As filed with the Securities and Exchange Commission on May 22, 1997.
Registration No. 333-
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
---------------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------------------------
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-2846796
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
-----------------------------------
FIELDS LANE
P.O. BOX 382
BREWSTER, NEW YORK 10509
(914) 277-8100
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
-----------------------------------
ANDREW L. SIMON
PRESIDENT
Touchstone Applied Science Associates, Inc.
Fields Lane, P.O. Box 382, Brewster, New York 10509
(914) 277-8100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
STEVEN R. BERGER, ESQ.
Christy & Viener
620 Fifth Avenue
New York, New York 10020
------------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
---------------------------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the
earlier registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Title of each
class of Amount Proposed maximum Proposed maximum Amount of
securities to to be offering price per aggregate offering registration
be registered registered unit(1) price(1) fee(1)
<S> <C> <C> <C> <C>
Common Stock
($.0001
par value) 850,000 $0.63 $535,500 $162.28
<FN>
(1) Estimated solely for purposes of calculating the registration fee on the
basis of the last reported sale price of the Common Stock on May 21,
1997 on the Nasdaq SmallCap Market in accordance with Rule 457(c)
under the Securities Act of 1933.
</FN>
</TABLE>
A PORTION OF THE SHARES COVERED BY THIS REGISTRATION STATEMENT ARE ISSUABLE
PURSUANT TO OUTSTANDING WARRANTS, THE TERMS OF WHICH PROVIDE FOR A CHANGE IN
THE NUMBER OF SHARES ISSUABLE THEREUNDER IN THE EVENT OF A STOCK SPLIT AND IN
CERTAIN OTHER EVENTS. PURSUANT TO RULE 416(B) UNDER THE SECURITIES ACT OF
1933, ANY GREATER OR LESSER NUMBER OF SHARES RESULTING FROM ANY ADJUSTMENT OF
THE NUMBER OF SHARES ISSUABLE PURSUANT TO SUCH WARRANTS ARE COVERED BY THIS
REGISTRATION STATEMENT.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE> 1
REGISTRATION NO. 333-
PROSPECTUS
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
850,000 SHARES OF COMMON STOCK
This Prospectus relates to up to 850,000 shares (the "Shares") of the
Common Stock, par value $.0001 per share (the "Common Stock"), of Touchstone
Applied Science Associates, Inc. (the "Company" or "TASA") to be sold from time
to time by the holders thereof (the "Selling Stockholders") on the NASDAQ
SmallCap Market ("NASDAQ") or otherwise at prices then attainable, less
ordinary brokers' commissions and dealers' discounts, as applicable.
The Shares were issued to the Selling Stockholders or are issuable upon the
exercise of certain warrants (the "Warrants") issued by the Company to some of
the Selling Stockholders. See "The Selling Stockholders" and "Plan of
Distribution".
The Shares have been approved for listing on NASDAQ, subject to
notice of issuance. TASA's Common Stock trades on NASDAQ under the trading
symbol TASA. The last reported sale price of the Company's Common Stock on
NASDAQ on May 21, 1997 was $0.63.
The Shares are being offered solely for the account of the Selling
Stockholders and the Company will receive no part of the proceeds of this
Offering, other than proceeds from the payment of the exercise price of the
Warrants. See "Use of Proceeds" and "The Selling Stockholders".
THE COMPANY'S SECURITIES ARE SPECULATIVE IN THAT THEY INVOLVE A HIGH
DEGREE OF RISK AND SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO
LOSE THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" FOR A DISCUSSION OF MATTERS
WHICH SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THESE SECURITIES.
<TABLE>
<CAPTION>
Underwriting
Price to Public discounts and Proceeds to issuer or
commissions other persons
<S> <C> <C> <C>
Per Share $0.63(1) -0- $0.63(1,2)
Total(3) $535,500(1) -0- $535,500(1,2)
<FN>
1 Estimated, based upon the last reported sale price of the Company's Common
Stock on May 21, 1997, the date of this Prospectus.
2 The Company will receive no part of the proceeds of this Offering, other
than proceeds from the payment of the exercise price of the Warrants.
250,000 Warrants are exercisable at a price of $0.469 per share, equaling
$117,250.00 of proceeds to the Company; 250,000 Warrants are exercisable
at a price of $0.50 per share, equaling $125,000.00 of proceeds to the
Company.
3 The following are the expenses totaling $24,163 payable by the Company in
connection with the issuance and distribution of the Shares: Securities
and Exchange Commission registration fee - $163; NASDAQ listing fees -
$8,500; fees and expenses of accountants - $1,000; fees and expenses of
counsel - $12,500; blue sky fees and expenses - $0; printing expenses -
$1,000; miscellaneous - $1,000. All the amounts shown are estimates,
except for the Securities and Exchange Commission registration fee and
the NASDAQ listing fees.
------------------------------
</FN>
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (the "Commission") OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------
The date of this Prospectus is ____________, 1997
<PAGE> 2
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS ON BEHALF OF THE COMPANY
NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER
THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR THE SOLICITATION OF AN
OFFER TO BUY, ANY SECURITIES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO
WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports and other information with the Securities
and Exchange Commission (the "Commission"). Reports, proxy statements and
other information filed by the Company can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such material can
also be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a Web site (located at http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission. The Company's
Common Stock is listed on NASDAQ and reports and other information concerning
the Company can be inspected at NASDAQ.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed with the Commission by the
Company (File Number 0-20303) pursuant to the Exchange Act are incorporated by
reference in this Prospectus: the Company's Annual Report on Form 10-KSB for
the fiscal year ended October 31, 1996, its Quarterly Report on Form 10-QSB for
the fiscal quarter ended January 31, 1997, its Current Reports on Form 8-K
filed on December 20, 1996, January 30, 1997 and April 15, 1997. The
description of the Company's Common Stock set forth in the Company's
Registration Statement on Form 8-A, dated May 28, 1992, filed under the
Exchange Act, including any subsequent amendment or report filed for the
purpose of updating such description, is also incorporated herein by
reference.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of the offering of the Shares covered by this Prospectus shall
be deemed to be incorporated by reference into this Prospectus and to be a part
of this Prospectus from the respective dates of the filing of such documents.
Any statement contained in a document incorporated herein by reference shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained in this Prospectus or in any other
subsequently filed document which also is or is deemed to be incorporated
herein by reference modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
This Prospectus incorporates certain documents by reference which
are not presented herein or delivered herewith. Copies of such documents
(other than exhibits not specifically incorporated by reference into the text
of such documents) are available, without charge, to each person to whom this
Prospectus is delivered, on the written or oral request of such person, to
Touchstone Applied Science Associates, Inc., Fields Lane, P.O. Box 382,
Brewster, New York 10509, Attention: Secretary (telephone (914) 278-7100).
<PAGE> 3
IN CONNECTION WITH THIS OFFERING, CERTAIN SELLING STOCKHOLDERS MAY
ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK OF THE COMPANY
ON NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "PLAN OF
DISTRIBUTION".
UNTIL __________________, 1997, ALL DEALERS EFFECTING TRANSACTIONS IN
THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION,
MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION
OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
TABLE OF CONTENTS
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . .2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. . . . . . . . .2
SUMMARY INFORMATION . . . . . . . . . . . . . . . . . . . . . .4
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . .5
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . 15
THE SELLING STOCKHOLDERS . . . . . . . . . . . . . . . . . . . 15
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . 16
SELECTED HISTORICAL FINANCIAL INFORMATION. . . . . . . . . . . 17
LEGAL OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . 18
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
<PAGE> 4
SUMMARY INFORMATION
The following summary is qualified in its entirety by the detailed
information and financial statements (including the notes thereto) appearing
elsewhere in this Prospectus.
THE COMPANY
Touchstone Applied Science Associates, Inc. (the "Company" or "TASA")
designs, develops, publishes and distributes educational tests, instructional
materials, and computer software to elementary and secondary schools, colleges
and universities.
Management believes that Degrees of Reading Power and Degrees of Word
Meaning tests are widely recognized as having advanced the state-of-the-art in
educational assessment. From descriptions contained in Tests in Print published
by Buros Institute of Mental Measurements, which endeavors to cover all tests
published in the United States, it is management's belief that DRP tests were
the first, and remain the only, commercial standardized tests whose results can
be directly interpreted with respect to the textual materials that students
can read. Management further believes that DRP tests are the only existing
instruments that can measure progress toward one or more standards or
requirements that are established by examining how well prose in books or other
sources must be comprehended for particular purposes. As a result, DRP tests
are especially useful in accountability assessments and in measuring literacy.
Management believes that DWM tests are the first measures of the size of a
student's reading vocabulary.
Certain specially prepared secure forms of the Company's DRP tests are
licensed for one-time or limited use by states and other forms listed in the
Company's catalog are licensed for an indefinite period of time to school
districts throughout the United States and Canada. In accord with the United
States Copyright Office's definition, secure test forms are composed of text
and test items that have never before been administered and are typically used
in only one test administration before they are destroyed. The Company
provides secure tests annually for administration in certain grades by the
states of Connecticut, New York and Virginia. The Company also sells its
tests through catalogs to school districts. The Company believes that
approximately four million DRP tests, for which the Company is the sole
source proprietor, are administered each year in states, school districts,
college and university testing programs. See "Business".
The Company presently maintains its corporate offices at Fields
Lane, P.O. Box 382, Brewster, New York 10509; and its telephone number is
914-277-8100.
THE SELLING STOCKHOLDERS
This Prospectus relates to the registration of the resale of an
aggregate of 850,000 shares of the Company's Common Stock as follows:
(a) 150,000 shares which were issued to Michael D. Beck and his immediate
family in January 1997 pursuant to the completion of the Company's
acquisition of Beck Evaluation & Testing Associates, Inc. Michael D. Beck
is currently a director and Vice President of the Company; (b) 100,000 shares
issued by the Company to Paris Group, Ltd. ("Paris Group"), a financial
consultant retained by the Company; (c) 100,000 shares issued by the Company
to Meyers Pollock Robbins, Inc. ("Meyers Pollock"), a financial consultant
retained by the Company, and 250,000 shares issuable upon the exercise of
Warrants issued by the Company to Meyers Pollock; and (d) 250,000 shares
issuable upon the exercise of Warrants issued by the Company to Jericho State
Capital Corp. of Florida ("Jericho"), a financial consultant retained by the
Company. Meyers Pollock may act as a market maker in the Company's securities,
and Paris Group, Meyers Pollock and Jericho provide financial consulting and
advisory services to the Company pursuant to separate consulting agreements.
Paris Group's consulting agreement expires in 2001, subject to earlier
termination by the Company. Meyers Pollock's consulting agreement expires in
1999. Jericho's consulting agreement has an initial term of one year, subject
to automatic renewal. Paris Group is located at 14 Fourth Street,
Farmingville, New York 11738, telephone: (516) 736-2130. Meyers Pollock is
located at One World Trade Center, Suite 9151, New York, New York 10048,
telephone (212) 323-3000. Jericho is located at 2500 Military Trail, Suite 240,
Boca Raton, Florida 33431, telephone: (561) 989-0091. Michael Beck and his
immediate family, Paris Group, Meyers Pollock and Jericho are collectively
referred to herein as the "Selling Stockholders". See "The Selling
Stockholders" and "Certain Relationships and Related Transactions".
<PAGE> 5
RISK FACTORS
The Shares offered hereby are speculative and involve a high degree
of risk. An investment in the Shares is suitable only for persons who can
afford to sustain the loss of their entire investment. Prospective investors
should carefully consider the following factors in addition to those described
elsewhere in this Prospectus before making an investment decision.
NO DIVIDENDS. The payment by the Company of dividends, if any, in
the future, rests within the discretion of its Board of Directors and will
depend, among other things, upon the Company's earnings, its capital
requirements and its financial condition as well as other relevant factors.
The Company has no present intention of paying any cash dividends on its
Common Stock in the foreseeable future, as it intends to use its earnings,
if any, to generate growth.
PRODUCT RECALLS. The Company uses a sophisticated technology to
produce its tests. Within the state-of-the-art, the Company warrants to
replace, at no additional charge, any test form which is not in accord with
the specifications described in its manuals. To date, the Company has not had
to provide any such replacement tests. Substantial product recalls could have
a material adverse effect on the Company's operations. In addition, a claimed
defect in the test or the failure of the Company's test to perform for the use
which the Company specifies may subject the Company to claims of liability
for damages.
NO FORMAL FEASIBILITY STUDIES. The Company intends to rely on the
judgment and conclusions of its management and their expertise. No formal
marketing studies have been done by the Company and no reports from outside
agencies have been obtained, nor does the Company intend to do or obtain such
studies.
RAPID POLICY AND TECHNOLOGICAL CHANGES. The field of which the
Company's products are a part has been characterized in recent years by
significant and rapid policy and technological changes. The ability of the
Company to operate profitably in the future will depend in part upon its
ability to develop and maintain a technically competent research staff and its
ability to adapt to changes in the field. It is anticipated that, in the
future, changes and modifications will be required in order to keep pace with
changes in the field. There can be no assurance that competitors will not
develop technology which will render the Company's products unmarketable or
obsolete.
PATENTS, COPYRIGHTS, TRADEMARKS AND TRADE SECRETS. The United
States Patent Office issued a patent (No. 4,943,239) to Bertram L. Koslin,
the Company's then President, on July 24, 1990, for the Test Answer and Score
Sheet Device. Pursuant to an agreement between the Company and Mr. Koslin,
all rights, title and interest to the Test Answer and Score Sheet were assigned
to the Company. The United States Copyright Office has issued copyrights to
the Company. There is no assurance that the patent and copyrights issued to
the Company are enforceable and there is no assurance that the Company will
derive any competitive advantage therefrom. While the patent and copyrights
are deemed important to the Company, they are not considered essential to the
success of the Company's business. The issuance of the patent and
copyrights may be insufficient to prevent competitors from designing around
the patented or copyrighted aspects. In addition, there is no assurance the
Company's product will not infringe on patents or copyrights owned by others,
licenses to which may not be available to the Company, or that competitors
will not develop functionally similar products outside the protection of the
patent. Moreover, there is no assurance that the validity of the patent and
copyrights in the future will be sustained if judicially tested. See "Business
- --Patents, Copyrights, Trademarks and Trade Secrets".
<PAGE> 6
GOVERNMENT REGULATIONS. The degree of government regulations to be
imposed upon the Company and the field in which the Company operates is
uncertain at this time.
Under Title 1 of the 1994 Improving America's Schools Act (IASA),
schools that serve large numbers of children from low income families receive
financial assistance from the Federal Government to expand and improve their
educational programs to meet the needs of educationally deprived students.
Title 1 regulations include a requirement that schools receiving Title 1
funds must evaluate student growth or progress in reading. It is management's
belief that State Education Authorities (SEAs) find DRP test results to
be in accord with the regulations for Title 1, as DRP tests are used by schools
to evaluate Federally-supported Title 1 programs.
If post-secondary institutions enroll students who have not graduated
from high school, or obtained their GED certificate, the United States
Department of Education requires the students to pass an approved "ability-
to-benefit" test before the institution can grant Federal financial
assistance to the students. All forms of DRP tests were approved in June 1991
for "ability-to-benefit" determinations. According to new regulations issued
by the Department of Education, only test batteries that generate both verbal
and quantitative scores will be approved. The Company does not currently
have any tests that measure quantitative abilities. Therefore, as of October
25, 1996, DRP tests may not be used by post-secondary institutions for
"ability-to-benefit" determinations.
Management knows of no other applicable government regulations or of
any other instance in which DRP tests failed to meet government regulations.
The Company's management believes it may be necessary to obtain other
government approvals for its products including the DWM tests. If necessary, a
portion of the Company's revenues may be directed toward obtaining such
approvals, and any such expenditures will occur without the assurance that
approvals will be achieved. Additionally, the extent of potentially adverse
government regulations which might arise from future legislative or
administrative action cannot be predicted. While the Company knows of no
government regulations other than those referenced above, it would represent
a serious problem should the Company's tests fail to meet any government
regulation. Such failure would mean that the Company's tests could not be
used in any program governed by any such regulation. See "Business--
Government Regulation".
COMPETITION. Success in the industry will be based on scientific
and technological superiority, service, product support, the availability of
patent protection, access to adequate capital, the ability to successfully
develop and market products and processes and the ability to obtain government
approvals. There is intense competition in the industry and there are both
domestic and foreign companies which may be deemed dominant competitors.
There can be no assurance that the features of the Company's products and/or
its ability to provide quality services will permit the Company to compete
successfully in its designated marketplace.
The Company is subject to competition from various sources. It is
anticipated that the Company's principal competition comes from established
profit and non-profit companies in the testing business and testing departments
within certain states and school districts, all of which have considerably
larger and greater financial and human resources and marketing capabilities.
See "Business--Competition".
ADDITIONAL FINANCING. The Company has traditionally generated
sufficient funds from operations to meet growth objectives. The accelerated
rate of fulfilling these objectives (which are subject to annual revision)
depends upon the net proceeds from the sale of securities. Additional
financing may be required for further expansion for operational expenditures.
If additional financing is required, there can be no assurance that such
financing will be available, or that it can be obtained on terms satisfactory
to the Company.
DEPENDENCE ON KEY PERSONNEL. The business of the Company will be
largely dependent upon the active participation of its executive officers and
directors, Andrew L. Simon, Linda G. Straley, Stephen H. Ivens, Michael D.
Beck and Michael Milone. The loss or unavailability to the Company of any of
such individuals could have a material adverse effect on the Company's
business prospects and potential earning capacity. If necessary, the Company
has several stock option plans designed to attract additional qualified
individuals to employment or association with the Company.
<PAGE> 7
EFFECTIVE CONTROL BY MANAGEMENT. As of April 30, 1997, there
were 8,139,322 shares of Common Stock outstanding and 1,500 shares of Series
A Preferred Stock, par value $.0001 per share (the "Preferred Stock"),
outstanding. Each share of Common Stock is entitled to one vote per share and
each share of Preferred Stock is entitled to 3,000 votes per share.
Consequently, there are an aggregate of 12,639,322 eligible votes for the
Company's outstanding capital stock.
All of the shares of Common Stock and Preferred Stock owned by
Andrew L. Simon, Linda G. Straley and Stephen H. 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. 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 47.2% of all eligible
votes.
SHARES AVAILABLE FOR RESALE. 5,100,000 shares of the total of the
Company's issued and outstanding stock were originally issued as "restricted
securities" as that term is defined under Rule 144 promulgated under the
Securities Act of 1933, as amended (the "Act"), and in the future only may be
sold in compliance with Rule 144 of the Act, or pursuant to a Registration
Statement filed under the Act. Rule 144 provides, in essence, that a person
holding restricted securities for a period of one (1) year may sell those
securities in unsolicited brokerage transactions or in transactions with a
market-maker, in an amount up to one (1%) percent of the Company's outstanding
Common Stock every three (3) months. Additionally, Rule 144 requires that an
issuer of securities make available adequate current public information with
respect to the issuer. Rule 144 also permits, under certain circumstances,
the sale of shares by a person who is not an affiliate of the Company and who
has satisfied a two-year holding period without any quantity limitation and
whether or not there is adequate current public information available.
Investors should be aware that sales under Rule 144, or pursuant to a
Registration Statement filed under the Act, may have a depressive effect on
the market price of the Company's securities in any market that may develop
for such shares. As of March 31, 1997, 1,463,055 shares have been outstanding
for more than one year and could be publicly sold in accordance with Rule 144.
POSSIBLE ISSUANCE OF ADDITIONAL SHARES. The Company's Board of
Directors has the power to issue any or all of the Company's additional Common
Stock and Preferred Stock without stockholder approval. Management presently
anticipates that it may choose to issue such shares to acquire business
interests or other types of property in the future, although the Company
presently has no commitments, contracts or intentions to issue any additional
shares. Potential investors should be aware that any such stock issuances may
result in a reduction of the book value or market price, if any, of the
outstanding shares of Common Stock. If the Company issues additional shares,
such issuance will reduce the proportionate ownership and voting power of each
other stockholder. Further, any new issuance of shares may result in a change
in control of the Company.
The ability of the Board of Directors to issue additional shares
without further stockholder action might serve as an anti-takeover device,
notwithstanding the desire of stockholders to change management or accept a
takeover offer. The ability of the Board of Directors to issue new shares may
make the cost of a takeover prohibitively expensive to anyone attempting to
acquire the Company.
BROKER-DEALER SALES OF THE COMPANY'S COMMON STOCK. The Company's
securities may be covered by a Commission rule that imposes additional sales
practice requirements on broker-dealers who sell such securities to persons
other than established customers and accredited investors (generally
institutions with assets in excess of $5,000,000 or individuals with a net
worth in excess of $1,000,000 or annual income exceeding $200,000
individually or $300,000 jointly with their spouse). For transactions
covered by the rule, broker-dealers must make a special suitability
determination for any purchaser and receive each purchaser's written agreement
to the transaction prior to the sale. Consequently, the rule may affect the
ability of broker-dealers to sell the Company's securities and also may
affect the ability of any purchasers in this offering to sell their shares
in the secondary market.
<PAGE> 8
LIMITATION ON LIABILITY OF DIRECTORS. As permitted by the General
Corporation Law of the State of Delaware, the Company's Certificate of
Incorporation provides that a director of the Company will not be personally
liable to the Company or its stockholders for monetary damages resulting from
breaches of his or her fiduciary duty as a director, including breaches which
constitute gross negligence. As a result, the right of the Company and its
stockholders to obtain monetary damages for acts or omissions of directors
will be more limited than they would be in the absence of such provision.
The provision would not apply to a violation of a director's responsibility
under federal securities laws.
REQUIREMENT OF CONTINUING REGISTRATION. The Company must have a
current and effective registration statement on file with the Commission in
order for a Selling Stockholder to sell his or its Shares or for a warrant
holder to be able to exercise its Warrants. Various state securities laws
relating to qualification of securities for sale in such states may also be
applicable. Necessarily, there can be no assurance that the Company will, at
all times during the life of the Warrants, be able to secure or maintain such
registration or qualification; and in the event it is unable to do so, the
Warrants will not be exercisable and will be valueless.
BUSINESS
Touchstone Applied Science Associates, Inc. (the "Company") designs,
develops, publishes and distributes educational tests, instructional materials
and computer software to elementary and secondary schools, colleges and
universities. The Company was originally incorporated in the State of New York
in 1976. In August 1991, the Company changed its corporate domicile to
Delaware by merger into a Delaware corporation created exclusively for that
purpose.
The Company's original corporate purpose when it was founded was to
perform research for others under contract. Therefore, some Company-developed
products were marketed by the College Board. In July 1988, all rights to the
Company-developed Degrees of Reading Power ("DRP") tests were assigned
by the College Board to the Company. With the acquisition of rights to DRP
tests, the Company changed corporate purposes becoming an educational publisher
instead of a contract research firm.
In addition to Primary, Standard and Advanced DRP tests, the Company
also publishes Degrees of Word Meaning ("DWM") tests. The Company's tests
assess student progress in the following interrelated components of literacy:
. the ability to comprehend the surface meaning of increasingly more
difficult textual material;
. the ability to reason with--that is, analyze, evaluate and extend the
ideas that are presented in--increasingly more difficult textual
material; and
. the size of students' reading vocabularies by measuring their
understanding of the meaning of words appearing in naturally occurring
contexts.
Management believes that Degrees of Reading Power and Degrees of Word
Meaning tests are widely recognized as having advanced the state-of-the-art
in educational assessment. From descriptions contained in Tests in Print
published by Buros Institute of Mental Measurements (which endeavors to cover
all tests published in the United States), it is management's belief that DRP
tests were the first, and remain the only, commercial standardized tests
whose results can be directly interpreted with respect to the textual materials
that students can read. Management further believes that DRP tests are the
only existing instruments that can measure progress toward one or more
standards or requirements that are established by examining how well prose in
books or other sources must be comprehended for particular purposes. As a
result, DRP tests are especially useful in accountability assessments and in
measuring literacy. Management further believes, based upon descriptions in
TESTS IN PRINT, DWM tests are the first measures of the size of a student's
reading vocabulary.
<PAGE> 9
Certain specially prepared secure forms of the Company's DRP tests
are licensed for one-time or limited use by states and other "shelf" forms
listed in the Company's catalog are licensed for an indefinite period of time
to school districts throughout the United States and Canada. In accordance
with the United States Copyright Office's definition, secure test forms are
composed of text and test items that have never before been administered and
are typically used in only one test administration before they are destroyed.
The Company provides secure tests annually for administration in certain
grades by the states of Connecticut, New York, and Virginia. Because the
Company's secure tests are mandatory in certain grades and because the tests
it sells through its catalog are generally administered by school entities that
require students to take them, management believes approximately 4 million DRP
tests, for which the Company is the sole source proprietor, are administered
each year in states and school districts, and in college and university
testing programs.
DEGREES OF READING POWER TESTS
When traditional, norm-referenced or criterion-referenced tests are
required or legislated, they tend to prescribe the nature of instruction in the
classroom. Because such tests typically contain specific items that measure
discrete skills, teachers often drill students on the skills that are tested.
While such drill and practice may raise the test scores on traditional tests,
there is little or no evidence that such drill and practice leads to
improvement in the desired educational outcome.
Because traditional reading tests are timed, they are unable to
distinguish between slow, competent readers and fast, careless readers.
Both types of students can earn identical scores even though their development
and instructional needs are markedly different. More important, these tests
often penalize those students who tend to become overly anxious when asked to
work under tight deadlines. Another limitation is that traditional tests may
require students to supply content knowledge about the passages being read
and/or they may contain questions that can be answered without reading the
passage. These conditions make test bias very difficult to control and the
interpretation of test results ambiguous.
The primary purpose of traditional, standardized tests is to
discriminate among students. Items for such tests are selected more on the
basis of their difficulty than on what the items actually assess. Student
performance on traditional, standardized tests is generally reported on one
or more norm-referenced scales--grade equivalents, percentiles and/or
standings. While norm-referenced scales may be used to assess the relative
performance of a student, norms are not adequate for reporting what students
can read or how much growth in reading has occurred over time.
In developing DRP tests for assessing reading comprehension, the
Company's ultimate objective was to design reading comprehension tests that
would have a beneficial impact on curriculum and instruction. Since teachers
would continue to have incentives to teach to such required tests, the test
format had to be designed so that teaching to the test would be synonymous
with the teaching of reading comprehension.
DRP tests also had to meet a number of other desirable objectives.
For example, the item format and the cognitive task asked of students had to
be consistent across all grades to ensure continuity of measurement. Without
such continuity, in terms of what is measured and how it is measured, it is
practically impossible to assess student growth in reading comprehension. In
addition, the scale upon which the results would be reported had to remain
invariant over time. While the benefits of meeting these objectives may
appear to be obvious, it is management's belief that no other standardized
test currently administered in schools has been able to completely meet them
(based upon the previously referenced descriptions in Tests in Print published
by Buros Institute of Mental Measurements). The final objective for DRP tests
was to develop a score scale that had functional meaning. A score scale in
reading that has functional meaning would be one that would describe what
students are able to read and how well they are able to do so. The references
for this type of score scale could be instructional materials used in the
classroom, materials used in the military or in various occupations and
professions, or "real world" reading tasks such as driver's license manuals,
newspapers, magazines and the like.
<PAGE> 10
While there would be many advantages to a score scale that
permitted a functional interpretation of student performance in reading, a key
advantage would be in the setting of expectations or standards in reading--
standards set in terms of the actual capability of students to function on
"real world" reading tasks with a functionally referenced score scale.
Currently, three distinct but related kinds of DRP tests are
available off the shelf for qualified customers: Primary, Standard and
Advanced. The most distinguishable feature of all DRP test forms is the
item format used to assess comprehension.
PRIMARY AND STANDARD DRP TESTS. Primary and Standard DRP tests
are a holistic measure of how well students understand the meaning of text.
As much as is possible in a testing situation, these tests determine how well
a student reads under real-life conditions in and out of school. Primary and
Standard DRP tests are single-objective tests measuring how well students
understand the surface meaning of what they read. As such, they measure the
process of reading rather than products of reading such as main idea and
author purpose.
Primary and Standard DRP tests consist of nonfiction paragraphs
and/or passages on a variety of topics. Each passage has been written, edited
and calibrated by the Company. The individual test passages are stored in the
Company's "Test Passage Bank", and each test is created by selecting the
appropriate test passages from the Test Passage Bank to satisfy the criteria
set for a particular test. Within these paragraphs and passages, words have
been deleted and the student is asked to select the correct word for each
deletion in text from a set of multiple-choice options.
Important features of the Primary and Standard DRP tests are:
(1) they are untimed; (2) the paragraphs and passages form a linearly ordered
scale (i.e., all paragraphs and passages, from the easiest to the hardest,
measure the same construct of reading); (3) the results can be interpreted in
terms of what students can read; and (4) the tests are particularly sensitive
to the assessment of growth in reading across the grades.
ADVANCED DRP TESTS. Advanced DRP tests have been developed that
extend the definition of comprehension employed in the Primary and Standard
DRP tests.
Advanced DRP test items engage those cognitive processes required
to remember, think about, analyze, derive, combine, or evaluate propositions
in text. Correct answers to these items are never simple rewordings or
restatements of the text. Finally, like the Primary and Standard DRP tests,
the passages on the Advanced DRP tests do not require the student to supply
topic/content knowledge in order to choose the unambiguously correct answer.
The items on Advanced DRP tests assess the ability to choose that
integration of propositions which is valid within a paragraph, between
adjacent paragraphs, and between two or more non-adjacent paragraphs. Stated
more simply, Advanced DRP tests assess how well students are able to reason
with textual materials. The questions can be considered "higher order"
because the correct answer depends upon the student being able to recognize
which response option is properly derived from the text.
As is true of the Primary DRP paragraphs and the Standard DRP
passages, there is no evidence that teachers can successfully circumvent the
instructional process by teaching to the format of the Advanced DRP passages.
While students need to be familiar with the format of any test prior to its
administration, there is no evidence that extensive practice on "cloze-type"
exercises will improve student scores on DRP tests.
<PAGE> 11
DEGREES OF WORD MEANING TESTS
Degrees of Word Meaning tests are the first measures of the size
of a student's reading vocabulary. Unlike conventional standardized vocabulary
tests, which only rank order students by such normative statistics as
percentile ranks, DWM tests measure growth toward adult proficiency levels.
It is expected that schools will administer both Standard DRP tests and DWM
tests using the Company's combined Test Answer Sheet.
SOFTWARE PRODUCTS
The Company has designed and produced computer software products
that are sold as instructional aids for reading development. Among the
products are MicRA->DRP, which allows the user to determine the difficulty
of written text. Additionally, in 1996, the Company introduced DRP->BOOKLINK
and Browzer->BOOKLINK, which allow teachers to find appropriate books for
each student based upon interest categories and reading ability.
TEST SCORING AND RELATED REPORTING SERVICES
The Company provides scanning, scoring, and reporting services to
schools and districts. Company-copyrighted test answer sheets or licensed
answer sheets are required for the administration of all of the Company's
tests. Answer marks on these sheets are interpreted by scanner-computer
systems that use Company-proprietary software. For example, Company-
copyrighted conversion tables are used to convert the total number of right
answers on a given DRP test form into a DRP score that indicates how well a
student can comprehend text of given difficulty (readability). These DRP scores
are also interpreted normatively (e.g., in terms of national percentiles)
using the Company's proprietary data. Primary, Standard and Advanced DRP
and DWM norms indicate a student's percentile rank in relation to students
nationally in his or her grade.
All District, School and Class Level Reports of the Company's test
results are copyrighted by the Company, as are various Parent and Individual
Reports that may be ordered by school systems. Schools may also order score
reports on Company-copyrighted pressure-sensitive labels for inclusion in
permanent records.
State education departments and other educational institutions may
purchase a license to score the Company's tests. Third-party firms that
provide scanning and scoring services to schools may also be licensed to score
the Company's tests. Similarly, the Company licenses MicRA->DRP and other
computer software.
APPLICATIONS OF THE DRP TECHNOLOGY
DRP tests have been adopted by a wide variety of educational
institutions and agencies including state departments of education, colleges
and universities, schools and school districts. While the desire to improve
the quality of instruction in reading may be the ultimate reason DRP tests are
administered in educational settings, other reasons are also important. DRP
tests are used in education to determine eligibility for graduation, allocate
resources to districts, document school accountability, set and maintain
promotion standards, place students into adult basic education and GED
(Graduate Equivalency Degree) programs of study and evaluate student progress
in adult literacy programs.
Because the Company's secure tests are mandatory in certain grades
and because the tests it sells through its catalog are generally administered
by school entities that require students to take them, management believes
approximately 4 million DRP tests, for which the Company is the sole source
proprietor, are administered each year in states and school districts and in
college and university testing programs.
DRP tests have been adopted as one component of the Connecticut
Mastery Testing Program in grades 4, 6 and 8. In New York State, DRP tests
are the reading component in the Regents Competency Testing program (RCT).
A student must attain a certain score on the RCT to be awarded a high school
diploma. In Virginia, DRP tests have been adopted as part of the Literacy
Testing Program in grade 6. In each of these instances, DRP tests serve as
an indicator of whether valued educational outcomes have been achieved.
<PAGE> 12
DRP test scores are utilized for placement of students in both
four- and two-year institutions. DRP tests are used to screen, identify,
place and evaluate the progress made by such students at, for example,
such four-year institutions as the University of Cincinnati, Bowling Green
University and the University of Northeastern Missouri. Among two-year
institutions, the Oregon System of Community Colleges uses DRP test
results to place students in ABE (Adult Basic Education) and GED programs of
study, while the College of Lake County (Illinois), Tarrant Community College
(Texas) and Triton College (Illinois) use DRP tests to monitor student
progress and maintain exit standards in reading.
The use of DRP tests as measures of accountability has been
increasing over the last few years--especially as the limitations of norm-
referenced score scales become more widely understood. One such limitation
of traditional tests is the lack of security associated with repeated
administrations of the same two "shelf" forms of the tests. To counter this
limitation, new fully secure DRP tests are constructed annually. These fully
secure DRP tests are only available on a contract basis and cannot be
purchased "off-the-shelf".
DRP test results are reported on a text difficulty scale.
Therefore, student test results can be used to select instructional materials
that best meet the needs of the students. In other words, teachers can
avoid the student frustration that arises when materials are too difficult
and the boredom that comes when materials are too easy.
In addition to the other features of DRP and DWM tests, the
availability of normative data for the tests means they can be used for
Federal program evaluations. Finally, DRP and DWM tests are in accord
with the professional standards for testing promulgated by the American
Psychological Association, the American Educational Research Association and
the National Council for Measurement in Education.
BETA
As of January 2, 1997, the Company acquired all of the outstanding
capital stock of Beck Evaluation & Testing Associates, Inc. ("BETA"). BETA
provides consulting services to schools and publishers.
COMPETITION
Success in the industry will be based on scientific and
technological superiority, service, product support, the availability of
patent protection, access to adequate capital, the ability to successfully
develop and market products and processes and the ability to obtain government
approvals. Although there is intense competition in the industry and there
are both domestic and foreign companies which may be deemed dominant
competitors, the Company believes that the features of its products coupled
with its ability to provide quality services will permit the Company to
compete successfully in its designated marketplace.
The Company is subject to competition from various sources. It is
anticipated that the Company's principal competition comes from established
for-profit and non-profit companies in the testing business and testing
departments within certain states and school districts, all of which are
considerably larger and have greater financial and human resources and
marketing capabilities.
Although there are a number of for-profit firms that develop,
publish, market, and distribute educational tests, the market is dominated by
three: CTB/McGraw-Hill, Lake Forest, Illinois, and Monterey, California; the
Psychological Corporation, San Antonio, Texas; and The Riverside Publishing
Company, Chicago, Illinois. As large, well-established publishers of
educational tests and related products and services, these firms are
considered strong competitors of the Company.
There are a number of non-profit organizations that develop,
publish and distribute educational tests. For example, the American College
Testing Program (ACT), Iowa City, Iowa; American Council on Education (ACE),
Washington, DC; and Educational Testing Service (ETS), Princeton, New Jersey.
In addition, there are various organizations that sponsor educational tests
even though they do not have the technical capability to produce tests. For
example, the College Board, New York, New York, sponsors the Scholastic
Assessment Test (SAT) which is developed for the College Board by ETS. All
of these non-profit organizations have, or have access to, the capability to
develop, publish and distribute tests to schools. Currently, ACT, College
Board, and ETS publish one or more educational tests for the school market.
<PAGE> 13
A number of states, and some school districts, have their own test
development and publishing capabilities. It is management's belief that the
largest developer of educational tests for its own use is the New York State
Education Department, which produces a variety of tests, including the New
York State Regents examinations. Although the Company's DRP tests are
licensed for specific use over fixed periods of time by three states that
develop other tests for their own use--Connecticut, New York and Virginia--
this does not necessarily mean that the Company's tests will be licensed to
other states that develop their own statewide tests. In contracts between the
Company and states, as in purchase orders executed with the Company by any
educational institution, the Company--which is the sole-source proprietor of
DRP tests--retains copyright ownership of all tests, items and other materials.
This ownership is acknowledged on the inside cover of the test booklets or in
some other prominent place in cases where DRP tests are part of a testing
program that carries a state name.
There are a number of for-profit and non-profit firms that provide
test design, production and consulting services to states under contract.
For example, Advanced Systems in Measurement and Evaluation, Inc., Dover,
New Hampshire; IOX Assessment Associates, Los Angeles, California; National
Evaluation Systems (NES), Amherst, Massachusetts; and National Computer
Systems (NCS), Iowa City, Iowa; are among the for-profit firms that supply
test development, printing, distribution, and scoring services to individual
states under contract. Among the non-profit organizations, ACT and ETS have
conducted such contract work for states and ETS is the current contractor for
the National Assessment of Educational Progress. By enabling states to have
tests developed and administered to their own specifications, these for-profit
and non-profit firms compete indirectly with the Company. In terms of size
alone, these firms have greater marketing capability and resources than does
the Company.
MARKETING
The Company markets its products and services as follows:
(a) Sales of secure tests to large scale users such as state
education departments are conducted directly by the Company's staff. This
includes making presentations and negotiating contracts and license
agreements.
(b) Sales of the Company's products and services as
described in the Company's catalog are made primarily through direct mail
campaigns to elementary school, secondary school and college markets. The
Company also advertises its products in trade journals.
(c) In addition, the Company's staff and its independent
consultants provide presentations and in-service workshops supporting the
Company's products.
PRICING AND OTHER CUSTOMER TERMS
The Company sells its products on a contract or purchase order
basis in accordance with a published price list. Depending upon the contract
or the purchase order, the Company sells its product on a net 30-day or C.O.D.
basis. The Company does not offer extended credit terms to its customers.
Historically, bad debts have not been material.
GOVERNMENT REGULATIONS
The degree of government regulations to be imposed upon the
Company and the field in which the Company engages is uncertain at this time.
<PAGE> 14
Under Title 1 of the 1994 Improving America's Schools Act (IASA),
schools that serve large numbers of children from low income families receive
financial assistance from the Federal government to expand and improve their
educational programs to meet the needs of educationally deprived students.
Title 1 regulations include a requirement that schools receiving Title 1
funds must evaluate student growth or progress in reading. It is management's
belief that State Education Authorities (SEAs) find DRP test results to
be in accord with the regulations for Title 1, as DRP tests are used by schools
to evaluate Federally-supported Title 1 programs.
If post-secondary institutions enroll students who have not
graduated from high school, or obtained their GED certificate, the United
States Department of Education requires the students to pass an approved
"ability-to-benefit" test before the institution can grant Federal financial
assistance to the students. All forms of DRP tests were approved in June 1991
for "ability-to-benefit" determinations. According to new regulations issued
by the Department of Education, only test batteries that generate both verbal
and quantitative scores will be approved. The Company does not currently have
any tests that measure quantitative abilities. Therefore, as of October 25,
1996, DRP tests may not be used by post-secondary institutions for "ability-
to-benefit" determinations.
Management knows of no other applicable government regulations or
of any other instance in which DRP tests failed to meet government regulations.
The Company's management believes it may be necessary to obtain other
government approvals for its products including the DWM tests. If necessary,
a portion of the revenues of the Company may be directed toward obtaining
such approvals, and any such expenditures will occur without the assurance
that approvals will be achieved. Additionally, the extent of potentially
adverse government regulations which might arise from future legislative or
administrative action cannot be predicted.
PATENTS, COPYRIGHTS, TRADEMARKS AND TRADE SECRETS
The United States Patent Office issued a patent (No. 4,943,239) to
Bertram L. Koslin, the Company's former President, on July 24, 1990, for the
Test Answer and Score Sheet Device. Pursuant to an agreement between the
Company and Mr. Koslin, all rights, title and interest to the Test Answer and
Score Sheet were assigned to the Company. There is no assurance that the
patent assigned to the Company is enforceable and there is no assurance that
the Company will derive any competitive advantage therefrom. While the patent
is deemed important to the Company, it is not considered essential to the
success of the Company's business. The issuance of the patent for the Test
Answer and Score Sheet Device may be insufficient to prevent competitors from
essentially duplicating the product by designing around the patented
aspects. In addition, there is no assurance the Company's product will not
infringe on patents owned by others, licenses which may not be available to
the Company or that competitors will not develop functionally similar
products outside the protection of the patent. Moreover, there is no
assurance that the validity of the patent issued for the Test Answer and
Score Sheet Device or any other Company product in the future will be
sustained if judicially tested.
As of October 31, 1996, the United States Copyright Office has
issued 66 copyrights to the Company for shelf-secure test booklets, annually
secure test booklets, reports and manuals. The Company regularly asserts
copyrights to all of its test and instructional materials.
The following are registered trademarks of the Company:
TASA, the TASA logo, Degrees of Literacy Power, DLP, Degrees of
Reading Power, DRP, Degrees of Word Meaning, DWM, Traveling Classroom
Library, TCL, MicRA->DRP, Browzer, the Browzer dog logo, Booklore, and
DRP->BOOKLINK (pending) and Browzer->BOOKLINK (pending).
Trade secrets are maintained by licenses for software and certain
proprietary data. In addition, all employees execute nondisclosure agreements
as a condition of employment.
<PAGE> 15
USE OF PROCEEDS
The Company will not realize any proceeds from the sale of the
Shares by the Selling Stockholders. The Company will realize proceeds only
from the exercise of Warrants held by some of the Selling Stockholders, which
proceeds, if all such Warrants are exercised, would aggregate $242,250. The
Company will use the net proceeds from the exercise of such Warrants for
working capital purposes.
THE SELLING STOCKHOLDERS
An aggregate of 850,000 shares of Common Stock are being offered
pursuant to this Prospectus. The following is a description of the Selling
Stockholders.
MICHAEL D. BECK, CONNIE BECK AND MICHAEL D. BECK, AS CUSTODIAN
FOR AMANDA P. BECK. The Shares being offered pursuant hereto include 75,000
shares owned by Michael D. Beck, 37,500 shares owned by Connie Beck, Mr.
Beck's wife, and 37,500 shares owned by Mr. Beck, as custodian for his minor
daughter, Amanda P. Beck. These shares were issued by the Company pursuant
to a transaction concluded as of January 2, 1997, in which the Company
purchased all of the outstanding capital stock of Beck Evaluation & Testing
Associates, Inc. ("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. Mr. Beck and
members of Mr. Beck's immediate family owned 100% of the outstanding stock of
BETA. 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. Mr. Beck
was elected as Vice President of the Company on January 2, 1997, and as a
director of the Company on March 28, 1997. 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. As of the date of this Prospectus, Mr. Beck
beneficially owns an aggregate of 119,500 shares of the Company's Common
Stock, which includes 7,000 shares owned jointly with his wife, Connie Beck,
and the 37,500 shares held by Mr. Beck as custodian for his minor daughter.
Mr. Beck also holds options to acquire 125,000 shares of the Company's Common
Stock, which options were issued pursuant to the Company's Amended and
Restated 1991 Stock Option Incentive Plan and which are not currently
exercisable.
PARIS GROUP, LTD. The Shares being offered pursuant hereto
include 100,000 shares owned by Paris Group, a financial consultant retained
by the Company pursuant to a consulting agreement dated as of December 13,
1996. The consulting agreement is for a five-year term, although the Company
may terminate it earlier upon 20 days' prior written notice to Paris Group.
Pursuant to the consulting agreement, Paris Group has agreed to provide
financial management and consulting services in order to assist the
Company in meeting its short-term and long-term financial and strategic
goals, and includes the following services: analysis of proposed business
opportunities; strategic planning; and identifying and evaluating merger,
acquisition, joint venture and strategic alliance opportunities. Paris Group
has no authority to bind the Company to any contracts or commitments.
As of the date of this Prospectus, Paris Group owns an aggregate
of 100,000 shares of the Company's Common Stock. Mr. William Hayde is the
sole stockholder of Paris Group. Mr. Hayde beneficially owns an additional
155,000 shares of the Company's Common Stock, which shares were purchased in
the open market. Paris Group is located at 14 Fourth Street, Farmingville,
New York 11738.
MEYERS POLLOCK ROBBINS, INC. The Shares being offered pursuant
hereto also include 100,000 shares owned by Meyers Pollock, a financial
consultant retained by the Company in February 1997, and 250,000 shares
issuable upon the exercise of warrants issued to Meyers Pollock in connection
with such consulting arrangement. The Company's consulting agreement with
Meyers Pollock is initially for a two-year term, although it may be
terminated by either party at any time after one year upon thirty days' prior
written notice to the other party. Meyers Pollock also acts as a market
maker in the Company's securities. Pursuant to the consulting agreement,
Meyers Pollock has agreed to provide the following services: assisting in
the Company's relations with investors, securities analysts and brokers,
financial public relations and strategic planning. Meyers Pollock has no
authority to bind the Company to any contracts or commitments.
<PAGE> 16
In connection with the consulting agreement, the Company issued
to Meyers Pollock warrants (the "Meyers Pollock Warrants") to purchase up to
250,000 shares of the Company's Common Stock. The Meyers Pollock Warrants
are exercisable at any time and from time to time through February 24, 2002,
at an exercise price of $0.469 per share (which was the closing price of the
Company's Common Stock on the date of the consulting agreement). The number
of shares issuable pursuant to the Meyers Pollock Warrants is subject to
adjustment in the event of a stock dividend, stock split, combination,
reclassification or similar event.
As of the date of this Prospectus, Meyers Pollock beneficially
owns an aggregate of 353,000 shares of the Company's Common Stock, which
includes the 100,000 shares described above and the 250,000 shares issuable
upon the exercise of the Meyers Pollock Warrants. Meyers Pollock is located
at One World Trade Center, Suite 9151, New York, New York 10048.
JERICHO STATE CAPITAL CORP. OF FLORIDA. The Shares being offered
pursuant hereto also include 250,000 shares issuable upon the exercise of
warrants issued by the Company to Jericho, a financial consultant retained
by the Company in March 1997. The Company's consulting agreement with
Jericho is initially for a one-year term, although it is subject to automatic
yearly renewals and it may be terminated by either party at any time upon
thirty days' prior written notice to the other party. Pursuant to the
consulting agreement, Jericho has agreed to provide the following services:
assisting in the Company's relations with investors, securities analysts and
brokers, financial public relations, strategic planning and assisting the
Company in identifying and consummating acquisitions. Jericho has no
authority to bind the Company to any contracts or commitments.
In connection with the consulting agreement, the Company issued
to Jericho warrants (the "Jericho Warrants") to purchase up to 250,000 shares
of the Company's Common Stock. The Jericho Warrants are exercisable at any
time and from time to time through March 6, 2002, at an exercise price of
$0.50 per share (which was the closing price of the Company's Common Stock on
the date of the consulting agreement). The number of shares issuable pursuant
to the Jericho Warrants is subject to adjustment in the event of a stock
dividend, stock split, combination, reclassification or similar event.
As of the date of this Prospectus, Jericho beneficially owns only
the 250,000 shares issuable upon the exercise of the Jericho Warrants.
Jericho is located at 2500 North Military Trail, Suite 240, Boca Raton,
Florida 33431.
PLAN OF DISTRIBUTION
The Selling Stockholders expect to sell the Shares primarily
through brokers' transactions over NASDAQ at prices then attainable, less
ordinary brokers' commissions and dealers' discounts, as applicable.
The Selling Stockholders and any broker or dealer to or through
whom any of the Shares are sold ("Brokers") may be deemed to be underwriters
within the meaning of the Act with respect to the Shares offered hereby, and
any profits realized by the Selling Stockholder or the Brokers may be deemed
to be underwriting commissions. To the best of the Company's knowledge,
brokers' commissions and dealers' discounts, taxes and other selling expenses
to be borne by the Selling Stockholders are not expected to exceed normal
selling expenses for sales over NASDAQ or otherwise, as the case may be.
The registration of the Shares under the Act shall not be deemed
an admission by the Selling Stockholders or the Company that any Selling
Stockholder is an underwriter for purposes of the Act of any of the Shares
offered pursuant to this Prospectus.
<PAGE> 17
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected historical financial information presented below for
and as of the end of each of the two fiscal years in the period ended October
31, 1996, is derived from the Financial Statements of the Company, which
financial statements have been audited by Lazar Levine & Co. LLP,
independent certified public accountants. The selected historical financial
information presented below for and as of the end of the fiscal year ended
October 31, 1994 is derived from the Financial Statemetns of the Company,
which financial statements have been audited by Thomas J. Marion, CPA,
independent certified public accountant, as set forth in his report thereon.
The Consolidated Financial Statements as of October 31, 1996 and October 31,
1995 and for each of the two years in the period ended October 31, 1996 and
the report of Lazar Levine & Co. LLP thereon, and the Consolidated Financial
Statements as of October 31, 1994 and for the fiscal year ended October 31,
1994 and the report of Thomas J. Marion thereon, are included in the
Company's Annual Report on Form 10-KSB for the fiscal year ended October 31,
1996, incorporated herein by reference. The selected historical financial
information presented below as at January 31, 1997 and 1996 and for the three
months ended January 31, 1997 and 1996, is derived from the unaudited
condensed consolidated financial statements of the Company, included in the
Company's Quarterly Report on Form 10-QSB for the fiscal quarter ended
January 31, 1997, incorporated herein by reference, which in the opinion of
the Company's management includes all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the information set forth
therein. This selected historical financial information should be read in
conjunction with the consolidated financial statements, related notes,
management's discussion and analysis of financial condition and results of
operations and other financial information incorporated herein by reference.
The results of operations for the three months ended January 31, 1997 are not
necessarily indicative of results that can be expected for the full year.
<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED OCTOBER 31, JANUARY 31,
------------------------- -------------------
1996 1995 1994 1997 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues $2,519,908 $2,314,594 $2,027,521 $937,511 $775,616
Net sales 2,519,908 2,314,594 2,027,521 937,511 775,616
Gross profit 1,808,344 1,359,687 1,488,539 677,399 572,270
Income (loss)
from operations 108,430 24,867 (1,328,455) 213,315 239,772
Income (loss) before
income taxes 211,257 129,642 (1,311,533) 224,423 257,768
Net income (loss) 192,048 155,146 (658,696) 151,442 166,549
Earnings (loss) per share .03 .02 (.10) .02 .02
BALANCE SHEETS:
Current assets $4,458,538 $3,449,356 $3,681,972 4,418,366 $3,881,718
Total assets 8,975,542 8,416,732 8,300,187 9,411,362 8,661,801
Long-term obligations 728,250 571,250 886,250 785,864 552,500
Total liabilities 1,591,807 1,699,492 1,908,255 1,679,508 1,621,171
Working capital 4,116,202 2,923,276 3,439,128 4,024,816 3,394,974
Stockholders' equity 7,383,735 6,717,240 6,391,932 7,731,854 7,040,630
</TABLE>
<PAGE> 18
LEGAL OPINIONS
The validity of the shares of the Common Stock offered hereby will
be passed upon for the Company by Christy & Viener, New York, New York.
Steven R. Berger, Esq., a partner in the firm of Christy & Viener
participating in the work on this matter, is a director of the Company.
Mr. Berger holds options, pursuant to the Company's Directors Stock Option
Plan, covering an aggregate of 7,500 shares of the Company's Common Stock.
EXPERTS
The consolidated financial statements of the Company appearing in
its Annual Report (Form 10-KSB) for the fiscal year ended October 31, 1994,
have been audited by Thomas J. Marion, CPA, independent certified public
accountant, as set forth in his report thereon included therein and referred
to herein. Such financial statements are incorporated herein in reliance
upon the reports of Thomas J. Marion, CPA, pertaining to such financial
statements (to the extent covered by consents filed with the Commission)
given upon the authority of Mr. Marion as an expert in accounting and
auditing.
The consolidated financial statements and schedules of the Company
appearing in the Company's Annual Report (Form 10-KSB) for the year ended
October 31, 1996, have been audited by Lazar Levine & Co. LLP, independent
certified public accountants, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
<PAGE> II-1
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses payable by the Company in connection with the issuance
and distribution of the Shares are set forth below. All the amounts shown
are estimates, except for the Securities and Exchange Commission registration
fee and the NASDAQ listing fees.
Securities and Exchange
Commission registration fee. . . . . . . . . . $ 163
NASDAQ listing fees . . . . . . . . . . . . . . . . 8,500
Fees and expenses of accountants. . . . . . . . . . 1,000
Fees and expenses of counsel. . . . . . . . . . . . 12,500
Blue Sky fees and expenses. . . . . . . . . . . . . 0
Printing expenses . . . . . . . . . . . . . . 1,000
Miscellaneous . . . . . . . . . . . . . . . . . . . 1,000
Total . . . . . . . . . . $ 24,163
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 10 of the Registrant's Restated Certificate of Incorporation
and Article IX of the Registrant's Amended and Restated By-Laws provide for
indemnification of officers and directors of the Registrant, to the fullest
extent permitted by applicable law, for expenses, liabilities and losses
actually and reasonably incurred by them in connection with actual or
threatened claims, actions, suits or proceedings by reason of the fact that
such persons are or were officers or directors of the Registrant. Such
indemnification right includes the right to receive payment in advance of
expenses incurred by the persons seeking indemnification in connection with
claims, actions, suits or proceedings, to the fullest extent consistent with
applicable law. The Amended and Restated By-Laws provide that the right to
indemnification is a contract right and authorize the Registrant to obtain
insurance to effect indemnification. Section 145 of the General Corporation
Law of the State of Delaware grants each corporation organized thereunder,
such as the Registrant, express powers to indemnify its directors and
officers.
The Registrant carries directors' and officers' liability insurance
covering losses up to $1,000,000 (subject to certain deductible amounts).
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following Exhibits are filed as part of this Registration Statement:
4.1 Certificate of Incorporation, dated August 22, 1991 filed with the
Secretary of State of the State of Delaware*
4.2 Certificate of Merger, dated August 26, 1991, filed with the Secretary
of State of the State of Delaware*
4.3 Amended and Restated By-Laws***
4.4 Certificate of Designations of Series A Preferred Stock, dated
March 24, 1995, filed with the Secretary of State of the State of
Delaware**
4.5 Specimen Certificate evidencing shares of Common Stock*
<PAGE> II-2
4.6 Form of Warrant***
5 Opinion of Christy & Viener***
23.1 Consent of Christy & Viener (included in Exhibit 5)
23.2 Consent of Thomas J. Marion, CPA***
23.3 Consent of Lazar, Levine & Company LLP***
______________________
* Incorporated herein by reference to the exhibit contained in the Company's
Registration Statement on Form SB-2 (File No. 33-65766) under the
Securities Act of 1933, as amended, filed with the Commission on
July 7, 1993.
** Incorporated herein by reference to the exhibit contained in the Company's
Annual Report (Form 10-KSB/A-1) for the fiscal year ended October 31,
1994.
*** Filed herewith.
ITEM 17. UNDERTAKINGS.
(1) The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are
being made, a post-effective amendment to the registration statement: to
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement.
(b) That for the purpose of determining any liability under the
Securities Act of 1933, as amended (the "Act") each such post-effective
amendment shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(2) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d)
of the Exchange Act) that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
<PAGE> II-3
EXPERTS
The consolidated financial statements of the Company appearing in its
Annual Report (Form 10-KSB) for the fiscal year ended October 31, 1994, have
been audited by Thomas J. Marion, CPA, independent certified public accountant,
as set forth in his report thereon included therein and referred to herein.
Such financial statements are incorporated herein in reliance upon the reports
of Thomas J. Marion, CPA, pertaining to such financial statements (to the
extent covered by consents filed with the Commission) given upon the
authority of Mr. Marion as an expert in accounting and auditing.
The consolidated financial statements of the Company appearing in its
Annual Report (Form 10-KSB) for the fiscal year ended October 31, 1996, have
been audited by Lazar, Levine & Company LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such financial statements are, and audited financial statements to
be included in subsequently filed documents will be, incorporated herein in
reliance upon the reports of Lazar, Levine & Company LLP pertaining to such
financial statements (to the extent covered by consents filed with the
Commission) given upon the authority of Lazar, Levine & Company LLP as an
expert in accounting and auditing.
<PAGE> II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Brewster, State of New York,
on the 22nd day of May, 1997.
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
By: /s/ ANDREW L. SIMON
---------------------------------------------
Andrew L. Simon
Chairman of the Board and President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Andrew L. Simon, Linda G. Straley and
Stephen H. Ivens, or any of them, his or her attorney-in-fact, for him or her
in any and all capacities, with full power of substitution and resubstitution,
to sign any amendments, including any post-effective amendments, to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said attorney-in-fact,
or his or her substitutes, may do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
----------- ------- ------
/s/ ANDREW L. SIMON
- ------------------------
Andrew L. Simon Director, President and Chief May 22, 1997
Executive Officer (principal
executive and financial officer)
/s/ LINDA G. STRALEY
- ------------------------
Linda G. Straley Director May 22, 1997
/s/ STEPHEN H. IVENS
- ------------------------
Stephen H. Ivens Director May 22, 1997
/s/ MICHAEL. D. BECK
- ------------------------
Michael D. Beck Director May 22, 1997
/s/ STEVEN R. BERGER
- ------------------------
Steven R. Berger Director May 22, 1997
/s/ MICHAEL MILONE
- ------------------------
Michael Milone Director May 22, 1997
<PAGE>
INDEX TO EXHIBITS
Exhibit Description Page
- ----------- ------------- ------
4.1 Certificate of Incorporation, dated August 22, 1991 filed
with the Secretary of State of the State of Delaware* --
4.2 Certificate of Merger, dated August 26, 1991, filed with
the Secretary of State of the State of Delaware* --
4.3 Amended and Restated By-Laws*** 26
4.4 Certificate of Designations of Series A Preferred Stock,
dated March 24, 1995, filed with the Secretary of State of
the State of Delaware** --
4.5 Specimen Certificate evidencing shares of Common Stock* --
4.6 Form of Warrant*** 42
5 Opinion of Christy & Viener*** 49
23.1 Consent of Christy & Viener (included in Exhibit 5) --
23.2 Consent of Thomas J. Marion, CPA*** 50
23.3 Consent of Lazar, Levine & Company LLP*** 51
- -----------------------------
* Incorporated herein by reference to the exhibit contained in the Company's
Registration Statement on Form SB-2 (File No. 33-65766) under the
Securities Act of 1933, as amended, filed with the Commission on
July 7, 1993.
** Incorporated herein by reference to the exhibit contained in the Company's
Annual Report (Form 10-KSB/A-1) for the fiscal year ended October 31, 1994.
*** Filed herewith.
<PAGE>
Exhibit 4.3
-------------
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.
Exhibit 4.6
-----------
FORM OF WARRANT
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF
COMMON STOCK ISSUABLE UPON EXERCISE OF SUCH WARRANTS HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER ANY APPLICABLE STATE SECURITIES LAWS. THESE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW
TO DISTRIBUTION, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR UNDER ANY APPLICABLE STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL SATISFACTORY TO TOUCHSTONE APPLIED SCIENCE
ASSOCIATES, INC. THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT
OR SUCH LAWS.
VOID AFTER 5:00 P.M. (EASTERN TIME) ON __________________
No. ______ [DATE]
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
WARRANTS TO PURCHASE COMMON STOCK
THIS CERTIFIES that ___________________ or its registered
assigns (hereinafter called the "Holder") is the registered holder of
the aggregate number of Warrants ("Warrants") entitling the Holder to
purchase from Touchstone Applied Science Associates, Inc., a corporation
organized and existing under the laws of the State of Delaware (the
"Company"), subject to the terms and conditions set forth hereinafter,
__________________ (__________) fully paid and non-assessable
shares (each, a "Warrant Share'') of the Common Stock, par value $.0001
per share ("Common Stock"), of the Company (subject to adjustment as
provided herein). The Holder shall be entitled to exercise the Warrants
upon surrender of this Warrant Certificate, and with the subscription
form annexed hereto duly executed, and payment in lawful money of the
United States of the subscription price of $_____ (as it may be adjusted
as provided herein, the "Subscription Price") for each Warrant Share
being purchased, at any time on or after the date hereof and at or prior
to 5:00 P.M. (Eastern Time) on _____________ at the office of the
Company or, if the Company shall designate a warrant transfer agent, at
the office of such warrant transfer agent. The Warrants represented by
this Warrant Certificate may be exercised by the Holder in whole or in
part, but not as to a fraction of a Warrant Share. Payment of the
Subscription Price shall be made in cash or by certified or official
bank check.
1. Upon the surrender of this Warrant Certificate and payment
of the Subscription Price, as herein provided, the Warrants shall be
deemed to have been exercised and the person exercising the same shall
become the holder of record of the shares of Common Stock so purchased
for all purposes on the date of such surrender and payment; provided,
--------
however, that if such date is a date on which the stock transfer books
-------
of the Company are closed, such person shall be deemed to have become
the record holder of such shares of Common Stock on the next succeeding
date on which the stock transfer books are open. As soon as practicable
after such surrender and payment, the Company shall issue and deliver to,
or upon the order of, the Holder a certificate or certificates
representing the Warrant Shares so purchased and, in the case of a
fractional interest in a Warrant Share, cash as provided herein. Upon
surrender of this Warrant Certificate to the Company (or its warrant
transfer agent, if any), the Company (or warrant transfer agent) shall
cancel this Warrant Certificate, and to the extent there is a partial
exercise of the Warrants evidenced hereby, the Holder of the Warrant
certificate shall receive a replacement Warrant Certificate of like
tenor and date evidencing the number of Warrants which shall not have
been exercised, unless such Warrants shall have expired.
2. Notwithstanding the foregoing, if the Company shall give
notice to its stockholders of the liquidation, dissolution or winding up
of the Company, the right to exercise the Warrants evidenced hereby shall
terminate at the close of business on the third full business day prior
to the date specified in such notice as the record date for determining
the Company's stockholders entitled to receive any distribution upon
liquidation, dissolution or winding up.
3. The number and kinds of shares of stock of the Company
issuable upon exercise of the Warrants evidenced hereby are subject to
modification and adjustment upon the happening of certain events set
forth as follows:
(a) If, at any time after the date hereof, the Company shall
declare or pay a dividend or make a distribution to its stockholders
consisting of Common Stock of the Company, the Holder of the Warrants
evidenced hereby shall, upon the exercise of such Warrants after the
record date for such dividend, receive, in addition to the Warrants
Shares otherwise issuable upon such exercise, the number of shares
of Common Stock as to which such Holder would have been entitled to
receive had such Holder exercised such Warrants immediately prior to
the record date for such dividend.
(b) If, at any time after the date hereof, the Company shall,
by subdivision, combination or reclassification of Common Stock, or
through merger or consolidation, or otherwise, alter or modify the
number, kind or class of shares of Common Stock, or other securities
or property of the Company, then as of the record date of such
alteration or modification, the Warrant Shares issuable upon the
exercise of a warrant shall be adjusted so as to consist of the
number of shares of capital stock or other securities or property of
the Company which the Holder would have owned or have been entitled
to receive had the Warrants evidenced hereby been exercised immediately
prior to the record date for such subdivision, combination or
reclassification of Common Stock, or merger or consolidation, or
other alteration or modification.
(c) If, at any time after the date hereof, the Company
shall make any distribution of its assets upon or with respect to
the Common Stock, as a liquidating or partial liquidating dividend
(other than a liquidation, dissolution, or winding up of the Company
as provided for below, or other than as a cash dividend payable out
of earnings legally available for dividends under the laws of the
State of Delaware), the Holder of the Warrants evidenced hereby shall,
upon the exercise of such Warrants after the record date for such
distribution or, in the absence of a record date, after the date of
such distribution, receive, in addition to the Warrant Shares issuable
upon such exercise, the amount of such assets which would have been
distributed to such Holder had such Holder exercised such Warrants
immediately prior to the record date for such distribution or, in
the absence of a record date, immediately prior to the date of such
distribution.
(d) Unless the context otherwise indicates, all references to
Warrant Shares in this Warrant Certificate shall, in the event of an
adjustment hereunder, be deemed to refer also to any other securities
or property receivable upon exercise of the Warrants pursuant to
such adjustment.
(e) The Warrant Certificate need not be amended because of any
adjustment in the number and/or content of Warrant Shares pursuant
thereto, and any Warrant Certificate delivered after such adjustment
may state the same number of Warrant Shares as is stated in the
Warrant Certificate originally delivered. However, the Company may,
with the prior written consent of the holders of a majority of
outstanding Warrants, amend the form of Warrant Certificate, provided
such amendment in form does not affect the substance thereof; and any
Warrant Certificate thereafter countersigned and delivered, whether
in exchange or substitution for an outstanding Warrant Certificate
or otherwise, may be in the form as so amended.
(f) The Company shall not be required to issue fractional
shares of Common Stock upon exercise of the Warrants. If, by reason
of the calculation of the number of Warrant Shares issuable upon
exercise of the Warrants or any adjustment made pursuant to the terms
hereof the Holder of the Warrants evidenced hereby would be entitled,
upon the exercise thereof, to receive a fractional interest in a
share of Common Stock, the Company shall, upon such exercise, purchase
such fractional interest for an amount in cash equal to (i) the then
current market value of such fractional interest, computed on the
basis of the average closing bid and asked prices of shares of
Common Stock on the exercise date as furnished to the Company by any
member of member firm of a registered national securities exchange
selected from time to time by the Company for that purpose or (ii)
if such shares of Common Stock are listed on a national securities
exchange, at the closing price of such shares on the exercise date.
(g) The Holder of the Warrants evidenced hereby shall not,
upon the exercise thereof, be entitled to any dividends that may have
accrued with respect to the Warrant Shares issuable in respect
thereof, or to any interest that may have accrued upon any evidence
of indebtedness included in the Warrant Shares, prior to the exercise
date, except as otherwise provided above.
(h) Whenever the number and/or content of Warrant Shares
is adjusted pursuant to the terms hereof, the Company shall promptly
mail to the Holder of the Warrants evidenced hereby at the address
registered with the Company a notice setting forth the adjusted
number and/or content of Warrant Shares. Notwithstanding anything to
the contrary herein, no provisions of this Warrant Certificate shall
entitle the Holder of the Warrants evidenced hereby to any adjustment
in Warrant Shares as a result of the grant or exercise of options to
public stockholders of the Company.
4. This Warrant Certificate may be exchanged either separately
or in combination with one or more other Warrant Certificates evidencing
Warrants for one or more new certificates of like tenor and date for the
same aggregate number of Warrants as are evidenced by the Warrant
Certificate of Warrant Certificates exchanged.
5. In the event of the liquidation, dissolution, or winding
up of the Company (which shall not include an event described in the next
paragraph), a notice thereof shall be filed by the Company with the
warrant transfer agent, if any shall have been designated by the Company,
at least thirty (30) days prior to the record date (which date shall be
specified in such notice) for determining security holders of the Company
entitled to receive any distribution upon such liquidation, dissolution,
or winding up. Such notice also shall specify the date on which the right
to exercise Warrants shall expire as provided above. A copy of such
notice shall be mailed to the Holder of the Warrants evidenced hereby at
the address registered with the Company not more than thirty (30) nor
less than twenty (20) days before such record date.
6. In the case of any consolidation or merger of the Company
with or into another corporation (other than a consolidation or merger
in which the Company is the continuing corporation and which does not
result in any reclassification or change of outstanding shares of the
class or classes of Warrant Shares), or in the case of any sale or
transfer to another corporation of the property of the Company in its
entirety or substantially in its entirety, the Holder of the Warrants
evidenced hereby, upon the exercise thereof at any time after such
consolidation, merger, sale or transfer, shall be entitled to receive
the kind and amount of shares of Common Stock and other securities and
property which such Holder would have received upon such consolidation,
merger, sale, or transfer had such Holder exercised its Warrants
immediately prior thereto.
7. The issue of any shares of Common Stock or other
certificate upon the exercise of the Warrants shall be made without charge
to the Holder hereof for any tax in respect of the issue thereof. The
Company shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of any
certificate in a name other than that of the Holder of this Warrant
Certificate, and the Company shall not be required to issue or deliver
any such certificate unless and until the person or persons requesting
the issue thereof shall have paid to the Company the amount of such tax
or shall have established to the satisfaction of the Company that
such tax has been paid.
8. This Warrant Certificate and all rights hereunder are
transferable on the books of the Company only upon compliance with the
provisions of the Securities Act of 1933, as amended, and applicable
state securities laws, upon surrender of this Warrant Certificate, with
the form of assignment attached hereto duly executed by the Holder hereof
or by its attorney duly authorized in writing, to the Company at its
principal executive offices, or at the office of the warrant transfer
agent, if any shall have been designated by the Company, and thereupon
there shall be issued in the name of the transferee or transferees, in
exchange for this Warrant Certificate, a new Warrant Certificate or
Warrant Certificates of like tenor and date, representing in the
aggregate the number of warrants evidenced hereby.
9. If this Warrant Certificate shall be lost, stolen, mutilated
or destroyed, the Company shall, on such terms as to indemnify or
otherwise protect the Company as the Company may in its discretion
impose, issue a new Warrant Certificate of like denomination, tenor and
date as the Warrant Certificate so lost, stolen, mutilated or destroyed.
Any such new Warrant Certificate shall constitute an original contractual
obligation of the Company, whether or not the allegedly lost, stolen,
mutilated or destroyed Warrant Certificate shall be at any time enforceable
by anyone.
10. The Company may deem and treat the Holder of this Warrant
Certificate as the absolute owner of this Warrant Certificate for all
purposes and shall not be affected by any notice to the contrary.
11. This Warrant Certificate and the Warrants evidenced hereby
shall not entitle the Holder to any rights of a stockholder of the
Company either at law in or equity including, without limitation, the
right to vote, to receive dividends and other distributions, to exercise
any preemptive rights or to receive any notice of meetings of stockholders
or of any other proceedings of the Company, except as provided herein.
12. This Warrant Certificate, in all events, shall be wholly
void and have no effect after 5:00 P.M. (Eastern time) on _______________.
13. In the event that one or more of the provisions of this
Warrant Certificate shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Warrant
Certificate, but this Warrant Certificate shall be construed as if such
invalid, illegal or unenforceable provision had never been contained
herein.
14. This Warrant Certificate shall be binding upon any
successors or assigns of the Company.
15. This Warrant Certificate shall be governed by and
construed in accordance with the laws of the State of New York, without
giving effect to provisions thereof governing conflicts of law.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed and delivered by its officer hereunder
duly authorized.
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
By: ____________________________________________
Andrew L. Simon, President
Countersigned:
____________________________
Linda G. Straley, Secretary
<PAGE>
[Form of Subscription]
(To be Executed by the Holder Desiring to Exercise
Warrants Evidenced by the Within Warrant Certificate)
To: TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
The undersigned hereby irrevocable elects to exercise Warrants,
evidenced by the within Warrant Certificate, for, and to purchase
thereunder, full shares of Common Stock, par value $.0001 per share, of
Touchstone Applied Science Associates, Inc. issuable upon exercise of
said Warrants and delivery of $____________________ in cash.
The undersigned requests that certificates for such shares by
issued in the name of __________________________________________.
SOCIAL SECURITY
OR TAX IDENTIFICATION NUMBER: _____________________________
___________________________________________________________
___________________________________________________________
(Please print name and address)
Date:_______________________ ____________________________________
(Signature)
If said number of Warrants shall not be all of the Warrants
evidenced by the within Warrant Certificate, the undersigned requests that
a new Warrant Certificate evidencing the Warrants not so exercised be
issued in the name of and delivered to:
_________________________________________________________________________
(Please print name and address)
_________________________________________________________________________
_____________________________________________
(Signature)
NOTICE: The signature on this subscription form must correspond with the
name as written upon the face of the within Warrant Certificate,
or upon the assignment thereof, in every particular, without
alteration, enlargement, or any change whatsoever and must be
guaranteed by a bank, other than a savings bank, or trust
company having an office or correspondent in New York, New York,
or by a firm having membership on a regional securities exchange
and an office in New York, New York.
<PAGE>
TRANSFER OF WARRANT CERTIFICATE
-------------------------------
For value received ______________________________ hereby sells,
assigns and transfers unto ________________________ Warrants to purchase
shares of Common Stock, par value $.0001 per share, of TOUCHSTONE APPLIED
SCIENCE ASSOCIATES, INC. (the "Company"), which Warrants are represented
by the attached Warrant Certificate, and does hereby irrevocably
constitute and appoint ___________________________ attorney to transfer
such Warrants on the books of such Company, with full power of
substitution in the premises.
_____________________________________
(Signature)
Social Security or other
Identifying Number of Transferor: ____________________________
Address of Assignee: _______________________________________________
____________________________________________________________________
Dated: ________________________________________________________
In the Presence of: ___________________________________________
Exhibit 5
---------
CHRISTY & VIENER
620 Fifth Avenue
New York, New York 10020
(212) 632-5500
Fax: (212) 632-5555
May 22, 1997
Touchstone Applied Science Associates, Inc.
Fields Lane
P.O. Box 382
Brewster, New York 10509
Re: Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
We have acted as general counsel to Touchstone Applied Science
Associates, Inc., a Delaware corporation (the "Corporation"), in
connection with the preparation of a Registration Statement on Form S-3
(the "Registration Statement") being filed under the Securities Act of
1933, as amended, for the registration by the Corporation of shares of the
Corporation's Common Stock, par value $0.0001 per share (the "Shares"),
(i) issued in connection with the acquisition of Beck Evaluation &
Testing Associates, Inc., (ii) issued to Paris Group, Ltd. and Meyers
Pollock Robbins, Inc. in connection with various consulting arrangements,
and (iii) issuable upon the exercise of warrants held by certain third
parties (the "Warrants").
As counsel to the Corporation, we have examined and are familiar
with the Corporation's Certificate of Incorporation and By-Laws, its
corporate proceedings taken in connection with the issuance of the Shares
and Warrants, and such certificates of public officials and such other
corporate records and other documents as we have deemed necessary in
rendering this opinion.
Based upon the foregoing, we are of the opinion that:
1. The Corporation is duly incorporated, validly existing and
in good standing under the laws of the State of Delaware.
2. The Shares have been duly authorized and, upon issuance in
accordance with the exercise of the Warrants and the awards or options
granted thereunder, will be legally issued, fully paid and nonassessable.
We consent to being named in the Registration Statement on Form
S-3 as attorneys who have passed upon legal matters in connection with
the Shares and we consent to the filing of this opinion as Exhibit 5 to
the Registration Statement.
Very truly yours,
CHRISTY & VIENER
Exhibit 23.2
------------
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
I hereby consent to the reference to my firm under the caption
"Experts" in the Registration Statement (Form S-3) of Touchstone Applied
Science Associates, Inc. and to the use of, and reference to, my
independent auditor's report, dated February 10, 1995, on the financial
statements of Touchstone Applied Science Associates, Inc., as of October
31, 1994 and for the two years then ended included in its Annual Report
(Form 10-KSB) for the fiscal year ended October 31, 1995 filed with the
Securities and Exchange Commission incorporated therein.
THOMAS J. MARION
Certified Public Accountant
New York, New York
May 22, 1997
Exhibit 23.3
------------
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference of our firm under the caption
"Experts" in the Registration Statement (Form S-3) of Touchstone Applied
Science Associates, Inc. and to the incorporation by reference therein of
our report dated December 5, 1996 with respect to the consolidated
financial statements and notes thereto of Touchstone Applied Science
Associates, Inc. included in its Annual Report (Form 10-KSB) for the
fiscal year ended October 31, 1996 filed with the Securities and Exchange
Commission.
LAZAR, LEVINE & COMPANY LLP
New York, New York
May 22, 1997
