NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF
TOP SOURCE TECHNOLOGIES, INC.
To All Stockholders:
The annual meeting of the stockholders of Top Source Technologies, Inc. (the
"Company") will be held at the Hotel Nikko Atlanta, Friday, March 15, 1996 at
6:00 p.m. for the following purposes:
1. To elect those members who are up for reelection to the board of directors
of the Company to serve until the Company's next annual meeting.
2. To ratify the appointment of Arthur Andersen LLP as independent auditors
for the fiscal year ended September 30, 1996.
3. For the transaction of other lawful business that may properly come before
the meeting.
The board of directors has fixed the close of business on Friday, January 26,
1996 as the record date for a determination of stockholders entitled to notice
of, and to vote at, this annual meeting or any adjournment thereof.
Please vote, date, sign and mail the enclosed proxy card promptly in the
enclosed return envelope.
By Order of the Board of Directors
Dated January 17, 1996
By: Christer Rosen, Secretary
<PAGE>
TOP SOURCE TECHNOLOGIES, INC.
PROXY STATEMENT
The enclosed proxy is solicited by Stuart Landow, Christer Rosen and
David Natan and on behalf of the Board of Directors of Top Source Technologies,
Inc. (the "Company") for use at the annual meeting of stockholders to be held on
March 15, 1996 (the "1996 Annual Meeting"). Proxies are solicited to give all
stockholders who are entitled to vote on the matters that come before the
meeting the opportunity to vote, whether or not they choose to attend the
meeting in person. Such solicitation is being made by mail, and the Company may
also use its officers to solicit proxies from stockholders either in person or
by telephone or letter without extra compensation. All expenses of this
solicitation will be paid by the Company. Since proxies are being solicited by
management (all of whom are directors) and management serves at the will of the
Board of Directors, management may have a conflict of interest in recommending
how stockholders vote for the proposals.
Only stockholders of record at the close of business on January 26,
1996 are entitled to notice of, and to vote at, the meeting. Each share of
common stock outstanding on the record date is entitled to one vote on all
proposals. As of the close of business on January 12, 1996, 27,974,477 shares of
common stock of the Company were outstanding. Shares cannot be voted unless a
signed proxy card is returned or other specific arrangements are made to have
shares represented at the meeting. A proxy may be revoked at any time before it
is voted at the meeting by taking one of the three following actions: (i) by
giving a written notice of revocation to the principal office of the Company;
(ii) by executing and delivering a proxy with a later date; or (iii) by voting
in person at the meeting. If a stockholder wishes to give a proxy to someone
other than management, he or she may cross out the names appearing on the
enclosed proxy card, insert the name of some other person and sign and give the
proxy card to that person for use at the meeting.
<PAGE>
A majority of the outstanding shares entitled to vote, present in person
or represented by proxy, shall constitute a quorum. A plurality of the votes
cast at the meeting is required to elect directors. The affirmative vote of the
majority of the shares of stock present in person or by proxy and entitled to
vote is required for ratification of the appointment of Arthur Andersen LLP
Proxies which abstain on one or more proposals and "broker non-votes" will be
deemed present for quorum purposes for all proposals to be voted on at the
meeting. Broker non-votes occur where a broker holding stock in street name
votes the shares on some matters but not others. The missing votes are broker
non-votes. Client directed abstentions are not broker non-votes. With regard to
all proposals presented to the stockholders, abstentions will be counted as a
vote against the proposal and broker non-votes will be treated as not entitled
to vote and therefore will not be counted as either a vote for or against the
proposals. Stockholders whose shares are in street name and do not return a
proxy are not counted for any purpose and are neither an abstention nor a broker
non-vote. Stockholders who sign, date and return a proxy but do not indicate how
their shares are to be voted are giving management full authority to vote their
shares as they deem best for the Company.
This proxy statement and the accompanying proxy and notice of meeting
are first being mailed to stockholders on or about January 30, 1996.
Voting Securities and Principal Holders
The following table sets forth the number of shares of the Company's
common stock beneficially owned as of December 31, 1995 by (i) owners of more
than 5% of the Company's common stock, (ii) by all directors and (iii) all
directors and executive officers of the Company as a group.
<TABLE>
<S> <C> <C> <C>
- --------------------- ---------------------------------------- ----------------------------------------
Amount and
Nature of
Title of Name and Address of Beneficial Percent of
Class Beneficial Owner Ownership Class
- --------------------- ---------------------------------------- ----------------------- -----------------
Common Stock STUART LANDOW(1) 1,237,300 4.32%
and Vested 450 Park Avenue, Suite 2100
Options New York, New York 10022
- --------------------- ---------------------------------------- ----------------------- -----------------
Common Stock CHRISTER ROSEN(2) 840,000 2.95%
and Vested 2000 PGA Blvd., Suite 3200
Options Palm Beach Gardens, FL 33408
- --------------------- ---------------------------------------- ----------------------- -----------------
Common Stock DAVID NATAN(3) 16,975 *
and Vested 2000 PGA Blvd., Suite 3200
Options Palm Beach Gardens, FL 33408
- --------------------- ---------------------------------------- ----------------------- -----------------
Common Stock CARLTON S. JOYCE(4) 300,000 1.07%
and Vested 3125 Presidential Parkway
Options Atlanta, GA 30340-3907
- --------------------- ---------------------------------------- ----------------------- ------------------
Common Stock RONALD P. BURD(5),(6) 160,500 *
and Vested 251 Linden Lane
Options Merion Station, PA 19066
- --------------------- ---------------------------------------- ----------------------- ------------------
Common Stock CLINTON D. LAUER(7) 23,000 *
and Vested 4053 Hidden Woods Drive
Options Bloomfield Hills, MI 48301
- --------------------- -------------------------------------------------------------- -------------------
Common Stock PAUL F. MOORE(8) 26,000 *
and Vested 325 N. Cliften Rd.
Options Bloomfield Hills, MI 48301
- --------------------- --------------------------------------------------------------------------------
Common Stock MANI A. SADEGHI(9) 45,000 *
and Vested 39 Strawberry Patch Lane
Options Stamford, CT 06902
- --------------------- ---------------------------------------------------------------------------------
Common Stock ARTHUR S. KIRSCH(10) 55,000 *
and Vested Marie Major Drive
Options Alpine, NJ 07620
- --------------------- -------------------------------------------------------------- --------------------
Common Stock GANZ CAPITAL MGMT., INC.(11) 5,485,000 19.59%
and Vested 2875 N.E. 191st Street
Options Penthouse I
N. Miami Beach, FL 33130
- --------------------------------------------------------------------------------------------------------
All directors and existing officers 2,703,775 9.21%
of the Company as a group
(9 persons)(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)
*Less than 1% of class
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 200,000 vested options exercisable at approximately $.53 per
share and 500,000 vested options exercisable at approximately $2.0625
per share held by Mr. Landow.
(2) Includes 500,000 vested options held by Mr. Rosen exercisable at
approximately $.53 per share.
(3) Includes 15,625 vested options held by Mr. Natan exercisable at
approximately $6.9375 per share, 350 shares held by Mr. Natan and
1,000 shares held by Mr. Natan's wife.
(4) Includes 100,000 vested options held by Carlton S. Joyce exercisable
at approximately $1.50 per share.
(5) Includes 25,000 vested options exercisable at approximately $3.38 per
share, 50,000 vested options exercisable at approximately $1.78 per
share and 10,000 vested options exercisable at approximately $6.25
held by Mr. Burd.
(6) Includes 72,000 shares held jointly by Mr. Burd and his wife and 3,500
shares gifted by Mr. Burd to the Devereux Foundation, of which Mr.
Burd is President and Chief Executive Officer.
(7) Includes 20,000 vested options exercisable at approximately $8.75 per
share and 3,000 shares held by Mr. Lauer.
(8) Includes 25,000 vested options exercisable at approximately $3.125 per
share and 1,000 shares held by Mr. Moore.
(9) Includes 25,000 vested options exercisable at approximately $3.125 per
share held by Mr. Sadeghi and 20,000 shares held jointly by Mr.
Sadeghi and his wife.
(10) Includes 10,000 vested options exercisable at approximately $7.50 per
share and 45,000 shares held by Mr. Kirsch.
(11) Ganz Capital Management, Inc. ("Ganz Capital") is a registered
investment advisor. On November 17, 1995, it held beneficial ownership
of 5,462,900 shares of common stock and 22,100 warrants. Of these
warrants, 8,100 are exercisable at $4.00 per share and 14,000 are
exercisable at $1.00 per share. This represents beneficial ownership
of 40.1% and 23.1% of each class of warrants outstanding,
respectively.
BOARD OF DIRECTORS
The business of the Company is managed under the direction of the Board of
Directors. It has responsibility for establishing broad corporate policies and
for the overall performance of the Company. It is not, however, involved in the
operating details on a day to day basis. The Board is kept advised of the
Company's business through regular written communications and discussions with
management.
Compensation of Directors
The Company's outside directors each receive $2,500 per board meeting
attended. They are also reimbursed for expenses incurred in attending such
meetings.
All non-employee directors automatically receive grants of 30,000
non-qualified options (i) upon election or appointment to the Board and (ii)
after all options previously granted have vested if vesting occurs during the
term of office of such director. The options vest semi-annually over a three
year period.
Board Meetings and Committees
The Board of Directors of the Company held four meetings during the fiscal
year ended September 30, 1995. No director attended fewer than 75 percent of the
total number of meetings of the Board of Directors during this period. On many
occasions throughout the year, the Board took action by unanimous consent in
lieu of holding a meeting.
The Company has a Stock Option Committee comprised of Messrs. Moore and Sadeghi;
a Compensation Committee comprised of Messrs. Burd and Lauer; an Audit Committee
comprised of Messrs. Burd, Lauer; a Nominating Committee comprised of Messrs.
Landow, Moore and Sadeghi and an Executive Committee comprised of Stuart Landow,
Christer Rosen, and Paul Moore.
Proposal 1. Election of Directors
Eight directors were elected at the 1994 Annual Meeting and those persons
elected will hold office until their terms expire as explained below and until
their successors have been elected and qualified. The Company's bylaws provide
that the Board of Directors shall consist of no less than three and no more than
nine members, with the actual number to be established by resolution of the
Board of Directors. The current Board of Directors has by resolution established
the number of directors at nine.
The Company amended its certificate of incorporation to provide for a
classified Board of Directors commencing with the 1994 Annual Meeting.
Accordingly, three persons, designated as Class A directors, were elected to a
three-year term, three persons, designated as Class B directors, were elected to
a two- year term and two persons, designated as Class C directors, were elected
for a one-year term. As the one and two-year terms expire, new directors will be
elected for three-year terms.
<TABLE>
Current and Fiscal 1995
Board of Directors
<CAPTION>
- -------------------------- -------- ---------------------------- ----------------- ----------------- ---------------
Name Age Position with
Company Since Term Ending
<S> <C> <C> <C> <C> <C>
- -------------------------- -------- ---------------------------- ----------------- ----------------- ---------------
Stuart Landow(1) 49 President (Chief Executive 1990 Three Years 1997
Officer) and Chairman of
the Board of Directors
- -------------------------- -------- ---------------------------- ----------------- ----------------- ---------------
Christer Rosen 44 Executive Vice President, 1987 Three Years 1997
Secretary and Director
- -------------------------- -------- ---------------------------- ----------------- ----------------- ---------------
James P. Samuels(5) 48 Vice President of Finance 1992 Resigned 1997
(Chief Financial Officer),
Treasurer and Director
- -------------------------- -------- ---------------------------- ----------------- ----------------- ---------------
David Natan 42 Vice President of Finance 1995 Replaced James 1997
(Chief Financial Officer), P. Samuels who
Treasurer and Director resigned August
31, 1995
- -------------------------- -------- ---------------------------- ----------------- ----------------- ---------------
Ronald P. Burd(2)(3) 49 Director 1992 Two Years 1996
- -------------------------- -------- ---------------------------- ----------------- ----------------- ---------------
Carlton S. Joyce 65 Director 1993 Three Years 1998
- -------------------------- -------- ---------------------------- ----------------- ----------------- ---------------
Paul F. Moore(1)(4) 69 Director 1993 Two Years 1996
- -------------------------- -------- ---------------------------- ----------------- ----------------- ---------------
Mani A. Sadeghi(1)(4) 32 Director 1993 Three Years 1998
- -------------------------- -------- ---------------------------- ----------------- ----------------- ---------------
Clinton D. Lauer(2)(3) 69 Director 1994 Two Years 1996
- -------------------------- -------- ---------------------------- ----------------- ----------------- ---------------
Arthur S. Kirsch 43 Director 1994 Three Years 1998
- -------------------------- -------- ---------------------------- ----------------- ----------------- ---------------
</TABLE>
(1) Member of the Nominating Committee
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
(4) Member of the Stock Option Committee.
(5) Mr. Samuels resigned as a Director, Vice President of Finance and Treasurer
on August 31, 1995 and was replaced by Mr. David Natan. Mr. Samuels ceased
being employed by the Company on December 31, 1995.
The nominees for the reelection of certain Board of Directors are set forth
below. The proxy holders intend to vote all proxies received by them for the
nominees for directors listed below unless instructed otherwise. In the event
any nominee is unable or declines to serve as a director at the time of the
annual meeting, the proxies will be voted for any nominee who shall be
designated by the present Board of Directors to fill the vacancy. In the event
that additional persons are nominated for election as directors, the proxy
holders intend to vote all proxies received by them for the nominees listed
below unless instructed otherwise. As of the date of this Proxy Statement, the
Board of Directors is not aware of any nominee who is unable or will decline to
serve as a director.
Nominees for Election at the 1996 Annual Meeting:
- ------------------------ ---------------------- ---------------------- ---------
Name Age The Company Since New Term
- ------------------------ ----------------- -------------- ----------------------
Ronald P. Burd 49 Director 1992 Three Years
- ------------------------ ----------------- --------------- ---------------------
Paul F. Moore 69 Director 1993 Three Years
- ------------------------ ----------------- ---------------- --------------------
Clinton D. Lauer 69 Director 1994 Three Years
- ------------------------ ---------------- ---------------- --------------------
Stuart Landow - Mr. Landow was elected President, Chief Executive Officer and a
member of the Board of Directors of the Company on July 27, 1990, and Chairman
of the Board of Directors on October 2, 1991. As Chairman, President and Chief
Executive Officer of the Company, Mr. Landow is responsible for the overall
management of the business, with an emphasis on business strategy and long term
planning. Mr. Landow devotes a significant amount of time to project management
of On-Site Analysis, Inc. and the development and marketing of On-Site
Analyzers. Presently, Mr. Landow's primary efforts are being concentrated on the
development of contractual relationships for the marketing of the Company's
present products and technologies with industrial partners and universities, and
on communications with analysts, brokers and others. Additionally, Mr. Landow
concentrates on utilizing his contacts with the automobile industry and others
for the purpose of learning about and obtaining new technologies for the
Company.
Christer Rosen - Mr. Rosen has been Executive Vice President and Secretary of
the Company and a director since 1987. In 1995, Mr. Rosen was appointed
President of Top Source Automotive, Inc. and later in the year, was appointed
President of the Company's Transportation Technology Group division. Mr. Rosen
was responsible for bringing the Overhead Sound System and the seat safety
motion concepts to the Company. Mr. Rosen is the only original member of the
management team which founded the Company.
David Natan - Mr. Natan joined the Company in June of 1995 and brings nearly 20
years of management and analytical experience to his responsibilities as Vice
President and Chief Financial Officer of the Company. Prior to joining the
Company, from November 1992 through June 1995, Mr. Natan was Chief Financial
Officer of MBf USA, Inc., which is a publicly listed subsidiary of MBf Holdings
Berhad, a four-billion-dollar multi-national conglomerate. From August 1987
through October 1992, Mr. Natan was Treasurer and Controller for Jewelmasters,
Inc., an American Stock Exchange listed company, where he was responsible for
all financial, accounting, tax, SEC reporting, shareholder services, investor
relations, data processing and employee benefit functions. Mr. Natan is a
Certified Public Accountant licensed in the State of Florida since 1987, and
received his Bachelor of Arts degree from Boston University.
Ronald P. Burd - Mr. Burd has been a director of the Company since March 1992.
From 1984 through the present, Mr. Burd has been President and Chief Executive
Officer of the Devereux Foundation. Devereux, founded in 1912, is a nationwide,
private, not-for-profit organization that treats individuals of all ages who
have a wide range of emotional disorders and/or developmental disabilities.
Headquartered in Devon, Pennsylvania, Devereux operates residential, day and
community-based treatment programs located in 13 states and the District of
Columbia.
Carlton S. Joyce - Mr. Joyce was appointed a director of the Company in
September 1993. From 1974 to 1993, Mr. Joyce was Chairman of a major oil
analysis laboratory, Spectro/Metrics, Inc. ("SMI") in Atlanta, Georgia, which
the Company acquired in July 1993. He has been Chairman of UTG, the Company's
oil analysis subsidiary since the Company's acquisition of SMI, and also
President of On-Site Analysis, Inc. ("OSA"). Mr. Joyce has been spearheading the
concept and development of the On-Site Analyzer.
Arthur B. Kirsch - Mr. Kirsch was appointed a director of the Company in October
1994. From 1993 to present, Mr. Kirsch has been President of Global Investors
Group, Inc., a New York City based investment banking firm with domestic and
international operations. From February 1990 to the founding of Global Investors
in 1993, Mr. Kirsch was President of NatWest Securities, Inc. From September
1991 to 1993, Mr. Kirsch held the position of Managing Director of NatWest
Securities, Ltd., supervising 1,200 individuals around the world. Prior to
joining NatWest, Mr. Kirsch was Executive Vice President at Drexel Burnham
Lambert, Inc. and Director of Worldwide Equities.
Clinton D. Lauer - Mr. Lauer was appointed a director of the Company in March
1994. From January 1992 to present, Mr. Lauer has been President of Lauer and
Associates, a consulting firm working with automotive supplier companies. From
1987 to January 1992, Mr. Lauer held the position of Vice President, Purchasing
and Supply with Ford Motor Company. In January 1992 he retired from the Ford
Motor Company after 36 years with that company.
Paul F. Moore - Mr. Moore was appointed a director of the Company in September
1993. Currently, Mr. Moore is President and CEO of P.F. Moore & Associates, a
consulting engineering company. From 1991 to 1994, Mr. Moore was President of
Advanced Vehicle Concepts, a Michigan based company which builds prototype
vehicles. From 1986 through 1991, Mr. Moore was chief executive officer of
American Professional Services which was later acquired by First Technology PLC
of Great Britain. Mr. Moore spent 25 years as a senior executive with Chrysler
Corporation and retired from Chrysler in 1981.
Mani A. Sadeghi - Mr. Sadeghi was appointed a director of the Company in
September 1993. From October 1994 to present, Mr. Sadeghi has been Vice
President of Corporate Development for AT&T Capital Corporation. From 1992 to
October 1994, Mr. Sadeghi had been Director of Strategic Planning and Business
Development at G.E. Capital Corp. From 1988 to 1992, Mr. Sadeghi was a
management consultant with Bain & Company located in San Francisco where he
provided strategic consulting services to his clients. Mr. Sadeghi is the
brother-in-law of Mr. Charles Ganz, the President of Ganz Capital which is the
principal beneficial owner of approximately 19.59% of the Company's common
stock.
Non-Director Executive Officers
Steven L. Ludmerer - Mr. Ludmerer was appointed President of the Company's
Petrochemical Technology Group, which is comprised of On-Site Analysis, Inc. and
United Testing Group, Inc., in January 1996. Mr. Ludmerer is responsible for
directing the overall operations of the Petrochemical Technology Group and in
particular, directing the Company's commercialization of its On-Site Analyzer.
Prior to joining the Company, from July 1994 through December 1995, Mr. Ludmerer
provided independent consulting services. From May 1992 through June 1994, Mr.
Ludmerer was President and Chief Executive Officer of Quantix Systems
("Quantix"), which was a unit of DNA Plant Technology Corporation, a Nasdaq
listed company, which developed, manufactured and marketed rapid on-site
environmental analysis systems. From November 1989 through April 1982, Mr.
Ludmerer was Business Director in the Specialty Chemicals Division of Union
Carbide Chemicals and Plastics Company. From 1965 to 1989, Mr. Ludmerer was with
E.I. duPont de Nemours and Company in a variety of executive and managerial
positions.
- --------------------------------------------------------------------------------
Executive Officer Compensation
- --------------------------------------------------------------------------------
The following table sets forth certain summary information concerning the
compensation awarded to, earned by, or paid to the Chief Executive Officer and
the other four most highly compensated executive officers of the Company whose
combined salary and bonus for the fiscal year ended September 30, 1995 exceeded
$100,000 (collectively, the "Named Executive Officers") for the years indicated.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
Annual Compensation
Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
====================================================================================================================================
Securities
Other Annual Restricted Underlying All Other
Name and Principal Compensation 4 Stock Option/SARS LTIP Compensation
Position Year Salary($) Bonus($) ($)(1) Award(s)($) (#) Payouts ($) ($)(2)
- -------- ---- --------- -------- ------ ---------- ----------- ----------- ------
========================--------------------------- -------------- ----------------- ----------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stuart Landow 1995 $202,794 $189,688(5) $ 7,200 $ 0(4) 0 $ 0 $14,213
President 1994 $218,000 $151,378(6) $ 7,550 $ 0(3) 0 $ 0 $21,105
(Chief Executive Officer) 1993 $171,818 $ 30,000 $ 9,523 $ 0(3) 600,000 $ 0 $ 0
========================---------- --------------- -------------- ----------------- ----------------- --------------- ------------
Christer Rosen 1995 $180,940 $ 25,000 $14,064 $ 0(8) 0 $ 0 $ 4,419
Executive Vice President 1994 $177,733 $ 0 $11,538 $231,250(9) 0 $ 0 $ 3,039
1993 $137,293 $ 20,000 $14,246 $ 0(10) 0 $ 0 $ 0
========================== ----------- --------------- -------------- ----------------- ----------------- --------------- ---------
Carlton S. Joyce 1995 $200,000 $ 0 $ 9,811 $ 0 0 $ 0 $ 0
President 1994 $207,692 $ 0 $ 385 $ 0 0 $ 0 $ 4,667
1993 N/A N/A N/A N/A N/A N/A N/A
========================== ----------- --------------- -------------- ----------------- ----------------- --------------- ---------
James P. Samuels 1995 $137,500 $ 0 $ 8,883 $ 0 0 $ 0 $61,447(7)
Vice President of Finance 1994 $153,333 $ 0 $10,546 $ 0 0 $ 0 $18,997(12)
and Treasurer (Chief 1993 $111,350 $ 20,000 $ 6,750 $ 0 325,000 $ 0 $ 0
Financial Officer)
========================== =========== =============== ============== ================= ================= =============== =========
W. Earl Somerville 1995 $101,158 $ 5,000 $ 8,576 $ 0 25,000 $ 0 $50,552(11)
Vice President 1994 $110,000 $ 217 $ 7,428 $ 0 92.500 $ 0 $ 5,160
1993 N/A N/A N/A N/A N/A N/A N/A
======================== =========== =============== ============== ================= ================= =============== ==========
</TABLE>
<PAGE>
(1) Amounts consist principally of automobile allowances paid by the Company.
In the case of Mr. Rosen, the amounts for 1995, 1994 and 1993 also include
$4,407, $4,338 and $6,640 in club membership dues paid by the Company,
respectively.
(2) Amounts represent group term life insurance premiums paid by the Company,
the Company's match of the Retirement Salary Savings Plan - 401(k) and
reimbursement of out-of-pocket medical, dental, etc. expenses not covered
by the Company's insurance.
(3) In fiscal 1994 and 1993, Mr. Landow deferred vesting of 50,000 shares
granted in July 1990. In total, the vesting of 100,000 shares that were
granted to Mr. Landow, have been deferred.
(4) At September 30, 1995, Mr. Landow owned 565,300 shares of restricted stock.
The value of the restricted stock is $4,981,706.25, based on $8.8125, the
closing stock price at September 30, 1995.
(5) In fiscal 1995 , Mr. Landow was awarded, as stated in his employment
agreement, an incentive compensation payment of 1% of net sales. This
amount totalled $189,688 of which $163,037 had been paid at fiscal year-end
and $26,651 was accrued.
(6) In fiscal 1994, Mr. Landow was paid $151,378 in incentive compensation
equaling 1% of net sales.
(7) Mr. Samuels resigned as an executive officer on August 31, 1995. Mr.
Samuels received $13,000 in salary from his date of resignation, August 31,
1995 through September 30, 1995. The Company accrued salary of $39,000 for
Mr. Samuels as of September 30, 1995, which was fully paid at calendar year
end. These amounts are included in "all other compensation".
(8) At September 30, 1995, Mr. Rosen had an aggregate of 378,900 shares of
restricted stock. The value of the restricted stock is $3,339,056.25 based
on $8.8125, the closing stock price at September 30, 1995.
(9) The aggregate value of these shares of restricted stock was based on the
closing sales price of the Company's common stock on the date of vesting
(50,000 shares at $4.625). The 50,000 shares vested on January 1, 1994.
Although the Company does not anticipate declaring a dividend, if one is
declared, dividends will be paid on restricted stock.
(10) In fiscal 1993, Mr. Rosen cancelled 50,000 shares previously granted to him
which were reissued to a consultant for services rendered in 1987 - 1989.
(11) Mr. Somerville resigned as an executive officer on August 11, 1995. Mr.
Somerville received $17,092 in salary from his date of resignation, August
11, 1995, through September 30, 1995. Also, the Company accrued salary of
$25,208 for Mr. Somerville as of September 30, 1995, which sum was fully
paid by December 15, 1995. These amounts are included in "all other
compensation".
(12) Amount includes $12,468 in relocation expenses.
<PAGE>
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR-
SEPTEMBER 30, 1995
<CAPTION>
PotentialRealizable Value
at Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term
(1)
- ------------------------ ----------------- --------------------- ---------------------- --------------------
(a) (b) (c) (d) (e) (f) (g)
- ------------------------ ----------------- --------------------- ---------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise or Base
Name Granted (#) Fiscal Year Price ($/Sh) are Expiration Date 5% ($) 10% ($)
- ---- ------- ------------ ---------------- --------------- --------- --------
- ------------------------ ----------------- --------------------- ------------------------------------------
Stuart Landow 0 N/A N/A N/A N/A N/A
Christer Rosen 0 N/A N/A N/A N/A N/A
James P. Samuels 0 N/A N/A N/A N/A N/A
Carlton S. Joyce 0 N/A N/A N/A N/A N/A
W.Earl Somerville 25,000(4) 4.3% 6.50 12/20/94 $102,195(2) $258,983(3)
- ------------------------ ----------------- --------------------- ---------------------- --------------------
</TABLE>
(1) The values shown are based on indicated assumed annual rates of
appreciation compounded annually through the applicable expiration
date. Actual gains realized, if any, on stock option exercises and
common stock holdings are dependent on the future performance of the
common stock and overall market conditions. There can be no assurance
that the values shown on this table will be achieved.
(2) Represents an assumed market price per share ofcommon stock of $10.59.
(3) Represents an assumed market price per share of common stock of $16.86.
(4) Mr. Somerville resigned on August 11, 1995. He exercised 12,500 of the
25,000 options on September 19, 1995 when the market price was $7.75,
therefore generating net proceeds of $15,625. The remaining options
were not vested when Mr. Somerville resigned and therefore were
cancelled.
<PAGE>
The following table sets forth certain information with respect to the exercise
of options to purchase common stock and SARs during the fiscal year ended
September 30, 1995, and the unexercised options held and the value thereof at
that date, by each of the Named Executive Officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END(1) OPTION/SAR VALUES
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
- ------------------------- ------------------- --------------------- ----------------------------------------- ---------------------
Number of Securities Underlying Value of Unexercised In-the-Money
Unexercised Options/SARs at Options/SARS
Fiscal Year End (#) at Fiscal Year End ($) (2)
- ------------------------- ------------------- -------------------------------------------------------------------------------------
Shares Acquired
on Exercise Value Realized
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------- ------------------- --------------------- ---------------------------------------------------------------
Stuart Landow 450,000 $3,305,250(3) 800,000 100,000 $5,859,750 $675,000
Christer Rosen 0 N/A 500,000 0 $4,141,250 $ 0
Carlton S. Joyce 0 N/A 100,000 70,000 $ 731,250 $446,285
James P. Samuels 91,000 $ 455,000(4) 94,000 0 $ 628,625 $ 0
W. Earl Somerville 77,500 $ 328,437(5) 27,500 0 $ 161,563 $ 0
- ------------------------- ------------------- --------------------- ---------------- ----------------------------------------------
</TABLE>
(1) All options were granted at 100% of fair market value.
(2) Market price at September 30, 1995 of $8.8125
(3) Includes 450,000 shares exercised at fair market value of $7.8750 with an
exercise price of $ .53.
(4) Includes 91,000 shares exercised at fair market value of $8.1875 with an
exercise price of $3.1875.
(5) Includes 65,000 shares exercised at fair market value of $7.75 with
exercise price of $2.9375 and 12,500 shares exercised as fair market value
of $7.75 with an exercise price of $6.50.
Executive Compensation Agreements
- -------------------------------------------------------------------------------
Effective August 18, 1993, the Company entered into a new five-year employment
agreement with its president and chief executive officer, Mr. Stuart Landow. The
agreement provides for a base annual salary of $200,000 per year. The Company's
Compensation Committee will review the base salary annually during the term
commencing in January 1994 and may increase, but not decrease, the base salary.
Additionally, Mr. Landow shall receive incentive compensation payments based
upon both the revenue at the rate of 1% of revenue descending downward if
quarterly revenue exceeds $6.25 million, and profitability (at the rate of 50%
of the incentive amount based on revenue if net operating income is 8% of net
sales, up to a rate of twice the incentive amount based on revenue if net
operating income is 20% or greater) of the Company during the term, payable
after the end of each of the Company's fiscal quarters according to specific
formulas contained in the agreement. Mr. Landow is not eligible to receive a
profitability incentive payment for fiscal year 1995 since the Company had net
operating income loss. However, Mr. Landow did receive incentive compensation
payments based on revenue. Mr. Landow also receives an automobile allowance of
$600 per month. In August 1993, the Company granted Mr. Landow non-qualified
options to purchase 600,000 shares of common stock exercisable at $2.0625 per
share under the 1993 Plan. The options vest annually with 500,000 options vested
as of December 31, 1995 and the remaining 100,000 options will vest on August
18, 1996.
In the event Mr. Landow is terminated without cause or if he resigns for "good
reason" as defined in the agreement (which includes a material diminution of his
duties or responsibilities), the Company agreed to pay Mr. Landow 36 consecutive
monthly payments equal to his base and incentive compensation. He will also
continue to receive medical, life and disability insurance coverage during the
36 month term.
Mr. Christer Rosen, Executive Vice President and Secretary, currently receives
an annual salary of $200,560 per year pursuant to an oral agreement. Mr. Rosen
also receives an automobile allowance of $600 per month. Additionally, Mr. Rosen
participates in a profit sharing incentive program whereby he is eligible to
receive an incentive payment of half of his base salary if the Company's net
operating income, as a percentage of net sales, exceeds 8%. According to the
formula utilized the incentive payment may be as high as twice the base salary
if the percentage is 20% or greater. In fiscal 1995, Mr. Rosen received a
performance-based bonus payment of $25,000.
Mr. David Natan, Vice President and Chief Financial Officer, receives an annual
salary of $125,000 pursuant to an employment agreement and a car allowance of
$600 per month. Mr. Natan received a performance bonus of $10,000 in mid
December 1995.
On August 31, 1995, Mr. James P. Samuels resigned as an executive officer and
director of the Company. Mr. Samuels remained an employee and was paid through
December 31, 1995. Prior to his resignation, Mr. Samuels also was eligible for
the same incentive payouts as Mr. Rosen however, no such payments were ever
made.
On August 11, 1995, Mr. Earl W. Somerville resigned as an executive officer of
the Company. Mr. Somerville remained an employee and was paid through December
11, 1995.
Mr. Carlton S. Joyce entered into a four year employment agreement on July 17,
1993 and was appointed Chairman of UTG (the Company's subsidiary). Under his
employment agreement, as amended, Mr. Joyce receives a base salary of $200,000
per year adjustable each year for increases in the cost of living. Mr. Joyce is
eligible to receive an override equivalent to 3% of pre-tax income of On-Site
Analysis, Inc. net of any cumulative losses and direct corporate overhead
expenses. Due to the losses incurred by On-Site Analysis, Inc., no amounts have
been paid since the inception of the agreement.
Additionally, effective in October 1993, the Company began providing each of
Messers Landow and Rosen with a $950,000 term life insurance policy.
Retirement Salary Savings Plan
In October 1993, the Company established a 401(k) Retirement Salary Savings
Plan (the "Plan"). All current employees, including executive officers, were
eligible to participate as of October 1, 1993. Any individuals employed
thereafter must complete three months of service to meet the eligibility
requirements. Employees may voluntarily contribute from 1% to 15% of their pay
each plan year although certain requirements may limit the contribution levels
of highly compensated employees. During calendar 1995 the Company contributed
matching dollars equal to 25% of every dollar invested in the Plan on the first
6% of salary savings. The cost the Company incurred for matching employee
contributions and administrative costs during fiscal 1995 was approximately
$57,384. The Plan provides that the Company's matching contribution may change
from year to year and that the Company may declare additional matching dollars
at year-end. The same percentage was voted on and approved in December 1995 for
calendar 1996. Any forfeited non-vested amounts contributed are used to reduce
required Company matching contributions. All participants employed with the
Company who enrolled on or before October 1, 1993 were immediately 100% vested
for all future employer matching contributions. All employees hired after
October 1, 1993 vest ratably over a five-year term.
Repricing of Options
In fiscal year ended September 30, 1995, the Company did not adjust or amend
the exercise price of stock options previously granted to any of the Named
Executive Officers.
Report on Executive Compensation by the Compensation and Stock Option Committees
One of the principal goals of the compensation policy of the Company is to
align executive compensation in a way that will encourage enhanced shareholder
value, while concurrently allowing the Company to attract, retain and
satisfactorily reward all employees who contribute to the Company's long-term
growth and success. The guiding principles of the compensation program are shown
below:
o The compensation program should encourage and balance the attainment of short
term operational goals and long term strategic initiatives.
o The compensation program should provide total compensation that will allow
the Company to attract, retain and motivate high calibre employees.
o The compensation program should encourage stock ownership by executives,
and other employees, in order to ensure actions on their part which will
enhance both operating results and shareholder value.
The compensation program for Company executives includes an annual base salary,
appropriate fringe benefits, the potential for an annual cash bonus incentive,
and long term stock option incentives. The annual incentive awards are based on
actual Company results for the year, compared with objectives which are
established at the beginning of the year.
An employment agreement (the "Agreement") was entered into between the Company
and Mr. Stuart Landow on August 18, 1993, which was described in detail in the
Compensation Committee Report of the Proxy Statement for the year ended
September 30, 1993. The Compensation Committee is authorized to review Mr.
Landow's base salary each year pursuant to the Agreement. During 1995, an annual
salary increase of $11,200 (approximately 5.6%) was awarded to Mr. Landow as a
result of his overall management of the Company during a period of new product
development and production launch, organizational realignment and consolidation.
In addition, he received $189,688 in incentive compensation payments (of which
$26,651 was accrued) based upon gross revenue in accordance with the terms of
the Agreement.
The Compensation Committee believes that Mr. Landow has been reasonably
compensated for his performance as Chief Executive Officer. The compensation
arrangements with Mr. Landow meet the compensation objectives discussed earlier
in this report.
In reviewing the performance of the Company and Mr. Landow during the 1995
fiscal year, the Compensation Committee determined that:
o The annual revenue increased to $19.0 million, compared to $15.1 million in
fiscal 1994.
o Overhead Sound Systems continue to have record sales with a 51% increase in
product sales for fiscal 1995.
Mr. Rosen is eligible to receive an incentive payment of half of his base salary
if the Company's net operating income as a percentage of net sales exceeds eight
percent. This incentive payment could be as high as twice the base salary if
this percentage is 20 percent or greater. Mr. Rosen was not eligible for an
incentive payment for fiscal 1995, but did receive a performance-based bonus of
$25,000. Mr. Samuels also was eligible for the same incentive payouts as Mr.
Rosen however, no such payments were ever made. Both Messers Rosen and Samuels
waived the incentive payments for fiscal 1994.
During fiscal 1995, effective June 30, 1995, one new individual became an
executive officer. The Company hired Mr. David Natan to replace James P. Samuels
as its Chief Financial Officer. Mr. Natan's employment agreement provides an
annual salary of $125,000 and $600 per month car allowance. Mr. Natan was
granted 93,750 options exercisable at $6.9375 per share under the Company's 1993
Stock Option Plan. In mid December 1995, Mr. Natan received a performance-based
bonus of $10,000 and was granted 10,000 options exercisable at $7.75 per share
under the Company's 1993 Stock Option Plan.
This report is submitted by the Compensation Committee and the Stock Option
Committee.
Compensation Committee Stock Option Committee
Ronald P. Burd Paul F. Moore
Clinton D. Lauer Mani A. Sadeghi
Performance Graph
The following Performance Graph assumes that $100 was invested in the Company,
the AMEX Market Index and the Peer Group Index on October 1, 1990. Information
on prices at which the Company's stock traded prior to that date are not readily
available. The Performance Graph further assumes all dividends were reinvested.
However, the Company has never paid any dividends.
TOTAL RETURN COMPARISON
The following graph sets forth a five-year comparison of total returns for:
(1) the Company; (2) a Company selected Peer Group (comprised of Gentex CP,
Johnson Controls, Inc. and Magna International A); and (3) the American Stock
Exchange - Broad Market Index.
(The following table was represented by a chart in the printed material)
Date TopSource Peer Group Amex
------- --------- ----------- -----
10/90 100 100 100
10/91 376.89 199.33 119.92
10/92 399.95 273.35 125.15
10/93 799.90 445.42 146.91
10/94 1,722.86 403.20 149.73
10/95 2,168,96 508.46 180.41
<PAGE>
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
OF COMPANY, PEER GROUP AND BROAD MARKET
FISCAL YEAR ENDING
COMPANY 1990 1991 1992 1993 1994 1995
TOP SOURCE
TECHNOLOGIES 100.00 376.89 399.95 799.90 1,722.86 2,168.96
PEER GROUP 100.00 199.33 273.35 445.42 403.20 508.46
BROAD MARKET 100.00 119.92 125.15 146.91 149.73 180.41
The Broad Market Index Chosen Was: American Stock Exchange
The Peer Group Chosen Was: Customer Selected Stock List
The Peer Group is Made Up of the Following Securities:
Gentex CP, Johnson Controls, Inc., Magna International A
Proposal 2. Appointment of Auditors
Arthur Andersen LLP ("Arthur Andersen"), independent public
accountants, currently acts as the independent auditors of the Company. Unless
directed to vote no, proxies being solicited will be voted in favor of the
election of Arthur Andersen as independent auditors for the Company's fiscal
year ended September 30, 1996. Arthur Andersen acted as auditors for the Company
for the fiscal year ended September 30, 1995. A representative of Arthur
Andersen will be present at the meeting, be available to respond to appropriate
questions, and have the opportunity to make statements should they desire to do
so.
Ratification of the appointment of Arthur Andersen as the Company's
independent accountants for fiscal 1996 will require the affirmative vote of at
least a majority of the shares of the Company's common stock represented in
person or by proxy at the annual meeting and entitled to vote. Proxies solicited
by management will be voted for the proposal unless instructed otherwise.
Proposal 3. Other Matters
The Board has no knowledge of any other matters which may come before
the meeting and does not intend to present any other matters. However, if any
other matters shall properly come before the meeting or any adjournment thereof,
the persons soliciting proxies will have the discretion to vote as they see fit
unless directed otherwise.
If you do not plan to attend the meeting, in order that your shares may
be represented and in order to assure the required quorum, please sign, date and
return your proxy promptly. In the event you are unable to attend the meeting,
at your request, the Company will cancel the proxy.
Stockholders' Proposals
Any stockholder of the Company who wishes to present a proposal to be
considered at the 1997 annual meeting of the stockholders of the Company and who
wishes to have such proposal presented in the Company's proxy statement for such
meeting must deliver such proposal in writing to the Company no later than
September 25, 1996. In addition, the Company's bylaws preclude a stockholder
from otherwise introducing business unless such stockholder gives notice to the
Company not later than 60 days prior to the meeting or within 15 days following
notice to stockholders of the date of the 1997 meeting if less than 75 days
notice of the date is given.
The Company will furnish, without charge to any stockholder submitting
a written request a copy of the Company's annual report on Form 10-K as filed
with the Securities and Exchange Commission including financial statements and
schedules thereto. Such written request should be directed to Christer Rosen,
Secretary of the Company, at the address of the Company stated herein.
By the Order of the Board of Directors
Christer Rosen, Secretary
<PAGE>
APPENDIX
1. Election of Directors __ FOR all nominees__ WITHHOLD AUTHORITY to vote
(see reverse side) listed below for all nominees listed below
*EXCEPTIONS __
Nominees: Ronald P. Burd, Clinton D. Lauer, Paul F. Moore
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below.)
*Exceptions __________________________________________________________________
2. I hereby ratify the appointment 3. I hereby authorize the transaction
of Arthur Andersen LLP as independent of any other lawful business that
auditors for the fiscal year ended may come before the annual meeting
September 30, 1996. of stockholders.
FOR __ AGAINST__ ABSTAIN __ FOR __ AGAINST __ ABSTAIN __
Change of Address or
Comments Mark Here __
The form must be signed by the
person in whose name the relevant
Receipt is registered on the books
of the Depository. In the case of a
Corporation the Form should be
executed by a duly authorized
Officer or Attorney.
Dated: ___________________, 199 ___
-----------------------------------
Signature of Stockholder
-----------------------------------
Typed or Printed Name of Stockholder
------------------------------------
Number of Shares Owned
Shares cannot be voted unless this proxy is
signed and returned,or specific arrangements Votes MUST be indicated
are made to have the shares represented at the (x) in Black or Blue Ink.
Meeting.
TOP SOURCE TECHNOLOGIES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF TOP SOURCE TECHNOLOGIES, INC.
FOR THE ANNUAL MEETING OF STOCKHOLDERS ON MARCH 15, 1996.
The undersigned hereby appoints Stuart Landow, Christer Rosen, and
David Natan (or the majority of them) as my proxy with power of substitution for
and in the name of the undersigned to vote all shares of common stock of Top
Source Technologies, Inc. (the "Company") which the undersigned would be
entitled to vote at the annual meeting of stockholders of the Company to be held
at The Hotel Nikko Atlanta, 3300 Peachtree Rd., Atlanta on March 15, 1996 at
6:00 P.M. and at any adjournment thereof, upon such business as may properly
come before the meeting, including the items set forth on the reverse side.
Each share of common stock outstanding on the record date is entitled to
one vote on all proposals.
If no direction is indicated, this Proxy will be voted as recommended by
the board of directors for the directors (Ronald P. Burd, Clinton D. Lauer, Paul
F. Moore) and for all other proposals. If no direction is indicated, this Proxy
will be voted as recommended by the board of directors for all proposals.
(Continued and to be dated and
signed on the reverse side.)
TOP SOURCE TECHNOLOGIES, INC.
P.O. BOX 11080
NEW YORK, N.Y. 10203-0080
