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 January 31, 1997
[ ] Transition report pursuant to Section 13 or 15(d) of the Exchange Act
For the transition period from ___________ to ___________
Commission file number 0-20303
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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
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(Address of principal executive offices)
(914) 277-8100
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(Issuer's telephone number, including area code)
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(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
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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 March 6, 1997:
--------------------
7,939,322 shares of Common Stock, par value $0.0001 per share.
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Transitional Small Business Disclosure Format (check one):
Yes No X
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<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The financial statements for the Company's fiscal quarter ended
January 31, 1997 are attached to this Report, commencing at page F-1.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Until January 1997, the Company's revenues were derived
solely from the sale of its Degrees of Reading Power Tests and Degrees
of Word Meaning Tests, the sales 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.
With the acquisition of Beck Evaluation & Testing Associates, Inc.
("BETA") on January 2, 1997, revenues are now also derived from the
provision of consulting services to schools and publishers. BETA is a
wholly-owned subsidiary of the Company.
RESULTS OF OPERATIONS
REVENUES. For the three-month period ended January 31,
1997, the Company's total net revenues increased 20.9% versus the
comparable 1996 period ($937,511 in 1997 versus $775,616 in 1996). Of
the $161,895 increase in revenues, $48,437 is attributable to revenue
generated by BETA and $113,458 is attributable to the Company's core
products.
For the three-month period ended January 31, 1997, contract
income was essentially flat compared to the comparable 1996 period
($466,048 in 1997 versus $467,480 in 1996). Contract income now
represents 49.7% of first quarter revenues versus 60.3% of first
quarter sales in 1996. With the acquisition of BETA and the increase
in catalog sales for the Company's core products, the Company has
become less dependent upon any one major source for its income.
For the three-month period ended January 31, 1997, catalog
sales for shelf tests and associated products increased 37.3% versus
the comparable 1996 period ($423,026 in 1997 versus $308,136 in 1996).
Catalog sales now represent 45.1% of first quarter revenues versus
39.7% of first quarter revenues in 1996. Management believes that
this significant increase in catalog sales is attributable to the
continued emphasis by the Company on the marketing and sales effort in
this area and the new software products that the Company introduced
into the market during the second half of the Company's 1996 fiscal
year.
For the three-month period ended January 31, 1997,
consulting revenues of $48,437 were attributable to BETA, which
represented 5.2% of first quarter revenues. Such amount represents
only consulting revenues generated from January 2, 1997, the date of
the acquisition of BETA, through the end of the first quarter on
January 31, 1997.
COSTS AND EXPENSES. For the three-month period ended
January 31, 1997, cost of goods sold increased 27.9% versus the
comparable 1996 period ($260,112 in 1997 versus $203,346 in 1996).
Cost of goods sold as a percentage of sales for the three-month period
ended January 31, 1997 increased 1.5% versus the comparable 1996
period (27.7% in 1997 versus 26.2% in 1996). This increase is due to
an overall change in product mix between catalog sales, contract
income and consulting income.
For the three-month period ended January 31, 1997, selling
expenses increased 35.8% versus the comparable 1996 period ($209,232
in 1997 versus $154,028 in 1996). This increase is primarily
attributable to the Company's addition of three educational
consultants in the second half of the Company's 1996 fiscal year.
For the three-month period ended January 31, 1997, general
and administrative expenses increased 42.8% versus the comparable 1996
period ($254,852 in 1997 versus $178,470 in 1996). This increase in
spending is primarily attributable to professional fees associated
with the review of potential acquisition candidates and fees
associated with deferred offering expenses in the comparable 1996
period.
In fiscal year 1996, the Company had product development
costs relating to a consumer product which was in development. In
late 1996, the product achieved feasibility. Therefore, in accordance
with generally accepted accounting principles, the Company is now
capitalizing the costs associated with the product prior to its
introduction into the marketplace.
For the three-month period ended January 31, 1997, interest
expense decreased 3.1% versus the comparable 1996 period ($17,247 in
1997 versus $17,800 in 1996). For the three-month period ended
January 31, 1997, investment income increased 11.9% versus the
comparable 1996 period ($40,055 in 1997 versus $35,796 in 1996). For
the three-month period ended January 31, 1997, the Company experienced
a loss on the sale of assets of $11,700. There were no comparable
expenses in the comparable 1996 period.
NET INCOME AND EARNINGS PER SHARE. For the three-month
period ended January 31, 1997, net after-tax income decreased 9.1%
versus the comparable 1996 period ($151,442 in 1997 versus $166,549 in
1996). This decrease is primarily due to increased selling and
general and administrative expenses.
For the three-month period ended January 31, 1997, earnings
per share were essentially flat versus the comparable 1996 period
($0.02 in 1997 and 1996).
LIQUIDITY AND CAPITAL RESOURCES
Working capital, which consists principally of cash, cash
equivalents, marketable securities and accounts receivable, was
$4,024,816 on January 31, 1997, versus $4,116,202 on October 31, 1996.
The decrease in working capital is primarily attributable to the
payment of the purchase price of BETA.
For the three-month period ended January 31, 1997, net cash
flows from operating activities were $58,676 (versus $377,605 in the
comparable 1996 period). Additionally, for the three-month period
ended January 31, 1997, the Company invested $115,829 to increase the
size of its Test Passage Bank (versus $86,720 in the comparable 1996
period), $38,824 in property, plant and equipment (versus $27,466 in
the comparable 1996 period), $44,476 readying its new DRP-->BookLink
software product for market (versus $28,734 the comparable 1996
period), $29,900 to purchase the Maculaitis Test Series (versus no
comparable expenditures in the comparable 1996 period) and $143,974 to
purchase BETA (versus no comparable expenditures in the comparable
1996 period). In the three-month period ended January 31, 1997, the
Company received proceeds of $200,000 from the maturation of certain
marketable securities (versus no comparable receipt of proceeds in
1996).
For the three-month period ended January 31, 1997, the
Company had a net cash outflow from financing activities of $26,020,
as compared to a net cash inflow from financing activities of $322,764
for the comparable 1996 period. The 1996 inflow was attributable to
the exercise of certain options and warrants; there were no comparable
exercises in 1997.
In November 1996, the Company refinanced its second mortgage
for the addition to its facility which was completed in 1991. Both
the first and second mortgages are due in 2001. The Company has
certain debt obligations in connection with the acquisition of BETA
which management believes can be financed from the cash flow from
operations. 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.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
As of December 13, 1996, the Company entered into a
consulting agreement with Paris Group, Ltd. ("Paris"), pursuant to
which Paris agreed to perform financial management and consulting
services to the Company for a term of five years in exchange for
100,000 shares of the Company's Common Stock, par value $0.0001 per
share (the "Common Stock").
On December 30, 1996, the Company purchased certain assets
relating to the Maculaitis Test Series from the Steck-Vaughn Company
for an aggregate purchase price of $50,000, payable in cash.
As of January 2, 1997, the Company purchased all of the
outstanding capital stock of BETA from the holders of such shares for
a purchase price equal to (i) $130,000 in cash, (ii) $150,000 payable
in promissory notes, bearing interest at the rate of 8 1/4% and
maturing on January 2, 1999, and (iii) 150,000 shares of the Company's
Common Stock.
As of January 2, 1997, the Company entered into an
employment agreement with Michael D. Beck, pursuant to which the
Company agreed to employ Mr. Beck, and Mr. Beck agreed to remain, as
the Company's Vice President and as President and Chief Executive
Officer of BETA, a wholly-owned subsidiary of the Company, for a term
of three years, subject to automatic yearly extensions and certain
rights of termination as provided in such agreement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 10.1 -- Stock Purchase Agreement, dated as of
January 2, 1997, between Beck
Evaluation & Testing Associates, Inc.,
Connie K. Beck, Michael D. Beck,
Amanda P. Beck and the Company,
together with all schedules and
exhibits thereto
Exhibit 10.2 -- Employment Agreement, dated as of
January 2, 1997, between the Company
and Michael D. Beck
Exhibit 10.3 -- Assignment, Assumption and Sale
Agreement, dated as of December 30,
1996, between Steck-Vaughn Company and
the Company
Exhibit 10.4 -- Consulting Agreement, dated as of
December 13, 1996, between the Company
and Paris Group, Ltd., as amended by
Amendment No. 1 to Consulting
Agreement, dated as of January 31,
1997, between the Company and Paris
Group, Ltd.
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, dated December 20, 1996,
reporting the entrance by the Company into a letter of
intent to purchase Beck Evaluation & Testing
Associates, Inc.
Current Report on Form 8-K, dated January 30, 1997,
reporting the acquisition by the Company of all the
outstanding stock of Beck Evaluation & Testing
Associates, Inc.
<PAGE>
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
Index to Consolidated Financial Statements (Unaudited)
for the Quarter Ended January 31, 1997
Consolidated Balance Sheets F-1
Consolidated Statements of Income F-3
Consolidated Statements of Cash Flows F-4
Notes to Consolidated Financial Statements F-6
<PAGE> F - 1
<TABLE>
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
AND SUBSIDIARY
Page 1 of 2
CONSOLIDATED BALANCE SHEETS
<CAPTION>
January 31, October 31,
1 9 9 7 1 9 9 6
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ASSETS
------
<S> <C> <C>
Current assets:
Cash and temporary investments $ 916,941 $ 1,049,819
Marketable securities 1,901,967 2,076,158
Accounts receivable 702,044 567,374
Inventories 251,199 242,081
Loan receivable 400,000 400,000
Prepaid expenses and other
current assets 246,215 123,106
----------- -----------
Total current assets 4,418,366 4,458,538
Property, plant and equipment - net of
accumulated depreciation of $929,754
and $909,607, respectively 1,780,826 1,795,195
Other assets:
Test passage bank, net of accumulated
amortization of $974,099 and
$907,053, respectively 2,612,070 2,563,286
Software development costs, net of
accumulated amortization of
$11,700 and $5,427, respectively 175,133 136,928
Goodwill, net of accumulated
amortization of $5,195 368,872 --
Other assets 56,095 21,595
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Total assets $9,411,362 $8,975,542
=========== ===========
<FN>
See notes to financial statements.
</FN>
</TABLE>
<PAGE> F - 2
<TABLE>
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
AND SUBSIDIARY
Page 2 of 2
CONSOLIDATED BALANCE SHEETS
<CAPTION>
January 31, October 31,
1 9 9 7 1 9 9 6
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<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current portion of long-term debt $ 167,440 $ 95,500
Accounts payable and accrued expenses 149,183 246,270
Corporation taxes payable 76,927 566
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Total current liabilities 393,550 342,336
Long-term debt:
Long-term debt less current portion 785,864 728,250
Deferred income taxes 500,094 521,221
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Total liabilities 1,679,508 1,591,807
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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, 7,939,322 and
7,789,322 shares issued and outstanding 794 779
Additional paid-in capital 4,251,319 4,077,935
Stock subscription receivable (14,350) (14,350)
Unrealized holding gain (loss) 3,205 (20,073)
Retained earnings 3,490,886 3,339,444
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Total stockholders' equity 7,731,854 7,383,735
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Total liabilities & stockholders'
equity $9,411,362 $8,975,542
=========== ===========
<FN>
See notes to financial statements.
</FN>
</TABLE>
<PAGE> F - 3
<TABLE>
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Three Months Ended
January 31,
1 9 9 7 1 9 9 6
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<S> <C> <C>
Contract income $ 466,048 $ 467,480
Catalog sales 423,026 308,136
Consulting income 48,437 --
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Total net revenue 937,511 775,616
Cost of goods sold 260,112 203,346
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Gross profit 677,399 572,270
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Operating expenses:
Selling expenses 209,232 154,028
General and administrative expenses 254,852 178,470
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Total operating expenses 464,084 332,498
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Income from operations 213,315 239,772
Other income (expense):
Interest expense (17,247) (17,800)
Loss on sale of assets (11,700) --
Investment income 40,055 35,796
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Net income before income taxes 224,423 257,768
Income taxes 72,981 91,219
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Net income $ 151,442 $ 166,549
=========== ===========
Weighted average shares outstanding
Primary 7,938,223 8,170,853
Fully diluted 7,938,223 8,170,853
Earnings per share
Primary $ .02 $ .02
Fully diluted $ .02 $ .02
<FN>
See notes to financial statements.
</FN>
</TABLE>
<PAGE> F - 4
<TABLE>
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
January 31,
1 9 9 7 1 9 9 6
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<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 151,442 $ 166,549
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 112,262 93,589
Deferred income taxes - net (22,409) (20,235)
Financial advisory services 2,344 26,375
Loss on sale of auto 11,700 --
Changes in operating assets and
liabilities:
Accounts receivable (134,670) 75,331
Inventory (9,118) (5,582)
Other current assets (31,703) 80,914
Accounts payable (21,172) (39,336)
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NET CASH FLOWS FROM OPERATING ACTIVITIES 58,676 377,605
----------- -----------
INVESTING ACTIVITIES
Acquisition of property, plant and
equipment (38,824) (27,466)
Test passage bank (115,829) (86,720)
Software development costs (44,476) (28,734)
Purchase of marketable securities (2,531) (2,531)
Proceeds from sale of marketable
securities 200,000 --
Proceeds from sale of auto 10,000 --
Acquisition of subsidiary (143,974) --
Acquisition of test (29,900) --
----------- -----------
NET CASH FLOWS FROM INVESTING ACTIVITIES (165,534) (145,451)
----------- -----------
FINANCING ACTIVITIES
Principal payments on industrial revenue
bond obligation (20,446) (18,750)
Proceeds from exercise of options -- 428,000
Deferred offering costs -- (86,486)
Mortgage costs (4,374) --
Organizational expenses of subsidiary (1,200) --
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NET CASH FLOWS FROM FINANCING ACTIVITIES (26,020) 322,764
----------- -----------
NET CHANGE IN CASH AND TEMPORARY INVESTMENTS (132,878) 554,918
CASH AND TEMPORARY INVESTMENTS
AT BEGINNING OF PERIOD 1,049,819 617,305
----------- -----------
CASH AND TEMPORARY INVESTMENTS
AT END OF PERIOD $ 916,941 $1,172,223
=========== ===========
<FN>
See notes to financial statements.
</FN>
</TABLE>
<PAGE> F - 5
<TABLE>
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended
January 31,
1 9 9 7 1 9 9 6
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<S> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 16,310 $ 16,333
=========== ===========
Income taxes paid $ 3,417 $ 1,000
=========== ===========
Stock issued for prepaid consulting
costs (Note B) $ 93,750 $ --
=========== ===========
SUMMARY OF ACQUIRED SUBSIDIARY:
Assets acquired consisting primarily
of Goodwill $ 374,067 $ --
Liabilities assumed, including cash
payment to prior shareholders (294,417) --
----------- -----------
Fair value of common stock issued $ 79,650 $ --
=========== ===========
<FN>
See notes to financial statements.
</FN>
</TABLE>
<PAGE> F - 6
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED 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
January 31, 1997 and October 31, 1996 and the results of operations
for the three months ended January 31, 1997 and 1996 and cash flows
for the three months ended January 31, 1997 and 1996.
The results of operations for the three months ended January 31, 1997
and 1996 are not necessarily indicative of the results to be expected
for the full year.
Except as follows, 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, 1996,
as amended by amendment number 1 on Form 10-KSB/A-1.
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, Beck Evaluation & Testing
Associates, Inc. All material intercompany transactions have been
eliminated in consolidation.
Goodwill
- --------
Included in the purchase of the Company's subsidiary is goodwill
totaling $374,067. This goodwill is being amortized over a period of
six years. The Company will continue to evaluate goodwill for
potential impairment.
<PAGE> F - 7
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE B - CONSULTING AGREEMENT
- -----------------------------
In December 1996, the Company entered into a written consulting
agreement with a financial consulting firm. The consultant is to
receive 100,000 shares of the Company's common stock in exchange for
consulting services. The cost of these services has been valued at
$46,875, the market value for such shares on the date of issuance and
will be expensed over a period of five years.
NOTE C - ACQUIRED SUBSIDIARY
- ----------------------------
In January 1997, the Company acquired all the outstanding common stock
of Beck Evaluation & Testing Associates, Inc., ("BETA"). The purchase
price consisted of $130,000 paid in cash, $150,000 payable in
promissory notes, bearing interest at the rate of 8 1/4% per annum and
maturing on January 2, 1999 and 150,000 shares of the Company's common
stock. The acquisition is being accounted for using the purchase
method of accounting and accordingly, the Company's financial
statements include the operations of BETA from the date of acquisition.
As part of the acquisition, the Company entered into an employment
agreement with a former stockholder and officer of BETA. The
agreement names this former officer as a Vice President of the Company
and the President and Chief Executive officer of BETA. In addition to
other terms and conditions, the agreement is for a three year period,
renewing annually unless terminated in writing, and provides for
compensation of $100,000 per year plus a bonus based upon meeting
certain sales goals.
In January 1997, the Company granted an option pursuant to the
Company's Amended & Restated 1991 Stock Option Incentive Plan, to this
officer to purchase 125,000 shares of the Company's common stock at
$.531 per share, the fair market value on the date of the grant. The
option may be exercised for a four year period commencing one year
from the date of the grant.
<PAGE> F - 8
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE C - ACQUIRED SUBSIDIARY (Continued)
- ----------------------------------------
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-
Based Compensation". The Company currently accounts for its stock-
based compensation plans using the accounting prescribed by Accounting
Principles Board Opinion No. 25 "Accounting for Stock Issued to
Employees." Since the Company is not required to adopt the fair value
based recognition provisions prescribed under SFAS No. 123, it has
elected only to comply with the disclosure requirements set forth in
the statement which includes disclosing pro forma net income and
earnings per share as if the fair value based method of accounting had
been applied. The pro forma net income and earnings per share for the
quarter ended January 31, 1997 would have been $111,797 and $.01 had
the new method been applied.
NOTE D - ACQUISITION OF TEST
- ----------------------------
In December 1996, the Company acquired the rights and inventory
pursuant to the assumption of a publishing agreement for the
Maculaitis Test Series for an aggregate of $50,000.
<PAGE>
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: March 10, 1997
Exhibit 10.1
STOCK PURCHASE AGREEMENT
AGREEMENT made as of the 2nd day of January, 1997, by and between
MICHAEL D. BECK ("MICHAEL"), CONNIE K. BECK ("CONNIE"), AND MICHAEL D.
BECK AS GUARDIAN OF AMANDA P. BECK, HIS CHILD ("AMANDA"), each residing
at 35 Guion Street, Pleasantville, New York 10570 (Michael, Connie and
Amanda are collectively known as "Seller"), BECK EVALUATION & TESTING
ASSOCIATES, INC., a New York corporation with its principal place of
business at 35 Guion Street, Pleasantville, New York 10570 (the
"Corporation") and TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC., a
Delaware corporation, with its principal place of business at Fields
Lane, Brewster, New York, ("Purchaser").
WHEREAS, Michael is the owner of five hundred (500) common shares
of the Corporation, Connie is the owner of two hundred and fifty (250)
common shares of the Corporation and Amanda is the owner of two hundred
and fifty (250) common shares of the Corporation; such one thousand
(1000) shares (the "Shares") constituting all of the issued and
outstanding common shares, $1.00 par value per share, of the Corporation
which has authorized 20,000 common shares; and
WHEREAS, Seller desires to sell the Shares at the price set forth
below, and Purchaser desires to purchase the Shares, all on and subject
to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereby agree as follows:
1. SALE OF STOCK. Purchaser will purchase and Seller will sell
-------------
the Shares, which constitute all of the issued and outstanding capital
stock of the Corporation. After the Closing (as defined hereinafter),
the Corporation shall be operated as a wholly-owned, subsidiary of
Purchaser and Michael shall be appointed as its President during the term
of his employment with Purchaser pursuant to the terms of that certain
Employment Agreement between Purchaser and Seller referenced in Section
5(c) below. Employee shall also be nominated as Vice President of the
Corporation and, subject to his agreement to serve, shall be elected as
such officer during the term of his Employment Agreement.
2. PURCHASE PRICE. The Shares shall be purchased and sold
--------------
hereunder for a total consideration of:
(a) Two hundred eighty thousand and 00/100 ($280,000.00)
dollars, payable as set forth in Section 7 below; and
(b) One hundred fifty thousand (150,000) shares of common
stock of Purchaser which shares Purchaser agrees to register under the
Securities Act of 1933, not later than (6) six months after the Closing
(as hereinafter defined).
3. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF
--------------------------------------------------------
SELLER AND THE CORPORATION. Seller and the Corporation represent and
- --------------------------
warrant to Purchaser and agree with Purchaser as follows:
(a) Seller owns beneficially and of record the Shares being
sold hereby, free and clear of any liens, claims, charges, options or
encumbrances, and has full power and authority to transfer the Shares to
Purchaser in accordance with the terms of this Agreement; the sale and
delivery by Seller of certificates representing the Shares vests full
legal and beneficial title thereto in Purchaser free and clear of any
liens, claims, charges, or encumbrances. The Shares are duly authorized,
validly issued, fully paid and nonassessable and constitute one hundred
percent of the issued and outstanding capital stock of the Corporation.
(b) There are no existing options, warrants, subscription
rights, convertible securities or similar rights granted by the
Corporation or Seller or any commitments or agreements of any character
to which the Corporation or the Seller is a party, relating to the
authorized or issued capital stock of the Corporation.
(c) The Corporation is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York,
and has full corporate power to carry on its business as it is now being
conducted, and it is not necessary for the Corporation to be qualified,
licensed or domesticated as a foreign corporation to transact business
in any other jurisdiction. The copies of the Corporation's Articles of
Incorporation and Bylaws heretofore delivered to the Purchaser, are true,
correct and complete copies thereof as now in effect; no provision of the
Articles of Incorporation or Bylaws of the Corporation or any other
instrument to which it or any shareholder is a party or to which it or
any shareholder or any property of the Corporation is subject, prohibits,
limits or otherwise affects the right, power and authority of the Seller
or the Corporation, to enter into and consummate this Agreement.
(d) The Corporation has no subsidiaries or any equity
interest in any entity.
(e) All of the financial records and books of account of the
Corporation, to the best of the knowledge of Seller, are true and
complete and have been maintained in accordance with generally accepted
accounting principles consistently applied. Seller has heretofore
delivered to Purchaser (i) federal income tax returns, including all
schedules thereto, for the years ended 12/31/92, through and including
12/31/95; (ii) management prepared cash basis balance sheets and profit
and loss statements of the Corporation as at and for the year ended
12/31/96 (collectively, the "Financial Statements"). The Financial
Statements are true and complete and accurately reflect the financial
position and results of operations of the Corporation as at the dates and
for the periods indicated. The Corporation has no material liabilities
or obligations whatsoever, liquidated or unliquidated, actual or
contingent which are not disclosed on or referred to in the Financial
Statements, other than (i) liabilities or obligations incurred or arising
since such date in the ordinary course of business of the Corporation,
none of which individually or in the aggregate resulted or will result
in a material adverse change in the business or financial condition of
the Corporation and (ii) contingent liabilities which are fully covered
under valid and effective insurance policies.
(f) Attached hereto as Schedule 1 is a list, which is true
and complete in all material respects, of all "Material Contracts", which
term, as used in this Agreement, includes all material contracts and
commitments, all indentures, mortgages, security agreements, leases,
loans and credit agreements, and all other material agreements (including
any employment contracts or deferred compensation, pension, profit
sharing or retirement plans, supply contracts or contracts for the
purchase or sale of products or services), oral or written, imposing any
obligation on the Corporation or to which its properties are subject.
A contract, commitment or agreement shall be deemed to be material if it
either (i) involves or may involve the payment or receipt of more than
five thousand and 00/100 ($5,000.00) dollars over the life of the
contract or commitment, or (ii) regardless of the amount involved, if it
is not terminable without penalty solely at the will of the Corporation
upon notice of thirty (30) days or less. Such list is true and complete
in all material respects; and, except as shown thereon, the Corporation
is not a party to or bound by any Material Contract whatsoever. Those
copies of each contract or other instrument described on such list which
have been delivered to the Purchaser or which will be delivered on
request and are true and complete copies thereof. Neither Seller nor the
Corporation is, or by the execution and performance of this Agreement
will be, in breach of, or in default under, any Material Contract or
outstanding indenture, mortgage, contract or agreement to which either
of them is a party or any provision of the Certificate of Incorporation
or Bylaws of the Corporation. Seller and the Corporation agree that the
Medical Care Reimbursement Plan adopted as of January 1, 1985, and as
amended to date, shall be terminated effective as of the date Michael is
insured by the Purchaser's medical insurance plan, and that evidence of
same shall be delivered to Purchaser as of such date.
(g) The Corporation owns and holds good and merchantable
title, free and clear of any liens, encumbrances, charges or assessments,
to all of the assets shown on the Financial Statements, except (i) assets
disposed of since 12/31/96 in the ordinary course of business, (ii) liens
set forth on such Financial Statements, (iii) liens for taxes not yet due
and payable, and the outstanding franchise tax, penalties and interest
for the period ending 6/30/83, and (iv) minor defects and irregularities
in the title to, and/or minor encumbrances on such assets, which, in the
aggregate do not materially affect the value of such property or impair
the use of such assets for the purpose for which it is held by the
Corporation or for any other purpose. Such assets and properties are in
good repair, physical condition and working order. Notwithstanding
anything to the contrary in this subparagraph, to the extent liens arise
which were not disclosed in connection with this sale of stock for which
Purchaser may be held liable, and such liens exceed $5,000 in the
aggregate, Seller agrees to pay Purchaser the amount by which such liens
exceed $5,000 for which Purchaser may be held liable. Seller may elect
to have such payments offset against any other obligations of Purchaser
to Seller by sending written notice to the lienholder.
(h) The Corporation does not own or hold in fee or under
lease, or otherwise in any manner use or occupy, any real property except
that office space described in the occupancy agreement disclosed on
Schedule 2 (the "Lease"). Neither the Corporation nor the landlord is
in breach of the Lease, and no event which with notice or lapse of time,
or both, would constitute a breach thereof has occurred and is
continuing. There have been no amendments or modifications to the Lease.
(i) Except as disclosed on Schedule 3, there are, to the best
of Seller's knowledge, no actions, suits, claims, or proceedings pending
(collectively, "Claims"), or known to be threatened, against the
Corporation, in law or in equity, or before any federal, state, municipal
or other governmental agency or instrumentality, domestic or foreign or
any Claims against Seller which could have a material adverse effect on
the transactions contemplated hereby.
(j) The properties and assets of the Corporation are insured
by rider to the homeowner's policy of Seller with reputable insurers
which is reasonable and adequate for the businesses conducted by it. All
insurance policies are listed on Schedule 4 hereof which is a true,
correct and complete list of all such insurance. Seller shall deliver
a copy of such policies within thirty (30) days of Closing.
(k) Since 12/31/96, there has not been, and nothing has come
to the attention of the Seller or the Corporation which reasonably
appears likely in the future to constitute:
(i) Any materially adverse change in the business,
operations or assets of the Corporation.
(ii) Any transaction outside the ordinary course of business
of the Corporation;
(iii) Any loans, advances, or payments of any kind by the
Corporation to any person except payments of
amounts due with respect to obligations incurred
prior to 12/31/96, and reflected in the Financial
Statements, or thereafter incurred in the normal
course of business, except a loan by Seller to the
Corporation with respect to its annual pension
contribution which shall be repaid in connection
with the Closing;
(iv) Any material increase in the compensation payable or to
become payable by the Corporation to any of its
officers, directors, employees, or agents, or any
material bonus, percentage compensation, service award
or other like benefit, granted, made or accrued to or to
the credit of any of such officers, directors, employees
or agents, or any employee welfare, pension, retirement
or similar payment or arrangement made or agreed to by
the Corporation;
(v) Any significant labor trouble, or any other event or
condition of any character which has materially and
adversely affected, or reasonably appears likely to
materially and adversely affect, the business, prospects
or profitability of the Corporation, financial or
otherwise; or
(vi) Any sale or other disposition of any interest in any of
the Corporation's assets or properties other than in the
normal course of business and in consideration of money
or monies worth equal to or exceeding the value or price
at which said asset was carried on or included in the
12/31/96 Balance Sheet.
(l) Seller has delivered to Purchaser copies of the documents
which are listed on Schedule 5 annexed hereto which constitute true,
complete and correct copies of such documents and all material United
States and foreign patent, trademark and trade name registrations,
unexpired as of the date hereof, all material United States and foreign
applications pending on said date for any patent, trademark, trade name,
or copyright registrations and all material trademarks, trade names,
label and other trade rights in use on the date hereof, all of the
foregoing being owned, in whole or in part on said date by the
Corporation; all licenses granted by or to the Corporation, and all other
agreements to which it is a party and which are in force as of the date
hereof and relate in whole or in part to any items of the categories
mentioned in this subsection (l) or to inventories, discoveries,
improvements, processes, formulate, proprietary rights, trade secrets,
ideas or other know-how, whether owned by the Corporation or otherwise.
To the best of Seller's knowledge, there are no claims presently pending
or threatened against the Corporation or Seller for infringement of any
patents, patent rights or licenses, trademarks or trade names, or
copyrights or copyright registrations.
(m) Except as otherwise disclosed on Schedule 6, no person
holds any power of attorney, from Seller with respect to the stock held
by Seller, or from the Corporation for any purpose whatsoever.
(n) The only equipment owned by the Corporation is office
equipment listed on Schedule 7, and used by it in the ordinary course of
its business, situated in the Corporation offices at Pleasantville, New
York (the "Equipment"). The Equipment is adequate for the business being
conducted by the Corporation and is in good and usable repair and
condition, reasonable wear and tear excepted.
(o) Except as disclosed in Paragraph 8(a) hereof, all United
States, foreign, state, county, local and other taxes, including,
without limitation, income taxes, corporate franchise taxes, and ad valorem
-- -------
taxes, due and payable by the Corporation on or before the date of this
Agreement have been paid, and all tax returns and reports required to be
filed by them with all such taxing authorities have been filed. The
Corporation has withheld and collected all taxes and assessments it is
or has been required by law to withhold or collect, and all of the same are
duly reflected in said Balance Sheet. The Corporation has no outstanding
or unsatisfied deficiency assessments with respect to any taxes. If, at
any time within three (3) years following the Closing, income tax
deficiencies, and any penalties and interest thereon, applicable to years
in which Seller was a Shareholder of the Corporation are assessed against
the Corporation, each Seller shall repay to the Corporation his or her pro
rata share (based on his or her proportionate ownership of Shares in the
Corporation in the year for which liability is assessed) of sums actually
expended by the Corporation in meeting such assessments. Such repayment
may, at the Seller's option, be made by the reduction of the principal
amount of the Note of Purchaser hereunder. If any tax audit is in progress
and said three (3) year period expires prior to the completion of such
audit, the parties hereto agree to extend said three (3) year period to
the period terminating ninety (90) days following closing of audit,
settlement of tax, or final judgment, whichever occurs last.
(p) The Corporation is not a party to any collective
bargaining agreement.
(q) To the best of Seller's knowledge, the Corporation is not
in violation of any applicable zoning regulation, ordinance or other
similar law, order, regulation or requirement relating to its operations
or properties, or in violation of any other law, ordinance, or regulation
of any governmental authority having jurisdiction, and the Corporation
holds all permits, licenses and other authorizations necessary for the
conduct of its business as it is now being operated.
(r) No representation or warranty by Seller or the
Corporation contained in this Agreement nor any written representation,
statement or certificate made or furnished, by Seller or by any officer
of the Corporation pursuant hereto or in connection with the transactions
contemplated hereby, contains any material error or misstatement or omits
to state any material fact necessary to make the representations or
statements contained herein or therein are not misleading.
(s) This Agreement and the documents and instruments executed
and delivered by the Corporation or Seller in connection with the
transactions contemplated hereby, constitute the valid, legal and binding
obligations of the Corporation or Seller, as the case may be, enforceable
in accordance with their terms.
(t) The Corporation has taken all necessary steps to
terminate the "Beck Evaluation & Testing Associates Inc. Employee Pension
Plan which is a defined benefit plan effective as of June 30, 1985.
There are no contributions, penalties or other surcharges (collectively,
"Contributions") due by the Corporation to such plan as of the date of
Closing. It is understood that the final Internal Revenue Service
determination letter has not been received as of the date of Closing and
that any and all costs and expenses (including reasonable attorneys fees)
or any Contributions which may be incurred or due by the Corporation or
Seller to obtain such letter shall be paid by Seller personally and shall
not be the liability of the Corporation. Seller agrees to indemnify the
Corporation and Purchaser for any and all such costs, expenses and
Contributions which either may incur in connection with the termination
of the plan. The Corporation has granted to John D. Miller and Samuel
Winikor a power of attorney as disclosed on Schedule "6" hereof with
respect to this termination process.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER.
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(a) Purchaser hereby represents, warrants, and agrees with
Seller that:
(i) Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware,
and has full corporate power to carry on its business as it is now being
conducted in the State of New York, and each other jurisdiction where the
character and location of the properties owned or leased by it and the
nature of the business transacted by it, would require such
qualification.
(ii) Purchaser has corporate power to enter into and to
perform all of its obligations under this Agreement; and the Board of
Directors of Purchaser has approved the execution and delivery by
Purchaser of this Agreement and the other agreements contemplated herein.
(iii) There are, to the best of Purchaser's knowledge, no
actions, suits, claims, or proceedings pending, or known to be
threatened, against Purchaser, in law or in equity, or before any
federal, state, municipal or other governmental agency or
instrumentality, domestic or foreign which would impact in any material
way the obligations of Purchaser hereunder.
(iv) No representation or warranty by Purchaser contained in
this Agreement nor any written representation, statement or certificate
made or furnished, by Purchaser or by any officer of Purchaser pursuant
hereto or in connection with the transactions contemplated hereby,
contains any material error or misstatement or omits to state any
material fact necessary to make the representations or statements
contained herein or therein are not misleading.
(v) This Agreement and the documents and instruments executed
and delivered by Purchaser in connection with the transactions
contemplated hereby, constitute the valid, legal and binding obligations
of Purchaser, enforceable in accordance with their terms.
(b) Purchaser further covenants with Seller as follows:
(i) Subsequent to Closing, the Corporation shall exist and
operate as a stand-alone, self-contained, wholly-owned subsidiary of
Purchaser, unless and until the employment of Michael with Purchaser is
terminated; and
(ii) The Corporation shall continue to have its principal
office, and operate its business from, its present location in
Pleasantville, New York unless and until the employment of Michael with
Purchaser is terminated; and
(iii) Purchaser shall not make an election under Section
338 of the Internal Revenue Code of 1986, as amended, in connection with
the Closing of the transactions contemplated herein.
5. CONDITIONS TO PURCHASER'S OBLIGATIONS. The obligations of
-------------------------------------
Purchaser are subject to the fulfillment of each of the following
conditions:
(a) There shall be furnished to the Purchaser a certificate
executed by the Seller that the representations and warranties of the
Seller, contained in this Agreement, are true and correct at the date
hereof and will be true and correct on and as of the Closing Date.
(b) Purchaser shall have received the written opinion, dated
the Closing Date, from Cowan, Liebowitz & Latman, P.C., counsel for
Seller, to the effect that (i) the Corporation has been duly incorporated
and is existing as a corporation in good standing under the laws of the
State of New York; (ii) the Corporation is legally authorized to carry
on its business under the laws of the State of New York; (iii) to the
best of its knowledge, the Shares have been duly issued and are fully
paid and nonassessable; (iv) to the best of its knowledge, Seller has
full power and authority to sell, assign, or transfer such Shares, and
delivery of such Shares to Purchaser will transfer to Purchaser title
thereto free and clear of all liens, pledges, encumbrances, security
interests, or claims; and (v) this Agreement and any and all documents
and instruments executed and delivered in connection therewith, have been
duly executed and delivered by Seller and the Corporation is a binding
obligations of Seller and the Corporation according to their terms.
(c) There shall be executed and delivered the following:
(i) Employment Agreement, substantially in the form of
Exhibit "A", annexed hereto and made a part hereof (the "Employment
Agreement");
(ii) Option Agreement, substantially in the form of Exhibit
"B", annexed hereto and made a part hereof (the "Option Agreement");
(iii) Lease, substantially in the form of Exhibit "C"
annexed hereto and made a part hereof (the "Lease Agreement"); and
(iv) Such other ancillary documents as counsel for the parties
deem necessary or appropriate to consummate the transactions contemplated
hereunder and hereby.
(d) The Seller shall have furnished to the Purchaser a
representation in form satisfactory to the Purchaser's counsel that the
Seller is acquiring the shares of the Purchaser for its own account for
investment and not with a view for the sale or distribution thereof, that
it understands the nature and effect of such representations, and that
it will not sell or transfer any of the shares so acquired by it unless
(i) a registration statement under the Securities Act of 1933 shall be
in effect with respect thereto, or (ii) it shall have received written
notice from the Securities and Exchange Commission that such sale or
transfer may be made without registration under said Act, or (iii) it has
obtained and delivered to Purchaser a legal opinion from counsel
satisfactory to Purchaser, that registration under such Act is not
required.
6. CONDITIONS TO SELLER'S OBLIGATIONS. The obligations of Seller
----------------------------------
are subject to the fulfillment by Purchaser of each of the following
conditions:
(a) There shall be furnished to Seller a certificate executed
by Purchaser to the effect that the representations and warranties of
Purchaser, contained in this Agreement, are true and correct at the date
hereof and will be true and correct on and as of the Closing Date.
(b) Seller shall have received the written opinion, dated the
Closing Date, from Rider, Weiner, Frankel & Calhelha, P.C. counsel for
Purchaser, to the effect that (i) Purchaser has been duly incorporated
and is existing as a corporation in good standing under the laws of the
State of Delaware; (ii) Purchaser is in good standing and legally
authorized to carry on its business under the laws of the State of New
York, and (iii) this Agreement, and any and all other documents and
instruments executed and delivered in connection therewith, have been
duly executed and delivered by Purchaser and is a legal and binding
obligation of Purchaser, enforceable in accordance with their terms.
(c) There shall be executed and delivered the following:
(i) Employment Agreement;
(ii) Lease Agreement;
(iii) Option Agreement
(iv) Promissory Notes dated the Closing Date hereof, made by
Purchaser in favor of Michael, in the principal amount of $75,000; in
favor of Connie in the principal amount of $37,500 and in favor of
Michael D. Beck as custodian of Amanda in the principal amount of $37,500
(collectively, the "Note"), substantially in the forms of Exhibit "D"
annexed hereto and made a part hereof; and
(v) Such other ancillary documents as counsel to the parties
may deem reasonably necessary or desirable to consummate the transactions
contemplated hereunder and hereby.
(d) The Purchaser shall have furnished to the Seller a
representation in form satisfactory to the Seller's counsel that the
Purchaser is acquiring the Shares for its own account for investment and
not with a view for the sale or distribution thereof, that it understands
the nature and effect of such representations, and that it will not sell
or transfer any of the shares so acquired by it unless (i) a registration
statement under the Securities Act of 1933 shall be in effect with
respect thereto, or (ii) it shall have received written notice from the
Securities and Exchange Commission that such sale or transfer may be made
without registration under said Act, or (iii) it has received an opinion
from Christy & Viener, special securities counsel for Seller, or other
counsel satisfactory to the Seller, that registration under such Act is
not required.
7. PAYMENT OF PURCHASE PRICE.
-------------------------
Subject to the conditions, representations and warranties hereof,
at the closing, Purchaser shall deliver to Seller:
(a) good funds, by checks of Purchaser in the aggregate
amount of One Hundred Thirty-Thousand and 00/100 ($130,000.00) Dollars;
(b) the Note;
(c) One Hundred Fifty Thousand shares of common stock of
Purchaser.
8. INDEMNIFICATION.
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(a) Seller agrees to and shall indemnify Purchaser, its
successors and assigns, against any and all damages resulting from any
breach of any representation, warranty or agreement, set forth in this
Agreement, or the untruth or inaccuracy thereof, including, but not
limited to all statements or figures contained in any of the Schedules
or Exhibits to this Agreement. Seller further agrees to and shall
indemnify Purchaser against any and all debts, liabilities, or claims of
any nature, absolute or contingent, together with all expenses and legal
fees resulting from any such breach, untruth or inaccuracy, or which may
be incurred to compromise, or defend such liabilities, or claims of any
nature, absolute or contingent, including, but not limited to, any and
all liabilities for federal income or excise taxes, or state or municipal
taxes of any nature. Notwithstanding the above, Seller acknowledges that
there is reported as due and owing certain income taxes, interest,
penalties and other surcharges (collectively, "Taxes") for the period
ending 6/30/83 and that it shall pay all such Taxes from the proceeds of
Closing and shall provide to Purchaser evidence of same, or evidence
reasonably acceptable to Purchaser from the appropriate taxing
authorities that no Taxes are in fact due. The Taxes shall be paid and
evidence of payment delivered, or such evidence as to the fact that no
taxes are due shall be delivered to Purchaser within one year of Closing,
or Purchaser shall be entitled to determine the amount of Taxes due with
such taxing authorities and deduct same from the payments due on the Note
and remit same to the appropriate taxing authorities.
(b) Purchaser agrees to and shall indemnify Seller, its
successors and assigns, against any and all damages resulting from any
breach of any representation, warranty or agreement, set forth in this
Agreement, or the untruth or inaccuracy thereof, including, but not
limited to all statements or figures contained in any of the Schedules
or Exhibits to this Agreement. Purchaser further agrees to and shall
indemnify Seller against any and all debts, liabilities, or claims of any
nature, absolute or contingent, together with all expenses and legal fees
resulting from any such breach, untruth or inaccuracy, or which may be
incurred to compromise, or defend such liabilities, or claims of any
nature, absolute or contingent, including, but not limited to, any and
all liabilities for federal income or excise taxes, or state or municipal
taxes of any nature.
(c) The indemnity of (a) and (b) above shall survive the
closing but shall be limited to liabilities of which the indemnifying
party shall receive notice in writing from the other within three (3)
years from the date hereof. The party claiming indemnification shall
notify the indemnitor of any such breach or claim with reasonable
promptness and the indemnitor or its legal representatives shall have,
at its election, the right to compromise or defend any such matter
through counsel of its own choosing, at the expense of such indemnitor.
Such notice and opportunity to compromise or defend, if applicable, shall
be a condition precedent to any liability of any party under this
indemnity. In the event that a party undertakes to compromise or defend
any such liability, it shall notify the other in writing promptly of its
intention to do so and each agrees to cooperate with the other and its
counsel in the compromising of or the defending against any such
liabilities.
(d) Nothwithstanding Paragraph 8(c), if Michael repurchases
the Shares of the Corporation from Purchaser pursuant to the rights
granted herein and in the Employment Agreement, Purchaser shall indemnify
Seller, its successors and assigns, against any and all debts,
liabilities, claims or damages, (including any tax liabilities) arising
or resulting from any acts of Purchaser during the term of its ownership
of the Shares of the Corporation, including, but not limited to
reasonable attorneys fees.
9. REPURCHASE OPTION AND RIGHTS.
----------------------------
(a) Seller and Purchaser desire to provide a mechanism
pursuant to which Seller shall have a right to reaquire the Shares on
certain terms and conditions. The repurchase rights ("Repurchase
Option") shall be dependent upon the termination provisions set forth in
the Employment Agreement in Paragraphs 7 and 8 thereof and the
capitalized terms used herein shall have the meaning ascribed thereto in
the Employment Agreement. The Repurchase Option shall be exercisable for
a period of six (6) years from the date of this Agreement, although
Michael may not exercise such option before the expiration of the third
anniversary of this Agreement unless he is terminated by the Corporation
either for Cause or Disability or he leaves for Good Reason. In these
such instances, Michael may repurchase the Shares prior to the expiration
of the third anniversary of this Agreement.
(b) The repurchase price shall be as follows:
(i) If the Employment Agreement is terminated for Cause,
Disability, Good Reason, at any time, or Voluntary Termination after the
third anniversary of the date of this Agreement, Michael may repurchase
the Shares for the market value of the Corporation as at the date of his
termination. Market value shall be calculated to be an amount equal to
the annual gross sales of the Corporation for the twelve months prior to
the date of Michael's termination, less the aggregate debt (including all
principal, interest and late charges, if any) of the Note at the date of
termination, which aggregate debt shall be offset against the repurchase
price.
(ii) If the Employment Agreement is terminated for Death or
if Voluntary Termination occurs on or before the third anniversary of the
Employment Agreement, no Repurchase Option shall be available to Michael.
(iii) If the Employment Agreement terminates pursuant to
Paragraph 1 thereof prior to the expiration of the sixth anniversary of
said Employment Agreement, Michael may repurchase the Shares for the
price of $400,000 less one sixth, or pro rata portion thereof calculated
monthly, of such $400,000 amount for each year, or part thereof, of the
six year option period. For example, if terminated pursuant to Paragraph
1 of the Employment Agreement at the end of the fourth year after the
"Effective Date" (as defined in the Employment Agreement), repurchase
price shall be: $400,000 less [(4/6 x $400,000 = $266,666.67)] =
$133,333.33.
(c) Michael shall exercise his Repurchase Option by giving
notice to Purchaser within thirty (30) days of the date of termination
of employment and setting forth therein the date of closing of the
repurchase which shall be a date not later than one hundred and twenty
(120) days thereafter. At the closing, Michael shall deliver the
purchase price to Purchaser in certified funds and Purchaser shall
deliver a stock certificate for the Corporation, duly executed
representing 100% of the issued and outstanding capital stock of the
Corporation at such time. The parties agree to execute and deliver all
such other documents as may be reasonably required to effectuate the
stock repurchase.
10. FINDER'S FEES. Seller and Purchaser represent that to the
-------------
best of their knowledge there is no obligation to pay any commission,
finder's fee, or similar charge in connection with the transactions
provided for in this Agreement. Each of Seller and Purchaser will
indemnify and hold each other harmless from and against any loss,
liability, and damage, including expenses, arising our of any claim for
such commission, fee or charge, so far as any claim for such commission,
fee, or charge, so far as any thereof arises by reason of services
alleged to have been rendered to, or at the instance of, such party.
11. CLOSING. The Closing Date shall be effective as of January 2,
-------
1997, and the Closing shall take place at the offices of Purchaser's
counsel at 10:00 a.m. on such date, unless otherwise agreed to in writing
by Purchaser and Seller. The closing shall be conditioned upon the
following:
(a) The Corporation shall not have, since the date of this
Agreement or as otherwise permitted hereunder (i) issued or sold any
shares, bonds, or other corporate securities, or given options or rights
to purchase or otherwise acquire such shares, bonds, notes, or corporate
securities; (ii) incurred any obligation or liability, absolute or
contingent, except current liabilities and obligations incurred in the
ordinary course of business, except that certain loan to the Corporation
with respect to the pension contribution to be discharged at Closing;
(ii) discharged or paid any obligation or liability, absolute or
contingent, other than current liabilities and obligations incurred in
the ordinary course of business; (iv) made any payment or distribution
to its Shareholders or purchased or redeemed any of its shares; (v)
mortgaged pledged, created a security interest in, or subjected to lien
or other encumbrances any of its assets, tangible or intangible, except
in the ordinary course of business; (vi) sold or transferred any of its
tangible assets, or canceled any debts or claims, except in each case in
the ordinary course of business, (vii) sold, assigned, or transferred any
intangible assets, or (viii) entered into any transaction other than in
the ordinary course of business.
(b) The representations and warranties of the respective
parties, and the contents of the Schedules annexed hereto and made a part
hereof and any certificate furnished in their behalf pursuant hereto,
shall be true and correct.
12. EXPENSES. Each party hereto will pay the expenses incurred by
--------
him or it under or in connection with this Agreement, including counsel
fees and expenses of his or its representatives, whether or not the
transactions contemplated by this Agreement are consummated.
13. SURVIVAL OF REPRESENTATIONS. The representations, warranties,
---------------------------
and agreements of Seller and Purchaser contained in this Agreement shall
not be discharged or dissolved upon, but shall survive, the closing, and
shall be unaffected by any investigation made by any party at any time.
14. NOTICES. All notices given under any of the provisions of
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this Agreement shall be deemed to have been duly given if mailed by
certified mail, return receipt requested, as follows:
To Seller: Mr. Michael D. Beck
35 Guion Street
Pleasantville, NY 10570
Fax: (914) 769-4809
with a copy to Cowan, Liebowitz & Latman, P.C.
1133 Avenue of the Americas
New York, NY 10036-6799
Att: Robert Halper, Esq.
Fax: (212) 790-9300
To Purchaser: Touchstone Applied Science Associates, Inc.
Fields Lane
Brewster, NY 10509
Att: Mr. Andrew Simon, President
Fax: (914) 277-3548
with a copy to Rider, Weiner, Frankel & Calhelha, P.C.
655 Little Britain Road
Newburgh, NY 12550
Att: David L. Rider, Esq.
Fax: (914) 562-9126
or at such other address as each of the foregoing may designate in
writing by certified mail, return receipt requested, to each of the
others, and shall be deemed to have been duly given three (3) business
days after deposit into the United States mails if mailed by certified
mail, return receipt requested, properly addressed with postage affixed
or if sent by facsimile transmission when sent with evidence of
transmission.
15. AMENDMENT. Neither this Agreement nor any term or provision
---------
hereof may be changed, waived, discharged, or terminated orally, or in
any manner other than by an instrument in writing signed by the party
against which the enforcement of the change, waiver discharge or
termination is sought.
16. BINDING EFFECT. This Agreement shall be binding upon and
--------------
inure to the benefit of the respective parties, and their successors and
assigns, heirs and personal representatives, except as otherwise
expressly provided herein.
17. COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original.
18. GOVERNING LAW. This Agreement shall be construed and enforced
-------------
in accordance with the laws of the State of New York, applicable to
agreements made and to be performed wholly within the State of New York.
Any legal or equitable action or proceeding with respect to this
Agreement brought by Seller may be brought only in a Federal or State
court of competent jurisdiction located in the County of Westchester,
State of New York.
19. CONSENT TO JURISDICTION. The parties irrevocably accept the
-----------------------
jurisdiction of the Federal or New York State courts of competent
jurisdiction located in the County Westchester and any related appellate
court, irrevocably agrees to be bound by any judgment rendered thereby
in connection with this commitment, and irrevocably waives any objection
it or he may now or hereafter have as to the venue of any such action or
proceeding brought in such a court or that such a court is an
inconvenient forum. Each party irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered mail, postage
prepaid, such service to become effective three (3) business days after
mailing. Nothing herein shall affect any party's right to serve process
in any other manner prescribed by law or the right to bring legal or
equitable actions or proceedings in other competent jurisdictions.
20. BINDING EFFECT; NO ASSIGNMENT. This Agreement shall be
-----------------------------
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. Neither party shall have the right
to assign its rights or delegate its obligations hereunder without the
prior written consent of the other. Any purported assignment or
delegation without such consent shall be void.
21. CAPTION. Captions set forth herein are for convenience and
-------
reference only and are not intended to modify, limit, describe or affect
in any way the content, scope or intent of this Agreement.
22. FURTHER ASSURANCES. The parties agree to do any act or
------------------
execute and deliver any additional documents reasonably required to fully
effect the purposes of this
Agreement and the other documents and instruments executed and delivered
in connection therewith.
23. SEVERABILITY. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
BECK EVALUATION & TESTING ASSOCIATES, INC.
By: /s/ MICHAEL D. BECK
---------------------------------------------
Name: Michael D. Beck
Title: President
/s/ MICHAEL D. BECK
------------------------------------------------
Michael D. Beck
/s/ CONNIE K. BECK
------------------------------------------------
Connie K. Beck
/s/ MICHAEL D. BECK, as guardian
------------------------------------------------
Michael D. Beck, as Guardian for Amanda P. Beck
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
By: /s/ ANDREW L. SIMON
---------------------------------------------
Name: Andrew L. Simon
Title: President
<PAGE>
SCHEDULE "1"
MATERIAL CONTRACTS
BETA with The Institute for Academic Excellence
Incorporated (IAE) in connection with the Barracuda
Reading Test, dated as of October 1, 1995
BETA with Rhode Island, billable through Harcourt,
dated as of December 1, 1996
BETA with Harcourt Brace & Company of Orlando, Florida,
dated as of August 7, 1995
BETA with Harcourt Brace & Company of Virginia,
dated as of July 8, 1996
BETA with Board of Education of the City of New York,
dated as of November 13, 1996
BETA with Pitney Bowes
Defined Benefit Plan known as "Beck Evaluation & Testing Associates,
Inc. Employee Pension Plan"
Medical Care Reimbursement Plan adopted as of January 1, 1985
<PAGE>
SCHEDULE "2"
REAL PROPERTY AND LEASEHOLD INTERESTS
Oral Lease for the office space located at 35 Guion Street,
Pleasantville, New York at the rental rate of $500 per month, including
all utilities and services.
<PAGE>
SCHEDULE "3"
LITIGATION AND OTHER CLAIMS
None
<PAGE>
SCHEDULE "4"
INSURANCE
1. Liability and Property Damage Rider to Homeowner's Policy of
Michael and Connie Beck on the property at 35 Guion Street,
Pleasantville, New York.
2. Disability Income insurance policy on Michael Beck.
<PAGE>
SCHEDULE "5"
PATENTS, TRADEMARKS & COPYRIGHTS
None
<PAGE>
SCHEDULE "6"
ATTORNEY'S IN FACT
1. A Power of Attorney had been granted to John D. Miller and
Samuel Winikor of Improved Funding Techniques Inc. with respect to
representation of the Corporation before the Internal Revenue Service
and/or Pension Benefit Guaranty Corporation and termination of the
Corporation's Pension Plan, which power shall be revoked upon receipt of
the IRS Determination Letter and approval of termination of the Pension
Plan.
<PAGE>
SCHEDULE "7"
FURNITURE, FIXTURES AND EQUIPMENT
TT Systems 3-line Telephones
GE Answering Machine
ATT Typewriter
Canon PC770 copier
Brother 900 fax
PC Brand 386 computer, with dot matrix printer
Misc. file cabinets, bookshelves, and office furniture
<PAGE>
EXHIBIT "A"
EMPLOYMENT AGREEMENT
AGREEMENT dated as of the 2nd day of January, 1997 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 MICHAEL D. BECK, an individual residing at 35 Guion Street,
Pleasantville, New York 10570 ("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 in a dual capacity, as its Vice President, or in such other
capacity or capacities as may be determined by the Board (provided that
his authority, duties and responsibilities shall be at least commensurate
in all material respects with his office, status and titles at the time
of such change); and as the President and Chief Executive Officer of its
wholly-owned subsidiary, Beck Evaluation & Testing Associates, Inc.
("BETA"). 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, but in no event more than 40 miles from the principal office
of BETA in Pleasantville, New York. 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. It is anticipated that during the initial year
of this Agreement, Executive shall devote eighty (80%) percent of his
time to his responsibilities relating to BETA and twenty (20%) percent
of his time to his responsibilities to the Corporation. Thereafter,
Executive shall devote such time to the business of each of the
Corporation and BETA as shall be agreed by Executive and the Chief
Executive Officer of the Corporation it being understood that such time
shall continue to be devoted to BETA as shall be required to maintain
BETA's viability and effectively operate and manage its affairs. 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 (the "Base Salary") of not less than: (i) $100,000.00 during the
first and second years of this Agreement, (ii) $106,000 during the third
year of this Agreement and (iii) $110,000 each year of this Agreement
thereafter. 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, Executive shall be
entitled to a bonus (the "BETA Bonus") on an annual basis equal to six
(6%) percent of the annual gross revenues of BETA in excess of Four
Hundred Thousand Dollars ($400,000.00). In the event of a Change of
Control, in addition to the BETA Bonus and Base Salary, 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, BETA Bonus and Annual 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. The Corporation specifically agrees
that it, or BETA, in the Corporation's discretion, shall pay the annual
premium of approximately $10,000 for each of years 1997 and 1998 and
$4,000 for year 1999 for the life insurance policy currently owned by
Executive and for which BETA has paid the premium in 1996.
(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 paid for by the Corporation,
in each case 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.
(c) As an incentive to enter into this Agreement and pursuant
to the terms of the Stock Purchase Agreement dated as of January 2, 1997
(the "Stock Purchase Agreement") pursuant to which the Corporation
acquired the capital stock of BETA, the Corporation, immediately upon the
execution and delivery of this Agreement, shall deliver to Executive a
Stock Option Agreement pursuant to its Amended and Restated 1991 Stock
Option Incentive Plan, granting to Executive options for 125,000 shares
of the common stock of the Corporation at fair market value as of the
date hereof, exercisable over a five year period.
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) the product of the BETA 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, (iv) 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 (v) 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), (iii) and (iv) 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
(other than the obligation of the Corporation to register the shares
delivered to Executive and Connie Beck and Michael D. Beck as Custodian
for Amanda Beck pursuant to the Stock Purchase Agreement dated as of
January 2, 1997) 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 (a) (i), (ii), (iii) and
(iv) 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 or Executive's legal representative'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 (a) (i), (ii), (iii) and (iv)
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 OTHER THAN 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 (z) the highest BETA Bonus earned (whether or not
deferred) by Executive during the same three year period; 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. Repurchase Option. (a) The Corporation and Executive desire
-----------------
to provide a mechanism pursuant to which Executive shall have a right to
reaquire the capital stock of BETA on certain terms and conditions. The
repurchase rights ("Repurchase Option") shall be dependent upon the
termination provisions set forth herein. Except as provided herein and
in the Stock Purchase Agreement, the Repurchase Option shall be
exercisable for a period of six (6) years from the date of this
Agreement, although Executive may not exercise such option before
expiration of the third anniversary of this Agreement unless he is
terminated by the Corporation either for Cause or Disability or he leaves
for Good Reason. In these such instances he may repurchase the Shares
prior to the expiration of the third anniversary of this Agreement.
(b) The repurchase price shall be as follows:
(i) If terminated for Cause, Disability, or Good
Reason, at any time, or Voluntary Termination after the third anniversary
of the date of this Agreement, Executive may repurchase the Shares for
the market value of the Corporation as at the date of his termination at
the formula as set forth in Paragraph 9 (b)(i) of the Stock Purchase
Agreement.
(ii) If terminated for Death or if Voluntary Termination
occurs on or before the third anniversary of the Employment Agreement,
no Repurchase Option shall be available to Executive.
(iii) If terminated pursuant to Paragraph 1 hereof
prior to the expiration of the sixth anniversary of this Agreement,
Executive may repurchase the Shares for the repurchase price as set forth
in Paragraph 9 (b)(iii) of the Stock Purchase Agreement.
(c) Executive shall exercise his Repurchase Option by giving
notice pursuant to the terms of Paragraph 9 (c) of the Stock Purchase
Agreement.
10. 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 10 and Section 11, the term
"Corporation" includes the Corporation and any other predecessor
corporation, and affiliates (including, without limitation, distributors,
licensees, franchisees, subsidiaries and joint ventures).
(d) In the event Executive exercises his Repurchase Option,
the Corporation agrees that it and its officers, directors and employees
shall not at any time from the date of closing of the repurchase, reveal,
report, publish, transfer or otherwise disclose to any person,
corporation or other entity, or use, any of BETA's confidential
information, without the written consent of BETA, except for such
information which legally and legitimately is or becomes of general
public knowledge from authorized sources other than the Corporation. The
Corporation further agrees that at the closing of the repurchase, it
shall promptly deliver to BETA 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 BETA's business which are in the Corporation's possession or control.
BETA shall reimburse the Corporation for any packing or moving costs
reasonably incurred by the Corporation in connection with the foregoing
delivery.
11. Non-Competition. (a) 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,
except as provided in (b) below, 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:
(i) solicit or attempt to solicit business of any customers
of the Corporation or BETA (including prospective customers solicited by
the Corporation or BETA during the term of his employment) for products
or services the same or similar to those offered, sold, produced or under
development by the Corporation or BETA during the term of his employment
therewith or dealt in by Executive during his employment with the
Corporation;
(ii) solicit or attempt to solicit for any business endeavor
any employee of the Corporation or BETA;
(iii) interfere with any business relationship between
the Corporation or BETA and any other person or entity;
(v) use the name of the Corporation or BETA or a name similar
thereto; or
(vi) 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 11 (although Executive's
obligations under Section 10 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.
(b) Notwithstanding anything to the contrary contained in
this Agreement, in the event that upon termination of employment for any
reason, Executive acquires BETA from the Corporation, the provisions of
Section 11 (a) of this Section 11 shall be deemed to be in effect, except
that the language shall be deemed modified to delete "BETA" from each and
every provision thereof.
(c) In the event Executive exercises his Repurchase Option,
the Corporation agrees that it and its officers, directors and employees
shall not at any time from the date of closing of the repurchase, except
as provided in (b) below, 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 the Corporation) directly or indirectly:
(i) solicit or attempt to solicit business of any customers
of BETA (including prospective customers solicited by BETA during the
term of Executive's employment) for products or services the same or
similar to those offered, sold, produced or under development by BETA
during the term of Executive's employment with the Corporation or dealt
in by BETA during his employment with the Corporation;
(ii) solicit or attempt to solicit for any business endeavor
any employee of BETA;
(iii) interfere with any business relationship between
BETA and any other person or entity;
(iv) use the name of BETA or a name similar thereto;
provided, however, that notwithstanding the foregoing, the Corporation
- -------- -------
shall not have any obligation under Section 11 (c) (although the
Corporation's obligations under Section 10 (d) shall continue unimpaired)
if Executive does not exercise his Repurchase Option. The foregoing
shall not prevent the Corporation from purchasing or owning up to five
percent of the voting securities of any corporation, the securities of
which are publicly-traded.
12. 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 10 or 11, be available to the Corporation. The
provisions of Sections 10 and 11 and this Section 12 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 10 or 11 of this Agreement constitute a basis for deferring
or withholding any amounts otherwise payable to Executive under this
Agreement.
13. 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 which
the Corporation may have against Executive or others except as set forth
in the Stock Purchase Agreement. 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 14, 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 Corporation's obligations hereunder, in his
sole discretion. If the parties hereto so agree in writing, any disputes
under this Agreement may be settled by arbitration.
14. 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 14) ("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 14(c), all
determinations required to be made under this Section 14, 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
14(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 14(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 14(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 14(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 14(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
14(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 14(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.
15. 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.
16. 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.
17. 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.
18. 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.
19. Communications and Notices. All notices and other
--------------------------
communications under this Agreement shall be in writing and shall be
deemed to have been duly given three (3) business days after they are
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.
20. 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.
21. 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.
22. 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:________________________________
Name: Andrew L. Simon
Title: President
Executive:
________________________________
Michael D. Beck
<PAGE>
EXHIBIT "B"
OPTION AGREEMENT
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
INCENTIVE STOCK OPTION
For valuable consideration, receipt of which is hereby
acknowledged, TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC., a Delaware
corporation (the "Company"), hereby grants to MICHAEL D. BECK, who
resides at 35 Guion Street, Pleasantville, New York 10570 (the
"Optionee"), an incentive stock option (the "Option"), subject to the
terms and conditions hereof, to purchase from the Company an aggregate
of 125,000 shares of the Common Stock of the Company, par value $.0001
per share (the "Common Stock"), at the price of $0.531 per share (the
"Option Price"), such option to be exercisable at any time after the
first anniversary of the date of grant until any time on or before the
day (the "Termination Date") preceding the fifth anniversary of the date
hereof.
This Option is granted pursuant to the Company's Amended and
Restated 1991 Stock Option Incentive Plan (the "Plan") and is subject to
the terms and conditions thereof. The Plan is administered by the
Committee (as defined in the Plan). All determinations and acts of the
Committee as to any matters concerning the Plan, including
interpretations or constructions of this Option and of the Plan, shall
be conclusive and binding on the Optionee and any parties claiming
through the Optionee.
Unless the Optionee ceases to be employed by the Company or a
direct or indirect parent or subsidiary thereof, the right of the
Optionee to purchase shares of Common Stock subject to this Option may
be exercised in whole at any time or in part from time to time after the
first anniversary of the date of grant and prior to the Termination Date,
except as otherwise provided herein. This Option may be exercised only
with respect to full shares.
Subject to the provisions of this Option, this Option may be
exercised by written notice (the "Notice") to the Company stating the
number of shares of Common Stock with respect to which it is being
exercised. The Notice shall be accompanied by the Optionee's payment in
full of the Option Price for each of the shares to be purchased by the
Optionee, such payment to be made in cash or by (a) certified or bank
cashier's check payable to the order of the Company, (b) the Optionee's
tendering Common Stock valued at, or on the basis of, Fair Market Value
(as defined in the Plan) of the Common Stock on the date of exercise, (c)
delivery of a promissory note issued by the Optionee to the Company in
a form acceptable to the Committee, or (d) any other means acceptable to
the Committee.
As soon as practicable after receipt of the Notice and
payment, and subject to the next two paragraphs, the Company shall,
without transfer or issue tax or other incidental expense to the
Optionee, deliver to the Optionee a certificate or certificates for the
shares of Common Stock so purchased. Such delivery shall be made (a) at
the offices of the Company at Fields Lane, P.O. Box 382, Brewster, New
York 10509, (b) at such other place as may be mutually acceptable to the
Company and the Optionee, or (c) at the election of the Company, by
certified mail addressed to the Optionee at (i) the Optionee's address
shown in the records of the Company, or (ii) the location at which the
Optionee is employed by the Company.
The Company shall have the right to withhold an appropriate
number of shares of Common Stock (based on the fair market value thereof
on the date of exercise) 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.
The Company may postpone the time of delivery of
certificate(s) for shares of Common Stock for such additional time as the
Company shall deem necessary or desirable to enable it to comply with the
requirements of any securities exchange upon which the Common Stock may
be listed, or the requirements of the Securities Act of 1933, as amended,
the Securities Exchange Act of 1934, as amended, any rules or regulations
of the Securities and Exchange Commission promulgated thereunder, or any
applicable state laws relating to the authorization, issuance or sale of
securities.
The issuance of the shares of Common Stock subject hereto and
issuable upon the exercise of this Option and the transfer or resale of
such shares shall be subject to such restrictions as are, in the opinion
of the Company's counsel, required to comply with the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder,
and the certificate(s) representing such shares shall, if it is deemed
advisable by the Company's counsel, bear a legend to such effect.
If, upon tender of delivery thereof, the Optionee fails to
accept delivery of and pay or have paid for all or any part of the number
of shares of Common Stock specified in the Notice, the Optionee's right
to exercise this Option with respect to such undelivered and unpaid for
shares may be terminated by the Company.
During the Optionee's lifetime, this Option shall be
exercisable only by the Optionee (except as otherwise provided below),
and neither this Option nor any right hereunder shall be assignable or
transferable otherwise than by will or the laws of descent and
distribution (as provided below), or be subject to attachment, execution
or other similar process. In the event of any attempt by the Optionee
to alienate, assign, pledge, hypothecate or otherwise dispose of this
Option or of any right hereunder, except as provided for herein, or in
the event of any levy or any attachment, execution or similar process
upon the rights or interest hereby conferred, the Company may terminate
this Option by notice to the Optionee, and it shall become null and void.
If, on or prior to the first anniversary of the date of grant,
the Optionee's employment with the Company or any of its direct or
indirect parents or subsidiaries terminates for any reason (otherwise
than by reason of the Optionee's death or disability (as defined below)),
this Option, and all rights hereunder, shall be forfeited to the Company.
If, prior to the Termination Date but after the first anniversary of the
date of grant, the Optionee's employment with the Company or any of its
direct or indirect parents or subsidiaries terminates for any reason
(otherwise than by reason of the Optionee's death or disability), this
Option, and all rights hereunder to the extent that such rights shall not
have been exercised, shall terminate and become null and void at the
earlier of the Termination Date or 90 days after such termination of
employment.
In the event of the Optionee's death prior to the Termination
Date but after the first anniversary of the date of grant, and while the
Optionee is employed by the Company or a direct or indirect parent or
subsidiary thereof, this Option may be exercised before the first
anniversary of the date of the Optionee's death by the person(s) to whom
the right passes pursuant to the following sentence, but in no event may
this Option be exercised later than the Termination Date. All rights
with respect to this Option, including the right to exercise it, shall
pass in the following order: (a) to beneficiaries so designated in
writing by the Optionee, or if none, then (b) to the legal representative
of the Optionee, or if none, then (c) to the persons entitled thereto as
determined by a court of competent jurisdiction.
In the event that the Optionee, prior to the Termination Date
but after the first anniversary of the date of grant, ceases to be em-
ployed by the Company or a direct or indirect subsidiary thereof because
the Optionee is deemed by the Company to be disabled, this Option may be
exercised by the Optionee, if legally competent, or by a committee or
other legally designated guardian or representative if the Optionee is
legally incompetent, before the first anniversary of the date the
Optionee ceases to be employed by the Company or a direct or indirect
subsidiary thereof as a result of such disability, but in no event may
this Option be exercised later than the Termination Date. For purposes
of this Option, the Optionee shall be deemed by the Company to be
disabled if the Optionee is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than
twelve months. The Optionee shall not be considered to be disabled
unless the Optionee or the Optionee's representative furnishes proof of
the existence of such disability in such form and manner, and at such
times, as may be required by the Committee, and unless such proof shall
be satisfactory to the Committee. The determination by the Committee
with respect to the existence of such disability shall be conclusive and
binding upon the Optionee and any parties claiming through the Optionee.
In the event of any change in the outstanding Common Stock by
reason of a stock split, stock dividend, combination or reclassification
of shares, recapitalization, merger or similar event, the Committee shall
adjust proportionally the number of shares of Common Stock covered by
this Option and the Option Price thereof. In the event of any other
change affecting the Common Stock or any distribution (other than normal
cash dividends) to holders of Common 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 may authorize the assumption of this Option or the substitution
of a new stock option for this Option, whether or not in a transaction
to which Section 424(a) of the Internal Revenue Code of 1986, as amended
from time to time, applies. The judgment of the Committee with respect
to any matter referred to in this paragraph shall be conclusive and
binding upon the Optionee and any parties claiming through the Optionee.
Neither the Optionee nor any person or persons entitled to
exercise the Optionee's rights under this Option in accordance herewith
shall have any rights to dividends or any other rights of a stockholder
with respect to any shares of Common Stock subject to this Option, except
to the extent that a certificate for such shares shall have been issued
upon the exercise of this Option as provided herein.
Each notice relating to this Option shall be in writing and
delivered in person or by certified mail to the proper address. All
notices to the Company shall be addressed to it at its offices at Fields
Lane, P.O. Box 382, Brewster, New York 10509, attention of the Committee,
c/o the Company's Secretary, and shall become effective when received by
the Secretary. All notices to the Optionee or other person or persons
then entitled to exercise any rights with respect to this Option shall
be addressed to the Optionee or such other person or persons at (i) the
Optionee's address shown in the records of the Company or (ii) the
location at which the Optionee is employed by the Company. Anyone to
whom a notice may be given under this Option may designate a new address
by notice to that effect.
Neither the adoption of the Plan nor the granting of this
Option confers on the Optionee any right to continued employment by the
Company (or any of its direct or indirect subsidiaries) or in any way
interferes with or alters the Company's (and its direct and indirect
parents' and subsidiaries') right to terminate the employment of the
Optionee at any time, with or without cause, and without liability
therefor. This Option shall not be deemed a part of the Optionee's
regular, recurring compensation for any purpose, including, without
limitation, for the purposes of any termination indemnity or severance
pay law of any jurisdiction.
This Option and all determinations made and actions taken
pursuant hereto, to the extent not otherwise governed by the Internal
Revenue Code of 1986, as amended from time to time, or the securities
laws of the United States, shall be governed by and construed under the
laws of the State of Delaware.
THIS OPTION IS INTENDED TO QUALIFY AS AN INCENTIVE STOCK
OPTION UNDER SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
FROM TIME TO TIME.
IN WITNESS WHEREOF, TOUCHSTONE APPLIED SCIENCE ASSOCIATES,
INC. has caused this Option to be executed by its officers, thereunto
duly authorized, as of the 2nd day of January, 1997.
TOUCHSTONE APPLIED SCIENCE
ASSOCIATES, INC.
By:________________________________________
Andrew L. Simon
President
ATTEST:
__________________________________________
Stephen H. Ivens
Vice President
AGREED AND ACCEPTED
__________________________________________
Michael D. Beck
<PAGE>
EXHIBIT "C"
LEASE
LEASE AGREEMENT
This Lease Agreement dated as of the 2nd day of January, 1997 by and
among BECK EVALUATION & TESTING ASSOCIATES, INC., a New York corporation
with its principal place of business at 35 Guion Street, Pleasantville,
NY 10570 ("Tenant") and MICHAEL D. BECK and CONNIE K. BECK, residing at
35 Guion Street, Pleasantville, NY 10570 (collectively, "Landlord").
1. Leasehold Premises Landlord hereby leases to Tenant and Tenant
------------------
hereby leases from Landlord that certain premises located within the
residence of Landlord (the building) in Pleasantville, New York which
premises consists of office space on the third floor, (the "leased
premises") together with the right to use, in common with others, and
subject to the restrictions set forth in this agreement, the parking lot
for the building, and other common areas of the building. Landlord
reserves the right to install, maintain, use and repair and replace
pipes, wires and structural elements leading through the leased premises.
2. Term The term of this lease shall be for a period of the earlier
----
of (i) six (6) years from the date hereof, (ii) 30 days after termination
of employment of Michael D. Beck from his employment with Touchstone
Applied Science Associates, Inc., or (iii) sale of the building by
Landlord.
3. Rent Tenant shall pay during the term of this lease a basic monthly
----
rent of $500.
4. Services, Utilities and Facilities. Landlord shall furnish heat,
----------------------------------
electricity and air conditioning to the leased premises. Tenant shall
furnish routine janitorial and cleaning services of the leased premises,
telephone service (including installation of computer and facsimile
lines) and lawn maintenance for the building.
5. Repairs. Landlord shall maintain the roof, exterior walls,
-------
building equipment (including heating, electrical, sanitary, air
conditioning and other systems) and other common facilities and common
areas of the building. Tenant shall make all non-structural repairs as
necessary to the leasehold premises to keep them in such repair and order
as received, subject to ordinary wear and tear.
6. Use of Leasehold Premises. Tenant covenants and agrees to use and
-------------------------
occupy the leasehold premises only for the purpose and business of Tenant
as presently conducted therein and related integrated services.
7. Assignment and Subletting. Tenant shall not assign, transfer or
-------------------------
sublet this lease.
8. Landlord's Right of Access. Landlord shall maintain at all times
--------------------------
during the term of this lease the right to enter Tenant's leasehold
premises at all reasonable times and upon reasonable notice to make
repairs or alterations as may be necessary for the safety and
preservation of the premises or persons occupying same or for any other
reasonable purpose.
9. Surrender of Possession. Tenant covenants that at the expiration
-----------------------
or other termination of this lease that it shall remove its property and
any effects from leasehold premises and to surrender same with all keys
and locks and other fixtures in good repair, ordinary wear and tear
excepted. Tenant shall repair any damages caused to the leased premises
by removal of its property therefrom.
10. Insurance. Landlord shall maintain insurance for fire and other
---------
casualty on the leased premises, as a rider to their homeowner's policy
and shall name Tenant as an additional insured. Tenant may maintain such
other insurance as it deems appropriate.
11. Destruction and Condemnation. In case of any destruction or taking
or condemnation, the term of this lease shall cease and the lease
terminate. The entire award shall be the property of the Landlord, the
Tenant hereby assigns to Landlord all of Tenant's right, title and
interest in and to any such award.
12. Limitation of Landlord's Liability. Landlord shall not be liable
----------------------------------
to Tenant except for Landlord's gross negligence or wilful intent, for
any loss, damage or expense of any kind.
13. Default by Tenant. Upon the occurrence of any of the following
-----------------
events ("Events of Default") Landlord shall send written notice of their
intention to terminate the lease upon a specified date not less than
fifteen (15) days after the date of the notice and this lease shall then
expire on the date so specified unless the default is cured within that
time. If this lease is terminated in the above manner, Landlord or its
agents may immediately re-enter and resume possession of the leasehold
premises and remove Tenant and those claiming under Tenant from said
premises along with any property belonging to Tenant without being deemed
guilty of trespassing without prejudice to any other remedies for arrears
or rent or damages from the breach of this lease.
(1) Tenant fails to pay any monthly rent or any other amount
due hereunder on the due date and such failure to pay continues for more
than ten (10) days thereafter.
(2) Tenant neglects to observe any other covenant contained
in this lease on Tenant's part to be performed and such failure continues
for more than thirty (30) days after notice.
(3) Tenant is adjudicated a debtor under the United States
Bankruptcy Code or makes a general assignment for the benefit of
creditors, or a receiver or trustee is appointed to take charge of any
substantial part of Tenants' property or assets.
(4) Tenant vacates or abandons the leasehold premises.
14. Subordination. This lease shall be subject and subordinate at all
-------------
times to the lien of any mortgage which may now or at any time hereafter
be or become a lien upon the building.
15. Holdover Tenants. If Tenant does not immediately surrender
----------------
possession of the leasehold premises at the expiration or termination of
this lease, Tenant shall become Tenant "from month to month" at twice the
basic rent and additional rent payable under the terms of this lease.
Unless and until Landlord accepts such rent from Tenant, Landlord shall
continue to be entitled to retake possession of the leasehold premises
in any lawful manner and Tenants shall be liable to Landlord for any loss
Landlord may sustain by reason of Tenant's failure to surrender
possession of the leasehold premises immediately upon expiration or
termination of the lease.
16. Quiet Enjoyment. Landlord covenants and agrees that Tenant, upon
---------------
paying when due the basic rent and additional rent and observing and
keeping the covenants and conditions of this lease on its part to be
kept, shall lawfully and quietly hold, occupy and enjoy the leased
premises upon the terms hereof and during the term hereof, with
extensions, if any, without hindrance or molestation of Landlord or any
person or persons claiming under Landlord.
17. Entire Agreement. This lease contains the entire understanding and
----------------
agreement between the parties with regard to the leasehold premises and
may not be changed except by a writing signed by the party to be charged.
18. Notices. All notices required to be given under this lease shall
-------
be in writing and shall be deemed to have been duly given three (3)
business days after the date mailed when sent by certified mail/return
receipt requested at the addresses first set forth above and a copy to
Touchstone Applied Science Associates, Inc., Fields Lane, Brewster, NY
c/o Mr. Andrew L. Simon, Pres.
19. Governing Law. This lease shall be governed by and construed under
-------------
the laws of the State of New York.
IN WITNESS WHEREOF, the undersigned have executed and delivered this
lease as of the 2nd day of January, 1997.
LANDLORD: TENANT:
- -------- ------
BECK EVALUATION & TESTING
_____________________________ ASSOCIATES, INC.
Connie K. Beck
By:___________________________
_____________________________ Name: Michael D. Beck
Michael D. Beck Title: President
<PAGE>
EXHIBIT "D"
NOTE
PROMISSORY NOTE
$75,000.00 Newburgh, New York
As of January 2, 1997
FOR VALUE RECEIVED, the undersigned, TOUCHSTONE APPLIED SCIENCE
ASSOCIATES, INC., a Delaware corporation with its principal office at
Fields Lane, Brewster, New York, ("TASA") promises to pay to the order
of MICHAEL D. BECK at 35 Guion Lane, Pleasantville, New York ("Beck") the
principal amount of SEVENTY-FIVE THOUSAND AND 00/100 ($75,000.00) DOLLARS
with interest at the Interest Rate (as hereinafter defined) payable
quarterly on the unpaid principal balance of such amount from the date
of this Note until the Maturity Date. This Note evidences a debt (the
"Debt") owed to Beck by TASA, in the principal amount hereof, pursuant
to the terms of that certain Stock Purchase Agreement among TASA, Beck,
and Connie Beck and Michael D. Beck as guardian of Amanda Beck, dated as
of the date hereof (the "Stock Purchase Agreement"). All terms used
herein and not otherwise defined herein are used as defined in the Stock
Purchase Agreement. This Note is entitled to the benefits of the Stock
Purchase Agreement.
ARTICLE I.
Definitions
-----------
(a) "Base Rate" shall mean is eight and one quarter (8 1/4%)
percent per annum.
(b) "Default Rate" shall mean three (3%) percent per annum over
the Base Rate.
(c) "Initial Period" shall mean the period from the date of the
execution of this Note until the Maturity Date.
(d) "Interest Rate" shall mean the rate of interest to be paid by
TASA on any outstanding principal due under this Note and shall be
determined in accordance with Article II hereof.
(e) "Maturity Date" shall mean the earlier of the second (2nd)
year anniversary of the date hereof, and the date the full principal
balance of the Note plus interest thereon becomes due and payable as a
result of acceleration or otherwise.
(f) "Subsequent Period" shall mean the period from and including
the Maturity Date through such later date as the TASA pays the full
balance of the principal and interest (including Default Interest) and
Late Payment Charges remaining unpaid under this Note.
ARTICLE II
Computation of Interest and Determination of Interest Rate
----------------------------------------------------------
(a) Computation of Interest. Interest on the outstanding
-----------------------
principal balance of this Note shall be computed on the basis of a 360
day year for the actual number of days elapsed. Interest shall accrue
until the date of receipt of payment by Beck. Interest shall be paid
quarterly in arrears.
(b) Determination of Interest Rate. During the Initial Period,
------------------------------
the Interest Rate shall equal the Base Rate. During the Subsequent
Period, the Interest Rate shall be the Default Rate.
ARTICLE III
Payment of Principal and Interest
---------------------------------
(a) Periodic Payments. Payments shall be made to the order of
-----------------
"Michael D. Beck" at 35 Guion Lane, Pleasantville, New York 10570, or at
such other place as Beck may from time to time designate in writing.
Payments of principal and interest, subject to the provisions for
prepayment described below, shall be payable quarterly, commencing on
March 31, 1997 and continuing on the last day of June, September and
December of 1977 and each succeeding quarter thereafter to and including
December 31, 1998, in equal quarterly installments. On the Maturity Date
the balance of principal outstanding plus accrued interest (including
Default Interest) and any Late Payment Charges as hereinafter defined,
if any, shall be due and payable.
ARTICLE IV
General Conditions
------------------
(a) Application of Payments Received. Except as otherwise
--------------------------------
provided in this Note, all payments received by Beck on this Note shall
be applied by Beck as follows:
First, to any unpaid Late Payment Charges; and
Second, to accrued and unpaid interest then due and owing (including
Default Interest); and
Third, to the reduction of principal of this Note.
If an Event of Default occurs, Beck may apply any payments received
to sums due hereunder in such manner at he deems appropriate.
(b) Late Payment Charges. If TASA fails to pay any amount of
--------------------
principal and/or interest on the Note for fifteen (15) days after such
payment becomes due, whether by acceleration or otherwise, Beck may, at
its option, impose a late payment charge (the "Late Payment Charge") of
five percent (5%) of the payment due. Until any and all Late Payment
Charges are paid in full, the amount thereof shall be added to the
indebtedness herein. The Late Payment Charge is not a penalty and is
deemed to be liquidated damages for the purposes of compensating Beck for
computing the actual amount of damages incurred by Beck as a result of
the late payment by TASA.
(c) Prepayment. The Debt may be prepaid at any time and from time
----------
to time.
(d) Events of Default. Each of the following shall constitute an
-----------------
Event of Default under this Note:
(i) TASA shall fail to pay when due any amount of principal,
interest or fees payable by TASA under this Note and such failure shall
remain unremedied for five (5) days after written notice thereof shall
be given to TASA by Beck; or
(ii) TASA shall fail to perform or observe any other term,
condition, obligation or other covenant on its part to be performed or
observed under this Note or the Stock Purchase Agreement for ten (10)
days after Beck has given written notice to TASA; or
(iii) Any warranty, representation, covenant or other
statement by or on behalf of TASA in any instrument furnished with this
Note is false or misleading in any material respect; or
(iv) TASA shall (A) commence any voluntary case or other
proceeding seeking liquidation, reorganization or other relief with
respect to a voluntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or (B) consent to the
entry of any order for relief in an involuntary case under any such law
or to the appointment of or the taking possession by a receiver,
liquidator, assignee, custodian (or other similar official) of their
respective property or of any substantial part thereof, or (C) conceal,
remove or permit to be concealed or removed any part of its property,
with intent to hinder, delay or defraud its creditors or any of them, (D)
make or suffer a transfer of any of its property which may be fraudulent
under any bankruptcy, insolvency, fraudulent conveyance or other similar
law now or hereafter in effect, or (E) make any transfer of its property
to or for the benefit of a creditor at a time when other creditors
similarly situated have not been paid, or (F) make any general assignment
for the benefits of creditors, or (G) fail generally to pay its debt as
such debts become due; or
(v) If any involuntary case or other proceeding shall, at any
time be commenced against TASA seeking liquidation, reorganization or
other relief with respect to either of them or their respective debts
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or seeking the appointment of or the taking
possession by a receiver, liquidator, assignee (or other similar
official) of their respective property, or at any time, TASA shall suffer
or permit, while insolvent any creditor or obtain any lien upon any of
its property through legal proceedings or distraint, in such case,
proceedings or writ is not withdrawn, dismissed, vacated or fully bonded
within sixty (60) days;
(vi) Any judgment, order or award shall be rendered against
TASA, or any attachment, levy or execution shall be made against any of
its properties and either (A) any enforcement proceedings shall have been
commenced upon any such judgment, order, award, attachment, levy or
execution; or (B) such judgment, order, award, attachment, levy or
execution shall remain unpaid, unstayed on appeal, undischarged, unbonded
or undismissed for a period of 45 days or more;
(vii) An "Event of Default", as said term is defined in any
other document executed and delivered in connection herewith, shall have
occurred and continue unremedied beyond the expiration of any applicable
cure;
(viii) Any admission in writing by TASA of its inability
to pay its debts as they become due;
(ix) Any sale, transfer or assignment by TASA of substantially
all of the assets or capital stock of Beck Evaluation & Testing
Associates, Inc. ("BETA") (except to Michael D. Beck).
(x) If the Employment Agreement between TASA and Michael D.
Beck is terminated for any reason other than as set forth in Paragraphs
7(a) Cause or 7(d) Voluntary Termination of the Employment Agreement.
then, and in any such event, Beck may, at its option, declare the entire
unpaid balance of this Note together with interest accrued thereon and
any other sums due hereunder, to be immediately due and payable and Beck
may proceed to exercise any rights or remedies that it may have under
this Note, or such other rights and remedies which Beck may have at law,
equity or otherwise.
(e) Costs and Expenses on Default. After default, in addition to
-----------------------------
principal, interest (including Default Interest) and any Late Payment
Charge, Beck shall be entitled to collect all costs of collection,
including, but not limited to, reasonable attorneys' fees, and all such
costs and expenses shall be payable on demand.
(f) No Waiver. No failure on the part of Beck or other holder
---------
hereof to exercise any right or remedy hereunder, whether before or after
the happening of a default, shall constitute a waiver thereof, and no
waiver of any past default shall constitute waiver of any future default
or any defaults. No failure to accelerate the Debt, or the acceptance
of past due installments, or indulgence granted from time to time shall
be construed to be a waiver of the right to insist upon prompt payment
thereafter, or be construed so as to preclude the exercise of any right
which Beck may have. TASA, and each endorser hereby expressly waives the
benefit of any statute or rule of law or equity which would produce the
result contrary or in conflict with the foregoing. This Note may not be
changed orally but only by an agreement in writing signed by the party
against whom such agreement is sought to be enforced.
(g) Waiver by TASA. TASA hereby waives presentment, protest,
--------------
demand, notice of dishonor and of nonpayment, against the enforcement and
collection of the obligations evidenced by this Note and any and all
extensions, renewals and modifications hereof.
(h) Compliance with Usury Laws. It is not intended hereby to
--------------------------
charge interest at a rate in excess of the maximum interest rate
permitted to be charged to the TASA under applicable law. TASA shall not
be required to make interest payments to the extent that the receipt
thereof by Beck would not be permissible under any applicable statute,
rule or regulation limiting rates of interest which may be charged or
collected by any lender; provided, however, that any interest payment not
required to be made by TASA pursuant to the foregoing limitations
sentence shall be made by TASA to Beck on the earliest date or dates on
which the receipt thereof would be permissible under such statutes, rules
or regulations; and provided, further, that no interest shall accrue or
be charged on the amount of any interest payment deferred pursuant to
this provision.
(i) Governing Law; Submission to Jurisdiction. This Note shall be
-----------------------------------------
governed and construed under the laws of the State of New York. TASA
hereby irrevocably submits to personal jurisdiction in the federal or
state courts of competent jurisdiction located in the County of
Westchester and any related appellate courts and irrevocably waives any
objections as to the venue of any such action or proceeding brought in
such court or that such court is an inconvenient forum.
(j) Notices. Any notices required or permitted to be given
-------
hereunder shall be given by registered or certified mail, postage
prepaid, return receipt requested to the addresses set forth below or by
facsimile to:
If to TASA:
Touchstone Applied Science Associates, Inc.
Fields Lane
Brewster, NY
Att: Andrew L. Simon, President
(914) 277-3548
with a copy to:
Rider, Weiner, Frankel & Calhelha, P.C.
655 Little Britain Road
Newburgh, NY 12550
Att: David L. Rider, Esq.
(914) 562-9126
If to Beck:
Mr. Michael D. Beck
35 Guion Street
Pleasantville, NY 10570
(914) 769-5235
with a copy to:
Cowan, Liebowitz, & Latman, P.C.
1133 Avenue of the Americas
New York, NY 10036-6799
Att: Robert Halper, Esq.
(212) 790-9300
or such other addresses or facsimile numbers as the parties may designate
in writing to the other party. All notices shall be deemed given three
(3) days after deposit in the U.S. mails, or in the case of facsimile
notice, when sent with evidence of transmission.
(k) This Note may be transferred to any other person, firm
or corporation who shall thereaafter become vested in all the powers,
rights and obligations of holder herein.
(l) TASA AND BECK HEREBY WAIVE TRIAL BY JURY IN ANY
LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING
OUT OF THIS NOTE, OR THE VALIDITY, PROTECTION, COLLECTION OR ENFORCEMENT
THEREOF, OR ANY OTHER CLAIM OR DISPUTE HOWEVER ARISING BETWEEN TASA AND
BECK OR ANY HOLDER OF THIS NOTE.
IN WITNESS WHEREOF, TASA, by its duly appointed and acting officer,
and Beck have executed this instrument as of the date first above
written.
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
By:_____________________________________________
Andrew L. Simon, President
________________________________________________
Michael D. Beck
<PAGE>
PROMISSORY NOTE
---------------
$37,500.00 Newburgh, New York
As of January 2, 1997
FOR VALUE RECEIVED, the undersigned, TOUCHSTONE APPLIED SCIENCE
ASSOCIATES, INC., a Delaware corporation with its principal office at
Fields Lane, Brewster, New York, ("TASA") promises to pay to the order
of CONNIE K. BECK at 35 Guion Lane, Pleasantville, New York ("Beck") the
principal amount of THIRTY-SEVEN THOUSAND FIVE HUNDRED AND 00/100
($37,500.00) DOLLARS with interest at the Interest Rate (as hereinafter
defined) payable quarterly on the unpaid principal balance of such amount
from the date of this Note until the Maturity Date. This Note evidences
a debt (the "Debt") owed to Beck by TASA, in the principal amount hereof,
pursuant to the terms of that certain Stock Purchase Agreement among
TASA, Beck, and Michael Beck and Michael Beck as Guardian of Amanda Beck,
dated as of the date hereof (the "Stock Purchase Agreement"). All terms
used herein and not otherwise defined herein are used as defined in the
Stock Purchase Agreement. This Note is entitled to the benefits of the
Stock Purchase Agreement.
ARTICLE I.
Definitions
-----------
(a) "Base Rate" shall mean eight and one quarter (8 1/4%) percent
per annum.
(b) "Default Rate" shall mean three (3%) percent per annum over
the Base Rate.
(c) "Initial Period" shall mean the period from the date of the
execution of this Note until the Maturity Date.
(d) "Interest Rate" shall mean the rate of interest to be paid by
TASA on any outstanding principal due under this Note and shall be
determined in accordance with Article II hereof.
(e) "Maturity Date" shall mean the earlier of the second (2nd)
year anniversary of the date hereof, and the date the full principal
balance of the Note plus interest thereon becomes due and payable as a
result of acceleration or otherwise.
(f) "Subsequent Period" shall mean the period from and including
the Maturity Date through such later date as the TASA pays the full
balance of the principal and interest (including Default Interest) and
Late Payment Charges remaining unpaid under this Note.
ARTICLE II
Computation of Interest and Determination of Interest Rate
----------------------------------------------------------
(a) Computation of Interest. Interest on the outstanding
-----------------------
principal balance of this Note shall be computed on the basis of a 360
day year for the actual number of days elapsed. Interest shall accrue
until the date of receipt of payment by Beck. Interest shall be paid
quarterly in arrears.
(b) Determination of Interest Rate. During the Initial Period,
------------------------------
the Interest Rate shall equal the Base Rate. During the Subsequent
Period, the Interest Rate shall be the Default Rate.
ARTICLE III
Payment of Principal and Interest
---------------------------------
(a) Periodic Payments. Payments shall be made to the order of
-----------------
"Connie K. Beck" at 35 Guion Lane, Pleasantville, New York 10570, or at
such other place as Beck may from time to time designate in writing.
Payments of principal and interest, subject to the provisions for
prepayment described below, shall be payable quarterly, commencing on
March 31, 1997 and continuing on the last day of June, September and
December of 1977 and each succeeding quarter thereafter to and including
December 31, 1998, in equal quarterly installments. On the Maturity Date
the balance of principal outstanding plus accrued interest (including
Default Interest) and any Late Payment Charges as hereinafter defined,
if any, shall be due and payable.
ARTICLE IV
General Conditions
(a) Application of Payments Received. Except as otherwise
--------------------------------
provided in this Note, all payments received by Beck on this Note shall
be applied by Beck as follows:
First, to any unpaid Late Payment Charges; and
Second, to accrued and unpaid interest then due and owing (including
Default Interest); and
Third, to the reduction of principal of this Note.
If an Event of Default occurs, Beck may apply any payments received
to sums due hereunder in such manner at he deems appropriate.
(b) Late Payment Charges. If TASA fails to pay any amount of
--------------------
principal and/or interest on the Note for fifteen (15) days after such
payment becomes due, whether by acceleration or otherwise, Beck may, at
its option, impose a late payment charge (the "Late Payment Charge") of
five percent (5%) of the payment due. Until any and all Late Payment
Charges are paid in full, the amount thereof shall be added to the
indebtedness herein. The Late Payment Charge is not a penalty and is
deemed to be liquidated damages for the purposes of compensating Beck for
computing the actual amount of damages incurred by Beck as a result of
the late payment by TASA.
(c) Prepayment. The Debt may be prepaid at any time and from time
----------
to time.
(d) Events of Default. Each of the following shall constitute an
-----------------
Event of Default under this Note:
(i) TASA shall fail to pay when due any amount of principal,
interest or fees payable by TASA under this Note and such failure shall
remain unremedied for five (5) days after written notice thereof shall
be given to TASA by Beck; or
(ii) TASA shall fail to perform or observe any other term,
condition, obligation or other covenant on its part to be performed or
observed under this Note or the Stock Purchase Agreement for ten (10)
days after Beck has given written notice to TASA; or
(iii) Any warranty, representation, covenant or other
statement by or on behalf of TASA in any instrument furnished with this
Note is false or misleading in any material respect; or
(iv) TASA shall (A) commence any voluntary case or other
proceeding seeking liquidation, reorganization or other relief with
respect to a voluntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or (B) consent to the
entry of any order for relief in an involuntary case under any such law
or to the appointment of or the taking possession by a receiver,
liquidator, assignee, custodian (or other similar official) of their
respective property or of any substantial part thereof, or (C) conceal,
remove or permit to be concealed or removed any part of its property,
with intent to hinder, delay or defraud its creditors or any of them, (D)
make or suffer a transfer of any of its property which may be fraudulent
under any bankruptcy, insolvency, fraudulent conveyance or other similar
law now or hereafter in effect, or (E) make any transfer of its property
to or for the benefit of a creditor at a time when other creditors
similarly situated have not been paid, or (F) make any general assignment
for the benefits of creditors, or (G) fail generally to pay its debt as
such debts become due; or
(v) If any involuntary case or other proceeding shall, at any
time be commenced against TASA seeking liquidation, reorganization or
other relief with respect to either of them or their respective debts
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or seeking the appointment of or the taking
possession by a receiver, liquidator, assignee (or other similar
official) of their respective property, or at any time, TASA shall suffer
or permit, while insolvent any creditor or obtain any lien upon any of
its property through legal proceedings or distraint, in such case,
proceedings or writ is not withdrawn, dismissed, vacated or fully bonded
within sixty (60) days;
(vi) Any judgment, order or award shall be rendered against
TASA, or any attachment, levy or execution shall be made against any of
its properties and either (A) any enforcement proceedings shall have been
commenced upon any such judgment, order, award, attachment, levy or
execution; or (B) such judgment, order, award, attachment, levy or
execution shall remain unpaid, unstayed on appeal, undischarged, unbonded
or undismissed for a period of 45 days or more;
(vii) An "Event of Default", as said term is defined in any
other document executed and delivered in connection herewith, shall have
occurred and continue unremedied beyond the expiration of any applicable
cure;
(viii) Any admission in writing by TASA of its inability
to pay its debts as they become due;
(ix) Any sale, transfer or assignment by TASA of substantially
all of the assets or capital stock of Beck Evaluation & Testing
Associates, Inc. ("BETA") (except to Michael Beck).
(x) If the Employment Agreement between TASA and Michael Beck
is terminated for any reason other than as set forth in Paragraphs 7(a)
Cause or 7(d) Voluntary Termination of the Employment Agreement.
then, and in any such event, Beck may, at its option, declare the entire
unpaid balance of this Note together with interest accrued thereon and
any other sums due hereunder, to be immediately due and payable and Beck
may proceed to exercise any rights or remedies that it may have under
this Note, or such other rights and remedies which Beck may have at law,
equity or otherwise.
(e) Costs and Expenses on Default. After default, in addition to
-----------------------------
principal, interest (including Default Interest) and any Late Payment
Charge, Beck shall be entitled to collect all costs of collection,
including, but not limited to, reasonable attorneys' fees, and all such
costs and expenses shall be payable on demand.
(f) No Waiver. No failure on the part of Beck or other holder
---------
hereof to exercise any right or remedy hereunder, whether before or after
the happening of a default, shall constitute a waiver thereof, and no
waiver of any past default shall constitute waiver of any future default
or any defaults. No failure to accelerate the Debt, or the acceptance
of past due installments, or indulgence granted from time to time shall
be construed to be a waiver of the right to insist upon prompt payment
thereafter, or be construed so as to preclude the exercise of any right
which Beck may have. TASA, and each endorser hereby expressly waives the
benefit of any statute or rule of law or equity which would produce the
result contrary or in conflict with the foregoing. This Note may not be
changed orally but only by an agreement in writing signed by the party
against whom such agreement is sought to be enforced.
(g) Waiver by TASA. TASA hereby waives presentment, protest,
--------------
demand, notice of dishonor and of nonpayment, against the enforcement and
collection of the obligations evidenced by this Note and any and all
extensions, renewals and modifications hereof.
(h) Compliance with Usury Laws. It is not intended hereby to
--------------------------
charge interest at a rate in excess of the maximum interest rate
permitted to be charged to the TASA under applicable law. TASA shall not
be required to make interest payments to the extent that the receipt
thereof by Beck would not be permissible under any applicable statute,
rule or regulation limiting rates of interest which may be charged or
collected by any lender; provided, however, that any interest payment not
required to be made by TASA pursuant to the foregoing limitations
sentence shall be made by TASA to Beck on the earliest date or dates on
which the receipt thereof would be permissible under such statutes, rules
or regulations; and provided, further, that no interest shall accrue or
be charged on the amount of any interest payment deferred pursuant to
this provision.
(i) Governing Law; Submission to Jurisdiction. This Note shall be
-----------------------------------------
governed and construed under the laws of the State of New York. TASA
hereby irrevocably submits to personal jurisdiction in the federal or
state courts of competent jurisdiction located in the County of
Westchester and any related appellate courts and irrevocably waives any
objections as to the venue of any such action or proceeding brought in
such court or that such court is an inconvenient forum.
(j) Notices. Any notices required or permitted to be given
-------
hereunder shall be given by registered or certified mail, postage
prepaid, return receipt requested to the addresses set forth below or by
facsimile to:
If to TASA:
Touchstone Applied Science Associates, Inc.
Fields Lane
Brewster, NY
Att: Andrew L. Simon, President
(914) 277-3548
with a copy to:
Rider, Weiner, Frankel & Calhelha, P.C.
655 Little Britain Road
Newburgh, NY 12550
Att: David L. Rider, Esq.
(914) 562-9126
If to Beck:
Mrs. Michael Beck
35 Guion Street
Pleasantville, NY 10570
(914) 769-5235
with a copy to:
Cowan, Liebowitz, & Latman, P.C.
1133 Avenue of the Americas
New York, NY 10036-6799
Att: Robert Halper, Esq.
(212) 790-9300
or such other addresses or facsimile numbers as the parties may designate
in writing to the other party. All notices shall be deemed given three
(3) days after deposit in the U.S. mails, or in the case of facsimile
notice, when sent with evidence of transmission.
(k) This Note may be transferred to any other person, firm
or corporation who shall thereaafter become vested in all the powers,
rights and obligations of holder herein.
(l) TASA AND BECK HEREBY WAIVE TRIAL BY JURY IN ANY
LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING
OUT OF THIS NOTE, OR THE VALIDITY, PROTECTION, COLLECTION OR ENFORCEMENT
THEREOF, OR ANY OTHER CLAIM OR DISPUTE HOWEVER ARISING BETWEEN TASA AND
BECK OR ANY HOLDER OF THIS NOTE.
IN WITNESS WHEREOF, TASA, by its duly appointed and acting officer,
and Beck have executed this instrument as of the date first above
written.
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
By:_____________________________________________
Andrew L. Simon, President
________________________________________________
Connie K. Beck
<PAGE>
PROMISSORY NOTE
$37,500.00 Newburgh, New York
As of January 2, 1997
FOR VALUE RECEIVED, the undersigned, TOUCHSTONE APPLIED SCIENCE
ASSOCIATES, INC., a Delaware corporation with its principal office at
Fields Lane, Brewster, New York, ("TASA") promises to pay to the order
of MICHAEL D. BECK as Guardian for AMANDA BECK at 35 Guion Lane,
Pleasantville, New York ("Beck") the principal amount of THIRTY-SEVEN
THOUSAND FIVE HUNDRED AND 00/100 ($37,500.00) DOLLARS with interest at
the Interest Rate (as hereinafter defined) payable quarterly on the
unpaid principal balance of such amount from the date of this Note until
the Maturity Date. This Note evidences a debt (the "Debt") owed to Beck
by TASA, in the principal amount hereof, pursuant to the terms of that
certain Stock Purchase Agreement among TASA, Connie Beck, Michael Beck
and Michael Beck as Guardian of Amanda Beck, dated as of the date hereof
(the "Stock Purchase Agreement"). All terms used herein and not
otherwise defined herein are used as defined in the Stock Purchase
Agreement. This Note is entitled to the benefits of the Stock Purchase
Agreement.
ARTICLE I.
Definitions
-----------
(a) "Base Rate" shall mean eight and eight and one quarter (8
1/4%) percent per annum.
(b) "Default Rate" shall mean three (3%) percent per annum over
the Base Rate.
(c) "Initial Period" shall mean the period from the date of the
execution of this Note until the Maturity Date.
(d) "Interest Rate" shall mean the rate of interest to be paid by
TASA on any outstanding principal due under this Note and shall be
determined in accordance with Article II hereof.
(e) "Maturity Date" shall mean the earlier of the second (2nd)
year anniversary of the date hereof, and the date the full principal
balance of the Note plus interest thereon becomes due and payable as a
result of acceleration or otherwise.
(f) "Subsequent Period" shall mean the period from and including
the Maturity Date through such later date as the TASA pays the full
balance of the principal and interest (including Default Interest) and
Late Payment Charges remaining unpaid under this Note.
ARTICLE II
Computation of Interest and Determination of Interest Rate
----------------------------------------------------------
(a) Computation of Interest. Interest on the outstanding
-----------------------
principal balance of this Note shall be computed on the basis of a 360
day year for the actual number of days elapsed. Interest shall accrue
until the date of receipt of payment by Beck. Interest shall be paid
quarterly in arrears.
(b) Determination of Interest Rate. During the Initial Period,
------------------------------
the Interest Rate shall equal the Base Rate. During the Subsequent
Period, the Interest Rate shall be the Default Rate.
ARTICLE III
Payment of Principal and Interest
---------------------------------
(a) Periodic Payments. Payments shall be made to the order of
-----------------
"Michael D. Beck as Custodian for Amanda Beck" at 35 Guion Lane,
Pleasantville, New York 10570, or at such other place as Beck may from
time to time designate in writing. Payments of principal and interest,
subject to the provisions for prepayment described below, shall be
payable quarterly, commencing on March 31, 1997 and continuing on the
last day of June, September and December of 1977 and each succeeding
quarter thereafter to and including December 31, 1998, in equal quarterly
installments. On the Maturity Date the balance of principal outstanding
plus accrued interest (including Default Interest) and any Late Payment
Charges as hereinafter defined, if any, shall be due and payable.
ARTICLE IV
General Conditions
------------------
(a) Application of Payments Received. Except as otherwise
--------------------------------
provided in this Note, all payments received by Beck on this Note shall
be applied by Beck as follows:
First, to any unpaid Late Payment Charges; and
Second, to accrued and unpaid interest then due and owing (including
Default Interest); and
Third, to the reduction of principal of this Note.
If an Event of Default occurs, Beck may apply any payments received
to sums due hereunder in such manner at he deems appropriate.
(b) Late Payment Charges. If TASA fails to pay any amount of
--------------------
principal and/or interest on the Note for fifteen (15) days after such
payment becomes due, whether by acceleration or otherwise, Beck may, at
its option, impose a late payment charge (the "Late Payment Charge") of
five percent (5%) of the payment due. Until any and all Late Payment
Charges are paid in full, the amount thereof shall be added to the
indebtedness herein. The Late Payment Charge is not a penalty and is
deemed to be liquidated damages for the purposes of compensating Beck for
computing the actual amount of damages incurred by Beck as a result of
the late payment by TASA.
(c) Prepayment. The Debt may be prepaid at any time and from time
----------
to time.
(d) Events of Default. Each of the following shall constitute an
-----------------
Event of Default under this Note:
(i) TASA shall fail to pay when due any amount of principal,
interest or fees payable by TASA under this Note and such failure shall
remain unremedied for five (5) days after written notice thereof shall
be given to TASA by Beck; or
(ii) TASA shall fail to perform or observe any other term,
condition, obligation or other covenant on its part to be performed or
observed under this Note or the Stock Purchase Agreement for ten (10)
days after Beck has given written notice to TASA; or
(iii) Any warranty, representation, covenant or other
statement by or on behalf of TASA in any instrument furnished with this
Note is false or misleading in any material respect; or
(iv) TASA shall (A) commence any voluntary case or other
proceeding seeking liquidation, reorganization or other relief with
respect to a voluntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or (B) consent to the
entry of any order for relief in an involuntary case under any such law
or to the appointment of or the taking possession by a receiver,
liquidator, assignee, custodian (or other similar official) of their
respective property or of any substantial part thereof, or (C) conceal,
remove or permit to be concealed or removed any part of its property,
with intent to hinder, delay or defraud its creditors or any of them, (D)
make or suffer a transfer of any of its property which may be fraudulent
under any bankruptcy, insolvency, fraudulent conveyance or other similar
law now or hereafter in effect, or (E) make any transfer of its property
to or for the benefit of a creditor at a time when other creditors
similarly situated have not been paid, or (F) make any general assignment
for the benefits of creditors, or (G) fail generally to pay its debt as
such debts become due; or
(v) If any involuntary case or other proceeding shall, at any
time be commenced against TASA seeking liquidation, reorganization or
other relief with respect to either of them or their respective debts
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or seeking the appointment of or the taking
possession by a receiver, liquidator, assignee (or other similar
official) of their respective property, or at any time, TASA shall suffer
or permit, while insolvent any creditor or obtain any lien upon any of
its property through legal proceedings or distraint, in such case,
proceedings or writ is not withdrawn, dismissed, vacated or fully bonded
within sixty (60) days;
(vi) Any judgment, order or award shall be rendered against
TASA, or any attachment, levy or execution shall be made against any of
its properties and either (A) any enforcement proceedings shall have been
commenced upon any such judgment, order, award, attachment, levy or
execution; or (B) such judgment, order, award, attachment, levy or
execution shall remain unpaid, unstayed on appeal, undischarged, unbonded
or undismissed for a period of 45 days or more;
(vii) An "Event of Default", as said term is defined in any
other document executed and delivered in connection herewith, shall have
occurred and continue unremedied beyond the expiration of any applicable
cure;
(viii) Any admission in writing by TASA of its inability
to pay its debts as they become due;
(ix) Any sale, transfer or assignment by TASA of substantially
all of the assets or capital stock of Beck Evaluation & Testing
Associates, Inc. ("BETA") (except to Michael Beck);
(x) If the Employment Agreement between TASA and Michael Beck
is terminated for any reason other than as set forth in Paragraphs 7(a)
Cause or 7(d) Voluntary Termination of the Employment Agreement;
then, and in any such event, Beck may, at its option, declare the entire
unpaid balance of this Note together with interest accrued thereon and
any other sums due hereunder, to be immediately due and payable and Beck
may proceed to exercise any rights or remedies that it may have under
this Note, or such other rights and remedies which Beck may have at law,
equity or otherwise.
(e) Costs and Expenses on Default. After default, in addition to
-----------------------------
principal, interest (including Default Interest) and any Late Payment
Charge, Beck shall be entitled to collect all costs of collection,
including, but not limited to, reasonable attorneys' fees, and all such
costs and expenses shall be payable on demand.
(f) No Waiver. No failure on the part of Beck or other holder
---------
hereof to exercise any right or remedy hereunder, whether before or after
the happening of a default, shall constitute a waiver thereof, and no
waiver of any past default shall constitute waiver of any future default
or any defaults. No failure to accelerate the Debt, or the acceptance
of past due installments, or indulgence granted from time to time shall
be construed to be a waiver of the right to insist upon prompt payment
thereafter, or be construed so as to preclude the exercise of any right
which Beck may have. TASA, and each endorser hereby expressly waives the
benefit of any statute or rule of law or equity which would produce the
result contrary or in conflict with the foregoing. This Note may not be
changed orally but only by an agreement in writing signed by the party
against whom such agreement is sought to be enforced.
(g) Waiver by TASA. TASA hereby waives presentment, protest,
--------------
demand, notice of dishonor and of nonpayment, against the enforcement and
collection of the obligations evidenced by this Note and any and all
extensions, renewals and modifications hereof.
(h) Compliance with Usury Laws. It is not intended hereby to
--------------------------
charge interest at a rate in excess of the maximum interest rate
permitted to be charged to the TASA under applicable law. TASA shall not
be required to make interest payments to the extent that the receipt
thereof by Beck would not be permissible under any applicable statute,
rule or regulation limiting rates of interest which may be charged or
collected by any lender; provided, however, that any interest payment not
required to be made by TASA pursuant to the foregoing limitations
sentence shall be made by TASA to Beck on the earliest date or dates on
which the receipt thereof would be permissible under such statutes, rules
or regulations; and provided, further, that no interest shall accrue or
be charged on the amount of any interest payment deferred pursuant to
this provision.
(i) Governing Law; Submission to Jurisdiction. This Note shall be
-----------------------------------------
governed and construed under the laws of the State of New York. TASA
hereby irrevocably submits to personal jurisdiction in the federal or
state courts of competent jurisdiction located in the County of
Westchester and any related appellate courts and irrevocably waives any
objections as to the venue of any such action or proceeding brought in
such court or that such court is an inconvenient forum.
(j) Notices. Any notices required or permitted to be given
-------
hereunder shall be given by registered or certified mail, postage
prepaid, return receipt requested to the addresses set forth below or by
facsimile to:
If to TASA:
Touchstone Applied Science Associates, Inc.
Fields Lane
Brewster, NY
Att: Andrew L. Simon, President
(914) 277-3548
with a copy to:
Rider, Weiner, Frankel & Calhelha, P.C.
655 Little Britain Road
Newburgh, NY 12550
Att: David L. Rider, Esq.
(914) 562-9126
If to Beck:
Mr. Michael Beck, as Guardian for Amanda Beck
35 Guion Street
Pleasantville, NY 10570
(914) 769-5235
with a copy to:
Cowan, Liebowitz, & Latman, P.C.
1133 Avenue of the Americas
New York, NY 10036-6799
Att: Robert Halper, Esq.
(212) 790-9300
or such other addresses or facsimile numbers as the parties may designate
in writing to the other party. All notices shall be deemed given three
(3) days after deposit in the U.S. mails, or in the case of facsimile
notice, when sent with evidence of transmission.
(k) This Note may be transferred to any other person, firm
or corporation who shall thereafter become vested in all the powers,
rights and obligations of holder herein.
(l) TASA AND BECK HEREBY WAIVE TRIAL BY JURY IN ANY
LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING
OUT OF THIS NOTE, OR THE VALIDITY, PROTECTION, COLLECTION OR ENFORCEMENT
THEREOF, OR ANY OTHER CLAIM OR DISPUTE HOWEVER ARISING BETWEEN TASA AND
BECK OR ANY HOLDER OF THIS NOTE.
IN WITNESS WHEREOF, TASA, by its duly appointed and acting officer,
and Beck have executed this instrument as of the date first above
written.
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
By:_____________________________________________
Andrew L. Simon, President
________________________________________________
Michael Beck, as Guardian for Amanda Beck
Exhibit 10.2
EMPLOYMENT AGREEMENT
AGREEMENT dated as of the 2nd day of January, 1997 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 MICHAEL D. BECK, an individual residing at 35 Guion Street,
Pleasantville, New York 10570 ("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 in a dual capacity, as its Vice President, or in such other
capacity or capacities as may be determined by the Board (provided that
his authority, duties and responsibilities shall be at least commensurate
in all material respects with his office, status and titles at the time
of such change); and as the President and Chief Executive Officer of its
wholly-owned subsidiary, Beck Evaluation & Testing Associates, Inc.
("BETA"). 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, but in no event more than 40 miles from the principal office
of BETA in Pleasantville, New York. 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. It is anticipated that during the initial year
of this Agreement, Executive shall devote eighty (80%) percent of his
time to his responsibilities relating to BETA and twenty (20%) percent
of his time to his responsibilities to the Corporation. Thereafter,
Executive shall devote such time to the business of each of the
Corporation and BETA as shall be agreed by Executive and the Chief
Executive Officer of the Corporation it being understood that such time
shall continue to be devoted to BETA as shall be required to maintain
BETA's viability and effectively operate and manage its affairs. 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 (the "Base Salary") of not less than: (i) $100,000.00 during the
first and second years of this Agreement, (ii) $106,000 during the third
year of this Agreement and (iii) $110,000 each year of this Agreement
thereafter. 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, Executive shall be
entitled to a bonus (the "BETA Bonus") on an annual basis equal to six
(6%) percent of the annual gross revenues of BETA in excess of Four
Hundred Thousand Dollars ($400,000.00). In the event of a Change of
Control, in addition to the BETA Bonus and Base Salary, 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, BETA Bonus and Annual 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. The Corporation specifically agrees
that it, or BETA, in the Corporation's discretion, shall pay the annual
premium of approximately $10,000 for each of years 1997 and 1998 and
$4,000 for year 1999 for the life insurance policy currently owned by
Executive and for which BETA has paid the premium in 1996.
(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 paid for by the Corporation,
in each case 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
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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.
(c) As an incentive to enter into this Agreement and pursuant
to the terms of the Stock Purchase Agreement dated as of January 2, 1997
(the "Stock Purchase Agreement") pursuant to which the Corporation
acquired the capital stock of BETA, the Corporation, immediately upon the
execution and delivery of this Agreement, shall deliver to Executive a
Stock Option Agreement pursuant to its Amended and Restated 1991 Stock
Option Incentive Plan, granting to Executive options for 125,000 shares
of the common stock of the Corporation at fair market value as of the
date hereof, exercisable over a five year period.
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) the product of the BETA 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, (iv) 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 (v) 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), (iii) and (iv) 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
(other than the obligation of the Corporation to register the shares
delivered to Executive and Connie Beck and Michael D. Beck as Custodian
for Amanda Beck pursuant to the Stock Purchase Agreement dated as of
January 2, 1997) 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 (a) (i), (ii), (iii) and
(iv) 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 or Executive's legal representative'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 (a) (i), (ii), (iii) and (iv)
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 OTHER THAN 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 (z) the highest BETA Bonus earned (whether or not
deferred) by Executive during the same three year period; 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. Repurchase Option. (a) The Corporation and Executive desire
-----------------
to provide a mechanism pursuant to which Executive shall have a right to
reaquire the capital stock of BETA on certain terms and conditions. The
repurchase rights ("Repurchase Option") shall be dependent upon the
termination provisions set forth herein. Except as provided herein and
in the Stock Purchase Agreement, the Repurchase Option shall be
exercisable for a period of six (6) years from the date of this
Agreement, although Executive may not exercise such option before
expiration of the third anniversary of this Agreement unless he is
terminated by the Corporation either for Cause or Disability or he leaves
for Good Reason. In these such instances he may repurchase the Shares
prior to the expiration of the third anniversary of this Agreement.
(b) The repurchase price shall be as follows:
(i) If terminated for Cause, Disability, or Good
Reason, at any time, or Voluntary Termination after the third anniversary
of the date of this Agreement, Executive may repurchase the Shares for
the market value of the Corporation as at the date of his termination at
the formula as set forth in Paragraph 9 (b)(i) of the Stock Purchase
Agreement.
(ii) If terminated for Death or if Voluntary Termination
occurs on or before the third anniversary of the Employment Agreement,
no Repurchase Option shall be available to Executive.
(iii) If terminated pursuant to Paragraph 1 hereof
prior to the expiration of the sixth anniversary of this Agreement,
Executive may repurchase the Shares for the repurchase price as set forth
in Paragraph 9 (b)(iii) of the Stock Purchase Agreement.
(c) Executive shall exercise his Repurchase Option by giving
notice pursuant to the terms of Paragraph 9 (c) of the Stock Purchase
Agreement.
10. 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 10 and Section 11, the term
"Corporation" includes the Corporation and any other predecessor
corporation, and affiliates (including, without limitation, distributors,
licensees, franchisees, subsidiaries and joint ventures).
(d) In the event Executive exercises his Repurchase Option,
the Corporation agrees that it and its officers, directors and employees
shall not at any time from the date of closing of the repurchase, reveal,
report, publish, transfer or otherwise disclose to any person,
corporation or other entity, or use, any of BETA's confidential
information, without the written consent of BETA, except for such
information which legally and legitimately is or becomes of general
public knowledge from authorized sources other than the Corporation. The
Corporation further agrees that at the closing of the repurchase, it
shall promptly deliver to BETA 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 BETA's business which are in the Corporation's possession or control.
BETA shall reimburse the Corporation for any packing or moving costs
reasonably incurred by the Corporation in connection with the foregoing
delivery.
11. Non-Competition. (a) 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,
except as provided in (b) below, 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:
(i) solicit or attempt to solicit business of any customers
of the Corporation or BETA (including prospective customers solicited by
the Corporation or BETA during the term of his employment) for products
or services the same or similar to those offered, sold, produced or under
development by the Corporation or BETA during the term of his employment
therewith or dealt in by Executive during his employment with the
Corporation;
(ii) solicit or attempt to solicit for any business endeavor
any employee of the Corporation or BETA;
(iii) interfere with any business relationship between
the Corporation or BETA and any other person or entity;
(v) use the name of the Corporation or BETA or a name similar
thereto; or
(vi) 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 11 (although Executive's
obligations under Section 10 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.
(b) Notwithstanding anything to the contrary contained in
this Agreement, in the event that upon termination of employment for any
reason, Executive acquires BETA from the Corporation, the provisions of
Section 11 (a) of this Section 11 shall be deemed to be in effect, except
that the language shall be deemed modified to delete "BETA" from each and
every provision thereof.
(c) In the event Executive exercises his Repurchase Option,
the Corporation agrees that it and its officers, directors and employees
shall not at any time from the date of closing of the repurchase, except
as provided in (b) below, 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 the Corporation) directly or indirectly:
(i) solicit or attempt to solicit business of any customers
of BETA (including prospective customers solicited by BETA during the
term of Executive's employment) for products or services the same or
similar to those offered, sold, produced or under development by BETA
during the term of Executive's employment with the Corporation or dealt
in by BETA during his employment with the Corporation;
(ii) solicit or attempt to solicit for any business endeavor
any employee of BETA;
(iii) interfere with any business relationship between
BETA and any other person or entity;
(iv) use the name of BETA or a name similar thereto;
provided, however, that notwithstanding the foregoing, the Corporation
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shall not have any obligation under Section 11 (c) (although the
Corporation's obligations under Section 10 (d) shall continue unimpaired)
if Executive does not exercise his Repurchase Option. The foregoing
shall not prevent the Corporation from purchasing or owning up to five
percent of the voting securities of any corporation, the securities of
which are publicly-traded.
12. 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 10 or 11, be available to the Corporation. The
provisions of Sections 10 and 11 and this Section 12 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 10 or 11 of this Agreement constitute a basis for deferring
or withholding any amounts otherwise payable to Executive under this
Agreement.
13. 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 which
the Corporation may have against Executive or others except as set forth
in the Stock Purchase Agreement. 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 14, 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 Corporation's obligations hereunder, in his
sole discretion. If the parties hereto so agree in writing, any disputes
under this Agreement may be settled by arbitration.
14. 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 14) ("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 14(c), all
determinations required to be made under this Section 14, 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
14(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 14(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 14(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 14(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 14(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
14(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 14(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.
15. 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.
16. 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.
17. 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.
18. 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.
19. Communications and Notices. All notices and other
--------------------------
communications under this Agreement shall be in writing and shall be
deemed to have been duly given three (3) business days after they are
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.
20. 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.
21. 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.
22. 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/ MICHAEL D. BECK
--------------------------------
Michael D. Beck
Exhibit 10.3
ASSIGNMENT, ASSUMPTION AND SALE AGREEMENT
THIS ASSIGNMENT, ASSUMPTION AND SALE AGREEMENT (the
"Agreement") is made as of the 30th day of December, 1996 between
Steck-Vaughn Company ("SVC") and Touchstone Applied Science
Associates, Inc. ("Touchstone"). SVC is successor by assignment to
Berrent Publications, Inc. ("Berrent") under that certain Publishing
Agreement dated January 6, 1994, between Berrent and Jean D'Arcy
Maculaitis (the "Publishing Agreement").
1. Assignment. For the consideration set forth below,
----------
from and after the date hereof, SVC irrevocably assigns, grants,
transfers, and sets over unto Touchstone all of SVC's rights, title,
interest, benefits, privileges, causes of action and remedies under,
in and to the Publishing Agreement.
2. Assumption. Touchstone irrevocably accepts the
----------
assignment of the Publishing Agreement pursuant to Section 1 hereof
and, from and after the date hereof, Touchstone assumes, and agrees to
perform, pay and discharge when due any and all of the liabilities,
obligations, commitments and duties of SVC arising under the
Publishing Agreement. Except liabilities for royalties on sales thru
the date hereof which remain the obligation of SVC. SVC shall also
prepare the royalty report for the same period.
3. Purchase of Inventory. In connection with the
---------------------
foregoing assignment, as of the date of this Agreement, Touchstone
hereby irrevocably purchases from SVC, and SVC hereby sells to
Touchstone, all inventory of the Maculaitis Test Series published
pursuant to the Publishing Agreement (the "Work"). Such inventory
consists of approximately 10,040 saleable copies of the Work, which
inventory shall be shipped FOB Austin, Texas within 15 days of the
date of this Agreement, in accordance with Touchstone's shipping
instructions and at Touchstone's cost and expense.
4. Consideration. In consideration of the foregoing,
-------------
Touchstone shall pay to SVC within 15 days of execution of this
Agreement a total of Fifty Thousand Dollars ($50,000), which shall
consist of $29,900 payable for assignment of the Publishing Agreement,
and $20,100 payable for purchase of SVC's inventory of the Work.
5. Further Assurances. SVC and Touchstone hereby
------------------
covenant and agree that at any time, and from time to time, upon
written request therefor, SVC or Touchstone will execute, acknowledge
and deliver or cause to be done, instruments of transfer, assignments,
covenants, powers of attorney and assurances as may be reasonably
requested by the other party in connection with the assigning,
delegating, conveying, assuring and confirming by SVC to Touchstone
the Publishing Agreement. The parties shall cooperate in any
reasonable arrangement designed to provide for the enjoyment by
Touchstone and the release and discharge of SVC of rights to,
interests in, benefits of or liabilities of the Publishing Agreement.
6. Governing Law. This Agreement shall be governed by
-------------
and construed in accordance with the substantive laws of the State of
Texas without giving effect to the conflicts of law or choice of law
provisions thereof. Any dispute arising hereunder will be resolved by
binding arbitration in front of the American Arbitration Association
or such other arbitration service acceptable to both parties.
7. Indemnification. Each party (the "Indemnifying
---------------
Party") hereby agrees to indemnify, defend and hold harmless the other
party (the "Indemnified Party") from and against any breach or alleged
breach of this Agreement by the Indemnifying Party. The Indemnified
Party shall provide prompt notice to the Indemnifying Party of any
claim or threat that may give rise to indemnification hereunder, and
the Indemnifying Party shall assume defense and resolution of such
claim or threat. The Indemnifying Party's obligations shall be
limited to the extent of any prejudiced caused the Indemnifying Party
by delay in notification from the Indemnified Party of any such claim
or threat.
8. Limitation of Liability. The liability of SVC, if
-----------------------
any, for damages arising out of or relating to this Agreement shall be
limited to direct damages and shall not exceed the total amount paid
by Touchstone to SVC hereunder. In no event shall SVC be liable for
punitive, special, consequential or incidental damages arising out of
or relating to this Agreement, even if SVC has been advised in advance
of the possibility of such damages.
9. Binding Effect. This Agreement shall be binding upon,
--------------
be enforceable against, and inure to the benefit of the parties and
their respective successors and assigns.
10. Counterparts. This Agreement may be executed in one
------------
or more counterparts, each of which shall be deemed an original, and
all of which together shall be deemed to constitute one and the same
document.
11. Entire Agreement. This Agreement represents the
----------------
entire agreement, arrangement and understanding between the parties
hereto, and supersedes and terminates any prior agreement, arrangement
or understanding.
IN WITNESS WHEREOF, the parties hereto have executed this
Assignment and Assumption Agreement as of the date and year first
above written.
TOUCHSTONE APPLIED SCIENCE STECK-VAUGHN COMPANY
ASSOCIATES, INC.
By: /s/ ANDREW L. SIMON By: /s/ RICH BLUMENTHAL
----------------------------------- --------------------------------
Rich Blumenthal, Vice President
Its: Andrew L. Simon Pres.
----------------------------------
Exhibit 10.4
CONSULTING AGREEMENT
CONSULTING AGREEMENT, dated as of the 13th day of December,
1996, by and among TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC., a
Delaware corporation (the "Company"), with a principal place of
business at Fields Lane, Brewster, New York, and PARIS GROUP, LTD.
(the "Consultant"), with a principal place of business at 14 Fourth
Street, Farmingville, New York.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Consultant is in the business of providing
management and financial consulting services to public companies;
WHEREAS, the Company desires to engage the services of
Consultant to provide management and financial consulting services to
the Company, and the Consultant is willing to provide such services,
on the terms and conditions stated herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained in this Agreement, the parties hereto agree as
follows:
1. Consulting Services.
-------------------
(a) Upon the terms and subject to the conditions contained
in this Agreement, the Company hereby agrees to engage the Consultant,
and the Consultant hereby agrees to perform financial management and
consulting services in order to assist the Company in meeting its
short-term and long-term financial and strategic goals.
(b) The Consultant and the Company shall agree on the
scope and extent of the services to be performed by the Consultant.
The Consultant shall perform such services subject to Federal and
state securities laws and regulations, and applicable rules,
regulations and policies of the National Association of Securities
Dealers, Inc. (the "NASD"), and the Securities and Exchange Commission
(the "Commission").
(c) Without limiting the generality of the foregoing, the
Consultant's services shall include the following:
(i) attending meetings of the Company's Board of Directors
of committees thereof, when requested by the Company;
(ii) at the request of the Company, reviewing, analyzing
and reporting on proposed business opportunities, and attending
meetings regarding the same;
(iii) consulting with the Company concerning on-going
strategic corporate planning and long-term investment policies;
and
(iv) consulting with the Company and advising and assisting
the Company in identifying, studying and evaluating merger,
acquisition, joint venture, strategic alliance, recapitalization
and restructuring proposals.
(d) The Consultant agrees that, during the term of this
Agreement, the Consultant shall devote sufficient time and effort on
behalf of the Company as shall be necessary to effect the intents and
purposes of this Agreement. The Consultant will, at all times,
faithfully and to the best of the Consultant's experience and
abilities, perform all duties that may be required of the Consultant
pursuant to the terms of this Agreement. The Company expressly
acknowledges and agrees that the Consultant's efforts shall be on a
"best-efforts" basis and the Consultant has not, cannot and does not,
guarantee that the Consultant's efforts will have any impact on the
Company's business or that any subsequent financial improvement will
result from his efforts.
(e) The Consultant agrees that the Consultant is not the
agent of the Company and has no power or authority to bind the Company
to any agreement, transaction or other commitment, and the Consultant
shall not represent or warrant to the contrary to any third party.
The Company has the sole right, in the exercise of its business
judgment and discretion, to approve or disapprove of any agreement,
transaction or commitment introduced by the Consultant.
(f) The Consultant shall not issue any press releases or
other public statement regarding the Company without the Company's
prior written approval.
(2) Term. The Agreement shall be for a term of five (5)
----
years from the date hereof, unless earlier terminated. The Company
may terminate this Agreement, at any time, upon 20 days' prior written
notice to the Consultant.
(3) Compensation. As full compensation for its services,
------------
the Company shall cause to be issued to the Consultant as promptly as
practicable after the execution of this Agreement, 100,000 shares of
its common stock (the "Shares"). The Shares shall be restricted
shares and bear a legend in substantially the following form:
"The Shares evidenced by this Certificate have not been
registered under the Securities Act of 1933, as amended, or
applicable state securities laws, and may not be sold,
transferred or encumbered except pursuant an effective
registration statement under the Securities Act of 1933, as
amended, and such state securities laws, or unless an exemption
from such registration is then available".
No later than June 30, 1997, the Company agrees, at its sole
cost and expense, to prepare and file a registration statement on Form
S-3, or on such other form as may be appropriate therefor (the
"Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), registering the Shares with the Commission.
The Company shall use its best efforts to maintain the effectiveness
of the Registration Statement for up to nine (9) months thereafter,
pursuant to which, any of the Shares are being offered, and from time
to time will amend or supplement such Registration Statement and the
prospectus contained therein as and to the extent necessary to comply
with the Securities Act and any state securities statute or
regulation. The Company will also provide the Consultant with as many
copies of the prospectus contained in any such Registration Statement
as it may reasonably request.
4. Expenses. Unless otherwise approved in writing by the
--------
Company, the Consultant shall bear all expenses incurred in connection
with the services to be rendered to the Company.
5. Representations and Warranties of the Consultant. The
------------------------------------------------
Consultant represents and warrants to the Company, as follows:
(a) The Consultant is a corporation, duly organized,
validly existing and in good standing under the laws of their
respective jurisdictions of incorporation. The Consultant has
the corporate power and authority to enter into this Agreement
and to perform the services contemplated hereby.
(b) This Agreement has been duly authorized by all
necessary corporate action of the Consultant. This Agreement
constitutes the legal, valid and binding obligation of the
Consultant, subject to applicable bankruptcy, insolvency,
moratorium and other laws affecting creditors' rights generally
and to general principles of equity. The execution, delivery and
performance of this Agreement does not and will not conflict with
the Certificate of Incorporation or By-Laws of the Consultant, or
any agreement, law, order or regulation to which the Consultant
is subject.
(c) There is no litigation, action, claim or proceeding
pending, or to the knowledge of the Consultant threatened, and
nor order or injunction has been entered, against the Consultant
or any of its directors, officers or stockholders (individually
or in the respective capacities for the Consultant) which arises
out of, or is based upon, any alleged violation or breach of
Federal or state securities laws or regulations or the
regulations or policies of the NASD or any stock exchange.
(d) The Consultant has received and reviewed copies of the
Company's most recent reports under the Securities Exchange of
1934, as amended. The Consultant acknowledges and agrees that the
receipt of capital stock of the Company as compensation under
this Agreement involves a high degree of risk, including the risk
that the Shares may substantially decrease in value. The
Consultant expressly acknowledges and accepts this risk, and is
cognizant of the financial condition and operations of the
Company. The Consultant has had the opportunity to discuss with
the management of the Company the financial condition and
operations of the Company and has had the opportunity to receive
all information which it has deemed necessary in entering into
this Agreement. Accordingly, the Consultant has been able to
evaluate the merits and risks of the Consultant's investment in
the Shares. In entering into this Agreement, the Consultant has
not in any manner directly or indirectly relied on any warranty
or representation by the company, its officers, directors,
agents, legal counsel or accountants concerning the Company
and/or its securities as to matters past, present or future.
(e) The directors, officers and stockholders of the
Consultant are as set forth on Schedule I attached hereto.
6. Representations and Warranties of the Company. The
---------------------------------------------
Company represents and warrants to the Consultant that:
(a) The Company is duly organized, validly existing and in
good standing under the laws of the State of Delaware. The
Company has the corporate power and authority to enter into this
Agreement.
(b) This Agreement has been duly authorized by all
necessary corporate action of the Company. This Agreement
constitutes the legal, valid and binding obligation of the
Company, subject to applicable bankruptcy, insolvency, moratorium
and other laws affecting creditors' rights generally and to
general principles of equity. The execution, delivery and
performance of this Agreement does not and will not conflict with
the Certificate of Incorporation or By-Laws of the Company, or
any agreement, law, order or regulation to which the Company is
subject.
(c) The Company is current in its reporting obligations
under the Securities Exchange Act of 1934, as amended.
7. Non-Exclusive Services; Non-Competition.
---------------------------------------
(a) The Company understands that the Consultant is
currently providing certain advisory and financial consulting
services to other individuals and companies and agrees that the
Consultant is not prevented or barred from rendering such
services to such other entities, subject to paragraph (b) hereof.
In addition, the Consultant understands and agrees that the
Company shall not be prevented or barred from retaining other
persons or entities to provide services of the same or similar
nature as those provided by the Consultant.
(b) The Consultant shall not, during the term of this
Agreement, directly or indirectly, engage or consult with any
business substantially similar to the business of the Company.
The term "engage" shall include, but shall not be limited to
activities as proprietor, partner, principal shareholder,
principal agent, employee or consultant. The Consultant
acknowledges that during the term of this Agreement, the
Consultant shall have access to information, materials and/or
processes confidential and proprietary to the Company and the
Consultant and its employees, agents, attorneys and accountants
shall at all times during the term of this Agreement and
thereafter, maintain the secrecy and confidentiality of all such
information, materials and/or processes acquired or revealed to
them under, pursuant or in connection with this Agreement, except
as to such information which enters the public domain other than
through the actions or omissions of the Consultant, pursuant to
requests from governmental authorities with applicable
jurisdiction, or pursuant to judicial subpoena. Upon termination
of this Agreement, the Consultant will promptly return to the
Company all non-public, proprietary information of the Company,
and all copies thereof.
8. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless the
Consultant from and against any and all losses, claims, damages,
liabilities and expenses (including, without limitation
attorneys' fees and costs incurred in the investigation, defense
and settlement of the matter), suffered or incurred by the
Consultant which arises out of this Agreement or otherwise out of
the performance by the Consultant of its obligations hereunder,
unless such losses, claims, damages, liabilities or expenses are
found by a final determination of a court of competent
jurisdiction to have arisen out of gross negligence or
malfeasance of the Consultant in performing its services
hereunder. If, for any reason, the foregoing indemnification is
unavailable to the Consultant, or insufficient to hold it
harmless, then the Company shall contribute to the amount paid or
payable by the Consultant as a result of such loss, claim, damage
or liability in such proportion as is appropriate to reflect not
only the relative benefits received by the Company on the one
hand and the Consultant on the other hand, but also the relative
fault of the Company and the Consultant, as well as any other
relevant equitable considerations. The reimbursement, indemnity
and contribution obligations of the Company under this section
shall be in addition to any liability which the Company may
otherwise have and shall be binding and inure to the benefit of
any respective successors, assigns, heirs and personal
representatives of the Company and the Consultant.
(b) The Company will, to the extent permitted by law,
indemnify and hold harmless the Consultant, its officers and
directors (including any broker or dealer through whom Shares may
be sold) from and against any and all losses, claims, damages,
expenses, liabilities, joint or several, to which they or any of
them become subject under the Securities Act or any equivalent
foreign act or any rule or regulation of any securities exchange
or under any other statute or at common law or otherwise, and,
except as hereinafter provided, will reimburse the Consultant or
other person, if any, for any legal or other expenses reasonably
incurred by it or any of them in connection with investigating or
defending any actions whether or not resulting in any liability,
insofar as such losses, claims, damages, expenses, liabilities or
actions arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement, in any preliminary or amended preliminary
prospectus or in the prospectus (or the Registration Statement or
prospectus as from time to time may be amended or supplemented by
the company) or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements
therein not misleading or any violation by the Company of any
rule or regulation promulgated under the Securities Act or any
equivalent foreign act or any rule or regulation of any
securities exchange applicable to the company and relating to
action or inaction required of the Company in connection with
such registration, unless such untrue statement or omission was
made in such Registration Statement, preliminary or amended,
preliminary prospectus or prospectus in reliance upon and in
conformity with information furnished in writing to the Company
in connection therewith by the Consultant, expressly for use
therein. Promptly after receipt by the Consultant (including any
broker or dealer through whom such shares way be sold) of notice
of the commencement of any action in respect of which indemnity
may be sought against the Company, the Consultant will notify the
company in writing of the commencement thereof, and, subject to
the provisions hereinafter stated, the Company shall assume the
defense of such action (including the employment of counsel, who
shall be counsel reasonably satisfactory to the Consultant), and
the payment of expenses insofar as such action shall relate to
any alleged liability in respect of which indemnity may be sought
against the Company. The Consultant shall have the right to
employ separate counsel in any such action and to participate in
the defense thereof but the fees and expenses of such counsel
shall not be at the expense of the Company unless the employment
of such counsel has been specifically authorized by the Company.
The Company shall not, except with the approval of the Consultant
or any other person indemnified under this section, consent to
entry of any judgment or enter into any settlement which dose not
include as an unconditional term thereof the giving by the
claimant or plaintiff, of a full release to the parties being so
indemnified.
(c) The Consultant agrees to indemnify and hold harmless
the Company (and the Company's officers, directors and agents,
and their respective heirs, successors and assigns) from and
against any and all losses, claims, damages, liabilities and
expenses (including, without limitation attorneys' fees and costs
incurred in the investigation, defense and settlement of the
matter), suffered or incurred by the Company (or such other
persons) which arises out of this Agreement or otherwise out of
the performance by the Consultant of its obligations hereunder or
the failure of the Consultant to perform in accordance with the
terms hereof or the breach by the Consultant of any of its
representations and warranties as of the date such
representations and warranties were made. If, for any reason,
the foregoing indemnification is unavailable to the Company (or
such other persons), or insufficient to hold it harmless, then
the Consultant shall contribute to the amount paid or payable by
the Company (or such other persons) as a result of such loss,
claim, damage or liability in such proportion as is appropriate
to reflect not only the relative benefits received by the
Consultant on the one hand and the Company (and such other
persons) on the other hand, but also the relative fault of the
Consultant and the Company, as well as any other relevant
equitable considerations. The reimbursement, indemnity and
contribution obligations of the Consultant under this section
shall be in addition to any liability which the Consultant may
otherwise have and shall be binding and inure to the benefit of
any respective successors, assigns, heirs and personal
representatives of the Consultant and the Company.
(d) The Consultant will, to the extent permitted by law,
indemnify and hold harmless the Company (including any broker or
dealer through whom the Shares may be sold and officers,
directors and agents of the Company), from and against any and
all losses, claims, damages, expenses, liabilities, joint or
several, to which they or any of them become subject under the
Securities Act or any equivalent foreign act or any rule or
regulation of any securities exchange or under any other statute
or at common law or otherwise, and, except as hereinafter
provided, will reimburse the Company or other person, if any, for
any legal or other expenses reasonably incurred by then or any of
them in connection with investigating or defending any actions
whether or not resulting in any liability, insofar as such
losses, claims, damages, expenses, liabilities or actions arise
out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration
Statement, in any preliminary or amended preliminary prospectus
or in the prospectus (or the Registration Statement or prospectus
as from time to time may be amended or supplemented by the
company) or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements
therein not misleading but only insofar as such statement or
omission was made in reliance upon and in conformity with
information furnished in writing to the company in connection
therewith by the Consultant expressly for the use therein. The
obligations of the Consultant to indemnify the Company shall be
limited to the obligations set forth in the immediately preceding
sentence. Promptly after receipt by the Company (including any
broker or dealer through whom such shares may be sold) of notice
of the commencement of any action in respect of which indemnity
may be sought against the Consultant, the Company will notify the
Consultant in writing of the commencement thereof, and, subject
to the provisions hereinafter stated, the Consultant shall assume
the defense of such action (including the employment of counsel,
who shall be counsel reasonably satisfactory to the Company), and
the payment of expenses insofar as such action shall relate to
any alleged liability in respect of which indemnity may be sought
against the Consultant. The Company shall have the right to
employ separate counsel in any such action and to participate in
the defense thereof but the fees and expenses of such counsel
shall not be at the expense of the Consultant unless the
employment of such counsel has been specifically authorized by
the Consultant. The Consultant shall not be liable to indemnify
any person for any settlement of any such action effected without
Consultant's consent.
(e) The provisions of this Section 8 shall survive the
termination and expiration of this Agreement.
9. Entire Agreement. This Agreement contains the entire
----------------
agreement among the parties wish respect to the subject matter hereof
and supersedes all prior agreements, written or oral, with respect
thereto.
10. Waivers and Amendments. This Agreement may be
----------------------
amended, modified, superseded, canceled, renewed or extended, and the
terms and conditions hereof may be waived, only by a written
instrument signed by the parties or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any
right, power or privilege hereunder, nor any single or partial
exercise of any right, power or privilege hereunder, preclude any
other or further exercise thereof or the exercise of any other right,
power or further exercise thereof or the exercise of any other right,
power or privilege hereunder. The rights and remedies herein provided
are cumulative and are not exclusive of any rights or remedies which
any party may otherwise have at law or in equity.
11. Successors and Assigns; No Assignment by the Consultant.
-------------------------------------------------------
This Agreement shall inure to the benefit of, and be binding upon, the
Company, its successors and assigns. This Agreement is not assignable
by the Consultant as it is intended to secure the personal services of
the Consultant and its employees.
12. Headings. The headings in this Agreement are for
--------
reference purpose only and shall not in any way affect the meaning or
interpretation of this Agreement.
13. Severability of Provision-. The invalidity or
--------------------------
unenforceability of any term, phrase, clause, paragraph, restriction,
covenant, agreement or other provision of this Agreement shall in no
way affect the validity or enforcement of any other provision or any
part thereof.
14. Counterparts. This Agreement may be executed in any
------------
number of counterparts, each of which when so executed, shall
constitute an original copy hereof, but all of which together shall
consider but one and the same document.
15. Notices. All notices to be given hereunder shall be
-------
in writing, with fax notices being an acceptable substitute for mail
and/or and delivery to:
(i) the Company, at:
Touchstone Applied Science Associates, Inc.
Fields Lane
P.O. Box 382
Brewster, New York 10509
(ii) the Consultant, at:
Paris Group, Ltd.
14 Fourth Street
Farmingville, New York 11738
16. Governing Law. This Agreement shall be governed and
-------------
construed in accordance with the laws of the State of New York
applicable to agreements made and to be performed entirely within such
State.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
By /s/ ANDREW L. SIMON
--------------------------------------------
Andrew L. Simon
President
PARIS GROUP, LTD.
By /s/ WILLIAM C. HAYDE
--------------------------------------------
<TABLE>
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
AND SUBSIDIARY
EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON SHARE
<CAPTION>
Three Months Ended
January 31,
1 9 9 7 1 9 9 6
------- -------
<S> <C> <C>
Primary earnings:
Net income $ 151,442 $ 166,549
Shares:
Weighted common shares outstanding 7,938,223 7,499,400
Harriman options -- 113,223
Employee stock options -- 453,493
B warrants -- 70,187
Underwriter options -- 34,550
----------- -----------
Total weighted shares outstanding 7,938,223 8,170,853
----------- -----------
Primary earnings per common share $ .02 $ .02
=========== ===========
Fully diluted earnings:
Net income $ 151,442 $ 166,549
Shares:
Weighted common shares outstanding 7,938,223 7,499,400
Harriman options -- 113,223
Employee stock options -- 453,493
B warrants -- 70,187
Underwriter options -- 34,550
----------- -----------
Total weighted shares outstanding 7,938,223 8,170,853
----------- -----------
Fully diluted earnings per common share $ .02 $ .02
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information entracted from the
Balance Sheet and Statements of Income filed as part of the report
on Form 10QSB for the fiscal quarter ended January 31 1997 and is qualified
in its entirety by reference to such report of Form 10QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> JAN-31-1997
<CASH> 916,941
<SECURITIES> 1,901,967
<RECEIVABLES> 702,044
<ALLOWANCES> 0
<INVENTORY> 251,199
<CURRENT-ASSETS> 4,418,366
<PP&E> 2,710,580
<DEPRECIATION> 929,754
<TOTAL-ASSETS> 9,411,362
<CURRENT-LIABILITIES> 393,550
<BONDS> 0
0
0
<COMMON> 794
<OTHER-SE> 7,731,060
<TOTAL-LIABILITY-AND-EQUITY> 9,411,362
<SALES> 937,511
<TOTAL-REVENUES> 977,566
<CGS> 260,112
<TOTAL-COSTS> 464,084
<OTHER-EXPENSES> 11,700
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,247
<INCOME-PRETAX> 224,423
<INCOME-TAX> 72,981
<INCOME-CONTINUING> 151,442
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 151,442
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
