SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
--------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- -----------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- -----------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
- -----------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -----------------------------------------------------------------------------
(5) Total fee paid:
- -----------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
(1) Amount previously paid:
- -----------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- -----------------------------------------------------------------------------
(3) Filing Party:
- -----------------------------------------------------------------------------
(4) Date Filed:
- -----------------------------------------------------------------------------
<PAGE>
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
4 Hardscrabble Heights, P.O. Box 382
Brewster, New York 10509
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on March 27, 1998
To the Stockholders of Touchstone Applied Science Associates, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders (the "Meeting") of TOUCHSTONE APPLIED SCIENCE
ASSOCIATES, INC., a Delaware corporation (the "Company"), will be
held at the Company's headquarters at 4 Hardscrabble Heights,
Brewster, New York 10509 on Friday, March 27, 1998 at the hour of
9:00 a.m. local time for the following purposes:
(1) To elect Directors of the Company;
(2) To ratify the appointment of independent auditors;
and
(3) To transact such other business as may properly
come before the Meeting.
Only stockholders of record at the close of business on
February 13, 1998 are entitled to notice of and to vote at the
Meeting or any adjournment thereof.
By Order of the Board of Directors,
LINDA G. STRALEY
Vice President and Secretary
Brewster, New York
February 27, 1998
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING
REGARDLESS OF THE NUMBER OF SHARES YOU HOLD. YOU ARE INVITED TO
ATTEND THE MEETING IN PERSON, BUT WHETHER OR NOT YOU PLAN TO
ATTEND, PLEASE COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE. IF YOU DO ATTEND
THE MEETING, YOU MAY, IF YOU PREFER, REVOKE YOUR PROXY AND VOTE
YOUR SHARES IN PERSON.
<PAGE>
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
4 Hardscrabble Heights, P.O. Box 382
Brewster, New York 10509
ANNUAL MEETING OF STOCKHOLDERS
PROXY STATEMENT
This Proxy Statement and the accompanying proxy are
furnished by the Board of Directors of Touchstone Applied Science
Associates, Inc., a Delaware corporation (the "Company"), in
connection with the solicitation of proxies for use at the Annual
Meeting of Stockholders (the "Meeting") referred to in the
foregoing notice. It is contemplated that this Proxy Statement,
together with the accompanying form of proxy and the Company's
Annual Report for the fiscal year ended October 31, 1997, will be
mailed together to stockholders on or about February 27, 1998.
Stockholders of record at the close of business on
February 13, 1998 are entitled to notice of, and to vote at, the
Meeting. On that date there were issued and outstanding (i)
8,489,322 shares of Common Stock, par value $.0001 per share (the
"Common Stock"), and (ii) 1,500 shares of Series A Preferred
Stock, par value $.0001 per share (the "Preferred Stock"). Each
share of Common Stock is entitled to one vote and each share of
Preferred Stock is entitled to 3,000 votes.
The presence, in person or by proxy, of the holders of
a majority of the shares of Common Stock and Preferred Stock
outstanding and entitled to vote at the meeting is necessary to
constitute a quorum. In deciding all questions, a holder of
Common Stock shall be entitled to one vote and a holder of
Preferred Stock shall be entitled to 3,000 votes, in person or by
proxy, for each share held in his, her or its name on the record
date. Directors will be elected by a plurality of the votes cast
at the Meeting. The ratification or approval of all other
proposals will be decided by a majority of the votes cast at the
Meeting. Shares represented by proxies marked to withhold
authority to vote, and shares represented by proxies that
indicate that the broker or nominee stockholder thereof does not
have discretionary authority to vote them will be counted to
determine the existence of a quorum at the Meeting but will not
affect the plurality or majority vote required.
All proxies received pursuant to this solicitation will
be voted (unless revoked) at the Meeting or any adjournment
thereof in the manner directed by a stockholder and, if no
direction is made, will be voted FOR the election of each of the
management nominees for director in Proposal No. 1 and FOR the
ratification of the independent auditors in Proposal No. 2. If
any other matters are properly presented at the meeting for
action, which is not presently anticipated, the proxy holders
will vote the proxies (which confer authority to such holders to
vote on such matters) in accordance with their best judgment. A
proxy given by a stockholder may nevertheless be revoked at any
time before it is voted by communicating such revocation in
writing to the transfer agent, American Stock Transfer & Trust
Company, at 40 Wall Street, New York, New York 10005 or by
executing and delivering a later-dated proxy. Furthermore, any
person who has executed a proxy but is present at the Meeting may
vote in person instead of by proxy, thereby canceling any proxy
previously given, whether or not written revocation of such proxy
has been given.
As of the date of this Proxy Statement, the Board of
Directors knows of no matters other than the foregoing which will
be presented at the Meeting. If any other business should
properly come before the Meeting, the accompanying form of proxy
will be voted in accordance with the judgment of the persons
named therein, and discretionary authority to do so is included
in the proxy. All expenses in connection with the solicitation
of proxies will be paid by the Company. In addition to
solicitation by mail, officers, directors and regular employees
of the Company who will receive no extra compensation for their
services may solicit proxies by telephone, telecopier, telegraph
or personal calls. Management does not intend to use specially
engaged employees or paid solicitors for such solicitation.
Management intends to solicit proxies which are held of record by
brokers, dealers, banks, or voting trustees, or their nominees,
and may pay the reasonable expenses of such record holders for
completing the mailing of solicitation materials to persons for
whom they hold the shares.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information
regarding the beneficial ownership of the Company's Common Stock
and Series A Preferred Stock, as of December 31, 1997, by (i)
each person who is known by the Company to own beneficially more
than 5% of the Company's outstanding Common Stock; (ii) each of
the Company's officers and directors; and (iii) all officers and
directors as a group.
As of December 31, 1997, there were 8,489,322 shares of
Common Stock outstanding, and 1,500 shares of Series A Preferred
Stock outstanding. Each share of Common Stock is entitled to one
vote per share and each share of Series A Preferred Stock is
entitled to 3,000 votes per share. Consequently, there are an
aggregate of 12,989,322 eligible votes for the Company's
outstanding capital stock.
All of the shares of Common Stock and Preferred Stock
owned by Messrs. Simon and Ivens and Ms. Straley, other than
shares deemed to be owned beneficially by such officers 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, have
been appointed as successor Voting Trustees. For purposes of the
table set forth below, each of such officers is listed as
beneficially owning the shares of Common Stock and Preferred
Stock listed opposite his or her name, even though the Voting
Trust has the sole rights to vote such shares. Because the Voting
Trust has the sole and exclusive power to exercise all voting
rights with respect to the shares of Common Stock and Preferred
Stock deposited in the Voting Trust, the Voting Trust has sole
voting and dispositive power with respect to 1,441,055 shares of
Common Stock (and, therefore, 1,441,055 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
5,941,055 votes, or 45.7% of all eligible votes.
<PAGE>
<TABLE>
<CAPTION>
Shares of Percent of Shares of Percent of
Name and Address of Common Stock Common Stock Preferred Stock Preferred Stock Percent of all
Beneficial Owners and Beneficially Beneficially Beneficially Beneficially Outstanding
Directors and Officers Owned Owned Owned Owned Votes
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5% Beneficial Owners:
- ---------------------
Voting Trust, u/a dated 1,441,055 17.0% 1,500.0 100.0% 45.7%
August 19, 1992, as
amended, Julius
Ostreicher,
Andrew L. Simon
and Eileen West,
Voting Trustees
c/o Touchstone
Applied Science
Associates, Inc.,
4 Hardscrabble
Heights,
Brewster, NY 10509
- ---------------------------------------------------------------------------------------------------------
Estate of Bertram 454,170 5.4% 948.68 63.2% 25.4%
L. Koslin
c/o Ostreicher &
Ennis
225 Mamaroneck
Avenue
White Plains, NY 10605
- ----------------------------------------------------------------------------------------------------------
Eileen West 21,500(a) 0.1% 10.74 0.72% 0.1%
56 Harrison Street
New Rochelle, NY 10801
- ----------------------------------------------------------------------------------------------------------
Officers and Directors:
- -----------------------
Andrew L. Simon 649,902(b) 7.4% 179.0 11.9% 8.9%
1905 Hunterbrook Road
Yorktown Heights, NY 10598
- ----------------------------------------------------------------------------------------------------------
Stephen H. Ivens 304,976(c) 3.5% 89.5 6.0% 4.4%
272 River Drive
River Vale, NJ 07675
- ----------------------------------------------------------------------------------------------------------
Linda G. Straley 337,977(d) 3.9% 89.5 6.0% 4.6%
2 Circle Drive East
Ridgefield, CT 06877
- ----------------------------------------------------------------------------------------------------------
Steven R. Berger 5,000(e) 0.1% 0 0.0% --(f)
3 Castle View Court
Rye Brook, NY 10573
- ----------------------------------------------------------------------------------------------------------
Michael Milone 83,000(g) 0.1% 0 0.0% 0.6%
64 Calle del Norte
Placitas, NM 87043
- ----------------------------------------------------------------------------------------------------------
Michael D. Beck 284,500(h) 3.3% 0 0.0% 2.2%
35 Guion Street
Pleasantville, NY 10570
- ----------------------------------------------------------------------------------------------------------
Walter B. Barbe 10,000(i) 0.1% 0 0.0% --(f)
910 Church Street
Honesdale, PA 18431
- ----------------------------------------------------------------------------------------------------------
Officers and Directors 2,455,255(j,k) 26.5% 1,500(j) 100.0% 50.6%
as a Group (7 persons)
- ----------------------------------------------------------------------------------------------------------
<FN>
- -------------------
(a) Includes 21,500 shares which Ms. West has the right to acquire upon the exercise of
currently exercisable stock options; excludes the shares of Common Stock and Preferred
Stock held in the Voting Trust for the benefit of all members thereof, which Voting Trust
is listed separately as a 5% shareholder in this Table. Ms. West is one of three Voting
Trustees of the Voting Trust.
(b) Includes 321,500 shares which Mr. Simon has the right to acquire upon the exercise of
currently exercisable stock options, which options are not included in the Voting Trust;
excludes (i) 1,500 shares of Common Stock owned by the retirement account of Mr. Simon's
wife, as to which Mr. Simon disclaims beneficial ownership, and (ii) the shares of
Common Stock and Preferred Stock held in the Voting Trust for the benefit of all of the
members thereof, which Voting Trust is listed separately as a 5% stockholder in this table.
Mr. Simon is one of three voting Trustees of the Voting Trust.
(c) Includes 155,000 shares which Mr. Ivens has the right to acquire upon the exercise of
currently exercisable stock options.
(d) Includes 155,200 shares which Ms. Straley has the right to acquire upon the exercise of
currently exercisable stock options.
(e) Includes 5,000 shares which Mr. Berger has the right to acquire upon the exercise of
currently exercisable stock options; excludes 2,500 shares which are the subject of
options granted to Mr. Berger which are not currently exercisable.
(f) Less than 0.1%.
(g) Includes (i) 78,000 shares which are held in a Custodial SEP, of which Dr. Milone is the
beneficiary, and (ii) 5,000 shares which Dr. Milone has the right to acquire upon the
exercise of currently exercisable stock options; excludes 2,500 shares which are the
subject of options granted to Dr. Milone which are not currently exercisable.
(h) Inlcudes (i) 47,000 shares which are owned jointly with Mr. Beck's wife, (ii) 37,500 shares
owned by Mr. Beck's minor daughter, and (iii) 125,000 shares which Mr. Beck has the
right to acquire upon the exercise of currently exercisable stock options; excludes 37,500
shares owned by Mr. Beck's wife, as to which Mr. Beck disclaims beneficial ownership.
(i) Excludes 125,000 shares which are the subject of options granted to Dr. Barbe which are
not currently exercisable.
(j) Includes shares held in the Voting Trust for the benefit of the Estate of Bertram L. Koslin,
Eileen West and certain employees of the Company. Andrew L. Simon, Chairman of the
Board of Directors and President of the Company, is one of three Voting Trustees of the
Voting Trust.
(k) Includes an aggregate of 766,700 currently exercisable options which are held by officers
and directors of the Company, but are not included in the Voting Trust. Excludes an
aggregate of 130,000 options held by officers and directors of the Company which are not
currently exercisable and are not included in the Voting Trust.
</FN>
</TABLE>
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
MANAGEMENT RECOMMENDS THAT YOU VOTE IN FAVOR OF
THE NOMINEES NAMED TO THE BOARD OF DIRECTORS.
Seven directors are to be elected at the Meeting for
terms of one year each and until their successors shall be
elected and qualified. It is intended that votes will be cast
pursuant to such proxy for the election of the seven persons
whose names are first set forth below unless authority to vote
for one or more of the nominees is withheld by the enclosed
proxy, in which case it is intended that votes will be cast for
those nominees, if any, with respect to whom authority has not
been withheld. All nominees are currently members of the Board
of Directors. In the event that any of the nominees should
become unable or unwilling to serve as a director, a contingency
which the management has no reason to expect, it is intended that
the proxy be voted, unless authority is withheld, for the
election of such person, if any, as shall be designated by the
Board of Directors.
DIRECTORS WILL BE ELECTED BY A PLURALITY OF THE VOTES
CAST AT THE MEETING. THE VOTING TRUST INTENDS TO VOTE IN FAVOR
OF THE PROPOSAL.
The following table sets forth information concerning
each person nominated to serve as a director of the Company:
First
Became
Name Age Director Position
- ---- --- -------- --------
Walter B. Barbe, Ph.D. 71 1997 Director; and President,
Modern Learning Press, Inc.
Michael D. Beck 51 1997 Director; Vice President;
President and Chief
Executive Officer, Beck
Evaluation & Testing
Associates, Inc.
Steven R. Berger 42 1996 Director
Stephen H. Ivens, Ph.D. 56 1995 Director; Vice President,
DRP Services
Michael Milone, Ph.D. 52 1996 Director
Andrew L. Simon 55 1995(1) Chairman of the Board of
Directors; Chief Executive
Officer; President; Chief
Financial Officer
Linda G. Straley 42 1994 Director; Vice President,
Operations; Secretary
(1) Also served as a director of the Company from 1976 to 1991.
WALTER B. BARBE was elected as a Director of the
Company on May 30, 1997 and has been President and Publisher of
Modern Learning Press, Inc. ("MLP"), the Company's wholly-owned
subsidiary, since May 1, 1997. Dr. Barbe is also a Director of
MLP. From 1990 until he joined MLP, Dr. Barbe was a Vice
President of Universal Publishing. Prior to 1990, Dr. Barbe was
the Editor in Chief of Highlights for Children, a children's
-----------------------
magazine publication. Additionally, Dr. Barbe was a professor
and chairman of the Department of Special Education at Kent State
University and has lectured extensively on various topics. Dr.
Barbe received a B.S., an M.A. and a Ph.D. from Northwestern
University and is a licensed psychologist, a publisher and a
college professor.
MICHAEL D. BECK was elected as a Director of the
Company on March 28, 1997 and has been Vice President of the
Company since January 2, 1997. Mr. Beck is also a Director of
BETA. Since 1983, Mr. Beck has been President of BETA, which
provides consulting and contractual services to school districts,
state education departments and test and textbook publishers. As
of January 2, 1997, BETA became a wholly-owned subsidiary of the
Company and Mr. Beck continues to serve as the President of BETA.
See "Certain Relationships and Related Transactions". Mr. Beck
has also provided consulting services on matters of educational
research and assessment for various organizations, including the
U.S. Army Training Support Center and Pitney Bowes Corporation.
Mr. Beck received an A.B. from John Carroll University and an
M.A. from Fordham University.
STEVEN R. BERGER was elected as a Director of the
Company on March 29, 1996 and he also serves on the Company's
Compensation Committee and Audit Committee. Mr. Berger has been
a partner in the law firm of Christy & Viener in New York City
since January 1989. Mr. Berger received an A.B. and a J.D. from
Harvard University. Christy & Viener has acted as special
securities counsel to the Company since January 1995.
STEPHEN H. IVENS was elected as a Director of the
Company on March 31, 1995, and has been Vice President, DRP
Services since June 1997. Prior to serving as Vice President,
DRP Services, Mr. Ivens was Vice President of Research and
Development from June 1994 and, prior to that, was Executive
Director of DRP Services of the Company from August 1989. Mr.
Ivens received a B.S. in Mathematics and M.S. in Guidance from
Illinois State University and a Ph.D. in Educational Research
from Florida State University. From 1970 to 1989 he was an
Executive Director at the College Entrance Examination Board.
MICHAEL MILONE was elected as a Director of the Company
on March 29, 1996 and he also serves on the Company's
Compensation Committee and Audit Committee. Dr. Milone is also a
Director of each of MLP and BETA. Dr. Milone has been an
educational writer and independent consultant to publishers and
school districts since 1984. Dr. Milone received an M.A. from
Gallaudet University and a Ph.D. from The Ohio State University,
where he has served as an adjunct assistant professor in the
Department of Educational Services and Research.
ANDREW L. SIMON was elected as Director and as
President and Treasurer of the Company on March 31, 1995. Mr.
Simon is also a Director of MLP and is a Director and Secretary
of BETA. He served as Interim President of TASA from June 1994
through March 31, 1995. He was a founder of the Company and
previously served as a Director from 1976 to 1991 and has acted
as a financial consultant to the Company since its inception in
1976. From 1983 to 1986, he was a Vice President/Marketing
Division Head in the Private Clients Group at Bankers Trust
Company. He was a Vice President at Citibank, NA, where he held
a number of senior marketing and sales positions, from 1980 to
1983. Prior to 1980, Mr. Simon served as Marketing Director for
several consumer package goods companies including Norcliff-
Thayer and Lederle Laboratories. He holds an M.B.A. from
Columbia University and a B.A. from Washington University.
Mr. Simon is a trustee of the Harvey School and previously served
as a director of the City of Poughkeepsie Partnership.
LINDA G. STRALEY was elected as a Director of the
Company and has been Vice President of Operations since June
1994. From June 1994 through March 31, 1995, she was Chairman of
the Board of Directors. She has been Secretary since August 1992
and, since 1984, she has served as director of DRP Services for
the Company. Ms. Straley received a B.A. in Education from
Bethany College and an M.S. in Psychology and Statistics from the
State University of New York.
COMMITTEES AND MEETINGS
The Company does not presently have any standing
nominating committee of the Board of Directors or committee
performing similar functions.
The Board of Directors had 2 meetings during the fiscal
year ended October 31, 1997 ("Fiscal 1997") and otherwise acted
by unanimous written consent. All directors attended 100% of the
meetings.
The Compensation Committee, which consists of Mr.
Berger and Dr. Milone, had 3 meetings during Fiscal 1997 and
otherwise acted by unanimous written consent. The Compensation
Committee, among other things, sets compensation for the
employees of the Company and administers the Company's Amended
and Restated 1991 Stock Option Incentive Plan. All members of
the Compensation Committee attended 100% of the meetings.
The Audit Committee, which consists of Mr. Berger and
Dr. Milone, had 2 meetings during Fiscal 1997 and otherwise acted
by unanimous written consent. The Audit Committee, among other
things, reviews the financial statements with the Company's
independent auditors.
EXECUTIVE COMPENSATION
The following table shows compensation for services
rendered to the Company during the fiscal years ended October 31,
1997, 1996 and 1995, respectively, by the Chief Executive
Officer, the Vice President, DRP Services, the Vice President,
Operations and the President of BETA. Each executive officer
serves under the authority of the Board of Directors. No other
executive officer of the Company received cash compensation that
exceeded $100,000 during the fiscal years ended October 31, 1997,
1996 and 1995. Therefore, pursuant to Item 402 of Regulation S-B,
only compensation for each of the Chief Executive Officer, the
Vice President, DRP Services, Vice President, Operations and
President of BETA is shown in the Summary Compensation Table
below.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
-------------------------------------------------------------------------------
Awards Payouts
-------------------------------------
Other Annual Securities All Other
Compen- Restricted Underlying LTIP Compen-
sation Stock Options/SARs(1) Payouts sation
Name and Principal Year Salary($) Bonus($) ($) Award(s)($) (#) ($) ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Andrew L. Simon, 1997 $135,000 0 $39,025(3) 0 239,000(2) 0 0
President, Chief 1996 109,568 0 33,707(3) 0 82,500 0 0
Executive Officer 1995 99,112 $2,500 32,271(3) 0 0 0 0
and Chief Financial
Officer
- ------------------------------------------------------------------------------------------------------------------
Stephen H. Ivens, 1997 $112,000 0 $35,210(4) 0 102,500(2) 0 0
Vice President, 1996 107,068 0 34,163(4) 0 52,500 0 0
DRP Services 1995 102,498 $2,500 32,811(4) 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------
Linda G. Straley, 1997 $ 91,500 0 $23,635(5) 0 102,700(2) 0 0
Vice President, 1996 88,125 0 25,951(5) 0 52,500 0 0
Operations, 1995 72,500 $2,500 23,982(5) 0 0 0 0
and Secretary
- ------------------------------------------------------------------------------------------------------------------
Michael D. Beck, 1997 $ 83,333(8) 0 $24,622(6) 0 125,000(7) 0 0
Vice President, 1996 0 0 0 0 0 0 0
TASA; President 1995 0 0 0 0 0 0 0
and Chief Executive
Officer, BETA
- ------------------------------------------------------------------------------------------------------------------
<FN>
(1) To date, the Company has issued no SARs
(2) Granted in connection with the rejuvenation of certain
options held by all employees of the Company, pursuant
to which certain severely out-of-the-money options were
canceled and new options to purchase an equal number of
shares were granted, each with a new expiration date
and a new exercise price equal to the fair market value
of the Company's Common Stock on March 28, 1997, the
date of the Rejuvenation. See "Report of the
Compensation Committee", below.
(3) Includes: contributions of $20,250, $16,435, and
$15,242 to the Company's qualified 401(k) Profit
Sharing Plan (the "401(k)"), in the fiscal years ended
October 31, 1997, 1996, 1995, respectively; and $8,250
annually for a company car.
(4) Includes: contributions of $16,800, $16,060 and $15,750
to the Company's 401(k) in the fiscal years ended
October 31, 1997, 1996, 1995, respectively; and $6,100,
$7,250, and $7,250 for a company car, in the fiscal
years ended October 31, 1997, 1996, 1995, respectively.
(5) Includes: contributions of $10,980, $13,219 and $11,250
to the Company's 401(k) in the fiscal years ended
October 31, 1997, 1996, 1995, respectively; and $3,100,
$7,250, and $7,250 for a company car, in the fiscal
years ended October 31, 1997, 1996, 1995, respectively.
(6) Includes: a contribution of $12,500 to the Company's
401(k) in Fiscal 1997; and $4,460 for a company car in
Fiscal 1997.
(7) Granted as part of the purchase price for the
acquisition of BETA by the Company.
(8) Represents salary paid since the commencement of Mr.
Beck's employment by the Company on January 2, 1997.
</FN>
</TABLE>
EMPLOYMENT CONTRACTS
On March 1, 1996, the Company entered into an
employment agreement with each of Andrew L. Simon, Linda G.
Straley and Stephen H. Ivens, pursuant to which the Company
agreed to employ Mr. Simon, Ms. Straley and Mr. Ivens, and each
of Mr. Simon, Ms. Straley and Mr. Ivens agreed to remain, as the
Company's President and Chief Executive Officer, Vice President,
Operations and Vice President, DRP Services, respectively, for a
term of three years, subject to automatic yearly extensions and
certain rights of termination as provided in each such agreement.
As of January 2, 1997, the Company entered into an
employment agreement with Michael D. Beck, pursuant to which the
Company agreed to employ Mr. Beck, and Mr. Beck agreed to remain,
as a vice president of TASA and President and Chief Executive
Officer of BETA, for a term of three years, subject to automatic
yearly extensions and certain rights of termination as provided
in such agreement.
In the employment agreements with each of Messrs.
Simon, Ivens and Beck and Ms. Straley, the Company has agreed to
provide for certain benefits and protections for such executive
officers in connection with a change of control of the Company.
Such agreements provide that upon the occurrence of a change of
control (as defined in each agreement), such executive's
employment agreement would continue until the earlier of three
years from the date of such change of control or the date all of
the Company's obligations under the employment agreement are
satisfied. In addition, in the event of a change of control,
each executive officer would be awarded for each fiscal year
during the employment term, an annual bonus in cash at least
equal to the average annual bonus payable to such executive in
respect of two of the last three fiscal years immediately
preceding the date of the change of control in which bonuses paid
were higher. In addition, Mr. Beck's employment agreement
provides that, in the event of a change of control, he would be
entitled to receive a bonus equal to the average annual bonus
payable to Mr. Beck from the Company in respect of two of the
last three fiscal years immediately preceding the date of any
change of control in which the bonuses paid were higher.
As of May 1, 1997, MLP entered into an employment
agreement with Walter B. Barbe, pursuant to which MLP agreed to
employ Dr. Barbe, and Dr. Barbe agreed to remain, as MLP's
President and Publisher for a term of one year, subject to
automatic yearly extensions and certain rights of termination as
provided in each such agreement.
Each employment agreement contains a non-competition
clause for two years following termination of the executive's
employment.
Generally, each employee of the Company has agreed to
the assignment to the Company of the employee's rights to any
inventions relating to the Company's business or interest which
were conceived both prior to and during the period of employment
and, except under certain specified conditions, the Company's
employees are prohibited from competing for one year with the
Company in areas in which he or she was employed.
STOCK INCENTIVE PLAN
The Board of Directors of the Company adopted the 1991
Stock Option Incentive Plan (the "Option Plan") on August 25,
1991 in order to attract and retain qualified personnel, which
Option Plan was approved by the stockholders on August 25, 1991.
The Board of Directors adopted the Amended and Restated 1991
Stock Option Incentive Plan (the "Amended Option Plan") in
February 1996, which Amended Option Plan amended and restated the
Option Plan and was approved by the stockholders of the Company
on March 29, 1996. Under the Amended Option Plan, options to
purchase up to 2,500,000 shares of Common Stock may be granted to
employees, officers, directors and consultants of the Company.
The Amended Option Plan is administered by the Compensation
Committee of the Board of Directors (the "Committee"). Subject to
the terms of the Amended Option Plan, the Committee is authorized
to select optionees and determine the number of shares covered by
each option and certain of its other terms. The exercise price
of stock options granted under the Amended Option Plan may not be
less than the fair market value of the Company's Common Stock on
the date of the grant. In general, options become exercisable
after the first anniversary of the date of grant. The period
within which any stock option may be exercised cannot exceed ten
years from the date of grant. Options held by a terminated
employee expire three months after termination except in the
event of death, disability or termination for cause. No one
participant may receive, in any one fiscal year, awards under the
Amended Option Plan which would entitle the Participant to
receive more than 200,000 shares.
In Fiscal 1995, the Company granted a total 72,500
options under the Option Plan; in Fiscal 1996, the Company
granted a total of 233,000 options under the Amended Option Plan;
and in Fiscal 1997, the Company granted a total of 1,018,250
options under the Amended Option Plan of which 715,750 options
were granted in connection with the Rejuvenation. In Fiscal
1995, 18,900 options under the Option Plan were forfeited; in
Fiscal 1996, 637,678 options under the Amended Option Plan were
canceled or forfeited; and in Fiscal 1997, 715,750 options under
the Amended Option Plan were canceled. As of December 15, 1997,
there were 1,355,250 options in the aggregate outstanding under
the Amended Option Plan.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
- -----------------------------------------------------------------------------------------------------------------
Number of Securities
Underlying Percent of Total Exercise or
Options/SARs(1) Granted Options/SARs Granted to Base Price
Name (#) Employees in Fiscal Year(3) ($/Sh) Expiration Date
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Andrew L. Simon, 239,000(2)(5) 26.6% $0.719 March 27, 2007
President, Chief
Executive Officer and
Chief Financial
Officer
- -----------------------------------------------------------------------------------------------------------------
Stephen H. Ivens, 102,500(2)(5) 11.4% $0.719 March 27, 2007
Vice President, DRP
Services
- -----------------------------------------------------------------------------------------------------------------
Linda G. Straley, 102,700(2)(5) 11.4% $0.719 March 27, 2007
Vice President,
Operations, and
Secretary
- -----------------------------------------------------------------------------------------------------------------
Michael D. Beck, 125,000(4) 13.9% $0.531 January 2, 2002
Vice President,
TASA; President
and Chief Executive
Officer, BETA
- -----------------------------------------------------------------------------------------------------------------
<FN>
(1) To date, the Company has issued no SARs.
(2) These options became exercisable on September 29, 1997.
(3) Includes all options granted to employees and directors
under the Amended Option Plan, the Directors Stock
Option Plan and the Consultants Stock Incentive Plan in
Fiscal 1997.
(4) These options became exercisable on January 3, 1998.
(5) Granted in connection with the Rejuvenation.
</FN>
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Number of Value of
Securities Underlying Unexercised
Unexercised In-the-Money
Options/SARs(1) Options/SARs(1)
at FY-End(#) at FY-End ($)
----------------------------------------
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Andrew L. Simon, 0 0 321,500/0 $30,580/$0.00(2)
President, Chief
Executive Officer
and Chief
Financial Officer
- -----------------------------------------------------------------------------------------------------
Stephen H. Ivens, 0 0 155,000/0 $13,542/$0.00(2)
Vice President,
DRP Services
- -----------------------------------------------------------------------------------------------------
Linda G. Straley, 0 0 155,200/0 $13,517/$0.00(2)
Vice President,
Operations, and
Secretary
- -----------------------------------------------------------------------------------------------------
Michael D. Beck, 0 0 o/125,000(3) $0.00/$39,125(2)(3)
Vice President,
TASA; President
and Chief Executive
Officer, BETA
- -----------------------------------------------------------------------------------------------------
<FN>
(1) To date, the Company has issued no SARs.
(2) Based on the closing bid price of the Company's Common
Stock on NASDAQ on October 31, 1997, or $0.844.
(3) Became exercisable on January 3, 1998.
</FN>
</TABLE>
Report of the Compensation Committee
During Fiscal 1997, the Compensation Committee of the
Board of Directors determined to institute an option
"rejuvenation" program (the "Rejuvenation"), rather than award
new options to employees. Pursuant to the Rejuvenation, each
employee of the Company, including executive officers, holding
severely out-of-the-money options previously granted to him or
her under the Option Plan in the fiscal years ended October 31,
1992, 1993, and 1994 would forfeit such options in exchange for
options to purchase the same number of shares of the Company's
Common Stock as was represented by the options so forfeited. In
each instance, a new six-month vesting schedule, a new expiration
date of March 27, 2007 and a new exercise price equal to the fair
market value of the Company's Common Stock on March 27, 1997 was
established.
The Compensation Committee believes that the
Rejuvenation is in the best interests of the Company, as it
provides the Company's employees with a meaningful incentive
compensation opportunity in light of the trading prices of the
Company's Common Stock and does not further deplete the shares of
Common Stock available for future grants under the Amended Option
Plan.
The options held by Messrs. Simon and Ivens and Ms.
Straley which were granted in the fiscal years ended October 31,
1992, 1993, and 1994 were forfeited in connection with the
Rejuvenation. The Compensation Committee acknowledges that Mr.
Simon's grant exceeds the annual grant limit per employee per
year imposed by the Amended Option Plan; however, as the grant
was not a grant of new shares from the Amended Option Plan, but
merely a re-grant of three years' worth of options at a new
exercise price, the Compensation Committee opted to waive this
limitation in this one instance.
Submitted by:
Compensation Committee
----------------------
Steven R. Berger
Michael Milone
DIRECTORS COMPENSATION
The Board of Directors of the Company adopted the
Directors Plan in February 1996 in order to aid the Company in
attracting, retaining and motivating independent directors, which
Directors Plan was approved by the stockholders of the Company on
March 29, 1996. Under the Directors Plan, non-qualified stock
options to purchase up to 100,000 shares of Common Stock may be
granted to non-employee directors of the Company, which options
are granted automatically at the times and in the manner stated
in the Directors Plan.
Subject to the terms of the Directors Plan, each non-
employee director receives 5,000 options on the day he (she)
first is elected to the Board of Directors, and 2,500 options on
the date of each annual meeting of the stockholders of the
Company, provided he (she) is re-elected to the Board of
Directors. The exercise price of stock options granted under the
Directors Plan is the fair market value of the Company's Common
Stock on the date of grant. The options become exercisable after
the first anniversary of the date of grant and the term of the
option cannot exceed ten years. On March 29, 1996, the Company
granted 10,000 options; and on March 28, 1997, the Company
granted 5,000 options.
On March 11, 1997, the Company entered into a
consulting contract with Michael Milone, pursuant to which Dr.
Milone would provide consulting services to the Company in
exchange for the grant of options to purchase 30,000 shares of
the Company's Common Stock pursuant to the Consultants Stock
Incentive Plan (the "Consultants Plan"). The agreement expired
October 31, 1997.
Directors receive no compensation, other than the
options pursuant to the Directors Plan, for services in such
capacity.
OTHER PLANS
Consultants Stock Incentive Plan. In March 1997, the
--------------------------------
Board of Directors of the Company adopted the Consultants Plan,
pursuant to which options to purchase up to 200,000 shares of
Common Stock may be granted to consultants to the Company. The
Consultants Plan is administered by the Board of Directors of the
Company. Subject to the terms of the Consultants Plan, the Board
is authorized to select optionees and determine the number of
shares covered by each option and certain of its other terms. In
general, the exercise price of stock options granted under the
Consultants Plan is the fair market value of the Company's Common
Stock on the date of the grant, however, the Board has the
discretion to use another method of valuation if it determines
that such other valuation is warranted. In general, options
become exercisable six months from the date of grant, although
the Board has discretion to set either longer or shorter vesting
periods. The period within which any stock option may be
exercised cannot exceed ten years from the date of grant. If a
consultant's association with the Company is terminated prior to
the end of its agreed term, all unexercised, deferred and unpaid
awards shall be canceled immediately, except in the event of the
Consultant's death or disability. In Fiscal 1997, 50,000 options
were granted under the Consultants Plan.
Profit Sharing Plan. The Company has a qualified 401(k)
-------------------
Profit Sharing Plan. The 401(k) Plan allows employees to
contribute up to 15 percent of income through Company
contributions and a salary reduction mechanism. Company
contributions to the 401(k) Plan are optional and accrue at the
discretion of the Board of Directors. For Fiscal 1997, Fiscal
1996 and Fiscal 1995, the Company made a contribution to profit
sharing equal to five percent (5%) of each eligible employee's
compensation, thereby limiting each eligible employee to
contribute up to ten percent (10%) of compensation.
Net assets for the 401(k) Plan, as estimated by the
Massachusetts Mutual Life Insurance Company which maintains such
plan's records, are $1,523,346 at October 31, 1997.
Money Purchase Pension Plan. In October 1991, the
---------------------------
Company adopted a Money Purchase Pension Plan, which has been
qualified by the Internal Revenue Service. Under this Plan, the
Company makes an annual contribution to the Plan equal to ten
percent (10%) of each eligible employee's compensation.
Net assets for the Money Purchase Pension Plan, as
estimated by the Massachusetts Mutual Life Insurance Company
which maintains such plan's records, are $742,342 at October 31,
1997.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's directors, executive officers and persons
who own beneficially more than ten percent of the Company's
outstanding common stock to file with the SEC initial reports of
beneficial ownership and reports of changes in beneficial
ownership of common stock and other securities of the Company on
Forms 3, 4 and 5, and to furnish the Company with copies of all
such forms they file. Based on a review of copies of such
reports received by the Company, all of the Company's directors
and officers timely filed all reports required with respect to
Fiscal 1997.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
As of January 2, 1997 (the "Agreement Date"), the
Company purchased all of the outstanding capital stock of BETA
from the holders of such shares for a purchase price equal to (i)
$130,000 in cash, (ii) $150,000 payable in promissory notes,
bearing interest at the rate of 8 1/4% and maturing on January 2,
1999, and (iii) 150,000 shares of the Company's Common Stock, par
value $.0001 per share. Michael D. Beck, Vice President and
Director of the Company and President and Chief Executive Officer
of BETA, Connie Beck, Mr. Beck's wife, and Amanda Beck, Mr.
Beck's minor daughter, were the shareholders of BETA at the time
of its acquisition. Pursuant to the Stock Purchase Agreement,
Mr. Beck has the option to repurchase all of the outstanding
capital stock of BETA from the Company for a period of six years
from the Agreement Date, provided that Mr. Beck may not exercise
the option prior to the third anniversary of the Agreement Date
unless his employment with the Company and BETA is not renewed at
the expiration of the initial three-year term or has been
terminated for "cause" or "disability" or he leaves after a
change of control for "good reason" (as contemplated by his
employment agreement). The option exercise price is subject to a
formula and varies based upon the reason for, and timing of,
exercise.
One of the Company's directors, Steven R. Berger, is a
partner in Christy & Viener, which acts as special securities
counsel to the Company. The Company paid legal fees of $124,864,
$112,458 and $84,362 to Christy & Viener for the fiscal years
ended October 31, 1997, 1996 and 1995, respectively.
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT AUDITORS
MANAGEMENT RECOMMENDS THAT YOU VOTE TO RATIFY
THE APPOINTMENT OF THE INDEPENDENT AUDITORS.
The Board of Directors of the Company has appointed the
firm of Lazar, Levine & Felix LLP ("Lazar") as its independent
auditors for the 1998 fiscal year. While it is not required to
do so, the Company is submitting the appointment of Lazar to the
stockholders for ratification. Lazar has been serving the
Company in this capacity since September 1995. A representative
from Lazar will be present at the Meeting and will be given the
opportunity to make a statement if the representative desires to
do so. The representative is expected to be available to respond
to appropriate questions. If the appointment of Lazar is not
ratified by the stockholders of the Company, the Board of
Directors will reconsider the appointment of Lazar.
THE APPOINTMENT OF THE INDEPENDENT AUDITORS WILL BE
RATIFIED BY A MAJORITY OF THE VOTES CAST. THE VOTING TRUST
INTENDS TO VOTE IN FAVOR OF THE PROPOSAL.
OTHER INFORMATION
Accompanying this Proxy Statement and the notice of
meeting which is the first page of this Proxy Statement is the
Company's Proxy and Annual Report for its fiscal year ended
October 31, 1997.
PROPOSALS OF SECURITY HOLDERS
Proposals of security holders intended to be presented
at the next Annual Meeting must be received by the Company for
inclusion in the Company's Proxy Statement and form of proxy
relating to that meeting no later than October 30, 1998.
AVAILABILITY OF ANNUAL REPORT
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1997, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, WILL BE PROVIDED FREE OF
CHARGE TO ANY STOCKHOLDER UPON WRITTEN REQUEST TO:
Ms. Linda G. Straley, Vice President and Secretary,
Touchstone Applied Science Associates, Inc., P.O. Box 382,
4 Hardscrabble Heights, Brewster, New York 10509.
LINDA G. STRALEY
Vice President and Secretary
Brewster, New York
February 27, 1998
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
PROXY--Annual Meeting of Stockholders--March 27, 1998
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, a stockholder of TOUCHSTONE APPLIED SCIENCE
ASSOCIATES, INC., a Delaware corporation (the "Company"), does
hereby appoint ANDREW L. SIMON and LINDA G. STRALEY, and each of
them, the true and lawful attorneys and proxies, with full power
of substitution, for and in the name, place and stead of the
undersigned, to vote, as designated below, all of the shares of
stock of the Company which the undersigned would be entitled to
vote if personally present at the Annual Meeting of Stockholders
of the Company to be held at the headquarters of the Company at 4
Hardscrabble Heights, Brewster, New York 10509, on March 27,
1998, at 9:00 a.m., local time, and at any adjournment or
adjournments thereof.
Please mark
[X] votes as in
this example
UNLESS OTHERWISE DIRECTED, THIS PROXY WILL BE VOTED IN ACCORDANCE
WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS.
1. Election of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES.
Nominees: Walter B. Barbe, Michael D. Beck, Steven R. Berger,
Stephen H. Ivens, Michael Milone, Andrew L. Simon,
and Linda G. Straley
WITHHELD
FOR ALL [ ] FROM ALL [ ]
NOMINEES NOMINEES
For, except vote withheld from the following nominee(s):
[ ]------------------------------------------------------------------
2. Ratification of the Company's Independent Auditors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. To vote with discretionary authority with respect to all
other matters which may come before the meeting.
The undersigned hereby revokes any proxy or proxies heretofore
given and ratifies and confirms all that the proxies appointed
hereby, or either one of them, or their substitutes, may lawfully
do or cause to be done by virtue hereof. Both of said proxies or
their substitutes who shall be present and act at the meeting, or
if only one is present and acts, then that one, shall have and
may exercise all of the powers hereby granted to such proxies.
The undersigned hereby acknowledges receipt of a copy of the
Notice of Annual Meeting and Proxy Statement, both dated February
27, 1998, and a copy of the Annual Report for the fiscal year
ended October 31, 1997.
[ ] MARK HERE FOR ADDRESS CHANGE AND INDICATE CHANGE:
Signature: Date
------------------------------------------- -----------------
Signature: Date
------------------------------------------- -----------------
NOTE: Your signature should appear the same as your name
appears hereon. In signing as attorney, executor,
administrator, trustee or guardian, please indicate the
capacity in which signing. When signing as joint
tenants, all parties in the joint tenancy must sign.
When a proxy is given by a corporation, it should be
signed by an authorized officer and the corporate seal
affixed. No postage is required if returned in the
enclosed envelope and mailed in the United States.
