UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A No. 1
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarterly Period Ended March 31, 1998
Commission File Number 1-11046
TOP SOURCE TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 84-1027821
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
7108 Fairway Drive, Suite 200, Palm Beach Gardens, Florida 33418
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 775-5756
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at May 14, 1998
Common stock: $.001 par value 28,724,177 shares
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TOP SOURCE TECHNOLOGIES, INC.
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements Page
Consolidated Balance Sheets as of March 31, 1998
(Unaudited) and September 30, 1997.......................1
Consolidated Statements of Operations for the
Three and Six Months Ended March 31, 1998 and 1997
(Unaudited).............................................2-3
Consolidated Statements of Cash Flows for the Six Months Ended
March 31, 1998 and 1997 (Unaudited)......4
Notes to Unaudited Interim Consolidated
Financial Statements....................................5-7
ITEM 2. Management's Discussion and Analysis of Interim
Financial Condition and Results of Operations..........8-11
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K................................12
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TOP SOURCE TECHNOLOGIES, INC.
Form 10-Q
CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1998 AND SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
March 31 September 30
ASSETS 1998 1997
---------------- ------------------
(UNAUDITED)
Current Assets:
Cash and cash equivalents $545,626 $2,103,679
Accounts receivable trade 2,508,612 2,255,303
Advances to officer 21,489 27,234
Inventories 1,175,581 881,023
Prepaid expenses 201,196 219,446
Other 100,141 155,448
---------------- ------------------
Total current assets 4,552,645 5,642,133
Property and equipment, net 1,696,786 2,147,403
Manufacturing and distribution rights and patents, net 271,323 284,562
Capitalized database, net 2,178,611 2,284,027
Notes receivable from officers 107,388 106,687
Other assets, net 222,893 890,218
================ ==================
TOTAL ASSETS $9,029,646 $11,355,030
================ ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Line of credit $1,029,301 $1,996,341
Accounts payable 1,023,039 672,836
Accrued salaries 4,162 7,494
Accrued liabilities 549,988 1,050,978
Net liabilities from discontinued operations 114,521 122,928
---------------- ------------------
Total current liabilities 2,721,011 3,850,577
Senior convertible notes 3,020,000 3,020,000
---------------- ------------------
Total liabilities 5,741,011 6,870,577
Commitments and contingencies
Stockholders' equity:
Preferred stock - $.10 par value, 5,000,000 shares
authorized; none outstanding - -
Common stock-$.001 par value, 50,000,000 shares
authorized; 28,686,477 and 28,461,477 shares issued and
outstanding on March 31 and September 30, respectively 28,686 28,461
Additional paid-in capital 28,960,476 28,744,451
Accumulated deficit (24,351,173) (22,939,105)
Treasury stock-at cost; 466,234 (1,349,354) (1,349,354)
---------------- ------------------
Total stockholders' equity 3,288,635 4,484,453
---------------- ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $9,029,646 $11,355,030
================ ==================
See accompanying notes to unaudited interim consolidated
financial statements.
1
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<CAPTION>
TOP SOURCE TECHNOLOGIES, INC.
Form 10-Q
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
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<S> <C> <C>
1998 1997
---------------- ------------------
Revenue:
Product sales $3,172,381 $5,072,140
Service revenue 168,057 172,860
---------------- ------------------
Net sales 3,340,438 5,245,000
---------------- ------------------
Cost of sales:
Cost of product sales 2,146,147 3,282,215
Cost of services 81,645 69,181
---------------- ------------------
Cost of sales 2,227,792 3,351,396
---------------- ------------------
Gross profit 1,112,646 1,893,604
---------------- ------------------
Expenses:
General and administrative 1,206,217 1,188,892
Selling and marketing 314,169 375,368
Depreciation and amortization 222,981 272,927
Research and development 47,175 891
---------------- ------------------
Total expenses 1,790,542 1,838,078
---------------- ------------------
Income (loss) from operations (677,896) 55,526
Other income (expense):
Interest income 23,276 28,301
Interest expense (136,515) (70,703)
Other income, net 29,249 20,266
---------------- ------------------
Net other expense (83,990) (22,136)
---------------- ------------------
Income (loss) before income taxes (761,886) 33,390
Income tax expense (18,500) (18,500)
---------------- ------------------
Income (loss) from continuing operations (780,386) 14,890
Income from discontinued operations - 36,933
================ ==================
Net income (loss) $ (780,386) $ 51,823
================ ==================
Basic and diluted loss per weighted average common
Continuing operations $ (0.03)
Discontinued operations -
================
Total $ (0.03)
================
Basic and diluted weighted average common shares outstanding 28,135,799
================
Net income per basic and diluted common shares:
Continuing operations $ 0.00
Discontinued operations 0.00
==================
Total $ 0.00
==================
Weighted average common shares outstanding:
Basic 28,560,577
==================
Diluted 28,560,690
==================
See accompanying notes to unaudited interim consolidated financial statements.
2
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<CAPTION>
TOP SOURCE TECHNOLOGIES, INC.
Form 10-Q
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1998 1997
---------------- ------------------
Revenue:
Product sales $6,419,416 $8,269,677
Service revenue 197,350 199,435
---------------- ------------------
Net sales 6,616,766 8,469,112
---------------- ------------------
Cost of sales:
Cost of product sales 4,276,793 5,505,334
Cost of services 90,899 78,435
---------------- ------------------
Cost of sales 4,367,692 5,583,769
---------------- ------------------
Gross profit 2,249,074 2,885,343
---------------- ------------------
Expenses:
General and administrative 2,251,457 2,481,833
Selling and marketing 634,559 618,594
Depreciation and amortization 483,140 539,779
Research and development 62,440 3,225
---------------- ------------------
Total expenses 3,431,596 3,643,431
---------------- ------------------
Loss from operations (1,182,522) (758,088)
Other income (expense):
Interest income 52,299 67,034
Interest expense (271,750) (141,150)
Other income, net 26,905 26,427
---------------- ------------------
Net other expense (192,546) (47,689)
---------------- ------------------
Loss before income taxes (1,375,068) (805,777)
Income tax expense (37,000) (37,000)
---------------- ------------------
Loss from continuing operations (1,412,068) (842,777)
Income from discontinued operations - 61,933
================ ==================
Net loss $(1,412,068) $ (780,844)
================ ==================
Basic and diluted loss per weighted average common share outstanding:
Continuing operations $ (0.05) $ (0.03)
Discontinued operations - 0.00
================ ==================
Total $ (0.05) $ (0.03)
================ ==================
Basic and diluted weighted average common shares outstanding 28,110,033 28,135,616
================ ==================
See accompanying notes to unaudited interim consolidated
financial statements.
3
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<CAPTION>
TOP SOURCE TECHNOLOGIES, INC.
Form 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1998 1997
---------------- ------------------
Net loss ($1,412,068) ($780,844)
Adjustments to reconcile net loss to
net cash used in operating activities:
Income from discontinued operations - (61,933)
Depreciation 499,513 558,664
Amortization 139,659 138,957
Disposal of equipment 127,200 178,324
Repayment from (advance to officer) 5,044 (30,994)
Decrease (increase) in accounts receivable, net (253,309) 386,624
Increase in inventories (294,558) (280,154)
Decrease in prepaid expenses 18,250 19,072
Decrease (increase) in other assets 720,622 (2,839)
Increase (decrease) in accounts payable 350,203 (423,593)
Decrease in accrued salaries (3,332) (217,739)
Decrease in accrued liabilities (500,990) (483,725)
---------------- ------------------
Net cash used in operating activities (603,766) (1,000,180)
---------------- ------------------
INVESTING ACTIVITIES:
Purchases of property and equipment, net (176,096) (1,007,369)
Reimbursement of tooling costs - 361,056
Additions to patent costs, net (18,994) (9,033)
Discontinued operations - change in net assets (8,407) 3,410,843
---------------- ------------------
Net cash provided by (used in) investing activities (203,497) 2,755,497
---------------- ------------------
FINANCING ACTIVITIES:
Proceeds from sale of common stock, net 216,250 20,613
Repurchase of treasury stock - (1,188,566)
Repayment of borrowings (967,040) -
---------------- ------------------
Net cash used in financing activities (750,790) (1,167,953)
---------------- ------------------
Net increase (decrease) in cash and cash equivalents (1,558,053) 587,364
Cash and cash equivalents at beginning of period 2,103,679 653,129
---------------- ------------------
Cash and cash equivalents at end of period $545,626 $1,240,493
================ ==================
See accompanying notes to unaudited interim consolidated
financial statements.
4
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TOP SOURCE TECHNOLOGIES, INC.
FORM 10-Q
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying financial statements of Top Source Technologies, Inc.
(the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do
not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included in the accompanying
financial statements. The consolidated financial statements include the accounts
of the Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated. The results of operations of any interim
period are not necessarily indicative of the results of operations for the
fiscal year. For further information, refer to the financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for the
year ended September 30, 1997. Certain fiscal year 1998 amounts have been
reclassified to conform to current year presentation.
New Accounting Standard
a. Loss per share was calculated based upon Financial Accounting Standards
(SFAS) No. 128, Earnings Per Share, which was adopted by the Company during the
three months ended December 31, 1997. Adoption of SFAS No. 128 which superseded
the previous standard (APB No. 15) had no effect on the Companys previously
reported loss per share.
b. During the three months ended March 31, 1998, the Company adopted
Financial Standards Board Statement of Financial Accounting Standard No. 130,
Reporting Comprehensive Income (SFAS 130). SFAS 130 establishes standards for
reporting and display of comprehensive income and its components in the
financial statements. For the three and six months ended March 31, 1997 and
1998, there were no differences between net income and comprehensive income.
2. INVENTORIES
Inventories consisted of the following:
March 31, September 30,
1998 1997
Raw materials $1,031,501 $ 820,821
Finished goods 144,080 60,202
--------- -----------
$1,175,581 $ 881,023
========== ============
3. EXECUTIVE EMPLOYMENT CONTRACT
In fiscal 1993, Stuart Landow, the former President and Chief Executive
Officer and the current Chairman of the Board of Directors of the Company,
entered into an employment agreement ("Employment Agreement") with the Company.
The term of this Employment Agreement was five years through August 18, 1998.
The Employment Agreement provides for a base annual salary of $200,000 per year,
subject to a review by the Company's Compensation Committee in which Mr.
Landow's base salary during the term may be increased, but not decreased.
Additionally, the Employment Agreement calls for incentive compensation payments
based upon certain percentages of revenue. In the event of termination without
cause, or if Mr. Landow resigns for "Good Reason", as defined in the Employment
Agreement, the Company is required to make 36 consecutive monthly payments equal
to his base and incentive compensation. Mr. Landow will also be entitled to
continue to receive medical, life and disability insurance coverage during the
36-month term.
5
<PAGE>
TOP SOURCE TECHNOLOGIES, INC.
FORM 10-Q
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. EXECUTIVE EMPLOYMENT CONTRACT (Continued)
As a result of the hiring of a new CEO in May 1997, a breach in the
terms of the original Employment Agreement occurred, thus, Mr. Landow could have
requested that the "Good Reason" clause of his contract be triggered effective
July 1, 1997. This clause was waived by Mr. Landow with the approval of the
Board of Directors as it was determined to be in the best interest of the
Company to retain Mr. Landow for a period of one year. This waiver is effective
until June 30, 1998 or earlier, if elected by Mr. Landow at which time the terms
of the original Employment Agreement will remain in effect, with the exception
of the incentive payments which will be calculated based on the previous sales
for the period from July 1, 1996 through June 30, 1997.
On May 14, 1998, Mr. Landow and the Company's Board of Directors
reached an agreement in principle, subject to the execution of final legal
documents, to modify his Employment Agreement resulting in Mr. Landow triggering
the Good Reason clause of his contract and resigning as Chairman and as Director
of the Company, effective June 30, 1998.
In order to lessen the cash impact of the Employment Agreement to the
Company, Mr. Landow agreed to a reduction of approximately $195,000 from the
total amount of severance payments due under the terms of the Employment
Agreement. In addition, in the event all of Mr. Landow's 600,000 vested options
are exercised, Mr. Landow will pay $300,000 more for the exercise of 200,000 of
these 600,000 options, by agreeing to an increase in the original strike price
from $2.06 to $3.56 on 200,000 options. In return for these modifications to the
Employment Agreement, the Company agreed to extend the exercise period for all
of Mr. Landow's 600,000 vested options from the original expiration date of July
1, 1999 to the new date of July 1, 2001.
As a result of the triggering of the Good Reason clause of the
Employment Agreement and the modifications agreed to by both Mr. Landow and the
Company's Board of Directors, the Company will record a one-time charge against
earnings of approximately $900,000 in the third fiscal quarter ending June 30,
1998.
4. OTHER ASSETS
On March 20, 1998, the Company entered into an agreement with Thermo
Jarrell Ash Corporation ("TJA") to terminate the supply agreement entered into
by both parties on March 3, 1995. Pursuant to the terms of the original
agreement, Top Source Instruments ("TSI") made a deposit of $650,000 with TJA,
for TJA to be the exclusive manufacturer of the MotorCheck(TM) On-Site Analyzer
("OSA"). This amount was included in "Other Assets" in the September 30, 1997
Consolidated Balance Sheet. Both parties agreed to terminate the original
agreement effective March 31, 1998 due to the anticipation of the second
generation of OSA which would not require any TJA involvement. On March 31,
1998, TJA returned cash to the Company of $285,000 and applied the remainder of
the deposit ($365,000) as payment in full for the purchase by the Company of
$582,689 of OSA parts at TJA's cost. The Company has recorded these materials as
parts inventory at the purchase price of $365,000. The Company believes that
these parts along with the parts inventory previously on hand will be sufficient
inventory to support the existing OSA machines at customers locations and
equipment inventory.
6
<PAGE>
TOP SOURCE TECHNOLOGIES, INC.
FORM 10-Q
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. PRIVATE PLACMENT OF SERIES A CONVERTIBLE PREFERRED STOCK
In May 1998, the Company completed the sale in a private offering to
foreign investors of 1,000 shares of Series A Convertible Preferred Stock
("Preferred Stock") with a liquidation value of $1,000 per share. This funding
was comprised of $1,000,000 in Preferred Stock, less placement and legal fees
yielding $935,000 in net proceeds to the Company. This Preferred Stock pays an
annual dividend of 5% in cash or common stock. The investors are obligated to
fund an additional $1,500,000 in tranches of $500,000 in October, November and
December of 1998. The additional three tranches of funding are subject to the
Company maintaining a stock price of $1.00 per share and daily trading volume of
40,000 shares.
The holders of Preferred Stock shall have the right to convert each share
of Preferred Stock into a number of shares of common stock in whole or in part
cumulatively as follows: 25% on August 8, 1998, 25% on September 8, 1998, 25% on
October 8, 1998 and 25% November 8, 1998. The conversion price shall be the
lesser of $1.10 or 85% of the five-day average closing bid price of the shares
of Top Source prior to conversion, decreasing to 83% for conversion after 120
days and 80% for conversion after 150 days. The Company may redeem the Preferred
Stock, at any time, in whole or in part at 120% of the purchase price of the
Preferred Stock plus all accrued and unpaid dividends.
As part of the transaction, the foreign investors and the placement
agent received a total of 250,000 three-year Warrants exercisable as $1.10.
These Warrants vest pro-rata as amounts are funded up to $2,500,000. As a
requirement of the Subscription Agreement, the Company must file a Registration
Statement with the Securities and Exchange Commission no later than June 8, 1998
covering the future sale of common stock underlying the Preferred Stock and
warrants.
6. LETTER OF INTENT TO PURCHASE TOP SOURCE AUTOMOTIVE, INC.
On April 17, 1998, the Company received a non-binding purchase Letter
of Intent from a potential acquirer to purchase 100% of the assets or stock of
Top Source Automotive, Inc. ("TSA"). During the next two weeks, the Company
anticipates receiving a non-refundable deposit, which will allow the potential
acquirer to complete preliminary due diligence, on a non-exclusive basis. The
Company will not have an exclusive purchase agreement in place until the due
diligence is completed and an additional deposit is received. Until that event,
the Company will continue negotiations with other potential acquirers. Subject
to a fairness opinion and Top Source shareholder approval, it is anticipated
that a transaction will be consummated by December 31, 1998, however, there can
be no assurances that a deposit will be received, that a definitive agreement
can be reached, that shareholder approval will be received, and that the
transaction will be ultimately closed.
7
<PAGE>
TOP SOURCE TECHNOLOGIES, INC.
FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF INTERIM FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Total revenue for the three and six month periods ended March 31, 1998
was $3,340,438 and $6,616,766 compared to $5,245,000 and $8,469,112 for the same
period in 1997. The decrease in revenue for the three month period ended March
31, 1998 compared to the same period in 1997 is primarily attributable to the
loss of the patented Overhead Mounted Speaker System ("OHSS") sales for the Jeep
Cherokee(TM) contract which ended on June 30, 1997. For the three months ended
March 1, 1998, the Jeep Cherokee(TM) sales were $0 compared to $2,733,767 in
sales for the three months ended March 31, 1997, which was offset by the
increase in sales of $1,075,268 for the Grand Cherokee. The decrease in the
Wrangler sales for the three-month period was nominal. For the six months ended
March 31, 1998, the Jeep Cherokee(TM) sales were $0 compared to $3,776,764 in
sales for the six months ended March 31, 1998, which was offset by the increase
in sales of $2,173,007 for the Grand Cherokee and the increase in sales of
$216,115 for the Wrangler compared to the respective periods in 1997. There was
a nominal decrease in the OSA revenue for both the three and six months ended
March 31, 1998.
In March 1998, the Company announced that it had hired the investment
banking firm of Morgan Keegan and Company, Inc. to begin soliciting offers for
the sale of TSA. On April 17, 1998, the Company received a non-binding Letter of
Intent (see NOTE 6. LETTER OF INTENT TO PURCHASE TOP SOURCE AUTOMOTIVE, INC.)
from an acquirer seeking to purchase TSA. The Company believes that this
transaction will be ultimately consummated, however, in the interim it will
continue its efforts to increase revenues at TSA.
TSA is currently seeking to increase its revenues by entering into
strategic relationships with major suppliers to Original Equipment Manufacturers
("OEMs") that, if successful, could result in production line orders for
Overhead Speaker Systems in fiscal years after 1998. TSA is also attempting to
increase revenues by seeking strategic relationships with several after-market
suppliers. During the first and second fiscal 1998 quarters, the Company
developed and tested a new OHSS for Kenwood USA ("Kenwood"). TSA's new OHSS
developed by the Company for Kenwood was displayed at the Consumer Electronics
Show in Las Vegas, Nevada. In May 1998, the Company received its first order
from Kenwood for approximately $150,000. Additionally, the Company is working
with Kenwood and other aftermarket suppliers to provide additional aftermarket
products.
As of May 18, 1998, TSI had approximately 12 OSA units generating various
levels of monthly revenue (in some cases nominal monthly revenue) through leases
and revenue generating tests, as well as commitments to place seven revenue
generating OSAs in a variety of industries including automobile dealerships,
truck lube centers, truck stops, auto quick-lube centers, motorcycle development
laboratories and the boating and marine industry. During fiscal 1997 and 1998,
the Company has sold OSA units for internal powertrain development applications
at Chrysler Corporation, General Motors, Hyundai Motors, Ford Motor Company and
Daniel Drecq Technologies ("D2T") located in France.
The Company believes that this activity has demonstrated that the OSA
technology is commercially viable, that the awareness of the OSA is increasing
and that it will begin to generate increasing on-going revenue through multiple
OSA placements and long-term leases, however, there can be no assurance this
will occur.
8
<PAGE>
TOP SOURCE TECHNOLOGIES, INC.
FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF INTERIM FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
Results of Operations - (Continued)
On March 20, 1998, the Company entered into an agreement with TJA to
terminate its supply relationship (see NOTE 4. OTHER ASSETS) to purchase an
inventory of parts to support the OSA units in the field. This action was
undertaken because the Company believes it has developed a faster, smaller, less
expensive, more durable, modular second generation OSA ("OSA-II") that can be
assembled internally. Currently, the Company believes that the OSA-II will be
ready to ship to customers by the end of July 1998.
Additionally, the Company has continued to have discussions with
potential strategic partners who are interested in licensing the OSA technology
for specific industry applications both domestically and internationally.
The Company believes that it has sufficient quantities of the first
generation OSA units and parts to support current locations. The Company also
believes that the enhanced OSA-II will function properly, however, there can be
no assurances that the OSA-II units will operate properly or will be ready on
schedule. Failure by the Company to produce functional OSA-II units will have a
material adverse impact on the Company.
The gross profit margin for three and six months ended March 31, 1998
was 33.3% and 34.0% compared to 36.1% and 34.1% for the same periods in 1997.
The decrease in the gross profit margin compared to the prior year is primarily
attributable to the decrease in OSA gross margin due to the sale of a used
demonstrator unit to D2T Corporation, headquartered in France, at a discounted
price and a decrease in the gross margin at TSA for the Grand Cherokee due to
increased costs of materials.
General and administrative expenses decreased $230,376 for the
six-month period ended March 31, 1998 compared to the same period in 1997. This
decrease is attributable to the Company's restructuring which took place in the
fourth quarter of fiscal 1997, partially offset by the hiring of a new CEO and
additional OSA support and development of personnel.
Selling and marketing expenses decreased 16.3% for the three months
ended March 31, 1998 compared to the same period in 1997. The decrease was
primarily attributable to the closing of the Farmington Hills, Michigan location
related to the OSA group.
Depreciation and amortization decreased $49,946 and $56,639 for the
three and six months ended March 31, 1998 compared to the same periods ended in
1997. The decrease is due to the reduction in the fixed asset base from the
write-off at the end of fiscal 1997 of obsolete tooling at TSA.
Interest income decreased 22% for the six months ended March 31, 1998
compared to the same period in 1997. The decrease is attributable to a decline
in on hand cash balances due to operating losses.
Interest expense increased 93.1% and 92.5% for the three and six months
ended March 31, 1998 compared to the same period in 1998. The increase is due to
the increased borrowings with NationsCredit.
9
<PAGE>
TOP SOURCE TECHNOLOGIES, INC.
FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF INTERIM FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
Results of Operations - (Continued)
Net Loss Analysis
In order to reduce its operating losses, the Company is focusing its
efforts on new TSA's aftermarket initiatives and on increasing revenues at TSI
and TSA. The Company believes that recent OSA activity will help to reduce its
operating losses, and establish additional credibility for the OSA technology as
discussed in the MD&A Section above. Due to anticipated end of factory
production for the Grand Cherokee vehicle in November of 1998, the Company's
revenues at TSA based on current sales levels will be reduced by approximately
25%. Although TSA is a candidate for divestiture, the Company is continuing its
efforts to increase revenues at TSA, to enhance its performance in the event it
is unable to sell TSA at an acceptable price. The Company must generate
significant additional on-going revenue in future months in order to avoid
future material operating losses.
Liquidity and Capital Resources
Net cash used in operating activities was ($603,766) for the six months
ended March 31, 1998. This usage of cash was attributable to a net loss of
$772,896 which excludes depreciation and amortization, an increase in
inventories of $294,558, an increase in accounts receivable of $253,309 and a
decrease in accrued liabilities of $500,990. This was partially offset by an
increase in accounts payable of $350,203 and a decrease in other assets of
$720,622 and disposal of equipment of $127,200.
Net cash used by investing activities was ($203,497). This use of cash
was attributable to $176,096 which was expended for capital assets and additions
to patent costs of $18,994.
Net cash used by financing activities was ($750,790) which consisted of
$967,040 in repayment of borrowings on the Company's Credit Facility which was
offset by the net proceeds from sales of Common Stock through exercise of stock
options of $216,250.
On July 1, 1997, the Company entered into a three-year $5,000,000
asset-based financing agreement ("Credit Facility") with NationsCredit
Commercial Corporation ("Nations"). This Credit Facility replaced the Company's
former $3,750,000 facility. The new Credit Facility, which is secured by
substantially all of the assets of the Company enables the Company to borrow up
to $5,000,000 based upon certain percentages of accounts receivable and
inventory balances. The Credit Facility allows for borrowing of up to 85% of
accounts receivable and 50% of inventory for both TSA and TSI. The overall
sub-limit of borrowing against inventory is $1,500,000. The interest rate on
this Credit Facility is 1-1/2% over the prime rate and is payable monthly with a
required minimum borrowing level of $2,500,000 for the fee calculation purposes.
The Company's effective interest rate at March 31, 1998 factoring the interest
earned on used drawn funds was 8.12%. As of March 31, 1998 and May 15, 1998,
borrowings on this Credit Facility were $1,029,301 and $1,280,042, respectively.
Total unused availability for the same periods were $397,688 and $240,736,
respectively.
In 1995, advisory clients of Mellon Private Asset Management
("Mellon"), purchased $3,020,000 in 9% Senior Subordinated convertible notes
from the Company ("Notes"). These Notes are subject to an Indebtedness to Equity
ratio that cannot exceed 1.5 to 1.0. As of March 31, 1998, this ratio was 1.23,
10
<PAGE>
TOP SOURCE TECHNOLOGIES, INC.
FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF INTERIM FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
Liquidity and Capital Resources - Continued
therefore, the Company was in compliance with the ratio. However, due to the
Company's historic losses and due to the uncertainty on the timing of OSA
revenues, there is a possibility that the Company will exceed this ratio during
fiscal 1998. In the event the ratio is not met and the Company is unable to
receive a waiver from Mellon, G. Jeff Mennen, a new Board member of the Company,
has agreed to guarantee a sufficient capital infusion into the Company to
maintain compliance of this ratio through October 1, 1998 or refinance the notes
to the satisfaction of Mellon. In consideration for this guarantee, the Company
issued 50,000 ten-year Warrants at a strike price of $2.00 per share to Mr.
Mennen.
In May 1998, the Company completed a private placement of Series A
Preferred Stock and received net proceeds of $935,000. (See NOTE 6. to the
Financial Statements.) The Company also anticipates additional funding from this
private placement of approximately $1,500,000.
As of May 13, 1998, the Company had approximately $2,000,000 of cash on
hand. Based on this cash balance, the Credit line and its ability to further
reduce expenses, if required, the Company believes it has sufficient cash flow
and liquidity to fund its current operations and anticipated increasing OSA-II
commercialization.
During the last year, the Company initiated and completed a major
restructuring. This restructuring included the hiring of a new CEO and a
reduction in approximately one-third of the Company's work force. The primary
strategy of the new Company management has been to concentrate marketing
activities to sell or lease OSA to seven specific markets. The Company believes
that their marketing efforts will be successful. However, if the Company is
unable to meet goals or to have the necessary resources to sustain their
marketing activities it could have a material adverse effect on the financial
condition of the Company. The Company will continue to evaluate the success of
the new marketing efforts.
Forward-Looking Statements
The statements discussed in the footnotes above and in this Item 2 relate
to the Company's expectations that it anticipates (1) generating additional and
increasing OSA revenue (2) entering into strategic relationships, (3) completing
the development of a viable OSA-II instrument and meeting the shipment
timetable, (4) selling all or part of its TSA subsidiary, (5) the adequacy of
cash flow and liquidity, (6) being able to support the current OSA instruments
without the involvement of TJA, (7) reducing operating losses, and (8) the
funding of the balance of $1,500,000 of the Preferred Stock offering are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Important factors that could cause actual results to differ materially from
the forward-looking statements include the following: (1) a decline in
production levels at Chrysler for vehicles installing OHSS, (2) the continued
reliability of the OSA technology over an extended period of time, (3) the
Company's ability to market OSAs, (4) the acceptance of the OSA technology by
the marketplace, (5) the general tendency of large corporations to slowly change
from known technology to emerging new technology, (6) potential future
competition from third parties that may develop proprietary technology which
either does not violate the Company's proprietary rights or is claimed not to
violate the Company's proprietary rights, (7) potential unforeseen technical
problems with the performance of OSA-II, (8) an inability to attain joint
venture agreements with large OEM and aftermarket suppliers at TSA, (9) the
ability to attract major strategic OSA partners, (10) the ability of the Company
to enter into a definite agreement for the sale of TSA, and (11) matters
relating to the Company's future stock price and volume.
11
<PAGE>
TOP SOURCE TECHNOLOGIES, INC.
FORM 10-Q
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
10.1 5% Series A Convertible Preferred Stock and Warrants
of Top Source Technologies, Inc. Agreements
10.2 Thermo Jarrell Ash Corporation Agreement
27.0 Financial Data Schedule
b. Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
March 31, 1998.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TOP SOURCE TECHNOLOGIES, INC.
By: /s/ DAVID NATAN
David Natan
Vice President and Chief Financial Officer
Dated: May 20, 1998
12
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> MAR-31-1998
<CASH> $ 545,626
<SECURITIES> 0
<RECEIVABLES> 2,508,612
<ALLOWANCES> 0
<INVENTORY> 1,175,581
<CURRENT-ASSETS> 4,552,645
<PP&E> 1,696,786
<DEPRECIATION> 2,801,798
<TOTAL-ASSETS> 9,029,646
<CURRENT-LIABILITIES> 2,721,011
<BONDS> 0
0
0
<COMMON> 28,686
<OTHER-SE> 3,259,949
<TOTAL-LIABILITY-AND-EQUITY> 9,029,646
<SALES> 6,616,766
<TOTAL-REVENUES> 6,616,766
<CGS> 4,367,692
<TOTAL-COSTS> 4,367,692
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (271,750)
<INCOME-PRETAX> (1,375,068)
<INCOME-TAX> ( 37,000)
<INCOME-CONTINUING> (1,412,068)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,412,068)
<EPS-PRIMARY> (0.05)
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</TABLE>
EXHIBIT 10.1
CERTIFICATE OF DESIGNATION
OF RIGHTS AND PREFERENCES OF THE
SERIES A CONVERTIBLE PREFERRED STOCK OF
TOP SOURCE TECHNOLOGIES , INC.
I, William C. Willis, Jr., President, of Top Source Technologies,
Inc. a corporation organized and existing under the laws of the state of
Delaware (hereinafter the "Corporation"), DO HEREBY CERTIFY:
FIRST:
That pursuant to authority expressly granted and vested in the Board of
Directors of said Corporation under Section 151 of the Delaware General
Corporation Law and the provisions of the corporation=s Certificate of
Incorporation, said Board of Directors, on May 4th, 1998, adopted the following
resolution setting forth the designations, powers, preferences and rights of its
Convertible Preferred Stock as set out in this Certificate of Designation.
RESOLVED: That the designations, powers, preferences and rights of
the Series A 5% Convertible Preferred Stock be, and they hereby are, as set
forth below:
1. Number of Shares of Series A Convertible Preferred Stock.
The Corporation hereby authorizes the issuance of up to 2,500 (two thousand,
five hundred) shares of Series A Convertible Preferred Stock par value $.10 per
share (the APreferred Stock@). Each share of Preferred Stock shall have a value
equal to $1,000.00 (one thousand dollars) (the AStated Value@). This Preferred
Stock shall pay an annual dividend of 5%, payable quarterly on each subsequent
June 30th, (pro-rated for the first payment based upon the number of days from
issuance to June 30th) September 30th, December 31st and March 31st, and shall
be payable in cash or shares of Common Stock at the Corporation=s option, the
Corporation shall pay the dividend within ten (10) business days of the
quarterly dates. The Corporation may pay the dividend in shares upon conversion,
and the number of shares paid shall be calculated pursuant to Section 5(a) of
this Certificate of Designation.
Any outstanding Preferred Stock shall be converted automatically on the terms
pursuant to Section 5(a) of this Certificate of Designation, two (2) years from
the date of issue.
2. Voting.
(a) Except as provided by law, by the provisions of Subparagraph 2(b) below,
holders of Preferred Stock (the AHolders@) shall not have the right to vote on
any matter affecting the Corporation.
(b) The Corporation shall not amend, alter or repeal the preferences, special
rights or other powers of the Preferred Stock so as to affect adversely the
Preferred Stock, without the written consent or affirmative vote of the Holders
of at least a two thirds majority of the then outstanding shares of Preferred
Stock to be affected by amendment, alteration or repeal, given in writing or by
vote at a meeting, consenting or voting (as the case may be,) separately as a
class. For this purpose, without limiting the generality of the foregoing, the
authorization or issuance of any series of preferred stock with preference or
priority over or on a parity with the Preferred Stock as to the right to receive
either dividends or amounts distributable upon liquidation, dissolution or
winding up of the Corporation shall not be deemed to affect adversely the
designated class of Preferred Stock.
3. Liquidation.
In the event of a voluntary or involuntary dissolution, liquidation, or winding
up of the Corporation, the Holders of Preferred Stock shall be entitled to
receive out of the assets of the Corporation legally available for distribution
to holders of its capital stock, before any payment or distribution shall be
made to holders of Common Stock or any other class of stock ranking junior to
the Preferred Stock, the Stated Value per share plus any accrued and unpaid
dividends. If upon such liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the assets to be distributed
among the Holders of Preferred Stock shall be insufficient to permit payment to
the Holders of Preferred Stock of the amount distributable as aforesaid, then
the entire assets of the Corporation to be so distributed shall be distributed
ratably among the Holders of Preferred Stock. Upon any such liquidation,
dissolution or winding up of the Corporation, after the Holders of Preferred
Stock shall have been paid in full the amounts to which they shall be entitled,
the remaining net assets of the Corporation may be distributed to the Holders of
stock ranking on liquidation junior to the Preferred Stock. Written notice of
such liquidation, dissolution or winding up, stating a payment date, the amount
of the liquidation payments and the place where said liquidation payments shall
be payable, shall be given by mail, postage prepaid or by telex or facsimile to
non-U.S. residents, not less than 10 days prior to the payment date stated
therein, to the Holders of record of Preferred Stock, such notice to be
addressed to each such Holder at its address as shown by the records of the
Corporation. For purposes hereof the Common Stock, shall rank on liquidation
junior to the Preferred Stock.
4. Restrictions.
The Corporation will not modify the terms of the Preferred Stock at any time
when shares of Preferred Stock are outstanding, without the approval of the
Holders of at least a two thirds majority of the then outstanding shares of
Preferred Stock given in writing or by vote at a meeting, consenting or voting
(as the case may be) separately as a series, except where the vote or written
consent of the Holders of a greater number of shares of the Corporation is
required by law or by the Corporation's Certificate of Incorporation, as
amended, provided, however, that pursuant to the power granted to them in the
Corporation=s Certificate of Incorporation, the Corporation=s Board of Directors
may, without approval of any of the Holders of the Preferred Stock, resolve to:
(i) increase the number of shares of the Preferred Stock issuable under this
Certificate of Designation, or (ii) decrease the number of shares of Preferred
Stock issuable under this Certificate of Designation to the number of shares of
Preferred Stock then outstanding.
5. Optional Conversion.
The Holders of shares of Preferred Stock shall have the following conversion
rights:
(a) Right to Convert: Conversion Price. Subject to the terms, conditions, and
restrictions of this Section 5, the Holder of any share or shares of Preferred
Stock shall have the right to convert each such share of Preferred Stock into a
number of shares of Common Stock equal to the Stated Value of the Preferred
Stock plus all accrued but unpaid dividends of such share or shares of Preferred
Stock divided by the AConversion Price@ which shall be equal to the lesser of
(a) (i) 85 % of the average closing bid price of the Common Stock (the "Average
Closing Price"), during the period of five trading days immediately preceding
the date of conversion (the "Conversion Date") for conversions prior to 120 days
after the date the Private Securities Subscription Agreement was duly executed
by all parties (the Closing Date), (ii) 83% of the Average Closing Price during
the period of five (5) trading days immediately preceding the Conversion Date
for conversions 121 - 150 days after the Closing Date, (iii) 80% of the Average
Closing Price during the period of five (5) trading days immediately preceding
the Conversion Date for conversions 151 days after the Closing Date, and
subsequent, or (b) $1.10 per share of Common Stock.
(b) Conversion Dates. The Holder of any share or shares of Preferred Stock may
convert such shares cumulatively after ninety (90) days subsequent to the
Closing Date, pursuant to the following restrictions:
(a) up to 25% of the outstanding Stated Value of the Preferred Stock 90
days after the Closing Date; (b) up to 50% of the outstanding Stated
Value of the Preferred Stock 120 days after the Closing Date; (c) up to
75% of the outstanding Stated Value of the Preferred Stock 150 days
after the Closing Date; (d) up to 100% of the outstanding Stated Value
of the Preferred Stock 180 days after the Closing Date;
(c) Conversion Notice. The right of conversion shall be exercised by the Holder
thereof by telecopying or faxing an executed and completed written notice (the
"Conversion Notice") attached as Exhibit 1 to this Certificate of Designation,
to the Corporation that the Holder elects to convert a specified number of
shares of Preferred Stock representing a specified Stated Value thereof into
Common Stock and by delivering the original Conversion Notice and a certificate
or certificates of Preferred Stock being converted to the Corporation at its
principal office (or such other office or agency of the Corporation as the
Corporation may designate by notice in writing to the Holders of the Preferred
Stock), together with a statement of the name or names (with address) in which
the certificate or certificates for shares of Common Stock shall be issued. The
business date indicated on a Conversion Notice which is telecopied to and
received by the Corporation in accordance with the provisions hereof shall be
deemed a Conversion Date. The Conversion Notice shall include therein the Stated
Value of shares of Preferred Stock to be converted, and a calculation (a) of the
Average Closing Bid Price, (b) the Conversion Price, and (c) the number of
shares of Common Stock to be issued in connection with such conversion. The
Corporation shall have the right to review the calculations included in the
Conversion Notice, and shall provide notice of any discrepancy or dispute
therewith within one (1) business day of the receipt thereof. The Holder shall
deliver to the Corporation an original Notice of Conversion and the original
Preferred to be converted within three (3) business days from the date of the
Notice of Conversion. Whenever this Certificate of Designation refers to the
delivery of Preferred Stock or conversion of Preferred Stock or the redemption
of Preferred Stock such delivery, conversion or redemption shall not be
completed until the Holder delivers an executed stock power containing either a
medallion or a broker guarantee. The failure to mention the stock power herein
shall not create an implication to the contrary.
(d) Issuance of Certificates - Time Conversion Effected. Promptly, but in no
event more than three (3) business days after the receipt of the Conversion
Notice referred to in Subparagraph (5)(c) and surrender of the certificate or
certificates for the share or shares of Preferred Stock to be converted, the
Corporation shall issue and deliver, or cause to be issued and delivered, to the
Holder, unlegended and unrestricted shares of Common Stock, registered in such
name or names as such Holder may direct, a certificate or certificates for the
number of whole shares of Common Stock into which such shares of Preferred Stock
are converted. Such conversion shall be deemed to have been effected as of the
close of business on the date on which such Conversion Notice shall have been
received by the Corporation, and the rights of the Holder of such share or
shares of Preferred Stock shall cease, at such time, and the person or persons
in whose name or names any certificate or certificates for shares of Common
Stock shall be issuable upon such conversion shall be deemed to have become the
Holder or Holders of record of the shares represented thereby. Issuance of
shares of Common Stock issuable upon conversion which are requested to be
registered in a name other than that of the registered Holder shall be subject
to compliance with all applicable federal and state securities laws.
(e) Penalty for Late Delivery. The Corporation shall pay to the Holders a Late
Delivery Penalty, which is defined as liquidated damages of $10.00 per $1,000.00
Stated Value of Preferred Stock for every day subsequent to five (5) business
days after (the later of ) (i) the receipt of an original Conversion Notice and
(ii) the receipt of the original certificate or certificates representing the
share or shares of Preferred Stock, that the Corporation fails to deliver the
Common Stock to the Holder. The Corporation shall not be liable for a Late
Delivery Penalty if the original Conversion Notice is incomplete or inaccurately
filled out or a strike, power failure, weather conditions, terrorist act, an act
of war, or an act of God delays delivery, provided the Corporation has made good
faith efforts to effect timely delivery. Further, in the event of a Late
Delivery Penalty, the number of shares of Common Stock issued upon conversion
pursuant to Section 5(a) shall be adjusted and calculated at an amended
conversion price to reflect any five (5) trading day period as selected by the
Holder commencing on the Closing Date and ending on the date of delivery of the
shares of Common Stock to the Holder (Amended Conversion Price).
(f) Penalty for Late Registration. In the event that the registration statement
filed by the Corporation pursuant to the Registration Rights Agreement, Exhibit
B, is not declared effective by the Securities and Exchange Commission within
ninety (90) days after the Closing Date, the Holder, in addition to all other
rights pursuant to the Registration Rights Agreement, Exhibit B, shall have the
right to convert the Preferred Stock outstanding pursuant to the Amended
Conversion Price.
(g) Fractional Shares. No fractional shares shall be issued upon conversion of
any Preferred Stock into Common Stock. All fractional shares shall be rounded
down to the nearest whole share. In case the number of shares of Preferred Stock
represented by the certificate or certificates surrendered pursuant to
Subparagraph 5(a) exceeds the number of shares converted, the Corporation shall,
upon such conversion, execute and deliver to the Holder, at the expense of the
Corporation, a new certificate or certificates for the number of shares of
Preferred Stock represented by the certificate or certificates surrendered which
are not to be converted.
(h) Reorganization or Reclassification. If any capital reorganization or
reclassification of the capital stock of the Corporation shall be effected in
such a way that Holders of Common Stock shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Stock, then, as a
condition of such reorganization or reclassification, lawful and adequate
provisions shall be made whereby each Holder of a share or shares of Preferred
Stock shall thereupon have the right to receive, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore receivable upon the conversion of such share or shares
of Preferred Stock, such shares of stock, securities or assets as may be issued
or payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of shares of such Common Stock immediately
theretofore receivable upon such conversion had such reorganization or
reclassification not taken place, and in any such case appropriate provisions
shall be made with respect to the rights and interests of such Holder to the end
that the provisions hereof (including without limitation provisions for
adjustments of the conversion rights) shall thereafter be applicable, as nearly
as may be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of such conversion rights.
(i) Adjustments for Splits, Combinations, etc., The Conversion Price and the
number of shares of Common Stock into which the Preferred Stock shall be
convertible shall be adjusted for stock splits, combinations, or other similar
events. Additionally, an adjustment will be made in the case of an exchange of
Common Stock, consolidation or merger of the Corporation with or into another
corporation or sale of all or substantially all of the assets of the Corporation
in order to enable the Holder of Preferred Stock to acquire the kind and the
number of shares of stock or other securities or property receivable in such
event by a Holder of the Preferred Stock of the number of shares that might
otherwise have been issued upon the conversion of the Preferred Stock. No
adjustment to the Conversion Price will be made for dividends (other than stock
dividends), if any, paid on the Common Stock or for securities issued for fair
value.
(j) Mandatory Conversion. All outstanding shares of Preferred Stock will
automatically convert to Common Stock pursuant to the formula set forth in
Section 5 two (2) years from the date of issuance.
6. Assignment.
Subject to all applicable restrictions on transfer, the rights and obligations
of the Corporation and the Holder of the Preferred Stock shall be binding upon
and benefit the successors, assigns, heirs, administrators, and transferees of
the parties.
7. Shares to be Reserved.
The Corporation, upon the effective date of this Certificate of Designation, has
a sufficient number of shares of Common Stock available to reserve for issuance
upon the conversion of all outstanding shares of Preferred Stock, pursuant to
the terms and conditions set forth in Section 5. The Corporation will at all
times reserve and keep available out of its authorized Common Stock, solely for
the purpose of issuance upon the conversion of Preferred Stock as herein
provided, such number of shares of Common Stock as shall then be issuable upon
the conversion of all outstanding shares of Preferred Stock. The Corporation
covenants that all shares of Common Stock which shall be so issued shall be duly
and validly issued, fully paid and non assessable. The Corporation will take all
such action as may be required, if the total number of shares of Common Stock
issued and issuable after such action upon conversion of the Preferred Stock
would exceed the total number of shares of Common Stock then authorized by the
Corporation's Certificate of Incorporation, as amended, in order to increase the
number of authorized shares of Common Stock to a number sufficient to permit
conversion of the Preferred Stock.
8(a). Redemption.
The Corporation may redeem the Preferred Stock at any time, in whole or in part,
prior to the submission of a Conversion Notice at one hundred and twenty percent
(120%) of the Stated Value of the Preferred Stock plus all accrued and unpaid
dividends. To redeem Preferred Stock, the Corporation shall deliver notice to
the Holders, provided, however, that the Corporation may not redeem Preferred
Stock after a Notice of Conversion has been delivered by the Holder.
8(b) Mechanics and Effect of Redemption. As promptly as practicable after
receiving notice of the Corporation's election to redeem the Preferred Stock
(but in no case later than three (3) business days thereafter), the Holder, at
its expense, shall surrender the Preferred Stock to the Corporation, duly
endorsed with medallion guarantees, at the principal offices of the Corporation.
The Corporation shall make the redemption payment within five (5) business days
after the Corporation delivers to the Holder notice of redemption (Redemption
Payment Date). Dividends shall continue to accrue on the Preferred Stock until
the Redemption Payment Date. If the Preferred Stock is to be redeemed in part,
then upon surrender of the Preferred Stock, the Corporation shall deliver to the
Holder a new certificate of Preferred Stock in the aggregate principal amount
equal to the unredeemed portion thereof. If the Corporation falls to make
payment, by cheque drawn on an United States commercial bank, in cash to the
Holder, in full by the Redemption Payment Date, the Corporation shall forfeit
its rights of redemption pursuant to Section 8 in relation to the redemption
made and all future redemptions.
9. No Reissuance of Series A Convertible Preferred Stock.
Shares of Preferred Stock which are converted into shares of Common Stock as
provided herein shall not be reissued.
10. Closing of Books.
The Corporation will at no time close its transfer books against the transfer of
any Preferred Stock or of any shares of Common Stock issued or issuable upon the
conversion of any shares of Preferred Stock in any manner which interferes with
the timely conversion of such Preferred Stock, except as may otherwise be
required to comply with applicable securities laws.
11. Definition of Common Stock.
As used in this Certificate of Designation, the term "Common Stock" shall mean
and include the Corporation's authorized Common Stock, as constituted on the
date of filing of these terms of the Preferred Stock, and shall also include any
capital stock of any class of the Corporation thereafter authorized which shall
neither be limited to a fixed sum or percentage of par value in respect of the
rights of the Holders thereof to participate in dividends nor entitled to a
preference in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the corporation; provided that the
shares of Common Stock receivable upon conversion of shares of Preferred
<PAGE>
Stock shall include only shares designated as Common Stock of the Corporation on
the date of filing of this instrument, or in case of any reorganization,
reclassification, or stock split of the outstanding shares thereof, the stock,
securities or assets provided for hereof.
The said determination of the designation, preferences and relative,
participating, optional or other rights, and the qualifications, limitations or
restrictions thereof, relating to the Preferred Stock was duly made by the Board
of Directors pursuant to the provisions of the Corporation=s Certificate of
Incorporation and in accordance with the provisions of the Delaware General
Corporation Law.
12. Delivery
Except as provided in Section 5(c), all notices and deliveries contemplated
hereunder shall be by Federal Express or other overnight delivery service with
delivery required by the morning of the next business day. Delivery shall be
complete when the Stock Certificates are issued by the Corporation=s stock
transfer agent and delivered to Federal Express or other overnight delivery
service.
IN WITNESS HEREOF, this Certificate of Designation has been signed by:
William C. Willis, Jr., President, on this _____ day of May, 1998.
- ------------------------------------------
William C. Willis, Jr., President
TOP SOURCE TECHNOLOGIES, INC.
<PAGE>
REGULATION D
PRIVATE SECURITIES SUBSCRIPTION AGREEMENT
TOP SOURCE TECHNOLOGIES, INC.
THIS PRIVATE SECURITIES SUBSCRIPTION AGREEMENT (hereinafter
"Agreement") has been executed by the undersigned in connection with the
purchase in a private placement pursuant to Section 4(2) of the Securities Act
of 1933, as amended (the "Securities Act") of up to 2,500 shares of certain 5%
Series A Convertible Preferred Stock, par value $0.10, (hereinafter the
"Preferred"), convertible into shares of common stock, par value $.001 per share
(hereinafter "Common Stock") and certain Common Stock Purchase Warrants
(hereinafter called "Warrants"), from Top Source Technologies, Inc., 7108
Fairway Drive, Suite 200, Palm Beach Gardens, Florida, 33418, USA, a Company
organized under the laws of Delaware (hereinafter the "Company") by Gundyco In
Trust for RRSP 550-98866-19, organized under the laws of Canada, (hereinafter
"Buyer"). Such shares of Common Stock issuable upon conversion of the Preferred
and exercise of the Warrants are referred to hereinafter collectively as the
"Shares". The Company and Buyer (hereinafter collectively the "Parties") each
hereby represents, warrants and agrees as follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE:
(i) Buyer hereby subscribes for up to 750 shares of Preferred as set out in the
Certificate of Designation, Exhibit A, attached, to, and forming an integral
part of this Agreement at a purchase price per share of $1,000 USD (the "Stated
Value"). Buyer shall on the date this Agreement is duly executed by all parties
(the Closing Date), subscribe for 300 shares of Preferred for an aggregate
consideration of $300,000 USD. The Buyer shall, following the effective date
(Effective Date) of the Company's registration statement, referred to in the
Registration Rights Agreement, Exhibit B, purchase, and the Company shall sell
an additional 450 shares of Preferred in three (3) equal tranches of 150 shares
of Preferred pursuant to the Certificate of Designation. The dates of purchase
and csale ("Purchase Date") of each of the three (3) subsequent tranches of
Preferred shall be:
(a) 90 days after the Effective Date; (b) 150 days after the
Effective Date; (c) 210 days after the Effective Date.
The Buyer's subsequent purchase of Preferred, in each tranche, is conditional
upon the following Subsequent Conditions as defined in sub-paragraphs (a), (b)
and, (c):
(a) The Common Stock for the twenty (20) trading days prior to the date of
purchase of each tranche closes at an average bid price of not less than one
dollar ($1.00) per share;
(b) The average daily sales volume for the twenty (20) trading days prior to the
date of purchase of each tranche is not less than forty thousand (40,000)
shares; and
(c) The Company is not in default of any terms and conditions as set out in this
Agreement.
The Subsequent Conditions may be waived by the Buyer, and if waived, the Buyer
shall purchase any number of Preferred up to 150 in each tranche.
If the Subsequent Conditions occur, and the Buyer fails to purchase the
Preferred within thirty (30) days of the Purchase Date of each subsequent
tranche, the Buyer shall forfeit its rights under the Certificate of
Designation.
(ii) Buyer shall on or before the Closing Date execute a copy of the
Registration Rights Agreement (the "Registration Rights Agreement")
substantially in the form attached as Exhibit "B" to and forming an integral
part of this Agreement;
(iii) Buyer will receive Warrants to purchase fifty six thousand, two hundred
and fifty (56,250) Shares substantially in the form attached as Exhibit C to and
forming an integral part of this Agreement. The Warrants will be issued at an
exercise price of $1.10 and will expire three (3) years after the Closing Date;
(iv) The Company shall within thirty (30) days of the Closing Date, file with
the Securities and Exchange Commission (the "Commission"), a registration
statement under the Securities Act covering the registration of all the Buyer's
Shares issuable upon conversion of the Preferred and exercise of the Warrants
("Registrable Securities").
2. BUYER'S REPRESENTATIONS
Buyer represents and warrants as follows:
(i) Such Buyer has full power and authority to enter into this Agreement and the
Registration Rights Agreement, (collectively, the "Transaction Documents") and
that the Transaction Documents, when executed and delivered will constitute a
valid and legally binding obligation of Buyer in accordance with their terms,
subject to (A) bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws now or hereafter in effect relating to creditors'
rights and (B) that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceedings therefor may be brought.
(ii) This Agreement is made by the Company in reliance upon Buyer's
representation to the Company, which by such Buyer's execution of this Agreement
Buyer hereby confirms, that the Preferred and Warrants to be purchased by Buyer
and the Common Stock issuable upon conversion and exercise thereof
(collectively, the "Securities") will be acquired for investment for Buyers own
account, not as a nominee, and not with a view to the resale or distribution of
any part thereof. By execution of this Agreement, Buyer further represents that
Buyer does not have any contract, undertaking, agreement or arrangement with any
person, to sell, transfer or grant participation to such person or to any third
person, with respect to any of the Securities.
(iii) Buyer is not a company, syndicate, partnership or other form of
incorporation entity or Company created solely to permit the purchase of the
Securities by a group of individuals whose individual share in the aggregate
acquisition cost of the Securities is less than $150,000 and Buyer is not
purchasing the Securities as a result of an advertisement of the Securities,
including an advertisement in printed media of general and regular paid
circulation, radio or television, or a result of any general solicitation. The
Buyer has a pre-existing relationship with the placement agent.
(iv) The Buyer understands that the Securities may not be sold, transferred or
otherwise disposed of without registration under the Securities Act or an
exemption therefrom.
(v) The Buyer has been furnished with and has read the Company's reports, Forms
10-K and 10-Q, filed with the Commission and proxy or information statements
filed, (collectively, with exhibits thereto, hereinafter referred to as the
"Reports"). In addition, the Buyer has received from the Company such other
information concerning its operations, financial condition and other matters as
the Buyer has requested, and considered all factors the Buyer deems material in
deciding on the advisability of investing in the Securities (such information in
writing is collectively, the "Other Written Information").
(vi) The Buyer is an "accredited investor", as such term is defined in
Regulation D promulgated by the Commission under the Act, is experienced in
investments and business matters, has made investments of a speculative nature
and has purchased securities of United States publicly-owned companies in the
past and, with its representatives, has such knowledge and experience in
financial, tax and other business matters as to enable the Buyer to utilize the
information made available by the Company to evaluate the merits and risks of
and to make an informed investment decision with respect to the proposed
purchase, which represents a speculative investment. The Buyer has the authority
and is duly and legally qualified to purchase and own the Securities and is in
compliance with both federal and provincial Canadian law.
3. COMPANY'S REPRESENTATIONS
Company represents and warrants as follows:
(i) The Company is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware, and has all requisite
corporate power and authority to carry on its business as now conducted and as
currently proposed to be conducted. The Company is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure to so
qualify would have a material adverse effect on the business or the properties
of the Company and its subsidiaries taken as a whole. To its knowledge, the
Company is not the subject of any pending, threatened or contemplated
investigation or administrative or legal proceedings by the Internal Revenue
Service or the taxing authorities of any State of local jurisdiction or any
other government entity.
(ii) The Company has not conducted any general solicitation or general
advertising with respect to any of the Securities offered hereby.
(iii) The Certificate of Designation, when executed and delivered pursuant to
the terms of this Agreement, will have been duly authorized and executed and the
Preferred, when issued and delivered will be fully paid and non assessable, will
constitute valid and legally binding obligations of the Company in accordance
with their terms, subject to (A) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws now or hereafter in effect relating
to creditors' rights and (B) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceedings
therefor may be brought.
(iv) The Shares, when issued and delivered upon conversion of the Preferred, or
exercise of the Warrants in accordance with their terms, will be duly and
validly authorized and issued fully paid and non assessable and will not subject
the Buyers thereof to personal liability by reason of being such Buyers. There
are no preemptive rights of any shareholder of the Company with respect to the
Shares contained in the Company's Certificate of Incorporation or any agreement
to which the Company is a party.
(v) The Certificate of Designation and Warrants, have been duly authorized,
validly executed and delivered on behalf of the Company and each is a valid and
binding agreement of the Company in accordance with its terms and subject to (A)
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws new or hereafter in effect relating to creditors' rights and (B)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable deficiencies and to the discretion
of the court before which any proceedings thereafter may be brought.
(vi) The execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement do not and will not conflict with or
result in a breach by the Company of any of the terms or provisions of, or
constitute a default under, the Certificate of Incorporation (or charter) or
By-Laws of the Company, or any indenture, mortgage, deed of trust or other
material agreement or instrument to which the Company is a party or by which it
or any of its proprietors or agents are bound, or any existing applicable
decree, judgment or order of any court, federal or state regulatory body,
administrative agency or governmental body having jurisdiction over the Company
or any of it properties or assets.
(vii) No authorization, approval or consent of or filing with any federal, state
or local governmental body of the United States, is legally required for the
issuance and sale of the Preferred and (provided no commission or other
remuneration is paid or given directly or indirectly by the Company for
soliciting such conversion) the issuance of the Shares upon conversion of the
Preferred in accordance with their terms, as contemplated by this Agreement,
except the filing of a Form D with the Commission.
(viii) To the best of the Company's knowledge, after reasonable investigation,
the information contained in the Company's reports and proxy statements, as
filed with the Commission does not contain any untrue statement of material fact
or omit any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made not misleading. Since
December 31, 1997, there has been no material adverse development in the
business, properties, operations, financial condition or results of operations
of the Company.
(ix) The Company will issue one or more certificates representing the Preferred
in the name of Buyer in such denominations to be specified by Buyer prior to
closing and will issue one or more certificates representing the Shares in such
denominations to be specified by the Buyer upon conversion of the Preferred. The
Company further warrants that the Preferred and the Shares shall be transferable
on the books and records of the Company as and to the extent provided in the
Transaction Documents, subject to compliance with federal and state securities
laws, as well as Canadian federal and provincial securities laws.
(x) The Company is not involved in any litigation which if determined adversely
to the Company, could reasonably be expected to have a material adverse effect
upon the Company's financial position.
(xi) The Company is eligible to register with the Securities and Exchange
Commission, the Common Stock for resale on Form S-3.
(xii) No other persons or entities currently hold registration rights except
certain purchasers of 9% Senior Subordinated Convertible Notes dated as of June
9, 1995.
(xiii) The Company, as of May 5, 1998, has 28,724,177 shares of Common Stock
outstanding, and has 50,000,000 shares of Common Stock authorized.
(xiv) So long as a Buyer beneficially owns any Preferred or Warrants, the
Company shall maintain its corporate existence in good standing under the laws
of the jurisdiction in which it is incorporated and, except as required by the
Loan and Security Agreements entered into on July 1, 1997 and related agreements
among Nations Credit Commercial Corporation, the Company, Top Source Automotive
Inc. and Top Source Instruments Inc., or any replacement financial with
institutional lender, shall not pledge, sell, or hypothecate all the assets of
the Company, except in the event of a merger or consolidation or sale of all or
substantially all of the Company's assets where (a) the surviving or successor
entity in such transaction (i) assumes the Company's obligations hereunder and
under the agreements and instruments entered into in connection herewith and
(ii) is a publicly traded Company or (b) the consideration paid for the
outstanding securities of the Company is solely in the form of cash.
(xv) The Company will conduct its business in compliance with all applicable
laws, rules and regulations of the jurisdictions in which it is conducting
business (including without limitation, all applicable local, state and federal
environmental laws and regulations), except where the failure to comply with
such laws, rules or regulations would not have a material adverse effect, on the
Company and its subsidiaries taken as a whole.
(xvi) The Company shall maintain liability, casualty and other insurance with
responsible insurance companies against such risk of the types and in the
amounts customarily maintained by companies of comparable size, and business to
the Company.
(xvii) Except as set forth in the Company's reports filed with the Commission,
the Company is not in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust or other material instrument or agreement to which it is
a party or by which it or its property is bound, and neither the execution of,
nor the delivery by the Company of, nor the performance by the Company of its
obligations under this Agreement or the Preferred, or the conversion provision
thereof, will conflict with or result in the breach or violation of any of the
terms or provisions of, or constitute a default or result in the creation or
imposition of any lien or charge on any assets or properties of the Company
under, (i) any material indenture, mortgage, deed of trust or other material
agreement applicable to the Company or instrument to which the Company is a
party or by which it is bound, (ii) any statute applicable to the Company or its
property, (iii) the Certificate of Incorporation or By-Laws of the Company, (iv)
any decree , judgment, order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company regulation of any court or
governmental agency or body having jurisdiction over the Company or its
properties, or (v) the Company's listing agreement for its Shares.
4. RESERVATION OF SHARES
The Company shall at all times have authorized, and reserved for the purpose of
issuance sufficient number of Shares to provide for the full conversion of the
outstanding Preferred and issuance of the Shares in connection therewith (based
on the conversion price of the Preferred in effect from time to time) and the
full exercise of the Warrants and (based upon the exercise price of the Warrants
in effect from time to time). The Company shall not reduce the number of Shares
without the consent of each Buyer, which consent will not be unreasonably
withheld. The Company shall use its best efforts at all times to maintain the
number of Shares so reserved for issuance at no less than two (2) times the
number that is then actually issuable upon full conversion of the Preferred and
full exercise of the Warrants (based on the conversion price of the Preferred or
exercise price of the Warrants in effect from time to time). If at any time the
number of Shares authorized and reserved for issuance is below the number of
Shares issued and issuable upon conversion of the Preferred (based on the
conversion price of the Preferred and exercise price of the Warrants then in
effect), the Company will, forthwith, take all corporate action necessary to
authorize and reserve a sufficient number of Shares, including, without
limitation, immediately calling a special meeting of stockholders.
If, at any time a Buyer submits a notice of conversion ("Conversion Notice") and
the Company does not have sufficient authorized but unissued Shares available to
effect, in full, a conversion of the Shares (a "Conversion Default", the date of
such default being referred to herein as the "Conversion Default Date"), the
Company shall issue to the Buyer all of the Shares which are available, and the
Conversion Notice as to any Shares requested to be converted but not converted
(the "Unconverted Shares"), upon Buyer's sole option, may be deemed null and
void. The Company shall provide notice of such Conversion Default ("Notice of
Conversion Default") to all existing Buyers of outstanding Shares, by facsimile,
within one (1) business day of such default (with the original delivered by
overnight courier), and the Buyer shall give notice to the Company by facsimile
within five business days of receipt of the original Notice of Conversion
Default (with the original delivered by overnight or courier) of its election to
either nullify or confirm the Conversion Notice.
The Company agrees to pay to all Buyers of outstanding Shares payments for a
Conversion Default ("Conversion Default Payments") in the amount of (N/365) x
(.24) x the initial issuance price of the outstanding and/or tendered but not
converted Preferred held by each Buyer where N = the number of days from the
Conversion Default Date to the date (the "Authorization Date") that the Company
authorizes a sufficient number of Shares to effect conversion of all remaining
Shares. The Company shall send notice ("Authorization Notice") to each Buyer of
outstanding Shares that additional Shares have been authorized, the
Authorization Date and the amount of Buyer's accrued Conversion Default
Payments. The accrued Conversion Default shall be paid in cash or shall be
convertible into Shares, at the Buyer's option, payable as follows: (i) in the
event Buyer elects to take such payment in cash, cash payments shall be made to
such Buyer of outstanding Shares by the fifth day of the following calendar
month, or (ii) in the event Buyer elects to take such payment in Shares, the
Buyer may convert such payment amount into Shares at the conversion rate set
forth in the Certificate of Designation.
The Company acknowledges that its failure to maintain a sufficient number of
authorized but unissued Shares to effect in full a conversion of the Shares will
cause the Buyer to suffer damages in an amount that will be difficult to
ascertain. Accordingly, the parties agree that it is appropriate to include in
this Agreement a provision for liquidated damages. The parties acknowledge and
agree that the liquidated damages provision set forth in this section represents
the parties' good faith effort to quantify such damages and, as such, agree that
the form and amount of such liquidated damages are reasonable and will not
constitute a penalty. The payment of liquidated damages shall not relieve the
Company from its obligations to deliver the Shares pursuant to the terms of this
Agreement.
Nothing herein shall limit the Buyer's right to pursue actual damages or cancel
the Conversion Notice for the Company's failure to maintain a sufficient number
of authorized Shares. The Company shall in the event of a Conversion Default, no
later than ten (10) days, after a Conversion Default, take all the required
procedures to authorize sufficient Shares to comply with a Conversion Notice.
<PAGE>
5. Listing
The Company shall timely secure the listing of the Shares upon the American
Stock Exchange or such national securities exchange or automated quotation
system, if any, upon which Shares are then listed (subject to official notice of
issuance). The Company will use its best efforts to maintain the listing and
trading of its Common Stock on the American Stock Exchange or other national
securities exchange or automated quotation system and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the American Stock Exchange or such exchanges or quotation
systems, as applicable. The Company shall promptly provide to the Buyer copies
of any notices it receives regarding the continued eligibility of the Common
Stock for listing on the American Stock Exchange or other principal exchange or
quotation system on which the Common Stock is then listed or traded.
6. Instructions to Transfer Agent
The Company shall on the date the registration statement registering the Shares
underlying the Preferred and Warrants is declared effective by the Commission
instruct its Transfer Agent to issue, upon receipt by the Company of a
Conversion Notice from the Buyer, the required number of Shares, subject to the
Conversion Notice. The Company shall, as soon as the Shares, subject to the
Conversion Notice are sold, forthwith instruct its Transfer Agent to remove any
restrictive legend from the Shares.
The Company acknowledges that its failure to deliver the Shares within three (3)
business days after the Conversion Date will cause the Buyer to suffer damages
in an amount that will be difficult to ascertain. Accordingly, the parties agree
that it is appropriate to include in this Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages provision
set forth in the Certificate of Designation represents the parties' good faith
effort to qualify such damages and, as such, agree that the form and amount of
such liquidated damages are reasonable and will not constitute a penalty. The
payment of liquidated damages shall not relieve the Company from its obligations
to deliver the Shares pursuant to the terms of this Agreement.
<PAGE>
7. CLOSING
The Preferred and Warrants shall be delivered to Buyer and the funds therefor
shall be delivered to Company on the 7th day of May, 1998 (the "Closing"), or at
such time to be mutually agreed.
At the closing, the Company shall execute the appropriate copies of the
transaction documents (the "Company's Closing Documents") and deliver the
executed documents to Hechter and Associates, counsel for Buyer, with
instructions to hold the documents in trust and not to release the documents to
Buyer until advised to do so by the Company. Buyer shall execute the appropriate
copies of the Transaction Documents (the "Buyer's Closing Documents") and
deliver the executed documents to Michael Harris, P.A., counsel for the Company,
with instructions to hold the documents in trust and not to release the
documents to the Company until advised to do so by Buyer.
Immediately after Buyer has confirmed that its counsel has received the
Company's Closing Documents executed by the Company, then Buyer shall pay to the
Company the aggregate purchase price of the Preferred for which Buyer subscribed
(the "Purchase Price"). Buyer shall pay the Purchase Price, less all appropriate
legal fees and commissions by wire transfer of immediately available funds in
accordance with the following instructions:
Bank Name: First Union National Bank
ABA #: 063000021
Credit: Top Source Technologies, Inc.
Account #: 2165 000 11334
On the banking day that the Company has confirmed that its counsel has received
the Buyer's Closing Documents and is credited with having received the Purchase
Price (the "Closing Date"), The Company shall advise Buyer. Immediately
thereafter, the Company shall advise Hechter and Associates to release the
Company's Closing Documents to Buyer and Buyer shall advise Michael Harris,
P.A., to release the Buyer's Closing Documents to the Company. The Transaction
Documents shall not be deemed to have been delivered except in accordance with
the procedures described in this Section 7.
<PAGE>
8. CONDITIONS TO CLOSING
(i) Buyer understands that the Company's obligation to sell the
Preferred and Warrants is conditioned upon the receipt in immediately available
funds of the amount set forth in Paragraph 1 hereof.
(ii) The Company understands that Buyer's obligation to purchase the
Preferred, is conditioned upon delivery of certificate(s) representing the
Preferred and Warrants as described in Exhibit A and Exhibit B herein, and
receipt of an opinion of the Company's counsel, satisfactory to Buyer's Counsel,
attached as Exhibit D, and forming an integral part of this Agreement; and
(iii) no statute, rule, regulation, executive order, decree, ruling or
injunction shall be enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction which prohibits or adversely
effects any of the transactions contemplated by this Agreement, and no
proceedings or investigation shall have been commenced or threatened which may
have the effect of prohibiting or adversely effecting any of the transactions
contemplated by this Agreement; and
(iv) from and after the date hereof to and including the Closing Date,
the trading of the Common Stock shall not have been suspended by the Securities
and Exchange Commission, or the American Stock Exchange and trading in
securities generally on the New York Stock Exchange or Nasdaq shall not have
been suspended or limited nor shall there be any outbreak or escalation of
hostilities involving the United States or any material adverse change in any
financial market that in either case in the reasonable judgment of the Buyer
makes it impracticable or inadvisable to purchase the Preferred Stock.
(v) that all representations and warranties of the Company shall remain
true and correct as of the Closing Date, and shall survive the Closing Date.
9. RESTRICTIONS ON NEW SECURITIES
The Company will not enter into another equity financing that (a) would cause
additional Common Stock issued in such other equity financing to become freely
tradable before one hundred and eighty (180) days after the registration
statement referred to in the Registration Rights Agreement, Exhibit B, is
declared effective by the Securities and Exchange Commission. Further, the
Company shall not register any additional Securities as part of the registration
statement to be filed pursuant to the Registration Rights Agreement, Exhibit B.
10. RIGHT OF FIRST REFUSAL
For a period expiring one hundred and eighty (180) days after the registration
statement pursuant to the Registration Rights Agreement, (Exhibit B), is
declared effective, the Company hereby grants to the Buyer the right of first
offer to purchase all (or any part) of New Securities (as defined herein) which
the Company may, from time to time, propose to sell and issue. This right of
first offer shall be subject to the following provisions:
In the event the Company proposes to issue New Securities, it shall give Buyer
written notice of its intention, describing the type of New Securities, the
price and the general terms upon which the Company proposes to issue the same.
Buyer shall have three (3) days from the date of receipt of any such notice to
agree to purchase such New Securities for the price and upon the general terms
specified in the notice by giving written notice to the Company and stating
therein the quantity of New Securities to be purchased. The sale of New
Securities to Buyer shall be closed within ten (10) days of Buyer's notice to
the Company agreeing to purchase such New Securities.
In the event the Buyer fails to exercise the right of first offer with respect
to all of the available New Securities proposed to be sold by the Company within
said three (3) day period or in the event Buyer fails to close within ten (10)
days of Buyer's notice to the Company agreeing to purchase such New Securities,
the Company Shall have 30 days thereafter to sell or enter into an agreement
(pursuant to which the sale of New Securities covered thereby shall be closed,
if at all, within 45 days from the date of said agreement), to sell the New
Securities respecting which the Buyer's option was not exercised, at a price and
upon general terms no more favourable to the purchasers thereof than specified
in the Company's notice to the Buyer.
In the event the Company has not entered into an agreement to sell the New
Securities within said 30 day period (or sold and issued New Securities in
accordance with the foregoing within 45 days from the date of said agreement),
the Company shall not thereafter issue or sell any New Securities, without first
offering such securities to the Buyer in the manner provided above.
"New Securities" means any Securities to be issued pursuant to Regulation D or S
under the Securities Act, exclusive of (i) securities issued pursuant to the
acquisition of another business entity or segment of any such entity by the
Company by merger, asset purchase, stock purchase or otherwise, (ii) any
borrowing, direct or indirect, from financial institutions or other persons by
the Company, whether or not presently authorized, including any type of loan or
payment evidenced by any type of debt instrument, provided such borrowings do
not have any equity features including warrants, options or other rights to
purchase capital stock and are not convertible into capital stock of the Company
(iii) securities issued to employees, consultants, officers or directors of the
Company pursuant to any stock option, stock purchase or stock bonus plan,
agreement or arrangement, (iv) securities issued to vendors or customers or to
other persons in similar commercial situations with the Company, (v) securities
issued in connection with obtaining lease financing, whether issued to a lessor,
guarantor or other person, (vi) securities issued in connection with any stock
split, stock dividend or recapitalization of the Company, or (vi) securities
issued in connection with corporate partnering transactions.
11. GOVERNING LAW: INTERPRETATION OF DISPUTES:
This Agreement, and all exhibits attached, shall be governed by and construed
under the laws of the State of Delaware and the laws applicable therein without
regard to its choice of law principles. All disputes shall be determined and
litigated in the law courts of Delaware.
Any litigation based thereon, or arising out of, under, or in connection with,
this Agreement or any course of conduct, course of dealing, statements (whether
oral or written) or actions of the Company or Buyer shall be brought and
maintained exclusively in the courts of the state of Delaware. The Company
hereby expressly and irrevocably submits to the jurisdiction of the state and
federal Courts of the state of Delaware for the purpose of any such litigation
as set forth above and irrevocably agrees to be bound by any final judgment
rendered thereby in connection with such litigation. The Company further
irrevocably consents to the service of process by registered mail, postage
prepaid, or by personal service within or without the State of Delaware. The
Company hereby expressly and irrevocably waives, to the fullest extent permitted
by law, any objection which it may have or hereafter may have to the laying of
venue of any such litigation brought in any such court referred to above and any
claim that any such litigation has been brought in any inconvenient forum. To
the extent that the Company has or hereafter may acquire any immunity from
jurisdiction of any court or from any legal process (whether through service or
notice, attachment prior to judgment, attachment in aid of execution or
otherwise) with respect to itself or its property. The Company hereby
irrevocably waives such immunity in respect of its obligations under this
agreement and the other loan documents.
Buyer and the Company hereby knowingly, voluntarily and intentionally waive any
rights they may have to a trial by jury in respect of any litigation based
hereon, or arising out of, under, or in connection with, this agreement, or any
course of conduct, course of dealing, statements (whether oral or written) or
actions of the Holder or the Company. The Company acknowledges and agrees that
it has received full and sufficient consideration for this provision and that
this provision is a material inducement for the Buyer entering into this
agreement.
Any legal action or proceeding in connection with this Agreement or the
performance hereof may be brought in the state and federal courts located in
Delaware, and the parties hereby irrevocably submit to the non-exclusive
jurisdiction of such courts for the purpose of any such action or proceeding.
12. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement among the parties hereof with
respect to the subject matter hereof and supersedes any and all prior
contemporaneous representations, warranties, agreements and understandings in
connection therewith. This Agreement may be amended only by a writing executed
by all parties hereto. This Agreement may be executed in counterparts and the
facsimile transmission of an executed counterpart to this Agreement shall be
effective as an original.
13. NOTICES
All notices or other communications to be given or made hereunder must be in
writing and will be delivered personally or mailed, by registered or certified
mail, or sent by facsimile, to the undersigned, at the address set forth in this
Agreement, with copies to such persons, at such addresses, as are set forth in
this Agreement.
<PAGE>
14. FEES
The Buyer undertakes that in connection with additional fundings referred to in
Section 1, the Company's only obligation to the placement agent shall be to pay
an additional commission, and not to pay additional legal fees.
15. FULL NAME AND ADDRESS OF BUYER
FOR REGISTRATION PURPOSES:
NAME: Gundyco In Trust for 550-98866-19
ADDRESS: 4120 Yonge Street, Suite 416, Toronto, Ontario, Canada, M5P 2A1
TEL. No. 416-225-7980
Fax. No. 416-225-7950
CONTACT
NAME: Mark Shoom
16. DELIVERY INSTRUCTIONS: (if different from
Registration Name):
NAME: _______________________________________
ADDRESS: ________________________________________
TEL. No.: __________________________________________
FAX No.: ___________________________________________
CONTACT
NAME: ____________________________________________
SPECIAL
INSTRUCTIONS:__________________________________________
<PAGE>
IN WITNESS WHEREOF, this Agreement was duly executed on the date first written
below
Dated this 7th day of the month of May, 1998.
NAME: _______________________________________
BY: _____________________________________
TITLE: ______________________________________
TOP SOURCE TECHNOLOGIES, INC.
7108 Fairway Drive, Suite 200
Palm Beach Gardens, Florida, 33418
BY: __________________________________________
William C. Willis, Jr., President
I have the full authority to bind TOP SOURCE TECHNOLOGIES, INC.
____(initial)
NAME: _________________________________
TITLE: _________________________________
<PAGE>
4
EXHIBIT A
CERTIFICATE OF DESIGNATION
OF RIGHTS AND PREFERENCES OF THE
SERIES A CONVERTIBLE PREFERRED STOCK OF
TOP SOURCE TECHNOLOGIES , INC.
I, William C. Willis, Jr., President, of Top Source Technologies,
Inc. a corporation organized and existing under the laws of the state of
Delaware (hereinafter the "Corporation"), DO HEREBY CERTIFY:
FIRST:
That pursuant to authority expressly granted and vested in the Board of
Directors of said Corporation under Section 151 of the Delaware General
Corporation Law and the provisions of the corporation's Certificate of
Incorporation, said Board of Directors, on May 4th, 1998, adopted the following
resolution setting forth the designations, powers, preferences and rights of its
Convertible Preferred Stock as set out in this Certificate of Designation.
RESOLVED: That the designations, powers, preferences and rights of
the Series A 5% Convertible Preferred Stock be, and they hereby are, as set
forth below:
1. Number of Shares of Series A Convertible Preferred Stock.
The Corporation hereby authorizes the issuance of up to 2,500 (two thousand,
five hundred) shares of Series A Convertible Preferred Stock par value $.10 per
share (the "Preferred Stock"). Each share of Preferred Stock shall have a value
equal to $1,000.00 (one thousand dollars) (the "Stated Value"). This Preferred
Stock shall pay an annual dividend of 5%, payable quarterly on each subsequent
June 30th, (pro-rated for the first payment based upon the number of days from
issuance to June 30th) September 30th, December 31st and March 31st, and shall
be payable in cash or shares of Common Stock at the Corporation's option, the
Corporation shall pay the dividend within ten (10) business days of the
quarterly dates. The Corporation may pay the dividend in shares upon conversion,
and the number of shares paid shall be calculated pursuant to Section 5(a) of
this Certificate of Designation.
Any outstanding Preferred Stock shall be converted automatically on the terms
pursuant to Section 5(a) of this Certificate of Designation, two (2) years from
the date of issue.
2. Voting.
(a) Except as provided by law, by the provisions of Subparagraph 2(b) below,
holders of Preferred Stock (the "Holders") shall not have the right to vote on
any matter affecting the Corporation.
(b) The Corporation shall not amend, alter or repeal the preferences, special
rights or other powers of the Preferred Stock so as to affect adversely the
Preferred Stock, without the written consent or affirmative vote of the Holders
of at least a two thirds majority of the then outstanding shares of Preferred
Stock to be affected by amendment, alteration or repeal, given in writing or by
vote at a meeting, consenting or voting (as the case may be,) separately as a
class. For this purpose, without limiting the generality of the foregoing, the
authorization or issuance of any series of preferred stock with preference or
priority over or on a parity with the Preferred Stock as to the right to receive
either dividends or amounts distributable upon liquidation, dissolution or
winding up of the Corporation shall not be deemed to affect adversely the
designated class of Preferred Stock.
3. Liquidation.
In the event of a voluntary or involuntary dissolution, liquidation, or winding
up of the Corporation, the Holders of Preferred Stock shall be entitled to
receive out of the assets of the Corporation legally available for distribution
to holders of its capital stock, before any payment or distribution shall be
made to holders of Common Stock or any other class of stock ranking junior to
the Preferred Stock, the Stated Value per share plus any accrued and unpaid
dividends. If upon such liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the assets to be distributed
among the Holders of Preferred Stock shall be insufficient to permit payment to
the Holders of Preferred Stock of the amount distributable as aforesaid, then
the entire assets of the Corporation to be so distributed shall be distributed
ratably among the Holders of Preferred Stock. Upon any such liquidation,
dissolution or winding up of the Corporation, after the Holders of Preferred
Stock shall have been paid in full the amounts to which they shall be entitled,
the remaining net assets of the Corporation may be distributed to the Holders of
stock ranking on liquidation junior to the Preferred Stock. Written notice of
such liquidation, dissolution or winding up, stating a payment date, the amount
of the liquidation payments and the place where said liquidation payments shall
be payable, shall be given by mail, postage prepaid or by telex or facsimile to
non-U.S. residents, not less than 10 days prior to the payment date stated
therein, to the Holders of record of Preferred Stock, such notice to be
addressed to each such Holder at its address as shown by the records of the
Corporation. For purposes hereof the Common Stock, shall rank on liquidation
junior to the Preferred Stock.
4. Restrictions.
The Corporation will not modify the terms of the Preferred Stock at any time
when shares of Preferred Stock are outstanding, without the approval of the
Holders of at least a two thirds majority of the then outstanding shares of
Preferred Stock given in writing or by vote at a meeting, consenting or voting
(as the case may be) separately as a series, except where the vote or written
consent of the Holders of a greater number of shares of the Corporation is
required by law or by the Corporation's Certificate of Incorporation, as
amended, provided, however, that pursuant to the power granted to them in the
Corporation's Certificate of Incorporation, the Corporation's Board of Directors
may, without approval of any of the Holders of the Preferred Stock, resolve to:
(i) increase the number of shares of the Preferred Stock issuable under this
Certificate of Designation, or (ii) decrease the number of shares of Preferred
Stock issuable under this Certificate of Designation to the number of shares of
Preferred Stock then outstanding.
5. Optional Conversion.
The Holders of shares of Preferred Stock shall have the following conversion
rights:
(a) Right to Convert: Conversion Price, Subject to the terms, conditions, and
restrictions of this Section 5, the Holder of any share or shares of Preferred
Stock shall have the right to convert each such share of Preferred Stock into a
number of shares of Common Stock equal to the Stated Value of the Preferred
Stock plus all accrued but unpaid dividends of such share or shares of Preferred
Stock divided by the "Conversion Price" which shall be equal to the lesser of
(a) (i) 85 % of the average closing bid price of the Common Stock (the "Average
Closing Price"), during the period of five trading days immediately preceding
the date of conversion (the "Conversion Date") for conversions prior to 120 days
after the date the Private Securities Subscription Agreement was duly executed
by all parties (the Closing Date), (ii) 83% of the Average Closing Price during
the period of five (5) trading days immediately preceding the Conversion Date
for conversions 121 - 150 days after the Closing Date, (iii) 80% of the Average
Closing Price during the period of five (5) trading days immediately preceding
the Conversion Date for conversions 151 days after the Closing Date, and
subsequent, or (b) $____ per share of Common Stock.
(b) Conversion Dates, The Holder of any share or shares of Preferred Stock may
convert such shares cumulatively after ninety (90) days subsequent to the
Closing Date, pursuant to the following restrictions:
(a) up to 25% of the outstanding Stated Value of the Preferred
Stock 90 days after the Closing Date;
(b) up to 50% of the outstanding Stated Value of the Preferred
Stock 120 days after the Closing Date;
(c) up to 75% of the outstanding Stated Value of the Preferred
Stock 150 days after the Closing Date;
(d) up to 100% of the outstanding Stated Value of the Preferred
Stock 180 days after the Closing Date;
(c) Conversion Notice. The right of conversion shall be exercised by the Holder
thereof by telecopying or faxing an executed and completed written notice (the
"Conversion Notice") attached as Exhibit 1 to this Certificate of Designation,
to the Corporation that the Holder elects to convert a specified number of
shares of Preferred Stock representing a specified Stated Value thereof into
Common Stock and by delivering the original Conversion Notice and a certificate
or certificates of Preferred Stock being converted to the Corporation at its
principal office (or such other office or agency of the Corporation as the
Corporation may designate by notice in writing to the Holders of the Preferred
Stock), together with a statement of the name or names (with address) in which
the certificate or certificates for shares of Common Stock shall be issued. The
business date indicated on a Conversion Notice which is telecopied to and
received by the Corporation in accordance with the provisions hereof shall be
deemed a Conversion Date. The Conversion Notice shall include therein the Stated
Value of shares of Preferred Stock to be converted, and a calculation (a) of the
Average Closing Bid Price, (b) the Conversion Price, and (c) the number of
shares of Common Stock to be issued in connection with such conversion. The
Corporation shall have the right to review the calculations included in the
Conversion Notice, and shall provide notice of any discrepancy or dispute
therewith within one (1) business day of the receipt thereof. The Holder shall
deliver to the Corporation an original Notice of Conversion and the original
Preferred to be converted within three (3) business days from the date of the
Notice of Conversion. Whenever this Certificate of Designation refers to the
delivery of Preferred Stock or conversion of Preferred Stock or the redemption
of Preferred Stock such delivery, conversion or redemption shall not be
completed until the Holder delivers an executed stock power containing either a
medallion or a broker guarantee. The failure to mention the stock power herein
shall not create an implication to the contrary.
(d) Issuance of Certificates - Time Conversion Effected. Promptly, but in no
event more than three (3) business days after the receipt of the Conversion
Notice referred to in Subparagraph (5)(c) and surrender of the certificate or
certificates for the share or shares of Preferred Stock to be converted, the
Corporation shall issue and deliver, or cause to be issued and delivered, to the
Holder, unlegended and unrestricted shares of Common Stock, registered in such
name or names as such Holder may direct, a certificate or certificates for the
number of whole shares of Common Stock into which such shares of Preferred Stock
are converted. Such conversion shall be deemed to have been effected as of the
close of business on the date on which such Conversion Notice shall have been
received by the Corporation, and the rights of the Holder of such share or
shares of Preferred Stock shall cease, at such time, and the person or persons
in whose name or names any certificate or certificates for shares of Common
Stock shall be issuable upon such conversion shall be deemed to have become the
Holder or Holders of record of the shares represented thereby. Issuance of
shares of Common Stock issuable upon conversion which are requested to be
registered in a name other than that of the registered Holder shall be subject
to compliance with all applicable federal and state securities laws.
(e) Penalty for Late Delivery. The Corporation shall pay to the Holders a Late
Delivery Penalty, which is defined as liquidated damages of $10.00 per $1,000.00
Stated Value of Preferred Stock for every day subsequent to five (5) business
days after (the later of ) (i) the receipt of an original Conversion Notice and
(ii) the receipt of the original certificate or certificates representing the
share or shares of Preferred Stock, that the Corporation fails to deliver the
Common Stock to the Holder. The Corporation shall not be liable for a Late
Delivery Penalty if the original Conversion Notice is incomplete or inaccurately
filled out or a strike, power failure, weather conditions, terrorist act, an act
of war, or an act of God delays delivery, provided the Corporation has made good
faith efforts to effect timely delivery. Further, in the event of a Late
Delivery Penalty, the number of shares of Common Stock issued upon conversion
pursuant to Section 5(a) shall be adjusted and calculated at an amended
conversion price to reflect any five (5) trading day period as selected by the
Holder commencing on the Closing Date and ending on the date of delivery of the
shares of Common Stock to the Holder (Amended Conversion Price).
(f) Penalty for Late Registration. In the event that the registration statement
filed by the Corporation pursuant to the Registration Rights Agreement, Exhibit
B, is not declared effective by the Securities and Exchange Commission within
ninety (90) days after the Closing Date, the Holder, in addition to all other
rights pursuant to the Registration Rights Agreement, Exhibit B, shall have the
right to convert the Preferred Stock outstanding pursuant to the Amended
Conversion Price.
(g) Fractional Shares. No fractional shares shall be issued upon conversion of
any Preferred Stock into Common Stock. All fractional shares shall be rounded
down to the nearest whole share. In case the number of shares of Preferred Stock
represented by the certificate or certificates surrendered pursuant to
Subparagraph 5(a) exceeds the number of shares converted, the Corporation shall,
upon such conversion, execute and deliver to the Holder, at the expense of the
Corporation, a new certificate or certificates for the number of shares of
Preferred Stock represented by the certificate or certificates surrendered which
are not to be converted.
(h) Reorganization or Reclassification. If any capital reorganization or
reclassification of the capital stock of the Corporation shall be effected in
such a way that Holders of Common Stock shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Stock, then, as a
condition of such reorganization or reclassification, lawful and adequate
provisions shall be made whereby each Holder of a share or shares of Preferred
Stock shall thereupon have the right to receive, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore receivable upon the conversion of such share or shares
of Preferred Stock, such shares of stock, securities or assets as may be issued
or payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of shares of such Common Stock immediately
theretofore receivable upon such conversion had such reorganization or
reclassification not taken place, and in any such case appropriate provisions
shall be made with respect to the rights and interests of such Holder to the end
that the provisions hereof (including without limitation provisions for
adjustments of the conversion rights) shall thereafter be applicable, as nearly
as may be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of such conversion rights.
(i) Adjustments for Splits, Combinations, etc., The Conversion Price and the
number of shares of Common Stock into which the Preferred Stock shall be
convertible shall be adjusted for stock splits, combinations, or other similar
events. Additionally, an adjustment will be made in the case of an exchange of
Common Stock, consolidation or merger of the Corporation with or into another
corporation or sale of all or substantially all of the assets of the Corporation
in order to enable the Holder of Preferred Stock to acquire the kind and the
number of shares of stock or other securities or property receivable in such
event by a Holder of the Preferred Stock of the number of shares that might
otherwise have been issued upon the conversion of the Preferred Stock. No
adjustment to the Conversion Price will be made for dividends (other than stock
dividends), if any, paid on the Common Stock or for securities issued for fair
value.
(j) Mandatory Conversion. All outstanding shares of Preferred Stock will
automatically convert to Common Stock pursuant to the formula set forth in
Section 5 two (2) years from the date of issuance.
6. Assignment.
Subject to all applicable restrictions on transfer, the rights and obligations
of the Corporation and the Holder of the Preferred Stock shall be binding upon
and benefit the successors, assigns, heirs, administrators, and transferees of
the parties.
7. Shares to be Reserved.
The Corporation, upon the effective date of this Certificate of Designation, has
a sufficient number of shares of Common Stock available to reserve for issuance
upon the conversion of all outstanding shares of Preferred Stock, pursuant to
the terms and conditions set forth in Section 5. The Corporation will at all
times reserve and keep available out of its authorized Common Stock, solely for
the purpose of issuance upon the conversion of Preferred Stock as herein
provided, such number of shares of Common Stock as shall then be issuable upon
the conversion of all outstanding shares of Preferred Stock. The Corporation
covenants that all shares of Common Stock which shall be so issued shall be duly
and validly issued, fully paid and non assessable. The Corporation will take all
such action as may be required, if the total number of shares of Common Stock
issued and issuable after such action upon conversion of the Preferred Stock
would exceed the total number of shares of Common Stock then authorized by the
Corporation's Certificate of Incorporation, as amended, in order to increase the
number of authorized shares of Common Stock to a number sufficient to permit
conversion of the Preferred Stock.
8(a). Redemption.
The Corporation may redeem the Preferred Stock at any time, in whole or in part,
prior to the submission of a Conversion Notice at one hundred and twenty percent
(120%) of the Stated Value of the Preferred Stock plus all accrued and unpaid
dividends. To redeem Preferred Stock, the Corporation shall deliver notice to
the Holders, provided, however, that the Corporation may not redeem Preferred
Stock after a Notice of Conversion has been delivered by the Holder.
8(b) Mechanics and Effect of Redemption. As promptly as practicable after
receiving notice of the Corporation's election to redeem the Preferred Stock
(but in no case later than three (3) business days thereafter), the Holder, at
its expense, shall surrender the Preferred Stock to the Corporation, duly
endorsed with medallion guarantees, at the principal offices of the Corporation.
The Corporation shall make the redemption payment within five (5) business days
after the Corporation delivers to the Holder notice of redemption (Redemption
Payment Date). Dividends shall continue to accrue on the Preferred Stock until
the Redemption Payment Date. If the Preferred Stock is to be redeemed in part,
then upon surrender of the Preferred Stock, the Corporation shall deliver to the
Holder a new certificate of Preferred Stock in the aggregate principal amount
equal to the unredeemed portion thereof. If the Corporation falls to make
payment, by cheque drawn on an United States commercial bank, in cash to the
Holder, in full by the Redemption Payment Date, the Corporation shall forfeit
its rights of redemption pursuant to Section 8 in relation to the redemption
made and all future redemptions.
9. No Reissuance of Series A Convertible Preferred Stock
Shares of Preferred Stock which are converted into shares of Common Stock as
provided herein shall not be reissued.
10. Closing of Books.
The Corporation will at no time close its transfer books against the transfer of
any Preferred Stock or of any shares of Common Stock issued or issuable upon the
conversion of any shares of Preferred Stock in any manner which interferes with
the timely conversion of such Preferred Stock, except as may otherwise be
required to comply with applicable securities laws.
11. Definition of Common Stock.
As used in this Certificate of Designation, the term "Common Stock" shall mean
and include the Corporation's authorized Common Stock, as constituted on the
date of filing of these terms of the Preferred Stock, and shall also include any
capital stock of any class of the Corporation thereafter authorized which shall
neither be limited to a fixed sum or percentage of par value in respect of the
rights of the Holders thereof to participate in dividends nor entitled to a
preference in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the corporation; provided that the
shares of Common Stock receivable upon conversion of shares of Preferred Stock
shall include only shares designated as Common Stock of the Corporation on the
date of filing of this instrument, or in case of any reorganization,
reclassification, or stock split of the outstanding shares thereof, the stock,
securities or assets provided for hereof.
The said determination of the designation, preferences and relative,
participating, optional or other rights, and the qualifications, limitations or
restrictions thereof, relating to the Preferred Stock was duly made by the Board
of Directors pursuant to the provisions of the Corporation's Certificate of
Incorporation and in accordance with the provisions of the Delaware General
Corporation Law.
12. Delivery
Except as provided in Section 5(c), all notices and deliveries contemplated
hereunder shall be by Federal Express or other overnight delivery service with
delivery required by the morning of the next business day. Delivery shall be
complete when the Stock Certificates are issued by the Corporation's stock
transfer agent and delivered to Federal Express or other overnight delivery
service.
IN WITNESS HEREOF, this Certificate of Designation has been signed by:
William C. Willis, Jr., President, on this _____ day of May, 1998.
- ------------------------------------------
William C. Willis, Jr., President
TOP SOURCE TECHNOLOGIES, INC.
<PAGE>
12
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of May ____, 1998 by and among Top Source Technologies, Inc. a
Delaware corporation (the "Company"), and, the undersigned Purchasers of the
Company's Series A Convertible Preferred Stock and Warrants (the "Investors").
A. Pursuant to the terms of a Private Securities Subscription Agreement, dated
as of May ___, 1998 (as the same may be amended, the "Subscription Agreement"),
by and between the Company and the Investors, the Investors shall purchase up to
$2,500,000.00 aggregate principal amount of 5% Series A Convertible Preferred
Shares (the "Preferred"), of the Company, which may be converted into shares of
the $.001 par value per share common stock of the company (the "Common Stock").
B. The Company has agreed, as a condition precedent to the Investors obligations
under the Subscription Agreement, to grant the Investors certain registration
rights.
C. The Company and the Investors desire to define such registration rights on
the terms and subject to the conditions herein set forth.
D. The Investors, and the Placement Agent shall acquire Warrants to purchase up
to 250,000 shares of the Common Stock (the Warrants).
In consideration of the foregoing premises and for other good and valuable
consideration, the parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms have the respective meanings set
forth below:
Commission: shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the federal securities
laws;
Closing Date: shall mean the Closing Date, as defined by the Subscription
Agreement;
Exchange Act: shall mean the Securities Exchange Act of 1934, as amended;
Holder: shall mean any holder of Registrable Securities;
Person: shall mean an individual, partnership, joint stock company,
corporation, trust or unincorporated organization, and a government or
agency or political subdivision thereof,
Register, Registered and Registration: shall mean a registration effected by
preparing and filing a registration statement in compliance with the Securities
Act (and any post-effective amendments filed or required to be filed) and the
declaration or ordering of effectiveness of such registration statement;
Registrable Securities: shall mean (A) an unlimited number of shares of Common
Stock into which the Preferred are convertible or for which the Warrants are
exercisable, (B) any securities of the Company issued as a dividend or other
distribution with respect to, or in exchange for or in replacement of, the
shares of Common Stock referred to in clause (A), and (C); the shares of Common
Stock issuable to the Placement Agent upon the exercise of Warrants, provided
that Registrable Securities shall not include (i) securities with respect to
which a registration statement with respect to the sale of such securities has
become effective under the Securities Act and all such securities have been
disposed of in accordance with such registration statement, (ii) such securities
as may be sold without limitations on volume pursuant to Rule 144(k) (or any
successor provision thereto) under the Securities Act ("Rule 144"), (iii) such
securities as are acquired by the Company or any of its subsidiaries or (iv)
Preferred or Warrants which cease to be outstanding as the result of conversion
or exercise;
Registration Expenses: shall mean all expenses incurred by the Company in
compliance with Sections 2(a), (b) and (c) hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company, which shall
be paid in any event by the Company);
Security, Securities: shall have the meaning set forth in Section 2(l) of
the Securities Act;
Securities Act: shall mean the Securities Act of 1933, as amended;
and
Selling Expenses: shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities.
2. SHELF REGISTRATION
(a) Within 30 days after the Closing Date, the Company shall file a "shelf"
registration statement pursuant to Rule 415 under the Securities Act (the "Shelf
Registration") registering no fewer than 3,500,000 shares of Common Stock with
respect to the Registrable Securities to be issued under the Subscription
Agreement, provided that if the staff of the Commission determines by way of a
final ruling in writing to reduce the number of shares of Common Stock that can
be included in the registration statement, the Company shall within ten (10)
days file such additional registrations to register all shares of Common Stock
required to effect the conversion of the Preferred and exercise of the Warrants.
The Shelf Registration shall be on Form S-3 under the Securities Act or such
other appropriate form selected by the Company, and approved by Investors legal
counsel, which allows resales of Registrable Securities. The Company shall use
its reasonable best efforts to cause the Shelf Registration to become effective
within ninety (90) days of the Closing Date, and shall use its reasonable best
efforts to keep the Shelf Registration continuously effective from the date such
Shelf Registration is effective until the earlier to occur of (i) the second
anniversary of the Closing Date, or (ii) the date on which all Registrable
Securities have been sold or are eligible to be sold, in order to permit the
prospectus forming a part thereof to be usable by Holders during such period. If
the Shelf Registration has not been filed with the Commission with 30 days,
(Default) or is not declared effective by the Commission on or before the 90th
day after the Closing Date (Default), then the Company shall accrue to each
Investor, as liquidated damages, an amount in cash equal to two percent (2%),
per month, of the liquidation value of the Preferred then held by such Investors
payable on the 91st day after the Closing Date, and every 30 days thereafter,
pro-rated, until the Shelf Registration is declared effective by the Commission.
No damages shall accrue to any Investor if a delay in filing or declaration of
effectiveness is due to a request for documents, comment or objection by any
Holder or underwriter. The Company shall not be responsible for any liquidated
damages referred to in Section 2(a) hereof for any period of delay in which any
Holder fails to respond within two (2) business days it being the intent of the
parties that the ninety (90) day period shall be tolled during such period until
all Holders respond.
(b) The Company shall supplement or amend the Shelf Registration only as it
relates to the Investors, (i) as required by the registration form utilized by
the Company or by the instructions applicable to such registration form or by
the Securities Act or the rules and regulations promulgated thereunder, (ii) to
include in such Shelf Registration any additional securities that become
Registrable Securities by operation of the definition thereof, and (iii) the
Company shall furnish to the Holders of the Registrable Securities to which the
Shelf Registration relates copies of any such supplement or amendment
sufficiently in advance (but in no event less than two business days in advance)
of its use and/or, filing with the Commission to allow the Holders a meaningful
opportunity to comment thereon. The ninety (90) day period referred to in
Section 2(a) hereof shall be tolled if any Investor fails to reasonably approve
a Shelf registration, supplement, or amendment, or comment thereon within two
(2) business days of receipt.
(c) Expenses of Registration. All Registration Expenses incurred in connection
with any registration, qualification or compliance pursuant to this Section 2
shall be borne by the Company, and all Selling Expenses shall be borne by the
Holders of the Registerable Securities registered pro rata on the basis of the
number of their Registerable Securities.
(d) Registration Procedures. In the case of each Registration effected by the
Company pursuant to this Section 2, the Company will keep the Holders, as
applicable, advised in writing as to the initiation of each Registration and as
to the completion thereof. At its expense, the Company will:
(i) furnish to each Holder, and to any underwriter before filing with
the Commission, copies of any registration statement (including all exhibits)
and any prospectus forming a part thereof and any amendments and supplements
thereto (including all documents incorporated or deemed incorporated by
reference therein prior to the effectiveness of such registration statement and
including each preliminary prospectus, any summary prospectus or any term sheet
(as such term is used in Rule 434 under the Securities Act)) and any other
prospectus filed under Rule 424 under the Securities Act, which documents, other
than documents incorporated or deemed incorporated by reference, will be subject
to the review of the Holders and any such underwriter for a period of at least
two (2) business days, and the Company shall not file any such registration
statement or such prospectus or any amendment or supplement to such registration
statement or prospectus to which any Holder or any such underwriter shall
reasonably object within two (2) business days after the receipt thereof. A
Holder, if any, shall be deemed to have reasonably objected to such filing only
if the registration statement, amendment, prospectus or supplement, as
applicable, as proposed to be filed, includes an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(ii) furnish to each Holder and to any underwriter, such number of
conformed copies of the applicable registration statement and of each amendment
and supplement thereto (in each case including all exhibits) and such number of
copies of the prospectus forming a part of such registration statement
(including each preliminary prospectus, any summary prospectus or any term sheet
(as such term is used in Rule 434 under the Securities Act)) and any other
prospectus filed under Rule 424 under the Securities Act, in conformity with the
requirements of the Securities Act, and such other documents, including without
limitation documents incorporated or deemed to be incorporated by reference
prior to the effectiveness of such Registration, as each of the Holders or any
such underwriter, from time to time may reasonably request;
(iii) make available at reasonable times for inspection by the Holders,
any underwriter participating in any disposition pursuant to such Registration
and any attorney or accountant retained by the Holders or any such underwriter,
all financial and other records, pertinent corporate documents and properties of
the Company and cause the officers, directors and employees of the Company to
supply all information reasonably requested by the Holders and any such
underwriters, attorneys or accountants in connection with such registration
subsequent to the filing of the applicable registration statement and prior to
the effectiveness of the applicable registration statement;
(iv) use its best efforts (x) to register or qualify all Registrable
Securities and other securities covered by such Registration under such other
securities or blue sky laws of such States of the United States of America where
an exemption is not available and as the sellers of Registrable Securities
covered by such Registration shall reasonably request, (y) to keep such
Registration or qualification in effect for so long as the applicable
registration statement remains in effect, and (z) to take any other action which
may be reasonably necessary or advisable to enable such sellers to consummate
the disposition in such jurisdictions of the Registrable Securities to be sold
by such sellers, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in any
jurisdiction where it is not so qualified, or to subject itself to taxation in
any such jurisdiction, or to execute a general consent to service of process in
effecting such registration, qualification or compliance, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act or applicable rules or regulations thereunder;
(v) subject to Section 2(h) hereof, promptly notify each Holder of
Registrable Securities covered by a registration statement (A) upon discovery
that, or upon the happening of any event as a result of which, the prospectus
forming a part of such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, (B) of the
issuance by the Commission of any stop order suspending the effectiveness of
such registration statement or the initiation of proceedings for that purpose,
(C) of any request by the Commission for (1) amendments to such registration
statement or any document incorporated or deemed to be incorporated by reference
in any such registration statement, (2) supplements to the prospectus forming a
part of such registration statement or (3) additional information, or (D) of the
receipt by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation of any proceeding for
such purpose, and at the request of any such Holder promptly prepare and furnish
to it a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(vi) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of any such registration, or the lifting of any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction;
(vii) if requested by the initiating Holders, or any underwriter,
promptly incorporate in such registration statement or prospectus, pursuant to a
supplement or post effective amendment if necessary, such information as the
Holders and any underwriter may reasonably request to have included therein,
including, without limitation, information relating to the "plan of
distribution" of the Registrable Securities, information with respect to the
principal amount or number of shares of Registrable Securities being sold to
such underwriter, the purchase price being paid therefor and any other terms of
the offering of the Registrable Securities to be sold in such offering and make
all required filings of any such prospectus supplement or post-effective
amendment as soon as practicable after the Company is notified of the matters to
be incorporated in such prospectus supplement or post effective amendment;
(viii) in the event of an underwritten offering of Registrable
Securities, furnish to the underwriters, addressed to them, an opinion of
counsel for the Company, dated the date of the closing under the underwriting
agreement, and use its reasonable best efforts to furnish to the underwriters,
addressed to them, a "cold comfort" letter signed by the independent certified
public accountants who have certified the Company's financial statements
included in such registration, covering substantially the same matters with
respect to such registration (and the prospectus included therein) and, in the
case of such accountants' letter, with respect to events subsequent to the date
of such financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to underwriters in underwritten
public offerings of securities and such other matters as the underwriters may
reasonably request;
(ix) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its security holders,
as soon as reasonably practicable, an earnings statement covering the period of
at least 12 months, but not more than 18 months, beginning with the first full
calendar month after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11 (a) of the
Securities Act and Rule 158 promulgated thereunder;
(x) provide promptly to the Holders upon request any document filed by
the Company with the Commission pursuant to the requirements of Section 13 and
Section 15 of the Exchange Act; and
(xi) use its commercially reasonable best efforts to cause all
Registrable Securities included in any registration pursuant hereto to be listed
on each securities exchange on which securities of the same class are then
listed, or, if not then listed on any securities exchange, to be eligible for
trading in any over-the-counter market or trading system in which securities of
the same class are then traded.
(e) Indemnification.
(i) The Company will indemnify each of the Holders, and as applicable,
each of their respective officers, directors, members and partners, and each
person controlling each of the Holders, with respect to each Registration which
has been effected pursuant to this Section 2, and each underwriter, if any, and
each person who controls any underwriter, against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
Registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or the Exchange Act or any rule or regulation
thereunder applicable to the Company and relating to action or inaction required
of the Company in connection with any such registration, qualification or
compliance, and will reimburse each of the Holders, each of its officers,
directors, members and partners, and each person controlling each of the
Holders, each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending any such claim, loss, damage,
liability or action, provided that the Company will not be liable in any such
case to the extent that any such claim loss, damage, liability or expense arises
out of or is based on any untrue statement or omission based upon written
information furnished to the Company by the Holders or underwriter and stated to
be specifically for use therein. PROVIDED, FURTHER, that the Company shall not
be liable to any Holder or underwriter in respect of any Prospectus to the
extent that (i) the Prospectus did not contain the untrue statement or alleged
untrue statement or omission or alleged omission giving rise to such loss,
claim, damage, liability or action; or (ii) the Prospectus was not sent or given
to the purchaser of the Registrable Securities in question at or prior tot he
time at which the written confirmation of the sale of such Registrable
Securities was sent or given to such person; or (iii) the Holder fails to
deliver a prospectus as required by law; or (iv) the Holder sells his securities
through an unlicensed seller or agent.
(ii) Each of the Holders will, if Registrable Securities held by it are
included in the securities as to which such Registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers and each underwriter, if any, of the Company's securities covered by
such a registration statement and each person who controls the Company or such
underwriter, each Other Stockholder and each of their officers, directors,
members and partners, and each person controlling such Other Stockholder against
all claims, losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any such registration statement, prospectus,
offering circular or other document made by such Holder, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements by such Holder therein not misleading, and
will reimburse the Company and such Other Stockholders, directors, officers,
partners, members, persons, underwriters or control persons for any legal or any
other expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder or
his agent and stated to be specifically for use therein; provided, however, that
the obligations of each of the Holders hereunder and under clause (vi) below
shall be limited to an amount equal to the net proceeds to such Holder of
securities sold as contemplated herein.
(iii) Each party entitled to indemnification under this Section 2(f)
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld) and the Indemnified Party may participate in such
defense at such party's expense (unless counsel for the Indemnified Party shall
have reasonably concluded that there may be a conflict of interest between the
Indemnifying Party and the Indemnified Party in such action, in which case the
fees and expenses of one such counsel for all Indemnified Parties shall be at
the expense of the Indemnifying Party), and provided further that the failure of
any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 2 unless the
Indemnifying Party is materially prejudiced thereby. No Indemnifying Party, in
the defense of any such claim or litigation shall, except with the consent of
each Indemnified Party (which consent shall not be unreasonably withheld or
delayed), consent to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation. Each Indemnified Party shall furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
(iv) If the indemnification provided for in this Section 2(f) is held
by a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any loss, liability, claim, damage or expense referred to
herein, because a court has ruled indemnification is against public policy or
contrary to the Securities Act or Exchange Act, then the Indemnifying Party, in
lieu of indemnifying such Indemnified Party hereunder, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such loss,
liability, claim, damage or expense in such proportion as is appropriate to
reflect the relative fault of the Indemnifying Party on the one hand and of the
Indemnified Party on the other in connection with the statements or omissions
which resulted in such loss, liability, claim, damage or expense, as well as any
other relevant equitable considerations. The relative fault of the Indemnifying
Party and of the Indemnified Party shall be determined by reference to, among
other things, whether the untrue (or alleged untrue) statement of a material
fact or the omission (or alleged omission) to state a material fact relates to
information supplied by the Indemnifying Party or by the Indemnified Party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
(v) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with any underwritten public offering contemplated by this
Agreement are in conflict with the foregoing provisions, the provisions in such
underwriting agreement shall be controlling.
(f) Information by the Holders. Each of the Holders holding securities included
in any Registration shall promptly furnish to the Company such information
regarding such Holder and the distribution proposed by such Holder as the
Company may reasonably request in writing and as shall be reasonably required in
connection with any Registration, qualification or compliance referred to in
this Section 2.
(g) Assignment. The registration rights set forth in Section 2 hereof may be
assigned, in whole or in part, to any transferee of Registrable Securities (i)
who is an affiliate of the Investors, or (ii) who is a purchaser of at least 50%
of the then outstanding Registrable Securities. Any such transferee shall be
considered thereafter to be a Holder (provided that any transferee who is not an
affiliate of Investors shall be a Holder only with respect to such Registrable
Securities so acquired and any stock of the Company issued as a dividend or
other distribution with respect to, or in exchange for or in replacement of,
such Registrable Securities) and shall be bound by all obligations and
limitations of this Agreement.
3. RULE 144 REPORTING
With a view to making available the benefits of certain rules and regulations of
the Commission which may permit the sale of restricted securities to the public
without registration, the Company agrees to:
(i) make and keep public information available (as those terms are
understood and defined in Rule 144)at all times;
(ii) use its reasonable best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(iii) so long as there are outstanding any Registrable Securities,
furnish to each Holder, upon request, a written statement by the Company as to
its compliance with the reporting requirements of Rule 144 and of the Securities
Act and the Exchange Act, a copy of the most recent annual or quarterly report
of the Company, and such other reports and documents so filed as such Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing such Holder to sell any such securities without
registration.
4. INTERPRETATION OF THIS AGREEMENT
(a) Directly or Indirectly. Where any provision in this Agreement
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether such action is taken
directly or indirectly by such Person.
(b) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, and all disputes shall be
determined by the courts of law in Delaware, as set out in the Subscription
Agreement.
(c) Section Headings. The headings of the sections and subsections of
this Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof.
5. MISCELLANEOUS
(a) Notices.
(i) All communications under this Agreement shall be in
writing and shall be delivered by facsimile or by hand or mailed by overnight
courier or by registered or certified mail, postage prepaid:
(A) if to the Company, to Top Source Technologies,
Inc., or at such other address as
it may have furnished in writing to the Investors;
(B) if to the Investors, at the address listed on the
signature page hereto, or at
such other address as may have been furnished the Company in writing.
(ii) Any notice so addressed shall be deemed to be given: if
delivered by hand, on the date of such delivery; if mailed by courier, on the
first business day following the date of such mailing; and if mailed by
registered or certified mail, on the third business day after the date of such
mailing.
(b) Reproduction of Documents. This Agreement and all documents
relating thereto, including, without limitation, any consents, waivers and
modifications which may hereafter be executed may be reproduced by the Investors
by any photographic, photostatic, microfilm, microcard, miniature photographic
or other similar process and the Investors may destroy any original document so
reproduced. The parties hereto agree and stipulate that any such reproduction
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made by the Investors in the regular course
of business) and that any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence.
(c) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties.
(d) Entire Agreement: Amendment and Waiver. This Agreement constitutes
the entire understanding of the parties hereto and supersedes all prior
understanding among such parties. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, with (and only with) the
written consent of the Company and the Holders of a majority of the then
outstanding Registrable Securities.
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
(f) Remedies. Each Holder of Registrable Securities, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(g) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended and understood that all of the rights and privileges
of each of the Holders shall be enforceable to the fullest extent permitted by
law.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first set forth above.
TOP SOURCE TECHNOLOGIES, INC.
By: _________________________
Name: ________________________
Title: _________________________
INVESTOR:
By: _________________________
Name:_______________________
Title: _______________________
ADDRESS:
-------------------------------
-------------------------------
INVESTOR:
By: _________________________
Name:_______________________
Title: _______________________
ADDRESS:
-------------------------------
-------------------------------
-------------------------------
<PAGE>
INVESTOR:
By: _________________________
Name:_______________________
Title: _______________________
ADDRESS:
-------------------------------
-------------------------------
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<PAGE>
EXHIBIT C
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION") OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"). THIS WARRANT MAY NOT BE EXERCISED BY OR ON
BEHALF OF ANY U.S. PERSON, UNLESS REGISTERED UNDER THE 1933 ACT, OR AN EXEMPTION
FROM SUCH REGISTRATION IS AVAILABLE. THIS WARRANT SHALL NOT CONSTITUTE AN OFFER
TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE WARRANT IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE MAY NOT BE SOLD,
PLEDGED, TRANSFERRED OR ASSIGNED BY OR TO ANY U.S. PERSON EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT AND UNDER APPLICABLE STATE
SECURITIES LAWS, OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE
PROVISIONS OF THE 1933 ACT AND UNDER PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS; AND IN THE CASE OF AN EXEMPTION, ONLY IF THE COMPANY HAS RECEIVED AN
OPINION FROM COUNSEL THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION OF THE
SECURITIES.
STOCK PURCHASE WARRANT
No. 1
TO PURCHASE 187,500 SHARES OF COMMON STOCK OF
TOP SOURCE TECHNOLOGIES, INC.
THIS CERTIFIES that, for value received, ____________________________, located
at, __________________________, _______, _______, ______, (the "Investor"), is
entitled, upon the terms and subject to the conditions hereinafter set forth, at
any time on or after May ____, 1998 and on or prior to May ____, 2001 (the
"Termination Date") but not thereafter, to subscribe for and purchase from TOP
SOURCE TECHNOLOGIES, INC., a corporation incorporated in the State of Delaware
(the "Company"), one hundred and eighty seven thousand, five hundred (187,500)
shares (the "Warrant Shares") of Common Stock, $.001 value per share of the
Company (the "Common Stock"). The purchase price of one share of Common Stock
(the "Exercise Price") under this Warrant shall be equal to $_____. The Exercise
Price and the number of shares for which the Warrant is exercisable shall be
subject to adjustment as provided herein. This Warrant is being issued in
connection with the Subscription Agreement dated May ____, 1998 (the
"Agreement") and is subject to its terms and conditions.
1. Title of Warrant. Prior to the expiration hereof and subject to compliance
with applicable laws, this Warrant and all rights hereunder are transferable, in
whole or in part, at the office or agency of the Company by the holder hereof in
person or by duly authorized attorney, upon surrender of this Warrant together
with the Assignment Form annexed hereto properly endorsed.
2. Authorization of Shares. The Company covenants that all shares of Common
Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant and full
payment of the Exercise Price, be duly authorized, validly issued, fully paid
and nonassessable and free from all taxes, liens and charges in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).
3. Exercise of Warrant. Except as provided in Section 11 herein, exercise of the
purchase rights represented by this Warrant may be made pursuant to the
Company's registration statement, referred to in the Registration Rights
Agreement, declared effective by the Securities and Exchange Commission (the
"Effective Date") as follows: (a) 75,000 shares commencing on the Effective
Date; (b) 37,500 shares commencing ninety (90) days after the Effective Date;
(c) 37,500 shares commencing one hundred and fifty (150) days after the
Effective Date; and (d) 37, 500 shares commencing two hundred and ten (210) days
after the Effective Date, and all shares as set out in (a), (b), (c) and, (d)
ending before the close of business on the Termination Date, or such earlier
date on which this Warrant may terminate as provided in this Warrant, by the
surrender of this Warrant and the Notice of Exercise Form annexed hereto duly
executed, at the office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the registered holder hereof
at the address of such holder appearing on the books of the Company) and upon
payment of the Exercise Price of the shares thereby purchased; whereupon the
holder of this Warrant shall be entitled to receive a certificate for the number
of shares of Common Stock so purchased. Certificates for shares purchased
hereunder shall be delivered to the holder hereof within four (4) business days
after the date on which this Warrant shall have been exercised as aforesaid, or
be subject to the damages set forth in the Agreement. Payment of the Exercise
Price may be by certified check or cashier's check or by wire transfer to an
account designated by the Company in an amount equal to the Exercise Price
multiplied by the number of Warrant Shares.
4. No Fractional Shares or Script. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. Fractional
Shares shall be rounded down as provided for in Section 5(g) of the Certificate
of Designation.
5. Charges, Taxes and Expenses. Issuance of certificates for shares of Common
Stock upon the exercise of this Warrant shall be made without charge to the
holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; provided, however, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof, and provided further, that upon any transfer involved in the issuance or
delivery of any certificates for shares of Common Stock, the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
6. Closing of Books. Unless otherwise required by law or the principal trading
market for the Company's Common Stock, the Company will not close its
shareholder books or records in any manner which prevents the timely exercise of
this Warrant for a period of time in excess of five (5) trading days per year.
7. No Rights as Shareholder until Exercise. This Warrant does not entitle the
holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise thereof. Upon the surrender of this Warrant and
the payment of the aggregate Exercise Price, the Warrant Shares so purchased
shall be, and be deemed to be, issued to such holder as the record owner of such
shares as of the close of business on the later of the date of such surrender or
payment.
8. Assignment and Transfer of Warrant. This Warrant may be assigned by the
surrender of this Warrant and the Assignment Form annexed hereto duly executed
at the office of the Company (or such other office or agency of the Company as
it may designate by notice in writing to the registered holder hereof at the
address of such holder appearing on the books of the Company); provided,
however, that the Company may require, as a condition thereto, the payment of a
sum sufficient to reimburse it for any expenses of transfer incidental thereto
and that this Warrant may not be resold or otherwise transferred except (I) in a
transaction registered under the Securities Act of 1933 (the "Securities Act"),
or (ii) in a transaction pursuant to an exemption, if available, from such
registration and whereby, if requested by the Company, an opinion of counsel
reasonably satisfactory to counsel for the Company is obtained by the holder of
this Warrant to the effect that the transaction is so exempt.
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company represents and
warrants that upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of this Warrant certificate or
any stock certificate relating to the Warrant Shares, and in case of loss, theft
or destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of such Warrant or stock certificate, if
mutilated, the Company will make and deliver a new Warrant or stock certificate
of like tenor and dated as of such cancellation, in lieu of such Warrant or
stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday, Sunday or a legal holiday in the State of New York, then
such action may be taken or such right may be exercised on the next succeeding
day not a legal holiday.
11. Effect of Certain Events.
(a) If at any time the Company proposes (i) to sell or otherwise convey all or
substantially all of its assets or (ii) to effect a transaction (by merger or
otherwise) in which more than 50% of the voting power of the Company is disposed
of (collectively, a "Sale or Merger Transaction"), in which the consideration to
be received by the Company or its shareholders consists solely of cash, then the
Warrant shall terminate if the Warrant has not been exercised by the effective
date of such Sale or Merger transaction, the Company shall give the holder of
this Warrant thirty (30) days notice of such termination and of the proposed
effective date of the Sale or Merger transaction.
(b) In case the Company shall at any time effect a Sale or Merger Transaction in
which the consideration to be received by the Company or its shareholders
consists in whole or in part of consideration other than cash, the holder of
this Warrant shall have the right thereafter to purchase, by exercise of this
Warrant and payment of the aggregate Exercise Price in effect immediately prior
to such action, the kind and amount of shares and other securities and property
which it would have owned or have been entitled to receive after the happening
of such Sale or Merger transaction had this Warrant been exercised immediately
prior thereto.
(c) "Piggy-Back" Registration.
(i) The holder of this Warrant shall have the right to include all of the
Warrant Shares (the "Registrable Securities") as part of any registration of
securities filed by the Company (other than in connection with a transaction
contemplated by Rule 145(a) promulgated under the Securities Act or pursuant to
Forms S-4 or S-8) and must be notified in writing of such filing. The holder
shall have five (5) business days to notify the Company in writing as to whether
the Company is to include holder's Registrable Securities as part of the
registration; provided, however, that if any registration pursuant to this
Section shall be underwritten, in whole or in part, the Company may require that
the Registrable Securities requested for inclusion pursuant to this Section be
included in the underwriting on the same terms and conditions as the securities
other-wise being sold through the underwriters. If in the good faith judgment of
the underwriter of such offering only a limited number of Registrable Securities
should be included in such offering, or no such shares should be included, the
holder of such Registrable Securities, and any other selling stockholders, shall
be reduced, such reduction to be applied by excluding (on a pro rata basis)
Registrable Securities proposed to be sold by the holder of this Warrant and
shares proposed to be sold by all other persons. Those Registrable Securities
which are not included in an underwritten offering pursuant to the foregoing
provisions of this Section (and all other Registrable Securities held by the
selling stockholders) shall be withheld from the market by the Holders thereof
for a period, not to exceed ninety (90) days, which the underwriter may
reasonably determine-nine is necessary in order to effect such underwritten
offering, and the Holder shall sign any agreement to this effect requested by
such underwriter. Notwithstanding the foregoing provisions, the Company may
withdraw any registration statement without incurring any liability to the
holders of Registrable Securities.
(ii) The registration rights set forth in Section 11(c)(i) shall cease upon the
earliest of (A) the effective registration under the Securities Act of all of
the Registrable Securities and the disposal of such securities pursuant to such
registration, (B) registration under the Securities Act is no longer required
for the immediate public distribution of such security as a result of the
provisions of Rule 144 promulgated under the Securities Act, or (C) such
Registrable Securities cease to be outstanding.
12. Adjustments-of Exercise Price and Number of Warrant Shares. The number and
kind of securities purchasable upon the exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
happening of any of the following.
In case the Company shall (i) declare or pay a dividend in shares of Common
Stock or make a distribution in shares of Common Stock to holders of its
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock,
(iii) combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock or (iv) issue any shares of its capital stock in a
reclassification of the Common Stock, then the number of Warrant Shares
purchasable upon exercise of this Warrant immediately prior thereto shall be
adjusted so that the holder of this Warrant shall be entitled to receive the
kind and number of Warrant Shares or other securities of the Company which he
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof Upon each such adjustment of the kind and number of
Warrant Shares or other securities of the Company which are purchasable
hereunder, the holder of this Warrant shall thereafter be entitled to purchase
the number of Warrant Shares or other securities resulting from such adjustment
at an Exercise Price per such Warrant Share or other security obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of Warrant Shares purchasable pursuant hereto immediately prior to
such adjustment and dividing by the number of Warrant Shares or other securities
of the Company resulting from such adjustment. An adjustment made pursuant to
this paragraph shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event.
13. Voluntary Adjustment by the Company . The Company may at any time during the
term of this Warrant, reduce the then current Exercise Price to any amount and
for any period of time deemed appropriate by the Board of Directors of the
Company.
14. Notice of Adjustment. Whenever the number of Warrant Shares or number or
kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted, as herein provided, the Company shall
promptly mail by registered or certified mail, return receipt requested, to the
holder of this Warrant notice of such adjustment or adjustments setting forth
the number of Warrant Shares (and other securities or property) purchasable upon
the exercise of this Warrant and the Exercise Price of such Warrant Shares (and
other securities or property) after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made. Such notice, in absence of
manifest error, shall be conclusive evidence of the correctness of such
adjustment.
15. Authorized Shares. The Company covenants that during the period the Warrant
is outstanding, it will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of the Warrant Shares
upon the exercise of any purchase rights under this Warrant. The Company further
covenants that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant. The Company will take all
such reasonable action as may be necessary to assure that such Warrant Shares
may be issued as 'provided herein without violation of any applicable law or
regulation, or of any requirements of prove the NASDAQ Stock Market or any
domestic securities exchange upon which the Common Stock may be listed.
16. Miscellaneous.
(a) Issue Date, Jurisdiction. The provisions of this Warrant shall be construed
and shall be given effect in all respects as if it had been issued and delivered
by the Company on the date hereof This Warrant shall be binding upon any
successors or assigns of the Company. This Warrant shall constitute a contract
under the laws of the State of Delaware, without regard to its conflict of law,
principles or rules. This Agreement and any dispute, disagreement, or issue of
construction or interpretation arising hereunder whether relating to its
execution, its validity, the obligations provided herein or performance shall be
governed or interpreted according to the internal laws of the State of Delaware
without regard to choice of law considerations. The courts of the State of
Delaware shall have exclusive jurisdiction over any cause or controversy arising
under the terms of this Agreement or between the parties as the result of any
act taken or failure to act not taken by either party pursuant to this
Agreement.
(b) Restrictions. The holder hereof acknowledges that the Warrant Shares
acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.
(c) Modification and Waiver. This Warrant and any provisions hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
(d) Notices. Any notice, request or other document required or permitted to be
given or delivered to the holders hereof by the Company shall be delivered or
shall be sent by certified or registered mail, postage prepaid, to each such
holder at its address as shown on the Books of the Company or to the Company at
the address set forth in the Agreement.
(e) Capitalized Terms. All capitalized terms not otherwise defined herein shall
have the meaning assigned to them in the Agreement.
(d) Entire Agreement. This Warrant, together with all documents referenced
herein, embody the entire agreement and understanding between the parties hereto
with respect to the subject matter hereof and supersedes all prior oral or
written agreements and understandings relating to the subject matter hereof. No
statement, representation, warranty, covenant or agreement of any kind not
expressly set forth in this Agreement shall affect, or be used to interpret,
change or restrict, the express terms and provisions of this Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized.
Dated: May ____, 1998
TOP SOURCE TECHNOLOGIES, INC.
By: _____________________________________________
<PAGE>
8
EXHIBIT C
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION") OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"). THIS WARRANT MAY NOT BE EXERCISED BY OR ON
BEHALF OF ANY U.S. PERSON, UNLESS REGISTERED UNDER THE 1933 ACT, OR AN EXEMPTION
FROM SUCH REGISTRATION IS AVAILABLE. THIS WARRANT SHALL NOT CONSTITUTE AN OFFER
TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE WARRANT IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE MAY NOT BE SOLD,
PLEDGED, TRANSFERRED OR ASSIGNED BY OR TO ANY U.S. PERSON EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT AND UNDER APPLICABLE STATE
SECURITIES LAWS, OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE
PROVISIONS OF THE 1933 ACT AND UNDER PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS; AND IN THE CASE OF AN EXEMPTION, ONLY IF THE COMPANY HAS RECEIVED AN
OPINION FROM COUNSEL THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION OF THE
SECURITIES.
STOCK PURCHASE WARRANT
No. 1
TO PURCHASE 131,250 SHARES OF COMMON STOCK OF
TOP SOURCE TECHNOLOGIES, INC.
THIS CERTIFIES that, for value received, Excalibur Limited Partnership, located
at, 205 Vesta Drive, Toronto, Ontario, Canada, M5P 3A1, (the "Investor"), is
entitled, upon the terms and subject to the conditions hereinafter set forth, at
any time on or after May 7, 1998 and on or prior to May 7, 2001 (the
"Termination Date") but not thereafter, to subscribe for and purchase from TOP
SOURCE TECHNOLOGIES, INC., a corporation incorporated in the State of Delaware
(the "Company"), one hundred and thirty one thousand, two hundred and fifty
(131,250) shares (the "Warrant Shares") of Common Stock, $.001 value per share
of the Company (the "Common Stock"). The purchase price of one share of Common
Stock (the "Exercise Price") under this Warrant shall be equal to $1.10. The
Exercise Price and the number of shares for which the Warrant is exercisable
shall be subject to adjustment as provided herein. This Warrant is being issued
in connection with the Subscription Agreement dated May 7th, 1998 (the
"Agreement") and is subject to its terms and conditions.
1. Title of Warrant. Prior to the expiration hereof and subject to compliance
with applicable laws, this Warrant and all rights hereunder are transferable, in
whole or in part, at the office or agency of the Company by the holder hereof in
person or by duly authorized attorney, upon surrender of this Warrant together
with the Assignment Form annexed hereto properly endorsed.
2. Authorization of Shares. The Company covenants that all shares of Common
Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant and full
payment of the Exercise Price, be duly authorized, validly issued, fully paid
and nonassessable and free from all taxes, liens and charges in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).
3. Exercise of Warrant. Except as provided in Section 11 herein, exercise of the
purchase rights represented by this Warrant may be made pursuant to the
Company's registration statement, referred to in the Registration Rights
Agreement, declared effective by the Securities and Exchange Commission (the
"Effective Date") as follows: (a) 52,500 shares commencing on the Effective
Date; (b) 26,250 shares commencing ninety (90) days after the Effective Date;
(c) 26,250 shares commencing one hundred and fifty (150) days after the
Effective Date; and (d) 26,250 shares commencing two hundred and ten (210) days
after the Effective Date, and all shares as set out in (a), (b), (c) and, (d)
ending before the close of business on the Termination Date, or such earlier
date on which this Warrant may terminate as provided in this Warrant, by the
surrender of this Warrant and the Notice of Exercise Form annexed hereto duly
executed, at the office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the registered holder hereof
at the address of such holder appearing on the books of the Company) and upon
payment of the Exercise Price of the shares thereby purchased; whereupon the
holder of this Warrant shall be entitled to receive a certificate for the number
of shares of Common Stock so purchased. Certificates for shares purchased
hereunder shall be delivered to the holder hereof within four (4) business days
after the date on which this Warrant shall have been exercised as aforesaid, or
be subject to the damages set forth in the Agreement. Payment of the Exercise
Price may be by certified check or cashier's check or by wire transfer to an
account designated by the Company in an amount equal to the Exercise Price
multiplied by the number of Warrant Shares.
4. No Fractional Shares or Script. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. Fractional
Shares shall be rounded down as provided for in Section 5(g) of the Certificate
of Designation.
5. Charges, Taxes and Expenses. Issuance of certificates for shares of Common
Stock upon the exercise of this Warrant shall be made without charge to the
holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; provided, however, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof, and provided further, that upon any transfer involved in the issuance or
delivery of any certificates for shares of Common Stock, the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
6. Closing of Books. Unless otherwise required by law or the principal trading
market for the Company's Common Stock, the Company will not close its
shareholder books or records in any manner which prevents the timely exercise of
this Warrant for a period of time in excess of five (5) trading days per year.
7. No Rights as Shareholder until Exercise. This Warrant does not entitle the
holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise thereof. Upon the surrender of this Warrant and
the payment of the aggregate Exercise Price, the Warrant Shares so purchased
shall be, and be deemed to be, issued to such holder as the record owner of such
shares as of the close of business on the later of the date of such surrender or
payment.
8. Assignment and Transfer of Warrant. This Warrant may be assigned by the
surrender of this Warrant and the Assignment Form annexed hereto duly executed
at the office of the Company (or such other office or agency of the Company as
it may designate by notice in writing to the registered holder hereof at the
address of such holder appearing on the books of the Company); provided,
however, that the Company may require, as a condition thereto, the payment of a
sum sufficient to reimburse it for any expenses of transfer incidental thereto
and that this Warrant may not be resold or otherwise transferred except (I) in a
transaction registered under the Securities Act of 1933 (the "Securities Act"),
or (ii) in a transaction pursuant to an exemption, if available, from such
registration and whereby, if requested by the Company, an opinion of counsel
reasonably satisfactory to counsel for the Company is obtained by the holder of
this Warrant to the effect that the transaction is so exempt.
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company represents and
warrants that upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of this Warrant certificate or
any stock certificate relating to the Warrant Shares, and in case of loss, theft
or destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of such Warrant or stock certificate, if
mutilated, the Company will make and deliver a new Warrant or stock certificate
of like tenor and dated as of such cancellation, in lieu of such Warrant or
stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday, Sunday or a legal holiday in the State of New York, then
such action may be taken or such right may be exercised on the next succeeding
day not a legal holiday.
11. Effect of Certain Events.
(a) If at any time the Company proposes (i) to sell or otherwise convey all or
substantially all of its assets or (ii) to effect a transaction (by merger or
otherwise) in which more than 50% of the voting power of the Company is disposed
of (collectively, a "Sale or Merger Transaction"), in which the consideration to
be received by the Company or its shareholders consists solely of cash, then the
Warrant shall terminate if the Warrant has not been exercised by the effective
date of such Sale or Merger transaction, the Company shall give the holder of
this Warrant thirty (30) days notice of such termination and of the proposed
effective date of the Sale or Merger transaction.
(b) In case the Company shall at any time effect a Sale or Merger Transaction in
which the consideration to be received by the Company or its shareholders
consists in whole or in part of consideration other than cash, the holder of
this Warrant shall have the right thereafter to purchase, by exercise of this
Warrant and payment of the aggregate Exercise Price in effect immediately prior
to such action, the kind and amount of shares and other securities and property
which it would have owned or have been entitled to receive after the happening
of such Sale or Merger transaction had this Warrant been exercised immediately
prior thereto.
(c) "Piggy-Back" Registration.
(i) The holder of this Warrant shall have the right to include all of the
Warrant Shares (the "Registrable Securities") as part of any registration of
securities filed by the Company (other than in connection with a transaction
contemplated by Rule 145(a) promulgated under the Securities Act or pursuant to
Forms S-4 or S-8) and must be notified in writing of such filing. The holder
shall have five (5) business days to notify the Company in writing as to whether
the Company is to include holder's Registrable Securities as part of the
registration; provided, however, that if any registration pursuant to this
Section shall be underwritten, in whole or in part, the Company may require that
the Registrable Securities requested for inclusion pursuant to this Section be
included in the underwriting on the same terms and conditions as the securities
other-wise being sold through the underwriters. If in the good faith judgment of
the underwriter of such offering only a limited number of Registrable Securities
should be included in such offering, or no such shares should be included, the
holder of such Registrable Securities, and any other selling stockholders, shall
be reduced, such reduction to be applied by excluding (on a pro rata basis)
Registrable Securities proposed to be sold by the holder of this Warrant and
shares proposed to be sold by all other persons. Those Registrable Securities
which are not included in an underwritten offering pursuant to the foregoing
provisions of this Section (and all other Registrable Securities held by the
selling stockholders) shall be withheld from the market by the Holders thereof
for a period, not to exceed ninety (90) days, which the underwriter may
reasonably determine-nine is necessary in order to effect such underwritten
offering, and the Holder shall sign any agreement to this effect requested by
such underwriter. Notwithstanding the foregoing provisions, the Company may
withdraw any registration statement without incurring any liability to the
holders of Registrable Securities.
(ii) The registration rights set forth in Section 11(c)(i) shall cease upon the
earliest of (A) the effective registration under the Securities Act of all of
the Registrable Securities and the disposal of such securities pursuant to such
registration, (B) registration under the Securities Act is no longer required
for the immediate public distribution of such security as a result of the
provisions of Rule 144 promulgated under the Securities Act, or (C) such
Registrable Securities cease to be outstanding.
12. Adjustments-of Exercise Price and Number of Warrant Shares. The number and
kind of securities purchasable upon the exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
happening of any of the following.
In case the Company shall (i) declare or pay a dividend in shares of Common
Stock or make a distribution in shares of Common Stock to holders of its
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock,
(iii) combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock or (iv) issue any shares of its capital stock in a
reclassification of the Common Stock, then the number of Warrant Shares
purchasable upon exercise of this Warrant immediately prior thereto shall be
adjusted so that the holder of this Warrant shall be entitled to receive the
kind and number of Warrant Shares or other securities of the Company which he
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof Upon each such adjustment of the kind and number of
Warrant Shares or other securities of the Company which are purchasable
hereunder, the holder of this Warrant shall thereafter be entitled to purchase
the number of Warrant Shares or other securities resulting from such adjustment
at an Exercise Price per such Warrant Share or other security obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of Warrant Shares purchasable pursuant hereto immediately prior to
such adjustment and dividing by the number of Warrant Shares or other securities
of the Company resulting from such adjustment. An adjustment made pursuant to
this paragraph shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event.
13. Voluntary Adjustment by the Company. The Company may at any time during the
term of this Warrant, reduce the then current Exercise Price to any amount and
for any period of time deemed appropriate by the Board of Directors of the
Company.
14. Notice of Adjustment. Whenever the number of Warrant Shares or number or
kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted, as herein provided, the Company shall
promptly mail by registered or certified mail, return receipt requested, to the
holder of this Warrant notice of such adjustment or adjustments setting forth
the number of Warrant Shares (and other securities or property) purchasable upon
the exercise of this Warrant and the Exercise Price of such Warrant Shares (and
other securities or property) after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made. Such notice, in absence of
manifest error, shall be conclusive evidence of the correctness of such
adjustment.
15. Authorized Shares. The Company covenants that during the period the Warrant
is outstanding, it will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of the Warrant Shares
upon the exercise of any purchase rights under this Warrant. The Company further
covenants that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant. The Company will take all
such reasonable action as may be necessary to assure that such Warrant Shares
may be issued as 'provided herein without violation of any applicable law or
regulation, or of any requirements of prove the NASDAQ Stock Market or any
domestic securities exchange upon which the Common Stock may be listed.
16. Miscellaneous.
(a) Issue Date, Jurisdiction. The provisions of this Warrant shall be construed
and shall be given effect in all respects as if it had been issued and delivered
by the Company on the date hereof This Warrant shall be binding upon any
successors or assigns of the Company. This Warrant shall constitute a contract
under the laws of the State of Delaware, without regard to its conflict of law,
principles or rules. This Agreement and any dispute, disagreement, or issue of
construction or interpretation arising hereunder whether relating to its
execution, its validity, the obligations provided herein or performance shall be
governed or interpreted according to the internal laws of the State of Delaware
without regard to choice of law considerations. The courts of the State of
Delaware shall have exclusive jurisdiction over any cause or controversy arising
under the terms of this Agreement or between the parties as the result of any
act taken or failure to act not taken by either party pursuant to this
Agreement.
(b) Restrictions. The holder hereof acknowledges that the Warrant Shares
acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.
(c) Modification and Waiver. This Warrant and any provisions hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
(d) Notices. Any notice, request or other document required or permitted to be
given or delivered to the holders hereof by the Company shall be delivered or
shall be sent by certified or registered mail, postage prepaid, to each such
holder at its address as shown on the Books of the Company or to the Company at
the address set forth in the Agreement.
(e) Capitalized Terms. All capitalized terms not otherwise defined herein shall
have the meaning assigned to them in the Agreement.
(d) Entire Agreement. This Warrant, together with all documents referenced
herein, embody the entire agreement and understanding between the parties hereto
with respect to the subject matter hereof and supersedes all prior oral or
written agreements and understandings relating to the subject matter hereof. No
statement, representation, warranty, covenant or agreement of any kind not
expressly set forth in this Agreement shall affect, or be used to interpret,
change or restrict, the express terms and provisions of this Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized.
Dated: May 7th, 1998
TOP SOURCE TECHNOLOGIES, INC.
By: _____________________________________________
<PAGE>
8
EXHIBIT C
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION") OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"). THIS WARRANT MAY NOT BE EXERCISED BY OR ON
BEHALF OF ANY U.S. PERSON, UNLESS REGISTERED UNDER THE 1933 ACT, OR AN EXEMPTION
FROM SUCH REGISTRATION IS AVAILABLE. THIS WARRANT SHALL NOT CONSTITUTE AN OFFER
TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE WARRANT IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE MAY NOT BE SOLD,
PLEDGED, TRANSFERRED OR ASSIGNED BY OR TO ANY U.S. PERSON EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT AND UNDER APPLICABLE STATE
SECURITIES LAWS, OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE
PROVISIONS OF THE 1933 ACT AND UNDER PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS; AND IN THE CASE OF AN EXEMPTION, ONLY IF THE COMPANY HAS RECEIVED AN
OPINION FROM COUNSEL THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION OF THE
SECURITIES.
STOCK PURCHASE WARRANT
No. 2
TO PURCHASE 56,250 SHARES OF COMMON STOCK OF
TOP SOURCE TECHNOLOGIES, INC.
THIS CERTIFIES that, for value received, Gundyco in Trust for RRSP 550-98866-19,
located at, 4120 Yonge Street, Suite 416, Toronto, Ontario, Canada, M2P 1B8,
(the "Investor"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, at any time on or after May 7, 1998 and on or prior to
May 7, 2001 (the "Termination Date") but not thereafter, to subscribe for and
purchase from TOP SOURCE TECHNOLOGIES, INC., a corporation incorporated in the
State of Delaware (the "Company"), fifty six thousand, two hundred and fifty
(56,250) shares (the "Warrant Shares") of Common Stock, $.001 value per share of
the Company (the "Common Stock"). The purchase price of one share of Common
Stock (the "Exercise Price") under this Warrant shall be equal to $1.10. The
Exercise Price and the number of shares for which the Warrant is exercisable
shall be subject to adjustment as provided herein. This Warrant is being issued
in connection with the Subscription Agreement dated May 7th, 1998 (the
"Agreement") and is subject to its terms and conditions.
1. Title of Warrant. Prior to the expiration hereof and subject to compliance
with applicable laws, this Warrant and all rights hereunder are transferable, in
whole or in part, at the office or agency of the Company by the holder hereof in
person or by duly authorized attorney, upon surrender of this Warrant together
with the Assignment Form annexed hereto properly endorsed.
2. Authorization of Shares. The Company covenants that all shares of Common
Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant and full
payment of the Exercise Price, be duly authorized, validly issued, fully paid
and nonassessable and free from all taxes, liens and charges in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).
3. Exercise of Warrant. Except as provided in Section 11 herein, exercise of the
purchase rights represented by this Warrant may be made pursuant to the
Company's registration statement, referred to in the Registration Rights
Agreement, declared effective by the Securities and Exchange Commission (the
"Effective Date") as follows: (a) 22,500 shares commencing on the Effective
Date; (b) 11,250 shares commencing ninety (90) days after the Effective Date;
(c) 11,250 shares commencing one hundred and fifty (150) days after the
Effective Date; and (d) 11,250 shares commencing two hundred and ten (210) days
after the Effective Date, and all shares as set out in (a), (b), (c) and, (d)
ending before the close of business on the Termination Date, or such earlier
date on which this Warrant may terminate as provided in this Warrant, by the
surrender of this Warrant and the Notice of Exercise Form annexed hereto duly
executed, at the office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the registered holder hereof
at the address of such holder appearing on the books of the Company) and upon
payment of the Exercise Price of the shares thereby purchased; whereupon the
holder of this Warrant shall be entitled to receive a certificate for the number
of shares of Common Stock so purchased. Certificates for shares purchased
hereunder shall be delivered to the holder hereof within four (4) business days
after the date on which this Warrant shall have been exercised as aforesaid, or
be subject to the damages set forth in the Agreement. Payment of the Exercise
Price may be by certified check or cashier's check or by wire transfer to an
account designated by the Company in an amount equal to the Exercise Price
multiplied by the number of Warrant Shares.
4. No Fractional Shares or Script. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. Fractional
Shares shall be rounded down as provided for in Section 5(g) of the Certificate
of Designation.
5. Charges, Taxes and Expenses. Issuance of certificates for shares of Common
Stock upon the exercise of this Warrant shall be made without charge to the
holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; provided, however, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof, and provided further, that upon any transfer involved in the issuance or
delivery of any certificates for shares of Common Stock, the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
6. Closing of Books. Unless otherwise required by law or the principal trading
market for the Company's Common Stock, the Company will not close its
shareholder books or records in any manner which prevents the timely exercise of
this Warrant for a period of time in excess of five (5) trading days per year.
7. No Rights as Shareholder until Exercise. This Warrant does not entitle the
holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise thereof. Upon the surrender of this Warrant and
the payment of the aggregate Exercise Price, the Warrant Shares so purchased
shall be, and be deemed to be, issued to such holder as the record owner of such
shares as of the close of business on the later of the date of such surrender or
payment.
8. Assignment and Transfer of Warrant. This Warrant may be assigned by the
surrender of this Warrant and the Assignment Form annexed hereto duly executed
at the office of the Company (or such other office or agency of the Company as
it may designate by notice in writing to the registered holder hereof at the
address of such holder appearing on the books of the Company); provided,
however, that the Company may require, as a condition thereto, the payment of a
sum sufficient to reimburse it for any expenses of transfer incidental thereto
and that this Warrant may not be resold or otherwise transferred except (I) in a
transaction registered under the Securities Act of 1933 (the "Securities Act"),
or (ii) in a transaction pursuant to an exemption, if available, from such
registration and whereby, if requested by the Company, an opinion of counsel
reasonably satisfactory to counsel for the Company is obtained by the holder of
this Warrant to the effect that the transaction is so exempt.
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company represents and
warrants that upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of this Warrant certificate or
any stock certificate relating to the Warrant Shares, and in case of loss, theft
or destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of such Warrant or stock certificate, if
mutilated, the Company will make and deliver a new Warrant or stock certificate
of like tenor and dated as of such cancellation, in lieu of such Warrant or
stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday, Sunday or a legal holiday in the State of New York, then
such action may be taken or such right may be exercised on the next succeeding
day not a legal holiday.
11. Effect of Certain Events.
(a) If at any time the Company proposes (i) to sell or otherwise convey all or
substantially all of its assets or (ii) to effect a transaction (by merger or
otherwise) in which more than 50% of the voting power of the Company is disposed
of (collectively, a "Sale or Merger Transaction"), in which the consideration to
be received by the Company or its shareholders consists solely of cash, then the
Warrant shall terminate if the Warrant has not been exercised by the effective
date of such Sale or Merger transaction, the Company shall give the holder of
this Warrant thirty (30) days notice of such termination and of the proposed
effective date of the Sale or Merger transaction.
(b) In case the Company shall at any time effect a Sale or Merger Transaction in
which the consideration to be received by the Company or its shareholders
consists in whole or in part of consideration other than cash, the holder of
this Warrant shall have the right thereafter to purchase, by exercise of this
Warrant and payment of the aggregate Exercise Price in effect immediately prior
to such action, the kind and amount of shares and other securities and property
which it would have owned or have been entitled to receive after the happening
of such Sale or Merger transaction had this Warrant been exercised immediately
prior thereto.
(c) "Piggy-Back" Registration.
(i) The holder of this Warrant shall have the right to include all of the
Warrant Shares (the "Registrable Securities") as part of any registration of
securities filed by the Company (other than in connection with a transaction
contemplated by Rule 145(a) promulgated under the Securities Act or pursuant to
Forms S-4 or S-8) and must be notified in writing of such filing. The holder
shall have five (5) business days to notify the Company in writing as to whether
the Company is to include holder's Registrable Securities as part of the
registration; provided, however, that if any registration pursuant to this
Section shall be underwritten, in whole or in part, the Company may require that
the Registrable Securities requested for inclusion pursuant to this Section be
included in the underwriting on the same terms and conditions as the securities
other-wise being sold through the underwriters. If in the good faith judgment of
the underwriter of such offering only a limited number of Registrable Securities
should be included in such offering, or no such shares should be included, the
holder of such Registrable Securities, and any other selling stockholders, shall
be reduced, such reduction to be applied by excluding (on a pro rata basis)
Registrable Securities proposed to be sold by the holder of this Warrant and
shares proposed to be sold by all other persons. Those Registrable Securities
which are not included in an underwritten offering pursuant to the foregoing
provisions of this Section (and all other Registrable Securities held by the
selling stockholders) shall be withheld from the market by the Holders thereof
for a period, not to exceed ninety (90) days, which the underwriter may
reasonably determine-nine is necessary in order to effect such underwritten
offering, and the Holder shall sign any agreement to this effect requested by
such underwriter. Notwithstanding the foregoing provisions, the Company may
withdraw any registration statement without incurring any liability to the
holders of Registrable Securities.
(ii) The registration rights set forth in Section 11(c)(i) shall cease upon the
earliest of (A) the effective registration under the Securities Act of all of
the Registrable Securities and the disposal of such securities pursuant to such
registration, (B) registration under the Securities Act is no longer required
for the immediate public distribution of such security as a result of the
provisions of Rule 144 promulgated under the Securities Act, or (C) such
Registrable Securities cease to be outstanding.
12. Adjustments-of Exercise Price and Number of Warrant Shares. The number and
kind of securities purchasable upon the exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
happening of any of the following.
In case the Company shall (i) declare or pay a dividend in shares of Common
Stock or make a distribution in shares of Common Stock to holders of its
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock,
(iii) combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock or (iv) issue any shares of its capital stock in a
reclassification of the Common Stock, then the number of Warrant Shares
purchasable upon exercise of this Warrant immediately prior thereto shall be
adjusted so that the holder of this Warrant shall be entitled to receive the
kind and number of Warrant Shares or other securities of the Company which he
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof Upon each such adjustment of the kind and number of
Warrant Shares or other securities of the Company which are purchasable
hereunder, the holder of this Warrant shall thereafter be entitled to purchase
the number of Warrant Shares or other securities resulting from such adjustment
at an Exercise Price per such Warrant Share or other security obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of Warrant Shares purchasable pursuant hereto immediately prior to
such adjustment and dividing by the number of Warrant Shares or other securities
of the Company resulting from such adjustment. An adjustment made pursuant to
this paragraph shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event.
13. Voluntary Adjustment by the Company. The Company may at any time during the
term of this Warrant, reduce the then current Exercise Price to any amount and
for any period of time deemed appropriate by the Board of Directors of the
Company.
14. Notice of Adjustment. Whenever the number of Warrant Shares or number or
kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted, as herein provided, the Company shall
promptly mail by registered or certified mail, return receipt requested, to the
holder of this Warrant notice of such adjustment or adjustments setting forth
the number of Warrant Shares (and other securities or property) purchasable upon
the exercise of this Warrant and the Exercise Price of such Warrant Shares (and
other securities or property) after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made. Such notice, in absence of
manifest error, shall be conclusive evidence of the correctness of such
adjustment.
15. Authorized Shares. The Company covenants that during the period the Warrant
is outstanding, it will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of the Warrant Shares
upon the exercise of any purchase rights under this Warrant. The Company further
covenants that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant. The Company will take all
such reasonable action as may be necessary to assure that such Warrant Shares
may be issued as 'provided herein without violation of any applicable law or
regulation, or of any requirements of prove the NASDAQ Stock Market or any
domestic securities exchange upon which the Common Stock may be listed.
16. Miscellaneous.
(a) Issue Date, Jurisdiction. The provisions of this Warrant shall be construed
and shall be given effect in all respects as if it had been issued and delivered
by the Company on the date hereof This Warrant shall be binding upon any
successors or assigns of the Company. This Warrant shall constitute a contract
under the laws of the State of Delaware, without regard to its conflict of law,
principles or rules. This Agreement and any dispute, disagreement, or issue of
construction or interpretation arising hereunder whether relating to its
execution, its validity, the obligations provided herein or performance shall be
governed or interpreted according to the internal laws of the State of Delaware
without regard to choice of law considerations. The courts of the State of
Delaware shall have exclusive jurisdiction over any cause or controversy arising
under the terms of this Agreement or between the parties as the result of any
act taken or failure to act not taken by either party pursuant to this
Agreement.
(b) Restrictions. The holder hereof acknowledges that the Warrant Shares
acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.
(c) Modification and Waiver. This Warrant and any provisions hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
(d) Notices. Any notice, request or other document required or permitted to be
given or delivered to the holders hereof by the Company shall be delivered or
shall be sent by certified or registered mail, postage prepaid, to each such
holder at its address as shown on the Books of the Company or to the Company at
the address set forth in the Agreement.
(e) Capitalized Terms. All capitalized terms not otherwise defined herein shall
have the meaning assigned to them in the Agreement.
(d) Entire Agreement. This Warrant, together with all documents referenced
herein, embody the entire agreement and understanding between the parties hereto
with respect to the subject matter hereof and supersedes all prior oral or
written agreements and understandings relating to the subject matter hereof. No
statement, representation, warranty, covenant or agreement of any kind not
expressly set forth in this Agreement shall affect, or be used to interpret,
change or restrict, the express terms and provisions of this Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized.
Dated: May 7th, 1998
TOP SOURCE TECHNOLOGIES, INC.
By: _____________________________________________
<PAGE>
8
EXHIBIT C
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION") OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"). THIS WARRANT MAY NOT BE EXERCISED BY OR ON
BEHALF OF ANY U.S. PERSON, UNLESS REGISTERED UNDER THE 1933 ACT, OR AN EXEMPTION
FROM SUCH REGISTRATION IS AVAILABLE. THIS WARRANT SHALL NOT CONSTITUTE AN OFFER
TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE WARRANT IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE MAY NOT BE SOLD,
PLEDGED, TRANSFERRED OR ASSIGNED BY OR TO ANY U.S. PERSON EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT AND UNDER APPLICABLE STATE
SECURITIES LAWS, OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE
PROVISIONS OF THE 1933 ACT AND UNDER PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS; AND IN THE CASE OF AN EXEMPTION, ONLY IF THE COMPANY HAS RECEIVED AN
OPINION FROM COUNSEL THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION OF THE
SECURITIES.
STOCK PURCHASE WARRANT
No. 3
TO PURCHASE 20,500 SHARES OF COMMON STOCK OF
TOP SOURCE TECHNOLOGIES, INC.
THIS CERTIFIES that, for value received, H & H Securities Limited, located at,
205 Vesta Drive, Toronto, Ontario, Canada, M5P 3A1, (the "Investor"), is
entitled, upon the terms and subject to the conditions hereinafter set forth, at
any time on or after May 7, 1998 and on or prior to May 7, 2001 (the
"Termination Date") but not thereafter, to subscribe for and purchase from TOP
SOURCE TECHNOLOGIES, INC., a corporation incorporated in the State of Delaware
(the "Company"), twenty thousand, five hundred (20,500) shares (the "Warrant
Shares") of Common Stock, $.001 value per share of the Company (the "Common
Stock"). The purchase price of one share of Common Stock (the "Exercise Price")
under this Warrant shall be equal to $1.10. The Exercise Price and the number of
shares for which the Warrant is exercisable shall be subject to adjustment as
provided herein. This Warrant is being issued in connection with the
Subscription Agreement dated May 7th, 1998 (the "Agreement") and is subject to
its terms and conditions.
1. Title of Warrant. Prior to the expiration hereof and subject to compliance
with applicable laws, this Warrant and all rights hereunder are transferable, in
whole or in part, at the office or agency of the Company by the holder hereof in
person or by duly authorized attorney, upon surrender of this Warrant together
with the Assignment Form annexed hereto properly endorsed.
2. Authorization of Shares. The Company covenants that all shares of Common
Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant and full
payment of the Exercise Price, be duly authorized, validly issued, fully paid
and nonassessable and free from all taxes, liens and charges in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).
3. Exercise of Warrant. Except as provided in Section 11 herein, exercise of the
purchase rights represented by this Warrant may be made pursuant to the
Company's registration statement, referred to in the Registration Rights
Agreement, declared effective by the Securities and Exchange Commission (the
"Effective Date") as follows: (a) 8,200 shares commencing on the Effective Date;
(b) 4,100 shares commencing ninety (90) days after the Effective Date; (c) 4,100
shares commencing one hundred and fifty (150) days after the Effective Date; and
(d) 4,100 shares commencing two hundred and ten (210) days after the Effective
Date, and all shares as set out in (a), (b), (c) and, (d) ending before the
close of business on the Termination Date, or such earlier date on which this
Warrant may terminate as provided in this Warrant, by the surrender of this
Warrant and the Notice of Exercise Form annexed hereto duly executed, at the
office of the Company (or such other office or agency of the Company as it may
designate by notice in writing to the registered holder hereof at the address of
such holder appearing on the books of the Company) and upon payment of the
Exercise Price of the shares thereby purchased; whereupon the holder of this
Warrant shall be entitled to receive a certificate for the number of shares of
Common Stock so purchased. Certificates for shares purchased hereunder shall be
delivered to the holder hereof within four (4) business days after the date on
which this Warrant shall have been exercised as aforesaid, or be subject to the
damages set forth in the Agreement. Payment of the Exercise Price may be by
certified check or cashier's check or by wire transfer to an account designated
by the Company in an amount equal to the Exercise Price multiplied by the number
of Warrant Shares.
4. No Fractional Shares or Script. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. Fractional
Shares shall be rounded down as provided for in Section 5(g) of the Certificate
of Designation.
5. Charges, Taxes and Expenses. Issuance of certificates for shares of Common
Stock upon the exercise of this Warrant shall be made without charge to the
holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; provided, however, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof, and provided further, that upon any transfer involved in the issuance or
delivery of any certificates for shares of Common Stock, the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
6. Closing of Books. Unless otherwise required by law or the principal trading
market for the Company's Common Stock, the Company will not close its
shareholder books or records in any manner which prevents the timely exercise of
this Warrant for a period of time in excess of five (5) trading days per year.
7. No Rights as Shareholder until Exercise. This Warrant does not entitle the
holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise thereof. Upon the surrender of this Warrant and
the payment of the aggregate Exercise Price, the Warrant Shares so purchased
shall be, and be deemed to be, issued to such holder as the record owner of such
shares as of the close of business on the later of the date of such surrender or
payment.
8. Assignment and Transfer of Warrant. This Warrant may be assigned by the
surrender of this Warrant and the Assignment Form annexed hereto duly executed
at the office of the Company (or such other office or agency of the Company as
it may designate by notice in writing to the registered holder hereof at the
address of such holder appearing on the books of the Company); provided,
however, that the Company may require, as a condition thereto, the payment of a
sum sufficient to reimburse it for any expenses of transfer incidental thereto
and that this Warrant may not be resold or otherwise transferred except (I) in a
transaction registered under the Securities Act of 1933 (the "Securities Act"),
or (ii) in a transaction pursuant to an exemption, if available, from such
registration and whereby, if requested by the Company, an opinion of counsel
reasonably satisfactory to counsel for the Company is obtained by the holder of
this Warrant to the effect that the transaction is so exempt.
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company represents and
warrants that upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of this Warrant certificate or
any stock certificate relating to the Warrant Shares, and in case of loss, theft
or destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of such Warrant or stock certificate, if
mutilated, the Company will make and deliver a new Warrant or stock certificate
of like tenor and dated as of such cancellation, in lieu of such Warrant or
stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday, Sunday or a legal holiday in the State of New York, then
such action may be taken or such right may be exercised on the next succeeding
day not a legal holiday.
11. Effect of Certain Events.
(a) If at any time the Company proposes (i) to sell or otherwise convey all or
substantially all of its assets or (ii) to effect a transaction (by merger or
otherwise) in which more than 50% of the voting power of the Company is disposed
of (collectively, a "Sale or Merger Transaction"), in which the consideration to
be received by the Company or its shareholders consists solely of cash, then the
Warrant shall terminate if the Warrant has not been exercised by the effective
date of such Sale or Merger transaction, the Company shall give the holder of
this Warrant thirty (30) days notice of such termination and of the proposed
effective date of the Sale or Merger transaction.
(b) In case the Company shall at any time effect a Sale or Merger Transaction in
which the consideration to be received by the Company or its shareholders
consists in whole or in part of consideration other than cash, the holder of
this Warrant shall have the right thereafter to purchase, by exercise of this
Warrant and payment of the aggregate Exercise Price in effect immediately prior
to such action, the kind and amount of shares and other securities and property
which it would have owned or have been entitled to receive after the happening
of such Sale or Merger transaction had this Warrant been exercised immediately
prior thereto.
(c) "Piggy-Back" Registration.
(i) The holder of this Warrant shall have the right to include all of the
Warrant Shares (the "Registrable Securities") as part of any registration of
securities filed by the Company (other than in connection with a transaction
contemplated by Rule 145(a) promulgated under the Securities Act or pursuant to
Forms S-4 or S-8) and must be notified in writing of such filing. The holder
shall have five (5) business days to notify the Company in writing as to whether
the Company is to include holder's Registrable Securities as part of the
registration; provided, however, that if any registration pursuant to this
Section shall be underwritten, in whole or in part, the Company may require that
the Registrable Securities requested for inclusion pursuant to this Section be
included in the underwriting on the same terms and conditions as the securities
other-wise being sold through the underwriters. If in the good faith judgment of
the underwriter of such offering only a limited number of Registrable Securities
should be included in such offering, or no such shares should be included, the
holder of such Registrable Securities, and any other selling stockholders, shall
be reduced, such reduction to be applied by excluding (on a pro rata basis)
Registrable Securities proposed to be sold by the holder of this Warrant and
shares proposed to be sold by all other persons. Those Registrable Securities
which are not included in an underwritten offering pursuant to the foregoing
provisions of this Section (and all other Registrable Securities held by the
selling stockholders) shall be withheld from the market by the Holders thereof
for a period, not to exceed ninety (90) days, which the underwriter may
reasonably determine-nine is necessary in order to effect such underwritten
offering, and the Holder shall sign any agreement to this effect requested by
such underwriter. Notwithstanding the foregoing provisions, the Company may
withdraw any registration statement without incurring any liability to the
holders of Registrable Securities.
(ii) The registration rights set forth in Section 11(c)(i) shall cease upon the
earliest of (A) the effective registration under the Securities Act of all of
the Registrable Securities and the disposal of such securities pursuant to such
registration, (B) registration under the Securities Act is no longer required
for the immediate public distribution of such security as a result of the
provisions of Rule 144 promulgated under the Securities Act, or (C) such
Registrable Securities cease to be outstanding.
12. Adjustments-of Exercise Price and Number of Warrant Shares. The number and
kind of securities purchasable upon the exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
happening of any of the following.
In case the Company shall (i) declare or pay a dividend in shares of Common
Stock or make a distribution in shares of Common Stock to holders of its
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock,
(iii) combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock or (iv) issue any shares of its capital stock in a
reclassification of the Common Stock, then the number of Warrant Shares
purchasable upon exercise of this Warrant immediately prior thereto shall be
adjusted so that the holder of this Warrant shall be entitled to receive the
kind and number of Warrant Shares or other securities of the Company which he
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof Upon each such adjustment of the kind and number of
Warrant Shares or other securities of the Company which are purchasable
hereunder, the holder of this Warrant shall thereafter be entitled to purchase
the number of Warrant Shares or other securities resulting from such adjustment
at an Exercise Price per such Warrant Share or other security obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of Warrant Shares purchasable pursuant hereto immediately prior to
such adjustment and dividing by the number of Warrant Shares or other securities
of the Company resulting from such adjustment. An adjustment made pursuant to
this paragraph shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event.
13. Voluntary Adjustment by the Company. The Company may at any time during the
term of this Warrant, reduce the then current Exercise Price to any amount and
for any period of time deemed appropriate by the Board of Directors of the
Company.
14. Notice of Adjustment. Whenever the number of Warrant Shares or number or
kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted, as herein provided, the Company shall
promptly mail by registered or certified mail, return receipt requested, to the
holder of this Warrant notice of such adjustment or adjustments setting forth
the number of Warrant Shares (and other securities or property) purchasable upon
the exercise of this Warrant and the Exercise Price of such Warrant Shares (and
other securities or property) after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made. Such notice, in absence of
manifest error, shall be conclusive evidence of the correctness of such
adjustment.
15. Authorized Shares. The Company covenants that during the period the Warrant
is outstanding, it will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of the Warrant Shares
upon the exercise of any purchase rights under this Warrant. The Company further
covenants that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant. The Company will take all
such reasonable action as may be necessary to assure that such Warrant Shares
may be issued as 'provided herein without violation of any applicable law or
regulation, or of any requirements of prove the NASDAQ Stock Market or any
domestic securities exchange upon which the Common Stock may be listed.
16. Miscellaneous.
(a) Issue Date, Jurisdiction. The provisions of this Warrant shall be construed
and shall be given effect in all respects as if it had been issued and delivered
by the Company on the date hereof This Warrant shall be binding upon any
successors or assigns of the Company. This Warrant shall constitute a contract
under the laws of the State of Delaware, without regard to its conflict of law,
principles or rules. This Agreement and any dispute, disagreement, or issue of
construction or interpretation arising hereunder whether relating to its
execution, its validity, the obligations provided herein or performance shall be
governed or interpreted according to the internal laws of the State of Delaware
without regard to choice of law considerations. The courts of the State of
Delaware shall have exclusive jurisdiction over any cause or controversy arising
under the terms of this Agreement or between the parties as the result of any
act taken or failure to act not taken by either party pursuant to this
Agreement.
(b) Restrictions. The holder hereof acknowledges that the Warrant Shares
acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.
(c) Modification and Waiver. This Warrant and any provisions hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
(d) Notices. Any notice, request or other document required or permitted to be
given or delivered to the holders hereof by the Company shall be delivered or
shall be sent by certified or registered mail, postage prepaid, to each such
holder at its address as shown on the Books of the Company or to the Company at
the address set forth in the Agreement.
(e) Capitalized Terms. All capitalized terms not otherwise defined herein shall
have the meaning assigned to them in the Agreement.
(d) Entire Agreement. This Warrant, together with all documents referenced
herein, embody the entire agreement and understanding between the parties hereto
with respect to the subject matter hereof and supersedes all prior oral or
written agreements and understandings relating to the subject matter hereof. No
statement, representation, warranty, covenant or agreement of any kind not
expressly set forth in this Agreement shall affect, or be used to interpret,
change or restrict, the express terms and provisions of this Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized.
Dated: May 7th, 1998
TOP SOURCE TECHNOLOGIES, INC.
By: _____________________________________________
<PAGE>
8
EXHIBIT C
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION") OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"). THIS WARRANT MAY NOT BE EXERCISED BY OR ON
BEHALF OF ANY U.S. PERSON, UNLESS REGISTERED UNDER THE 1933 ACT, OR AN EXEMPTION
FROM SUCH REGISTRATION IS AVAILABLE. THIS WARRANT SHALL NOT CONSTITUTE AN OFFER
TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE WARRANT IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE MAY NOT BE SOLD,
PLEDGED, TRANSFERRED OR ASSIGNED BY OR TO ANY U.S. PERSON EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT AND UNDER APPLICABLE STATE
SECURITIES LAWS, OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE
PROVISIONS OF THE 1933 ACT AND UNDER PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS; AND IN THE CASE OF AN EXEMPTION, ONLY IF THE COMPANY HAS RECEIVED AN
OPINION FROM COUNSEL THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION OF THE
SECURITIES.
STOCK PURCHASE WARRANT
No. 4
TO PURCHASE 21,000 SHARES OF COMMON STOCK OF
TOP SOURCE TECHNOLOGIES, INC.
THIS CERTIFIES that, for value received, Intercontinental Holding Company Ltd.,
located at, 8351 Roswell Road, Suite 239, Atlanta, Georgia, 30350, U.S.A., (the
"Investor"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, at any time on or after May 7, 1998 and on or prior to
May 7, 2001 (the "Termination Date") but not thereafter, to subscribe for and
purchase from TOP SOURCE TECHNOLOGIES, INC., a corporation incorporated in the
State of Delaware (the "Company"), twenty one thousand (21,000) shares (the
"Warrant Shares") of Common Stock, $.001 value per share of the Company (the
"Common Stock"). The purchase price of one share of Common Stock (the "Exercise
Price") under this Warrant shall be equal to $1.10. The Exercise Price and the
number of shares for which the Warrant is exercisable shall be subject to
adjustment as provided herein. This Warrant is being issued in connection with
the Subscription Agreement dated May 7th, 1998 (the "Agreement") and is subject
to its terms and conditions.
1. Title of Warrant. Prior to the expiration hereof and subject to compliance
with applicable laws, this Warrant and all rights hereunder are transferable, in
whole or in part, at the office or agency of the Company by the holder hereof in
person or by duly authorized attorney, upon surrender of this Warrant together
with the Assignment Form annexed hereto properly endorsed.
2. Authorization of Shares. The Company covenants that all shares of Common
Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant and full
payment of the Exercise Price, be duly authorized, validly issued, fully paid
and nonassessable and free from all taxes, liens and charges in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).
3. Exercise of Warrant. Except as provided in Section 11 herein, exercise of the
purchase rights represented by this Warrant may be made pursuant to the
Company's registration statement, referred to in the Registration Rights
Agreement, declared effective by the Securities and Exchange Commission (the
"Effective Date") as follows: (a) 8,400 shares commencing on the Effective Date;
(b) 4,200 shares commencing ninety (90) days after the Effective Date; (c)4,200
shares commencing one hundred and fifty (150) days after the Effective Date; and
(d) 4,200 shares commencing two hundred and ten (210) days after the Effective
Date, and all shares as set out in (a), (b), (c) and, (d) ending before the
close of business on the Termination Date, or such earlier date on which this
Warrant may terminate as provided in this Warrant, by the surrender of this
Warrant and the Notice of Exercise Form annexed hereto duly executed, at the
office of the Company (or such other office or agency of the Company as it may
designate by notice in writing to the registered holder hereof at the address of
such holder appearing on the books of the Company) and upon payment of the
Exercise Price of the shares thereby purchased; whereupon the holder of this
Warrant shall be entitled to receive a certificate for the number of shares of
Common Stock so purchased. Certificates for shares purchased hereunder shall be
delivered to the holder hereof within four (4) business days after the date on
which this Warrant shall have been exercised as aforesaid, or be subject to the
damages set forth in the Agreement. Payment of the Exercise Price may be by
certified check or cashier's check or by wire transfer to an account designated
by the Company in an amount equal to the Exercise Price multiplied by the number
of Warrant Shares.
4. No Fractional Shares or Script. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. Fractional
Shares shall be rounded down as provided for in Section 5(g) of the Certificate
of Designation.
5. Charges, Taxes and Expenses. Issuance of certificates for shares of Common
Stock upon the exercise of this Warrant shall be made without charge to the
holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; provided, however, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof, and provided further, that upon any transfer involved in the issuance or
delivery of any certificates for shares of Common Stock, the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
6. Closing of Books. Unless otherwise required by law or the principal trading
market for the Company's Common Stock, the Company will not close its
shareholder books or records in any manner which prevents the timely exercise of
this Warrant for a period of time in excess of five (5) trading days per year.
7. No Rights as Shareholder until Exercise. This Warrant does not entitle the
holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise thereof. Upon the surrender of this Warrant and
the payment of the aggregate Exercise Price, the Warrant Shares so purchased
shall be, and be deemed to be, issued to such holder as the record owner of such
shares as of the close of business on the later of the date of such surrender or
payment.
8. Assignment and Transfer of Warrant. This Warrant may be assigned by the
surrender of this Warrant and the Assignment Form annexed hereto duly executed
at the office of the Company (or such other office or agency of the Company as
it may designate by notice in writing to the registered holder hereof at the
address of such holder appearing on the books of the Company); provided,
however, that the Company may require, as a condition thereto, the payment of a
sum sufficient to reimburse it for any expenses of transfer incidental thereto
and that this Warrant may not be resold or otherwise transferred except (I) in a
transaction registered under the Securities Act of 1933 (the "Securities Act"),
or (ii) in a transaction pursuant to an exemption, if available, from such
registration and whereby, if requested by the Company, an opinion of counsel
reasonably satisfactory to counsel for the Company is obtained by the holder of
this Warrant to the effect that the transaction is so exempt.
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company represents and
warrants that upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of this Warrant certificate or
any stock certificate relating to the Warrant Shares, and in case of loss, theft
or destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of such Warrant or stock certificate, if
mutilated, the Company will make and deliver a new Warrant or stock certificate
of like tenor and dated as of such cancellation, in lieu of such Warrant or
stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday, Sunday or a legal holiday in the State of New York, then
such action may be taken or such right may be exercised on the next succeeding
day not a legal holiday.
11. Effect of Certain Events.
(a) If at any time the Company proposes (i) to sell or otherwise convey all or
substantially all of its assets or (ii) to effect a transaction (by merger or
otherwise) in which more than 50% of the voting power of the Company is disposed
of (collectively, a "Sale or Merger Transaction"), in which the consideration to
be received by the Company or its shareholders consists solely of cash, then the
Warrant shall terminate if the Warrant has not been exercised by the effective
date of such Sale or Merger transaction, the Company shall give the holder of
this Warrant thirty (30) days notice of such termination and of the proposed
effective date of the Sale or Merger transaction.
(b) In case the Company shall at any time effect a Sale or Merger Transaction in
which the consideration to be received by the Company or its shareholders
consists in whole or in part of consideration other than cash, the holder of
this Warrant shall have the right thereafter to purchase, by exercise of this
Warrant and payment of the aggregate Exercise Price in effect immediately prior
to such action, the kind and amount of shares and other securities and property
which it would have owned or have been entitled to receive after the happening
of such Sale or Merger transaction had this Warrant been exercised immediately
prior thereto.
(c) "Piggy-Back" Registration.
(i) The holder of this Warrant shall have the right to include all of the
Warrant Shares (the "Registrable Securities") as part of any registration of
securities filed by the Company (other than in connection with a transaction
contemplated by Rule 145(a) promulgated under the Securities Act or pursuant to
Forms S-4 or S-8) and must be notified in writing of such filing. The holder
shall have five (5) business days to notify the Company in writing as to whether
the Company is to include holder's Registrable Securities as part of the
registration; provided, however, that if any registration pursuant to this
Section shall be underwritten, in whole or in part, the Company may require that
the Registrable Securities requested for inclusion pursuant to this Section be
included in the underwriting on the same terms and conditions as the securities
other-wise being sold through the underwriters. If in the good faith judgment of
the underwriter of such offering only a limited number of Registrable Securities
should be included in such offering, or no such shares should be included, the
holder of such Registrable Securities, and any other selling stockholders, shall
be reduced, such reduction to be applied by excluding (on a pro rata basis)
Registrable Securities proposed to be sold by the holder of this Warrant and
shares proposed to be sold by all other persons. Those Registrable Securities
which are not included in an underwritten offering pursuant to the foregoing
provisions of this Section (and all other Registrable Securities held by the
selling stockholders) shall be withheld from the market by the Holders thereof
for a period, not to exceed ninety (90) days, which the underwriter may
reasonably determine-nine is necessary in order to effect such underwritten
offering, and the Holder shall sign any agreement to this effect requested by
such underwriter. Notwithstanding the foregoing provisions, the Company may
withdraw any registration statement without incurring any liability to the
holders of Registrable Securities.
(ii) The registration rights set forth in Section 11(c)(i) shall cease upon the
earliest of (A) the effective registration under the Securities Act of all of
the Registrable Securities and the disposal of such securities pursuant to such
registration, (B) registration under the Securities Act is no longer required
for the immediate public distribution of such security as a result of the
provisions of Rule 144 promulgated under the Securities Act, or (C) such
Registrable Securities cease to be outstanding.
12. Adjustments-of Exercise Price and Number of Warrant Shares. The number and
kind of securities purchasable upon the exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
happening of any of the following.
In case the Company shall (i) declare or pay a dividend in shares of Common
Stock or make a distribution in shares of Common Stock to holders of its
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock,
(iii) combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock or (iv) issue any shares of its capital stock in a
reclassification of the Common Stock, then the number of Warrant Shares
purchasable upon exercise of this Warrant immediately prior thereto shall be
adjusted so that the holder of this Warrant shall be entitled to receive the
kind and number of Warrant Shares or other securities of the Company which he
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof Upon each such adjustment of the kind and number of
Warrant Shares or other securities of the Company which are purchasable
hereunder, the holder of this Warrant shall thereafter be entitled to purchase
the number of Warrant Shares or other securities resulting from such adjustment
at an Exercise Price per such Warrant Share or other security obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of Warrant Shares purchasable pursuant hereto immediately prior to
such adjustment and dividing by the number of Warrant Shares or other securities
of the Company resulting from such adjustment. An adjustment made pursuant to
this paragraph shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event.
13. Voluntary Adjustment by the Company. The Company may at any time during the
term of this Warrant, reduce the then current Exercise Price to any amount and
for any period of time deemed appropriate by the Board of Directors of the
Company.
14. Notice of Adjustment. Whenever the number of Warrant Shares or number or
kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted, as herein provided, the Company shall
promptly mail by registered or certified mail, return receipt requested, to the
holder of this Warrant notice of such adjustment or adjustments setting forth
the number of Warrant Shares (and other securities or property) purchasable upon
the exercise of this Warrant and the Exercise Price of such Warrant Shares (and
other securities or property) after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made. Such notice, in absence of
manifest error, shall be conclusive evidence of the correctness of such
adjustment.
15. Authorized Shares. The Company covenants that during the period the Warrant
is outstanding, it will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of the Warrant Shares
upon the exercise of any purchase rights under this Warrant. The Company further
covenants that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant. The Company will take all
such reasonable action as may be necessary to assure that such Warrant Shares
may be issued as 'provided herein without violation of any applicable law or
regulation, or of any requirements of prove the NASDAQ Stock Market or any
domestic securities exchange upon which the Common Stock may be listed.
16. Miscellaneous.
(a) Issue Date, Jurisdiction. The provisions of this Warrant shall be construed
and shall be given effect in all respects as if it had been issued and delivered
by the Company on the date hereof This Warrant shall be binding upon any
successors or assigns of the Company. This Warrant shall constitute a contract
under the laws of the State of Delaware, without regard to its conflict of law,
principles or rules. This Agreement and any dispute, disagreement, or issue of
construction or interpretation arising hereunder whether relating to its
execution, its validity, the obligations provided herein or performance shall be
governed or interpreted according to the internal laws of the State of Delaware
without regard to choice of law considerations. The courts of the State of
Delaware shall have exclusive jurisdiction over any cause or controversy arising
under the terms of this Agreement or between the parties as the result of any
act taken or failure to act not taken by either party pursuant to this
Agreement.
(b) Restrictions. The holder hereof acknowledges that the Warrant Shares
acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.
(c) Modification and Waiver. This Warrant and any provisions hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
(d) Notices. Any notice, request or other document required or permitted to be
given or delivered to the holders hereof by the Company shall be delivered or
shall be sent by certified or registered mail, postage prepaid, to each such
holder at its address as shown on the Books of the Company or to the Company at
the address set forth in the Agreement.
(e) Capitalized Terms. All capitalized terms not otherwise defined herein shall
have the meaning assigned to them in the Agreement.
(d) Entire Agreement. This Warrant, together with all documents referenced
herein, embody the entire agreement and understanding between the parties hereto
with respect to the subject matter hereof and supersedes all prior oral or
written agreements and understandings relating to the subject matter hereof. No
statement, representation, warranty, covenant or agreement of any kind not
expressly set forth in this Agreement shall affect, or be used to interpret,
change or restrict, the express terms and provisions of this Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized.
Dated: May 7th, 1998
TOP SOURCE TECHNOLOGIES, INC.
By: _____________________________________________
<PAGE>
8
EXHIBIT C
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION") OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"). THIS WARRANT MAY NOT BE EXERCISED BY OR ON
BEHALF OF ANY U.S. PERSON, UNLESS REGISTERED UNDER THE 1933 ACT, OR AN EXEMPTION
FROM SUCH REGISTRATION IS AVAILABLE. THIS WARRANT SHALL NOT CONSTITUTE AN OFFER
TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE WARRANT IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE MAY NOT BE SOLD,
PLEDGED, TRANSFERRED OR ASSIGNED BY OR TO ANY U.S. PERSON EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT AND UNDER APPLICABLE STATE
SECURITIES LAWS, OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE
PROVISIONS OF THE 1933 ACT AND UNDER PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS; AND IN THE CASE OF AN EXEMPTION, ONLY IF THE COMPANY HAS RECEIVED AN
OPINION FROM COUNSEL THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION OF THE
SECURITIES.
STOCK PURCHASE WARRANT
No. 5
TO PURCHASE 21,000 SHARES OF COMMON STOCK OF
TOP SOURCE TECHNOLOGIES, INC.
THIS CERTIFIES that, for value received, San Rafael Consulting Group, located
at, 130 Trellis Drive, San Rafael, California, 94903, U.S.A., (the "Investor"),
is entitled, upon the terms and subject to the conditions hereinafter set forth,
at any time on or after May 7, 1998 and on or prior to May 7, 2001 (the
"Termination Date") but not thereafter, to subscribe for and purchase from TOP
SOURCE TECHNOLOGIES, INC., a corporation incorporated in the State of Delaware
(the "Company"), twenty one thousand (21,000) shares (the "Warrant Shares") of
Common Stock, $.001 value per share of the Company (the "Common Stock"). The
purchase price of one share of Common Stock (the "Exercise Price") under this
Warrant shall be equal to $1.10. The Exercise Price and the number of shares for
which the Warrant is exercisable shall be subject to adjustment as provided
herein. This Warrant is being issued in connection with the Subscription
Agreement dated May 7th, 1998 (the "Agreement") and is subject to its terms and
conditions.
1. Title of Warrant. Prior to the expiration hereof and subject to compliance
with applicable laws, this Warrant and all rights hereunder are transferable, in
whole or in part, at the office or agency of the Company by the holder hereof in
person or by duly authorized attorney, upon surrender of this Warrant together
with the Assignment Form annexed hereto properly endorsed.
2. Authorization of Shares. The Company covenants that all shares of Common
Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant and full
payment of the Exercise Price, be duly authorized, validly issued, fully paid
and nonassessable and free from all taxes, liens and charges in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).
3. Exercise of Warrant. Except as provided in Section 11 herein, exercise of the
purchase rights represented by this Warrant may be made pursuant to the
Company's registration statement, referred to in the Registration Rights
Agreement, declared effective by the Securities and Exchange Commission (the
"Effective Date") as follows: (a) 21,000 shares commencing on the Effective
Date; (b) 4,200 shares commencing ninety (90) days after the Effective Date; (c)
4,200 shares commencing one hundred and fifty (150) days after the Effective
Date; and (d) 4,200 shares commencing two hundred and ten (210) days after the
Effective Date, and all shares as set out in (a), (b), (c) and, (d) ending
before the close of business on the Termination Date, or such earlier date on
which this Warrant may terminate as provided in this Warrant, by the surrender
of this Warrant and the Notice of Exercise Form annexed hereto duly executed, at
the office of the Company (or such other office or agency of the Company as it
may designate by notice in writing to the registered holder hereof at the
address of such holder appearing on the books of the Company) and upon payment
of the Exercise Price of the shares thereby purchased; whereupon the holder of
this Warrant shall be entitled to receive a certificate for the number of shares
of Common Stock so purchased. Certificates for shares purchased hereunder shall
be delivered to the holder hereof within four (4) business days after the date
on which this Warrant shall have been exercised as aforesaid, or be subject to
the damages set forth in the Agreement. Payment of the Exercise Price may be by
certified check or cashier's check or by wire transfer to an account designated
by the Company in an amount equal to the Exercise Price multiplied by the number
of Warrant Shares.
4. No Fractional Shares or Script. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. Fractional
Shares shall be rounded down as provided for in Section 5(g) of the Certificate
of Designation.
5. Charges, Taxes and Expenses. Issuance of certificates for shares of Common
Stock upon the exercise of this Warrant shall be made without charge to the
holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; provided, however, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof, and provided further, that upon any transfer involved in the issuance or
delivery of any certificates for shares of Common Stock, the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
6. Closing of Books. Unless otherwise required by law or the principal trading
market for the Company's Common Stock, the Company will not close its
shareholder books or records in any manner which prevents the timely exercise of
this Warrant for a period of time in excess of five (5) trading days per year.
7. No Rights as Shareholder until Exercise. This Warrant does not entitle the
holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise thereof. Upon the surrender of this Warrant and
the payment of the aggregate Exercise Price, the Warrant Shares so purchased
shall be, and be deemed to be, issued to such holder as the record owner of such
shares as of the close of business on the later of the date of such surrender or
payment.
8. Assignment and Transfer of Warrant. This Warrant may be assigned by the
surrender of this Warrant and the Assignment Form annexed hereto duly executed
at the office of the Company (or such other office or agency of the Company as
it may designate by notice in writing to the registered holder hereof at the
address of such holder appearing on the books of the Company); provided,
however, that the Company may require, as a condition thereto, the payment of a
sum sufficient to reimburse it for any expenses of transfer incidental thereto
and that this Warrant may not be resold or otherwise transferred except (I) in a
transaction registered under the Securities Act of 1933 (the "Securities Act"),
or (ii) in a transaction pursuant to an exemption, if available, from such
registration and whereby, if requested by the Company, an opinion of counsel
reasonably satisfactory to counsel for the Company is obtained by the holder of
this Warrant to the effect that the transaction is so exempt.
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company represents and
warrants that upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of this Warrant certificate or
any stock certificate relating to the Warrant Shares, and in case of loss, theft
or destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of such Warrant or stock certificate, if
mutilated, the Company will make and deliver a new Warrant or stock certificate
of like tenor and dated as of such cancellation, in lieu of such Warrant or
stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday, Sunday or a legal holiday in the State of New York, then
such action may be taken or such right may be exercised on the next succeeding
day not a legal holiday.
11. Effect of Certain Events.
(a) If at any time the Company proposes (i) to sell or otherwise convey all or
substantially all of its assets or (ii) to effect a transaction (by merger or
otherwise) in which more than 50% of the voting power of the Company is disposed
of (collectively, a "Sale or Merger Transaction"), in which the consideration to
be received by the Company or its shareholders consists solely of cash, then the
Warrant shall terminate if the Warrant has not been exercised by the effective
date of such Sale or Merger transaction, the Company shall give the holder of
this Warrant thirty (30) days notice of such termination and of the proposed
effective date of the Sale or Merger transaction.
(b) In case the Company shall at any time effect a Sale or Merger Transaction in
which the consideration to be received by the Company or its shareholders
consists in whole or in part of consideration other than cash, the holder of
this Warrant shall have the right thereafter to purchase, by exercise of this
Warrant and payment of the aggregate Exercise Price in effect immediately prior
to such action, the kind and amount of shares and other securities and property
which it would have owned or have been entitled to receive after the happening
of such Sale or Merger transaction had this Warrant been exercised immediately
prior thereto.
(c) "Piggy-Back" Registration.
(i) The holder of this Warrant shall have the right to include all of the
Warrant Shares (the "Registrable Securities") as part of any registration of
securities filed by the Company (other than in connection with a transaction
contemplated by Rule 145(a) promulgated under the Securities Act or pursuant to
Forms S-4 or S-8) and must be notified in writing of such filing. The holder
shall have five (5) business days to notify the Company in writing as to whether
the Company is to include holder's Registrable Securities as part of the
registration; provided, however, that if any registration pursuant to this
Section shall be underwritten, in whole or in part, the Company may require that
the Registrable Securities requested for inclusion pursuant to this Section be
included in the underwriting on the same terms and conditions as the securities
other-wise being sold through the underwriters. If in the good faith judgment of
the underwriter of such offering only a limited number of Registrable Securities
should be included in such offering, or no such shares should be included, the
holder of such Registrable Securities, and any other selling stockholders, shall
be reduced, such reduction to be applied by excluding (on a pro rata basis)
Registrable Securities proposed to be sold by the holder of this Warrant and
shares proposed to be sold by all other persons. Those Registrable Securities
which are not included in an underwritten offering pursuant to the foregoing
provisions of this Section (and all other Registrable Securities held by the
selling stockholders) shall be withheld from the market by the Holders thereof
for a period, not to exceed ninety (90) days, which the underwriter may
reasonably determine-nine is necessary in order to effect such underwritten
offering, and the Holder shall sign any agreement to this effect requested by
such underwriter. Notwithstanding the foregoing provisions, the Company may
withdraw any registration statement without incurring any liability to the
holders of Registrable Securities.
(ii) The registration rights set forth in Section 11(c)(i) shall cease upon the
earliest of (A) the effective registration under the Securities Act of all of
the Registrable Securities and the disposal of such securities pursuant to such
registration, (B) registration under the Securities Act is no longer required
for the immediate public distribution of such security as a result of the
provisions of Rule 144 promulgated under the Securities Act, or (C) such
Registrable Securities cease to be outstanding.
12. Adjustments-of Exercise Price and Number of Warrant Shares. The number and
kind of securities purchasable upon the exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
happening of any of the following.
In case the Company shall (i) declare or pay a dividend in shares of Common
Stock or make a distribution in shares of Common Stock to holders of its
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock,
(iii) combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock or (iv) issue any shares of its capital stock in a
reclassification of the Common Stock, then the number of Warrant Shares
purchasable upon exercise of this Warrant immediately prior thereto shall be
adjusted so that the holder of this Warrant shall be entitled to receive the
kind and number of Warrant Shares or other securities of the Company which he
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof Upon each such adjustment of the kind and number of
Warrant Shares or other securities of the Company which are purchasable
hereunder, the holder of this Warrant shall thereafter be entitled to purchase
the number of Warrant Shares or other securities resulting from such adjustment
at an Exercise Price per such Warrant Share or other security obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of Warrant Shares purchasable pursuant hereto immediately prior to
such adjustment and dividing by the number of Warrant Shares or other securities
of the Company resulting from such adjustment. An adjustment made pursuant to
this paragraph shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event.
13. Voluntary Adjustment by the Company. The Company may at any time during the
term of this Warrant, reduce the then current Exercise Price to any amount and
for any period of time deemed appropriate by the Board of Directors of the
Company.
14. Notice of Adjustment. Whenever the number of Warrant Shares or number or
kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted, as herein provided, the Company shall
promptly mail by registered or certified mail, return receipt requested, to the
holder of this Warrant notice of such adjustment or adjustments setting forth
the number of Warrant Shares (and other securities or property) purchasable upon
the exercise of this Warrant and the Exercise Price of such Warrant Shares (and
other securities or property) after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made. Such notice, in absence of
manifest error, shall be conclusive evidence of the correctness of such
adjustment.
15. Authorized Shares. The Company covenants that during the period the Warrant
is outstanding, it will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of the Warrant Shares
upon the exercise of any purchase rights under this Warrant. The Company further
covenants that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant. The Company will take all
such reasonable action as may be necessary to assure that such Warrant Shares
may be issued as 'provided herein without violation of any applicable law or
regulation, or of any requirements of prove the NASDAQ Stock Market or any
domestic securities exchange upon which the Common Stock may be listed.
16. Miscellaneous.
(a) Issue Date, Jurisdiction. The provisions of this Warrant shall be construed
and shall be given effect in all respects as if it had been issued and delivered
by the Company on the date hereof This Warrant shall be binding upon any
successors or assigns of the Company. This Warrant shall constitute a contract
under the laws of the State of Delaware, without regard to its conflict of law,
principles or rules. This Agreement and any dispute, disagreement, or issue of
construction or interpretation arising hereunder whether relating to its
execution, its validity, the obligations provided herein or performance shall be
governed or interpreted according to the internal laws of the State of Delaware
without regard to choice of law considerations. The courts of the State of
Delaware shall have exclusive jurisdiction over any cause or controversy arising
under the terms of this Agreement or between the parties as the result of any
act taken or failure to act not taken by either party pursuant to this
Agreement.
(b) Restrictions. The holder hereof acknowledges that the Warrant Shares
acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.
(c) Modification and Waiver. This Warrant and any provisions hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
(d) Notices. Any notice, request or other document required or permitted to be
given or delivered to the holders hereof by the Company shall be delivered or
shall be sent by certified or registered mail, postage prepaid, to each such
holder at its address as shown on the Books of the Company or to the Company at
the address set forth in the Agreement.
(e) Capitalized Terms. All capitalized terms not otherwise defined herein shall
have the meaning assigned to them in the Agreement.
(d) Entire Agreement. This Warrant, together with all documents referenced
herein, embody the entire agreement and understanding between the parties hereto
with respect to the subject matter hereof and supersedes all prior oral or
written agreements and understandings relating to the subject matter hereof. No
statement, representation, warranty, covenant or agreement of any kind not
expressly set forth in this Agreement shall affect, or be used to interpret,
change or restrict, the express terms and provisions of this Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized.
Dated: May 7th, 1998
TOP SOURCE TECHNOLOGIES, INC.
By: _____________________________________________
EXHIBIT 10.2
TERMINATION AGREEMENT AND GENERAL RELEASE
THIS TERMINATION AGREEMENT AND GENERAL RELEASE (this "Agreement") is
made and entered into as of March 20, 1998, by and between THERMO JARRELL ASH
CORPORATION, a Massachusetts corporation having a place of business at 8 East
Forge Parkway, Franklin, Massachusetts 02038 ("TJA"), and THERMO INSTRUMENT
SYSTEMS INC., a Delaware corporation having a place of business at 860 West
Airport Freeway, Suite 301, Hurst, Texas 76054 ("Thermo Instrument"), on the one
part, and TOP SOURCE INSTRUMENTS, INC. (formerly known as On-Site Analysis,
Inc.), a Georgia corporation having a place of business at 3125 Presidential
Drive, Suite 130, Atlanta, Georgia 30340 ("TSI"), and TOP SOURCE TECHNOLOGIES,
INC., a Delaware corporation having a place of business at 7108 Fairway Drive,
Suite 200, Palm Beach Gardens, Florida 33418 ("Top Source"), on the other part.
TJA, Thermo Instrument, TSI and Top Source are hereinafter sometimes
collectively referred to as the "Parties."
WITNESSETH:
WHEREAS, the Parties entered into an Agreement dated as of March 3,
1995, a copy of which is attached hereto as Exhibit A (the "Original
Agreement"), whereby the Parties agreed to develop, manufacture and market, upon
the terms and conditions set forth in the Original Agreement, an integrated
instrument combining an optical emission spectrometer with spark excitation and
a Fourier transform infrared spectrometer to be used for the analysis of mineral
oils, synthetic oils and hydraulic fluids (the "OSA"); and
WHEREAS, the Parties desire to terminate the Original Agreement upon
the terms and subject to the conditions more particularly set forth herein;
NOW, THEREFORE, for and in consideration of the premises and mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties hereto
agree as follows:
1. Termination of Original Agreement. The Parties hereby agree that the
Original Agreement shall be terminated effective as of March 31, 1998
(the "Termination Date"), as though such Termination Date were set
forth in the Original Agreement as the expiration date of the term
thereof. It is expressly understood and agreed that the termination of
the Original Agreement shall in no event be deemed a termination by TJA
pursuant to the provisions of Section 15.2.5 of the Original Agreement.
2. Security Deposit. On or before the Termination Date, TJA shall
deliver to TSI an amount equal to $285,000, representing a portion of
the Security Deposit currently held by TJA in accordance with Section
6.9 of the Original Agreement. From and after the Termination Date, the
balance of the Security Deposit in the amount of $365,000 shall be
retained by TJA as it sole and exclusive property.
3. Technical Contributions: From and after the Termination Date, TJA
and TSI shall each remain fully vested with all right, title and
interest (as owner, licensee or designee, as the case may be) in and to
its respective Technical Contributions (as defined in Section 1.14 of
the Original Agreement).
4. Thermo Marks. On or before the Termination Date, TSI shall remove
all trademarks, trade names, service marks and trade dress of TJA,
Thermo Instrument, Nicolet Instrument Corporation and/or Thermo Optek
Corporation (collectively, the "Thermo Marks") from all OSAs and
replacement parts therefor in the possession of TSI and/or Top Source
(the OSAs and replacement parts are hereinafter sometimes collectively
referred to as the "Products"). From and after the Termination Date,
TSI and Top Source shall cease all use of the Thermo Marks, including
without limitation in connection with the sale, leasing, licensing,
sublicensing, distribution or marketing of the Products (or related
services); provided, however, that TSI and Top Source agree not to
remove or obscure any notice of copyright, patent, trademark, trade
secret or restricted or limited rights which may be contained on the
Instrument Software (as defined in Section 1.3 of the Original
Agreement) and/or of TJA's Technical Contributions. It is further
understood and agreed that, from and after the Termination Date,
neither TSI nor Top Source shall identify TJA (or any parent,
subsidiary, affiliate or division of TJA) as the manufacturer of the
Products.
5. Existing Inventory. On or before the Termination Date, TJA shall
deliver to TSI the inventory of Products listed in Exhibit B attached
hereto and incorporated herein by this reference (the "Inventory"). The
Inventory is currently located at facilities of two of TJA's affiliates
in Grand Junction, Colorado and Madison, Wisconsin, respectively. The
Inventory will be shipped to the destination specified by TSI, F.O.B.
said facilities. TJA will select the carrier for shipment of the
Inventory, but in no event will TJA be deemed to assume any liability
in connection with such shipment nor will the carrier be deemed to be
the agent of TJA. TSI agrees to have a representative present at each
of the aforesaid facilities to oversee the delivery of the Inventory to
the carrier and to confirm that the Inventory so delivered is
consistent with that listed in Exhibit B hereto. Delivery of possession
of the Inventory to the carrier will constitute agreement by TSI that
the Inventory as delivered to the carrier is in conformance with the
list set forth in Exhibit B hereto. The Inventory will be insured in
transit at the expense of TSI. Title to and risk of loss of the
Inventory will pass to TSI upon delivery of possession of the Inventory
to the carrier. Any claims for damage to, or loss or misdelivery of,
the Inventory will be filed directly with the carrier by TSI. It is
expressly understood and agreed that the Inventory is being conveyed to
TSI on an "AS IS, WHERE IS" basis. TJA DISCLAIMS ALL WARRANTIES,
WHETHER EXPRESSED OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT TO THE
INVENTORY, INCLUDING WITHOUT LIMITATION ALL IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. TJA DOES NOT
WARRANT THAT THE INVENTORY IS ERROR-FREE OR WILL ACCOMPLISH ANY
PARTICULAR RESULT.
6. Survival.
6.1 Notwithstanding anything to the contrary contained herein,
the provisions of Section 3.1, Section 3.2.4, Section 3.3.2, Section 10.2,
Article 13, Article 14 and, to the extend related to the foregoing, Articles 16
and 17 of the Original Agreement, shall survive the termination of the Original
Agreement.
6.2 Solely with respect to OSAs and Inventory purchased form
TJA and paid for by TSI pursuant to the Original Agreement or this Agreement, as
the case may be, and solely in connection with the normal operation thereof, TSI
and Customers (as defined in Section 1.1 of the Original Agreement) shall have,
without payment of additional consideration, the continuing perpetual and
worldwide non-exclusive right and license to use, license and, with respect to
TSI only, sublicense, "AS IS, WHERE IS," the Instrument Software (as defined in
Section 1.3 of the Original Agreement) and Technical Contributions of TJA and to
install and reinstall such OSAs with existing or new Customers, all without
restriction except, (i) with respect to TSI, as provided in those Sections of
the Original Agreement which shall survive, in accordance with the provisions of
Subsection 6.1 above, the termination of the Original Agreement, and (ii) with
respect to any Customer, as provided for the benefit of TJA in any applicable
Customer Agreement (as defined in Article 12 of the Original Agreement). TJA
agrees to consent to the assignment by TSI of its rights under this Subsection
6.2 to any party which enters into a joint venture or similar relationship with
TSI or to any successor of TSI (including any third party which purchases all or
part of the assets of TSI), provided any such assignee executes an agreement, in
form acceptable to TJA, whereby said assignee agrees to be bound by the
restrictions imposed upon, and the indemnification and other applicable
obligations of, TSI pursuant to those Sections of the Original Agreement which
survive the termination of the Original Agreement.
7. Release.
7.1 TSI and Top Source each hereby releases, holds harmless
and forever discharges TJA, Thermo Instrument and their respective parents,
subsidiaries, affiliates, divisions, successors and assigns, including without
limitation Thermo Optek Corporation and Nicolet Instrument Corporation
(collectively, the "Thermo Parties"), of and from any and all past, present and
future actions, causes of action, rights, claims, demands, liabilities, losses,
costs, expenses and compensation (including without limitation claims for fraud,
breach of contract, breach of fiduciary duty, negligence, rescission,
restitution, compensatory damages, punitive damages, penalties, specific
performance or injunctive or declamatory relief), which TSI and/or Top Source
ever had, now has or may have against any of the Thermo Parties arising from or
in connection with the Original Agreement, including without limitation the
development, manufacture, marketing, sale, leasing, licensing, sublicensing or
distribution of the Products. Without in any way limiting the foregoing, it is
expressly understood and agreed that the Thermo Parties shall have no liability
for errors in, or other failures in or degradation of performance of, the
Instrument Software due to Year 2000 issues. Notwithstanding anything to the
contrary contained herein, it expressly understood and agreed that the foregoing
provisions of this Subsection 7.1 shall not apply to any liabilities or
obligations of TJA or Thermo Instrument under those provisions of the Original
Agreement which are expressly stated in Section 6 above to survive the
termination of the Original Agreement.
7.2 TJA and Thermo Instrument each hereby releases, holds
harmless and forever discharges TSI, Top Source, and their respective parents,
subsidiaries, affiliates, divisions, successors and assigns (collectively, the
"TSI Parties"), of an from any and all past, present and future actions, causes
of action, rights, claims, demands, liabilities, losses, costs, expenses and
compensation (including without limitation claims for fraud, breach of contract,
breach of fiduciary duty, negligence, rescission, restitution, compensatory
damages, punitive damages, penalties, specific performance or injunctive or
declaratory relief), which TJA and/or Thermo Instrument ever had, now has or may
have against any of the TSI Parties arising from or in connection with the
Original Agreement, including without limitation the development, manufacturer,
marketing, sale, leasing, licensing, sublicensing or distribution of the
Products. Notwithstanding anything to the contrary contained herein, it is
expressly understood and agreed that the foregoing provisions of this Subsection
7.2 shall not apply to any liabilities or obligations of TSI or Top Source under
those provisions of the Original Agreement which are expressly stated in Section
6 above to survive the termination of the Original Agreement.
7.3 Each of the Parties hereto acknowledges that (i) this
Agreement contains the resolution of a fully matured set of facts and each of
the Parties individually declares and represents that it is executing this
Agreement in reliance solely on its own judgment, belief and knowledge of the
facts surrounding the transactions described in this Agreement, and upon advice
of its legal counsel, (ii) this Agreement is made without reliance upon any
statement or representation not contained in this Agreement of any other of the
Parties to this Agreement or any representative, agent or attorney of any of the
other Parties to this Agreement, (iii) no promise, inducement or agreement not
expressed in this Agreement has been made to any of the Parties to this
Agreement and (iv) the terms and conditions contained in this Agreement are
contractual and not mere recitals.
7.4 Each of the Parties hereto represents, warrants and agrees
that in executing this Agreement, it does so with full knowledge of any and all
rights it may have with respect to the other Parties and that it has received,
or had the opportunity to receive, independent legal advice from its attorneys
with respect to the facts involved in the controversy resolved by this Agreement
and with regard to its rights and asserted rights arising out of such facts.
8. Notices. Whenever, by the terms of this Agreement, notice, demand or
other communication shall or may be given to any Party hereunder, the same shall
be in writing and addressed as follows:
Thermo Jarrell Ash Corporation
27 Forge Parkway
Franklin, MA 02038-3148
Attn: President
With copies to: Thermo Electron Corporation
81 Wyman Street
Waltham, MA 02254-9046
Attn: General Counsel
and
Thermo Optek Corporation
8 East Forge Parkway
Franklin, Massachusetts 02038-3148
Attn: President
If to Thermo Instrument: Thermo Instrument Systems Inc.
860 West Airport Freeway
Suite 301
Hurst, TX 76054
Attn: President
with a copy to: Thermo Electron Corporation
81 Wyman Street
Waltham, MA 02254-9046
Attn: General Counsel
If to one or more of Top Source Technologies, Inc.
TSI and 7108 Fairway Drive, Suite 200
Top Source: Palm Beach Gardens, FL 33418-3757
Attn: President
or to such other address or addresses as shall from time to time be designated
by written notice by any Party to the others as herein provided. All notices
shall be sent by registered or certified mail, postage pre-paid and return
receipt requested, or by Federal Express or other comparable courier service
providing proof of delivery, and shall be deemed duly given and received (i) if
mailed, on the third business day following the mailing thereof, or (ii) if sent
by courier service, the date of its receipt (or, if such day is not a business
day, the next succeeding business day).
9. Miscellaneous. Any and all rights and remedies which any of the
Parties may have under this Agreement, at law or in equity, shall be cumulative
and shall not be deemed inconsistent with each other, and any two or more of all
such rights and remedies may be exercised at the same time insofar as permitted
by law. No delay or omission on the part of any of the Parties to this Agreement
in requiring performance by any of the other Parties or in exercising any right
hereunder shall operate as a waiver of any provision hereof or of any right
hereunder, and the waiver, omission or delay in requiring performance or
exercising any right hereunder on any one occasion shall not be construed as a
bar to or waiver of such performance or right on any future occasion. This
Agreement shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts, without giving effect to its principles of
conflict of laws. This Agreement constitutes the entire agreement between the
Parties with respect to the subject matter hereof and shall not be supplemented,
amended, varied or modified in any manner except by an instrument in writing
signed by a duly authorized representative of each of the Parties. This
Agreement shall be binding upon and shall inure to the benefit of the Parties
hereto and their respective successors and assigns. The individuals executing
this Agreement hereby represent and warrant that they are empowered and duly
authorized to so execute this Agreement on behalf of the Parties they represent.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
under seal as of the date first set forth above.
TOP SOURCE INSTRUMENTS, INC. THERMO JARREL ASH CORPORATION
By: David Natan By: Robert J. Rosenthal_________
Name: David Natan____________ Name:Robert J. Rosenthal_____
Title: Vice President and_________ Title: President_____
Chief Financial Officer
TOP SOURCE TECHNOLOGIES, INC. THERMO INSTRUMENT SYSTEMS INC.
By: David Natan____________ By: _____________________________
Name: David Natan____________ Name: ___________________________
Title: Vice President and________ Title: President and CEO______
Chief Financial Officer
