SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a- 6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- -----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- -----------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- -----------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
- -----------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -----------------------------------------------------------------------------
(5) Total fee paid:
- -----------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
- -----------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- -----------------------------------------------------------------------------
(3) Filing Party:
- -----------------------------------------------------------------------------
(4) Date Filed:
- -----------------------------------------------------------------------------
<PAGE>
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
FIELDS LANE, P.O. BOX 382
BREWSTER, NEW YORK 10509
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 28, 1997
To the Stockholders of Touchstone Applied Science Associates, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders (the "Meeting") of TOUCHSTONE APPLIED SCIENCE ASSOCIATES,
INC., a Delaware corporation (the "Company"), will be held at the
Company's headquarters at Fields Lane, Brewster, New York 10509 on
Friday, March 28, 1997 at the hour of 9:00 a.m. local time for the
following purposes:
(1) To elect Directors of the Company;
(2) To approve the adoption of the Amendment of Provisions
of the By-Laws Relating to Stockholder Meetings;
(3) To approve the adoption of the Amendment of Provisions
of the By-Laws Relating to the Board of Directors;
(4) To approve the adoption of the Amendment of Provisions
of the By-Laws Relating to Officers and Other Corporate
Matters;
(5) To approve the adoption of the Amendment of Provisions
of the By-Laws Relating to Indemnification of Officers
and Directors of the Company;
(6) To approve the adoption of the Amendment of Provisions
of the By-Laws Relating to the Further Amendment of
the By-Laws;
(7) To ratify the appointment of independent auditors; and
(8) To transact such other business as may properly come
before the Meeting.
Only stockholders of record at the close of business on
February 17, 1997 are entitled to notice of and to vote at the Meeting
or any adjournment thereof.
By Order of the Board of Directors,
LINDA G. STRALEY
Vice President and Secretary
Brewster, New York
March 3, 1997
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING
REGARDLESS OF THE NUMBER OF SHARES YOU HOLD. YOU ARE INVITED TO ATTEND
THE MEETING IN PERSON, BUT WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE
COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE
ENCLOSED ENVELOPE. IF YOU DO ATTEND THE MEETING, YOU MAY, IF YOU
PREFER, REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
<PAGE>
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
FIELDS LANE, P.O. BOX 382
BREWSTER, NEW YORK 10509
ANNUAL MEETING OF STOCKHOLDERS
PROXY STATEMENT
This Proxy Statement and the accompanying proxy are
furnished by the Board of Directors of Touchstone Applied Science
Associates, Inc., a Delaware corporation (the "Company"), in
connection with the solicitation of proxies for use at the Annual
Meeting of Stockholders (the "Meeting") referred to in the foregoing
notice. It is contemplated that this Proxy Statement, together with
the accompanying form of proxy and the Company's Annual Report for the
fiscal year ended October 31, 1996, will be mailed together to
stockholders on or about March 3, 1997.
Stockholders of record at the close of business on February
17, 1997 are entitled to notice of, and to vote at, the Meeting. On
that date there were issued and outstanding (i) 7,939,322 shares of
Common Stock, par value $.0001 per share (the "Common Stock"), and
(ii) 1,500 shares of Series A Preferred Stock, par value $.0001 per
share (the "Preferred Stock"). Each share of Common Stock is entitled
to one vote and each share of Preferred Stock is entitled to 3,000
votes.
The presence, in person or by proxy, of the holders of a
majority of the shares of Common Stock and Preferred Stock outstanding
and entitled to vote at the meeting is necessary to constitute a
quorum. In deciding all questions, a holder of Common Stock shall be
entitled to one vote, in person or by proxy, for each share held in
his name on the record date. Directors will be elected by a plurality
of the votes cast at the Meeting. The ratification or approval of all
other proposals will be decided by a majority of the votes cast at the
Meeting. Shares represented by proxies marked to withhold authority
to vote, and shares represented by proxies that indicate that the
broker or nominee stockholder thereof does not have discretionary
authority to vote them will be counted to determine the existence of a
quorum at the Meeting but will not affect the plurality or majority
vote required.
All proxies received pursuant to this solicitation will be
voted (unless revoked) at the Meeting or any adjournment thereof in
the manner directed by a stockholder and, if no direction is made,
will be voted FOR the election of each of the management nominees for
director in Proposal No. 1, FOR the approval of the adoption of the
Amendment of Provisions of the By-Laws Relating to Stockholder
Meetings in Proposal No. 2, FOR the approval of the adoption of the
Amendment of Provisions of the By-Laws Relating to the Board of
Directors in Proposal No. 3, FOR the approval of the adoption of the
Amendment of Provisions of the By-Laws Relating to Officers and Other
Corporate Matters in Proposal No. 4, FOR the approval of the adoption
of the Amendment of Provisions of the By-Laws Relating to
Indemnification of Officers and Directors of the Company in Proposal
No. 5, FOR the approval of the adoption of the Amendment of Provisions
of the By-Laws Relating to the Further Amendment of the By-Laws in
Proposal No. 6, and FOR the ratification of the independent auditors
in Proposal No. 7. If any other matters are properly presented at the
meeting for action, which is not presently anticipated, the proxy
holders will vote the proxies (which confer authority to such holders
to vote on such matters) in accordance with their best judgment. A
proxy given by a stockholder may nevertheless be revoked at any time
before it is voted by communicating such revocation in writing to the
transfer agent, American Stock Transfer & Trust Company, at 40 Wall
Street, New York, New York 10005 or by executing and delivering a
later-dated proxy. Furthermore, any person who has executed a proxy
but is present at the Meeting may vote in person instead of by proxy,
thereby canceling any proxy previously given, whether or not written
revocation of such proxy has been given.
As of the date of this Proxy Statement, the Board of
Directors knows of no matters other than the foregoing which will be
presented at the Meeting. If any other business should properly come
before the Meeting, the accompanying form of proxy will be voted in
accordance with the judgment of the persons named therein, and
discretionary authority to do so is included in the proxy. All
expenses in connection with the solicitation of proxies will be paid
by the Company. In addition to solicitation by mail, officers,
directors and regular employees of the Company who will receive no
extra compensation for their services may solicit proxies by
telephone, telecopier, telegraph or personal calls. Management does
not intend to use specially engaged employees or paid solicitors for
such solicitation. Management intends to solicit proxies which are
held of record by brokers, dealers, banks, or voting trustees, or
their nominees, and may pay the reasonable expenses of such record
holders for completing the mailing of solicitation materials to
persons for whom they hold the shares.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information regarding
the beneficial ownership of the Company's Common Stock and Series A
Preferred Stock, as of January 31, 1997, by (i) each person who is
known by the Company to own beneficially more than 5% of the Company's
outstanding Common Stock; (ii) each of the Company's officers and
directors; (iii) each nominee for director; and (iv) all officers,
directors and nominees as a group.
As of January 31, 1997, there were 7,939,322 shares of
Common Stock outstanding, and 1,500 shares of Series A Preferred Stock
outstanding. Each share of Common Stock is entitled to one vote per
share and each share of Series A Preferred Stock is entitled to 3,000
votes per share. Consequently, there are an aggregate of 12,439,322
eligible votes for the Company's outstanding capital stock.
All of the shares of Common Stock and Preferred Stock owned
by Mr. Simon, Ms. Straley and Mr. Ivens, as well as certain other
persons affiliated with the Company or the Voting Trust (as defined
below), other than shares deemed to be owned beneficially by such
officers and directors because they may be acquired through the
exercise of currently exercisable stock options, are held in a voting
trust (the "Voting Trust"), pursuant to a Voting Trust Agreement,
dated as of August 19, 1992, as amended. Until his death, Bertram L.
Koslin had been sole Voting Trustee. Julius Ostreicher, the attorney
for the Estate of Bertram L. Koslin, Andrew L. Simon, the Chairman of
the Board of Directors and the President of the Company, and Eileen
West, a former director of the Company, were appointed as successor
Voting Trustees on March 30, 1995, pursuant to an amendment to the
Voting Trust Agreement. Unless the Voting Trustees exercise their
right to terminate the Voting Trust earlier, the Voting Trust shall
terminate on August 18, 2002. For purposes of the table set forth
below, each of the officers and directors are listed as beneficially
owning the shares of Common Stock and Preferred Stock listed opposite
his or her name, even though the Voting Trust has the sole rights to
vote such shares. Because the Voting Trust has the sole and exclusive
power to exercise all voting rights with respect to the shares of
Common Stock and Preferred Stock deposited in the Voting Trust, the
Voting Trust has sole voting and dispositive power with respect to
1,463,055 shares of Common Stock (and, therefore, 1,463,055 votes) and
with respect to 1,500 shares of Preferred Stock (and, therefore,
4,500,000 votes). Accordingly, the Voting Trust has the power to
exercise 5,963,055 votes, or 47.9% of all eligible votes.
<PAGE>
<TABLE>
<CAPTION>
Shares of Percent Shares of Percent of
Name and Address of Common of Common Preferred Preferred Percent of
Beneficial Owners and Stock Stock Stock Stock all
Directors, Officers and Beneficially Beneficially Beneficially Beneficially Outstanding
Nominees Owned Owned Owned Owned Votes
- ----------------------- ------------ ------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
5% Beneficial Owners:
- -----------------------
Voting Trust, u/a dated 1,463,055 18.4% 1,500 100.0% 47.9%
August 19, 1992, as
amended, Julius
Ostreicher, Andrew L.
Simon and Eileen West,
Voting Trustees c/o
Touchstone Applied
Science Associates,
Inc., Fields Lane,
Brewster, NY 10509
Estate of Bertram L. 464,170 5.8% 948.68 63.2% 26.6%
Koslin
1640 Hunterbrook Road
Yorktown Heights, NY
10598
Eileen West 21,500(a) 0.3% 10.74 0.7% 0.4%
56 Harrison Street
New Rochelle, NY 10801
Officers, Directors and
- -----------------------
Nominees:
- ---------
Andrew L. Simon 567,452(b) 6.9% 179.0 11.9% 8.7%
1905 Hunterbrook Road
Yorktown Heights, NY
10598
Stephen H. Ivens 264,476(c) 3.3% 89.5 6.0% 4.3%
272 River Drive
River Vale, NJ 07675
Linda G. Straley 285,477(d) 3.6% 89.5 6.0% 4.4%
2 Circle Drive East
Ridgefield, CT 06877
Steven R. Berger 5,000(e) 0.1% -- -- *
3 Castle View Court
Rye Brook, NY 10573
Michael Milone 41,000(f) 0.5% -- -- 0.3%
64 Calle del Norte
Placitas, NM 87043
Michael D. Beck 119,500(g) 1.5% -- -- 1.0%
35 Guion Street
Pleasantville, NY 10570
Directors, Officers, and 2,072,755(h) 24.7% 1,500 100.0% 51.0%
Nominees as a Group
(6 persons)
<FN>
- ------------------
* Less than 0.1%
- -----------------------
(a) Represents 21,500 shares which Ms. West has the right to acquire upon
the exercise of currently exercisable stock options; excludes the
shares of Common Stock and Preferred Stock held in the Voting Trust
for the benefit of all members thereof, which Voting Trust is listed
separately as a 5% stockholder in this Table. Ms. West is one of
three Voting Trustees of the Voting Trust.
(b) Includes 239,000 shares which Mr. Simon has the right to acquire upon
the exercise of currently exercisable stock options, which options
are not included in the Voting Trust. Excludes (i) 82,500 shares
which are the subject of options granted to Mr. Simon which are not
currently exercisable and (ii) the shares of Common Stock and Preferred
Stock (other than those beneficially owned by Mr. Simon) held in the
Voting Trust for the benefit of all of the members thereof, which
Voting Trust is listed separately as a 5% stockholder in this table.
Mr. Simon is one of three Voting Trustees of the Voting Trust.
(c) Includes 102,500 shares which Mr. Ivens has the right to acquire upon
the exercise of currently exercisable stock options. Excludes 52,500
shares which are the subject of options granted to Mr. Ivens which
are not currently exercisable.
(d) Includes 102,700 shares which Ms. Straley has the right to acquire
upon the exercise of currently exercisable stock options. Excludes
52,500 shares which are the subject of options granted to Ms. Straley
which are not currently exercisable.
(e) Includes 5,000 shares which are the subject of options granted to
Mr. Berger which will become exercisable within 60 days.
(f) Includes (i) 36,000 shares which are held in a Custodial SEP, of which
Dr. Milone is the beneficiary, and (ii) 5,000 shares which are the
subject of options granted to Dr. Milone which will become exercisable
within 60 days.
(g) Mr. Beck was elected as Vice President of the Company on
January 2, 1997. Mr. Beck has not previously been a director of the
Company, but is currently a nominee for director, which nomination
is being submitted to the stockholders for election at the Meeting.
Includes (i) 7,000 shares owned jointly with Mr. Beck's wife, and
(ii) 37,500 shares owned by Mr. Beck's minor daughter, for which
Mr. Beck acts as custodian. Excludes (i) 125,000 shares which are
the subject of options granted to Mr. Beck which are not currently
exercisable, and (ii) 37,500 shares owned by Mr. Beck's wife, as to
which Mr. Beck disclaims beneficial ownership.
(h) Includes all shares held in the Voting Trust. Andrew L. Simon,
Chairman of the Board of Directors and President of the Company, is
one of three Voting Trustees of the Voting Trust. Includes (i) an
aggregate of 444,200 currently exercisable options which are held
by certain officers and directors of the Company, but are not included
in the Voting Trust, and (ii) an aggregate of 10,000 options held by
Mr. Berger and Dr. Milone, which will become exercisable within
60 days. Excludes an aggregate of 312,500 options held by officers,
directors and nominees of the Company which are not currently
exercisable and are not included in the Voting Trust.
</FN>
</TABLE>
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
MANAGEMENT RECOMMENDS THAT YOU VOTE IN FAVOR OF
THE NOMINEES NAMED TO THE BOARD OF DIRECTORS.
Six directors are to be elected at the Meeting for terms of
one year each and until their successors shall be elected and
qualified. It is intended that votes will be cast pursuant to such
proxy for the election of the six persons whose names are first set
forth below unless authority to vote for one or more of the nominees
is withheld by the enclosed proxy, in which case it is intended that
votes will be cast for those nominees, if any, with respect to whom
authority has not been withheld. All nominees other than Mr. Beck are
currently members of the Board of Directors. In the event that any of
the nominees should become unable or unwilling to serve as a director,
a contingency which the management has no reason to expect, it is
intended that the proxy be voted, unless authority is withheld, for
the election of such person, if any, as shall be designated by the
Board of Directors.
DIRECTORS WILL BE ELECTED BY A PLURALITY OF THE VOTES CAST
AT THE MEETING. THE VOTING TRUST INTENDS TO VOTE IN FAVOR OF THE
PROPOSAL.
The following table sets forth information concerning each
person nominated to serve as a director of the Company:
<TABLE>
<CAPTION>
First
Became
Name Age Director Position
---- --- -------- --------
<S> <C> <C> <C>
Michael D. Beck 50 -- Vice President; President
and Chief Executive Officer
of Beck Evaluation &
Testing Associates, Inc.
Steven R. Berger 41 1996 Director
Stephen H. Ivens, Ph.D. 55 1995 Director; Vice President,
Research & Development
Michael Milone, Ph.D. 51 1996 Director
Andrew L. Simon 54 1995(1) Chairman of the Board of
Directors; Chief Executive
Officer; President; Treasurer
Linda G. Straley 41 1994 Director; Vice President,
Operations; Secretary
<FN>
(1) Also served as a director of the Company from 1976 to 1991.
</FN>
</TABLE>
MICHAEL D. BECK was elected as Vice President of the Company
on January 2, 1997. Since 1983, Mr. Beck has been President of Beck
Evaluation & Testing Associates, Inc. ("BETA"), which provides
consulting and contractual services to school districts, state
education departments and test and textbook publishers. As of January
2, 1997, BETA became a wholly-owned subsidiary of the Company and Mr.
Beck continues to serve as the President of BETA. See "Interests of
Certain Persons In Matters to be Acted Upon". Mr. Beck has also
provided consulting services on matters of educational research and
assessment for various organizations, including the U.S. Army Training
Support Center and Pitney Bowes Corporation. Mr. Beck received an
A.B. from John Carroll University and an M.A. from Fordham University.
STEVEN R. BERGER was elected as a Director of the Company on
March 29, 1996 and he also serves on the Company's Compensation
Committee. Mr. Berger has been a partner in the law firm of Christy &
Viener in New York City since January 1989. Mr. Berger received an
A.B. and a J.D. from Harvard University. Christy & Viener has acted
as special securities counsel to the Company since January 1995.
STEPHEN H. IVENS was elected as a Director of the Company on
March 31, 1995, and has been Vice President, Research and Development
since June 1994, and was Executive Director of DRP Services of the
Company since August 1989. Mr. Ivens received a B.S. in Mathematics
and M.S. in Guidance from Illinois State University and a Ph.D. in
Educational Research from Florida State University. From 1970 to 1989
he was an Executive Director at the College Entrance Examination
Board.
MICHAEL MILONE was elected as a Director of the Company on
March 29, 1996 and he also serves on the Company's Compensation
Committee. Dr. Milone has been an educational writer and independent
consultant to publishers and school districts since 1984. Dr. Milone
received an M.A. from Gallaudet University and a Ph.D. from The Ohio
State University, where he has served as an adjunct assistant
professor in the Department of Educational Services and Research.
ANDREW L. SIMON was elected as Director and as President and
Treasurer of the Company on March 31, 1995. He served as Interim
President from June 1994 through March 31, 1995. He was a founder of
the Company and previously served as a Director from 1976 to 1991 and
has acted as a financial consultant to the Company since its inception
in 1976. From 1983 to 1986, he was a Vice President/Marketing
Division Head in the Private Clients Group at Bankers Trust Company.
He was a Vice President at Citibank, NA, where he held a number of
senior marketing and sales positions, from 1980 to 1983. Prior to
1980, Mr. Simon served as Marketing Director for several consumer
package goods companies including Norcliff-Thayer and Lederle
Laboratories. He holds an M.B.A. from Columbia University and a B.A.
from Washington University. Mr. Simon is a trustee of the Harvey
School and previously served as a director of the City of Poughkeepsie
Partnership.
LINDA G. STRALEY is a Director of the Company and has been
Vice President of Operations since June 1994. From June 1994 through
March 31, 1995, she was Chairman of the Board of Directors. She has
been Secretary since August 1992 and, since 1984, she has served as
director of DRP Services for the Company. Ms. Straley received a B.A.
in Education from Bethany College and an M.S. in Psychology and
Statistics from the State University of New York.
COMMITTEES AND MEETINGS
The Company does not presently have any standing audit or
nominating committees of the Board of Directors or committees
performing similar functions.
The Board of Directors had 4 meetings during fiscal year
1996 and otherwise acted by unanimous written consent. All directors
attended 100% of the meetings.
The Compensation Committee, which consists of Messrs. Berger
and Milone, had two meetings during fiscal year 1996 and otherwise
acted by unanimous written consent. The Compensation Committee, among
other things, sets compensation for the employees of the Company and
administers the Company's Amended and Restated 1991 Stock Option
Incentive Plan. All members of the Compensation Committee attended
100% of the meetings.
<PAGE>
EXECUTIVE COMPENSATION
The following table shows compensation for services rendered
to the Company during fiscal years 1996, 1995 and 1994 by the Chief
Executive Officer, the Vice President, Research & Development and the
Vice President, Operations. Each executive officer serves under the
authority of the Board of Directors. No other executive officer of
the Company received cash compensation that exceeded $100,000 during
fiscal years 1996, 1995 and 1994. Therefore, pursuant to Item 402 of
Regulation S-B, only compensation for each of the Chief Executive
Officer, the Vice President, Research & Development, and Vice
President, Operations is shown in the Summary Compensation Table
below.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------- -----------------------------------
Awards Payouts
----------------------- ---------
Securities All
Other Under- Other
Annual Restricted lying Com-
Compen- Stock Options/ LTIP pensa-
Name and Bonus sation Award(s) SARs(a) Payouts tion
Principal Position Year Salary($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Andrew L. Simon, 1996 $109,568 0 $25,457 0 82,500 0 __b
President, Chief 1995 99,112 $2,500 24,021 0 0 0 __b
Executive Officer* 1994 64,680(c) 0 12,439 0 59,000 0 __b
and Treasurer
Stephen H. Ivens, 1996 $107,068 0 $26,913 0 52,500 0 __b
Vice President, 1995 102,498 $2,500 25,561 0 0 0 __b
Research & 1994 95,760 0 24,175 0 59,000 0 __b
Development
Linda G. Straley, 1996 $88,125 0 $18,701 0 52,500 0 __b
Vice President, 1995 72,500 $2,500 16,732 0 0 0 __b
Operations, and 1994 64,705 0 15,187 0 59,000 0 __b
Secretary
<FN>
(a) To date, the Company has issued no SARs
(b) Has an assigned Company car with an approximate value of $8,250 for
Mr. Simon, $7,250 for Mr. Ivens and $7,250 for Ms. Straley
(c) Includes consulting fees from November 1, 1993 through June 30, 1994 and
salary as Interim President from July 1, 1994 through October 31, 1994
* Commencing June 1994
</FN>
</TABLE>
EMPLOYMENT CONTRACTS
On March 1, 1996, the Company entered into an employment
agreement with each of Andrew L. Simon, Linda G. Straley and Stephen
H. Ivens, pursuant to which the Company agreed to employ Mr. Simon,
Ms. Straley and Mr. Ivens, and each of Mr. Simon, Ms. Straley and Mr.
Ivens agreed to remain, as the Company's President and Chief Executive
Officer, Vice President, Research and Development, and Vice President,
Operations, respectively, for a term of three years, subject to
automatic yearly extensions and certain rights of termination as
provided in each such agreement.
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.
In the employment agreements with each of the executive
officers of the Company, the Company has agreed to provide for certain
benefits and protections for such executive officers in connection
with a change of control of the Company. Such agreements provide that
upon the occurrence of a change of control, such executive's
employment agreement would continue until the earlier of three years
from the date of such change of control or the date all of the
Company's obligations under the employment agreement are satisfied.
In addition, in the event of a change of control, each executive
officer would be awarded for each fiscal year during the employment
term, an annual bonus in cash at least equal to the average annual
bonus payable to such executive in respect of two of the last three
fiscal years immediately preceding the date of the change of control
in which bonuses paid were higher. For purposes of these employment
agreements, a "change of control" will be deemed to have occurred if:
(a) any person, entity or "group", within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act acquires 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 Company's
common stock or the combined voting power of the Company's then
outstanding voting securities entitled to vote generally in the
election of directors; (b) individuals who, as of the date of the
employment agreement, constituted 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 of such employment agreement 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 Company 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; (c) the stockholders of the Company
approve a reorganization, share exchange, merger or consolidation with
respect to which, in any such case the persons who were the
stockholders of the Company 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) a liquidation or dissolution of the
Company occurs or a sale of all or substantially all of the assets of
the Company is made. Each employment agreement also contains a
non-competition clause for two years following termination of the
executive's employment.
Generally, each employee of the Company has agreed to the
assignment to the Company of the employee's rights to any inventions
relating to the Company's business or interest which were conceived
both prior to and during the period of employment and, except under
certain specified conditions, the Company's employees are prohibited
from competing for one year with the Company in areas in which he or
she was employed.
STOCK OPTION PLAN
The Board of Directors of the Company adopted the 1991
Incentive Stock Option Plan (the "Option Plan") on August 25, 1991 in
order to attract and retain qualified personnel, which Option Plan was
approved by the stockholders on August 25, 1991. The Board of
Directors adopted the Amended and Restated 1991 Stock Option Incentive
Plan (the "Amended Option Plan") in February 1996, which Amended
Option Plan amended and restated the Option Plan and was approved by
the stockholders of the Company on March 29, 1996. Under the Amended
Option Plan, options to purchase up to 2,500,000 shares of Common
Stock may be granted to employees, officers, directors and consultants
of the Company. The Amended Option Plan is administered by the
Compensation Committee of the Board of Directors (the "Committee").
Subject to the terms of the Amended Option Plan, the
Committee is authorized to select optionees and determine the number
of shares covered by each option and certain of its other terms. The
exercise price of stock options granted under the Amended Option Plan
may not be less than the fair market value of the Company's Common
Stock on the date of the grant. In general, options become exercis-
able after the first anniversary of the date of grant. The period
within which any stock option may be exercised cannot exceed ten years
from the date of grant. Options held by a terminated employee expire
three months after termination except in the event of death,
disability or termination for cause. No one participant may receive,
in any one fiscal year, awards under the Amended Option Plan which
would entitle the Participant to receive more than 200,000 shares. On
October 31, 1994, the Company granted 460,000 options under the Option
Plan; on October 1, 1995, the Company granted 72,500 options under the
Option Plan; on July 10, 1996, the Company granted 170,000 options
under the Amended Option Plan; on September 30, 1996, the Company
granted 40,500 options under the Amended Option Plan; and on October
31, 1996, the Company granted 22,500 options under the Amended Option
Plan. In 1994, 470,250 options were forfeited; in 1995, 18,900
options were forfeited; and, in 1996, 637,678 options were canceled or
forfeited. As of November 1, 1996, there were 1,052,750 options in
the aggregate outstanding under the Option Plan.
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
<CAPTION>
Number of Percent of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs(a) Employees in Fiscal Base Price Expiration
Name Granted (#) Year(c) ($/sh) Date
<S> <C> <C> <C> <C>
Andrew L. 75,000 (b) 32.19% $1.0938 July 9, 2006
Simon, 7,500 (d) 3.22% $0.75 October 30, 2006
President,
Chief Executive
Officer and
Treasurer
Stephen H. 45,000 (b) 19.31% $1.0938 July 9, 2006
Ivens, Vice 7,500 (d) 3.22% $0.75 October 30, 2006
President,
Research &
Development
Linda G. Straley, 45,000 (b) 19.31% $1.0938 July 9, 2006
Vice President, 7,500 (d) 3.22% $0.75 October 30, 2006
Operations, and
Secretary
<FN>
(a) To date, the Company has issued no SARs.
(b) These options become exercisable on July 10, 1997.
(c) Includes all options granted under the Amended Option Plan.
(d) These options become exercisable on October 31, 1997.
</FN>
</TABLE>
None of the named executive officers received any option
grants in the fiscal year ended October 31, 1995.
<PAGE>
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs(a) Options/SARs(a)
at FY-End (#) at FY-End ($)
--------------------------------
Shares Value
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
- ------------------ ------------ --------- --------------- -------------------
<S> <C> <C> <C> <C>
Andrew L. Simon, 0 0 239,000/82,500 $0.00/$0.00(b)
President, Chief
Executive Officer
and Treasurer
Stephen H. Ivens, 0 0 102,500/52,500 $0.00/$0.00(b)
Vice President,
Research &
Development
Linda G. Straley, 0 0 102,700/52,500 $0.00/$0.00(b)
Vice President,
Operations, and
Secretary
<FN>
(a) To date, the Company has issued no SARs.
(b) Based on the closing bid price of the Company's Common Stock
on NASDAQ on January 31, 1997 of $0.50, there are no
options outstanding which are in-the-money.
</FN>
</TABLE>
DIRECTORS STOCK OPTION PLAN
The Board of Directors of the Company adopted the Directors
Stock Option Plan (the "Directors Plan") in February 1996 in order to
aid the Company in attracting, retaining and motivating independent
directors, which Directors Plan was approved by the stockholders of the
Company on March 29, 1996. Under the Directors Plan, non-qualified
stock options to purchase up to 100,000 shares of Common Stock may be
granted to non-employee directors of the Company, which options are
granted automatically at the times and in the manner stated in the
Directors Plan.
Subject to the terms of the Directors Plan, each non-employee
director receives 5,000 options on the day he (she) first is
elected to the Board of Directors, and 2,500 options on the date of
each annual meeting of the stockholders of the Company, provided he
(she) is re-elected to the Board of Directors. The exercise price of
stock options granted under the Directors Plan is the fair market value
of the Company's Common Stock on the date of grant. The options become
exercisable after the first anniversary of the date of grant and the
term of the option cannot exceed ten years. On March 29, 1996, the
Company granted 10,000 options.
OTHER PLANS
PROFIT SHARING PLAN. The Company has a qualified 401(k)
Profit Sharing Plan. The Plan allows employees to contribute up to 15
percent of income through Company contributions and a salary reduction
mechanism. Company contributions to the Plan are optional and accrue
at the discretion of the Board of Directors. For the fiscal years
ended October 31, 1996, 1995 and 1994, the Company made a contribution
to profit sharing equal to five percent (5%) of each eligible
employee's compensation, thereby limiting each eligible employee to
contribute up to ten percent (10%) of compensation.
Net assets for the Profit Sharing Plan, as estimated by the
Massachusetts Mutual Life Insurance Company which maintains the plan's
records, are $1,144,585 at October 31, 1996.
MONEY PURCHASE PENSION PLAN. In October 1991, the Company
adopted a Money Purchase Pension Plan, which has been qualified by the
Internal Revenue Service. Under this Plan, the Company makes an annual
contribution to the Plan equal to ten percent (10%) of each eligible
employee's compensation.
Net assets for the Money Purchase Pension Plan, as estimated
by the Massachusetts Mutual Life Insurance Company which maintains the
plan's records, are $424,231 at October 31, 1996.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's directors, executive officers and persons who
own beneficially more than ten percent of the Company's outstanding
common stock to file with the SEC initial reports of beneficial
ownership and reports of changes in beneficial ownership of common
stock and other securities of the Company on Forms 3, 4 and 5, and to
furnish the Company with copies of all such forms they file. Based on
a review of copies of such reports, all of the Company's directors and
officers timely filed all reports required with respect to fiscal 1996,
except that Andrew L. Simon, President, filed a Form 4 reporting his
December 1995 sale of 10,000 shares of Common Stock on the open market
one month late.
COMPENSATION OF DIRECTORS
Directors do not presently receive compensation for serving
on the Board. Depending on the number of meetings and the time
required for the Company's operations, the Company may decide to
compensate its directors in the future.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
The law firm of Christy & Viener in New York City, in which
Mr. Berger, a nominee for director of the Company, is a partner, acts
as special securities counsel to, and performs legal services for, the
Company. The firm received fees in the aggregate amount of
approximately $95,525 for legal services rendered to the Company during
the Company's fiscal year ended October 31, 1996.
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, $0.0001 per share. Mr. Beck, a nominee for director of the
Company, and members of Mr. Beck's immediate family owned 100% of the
outstanding stock of BETA.
PROPOSALS TO AMEND THE BY-LAWS OF THE COMPANY
GENERAL
The Board of Directors believes it is in the best interests
of the Company and the stockholders to adopt amendments to the By-Laws
of the Company (the "Existing By-Laws") which are more consistent with
public ownership of the Company and which conform with certain changes
to, and are in compliance with, the Delaware General Corporation Law, as
amended through the date hereof (the "DGCL"). Accordingly, in February
1997, the Board of Directors adopted several amendments (each, an
"Amendment" and, collectively, the "Amendments") to the Existing By-Laws,
which Amendments are being submitted to the stockholders for
approval. The Existing By-Laws afford the Company's stockholders the
ability, and permit the Board of Directors (subject to certain
limitations on the extent of amendments adopted only by the Board of
Directors), to amend the By-Laws. As the Board of Directors has
adopted the Amendments to the Existing By-Laws, the Board has
recommended that such Amendments be submitted to the stockholders for
approval. Assuming each of the Amendments is approved by the
Stockholders, the Board has adopted the Amended and Restated By-Laws
incorporating the Amendments (the "Amended By-Laws"), a copy of which
is attached hereto as Appendix A. If any Amendment is not approved by
the Stockholders, the Board will reconsider the specific Amendment.
MANAGEMENT RECOMMENDS THAT YOU VOTE TO APPROVE EACH AMENDMENT.
Each of the Amendments is presented below as a separate
Proposal. A discussion of the material changes from the Existing By-Laws
made by each Amendment follows the text of each Amendment. You are being
asked to vote on each Amendment separately.
PROPOSAL NO. 2
APPROVAL OF THE AMENDMENT OF PROVISIONS OF THE BY-LAWS
RELATING TO STOCKHOLDER MEETINGS
The Board has approved an Amendment in the form set forth as
Article II of the Amended By-Laws, which is set forth in Appendix A to
this Proxy Statement, to address the calling, notice and conduct at
meetings of, and actions by, the Stockholders of the Company. The
Amendment amends and restates Article II of the Existing By-Laws.
Reference should be made to Article II of Appendix A for the full text
of the Amendment.
DISCUSSION
The Amendment requires that the annual meeting of
stockholders be held within six months of the end of the fiscal year of
the Company or at any other such time as the Board may designate. This
provision gives the Board greater flexibility in determining the date
for the annual meeting of stockholders. The Existing By-Laws contain
a rigid requirement that such meeting be held within five months of the
end of each fiscal year.
Under the Existing By-Laws, special meetings of stockholders
could be called upon the written request of the holders of ten percent
(10%) of the shares outstanding and entitled to vote thereat. The
Amendment permits a special meeting to be called by the holders of more
than fifty percent (50%) of the shares outstanding and entitled to vote
thereat. Permitting special meetings to be called by the holders of a
small minority of the stock of the Company would allow a small faction
of stockholders to call unnecessary meetings as is the case under the
Existing By-Laws. The Amendment, which raises the percentage of shares
outstanding entitled to call a meeting, may have an anti-takeover
effect in that a significant stockholder who has less than fifty
percent (50%) of the outstanding shares would be unable to call a
meeting of stockholders independently and the Amendment would,
therefore, preserve the incumbency of the existing directors.
The Existing By-Laws require that, if any action to be taken
at a meeting would entitle the stockholders to a payment, the action
and the payment be specifically described in the notice of the meeting.
The Amendment does not contain such a provision. Additionally, in
accordance with the DGCL, the Amendment requires that, if any meeting
of stockholders is adjourned for more than 30 days or if, after an
adjournment of such a meeting, a new record date is fixed for
determining eligibility of votes at such adjourned meeting, a notice of
the adjourned meeting be sent to each stockholder of record entitled to
vote at the meeting. The Existing By-Laws contained no such notice
requirement.
The Existing By-Laws do not specifically designate a person
to chair the meetings of stockholders. The Amendment designates the
Chairman of the Board and, in his or her absence, the President and, in
his or her absence, any person chosen by a majority of those
stockholders present or represented to chair each meeting of
stockholders.
Pursuant to the Amendment, proxies given by stockholders are
valid for three years or such longer period as provided in the proxy.
The Existing By-Laws permitted proxies to be valid for only eleven
months from the date given. Additionally, under the Amendment,
stockholders are given the explicit right to revoke any proxy they have
executed for any reason, except in those cases where an irrevocable
proxy is permitted by law. These provisions conform to the applicable
provisions of the DGCL.
The Amendment specifically requires that the Company prepare
and make available for inspection, at least ten days prior to every
meeting of stockholders, a list of every stockholder eligible to vote
at a given meeting, listed in alphabetical order, and showing the
address and number of shares registered to each stockholder. The
Existing By-Laws lacked this explicit requirement.
Under the Existing By-Laws, the stockholders of the Company
could act without a meeting only upon the unanimous written consent of
all the stockholders of the Company. In addition to being very
cumbersome, this requirement is more restrictive than the DGCL. The
Amendment permits the stockholders to act without a meeting, upon the
written consent of the holders of a majority of the shares that would
be entitled to vote at a meeting, as permitted by the DGCL.
Additionally, the Amendment requires that prompt notice of the taking
of any action without a meeting by less than unanimous written consent
be given to those stockholders who did not consent to such action.
The Amendment contains specific procedures for a stockholder
to properly bring a proposal before a meeting of stockholders. The
Existing By-Laws contained no such procedures. Explicit procedures are
needed in order to enable the Company to provide the stockholders with
effective notice of all business to come before a meeting.
The Amendment allows for the election of directors by a
plurality vote of stockholders as opposed to a majority vote which was
required under the Existing By-Laws. The DGCL requires directors to be
elected by a plurality of the shares entitled to vote on the election
of directors.
RECOMMENDATION
The Board of Directors of the Company believes that it is in
the best interests of the Company and its Stockholders that Proposal 2
be approved. The Board of Directors believes that the new Article II
will provide a more detailed and effective mechanism for calling and
conducting meetings of Stockholders. The new Article II not only
conforms more readily with the DGCL and recent changes thereto, but is
also more consistent with the operation of a publicly-held company.
Accordingly, the Board of Directors has adopted, and recommends that
the Stockholders approve, Proposal No. 2.
PROPOSAL NO. 2 (APPROVAL OF THE AMENDMENT OF PROVISIONS OF
THE BY-LAWS RELATING TO STOCKHOLDER MEETINGS) WILL BE APPROVED BY A
MAJORITY OF THE VOTES CAST. THE VOTING TRUST INTENDS TO VOTE IN FAVOR
OF PROPOSAL NO. 2.
PROPOSAL NO. 3
APPROVAL OF THE AMENDMENT OF PROVISIONS OF THE BY-LAWS
RELATING TO THE BOARD OF DIRECTORS
The Board of Directors has approved an Amendment in the form
set forth as Articles III and IV of the Amended By-Laws, which is set
forth in Appendix A to this Proxy Statement, to address the election,
meetings and actions of the Board of Directors of the Company and the
establishment and powers of the Committees of the Board of Directors.
The Amendment amends and restates Article III of the Existing By-Laws.
Reference should be made to Articles III and IV of Appendix A for the
full text of the Amendment.
DISCUSSION
Under the Existing By-Laws, special meetings of the Board of
Directors could be called by any one director or the President of the
Company. The Amendment permits the President or Chairman to call a
special meeting, but requires that at least two other directors call a
meeting.
The Existing By-Laws, while granting authority to the Board
of Directors to create by resolution an Executive and other committees,
do not include specific details regarding the powers of such
committees. The Amendment preserves this authority for the Board of
Directors. The Amendment lowers the number of directors required to
serve on each committee from three to two and allows for the creation
of an Executive Committee, which would be able to exercise all the
powers and authority of the Board in the absence of action by the full
Board. The Company does not currently have an Executive Committee and
the Board does not currently contemplate creating an Executive
Committee in the near future. The Amendment contains specific
limitations on the powers of such committees, including prohibitions
against amending the Certificate of Incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders
the sale, lease or exchange of all or substantially all of the
Company's property or assets, recommending to the stockholders a
dissolution of the Company or a revocation of a dissolution, or
amending the By-Laws, and, unless a resolution of the Board of
Directors or the By-Laws so provide, no committee may declare a
dividend or authorize the issuance of stock. All committees are
required to keep written minutes of their proceedings, and all such
proceedings shall be subject to revision or alteration by the Board of
Directors. The Board of Directors may fill vacancies in, change the
membership of, or dissolve any committee.
The Amendment contains provisions which govern the internal
workings of the Executive Committee. Unless the Board of Directors
provides otherwise, a majority of any other committee may also fix its
own rules of procedure, determine action and fix the time and place of
meetings. The Board of Directors may appoint one or more committees
consisting of persons who are not directors of the Company, provided
that no such committee shall have or may exercise any authority of the
Board of Directors unless any action taken thereby is approved by a
majority of the members thereof, each member of which is a member of
the Board of Directors.
RECOMMENDATION
The Board of Directors of the Company believes that it is in
the best interests of the Company and the Stockholders that Proposal
No. 3 be approved. The Board of Directors believes that the new
Article III will provide a more complete set of rules for the election
and conduct of the Board of Directors. The new Articles III and IV not
only conform more readily with the DGCL and recent changes thereto, but
are also more consistent with the operation of a publicly-held company.
Accordingly, the Board of Directors has adopted, and recommends that
the Stockholders approve, Proposal No. 3.
PROPOSAL NO. 3 (APPROVAL OF THE AMENDMENT OF PROVISIONS OF
THE BY-LAWS RELATING TO THE BOARD OF DIRECTORS) WILL BE APPROVED BY A
MAJORITY OF THE VOTES CAST. THE VOTING TRUST INTENDS TO VOTE IN FAVOR
OF PROPOSAL NO. 3.
PROPOSAL NO. 4
APPROVAL OF THE AMENDMENT OF PROVISIONS OF THE BY-LAWS
RELATING TO OFFICERS AND OTHER CORPORATE MATTERS
The Board of Directors has approved an Amendment in the form
set forth as Articles V, VI, VII and VIII of the Amended By-Laws, which
is set forth in Appendix A to this Proxy Statement, to address the
election, meetings and powers of the officers of the Company and to
govern better the transfer of the Company's shares of Common Stock. The
Amendment amends and restates Articles IV, V and VI of the Existing By-Laws.
Reference should be made to Articles V, VI, VII and VIII of Appendix A
for the full text of the Amendment.
DISCUSSION
The Amendment contains a more detailed account of the
responsibilities of each officer of the Company, but does not
materially differ or substantively change the powers and authority of
the current officers. Furthermore, the Amendment contains specific
provisions authorizing the Company to draw checks, make deposits and
open bank accounts and certain other provisions are added concerning
stock certificates, stock records and transfers and dividends. These
provisions are procedural and do not materially change the abilities,
authority or powers of the Company to act in any such regard.
RECOMMENDATION
The Board of Directors of the Company believes that it is in
the best interests of the Company and the Stockholders that Proposal
No. 4 be approved. The Board of Directors believes that the new
Articles V, VI, VII and VIII will provide a more complete set of rules
for the election and conduct of the officers of the Company and will
better govern the transfer of the Company's shares of Common Stock.
The new Articles V, VI, VII and VIII not only conform more readily with
the DGCL and recent changes thereto, but are also more consistent with
the operation of a publicly-held company. Accordingly, the Board of
Directors has adopted, and recommends that the Stockholders approve,
Proposal No. 4.
PROPOSAL NO. 4 (APPROVAL OF THE AMENDMENT OF PROVISIONS OF
THE BY-LAWS RELATING TO OFFICERS AND OTHER CORPORATE MATTERS) WILL BE
APPROVED BY A MAJORITY OF THE VOTES CAST. THE VOTING TRUST INTENDS TO
VOTE IN FAVOR OF PROPOSAL NO. 4.
PROPOSAL NO. 5
APPROVAL OF THE AMENDMENT OF THE PROVISIONS OF THE BY-LAWS
RELATING TO INDEMNIFICATION OF OFFICERS AND DIRECTORS OF THE COMPANY
The Board of Directors has approved an Amendment in the form
set forth as Article IX of the Amended By-Laws, which is set forth in
Appendix A to this Proxy Statement, to provide for the indemnification
of officers and directors of the Company in connection with their
actions in such capacities. The Amendment amends and restates Article
X of the Existing By-Laws. The DGCL permits corporations to adopt
certain provisions which serve to limit, and in some cases eliminate,
the personal liability of directors, officers and employees for actions
taken on behalf of the corporation by allowing a corporation to
indemnify such individuals against costs, liability and loss. The
advantage in adopting such provisions is that it allows the Company to
attract individuals to the Board of Directors and as officers and
employees who may otherwise refuse to take such a position because of
concerns of personal liability. These provisions also enable the
individual director or officer to act freely and solely in the best
interests of the Company without concern for possible personal
liability, expense or loss. The Board, therefore, has decided to
include indemnification provisions in the Amended By-Laws, consistent
with the DGCL, which are substantially more detailed than the
indemnification provisions of the Existing By-Laws. Reference should be
made to Article IX of Appendix A for the full text of the Amendment.
DISCUSSION
Set forth below is a brief description of the material
differences between the provisions of the Existing By-Laws and those of
the Amendment governing indemnity.
The Amendment requires the Company to indemnify any person
who is involved in any manner with a threatened or actual lawsuit or
proceeding by reason of the fact the individual was a director or
officer of the Company or was serving at the request of the Company as
a director or officer of any other corporation or business entity. The
Amendment includes a definition of a "Proceeding" for which indemnity
will be provided, which includes any threatened, pending or completed
investigation, claim, action, suit or proceeding, whether civil,
criminal, administrative or investigative, whereas the Existing By-Laws
contemplate only actual suits, proceeding or actions, and make no
mention of investigations or claims. The Amendment also has a more
expansive view of an individual's potential involvement in a Proceeding
(as defined in the Amended By-Laws), and provides for indemnification
even if the individual is not an actual party to such Proceeding, but
incurs expenses in connection with being a witness or having some other
involvement in such Proceeding. The provisions of the Amendment also
specifically include in the definition of a Proceeding actions, suits,
or proceedings by or in right of the Company to procure a judgment in
its favor. The Amendment provides for indemnification of a director or
officer whether or not the basis of any Proceeding is alleged action in
an official capacity as a director or officer or in any other capacity
while serving as a director or officer. The Existing By-Laws allow for
indemnification only against actual expenses incurred in connection
with defending such actions. The provisions of the Amendment provide
for indemnity for expenses, as well as all actual liabilities and
losses. The right to indemnification under the Amendment also includes
a right to receive payment in advance of any expenses incurred by the
indemnitee in connection with a Proceeding. The indemnification rights
conferred by the Amendment are explicitly deemed to be contractual
rights between the Company and the individual. The Existing By-Laws
require that all employees receive the same right of indemnification as
officers and directors. The Amendment has no explicit requirement to
indemnify employees, but instead grants the Board of Directors the
ability to provide indemnification to employees, agents, attorneys and
representatives of the Company with up to the same scope and extent as
provided for officers and directors.
Under the Existing By-Laws, an officer, director or employee
would not be entitled to indemnity in cases where it is adjudged that
such officer, director or employee is liable for negligence or
misconduct in the performance of his or her duties. While the
Amendment does not contain this explicit carve-out, the DGCL requires
that the indemnitee act in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of
the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The Existing By-Laws empowered the Board of Directors to fix
the amount of indemnity to which any officer or director would be
entitled; the Amendment does not contain this provision.
The Amendment specifically authorizes the Company to
purchase and maintain insurance to protect itself and any officer,
director, employee, agent, attorney or representative of the Company
against any expense, liability or loss asserted or incurred in
connection with any Proceeding, regardless of the Company's ability or
obligation to indemnify such person against such expenses, liabilities
or losses. The Company may also create trust funds, grant security
interests or use other means to ensure that the payment of any amounts
due under the indemnification provisions of the Amendment is made.
The Existing By-Laws contain no similar provisions.
RECOMMENDATION
The Board of Directors of the Company believes that it is in
the best interests of the Company and the Stockholders that Proposal
No. 5 be approved. The Board of Directors believes that the new
Article IX will provide a more complete set of rules and procedures for
the indemnification of the officers and directors of the Company. The
new Article IX not only conforms more readily with the DGCL and recent
changes thereto, but is also more consistent with the operation of a
publicly-held company. Accordingly, the Board of Directors has
adopted, and recommends that the Stockholders approve, Proposal No. 5.
PROPOSAL NO. 5 (APPROVAL OF THE AMENDMENT OF PROVISIONS OF
THE BY-LAWS RELATING INDEMNIFICATION OF OFFICERS AND DIRECTORS OF THE
COMPANY) WILL BE APPROVED BY A MAJORITY OF THE VOTES CAST. THE VOTING
TRUST INTENDS TO VOTE IN FAVOR OF PROPOSAL NO. 5.
PROPOSAL NO. 6
APPROVAL OF THE AMENDMENT OF PROVISIONS OF THE BY-LAWS
RELATING TO THE FURTHER AMENDMENT OF THE BY-LAWS
The Board of Directors has approved an Amendment in the form
set forth as Article XII of the Amended By-Laws, which is set forth in
Appendix A to this Proxy Statement, to govern the future amendment of
the By-Laws of the Company. The Amendment amends and restates Article
IX of the Existing By-Laws. Reference should be made to Article XII
of Appendix A for the full text of the Amendment.
DISCUSSION
The Amendment includes less restrictive criteria for further
amendments to, or the repeal of, the Amended By-Laws than those
criteria contained in the Existing By-Laws. The Existing By-Laws
permitted the Stockholders of the Company holding a majority of the
outstanding shares entitled to vote to amend any provision of the By-Laws.
The Existing By-Laws permitted the Board of Directors to adopt,
amend or repeal the By-Laws of the Company (except as discussed
below), but the Stockholders had the right to alter, amend or repeal
any by-law provision adopted by the Board of Directors. While there
was no specific time at which the Stockholders would have to approve
any amendment to the Existing By-Laws adopted by the Board, the
Existing By-Laws effectively gave the Stockholders such right of
approval at any time after the adoption of such amendment. Therefore,
the Board would be uncertain as to the validity of any action taken
pursuant to an amendment to such Existing By-Laws. By empowering
either the Board or the Stockholders to amend the By-Laws, the
Amendment provides the Board with a level of confidence and certainty
in actions taken in reliance on such amended provisions which the
Board believes will ultimately be in the best interests of the
Stockholders.
Under the Existing By-Laws, the Board was subject to the
further restriction it had no power to change the following
substantive provisions of the By-Laws: the quorum for meetings of
Stockholders or of the Board of Directors, the removal of directors or
the filling of vacancies in the Board resulting from removal by the
Stockholders. By eliminating these restrictions on the power of the
Board to amend the By-Laws in these substantive areas, the Amendment
effects a material change in the rights of Stockholders in that the
Board of Directors will now have greater discretion in these areas of
corporate governance than it did under the Existing By-Laws.
Under the Amendment, further amendments to, or a repeal of,
any or all provisions can be effected by the action of a majority vote
of the stockholders or a majority vote of the Board of Directors.
While the Board of Directors does not currently anticipate making any
changes in the Amended By-Laws as presented in Appendix A to this
Proxy Statement, the new Article XII does, in fact, afford the Board
the flexibility to address problems that could arise in the future
which might require Board action in these areas.
RECOMMENDATION
The Board of Directors of the Company believes that it is in
the best interests of the Company and the Stockholders that Proposal
No. 6 be approved. The Board of Directors believes that the new
Article XII will provide a more flexible method for amending the
By-Laws of the Company. The new Article XII not only conforms more
readily with the DGCL and recent changes thereto, but is also more
consistent with the efficient governance of a publicly-held company.
Accordingly, the Board of Directors has adopted, and recommends that
the Stockholders approve, Proposal No. 6.
PROPOSAL NO. 6 (APPROVAL OF THE AMENDMENT OF PROVISIONS OF
THE BY-LAWS RELATING TO THE FURTHER AMENDMENT OF THE BY-LAWS) WILL BE
APPROVED BY A MAJORITY OF THE VOTES CAST. THE VOTING TRUST INTENDS TO
VOTE IN FAVOR OF THE PROPOSAL.
PROPOSAL NO. 7
RATIFICATION OF INDEPENDENT AUDITORS
Management recommends that you vote to ratify
the appointment of the independent auditors.
The Board of Directors of the Company has appointed the firm
of Lazar, Levine & Company LLP ("Lazar") as its independent auditors
for the 1997 fiscal year. While it is not required to do so, the
Company is submitting the appointment of Lazar to the stockholders for
ratification. Lazar has been serving the Company in this capacity
since September 1995. A representative from Lazar will be present at
the Meeting and will be given the opportunity to make a statement if
the representative desires to do so. The representative is expected to
be available to respond to appropriate questions. If the appointment
of Lazar is not ratified by the stockholders of the Company, the Board
of Directors will reconsider the appointment of Lazar.
THE APPOINTMENT OF THE INDEPENDENT AUDITORS WILL BE RATIFIED
BY A MAJORITY OF THE VOTES CAST. THE VOTING TRUST INTENDS TO VOTE IN
FAVOR OF THE PROPOSAL.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On July 25, 1995, the Company received notification from its
independent accountant, Thomas J. Marion, that the client-auditor
relationship between the Company and Mr. Marion had ceased. Mr.
Marion's reports on the financial statements of the Company for the
past two years did not contain an adverse opinion or a disclaimer of
opinion, and were not qualified or modified as to uncertainty, audit
scope or accounting principles. The Company's Board of Directors has
approved the change in the Company's independent accountant. The
Company has had no disagreements with Mr. Marion during the Company's
two most recent fiscal years or in any subsequent interim period on any
matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure. Mr. Marion has confirmed to
the Company in writing that he agrees with the statements contained in
this paragraph.
On September 7, 1995, the Board of Directors of the Company
appointed Lazar as its independent auditors, which appointment was
ratified by the stockholders on March 29, 1996. Lazar is located at
350 Fifth Avenue, New York, New York 10118.
OTHER INFORMATION
Accompanying this Proxy Statement and the notice of meeting
which is the first page of this Proxy Statement is the Company's Proxy
and 1996 Annual Report for its fiscal year ended October 31, 1996.
PROPOSALS OF SECURITY HOLDERS
Proposals of security holders intended to be presented at
the next Annual Meeting must be received by the Company for inclusion
in the Company's Proxy Statement and form of proxy relating to that
meeting no later than November 1, 1997.
AVAILABILITY OF ANNUAL REPORT
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE
FISCAL YEAR ENDED OCTOBER 31, 1996, AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, WILL BE PROVIDED FREE OF CHARGE TO ANY STOCKHOLDER
UPON WRITTEN REQUEST TO:
Ms. Linda G. Straley, Vice President and Secretary,
Touchstone Applied Science Associates, Inc., P.O. Box 382, Fields Lane,
Brewster, NY 10509.
LINDA G. STRALEY
Vice President and Secretary
Brewster, New York
March 3, 1997
<PAGE>
Appendix A
----------
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
____________________________________
AMENDED AND RESTATED BY-LAWS
____________________________________
ARTICLE I
Offices
-------
Section 1. Registered Office. The registered office of the
-----------------
Corporation shall be in the City of Dover, County of Kent, State of
Delaware, and the registered agent of the Corporation shall be
Incorporating Services, Ltd., 15 East North Street, Dover, Delaware
19901, or such other agent within the State of Delaware as the Board
of Directors of the Corporation shall select.
Section 2. Other Offices. The Corporation may also have
-------------
offices at such other places both within and without the State of
Delaware as the Board of Directors may from time to time determine or
the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
------------------------
Section 1. Annual Meeting. The annual meeting of the
--------------
stockholders of the Corporation for the election of directors and for
the transaction of such other business as may properly come before the
meeting shall be held within six months following the close of each
fiscal year of the Corporation, or on such other date as may be fixed
from time to time by resolution of the Board of Directors, and at such
place within or without the State of Delaware as shall be designated
by the Board of Directors.
Section 2. Special Meeting. Special meetings of the
---------------
stockholders, for any purpose or purposes, may be called at any time
by the Chairman of the Board, if any, or the President of the
Corporation or the majority of the Board of Directors or the holders
of more than fifty percent (50%) of the shares of stock of the
Corporation issued and outstanding and entitled to vote thereat, and
shall be called by the Board of Directors. Such meetings shall be
held at such time and at such place within or without the State of
Delaware as shall be specified in the notice of the meeting.
Section 3. Notice of Meetings. Notice of the place, date
------------------
and time of the holding of each annual and special meeting of the
stockholders and the purpose or purposes thereof shall be given
personally or by mail in a postage prepaid envelope to each
stockholder entitled to vote at such meeting, not less than ten nor
more than 60 days before the date of such meeting, and, if mailed, it
shall be directed to such stockholder at his address as it appears on
the records of the Corporation, unless he shall have filed with the
Secretary of the Corporation a written request that notices to him be
mailed to some other address, in which case it shall be directed to
him at such other address. Any such notice for any meeting other than
the annual meeting of stockholders shall indicate that it is being
issued at the direction of the Chairman of the Board, if any, the
President, the Board of Directors or the stockholders, which notice
shall not be required to be given to any stockholder who shall attend
such meeting in person or by proxy and shall not, at the beginning of
such meeting, object to the transaction of any business because the
meeting is not lawfully called or convened, or who shall, either
before or after the meeting, submit a signed waiver of notice, in
person or by proxy. Unless the Board of Directors shall fix a new
record date for an adjourned meeting, notice of such adjourned meeting
need not be given if the time and place to which the meeting shall be
adjourned are announced at the meeting at which the adjournment is
taken. At the adjourned meeting, the Corporation may transact any
business which might have been transacted at the original meeting.
If the adjournment is for more than 30 days or, if after the
adjournment a new record date is fixed for the adjourned meeting,
a notice of the adjourned meeting shall be given to each stockholder
of record entitled to vote at the meeting.
Section 4. Quorum. Except as otherwise required by law or
------
the Certificate of Incorporation, at all meetings of the stockholders,
the presence in person or by proxy of the holders of a majority of the
shares of stock of the Corporation issued and outstanding and entitled
to vote shall constitute a quorum for the transaction of any business.
In the absence of a quorum, the holders of a majority of the shares of
stock present in person or by proxy and entitled to vote or, if no
stockholder entitled to vote is present, then any officer of the
Corporation, may adjourn the meeting from time to time. At any such
adjourned meeting at which a quorum may be present, any business may
be transacted which might have been transacted at the meeting as
originally called.
Section 5. Organization. At each meeting of the
------------
stockholders, the Chairman of the Board, if any, or in his absence or
inability to act, the President, or in his absence or inability to
act, any person chosen by a majority of those stockholders present or
represented, shall act as chairman of the meeting. The Secretary, or,
in his absence or inability to act, an Assistant Secretary or any
other officer appointed by the chairman of the meeting, shall act as
secretary of the meeting and keep the minutes thereof.
Section 6. Order of Business. The order of business at all
-----------------
meetings of the stockholders shall be as determined by the chairman of
the meeting.
Section 7. Voting. Except as otherwise provided by statute
------
or the Certificate of Incorporation, each holder of record of shares
of stock of the Corporation having voting power shall be entitled at
each meeting of the stockholders to one vote for every share of such
stock standing in his name on the record of stockholders of the
Corporation (a) on the date fixed by the Board of Directors as the
record date for the determination of the stockholders who shall be
entitled to notice of and to vote at such meeting; or (b) if such
record date shall not have been so fixed, then at the close of
business on the day next preceding the day on which notice thereof shall
be given; or (c) if notice is waived, at the close of business on the
day next preceding the day on which the meeting is held. Each
stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him by a proxy signed by
such stockholder or his attorney-in-fact. Any such proxy shall be
delivered to the secretary of such meeting at or prior to the time
designated in the order of business for so delivering such proxies.
No proxy shall be valid after the expiration of three years from the
date thereof, unless the proxy provides for a longer period. Every
proxy shall be revocable at the pleasure of the stockholder executing
it, except in those cases where an irrevocable proxy is permitted by
law. Except as otherwise required by law, the Certificate of
Incorporation or these By-Laws, any corporate action to be taken by
vote of the stockholders shall be authorized by a majority of the
total votes cast at a meeting of stockholders by the holders of shares
present in person or represented by proxy and entitled to vote on such
action. Unless required by statute, or determined by the chairman of
the meeting to be advisable, the vote on any question need not be by
written ballot. On a vote by written ballot, each ballot shall be
signed by the stockholder voting, or by his proxy, if there be such
proxy, and shall state the number of shares voted.
Section 8. List of Stockholders. The officer who has
--------------------
charge of the stock ledger of the Corporation shall prepare and make
or cause to be prepared and made, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled
to vote at the meeting, arranged in alphabetical order, and showing
the address of each stockholder and the number of shares registered in
the name of each stockholder. Such list shall be open to the
examination of any stockholder for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days
prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time
and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 9. Inspectors. The Board of Directors may, in
----------
advance of any meeting of stockholders, appoint one or more inspectors
to act at such meeting or any adjournment thereof. If inspectors
shall not be so appointed or if any of them shall fail to appear or
act, the chairman of the meeting may, and on the request of any
stockholder entitled to vote thereat shall, appoint one or more
inspectors. Each inspector, before entering upon the discharge of his
duties, shall take and sign an oath faithfully to execute the duties
of inspector at such meeting with strict impartiality and according to
the best of his ability. The inspectors shall determine the number of
shares outstanding, the number of shares represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and
shall receive votes, ballots or consents, hear and determine all
challenges and questions arising in connection with the right to vote,
count and tabulate all votes, ballots or consents, determine the
result, and do such acts as are proper to conduct the election or vote
with fairness to all stockholders. On request of the chairman of the
meeting or any stockholder entitled to vote thereat, the inspectors
shall make a report in writing of any challenge, request or matter
determined by them and shall execute a certificate of any fact found
by them. No director or candidate for the office of director shall
act as inspector of an election of directors. Inspectors need not be
stockholders.
Section 10. Consent of Stockholders in Lieu of Meeting.
------------------------------------------
Unless otherwise provided by the Certificate of Incorporation or by
law, any action which is required or permitted to be taken at any
meeting of stockholders may be taken without a meeting, without prior
notice and without a vote, if a written consent setting forth the
action so taken is signed by the holders of record of outstanding
shares having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who
have not consented in writing.
Section 11. Notice of Stockholder Business. At an annual
------------------------------
meeting of stockholders, only such business shall be conducted as
shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be (a) specified in
the notice of meeting (or any supplement thereto) given by or at the
direction of the Board of Directors, (b) otherwise properly brought
before the meeting by or at the direction of the Board of Directors or
by the Chairman of the Board or the President of the Corporation or
(c) otherwise properly brought before the meeting by a stockholder.
For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof (as
determined by the Board of Directors) in writing to the Secretary of
the Corporation. As used in this Section 11 of these By-Laws, the
phrase "notice or prior public disclosure of the date of the meeting"
shall mean notice or prior public disclosure of the date on which the
meeting is originally scheduled to be called to order and shall not
refer to notice or prior public disclosure of any date to which such
meeting may be adjourned. A stockholder's notice to the Secretary
shall set forth, as to each matter the stockholder proposes to bring
before the annual meeting, (a) a brief description of the business
desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (b) the name and
address, as they appear on the Corporation's stock transfer books, of
the stockholder proposing such business, (c) the class and number of
shares of capital stock of the Corporation which are beneficially
owned (such term being used in this Section 11 of these By-Laws with
the meaning ascribed to such term in Rule 13d-3 of the rules under the
Securities Exchange Act of 1934, as amended, as such Rule was in
effect on July 1, 1990) by the stockholder and (d) any material
interest of the stockholder in such business. Notwithstanding any
other provision of these By-Laws, no business shall be conducted at an
annual meeting except in accordance with the procedures set forth in
this Section 11. If the presiding officer of an annual meeting
determines and declares that business was not properly brought before
the meeting in accordance with this Section 11, any such business
shall not be transacted.
ARTICLE III
Board of Directors
------------------
Section 1. General Powers. The property, business and
--------------
affairs of the Corporation shall be managed by the Board of Directors.
The Board of Directors may exercise all such authority and powers of
the Corporation and do all such lawful acts and things as are not by
statute or the Certificate of Incorporation or these By-Laws directed
or required to be exercised or done by the stockholders.
Section 2. Number, Term of Office, Qualifications and Election.
---------------------------------------------------
The number of directors of the Corporation (exclusive of any directors
to be elected by any series of preferred stock, if any, voting
separately as a class) shall be not less than three nor more
than fifteen, and within such range the number of directors at any
time shall be determined by resolution of the Board of Directors or
the stockholders. At each annual meeting of stockholders, directors
elected to succeed the directors whose terms expire at such annual
meeting shall be elected to hold office for a term expiring at the
next annual meeting. Directors need not be stockholders. Except as
otherwise required by statute or the Certificate of Incorporation or
these By-Laws, directors to be elected at each annual meeting of
stockholders shall be elected by a plurality of the votes cast at the
meeting by the holders of shares present in person or represented by
proxy and entitled to vote for the election of directors.
Section 3. Annual Meeting. The Board of Directors shall
--------------
meet for the purpose of organization, the election of officers and the
transaction of other business, as soon as practicable after each
annual meeting of the stockholders, on the same day and at the same
place where such annual meeting shall be held or at such other time
and place as the Board of Directors shall determine. Notice of such
meeting need not be given. Such meeting may be held at any other time
or place (within or without the State of Delaware) which shall be
specified in a notice thereof given as hereinafter provided in Section
6 of this Article III, or in a waiver of notice thereof.
Section 4. Regular Meetings. Regular meetings of the Board
----------------
of Directors shall be held at such times and places within or without
the State of Delaware as the Board of Directors may from time to time
by resolution determine. If any day fixed for a regular meeting shall
be a legal holiday at the place where the meeting is to be held, then
the meeting which would otherwise be held on that day shall be held at
the same hour on the next succeeding business day. Notice of regular
meetings of the Board of Directors need not be given except as
otherwise required by statute or these By-Laws.
Section 5. Special Meetings. Special meetings of the Board
----------------
of Directors may be called at any time by the Chairman of the Board,
if any, the President or any two directors of the Corporation and
shall be held at such time and at such place within or without the
State of Delaware as shall be specified in the notice of meeting or
waiver thereof.
Section 6. Notice of Meetings. Notice of each special
------------------
meeting of the Board of Directors (and of each regular meeting for
which notice shall be required) shall be given by the Secretary as
hereinafter provided in this Section 6, in which notice shall be
stated the time and place of the meeting. Notice of each such meeting
shall be delivered to each director, either personally or by
telephone, telegraph, facsimile transmission, cable, or wireless, at
least twenty-four hours before the time at which such meeting is to be
held or shall be mailed to each director by first-class mail postage
prepaid, addressed to him at his residence, or usual place of
business, at least two days before the day on which such meeting is to
be held. Notice of any such meeting need not be given to any director
who shall, either before or after the meeting, submit a signed waiver
of notice or who shall attend such meeting without objecting, at the
beginning of such meeting, to the transaction of any business because
the meeting is not lawfully called or convened. Except as otherwise
specifically required by these By-Laws, a notice or waiver of notice
of any regular or special meeting of the Board of Directors need not
state the purpose or purposes of such meeting.
Section 7. Quorum and Manner of Acting. A majority of the
---------------------------
number of directors constituting the entire Board of Directors shall
be present in person at any meeting of the Board of Directors in order
to constitute a quorum for the transaction of business at such
meeting, and, except as otherwise expressly required by statute or the
Certificate of Incorporation, the act of a majority of the directors
present at any meeting at which a quorum is present shall be the act
of the Board of Directors. In the absence of a quorum at any meeting
of the Board of Directors, a majority of the directors present, or if
no director is present, the Secretary, may adjourn such meeting to
another time and place, or such meeting, unless it be the annual
meeting of the Board of Directors, need not be held. At any adjourned
meeting at which a quorum is present, any business may be transacted
which might have been transacted at the meeting as originally called.
Except as provided in Section 11 of this Article III and Article IV of
these By-Laws and as otherwise specifically authorized by resolution
of the Board of Directors, the directors shall act only as a Board of
Directors and the individual directors shall have no power as such.
Section 8. Organization. At each meeting of the Board of
------------
Directors, the Chairman of the Board, if any, or, in his absence or
inability to act, the President, or, in his absence or inability to
act, another director chosen by a majority of the directors present,
shall act as chairman of the meeting and preside thereat. The minutes
of the meeting shall be recorded by any officer of the Corporation
present and designated by such chairman.
Section 9. Resignations. Any director of the Corporation
------------
may resign at any time by giving written notice of his or her
resignation to the Board of Directors, the Chairman of the Board, the
President or the Secretary of the Corporation. Any such resignation
shall take effect at the time specified therein, or, if the time when
it shall become effective shall not be specified therein, immediately
upon its receipt; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it
effective.
Section 10. Removal of Directors. Except as otherwise
--------------------
provided in the Certificate of Incorporation, any director may be
removed, at any time, with or without cause, by the affirmative vote
of the holders of a majority of the outstanding shares of stock
entitled to vote for the election of directors of the Corporation at a
meeting of the stockholders called and held for that purpose.
Section 11. Vacancies. Except as otherwise required by
---------
statute or by the Certificate of Incorporation, during the intervals
between annual meetings of stockholders, any vacancies and any newly
created directorships resulting from an increase in the authorized
number of directors of the Corporation and vacancies occurring in the
Board of Directors for any reason shall be filled by a majority vote
of the directors then in office, or whether or not a quorum, or by a
sole remaining director, at a meeting of the Board of Directors. Each
director chosen to fill a vacancy shall hold office for the unexpired
term in respect of which such vacancy occurred. Each director chosen
to fill a newly created directorship shall hold office for a term
expiring at the next annual meeting. Each director shall hold office
for the specified term and until a successor shall be duly elected and
qualified, except in the event of death, resignation or removal. If
there are no directors in office, then a special meeting of
stockholders for the election of directors may be called and held in
the manner provided by statute.
Section 12. Compensation. The Board of Directors or a
------------
committee of the Board designated by it shall have authority to fix
the compensation, if any, including without limitation fees and
reimbursement of expenses, of directors for services to the
Corporation in any capacity; provided, however, that no such payment
shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
Section 13. Action Without Meeting. Any action required or
----------------------
permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting if all members of
the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
Section 14. Participation in Meetings by Telephone and Other
------------------------------------------------
Equipment. Members of the Board of Directors or of any committee
- ---------
thereof may participate in a meeting of the Board or committee by
means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each
other, and participation in a meeting pursuant to this Section shall
constitute presence in person at such meeting.
ARTICLE IV
Executive and Other Committees
------------------------------
Section 1. Executive and Other Committees. The Board of
------------------------------
Directors may, by a resolution passed by a majority of the whole
Board, designate an Executive Committee, to consist of two or more
directors of the Corporation, and one or more other committees, each
such other committee to consist of two or more of the directors of the
Corporation. The Board of Directors may designate one or more
directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In the
absence or disqualification of any member of the Executive Committee
or such other committee or committees, the member or members thereof
present at any meeting and not disqualified from voting, whether or
not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. The Executive Committee,
while the Board of Directors is not in session shall have and may
exercise, and any such other committee, to the extent provided in the
resolution of the Board of Directors, shall have and may exercise, all
the powers and authority of the Board of Directors in the management
of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require
it; but no such committee shall have the power or authority in
reference to amending the Certificate of Incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders
the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or
amending the By-Laws of the Corporation; and, unless the resolution or
By-Laws expressly so provide, no such committee shall have the power
or authority to declare a dividend or to authorize the issuance of
stock. Each committee shall keep written minutes of its proceedings
and shall report such minutes to the Board of Directors when required.
All such proceedings shall be subject to revision or alteration by the
Board of Directors; provided, however, that rights of third parties
-------- --------
shall not be prejudiced by such revision or alteration. The Board of
Directors, by action of a majority of the entire Board, may at any
time fill vacancies in, change the membership of, or dissolve any such
committee.
Section 2. Executive Committee: General. Regular meetings
-----------------------------
of the Executive Committee shall be held at such times and places,
within or without the State of Delaware, as a majority of such
Committee may from time to time by resolution determine. Special
meetings of the Executive Committee may be called at the request of
any member thereof and may be held at such times and places, within or
without the State of Delaware, as such Committee may from time to time
by resolution determine or as shall be specified in the respective
notices or waivers of notice thereof. Notice of regular meetings of
such Committee need not be given except as otherwise required by
statute or these By-Laws. Notice of each special meeting of such
Committee shall be given to each member of such Committee in the
manner provided for in Section 6 of Article III of these By-Laws.
Subject to the provisions of this Article IV, the Executive Committee,
by resolution of a majority of such Committee, shall fix its own rules
of procedure. A majority of the Executive Committee shall be present
in person at any meeting of the Executive Committee in order to
constitute a quorum for the transaction of business at such meeting,
and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of the Executive Committee. The
members of the Executive Committee shall act only as a committee, and
the individual members shall have no power as such.
Section 3. Other Committees: General. A majority of any
--------------------------
committee may fix its rules of procedure, determine its action, and
fix the time and place, within or without the State of Delaware, of
its meetings, unless the Board of Directors shall otherwise by
resolution provide. Notice of such meetings shall be given to each
member of the committee in the manner provided for in Section 6 of
Article III of these By-Laws. Nothing in this Article IV shall be
deemed to prevent the Board of Directors from appointing one or more
committees consisting in whole or in part of persons who are not
directors of the Corporation; provided, however, that no such
committee shall have or may exercise any authority of the Board of
Directors unless any action taken thereby is approved by a majority of
the members thereof, each member of which is a member of the Board of
Directors.
ARTICLE V
Officers
--------
Section 1. Number and Qualifications. The officers of the
-------------------------
Corporation shall be a President, a Treasurer and a Secretary. Any
two or more offices may be held by the same person. Such officers
shall be elected from time to time by the Board of Directors, each to
hold office until the meeting of the Board following the next annual
meeting of the stockholders, or until his successor shall have been
duly elected and shall have qualified, or until his death, or until he
shall have resigned or until he shall have been removed, as
hereinafter provided in these By-Laws. The Board of Directors may
from time to time elect such other officers (including a Chairman of
the Board and one or more Vice Presidents, Assistant Treasurers and
Assistant Secretaries) and such agents as it may deem necessary or
desirable for the business of the Corporation. The Board of Directors
may from time to time authorize any principal officer or committee to
appoint, and to prescribe the authority and duties of, any such
subordinate officers or agents. Each of such other officers and
agents shall have such authority, perform such duties, and hold office
for such period, as are provided in these By-Laws or as may be
prescribed by the Board of Directors or by the principal officer or
committee appointing such officer or agent.
Section 2. Resignations. Any officer of the Corporation
------------
may resign at any time by giving written notice of his or her
resignation to the Board of Directors, the Chairman of the Board, if
any, the President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall
become effective shall not be specified therein, immediately upon its
receipt; and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 3. Removal. Any officer or agent of the
-------
Corporation may be removed, either with or without cause, at any time,
by the vote of the majority of the entire Board of Directors at any
meeting of the Board, or, except in the case of an officer or agent
elected or appointed by the Board, by any principal officer or
committee upon whom such power of removal may be conferred by the
Board.
Section 4. Vacancies. A vacancy in any office, whether
---------
arising from death, resignation, disqualification, removal or any
other cause, may be filled for the unexpired portion of the term of
the office which shall be vacant, in the manner prescribed in these
By-Laws for the regular election or appointment to such office.
Section 5. The Chairman of the Board. The Chairman of the
-------------------------
Board, if elected, shall, if present, preside at all meetings of the
stockholders and the Board of Directors and, in general, shall have
such other powers and perform such other duties as usually pertain to
the office of the Chairman of the Board or as from time to time may be
assigned to him by the Board of Directors. At the discretion of the
Board of Directors, the Chairman of the Board, if elected, may be the
chief executive officer of the Corporation and, if so appointed by the
Board of Directors, shall have general and active supervision and
direction over the business and affairs of the Corporation and over
its officers, subject, however, to the control of the Board of
Directors.
Section 6. The President. The President shall be the chief
-------------
executive officer of the Corporation and shall have general and active
supervision and direction over the business and affairs of the
Corporation and over its officers, unless the Chairman of the Board,
if any, is appointed to serve as chief executive officer, in which
case the President shall be the chief operating officer of the
Corporation and shall have general and active supervision and
direction over the ordinary business operations and affairs of the
Corporation and over its officers, subject, however, to the
supervision and direction of the Chairman of the Board, if any, who is
also the chief executive officer of the Corporation, and to the
control of the Board of Directors. He shall, if present, in the
absence or inability to act of the Chairman of the Board, preside at
meetings of the stockholders and at meetings of the Board of
Directors. In general, the President shall have such other powers and
perform such other duties as usually pertain to the office of the
President and chief executive officer or chief operating officer, as
the case may be, or as from time to time may be assigned to him by the
Board of Directors or the Chairman of the Board, if any.
Section 7. Vice Presidents. Each Vice President shall have
---------------
such powers and perform such duties as usually pertain to his office
or as from time to time may be assigned to him by the Board of
Directors, the Chairman of the Board, if any, or the President. If
there is more than one Vice President, they shall be ranked in an
order designated by the Board of Directors or failing such
designation, the Vice Presidents will be deemed to be ranked by the
Board of Directors on the order of their election as set forth in the
resolution or resolutions of the Board of Directors providing for
their election. During the absence of the President or his inability
to act, the Vice President, or, if there is more than one Vice
President, the highest ranking Vice President designated or deemed
designated by the Board of Directors, shall exercise the powers and
perform the duties of the President, subject to the direction of the
Board of Directors or the Chairman of the Board, if any.
Section 8. Treasurer. The Treasurer shall:
---------
(a) have charge and custody of, and be responsible for,
all the funds and securities of the Corporation;
(b) keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and have
control of all books of account of the Corporation;
(c) cause all moneys and other valuables to be deposited
to the credit of the Corporation in such depositaries as may be
designated by the Board of Directors;
(d) receive, and give receipts for, moneys due and payable
to the Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise
the investment of its funds as ordered or authorized by the Board
of Directors, taking proper vouchers therefor;
(f) render to the Chairman of the Board, if any, the
President, the Board of Directors or any committee thereof,
whenever required, an account of the financial condition of the
Corporation and of his transactions as Treasurer; and
(g) in general, have such other powers and perform such
other duties as usually pertain to the office of Treasurer or as
from time to time may be assigned to him by the Board of
Directors, the Chairman of the Board, if any, or the President.
Section 9. Assistant Treasurers. At the request of the
--------------------
Treasurer or in the case of his absence or inability to act, the
Assistant Treasurer, or if there be more than one, the Assistant
Treasurer designated by the Board of Directors or, in the absence of
such designation, by the Chairman of the Board, if any, or the
President, shall perform all the duties of the Treasurer, and when so
acting, shall have all the powers of and be subject to all the
restrictions upon the Treasurer. In general, each Assistant Treasurer
shall have such other powers and perform such other duties as from
time to time may be assigned to him by the Board of Directors, the
Chairman of the Board, if any, the President or the Treasurer.
Section 10. The Secretary. The Secretary shall:
-------------
(a) keep or cause to be kept, in one or more books
provided for the purpose, the minutes of all meetings of the
Board of Directors, of the committees of the Board of Directors
and of the stockholders;
(b) see that all notices are duly given in accordance with
the provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the
Corporation and affix and attest the seal to all stock certificates
of the Corporation (unless the seal of the Corporation on such
certificates shall be a facsimile, as hereinafter provided) and affix
and attest the seal to all other documents to be executed on behalf
of the Corporation under its seal;
(d) see that the books, reports, statements, certificates
and other documents and records required by law to be kept and
filed are properly kept and filed; and
(e) in general, have such other powers and perform such
other duties as usually pertain to the office of Secretary or as
from time to time may be assigned to him by the Board of
Directors, the Chairman of the Board, if any, or the President.
Section 11. Assistant Secretaries. At the request of the
---------------------
Secretary or in case of his absence or inability to act, the Assistant
Secretary, or if there be more than one, the Assistant Secretary
designated by the Board of Directors or, in the absence of such
designation, by the Chairman of the Board, if any, or the President
shall perform all the duties of the Secretary, and when so acting,
shall have all the powers of and be subject to all the restrictions
upon the Secretary. In general, each Assistant Secretary shall have
such other powers and perform such other duties as from time to time
may be assigned to him by the Board of Directors, the Chairman of the
Board, if any, the President or the Secretary.
Section 12. Officers' Bonds or Other Security. If required
---------------------------------
by the Board of Directors, any officer of the Corporation shall give a
bond for the faithful performance of his duties, for such term and in
such amount and with such surety or sureties as the Board may require.
Section 13. Compensation. The compensation of the officers
------------
of the Corporation for their services as such officers shall be fixed
from time to time by the Board of Directors or a committee of the
Board designated by it, and no officer of the Corporation shall be
prevented from receiving compensation by reason of the fact that he is
also a director of the Corporation.
ARTICLE VI
Checks, Drafts, Bank Accounts, Etc.
----------------------------------
Section 1. Checks, Drafts, etc. All checks, drafts, bills
-------------------
of exchange or other orders for the payment of money out of the funds
of the Corporation, and all notes or other evidences of indebtedness
of the Corporation shall be signed in the name and on behalf of the
Corporation by such person or persons and in such manner as shall from
time to time be authorized by the Board of Directors.
Section 2. Deposits. All funds of the Corporation not
--------
otherwise employed shall be deposited from time to time to the credit
of the Corporation in such banks, trust companies or other
depositaries as the Board of Directors may from time to time designate
or as may be designated by any officer or officers of the Corporation
to whom such power of designation may from time to time be delegated
by the Board of Directors. For the purpose of deposit and for the
purpose of collection for the account of the Corporation, checks,
drafts and other orders for the payment of money which are payable to
the order of the Corporation may be endorsed, assigned and delivered
by any officer or agent of the Corporation.
Section 3. General and Special Bank Accounts. The Board of
---------------------------------
Directors may from time to time authorize the opening and keeping of
general and special bank accounts with such banks, trust companies or
other depositaries as the Board may designate or as may be designated
by any officer or officers of the Corporation to whom such power of
designation may from time to time be delegated by the Board of
Directors. The Board of Directors may make such special rules and
regulations with respect to such bank accounts, not inconsistent with
provisions of these By-Laws, as it may deem expedient.
Section 4. Proxies in Respect of Securities of Other Corporations.
------------------------------------------------------
Unless otherwise provided by resolution adopted by the Board of
Directors, the Chairman of the Board, if any, the President
or any Vice President may from time to time appoint an attorney or
attorneys or agent or agents of the Corporation in the name and on
behalf of the Corporation to cast the votes which the Corporation may
be entitled to cast as the holder of stock or other securities in any
other corporation any of whose stock or other securities may be held
by the Corporation, at meetings of the holders of the stock or other
securities of such other corporation, or to consent in writing in the
name of the Corporation as such holder to any action by such other
corporation, and may instruct the person or persons so appointed as to
the manner of casting such votes or giving such consent, and may
execute or cause to be executed in the name of or on behalf of the
Corporation and under its corporate seal, or otherwise, all such
written proxies or other instruments as he may deem necessary or
proper in the premises.
ARTICLE VII
Shares and Their Transfer; Examination of Books
-----------------------------------------------
Section 1. Stock Certificates. Every holder of stock of
------------------
the Corporation shall be entitled to have a certificate, in such form
as shall be approved by the Board of Directors, certifying the number
and class of shares of stock of the Corporation owned by him. The
certificates representing shares of the respective classes of stock
shall be numbered in order of their issue and shall be signed in the
name of the Corporation by the Chairman of the Board, if any, or the
President or a Vice President and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary and sealed with
the seal of the Corporation (which seal may be a facsimile, engraved
or printed). Any or all the signatures on the certificate may be a
facsimile. In case any officer, transfer agent, or registrar who has
signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the Corporation
with the same effect as if he were such officer, transfer agent, or
registrar at the date of issue.
Section 2. Books of Account and Record of Stockholders.
-------------------------------------------
The books and records of the Corporation may be kept at such places,
within or without the State of Delaware, as the Board of Directors may
from time to time determine. The stock record books and the blank
stock certificate books shall be kept by the Secretary or by any other
officer or agent designated by the Board of Directors.
Section 3. Transfers of Shares. Transfers of shares of
-------------------
stock of the Corporation shall be made on the stock records of the
Corporation only upon authorization by the registered holder thereof,
or by his attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary or with a transfer agent or
transfer clerk, and on surrender of the certificate or certificates
for such shares properly endorsed or accompanied by a duly executed
stock transfer power and the payment of all taxes thereon. Except as
otherwise provided by law, the Corporation shall be entitled to
recognize the exclusive right of a person in whose name any share or
shares stand on the record of stockholders as the owner of such share
or shares for all purposes, including, without limitation, the rights
to receive dividends or other distributions, and to vote as such
owner, and the Corporation may hold any such stockholder of record
liable for calls and assessments and the Corporation shall not be
bound to recognize any equitable or legal claim to or interest in any
such share or shares on the part of any other person whether or not it
shall have express or other notice thereof. Whenever any transfers of
shares shall be made for collateral security and not absolutely, and
both the transferor and transferee request the Corporation to do so,
such fact shall be stated in the entry of the transfer.
Section 4. Regulations. The Board of Directors may make
-----------
such additional rules and regulations, not inconsistent with these
By-Laws, as it may deem expedient concerning the issue, transfer and
registration of certificates for shares of stock of the Corporation.
It may appoint, or authorize any officer or officers to appoint, one
or more transfer agents or one or more transfer clerks and one or more
registrars and may require all certificates for shares of stock to
bear the signature or signatures of any of them.
Section 5. Lost, Destroyed or Mutilated Certificates. The
-----------------------------------------
holder of any certificate representing shares of stock of the
Corporation shall immediately notify the Corporation of any loss,
destruction or mutilation of such certificate, and the Corporation may
issue a new certificate of stock in the place of any certificate
theretofore issued by it which the owner thereof shall allege to have
been lost, stolen or destroyed or which shall have been mutilated, and
the Board of Directors may, in its discretion, require such owner or
his legal representatives to give the Corporation and/or any agent of
the Corporation designated by it a bond in such sum, limited or
unlimited, and in such form and with such surety or sureties as the
Board of Directors in its absolute discretion shall determine, to
indemnify the Corporation and/or such agent against any claim that may
be made against it on account of the alleged loss, theft or
destruction of any such certificate, or the issuance of a new
certificate. Anything herein to the contrary notwithstanding, the
Board of Directors, in its absolute discretion, may refuse to issue
any such new certificate, except pursuant to legal proceedings under
the laws of the State of Delaware.
Section 6. Stockholder's Right of Inspection. Any
---------------------------------
stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper
purpose the Corporation's stock ledger, a list of its stockholders,
and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean a purpose reasonably related
to such person's interest as a stockholder. In every instance where
an attorney or other agent shall be the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of
attorney or such other writing which authorizes the attorney or other
agent to so act on behalf of the stockholder. The demand under oath
shall be directed to the Corporation at its registered office in the
State of Delaware or at its principal place of business.
Section 7. Fixing of Record Date. In order that the
---------------------
Corporation may determine the stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect
of any change, conversion or exchange of stock or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a
record date, which shall not be more than sixty nor less than ten days
before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of
-------- -------
Directors may fix a new record date for the adjourned meeting.
ARTICLE VIII
Dividends
---------
Subject to the provisions of applicable law or of the
Certificate of Incorporation relating thereto, if any, dividends upon
the capital stock of the Corporation may be declared by the Board of
Directors at any regular or special meeting. Dividends may be paid in
cash, in property or in shares of the capital stock of the
Corporation, subject to applicable law and the Certificate of
Incorporation.
Before payment of any dividend, there may be set aside out
of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors from time to time, in its absolute
discretion, think proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for such other purpose
or purposes as the Board of Directors shall determine to be in the
interest of the Corporation, and the Board of Directors may modify or
abolish any such reserve in the manner in which it was created.
ARTICLE IX
Indemnification
---------------
Section 1. Right to Indemnification. The Corporation
------------------------
shall, to the fullest extent permitted by applicable law as then in
effect, indemnify any person (the "Indemnitee") who was or is involved
in any manner (including, without limitation, as a party or a witness)
or was or is threatened to be made so involved in any threatened,
pending or completed investigation, claim, action, suit or proceeding,
whether civil, criminal, administrative or investigative (including,
without limitation, any action, suit or proceeding by or in the right
of the Corporation to procure a judgment in its favor) (a"Proceeding")
by reason of the fact that he is or was a director or officer of the
Corporation, or is or was serving at the request of the Corporation as
a director or officer of another corporation or of a partnership,
joint venture, trust or other enterprise (including, without limitation,
service with respect to any employee benefit plan), whether the basis of
any such Proceeding is alleged action in an official capacity as a
director or officer or in any other capacity while serving as a
director or officer, against all expenses, liability and loss
(including, without limitation, attorneys' fees, judgments, fines,
ERISA excise taxes or penalties and amounts paid or to be paid in
settlement) actually and reasonably incurred by him in
connection with such Proceeding. The right to indemnification
conferred in this Article IX shall include the right to receive
payment in advance of any expenses incurred by the Indemnitee in
connection with such Proceeding, consistent with applicable law as
then in effect. All right to indemnification conferred in this
Article IX, including such right to advance payments and the
evidentiary, procedural and other provisions of this Article IX, shall
be a contract right. The Corporation may, by action of its Board of
Directors, provide indemnification for employees, agents, attorneys
and representatives of the Corporation with up to the same scope and
extent as provided for officers and directors.
Section 2. Insurance, Contracts and Funding. The
--------------------------------
Corporation may purchase and maintain insurance to protect itself and
any person who is, was or may become an officer, director, employee,
agent, attorney or representative of the Corporation or, at the
request of the Corporation, an officer, director, employee, agent,
attorney or representative of another corporation or entity, against
any expense, liability or loss asserted against him or incurred by him
in connection with any Proceeding in any such capacity, or arising out
of his status as such, whether or not the Corporation would have the
power to indemnify him against such expense, liability or loss under
the provisions of Article TENTH of the Certificate of Incorporation or
this Article IX or otherwise. The Corporation may enter into
contracts with any director, officer, employee, agent, attorney or
representative of the Corporation, or any person serving as such at
the request of the Corporation for another corporation or entity, in
furtherance of the provisions of this Article IX and may create a
trust fund, grant a security interest or use other means (including,
without limitation, a letter of credit) to ensure the payment of such
amounts as may be necessary to effect indemnification of any person
entitled thereto.
Section 3. Indemnification; Not Exclusive Right. The right
------------------------------------
of indemnification provided in this Article IX shall not be exclusive
of any other rights to which any person seeking indemnification may
otherwise be entitled under any provision of the Certificate of
Incorporation or By-Laws or agreement or otherwise. The provisions of
this Article IX shall inure to the benefit of the heirs and legal
representatives of any person entitled to indemnity under this Article
IX and shall be applicable to all Proceedings, whether arising from
acts or omissions occurring before or after the adoption of this
Article IX. No amendment or repeal of any provision of this Article
IX shall remove, abridge or adversely affect any right of
indemnification or any other benefits of the Indemnitee under the
provisions of this Article IX with respect to any Proceeding involving
any act or omission which occurred prior to such amendment.
Section 4. Advancement of Expenses; Procedures;
------------------------------------
Presumptions and Effect of Certain Proceedings; Remedies. In
- --------------------------------------------------------
furtherance, but not in limitation, of the provisions of the
Certificate of Incorporation or the foregoing provisions of this
Article IX, the following procedures, presumptions and remedies shall
apply with respect to advancement of expenses and the right to
indemnification under the Certificate of Incorporation or this Article
IX:
(a) Advancement of Expenses. All reasonable expenses
-----------------------
incurred by or on behalf of the Indemnitee in connection with any
Proceeding shall be advanced to the Indemnitee by the Corporation
within 20 days after the receipt by the Corporation of a
statement or statements from the Indemnitee requesting such
advance or advances from time to time, whether prior to or after
final disposition of such Proceeding. Such statement or
statements shall reasonably evidence the expenses incurred by the
Indemnitee and, if required by law at the time of such advance,
shall include or be accompanied by an undertaking by or on behalf
of the Indemnitee to repay the amounts advanced if it should
ultimately be determined that the Indemnitee is not entitled to
be indemnified against such expense pursuant to this Article IX.
(b) Procedure for Determination of Entitlement to Indemnification.
-------------------------------------------------------------
(i) To obtain indemnification, an Indemnitee shall
submit to the President or Secretary of the Corporation a written
request, including such documentation and information as is
reasonably available to the Indemnitee and reasonably necessary
to determine whether and to what extent the Indemnitee is
entitled to indemnification (the "Supporting Documentation").
The determination of the Indemnitee's entitlement to
indemnification shall be made not later than 60 days after
receipt by the Corporation of the written request for
indemnification together with the Supporting Documentation. The
President or Secretary of the Corporation shall, promptly upon
receipt of such a request for indemnification, advise the Board
of Directors in writing that the Indemnitee has requested
indemnification.
(ii) The Indemnitee's entitlement to indemnification
shall be determined in one of the following ways: (A) by a
majority vote of the Disinterested Directors (as hereinafter
defined) (or the Disinterested Director, if only one); (B) by a
written opinion of Independent Counsel (as hereinafter defined)
if (x) a Change of Control (as hereinafter defined) shall have
occurred and the Indemnitee so requests or (y) there is no
Disinterested Director or a majority of the Disinterested
Directors (or the Disinterested Director, if only one) so
directs; (C) by the stockholders of the Corporation (but only if
a majority of the Disinterested Directors (or the Disinterested
Director, if only one) determines that the issue of entitlement
to indemnification should be submitted to the stockholders for
their determination); or (D) as provided in Section 4(c) of this
Article IX.
(iii) In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to
Section 4(b)(ii) of this Article IX, a majority of the
Disinterested Directors (or the Disinterested Director, if only
one) shall select the Independent Counsel, but only an
Independent Counsel to which the Indemnitee does not reasonably
object; provided, however, that if a Change of Control shall have
-------- -------
occurred, the Indemnitee shall select such Independent Counsel,
but only an Independent Counsel to which the Board of Directors
does not reasonably object.
(c) Presumptions and Effect of Certain Proceedings.
----------------------------------------------
Except as otherwise expressly provided in this Article IX, the
Indemnitee shall be presumed to be entitled to indemnification
upon submission of a request for indemnification together with
the Supporting Documentation in accordance with Section 4(b)(i)
of this Article IX, and thereafter the Corporation shall have the
burden of proof to overcome that presumption in reaching a
contrary determination. In any event, if the person or persons
empowered under Section 4(b) of this Article IX to determine
entitlement to indemnification shall not have been appointed or
shall not have made a determination within 60 days after receipt
by the Corporation of the request therefor together with the
Supporting Documentation, the Indemnitee shall be deemed to be
entitled to indemnification. With regard to the right to
indemnification for expenses, if and to the extent that the
Indemnitee has been successful on the merits or otherwise in any
Proceeding, or if and to the extent that the Indemnitee was not a
party to the Proceeding or if a Proceeding was terminated without
a determination of liability on the part of the Indemnitee with
respect to any claim, issue or matter therein or without any
payments in settlement or compromise being made by the Indemnitee
with respect to a claim, issue or matter therein, the Indemnitee
shall be deemed to be entitled to indemnification, which
entitlement shall not be diminished by any determination which
may be made pursuant to Sections (4)(b)(ii)(A), (B) or (C). In
either case, the Indemnitee shall be entitled to such indemnification,
unless (A) the Indemnitee misrepresented or failed to
disclose a material fact in making the request for
indemnification or in the Supporting Documentation or (B) such
indemnification is prohibited by law, in either case as finally
determined by adjudication or, at the Indemnitee's sole option,
arbitration (as provided in Section 4(d)(i) of this Article IX).
The termination of any Proceeding described in Section 1 of this
Article IX, or of any claim, issue or matter therein, by
judgment, order, settlement or conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, adversely
---- ----------
affect the right of the Indemnitee to indemnification or create
any presumption with respect to any standard of conduct or belief
or any other matter which might form a basis for a determination
that the Indemnitee is not entitled to indemnification.
(d) Remedies of Indemnitee.
----------------------
(i) In the event that a determination is made
pursuant to Section 4(b) of this Article IX that the Indemnitee
is not entitled to indemnification under this Article IX, (A) the
Indemnitee shall be entitled to seek an adjudication of his
entitlement to such indemnification either, at the Indemnitee's
sole option, in (x) an appropriate court of the State of Delaware
or any other court of competent jurisdiction or (y) an
arbitration to be conducted by three arbitrators (or, if the
dispute involves less than $100,000, by a single arbitrator)
pursuant to the rules of the American Arbitration Association;
(B) any such judicial proceedings or arbitration shall be de novo
and the Indemnitee shall not be prejudiced by reason of such
adverse determination; and (C) in any such judicial proceeding or
arbitration the Corporation shall have the burden of proof that
the Indemnitee is not entitled to indemnification under this
Article IX.
(ii) If a determination shall have been made or deemed
to have been made, pursuant to Section 4(b) or (c) of this
Article IX, that the Indemnitee is entitled to indemnification,
the Corporation shall be obligated to pay the amounts
constituting such indemnification within five days after such
determination has been made or deemed to have been made and shall
be conclusively bound by such determination, unless (A) the
Indemnitee misrepresented or failed to disclose a material fact
in making the request for indemnification or in the Supporting
Documentation or (B) such indemnification is prohibited by law,
in either case as finally determined by adjudication or, at the
Indemnitee's sole option, arbitration (as provided in Section
4(d)(i) of this Article IX). In the event that (C) advancement
of expenses is not timely made pursuant to Section 4(a) of this
Article IX or (D) payment of indemnification is not made within
five days after a determination of entitlement to indemnification
has been made or deemed to have been made pursuant to Section
4(b) or (c) of this Article IX, the Indemnitee shall be entitled
to seek judicial enforcement of the Corporation's obligation to
pay to the Indemnitee such advancement of expenses or
indemnification. Notwithstanding the foregoing, the Corporation
may bring an action, in an appropriate court in the State of
Delaware or any other court of competent jurisdiction, contesting
the right of the Indemnitee to receive indemnification hereunder
due to the occurrence of an event described in subclause (A) or
(B) of this clause (ii) (a "Disqualifying Event"), provided,
however, that if the Indemnitee shall elect, at his sole option,
that such dispute shall be determined by arbitration (as provided
in Section 4(d)(i) of this Article IX), the Corporation shall
proceed by such arbitration. In any such enforcement or other
proceeding or action in which whether a Disqualifying Event has
occurred is an issue, the Corporation shall have the burden of
proving the occurrence of such Disqualifying Event.
(iii) The Corporation shall be precluded from asserting
in any judicial proceeding or arbitration commenced pursuant to
this Section 4(d) that the procedures and presumptions of this
Article IX are not valid, binding and enforceable and shall
stipulate in any such court or before any such arbitrator or
arbitrators that the Corporation is bound by all the provisions
of this Article IX.
(iv) In the event that the Indemnitee, pursuant to
this Article IX, seeks a judicial adjudication of or an award in
arbitration to enforce his rights under, or to recover damages
for breach of, this Article IX, or is otherwise involved in any
adjudication or arbitration with respect to his right to
indemnification, the Indemnitee shall be entitled to recover from
the Corporation, and shall be indemnified by the Corporation
against, any expenses actually and reasonably incurred by him if
the Indemnitee prevails in such judicial adjudication or
arbitration. If it shall be determined in such judicial
adjudication or arbitration that the Indemnitee is entitled to
receive part but not all of the indemnification or advancement of
expenses sought, the expenses incurred by the Indemnitee in
connection with such judicial adjudication or arbitration shall
be prorated accordingly.
(e) Definitions. For purposes of this Section 4:
-----------
(i) "Change in Control" means a change in control of
the ultimate corporate parent of the Corporation of a nature that
would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation l4A promulgated under the Securities
Exchange Act of 1934 (the "Act"), as such item was in effect on
November 1, 1992, whether or not the Corporation is then subject
to such reporting requirement; provided that, without limitation,
such a change in control shall be deemed to have occurred if (A)
any "person" (as such term is used in Sections 13(d) and 14(d) of
the Act) is or becomes the "beneficial owner" (as defined in Rule
l3d-3 under the Act), directly or indirectly, of securities of
the Corporation representing 20 percent or more of the combined
voting power of the Corporation's then outstanding securities
without the prior approval of at least two-thirds of the members
of the Board of Directors in office immediately prior to such
acquisition; (B) the Corporation is a party to a merger,
consolidation, sale of assets or other reorganization, or a proxy
contest, as a consequence of which members of the Board of
Directors in office immediately prior to such transaction or
event constitute less than a majority of the Board of Directors
thereafter; or (C) during any period of two consecutive years,
individuals who at the beginning of such period constituted the
Board of Directors (including for this purpose any new director
whose election or nomination for election by the Corporation's
stockholders was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the
beginning of such period) cease for any reason to constitute at
least a majority of the Board of Directors.
(ii) "Disinterested Director" means a director of the
Corporation who is not or was not a material party to the Proceeding
in respect of which indemnification is sought by the Indemnitee.
(iii) "Independent Counsel" means a law firm or a
member of a law firm that neither presently is, nor in the past
five years has been, retained to represent: (A) the Corporation
or the Indemnitee in any matter or (B) any other party to the
Proceeding giving rise to a claim for indemnification under this
Article IX. Notwithstanding the foregoing, the term "Independent
Counsel" shall not include any person who, under the applicable
standards of professional conduct then prevailing under the law
of the State of Delaware, would have a conflict of interest in
representing either the Corporation or the Indemnitee in an
action to determine the Indemnitee's rights under this Article IX.
Section 5. Acts of Disinterested Directors. Disinterested
-------------------------------
Directors considering or acting on any indemnification matter under
this Article IX or otherwise may consider or take action as the Board
of Directors or may consider or take action as a committee or
individually or otherwise. In the event Disinterested Directors
consider or take action as the Board of Directors, one-third of the
total number of directors shall constitute a quorum.
Section 6. Severability. If any provision or provisions of
------------
this Article IX shall be held to be invalid, illegal or unenforceable
for any reason whatsoever: (i) the validity, legality and
enforceability of the remaining provisions of this Article IX
(including, without limitation, all portions of any paragraph of this
Article IX containing any such provision held to be invalid, illegal
or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby;
and (ii) to the fullest extent possible, the provisions of this
Article IX (including, without limitation, all portions of any
paragraph of this Article IX containing any such provision held to be
invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to
the intent manifested by the provision held invalid, illegal or
unenforceable.
ARTICLE X
Fiscal Year
-----------
The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.
ARTICLE XI
Seal
----
The Board of Directors shall provide a corporate seal, which
shall be circular in form and bear the name of the Corporation and the
words and figures denoting its organization under the laws of the
State of Delaware and the year thereof.
ARTICLE XII
Amendments
----------
Except as otherwise provided in the Certificate of
Incorporation, these By-Laws may be amended or repealed, or new
By-Laws may be adopted only by action of not less than the holders of a
majority of the shares of stock outstanding and entitled to vote
thereon or a majority of the entire Board of Directors.
<PAGE>
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
PROXY--Annual Meeting of Stockholders--March 28, 1997
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, a stockholder of TOUCHSTONE APPLIED SCIENCE
ASSOCIATES, INC., a Delaware corporation (the "Company"), does hereby
appoint ANDREW L. SIMON and LINDA G. STRALEY, and each of them, the
true and lawful attorneys and proxies, with full power of
substitution, for and in the name, place and stead of the undersigned,
to vote, as designated below, all of the shares of stock of the
Company which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Stockholders of the Company to be
held at the headquarters of the Company at Fields Lane, Brewster, New
York 10509, on March 28, 1997, at 9:00 a.m., local time, and at any
adjournment or adjournments thereof.
___
| | Please mark
| X | votes as in
|___| this example
UNLESS OTHERWISE DIRECTED, THIS PROXY WILL BE VOTED IN ACCORDANCE
WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS.
1. ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES.
NOMINEES: Michael D. Beck, Steven R. Berger, Stephen H. Ivens,
Michael Milone, Andrew L. Simon and Linda G. Straley
___ ___
FOR ALL | | WITHHELD | |
NOMINEES | | FROM ALL | |
|___| NOMINEES |___|
For, except vote withheld from the following nominee(s):
___
| |
| |
|___| _____________________________________________
2. APPROVAL OF THE ADOPTION OF THE AMENDMENT OF PROVISIONS OF THE
BY-LAWS RELATING TO STOCKHOLDER MEETINGS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL.
___ ___ ___
| | | | | |
FOR | | AGAINST | | ABSTAIN | |
|___| |___| |___|
3. APPROVAL OF THE ADOPTION OF THE AMENDMENT OF PROVISIONS OF THE
BY-LAWS RELATING TO THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL.
___ ___ ___
| | | | | |
FOR | | AGAINST | | ABSTAIN | |
|___| |___| |___|
4. APPROVAL OF THE ADOPTION OF THE AMENDMENT OF PROVISIONS OF THE
BY-LAWS RELATING TO OFFICERS AND OTHER CORPORATE MATTERS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL.
___ ___ ___
| | | | | |
FOR | | AGAINST | | ABSTAIN | |
|___| |___| |___|
5. APPROVAL OF THE ADOPTION OF THE AMENDMENT OF PROVISIONS OF THE
BY-LAWS RELATING TO INDEMNIFICATION OF OFFICERS AND DIRECTORS OF
THE COMPANY
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL.
___ ___ ___
| | | | | |
FOR | | AGAINST | | ABSTAIN | |
|___| |___| |___|
6. APPROVAL OF THE ADOPTION OF THE AMENDMENT OF PROVISIONS OF THE
BY-LAWS RELATING TO THE FURTHER AMENDMENT OF THE BY-LAWS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL.
___ ___ ___
| | | | | |
FOR | | AGAINST | | ABSTAIN | |
|___| |___| |___|
7. RATIFICATION OF THE COMPANY'S INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION.
___ ___ ___
| | | | | |
FOR | | AGAINST | | ABSTAIN | |
|___| |___| |___|
8. TO VOTE WITH DISCRETIONARY AUTHORITY WITH RESPECT TO ALL OTHER
MATTERS WHICH MAY COME BEFORE THE MEETING.
The undersigned hereby revokes any proxy or proxies heretofore given
and ratifies and confirms all that the proxies appointed hereby, or
either one of them, or their substitutes, may lawfully do or cause to
be done by virtue hereof. Both of said proxies or their substitutes
who shall be present and act at the meeting, or if only one is present
and acts, then that one, shall have and may exercise all of the powers
hereby granted to such proxies. The undersigned hereby acknowledges
receipt of a copy of the Notice of Annual Meeting and Proxy Statement,
both dated March 3, 1997, and a copy of the Annual Report for the
fiscal year ended October 31, 1996.
___
| |
| | MARK HERE FOR ADDRESS CHANGE AND INDICATE CHANGE:
|___|
Signature:_________________________________________ Date________________
Signature:_________________________________________ Date________________
NOTE: Your signature should appear the same as your name appears
hereon. In signing as attorney, executor, administrator,
trustee or guardian, please indicate the capacity in which
signing. When signing as joint tenants, all parties in the
joint tenancy must sign. When a proxy is given by a
corporation, it should be signed by an authorized officer
and the corporate seal affixed. No postage is required if
returned in the enclosed envelope and mailed in the United
States.
