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 6:00 P.M. on Thursday, May 15th, 1997 at the
DoubleTree Guest Suites, 28100 Franklin Road, Southfield, Michigan 48034 for the
following purposes:
1. To elect those members who are up for re-election 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, 1997.
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 March 21, 1997 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: March 31, 1997
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
May 15, 1997 (the "1997 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 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 March 21, 1997
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 March 3,1997, there were 28,461,477 shares of
common stock of the Company 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.
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 March 31, 1997.
<PAGE>
Voting Securities and Principal Holders
The following table sets forth the number of shares of the Company's
common stock beneficially owned as of February 21, 1997 by (i) owners of more
than 5% of the Company's common stock, (ii) by each director 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) 1,054,300 3.6%
and Vested 450 Park Avenue, Suite 2100
Options New York, New York 10022
- - --------------------- ---------------------------------------- ----------------------- ------------------------
Common Stock CHRISTER ROSEN(2) 840,000 2.9%
and Vested 7108 Fairway Drive, Suite 200
Options Palm Beach Gardens, FL 33418
- - --------------------- ---------------------------------------- ----------------------- ------------------------
Common Stock DAVID NATAN(3) 60,225 *
and Vested 7108 Fairway Drive, Suite 200
Options Palm Beach Gardens, FL 33418
- - --------------------- ---------------------------------------- ----------------------- ------------------------
Common Stock RONALD P. BURD(4),(5) 180,500 *
and Vested 251 Linden Lane
Options Merion Station, PA 19066
- - --------------------- ---------------------------------------- ----------------------- ------------------------
Common Stock CLINTON D. LAUER(6) 38,000 *
and Vested 4053 Hidden Woods Drive
Options Bloomfield Hills, MI 48301
- - --------------------- ---------------------------------------- ----------------------- ------------------------
Common Stock PAUL F. MOORE(7) 36,000 *
and Vested 325 N. Cliften Rd.
Options Bloomfield Hills, MI 48301
- - --------------------- ---------------------------------------- ----------------------- ------------------------
Common Stock MANI A. SADEGHI(8) 55,000 *
and Vested 35 Manor Drive
Options Morris Township, NJ 07960
- - --------------------- ---------------------------------------- ----------------------- ------------------------
Common Stock GANZ CAPITAL MGMT., INC.(9) 2,917,554 10.2%
and Vested 2875 N.E. 191st Street
Options Penthouse I
N. Miami Beach, FL 33130
- - -------------------------------------------------------------- ----------------------- ------------------------
All directors and existing officers of the Company as a 2,264,025 7.6%
group (7 persons)(1)(2)(3)(4)(5)(6)(7)(8)
*Less than 1% of class
- - -------------------------------------------------------------- ----------------------- ------------------------
</TABLE>
<PAGE>
(1) Includes 600,000 options all of which are vested options exercisable at
approximately $2.0625 per share held by Mr. Landow.
(2) Includes 500,000 options all of which are vested options exercisable at
approximately $.53 per share.
(3) Includes 46,875 vested options held by Mr. Natan exercisable at
approximately $6.9375 per share and 10,000 vested options at approximately
$7.75 per share, 2,350 shares held by Mr. Natan and 1,000 shares held by
Mr. Natan's wife.
(4) Includes 25,000 vested options exercisable at approximately $3.38 per
share, 50,000 vested options exercisable at approximately $1.78 per share
and 20,000 vested options exercisable at approximately $6.25 held by Mr.
Burd.
(5) Includes 82,000 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.
(6) Includes 30,000 vested options exercisable at approximately $8.75 per
share and 8,000 shares held by Mr. Lauer.
(7) Includes 30,000 vested options exercisable at approximately $3.125 per
share and 5,000 vested options at approximately $7.125
per share. and 1,000 shares held by Mr. Moore.
(8) Includes 30,000 vested options exercisable at approximately $3.125 per
share and 5,000 vested options at $7.125 per share and 20,000 shares held
by Mr. Sadeghi.
(9) Ganz Capital Management, Inc. ("Ganz Capital") is a registered investment
advisor. On January 17, 1996, it filed a Schedule 13-G with the Securities
and Exchange Commission disclosing beneficial ownership of 2,895,454
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 68.3% 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 six meetings during the fiscal
year ended September 30, 1996. 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.
<PAGE>
The Company has a Compensation Committee comprised of Messrs. Burd, Lauer,
Moore, and Sadeghi; an Audit Committee comprised of Messrs. Burd, and Lauer; a
Nominating Committee comprised of Messrs. Landow, Moore and Sadeghi, and an
Executive Committee comprised of Stuart Landow and Paul Moore. The Stock Option
Committee was merged into the Compensation Committee on June 7, 1996.
Proposal 1. Election of Directors
The Company has a classified Board of Directors which provides for three
classes of directors each of which serves a three-year term. One class is
elected each year. Three directors were elected at the 1996 Annual Meeting and
those persons elected will hold office until their terms expire in 1999 and
until their successors have been elected and qualified. An independent director,
Mr. Arthur S. Kirsch, who had been a director of the Company since 1994 and
whose term was scheduled to end in 1998, resigned on December 6, 1996.
Therefore, in order to maintain a majority of independent non-employee
directors, Mr. Christer Rosen, Mr. David Natan and Mr. Carlton Joyce, each of
whom is an officer/employee of the Company, resigned as a director of the
Company effective January 31, 1997. The Company's by-laws 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 seven. There are two vacancies that may be filled by the
Board of Directors as provided in the Company's by-laws, one for a term expiring
in 1998 and one for a term expiring in 2000.
<TABLE>
Current and Fiscal 1996
Board of Directors
<S> <C> <C> <C> <C> <C>
- - ---------------------------- -------- ------------------------- -------- ----------------- ---------------
Name Age Position with
Company Since Term Ending
- - ---------------------------- -------- ------------------------- -------- ----------------- ---------------
Stuart Landow(1) (4) 50 President (Chief 1990 Three Years 1997
Executive Officer) and
Chairman of the Board of
Directors
- - ---------------------------- -------- ------------------------- -------- ----------------- ---------------
Ronald P. Burd(2)(3) 50 Director 1992 Three Years 1999
- - ---------------------------- -------- ------------------------- -------- ----------------- ---------------
Paul F. Moore(1)(4)(3) 70 Director 1993 Three Years 1999
- - ---------------------------- -------- ------------------------- -------- ----------------- ---------------
Mani A. Sadeghi(1)(3) 33 Director 1993 Three Years 1998
- - ---------------------------- -------- ------------------------- -------- ----------------- ---------------
Clinton D. Lauer(2)(3) 70 Director 1994 Three Years 1999
- - ---------------------------- -------- ------------------------- -------- ----------------- ---------------
</TABLE>
(1) Member of the Nominating Committee
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
(4) Member of the Executive Committee.
<PAGE>
The nominee for the re-election is set forth below. The proxy holders intend to
vote all proxies received by them for the nominee for directors listed below
unless instructed otherwise. In the event the 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 nominee listed below unless instructed otherwise. As of the date of
this Proxy Statement, the Board of Directors is not aware that the nominee is
unable or will decline to serve as a director.
<TABLE>
Nominee for Election at the 1997 Annual Meeting:
<S> <C> <C> <C> <C> <C>
- - ------------------------ ---------------- ----------------------- --------- ---------------------- ------------------------
Name Age Position With The Since New Term Term Ending
Company
- - ------------------------ ---------------- ----------------------- --------- ---------------------- ------------------------
Stuart Landow 50 Director 1990 Three Years 2000
- - ------------------------ ---------------- ----------------------- --------- ---------------------- ------------------------
</TABLE>
Stuart Landow - Mr. Landow has been President, Chief Executive Officer and a
member of the Board of Directors of the Company since July 27, 1990, and
Chairman of the Board of Directors since 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 introduced the oil analysis concept to the
Company and devotes a significant amount of time to project management of
On-Site Analysis, Inc., whose name changed to Top Source Instruments, Inc.
("TSI"), and to the development and marketing of On-Site Analyzers. In addition,
Mr. Landow introduced the licensing through MIT of the ARCS technology and of
the EFECS Technology, which was subsequently sold by the Company in 1995.
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 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.
In December 1996, the Board of Directors determined that it would best serve
stockholder interests to augment top management by retaining the services of an
additional executive as Chief Executive Officer, or in some other capacity, to
work with Mr. Landow in executing the Company's business plan. The Company's
search for such a new executive is continuing. For a discussion of certain
payments and other benefits to which Mr. Landow may be entitled if his
responsibilities and duties are materially diminished if and when such a new
executive is retained, see the section of this Proxy Statement entitled
"Executive Compensation Agreements."
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.
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.
<PAGE>
Mani A. Sadeghi - Mr. Sadeghi was appointed a director of the Company in
September 1993. Mr. Sadeghi is currently group president for specialty financial
service businesses at AT&T Capital Corporation. From October 1994 to October
1996, Mr. Sadeghi was 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 beneficial owner of approximately 10.2% of the Company's common
stock.
Non-Director Executive Officers
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 NASDAQ 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. In January 1996, Mr. Natan
became a Director of IMX Corporation ("IMX") in Boca Raton, Florida. IMX is a
NASDAQ listed distributor of pharmaceutical products.
Richard J. Ragan - Mr. Ragan was appointed Chief Executive Officer of Top Source
Instruments, Inc. ("TSI") in October, 1996, which consists of the Company's
On-Site Analyzer (OSA) product line. Mr. Ragan is responsible for the day to day
leadership of the TSI staff, setting the direction of the company, providing the
vision for the future and overall profitability of the group. Prior to joining
the TSI group, Mr. Ragan was President and Chief Executive Officer of AVL North
America, Inc. from 1992 to 1996. From 1986 to 1992, Mr. Ragan was the Marketing
Manager for Sverdrup Technology, Inc., a subsidiary of the Sverdrup Corporation
responsible for business development and customer advocacy primarily in the
automotive markets.
Christer Rosen - Mr. Rosen has been Executive Vice President and Secretary of
the Company since 1987. From 1995 to September 1996, Mr. Rosen was President of
Top Source Automotive, Inc. ("TSA") and in September 1996 was appointed officer
in charge of both the TSI and TSA subsidiaries. Mr. Rosen was responsible for
bringing the Overhead Sound System to the Company. Mr. Rosen is the only
original member of the management team which founded the Company.
Dennis K. Littleworth - Mr. Littleworth was appointed Vice President and General
Manager of Top Source Automotive, Inc. ("TSA"), in April 1996, and was promoted
to President in October 1996. Mr. Littleworth is responsible for directing the
overall operations of TSA. Prior to joining the Company in 1996, Mr. Littleworth
was employed by United Technologies Corporation for twenty-one years in a
variety of managerial positions. From October 1994 through February 1996, Mr.
Littleworth was Director of Manufacturing Interiors for United Technologies
Automotive, Inc. (UTA). From December 1989 through September 1994, Mr.
Littleworth was General Manager of UTA's Engineered Elastomer Products unit.
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, 1996 exceeded
$100,000 (collectively, the "Named Executive Officers") for the years indicated.
<PAGE>
<TABLE>
- - ---------------------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation
Awards Payouts
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h) (i)
=================== ----------- --------------- ------------- ------------- ------------- ------------ ------------- ---------
Securities
Other Annual Underlying All Other
Name and Principal Compensation Restricted Option/SARS LTIP Compensation
Position Year Salary($) Bonus($) ($)(1) Stock (#) ($)(2)
Award(s)($) Payouts($)
=================== --------- -------------- ------------ --------- ------------- ----------- ---------- -----------
Stuart Landow
President 1996 $211,200 $238,535(6) $14,300 $525,000(3) 0 $ 0 $33,002
(Chief Executive 1995 $202,794 $189,688(5) $ 7,200 $ 0 0 $ 0 $14,213
Officer) 1994 $218,000 $151,378(4) $ 7,550 $ 0 0 $ 0 $21,105
=================== ----------- --------------- ------------- ----------- -------------- --------- --------- ---------
Christer Rosen 1996 $200,560 $ 25,000 $19,592 $ 0(7) 0 $ 0 $ 7,837
Executive Vice 1995 $180,940 $ 25,000 $14,064 $ 0 0 $ 0 $ 4,419
President 1994 $177,733 $ 0 $11,538 $231,250(8) 0 $ 0 $ 3,039
- - ----------------- ----------- --------------- -------------- ------------ -------------- --------- --------- --------
David Natan 1996 $125,000 $ 25,000 $10,914 $ 0 10,000 $ 0 $ 5,448
Vice President of 1995 N/A N/A N/A N/A N/A N/A N/A
Finance and Treas. 1994 N/A N/A N/A N/A N/A N/A N/A
(Chief Financial
Officer)
- - ----------------- ----------- --------------- -------------- ------------- --------------- ---------- ---------- --------
Carlton S. Joyce 1996 $216,612 $ 0 $11,649 $ 0 0 $ 0 $ 4,000
Director - Product 1995 $200,000 $ 0 $ 9,811 $ 0 0 $ 0 $ 0
Technology 1994 $207,692 $ 0 $ 385 $ 0 0 $ 0 $ 4,667
- - ----------------- ---------- ------------- ---------------- ------------- --------------- --------- ---------- -------
Steven Ludmerer(9) 1996 $103,266 $ 0 $ 8,500 $ 0 100,000 $ 0 $ 617
President 1995 N/A N/A N/A N/A N/A N/A N/A
Petrochemical Group 1994 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 1996, 1995 and
1994 also include $8,792, $4,407 and $4,338 in club membership dues
paid by the Company, respectively.
(2) These amounts, as follows, represent group term life insurance
premiums paid by the Company, the Company's match of the Retirement
Salary Saving Plan - 401(k) and reimbursement of out-of-pocket
medical, dental, etc. expenses not covered by the Company's insurance:
(a) The 1996 group term life insurance premiums was as follows:
Mr. Landow $7,239, Mr. Rosen $5,066, and Mr. Joyce $4,000.
(b) The 1996 employer match of the Retirement Salary Savings Plan -
401(K) was as follows: Mr. Landow $2,840, Mr. Rosen $1,556 and
Mr. Natan $1,782.
(c) The 1996 reimbursement of out-of pocket medical, dental, etc.
not covered by the Company's insurance was as follows:
Mr. Landow $22,923, Mr. Rosen $1,215 and Mr. Natan $3,666.
(3) At September 30, 1996, Mr. Landow owned 620,300 shares of restricted
stock. The value of the restricted stock was $2,907,656, based on
$4.6875, the closing stock price of the Company's common stock on the
American Stock Exchange at September 30, 1996. Although the Company
does not anticipate declaring a dividend, if one is declared, dividends
will be paid on restricted stock. Also in prior years, Mr. Landow had
deferred vesting of 100,000 shares that were granted to him in 1990. In
July 1996, Mr. Landow agreed to the full vesting of the 100,000 shares,
which was valued at $525,000 based on $5.25, the closing stock price of
the Company's common stock on the American Stock Exchange at July 17,
1996.
(4) In fiscal 1994, Mr. Landow was paid $151,378 in incentive compensation
equaling 1% of net sales.
(5) In fiscal 1995 , Mr. Landow was awarded, an incentive compensation
payment of 1% of net sales. This amount totaled $189,688 of which
$163,037 had been paid at fiscal year-end and $26,651 was accrued.
(6) In fiscal 1996, Mr. Landow was paid $238,535 in incentive compensation
payments which are based on a % of net sales as defined in his
employment agreement, included in these payments is $27,568 which is
directly related to the sale of the United Testing Group, Inc. assets .
(7) At September 30, 1996, Mr. Rosen had an aggregate of 340,000 shares of
restricted stock. The value of the restricted stock was $1,593,750
based on $4.6875, the closing stock price of the Company's common stock
on the American Stock Exchange at September 30, 1996. Although the
Company does not anticipate declaring a dividend, if one is declared,
dividends will be paid on restricted stock.
(8) 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 $4.625). The 50,000 shares vested on
January 1, 1994.
(9) Mr. Ludmerer resigned in December 1996, therefore, all unexercisable
stock options were forfeited.
<PAGE>
<TABLE>
==================================================================================================================================
OPTION/SAR GRANTS IN LAST FISCAL YEAR
==================================================================================================================================
SEPTEMBER 30, 1996
Potential Realizable Value at Assumed
Annual Rates of Stock Price Appreciation
Individual Grants for Option Term(1)
<S> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g)
- - --------------- ----------------- ---------------- ----------- --------------- --------------------- ---------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise
Options/SARs Employees in or Base Price
Name Granted (#) Fiscal Year ($/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
David Natan 10,000 1.94 $7.75 12/13/2005 $ 48,739(2) $123,515(3)
Carlton S. Joyce 0 N/A N/A N/A N/A N/A
Steven Ludmerer 100,000 19.4 $6.4375 1/31/2006(6) $404,851(4) $1,025,972(5)
- - ---------------- --------------- ------------- ------------- ---------------- --------------------- ---------------------
(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 of common stock of $12.62.
(3) Represents an assumed market price per share of common stock of $20.10.
(4) Represents an assumed market price per share of common stock of $10.49.
(5) Represents an assumed market price per share of common stock of $16.70.
(6) Mr. Ludmerer resigned in December 1996 and the 100,000 options which
were granted to him had not vested. Therefore, these options have
expired.
</TABLE>
<PAGE>
The following table sets forth certain information with respect to the exercise
of options to purchase common stock and SARs during the fiscal year ended
September 30, 1996, and the unexercised options held and the value thereof at
that date, by each of the Named Executive Officers.
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END(1) OPTION/SAR VALUES
<S> <C> <C> <C> <C>
(a) (b) (c) (d) (e)
- - ----------------- --------------- --------------- --------------------------------- ---------------------------------
Number of Securities Underlying Value of Unexercised In-the-Money
Unexercised Options/SARs at Options/SARS
Fiscal Year End (#) at Fiscal Year End ($)(2)(4)
- - ----------------- --------------- --------------- --------------------------------- ----------------------------------
Shares Acquired
on Exercise Value Realized
Name (#)(1) ($) Exercisable Unexercisable Exercisable Unexercisable
- - ----------------- --------------- --------------- ------------ -------------- ------------ -------------
Stuart Landow 300,000 $1,653,500(3) 600,000 0 $1,575,000 $ 0
Christer Rosen 0 N/A 500,000 0 $2,078,750 $ 0
David Natan 0 N/A 36,250 67,500 $0 $ 0
Carlton S. Joyce 0 N/A 100,000 70,000 $ 318,750 $157,535
Steven Ludmerer 0 N/A 0 100,000 $ 0 $ 0
- - ----------------- -------------- --------------- ------------ -------------- ------------- -------------
</TABLE>
(1) All options were granted at 100% of fair market value.
(2) Based on the difference between the closing market price of the
Company's stock on the American Stock Exchange at September 30,
1996 of $4.6875 and the option exercise price.
(3) Includes 100,000 shares exercised at fair market value of $7.00;
100,000 shares exercised at fair market value of $4.625; and 100,000
shares exercised at fair market value of $6.50 all with exercise
prices of $.53.
(4) The closing market price of the Company's common stock on March 3,
1997 was $2.375. The following values of unexercised In-The Money
Options/SARS changed to the following amounts:
Exercisable
Stuart Landow $ 87,500
Christer Rosen $922,500
Carlton Joyce $ 87,500
<PAGE>
- - ----------------------------------------------------------------------------
Executive Compensation Agreements
Effective August 18th, 1993, the Company entered into a 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 with an annual
cost of living increase. The Company's Compensation Committee reviews the base
salary annually during the term and may increase, but not decrease, the base
salary. Currently, Mr. Landow receives a salary of $211,200. Additionally, Mr.
Landow receives 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 was not eligible to receive a profitability incentive
payment for fiscal year 1996 since the Company had a net operating loss.
However, Mr. Landow did receive incentive compensation payments based on
revenue. Mr. Landow also receives an automobile allowance of $600 per month and
an automobile maintenance allowance of $400 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 600,000
options were fully vested as of September 30, 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 and an automobile
maintenance allowance of $400 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. Mr. Rosen was not eligible to receive a
profitability incentive payment for fiscal year 1996 since the Company had a net
operating loss. Mr. Rosen received a performance-based bonus payment of $25,000
in December 1996.
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 and an automobile maintenance allowance of $400 per month. Mr.
Natan received a performance bonus of $25,000 in December 1996. In 1995, Mr.
Natan was granted 10,000 option shares exercisable at $7.75 per share under the
Company's 1993 Stock Option Plan.
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). Mr. Joyce is
currently the Director of Technology for TSI. 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's current salary is
$218,154. Mr. Joyce also receives an automobile allowance of $600 per month and
an automobile maintenance allowance of $400 per month. Mr. Joyce is eligible to
receive an override equivalent to 3% of pre-tax income of TSI, net of any
cumulative losses and direct corporate overhead expenses. Due to the losses
incurred by TSI, Inc., no amounts have been paid as an override since the
inception of the agreement.
Mr. Richard J. Ragan entered into an employment agreement on October 1, 1996 and
was appointed CEO of TSI. Mr. Ragan receives an annual salary of $200,000
pursuant to an employment agreement and a car allowance of $600 per month and an
automobile maintenance allowance of $400 per month. Mr. Ragan received a grant
of 25,000 stock options which vest in six month increments beginning June 30,
1997. In addition, Mr. Ragan is eligible to receive additional stock options and
an incentive bonus if certain targets and objectives are met as defined in his
contract.
<PAGE>
Mr. Dennis K. Littleworth entered into an employment agreement on April 12, 1996
and was appointed Vice President and General Manager of TSA. In October 1996 he
was appointed President of TSA. Mr. Littleworth currently receives an annual
salary of $140,000 pursuant to an employment agreement and a car allowance of
$600 per month and an automobile maintenance allowance of $400 per month. Mr.
Littleworth received 70,000 stock options vesting in six month increments over a
three-year period beginning December 31, 1996. Also, Mr. Littleworth will be
eligible to receive certain program incentives if certain target and profit
goals are met as defined in his contract.
Additionally, effective in October 1993, the Company began providing each of
Messrs. 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 fiscal 1996 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 1996 was approximately
$55,521. 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. 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, 1996, 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 Committee
One of the principal goals of the compensation policy of the Company is to
align executive compensation in a way that will encourage enhanced stockholder
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 caliber 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 stockholder value.
<PAGE>
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. In addition, he
received $238,535 in incentive compensation payments based upon gross revenue in
accordance with the terms of the Agreement, included in these payments is
$27,568 which is directly related to the sale of the United Testing Group
assets.
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 1996
fiscal year, the Compensation Committee determined that:
1. The annual revenue increased to $16.1 million, compared to $13.9
million in fiscal 1996.
2. Overhead Sound Systems continue to have record sales with a 15.9%
increase in product sales for fiscal 1996.
3. The sale of United Testing Group assets had a beneficial impact on
the Company's liquidity and enabled the Company to focus more
resources on OSA development.
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 1996, but did receive a performance-based
bonus of $25,000.
During fiscal 1996, Mr. Natan's employment agreement provides an annual
salary of $125,000. Mr. Natan was granted 10,000 options exercisable at $7.75
per share under the Company's 1993 Stock Option Plan. In mid December 1996,
Mr. Natan received a performance-based bonus of $25,000.
This report is submitted by the Compensation Committee.
Compensation 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, 1991. 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.
<PAGE>
<TABLE>
COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY, PEER GROUP AND BROAD MARKET
<S> <C> <C> <C> <C> <C> <C>
COMPANY 1991 1992 1993 1994 1995 1996
------- ---- ----- ---- ---- ----- ----
Top Source Technologies 100 106.12 212.24 457.13 575.49 306.11
Peer Group 100 137.52 225.16 203.61 256.45 316.13
Broad Market 100 104.36 122.51 124.86 150.45 156.58
</TABLE>
The Peer Group chosen was:
Customer Selected Stock List
The Broad Market Index chosen was:
American Stock Exchange
The Peer Group is made up of the following securities:
Gentex Corp.
Johnson Controls, Inc.
Magna Internat Inc.
Source: Media General Financial Services
P. O. Box 85333
Richmond, VA 23293
Phone: 1-800-446-7922
Fax: 1-804-649-6097
<PAGE>
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, 1997. Arthur Andersen acted as auditors for the Company
for the fiscal year ended September 30, 1996. 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 1997 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
Proposals 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 1998 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, 1997. In addition, the Company's by-laws preclude a stockholder
from otherwise introducing business unless less than 75 days notice is given to
the Company of the meeting (or prior public disclosure of the date of the
meeting) (collectively the "Notice Date") in which event notice must be given to
the Company within 15 days of such Notice Date.
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
/s/Christer Rosen
-------------------
Christer Rosen
Secretary
<PAGE>
APPENDIX
1. Election of Director __ FOR nominee __ WITHHOLD AUTHORITY to vote
(see reverse side) listed below for nominee listed below
*EXCEPTIONS __
Nominee: Stuart Landow
(INSTRUCTIONS: To withhold authority to vote for the 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
September 30, 1997. Meeting 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.
<PAGE>
TOP SOURCE TECHNOLOGIES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF TOP SOURCE TECHNOLOGIES, INC.
FOR THE ANNUAL MEETING OF STOCKHOLDERS ON MAY 15, 1997.
The undersigned hereby appoints Stuart Landow, Christer Rosen and David
Natan 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 Doubletree Guest
Suites, 28100 Franklin Road, Southfield, Michigan 48034 on May 15, 1997 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 director, Stuart Landow, 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
