and (C) instruct
the Company to pay the total of any accelerated payments under
the Awards in a lump sum to the Participant or to the Participant's
estate, beneficiaries or representatives, notwithstanding that, in
the absence of such termination of restrictions or acceleration of
payments, any or all of the payments due under the Awards might
ultimately have become payable to other beneficiaries.
(iv) In the event of uncertainty as to the interpretation
of, or controversies concerning, paragraph (b) of this
Section 12, the Committee's determinations shall be binding and
conclusive on all Participants and any parties validly claiming
through them.
13. NONASSIGNABILITY.
(a) Except as provided for in paragraphs (a) and (b) of
Section 12 hereof and paragraph (b) of this Section 13, no Award or
any other benefit under the Plan, or any right with respect thereto,
shall be assignable or transferable, or payable to or exercisable by,
anyone other than the Participant to whom it is granted.
(b) If a Participant's employment or association with
the Company terminates in order for such Participant to assume a
position with a governmental, charitable or educational agency or
institution, and the Participant retains Awards pursuant to paragraph
(a) of Section 12 hereof, the Committee, in its discretion and to the
extent permitted by law, may authorize a third party (including,
without limitation, the trustee of a "blind" trust), acceptable to
the applicable authorities, the Participant and the Committee, to act
on behalf of the Participant with respect to such Awards.
14. ADJUSTMENTS. In the event of any change in the
outstanding Stock by reason of a stock split, stock dividend, combination
or reclassification of shares, recapitalization, merger or similar event,
the Committee shall adjust proportionally (a) the number of shares of Stock
(i) reserved under the Plan, (ii) available for options or other Awards and
available for issuance pursuant to options, or upon which SARs may be
based, for individual Participants and (iii) covered by outstanding Awards
denominated in Stock or units of Stock; (b) the prices related to outstanding
Awards; and (c) the appropriate Fair Market Value and other price
determinations for such Awards. In the event of any other change affecting
the Stock or any distribution (other than normal cash dividends) to holders
of Stock, such adjustments as may be deemed equitable by the Committee,
including adjustments to avoid fractional shares, shall be made to give
proper effect to such event. In the event of a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization
or liquidation, the Committee shall be authorized to issue or assume stock
options or other awards, whether or not in a transaction to which Section
424(a) of the Code applies, by means of substitution of new stock options
or Awards for previously issued options or awards or an assumption of
previously issued stock options or awards.
15. NOTICE. Any written notice to TASA required by any of
the provisions of the Plan shall be addressed to the Committee, c/o the
Secretary of TASA, and shall become effective when received by the
Secretary.
16. UNFUNDED PLAN. Insofar as the Plan provides for Awards
of cash or Stock, the Plan shall be unfunded unless and until the Board or
the Committee otherwise determines. Although bookkeeping accounts may be
established with respect to Participants who are entitled to cash, Stock or
rights thereto under the Plan, any such accounts shall be used merely as a
bookkeeping convenience. Unless the Board otherwise determines, (a) the
Company shall not be required to segregate any assets that may at any time
be represented by cash, Stock or rights thereto, nor shall the Plan be
construed as providing for such segregation, nor shall the Company, the
Board or the Committee be deemed to be a trustee of any cash, Stock or
rights thereto to be granted under the Plan; (b) any liability of the
Company to any Participant with respect to a grant of cash, Stock or rights
thereto under the Plan shall be based solely upon any contractual
obligations that may be created by the Plan and an Award Agreement; (c) no
such obligation of the Company shall be deemed to be secured by any pledge
or other encumbrance on any property of the Company; and (d) neither the
Company, the Board nor the Committee shall be required to give any security
or bond for the performance of any obligation that may be created by or
pursuant to the Plan.
17. PAYMENTS TO TRUST. Notwithstanding the provisions of
Section 16 hereof, the Board or the Committee may cause to be established
one or more trust agreements pursuant to which the Committee may make
payments of cash, or deposit shares of Stock, due or to become due under
the Plan to Participants.
18. NO RIGHT TO EMPLOYMENT. Neither the adoption of the Plan
nor the granting of any Award shall confer on any Participant any right to
continued employment or association with the Company or in any way
interfere with the Company's right to terminate the employment or
association of any Participant at any time, with or without cause, and
without liability therefor. Awards, payments and other benefits received
by a Participant under the Plan shall not be deemed a part of the
Participant's regular, recurring compensation for any purpose, including,
without limitation, for the purposes of any termination indemnity or
severance pay law of any jurisdiction.
19. GOVERNING LAW. The Plan and all determinations made and
actions taken pursuant hereto, to the extent not otherwise governed by the
Code or the securities laws of the United States, shall be governed by and
construed under the laws of the State of Delaware.
20. EFFECTIVE AND TERMINATION DATES. The Plan, and any
amendment hereof requiring stockholder approval, shall become effective as
of the date of its approval by the stockholders of TASA by the affirmative
vote of a majority of the votes cast at a stockholders' meeting at which
the approval of the Plan (or any such amendment) is considered, provided
that the total vote cast represents over 50% of all shares entitled to vote
on the proposal. The Plan shall terminate ten years after its initial
effective date, subject to earlier termination by the Board pursuant to
Section 11 hereof, except as to Awards then outstanding.
Exhibit 10.2
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
DIRECTORS STOCK OPTION PLAN
1. PURPOSE. The purpose of the Directors Stock Option Plan
(the "Plan") is to aid the Company in attracting, retaining and motivating
directors by providing them with incentives for making significant
contributions to the growth and profitability of the Company. The Plan is
designed to accomplish this goal by the granting of stock options, thereby
providing Participants with a proprietary interest in the growth,
profitability and success of the Company.
2. DEFINITIONS.
(a) BOARD. The Board of Directors of the Company.
(b) CODE. The Internal Revenue Code of 1986, as amended
from time to time.
(c) COMMITTEE. The members of the Board who are not
eligible to participate in the Plan, or a committee composed of such
members (consisting of not less than two persons) as may be designated
from time to time by all such members, who shall administer the Plan.
(d) COMPANY. Touchstone Applied Science Associates, Inc.
(e) FAIR MARKET VALUE. If the Stock is listed on the New
York Stock Exchange (or other national exchange), the average of the
high and low sale prices as reported on the New York Stock Exchange (or
such other exchange) or, if the Stock is not listed on a national exchange,
the average of the high and low sale prices of the Stock in the
over-the-counter market, as reported by the National Association of
Securities Dealers through its Automated Quotation System or otherwise,
in either case for the date in question, PROVIDED that if no
transactions in the Stock are reported for that date, the average of the
high and low sale prices as so reported for the preceding day on which
transactions in the Stock were effected.
(f) NON-EMPLOYEE DIRECTORS. Directors of the Company who
are not officers or employees of the Company or any direct or indirect
subsidiary of the Company.
(g) OPTION. A non-qualified stock option to purchase
shares of Stock granted pursuant to the terms and conditions of the Plan.
(h) OPTION AGREEMENT. An agreement between the Company
and a Participant setting forth the terms, conditions and limitations
applicable to an Option.
(i) PARTICIPANT. A director of the Company to whom an
Option has been granted.
(j) STOCK. Authorized and issued or unissued shares of
Common Stock of the Company or any security issued in exchange or
substitution therefor.
(k) STOCK INCENTIVE PLAN COMMITTEE. The committee
designated to administer the Amended and Restated 1991 Stock Option
Incentive Plan.
3. ELIGIBILITY. Only the following persons are eligible to
participate in the Plan: (a) directors who are members of the Stock Incentive
Plan Committee and (b) Non-Employee Directors who (i) have not been designated
by the Board within 30 days after becoming a director as being eligible to
receive Awards under the Amended and Restated 1991 Stock Option Incentive
Plan, or (ii) having been eligible to participate in the Amended and Restated
1991 Stock Option Incentive Plan, have ceased to be so eligible as a result of
a determination by the Board. The eligibility of any such director to
participate in the Plan shall cease if such director is subsequently
designated as being eligible to receive Awards (as defined in the Amended and
Restated 1991 Stock Option Incentive Plan) under the Amended and Restated 1991
Stock Option Incentive Plan.
4. STOCK AVAILABLE FOR OPTIONS. Subject to Section 8 hereof, a
total of 100,000 shares of Stock shall be available for issuance pursuant to
options granted under the Plan. From time to time, the Board and appropriate
officers of the Company shall file such documents with governmental
authorities and, if the Stock is listed on the New York Stock Exchange (or
other national exchange), with such stock exchange, as are required to make
shares of Stock available for issuance pursuant to Options and publicly
tradeable. Shares of Stock related to Options, or portions of Options, that
are forfeited, canceled or terminated, expire unexercised, are surrendered
in exchange for other Options, or in such manner that all or some of the
shares covered by an Option are not and will not be issued to a Participant,
shall be restored to the total number of shares of Stock available for
issuance pursuant to Options.
5. ADMINISTRATION. The Plan shall be administered by the
Committee, which shall have full and exclusive power to (a) construe and
interpret the Plan and all Option Agreements, (b) adopt and amend such rules,
procedures, regulations and guidelines for carrying out the Plan as it may
deem necessary or desirable and (c) take any other action necessary for the
proper operation and administration of the Plan, all of which powers shall be
exercised in a manner consistent with the objectives, and in accordance with
the terms and conditions, of the Plan; PROVIDED, HOWEVER, that no discretion
regarding the grant, amount, timing, terms and conditions of Options granted
under the Plan (which are established by the Plan), shall be afforded to the
Committee. All actions of the Committee with respect to the Plan shall
require the vote of a majority of its members or, if there are only two
members, by the vote of both. Any action of the Committee may be taken by a
written instrument signed by a majority (or both) of such members and any
action so taken shall be as effective as if it had been taken by a vote of
such members at a meeting. All determinations and acts of the Committee as to
any matters concerning the Plan, including interpretations or constructions of
the Plan and any Award Agreement, shall be conclusive and binding on all
Participants and on any parties validly claiming through any Participants.
6. GRANTING OF OPTIONS.
(a) On the date the Plan becomes effective, each director
who at such date is eligible to participate in the Plan shall
automatically be granted an Option to purchase 5,000 shares of Stock.
(b) On the date of the Annual Meeting of Stockholders to
be held in March 1996, and on the date of each succeeding Annual Meeting
of Stockholders, each director of the Company who remains a director and
eligible to participate in the Plan shall automatically be granted an
Option to purchase 2,500 shares of Stock.
(c) On the date that any Non-Employee Director (other than
a director who received a grant pursuant to subparagraph (a) of this
Section 6) first becomes eligible to participate in the Plan, such
Non-Employee Director shall automatically be granted an Option to purchase
5,000 shares of Stock.
(d) Commencing on the date of the Annual Meeting of
Stockholders of the Company (i) on or next preceding the second anniversary
of the date on which a Participant becomes eligible to participate
in the Plan, in the case of a Participant who is granted an Option
pursuant to subparagraph (c) of this Section 6, or (ii) on or next
preceding the first anniversary of the date on which a Non-Employee
Director becomes eligible to participate in the Plan, in the case of a
Non-Employee Director who is not granted an Option pursuant to
subparagraph (c) of this Section 6, and, in each case, on the date of
each succeeding Annual Meeting of Stockholders, any such Participant, if
remaining a director and eligible to participate in the Plan, shall
automatically be granted an Option to purchase 2,500 shares of Stock.
(e) Notwithstanding the foregoing, no Option shall be
granted to any person whose service as a director ends at the Annual
Meeting of Stockholders on the date of which the Option would otherwise
be granted.
(f) The number of shares of Stock for which Options shall
be granted under this Section 6 is subject to adjustment as set forth in
Section 7(l) hereof.
7. OPTIONS. Each Option granted pursuant to, or otherwise to
be governed by the terms and conditions of, the Plan shall have the following
terms and conditions:
(a) Each Option shall have an exercise price equal to the Fair
Market Value of a share of Stock on the date of grant.
(b) The price at which shares of Stock may be purchased upon
exercise of an Option shall be paid in full at the time of exercise, in
cash or by (i) tendering Stock or surrendering another stock option,
valued at, or on the basis of, the Fair Market Value of the Stock on the
date of exercise, (ii) delivery of a promissory note issued by a
Participant to the Company in a form determined by the Committee, or
(iii) other means acceptable to the Committee. The Committee shall
determine acceptable methods for tendering Stock or surrendering other
stock options. Participants may also exercise Options and simultaneously
sell some or all of the shares of Stock so acquired pursuant to a
brokerage or similar arrangement which provides for the payment of the
Option exercise price substantially concurrently with the delivery of
such shares.
(c) Each Option shall be exercisable for a period of ten years
from the date of grant.
(d) Each Option shall be exercisable after the first anniversary
of the date of grant.
(e) The Company shall have the right to deduct applicable taxes
resulting from any exercise of or other payment on an Option and to
withhold an appropriate number of shares of Stock for payment of tax
withholding obligations, if any, or to take such other action as may be
necessary in the opinion of the Company to satisfy any tax withholding
obligations. In addition, Participants may elect to (i) have the
Company deduct applicable taxes by withholding an appropriate number of
shares of Stock for payment of taxes required by law or (ii) tender to
the Company for the purpose of satisfying tax payment obligations other
Stock held by the Participant. If the Company withholds shares of Stock
to satisfy tax payment obligations, the value of such Stock shall be its
Fair Market Value on the date the Option is exercised. If a Participant
tenders shares of Stock pursuant to clause (ii) above to satisfy tax
payment obligations, the value of such Stock shall be the Fair Market
Value on the date the Participant tenders such Stock to the Company.
(f) Except as otherwise set forth in the applicable Option
Agreement or as otherwise provided in paragraphs (g), (h), (i) and (j)
of this Section 7, if a Participant's association with the Company
terminates, any unexercised Option (or portion thereof) shall, to the
extent it is exercisable pursuant to the terms of such Option on the
date of such termination, remain exercisable for a period of three
months following the date of termination or until the stated expiration
date of the Option, if earlier.
(g) If a Participant dies, any outstanding Option then held by
the Participant shall become fully exercisable as of the date of the
Participant's death. Any such Option shall be exercisable by the
Participant's estate or beneficiaries following the Participant's death
through the expiration date specified in the applicable Option Agreement
and in such manner as if the Participant were living. Rights with
respect to any such Option shall pass in the following order: (i) to
beneficiaries so designated in writing by the Participant; or if none,
then (ii) to the Participant's legal representatives; or if none, then
(iii) to the persons entitled thereto as determined by a court of compe-
tent jurisdiction.
(h) If a Participant ceases to be associated with the Company
because the Participant is deemed by the Company to be disabled, any
Option held by the Participant may be exercised by the Participant, if
legally competent, or by a committee or other legally designated guardian
or representative if the Participant is legally incompetent,
through the expiration date specified in the applicable Option
Agreement. Any such Option shall become fully exercisable as of the
date of the Participant's termination of his or her association with the
Company by virtue of such disability.
(i) If a Participant's association with the Company terminates
in order that such Participant may assume a position with a
governmental, charitable or educational agency or institution, such
Participant's Options, to the extent permitted by law, shall continue in
effect and be exercisable beyond the date of termination, up until the
expiration date specified in the applicable Option Agreement. Any such
Option shall become fully exercisable as of the date of the
Participant's termination. To the extent permitted by law, the
Participant may authorize a third party (including, without limitation,
the trustee of a "blind" trust), acceptable to the applicable authorities,
the Participant and the Committee, to act on behalf of the Participant
with respect to such Options.
(j) If a Participant's association with the Company terminates
by reason of the Participant's retirement at 62 years of age or
thereafter, any outstanding Option then held by the Participant shall
become fully exercisable as of the date of the Participant's retirement.
Any such Option shall be exercisable through the expiration date
specified in the applicable Option Agreement.
(k) No Option shall be assignable or transferable to, or
exercisable by, anyone other than the Participant to whom it is granted,
except as provided in subparagraphs (g), (h), (i) and (j) of this
Section 7.
(l) In the event of any change in the number of shares of
outstanding Stock by reason of a stock split, stock dividend, combination
or reclassification of shares, recapitalization, merger, consolidation
or similar event, the Committee shall adjust proportionally the number
of shares of Stock covered by each outstanding Option and the exercise
price thereof. In the event of any other change affecting the Stock
or any distribution (other than normal cash dividends) to holders of
Stock, such adjustments as may be deemed equitable by the Committee,
including adjustments to avoid fractional shares, shall be made to give
proper effect to such event.
(m) Notwithstanding the provisions of paragraph (d) of this
Section 7, Options shall be subject to acceleration of exercisability in
the event of a Change in Control of the Company, as provided in
agreements between the Company and certain of its officers and directors
which provide for certain protections and benefits in the event of a
Change in Control (as defined in such agreements), or as shall be
provided in applicable Option Agreements. "Change in Control" for
purposes of the Plan and any Options shall mean a change in control of
the Company under such circumstances as shall be specified (i) where
applicable to any Options by any such agreement between the Company and
a Participant as (A) may have been entered into prior to the effective
date of the Plan or (B) shall be entered into after the effective date
of the Plan upon such terms and conditions, to the extent applicable to
any Options, as are substantially the same as those contained in earlier
prior agreements with certain officers and directors, or (ii) in the
applicable Option Agreement. For the purposes of the Plan or any
Option, a "Change in Control" may, without limitation, be deemed to have
occurred if (x) any "person" or "group" of persons (as the terms
"person" and "group" are used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended, and the rules thereunder)
is or becomes the beneficial owner, directly or indirectly, of securities
of the Company representing 30% or more of the combined voting power of
the then outstanding securities of the Company or (y) a change of more
than 25% in the composition of the Board occurs within a two-year period,
unless such change in the Board composition was approved in advance by
at least two-thirds of the previous directors.
8. ADJUSTMENTS. In the event of any change in the outstanding
Stock by reason of a stock split, stock dividend, combination or
reclassification of shares, recapitalization, merger, consolidation or similar
event, the Committee shall adjust proportionally the number of shares of Stock
(a) reserved for issuance pursuant to the Plan and (b) available for Options.
9. AMENDMENT OR TERMINATION. The Committee may amend, modify,
suspend or terminate the Plan for the purpose of (a) meeting or addressing any
changes in any applicable tax, securities or other laws, rules or regulations
or (b) for any other purpose permitted by law; PROVIDED, HOWEVER, that the
provisions of the Plan fixing the selection of Participants, the granting and
timing of Options and the terms and conditions of such Options shall not be
amended (other than to comport with changes in the Code or the Employee
Retirement Income Security Act, as amended, or the rules thereunder), more
than once every six months. Further, subject to changes in law or other legal
requirements which would permit otherwise, the Plan may not be amended without
stockholder approval to (i) materially increase the aggregate number of shares
of Stock that may be issued under the Plan (except for any increase resulting
from adjustments pursuant to Section 7(l) or 8 hereof) or (ii) materially
increase the benefits accruing to Participants or (iii) materially modify the
requirements as to eligibility for participation in the Plan. Further, the
Plan may not be amended in a manner that would alter, impair, amend, modify,
suspend or terminate any rights of a Participant or obligation of the Company
under any Options theretofore granted, in any manner adverse to such affected
Participant, without the consent of such affected Participant.
10. NOTICE. Any written notice to the Company required by any
of the provisions of the Plan shall be addressed to the Committee, c/o the
Secretary of the Company, and shall become effective when received by the
Secretary.
11. GOVERNING LAW. The Plan and all determinations made and
actions taken pursuant hereto, to the extent not otherwise governed by the
Code or the securities laws of the United States, shall be governed by and
construed under the laws of the State of Delaware.
12. EFFECTIVE AND TERMINATION DATES. The Plan, and any
amendment hereof requiring stockholder approval, shall become effective as of
the date of its approval by the stockholders of the Company by the affirmative
vote of a majority of the votes cast at a stockholders' meeting at which the
approval of the Plan (or any such amendment) is considered, PROVIDED that the
total vote cast represents over 50% of all shares entitled to vote on the
proposal. The Plan shall terminate ten years after its initial effective
date, subject to earlier termination by the Board pursuant to Section 9
hereof, except as to Options then outstanding.
Exhibit 10.3
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of March, 1996 by and between
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC., a Delaware corporation with its
principal place of business at Field Lane, Brewster, New York ("TASA") and
ANDREW L. SIMON, an individual residing at 1905 Hunterbrook Road, Yorktown
Heights, New York 10598 ("Executive").
W I T N E S S E T H:
- - - - - - - - - --
WHEREAS, the Corporation recognizes that the current business
environment makes it difficult to attract and retain highly qualified key
employees unless a certain degree of security can be offered to such
individuals against organizational and personnel changes which frequently
follow Changes of Control (as defined below) of a corporation; and
WHEREAS, even rumors of acquisitions or mergers may cause key employees
to consider major career changes in an effort to assure financial security for
themselves and their families; and
WHEREAS, the Corporation desires to assure fair treatment of its key
employees in the event of a Change of Control and to allow them to make
critical career decisions without undue time pressure and financial
uncertainty, thereby increasing their willingness to remain with the
Corporation notwithstanding the outcome of a possible Change of Control
transaction; and
WHEREAS, the Corporation recognizes that its key employees will be
involved in evaluating or negotiating any offers, proposals or other
transaction which could result in Changes of Control of the Corporation and
believes that it is in the best interest of the Corporation and its
stockholders for such key employees to be in a position, free from personal
financial and employment considerations, to be able to assess objectively and
pursue aggressively the interests of the Corporation's stockholders in making
these valuations and carrying on such negotiations; and
WHEREAS, The Board of Directors (the "Board") of the Corporation
believes it is essential to provide Executive with compensation arrangements
upon a Change of Control which provide Executive with individual financial
security and which are competitive with those of other corporations, and in
order to accomplish these objectives, the Board has caused the Corporation to
enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements set forth herein, the parties hereto, intending to be legally
bound, agree as follows:
1. EMPLOYMENT AND TERM. Subject to the terms and conditions of this
Agreement, the Corporation agrees to employ Executive, and Executive hereby
accepts employment by the Corporation, for a term beginning as of the date
hereof (the "Effective Date") and ending on the third anniversary of the
Effective Date; PROVIDED, HOWEVER, that commencing on the date one year after
the Effective Date, and on each annual anniversary of such date (such date and
each annual anniversary thereof is hereinafter referred to as the "Renewal
Date"), the term of this Agreement shall be automatically extended so as to
terminate three years from such Renewal Date, unless at least 60 days prior to
the Renewal Date the Corporation shall give written notice that the term of
the Agreement shall not be so extended; and PROVIDED, FURTHER, that after a
Change of Control of the Corporation during the term of this Agreement, this
Agreement shall remain in effect for the period commencing on the date of
Change of Control and ending on the later of (x) the third anniversary of such
date and (y) the date all of the obligations of the parties hereunder are
satisfied (the "Employment Term"). Anything to the contrary in this Agreement
notwithstanding, if Executive's employment with the Corporation is terminated
prior to the date on which a Change of Control occurs, and it is reasonably
demonstrated that such termination (i) was at the request of a third party who
has taken steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or in anticipation of a Change of Control,
then for all purposes of this Agreement, such termination shall be deemed to
have occurred on the date of Change of Control.
2. CERTAIN DEFINITIONS.
(a) A reference herein to a section of the Internal Revenue Code
of 1986, as amended (the "Code") or a subdivision thereof shall be construed
to incorporate reference to any section or subdivision of the Code enacted as
a successor thereto, any applicable proposed, temporary or final regulations
promulgated pursuant to such sections and any applicable interpretation
thereof by the Internal Revenue Service.
(b) A reference herein to a section of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or any rule or regulation
promulgated thereunder shall be construed to incorporate reference to any
section of the Exchange Act or any rule or regulation enacted or promulgated
as a successor thereto.
(c) "Subsidiary(ies)" means a company 50% or more of the voting
securities of which are owned by the corporation.
(d) "Executive Benefit Plan" means any written plan providing
benefits for employees of the Corporation or any Subsidiary.
3. CHANGE OF CONTROL. For the purposes of this Agreement, a "Change
of Control" shall be deemed to have occurred upon the happening of any of the
following:
(a) The acquisition (other than from the Corporation) by any
person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2)
of the Exchange Act, (excluding, for this purpose, the Corporation or its
Subsidiaries, or any Executive Benefit Plan which acquires beneficial
ownership of voting securities of the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20%
or more of either the then outstanding shares of the Corporation's common
stock or the combined voting power of the Corporation's then outstanding
voting securities entitled to vote generally in the election of directors.
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board, provided that any person who first becomes a director subsequent
to the date hereof whose recommendation, election or nomination for election
by the Corporation's stockholders was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is
in connection with an actual or threatened election contest relating to the
election of the directors of the Corporation as described in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) shall be, for purposes of
this Agreement, considered as though such person were a member of the
Incumbent Board; or
(c) Approval by the stockholders of the Corporation of a
reorganization, share exchange, merger or consolidation with respect to which,
in any such case, the persons who were the stockholders of the Corporation
immediately prior to such reorganization, share exchange, merger or
consolidation do not, immediately thereafter, own more than 50% of the
combined voting power entitled to vote in the election of directors of the
reorganized, merged or consolidated company; or
(d) Liquidation or dissolution of the Corporation or a sale of
all or substantially all of the assets of the Corporation.
4. DUTIES. During the Employment Term, Executive shall serve the
Corporation as its President and Chief Executive Officer, or in such other
capacity or capacities as may be determined by the Board; provided, however,
that his authority, duties and responsibilities shall be at least commensurate
in all material respects with his present offices, status and titles.
Executive shall perform such executive, administrative, development,
production, marketing and other services and duties for the Corporation, or
any Subsidiary, at the present location of the Corporation or any office or
location less than 25 miles from such location. During the Employment Term,
and excluding any periods of vacation and sick leave, Executive agrees to
devote reasonable attention and time during normal business hours to the
business and affairs of the Corporation and, to the extent necessary, to
discharge the responsibilities assigned to Executive hereunder, to use
Executive's reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Term it shall not be a violation of
this Agreement for Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions, and (C) manage personal investments, so
long as Executive's duties in connection therewith do not unreasonably
interfere with Executive's duties under this Agreement. Activities of
Executive consistent with this Section 4 shall not permit the Corporation to
terminate Executive's employment for "Cause", as defined below.
5. COMPENSATION.
(a) Base Salary. During the Employment Term, the Corporation
shall pay to Executive, in equal installments no less frequently than twice
per month (or at such other intervals as are in effect from time to time for
other executive officers of the Corporation), an annual base salary of not
less than $109,568.00 (the "Base Salary"). Base Salary to be paid by the
Corporation to Executive shall be reviewed by the Board of Directors at least
once annually prior to each anniversary of the Effective Date for the purposes
of determining whether any increases to such salary would be appropriate. Any
increase in Base Salary shall not serve to limit or reduce any other
obligation to Executive under this Agreement. Base Salary shall not be
reduced after any such increase.
(b) Bonus. In addition to Base Salary, in the event of a Change
of Control, Executive shall be awarded, for each fiscal year ending during the
Employment Term, an annual bonus ("Annual Bonus") in cash at least equal to
the average annual bonus payable to Executive from the Corporation and its
Subsidiaries in respect of two of the last three fiscal years immediately
preceding the date of any Change of Control in which the bonuses paid were
higher.
(c) Incentive, Savings, Welfare Benefit Plans and Retirement
Plans. In addition to Base Salary and Bonus, Executive and/or Executive's
family, as the case may be, shall be eligible to participate in or benefit
from, such medical insurance, life insurance, disability insurance, pension,
bonus, profit-sharing, stock option, stock purchase and any other fringe
benefit plans, practices, programs or policies provided by the Corporation and
its Subsidiaries to executive employees in accordance with the terms of such
plans, practices, programs and policies, in each case providing benefits which
are the economic equivalent to those in effect with respect to other key
employees of the Corporation and its Subsidiaries, including the period
subsequent to a Change of Control.
(d) Key Man Insurance. Executive agrees that the Corporation
may obtain key man life insurance with respect to Executive, and in connection
therewith, agrees to submit to all reasonable and customary examinations by
the provider of such life insurance.
(e) Expenses. Executive shall be entitled to reimbursement for
all normal and reasonable travel, entertainment and other expenses necessarily
incurred by him in the performance of his duties hereunder in accordance with
the most favorable policies, practices and procedures of the Corporation and
its Subsidiaries in effect with respect to other key employees of the
Corporation and its Subsidiaries, including the period subsequent to a Change
of Control.
(f) Fringe Benefits. During the Employment Term, Executive
shall be entitled to fringe benefits, including but not limited to the use of
an automobile and payment of related expenses, in accordance with the most
favorable plans, practices, policies and programs of the Corporation and its
Subsidiaries in effect with respect to other key employees of the Corporation
and its Subsidiaries, including the period subsequent to a Change of Control.
(g) Disability. Except as hereinafter provided, the Corporation
shall pay Executive for any period, up to a maximum of six months, during the
Employment Term in which he is unable fully to perform his duties because of
physical or mental disability or incapacity, an amount equal to the Base
Salary due him for such period pursuant to Section 5(a), less the aggregate
amount of all income disability benefits which for such period he may receive
by reason of (i) any group health insurance plan or disability insurance plan,
which is intended to function as a salary replacement plan, (ii) any
applicable compulsory state disability law, (iii) the Federal Social Security
Act, (iv) any applicable workmen's compensation law or similar law and (v) any
plan towards which the Corporation or any subsidiary or affiliate of the
Corporation (including any predecessor of any thereof) has contributed or for
which it has made payroll deductions, such as group accident or health
policies, other than those which reimburse for actual medical expenses.
(h) Vacation. During the Employment Term, Executive shall be
entitled to paid vacation in accordance with the most favorable plans,
practices, policies and programs of the Corporation and its Subsidiaries as in
effect with respect to other key employees of the Corporation and its
Subsidiaries, including any period after a Change of Control.
6. STOCK OPTIONS.
(a) As part of the consideration to be paid to Executive for his
services hereunder, Executive shall be eligible to participate in any stock
incentive plan adopted by the Corporation (the "Plan") for which an executive
level employee may participate.
(b) The Corporation hereby agrees that it shall cause to be
filed with the Securities and Exchange Commission a registration statement on
Form S-8 (or equivalent form as may be in effect at such time) with respect to
all options theretofore granted to Executive under the Plan. The Corporation
covenants that it will keep such registration statement current until
Executive is no longer employed by the Corporation; PROVIDED, HOWEVER, that if
Executive's employment is terminated hereunder other than pursuant to Sections
7(a), 7(b) or 7(d), then Executive shall have until 90 days following the
termination of his employment to exercise any such vested options which he
owned at the time of such termination, and the Corporation shall maintain the
effectiveness of such registration statement for such period. The Corporation
also hereby agrees that, for so long as either the Corporation does not have
an effective registration statement on Form S-8 or the Corporation has an
effective registration statement on Form S-8 but Executive is restricted in
his ability to resell shares acquired pursuant to the exercise of options
because of the provisions of General Instruction C.2(b) to Form S-8, Executive
shall have "piggyback" registration rights with respect to the options granted
to Executive under the Plan and the shares underlying such options.
7. RIGHTS OF TERMINATION.
(a) Cause. During the Employment Term, the Corporation shall
have the right, at any time effective upon notice to Executive, to terminate
Executive's employment for "Cause" (as hereinafter defined). For purposes of
this Agreement, "Cause" shall mean (i) an act or acts of personal dishonesty
engaged in by Executive and intended to result in substantial personal
enrichment of Executive at the expense of the Corporation, and (ii) repeated
violations by Executive of Executive's obligations under Section 4 of this
Agreement which are demonstrably willful and deliberate on Executive's part
and which are not remedied in a reasonable period of time after receipt of
written notice from the Corporation.
(b) Disability; Death. In the event that Executive, due to
physical or mental disability or incapacity, is unable to substantially
perform his duties hereunder for a period of six or more successive months,
the Corporation or Executive shall have the right to terminate this Agreement
and Executive's employment hereunder upon 30 days' prior written notice and
termination shall be effective on the 30th day after receipt of such notice by
the Executive (the "Disability effective date"). In the event that Executive
is able to and recommences rendering services and performing his duties
hereunder within such 30-day notice period, Executive shall be reinstated and
such notice shall be without further force or effect. If Executive dies
during the Term, this Agreement shall terminate immediately upon his death.
(c) Good Reason. Notwithstanding anything to the contrary
contained herein, after a Change of Control and continuing during the
Employment Term, Executive's employment may be terminated by Executive for
Good Reason and such termination shall be deemed a constructive discharge of
Executive by the Corporation. For purposes of this Agreement, "Good Reason"
shall mean:
(i) the assignment to Executive of any duties inconsistent
in any respect with Executive's position (including status, offices, titles
and reporting requirements, authority duties or responsibilities as
contemplated by Section 4 of this Agreement, or any other action by the
Corporation which results in a diminution in such position, authority, duties
or responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the
Corporation promptly after receipt of notice thereof given by Executive;
(ii) any failure by the Corporation to comply with any of
the provisions of Sections 5 and 6 of this Agreement, other than an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Corporation promptly after receipt of notice thereof given by
Executive;
(iii) the Corporation's requiring Executive to be based at
any office or location other than that described in Section 4 hereof, except
for travel reasonably required in the performance of Executive's
responsibilities;
(iv) any purported termination by the Corporation of
Executive's employment otherwise than as expressly permitted by this
Agreement; or
(v) any failure by the company to comply with and satisfy
Section 13 of this Agreement.
For purposes of this Section 7(c), any good faith determination of "Good
Reason" made by Executive shall be conclusive. Anything in this Agreement to
the contrary notwithstanding, a termination by Executive for any reason during
the 30-day period immediately following the first anniversary of a Change in
Control shall be deemed to be a termination for Good Reason for all purposes
of this Agreement.
(d) Voluntary Termination. Executive may terminate this
Agreement on six months written notice to the Corporation at any time.
(e) Notice of Termination. Any termination of Executive's
employment by the Corporation for Cause, or by Executive for Good Reason or by
Executive for Voluntary Termination, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 18 of
this Agreement. Such Notice of Termination shall mean a written notice which
(i) indicates the specific termination provision in this Agreement relied on,
(ii) sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination, and (iii) if the Date of Termination (as
defined below) is other than the date of receipt of such notice, specifies the
termination date (which date, except for Voluntary Termination, shall not be
more than 15 days after the giving of such notice). The failure by Executive
to set forth in the Notice of Termination any fact or circumstances which
contributes to a showing of Good Reason shall not waive any right of Executive
hereunder or preclude Executive from asserting such fact or circumstance in
enforcing his rights hereunder.
(f) Date of Termination. "Date of Termination" means the date
of receipt of the Notice of Termination or any later date specified therein,
as the case may be; provided, however, that (i) if the Executive's employment
is terminated by the Corporation other than for Cause or Disability or by
reason of death, the Date of Termination shall be the date on which the
Corporation notifies Executive of such termination and (ii) if Executive's
employment is terminated by reason of death or Disability, or voluntary
withdrawal, the Date of Termination shall be the date of death or Executive or
the Disability effective date, or the last date of employment, as the case may
be.
8. EFFECTS OF TERMINATION.
(a) Cause or Voluntary Termination. In the event that
Executive's employment is terminated pursuant to Section 7(a) hereof for Cause
or 7(d) for Voluntary Termination, Executive's employment hereunder shall
terminate without further obligations to Executive, other than those
obligations accrued or earned and vested (if applicable) by Executive through
the Date of Termination, including for this purpose all "Accrued Obligations",
defined as those obligations accrued or earned and vested (if applicable) by
Executive as of the Date of Termination, including, for this purpose (i)
Executive's full Base Salary accrued but unpaid as of the Date of Termination
(ii) the product of the Annual Bonus paid to Executive for the last full
fiscal year and a fraction, the numerator of which is the number of days in
the current fiscal year through the Date of Termination, and the denominator
of which is 365, (iii) any compensation previously deferred by Executive
(together with any accrued earning thereon) and not yet paid by the
Corporation and any accrued vacation pay not yet paid by the Company and (iv)
all amounts payable to the estate or designated beneficiaries of Executive
under any pension, savings, life insurance or other plans, practices, policies
and programs of the Corporation, and/or all other amounts payable pursuant to
Sections 5(c), (e), (f), (g) and (h) hereof. In addition:
(i) the Corporation shall pay to Executive all Accrued
Obligations such that the Accrued Obligations specified in clauses (i), (ii)
and (iii) of Section 8(a) hereof, shall be paid to Executive in a lump sum in
cash within 30 days of the Date of Termination, and the other Accrued
Obligations shall be paid in accordance with Executive's specific elections
pursuant to, and otherwise in accordance with the terms of, any plan,
practice, policy or program providing benefits forming a part of the Accrued
Obligations;
(ii) all then non-exercisable options shall immediately and
automatically terminate, and
(iii) any registration rights theretofore granted which
have not been invoked with respect to shares of Common Stock of the
Corporation either acquired by Executive pursuant to the exercise of stock
options or underlying vested options shall immediately and automatically
terminate.
(b) Death. In the event that Executive's employment is
terminated pursuant to Section 7(b) hereof as a result of Death, Executive's
employment hereunder shall cease in accordance with Section 7(b) without
further obligations under this Agreement to Executive's representatives, other
than those obligations accrued or earned and vested (if applicable) by
Executive as of the Date of Termination, including, for this purpose all
Accrued Obligations. The Corporation shall pay to Executive or his legal
representatives, as the case may be, all Accrued Obligations specified in
clauses (i), (ii) and (iii) in a lump sum within 30 days of the Date of
Termination, and the other Accrued Obligations shall be paid in accordance
with the Executive's specific elections pursuant to, and otherwise in
accordance with the terms of, any such plan, practice, policy or program.
Anything in this Agreement to the contrary notwithstanding, Executive's family
shall be entitled to receive benefits at least equal to the most favorable
plans, practices, policies and programs of the Corporation and its
Subsidiaries in effect with respect to other key employees of the Corporation
and its Subsidiaries, including any period after a Change of Control.
(c) Disability. In the event that Executive's employment is
terminated pursuant to Section 7(b) hereof as a result of Disability,
Executive's employment hereunder shall cease without further obligations under
this Agreement to Executive, other than those obligations accrued or earned
and vested (if applicable) by Executive as of the Date of Termination,
including, for this purpose all Accrued Obligations. Accrued Obligations
specified in clauses (i), (ii) and (iii) of Section 8(a) shall be paid to
Executive in a lump sum within 30 days of the Date of Termination, and the
other Accrued Obligations shall be paid in accordance with the Executive's
specific elections pursuant to, and otherwise in accordance with the terms of,
any such plan, practice, policy or program. Anything in this Agreement to the
contrary notwithstanding, Executive shall be entitled after the Disability
effective date to receive benefits at least equal to the most favorable plans,
practices, policies and programs of the Corporation and its Subsidiaries in
effect with respect to other key employees of the Corporation and its
Subsidiaries, including any period after a Change of Control.
(d) Good Reason or Other than Cause or Disability by the
Corporation or Other than Death or Other than Voluntary Termination. In the
event that Executive's employment hereunder during the Term is terminated
after a Change of Control (x) for Good Reason by Executive, or (y) for other
than Cause or other than Disability by the Corporation or other than Death or
other than Voluntary Termination, the Corporation shall pay to Executive in a
lump sum in cash within 30 days after the Date of Termination (or in
accordance with the Executive's specific elections pursuant to, and otherwise
in accordance with the terms of, any such plan, practice, policy or program
providing benefits forming a part of the Accrued Obligations specified in
clause (iv) of Section 8(a) hereof), the aggregate of the following amounts
and shall provide the following benefits:
(i) the Accrued Obligations in clauses (i), (ii), (iii)
and (iv) of Section 8(a)
(ii) a lump sum severance payment in an amount equal to
450% of the sum of (x) Executive's Base Salary (on an annualized basis) for
the year which includes the Date of Termination and (y) the highest Annual
Bonus earned (whether or not deferred) by Executive during the three years
immediately preceding the year which includes the date of Termination; and
(iii) following Executive's termination or employment,
the Corporation shall continue to cover Executive and his family under, or
provide Executive and his family with insurance coverage no less favorable
than, the Corporation's life, disability, health, dental or other employee
welfare benefit plans or programs (as in effect on the Date of Termination)
for a period equal to the lesser of (x) three years following the Date of
Termination or (y) until Executive is provided by another employer with
benefits substantially comparable to the benefits provided by such plans or
programs.
9. CONFIDENTIALITY.
(a) Executive understands and acknowledges that as a result of
Executive's employment with the Corporation, and involvement with the business
of the Corporation, he is or shall necessarily become informed of, and have
access to, confidential information of the Corporation including, without
limitation, inventions, patents, patent applications, trade secrets, technical
information, know-how, plans, specifications, marketing plans and information,
pricing information, identity of customers and prospective customers and
identity of suppliers, and that such information, even though it may have been
or may be developed or otherwise acquired by Executive, is the exclusive
property of the Corporation to be held by Executive in trust and solely for
the Corporation's benefit. Executive shall not at any time, either during or
subsequent to his employment hereunder, reveal, report, publish, transfer or
otherwise disclose to any person, corporation or other entity, or use, any of
the Corporation's confidential information, without the written consent of the
Board, except for use on behalf of the Corporation in connection with the
Corporation's business, and except for such information which legally and
legitimately is or becomes of general public knowledge from authorized sources
other than Executive.
(b) Upon the termination of his employment with the Corporation
for any reason, Executive shall promptly deliver to the Corporation all
drawings, manuals, letters, notes, notebooks, reports and copies thereof and
all other materials, including, without limitation, those of a secret or
confidential nature, relating to the Corporation's business which are in
Executive's possession or control. The Corporation shall reimburse Executive
for any packing or moving costs reasonably incurred by Executive in connection
with the foregoing delivery.
(c) For purposes of this Section 9 and Section 10, the term
"Corporation" includes the Corporation and any other predecessor corporation,
and affiliates (including, without limitation, distributors, licensees,
franchisees, subsidiaries and joint ventures).
10. NON-COMPETITION. Executive agrees that, for a period commencing
on the date hereof and ending two years after the termination of his
employment with the Corporation for any reason, he shall not, anywhere in the
United States (or for such lesser area or such lesser period as may be
determined by a court of competent jurisdiction to be a reasonable limitation
on the competitive activity of Executive) directly or indirectly:
(a) engage, directly or indirectly, as an independent contractor
in any activity for or on behalf of any person or entity in a competitive line
of business to that carried on by the Corporation during the term of his
employment therewith, competitive with the business carried by the Corporation
during the term of Executive's employment therewith or dealt in by Executive
during his employment with the Corporation;
(b) solicit or attempt to solicit business of any customers of
the Corporation (including prospective customers solicited by the Corporation)
for products or services the same or similar to those offered, sold, produced
or under development by the Corporation during the term of his employment
therewith or dealt in by Executive during his employment with the Corporation;
(c) otherwise divert or attempt to divert from the Corporation
any business whatsoever;
(d) solicit or attempt to solicit for any business endeavor any
employee of the Corporation;
(e) interfere with any business relationship between the
Corporation and any other person;
(f) use the name of the Corporation or a name similar thereto; or
(g) render any services as an officer, director, employee,
partner, consultant or otherwise to, or have any interest as a stockholder,
partner, lender or otherwise in, any person which is engaged in activities
which, if performed by Executive would violate this Section 10;
PROVIDED, HOWEVER, that notwithstanding the foregoing, Executive shall not
have any obligation under this Section 10 (although Executive's obligations
under Section 9 shall continue unimpaired) if either (A) Executive's
employment hereunder is terminated by the Corporation other than pursuant to
Section 7(a), 7(b) or 7(d), or (B) after a Change of Control, (x) the
Corporation does not renew Executive's employment upon expiration of the
Employment Term other than for reasons specified in Section 7(a), 7(b) or
7(d), or (y) the Corporation does not offer a renewal of Executive's
employment on terms at least as favorable as those prevailing during the last
year of the Employment Term. The foregoing shall not prevent Executive from
purchasing or owning up to five percent of the voting securities of any
corporation, the securities of which are publicly-traded.
11. REMEDIES AND SURVIVAL. Because the Corporation does not have an
adequate remedy at law to protect its interest in its trade secrets,
privileged, proprietary or confidential information and similar commercial
assets, or its business from Executive's competition, the Corporation shall be
entitled to injunctive relief, in addition to such other remedies and relief
that would, in the event of a breach of the provisions of Sections 9 or 10, be
available to the Corporation. The provisions of Sections 9 and 10 and this
Section 11 shall survive any termination of Executive's employment with the
Corporation for any reason whatsoever. In no event shall an asserted
violation of the provisions of Sections 9 or 10 of this Agreement constitute a
basis for deferring or withholding any amounts otherwise payable to Executive
under this Agreement.
12. FULL SETTLEMENT; LEGAL EXPENSES. The Corporation's obligation to
make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action with the Corporation may
have against Executive or others. In no event shall Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to Executive under any of the provisions of this Agreement.
The Corporation agrees to pay, upon written demand therefore by Executive, all
legal fees and expenses which Executive may reasonably incur as a result of
any dispute or contest (regardless of the outcome thereof) by or with the
Corporation or others regarding the validity or enforceability of, or
liability under, any provision of this Agreement (including as a result of any
contest by the Executive about the amount of any payment pursuant to Section
13, plus interest at the applicable Federal rate provided for in Section
7872(f)(2) of the Code. Executive shall be entitled to seek both legal and
equitable relief and remedies, including, without limitation, specific
performance of the Corporations obligations hereunder, in his sole discretion.
If the parties hereto so agree in writing, any disputes under this Agreement
may be settled by arbitration.
13. CERTAIN ADDITIONAL PAYMENTS BY THE CORPORATION.
(a) Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment or distribution made, or
benefit provided, (including, without limitation, the acceleration of any
payment, distribution or benefit), by the Corporation to or for the benefit of
Executive (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 13) ("Payment") would be
subject to the excise tax imposed by Section 4999 of the Code (or any similar
excise tax) or any interest or penalties are incurred by Executive with
respect to such excise tax (such excise tax, together with any such interest
and penalties, hereinafter collectively, the "Excise Tax"), then Executive
shall be entitled to receive an additional payment ("Gross-Up Payment') in an
amount such that after payment by the employee of all taxes (including any
Excise Tax) imposed upon the Gross-Up Payment and any interest or penalties
imposed with respect to such taxes, Executive retains from the Gross-Up
Payment an amount equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 13(c), all
determinations required to be made under this Section 13, including
determination of whether a Gross-Up Payment is required and of the amount of
any such Gross-Up Payment, shall be made by the accountants regularly
servicing the Corporation at the time of any Change of Control, or if no
change of Control has occurred, at the time of the termination of this
Agreement (the "Accounting Firm"). Detailed supporting calculations shall be
provided by the Accounting Firm both to the Corporation and Executive within
15 business days of the date of termination, if applicable, or such earlier
time as is required by the Corporation, provided that any determination that
an Excise Tax is payable by Executive shall be made on the basis of
substantial authority. The initial Gross-Up Payment if any, as determined
pursuant to this Section 13(b), shall be paid to Executive within five
business days of the receipt of the Accounting Firm's determination. If the
Accounting Firm determines that no Excess Tax is payable by Executive, it
shall furnish Executive with a written opinion that he has substantial
authority not to report any Excise Tax on his Federal income tax return. Any
determination by the Accounting Firm meeting the requirements of this Section
13(b) shall be binding upon the Corporation and Executive; subject only to
payments pursuant to the following sentence based on a determination that
additional Gross-Up Payments should have been made, consistent with the
calculations required to be made hereunder (the amount of such additional
payments are referred to herein as the "Gross-Up Underpayment'). In the event
that the Corporation exhausts its remedies pursuant to Section 13(c) and
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine at the amount of the Gross-Up Underpayment
that has occurred and any such Gross-Up Underpayment shall be promptly paid by
the Corporation to or for the benefit of Executive. The fees and
disbursements of the Accounting Firm shall by paid by the Corporation.
(c) Executive shall notify the Corporation in writing of any
claim by the Internal Revenue Service, that, if successful, would require
payment by the Corporation of a Gross-Up Payment. Such notification shall be
given a soon as practicable, but not later than ten business days after
Executive received written notice of such claim and shall apprise the
Corporation of the nature of such claim and the date on which such claim is
requested to be paid. Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it has given such
notice to the Corporation (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Corporation
notifies Executive in writing prior to the expiration of such period that it
desires to contest such claim and that it will bear the costs and provide the
indemnification as required by this sentence, Executive shall:
(i) give the Corporation any information reasonably
requested by Corporation relating to such claim,
(ii) take such action in connection with contesting such
claim as the Corporation shall reasonably request in writing from time to
time, including without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the Corporation,
(iii) cooperate with the Corporation in good faith in order
effectively to contest such claim, and
(iv) permit the Corporation to participate in any
proceedings relating to such claim;
provided, however, that the Corporation shall bear and pay directly all costs
and expenses (including additional interest and penalties incurred in
connection with such contest and shall indemnify and hold harmless Executive,
on an after-tax basis, for any Excise Tax or income tax, including interest
and penalties with respect thereto, imposed as a result of such representation
and payment of costs and expenses. Without limitation on the foregoing
provisions of this Section 13(c), the Corporation shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Corporation shall determine; provided that if the Corporation directs
Executive to pay such claim and sue for a refund, Corporation shall advance
the amount of such payment to Executive, on an interest-free basis and shall
indemnify and hold Executive harmless, on an after-tax basis, from any Excise
Tax, or income tax, including interest or penalties with respect thereto,
imposed with respect to such advance or with respect to any imputed income
with respect to such advance; and further provided that any extension of the
statute of limitations relating to the payment of taxes for the taxable year
of Executive with respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the Corporation's
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(d) If, after the receipt by Executive of an amount advanced by
the Corporation pursuant to Section 13(c), Executive becomes entitled to
receive any refund with respect to such claim, Executive shall (subject to the
Corporation's complying with the requirements of Section 13(c)) promptly pay
to the Corporation the amount of such refund (together with any interest paid
or credited thereon after taxes applicable thereto). If, after the receipt by
Executive of an amount advanced by the Corporation pursuant to Section 13(c),
a determination is made that Executive shall not be entitled to any refund
with respect to such claim and the Corporation does not notify Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then any obligation of Executive to repay
such advance shall be forgiven and the amount of such advance shall offset, to
the extent thereof, the amount of Gross-Up Payment required to be paid.
14. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit Executive's continuing or future participation in any
benefit, bonus, incentive or other plans, practices, policies or programs
provided by the Corporation or any of its Subsidiaries and for which Executive
may qualify, nor shall anything herein limit or otherwise affect such rights
as Executive may have under any stock option or other agreements with the
Corporation or any of its Subsidiaries. Amounts which are vested benefits or
which Executive is otherwise entitled to receive at or subsequent to the Date
of Termination shall be payable in accordance with the plan, practice, policy
or program of the Corporation under which Executive has such entitlement.
15. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties hereto with respect to its subject matter, merges
and supersedes any prior or contemporaneous agreements or understandings with
respect to its subject matter, and shall not be modified or terminated except
by another agreement in writing executed by the Corporation and Executive.
Failure of a party to enforce one or more of the provisions of this Agreement
or to require at any time performance of any of the obligations hereof shall
not be construed to be a waiver of such provisions by such party nor to in any
way affect the validity of this Agreement or such party's right thereafter to
enforce any provision of this Agreement, nor to preclude such party from
taking any other action at any time which it would legally be entitled to
take.
16. SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable by any court or tribunal of competent jurisdiction,
the remainder of this Agreement shall not be affected by such judgement and
such provision shall be carried out as nearly as possible according to its
original terms and intent to eliminate such invalidity or unenforceability.
17. SUCCESSORS AND ASSIGNS. This Agreement is personal to Executive
and without the prior written consent of the Corporation shall not be
assignable by Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by Executive's legal representatives or Successors in Interest. This Agreement
shall insure to the benefit of and be binding upon the Corporation and its
successors and assigns. The Corporation will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Corporation would be required to perform it if no such
succession had taken place. As used in the Agreement, "Corporation" shall
mean the Corporation as hereinbefore defined and any successor to its business
and/or assets as aforesaid with assumes and agrees to perform this Agreement
by operation of law or otherwise.
18. COMMUNICATIONS AND NOTICES. All notices and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given at the time when mailed in any United States post office enclosed in a
registered or certified postage-paid envelope and addressed as set forth at
the beginning of this Agreement, or to such other address as any party may
specify by notice to the other parties, or delivered by Federal Express or a
similar overnight courier to such address; provided, however, that any notice
of change of address shall be effective only upon receipt.
19. CONSTRUCTION; COUNTERPARTS. The headings contained in this
Agreement are for convenience only and shall in no way restrict or otherwise
affect the construction of the provisions hereof. References in this
Agreement to Sections are to the sections of this Agreement. This Agreement
may be executed in multiple counterparts, each of which shall be an original
and all of which together shall constitute one and the same instrument.
20. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. Executive's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a waiver of
such provision. This Agreement contains the entire understanding of the
Corporation and Executive with respect to the subject matter hereof but does
not supersede or override the provisions of any stock option, employee benefit
or other plan, program, policy or practice in which Executive is a participant
or under which Executive is a beneficiary.
21. GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of New York.
IN WITNESS WHEREOF, the undersigned parties have executed and delivered
this Agreement as of the date first above written.
TOUCHSTONE APPLIED SCIENCE
ASSOCIATES, INC.
By: /s/ LINDA G. STRALEY
--------------------------------------
Name: Linda Straley
Title: Vice President
Executive:
/s/ ANDREW L. SIMON
--------------------------------------
Andrew L. Simon
Exhibit 10.4
EMPLOYMENT AGREEMENT
AGREEMENT dated as of the 1st day of March, 1996 by and between
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC., a Delaware corporation with its
principal place of business at Field Lane, Brewster, New York ("TASA") and
LINDA STRALEY, an individual residing at 2 Circle Drive East, Ridgefield,
Connecticut 06877 ("Executive").
W I T N E S S E T H:
- - - - - - - - - --
WHEREAS, the Corporation recognizes that the current business
environment makes it difficult to attract and retain highly qualified key
employees unless a certain degree of security can be offered to such
individuals against organizational and personnel changes which frequently
follow Changes of Control (as defined below) of a corporation; and
WHEREAS, even rumors of acquisitions or mergers may cause key employees
to consider major career changes in an effort to assure financial security for
themselves and their families; and
WHEREAS, the Corporation desires to assure fair treatment of its key
employees in the event of a Change of Control and to allow them to make
critical career decisions without undue time pressure and financial
uncertainty, thereby increasing their willingness to remain with the
Corporation notwithstanding the outcome of a possible Change of Control
transaction; and
WHEREAS, the Corporation recognizes that its key employees will be
involved in evaluating or negotiating any offers, proposals or other
transaction which could result in Changes of Control of the Corporation and
believes that it is in the best interest of the Corporation and its
stockholders for such key employees to be in a position, free from personal
financial and employment considerations, to be able to assess objectively and
pursue aggressively the interests of the Corporation's stockholders in making
these valuations and carrying on such negotiations; and
WHEREAS, The Board of Directors (the "Board") of the Corporation
believes it is essential to provide Executive with compensation arrangements
upon a Change of Control which provide Executive with individual financial
security and which are competitive with those of other corporations, and in
order to accomplish these objectives, the Board has caused the Corporation to
enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements set forth herein, the parties hereto, intending to be legally
bound, agree as follows:
1. EMPLOYMENT AND TERM. Subject to the terms and conditions of this
Agreement, the Corporation agrees to employ Executive, and Executive hereby
accepts employment by the Corporation, for a term beginning as of the date
hereof (the "Effective Date") and ending on the third anniversary of the
Effective Date; PROVIDED, HOWEVER, that commencing on the date one year after
the Effective Date, and on each annual anniversary of such date (such date and
each annual anniversary thereof is hereinafter referred to as the "Renewal
Date"), the term of this Agreement shall be automatically extended so as to
terminate three years from such Renewal Date, unless at least 60 days prior to
the Renewal Date the Corporation shall give written notice that the term of
the Agreement shall not be so extended; and PROVIDED, FURTHER, that after a
Change of Control of the Corporation during the term of this Agreement, this
Agreement shall remain in effect for the period commencing on the date of
Change of Control and ending on the later of (x) the third anniversary of such
date and (y) the date all of the obligations of the parties hereunder are
satisfied (the "Employment Term"). Anything to the contrary in this Agreement
notwithstanding, if Executive's employment with the Corporation is terminated
prior to the date on which a Change of Control occurs, and it is reasonably
demonstrated that such termination (i) was at the request of a third party who
has taken steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or in anticipation of a Change of Control,
then for all purposes of this Agreement, such termination shall be deemed to
have occurred on the date of Change of Control.
2. CERTAIN DEFINITIONS.
(a) A reference herein to a section of the Internal Revenue Code
of 1986, as amended (the "Code") or a subdivision thereof shall be construed
to incorporate reference to any section or subdivision of the Code enacted as
a successor thereto, any applicable proposed, temporary or final regulations
promulgated pursuant to such sections and any applicable interpretation
thereof by the Internal Revenue Service.
(b) A reference herein to a section of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or any rule or regulation
promulgated thereunder shall be construed to incorporate reference to any
section of the Exchange Act or any rule or regulation enacted or promulgated
as a successor thereto.
(c) "Subsidiary(ies)" means a company 50% or more of the voting
securities of which are owned by the corporation.
(d) "Executive Benefit Plan" means any written plan providing
benefits for employees of the Corporation or any Subsidiary.
3. CHANGE OF CONTROL. For the purposes of this Agreement, a "Change
of Control" shall be deemed to have occurred upon the happening of any of the
following:
(a) The acquisition (other than from the Corporation) by any
person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2)
of the Exchange Act, (excluding, for this purpose, the Corporation or its
Subsidiaries, or any Executive Benefit Plan which acquires beneficial
ownership of voting securities of the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20%
or more of either the then outstanding shares of the Corporation's common
stock or the combined voting power of the Corporation's then outstanding
voting securities entitled to vote generally in the election of directors.
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board, provided that any person who first becomes a director subsequent
to the date hereof whose recommendation, election or nomination for election
by the Corporation's stockholders was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is
in connection with an actual or threatened election contest relating to the
election of the directors of the Corporation as described in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) shall be, for purposes of
this Agreement, considered as though such person were a member of the
Incumbent Board; or
(c) Approval by the stockholders of the Corporation of a
reorganization, share exchange, merger or consolidation with respect to which,
in any such case, the persons who were the stockholders of the Corporation
immediately prior to such reorganization, share exchange, merger or
consolidation do not, immediately thereafter, own more than 50% of the
combined voting power entitled to vote in the election of directors of the
reorganized, merged or consolidated company; or
(d) Liquidation or dissolution of the Corporation or a sale of
all or substantially all of the assets of the Corporation.
4. DUTIES. During the Employment Term, Executive shall serve the
Corporation as its Vice President or in such other capacity or capacities as
may be determined by the Board; provided, however, that her authority, duties
and responsibilities shall be at least commensurate in all material respects
with her present offices, status and titles. Executive shall perform such
executive, administrative, development, production, marketing and other
services and duties for the Corporation, or any Subsidiary, at the present
location of the Corporation or any office or location less than 25 miles from
such location. During the Employment Term, and excluding any periods of
vacation and sick leave, Executive agrees to devote reasonable attention and
time during normal business hours to the business and affairs of the
Corporation and, to the extent necessary, to discharge the responsibilities
assigned to Executive hereunder, to use Executive's reasonable best efforts to
perform faithfully and efficiently such responsibilities. During the
Employment Term it shall not be a violation of this Agreement for Executive to
(A) serve on corporate, civic or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements or teach at educational institutions,
and (C) manage personal investments, so long as Executive's duties in
connection therewith do not unreasonably interfere with Executive's duties
under this Agreement. Activities of Executive consistent with this Section 4
shall not permit the Corporation to terminate Executive's employment for
"Cause", as defined below.
5. COMPENSATION.
(a) Base Salary. During the Employment Term, the Corporation
shall pay to Executive, in equal installments no less frequently than twice
per month (or at such other intervals as are in effect from time to time for
other executive officers of the Corporation), an annual base salary of not
less than $88,125.00 (the "Base Salary"). Base Salary to be paid by the
Corporation to Executive shall be reviewed by the Board of Directors at least
once annually prior to each anniversary of the Effective Date for the purposes
of determining whether any increases to such salary would be appropriate. Any
increase in Base Salary shall not serve to limit or reduce any other
obligation to Executive under this Agreement. Base Salary shall not be
reduced after any such increase.
(b) Bonus. In addition to Base Salary, in the event of a Change
of Control, Executive shall be awarded, for each fiscal year ending during the
Employment Term, an annual bonus ("Annual Bonus") in cash at least equal to
the average annual bonus payable to Executive from the Corporation and its
Subsidiaries in respect of two of the last three fiscal years immediately
preceding the date of any Change of Control in which the bonuses paid were
higher.
(c) Incentive, Savings, Welfare Benefit Plans and Retirement
Plans. In addition to Base Salary and Bonus, Executive and/or Executive's
family, as the case may be, shall be eligible to participate in or benefit
from, such medical insurance, life insurance, disability insurance, pension,
bonus, profit-sharing, stock option, stock purchase and any other fringe
benefit plans, practices, programs or policies provided by the Corporation and
its Subsidiaries to executive employees in accordance with the terms of such
plans, practices, programs and policies, in each case providing benefits which
are the economic equivalent to those in effect with respect to other key
employees of the Corporation and its Subsidiaries, including the period
subsequent to a Change of Control.
(d) Key Man Insurance. Executive agrees that the Corporation
may obtain key man life insurance with respect to Executive, and in connection
therewith, agrees to submit to all reasonable and customary examinations by
the provider of such life insurance.
(e) Expenses. Executive shall be entitled to reimbursement for
all normal and reasonable travel, entertainment and other expenses necessarily
incurred by him in the performance of his duties hereunder in accordance with
the most favorable policies, practices and procedures of the Corporation and
its Subsidiaries in effect with respect to other key employees of the
Corporation and its Subsidiaries, including the period subsequent to a Change
of Control.
(f) Fringe Benefits. During the Employment Term, Executive
shall be entitled to fringe benefits, including but not limited to the use of
an automobile and payment of related expenses, in accordance with the most
favorable plans, practices, policies and programs of the Corporation and its
Subsidiaries in effect with respect to other key employees of the Corporation
and its Subsidiaries, including the period subsequent to a Change of Control.
(g) Disability. Except as hereinafter provided, the Corporation
shall pay Executive for any period, up to a maximum of six months, during the
Employment Term in which he is unable fully to perform his duties because of
physical or mental disability or incapacity, an amount equal to the Base
Salary due him for such period pursuant to Section 5(a), less the aggregate
amount of all income disability benefits which for such period he may receive
by reason of (i) any group health insurance plan or disability insurance plan,
which is intended to function as a salary replacement plan, (ii) any
applicable compulsory state disability law, (iii) the Federal Social Security
Act, (iv) any applicable workmen's compensation law or similar law and (v) any
plan towards which the Corporation or any subsidiary or affiliate of the
Corporation (including any predecessor of any thereof) has contributed or for
which it has made payroll deductions, such as group accident or health
policies, other than those which reimburse for actual medical expenses.
(h) Vacation. During the Employment Term, Executive shall be
entitled to paid vacation in accordance with the most favorable plans,
practices, policies and programs of the Corporation and its Subsidiaries as in
effect with respect to other key employees of the Corporation and its
Subsidiaries, including any period after a Change of Control.
6. STOCK OPTIONS.
(a) As part of the consideration to be paid to Executive for his
services hereunder, Executive shall be eligible to participate in any stock
incentive plan adopted by the Corporation (the "Plan") for which an executive
level employee may participate.
(b) The Corporation hereby agrees that it shall cause to be
filed with the Securities and Exchange Commission a registration statement on
Form S-8 (or equivalent form as may be in effect at such time) with respect to
all options theretofore granted to Executive under the Plan. The Corporation
covenants that it will keep such registration statement current until
Executive is no longer employed by the Corporation; PROVIDED, HOWEVER, that if
Executive's employment is terminated hereunder other than pursuant to Sections
7(a), 7(b) or 7(d), then Executive shall have until 90 days following the
termination of his employment to exercise any such vested options which he
owned at the time of such termination, and the Corporation shall maintain the
effectiveness of such registration statement for such period. The Corporation
also hereby agrees that, for so long as either the Corporation does not have
an effective registration statement on Form S-8 or the Corporation has an
effective registration statement on Form S-8 but Executive is restricted in
his ability to resell shares acquired pursuant to the exercise of options
because of the provisions of General Instruction C.2(b) to Form S-8, Executive
shall have "piggyback" registration rights with respect to the options granted
to Executive under the Plan and the shares underlying such options.
7. RIGHTS OF TERMINATION.
(a) Cause. During the Employment Term, the Corporation shall
have the right, at any time effective upon notice to Executive, to terminate
Executive's employment for "Cause" (as hereinafter defined). For purposes of
this Agreement, "Cause" shall mean (i) an act or acts of personal dishonesty
engaged in by Executive and intended to result in substantial personal
enrichment of Executive at the expense of the Corporation, and (ii) repeated
violations by Executive of Executive's obligations under Section 4 of this
Agreement which are demonstrably willful and deliberate on Executive's part
and which are not remedied in a reasonable period of time after receipt of
written notice from the Corporation.
(b) Disability; Death. In the event that Executive, due to
physical or mental disability or incapacity, is unable to substantially
perform his duties hereunder for a period of six or more successive months,
the Corporation or Executive shall have the right to terminate this Agreement
and Executive's employment hereunder upon 30 days' prior written notice and
termination shall be effective on the 30th day after receipt of such notice by
the Executive (the "Disability effective date"). In the event that Executive
is able to and recommences rendering services and performing his duties
hereunder within such 30-day notice period, Executive shall be reinstated and
such notice shall be without further force or effect. If Executive dies
during the Term, this Agreement shall terminate immediately upon his death.
(c) Good Reason. Notwithstanding anything to the contrary
contained herein, after a Change of Control and continuing during the
Employment Term, Executive's employment may be terminated by Executive for
Good Reason and such termination shall be deemed a constructive discharge of
Executive by the Corporation. For purposes of this Agreement, "Good Reason"
shall mean:
(i) the assignment to Executive of any duties inconsistent
in any respect with Executive's position (including status, offices, titles
and reporting requirements, authority duties or responsibilities as
contemplated by Section 4 of this Agreement, or any other action by the
Corporation which results in a diminution in such position, authority, duties
or responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the
Corporation promptly after receipt of notice thereof given by Executive;
(ii) any failure by the Corporation to comply with any of
the provisions of Sections 5 and 6 of this Agreement, other than an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Corporation promptly after receipt of notice thereof given by
Executive;
(iii) the Corporation's requiring Executive to be based at
any office or location other than that described in Section 4 hereof, except
for travel reasonably required in the performance of Executive's
responsibilities;
(iv) any purported termination by the Corporation of
Executive's employment otherwise than as expressly permitted by this
Agreement; or
(v) any failure by the company to comply with and satisfy
Section 13 of this Agreement.
For purposes of this Section 7(c), any good faith determination of "Good
Reason" made by Executive shall be conclusive. Anything in this Agreement to
the contrary notwithstanding, a termination by Executive for any reason during
the 30-day period immediately following the first anniversary of a Change in
Control shall be deemed to be a termination for Good Reason for all purposes
of this Agreement.
(d) Voluntary Termination. Executive may terminate this
Agreement on six months written notice to the Corporation at any time.
(e) Notice of Termination. Any termination of Executive's
employment by the Corporation for Cause, or by Executive for Good Reason or by
Executive for Voluntary Termination, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 18 of
this Agreement. Such Notice of Termination shall mean a written notice which
(i) indicates the specific termination provision in this Agreement relied on,
(ii) sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination, and (iii) if the Date of Termination (as
defined below) is other than the date of receipt of such notice, specifies the
termination date (which date, except for Voluntary Termination, shall not be
more than 15 days after the giving of such notice). The failure by Executive
to set forth in the Notice of Termination any fact or circumstances which
contributes to a showing of Good Reason shall not waive any right of Executive
hereunder or preclude Executive from asserting such fact or circumstance in
enforcing his rights hereunder.
(f) Date of Termination. "Date of Termination" means the date
of receipt of the Notice of Termination or any later date specified therein,
as the case may be; provided, however, that (i) if the Executive's employment
is terminated by the Corporation other than for Cause or Disability or by
reason of death, the Date of Termination shall be the date on which the
Corporation notifies Executive of such termination and (ii) if Executive's
employment is terminated by reason of death or Disability, or voluntary
withdrawal, the Date of Termination shall be the date of death or Executive or
the Disability effective date, or the last date of employment, as the case may
be.
8. EFFECTS OF TERMINATION.
(a) Cause or Voluntary Termination. In the event that
Executive's employment is terminated pursuant to Section 7(a) hereof for Cause
or 7(d) for Voluntary Termination, Executive's employment hereunder shall
terminate without further obligations to Executive, other than those
obligations accrued or earned and vested (if applicable) by Executive through
the Date of Termination, including for this purpose all "Accrued Obligations",
defined as those obligations accrued or earned and vested (if applicable) by
Executive as of the Date of Termination, including, for this purpose (i)
Executive's full Base Salary accrued but unpaid as of the Date of Termination
(ii) the product of the Annual Bonus paid to Executive for the last full
fiscal year and a fraction, the numerator of which is the number of days in
the current fiscal year through the Date of Termination, and the denominator
of which is 365, (iii) any compensation previously deferred by Executive
(together with any accrued earning thereon) and not yet paid by the
Corporation and any accrued vacation pay not yet paid by the Company and (iv)
all amounts payable to the estate or designated beneficiaries of Executive
under any pension, savings, life insurance or other plans, practices, policies
and programs of the Corporation, and/or all other amounts payable pursuant to
Sections 5(c), (e), (f), (g) and (h) hereof. In addition:
(i) the Corporation shall pay to Executive all Accrued
Obligations such that the Accrued Obligations specified in clauses (i), (ii)
and (iii) of Section 8(a) hereof, shall be paid to Executive in a lump sum in
cash within 30 days of the Date of Termination, and the other Accrued
Obligations shall be paid in accordance with Executive's specific elections
pursuant to, and otherwise in accordance with the terms of, any plan,
practice, policy or program providing benefits forming a part of the Accrued
Obligations;
(ii) all then non-exercisable options shall immediately and
automatically terminate, and
(iii) any registration rights theretofore granted which
have not been invoked with respect to shares of Common Stock of the
Corporation either acquired by Executive pursuant to the exercise of stock
options or underlying vested options shall immediately and automatically
terminate.
(b) Death. In the event that Executive's employment is
terminated pursuant to Section 7(b) hereof as a result of Death, Executive's
employment hereunder shall cease in accordance with Section 7(b) without
further obligations under this Agreement to Executive's representatives, other
than those obligations accrued or earned and vested (if applicable) by
Executive as of the Date of Termination, including, for this purpose all
Accrued Obligations. The Corporation shall pay to Executive or his legal
representatives, as the case may be, all Accrued Obligations specified in
clauses (i), (ii) and (iii) in a lump sum within 30 days of the Date of
Termination, and the other Accrued Obligations shall be paid in accordance
with the Executive's specific elections pursuant to, and otherwise in
accordance with the terms of, any such plan, practice, policy or program.
Anything in this Agreement to the contrary notwithstanding, Executive's family
shall be entitled to receive benefits at least equal to the most favorable
plans, practices, policies and programs of the Corporation and its
Subsidiaries in effect with respect to other key employees of the Corporation
and its Subsidiaries, including any period after a Change of Control.
(c) Disability. In the event that Executive's employment is
terminated pursuant to Section 7(b) hereof as a result of Disability,
Executive's employment hereunder shall cease without further obligations under
this Agreement to Executive, other than those obligations accrued or earned
and vested (if applicable) by Executive as of the Date of Termination,
including, for this purpose all Accrued Obligations. Accrued Obligations
specified in clauses (i), (ii) and (iii) of Section 8(a) shall be paid to
Executive in a lump sum within 30 days of the Date of Termination, and the
other Accrued Obligations shall be paid in accordance with the Executive's
specific elections pursuant to, and otherwise in accordance with the terms of,
any such plan, practice, policy or program. Anything in this Agreement to the
contrary notwithstanding, Executive shall be entitled after the Disability
effective date to receive benefits at least equal to the most favorable plans,
practices, policies and programs of the Corporation and its Subsidiaries in
effect with respect to other key employees of the Corporation and its
Subsidiaries, including any period after a Change of Control.
(d) Good Reason or Other than Cause or Disability by the
Corporation or Other than Death or Other than Voluntary Termination. In the
event that Executive's employment hereunder during the Term is terminated
after a Change of Control (x) for Good Reason by Executive, or (y) for other
than Cause or other than Disability by the Corporation or other than Death or
other than Voluntary Termination, the Corporation shall pay to Executive in a
lump sum in cash within 30 days after the Date of Termination (or in
accordance with the Executive's specific elections pursuant to, and otherwise
in accordance with the terms of, any such plan, practice, policy or program
providing benefits forming a part of the Accrued Obligations specified in
clause (iv) of Section 8(a) hereof), the aggregate of the following amounts
and shall provide the following benefits:
(i) the Accrued Obligations in clauses (i), (ii), (iii)
and (iv) of Section 8(a)
(ii) a lump sum severance payment in an amount equal to
450% of the sum of (x) Executive's Base Salary (on an annualized basis) for
the year which includes the Date of Termination and (y) the highest Annual
Bonus earned (whether or not deferred) by Executive during the three years
immediately preceding the year which includes the date of Termination; and
(iii) following Executive's termination or employment,
the Corporation shall continue to cover Executive and his family under, or
provide Executive and his family with insurance coverage no less favorable
than, the Corporation's life, disability, health, dental or other employee
welfare benefit plans or programs (as in effect on the Date of Termination)
for a period equal to the lesser of (x) three years following the Date of
Termination or (y) until Executive is provided by another employer with
benefits substantially comparable to the benefits provided by such plans or
programs.
9. CONFIDENTIALITY.
(a) Executive understands and acknowledges that as a result of
Executive's employment with the Corporation, and involvement with the business
of the Corporation, he is or shall necessarily become informed of, and have
access to, confidential information of the Corporation including, without
limitation, inventions, patents, patent applications, trade secrets, technical
information, know-how, plans, specifications, marketing plans and information,
pricing information, identity of customers and prospective customers and
identity of suppliers, and that such information, even though it may have been
or may be developed or otherwise acquired by Executive, is the exclusive
property of the Corporation to be held by Executive in trust and solely for
the Corporation's benefit. Executive shall not at any time, either during or
subsequent to his employment hereunder, reveal, report, publish, transfer or
otherwise disclose to any person, corporation or other entity, or use, any of
the Corporation's confidential information, without the written consent of the
Board, except for use on behalf of the Corporation in connection with the
Corporation's business, and except for such information which legally and
legitimately is or becomes of general public knowledge from authorized sources
other than Executive.
(b) Upon the termination of his employment with the Corporation
for any reason, Executive shall promptly deliver to the Corporation all
drawings, manuals, letters, notes, notebooks, reports and copies thereof and
all other materials, including, without limitation, those of a secret or
confidential nature, relating to the Corporation's business which are in
Executive's possession or control. The Corporation shall reimburse Executive
for any packing or moving costs reasonably incurred by Executive in connection
with the foregoing delivery.
(c) For purposes of this Section 9 and Section 10, the term
"Corporation" includes the Corporation and any other predecessor corporation,
and affiliates (including, without limitation, distributors, licensees,
franchisees, subsidiaries and joint ventures).
10. NON-COMPETITION. Executive agrees that, for a period commencing
on the date hereof and ending two years after the termination of his
employment with the Corporation for any reason, he shall not, anywhere in the
United States (or for such lesser area or such lesser period as may be
determined by a court of competent jurisdiction to be a reasonable limitation
on the competitive activity of Executive) directly or indirectly:
(a) engage, directly or indirectly, as an independent contractor
in any activity for or on behalf of any person or entity in a competitive line
of business to that carried on by the Corporation during the term of his
employment therewith, competitive with the business carried by the Corporation
during the term of Executive's employment therewith or dealt in by Executive
during his employment with the Corporation;
(b) solicit or attempt to solicit business of any customers of
the Corporation (including prospective customers solicited by the Corporation)
for products or services the same or similar to those offered, sold, produced
or under development by the Corporation during the term of his employment
therewith or dealt in by Executive during his employment with the Corporation;
(c) otherwise divert or attempt to divert from the Corporation
any business whatsoever;
(d) solicit or attempt to solicit for any business endeavor any
employee of the Corporation;
(e) interfere with any business relationship between the
Corporation and any other person;
(f) use the name of the Corporation or a name similar thereto;
or
(g) render any services as an officer, director, employee,
partner, consultant or otherwise to, or have any interest as a stockholder,
partner, lender or otherwise in, any person which is engaged in activities
which, if performed by Executive would violate this Section 10;
PROVIDED, HOWEVER, that notwithstanding the foregoing, Executive shall not
have any obligation under this Section 10 (although Executive's obligations
under Section 9 shall continue unimpaired) if either (A) Executive's
employment hereunder is terminated by the Corporation other than pursuant to
Section 7(a), 7(b) or 7(d), or (B) after a Change of Control, (x) the
Corporation does not renew Executive's employment upon expiration of the
Employment Term other than for reasons specified in Section 7(a), 7(b) or
7(d), or (y) the Corporation does not offer a renewal of Executive's
employment on terms at least as favorable as those prevailing during the last
year of the Employment Term. The foregoing shall not prevent Executive from
purchasing or owning up to five percent of the voting securities of any
corporation, the securities of which are publicly-traded.
11. REMEDIES AND SURVIVAL. Because the Corporation does not have an
adequate remedy at law to protect its interest in its trade secrets,
privileged, proprietary or confidential information and similar commercial
assets, or its business from Executive's competition, the Corporation shall be
entitled to injunctive relief, in addition to such other remedies and relief
that would, in the event of a breach of the provisions of Sections 9 or 10, be
available to the Corporation. The provisions of Sections 9 and 10 and this
Section 11 shall survive any termination of Executive's employment with the
Corporation for any reason whatsoever. In no event shall an asserted
violation of the provisions of Sections 9 or 10 of this Agreement constitute a
basis for deferring or withholding any amounts otherwise payable to Executive
under this Agreement.
12. FULL SETTLEMENT; LEGAL EXPENSES. The Corporation's obligation to
make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action with the Corporation may
have against Executive or others. In no event shall Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to Executive under any of the provisions of this Agreement.
The Corporation agrees to pay, upon written demand therefore by Executive, all
legal fees and expenses which Executive may reasonably incur as a result of
any dispute or contest (regardless of the outcome thereof) by or with the
Corporation or others regarding the validity or enforceability of, or
liability under, any provision of this Agreement (including as a result of any
contest by the Executive about the amount of any payment pursuant to Section
13, plus interest at the applicable Federal rate provided for in Section
7872(f)(2) of the Code. Executive shall be entitled to seek both legal and
equitable relief and remedies, including, without limitation, specific
performance of the Corporations obligations hereunder, in his sole discretion.
If the parties hereto so agree in writing, any disputes under this Agreement
may be settled by arbitration.
13. CERTAIN ADDITIONAL PAYMENTS BY THE CORPORATION.
(a) Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment or distribution made, or
benefit provided, (including, without limitation, the acceleration of any
payment, distribution or benefit), by the Corporation to or for the benefit of
Executive (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 13) ("Payment") would be
subject to the excise tax imposed by Section 4999 of the Code (or any similar
excise tax) or any interest or penalties are incurred by Executive with
respect to such excise tax (such excise tax, together with any such interest
and penalties, hereinafter collectively, the "Excise Tax"), then Executive
shall be entitled to receive an additional payment ("Gross-Up Payment') in an
amount such that after payment by the employee of all taxes (including any
Excise Tax) imposed upon the Gross-Up Payment and any interest or penalties
imposed with respect to such taxes, Executive retains from the Gross-Up
Payment an amount equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 13(c), all
determinations required to be made under this Section 13, including
determination of whether a Gross-Up Payment is required and of the amount of
any such Gross-Up Payment, shall be made by the accountants regularly
servicing the Corporation at the time of any Change of Control, or if no
change of Control has occurred, at the time of the termination of this
Agreement (the "Accounting Firm"). Detailed supporting calculations shall be
provided by the Accounting Firm both to the Corporation and Executive within
15 business days of the date of termination, if applicable, or such earlier
time as is required by the Corporation, provided that any determination that
an Excise Tax is payable by Executive shall be made on the basis of
substantial authority. The initial Gross-Up Payment if any, as determined
pursuant to this Section 13(b), shall be paid to Executive within five
business days of the receipt of the Accounting Firm's determination. If the
Accounting Firm determines that no Excess Tax is payable by Executive, it
shall furnish Executive with a written opinion that he has substantial
authority not to report any Excise Tax on his Federal income tax return. Any
determination by the Accounting Firm meeting the requirements of this Section
13(b) shall be binding upon the Corporation and Executive; subject only to
payments pursuant to the following sentence based on a determination that
additional Gross-Up Payments should have been made, consistent with the
calculations required to be made hereunder (the amount of such additional
payments are referred to herein as the "Gross-Up Underpayment'). In the event
that the Corporation exhausts its remedies pursuant to Section 13(c) and
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine at the amount of the Gross-Up Underpayment
that has occurred and any such Gross-Up Underpayment shall be promptly paid by
the Corporation to or for the benefit of Executive. The fees and
disbursements of the Accounting Firm shall by paid by the Corporation.
(c) Executive shall notify the Corporation in writing of any
claim by the Internal Revenue Service, that, if successful, would require
payment by the Corporation of a Gross-Up Payment. Such notification shall be
given a soon as practicable, but not later than ten business days after
Executive received written notice of such claim and shall apprise the
Corporation of the nature of such claim and the date on which such claim is
requested to be paid. Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it has given such
notice to the Corporation (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Corporation
notifies Executive in writing prior to the expiration of such period that it
desires to contest such claim and that it will bear the costs and provide the
indemnification as required by this sentence, Executive shall:
(i) give the Corporation any information reasonably
requested by Corporation relating to such claim,
(ii) take such action in connection with contesting such
claim as the Corporation shall reasonably request in writing from time to
time, including without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the Corporation,
(iii) cooperate with the Corporation in good faith in order
effectively to contest such claim, and
(iv) permit the Corporation to participate in any
proceedings relating to such claim;
provided, however, that the Corporation shall bear and pay directly all costs
and expenses (including additional interest and penalties incurred in
connection with such contest and shall indemnify and hold harmless Executive,
on an after-tax basis, for any Excise Tax or income tax, including interest
and penalties with respect thereto, imposed as a result of such representation
and payment of costs and expenses. Without limitation on the foregoing
provisions of this Section 13(c), the Corporation shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Corporation shall determine; provided that if the Corporation directs
Executive to pay such claim and sue for a refund, Corporation shall advance
the amount of such payment to Executive, on an interest-free basis and shall
indemnify and hold Executive harmless, on an after-tax basis, from any Excise
Tax, or income tax, including interest or penalties with respect thereto,
imposed with respect to such advance or with respect to any imputed income
with respect to such advance; and further provided that any extension of the
statute of limitations relating to the payment of taxes for the taxable year
of Executive with respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the Corporation's
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(d) If, after the receipt by Executive of an amount advanced by
the Corporation pursuant to Section 13(c), Executive becomes entitled to
receive any refund with respect to such claim, Executive shall (subject to the
Corporation's complying with the requirements of Section 13(c)) promptly pay
to the Corporation the amount of such refund (together with any interest paid
or credited thereon after taxes applicable thereto). If, after the receipt by
Executive of an amount advanced by the Corporation pursuant to Section 13(c),
a determination is made that Executive shall not be entitled to any refund
with respect to such claim and the Corporation does not notify Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then any obligation of Executive to repay
such advance shall be forgiven and the amount of such advance shall offset, to
the extent thereof, the amount of Gross-Up Payment required to be paid.
14. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit Executive's continuing or future participation in any
benefit, bonus, incentive or other plans, practices, policies or programs
provided by the Corporation or any of its Subsidiaries and for which Executive
may qualify, nor shall anything herein limit or otherwise affect such rights
as Executive may have under any stock option or other agreements with the
Corporation or any of its Subsidiaries. Amounts which are vested benefits or
which Executive is otherwise entitled to receive at or subsequent to the Date
of Termination shall be payable in accordance with the plan, practice, policy
or program of the Corporation under which Executive has such entitlement.
15. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties hereto with respect to its subject matter, merges
and supersedes any prior or contemporaneous agreements or understandings with
respect to its subject matter, and shall not be modified or terminated except
by another agreement in writing executed by the Corporation and Executive.
Failure of a party to enforce one or more of the provisions of this Agreement
or to require at any time performance of any of the obligations hereof shall
not be construed to be a waiver of such provisions by such party nor to in any
way affect the validity of this Agreement or such party's right thereafter to
enforce any provision of this Agreement, nor to preclude such party from
taking any other action at any time which it would legally be entitled to
take.
16. SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable by any court or tribunal of competent jurisdiction,
the remainder of this Agreement shall not be affected by such judgement and
such provision shall be carried out as nearly as possible according to its
original terms and intent to eliminate such invalidity or unenforceability.
17. SUCCESSORS AND ASSIGNS. This Agreement is personal to Executive
and without the prior written consent of the Corporation shall not be
assignable by Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by Executive's legal representatives or Successors in Interest. This Agreement
shall insure to the benefit of and be binding upon the Corporation and its
successors and assigns. The Corporation will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Corporation would be required to perform it if no such
succession had taken place. As used in the Agreement, "Corporation" shall
mean the Corporation as hereinbefore defined and any successor to its business
and/or assets as aforesaid with assumes and agrees to perform this Agreement
by operation of law or otherwise.
18. COMMUNICATIONS AND NOTICES. All notices and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given at the time when mailed in any United States post office enclosed in a
registered or certified postage-paid envelope and addressed as set forth at
the beginning of this Agreement, or to such other address as any party may
specify by notice to the other parties, or delivered by Federal Express or a
similar overnight courier to such address; PROVIDED, HOWEVER, that any notice
of change of address shall be effective only upon receipt.
19. CONSTRUCTION; COUNTERPARTS. The headings contained in this
Agreement are for convenience only and shall in no way restrict or otherwise
affect the construction of the provisions hereof. References in this
Agreement to Sections are to the sections of this Agreement. This Agreement
may be executed in multiple counterparts, each of which shall be an original
and all of which together shall constitute one and the same instrument.
20. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. Executive's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a waiver of
such provision. This Agreement contains the entire understanding of the
Corporation and Executive with respect to the subject matter hereof but does
not supersede or override the provisions of any stock option, employee benefit
or other plan, program, policy or practice in which Executive is a participant
or under which Executive is a beneficiary.
21. GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of New York.
IN WITNESS WHEREOF, the undersigned parties have executed and delivered
this Agreement as of the date first above written.
TOUCHSTONE APPLIED SCIENCE
ASSOCIATES, INC.
By: /s/ ANDREW L. SIMON
-----------------------------------
Name: Andrew L. Simon
Title: President
Executive:
/s/ LINDA G. STRALEY
-----------------------------------
Linda G. Straley
Exhibit 10.5
EMPLOYMENT AGREEMENT
AGREEMENT dated as of the 1st day of March, 1996 by and between
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC., a Delaware corporation with its
principal place of business at Field Lane, Brewster, New York ("TASA") and
STEPHEN IVENS, an individual residing at 272 River Drive, River Vale, New
Jersey 07675 ("Executive").
W I T N E S S E T H:
- - - - - - - - - --
WHEREAS, the Corporation recognizes that the current business
environment makes it difficult to attract and retain highly qualified key
employees unless a certain degree of security can be offered to such
individuals against organizational and personnel changes which frequently
follow Changes of Control (as defined below) of a corporation; and
WHEREAS, even rumors of acquisitions or mergers may cause key employees
to consider major career changes in an effort to assure financial security for
themselves and their families; and
WHEREAS, the Corporation desires to assure fair treatment of its key
employees in the event of a Change of Control and to allow them to make
critical career decisions without undue time pressure and financial
uncertainty, thereby increasing their willingness to remain with the
Corporation notwithstanding the outcome of a possible Change of Control
transaction; and
WHEREAS, the Corporation recognizes that its key employees will be
involved in evaluating or negotiating any offers, proposals or other
transaction which could result in Changes of Control of the Corporation and
believes that it is in the best interest of the Corporation and its
stockholders for such key employees to be in a position, free from personal
financial and employment considerations, to be able to assess objectively and
pursue aggressively the interests of the Corporation's stockholders in making
these valuations and carrying on such negotiations; and
WHEREAS, The Board of Directors (the "Board") of the Corporation
believes it is essential to provide Executive with compensation arrangements
upon a Change of Control which provide Executive with individual financial
security and which are competitive with those of other corporations, and in
order to accomplish these objectives, the Board has caused the Corporation to
enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements set forth herein, the parties hereto, intending to be legally
bound, agree as follows:
1. EMPLOYMENT AND TERM. Subject to the terms and conditions of this
Agreement, the Corporation agrees to employ Executive, and Executive hereby
accepts employment by the Corporation, for a term beginning as of the date
hereof (the "Effective Date") and ending on the third anniversary of the
Effective Date; PROVIDED, HOWEVER, that commencing on the date one year after
the Effective Date, and on each annual anniversary of such date (such date and
each annual anniversary thereof is hereinafter referred to as the "Renewal
Date"), the term of this Agreement shall be automatically extended so as to
terminate three years from such Renewal Date, unless at least 60 days prior to
the Renewal Date the Corporation shall give written notice that the term of
the Agreement shall not be so extended; and PROVIDED, FURTHER, that after a
Change of Control of the Corporation during the term of this Agreement, this
Agreement shall remain in effect for the period commencing on the date of
Change of Control and ending on the later of (x) the third anniversary of such
date and (y) the date all of the obligations of the parties hereunder are
satisfied (the "Employment Term"). Anything to the contrary in this Agreement
notwithstanding, if Executive's employment with the Corporation is terminated
prior to the date on which a Change of Control occurs, and it is reasonably
demonstrated that such termination (i) was at the request of a third party who
has taken steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or in anticipation of a Change of Control,
then for all purposes of this Agreement, such termination shall be deemed to
have occurred on the date of Change of Control.
2. CERTAIN DEFINITIONS.
(a) A reference herein to a section of the Internal Revenue Code
of 1986, as amended (the "Code") or a subdivision thereof shall be construed
to incorporate reference to any section or subdivision of the Code enacted as
a successor thereto, any applicable proposed, temporary or final regulations
promulgated pursuant to such sections and any applicable interpretation
thereof by the Internal Revenue Service.
(b) A reference herein to a section of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or any rule or regulation
promulgated thereunder shall be construed to incorporate reference to any
section of the Exchange Act or any rule or regulation enacted or promulgated
as a successor thereto.
(c) "Subsidiary(ies)" means a company 50% or more of the voting
securities of which are owned by the corporation.
(d) "Executive Benefit Plan" means any written plan providing
benefits for employees of the Corporation or any Subsidiary.
3. CHANGE OF CONTROL. For the purposes of this Agreement, a "Change
of Control" shall be deemed to have occurred upon the happening of any of the
following:
(a) The acquisition (other than from the Corporation) by any
person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2)
of the Exchange Act, (excluding, for this purpose, the Corporation or its
Subsidiaries, or any Executive Benefit Plan which acquires beneficial
ownership of voting securities of the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20%
or more of either the then outstanding shares of the Corporation's common
stock or the combined voting power of the Corporation's then outstanding
voting securities entitled to vote generally in the election of directors.
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board, provided that any person who first becomes a director subsequent
to the date hereof whose recommendation, election or nomination for election
by the Corporation's stockholders was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is
in connection with an actual or threatened election contest relating to the
election of the directors of the Corporation as described in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) shall be, for purposes of
this Agreement, considered as though such person were a member of the
Incumbent Board; or
(c) Approval by the stockholders of the Corporation of a
reorganization, share exchange, merger or consolidation with respect to which,
in any such case, the persons who were the stockholders of the Corporation
immediately prior to such reorganization, share exchange, merger or
consolidation do not, immediately thereafter, own more than 50% of the
combined voting power entitled to vote in the election of directors of the
reorganized, merged or consolidated company; or
(d) Liquidation or dissolution of the Corporation or a sale of
all or substantially all of the assets of the Corporation.
4. DUTIES. During the Employment Term, Executive shall serve the
Corporation as its Vice President, or in such other capacity or capacities as
may be determined by the Board; provided, however, that his authority, duties
and responsibilities shall be at least commensurate in all material respects
with his present offices, status and titles. Executive shall perform such
executive, administrative, development, production, marketing and other
services and duties for the Corporation, or any Subsidiary, at the present
location of the Corporation or any office or location less than 25 miles from
such location. During the Employment Term, and excluding any periods of
vacation and sick leave, Executive agrees to devote reasonable attention and
time during normal business hours to the business and affairs of the
Corporation and, to the extent necessary, to discharge the responsibilities
assigned to Executive hereunder, to use Executive's reasonable best efforts to
perform faithfully and efficiently such responsibilities. During the
Employment Term it shall not be a violation of this Agreement for Executive to
(A) serve on corporate, civic or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements or teach at educational institutions,
and (C) manage personal investments, so long as Executive's duties in
connection therewith do not unreasonably interfere with Executive's duties
under this Agreement. Activities of Executive consistent with this Section 4
shall not permit the Corporation to terminate Executive's employment for
"Cause", as defined below.
5. COMPENSATION.
(a) Base Salary. During the Employment Term, the Corporation
shall pay to Executive, in equal installments no less frequently than twice
per month (or at such other intervals as are in effect from time to time for
other executive officers of the Corporation), an annual base salary of not
less than $107,068.00 (the "Base Salary"). Base Salary to be paid by the
Corporation to Executive shall be reviewed by the Board of Directors at least
once annually prior to each anniversary of the Effective Date for the purposes
of determining whether any increases to such salary would be appropriate. Any
increase in Base Salary shall not serve to limit or reduce any other
obligation to Executive under this Agreement. Base Salary shall not be
reduced after any such increase.
(b) Bonus. In addition to Base Salary, in the event of a Change
of Control, Executive shall be awarded, for each fiscal year ending during the
Employment Term, an annual bonus ("Annual Bonus") in cash at least equal to
the average annual bonus payable to Executive from the Corporation and its
Subsidiaries in respect of two of the last three fiscal years immediately
preceding the date of any Change of Control in which the bonuses paid were
higher.
(c) Incentive, Savings, Welfare Benefit Plans and Retirement
Plans. In addition to Base Salary and Bonus, Executive and/or Executive's
family, as the case may be, shall be eligible to participate in or benefit
from, such medical insurance, life insurance, disability insurance, pension,
bonus, profit-sharing, stock option, stock purchase and any other fringe
benefit plans, practices, programs or policies provided by the Corporation and
its Subsidiaries to executive employees in accordance with the terms of such
plans, practices, programs and policies, in each case providing benefits which
are the economic equivalent to those in effect with respect to other key
employees of the Corporation and its Subsidiaries, including the period
subsequent to a Change of Control.
(d) Key Man Insurance. Executive agrees that the Corporation
may obtain key man life insurance with respect to Executive, and in connection
therewith, agrees to submit to all reasonable and customary examinations by
the provider of such life insurance.
(e) Expenses. Executive shall be entitled to reimbursement for
all normal and reasonable travel, entertainment and other expenses necessarily
incurred by him in the performance of his duties hereunder in accordance with
the most favorable policies, practices and procedures of the Corporation and
its Subsidiaries in effect with respect to other key employees of the
Corporation and its Subsidiaries, including the period subsequent to a Change
of Control.
(f) Fringe Benefits. During the Employment Term, Executive
shall be entitled to fringe benefits, including but not limited to the use of
an automobile and payment of related expenses, in accordance with the most
favorable plans, practices, policies and programs of the Corporation and its
Subsidiaries in effect with respect to other key employees of the Corporation
and its Subsidiaries, including the period subsequent to a Change of Control.
(g) Disability. Except as hereinafter provided, the Corporation
shall pay Executive for any period, up to a maximum of six months, during the
Employment Term in which he is unable fully to perform his duties because of
physical or mental disability or incapacity, an amount equal to the Base
Salary due him for such period pursuant to Section 5(a), less the aggregate
amount of all income disability benefits which for such period he may receive
by reason of (i) any group health insurance plan or disability insurance plan,
which is intended to function as a salary replacement plan, (ii) any
applicable compulsory state disability law, (iii) the Federal Social Security
Act, (iv) any applicable workmen's compensation law or similar law and (v) any
plan towards which the Corporation or any subsidiary or affiliate of the
Corporation (including any predecessor of any thereof) has contributed or for
which it has made payroll deductions, such as group accident or health
policies, other than those which reimburse for actual medical expenses.
(h) Vacation. During the Employment Term, Executive shall be
entitled to paid vacation in accordance with the most favorable plans,
practices, policies and programs of the Corporation and its Subsidiaries as in
effect with respect to other key employees of the Corporation and its
Subsidiaries, including any period after a Change of Control.
6. STOCK OPTIONS.
(a) As part of the consideration to be paid to Executive for his
services hereunder, Executive shall be eligible to participate in any stock
incentive plan adopted by the Corporation (the "Plan") for which an executive
level employee may participate.
(b) The Corporation hereby agrees that it shall cause to be
filed with the Securities and Exchange Commission a registration statement on
Form S-8 (or equivalent form as may be in effect at such time) with respect to
all options theretofore granted to Executive under the Plan. The Corporation
covenants that it will keep such registration statement current until
Executive is no longer employed by the Corporation; PROVIDED, HOWEVER, that if
Executive's employment is terminated hereunder other than pursuant to Sections
7(a), 7(b) or 7(d), then Executive shall have until 90 days following the
termination of his employment to exercise any such vested options which he
owned at the time of such termination, and the Corporation shall maintain the
effectiveness of such registration statement for such period. The Corporation
also hereby agrees that, for so long as either the Corporation does not have
an effective registration statement on Form S-8 or the Corporation has an
effective registration statement on Form S-8 but Executive is restricted in
his ability to resell shares acquired pursuant to the exercise of options
because of the provisions of General Instruction C.2(b) to Form S-8, Executive
shall have "piggyback" registration rights with respect to the options granted
to Executive under the Plan and the shares underlying such options.
7. RIGHTS OF TERMINATION.
(a) Cause. During the Employment Term, the Corporation shall
have the right, at any time effective upon notice to Executive, to terminate
Executive's employment for "Cause" (as hereinafter defined). For purposes of
this Agreement, "Cause" shall mean (i) an act or acts of personal dishonesty
engaged in by Executive and intended to result in substantial personal
enrichment of Executive at the expense of the Corporation, and (ii) repeated
violations by Executive of Executive's obligations under Section 4 of this
Agreement which are demonstrably willful and deliberate on Executive's part
and which are not remedied in a reasonable period of time after receipt of
written notice from the Corporation.
(b) Disability; Death. In the event that Executive, due to
physical or mental disability or incapacity, is unable to substantially
perform his duties hereunder for a period of six or more successive months,
the Corporation or Executive shall have the right to terminate this Agreement
and Executive's employment hereunder upon 30 days' prior written notice and
termination shall be effective on the 30th day after receipt of such notice by
the Executive (the "Disability effective date"). In the event that Executive
is able to and recommences rendering services and performing his duties
hereunder within such 30-day notice period, Executive shall be reinstated and
such notice shall be without further force or effect. If Executive dies
during the Term, this Agreement shall terminate immediately upon his death.
(c) Good Reason. Notwithstanding anything to the contrary
contained herein, after a Change of Control and continuing during the
Employment Term, Executive's employment may be terminated by Executive for
Good Reason and such termination shall be deemed a constructive discharge of
Executive by the Corporation. For purposes of this Agreement, "Good Reason"
shall mean:
(i) the assignment to Executive of any duties inconsistent
in any respect with Executive's position (including status, offices, titles
and reporting requirements, authority duties or responsibilities as
contemplated by Section 4 of this Agreement, or any other action by the
Corporation which results in a diminution in such position, authority, duties
or responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the
Corporation promptly after receipt of notice thereof given by Executive;
(ii) any failure by the Corporation to comply with any of
the provisions of Sections 5 and 6 of this Agreement, other than an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Corporation promptly after receipt of notice thereof given by
Executive;
(iii) the Corporation's requiring Executive to be based at
any office or location other than that described in Section 4 hereof, except
for travel reasonably required in the performance of Executive's
responsibilities;
(iv) any purported termination by the Corporation of
Executive's employment otherwise than as expressly permitted by this
Agreement; or
(v) any failure by the company to comply with and satisfy
Section 13 of this Agreement.
For purposes of this Section 7(c), any good faith determination of "Good
Reason" made by Executive shall be conclusive. Anything in this Agreement to
the contrary notwithstanding, a termination by Executive for any reason during
the 30-day period immediately following the first anniversary of a Change in
Control shall be deemed to be a termination for Good Reason for all purposes
of this Agreement.
(d) Voluntary Termination. Executive may terminate this
Agreement on six months written notice to the Corporation at any time.
(e) Notice of Termination. Any termination of Executive's
employment by the Corporation for Cause, or by Executive for Good Reason or by
Executive for Voluntary Termination, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 18 of
this Agreement. Such Notice of Termination shall mean a written notice which
(i) indicates the specific termination provision in this Agreement relied on,
(ii) sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination, and (iii) if the Date of Termination (as
defined below) is other than the date of receipt of such notice, specifies the
termination date (which date, except for Voluntary Termination, shall not be
more than 15 days after the giving of such notice). The failure by Executive
to set forth in the Notice of Termination any fact or circumstances which
contributes to a showing of Good Reason shall not waive any right of Executive
hereunder or preclude Executive from asserting such fact or circumstance in
enforcing his rights hereunder.
(f) Date of Termination. "Date of Termination" means the date
of receipt of the Notice of Termination or any later date specified therein,
as the case may be; provided, however, that (i) if the Executive's employment
is terminated by the Corporation other than for Cause or Disability or by
reason of death, the Date of Termination shall be the date on which the
Corporation notifies Executive of such termination and (ii) if Executive's
employment is terminated by reason of death or Disability, or voluntary
withdrawal, the Date of Termination shall be the date of death or Executive or
the Disability effective date, or the last date of employment, as the case may
be.
8. EFFECTS OF TERMINATION.
(a) Cause or Voluntary Termination. In the event that
Executive's employment is terminated pursuant to Section 7(a) hereof for Cause
or 7(d) for Voluntary Termination, Executive's employment hereunder shall
terminate without further obligations to Executive, other than those
obligations accrued or earned and vested (if applicable) by Executive through
the Date of Termination, including for this purpose all "Accrued Obligations",
defined as those obligations accrued or earned and vested (if applicable) by
Executive as of the Date of Termination, including, for this purpose (i)
Executive's full Base Salary accrued but unpaid as of the Date of Termination
(ii) the product of the Annual Bonus paid to Executive for the last full
fiscal year and a fraction, the numerator of which is the number of days in
the current fiscal year through the Date of Termination, and the denominator
of which is 365, (iii) any compensation previously deferred by Executive
(together with any accrued earning thereon) and not yet paid by the
Corporation and any accrued vacation pay not yet paid by the Company and (iv)
all amounts payable to the estate or designated beneficiaries of Executive
under any pension, savings, life insurance or other plans, practices, policies
and programs of the Corporation, and/or all other amounts payable pursuant to
Sections 5(c), (e), (f), (g) and (h) hereof. In addition:
(i) the Corporation shall pay to Executive all Accrued
Obligations such that the Accrued Obligations specified in clauses (i), (ii)
and (iii) of Section 8(a) hereof, shall be paid to Executive in a lump sum in
cash within 30 days of the Date of Termination, and the other Accrued
Obligations shall be paid in accordance with Executive's specific elections
pursuant to, and otherwise in accordance with the terms of, any plan,
practice, policy or program providing benefits forming a part of the Accrued
Obligations;
(ii) all then non-exercisable options shall immediately and
automatically terminate, and
(iii) any registration rights theretofore granted which
have not been invoked with respect to shares of Common Stock of the
Corporation either acquired by Executive pursuant to the exercise of stock
options or underlying vested options shall immediately and automatically
terminate.
(b) Death. In the event that Executive's employment is
terminated pursuant to Section 7(b) hereof as a result of Death, Executive's
employment hereunder shall cease in accordance with Section 7(b) without
further obligations under this Agreement to Executive's representatives, other
than those obligations accrued or earned and vested (if applicable) by
Executive as of the Date of Termination, including, for this purpose all
Accrued Obligations. The Corporation shall pay to Executive or his legal
representatives, as the case may be, all Accrued Obligations specified in
clauses (i), (ii) and (iii) in a lump sum within 30 days of the Date of
Termination, and the other Accrued Obligations shall be paid in accordance
with the Executive's specific elections pursuant to, and otherwise in
accordance with the terms of, any such plan, practice, policy or program.
Anything in this Agreement to the contrary notwithstanding, Executive's family
shall be entitled to receive benefits at least equal to the most favorable
plans, practices, policies and programs of the Corporation and its
Subsidiaries in effect with respect to other key employees of the Corporation
and its Subsidiaries, including any period after a Change of Control.
(c) Disability. In the event that Executive's employment is
terminated pursuant to Section 7(b) hereof as a result of Disability,
Executive's employment hereunder shall cease without further obligations under
this Agreement to Executive, other than those obligations accrued or earned
and vested (if applicable) by Executive as of the Date of Termination,
including, for this purpose all Accrued Obligations. Accrued Obligations
specified in clauses (i), (ii) and (iii) of Section 8(a) shall be paid to
Executive in a lump sum within 30 days of the Date of Termination, and the
other Accrued Obligations shall be paid in accordance with the Executive's
specific elections pursuant to, and otherwise in accordance with the terms of,
any such plan, practice, policy or program. Anything in this Agreement to the
contrary notwithstanding, Executive shall be entitled after the Disability
effective date to receive benefits at least equal to the most favorable plans,
practices, policies and programs of the Corporation and its Subsidiaries in
effect with respect to other key employees of the Corporation and its
Subsidiaries, including any period after a Change of Control.
(d) Good Reason or Other than Cause or Disability by the
Corporation or Other than Death or Other than Voluntary Termination. In the
event that Executive's employment hereunder during the Term is terminated
after a Change of Control (x) for Good Reason by Executive, or (y) for other
than Cause or other than Disability by the Corporation or other than Death or
other than Voluntary Termination, the Corporation shall pay to Executive in a
lump sum in cash within 30 days after the Date of Termination (or in
accordance with the Executive's specific elections pursuant to, and otherwise
in accordance with the terms of, any such plan, practice, policy or program
providing benefits forming a part of the Accrued Obligations specified in
clause (iv) of Section 8(a) hereof), the aggregate of the following amounts
and shall provide the following benefits:
(i) the Accrued Obligations in clauses (i), (ii), (iii)
and (iv) of Section 8(a)
(ii) a lump sum severance payment in an amount equal to
450% of the sum of (x) Executive's Base Salary (on an annualized basis) for
the year which includes the Date of Termination and (y) the highest Annual
Bonus earned (whether or not deferred) by Executive during the three years
immediately preceding the year which includes the date of Termination; and
(iii) following Executive's termination or employment,
the Corporation shall continue to cover Executive and his family under, or
provide Executive and his family with insurance coverage no less favorable
than, the Corporation's life, disability, health, dental or other employee
welfare benefit plans or programs (as in effect on the Date of Termination)
for a period equal to the lesser of (x) three years following the Date of
Termination or (y) until Executive is provided by another employer with
benefits substantially comparable to the benefits provided by such plans or
programs.
9. CONFIDENTIALITY.
(a) Executive understands and acknowledges that as a result of
Executive's employment with the Corporation, and involvement with the business
of the Corporation, he is or shall necessarily become informed of, and have
access to, confidential information of the Corporation including, without
limitation, inventions, patents, patent applications, trade secrets, technical
information, know-how, plans, specifications, marketing plans and information,
pricing information, identity of customers and prospective customers and
identity of suppliers, and that such information, even though it may have been
or may be developed or otherwise acquired by Executive, is the exclusive
property of the Corporation to be held by Executive in trust and solely for
the Corporation's benefit. Executive shall not at any time, either during or
subsequent to his employment hereunder, reveal, report, publish, transfer or
otherwise disclose to any person, corporation or other entity, or use, any of
the Corporation's confidential information, without the written consent of the
Board, except for use on behalf of the Corporation in connection with the
Corporation's business, and except for such information which legally and
legitimately is or becomes of general public knowledge from authorized sources
other than Executive.
(b) Upon the termination of his employment with the Corporation
for any reason, Executive shall promptly deliver to the Corporation all
drawings, manuals, letters, notes, notebooks, reports and copies thereof and
all other materials, including, without limitation, those of a secret or
confidential nature, relating to the Corporation's business which are in
Executive's possession or control. The Corporation shall reimburse Executive
for any packing or moving costs reasonably incurred by Executive in connection
with the foregoing delivery.
(c) For purposes of this Section 9 and Section 10, the term
"Corporation" includes the Corporation and any other predecessor corporation,
and affiliates (including, without limitation, distributors, licensees,
franchisees, subsidiaries and joint ventures).
10. NON-COMPETITION. Executive agrees that, for a period commencing
on the date hereof and ending two years after the termination of his
employment with the Corporation for any reason, he shall not, anywhere in the
United States (or for such lesser area or such lesser period as may be
determined by a court of competent jurisdiction to be a reasonable limitation
on the competitive activity of Executive) directly or indirectly:
(a) engage, directly or indirectly, as an independent contractor
in any activity for or on behalf of any person or entity in a competitive line
of business to that carried on by the Corporation during the term of his
employment therewith, competitive with the business carried by the Corporation
during the term of Executive's employment therewith or dealt in by Executive
during his employment with the Corporation;
(b) solicit or attempt to solicit business of any customers of
the Corporation (including prospective customers solicited by the Corporation)
for products or services the same or similar to those offered, sold, produced
or under development by the Corporation during the term of his employment
therewith or dealt in by Executive during his employment with the Corporation;
(c) otherwise divert or attempt to divert from the Corporation
any business whatsoever;
(d) solicit or attempt to solicit for any business endeavor any
employee of the Corporation;
(e) interfere with any business relationship between the
Corporation and any other person;
(f) use the name of the Corporation or a name similar thereto;
or
(g) render any services as an officer, director, employee,
partner, consultant or otherwise to, or have any interest as a stockholder,
partner, lender or otherwise in, any person which is engaged in activities
which, if performed by Executive would violate this Section 10;
PROVIDED, HOWEVER, that notwithstanding the foregoing, Executive shall not
have any obligation under this Section 10 (although Executive's obligations
under Section 9 shall continue unimpaired) if either (A) Executive's
employment hereunder is terminated by the Corporation other than pursuant to
Section 7(a), 7(b) or 7(d), or (B) after a Change of Control, (x) the
Corporation does not renew Executive's employment upon expiration of the
Employment Term other than for reasons specified in Section 7(a), 7(b) or
7(d), or (y) the Corporation does not offer a renewal of Executive's
employment on terms at least as favorable as those prevailing during the last
year of the Employment Term. The foregoing shall not prevent Executive from
purchasing or owning up to five percent of the voting securities of any
corporation, the securities of which are publicly-traded.
11. REMEDIES AND SURVIVAL. Because the Corporation does not have an
adequate remedy at law to protect its interest in its trade secrets,
privileged, proprietary or confidential information and similar commercial
assets, or its business from Executive's competition, the Corporation shall be
entitled to injunctive relief, in addition to such other remedies and relief
that would, in the event of a breach of the provisions of Sections 9 or 10, be
available to the Corporation. The provisions of Sections 9 and 10 and this
Section 11 shall survive any termination of Executive's employment with the
Corporation for any reason whatsoever. In no event shall an asserted
violation of the provisions of Sections 9 or 10 of this Agreement constitute a
basis for deferring or withholding any amounts otherwise payable to Executive
under this Agreement.
12. FULL SETTLEMENT; LEGAL EXPENSES. The Corporation's obligation to
make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action with the Corporation may
have against Executive or others. In no event shall Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to Executive under any of the provisions of this Agreement.
The Corporation agrees to pay, upon written demand therefore by Executive, all
legal fees and expenses which Executive may reasonably incur as a result of
any dispute or contest (regardless of the outcome thereof) by or with the
Corporation or others regarding the validity or enforceability of, or
liability under, any provision of this Agreement (including as a result of any
contest by the Executive about the amount of any payment pursuant to Section
13, plus interest at the applicable Federal rate provided for in Section
7872(f)(2) of the Code. Executive shall be entitled to seek both legal and
equitable relief and remedies, including, without limitation, specific
performance of the Corporations obligations hereunder, in his sole discretion.
If the parties hereto so agree in writing, any disputes under this Agreement
may be settled by arbitration.
13. CERTAIN ADDITIONAL PAYMENTS BY THE CORPORATION.
(a) Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment or distribution made, or
benefit provided, (including, without limitation, the acceleration of any
payment, distribution or benefit), by the Corporation to or for the benefit of
Executive (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 13) ("Payment") would be
subject to the excise tax imposed by Section 4999 of the Code (or any similar
excise tax) or any interest or penalties are incurred by Executive with
respect to such excise tax (such excise tax, together with any such interest
and penalties, hereinafter collectively, the "Excise Tax"), then Executive
shall be entitled to receive an additional payment ("Gross-Up Payment') in an
amount such that after payment by the employee of all taxes (including any
Excise Tax) imposed upon the Gross-Up Payment and any interest or penalties
imposed with respect to such taxes, Executive retains from the Gross-Up
Payment an amount equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 13(c), all
determinations required to be made under this Section 13, including
determination of whether a Gross-Up Payment is required and of the amount of
any such Gross-Up Payment, shall be made by the accountants regularly
servicing the Corporation at the time of any Change of Control, or if no
change of Control has occurred, at the time of the termination of this
Agreement (the "Accounting Firm"). Detailed supporting calculations shall be
provided by the Accounting Firm both to the Corporation and Executive within
15 business days of the date of termination, if applicable, or such earlier
time as is required by the Corporation, provided that any determination that
an Excise Tax is payable by Executive shall be made on the basis of
substantial authority. The initial Gross-Up Payment if any, as determined
pursuant to this Section 13(b), shall be paid to Executive within five
business days of the receipt of the Accounting Firm's determination. If the
Accounting Firm determines that no Excess Tax is payable by Executive, it
shall furnish Executive with a written opinion that he has substantial
authority not to report any Excise Tax on his Federal income tax return. Any
determination by the Accounting Firm meeting the requirements of this Section
13(b) shall be binding upon the Corporation and Executive; subject only to
payments pursuant to the following sentence based on a determination that
additional Gross-Up Payments should have been made, consistent with the
calculations required to be made hereunder (the amount of such additional
payments are referred to herein as the "Gross-Up Underpayment'). In the event
that the Corporation exhausts its remedies pursuant to Section 13(c) and
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine at the amount of the Gross-Up Underpayment
that has occurred and any such Gross-Up Underpayment shall be promptly paid by
the Corporation to or for the benefit of Executive. The fees and
disbursements of the Accounting Firm shall by paid by the Corporation.
(c) Executive shall notify the Corporation in writing of any
claim by the Internal Revenue Service, that, if successful, would require
payment by the Corporation of a Gross-Up Payment. Such notification shall be
given a soon as practicable, but not later than ten business days after
Executive received written notice of such claim and shall apprise the
Corporation of the nature of such claim and the date on which such claim is
requested to be paid. Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it has given such
notice to the Corporation (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Corporation
notifies Executive in writing prior to the expiration of such period that it
desires to contest such claim and that it will bear the costs and provide the
indemnification as required by this sentence, Executive shall:
(i) give the Corporation any information reasonably
requested by Corporation relating to such claim,
(ii) take such action in connection with contesting such
claim as the Corporation shall reasonably request in writing from time to
time, including without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the Corporation,
(iii) cooperate with the Corporation in good faith in order
effectively to contest such claim, and
(iv) permit the Corporation to participate in any
proceedings relating to such claim;
provided, however, that the Corporation shall bear and pay directly all costs
and expenses (including additional interest and penalties incurred in
connection with such contest and shall indemnify and hold harmless Executive,
on an after-tax basis, for any Excise Tax or income tax, including interest
and penalties with respect thereto, imposed as a result of such representation
and payment of costs and expenses. Without limitation on the foregoing
provisions of this Section 13(c), the Corporation shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Corporation shall determine; provided that if the Corporation directs
Executive to pay such claim and sue for a refund, Corporation shall advance
the amount of such payment to Executive, on an interest-free basis and shall
indemnify and hold Executive harmless, on an after-tax basis, from any Excise
Tax, or income tax, including interest or penalties with respect thereto,
imposed with respect to such advance or with respect to any imputed income
with respect to such advance; and further provided that any extension of the
statute of limitations relating to the payment of taxes for the taxable year
of Executive with respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the Corporation's
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(d) If, after the receipt by Executive of an amount advanced by
the Corporation pursuant to Section 13(c), Executive becomes entitled to
receive any refund with respect to such claim, Executive shall (subject to the
Corporation's complying with the requirements of Section 13(c)) promptly pay
to the Corporation the amount of such refund (together with any interest paid
or credited thereon after taxes applicable thereto). If, after the receipt by
Executive of an amount advanced by the Corporation pursuant to Section 13(c),
a determination is made that Executive shall not be entitled to any refund
with respect to such claim and the Corporation does not notify Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then any obligation of Executive to repay
such advance shall be forgiven and the amount of such advance shall offset, to
the extent thereof, the amount of Gross-Up Payment required to be paid.
14. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit Executive's continuing or future participation in any
benefit, bonus, incentive or other plans, practices, policies or programs
provided by the Corporation or any of its Subsidiaries and for which Executive
may qualify, nor shall anything herein limit or otherwise affect such rights
as Executive may have under any stock option or other agreements with the
Corporation or any of its Subsidiaries. Amounts which are vested benefits or
which Executive is otherwise entitled to receive at or subsequent to the Date
of Termination shall be payable in accordance with the plan, practice, policy
or program of the Corporation under which Executive has such entitlement.
15. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties hereto with respect to its subject matter, merges
and supersedes any prior or contemporaneous agreements or understandings with
respect to its subject matter, and shall not be modified or terminated except
by another agreement in writing executed by the Corporation and Executive.
Failure of a party to enforce one or more of the provisions of this Agreement
or to require at any time performance of any of the obligations hereof shall
not be construed to be a waiver of such provisions by such party nor to in any
way affect the validity of this Agreement or such party's right thereafter to
enforce any provision of this Agreement, nor to preclude such party from
taking any other action at any time which it would legally be entitled to
take.
16. SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable by any court or tribunal of competent jurisdiction,
the remainder of this Agreement shall not be affected by such judgement and
such provision shall be carried out as nearly as possible according to its
original terms and intent to eliminate such invalidity or unenforceability.
17. SUCCESSORS AND ASSIGNS. This Agreement is personal to Executive
and without the prior written consent of the Corporation shall not be
assignable by Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by Executive's legal representatives or Successors in Interest. This Agreement
shall insure to the benefit of and be binding upon the Corporation and its
successors and assigns. The Corporation will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Corporation would be required to perform it if no such
succession had taken place. As used in the Agreement, "Corporation" shall
mean the Corporation as hereinbefore defined and any successor to its business
and/or assets as aforesaid with assumes and agrees to perform this Agreement
by operation of law or otherwise.
18. COMMUNICATIONS AND NOTICES. All notices and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given at the time when mailed in any United States post office enclosed in a
registered or certified postage-paid envelope and addressed as set forth at
the beginning of this Agreement, or to such other address as any party may
specify by notice to the other parties, or delivered by Federal Express or a
similar overnight courier to such address; PROVIDED, HOWEVER, that any notice
of change of address shall be effective only upon receipt.
19. CONSTRUCTION; COUNTERPARTS. The headings contained in this
Agreement are for convenience only and shall in no way restrict or otherwise
affect the construction of the provisions hereof. References in this
Agreement to Sections are to the sections of this Agreement. This Agreement
may be executed in multiple counterparts, each of which shall be an original
and all of which together shall constitute one and the same instrument.
20. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. Executive's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a waiver of
such provision. This Agreement contains the entire understanding of the
Corporation and Executive with respect to the subject matter hereof but does
not supersede or override the provisions of any stock option, employee benefit
or other plan, program, policy or practice in which Executive is a participant
or under which Executive is a beneficiary.
21. GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of New York.
IN WITNESS WHEREOF, the undersigned parties have executed and delivered
this Agreement as of the date first above written.
TOUCHSTONE APPLIED SCIENCE
ASSOCIATES, INC.
By: /s/ ANDREW L. SIMON
--------------------------------------
Name: Andrew L. Simon
Title: President
Executive:
/s/ STEPHEN H. IVENS
--------------------------------------
Stephen Ivens
<TABLE>
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
EXHIBIT II
COMPUTATION OF EARNINGS PER COMMON SHARE
----------------------------------------
<CAPTION>
Six Months Ended Three Months Ended
April 30, April 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Primary earnings:
Net income $ 160,111 $ 220,296 $ (6,438) $ 76,812
Shares:
Weighted average
Number of common shares and
common share equivalents
outstanding 7,827,429 10,339,150 7,604,322 10,339,150
Primary earnings per common
share $ .02 $ .02 $ -- $ .01
========== ========== ========== ==========
Fully diluted earnings:
Net income $ 160,111 $ 220,296 $ (6,438) $ 76,812
Net (after tax) interest
expense related to
convertible debt -- -- -- --
---------- ---------- ---------- ----------
Net income as adjusted $ 160,111 $ 220,296 $ (6,438) $ 76,812
========== ========== ========== ==========
Shares:
Weighted average number of
common shares and common share
equivalents outstanding 7,827,429 10,339,150 7,604,322 10,339,150
Fully diluted earnings per
common share $ .02 $ .02 $ -- $ .01
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Balance
Sheet and Statements of Income filed as part of the report on Form 10QSB for
the fiscal quarter ended April 30, 1996 and is qualified in its entirety by
reference to such report on Form 10QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> APR-30-1996
<CASH> 1,094,757
<SECURITIES> 2,230,740
<RECEIVABLES> 299,989
<ALLOWANCES> 0
<INVENTORY> 199,238
<CURRENT-ASSETS> 3,919,309
<PP&E> 3,476,611
<DEPRECIATION> 1,647,565
<TOTAL-ASSETS> 8,710,895
<CURRENT-LIABILITIES> 461,593
<BONDS> 0
0
0
<COMMON> 760
<OTHER-SE> 7,153,100
<TOTAL-LIABILITY-AND-EQUITY> 8,710,895
<SALES> 1,285,086
<TOTAL-REVENUES> 1,366,986
<CGS> 363,961
<TOTAL-COSTS> 744,724
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,060
<INCOME-PRETAX> 227,241
<INCOME-TAX> 67,130
<INCOME-CONTINUING> 160,111
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 160,111
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
