As filed with the Securities and Exchange Commission on March 31, 1999.
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)
_________________________
4 Hardscrabble Heights
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.
4 Hardscrabble Heights, 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.
Salans Hertzfeld Heilbronn Christy & Viener
620 Fifth Avenue
New York, New York 10020
(212) 632-5500
_________________________
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 effective 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. [ ]
CALCULATION OF REGISTRATION FEE
Title of each Proposed Proposed
class of Amount maximum maximum Amount of
securities to to be offering price aggregate registration
be registered registered per unit(1) offering price(1) fee(1)
Common Stock 87,500 $1.95 $170,625 $48.00
($.0001 par value)
(1) Estimated solely for purposes of calculating the
registration fee on the basis of the last reported sale price of
the Common Stock on March 25, 1999 on The Nasdaq Small
Capitalization Market in accordance with Rule 457(c) under the
Securities Act of 1933.
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>
Registration No. 333-
PROSPECTUS
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
87,500 SHARES OF COMMON STOCK
This Prospectus is being used by several
stockholders (the "Selling Stockholders") of Touchstone
Applied Science Associates, Inc. ("Touchstone") to sell 87,500
shares of Touchstone's Common Stock. The Selling Stockholders
will sell the Common Stock at prices then attainable, less
ordinary brokers' commissions and dealers' discounts, as
applicable. The shares of Common Stock being offered were
either previously issued to the Selling Stockholders or are
issuable upon the exercise of certain warrants issued by
Touchstone to the Selling Stockholders. All share amounts and
per share prices in this Prospectus and the related
Registration Statement have been adjusted to reflect the one-for-
four reverse stock split on March 4, 1999.
INVESTING IN THE COMMON STOCK INVOLVES RISKS WHICH
ARE DESCRIBED IN THE "RISK FACTORS" SECTION BEGINNING ON PAGE
7 OF THIS PROSPECTUS.
Touchstone's Common Stock trades on The Nasdaq Small
Capitalization Market under the trading symbol TASA. On March
25, 1999, the last sale price of the Common Stock on The
Nasdaq Small Capitalization Market was $2.125 per share.
Accordingly, the aggregate proceeds to the Selling
Stockholders may be calculated as follows:
____________________
Per Share Total
--------- -----
Public Offering Price. . . . . . . . . . .. . . . . . . $2.125 $185,958
Underwriting discount. . . . . . . . . . . . . . . . . .$0.00 $0.00
Proceeds, before expenses, to Selling Stockholders . . .$2.125 $185,958
____________________
Neither the Securities and Exchange Commission nor
any state securities commission has approved or disapproved of
these securities or determined if this Prospectus is truthful
or complete. Any representation to the contrary is a criminal
offense.
____________________
The date of this Prospectus is ________, 1999.
<PAGE>
TABLE OF CONTENTS
Forward-Looking Statements . . . . . . . . . . . . . . . . . . .2
Where You Can Find More Information About the Company. . . . . .4
Incorporation of Information We File with the SEC. . . . . . . .4
Summary Information. . . . . . . . . . . . . . . . . . . . . . .6
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . .7
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . 15
The Selling Stockholders . . . . . . . . . . . . . . . . . . . 15
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . 17
Selected Historical Financial Information. . . . . . . . . . . 18
Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . 19
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
FORWARD-LOOKING STATEMENTS
This Report contains (or incorporates by reference)
certain "forward-looking statements". We have based these
forward-looking statements on our current expectations and
projections about future events. These forward-looking
statements are subject to risks, uncertainties and assumptions
about Touchstone, including, among other things:
. Rapid changes in (i) the technology used to administer
standardized tests generally or market educational
materials or (ii) in the policy considerations which
determine which test will be administered;
. Non-renewal of certain annual contracts with various
states;
. The loss of any significant customer;
. Our ability to compete successfully with the other
providers of standardized tests;
. Our ability to accommodate any changes in government
regulation which may impact the marketability of our
tests;
. The inability of the Mildred Elley schools to requalify
for the Federal student loan program, or the loss of
its eligibility under Federal or state grant programs
for tuition assistance, or the discontinuance of
Federal or state grant programs for tuition assistance;
. The loss of accreditation of the Mildred Elley schools;
-2-
<PAGE>
. Our ability to secure additional financing as and when
necessary;
. Our ability to retain the services of our key
management, and to attract new members of the
management team;
. Our ability to effect and retain appropriate patent,
copyright and trademark protection of its products;
. Our ability to meet the continued listing requirements
of the Nasdaq Small Capitalization Market;
. The failure of third parties to resolve the potential
impact of the year 2000 on relevant computerized
information systems by January 1, 2000;
. Any decrease in the market for educational consulting
services; and
. Increased competition in the field of publishing.
We undertake no obligation to update publicly or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise. In light of these
risks, uncertainties and assumptions, the forward-looking events
contained or incorporated by reference in this Prospectus might
not occur.
____________________
You should rely only on the information contained in or
incorporated by reference into this Prospectus. We have not
authorized any other person to provide you with different
information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not
making an offer to sell these securities in any jurisdiction
where the offer or sale is not permitted. You should assume that
the information appearing in this Prospectus, as well as
information we previously filed with the SEC and incorporated by
reference, is accurate as of the date on the front cover of this
Prospectus only. Our business, financial condition, results of
operations and prospects may have changed since that date.
-3-
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION ABOUT THE COMPANY
We file reports, proxy statements, and other
information with the Securities and Exchange Commission (SEC File
Number 0-20303). Our SEC filings are also available over the
Internet at the SEC's web site at http://www.sec.gov. You may
------------------
also read and copy any document we file at the SEC's public
reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
more information on the public reference rooms and their copy
charges. You may also inspect our SEC reports and other
information at The Nasdaq Stock Market, Inc., 1735 K Street,
N.W., Washington D.C. 20006-1500. Additionally, we maintain
web sites at http://www.tasa.com and http://www.tasaliteracy.com.
------------------- --------------------------
At the same time as we are filing this Prospectus with
the SEC, we are also filing a registration statement on Form S-3
covering the Common Stock being sold by the Selling Stockholders.
For further information on Touchstone and our Common Stock, you
should refer to our registration statement and its exhibits.
This Prospectus summarizes material provisions of contracts and
other documents to which we refer you. As the Prospectus may not
contain all the information that you may find important, you
should review the full text of those documents.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The SEC allows us to "incorporate by reference" the
information we file with it, which means:
. Incorporated documents are considered part of the
Prospectus;
. We can disclose important information to you by
referring you to those documents; and
. Information that we file with the SEC will
automatically update and supersede this Prospectus.
We incorporate by reference the documents listed below
which were filed with the SEC under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"):
. Annual Report on Form 10-KSB for the fiscal year ended
October 31, 1998;
. Quarterly Report on Form 10-QSB for the fiscal quarter
ended January 31, 1999;
. Current Report on Form 8-K filed with the SEC on
November 23, 1998 (and the Amendment to that Current
Report filed with the SEC on January 21, 1999);
. Current Report on Form 8-K filed with the SEC on
December 22, 1998; and
-4-
<PAGE>
. Description of our Common Stock set forth in
Touchstone's Registration Statement on Form 8-A, dated
May 28, 1992, including any subsequent amendment or
report filed for the purpose of updating such
description.
We also incorporate by reference each of the following
documents that we will file with the SEC after the date of this
Prospectus but before all the Common Stock offered by this
Prospectus has been sold:
. Reports filed under Sections 13(a) and (c) of the
Exchange Act; and
. Definitive proxy or information statements filed under
Section 14 of the Exchange Act in connection with any
subsequent stockholders' meeting.
. Any reports filed under Section 15(d) of the Exchange
Act.
You may request a copy of any filings referred to above
(excluding exhibits), at no cost, by contacting us at the
following address:
Touchstone Applied Science Associates, Inc.
4 Hardscrabble Heights
P.O. Box 382
Brewster, New York 10509
Attention: Secretary
(914) 277-8100
-5-
<PAGE>
SUMMARY INFORMATION
INFORMATION ABOUT TOUCHSTONE
Touchstone serves the education market with assessment
and instructional products and, as of November 1998, in the post-
secondary proprietary school market. Prior to new executive
management in 1994, Touchstone's primary business was reading
assessment through the publishing and sale of its proprietary
tests and related assessment tools. Since 1994, Touchstone's
current management has implemented a strategy to broaden
Touchstone's services in the education market. In Touchstone's
1997 and 1998 fiscal years and through the beginning of fiscal
1999, Touchstone completed four acquisitions in three core
segments of the education market: assessment, instruction and
delivery. Touchstone revenues increased from $2.5 million in
1996 to $6.3 million in 1998 and, on a pro forma basis, to over
--- -----
$11.0 million with the acquisition of the Mildred Elley post-
secondary proprietary schools in November 1998.
Touchstone is located at 4 Hardscrabble Heights,
Brewster, New York 10509, telephone: 914-277-8100. Touchstone
maintains websites at http://www.tasa.com and
-------------------
http://tasaliteracy.com. Touchstone is a Delaware corporation.
- -----------------------
INFORMATION ABOUT THE SELLING STOCKHOLDERS AND THIS PROSPECTUS
In August 1997, Touchstone retained Theodore P.
Allocca, Theodore P. Allocca, Jr., Steven Kevorkian and Barry M.
Goldstein (together, the "Selling Stockholders") as financial
consultants. Pursuant to their consulting agreements, the
Selling Stockholders received a total 25,000 shares of
Touchstone's common stock, par value $0.0001 per share (the
"Common Stock"), and warrants to acquire an additional 62,500
shares (together, the "Shares").
The Selling Stockholders are using this Prospectus to
sell, from time to time, the Shares. Once this Prospectus is
effective, the Selling Stockholders may:
. sell the 25,000 Shares currently held by them on the
open market; and
. upon exercise of their warrants (including payment of
the warrant exercise price), sell the additional 62,500
Shares underlying the warrants on the open market;
Touchstone does not know if or when any of the Selling
Stockholders will exercise any of the warrants or sell any of the
Shares referred to above.
You should rely only on the information contained in
this Prospectus or in documents that this Prospectus incorporates
by reference. Touchstone has not authorized anyone to provide
you with information that is different. This Prospectus is not
an offer to sell the Shares and is not soliciting an offer to buy
the Shares in any state where the offer or sale is not permitted.
You should not assume that the information in this Prospectus or
any of its supplements is accurate as of any date other than the
date of this Prospectus.
-6-
<PAGE>
RISK FACTORS
This section describes some, but not all, of the risks
of purchasing our Common Stock. The order in which these risks
are listed does not necessarily indicate their relative
importance. You should carefully consider these risks and the
other information in this Prospectus before investing in our
Common Stock.
This Prospectus contains forward-looking statements.
These statements are based on our current beliefs, expectations
and assumptions and are subject to a number of risks and
uncertainties. Actual results and events may vary materially from
those discussed in the forward-looking statements. We discuss
risks and uncertainties that might cause such a difference above
and in other places in this Prospectus.
NO DIVIDENDS. The payment by us of dividends, if any,
in the future, rests within the discretion of our Board of
Directors and will depend, among other things, upon:
. our earnings;
. our capital requirements; and
. our financial condition, as well as other relevant
factors.
We have no present intention of paying any cash dividends on our
Common Stock in the foreseeable future. We intend to use our
earnings, if any, to generate growth.
GOVERNMENT REGULATIONS. ASSESSMENT. The degree of
----------
government regulations to be imposed on us in the assessment
field is uncertain at this time. Under Title I 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 I regulations include a requirement
that schools receiving Title I funds must evaluate student growth
or progress in reading. We believe that State Education
Authorities (SEAs) find DRP test results to be in accord with the
regulations for Title I, as DRP tests are used by schools to
evaluate Federally-supported Title I programs; however, we cannot
assure you that this is or will continue to be the case.
We believe it may be necessary to obtain other
governmental approvals for our products. If necessary, a portion
of our revenues may be directed toward obtaining such approvals,
and we cannot assure you that any such expenditures will lead to
the necessary approvals. Additionally, the extent of potentially
adverse government regulations which might arise from future
legislative or administrative action cannot be predicted.
EDUCATIONAL DELIVERY. The post-secondary proprietary
--------------------
school industry is highly regulated with respect to accreditation
and government funding issues. To participate in federal student
financial aid programs, an institution must receive and maintain
authorization by the appropriate state education authority or
authorities, accreditation by an accrediting commission
-7-
<PAGE>
recognized by the U.S. Department of Education, and certification
by the U.S. Department of Education. As a result, we are subject
to extensive regulation by the U.S. Department of Education,
state education authorities and accrediting commissions.
The purpose of these regulations is to protect
students, the public and the government; it is not to protect
stockholders. Among other things, these regulations require us
to satisfy criteria related to:
. our programs of study and educational resources,
including faculty, equipment and facilities;
. our administrative capability; and
. the management and control of our financial
operations, including our ability to meet specified
financial ratios and other standards.
Regulatory requirements affect our capital structure, investment
practices and cash management. They also affect our ability to
make acquisitions, sell our Common Stock or change our corporate
structure. These requirements may limit our operations or
expansion plans. Our regulatory agencies periodically change
their regulatory requirements. We believe that we substantially
comply with requirements of these regulatory bodies, but we
cannot predict with certainty how all of their requirements will
be applied, or if we will be able to comply with all of their
requirements in the future.
Accreditation. Through one of our subsidiaries, we
-------------
acquired Mildred Elley in November 1998. As a result of the
change in ownership of Mildred Elley, the Mildred Elley schools
are required, under applicable regulation, to apply to the
accrediting agency, the U.S. Department of Education, and the
applicable state departments of education for approval to operate
under its new owners. We were notified that, on February 8,
1999, the U.S. Department of Education approved the transfer of
ownership of Mildred Elley from its former stockholders to us.
Government Funding. Students attending Mildred Elley
------------------
schools finance their education through a combination of
individual resources and government sponsored financial aid in
the form of loans and grants. Touchstone estimates that over 70%
of students currently enrolled at the Mildred Elley schools
receive some form of government-sponsored assistance. Currently,
Mildred Elley students may receive tuition funds under Federal
Pell grant programs and New York State grant programs, as well
from loans funded by Mildred Elley itself.
The Federal government provides a substantial part of
its support for post-secondary education in the form of grants
and loans to students attending an institution certified as
eligible by the U.S. Department of Education. The Higher
Education Act of 1965, as amended (the "Higher Education Act"),
and the regulations promulgated by the U.S. Department of
Education pursuant to the Higher Education Act subject the
Mildred Elley schools to significant regulatory scrutiny on the
basis of numerous standards that schools must satisfy in order to
participate in the various Federal student financial assistance
programs under Title IV of the Higher Education Act. Included
among these standards are the following:
-8-
<PAGE>
. the institution must maintain a rate of default by
its students on federally guaranteed or funded
student loans that is below a certain rate;
. the proportion of an institution's revenue that
may be derived from Title IV programs is limited;
. the institution must adhere to certain financial
responsibility and administrative capability
standards;
. the institution must adhere to certain change in
ownership restrictions; and
. the institution must achieve certain standards in
program completion and placement.
An institution may lose its eligibility to participate
in some or all Federal student financial aid programs, if the
rates at which the institution's students default on their
Federal student loans exceed specified percentages. Due to prior
default rates on student loans, Mildred Elley students do not
currently qualify for loans under Title IV. We currently
anticipate that in the spring or fall of 2000, the Mildred Elley
schools will be requalified for the Title IV program. We cannot
assure you that the Mildred Elley schools will requalify for the
Title IV program at that or any other time. To the extent that
the Mildred Elley schools qualify for the Federal student loan
programs, the schools will be more attractive to potential
students and will not have to provide funding for tuition loans.
If the Mildred Elley schools are unable to qualify for student
loan programs or if the Federal or state grant programs are
limited or withdrawn, Mildred Elley will have to provide its own
funding for tuition loans. We are not currently aware of any
facts indicating that such programs may be cut, but we cannot
assure you that the loan programs will be available to the
Mildred Elley schools indefinitely.
The U.S. Congress regularly reviews and revises the
laws governing federal student financial aid programs. The U.S.
Congress also must determine the federal funding level for each
of these programs every year. Any action by the U.S. Congress
that significantly reduces funding for federal student financial
aid programs or the ability of our institutes or students to
participate in these programs could have a material adverse
effect on our financial condition or results of operations.
Legislative action may also increase our administrative costs and
burden and require us to adjust our practices in order for our
institutes to comply fully with the legislative requirements,
which could have a material adverse effect on our financial
condition or results of operations.
Each of our institutes must be authorized by the
applicable state education authority or authorities to operate
and grant degrees or diplomas to its students. State
authorization and accreditation by an accrediting commission
recognized by the U.S. Department of Education are also required
in order for an institution to be eligible to participate in
Federal student financial aid programs. Loss of state
authorization by any of our institutes would force us to close
that institute.
-9-
<PAGE>
COMPETITION. Our success in the industries in which we
operate will be based on the following criteria:
. scientific and technological superiority;
. service;
. product support;
. the availability of patent and copyright
protection;
. access to adequate capital;
. the ability to successfully develop and market
products and processes;
. access to superior faculty and the ability to
. develop and offer desirable course programs; and
. the ability to obtain government approvals.
Each of our industries has intense competition. Both domestic
and foreign companies may be deemed dominant competitors. We
cannot assure you that the features of our products and/or our
ability to provide quality services will permit us to compete
successfully in our designated marketplaces.
ASSESSMENT. Our principal competition in assessment
----------
comes from established profit and non-profit companies in the
testing business and testing departments within certain states
and school districts. Many of these are considerably larger and
have greater financial and human resources and marketing
capabilities than we do. Education publishers who include
reading comprehension tests with their instructional materials
and companies that distribute reading motivation programs may
also compete with us.
INSTRUCTIONAL MATERIALS. The elementary school market
-----------------------
for the consumable books published by Modern Learning Press is
both huge and highly competitive, with every major publisher and
numerous smaller publishers providing material. Our disadvantage
is that our marketing resources are significantly smaller than
those of the major publishers. One advantage is that, with our
smaller corporate structure, decisions can be made rapidly so
that new products can be available in a fraction of the time
required by the major publishers. Another competitive advantage
is that our products have a much lower selling price than other
consumable books. We cannot assure you that our advantages will
continue to outweigh our disadvantages.
EDUCATIONAL DELIVERY. The post-secondary education
--------------------
market is highly competitive. We compete for students and
faculty with public and private two-year and four-year colleges
as well as other proprietary schools. Our available student pool
is from a limited geographic area. Many of the colleges and
other proprietary post-secondary schools in such areas have
greater resources than are currently available to us. Some of
these schools offer programs similar to ours and some offer
programs not currently available at our schools. We cannot
assure you that our schools will be able to compete successfully
in these markets, despite the quality of its faculty, education
programs and job placement or that competitive pressures will not
have a material adverse affect on us.
-10-
<PAGE>
YEAR 2000 COMPLIANCE. The "Year 2000 problem" arose
because many information technology systems, as well as other
systems containing embedded technology, such as micro-controllers
and micro-chip processors, use only the last two digits to refer
to a year. As a result, these systems do not properly recognize a
year that begins with "20" instead of "19." If not corrected,
this limitation may cause these systems to experience problems
processing information with dates after December 31, 1999. These
problems may cause the systems to fail or create erroneous
results. In Fiscal 1998, we developed and implemented a program
to resolve the potential impact of the Year 2000 problem on the
ability of our computer systems to accurately process information
that may be date-sensitive.
As to third-party relationships, we believe that most
of these parties intend to be Year 2000 compliant by January 1,
2000; however, we cannot assure you that this will be the case.
If third parties are not able to address this issue in a timely
manner, it could result in a material financial risk to us.
DEPENDENCE ON KEY EMPLOYEES. Our business and
performance will be largely dependent upon the active
participation of our executive officers. The loss or
unavailability to us of any of such individuals could have a
material adverse effect on our business prospects and potential
earning capacity. If necessary, we have several stock option
plans designed to attract additional qualified individuals to
employment or association with us.
POTENTIAL ADVERSE EFFECT ON SHARES ELIGIBLE FOR FUTURE
SALE. Immediately after this offering and after adjusting for
the one-for-four reverse stock split which occurred on March 4,
1999, we will have issued and outstanding approximately 2,141,806
shares of our Common Stock. The shares of our Common Stock
included in this offering will be freely tradeable, except for
shares held by our "affiliates," as that term is defined in Rule
144 under the Securities Act of 1933, as amended (the "Act"). If
the Selling Stockholders sell all or substantially all of the
Common Stock covered by this Prospectus at approximately the same
time, the market price of our Common Stock could drop.
ANTI-TAKEOVER PROVISIONS. Our Certificate of
Incorporation authorizes our Board of Directors to issue
preferred stock with terms set by our Board, without stockholder
approval. This provision could make it more difficult for a
third party to acquire control of us without the approval of our
Board of Directors.
In many cases, stockholders receive a premium for their
shares in a change in control. This provision may make it
difficult for stockholders to take certain actions and will make
it somewhat less likely that a change in control will occur or
that you will receive a premium for your shares if a change in
control does occur.
ADDITIONAL FINANCING. While we have generated
sufficient funds for our operations, we may require additional
financing for further expansion and acquisitions. If additional
financing is required, we cannot assure you that such financing
will be available, or that it can be obtained on terms
satisfactory to us.
-11-
<PAGE>
SHARES AVAILABLE FOR RESALE. As of March 25, 1999,
approximately 306,292 shares of our issued and outstanding Common
Stock (after giving effect to the one-for-four reverse stock split
which occurred on March 4, 1999), which were originally issued as
"restricted securities" as that term is defined under Rule 144
promulgated under the Act have been outstanding for more than one
year and could be publicly sold in accordance with Rule 144, 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 percent (1%) of our
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 Touchstone and who
has satisfied a two-year holding period without any quantity
limitation and whether or not there is adequate current public
information available. You 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 Touchstone's
securities in any market that may develop for such shares.
POSSIBLE ISSUANCE OF ADDITIONAL SHARES. Our Board of
Directors has the power to issue any or all of our additional
Common Stock and preferred stock without stockholder approval.
The Board of Directors has no present intention to issue such
shares to acquire business interests or other types of property
in the future, but could opt to do so in the future. You should
be aware that any such issuance may result in a reduction of the
book value or market price, if any, of the outstanding shares of
Common Stock. If we issue additional shares, such issuance will
reduce your proportionate ownership and voting power. Further,
any new issuance of shares may result in a change in control of
Touchstone.
The ability of the Board of Directors to issue
additional shares without further stockholder action might serve
as an anti-takeover device, regardless of your desire 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
Touchstone.
RISKS ASSOCIATED WITH EXPANSION. We cannot assure you
that suitable expansion or acquisition opportunities will be
identified or that any new or acquired institutions or products
can be operated profitably or successfully integrated into our
operations. Growth through expansion or acquisition also could
involve other risks, including:
. the diversion of management's attention from
normal operating activities;
. our inability to find appropriate personnel to
manage our expanding operations; and
. the possibility that the acquired businesses will
be subject to unanticipated business or regulatory
uncertainties or liabilities.
Our failure to manage our expansion and acquisition program
effectively could have a material adverse effect on us.
-12-
<PAGE>
BROKER-DEALER SALES OF TOUCHSTONE'S COMMON STOCK. Our
securities may be covered by an SEC 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 our securities and also may affect your ability to sell
your shares in the secondary market.
COPYRIGHTS. The United States Copyright Office has
issued several copyrights to us and our subsidiaries relating to
test booklets, reports, manuals and publications. We cannot
assure you that the copyrights issued to us are enforceable or
that we will derive any competitive advantage from them. While
the copyrights are deemed important to us, they are not
considered essential to our success. The issuance of the
copyrights may be insufficient to prevent competitors from
designing around the copyrighted aspects. In addition, we cannot
assure you that our product will not infringe on copyrights owned
by others, licenses to which may not be available to us.
Moreover, we cannot assure you that the validity of the
copyrights in the future will be sustained if judicially tested.
RAPID POLICY AND TECHNOLOGICAL CHANGES. The
educational assessment field has been characterized in recent
years by significant and rapid policy and technological changes.
Our ability to operate profitably in the future will depend in
part upon our ability to develop and maintain a technically
competent research staff and our ability to adapt to changes in
the field. We anticipate that we will have to make changes and
modifications in the future to keep pace with changes in the
field. We cannot assure you that competitors will not develop
technology which will render our products unmarketable or
obsolete.
LIMITATION ON LIABILITY OF DIRECTORS. As permitted by
the General Corporation Law of the State of Delaware, our
Certificate of Incorporation provides that a director of
Touchstone will not be personally liable to Touchstone or its
stockholders for monetary damages resulting from breaches of his
or her fiduciary duty as a director, including breaches which
constitute gross negligence, or for expenses, liabilities and
losses actually and reasonably incurred by him or her in
connection with other actual or threatened claims, actions, suits
or proceedings by reason of the fact that he or she is or was a
director of Touchstone. As a result, the right of Touchstone 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 the Federal
securities laws.
REQUIREMENT OF CONTINUING REGISTRATION. We must have a
current and effective registration statement on file with the SEC
in order for a Selling Stockholder to be able to exercise its
warrants and sell the underlying shares of Common Stock. Various
state securities laws relating to qualification of securities for
sale in such states may also be applicable. Necessarily, we
cannot assure you that we will, at all times during the life of
the warrants, be able
-13-
<PAGE>
to secure or maintain such registration or
qualification; and in the event we are unable to do so, the
warrants will not be exercisable and will be valueless.
BUSINESS
OVERVIEW
Touchstone serves the education market with assessment
and instructional products and, as of November 1998, in the post-
secondary proprietary school market. Prior to new executive
management in 1994, Touchstone's primary business was reading
assessment through the publishing and sale of its proprietary
tests and related assessment tools. Since 1994, Touchstone's
current management has implemented a strategy to broaden
Touchstone's services in the education market. In Touchstone's
1997 and 1998 fiscal years and through the beginning of fiscal
1999, Touchstone completed four acquisitions in three core
segments of the education market: assessment, instruction and
delivery. Touchstone's revenues increased from $2.5 million in
1996 to $6.3 million in 1998 and, on a pro forma basis, to over
--- -----
$11.0 million with the acquisition of the Mildred Elley post-
secondary proprietary schools in November 1998.
PRODUCTS AND SERVICES
ASSESSMENT. Touchstone designs, develops, calibrates,
publishes, markets, and sells educational reading assessment
tests to elementary and secondary schools, colleges, and
universities throughout the United States and Canada.
Touchstone's reading comprehension tests are based on its
internally developed assessment methodology called Degrees of
Reading Power(R) ("DRP"). The DRP testing program is published in
three distinct versions: Primary, Standard, and Advanced. DRP
measures an individual student's reading ability in a non-culturally
biased manner and allows a school, district or other
entity to track an individual's reading development over time.
Touchstone also offers the following assessment
products or services:
. TextSense(TM) Summary Writing -- an instruction and
-----------------------------
assessment program, which uses instruction and assessment in
summary writing to promote better reading, better writing, and
better thinking about text;
. The Maculaitis Test -- a comprehensive English language
-------------------
assessment and evaluation program, intended for use in English as
a Second Language, Bilingual Education and Limited English
Proficiency programs;
. scanning, scoring and reporting services for DRP tests; and
. computer software products that are sold as
instructional aids or analytical tools for reading development.
-14-
<PAGE>
Beck Evaluation and Testing Associates, Inc. ("BETA"),
a subsidiary of Touchstone acquired in January 1997, provides
consulting services to states, schools and textbook publishers.
Since January 1997, BETA has concentrated on increasing its test
assessment and design services to states.
INSTRUCTION. Through Modern Learning Press, Inc.
("MLP"), a subsidiary of Touchstone organized in May 1997,
Touchstone designs, publishes and distributes affordable
"consumable" student workbooks for grades K-4, and creates and
publishes books and pamphlets for elementary school teachers and
parents. The elementary instructional workbook series currently
offered by MLP ranges from the teaching of phonics, penmanship,
ESL, and reading comprehension to vocabulary development. In
conjunction with Yale University's Gesell Institute, MLP has also
published the Gesell child development scales, which management
believes are considered the best predictor of a young child's
readiness to start kindergarten.
EDUCATIONAL DELIVERY. In late 1997, Touchstone decided
that the post-secondary proprietary school market was an area in
which it wanted to compete due to attractive characteristics
including a large growing market, countercyclical growth trends
and attractive levels of profitability. In November 1998,
Touchstone, through one of its subsidiaries, purchased
substantially all of the assets of Mildred Elley Schools, Inc.
("Mildred Elley"), as the platform for Touchstone's entrance into
the post-secondary school market. Mildred Elley is a two-year,
New York State degree-granting institution and has been in
operation for over 80 years. Mildred Elley's principal campus is
located in Latham, New York, with an additional branch in
Pittsfield, Massachusetts. The Mildred Elley schools offer
programs in business, paralegal, travel and health fields, and
are well-respected in the communities they serve.
USE OF PROCEEDS
Touchstone will not realize any proceeds from the sale
of the Shares by the Selling Stockholders. Touchstone will
realize proceeds only from the exercise of warrants held by the
Selling Stockholders, which proceeds, if all such warrants are
exercised, would aggregate $117,250. Touchstone is preparing
this Prospectus only to assist the Selling Stockholders and will
use the net proceeds from the exercise of such warrants for
working capital purposes.
THE SELLING STOCKHOLDERS
The Selling Stockholders are using this Prospectus to
offer a maximum of 87,500 shares (the "Shares"), which consist of
a total of 25,000 issued shares (the "Issued Shares") and
warrants (the "Warrants") to acquire an additional 62,500 shares.
The Selling Stockholders are Theodore P. Allocca ("Allocca"),
Theodore P. Allocca, Jr. ("Theodore"), Steven Kevorkian
("Kevorkian") and Barry M. Goldstein ("Goldstein").
The Selling Stockholders acquired the Shares pursuant
to consulting agreements that each of the Selling Stockholders
entered into with Touchstone in August 1997. Pursuant to a
-15-
<PAGE>
consulting agreement, dated as of August 19, 1997 (the
"Comprehensive Agreement"), among Comprehensive Capital, Allocca,
Theodore and Kevorkian (together, the "Comprehensive Group") and
Touchstone, the Comprehensive Group received Issued Shares and
the Warrants (the "Comprehensive Warrants") entitling each holder
to acquire Shares in the following amounts:
Shares underlying
Name Issued Shares Comprehensive Warrants
-------------------------------------------------------------------
Allocca 3,750 9,375
-------------------------------------------------------------------
Theodore 3,750 9,375
-------------------------------------------------------------------
Kevorkian 5,000 12,500
-------------------------------------------------------------------
Pursuant to a consulting agreement, dated as of August 19, 1997
(the "Goldstein Agreement"), between Goldstein and Touchstone,
Goldstein received 12,500 Issued Shares and Warrants (the
"Goldstein Warrants") entitling Goldstein to acquire 31,250 Shares.
The following table sets forth certain information with
respect to the beneficial ownership of Common Stock as of the
date of this Prospectus by the Selling Stockholders, and as
adjusted to give effect to the sale by the Selling Stockholders
of the Shares offered hereby:
<TABLE>
<CAPTION>
Beneficial Ownership Prior to Beneficial Ownership After
Offerings Offerings(1)
----------------------------- Shares Being --------------------------
Name Shares Percentage(2) Offered(3) Shares Percentage(2)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Theodore P. Allocca 13,125(4) 0.6% 13,125 0 --
- --------------------------------------------------------------------------------------------------
Theodore P. Allocca, Jr. 13,125(5) 0.6% 13,125 0 --
- --------------------------------------------------------------------------------------------------
Steven Kevorkian 17,500(6) 0.8% 17,500 0 --
- --------------------------------------------------------------------------------------------------
Barry M. Goldstein 43,750(7) 2.0% 43,750 0 --
- --------------------------------------------------------------------------------------------------
<FN>
(1) Assumes that all of the Shares are sold.
(2) Based on 2,141,806 shares of Common Stock issued and outstanding as of
March 4, 1999 (after giving effect to the one-for-four reverse stock split
effected on such date).
(3) Assumes that all of the Warrants are exercised as of the date of this
Prospectus.
(4) Includes (i) 3,750 Issued Shares and (ii) 9,375 Shares that Allocca
currently has the right to acquire upon the exercise of his Comprehensive
Warrants.
(5) Includes (i) 3,750 Issued Shares and (ii) 9,375 Shares that Theodore
currently has the right to acquire upon the exercise of his Comprehensive
Warrants.
(6) Includes (i) 5,000 Issued Shares and (ii) 12,500 Shares that Kevorkian
currently has the right to acquire upon the exercise of his Comprehensive
Warrants.
(7) Includes (i) 12,500 Issued Shares and (ii) 31,250 Shares that
Goldstein currently has the right to acquire upon the exercise of the
Goldstein Warrants.
</FN>
</TABLE>
The Comprehensive Agreement and the Goldstein
Agreement were each initially for a one-year term, commencing in
August 1997, and each is subject to automatic yearly
-16-
<PAGE>
renewals if notice of termination is not provided by one of the parties to
the agreement at least 30 days prior to the expiration of the
then applicable term. Either agreement may be terminated by one
of its parties at any time upon thirty days' prior written notice
to the other party to that agreement. To date, neither agreement
has been so terminated.
Pursuant to the Comprehensive Agreement, the
Comprehensive Group has agreed to, among other things, (i) assist
Touchstone in finding strategic partners and/or financing
entities to assist Touchstone in its projects, (ii) make itself
available for financial public relations and marketing consulting
and (iii) arrange introductions to various broker/dealers who may
be interested in knowing more about Touchstone, including its
goals and aspirations. Pursuant to the Goldstein Agreement,
Goldstein has agreed to, among other things, (i) assist
Touchstone in finding strategic partners and/or financing
entities to assist Touchstone in its projects, (ii) make himself
available for financial public relations and marketing consulting
and (iii) arrange introductions to various broker/dealers who may
be interested in knowing more about Touchstone, including its
goals and aspirations. The Comprehensive Group may act as market
makers in Touchstone's stock. None of the Comprehensive Group or
Goldstein has the authority to bind Touchstone to any contracts
or commitments
The Comprehensive Warrants and Goldstein Warrants are
exercisable at any time and from time to time through August 19,
2002, at an exercise price of $1.88 per share (which was the
closing price of Touchstone's Common Stock on the date of the
Comprehensive Agreement and the Goldstein Agreement). The number
of shares issuable pursuant to the Warrants is subject to
adjustment in the event of a stock dividend, stock split,
combination, reclassification or similar event.
PLAN OF DISTRIBUTION
The Selling Stockholders have informed Touchstone that
they expect to sell the Shares primarily through brokers'
transactions over The Nasdaq Small Capitalization Market (the
"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 any of the
Selling Stockholders or the Brokers may be deemed to be
underwriting commissions. To the best of Touchstone'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 the
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 Touchstone
that any Selling Stockholder is an underwriter for purposes of
the Act of any of the Shares offered pursuant to this Prospectus.
-17-
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected historical financial information presented
below for and as of the end of each of the three fiscal years in
the period ended October 31, 1998, is derived from the
Consolidated Financial Statements of Touchstone, which financial
statements have been audited by Lazar Levine & Felix LLP,
independent certified public accountants. The Consolidated
Financial Statements as of October 31, 1998 and 1997, and
for each of the three years in the period ended October 31, 1998
and the report of Lazar Levine & Felix LLP thereon are included
in Touchstone's Annual Report on Form 10-KSB for the fiscal year
ended October 31, 1998, incorporated herein by reference. The
selected historical financial information presented below as at
January 31, 1999 and 1998 and for the three months ended January
31, 1999 and 1998, 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, 1999, 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, 1999 are not
necessarily indicative of results that can be expected for the
full year.
-18-
<PAGE>
<TABLE>
<CAPTION>
Year Ended October 31, Quarter Ended January 31,
---------------------- -------------------------
1998(1) 1997(1) 1996(1) 1999(1) 1998(1)
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Operating revenues $6,317,114 $4,587,633 $2,519,908 $2,356,127 $1,297,744
Net sales 6,317,114 4,587,633 2,519,908 2,356,127 1,297,744
Gross profit 4,382,010 3,008,884 1,808,344 1,389,551 934,148
Income (loss)
from operations 366,514 (2,129,158) 108,430 (189,666) 9,340
Income (loss) before income taxes 160,207 (2,193,780) 211,257 (322,398) (43,018)
Net income (loss) 131,202 (1,363,811) 192,048 (200,357) (33,047)
Earnings (loss) per share .06 (.66) .10 (.09) (.02)
Balance Sheet Data:
Current assets $7,106,418 $3,078,853 $4,458,538 $6,114,052 $2,743,232
Total assets 14,074,640 9,592,885 8,975,542 16,725,373 9,276,925
Long-term obligations 6,267,198 2,528,968 728,250 7,600,947 2,449,337
Total liabilities 7,548,800 3,363,333 1,591,807 10,348,809 3,015,448
Working capital 5,824,816 2,244,488 4,116,202 3,366,190 2,177,121
Stockholders' equity 6,525,840 6,229,552 7,383,735 6,376,564 6,261,477
______________________________
<FN>
(1) All amounts have been adjusted to give effect to the one-for-four
reverse stock split effected by Touchstone on March 4, 1999.
</FN>
</TABLE>
LEGAL OPINIONS
The validity of the shares of the Common Stock offered
hereby will be passed upon for Touchstone by Salans Hertzfeld
Heilbronn Christy & Viener, New York, New York. Steven R. Berger,
Esq., a partner in the firm of Salans Hertzfeld Heilbronn Christy &
Viener participating in the work on this matter, is a director of
Touchstone. Since Mr. Berger's appointment as a director,
Touchstone has granted to him, pursuant to Touchstone's Directors
Stock Option Plan, options to acquire an aggregate of 2,500 shares
of Touchstone's Common Stock.
-19-
<PAGE>
EXPERTS
The consolidated financial statements and schedules of
Touchstone appearing in Touchstone's Annual Report (Form 10-KSB)
for the fiscal year ended October 31, 1998, have been audited by
Lazar Levine & Felix 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.
-20-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses payable by Touchstone 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 . . . . . . . . $ 48
Nasdaq listing fees . . . . . . . . . . . . . . . . . . . . . . . . 0
Fees and expenses of accountants . . . . . . . . . . . . . . . . . . 1,000
Fees and expenses of counsel . . . . . . . . . . . . . . . . . . . . 20,000
Blue Sky fees and expenses . . . . . . . . . . . . . . . . . . . . . 0
Transfer agent fees . . . . . . . . . . . . . . . . . . . . . . . . 1,000
Printing expenses . . . . . . . . . . . . . . . . . . . . . . . . . 1,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000
-------
Total . . . . . . . . . . . . . . . . . . . . . $24,048
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 10 of Touchstone's Restated Certificate of
Incorporation and Article IX of Touchstone's Amended and Restated
By-Laws provide for indemnification of officers and directors of
Touchstone, 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 Touchstone. 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 Touchstone 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 Touchstone, express
powers to indemnify its directors and officers.
Touchstone carries directors' and officers' liability
insurance covering losses up to $2,000,000 (subject to certain
deductible amounts).
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following Exhibits are filed as part of this Registration Statement:
Exhibit Description
- ------- -----------
4.1 Certificate of Incorporation, dated August 22, 1991 filed
with the Secretary of State of the State of Delaware
(incorporated herein by reference to the exhibit contained
in Touchstone's Quarterly Report on Form 10-QSB for the
fiscal quarter ended January 31, 1999).
4.2 Certificate of Merger, dated August 26, 1991, filed with
the Secretary of State of the State of Delaware
(incorporated herein by reference to the exhibit contained
in Touchstone'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).
4.3 Amended and Restated By-Laws (incorporated herein by
reference to the exhibit contained in Touchstone's
Registration Statement on Form S-3 (File No. 333-27659)
under the Securities Act of 1933, as amended, filed with
the Commission on May 22, 1997).
4.4 Specimen Certificate evidencing shares of Common Stock
(filed herewith).
4.5 Form of Warrant (incorporated by reference to the exhibit
contained in Touchstone's Registration Statement on Form
S-3 (File No. 333-27659) under the Securities Act of 1933,
as amended, filed with the Securities and Exchange
Commission on May 22, 1997)
4.6 Investor Rights Agreement, dated as of September 4, 1998,
by and among Touchstone, Cahill Warnock Strategic Partners
Fund, L.P., Strategic Associates, L.P., and the Individual
Shareholders Named Therein (incorporated by reference to
the exhibit contained in Touchstone's Current Report on
Form 8-K, which was filed with the Securities and Exchange
Commission on November 23, 1998 (the "November 1998 8-K"))
4.7 Registration Rights Agreement, dated as of September 4,
1998, by and among Touchstone, Cahill, Warnock Strategic
Partners Fund, L.P., and Strategic Associates, L.P.
(incorporated by reference to the exhibit contained in the
November 1998 8-K)
4.8 Form of 8% Subordinated Debenture (incorporated by
reference to the exhibit contained in the November 1998 8-K)
4.9 Form of Warrant issued in connection with the Securities
Purchase Agreement by and between Touchstone, Cahill,
Warnock Strategic Partners Fund, L.P., and Strategic
Associates, L.P. (incorporated by reference to the exhibit
contained in the November 1998 8-K)
II-2
<PAGE>
4.10 Form of Warrant issued in connection with (i) the
Agreement, dated as of August 19, 1997, among
Comprehensive Capital, Theodore P. Allocca, Theodore
Allocca and Steven Kevorkian and Touchstone and (ii) the
Agreement, dated as of August 19, 1997, between Touchstone
and Barry M. Goldstein (filed herewith)
5 Opinion of Salans Hertzfeld Heilbronn Christy & Viener
(filed herewith)
23.1 Consent of Salans Hertzfeld Heilbronn Christy & Viener
(included in Exhibit 5)
23.2 Consent of Lazar, Levine & Felix LLP (filed herewith)
24.1 Power of Attorney (included on signature page)
ITEM 17. UNDERTAKINGS.
(1) Touchstone 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) Insofar as indemnification for liabilities arising
under the Act may be permitted to directors, officers and
controlling persons of Touchstone pursuant to the foregoing
provisions, or otherwise, Touchstone 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 Touchstone of expenses incurred or paid by a director, officer
or controlling person of Touchstone 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, Touchstone 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.
II-3
<PAGE>
EXPERTS
The consolidated financial statements of Touchstone
appearing in its Annual Report (Form 10-KSB) for the fiscal year
ended October 31, 1998, have been audited by Lazar, Levine &
Felix LLP, independent certified public accountants, 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 & Felix LLP pertaining to such financial
statements (to the extent covered by consents filed with the SEC)
given upon the authority of Lazar, Levine & Felix LLP as an
expert in accounting and auditing.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act
of 1933, Touchstone 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
31st day of March 1999.
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
and LINDA G. STRALEY, or either 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 Director and Chairman of the March 31, 1999
- ------------------------
Andrew L. Simon Board; Chief Financial
Officer
/s/ WALTER B. BARBE Director March 31, 1999
- ------------------------
Walter B. Barbe
/s/ MICHAEL. D. BECK Director March 31, 1999
- ------------------------
Michael D. Beck
<PAGE>
/s/ STEVEN R. BERGER Director March 31, 1999
- ------------------------
Steven R. Berger
/s/ JOSEPH A. FERNANDEZ Director March 31, 1999
- ------------------------
Joseph A. Fernandez
/s/ LINDA G. STRALEY Director March 31, 1999
- ------------------------
Linda G. Straley
/s/ DAVID L. WARNOCK Director March 31, 1999
- ------------------------
David L. Warnock
<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 (incorporated herein by
reference to the exhibit contained in
Touchstone's Quarterly Report on Form 10-QSB
for the fiscal quarter ended January 31, 1999) --
4.2 Certificate of Merger, dated August 26, 1991,
filed with the Secretary of State of the State
of Delaware (incorporated herein by reference
to the exhibit contained in Touchstone'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) --
4.3 Amended and Restated By-Laws (incorporated
herein by reference to the exhibit contained in
Touchstone's Registration Statement on Form S-3
(File No. 333-27659) under the Securities Act
of 1933, as amended, filed with the Commission
on May 22, 1997) --
4.4 Specimen Certificate evidencing shares of
Common Stock (filed herewith) 31
4.5 Form of Warrant (incorporated by reference to
the exhibit contained in Touchstone's
Registration Statement on Form S-3 (File No.
333-27659) under the Securities Act of 1933, as
amended, filed with the Securities and Exchange
Commission on May 22, 1997) --
4.6 Investor Rights Agreement, dated as of
September 4, 1998, by and among Touchstone,
Cahill Warnock Strategic Partners Fund, L.P.,
Strategic Associates, L.P., and the Individual
Shareholders Named Therein (incorporated by
reference to the exhibit contained in
Touchstone's Current Report on Form 8-K, which
was filed with the Securities and Exchange
Commission on November 23, 1998 (the "November
1998 8-K")) --
4.7 Registration Rights Agreement, dated as of
September 4, 1998, by and among Touchstone,
Cahill, Warnock Strategic Partners Fund, L.P.,
and Strategic Associates, L.P. (incorporated by
reference to the exhibit contained in the
November 1998 8-K) --
4.8 Form of 8% Subordinated Debenture (incorporated
by reference to the exhibit contained in the
November 1998 8-K) --
<PAGE>
4.9 Form of Warrant issued in connection with the
Securities Purchase Agreement by and between
Touchstone, Cahill, Warnock Strategic Partners
Fund, L.P., and Strategic Associates, L.P.
(incorporated by reference to the exhibit
contained in the November 1998 8-K) --
4.10 Form of Warrant issued in connection with (i)
the Agreement, dated as of August 19, 1997,
among Comprehensive Capital, Theodore P.
Allocca, Theodore Allocca and Steven Kevorkian
and Touchstone and (ii) the Agreement, dated as
of August 19, 1997, between Touchstone and
Barry M. Goldstein (filed herewith) 34
5 Opinion of Salans Hertzfeld Heilbronn Christy &
Viener (filed herewith) 43
23.1 Consent of Salans Hertzfeld Heilbronn Christy &
Viener (included in Exhibit 5) --
23.2 Consent of Lazar, Levine & Felix LLP (filed
herewith) 45
24.1 Power of Attorney (included on signature page) --
Exhibit 4.4
-----------
[Form of Face of Certificate]
[Border]
[Logo]
Number Shares
TA
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
CUSIP 891546 30 1
INCORPORATED UNDER THE LAWS SEE REVERSE FOR
OF THE STATE OF DELAWARE CERTAIN DEFINITIONS
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF THE
PAR VALUE OF $.0001 PER SHARE OF
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
transferable on the books of the Corporation by the holder hereof
in person or by duly authorized Attorney, upon surrender of this
Certificate, properly endorsed.
This Certificate is not valid until countersigned by the
Transfer Agent.
WITNESS the facsimile seal of the Corporation and the
facsimile signatures of its duly authorized officers.
Dated:
[SEAL]
/s/ Linda G. Straley /s/ Andrew L. Simon
SECRETARY PRESIDENT
AMERICAN STOCK TRANSFER & TRUST COMPANY
(New York, NY) TRANSFER AGENT
<PAGE>
BY
AUTHORIZED OFFICER
[FORM OF BACK OF CERTIFICATE]
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH
STOCKHOLDER WHO SO REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF
EACH CLASS OF STOCK OR SERIES THEREOF AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to the applicable laws or
regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT - ___________ Custodian ___________
(Cust) (Minor)
under Uniform Gifts to Minors
Act _________
(State)
Additional abbreviations may also be used though not
in the above list.
For Value Received, ______ hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_____________________________
| |
|_____________________________|
_________________________________________________________________
(Please print or Typewrite Name and Address, Including
Zip Code, of Assignee)
_________________________________________________________________
_________________________________________________________________
__________________________________________________________ Shares
<PAGE>
of the capital stock represented by the within Certificate, and
do hereby irrevocably constitute and appoint
_______________________________________________________Attorney
to transfer the said stock on the books of the within named
Company with full power of substitution in the premises.
Dated ________________________
___________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN
EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER
Exhibit 4.10
------------
FORM OF WARRANT
THE WARRANTS REPRESENTED BY THIS CERTIFICATE 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 AUGUST 19, 2002
No. ____ August 19, 1997
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
WARRANTS TO PURCHASE COMMON STOCK
THIS CERTIFIES that _______________________________
_____________ or his 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 August 19, 2002 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
<PAGE>
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 dis-
tribution 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 reclassi-
fication of Common Stock, or through merger or consoli-
dation, 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.
-2-
<PAGE>
(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 en-
titled, upon the exercise thereof, to receive a frac-
tional 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, com-
puted 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
-3-
<PAGE>
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 cer-
tificate 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
-4-
<PAGE>
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 Cer-
tificate 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 in-
cluding, 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 August 19, 2002.
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 in-
validity, 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.
-5-
<PAGE>
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
-6-
<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)
-7-
<PAGE>
NOTICE: The signature on this subscription form must cor-
respond with the name as written upon the face of
the within Warrant Certificate, or upon the assign-
ment thereof, in every particular, without altera-
tion, 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.
-8-
<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: _______________________________
-9-
Exhibit 5
---------
SALANS HERTZFELD HEILBRONN CHRISTY & VIENER
620 Fifth Avenue
New York, New York 10020
(212) 632-5500
Fax: (212) 632-5555
March 31, 1999
Touchstone Applied Science Associates, Inc.
4 Hardscrabble Heights
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 (the
"Securities Act"), for the registration by the Corporation of
shares of the Corporation's Common Stock, par value $0.0001 per
share, (i) issued to Barry M. Goldstein, Theodore P. Allocca,
Theodore P. Allocca, Jr. and Steven Kevorkian (the "Selling
Stockholders") and (ii) issuable upon the exercise of warrants
(the "Warrants") held by each of the Selling Stockholders
(collectively, the "Shares").
As counsel to the Corporation, we have examined and are
familiar with the following: (i) the Corporation's Certificate of
Incorporation, (ii) the Corporation's By-Laws, (iii) the
Corporation's corporate proceedings taken in connection with the
issuance of the Shares and Warrants, (iv) the Registration
Statement, (v) the Agreement, dated as of August 19, 1997, among
Comprehensive Capital, Theodore P. Allocca, Theodore Allocca,
Steven Kevorkian and the Corporation and related documents, (vi)
the Agreement, dated as of August 19, 1997, between the
Corporation and Barry M. Goldstein and related documents, and
(vii) such other documents and instruments as we have deemed
appropriate. In such review, we have assumed the genuineness of
all signatures, the authenticity of all documents submitted to us
as originals and the conformity to the original documents of all
documents submitted to us as copies.
Based upon the foregoing, and assuming that applicable
provisions of the Securities Act and the securities or "blue sky"
laws of various states shall have been complied with, we are of
the opinion that:
<PAGE>
1. The Corporation is duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware.
2. The Shares issued to the Selling Stockholders
have been duly authorized and are legally issued, fully paid and
nonassessable.
3. The Shares issuable upon exercise of the
Warrants have been duly authorized and, upon issuance of the
Shares in accordance with the terms of the Warrants (including
the payment of the exercise price thereof), the Shares will be
legally issued, fully paid and nonassessable.
We are qualified to practice law in the State of New
York and do not purport to be experts on, or to express any
opinion herein concerning, any laws other than the laws of the
State of New York, the General Corporation Law of the State of
Delaware and the federal laws of the United States of America,
and this opinion is rendered only with respect to such laws.
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 the Warrants and we consent to the
filing of this opinion as Exhibit 5 to the Registration
Statement.
Very truly yours,
SALANS HERTZFELD HEILBRONN
CHRISTY & VIENER
Exhibit 23.2
------------
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 November
30, 1998 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, 1998 filed with the Securities and Exchange
Commission.
LAZAR, LEVINE & FELIX LLP
New York, New York
March 29, 1999
