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REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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BARRINGER TECHNOLOGIES INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 3829 84-0720473
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
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219 SOUTH STREET, NEW PROVIDENCE, NEW JERSEY 07974
(908) 665-8200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
STANLEY S. BINDER, PRESIDENT
BARRINGER TECHNOLOGIES INC.
219 SOUTH STREET, NEW PROVIDENCE, NEW JERSEY 07974
(908) 665-8200
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
COPIES TO:
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JOHN D. HOGOBOOM, ESQ. ARTHUR M. BORDEN, ESQ.
LOWENSTEIN, SANDLER, KOHL, FISHER & BOYLAN, P.A. ROSENMAN & COLIN LLP
65 LIVINGSTON AVENUE 575 MADISON AVENUE
ROSELAND, NEW JERSEY 07068 NEW YORK, NEW YORK 10022
(201) 992-8700 (212) 940-8790
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
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If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. / /
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED PER SECURITY(1) OFFERING PRICE(1) FEE
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Common Stock, $.01 par value........................ $8.00 $9,200,000 $2,788
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Common Stock Purchase Warrants...................... $.05 $57,500 $18
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Common Stock, $.01 par value, underlying Common
Stock Purchase Warrants(2)........................ $8.00 $4,600,000 $1,394
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Underwriter's Warrants.............................. $.0012 $120 $1
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Common Stock, $.01 par value, underlying
Underwriter's Warrants(2)......................... $8.00 $800,000 $243
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Common Stock Purchase Warrants underlying
Underwriter's Warrants(2)......................... $.05 $5,000 $2
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Common Stock, $.01 par value, underlying Common
Stock Purchase Warrants underlying Underwriter's
Warrants(2)....................................... $8.00 $400,000 $122
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933 on the basis of the
average of the high and low bid prices for a share of Common Stock on The
NASDAQ SmallCap Market on October 3, 1996.
(2) Pursuant to Rule 416, this Registration Statement also relates to (i) an
indeterminate number of additional shares of Common Stock issuable upon
exercise of the Warrants pursuant to anti-dilution provisions contained
therein, and (ii) an indeterminate number of additional shares of Common
Stock and Warrants issuable upon the exercise of the Underwriter's Warrants
pursuant to anti-dilution provisions contained therein.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such state.
SUBJECT TO COMPLETION, DATED OCTOBER 8, 1996
PROSPECTUS
LOGO
BARRINGER TECHNOLOGIES INC.
1,000,000 SHARES OF COMMON STOCK
AND
1,000,000 COMMON STOCK PURCHASE WARRANTS
Barringer Technologies Inc., a Delaware corporation (the "Company"), hereby
offers 1,000,000 shares (the "Shares") of common stock, $.01 par value per share
(the "Common Stock"), and 1,000,000 Common Stock Purchase Warrants (the
"Warrants"). The Shares and Warrants are sometimes hereinafter collectively
referred to as the "Securities." Each Warrant is exercisable for three years and
entitles the registered holder to purchase one-half of a share of Common Stock
at an exercise price of $ per share [120% of the initial offering price
per share] during the first year, $ per share [130% of such price]
during the second year and $ per share [140% of such price] during the
third year. The Warrant exercise price and the number of shares issuable upon
exercise of the Warrants are subject to adjustment under certain circumstances.
The Company may redeem outstanding Warrants commencing six months after the date
of this Prospectus on not less than 30 days notice at a price of $.25 per
Warrant if the closing bid price of the Common Stock averages in excess of 200%
of the applicable exercise price for a period of 30 days ending within 15 days
of the redemption notice date. The Shares and Warrants may only be purchased
together, but will be separately transferable immediately following the
completion of the Offering.
The Common Stock is traded on The NASDAQ SmallCap Market under the symbol
"BARR." The Company intends to apply to include the Warrants on The NASDAQ
SmallCap Market. On October 7, 1996, the closing sale price of the Common Stock
as reported by NASDAQ was $7.25 per share. See "Price Range of Common Stock."
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SEE "RISK FACTORS" ON PAGE 7 FOR A DISCUSSION OF CERTAIN RISK FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
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Per Share................................ $ $ $
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Per Warrant.............................. $ $ $
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Total(3)................................. $ $ $
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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933 (the
"Securities Act"). The Company also has agreed to issue warrants to the
Representative of the Underwriters to purchase 100,000 shares of Common
Stock and 100,000 Common Stock Purchase Warrants, in each case at an initial
exercise price of 120% of the initial offering price. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $475,000 and a
2% non-accountable expense allowance payable to the Representative of the
Underwriters. See "Underwriting."
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 150,000 additional shares of Common Stock and 150,000 Warrants solely to
cover over-allotments, if any. If such option is exercised in full, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Company will be $ , $ and $ , respectively.
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The Securities are being offered on a firm commitment basis by the
Underwriters named herein, subject to prior sale, when, as and if delivered to
and accepted by them subject to certain conditions. It is expected that
certificates for the Securities offered hereby will be available for delivery on
or about , 1996, at the office of Janney Montgomery Scott Inc., 26
Broadway, New York, New York.
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JANNEY MONTGOMERY SCOTT INC.
, 1996
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Photo #1
Shows a picture of the Company's IONSCAN(R) Model 400, a portable desk-top
instrument that utilizes a proprietary implementation of ion mobility
spectrometry technology to determine the presence or absence of targeted
compounds in a sample.
Photo #2
Shows a technician using a sampling cloth to collect particle samples from a
piece of carry-on luggage for testing with the Model 400 IONSCAN(R).
Photo #3
Shows a technician using a glove to collect particle samples from a piece of
carry-on luggage for testing with the Model 400 IONSCAN(R).
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AND THE WARRANTS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
NASDAQ IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934.
SEE "UNDERWRITING."
2
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AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and, in accordance therewith, files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and information
filed by the Company with the Commission can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, NW, Washington, D.C. 20549; and at the Commission's Regional Offices at
500 West Madison, Suite 1400, Chicago, Illinois 60661 and at 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at its principal
office at Room 1024, 450 Fifth Street, NW, Washington, D.C. 20549, at prescribed
rates. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding issuers, such as the
Company, that file electronically with the Commission and the address of such
Web site is http://www.sec.gov. The Common Stock is included in The NASDAQ
SmallCap Market, under the symbol BARR, and reports, proxy statements and other
information regarding the Company can be inspected at the offices of the
National Association of Securities Dealers, Inc. at 33 Whitehall Street, 10th
Floor, New York, New York 10004.
The Company has filed with the Commission a Registration Statement on Form
SB-2 (together with all amendments thereto, the "Registration Statement") under
the Securities Act with respect to the Securities offered hereby (the
"Offering"). This Prospectus does not contain all of the information set forth
in the Registration Statement and exhibits thereto, certain portions of which
have been omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the
Securities offered hereby reference is made to the Registration Statement and
related exhibits and to documents filed with the Commission. Any statements
contained herein concerning the provisions of any document are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement. Each such statement is
qualified in its entirety by such reference. Copies of the Registration
Statement and the exhibits thereto are on file at the offices of the Commission
and may be obtained, upon payment of the fee prescribed by the Commission, or
may be examined without charge at the public reference facilities of the
Commission described above.
FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. Such
statements include, but are not limited to, the anticipated growth in the demand
for the Company's products, the Company's opportunities to increase sales
through, among other things, the development of new applications, markets and
extension of its IONSCAN(R) products, the development of new IONSCAN(R)
products, the probability of the Company's success in the sales of its
IONSCAN(R) products in current markets, governmental regulations and directives
changing security requirements, liquidity and capital requirements and use of
proceeds.
Forward-looking statements are inherently subject to risks and
uncertainties, many of which can not be predicted with accuracy and some of
which might not even be anticipated. Future events and actual results, financial
and otherwise, could differ materially from those set forth in or contemplated
by the forward-looking statements herein. Important factors that could
contribute to such differences are set forth below under "Risk Factors,"
including, but not limited to, "History of Losses," "Cash Constraints,"
"Dependence on and Effects of Governmental Regulation," "Dependence on
IONSCAN(R) and Market Acceptance," "Dependence on New Product Development;
Technological Advancement" and "Competition."
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and Consolidated Financial Statements, including the Notes thereto,
appearing elsewhere in this Prospectus. Each prospective investor is urged to
read this Prospectus in its entirety. Unless otherwise indicated, all
information herein has been adjusted to give effect to the one-for-four reverse
split of the Common Stock effected on September 25, 1995 and assumes (i) no
exercise of the Warrants; (ii) no exercise of the Underwriters' over-allotment
option; (iii) no exercise of the Warrants issuable to the representative of the
Underwriters (the "Underwriter's Warrants"), and (iv) no exercise or conversion
of outstanding securities, including options, exercisable for or convertible
into Common Stock. See "Description of Capital Stock," "Description of Warrants"
and "Underwriting." Unless the context otherwise requires, all references in
this Prospectus to the Company refer to Barringer Technologies Inc. and its
subsidiaries.
THE COMPANY
Barringer Technologies Inc. (the "Company") is principally engaged in the
design, development, manufacture and sale of analytical instruments used for the
high sensitivity detection of trace amounts of plastic and other explosives and
illegal narcotics. The Company's principal product, the IONSCAN(R), is a
portable, desk-top instrument that utilizes a proprietary implementation of ion
mobility spectrometry ("IMS") technology to determine the presence or absence of
targeted compounds in a sample. The IONSCAN(R) can detect targeted substances in
amounts smaller than one-billionth of a gram in approximately six seconds. See
"Business -- IONSCAN(R) Technology."
The Company's customers are primarily governmental, security and law
enforcement agencies throughout the world, including the Federal Bureau of
Investigation (the "FBI"), the Drug Enforcement Agency (the "DEA"), the General
Services Administration (the "GSA"), the United States, French, and Canadian
customs services and various airports worldwide. Because of its high
sensitivity, the IONSCAN(R) is used both in lieu of and in conjunction with
other detection technologies, such as X-ray, computer aided tomography
("CATSCAN"), quadropole resonance and nuclear magnetic resonance imaging. As of
June 30, 1996, the Company had sold over 300 IONSCAN(R)s, and the Company
believes that, in terms of units sold, it is the world's leading supplier of
trace particle detection instruments. See "Business -- Overview."
IONSCAN(R)s have been sold for explosives detection applications primarily
outside the United States and for drug interdiction and detection both within
the United States and elsewhere. For example, the IONSCAN(R) is used in foreign
airports, on trains and at the Eurotunnel to check for explosives and by the
United States Coast Guard to check ships and cargo in U.S. territorial waters
for illegal narcotics. The Company believes that the security-related market for
the IONSCAN(R) is growing as a result of governmental actions, particularly in
the United States, which reflect heightened public safety concerns in the wake
of an increasing number of terrorist acts. Recently, Congress appropriated
$144,000,000 for the purchase of enhanced explosives detection equipment for use
at certain airports in the United States, and the Company believes that a
portion of such appropriation will be utilized for the acquisition of trace
particle detection equipment. The Company also believes that additional growth
will occur in the drug interdiction market for the IONSCAN(R) as a result of
recently reported increases in domestic drug usage, particularly among
teenagers. However, no assurance can be given as to the growth of either the
security-related market or the drug interdiction market for the IONSCAN(R).
The Company's objective is to strengthen its position as the leading
supplier of trace detection equipment by (i) further penetrating existing
markets for the IONSCAN(R) through aggressive pursuit of additional sales, (ii)
expanding the uses of the IONSCAN(R), particularly for security screening of
individuals and for process control and quality assurance in certain industrial
applications, and (iii) extending the capabilities and the potential uses of the
IONSCAN(R) for environmental, biological and chemical testing by, among other
things, combining the IMS technology used by the IONSCAN(R) with other existing
technologies, such as gas chromatography, and by developing a hand-held detector
utilizing the IONSCAN(R) technology. See "Business -- Strategy."
The Company believes that it is well positioned to implement its strategy
as a result of the large installed base of IONSCAN(R)s, the IONSCAN(R)'s
favorable field performance, its low price as compared to other available
detection equipment and its ease of use.
4
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THE OFFERING
SECURITIES OFFERED.............. 1,000,000 shares of Common Stock and
1,000,000 Warrants. See "Description of
Capital Stock" and "Description of Warrants."
The Shares and the Warrants may only be
purchased together, but will be separately
transferable immediately following the
completion of the Offering.
DESCRIPTION OF WARRANTS......... Each Warrant is exercisable for three years
and entitles the registered holder to
purchase one-half of a share of Common Stock
at an exercise price of $ per share
[120% of the initial offering price per
share] during the first year, $ per
share [130% of such price] during the second
year and $ per share [140% of such
price] during the third year. The Warrant
exercise price and the number of shares
issuable upon exercise of the Warrants are
subject to adjustment under certain
circumstances. The Company may redeem
outstanding Warrants commencing six months
after the date of this Prospectus on not less
than 30 days notice at a price of $.25 per
Warrant if the closing bid price of the
Common Stock averages in excess of 200% of
the applicable exercise price for a period of
30 days ending within 15 days of the
redemption notice date. See "Description of
Warrants."
COMMON STOCK OUTSTANDING BEFORE
OFFERING...................... 3,506,474 shares
COMMON STOCK OUTSTANDING AFTER
OFFERING...................... 4,506,474 shares(1)
USE OF PROCEEDS................. Net proceeds received from the Offering will
be used to fund product development, to repay
certain indebtedness, to expand the Company's
manufacturing and assembling capabilities and
for working capital and general corporate
purposes, including possible acquisitions and
joint ventures. See "Use of Proceeds" and
"Business -- Strategy."
NASDAQ SYMBOLS:
COMMON STOCK.................... BARR
WARRANTS (PROPOSED)............. BARRW
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(1) Excludes a total of 2,284,244 shares which will be reserved for issuance
upon completion of the Offering, consisting of (i) 500,000 shares of Common
Stock issuable upon exercise of the Warrants, (ii) 481,250 shares of Common
Stock issuable upon exercise of outstanding warrants, (iii) 463,750 shares
of Common Stock issuable upon exercise of outstanding stock options, (iv)
464,244 shares of Common Stock issuable upon conversion of the Company's
outstanding convertible securities, (v) 100,000 shares of Common Stock
issuable upon exercise of the Underwriter's Warrants, and 50,000 shares of
Common Stock issuable upon exercise of the Warrants underlying the
Underwriter's Warrants, and (vi) an aggregate of 225,000 shares of Common
Stock subject to the Underwriters' over-allotment option (collectively, the
"Reserved Shares").
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SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The summary consolidated financial information set forth below should be
read in conjunction with the Consolidated Financial Statements, including the
Notes thereto, appearing elsewhere in the Prospectus.
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SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
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1991 1992 1993 1994 1995 1995 1996
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STATEMENT OF OPERATIONS DATA(1):
Revenues from operations......... $ 1,963 $ 2,838 $7,770 $ 5,514 $ 6,374 $3,110 $5,012
Gross profit..................... 260 627 3,840 1,245 2,570 1,218 2,365
Operating income (loss).......... (3,105) (1,714) 541 (2,469) (886) (186) 667
Income (loss) from continuing
operations.................... (3,324) (1,763) 593 (2,633) (1,178) (356) 564
Income (loss) from operations
held for sale................. (339) (44) 2 68 351 55 --
Net Income (loss)................ (3,663) (1,807) 595 (2,565) (827) (301) 564
Preferred stock dividends........ (103) (160) (114) (108) (82) (51) (24)
Net Income (loss) attributable to
common stockholders........... (3,766) (1,967) 481 (2,673) (909) (352) 540
Income (loss) per common share
from continuing operations.... (1.84) (0.90) 0.20 (0.97) (0.39) (0.13) 0.15
Net income (loss) per common
share:
Primary....................... (2.02) (0.92) 0.20 (0.95) (0.28) (0.11) 0.16
Fully-diluted................. -- -- -- -- -- -- 0.15
Weighted average common shares
outstanding:
Primary....................... 1,862 2,135 2,570 2,827 3,283 3,060 3,483
Fully diluted................. -- -- -- -- -- -- 3,854
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JUNE 30, 1996
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ACTUAL AS ADJUSTED(2)
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BALANCE SHEET DATA:
Working capital............................ $ 940 $7,710
Current assets............................. 4,828 10,367
Total assets............................... 5,881 11,420
Current liabilities........................ 3,888 2,657
Long-term liabilities...................... 113 113
Stockholders' equity....................... 1,880 8,650
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(1) Amounts for all periods ending prior to December 31, 1995 reflect Barringer
Laboratories Inc. ("Labco") as a discontinued operation. The Company sold a
portion of its equity interest in Labco in December 1995. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations
-- Overview."
(2) As adjusted for the issuance and sale of the Securities offered hereby (at
an assumed initial offering price of $8.00 per Share and $.05 per Warrant),
after deducting the estimated underwriting discounts and estimated offering
expenses payable by the Company and the application of the net proceeds
therefrom. See "Use of Proceeds."
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RISK FACTORS
In addition to the other information contained in this Prospectus, the
following risk factors should be considered carefully in evaluating an
investment in the Securities offered hereby.
HISTORY OF LOSSES
The Company sustained net losses of $2,565,000 and $827,000 for the years
ended December 31, 1994 and 1995, respectively, and had an accumulated deficit
of $16,003,000 at June 30, 1996. Although the Company generated net income of
$564,000 for the first six months of 1996, there can be no assurance that the
Company will be able to sustain a profitable level of operations in any future
period.
CASH CONSTRAINTS
Historically, the Company has not generated net cash flow from operations
and, accordingly, has experienced periodic severe cash shortages. Although the
Company will seek to improve its cash flow through, among other things, the use
of a portion of the proceeds of this Offering and the implementation of its
business strategy, no assurance can be given that the Company will have
sufficient cash to implement such strategy or that implementation of such
strategy will enable the Company to satisfy its long-term cash requirements. See
"Business -- Strategy."
DEPENDENCE ON AND EFFECTS OF GOVERNMENTAL REGULATION
The Company's business is dependent upon purchases of IONSCAN(R)s by
governmental agencies. See "Government and Other Procurement Policies." While
the Company believes that certain of its governmental customers will continue to
purchase IONSCAN(R)s for explosives detection and drug interdiction
applications, growth in the Company's business will be driven in part by the
adoption of regulations or requirements in the aviation security market
resulting in the use of enhanced explosives detection systems, including trace
particle detection equipment. As a result of certain government initiatives in
the United States, including the recent report of the Aviation Safety and
Security Commission (the "Gore Commission"), the Company anticipates that such
regulations or requirements will be adopted in the United States in the near
future. Among other things, the initial Gore Commission report recommended that
the government purchase enhanced explosives detection equipment for deployment
at certain United States airports. In October 1996, Congress appropriated
approximately $1.1 billion to fund certain anti-terrorist programs in fiscal
1997, including the initial recommendations contained in the Gore Commission
report. It is anticipated that approximately $144,000,000 of such appropriation
will be used to purchase enhanced explosives detection equipment. There can be
no assurance that funding for the purchase of such equipment will be continued
in subsequent fiscal years or as to the level thereof. While the recent
government initiatives have contemplated the deployment of trace particle
detection equipment, such as the IONSCAN(R), a substantial amount of the
appropriated funds will be used to purchase equipment utilizing other
technologies, such as CATSCAN, enhanced X-ray, quadropole resonance and other
imaging techniques. Accordingly, there can be no assurance as to the amount that
will ultimately be spent on the purchase of trace particle detection equipment
or as to the number of IONSCAN(R)s that will actually be purchased. In addition,
there can be no assurance that the IONSCAN(R) will meet any certification or
other requirements that may be adopted in connection with such initiatives.
The Company anticipates that the aviation security market will undergo
significant technological changes in the future. As part of its oversight of the
domestic aviation industry, the Federal Aviation Administration (the "FAA")
sponsors research in the area of enhanced explosives detection technologies.
During the last five years, the FAA has spent approximately $150,000,000 on such
research and development activities. The FAA's sponsorship covers a wide range
of areas, such as imaging technologies, development of bomb-resistant containers
and trace detection methods including those developed by the Company and other
entities. The Gore Commission recommended dramatically increasing the amount
spent on research and development of enhanced explosives detection technologies
and Congress recently increased the FAA's budget for such research and
development activities in fiscal 1997. As a result of these initiatives, the
Company anticipates that new technology will be introduced into the aviation
security market in the future. While the Company
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believes that its IONSCAN(R) functions at a state-of-the-art level, there can be
no assurance that the Company will be able to maintain its present position in
this market. See "Dependence on New Product Development; Technological
Advancement."
GOVERNMENT AND OTHER PROCUREMENT POLICIES
The Company's principal customers are governmental agencies and law
enforcement entities that are subject to budgetary processes and expenditure
constraints. Budgetary allocations for detection equipment are dependent, in
part, upon governmental policies which fluctuate from time to time in response
to political and other factors. A reduction of funding for drug interdiction and
security efforts could materially and adversely affect the Company's business,
financial condition and results of operations.
Moreover, although the Company's sales are not seasonal in nature,
governmental agencies and certain of the Company's other customers expend unused
budgeted funds at the end of their respective fiscal years, causing the
Company's sales to be higher during such periods. Since the Company recognizes
substantially all of the revenue from a sale upon shipment, and since the
recognition of revenue from the sale of relatively few IONSCAN(R)s may
substantially impact the Company's profitability during any period, the impact
of these budgetary constraints on the delivery date of a relatively few units
could significantly affect the Company's quarterly results.
DEPENDENCE ON IONSCAN(R) AND MARKET ACCEPTANCE
The Company's future profitability is substantially dependent on the
Company's ability to successfully market the IONSCAN(R). While the Company
believes that significant markets exist for its IONSCAN(R) technology, there can
be no assurance that such markets will develop as the Company expects or that
the Company will be able to capitalize on such market development. Similarly,
there can be no assurance that any markets that do develop will be sustained.
DEPENDENCE ON NEW PRODUCT DEVELOPMENT; TECHNOLOGICAL ADVANCEMENT
The Company's success is dependent upon its ability to continue to enhance
the IONSCAN(R) and to develop and introduce in a timely manner new IONSCAN(R)
products that incorporate technological advances, keep pace with evolving
industry standards and respond to customer requirements. There can be no
assurance that the Company will be successful in developing and marketing
enhancements to the IONSCAN(R) or new IONSCAN(R) products on a timely basis or
that any new or enhanced IONSCAN(R) products will adequately address the
changing needs or preferences of the marketplace. If the Company is unable to
develop and introduce new products or enhancements in a timely manner in
response to changing market conditions or customer requirements, the Company's
business and operating results would be materially adversely affected.
In addition, from time to time the Company or its present or potential
competitors may announce new products, capabilities or technologies that have
the potential to replace or shorten the life spans of the Company's existing
products. Announcements of currently planned or other new products may cause
customers to delay their purchasing decisions in anticipation of such products,
as occurred in late 1994 when the Company introduced the Model 400 IONSCAN(R).
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations." Such delays could have a material adverse effect on the Company's
business, results of operations and financial condition.
LACK OF PROPRIETARY TECHNOLOGY
The Company believes that its implementation of IMS technology in the
IONSCAN(R) is proprietary to the Company. The Company has an exclusive license
from the Canadian government for certain technology used in the IONSCAN(R). See
"Business -- Patents, Trademarks and Proprietary Rights." In addition, the
Company has a number of patents covering certain aspects of the IONSCAN(R).
However, the basic IMS technology is not proprietary and is available in the
public domain. Accordingly, present and potential competitors could use such
technology to duplicate the performance of the IONSCAN(R). However,
8
<PAGE> 10
the Company believes that such competitors could not readily replicate the
IONSCAN(R)'s performance and that any attempt to do so would require substantial
time and resources.
COMPETITION
The Company competes with other entities, a number of which have
significantly greater financial, marketing and other resources than the Company.
In particular, the Company competes for governmental expenditures with equipment
manufacturers utilizing other types of detection technologies, including
CATSCAN, enhanced X-ray and quadropole resonance, as well as with other forms of
trace particle detection technology, such as gas chromatography and
chemoluminescence detection. As a result of recent governmental initiatives, the
Company anticipates that additional technologies will be developed and that new
competitors will enter the Company's markets. See "Dependence on and Effect of
Governmental Regulation." While the Company believes that it competes
effectively in its principal markets, there can be no assurance that the Company
will maintain its competitive position.
NONCOMPLIANCE UNDER CREDIT FACILITY
The Company's principal subsidiary, Barringer Research Ltd. ("BRL"), is a
party to a credit facility (the "Facility") with the Toronto-Dominion Bank (the
"Bank") which the Company intends to repay in full with a portion of the net
proceeds of the Offering. See "Use of Proceeds." From time to time, BRL has not
been in compliance with the terms of the Facility. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
RETENTION OF AND DEPENDENCE ON KEY PERSONNEL
The Company's success will depend, in part, on its ability to retain the
services of its key personnel, including management and scientific employees,
who are and will continue to be instrumental in the development and management
of the Company's business. Although the Company has entered into an employment
agreement with its Chief Executive Officer and expects to enter into employment
agreements with certain of its other senior executives, the loss of the services
of one or more of the Company's key employees could have a material adverse
effect on the Company.
WARRANTY CLAIMS
The Company generally provides a one-year parts and labor warranty on each
IONSCAN(R). Although the Company has not experienced significant warranty
claims, there can be no assurance that such claims will not increase as the
Company's sales increase. A material increase in warranty claims could have a
material adverse effect on the Company's business, results of operations and
financial condition.
POTENTIAL PRODUCT LIABILITY INSURANCE LIMITS
The Company currently maintains product liability insurance in the amount
of $5 million per occurrence. The Company's insurance policy covers certain
claims and the cost of legal fees involved in the defense of such claims, which
are either covered under the policy or alleged in such a manner so as to invoke
the insurer's duty to defend the Company. No significant product liability
claims have been asserted or, to the knowledge of the Company's management,
threatened against the Company to date. The Company believes that, as the
Company distributes more products into the marketplace and expands its product
lines, the Company's exposure to potential product liability claims and
litigation arising from injuries and other damages allegedly caused by the
improper functioning or design of its IONSCAN(R) products will occur and may
increase. There can be no assurance that the Company's current level of
insurance will be sufficient to protect the business and assets of the Company
from all claims, nor can any assurance be given that the Company will be able to
maintain the existing coverage or additional coverage at commercially reasonable
rates. To the extent product liability losses are beyond the limits or scope of
the Company's insurance coverage, the Company could experience a materially
adverse effect on its business, results of operations and financial condition.
9
<PAGE> 11
CURRENCY FLUCTUATIONS
A portion of the Company's revenues and expenses are denominated in foreign
currencies. As a result, the Company is exposed to a certain degree of exchange
rate risk. The Company currently does not hedge its foreign exchange exposure.
To date, the Company has not experienced any material loss as a result of
currency fluctuations. However, there can be no assurance that the Company will
not experience material losses in the future as a result of currency
fluctuations.
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, 4,506,474 shares of Common Stock will be
outstanding (4,656,474 shares, assuming exercise of the Underwriters'
over-allotment option). Up to 500,000 additional shares of Common Stock (575,000
shares, assuming exercise of the Underwriters' overallotment option) will be
issuable upon the conversion of the Warrants offered hereby. 623,164 of the
shares that will be outstanding upon consummation of the Offering are held by
officers, directors and other affiliates of the Company, all of which are freely
tradeable, subject to the lock-up described below. An additional 1,025,292
shares of Common Stock are issuable to such officers, directors and other
affiliates upon the conversion or exercise of outstanding securities, including
stock options. The Company recently registered for resale 967,042 shares of
Common Stock held by or issuable to officers, directors and other affiliates of
the Company upon the exercise or conversion of outstanding securities which had
previously been restricted. The Company also intends, in the near future, to
register for resale an additional 414,500 restricted shares of Common Stock
issuable upon exercise of options previously granted to officers and directors.
Thereafter, all 1,381,542 of such shares will be generally available for sale in
the open market by the holders thereof.
The Company can not predict the effect, if any, that sales of additional
shares of Common Stock or the availability of shares for future sale will have
on the market price of the Common Stock or the Warrants. Sale in the public
market of substantial amounts of Common Stock (including shares issued upon the
exercise or conversion of outstanding securities), or the perception that such
sales could occur, could adversely affect prevailing market prices for the
Common Stock or the Warrants. Such sales also may make it more difficult for the
Company to sell equity securities or equity-related securities in the future at
a time and price that the Company deems appropriate. It is expected that the
officers and directors of the Company, who hold an aggregate of 681,934 shares
of Common Stock (including shares issuable upon the exercise or conversion of
outstanding securities), will agree with the Underwriters not to offer or sell,
directly or indirectly, any securities of the Company in the public market for a
period of 180 days after the date of this Prospectus, subject to certain
exceptions, without the prior written consent of Janney Montgomery Scott Inc.
See "Description of Capital Stock -- Shares Eligible For Future Sale" and
"Underwriting."
VOLATILITY OF COMMON STOCK PRICE
Prior to the Offering, there have been significant fluctuations in the
trading price of the Common Stock. No assurance can be given that such
volatility will not continue following the completion of the Offering. See
"Price Range of Common Stock."
DETERMINATION OF WARRANT EXERCISE PRICE
The exercise price of the Warrants has been set at a premium to the
existing market price of the Common Stock and bears no relationship to any
objective criteria of future value and, accordingly, should in no event be
regarded as an indication of any future market price of the Securities offered
hereby.
ABSENCE OF TRADING MARKET FOR THE WARRANTS
There currently is no trading market for the Warrants. Although the Company
intends to apply for listing of the Warrants on the NASDAQ SmallCap Market,
there can be no assurance that an active market will develop for the Warrants
or, if developed, that it will be maintained. The price for the Warrants is
expected to be directly related to the market price for the Common Stock. The
market price of the Common Stock and thus the price for the Warrants are likely
to be subject to significant fluctuation in response to variations in
10
<PAGE> 12
quarterly results of operations, general trends in the market place and other
factors, many of which are not within the Company's control.
UNDERWRITER'S WARRANTS
In connection with the Offering, the Company has agreed to sell to Janney
Montgomery Scott Inc., the representative of the Underwriters (the
"Representative"), the Underwriter's Warrants pursuant to which the
Representative will have the right to purchase from the Company 100,000 shares
of Common Stock and 100,000 Warrants. The Underwriter's Warrants are exercisable
with respect to the Common Stock for a period of four years commencing one year
after the date of this Prospectus at varying exercise prices and with respect to
the Warrants underlying the Underwriter's Warrants for a period of two years
following such one year period at varying exercise prices. See "Underwriting."
The Underwriter's Warrants, and the Warrants issuable upon exercise thereof,
afford the holders thereof the opportunity, at nominal cost, to profit from a
rise in the market price of the Common Stock, which may adversely affect the
terms upon which the Company could issue additional shares of Common Stock
during the exercise period of the Underwriter's Warrants. Additionally, the
holders of the Underwriter's Warrants, and the Warrants issuable upon exercise
thereof, will most likely exercise the Underwriter's Warrants and the Warrants
issuable upon exercise thereof at a time when the Company could obtain capital
from other sources on terms more favorable than those contained in the
Underwriter's Warrants.
CERTAIN CHARTER PROVISIONS
The Company currently has 7,000,000 shares of Common Stock authorized for
issuance. Upon completion of the Offering, the Company will have 4,506,474
shares of Common Stock outstanding (4,656,474 shares, assuming full exercise of
the Underwriters' over-allotment option). An additional 2,059,244 shares of
Common Stock (2,134,244 shares, assuming full exercise of the Underwriters'
over-allotment option) will be reserved for issuance upon the conversion or
exercise of outstanding securities of the Company. The Company intends to seek
stockholder approval at its next annual meeting of stockholders to increase the
number of shares of Common Stock the Company is authorized to issue. In the
event that the authorized number of shares of Common Stock is not increased, the
Company's ability to issue additional shares of capital stock, including in
connection with acquisitions and subsequent financings, would be significantly
restricted.
The Company's Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), contains provisions which require the favorable vote of the
holders of not less than 80% of the outstanding shares of Common Stock for the
approval of any merger, consolidation or other combination with, or sale, lease
or exchange of all or substantially all of the assets of the Company to, another
entity holding more than 10% of the Company's outstanding voting equity
securities or any affiliate of such entity. These provisions could discourage
potential acquisition proposals, delay or prevent a change in control of the
Company and limit the price that certain investors might be willing to pay in
the future for shares of the Common Stock.
The Board of Directors of the Company is empowered to issue shares of
preferred stock without stockholder action. The existence of this "blank check"
preferred stock could render more difficult or discourage an attempt to obtain
control of the Company by means of a tender offer, merger, proxy contest or
otherwise and may adversely affect the prevailing market price of the Common
Stock. The Company currently has no plans to issue additional shares of
preferred stock. In addition, Section 203 of the Delaware General Corporation
Law prohibits certain persons from engaging in business combinations with the
Company. See "Description of Capital Stock."
11
<PAGE> 13
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Securities offered
hereby are estimated to be approximately $6,770,000 ($7,857,000 if the
Underwriter's over-allotment option is exercised in full) assuming an initial
offering price of $8.00 per Share and $.05 per Warrant after deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by the Company. Such proceeds are intended to be applied approximately as
follows:
- $4,000,000 for product development, including research and
development, tooling and drawing expenses and product testing (see
"Business -- Strategy");
- up to $1,000,000 for repayment of the Company's 6% Subordinated
Convertible Debentures due 1997 (the "Debentures"), to the extent not
converted as described below;
- up to $700,000 for repayment of the outstanding indebtedness under
the Facility (see "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital
Resources");
- up to $700,000 for repayment of BRL's loan (the "ODC Loan") from the
Ontario Development Corporation ("ODC") (see "Management's Discussion
and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources");
- $300,000 for expansion of the Company's manufacturing and assembling
capabilities (see "Business -- Manufacturing and Assembly"); and
- the balance for general corporate purposes, including additions to
working capital and inventory.
The Company issued $1,000,000 of the Debentures in July 1996. The
Debentures bear interest at the rate of 6% per annum, are presently convertible
into shares of Common Stock at a conversion rate of $2.75, and mature 30 days
after the consummation of the Offering unless converted prior thereto. Because
the conversion rate of the Debentures is substantially lower than the current
per share price of the Common Stock, the Company anticipates that substantially
all of the Debentures will be converted into shares of Common Stock. Any
Debentures not so converted will be repaid with a portion of the net proceeds of
the Offering. $300,000 of the net proceeds of the Debentures were utilized to
repay the Company's 12 1/2% convertible subordinated debentures due 1996 (the
"Old Debentures"), and the remaining proceeds were added to working capital. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
The Facility bears interest at a variable rate (8% at June 30, 1996) equal
to 1 1/2% above the Bank's prime lending rate, although from time to time
certain amounts thereunder have borne interest at a default rate of 21%. See
Note 5 to Consolidated Financial Statements. Borrowings under the Facility are
payable upon demand and have been used for working capital, including
manufacturing and inventory requirements.
The ODC Loan bears interest at a variable rate set quarterly by ODC, which
was 10% at June 30, 1996, and matures on April 30, 1997, subject to renewal.
Borrowings under the ODC Loan have been used to support Canadian export, sales
and related production and receivables financing.
A portion of the net proceeds of the Offering may be used to make future
strategic acquisitions or to invest in joint ventures, although currently the
Company has no agreement, understanding or commitment with respect to any
acquisition, investment or joint venture.
Pending the applications described above, the Company will invest the
proceeds principally in short-term bank certificates of deposit, highly rated
short-term debt securities, United States governmental obligations, money market
instruments or other highly rated interest-bearing investments with maturities
of less than one year.
12
<PAGE> 14
PRICE RANGE OF COMMON STOCK
The Common Stock is traded in the over-the-counter market and quoted on The
NASDAQ SmallCap Market under the symbol BARR. The Company intends to apply to
include the Warrants in The NASDAQ SmallCap Market. The following table sets
forth, for each period indicated, the high and low bid prices for the Common
Stock as reported on The NASDAQ SmallCap Market after giving effect to the
one-for-four reverse stock split effected September 25, 1995. Such prices
reflect inter-dealer prices, without retail mark-up, mark-down or commissions
and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
HIGH LOW
------ -----
<S> <C> <C>
1994
First Quarter........................................... $11.24 $9.00
Second Quarter.......................................... 9.24 6.00
Third Quarter........................................... 6.76 4.00
Fourth Quarter.......................................... 4.52 2.00
1995
First Quarter........................................... $ 6.88 $1.25
Second Quarter.......................................... 5.00 2.00
Third Quarter........................................... 4.25 2.25
Fourth Quarter.......................................... 3.25 0.50
1996
First Quarter........................................... $ 0.56 $0.31
Second Quarter.......................................... 4.19 0.44
Third Quarter........................................... 13.88 2.88
Fourth Quarter (through October 7, 1996)................ 8.38 7.19
</TABLE>
On October 7, 1996, the last reported sale price of the Common Stock was
$7.25 per share. As of August 26, 1996, the Company had approximately 965
stockholders of record.
DIVIDEND POLICY
Since inception, the Company has not paid cash dividends on its Common
Stock. The Company currently intends to retain future earnings to support its
growth strategy and does not anticipate paying dividends in the foreseeable
future. Payment of future dividends, if any, will be at the discretion of the
Company's Board of Directors after taking into account various factors,
including the Company's financial condition, results of operations, current and
anticipated cash needs and plans for expansion. The Company is prohibited from
paying cash dividends on the Common Stock unless full cumulative dividends have
been paid or set aside for payment on the Company's Class A Convertible
Preferred Stock and Class B Convertible Preferred Stock at an annual rate of
$.16 per share, which dividends, at the option of the Company, are payable in
cash or shares of Common Stock. See "Description of Capital Stock." In addition,
the ability of the Company to pay dividends has been limited because BRL is
restricted from providing cash to the Company by the terms of the Facility. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." The Company's ability to pay
dividends on its Common Stock may be further limited in the future by other
legal or contractual restrictions placed on the Company and on the ability of
its subsidiaries to provide cash to the Company.
13
<PAGE> 15
CAPITALIZATION
The following table sets forth the short-term debt and the capitalization
of the Company as of June 30, 1996 and as adjusted to give effect to the sale by
the Company of the 1,000,000 shares of Common Stock and 1,000,000 Warrants
offered hereby (assuming an initial offering price of $8.00 per Share and $.05
per Warrant, after deducting the estimated underwriting discounts and
commissions and estimated offering expenses payable by the Company) and the
application by the Company of the net proceeds therefrom. See "Use of Proceeds."
This table should be read in conjunction with the Consolidated Financial
Statements, including the Notes thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
-------------------------------
ACTUAL AS ADJUSTED(1)
------------ --------------
<S> <C> <C>
Short-term debt(2).............................................. $ 300,000 $ --
============ ============
Long-term debt.................................................. -- --
Stockholders' equity(3):
Convertible Preferred Stock, $1.25 per value, 1,000,000 shares
authorized, none outstanding............................... -- --
Preferred Stock, $2.00 par value, 4,000,000 shares authorized
270,000 shares designated Class A Convertible Preferred
Stock, 74,000 shares outstanding less discount of $57,000.. $ 91,000 $ 91,000
730,000 shares designated as Class B Convertible Preferred
Stock, 233,000 shares outstanding........................ 465,000 465,000
Common Stock, $.01 par value, 7,000,000 shares authorized,
3,498,000 shares issued and outstanding, 4,498,000 shares,
as adjusted(4)............................................. 35,000 45,000
Additional paid-in-capital...................................... 17,765,000 24,525,000
Accumulated deficit............................................. (16,003,000) (16,003,000)
Foreign currency translation.................................... (460,000) (460,000)
Less: Common Stock in treasury at cost, 31,000 shares......... (13,000) (13,000)
------------ ------------
Total stockholders' equity...................................... 1,880,000 8,650,000
------------ ------------
Total capitalization............................................ $ 1,880,000 $ 8,650,000
============ ============
</TABLE>
- ---------------
(1) Assumes that all of the outstanding Debentures are repaid with a portion of
the net proceeds of the Offering and are not converted into shares of Common
Stock. See "Use of Proceeds."
(2) Short-term debt at June 30, 1996 consisted of the Old Debentures. The Old
Debentures were repaid on July 15, 1996 with a portion of the net proceeds
from the sale of the Debentures.
(3) See "Description of Capital Stock" for a description of the relative rights
of the Company's Preferred Stock and Common Stock.
(4) Excludes an aggregate of 2,284,244 Reserved Shares.
14
<PAGE> 16
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected consolidated financial data presented below for the years
ended December 31, 1991 through 1995 have been derived from financial statements
which have been audited by BDO Seidman, LLP, independent certified public
accountants. The selected consolidated financial data presented below for the
six-month periods ended June 30, 1995 and 1996 have been derived from unaudited
financial statements which, in the opinion of management, reflect all
adjustments, consisting only of normal recurring items, necessary for a fair
presentation of such data. Results for the six months ended June 30, 1996 are
not necessarily indicative of the results that can be expected for any other
interim period or for the year ended December 31, 1996 as a whole. The selected
consolidated financial data appearing below should be read in conjunction with
the Consolidated Financial Statements and the Notes thereto included elsewhere
in this Prospectus and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained herein.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------------------- ---------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------ ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Revenues from operations................... $ 1,963 $ 2,838 $7,770 $ 5,514 $ 6,374 $3,110 $5,012
Cost of sales.............................. 1,703 2,211 3,930 4,269 3,804 1,892 2,647
------- ------- ------ ------- ------- ------ ------
Gross profit............................... 260 627 3,840 1,245 2,570 1,218 2,365
------- ------- ------ ------- ------- ------ ------
Selling, general and administrative
expenses................................ 2,733 2,180 3,117 3,352 3,305 1,300 1,641
Unfunded research and development.......... 632 161 182 362 151 104 57
------- ------- ------ ------- ------- ------ ------
Operating expenses......................... 3,365 2,341 3,299 3,714 3,456 1,404 1,698
------- ------- ------ ------- ------- ------ ------
Operating income (loss) from operations.... (3,105) (1,714) 541 (2,469) (886) (186) 667
Other expense, net......................... (219) (49) (101) (89) (292) (170) (103)
Income tax benefit (provision)............. -- -- 153 (75) -- -- --
------- ------- ------ ------- ------- ------ ------
Income (loss) from continuing operations... (3,324) (1,763) 593 (2,633) (1,178) (356) 564
Income (loss) from operation held for
sale.................................... (339) (44) 2 68 351 55 --
------- ------- ------ ------- ------- ------ ------
Net income (loss).......................... (3,663) (1,809) 595 (2,565) (827) (301) 564
Preferred stock dividends.................. (103) (160) (114) (108) (82) (51) (24)
------- ------- ------ ------- ------- ------ ------
Net income (loss) atributable to common
stockholders............................ (3,766) (1,967) 481 (2,673) (909) (352) 540
======= ======= ====== ======= ======= ====== ======
Income (loss) per common share from
continuing operations(2)................ (1.84) (0.90) 0.20 (0.97) (0.39) (0.13) 0.15
Net income (loss) per common share(2):
Primary................................. (2.02) (0.92) 0.20 (0.95) (0.28) (0.11) 0.16
Fully-diluted........................... -- -- -- -- -- -- 0.15
Weighted average common shares
outstanding(2):
Primary................................. 1,862 2,135 2,570 2,827 3,283 3,060 3,483
Fully-diluted........................... -- -- -- -- -- -- 3,854
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
DECEMBER 31, -----------------
1995 1995 1996
------------ ------ ------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........................................ $ 370 $1,139 $ 940
Current assets......................................... 3,672 5,532 4,828
Total assets........................................... 4,735 6,278 5,881
Current liabilities.................................... 3,302 4,393 3,888
Long-term liabilities.................................. 108 -- 113
Stockholders' equity................................... 1,325 1,885 1,880
</TABLE>
- ---------------
(1) Amounts for all periods ending prior to December 31, 1995 reflect Labco as a
discontinued operation. The Company sold a portion of its equity interest in
Labco in December 1995. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Overview."
(2) Adjusted to give effect to the one-for-four reverse split of the Common
Stock effected on September 25, 1995.
15
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with,
and is qualified in its entirety by, the Company's Consolidated Financial
Statements, including the Notes thereto, appearing elsewhere in this Prospectus.
Historical results are not necessarily indicative of trends in operating results
for any future period.
OVERVIEW
Since 1990, the Company has principally engaged in the design, development,
manufacture and sale of the IONSCAN(R). To a lesser extent, the Company also
manufactures specialty instruments and engages in contract research and
development activities for industrial companies and various governmental
agencies. Prior to 1990, the Company engaged primarily in airborne mineral
exploration utilizing trace particle collection techniques and analysis, and
funded research and development activities, consisting of contracts and grants
received by the Company for research and development on behalf of third parties.
In 1990, the Company decided to use the trace particle expertise gained in its
airborne exploration business and research and development activities to pursue
the more attractive detection instrument market. Accordingly, the Company ceased
its airborne exploration business and began the development of the IONSCAN(R).
For the year ended December 31, 1995 and the six months ended June 30, 1996,
approximately 82% and 88%, respectively, of the Company's consolidated revenues
were derived from the sale and servicing of IONSCAN(R)s and other speciality
instruments.
The Company sells IONSCAN(R)s in two primary markets, explosives detection
and drug interdiction. The Company sold its first IONSCAN(R) in 1990 and had
sold a total of approximately 300 units as of June 30, 1996. Historically, the
Company sold a majority of its units for drug interdiction applications.
However, during 1996 the Company's sales have been divided almost evenly between
the explosives detection market and the drug interdiction market. Management
expects that the explosives detection market will account for an increasingly
significant portion of the Company's future growth.
The Company sells IONSCAN(R)s for between $50,000 and $95,000 per unit,
depending principally on the configuration of the unit and the purchaser's
location. While substantially all of the Company's revenues are denominated in
U.S. dollars, the Company operates in several foreign countries, including
Canada, the United Kingdom and France, and in certain instances, the Company
sells the IONSCAN(R) in other denominations, particularly British pounds and
French francs. In addition, the Company conducts operations in Canada and, as a
result, certain of the Company's costs are incurred in Canadian dollars. To
date, the Company has not experienced significant losses as a result of foreign
currency fluctuations. The Company currently does not hedge its foreign currency
exposure.
The Company manufactures to a sales forecast in order to have inventory
available to meet anticipated demand promptly and, accordingly, does not have a
significant backlog. Management's sales forecast is determined by an analysis of
a number of factors, including, among other things, the customer's need, the
availability of budgeted funds, the status of equipment demonstrations, the
status of any required approvals and the complexity of the customer's
procurement process. The Company also considers the effect of competition in
obtaining an order. The Company has publicly announced its intention to double
its production in the second half of 1996 in order to accommodate anticipated
demand. There can be no assurance that the Company will receive orders for all
of the units to be produced and, if such orders are not received, the Company's
liquidity and results of operations could be materially and adversely affected.
The Company believes that its existing manufacturing facilities, which the
Company intends to supplement through the use of a portion of the proceeds from
the Offering, will be sufficient for the anticipated growth in orders for the
IONSCAN(R) in the foreseeable future.
Through the period ended June 30, 1996, the Company reported two segments
for financial statement purposes: (i) specialty instruments and (ii) funded
research and development. Because of the rapid growth in sales of IONSCAN(R)s
through June 1996, the funded research and development segment is no longer
16
<PAGE> 18
significant to the Company's consolidated revenues. Accordingly, effective June
30, 1996, the Company ceased reporting segment information.
Approximately 72% and 82% of the Company's revenues for the year ended
December 31, 1995 and for the six months ended June 30, 1996, respectively, were
derived from non-United States sources. Approximately 30% of revenues in 1995
were derived from customers in Canada.
The Company recognizes revenues from the sale of IONSCAN(R)s upon shipment.
Accordingly, changes in delivery dates for relatively few IONSCAN(R)s from one
quarter to another may have a significant impact on the Company's quarterly
results.
Prior to December 1995, the Company controlled Barringer Laboratories, Inc.
("Labco"), a publicly traded company that provides comprehensive
laboratory-based analytical and consulting services in the United States and
Mexico, including environmental monitoring and geochemical analysis for the
hydrocarbon and mineral exploration industries. In order to focus its resources
on its core business and to increase working capital, in December 1995 the
Company entered into a Stock Purchase Agreement with Labco (the "Stock Purchase
Agreement") pursuant to which the Company sold back to Labco 647,238 shares of
Labco's common stock for an aggregate purchase price of $809,000. The purchase
price consisted of the cancellation of all inter-company obligations and
$300,000 in cash. A portion of the net cash proceeds from such sale were
contributed to BRL pursuant to an agreement with the Bank. After giving effect
to the sale, the Company continued to own 437,475 shares of Labco's common
stock. However, under the terms of the Stock Purchase Agreement, Labco retained
an additional 88,260 shares of Labco common stock owned by the Company (the
"Retained Shares"). The Company is only entitled to the return of the Retained
Shares if Labco meets certain pre-tax earnings goals for 1996. The Company also
agreed to terminate all voting arrangements allowing it to vote shares of Labco
common stock not owned by it and agreed for a period of 24 months not to enter
into any such voting arrangements. Labco had the right until January 2, 1997 to
purchase the Company's remaining ownership interest in Labco under certain
circumstances. In addition, the Company agreed to certain restrictions on the
transferability of its remaining Labco stock until January 2, 1997. As a result
of the transactions contemplated by the Stock Purchase Agreement, the Company
reclassified its financial statements, where appropriate, to reflect its
remaining interest in Labco as a discontinued operation and commenced using the
equity method of accounting. See Note 2 of the Notes to Consolidated Financial
Statements.
In October 1996, the Company and Labco entered into a Termination Agreement
(the "Termination Agreement") pursuant to which Labco agreed to waive its right
of first refusal and to terminate the restrictions on the transfer of the
Company's remaining Labco shares. The Company agreed that, for a period of three
months from the date of the Termination Agreement, it would sell such shares at
a price of at least $1.6875 per share (the "Target Price") in a distribution in
which it would not knowingly sell more than 75,000 shares to any one purchaser
or group of related purchasers. Under the Termination Agreement, for such three-
month period, the Company must sell its Labco shares as provided above if it
receives an offer to acquire such shares at a price per share at least equal to
the Target Price. The restrictions described above also apply to any shares of
Labco common stock issuable to the Company upon the exercise of certain warrants
held by the Company. Labco has registered the Company's Labco shares for resale
pursuant to the Securities Act to facilitate such sales.
In the Termination Agreement, the Company and Labco agreed to terminate all
remaining inter-company arrangements. In addition, upon the disposition by the
Company of at least 250,000 of its shares of Labco common stock, Stanley S.
Binder and John J. Harte will resign their positions with Labco.
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<PAGE> 19
The following table presents certain income statement items expressed as a
percentage of total revenue for the fiscal years ended December 31, 1993, 1994,
and 1995 and the six months ended June 30, 1995 and 1996.
PERCENTAGE OF TOTAL REVENUE
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- ---------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:(1)
Revenues from operations......................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.................................... 50.6 77.4 59.7 60.8 52.8
Gross profit..................................... 49.4 22.6 40.3 39.2 47.2
Selling, general and administrative expenses..... 40.1 60.8 51.9 41.8 32.7
Unfunded research and development................ 2.3 6.6 2.4 3.3 1.1
Operating income (loss).......................... 7.0 (44.8) (13.9) (6.0) 13.3
Other expense, net............................... (1.3) (1.6) (4.6) (5.5) (2.1)
Income tax benefit (provision)................... 2.0 (1.4) -- -- --
Income (loss) from continuing operations......... 7.6 (47.8) (18.5) (11.4) 11.3
Income from operation held for sale.............. * 1.2 5.5 1.8 --
Net Income (loss)................................ 7.7 (46.5) (13.0) (9.7) 11.3
Preferred stock dividends........................ (1.5) (2.0) (1.3) (1.6) (0.5)
Net income (loss) attributable
to common stockholders........................ 6.2% (48.5)% (14.3)% (11.3)% 10.8%
</TABLE>
- ---------------
* less than 0.1%
(1) Columns may not foot due to rounding.
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Revenues from operations of the Company consist of (a) net sales of its
IONSCAN(R) drug and explosives detection equipment, related accessories and
consumable supplies, maintenance, training and billable repairs; (b) net sales
of other instruments; and (c) revenues derived from funded research and
development grants and contracts. Revenues from operations increased by
$1,902,000, or 61.2%, in the six months ended June 30, 1996 compared to the same
period in 1995. Net sales of the IONSCAN(R) and related products increased by
approximately $1,676,000, or 77.1%, in the six months ended June 30, 1996
compared to the same period in 1995, due to an increase in the number of units
sold of approximately 73%. The increase in IONSCAN(R) sales was due to increased
sales of the Model 400 which was introduced in the first quarter of 1995 in
various configurations designed to suit customers' needs. Management believes
the increased sales resulted from an expanding market, coupled with the Model
400 having a lower selling price than the predecessor Model 350, and being
smaller, lighter and containing more features. Net sales of other instruments
increased by approximately $346,000, or 155%, in the six months ended June 30,
1996 compared to the same period in 1995, principally due to work performed on a
heavy water analyzer contract, which was awarded to the Company in mid-1995 and
completed in the first half of 1996. In addition, net sales benefited from the
sale of several other instruments. The markets for heavy water analyzers and
other instruments are limited, and therefore management cannot predict whether
the Company will receive any future orders. Revenues derived from funded
research and development decreased by approximately $145,000, or 21.2%, in the
six months ended June 30, 1996 compared to the same period in 1995. The reduced
revenues are attributable to reduced work performed under the Company's contract
with the Emergencies Science Division, Environment Canada to design and build an
airborne laser-fluorosensor system, a substantial portion of which was completed
in 1995.
Gross profit as a percentage of sales for the six months ended June 30,
1996 increased to 47.2% from 39.2% in the same period last year. The improvement
was primarily attributable to higher margins on special
18
<PAGE> 20
orders and international sales, coupled with larger, more efficient production
runs of the IONSCAN(R) and related products. The sale at higher than expected
prices of several Model 350 units during the first six months of 1996, the
carrying value of which had been reduced in 1995, also contributed to the
improvement. Improved gross profits from funded research and development
activities also contributed to the overall improvement.
Selling, general and administrative expenses, consisting primarily of
salaries and related fringe benefits, occupancy costs, professional fees and
travel expenses, increased by approximately $341,000, or 26.2%, for the six
months ended June 30, 1996 as compared to the same period in 1995. However, in
the 1995 period the Company recognized an expense decrease of $152,000
attributable to a negotiated reduction in professional fees. But for such
reduction, selling, general and administrative expenses in the 1996 period would
have increased by $189,000. As a percentage of revenues, selling, general and
administrative expenses decreased to 32.7% for the first six months of 1996 from
41.8% for the same period in 1995. The decrease as a percentage of revenues was
primarily attributable to spreading costs over increased revenues. Selling
expenses increased by $256,000, or 34.3%, for the six-month period ended June
30, 1996 compared to the same period in 1995. Most of the increase was
attributable to expenses associated with the Company's French and United Kingdom
offices being open for a six-month period in 1996 at full staffing levels. The
balance of the increase was attributable to increased levels of sales activity
in Canada and the United States and marketing expenses associated with the
DrugAlert(TM) product (a drug testing kit designed for use by individuals),
which marketing expenses were substantially eliminated as of July 1, 1996.
In the first six months of 1996, unfunded research and development expenses
consisting primarily of salaries and related benefits and occupancy costs for
product and application development applied to IONSCAN(R) technology decreased
by approximately $47,000, or 45.2%, compared to the first six months of 1995.
The level of unfunded research and development engaged in by the Company at any
time is primarily a function of the resources, both financial and personnel,
that are available at the time.
Interest expense increased by approximately $8,000 in the six months ended
June 30, 1996, or 6.6%, over the same period in 1995. The increase is the result
of higher levels of borrowing, at higher interest rates.
Equity in earnings of Labco represents the Company's share of the earnings
and losses of Labco, in which the Company has a 26% ownership interest. Prior to
December 31, 1995, the Company had a controlling interest in Labco, but since
the first quarter of 1995, the Company has presented Labco as an operation held
for sale. Fluctuations in earnings and losses are dependent upon the performance
of Labco. The Company's share of Labco's net income for the six months ended
June 30, 1996 was $20,000, as compared to $55,000 for the same period in 1995
(where it is shown under the caption "Income from operation held for sale").
Other income, net of expense, was $7,000 for the six months ended June 30,
1996 as compared to other expense, net of income, of $48,000 for the same period
last year. The increase was primarily due to gains of approximately $42,000
recognized during the first six months of 1996 on trading securities held for
pension funding purposes.
1995 Compared to 1994
Sales of all instruments increased by $34,000, or 0.01%, in 1995 as
compared to 1994. Sales of IONSCAN(R) instruments and related products decreased
by approximately $200,000, or 3.9%. The decrease was due, in part, to the lower
selling price of the new Model 400 IONSCAN(R), which was introduced in the first
quarter of 1995. This reduction in selling price, coupled with other
improvements of the new model, resulted in approximately 60% more unit sales.
Sales of instruments other than IONSCAN(R) products increased in 1995 by
approximately $100,000, or 23%, principally due to the award in 1995 of the
contract to build four heavy water analyzers for use at a nuclear facility in
Asia, which was completed in mid-1996. The introduction of the Model 400
resulted in reduced sales of the Model 350. As a result, the Company reduced the
carrying value of the Model 350s remaining in inventory.
Revenues of the research and development business increased by
approximately $754,000, or 253.0%, in 1995 as compared to 1994. The improved
sales are attributable to work performed in 1995 under the
19
<PAGE> 21
Company's contract with the Emergencies Science Division, Environment Canada to
design and build an airborne laser-fluorosensor system.
The Company introduced and made a limited distribution of DrugAlert(TM) in
1995. Sales of such product were not significant.
Gross profit as a percentage of sales for the year ended December 31, 1995
increased to 40.3% from 22.6% in 1994. The gross profit as a percentage of sales
for the research and development business improved to a negative 14.2% in 1995
from a negative 44.6% in 1994. The improvement was due to higher volume which
absorbed a greater portion of the fixed overhead. The gross profit as a
percentage of sales for the instruments business increased to 53.1% in 1995 from
26.4% in 1994. The 1995 gross profit was impacted by the write down of the
carrying value of the Model 350 inventory which aggregated approximately
$450,000, approximately $160,000 of which related to excess spare parts
inventory and the balance to finished goods. In 1994, the Company took an
$800,000 charge against its Model 350 inventory. The consumer products business
had negative gross profit in 1995 due primarily to the expensing of tooling,
software and other development costs.
Selling, general and administrative expenses in 1995 decreased by
approximately $47,000, or 1.4%, over 1994. As a percentage of revenues, selling,
general and administrative expenses decreased to 51.9% for 1995 from 60.8% in
1994. The decrease as a percentage of revenues was primarily attributable to
such costs being spread over a higher revenue base. Selling expenses increased
by $759,000, or 48.3%, in 1995. The increase was primarily attributable to the
expenses associated with the Company's Paris, France and London, England offices
being open for a full year and marketing expenses associated with the
DrugAlert(TM) product. General and administrative expenses decreased by
approximately $806,000 in 1995, or 45.3%, over 1994. This reduction was
attributable primarily to the recovery of $147,000 relating to the 1993
conversion of the Canadian pension plan from a defined benefit plan to a money
purchase plan, a reduction in accounts payable of $226,000 relating to a
settlement of professional fees and the effect of staff and expense reductions
implemented in late 1994.
Unfunded research and development in 1995 decreased by approximately
$211,000, or 58.3%, over 1994. The 1994 level was attributable to the completion
of the development of the Company's new Model 400.
Interest expense increased by approximately $38,000 in 1995, or 18.8%, over
1994 levels. The increase is the result of higher levels of borrowing, at higher
interest rates.
Other expense, net of income, in 1995, was approximately $52,000 as
compared to other income, net of expense, in 1994 of approximately $113,000. The
difference of $165,000 was attributable primarily to the changes in exchange
rates which generated a gain of $135,000 in 1994 compared to a loss of $79,000
in 1995.
1994 Compared to 1993
Sales of all instruments for 1994 decreased by $1,545,000, or 22.8%, over
1993. The decrease was attributable to several factors. Management believes that
the pending introduction of the Company's new Model 400 IONSCAN(R) caused a
deferral of purchases until the Model 400 was available. Because of the
announcement of the Model 400, the Company anticipated that its remaining Model
350s would be sold at lower prices over a longer period of time than previously
expected. Accordingly, it offered reduced prices to certain customers as
inducements to secure more timely purchase commitments and reduced prices on
outstanding quotations in order to expedite buying decisions.
Revenues of the research and development business decreased by $711,000, or
70.5%, in 1994 compared to 1993, partially as a result of a decrease in
government sponsored research due to budgetary constraints. In addition, the
Company had several proposals outstanding involving potential new applications
of its IONSCAN technology with U.S., Canadian and European governmental
agencies, which resulted in 1995 revenues for the research and development
business being significantly improved from 1994. See "1995 Compared to 1994."
Gross profit for the instrument and research and development businesses as
a percentage of sales for the year ended December 31, 1994 decreased from 49.4%
in 1993 to 22.6% in 1994. The gross profit as a
20
<PAGE> 22
percentage of sales on the research and development business decreased from 6.5%
in 1993 to a negative 44.6% in 1994 and the gross profit as a percentage of
sales on the instruments business decreased from 55.8% in 1993 to 26.4% in 1994.
As a result of the decline in the value of its inventory of Model 350s in 1994,
which resulted from the introduction of the Model 400, the Company provided for
approximately $800,000 in inventory and other charges against the remaining
inventory of Model 350s. This charge reduced 1994 gross profit percentage of the
instruments business by approximately 15.3% from 1993. The remaining decrease in
gross profit percentage was due primarily to volume variances as a result of
cutbacks in planned Model 350 production to meet the anticipated reduction in
sales levels.
Selling, general and administrative expenses in 1994 increased by $235,000,
or 7.5%, over 1993. As a percentage of revenues, selling, general and
administrative expenses increased to 60.8% in 1994 from 40.1% in 1993. The
increase was primarily attributable to such costs being spread over a lower
revenue base. Selling expenses decreased by $274,000 in 1994, or 14.9%, over
1993, as a result of reduced commissions resulting from reduced unit sales
during 1994, offset in part by the expenses incurred in connection with the
opening of the Company's Paris office. General and administrative expenses
increased by $509,000, or 40%, primarily as a result of the impact of the
Canadian pension expense of approximately $100,000 in 1994 against a pension
credit of $206,000 in 1993, which was the result of converting from a defined
benefit plan to a money purchase plan similar to the 401(k) savings plans
available to the Company's U.S. employees. Also, payroll costs increased during
the first three quarters of 1994 in anticipation of increased volume which did
not materialize. Subsequently, significant staff reductions were implemented. In
addition, a reserve against accounts receivable of approximately $110,000 was
established.
Unfunded research and development in 1994, applied to IONSCAN(R)
technology, doubled to $362,000 from 1993 levels. The increase was primarily
attributable to the development of the Company's new Model 400 instrument.
Interest expense increased by $38,000, or 23.2%, in 1994, as a result of
higher average borrowings and rising interest rates.
Other income, net of expense in 1994 was approximately $113,000 as compared
to other income, net of expense, in 1993 of approximately $63,000. The
difference is attributable, in part, to foreign exchange gains realized during
1994. Sales of IONSCAN(R) units are quoted in U.S. dollars, while production
costs are incurred in Canadian dollars.
In 1994, the Company had a net reduction in its Canadian deferred tax
assets of $75,000. In 1993, the Company had a net tax benefit of $153,000,
composed of prior years' assessments by Revenue Canada of $147,000 and a net
recognition of $300,000 in Canadian deferred tax assets.
LIQUIDITY AND CAPITAL RESOURCES
The Company sustained net losses of $2,565,000 and $827,000 for the years
ended December 31, 1994 and 1995, respectively, and had an accumulated deficit
of $16,003,000 at June 30, 1996. Although the Company generated net income of
$564,000 for the six months ended June 30, 1996, the Company did not generate
net cash flow from operations during such period as a result of the Company's
need for working capital to support higher levels of accounts receivable and
inventory. The Company's history of losses and its failure to generate positive
operating cash flow have resulted in significant cash shortages from time to
time. See "Risk Factors -- History of Losses" and "-- Cash Constraints." The
Company's cash constraints were exacerbated during 1995 in connection with the
introduction of the Company's Model 400 IONSCAN(R), as customers chose to wait
for Model 400s to become available rather than purchase existing Model 350s.
The Company has used the net proceeds of private sales of securities to
fund a portion of its cash flow needs. During 1995, the Company generated net
proceeds of $888,000 from such sales. In July 1996, the Company issued the
Debentures, resulting in net proceeds to the Company of approximately
$1,000,000. The Company used $300,000 of the net proceeds from the sale of the
Debentures to repay the Old Debentures which matured on July 15, 1996. The
remaining net proceeds were added to working capital. The Company intends to use
a portion of the net proceeds of the Offering to repay the Debentures, if
required, and to support
21
<PAGE> 23
its working capital needs. See "Use of Proceeds." The Company believes that the
net proceeds of the Offering will be sufficient to fund its working capital
requirements for at least the next twelve months.
In 1995, the Company also financed its working capital requirements in part
through the sale of a portion of its investment in Labco. See "Overview."
The Company funds a portion of BRL's operations through the Facility and
the ODC Loan, which are used to support Canadian export production, sales and
related receivables financing. At June 30, 1996, BRL's outstanding borrowings
under these facilities were $1,231,000, and $250,000 remained available for
future borrowings thereunder, to the extent qualifying collateral is available
to support such additional borrowings. From time to time BRL's borrowings under
the Facility have exceeded the limits set forth therein. In addition, from time
to time BRL has not been in compliance with one or more of the financial
covenants contained therein. See "Risk Factors -- Noncompliance Under Credit
Facility" and Note 5 to Consolidated Financial Statements. The Company intends
to repay the Facility and the ODC Loan out of the net proceeds of the Offering.
Upon completion of the Offering, the Company intends to seek a new working
capital facility to support its operations, although no assurance can be given
that the Company will obtain a facility or as to the terms thereof. See "Use of
Proceeds."
The Company's capital expenditures relating to its continuing operations
were $120,000, $490,000 and $358,000 for the years ended December 31, 1993, 1994
and 1995, respectively, and $47,000 for the six months ended June 30, 1996. Such
expenditures related primarily to the support of the production of the
IONSCAN(R). During 1995, a portion of such expenditures related to the opening
of the Company's foreign sales offices. Approximately $75,000 of the 1995
expenditures were for development of the DrugAlert product, further development
of which has been suspended. The Company anticipates that total capital
expenditures will be approximately $100,000 for the year ended December 31,
1996, substantially all of which will be used to support production of the
IONSCAN(R). The Company intends to use approximately $300,000 of the net
proceeds of the Offering for expansion of the Company's manufacturing and
assembling capabilities. See "Use of Proceeds."
The Company has substantial tax loss and research and development tax
credit carryforwards to offset future tax liabilities both in Canada and the
United States. However, it is anticipated that the Company will have utilized
substantially all of its Canadian Provincial tax loss and research and
development tax credit carryforwards and, commencing in the third quarter of
1996, may incur Canadian Provincial tax liabilities.
INFLATION
Inflation was not a material factor in either the sales or the operating
expenses of the Company during the periods presented herein.
RECENT PRONOUNCEMENTS OF THE FINANCIAL ACCOUNTING STANDARDS BOARD
Recent pronouncements of the Financial Accounting Standards Board ("FASB"),
which are not required to be adopted at this date, include Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123") and SFAS No. 121, "Accounting for Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"),
which are effective for fiscal years beginning after December 15, 1995. The
Company's accounting policy with respect to Long-Lived Assets is in conformity
with SFAS 121 and the Company does not presently intend to adopt the fair value
based method for accounting for stock compensation plans pursuant to SFAS 123.
22
<PAGE> 24
BUSINESS
OVERVIEW
The Company is principally engaged in the design, development, manufacture
and sale of analytical instruments used for the high sensitivity detection of
trace amounts of plastic and other explosives and illegal narcotics. The
Company's principal product, the IONSCAN(R), is a portable, desk-top instrument
that utilizes a proprietary implementation of ion mobility spectrometry ("IMS")
technology to determine the presence or absence of targeted compounds in a
sample. The IONSCAN(R) can detect targeted substances in amounts smaller than
one-billionth of a gram in approximately six seconds. See "IONSCAN(R)
Technology."
The Company's customers are primarily governmental, security and law
enforcement agencies throughout the world, including the Federal Bureau of
Investigation (the "FBI"), the Drug Enforcement Agency (the "DEA"), the General
Services Administration (the "GSA"), the United States, French, and Canadian
customs services and various airports worldwide. Because of its high
sensitivity, the IONSCAN(R) is used both in lieu of and in conjunction with
other detection technologies, such as X-ray, computer aided tomography
("CATSCAN"), quadropole resonance and nuclear magnetic resonance imaging. As of
June 30, 1996, the Company had sold over 300 IONSCAN(R)s, and the Company
believes that, in terms of units sold, it is the world's leading supplier of
trace particle detection instruments.
IONSCAN(R)s have been sold for explosives detection applications primarily
outside the United States and for drug interdiction and detection deployment
both within the United States and elsewhere. For example, the IONSCAN(R) is used
in foreign airports, on trains and at the Eurotunnel to check for explosives and
by the United States Coast Guard to check ships and cargo in U.S. territorial
waters for illegal narcotics.
The Company believes that the security-related market for the IONSCAN(R) is
growing as a result of governmental actions, particularly in the United States,
which reflect heightened public safety concerns in the wake of an increasing
number of terrorist acts. Recently, Congress appropriated $144,000,000 for the
purchase of enhanced explosives detection equipment for use at certain airports
in the United States, and the Company believes that a portion of such
appropriation will be utilized for the acquisition of trace particle detection
equipment. Governmental agencies in the United States, including the GSA and the
FAA have accelerated their evaluation or use of enhanced methods to increase
security measures currently employed in United States airports, other
transportation centers and in public buildings. However, no assurance can be
given as to the growth of the security-related market for the IONSCAN(R).
The Company also believes that the market for the IONSCAN(R) for use in
drug applications will increase as a result of recently reported increases in
domestic drug usage, particularly among teenagers. Various governmental
agencies, including the DEA, have purchased IONSCAN(R)s for use in their efforts
to diminish drug trafficking. Prisons and private entities, including public
utilities and drug rehabilitation clinics, also have purchased IONSCAN(R)s to
detect the presence of drugs. No assurance can be given as to the growth of the
drug interdiction and detection market for the IONSCAN(R).
The Company believes that new markets for the IONSCAN(R) can be developed
in other areas, such as security screening of individuals and process control
and quality assurance in certain industrial applications. In addition, when
coupled with certain other existing technologies, such as gas chromatography,
the IONSCAN(R) can be adapted to other uses, including environmental, biological
and chemical testing. Further, the Company intends to expand the potential uses
of the IONSCAN(R) technology by developing a hand held detector.
In addition to the IONSCAN(R), the Company manufactures specialty
instruments and engages in contract research and development activities for
industrial companies and various governmental agencies. For the year ended
December 31, 1995 and the six months ended June 30, 1996, approximately 25% and
23%, respectively, of the Company's consolidated revenues were derived from
these other activities.
The Company was incorporated under the laws of the State of Delaware on
September 7, 1967. The Company's principal executive offices are located at 219
South Street, New Providence, New Jersey 07974, and its telephone number is
(908) 665-8200.
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<PAGE> 25
MARKET OVERVIEW
Explosives Detection
Since the 1970s, metal detection equipment and visual inspection have been
employed throughout the world to detect the presence of weapons. Passengers
boarding airplanes pass through metal detectors while carry-on baggage is
scanned by security personnel utilizing X-ray equipment or is searched by hand.
Similar security measures are used in a variety of public buildings, including
courts, where security concerns are particularly high.
The persistent occurrence of terrorist bombings has demonstrated that
currently deployed security measures are inadequate, particularly for the
detection of explosives. While existing screening installations are effective to
detect metallic weapons and other metal objects, they are not always effective
for detecting explosives. In addition, advanced detection equipment has not been
uniformly deployed because of concerns relating to its efficacy, cost and
reliability.
In the aviation security market the need for deployment of more
sophisticated explosives detection systems has been recognized for some time. In
1985, the FAA announced its intention to take certain actions to encourage the
development of new technologies and to increase the use of enhanced detection
equipment.
In the aftermath of the bombing of Pan Am flight 103 over Scotland in 1988,
the Aviation Security Improvement Act of 1990 (the "Safety Act") was enacted.
The Safety Act directed the FAA to establish a research and development program
related to the development and implementation of explosives detection technology
and procedures to counteract terrorism against civilian aircraft. The Safety Act
directed the FAA to develop certification protocols for explosives detection
equipment and authorized the FAA Administrator to require the use of certified
equipment commencing thirty-six months after enactment.
In response to the requirements of the Safety Act, the FAA began funding
research and development of enhanced explosives detection technology. During the
past five years, the FAA has spent approximately $150,000,000 on such
activities. In addition, the FAA adopted a certification protocol regarding the
use of imaging detection systems for use on checked baggage. The imaging
protocol focuses on (i) the explosive substances to be detected, (ii) the
probability of detection, by explosive, (iii) the quantity of explosive that
must be detected, and (iv) the number of bags processed per hour. In addition
the protocol specifies a maximum acceptable false alarm rate by explosive. To
date, only one imaging system has met the requirements of the protocol. The FAA
has not mandated the deployment of such certified imaging equipment, in part,
because of its cost (approximately $2 million per screening station). Concern
also has been raised about its selectivity because its false alarm rate in
airport testing has been much higher than the protocol results had indicated.
A number of recent events, including the destruction of TWA flight 800 over
Long Island and the bombing at the 1996 Olympics in Atlanta, have refocused
attention on the need to deploy enhanced explosives detection equipment. In
response to the crash of TWA flight 800, the FAA issued a classified security
directive to all airlines subject to FAA regulation. Although the directive is
not publicly available, the Company believes that the directive mandated
enhanced security checks for all baggage checked-in through certain airports
using one of three techniques: manual searching, deployment of certified imaging
equipment and use of trace particle detection equipment. The Company believes
that airlines are using manual searching techniques to comply with the FAA
directive and have not deployed enhanced explosives detection equipment
primarily because of the cost of such equipment which, under existing FAA
regulations, must be borne by the airlines.
On international flights, the FAA has mandated that airlines subject to FAA
regulation comply with the International Civil Aviation Organization's
International Standards and Recommended Practices Safeguarding International
Civil Aviation Against Acts of Unlawful Interference ("Annex 17"). Annex 17
contains generalized recommendations regarding bag matching, the screening of
checked bags and the taking of "appropriate actions" to determine if carry-on
baggage contains explosives. For all international flights, the FAA requires
airlines to use bag matching, to X-ray all carry-on and checked baggage and to
confirm that electronic devices such as cellular telephones, tape recorders and
laptop computers are operational. For certain international flights, the FAA has
mandated more stringent security measures. The Company believes that the FAA
directive augments these procedures in certain respects.
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<PAGE> 26
Annex 17 is implemented in a variety of ways outside the United States. In
the United Kingdom, for instance, certain airports have implemented a tiered
approach to baggage screening that utilizes trace particle detection equipment
to resolve potential security concerns. See "Explosives Applications." Certain
member countries have adopted different security protocols relying on manual
searching or other techniques and many have taken no actions to implement Annex
17.
As a result of the crash of TWA flight 800, the Gore Commission was formed
to examine the security measures currently in place in United States airports
and to make recommendations to the President with respect thereto. The Gore
Commission's initial report made a number of general recommendations regarding
the enhancement of airport security. These recommendations included, among other
things, that the government bear the initial cost of enhanced security
equipment, through ticket surcharges or other methods, that approximately
$160,000,000 be appropriated initially for the purchase of enhanced explosives
detection equipment at major airports, that approximately $50,000,000 be spent
in fiscal 1997 on research and development activities and that cooperation and
sharing of information among agencies be increased.
Partially in response to the Gore Commission's initial report, the
administration asked Congress to appropriate $1.1 billion to fund anti-terrorism
activities. In October 1996, Congress appropriated all the funds recommended by
the administration for fiscal 1997, including $144,000,000 for the purchase of
enhanced explosives detection equipment. A published report indicates that the
administration plans to use a portion of that appropriation to purchase 489
trace detection instruments in fiscal 1997. The Company believes that these
instruments will be used to augment screening of carry-on baggage and to resolve
false alarms reported by imaging equipment. Published reports estimate the total
cost of implementing enhanced explosives detection equipment at the 75 busiest
domestic airports will be upwards of $6 billion and will take ten years to
complete.
The Company believes that the aviation security market for the IONSCAN(R)
will expand significantly as a result of the actions of Congress and the Gore
Commission. While a substantial amount of the initial $144,000,000 appropriated
for the purchase of enhanced explosives detection equipment in fiscal 1997 will
be used to purchase equipment utilizing other technologies, such as CATSCAN,
enhanced X-ray, quadropole resonance and other imaging techniques, the Company
believes that, as indicated above, a significant number of trace particle
detection instruments, including IONSCAN(R)s, will be purchased. In addition,
the appropriation approved by Congress covers only a limited number of United
States airports. The Company believes that additional appropriations will be
required to deploy enhanced explosives detection equipment at all major airports
in the United States. However, there can be no assurance that funding for the
purchase of such equipment will be continued in subsequent fiscal years or as to
the level thereof. In addition, there can be no assurance as to the amount that
will ultimately be spent on the purchase of trace particle detection equipment
or as to the number of IONSCAN(R)s that will actually be purchased or that the
IONSCAN(R) will meet any certification or other requirements that may be adopted
in connection therewith.
Other explosives detection markets for the IONSCAN(R) have been similarly
affected by increased terrorist activity. For instance, as a result of the World
Trade Center bombing in 1990 and the 1995 bombing in Oklahoma City, the Company
has sold IONSCAN(R)s to customers, including the World Trade Center and the GSA,
for facilities protection applications.
Drug Interdiction
The Company believes that concerns regarding the increasing usage of
narcotics will result in substantial growth in the market for IONSCAN(R)s used
in drug detection and interdiction efforts. According to the Office of National
Drug Control Policy, use of certain illegal narcotics significantly increased
during the past five years. Recent surveys have also indicated that the use of
illegal narcotics by teenagers has reached a record level. X-ray scanning,
random searches and the use of canines have not resulted in sufficient progress
in programs to suppress illegal drug trafficking. Accordingly, customs and law
enforcement agencies, particularly in the United States, have increasingly
turned to more sophisticated detection equipment, including the IONSCAN(R), to
assist in their interdiction and detection efforts. The United States Coast
Guard and customs services throughout the world have purchased IONSCAN(R)s for
use in their drug interdiction efforts. Prisons throughout the United States and
around the world also are increasingly using sophisticated equipment, such as
the IONSCAN(R), to reduce drug use. Various prisons in the United States, as
well as in Canada and
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<PAGE> 27
Mexico, have purchased IONSCAN(R)s to test visitors, packages, cell blocks and
vehicles for illegal narcotics. The Company believes that the successful
integration of the IONSCAN(R) in drug interdiction and detection activities by
the United States Coast Guard, as well as by the various customs services and
correctional facilities described above, will result in additional purchases of
the IONSCAN(R) for drug interdiction purposes, although no assurance can be
given in such regard.
As a result of increased drug usage and a heightened public awareness
regarding criminal activity generally, governmental agencies have increased
their spending on drug interdiction efforts. In addition, in connection with the
implementation of United States foreign policy, grants have been provided to
foreign countries, particularly in Latin America, for use in drug interdiction
efforts. The Company believes that as a result of the increased governmental
focus on drug prevention and the increased budgetary allocations for drug
intervention programs, the drug detection market for the IONSCAN(R) will
continue to grow, although no assurance can be given as to the growth of the
drug interdiction and detection market for the IONSCAN(R).
STRATEGY
The Company's objective is to strengthen its position as the leading
supplier of trace particle detection equipment by (i) further penetrating
existing markets for the IONSCAN(R) through aggressive pursuit of additional
sales from new and existing customers, (ii) expanding the uses of the
IONSCAN(R), particularly for security screening of individuals and for process
control and quality assurance in certain industrial applications, and (iii)
extending the capabilities and the potential uses of the IONSCAN(R) for
environmental, biological and chemical testing by, among other things, combining
the IMS technology used by the IONSCAN(R) with other existing technologies, such
as gas chromatography, and by developing a hand-held detector utilizing the
IONSCAN(R) technology. The following are the key elements of the Company's
strategy to achieve these objectives:
Increased Penetration of Existing Markets
The Company's primary strategic objective is to enhance its sales and
marketing capabilities to take advantage of existing and emerging selling
opportunities. The Company believes that the acceptance of the IONSCAN(R) by
customers worldwide and its performance in the field both for explosives
detection and drug detection place the Company in a favorable position to take
advantage of the expected growth in its markets.
Development of New Applications
The Company is developing new applications for its IONSCAN(R) technology.
For instance, under a research grant from the FAA, the Company recently began
development of an individual passenger screening system for the aviation
security market. The Company believes that the IONSCAN(R) is uniquely suited for
this application due to its quick analysis time and high level of throughput in
terms of items checked per hour.
In addition, in the chemical manufacturing and processing industries,
instrumentation is used to ensure that specified chemicals are present and in
the correct proportions and to ensure the absence of other chemicals at various
stages of the process. The Company believes that the IONSCAN(R) is readily
adaptable for use in these applications.
Product Extension
The Company believes that the IONSCAN(R) can be combined with other readily
available technologies, particularly gas chromatography, to enable the
IONSCAN(R) to detect compounds contained in more difficult sampling media, such
as soil. The Company believes that a modified IONSCAN(R) would be able to break
down a complex matrix of chemicals to separate out the background material and
permit testing for the targeted substance on site, instead of requiring shipment
of a sample to an offsite laboratory for analysis. As a result, the modified
IONSCAN(R) could be utilized to field test for the presence of microscopic
organisms and other environmentally sensitive materials. In addition, the
Company intends to use a portion of the net proceeds of the Offering to fund the
development of a handheld detector utilizing the same technology as the
IONSCAN(R). Such an instrument could be used, for instance, by law enforcement
officers to test for the presence of illegal narcotics during an investigation.
26
<PAGE> 28
IONSCAN(R) TECHNOLOGY
The IONSCAN(R) is a portable, desktop instrument that utilizes a
proprietary implementation of ion mobility spectrometry to analyze samples for
the presence of targeted chemical compounds in amounts smaller than
one-billionth of a gram. An operator collects samples, either by utilizing a
hand-held suction device that contains a special filter cartridge which collects
the sampled matter or by swiping a cloth or glove across the surface to be
tested and then transferring the sampled matter to the cartridge. After the
sample has been collected, the filter cartridge is placed onto a slide tray on
the front of the IONSCAN(R) and inserted into a heating chamber. The sample is
then rapidly heated causing the sample to vaporize. The molecules contained in
the vapors from the sample are charged electrically converting them into ions
which are collected and then propelled through a testing chamber containing a
controlled mixture of calibrant gases. The speed at which each ion travels
through the testing chamber will vary depending upon its molecular structure.
The IONSCAN(R) measures the time of flight of the ions through the testing
chamber and, utilizing proprietary software containing Company-developed
detection algorithms, determines whether the targeted chemicals are present and
reports the results to the user. If traces of any of the targeted chemical
compounds are present, the IONSCAN(R)'s alarm will ring, a red light on the
IONSCAN(R) will flash and the screen will display a list of the targeted
substances which were detected. If no traces of the targeted substances are
detected, the IONSCAN(R) will display a green light. The IONSCAN(R) analyzes a
sample in approximately six seconds. Because the IONSCAN(R)'s analysis takes
place under high temperature, there is virtually no residue from the sample and,
under normal operating conditions, additional sampling can take place almost
immediately with no need to clean out the testing chamber. The following diagram
illustrates the operation of the IONSCAN(R).
[Schematic showing the operation of the IONSCAN(R)]
27
<PAGE> 29
The Company assembles IONSCAN(R)s from components supplied to it by various
suppliers and parts manufactured internally. Once the IONSCAN(R) is assembled,
the IONSCAN(R) is "burned in" for up to 400 hours using certain chemicals to
calibrate and tune the unit and to assure its proper functioning. After
successful completion of this procedure, the IONSCAN(R) is ready for shipment to
a customer.
The Company also has developed the IONSCAN(R) Manager software for use in
conjunction with the IONSCAN(R). The IONSCAN(R) Manager provides the user with
enhanced graphic read-outs of test results enabling the user to view the data in
more detail. Utilizing this software, a user can view multiple test results at
the same time, switch back and forth between test results and highlight
particular areas of interest to obtain greater detail. This software also can be
used to print out or save data and to transfer test results onto a computer disk
for storage, transportation or other uses, such as manipulation in chemical
studies.
In addition, the Company has developed the Barringer Link software, which
allows a remote user to have access to the IONSCAN(R). Typically, this software
is used by the customer to select different testing algorithms for the
IONSCAN(R) or to trouble shoot problems with the unit. A customer has the
capability to test for a different set of chemical compounds by remotely
downloading the necessary algorithms onto its IONSCAN(R). For instance, if a
United States Coast Guard vessel on patrol needs the capability to test a
suspect vessel for a particular type of illegal narcotics, the Coast Guard can
download the required information to its unit. In addition, the Barringer Link
allows the Company or the customer to run certain diagnostic programs to
determine problems which may have occurred within a particular unit and to
correct certain software problems.
EXPLOSIVES APPLICATIONS
Aviation Security
IONSCAN(R)s are currently used in explosives detection applications in the
aviation security market primarily outside the United States. In most cases, the
IONSCAN(R) is used to resolve concerns regarding checked or carry-on baggage
that may contain explosives. For instance, certain foreign airports have
implemented a three-tiered security procedure for checked baggage. All checked
bags are screened by an X-ray machine to identify those bags that may contain
explosive materials. Bags identified through that process are then subjected to
a second level of testing, generally using a more sensitive imaging system, such
as enhanced X-ray or CATSCAN. Bags that are not cleared at this second level are
either manually searched or tested using trace particle detection instruments
such as the IONSCAN(R). A number of IONSCAN(R)s have been purchased for this
purpose.
IONSCAN(R)s also are used to augment screening of carry-on baggage. The
carry-on bags of individuals meeting certain passenger profiles are searched
manually (including using bomb sniffing canines), screened by imaging equipment
or scanned using trace particle detection equipment, such as the IONSCAN(R).
Although the IONSCAN(R) was approved in 1992 by the FAA for screening electronic
items, there has been only limited use of it for such purpose.
Although most airports use manual searching to resolve concerns about
checked baggage and to provide enhanced security of certain carry-on baggage,
the Company believes that as a result of recent governmental initiatives,
governmental regulators will require deployment of more sophisticated equipment,
such as the IONSCAN(R). Currently, IONSCAN(R)s are used in 15 airports
throughout the world in explosives detection applications.
Other Transportation Security
IONSCAN(R)s also are employed in explosives detection applications in other
segments of the transportation industry. In Europe, IONSCAN(R)s are in use at
the Eurotunnel, which connects England and France, to scan vehicles and freight
for explosive materials. In addition, IONSCAN(R)s are used by British Rail and
train systems operating in the Eurotunnel to test for explosive materials. The
Company believes that this market will experience substantial growth as
governmental authorities increasingly recognize that terrorist acts, such as the
poison gas incidents in Tokyo in 1995, may involve other forms of public
transportation, such as
28
<PAGE> 30
railroads and subways. However, there can be no assurance as to the ultimate
size of this market or as to the technologies that will be used to implement any
increased security measures.
Building Security and Forensics
IONSCAN(R)s are deployed at numerous facilities around the world, such as
large electric utilities and landmark buildings, that are perceived as
potentially likely targets for terrorist attacks. For instance, IONSCAN(R)s
currently are in use at the World Trade Center in New York as a result of the
bombing there in 1993. In addition, the Company recently sold several
IONSCAN(R)s to the GSA, which is responsible for the maintenance and security of
U.S. government buildings. In the wake of incidents such as the 1995 Oklahoma
City bombing and the bombing in Atlanta during the 1996 Summer Olympics, the
Company believes that this market will experience significant growth as the need
for physical security measures at public facilities increases, although there
can be no assurance as to the growth of this market for the IONSCAN(R). The
Company believes that the IONSCAN(R) is particularly well suited for this
application because of its fast scanning time, its high throughput and its low
cost compared to other available detection technologies.
Customers, such as the FBI, the New York City Police Department, and
military forces in Europe and the Middle East use the IONSCAN(R) for forensic
purposes to test debris for traces of explosives and other chemicals following
the occurrence of a bombing or explosion. For example, IONSCAN(R)s were used to
test debris from the crash of TWA flight 800 and at the site of the 1995
Oklahoma City bombing.
DRUG APPLICATIONS
Drug Interdiction
As a result of the increased usage of illegal narcotics, governmental
agencies in the United States and around the world are refining their drug
interdiction techniques. Metal detectors, X-ray equipment, random manual
searching and the use of canines have not resulted in sufficient progress in
programs to suppress illegal drug trafficking, and governmental agencies have
been increasingly utilizing more sophisticated detection equipment, including
the IONSCAN(R), to supplement their drug interdiction efforts. Currently, law
enforcement agencies around the world, including the FBI, the DEA, customs
officials in the United States and eight other countries, the U.S. and Japanese
Coast Guards, police departments in 10 states and five foreign countries and a
number of federal and foreign prisons use the IONSCAN(R) for this purpose.
IONSCAN(R)s also are in use in drug interdiction efforts in 16 airports
throughout the world.
The Company expects that this market will continue to grow as a result of
continuing drug trafficking, increased governmental attention in this area and
increased budgets for anti-drug activities. The Company believes that it will be
well-positioned to take advantage of the expected growth in this market because
of its large installed base, the breadth of its customers and the field
performance of the IONSCAN(R) to date, although no assurance can be given as to
the growth of the drug interdiction market for the IONSCAN(R).
Drug Detection
The increased usage of illegal narcotics also is driving sales of
IONSCAN(R)s to other entities for drug detection applications. For instance,
several large public utilities have purchased IONSCAN(R)s to test their
facilities, vehicles and employees for the presence of illegal narcotics. In
addition, various prisons in the United States, as well as in Canada and Mexico,
have purchased IONSCAN(R)s to test visitors and packages entering prisons, cell
blocks and vehicles for illegal narcotics. Drug rehabilitation centers also have
purchased IONSCAN(R)s to supplement their testing procedures for patients. The
Company believes that this market segment will experience additional growth as
other large utilities, prisons and drug rehabilitation centers seek to
supplement their current drug detection efforts, although no assurance can be
given as to the growth of the drug detection market for the IONSCAN(R).
29
<PAGE> 31
SALES AND MARKETING
The Company sells its products through a direct sales and support force of
18 persons located at its headquarters in New Jersey and at its offices in
Toronto, London and Paris. In addition, the Company has a network of independent
sales representatives located throughout Europe, the Middle East, Africa, Asia,
South America and Australia. See "Facilities." The Company also has entered into
sales representative agreements with Mitsubishi Heavy Industries for
distribution of the IONSCAN(R) in Japan. The Company's sales and marketing
efforts typically involve extensive customer visits, demonstrations and field
testing. Sales prospects generally are targeted by the Company or its
independent sales representatives, although the Company also responds to
requests for proposals.
Typically, the Company sells its IONSCAN(R) instruments for prices between
$50,000 and $95,000 per unit, depending principally on the configuration of the
unit and the purchaser's location. Once a sale is consummated, the Company
provides training at a customer's location to teach operators how to use the
IONSCAN(R), including proper sampling techniques. The Company generally provides
a one-year parts and labor warranty on its IONSCAN(R) instruments, although from
time to time the Company has entered into service contracts which include
extended warranties. To date, the Company's warranty claims experience has not
been significant.
The Company does not actively market its other specialty instruments or its
contract research and development services. However, from time to time the
Company responds to appropriate requests for proposals for non-IONSCAN(R)
instruments and such services. Although sales of such instruments and such
services have been material to the Company's historic results from time to time,
as a result of the expected increase in sales of the IONSCAN(R), the Company
does not expect that such sales will materially affect its results of operations
in future periods.
During 1995, no customer accounted for more than 10% of the consolidated
revenues of the Company. During 1994, one customer accounted for 10.8% of the
consolidated revenues of the Company.
BACKLOG
Although the Company's sales cycle is relatively long due to governmental
budgetary and procurement policies, once orders are placed customers typically
seek immediate delivery. Accordingly, for competitive purposes, the Company
follows the practice of manufacturing to a sales forecast. As a result, the
Company does not have a material backlog of orders for its instruments. The
Company anticipates that all of its instrument backlog at June 30, 1996 will be
shipped prior to December 31, 1996. Because the Company's funded research and
development activities are undertaken pursuant to contracts which typically run
for one or more fiscal periods, from time to time the Company has a backlog
relating to research and development activities to be performed in future
periods. Such backlog was not material at June 30, 1996. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
MANUFACTURING AND ASSEMBLY
The Company manufactures and assembles IONSCAN(R)s at its facility in
Toronto, Canada, and has recently expanded its capabilities to manufacture and
assemble IONSCAN(R)s at its facility in New Providence, New Jersey. The Company
intends to use a portion of the net proceeds from the Offering to augment its
existing manufacturing and assembling capabilities. See "Use of Proceeds."
Although many of the basic components of the IONSCAN(R), such as
chipboards, resistors, capacitors, liquid crystal displays and other similar
components, are readily available from a number of sources, the Company
typically purchases such components from single suppliers. A limited number of
components and sub-assemblies are manufactured for the Company, pursuant to the
Company's proprietary specifications, but the Company does not believe it is
dependent on any single source for these items. To date, the Company has not
experienced any difficulty in obtaining any components or sub-assemblies.
30
<PAGE> 32
COMPETITION
The Company competes with other entities, a number of which have
significantly greater financial, marketing and other resources than the Company.
Principal competitive factors include selectivity (the ability of an instrument
to identify the presence of a particular substance), sensitivity (the ability of
an instrument to detect small amounts of a particular substance), false alarm
rate, price, marketing, ease of use and speed of analysis. The Company believes
that it competes effectively with respect to each of these factors.
The Company competes for governmental expenditures with equipment
manufacturers utilizing other types of detection technologies, including
CATSCANs, enhanced X-ray and quadropole resonance, as well as with other forms
of trace particle detection equipment, such as gas chromatography and
chemoluminescence. Because trace particle detection equipment is used in certain
instances to verify detection results obtained by other enhanced detection
systems, the IONSCAN(R) and other trace particle detection equipment are used in
conjunction with systems utilizing imaging technolgies. As a result of recent
governmental initiatives, the Company anticipates that additional technologies
will be developed and that new competitors will enter the Company's markets. See
"Overview."
In the trace particle detection market, the Company's main competitor is
Thermedics, Inc. ("Thermedics"), which has greater financial, marketing and
other resources than the Company. However, the Company believes that the
IONSCAN(R) has certain advantages over Thermedics' instrument, including faster
speed of analysis, lower cost, greater portability, lower power consumption and
lower weight. Accordingly, the Company believes that it competes effectively
with Thermedics and will continue to do so, although no assurance can be given.
The Company also competes with the present use by various law enforcement
agencies of canines to locate the presence of explosives or drugs. Although
canines have a highly developed sense of smell and are able to follow a trail,
the Company believes that its IONSCAN(R) instruments are more effective and cost
efficient than canines, because they can operate 24 hours a day, have greater
selectivity than canines and can identify the composition of the substance
detected.
GOVERNMENT REGULATION
Although the Company's business is not subject to significant government
regulation, government regulation plays a large role in determining the demand
for the IONSCAN(R). In the United States and most foreign countries, the
aviation industry is highly regulated and authorities, such as the FAA in the
United States, have the ability to recommend or mandate use of enhanced
explosives detection equipment.
The FAA has adopted a certification protocol regarding the use of imaging
detection systems for use on checked baggage. See "Overview." The FAA is
currently developing a certification protocol for trace particle detection
equipment, which the Company believes will be finalized in the second quarter of
1997. Once the protocol is adopted, the Company believes that only instruments
meeting the FAA certification requirements will be approved for use by airlines
subject to FAA regulation. Although the final protocol has yet to be adopted,
based on early versions of the testing criteria, as well as discussions with
representatives of the FAA, the Company believes that the IONSCAN(R) will meet
the FAA's certification requirements, although no assurance can be given. The
FAA has approved the IONSCAN(R) for screening of electronic carry-on items, such
as cellular telephones, tape recorders and laptop computers. In addition, the
FAA recently issued a classified security directive that the Company believes
authorizes the use of certain trace particle detection equipment, including the
IONSCAN(R), on carry-on baggage.
UNFUNDED RESEARCH AND DEVELOPMENT
The Company's research and development expenses totaled $57,000, $151,000,
$362,000 and $182,000, for the six months ended June 30, 1996 and the years
ended December 31, 1995, 1994 and 1993, respectively. These amounts primarily
relate to the development and enhancement of the Company's IONSCAN(R)
instruments. All of these amounts were funded by the Company.
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<PAGE> 33
The Company intends to use a portion of the net proceeds from this Offering
to fund increased research and development of the IONSCAN(R). In addition to
further performance enhancements, the Company intends to combine the IONSCAN(R)
with other existing technologies, such as gas chromatography, to enable the
IONSCAN(R) to detect compounds contained in more difficult sampling media, such
as soil. The Company believes that the modified IONSCAN(R) would be able to
break down a complex matrix of chemicals to separate out the background material
and permit testing for the targeted substance on site instead of shipment of a
sample to an offsite laboratory for analysis. As a result, the modified
IONSCAN(R) could be utilized to field test for the presence of microscopic
organisms and other environmentally sensitive materials. In addition, the
Company intends to use a portion of the net proceeds of the Offering to fund the
development of a hand-held detector utilizing the same technology as the
IONSCAN(R). Such an instrument could be used, for instance, by law enforcement
officers to test for the presence of illegal narcotics during an investigation.
See "Strategy." In order to gain access to technology and manufacturing
expertise, the Company may also use a portion of the net proceeds of the
Offering to make strategic acquisitions or to enter into development joint
ventures. To date, the Company has not entered into any agreements or
understandings with respect to any such acquisitions or joint ventures. See "Use
of Proceeds."
PATENTS, TRADEMARKS AND PROPRIETARY RIGHTS
The Company holds, through BRL, an aggregate of 10 patents throughout the
world related to equipment, systems and techniques. While such patents may be
regarded as having substantial value, the Company's current business is not
deemed to be materially dependent upon either the aggregate of such patents or
any one of them individually. The Company relies primarily on unpatented
proprietary know-how in building the IONSCAN(R) which it protects through the
use of nondisclosure agreements and other methods. However, the basic technology
used in the IONSCAN(R) is not proprietary to the Company and the same
functionality contained in the IONSCAN(R) could be duplicated by the Company's
competitors without violating the Company's patents.
The Company's initial development of the IONSCAN(R) was funded in part by
Transport Canada and Revenue Canada. Pursuant to an agreement with the Canadian
government, the Company has received a worldwide, perpetual license to certain
unpatented technology developed from such work and pays Revenue Canada a royalty
equal to 1% of sales of all IONSCAN(R) units. This licensing arrangement remains
exclusive until March 31, 1999. The Company has entered into an agreement in
principle with Revenue Canada, pursuant to which the Company expects to obtain
the right to renew such exclusive arrangement on a year by year basis for up to
ten additional years at which time Revenue Canada would have the right to
license the technology to third parties. Revenue Canada has retained the right
to use the technology and to produce products incorporating such technology
although, to date, Revenue Canada has not attempted to do so.
The Company believes that the IONSCAN(R) registered trademark has gained
recognition in the markets for the Company's products and is a valuable
trademark.
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FACILITIES
The Company does not own any real property and currently conducts its
operations at the following leased premises:
<TABLE>
<CAPTION>
SQUARE ANNUAL LEASE
LOCATION FOOTAGE LEASE COST EXPIRATION USE
- -------------------------- ------- ---------- -------------- ----------------------
<S> <C> <C> <C> <C>
219 South Street 4,910 $ 78,000 March 1998 Corporate
New Providence, NJ 07974 headquarters, sales,
service and assembly
1730 Aimco Boulevard 28,380 $102,000* September 2005 Research,
Mississauga, Ontario, manufacturing and
Canada L4W 1V1 assembly, sales,
service and
administrative
Aeroport DeParis 1,060 $ 21,000 February 1998 Sales and service
Riossytech
BP 10614-1 Rue Du Cercle
95724, Roissy C.D.G.
France
Unit 3 at Manor Royal 1,560 $ 19,000 February 1998 Sales and service
Crawley, West Sussex
England RH10 2QU
</TABLE>
- ---------------
* Increases to $156,000 on September 1, 2000.
EMPLOYEES
As of June 30, 1996, the Company had 62 full-time and 6 part-time employees
of whom 26 were engaged in manufacturing, 18 were engaged in research and
development activities, 16 of whom have advanced degrees (including 6
doctorates) and 24 were engaged in sales, service and general administration.
None of the Company's employees is represented by any union, and the Company
considers its relationships with its employees to be satisfactory.
LITIGATION
The Company is not a party to any material legal proceedings.
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<PAGE> 35
MANAGEMENT
The following table sets forth the names and ages of the members the
Company's Board of Directors and its executive officers, and the positions with
the Company and its subsidiaries held by each:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------- --- ---------------------------------------
<S> <C> <C>
Stanley S. Binder 54 Director, President and Chief Executive
Officer of the Company; Director of BRL
John H. Davies 60 Director and Executive Vice President
of the Company; President, Chief
Executive Officer and Director of BRL
John J. Harte 54 Director and Vice President, Special
Projects, of the Company
Richard D. Condon 61 Director of the Company
John D. Abernathy 59 Director of the Company
James C. McGrath 54 Director of the Company
Richard S. Rosenfeld 50 Vice President-Finance, Chief Financial
Officer, Treasurer and Assistant
Secretary of the Company
Kenneth S. Wood 44 Vice President and Secretary of the
Company; President of Barringer
Instruments, Inc. ("BII")
</TABLE>
Mr. Stanley S. Binder, is a Director and the President and Chief Executive
Officer of the Company. He has been a director of the Company since 1991. Mr.
Binder also is a Director of Labco and BRL. In July 1989, Mr. Binder joined the
Company and has since held the following offices with the Company: President
from 1989 to the present date, Chief Operating Officer from 1989 to June 1990,
Chief Financial Officer from 1989 until July 1993, and Chief Executive Officer
from July 1990 to the present date. Mr. Binder also is an independent General
Partner in the Special Situations Fund III, L.P. ("SSF III"), a substantial
investor in the Company. See "Certain Relationships and Related Transactions."
Mr. Binder is chairman of the New Jersey Counsel of the American Electronics
Association and a member of the Board of Directors of the American Electronics
Association.
Mr. John H. Davies, is a Director and Executive Vice President of the
Company and the President, Chief Executive Officer and a Director of BRL. Mr.
Davies has been an Executive Vice President and Director of the Company since
January 1992. Mr. Davies joined BRL in 1967 and has been the President and Chief
Executive Officer of BRL since August 1989.
Mr. John J. Harte, is a Director and Vice President, Special Projects, of
the Company. He has been Vice President, Special Projects since 1991 and has
been Director since joining the Company in 1986. Mr. Harte also is the Chairman
of the Board of Labco. He is a certified public accountant and, since 1978, has
been a Vice President of Mid-Lakes Distributing Inc., a manufacturer and
distributor of heating and air conditioning parts and equipment located in
Chicago, Illinois.
Mr. Richard D. Condon, has been a Director of the Company since February
1992. Since 1989, he has been a consultant to and director of Analytical
Technology, Inc., Boston, Massachusetts, a scientific instrumentation company.
Mr. John D. Abernathy, a Director of the Company since October 1993, is a
certified public accountant. Since January 1995, he has been Executive Director
of the law firm of Patton Boggs, LLP. From March 1994 to January 1995, he was a
financial and management consultant. From March 1991 to March 1994, he was the
Managing Director of Summit, Solomon & Feldesman, a law firm in dissolution
since March 1993. From July 1983 until June 1990, Mr. Abernathy was Chairman and
Chief Executive Partner of BDO Seidman, a public accounting firm. He also is a
Director of Oakhurst Company, Inc., a distributor of automotive parts and
34
<PAGE> 36
accessories, and Wahlco Environmental Systems, Inc., a manufacturer of air
pollution control and power plant efficiency equipment.
Mr. James C. McGrath, a Director of the Company since January 1994, is an
international security consultant. Since July 1989, he has been President of
McGrath International, Inc., a management consulting firm specializing in the
security field.
Mr. Richard S. Rosenfeld, a certified public accountant, has been Vice
President-Finance and Chief Financial Officer of the Company since July 1993. He
has been the Treasurer and Assistant Secretary of the Company since January
1992, and was a consultant to the Company from July 1991 to December 1991.
Mr. Kenneth S. Wood, has been a Vice President of the Company and the
President of BII since January 1992 and the Secretary of the Company since March
1993. He was Vice President of Operations for BII from April 1990 to January
1992. From July 1978 until April 1990, he was Program Director for Lockheed
Electronics, the principal business of which is aerospace and defense
electronics.
All directors hold office until the next annual meeting of stockholders and
until their successors have been duly elected and qualified. The Company's
Directors are elected by the holders of the Company's Common Stock, Class A
Convertible Preferred Stock and Class B Convertible Preferred Stock voting as a
single class. There are no family relationships among any of the directors or
executive officers.
COMPENSATION OF DIRECTORS
Outside directors are entitled to an annual retainer of $2,500 per quarter
and a fee of $1,000 for each meeting attended. Although Mr. Harte is a
non-employee director, he does not participate in the Company's compensation
plan for non-employee directors. Mr. Harte receives a fee of $2,000 per month
for services he renders to the Company, and a fee of $1,000 for each meeting he
attends in his capacity as a director. See "Employment Agreements and
Compensation Arrangements."
The Board of Directors has adopted the 1991 Directors Warrant Plan (the
"1991 Warrant Plan"), under which each non-employee director, upon election or
appointment to the Board, is offered 3,750 warrants, at $0.40 per warrant, each
of which may be exercised within five years to purchase one share of Common
Stock at an exercise price to be determined by the Board at the time the
warrants are issued, which may not be less than the then current market price
for the shares underlying the warrants. The 1991 Warrant Plan provides that each
such new director shall use the first quarterly director's fee to pay the
purchase price for such warrants.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Tenth of the Certificate of Incorporation and Section 10 of the
Company's by-laws, as amended ("By-laws"), provide that the Company shall, to
the fullest extent permitted by law, indemnify each person (including the heirs,
executors, administrators and other personal representatives of such person)
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement, actually and reasonably incurred by such person in connection
with any threatened, pending or actual suit, action or proceeding (whether
civil, criminal, administrative or investigative in nature or otherwise) in
which such person may be involved by reason of the fact that he or she is or was
a director or officer of the Company or is serving any other incorporated or
unincorporated enterprise in any of such capacities at the request of the
Company. Such provisions may provide indemnification to the officers and
directors of the Company for liability under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
35
<PAGE> 37
EXECUTIVE COMPENSATION
The following table sets forth a summary of all compensation paid for the
past three fiscal years to the President and Chief Executive Officer of the
Company, the Chief Financial Officer of the Company and each other executive
officer of the Company whose total annual salary and bonus are $100,000 or more:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------
AWARDS
ANNUAL COMPENSATION ------------------------- PAYOUTS
------------------------------- RESTRICTED SECURITIES ------- ALL OTHER
SALARY BONUS OTHER ANNUAL STOCK UNDERLYING LTIP COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS ($)(1)
- ------------------------------- ---- ------- ------ ------------ ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stanley S. Binder 1995 171,491 -- -- -- 45,000 -- 5,940
President and Chief 1994 167,757 -- -- -- -- -- 5,940
Executive Officer 1993 148,272 17,400 -- -- -- -- 5,492
John H. Davies 1995 125,775* -- 12,149(2) -- 31,250 -- --
Executive Vice President 1994 120,582* -- -- -- -- -- 5,741
of the Company; President 1993 115,785* 15,600 -- -- -- -- --
and Chief Executive Officer
of Barringer Research Ltd.
Kenneth S. Wood 1995 114,190 -- -- -- 26,250 -- 2,283
Vice President and Secretary 1994 109,751 -- -- -- -- -- 2,436
of the Company; President 1993 97,874 14,400 -- -- -- -- 2,386
of Barringer Instruments,
Inc.
Richard S. Rosenfeld 1995 96,000 -- -- -- 22,500 -- 4,410
Vice President Finance, 1994 90,400 -- -- -- -- -- 4,545
Treasurer and Chief 1993 68,094 12,600 -- -- -- -- 1,976
Financial Officer of the
Company
</TABLE>
- ---------------
* Amounts converted to U.S. dollars at the average exchange rate for the
respective year.
(1) Represents amounts contributed by the Company pursuant to the Company's
tax-qualified 401(k) deferred compensation plan ("401(k) Plan"). The 401(k)
Plan provides that the Company will make matching contributions to the
participants in the 401(k) Plan equal to 100% of the first 2% of a
participant's salary contributed and 50% of the next 5% of a participant's
salary contributed, which contributions vest proportionately over a
five-year period commencing at the end of the participant's first year with
the Company.
(2) The other annual compensation for Mr. John Davies represented the payment of
previously accrued and unpaid vacation pay.
The following table summarizes certain information relating to the grant of
options to purchase Common Stock to each of the executives included in the
Summary Compensation Table above:
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE
OPTIONS/SARS EMPLOYEES IN OR BASE PRICE EXPIRATION
NAME GRANTED(#)(2) FISCAL YEAR(3) ($/SH) DATE
----------------------------------- ------------- ---------------- ------------- ----------
<S> <C> <C> <C> <C>
Stanley S. Binder.................. 45,000 24.80% $2.00 3/10/2000
John H. Davies..................... 31,250 17.20 $2.00 3/10/2000
Kenneth S. Wood.................... 26,250 14.50 $2.00 3/10/2000
Richard S. Rosenfeld............... 22,500 12.40 $2.00 3/10/2000
</TABLE>
- ---------------
(1) The Company did not grant any stock appreciation rights in 1995.
36
<PAGE> 38
(2) The stock options expire on March 10, 2000. Forty percent of each option
grant is exercisable after the first year, sixty percent after the second
year, eighty percent after the third year and one hundred percent after the
fourth year. See Note 7 of Notes to Consolidated Financial Statements.
(3) Options covering a total of 181,375 shares of Common Stock were granted in
1995.
In April 1996, the Company granted non-qualified options covering a total
of 253,000 shares of Common Stock to certain officers and directors of the
Company. These options are exercisable at $1.00 per share and expire on April
25, 2001. Twenty-five percent of each option grant was exercisable immediately,
fifty percent is exercisable after the first year, seventy-five percent is
exercisable after the second year and one-hundred percent is exercisable after
the third year.
The following table sets forth information with respect to the executive
officers named in the Summary Compensation Table concerning the exercise of
stock options during 1995 and unexercised options held by such executive
officers as of December 31, 1995:
AGGREGATED OPTION EXERCISES IN 1995 AND
FISCAL YEAR-END OPTION VALUES
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES SECURITIES UNDERLYING AT YEAR-END(1)
ACQUIRED VALUE OPTIONS/SARS AT YEAR-END --------------------
ON EXERCISE REALIZED ------------------------ EXERCISABLE/
NAME (#) ($) EXERCISABLE/UNEXERCISABLE UNEXERCISABLE
--------------------------- ----------- -------- ------------------------ --------------------
<S> <C> <C> <C> <C>
Stanley S. Binder.......... -- -- 0/45,000 --
John H. Davies............. -- -- 0/31,250 --
Kenneth S. Wood............ -- -- 3,000/38,250 --
Richard S. Rosenfeld....... -- -- 1,250/27,500 --
</TABLE>
- ---------------
(1) The exercise price of such options exceeded the market price of the
underlying Common Stock on December 31, 1995.
BRL maintained a defined benefit pension plan for its Canadian employees
that was terminated on December 31, 1993. Mr. Davies was a participant in that
plan. His projected annual benefit at age 65 has been set at approximately
$54,000, which amount may be subject to change only in response to changes in
the Canadian pension regulatory scheme.
1990 OPTION PLAN
The Company maintained an option plan (the "1990 Option Plan") pursuant to
which the Company was authorized to issue options covering a total of 100,000
shares of Common Stock. No shares are available for issuance under the 1990
Option Plan. However, options covering a total of 32,500 shares of Common Stock
remain outstanding thereunder. Options granted pursuant to the 1990 Option Plan
are exercisable after the expiration of two years from the date of grant and
expire five years after the date of grant.
EXERCISE PROGRAM
In connection with the options granted by the Company to its employees, the
Board of Directors has approved a stock option exercise program (the "Exercise
Program"). The Exercise Program permits all employees of the Company and its
subsidiaries who are granted stock options (pursuant to either qualified or
non-qualified plans) to finance the exercise of such options by causing the
Company to issue the shares underlying such options upon receipt by the Company
from the employee of a full-recourse demand note evidencing indebtedness to the
Company in an amount equal to the exercise price. Such loans, which are secured
by the underlying shares of Common Stock, are interest-free for one year from
the date on which the employee exercises his or her option, after which interest
accrues at the prime rate, which rate is changed
37
<PAGE> 39
monthly. The loans are repaid with a portion of the proceeds from the sale of
the Common Stock to be received by the employees upon the exercise of their
options.
EMPLOYMENT AGREEMENTS AND COMPENSATION ARRANGEMENTS
The Company has entered into an Employment Agreement with Stanley S.
Binder, the President and Chief Executive Officer of the Company, (the
"Employment Agreement"), pursuant to which Mr. Binder receives $171,000 as
compensation, subject to increases equal to percentage increases in the Consumer
Price Index as well as by increases authorized by the Company's Executive
Compensation Committee. The Employment Agreement provides that it will be
automatically renewed each year, unless either party gives the other six months
prior written notice of non-renewal. In addition, under the Employment Agreement
Mr. Binder received an option to purchase 25,000 shares of Common Stock at an
exercise price of $4.00 per share, which approximated market value at the time
that the Employment Agreement was executed. In addition, Mr. Binder received a
non-qualified option to purchase 25,000 shares of Common Stock at an exercise
price of $8.00 per share, subject to anti-dilution provisions, which option
became exercisable immediately as to all shares subject thereto. Such
non-qualified option has been exercised by Mr. Binder, pursuant to the Stock
Option Exercise Program. See "Certain Relationships and Related Transactions."
During 1995, Mr. Binder received a non-qualified option to purchase 45,000
shares of the Company's Common Stock at $2.00 per share.
The Company expects to enter into employment agreements with both Kenneth
S. Wood and Richard S. Rosenfeld which will run for a term of one year, subject
to automatic renewal unless either the employee or the Company gives the other
party to the employment agreement 90 days' prior written notice of non-renewal.
Pursuant to the employment agreements, Messrs. Wood and Rosenfeld will receive
annual base salaries of $111,815 and $96,000, respectively, subject to periodic
increases at the discretion of the Board of Directors, and will be entitled to
participate in any cash bonus plan maintained by the Company. Both of the
employment agreements will provide, among other things, that, in the event of a
termination of employment by the Company without cause, or a termination by the
employee in certain circumstances following a "change in control" of the
Company, the employee will be entitled to receive certain severance benefits
(payable in equal monthly installments) determined on a formula basis. Both of
the employment agreements also will contain certain confidentiality and
non-competition provisions which would continue in effect following the
termination of the employee's employment by the Company.
The Company has entered into a Consulting Agreement with John J. Harte (the
"Consulting Agreement") pursuant to which Mr. Harte receives $2,000 per month as
compensation. The Consulting Agreement provides that it will be automatically
renewed each year, unless either party gives the other six months prior written
notice of non-renewal. In addition, under the Consulting Agreement, Mr. Harte is
entitled to participate in any grant of stock options to outside board members.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee is comprised of Messrs. Abernathy,
Harte and McGrath. During the fiscal year ended December 31, 1995, Mr. Harte was
also the Vice President, Special Projects, of the Company. Messrs. Abernathy and
McGrath were not officers or employees of the Company during fiscal 1995.
Mr. Harte is Chairman of the Board of Labco, and Mr. Binder is a Director
of Labco. Mr. Binder serves on the compensation committee of Labco's Board of
Directors. Except as described herein, no executive officer of the Company and
no member of the Compensation Committee is a member of any other business entity
that has an executive officer that sits on the Company's Board or on the
Compensation Committee. In January 1996, Mr. Binder received an option to
purchase 10,000 shares of Labco common stock at an exercise price equal to the
fair market value of the Labco Common Stock on the date of grant. For certain
other transactions between Labco and the Company, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Overview."
38
<PAGE> 40
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of August 26, 1996, the number of shares
of Common Stock, Class A Convertible Preferred Stock and Class B Convertible
Preferred Stock owned by each executive officer named in the Summary
Compensation Table, each director and all directors and executive officers as a
group and any persons (including any "group" as used in Section 13(d)(3) of the
Securities Exchange Act of 1934) known by the Company to own beneficially 5% or
more of such securities. As of August 26, 1996, there were 3,506,474 shares of
Common Stock, 74,008 shares of Class A Convertible Preferred Stock and 207,500
shares of Class B Convertible Preferred Stock issued and outstanding. As of that
date, none of the executive officers and directors of the Company owned shares
of the Company's Class A Convertible Preferred Stock or Class B Convertible
Preferred Stock. The business address for all of the executive officers and
directors of the Company is 219 South Street, New Providence, New Jersey 07974.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP OF CLASS A CONVERTIBLE CLASS B CONVERTIBLE
COMMON STOCK(1)(2) PREFERRED STOCK PREFERRED STOCK
------------------------ ------------------------ ------------------------
NAME OF NUMBER OF PERCENT OF NUMBER OF PERCENT OF NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES CLASS SHARES CLASS SHARES CLASS
- ------------------------------- --------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Stanley S. Binder.............. 110,386(3) 3.1% -- -- -- --
John H. Davies................. 93,295(4) 2.6 -- -- -- --
John J. Harte.................. 53,440(5) 1.5 -- -- -- --
Richard D. Condon.............. 20,500(6) * -- -- -- --
John D. Abernathy.............. 22,454(7) * -- -- -- --
James C. McGrath............... 20,500(6) * -- -- -- --
Kenneth S. Wood................ 47,574(8) 1.3 -- -- -- --
Richard S. Rosenfeld........... 36,161(9) 1.0 -- -- -- --
All directors and executive
officers as a group
consisting of eight (8)
persons...................... 404,309 10.8 -- -- -- --
Austin W. Marxe................ 966,522(10) 27.6 -- -- -- --
153 E. 53rd St.
New York, NY 10022
John R. Purcell................ 35,583 * -- -- 100,000 48.2%
700 Canal Street
Stamford, CT 06902-5921
Herbert Boeckmann II........... 21,350 * -- -- 60,000 28.9
155595 Roscoe Blvd.
Sepulveda, CA 93134-6503
R.R. Bowlin.................... 8,895 * -- -- 25,000 12.0
2300 West Jefferson
Ft. Wayne, IN 46802-4695
Esther & Carlos Otto........... 5,086 * 14,060 19.0% -- --
5245 Fishing Bridge
Cheyenne, WY 82009
Elizabeth Butenschoen.......... 2,362 * 6,530 8.8 -- --
434 Catskill Drive
Colfax, CA 95713
Max Gerber..................... 4,447 * -- -- 12,500 6.0
26 Broadway
New York, NY 10004-1776
</TABLE>
- ---------------
* Less than 1%
(1) Assumes the exercise of all outstanding warrants for Common Stock, the
conversion of each outstanding share of Convertible Preferred Stock, Class
A Convertible Preferred Stock and Class B Convertible Preferred Stock into
Common Stock, the conversion of the Debentures into shares of Common Stock
and the issuance of all shares of Common Stock subject to options
exercisable within 60 days of August 26, 1996 for each person or entity.
(2) Certain amounts shown are subject to adjustment in certain circumstances.
(3) Includes 31,750 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of August 26, 1996, 12,500 shares of Common
Stock issuable upon exercise of warrants and 3,636 shares of Common Stock
39
<PAGE> 41
issuable upon conversion of Debentures owned by Mr. Binder. Excludes
558,561 shares of Common Stock owned by SSF III, of which Mr. Binder is an
independent General Partner. Mr. Binder disclaims beneficial ownership of
such shares.
(4) Includes 22,063 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of August 26, 1996, 12,500 shares of Common
Stock issuable upon exercise of warrants and 5,454 shares of Common Stock
issuable upon conversion of Debentures owned by Mr. Davies.
(5) Includes 6,750 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of August 26, 1996, 12,500 shares of Common
Stock issuable upon exercise of warrants and 9,090 shares of Common Stock
issuable upon conversion of Debentures owned by Mr. Harte.
(6) Includes 6,750 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of August 26, 1996 and 8,750 shares issuable
upon exercise of warrants.
(7) Includes 6,750 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of August 26, 1996, 6,250 shares of Common Stock
issuable upon exercise of warrants and 5,454 shares of Common Stock
issuable upon conversion of Debentures owned by Mr. Abernathy.
(8) Includes 33,938 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of August 26, 1996 and 3,636 shares of Common
Stock issuable upon conversion of Debentures owned by Mr. Wood.
(9) Includes 22,125 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of August 26, 1996, 5,000 shares of Common Stock
issuable upon exercise of warrants and 3,636 shares of Common Stock
issuable upon conversion of Debentures owned by Mr. Rosenfeld as custodian
for a minor child.
(10) Includes (i) 369,553 shares of Common Stock, 256,667 shares of Common Stock
issuable upon the exercise of warrants and 72,727 shares issuable upon
conversion of Debentures owned by SSF III, and (ii) 83,333 shares of Common
Stock, 93,333 shares of Common Stock issuable upon the exercise of warrants
and 90,909 shares issuable upon conversion of Debentures owned by Special
Situations Cayman Fund, L.P. (the "Cayman Fund"). AWM Investment Company,
Inc. ("AWM") is the sole general partner of the Cayman Fund and the sole
general partner of MGP Advisors Limited ("MGP"), a general partner of SSF
III. Mr. Marxe is the President and Chief Executive Officer of AWM and the
principal limited partner of MGP. As such Mr. Marxe may be deemed to be the
beneficial owner of all of the shares held by SSF III and the Cayman Fund.
Stanley S. Binder, the Company's President and Chief Executive Officer, is
an independent general partner of SSF III. Mr. Binder disclaims beneficial
ownership of all shares held by SSF III.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the Exercise Program, on April 21, 1994, Mr. Binder and Mr.
Wood exercised options to purchase 37,500 shares of Common Stock and 10,000
shares of Common Stock, respectively, in exchange for which Mr. Binder and Mr.
Wood executed notes payable to the Company in the amount of $203,000 and
$71,600, respectively. In 1995, for the period in which no interest accrued to
the Company (from January 1, 1995 through April 21, 1995), Mr. Binder and Mr.
Wood received benefits of $5,469 and $1,929 respectively, under the Stock Option
Exercise Program, representing interest otherwise payable on such notes.
On May 9, 1995 the Company sold to SSF III, of which Mr. Binder is an
independent General Partner with approximately .01% interest in such
partnership, and to the Cayman Fund, an affiliate of SSF III (collectively, with
SSF III, "SSF"), an aggregate of 125 units at a purchase price of $6,000 per
unit for an aggregate purchase price of $750,000. Each unit consisted of 2,500
shares of Common Stock and a five-year warrant to purchase 2,500 shares of
Common Stock at $1.96 per share, subject to certain anti-dilution provisions. As
an inducement to enter into the transaction and in lieu of a transaction fee,
the Company also issued to SSF warrants, exercisable for three years, to
purchase an aggregate of 37,500 shares of Common Stock at $1.96 per share,
subject to certain anti-dilution provisions. In addition, on June 30, 1995, the
Company sold 22 units to certain officers and directors of the Company for an
aggregate purchase price of $132,000. Such units were identical to those sold to
SSF.
40
<PAGE> 42
For a description of certain transactions between Labco and the Company,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Overview." Mr. John Harte is Chairman of the Board of Labco and Mr.
Stanley Binder is a Director of Labco. See "Management - Compensation Committee
Interlocks and Insider Participation."
In July 1996, as part of a private placement and on the same terms as all
other investors, the Company issued Debentures in an aggregate amount of $50,000
and $150,000 to Herbert Gardner and William Barrett, respectively. Herbert
Gardner and William Barrett are officers of the Representative of the
Underwriters. Mr. Gardner and Mr. Barrett purchased the Debentures without any
understanding or agreement regarding this Offering. As part of the same private
placement, certain officers and directors of the Company purchased Debentures in
an aggregate principal amount of $85,000, and SSF purchased $200,000 in
principal amount of the Debentures.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The following is a brief summary of certain provisions of the capital stock
of the Company. Such summary does not purport to be complete and is qualified in
all respects by reference to the actual text of the Certificate of
Incorporation, a copy of which has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
The Company's authorized capital stock consists of 7,000,000 shares of
Common Stock, par value $.01 per share, 1,000,000 shares of Convertible
Preferred Stock, par value $1.25 per share, and 4,000,000 shares of Preferred
Stock, par value $2.00 per share, of which 270,000 shares are designated as
Class A Convertible Preferred Stock and 730,000 shares are designated as Class B
Convertible Preferred Stock. As of August 26, 1996, the Company had outstanding
3,506,474 shares of Common Stock, no shares of Convertible Preferred Stock,
74,008 shares of Class A Convertible Preferred Stock and 207,500 shares of Class
B Convertible Preferred Stock. Upon completion of the Offering, the Company will
have outstanding 4,506,474 shares of Common Stock (4,656,474 shares if the
Underwriters' over-allotment option is exercised in full). In addition, the
Company will have 2,059,244 shares of Common Stock (2,134,244 shares if the
Underwriters' overallotment option is exercised in full) reserved for issuance
pursuant to outstanding options and the Warrants, and upon conversion or
exercise of outstanding securities. See "Shares Eligible For Future Sale." As of
August 26, 1996, there were approximately 965 record holders of Common Stock.
COMMON STOCK
The holders of shares of Common Stock are entitled to one vote for each
share on all matters on which the holders of Common Stock are entitled to vote.
Subject to the rights of the outstanding shares of Convertible Preferred Stock
and Preferred Stock, the holders of the Common Stock are entitled to receive
ratably such dividends as may be declared by the Company's Board of Directors
out of funds legally available therefor. Holders of Common Stock are entitled to
share ratably in the net assets of the Company upon liquidation or dissolution
after payment or provision for all liabilities and the preferential liquidation
rights of the Convertible Preferred Stock and Preferred Stock then outstanding.
The holders of Common Stock have no pre-emptive rights to purchase any shares of
any class of stock of the Company. All outstanding shares of Common Stock are,
and the shares of Common Stock to be issued pursuant to the Offering will be,
upon payment therefor, fully paid and nonassessable.
PREFERRED STOCK
The Company's Preferred Stock may be issued from time to time in one or
more classes or series, and the Company's Board of Directors is authorized,
subject to any limitations prescribed by Delaware law, to fix the rights,
preferences and privileges of the shares and the qualifications, limitations or
restrictions thereon, the number of shares constituting such class or series and
the designation thereof, without any further vote or action by the stockholders.
Unless the designations establishing a particular series of Preferred Stock
provide
41
<PAGE> 43
that the shares of such series of Preferred Stock rank junior to the Convertible
Preferred Stock, all outstanding shares of Preferred Stock will rank pari passu
with the Convertible Preferred Stock.
One of the effects of undesignated Preferred Stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a tender offer, proxy contest, merger
or otherwise, and thereby to protect the continuity of the Company's management.
Depending upon the rights of such Preferred Stock, the issuance of additional
Preferred Stock could adversely affect the holders of Common Stock. For example,
Preferred Stock issued by the Company may rank senior to the Common Stock as to
dividend rights, liquidation preference or both, may have full or limited voting
rights and may be convertible into shares of Common Stock. Accordingly, the
issuance of shares of Preferred Stock may discourage bids for the Common Stock
at a premium or may otherwise adversely affect the market price of the Common
Stock.
The Company's Board of Directors has designated two series of Preferred
Stock, the Class A Convertible Preferred Stock and the Class B Convertible
Preferred Stock.
Class A Convertible Preferred Stock
Holders of Class A Convertible Preferred Stock are entitled to receive or
have set apart for payment, when and as declared by the Company's Board of
Directors, cumulative dividends at an annual rate of $.16 per share, payable
semiannually in cash or shares of Common Stock at the Company's option. Holders
of shares of Class A Convertible Preferred Stock are entitled to convert each
share of Class A Convertible Preferred Stock into .361745 of a share of Common
Stock. The number of shares of Common Stock into which each share of Class A
Convertible Preferred Stock is convertible is subject to adjustment in certain
events. The Class A Convertible Preferred Stock is redeemable any time, at the
Company's option, after the closing price of the Common Stock has been $12.00 or
more for ninety (90) consecutive trading days, in whole or in part, at $2.00 per
share, plus accrued dividends. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company, holders of
Class A Convertible Preferred Stock will be entitled to a liquidation preference
of $2.00 per share plus accrued dividends. Holders of Class A Convertible
Preferred Stock are entitled to vote on all matters on which the holders of
shares of Common Stock are entitled to vote, vote together with the holders of
the Common Stock the Convertible Preferred Stock and the Class B Convertible
Preferred Stock as a single class, and in such circumstances will be entitled to
that number of votes which is equal to the number of shares of Common Stock into
which each share of Class A Convertible Preferred Stock held by such holder is
then convertible. Holders of Class A Convertible Preferred Stock also are
entitled to vote as a class in certain limited circumstances.
Class B Convertible Preferred Stock
Holders of Class B Convertible Preferred Stock are entitled to receive or
have set apart for payment, when and as declared by the Company's Board of
Directors, cumulative dividends at an annual rate of $.16 per share, payable
semiannually in cash or shares of Common Stock at the Company's option. Holders
of shares of Class B Convertible Preferred Stock are entitled to convert each
share of Class B Convertible Preferred Stock at any time after the date of
issuance thereof, into .355839 of a share of Common Stock. The number of shares
of Common Stock into which each share of Class B Convertible Preferred Stock is
convertible is subject to adjustment in certain events. The Class B Convertible
Preferred Stock is redeemable any time, at the Company's option, after the
closing price of the Common Stock has been $12.00 or more for ninety (90)
consecutive trading days, in whole or in part, at $2.00 per share, plus accrued
dividends. In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Company, holders of Class B Convertible
Preferred Stock will be entitled to a liquidation preference of $2.00 per share,
plus accrued dividends. Holders of Class B Convertible Preferred Stock are
entitled to vote on all matters on which the holders of Common Stock are
entitled to vote, together with the holders of Common Stock, the Convertible
Preferred Stock and the Class A Convertible Preferred Stock as a single class,
and in such circumstances will be entitled to that number of votes which is
equal to the number of shares of Common Stock into which each share of Class B
Convertible Preferred Stock held by such holder is then convertible.
42
<PAGE> 44
Holders of Class B Convertible Preferred Stock also are entitled to vote as a
class in certain limited circumstances.
CONVERTIBLE PREFERRED STOCK
No Convertible Preferred Stock is currently issued or outstanding, and the
Company has no current plan to issue any shares of Convertible Preferred Stock.
Holders of Convertible Preferred Stock, when and if issued, will be entitled to
receive or have set apart for payment, when and as declared by the Company's
Board of Directors, cumulative dividends at an annual rate of $.10 per share,
payable semi-annually in Common Stock. Holders of shares of Convertible
Preferred Stock will be entitled to convert each share of Convertible Preferred
Stock at any time prior to the fourth anniversary of the date of issuance
thereof, into one (1) share of Common Stock. The Company will be entitled to
force a conversion of the Convertible Preferred Stock, but not with respect to
less than all of the outstanding shares, upon the occurrence of certain events
The number of shares of Common Stock into which each share of Convertible
Preferred Stock is convertible is subject to adjustment in certain events. In
the event of any voluntary or involuntary liquidation, dissolution or winding up
of the affairs of the Company, holders of Convertible Preferred Stock will be
entitled to a liquidation preference of $1.25 per share. Holders of Convertible
Preferred Stock will be entitled to vote on all matters on which the holders of
Common Stock vote, together with the Common Stock, the Class A Convertible
Preferred Stock and the Class B Convertible Preferred Stock as a single class,
and in such circumstances will be entitled to that number of votes which is
equal to the number of shares of Common Stock into which each share of
Convertible Preferred Stock held by such holder is then convertible. Holders of
Convertible Preferred Stock will also be entitled to vote as a class in certain
circumstances including, a merger, consolidation, a sale of substantially all of
the Company's assets and the adoption of stock option or other incentive plans.
CERTAIN CHARTER PROVISIONS
The Company's Certificate of Incorporation contains provisions which
require the favorable vote by the holders of not less than 80% of the
outstanding shares of Common Stock for the approval of any merger, consolidation
or other combination with, or sale, lease or exchange of all or substantially
all of the assets of the Company to, another entity holding more than 10% of the
Company's outstanding voting equity securities or any affiliate of such entity.
These provisions could discourage potential acquisition proposals, delay or
prevent a change in control of the Company and limit the price that certain
investors might be willing to pay in the future for shares of the Company's
Common Stock.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Section 203 of the Delaware General Corporation Law generally restricts a
corporation from entering into certain business combinations with an interested
stockholder (defined as any person or entity that is the beneficial owner of at
least 15% of a corporation's voting stock) or its affiliates for a period of
three years after the date of the transaction in which the person became an
interested stockholder unless (i) the transaction is approved by the board of
directors of the corporation prior to such business combination, (ii) the
interested stockholder acquires 85% of the corporation's voting stock in the
same transaction in which it exceeds 15%, or (iii) the business combination is
approved by the board of directors and by a vote of two-thirds of the
outstanding voting stock not owned by the interested stockholder. The Delaware
General Corporation Law provides that a corporation may elect not to be governed
by Section 203. At present, the Company does not intend to make such an
election. Section 203 may render more difficult a change in control of the
Company or the removal of incumbent management.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock and the Warrants is
American Stock Transfer & Trust Company, New York, New York.
43
<PAGE> 45
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, 4,506,474 shares of Common Stock will be
outstanding (4,656,474 shares, assuming exercise of the Underwriters'
over-allotment option). Up to 500,000 additional shares of Common Stock (575,000
shares, assuming exercise of the Underwriters' overallotment option) will be
issuable upon the conversion of the Warrants offered hereby. 623,164 of the
shares that will be outstanding upon consummation of the Offering are held by
officers, directors and other affiliates of the Company, all of which are freely
tradeable, subject to the lock-up described below. An additional 1,025,292
shares of Common Stock are issuable to such officers, directors and other
affiliates upon the conversion or exercise of outstanding securities, including
stock options. The Company recently registered for resale 967,042 shares of
Common Stock held by or issuable to officers, directors and other affiliates of
the Company upon the exercise or conversion of outstanding securities which had
previously been restricted. The Company also intends, in the near future, to
register for resale an additional 414,500 restricted shares of Common Stock
issuable upon exercise of options previously granted to officers and directors.
Thereafter, all 1,381,542 of such shares will be generally available for sale in
the open market by the holders thereof.
It is expected that the officers and directors of the Company, who hold an
aggregate of 681,934 shares of Common Stock (including shares issuable upon the
exercise or conversion of outstanding securities), will agree with the
Underwriters not to offer or sell, directly or indirectly, any securities of the
Company in the public market for a period of 180 days after the date of this
Prospectus, subject to certain exceptions, without the prior written consent of
Janney Montgomery Scott Inc. See "Underwriting."
DESCRIPTION OF WARRANTS
The following is a brief summary of certain provisions of the Warrants.
Such summary does not purport to be complete and is qualified in all respects by
reference to the actual text of the Warrant Agreement (the "Warrant Agreement")
between the Company, the Representative and American Stock Transfer & Trust
Company (the "Warrant Agent"). A copy of the Warrant Agreement has been filed as
an exhibit to the Registration Statement of which this Prospectus is a part. See
"Additional Information."
EXERCISE PRICE AND TERMS
Each Warrant entitles the registered holder thereof to purchase one-half of
a share of Common Stock at an exercise price of $ per share [120% of
the initial offering price per share] at any time during the period commencing
on the date of this Prospectus and terminating on , 1997 [twelve
months from the date of this Prospectus], $ per share [130% of the
initial offering price per share] at any time during the period commencing
, 1997 [twelve months from the date of this Prospectus] and
terminating on , 1998 [twenty-four months from the date of this
Prospectus] and $ per share [140% of the initial offering price] at any
time during the period commencing , 1998 [twenty-four months from
the date of this Prospectus] and terminating on , 1999 [thirty-six
months from the date of this Prospectus] subject to adjustment in accordance
with the anti-dilution and other provisions referred to below. The holder of any
Warrant may exercise such Warrant by surrendering the certificate representing
the Warrant to the Warrant Agent, with the subscription form thereon properly
completed and executed, together with payment of the exercise price. The
Warrants may be exercised at any time in whole or in part at the applicable
exercise price until expiration or redemption of the Warrants. No fractional
shares will be issued upon the exercise of the Warrants.
The exercise price of the Warrants has been set at a premium to the
existing market price of the Common Stock and bears no relationship to any
objective criteria of future value and, accordingly, should in no event be
regarded as an indication of any future market price of the Securities offered
hereby.
ADJUSTMENTS
The exercise price and the number of shares of Common Stock purchasable
upon the exercise of the Warrants are subject to adjustment upon the occurrence
of certain events, including stock dividends, stock
44
<PAGE> 46
splits, combinations or reclassifications of the Common Stock, or sale by the
Company of shares of its Common Stock or other securities convertible into
Common Stock (exclusive of shares issued upon the exercise or conversion of
outstanding options, warrants and convertible securities) at a price below the
market price (as defined) of the Common Stock. Additionally, an adjustment would
be made in the case of a reclassification or exchange of Common Stock,
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the surviving
corporation) or sale of all or substantially all of the assets of the Company in
order to enable Warrant holders to acquire the kind and number of shares of
stock or other securities or property receivable in such event by a holder of
the number of shares of Common Stock that might otherwise have been purchased
upon the exercise of the Warrant.
REDEMPTION PROVISIONS
Commencing six months from the date of this Prospectus, the Warrants are
subject to redemption by the Company, at $.25 per Warrant, upon not less than 30
days' prior written notice, if the bid price of the Common Stock as reported by
NASDAQ averages in excess of 200% of the applicable exercise price of the
Warrants for a period of 30 days ending within 15 days of the redemption notice
date. In the event that the Company exercises the right to redeem the Warrants,
such Warrants will be exercisable until the close of business on the date for
redemption fixed in the redemption notice. If any Warrant called for redemption
is not exercised by such time, it will cease to be exercisable and its holder
will be entitled only to the redemption price.
TRANSFER, EXCHANGE AND EXERCISE
The Warrants are in registered form and may be presented to the Warrant
Agent for transfer, exchange or exercise at any time on or prior to the earlier
of (i) the redemption date, or (ii) their expiration date three years from the
date of this Prospectus, at which time the Warrants become wholly void and of no
value. If a market for the Warrants develops, the holder may sell the Warrants
instead of exercising them. There can be no assurance, however, that a market
for the Warrants will develop or continue.
WARRANT HOLDER NOT A STOCKHOLDER
The Warrants do not confer upon holders any voting, dividend or other
rights as stockholders of the Company.
MODIFICATION OF WARRANTS
The Company and the Warrant Agent may make such modifications to the
Warrants as they deem necessary and desirable that do not adversely affect the
interests of the warrant holders. The Company may, in its sole discretion, lower
the exercise price of the Warrants for a period of not less than thirty days on
not less than thirty days' prior written notice to the warrant holders and the
Representative. Except as described above, modification of the number of
securities purchasable upon the exercise of any Warrant, the exercise price and
the expiration date with respect to any Warrant or any other modification to the
Warrants requires the consent of the holders of two-thirds of the outstanding
Warrants.
The Warrants are not exercisable unless, at the time of the exercise, the
Company has a current prospectus covering the shares of Common Stock issuable
upon exercise of the Warrants, and such shares have been registered, qualified
or are deemed to be exempt under the securities laws of the state of residence
of the exercising holder of the Warrants. Although the Company will use its best
efforts to have all the shares of Common Stock issuable upon exercise of the
Warrants registered or qualified on or before the exercise date and to maintain
a current prospectus relating thereto until the expiration of the Warrants,
there can be no assurance that it will be able to do so.
The Warrants are separately transferable immediately upon issuance.
Although the Securities will not knowingly be sold to purchasers in
jurisdictions in which the Securities are not registered or otherwise qualified
for sale, purchasers may buy Warrants in the aftermarket in, or may move to,
jurisdictions in which
45
<PAGE> 47
the shares underlying the Warrants are not so registered or qualified during the
period that the Warrants are exercisable. In this event, the Company would be
unable to issue shares to those persons desiring to exercise their Warrants, and
holders of Warrants would have no choice but to attempt to sell the Warrants in
a jurisdiction where such sale is permissible or allow them to expire
unexercised.
UNDERWRITER'S WARRANTS
In connection with this Offering, the Company has authorized the issuance
of the Underwriter's Warrants and has reserved 150,000 shares of Common Stock
for issuance upon exercise of such Underwriter's Warrants (including the
Warrants issuable upon exercise of the Underwriter's Warrants). The
Underwriter's Warrants will entitle the holder to acquire 100,000 shares of
Common Stock and 100,000 Warrants at an exercise price of $ per
Underwriter's Warrant and $ per Warrant. See "Underwriting."
46
<PAGE> 48
UNDERWRITING
Under the terms and subject to the conditions contained in the Underwriting
Agreement, each of the Underwriters named below (the "Underwriters") has
severally agreed to purchase, and the Company has agreed to sell to each such
Underwriter, the respective number of Securities set forth opposite the name of
such Underwriter below:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SECURITIES
----------------------------------------------------------------- -------------
<S> <C>
Janney Montgomery Scott Inc......................................
----------
Total.................................................. 1,000,000
==========
</TABLE>
The obligations of the Underwriters are subject to certain conditions
precedent. The Underwriters are obligated to take and pay for all of the
Securities offered hereby (other than those covered by the over-allotment option
described below), if any such Securities are taken.
The Underwriters for whom Janney Montgomery Scott Inc. is acting as
representative (the "Representative") propose to initially offer the Securities
directly to the public at the initial offering price set forth on the cover page
hereof and to certain dealers (who may be Underwriters) at a price that
represents a concession not in excess of $ per Share and $ per
Warrant under the initial offering price. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $ per Share and
$ per Warrant to other Underwriters or to certain other dealers. After
the commencement of the offering, the public offering prices and such
concessions may be changed by the Representative. The Representative has
informed the Company that it does not expect sales to discretionary accounts by
the Underwriters to exceed five percent of the Securities offered hereby.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to 150,000 additional
Shares and 150,000 additional Warrants at the offering prices set forth on the
cover page hereof, less Underwriting discounts and commissions. The Underwriters
may exercise such option to purchase additional Shares and Warrants solely for
the purpose of covering over-allotments, if any, incurred in connection with the
sale of the Securities offered hereby.
The Company and the Underwriters have agreed to indemnify each other
against certain liabilities that may be incurred in connection with the
Offering, including liability that may be incurred in connection with the
Offering under the Securities Act. In addition to underwriting discounts and
commissions, the Company has agreed to pay the Representative a non-accountable
expense allowance equal to 2% of the gross proceeds of this Offering.
The Company, and its present executive officers and directors, have agreed
not to offer, pledge, sell, contract to sell, grant any option for the sale of,
or otherwise dispose of, directly or indirectly, any securities of the Company
for a period of 180 days after the date of this Prospectus, subject to certain
exceptions, without the prior written consent of the Representative.
Certain Underwriters may engage in passive market making transactions in
the Common Stock on the NASDAQ Stock Market in accordance with Rule 10b-6A under
the Exchange Act prior to the commencement of offers or sales of Common Stock
offered hereby. Passive market making consists of displaying bids and effecting
transactions in the Common Stock at a price that is not in excess of the highest
bid price for the Common Stock that is displayed on NASDAQ by a market maker who
is not an Underwriter or an affiliated purchaser. New purchases on each day by a
passive market maker are limited to 30% of the average daily trading volume in
the Common Stock during the applicable period.
47
<PAGE> 49
Although it has no obligation to do so, the Representative currently
intends to make a market in the Company's Securities and may otherwise effect
transactions in such Securities. Such market-making activity may be discontinued
at any time.
In connection with this offering, the Company has agreed to sell to the
Representative, at a purchase price of $.0012 per Underwriter's Warrant,
Underwriter's Warrants to purchase from the Company 100,000 shares of Common
Stock and 100,000 Warrants (the "Underlying Warrants"). Each Underlying Warrant
entitles the holder to purchase one-half of a share of Common Stock. The
Underwriter's Warrants are exercisable for a period of four years commencing one
year after the date of this Prospectus at an exercise price (the "Exercise
Price") of 107% of the initial offering price of the Securities, 114% of the
initial offering price of the Securities commencing two years from the date of
this Prospectus, 121% of the initial offering price of the Securities commencing
three years from the date of this Prospectus and 128% of the initial offering
price of the Securities commencing four years from the date of this Prospectus.
The Underwriter's Warrants and the Underlying Warrants provide for adjustment in
the number of shares of Common Stock issuable upon the exercise thereof as a
result of certain events, including stock dividends, stock splits, combinations
and issuance of Common Stock for consideration less than the Exercise Price,
subject to certain exceptions. The Underwriter's Warrants are restricted and may
not be sold, transferred, assigned or hypothecated for a period of one year from
the date of this Prospectus, except to officers of the Representative. The
holders of Underwriter's Warrants and Underlying Warrants have no voting,
dividend or other rights as stockholders of the Company with respect to shares
underlying such warrants, or shares purchasable upon exercise of such warrants
until and to the extent shares of Common Stock have been purchased, upon
exercise of such warrants. The Underlying Warrants expire three years from the
date of this Prospectus.
If the Underwriter's Warrants to purchase Common Stock or the Underlying
Warrants are exercised, the value of the Common Stock held by public investors
will be diluted. The Underwriter's Warrants and the Underlying Warrants afford
the holders thereof the opportunity, at nominal cost, to profit from a rise in
the market price of the Common Stock, which may adversely affect the terms upon
which the Company could issue additional shares of Common Stock during the
four-year exercise period.
A new registration statement or post-effective amendment to the
registration statement of which this Prospectus is a part will be required to be
filed and declared effective before distribution to the public of shares of
Common Stock issuable upon exercise of the Underwriter's Warrants and the
Underlying Warrants (the "Warrant Shares"). The Company has agreed, on one
occasion when requested by the holders of a majority of the Warrant Shares and
the Underlying Warrants, to make necessary filings, at its expense (subject to a
maximum of $25,000), to permit a public offering of the Warrant Shares during
the period beginning one year after the date of this Prospectus and ending four
years thereafter, and to use its best efforts to cause such filing to become
effective and remain effective for a period of at least one year. In addition,
the Company has agreed, during the period commencing at the beginning of the
second year and concluding at the end of the fifth year after the effective date
of the Registration Statement, to give advance notice to holders of
Underwriter's Warrants, Underlying Warrants and Warrant Shares of its intention
to file a registration statement and, in such case, holders of such securities
shall have the right to require the Company to include the Warrant Shares and
the Underlying Warrants in such registration statement at the Company's expense
and to maintain the effectiveness of such registration statement for a period of
at least one year.
LEGAL MATTERS
The validity of the Securities offered hereby will be passed upon for the
Company by Lowenstein, Sandler, Kohl, Fisher & Boylan, P.A., Roseland, New
Jersey. Certain legal matters in connection with the Offering will be passed
upon for the Underwriters by Rosenman & Colin LLP, New York, New York.
48
<PAGE> 50
EXPERTS
The Consolidated Financial Statements included in the Prospectus of
Barringer Technologies Inc. and subsidiaries as of December 31, 1994 and 1995
and each of the years in the three-year period ended December 31, 1995, have
been audited by BDO Seidman, LLP, independent certified public accountants, as
stated in their reports appearing herein and elsewhere in the Registration
Statement, and have been so included in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing.
49
<PAGE> 51
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants.................................... F-2
Consolidated Balance Sheets -- December 31, 1995 and 1994 and June 30, 1996
(unaudited)......................................................................... F-3
Consolidated Statements of Operations -- For Each of the Three Years Ended December
31, 1995, 1994 and 1993 and for the Six-Month Periods Ending June 30, 1996 and 1995
(unaudited)......................................................................... F-4
Consolidated Statements of Cash Flows -- For Each of the Three Years Ended December
31, 1995, 1994 and 1993 and for the Six-Month Periods Ending June 30, 1996 and 1995
(unaudited)......................................................................... F-5
Consolidated Statements of Stockholders' Equity -- For Each of the Three Years Ended
December 31, 1995, 1994 and 1993 and for the Six-Month Period Ending June 30, 1996
(unaudited)......................................................................... F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE> 52
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Barringer Technologies Inc.
New Providence, New Jersey
We have audited the accompanying consolidated balance sheets of Barringer
Technologies Inc. as of December 31, 1995 and 1994 and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Barringer
Technologies Inc. at December 31, 1995 and 1994 and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
BDO Seidman, LLP
Woodbridge, New Jersey
March 27, 1996
F-2
<PAGE> 53
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 30,
1994 1995 1996
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash.................................................... $ 267 $ 43 $ 17
Receivables, less allowances of $539, $41 and $90 (note
5)................................................... 2,565 1,533 2,658
Inventories............................................. 1,790 1,621 1,652
Prepaid expenses and other.............................. 220 250 276
Deferred tax asset (note 8)............................. 225 225 225
-------- -------- --------
Total current assets................................. 5,067 3,672 4,828
Property and equipment, net (note 4)...................... 1,364 586 558
Investment in unconsolidated subsidiary (note 2).......... -- 334 355
Other..................................................... 361 143 140
-------- -------- --------
$ 6,792 $ 4,735 $ 5,881
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Bank indebtedness and other notes (note 5).............. $ 1,160 $ 744 $ 1,231
Accounts payable........................................ 1,632 1,278 1,117
Accrued liabilities..................................... 949 723 902
Accrued payroll and related taxes....................... 444 257 338
Current portion of long-term debt (notes 6 and 14)...... 230 300 300
-------- -------- --------
Total current liabilities............................ 4,415 3,302 3,888
Other non-current liabilities............................. 451 108 113
Minority interest in subsidiary (note 2).................. 740 -- --
Commitments (notes 9 and 10)
Stockholders' equity (notes 6, 7 and 14):
Convertible preferred stock, $1.25 par value, 1,000
shares authorized, 445, 0, and 0 shares outstanding,
respectively......................................... 555 -- --
Preferred Stock, $2.00 par value, 4,000 shares
authorized, 270 shares designated class A convertible
preferred stock, 83, 83, and 74 shares outstanding,
less discount of $64, $64 and $57, respectively.... 101 101 91
730 shares designated class B convertible preferred
stock, 318, 258, and 233 shares outstanding,
respectively....................................... 635 515 465
Common stock, $0.01 par value, 5,000, 7,000, and 7,000
shares authorized, respectively and 2,872, 3,479, and
3,498 shares outstanding, respectively............... 29 35 35
Additional paid-in capital.............................. 16,036 17,685 17,765
Accumulated deficit..................................... (15,633) (16,542) (16,003)
Cumulative foreign currency translation adjustment...... (524) (456) (460)
-------- -------- --------
1,199 1,338 1,893
Less: common stock in treasury, at cost, 31 shares...... (13) (13) (13)
-------- -------- --------
Total stockholders' equity........................... 1,186 1,325 1,880
-------- -------- --------
$ 6,792 $ 4,735 $ 5,881
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 54
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------ -----------------
1993 1994 1995 1995 1996
------ ------- ------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales....................................... $7,770 $ 5,514 $ 6,374 $3,110 $5,012
Cost of sales............................... 3,930 4,269 3,804 1,892 2,647
------ ------- ------- ------ ------
Gross profit.............................. 3,840 1,245 2,570 1,218 2,365
Operating expenses:
Selling, general and administrative....... 3,117 3,352 3,305 1,300 1,641
Unfunded research and development......... 182 362 151 104 57
------ ------- ------- ------ ------
3,299 3,714 3,456 1,404 1,698
------ ------- ------- ------ ------
Operating income (loss)................ 541 (2,469) (886) (186) 667
Other income, (expense):
Interest expense.......................... (164) (202) (240) (122) (130)
Equity in earnings of Labco............... -- -- -- -- 20
Other..................................... 63 113 (52) (48) 7
------ ------- ------- ------ ------
(101) (89) (292) (170) (103)
Income (loss) before income tax
provision (benefit).................. 440 (2,558) (1,178) (356) 564
Income tax provision (benefit) (note 8)..... (153) 75 -- -- --
------ ------- ------- ------ ------
Income (loss) from continuing
operations........................... 593 (2,633) (1,178) (356) 564
Operation held for sale (note 2):
Income from operations.................... 2 68 258 55 --
Gain on sale of a portion of investment
in Labco............................... -- -- 93 -- --
------ ------- ------- ------ ------
2 68 351 55 0
------ ------- ------- ------ ------
Net income (loss)...................... 595 (2,565) (827) (301) 564
Preferred stock dividends................... (114) (108) (82) (51) (24)
------ ------- ------- ------ ------
Net income (loss) attributable to common
stockholders.............................. $ 481 $(2,673) $ (909) $ (352) $ 540
====== ======= ======= ====== ======
Primary Per Share Data (note 1):
Continuing operations..................... $ 0.20 $ (0.97) $ (0.39) $(0.13) $ 0.16
Operation held for sale:
Income from operations................. -- 0.02 0.08 0.02 --
Gain on sale of a portion of investment
in Labco............................. -- -- 0.03 -- --
------ ------- ------- ------ ------
Net income (loss) per share................. $ 0.20 $ (0.95) $ (0.28) $(0.11) $ 0.16
====== ======= ======= ====== ======
Fully Diluted Per Share Data (note 1):
Continuing operations..................... $ 0.20 $ (0.97) $ (0.39) $(0.13) $ 0.15
Operation held for sale:
Income from operations................. -- 0.02 0.08 0.02 --
Gain on sale of a portion of investment
in Labco............................. -- -- 0.03 -- --
------ ------- ------- ------ ------
Net income (loss) per share............... $ 0.20 $ (0.95) $ (0.28) $(0.11) $ 0.15
====== ======= ======= ====== ======
Weighted average common and common
equivalent shares outstanding
Primary................................... 2,570 2,827 3,283 3,060 3,483
Fully diluted............................. 2,570 2,827 3,283 3,060 3,854
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 55
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------- -----------------
1993 1994 1995 1995 1996
------- ------- ----- ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating Activities:
Net income (loss)............................. $ 595 $(2,565) $(827) $ (301) $ 564
Items not affecting cash:
Depreciation and amortization.............. 625 711 362 309 75
Inventory write-down and receivable
reserves................................. -- 1,210 656 -- --
Minority interest.......................... (2) (76) -- -- --
Income and gain from operation held for
sale..................................... -- -- (351) (55) --
Pension recovery........................... (92) -- (147) -- --
Deferred tax expense (benefit)............. (300) 75 -- -- --
Prepaid pension cost....................... (132) 132 (78) -- --
Other...................................... (27) 235 71 81 (1)
Decrease (increase) in non-cash working
capital balances........................... (2,819) 206 (397) (695) (1,083)
------- ------- ----- ------ -------
Cash used in operating activities........ (2,152) (72) (711) (661) (445)
------- ------- ----- ------ -------
Investing Activities:
Purchase of equipment, net and other.......... (473) (847) (358) (262) (47)
Escrowed cash on sale of Canadian
subsidiary................................. (225) 225 -- -- --
Proceeds on sale of partial interest in
Labco...................................... -- -- 300 -- --
Increase in investment in Labco............... -- -- -- (133) (21)
------- ------- ----- ------ -------
Cash used in investing activities........ (698) (622) (58) (395) (68)
------- ------- ----- ------ -------
Financing Activities
Reduction in long-term debt................... (43) (184) -- -- --
Increase (decrease) in bank debt and other.... 407 488 (412) 210 487
Proceeds on issuance of securities and
other...................................... 2,308 171 888 905 --
Rent inducement............................... -- -- 108 -- --
Receipt of subscriptions receivable........... 100 -- -- -- --
------- ------- ----- ------ -------
Cash provided by financing activities.... 2,772 475 584 1,115 487
------- ------- ----- ------ -------
Decrease in cash................................ (78) (219) (185) 59 (26)
Cash -- beginning of period..................... 564 486 267 267 43
Less cash held for sale......................... -- -- (39) -- --
------- ------- ----- ------ -------
Cash -- end of period........................... $ 486 $ 267 $ 43 $ 326 $ 17
======= ======= ===== ====== =======
Changes in components of non-cash working
capital balances related to operations:
Receivables................................... $(3,075) $ 1,249 $ 38 $ (757) $(1,125)
Inventories................................... (593) (987) (281) 281 (31)
Other current assets.......................... (50) (58) 60 (8) (26)
Other assets.................................. -- -- (12) (32) --
Accounts payable and accrued liabilities...... 899 2 (202) (179) 99
------- ------- ----- ------ -------
Decrease (increase) in operating assets net of
operating liabilities arising from cash
transactions.................................. $(2,819) $ 206 $(397) $ (695) $(1,083)
======= ======= ===== ====== =======
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 56
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK
TOTAL --------------- --------------- --------------- --------------- PAID IN
EQUITY SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992.... $ 709 2,423 $ 24 452 $ 564 166 $ 203 471 $ 941 $12,765
Exercise of stock options/
warrants.................... 1,315 156 2 1,313
1993 dividend on preferred
stock....................... 0 11 114
Conversion of preferred stock
to common................... 0 63 1 (7) (9 ) (83) (102 ) (153) (306 ) 416
Subscription receivable
payments.................... 100 100
Sale of common stock in
private placement, net...... 768 109 1 767
Sale of treasury stock........ 225 208
Net income.................... 595
Translation adjustments....... (66)
------ ----- --- ---- ----- --- ----- ---- ----- -------
Balance December 31, 1993....... 3,646 2,762 28 445 555 83 101 318 635 15,683
Exercise of stock
options/warrants............ 168 72 1 167
Issuance of common stock
pursuant to settlement of
1993 litigation............. 70 12 78
1994 dividend on preferred
stock....................... 0 26 108
Net loss...................... (2,565)
Translation adjustment........ (133)
------ ----- --- ---- ----- --- ----- ---- ----- -------
Balance December 31, 1994....... 1,186 2,872 29 445 555 83 101 318 635 16,036
Sale of units in private
placement, net.............. 888 383 4 884
Conversion of preferred
stock....................... 0 159 2 (445) (555 ) (60) (120 ) 673
Change in warrant exercise
price in payment of debt.... 10 10
1995 dividend on preferred
stock....................... 0 65 82
Net loss...................... (827)
Translation adjustment........ 68
------ ----- --- ---- ----- --- ----- ---- ----- -------
Balance December 31, 1995....... 1,325 3,479 35 0 0 83 101 258 515 17,685*
Conversion of preferred stock
(unaudited)................. 0 12 (9) (10 ) (25) (50 ) 60
1996 dividend on preferred
stock (unaudited)........... 0 7 24
Net income (unaudited)........ 564
Translation adjustment
(unaudited)................. (5)
Miscellaneous adjustment
(unaudited)................. (4) (4)
------ ----- --- ---- ----- --- ----- ---- ----- -------
Balance June 30, 1996
(unaudited)................... $1,880 3,498 $ 35 0 $ 0 74 $ 91 233 $ 465 $17,765*
====== ===== === ==== ===== === ===== ==== ===== =======
<CAPTION>
ACCUMULATED FOREIGN TREASURY
DEFICIT TRANSLATION STOCK
----------- ----------- --------
<S> <C> <C> <C>
Balance at December 31, 1992.... $ (13,441) $(325) $(22)
Exercise of stock options/
warrants....................
1993 dividend on preferred
stock....................... (114)
Conversion of preferred stock
to common...................
Subscription receivable
payments....................
Sale of common stock in
private placement, net......
Sale of treasury stock........ 17
Net income.................... 595
Translation adjustments....... (66)
-------- ----- ----
Balance December 31, 1993....... (12,960) (391) (5)
Exercise of stock
options/warrants............
Issuance of common stock
pursuant to settlement of
1993 litigation............. (8)
1994 dividend on preferred
stock....................... (108)
Net loss...................... (2,565)
Translation adjustment........ (133)
-------- ----- ----
Balance December 31, 1994....... (15,633) (524) (13)
Sale of units in private
placement, net..............
Conversion of preferred
stock.......................
Change in warrant exercise
price in payment of debt....
1995 dividend on preferred
stock....................... (82)
Net loss...................... (827)
Translation adjustment........ 68
-------- ----- ----
Balance December 31, 1995....... (16,542) (456) (13)
Conversion of preferred stock
(unaudited).................
1996 dividend on preferred
stock (unaudited)........... (24)
Net income (unaudited)........ 564
Translation adjustment
(unaudited)................. (1) (4)
Miscellaneous adjustment
(unaudited).................
-------- ----- ----
Balance June 30, 1996
(unaudited)................... $ (16,003) $(460) $(13)
======== ===== ====
</TABLE>
- ---------------
* At December 31, 1995 and June 30, 1996, net of notes receivable of $274 from
the sale of stock.
See notes to consolidated financial statements.
F-6
<PAGE> 57
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO JUNE 30, 1996 AND THE SIX MONTHS ENDED
JUNE 30, 1996 AND 1995 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements comprise the accounts of
the Company and its continuing subsidiary companies. All intercompany
transactions have been eliminated.
Principles of Translation
Assets and liabilities of the Company's foreign subsidiaries are translated
by using year-end exchange rates and income statement items are translated at
average exchange rates for the year. Translation adjustments are accumulated in
a separate component of stockholders' equity.
Inventories
Materials and supplies are carried at the lower of average cost or
replacement cost. Finished goods and work-in process are carried at the lower of
average cost or net realizable value.
Property and Equipment
Property and equipment are carried at cost. Depreciation of owned equipment
is computed on a straight-line basis over the estimated useful lives of the
related assets, generally from three to ten years. Leasehold improvements are
amortized over the term of the related lease, generally from five to ten years,
which approximates the useful lives of these improvements. Equipment under
capital leases is amortized on a straight-line basis over the term of the lease,
generally four to ten years, which approximates the estimated useful lives of
the leased equipment.
Per Share Data
Income (loss) per share is computed by dividing net income (loss), less
preferred stock dividends, by the weighted average number of common and common
equivalent shares outstanding during the period. Common equivalent shares
consist of the dilutive effect, if any, of unissued shares under options and
warrants, computed using the treasury stock method (using the average stock
prices for primary basis and the higher of average or period-end stock prices
for fully diluted basis). In applying the treasury stock method, the provisions
of Accounting Principles Board Opinion 15, paragraph 38 were considered and had
a dilutive effect on the fully diluted earnings per share calculation for the
six months ended June 30, 1996. The effect of this provision is to limit the
number of shares assumed to have been purchased under the treasury stock method
to 20% of outstanding shares and apply the excess proceeds to reduce borrowings
and related interest expense.
Statement of Cash Flows
For purposes of the Statement of Cash Flows, the Company considers all
highly liquid investments with an original maturity of three months or less to
be cash equivalents.
Revenue Recognition
The Company recognizes revenue on the percentage of completion method for
its research and development contracts with progress measured based on the ratio
of costs incurred to the total estimated cost, and generally, when product is
shipped for all other sales. Where the Company receives contracts for the design
and construction of specialty instruments that require long manufacturing times,
the Company will also
F-7
<PAGE> 58
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
recognize revenue on the percentage of completion method similar to its
recognition method in the research and development business.
For the year ended December 31, 1995, the Company had recognized revenues
of $264,000 on jobs in process and had incurred related costs of $183,000, of
which $210,000 were billed to customers at December 31, 1995. For the six months
ended June 30, 1996, the Company had recognized revenues of $123,000 on jobs in
process and had incurred costs of $60,000, of which $87,000 were billed to
customers at June 30, 1996.
Financial Instruments and Credit Risk Concentration
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of trade accounts receivable.
Concentrations of credit risk with respect to such receivables are limited
primarily to United States and Canadian governmental agencies.
Long-Lived Assets
Long-lived assets, such as property and equipment, are evaluated for
impairment when events or changes in circumstances indicate that the carrying
amount of the assets may not be recoverable through the estimated undiscounted
future cash flows from the use of these assets. When any such impairment exists,
the related assets will be written down to fair value. This policy is in
accordance with Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed
of ", which is effective for the fiscal years beginning after December 15, 1995.
No write-downs have been necessary through June 30, 1996.
Stock-Based Compensation
The Company does not presently intend to adopt the fair value based method
for accounting for stock compensation plans as permitted by Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation", which is effective for transactions entered into in fiscal years
that begin after December 15, 1995.
Fair Value of Financial Instruments
The carrying amounts reported in the consolidated balance sheets for cash
and cash equivalents, accounts receivable, accounts payable, and accrued
liabilities approximate fair value because of the immediate or short-term
maturity of these financial instruments.
Unaudited Information
The consolidated balance sheet of the Company as of June 30, 1996, the
consolidated statements of operations and cash flows for the six months ended
June 30, 1996 and 1995, the consolidated statement of stockholders' equity for
the six months ended June 30, 1996 and the notes to such financial statements,
are unaudited. However, in the opinion of management, such financial statements
contain all adjustments (consisting of only normal recurring accruals) necessary
for a fair presentation. The results of operations for the interim periods are
not necessarily indicative of the results to be expected for the full year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these
F-8
<PAGE> 59
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
estimates. Many of the Company's estimates and assumptions used in the financial
statements relate to the Company's products, which are subject to technology and
market changes. It is reasonably possible that changes may occur in the near
term that would affect management's estimates with respect to inventories and
equipment.
2. INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
During the first quarter of 1995, the Company began to seek a purchaser for
its then 47% interest in Barringer Laboratories, Inc. ("Labco"). Accordingly,
the financial statements have been reclassified, where appropriate, to reflect
Labco as an operation held for sale.
Pursuant to the terms of a Stock Purchase Agreement, dated December 8, 1995
("Agreement"), by and between the Company and Labco, on December 13, 1995 the
Company sold to Labco 647,238 shares of Labco's common stock for an aggregate
purchase price of $809,000, resulting in a gain of $93,000. The purchase price
consisted of cancellation of all intercompany obligations and $300,000 in cash.
After giving effect to the sale of the Labco shares, the Company continued to
own 437,475 shares of Labco stock.
Under the terms of the Agreement, all intercompany agreements between the
Company and Labco terminated and certain collateral securing the Company's
obligations thereunder was returned to the Company. However, pursuant to the
terms of the Agreement, Labco retained 88,260 shares of Labco stock owned by the
Company (the "Retained Shares"). In the event that Labco meets certain pre-tax
earnings goals for 1996, those shares will be returned to the Company. If Labco
does not meet such goals, all or a portion of such Retained Shares will be
retained by Labco. The Company has reduced its gain by the value of the retained
shares.
The Company also agreed to terminate all voting arrangements allowing it to
vote shares of Labco stock not owned by it and agreed for a period of 24 months
not to enter into any such voting arrangements. In addition, the Company granted
Labco the right, until January 2, 1997, to purchase shares of Labco stock owned
by the Company in the event that the Company wishes to sell any additional
shares. In connection with such right, the Company agreed to certain
restrictions on the transferability of any Labco stock owned until January 2,
1997.
The right of first refusal and the related restrictions will terminate upon
the first to occur of (a) the sale, within twelve months of the date of the
Agreement, of Labco stock sufficient to give any one person or entity ownership
of 50% or more of the Labco stock, or (b) the change of more than three members
of the Board of Directors of Labco, other than as a result of resignation,
during any twelve month period after the date of the Agreement.
After the transaction described above, the Company retained a 26% ownership
interest in the common stock of Labco and is reporting its remaining interest in
Labco under the equity method of accounting.
In October 1996, the Company and Labco entered into a Termination Agreement
(the "Termination Agreement") pursuant to which Labco agreed to waive its right
of first refusal and to terminate the restrictions on the transfer of the
Company's remaining Labco shares. The Company agreed that, for a period of three
months from the date of the Termination Agreement, it would sell such shares at
a price of at least $1.6875 per share (the "Target Price") in a distribution in
which it would not knowingly sell more than 75,000 shares to any one purchaser
or group of related purchasers. Under the Termination Agreement, for such three-
month period, the Company must sell its Labco shares as provided above if it
receives an offer to acquire such shares at a price per share at least equal to
the Target Price. The restrictions described above also apply to any shares of
Labco common stock issuable to the Company upon the exercise of certain warrants
held by the Company. Labco has registered the Company's Labco shares for resale
pursuant to the Securities Act to facilitate such sales.
F-9
<PAGE> 60
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In the Termination Agreement, the Company and Labco agreed to terminate all
remaining inter-company arrangements. In addition, upon the disposition by the
Company of at least 250,000 of its shares of Labco common stock, Stanley S.
Binder and John J. Harte will resign their positions with Labco.
The following are the condensed results of operations and condensed balance
sheet for Labco:
CONDENSED RESULTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------- -------------------
1994 1995 1995 1996
------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues.................................. $5,941 $6,758 $3,089 $2,971
Costs and expenses........................ 5,797 6,198 2,971 2,893
------ ------ ------ ------
144 560 118 78
Minority interest......................... (76) (302) (63) --
------ ------ ------ ------
Income from operation held for sale....... $ 68 $ 258 $ 55 --
====== ====== ======
Net income................................ $ 78
======
Equity in earnings of Labco............... $ 20
======
</TABLE>
CONDENSED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30,
1996
DECEMBER 31, -----------
1995
------------ (UNAUDITED)
<S> <C> <C>
Current assets............................................ $1,362 $ 1,301
Property and equipment, net............................... 541 482
Other noncurrent assets................................... 47 52
------ ------
Total assets.................................... $1,950 $ 1,835
====== ======
Current liabilities....................................... $ 908 $ 625
Long-term liabilities..................................... 33 122
Equity.................................................... 1,009 1,088
------ ------
Total liabilities and equity.................... $1,950 $ 1,835
====== ======
</TABLE>
3. INVENTORIES
At December 31, 1994 and 1995, and June 30, 1996, the Company had work in
process of $982,000, $1,010,000 and $1,211,000 and finished goods of $808,000,
$611,000, and $441,000, respectively.
F-10
<PAGE> 61
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT
The major categories of property and equipment are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
DECEMBER 31,
--------------------- JUNE 30,
1994 1995 1996
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Owned:
Office equipment.............................. $ 359 $ 350 $ 350
Machinery and equipment....................... 2,856 1,687 1,740
Leasehold improvement......................... 1,012 64 64
------- ------- -------
4,227 2,101 2,154
Accumulated depreciation...................... (3,279) (1,515) (1,596)
------- ------- -------
948 586 558
------- ------- -------
Capital leases:
Machinery and equipment....................... 912 -- --
Accumulated amortization...................... (496) -- --
------- ------- -------
416 -- --
------- ------- -------
Totals................................ $ 1,364 $ 586 $ 558
======= ======= =======
</TABLE>
5. BANK INDEBTEDNESS, OTHER NOTES AND ACCRUED LIABILITIES
The Company's Canadian subsidiary, Barringer Research Ltd. ("BRL"), has a
financing arrangement with the Ontario Development Corporation ("ODC") for a
$730,000 export line of credit. BRL may borrow up to $730,000 on a formula basis
of 90% of export accounts receivable plus 70% of the value of export purchase
orders (subject to a maximum sub-limit of $230,000). The rate of interest is
adjusted quarterly and was 10% at June 30, 1996. At June 30, 1996, the line was
fully utilized.
BRL also has a line of credit financing arrangement with the
Toronto-Dominion Bank ("Bank") that provides up to $730,000 based on eligible
receivables. The rate of interest is Canadian prime plus 1.5% (8% at June 30,
1996). At December 31, 1995, $295,000 was borrowed. At June 30, 1996, BRL had
$250,000 available pursuant to the borrowing formula under this facility. This
facility is guaranteed by the Company.
Commencing in March 1995, BRL had not been in compliance with the
collateral coverage covenant of the loan agreement. The amount of funds borrowed
were in excess of the amount allowed pursuant to the collateral formula. At that
time, the Bank agreed to give BRL approximately six months to comply with this
formula. During this time, the Bank continued to finance BRL's needs. On
September 28, 1995, the Company entered into an agreement ("Agreement") with the
Bank, pursuant to which the Bank agreed that BRL would have until September 30,
1995 to comply with certain amended covenants specified in the Agreement and to
maintain such requirements thereafter. In exchange, the Company agreed to remit
50% of the net proceeds realized on the sale of a portion of its stock in Labco
(see Note 2) to BRL. In addition, the Company agreed to provide the Bank with
additional collateral to secure its advances to BRL, resulting in the pledge of
substantially all the assets of the Company as collateral. At September 30,
1995, BRL was in compliance with such covenants. However, at December 31, 1995
BRL was not in compliance with the minimum working capital requirement and at
January 31 and February 29, 1996 BRL's borrowings under the line of credit
exceeded the amount available thereunder. The Bank notified BRL of such
defaults, and without waiving any other remedies available to it, has charged
BRL an interest rate of 21% on the excess of such allowable borrowings. At June
30, 1996 BRL was not in compliance with the minimum working capital or the
minimum net worth requirements. BRL was in compliance at August 31, 1996,
although, there can be no assurances that
F-11
<PAGE> 62
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
BRL will remain in compliance in the future. Management believes that the Bank
will continue to provide funding consistent with past practices, however, the
Company cannot predict what actions, if any, the Bank may take or as to the
timing thereof.
Accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
DECEMBER 31,
--------------- JUNE 30,
1994 1995 1996
----- ----- -----------
(UNAUDITED)
<S> <C> <C> <C>
Accrued commissions.................................... $ 404 $ 27 $ --
Accrued other.......................................... 545 696 902
---- ---- ----
$ 949 $ 723 $ 902
==== ==== ====
</TABLE>
6. LONG-TERM DEBT AND OTHER LIABILITIES
Long-term debt consists of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
DECEMBER 31,
--------------- JUNE 30,
1994 1995 1996
----- ----- -----------
(UNAUDITED)
<S> <C> <C> <C>
12 1/2% Convertible subordinated debentures(a)......... $ 300 $ 300 $ 300
Capital leases......................................... 344 -- --
Other(b)............................................... 37 108 113
---- ---- ----
681 408 413
Less: Current portion.................................. (230) (300) (300)
---- ---- ----
$ 451 $ 108 $ 113
==== ==== ====
</TABLE>
- ---------------
(a) The 12 1/2% Convertible Subordinated Debentures were due July 17, 1996 and
were convertible at face amount into common stock any time before maturity
at $32.00 per share (9,375 shares of common stock reserved at June 30,
1996). Under the terms of the Indenture, so long as these debentures were
outstanding, the Company could not pay cash dividends, nor make any payment
on account of the purchase, redemption or other acquisition or retirement of
its capital stock. The 12 1/2% Convertible Subordinated Debentures were
repaid on July 15, 1996 with a portion of the net proceeds from the sale of
$1,000,000 of 6% Convertible Subordinated Debentures due 1997 (see Note 14).
(b) Other long-term liabilities at December 31, 1995 and June 30, 1996
represents rents payable on the Company's Canadian facility.
7. STOCKHOLDERS' EQUITY
Private Offering
On May 9, 1995, the Company completed the private placement of 125 units
priced at $6,000 each for an aggregate sales price of $750,000. Each unit
("Unit") consisted of 2,500 shares of the Company's common stock and a five-year
warrant to purchase 2,500 shares of the Company's common stock at $2.00 per
share. In addition, in order to induce the purchasers to enter into this
transaction, an additional three-year warrant to acquire 37,500 shares of the
Company's common stock at $2.00 per share was issued.
On June 30, 1995, the Company completed a private placement in which it
sold 28 similar Units, including 22 Units to 17 members of senior management and
the Company's Board of Directors, for proceeds aggregating $168,000. This
private placement did not include the additional three-year warrant.
F-12
<PAGE> 63
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Due from Officers/Stockholders
In connection with the exercise of options to acquire 190,000 shares of the
Company's Common Stock, two officers of the Company signed full recourse
interest bearing (no interest the first year, prime rate thereafter) unsecured
promissory demand notes aggregating $274,000 under the Company's stock option
exercise program. The loans are repaid with a portion of the proceeds from the
sale of the Common Stock to be received by the employees upon the exercise of
their options. As of June 30, 1996, the notes were still outstanding.
Common Stock Outstanding or Reserved for Issuance
The following table sets forth the number of shares of Common Stock
outstanding as of December 31, 1995 as well as the number of shares of Common
Stock that would be outstanding in the event that all of the options and
warrants are exercised and all series of Convertible Preferred Stock and
Debentures are converted into Common Stock.
<TABLE>
<CAPTION>
COMMON STOCK
OUTSTANDING
EXERCISE, OR
CONVERSION OR RESERVED FOR
OPTION PRICE ISSUANCE
--------------- ------------
<S> <C> <C>
Common stock.......................................... 3,479,131
Convertible subordinated notes........................ $32.00 9,375
Class A convertible preferred stock................... $6.06 27,439
Class B convertible preferred stock................... $6.19 83,147
Stock options(i)...................................... $2.00 to $14.00 234,500
Private placement warrants(ii)........................ $2.00 420,000
Other warrants(iii)................................... $4.00 to $14.23 68,750
---------
Total....................................... 4,322,342
=========
</TABLE>
- ---------------
(i) Stock Options -- Pursuant to the Company's 1990 Stock Option Plan the
Company was authorized to issue both incentive stock options and qualified
stock options. Options granted under the 1990 Stock Option Plan are
exercisable after the expiration of two years from the date of grant until
the expiration of five years after the date of grant. Options are
exercisable only during the optionee's employment with the Company or a
subsidiary of the Company. The Company also was permitted to grant stock
options to consultants as authorized by the Board of Directors. These
options are exercisable at varying times from date of grant and expire five
years from date of grant. No shares are available for issuance under the
1990 Stock Option Plan.
During the six months ended June 30, 1996, the Company issued non-qualified
options to purchase 253,000 shares of the Company's common stock at a price
of $1.00 per share to 20 employees which equaled the fair market value of
the Common Stock on the date of grant. The options issued in 1996 expire on
April 25, 2001 and are exercisable as to 25% of the optioned shares
immediately, 50% after the first year, 75% after the second year and 100%
after the third year. During 1995, the Company issued non-qualified options
to purchase 181,375 shares of the Company's common stock at a price of
$2.00 per share to 20 employees and 5,625 options were canceled. The
options issued in 1995 expire on March 10, 2000 and are exercisable as to
40% of the optioned shares after the first year, 60% after two years, 80%
after the third year and 100% after the fourth year. During 1994 no options
were issued and 6,250 options were canceled. During 1993, the Company
issued options to purchase 13,750 shares of common stock at a price of
$14.00 per share to 6 employees and 25,000 options were canceled.
All outstanding stock options expire between July 17, 1996 and April 25,
2001.
F-13
<PAGE> 64
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ii) Private Placement Warrants
In connection with the Company's private placement (see above) warrants to
purchase 420,000 shares of the Company's common stock at $1.96 per share
were sold to a group of private investors and senior management. The
warrants expire between May 9, 1998 and June 29, 2000.
(iii) Other warrants -- During 1994, 60,600 Class D Warrants and 16,537
Underwriter's Warrants were exercised for an aggregate exercise price of
$165,00, resulting in the issuance of 22,958 shares of common stock and
16,537 Class E Warrants. Both the Class D Warrants and the Class E
Warrants have expired.
In September 1994, the Company issued warrants to purchase 6,250 shares of
the Company's common stock at $5.25 per share to the Ontario Development
Corporation in connection with their increase in the export financing
facility available to the Company's Canadian subsidiary, from $365,000 to
$730,000). See Note 5 for additional information.
On December 31, 1991, the Board of Directors adopted the 1991 Directors
Warrant Plan ("Plan"). Pursuant to the Plan, each non-employee director
will be sold a five-year warrant to purchase 3,750 shares of Common Stock
at an exercise price to be determined by the Board at the time of such
sale, but shall not be less than the current market price for such shares
at the time of issuance of the warrant. During 1994, warrants to purchase
3,750 shares were issued to a director at $9.64 per share, subject to
adjustment. No warrants were issued under the Plan in 1995 or during the
six months ended June 30, 1996.
On April 7, 1995, the Company issued warrants to purchase 6,250 shares of
the Company's common stock at $4.00 per share to Labco in connection with
the extension by Labco of an intercompany obligation, which was
subsequently paid.
All of the other warrants described herein expire between April 1, 1996 and
January 12, 1999.
Increase in Authorized Shares
At the 1995 Annual Meeting of Stockholders, the Company's stockholders
approved an amendment to the Company's Certificate of Incorporation to increase
the number of authorized shares of capital stock of the Company from 7,000,000
to 12,000,000, comprised of 7,000,000 shares of Common Stock, 1,000,000 shares
of Convertible Preferred Stock, par value $1.25 per share and 4,000,000 shares
of Preferred Stock, par value $2.00 per share. The stockholders also approved a
one for four reverse stock split of the Company's common stock.
8. INCOME TAXES
Effective January 1, 1993 the Company prospectively adopted Financial
Accounting Standards No 109 "Accounting for Income Taxes". The adoption had no
effect on prior year financial statements presented. Accordingly, there was no
cumulative effect adjustment required in the year ended December 31, 1993.
F-14
<PAGE> 65
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provision for income taxes (benefits) charged to continuing operations
are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------- -------------
1993 1994 1995 1995 1996
----- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current Tax Expense:
U.S.......................................... -- -- -- -- --
Canadian..................................... $ 147 -- -- -- --
----- --- --- --- ----
Total Current............................. 147 -- -- -- --
----- --- --- --- ----
Deferred Tax Expense (Benefit):
Canadian..................................... (300) $75 -- -- --
----- --- --- --- ----
Total Deferred............................ (300) 75 -- -- --
----- --- --- --- ----
Total income tax provision
(benefit).......................... $(153) $75 $ 0 $ 0 $ 0
===== === === === ====
</TABLE>
Deferred tax assets are comprised of the following temporary differences
and carryforwards at December 31:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1994 1995
------- -------
<S> <C> <C>
Nondeductible allowances against trade receivables............... $ 206 $ 15
Nondeductible inventory reserves................................. 133 90
Nondeductible expense accruals................................... 52 50
Depreciation..................................................... 82 50
Other............................................................ 10 10
Tax benefit of U.S. operating loss carry forwards................ 6,552 6,870
Tax benefit of Canadian operating loss and investment credit
carry forwards................................................. 850 790
------- -------
Gross deferred tax assets...................................... 7,885 7,875
Deferred tax assets valuation allowance.......................... (7,660) (7,650)
------- -------
Net deferred tax asset................................. $ 225 $ 225
======= =======
</TABLE>
As a result of the Company's history of losses, a valuation allowance has
been provided for all U.S. deferred tax assets and for substantially all of the
Canadian deferred tax assets. The net deferred tax asset relates to the
Company's Canadian subsidiary, which has available tax credits and loss
carryforwards. The Canadian subsidiary has a history of profitability, despite
the consolidated losses of the Company. Based on this history and estimated 1996
earnings, which includes earnings from certain contracts, as well as available
tax planning strategies, management considers realization of the unreserved
deferred tax asset more likely than not. During 1995 the Canadian subsidiary
realized tax loss carryforwards of approximately $75,000 with a tax benefit of
approximately $29,000.
F-15
<PAGE> 66
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's income tax provision (benefit) differed from the amount of
income tax determined by applying the applicable statutory U.S. federal income
tax rate to pretax income from continuing operations as a result of the
following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- ---------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Income taxes (benefit) computed at the
U.S. statutory rate.................... $ 155 $(821) $(280) $(125) $ 197
U.S. losses for which no tax benefit has
been recognized........................ 315 943 398 125 51
Consolidated subsidiaries outside the
U.S.:
Change in deferred tax asset valuation
allowance........................... (300) 75 (89) -- --
Use of Canadian tax credits and net
operating loss carryforwards to
offset Canadian income net of effect
of U.S./ Canada tax rate
differential........................ (323) (122) (29) -- (248)
----- ----- ----- ----- -----
Provision (benefit) for income taxes..... $(153) $ 75 $ 0 $ 0 $ 0
===== ===== ===== ===== =====
</TABLE>
At December 31, 1995, the Company has net operating loss carryforwards of
approximately $13,152,000 for federal income tax purposes which expire in
varying amounts through 2011. The Company also has Canadian net operating loss
carryforwards of approximately $2,190,000 and research and development
investment tax credits of approximately $730,000 which expire in varying amounts
through 2005.
9. COMMITMENTS
The Company rents facilities, automobiles and equipment under various
operating leases. Rental expenses under such leases amounted to $280,000,
$191,000 and $108,000 for 1995, 1994 and 1993, respectively.
At December 31, 1995, the aggregate minimum commitments pursuant to
operating leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------------------------------------------------
<S> <C>
1996............................................................ $275,000
1997............................................................ 269,000
1998............................................................ 160,000
1999............................................................ 121,000
2000 and thereafter............................................. 545,000
</TABLE>
10. PENSION PLAN
The Company's Canadian subsidiary's defined benefit pension plan, which
covered its Canadian employees, was terminated at December 31, 1993. At the same
time, it established a money purchase plan that is structured after the 401(k)
salary deferral plan available to all U.S. employees and as such, does not
establish any corporate obligation other than a discretionary matching formula
to employee contributions. As a result of the termination, the Company
recognized a gain of $214,000, representing the excess of the Plan's projected
benefit obligation over the accumulated benefit obligation, in 1993 and
recognized an additional gain in 1995 of $172,000, representing the excess of
the Plan's assets over the cost of providing the annuities to the participants
for the value of their termination benefits. This excess will be put into a
money purchase contract
F-16
<PAGE> 67
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and used by the Company to provide for its matching contributions under the new
arrangement. This amount is being carried as a prepaid pension expense asset on
the balance sheet.
The Company maintains a 401(k) salary deferral plan instituted for all U.S.
employees with more than one year of service. As a money purchase plan, it does
not establish any Company liability other than a matching formula to employee
contributions. The aggregate cost of the plan for 1993, 1994 and 1995 and for
the six months ended June 30, 1995 and 1996 was $14,000, $16,000, $15,700,
$8,000 and $9,000, respectively.
11. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The Company made cash payments for interest of $180,000, $246,000,
$189,000, $150,000 and $107,000 for the three years ended December 31, 1995 and
for the six months ended June 30, 1995 and 1996. Additionally, income taxes of
$123,000 and $3,500 were paid for the years ended December 31, 1993 and 1994.
The Company did not pay income taxes for the year ended December 31, 1995 or for
the six-month periods ended June 30, 1995 and 1996.
In the three years ended December 31, 1995 and for the six months ended
June 30, 1995 and 1996 the Company paid Preferred Stock dividends in the amount
$114,000, $108,000, $82,000, $51,000 and $24,000 in the form of 11,338, 25,291,
65,417, 17,232 and 7,950 shares of common stock, respectively.
12. INFORMATION CONCERNING THE COMPANY'S PRINCIPAL ACTIVITIES
A summary of the Company's continuing operations by geographic area for the
three years ended December 31, and the six months ended June 30, 1995 and 1996
is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31 JUNE 30,
------------------------------- -------------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Total sales of goods and
services:
United States.................. $ 4,061 $ 1,862 $ 1,867 $ 845 $ 1,394
Canada......................... 6,185 5,593 5,110 2,346 3,690
Europe......................... -- -- 1,599 708 1,590
Eliminations................... (2,476) (1,941) (2,202) (789) (1,662)
------- ------- ------- ------- -------
Totals................. $ 7,770 $ 5,514 $ 6,374 $ 3,110 $ 5,012
======= ======= ======= ======= =======
Income (loss) from continuing
operations:
United States.................. $ (902) $(2,653) $(1,548) $ (247) $ (146)
Canada......................... 1,495 20 270 (190) 577
Europe......................... -- -- 100 81 133
------- ------- ------- ------- -------
$ 593 $(2,633) $(1,178) $ (356) $ 564
======= ======= ======= ======= =======
Identifiable assets:
United States.................. $ 8,982 $ 6,400 $ 4,253 $ 5,568 $ 4,158
Canada......................... 3,890 4,422 6,248 6,394 7,366
Europe......................... -- -- 696 718 1,210
Eliminations................... (3,933) (4,030) (6,462) (6,402) (6,853)
------- ------- ------- ------- -------
Totals................. $ 8,939 $ 6,792 $ 4,735 $ 6,278 $ 5,881
======= ======= ======= ======= =======
</TABLE>
F-17
<PAGE> 68
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Export sales, including sales from Canada to other countries, comprised
43.8% of total revenues and were made primarily to Western Europe, Asia and
Central and South America.
A summary of the Company's continuing operations by principal activity for
the three years ended December 31, 1995 and the six months ended June 30, 1996
is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
RESEARCH
AND CORPORATE
TOTAL ELIMINATION DEVELOPMENT INSTRUMENTS AND OTHER
------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
June 30, 1996 (Unaudited):
Revenues....................... $ 5,012 $ 594 $ 4,329 $ 89
======= ====== ======= =======
Operating Income (loss)........ $ 667 $ (30) $ 1,030 $ (333)
====== ======= =======
Interest expense and other..... (103)
-------
Income before income taxes..... $ 564
=======
Depreciation and
amortization................. $ 75 $ 11 $ 49 $ 15
======= ====== ======= =======
Capital expenditures........... $ 47 -- $ 47 --
======= ====== ======= =======
Identifiable assets............ $ 5,881 $(6,853) $ 240 $ 9,563 $ 2,931
======= ======= ====== ======= =======
1995:
Revenues....................... $ 6,374 $ 1,052 $ 5,250 $ 72
======= ====== ======= =======
Operating income (loss)........ $ (886) $ (311) $ 268 $ (843)
====== ======= =======
Interest expense and other..... (292)
-------
Loss before income taxes....... $(1,178)
=======
Depreciation and
amortization................. $ 362 $ 45 $ 314 $ 3
======= ====== ======= =======
Capital expenditures........... $ 359 $ 10 $ 349 --
======= ====== ======= =======
Identifiable assets............ $ 4,735 $(6,462) $ 275 $ 7,589 $ 3,333
======= ======= ====== ======= =======
1994:
Revenues....................... $ 5,514 $ 298 $ 5,216 --
======= ====== ======= =======
Operating income (loss)........ $(2,469) $ (208) $(1,075) $ (1,186)
====== ======= =======
Interest expense and other..... (89)
-------
Loss before income taxes....... $(2,558)
=======
Depreciation and
amortization................. $ 320 $ 8 $ 280 $ 32
======= ====== ======= =======
Capital expenditures........... $ (491) -- $ (491) --
======= ====== ======= =======
Identifiable assets............ $ 5,003 $(4,030) $ 302 $ 5,486 $ 3,245
======= ====== ======= =======
Identifiable assets -- held for
sale......................... 1,789
-------
Identifiable assets -- per
balance sheet................ $ 6,792
=======
</TABLE>
F-18
<PAGE> 69
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
(IN THOUSANDS)
RESEARCH
AND CORPORATE
TOTAL ELIMINATION DEVELOPMENT INSTRUMENTS AND OTHER
------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
1993:
Revenues....................... $ 7,770 $ 1,009 $ 6,761 --
======= ====== ======= =======
Operating income (loss)........ $ 541 $ (56) $ 1,709 $(1,112)
====== ======= =======
Interest expense and other..... (101)
-------
Income before income taxes..... $ 440
=======
Depreciation and
amortization................. $ 214 $ 20 $ 162 $ 32
======= ====== ======= =======
Capital expenditures........... $ 120 -- $ 116 $ 4
======= ====== ======= =======
Identifiable
assets -- continuing
operations................... $ 7,144 $(3,933) $ 325 $ 6,363 $ 4,389
======= ====== ======= =======
Identifiable assets -- held for
sale......................... 1,795
-------
Identifiable assets -- per
balance sheet................ $ 8,939
=======
</TABLE>
13. FOURTH QUARTER ADJUSTMENTS
During the fourth quarter of 1995, the Company recorded adjustments for
estimated losses on inventories and receivables of approximately $450,000 and
$200,000, respectively. During the fourth quarter of 1994, the Company recorded
adjustments for estimated losses on inventories and receivables of approximately
$800,000 and $515,000, respectively.
14. SUBSEQUENT EVENT
On July 10, 1996, the Company completed the sale of $1,000,000 of its 6%
Convertible Subordinated Debentures, due 1997, in a private transaction to
private investors including members of management. These debentures are due July
9, 1997 and are convertible into shares of the Company's Common Stock at the
rate of $2.75 per share of Common Stock and mature on the earlier of (i) 30 days
after the completion of an underwritten public offering or a private placement
by the Company of its equity securities pursuant to which the Company receives
net proceeds in an aggregate amount in excess of $5,000,000, or (ii) July 9,
1997. Interest is payable semi-annually. A portion of the net proceeds of the
sale of these debentures were used to repay the 12 1/2% Subordinated Convertible
Debentures due 1996 (see Note 6).
F-19
<PAGE> 70
Photo #4
Shows a security agent using a portable Model 400 IONSCAN(R) to check for
explosives in luggage on board a European train.
Photo #5
Shows a security agent using a suction device to obtain samples from a piece of
checked luggage for testing using the Model 400 IONSCAN(R).
Photo #6
Shows a portable Model 400 IONSCAN(R) ready for use on the tarmac at a French
airbase.
<PAGE> 71
- ------------------------------------------------------
- ------------------------------------------------------
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE SHARES OF COMMON STOCK AND WARRANTS OFFERED HEREBY, NOR
DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH AN OFFER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH
DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information................. 3
Forward-Looking Statements............ 3
Prospectus Summary.................... 4
Risk Factors.......................... 7
Use of Proceeds....................... 12
Price Range of Common Stock........... 13
Dividend Policy....................... 13
Capitalization........................ 14
Selected Consolidated Financial
Data................................ 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 16
Business.............................. 23
Management............................ 34
Security Ownership of Certain
Beneficial Owners and Management.... 39
Certain Relationships and Related
Transactions........................ 40
Description of Capital Stock.......... 41
Description of Warrants............... 44
Underwriting.......................... 47
Legal Matters......................... 48
Experts............................... 49
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
1,000,000 SHARES OF COMMON STOCK
AND
1,000,000 COMMON STOCK PURCHASE WARRANTS
[ BARRINGER LOGO ]
BARRINGER TECHNOLOGIES INC.
------------------------
PROSPECTUS
------------------------
JANNEY MONTGOMERY SCOTT INC.
, 1996
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 72
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Tenth of the Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), and Section 10 of the Company's by-laws, as
amended ("By-laws"), provide that the Company shall, to the fullest extent
permitted by law, indemnify each person (including the heirs, executors,
administrators and other personal representatives of such person) against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement, actually and reasonably incurred by such person in connection with
any threatened, pending or actual suit, action or proceeding (whether civil,
criminal, administrative or investigative in nature or otherwise) in which such
person may be involved by reason of the fact that he or she is or was a director
or officer of the Company or is serving any other incorporated or unincorporated
enterprise in any of such capacities at the request of the Company.
Section 145 of the General Corporation Law of the State of Delaware (the
"GCL") permits a corporation, under specified circumstances, to indemnify its
directors, officers, employees or agents against expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by them in connection with any action, suit or proceeding brought by
third parties by reason of the fact that they were or are directors, officers,
employees or agents of the corporation, if such directors, officers, employees
or agents acted in good faith and in a manner they reasonably believed to be in
or not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reason to believe their conduct was
unlawful. In a derivative action, i.e., one by or in the right of the
corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors, officers, employees or agents in connection
with the defense or settlement of an action or suit, and only with respect to a
matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been judged liable to the corporation unless and only to the extent that
the court in which the action or suit was brought shall determine upon
application that the defendant directors, officers, employees or agents are
fairly and reasonably entitled to indemnity for such expenses despite such
adjudication of liability.
Article Tenth of the Certificate of Incorporation also contains a provision
limiting the personal liability of directors to the fullest extent permitted or
authorized by the GCL or other applicable law. Under the GCL, such provision
would not limit liability of a director for (i) breach of the director's duty of
loyalty, (ii) acts or omissions not in good faith or involving intentional
misconduct or knowing violation of law, (iii) payment of dividends or
repurchases or redemptions of stock other than from lawfully available funds, or
(iv) any transactions from which the director derives an improper benefit.
II-1
<PAGE> 73
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table lists the expenses which will be incurred in connection
with the issuance and distribution of the Securities being registered:
<TABLE>
<CAPTION>
EXPENSE
--------
<S> <C>
SEC Registration Fee.............................................. $ 4,568
National Association of Securities Dealers, Inc. Filing Fee....... 2,007
NASDAQ Listing Fee................................................ 40,727
Accounting Fees and Expenses...................................... 75,000
Legal Fees and Expenses........................................... 175,000
Blue Sky Fees and Expenses........................................ 25,000
Printing and Engraving............................................ 110,000
Miscellaneous..................................................... 42,698
--------
TOTAL................................................... $475,000
========
</TABLE>
All of the above amounts, other than the registration fee, are estimates
only. All of the above expenses will be paid by the Company.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The following information relates to securities of the Company issued or
sold within the past three years which were not registered under the Securities
Act (all share and per share amounts have been adjusted to reflect the
one-for-four reverse stock split of the Company's common stock, $.01 par value
(the "Common Stock") effected on September 25, 1995):
(i) On July 10, 1996, the Company issued an aggregate amount of
$1,000,000 of its 6% subordinated convertible debentures, due 1997 (the
"Debentures") to institutional and private investors and members of
management for an aggregate purchase price of $1,000,000. This transaction
was completed without registration under the Securities Act of the
Debentures or the shares of Common Stock into which such Debentures are
convertible in reliance upon exemptions provided by Section 4(2) of the
Securities Act. There were no underwriters for this issuance.
(ii) On June 30, 1995 the Company issued an aggregate of 28 units,
each unit consisting of 2,500 shares of Common Stock and a five-year
warrant to purchase 2,500 shares of Common Stock at $2.00 per share (a
"Unit"), to private investors and members of management, for an aggregate
purchase price of $168,000. This transaction was completed without
registration under the Securities Act of the shares of Common Stock or the
warrants comprising the Units or the shares of Common Stock underlying the
warrants in reliance upon the exemptions provided by Section 4(2) of the
Securities Act. There were no underwriters for this issuance.
(iii) On May 9, 1995 the Company issued an aggregate of 125 Units and
one three year warrant to purchase 37,500 shares of Common Stock at $2.00
per share, to two institutional investors, for an aggregate purchase price
of $750,000. This transaction was completed without registration under the
Securities Act of the shares of Common Stock or the warrants comprising the
Units, the shares of Common Stock underlying the warrants included in the
Units, the additional three-year warrant or the shares of Common Stock
underlying the three-year warrant, in reliance upon the exemptions provided
by Section 4(2) of the Securities Act. There were no underwriters for this
issuance.
(iv) At various times between October 1993 and October 1996, the
Company granted stock options to certain employees of the Company covering
an aggregate of 434,375 shares of Common Stock. These grants were exempt
from registration pursuant to Securities Act Release No. 33-6188 (Feb. 1,
1980). No underwriter was involved in these grants.
II-2
<PAGE> 74
ITEM 27. EXHIBITS
The following exhibits are filed as part of this Registration Statement:
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Company, as amended.(1)
3.2 Bylaws of the Company.(2)
4.1 Form of Warrant Agreement.*
4.2 Form of Warrant to be issued to Janney Montgomery Scott Inc.*
5.1 Opinion of Lowenstein, Sandler, Kohl, Fisher & Boylan, P.A.*
10.1 Employment Agreement between Stanley S. Binder and the Company dated as of
July 10, 1989.(3)
10.2 Form of Employment Agreement between Richard S. Rosenfeld and the Company.*
10.3 Form of Employment Agreement between Kenneth S. Wood and the Company.*
10.4 Consulting Agreement between John J. Harte and the Company dated as of
January 1, 1991.
10.5 Barringer Resources, Inc. 1990 Stock Option Plan.(4)
10.6 Form of 1995 nonqualified stock option agreement.
10.7 Form of 1996 nonqualified stock option agreement.
10.8 Description of 1991 Warrant Plan.
10.9 Description of Exercise Plan.
10.10 License Agreement dated February 27, 1989 between Canadian Patents and
Development Limited -- Societe Canadienne Des Brevets Et D'Exploitation
Limite and Barringer Instruments Limited (the "License Agreement"),
Supplement #1 dated March 4, 1991, Assignment of License Agreement, dated
January 2, 1992, to Her Majesty the Queen in Right of Canada, as
Represented By the Minister of National Revenue and Supplemental Letter
Agreement, dated October 7, 1996.
10.11 Termination Agreement between the Company and Labco dated October 7, 1996.
10.12 Unit Purchase Agreement and Form of Warrant Agreement by and between the
Company, Special Situations Fund III, L.P. and Special Situations Cayman
Fund, L.P. dated May 9, 1995.(5)
10.13 Form of Subscription Agreement and Form of Warrant Agreement by and between
the Company and certain officers and directors of the Company, dated as of
June 30, 1995.(6)
10.14 Form of Debenture Purchase Agreement dated as of July 10, 1996, by and
between the Company and certain accredited investors.
10.15 Loan Agreement dated September 20, 1994 by and between Ontario Development
Corporation and Barringer Research Limited.(7)
10.16 Agreement dated September 28, 1995 between the Toronto-Dominion Bank, the
Company and Barringer Research Limited.(8)
10.17 Lease between the Company and Murray Hill Inn Associates dated as of
February 17, 1993.
10.18 Lease between BRL and Lehndorff Management Limited ("Lehndorff") dated as
of July 27, 1995.
10.31 Form of Stock Purchase Agreement dated as of November 30, 1992 by and
between the Company and certain accredited investors.(9)
10.33 Stock Purchase Agreement dated as of February 2, 1993 by and between the
Company and Special Situations Cayman Funds, L.P.(9)
10.34 Form of Stock Purchase Agreement dated as of December 13, 1993 by and
between the Company and certain accredited investors.(9)
11 Earnings per share computation for the six months ended June 30, 1996.(10)
21 List of Subsidiaries of the Company.
</TABLE>
II-3
<PAGE> 75
<TABLE>
<C> <S>
23.1 Consent of Lowenstein, Sandler, Kohl, Fisher & Boylan, P.A. (included in
Exhibit 5.1 to this registration statement).
23.2 Consent of BDO Seidman, LLP, independent certified public accountants.
24.1 Power of Attorney (included on the signature page).
</TABLE>
- ---------------
* To be filed by Amendment.
(1) Incorporated by reference to Exhibit 3.1A to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, File No. 0-3207.
(2) Incorporated by reference to Exhibit 3.2A to the Company's Annual Report on
Form 10-K/A-2 for the fiscal year ended December 31, 1994, File No. 0-3207.
(3) Incorporated by reference to Exhibit 10.15 to the Company's Registration
Statement on Form S-1, File No. 33-3162.
(4) Incorporated by reference to Exhibit 10.25 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1990, File No. 0-3207.
(5) Incorporated by reference to Exhibit 4.17 to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 1995, File No. 0-3207.
(6) Incorporated by reference to Exhibit 4.19 to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 1995, File No. 0-3207.
(7) Incorporated by reference to Exhibit 10.36 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1994, File No. 0-3207.
(8) Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed
on October 13, 1995, File No. 0-3207.
(9) Incorporated by reference to the identically numbered Exhibit to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1992, File No. 0-3207.
(10) Incorporated by reference to the identically numbered Exhibit to the
Company's Quarterly Report on Form 10-QSB for the quarter ended June 30,
1996, File No. 0-3207.
ITEM 28. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) For the purpose of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act, shall be deemed a part of this
Registration Statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions on
indemnifications, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
II-4
<PAGE> 76
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and authorizes this registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New Providence, State of New Jersey, on October 8, 1996.
BARRINGER TECHNOLOGIES INC.
By: /s/ STANLEY S. BINDER
------------------------------------
Stanley S. Binder, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated below on October 8, 1996. Each of the undersigned hereby
constitutes and appoints Stanley S. Binder and Richard S. Rosenfeld, and each of
them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement on Form SB-2 relating to the
securities offered pursuant hereto and to file the same, together with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission and such other state and federal government
commissions and agencies as may be necessary or advisable, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- -----------------------------------------
<S> <C>
/s/ STANLEY S. BINDER President, Chief Executive Officer
- --------------------------------------------- (Principal Executive Officer) and
Stanley S. Binder Director
/s/ JOHN D. ABERNATHY Director
- ---------------------------------------------
John D. Abernathy
/s/ RICHARD D. CONDON Director
- ---------------------------------------------
Richard D. Condon
/s/ JOHN H. DAVIES Director
- ---------------------------------------------
John H. Davies
/s/ JOHN J. HARTE Director
- ---------------------------------------------
John J. Harte
/s/ JAMES C. MCGRATH Director
- ---------------------------------------------
James C. McGrath
/s/ RICHARD S. ROSENFELD Vice President-Finance, Chief Financial
- --------------------------------------------- Officer and Treasurer (Principal
Richard S. Rosenfeld Accounting and Financial Officer)
</TABLE>
II-5
<PAGE> 77
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ---------------------------------------------------------------------------------
<C> <S> <C>
1.1 Form of Underwriting Agreement...................................
3.1 Certificate of Incorporation of the Company, as amended(1).......
3.2 Bylaws of the Company(2).........................................
4.1 Form of Warrant Agreement*.......................................
4.2 Form of Warrant to be issued to Janney Montgomery Scott Inc.*....
5.1 Opinion of Lowenstein, Sandler, Kohl, Fisher & Boylan, P.A.*.....
10.1 Employment Agreement between Stanley S. Binder and the Company
dated as of July 10, 1989(3).....................................
10.2 Form of Employment Agreement between Richard S. Rosenfeld and the
Company*.........................................................
10.3 Form of Employment Agreement between Kenneth S. Wood and the
Company*.........................................................
10.4 Consulting Agreement between John J. Harte and the Company dated
as of January 1, 1991............................................
10.5 Barringer Resources, Inc. 1990 Stock Option Plan(4)..............
10.6 Form of 1995 nonqualified stock option agreement.................
10.7 Form of 1996 nonqualified stock option agreement.................
10.8 Description of 1991 Warrant Plan.................................
10.9 Description of Exercise Plan.....................................
10.10 License Agreement dated February 27, 1989 between Canadian
Patents and Development Limited -- Societe Canadienne Des Brevets
Et D'Exploitation Limite and Barringer Instruments Limited (the
"License Agreement"), Supplement #1 dated March 4, 1991,
Assignment of License Agreement, dated January 2, 1992, to Her
Majesty the Queen in Right of Canada, as Represented By the
Minister of National Revenue and Supplemental Letter Agreement,
dated October 7, 1996............................................
10.11 Termination Agreement between the Company and Labco dated October
7, 1996..........................................................
10.12 Unit Purchase Agreement and Form of Warrant Agreement by and
between the Company, Special Situations Fund III, L.P. and
Special Situations Cayman Fund, L.P. dated May 9, 1995(5)........
10.13 Form of Subscription Agreement and Form of Warrant Agreement by
and between the Company and certain officers and directors of the
Company, dated as of June 30, 1995(6)............................
10.14 Form of Debenture Purchase Agreement dated as of July 10, 1996,
by and between the Company and certain accredited investors......
10.15 Loan Agreement dated September 20, 1994 by and between Ontario
Development Corporation and Barringer Research Limited(7)........
10.16 Agreement dated September 28, 1995 between the Toronto-Dominion
Bank, the Company and Barringer Research Limited(8)..............
10.17 Lease between the Company and Murray Hill Inn Associates dated as
of February 17, 1993.............................................
10.18 Lease between BRL and Lehndorff Management Limited ("Lehndorff")
dated as of July 27, 1995........................................
</TABLE>
<PAGE> 78
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ---------------------------------------------------------------------------------
<C> <S> <C>
10.31 Form of Stock Purchase Agreement dated as of November 30, 1992 by
and between the Company and certain accredited investors(9)......
10.33 Stock Purchase Agreement dated as of February 2, 1993 by and
between the Company and Special Situations Cayman Funds,
L.P.(9)..........................................................
10.34 Form of Stock Purchase Agreement dated as of December 13, 1993 by
and between the Company and certain accredited investors(9)......
11 Earnings per share computation for the six months ended June 30,
1996(10).........................................................
21 List of Subsidiaries of the Company..............................
23.1 Consent of Lowenstein, Sandler, Kohl, Fisher & Boylan, P.A.
(included in Exhibit 5.1 to this registration statement).........
23.2 Consent of BDO Seidman, LLP, independent certified public
accountants......................................................
24.1 Power of Attorney (included on the signature page)...............
</TABLE>
- ---------------
* To be filed by amendment.
(1) Incorporated by reference to Exhibit 3.1A to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, File No. 0-3207.
(2) Incorporated by reference to Exhibit 3.2A to the Company's Annual Report on
Form 10-K/A-2 for the fiscal year ended December 31, 1994, File No. 0-3207.
(3) Incorporated by reference to Exhibit 10.15 to the Company's Registration
Statement on Form S-1, File No. 33-3162.
(4) Incorporated by reference to Exhibit 10.25 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1990, File No. 0-3207.
(5) Incorporated by reference to Exhibit 4.17 to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 1995, File No. 0-3207.
(6) Incorporated by reference to Exhibit 4.19 to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 1995, File No. 0-3207.
(7) Incorporated by reference to Exhibit 10.36 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1994, File No. 0-3207.
(8) Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed
on October 13, 1995, File No. 0-3207.
(9) Incorporated by reference to the identically numbered Exhibit to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1992, File No. 0-3207.
(10) Incorporated by reference to the identically numbered Exhibit to the
Company's Quarterly Report on Form 10-QSB for the quarter ended June 30,
1996, File No. 0-3207.
<PAGE> 1
EXHIBIT 1.1
1,000,000 SHARES OF COMMON STOCK
1,000,000 COMMON STOCK PURCHASE WARRANTS
BARRINGER TECHNOLOGIES INC.
UNDERWRITING AGREEMENT
, 1996
JANNEY MONTGOMERY SCOTT INC.
1801 Market Street
20th Floor
Philadelphia, Pennsylvania 19103
Attention: Syndicate Department
Dear Ladies and Gentlemen:
Barringer Technologies Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to the several underwriters named in Schedule I
hereto (the "Underwriters") 1,000,000 shares of its Common Stock, par value $.01
per share (the "Common Stock") and 1,000,000 Common Stock Purchase Warrants.
Each such Warrant shall represent the right to acquire one-half share of Common
Stock, shall expire three years from the effective date of the public offering,
shall be exercisable at a price equal to 120% of the public offering price per
share of Common Stock for the first twelve months from the date of issuance, at
a price equal to 130% of such public offering price during the ensuing twelve
months and at a price equal to 140% of such price during the last twelve months
of the term of such Warrants, and shall contain such other terms and conditions
as are set forth in the related exhibit to the Registration Statement described
below. The 1,000,000 shares of Common Stock to be purchased by the Underwriters
are hereinafter referred to as the "Firm Shares" and the 1,000,000 Common Stock
Purchase Warrants to be purchased by the Underwriters as the "Firm Warrants".
The Firm Shares and Firm Warrants are hereinafter collectively referred to as
the "Firm Securities". In addition, the Company proposes to grant to the several
Underwriters, solely for the purpose of covering over-allotments, the option
described in Section 5 of this agreement (the "Agreement") to purchase up to
150,000 additional shares of Common Stock of the Company (the "Additional
Shares") and 150,000 additional Common Stock Purchase Warrants (the "Additional
Warrants"). The Additional Shares and the Additional Warrants are hereinafter
collectively referred to as the "Additional Securities". The Additional
Securities may only be purchased on the basis of one Additional Warrant for each
Additional Share purchased.
<PAGE> 2
The Firm Securities and the Additional Securities, and the shares of
Common Stock issuable on exercise of the Firm Warrants and the Additional
Warrants are hereinafter collectively referred to as the "Offered Securities";
the Offered Securities and the Representative's Securities (itself defined in
Section 6 hereof) collectively as the "Securities"; all the warrants included in
the Securities as the "Warrants" and all of the shares of Common Stock issuable
on exercise of the Warrants as the "Warrant Shares".
You, as representative of the Underwriters (the "Representative"), have
advised the Company that you and the other Underwriters desire to purchase,
severally and not jointly, the Firm Securities and that you have been authorized
by the Underwriters to execute this Agreement on their behalf. The Company
hereby confirms the agreement made by it with respect to the purchase of the
Firm Securities by the several Underwriters on whose behalf you are signing this
agreement, as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(a) REGISTRATION STATEMENT AND PROSPECTUS. The Company has
filed with the Securities and Exchange Commission ("Commission") a
registration statement on Form SB-2 (No. 333-_________) for the
registration under the Securities Act of 1933, as amended ("Securities
Act"), of the Securities, and may have filed one or more amendments
thereto, copies of which have heretofore been delivered to you. The
registration statement, including the prospectus, financial statements
and exhibits, when it shall become effective, and such additional
information, if any, with respect to the offering permitted to be
omitted from such registration statement when it becomes effective if
subsequently filed with the Commission pursuant to Rule 430A of the
General Rules and Regulations of the Commission under the Securities
Act (the "Rules under the Securities Act"), is hereinafter called the
"Registration Statement" and the final prospectus included as part of
the Registration Statement is herein called the "Prospectus", except
that, if any revised prospectus shall be provided to the Underwriters
by the Company for use in connection with the offering of the
Securities which differs from the Prospectus on file at the Commission
at the time the Registration Statement becomes effective (whether or
not such revised prospectus is required to be filed by the Company
pursuant to Rule 424(b) of the Rules under the Securities Act), the
term "Prospectus" shall refer to such revised prospectus from and after
the time it is first provided to the Underwriters for such use. The
term "Preliminary Prospectus" as used in this agreement means a
preliminary prospectus as defined in Rule 430 of the Rules under the
Securities Act. The Securities Act, the Securities Exchange Act of
1934, as amended ("Exchange Act"), and the rules and regulations
promulgated thereunder are sometimes collectively referred to in this
agreement as the "Acts." All contracts and documents required by the
Acts to be filed or submitted in connection with the Registration
Statement have been so filed or submitted.
2
<PAGE> 3
(b) COMPLIANCE WITH SECURITIES ACT, ETC. When the Registration
Statement shall become effective and at all times subsequent thereto,
up to and including the Closing Date and the Option Closing Date (as
such terms are herein defined), and during such longer period until any
post-effective amendment to the Registration Statement shall become
effective, the Registration Statement (and any post-effective amendment
to the Registration Statement) will contain all statements which are
required to be stated therein in accordance with the Securities Act and
the Rules under the Securities Act, will fully comply in all material
respects with the applicable provisions of the Securities Act and the
Rules under the Securities Act, and the Registration Statement and any
post-effective amendment to the Registration Statement will not contain
any untrue statement of a material fact and will not omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein not misleading; and the Prospectus and any
amendment or supplement thereto will at all times up to and including
the Closing Date and the Option Closing Date (as hereinafter defined),
and during such longer period as the Prospectus may be required to be
delivered in connection with sales of Securities by the Underwriters or
any dealer, or in connection with the issuance and sale by the Company
of shares of Common Stock on exercise of any of the Warrants fully
comply in all material respects with the provisions of the Securities
Act and the Rules under the Securities Act and will not contain any
untrue statement of a material fact and will not omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that the
Company makes no representations or warranties as to the information
contained in or omitted from the Registration Statement and any
post-effective amendment to the Registration Statement or the
Prospectus or any amendment of, or supplement to, either of them in
reliance upon and in conformity with information furnished in writing
to the Company by or on behalf of any Underwriter through the
Representative specifically for use in connection with the preparation
of the Registration Statement or of the Prospectus. It is understood
that for all purposes of this Agreement the statements set forth in the
Prospectus on page 2 with respect to stabilization, under the section
entitled "Underwriting" and the identity of counsel for the
Underwriters under the section entitled "Legal Matters" constitute the
only information furnished in writing by or on behalf of the
Underwriters for inclusion in the Registration Statement and
Prospectus.
(c) NO STOP ORDER, ETC. The Commission has not issued any
order preventing or suspending the use of any Preliminary Prospectus,
and each Preliminary Prospectus, at the time of filing thereof, fully
complied in all material respects with the provisions of the Securities
Act and the Rules under the Securities Act and did not include any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the Company makes no
representations or warranties as to the information contained in or
omitted from any Preliminary Prospectus in reliance
3
<PAGE> 4
upon and in conformity with information furnished in writing to the
Company by or on behalf of any Underwriter through the Representative
specifically for use in connection with the preparation of such
Preliminary Prospectus.
(d) ACCOUNTANTS. BDO Seidman, LLP has audited the audited
financial statements filed as part of the Registration Statement and
those included in the Prospectus, to the extent set forth in their
reports in the Registration Statement and Prospectus, and are
independent public accountants as required by the Securities Act and
the Rules under the Securities Act.
(e) FINANCIAL STATEMENTS. The consolidated financial
statements included in the Registration Statement and Prospectus comply
as to form in all material respects with the applicable accounting
requirements of the Securities Act and the Rules under the Securities
Act. The consolidated financial statements present fairly the financial
condition and results of operations and combined cash flows of the
Company and its consolidated subsidiaries, at the dates and for the
periods indicated, and have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis throughout
the periods involved and the pro forma financial information included
in the Registration Statement and the Prospectus has been prepared in
accordance with the applicable requirements of Item 310 of Regulation
S-B of the Rules under the Securities Act and the assumptions used in
the preparation thereof are, in the opinion of the Company, reasonable.
The financial information set forth in the Prospectus under the
headings "Summary Consolidated Financial Information" and "Selected
Consolidated Financial Data" present fairly, on the basis stated in the
Prospectus, the information set forth therein and has been derived from
or compiled on a basis consistent with that of the audited consolidated
financial statements included in the Prospectus.
The Companies (as defined below) maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with the management's general
or specific authorization; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability
for assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to
any difference.
(f) SUBSIDIARIES; COMMONLY CONTROLLED ENTITIES. The Company
owns all of the outstanding shares of capital stock of Barringer
Instruments, Inc., a _____________ corporation ("BII"), and of
Barringer Research Ltd., a ________________ corporation ("BRL") and 26%
of the capital stock of Barringer Laboratories, Inc., a corporation
("Labco") (collectively the "Subsidiaries"). All the outstanding shares
of Capital Stock of each of the Subsidiaries have been duly authorized
and validly issued, are fully paid and non-assessable and all the
shares of capital stock of BII and
4
<PAGE> 5
BRL and 26% of such shares of Labco are owned beneficially by the
Company, free and clear of any liens, encumbrances, security interests
or other restrictions, and no rights exist, or with the passage of time
or otherwise will exist, to acquire any of the capital stock of any of
the Subsidiaries. Neither the Company, nor any of its Subsidiaries owns
any securities of any corporation or has any equity interest in any
firm, partnership, association or other entity. The Company and the
Subsidiaries are hereinafter collectively referred to as the
"Companies".
(g) NO MATERIAL ADVERSE CHANGE. None of the Companies has
sustained any material loss or interference with their respective
businesses, financial condition or properties from fire, flood,
hurricane, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree; and, subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
none of the Companies has incurred any material liabilities or
obligations, direct or contingent, or entered into any material
transactions, not in the ordinary course of business, and there has not
been any material change in the capital stock (including any dividend
or distribution of any kind declared, paid, or made on any class of
capital stock of any of the Companies) or long-term debt or obligations
under capital leases of any of the Companies, or any material adverse
change; and there is no present intention by any of the Companies to
terminate any material supplier relationship or knowledge by any of
them of any such supplier's present intention to terminate any supplier
relationship with any of the Companies, nor any development involving a
prospective material adverse change in their respective businesses,
financial conditions or properties, including any proposed legislation
or regulations which, if enacted or adopted, could have a material
adverse change, in the condition (financial or otherwise), or in the
earnings, business affairs or business prospects of the any of the
Companies other than those reflected in the Registration Statement and
the Prospectus.
(h) CAPITALIZATION; DESCRIPTIONS OF SECURITIES. (i) The
authorized, issued and outstanding capital stock of the Company is as
set forth in the Prospectus under "Capitalization"; the issued and
outstanding shares of Common Stock and Preferred Stock of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable; the Warrant Shares, when issued and delivered by the
Company pursuant to this agreement, will be validly issued, fully paid
and non-assessable. The shares of Common Stock and Preferred Stock of
the Company conform to the descriptions of them contained in the
Prospectus, and the descriptions of the Common Stock and Preferred
Stock conform to the rights set forth in the Company's Certificate of
Incorporation, as amended, defining the same. No rights exist, or with
the passage of time, or otherwise will exist, to acquire any of the
capital stock of the Company, except as set forth in the Registration
Statement. The issuance of the Firm Shares and the Additional Shares is
not subject to, or in violation of, any preemptive or other similar
rights.
5
<PAGE> 6
(ii) The Warrants have been duly authorized and, when
delivered and paid for in accordance with the Agreement will be validly
issued and will constitute valid and binding obligations of the Company
in accordance with, and will be exercisable in accordance with, their
terms; the shares of Common Stock issuable on exercise of the Warrants
have been duly and validly reserved for issuance pursuant to the terms
of the Warrants and, when delivered and paid for pursuant to the terms
of such Warrants, will be duly authorized, validly issued, fully paid
and nonassessable, and the holders will not be subject to personal
liability by reason of being such holders, and such shares will not be
subject to the preemptive rights of any stockholder of the Company.
(iii) The Warrants and the Warrant Shares conform in all
material respects to the descriptions thereof contained in the
Prospectus, and such descriptions conform to the rights set forth in
the instruments defining the same.
(i) ORGANIZATION, QUALIFICATION, ETC. The Company is a duly
organized and validly existing corporation in good standing under the
laws of the State of Delaware with corporate power and authority to own
and lease its properties and to conduct its business as described in
the Prospectus and to enter into and perform its obligations under this
agreement, BII is a duly organized and validly existing corporation in
good standing under the laws of the State of New Jersey, BRL is a duly
organized and validly existing corporation in good standing under the
laws of __________, and Labco is a duly organized and validly existing
corporation in good standing under the laws of the State of __________,
each with corporate power to own and lease its properties and to
conduct its business as described in the Prospectus, and each is duly
qualified to do business and in good standing in each jurisdiction in
which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except
where the failure to so qualify would not have a material adverse
change in its condition, financial or otherwise, or on its earnings,
business affairs or business prospects.
(j) REGULATORY COMPLIANCE. Each of the Companies holds all
material licenses, certificates, permits and other evidence of
regulatory compliance issued by appropriate federal, state or local or
foreign governmental agencies or bodies necessary for the conduct of
its business as described in the Prospectus, and none of the Companies
has received any notice of proceedings relating to the revocation or
modification of any such license, certificate, permit or other evidence
of compliance which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially and adversely
affect its condition, financial or otherwise, or the earnings, business
affairs or business prospects.
(k) AUTHORITY. The Company has full power and lawful
authority, and has taken all corporate action necessary, to enter into
this agreement and to authorize, issue and sell the Securities on the
terms and conditions set forth in this agreement, and this agreement
has been duly authorized, executed and delivered by the
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Company and constitutes the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.
(l) COMPLIANCE WITH OTHER INSTRUMENTS; CONSENTS. None of the
Companies is in violation of its charter or bylaws or in default in the
performance or observation of any obligation, agreement, covenant or
condition contained in any distribution agreement, indenture, mortgage,
deed of trust, note, bank loan or credit agreement, or any other
material agreement or instrument to which any of the Companies is a
party or by which it is bound, or to which any of its properties or
assets are subject, which default or defaults, singly or in the
aggregate, are material to its condition, financial or otherwise, or
its earnings, business affairs or business prospects, and each such
distribution agreement, indenture, mortgage, deed of trust, note, bank
loan or credit agreement, and other material agreement or instrument,
is in full force and effect and is the legal, valid and binding
obligation of, and is enforceable as to, each of the Companies, as the
case may be, in accordance with its terms. The execution, delivery and
performance of this agreement by the Company and the consummation by
the Company of the transactions contemplated herein will not (i)
conflict with, result in a breach or violation of any of the terms or
provisions of, or constitute a default under, or give rise to the
rights of termination under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the
Companies pursuant to, any distribution agreement, indenture, mortgage,
deed of trust, note, bank loan or credit agreement or any other
material agreement or instrument to which any of the Companies is a
party or by which any of their respective properties or assets are
bound, nor will such action result in any violation of the provisions
of the charter or bylaws of any of the Companies, or any material law,
rule, regulation, judgment, order or decree of any government,
governmental instrumentality or court having jurisdiction over any of
the Companies, or their respective properties or operations, or (ii)
require the consent, approval, authorization or order of any court or
governmental agency or body for the consummation by the Company of any
of the transactions contemplated hereby, except such as have been
obtained and such as may be required under the Acts, and under state
securities or "Blue Sky" laws in connection with the issuance and
distribution of the Securities. There are no contracts or documents of
the Companies that are required to be filed as exhibits to the
Registration Statement under the Securities Act or the Rules that have
not been so filed.
(m) LITIGATION. Except as set forth in the Prospectus, there
is no action, suit or proceeding before or by any court or governmental
agency or body, domestic or foreign, now pending or, to the knowledge
of the Company, threatened, against or affecting any of the Companies,
that is required to be disclosed in the Registration Statement (other
than as disclosed therein), or that might result in a material adverse
change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of any of the Companies or that
might materially and adversely affect the properties or assets thereof
or that might materially or adversely affect the consummation of this
agreement; all pending legal or governmental proceedings to
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which any of the Companies is a party or of which any of their
respective properties or assets are the subject, that are not described
in the Registration Statement, including ordinary routine litigation
incidental to the business of the Companies, are not material.
(n) PAYMENT OF TAXES. Each of the Companies has filed all
United States federal, state and local tax returns which are required
to be filed and all such filed returns are complete and accurate. All
taxes and all assessments to the extent that they have become due have
been paid in full, and each of them has made adequate accruals for all
taxes which may be owed but have not been paid. There is no audit,
examination, deficiency, or refund litigation pending or threatened,
with respect to any Taxes of the Companies that would individually or
in the aggregate have a material adverse effect on any or all of the
Companies. All Taxes, interest, additions, and penalties due with
respect to completed and settled examinations or concluded litigation
relating to it have been paid in full. None of the Companies has
executed an extension or waiver of any statute of limitations on the
assessment or collection of any Tax that is currently in effect. No
rulings have been issued by or agreements entered into with any Tax
Authority (as defined below) with respect to the Company or any
subsidiary or affiliate. For purposes of this paragraph, "Taxes" shall
mean all taxes, charges, fees, liens, duties or other assessments,
however denominated, including any interest or penalties that may
become payable in respect thereof, imposed by the United States
government, any state, local or foreign government or any agency or
political subdivision of any such government (a "Taxing Authority"),
which taxes shall include, without limiting the generality of the
foregoing, all income taxes, payroll and employee withholding taxes,
unemployment insurance, social security, sales and use taxes, excise
taxes, capital taxes, franchise taxes, gross receipt taxes, occupation
taxes, real or personal property taxes, value added taxes, stamp taxes,
transfer taxes, workers' compensation taxes, and other obligations of
the same or of a similar nature.
(o) The Securities shall have been qualified for listing on
The NASDAQ National Market System.
(p) None of the Companies are an "investment company" or an
"affiliated person" of, or promoter, or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment
Company Act of 1940.
(q) REAL AND PERSONAL PROPERTY. Except as disclosed in the
Prospectus, each of the Companies owns outright, in fee simple, title
to the real and personal property purported to be owned by it, free and
clear of all liens, mortgages, charges or encumbrances of any nature,
except those which do not materially diminish the value of the property
subject to them or interfere with or impair the present and continued
use of that property in the usual and normal conduct of its business.
All of the leases under which each of the Companies holds properties or
assets as lessee are, in all material respects, as described in the
Prospectus and are valid and in full
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force and effect and enforceable as to the Companies in accordance with
their terms, and none of the Companies is in default in any respect
under any of the terms or provisions of any such leases, except for any
default which would not have a material adverse change on its business,
and no claim has been asserted by anyone adverse to the rights of the
Companies as lessee under any of the leases mentioned above, or
affecting or questioning the right of any of the Companies to continued
possession of the leased premises or assets under any such lease.
(r) INTELLECTUAL PROPERTY. Each of the Companies owns or
possesses adequate licenses or other rights to use all patents, trade
secrets, trademarks, trade names and copyrights necessary to enable it
to conduct its business as now operated (the "Intellectual Property")
and such Intellectual Property (other than Intellectual Property rights
acquired as licensee) is owned free and clear of any liens, security
interests, mortgages, charges, encumbrances and adverse rights of every
kind, nature and description; and none of the Companies has any
knowledge of any claim or received any notice of infringement of or
conflict with asserted rights of others or have knowledge of
infringement by others of its rights with respect to any of the
foregoing which, singly or in the aggregate, could result in a material
adverse change in its condition, financial or otherwise, or in its
earnings, business affairs or business prospects. Except for the rights
of customers under license agreements, the Intellectual Property is not
subject to any licenses, sublicenses, royalty arrangements, or
disputes, and except for such rights, each of the Companies has the
exclusive right to make, copy, sell, exploit and provide to others the
use of the Intellectual Property pertinent to it and all derivative
works thereof free and clear of any liens, security interests,
mortgages, charges, encumbrances and adverse rights of every kind,
nature and description. There are no defects in the Intellectual
Property, which defects would in any material and adverse respect
affect the functioning thereof in accordance with the specifications
therefor, or the use or exploitation thereof. No agreement exists which
would preclude any desired change to the Intellectual Property. Each of
the Companies has taken or is taking all actions necessary in its
reasonable judgment to protect the Intellectual Property pertinent to
it. No third party has any interest in, or right to compensation from
any of the Companies by reason of the use, exploitation or sale of the
Intellectual Property, and none of the Companies has received notice or
knowledge of any complaint, assertion, threat or allegation that would
contradict the foregoing.
(s) INSURANCE. Each of the Companies has its property
adequately insured against loss or damage by fire, maintains adequate
insurance against liability for negligence, and maintains such other
insurance in such nature and amounts of coverage as is usually
maintained by companies engaged in the same or similar business.
(t) NO STABILIZATION OR MANIPULATION OF PRICE. Neither the
Company nor any officer or director of the Company has taken, and the
Company and each officer and director of the Company have agreed not to
take, directly or indirectly, any
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action designed to stabilize or manipulate the price of any security of
the Company, or which has constituted or which might in the future
reasonably be expected to constitute stabilization or manipulation of
the price of the Offered Securities in connection with the offering
contemplated by the Registration Statement.
(u) RELATED TRANSACTIONS. There are no business relationships
or related-party transactions of the nature described in Item 404 of
Regulation S-B involving any of the Companies and any other persons
referred to in said Item 404 that are required to be described in the
Prospectus and which have not been so disclosed.
(v) NO REGISTRATION RIGHTS. Except as set forth in the
Prospectus, no person or entity has the right (which has not been
waived) to require registration of Common Stock or other securities of
the Company because of the filing or effectiveness of the Registration
Statement or otherwise.
(w) LOCK-UP AGREEMENTS. The Company has obtained and delivered
to the Underwriters a written agreement, in form satisfactory to
Rosenman & Colin LLP, counsel for the Underwriters, by each officer and
director of the Company as of the Effective Date not to, directly or
indirectly, sell, offer to sell or agree to sell or otherwise dispose
of any Common Stock of the Company for a period of 180 days from the
Effective Date without the prior written consent of the Representative,
other than pursuant to the Registration Statement, and relating also to
the manner of sale of such shares in the two-year period following such
180-day period.
(x) NO BROKER OR FINDER ENGAGED BY THE COMPANY. The Company
has not incurred any liability for any finder's fees or similar
payments in connection with any of the transactions herein
contemplated.
(y) LABOR RELATIONS. None of the Companies is involved in any
labor dispute which might be expected to result in a material adverse
effect on its condition, financial or otherwise, or on its earnings,
business affairs or business prospects, and no such dispute is pending,
or, to the knowledge of the Companies, threatened.
(z) DEALINGS. None of the Companies nor any of their
respective officers, directors, employees, agents or any other person
acting on their behalf has, directly or indirectly, given or agreed to
give any money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business) to any
customer, supplier, employee or an agent of a customer or supplier, or
official or employee of any governmental agency or instrumentality of
any government (domestic or foreign) or any political party or
candidate for office (domestic or foreign) or other person who was, is,
or may be in a position to help or hinder their respective businesses
(or assist in connection with any actual or proposed transaction) which
(a) might subject any of them to any damage or penalty in any civil,
criminal or governmental litigation or proceeding, (b) if not given in
the past, might have had a materially adverse effect on the assets,
business or operations of any of them as reflected in any of the
combined financial statements contained in the Prospectus,
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or (c) if not continued in the future, might adversely affect the
assets, business, operations or prospects of any of them. Each of the
Companies' internal accounting controls and procedures are sufficient
to cause it to comply with the Foreign Corrupt Practices Act of 1977,
as amended.
(aa) PRIOR TRANSACTIONS. Except as set forth in the
Registration Statement, the Company has not issued, sold or offered for
sale within the last three years any of its equity securities.
2. PURCHASE AND SALE OF SHARES. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company hereby agrees to issue and sell to the Underwriters,
severally and not jointly,the number of Firm Securities to be sold by the
Company set forth opposite the name of each Underwriter on Schedule I, and each
Underwriter, severally and not jointly, hereby agrees to purchase from the
Company the number of Firm Securities set forth opposite the name of such
Underwriter in Schedule I hereto, at a purchase price of $______ per Firm Share
and $_______ per Firm Warrant.
3. DELIVERY AND PAYMENT. The Company shall deliver the Firm Securities
at the office of Janney Montgomery Scott Inc., 26 Broadway, New York, New York,
on ________________, 1996 at 10:00 A.M., New York City time, the date and time
of such delivery being hereinafter called the "Closing Date." On the Closing
Date, delivery of the Firm Securities shall be made to you, for the respective
accounts of the several Underwriters, against payment by the several
Underwriters through you of the purchase price for the Firm Securities. The
purchase price for the Firm Securities will be paid to or upon the order of the
Company, in bank checks in New York Clearing House funds. Certificates for the
Firm Securities shall be made available to you for inspection, checking and
packaging at the office of Janney Montgomery Scott Inc., 26 Broadway, New York,
New York, not less than one full business day prior to the Closing Date. Time
shall be of the essence and delivery at the time and place specified in this
agreement is a further condition to the obligations of each Underwriter.
In the event the Underwriters exercise the option granted in Section
4(a) hereof to purchase all or any portion of the Additional Securities, the
Company shall deliver the Additional Securities at the office of Janney
Montgomery Scott Inc., 26 Broadway, New York, New York, at 10:00 A.M., New York
City time on the Option Closing Date (as hereinafter defined). On the Option
Closing Date, delivery of the Additional Securities shall be made to you, for
the respective accounts of the several Underwriters, against payment by the
several Underwriters through you of the purchase price for the Additional
Securities. The purchase price for the Additional Securities will be paid to or
upon the order of the Company, in bank checks in New York Clearing House funds.
Certificates for the Additional Securities shall be made available to you for
inspection, checking and packaging at the office of Janney Montgomery Scott
Inc., 26 Broadway, New York, New York, not less than one full business day prior
to the Option Closing Date. Time shall be of the essence and delivery at the
time and place specified in this agreement is a further condition to the
obligations of each Underwriter.
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4. OPTION TO PURCHASE ADDITIONAL SHARES.
(a) For the purpose of covering any over-allotments in connection with
the distribution and sale of the Firm Securities as contemplated by the
Prospectus, the Company hereby grants an option to the Underwriters to purchase
150,000 Additional Shares and 150,000 Additional Warrants from the Company, in
each case at a price identical to the price per Firm Share and Firm Warrant set
forth in Section 2 of this Agreement. The option hereby granted may be exercised
by the Underwriters as to all or any part of the Additional Securities at any
time, but only once prior to the end of the close of business on the thirtieth
day following the Closing Date; provided, however, that Additional Securities
may only be purchased on the basis of one additional Warrant for each Additional
Share purchased. Subject to such adjustments to eliminate fractional Additional
Securities as you, as the Representative of the Underwriters, may determine, the
number of Additional Securities to be purchased by each Underwriter shall bear
the same relation to the total number of Additional Securities to be sold as the
total number of Firm Securities to be purchased by such Underwriter bears to the
total number of Firm Securities purchased by the Underwriters.
(b) The option granted hereby may be exercised by you, as the
Representative of the Underwriters, by giving written notice to the Company
setting forth the number of Additional Securities to be purchased, the date and
time for delivery of payment for the Additional Securities, and stating that the
Additional Securities being purchased are to be used for the purpose of covering
over-allotments in connection with the distribution and sale of the Firm
Securities. If the notice is given prior to the Closing Date, the date for
delivery and payment shall not be earlier than the later of two (2) full
business days after the notice is given or the Closing Date. If the notice is
given on or after the Closing Date, the date for delivery and payment shall not
be earlier than five full business days after the day on which the notice is
given. In either event, the date shall not be more than fifteen (15) full
business days after the day on which the notice is given. The date and time for
delivery and payment is called the "Option Closing Date." Upon exercise of the
option, the Company shall become obligated to sell to the Underwriters and,
subject to the terms and conditions set forth in Section 4(c) of this Agreement,
the Underwriters shall become obligated, severally and not jointly to purchase
the number of Additional Shares described in Section 4(a) above. On the Option
Closing Date, delivery of the Additional Securities shall be made against
payment of the purchase price to the Company by bank check or checks payable in
New York Clearing House funds.
(c) The obligation of the Underwriters to purchase and pay for any of
the Additional Securities is subject to the accuracy as of the date of this
Agreement, the Closing Date and the Option Closing Date of, and the compliance
by the Company in all material respects with, its representations and warranties
in this Agreement, to the accuracy of the statements of the officers of the
Company made pursuant to this Agreement, to the performance in all material
respects by the Company of its obligations under this Agreement, to the
satisfaction by the Company as of the Option Closing Date of the conditions set
forth in Section 11 of this Agreement, and to the delivery to you of opinions,
certificates, and letters addressed to you and dated the Option Closing Date
substantially similar in scope to those specified in Section 11 of this
Agreement, but with each reference
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to "Firm Securities" to be to the Additional Securities being sold, and "Closing
Date" to be to the "Option Closing Date."
5. OFFERING BY UNDERWRITERS. After the Registration Statement becomes
effective, the Underwriters propose to offer for sale to the public the Firm
Securities and any Additional Securities which may be sold at the price and upon
the terms set forth in the Prospectus. The Representative represents and
warrants that it has not incurred any liability for finder's fees or similar
payments in connection with the transactions herein contemplated.
6. REPRESENTATIVE'S WARRANTS. At the Closing, the Company shall sell to
the Representative, for a nominal consideration, five-year warrants entitling
the holder to purchase up to 100,000 shares of Common Stock and three-year
warrants entitling the holder to purchase up to 100,000 warrants identical in
form and substance to the Firm Warrants (the warrants to be issued to the
Representative to purchase shares of Common Stock and warrants are referred to
herein as the "Representative's Warrants" and the warrants purchasable on
exercise of the Representative's Warrants are referred to herein as the
"Included Warrants"). The Representative's Warrants to purchase shares of Common
Stock shall be initially exercisable for a period of four years commencing one
year after the effective date of the Prospectus and the Representative's
Warrants to purchase warrants shall be initially exercisable for a period of two
years commencing one year after the effective date of the Prospectus, in each
case at a price or prices conforming to the requirements of the National
Association of Securities Dealers Inc. and shall contain the registration rights
and other terms and conditions set forth in the related Exhibit to the
Registration Statement. As used herein, "Representative's Securities" shall mean
the Representative's Warrants, the Included Warrants and the shares of Common
Stock issuable on exercise of all such Warrants.
7. EXPENSES.
The Company will pay all fees, taxes and expenses incident to the
performance of the obligations of the Company under this Agreement and under any
other agreement in connection with the offer, sale and issuance of the Firm
Securities and Additional Securities, and any fees, taxes and expenses,
including transfer taxes incident to the issuance and delivery of the Firm
Securities and Additional Securities to the Underwriters as may be required by
this agreement, including, without limitation, accounting, legal (other than the
fees and disbursements of the Underwriters' counsel, except as provided below),
printing, any state or local transfer or other taxes advertising and other costs
incurred in connection with the preparation, printing, filing and delivery to
the Representative of the Registration Statement, the Preliminary Prospectus,
the Prospectus, and all amendments or supplements to them, preliminary and final
Blue Sky Memoranda, this Agreement, the Agreement Among Underwriters and
Selected Dealer Agreement, Underwriters' Questionnaires, powers of attorney, the
listing of the Securities on The Nasdaq National Market System and any other
agreements or similar items of expense, including postage, printing, advertising
costs, the costs of "road shows" and other marketing expenses reasonably
incurred by you or reasonably required or desirable in connection with the
offering and sale of the Firm Securities and Additional Securities, and in
connection with furnishing copies of the
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Preliminary Prospectus, the Prospectus and all supplements and amendments to
them to the several Underwriters and all filing fees to the Commission and the
National Association of Securities Dealers, Inc. ("NASD") payable in connection
with this offering. The Company will pay all legal fees (including the
reasonable fees of Rosenman and Colin LLP, Blue Sky counsel to the Company),
disbursements, filing fees and other costs of compliance with or registration
and qualification under applicable state securities or Blue Sky laws and all
reasonable expenses incident thereto. The Company shall also pay the fees and
expenses of the transfer agent and Custodian. At the Closing, the Company shall
pay to the Representative a non-accountable expense allowance of 2% of the gross
proceeds of the offering of the Firm Securities, of which the Representative
acknowledges having received a non-refundable advance of $20,000, and at any
Option Closing shall pay to the Representative a further non-accountable expense
allowance of 2% of the gross proceeds of the offering of Additional Securities.
8. FURTHER COVENANTS OF THE COMPANY. In further consideration of the
agreements of the Underwriters contained in this Agreement, the Company
covenants and agrees with each of the several Underwriters as follows:
(a) The Company will not at any time submit or make any
amendment or supplement to the Prospectus or Registration Statement
which shall not have been submitted to you within a reasonable time
prior to the proposed submission thereof, or to which you shall
reasonably object in writing, or which is not in compliance with the
Acts.
(b) The Company will use its best efforts to cause the
Registration Statement and any post-effective amendments thereto to
comply with the requirements of the Securities Act and the Rules under
the Securities Act and to become effective, and will promptly advise
you and confirm in writing (i) when the Registration Statement and any
amendment thereto shall become effective, (ii) when any post-effective
amendment to the Registration Statement becomes effective, (iii) of the
receipt of any comments from the Commission, (iv) when the Commission
shall request any amendment to the Registration Statement or
Prospectus, or request any additional information, (v) of the necessity
of amending or supplementing the Registration Statement or any
post-effective amendment in order to then meet the requirements of the
Securities Act and the Rules under the Securities Act, and (vi) of the
issuance by the Commission, any "Blue Sky" authority or any other
governmental agency with jurisdiction over the Company or its
securities, of any stop order or similar order with regard to the
Registration Statement or the Prospectus, or any order preventing or
suspending the use of any Preliminary Prospectus or the Registration
Statement or Prospectus, or of the suspension of the qualification of
the Securities for offer or sale in any jurisdiction, or of the
institution of any proceedings for any such purpose. The Company will
use its best efforts to prevent the issuance of any stop order or of
any order preventing or suspending such use and if such an order shall
be issued, the Company will use its best efforts to obtain its
withdrawal as soon as possible.
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(c) The Company will prepare and file with the Commission,
upon your reasonable request, any amendments or supplements to the
Registration Statement or Prospectus, in form and substance reasonably
satisfactory to counsel for the Company, as in the opinion of Rosenman
& Colin LLP, counsel for the Underwriters, may be necessary or
advisable in connection with the distribution of the Offered Securities
and the exercise of the Warrants included therein, and will use its
best efforts to cause the same to become effective as promptly as
possible and to remain effective for the term of the Warrants included
in the Offered Securities.
(d) The Company consents to the use of any Preliminary
Prospectus by the several Underwriters and by dealers for the purposes
contemplated by this agreement and in accordance with the Acts. The
Company will deliver to you, at or before the Closing Date, three
executed copies of the Registration Statement and all amendments
thereto, including all financial statements and exhibits filed with it,
and copies of all written communications between the Company, its
representatives and agents and the Commission, and will deliver to you
such number of copies of the Registration Statement, including such
financial statements, but without exhibits, and all amendments thereto
as you may reasonably request. The Company will deliver or mail to you
and, upon your request, to the Underwriters, from time to time, during
the period when delivery of the Prospectus relating to the Offered
Securities shall be required under the Acts, as many copies of the
Prospectus (as amended or supplemented) as you may reasonably request.
(e) If, at the time that the Registration Statement becomes
effective, any information shall have been omitted therefrom in
reliance upon Rule 430A of the Rules under the Securities Act, then,
immediately thereafter, the Company will prepare, and file or transmit
for filing with the Commission in accordance with such Rule 430A and
Rule 424(b) of the Rules under the Securities Act copies of the amended
Prospectus, or, if required by such Rule 430A, a post-effective
amendment to the Registration Statement (including an amended
Prospectus) containing all information so omitted.
(f) The Company will comply with the requirements of the Acts
and any other applicable rules and regulations of any governmental
authority having jurisdiction over this offering so as to permit the
continuance of sales or dealing in the Offered Securities. Subject to
the provisions of Subsection (a) of this Section 8, if, at any time
when a Prospectus is required to be delivered under the Acts, (i) an
event relating to or affecting the Company shall have occurred which,
in the judgment of the Company and its counsel, or in the opinion of
counsel for the Underwriters, would cause the Registration Statement as
then in effect to include an untrue statement of a material fact or to
omit to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading, or in
order to make the Registration Statement comply with the Acts and the
Rules under the Securities Act, or (ii) it is necessary to amend or
supplement the Registration Statement or Prospectus, the Company will
promptly notify you of the occurrence and will promptly prepare, file
and deliver to you without charge such number of copies of the amended
or supplemented Registration Statement or
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Prospectus as you shall reasonably request, and will use its best
efforts to cause the Commission and appropriate "Blue Sky" authorities
to take all required action with regard to any such amendment as may be
necessary to permit the lawful use of the Registration Statement and
Prospectus in connection with the distribution of the Offered
Securities.
(g) The Company will supply all necessary documents, exhibits
and information and execute all applications, instruments and papers as
may be necessary or desirable in the opinion of Rosenman & Colin LLP,
Blue Sky counsel, and as requested by you, to qualify the Offered
Securities for sale under the Blue Sky or other securities laws in such
jurisdictions as the Underwriters may reasonably request, provided the
Company shall not have to qualify as a foreign corporation and shall
not be required to consent to service of process generally. The Company
will take any reasonable measures requested by you and such action, if
any, which is necessary under such laws in order to qualify the Offered
Securities for sale and to continue such registration or qualification
so long as necessary to permit the continuance of sales or dealings
therein with respect to such Securities.
(h) The Company will make generally available to its security
holders as soon as practicable after the expiration of one year after
the date the Registration Statement becomes effective, and in all
events not later than ___________, 1997, an earnings statement of the
Company (which will be in such detail and form as you may reasonably
request and which need not be audited) covering a period of at least 12
months beginning not later than the first day of the Company's fiscal
quarter next following the date the Registration Statement becomes
effective, which earnings statement shall satisfy the provision of
Section 11(a) of the Securities Act.
(i) So long as the Company shall be subject to the reporting
requirements of the Exchange Act, the Company shall mail to its
stockholders and warrantholders annual reports containing financial
statements of the Company audited by its independent certified public
accountants and quarterly reports for the first three quarters of its
fiscal year containing financial information which may be unaudited.
(j) The Company will, from time to time, after the date the
Registration Statement becomes effective, file with the Commission such
reports as are required by the Acts and with state securities
commissions in states where the Offered Securities have been sold by
the Representative (as the Representative shall have advised the
Company in writing) such reports as are required to be filed by the
securities acts and the regulations of those states.
(k) The Company will apply the net proceeds from the sale of
the Offered Securities for the purposes set forth under "Use of
Proceeds" in the Prospectus.
(l) The Company shall furnish to you as early as practicable
prior to the Closing Date, but no later than three (3) full business
days prior thereto, a copy of the latest available unaudited interim
financial statements of the Company which
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have been read by the Company's independent certified public
accountants, as stated in their letters to be furnished pursuant to
Section 11(i) of this agreement.
(m) During the period of five (5) years from the date the
Registration Statement becomes effective, the Company will furnish to
the Representative copies of all reports and other communications
(financial or other) furnished by the Company to its shareholders and,
as soon as reasonably practicable, copies of any reports or financial
statements furnished or filed by the Company to or with the Commission,
NASDAQ, or any national exchange on which any class of securities of
the Company may be listed.
(n) During a period of 180 days after the date the
Registration Statement becomes effective, the Company will not,
directly or indirectly, without the prior written consent of the
Representative, offer, sell, grant any option to purchase or otherwise
dispose of any Common Stock or any securities convertible into or
exchangeable for Common Stock except pursuant to this Agreement, and
except (i) in connection with a merger or asset acquisition, or (ii)
upon exercise or conversion of securities (including stock options) of
the Company outstanding prior to the effective date of the Registration
Statement or granted under the Company stock option plans under which
___________ shares of Common Stock are reserved for issuance upon
exercise of stock options granted thereunder.
(o) The Company will reasonably enforce, for your benefit, the
written agreements (copies of which have been furnished to you) by all
of the officers, directors and shareholders of the Company pursuant to
Section 1(w) hereof.
(p) At the request of the Representative, the Company, at its
expense, for a period of three years following the Closing Date shall
provide the Representative with copies of the daily transfer sheets for
the Company's Common Stock.
(q) The Company will cause the officers, directors and
principal shareholders of the Company (enumerate) to enter into
an agreement with the Representative to the effect that, for a period
of 180 days from the date hereof, he or she will not, without the
prior consent of the Representative, directly or indirectly, offer,
sell, offer to sell, grant any option to purchase or otherwise sell
or dispose of any shares of the Common Stock of the Company or any
securities convertible into or exercisable or exchangeable therefor
or with respect to which such person has the power of disposition.
9. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless, and, subject to
Section 9(c) to indemnify and hold harmless, each Underwriter (including
specifically each person who may be substituted for an Underwriter as provided
in Section 13 of this Agreement)
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and each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Securities Act, from and against any and all losses, claims,
damages, expenses or liabilities, joint or several, to which they or any of them
may become subject under the Act, state securities laws or under any other
statute or at common law or otherwise, and, except as hereinafter provided, will
reimburse each of the Underwriters and each such controlling person, if any, for
any legal or other expenses reasonably incurred by them or any of them in
connection with investigating or defending any claim or action whether or not
resulting in any liability, insofar as such losses, claims, damages, expenses,
liabilities or actions arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, in any Preliminary Prospectus or in the Prospectus (or the
Registration Statement or Prospectus as from time to time amended or
supplemented by the Company) or in any application or other document
(hereinafter "Application") executed by the Company or based upon written
information furnished by or on behalf of the Company, filed in any jurisdiction
in order to qualify the Securities under the securities laws of that
jurisdiction, or which arise out of or are based upon the omission or alleged
omission to state in any of the foregoing any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; provided,
however, that the indemnity agreement contained in this Subsection shall not
apply to any loss, claim, damage, expense or liability to the extent arising out
of any untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement, Preliminary Prospectus or
Prospectus (or the Registration Statement or Prospectus as from time to time
amended or supplemented by the Company) or, Application in reliance upon and in
conformity with information furnished in writing to the Company in connection
therewith by the Representative or any Underwriter directly or through you
expressly for use therein; provided, further that the indemnity agreement
contained in this Subsection is subject to the condition that, insofar as it
relates to any such untrue statement or alleged untrue statement or omission or
alleged omission in any Preliminary Prospectus but eliminated or remedied in the
Prospectus, such indemnity agreement shall not inure to the benefit of any
Underwriter or any person controlling such Underwriter from whom the person
asserting any such loss, claim, damage, expense, liability or action purchased
the Securities if (i) prior to the time such Prospectus was required under the
Securities Act to be furnished to such person the Company had furnished copies
of the properly corrected or supplemental Prospectus to such Underwriter, (ii) a
copy of such Prospectus, as then corrected or supplemented, was not furnished to
such person at or prior to the time required under the Securities Act, and (iii)
the delivery of such Prospectus would have constituted a complete defense to the
claim asserted by such person. Promptly after receipt by any Underwriter or any
person controlling such Underwriter of notice of the commencement of any action
in respect of which indemnity may be sought against the Company under this
Subsection (a), such Underwriter or controlling person shall notify the Company
in writing of the commencement of the action and, subject to the provisions
hereinafter stated, the Company shall assume the defense of that action
(including the employment of counsel who shall be reasonably satisfactory to the
Representative) and the payment of expenses insofar as such action shall relate
to any alleged liability in respect of which indemnity may be sought against the
Company. Any Underwriter or any such controlling person shall have the right to
employ separate counsel in any such action and participate in the defense, but
the fees and expenses of such counsel shall not be at the expense of the Company
unless the
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<PAGE> 19
employment of such counsel has been specifically authorized by the Company or
unless the indemnified party or parties reasonably conclude there may be
defenses available to it or them which were not available to the Company (in
which case the Company will not have the right to direct the defense of the
action on behalf of the indemnified parties), in which event the reasonable
expenses of one additional counsel for the Underwriters will be borne by the
Company. The Company shall not be liable to indemnify any person for any
settlement of any such action effected without the written consent of the
Company. The obligations of the Company under the indemnity agreement set forth
in this Subsection (a) shall be in addition to any liability the Company may
otherwise have under this Agreement.
(b) Each Underwriter (including specifically each person who may be
substituted for an Underwriter as provided in Section 13 of this Agreement)
severally agrees to indemnify and hold harmless the Company, each of its
directors, each of its officers and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act, from and against
any and all losses, claims, damages, expenses, or liabilities, joint or several,
to which they or any of them may become subject under the Acts or under any
other statute or at common law or otherwise, and, except as hereinafter
provided, will reimburse the Company and each such director, officer or
controlling person for any legal or other expenses reasonably incurred by them
or any of them in connection with investigating or defending any claim or action
whether or not resulting in any liability, insofar as such losses, claims,
damages, expenses, liabilities or actions arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, in any Preliminary Prospectus or in the Prospectus (or
the Registration Statement or Prospectus as from time to time amended or
supplemented) or in any Application, or arise out of or are based upon the
omission or alleged omission to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, but only insofar
as any such statement or omission was made in reliance upon and in conformity
with information furnished in writing to the Company in connection therewith by
the Representative or such Underwriter directly or through the Representative
expressly for use therein. Promptly after receipt of notice of the commencement
of any action in respect of which indemnity may be sought against one or more
Underwriters under this Subsection (b), the indemnified party shall notify all
Underwriters in writing of the commencement of the action and the Underwriter or
Underwriters against whom indemnity may be sought shall, subject to the
provisions hereinafter stated, assume the defense of such action (including the
employment of counsel who shall be reasonably satisfactory to the Company , and
the payment of expenses) insofar as such action shall relate to an alleged
liability in respect of which indemnity may be sought against such Underwriter
or Underwriters. The Company and each such director, officer or controlling
person shall have the right to employ separate counsel in any such action and
participate in the defense, but the fees and expenses of such counsel shall not
be at the expense of any Underwriter unless the employment of such counsel has
been specifically authorized by the Underwriters obligated to defend such
action, unless the indemnified party or parties reasonably conclude there may be
defenses available to it or them which are not available to the Underwriters
against whom indemnification is sought (in which case those Underwriters will
not have the right to direct the defense of the action on behalf of the
indemnified party or parties), in which event the reasonable expenses of one
additional counsel for all the indemnified
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<PAGE> 20
parties will be borne by the indemnifying Underwriters. The Underwriter against
whom indemnity may be sought shall not be liable to indemnify any person for any
settlement of any action effected without such Underwriter's written consent.
The obligations of each Underwriter under the indemnity agreement set forth in
this Subsection (b) shall be in addition to any liability each of them may
otherwise have under this Agreement.
10. CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Section 9 is for any reason held to be unenforceable by the indemnified parties
although applicable in accordance with its terms, the Company and the
Underwriters shall contribute to the aggregate losses, claims, damages,
liabilities and expenses of the nature contemplated by said indemnity agreement
incurred by the Company, and one or more of the Underwriters, as incurred, in
such proportions that the Underwriters are responsible for that portion
represented by the percentage that the underwriting discount appearing on the
cover page of the Prospectus bears to the public offering price appearing
thereon, and the Company shall be responsible for the balance; provided,
however, that no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Notwithstanding the provisions of this Section 10, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Firm Securities and Additional Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages of the kind described in Section 9(a) which
such Underwriter has otherwise paid in respect of such losses, claims, damages,
liabilities and expenses. For purposes of this Section , each person, if any,
who controls an Underwriter within the meaning of Section 15 of the Securities
Act shall have the same rights to contribution as such Underwriter, and each
director of the Company, each officer of the Company who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act shall have the same rights to contribution
as the Company.
11. CONDITIONS OF OBLIGATIONS OF UNDERWRITERS. The obligations of the
Underwriters to purchase and pay for the Firm Securities and Additional
Securities are subject (as of the date hereof and the Closing Date) to the
accuracy of the representations and warranties of the Company , the accuracy of
the statements of officers and directors of the Company made pursuant to the
provisions of this Agreement, the performance by the Company of its obligations
under this Agreement and to the following additional conditions:
(a) The Registration Statement shall become effective with the
Commission no later than 10:00 A.M., New York City time, on the day
following the date of this Agreement, or such later time and date as
shall have been consented to by the Underwriters (including you) who
are obligated to purchase a majority of the Firm Securities to be
purchased by all of the Underwriters pursuant to this Agreement; the
Commission shall have taken all required action, if any, with regard to
the Registration Statement, and, prior to the Closing Date, no stop
order or similar order with regard to the Registration Statement shall
have been issued and no proceedings for that purpose shall have been
instituted or shall be pending or, to the knowledge of the Underwriters
or the Company, shall be contemplated by the
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<PAGE> 21
Commission or by any securities, Blue Sky or other regulatory authority
of any jurisdiction, and any request on the part of the Commission or
such other securities, Blue Sky or regulatory authorities for
additional information shall have been complied with to the
satisfaction of Rosenman & Colin LLP, counsel for the Underwriters.
(b) Prior to the date of this Agreement, the issuance and sale
of the Securities shall have been approved by all requisite corporate
action of the Company.
(c) The NASD shall have indicated that it had no objection to
the underwriting arrangements pertaining to the sale of the Firm
Securities and the Additional Securities and the participation by the
Underwriters in the sale thereof.
(d) No action shall have been taken by the Commission or the
NASD the effect of which would make it improper, at any time prior to
the Closing Date, for members of the NASD to execute transactions (as
principal or agent) in any of the Securities, and no proceedings for
the taking of such action shall have been instituted or shall be
pending or, to the knowledge of the Underwriters or the Company, shall
be contemplated by the Commission or the NASD. The Company represents
that at the date hereof it has no knowledge that any such action is in
fact contemplated by the Commission or the NASD.
(e) Between the date of this Agreement and the Closing Date,
none of the Companies shall have sustained any material loss outside
the ordinary course of its business or of such character as would
materially adversely affect its business or property, whether or not
that loss is covered by insurance.
(f) Between the date of this Agreement and the Closing Date,
each of the Companies shall have conducted its business in the usual
and ordinary manner, and, except as disclosed in the Prospectus or
except in the ordinary course of its business, shall not have incurred
any material liabilities or obligations, direct or contingent, or
altered in any material respect any material supplier relationship, or
disposed of a material amount of its assets, or entered into any
material transactions, and shall not have suffered or experienced any
substantial adverse change in its condition, financial or otherwise. At
the Closing Date, the capital stock of the Company shall be
substantially as set forth in the Registration Statement, except with
respect to the Firm Securities to be sold by the Company.
(g) At the Closing Date, there shall have been delivered to
you a signed opinion of Lowenstein, Sandler, Kohl, Fisher & Boylan,
P.A. addressed to the Underwriters, dated as of the Closing Date, in
form and substance satisfactory to Rosenman & Colin LLP, counsel for
the Underwriters, together with a signed or photostatic copy of that
opinion for each of the other Underwriters, substantially to the effect
that:
(i) Each of the Companies has been duly incorporated
and is validly existing and in good standing under the laws of
its jurisdiction of incorpora-
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tion and has full corporate power and authority to own and
lease its properties and to conduct its business as described
in the Registration Statement and Prospectus, and is duly
qualified to do business as a foreign corporation and is in
good standing in each jurisdiction where, to such counsel's
knowledge, it owns or leases properties and where the failure
to so qualify would have a material adverse effect on its
earnings, business affairs or business prospects.
(ii) This Agreement has been duly authorized,
executed and delivered by the Company and is a valid and
binding agreement of the Company enforceable against the
Company in accordance with its terms, except to the extent
enforceability may be limited by bankruptcy or other laws
relating to or affecting creditors' rights generally or
equitable principles and by limitations on the enforceability
of the indemnification and contribution provisions under
federal or state securities laws or public policy. All
corporate action required to be taken by the Board of
Directors of the Company and all action required to be taken
by the stockholders of the Company in connection with the
authorization, issuance and sale of the Securities to be sold
by the Company as contemplated in the Registration Statement
and the Prospectus have been duly taken. The Company has the
requisite corporate power and authority to enter into and
consummate this Agreement.
(iii) Neither the issuance by the Company of the
Securities to be sold by it under this Agreement, the
execution and delivery of this Agreement, the undertakings
contained in the Registration Statement or the Prospectus, the
consummation of the transactions contemplated in this
Agreement or the compliance with the terms of this Agreement,
will conflict with or result in a breach of any of the terms
or provisions of the Certificate of Incorporation, as amended,
or the By-laws of any of the Companies, or any indenture,
mortgage, deed of trust, note, bank loan or credit agreement
or any other agreement or instrument of which such counsel is
aware to which any of the Companies is a party or by which its
respective properties or assets are bound or any applicable
law (other than Blue Sky laws), rule or regulation, or
(without search of any court dockets) any judgment, order or
decree of any government, governmental agency or
instrumentality or court, domestic or foreign, having
jurisdiction over any of the Companies or their respective
properties or assets, of which such counsel is aware.
(iv) The are no contracts, indentures, mortgages,
notes, leases or other instruments or agreements required to
be described or referred to in the Registration Statement or
to be filed as exhibits thereto other than those described or
referred to therein or filed as exhibits thereto; the
descriptions thereof or references thereto are correct in all
material respects, and no default exists in the due
performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture,
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<PAGE> 23
mortgage, note, lease or other instrument or agreement so
described, referred to or filed.
(v) To such counsel's knowledge, the Company has no
subsidiaries other than as set forth in Section 1(f) hereof.
All of the outstanding shares of capital stock of each such
subsidiary has been duly authorized and validly issued, are
fully paid and non-assessable and as of the Closing Date are
owned beneficially by the Company, free and clear of any
liens, encumbrances, security interests or other restrictions,
except that the Company owns only a 26% interest in Labco, and
no person, firm or corporation has the right, upon the passage
of time or otherwise, to acquire any of the stock of any such
Subsidiary.
(vi) Except as described in the Prospectus, each of
the Companies holds all material licenses, certificates,
permits and other evidence of regulatory compliance issued by
appropriate federal, state or local governmental agencies or
bodies necessary for the conduct of its business as described
in the Prospectus.
(vii) The Company's authorized capital stock consists
of 7,000,000 shares of Common Stock, par value $.01 per share,
1,000,000 shares of Convertible Preferred Stock, par value
$1.25 per share, and 4,000,000 shares of Preferred Stock, par
value $2.00 per share.
(viii) The outstanding stock options and warrants
relating to the Common Stock have been duly authorized and
validly issued and the descriptions thereof contained in the
Registration Statement and the Prospectus are true and
accurate in all respects.
(ix) The certificates for the Securities are in
proper form and comply with Delaware law.
(x) The Firm Shares and Additional Shares to be sold
by the Company as contemplated by this Agreement have been
duly authorized, and, when issued as provided in this
Agreement will be, and the presently outstanding shares of
Common Stock are, validly issued, fully paid and
non-assessable. The holders of the outstanding shares of
Common Stock are not, and the holders of any of the Firm
Shares and Additional Shares when issued as contemplated
pursuant to this Agreement will not be, subject to personal
liability solely by reason of being such holders, and, to such
counsel's knowledge, there is no preemptive right of any
holder of any securities of the Company applicable to any
outstanding shares of Common Stock. No preemptive right will
be applicable to any of the Firm Shares and Additional Shares
to be sold by the Company under this Agreement when issued and
sold as contemplated in this Agreement and in the Registration
Statement and the Prospectus.
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<PAGE> 24
(xi) The Warrants have been duly authorized and, when
delivered and paid for in accordance with the Agreement will
be validly issued and will constitute valid and binding
obligations of the Company in accordance with, and will be
exercisable in accordance with, their terms; the shares of
Common Stock issuable on exercise of the Warrants have been
duly and validly reserved for issuance pursuant to the terms
of the Warrants and when delivered and paid for pursuant to
the terms of such Warrants will be duly authorized, validly
issued, fully paid and nonassessable, and the holders will not
be subject to personal liability by reason of being such
holders, and such shares will not be subject to the preemptive
rights of any stockholder of the Company.
(xii) Except for registration or qualification under
the Securities Act or under state securities or Blue Sky laws,
no authorization, approval, consent or license of any
regulatory body or authority is required for the valid
authorization, issuance, sale and delivery of any of the
Securities, or, if required, all such authorizations,
approvals, consents and licenses have been obtained and are in
force and effect.
(xiii) The Registration Statement has become
effective, and, to such counsel's knowledge, no stop order or
similar order has been issued with regard to the Registration
Statement or the Prospectus, and no proceedings for that
purpose have been instituted or are pending and such counsel
has not been notified that any such proceedings are
contemplated under the Acts or under any Blue Sky or other
securities laws of any jurisdiction.
(xiv) At the time of effectiveness and as of the
Closing Date and the Option Closing Date, if applicable, the
Registration Statement, the Prospectus and each post-effective
amendment or supplement thereto complies as to form in all
material respects with the requirements of the Acts (except
that no opinion shall be expressed as to the financial
statements, notes related thereto, and other financial
statistical data included therein and information supplied by
you), and, to such counsel's knowledge, all contracts or other
documents of a character required by the Securities Act and
the Rules under the Securities Act to be summarized or
disclosed in the Prospectus or filed as exhibits to the
Registration Statement have been so summarized, disclosed or
filed.
(xv) Such counsel has acted as counsel for the
Company and has participated in the preparation of the
Registration Statement and Prospectus and any post-effective
amendments or supplements thereto to the date of such opinion,
and no facts have come to the attention of such counsel which
would lead such counsel to believe that either the
Registration Statement or the Prospectus or any post-effective
amendment thereto contains any untrue statement of a material
fact or omits 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 (except no
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<PAGE> 25
opinions need be expressed as to the financial statements and
other financial or statistical data included therein and
information supplied by you as set forth in Section 1(b)
hereof).
(xvi) To such counsel's knowledge, all statutes or
regulations or legal or governmental proceedings required to
be described in the Registration Statement or Prospectus are
described therein as required, and all such descriptions in
the Registration Statement or Prospectus are accurate in all
material respects and present fairly the information purported
to be shown.
(xvii) To such counsel's knowledge, none of the
Companies has any outstanding options, warrants or other
rights to purchase or acquire any shares of capital stock of
any of them except as set forth in the Registration Statement
or the Prospectus.
(xviii) The Common Stock conforms as to legal matters
in all material respects with the statements concerning such
shares made in the Registration Statement and the Prospectus
under the section entitled "Description of Capital Stock", and
such statements present fairly the matters respecting such
shares required to be set forth in the Registration Statement
or the Prospectus.
(xix) The Warrants conform as to legal matters in all
material respects with the statements concerning such Warrants
made in the Registration Statement and the Prospectus under
the section entitled "Description of Common Stock Purchase
Warrants", and such statements present fairly the matters
respecting such Warrants required to be set forth in the
Registration Statement or the Prospectus.
(xx) Except as set forth in the Registration
Statement and Prospectus, to such counsel's knowledge, there
is no pending or threatened action, suit or proceeding before
any court or before or by any governmental agency or body to
which any of the Companies is a party, or of which any of
their respective properties or assets are the subject, which
is required to be disclosed in the Registration Statement or
Prospectus or which would have a material adverse effect on
any of the Companies.
(xxi) The contracts filed as Exhibit Nos. 10.1
through ________ to the Registration Statement have been duly
authorized, executed and delivered by the Company, and such
counsel has not been advised of any assertion that such
contracts do not constitute the valid and binding obligation
of the other parties thereto.
(xxii) The Underwriting Agreement has been duly
authorized, executed and delivered by the Company and
constitutes the valid and binding agreement of the Company,
and is enforceable against the Company in accordance with its
terms except insofar as rights to indemnity and/or
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<PAGE> 26
contribution may be limited by the laws of the United States
or the public policy underlying such laws and except as
enforcement (A) may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting creditors'
rights generally, and (B) is subject to general principles of
equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(xxiii) The Company owns all of such shares of
capital stock BII and BRL and 26% of the capital stock of
Labco free and clear of any liens, encumbrances, security
interests or other restrictions, and to the knowledge of such
counsel, no rights exist, or with the passage of time or
otherwise will exist, to acquire any of the capital stock of
them.
(xxiv) Such other legal matters relating to this
Agreement, the Companies and the Securities as you and such
counsel shall reasonably agree upon.
In rendering such opinion, such counsel may rely (a) as to
matters involving the application of laws other than the laws of the
United States and jurisdictions in which they are admitted, to the
extent such counsel deems proper and to the extent specified in such
opinion, if at all, upon an opinion or opinions (in form and substance
reasonably satisfactory to counsel for Underwriters) of other counsel
reasonably acceptable to counsel for the Underwriters, familiar with
the applicable laws; and (b) as to matters of fact, to the extent they
deem proper, on certificates of responsible officers of the Company and
certificates or other written statements of officers of departments of
various jurisdictions having custody of documents respecting the
corporate existence or good standing of the Companies, provided that
copies of any such statements or certificates shall be delivered to
counsel for the Underwriters, and on the representations and warranties
of the Company contained in this Agreement. The opinion of such counsel
for the Company shall state that the opinion of any such other counsel
is in form satisfactory to such counsel, and, in their opinion, you and
they are justified in relying thereon.
(h) At the Closing Date, you shall have received a Certificate
signed by the President and the Vice President-Finance of the Company,
dated as of the Closing Date, to the effect that:
(i) Each officer signing the Certificate has
carefully examined the Registration Statement and the
Prospectus, and, in his opinion, as of the date of the
Prospectus, and as of the date of the Certificate, neither the
Registration Statement nor the Prospectus, nor any amendment
or supplement, includes an untrue statement of a material fact
or omits to state a material fact required to be stated
therein or necessary in order to make the statements therein
not misleading, and, since the date of the Prospectus, no
event has occurred which should have been set forth in an
amendment or a supplement to the Registration Statement or
Prospectus which has not been so set forth, and, since the
respective dates as of which information is given
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<PAGE> 27
in the Registration Statement and the Prospectus, there has
not been any material adverse change in the condition of any
of the Companies, financial or otherwise, or, as compared with
the comparable period in the prior fiscal year, in the
earnings of any of the Companies from that set forth in the
Registration Statement, whether or not arising in the ordinary
course of business.
(ii) No stop order or similar order with regard to
the Registration Statement or Prospectus has been issued and
no proceedings for that purpose have been taken or are, to the
knowledge of such officer, contemplated by the Commission or
any other agency having jurisdiction with respect to the
issuance, sale or distribution of the Offered Securities.
(iii) The Company has complied in all material
respects with its obligations under this Agreement, and the
representations and warranties set forth in Section 1 of this
Agreement are true and correct as of the date of the
Certificate with the same force and effect as though made on
that date.
(i) On the date of this Agreement, you shall have received
letters addressed to the Underwriters, with a signed or photostatic
copy for each of the several Underwriters, dated the date it is
delivered, in form and substance satisfactory to you and Rosenman &
Colin LLP (and substantially in the form of the drafts dated
____________, 1996, previously submitted to Rosenman & Colin LLP), from
BDO Seidman, LLP concerning their examination and review of financial
statements and various other data contained in the Registration
Statement. At the Closing Date, you shall have received a letter
addressed to you, dated as of the Closing Date, with a signed or
photostatic copy for each of the several Underwriters from BDO Seidman,
LLP confirming, as of the Closing Date, the statements made in the
letters furnished by them at the date of this Agreement and advising
that as of a date no earlier than three business days prior to the
Closing Date they have no reason to believe that there has been any
change in the matters described in the prior letters.
(j) At the Closing Date there shall have been delivered to
you, with a photostatic copy for each of the several Underwriters, a
signed opinion of Rosenman & Colin LLP, counsel for the Underwriters,
dated as of the Closing Date, with respect to the sufficiency of
corporate proceedings and other legal matters in connection with this
Agreement, the Securities, Registration Statement, Prospectus and
related matters as the Representative may request, and the Company
shall have furnished to such counsel all documents such counsel may
have requested for the purpose of enabling them to pass upon those
matters. In rendering such opinion, Rosenman & Colin LLP may rely, as
to incorporation of the Company and all matters of law governed by the
laws of states other than New York and Delaware, and as to factual
matters, upon the opinion referred to in (g) above.
(k) The Representative shall have received the
Representative's Warrants described in Section 6 hereof and the Company
shall have paid to the Representative
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a non-accountable expense allowance of 2% of the gross proceeds of the
offering of the Firm Securities pursuant to Section 7 hereof, less the
sum of $20,000 heretofore advanced to the Representative pursuant to
such Section 7.
(l) In the event the Underwriters exercise the option granted
in Section 4(a) hereof to purchase all or any portion of the Additional
Securities, the representations and warranties of the Companies
contained in Section 11(a) - (f) herein and the Statements in any
certificates furnished by the Companies shall be true and correct as of
the Option Closing Date and the Representative shall have received:
(i) A certificate, dated the Option Closing date, of
the Chairman or President of the Company and of the chief
financial or chief accounting officer of the Company
confirming that the Certificate delivered on the Closing Date
pursuant to Section 11(h) remains true as of the Option
Closing Date;
(ii) The favorable opinion of Lowenstein, Sandler,
Kohl, Fisher & Boylan, P.A., counsel for the Company, dated
the Option Closing Date, relating to the Additional Securities
and otherwise to the same effect as the opinion required by
Section 11(g), to the extent applicable;
(iii) The favorable opinion of Rosenman & Colin LLP,
counsel to the Underwriters, dated the Option Closing Date,
relating to the Additional Securities and otherwise to the
same effect as the opinion required by Section 11(j), to the
extent applicable;
(iv) A letter from BDO Seidman, LLP, in form and
substance satisfaction to the Underwriters and dated the
Option Closing Date, substantially the same in scope and
substance as the letter furnished to the Representative
pursuant to Section 11(i), dated not more than five days prior
to the Option Closing Date; and
(v) A non-accountable expense allowance of 2% of the
gross proceeds of the Additional Securities pursuant to
Section 7 hereof.
(m) All proceedings in connection with the authorization,
issuance and sale of the Securities on the Closing Date and the Option
Closing Date shall be reasonably satisfactory in form and substance to
you and to your counsel, and your counsel shall have been furnished
with all documents, certificates and opinions, including resolutions of
the Board of Directors of the Company and minutes of any stockholders'
meetings, as may have been reasonably requested in order to evidence
the accuracy and completeness of any of the representations, warranties
or statements of the Company and the performance of any of the
covenants of the Company or the compliance with any of the conditions
contained in this Agreement.
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<PAGE> 29
12. CONDITIONS OF OBLIGATIONS OF COMPANY. The obligations of the
Company to sell and deliver the Firm Securities to the several Underwriters is
subject to the condition that the Registration Statement shall become effective
with the Commission not later than 10:00 A.M., New York City time, on the day
following the date of this Agreement, or such later date as shall have been
consented to by the Underwriters (including you) who are obligated to purchase a
majority of the Firm Securities to be purchased by all of the Underwriters
pursuant to this Agreement, and that prior to the Closing Date (and, with
respect to the Additional Securities, prior the Option Closing Date), no stop
order or similar order with regard to the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or shall
be pending, or, to your knowledge or to the knowledge of the Company, shall be
contemplated by the Commission or any other regulatory agency having
jurisdiction with respect to the offer and sales of the Offered Securities.
13. SUBSTITUTION OF UNDERWRITERS.
(a) If one or more Underwriters default in its or their obligations to
purchase and pay for Firm Securities under this Agreement and if the aggregate
amount of the Firm Securities which all Underwriters so defaulting shall have
agreed to purchase does not exceed 10% of the Firm Securities, each
nondefaulting Underwriter shall have the right and is obligated, severally, to
purchase and pay for (in addition to the number of Firm Securities set forth
opposite its name in Schedule I) that proportion of the Firm Securities agreed
to be purchased by all the defaulting Underwriters which the percentage of Firm
Securities set forth opposite its name in Schedule I bears to the aggregate of
the percentage of Firm Securities set forth opposite the names of all the
nondefaulting Underwriters. In that event, the Representative, for the accounts
of the several nondefaulting Underwriters, may take up and pay for all or any
part of the Additional Securities to be purchased by each nondefaulting
Underwriter under this Subsection (a), and may postpone the Closing Date to a
time not exceeding three full business days after the Closing Date determined as
provided in Section 3 of this Agreement; or
(b) If one or more Underwriters default in its or their obligations to
purchase and pay for Firm Securities under this Agreement and if the aggregate
amount of the Firm Securities which all Underwriters so defaulting shall have
agreed to purchase exceeds 10% of the Firm Securities, or if one or more
Underwriters for any reason permitted under this Agreement cancel its or their
obligations to purchase and pay for Firm Securities under this Agreement, the
noncancelling and nondefaulting Underwriters (hereinafter called the "Remaining
Underwriters") shall have the right to purchase such Firm Securities on the
Closing Date in the proportion as may be agreed among them. If the Remaining
Underwriters do not purchase and pay for all such Firm Securities at the Closing
Date, the Closing Date shall be postponed by two business days and the Remaining
Underwriters shall have the right to purchase the Firm Securities, or to
substitute another person or persons to purchase them, or both, at the postponed
Closing Date. If purchasers are not found for such Firm Securities by the
postponed Closing Date, the Closing Date shall be postponed for a further five
business days and the Company shall have the right to substitute another person
or persons, satisfactory to the Representative, to purchase those Firm
Securities at the second postponed Closing Date. If the Company does not find
the purchasers for those
29
<PAGE> 30
Firm Securities by the second postponed Closing Date, then this Agreement shall
automatically terminate and neither the Company nor the Remaining Underwriters
shall be under any obligation under this Agreement (except that the Company
shall remain liable to the extent provided in Sections 7 and 9(a) and the
Underwriters shall remain liable to the extent provided in Section 9(b)). As
used in this Agreement, the term "Underwriter" includes any person substituted
for an Underwriter under this Section 13. Nothing in this Section will relieve a
defaulting Underwriter from liability for its default or obligate any
Underwriter to purchase or find purchasers for any Firm Securities in excess of
those agreed to be purchased by the Underwriter in Sections 2 and 13(a) of this
Agreement. If the Representative is the defaulting Underwriter, the right of
first refusal set forth in Section 16 hereof shall terminate.
14. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become effective
at whichever of the following times shall first occur: (i) at 10:00 A.M., New
York City time, on the next full business day following the date on which the
Registration Statement becomes effective or (ii) at such time after the
Registration Statement has become effective and the Underwriters shall release
the Firm Securities for sale to the public; provided, however, that the
provisions of Sections 7, 9, 10, 14 and 19 hereof shall at all times be
effective. For purposes of this Section 14, the Firm Securities shall be deemed
to have been so released upon the release by the Underwriters for publication,
at any time after the Registration Statement has become effective, of any
newspaper advertisement relating to the Firm Securities or upon the release by
the Underwriters of telegrams offering the Firm Securities for sale to
securities dealers, whichever may occur first.
15. TERMINATION OF AGREEMENT.
(a) This Agreement may be terminated at any time prior to the Closing
Date by you by giving written notice to the Company upon the occurrence of any
of the following events:
(i) any of the Companies shall have sustained a loss, by
reason of fire, flood, accident or other calamity, which in your
reasonable judgment, materially affects the aggregate value of the
property owned or leased by such one of the Companies or which
materially interferes with the operation of the business of any of the
Companies, regardless of whether or not that loss shall have been
insured;
(ii) any of the Companies has encountered or been threatened
with a strike (including but not limited to strikes of stevedores and
other transporters of goods) or other labor dispute or been subjected
to governmental action or fluctuations in currency or major political
upheaval which materially affects the aggregate value of the property
owned or leased or which materially interferes with the operation of
its business or which in your reasonable judgment makes it
impracticable or inadvisable to offer for sale or to enforce contracts
made by the Underwriters for the resale of the Firm Securities;
(iii) except as set forth in the Prospectus, there shall be
pending or threatened against any of the Companies or notification has
been received by any of
30
<PAGE> 31
the Companies of the threat of any material legal or governmental
proceeding or action relating generally to the business or prospects
such one of the Companies which could materially adversely affect such
one of the Companies (including action with respect to credit or
interest rates) or which in your reasonable opinion makes it
impracticable or inadvisable to proceed with the offering;
(iv) any of the certificates, opinions or other documents to
be delivered on the date of this Agreement or at the Closing Date are
not in form reasonably satisfactory to counsel to the Underwriters;
(v) any conditions set forth in Section 11 of this Agreement
shall not have been satisfied;
(vi) the Company is merged or consolidated or all or
substantially all of the capital stock or assets of the Company are
acquired by another company or group, or there exists a binding legal
commitment for the foregoing or any other material change of ownership
or control occurs;
(vii) if there has occurred any outbreak of hostilities or
escalation of any existing hostilities or other calamity or crisis, the
effect of which on the financial markets of the United States is such
as to make it impracticable, in the Representative's reasonable
judgment, to market any of the Firm Securities or the Additional
Securities or to enforce contracts for the sale of any of the Firm
Securities or the Additional Securities;
(viii) a banking moratorium shall have been declared by either
federal or state authorities;
(ix) if trading generally on the American Stock Exchange, the
New York Stock Exchange or NASDAQ has been suspended, or minimum or
maximum prices for trading have been fixed, or maximum ranges for
prices for securities have been required, by either of said Exchanges
or the NASD or by order of the Commission or any other governmental
authority;
(x) there shall have been a change in the general market,
political or economic conditions in the United States, such that in any
such case, in the Representative's reasonable judgment, it would be
inadvisable to proceed with the offering of the Firm Securities; or
(xi) any law shall be enacted or any regulation promulgated
relating to the business of any of the Companies which could materially
adversely affect any of the Companies.
(b) This Agreement may be terminated by the Company by giving written
notice to you (i) at any time before this Agreement becomes effective in
accordance with Section 14 hereof, or (ii) prior to the Closing Date if the
conditions set forth in Section 12 shall not have been satisfied at or prior to
such date.
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<PAGE> 32
(c) If this Agreement shall be terminated by the Company pursuant to
preceding clause (b)(i) because (x) the Company has made, or proposes to make, a
private placement which will provide it with substantial alternative funding
through another investment banking agent, the Representative shall be entitled
to a cash fee equal to 2% of the gross amount of such funding, whether
effectuated by the Company before or after such termination of this Agreement or
(y) because the Company is to be sold, whether by merger, sale of stock, sale of
assets or otherwise, the Representative shall be paid a cash fee of $200,000
should the acquisition or merger close; provided, however, that if in such event
the Company shall choose the Representative as its investment banker in
connection therewith, such $200,000 shall be a credit against any services
rendered by the Representative in such transaction.
(d) If this Agreement shall be terminated pursuant to this Section 15
other than by reason of the fault of the Representative, the Company, in
addition to the advance provided for in Section 7 hereof, shall pay to you your
accountable expenses, including the fees and expenses of your counsel, in an
amount not to exceed $30,000.
16. RIGHT OF FIRST REFUSAL. Until January 1, 1998, the Company shall
notify you in writing at least thirty (30) days before a proposed offering by
the Company of any of its securities (other than bank debt or similar
financing), securities offered solely to Company employees or securities
issuable in transactions enumerated in Rule 145(a) under the Securities Act so
that you, or, at your option, together with a group of investment bankers
associated with you, shall have the right of first refusal to effect the
offering on terms at least as favorable to the Company as those set forth in
such notice (which notice will specify the price to the underwriter or other
method of determining the underwriting discount or fee). You will notify the
Company if you intend to exercise your right of first refusal within thirty (30)
days of receipt by you of such notice from the Company. If you fail to exercise
the right of first refusal within the thirty (30) day period and the terms of
the proposed subsequent financing thereafter are altered in any material respect
less favorable to the Company, the Company shall again offer to you the right of
first refusal to effect a subsequent financing upon such terms and you shall
have ten (10) days from the date of receipt of such notice to notify the Company
of your acceptance.
17. NOTICES. All communications under this Agreement shall be in
writing and, except as otherwise provided shall be delivered at or mailed,
registered or certified, return receipt requested, or telegraphed to the
following addresses:
If to you or any other Underwriter:
Janney Montgomery Scott Inc.
Attention: Ann Green
26 Broadway
New York, New York 10004
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<PAGE> 33
Copies to:
Janney Montgomery Scott Inc.
As Representative of the Several Underwriters
Attention: Richard A. Thompson
1801 Market Street
20th Floor
Philadelphia, Pennsylvania 19103
and
Arthur M. Borden, Esq.
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
If to the Company:
Barringer Technologies Inc.
Attention: Stanley S. Binder, President
219 South Street
New Providence, N. J. 07974
Copy to:
John D. Hogoboom, Esq.
Lowenstein, Sandler, Kohl, Fisher & Boylan, P.A.
65 Livingston Avenue
Roseland, New Jersey 07068-1791
Any party may change its address by giving notice in accordance with
this Section .
18. PARTIES IN INTEREST. This Agreement is made solely for the benefit
of the Underwriters, the Company, directors and officers of the Company, and
their respective executors, administrators, successors and assigns, and no other
person shall acquire or have any right under or by virtue of this Agreement. The
term "successor" and "successor and assigns" shall not include any purchaser
from the Company or any of the several Underwriters of the Firm Securities or
the Additional Securities. All of the obligations of the Underwriters under this
Agreement are several and not joint.
19. SURVIVAL CLAUSE. The representations, warranties, indemnities,
agreements and other statements of the Underwriters and the Company and its
officers set forth in this Agreement and made pursuant to this Agreement will
remain operative and in full force and effect regardless of (i) any
investigation made by or on behalf of any Underwriter or controlling person
thereof or by or on behalf of the Company or any of its officers and directors
or (ii) any termination of this Agreement and (iii) delivery of and payment for
the Firm Securities and the Additional Securities.
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<PAGE> 34
20. REPRESENTATION OF UNDERWRITERS. You will act for the several
Underwriters in connection with this financing, and any action under or in
respect of this Agreement taken by you as Representative on behalf of the
Underwriters will be binding upon all of the Underwriters.
21. APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to the
principles of conflicts of law.
22. COUNTERPARTS. This Agreement may be signed in one or more
counterparts and shall be deemed effective when each party hereto has signed a
counterpart.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to the Company the enclosed duplicate hereof,
whereupon it will become a binding agreement among the Company and the
Underwriters in accordance with its terms.
Very truly yours,
BARRINGER TECHNOLOGIES INC.
By:_____________________________
The foregoing agreement is hereby confirmed and delivered as of the date first
above written.
JANNEY MONTGOMERY SCOTT INC.
By:____________________________
(Authorized Signature)
Acting on their own behalf and as
Representative of the several Underwriters
named in Schedule I attached hereto.
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<PAGE> 35
SCHEDULE I
LIST OF UNDERWRITERS
Number of
Underwriters Firm Securities
------------ ---------------
<PAGE> 1
EXHIBIT 10.4
CONSULTING AGREEMENT
--------------------
Agreement dated as of the 1st day of January 1991 between Barringer
Resources Inc. and John J. Harte (the Consultant).
WITNESSETH
----------
1. Employment -- The company hereby employs consultant, and consultant hereby
accepts employment, as a consultant to the company upon the terms and conditions
set forth in this agreement. This agreement replaces all previous consulting
agreements between the parties.
2. Duties -- Consultant shall serve the company as a consultant and perform
tasks as directed by the company including serving on the board of any
subsidiary if so requested. Consultant shall devote as much time as is required
to complete tasks assigned and will be available seven days a week if so
required but not more than twenty four days in a twelve month period.
3. Terms of Employment
Basic Term -- The consulting period will be January 1, 1991 to December 31,
1993 which is a three year term. The agreement will automatically renew on an
annual basis after December 31, 1993 unless notice of cancellation in writing
six months prior to December 31.
4. Compensation -- As compensation for performance of his duties and
obligations hereunder, the company shall pay to consultant a consulting fee of
$2,000.00 per month commencing on January 1, 1991 and on the first day of each
month thereafter.
5. Additional Compensation -- In addition to the compensation provided for in
section the company will issue stock options to the consultant as a board member
of either the parent company of any of its subsidiaries in the same proportion
as issued to other outside board members in the ordinary course of affairs.
6. Expenses -- Consultant will be reimbursed for all reasonable travel expenses
incurred in connection with the companies business. All such expenses will be
approved in advance by the company unless mandatory travel to board meetings.
7. Office Support -- Consultant will be reimbursed for reasonable office and
telephone expenses not to exceed three hundred dollars per month.
8. Notice -- Any notice required or permitted to be given hereunder shall be in
writing by first class mail, postage prepaid, addressed to the party of whom
intended at the address set forth below or any such other address as to either
party as such party shall specify by like notice to the other.
9. Successors and Assigns -- This Agreement shall be binding upon, and inure to
the benefit of, any company which shall require all or substantially all of the
assets of, or shall succeed by merger to, the company. Consultant may not assign
this Agreement, in whole or in part.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
fifth day of December, 1990.
BARRINGER RESOURCES INC.
By: /s/ Stanley S. Binder
----------------------------------
Stanley S. Binder, President
89 Headquarters Plaza
Morristown, N.J. 07960
/s/ John J. Harte
----------------------------------
John J. Harte, Consultant
1029 W. Adams
Chicago, Il. 60607
<PAGE> 1
EXHIBIT 10.6
BARRINGER TECHNOLOGIES INC.
NON-QUALIFIED
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT made on March 10, 1995 between BARRINGER
TECHNOLOGIES INC., a Delaware corporation, with its principal office at 219
South Street, New Providence, New Jersey 07974 (hereinafter called the
"Company") and _______________________________ residing at _____________________
__________________________________ (hereinafter called the "Optionee"), who is
an employee or Director of the Company or one or more of the Company's
subsidiaries.
WITNESSETH THAT:
1. Shares Subject to Option. The Company hereby grants to the Optionee an
option to purchase up to ( ) shares of Common Stock ($.01
par value) of the Company (hereinafter called the "Optioned Shares") at a price
of US$.50 per share (the "Option Price"), which represents the fair market value
of a share of common stock on the date hereof, in accordance with such authority
and subject to the terms and conditions and within the period of time
hereinafter set forth.
2. Terms and Exercise of Option. The Option hereby granted (the "Option")
may be exercised by the Optionee as to forty percent (40%) of the Optioned
Shares caused hereby after March 9, 1996; sixty percent (60%) of the Optioned
Shares caused hereby after March 9, 1997; eighty percent (80%) of the Optioned
Shares caused hereby after March 9, 1998 and one hundred percent (100%) after
March 9, 1999 (subject to the conditions set forth in Clause 3
1
<PAGE> 2
below). The Option will expire on March 10, 2000.
The option may be exercised only by written notice to the Company
specifying the number of shares of Common Stock in respect of which the Option
is being exercised and by payment to the Company in cash or in shares of Common
Stock (which shares shall be valued at their then fair market value) of the full
purchase price for the shares.
3. Conditions to Exercise. Exercise of the Option as hereinabove provided
shall be subject to the following express conditions precedent:
The Optionee shall have remained in the continuous employ or Directorship
of the Company or a subsidiary of the Company from the date of grant of the
Option until the date of exercise thereof except that:
(i) in the event of the death of the Optionee then the Option shall
terminate as to any unvested portion hereof immediately upon the
termination of employment or Directorship. The Optionee's executor or
administrator or person or persons to whom the Optionee's rights under the
Option shall pass by will or the laws of descent and distribution shall be
entitled at any time within twelve (12) months after the death of the
Optionee to exercise the Option with respect to any unexercised portion of
the Option that was exercisable at the time of the Optionee's death and
(ii) in the event of the disability of the Optionee, then the Option shall
terminate as to any unvested portion hereof
2
<PAGE> 3
immediately upon termination of employment or Directorship. The Optionee or
the Optionee's legal representative may exercise any unexercised portion of
the Option that was exercisable at the time of termination of employment or
Directorship within a period of three (3) months following such and
(iii) Upon termination of the Optionee's employment or Directorship with
the Company for any reason except disability or death, whether termination
by the Optionee or the Company, the Option shall terminate as to any
portion of the Option that was not exercisable at the time of termination
of employment or Directorship, immediately upon termination of such
employment or Directorship. The Optionee may exercise any unexercised
portion of the Option that was exercisable at the time of termination of
employment or Directorship within a period of three (3) months following
such termination and
(iv) in the event of the purchase of more than 50% of the then outstanding
shares of Common Stock of the Company by an entity or related group,
signifying a change in control, or a more than fifty percent (50%) change
in the current members of the Board of Directors, the Optioned Shares will
vest one hundred percent (100%).
4. Option Non-Transferable. This Option may not be assignable or
transferable in whole or in part by the Optionee otherwise than by Will or
the laws of descent and distribution and shall be exercisable during the
Optionee's lifetime only
3
<PAGE> 4
by the Optionee or, in the event of the Optionee's disability, by the
Optionee's legal representative.
5. Continuation of Employment. This Agreement shall not be construed as
giving the Optionee any right to be retained in the employment or
Directorship of the Company or any of its subsidiary companies or to affect
or limit in any way the right of the Company or of any of its subsidiary
companies to terminate the employment of the Optionee at any time with or
without cause. This Option hereby granted shall not be exercisable if such
exercise would involve a violation of any applicable law or regulation by
any governmental authority. The Company agrees to make such reasonable
efforts to comply with any applicable state or federal securities law or
regulations as it may in its sole discretion determine are reasonably
necessary and will not subject the Company to unreasonable expenses or
hardships.
6. Subdivision, Combination or Reclassification. In the event of any
reorganization, recapitalization, stock split, stock dividend, combination
of shares, merger, consolidation or other similar change in the corporate
structure or capitalization of the of the Company or in its Common Stock,
the number of Optioned Shares and the Option and the Option Price per share
shall be appropriately adjusted; but no such adjustment in the Option Price
shall be made which would reduce the Option Price per share to less than
the par value thereof.
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<PAGE> 5
7. Anti-Dilution. In the event that the Company shall, at any time or from
time to time after the date hereof, issue any shares of Common Stock or
options, warrants, convertible securities or other rights to acquire common
Stock other than pursuant to (i) the exercise of options, warrants,
convertible securities or other rights to acquire Common Stock outstanding
on the date hereof, (ii) a merger, subdivision, dividend or other
distribution on any class of stock, consolidation or reclassification of
shares of Common Stock under paragraph 6 hereof, or (iii) employee or
Director stock options outstanding on the date hereof or issued hereafter
pursuant to stock option plans of the Company or stock purchase warrants
outstanding on the date hereof, without consideration or for a
consideration per share less than the lesser of (x) the Option Price in
effect immediately prior to such issuance, or (y) the then-fair market
value per share of the Common Stock (as determined in good faith by the
Board of Directors of the Company or their designee), then, and thereafter
successively upon each such issuance, the Option Price in effect
immediately prior to the issuance of such shares shall forthwith be reduced
to a price (calculated to the nearest full cent) determined by dividing (a)
an amount equal to (i) the total number of shares of Common Stock
outstanding immediately prior to such issuance multiplied by the Option
Price in effect immediately prior to such issuance, plus (ii) the
consideration, if any, received by the Company upon such
5
<PAGE> 6
issuance by (b) the total number of shares of Common Stock outstanding
immediately after such issuance. Upon any such adjustment of the Stock
Option Price as provided above, this Option shall evidence the right to
purchase the number of shares of Common Stock (rounded to the nearest whole
share) obtained by multiplying the number of shares of Common Stock
purchasable immediately prior to such adjustment upon exercise of this
Option by the Option Price in effect immediately prior to such adjustment
and dividing the product so obtained by the Option Price in effect
immediately after such adjustment.
1. In case of the issuance of shares of Common Stock or other
securities of the Company for cash, the consideration received by
the Company therefor shall be deemed to be the cash proceeds
received by the Company therefor less any commissions or other
expenses paid or incurred by the Company for any underwriting of,
or otherwise in connection with, the issuance thereof.
2. In case of the issuance of shares of Common Stock or other
securities of the Company for a consideration other than cash, or
a consideration a part of which shall be other than cash, the
amount of the consideration received by the Company
6
<PAGE> 7
therefor shall be deemed to be the cash proceeds, if any,
received by the Company plus the fair value of the consideration
other than cash, as determined by the Board of Directors of the
Company or their designee, less any commissions or other expenses
paid or incurred by the Company for any underwriting of, or
otherwise in connection with, such issuance, provided however
that the amount of such consideration other than cash shall in no
event exceed the cost thereof as recorded on the books of the
Company.
3. In the case of the issuance by the Company of (a) any security
that is convertible into or exchangeable for shares of Common
Stock or (b) any rights, warrants or options to purchase shares
of Common Stock, the Company shall be deemed to have issued the
maximum number of shares of Common Stock into which such
convertible or exchangeable securities may be converted or
exchanged or the maximum number of shares of Common Stock
deliverable upon the exercise of such rights, warrants or
options, as the case may be, for the consideration (determined as
provided in subparagraphs 1 and 2 above) received by the Company
for such convertible or exchangeable securities or for such
rights or options, as the
7
<PAGE> 8
case may be, plus the minimum aggregate price at which shares of
Common Stock are to be delivered upon the exercise of such
rights, warrants or options, as the case may be. On the
expiration of such rights, warrants or options or the termination
of such right to convert or exchange, the Option Price hereunder
shall be readjusted to such Option Price as would have been
obtained had the adjustments made upon the issuance of such
rights, warrant or options, or convertible or exchangeable
securities, been made upon the basis of the delivery of, and
receipt of the consideration or adjustment payment, if any,
actually paid for, only the number of shares of Common Stock
actually delivered upon the exercise of such rights, warrants or
options or upon the conversion or exchange of such securities.
Except as provided in subparagraph 4, no further adjustment of
the Stock Option Exercise Price shall be made as a result of the
actual issuance of shares of Common Stock referred to in this
subparagraph 3.
4. The consideration for any securities issued as a stock dividend
shall be deemed to be zero.
5. Irrespective of any adjustment or change in the Stock Option
Price or the number of shares of Common Stock actually
purchasable under this or any
8
<PAGE> 9
other Option of, like tenor, the Options theretofore and
thereafter issued may continue to express the Stock Option Price
per share and the number of shares purchasable thereunder as the
Stock Option Price per share and the number of shares purchasable
that were expressed upon the Stock Option when initially issued.
OPTIONEE: BARRINGER TECHNOLOGIES INC.
By:
- ------------------------------ --------------------------
Optionee President
- ------------------------------
Witness
9
<PAGE> 1
EXHIBIT 10.7
NON-QUALIFIED STOCK OPTION AGREEMENT
(INCLUDING RESTRICTIVE COVENANT)
This agreement, made as of the th day of , 1996, by and
between Barringer Technologies Inc., a Delaware corporation (the "Company" and
("Optionee").
ARTICLE 1. RECITALS
a) Barringer Technologies Inc. from time to time will award
Non-Qualified Stock Options (the "Option") to acquire shares of the Company's
common stock, par value $0.01 per share (the "Common Stock"), to selected
directors, officers and other key employees of the Company and its direct and
indirect present and future subsidiaries (the "Subsidiaries") who are most
responsible for future growth. The Options are designed to help attract and
retain superior personnel for positions of substantial responsibility with the
Company and the Subsidiaries and to provide key employees with an additional
incentive to contribute to the success of the Company and the Subsidiaries
through the benefits arising from ownership of the Company's common stock.
b) The Options are awarded by the Board of Directors of the Company or
any duly created committee appointed by the Board of Directors ( collectively
the "Administrator").
c) The Administrator shall have the authority: (a) to construe and
interpret this agreement (the "Agreement"); b) to define the terms used herein;
c) to prescribe, amend and rescind rules and regulations relating to the
Agreement; d) to determine the employees and directors of the Company and
Subsidiaries to whom Options shall be granted; e) to determine the time or times
at which Options shall be granted; f) to determine the number of shares subject
to any Option as well as the Option price and any terms and conditions of
Options; and g) to make any other determinations necessary or advisable for the
administration of the Options. All decisions, determinations and interpretations
made by the Administrator shall be binding and conclusive on all Optionees and
on their legal representatives, heirs and beneficiaries.
ARTICLE 2. ELIGIBILITY AND PARTICIPATION
Key employees of the Company and the Subsidiaries, including officers
and directors, shall be eligible for selection by the Administrator.
ARTICLE 3. GRANT OF OPTION
a) The Administrator hereby grants the Optionee the right, privilege
and Option to purchase from the Company shares of Common Stock, in the
manner and subject to the terms and conditions provided in this Agreement.
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b) The Option Price shall be $1.00 per share of Common Stock.
ARTICLE 4. TIME OF EXERCISE
Subject to the terms of this Agreement, the Option shall be
exercisable in installments as follows:
25%, exercisable immediately upon grant
50%, exercisable first day of second year
75%, exercisable first day of third year
100%, exercisable first day of fourth year.
ARTICLE 5. METHOD OF EXERCISE
The Option may be exercised by written notice to the Chief Financial
Officer of the Company identifying the Option (name of Optionee and date of
grant), specifying the number of shares of Common Stock for which the Option is
exercised and:
a) enclosing a certified or bank cashier's check payable to the
order of the Company, in an amount equal to the Option Price for said shares of
Common Stock;
b) enclosing certificates for shares of Common Stock currently
owned by Optionee to be surrendered in satisfaction of the Option Price for said
shares of Common Stock with stock powers duly executed;
c) enclosing certificates for shares of Common Stock currently
owned by Optionee to be surrendered in satisfaction of some portion of the
Option Price for said shares of Common Stock with stock powers duly executed and
enclosing a certified or bank cashier's check, payable to the order of the
Company, in an amount equal to the remainder of the Option Price for said shares
of Common Stock; or
d) a written request to exercise pursuant to the terms of the
Company's Stock Option Exercise Program.
ARTICLE 6. TERMINATION OF THE OPTION
a) The Option, to the extent not theretofore exercised, shall terminate
five (5) years from the date of grant of the Option;
b) If an Optionee ceases to be employed by the Corporation or any
Subsidiaries for any reason other than death or disability, then, unless any
other provision of the Agreement provides for earlier termination all Options
shall terminate immediately in the event the Optionee's employment is terminated
for cause and in all other circumstances may be exercised, to the extent
exercisable on the date of termination of employment, until 30 days after the
date of termination of employment;
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provided however, the Administrator may, in its discretion, allow such Options
to be exercised (to the extent exercisable on the date of termination of
employment) at any time within three (3) months after the date of termination of
employment;
c) If an Optionee becomes disabled within the meaning of Section 22(e)(3)
of the Code while employed by the Company or any Subsidiaries, then unless any
other provision of the Agreement provides for earlier termination all Options
may be exercised, to the extent exercisable on the date of termination of
employment, at any time within six (6) months after the date of termination of
employment due to disability.
d) If an Optionee dies while employed by the Company or Subsidiaries, then,
unless any other provision of the Agreement provides for earlier termination all
Options may be exercised, to the extent exercisable on the date of death, by the
person to whom the Optionee's rights shall pass by will or by laws of descent
and distribution, within one (1) year after the date of death.
ARTICLE 7. CHANGE IN CONTROL
All Options shall become fully exercisable upon the occurrence of a Change
in Control Event. As used in the Agreement, a "Change in Control Event" shall be
deemed to have occurred if:
a) any person, firm or corporation acquires directly or indirectly the
Beneficial Ownership (as defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended) of any voting security of the Company and immediately after
such acquisition, the acquirer has Beneficial Ownership of voting securities
representing 50% or more of the total voting power of all the then-outstanding
voting securities of the Company;
b) the individuals (A) who, as of the date of this Option constitute
the Board (the "Original Directors") or (B) who thereafter are elected to the
Board and whose election, or nomination for election, to the Board was approved
by a vote of at least 2/3 of the Original Directors then still in office (such
Directors being called "Additional Original Directors") or (C) who are elected
to the Board and whose election or nomination for election to the Board was
approved by a vote of at least 2/3 of the Original Directors and Additional
Original Directors then still in office, cease for any reason to constitute at
least 3 of the members of the Board;
c) the stockholders of the Company shall approve a merger,
consolidation, recapitalization or reorganization of the Company or consummation
of any such transaction if stockholder approval is not sought or obtained, other
than any such transaction which would result in at least 75% of the total voting
power represented by the voting securities of the surviving entity outstanding
immediately after such transaction being Beneficially Owned by holders of the
outstanding voting securities of the Company immediately prior to the
transaction, with the voting power of each such continuing holder relative to
such other continuing holder being not altered substantially in the
transaction; or
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d) the stockholders of the Company shall approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or a substantial portion of the Company's assets (ie. 50% or more
in value of the total assets of the Company).
ARTICLE 8. MANDATORY EXERCISE
Upon the occurrence of or in anticipation of a contemplated Change in
Control Event, the Company may give the Optionee written notice requiring such
Optionee either (a) to exercise within a reasonable period of time established
by the Administrator after receipt of the notice each Option to the fullest
extent exercisable at the end of that period or (b) to surrender such Option or
any unexercised portion thereof. Any portion of such Option which shall not have
been exercised in accordance with the provisions of the Agreement by the end of
such period shall automatically lapse irrevocably and Optionee shall have no
further rights thereunder.
ARTICLE 9. ADJUSTMENTS
Subject to the provisions of Articles 7 and 8, in the event the outstanding
shares of Common Stock of the Company are hereafter increased, decreased,
changed into or exchanged for a different number or kind of shares or
securities through merger, consolidation, combination, exchange of shares,
other reorganization, recapitalization, reclassification, stock dividend, stock
split or reverse split, an appropriate adjustment shall be made by the
Administrator in the number or kind of shares allocated to unexercised options,
which shall have been granted prior to any such change. Any such adjustment in
outstanding options shall be made without change in the aggregate purchase price
applicable to the unexercised portion of the Option but with a corresponding
adjustment in the price for each share covered by the Option. In making any
adjustment pursuant to this Article 9, any fractional shares shall be
disregarded.
ARTICLE 10. PRIVILEGES OF STOCK OWNERSHIP
Notwithstanding the exercise of any options granted by the Administrator,
no Optionee shall have any rights or privileges of a stockholder of the Company
in respect of any shares of stock issuable upon the exercise of his or her
Option until certificates representing the shares have been issued and
delivered. No adjustment shall be made for dividends or any other distribution
for which the record date is prior to the date on which any stock certificate
is issued pursuant to the Agreement.
ARTICLE 11. RESERVATION OF SHARES OF COMMON STOCK
The Company will at all times reserve and keep available such number of
shares of its Common Stock as shall be sufficient to satisfy the requirements of
this Option.
ARTICLE 12. TAX WITHHOLDING
The exercise of any option under this Agreement is subject to the condition
that, if at any time
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the Company shall determine, in its discretion, that the satisfaction of
withholding tax or other withholding liabilities under any state, federal or
international tax treaties is necessary or desirable as a condition of, or in
any connection with, such exercise or the delivery or purchase of shares
pursuant thereto; then, in such event, the exercise of the Option shall not be
effective unless such withholding tax or other withholding liabilities shall
have been satisfied in a manner acceptable to the Company.
ARTICLE 13. EMPLOYMENT
Nothing in this Agreement gives to any Optionee any right to continued
employment by the Company or the Subsidiaries or limits in any way the right of
the Company or the Subsidiaries at any time to terminate or alter the terms of
that employment.
ARTICLE 14. RESTRICTIONS IN DISPOSITION
All shares of Common Stock acquired by Optionee pursuant to this Agreement
shall be subject to the restrictions on sale, encumbrance and other disposition
provided by Federal or State law. All shares of Common Stock issued to Optionee
pursuant to this Agreement shall bear a restrictive legend summarizing the
restrictions on transferability applicable thereto including those imposed by
Federal and state securities laws.
ARTICLE 15. NON-TRANSFERABILITY
Options granted hereunder may not be sold, pledged, assigned or transferred
in any manner by the Optionee otherwise than by will or by laws of descent and
distribution and shall be exercisable (a) during the Optionee's lifetime only
by the Optionee and (b) after the Optionee's death only by the Optionee's
executor, administrator or personal representative.
ARTICLE 16. CONFIDENTIALITY; COVENANT AGAINST COMPETITION
AS A CONDITION TO THE GRANT OF THIS OPTION, the Optionee agrees as follows:
a) The Optionee recognizes and acknowledges that all information pertaining
to the affairs, business, clients, or customers of the Company or the
Subsidiaries or affiliates (hereinafter collectively referred to as the
"Business"), as such information may exist from time to time, other than
information that the Company has previously made publicly available, is
confidential information and is a unique and valuable asset of the Business,
access to and knowledge of which will be essential to the performance of the
Optionee's duties under this Agreement. In consideration of the Option granted
to him hereunder, the Optionee shall not, except to the extent reasonably
necessary in the performance of his duties, divulge to any person, firm,
association, corporation, or governmental agency, any information concerning the
affairs, businesses, clients, or customers of the Business (except such
information as is required by law to be divulged to a government agency or
pursuant to lawful process), or make use of any such information for his own
purposes or for the benefit of any person, firm, association or corporation
(except the Business) and shall use his reasonable best efforts
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<PAGE> 6
to prevent the disclosure of any such information by others. All records,
memoranda, letters, books, papers, reports, accountings, experience or other
data, and other records and documents relating to the Business, whether made by
the Optionee or otherwise coming into his possession, are confidential
information and are, shall be, and shall remain the property of the Business. No
copies thereof shall be made which are not retained by the Business, and the
Optionee agrees, on termination of his employment or on demand of the Company,
to deliver the same to the Company or as the Company may direct.
b) In consideration of the Option granted to him hereunder, during the
one-year period commencing on the effective date of the termination of his
employment, the Optionee shall not, without express prior written approval of
the Administrator, directly or indirectly, own or hold any proprietary interest
in, or be employed by or receive remuneration from, any corporation,
partnership, sole proprietorship or other entity engaged in competition with the
Business (a "Competitor"), other than severance-type or retirement-type benefits
from entities constituting prior employers of the Optionee. The Optionee also
agrees that during such one-year period he will not solicit for the account of
any Competitor, any customer or client of the Business, or in the event of the
Optionee's termination of his employment, any entity or individual that was such
a customer or client during the twelve (12) month period immediately preceding
the Optionee's termination of employment. The Optionee also agrees not to act on
behalf of any Competitor to interfere with the relationship between the Business
and their employees. The Optionee also agrees not to hire any employee of the
Business or to solicit or induce any such employee to leave the employment of
the Company.
For purposes of the preceding paragraph, (i) the term "proprietary
interest" means legal or equitable ownership, whether through stockholding or
otherwise, of an entity interest in a business, firm or entity other than
ownership of less than 1 percent of any class of equity interest in a publicly
held business, firm or entity and (ii) an entity shall be considered to be
"engaged in competition" if such entity is, or is a holding company for, a
company engaged in competition with the Company.
c) The Optionee acknowledges the reasonableness of the restrictions
contained in this Article 16. The Optionee acknowledges that the Company and its
successors and assigns would be irreparably injured in a manner not adequately
compensated by money damages by a breach or violation (or threatened breach or
violation) of the provisions of this Article 16 by the Optionee. Therefore, in
the event of any such breach or violation (or threatened breach or violation),
in addition to all other rights and remedies which the Company may have, whether
at law or in equity, the Company and its successors and assigns shall be
entitled to obtain injunctive or other equitable relief against the Optionee
without the need to post bond or other security in connection therewith and the
Optionee hereby consents to the entry of an order for such injunctive or other
equitable relief.
d) The obligation of the Company to provide for any benefits under this
Agreement shall cease upon a violation of the preceding provisions of this
Article. The Optionee's agreement as set forth in this Article 16 shall survive
the expiration of the term of the Option and the Optionee's termination of his
employment with the Company.
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e) If any court determines that the provisions of this Article 16, or any
part hereof, is unenforceable because of the duration or geographic scope of
such provisions, such court shall have the power to reduce the duration or scope
of such provisions, as the case may be, so that, as so reduced, such provisions
are then enforceable to the maximum extent permitted by applicable law.
ARTICLE 17 ADDITIONAL DOCUMENTS
Optionee hereby agrees to execute and deliver such further documents and
instruments as may be necessary or as may be requested in order to effectuate
fully the purposes, terms and conditions of this Agreement, whether before, at,
or after the exercise of the Option.
ARTICLE 18 SEVERABILITY
The invalidity of any one or more provisions hereof or of any other
agreement or instrument given pursuant to or in connection with this Agreement
shall not affect the remaining portions of this Agreement or any such other
agreement or instrument or any part thereof; and if one or more provisions
contained herein or therein should be invalid, or should operate to render this
Agreement or any such other agreement or instrument invalid, this Agreement and
such other agreements and instruments shall be construed as if such invalid
provisions had not been inserted.
ARTICLE 19 SURVIVAL
It is the express intention and agreement of the parties hereof that all
covenants and agreements made in this Agreement shall survive the execution and
delivery of this Agreement and the exercise (if any) of the Option.
ARTICLE 20 WAIVERS
Neither the waiver by a party of a breach of or a default under any of the
provisions of this Agreement, nor the failure of a party, on one or more
occasions, to enforce any of the provisions of this Agreement or to exercise any
right, remedy, or privilege hereunder shall thereafter be construed as a waiver
of any subsequent breach or default of a similar nature, or as a waiver of any
such provisions, rights, remedies, or privileges hereunder.
ARTICLE 21 BINDING EFFECT
Subject to any provisions hereof restricting transfer, encumbrance and
assignment, this Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective heirs, personal representatives,
successors, and assigns.
ARTICLE 22 LIMITATIONS ON THE BENEFIT OF THIS AGREEMENT
It is the explicit intention of the parties hereto that no person or entity
other than the parties
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<PAGE> 8
hereof is or shall be entitled to bring any action to enforce any provisions of
this Agreement against any parties hereto, and that the covenants, undertakings,
and agreements set forth in the Agreement shall be solely for the benefit of,
and shall be enforceable only by, the parties hereto and their respective heirs,
personal representatives, successors and assigns as permitted hereunder.
ARTICLE 23 ENTIRE AGREEMENT
This Agreement and subsequent amendments and interpretations, contains the
entire agreement among the parties with respect to subject matter hereof, and
supersedes all prior oral or written agreements, commitments, or understandings
with respect to the matters provided for herein and therein.
ARTICLE 24 HEADINGS
Article and subarticle headings contained in this Agreement are inserted
for convenience of reference only, shall not be deemed to be part of this
Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.
ARTICLE 25 GOVERNING LAW
This Agreement, the rights and obligations of the parties hereto, and any
claims or disputes relating thereto, shall be governed by and construed in
accordance with the internal laws of the State of Delaware, except that Article
16 shall be governed by New Jersey law, in each case exclusive of laws regarding
choice of laws.
ARTICLE 26 NOTICES
All notices, demands, requests, or other communications that may be or are
required to be given, served, or sent by a party pursuant to this Agreement
shall be in writing and shall be (i) personally delivered, (ii) mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or (iii) sent by over-night carrier, addressed as follows:
(a) If to the Company:
Barringer Technologies Inc.
219 South Street
New Providence, NJ 07974
Att: Chief Financial Officer
(b) If to the Optionee:
The Last Known Residence or
Mailing Address of Optionee
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Reflected in the Records of the Corporation
Each party may designate by notice in writing in the manner described
above a new address to which any notice, demand, request, or communication
required or permitted by this Agreement may be sent. Any notice, demand,
request, or communication that shall be delivered, mailed, or transmitted in the
manner described above shall be deemed given, served, sent or received for all
purposes when it is delivered to the addressee. An affidavit of personal
delivery, the return receipt, or the delivery receipt shall be deemed
conclusive, not exclusive, evidence of such delivery or when delivery is refused
by the addressee upon presentation.
ARTICLE 27 COUNSEL
THE OPTIONEE REPRESENTS THAT HE HAS HAD THE OPPORTUNITY TO REVIEW THIS
AGREEMENT, INCLUDING THE COVENANT AGAINST COMPETITION, AND/OR HIS OTHER
PROFESSIONAL ADVISORS.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
COMPANY
Barringer Technologies Inc.
By:
------------------------------------------
Stanley S. Binder, Chief Executive Officer
Witness: OPTIONEE
- -------------------- ---------------------------------------------
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EXHIBIT 10.8
DESCRIPTION OF 1991 WARRANT PLAN
On December 13, 1990, the Board of Directors of the Company adopted
the 1991 Directors' Warrant Plan (the "1991 Warrant Plan"), pursuant to which
each non-employee director, upon election or appointment to the Board, will be
offered 3,750 five-year warrants, at $.40 per warrant (the "Directors'
Warrants"), each to purchase one share of Common Stock at an exercise price to
be determined by the Board at the time the Directors' Warrants are issued, which
exercise price shall not be less than the then current market price for the
shares of Common Stock underlying the Directors' Warrants, and which provides
that each new director shall use the first quarterly director's fee to pay the
purchase price for the Director's Warrants.
<PAGE> 1
EXHIBIT 10.9
DESCRIPTION OF EXERCISE PLAN
The Board of Directors of the Company has adopted the Stock Option
Exercise Program (the "Exercise Program"), pursuant to which all employees of
the Company and its subsidiaries who are granted stock options (pursuant to
either qualified or non-qualified plans) are permitted to finance the exercise
price of such options by causing the Company to issue the shares of Common Stock
underlying such options upon receipt by the Company from the employee of a
full-recourse demand note evidencing indebtedness to the Company in an amount
equal to the exercise price, which is secured by the underlying shares of Common
Stock and which is interest-free for one year from the date on which the
employee exercises his or her option, after which interest accrues at a rate per
annum equivalent to the prime rate, which rate is changed monthly. The loans
are repaid with a portion of the proceeds from the sale of the Common Stock to
be received by the employees upon the exercise of their options.
<PAGE> 1
EXHIBIT 10.10
435-9172-1
THIS AGREEMENT made in duplicate as of the 27th day of February, 1989
BETWEEN: CANADIAN PATENTS AND DEVELOPMENT
LIMITED-SOCIETE CANADIENNE DES BREVETS
ET D'EXPLOITATION LIMITEE, a Corporation
to which the Government Companies
Operation Act applies, having its Head
Office at the City of Ottawa in the
Province of Ontario (hereinafter called
"the Licensor")
OF THE ONE PART
-and-
Barringer Instruments Limited, a duly
incorporated Company, having a place of
business at the City of Rexdale in the
Province of Ontario (hereinafter called
"the Licensee")
OF THE OTHER PART
WITNESSETH THAT:
WHEREAS the Licensor is an agency Corporation wholly owned by Her
Majesty the Queen in right of Canada, reporting to Parliament through the
Minister of Regional Industrial Expansion; and
WHEREAS in consequence of scientific research conducted through
Department of Supply and Services of the Government of Canada Contracts Serial
Nos. T 8200-5-5570, 21ST-32032-4-033M, 19SR-32032-5-3080, 41ST-32032-6-3402 and
25ST-32032-7-3271, under the auspices of, the Department of Transport of the
Government of Canada, there has been developed an invention commonly designated
"Sample Handling System for Molecular Analyser" - Case Number 9172, and the
<PAGE> 2
Department of National Revenue of the Government of Canada there has been
developed an invention commonly designated "Narcotic Detector Using Ion Mobility
Spectrometer" Case 9281; and
WHEREAS the Licensor has made certain applications for patents in
respect of the said Inventions; and
WHEREAS the Licensor represents that it has full authority to license
the Invention and the Patent Rights and enter into this agreement; and
WHEREAS the Licensee and the Licensor are desirous of entering into a
license agreement on the terms and conditions hereinafter set forth.
NOW THEREFORE in consideration of the premises and of the mutual
covenants and agreements hereinafter contained, the parties hereto agree each
with the other as follows:
SECTION 1 - Definitions
A. "Departments" means the Department of Transport and the Department of
National Revenue of the Government of Canada;
B. "Invoice Price" means the genuine net selling price of Licensed Products
(before cash discounts, freight allowances, advertising allowances or similar
deductions are made, but excluding customs, excise and sales taxes, if any)
established in a normal bona fide arm's length transaction between parties not
subject to common control, direction or restraint, nor affiliated in any way.
C. "Invention" means the inventions commonly designated "Sample Handling System
for Molecular Analyser" - Case 9172 and "Narcotic Detector Using Ion Mobility
Spectrometer" Case Number 9281, which have been developed in consequence of
scientific research conducted under the auspices of the Departments.
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<PAGE> 3
D. "Know-how" means the technical knowledge and techniques relating generally to
the Inventions supplied to the Licensee by either the Licensor or the
Departments.
E. "Licensed Process" means the series of actions or operations carried out in
accordance with the method Inventions covered by the Patent Rights and/or
Know-how.
F. "Licensed Product" means a complete detection system or any part thereof made
in accordance with the Inventions covered by the Patent Rights and/or Know-how.
F. "Patent Rights" means any patent application, continuation-in-part or
divisional thereof, and any patent which has issued or may issue thereon
including any re-issue thereof in respect of the Inventions, as more
particularly shown in Schedule "A" hereto annexed.
G. "Records" means accounts, invoices, receipts, vouchers and like documents
relating to the sales of Licensed Products.
SECTION 2 - Grant
A. The Licensor hereby grants to the Licensee an exclusive right and license in
Canada to make, and have made, Licensed Products, with the right and license
throughout the world to use and sell Licensed Products and use the Licensed
Process including the right to grant sublicenses thereof to purchasers of
Licensed Products. Such exclusive right and license shall be for the period from
the date of this Agreement until the 31st day of March 1999; it being understood
and agreed that, after the expiry of the aforesaid period, the right and license
granted herein shall be non-exclusive for the remainder of the life of this
agreement.
B. Notwithstanding anything contained in this agreement, in respect of the
license granted herein, there is hereby reserved to Her Majesty the Queen in
right of
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Canada, the right to practice, and have practiced, the subject matter of said
license and to dispose of, in any manner whatsoever, any products derived from
such practice.
C. If the Licensee is in default with respect to any obligation contained in
this agreement, the Licensor may, at its discretion, in lieu of giving notice of
termination for such default, by notice in writing to the Licensee, reduce to
non-exclusive the license granted herein and may, after the date of such notice,
grant to third parties licenses in respect to the subject matter of this
agreement.
D. The Licensee may grant sublicenses of the license granted herein on terms and
conditions similar to those hereof and the Licensee agrees that it will submit
such sublicense agreements to the Licensor for ratification within ninety (90)
days after execution thereof and such ratification, which shall not be
unreasonably withheld, shall be a condition precedent to the validity of any
such sublicense.
SECTION 3 - Royalties
A. The Licensee agrees to pay to the Licensor during the life of this agreement,
royalties at the rate of Two Percent (2.0%) of the Invoice Price, on all
Licensed Products produced and sold by the Licensee and any of its sublicensees.
In the calculation of royalties appropriate amounts may be deducted for all
cancellations of orders and accepted return of Licensed Products.
B. For the purpose of this agreement, Licensed Products shall be considered sold
when billed out, or if not billed out, when delivered or shipped.
C. The Licensee agrees to pay to the Licensor as partial consideration for the
license granted herein, the sum of Five Thousand Dollars ($5,000.00), in the
following
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manner:
One Thousand Dollars ($1,000.00) earnest money, the receipt at which is
hereby acknowledged, and One Thousand Dollars ($1,000.00) to be paid
upon execution of these presents, and Three Thousand Dollars
($3,000.00) on the 1st day of October 1989.
D. The Licensee agrees to pay in advance to the Licensor minimum annual
royalties in the amounts and on the dates as follows:
Five Thousand Dollars ($5,000.00) on the 1st day of April 1990,
Seven Thousand Five Hundred Dollars ($7,500.00) on the 1st day of April
1991,
Ten Thousand Dollars ($10,000.00) on the 1st day at April 1992 and on
the 1st of April of each and every year thereafter during the life of this
agreement; such minimum annual royalty shall constitute a credit against
royalties accruing to the Licensor pursuant to this agreement for the period for
which such minimum annual royalty is paid.
E. It is mutually understood and agreed that there shall be no carrying forward
as a credit against future royalties nor refunding of any balance of a minimum
annual royalty remaining at termination or at March 31 of any period for which
such minimum annual royalty shall have been paid.
F. The Licensee shall also pay to the Licensor as partial consideration for each
sublicense granted, One-Third (1/3) of all considerations, other than royalties
stipulated in subsection A above, due to the Licensee in respect of the
sublicense granted pursuant to Section 2 hereof, and any such payment shall not
constitute a credit against the minimum annual royalty payable under subsection
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D above.
SECTION 4 - Reports and Payments
A. The Licensee covenants and agrees to report to the Licensor within thirty
(30) days after each calendar quarter ending the last day of March, June,
September and December in each year during the life of this agreement, as to
whether or not royalties under this agreement are due to the Licensor.
B. Nil reports of royalties may be made by simple letter. Reports of royalties
due shall be in the form of statements and in compliance with the following:
(1) record the total quantity of Licensed Products sold by the
Licensee and its sublicensees up to and including the last day of
the quarter.
(2) include a calculation of the amount due to the Licensor for the
royalties stipulated herein;
(3) be certified as correct by the Treasurer or some other senior
officer of the Licensee; and
(4) be accompanied by a remittance to the Licensor of the amount of
the royalties so shown to be payable.
C. All payments to be made by the Licensee hereunder shall be paid in Canadian
funds payable at par at Ottawa, Ontario, Canada.
D. It is mutually understood and agreed that all overdue accounts shall bear
interest at the rates set from time to time by the Licensor.
E. Any considerations payable to the Licensor under Section 3(F) shall be paid
to the Licensor by the Licensee within thirty (30) days after the calendar
quarter ending the last day of March, June, September and December in which the
consideration is due to the Licensee.
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SECTION 5 - Accounts
A. The Licensee shall:
(1) keep proper and detailed Records in respect of sales of the
Licensed products and it sublicenses;
(2) make the Records available during business hours and permit the
authorized representatives of the Licensor to audit and inspect
the Records, including Records relating to sales of Licensed
products by sublicensees, and to take extracts from, and make
copies of, the Records; and
(3) afford all facilities for such audits and inspections and furnish
representatives with information requisite to the understanding of
the Records.
B. The Licensee shall also preserve the Records during the life of this
agreement and for a period of one year thereafter. Provided that the Licensee
may, after giving the Licensor ninety (90) days notice, dispose of any or all
Records.
C. It is mutually understood and agreed that, at its discretion, but not more
frequently than once per agreement year, the Licensor may, in addition to, or in
lieu of, audits and inspections of the Records stipulated in A above, request
the Licensee to provide to the Licensor, at no cost to the Licensor, an audited
statement of such Records.
SECTION 6 - Due Diligence
The Licensee covenants to use all reasonable endeavours to exploit
commercially with due diligence, the subject matter of this agreement. The
Licensor reserves the right to terminate this agreement if the Licensee is not
using
7
<PAGE> 8
all reasonable endeavours to exploit said subject matter commercially. Such
termination shall be effective ninety (90) days after notice thereof in writing
by the Licensor to the Licensee if within such period the licensee has not
shown to the reasonable satisfaction of the Licensor that it has used all
reasonable endeavours as aforesaid. Provided that, for the purposes of this
agreement failure of the Licensee to meet the market demand for reasonably
priced Licensed Products shall be deemed to be non-compliance with the
obligations of the Licensee under this Section 6.
SECTION 7 -- Improvements and Additions
A. The Licensee covenants and agrees to inform the Licensor from time to
time of any improvements and/or additions made by the Licensee, during the life
of this agreement, to the subject matter hereof. Where such improvements and/or
additions are:
(1) Developed, in whole or in part, by the Licensee with funding from the
Government of Canada, or any agency thereof, and except where such right
and interest is vested in Her Majesty, or an agency of Her Majesty,
under any funding contract, or other arrangement, all right and interest
in and to any such improvements and/or additions, whether patentable or
unpatentable, shall be vested in the Licensor; the Licensor may, if
practicable, seek such proprietary protection for any such improvement
and/or addition, as the Licensor deems necessary or appropriate, and
shall include all such improvements and/or additions in the license
granted hereunder without alteration of the terms hereof, including the
royalty rate. Provided that, if such funding is less than fifty percent
(50%) of the cost of the overall development
8
<PAGE> 9
of the said improvements and/or addition such inclusion in the said license
shall be for the life of any proprietary protection obtained therefor, and
shall, unless the said license is already exclusive, be exclusive to the
Licensee in respect of the said improvements and/or additions for a period not
less than seven (7) years in duration commencing the date of said funding
contract, or other arrangement, as may be agreed upon by the parties; in respect
of unpatentable improvements and/or additions so developed, the inclusion in the
license shall be for a minimum period of ten (10) years commencing the date of
said funding contract, or other arrangement; or
(2) Developed by the Licensee at its own expense, upon termination of this
agreement prior to the expiration of the term herein set out, for any reason
whatsoever, the Licensee shall grant to the Licensor a nonexclusive,
unconditional, irrevocable, royalty-free, right and license to make, use or sell
such improvements and/or additions, whether patentable or unpatentable, with the
right to grant royalty bearing sublicenses therefor, for a term not exceeding
the life of any patent issued in respect thereof, or a minimum of ten (10)
years, as may be applicable.
B. Notification of improvements and/or additions shall be sent to the Licensor
within a reasonable time, not more than six (6) months, after they have been
made.
SECTION 8 Technical Assistance
A. The Licensor undertakes to supply to the Licensee such technical information
and Know-how within the possession of each. of the Departments as, in the
opinion of
9
<PAGE> 10
each of the Departments, may be necessary to enable the Licensee to manufacture
the Licensed Product and use the Licensed Process.
B. All confidential information made available under this agreement shall be
maintained confidential by the Licensee and may only be disclosed with the
written consent of the Licensor.
SECTION 9 - Financial Assistance
The Licensee covenants and agrees to notify the Licensor immediately if the
Licensee intends to seek from the Government of Canada or any agency thereof,
financial or other assistance by way of contract or otherwise for the
development of the Licensed Product.
SECTION 10 - Patents and Costs
A. The filing and prosecution of the patent applications in the countries listed
in Part I of Schedule "A" shall be the responsibility of the Licensor and all
costs connected therewith shall be assumed by the Licensor.
B. Upon a request prior to the 1st day of October 1989 by the Licensee and at
the expense of the Licensee, the Licensor will file and prosecute additional
patent applications in such countries, where it is possible to do so, as the
Licensee may designate in writing and such additional applications shall be
listed in Part II of Schedule "A". Any request shall be accompanied by a payment
in the amount of One Thousand Dollars ($1,000.00), for each additional country
in which an additional patent application is to be filed and prosecuted, which
shall be applied to the costs of the filing and prosecution of the patent
application. For the additional applications filed at the request of the
Licensee, the Licensor agrees to use, if necessary, Patent Agents in the
countries where the
10
<PAGE> 11
applications are filed which are acceptable to the Licensee for the filing and
prosecution of the applications. The Licensee agrees that, upon the receipt of
notice from the Licensor, the Licensee will reimburse the Licensor for all
costs, including but not limited to, patent officers' time, disbursements, and
overhead involved in the filing and prosecution of the patent applications
requested by the Licensee. The patents which issue on the applications shall
vest in the licensor and such patents will then be deemed to be included in the
Patent Rights without alteration of the royalty rate.
C. The Licensor agrees that the Licensee may, at any time notify the Licensor
requesting discontinuance of the prosecution of any patent application filed at
the Licensee's expense and the Licensor may then withdraw such applications from
the Patent Rights. The Licensee covenants and agrees to reimburse the Licensor,
as provided for herein, for all costs incurred or authorized in prosecution of
such application up to the time of receipt of such notice.
D. The Licensee agrees that, upon receipt of notice from the Licensor, the
Licensee will reimburse the Licensor for all renewal fees and incidental costs
related to any of the Patent Rights licensed herein.
D. The Licensee may at any time prior to ninety (90) days before the due date
for payment of such renewal fees, notify the Licensor that it does not desire to
have a patent continued in force in any particular country and after receipt of
such notice by the Licensor the said patent may be withdrawn from the Patent
Rights.
E. The Licensor agrees to notify the Licensee within a reasonable time of any
final refusal to grant a patent in respect of any patent application included in
the Patent Rights.
11
<PAGE> 12
F. It is understood and agreed that in the event that no patent issues in
respect of any of the Patent Rights or should any of the Patent Rights be held
invalid by any Court of competent jurisdiction, from which no appeal can be, or
is taken, or should any of the Patent Rights expire, royalties in respect
thereof shall cease to be payable, provided that royalties shall be payable on
all Licensed Products produced or sold under the existing Patent Rights and/or
Know-how.
G. It is further understood and agreed that in the event that no patents issues
in respect of the Patent Rights, the royalty stipulated to be paid under the
provisions of Section 3 A shall be reduced to One Percent (1.0%) as of the date
the last application in the Patent Rights is irrevocably abandoned and the date
of the expiry of the agreement set forth in Section 13 shall be the 31st day of
March 1999.
SECTION 11 - Termination
A. This agreement, at the option of the Licensor, may be terminated forthwith by
the Licensor if:
(1) The Licensee fails to make any payment provided for herein and such payment
remains in arrears and unpaid for a period of ninety (90) days; or
(2) The Licensee commits or permits a breach of any of the other covenants and
terms herein contained and does not remedy such breach within ninety (90)
days after being required in writing to do so by the Licensor, or
(3) The Licensee becomes bankrupt, or insolvent, or has a receiving order made
against it or has a receiver appointed to continue its operations, or
passes a resolution for winding up, or takes the benefit of any statute for
the time being in force relating to
12
<PAGE> 13
bankrupt or insolvent debtors or the orderly payment of debts; or
(4) The Licensee alters, or is required to alter, its management or financial
control in any manner whatsoever, and such alteration may in the sole
opinion of the Licensor be deemed to be detrimental to the interest of the
Licensor.
(5) The Licensee assigns this agreement in any manner and for any purpose
whatsoever except as provided for herein without the prior written consent
of the Licensor.
Such termination shall be effected by a notice which shall, as of the date of
such notice, determine the license herein granted, together with all rights of
the Licensee hereunder, without prejudice to the right of the Licensor to sue
for and recover any royalties or other sums due to the Licensor and without
prejudice to the remedy of either party in respect of any previous breach of
this agreement.
B. The Licensee may at its option terminate this agreement by giving the
Licensor at least ninety (90) days notice prior to the 31st day of March in any
year, provided that the Licensee shall pay to the Licensor all royalties or
other sums due hereunder up to the date of such termination.
C. Failure on the part of the Licensor to notify the Licensee of a breach of
this agreement, or to terminate the license granted hereunder because of such
breach, shall not constitute a condonation of the breach or a waiver of the
right of the Licensor to terminate the agreement in accordance with the
provisions herein contained.
D. The Licensor agrees that the Licensee and its sublicensees may sell all
stocks of Licensed Products produced during the currency of this agreement and
which remain unsold at the date of expiration or sooner
13
<PAGE> 14
determination provided that within thirty (30) days after such date the Licensee
pays to the Licensor royalties in respect thereof as stipulated herein.
SECTION 12 - Notice
A. Any notice under this agreement shall be in writing and in the case of the
Licensor shall be addressed to:
Canadian Patents and Development Limited,
275 Slater Street,
Ottawa, Ontario
K1A 0R3
and in the case of the Licensee to:
Barringer Instruments Limited
304 Carlingview Drive
Rexdale, Ontario
M9W 5G2
or to such other address as either party may in future designate by notice to
the other. All notices so addressed, if sent by registered mail, shall be deemed
to have been received ten (10) days after dispatch.
B. The Licensee covenants and agrees to notify the Licensor, and supply full
particulars, immediately upon:
a) effecting a change in its corporate name;
b) merging with another entity;
c) altering its management;
d) altering its financial control;
e) filing for bankruptcy;
f) involving itself in any insolvency proceedings; or
g) taking advantage of any statute then in being relating to the
orderly payment of debts.
SECTION 13 - Term
Subject to the provisions of Section 10 (G) and, unless sooner
terminated pursuant to the other provisions hereof, this agreement shall remain
in force until the last to expire of the Patent Rights licensed hereunder shall
14
<PAGE> 15
have expired.
SECTION 14 - Validity of Patent Rights
A. The Licensor does not warrant the validity of the Patent rights licensed to
the Licensee by this agreement and has not made, and does not make, any
representations to the Licensee as to the scope of the Patent Rights and that
such Patent Rights and/or the Know-how may be exploited without the infringement
of any rights of others.
B. The Licensee hereby recognizes and acknowledges the validity of the Patent
Rights other than any United states of America patent licensed hereunder and
agrees not to contest, during the life of this agreement, such validity, either
directly or indirectly, by assisting other parties.
SECTION 15 - Infringement
In the event that either the Licensee or the Licensor considers that
there exists a situation of infringement of the Patent Rights licensed hereunder
for which a suit for infringement should be brought, the one party will promptly
give to the other, free of any charge, all the available details regarding the
situation and the parties will jointly decide on the steps to be taken.
SECTION 16 - Litigation
A. In the event of any threatened or actual suit against the Licensee or its
sublicensees, in consequence of the exercise of the right and license granted
herein, the Licensee will promptly inform the Licensor and the parties will
jointly decide on the steps to be taken in the circumstances.
B. It is understood and agreed that, with regard to threatened litigation or
litigation arising from the license granted herein, or infringement of the
licensed rights by others, the parties hereto will at all times
15
<PAGE> 16
consult each other and give to one another free of any charge information or
advice which may be helpful for such purpose. However, neither party shall bind
or commit the other party to any course of action which involves liability for
legal costs, expenses or damages, but should the parties fail to agree, within a
reasonable time, as to any course of action jointly to be taken, either party
shall be at liberty to take or defend any proceedings alone at its own expense
on indemnifying the other party and shall be entitled to retain anything awarded
to it by a court.
SECTION 17 - Assignment
A. This agreement and everything herein contained shall enure to the benefit of
and be binding upon the successors and assigns of the parties hereto, but shall
not be assigned, transferred, conveyed, or encumbered by the Licensee except
upon the written consent of the Licensor and any assignment by the Licensee
without such consent shall be of no effect.
B. The Licensee agrees that the Licensor may, subject to the license granted
herein, assign or set over its entire right, title and interest in and to any
patent or patent application included in the Patent Rights and upon receipt of
notification from the Licensor that the obligations of the Licensor under this
agreement in respect of such patent or patent applications have been assumed by
an assignee, the Licensor shall be released from the obligations so assumed.
SECTION 18 - Publication
A. In the promotion of the subject matter of this agreement the Licensee agrees
that it shall use the words "Produced under license from Canadian Patents and
16
<PAGE> 17
Development Limited", but it shall not, in any manner whatsoever, use the name
of any department or other agency of the Government of Canada, without the prior
written permission of the Licensor.
B. The Licensee shall, at the request of the Licensor, within thirty days after
March 31 of each year throughout the life of this agreement, send to the
Licensor two copies of each piece of then current sales or product promotion
literature being used by the Licensee concerning the Licensed Product.
SECTION 19 - Compliance with Law
A. The Licensee covenants and agrees that it will comply with the Patent Law
regarding the affixing by means of a plate, label or other device to the
Licensed Product the number and date of issue of the patent or patents under
which such Licensed Product is produced.
B. The Licensee covenants and agrees to comply, at all times, with the orders,
regulations and statutes in force in the places where the right and license
granted herein are exercised.
SECTION 20 - Interpretation
A. For the purpose of this agreement, where applicable, words of the feminine
gender shall include the masculine, the singular shall include the plural, and
vice versa, and all sentences so affected herein shall be construed as being
grammatically correct.
B. This agreement shall be interpreted according to the laws of the Province of
Ontario, Canada.
17
<PAGE> 18
SECTION 21 - Entire Agreement
This agreement constitutes the entire agreement between the parties
hereto relating to the subject matter hereof and supersedes any prior
agreements. There are no terms, obligations, covenants, representations,
statements or conditions other than those contained herein. No variation or
modification of this agreement nor waiver of any of the terms and provisions
hereof shall be deemed valid unless in writing signed by both parties hereto.
IN WITNESS WHEREOF the parties hereto have caused these presents to be
executed under seal by their proper officers duly authorized in that behalf.
SIGNED, SEALED AND DELIVERED by:
CANADIAN PATENTS AND DEVELOPMENT
LIMITED-SOCIETE CANADIENNE DES
BREVETS ET D'EXPLOITATION LIMITEE
Per:/s/
-----------------------------------------
Vice President
Per:/s/
-----------------------------------------
Secretary - Treasurer
BARRINGER INSTRUMENTS LIMITED
Per:/s/ J. Davies (President)
-----------------------------------------
Per:
-----------------------------------------
18
<PAGE> 19
SCHEDULE "A"
PART I
<TABLE>
<CAPTION>
Country Appl. No. Date Patent No. Issued Expires
<S> <C> <C> <C> <C> <C>
Case 9172
Canada
United States
Case 9281
Canada
United States
</TABLE>
PART II
<TABLE>
<CAPTION>
Country Appl. No. Date Patent No. Issued Expires
<S> <C> <C> <C> <C> <C>
Case 9172
Case 9281
</TABLE>
19
<PAGE> 20
435-9172-1
SUPPLEMENT NUMBER 1
TO THE AGREEMENT DATED AS OF THE 21ST DAY OF FEBRUARY 1989
THIS AGREEMENT made in duplicate as of the 4th day of March, 1991.
BETWEEN: CANADIAN PATENTS AND DEVELOPMENT
LIMITED-SOCIETE CANADIENNE DES BREVETS
ET D'EXPLOITATION LIMITEE, a Corporation
to which the Government Corporations
Operation Act applies, having its Head
Office at the City of Ottawa in the
Province of Ontario (hereinafter called
"the Licensor")
OF THE ONE PART
-and-
BARRINGER INSTRUMENTS LIMITED, a duly
incorporated Company, having a place of
business at the City of Rexdale, in the
Province of Ontario (hereinafter called
"the Licensee")
OF THE OTHER PART
WITNESSETH THAT:
WHEREAS the parties hereto entered into an Agreement dated as of the
27th day of February, 1989, (hereinafter called "the Original Agreement"),
wherein the Licensor granted to the Licensee a license in respect of inventions
commonly referred to
<PAGE> 21
as "Sample Handling System for Molecular Analyser" - Case Number 9172 and
"Narcotic Detector Using Ion Mobility Spectrometer" - Case Number 9281; and
WHEREAS the parties are desirous of amending the Original Agreement on
the basis herein set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter contained, the parties hereto agree each
with the other as follows:
SECTION 1
1. Subsection A of Section 2 of the Original Agreement is deleted and the
following substituted therefor:
"A. The Licensor hereby grants to the Licensee an exclusive right and license in
Canada and the United States to make, and have made, Licensed Products, with the
right and license throughout the world to use and sell Licensed Products and use
the Licensed Process including the right to grant sublicenses thereof to
purchasers of Licensed Products; provided however, if the market demand for
Licensed Products can only justify one production/assembly facility, the
Licensed Products must be produced and assembled in Canada. Such exclusive right
and license shall be for the period from the date of this Agreement until the
31st day of March 1999; it being understood and agreed that, after the expiry of
the aforesaid period, the right and license granted herein shall be
non-exclusive for the remainder of the life of this Agreement."
SECTION 2
Subsection D of Section 2 of the original Agreement is
2
<PAGE> 22
deleted and the following substituted therefor:
"D. The Licensee may grant sublicenses of the license granted herein on terms
and conditions similar to those hereof and the Licensee agrees that it will
submit such sublicense agreements to the Licensor for ratification within ninety
(90) days after execution thereof and such ratification, which shall not be
unreasonably withheld, shall be a condition precedent to the validity of any
such sublicense; provided however, that the only sublicense granted to make and
have made Licensed Products in the United States shall be to Barringer
Instruments Inc. of New Jersey and not less than Fifty Percent (50%) of the
factory cost value of the Licensed Products assembled by Barringer Instruments
Inc. shall be of content obtained from Canada, as measured by the same cost
accounting standards as used by the Licensee in establishing its factory costs.
Under the provision of the said sublicense, Barringer Instruments Inc. shall
only have the right to sell Licensed Products made in the United States or to
United States' companies or agencies for their own use in its off-shore
operations. In order to allow the Licensee to comply with the provisions of
Section 7 of the Agreement, any manufacturing method improvements, assemble and
test improvements or other improvements relating to the assembly, calibration,
test, manufacturability and reliability of the Licensed Products made by
Barringer Instruments Inc. shall be made available to the Licensor for its own
use, and shall be provided at no cost to the Licensor."
3
<PAGE> 23
SECTION 3
This Agreement shall be designated as Supplement No. 1 to the Original
Agreement and, except as varied by terms of this Supplement No. 1, the terms of
the Original Agreement are hereby confirmed.
IN WITNESS WHEREOF the parties hereto have caused these presents to be
executed under seal by their proper officers duly authorized in that behalf.
SIGNED, SEALED AND DELIVERED by:
CANADIAN PATENTS AND DEVELOPMENT
LIMITED-SOCIETE CANADIENNE DES
BREVETS ET D'EXPLOITATION LIMITEE
Per:/s/
----------------------------
President
Per:/s/
----------------------------
Vice President
BARRINGER INSTRUMENTS LIMITED
Per:/s/ J. DAVIES
----------------------------
President
Per:/s/
----------------------------
Vice President Operations
4
<PAGE> 24
ASSIGNMENT OF AGREEMENT
THIS AGREEMENT made in triplicate as of the 2nd day of January 1992.
BETWEEN:
BARRINGER INSTRUMENTS LIMITED, a duly
incorporated Company, having a place
of business at the City of Rexdale in
the Province of Ontario (hereinafter
called "BIL")
OF THE FIRST PART
- and -
CANADIAN PATENTS AND DEVELOPMENT
LIMITED - SOCIETE CANADIENNE DES
BREVETS ET D'EXPLOITATION LIMITEE, a
Corporation to which the Government
Corporations Operation Act applies,
having its Head Office at the City of
Ottawa in the Province of Ontario
(hereinafter called "CPDL")
OF THE SECOND PART
- and -
HER MAJESTY THE QUEEN IN RIGHT OF
CANADA, as represented by the
MINISTER OF NATIONAL REVENUE, having
a place of business at the City of
Ottawa in the Province of Ontario
(hereinafter called "the Department")
OF THE THIRD PART
WITNESSETH THAT:
WHEREAS BIL and CPDL entered into an Agreement dated as of the 27th day
of February, 1989 as amended by Supplement Number 1 dated the 4th day of March
1991, more particularly described in Schedule "A" hereto, with respect to
Inventions commonly designated "Sample Handling System for Molecular Analyser" -
Case Number 9172 and "Narcotic Detector Using Ion Mobility Spectrometer" - Case
Number 9281, (hereinafter called "the Agreement"); and
WHEREAS CPDL has agreed to assign all of its rights and
<PAGE> 25
obligations under the Agreement to the Department; and
WHEREAS the Department has agreed to assume and perform all of the
rights and obligations created by the Agreement; and
WHEREAS BIL agrees to consent to such assignment.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter contained, the parties hereto agree each
with the other as follows:
1. CPDL assigns, transfers and sets over unto the Department absolutely
the Agreement as of and from the date hereof and all right, title and interest
of CPDL therein and thereto.
2. The Department accepts the assignment referred to in Section 1
hereof and hereby agrees with BIL and CPDL duly and faithfully to fulfill,
observe, perform and comply with all of the terms, conditions and provisions of
the Agreement and shall be entitled to all of the benefits of the Agreement as
though originally named as a party therein and may amend the Agreement in its
own name.
3. BIL hereby consents to the assignment by CPDL to the Department
referred to in Section 1 hereof on the terms herein set out.
4. Notices pursuant to Section 12 of the Agreement shall now, in the
case of the Licensor be addressed to:
Director General
Laboratory & Scientific Services Directorate
Department of National Revenue
79 Bentley Avenue
Ottawa, Ontario
K1A 0L5
and in the case of the Licensee to:
Barringer Instruments Limited
304 Carlingview Drive
Rexdale, Ontario
M9W 5G2
5. The Department hereby confirms, ratifies and adopts all the terms
and conditions of the Agreement.
2
<PAGE> 26
6. This Agreement shall be interpreted according to the laws of the
Province of Ontario, Canada.
7. This Agreement constitutes the entire Agreement between the parties
hereto relating to the subject matter hereof and supersedes any prior
agreements. There are no terms, obligations, covenants , representations,
statements or conditions other than those contained herein. No variation or
modification of this Agreement nor waiver of any of the terms and provisions
hereof shall be deemed valid unless in writing signed by all parties hereto.
IN WITNESS WHEREOF the parties hereto have caused these presents to be
executed under seal by their proper officers duly authorized in that behalf.
SIGNED, SEALED AND DELIVERED BY:
BARRINGER INSTRUMENTS LIMITED
Per: /s/ J. DAVIES (President)
----------------------------------
Per: /s/
----------------------------------
CANADIAN PATENTS AND DEVELOPMENT
LIMITED -- SOCIETE CANADIENNE DES
EREVETE ET D'EXPLOITATION LIMITIE
Per: /s/
----------------------------------
Per: /s/
----------------------------------
HER MAJESTY THE QUEEN IN RIGHT OF
CANADA as represented by the MINISTER
OF NATIONAL REVENUE
Per: /s/
----------------------------------
Per: /s/
----------------------------------
3
<PAGE> 27
SCHEDULE "A"
DESCRIPTION OF AGREEMENT
Date of Agreement: February 27, 1989
Date of Supplement No. 1: March 4, 1991
Re: License agreement in respect
of "Sample Handling System for
Molecular Analyser" - Case Number
9172 and "Narcotic Detector Using Ion
Mobility Spectrometer" - Case
Number 9281, including schedules,
deletions and modifications
4
<PAGE> 28
[BARRINGER LETTERHEAD]
7 October 1996
Mr. Wayne B. Morris
Director General
Laboratory and Scientific Services Directorate
Revenue Canada Customs and Excise
79 Bentley Ave.
Ottawa, Ontario K1A 0L5
Dear Mr. Morris:
Further to your letter of 1 October 1996 following our request for an extension
to the licence on a year-to-year basis to ten years starting 1 April 1999, with
all other terms of the licence to remain the same as under the present licence,
we accept the indemnification of the Crown, and by this letter incorporate that
indemnification into the licence, as follows:
Barringer shall indemnify and save Her Majesty in right of
Canada harmless from and against all claims, demands, losses,
costs, damages, actions, suits, or proceedings by whomever
made, brought or prosecuted and in any manner based upon,
arising out of, related to, occasioned by or attributable
to any use made of the IMS/IONSCAN technology by Barringer
or by any of its clients or customers including any
infringement or alleged infringement of a patent or invention
or any other kind of intellectual property.
Therefore, please accept by your counter-signature hereto our acceptance to the
extension of the licence, the details of the mechanics of the option to be
covered at a time closer to the renewal time.
Yours sincerely,
BARRINGER RESEARCH LTD.
/s/ J.H. Davies
- ------------------------------
John H. Davies
President
Acceptance: /s/ W. Morris Date: Oct 7/ 96
------------------- ---------------
Name: W. Morris
Director General
Laboratory and Scientific Services Directorate
<PAGE> 1
EXHIBIT 10.11
TERMINATION AGREEMENT
THIS AGREEMENT is made and entered into this ____ day of October, 1996,
by and among BARRINGER LABORATORIES, INC., a Delaware corporation
("Barringer"), and BARRINGER TECHNOLOGIES, INC., a Delaware corporation,
("BTI"). Barringer and BTI may be referred to herein collectively as "Parties."
WHEREAS, pursuant to the Stock Purchase Agreement dated December 8,
1995 (the "1995 Agreement"), BTI sold, and Barringer purchased, 647,238 shares
of Barringer Laboratories, Inc. common stock; and
WHEREAS, under the terms of the 1995 Agreement, BTI granted Barringer a
perfected security interest in 88,260 ("Collateral") of the 432,475 shares of
the Barringer Laboratories, Inc. stock which it continued to hold (the
"Remaining Shares"), to secure certain covenants and agreements of BTI under
the 1995 Agreement; and
WHEREAS, in order to maximize Barringer's ability to utilize its net
operating loss carryforwards, BTI agreed in the 1995 Agreement to certain
restrictions upon the further sale and transfer of the Remaining Shares,
including the grant to Barringer of a right of first refusal with respect to
the Remaining Shares; and
WHEREAS, BTI now desires the removal and release of these restrictions
on transferability in order to sell the Remaining Shares; and
WHEREAS, in consideration of BTI's transfer and assignment of the
Collateral to Barringer and of the other terms and conditions of this Agreement,
Barringer will agree to the removal and release of these restrictions on
transferability to the extent set forth herein and Barringer has filed a
registration statement under form S-3 with the Securities and Exchange
Commission to facilitate any desired sale of the Remaining Shares in compliance
with the terms of this Agreement.
NOW, THEREFORE, in consideration of these Recitals and the provisions
and the respective agreements hereinafter set forth, the Parties hereto hereby
agree as follows:
1. REMOVAL AND RELEASE OF PRIOR RESTRICTIONS. Upon the terms and
subject to the conditions set forth in this Agreement, Barringer hereby:
1.1 Waives and releases the restrictions on transferability set
forth in Section 4.4 of the 1995 Agreement respecting the 344,215 shares
of the Barringer Laboratories, Inc. stock which BTI holds. Barringer
agrees to take all action reasonably necessary to cause the reissuance
of the stock certificate(s) evidencing such shares without the
restrictive legend noting the existence of the restrictions set forth in
the 1995 Agreement.
1.2 Waives and releases the right granted by BTI in Section 4.5
of the 1995 Agreement to Barringer of a first right to purchase any
portion of the 432,475 shares of the Barringer Laboratories, Inc. stock
owned by BTI upon the same terms and conditions of a bona fide offer
received by BTI.
<PAGE> 2
2. TRANSFER AND ASSIGNMENT OF COLLATERAL. Subject to the terms and
conditions set forth herein, BTI hereby sells, assigns, and transfers to
Barringer all of the 88,260 issued and outstanding shares of Barringer's common
stock comprising the Collateral, free and clear of all liens, encumbrances and
adverse claims of whatsoever kind or nature. BTI shall deliver to Rumler Law
Corporation, PC, as set forth in Section 4, below, a stock assignment in form
satisfactory to Barringer, with a medallion certified signature stamp,
sufficient to transfer title to such shares (the Collateral) to Barringer.
3. RESTRICTIONS ON FUTURE SALE, ASSIGNMENT AND TRANSFER. The parties
acknowledge and agree that it is their intention to maximize Barringer's
ability to utilize its net operating loss carryforwards following the sale of
all or any portion of the 432,475 shares (plus 5,000 additional shares
purchased by BTI since the 1995 Agreement) of the Barringer Laboratories, Inc.
stock which it continues to hold and which are not to be transferred to
Barringer hereunder. Therefore, as a condition to the releases and waivers
described in Section 1 above, BTI agrees that:
3.1 For a period of three (3) months following the date of this
Agreement, and subject to the restriction set forth in Subsection 3.2,
immediately below, BTI agrees that it shall not, nor shall it have any
right to, knowingly sell, assign, transfer or otherwise dispose of more
than 75,000 shares of the Barringer Laboratories, Inc. stock which it
owns to any single purchaser or any affiliated purchasers, without the
prior written consent of Barringer, which Barringer may grant or deny
in its sole and absolute discretion. For purposes of this Agreement,
"affiliated purchasers" shall mean purchasers who, directly or
indirectly, influence, control, are controlled by or are under common
control, management or ownership, with each other. Affiliated Purchasers
shall include but not be limited to voting trusts, relatives of any
purchasers, and any director or officer of a purchaser.
3.2 For a period of three (3) months following the date of this
Agreement, and subject to the restriction set forth in Subsection 3.1,
immediately above, BTI agrees (i) that it shall not, nor shall it have
any right to, sell, assign, or transfer any such shares at a price less
than One and 11/16 Dollars ($1.6875) per share; and (ii) that in the
event it receives an offer to purchase such shares at a price equal to
or higher than the price set forth in 3.2(i), above, BTI shall be
required to sell, assign or transfer such shares, subject to the
other restrictions set forth in this Agreement.
Nothing contained herein shall limit BTI's right or ability to exercise those
certain warrants to purchase additional shares of the common stock of Barringer
according to the terms and conditions set forth in the "Warrants to Purchase
Common Stock of Barringer Laboratories, Inc." dated August 29, 1996. BTI
understands and agrees that the subsequent sale by BTI of the shares received
upon the exercise of such warrants, if so exercised, shall be subject to the
terms, conditions and restriction set forth in this Agreement, and shall be
subject to such other restrictions as provided under applicable state and
federal securities laws. Any sale, assignment, transfer or other disposition of
shares of Barringer Laboratories, Inc. stock owned by BTI in contravention of
the terms of this Agreement shall be null and void.
4. CONSUMMATION OF RELEASE AND TRANSFER. As provided in Section 2
above, BTI shall forward to Rumler Law Corporation, PC, the stock assignment in
form satisfactory to Barringer, with a medallion certified signature stamp,
sufficient to transfer title to the Collateral to Barringer. Upon the
subsequent receipt by Rumler Law Corporation PC (i) of executed copies of this
Agreement from each of the Parties; and (ii) of notice, in the form
satisfactory to Rumler Law Corporation, PC., of the proper consent of the Board
of Directors of Barringer,
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<PAGE> 3
herein shall become effective. Rumler Law Corporation PC shall then forward
executed copies of this Agreement and the stock power to the proper parties.
5. Representations and Warranties of BTI.
BTI represents and warrants to Barringer as follows:
5.1 EXISTENCE, GOOD STANDING, CORPORATE AUTHORITY, AND
VALIDITY OF AGREEMENTS. BTI is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. BTI has all requisite corporate power and authority to own and
transfer the Collateral pursuant to the terms and conditions of this Agreement.
This Agreement constitutes, and all agreements and documents contemplated
hereby when executed and delivered pursuant hereto for value received will
constitute, the valid and legally binding obligations of BTI enforceable in
accordance with their terms. The execution and delivery of this Agreement does
not and the consummation of the transactions contemplated hereby will not (i)
require the consent of any third party, or (ii) result in the breach of any
term or provision of, or constitute a default under, any agreement. Upon
transfer of the Collateral by BTI, Barringer will, as a result, receive good
and marketable title to all of the Collateral, free and clear of all security
interests, liens, encumbrances, charges, assessments, restrictions and adverse
claims, except those granted by Barringer and, those created under applicable
securities laws.
5.2 LITIGATION. There are no actions, suits or proceedings
at law or in equity, or before or by any federal, state, municipal or other
governmental agency which affect the Collateral or the BTI's ability to enter
into or perform its obligations hereunder. There are no orders, judgments,
injunctions or decrees of any court or governmental agency with respect to
which BTI has been named or to which BTI is a party, which apply to or restrict
BTI's performance of this Agreement and the transaction contemplated hereunder.
5.3 NO MISREPRESENTATION OR OMISSION. No representation or
warranty by BTI in this Article 5 or in any other Article or Section of this
Agreement, or in any certificate or other document furnished or, if to be
furnished by BTI pursuant hereto upon delivery, contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained therein not misleading or will
omit to state a material fact.
6. Representations and Warranties of Barringer.
Barringer represents and warrants to BTI as follows:
6.1 EXISTENCE, GOOD STANDING, CORPORATE AUTHORITY, AND
VALIDITY OF AGREEMENTS. Barringer is a corporation duly incorporated, validly
existing and in good standing under the laws if its jurisdiction of
incorporation. Barringer has all requisite corporate power and authority to
release and waive the restrictions and rights set forth herein pursuant to the
terms and conditions of this Agreement. The execution and delivery of this
Agreement does not and the consummation of the transactions contemplated hereby
will not require the consent of any third party or violate or conflict with any
provision of the by-laws or articles or certificate of incorporation of
Barringer as amended to the date of this Agreement.
6.2 LITIGATION. There are no actions, suits or proceedings
with respect to Barringer involving claims by or against Barringer which are
pending or threatened against Barringer, at law or in equity, or before or by
any federal, state, municipal or other governmental agency which affect
Barringer's ability to enter into or perform its obligations
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<PAGE> 4
hereunder. There are no orders, judgments, injunctions or decrees of any court
or governmental agency with respect to which Barringer has been named or to
which Barringer is a party, which apply to or restrict Barringer's performance
of this Agreement and the transaction contemplated hereunder.
6.3 NO MISREPRESENTATION OR OMISSION. No representation or
warranty by Barringer in this Article 6 or in any other Article or Section of
this Agreement, or in any certificate or other document furnished or, if to be
furnished by Barringer pursuant hereto upon delivery, contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained therein not misleading
or will omit to state a material fact.
7. Other Covenants and Agreements.
7.1 INSURANCE MATTERS. The parties hereby agree to terminate
any right: (i) of BTI to insure its employees under Barringer's group health
insurance policy as provided in Section 4.2.1 of the 1995 Agreement; and (ii)
of Barringer to be named an additional insured under BTI's property, casualty
and D&O insurance policies as provided in Section 4.2.2 of the 1995 Agreement.
7.2 RESIGNATION OF DIRECTORS. Promptly after the sale,
assignment, transfer or other conveyance by BTI of an aggregate of 250,000
shares or more of the issued and outstanding shares of the Barringer
Laboratories, Inc. stock owned by BTI, Stanley S. Binder and John M. Harte
shall each immediately resign as an officer, agent and/or director of Barringer
Laboratories, Inc. and immediately cease to act for or on behalf of Barringer
Laboratories, Inc. Barringer's timely receipt of these resignations shall be a
condition subsequent to the releases and waivers set forth in Section 1 of this
Agreement, and BTI's failure to timely deliver such resignations shall
constitute a material breach of this Agreement.
7.3 INDEMNIFICATION BY BTI. BTI shall to indemnify and hold
Barringer harmless against, and will reimburse Barringer on demand for, any
payment, loss, cost or expense (including reasonable attorney's fees and
reasonable costs of investigation incurred in defending against such payment,
loss, cost or expense or claim therefor) made or incurred by or asserted
against Barringer in respect of any omission, misrepresentation, breach of
warranty, or nonfulfillment or breach of any term, provision, covenant or
agreement on the part of BTI contained in this Agreement, or from any
misrepresentation in, or omission from any document to be furnished to
Barringer pursuant to this Agreement or from the failure of BTI to have and
deliver good and marketable title to the Collateral.
7.4 INDEMNIFICATION BY BARRINGER.
7.4.1 INDEMNIFICATION. Barringer shall to indemnify and
hold BTI harmless against, and will reimburse BTI on demand for, any payment,
loss, cost or expense (including reasonable attorney's fees and reasonable
costs of investigation incurred in defending against such payment, loss, cost
or expense or claim therefor) made or incurred by or asserted against BTI in
respect of (i) any omission, misrepresentation, breach of warranty, or
nonfulfillment of any term, provision, covenant or agreement on the part of
Barringer contained in this Agreement, and (ii) from any misrepresentation in,
or omission from, any document to be furnished to BTI pursuant to this
Agreement.
7.4.2 SECURITIES INDEMNIFICATION. Barringer shall
indemnify and hold
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<PAGE> 5
harmless BTI against any and all loss, claim, damage or liability, joint or
several, to which BTI may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage, or liability (or action with respect
thereto) arises out of or is based upon (a) any untrue statement or alleged
untrue statement of a material fact contained (i) in the Registration Statement,
the Effective Prospectus in respect of the Registration Statement; or (b) the
omission or alleged omission to state in the Registration Statement, the
Effective Prospectus or any amendment or supplement thereto of a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and shall reimburse BTI for any legal or other reasonable expenses
incurred by it in connection with investigating or defending against in
connection with any such loss, claim, damage, liability or action,
notwithstanding the possibility that payments for such expenses might later be
held to be improper, in which case the person receiving them shall promptly
refund them; except that the Barringer shall not be liable in any such case to
the extent, but only to the extent, that any such loss, claim, damage, or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Barringer through BTI by or
on behalf of BTI specifically for use in the preparation of the Registration
Statement, the Effective Prospectus or any amendment or supplement thereto.
7.5 RIGHT TO PROVIDE DEFENSE. Promptly after receipt by an indemnified
party under Section 7.3 and/or 7.4 above of written notice of the commencement
of any action, the indemnified party shall, if a claim in respect thereof is to
be made against the indemnifying party under such section, notify the
indemnifying party in writing of the claim or the commencement of that action;
the failure to notify the indemnifying party shall not relieve it of any
liability which it may have to an indemnified party, except to the extent that
the indemnifying party did not otherwise have knowledge of the commencement of
the action and the indemnifying party's ability to defend against the action was
prejudiced by such failure. Such failure shall not relieve the indemnifying
party from any other liability which it may have to the indemnified party. If
any such claim or action shall be brought against an indemnified party, and it
shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under such section for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation.
7.6 CONTRIBUTION. If the indemnification provided for in Section 7.4.2
herein is unavailable or insufficient to hold harmless an indemnified party,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of the losses, claims, damages, or
liabilities referred to in Section 7.4.2 above (a) in such proportion as is
appropriate to reflect the relative benefits received by the Barringer on one
hand and BTI on the other from the offering of the securities; or (b) if the
allocation provided by clause (a) above is not permitted by applicable law, in
such proportion as is appropriate to reflect the relative benefits referred to
in clause (a) above but also the relative fault of the Barringer on the one
hand and BTI on the other in connection with the statements or omissions which
resulted in such losses, claims, damages, or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the
Barringer and BTI shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the
Barringer bear to the total sales price and received by BTI. Relative fault
shall be determined by reference to, among other things, whether the untrue
statement of a material fact or the omission to state a material fact relates
to information supplied by the Barringer or BTI and the parties' relative
intent, knowledge, access to information, and opportunity to correct or
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<PAGE> 6
prevent such untrue statement or omission. For purposes of this Section 7.6, the
term "damages" shall include any counsel fees or other expenses reasonably
incurred by the Barringer or BTI in connection with investigating or defending
any action or claim which is the subject of the contribution provisions of this
Section 7.6. No person adjudged guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it shall promptly give
written notice of such service to the party or parties from whom contribution
may be sought, but the omission so to notify such party or parties of any such
service shall not relieve the party from whom contribution may be sought from
any obligation it may have hereunder or otherwise (except as specifically
provided in Section 7.6 hereof).
8. Miscellaneous.
8.1 NOTICE. Any notice required or permitted hereunder shall be
in writing and shall be sufficiently given if personally delivered or mailed by
certified or registered mail, return receipt requested, addressed as follows:
If to Barringer: Barringer Laboratories, Inc.
15000 W. 6th Avenue, Suite 300
Golden, CO 80401
Attention: Chief Executive Officer
Copy to: Paul E. Rumler, Esq.
Rumler Law Corporation, P.C.
55 Madison Street, Suite 410
Denver, Colorado 80206
If to BTI: Barringer Technologies, Inc.
219 S. Street
New Providence, NJ 07974
Attention: President
(or to such other address as any party shall specify by written notice so
given), and shall be deemed to have been delivered as of the date so personally
delivered or mailed.
8.2 OTHER COSTS AND EXPENSES. All costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby
shall be paid by the party incurring such costs and expenses.
8.3 AUTHORITY TO EXECUTE AGREEMENT. By execution of this
Agreement, each individual who signs this Agreement on behalf his respective
principal individually represents and warrants that (i) he is a duly authorized
officer or agent of his principal, (ii) the principal has taken all action
necessary to approve the covenants, terms and agreements set forth herein, and
(iii) the execution of this Agreement by the undersigned individual shall bind
the principal to the terms and conditions set forth herein.
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<PAGE> 7
8.4 Execution of Additional Documents. The Parties hereto will at any
time, and from time to time after the date of execution of this Agreement, upon
request of the other party, execute, acknowledge and deliver all such further
acts, deeds, assignments, transfers, conveyances, powers of attorney and
assurances as may be required to carry out the intent of this Agreement, and to
transfer and vest title to any shares being transferred hereunder, and to
protect the right, title and interest in and enjoyment of all of the shares
sold, granted, assigned, transferred, delivered and conveyed pursuant to this
Agreement; provided, however, that this Agreement shall be effective
regardless of whether any such additional documents are executed.
8.5 Binding Effect: Benefits, Assignability. This Agreement shall be
binding upon and shall inure to the benefit of the Parties hereto and their
respective heirs, successors, executors, administrators and assigns.
Notwithstanding anything contained in this Agreement to the contrary, nothing
in this Agreement, expressed or implied, is intended to confer on any person
other than the Parties hereto or their respective heirs,, successors,
executors, administrators and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement. Neither this Agreement nor
any of the Parties' rights hereunder shall be assignable by any party hereto
without the prior written consent of the other Parties hereto. This Agreement
and all agreements and documents contemplated hereby constitute one agreement
and are interdependent upon each other in all respects.
8.6 Entire Agreement. This Agreement, together with the other documents
contemplated hereby, constitute the final written expression of all of the
agreements between the Parties, and is a complete and exclusive statement of
those terms. It supersedes all understandings and negotiations concerning the
matters specified herein. Any representations, promises, warranties or
statements made by either party that differ in any way from the terms of this
written Agreement and the other documents contemplated hereby, shall be given
no force or effect. The Parties specifically represent, each to the other, that
there are no additional or supplemental agreements between them related in any
way to the matters herein contained unless specifically included or referred to
herein. No addition to or modification of any provision of this Agreement shall
be binding upon any party unless made in writing and signed by all Parties.
8.7 Governing Law. This Agreement and all matters and issues collateral
thereto shall be construed according to the laws of the State of Colorado,
except that issues governed by a state's corporate code, including without
limitation matters of corporate governance, shall be governed by the laws of
the Party's state of incorporation.
8.8 Mediation: Arbitration. Notwithstanding anything to the contrary
herein provided, the Parties agree to submit disputes under this Agreement
which they are unable to resolve to mediation under the Commercial Mediation
Rules of the American Arbitration Association. Any dispute or controversy
arising out of or relating to this Agreement which is not resolved through
mediation shall be submitted and settled by arbitration under the Rules of
Conciliation and Arbitration of the International Chamber of Commerce (the
"ICC") then in effect. There shall be one arbitrator, and such arbitrator
shall be chosen by mutual agreement of the parties in accordance with ICC
rules. The arbitration proceedings shall take place at such location as the
Parties shall mutually agree upon, or if the Parties are unable to agree upon a
location, then Chicago, Illinois. The arbitrator shall apply the laws of the
applicable state to all issues in dispute, in accordance with Section 8.5
hereof. The findings of the arbitrator shall be final and binding on the
parties, and may be enforced in any court of competent jurisdiction.
8.9 Survival and Severability. All of the terms, conditions, warranties
and representations contained in this Agreement shall survive, in accordance
with their terms, delivery by Barringer of the consideration to be given by it
hereunder and delivery by BTI of
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<PAGE> 8
the consideration to be given by it hereunder, and shall survive the execution
hereof for the period provided herein. If for any reason whatsoever, any one or
more of the provisions of this Agreement shall be held or deemed to be
inoperative, unenforceable or invalid as applied to any particular case or in
all cases, such circumstances shall not have the effect of rendering such
provision invalid in any other case or of rendering any of the other provisions
of this Agreement inoperative, unenforceable or invalid.
8.10 WAIVERS. Either Barringer or BTI may, by written notice to the
other, (i) extend the time for the performance of any of the obligations or
other actions of the other under this Agreement; (ii) waive any inaccuracies in
the representations or warranties of the other contained in this Agreement or
in any document delivered pursuant to this Agreement; (iii) waive compliance
with any of the conditions or covenants of the other Party contained in this
Agreement; or (iv) waive performance of any of the obligations of the other
Party under this Agreement. Except as provided in the preceding sentence, no
action taken pursuant to this Agreement, including without limitation any
investigation by or on behalf of any Party, shall be deemed to constitute a
waiver, by the Party taking such action, of compliance with any
representations, warranties, covenants or agreements contained in this
Agreement. The waiver by any Party hereto of a breach of any provision
hereunder shall not operate or be construed as a waiver of any prior or
subsequent breach of the same or any other provision hereunder.
8.11 HEADINGS: INTERPRETATION OF AGREEMENT. Headings of the Articles
and Sections of this Agreement are for the convenience of the Parties only, and
shall be given no substantive or interpretive effect whatsoever. The Parties
hereto each represent and acknowledge that they have reviewed this Agreement
with the assistance of their respective counsel. The Parties further
acknowledge that each shall bear co-extensive and identical responsibility for
the language of this Agreement, and that any ambiguity which may exist or
purportedly exist therein shall be attributed equally to the Parties.
8.12 ATTORNEY'S FEES. If any Party shall commence any action or
proceeding against another Party in order to enforce the provisions hereof, or
to recover damages as the result of the alleged breach of any of the provisions
hereof, the prevailing Party therein shall be entitled to recover all
reasonable costs incurred in connection therewith, including, but not limited
to, reasonable attorneys' fees.
8.13 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument. Evidence of the execution of this
Agreement by any party may be provided by facsimile and if so provided shall be
legal, valid and binding on any party executing in such manner.
8.14 APPROVAL OF BARRINGER'S BOARD OF DIRECTORS. This Agreement and
the effectiveness and enforceability of the terms and provisions included
herein is specifically contingent upon the approval, by the Board of Directors
of Barringer, no later than October 18, 1996. In the event approval of the
Board of Directors is not attained by such date, this agreement shall be null
and void.
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IN WITNESS WHEREOF, the Parties have executed this Agreement and caused
the same to be duly delivered on their behalf on the day and year hereinabove
first set forth.
BARRINGER TECHNOLOGIES, INC.
By:
--------------------------------
Its:
BARRINGER LABORATORIES, INC.
By:
--------------------------------
Its:
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<PAGE> 10
RESIGNATION OF OFFICERS/DIRECTORS/AGENTS
IN CONSIDERATION of the releases and waiver set forth in Section 1 of
the Termination Agreement, dated October __, 1996, by and between Barringer and
BTI, each of the undersigned hereby agree to resign as an officer, director
and/or agent of Barringer Laboratories, Inc. effective at the time provided in
Section 7.2 of such Agreement.
----------------------------------
Stanley S. Binder
Date:
--------------
----------------------------------
John M. Harte
Date:
--------------
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EXHIBIT 10.14
DEBENTURE PURCHASE AGREEMENT
THIS AGREEMENT, dated as of July 10, 1996, by and between
BARRINGER TECHNOLOGIES INC., a Delaware corporation (the "Company"), and
_____________________ (the "Purchaser").
W I T N E S S E T H:
WHEREAS, in reliance upon the respective representations,
warranties, terms and conditions hereinafter set forth, the Purchaser desires to
purchase from the Company, and the Company desires to sell to the Purchaser, an
aggregate of $__________ in principal amount of the Company's 6% Convertible
Subordinated Debentures due 1997 (the "Debentures"), convertible into shares of
the Company's Common Stock, par value $.01 per share ("Common Stock"), at an
initial conversion rate of $2.75 per share, subject to adjustment in certain
circumstances, as hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and the
respective covenants hereinafter set forth, the Company and the Purchaser hereby
agree as follows:
1. Sale and Purchase of the Debentures.
(a) Subject to the terms and conditions of this
Agreement, the Company agrees to issue and sell to the Purchaser, and the
Purchaser agrees to purchase from the Company at the Closing (as hereinafter
defined), $______________ in aggregate principal amount of the Debentures at a
total purchase price of $______________ (the "Purchase Price"). The Debentures
shall be in denominations of $1,000 and integral multiples thereof and shall be
in substantially the form of Exhibit A hereto.
(b) The sale and purchase of the Debentures shall
take place at the Company's offices at 219 South Street, New Providence, New
Jersey 07974 at 10:00 a.m. on July 10, 1996, or at such other time and place as
the Company and the Purchaser shall agree (the "Closing").
<PAGE> 2
2. Payment. At the Closing, the Purchaser shall make
payment for the Debentures in next-day funds by check or wire transfer to an
account previously designated by the Company. The Company shall deliver to the
Purchaser executed Debentures in the principal amount purchased by the Purchaser
at the Closing.
3. Representations and Warranties of the Company. The
Company hereby represents and warrants to the Purchaser as follows:
(a) The Company has been duly organized, is validly
existing and is in good standing under the laws of the State of Delaware.
(b) The authorized capital of the Company consists of
7,000,000 shares of Common Stock, 1,000,000 shares of Convertible Preferred
Stock, par value $1.25 per share ("Convertible Preferred Stock"), and 4,0000,000
shares of Preferred Stock, par value $2.00 per share, of which 270,000 shares
are designated as Class A Convertible Preferred Stock ("Class A Preferred
Stock") and 730,000 shares are designated as Class B Convertible Preferred Stock
("Class B Preferred Stock"). There are 3,497,961 shares of Common Stock, no
shares of Convertible Preferred Stock, 74,008 shares of Class A Preferred Stock
and 232,500 shares of Class B Preferred Stock presently outstanding. In
addition, there are warrants outstanding to purchase an aggregate of 481,250
shares of Common Stock at exercise prices of between $2.00 and $14.23 per share,
which warrants are exercisable at various dates through June 29, 2000. All of
the issued and outstanding shares of the Company's capital stock are duly
authorized, validly issued, fully paid and nonassessable. All of such shares
were offered, issued, sold and delivered by the Company in compliance with all
applicable state and federal laws concerning the issuance of securities. None of
such shares were issued in violation of any pre-emptive or subscription rights
of any person.
(c) The Company has the full right, power and
authority to enter into this Agreement and to perform the transactions
contemplated herein. This Agreement has been duly executed by the Company and
this Agreement and the transactions contemplated herein have been duly
authorized by all necessary corporate action. This Agreement constitutes the
legal,
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valid and binding obligation of the Company, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(d) The Debentures have been duly authorized and,
when issued in accordance with the terms hereof, will have been duly executed,
issued and delivered and will constitute valid and legally binding obligations
of the Company, enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles. The Company has sufficient authorized and
unissued shares of Common Stock reserved for issuance upon the exercise of the
Debentures in accordance with their terms (the "Shares"). Upon the due
conversion of the Debentures, and the payment in full of the conversion price
therefor, the Shares will be duly authorized, validly issued, fully paid and
non-assessable.
(e) The Company is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended, and the
applicable rules and regulations promulgated thereunder (the "Exchange Act")
and, in accordance therewith, files, reports and other information with the
Securities and Exchange Commission (the "Commission"). The Company has filed
with the Commission on a current and timely basis all reports required to be
filed by it under the Exchange Act, including the Annual Report on Form 10-K for
the year ended December 31, 1995 and the Quarterly Report on Form 10-QSB for the
quarter ended March 31, 1996 (as such documents may be amended, modified or
supplemented as of the date hereof, the "Disclosure Documents"). The information
contained in the Disclosure Documents described in all material respects the
business and financial condition of the Company as of their respective dates,
and such documents did not, as of their respective dates, contain 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 not misleading. The
accuracy and completeness of the Disclosure Documents constitutes a material
inducement to the Purchaser to purchase the Debentures.
(f) There has been no material adverse change in the
business, financial
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condition or earnings of the Company since December 31, 1995, except as
described in the Disclosure Documents.
(g) The Company will use the net proceeds of the sale
of the Debentures to repay the principal of and interest accrued on the
Company's existing 12-1/2% Convertible Subordinated Debentures due 1996 and for
working capital purposes.
4. Representations and Warranties of the Purchaser.
The Purchaser hereby represents and warrants to the Company as
follows:
(a) If the Purchaser is a corporation, it has been
duly incorporated, is validly existing and is in good standing under the laws of
its jurisdiction of incorporation. If the Purchaser is a partnership, limited
liability partnership, limited liability company or other non-corporate entity,
it has been duly organized, is validly existing and is in good standing under
the laws of the jurisdiction of its organization.
(b) The Purchaser has the full right, power and
authority to enter into this Agreement and to carry out and consummate the
transactions contemplated herein. The Agreement has been duly executed by the
Purchaser and this Agreement and the transactions contemplated herein have been
duly authorized by all necessary corporate, partnership or other similar action.
This Agreement constitutes the legal, valid and binding obligation of the
Purchaser, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
(c) The Purchaser acknowledges that it has received
and reviewed the Disclosure Documents and has had an opportunity to meet with
and ask questions of and receive answers from the management of the Company and
its consultants, attorney and accountants regarding the business and affairs of
the Company, its financial condition and prospects (financial and other) and the
terms and conditions of the offering of the Debentures.
(d) The Purchaser is an Accredited Investor within
the meaning of Rule 501 of the rules and regulations of the Commission
promulgated under the Securities Act of 1933, as
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<PAGE> 5
amended (the "Securities Act"), has the financial ability to bear the economic
risk of its investment, can afford to sustain a complete loss of such investment
and has adequate means of providing for its current fiscal needs, has no need
for liquidity in its investment in the Company, and the amount invested in the
Company by the Purchaser does not constitute a substantial portion of its net
worth. The Purchaser understands that in order to be treated as an accredited
investor it must meet one of the tests described in Exhibit B to this Agreement,
and the Purchaser represents and warrants to the Company that it meets one of
the tests indicated on said Exhibit B.
(e) The Purchaser is acquiring the Debentures for
investment and not with a view to the sale or distribution thereof, is acquiring
the Debentures for its own account and not on behalf of others and has not
granted any other person any right or option or any participation or beneficial
interest in any of the Debentures. The Purchaser acknowledges its understanding
that the Debentures constitute restricted securities within the meaning of Rule
144 promulgated under the Securities Act, and that none of the Debentures may be
sold except pursuant to an effective registration statement under the Securities
Act or in a transaction exempt from registration under the Securities Act, and
acknowledges that it understands the meaning and effect of such restriction. The
Purchaser has sufficient knowledge and experience in financial and business
affairs to evaluate the merits of the purchase of the Debentures. The Purchaser
has completed and executed a Confidential Purchaser Questionnaire, a copy of
which is attached hereto as Exhibit C, which Questionnaire is true and complete.
THE PURCHASER UNDERSTANDS THAT AN INVESTMENT IN THE DEBENTURES BEING PURCHASED
BY IT INVOLVES A HIGH DEGREE OF RISK, INCLUDING WITHOUT LIMITATION, RISKS
RELATING TO THE COMPANY'S CONTINUING OPERATING LOSSES, THE COMPANY'S NEED FOR
ADDITIONAL CAPITAL, THE COMPANY'S NEED FOR LIQUIDITY, THE EFFECTS OF THE FAILURE
OF THE COMPANY TO COMPLY WITH THE TERMS OF ITS EXISTING CREDIT FACILITIES, THE
EFFECTS OF COMPETITION, THE COMPANY'S RELIANCE ON KEY PERSONNEL, THE COMPANY'S
DEPENDENCE ON TECHNOLOGY AND TECHNOLOGICAL
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<PAGE> 6
INNOVATION, THE LONG LEAD-TIMES ASSOCIATED WITH THE PURCHASING PRACTICES OF
GOVERNMENTAL AGENCIES WHICH ARE SUBSTANTIAL CUSTOMERS OF THE COMPANY, THE
RESTRICTIONS ON TRANSFER OF THE DEBENTURES, AS WELL AS SIMILAR RESTRICTIONS ON
TRANSFERS OF THE SHARES, POTENTIAL CONFLICTS OF INTEREST AND RELATED PARTY
TRANSACTIONS INVOLVING THE COMPANY AND THE DIRECTORS AND OFFICERS OF THE
COMPANY, AND THE SUCCESSFUL CONSUMMATION OF THE COMPANY'S BUSINESS AND OPERATING
STRATEGY.
(f) The Purchaser has not been furnished any offering
literature, by the Company or otherwise, other than this Agreement and the
Disclosure Documents. The Purchaser has relied only on the information contained
in the Disclosure Documents and this Agreement in its decision to enter into
this Agreement. The Purchaser acknowledges and represents that no
representations or warranties have been made to it by the Company or its
directors, officers or any agents or representatives with respect to the
business of the Company, the financial condition or results of operations of the
Company and/or the economic, tax or any-other aspects or consequences of the
purchase of the Debentures, and the Purchaser has not relied upon any
information concerning the Company, written or oral, other than that contained
in the Disclosure Documents and this Agreement.
(g) Each conversion of a Debenture by the Purchaser
shall constitute an affirmation by the Purchaser that the representations and
warranties contained herein are also true and correct with respect to the Shares
to be acquired by it upon the conversion of the related Debenture.
5. Restrictions on Transferability; Compliance with
Securities Act.
(a) Transferability. The Debentures and the Shares
issuable upon the exercise of the Debentures shall not be transferable except
upon the conditions specified in this Paragraph 5, which conditions are intended
to insure compliance with the provisions of the Securities Act in respect of the
transfer of any of such securities.
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<PAGE> 7
(b) Restrictive Legend. The Debentures and any
certificates representing the Shares shall (unless otherwise permitted by the
provisions of Paragraph 5(c) below) be stamped or otherwise imprinted with the
following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE
AND CANNOT BE SOLD OR TRANSFERRED UNLESS AND UNTIL THEY ARE SO
REGISTERED OR UNLESS AN EXEMPTION UNDER SUCH ACT OR LAWS IS
AVAILABLE. THE TRANSFERABILITY OF THESE SECURITIES IS FURTHER
SUBJECT TO THE PROVISIONS OF A DEBENTURE PURCHASE AGREEMENT
DATED AS OF JULY 10, 1996 BETWEEN THE COMPANY AND THE
PURCHASER PARTY THERETO.
For purposes of this Paragraph 5, any references to "Debentures" or "Shares"
shall include any other securities issued in respect of any of such securities.
(c) Restrictions on Transfer. The Debentures and the
Shares shall not be transferred, and the Company shall not be required to
register any transfer thereof on the books of the Company, unless such transfer
is made pursuant to an effective registration statement, in compliance with Rule
144, or pursuant to another exemption under the Securities Act; provided,
however, that the Company shall not be required to register any transfer in the
event any securities are offered or sold otherwise than pursuant to an effective
registration statement or pursuant to Rule 144 unless the Company shall have
received an opinion of counsel to the Purchaser, satisfactory in form and
substance to the Company in its sole discretion, that such transfer does not
require registration under the Securities Act or applicable state securities
laws.
(d) The Company shall file a registration statement
with the Commission under the Securities Act by September 8, 1996 covering the
Shares, and use its best efforts to cause such registration statement to become
effective and to keep such registration statement effective for a period of five
years from the date it is declared effective by the
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<PAGE> 8
Commission. The Company shall not be obligated to cause to become effective more
than one registration statement pursuant to which the Shares may be sold under
this Paragraph 5(d). At any time and from time to time, the Purchaser agrees,
without further consideration, to take such actions and to execute and deliver
such documents as may be reasonably requested by the Company in order to
effectuate the purposes of this Paragraph 5, including, without limitation,
supplying information with respect to the Purchaser that may be necessary or
required for inclusion in the registration statement. In the event that such
information or other material requested by the Company is not provided to the
Company within a reasonable period of time following delivery of written notice
requesting such information, then the Company's obligations under this Paragraph
5 shall be suspended until a reasonable period of time after the Purchaser
complies with such request.
(e) Additional Shares; Incidental Registration. The
provisions of Paragraph 5(d) notwithstanding, if at any time following the
issuance of the Debentures the Company proposes to register any of its equity
securities under the Securities Act on Form S-1, S-2, S-3, S-18 or any other
registration form at the time available on which the Shares could be registered
for sale (other than a registration statement covering securities issuable
pursuant to an employee benefit or dividend reinvestment plan and other than a
registration statement covering securities issuable in a Rule 145 transaction),
the Company shall give written notice to the Purchaser of its intention to do
so. Such written notice shall be given as promptly as possible after the Company
determines to file such a registration statement but in no event shall such
notice be given less than four weeks prior to the date of the filing of such
registration statement. Upon written request of the Purchaser given within 15
days after receipt of any such notice (which request shall state the intended
method of disposition of the Shares by the Purchaser), the Company will use its
best efforts to cause the Shares which the Purchaser has requested be
registered, to be registered under the Securities Act and under the same
registration statement proposed to be filed by the Company, all to the extent
required to permit the sale or the disposition (in accordance with the written
request of the Purchaser as aforesaid), by the
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<PAGE> 9
Purchaser of the Shares so registered; provided, however, that no such notice
shall be given and the Purchaser shall not be entitled to have the Shares
included in such registration in the event that any underwriter with respect to
the offering which is the subject of such registration statement determines, in
its sole discretion, that the inclusion of the Shares in the registration will
be detrimental to such offering.
(f) The Company will pay all expenses incurred in
complying with Paragraphs 5(d) and 5(e) hereof, including, without limitation,
all registration and filing fees (including all expenses incident to filing with
the National Association of Securities Dealers, Inc.), printing expenses,
reasonable fees and disbursements of counsel to the Company, securities law and
blue sky fees and expenses and the expenses of any regular and special audits
incident to or required by any such registration. All underwriting discounts and
selling commissions applicable to sales of the Shares, any state or federal
transfer taxes payable with respect to sales of the Shares and all fees and
disbursements of counsel for the Purchaser, if any, in each case arising in
connection with registration or sale of the Shares under Paragraphs 5(d) and
5(e) hereof, shall be payable by the Purchaser.
(g) Indemnification. (i) In the event of any
registration under the Securities Act of the Shares pursuant to this Paragraph
5, the Company will indemnify and hold harmless the Purchaser from and against
all losses, claims, damages, expenses or liabilities, joint or several, to which
it may become subject under the Securities Act, the Exchange Act and state
securities and blue sky laws, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement of any material fact or alleged untrue statement of a material
fact contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto, or arise
out of or are based upon the omission to state therein a material fact required
to be stated therein or necessary to make the statements made therein, in light
of the circumstances under which they are made, not misleading; or any violation
by the Company of the Securities Act, the Exchange Act or state securities or
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<PAGE> 10
blue sky laws applicable to the Company and relating to action or inaction
required of the Company in connection with such registration or qualification
under such state securities or blue sky laws; and will reimburse the Purchaser
for any legal or any other expenses reasonably incurred by it in connection with
investigating or defending any such loss, claim damage, liability or action;
provided however, that the Company will not be liable in any such case to the
Purchaser to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or omission made in such
registration statement, said preliminary prospectus or said final prospectus or
said amendment or supplement or any document incident thereto in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of the Purchaser.
(ii) In the event of any registration of any
of the Shares under the Securities Act pursuant to this Paragraph 5, the
Purchaser will indemnify and hold harmless the Company and each person, if any,
who controls the Company within the meaning of the Securities Act or the
Exchange Act, each officer of the Company who signs the registration statement
and each director of the Company from and against any and all such losses,
claims, damages or liabilities arising from any untrue statement in, or omission
from, any such registration statement, preliminary or final prospectus,
amendment or supplement or document incident thereto if the statement or
omission in respect of which such loss, claim, damage or liability is asserted
was made in reliance upon and in conformity with information furnished in
writing to the Company by or on behalf of the Purchaser for use in connection
with the preparation of such registration statement or prospectus or such
amendment or supplement thereof.
(iii) The reimbursements required by this
Paragraph 5(g) shall be made by periodic payments during the course of the
investigation or defense as and when bills are received or expenses incurred;
provided, however, that to the extent that an indemnified party receives
periodic payments for legal or other expenses during the course of an
investigation or defense, and such party subsequently received payment for such
expenses from any other parties to the proceeding, such payments shall be used
by the indemnified party to reimburse the
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<PAGE> 11
indemnifying party for such periodic payments. Any party which proposes to
assert the right to be indemnified under this Paragraph 5(g) will, promptly
after receipt of notice of commencement of any action, suit or proceeding
against such party in respect of which a claim is to be made against any
indemnified party under this paragraph 5(g), notify each such indemnifying party
of the commencement of such action, suit or proceeding, enclosing a copy of all
papers served, but the failure to so notify such indemnifying party of any such
action, suit or proceeding shall not relieve the indemnifying party from any
obligation which it may have to any indemnified party hereunder unless and only
to the extent that the indemnifying party is prejudiced by said lack of notice.
In case any such action, suit or proceeding shall be brought against any
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in and, to the
extent that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expense, other than reasonable costs of investigation subsequently
incurred by such indemnified party in connection with the defense thereof. The
indemnified party shall have the right to employ its own counsel in any such
action, but the reasonable fees and expenses of such counsel shall be at the
expense of such indemnified party, when and as incurred, unless (A) the
employment of counsel by such indemnified party has been authorized by the
indemnifying party, (B) the indemnified party has reasonably concluded (based on
advice of counsel), that there may be legal defenses available to it that are
different from or in addition to those available to the indemnifying party, (C)
the indemnified party shall have reasonably concluded (based on advice of
counsel) that there may be a conflict of interest between the indemnifying party
and the indemnified party in the conduct of defense of such action (in which
case the indemnifying party shall not have the right to direct the defense of
such action on behalf of the indemnified party), or (D) the indemnifying party
shall not in fact have employed counsel to assume the defense of such action. An
indemnifying party shall not be liable for any
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<PAGE> 12
settlement or any action or claim effected without its consent.
(h) Contribution. (i) If the indemnification provided
for in this Section 5 from the indemnifying party is unavailable to any
indemnified party hereunder in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then the indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is appropriate to reflect
the relative fault of the indemnifying party and indemnified parties in
connection with the actions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of such indemnifying party and indemnified parties shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified parties, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set forth in
Section 5(g), any legal or other fees or expenses reasonably incurred by such
party in connection with any investigation or proceeding.
(ii) The parties hereto agree that it would
not be just and equitable if contribution pursuant to this Section 5(h) were
determined by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding any other provision hereof, in no event
shall the contribution obligation of the Purchaser be greater in amount than the
excess of (A) the dollar amount of the proceeds received by the Purchaser upon
the sale of the securities giving rise to such contribution obligation over (B)
the dollar amount of any damages that the Purchaser has otherwise been required
to pay by reason of the untrue or alleged untrue statement or omission or
alleged omission giving rise to such obligation. No Person guilty or fraudulent
misrepresentation
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<PAGE> 13
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
6. Brokerage. The Company represents and warrants to the
Purchaser that no broker, dealer or agent has been engaged in connection with
the transactions contemplated by this Agreement and the Company will indemnify
and save harmless the Purchaser from and against any and all claims, expenses,
liabilities or obligations with respect to brokerage or finders' fees or
commissions, or consulting fees in connection with the transactions contemplated
by this Agreement, asserted by any person on the basis of any statement or
representation alleged to have been made by the Company.
7. Notices. All notices provided for in this Agreement
shall be in writing, signed by the party giving such notice, and delivered
personally or sent by overnight courier or messenger against receipt thereof or
sent by registered mail (air mail or overseas), return receipt requested, or by
telex, facsimile transmission, telegram or similar means of communication.
Notices shall be deemed to have been received on the date of personal delivery,
or if sent by certified or registered mail, return receipt requested, shall be
deemed to be delivered on the third business day after the date of mailing.
Notices shall be sent to the following addresses:
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<PAGE> 14
If the Company:
Barringer Technologies Inc.
219 South Street
New Providence, N.J. 07974
Attention: Mr. Stanley S. Binder
with a copy to:
Lowenstein, Sandler, Kohl, Fisher & Boylan
65 Livingston Avenue
Roseland; N.J. 07068
Attention: John D. Hogoboom, Esq.
If to the Purchasers:
or to such other address as any party shall designate in the manner provided in
this Paragraph 9.
8. Miscellaneous.
(a) This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
its conflict of laws rules. Each of the parties hereto irrevocably submits to
the exclusive jurisdiction of the courts of the State of New York and the United
States District Court for the Southern District of New York for the purpose of
any suit, action, proceeding or judgment relating to or arising out of this
Agreement and the transactions contemplated hereby. Service of process in
connection with any such suit, action or proceeding may be served on each party
hereto anywhere in the world by the same methods as are specified for the giving
of notices under this Agreement. Each of the parties hereto irrevocably consents
to the jurisdiction of any such court in any such suit, action or proceeding and
to the laying of venue in such court. Each party hereto irrevocably waives any
objection to the laying of venue of any such suit, action or proceeding brought
in such courts and irrevocably waives any claim that any such suit, action or
proceeding brought in any such court
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<PAGE> 15
has been brought in an inconvenient forum.
(b) This Agreement shall be binding upon and inure to
the benefit of the parties hereto, and their respective heirs, executors, legal
representatives, successors and permitted assigns.
(c) This Agreement represents the entire agreement
between the parties relating to the subject matter hereof, superseding any and
all prior or contemporaneous oral and prior written agreements, understandings,
term sheets and memoranda or letters of intent. This Agreement may not be
modified or amended nor may any right be waived except by a writing which
expressly refers to this Agreement, states that it is a modification, amendment
or waiver and is signed by all parties with respect to a modification or
amendment or the party granting the waiver with respect to a waiver. No course
of conduct or dealing and no trade, custom or usage shall modify any provisions
of this Agreement.
(d) The captions and headings contained herein are
solely for convenience of reference and do not constitute a part of this
Agreement.
(e) Unless the context otherwise requires, all
references to any gender Shall be deemed to include the masculine, feminine or
neuter gender, the singular shall include the plural and the plural shall
include the singular.
(f) In the event that any provision of this Agreement
becomes or is declared a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided, however, that no such severability shall be
effective if it materially changes the economic benefits of this Agreement to
any party.
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<PAGE> 16
(g) This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instruction.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first written above.
BARRINGER TECHNOLOGIES INC.
By: __________________________
Stanley S. Binder
President
[Name of Purchaser]
By: __________________________
Name:
Title:
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<PAGE> 17
EXHIBIT A
Form of Debenture
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE
AND CANNOT BE SOLD OR TRANSFERRED UNLESS AND UNTIL THEY ARE SO
REGISTERED OR UNLESS AN EXEMPTION UNDER SUCH ACT OR LAWS IS
AVAILABLE. THE TRANSFERABILITY OF THESE SECURITIES IS FURTHER
SUBJECT TO THE PROVISIONS OF A DEBENTURE PURCHASE AGREEMENT
DATED AS OF JULY 10, 1996 BETWEEN THE COMPANY AND THE
PURCHASER PARTY THERETO.
No. $__________
BARRINGER TECHNOLOGIES INC.
promises to pay to
or registered assigns
the principal sum of _________________________ Dollars on July 9, 1997.
6% CONVERTIBLE SUBORDINATED DEBENTURES
DUE 1997
INTEREST: Payment Dates: January 10 and July 9
Record Dates: December 31 and June 30
Dated: July 10, 1996
BARRINGER TECHNOLOGIES INC.
(SEAL)
Attest: By:
- ----------------------------- --------------------------------
Secretary President
<PAGE> 18
BARRINGER TECHNOLOGIES INC.
6% CONVERTIBLE SUBORDINATED DEBENTURES DUE 1997
1. Interest.
Barringer Technologies Inc. (the "Company"), a Delaware corporation,
promises to pay interest on the principal amount of this Debenture at the rate
per annum shown above. The Company will pay interest semiannually on January 10
and July 9 of each year. Interest on the Debentures will accrue from the most
recent date on which interest has been paid or, if no interest has been paid,
from July 10, 1996. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
2. Method of Payment.
The Company will pay interest on this Debenture (except defaulted
interest) to the person in whose names this Debenture is registered at the close
of business on the December 31 or June 30 next preceding the interest payment
date. The holder of this Debenture must surrender this Debenture to the Company,
or a paying agent designated by the Company, to collect principal payments. The
Company will pay principal and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts.
However, the Company may pay principal and interest by its check payable in such
money. The Company may mail an interest check to the holder's registered
address.
3. Paying Agent, Registrar, Conversion Agent.
Initially, the Company will act as paying agent, conversion agent and
registrar. The Company may change any paying agent, registrar, conversion agent
or co-registrar without notice. Any of the Company's subsidiaries may act as
paying agent, registrar, conversion agent or co-registrar.
4. Issuance of Debentures; Denominations.
The Company has issued this Debenture pursuant to, and this Debenture
is subject to, the terms of a Debenture Purchase Agreement (the "Agreement"),
dated as of July 10, 1996. By accepting this Debenture, the holder hereof agrees
to be subject to all of the terms and provisions of the Agreement. The
Debentures are being issued without coupons in denominations of $1,000 and
integral multiples of $1,000.
5. Conversion.
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<PAGE> 19
(a) Right of Conversion.
The holder of this Debenture shall have the right at any time prior to
July 9, 1997, at his or her option, to convert, subject to the terms and
provisions hereof, the principal of this Debenture (or any portion of the
principal hereof which is $1,000 or an integral multiple of $1,000) into fully
paid and non-assessable shares of Common Stock of the Company ("Common Stock")
at the rate of 363.636 shares of Common Stock for each $1,000 principal amount
of Debentures or, in case an adjustment therein has taken place pursuant to the
provisions of subsection (d) hereof, then at the rate as so adjusted (except
that with respect to this Debenture, or any such portion, which shall be
designated for redemption by the Company such right shall terminate, except as
provided in the last paragraph of subsection (b) below, at the close of business
on the fifth Business Day prior to the Redemption Date for this Debenture or
portion hereof). Such right shall be exercised by the surrender of this
Debenture to the Company at any time during usual business hours at its
principal offices, accompanied by a written notice substantially in the form of
Annex A hereto, stating that the holder elects to convert this Debenture or any
portion hereof and specifying the name or names (with address) in which a
certificate or certificates for Common Stock are to be issued, and (if so
required by the Company) by a written instrument or instruments of transfer in
form satisfactory to the Company duly executed by the holder or his attorney
duly authorized in writing and transfer tax stamps or funds therefor, if
required pursuant to subsection (i) hereof. For convenience, the conversion of
all or a portion, as the case may be, of the principal of this Debenture into
the Common Stock of the Company is hereinafter sometimes referred to as the
conversion of this Debenture. All Debentures surrendered for conversion shall be
canceled, and, subject to the next succeeding sentence, no Debenture shall be
issued in lieu thereof. In the event that this Debenture is converted in part
only, upon such conversion the Company shall execute and deliver to the holder
hereof a new Debenture or Debentures of authorized denominations in an aggregate
principal amount equal to the unconverted portion of this Debenture.
(b) Issuance of Common Stock; Time of Conversion.
As promptly as practicable after the surrender, as herein provided, of
this Debenture for conversion, the Company shall deliver or cause to be
delivered to or upon the written order of the holder of this Debenture a
certificate or certificates representing the number of fully paid and
non-assessable shares of Common Stock of the Company into which this Debenture
(or portion hereof) may be converted in accordance with the provisions of this
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<PAGE> 20
Debenture. Subject to the following provisions of this paragraph and of
subsection (d) hereof, such conversion shall be deemed to have been made
immediately prior to the close of business on the date that this Debenture shall
have been surrendered in satisfactory form for conversion, so that the rights of
the holder as a holder shall cease with respect to this Debenture (or the
portion hereof being converted) at such time, and the person or persons entitled
to receive the shares of Common Stock deliverable upon conversion of this
Debenture shall be treated for all purposes as having become the record holder
or holders of such shares of Common Stock at such time, and such conversion
shall be at the conversion rate in effect at such time; provided, however, that
no such surrender on any date when the stock transfer books of the Company shall
be closed shall be effective to constitute the person or persons entitled to
receive the shares of Common Stock deliverable upon such conversion as the
record holder or holders of such shares of Common Stock on such date, but such
surrender shall be effective to constitute the person or persons entitled to
receive such shares of Common Stock as the record holder or holders thereof for
all purposes immediately prior to the close of business on the next succeeding
day on which such stock transfer books are open, and such conversion shall be
deemed to have been made at, and shall be made at the conversion rate in effect
at, such time on such next succeeding day.
If the last day for the exercise of the conversion right shall not be a
Business Day then such conversion right may be exercised on the next succeeding
Business Day.
(c) No Adjustments in Respect Dividends.
No payment or adjustment shall be made upon any conversion on account
of any dividends or similar distributions on the shares of Common Stock issued
upon conversion.
(d) Adjustment of Conversion Rate.
(i) In case the Company shall (aa) pay a dividend on Common
Stock in Common Stock, (bb) subdivide its outstanding shares of Common
Stock, or (cc) combine its outstanding shares of Common Stock into a
smaller number of shares, the conversion rate in effect immediately
prior thereto shall be adjusted retroactively as provided below so that
the holder of this Debenture thereafter surrendered for conversion
shall be entitled to receive the number of shares of Common Stock of
the Company which he or she would have owned or have been entitled to
receive after the happening of any of the events described above had
this Debenture been converted immediately prior to the happening of
such
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<PAGE> 21
event. An adjustment made pursuant to this subsection (i) shall become
effective immediately after the record date in the case of a dividend
and shall become effective immediately after the effective date in the
case of a subdivision or combination.
(ii) In case the Company shall issue (aa) shares of its Common
Stock in a public offering at a price per share less than the current
market price per share of Common Stock (as defined in subsection (iv)
below) at the record date mentioned below, (bb) shares of its Common
Stock in a non-public transaction, at a price per share of less than
75% less than the current market price per share of Common Stock (as
defined in subsection (iv) below) at the record date mentioned below,
or (cc) rights or warrants to all holders of its Common Stock entitling
them (for a period expiring within 45 days after the record date
mentioned below) to subscribe for or purchase shares of Common Stock at
a price per share less than the current market price per share of
Common Stock (as defined in subsection (iv) below) at the record date
mentioned below, the number of shares of Common Stock into which each
$1,000 principal amount of this Debenture shall thereafter be
convertible shall be determined by multiplying the number of shares of
Common Stock into which $1,000 principal amount of this Debenture was
theretofore convertible by a fraction, of which the numerator shall be
the number of shares of Common Stock outstanding on the record date
mentioned below plus the number of additional shares of Common Stock
offered for purchase or subscription, and of which the denominator
shall be the number of shares of Common Stock outstanding on such
record date plus the number of shares of Common Stock which the
aggregate offering price of the total number of shares of Common Stock
so offered would purchase at such current market price per share of
Common Stock. Such adjustment shall be made whenever such shares of
Common Stock, rights or warrants are issued, and shall become effective
retroactively immediately after the record date for the determination
of stockholders entitled to receive such shares of Common Stock, rights
or warrants; provided, however, in the case of rights or warrants, in
the event that all the shares of Common Stock offered for subscription
or purchase are not delivered upon the exercise of such rights or
warrants, upon the expiration of such rights or warrants the conversion
rate shall be readjusted to the conversion rate which would have been
in effect had the numerator and the denominator of the foregoing
fraction and the resulting adjustment been made based upon the number
of shares of Common Stock actually delivered
-5-
<PAGE> 22
upon the exercise of such rights or warrants rather than upon the
number of shares of Common Stock offered for subscription or purchase.
For the purposes of this subsection (ii), the number of shares of
Common Stock at any time outstanding shall not include shares held in
the treasury of the Company.
(iii) In case the Company shall distribute to all holders of
its Common Stock shares of its capital stock (including shares of its
Common Stock), evidences of its indebtedness or assets (excluding cash
dividends paid out of the earned surplus of the Company) or rights or
warrants to subscribe or purchase (excluding those referred to in
Subsection (ii) above), then in each such case the number of shares of
Common Stock into which each $1,000 principal amount of this Debenture
shall thereafter be convertible shall be determined by multiplying the
number of shares of Common Stock into which such principal amount of
this Debenture was theretofore convertible by a fraction, of which the
numerator shall be the current market price per share of Common Stock
(as determined in accordance with the provisions of Subsection (iv)
below) on the record date mentioned below and of which the denominator
shall be such current market price per share of Common Stock, less the
fair market value (as determined by the Board of Directors, whose
determination shall be conclusive) of that portion of the capital
stock, assets or evidences of indebtedness so distributed or of such
rights or warrants applicable to, one share of Common Stock. Such
adjustments shall be made whenever any such distribution is made, and
shall become effective retroactively immediately after the record date
for the determination of stockholders entitled to receive such
distribution.
(iv) For the purpose of any computation under Subsection (ii)
or (iii) above, the current market price per share of Common Stock at
any date shall be deemed to be the average of the daily closing prices
for the 15 consecutive Business Days commencing 20 Business Days before
the day in question. The closing price for each day shall be the
reported last sale price or, in case no such reported sale takes place
on such day, the average of the reported closing bid and asked prices,
in either case as reported on the New York Stock Exchange, or, if at
any time the Common Stock is not listed or admitted to trading on such
Exchange, on the principal national securities exchange on which the
Common Stock is listed or admitted to trading, or if not listed or
admitted to trading on any national securities exchange, on any trading
market maintained by the National Association of Securities Dealers,
Inc. or, if the Common
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<PAGE> 23
Stock is not listed or admitted to trading on any national securities
exchange or quoted on such trading market, the average of the closing
bid and asked prices in the over-the-counter market as furnished by any
New York Stock Exchange member firm selected from time to time by the
Company for that purpose. For the purposes of this Section 5, the term
"Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday, other than any day on which securities are not traded in such
exchange or in such market.
(v) No adjustment in the conversion rate shall be required
unless such adjustment would require an increase or decrease of at
least 1% in such rate; provided, however, that any adjustments which by
reason of this Subsection (v) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.
All calculations under this Section shall be made to the nearest cent
or to the nearest one-hundredth of a share, as the case may be.
Anything in this Section 5 notwithstanding, the Company shall be
entitled to make such increases in the conversion rate, in addition to
those required by this Section 5 as it in its discretion shall
determine to be advisable in order that any stock dividend, subdivision
or combination of shares, distribution of rights or warrants to
purchase stock or securities, or distribution of securities convertible
into or exchangeable for stock, hereafter made by the Company to its
stockholders shall not be taxable.
(vi) Whenever the conversion rate is adjusted, as herein
provided, the Company shall promptly prepare a notice of such
adjustment of the conversion rate setting forth the adjusted conversion
rate and the date on which such adjustment becomes effective and shall
mail such notice to the holder of this Debenture at his or her last
address appearing on the Company's books and records. Such notice shall
be conclusive evidence of the correctness of such adjustment.
(vii) In any case in which this Section 5 provides that an
upward adjustment of the conversion rate shall become effective
retroactively immediately after a record date or effective date for an
event, the Company may defer until the occurrence of such event (i)
issuing to the holder of this Debenture if converted after such record
date and before the occurrence of such event the additional shares of
Common Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the shares of Common Stock
issuable upon such conversion before giving effect to such adjustment
and
-7-
<PAGE> 24
(ii) paying to such holder any amount in cash in lieu of any fraction
pursuant to subsection (e), provided, however, that the Company shall
deliver to any such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional shares, and
such cash, upon the occurrence of the event requiring such adjustment.
(e) No Fractional Shares.
No fractional shares or scrip representing fractional shares shall be
issued upon the conversion of this Debenture. If more than one Debenture shall
be surrendered for conversion at one time by the same holder, the number of full
shares issuable upon conversion thereof shall be computed on the basis of the
aggregate principal amount of the Debentures so surrendered. If the conversion
of this Debenture results in a fraction, an amount equal to such fraction
multiplied by the closing price (determined as provided in the second sentence
of subsection (iv) of Section (5)(d)) of the Common Stock on the Business Day
(as defined in Section 5(d)) preceding the day of conversion shall be paid to
such holder in cash by the Company.
(f) Reclassifications, Mergers, Sales of Assets.
In case of any reclassification or change of outstanding shares of
Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination), or in case of any consolidation or merger of the Company with and
into another corporation or entity (other than a consolidation or merger in
which the Company is the continuing corporation and which does not result in any
reclassification or change of outstanding shares of Common Stock), or in case of
any sale or conveyance to another corporation or entity of the property of the
Company as an entirety or substantially as an entirety, the Company, or such
successor or purchasing corporation or entity, as the case may be, shall execute
and deliver a certificate to the Company providing that the holder of this
Debenture shall have the right thereafter to convert this Debenture into the
kind and amount of shares of stock or other securities, cash or other property
receivable upon such reclassification, change, consolidation, merger, sale or
conveyance by a holder of the number of shares of Common Stock of the Company
into which this Debenture could have been converted immediately prior to such
reclassification, change, consolidation, merger, sale or conveyance. Such
certificate shall provide for adjustments which shall be nearly equivalent as
may be practicable to the adjustments provided for in this Debenture. The
provisions of this subsection (f) shall similarly apply to successive
reclassifications, changes,
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<PAGE> 25
consolidations, mergers, sales or conveyances.
Notice of the execution of such a certificate shall be given by the
Company to the holder of this Debenture by mailing such notice to his or her
last address appearing on the Company's books and records. When a successor or
purchasing corporation or entity assumes all the obligations of its predecessor
under the Debentures, the predecessor corporation will be released from those
obligations.
(g) Prior Notice of Certain Events.
In case:
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock (other than cash dividends paid out
of the earned surplus of the Company and dividends payable in Common
Stock); or
(ii) the Company shall authorize the granting to the holders
of its Common Stock of rights or warrants to subscribe for or purchase
any shares of stock of any class or of any other rights or warrants; or
(iii) of any reclassification of the Common Stock of the
Company (other than a subdivision or combination of its outstanding
Common Stock, or a change in par value, or from par value to no par
value, or from no par value to par value), or of any consolidation or
merger to which the Company is a party and for which approval of any
shareholders of the Company is required, or of the sale or transfer of
all or substantially all of the assets of the Company; or
(iv) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; then the Company shall cause to be mailed to the
holder of this Debenture at his or her last address appearing on the Company's
books and records, as promptly as possible but in any event at least ten days
prior to the applicable date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of such dividend,
distribution or rights or warrants or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution or rights are to be determined, or (y) the date on which
such reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up.
-9-
<PAGE> 26
(h) Shares to Be Reserved.
The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
upon conversion of this Debenture as herein provided, such number of shares of
Common Stock as shall then be issuable upon the conversion of this Debenture.
The Company covenants that all shares of Common Stock which shall be so issuable
shall, when issued, be duly and validly issued and fully paid and
non-assessable.
(i) Taxes and Charges.
The issuance of certificates for shares of Common Stock upon the
conversion of this Debenture shall be made without charge to the converting
holder of the Debenture for such certificates or for any tax in respect of the
issuance of such certificates or the securities represented thereby, and such
certificates shall be issued in the respective names of, or in such names as may
be directed by, the holder of this Debenture; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect to
any transfer involved in the issuance and delivery of any such certificate in a
name other than that of the holder of this Debenture, and the Company shall not
be required to issue or deliver such certificates unless or until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.
6. Subordination.
(a) Debenture Subordinated to Senior Debt.
This Debenture is subordinated to "Senior Debt," which is any
Debt of the Company outstanding at any time except Debt which by its terms is
not superior in right of payment to the Debentures. Debt means (i) all items of
indebtedness or liability which in accordance with generally accepted accounting
principles would be included as a liability on the balance sheet of the Company,
(ii) indebtedness which is secured by any mortgage, pledge, lien or security
interest existing on property owned by the Company, whether or not the
indebtedness is assumed by the Company, and (iii) guarantees, endorsements and
other contingent obligations (other than for purposes of collection in the
ordinary course of business) involving the indebtedness of others. Any holder of
this Debenture by accepting this Debenture agrees to the subordination and
authorizes the Company to give it effect.
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<PAGE> 27
(b) Company Not to Make Payments in Certain Circumstances.
Upon the maturity of any Senior Debt by lapse of time,
acceleration or otherwise, all principal thereof and interest thereon shall
first be paid in full, or such payment duly provided for in cash or in a manner
satisfactory to the holders of such Senior Debt, before any payment is made on
account of the principal or interest on this Debenture or to prepay this
Debenture. Upon the happening of an event of default (or if an event of default
would result upon any payment with respect to the Debentures) with respect to
any Senior Debt, as such event of default is defined therein or in the
instrument under which it is outstanding, permitting the holders to accelerate
the maturity thereof, and, if the default is other than default in payment of
the principal, premium, if any, or interest on such Senior Debt, upon written
notice thereof given to the Company by the holders of such Senior Debt or their
representative, then, unless and until such event of default shall have been
cured or waived or shall have ceased to exist, no payment shall be made by the
Company with respect to the principal or interest on this Debenture or to prepay
this Debenture.
(c) Subordination to Prior Payment of All Senior Debt on Dissolution,
Liquidation or Reorganization.
Upon any distribution of assets of the Company upon any
dissolution, winding up, liquidation or reorganization of the Company (whether
in bankruptcy, insolvency or receivership proceedings or upon an assignment for
the benefit of creditors or otherwise):
(i) the Company shall give prompt written notice to the holder
of this Debenture of any dissolution, winding up, liquidation or
reorganization of the Company;
(ii) the holders of all Senior Debt shall first be entitled to
receive payment in full of the principal and interest due thereon
before the holder of this Debenture is entitled to receive any payment
on account of the principal or interest on this Debenture;
(iii) any payment or distributions of assets of the Company of
any kind or character, whether in cash, property or securities, to
which the holder of this Debenture would be entitled except for the
provisions of this Section 6 shall be paid by the liquidating trustee
or agent or other person making such payment or distribution directly
to the holders of Senior Debt or their representative, or to the
trustee under any indenture under which Senior Debt may have been
issued, to the extent necessary to make payment in full of all Senior
Debt remaining unpaid, after giving effect to any concurrent payment or
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<PAGE> 28
distribution or provision therefor to the holders of such Senior Debt;
(iv) in the event that, notwithstanding the foregoing
provisions of this Section 6, any payment or distribution of assets of
the Company of any kind or character, whether in cash, property or
securities, shall be received by the holder of this Debenture on
account of principal or interest on this Debenture before all Senior
Debt is paid in full, or effective provision made for its payment, such
payment or distribution shall be received and held in trust for, and
shall be paid over to, the holders of the Senior Debt remaining unpaid
or unprovided for or their representative, or the trustee under any
indenture under which Senior Debt may have been issued, for application
to the payment of such Senior Debt until all such Senior Debt shall
have been paid in full, after giving effect to any concurrent payment
or distribution or provision therefor to the holders of such Senior
Debt; and
(v) No right of any present or future holders of any Senior
Debt to enforce subordination as provided herein shall at any time in
any way be prejudiced or impaired by any act or failure to act on the
part of the Company or by any act or failure to act, in good faith, by
any such holder, or by any noncompliance by the Company with the terms
of this Debenture, regardless of any knowledge thereof which any such
holders may have or be otherwise charged with.
7. Debentureholder to be Subrogated to Right of Holders of Senior Debt.
Subject to the payment in full of all Senior Debt, the holder of this
Debenture (together with the holders of all other Debentures then outstanding)
shall be subrogated to the rights of the holders of Senior Debt to receive
payments or distributions of assets of the Company applicable to the Senior Debt
until all amounts owing on this Debenture shall be paid in full, and for the
purpose of such subrogation no payments or distributions to the holders of
Senior Debt by or on behalf of the Company or by or on behalf of the holders of
the Debentures by virtue of this Debenture which otherwise would have been made
to the holders of the Debentures shall, as between the Company and the holders
of the Debentures, be deemed to be payment by the Company to or on account of
the Senior Debt, it being understood that the provisions of this Section 8 are
intended solely for the purpose of defining the relative rights of the holders
of the Debentures, on the one hand, and the holders of the Senior Debt, on the
other hand.
8. Obligation of the Company Unconditional.
Nothing contained in this Debenture is intended to or shall impair, as
between the Company and the
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<PAGE> 29
holder of this Debenture, the obligation of the Company, which is absolute and
unconditional, to pay to the holder of this Debenture the principal and interest
on this Debenture as and when the same shall become due and payable in
accordance with its terms, or is intended to or shall affect the relative rights
of the holder of this Debenture and creditors of the Company other than the
holders of the Senior Debt, nor shall anything herein or therein prevent the
holder of this Debenture from exercising all remedies otherwise permitted by
applicable law upon default, subject to the rights herein, if any, of the
holders of Senior Debt in respect of cash, property or securities of the Company
received upon the exercise of any such remedy. Upon any distribution of assets
of the Company referred to herein, the holder of this Debenture shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceedings are pending, or a certificate of the liquidating
trustee or agent or other person making any distribution to the holder of this
Debenture, for the purpose of ascertaining the persons entitled to participate
in such distribution, the holders of the Senior Debt and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto.
-13-
<PAGE> 30
9. Failure to Make Payment Due to Subordination Provisions
Not To Prevent An Event of Default.
The failure to make a payment on account of principal or interest with
respect to this Debenture by reason of any provision in Sections 6 and 7 shall
not be construed as preventing the occurrence of an Event of Default under
Section 13.
10. Persons Deemed Owners.
The registered holder of this Debenture shall be treated as the owner
of it for all purposes.
11. Redemption at Option of the Company.
The Company may redeem all or any portion of this Debenture at any time
without premium or penalty upon not less than 30 days' notice to the holder of
this Debenture of such redemption, stating the principal amount of this
Debenture to be redeemed, the redemption price and designation of the redemption
date (the "Redemption Date"); provided, however, that the Company shall not have
the right to redeem any Debentures unless a registration statement covering the
shares of Common Stock issuable upon conversion of this Debenture is in effect.
Notwithstanding such notice, the holder hereof shall be entitled to convert this
Debenture in accordance with Section 5 hereof up until 5 Business Days prior to
the Redemption Date. Once a notice of redemption for this Debenture is mailed,
this Debenture becomes due and payable on the Redemption Date (unless previously
converted in accordance with the provisions hereof). On and after such
Redemption Date, interest on this Debenture or the applicable portion hereof,
shall cease to accrue.
All rights of the holder as a holder of this Debenture shall cease
immediately prior to the close of business on the Redemption Date (except for
the right of the holder to receive the redemption price and the accrued interest
to the Redemption Date), whether or not this Debenture is timely surrendered to
the Company, provided, that sufficient funds to pay the redemption price (and
accrued interest to the Redemption Date) of this Debenture have been placed in a
separate account for that purpose (which funds can be commingled with funds
being used to redeem other Debentures issued pursuant to the Agreement).
Promptly after surrender of this Debenture, or portion thereof, for redemption,
the Company shall deliver or cause to be delivered to the holder of this
Debenture at his or her last address appearing on the Company's books and
records, the redemption price. Upon surrender of this Debenture, this Debenture
or the redeemed portion hereof shall be canceled, provided that if this
Debenture is
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<PAGE> 31
redeemed in part, the Company shall issue a new Debenture equal in
principal amount to the unredeemed portion of this Debenture surrendered for
redemption.
12. Mandatory Redemption.
Notwithstanding the other provisions hereof, this Debenture shall
become due and payable 30 Business Days following the closing of either an
underwritten public offering or a private placement by the Company of its equity
securities pursuant to which the Company receives net proceeds in an aggregate
amount in excess of Five Million Dollars ($5,000,000) (a "Qualified Offering").
The Company shall provide notice to the holder of this Debenture of the
consummation of a Qualified Offering not less than 10 days after such
consummation, which notice shall specify the date on which this Debenture will
be redeemed (the "Mandatory Redemption Date") and the mandatory redemption price
to be paid by the Company. All rights of the holder of this Debenture shall
cease as of the Mandatory Redemption Date, whether or not the holder of this
Debenture has surrendered this Debenture, provided, that the Company has placed
sufficient funds to pay the mandatory redemption price of this Debenture into a
separate account for that purpose (which funds can be commingled with the funds
being used to mandatorily redeem the other Debentures issued pursuant to the
Agreement).
Promptly after surrender of this Debenture for mandatory redemption,
the Company shall deliver, or shall cause to be delivered to the holder of this
Debenture, at his or her last address appearing on the books and records of the
Company, the mandatory redemption price. Upon surrender of this Debenture for
mandatory redemption, this Debenture shall be canceled.
13. Defaults and Remedies.
An Event of Default is: (i) default for 30 days in payment of interest
on this Debenture; (ii) default in payment of principal or premium, if any, on
this Debenture; (iii) the failure by the Company to pay when due any amount due
and owing on any Senior Debt, any other default or event of default with respect
to any Senior Debt shall have occurred and shall have continued beyond the
expiration of any applicable grace period which in either case would permit the
holder or holders thereof to accelerate the maturity thereof, or there shall
have been an acceleration of the stated maturity of any such Senior Debt and
such acceleration shall not have been rescinded or annulled, (iv) the
consummation by the Company of (x) any consolidation or merger of the Company in
which
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<PAGE> 32
neither (A) the holders of voting stock of the Company immediately before
the consolidation or merger will in the aggregate own 40% or more of the voting
shares of the continuing or surviving corporation immediately after such
consolidation or merger, nor (Y) persons serving as the directors of the
Corporation immediately before the consolidation or merger will constitute a
majority of the directors of the continuing or surviving corporation immediately
after such consolidation or merger, or (y) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all or
substantially all of the assets of the Company, (v) any person or group of
persons becomes the beneficial owner of more than fifty percent (50%) of the
Common Stock then outstanding, and (vi) the Company shall have applied for or
consented to the appointment of a custodian, receiver, trustee or liquidator, or
other court-appointed fiduciary of all or a substantial part of its properties;
or a custodian, receiver, trustee or liquidator or other court appointed
fiduciary shall have been appointed with or without the consent of the Company;
or the Company is generally not paying its debts as they become due by means of
available assets or is insolvent, or has made a general assignment for the
benefits of creditors; or the Company files a voluntary petition in bankruptcy,
or a petition or an answer seeking reorganization or an arrangement with
creditors or seeking to take advantage of any insolvency law, or an answer
admitting the material allegations of a petition in any bankruptcy,
reorganization or insolvency proceeding or has taken action for the purpose of
effecting any of the foregoing; or if, within sixty (60) days after the
commencement of any proceeding against the Company seeking any reorganization,
rehabilitation, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under the Federal bankruptcy code or similar order under
future similar legislation, the appointment of any trustee, receiver, custodian,
liquidator, or other court-appointed fiduciary of the Company or of all or any
substantial part of his properties, such order or appointment shall not have
been vacated or stayed on appeal or otherwise or if, within sixty (60) days
after the expiration of any such stay, such order or appointment shall not have
been vacated. Upon the occurrence of any Event of Default, the holder may, at
its option, declare all amounts due hereunder to be due and payable immediately
and, upon any such declaration, the same shall become and be immediately due and
payable. If an Event of Default specified in clause (vi) occurs, then all
amounts due hereunder shall become immediately due and payable without any
declaration or other act on the part of the holder. Upon the occurrence of any
Event of Default, the holder may, in addition to declaring all amounts due
hereunder to be immediately due and payable, pursue any available remedy,
whether at law or in equity.
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<PAGE> 33
14. No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Debentures, or for any claim based on, in respect of or by reason of, such
obligations or their creation. The holder of this Debenture by accepting this
Debenture waives and releases all such liability. The waiver and release are
part of the consideration for the issue of this Debenture.
15. Authentication.
This Debenture shall not be valid until an authorized officer of the
Company signs the Debenture in the appropriate space.
16. Headings; Governing Law.
The headings used herein are for reference purposes only, and shall not
in any way affect the meaning or interpretation of this Debenture.
This Debenture shall be governed by and construed in accordance with,
the laws of the State of New York, without references to the choice of law
principles thereof.
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<PAGE> 34
ANNEX A
-------
- ---------------------------------------------------------
ASSIGNMENT FORM
If you the holder want to assign this Debenture, fill
in the form below:
I or we assign and transfer this Debenture to
__________________________________
(Insert assignee's soc. sec. or tax ID no.)
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
(Print or type assignee's name,
address and zip code)
and irrevocably appoint ______________
______________________________agent to transfer this
Debenture on the books of the
Company. The agent may substitute
another to act for him.
- ---------------------------------------------------------
- --------------------------------------------------------
CONVERSION NOTICE
If you the holder want to convert this Debenture into
Common Stock of the
Company, check the box:
/ /
If you want to convert only part of this Debenture,
state the amount:
- ----------------------------------
If you want the stock certificate made out in
another person's name, fill in the form below:
- ----------------------------------
(Insert other person's soc. sec. or tax ID no.)
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
(Print or type other person's name,
address and zip code)
- --------------------------------------------------------
Date Your Signature:
--------------------- ----------------------------
- -----------------------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Debenture)
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<PAGE> 35
EXHIBIT B
Tests For Accredited Investor
(a) The following are tests for an Accredited Investor who is
an individual:
Such investor has a net worth, or joint net worth with such
investor's spouse, of at least $1,000,000.
Such investor had individual income of more than $200,000 for
the Past two years, and such Investor has a reasonable expectation of having
income of at least $200,000 for the current year.
Such investor and his/her spouse had joint income of more than
$300,000 for the past two years, and has a reasonable expectation of having
joint income of at least $300,000 for the current year.
Such investor is an executive officer or director of the
company.
(b) The following are tests for any Accredited Investor who is
not an individual:
Any bank as defined in Section 3 (a) (2) of the Securities Act
or any savings and loan association or other institution as defined in section 3
(a) (5) (A) of the Securities Act whether acting in its individual or fiduciary
capacity.
Any broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934.
Insurance company as defined in Section 2 (13) of the
Securities Act.
Investment company registered under the investment Company Act
of 1940 or a business development company as defined in section 2(a)(48) of that
Act.
Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958.
Employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974, if the investment decision is
made by a plan fiduciary, as defined in Section 3(21) of such Act, which is
either a bank, savings and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has total assets in
<PAGE> 36
excess of $5,000,000 or, if a self-directed plan, with in-vestment decisions
made solely by persons that are accredited investors.
Any private business development company as defined in
Section 202 (a) (22) of the Investment Advisers Act of 1940.
Any organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000,
Any trust with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
purchase is directed by a sophisticated person as described in Rule 506 (b) (2)
(ii) of the Commission under the Securities Act.
Any entity in which all of the equity owners are Accredited
Investors (i.e., all of the equity owners meet one of the tests for an
accredited investor).
-2-
<PAGE> 37
EXHIBIT C
Confidential Purchaser Questionnaire
Name: ____________________________________________ Age: _____________
Residence Address:______________________________________________________
How Long?____________________________________________________________________
Residence Telephone Number:
Occupation (e.g., Officer, Partner, Owner) and Name of Business:
- ------------------------------------------------------------------------------
Corporation ____ Partnership ______ Proprietorship _______
Business Address: _____________________________
Business Telephone Number: _____________________
Your Social Security Number: _________________________________________________
Employer I.D. Number if the aforesaid business is owned or controlled by you:
Describe nature of current employment and position(s) held:
- --------------------------------------------------------------------------
How long?
---------------------------- ----------------------------
If you have been employed by your current employer for less than three years,
list your employment and position for the past three years.
- ---------------------------------------------------------------
- ---------------------------------------------------------------
Other business affiliations (service on Boards of Directors, etc.):
Educational background (schools and degrees):
Do you have a personal net worth or joint net worth with your spouse as of the
date hereof in excess of $1,000,000?
During each of the two most recent years, did either (i) you have income of more
than $200,000
-1-
<PAGE> 38
or (ii) you and your spouse have joint income of more than $300,000?
During the current year, do you reasonably anticipate (i) that you will have
income of more than $200,000 or (ii) you and your spouse will have joint income
of more than $300,0 00?
Are you an executive officer or director of Barringer Technologies Inc.?
Do you have knowledge and experience in financial and business matters so as to
be capable of evaluating the merits and risks of various investments both public
and private?
If so, describe the basis of your knowledge and experience:
If not, do you have an investment advisor? __________________________________
What is his name and address? _____________________________
-------------------------------------------------------------
Do you desire to have the person named above act as your
representative with respect to investments?
Yes _________________ No ____________________
Do you believe your representative has the ability to evaluate
the merits and risks associated with various investments?
Yes _________________ No ____________________
Are you an employee, officer, director, investor or shareholder of any NASD
broker-dealer firm?
If yes, supply name and address:
-------------------------------------------
- -----------------------------------------------------------------------
Are you aware that an investment in the securities of Barringer Technologies
Inc. is a high risk investment?
Do you presently own securities or other types of investments?
If so, please supply the approximate value thereof:
-2-
<PAGE> 39
Those of Business
Yours Owned
or Controlled by You
Marketable Securities $ $
Restrictive Securities $ $
Real Estate $ $
Investment Partnerships $ $
Other Assets $ $
TOTAL $ $
Do you have adequate means of providing for your current needs and personal
contingencies?
The following are tests for an Accredited Investor who is an individual. Please
indicate by a check mark which tests are applicable to you:
_____ Such investor has a net worth, or joint net worth with
such investor's spouse, of at least $1,000,000.
_____ Such investor had individual income of more than
$200,000 for the past two years, and such investor has a reasonable expectation
of having income of at least $200,000 for the current year.
_____ Such investor and his/her spouse had joint income of
more than 300,000 for the past two years, and has a reasonable expectation of
having joint income of at least $300,000 for the current year.
______ Such investor is an executive officer or director of
the Company.
The following are tests for an Accredited Investor who is not an individual.
Please indicate by a check mark which tests are applicable to you:
______ Any bank as defined in section 3 (a) (2) of the
Securities Act or any
-3-
<PAGE> 40
savings and loan association or other institution as defined in Section 3 (a)
(5) (A) of the Securities Act whether acting in its individual or fiduciary
capacity.
______ Any broker or dealer registered pursuant to Section 15
of the securities Exchange Act of 1934.
_____ Insurance company as defined in Section 2 (13) of the
Securities Act.
_____ Investment company registered under the Investment
Company Act of 1940 or a business development company as defined in Section
2(a)(48) of that Act.
_____ Small Business Investment Company licensed by the U.S.
Small Business Administration under Section 301(c) or (d) of the Small Business
investment Act of 1958.
_____ Employee benefit plan within the meaning of Title I of
the Employee Retirement Income Security Act of 1974, if the investment decision
is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is
either a bank, savings and loan association, insurance company or registered
investment advisor, or if the employee benefit plan has total assets in excess
of $5,000,000 or, if a self-directed plan, with investment decisions made solely
by persons that are accredited investors.
_____ Any private business development company as defined in
Section 2(a)(22) of the Investment Advisers Act of 1940.
_____ Any organization described in Section 501(c) (3) of the
Internal-Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000.
_____ Any trust, with total assets in excess of 45,000,000,
not formed for the specific purpose of acquiring the securities offered, whose
purchase is directed by a sophisticated person as described in Rule
506(b)(2)(ii) of the Commission under the Securities Act.
______ Any entity in which all of the equity owners are
Accredited Investors (i.e., all of the equity owners meet one of the tests for
an accredited investor).
-4-
<PAGE> 41
The undersigned represents the foregoing information to be true and correct and
agrees that such information may be relied upon by the Company.
------------------------------
Name:
Dated:
-5-
<PAGE> 1
EXHIBIT 10.17
================================================================================
Murray Hill Inn Associates, A Limited Partnership
By its General Partner The Boyle Group, A Limited Partnership
By its General Partner, Murray Hill 91, Inc., By William A. Boyle III, President
Landlord
TO
Barringer Technologies Inc.
Tenant
LEASE
PREMISES
219 South Street, New Providence, New Jersey
===============================================================================
<PAGE> 2
INDEX
ARTICLE CAPTION PAGE
1. Demise, Premises, Term, Rents ..................................
2. Use ............................................................
3. Preparation of the Demised Premises ............................
4. When Demised Premises Ready for Occupancy ......................
5. Adjustment of Rents ............................................
6. Subordination, Notice to Lessors and
Mortgagees ....................................................
7. Quiet Enjoyment ................................................
8. Assignment, Mortgaging, Subletting .............................
9. Compliance with Laws and Requirements of
Public Authorities .............................................
10. Insurance ......................................................
11. Rules and Regulations ..........................................
12. Tenant's Changes ...............................................
13. Tenant's Property ..............................................
14. Repairs and Maintenance ........................................
15. Electricity ....................................................
16. Heat, Ventilation and Air Conditioning .........................
17. Landlord's Other Services ......................................
18. Access, Changes in Building Facilities, Name ...................
19. Notices of Accidents, etc. .....................................
20. Non-Liability and Indemnification ..............................
<PAGE> 3
ARTICLE CAPTION PAGE
21. Destruction or Damage ..........................................
22. Eminent Domain .................................................
23. Surrender ......................................................
24. Conditions of Limitation .......................................
25. Re-Entry By Landlord ...........................................
26. Damages ........................................................
27. Waivers ........................................................
28. No Other Waivers Or Modifications ..............................
29. Curing Tenant's Defaults, Additional Rent ......................
30. Broker .........................................................
31. Notices ........................................................
32. Estoppel Certificate, Memorandum ...............................
33. Arbitration ....................................................
34. No Other Representations, Construction, Governing Law ..........
35. Security .......................................................
36. Parties Bound ..................................................
37. Certain Definitions And Constructions ..........................
Testimonium, Signatures and Seals ..............................
Acknowledgments ................................................
Exhibit A - Description of Land
B - Floor Plans
C - Separate Work Letter
D - Rules and Regulations
E - Definitions
38. Representatives Authorized .....................................
39. Option to Renew ...............................................
<PAGE> 4
LEASE, dated February 17, 1993, between Murray Hill Inn Associates, A
Limited Partnership by its General Partner The Boyle Company, A Limited
Partnership By its General Partner, Murray Hill 91, Inc., By William A. Boyle
III, President
(hereinafter called "Landlord"), and Barringer Technologies, Inc.
,a Delaware corporation,
having an office at
(hereinafter called "Tenant").
W I T N E S S E T H:
ARTICLE 1
DEMISE, PREMISES, TERM, RENTS
1.01. Landlord hereby leases to Tenant, and Tenant hereby hires from
Landlord, the premises hereinafter described, in the building located at 219
South Street at the Murray Hill Inn and Office Park, New Providence, New Jersey
(the "Building"), on the parcel of land more particularly described in Exhibit A
(the "Land"), for the term hereinafter stated, for the rents hereinafter
reserved and upon and subject to the conditions (including limitations,
restrictions and reservations) and covenants hereinafter provided. Each party
hereby expressly covenants and agrees to observe and perform all of the
conditions and covenants herein contained on its part to be observed and
performed.
1.02 The premises hereby leased to Tenant are Suite 200, northwest
corner of the 2nd floors of the Building, as shown on the floor plan annexed
hereto as Exhibit B, having a rentable area of 4064 square feet. Said premises
together with all fixtures and equipment which at the commencement, or during
the term, of this lease are thereto attached (except items not deemed to be
included therein and removable by Tenant as provided in Article 14) constitute
and are hereinafter called the "Demised Premises".
1.03 The term of this lease, for which the Demised Premises are hereby
leased, shall commence on a date (herein called the "Commencement Date") which
shall be (i) the day on which the
<PAGE> 5
<TABLE>
<S> <C> <C>
8/1/93 - 3/31/94 5,283.20 42,265.60
4/1/94 - 3/31/95 5,283.20 63,398.40
4/1/95 - 3/31/96 5,892.80 70,713.60
4/1/96 - 3/31/97 5,892.80 70,713.60
4/1/97 - 3/31/98 5,892.80 70,713.60
</TABLE>
<PAGE> 6
Demised Premises are ready for occupancy (as defined in Article 4) or (ii) the
day Tenant, or anyone claiming under or through Tenant, first occupies the
Demised Premises for business, whichever occurs earlier, and shall end at noon
of the last day of the calendar month in which occurs the day preceding the
fifth anniversary of the Commencement Date, which ending date is hereinafter
called the "Expiration Date", or shall end on such earlier date upon which said
term may expire or be canceled or terminated pursuant to any of the conditions
or covenants of this lease or pursuant to law. Promptly following the
Commencement Date the parties hereto (hereinafter sometimes referred to as the
"Parties") shall enter into a supplementary agreement fixing the dates of the
Commencement Date and the Expiration Date and if they cannot agree thereon
within fifteen (15) days after Landlord's request therefor, such dates shall be
determined by arbitration in the manner provided in Article 34. Target date for
occupancy is anticipated to be April 1, 1993.
The rents reserved under this lease, for the term thereof, shall be and
consist of
(a) Fixed rent of $42,265.00 for the first year;
$63,398.40 for the second year;
$70,713.60 for the third year;
$70,713.60 for the fourth year; and
$70,713.60 for the fifth year, Totaling $317,804.80 for the
five-year term, which shall be payable in equal monthly installments commencing
on the anniversary date of the 6th month of occupancy until the 12 month of
occupancy $5,283.20; $5,283.20 for the second year; $5,892.80 during the third
year; $5,892.80 during the fourth year; and $5,892.80 during the fifth year and
every calendar month during the term of this lease (except that Tenant shall
pay, upon the execution and delivery of this lease by Tenant, the sum of
$5,283.20 to be applied against the first installment or installments of fixed
rent becoming due under this lease), and
(b) additional rent consisting of all such other sums of money as shall
become due from and payable by Tenant to Landlord hereunder (for default in
payment of which Landlord shall have the same remedies as for a default in
payment of fixed rent), all to be paid to Landlord at its office, or such other
place, or to such agent and at such place, as Landlord may designate by notice
to Tenant, in lawful money of the United States of America.
-2-
<PAGE> 7
1.05. Tenant shall pay the fixed rent and additional rent herein
reserved promptly as and when the same shall become due and payable, without
demand therefor and without any abatement, deduction or setoff whatsoever except
as expressly provided in this lease.
1.06. If the Commencement Date occurs an a day other than the first day
of a calendar month, the fixed rent for such calendar month shall be prorated
and the balance of the first month's fixed rent theretofore paid shall be
credited against the next monthly installment of fixed rent.
ARTICLE 2
USE
2.01 Tenant shall use and occupy the Demised Premises for executive and
general offices for the transaction of Tenant's business which is the sale and
servicing of medical and chemical testing equipment.
and for no other
purpose.
2.02. If any governmental license or permit, other than a Certificate
of Occupancy, shall be required for the proper and lawful conduct of Tenant's
business in the Demised Premises, or any part thereof, and if failure to secure
such license or permit would in any way affect Landlord, Tenant, at its expense,
shall duly procure and thereafter maintain such license or permit and submit the
same to inspection by Landlord. Tenant shall at all times comply with the terms
and conditions of each such license or permit.
2.03. Tenant shall not at any time use or occupy, or do or permit
anything to be done in the Demised Premises, in violation of the Certificate of
Occupancy (or other similar municipal ordinance) governing the use and
occupation of the Demised Premises or for the Building.
3.
<PAGE> 8
ARTICLE 3
PREPARATION OF THE DEMISED PREMISES
3.01. The Demised Premises shall be completed and prepared for Tenant's
occupancy in the manner, and subject to the terms, conditions and covenants, set
forth in Exhibit C. The facilities, materials and work so to be furnished,
installed and performed in the Demised Premises by Landlord at its expense are
hereinafter and in paragraph 3 of Exhibit C referred to as "Landlord's Work".
Such other installations, materials and work which may be undertaken by or for
the account of Tenant to equip, decorate and furnish the Demised Premises for
Tenant's occupancy, commonly called finishing trades work, are hereinafter and
in Exhibit C called "Tenant's Finish Work".
ARTICLE 4
WHEN DEMISED PREMISES READY FOR OCCUPANCY
4.01. The Demised Premises shall be deemed ready for occupancy on the
earliest date on which all of the following conditions have been met.
(a) A certificate of occupancy (temporary or final) has been
issued by the applicable governmental authorities, permitting Tenant's
use of the Demised Premises for the purposes for which the same have
been leased.
(b) Landlord's Work, and so much of Tenant's Finish Work as
Landlord shall have undertaken, in the Demised Premises have been
substantially completed; and same shall be so deemed notwithstanding
the fact that minor or insubstantial details of construction,
mechanical adjustment, or decoration remain to be performed, the
noncompletion of which does not materially interfere with Tenant's use
of the Demised Premises.
(c) Reasonable means of access and facilities necessary to
Tenant's use and occupancy of the Demised Premises, including
corridors, elevators and stairways, and heating, ventilating, air
conditioning, sanitary, water, and electrical facilities, have been
installed and are in reasonably good operating order and available to
Tenant.
4.
<PAGE> 9
4.02. If the occurrence of any of the conditions listed in Section
4.01, and thereby the making of the Demised Premises ready for occupancy, shall
be delayed due to any act or omission of Tenant or any of its employees, agents
or contractors or any failure (not due to any act or omission of Landlord or any
of its employees, agents or contractors) to plan or execute Tenant's Finish Work
diligently and expeditiously, which shall continue after Landlord shall have
given Tenant reasonable notice that such act, omission or failure would result
in delay, and such delay shall have been unavoidable by Landlord in the exercise
of reasonable diligence and prudence, the Demised Premises shall be deemed
ready for occupancy on the date when they would have been ready but for such
delay.
4.03. If and when Tenant shall take actual possession of the Demised
Premises, it shall be conclusively presumed that the same were in satisfactory
condition (except for latent defects) as of the date of such taking of
possession, unless within fifteen (15) days after such date Tenant shall give
Landlord notice specifying the respects in which the Demised Premises were not
in satisfactory condition.
ARTICLE 5
ADJUSTMENTS OF RENTS
5.01. For the purpose of Sections 5.01-5.03:
(a) "Taxes " shall mean real estate taxes, special and
extraordinary assessments and governmental levies against the Land and
Building of which the Demised Premises are a part.
(b) "Base Tax Rate" shall mean the assessed valuation of the
Land and Building, as finally determined following completion of
construction and issuance of a final certificate of occupancy therefor
(or such equivalent certification if Certificates of Occupancy not be
used), multiplied by the tax rate for the Tax Year 1993 (the "Base
Year").
(c) "Tax Year" shall mean the fiscal year for which taxes are
levied by the governmental authority.
(d) "Operational Year" shall mean each calendar year after the
Base Year;
5.
<PAGE> 10
* (e) "Tenant's Proportionate Share of Increase" shall mean 12.7%
multiplied by the increase in Taxes for the Operational Year over the Base Tax
Rate. For purposes hereof, the Tenant's Proportionate Share of Increase has been
computed based upon a total square footage of the Building equal to 32,100
square feet, and a total square footage of the Demised Premises equal to 4,064
square feet.
(f) "Tenant's Projected Share of Increase" shall mean Tenant's
Proportionate Share of Increase for the Operational and Projected operational
Year divided by twelve (12) and payable monthly by Tenant to Landlord as
additional rent.
5.02. After the expiration of the Base year and any Operational Year, Landlord
shall furnish Tenant a written statement of the Taxes incurred for such Base
Year or Operational Year. Within thirty (30) days after receipt of such
statement for any Operational Year setting forth Tenant's proportionate Share of
Increase, Tenant shall pay same to Landlord as additional rent, subject to the
provisions of Section 5.03 hereof.
* Plus 12.7% of 40% of the land tax
5a
<PAGE> 11
5.03. Commencing with the first Operational Year after Landlord shall
be entitled to receive Tenant's Proportionate Share of Increase, Tenant shall
pay to Landlord as additional rent for the then Operational Year, Tenant's
Projected Share of Increase. If the statement furnished by Landlord to Tenant
pursuant to Section 5.02 at the end of the then Operational Year shall indicate
that Tenant's Projected Share of Increase exceeded Tenant's Proportionate Share
of Increase, Landlord shall forthwith either (a) pay the amount of excess
directly to Tenant concurrently with the notice or (b) permit Tenant to credit
the amount of such excess against the subsequent payment of rent due hereunder.
If such statement furnished by Landlord to Tenant hereunder shall indicate that
the Tenant's Proportionate Share of Increase exceeded Tenant's Projected Share
of Increase for the then Operational Year, Tenant shall forthwith pay the amount
of such excess to Landlord.
5.04. As used in Sections 5.04-5.06.
(a) Operating Expenses shall mean any or all expenses incurred
by Landlord in connection with the operation of the Building of which
the Demised Premises are a part, including all expenses incurred as a
result of Landlord's compliance with any of its obligations hereunder
other than Landlord's Work and such expenses shall include: (i)
salaries, wages, medical, surgical and general welfare benefits,
(including group life insurance) and pension payments of employees of
Landlord engaged in the operation and maintenance of the Building, (ii)
payroll taxes, workmen's compensation, uniforms and dry cleaning for
the employees referred to in subdivision (i), (iii) the cost of all
charges for oil, gas, electricity (including, but not limited to, fuel
cost adjustments), steam, heat, ventilation, air conditioning and
water, (including sewer rental and assessments) furnished to the
Building (including common areas thereof) including any taxes on any
such utilities, but excluding therefrom the cost, including taxes
thereon, of electric energy furnished directly to the Demised Premises
for purposes other than for heating and air-conditioning (which costs
shall be borne by Tenant pursuant to the provisions of Article 15
hereof), (iv) the cost of all charges for rent, casualty, war risk
insurance (if obtainable from the United States government) and of
liability insurance for the Building; (v) the cost of all building and
cleaning supplies for the common areas of the Building and charges for
telephone for the Building; and (vi) the cost of all charges for
management, window cleaning and services contracts with independent
contractors for the common areas of the Building.
6.
<PAGE> 12
(b) "Operational Year" shall mean each calendar year after the
Base Year as hereinafter defined.
(c) "Base Year" shall be calendar year 1993, except that with
respect to furnishing of electrical energy the base year shall mean the
rates in effect as of January 1, 1993.
(d) "Tenant's Proportionate Share of Increase" shall mean 12.7%
multiplied by the increase in Operating Expenses for the Operational
Year over Operating Expenses in the Base Year. For purposes hereof, the
Tenant's Proportionate Share of Increase has been computed based upon a
total square footage of the Building equal to 32,100 square feet, and a
total square footage of the Demised Premises equal to 4,064 square
feet.
(e) "Tenant's Projected Share of Increase" shall mean Tenant's
Proportionate Share of Increase for the prior Operational Year divided
by twelve (12) and payable monthly by Tenant to Landlord as additional
rent.
5.05. After the expiration of the Base Year and any Operational Year,
Landlord shall furnish Tenant a written detailed statement of the Operating
Expenses incurred for such Base Year or Operational Year. Within thirty (30)
days after receipt of such statement for any Operational Year setting forth
Tenant's Proportionate Share of Increase, Tenant shall pay same to Landlord as
additional rent, subject to the provisions of Section 5.06 hereof.
5.06. Commencing with the first Operational Year after Landlord shall
be entitled to receive Tenant's Proportionate Share of Increase, Tenant shall
pay to Landlord as additional rent for the then Operational year, Tenant's
Projected Share of Increase. If the statement furnished by Landlord to Tenant
pursuant to Section 5.05 at the end of the then Operational Year shall indicate
that Tenant's Projected Share of Increase exceeded Tenant's Proportionate Share
of Increase, Landlord shall forthwith either (a) pay the amount of excess
directly to Tenant concurrently with the notice or (b) permit Tenant to credit
the amount of such excess against the subsequent payment of rent due hereunder.
If such statement furnished by Landlord to Tenant hereunder shall indicate that
the Tenant's Proportionate Share of Increase exceeded Tenant's Projected Share
of Increase for the then Operational Year, Tenant shall forthwith pay the amount
of such excess to Landlord.
5.07. Every notice given by Landlord pursuant to Section 5.05 shall be
conclusive and binding upon Tenant unless (1) within a sixty (60) days after
the receipt of such notice
7
<PAGE> 13
Tenant shall notify Landlord that it disputes the correctness of the notice,
specifying the particular respects in which the notice is claimed to be
incorrect, and (ii) if such dispute shall not have been settled by agreement,
shall submit the dispute to arbitration within ninety (90) days after receipt of
the notice. Pending the determination of such dispute by agreement or
arbitration as aforesaid, Tenant shall within thirty (30) days after receipt of
such notice, pay additional rent in accordance with Landlord's notice and such
payment shall be without prejudice to Tenant's position. If the dispute shall be
determined in Tenant's favor, Landlord shall forthwith pay Tenant the amount of
Tenant's overpayment of rents resulting from compliance with Landlord's
statement.
ARTICLE 6
SUBORDINATION, NOTICE TO LESSORS AND MORTGAGEES
6.01. This lease, and all rights of Tenant hereunder, are and shall be
subject and subordinate in all respects to all ground leases, overriding leases
and underlying leases of the Land and/or the Building now or hereafter existing
and to all mortgages which may now or hereafter affect the Land and/or the
Building and/or any of such leases, whether or not such mortgages shall also
cover other lands and/or buildings, to each and every advance made or hereafter
to be made under such mortgages, and to all renewals, modifications,
replacements and extensions of such leases and such mortgages and spreaders and
consolidations of such mortgages. This Section shall be self-operative and no
further instrument of subordination shall be required. In confirmation of such
subordination, Tenant shall promptly execute and deliver any instrument that
Landlord, the lessor of any such lease or the holder of any such mortgage or any
of their respective successors in interest may reasonably request to evidence
such subordination. The leases to which this lease is, at the time referred to,
subject and subordinate pursuant to this Article are hereinafter sometimes
called "superior leases" and the mortgages to which this lease is, at the time
referred to, subject and subordinate are hereinafter sometimes called "superior
mortgages", the lessor of a superior lease or its successor in interest at the
time referred to is sometimes hereinafter called a "lessor", and the holder of a
superior mortgage or its successor in interest at the time referred to is
sometimes hereinafter called a "superior mortgagee"
8.
<PAGE> 14
ARTICLE 7
QUIET ENJOYMENT
7.01. So long as Tenant pays all of the fixed rent and additional rent
due hereunder and performs all of Tenant's other obligations hereunder, Tenant
shall peaceably and quietly have, hold and enjoy the Demised Premises subject,
nevertheless, to the obligations of this lease and, as provided in Article 6, to
the superior leases and the superior mortgages.
ARTICLE 8
ASSIGNMENT, MORTGAGING, SUBLETTING
8.01. Neither this lease, nor the term and estate hereby granted, nor
any part hereof or thereof, nor the interest of Tenant in any sublease, or the
rentals thereunder, shall be assigned, mortgaged, pledged, encumbered or
otherwise transferred by Tenant, and neither the Demised Premises, nor any part
thereof shall be encumbered in any manner by reason of any act or omission on
the part of Tenant or anyone claiming under or through Tenant, or shall be
sublet, or offered or advertised for subletting, or be used or occupied or
permitted to be used or occupied, or utilized for desk space or for mailing
privileges, by anyone other than Tenant or for any purpose other than as
permitted by this lease, without the prior written consent of Landlord in every
case, except as expressly otherwise provided in this Article.
8.02. If this lease be assigned, whether or not in violation of the
provisions of this lease, Landlord may collect rent from the assignee. If the
Demised Premises or any part thereof be sublet or be used or occupied by anybody
other than Tenant, whether or not in violation of this lease, Landlord may,
after default by Tenant and expiration of Tenant's time to cure such default,
collect rent from the undertenant or occupant. In either event, Landlord may
apply the net amount collected to the rents herein reserved, but no such
assignment, underletting, occupancy or collection shall be deemed a waiver of
any of the provisions of Section 8.01, or the acceptance of the assignee,
undertenant or occupants as tenant, or a
9
<PAGE> 15
release of Tenant from the further performance by Tenant of Tenant's obligations
under this lease. The consent by Landlord to assignment, mortgaging,
underletting or use or occupancy by others shall not in any wise be considered
to relieve Tenant from obtaining the express written consent of Landlord to any
other or further assignment, mortgaging or underletting at use or occupancy by
others not expressly permitted by this Article.
8.03. Provided Tenant complies with the following conditions Landlord
shall not unreasonably withhold its consent to the subletting of the entire
Demised Premises:
(a) Tenant shall submit in writing to Landlord (i) the name of
the proposed subtenant, (ii) the nature and character of the proposed
subtenant's business, (iii) the terms and conditions of the proposed
sublease and (iv) such reasonable financial information as Landlord may
request regarding the proposed subtenant;
(b) If Tenant requests the right to sublease, the Landlord, at
Landlord's election, may (i) elect to sublease the Demised Premises
directly from Tenant upon the same terms and conditions offered to the
proposed subtenant, or (ii) cancel this lease, in which event Tenant
agrees to surrender all of its right, title and interest hereunder and
Landlord may thereafter enter into a direct lease with the proposed
subtenant or with any other persons as Landlord may desire, or (iii)
consent to the subletting. Landlord's election under this subdivision
(b) shall be made within thirty (30) days after the information set
forth in subdivision (a) hereof has been received by Landlord;
(c) If Tenant has obtained consent to such proposed subletting
by any superior lessor and/or superior mortgagee, provided such
superior lessor and/or superior mortgagee requires consent to the
subletting.
8.04. Tenant shall remain fully liable for the performance of all of
Tenant's obligations hereunder notwithstanding any subletting provided for
herein, and without limiting the generality of the foregoing, shall remain fully
responsible and liable to Landlord for all acts and omissions of any subtenant
or anyone claiming under or through any subtenant which shall be in violation of
any of the obligations of this lease and any such violation shall be deemed to
be a violation by Tenant.
10.
<PAGE> 16
8.05. Notwithstanding any assignment and assumption by the assignee of
the obligations of Tenant hereunder, Tenant herein named, or any immediate or
remote successor in interest of Tenant herein named, shall remain liable jointly
and severally (as a primary obligor) with its assignee and all subsequent
assignees for the performance of Tenant's obligations hereunder.
ARTICLE 9
COMPLIANCE WITH LAWS AND REQUIREMENTS
OF PUBLIC AUTHORITIES
9.01. Tenant shall give prompt notice to Landlord of any notice it
receives of the violation of any law or requirement of public authority, and at
its expense shall comply with all laws and requirements of public authorities
which shall, with respect to the Demised Premises or the use and occupation
thereof, or the abatement of any nuisance, impose any violation, order or duty
on Landlord or Tenant, arising from (i) Tenant's use of the Demised Premises,
(ii) the manner of conduct of Tenant's business or operation of its
installations, equipment or other property therein, (iii) any cause or condition
created by or at the instance of Tenant, other than by Landlord's performance of
any work for or on behalf of Tenant, or (iv) breach of any of Tenant's
obligations hereunder. Furthermore, Tenant need not comply with any such law or
requirement of public authority so long as Tenant shall be contesting the
validity thereof, or the applicability thereof to the Demised Premises, in
accordance with Section 9.02.
9.02. Tenant may, at its expense (and if necessary, in the name of but
without expense to Landlord) contest, by appropriate proceedings prosecuted
diligently and in good faith, the validity, or applicability to the Demised
Premises, of any law or requirement of public authority, and Landlord shall
cooperate with Tenant in such proceedings, provided that
11.
<PAGE> 17
(a) Tenant shall defend, indemnify and hold harmless Landlord
against all liability, loss or damage which Landlord shall suffer by
reason of such non-compliance or contest, including reasonable
attorney's fees and other expenses reasonably incurred by Landlord;
(b) Such non-compliance or contest shall not constitute or
result in any violation of any superior lease or superior mortgage, or
if such superior lease and/or superior mortgage shall permit such
non-compliance or contest on condition of the taking of action or
furnishing of security by Landlord, such action shall be taken and such
security shall be furnished at the expense of Tenant; and
(c) Tenant shall keep Landlord advised as to the status of
such proceedings.
ARTICLE 10
INSURANCE
10.01. Tenant shall not violate, or permit the violation of, any
condition imposed by the standard fire insurance policy then issued for office
buildings in the county which the Demised Premises are situate, and shall not
do, or permit anything to be kept in the Demised Premises which would increase
the fire or other casualty insurance rate on the Building or the property
therein over the rate which would otherwise then be in effect, (unless Tenant
pays the resulting increased amount of premium as provided in Section 10.02) or
which would result in insurance companies of good standing refusing to insure
the Building or any of such property in amounts and at normal rates reasonably
satisfactory to Landlord. However, Tenant shall not be subject to any liability
or obligation under this Section by reason of the proper use of the Demised
Premises for the purposes permitted by Article 2.
10.02. If, by reason of any act or omission on the part of Tenant, the
rate of fire insurance with extended coverage on the Building or equipment or
other property of Landlord or other tenants shall be higher than it otherwise
would be, Tenant shall reimburse Landlord, on demand, for that part of the
premiums for fire insurance and extended coverage paid by Landlord because of
such act or omission on the part of Tenant, which sum shall be deemed to be
additional rent and collectible as such.
12.
<PAGE> 18
10.03. In the event that any dispute should arise between Landlord and
Tenant concerning insurance rates, a schedule or "make up" of rates for the
Building or the Demised Premises, as the case may be, issued by the Fire
Insurance Rating Organization of New Jersey or other similar body making rates
for fire insurance and extended coverage for the premises concerned, shall be
presumptive evidence of the facts therein stated and of the several items and
charges in the fire insurance rates with extended coverage then applicable to
such premises.
10.04. Tenant shall obtain and keep in full force and effect during the
term of this Lease at its own cost and expense Public Liability Insurance, such
insurance to afford protection in an amount of not less than $500,000 for injury
or death to any one person, $1,000,000 for injury or death arising out of any
one occurrence, and $50,000 for damage to property, protecting and naming the
Landlord and the Tenant as insureds against any and all claims for personal
injury, death or property damage occurring in, upon, adjacent, or connected with
the Demised Premises and any part thereof.
Said insurance is to be written on
a form reasonably satisfactory to Landlord by good and solvent insurance
companies of recognized standing, admitted to do business in the State of New
Jersey which shall be reasonably satisfactory to the Landlord. Tenant shall pay
all premiums and charges therefor and upon failure to do so Landlord may, but
shall not be obligated, to make such payments, and in such latter event the
Tenant agrees to pay the amount thereof to Landlord on demand and said sum shall
be deemed to be additional rent and in each instance collectible on the first
day of any month following the date of notice to Tenant in the same manner as
though it were rent originally reserved hereunder. Tenant will use its best
efforts to include in such Public Liability Insurance policy a provision to the
effect that same will be non-cancellable, except upon reasonable advance written
notice to Landlord. The original insurance policies or appropriate certificates
shall be deposited with Landlord together with any renewals, replacements or
endorsements to the end that said insurance shall be in full force and effect
for the benefit of the Landlord during the term of this Lease. In the event
Tenant shall fail to procure and place such insurance, the Landlord may, but
shall not be obligated to, procure and place same, in which event the amount
13.
<PAGE> 19
of the premium paid shall be refunded by Tenant to Landlord upon demand and
shall in each instance be collectible on the first day of the month or any
subsequent month following the date of payment by Landlord, in the same manner
as though said sums were additional rent reserved hereunder.
10.05. Each party agrees to use its best efforts to include in each of
its insurance policies (insuring the Building and Landlord's property therein
and rental value thereof in the case of Landlord, and insuring Tenant's property
and business interest in the Demised Premises (business interruption insurance)
in the case of Tenant, against loss, damage or destruction by fire or other
casualty) a waiver of the insurer's right of subrogation against the other
party, or if such waiver should be unobtainable or unenforceable (a) an
express agreement that such policy shall not be invalidated if the assured
waives the right of recovery against any party responsible for a casualty
covered by the policy before the casualty or (b) any other form of permission
for the release of the other party. If such waiver, agreement or permission
shall not be, or shall cease to be, obtainable without additional charge or at
all, the insured party shall so notify the other party promptly after learning
thereof. In such case, if the other party shall so elect and shall pay the
insurer's additional charge therefor, such waiver, agreement or permission
shall be included in the policy, or the other party shall be named as an
additional assured in the policy. Each such policy which shall so name a party
hereto as an additional assured shall contain, if obtainable, agreements by the
insurer that the policy will not be cancelled without at least ten (10) days
prior notice to both assureds and that the act or omission of one assured will
not invalidate the policy as to the other assured. Any failure by Tenant, if
named as an additional assured, promptly to endorse to the order of Landlord,
without recourse, any instrument for the payment of money under or with respect
to the policy of which Landlord is the owner or original or primary assured,
shall be deemed a default under this Lease.
10.06. Each party hereby releases the other party with respect to any
claim (including a claim for negligence) which it might otherwise have against
the other party for loss, damage or destruction with respect to its property
(including rental value or business interruption) occurring during the term of
this Lease and with respect and to the extent to which it is insured under a
policy or policies containing a waiver
14.
<PAGE> 20
of subrogation or permission to release liability or naming the other party as
an additional assured, as provided in Sections 10.04 and 10.05. If
notwithstanding the recovery of insurance proceeds by either party for loss,
damage or destruction of its property (or rental value or business interruption)
the other party is liable to the first party with respect thereto or is
obligated under this Lease to make replacement, repair or restoration or
payment, then provided that the first party's right of full recovery under its
insurance policies is not thereby prejudiced or otherwise adversely affected,
the amount of the net proceeds of the first party's insurance against such loss,
damage or destruction shall be offset against the second party's liability to
the first party therefor, or shall be made available to the second party to pay
for replacement, repair or restoration, as the case may be.
10.07. The waiver of subrogation or permission for release referred to
in Section 10.05 shall extend to the agents of each party and its and their
employees and, in the case of Tenant, shall also extend to all other persons and
entities occupying, using or visiting the Demised Premises in accordance with
the terms of this Lease, but only if and to the extent that, such waiver or
permission can be obtained without additional charge (unless such party shall
pay such charge). The releases provided for in Section 10.06 shall likewise
extend to such agents, employees and other persons and entities, if and to the
extent that such waiver or permission is effective as to them. Nothing contained
in Section 10.06 shall be deemed to relieve either party of any duty imposed
elsewhere in this Lease to repair, restore or rebuild or to nullify any
abatement of rents provided for elsewhere in this Lease. Except as otherwise
provided in Section 10.04, nothing contained in Sections 10.05 and 10.06 shall
be deemed to impose upon either party any duty to procure or maintain any of the
kinds of insurance referred to therein or any particular amounts or limits of
any such kinds of insurance. However, each party shall advise the other, upon
request, from time to time (but not more often than once a year) of all of the
policies of insurance it is carrying of any of the kinds referred to in Section
10.05, and if it shall discontinue any such policy or allow it to lapse, shall
notify the other party thereof with reasonable promptness. The insurance
policies referred to in Sections 10.05 and 10.06 shall be deemed to include
policies procured and maintained by a party for the benefit of its lessor,
mortgagee or pledgee.
15.
<PAGE> 21
ARTICLE 11
RULES AND REGULATIONS
11.01. Tenant and its employees and agents shall faithfully observe
and comply with the Rules and Regulations annexed hereto as Exhibit D, and such
reasonable changes therein (whether by modification, elimination or addition) as
Landlord at any time or times hereafter may make and communicate in writing to
Tenant, which do not unreasonably affect the conduct of Tenant's business in the
Demised Premises; provided, however, that in case of any conflict or
inconsistency between the provisions of this lease and any of the Rules and
Regulations as originally promulgated or as changed, the provisions of this
lease shall control.
11.02. Nothing in this lease contained shall be construed to impose upon
Landlord any duty or obligation to Tenant to enforce the Rules and Regulations
or the terms, covenants or conditions in any other lease, as against any other
tenant, and Landlord shall not be liable to Tenant for violation of the same by
any other tenant or its employees, agents or visitors. However, Landlord shall
not enforce any of the Rules and Regulations in such manner as to discriminate
against Tenant or anyone claiming under or through Tenant.
ARTICLE 12
TENANT'S CHANGES
12.01. Tenant shall make no changes, alterations, additions,
installations, substitutions or improvements (hereinafter collectively called
"changes", and, as applied to changes provided for in this Article, "Tenant's
Changes") in and to the Demised Premises without the express prior written
consent of Landlord.
All proposed Tenant's Changes shall be submitted to Landlord for
written approval at least sixty (60) days prior to the date Tenant intends to
commence such changes, such submission to include all plans and specifications
for the work to be done, proposed scheduling, and the estimated cost of
completion of Tenant's Changes. If Landlord consents to Tenant's Changes, Tenant
may commence and diligently prosecute to completion Tenant's Changes, under the
direct supervision of Landlord.
16.
<PAGE> 22
Tenant shall pay to Landlord a supervision fee (which shall
include the cost of review of the proposed Tenant's Changes) equal to ten (10)%
percent of the certified cost of completion of Tenant's Changes. Prior to the
commencement of Tenant's changes, Tenant shall pay to Landlord ten (10%) percent
of the estimated cost of completion (the "Estimated Payment") as additional
rent. Within fifteen (15) days after completion of Tenant's Changes, Tenant
shall furnish Landlord with a statement, certified by an officer or a principal
of Tenant to be accurate and true of the total cost of completion of Tenant's
Changes, (the "Total Cost"). If such certified statement furnished by Tenant
shall indicate that the Estimated Payment exceeded ten (10%) percent of the
Total Cost, Landlord shall forthwith either (a) pay the amount of excess
directly to Tenant concurrently with the delivery of the certified statement or
(b) permit Tenant to credit the amount of such excess against the subsequent
payment of rent due hereunder. If such certified statement furnished by Tenant
shall indicate that ten (10%) percent of the Total Cost exceeded Tenant's
Estimated Payment, Tenant shall, simultaneously with the delivery to Landlord of
the certified statement pay the amount of such excess to Landlord as additional
rent.
12.02. Notwithstanding the provisions of Section 12.01, all proposed
Tenant's Changes which shall affect or alter:
(a) the outside appearance or the strength of the Building or of
any of its structural parts;
(b) any part of the Building outside of the Demised Premises;
(c) the mechanical, electrical, sanitary and other service
systems of the Building, or increase the usage of such systems,
shall be performed only by the Landlord, at a cost to be mutually agreed upon
between Landlord and Tenant.
12.03. Tenant, at its expense, shall obtain all necessary governmental
permits and certificates for the commencement and prosecution of Tenant's
Changes and for final approval
17.
<PAGE> 23
thereof upon completion, and shall cause Tenant's Changes to be performed in
compliance therewith and with all applicable laws and requirements of public
authorities, and with all applicable requirements of insurance bodies, and in
good and workmanlike manner, using new materials and equipment at least equal in
quality and class to the original installations in the Building. Tenant's
Changes shall be performed in such manner as not to unreasonably interfere with
or delay, and (unless Tenant shall indemnify Landlord therefor to the latter's
reasonable satisfaction) as not to impose any additional expense upon Landlord
in the construction, maintenance or operation of the Building. Throughout the
performance of Tenant's Changes, Tenant, at its expense, shall carry, or cause
to be carried, workmen's compensation insurance in statutory limits and general
liability insurance for any occurrence in or about the Building, of which
Landlord and its agents shall be named as parties insured in such limits as
Landlord may reasonably prescribe, with insurers reasonably satisfactory to
Landlord. Tenant shall furnish Landlord with reasonably satisfactory evidence
that such insurance is in effect at or before the commencement of Tenant's
Changes and, on request, at reasonable intervals thereafter during the
continuance of Tenant's Changes. If any of Tenant's Changes shall involve the
removal of any fixtures, equipment or other property in the Demised Premises
which are not Tenant's Property (as defined in Article 13), such fixtures,
equipment or other property shall be promptly replaced, at Tenant's expense,
with new fixtures, equipment or other property (as the case may be) of like
utility and at least equal value unless Landlord shall otherwise expressly
consent in writing, and Tenant shall deliver such removed fixtures to Landlord.
12.04. Tenant, at its expense, and with diligence and dispatch, shall
procure the cancellation or discharge of all notices of violation arising from
or otherwise connected with Tenant's Changes which shall be issued by any public
authority having or asserting jurisdiction. Tenant shall defend, indemnify and
save harmless Landlord against any and all mechanic's and other liens filed in
connection with Tenant's Changes, including the liens of any security interest
in, conditional sales of, or chattel mortgages upon, any materials, fixtures or
articles so installed in and constituting part of the Demised Premises and
against all costs, expenses and liabilities incurred in connection with any such
lien, security interest, conditional sale or chattel mortgage or any action or
proceeding brought thereon. Tenant, at its expense, shall
18.
<PAGE> 24
procure the satisfaction or discharge of all such liens within fifteen (15) days
after Landlord makes written demand therefor. However, nothing herein contained
shall prevent Tenant from contesting, in good faith and at its own expense, any
such notice of violation, provided that Tenant shall comply with the provisions
of Section 9.02.
12.05. Tenant agrees that the exercise of its right pursuant to the
provisions of this Article 12 shall not be done in a manner which would create
any work stoppage, picketing, labor disruption or dispute or violate Landlord's
union contracts affecting the Land and Building, nor interference with the
business of Landlord or any Tenant or Occupant of the Building.
ARTICLE 13
TENANT'S PROPERTY
13.01. All fixtures, equipment, improvements and appurtenances, attached
to or built into the Demised Premises at the commencement of or during the term
of this lease, whether or not by or at the expense of Tenant, shall be and
remain a part of the Demised Premises, shall be deemed the property of Landlord
and shall not be removed by Tenant, except as hereinafter in this Article
expressly provided.
13.02. All business and trade fixtures, machinery and equipment,
communications equipment and office equipment, whether or not attached to or
built into the Demised Premises, which are installed in the Demised Premises by
or for the account of Tenant, without expense to Landlord, and can be removed
without permanent structural damage to the Building, and all furniture,
furnishings and other articles of movable personal property owned by Tenant and
located in the Demised Premises (all of which are sometimes called "Tenant's
Property") shall be and shall remain the property of Tenant and may be removed
by it at any time during the term of this lease; provided that if any of
Tenant's Property is removed, Tenant shall repair or pay the cost of repairing
any damage to the Demised Premises or to the Building resulting from such
removal. Any equipment or other property for which Landlord shall have granted
any allowance or credit to Tenant shall not be deemed to have been installed by
or for the account of Tenant, without expense to Landlord, and shall not be
considered Tenant's Property.
19.
<PAGE> 25
13.03. At or before the Expiration Date, or the date of any earlier
termination of this lease, or as promptly as practicable after such an earlier
termination date, Tenant at its expense, shall remove from the Demised Premises
all of Tenant's Property except such items thereof as Tenant shall have
expressly agreed in writing with Landlord were to remain and to become the
property of Landlord, and shall repair any damage to the Demised Premises or the
Building resulting from such removal.
13.04. Any other items of Tenant's Property (except money, securities
and other like valuables) which shall remain in the Demised Premises after the
Expiration Date or after a period of fifteen (15) days following an earlier
termination date, may, at the option of the Landlord, be deemed to have been
abandoned, and in such case either may be retained by Landlord as its property
or may be disposed of, without accountability, in such manner as Landlord may
see fit, at Tenant's expense.
ARTICLE 14
REPAIRS AND MAINTENANCE
14.01. Tenant shall take good care of the Demised Premises. Tenant, at
its expense, shall promptly make all repairs, ordinary or extraordinary,
interior or exterior, structural or, otherwise, in and about the Demised
Premises and the Building, as shall be required by reason of (i) the performance
or existence of Tenant's Finish Work or Tenant's Changes, (ii) the installation,
use or operation of Tenant's Property in the Demised Premises, (iii) the moving
of Tenant's Property, in or out of the Building, or (iv) the misuse or neglect
of Tenant or any of its employees, agents or contractors but Tenant shall not be
responsible, and Landlord shall be responsible, for any of such repairs as are
required by reason of Landlord's neglect or other fault in the manner of
performing any of Tenant's Finish Work or Tenant's Changes which may
20.
<PAGE> 26
be undertaken by Landlord for Tenant's account or are otherwise required by
reason of neglect or other fault of Landlord or its employees, agents or
contractors. Except if required by the neglect or other fault of Landlord or its
employees, agents or contractors, Tenant, at its expense, shall replace all
scratched, damaged or broken doors or other glass in or about the Demised
Premises and shall be responsible for all repairs, maintenance and replacement
of wall and floor coverings in the Demised Premises and, for the repair and
maintenance of all lighting fixtures therein.
14.02. Landlord, at its expense, shall keep and maintain the Building
and its fixtures, appurtenances, systems and facilities serving the Demised
Premises, in good working order, condition and repair and shall make all
repairs, structural and otherwise, interior and exterior, as and when needed in
or about the Demised Premises, except for those repairs for which Tenant is
responsible pursuant to any other provisions of this lease.
14.03. Except as expressly otherwise provided in this lease, Landlord
shall have no liability to Tenant by reason of any inconvenience, annoyance,
interruption or injury to business arising from Landlord's making any repairs or
changes which Landlord is required or permitted by this lease, or required by
law, to make in or to any portion of the Building or the Demised Premises, or in
or to the fixtures, equipment or appurtenances of the Building or the Demised
Premises, provided that Landlord shall use due diligence with respect thereto
and shall perform such work, except in case of emergency, at times reasonably
convenient to Tenant and otherwise in such manner as will not materially
interfere with Tenant's use of the Demised Premises.
ARTICLE 15
ELECTRICITY
15.01. Landlord shall furnish the electric energy that Tenant shall
require in the Demised Premises. Tenant shall pay to Landlord, as additional
rent, for all electric energy furnished to Tenant at the Demised Premises.
Additional rent for such elec-
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<PAGE> 27
tric energy shill be calculated and payable in the manner hereinafter set
forth.
15.02. Within a reasonable time after the commencement of the term of
this lease, subsequent to Tenant's having taken occupancy of the Demised
Premises and having installed and commenced the use of Tenant's electrical
equipment, Landlord, at Tenant's sole expense, shall cause a survey to be made
by a reputable independent electrical engineer or similar agency of the
estimated use of electric energy (other than for heat and air conditioning) to
the Demised Premises, and shall compute the cost thereof for the quantity so
determined at prevailing retail rates. Tenant shall pay Landlord the cost of
such electric energy, as so calculated, on a monthly basis, as additional rent,
together with its payment of fixed rent.
Until such time as Landlord shall complete the aforedescribed survey,
Tenant shall pay to Landlord, each and every month, as additional rent, for and
on account of Tenant's electrical consumption, the sum of $ to be applied
against Tenant's obligations hereunder. Upon completion of the survey, there
shall be an adjustment for the period from the Commencement Date through the
date that the results of the survey shall be effectuated as shall be required.
Landlord shall have the right, at any time, during the term of this lease, to
cause the Demised Premises to be resurveyed. In the event that such resurvey
shall indicate increased electrical consumption by Tenant at the Demised
Premises, there shall be an adjustment in the amount paid by Tenant to Landlord
for Tenant's electrical consumption in accordance with the survey as well as an
adjustment retroactive to the date Landlord establishes Tenant's increase in
electrical consumption in excess of the consumption established by the prior
survey.
Landlord shall submit to Tenant the results of any electrical survey and
the same shall be deemed binding upon Tenant unless Tenant shall object to same
within ninety (90) days of the date that Landlord shall furnish Tenant with the
results of the survey. In the event that Landlord and Tenant cannot agree upon
the results of a survey the same shall be submitted to arbitration in accordance
with Article 33, provided, however, until such time as the arbitration shall
have been concluded, the results of Landlord's survey shall be utilized for the
purposes of determining Tenant's electrical consumption with an appropriate
adjustment to be made based upon the results of the arbitration.
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<PAGE> 28
15.03. Landlord shall not be liable in any way to Tenant for any failure
or defect in the supply or character or electric energy furnished to the Demised
Premises by reason of any requirement, act or omission of the public utility
serving the Building with electricity or for any other reason. Landlord shall
furnish and install all replacement lighting tubes, lamps, bulbs and ballasts
required in the Demised Premises at Tenant's expense.
15.04. Tenant's use of electric energy in the Demised Premises shall not
at any time exceed the capacity of any of the electrical conductors and
equipment in or otherwise serving the Demised Premises. In order to insure that
such capacity is not exceeded and to avert possible adverse effect upon the
Building electric service, Tenant shall not, without Landlord's prior written
consent in each instance (which shall not be unreasonably withheld), connect any
additional fixtures, appliances or equipment to the Building electric
distribution system or make any alteration or addition to the electric system of
the Demised Premises existing on the Commencement Date. Should Landlord grant
such consent, all additional risers or other equipment required therefor shall
be provided by Landlord and the cost thereof shall be paid by Tenant upon
Landlord's demand. As a condition to granting such consent, Landlord, at
Tenant's sole expense, may cause a new survey to be made of the use of electric
energy (other than for heating and air-conditioning) in order to calculate the
potential additional electric energy to be made available to Tenant based upon
the estimated additional capacity of such additional risers or other equipment.
When the amount of such increase is so determined, and the estimated cost
thereof is calculated, the amount of monthly additional rent payable pursuant to
Section 15.02 hereof shall be adjusted to reflect the additional cost, and shall
be payable as therein provided.
15.05. If the public utility rate schedule for the supply of electric
current to the Building shall be increased during the term of this lease, the
additional rent payable pursuant to Section 15.02 hereof shall be equitably
adjusted to reflect the resulting increase in Landlord's cost of furnishing
electric service to the Demised Premises effective as of the date of any
increase. Landlord and Tenant agree that the rate charged to Tenant for
electricity shall not be greater than the rate Tenant would have paid had the
Demised Premises been separately metered.
22 A
<PAGE> 29
15.06. Tenant agrees within three (3) months from the Commencement Date
to submit to Landlord a list of fixtures and equipment utilizing electric
current including, but not limited to, copying machines, computers and word
processing equipment and equipment of a similar nature. On the first day of each
calendar quarter thereafter, Tenant shall submit to Landlord a statement
indicating any substantial changes in the list previously supplied as same may
be updated by the required quarterly statements.
ARTICLE 16
HEAT, VENTILATION AND AIR-CONDITIONING
16.01. Landlord, at its expense, shall maintain and operate the
heating, ventilating and air-conditioning systems (hereafter called "the
systems") and shall furnish heat, ventilating and air-conditioning
(hereinafter collectively called "air-conditioning service") in the
Demised Premises through the systems, in compliance with the performance
specifications in paragraph 3(C) of Exhibit C, as may be required for
comfortable occupancy of the Demised Premises during regular hours (that
is, generally customary daytime business hours, but not before 8:00
a.m., or after 6:00 p.m. weekdays) of business days (which term is used
herein to mean all days except Saturdays, Sundays and days observed by
the Federal or the state government as legal holidays) throughout the
year. If Tenant shall require air-conditioning service at any other time
(hereinafter called "after hours"), Landlord shall furnish such after
hours air-conditioning service upon reasonable advance notice from
Tenant, and Tenant shall pay Landlord's then established charges
therefor on Landlord's demand.
16.02. Use of the Demised Premises, or any part thereof, in a
manner exceeding the design conditions (including occupancy and
connected electrical load) specified in Exhibit C for air-conditioning
service in the Demised Premises, or rearrangement of partitioning which
interferes with normal operation of the air-conditioning in the Demised
Premises, may require changes in the air-conditioning system servicing
the Demised Premises. Such changes, so occasioned, shall be made by
Landlord, at Tenant's expense, as Tenant's Changes pursuant to Article
12.
23.
<PAGE> 30
ARTICLE 17
LANDLORD'S OTHER SERVICES
17.01. Landlord, at its expense, shall provide public elevator service,
passenger and service, by elevators serving the floor on which the Demised
Premises are situated during regular hours of business days, and shall have at
least one passenger elevator subject to call at all other times.
17.02. Landlord, at its expense, shall cause the Demised Premises,
including the exterior and the interior of the windows thereof, to be cleaned.
Tenant shall pay to Landlord on demand the costs incurred by Landlord for (a)
extra cleaning work in the Demised Premises required because of (i) misuse or
neglect on the part of Tenant or its employees or visitors, (ii) use of portions
of the Demised Premises for preparation, serving or consumption of food or
beverages, data processing or reproducing operations, private lavatories or
toilets or other special purposes requiring greater or more difficult cleaning
work than office areas, (iii) unusual quantity of interior glass surfaces, (iv)
non-building standard materials or finishes installed by Tenant or at its
request, and (b) removal from the Demised Premises and the Building of (i) so
much of any refuse and rubbish of Tenant as shall exceed that ordinarily
accumulated daily in the routine of business office occupancy. Landlord, its
cleaning contractor and their employees shall have after-hours access to the
Demised Premises and the free use of light, power and water in the Demised
Premises as reasonably required for the purpose of cleaning the Demised Premises
in accordance with Landlord's obligations hereunder.
17.03. Landlord, at its expense, shall furnish adequate hot and cold
water to each floor of the Building for drinking, lavatory and cleaning
purposes, together with soap, towels and toilet tissue for each lavatory. If
Tenant uses water for any other purpose Landlord, at Tenant's expense, shall
install meters to measure Tenant's consumption of cold water and/or hot water
for such other purposes and/or steam, as the case may be. Tenant shall pay for
the quantities of cold water and hot water shown on such meters, at Landlord's
cost thereof, on the rendition of Landlord's bills therefor.
24.
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17.04. Landlord, at its expense, and at Tenant's request, shall insert
initial listings on the Building directory of the names of Tenant, and the names
of any of their officers and employees, provided that the names so listed shall
not take up more than Tenant's Proportionate Share of the space on the Building
directory. All Building directory changes made at Tenant's request after the
Tenant's initial listings have been placed on the Building directory shall be
made by Landlord at the expense of Tenant, and Tenant agrees to promptly pay to
Landlord as additional rent the cost of such changes within ten (10) days after
Landlord has submitted an invoice therefor.
17.05. Landlord reserves the right, without any liability to Tenant,
except as otherwise expressly provided in this lease, to stop service of any of
the heating, ventilating, air conditioning, electric, sanitary, elevator or
other Building systems serving the Demised Premises, or the rendition of any of
the other services required of Landlord under this lease, whenever and for so
long as may be necessary, by reason of accidents, emergencies, strikes or the
making of repairs or changes which Landlord is required by this lease or by law
to make or in good faith deems necessary, by reason of difficulty in securing
proper supplies of fuel, steam, water, electricity, labor or supplies, or by
reason of any other cause beyond Landlord's reasonable control.
17.06. Landlord shall make available for Tenant's use seven parking
spaces in the parking area adjacent to the Building. The manner of allocation of
parking spaces, as well as the methods of control of same, shall be in the sole
and absolute discretion of Landlord.
ARTICLE 18
ACCESS, CHANGES IN BUILDING FACILITIES, NAME
18.01. All walls, windows and doors bounding the Demised Premises
(including exterior Building walls, core corridor walls and doors and any core
corridor entrance), except the inside surfaces thereof, any terraces or roofs
adjacent to the Demised Premises, and any space in or adjacent to the Demised
Premises used for shafts, stacks, pipes, conduits, fan room, ducts, electric
or other utilities, sinks or other Building facilities, and the use thereof, as
well as access thereto through the Demised Premises for the purposes of
operation, maintenance, decoration and repair are reserved to Landlord.
18.02. Tenant shall permit Landlord to install, use and maintain pipes,
ducts and conduits within the demising walls, bearing columns and ceilings of
the Demised Premises.
18.03. Landlord or Landlord's agent shall have the right upon request
(except in emergency under clause (ii) hereof) to enter and/or pass through the
Demised Premises or any part
25.
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thereof, at reasonable times during reasonable hours, (i) to examine the Demised
Premises and to show them to the fee owners, lessors of superior leases, holders
of superior mortgages, or prospective purchasers, mortgagees or lessees of the
Building as an entirety, and (ii) for the purpose of making such repairs or
changes or doing such repainting in or to the Demised Premises or its
facilities, as may be provided for by this lease or as may be mutually agreed
upon by the parties or as Landlord may be required to make by law or in order to
repair and maintain said structure or its fixtures or facilities. Landlord shall
be allowed to take all materials into and upon the Demised Premises that may be
required for such repairs, changes, repainting or maintenance, without liability
to Tenant, but Landlord shall not unreasonably interfere with Tenant's use of
the Demised Premises. Landlord shall also have the right to enter on and/or pass
through the Demised Premises, or any part thereof, at such times as such entry
shall be required by circumstances of emergency affecting the Demised Premises
or said structure.
18.04. During the period of eighteen (18) months prior to the Expiration
Date Landlord may exhibit the Demised Premises to prospective tenants.
18.05. Landlord reserves the right, at any time after completion of the
Building, without incurring any liability to Tenant therefor, to make such
changes in or to the Building and the fixtures and equipment thereof, as well as
in or to the street entrances, halls, passages, elevators, escalators and
stairways thereof, as it may deem necessary or desirable.
18.06. Landlord may adopt any name for the Building. Landlord reserves
the right to change the name or address of the Building at any time.
18.07. For the purposes of Article 18, the term "Landlord" shall include
lessors of leases and the holders of mortgages to which this lease is subject
and subordinate as provided in Article 7.
ARTICLE 19
NOTICE OF ACCIDENTS
19.01. Tenant shall give notice to Landlord, promptly after Tenant
learns thereof, of (i) any accident in or about
26.
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the Demised Premises for which Landlord might be liable, (ii) all fires in the
Demised Premises, (iii) all damage to or defects in the Demised Premises,
including the fixtures, equipment and appurtenances thereof, for the repair of
which Landlord might be responsible, and (iv) all damage to or defects in any
parts or appurtenances of the Building's sanitary, electrical, heating,
ventilating, air-conditioning, elevator and other systems located in or passing
through the Demised Premises or any part thereof.
ARTICLE 20
NON-LIABILITY AND INDEMNIFICATION
20.01. Neither Landlord nor any agent or employee of Landlord shall be
liable to Tenant for any injury or damage to Tenant or to any other person or
for any damage to, or loss (by theft or otherwise) of, any property of Tenant or
of any other person, irrespective of the cause of such injury, damage or loss,
unless caused by or due to the negligence of Landlord, its agents or employees
without contributory negligence on the part of Tenant, it being understood that
no property, other than such as might normally be brought upon or kept in the
Demised Premises as an incident to the reasonable use of the Demised Premises
for the purposes herein permitted, will be brought upon or be kept in the
Demised Premises.
20.02. Tenant shall indemnify and save harmless Landlord and its agents
against and from (a) any and all claims (i) arising from (x) the conduct or
management of the Demised Premises or of any business therein, or (y) any work
or thing whatsoever done, or any condition created (other than by Landlord for
Landlord's or Tenant's account) in or about the Demised Premises during the term
of this lease or during the period of time, if any, prior to the Commencement
Date that Tenant may have been given access to the Demised Premises, or (ii)
arising from any negligent or otherwise wrongful act or omission of Tenant or
any of its subtenants or licensees or its or their employees, agents or
contractors, and (b) all costs, expenses and liabilities incurred in or in
connection with each such claim or action or proceeding brought thereon. In case
any action or proceeding be brought against Landlord by reason of any such
claim, Tenant, upon notice from Landlord, shall resist and defend such action or
proceeding.
27.
<PAGE> 34
20.03. Except as otherwise expressly provided in this lease, this lease
and the obligations of Tenant hereunder shall be in no wise affected, impaired
or excused because Landlord is unable to fulfill, or is delayed in fulfilling,
any of its obligations under this lease by reason of strike, other labor
trouble, governmental pre-emption or priorities or other controls in connection
with a national or other public emergency or shortages of fuel, supplies or
labor resulting therefrom, or other like cause beyond Landlord's reasonable
control.
ARTICLE 21
DESTRUCTION OR DAMAGE
21.01. If the Building or the Demised Premises shall be partially or
totally damaged or destroyed by fire or other cause, then, whether or not the
damage or destruction shall have resulted from the fault or neglect of Tenant,
or its employees, agents or visitors (and if this lease shall not have been
terminated as in this Article hereinafter provided), Landlord shall repair the
damage and restore and rebuild the Building and/or the Demised Premises, at its
expense, with reasonable dispatch after notice to it of the damage or
destruction; provided, however, that Landlord shall not be required to repair or
replace any of Tenant's Property.
21.02. If the Building or the Demised Premises shall be partially
damaged or partially destroyed by fire or other cause not attributable to the
fault, negligence or misuse of the Demised Premises by the Tenant, its agents or
employees, the rents payable hereunder shall be abated to the extent that the
Demised Premises shall have been rendered untenantable and for the period from
the date of such damage or destruction to the date the damage shall be repaired
or restored. If the Demised Premises or a major part thereof shall be totally
(which shall be deemed to include substantially totally) damaged or destroyed or
rendered completely (which shall be deemed to include substantially completely)
untenantable on account of fire or other cause, the rents shall abate as of the
date of the damage or destruction and until Landlord shall repair, restore and
rebuild the Building and the Demised Premises, provided, however, that should
Tenant reoccupy a portion of the Demised Premises during the period the
restoration work is taking place and prior to the date that the same are made
completely tenantable, rents allocable to such portion shall be payable by
Tenant from the date of such occupancy.
28.
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21.03. If the Building or the Demised Premises shall be totally damaged
or destroyed by fire or other cause, or if the Building shall be so damaged or
destroyed by fire or other cause (whether or not the Demised Premises are
damaged or destroyed) as to require a reasonably estimated expenditure of more
than 40% of the full insurable value of the Building immediately prior to the
casualty, then in either such case Landlord may terminate this lease by giving
Tenant notice to such effect within 180 days after the date of the casualty. In
case of any damage or destruction mentioned in this Article, Tenant may
terminate this lease by notice to Landlord, if Landlord has not completed the
making of the required repairs and restored and rebuilt the Building and the
Demised Premises within twelve (12) months from the date of such damage or
destruction, or within such period after such date (not exceeding six (6)
months) as shall equal the aggregate period Landlord may have been delayed in
doing so by adjustment of insurance, labor trouble, governmental controls, act
of God, or any other cause beyond Landlord's reasonable control.
21.04. No damages, compensation or claim shall be payable by Landlord
for inconvenience, loss of business or annoyance arising from any repair or
restoration of any portion of the Demised Premises or of the Building pursuant
to this Article. Landlord shall use its best efforts to effect such repair or
restoration promptly and in such manner as not unreasonably to interfere with
Tenant's use and occupancy.
21.05. Notwithstanding any of the foregoing provisions of this Article,
if Landlord or the lessor of any superior lease or the holder of any superior
mortgage shall be unable to collect all of the insurance proceeds (including
rent insurance proceeds) applicable to damage or destruction of the Demised
Premises or the Building by fire or other cause, by reason of some action or
inaction on the part of Tenant or any of its employees, agents or contractors,
then, without prejudice to any other remedies which may be available against
Tenant, there shall be no abatement of Tenant's rents.
21.06. Landlord will not carry insurance of any kind on Tenant's
Property, and, except as provided by law or by reason of its fault or its breach
of any of its obligations hereunder, shall not be obligated to repair any damage
thereto or replace the same; to the extent that Tenant shall maintain insurance
on Tenant's Property, Landlord shall not be obligated to repair any damage
thereto or replace the same.
29.
<PAGE> 36
21.07. The provisions of this Article shall be considered an express
agreement governing any case of damage or destruction of the Demised Premises by
fire or other casualty, and any law of the State of New Jersey providing for
such a contingency in the absence of an express agreement, and any other law of
like import, now or hereafter in force, shall have no application in such case.
21.08. If the Demised Premises and/or access thereto become partially or
totally damaged or destroyed by any casualty not insured against, then Landlord
shall have the right to terminate this Lease upon giving the Tenant thirty (30)
days notice and upon the expiration of said thirty (30) day notice period this
Lease shall terminate as if such termination date were the Expiration Date.
ARTICLE 22
EMINENT DOMAIN
22.01. If the whole of the Building shall be lawfully taken by
condemnation or in any other manner for any public or quasi-public use or
purpose, this lease and the term and estate hereby granted shall forthwith
terminate as of the date of vesting of title on such taking (which date is
hereinafter also referred to as the "date of the taking"), and the rents shall
be prorated and adjusted as of such date.
22.02. If any part of the Building shall be so taken, this lease shall
be unaffected by such taking, except that Tenant may elect to terminate this
lease in the event of a partial taking, if the area of the Demised Premises
shall not be reasonably sufficient for Tenant to continue feasible operation of
its business and more than forty (40%) percent of the Demised Premises shall
have been taken. Tenant shall give notice of such election to Landlord not later
than thirty (30) days after the date of such taking. Upon the giving of such
notice to Landlord this Lease shall terminate on the date of service of notice
and the rents apportioned to the part of the Demised Premises so taken shall be
prorated and adjusted as of the date of the taking and the rents apportioned to
the remainder of the Demised Premises shall be prorated and adjusted as of such
termination date. Upon such partial taking and this lease continuing in force as
to any part of the Demised Premises, the rents apportioned to the part taken
shall be prorated and adjusted as of the date of taking and from such date the
fixed rent shall be reduced to the amount apportioned to the remainder of the
Demised Premises and additional rent shall be payable pursuant to Article 5
according to the rentable area remaining.
30.
<PAGE> 37
22.03. Except as specifically set forth in Section 22.04 hereof,
Landlord shall be entitled to receive the entire award in any proceeding with
respect to any taking provided for in this Article without deduction therefrom
for any estate vested in Tenant by this Lease and Tenant shall receive no part
of such award. Tenant hereby expressly assigns to Landlord all of its right,
title and interest in or to every such award.
22.04. If the temporary use or occupancy or all or any part of the
Demised Premises shall be lawfully taken by condemnation or in any other manner
for any public or quasi-public use or purpose during the term of this lease,
Tenant shall be entitled, except as hereinafter set forth, to receive any award
which does not serve to diminish Landlord's award in any respect and, if so
awarded, for the taking of Tenant's Property and for moving expenses, and
Landlord shall be entitled to receive that portion which represents
reimbursement for the cost of restoration of the Demised Premises. This lease
shall be and remain unaffected by such taking and Tenant shall continue
responsible for all of its obligations hereunder insofar as such obligations are
not affected by such taking and shall continue to pay in full the fixed rent and
additional rent when due. If the period of temporary use or occupancy shall
extend beyond the Expiration Date, that part of the award which represents
compensation for the use or occupancy of the Demised Premises (or a part
thereof) shall be divided between Landlord and Tenant so that Tenant shall
receive so much thereof as represents the period prior to the Expiration Date
and Landlord shall receive so much thereof as represents the period subsequent
to the Expiration Date. All moneys received by Tenant as, or as part of, an
award for temporary use and occupancy for a period beyond the date to which the
rents hereunder have been paid by Tenant shall be received, held and applied by
Tenant as a trust fund for payment of the rents falling due hereunder.
22.05. In the event of any taking of less than the whole of the Building
which does not result in a termination of this lease, or in the event of a
taking for a temporary use or occupancy of all or any part of the Demised
Premises which does not extend beyond the expiration date, Landlord, at its
expense, shall proceed with reasonable diligence to repair, alter and restore
the remaining parts of the Building and the Demised Premises to substantially
their former condition to the extent that the same may be feasible and so as to
constitute a complete and tenantable Building and Demised Premises provided that
Landlord's liability under this Section 22.05 shall be limited to
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the net amount (after deducting all costs and expenses, including, but not
limited to, legal expenses incurred in connection with the eminent domain
proceeding) received by Landlord as an award arising out of such taking, and
provided further that Landlord shall have the right, if such taking occurs
within the last three (3) years of the term of this Lease, to terminate this
Lease by giving the Tenant written notice to such effect within ninety (90) days
after such taking and this Lease shall then expire on the effective date stated
in the notice as if that were the Expiration Date, but the fixed rent and the
additional rent shall be prorated and adjusted as of the date of such taking.
22.06. Should any part of the Demised Premises be taken to effect
compliance with any law or requirement of public authority other than in the
manner hereinabove provided in this Article, then, (i) if such compliance is the
obligation of Tenant under this Lease, Tenant shall not be entitled to any
diminution or abatement of rent or other compensation from Landlord therefor,
but (ii) if such compliance is the obligation of Landlord under this Lease, the
fixed rent hereunder shall be reduced and additional rents under Article 5 shall
be adjusted in the same manner as is provided in Section 22.02 according to the
reduction in rentable area of the Demised Premises resulting from such taking.
22.07. Any dispute which may arise between the parties with respect to
the meaning or application of any of the provisions of this Article shall be
determined by arbitration in the manner provided in Article 33.
ARTICLE 23
SURRENDER
23.01 On the last day of the term of this lease, or upon any earlier
termination of this lease, or upon any re-entry by Landlord upon the Demised
Premises, Tenant shall quit and surrender the Demised Premises to Landlord in
good order, condition and repair, except for ordinary wear and tear and such
damage or destruction as Landlord is required to repair or restore under this
lease, and Tenant shall remove all of Tenant's Property therefrom except as
otherwise expressly provided in this lease.
32.
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ARTICLE 24
CONDITIONS OF LIMITATION
24.01. This lease and the term and estate hereby granted are subject to
the limitation that whenever Tenant shall make an assignment of the property of
Tenant for the benefit of creditors, or shall file a voluntary petition under
any bankruptcy or insolvency law, or an involuntary petition alleging an act of
bankruptcy or insolvency shall be filed against Tenant under any bankruptcy or
insolvency law, or whenever a petition shall be filed by or against Tenant under
the reorganization provisions of the United States Bankruptcy Act or under the
provisions of any law of like import, or whenever a petition shall be filed by
Tenant under the arrangement provisions of the United States Bankruptcy Act or
under the provisions of any law of like import, or whenever a permanent receiver
of Tenant or of or for the property of Tenant shall be appointed, then Landlord,
(a) at any time after receipt of notice of the occurrence of any such event, or
(b) if such event occurs without the acquiescence of Tenant, at any time after
the event continues for thirty (30) days, Landlord may give Tenant a notice of
intention to end the term of this Lease at the expiration of five (5) days from
the date of service of such notice of intention, and upon the expiration of said
five (5) day period this Lease and the term and estate hereby granted, whether
or not the term shall theretofore have commenced, shall terminate with the same
effect as if that day were the Expiration Date, but Tenant shall remain liable
for damages as provided in Article 26.
24.02. This lease and the term and estate hereby granted are subject to
the further limitation that
(a) whenever Tenant shall default in the payment of any
installment of fixed rent, or in the payment of any additional rent or
any other charge payable by Tenant to Landlord, on any day upon which
the same ought to be paid, and such default shall continue for ten (10)
days thereafter, or
(b) whenever Tenant shall do or permit anything to be done,
whether by action or inaction, contrary to any of Tenant's obligations
hereunder, and if such situation shall continue and shall not be
remedied by Tenant within
33.
<PAGE> 40
thirty (30) days after Landlord shall have given to Tenant a notice
specifying the same, or, in the case of a happening or default which
cannot with due diligence be cured within a period of thirty (30) days
and the continuance of which for the period required for cure will not
subject Landlord to the risk of criminal liability or termination of any
superior lease or foreclosure of any superior mortgage, if Tenant shall
not, (i) within said thirty (30) day period advise Landlord of Tenant's
intention to duly institute all steps necessary to remedy such
situation, (ii) duly institute within said thirty (30) day period, and
thereafter diligently prosecute to completion all steps necessary to
remedy the same and (iii) complete such remedy within such time after
the date of the giving of said notice of Landlord as shall reasonably be
necessary, or
(c) whenever any event shall occur or any contingency shall
arise whereby this lease or the estate hereby granted or the unexpired
balance of the term hereof would, by operation of law or otherwise,
devolve upon or pass to any person, firm or corporation other than
Tenant, except as expressly permitted by Article 8, or
(d) whenever Tenant shall abandon the Demised Premises (unless
as a result of a casualty),
then and in any of said cases this lease and the term and estate hereby granted,
whether or not the term shall theretofore have commenced, shall terminate
without the necessity of any notice or any further notice, as the case may be,
with the same effect as if that day were the Expiration Date, but Tenant shall
remain liable for damages as provided in Article 26.
ARTICLE 25
RE-ENTRY BY LANDLORD
25.01. If Tenant shall default in the payment of any installment of
fixed rent, or of any additional rent, on any date upon which the same ought to
be paid, and if such default shall continue for ten (10) days thereafter, or if
this Lease shall expire as in Article 24 provided, Landlord or Landlord's agents
and employees may immediately or at any time thereafter re-enter the Demised
Premises, or any part thereof,
34.
<PAGE> 41
in the name of the whole, either by summary dispossess proceedings or by any
suitable action or proceeding at law, or by force or otherwise, without being
liable to indictment, prosecution or damages therefor, and may repossess the
same, and may remove any persons therefrom, to the end that Landlord may have,
hold and enjoy the Demised Premises again as and of its first estate and
interest therein. The word "re-enter", as herein used, is not restricted to its
technical legal meaning. In the event of any termination of this lease under the
provisions of Article 24 or if Landlord shall re-enter the Demised Premises
under the provisions of this Article or in the event of the termination of this
Lease, or of re-entry, by or under any summary dispossess or other proceeding or
action or any provision of law by reason of default hereunder on the part of
Tenant, Tenant shall thereupon pay to Landlord the fixed rent and additional
rent payable by Tenant to Landlord up to the time of such termination of this
Lease, or of such recovery of possession of the Demised Premises by Landlord, as
the case may be, and shall also pay to Landlord damages as provided in Article
26.
25.02. In the event of a breach or threatened breach by Tenant of any of
its obligations under this lease, Landlord shall also have the right of
injunction. The special remedies to which Landlord may resort hereunder are
cumulative and are not intended to be exclusive of any other remedies or means
of redress to which Landlord may lawfully be entitled at any time and Landlord
may invoke any remedy allowed at law or in equity as if specific remedies were
not provided for herein.
25.03. If this Lease shall terminate under the provisions of Article
24, or if Landlord shall re-enter the Demised Premises under the provisions of
this Article, or in the event of the termination of this lease, or of re-entry,
by or under any summary dispossess or other proceeding or action or any
provision of law by reason of default hereunder on the part of Tenant, Landlord
shall be entitled to retain all moneys, if any, paid by Tenant to Landlord,
whether as advance rent, security or otherwise, but such moneys shall be
credited by Landlord against any fixed rent or additional rent due from Tenant
at the time of such termination or re-entry or, at Landlord's option, against
any damages payable by Tenant under Article 26 or pursuant to law.
35.
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ARTICLE 26
DAMAGES
26.01. If this lease is terminated under the provisions of Article 24,
or if Landlord shall re-enter the Demised Premises under the provisions of
Article 25, or in the event of the termination of this lease, or of re-entry, by
or under any summary dispossess or other proceeding or action or any provision
of law by reason of default hereunder on the part of Tenant, Tenant shall pay to
Landlord as damages, at the election of Landlord, either
(a) a sum which at the time of such termination of this lease or
at the time of any such re-entry by Landlord, as the case may be,
represents the then value of the excess, if any, of
(1) the aggregate of the fixed rent and the additional
rent payable hereunder which would have been payable by Tenant
(conclusively presuming the additional rent to be the same as
was payable for the year immediately preceding such termination)
for the period commencing with such earlier termination of this
lease or the date of any such re-entry, as the case may be, and
ending with the Expiration Date, had this lease not so
terminated or had Landlord not so re-entered the Demised
Premises, over
(2) the aggregate rental value of the Demised Premises
for the same period, or
(b) sums equal to the fixed rent and the additional rent (as
above presumed) payable hereunder which would have been payable by
Tenant had this lease not so terminated, or had Landlord not so
re-entered the Demised Premises, payable upon the due dates therefor
specified herein following such termination or such re-entry and until
the Expiration Date, provided, however, that if Landlord shall relet the
Demised Premises during said period, Landlord shall credit Tenant with
the net rents received by Landlord from such reletting, such net rents
to be determined by first deducting from the gross rents as and when
received by Landlord from such reletting the expenses incurred or paid
by Landlord in terminating this lease or
36.
<PAGE> 43
in re-entering the Demised Premises and in securing possession thereof,
as well as the expenses of reletting, including altering and preparing
the Demised Premises for new tenants, brokers' commissions, and all
other expenses properly chargeable against the Demised Premises and the
rental therefrom; it being understood that any such reletting may be for
a period shorter or longer than the remaining term of this lease; but in
no event shall Tenant be entitled to receive any excess of such net
rents over the sums payable by Tenant to Landlord hereunder, nor shall
Tenant be entitled in any suit for the collection of damages pursuant to
this Subsection to a credit in respect of any net rents from a
reletting, except to the extent that such net rents are actually
received by Landlord. If the Demised Premises or any part thereof should
be relet in combination with other space, then proper apportionment on a
square foot basis shall be made of the rent received from such reletting
and of the expenses of reletting.
If the Demised Premises or any part thereof be relet by Landlord for the
unexpired portion of the term of this lease, or any part thereof, before
presentation of proof of such damages to any court, commission or tribunal, the
amount of rent reserved upon such reletting shall, prima facie, be the fair and
reasonable rental value for the Demised Premises, or part thereof, so relet
during the term of the reletting.
26.02. Suit or suits for the recovery of such damages, or any
installments thereof, may be brought by Landlord from time to time at its
election, and nothing contained herein shall be deemed to require Landlord to
postpone suit until the date when the term of this Lease would have expired if
it had not been so terminated under the provisions of Article 24, or under any
provision of law, or had Landlord not re-entered the Demised Premises. Nothing
herein contained shall be construed to limit or preclude recovery by Landlord
against Tenant of any sums or damages to which, in addition to the damages
particularly provided above, Landlord may lawfully be entitled by reason of any
default hereunder on the part of Tenant. Nothing herein contained shall be
construed to limit or prejudice the right of Landlord to seek and obtain as
liquidated damages by reason of the termination of this lease or re-entry on the
Demised Premises for the default of Tenant under this lease, an amount equal to
the maximum allowed by any statute or rule of law in effect at the time when,
and governing the proceedings in which, such damages are to be proved whether or
not such amount be greater, equal to, or less than any of the sums referred to
in Section 26.01.
37.
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ARTICLE 27
WAIVERS
27.01. Tenant, for Tenant, and on behalf of any and all persons claiming
through or under Tenant, including creditors of all kinds, does hereby waive and
surrender all right and privilege which they or any of them might have under or
by reason of any present or future law, to redeem the Demised Premises or to
have a continuance of this lease for the term hereby demised after being
dispossessed or ejected therefrom by process of law or under the terms of this
lease or after the termination of this lease as herein provided.
27.02. In the event that Tenant is in arrears in payment of fixed rent
or additional rent hereunder, Tenant waives Tenant's right, if any, to designate
the items against which any payments made by Tenant are to be credited, and
Tenant agrees that Landlord may apply any payments made by Tenant to any items
it sees fit, irrespective of and notwithstanding any designation or request by
Tenant as to the items against which any such payments shall be credited.
27.03. Landlord and Tenant hereby waive trial by jury in any action,
proceeding or counterclaim brought by either against the other on any matter
whatsoever arising out of or in any way connected with this lease, the
relationship of Landlord and Tenant, Tenant's use or occupancy of the Demised
Premises, including any claim of injury or damage, or any emergency or other
statutory remedy with respect thereto.
27.04. The provisions of Articles 16 and 17 shall be considered express
agreements governing the services to be furnished by Landlord, and Tenant agrees
that any laws and/or requirements of public authorities, now or hereafter in
force, shall have no application in connection with any enlargement of
Landlord's obligations with respect to such services.
ARTICLE 28
NO OTHER WAIVERS OR MODIFICATIONS
28.01. The failure of either party to insist in any one or more
instances upon the strict performance of any one or more of the obligations of
this lease, or to exercise any election herein contained, shall not be construed
as a waiver
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or relinquishment for the future of the performance of such one or more
obligations of this lease or of the right to exercise such election, but the
same shall continue and remain in full force and effect with respect to any
subsequent breach, act or omission. No executory agreement hereafter made
between Landlord and Tenant shall be effective to change, modify, waive,
release, discharge, terminate or effect an abandonment of this lease, in whole
or in part, unless such executory agreement is in writing, refers expressly to
this lease and is signed by the party against whom enforcement of the change,
modification, waiver, release, discharge or termination or effectuation of the
abandonment is sought.
28.02. The following specific provisions of this Section shall not be
deemed to limit the generality of any of the foregoing provisions of this
Article:
(a) No agreement to accept a surrender of all or any part of the
Demised Premises shall be valid unless in writing and signed by
Landlord. The delivery of keys to an employee of Landlord or of its
agent shall not operate as a termination of this lease or a surrender of
the Demised Premises. If Tenant shall at any time request Landlord to
sublet the Demised Premises for Tenant's account, Landlord or its agent
is authorized to receive said keys for such purposes without releasing
Tenant from any of its obligations under this lease, and Tenant hereby
releases Landlord from any liability for loss or damage to any of
Tenant's property in connection with such subletting.
(b) The receipt by Landlord of rent with knowledge of breach of
any obligation of this lease shall not be deemed a waiver of such
breach.
(c) No payment by Tenant or receipt by Landlord of a lesser
amount than the correct fixed rent or additional rent due hereunder
shall be deemed to be other than a payment on account, nor shall any
endorsement or statement on any check or any letter accompanying any
check or payment be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's right to
recover the balance or pursue any other remedy in this lease or at law
provided.
ARTICLE 29
CURING TENANT'S DEFAULTS, ADDITIONAL RENT
29.01. If Tenant shall default in the performance of any of Tenant's
obligations under this lease, Landlord, without thereby waiving such default,
may (but shall not be obligated
39.
<PAGE> 46
to) perform the same for the account and at the expense of Tenant, without
notice, in a case of emergency, and in any other case, only if such default
continues after the expiration of (i) ten (10) days from the date Landlord gives
Tenant notice of intention so to do, or (ii) the applicable grace period
provided in Section 24.02 or elsewhere in this lease for cure of such default,
whichever occurs later.
29.02. Bills for any expenses incurred by Landlord in connection with
any such performance by it for this account of Tenant, and bills for all costs,
expenses and disbursements of every kind and nature whatsoever, including
reasonable counsel fees, involved in collecting or endeavoring to collect the
fixed rent or additional rent or any part thereof or enforcing or endeavoring to
enforce any rights against Tenant, under or in connection with this lease, or
pursuant to law, including any such cost, expense and disbursement involved in
instituting and prosecuting summary proceedings, as well as bills for any
property, material, labor or services provided, furnished, or rendered, by
Landlord or at its instance to Tenant, may be sent by Landlord to Tenant
monthly, or immediately, at Landlord's option, and, shall be due and payable in
accordance with the terms of such bills.
ARTICLE 30
BROKER
30.01. Tenant covenants, warrants and represents that there was no
broker except The Boyle Company instrumental in consummating this lease and that
no conversations or negotiations were had with any broker except concerning the
renting of the premises. Tenant agrees to hold Landlord harmless against any
claims for a brokerage commission arising out of any conversations or
negotiations had by Tenant with any broker except
ARTICLE 31
NOTICES
31.01. Any notice, statement, demand or other communication required or
permitted to be given, rendered or made by either party to the other, pursuant
to this lease or pursuant to any applicable law or requirement of public
authority, shall be in
40.
<PAGE> 47
writing (whether or not so stated elsewhere in this lease) and shall be deemed
to have been properly given, rendered or made, if sent by registered or
certified mail, return receipt requested, addressed to the other party at the
address hereinabove set forth (except that after the Commencement Date, Tenant's
address, unless Tenant shall give notice to the contrary, shall be the Building)
and shall be deemed to have been given, rendered or made on the date following
the date of mailing. Either party may, by notice as aforesaid, designate a
different address or addresses for notices, statements, demand or other
communications intended for it.
ARTICLE 32
ESTOPPEL CERTIFICATE, MEMORANDUM
32.01. Each party agrees, at any time and from time to time, as
requested by the other party, upon not less than ten (10) days' prior notice, to
execute and deliver to the other a statement certifying that this lease is
unmodified and in full force and effect (or if there have been modifications,
that the same is in full force and effect as modified and stating the
modifications), certifying the dates to which the fixed rent and additional rent
have been paid, and stating whether or not, to the best knowledge of the signer,
the other party is in default in performance of any of its obligations under
this lease, and, if so, specifying each such default of which the signer may
have knowledge, it being intended that any such statement delivered pursuant
hereto may be relied upon by others with whom the party requesting such
certificate may be dealing. If Tenant fails to deliver such notice, Landlord
shall be deemed appointed as Tenant's attorney-in-fact to prepare and deliver
such notice on behalf of Tenant, and Tenant shall be deemed bound thereby upon
Landlord's furnishing a copy of the notice to Tenant.
32.02 At the request of either party, Landlord and Tenant shall promptly
execute, acknowledge and deliver a memorandum with respect to this lease
sufficient for recording. Such memorandum shall not in any circumstances be
deemed to change or otherwise affect any of the obligations or provisions of
this lease.
ARTICLE 33
ARBITRATION
33.01. Either party may request arbitration of any matter in dispute
wherein arbitration is expressly provided in this
41.
<PAGE> 48
Lease as the appropriate remedy. The party requesting arbitration shall do so by
giving notice to that effect to the other party. The arbitration shall be
conducted, to the extent consistent with this Article, in accordance with the
then prevailing rules of the American Arbitration Association (or any
organization successor thereto) and application shall be made to the American
Arbitration Association for the appointment of one (1) arbitrator. The
arbitrator shall have the right to retain and consult experts and competent
authorities skilled in the matters under arbitration. The arbitrator shall
render his award within sixty (60) days after his appointment. Such award shall
be in writing and counterpart copies thereof shall be delivered to each of the
parties. In rendering such decision and award, the arbitrator shall not add to,
subtract from or otherwise modify the provisions of this lease.
33.02. If for any reason whatsoever the written decision and award of
the arbitrator shall not be rendered within sixty (60) days after his
appointment, then at any time thereafter before such decision and award shall
have been rendered either party may apply to the Superior Court or to any other
court having jurisdiction and exercising the functions similar to those now
exercised by such court, by action, proceeding or otherwise (but not by a new
arbitration proceeding) as may be proper to determine the question in dispute
consistently with the provisions of this lease.
33.03. Each party shall pay the fees and expenses of the arbitration
equally.
ARTICLE 34
NO OTHER REPRESENTATIONS, CONSTRUCTION, GOVERNING LAW
34.01. Tenant expressly acknowledges and agrees that Landlord has not
made and is not making, and Tenant, in executing and delivering this lease, is
not relying upon, any warranties, representations, promises or statements,
except to the extent that the same are expressly set forth in this lease or in
any other written agreement which may be made between the parties concurrently
with the execution and delivery of this lease and shall expressly refer to this
lease. This lease and said other written agreement(s) made concurrently herewith
are hereinafter referred to as the "lease documents". It is understood and
agreed that all understandings and agreements hereto-
42.
<PAGE> 49
fore had between the parties are merged in the lease documents, which alone
fully and completely express their agreements and that the same are entered into
after full investigation, neither party relying upon any statement or
representation not embodied in the lease documents, made by the other.
34.02. If any of the provisions of this lease, or the application
thereof to any person or circumstances, shall, to any extent, be invalid or
unenforceable, the remainder of this lease, or the application of such provision
or provisions to persons or circumstances other than those as to whom or which
it is held, invalid or unenforceable, shall not be affected thereby, and every
provision of this lease shall be valid and enforceable to the fullest extent
permitted by law.
34.03. This lease shall be governed in all respects by the laws of the
State of New Jersey.
ARTICLE 35
SECURITY
35.01 Tenant has deposited with Landlord the Burn of $ 10,566.00 receipt
of which is hereby acknowledged. Said deposit (sometimes referred to as the
"Security Deposit") shall be held by Landlord as security for the faithful
performance by Tenant of all the terms of the Lease by said Tenant to be
observed and performed. The Security Deposit shall not and may not be mortgaged,
assigned, transferred or encumbered by Tenant, without the written consent of
Landlord, and any such act on the part of Tenant shall be without force and
effect and shall not be binding upon Landlord. If any of the fixed or additional
rent herein reserved or any other sum payable by Tenant to Landlord shall be
overdue and unpaid, or if Landlord makes payment on behalf of Tenant, or if
Tenant shall fail to perform any of the terms, covenants and conditions of the
Lease, then Landlord may, at its option and without prejudice to any other
remedy which Landlord may have on account thereof, appropriate and apply the
entire Security Deposit or so much thereof as may be necessary to compensate
Landlord toward the payment of fixed or additional rent and any loss or damage
sustained by Landlord due to such breach on the part of Tenant, plus expenses;
and Tenant shall forthwith upon demand restore the Security Deposit to the
original sum deposited. The issuance of a warrant and/or the re-entering of the
Demised Premises by Landlord for any default on the part of Tenant or for any
other reason prior to
43.
<PAGE> 50
the expiration of the Demised Term shall not be deemed such a termination of the
Lease as to entitle Tenant to the recovery of the Security Deposit. If Tenant
complies with all of the terms, covenants and conditions of the Lease and pays
all of the fixed and additional rent and all other sums payable by Tenant to
Landlord as they fall due, the Security Deposit shall be returned in full to
Tenant after the expiration of the Demised Term and within thirty days after
delivery of possession of the Demised Premises to Landlord. In the event of
bankruptcy or other creditor-debtor proceedings against Tenant, the Security
Deposit and all other securities shall be deemed to be applied first to the
payment of fixed and additional rent and other charges due Landlord for all
periods prior to the filing of such proceedings. In the event of sale by
Landlord of the Building, Landlord may deliver the then balance of the Security
Deposit to the transferee of Landlord's interest in the Demised Premises and
Landlord shall thereupon be discharged from any further liability with respect
to the Security Deposit, and this provision shall also apply to any subsequent
transferees. No holder of a superior mortgage or a lessor's interest in a
superior lease to which the Lease is subordinate shall be responsible in
connection with the Security Deposit, by way of credit or payment of any fixed
or additional rent, or otherwise, unless such mortgagee or lessor actually shall
have received the entire Security Deposit.
ARTICLE 36
PARTIES BOUND
36.01. The obligation of this lease shall bind and benefit the
successors and assigns of the parties with the same effect as if mentioned in
each instance where a party is named or referred to, except that no violation of
the provisions of Article 8 shall operate to vest any rights in any successor or
assignee of Tenant and that the provisions of this Article shall not be
construed as modifying the conditions of limitation contained in Article 24.
However, the obligations of Landlord under this lease shall not be binding upon
Landlord herein named with respect to any period subsequent to the transfer of
its interest in the Building as owner or lessee thereof and in event of such
transfer said obligations shall thereafter be binding upon each transferee of
the interest of Landlord herein named as such owner or lessee of the Building,
but only with respect to the period ending with a subsequent transfer within the
meaning of this Article.
44.
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36.02. If Landlord shall be an individual, joint venture, tenancy in
common, copartnership, unincorporated association, or other unincorporated
aggregate of individuals and/or entities or a corporation, Tenant shall look
only to such Landlord's estate and property in the Building (or the proceeds
thereof) and, where expressly so provided in this lease, to offset against the
rents payable under this lease, for the satisfaction of Tenant's remedies for
the collection of a judgment (or other judicial process) requiring the payment
of money by Landlord in the event of any default by Landlord hereunder, and no
other property or assets of such Landlord shall be subject to levy, execution or
other enforcement procedure for the satisfaction of Tenant's remedies under or
with respect to this lease, the relationship of Landlord and Tenant hereunder or
Tenant's use or occupancy of the Demised Premises.
ARTICLE 37
CERTAIN DEFINITIONS AND CONSTRUCTIONS
37.01. For the purposes of this lease and all agreements supplemental
to this lease, unless the context otherwise requires the definitions set forth
in Exhibit E annexed hereto shall be utilized.
37.02. The various terms which are italicized and defined in other
Articles of this lease or are defined in Exhibits annexed hereto, shall have the
meanings specified in such other Articles and such Exhibits for all purposes of
this lease and all agreements supplemental thereto, unless the context shall
otherwise require.
37.03. The Article headings in this lease and the Index prefixed to
this lease are inserted only as a matter of convenience in reference and are not
to be given any effect whatsoever in construing this lease.
45.
<PAGE> 52
ARTICLE 38
REPRESENTATIVES AUTHORIZED
38.01 The above signatures represent that they are authorized by their
respective entities to execute this agreement, and that Tenant will
supply a Board Resolution confirming same.
-46-
<PAGE> 53
[LETTERHEAD ILLEGIBLE]
BEGINNING at the point of intersection of the westerly line of South Street and
the northerly line of Central Avenue; thence 1) along the said northerly line
of Central Avenue North 87 degrees 47 minutes West 408.58 feet to a point in the
easterly line of lands now or formerly of the L.B. Coddington Co.; thence 2)
along the said line of lands of L.B. Coddington Co., North 2 degrees 13 minutes
West 508.70 feet to a point in the southerly line of lands now or formerly of
Paul R. Badgley; thence 3) along the said line of lands of Paul R. Badgley
North 78 degrees 38 minutes East 231.35 feet to a point in the said westerly
line of South Street; thence 4) along the said westerly line of South Street;
South 40 degrees 36 minutes East 166.10 feet to a point of curve; thence 5)
still along the said westerly line of South Street on a curve to the right
having a radius of 344.19 feet an arc distance of 228.48 feet to a point of
tangency; thence 6) still along the said westerly line of South Street South 2
degrees 34 minutes East 235.26 feet to the point or place of BEGINNING.
The above description describes the entire parcel occupied by the office
building of which the demised premises forms a part and also includes the
Murray Hill Motor Inn building, parking appurtenances, et cetera. It is not
the intention of this description that the demised premises includes the above
description, but merely sets forth the entire parcel of which the demised
premises in the office building forms a part.
<PAGE> 54
EXHIBIT B
[TENANT LAYOUT PLAN] BARRINGER TECHNOLOGIES
<PAGE> 55
EXHIBIT C
LANDLORDS WORKLETTER
1) Landlord will paint and repair all walls and door frames with two coats
of latex paint, color to be chosen by Tenant.
2) Replace or repair any window blinds and screens.
3) Replace any stained or broken ceiling tiles.
4) Shampoo and clean all carpeted areas of the demised premises.
5) Clean all windows and sills of the demised premises.
6) Landlord agrees to repair any carpeting as necessary.
<PAGE> 56
EXHIBIT D
RULES AND REGULATIONS
1. The rights of tenants in the entrances, corridors, elevators and
escalators of the Building are limited to ingress to and egress from the
tenants' premises for the tenants and their employees, licensees and invitees,
and no tenant shall use, or permit the use of, the entrances, corridors,
escalators or elevators for any other purpose. No tenant shall invite to the
tenant's premises, or permit the visit of, persons in such numbers or under such
conditions as to interfere with the use and enjoyment of any of the plazas,
entrances, corridors, escalators, elevators and other facilities of the Building
by other tenants. Fire exits and stairways are for emergency use only, and they
shall not be used for any other purpose by the tenants, their employees,
licensees or invitees. No tenant shall encumber or obstruct, or permit the
encumbrance or obstruction of any of the sidewalks, plazas, entrances,
corridors, escalators, elevators, fire exits or stairways of the Building. The
Landlord reserves the right to control and operate the public portions of the
building and the public facilities, as well as facilities furnished for the
common use of the tenants, in such manner as it deems best for the benefit of
the tenants generally.
2. The Landlord may refuse admission to the Building outside of
ordinary business hours to any person not having a pass issued by the Landlord
or the tenant whose premises are to be entered or not otherwise properly
identified, and may require all persons admitted to or leaving the Building
outside of ordinary business hours to register. Any person whose presence in the
Building at any time shall, in the judgment of the Landlord, be prejudicial to
the safety, character, reputation and interests of the Building or of its
tenants may be denied access to the Building or may be ejected therefrom. In
case of invasion, riot, public excitement or other commotion the Landlord may
prevent all access to the Building during the continuance of the same, by
closing the doors or otherwise, for the safety of the tenants and protection of
property of the Building. The
<PAGE> 57
Landlord may require any person leaving the Building with any package or other
object to exhibit a pass from the tenant from whose premises the package or
object is being removed, but the establishment and enforcement of such
requirement shall not impose any responsibility on the Landlord for the
protection of any tenant against the removal of property from the premises of
the tenant. The Landlord shall in no way be liable to any tenant for damages or
loss arising from the admission, exclusion or ejection of any person to or from
the tenant's premises or the Building under the provisions of this rule.
Canvassing, soliciting or peddling in the Building is prohibited and every
tenant shall co-operate to prevent the same.
3. No tenant shall obtain or accept for use in its premises ice,
drinking water, food, beverage, towel, barbering, boot blacking, floor
polishing, lighting maintenance, cleaning or other similar services from any
persons not authorized by the Landlord in writing to furnish such services,
provided that the charges for such services by persons authorized by the
Landlord are not excessive and where appropriate and consonant with the security
and proper operation of the Building, sufficient persons are so authorized for
the same service to provide tenants with a reasonably competitive selection.
Such services shall be furnished only at such hours, in such places within the
tenant's premises and under such reasonable regulations as may be fixed by the
Landlord.
4. The cost of repairing any damage to the public portions of the
Building or the public facilities or to any facilities used in common with other
tenants, caused by a tenant or the employees, licensees or invitees of the
tenant, shall be paid by such tenant.
5. No lettering, sign, advertisement, notice or object shall be
displayed in or on the windows or doors, or on the outside of any tenant's
premises, or at any point inside any tenant's premises where the same might be
visible outside of such premises, except that the name of the tenant may be
displayed on the entrance door of the tenant's premises, and in the elevator
lobbies of the floors which are occupied entirely by any tenant, subject to the
approval of the Landlord as to the size, color and style of such display. The
inscription of the name of the tenant on the door of the tenant's premises
<PAGE> 58
shall be done by the Landlord at the expense of the tenant. Listing of the name
of the tenant on the directory boards in the Building shall be done by the
Landlord at its expense, any other listings shall be in the discretion of the
Landlord.
6. No awnings or other projections over or around the windows shall be
installed by any tenant, and only such window blinds as are supplied or
permitted by the Landlord shall be used in a tenant's premises. Linoleum, tile
or other floor covering shall be laid in a tenant's premises only in a manner
approved by the Landlord.
7. The Landlord shall have the right to prescribe the weight and
position of safes and other objects of excessive weight, and no safe or other
object whose weight exceeds the lawful load for the area upon which it would
stand shall be brought into or kept upon a tenant's premises. If, in the
judgment of the Landlord, it is necessary to distribute the concentrated weight
of any heavy object, the work involved in such distribution shall be done at the
expense of the tenant and in such manner as the Landlord shall determine. The
moving of safes and other heavy objects shall take place only outside of
ordinary business hours upon previous notice to the Landlord, and the persons
employed to move the same in and out of the Building shall be reasonably
acceptable to the Landlord and, if so required by law, shall hold a Master
Rigger's license. Freight, furniture, business equipment, merchandise and bulky
matter of any description shall be delivered to and removed from the premises
only in the freight elevators and through the service entrances and corridors,
and only during hours and in a manner approved by the Landlord. Arrangements
will be made by the Landlord with any tenant for moving large quantities of
furniture and equipment into or out of the building.
8. No machines or mechanical equipment of any kind other than
typewriters and other ordinary portable business machines, may be installed or
operated in any tenant's premises without Landlord's prior written consent, and
in no case (even where the same are of a type so excepted or as so consented to
by the Landlord) shall any machines or mechanical equipment be so placed or
operated as to disturb other tenants; but machines and mechanical equipment
which may be permitted
<PAGE> 59
to be installed and used in a tenant's premises shall be so equipped, installed
and maintained by such tenant as to prevent any disturbing noise, vibration or
electrical or other interference from being transmitted from such premises to
any other area of the Building.
9. No noise, including the playing of any musical instruments, radio or
television, which, in the judgment of the Landlord, might disturb other tenants
in the Building, shall be made or permitted by any tenant, and no cooking shall
be done in the tenant's premises, except as expressly approved by the Landlord.
Nothing shall be done or permitted in any tenant's premises, and nothing shall
be brought into or kept in any tenant's premises, which would impair or
interfere with any of the Building services or the proper and economic heating,
cleaning or other servicing of the Building or the premises, or the use or
enjoyment by any other tenant of any other premises, nor shall there be
installed by any tenant any ventilating, air conditioning, electrical or other
equipment of any kind which, in the judgment of the Landlord, might cause any
such impairment or interference. No dangerous, inflammable, combustible or
explosive object or material shall be brought into the Building by any tenant or
with the permission of any tenant. Any cuspidors or similar containers or
receptacles used in any tenant's premises shall be cared for and cleaned by and
at the expense of the tenant.
10. No acids, vapors or other materials shall be discharged or
permitted to be discharged into the waste lines, vents or flues of the Building
which may damage them. The water and wash closets and other plumbing fixtures in
or serving any tenant's premises shall not be used for any purpose other than
the purposes for which they were designed or constructed, and no sweepings,
rubbish, rags, acids or other foreign substances shall be deposited therein.
11. No additional locks or bolts of any kind shall be placed upon any
of the doors or windows in any tenant's premises and no lock on any door therein
shall be changed or altered in any respect. Additional keys for a tenant's
premises and toilet rooms shall be procured only from the Landlord, which may
make a reasonable charge therefor. Upon the termination of a tenant's lease, all
keys of the tenant's premises and toilet rooms shall be delivered to the
Landlord.
<PAGE> 60
12. All entrance doors in each tenant's premises shall be left locked
and all windows shall be left closed by the tenant when the tenant's premises
are not in use. Entrance doors shall not be left open at any time.
13. Hand trucks not equipped with rubber tires and side guards shall
not be used within the Building.
14. All windows in each tenant's premises shall be kept closed and all
blinds therein above the ground floor shall be lowered when and as reasonably
required because of the position of the sun, during the operation of the
Building air conditioning system to cool or ventilate the tenant's premises.
15. The Landlord reserves the right to rescind, alter or waive any rule
or regulation at any time prescribed for the Building when, in its judgment, it
deems it necessary, desirable or proper for its best interest and for the best
interests of the tenants, and no alteration or waiver of any rule or regulation
in favor of one tenant shall operate as an alteration or waiver in favor of any
other tenant. The Landlord shall not be responsible to any tenant for the
non-observance or violation by any other tenant of any of the rules and
regulations at any time prescribed by the Building.
<PAGE> 61
EXHIBIT E
DEFINITIONS
(a) The term mortgage shall include an indenture of mortgage and deed
of trust to a trustee to secure an issue of bonds, and the term mortgagee shall
include such a trustee.
(b ) The terms include, including and such as shall each be construed
as if followed by the phrase, "without being limited to".
(c) The term obligations of this lease, and words of like import, shall
mean the covenants to pay rent and additional rent under this lease and all of
the other covenants and conditions contained in this lease. Any provision in
this lease that one party or the other or both shall do or not do or shall cause
or permit or not cause or permit a particular act, condition, or circumstance
shall be deemed to mean that such party so covenants or both parties so
covenant, as the case may be.
(d) The term Tenant's obligations hereunder, and words of like import,
and the term Landlord's obligations hereunder, and words of like import, shall
mean the obligations of this lease which are to be performed or observed by
Tenant, or by Landlord, as the case may be. Reference to performance of either
party's obligations under this lease shall be construed as "performance and
observance".
(e) Reference to Tenant being or not being in default hereunder, or
words of like import, shall mean that Tenant is in default in the performance of
one or more of Tenant's obligations hereunder, or that Tenant is not in default
in the performance of any of Tenant's obligations hereunder, or that a condition
of the character described in Section 24.01 has occurred and continues or has
not occurred or does not continue, as the case may be.
(f) References to Landlord as having no liability to Tenant or being
without liability to Tenant, shall mean that Tenant is not entitled to terminate
this lease, or to claim
<PAGE> 62
actual or constructive eviction, partial or total, or to receive any abatement
or diminution of rent, or to be relieved in any manner of any of its other
obligations hereunder, or to be compensated for loss or injury suffered or to
enforce any other kind of liability whatsoever against Landlord under or with
respect to this lease or with respect to Tenant's use or occupancy of the
Demised Premises.
(g) The term laws and/or requirements of public authorities and words
of like import shall mean laws and ordinances of any or all of the Federal,
state, city, county and borough governments and rules, regulations, orders
and/or directives of any or all departments, subdivisions, bureaus, agencies or
offices thereof, or of any other governmental, public or quasi-public
authorities, having jurisdiction in the premises, and/or the direction of any
public officer pursuant to law.
(h) The term requirements of insurance bodies and words of like import
shall mean rules, regulations, orders and other requirements of the New Jersey
Board of Fire Underwriters and/or the New Jersey Fire Insurance Rating
Organization and/or any other similar body performing the same or similar
functions and having jurisdiction or cognizance of the Building and/or the
Demised Premises.
(i) The term repair shall be deemed to include restoration and
replacement as may be necessary to achieve and/or maintain good working order
and condition.
(j) Reference to termination of this lease includes expiration or
earlier termination of the term of this lease or cancellation of this lease
pursuant to any of the provisions of this lease or to law. Upon a termination of
this lease, the term and estate granted by this lease shall end at noon of the
date of termination as if such date were the date of expiration of the term of
this lease and neither party shall have any further obligation or liability to
the other after such termination (i) except as shall be expressly provided for
in this lease, or (ii) except for such obligation as by its nature or under the
circumstances can only be, or by the provisions of this lease, may be, performed
after such termination, and, in any event, unless expressly otherwise provided
<PAGE> 63
in this lease, any liability for a payment which shall have accrued to or with
respect to any period ending at the time of termination shall survive the
termination of this lease.
(k) The term in full force and effect when herein used in reference to
this lease as a condition to the existence or exercise of a right on the part of
Tenant shall be construed in each instance as including the further condition
that at the time in question no default on the part of Tenant exists, and no
event has occurred which has continued to exist for such period of time (after
the notice, if any, required by this lease), as would entitled Landlord to
terminate this lease or to dispossess Tenant.
(l) The term Tenant shall mean Tenant herein named or any assignee or
other successor in interest (immediate or remote) of Tenant herein named, while
such Tenant or such assignee or other successor in interest, as the case may be,
is in possession of the Demised Premises as owner of the Tenant's estate and
interest granted by this lease and also, if Tenant is not an individual or a
corporation, all of the persons, firms and corporations then comprising Tenant.
(m) Words and phrases used in the singular shall be deemed to include
the plural and vice versa, and nouns and pronouns used in any particular gender
shall be deemed to include any other gender.
(n) The rule of ejusdem generis shall not be applicable to limit a
general statement following or referable to an enumeration of specific matters
to matters similar to the matters specifically mentioned.
(o) All references in this lease to numbered Articles, numbered
Sections and lettered Exhibits are references to Articles and Sections of this
lease, and Exhibits annexed to (and thereby made part of) this lease, as the
case may be, unless expressly otherwise designated in the context.
<PAGE> 64
WITNESS:
/s/ /s/
- --------------------------- -----------------------------------------
MURRAY HILL INN ASSOCIATES
A Limited Partnership by its General
Partner The Boyle Group, A Limited
Partnership by its General Partner Murray
Hill 91, Inc. by William A. Boyle III,
President
ATTEST: BARRINGER TECHNOLOGIES, INC.
/s/ /s/ STANLEY BINDER, President
- --------------------------- -----------------------------------------
<PAGE> 1
EXHIBIT 10.18
SINGLE TENANT INDUSTRIAL LEASE
This Indenture made as of the 27th day of July 1995.
BETWEEN:
LEHNDORFF MANAGEMENT LIMITED
in Its capacity as agent for the Owners
(hereinafter called the "Landlord")
-and-
BARRINGER RESEARCH LIMITED
(hereinafter called the "Tenant")
Building: 1730 Aimco Boulevard, Mississauga
Rentable Area: 28,380 square feet
Commencement
Date: September 1, 1995
Expiry Date: August 31, 2005
<PAGE> 2
INDEX
CLAUSE 1 PREMISES
CLAUSE 2 TERM
CLAUSE 3 POSSESSION OF PREMISES
CLAUSE 4 RENT AND SECURITY DEPOSIT
CLAUSE 5 RENT AND INTEREST & GOODS AND SERVICES TAX
CLAUSE 6 NET LEASE
CLAUSE 7 UTILITIES & OTHER SERVICES
CLAUSE 8 TAXES, ETC.
CLAUSE 9 INSURANCE
CLAUSE 10 SPUR TRACK
CLAUSE 11 OPERATING AND MAINTENANCE COSTS
CLAUSE 12 DELETED
CLAUSE 13 GOOD & SUBSTANTIAL REPAIR
CLAUSE 14 ENTRY TO INSPECT
CLAUSE 15 QUALITY OF REPAIR
CLAUSE 16 NUISANCE, WASTE, HAZARDOUS SUBSTANCES
CLAUSE 17 USE
CLAUSE 18 ORDINANCES & REGULATIONS
CLAUSE 19 ASSIGNMENT 7 SUB-LETTING
CLAUSE 20 INDEMNIFICATION
CLAUSE 21 TENANT'S INSURANCE
CLAUSE 22 DAMAGE
CLAUSE 23 QUIET POSSESSION
CLAUSE 24 LANDLORD'S REPAIRS
CLAUSE 25 LANDLORD'S INSURANCE
CLAUSE 26 TAXES
CLAUSE 27 DAMAGE & DESTRUCTION
CLAUSE 28 ALTERATIONS & IMPROVEMENTS
CLAUSE 29 SIGNS
CLAUSE 30 NO LIENS
CLAUSE 31 TIME FOR PAYMENT AND LEGAL COSTS
CLAUSE 32 DEFAULT
CLAUSE 33 CONSEQUENCES OF DEFAULT
CLAUSE 34 DISTRESS
CLAUSE 35 SURRENDER
<PAGE> 3
CLAUSE 36 RIGHT TO EXHIBIT PREMISES
CLAUSE 37 OVERHOLDING
CLAUSE 38 WAIVER BY THE LANDLORD
CLAUSE 39 NOTICES
CLAUSE 40 DELETED
CLAUSE 41 SUBORDINATION & ACKNOWLEDGEMENTS
CLAUSE 42 DELETED
CLAUSE 43 TIME OF ESSENCE
CLAUSE 44 HEADINGS
CLAUSE 45 INTERPRETATION
CLAUSE 46 ACCEPTANCE
CLAUSE 47 GOVERNING LAWS
CLAUSE 48 DELETED
CLAUSE 49 DELETED
CLAUSE 50 REPRESENTATIONS
CLAUSE 51 BINDING ON SUCCESSORS & APPROVED ASSIGNS
CLAUSE 52 SALE OR FINANCING OF LANDS OR ASSIGNMENT BY LANDLORD
CLAUSE 53 REGISTRATION
CLAUSE 54 LAND USE CAVEAT
CLAUSE 55 EXCLUSION OF LIABILITY
CLAUSE 56 LANDLORD'S RIGHT TO PERFORM
CLAUSE 57 EXPROPRIATION
CLAUSE 58 DELAY
CLAUSE 59 SCHEDULES
<PAGE> 4
1
THIS AGREEMENT made as of the 27th day of July 1995.
BETWEEN
LEHNDORFF MANAGEMENT LIMITED, successor by amalgamation to
Lehndorff Property Management Limited, a Corporation
incorporated under the laws of the Province of Ontario having
a local office at 390 Bay Street, Toronto, Ontario, in its
capacity as agent for the Owners,
(herein called "the Landlord")
OF THE FIRST PART
-and-
BARRINGER RESEARCH LIMITED
(herein called "the Tenant")
OF THE SECOND PART
1. PREMISES
The Landlord is the manager of the building containing 28,380 square
feet, as outlined in red on Schedule "B", situate on the Lands (herein called
the "Building") known municipally as 1730 Aimco Boulevard, Mississauga, and
described in Schedule "A".
NOW THEREFORE THIS AGREEMENT WITNESSETH that the Landlord, being the
duly authorized managing agent of the Owner of the Lands, in consideration of
the rents, covenants and agreements hereinafter reserved and contained on the
part of the Tenant to be paid, observed and performed does hereby Lease unto the
Tenant the Lands and Building, hereinafter called the "Demised Premises",
containing 28,380 square feet.
2. TERM
TO HAVE AND TO HOLD the Demised Premises for and during the Term of ten
(10) years commencing on the 1st day of September 1995, (the "Commencement
Date") and to be fully completed and ended on the 31st day of August 2005, (the
"Expiry Date") (herein called the "Term") unless this Lease is sooner terminated
as hereinafter provided.
3. POSSESSION OF PREMISES
Except (or Landlord's Work and repairs referred to in Schedule "G", "J"
and "N" attached hereto, which are to be completed by the Landlord, the Tenant
accepts the Demised Premises in an "as is" condition.
PROVIDED ALWAYS, that if the Demised Premises are not ready for
possession by the Tenant on the Rent Commencement Date for any reason
attributable to any failure or neglect of the Landlord, the Rent Commencement
Date shall be postponed until the Demised Premises are ready for possession by
the Tenant but the Expiry Date shall not be varied as a result thereof nor shall
the Tenant have any claim against the Landlord as a result of such postponement.
PROVIDED FURTHER, HOWEVER, that if the Demised Premises are not ready
for possession by the Tenant on the Rent Commencement Date set forth below due
to any act or failure to act on the part of the Tenant, then the Rent shall
commence on that date as though the Demised Premises were ready for possession
by the Tenant and all the provisions of this Lease shall apply.
For the purpose of this Lease, the Demised Premises shall be deemed to
be ready for possession by the Tenant when the Landlord's and the Tenant's
representatives acting reasonably certify in writing that the improvements, and
repairs, if any, being carried out by the Landlord to the Demised Premises, in
accordance with plans and specifications heretofore approved by the Tenant or as
otherwise determined pursuant to the terms and conditions of the Offer to Lease
on which this Lease is based and the Schedules attached hereto, have been
carried out to the extent necessary to permit the Demised Premises to be
utilized by the Tenant without undue interference.
<PAGE> 5
2
4. RENT & SECURITY DEPOSIT
YIELDING AND PAYING therefore unto the Landlord Basic Rent as follows:
For the period November 1, 1995 (the "Rent Commencement Date") to AUGUST
31, 2000, $8,514.00 per month (adjusted pro-rata if the Rent Commencement Date
is not the first day of a month) payable in advance on the Rent Commencement
Date and thereafter on the first day of each month throughout this period.
For the period SEPTEMBER 1, 2000 to AUGUST 31, 2005, $13,007.50 per
month in advance on the first day of each month throughout this period.
All of the amounts referred to above are called "Basic Rent" within this LEASE.
THE LANDLORD ACKNOWLEDGES THAT THE TENANT HAS DEPOSITED $20,497.46 WITH
THE LISTING BROKER, CB COMMERCIAL, IN TRUST TO BE APPLIED AS FIRST MONTHS NET
RENTAL PLUS LAST MONTHS NET RENTAL PLUS G.S.T.
5. RENT AND INTEREST AND GOODS AND SERVICES TAXES
The Tenant covenants and agrees to pay to the Landlord or its order in
lawful money of Canada, at the office of the Landlord hereinafter set forth, or
at such other place as the Landlord may in writing direct, without notice or
demand, except as otherwise specifically provided herein, and without deduction
or set-off for any reason whatsoever a Rent comprised of:
a) the Basic Rent hereby reserved in the manner herein provided;
and
b) all amounts which become due and payable to the Landlord from
time to time pursuant to the terms permitted in this Lease
within the time herein provided (the "Additional Rent");
all of which amounts shall be payable and recoverable as Rent.
The Tenant covenants and agrees to pay to the Landlord interest at a
rate equal to the prime bank lending rate from time to time charged by the
Landlord's bank on all arrears of Basic Rent or Additional Rent owing to the
Landlord and all other sums payable by the Tenant to the Landlord pursuant to
the terms hereof from the date of default in the payment thereof until payment
is received by the Landlord. Basic Rent and Additional Rent may be herein
referred to collectively as "Rent".
In addition to the Rent payable herein, the Tenant will pay to the
Landlord (acting as agent for the taxing authority if applicable) or directly to
the taxing authority (if required by the applicable legislation) in the manner
specified by the Landlord, the full amount of all goods and services taxes,
sales taxes, value-added taxes, multi-stage taxes, business transfer taxes and
any other taxes imposed on the Tenant in respect of the Rent payable by the
Tenant under this Lease or in respect of the rental of space by the Tenant under
this Lease (collectively and individually, "GST"). GST is payable by the Tenant
whether characterized as a goods and services tax, sales tax, value-added tax,
multi-stage tax, business transfer tax, or otherwise. GST so payable by the
Tenant will:
a) be calculated by the Landlord in accordance with the
applicable legislation;
b) be paid by the Tenant at the same time as the amounts to which
the GST applies are payable to the Landlord under the terms of
this Lease (or upon demand at such other time or times as the
Landlord from time to time determines); and
c) despite anything else in this Lease, be considered not to be
Rent, but the Landlord shall have all of the same remedies for
and rights of recovery with respect to such amounts as it has
for non-payment of Rent under this Lease or at law.
<PAGE> 6
3
6. NET LEASE
The Tenant covenants and agrees with the Landlord that this Lease is a
net Lease and the Basic Rent referred to above is to be received by the Landlord
free of all outgoings whatsoever except as otherwise herein specifically
provided and except for the Landlord's income taxes and for payments of any
financing respecting the Lands and the Building that may now or in the future
become due.
The Rent herein shall be a net rental to the Landlord, and in addition
to the Rent, the Tenant shall pay real estate taxes, local improvement charges,
if any, utility charges, water and telephone charges, outside maintenance
including driveways, trucking and parking areas, lawn and shrubbery maintenance,
snow removal and insurance premiums for the building, in accordance with the
Lease.
7. UTILITIES & OTHER SERVICES
The Tenant covenants and agrees to pay and discharge as the same fall
due during the Term, without limitation, all charges for garbage removal,
janitorial services and maintenance respecting the Demised Premises and all
charges for utilities, including telephone installations, water, electrical
power, gas, and telephone charges metered separately or charged separately by
the authority providing the same to the Demised Premises, as well as any charges
of such authority based thereon for treatment or other facilities, and all like
charges or rates, goods and services taxes and business taxes, and all floor
space and personal property taxes, license fees, or other like taxes or fees
which may be imposed by any municipal, legislative or other authority upon or in
respect of any personal property of the Tenant situated thereon, as the same are
assessed and fall due.
8. TAXES, ETC.
See Rider Page 3A.
9. INSURANCE
The Tenant covenants and agrees to pay 100% per cent of the premiums for
the insurance carried by the Tenant on behalf of the Landlord during the Term of
this Lease for insurance against fire (and other coverages for perils and
liabilities related to the Lands or Building, which coverage shall be in the
Landlord's reasonable discretion) on the Building of which the Demised Premises
form a part, which insurance shall include coverage of the Tenant's trade
fixtures, merchandise, stock in trade, furniture or other property within, about
or adjacent to the Demised Premises or the Lands and Building. Premiums shall
include any costs incurred with respect to payment of any deductible amounts or
below deductible amounts payable pursuant to bona fide claims made on the
insurance policies.
<PAGE> 7
Rider 3A
8. Taxes, Etc.
In addition to the payment of Basic Rent hereunder, the Tenant shall promptly
discharge and pay when due (subject to the right of contestation as hereinafter
mentioned but including any fine, penalty, interest or cost which may be added
thereto) all taxes, rates, duties, assessments and other public charges which
during the Term may be levied, rated, charged or assessed against the Demised
Premises and the Building or any property owned or brought thereon by the
Tenant; and every tax, licence fee, business tax and other public charge
(except, however, any income, capital or profits taxes imposed on or against the
Landlord) together with interest and/or penalties thereon which, during the
Term, may be assessed, levied or charged in respect of the occupancy of the
Demised Premises and the Building by the Tenant, or any businesses carried on
therein by the Tenant, or the property of the Tenant thereon whether such taxes,
rates, assessments, licence fees and other public charges are assessed, levied
or charged by municipal, provincial, federal, school or other public body. If
the Tenant shall fail to pay any such amount or amounts when due, the Landlord
may, at its option, pay the same and an amount equal to the amount so paid,
together with interest thereon computed at the rate of interest set out in
paragraph 5 of this Lease from the date of payment by the Landlord, shall be
charged to and paid by the Tenant as Additional Rent. The Tenant shall,
forthwith after payment of the foregoing items and charges, produce to the
Landlord on request evidence satisfactory to the Landlord of the fact of such
payment; provided, however, that:
(a) if by law any tax, rate, duty, assessment, fee or charge, at
the option of the taxpayer, may be paid by instalments
(whether or not interest shall accrue on the unpaid balance
thereof), the Tenant may pay the sum in instalments as the
same respectively become due;
(b) the Tenant shall only be required to pay a proportionate part
of any such tax, rate, duty, assessment, fee or charge which
relates to a fiscal period of the taxing authority a part of
which period is included in a period prior to the commencement
or after the expiration of the Term;
(c) the Tenant may, upon written notice to the Landlord and after
paying such tax, rate, assessment or other public charge under
protest, contest the validity or the amount thereof (if
meanwhile such contestation will involve no forfeiture,
foreclosure, escheat, sale or termination of the Landlord's
title to the Demised Premises and the Building or any part
thereof), but upon a final determination of any such contest
the Tenant shall immediately pay and satisfy all proper costs,
penalties, interest or other charges payable in connection
therewith. The Landlord shall co-operate in the institution
and prosecution of any such proceedings and will execute any
documents required therefor, and the expense of such
proceedings including Landlord's costs shall be borne by the
Tenant and any refunds or rebates secured relative to the
period of occupancy shall belong to the Tenant.
<PAGE> 8
4
Tenant shall provide proof of payment in form satisfactory to the
Landlord, with certified copies of insurance policies required to be maintained
herein, at Landlord's request.
The Tenant covenants and agrees not to allow anything to be done, kept,
used or sold upon or about the Demised Premises which contravenes any of the
insurance policies or which would prevent the Landlord from procuring any such
policy with companies acceptable to the Landlord. If any insurance policy upon
the Building or any part thereof is cancelled or threatened by the insurer to be
cancelled, or the coverage thereunder reduced or threatened to be reduced by the
insurer, or if such insurance policy is not obtainable by reason of the use and
occupation of the Demised Premises or any part thereof by the Tenant or any
assignee or sub-tenant of the Tenant or by anyone permitted by the Tenant to be
upon the Demised Premises, the Tenant will promptly advise the Landlord of such
notice, and if the Tenant fails to remedy the condition giving rise to
cancellation, threatened cancellation, reduction or threatened reduction in
coverage or refusal to cover within 24 hours after notice thereof by the
Landlord, the Landlord may, without limiting any other remedies it may have
pursuant to this Lease or at law, enter the Demised Premises and remedy the
condition giving rise to the cancellation or reduction or threatened
cancellation or threatened reduction or refusal to cover and the Tenant will pay
to the Landlord the cost thereof upon demand and the Landlord shall not be
liable for any inconvenience, disturbance, loss of business or other damage
resulting from such entry and remedying.
10. SPUR TRACK
11. OPERATION AND MAINTENANCE COSTS
Except as otherwise provided in this Lease, the Tenant covenants and
agrees to operate, service, maintain, clean, supervise, police, replace and
repair, and keep in good order and safe condition the Demised Premises
including, without limiting the generality of the foregoing, all exterior
(including roof) maintenance and repairs, (excluding structural repairs and
maintenance to the Building and structural roof maintenance and repairs, which
are the responsibility of the Landlord,) landscaping, snow and ice removal and
to pay on demand to the Landlord reasonable management and administration
service charges pertaining to the Landlord's operation of the Demised Premises.
12. DELETED
13. GOOD & SUBSTANTIAL REPAIR
a) The Tenant covenants and agrees to keep, at the expense of the
Tenant, at all times during the said Term, the Demised
Premises in a clean and sanitary condition and in good and
substantial repair, and to replace any broken glass windows in
the Demised Premises and at the end or sooner termination of
the said Lease, to peaceably surrender and yield up the
Demised Premises in good and substantial repair and condition
(normal wear and tear and latent defect excepted) and, without
limiting the generality of the foregoing the Tenant will,
during the Term of the Lease, cause such good management and
care to be taken of the Demised Premises and the various parts
thereof, both interior and exterior, that no injury to the
same shall occur, and that the air conditioning equipment, if
any, heating apparatus, electric or other wires, pipes, pumps,
valves, reservoirs, sinks, baths, plumbing apparatus, gas keys
and fastenings of all kinds on the said Demised Premises shall
be kept during the said Term in a state of efficient and good
working order, and that all heating apparatus, water closets,
sinks, baths and accessories thereto on the Demised Premises
shall be protected from frost and kept at all times free from
any uncleanliness or obstruction that would prevent their
efficient working and that repairs needful or expedient to
keep them in efficient working order during the said Term will
be borne by the Tenant. And the Tenant shall be directly
responsible for all of the above repairs, maintenance and
decoration with respect to the Demised Premises and will
promptly, at its expense, carry out any and all repairs
required thereto. The Tenant shall be responsible for
<PAGE> 9
5
all janitorial services respecting the Demised Premises,
including the washing of windows therein both inside and
outside.
b) The Tenant covenants and agrees without limiting the
generality of the within clause or derogating from the
provisions thereof, to maintain in good condition to the
satisfaction of the Landlord, the heating system and air
conditioning system, if any, in the Demised Premises and to
operate, repair and replace, all subject to exceptions of the
within clause hereof, the system and all parts when necessary
throughout the Term of the Lease.
The Tenant covenants and agrees that it will at all times, with respect
to those matters of which the Tenant shall have knowledge, give the Landlord
prompt written notice of any accident or defect to or in the water pipes, gas
pipes, air conditioning equipment, if any, heating apparatus, electric or other
wires, or plumbing fixtures in the Demised Premises.
PROVIDED HOWEVER, that the Landlord may at its sole option from time to
time, elect by written notice to the Tenant to carry out at the expense and in
the name of the Tenant the Tenant's obligations pursuant to this clause for such
periods of time as the Landlord may determine, and the cost thereof shall be
payable to the Landlord by the Tenant forthwith as Rent on demand together with
interest thereon at the aforesaid rate from the date of the expenditure of such
monies by the Landlord until paid by the Tenant. The Landlord in doing so shall
not be liable for inconvenience, disturbance, loss of business or other damage
resulting therefrom.
14. ENTRY TO INSPECT
The Tenant covenants and agrees to permit the Landlord and its agents
and employees at all reasonable times to enter the Demised Premises to view the
state of repair and the Tenant shall forthwith, after the receipt of written
notice thereof, at the Tenant's expense, commence and diligently proceed to make
such repairs and replacements as the Tenant may be obligated to make and in the
event of the Tenant's failure or neglect so to do, the Landlord and its agents
and employees may enter the Demised Premises and, at the Tenant's expense,
perform and carry out such repairs or replacements and the Landlord in so doing
shall not be liable for inconvenience, disturbance, loss of business or other
damage resulting therefrom and in the event the Landlord expends any monies
pursuant to this clause the Tenant will pay the same on demand together with
interest thereon at the aforesaid rate from the date of the expenditure of such
monies by the Landlord until paid by the Tenant as Additional Rent on the first
day of the next month next following said payment by the Landlord.
15. QUALITY OF REPAIR
The Tenant covenants and agrees that all repairs and replacements made
by the Tenant to the Demised Premises shall be of a quality and class at least
equal to the original and shall become the property of the Landlord absolutely
and a part of the Demised Premises.
16. NUISANCE, WASTE, HAZARDOUS SUBSTANCES
The Tenant shall not keep or permit on the Leased Premises any toxic or
dangerous or hazardous waste, substance or material, asbestos, polychlorinated
biphenals, special nuclear or byproduct material, heavy metals, radioactive
materials, (hereinafter collectively referred to as "prohibited substances").
Any other substances declared to be hazardous or toxic or dangerous under any
law or regulation now or hereafter enacted or promulgated by any government
authority having jurisdiction, pollutant, contaminant or petroleum (shall be
cumulatively referred to as "noxious substances"). If the Tenant discovers the
existence of any noxious substances on the Leased Premises, the Tenant shall
promptly report such information to the Landlord. The Tenant shall not disclose
such information to any government agencies, officials or other persons unless
required to do so by applicable law. The Tenant shall at its sole cost and
expense comply with all applicable environmental laws, regulations, rulings or
orders, ordinances and occupational safety and health laws, rules, regulations,
requirements or permits, including, without limitation, any laws requiring the
filing of reports and notices relating to any noxious substances on the Leased
Premises (cumulatively referred to as "environmental and health laws"). In the
event of a violation of any environmental or health laws, or of a release of a
noxious substance from the Leased Premises, or of the discovery of environmental
contamination requiring remediation which violation, release or environmental
contamination is attributable to the acts, omission or negligence of the Tenant,
its agents, employees or invitees, the Tenant shall provide at its sole cost and
expense all bonds and other security required by governmental authorities having
jurisdiction and the Landlord shall have the right but shall not be obliged to
enter the Leased Premises and to supervise and approve any actions taken by the
Tenant to address the violation, release or environmental contamination, and in
the event that the Tenant fails to promptly address such violation, release or
environmental contamination then the Landlord shall have the right but shall not
be obliged to perform, at the Tenant's sole cost and expense, any actions
necessary or appropriate to address the violation, release or environmental
contamination. The Tenant hereby indemnifies, protects and holds harmless the
Landlord, its successors and assigns, its property manager and those for whom in
law the Landlord is responsible from and against all claims, demands, actions,
suits, fines, penalties, costs, expenses, damages and obligations of any nature
arising from any violation of any environmental or health laws or any other
environmental, health or safety matter including, without limitation, nuisance
or toxic tort claims, caused by the acts, omissions or negligence of the Tenant,
its agents, employees or invitees. The Tenant hereby
<PAGE> 10
6
authorizes the Landlord to make enquiries from time to time of any governmental
authority having jurisdiction with respect to the Tenant's compliance with
environmental and health laws, and the Tenant agrees from time to time to
provide such written authorization as the Landlord may reasonably require in
order to facilitate the obtaining of such information. The Tenant shall permit
the Landlord and its lenders and agents to conduct inspections and appraisals
from time to time of the Tenant's records, and physical Inspection of the
Tenant's operations, business and assets respecting compliance with
environmental and health laws and all matters pertaining to noxious substances.
The Tenant shall forthwith notify the Landlord in writing upon being advised of
any alleged violation or infringement of environmental and health laws or any
intended enforcement action pertaining thereto. If the Tenant shall keep or
permit any noxious substances upon the Leased Premises then such noxious
substances shall be and remain the sole and exclusive property of the Tenant and
shall not become the property of the Landlord notwithstanding any other
provision of this Lease or any rule of law or any degree of affixation of the
noxious substance or the goods containing the noxious substance to the Leased
Premises or the Property and notwithstanding the expiry or earlier termination
of this Lease. The obligations of the Tenant hereunder relating to noxious
substances and environmental and health laws shall survive the expiry or earlier
termination of this Lease.
See Rider 6A.
17. USE
The Tenant covenants and agrees that it will use the Demised Premises
for the purpose of research laboratories, general office use and light assembly
and the Tenant shall not use or permit, or suffer the use of any part or parts
thereof for any other business or purpose whatsoever unless the Landlord gives
its written consent to such change in use, not to be unreasonably withheld, and
provided that any such use shall be in compliance with all zoning regulations
and other legislation applicable the Demised Premises and the Building and shall
not be in breach of any other provision of this Lease.
18. ORDINANCES & REGULATIONS
Notwithstanding the use of the Demised Premises permitted in this Lease
hereof, the Tenant covenants and agrees to observe and fulfil the provisions and
requirements of all statutes, orders-in-council, by-laws, rules and regulations,
municipal, legislative, parliamentary or by other lawful authority, relating to
the use of the Demised Premises by the Tenant and, without limitation thereto,
to comply with any applicable lawful regulation or order of The Canadian
Underwriters Association or any body having similar functions or any liability
or fire insurance company by which the Landlord or Tenant may be insured, and
that all fines, charges, costs, damages, or other expenses resulting from the
default of infringement of, or changes in the Demised Premises required as a
result of the Tenant's use of the Demised Premises to comply with, the above
mentioned shall be borne by the Tenant.
See Rider 6A.
19. ASSIGNMENT & SUB-LETTING
The Tenant covenants that it will not assign this Lease nor sub-let the
Demised Premises in whole or in part without the prior written consent of the
Landlord, which consent the Landlord covenants not to withhold unreasonably:
- as to any assignee or sub-lessee who is in a financial
condition satisfactory to the Landlord, agrees to use the
Demised Premises for those purposes permitted hereunder, and
is otherwise satisfactory to the Landlord, acting reasonably,
and
- as to any portion of the Demised Premises which, in the
Landlord's sole judgment, is a proper and rational division of
the Demised Premises, subject to the Landlord's right of
termination arising under this clause. Without limitation, the
Tenant shall for the purpose of this clause be considered to
assign or sub-let in any case where it permits the Demised
Premises or any portion thereof to be occupied by persons
other than the Tenant, its agents and employees and others
engaged in carrying on the business of the Tenant, whether
pursuant to assignment, sub-letting, license or other right,
or where any of the foregoing occurs by operation of law.
The Tenant shall not assign this Lease or sub-let the whole or any part
of the Demised Premises unless:
- it shall have received or procured a bona fide written offer
to take an assignment or sub-Lease which is not inconsistent
with this Lease, and the acceptance of which would not breach
any provision of this Lease if this clause is being complied
with, and
- it shall have first requested and obtained the consent in
writing of the Landlord thereto.
Any request for consent shall be in writing and accompanied by a copy of
the offer certified by the Tenant to be true and complete, and the Tenant shall
furnish to the Landlord all information available to the Tenant and requested by
the Landlord as to the responsibility, financial standing and business of the
proposed assignee or sub-lessee. Notwithstanding the provisions herein, within
30 days after the receipt by the Landlord
<PAGE> 11
RIDER 6A
16. Nuisance, Waste, Hazardous Substances (cont.)
Notwithstanding the provision of Clause 16, the Landlord acknowledges
that the Tenant is required to use small quantities of certain noxious
substances, including without limitation, radioactive materials, chemicals and
explosives, in the course of its business activities and that such substances
will from time to time be stored on the Demised Premises, always in compliance
with the Atomic Energy control Board Radio-Isotope Licensing Requirements
governing the use, storage and transportation of radioactive materials and
Energy Mines & Resources License for a Temporary Magazine governing the use and
storage of explosives, or such other requirements which may from time to time be
applicable to such substances.
The Tenant covenants to provide the Landlord with copies of all licenses
and renewals thereto so the Landlord is kept current of the licensing
requirements.
Provided, however, that nothing in this Lease shall make the Tenant
liable for any environmental contamination which existed on the Demised Premises
prior to the date of this Lease, or which cannot be shown to have been caused in
whole or in part by the Tenant.
The Landlord represents to the best of its knowledge that there is no
environmental contamination currently in existence on the Demised Premises.
The Landlord agrees that it shall reimburse the Tenant for half of the
cost of a Phase I environmental assessment of the Demised Premises which the
Tenant shall cause to be conducted prior to its occupancy of the Demised
Premises.
18. Ordinances & Regulations (cont.)
Notwithstanding the foregoing, any non-observance by the Tenant of any
governmental or municipal regulations or other requirements governing the
conduct of any business by the Tenant in the Demised Premises shall not be
deemed a breach of covenant under the terms of this Lease if such non-observance
in no way raises any risk of penalty, damage or loss whatsoever to the Landlord,
its agents and mortgagees. Provided that the foregoing obligations of the Tenant
shall be subject to the Tenant being entitled to contest in good faith and in an
expeditious and diligent manner, any such governmental or municipal regulations
or other requirements.
<PAGE> 12
7
of such request for consent and of all information which the Landlord shall have
requested herein, the Landlord shall have the right upon written notice of
termination submitted to the Tenant, if the request is to assign this Lease or
sub-let the whole or part of the Demised Premises, to cancel and terminate this
Lease with respect to such part, in each case as of a termination date to be
stipulated in the notice of termination which shall be not less than 30 days
following the giving of such notice. In such event the Tenant shall surrender
the whole or part, as the case may be, of the Demised Premises in accordance
with such notice of termination and Basic Rent and Additional Rent shall be
apportioned and paid to the date of surrender and, if a part only of the Demised
Premises is surrendered, Basic Rent and Additional Rent shall after the date of
surrender abate proportionately. If such consent shall be given the Tenant shall
assign or sub-let, as the case may be, only upon the terms set out in the offer
submitted to the Landlord as aforesaid and not otherwise.
No assignment or sub-letting of this Lease shall be effective unless the
assignee or sub-lessee shall execute an assumption agreement on the Landlord's
form, assuming all the obligations of the Tenant hereunder, and shall pay to the
Landlord its reasonable fee for processing the assignment or sub-letting such
fee not to exceed $500.00.
The Tenant agrees that in the event the Landlord consents to the
sub-letting in whole or in part of the Demised Premises on terms under which the
sub-lessee is required to make any payment of Rent to the Tenant in excess of
those payable by the Tenant pursuant to this Lease, the Tenant shall, upon any
excess payments becoming due to the Tenant, pay such excess payments to the
Landlord.
Notwithstanding any of the foregoing, it is agreed that the Tenant shall
be allowed to assign this Lease or to sublet all or part of the Demised Premises
to a related company of the Tenant without the Landlord's prior written consent.
The Tenant agrees that any consent to an assignment or sub-letting of
this Lease or Demised Premises, shall not thereby release the Tenant of its
obligations hereunder.
The Landlord's consent to any assignment, subletting, change of control,
parting with or sharing possession does not imply any further consent to do so
without the Tenant in each instance complying with the terms of this Lease.
20. INDEMNIFICATION
The Tenant covenants and agrees notwithstanding any other provisions of
this Lease to the contrary, to indemnify and save harmless the Landlord from any
and all liabilities, damages, costs, claims, suits or actions resulting from:
a) any breach, violation or non-performance of any covenant,
condition or agreement in this Lease set forth and contained
on the part of the Tenant to be fulfilled, kept, observed and
performed;
b) any damage to property, including property of the Landlord,
occasioned by the operations of the Tenant's business on, or
the Tenant's occupation of the Demised Premises;
c) any injury to person or persons, including death, resulting at
any time therefrom, occasioned by the operation of the
Tenant's business on, or the Tenant's occupation of, the
Demised Premises;
See Rider 7A.
21. TENANT'S INSURANCE
See Rider 7A.
<PAGE> 13
Rider 7A.
20. Indemnification (cont.)
Provided, however, that the foregoing indemnity shall not apply where
any injury, loss or damage is due to the sole negligence of the Landlord or
those for whom the Landlord is in law responsible, or due to any breach by the
Landlord of any provision of this Lease.
20.2 The Landlord covenants and agrees notwithstanding any other provisions
of this Lease to the contrary, to indemnify and save harmless the Tenant from
any and all liabilities, damages, costs, claims, suits or actions resulting
from:
(a) any breach, violation or non-performance of any covenant, condition
or agreement in this Lease set forth and contained on the part of the
Landlord to be fulfilled, kept, observed and performed;
(b) any damage to property, including property of the Tenant, or any
injury to person(s), including death, resulting at any time therefrom,
occasioned by any structural flaw or failure of the Building other than
insurable losses or from any negligence, act, omission, fault or
default of the Landlord or those for whom it is in law responsible.
Provided, however, that the foregoing indemnity shall not apply where
any injury, loss or damage is due to the negligence of the Tenant or those for
whom the Tenant is in law responsible or due to any peril against which the
Tenant is or ought to have been insured, or due to any breach by the Tenant of
any provision of this Lease.
21. Tenant's Insurance
a) The Tenant shall, at its sole cost and expense, take out and keep in
full force and effect and in the names of the Tenant, the Landlord, the
Landlord's Mortgagees, trustees, holding companies, and as otherwise designated
from time to time by the Landlord, as their respective interest may appear, the
following insurance:
(i) All Risks Form Insurance upon property of every description
and kind including, without limitation, the building,
stock-in-trade, furniture, alterations, additions, partitions,
fixtures and anything in the nature of a leasehold
improvement, in an amount of not less than full replacement
cost thereof, against, at least all perils normally covered
under an all risks broad form policy including fire,
lightning, windstorm, hail, by-laws, sprinkler leakage, flood,
earthquake and collapse. The amount of insurance carried shall
not be subject to a percentage co-insurance clause. In the
event that there shall be a dispute as to the amount of full
replacement cost, the decision of an arbitrator selected in
accordance with the provisions of the Arbitration Act
(Ontario) shall be conclusive;
(ii) where applicable, Comprehensive Broad Form Boiler and
Machinery Insurance on a blanket repair and replacement basis
with limits for each accident for at least the full building
replacement costs as well as all leasehold improvements, such
insurance to include a joint loss agreement endorsement;
(iii) Business Interruption Insurance in an amount that will
reimburse the Lessee for direct or indirect loss of earnings
including prevention of access and Rental Loss Insurance for a
minimum twelve (12) month period of indemnity which limits
shall include all Rent (Basic Rent and realty taxes) set out
in this Lease; Landlord must be shown as Loss Payee with
respect to loss of rentals;
.../continue
<PAGE> 14
Rider 7A.
21. Tenant's Insurance (cont.)
(iv) broad form Commercial General Liability Insurance written on
an occurrence form including, without limitation, personal
injury and property damage insurance, contractual liability,
non-owned automobile liability, operations and completed
operations coverage (where applicable), owners' and
contractors' protective insurance coverage including
activities and operations conducted by the Tenant and any
other persons on the Premises and by the Tenant and any other
persons performing work on the Premises and those for whom the
Tenant is in law, responsible for. Such policies will be
written on a broad form comprehensive basis including limits
of at least three million dollars ($3,000,000.00) for bodily
injury for any one or more persons, or property damage (but
the Landlord, acting responsibly, or the mortgagee, may
require higher limits from time to time);
(v) standard Owner's Form Automobile Insurance providing third
party liability insurance with one million dollars
($1,000,000.00) inclusive limits, and accident benefits
insurance, covering all licensed vehicles owned or operated by
or on behalf of the Tenant;
(vii) any other form or forms of insurance as the Tenant and or the
Landlord or its Mortgagees may reasonably require from time to
time, in amounts and for insurance risks against which a
prudent Tenant or Landlord would insure.
b) All Property Damage Policies written on behalf of the Tenant shall contain
the Mortgagee's standard mortgage clause.
c) All policies will (i) be taken out with insurers acceptable to the Landlord
or the Mortgagees acting reasonably (ii) be in a form satisfactory to the
Landlord or its Mortgagees acting reasonably (iii) will be primary and not
excess to any other insurance available to all and any of the Landlord and
Mortgagee; (vi) contain a Cross Liability and Severability of Interest clause;
(vii) contain an undertaking by the insurers to notify the landlord and the
Mortgagee in writing not less than thirty (30) days before any cancellation, or
termination.
d) The Tenant will deliver as directed to the Landlord and to its Mortgagees (if
requested) duly executed by the Tenant's insurers certified copies of each
insurance policy as soon as possible after the placing of the insurance and
proof of payment in form satisfactory to the Landlord, no review or approval of
any insurance certificate or insurance policy by the Landlord derogates from or
diminishes the Landlord's rights under this Lease.
<PAGE> 15
8
In case of loss or damage, the proceeds of insurance for the
Building and Tenant's improvements shall be and are hereby assigned and made
payable to the Landlord and to the extent that such proceeds of insurance have
been paid to the Landlord, they shall be released to the Tenant (provided the
Tenant is not in default) upon the Tenant's written request, in progress
payments, at stages determined by a certificate of the Landlord's architect,
stating that repairs to each such stage have been satisfactorily completed free
of liens by the Tenant. In the event the Tenant defaults in making such repairs,
the Landlord may perform the repairs and the proceeds may be applied by the
Landlord to the cost thereof.
The Tenant agrees that if the Tenant fails to take out or keep
in force any such insurance referred to in this clause, or should any such
insurance not be approved by either the Landlord or its mortgagees (including
trustee for bondholders) and should the Tenant not rectify the situation within
48 hours after written notice by the Landlord to the Tenant (stating if the
Landlord or its mortgagees (including trustee for bondholders) do not approve of
such insurance, the reasons therefore) the Landlord shall have the right without
assuming any obligation in connection therewith, to effect such insurance at the
sole cost of the Tenant and all outlays by the Landlord shall be immediately
payable by the Tenant to the Landlord as Additional Rent and shall be due on the
first day of the next month following said payment by the Landlord without
prejudice to any other rights and remedies of the Landlord under this Lease.
The Tenant shall not do or permit anything to be done upon the
Demised Premises which shall cause the rate of insurance on the Lands and
Building to be increased and if the rate of insurance on the Lands and Building
shall be increased by reason of any use made of the Demised Premises or by
reason of anything done or omitted or permitted to be done by the Tenant or by
anyone permitted by the Tenant to be upon the Demised Premises, the Tenant shall
on demand pay to the Landlord the amount of such increase, and if any insurance
on the Lands and Building or any part thereof or on any building connected to
Lands and Building shall be cancelled by the insurer by reason of the use or
occupation of the Demised Premises or any part thereof by the Tenant or by any
assignee or sub-lessee of the Tenant or by anyone permitted by the Tenant to be
upon the Demised Premises the Landlord may, at its option, in addition to any
other remedy it may have, forthwith terminate this Lease by notice in writing to
the Tenant and thereupon Rent and any other payments for which the Tenant is
liable under this Lease shall be apportioned and paid in full to the date of
such termination and the Tenant shall immediately deliver up possession of the
Demised Premises to the Landlord and the Landlord may re-enter and take
possession of the same.
The Tenant covenants and agrees that the Landlord shall not be
liable or responsible in any way for any loss of or damage or injury to any
property belonging to the Tenant or to employees of the Tenant or to any other
person while such property is on the Demised Premises or in the Lands and
Building whether or not such property has been entrusted to employees or agents
of the Landlord and without limiting the generality of the foregoing the
Landlord shall not be liable for any damage to any such property caused by
steam, water, rain or snow which may leak into, issue or flow from any part of
the Lands or Building or from the water, steam or drainage pipes or plumbing
works of the Lands and Building or from any other place or quarter or for any
<PAGE> 16
9
damage caused by or attributable to the condition or arrangement of any electric
or other wiring or for any damage caused by anything done or omitted by the
Landlord or by any other Tenant of the Lands and Building.
The Tenant covenants and agrees that it will indemnify the
Landlord and save it harmless from and against any and all loss, claims,
actions, damages, liability and expense in connection with loss of life,
personal injury or damage to property arising from any occurrence on the Demised
Premises, or the Lands and Building, or the occupancy or use by the Tenant of
the Demised Premises or occasioned wholly or in part by any act or omission of
the Tenant, its agents, contractors, employees, servants, licensees or
concessionaires or by anyone permitted by the Tenant to be in the Demised
Premises or on the Lands and Building. In case the Landlord, without actual
fault on its part, is made a party to any litigation commenced by or against the
Tenant, the Tenant shall protect and hold the Landlord harmless and shall pay
all costs, expenses and legal fees (on a solicitor and his client basis)
incurred or paid by the Landlord in enforcing this Lease.
The requirements imposed on the Tenant in this clause respecting
the obtaining and maintaining of insurance shall not in any manner limit or
derogate from any other obligations imposed on the Tenant pursuant to this Lease
or at law.
22. DAMAGE
The Tenant covenants and agrees that it will not bring upon the
Demised Premises, the Building, the Lands, or any part thereof any vehicles,
machinery, equipment, safes, articles or things that by reason of their weight,
site or use might damage the floors or other improvements of the Demised
Premises, the Building or the Lands and that if any damage is caused to the
Demised Premises, the Building or the Lands by any such vehicle, machinery,
equipment, article or thing, or by such overloading or by any act, neglect or
misuse on the part of the Tenant or any of its servants, agents or employees or
any person having business with the Tenant, will at the election of the Landlord
either forthwith at its sole cost repair such damage to the satisfaction of the
Landlord or pay the cost of repair as determined by the Landlord, to the
Landlord.
23. QUIET POSSESSION
The Landlord covenants with the Tenant that upon the Tenant
paying the Rent hereby reserved and all other charges herein provided and
observing, performing and keeping the covenants and agreements herein contained,
the Tenant shall and may peaceably possess and enjoy the said Demised Premises
for the Term hereby granted without any interruption or disturbance from the
Landlord.
24. LANDLORD'S REPAIRS
The Landlord covenants and agrees that notwithstanding the
provisions permitted in this Lease, it shall at its sole cost during the Term
hereof carry out as soon as possible in the circumstances after receipt of
notice thereof in writing from the Tenant, structural repairs to footings,
structural columns, foundation, exterior walls, and metal roof decks, unless
necessitated as the result of normal wear and tear, and damages recoverable
under insurance policies. PROVIDED HOWEVER, that if such repairs are
necessitated by the negligence or misconduct of the Tenant, its servants,
agents, contractors, licensees, employees, visitors or others for whom in law
the Tenant is responsible, the Tenant shall pay to the Landlord on demand the
cost of such repairs as Additional Rent on the first day of the next month next
following said payment by the Landlord and interest thereon from the date of
expenditure thereof by the Landlord until paid by the Tenant to the extent the
cost thereof is not recoverable from insurance. PROVIDED that the Landlord shall
not be responsible for any damages, loss or injuries sustained by the Tenant, or
any persons claiming through or under it, by reason of such defects or the
consequences thereof, including the inconvenience occasioned to the Tenant by
the entry of the Landlord or its agents and employees on the Demised Premises to
effect such repairs.
The Landlord and Tenant shall, throughout the Term of this
Lease, at their respective expense, comply with all provisions of law,
including, without limiting the generality of the foregoing:
(i) all requirements of all federal, provincial and municipal
legislative enactments, by-laws, and other governmental or municipal
regulations now or hereafter in force which relate to each of their
responsibilities in respect of the Lands, the Building and the Demised
Premises, or to the making of any repairs, replacements, alterations,
additions, changes, substitutions or improvements thereto which are
their responsibility under this Lease; and
(ii) all police, fire, building and sanitary regulations imposed by any
governmental, provincial and municipal authorities or made by fire
insurance underwriters relating to each of their obligations in respect
of the Lands, the Building and the Demised Premises.
Notwithstanding the foregoing, any non-observance by either party of
any governmental or municipal regulations or other requirements governing their
obligations shall not be deemed a breach of covenant under the terms of this
Lease if such non-observance in no way disturbs, harms or poses a threat to the
Tenant's use and occupation of the Demised Premises or in no way raises any risk
of penalty, damage or loss to the Tenant or the Landlord. Provided that the
foregoing obligations of the Landlord and the Tenant shall be subject to the
Landlord or the Tenant, as the case may be, being entitled to contest in good
faith and in an expeditious and diligent manner, any such governmental or
municipal regulations or other requirements.
25. LANDLORD'S INSURANCE
26. TAXES
The Landlord covenants and agrees that it will, from time to
time, pay or cause to be paid the taxes (including local improvement charges),
assessments and other outgoings permitted in this Lease, PROVIDED
<PAGE> 17
10
HOWEVER, that nothing contained in this clause shall derogate from the Tenant's
covenant permitted in this Lease.
27. DAMAGE & DESTRUCTION
It is agreed between the Landlord and the Tenant that:
(a) In the event of damage to the Lands and Building or to any
part thereof, if the damage is such that the Demised Premises
or any substantial part thereof is rendered not reasonably
capable of use and occupancy by the Tenant for the purposes of
its business for any period of time in excess of 10 days,
then:
(i) unless the damage was caused by the fault or negligence of
the Tenant or its employees, agents, invitees or others under
its control, from the date of occurrence of the damage and
until the Demised Premises are again reasonably capable for
use and occupancy as aforesaid, the Basic Rent payable
pursuant to this Lease shall abate from time to time in
proportion to the part or parts of the Demised Premises not
reasonably capable of such use and occupancy; and
(ii) unless this Lease is terminated as hereinafter provided,
the Landlord or the Tenant as the case may be (according to
the nature of the damage and their respective obligations to
repair as provided herein) shall repair such damage with all
reasonable diligence, but to the extent that any part of the
Demised Premises is not reasonably capable of such use and
occupancy by reason of damage which the Tenant would otherwise
be entitled hereunder shall not extend later than the time by
which, in the reasonable opinion of the Landlord, repairs by
the Tenant ought to have been completed with reasonable
diligence; and
(b) If the Demised Premises are substantially damaged or destroyed
by any cause and if in the reasonable opinion of the Landlord
given in writing within 30 days of the occurrence the damage
cannot reasonably be repaired within 180 days after the
occurrence thereof, then at the option of the Landlord or the
Tenant, this Lease shall terminate, in which event neither the
Landlord nor the Tenant shall be bound to repair as provided
herein, and the Tenant shall instead deliver up possession of
the Demised Premises to the Landlord with reasonable
expedition and Rent shall be apportioned and paid to the date
of the occurrence; and
(c) If the premises whether of the Tenant or other lessees of the
Lands and Building comprising in the aggregate half or more of
the total number of square feet of rentable area in the
Building (as determined by the Landlord) or portions of the
Building which affect access or services essential thereto,
are substantially damaged or destroyed by any cause and if in
the reasonable opinion of the Landlord the damage cannot
reasonably be repaired within 180 days after the occurrence
thereof, the Landlord or the Tenant may, by written notice to
the other given within 30 days after the occurrence of such
damage or destruction, terminate this Lease, in which event
neither the Landlord nor the Tenant shall be bound to repair
as provided herein and the Tenant shall instead deliver up
possession of the Demised Premises to the Landlord with
reasonable expedition but in any event within 60 days after
delivery of such notice of termination, and Rent shall be
apportioned and paid to the date upon which possession is so
delivered up (but subject to any abatement to which the Tenant
may be entitled to herein.
28. ALTERATIONS & IMPROVEMENTS
Should the Tenant require any alterations, improvements, partitions, or
changes of whatsoever kind to or in the Demised Premises after the Tenant has
taken possession thereof, the Tenant will make and install the same at its own
expense and risk; PROVIDED HOWEVER, that no repairs, alterations, improvements,
partitions, or changes of whatsoever kind shall be made without the Tenant
having first obtained all permits and authorizations required by all authorities
having jurisdiction and a copy of said permits and authorizations having been
delivered to the Landlord and further without the written consent of the
Landlord first had and obtained, such consent not to be unreasonably withheld;
PROVIDED FURTHER, that any such repairs, alterations, improvements, partitions,
or changes of whatsoever kind shall be made in a good and workmanlike manner
with new, first-class materials and shall be carried out and the plans relating
thereto shall be prepared by qualified tradesmen, engineers or consultants. All
alterations, improvements, partitions and changes made in or to the Demised
Premises at any time before or after the taking of possession by the Tenant, by
the Tenant or the Landlord, shall immediately become the property of the
Landlord and form part of the Demised Premises and the Lands and Building and
shall remain upon the Demised Premises. PROVIDED ALWAYS that the Landlord may at
the expiration or sooner termination of this Lease for any reason whatsoever
require that the Tenant restore the Demised Premises in whole or in part to the
same condition in which they were at the time of the entering into of this
Lease, the exceptions to the Tenant's repair obligations only excepted.
Notwithstanding any of the foregoing, it is understood that the Tenant's
obligation to restore the Demised Premises shall not include the restoration of
any alterations or improvements which have been made to the Demised Premises by
either the Landlord or the Tenant under the Offer to Lease or under this Lease
in anticipation of or in connection with the Tenant's occupation of the Demised
Premises.
Notwithstanding any of the foregoing provisions of this clause to the
contrary all trade fixtures installed in the Demised Premises by the Tenant and
all other property not attached or affixed to the Demised Premises other than by
its own weight and installed in the Demised Premises by the Tenant shall remain
the property of the Tenant and shall not form a part of the Demised Premises
during the Term of this Lease PROVIDED that no such trade fixtures which are
attached or affixed to the Demised Premises other than by their own weight
<PAGE> 18
11
shall be removed from the Demised Premises during the Term unless replaced by
trade fixtures of comparable value. At the expiration or sooner termination of
the Term of this Lease all trade fixtures attached or affixed to the Demised
Premises other than by their own weight (excluding such trade fixtures,
equipment machinery and shelving which must be attached to prevent movement or
vibration or for safety purposes) and other than for those excepted fixtures
with respect to which the Landlord, prior to their installation, granted in
writing to the Tenant a right of removal at the expiration or sooner termination
of the Lease, shall become the sole property of the Landlord; PROVIDED HOWEVER,
that the Landlord may at the expiration or sooner termination of this Lease for
any reason whatsoever require that the Tenant remove any such fixtures and
restore the Demised Premises in whole or in part to the same condition in which
they were at the time of the entering into of this Lease, the exceptions to the
Tenant's repair obligations only excepted.
29. SIGNS
No signs shall be installed in or on the Demised Premises or the
Building or the Lands without the prior written consent of the Landlord. All
such signs shall conform to all applicable codes or statutes and the building
standard as determined by the Landlord from time to time as to size, design and
location. At the termination of this Lease, any of the Tenant's signs shall be
removed by the Tenant and any damage caused by such removal shall be repaired,
all at the expense of the Tenant.
NOTWITHSTANDING THE FOREGOING, THE TENANT SHALL HAVE THE RIGHT TO ERECT
A SIGN(S) ON THE EXTERIOR OF THE BUILDING AND ON THE LANDS DENOTING ITS TENANCY
THEREIN PROVIDED SUCH SIGN(S) CONFORMS WITH MUNICIPAL BY-LAWS AND OWNER'S
REGULATIONS GOVERNING SIGNS.
30. NO LIENS
At no time during the Term shall the Tenant permit any Construction lien
or similar lien to stand against the Demised Premises for any labour or
materials furnished to, or with the consent of, the Tenant, its agents or
contractors, in connection with work of any character (including all work which
the Tenant is obliged to do hereunder) performed or claimed to have been
performed on the Demised Premises by or at the direction or sufferance of the
Tenant. The Tenant shall cause all registrations of claims for such liens,
and/or certificates of action under any applicable legislation to be discharged,
released or vacated, as the case may be, within thirty (30) days of such
registration, or, in the event that such lien is being disputed by the Tenant,
the Tenant shall have commenced such action as may be required in order to
dispute such lien, all without cost or expense to the Landlord; provided further
that if the Tenant shall fail to remove, release or vacate any such lien as
required hereunder, the Landlord at its option may pay and discharge such lien,
and all amounts paid by or on behalf of the Landlord together with all expenses
incurred in connection therewith shall be charged to and paid by the Tenant as
Additional Rent.
31. TIME FOR PAYMENT AND LEGAL COSTS
All amounts (other than Rent) required to be paid by the Tenant to the
Landlord pursuant to this Lease shall, unless otherwise specified herein, be
payable at the place designated by the Landlord for payment of Rent and on
demand and if not so paid within 15 days of such demand be treated as Rent in
arrears and the Landlord may, in addition to any other remedy and it may have
for the recovery of the same, distrain for the amount thereof as Rent in
arrears.
In the event that the Tenant shall make default in payment of any sums
required to be paid by it under this Lease (other than payments to the
Landlord), the Landlord may pay the same.
Unless otherwise expressly provided herein all sums referred to in the
preceding clause of this clause and all reasonable costs paid by the Landlord on
account of any default by the Tenant under this Lease, shall be payable by the
Tenant to the Landlord as Additional Rent on the first day of the next month
next following said payment by the Landlord. The Landlord may, by notice to the
Tenant, demand payment thereof and if not paid by the Tenant within 15 days of
such notice, the amount thereof shall be deemed to be Rent in arrears and the
Landlord may, in addition to any other remedy it may have for the recovery of
the same, distrain for the amount thereof as Rent in arrears.
Wherever in this Lease the Landlord has made a payment which is subsequently
charged to the Tenant for payment, the Landlord shall first provide the Tenant
with evidence showing that such payment was made by the Landlord.
32. DEFAULT
If and whenever:
a) the Rent hereby reserved, or any part thereof, be not paid
when due, or there is non-payment of any other sum which the
Tenant is obligated to pay under any provisions hereof, and
such default shall continue for 5 days after notice by the
Landlord requiring the Tenant to rectify the same; or
<PAGE> 19
12
b) the Term hereby granted, or any goods, chattels or equipment of
the Tenant, shall be taken or be exigible in execution or in
attachment or if a writ of execution shall issue against the
Tenant; or
c) the Tenant shall become insolvent or commit an act of bankruptcy
or become bankrupt or take the benefit of any Act that may be in
force for bankrupt or insolvent debtors or become involved in a
winding-up proceeding, voluntary or otherwise, or if a receiver
shall be appointed for the business, property, affairs or
revenues of the Tenant, or if any governmental authority shall
take possession of the business or property of the Tenant; or
d) the Tenant shall make a bulk sale of its goods or move or
commence, attempt or threaten to move its goods, chattels and
equipment out of the Demised Premises (other than in the routine
course of its business) or shall abandon or vacate the Demised
Premises for a period of 15 consecutive days (without written
consent of the Landlord), or fail to conduct business from or
occupy the Demised Premises; or
e) the Tenant shall purport to assign, transfer, sub-let, or grant
a license with respect to any portion or all of the Term or the
Demised Premises without the written consent of the Landlord; or
f) the Tenant fails to remedy any condition giving rise to
cancellation, threatened cancellation, reduction or threatened
reduction of any insurance policy on the Building or any part
thereof within 24 hours after notice thereof by the Landlord; or
g) the Tenant shall not observe, perform and keep any other of the
covenants, agreements, provisions, stipulations and conditions
herein to be observed, performed and kept by the Tenant and
shall persist in such failure for 10 days after notice by the
Landlord requiring that the Tenant remedy, correct, desist or
comply (or in the case of any such breach which reasonably would
require more than 10 days to rectify unless the Tenant shall
commence rectification within the said 10 day period and
thereafter promptly and diligently and continuously proceed with
the rectification of the breach);
then and in any of such cases at the option of the Landlord, the full amount of
the current month's and next ensuing 3 months' installments of Rent shall
immediately become due and payable and the Landlord may immediately distrain for
the same, together with any arrears then unpaid; and the Landlord may without
notice or any form of legal process forthwith re-enter upon and take possession
of the Demised Premises or any part thereof in the name of the whole and remove
and sell the Tenant's goods, chattels and equipment therefrom, any rule of law
or equity to the contrary notwithstanding; and the Landlord may seize and sell
such goods, chattels, and equipment of the Tenant as are in the Demised Premises
or at any place at which the Landlord or any other person may have removed them
in the same manner as if they had remained and been distrained upon the Demised
Premises; and such sale may be effected in the discretion of the Landlord either
by public action or by private treaty, and either in bulk or by individual
item, or partly by one means and partly by another, all as the Landlord in its
entire discretion may decide.
33. CONSEQUENCES OF DEFAULT
If and whenever the Landlord is entitled to re-enter the Demised
Premises, or does re-enter the Demised Premises, the Landlord may either
terminate this Lease by giving written notice of termination to the Tenant, or
by posting notice of termination in the Demised Premises, and in such event the
Tenant will forthwith vacate and surrender the Demised Premises or
alternatively, the Landlord may from time to time without terminating the
Tenant's obligations under this Lease, make alterations and repairs considered
by the Landlord necessary to facilitate a sub-letting and sub-let the Demised
Premises or any part thereof as agent of the Tenant for such term or terms and
at such rent or rents and upon such other terms and conditions as the Landlord
in its reasonable discretion considers advisable. Upon each sub-letting all Rent
and other monies received by the Landlord from the sub-letting will be applied
first to the payment of indebtedness other than Rent due hereunder from the
Tenant to the Landlord, second to the payment of costs and expenses of the
sub-letting including brokerage fees and solicitors' fees and costs of the
alteration and repairs, and third to the payment of Rent due and unpaid
hereunder. The residue, if any, will be held by the Landlord and applied in
payment of future Rent as it becomes due and payable. If the Rent received from
the sub-letting during a month is less than the Rent to be paid during that
month by the Tenant, the Tenant will pay the deficiency to the Landlord. The
deficiency will be calculated and paid monthly. No re-entry by the Landlord will
be construed as an election on its part to terminate this Lease unless a written
notice of that intention is given to the Tenant or posted as aforesaid. Despite
a sub-letting without termination, the Landlord may elect at any time to
terminate this Lease for a previous breach. If the Landlord terminates this
Lease for any breach, the Tenant will pay to the Landlord on demand therefore;
a) both Basic Rent and Additional Rent, up to the time of re-entry
or termination, whichever is later, plus accelerated Rent as
provided for in this Lease;
b) all reasonable costs payable by the Tenant pursuant to the
provisions hereof up until the date of re-entry or termination,
whichever is later;
<PAGE> 20
13
c) such reasonable expenses as the Landlord may incur or has
incurred in connection with re-entering or terminating and
reletting, or collecting sums due or payable by the Tenant or
realizing upon assets seized including brokerage expense, legal
fees and disbursements and including the expense of keeping the
Demised Premises in good order and repairing or maintaining the
same or preparing the Demised Premises for re-leasing; and
d) as liquidated damages for the loss of Rent and other income of
the Landlord expected to be derived from this Lease during the
period which would have constituted the unexpired portion of the
Term had it not been terminated, the amount, if any, by which
the rental value of the Demised Premises for such period
established by reference to the terms and provisions of this
Lease, exceeds the rental value of the Demised Premises for such
period established by reference to the terms and provisions upon
which the Landlord re-lets them, if such re-leasing is
accomplished within a reasonable time after termination of this
Lease, and otherwise with reference to all market and other
relevant circumstances. Rental value is to be computed in each
case by reducing the present worth at an assumed interest rate
of 10% per cent per annum all Rent and other amounts to become
payable for such period and where the ascertainment of amounts
to become payable requires it, the Landlord may make estimates
and assumptions of fact which will govern unless shown to be
unreasonable or erroneous.
34. DISTRESS
The Tenant waives and renounces the benefit of any present or future
statute or any amendments thereto taking away or limiting the Landlord's right
of distress and agrees with the Landlord that, notwithstanding any such
enactment, all goods and chattels of the Tenant from time to time on the Demised
Premises shall be subject to distress for arrears of Rent, subject always to the
rights of prior secured parties.
35. SURRENDER
The Tenant shall, subject to any provisions permitted in this Lease to
the contrary, at the expiration of or sooner termination for any reason
whatsoever of this Lease, peacefully surrender and yield up to the Landlord all
and every part of the Demised Premises together with all Buildings, structures,
and fixtures including all appurtenances, alterations, repairs, additions and
replacements thereto all in good order, condition and repair, the exceptions to
the Tenant's repair obligations only excepted. PROVIDED ALWAYS, that the Tenant
shall on the expiration or sooner termination of this Lease sever and remove any
and all fixtures which are not or have not become the property of the Landlord
and the Tenant shall forthwith restore and repair the Demised Premises and any
damage caused as a result of such severance or removal. If the Tenant does not
so sever and remove in the time hereinbefore limited, the Landlord at its option
may do so at the expense of the Tenant and the Tenant will have no interest
whatsoever therein. PROVIDED ALWAYS, that no such fixtures and no goods and
chattels of any kind will, except in the ordinary course of business, be removed
from the Demised Premises during the Term or at any time thereafter without the
written consent of the Landlord first had and obtained, until all Rent in
arrears has been fully paid.
36. RIGHT TO EXHIBIT PREMISES
The Landlord and its agents and employees may at all reasonable times
enter the Demised Premises to exhibit the same for purposes of sale and may at
all reasonable times enter the Demised Premises to exhibit the same for purposes
of re-leasing and, in addition thereto, may display the usual "For Sale" and
"For Lease" signs thereon, provided that the Landlord shall not display "For
Lease" signs until it has received notice from the Tenant that this Lease will
not be renewed.
37. OVERHOLDING
If, at the expiration of the Term or sooner termination hereof, the
Tenant shall remain in possession without any further written agreement or in
circumstances where a tenancy would thereby be created by implication of law or
otherwise, a tenancy from year to year shall not be created by implication of
law or otherwise, but the Tenant shall be deemed to be a monthly tenant only, at
the greater of the then fair market rent for similar space or double Basic Rent
payable monthly in advance plus Additional Rent and otherwise upon and subject
to the same terms and conditions as herein contained, excepting provisions for
renewal (if any) and leasehold improvement allowance (if any), contained herein,
and nothing including the acceptance of any Rent by the Landlord, for periods
other than monthly periods, shall extend this Lease to the contrary except an
agreement in writing between the Landlord and the Tenant and the Tenant hereby
authorizes the Landlord to apply any monies received from the Tenant in payment
of such monthly Rent.
38. WAIVER BY THE LANDLORD
The failure of the Landlord to insist in any one or more cases upon the
strict performance of any of the covenants of this Lease or to exercise any
option herein contained shall not be construed as a waiver or a relinquishment
for the future of such covenant or option and the acceptance of rental by the
Landlord with knowledge of the breach by the Tenant of any covenants or
conditions of this Lease shall not be deemed a waiver of such breach and no
waiver by the Landlord of any provisions of the Lease shall be deemed to have
been made unless expressed in writing and signed by the Landlord.
<PAGE> 21
14
39. NOTICES
Any notice, advice, document or writing required or contemplated by any
provision thereof shall be given in writing and if to the Landlord, either
delivered personally to an officer of the Landlord or mailed by prepaid mail
addressed to the Landlord at the said local office address of the Landlord shown
above, or sent by facsimile or similar means of electronic communication and if
to the Tenant, either delivered personally to the Tenant (or to an officer of
the Tenant, if a corporation) or mailed by prepaid mail address to the Tenant at
the Demised Premises, or if an address of the Tenant is shown in the description
of the Tenant above, to such address or if sent by facsimile or similar means of
electronic communication to the number notified by either party to the other.
Every such notice, advice, document or writing shall be deemed to have been
given when delivered personally, of if mailed as aforesaid, upon the fifth day
after being mailed or if sent by facsimile or similar means of electronic
communication on the day following the date of transmission. The Landlord may
from time to time by notice in writing to the Tenant designate another address
as the address to which notices are to be mailed to it, or specify with greater
particularity the address and persona to which such notices are to be mailed and
may require that copies of notices be sent to an agent designated by it. The
Tenant may, if an address of the Tenant is shown in the description of the
Tenant above, from time to time by notice in writing to the Landlord, designate
another address as the address to which the notices are to be mailed to it, or
specify with greater particularity the address to which such notices are to be
mailed.
40. DELETED
41. SUBORDINATION & ACKNOWLEDGEMENTS
In the event of registration of this Lease (or a caveat based thereon)
in the Lands Titles Office by the Tenant, and in the further event of a mortgage
or mortgages being registered against the said Lands and Building, such mortgage
or mortgages shall take priority over this Lease in every respect and the Tenant
shall within 10 days of the request of the Landlord execute and deliver to the
Landlord any and all documents required to give effect to the foregoing,
including postponements under the appropriate Land Titles Act for the Province
of Ontario dealing with such matters provided that the mortgagee shall deliver
to the Tenant an agreement which shall permit the Tenant to continue in quiet
possession of the Demised Premises in accordance with the terms of this Lease as
long as the Tenant is not in default hereunder, whether such mortgage is in good
standing or not.
The Tenant covenants and agrees to promptly execute and deliver to the
Landlord and, if required by the Landlord, to any mortgagee (including any
trustee under a deed of trust and mortgage) designated by the Landlord, a
certificate in writing as to the then status of this Lease, including whether it
is in full force and effect, as modified or unmodified, confirming the Rent
payable hereunder and the state of accounts between the Landlord and the Tenant
and the existence or non-existence of defaults and any other matters pertaining
to the Lease as to which the Landlord shall request of such certificate.
PROVIDED FURTHER, that the Tenant, whenever requested by any mortgagee
(including any trustee under a deed of trust and mortgage), shall attorn to such
mortgagee as a Tenant upon all terms and conditions of this Lease and shall
execute promptly whenever requested by the Landlord or by such mortgagee an
instrument of attornment.
42. DELETED
43. TIME OF ESSENCE
Time shall be of the essence hereof.
44. HEADINGS
The Landlord and the Tenant hereto agree that the headings form no part
of this Lease and shall be deemed to have been inserted for the convenience of
reference only.
45. INTERPRETATION
Where the singular and masculine or neuter are used throughout this
Lease they shall be construed as if the plural and feminine had been used where
the context of the party or parties hereto so requires and the rest of the
sentence shall be construed as if the necessary grammatical and terminological
changes thereby rendered necessary had been made.
46. ACCEPTANCE
The Tenant does hereby accepts this Lease of the herein described
Demised Premises to be held by it as Tenant and subject to the conditions,
restrictions and covenants herein set forth.
<PAGE> 22
15
47. GOVERNING LAWS
This Lease and any rules and regulations adopted hereunder shall be
governed by the laws of the Province of Ontario. Should any provision of this
Lease and/or its conditions be illegal or not enforceable under the laws of the
Province of Ontario, it or they shall be considered severable, and this Lease
and its conditions shall remain in force and be binding upon the parties as
though the provision or provisions had never been included.
48. DELETED
49. DELETED
50. REPRESENTATIONS
The Tenant hereby acknowledges that the Demised Premises are taken
without representation of any kind on the part of the Landlord or its agent
other than as set forth herein. It is understood and agreed that no
representative or agent of the Landlord or Tenant is or shall be authorized or
permitted to make any representation with reference thereto, or to vary or
modify this agreement in any way, and that this Lease contains all of the
agreements and conditions made between the parties hereto respecting the Demised
Premises and that any addition to or alteration of or changes in this Lease or
other agreements hereafter made or conditions created to be binding, must be
made in writing and signed by both parties.
51. BINDING ON SUCCESSORS & APPROVED ASSIGNS
This indenture and everything herein contained shall enure to the
benefit of and be binding upon the parties hereto, the successors and assigns of
the Landlord and the approved successors and assigns of the Tenant.
52. SALE OR FINANCING OF LANDS OR ASSIGNMENT BY LANDLORD
The Tenant acknowledges that the rights of the Landlord under this
Lease may be mortgaged, charged, transferred or assigned to a purchaser or to a
mortgagee or trustee. The Tenant further acknowledges that in the event of the
sale or lease by the Landlord of the Lands or a portion thereof containing the
Demised Premises or the assignment by the Landlord of this Lease or of any
interest of the Landlord hereunder, and to the extent that such purchaser or
assignee, has assumed the covenants and obligations of the Landlord hereunder,
the Landlord shall, without further written agreement, be freed and relieved of
liability upon such covenants and obligations.
53. REGISTRATION
The Tenant covenants and agrees with the Landlord not to register this
Lease in any Land Registration Office in the Province of Ontario without the
prior written consent of the Landlord. If such consent is provided such notice
of Lease or caveat shall be in such form as the Landlord shall have approved in
writing and upon payment by the Tenant of the Landlord's reasonable fee (not to
exceed $250.00) for same and all applicable transfer or recording taxes or
charges. The Tenant shall remove and discharge at the Tenant's expense
registration of such a notice or caveat at the expiry or earlier termination of
the Term, and in the event of the Tenant's failure to so remove or discharge
such notice or caveat after 10 days written notice by the Landlord to the
Tenant, the Landlord may in the name and on behalf of the Tenant execute a
discharge of such a notice or caveat in order to remove and discharge such
notice of caveat and for the purpose thereof the Tenant hereby irrevocably
constitutes and appoints any officer of the Landlord the true and lawful
attorney of the Tenant. The Tenant will forthwith, upon demand, reimburse the
Landlord for the costs of any such action.
54. LAND USE CAVEAT
The Tenant covenants and agrees that it will not do or cause to be done
any act or make or cause to be made any omission which will result in a breach
or contravention of any land use caveats, development control caveats,
restrictive covenants or similar instruments presently registered against title
to the Lands, provided that the Tenant has been given prior notice of such
caveats, restrictive covenants or similar instruments by the Landlord.
Registration of such caveats, restrictive covenants or similar documents on
title to the Lands shall not constitute notification of the Tenant under this
paragraph.
<PAGE> 23
16
55. EXCLUSION OF LIABILITY
Except as otherwise provided in this Lease, it is agreed between the
Landlord and the Tenant that:
(a) The Landlord, its agents, servants and employees shall not be
liable for damage or injury to any property of the Tenant which
is entrusted to the care or control of the Landlord, its agents,
servants or employees.
(b) The Landlord, its agents, servants and employees, shall not be
liable nor responsible in any way for any personal or
consequential injury of any nature whatsoever that may be
suffered or sustained by the Tenant or any employee, agent,
customer, invitee or licensee of the Tenant or any other person
who may be upon the Demised Premises or for any loss of or
damage or injury to any property belonging to the Tenant or to
its employees or to any other person while such property is on
(he Demised Premises and, in particular (but without limiting
the generality of the foregoing), the Landlord shall not be
liable for any damage or damages of any nature whatsoever to any
such property or persons caused by the failure, by reason of a
breakdown of any apparatus or part thereof or other cause, to
supply adequate drainage, snow or ice removal, heating, air
conditioning, or electricity, or by reason of the interruption
of any public utility or service or in the event of steam,
water, rain, or snow which may leak into, issue, or flow from
any part of the Building or from the water, steam, sprinkler, or
drainage pipes or plumbing works of the same, or from any other
place or quarter or for any damage caused by anything done or
omitted by any lessee. The Tenant shall not be entitled to any
abatement of Rent in respect of any such condition, failure or
interruption of service.
(c) The Landlord, its agents, servants, employees or contractors
shall not be liable for any damage suffered to the Demised
Premises or the contents thereof by reason of the Landlord, its
agents, servants, employees or contractors, entering upon the
Demised Premises as herein provided to undertake any examination
thereof or any work therein or in the case of an emergency.
56. LANDLORD'S RIGHT TO PERFORM
If the Tenant falls to perform any of the covenants or obligations of
the Tenant under or in respect of this Lease, the Landlord may from time to time
at its discretion perform or cause to be performed any of such covenants or
obligations or any part thereof and for such purpose as may be requisite and may
enter upon the Demised Premises to do such things, and all expenses incurred and
expenditures made by or on behalf of the Landlord shall be paid by the Tenant as
Additional Rent on the first day of the next month next following the payment by
the Landlord, and if the Tenant fails to pay the same the Landlord may add the
same to the Rent and recover the same by all remedies available to the Landlord
for recovery of Rent in arrears; PROVIDED HOWEVER, that if the Landlord
commences and completes either the performance of any such covenants or
obligations or any part thereof, the Landlord shall not be obliged to complete
such performance or be later obliged to act in like fashion.
57. EXPROPRIATION
The Landlord and the Tenant shall co-operate, each with the other, in
respect of any public taking of the Demised Premises or any part thereof so that
the Tenant may receive the maximum award to which it is entitled in law for
relocation costs and business interruption and so that the Landlord may receive
the maximum award for all other compensation arising from or relating to such
public taking including all compensation for the value of the Tenant's leasehold
interest subject to the public taking) which shall be the property of the
Landlord, and the Tenant's rights to such compensation are hereby assigned to
the Landlord. If the whole or any part of the Demised Premises is publicly
taken, as between the parties hereto, their respective rights and obligations
under this Lease shall continue until the day on which the public taking
authority takes possession thereof. If the whole or any part of the Demised
Premises is publicly taken, the Landlord shall have the option, to be exercised
by written notice to the Tenant, to terminate this Lease and such termination
shall be effective on the day the public taking authority takes possession of
the whole or the portion of the Lands and Building publicly taken. Rent and all
other payments shall be adjusted as of the date of such termination and the
Tenant shall, on the date of such public taking, vacate the Demised Premises and
surrender the same to the Landlord, with the Landlord having the right to
re-enter and re-possess the Demised Premises discharged of this Lease and to
remove all persons therefrom. In this clause, the words "public taking" shall
include expropriation and condemnation and shall include a sale by the Landlord
to an authority with powers of expropriation, condemnation or taking, in lieu of
or under threat of expropriation or taking and "publicly taken' shall have a
corresponding meaning.
58. DELAY
Except as herein otherwise expressly provided, if and whenever and to
the extent that either the Landlord or the Tenant shall be prevented, delayed or
restricted in the fulfillment of any obligation hereunder in respect of the
supply or provision of any service or utility, the making of any repair, the
doing of any work or any other thing (other than the payment of monies required
to be paid by the Tenant to the Landlord hereunder) by reason of:
<PAGE> 24
17
(a) strikes or work stoppages;
(b) being unable to obtain any material, service, utility or labour
required to fulfil such obligation;
(c) any statute, law or regulation of, or inability to obtain any
permission from any government authority having lawful
jurisdiction preventing, delaying or restricting such
fulfillment; or
(d) other unavoidable occurrence,
the time for fulfillment of such obligation shall be extended during the period
in which such circumstance operates to prevent, delay or restrict the
fulfillment thereof, and the other party to this Lease shall not be entitled to
compensation for any inconvenience, nuisance or discomfort thereby occasioned;
provided that nevertheless the Landlord will use reasonable efforts to maintain
services essential to the use and enjoyment of the Demised Premises and provided
further that if the Landlord shall be prevented, delayed or restricted in the
fulfillment of any such obligation hereunder by reason of any of the
circumstances set out herein and to fulfil such obligation could not, in the
reasonable opinion of the Landlord, be completed without substantial additions
to or renovations of the Lands and Building, the Landlord may on 60 days written
notice to the Tenant terminate this Lease.
59. SCHEDULES
The provisions of the following Schedules attached hereto shall form
part of this Lease as if the same were embodied herein.
Schedule "A" - Legal Description of Property
Schedule "B" - Outlined of Demised Premises
Schedule "C" - Rules and Regulations
Schedule "D" - Option to Renew
Schedule "E" - Alteration and Installations
Schedule "F" - Structural Maintenance
Schedule "G" - Mechanical Maintenance
Schedule "H" - Basic Rent Free Period
Schedule "I" - Vacant Possession
Schedule "J" - Landlord's Work
Schedule "K" - Space Planner
Schedule "L" - Right of First Refusal - Purchase
Schedule "M" - Cash Allowance
Schedule "N" - Occupancy
IN WITNESS WHEREOF the parties hereto have executed this agreement by
their respective duly authorized officers in that behalf, as of the day and year
first above written.
BARRINGER RESEARCH LIMITED
Per: /s/ (President)
---------------------------------
/s/ Per: /s/ (VP Operations)
- ------------------------------ ---------------------------------
Witness as to
Signing by Tenant
of officer(s) of Tenant
LEHNDORFF MANAGEMENT LIMITED
in its capacity as agent for the Owners
Per: /s/ Philip Mostowich
---------------------------------
Title: Senior Vice President
Illegible
- ------------------------------ Per: /s/ Robert Stanley-Navona
Witness as to ---------------------------------
Signing by Landlord Title:
<PAGE> 25
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SCHEDULE A
LEGAL DESCRIPTION OF LANDS
ALL AND SINGULAR that certain parcel or tract of land and premises situate,
lying and being in the City of Mississauga, in the Regional Municipality of Peel
(formerly in the Town of Mississauga, in the County of Peel), and being composed
of Part Blocks J and I, Plan 928 and designated as Parts 1 and 3 on a reference
plan of survey deposited in the Land Registry Office of the Registry Division of
Peel (No. 43) as Plan 43R-1619.
<PAGE> 26
19
SCHEDULE B
OUTLINED OF DEMISED PREMISES
[SURVEYORS CERTIFICATE]
<PAGE> 27
20
SCHEDULE C
RULES AND REGULATIONS
1. The Tenant shall not perform any act or carry on any practice which may
injure or detrimentally affect the use of any common areas and facilities
or be a nuisance to any other tenants.
2. The Tenant shall not burn any trash or garbage in or about the demised
premises.
3. The Tenant shall not keep, display or store any merchandise on, or
otherwise obstruct common areas and roadways adjacent to the demised
premises.
4. The Tenant shall not keep, place or store any garbage or waste containers
outside of the demised premises, other than a waste bin to be located in
the rear parking.
5. No dangerous or explosive materials shall be kept or permitted to be kept
in the Leased Premises except as is stated in Rider 6A governing the
quantities and compliance required for use in the Tenant's operations.
6. The Tenant shall give the Landlord prompt notice of any accident to or any
defect in the plumbing, heating, air-conditioning, ventilating, mechanical
or electrical apparatus or any other part of the Building.
7. If the Tenant desires any electrical or communications wiring, the
Landlord reserves the right to direct qualified persons as to where and
how the wires are to be introduced, and without such directions no borings
or cutting for wires shall take place. No other wires or pipes of any kind
shall be introduced without the prior written consent of the Landlord.
8. The Tenant shall permit the periodic closing of lanes, driveways and
passages for the purpose of preserving the Landlord's rights over such
lanes, driveways and passages.
<PAGE> 28
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SCHEDULE "D"
Option to Renew (Negotiated)
(a) The Landlord covenants with the Tenant that if the Tenant duly and regularly
pays the Rent and any and all amounts required to be paid pursuant to this Lease
and performs each and every covenant, proviso and agreement on the part of the
Tenant to be paid, rendered, observed and performed herein, the Landlord will at
the expiration of the then expiring term on written notice by the Tenant to the
Landlord given by the Tenant not less than six (6) months prior to the
expiration of the then expiring term grant to the Tenant a five (5) year renewal
of lease of the Demised Premises (the "Renewal Term") on the same terms and
conditions as in the standard lease agreement then, at the commencement of the
Renewal Term, being used by the Landlord for the Building save and except the
right of further renewal, Landlord's Work (if any), Basic Rent, the tenant
improvement allowance (if any) and Basic Rent Free Period (if any).
(b) The Basic Rent for the Renewal Term shall be determined by reference to
prevailing rental rates for similar space in a similar area in which the Demised
Premises are situate, and if the Landlord and Tenant are unable to agree on
prevailing rental rates then the rental shall be determined by arbitration
conducted in accordance with the provisions of the Arbitration Act.
(c) Notwithstanding the above, if the Tenant does not exercise the Option to
Renew in accordance with Schedule "D" then this Option to Renew is null and
void.
<PAGE> 29
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SCHEDULE "E"
ALTERATION AND INSTALLATIONS
The Tenant shall have the right to make alterations and installations at its own
expense, from time to time during the lease term or any renewal thereof,
provided it has the prior written consent of the Landlord, which is not to be
unreasonably withheld and further provided that it agrees to restore the
premises to their original condition at the expiration of the lease term,
reasonable wear and tear excepted, at the Landlord's option.
The Tenant's obligation to restore the Demised Premises shall not, however,
apply to any alterations or improvements which have been made to the Demised
Premises by either the Landlord or the Tenant under the Offer to Lease or under
this Lease in anticipation of or in connection with the Tenant's occupation of
the Demised Premises.
<PAGE> 30
23
SCHEDULE "F"
STRUCTURAL MAINTENANCE
The Landlord shall be responsible for all structural repairs including the roof
if not occasioned by the fault of the Tenant or those for whom the Tenant is
responsible, or repairs recoverable through insurance policies.
<PAGE> 31
SCHEDULE "G"
MECHANICAL MAINTENANCE
During the Term of this Lease, the Tenant shall be responsible for the
maintenance and servicing of all mechanical systems including but not limited to
the HVAC, plumbing and electrical systems.
Prior to occupancy by the Tenant, the Landlord shall cause the HVAC
systems, roof deck and membrane and electrical wiring to be inspected by the
Landlord's engineers. All repairs or replacements recommended by the Landlord's
engineers shall be carried out by the Landlord at the Landlord's sole expense.
The Landlord shall, prior to occupancy, provide the Tenant with written
engineering reports with respect to the condition of the roof deck and membrane,
the HVAC systems and electrical wiring and with a complete report setting out
all repairs or replacements made hereunder.
<PAGE> 32
25
SCHEDULE "H"
BASIC RENT FREE PERIOD
The Tenant shall not be required to pay Basic Rent for the first two (2) months
of the Term of this Lease (herein called the "Basic Rent Free Period").
All other terms and provisions of this Lease shall, however, remain in full
force and effect during the Basic Rent Free Period and thereafter including
without limitation the payment of Additional Rent.
<PAGE> 33
26
SCHEDULE "I"
VACANT POSSESSION
Provided the Lease has been executed, the Landlord shall provide vacant
possession of the Premises on July 1, 1995 in order that the Tenant or Landlord
may complete any work required prior to the Lease commencement date. This vacant
possession period from July 1, 1995 to August 31, 1995 shall be on a total rent
free basis. Tenant agrees to carry appropriate liability insurance during this
period. All terms of the Lease shall apply during this period except payment of
rent, taxes, utilities and maintenance.
<PAGE> 34
27
SCHEDULE "J"
LANDLORD'S WORK
The Landlord shall, prior to September 1, 1995 complete the following work at
its own expense using quality materials and workmanship. All work shall be
completed in accordance with all applicable codes governing such work:
i) re-coat and reline currently paved parking area with a proper asphalt
coating;
ii) ensure that all mechanical systems including but not limited to HVAC,
electrical, plumbing and hardware systems have been properly serviced and
are in good working order;
iii) construct a dropped T-bar ceiling complete with adequate lighting,
heating and air-conditioning for the warehouse area shown shaded on the
attached Schedule "B". T-bar ceiling shall be at a height of 12' above
warehouse floor.
(iv) repair concrete slab adjacent to front entrance;
v) carry out additional repairs specified in Tenant's letter to Landlord
dated June 13, 1995.
<PAGE> 35
28
SCHEDULE "K"
SPACE PLANNER
The Landlord agrees to furnish Tenant with a space planner in order to price and
design modifications to the building that are necessary to the Tenant's
operation. The cost of the space planner's feasibility drawings shall be borne
by the Landlord. All working drawings are the responsibility of the Tenant.
<PAGE> 36
29
SCHEDULE "L"
RIGHT OF FIRST REFUSAL - PURCHASE
The Tenant shall have the Right of First Refusal to purchase the said property
at any time or times during its lease term or renewal thereof if and when the
property becomes available for sale. Pursuant to this Right of First Refusal,
the Landlord agrees to notify the Tenant when it has received a bona fide offer
to purchase the property from a third party arms length purchaser which the
Landlord is prepared to accept. Upon receipt of written notice and a copy of
said offer, the Tenant shall have a period of 72 hours to match the terms of the
offer which the Landlord must accept.
<PAGE> 37
30
SCHEDULE "M"
CASH ALLOWANCE
Provided the Lease has been executed by both parties, the Landlord agrees to
provide the Tenant with a cash allowance of One Hundred and Fifty Thousand
Dollars ($150,000.00) CDN payable by certified cheque unless otherwise mutually
agreed upon, in accordance with the following payment schedule set forth below.
This cash allowance will be applied against moving expenses and other costs
necessary to the operation of the Tenant's business.
a) Fifty Thousand Dollars ($50,000.00) CDN payable within seven (7) days of
signing of the Lease by both parties and occupancy of the Premises.
b) Fifty Thousand Dollars ($50,000.00) CDN payable on August 1, 1995
provided the Tenant has delivered satisfactory proof of expenditure of
the initial Fifty Thousand Dollars ($50,000.00) CDN.
c) Fifty Thousand Dollars ($50,000.00) CDN payable on the Lease commencement
date provided the Tenant has delivered satisfactory proof of expenditure
of the previous Fifty Thousand Dollars CDN.
<PAGE> 38
31
SCHEDULE "N"
OCCUPANCY
The Premises shall be given to the Tenant in a clean and broom swept condition
free of any refuse or debris. Any damage caused by the vacating of the Premises
by the existing tenant shall be repaired at the cost of the existing tenant
(Savin Canada Inc.) or the Landlord.
The Premises shall be repaired as required by the letter from the Tenant to the
Landlord dated June 13, 1995.
<PAGE> 1
EXHIBIT 21
BARRINGER TECHNOLOGIES INC.
LIST OF SUBSIDIARIES
Name Jurisdiction of Incorporation
---- -----------------------------
Barringer Instruments, Inc. Delaware
Barringer Consumer Products, LLC New Jersey
Barringer Research Ltd. Ontario, Canada
Barringer Europe, SARL France
Barringer Instruments UK, Ltd. United Kingdom
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Barringer Technologies Inc.
New Providence, New Jersey
We hereby consent to the inclusion in the Prospectus constituting a part of this
Registration Statement of our report dated March 27, 1996, relating to the
consolidated financial statements of Barringer Technologies Inc.
for the year ended December 31, 1995, also included in the Prospectus.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
BDO Seidman, LLP
Woodbridge, New Jersey
October 8, 1996
