<PAGE> 1
As filed with the Securities and Exchange Commission on August 7, 1997
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
BARRINGER TECHNOLOGIES INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 3829 84-0720473
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
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219 SOUTH STREET, MURRAY HILL, 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, MURRAY HILL, 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. J. VAUGHAN CURTIS, ESQ.
LOWENSTEIN, SANDLER, KOHL, FISHER & BOYLAN, P.A. ALSTON & BIRD LLP
65 LIVINGSTON AVENUE 1201 WEST PEACHTREE STREET
ROSELAND, NEW JERSEY 07068 ATLANTA, GEORGIA 30309
(201) 992-8700 (404) 881-7000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
----------------------
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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PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES AGGREGATE REGISTRATION
TO BE REGISTERED OFFERING PRICE(1) FEE
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Common Stock, $.01 par value................................... $34,931,250 $10,586
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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, as amended, on the
basis of the average of the high and low sales prices for a share of Common
Stock on the Nasdaq National Market on August 5, 1997.
----------------------
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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<PAGE> 2
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 AUGUST 7, 1997
[BARRINGER TECH LOGO]
2,000,000 SHARES
COMMON STOCK
All of the 2,000,000 shares of Common Stock offered hereby are being
offered by Barringer Technologies Inc. ("Barringer" or the "Company"). On August
5, 1997, the last sale price of the Common Stock as reported on the Nasdaq
National Market was $14.50 per share. See "Price Range of Common Stock." As of
the date of this Prospectus, the Common Stock is traded on the Nasdaq National
Market under the symbol "BARR."
----------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE 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.............. $ $ $
- -----------------------------------------------------------------------------------------------
Total(3)............... $ $ $
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(1) The Company and the Selling Stockholders (defined below) have agreed to
indemnify the several Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the "Securities
Act"). See "Underwriting."
(2) Before deducting estimated offering expenses of $300,000, payable by the
Company.
(3) The Company and certain stockholders (the "Selling Stockholders") have
granted to the Underwriters a 30-day option to purchase up to an additional
300,000 shares of Common Stock solely to cover over-allotments, if any. If
such over-allotment option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions, Proceeds to Company and Proceeds to
Selling Stockholders will be $ , $ , $ and
$ , respectively. See "Underwriting."
----------------------
The Common Stock is offered by the Underwriters as stated herein, subject
to receipt and acceptance by them and subject to their right to reject any order
in whole or in part. It is expected that delivery of such shares will be made
through the offices of Robertson, Stephens & Company LLC ("Robertson, Stephens &
Company"), in San Francisco, California, on or about September , 1997.
ROBERTSON, STEPHENS & COMPANY PACIFIC GROWTH EQUITIES, INC.
The date of this Prospectus is September , 1997
<PAGE> 3
Graphic Description
Front Inside Cover
Photo 1 is a map of the world showing the number of IONSCANS installed on each
continent under the heading "BARRINGER IONSCAN(R) THE WORLD LEADER IN
TRACE DETECTION*"
Photo 2 is a photograph of Canadian Customs agents standing beside a ship with
an IONSCAN. The caption reads as follows: "Customs services around the
world use the IONSCAN(R) to detect the presence of illicit drugs at
seaports, airports, and border crossings. U.S. Coast Guard and
international counterparts also utilize the IONSCAN(R) for interdiction
of drugs on the high seas."
Photo 3 is a photograph of a French Security Agent utilizing the IONSCAN(R) in
the inspection of luggage. The caption reads as follows: "Customs
personnel inspect cargo and checked luggage."
Photo 4 is a photograph of an airport security agent inspecting passenger
luggage with an IONSCAN(R). The caption reads as follows: "The
IONSCAN(R) Model 400 provides drug and explosive detection capability.
In order to enhance passenger safety and security, a guard examines a
carry-on item for traces of explosives at an airport screening station."
Photo 5 is a photograph of French security agents walking with a passenger and
wheeling an IONSCAN. The caption reads as follows: "Security personnel
aboard European passenger trains use the IONSCAN(R) to examine carry-on
baggage for traces of explosives prior to the train entering the
Eurotunnel."
<PAGE> 4
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES
OR AN OFFER TO, OR A SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH
OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
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TABLE OF CONTENTS
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PAGE
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Prospectus Summary................................................................... 3
Forward-Looking Statements........................................................... 5
Risk Factors......................................................................... 5
Use of Proceeds...................................................................... 12
Price Range of Common Stock.......................................................... 12
Dividend Policy...................................................................... 12
Capitalization....................................................................... 13
Selected Consolidated Financial Data................................................. 14
Management's Discussion and Analysis of Financial Condition and Results of
Operations......................................................................... 15
Business............................................................................. 23
Management........................................................................... 32
Certain Transactions................................................................. 39
Principal and Selling Stockholders................................................... 41
Description of Capital Stock......................................................... 43
Shares Eligible for Future Sale...................................................... 47
Underwriting......................................................................... 48
Legal Matters........................................................................ 50
Experts.............................................................................. 50
Additional Information............................................................... 50
Index to Consolidated Financial Statements........................................... F-1
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"IONSCAN(R)" is a registered trademark of the Company.
The Company was founded in September 1967. The Company's headquarters are
located at 219 South Street, Murray Hill, New Jersey 07974 and its telephone
number is (908) 665-8200.
The Company intends to furnish its stockholders with annual reports
containing audited consolidated financial statements examined by its independent
certified public accountants and quarterly reports containing unaudited
consolidated financial information for the first three quarters of each fiscal
year.
----------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS OR EFFECTING SYNDICATE COVERING
TRANSACTIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ STOCK MARKET IN ACCORDANCE
WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the consolidated financial statements and notes thereto
appearing elsewhere in this Prospectus, including the information under "Risk
Factors."
THE COMPANY
Barringer Technologies Inc. ("Barringer" or the "Company") is the world's
leading manufacturer (based on units sold) of high sensitivity equipment used
for detecting and identifying trace amounts of plastic and other explosives and
illegal drugs. The Company designs and produces products that employ a
proprietary application of ion mobility spectrometry ("IMS") technology that can
detect and identify targeted compounds in amounts smaller than one-billionth of
a gram in approximately six seconds. The Company's principal product, the
IONSCAN(R), is a portable desktop system which had an installed base of over 500
units in 39 countries as of June 30, 1997. The Company's revenues have grown
from $2.0 million for the year ended December 31, 1991 to $10.9 million for the
year ended December 31, 1996, representing a compounded annual growth rate of
40.4% over the last five years. For the six months ended June 30, 1997, the
Company's revenues and net income were $9.4 million and $2.3 million,
respectively.
The markets for the Company's IONSCAN(R) currently include aviation
security, surface transportation security, facilities protection, forensics,
military, correctional facilities, and customs and law enforcement agencies. The
Company's customers include the Federal Aviation Administration (the "FAA"), the
U.S. Coast Guard, the U.S. Drug Enforcement Agency (the "DEA") and the Federal
Bureau of Investigation (the "FBI"), as well as customs agencies in France,
Canada and Japan and various prison facilities in the U.S. and elsewhere. The
IONSCAN(R) is also installed at over 40 airports and transportation centers
around the world, including Gatwick and Heathrow airports in the United Kingdom,
John F. Kennedy International Airport, certain European Passenger Service
("British Rail") terminals and the Eurotunnel. The Company believes that its
principal competitive advantages are the detection capability, reliability,
versatility, cost effectiveness, ease of use and portability of the IONSCAN(R).
These advantages enable the IONSCAN(R) to be used both in lieu of and in
conjunction with bulk imaging technologies, such as enhanced x-ray and computer
aided tomography ("CATSCAN").
The Company believes that many of the markets it serves are experiencing
substantial growth. Recently, growth in the markets for advanced explosives
detection technology has accelerated significantly, principally in reaction to
heightened safety concerns caused by the threat of terrorism. For example, in
October 1996, Congress appropriated $144 million for the procurement of advanced
explosives detection technology for aviation security. Terrorist attacks on bus
and train stations, the World Trade Center and the Alfred R. Murrah Federal
Building in Oklahoma City have resulted in the deployment of advanced explosives
detection technology for other uses. In addition, according to the U.S. Office
of National Drug Control Policy, use of certain illegal drugs has increased
during the past five years. As a result of increased drug usage, a heightened
public awareness regarding drug-related criminal activity and the use of more
sophisticated techniques by drug traffickers, government agencies have
increasingly turned to advanced detection technology to assist in their drug
interdiction efforts.
The Company markets its products through a direct sales organization
comprised of 18 sales people located at its headquarters in New Jersey and at
offices in Toronto, London, and Paris. In addition, the Company supports a
network of 49 independent sales and service representatives located in Europe,
the Middle East, Africa, Asia, South America and Australia.
The Company's objective is to maintain its position as the world's leading
provider of trace detection systems in its core markets and to become a leading
supplier of other advanced technology security solutions. The Company intends to
achieve this objective by further penetrating its existing markets, leveraging
its IMS technology for new applications, pursuing strategic relationships and
acquisitions and expanding its sales and marketing capabilities.
3
<PAGE> 6
THE OFFERING
Common Stock Offered..................... 2,000,000 shares
Common Stock to be Outstanding after the
Offering................................. 7,475,179 shares
Use of Proceeds.......................... To increase sales, marketing and
customer support capabilities, to
expand facilities, to pursue
possible acquisitions of, or
investments in, complementary
businesses, products or
technologies and for general
corporate purposes. See "Use of
Proceeds."
Nasdaq National Market Symbol............ BARR
SUMMARY CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data)
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SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------- ---------------
1992 1993 1994 1995 1996 1996 1997
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(Unaudited)
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CONSOLIDATED STATEMENTS OF
OPERATIONS DATA(1):
Revenues......................... $ 2,838 $7,770 $ 5,514 $ 6,374 $10,923 $5,012 $9,438
Gross profit..................... 627 3,840 1,414 2,773 5,560 2,365 5,483
Operating income (loss).......... (1,714) 541 (2,469) (886) 1,596 667 1,945
Income tax benefit (provision)... -- 153 (75) -- 391 -- 131
Income (loss) from continuing
operations.................... (1,763) 593 (2,633) (1,178) 2,059 564 2,260
Net income (loss)................ (1,807) 595 (2,565) (827) 2,059 564 2,260
Preferred stock dividends........ (160) (114) (108) (82) (39) (24) (6)
Net income (loss) attributable to
common stockholders........... (1,967) 481 (2,673) (909) 2,020 540 2,254
Income (loss) per common share
from continuing operations
(fully diluted)............... $ (0.90) $ 0.20 $ (0.97) $ (0.39) $ 0.44 $ 0.15 $ 0.35
Net income (loss) per common
share (fully diluted)......... $ (0.92) $ 0.20 $ (0.95) $ (0.28) $ 0.44 $ 0.15 $ 0.35
Weighted average common shares
outstanding (fully diluted)... 2,135 2,570 2,827 3,283 4,607 3,854 6,388
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JUNE 30, 1997
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ACTUAL AS ADJUSTED(2)
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(Unaudited)
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CONSOLIDATED BALANCE SHEET DATA:
Working capital.................. $16,414 $ 43,374
Current assets................... 19,253 46,213
Total assets..................... 20,385 47,345
Current liabilities.............. 2,839 2,839
Long-term liabilities............ 121 121
Stockholders' equity............. 17,425 44,385
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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 1995 and the remainder of its
interest in 1996. See "Certain Transactions--Sale of Subsidiary."
(2) Adjusted to give effect to the sale of 2,000,000 shares of Common Stock
offered hereby and the application of the estimated net proceeds therefrom,
at an assumed public offering price of $14.50 per share and after deducting
underwriting discounts and commissions and estimated Offering expenses. See
"Capitalization."
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 Underwriters'
over-allotment option, and (ii) no exercise or conversion of options, warrants
and convertible securities outstanding as of August 1, 1997, exercisable for or
convertible into an aggregate of 1,502,899 shares of Common Stock.
4
<PAGE> 7
FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (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 and markets for the IONSCAN(R), the development
of new products, the probability of the Company's success in the sale of
IONSCAN(R)s in current or future markets, the potential effect of government
regulations and directives changing security requirements, the ability of the
IONSCAN(R) to satisfy any certification protocol adopted by the FAA or any other
government agency, the amount and timing of domestic and foreign government
appropriations for the development and deployment of advanced detection
technology, liquidity and capital requirements and use of proceeds.
Forward-looking statements are inherently subject to risks and
uncertainties, many of which cannot 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 contained herein. Important factors that could
contribute to such differences are set forth below under "Risk Factors,"
including, but not limited to, "Dependence on and Effects of Government
Regulation and Procurement Policies," "Dependence on Large Orders; Customer
Concentrations," "Dependence on IONSCAN(R) and Market Acceptance," "Dependence
on New Product Development; Technological Advancement," "Limited Proprietary
Technology," "Fluctuations in Operating Results," "Competition," "Lengthy Sales
Cycle," "International Business; Risk of Change in Foreign Regulations;
Fluctuations in Exchange Rates," "Dependence on Limited Number of Suppliers,"
"Ability to Manage Rapid Growth" and "History of Losses; Cash Constraints."
RISK FACTORS
The Common Stock offered hereby involves a high degree of risk. In addition
to the other information contained in this Prospectus, the following risk
factors should be considered carefully in evaluating the Company, its business
and an investment in the Common Stock offered hereby.
DEPENDENCE ON AND EFFECTS OF GOVERNMENT REGULATION AND PROCUREMENT POLICIES
The Company's business is dependent upon purchases of IONSCAN(R)s by
government agencies. Budgetary allocations for detection equipment are
dependent, in part, upon government policies that fluctuate from time to time in
response to political and other factors, including the public's perception of
the threat of airline bombings and other terrorist acts. Growth in the Company's
business is substantially dependent upon the adoption and implementation of
regulations or requirements in the aviation security market, particularly in the
United States, resulting in the use of advanced explosives detection systems,
including trace particle detection equipment. The Company expects that a
substantial portion of current and anticipated purchases of advanced detection
equipment in the aviation security market will be made by the FAA with
appropriated funds. In addition, growth in the Company's business will also be
dependent on continued government purchases of IONSCAN(R)s for drug interdiction
applications. A reduction of funding for security efforts or drug interdiction
could materially and adversely affect the Company's business, financial
condition and results of operations. There can be no assurance that funding for
the purchase of such equipment will be continued or as to the level of such
funding. A substantial amount of the funds appropriated to date have been and
amounts appropriated in the future will continue to be used to purchase
equipment utilizing other technologies, such as enhanced x-ray, CATSCAN and
other bulk imaging technologies. 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 Company's products
will meet any certification or other requirements that may be adopted by the FAA
or any other government agency. See "Business -- Government Regulation."
5
<PAGE> 8
DEPENDENCE ON LARGE ORDERS; CUSTOMER CONCENTRATIONS
In any given fiscal year, the Company's revenues have principally
consisted, and the Company believes will continue to consist, of orders for
multiple IONSCAN(R)s from a limited number of customers. For example, during the
first half of 1997, the Company received large orders for its IONSCAN(R) from
the FAA and the U.S. Coast Guard. While the number and identity of the Company's
customers may vary from period to period, the Company is nevertheless dependent
upon these multiple orders for a substantial portion of its revenues. There can
be no assurance that the Company will obtain such multiple orders on a
consistent basis. During the first half of 1997, approximately $4.8 million, or
51.2%, of the Company's revenues were generated from sales to the Company's
three largest customers. During the fiscal year ended December 31, 1996,
revenues from the Company's three largest customers were approximately $4.3
million, or 39.3%, of the Company's revenues. The Company anticipates that a
significant portion of its future revenues will result from orders from the FAA.
The Company's inability to obtain sufficient multiple orders or to expand its
customer base could have a material adverse effect on the Company's business,
financial condition and results of operations.
DEPENDENCE ON IONSCAN(R) AND MARKET ACCEPTANCE
The Company derives substantially all of its revenues from the sale of
IONSCAN(R)s and its future profitability is substantially dependent on the
Company's ability to market the IONSCAN(R) successfully. There can be no
assurance that markets for IONSCAN(R) technology 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. See "Business--Sales and Marketing."
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 products that
incorporate technological advances, keep pace with evolving industry standards
and respond to changing customer requirements. 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, financial condition and results of operations would be materially and
adversely affected. See "Business--Sales and Marketing" and "--Product
Development."
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, shorten the life spans of, or render obsolete the
Company's existing products. There can be no assurance that the Company will be
successful in convincing potential customers that the IONSCAN(R) is superior to
such other systems or products, that new systems with comparable or greater
performance, lower prices and faster or equivalent throughput will not be
introduced, or that, if such products are introduced, customers will not delay
or cancel existing or future orders for the IONSCAN(R). 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" and
"Business--Competition." Such delays could have a material adverse effect on the
Company's business, financial condition and results of operations.
LIMITED PROPRIETARY TECHNOLOGY
Certain of the technology used in the IONSCAN(R) is licensed by the Company
from the Canadian government pursuant to a license agreement that expires in
March 1999, subject to the Company's right to extend on a year-to-year basis
through March 2009. While the Company holds patents relating to certain
components, systems and techniques used in the IONSCAN(R) and while certain
other elements of the IONSCAN(R) are protected by other intellectual property
rights, the Company has
6
<PAGE> 9
no comprehensive patent or similar exclusive intellectual property right
covering the IONSCAN(R) in its entirety. In addition, the basic IMS technology
used by the Company is not proprietary and is available in the public domain.
Accordingly, present and potential competitors could use such basic technology
to duplicate the performance of the IONSCAN(R). See "Business--Competition" and
"--Patents, Trademarks and Proprietary Rights."
FLUCTUATIONS IN OPERATING RESULTS
The Company's past operating results have been, and its future operating
results will be, subject to fluctuations resulting from a number of factors,
including: the timing and size of orders from, and shipments to, major
customers; budgeting and purchasing cycles of its customers; delays in product
shipments caused by customer requirements or the inability of customers to
accept shipments; the timing of enhancements to the IONSCAN(R) by the Company or
new products introduced by the Company or its competitors; changes in pricing
policies by the Company, its competitors or suppliers, including possible
decreases in average selling prices of the IONSCAN(R) in response to competitive
pressures; the proportion of revenues derived from competitive bid processes;
the mix between sales to domestic and international customers; market acceptance
of enhanced versions of the IONSCAN(R); the availability and cost of key
components; the availability of manufacturing capacity; and fluctuations in
general economic conditions. The Company also may choose to reduce prices or to
increase spending in response to competition or to pursue new market
opportunities, all of which may have a material adverse effect on the Company's
business, financial condition and results of operations. The Company's revenues
in any period are derived from sales of IONSCAN(R)s to a limited number of
customers and are generally recognized upon shipment. As a result, variations in
the number of orders or the timing of shipments may cause the Company's
quarterly and annual operating results to vary substantially. See "-- Dependence
on Large Orders; Customer Concentrations" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Quarterly Results of
Operations."
Moreover, although the Company's sales are not seasonal in nature,
government agencies and certain 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. Because the Company generally recognizes
substantially all of the revenue from a sale upon shipment, and because 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 considerations on the delivery date of a relatively few units
could significantly affect the Company's quarterly results and the
predictability of such quarterly results.
COMPETITION
The Company competes with other entities, including Thermedics Detection
Inc., InVision Technologies, Inc. and Vivid Technologies, Inc., 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. There can be no assurance that the Company will be able to continue to
compete successfully with its competitors or be able to compete with new market
entrants or in new markets that may develop.
The Company competes for government expenditures with equipment
manufacturers utilizing other types of detection technologies, including
enhanced x-ray, CATSCAN and other bulk imaging technologies, as well as with
manufacturers of other IMS equipment and manufacturers using other trace
particle detection technologies, such as gas chromatography and
chemoluminescence.
The Company also competes with the use of canines to locate the presence of
explosives or drugs.
7
<PAGE> 10
As a result of recent government initiatives, the Company anticipates that
additional technologies, including improved IMS technologies, will be developed
and that new competitors will enter the Company's markets. The failure of the
Company to develop improvements or otherwise successfully compete in its markets
would have a material adverse effect on the Company's business, financial
condition and results of operations. See "--Dependence on and Effects of
Government Regulation and Procurement Policies" and "Business--Competition."
LENGTHY SALES CYCLE
The Company's sales process is often protracted due to the lengthy approval
processes that typically accompany government expenditures. Typically, six to 12
months may elapse between a new customer's initial evaluation of the IONSCAN(R)
and the execution of a contract. See "--Fluctuations in Operating Results,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview" and "--Quarterly Results of Operations."
INTERNATIONAL BUSINESS; RISK OF CHANGE IN FOREIGN REGULATIONS; FLUCTUATIONS IN
EXCHANGE RATES
The Company markets its products to customers outside of the U.S. and,
accordingly, is exposed to the risks of international business operations,
including unexpected changes in foreign and domestic regulatory requirements,
possible foreign currency controls, uncertain ability to protect and utilize its
intellectual property in foreign jurisdictions, currency exchange rate
fluctuations or devaluations, tariffs or other barriers, difficulties in
staffing and managing foreign operations, difficulties in obtaining and managing
vendors and distributors and potentially negative tax consequences.
International sales are subject to certain inherent risks including embargoes
and other trade barriers, staffing and operating foreign sales and service
operations and collecting accounts receivable. The Company is also subject to
risks associated with regulations relating to the import and export of high
technology products. The Company cannot predict whether quotas, duties, taxes or
other charges or restrictions upon the importation or exportation of the
Company's products in the future will be implemented by the U.S. or any other
country. There can be no assurance that any of these factors will not have a
material adverse effect on the Company's business, financial condition and
results of operations.
A portion of the Company's revenues and expenses are denominated in foreign
currencies. Fluctuations in currency exchange rates could adversely affect the
Company's profitability and could cause the Company's products to become
relatively more expensive to customers in a particular country, leading to fewer
sales or reduced selling prices in that country. As a result, the Company is
exposed to a certain degree of exchange rate risk. The Company generally does
not hedge its foreign exchange exposure. There can be no assurance that the
Company will not experience material losses in the future as a result of
currency fluctuations or that any such losses will not have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview."
DEPENDENCE ON LIMITED NUMBER OF SUPPLIERS
Certain key components used in the Company's products have been designed by
the Company to its specifications and are currently purchased only from one or a
limited number of suppliers. The Company currently does not have long-term
agreements with these suppliers. Moreover, in view of the high cost of many of
these components, the Company does not maintain significant inventories of some
necessary components. Recently, the Company has significantly increased its
purchases of certain components to meet expected demand for the IONSCAN(R). As a
result, in certain circumstances, the Company has had to enter into new supply
relationships in order to satisfy its increased demand for components and may be
required to do so in the future. If the Company's suppliers were to experience
financial, operational, production or quality assurance difficulties, the supply
of components to the Company would be reduced or interrupted. In the event that
a supplier were to cease operations, discontinue a product or withhold supply
for any reason, the Company might be unable to acquire certain components from
alternative sources, to find alternative third-party manufacturers or sub-
assemblers, or to obtain sufficient quantities of these components, which could
result in delays or
8
<PAGE> 11
interruptions in product shipments, and could have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Business--Manufacturing and Assembly."
ABILITY TO MANAGE RAPID GROWTH
The Company has rapidly expanded its business operations as a result of
increased demand for the IONSCAN(R), which has placed significant demands on the
Company's manufacturing, management and working capital resources and operating,
management and financial control systems. Failure to maintain needed resources
or to enhance the Company's operating, management and financial control systems
as and when necessary, or difficulties encountered during such enhancements,
could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company's future growth also will
depend on its ability to continue to improve and expand its engineering and
technical resources and to attract, retain and motivate key personnel. The
failure of the Company to increase its revenues sufficiently to compensate for
increased expenses resulting from current or future expansion, or the Company's
failure to otherwise adequately manage the growth of its business, would have a
material adverse effect on the Company's business, financial condition and
results of operations.
HISTORY OF LOSSES; CASH CONSTRAINTS
The Company sustained net losses of $2.6 million and $827,000 for the years
ended December 31, 1994 and 1995, respectively, and had an accumulated deficit
of $12.3 million at June 30, 1997. Although the Company generated net income of
$2.1 million and $2.3 million for the year ended December 31, 1996 and the six
months ended June 30, 1997, respectively, the Company used $1.4 million and $1.3
million, respectively, of cash in operations during such periods as a result of
the need for working capital to support higher levels of accounts receivable and
inventory. The Company's failure to generate positive operating cash flow or to
maintain other sources of working capital could result in significant cash
shortages that could have a material adverse effect on the Company's business,
financial condition and results of operations.
RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS
An element of the Company's strategy is to review acquisition prospects
that would complement the Company's existing product offerings, augment its
market coverage, enhance its technological capabilities or otherwise offer
growth opportunities. Although the Company has no present understandings,
commitments or agreements with respect to any material acquisition of any
business, products or technologies, the Company may make such acquisitions in
the future. Future acquisitions by the Company could result in potentially
dilutive issuances of equity securities, the incurrence of debt and contingent
liabilities, and amortization expenses relating to goodwill and other intangible
assets, any of which could materially and adversely affect the Company's
business, financial condition and results of operations. Acquisitions entail
numerous risks, including difficulties in the assimilation of acquired
businesses, products and technologies, diversion of management's attention from
other business concerns, risks of entering markets in which the Company has no
or limited prior experience and potential loss of key employees of acquired
organizations. The Company's management has limited experience in assimilating
acquired organizations. No assurance can be given as to the ability of the
Company to integrate successfully any businesses, products, technologies or
personnel that might be acquired in the future, and the failure of the Company
to do so could have a material adverse effect on the Company's business,
financial condition and results of operations.
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 employment
agreements with its Chief Executive Officer and certain of its other senior
9
<PAGE> 12
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 from time to time the Company has provided extended
warranties. 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. Increased warranty claims could have a material
adverse effect on the Company's business, financial condition and results of
operations.
POTENTIAL PRODUCT LIABILITY INSURANCE LIMITS
The Company currently maintains product liability insurance in the amount
of $5.0 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. The Company believes that, as it
distributes more products into the marketplace and expands its product lines,
its exposure to potential product liability claims and litigation 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 its
existing coverage or obtain additional coverage at commercially reasonable
rates. Product liability losses in excess of insurance coverage could have a
material adverse effect on the Company's business, financial condition and
results of operations.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, 7,475,179 shares of Common Stock will be
outstanding (7,775,179 shares, if the Underwriters' over-allotment option is
exercised in full). All of the shares offered hereby will be freely tradable
unless acquired by affiliates of the Company. The remaining 5,475,179 shares
that will be outstanding upon completion of this Offering are freely tradable,
subject to the lock-up described below. An additional 1,502,899 shares of Common
Stock are issuable upon the exercise or conversion of outstanding stock options,
warrants and convertible securities, 1,346,649 of which have been registered for
resale by the holders thereof.
The Company cannot 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. Sales in the public market of
substantial amounts of Common Stock (including shares issued upon the exercise
or conversion of outstanding options, warrants and convertible securities), or
the perception that such sales might occur, could adversely affect prevailing
market prices for the Common Stock. 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. The holders of an
aggregate of 770,297 shares of Common Stock (including 555,250 shares issuable
upon the exercise or conversion of outstanding options, warrants and convertible
securities), have agreed with the Underwriters not to offer or sell, directly or
indirectly, or otherwise reduce their risk in, any securities of the Company for
a period of 90 days after the date of this Prospectus, subject to certain
exceptions, without the prior written consent of Robertson, Stephens & Company.
See "Shares Eligible For Future Sale."
UNALLOCATED PROCEEDS OF OFFERING
A significant portion of the estimated net proceeds of this Offering has
not been designated for specific uses. Accordingly, management of the Company
will have broad discretion with respect to the use of these funds. See "Use of
Proceeds."
10
<PAGE> 13
VOLATILITY OF COMMON STOCK PRICE
Prior to this 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 this Offering. See
"Price Range of Common Stock."
CERTAIN CHARTER PROVISIONS
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 80.0% 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 10.0% 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> 14
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered hereby (2,300,000 if the Underwriters' over-allotment
option is exercised in full), at an assumed public offering price of $14.50 per
share and after deducting underwriting discounts and commissions and estimated
offering expenses payable by the Company, are estimated to be $27.0 million
($31.0 million if the Underwriters' over-allotment option is exercised in full).
The Company expects to use the net proceeds to increase its sales, marketing and
customer support capabilities, to expand its facilities, to pursue possible
acquisitions of, or investments in, complementary businesses, products or
technologies and for general corporate purposes. From time to time, the Company
evaluates potential acquisitions of such businesses, products or technologies in
the ordinary course of business. The Company has no present understandings,
commitments or agreements with respect to any material acquisitions of, or
investments in, any such businesses, products or technologies. See "Risk
Factors--Risks Associated with Potential Acquisitions."
Pending the foregoing uses, the Company intends to invest the net proceeds
from this Offering in short-term, interest bearing, investment-grade securities.
PRICE RANGE OF COMMON STOCK
Since November 12, 1996, the Common Stock has been included in the Nasdaq
National Market under the symbol "BARR." Prior to that, the Common Stock was
quoted in the Nasdaq SmallCap Market. The following table sets forth, for the
periods indicated, the high and low bid quotations for the Common Stock as
reported on the Nasdaq National Market or the Nasdaq SmallCap Market, as
applicable, after giving effect to the one-for-four reverse stock split effected
September 25, 1995. Such quotations 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>
Fiscal 1995
First quarter................................................... $ 6 7/8 $ 1 1/4
Second quarter.................................................. 5 2
Third quarter................................................... 4 1/4 2 1/4
Fourth quarter.................................................. 3 1/4 1/2
Fiscal 1996
First quarter................................................... $ 9/16 $ 5/16
Second quarter.................................................. 4 3/16 7/16
Third quarter................................................... 13 7/8 2 7/8
Fourth quarter.................................................. 10 5/8 6 5/8
Fiscal 1997
First quarter................................................... $10 3/4 $ 8 1/8
Second quarter.................................................. 15 9 3/8
Third quarter (through August 5, 1997).......................... 16 14 1/2
</TABLE>
On August 5, 1997, the last reported sale price of the Common Stock on the
Nasdaq National Market was $14.50 per share. As of August 1, 1997, the Company
had approximately 1,000 stockholders of record.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its Common Stock.
The Board of Directors 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
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 its Class A Convertible Preferred Stock and Class B
Convertible Preferred Stock at an annual rate of $0.16 per share, which
dividends, at the option of the Company, are payable in cash or shares of Common
Stock. See "Description of Capital Stock."
12
<PAGE> 15
CAPITALIZATION
The following table sets forth, as of June 30, 1997, the actual
capitalization of the Company and the capitalization of the Company as adjusted
to give effect to the sale of the 2,000,000 shares of Common Stock offered
hereby, at an assumed public offering price of $14.50 per share, and the
application of the estimated net proceeds therefrom.
<TABLE>
<CAPTION>
JUNE 30, 1997
-----------------------------
ACTUAL AS ADJUSTED
------------ ------------
<S> <C> <C>
Stockholders' equity:
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; 58,206 shares outstanding less discount of $45,000... $ 71,000 $ 71,000
730,000 shares designated as Class B Convertible Preferred
Stock;
22,500 shares outstanding................................... 45,000 45,000
Common Stock, $0.01 par value; 20,000,000 shares authorized;
5,470,455 shares issued and outstanding; 7,470,455 shares,
as adjusted(1).............................................. 55,000 75,000
Additional paid-in-capital.................................... 29,952,000 56,892,000
Accumulated deficit........................................... (12,268,000) (12,268,000)
Foreign currency translation.................................. (417,000) (417,000)
Less: Common Stock in treasury at cost, 31,000 shares......... (13,000) (13,000)
----------- -----------
Total stockholders' equity.................................. $ 17,425,000 $ 44,385,000
----------- -----------
Total capitalization...................................... $ 17,425,000 $ 44,385,000
=========== ===========
</TABLE>
- ----------------------
(1) Excludes 1,507,623 shares of Common Stock issuable upon exercise or
conversion of options, warrants and convertible securities outstanding as of
June 30, 1997.
13
<PAGE> 16
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth for the periods and at the dates indicated
certain financial data that should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements and notes thereto included elsewhere
herein. The statements of operations data for the years ended December 31, 1994,
1995 and 1996, and the balance sheet data at December 31, 1995 and 1996 are
derived from the consolidated financial statements of the Company that have been
audited by BDO Seidman, LLP, independent certified public accountants, and are
included elsewhere in this Prospectus. The statements of operations data for the
years ended December 31, 1992 and 1993 and the balance sheet data at December
31, 1992, 1993 and 1994 are derived from audited consolidated financial
statements of the Company not otherwise contained herein. The consolidated
statements of operations data for the six months ended June 30, 1996 and 1997
and the consolidated balance sheet data as of June 30, 1997 are derived from
unaudited consolidated financial statements of the Company included elsewhere
herein. The unaudited consolidated financial statements have been prepared by
the Company on a basis consistent with the Company's audited consolidated
financial statements and, in the opinion of management, include all adjustments,
consisting only of normal recurring accruals, necessary for a fair presentation
of the Company's results of operations for such periods and financial condition
at such dates. Results for the six months ended June 30, 1997 are not
necessarily indicative of the results that can be expected for any other interim
period or for the year ended December 31, 1997 as a whole.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
YEAR ENDED DECEMBER 31,
---------------------------------------------- ---------------
1992 1993 1994 1995 1996 1996 1997
------- ------ ------- ------- ------- ------ ------
(Unaudited)
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA(1):
Revenues................................................... $ 2,838 $7,770 $ 5,514 $ 6,374 $10,923 $5,012 $9,438
Cost of revenues........................................... 2,211 3,930 4,100 3,601 5,363 2,647 3,955
------ ------ ------ ------ ------- ------ ------
Gross profit............................................. 627 3,840 1,414 2,773 5,560 2,365 5,483
------ ------ ------ ------ ------- ------ ------
Operating expenses:
Selling, general and administrative expenses............. 2,180 3,117 3,352 3,305 3,734 1,641 3,200
Product development...................................... 161 182 531 354 230 57 338
------ ------ ------ ------ ------- ------ ------
Total operating expenses............................... 2,341 3,299 3,883 3,659 3,964 1,698 3,538
------ ------ ------ ------ ------- ------ ------
Operating income (loss).................................... (1,714) 541 (2,469) (886) 1,596 667 1,945
Other (expense) income, net................................ (49) (101) (89) (292) 72 (103) 184
Income tax benefit (provision)............................. -- 153 (75) -- 391 -- 131
------ ------ ------ ------ ------- ------ ------
Income (loss) from continuing operations................... (1,763) 593 (2,633) (1,178) 2,059 564 2,260
Income (loss) from operation held for sale................. (44) 2 68 351 -- -- --
------ ------ ------ ------ ------- ------ ------
Net income (loss).......................................... (1,807) 595 (2,565) (827) 2,059 564 2,260
Preferred stock dividends.................................. (160) (114) (108) (82) (39) (24) (6)
------ ------ ------ ------ ------- ------ ------
Net income (loss) attributable to common stockholders...... $(1,967) $ 481 $(2,673) $ (909) $ 2,020 $ 540 $2,254
====== ====== ====== ====== ======= ====== ======
Income (loss) per common share from continuing
operations................................................. (0.90) 0.20 (0.97) (0.39) 0.48 0.16 0.36
Net income (loss) per common share:
Primary.................................................. (0.92) 0.20 (0.95) (0.28) 0.48 0.16 0.36
====== ====== ====== ====== ======= ====== ======
Fully diluted............................................ (0.92) 0.20 (0.95) (0.28) 0.44 0.15 0.35
====== ====== ====== ====== ======= ====== ======
Weighted average common shares outstanding:
Primary.................................................. 2,135 2,570 2,827 3,283 4,221 3,483 6,176
Fully diluted............................................ 2,135 2,570 2,827 3,283 4,607 3,854 6,388
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------- JUNE 30,
1992 1993 1994 1995 1996 1997
------- ------ ------- ------- ------- -------------
(In thousands) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital.............................................. $ 27 $2,912 $ 652 $ 370 $14,271 $16,414
Current assets............................................... 2,835 7,000 5,067 3,672 16,624 19,253
Total assets................................................. 4,805 8,939 6,792 4,735 17,323 20,385
Current liabilities.......................................... 2,808 4,088 4,415 3,302 2,353 2,839
Long-term liabilities........................................ 759 581 451 108 117 121
Stockholders' equity......................................... 709 3,646 1,186 1,325 14,853 17,425
</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 1995 and the remainder of its interest in 1996. See "Certain
Transactions--Sale of Subsidiary."
14
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Barringer is the world's leading manufacturer (based on units sold) of high
sensitivity equipment used for detecting and identifying trace amounts of
plastic and other explosives and illegal drugs. The markets for the Company's
IONSCAN(R) currently include aviation security, surface transportation security,
facilities protection, forensics, military, correctional facilities, and customs
and law enforcement agencies. The Company sold its first IONSCAN(R) in 1990 and,
as of June 30, 1997, had sold over 500 units. From 1991 to 1995, the Company
incurred losses as its business continued to develop, except during 1993 when
the Company received a significant order for IONSCAN(R)s for deployment at the
Eurotunnel. In 1996, the Company achieved profitability principally as a result
of increased demand for and favorable market acceptance of the IONSCAN(R). Prior
to 1996, the Company sold most of its IONSCAN(R)s for use in drug interdiction
applications. However, in 1996, the Company's unit sales were more evenly
distributed between explosives detection and drug interdiction applications.
During the six months ended June 30, 1997, approximately half of the Company's
unit sales were for explosives detection applications in the aviation security
market. Management expects that the aviation security market will account for a
substantial portion of the Company's future revenues.
Revenues consist of (i) sales of IONSCAN(R)s, related accessories and
consumable supplies, maintenance, training, and billable repairs, (ii) sales of
other instruments and (iii) funded product development grants and contracts.
Selling prices for the IONSCAN(R) average between $50,000 and $95,000 per unit,
depending principally on the configuration of the unit and the purchaser's
location. Profitability associated with any given sale, and the Company's gross
margin for any given quarter, may vary substantially due to unit configuration,
the geographic location of the purchaser and whether sales prices include a
distributor mark-up. 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 of operations. See "Risk Factors--Dependence on
Large Orders; Customer Concentrations" and "--Fluctuations in Operating
Results."
Substantially all of the Company's revenues are denominated in U.S.
dollars. However, the Company operates in several foreign countries, including
Canada, the United Kingdom and France and, in those instances, the Company
recognizes revenues and incurs expenses denominated in the local currency. To
date, the Company has not experienced significant losses as a result of foreign
currency fluctuations. The Company generally does not hedge its foreign currency
exposure. Approximately 59.3% and 68.6% of the Company's total revenues for the
six months ended June 30, 1997 and the year ended December 31, 1996,
respectively, were derived from non-U.S. sources. Approximately 25.0% of total
revenues in 1996 were derived from customers in Canada. See "Risk
Factors--International Business; Risk of Changes in Foreign Regulations;
Fluctuations in Exchange Rates."
The Company manufactures to a sales forecast in order to have inventory
available to meet anticipated demand promptly and historically has not had a
backlog of orders. 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, the effects of competition and the complexity
of the customer's procurement process. However, as a result of large orders
received from the FAA and the U.S. Coast Guard in the second quarter of 1997, at
June 30, 1997 the Company had a backlog of orders. See "Business--Backlog."
15
<PAGE> 18
RESULTS OF OPERATIONS
The following table sets forth certain income and expense items from the
Company's consolidated statements of operations expressed as a percentage of
revenues for the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- ---------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues....................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues............................... 74.4 56.5 49.1 52.8 41.9
----- ----- ----- ----- -----
Gross profit................................ 25.6 43.5 50.9 47.2 58.1
----- ----- ----- ----- -----
Operating expenses:
Selling, general and administrative
expenses.................................. 60.8 51.9 34.2 32.8 33.9
Product development......................... 9.6 5.5 2.1 1.1 3.6
----- ----- ----- ----- -----
Total operating expenses.................. 70.4 57.4 36.3 33.9 37.5
----- ----- ----- ----- -----
Operating income (loss)........................ (44.8) (13.9) 14.6 13.3 20.6
Other (expense) income, net.................... (1.6) (4.6) 0.7 (2.1) 1.9
Income tax benefit (provision)................. (1.4) -- 3.6 -- 1.4
----- ----- ----- ----- -----
Income (loss) from continuing operations....... (47.8) (18.5) 18.9 11.2 23.9
Income from operation held for sale............ 1.3 5.5 -- -- --
----- ----- ----- ----- -----
Net income (loss).............................. (46.5) (13.0) 18.9 11.2 23.9
Preferred stock dividends...................... (2.0) (1.3) (0.4) (0.5) (0.1)
----- ----- ----- ----- -----
Net income (loss) attributable to common
stockholders................................ (48.5)% (14.3)% 18.5% 10.7% 23.8%
===== ===== ===== ===== =====
</TABLE>
COMPARISON OF THE SIX-MONTH PERIOD ENDED JUNE 30, 1997 TO THE SIX-MONTH PERIOD
ENDED JUNE 30, 1996
Revenues. For the six months ended June 30, 1997, revenues increased by
$4.4 million, or 88.3%, to $9.4 million from $5.0 million in the comparable
period ended June 30, 1996. Sales of IONSCAN(R)s and related products increased
by $5.2 million, or 135%, due to an increase of 167% in the number of units
sold, offset in part by a decline in average unit selling price. The increase in
unit sales was due to significant IONSCAN(R) sales to the aviation security
sector, primarily to the FAA, and, to a lesser extent, increased sales in other
markets. The decrease in average selling prices resulted primarily from an
increase in the number of IONSCAN(R)s sold to U.S. government agencies, which
typically are at lower unit prices than sales to other customers. Sales of
specialty instruments decreased by approximately $523,000, or 83.9%, in the six
months ended June 30, 1997 as compared to the same period in 1996, principally
due to the completion of a heavy water analyzer contract, which was awarded to
the Company in mid-1995 and completed in the first half of 1996. Revenues
derived from funded research and development decreased by approximately
$227,000, or 42.0%, in the six months ended June 30, 1997 as compared to the
same period in 1996. Funded research revenues declined as the Company redirected
its research and development resources to product application and development
and in support of increased production. As sales of its IONSCAN(R)s have
increased, the Company has placed less emphasis on marketing of specialty
instruments and contract research and development. As a result, management
anticipates that revenues from those activities will become increasingly less
important to the Company's overall results of operations.
Gross Profit. For the six months ended June 30, 1997, gross profit
increased by $3.1 million, or 132%, to $5.5 million from $2.4 million in the
comparable 1996 period. As a percentage of revenues, gross profit increased to
58.1% in the 1997 period from 47.2% in the comparable 1996 period. The
improvement was primarily attributable to higher margins on international sales,
coupled with larger,
16
<PAGE> 19
more efficient production runs of the IONSCAN(R), offset in part by lower
margins on sales to U.S. government agencies. In addition, the Company has been
able to reduce its cost of materials as a result of higher volume purchases.
Selling, General and Administrative. For the six months ended June 30,
1997, selling, general and administrative expenses increased by $1.6 million, or
95.0%, to $3.2 million from $1.6 million in the comparable 1996 period. Selling
and marketing expenses increased by approximately $1.0 million, of which
$687,000 was due to increased sales commissions attributable to a larger
percentage of sales originating through independent sales agents and
distributors during the period. The remaining increase was attributable to the
addition of sales and service personnel and related costs to handle increased
business volume. General and administrative expenses increased by $553,000,
primarily as a result of increased payroll and related costs and increased
professional and consulting costs. As a percentage of revenues, selling, general
and administrative expenses increased to 33.9% in the 1997 period from 32.8% in
the comparable 1996 period.
Product Development. For the six months ended June 30, 1997, product
development expenses increased by $281,000, or 493%, to $338,000 from $57,000 in
the comparable 1996 period. As a percentage of revenues, product development
expenses increased to 3.6% (6.9% when combined with funded research and
development) in the 1997 period from 1.1% (11.9% when combined with funded
research and development) in the comparable 1996 period as a result of a higher
level of new product development activity. Management expects to incur increased
product development expenses in future periods in connection with the
enhancement of existing products and the development of new products and
applications.
Other Income and Expense. For the six months ended June 30, 1997, interest
expense decreased by $125,000, or 96.2%, to $5,000 from $130,000 in the
comparable 1996 period as a result of the repayment of indebtedness out of the
net proceeds of the Company's November 1996 public offering.
Investment income for the six months ended June 30, 1997 was $212,000 as
compared to $42,000 for the same period in 1996, primarily as a result of the
investment of a portion of the net proceeds from the Company's November 1996
public offering. In the six months ended June 30, 1996, the Company recorded
$42,000 of gains recognized on trading securities held for Canadian pension
funding purposes.
Income Taxes. In the six-month period ended June 30, 1997, the Company had
a net tax benefit of $131,000, composed of current foreign taxes of $291,000,
offset by a $422,000 net deferred tax benefit. Such deferred tax benefit was due
in part to a reduction in the deferred tax valuation allowance as a result of
changes in management's estimates of the utilization of both U.S. and Canadian
tax loss carryforwards caused primarily by improved operating results.
Management anticipates that further deferred tax benefits will be recognized in
1997.
COMPARISON OF THE FISCAL YEAR ENDED DECEMBER 31, 1996 TO THE FISCAL YEAR ENDED
DECEMBER 31, 1995
Revenues. Revenues for the fiscal year ended December 31, 1996 increased
by $4.5 million, or 71.4%, to $10.9 million from $6.4 million for the fiscal
year ended December 31, 1995. Net sales of the IONSCAN(R) and related products
increased by approximately $4.9 million, or 93.5%, due to an increase of 134% in
the number of units sold. The increase in IONSCAN(R) sales was due to increased
sales of the Model 400 which was introduced in the first quarter of 1995. Net
sales of other instruments increased by approximately $223,000, or 41.6%, in
1996 as compared to 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 $349,000, or 33.2%, in 1996 as
compared to 1995. The reduced revenues were attributable to the Company's
contract with the Emergencies
17
<PAGE> 20
Science Division, Environment Canada to design and build an airborne laser
fluorosensor system, a substantial portion of which was completed in 1995.
Gross Profit. Gross profit increased by $2.8 million, or 101%, to $5.6
million from $2.8 million for fiscal 1995. As a percentage of revenues, gross
profit increased to 50.9% from 43.5%. The improvement was primarily attributable
to higher margins on 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 attributed to the
improvement.
Selling, General and Administrative. Selling, general and administrative
expenses increased by approximately $429,000, or 13.0%, to $3.7 million from
$3.3 million for fiscal 1995. In 1995, the Company recognized an expense
decrease of $337,000 attributable to a negotiated reduction in professional fees
and $147,000 of additional expense reduction recognized on the termination of
the Company's Canadian Pension Plan as of December 31, 1993. Excluding these
items, selling, general and administrative expenses in 1996 decreased by
$55,000, or 1.7%. As a percentage of revenues, selling, general and
administrative expenses decreased to 34.2% from 51.9%. The decrease as a
percentage of revenues was primarily attributable to spreading costs over
increased revenues. Selling expenses increased by $108,000, or 4.6%, in 1996 as
compared to 1995, primarily as a result of increased sales commissions on units
sold in the fourth quarter of 1996.
Product Development. Product development expenses decreased by
approximately $124,000, or 35.0%, to approximately $230,000 from $354,000 for
fiscal 1995. As a percentage of revenues, product development expenses decreased
to 2.1% from 5.5%. The level of product development at any time is primarily a
function of the availability of financial and personnel resources. Management
expects product development expenses to increase significantly in 1997.
Other Income and Expense. Equity in earnings of Labco represents the
Company's share of Labco's operating results, in which the Company had a
non-controlling ownership during most of 1996. Prior to December 31, 1995, the
Company had a controlling interest in Labco, but from the first quarter of 1995
until the end of 1996, the Company presented Labco as an operation held for
sale. The Company's share of Labco's net income for 1996 was $117,000, as
compared to $258,000 for the same period in 1995 (where it is shown as Income
from operations under the caption "Operation held for sale"). The Company sold
its remaining interest in Labco in 1996. See "Certain Transactions -- Sale of
Subsidiary."
In 1996, the Company earned investment income of $72,000.
Other expense, net of income, was $12,000 in 1996, as compared to $52,000
in 1995. In 1996, the Company recognized $44,000 of gains from trading
securities held for Canadian pension funding purposes, partially offset by
miscellaneous expenses, including $43,000 of foreign exchange losses realized in
1996. In 1995, the Company realized foreign exchange losses of $79,000.
Income Taxes. For the year ended December 31, 1996, the Company had a net
tax benefit of $391,000 primarily due to a reduction in the deferred tax
valuation allowance as a result of changes in management's estimates of the
utilization of both U.S. and Canadian tax loss carryforwards caused primarily by
improved operating results. Management anticipates that further deferred tax
benefits will be recognized in 1997.
COMPARISON OF THE FISCAL YEAR ENDED DECEMBER 31, 1995 TO THE FISCAL YEAR ENDED
DECEMBER 31, 1994
Revenues. Revenues for the fiscal year ended December 31, 1995 increased
by $860,000, or 15.6%, to $6.4 million from $5.5 million for the fiscal year
ended December 31, 1994. Sales of IONSCAN(R) instruments and related products
decreased by approximately $80,000, or 1.6%. 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, contributed to a 36.6% increase in unit sales.
18
<PAGE> 21
Sales of instruments other than IONSCAN(R) products increased in 1995 by
approximately $114,000, or 33.0%, 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%, in 1995 as compared to 1994. The improved
revenues are attributable to work performed in 1995 under the 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 DrugAlert(TM) were not significant.
Gross Profit. Gross profit increased by $1.4 million, or 96.1%, to $2.8
million from $1.4 million for fiscal 1994. As a percentage of sales, gross
profit increased to 43.5% from 25.6%. As a percentage of sales, gross profit for
the research and development business decreased to 5.1% from 12.1%. The decrease
was due to lower margins on 1995 contracts. As a percentage of sales, gross
profit for the instruments business increased to 53.1% from 26.4%. The 1995
gross profit was impacted by the write down of the carrying value of the Model
350 inventory which aggregated approximately $442,000, approximately $155,000 of
which related to excess spare parts inventory and the balance to finished goods.
In 1994, the Company took a $792,000 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. Selling, general and administrative
expenses decreased by approximately $47,000, or 1.4%, to $3.3 million from $3.4
million for fiscal 1994. As a percentage of revenues, selling, general and
administrative expenses decreased to 51.9% from 60.8%. 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 as compared to 1994. 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, or 45.3%, in 1995 as compared to 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.
Product Development. Product development expenses decreased by
approximately $177,000, or 33.3%, to $354,000 from $531,000 in fiscal 1994. As a
percentage of revenue, product development expenses decreased to 5.5% from 9.6%.
The 1994 level was attributable to the completion of the development of the
Company's new Model 400.
Other Income and Expense. Interest expense increased by approximately
$38,000, or 18.8%, in 1995 as compared to 1994. The increase resulted from
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 changes in exchange rates
which generated a gain of $135,000 in 1994 compared to a loss of $79,000 in
1995.
19
<PAGE> 22
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain consolidated statements of
operations data for the last two fiscal quarters of 1995, the four fiscal
quarters of 1996 and the first two fiscal quarters of 1997. This data is
unaudited but, in the opinion of management, reflects all adjustments,
consisting only of normal recurring adjustments, necessary for fair presentation
of this information in accordance with generally accepted accounting principles.
The operating results for any quarter are not necessarily indicative of results
for any future period or for the entire fiscal year.
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------------------
SEP 30, DEC 31, MAR 31, JUN 30, SEP 30, DEC 31, MAR 31, JUN 30,
1995 1995 1996 1996 1996 1996 1997 1997
-------- -------- -------- -------- -------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.............................. $1,434 $1,830 $2,354 $2,658 $2,340 $3,571 $3,622 $5,816
Cost of revenues...................... 952 757 1,236 1,411 1,002 1,715 1,461 2,494
------ ------ ------ ------ ------ ------ ------ ------
Gross profit........................ 482 1,073 1,118 1,247 1,338 1,856 2,161 3,322
------ ------ ------ ------ ------ ------ ------ ------
Operating expenses:
Selling, general and
administrative.................... 656 1,349 809 832 919 1,174 1,295 1,905
Product development................. 29 221 17 40 34 139 175 163
------ ------ ------ ------ ------ ------ ------ ------
Total operating expenses.......... 685 1,570 826 872 953 1,313 1,470 2,068
------ ------ ------ ------ ------ ------ ------ ------
Operating income (loss)............... (203) (497) 292 375 385 543 691 1,254
Other (expense) income, net........... (99) (23) (103) 0 33 142 79 105
Income tax benefit.................... -- -- -- -- 125 266 75 56
------ ------ ------ ------ ------ ------ ------ ------
Income (loss) from continuing
operations.......................... (302) (520) 189 375 543 951 845 1,415
Operation held for sale............... 139 157 -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Net income (loss)..................... $ (163) $ (363) $ 189 $ 375 $ 543 $ 951 $ 845 $1,415
====== ====== ====== ====== ====== ====== ====== ======
Net income (loss) per common share
(fully diluted)..................... $(0.05) $(0.11) $ 0.05 $ 0.10 $ 0.12 $ 0.18 $ 0.14 $ 0.22
====== ====== ====== ====== ====== ====== ====== ======
Weighted average common shares
outstanding (fully diluted)......... 3,412 3,415 3,479 3,489 4,619 5,376 6,109 6,418
</TABLE>
The following table sets forth, as a percentage of revenues, certain
consolidated statements of operations data for the last two fiscal quarters of
1995, the four fiscal quarters of 1996 and the first two fiscal quarters of
1997.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------------
SEP 30, DEC 31, MAR 31, JUN 30, SEP 30, DEC 31, MAR 31, JUN 30,
1995 1995 1996 1996 1996 1996 1997 1997
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues...................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues.............. 66.4 41.4 52.5 53.1 42.8 48.0 40.3 42.9
----- ----- ----- ----- ----- ----- ----- -----
Gross profit................ 33.6 58.6 47.5 46.9 57.2 52.0 59.7 57.1
----- ----- ----- ----- ----- ----- ----- -----
Operating expenses:
Selling, general and
administration............ 45.7 73.7 34.4 31.3 39.3 32.9 35.8 32.8
Product development......... 2.0 12.1 0.7 1.5 1.5 3.9 4.8 2.8
----- ----- ----- ----- ----- ----- ----- -----
Total operating
expenses................ 47.7 85.8 35.1 32.8 40.8 36.8 40.6 35.6
----- ----- ----- ----- ----- ----- ----- -----
Operating income (loss)....... (14.1) (27.2) 12.4 14.1 16.4 15.2 19.1 21.5
Other (expense) income, net... (6.9) (1.3) (4.4) 0.0 1.4 4.0 2.1 1.8
Income tax benefit............ -- -- -- -- 5.3 7.4 2.1 1.0
----- ----- ----- ----- ----- ----- ----- -----
Income (loss) from continuing
operations.................. (21.0) (28.5) 8.0 14.1 23.1 26.6 23.3 24.3
Operation held for sale....... 9.7 8.6 -- -- -- -- -- --
----- ----- ----- ----- ----- ----- ----- -----
Net income (loss)............. (11.3)% (19.9)% 8.0% 14.1% 23.1% 26.6% 23.3% 24.3%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
20
<PAGE> 23
LIQUIDITY AND CAPITAL RESOURCES
During 1995 and 1996, the Company used the net proceeds of private and
public sales of securities to fund a portion of its cash flow needs. Since
January 1, 1995, the Company has raised approximately $2.0 million from the
private sales of warrants, convertible debentures and Common Stock. During 1995
and 1996, the Company also financed a portion of its working capital needs
through the sale of its remaining interest in Labco, pursuant to which the
Company received $874,000. See "Certain Transactions--Sale of Subsidiary." In
November 1996, the Company completed a public offering of its Common Stock and
Common Stock Purchase Warrants, resulting in net proceeds of $10.4 million. A
portion of the net proceeds of that offering was used to repay the Company's
long-term indebtedness.
Cash used in operations was $1.3 million for the first six months of 1997,
$1.4 million in 1996 and $711,000 in 1995. Cash used in the first six months of
1997 resulted primarily from a significant increase in accounts receivable and
inventories, which more than offset net income of $2.3 million. Accounts
receivable increased as a result of higher sales, particularly during the month
of June. Inventories also increased substantially as the Company acquired the
materials necessary to support increased IONSCAN(R) production during the second
half of 1997. Cash used in operating activities during 1996 resulted primarily
from increases in accounts receivable and inventory, which more than offset net
income of $2.1 million for the year. Cash used in operating activities during
1995 resulted primarily from the loss of $827,000 recorded by the Company for
1995.
Net cash used in investing activities was $240,000 for the first six months
of 1997, $3.9 million in 1996 and $58,000 in 1995. Cash used in investing
activities during the first half of 1997 resulted primarily from capital
expenditures of $513,000, offset in part by the sale of investments. Cash used
in investing activities during 1996 resulted primarily from the investment of a
portion of the net proceeds of the Company's November 1996 public offering,
offset in part by the receipt of $574,000 in connection with the Company's sale
of its remaining interest in Labco. Cash used in investing activities during
1995 resulted primarily from the purchase of equipment, which was partially
offset by the receipt of an additional $300,000 in connection with the Labco
sale.
Cash provided by financing activities was $155,000 for the first six months
of 1997, $10.6 million in 1996 and $584,000 in 1995. Cash provided by financing
activities during the first six months of 1997 resulted primarily from the net
proceeds of certain option and warrant exercises, offset in part by the
repayment of indebtedness. Cash provided by financing activities in 1996
resulted primarily from the Company's November 1996 public offering, as well as
the conversion of $1.0 million of convertible subordinated debentures, offset in
part by the repayment of indebtedness. Cash provided by financing activities in
1995 resulted primarily from the receipt of net proceeds from the private
placement of securities, offset in part by the repayment of certain
indebtedness.
The Company's capital expenditures for the six months ended June 30, 1997
aggregated $513,000. Such expenditures consisted primarily of software upgrades
to various manufacturing information systems, computer hardware modernization
relating to the Company's network system and the acquisition of additional
equipment. The Company anticipates that total capital expenditures will be
approximately $500,000 for the remainder of 1997, substantially all of which
will relate to equipment. Also, the Company believes that it will require
approximately $1.0 million in additional investment in tooling, equipment,
fixtures and facility to meet its anticipated production levels for 1998.
The Company has substantial tax loss carryforwards to offset future tax
liabilities in the U.S.
As of June 30, 1997, the Company had cash and cash equivalents of $3.9
million and marketable securities of $4.1 million. The Company believes that its
existing cash balances, marketable securities, income from operations in future
periods and the net proceeds of this Offering will be sufficient to fund its
working capital requirements for at least the next twelve months.
21
<PAGE> 24
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
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
128") which establishes standards for computing and presenting earnings per
share. SFAS 128 replaces the presentation of primary earnings per share and
fully diluted earnings per share with basic earnings per share and diluted
earnings per share, respectively. Basic earnings per share excludes dilution and
is computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted earnings per
share is computed similarly to fully diluted earnings per share. The standard is
effective for financial statements for periods ending after December 15, 1997,
with earlier application not permitted.
Basic and diluted earnings per share using this standard would have been
$0.26 and $0.22 and $0.42 and $0.35, respectively, for the three months and six
months ended June 30, 1997, respectively, and $0.10 and $0.10 and $0.16 and
$0.15, respectively, for the three months and six months ended June 30, 1996,
respectively.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information,"
which requires disclosure of reportable operating segments and will be effective
for financial statements issued for fiscal years beginning after December 31,
1997. The Company will be reviewing this pronouncement to determine its
applicability to the Company, if any.
22
<PAGE> 25
BUSINESS
OVERVIEW
Barringer is the world's leading manufacturer (based on units sold) of high
sensitivity equipment used for detecting and identifying trace amounts of
plastic and other explosives and illegal drugs. The Company designs and produces
products that employ a proprietary application of ion mobility spectrometry
("IMS") technology that can detect and identify targeted compounds in amounts
smaller than one-billionth of a gram in approximately six seconds. The Company's
principal product, the IONSCAN(R), is a portable desktop system which had an
installed base of over 500 units in 39 countries as of June 30, 1997. The
Company's revenues have grown from $2.0 million for the year ended December 31,
1991 to $10.9 million for the year ended December 31, 1996, representing a
compounded annual growth rate of 40.4% over the last five years. For the six
months ended June 30, 1997, the Company's revenues and net income were $9.4
million and $2.3 million, respectively.
The markets for the Company's IONSCAN(R) currently include aviation
security, surface transportation security, facilities protection, forensics,
military, correctional facilities and customs and law enforcement agencies. The
Company's customers include the FAA, the U.S. Coast Guard, the DEA and the FBI,
as well as customs agencies in France, Canada and Japan and various prison
facilities in the U.S. and elsewhere. The IONSCAN(R) is also installed at over
40 airports and transportation centers around the world, including Gatwick and
Heathrow airports in the United Kingdom, John F. Kennedy International Airport,
certain British Rail terminals and the Eurotunnel. The Company believes that its
principal competitive advantages are the detection capability, reliability, cost
effectiveness, versatility, ease of use and portability of the IONSCAN(R). These
advantages enable the IONSCAN(R) to be used both in lieu of and in conjunction
with bulk imaging technologies, such as enhanced x-ray and CATSCAN.
INDUSTRY BACKGROUND
The Company believes that there are numerous potential applications for its
trace detection technology. Currently, the principal applications are explosives
detection and drug interdiction.
Explosives Detection
In the past several years, a number of events have contributed to increased
public concern regarding the threat of terrorism and have focused government
attention on the limited effectiveness of currently deployed x-ray and metal
detection equipment and on the need for advanced explosives detection
technology. As a result, several advanced technologies have been adapted for use
in explosives detection applications. These technologies include bulk imaging
techniques, such as enhanced x-ray and CATSCAN, as well as trace detection
techniques, such as IMS, gas chromatography and chemoluminescence. Bulk imaging
techniques offer certain advantages over conventional x-ray technology, but are
generally expensive to deploy (as much as $1.0 million per installation), are
non-portable and generally reject a large number of objects as a result of
perceived anomalies that are later determined not to be explosives. By
comparison, trace detection equipment is capable of detecting and identifying
minute amounts of chemical substances and is generally more portable and less
expensive than bulk imaging equipment.
While implementation of advanced detection strategies has varied
significantly around the world, aviation authorities, including the FAA and BAA
plc, formerly the British Airport Authority (the "BAA"), have generally
recognized that no one detection technology provides a complete solution to the
problem of enhancing existing detection capabilities. Consequently, trace
detection technology is frequently deployed as a complement to bulk imaging
equipment to resolve anomalies identified by bulk detectors and in applications
where it is impractical to use the larger, less mobile bulk imaging detectors,
such as checking carry-on baggage. Trace detection technology is also deployed
in lieu of
23
<PAGE> 26
bulk imaging equipment in certain installations because of its relatively low
cost, particularly in smaller airports and in less developed countries.
The development and deployment of advanced explosives detection technology
is being driven by recent government initiatives in the United States and
elsewhere in the world. For example, in response to the recommendations of the
White House Commission on Aviation Safety and Security (the "Gore Commission"),
in October 1996, the U.S. Congress appropriated $144 million for the procurement
of advanced explosives detection technology which the FAA is using to deploy
such technology in a limited number of the 400 busiest U.S. airports. In
addition, the BAA has installed enhanced detection technologies, including trace
detectors, in airports throughout Britain. Also, since the enactment of the
Aviation Security Act of 1990, the FAA has funded over $150 million for research
and development of advanced explosives detection technologies.
Trace detection technology has a broad range of other explosives detection
uses, including surface transportation security, facilities protection,
forensics, military and law enforcement agencies. For instance, trace detection
equipment has been deployed by British Rail for use on trains traveling through
the Eurotunnel. Government agencies, military forces and private businesses have
deployed trace detection equipment at facilities, such as the World Trade
Center, embassies and public utilities, such as nuclear power plants, that are
perceived as potential targets of terrorist attacks. Law enforcement agencies,
such as the FBI and the New York City Police Department, and military forces
also use trace detection technology for forensic purposes. For example, the
IONSCAN(R) was recently used in connection with the investigations of the crash
of TWA Flight 800 and the 1995 Oklahoma City bombing.
Drug Interdiction
As a result of increased drug usage, a heightened public awareness
regarding drug-related criminal activity generally and the use of more
sophisticated techniques by drug traffickers, government agencies have increased
their spending on drug interdiction efforts. For example, in fiscal year 1996,
the U.S. government spent $1.4 billion on these drug interdiction efforts. The
use of conventional x-ray scanning, random searches and canines has not
measurably suppressed illegal drug trafficking. Accordingly, customs and law
enforcement agencies have increasingly turned to advanced detection technology
to assist in their drug detection and interdiction efforts. For example, the
U.S. Coast Guard has deployed trace detection equipment onboard its ships to
search vessels at sea for illegal drugs. Similarly, prisons in the U.S. and
elsewhere are employing trace detection equipment to reduce drug use.
THE BARRINGER ADVANTAGE
The Company believes that its implementation of IMS technology gives the
IONSCAN(R) a distinct competitive advantage over other detection techniques,
including bulk imaging and other trace detection technologies. The IONSCAN(R)
can detect and identify targeted compounds in amounts smaller than one-billionth
of a gram. Existing bulk imaging technologies, in contrast, search for anomalies
that might indicate the presence of explosive materials but are not presently
capable of identifying specific compounds or detecting the presence of
explosives with the same sensitivity as the IONSCAN(R). In addition, because
bulk imaging technologies attempt to identify anomalies present in an object,
they reject a significantly higher number of objects that do not contain
explosives than the IONSCAN(R).
The Company believes that the portability and low cost of the IONSCAN(R)
make the IONSCAN(R) particularly attractive to customers seeking a
cost-effective solution to their need for advanced detection technology. The
portability of the IONSCAN(R) allows customers to deploy the equipment where
needed. The low cost of the IONSCAN(R) relative to other existing detection
technologies allows customers in smaller installations and in less developed
countries to obtain advanced detection
24
<PAGE> 27
technology without having to incur the significant capital expenses currently
necessary to deploy bulk imaging technologies.
The Company believes that the IMS technology used in the IONSCAN(R) also
makes the IONSCAN(R) more versatile and easier to use than other detection
technologies. For example, an IONSCAN(R) can be readily used in either an
explosives detection or drug interdiction application without modification.
Currently, trace detectors utilizing other detection technologies, such as gas
chromatography, can only perform one such application.
In addition the IONSCAN(R) has demonstrated its reliability in field use.
For example, based on sampling data obtained from the FAA as of July 15, 1997,
the IONSCAN(R)s deployed by the FAA to date have experienced a mean time between
failures in excess of 6,000 hours. The Company believes that this level of
reliability has not been duplicated by its competitors to date.
The Company believes that the advantages of the IONSCAN(R) have been
recognized by the Company's customers, as demonstrated by the large installed
base of over 500 IONSCAN(R)s as of June 30, 1997.
STRATEGY
The Company's objective is to maintain its position as the world's leading
provider of trace detection systems in its core markets and to become a leading
supplier of other advanced technology security solutions. The Company's strategy
for achieving this objective includes the following:
Further Penetrate Existing Markets. The Company sells its IONSCAN(R)
product in a variety of markets, including aviation security, surface
transportation security, facilities protection, forensics, military,
correctional facilities, and customs and law enforcement agencies. The Company
intends to extend its leadership in its existing markets through continuous
improvements to its IMS technology. In addition, the Company intends to adapt
its core IMS technology to expand its use in existing markets. For example, the
Company has received funding from the FAA for the development of a document
scanner and a token scanner for the purpose of passenger screening at airports
and an automated luggage screening system for the purpose of screening checked
luggage.
Leverage IMS Technology for New Applications. The Company believes that
the requirement for high-precision detection capability creates opportunities
for the Company's technology in applications other than explosives detection and
drug interdiction. Accordingly, the Company intends to develop products for new
applications such as quality monitoring, process control, and food and
perishable goods inspection. The Company believes that its IMS technology can
also be used to detect the presence of chemical and biological agents.
Pursue Strategic Relationships and Acquisitions. An important element of
the Company's growth strategy is to extend its existing technology and market
expertise to attain leadership in other security markets through strategic
relationships and acquisitions. As these markets evolve and customers in both
commercial and government segments become more sophisticated, the Company
believes the ability to offer a broader scope of detection capability for use in
various current and emerging applications will become increasingly important.
Moreover, the Company believes that numerous security technologies exist that
are complementary to its own capabilities and for which the Company can provide
enhanced access to distribution, management, manufacturing and financial
resources.
Expand Sales and Marketing Capabilities. The Company intends to continue
to expand its sales and marketing capabilities both domestically and
internationally to capitalize on opportunities in its existing markets for new
installations as well as on opportunities in new markets. The Company intends to
hire additional sales and customer service personnel in Europe, certain
republics of the former Soviet Union, and the Middle East and to open an office
in Malaysia by the end of 1997. Expanding its international sales and marketing
presence will provide the Company with better access to growing foreign markets
and to its existing international customer base.
25
<PAGE> 28
IONSCAN(R) TECHNOLOGY
The IONSCAN(R) is a portable, desktop system that utilizes a proprietary
implementation of IMS technology 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 that 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 that 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 that 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 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 troubleshoot 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
U.S. Coast Guard vessel on patrol needs the capability to test a suspect vessel
for a particular type of illegal drug, the required information can be
downloaded to its unit. In addition, the Barringer Link allows the Company or
the customer to run certain diagnostic programs to determine problems that may
have occurred within a particular unit and to correct certain software problems.
26
<PAGE> 29
CUSTOMERS
The following is a list of representative end users and/or installations of
the IONSCAN(R) as of June 30, 1997.
Explosives Detection
<TABLE>
<CAPTION>
MARKETS END USER/INSTALLATION
- ----------------------------------- ----------------------------------------------------------------
<S> <C>
- ---------------------------------------------------------------------------------------------------------
Aviation Security Manchester Airport plc, UK
Aeroporti di Roma, Italy
Heathrow Airport Ltd., UK
Gatwick Airport Ltd., UK
Birmingham International Airport plc, UK
Bristol Airport plc, UK
Kuala Lumpur International Airport, Malaysia
John F. Kennedy International Airport (New York)
Luton International Airport, UK
- ---------------------------------------------------------------------------------------------------------
Surface Transportation Security Societe Nationale Companie Maritime, France
British Rail
Eurostar, UK
Societe Nationale des Chemins de Fer Francais (Le Shuttle)
The Channel Tunnel Group Ltd. (Eurotunnel)
Airmax, Inc. (Chicago)
- ---------------------------------------------------------------------------------------------------------
Facilities Protection Gaz de France
Electricity de France
New York World Trade Center
Ronald Reagan Federal Office Building
- ---------------------------------------------------------------------------------------------------------
Forensics Federal Bureau of Investigation
Department of Justice, Belgium
Ministry of Defense, Italy
Ministry of Justice, Taiwan
Stadt Polizei Zurich, Switzerland
- ---------------------------------------------------------------------------------------------------------
Military Ministry of Defense, UK
Gendarmerie Nationale, France
Comando Generale Arma Dei Carabinieri, Italy
Aeronautica Militare, Italy
U.S. Army
U.S. Navy
U.S. Air Force
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Drug Interdiction
<TABLE>
<CAPTION>
MARKETS END USER/INSTALLATION
- ----------------------------------- ----------------------------------------------------------------
<S> <C>
- ---------------------------------------------------------------------------------------------------------
Correctional Facilities California Department of Corrections
Pennsylvania Department of Corrections
Departamento del Distrito Federal (Reclusiorios Prisiones
Federales)
Correctional Service Canada
- ---------------------------------------------------------------------------------------------------------
Customs U.S. Customs Service
Revenue Canada, Customs and Excise
HM Customs and Excise, UK
French Customs (Douanes)
Customs Bureau, Ministry of Finance, Japan
Australia Customs Service
Vietnam General Department of Customs
Korea Customs Service
- ---------------------------------------------------------------------------------------------------------
Law Enforcement U.S. Coast Guard
Japan Coast Guard
U.S. Drug Enforcement Agency
Port Authority of New York and New Jersey
New York Police Department
Police Nationale, France
Home Office, UK
Ministero dell' Interno, Italy
Hong Kong Police
Harris County Parole Program (Texas)
Public Housing Authorities (Florida)
Panama City Housing Authority (Florida)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 30
SALES AND MARKETING
The Company sells its products through a direct sales organization
comprised of 18 sales people located at its headquarters in New Jersey and at
offices in Toronto, London and Paris. The Company also intends to open an office
in Malaysia by the end of 1997. In addition, the Company maintains a network of
49 independent sales and service representatives located in 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.
Selling prices for the IONSCAN(R) average 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 provided 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 the first six months of 1997, each of the Company's three largest
customers accounted for more than 10.0% of the consolidated revenues of the
Company. During 1996, one customer accounted for more than 10.0% of the
consolidated revenues of the Company. During 1995, no customer accounted for
more than 10.0% of the consolidated revenues of the Company. See "Risk
Factors--Dependence on Large Orders; Customer Concentrations."
BACKLOG
The Company measures its backlog of instrument revenues as orders for which
contracts or purchase orders have been signed, but that have not yet been
shipped and for which revenues have not yet been recognized. The Company
includes in its backlog only those customer orders that are scheduled for
delivery within the next 18 months. The Company typically ships its products
within three months of receiving an order. For competitive purposes, the Company
follows the practice of manufacturing to a sales forecast. As a result, the
Company has not historically had a material backlog of orders for its
instruments and, in the ordinary course of business, intends to have sufficient
inventory of IONSCAN(R)s on hand to allow shipment upon receipt of an order.
However, as a result of large orders received from the FAA and the U.S. Coast
Guard in the second quarter of 1997, at June 30, 1997 the Company had a $2.6
million backlog of orders for its IONSCAN(R)s. There can be no assurance that
the Company will have a material backlog of orders in any future period.
Substantially all of the Company's backlog at June 30, 1997 is expected to
be shipped during the current fiscal year. Any failure by the Company to meet an
agreed-upon schedule could lead to the cancellation of the related order. All
orders are subject to cancellation or delay by the customer and, accordingly,
there can be no assurance that such backlog will eventually result in revenues.
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
assembles IONSCAN(R)s from components supplied to it by
28
<PAGE> 31
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.
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. See
"Risk Factors--Limited Number of Suppliers."
COMPETITION
The Company competes with other entities, including Thermedics Detection
Inc. ("Thermedics"), InVision Technologies, Inc. and Vivid Technologies, Inc., 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 government expenditures with equipment
manufacturers utilizing other types of detection technologies, including
enhanced x-ray, CATSCAN and other bulk imaging technologies, as well as with
manufacturers of other IMS equipment and manufacturers using other trace
particle detection technologies, such as gas chromatography and
chemoluminescence. Because trace particle detection equipment is used in certain
instances to verify detection results obtained by bulk imaging systems, the
IONSCAN(R) and other trace particle detection products are often used in
conjunction with systems utilizing imaging and other detection technologies. As
a result of recent government initiatives, the Company anticipates that
additional technologies, including improved IMS technologies, will be developed
and that new competitors will enter the Company's markets. See "Risk
Factors--Dependence on and Effects of Government Regulation and Procurement
Policies" and "--Competition."
In the trace particle detection market, the Company's main competitor is
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 use 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 U.S. and most foreign countries, the aviation
industry is highly regulated and authorities, such as the FAA in the U.S., have
the ability to recommend or mandate use of enhanced explosives detection
equipment.
29
<PAGE> 32
The FAA has adopted a certification protocol regarding the use of imaging
detection systems for use on checked baggage. The FAA is currently developing a
certification protocol for trace particle detection equipment. 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. See "Risk
Factors--Dependence on and Effects of Government Regulation and Procurement
Policies."
PRODUCT DEVELOPMENT
The Company spent $651,000, $1.1 million and $1.4 million, respectively, on
research and development activities for the six months ended June 30, 1997 and
the years ended December 31, 1996 and 1995, respectively, of which $313,000,
$858,000 and $1.1 million were funded under various research and development
grants and contracts. Substantially all of the Company's research and
development activities have related to the development and enhancement of the
Company's IONSCAN(R) technology and the development of new IONSCAN(R) products.
The Company received a development grant from the FAA in October 1996 to
develop a document scanner that would scan boarding passes or other passenger
documents for the presence of explosives prior to boarding. The Company
delivered a prototype of the document scanner to the FAA in December 1996.
As part of the October 1996 grant, the FAA also funded the development of a
prototype token scanner system. The token scanner would sample tokens handled by
passengers for the presence of explosives prior to boarding. The Company
delivered a prototype of the token scanner to the FAA in the second quarter of
1997.
The Company received a design grant from the FAA in March 1997 for the
design of an automated luggage system that would scan checked baggage for the
presence of drugs or explosives. The grant does not require the production of a
prototype. However, under the contract, the Company is required to deliver
detailed design drawings to the FAA in February 1998.
In addition to these government funded activities, the Company also engages
in internal product development activities. For example, the Company is
currently developing a hand-held version of the IONSCAN(R).
There can be no assurance that the Company will successfully complete the
development of the products described above or that any such products would, if
successfully developed, achieve market acceptance or a significant level of
sales. See "Risk Factors--Dependence on New Product Development; Technological
Advancement."
PATENTS, TRADEMARKS AND PROPRIETARY RIGHTS
Certain of the technology used in the IONSCAN(R) is licensed by the Company
from the Canadian government as described below. While the Company holds patents
relating to certain components, systems and techniques used in the IONSCAN(R)
and while certain other elements of the IONSCAN(R) are protected by other
intellectual property rights, the Company has no comprehensive patent or similar
exclusive intellectual property right covering the IONSCAN(R) in its entirety.
In addition, the basic technology used in the IONSCAN(R) is not proprietary and
is available in the public domain. Accordingly, present and potential
competitors could use such basic technology to duplicate the performance of the
IONSCAN(R). See "Risk Factors--Limited Proprietary Technology."
The 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 a worldwide
30
<PAGE> 33
license to use certain unpatented technology developed from such work and pays
Revenue Canada a royalty equal to 1.0% of certain IONSCAN(R) sales. The initial
term of this license agreement expires on March 31, 1999. However, the Company
has entered into an agreement with Revenue Canada, pursuant to which the Company
has obtained the right to renew such licensing arrangement on a year-by-year
basis for up to ten additional years. 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.
FACILITIES
The Company does not own any real property and currently conducts its
operations at the following leased premises:
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE ANNUAL LEASE
LOCATION DESCRIPTION OF FACILITY FOOTAGE LEASE COST EXPIRATION
- -------------------------- ------------------------- ----------- ---------- ---------------
<S> <C> <C> <C> <C>
219 South Street.......... Corporate headquarters, 4,910 $ 78,000 March 1998
Murray Hill, New Jersey sales, customer support
07974 and assembly
1730 Aimco Boulevard...... Research, manufacturing 28,380 $ 76,000* September 2005
Mississauga, Ontario, and assembly, sales,
Canada L4W 1V1 customer support and
administrative
Village Fret BAT-3453..... Sales and customer 2,500 $ 40,000 February 2000
BP 10614-4 support
Rue du Te
95724, Roissy C.D.G.
France
Unit 3 at Manor Royal..... Sales and customer 1,560 $ 16,000 February 1998
Crawley, West Sussex support
England RH10 2QU
</TABLE>
- ----------------------
* Increases to $115,000 on September 1, 2000.
The Company currently intends to relocate its New Jersey headquarters,
sales, customer support and administrative offices to approximately 15,000
square feet of leased space in Warren, New Jersey. Although no lease has been
entered into as of the date hereof, the Company anticipates that its rental
expense for the new facility will be approximately $140,000 per annum. The
Company anticipates relocating to this new facility in the fourth quarter of
1997. Management believes that the new facility will be sufficient to satisfy
the Company's U.S. administrative and manufacturing needs for the foreseeable
future.
EMPLOYEES
As of June 30, 1997, the Company had 106 full-time and 14 part-time
employees, of whom 58 were engaged in manufacturing, 28 were engaged in product
development activities and 34 were engaged in sales, service and general
administration. Of those engaged in product development, 14 have advanced
degrees (including 10 doctorates). 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.
31
<PAGE> 34
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the Company's
executive officers and directors as of August 1997.
<TABLE>
<CAPTION>
NAME AGE POSITION
------------------------------- --- ------------------------------------------------
<S> <C> <C>
Stanley S. Binder(1)........... 55 Chairman of the Board, Chief Executive Officer
and President
John H. Davies(1).............. 60 Executive Vice President and Director, President
and Chief Executive Officer of Barringer
Research Limited ("BRL")
Richard S. Rosenfeld........... 50 Vice President-Finance, Chief Financial Officer,
Treasurer and Assistant Secretary
Kenneth S. Wood................ 44 Vice President and Secretary, President of
Barringer Instruments, Inc. ("BII")
John D. Abernathy(1)(2)(3)..... 60 Director
Richard D. Condon(2)........... 62 Director
John J. Harte(1)(3)............ 55 Director
James C. McGrath(2)(3)......... 55 Director
</TABLE>
- ----------------------
(1) Member of Executive Committee.
(2) Member of Audit and Finance Committee.
(3) Member of Executive Compensation Committee.
Mr. Stanley S. Binder joined the Company in July 1989 and has served as
Chairman of the Board since February 1991, Chief Executive Officer since July
1990 and President since July 1989. 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 Transactions." Mr. Binder is chairman of
the New Jersey Council of the American Electronics Association and a member of
the Board of Directors of the American Electronics Association.
Mr. John H. Davies has served as Executive Vice President of the Company
since January 1992. Mr. Davies has been the President and Chief Executive
Officer of BRL since August 1989.
Mr. Richard S. Rosenfeld, a certified public accountant, joined the Company
in January 1992 as Treasurer and Assistant Secretary. Since July 1993, he has
been Vice President-Finance and Chief Financial Officer of the Company.
Mr. Kenneth S. Wood joined the Company in April 1990 as Vice President of
Operations of BII. Since January 1992, he has served as Vice President of the
Company and the President of BII. He also has served as the Secretary of the
Company since March 1993. From July 1978 until April 1990, he was Program
Director for Lockheed Electronics, a company engaged in aerospace and defense
electronics.
Mr. John D. Abernathy, has served as a Director of the Company since
October 1993. Mr. Abernathy 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 an independent 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 accessories.
Mr. Richard D. Condon has served as a Director of the Company since
February 1992. Since January 1996, Mr. Condon has been a consultant to and
director of Amherst Process Instruments, Inc., a scientific instrumentation
company. From 1989 until December, 1995, Mr. Condon was a consultant
32
<PAGE> 35
to and director of Analytical Technology, Inc., Boston, Massachusetts, a
scientific instrumentation company.
Mr. John J. Harte has served as a Director of the Company since 1986. He
was Vice President, Special Projects of the Company from 1991 until January
1997. 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. James C. McGrath, has served as a Director of the Company since January
1994. Mr. McGrath 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.
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.
Outside directors are entitled to an annual retainer of $2,500 per quarter
and a fee of $1,000 for each meeting attended and $500 for each committee
meeting attended (unless the committee meeting is held on the same day as a
meeting of the Board of Directors). In lieu of the annual retainer, 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." Pursuant to the terms of
the Company's 1997 Stock Compensation Program (the "Stock Compensation
Program"), each director who has not been a full-time employee of the Company or
any subsidiary for at least the prior 12 months receives an option to purchase
3,000 shares of Common Stock each year on the earlier of (i) the date of the
Company's annual meeting of stockholders, or (ii) June 1. Options granted to
such directors under the Stock Compensation Program have an exercise price equal
to the fair market value per share as of the date of grant. See "1997 Stock
Compensation Program."
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, 1996, 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 1996.
Until November 1996, Mr. Harte was Chairman of the Board of Labco, and Mr.
Binder was a Director of Labco. Mr. Binder also served 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
"Certain Transactions--Sale of Subsidiary."
33
<PAGE> 36
EXECUTIVE COMPENSATION
The following table sets forth certain compensation paid to the President
and Chief Executive Officer and each other executive officer of the Company
whose total annual salary and bonus for the year ended December 31, 1996
exceeded $100,000 (collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION -----------------------------------
--------------------------------- RESTRICTED SECURITIES ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS OTHER ANNUAL STOCK UNDERLYING LTIP COMPENSATION
POSITION YEAR ($) ($) COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS ($)(1)
- ------------------------- ------ -------- ------- ------------ ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stanley S. Binder........ 1996 $171,491 $63,000 -- -- 55,000 -- --
President and Chief 1995 171,491 -- -- -- 45,000 -- --
Executive Officer 1994 167,757 -- -- -- -- -- --
John H. Davies........... 1996 125,275* 43,200* -- -- 38,250 -- --
Executive Vice
President 1995 125,775* -- $ 12,149*(2) -- 31,250 -- --
of the Company 1994 120,582* -- -- -- -- -- --
Kenneth S. Wood.......... 1996 111,815 39,600 -- -- 33,750 -- --
President of Barringer 1995 111,815 -- -- -- 26,250 -- --
Instruments, Inc. 1994 109,751 -- -- -- -- -- --
Richard S. Rosenfeld..... 1996 96,000 34,200 -- -- 27,500 -- --
Vice President-Finance, 1995 96,000 -- -- -- 22,500 -- --
Chief Financial Officer 1994 90,400 -- -- -- -- -- --
</TABLE>
- ----------------------
* Amounts converted to U.S. dollars at the average exchange rate for such
year.
(1) Represents amounts contributed by the Company pursuant to the Company's
tax-qualified 401(k) deferred compensation plan ("401(k) Plan"). In 1996,
the 401(k) Plan provided that the Company would make matching contributions
to the participants in the 401(k) Plan equal to 100% of the first 2.0% of a
participant's salary contributed and 50.0% of the next 5.0% of a
participant's salary contributed, which contributions vested 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.
OPTION GRANTS
The following table summarizes certain information relating to the grant of
options to purchase Common Stock to each of the Named Executive Officers:
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES IN EXERCISE OR
NAME GRANTED(#)(2) FISCAL YEAR(3) BASE PRICE($/SH)
- ----------------------------------------------- ------------ ---------------- ----------------
<S> <C> <C> <C>
Stanley S. Binder.............................. 55,000 21.7% $ 1.00
John H. Davies................................. 38,250 15.1 1.00
Kenneth S. Wood................................ 33,750 13.3 1.00
Richard S. Rosenfeld........................... 27,500 10.9 1.00
</TABLE>
- ----------------------
(1) The Company did not grant stock appreciation rights in 1996.
(2) The stock options expire on April 25, 2001. Twenty-five percent of each
option grant is exercisable immediately, 50.0% is exercisable after the
first year, 75.0% is exercisable after the second year and 100% is
exercisable after the third year.
(3) Options covering a total of 253,000 shares of Common Stock were granted in
1996.
34
<PAGE> 37
OPTIONS EXCERCISED IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to the executives
named in the Summary Compensation Table concerning the exercise of stock options
during 1996 and unexercised options held by such executive officers as of
December 31, 1996.
AGGREGATED OPTION EXERCISES IN 1996 AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
SECURITIES UNDERLYING VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY OPTIONS
SHARES AT YEAR-END(#) AT YEAR-END($)(1)
ACQUIRED VALUE -------------------------- --------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stanley S. Binder..... -- -- 31,750 68,250 $ 216,156 $ 476,344
John H. Davies........ -- -- 22,062 47,438 150,208 331,105
Kenneth S. Wood....... -- -- 33,937 41,063 129,161 287,089
Richard S. Rosenfeld
.................... -- -- 22,125 34,125 108,078 238,172
</TABLE>
- ----------------------
(1) Based on a closing bid price of $8.375 per share for the Common Stock as of
December 31, 1996.
STOCK OPTION PLANS
1990 Option Plan
The Company maintained an option plan (the "1990 Option Plan") pursuant to
which the Company was authorized to grant options covering a total of 100,000
shares of Common Stock. As of December 31, 1996, options covering a total of
23,750 shares of Common Stock were outstanding thereunder and no further options
could be granted thereunder. All of such options expired in January 1997.
1997 Stock Compensation Program
In May 1997, the Company adopted the Stock Compensation Program in order to
promote the interests of the Company, its direct and indirect present and future
subsidiaries and its stockholders by providing eligible persons with the
opportunity to acquire an ownership interest, or to increase their ownership
interest, in the Company as an incentive to remain in the service of the
Company. The Stock Compensation Program authorizes the granting of incentive
stock options, non-qualified stock options, stock appreciation rights,
performance shares and stock bonus awards to employees and consultants of the
Company and its subsidiaries, including those employees serving as officers or
directors of the Company (the "Employee Plans"). The Stock Compensation Program
also authorizes automatic option grants to directors who are not otherwise
employed by the Company (the "Independent Director Plan"). In connection with
the Stock Compensation Program, 600,000 shares of Common Stock are reserved for
issuance, of which up to 500,000 shares may be issued under the Employee Plans
and up to 100,000 shares may be issued under the Independent Director Plan. The
Stock Compensation Program is administered by the Executive Compensation
Committee of the Board of Directors.
Options and awards granted under the Stock Compensation Program may have an
exercise or payment price as established by the Executive Compensation
Committee; provided that the exercise price of incentive stock options granted
under the Employee Plans may not be less than the fair market value of the
underlying shares on the date of grant. Options granted under the Independent
Director Plan must have an exercise price equal to the fair market value of the
underlying shares on the date of grant.
35
<PAGE> 38
Unless otherwise provided at the date of grant, no option or award may vest
within one year of the date of grant and no option or award may be exercised
more than 10 years from the date of grant. Options granted under the Independent
Director Plan vest one year following the date of grant and expire if not
exercised on or before the fifth anniversary thereof. Unless otherwise specified
by the Executive Compensation Committee, options and awards (other than pursuant
to the Independent Director Plan) vest in four equal installments on the first,
second, third and fourth anniversaries of the date of grant. Vesting of any
option or award granted under the Stock Compensation Program may be accelerated
in certain circumstances, including upon the occurrence of a "Change in Control
Event" (as defined in the Stock Compensation Program).
Options and awards granted under the Stock Compensation Program are
nontransferable, except by will or by the laws of descent and distribution.
However, the Executive Compensation Committee may permit the recipient of a
non-incentive stock option granted under the Employee Plans and options granted
under the Independent Director Plan to transfer the option to a family member or
a trust created for the benefit of family members. During the lifetime of a
participant, an option may be exercised only by the participant or a permitted
transferee. In the event that a participant's employment or service terminates
as a result of death, all vested awards will be paid to the participant's estate
by the Company and the participant's estate or any permitted transferee will
have the right to exercise vested options for a period ending on the earlier of
the expiration dates of such options or one year from the date of death. If the
participant's employment or service terminates as a result of retirement or a
"disability" (as set forth in the Stock Compensation Program), all vested awards
will be paid to the participant by the Company and the participant or any
permitted transferee will have the right to exercise vested options for a period
ending on the earlier of the expiration dates of such options or one year from
the date of termination. If the participant's employment or service terminates
for cause, all options and awards will automatically expire upon termination. If
the participant's employment or service terminates other than as a result of
death, disability, retirement or termination for cause, the participant will
have the right to collect on vested awards immediately and the participant or
any permitted transferee will have the right to exercise vested options for a
period ending on the earlier of the expiration dates of such options or awards
or 30 days from the date of termination, subject to extension at the discretion
of the Administrator, or three months from the date of termination in the case
of options granted pursuant to the Independent Director Plan. In all cases, any
unvested options or awards will terminate as of the date of termination of
employment or service.
The Stock Compensation Program will terminate on February 28, 2007, unless
earlier terminated by the Board of Directors. No options or awards may be
granted under the Stock Compensation Program after its termination; however,
termination of the Stock Compensation Program will not affect the status of any
option or award outstanding on the date of termination.
Incentive stock options exercisable for an aggregate of 135,500 shares of
Common Stock have been granted to date under the Employee Plans. These options
expire 10 years after the date of grant and have an exercise price, subject to
adjustment, of $9.375 per share. Such options are exercisable annually in 25%
increments beginning with the first anniversary of 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 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.
36
<PAGE> 39
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 Exercise
Program, representing interest otherwise payable on such notes.
EMPLOYMENT AGREEMENTS AND COMPENSATION ARRANGEMENTS
The Company has entered into an Employment Agreement with Mr. Binder, the
President and Chief Executive Officer of the Company (the "Employment
Agreement"), pursuant to which Mr. Binder receives $171,000 annually as
compensation, subject to increases equal to percentage increases in the Consumer
Price Index as well as by increases authorized by the 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 of grant.
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
Transactions."
The Company has entered into employment agreements with Messrs. Wood and
Rosenfeld which run for a term of one year from November 1, 1996, 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 receive annual
base salaries of $111,815 and $96,000, respectively, subject to periodic
increases at the discretion of the Board of Directors, and are entitled to
participate in any cash bonus plan maintained by the Company. Both of the
employment agreements 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 contain certain confidentiality and
non-competition provisions which continue in effect following the termination of
the employee's employment by the Company.
The Company has entered into a Consulting Agreement with Mr. 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.
INDEMNIFICATION OF THE DIRECTORS AND OFFICERS
The Certificate of Incorporation and 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.
37
<PAGE> 40
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 Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
38
<PAGE> 41
CERTAIN TRANSACTIONS
GENERAL
In May 1995, the Company sold to SSF III, which is controlled by Mr. Marxe
and of which Mr. Binder is an independent general partner with approximately
0.01% interest in such partnership, and to the Special Situations Cayman Fund,
LP, 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, in June 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.
For a description of certain transactions between Labco and the Company,
see "--Sale of Subsidiary" and "Management--Compensation Committee Interlocks
and Insider Participation."
In July 1996, the Company sold to SSF $450,000 in principal amount of the
Company's 6% Subordinated Convertible Debentures due 1997 (the "Debentures").
The Debentures bore interest at the rate of 6.0% per annum, were convertible
into shares of Common Stock at a conversion rate of $2.75 and, pursuant to their
terms, matured 30 days after the consummation of the Company's November 1996
public offering, unless converted prior thereto. Certain officers and directors
of the Company purchased an additional $100,000 in aggregate principal amount of
the Debentures. All of the Debentures were converted into shares of Common Stock
in December 1996.
Mr. Abernathy is currently the Executive Director of Patton Boggs, LLP, a
Washington, D.C. law firm. During 1996, the Company retained Patton Boggs, LLP
to represent the Company in various matters and has retained such firm in 1997.
SALE OF SUBSIDIARY
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. 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"), subject to the return of the
Retained Shares to the Company upon Labco meeting 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. 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 with respect to, and to terminate the other 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 agreed to
39
<PAGE> 42
sell its Labco shares as provided above upon receipt of an offer to acquire such
shares at a price per share at least equal to the Target Price. The restrictions
described above also applied to any shares of Labco common stock issuable to the
Company upon the exercise of certain warrants held by the Company. Labco
registered the Company's Labco shares for resale pursuant to the Securities Act
to facilitate such sales.
In the Termination Agreement, the Company also agreed to surrender to Labco
the Retained Shares and 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, Messrs. Binder and Harte agreed to resign their
positions with Labco.
As of December 31, 1996, the Company had sold its entire interest in Labco
and, pursuant to the terms of the Termination Agreement, Messrs. Binder and
Harte had resigned their respective positions with Labco.
40
<PAGE> 43
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth, as of August 1, 1997, the number of shares
of Class A Convertible Preferred Stock, Class B Convertible Preferred Stock and
Common Stock owned by each Named Executive Officer, 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 Exchange Act) known by the Company to
own beneficially 5% or more of such securities. As of August 1, 1997, there were
5,470,455 shares of Common Stock, 58,206 shares of Class A Convertible Preferred
Stock and 22,500 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, Murray
Hill, New Jersey 07974.
<TABLE>
<CAPTION>
BENEFICIAL BENEFICIAL BENEFICIAL
OWNERSHIP OWNERSHIP BENEFICIAL OWNERSHIP OWNER
OF CLASS A OF CLASS B OF COMMON STOCK SHARES OF COMMON STOCK
CONVERTIBLE CONVERTIBLE PRIOR TO BEING AFTER
PREFERRED STOCK PREFERRED STOCK OFFERING(1)(2) OFFERED OFFERING(1)
--------------- --------------- -------------------- ------ ---------------
NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT NUMBER NUMBER PERCENT
OF OF OF OF OF OF OF OF OF
NAME SHARES CLASS SHARES CLASS SHARES CLASS SHARES SHARES CLASS
- ------------------------------ ------ ------- ------ ------- --------- ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stanley S. Binder............. -- -- -- 133,136(3) 2.4%
John H. Davies................ -- -- -- 109,107(4) 2.0
John J. Harte................. -- -- -- 49,600(5) *
Richard D. Condon............. -- -- -- 22,000(6) *
John D. Abernathy............. -- -- -- 24,704(7) *
James C. McGrath.............. -- -- -- 20,750(8) *
Kenneth S. Wood............... -- -- -- 46,261(9) *
Richard S. Rosenfeld.......... -- -- -- 41,286(10) *
All directors and executive
officers as a group
consisting of ten (10)
persons..................... -- -- -- 467,747 8.2
Austin W. Marxe............... -- -- -- 1,026,822(11) 18.0
153 E. 53rd St.
NY, NY 10022
Perkins Capital Management,
Inc. ....................... -- -- -- 721,159(12) 13.5
708 East Lake Street
Wayzata, MN 55391
Ronald and Kathleen Hanna..... 21,549 37.0% -- -- 7,795 *
135 South Horizon Circle
Prescott, AZ 86303
Max Gerber.................... -- 12,500 55.6 4,447 *
26 Broadway
New York, NY 10004-1776
Paul Spitzberg................ -- 10,000 44.4 3,558 *
16 Whiteowl Road
Tenafly, NJ 07670
</TABLE>
- ----------------------
* Less than 1%
(1) Assumes the exercise of all outstanding warrants for Common Stock, the
conversion of each outstanding share of Class A Convertible Preferred Stock
and Class B Convertible Preferred Stock into Common Stock and the exercise
of all options exercisable within 60 days of August 1, 1997 for each person
or entity.
(2) Certain amounts shown are subject to adjustment in certain circumstances.
(3) Includes 54,500 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of August 1, 1997 and 12,500 shares of
Common Stock issuable upon exercise of warrants 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 any
beneficial interest in such shares.
41
<PAGE> 44
(4) Includes 37,875 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of August 1, 1997 and 12,500 shares of
Common Stock issuable upon the exercise of warrants owned by Mr. Davies.
(5) Includes 12,000 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of August 1, 1997.
(6) Includes 12,000 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of August 1, 1997 and 5,000 shares of
Common Stock issuable upon the exercise of warrants owned by Mr. Condon.
(7) Includes 12,000 shares of Common Stock issuable upon the exercise of
options exercisable with 60 days of August 1, 1997 and 6,250 shares of
Common Stock issuable upon the exercise of warrants owned by Mr. Abernathy.
(8) Includes 12,000 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of August 1, 1997 and 3,750 shares of
Common Stock issuable upon the exercise of warrants owned by Mr. McGrath.
(9) Includes 32,625 shares of Common Stock issuable upon the exercise of
options exercisable by Mr. Wood within 60 days of August 1, 1997.
(10) Includes 27,250 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of August 1, 1997 and 5,000 shares of
Common Stock issuable upon the exercise of warrants owned by Mr. Rosenfeld.
Also includes 3,636 shares of Common Stock owned by Mr. Rosenfeld as
custodian for a minor child.
(11) Includes (i) 502,580 shares of Common Stock and 256,667 shares of Common
Stock issuable upon the exercise of warrants owned by SSF III, and (ii)
174,242 shares of Common Stock and 93,333 shares of Common Stock issuable
upon the exercise of warrants 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. Accordingly, Mr. Marxe may be deemed to be the beneficial
owner of all of the shares of Common Stock held by SSF III and the Cayman
Fund. Mr. Binder is an independent general partner of SSF III. Mr. Binder
disclaims beneficial ownership of all shares held by SSF III.
(12) Consists of 421,159 shares of Common Stock owned by clients of Perkins
Capital Management, Inc. ("Perkins Capital") and 300,000 shares of Common
Stock held by The Perkins Opportunity Fund (the "Perkins Fund"), for which
Perkins Capital acts as investment adviser. Perkins Capital disclaims any
beneficial interest in the shares of Common Stock held by the Perkins Fund.
42
<PAGE> 45
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 20,000,000 shares of
Common Stock, par value $0.01 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 1, 1997, the Company had outstanding
5,475,179 shares of Common Stock, no shares of Convertible Preferred Stock,
45,146 shares of Class A Convertible Preferred Stock and 22,500 shares of Class
B Convertible Preferred Stock. The Company currently intends to redeem the
outstanding shares of Class A Convertible Preferred Stock and Class B
Convertible Preferred Stock as soon as permitted under the terms thereof. Upon
completion of this Offering, the Company will have outstanding 7,475,179 shares
of Common Stock (7,775,179 shares if the Underwriters' over-allotment option is
exercised in full). In addition, the Company will have 1,502,899 shares of
Common Stock reserved for issuance pursuant to options, warrants and convertible
securities outstanding as of August 1, 1997. See "Shares Eligible For Future
Sale." As of August 1, 1997, there were approximately 1,000 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 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 by the Company pursuant to the Offering
will be, upon payment therefor, fully paid and non-assessable.
PREFERRED STOCK
The Preferred Stock may be issued from time to time in one or more classes
or series, and the 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 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,
43
<PAGE> 46
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 Board of Directors has designated two series of Preferred Stock, the
Class A Convertible Preferred Stock and the Class B Convertible Preferred Stock.
As indicated above, the Company currently intends to redeem the outstanding
shares of Class A Convertible Preferred Stock and Class B Convertible Preferred
Stock as soon as permitted under the terms thereof. Based on the recent trading
history for the Common Stock, the Company anticipates that it will be permitted
to redeem the outstanding shares of Class A Convertible Preferred Stock and
Class B Convertible Preferred Stock on or about September 18, 1997.
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 Board of Directors,
cumulative dividends at an annual rate of $0.16 per share, payable semi-annually
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 0.361745 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
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 Board of Directors,
cumulative dividends at an annual rate of $0.16 per share, payable semi-annually
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 0.355839 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 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. Holders of Class B Convertible Preferred
Stock also are entitled to vote as a class in certain limited circumstances.
44
<PAGE> 47
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 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
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 Certificate of Incorporation contains provisions which require the
favorable vote by the holders of not less than 80.0% 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 10.0% 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.
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 15.0% 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 85.0% of the corporation's voting stock in the
same transaction in which it exceeds 15.0%, 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 is American Stock
Transfer & Trust Company, New York, New York.
45
<PAGE> 48
COMMON STOCK PURCHASE WARRANTS
In connection with its November 1996 public offering, the Company issued an
aggregate of 1,437,500 Common Stock Purchase Warrants (the "Warrants"). Each
Warrant entitles the registered holder thereof to purchase one-quarter of a
share of Common Stock at an exercise price of $9.847 per share prior to November
12, 1999, subject to adjustment in certain circumstances. The Warrants are
subject to redemption by the Company, at $0.25 per Warrant (subject to
adjustment under certain circumstances), 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 exercise price of the Warrants for a period of
30 days ending within 15 days of the redemption notice date. The Company may, in
its sole discretion, lower the exercise price of the Warrants for a period of
not less than 30 days on not less than 30 days' prior written notice. 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.
In connection with the November 1996 public offering, the Company sold to
Janney, Montgomery Scott, Inc. Underwriter's Warrants (the "Underwriter's
Warrants") to purchase from the Company 125,000 shares of Common Stock at an
exercise price of $10.276 per share and 125,000 Warrants at an exercise price of
$0.06 per Warrant. The Underwriter's Warrants are exercisable with respect to
the Common Stock for a period of four years commencing November 12, 1997 and
with respect to the Warrants for a period of two years thereafter.
46
<PAGE> 49
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, based on shares outstanding as of August
1, 1997, the Company will have outstanding approximately 7,475,179 shares of
Common Stock assuming no exercise or conversion of options, warrants and
convertible securities after August 1, 1997. All of the outstanding shares,
including the 2,000,000 shares offered hereby (2,300,000 shares if the
Underwriters' over-allotment option is exercised in full), will be freely
tradable without restriction or further registration under the Securities Act,
unless purchased by "affiliates" of the Company as that term is defined in Rule
144 under the Securities Act. An additional 1,502,899 shares of Common Stock are
issuable upon the conversion or exercise of outstanding stock options, warrants
and convertible securities, 1,346,649 of which have been registered for resale
by the holders thereof.
As a result of lock-up agreements between certain security holders and the
representatives of approximately 770,297 shares of Common Stock (excluding
shares offered hereby) may not be sold (subject to certain exceptions) for a
period of 90 days from the date of this Prospectus, which restriction may be
waived at the sole discretion of Robertson, Stephens & Company. Following the
lock-up period, all of the shares subject to the lock-up agreements will be
available for immediate sale.
Sales of substantial amounts of such shares in the public market, or the
perception that such sales might occur, could adversely affect the market price
of the Common Stock and could impair the Company's future ability to raise
capital through an offering of its equity securities. See "Risk Factors--Shares
Eligible for Future Sale."
47
<PAGE> 50
UNDERWRITING
The Underwriters named below, acting through their representatives,
Robertson, Stephens & Company LLC and Pacific Growth Equities, Inc. (the
"Representatives"), have severally agreed with the Company, subject to the terms
and conditions of the Underwriting Agreement, to purchase from the Company the
numbers of shares of Common Stock set forth opposite their names below. The
Underwriters are committed to purchase and pay for all such shares if any are
purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- --------------------------------------------------------------------------------- ---------
<S> <C>
Robertson Stephens & Company LLC.................................................
Pacific Growth Equities, Inc. ...................................................
---------
Total........................................................................ 2,000,000
=========
</TABLE>
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public at the public offering
price set forth on the cover page of this Prospectus and to certain dealers at
such price less a concession of not more than $ per share, of which
$ may be reallowed to other dealers. After the public offering, the
public offering price, concession and reallowance to dealers may be reduced by
the Representatives. No such reduction shall change the amount of proceeds to be
received by the Company as set forth on the cover page of this Prospectus.
The Company and certain Selling Stockholders have granted to the
Underwriters an option, exercisable during the 30-day period after the date of
this Prospectus, to purchase up to 300,000 additional shares of Common Stock at
the same price per share as the Company receives for the 2,000,000 shares that
the Underwriters have agreed to purchase. To the extent that the Underwriters
exercise such option, each of the Underwriters will have a firm commitment to
purchase approximately the same percentage of such additional shares that the
number of shares of Common Stock to be purchased by it shown in the above table
represents as a percentage of the 2,000,000 shares offered hereby. If purchased,
such additional shares will be sold by the Underwriters on the same terms as
those on which the 2,000,000 shares are being sold.
The Underwriting Agreement contains covenants of indemnity between the
Underwriters, the Company and the Selling Stockholders against certain civil
liabilities, including liabilities under the Securities Act.
Each executive officer and director of the Company has agreed with the
Representatives for a period of 90 days from the date of this Prospectus (the
"Lock-Up Period") not to offer to sell, contract to sell, or otherwise sell,
dispose of, loan, pledge or grant any rights with respect to any shares of
Common Stock, any options or warrants to purchase any shares of Common Stock, or
any securities convertible into or exchangeable for shares of Common Stock, now
owned or hereafter acquired directly by such holders or with respect to which
such holders have or hereafter acquire the power of disposition (subject to
certain exceptions) without the prior written consent of Robertson, Stephens &
Company LLC, which may, in its sole discretion and at any time or from time to
time, without notice, release all or any portion of the shares subject to the
lock-up agreements. In addition, the Company has agreed that during the Lock-Up
Period, it will not, without the prior written consent of Robertson, Stephens &
Company LLC, issue, sell, contract to sell or otherwise dispose of any shares of
Common Stock, any options or warrants to purchase any shares of Common Stock or
any securities convertible into, exercisable for or exchangeable for shares of
Common Stock other than the issuance of Common Stock upon the exercise of
outstanding options and warrants and the Company's issuance of options under
existing employee stock option plans.
The offering price of the Common Stock was determined by negotiations among
the Company and the Representatives of the Underwriters, based in part upon the
market price for the Common Stock as reported on the Nasdaq National Market.
48
<PAGE> 51
In connection with this Offering, certain Underwriters and selling group
members (if any) who are qualified market makers on The Nasdaq Stock Market may
engage in passive market making transactions in the Common Stock on The Nasdaq
Stock Market in accordance with Rule 103 of Regulation M under the Exchange Act
during the business day prior to the pricing of this Offering before the
commencement of offers or sales of the Common Stock. Passive market makers must
comply with applicable volume and price limitations and must be identified as
such. In general, a passive market maker must display its bid at a price not in
excess of the highest independent bid for such security; if all independent bids
are lowered below the passive market maker's bid, however, such bid must then be
lowered when certain purchase limits are exceeded.
Certain persons participating in this Offering may overallot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids or effecting syndicate covering
transactions. A stabilizing bid means the placing of any bid or effecting of any
purchase, for the purpose of pegging, fixing or maintaining the price of the
Common Stock. A syndicate covering transaction means the placing of any bid on
behalf of the underwriting syndicate or the effecting of any purchase to reduce
a short position created in connection with this Offering. Such transactions may
be effected on The Nasdaq Stock Market, in the over-the-counter market or
otherwise. Such stabilizing, if commenced, may be discontinued at any time.
49
<PAGE> 52
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Lowenstein, Sandler, Kohl, Fisher & Boylan, P.A.,
Roseland, New Jersey. Certain legal matters will be passed upon for the
Underwriters by Alston & Bird LLP, Atlanta, Georgia.
EXPERTS
The consolidated financial statements included in the Prospectus of
Barringer Technologies Inc. and subsidiaries as of December 31, 1995 and 1996
and each of the years in the three year period ended December 31, 1996, 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.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") in Washington, D.C. a Registration Statement on Form SB-2 under
the Securities Act with respect to the securities offered hereby. This
Prospectus, which constitutes part of the Registration Statement, omits certain
of the information contained in the Registration Statement and the exhibits and
schedules thereto on file with the Commission pursuant to the Securities Act and
the rules and regulations of the Commission thereunder. Statements contained in
this Prospectus as to the content of any contract or other document referred to
are not necessarily complete and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement, and each such statement is qualified in all respects by such
reference. The Company is subject to the informational requirements of the
Exchange Act and, in accordance therewith, files reports, proxy statements and
other information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following Regional Offices of the
Commission: Seven World Trade Center, Suite 1300, New York, New York 10048; and
500 West Madison, Suite 1400, Chicago, Illinois 60661. Copies of such material
can be obtained from the public reference section of the Commission at its
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates, or from the Commission's Internet web site at
http://www.sec.gov. In addition, such materials also may be inspected and copied
at the offices of The Nasdaq Stock Market, 1735 K Street, N.W., Washington, D.C.
20006.
50
<PAGE> 53
BARRINGER TECHNOLOGIES INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Report of Independent Certified Public Accountants................................... F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996 and
June 30, 1997 (unaudited).......................................................... F-3
Consolidated Statements of Operations for the Years Ended December 31, 1994, 1995
and 1996 and for the Six Months Ended June 30, 1996 (unaudited)
and 1997 (unaudited)............................................................... F-4
Consolidated Statements of Stockholders' Equity for the Years Ended December 31,
1994, 1995 and 1996 and for the Six Months Ended June 30, 1997 (unaudited)......... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1995
and 1996 and for the Six Months Ended June 30, 1996 (unaudited)
and 1997 (unaudited)............................................................... F-6
Notes to Consolidated Financial Statements........................................... F-7
</TABLE>
F-1
<PAGE> 54
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Barringer Technologies Inc.
Murray Hill, New Jersey
We have audited the accompanying consolidated balance sheets of Barringer
Technologies Inc. as of December 31, 1995 and 1996 and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1996. 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 presentation of the financial
statements. 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 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
Also, in our opinion, the schedule presents fairly, in all material
respects, the information set forth therein.
/s/ BDO Seidman, LLP
---------------------
Woodbridge, New Jersey BDO Seidman, LLP
February 12, 1997
F-2
<PAGE> 55
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 30,
1995 1996 1997
-------- -------- -----------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 43 $ 5,276 $ 3,896
Marketable securities................................. -- 4,328 4,055
Trade receivables, less allowances of $41, $63 and
$157............................................... 1,533 3,521 6,352
Inventories........................................... 1,621 2,270 3,424
Prepaid expenses and other............................ 250 498 495
Deferred tax asset (note 8)........................... 225 731 1,031
-------- -------- --------
Total current assets............................... 3,672 16,624 19,253
Equipment, net (note 4)................................. 586 595 1,066
Investment in unconsolidated subsidiary (note 2)........ 334 -- --
Other................................................... 143 104 66
-------- -------- --------
$ 4,735 $ 17,323 $ 20,385
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank indebtedness and other notes (note 5)............ $ 744 $ 174 --
Accounts payable...................................... 1,278 1,009 $ 1,266
Accrued liabilities................................... 696 536 717
Accrued payroll and related taxes..................... 257 522 410
Accrued commission.................................... 27 112 446
Current portion of long-term debt (note 6)............ 300 -- --
-------- -------- --------
Total current liabilities.......................... 3,302 2,353 2,839
Other non-current liabilities........................... 108 117 121
Commitments (notes 9 and 10)
Stockholders' equity (notes 6 and 7):
Preferred stock, $2.00 par value, 4,000 shares
authorized. 270 shares designated class A
convertible preferred stock, 83, 60 and 58 shares
outstanding, less discount of $64, $47 and $45,
respectively....................................... 101 74 71
730 shares designated class B convertible preferred
stock, 258, 123 and 23 shares outstanding,
respectively....................................... 515 245 45
Common stock, $0.01 par value, 5,000, 7,000 and 20,000
shares authorized, respectively and 3,479, 5,357
and 5,470 shares outstanding, respectively......... 35 54 55
Additional paid-in capital............................ 17,685 29,430 29,952
Accumulated deficit................................... (16,542) (14,522) (12,268)
Cumulative foreign currency translation adjustment.... (456) (415) (417)
-------- -------- --------
1,338 14,866 17,438
Less: common stock in treasury, at cost, 31 shares.... (13) (13) (13)
-------- -------- --------
Total stockholders' equity......................... 1,325 14,853 17,425
-------- -------- --------
$ 4,735 $ 17,323 $ 20,385
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 56
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
-------------------------------- ------------------
1994 1995 1996 1996 1997
------- ------ ------- ------ ------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues......................................... $ 5,514 $6,374 $10,923 $5,012 $9,438
Cost of revenues................................. 4,100 3,601 5,363 2,647 3,955
------- ------ ------- ------ ------
Gross profit................................... 1,414 2,773 5,560 2,365 5,483
Operating expenses:
Selling, general and administrative............ 3,352 3,305 3,734 1,641 3,200
Product development............................ 531 354 230 57 338
------- ------ ------- ------ ------
3,883 3,659 3,964 1,698 3,538
------- ------ ------- ------ ------
Operating income (loss)...................... (2,469) (886) 1,596 667 1,945
Other income, (expense):
Interest expense............................... (202) (240) (228) (130) (5)
Equity in earnings of unconsolidated
subsidiary................................... -- -- 117 20 --
Gain on sale of investment in unconsolidated
subsidiary................................... -- -- 123 -- --
Investment income.............................. -- -- 72 42 212
Other, net..................................... 113 (52) (12) (35) (23)
------- ------ ------- ------ ------
(89) (292) 72 (103) 184
Income (loss) before income tax (provision)
benefit................................... (2,558) (1,178) 1,668 564 2,129
Income tax (provision) benefit (note 8).......... (75) -- 391 -- 131
------- ------ ------- ------ ------
Income (loss) from continuing operations..... (2,633) (1,178) 2,059 564 2,260
Operation held for sale (note 2):
Income from operations......................... 68 258 -- -- --
Gain on sale of portion of investment.......... -- 93 -- -- --
------- ------ ------- ------ ------
68 351 0 0 0
------- ------ ------- ------ ------
Net income (loss)....................... (2,565) (827) 2,059 564 2,260
Preferred stock dividends........................ (108) (82) (39) (24) (6)
------- ------ ------- ------ ------
Net income (loss) attributable to common
stockholders................................... $(2,673) $ (909) $ 2,020 $ 540 $2,254
======= ====== ======= ====== ======
Primary per share data (note 1):
Continuing operations.......................... $ (0.97) $(0.39) $ 0.48 $ 0.16 $ 0.36
Income from operation held for sale............ 0.02 0.08 -- -- --
Gain on sale of operation held for sale........ -- 0.03 -- -- --
------- ------ ------- ------ ------
$ (0.95) $(0.28) $ 0.48 $ 0.16 $ 0.36
======= ====== ======= ====== ======
Fully diluted per share data (note 1):
Continuing operations.......................... $ (0.97) $(0.39) $ 0.44 $ 0.15 $ 0.35
Income from operation held for sale............ 0.02 0.08 -- -- --
Gain on sale of operation held for sale........ -- 0.03 -- -- --
------- ------ ------- ------ ------
$ (0.95) $(0.28) $ 0.44 $ 0.15 $ 0.35
======= ====== ======= ====== ======
Weighted average common and common
equivalent shares outstanding:
Primary........................................ 2,827 3,283 4,221 3,483 6,176
======= ====== ======= ====== ======
Fully diluted.................................. 2,827 3,283 4,607 3,854 6,388
======= ====== ======= ====== ======
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 57
BARRINGER TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED CLASS A
STOCK PFD. STK.
TOTAL -------------- ------------- -------------
EQUITY SHRS AM'T SHRS AM'T SHRS AM'T
------- ----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance--January 1, 1994.................................. $ 3,646 2,762 $28 445 $555 83 $101
Exercise of stock options/warrants...................... 168 72 1
Issuance of common stock pursuant to settlement of 1993
litigation............................................ 70 12
1994 dividend on preferred stock........................ 0 26
Net loss................................................ (2,565)
Translation adjustment.................................. (133)
------- ------ --- ---- ----- --- ----
Balance--December 31,1994................................. 1,186 2,872 29 445 555 83 101
Sale of units in private placement, net................. 888 383 4
Conversion of preferred stock........................... 0 159 2 (445) (555)
Change in warrant exercise price in payment of debt..... 10
1995 dividend on preferred stock........................ 0 65
Net loss................................................ (827)
Translation adjustment.................................. 68
------- ------ --- ---- ----- --- ----
Balance--December 31, 1995................................ 1,325 3,479 35 0 0 83 101
Sale of securities, net of expense ($741)............... 10,401 1,437 14
Conversion of preferred stock........................... 0 55 1 (23) (27)
Exercise of stock options and warrants.................. 42 15
Conversion of debentures................................ 1,000 364 4
Preferred stock dividends............................... (15) 7
Net income.............................................. 2,059
Translation adjustment.................................. 41
------- ------ --- ---- ----- --- ----
Balance--December 31, 1996................................ 14,853 5,357.. 54 0 0 60 74
Conversion of preferred stock........................... 0 37 (2) (3)
Exercise of stock options and warrants.................. 249 76 1
Repayment of stockholder loan........................... 71
Net income for the period............................... 2,260
Translation adjustment.................................. (2)
Preferred stock dividends............................... (6)
------- ------ --- ---- ----- --- ----
Balance--June 30, 1997 (unaudited)........................ $17,425 5,470.. $55 0 $ 0 58 $71
======= ====== === ==== ===== === ====
<CAPTION>
CLASS B
PFD. STK.
--------------- PAID IN ACCUM. FOREIGN TREAS.
SHRS AM'T CAPITAL DEFICIT TRANSL STOCK
---- ----- ------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance--January 1, 1994.................................. 318 $ 635 $15,683 $(12,960) $ (391) $ (5)
Exercise of stock options/warrants...................... 167
Issuance of common stock pursuant to settlement of 1993
litigation............................................ 78 (8)
1994 dividend on preferred stock........................ 108 (108)
Net loss................................................ (2,565)
Translation adjustment.................................. (133)
--- ----- ------- -------- ----- ----
Balance--December 31,1994................................. 318 635 16,036 (15,633) (524) (13)
Sale of units in private placement, net................. 884
Conversion of preferred stock........................... (60) (120) 673
Change in warrant exercise price in payment of debt..... 10
1995 dividend on preferred stock........................ 82 (82)
Net loss................................................ (827)
Translation adjustment.................................. 68
--- ----- ------- -------- ----- ----
Balance--December 31, 1995................................ 258 515 17,685 (16,542) (456) (13)
Sale of securities, net of expense ($741)............... 10,387
Conversion of preferred stock........................... (135) (270) 296
Exercise of stock options and warrants.................. 42
Conversion of debentures................................ 996
Preferred stock dividends............................... 24 (39)
Net income.............................................. 2,059
Translation adjustment.................................. 41
--- ----- ------- -------- ----- ----
Balance--December 31, 1996................................ 123 245 29,430 * (14,522) (415) (13)
Conversion of preferred stock........................... (100) (200) 203
Exercise of stock options and warrants.................. 248
Repayment of stockholder loan........................... 71
Net income for the period............................... 2,260
Translation adjustment.................................. (2)
Preferred stock dividends............................... (6)
--- ----- ------- -------- ----- ----
Balance--June 30, 1997 (unaudited)........................ 23 $ 45 $29,952* $(12,268) $ (417) $(13)
=== ===== ======= ======== ===== ====
</TABLE>
- ------------
* At December 31, 1996 and June 30, 1997, net of notes receivable of $274 and
$203, respectively, from the sale of stock.
See notes to consolidated financial statements.
F-5
<PAGE> 58
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
-------------------------- -------------------
1994 1995 1996 1996 1997
------- ------ ------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net income (loss)....................................... $(2,565) $ (827) $ 2,059 $ 564 $ 2,260
Items not affecting cash:
Depreciation and amortization......................... 711 362 115 75 80
Inventory write-down and receivable reserves.......... 1,210 656 22 -- 94
Minority interest..................................... (76) -- -- -- --
Income from and gain on sale of investment in Labco... -- (351) (240) (20) --
Pension recovery...................................... -- (147) -- -- --
Deferred tax (benefit), expense....................... 75 -- (506) -- (300)
Prepaid pension cost.................................. 132 (78) -- -- --
Other................................................. 235 71 50 19 (13)
(Increase) decrease in non-cash working capital
balances.............................................. 206 (397) (2,947) (1,083) (3,416)
------- ------ ------- ------- -------
Cash used in operating activities................... (72) (711) (1,447) (445) (1,295)
------- ------ ------- ------- -------
Investing activities:
Purchase of machinery and equipment................... (847) (358) (124) (47) (513)
Escrowed cash on sale of Canadian subsidiary.......... 225 -- -- -- --
Sale of (investment in) marketable securities......... -- -- (4,328) -- 273
Proceeds on sale of investment in Labco............... -- 300 574 -- --
Increase in investment in operation held for sale..... -- -- -- (21) --
------- ------ ------- ------- -------
Cash (used in) investing activities................. (622) (58) (3,878) (68) (240)
------- ------ ------- ------- -------
Financing activities:
Proceeds on issuance of Convertible Subordinated
Debentures.......................................... -- -- 1,000 -- --
Reduction in long-term debt........................... (184) -- (300) -- --
Increase (decrease) in bank debt and other............ 488 (412) (570) 487 (174)
Proceeds on issuance of equity securities............. 171 888 10,443 -- 264
Repayment of stockholder loan......................... -- -- -- -- 71
Rent inducement....................................... -- 108 -- -- --
Payment of dividends on preferred stock............... -- -- (15) -- (6)
------- ------ ------- ------- -------
Cash provided by financing activities............... 475 584 10,558 487 155
------- ------ ------- ------- -------
Increase (decrease) in cash and cash equivalents........ (219) (185) 5,233 (26) (1,380)
Cash and cash equivalents--beginning of period.......... 486 267 43 43 5,276
Less cash held for sale................................. -- (39) -- -- --
------- ------ ------- ------- -------
Cash and cash equivalents--end of period................ $ 267 $ 43 $ 5,276 $ 17 $ 3,896
======= ====== ======= ======= =======
Changes in components of non-cash working capital
balances related to operations:
Trade receivables..................................... $ 1,249 $ 38 $(2,010) $(1,125) $(2,925)
Inventories........................................... (987) (281) (649) (31) (1,154)
Other current assets.................................. (58) 60 (248) (26) 3
Other assets.......................................... -- (12) 39 -- --
Accounts payable and accrued liabilities.............. 2 (202) (79) 99 660
------- ------ ------- ------- -------
Decrease (increase) in operating assets net of operating
liabilities arising from cash transactions............ $ 206 $ (397) $(2,947) $(1,083) $(3,416)
======= ====== ======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 59
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO JUNE 30, 1997 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1996 AND 1997 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 statement of operation 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
Net 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). Fully diluted income (loss) per share is computed
assuming the conversion of convertible preferred stock and subordinated
debentures at the beginning of the period or the date of issuance, whichever is
later.
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 recognize revenue on the percentage of completion method
similar to its recognition method in the research and development business.
F-7
<PAGE> 60
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
For the years ended December 31, 1994, 1995 and 1996, the Company had
recognized revenues of $17,000, $264,000 and $49,000 respectively, on jobs in
process and had incurred related costs of $10,000, $183,000 and $25,000
respectively, of which $5,000, $210,000 and $0 respectively, were billed to
customers. For the six months ended June 30, 1997, the Company did not have any
significant contracts in progress.
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 to
primarily governmental agencies. Marketable securities consists primarily of
investments in U.S. government and agency obligations and commercial paper.
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. If and 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, ("SFAS
121") "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed of", which the Company adopted effective for the year ended
December 31, 1996. No write-downs have been necessary through June 30, 1997 as a
result of SFAS 121.
Stock-Based Compensation
The Company has adopted the disclosure only provisions of SFAS 123,
"Accounting for Stock-Based Compensation", but applies Accounting Principle
Board Opinion No. 25 in accounting and measuring compensation expense related to
stock option plans. There was no compensation expense related to the issuance of
stock options for the years ended December 31, 1994, 1995 and 1996 and for the
six months ended June 30, 1996 and 1997. (see note 7 for pro-forma disclosure
required by SFAS 123).
Fair Value of Financial Instruments
The carrying amounts reported in the consolidated balance sheets for cash
and cash equivalents, marketable securities, accounts receivable, accounts
payable, accrued liabilities and notes payable approximate fair value because of
the immediate or short-term maturity of these financial instruments. The Company
has the ability and intent to hold all marketable securities through their
respective maturity dates.
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 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 accounts receivable, inventories,
equipment and deferred income taxes.
F-8
<PAGE> 61
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Unaudited Information
The consolidated balance sheet of the Company as of June 30, 1997, the
consolidated statements of operations and cash flows for the six months ended
June 30, 1996 and 1997, the consolidated statement of stockholders' equity for
the six months ended June 30, 1997 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 any other interim
or annual period.
2. INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
During the first quarter of 1995, the Company started to actively seek a
purchaser for its then 47% interest in Barringer Laboratories, Inc ("Labco").
Accordingly, the financial statements had 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 $300,000 in cash, cancellation of all amounts owed by the Company
to Labco pursuant to certain intercompany agreements (aggregating $452,000) and
cancellation of $57,000 in accounts receivable due to Labco. After giving effect
to the sale of the Labco shares, the Company continued to own 432,475 shares of
Labco stock representing a 26% ownership interest.
In October 1996, the Company and Labco entered into a Termination Agreement
(the "Termination Agreement") pursuant to which, among other things, the Company
agreed that, for a period of three months from the date of the Termination
Agreement, it would sell its remaining shares in Labco at a price of at least
$1.6875 per share. During 1996, the Company sold all of its remaining shares and
warrants in Labco and recognized a gain on such sales of $123,000. In addition
to the gain on the sale of its Labco investment, the Company recorded $117,000
of income representing its proportionate share of Labco's net income for 1996.
3. INVENTORIES
At December 31, 1995 and 1996 and June 30, 1997, the Company had parts,
subassemblies and work in process of $1,010,000, $1,483,000, and $2,953,000 and
finished goods of $611,000, $787,000, and $471,000, respectively.
4. MACHINERY AND EQUIPMENT
The major categories of machinery and equipment are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
--------------------------- -----------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Office equipment.......................... $ 350,000 $ 395,000 $ 772,000
Machinery and equipment................... 1,687,000 1,857,000 1,569,000
Leasehold improvement..................... 64,000 64,000 67,000
---------- ---------- ----------
2,101,000 2,316,000 2,408,000
Accumulated depreciation.................. (1,515,000) (1,721,000) (1,342,000)
---------- ---------- ----------
Totals...................................... $ 586,000 $ 595,000 $ 1,066,000
========== ========== ==========
</TABLE>
F-9
<PAGE> 62
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. BANK INDEBTEDNESS AND OTHER NOTES PAYABLE
The Company's Canadian subsidiary, Barringer Research Ltd. ("BRL"), had a
financing arrangement with the Ontario Development Corporation ("ODC") for a
$730,000 export line of credit. The rate of interest was adjusted quarterly and
was 10% at December 31, 1996 and outstanding borrowings totaled $150,000. The
ODC has informed the Company that this facility will no longer be available due
to the phasing out of the ODC by the Canadian government. In January 1997, the
Company paid all amounts owed to the ODC and the facility was terminated.
BRL's line of credit arrangement with the Toronto-Dominion Bank ("Bank")
was terminated by BRL in December 1996 upon the payment of all amounts due to
the Bank. During December 1996, the Company placed in an interest bearing
account $280,000 in order to secure a performance bond that was previously
issued by the Bank. At December 31, 1996, this deposit was restricted. On
February 12, 1997, the bond was canceled and the deposit released.
6. CURRENT PORTION OF LONG-TERM DEBT AND OTHER NON-CURRENT LIABILITIES
(a) Current portion of long-term debt at December 31, 1995, consisted of
amounts due on the 12 1/2% Convertible Subordinated Debentures which 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 7).
(b) Other non-current liabilities represent rents payable on the Company's
Canadian facility.
7. STOCKHOLDERS' EQUITY
Public Offering
On November 12, 1996, the Company completed the sale of 1,250,000 shares
("Shares") of common stock and 1,250,000 Common Stock Purchase Warrants
("Warrants") in a public underwriting. On December 12, 1996, the underwriters
exercised their over-allotment option and acquired an additional 187,500 Shares
and 187,500 Warrants. The aggregate net proceeds to the Company, after all
expenses of the offering, was approximately $10,401,000.
Private Offerings
On May 9, 1995, the Company completed the private placement of its
securities to two institutional investors. The private placement consisted 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
$1.96 per share. In addition, in order to induce the institutional investors to
enter into this transaction, an additional three-year warrant to acquire 37,500
shares of the Company's common stock at $1.96 per share was issued.
On June 30, 1995, the Company completed an additional private placement in
which it sold an additional 28 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.
On July 10, 1996, the Company completed the sale of $1,000,000 of its 6%
Convertible Subordinated Debentures, ("Debentures") due 1997, in a private
transaction to private investors including members of management. These
debentures are convertible into shares of the Company's Common Stock at the rate
of $2.75 per share 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
F-10
<PAGE> 63
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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. All of the Debentures were
converted into 363,628 shares of common stock in December 1996, as a result of
the public offering.
Due from Officers/Shareholders
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 that was available to them under
the Company's stock option purchase program. Under that program the Company has
arranged for a market-maker in the Company's Common Stock, to coordinate the
orderly sale in the open market of a portion of the Common Stock to be received
by the employees upon the exercise of their options in an amount sufficient to
repay the loan and related interest. As of June 30, 1997, $203,000 was 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, 1996 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................................. 5,357,852
Class A convertible preferred stock.......... 0.361745 21,764
Class B convertible preferred stock.......... 0.355839 43,590
Stock options (i)............................ $1.00 to $14.00 461,000
Private placement warrants (ii).............. $1.96 412,499
Public warrants (iii)........................ $9.847 359,375
Underwriter's warrants (iii)................. $10.276 125,000
Underlying warrants (iii).................... $9.847 31,250
Other warrants (iv).......................... $4.82 to $12.46 55,000
---------
Total........................................ 6,867,330
=========
</TABLE>
All outstanding warrants expire between January 23, 1997 and April 25,
2001.
(i) Stock Compensation Plans
From time to time, the Company has granted non-qualified options to various
employees and directors. The Company applies APB Opinion 25, "Accounting for
Stock Issued to Employees", and related Interpretations in accounting for the
plans. Under APB Opinion 25, because the exercise price of the Company's stock
options issued to employees equals the market price of the underlying stock on
the date of grant, no compensation is recognized.
SFAS 123, "Accounting for Stock-Based Compensation", requires the Company
to provide pro forma information regarding net income (loss) and earnings (loss)
per share as if compensation cost
F-11
<PAGE> 64
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
for the Company's stock option plans had been determined in accordance with the
fair value based method prescribed in SFAS 123. The Company estimates the fair
value of each stock option at the grant date by using the Black-Scholes
option-price model with the following weighted average assumptions used for
grants in 1995 and 1996, respectively: no dividend yield; expected volatility of
30%; risk-free interest rates of 7.11% and expected lives of 5 years for the
options.
Under the accounting provisions of SFAS 123, the Company's net income
(loss), primary earnings (loss) per share and fully diluted earnings (loss) per
share would have been reduced (increased) to the pro-forma amounts indicated
below.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------
1995 1996
--------- ----------
<S> <C> <C>
Net income (loss):
As reported......................................... $(827,000) $2,059,000
Pro-forma........................................... $(884,000) $1,986,000
Primary earnings (loss) per share from continuing
operations:
As reported......................................... $ (0.39) $ 0.48
Pro-forma........................................... $ (0.40) $ 0.47
Fully diluted earnings (loss) per share from
continuing operations:
As reported......................................... $ (0.39) $ 0.44
Pro-forma........................................... $ (0.40) $ 0.43
</TABLE>
At the May 13, 1997 Annual Meeting of Stockholders, the Company's
stockholders approved the adoption of the Company's 1997 Stock Compensation
Program ("Program"). The Program authorizes the granting of incentive stock
options, non-qualified supplementary options, stock appreciation rights,
performance shares and stock bonus awards to employees and consultants of the
Company and its subsidiaries, including those employees serving as officers or
directors of the Company ("Employee Plans"). The Program also authorizes
automatic option grants to directors who are not otherwise employed by the
Company ("Independent Director Plan"). In connection with the Program, 600,000
shares of Common Stock are reserved for issuance, of which up to 500,000 shares
may be issued under the Employee Plans and up to 100,000 shares may be issued
under the Independent Director Plan. In the event that an option or award
granted under the Program expires, is terminated or forfeited or certain
performance objectives with respect thereto are not met prior to exercise or
vesting, then the number of shares of Common Stock covered thereby will again
become eligible for grant under the Program. The Company will receive no
consideration for grants of options or awards under the Program.
F-12
<PAGE> 65
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A summary of the status of the Company's outstanding options as of December
31, 1995 and 1996 and June 30, 1997 and changes during the periods ending on
those dates is presented below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------- SIX MONTHS
ENDED
1995 1996 JUNE 30, 1997
------------------- ------------------- ------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF EXERCISE OF EXERCISE OF EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
-------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding--
beginning of period................ 58,750 $12.38 240,125 $ 4.54 461,000 $ 2.19
Granted.......................... 181,375 2.00 253,000 1.00 147,500 9.74
Exercised........................ 0 (1,250) 2.00 (16,312) 1.21
Forfeited........................ 0 (30,875) 10.66 (29,250) 10.88
-------- -------- -------
Outstanding--end of period......... 240,125 4.54 461,000 2.19 562,938 3.75
======== ======== =======
Options exercisable--period-end.... 126,800 $ 6.38 164,200 $ 3.49 230,619 $ 1.94
Fair value of options granted
during the period................ $ 0.70 $ 0.40 $ 5.39
======== ======== =======
</TABLE>
On February 28, 1997, options to acquire 135,500 shares of the Company's
common stock at $9.375 per share, which was the market value at date of grant,
were issued to officers and key employees of the Company, pursuant to the
Employee Plan. These options expire on February 28, 2007 and are exercisable as
to 25% of the optioned shares after the first year, 50% after the second year,
75% after the third year and 100% after the fourth year. On May 13, 1997,
options to acquire 12,000 shares of the Company's common stock at $13.875 per
share, which was the market value at date of grant, were issued to the Company's
independent directors pursuant to the Independent Director Plan. These options
expire on May 13, 2002 and are exercisable as to 100% after the first year. 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. 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 the second year, 80% after the third year and 100% after the
fourth year.
The following table summarizes information about stock options outstanding
at June 30, 1997.
<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
OPTIONS OUTSTANDING ------------------------
-------------------------------------------- NUMBER
NUMBER WEIGHTED-AVERAGE EXERCISABLE
EXERCISE OUTSTANDING AT REMAINING EXERCISE AT EXERCISE
PRICE JUNE 30, 1997 CONTRACTUAL LIFE PRICE JUNE 30, 1997 PRICE
- ------------------------- -------------- ---------------- -------- ------------- --------
<S> <C> <C> <C> <C> <C>
$ 1.00 239,438 3.8 years $ 1.00 119,719 $ 1.00
2.00 170,250 2.7 years 2.00 102,150 2.00
9.38 132,500 9.8 years 9.38 0 9.38
13.88 12,000 4.8 years 13.88 0 13.88
14.00 8,750 0.7 years 14.00 8,750 14.00
------- -------
1.00 to 14.00 562,938 4.8 years $ 3.75 230,619 $ 1.94
======= =======
</TABLE>
F-13
<PAGE> 66
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table summarizes information about stock options outstanding
at December 31, 1996.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------------- OPTIONS EXERCISABLE
NUMBER ----------------------------
OUTSTANDING AT WEIGHTED-AVERAGE NUMBER
EXERCISE DECEMBER 31, REMAINING EXERCISE EXERCISABLE AT EXERCISE
PRICE 1996 CONTRACTUAL LIFE PRICE DECEMBER 31, 1996 PRICE
- -------------------------- -------------- ---------------- -------- ----------------- --------
<S> <C> <C> <C> <C> <C>
$ 1.00 253,000 4.3 years $ 1.00 63,250 $ 1.00
2.00 175,500 3.2 years 2.00 70,200 2.00
12.00 23,750 0.1 years 12.00 23,750 12.00
14.00 8,750 1.2 years 14.00 7,000 14.00
------- -------
1.00 to 14.00 461,000 3.6 years $ 2.19 164,200 $ 3.49
======= =======
</TABLE>
(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) Public Warrants
The public warrants (see above) are exercisable for three years and entitle
the registered holder to purchase one-quarter of a share of Common Stock at an
exercise price of $9.847 per share. 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 from November 12, 1996 on not less than 30 days notice at a price of
$0.25 per Warrant (subject to adjustment under certain circumstances) if the
closing bid price of the Common Stock averages in excess of 200% of the exercise
price for a period of 30 days' ending within 15 days of the redemption notice
date.
In connection with the November 1996 public offering, the underwriter
received a warrant ("Underwriter's Warrant") to purchase from the Company
125,000 shares of Common Stock at an exercise price of $10.276 per share
("Exercise Price") and 125,000 Warrants ("Underlying Warrant") at an exercise
price of $0.06 per Warrant. Each Underlying Warrant entitles the holder to
purchase one-quarter of a share of Common Stock at an exercise price of $9.847
per share. The Underwriter's Warrants are exercisable with respect to the Common
Stock for a period of four years commencing from November 12, 1997 and with
respect to the Underlying Warrants for a period of two years commencing from
November 12, 1997. These warrants contain certain registration rights.
(iv) Other warrants
In September 1994, the Company issued a warrant 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. The warrant was exercised in 1997.
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
F-14
<PAGE> 67
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
warrant. During 1997, 3,750 warrants were exercised. During 1996, 3,750 warrants
expired. During 1995, no warrants were issued under the Plan.
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 Barringer Laboratories in
connection with their extending an intercompany obligation, which has
subsequently been paid. The warrant was exercised in 1996.
The other warrants expire between March 1, 1997 and January 12, 1999.
Increase in Authorized Shares
At the reconvened 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.
At the May 13, 1997 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 common stock of the Company from
7,000,000 to 20,000,000.
8. INCOME TAXES
The provision (benefit) for income taxes related to continuing operations
are as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------- -----------------------
1994 1995 1996 1996 1997
------- ---- ----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current tax expense:
U.S....................... -- -- -- -- --
Foreign (primarily
Canadian).............. -- -- $ 115,000 $ 44,000 $ 291,000
------- -- ----------- --------- ---------
Total current.......... $ 0 $ 0 115,000 44,000 291,000
------- -- ----------- --------- ---------
Deferred tax expense:
U.S....................... -- -- 574,000 4,000 394,000
Foreign (primarily
Canadian).............. -- -- 90,000 192,000 33,000
------- -- ----------- -------- ---------
Total deferred......... 0 0 664,000 196,000 427,000
------- -- ----------- -------- ---------
Change in valuation
allowance:
U.S....................... -- -- (726,000) (4,000) (449,000)
Foreign (primarily
Canadian).............. 75,000 -- (444,000) (236,000) (400,000)
-------- -- ----------- --------- ---------
Total change........... 75,000 0 (1,170,000) (240,000) (849,000)
-------- -- ----------- --------- ---------
Total income tax provision
(benefit)................. $75,000 $ 0 $ (391,000) $ 0 $(131,000)
======= == ========== ======== =========
</TABLE>
F-15
<PAGE> 68
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deferred tax assets are comprised of the following temporary differences
and carryforwards at December 31:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Nondeductible allowances against trade
receivables............................. $ 15,000 $ 24,000
Nondeductible inventory reserves.......... 90,000 106,000
Nondeductible expense accruals............ 50,000 72,000
Machinery and equipment................... 706,000 787,000
Tax benefit of Canadian operating loss and
investment credit carry forwards........ 401,000 217,000
Tax benefit of U.S. operating loss carry
forwards................................ 4,621,000 4,019,000
Other..................................... 41,000 35,000
------- --------
Gross deferred tax assets............... 5,924,000 5,260,000
Deferred tax assets valuation allowance... (5,699,000) (4,529,000)
------- --------
Net deferred tax assets......... $ 225,000 $ 731,000
======= ========
</TABLE>
As a result of the Company's historical trend of losses, a valuation
allowance has been provided for a substantial portion of the U.S. and Canadian
deferred tax assets. At December 31, 1995, the net deferred tax asset of
$225,000 related to the Company's Canadian subsidiary, which had available tax
credits and loss carryforwards. The Canadian subsidiary has a history of
profitability, despite the consolidated losses of the Company through December
31, 1995. At December 31, 1996, the net deferred tax asset of $731,000, included
approximately $525,000 and $206,000 related to the Company's Canadian and U.S.
operations, respectively. At June 30, 1997, the net deferred tax asset of
$1,031,000, included approximately $525,000 and $506,000 related to the
Company's Canadian and U.S. operations, respectively. Based on historical
results and estimated 1997 and 1998 earnings, which include earnings from
certain contracts, as well as available tax planning strategies, management
considers realization of the unreserved deferred tax asset more likely than not.
Additional reductions to the valuation allowance will be recorded when, in the
opinion of management, the Company's ability to generate taxable income is
considered more likely than not.
F-16
<PAGE> 69
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 (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER ENDED
31, JUNE 30,
--------------------- -------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Income taxes (benefit) computed at the U.S.
statutory rate................................. $(821) $(280) $ 567 $ 192 $ 724
Income not subject to U.S. tax, net.............. (154) (126) (112) (184) (296)
U.S. losses and expenses for which no tax benefit
has been recognized............................ 943 398 25 13 30
Utilization of U.S. net operating losses......... -- -- (340) (4) (314)
Change in net deferred tax assets................ 75 -- (506) -- (300)
Other............................................ 32 8 (25) (17) 25
----- ----- ----- ----- -----
Provision (benefit) for income taxes............. $ 75 $ 0 $(391) $ 0 $(131)
===== ===== ===== ===== =====
</TABLE>
At December 31, 1996, the Company has net operating loss carry forwards in
the U.S. of approximately $10,500,000 and $5,000,000 for federal and state
income tax purposes, respectively, which expire in varying amounts through 2011.
Canadian research and development investment tax credits of approximately
$217,000 will expire in varying amounts through 2006.
9. COMMITMENTS
The Company rents facilities, automobiles and equipment under various
operating leases. Rental expenses under such leases amounted to $325,000,
$280,000, and $191,000 for 1996, 1995 and 1994, respectively.
At December 31, 1996, the aggregate minimum commitments pursuant to
operating leases are as follows:
<TABLE>
<S> <C>
YEAR ENDING DECEMBER 31,
1997............................................... $298,000
1998............................................... 203,000
1999............................................... 149,000
2000............................................... 98,000
2001 and thereafter................................ 543,000
</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 $206,000 in 1993, representing the excess of the Plan's
projected benefit obligation over the accumulated benefit obligation 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
F-17
<PAGE> 70
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
benefits. This excess was placed into a money purchase contract and used by the
Company to provide for its matching contributions under the new arrangement.
This amount is being carried as a deferred pension expense asset on the
consolidated 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 1994, 1995, and 1996 and for
the six months ended June 30, 1996 and 1997 was $16,000, $15,700, $20,000,
$9,000 and $20,000, respectively.
11. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The Company made cash payments for interest of $239,000, $189,000,
$246,000, $107,000 and $2,000, for the years ended December 31, 1994, 1995 and
1996 and for the six months ended June 30, 1996 and 1997, respectively.
Additionally, income taxes of $190,000, $0, $3,500, $0 and $158,000, were paid
for the years ended December 31, 1994, 1995 and 1996, and for the six months
ended June 30, 1996 and 1997, respectively.
In the three years ended December 31, 1996, the Company issued Preferred
Stock dividends in the amount $108,000, $82,000, and $24,000 in the form of
25,291, 65,417, and 7,949 shares of common stock, respectively. None were issued
in 1997.
In December 1996, the entire $1,000,000 of the Company's 6% Convertible
Subordinated Debentures were converted into 363,628 shares of the Company's
common stock as a result of the public offering (see note 7).
12. INFORMATION CONCERNING THE COMPANY'S PRINCIPAL ACTIVITIES
A summary of the Company's continuing operations by geographic area for
each of the three years in the period ended December 31, 1996 and the six months
ended June 30, 1996 and 1997 is as follows in thousands:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
------------------------------- -------------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
United States.......................... $ 1,862 $ 1,867 $ 4,122 $ 1,394 $ 5,030
Canada................................. 5,593 5,110 7,887 3,690 6,429
Europe................................. -- 1,599 2,577 1,590 2,421
Eliminations........................... (1,941) (2,202) (3,663) (1,662) (4,442)
------- ------- ------- ------- -------
Totals......................... $ 5,514 $ 6,374 $10,923 $ 5,012 $ 9,438
======= ======= ======= ======= =======
</TABLE>
F-18
<PAGE> 71
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------- -----------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Income (loss) from continuing
operations:
United States........................ $(2,653) $(1,548) $ 1,152 $ (146) $ 1,241
Canada............................... 20 270 869 577 746
Europe............................... -- 100 38 133 273
------- ------- ------- ------- -------
$(2,633) $(1,178) $ 2,059 $ 564 $ 2,260
======= ======= ======= ======= =======
Identifiable assets:
United States........................ $ 6,400 $ 4,253 $16,650 $ 4,158 $17,978
Canada............................... 4,422 6,248 7,750 7,366 9,444
Europe............................... -- 696 1,256 1,210 1,530
Eliminations......................... (4,030) (6,462) (8,333) (6,853) (8,567)
------- ------- ------- ------- -------
Totals....................... $ 6,792 $ 4,735 $17,323 $ 5,881 $20,385
======= ======= ======= ======= =======
</TABLE>
For the year ended December 31, 1996, export sales, including sales from
Canada to other countries, comprised 53.0% 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 years ended December 31, 1994 and 1995 is as shown below. Starting in 1996
no segment, other than the Instruments segment, was material to the Company's
consolidated operations and accordingly, segment reporting is no longer
required.
<TABLE>
<CAPTION>
TOTAL ELIMINATION RES. & DEV. INSTRUMENTS CORP. & OTHER
------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
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-19
<PAGE> 72
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
TOTAL ELIMINATION RES. & DEV. INSTRUMENTS CORP. & OTHER
------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
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
======= ========== ========== ========== ============
</TABLE>
13. SALES TO MAJOR CUSTOMERS
During 1996, one customer accounted for approximately 11% of consolidated
revenues of the Company. During 1995, no customer accounted for more than 10% of
the consolidated revenues of the Company. During 1994, one customer accounted
for approximately 22% of consolidated revenues.
14. FOURTH QUARTER ADJUSTMENTS
During the fourth quarter of 1996, the Company recorded a deferred tax
benefit related to a decrease in the deferred tax asset valuation allowance of
$266,000. 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.
F-20
<PAGE> 73
SCHEDULE III
BARRINGER TECHNOLOGIES INC
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE
BALANCE -- --
BEGINNING OF END OF
PERIOD ADDITION DEDUCTION RECOVERY PERIOD
------------ -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts and
sales allowances:
Six months ended June 30, 1997
(Unaudited)...................... $ 63,000 $100,000 $ 6,000 -- $157,000
Year ended December 31, 1996....... 41,000 52,000 30,000 -- 63,000
Year ended December 31, 1995....... 539,000 221,000 719,000 -- 41,000
Year ended December 31, 1994....... 25,000 526,000 17,000 $5,000 539,000
</TABLE>
F-21
<PAGE> 74
Graphic Description
Inside Back Cover
Photo 1 shows a schematic of the IONSCAN(R) heating and testing
chambers under the heading "IONSCAN(R) Technology at Work" surrounded by five
additional pictures. Picture 1 is headed "1 Particle Collected" and shows a
security agent collecting a sample from a briefcase. Picture 2 is headed "2
Sample Inserted" and shows a sample being inserted into the IONSCAN(R).
Picture 3 is headed "3 IONSCAN(R) Analyzes" and shows the IONSCAN(R) processing
a sample. Picture 4 is headed "4 Pass" and shows the IONSCAN(R)'s alarm
indicating "pass." Picture 5 is headed "5 Passenger Proceeds" and shows a
female passenger about to pick up her bag from the security station.
Photo 2 is a schematic drawing of a proposed automated luggage system
under the heading "New Product Development." The caption to the schematic reads
as follows:
"The FAA has recently awarded Barringer a contract to develop an
automated luggage trace explosives detection system. If successfully developed,
this product would provide high throughput testing of checked luggage with
minimal operator intervention."
Photo 3 shows a prototype of the Company's document scanner system.
The caption to the photograph reads as follows:
"Barringer has developed a Document Scanner under contract with the FAA
which could potentially provide passenger screening capabilities in airports
throughout the world."
<PAGE> 75
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), and 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.
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> 76
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth an itemized statement of all expenses to be
incurred in connection with the issuance and distribution of the securities that
are the subject of this Registration Statement, other than underwriting
discounts and commissions. All expenses incurred with respect to the
distribution will be paid by the Company, and such amounts, other than the
Securities and Exchange Commission registration fee and the NASD filing fee, are
estimates only.
<TABLE>
<CAPTION>
EXPENSE
--------
<S> <C>
Securities and Exchange Commission registration fee............... $ 10,586
National Association of Securities Dealers, Inc. filing fee....... 3,994
Nasdaq National Market listing fee................................ 17,500
Accounting fees and expenses...................................... 35,000
Legal fees and expenses........................................... 85,000
Blue Sky fees and expenses........................................ 5,000
Printing and engraving expenses................................... 125,000
Miscellaneous..................................................... 17,920
-------
Total................................................... $300,000
=======
</TABLE>
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 Common Stock, $.01 par value 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. All of the
Debentures were converted into 363,628 shares of Common Stock in December
1996, as a result of the Company's November 1996 public offering.
(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 May 1997, the Company
granted stock options to retain employees of the Company covering an
aggregate of 434,375 shares of Common
II-2
<PAGE> 77
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.
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.
3.2 By-laws of the Company (previously filed as 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)
and incorporated herein by reference).
5.1 Opinion of Lowenstein, Sandler, Kohl, Fisher & Boylan, P.A.*
10.1 Employment Agreement, dated as of July 10, 1989, between the Company and Stanley S.
Binder (previously filed as Exhibit 10.15 to the Company's Registration Statement on
Form S-1 (File No. 33-3162) and incorporated herein by reference).
10.2 Employment Agreement, dated November 1, 1996, between the Company and Richard S.
Rosenfeld (previously filed as Exhibit 10.2 to the Company's Registration Statement
on Form SB-2 (File No. 333-13703) and incorporated herein by reference).
10.3 Employment Agreement, dated November 1, 1996, between the Company and Kenneth S. Wood
(previously filed as Exhibit 10.3 to the Company's Registration Statement on Form
SB-2 (File No. 333-13703) and incorporated herein by reference).
10.4 Consulting Agreement, dated as of January 1, 1991, between the Company and John J.
Harte (previously filed as Exhibit 10.4 to the Company's Registration Statement on
Form SB-2 (File No. 333-13703) and incorporated herein by reference).
10.5 Form of 1995 nonqualified stock option agreement (previously filed as Exhibit 10.6 to
the Company's Registration Statement on Form SB-2 (File No. 333-13703) and
incorporated herein by reference).
10.6 Form of 1996 nonqualified stock option agreement (previously filed as Exhibit 10.3 to
the Company's Registration Statement on Form SB-2 (File No. 333-13703) and
incorporated herein by reference).
10.7 Description of 1991 Warrant Plan (previously filed as Exhibit 10.8 to the Company's
Registration Statement on Form SB-2 (File No. 333-13703) and incorporated herein by
reference).
10.8 Description of Exercise Plan (previously filed as Exhibit 10.9 to the Company's
Registration Statement on Form SB-2 (File No. 333-13703) and incorporated herein by
reference).
10.9 Barringer Technologies Inc. 1997 Stock Compensation Program.
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 (previously filed as Exhibit 10.10 to the
Company's Registration Statement on Form B-2 (File No. 333-13703) and incorporated
herein by reference).
10.11 Letter Agreement, dated July 25, 1997, by and between Barringer Research Limited and
Her Majesty the Queen in Right of Canada, as Represented By the Minister of National
Revenue.
10.12 Termination Agreement, dated October 7, 1996, between the Company and Barringer
Laboratories Inc. (previously filed as Exhibit 10.11 to the Company's Registration
Statement on Form SB-2 (File No. 333-13703) and incorporated herein by reference).
</TABLE>
II-3
<PAGE> 78
<TABLE>
<C> <S>
10.13 Warrant Agreement by and between the Company and American Stock Transfer & Trust
Company (previously filed as Exhibit 4.1 to the Company's Registration Statement on
Form SB-2 (File No. 333-13703) and incorporated herein by reference).
10.14 Form of Warrant issued to Janney Montgomery Scott Inc. (previously filed as Exhibit
4.2 to the Company's Registration Statement on Form SB-2 (File No. 333-13703) and
incorporated herein by reference).
10.15 Lease, dated as of February 17, 1993, between the Company and Murray Hill Associates
(previously filed as Exhibit 10.17 to the Company's Registration Statement on Form
SB-2 (File No. 333-13703) and incorporated herein by reference).
10.16 Lease, dated as of July 27, 1995, between Barringer Research Limited and Lehndorff
Management Limited (previously filed as Exhibit 10.18 to the Company's Registration
Statement on Form SB-2 (File No. 333-13703) and incorporated herein by reference).
11.1 Computation of Earnings Per Share.
21.1 List of the Company's Subsidiaries (previously filed as Exhibit 21 to the Company's
Registration Statement on Form SB-2 (File No. 333-13703) and incorporated herein by
reference).
23.1 Consent of BDO Seidman, LLP, independent certified public accountants.
23.2 Consent of Lowenstein, Sandler, Kohl, Fisher & Boylan, P.A. (included in Exhibit 5.1
to this registration statement).*
24.1 Power of Attorney (included on the signature page).
27.1 Financial Data Schedule.
</TABLE>
- ------------
* To be filed by amendment.
ITEM 28. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) For the purpose of determining any liability under the Securities
Act of 1933, as amended (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
indemnification, 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> 79
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
Borough of New Providence, State of New Jersey, on August 7, 1997.
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 August 7, 1997. Each of the undersigned hereby
constitutes and appoints Stanley S. Binder and Richard S. Rosenfeld, and each of
them, his true and lawful attorneys-in-fact and agents, 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, any additional registration statement filed
pursuant to Rule 462 under the Securities Act of 1933 relating hereto, and any
and all amendments (including post-effective amendments) thereto, 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 Director
Stanley S. Binder
/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 Accounting Financial
Richard S. Rosenfeld Officer)
</TABLE>
II-5
<PAGE> 80
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------------------------------------------------------------------------- ----
<C> <S> <C>
1.1 Form of Underwriting Agreement.*.............................................
3.1 Certificate of Incorporation of the Company, as amended......................
3.2 By-laws of the Company (previously filed as 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) and incorporated herein by reference)......................
5.1 Opinion of Lowenstein, Sandler, Kohl, Fisher & Boylan, P.A.*.................
10.1 Employment Agreement, dated as of July 10, 1989, between the Company and
Stanley S. Binder (previously filed as Exhibit 10.15 to the Company's
Registration Statement on Form S-1 (File No. 33-3162) and incorporated herein
by reference)................................................................
10.2 Employment Agreement, dated November 1, 1996, between the Company and Richard
S. Rosenfeld (previously filed as Exhibit 10.2 to the Company's Registration
Statement on Form SB-2 (File No. 333-13703) and incorporated herein by
reference)...................................................................
10.3 Employment Agreement, dated November 1, 1996, between the Company and Kenneth
S. Wood (previously filed as Exhibit 10.3 to the Company's Registration
Statement on Form SB-2 (File No. 333-13703) and incorporated herein by
reference)...................................................................
10.4 Consulting Agreement, dated as of January 1, 1991, between the Company and
John J. Harte (previously filed as Exhibit 10.4 to the Company's Registration
Statement on Form SB-2 (File No. 333-13703) and incorporated herein by
reference)...................................................................
10.5 Form of 1995 nonqualified stock option agreement (previously filed as Exhibit
10.6 to the Company's Registration Statement on Form SB-2 (File No.
333-13703) and incorporated herein by reference).............................
10.6 Form of 1996 nonqualified stock option agreement (previously filed as Exhibit
10.3 to the Company's Registration Statement on Form SB-2 (File No.
333-13703) and incorporated herein by reference).............................
10.7 Description of 1991 Warrant Plan (previously filed as Exhibit 10.8 to the
Company's Registration Statement on Form SB-2 (File No. 333-13703) and
incorporated herein by reference)............................................
10.8 Description of Exercise Plan (previously filed as Exhibit 10.9 to the
Company's Registration Statement on Form SB-2 (File No. 333-13703) and
incorporated herein by reference)............................................
10.9 Barringer Technologies Inc. 1997 Stock Compensation Program..................
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 (previously filed as Exhibit 10.10 to the Company's
Registration Statement on Form SB-2 (File No. 333-13703) and incorporated
herein by reference).........................................................
10.11 Letter Agreement, dated July 25, 1997, by and between Barringer Research
Limited and Her Majesty the Queen in Right of Canada, as Represented By the
Minister of National Revenue.................................................
</TABLE>
<PAGE> 81
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------------------------------------------------------------------------- ----
<C> <S> <C>
10.12 Termination Agreement, dated October 7, 1996, between the Company and
Barringer Laboratories Inc. (previously filed as Exhibit 10.11 to the
Company's Registration Statement on Form SB-2 (File No. 333-13703) and
incorporated herein by reference)............................................
10.13 Warrant Agreement by and between the Company and American Stock Transfer &
Trust Company (previously filed as Exhibit 4.1 to the Company's Registration
Statement on Form SB-2 (File No. 333-13703) and incorporated herein by
reference)...................................................................
10.14 Form of Warrant issued to Janney Montgomery Scott Inc. (previously filed as
Exhibit 4.2 to the Company's Registration Statement on Form SB-2 (File No.
333-13703) and incorporated herein by reference).............................
10.15 Lease, dated as of February 17, 1993, between the Company and Murray Hill
Associates (previously filed as Exhibit 10.17 to the Company's Registration
Statement on Form SB-2 (File No. 333-13703) and incorporated herein by
reference)...................................................................
10.16 Lease, dated as of July 27, 1995, between Barringer Research Limited and
Lehndorff Management Limited (previously filed as Exhibit 10.18 to the
Company's Registration Statement on Form SB-2 (File No. 333-13703) and
incorporated herein by reference)............................................
11.1 Computation of Earnings Per Share............................................
21.1 List of the Company's Subsidiaries (previously filed as Exhibit 21 to the
Company's Registration Statement on Form SB-2 (File No. 333-13703) and
incorporated herein by reference)............................................
23.1 Consent of BDO Seidman, LLP, independent certified public accountants........
23.2 Consent of Lowenstein, Sandler, Kohl, Fisher & Boylan, P.A. (included in
Exhibit 5.1 to this registration statement).*................................
24.1 Power of Attorney (included on the signature page)...........................
27.1 Financial Data Schedule......................................................
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 3.1A
CERTIFICATE OF INCORPORATION
OF
BARRINGER RESEARCH INC.
THE UNDERSIGNED, for the purpose of forming a corporation pursuant to
the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY as
follows:
FIRST: The name of the corporation is BARRINGER RESEARCH INC.
(hereinafter called the "Corporation").
SECOND: Its registered office in the State of Delaware is located at
No. 100 West Tenth Street, in the City of Wilmington, County of New Castle. The
name and address of its registered agent is The Corporation Trust Company, No.
100 West Tenth Street, Wilmington, Delaware 19899.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of stock that the Corporation shall
have authority to issue is two million (2,000,000) shares of Common Stock, of
the par value of $.01 per share.
FIFTH: The name and mailing address of the incorporator is Denis
Pinkernell, 277 Park Avenue, New York, New York 10017.
SIXTH: The names and mailing addresses of the persons who are to serve
as directors of the Corporation until the first annual meeting of stockholders
or until their successors are elected and qualify are as follows:
<PAGE> 2
Dr. Anthony R. Barringer 304 Carlingview Drive
Rexdale, Ontario, Canada
Dr. D. Richard Clews 304 Carlingview Drive
Rexdale, Ontario, Canada
Mr. Robert J. Armstrong 366 Bay Street
Toronto 1, Ontario, Canada
SEVENTH: Subject to the provisions of the General Corporation Law of
the State of Delaware, the number of directors of the Corporation shall be
determined as provided in the By-laws.
EIGHTH: All corporate powers of the Corporation shall be exercised by
the Board of Directors. In furtherance and not in limitation of the powers
conferred by the laws of the State of Delaware, the Board of Directors is
expressly authorized:
1. To make, alter or repeal the By-laws of the Corporation.
2. By a suitable By-law or by a resolution passed by a majority of
the entire Board of Directors to designate two or more of their number
to constitute a committee or committees with such name or names as may
be determined from time to time by resolution of the Board of
Directors, which committee or committees, to the extent provided in
such resolution or resolutions or in the By-laws of the Corporation,
shall have and may exercise the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and may have
power to authorize the seal of the Corporation to be affixed to all
papers which may require it.
3. To fix and determine and vary from time to time the amount of
working capital and reserve funds of the Corporation; to determine
whether any and if any, what part of the net profits of the Corporation
or of its surplus or of its net assets in excess of its capital shall
be declared in dividends and paid to the stockholders, and to direct
and determine the use and disposition of any such net profits or of any
such surplus or of any such net assets in excess of capital.
4. To remove at any time, for cause or without cause, any officer
or employee of the Corporation, or to confer such power on any
committee or officer; provided, however, that any officer elected or
appointed by the Board of Directors may be removed only by the
affirmative vote of a majority of the Board of Directors then in
office.
5. Subject to the provisions of the statutes of Delaware, to
exercise any and all other powers, in addition to the powers expressly
conferred by law and by this Certificate of Incorporation which may be
conferred upon it by the Corporation through appropriate by-law
provisions.
NINTH: The board of directors may from time to time offer for
subscription, or otherwise issue or sell, or grant rights, warrants, or options
for the subscription to or purchase of, any and all of the authorized stock of
the corporation not then issued or which may have been issued and reacquired as
treasury stock by the corporation, and any or all of any increased stock of any
class that may hereafter by authorized, for such consideration as the directors
may determine. The board of directors may, at the time of such issue and sale,
or at the time of granting of such rights, warrants or options, specify in
amount or value the part of the consideration received on such issue and sale
over and above the par value of such stock, which shall be capital and which
shall be surplus, respectively. Bonds, debentures, certificates of indebtedness
or other securities may be issued, sold or disposed of pursuant to resolution of
the board of directors for such consideration and upon such terms and conditions
as may be deemed advisable by the board of directors in the exercise of its
discretion.
<PAGE> 3
TENTH: Each director and each officer of the Corporation shall be
indemnified by the Corporation to the full extent permitted under the General
Corporation Law of the State of Delaware.
THE UNDERSIGNED, being the incorporator hereinbefore named for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, DOES MAKE this Certificate, hereby declaring and certifying
that the facts herein stated are true and, accordingly, has hereunto set his
hand this 6th day of September, 1967.
/s/ Denis Pinkernell
_______________________________
Denis Pinkernell
STATE OF NEW YORK:
ss.:
COUNTY OF NEW YORK :
BE IT REMEMBERED, that on this 6th day of September, 1967,
personally came before me, _______________, a Notary Public for the State of New
York, DENIS PINKERNELL, the party to the foregoing Certificate of Incorporation,
known to me personally to be such, and acknowledged said Certificate to be the
act and deed of the signer and that the facts therein stated are truly set
forth.
GIVEN under my hand and seal of office the day and year aforesaid.
/s/ John D. Viener
_______________________________
Notary Public
<PAGE> 4
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
BARRINGER RESEARCH INC.
(Pursuant to 242 of the General Corporation Law)
THE UNDERSIGNED, D. RICHARD CLEWS and ROBERT J. ARMSTRONG, being the
duly elected Executive Vice President and Secretary, respectively, of BARRINGER
RESEARCH INC., a Delaware corporation (the "Corporation"), for the purpose of
amending the Certificate of Incorporation of the Corporation pursuant to 242 of
the General Corporation Law, DO HEREBY CERTIFY THAT:
FIRST: The name of the Corporation is BARRINGER RESEARCH INC. The
original Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on September 7, 1967.
SECOND: The Board of Directors of the Corporation, at a meeting thereof
duly called and held on March 12, 1980, duly adopted and approved and declared
advisable the following resolution with respect to the amendment of Article.
FOURTH of the Certificate of Incorporation of the Corporation to
increase the authorized capitalization to ten million shares of Common Stock,
par value $.01 per share, in accordance with the provisions of 242 of the
General Corporation Law:
RESOLVED that, subject to the approval of stockholders of the
Corporation at the Annual Meeting thereof to be held on May 14, 1980,
Article FOURTH of the Certificate of Incorporation of the Corporation
be amended to read and provide in its entirety as follows:
"FOURTH: The total number of shares of stock that the
Corporation shall have authority to issue is ten million
(10,000,000) shares of Common Stock of the par value of $.01
per share.
THIRD: At the annual meeting of stockholders of the Corporation duly
called and held on May 14, 1980, in accordance with 242 of the General
Corporation Law of the State of Delaware the holders of a majority of the
outstanding Common Stock of the Company voted in favor of the Amendment of the
Certificate of Incorporation as herein set forth in accordance with the
provisions of 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands this
14th day of May, 1980.
/s/ D. Richard Clews
_______________________________
D. Richard Clews
Executive Vice President
<PAGE> 5
ATTEST: /s/ Robert J. Armstrong
_______________________________
Robert J. Armstrong
Secretary
<PAGE> 6
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
BARRINGER RESEARCH INC.
(Pursuant to 242 of the General Corporation Law)
THE UNDERSIGNED, D. RICHARD CLEWS and ROBERT J. ARMSTRONG, being the
duly elected Executive Vice President and Secretary, respectively, of BARRINGER
RESEARCH INC., a Delaware corporation (the "Corporation"), for the purpose of
amending the Certificate of Incorporation of the Corporation pursuant to Section
242 of the General Corporation Law, DO HEREBY CERTIFY THAT:
FIRST: The name of the Corporation is BARRINGER RESEARCH INC. The
original Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on September 7, 1967.
SECOND: The Board of Directors of the Corporation, at a meeting thereof
duly called and held on May 22, 1980, duly adopted and approved and declared
advisable the following resolution with respect to the amendment of Article.
FIRST of the Certificate of Incorporation of the Corporation to change
the name of the corporation in accordance with the provisions of Section 242 of
the General Corporation Law:
RESOLVED that, subject to approval of stockholders of the
Corporation, Article FIRST of the Certificate of Incorporation of the
Corporation be amended to read and provide in its entirety to read as
follows:
"FIRST: The name of the Corporation is BARRINGER RESOURCES
INC. (hereinafter called the "Corporation")."
THIRD: The holders of a majority of the outstanding shares of Common
Stock ($.01 par value) of the Corporation, the only outstanding class of stock
of the Corporation, by written consent pursuant to Section 228 of the General
Corporation Law of the State of Delaware, consented to the amendment of the
Certificate of Incorporation as herein set forth in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands this
30th day of May, 1980.
/s/ D. Richard Clews
________________________________
D. Richard Clews
Executive Vice President
<PAGE> 7
ATTEST:
/s/ Robert J. Armstrong
_________________________________
Robert J. Armstrong
Secretary
<PAGE> 8
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
BARRINGER RESOURCES INC.
(Pursuant to Section 242 of the General Corporation Law)
THE UNDERSIGNED, D. RICHARD CLEWS and ROBERT J. ARMSTRONG, being the
duly elected and acting Executive Vice President and Secretary, respectively, of
BARRINGER RESOURCES INC., a Delaware corporation (the "Corporation"), for the
purpose of amending the Certificate of Incorporation of the Corporation pursuant
to Section 242 of the General Corporation Law, DO HEREBY CERTIFY THAT:
FIRST: The name of the Corporation is BARRINGER RESOURCES INC. The
original Certificate of Incorporation was filed with the Secretary of State of
the State of Delaware on September 7, 1967, under the name of BARRINGER RESEARCH
INC.
SECOND: The Board of Directors of the Corporation at a meeting thereof
called and held on April 30, 1981, duly adopted and approved and declared
advisable the following resolution with respect to the amendment of the
Certificate of Incorporation by the addition of Articles ELEVENTH and TWELFTH
thereto relating to higher voting requirements required with respect to certain
transactions in accordance with the provisions of Section 242 of the General
Corporation Law:
RESOLVED, that subject to the approval of the
stockholders of the Corporation, the Certificate of
Incorporation of the Corporation be amended to add Articles
ELEVENTH and TWELFTH to the Certificate of Incorporation of
the Corporation to read and provide in their entirety as
follows:
"ELEVENTH: The affirmative vote of the holders of at
least eighty percent (80%) of the outstanding shares of Common
Stock entitled to vote thereon shall be required to authorize,
adopt or approve any of the following: (i) any plan of merger
or consolidation of the Corporation with or into any other
corporation holding more than ten percent (10%) of the
Corporation's voting stock (such corporation hereinafter
referred to as a "Related Company") or any affiliate of a
Related Company; or (ii) any sale, lease or exchange or other
disposition of all or substantially all of the assets of the
Corporation to any Related Company or any affiliate of a
Related Company."
"TWELFTH: Article ELEVENTH and this Article TWELFTH
may not be amended, except by the affirmative vote of the
holders of at least eighty percent (80%) of the outstanding
shares of Common Stock of the Corporation entitled to vote
thereon."
THIRD: The foregoing amendment to the Certificate of Incorporation of
the Corporation was approved by the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock ($.01 par value) of the
Corporation, the only outstanding class of stock of the Corporation, at the
Annual Meeting of the Corporation held June 10, 1981 in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
<PAGE> 9
IN WITNESS WHEREOF, the undersigned have hereunto set their hands this
10th day of June, 1981.
/s/ D. Richard Clews
___________________________
D. Richard Clews
Executive Vice President
ATTEST:
/s/ Robert J. Armstrong
____________________________
Robert J. Armstrong
Secretary
<PAGE> 10
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
BARRINGER RESOURCES INC.
(Pursuant to 242 of the General Corporation Law)
THE UNDERSIGNED, ANTHONY R. BARRINGER and ROBERT J. ARMSTRONG, being
the duly elected President and Secretary, respectively, of BARRINGER RESOURCES
INC., a Delaware corporation (the "Corporation"), for the purposes of amending
the Certificate of Incorporation pursuant to Section 242 of the General
Corporation Law, DO HEREBY CERTIFY THAT:
FIRST: The name of the Corporation is BARRINGER RESOURCES INC. The
original Certificate of Incorporation was filed with the Secretary of State of
Delaware on September 7, 1967, under the name of BARRINGER RESEARCH INC.
SECOND: The Board of Directors of the Corporation at a meeting thereof
duly called and held on January 21, 1983, duly adopted and approved and declared
advisable the following resolution with respect to the amendment of Article
FOURTH of the Certificate of Incorporation of the Corporation to increase the
authorized capitalization to 10,100,000 shares comprised of 10,000,000 shares of
Common Stock, par value $.01 per share, and 100,000 shares of Class B Common
Stock, par value $.01 per share ("Class B Common Stock"), in accordance with the
provisions of Section 242 of the General Corporation Law:
RESOLVED, that subject to the approval of the Stockholders of
the Corporation at the Annual Meeting thereof to be held on May 11,
1983, Article FOURTH of the Certificate of Incorporation of the
Corporation be amended to read and provide in its entirety as follows:
FOURTH: Section 1. Authorized Shares
The total number of shares of stock the Corporation shall have
authority to issue is ten million one hundred thousand
(10,100,000) shares comprised of 10,000,000 shares of Common
Stock, par value $.01 per share ("Common Stock"), and 100,000
shares of Class B Common Stock, par value $.01 per share
("Class B Common Stock").
Section 2. Rights of the Classes
The shares of Common Stock and Class B Common Stock shall be
identical in every respect and shall be entitled to all of the
rights and privileges pertaining to common stock without
limitations, prohibitions, restrictions or qualifications,
except as otherwise expressly set forth in this Article.
Section 3. Voting Powers
The holders of Common Stock shall be entitled to one (1) vote
per share on all matters on which holders of common stock are
entitled to vote. The holders of Class B common stock shall be
entitled to one hundred (100) votes per share on all matters
on which holders of common stock of the Corporation are
entitled to vote. The holders of Common Stock and Class B
Common Stock shall vote as a single class on all matters,
except as otherwise required by law. No holder of
<PAGE> 11
Common Stock or Class B Common Stock shall have any preemptive
or preferential rights of subscription to any shares of any
class of stock in this Corporation, whether now or hereafter
authorized.
Section 4. Conversion of Class B Common Stock into Common
Stock
Any holder of Class B Common Stock may, at any time and from
time to time, by written notice to the Secretary of the
Corporation, convert said shares into a like number of shares
of Common Stock.
Section 5. Restrictions on the Right to Transfer or
Hypothecate Class B Common Stock
No holder of Class B Common Stock shall have the right or
power to sell, transfer, assign, pledge, hypothecate, or
otherwise dispose of any share of Class B Common Stock,
provided, however, that in the event the Board of Directors of
the Corporation, at a meeting thereof duly called and held or
by unanimous written consent, shall consent to a sale,
transfer, assignment, pledge, hypothecation or other
disposition, upon the recording thereof in the minutes of such
meeting or the filing of a copy of such written consent with
the Secretary of the Corporation, such sale, transfer,
assignment, pledge, hypothecation or other disposition of
shares of Class B Common Stock may be effected in accordance
with the terms of such consent, and such shares of Class B
Common Stock shall remain outstanding.
In the event that any holder of Class B Common Stock shall
sell, assign, transfer, pledge, hypothecate or otherwise
dispose of any share of Class B Common Stock without such
consent, such shares shall automatically and immediately upon
the occurrence of such event be converted into, and shall be,
an equal number of shares of Common Stock.
THIRD: At the Annual Meeting of Stockholders of the Corporation duly
called and held on May 11, 1983, in accordance with the provisions of Section
242 of the General Corporation Law of the State of Delaware the holders of the
majority of the outstanding Common Stock of the Corporation, the only
outstanding class of stock of the Corporation, voted in favor of the amendment
of the Certificate of Incorporation as set forth herein.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands this
11th day of May, 1983.
/s/ Anthony R. Barringer
__________________________________
Anthony R. Barringer
President
Attest:
/s/ Robert J. Armstrong
___________________________________
Robert J. Armstrong
Secretary
<PAGE> 12
CERTIFICATE
FOR RENEWAL AND REVIVAL OF CHARTER
Barringer Resources Inc, a corporation organized under the laws of
Delaware, the certificate of incorporation of which was filed in the office of
the Secretary of State on the 7th day of September 1967, and recorded in the
office of the Recorder of Deeds for ______________ County, the charter of which
was voided for non-payment of taxes, now desires to procure a restoration,
renewal and revival of its charter, and hereby certifies as follows:
1. The name of this corporation is Barringer Resources Inc.
2. Its registered office in the State of Delaware is located at
Corporation Trust Center, 1209 Orange Street, City of Wilmington, Zip Code 19801
County of New Castle the name and address of the registered agent is The
Corporation Trust Company.
3. The date when the restoration, renewal, and revival of the charter
of this company is to commence is the 28th day of February, name being prior to
the date of the expiration of the charter. This renewal and revival of the
charter of this corporation is to be perpetual.
4. This corporation were duly organized and carried on the business
authorized by its charter until the 1st day of March A.D. 1986, at which time
its charter became inoperative and void for non-payment of taxes and this
certificate for renewal and revival if filed by authority of the duly elected
directors of the corporation in accordance with the laws of the State of
Delaware.
IN TESTIMONY WHEREOF, and in compliance with the provisions of Section
312 of the General Corporation Law of the State of Delaware, as amended,
providing for the renewal, estimates and restoration of charters, A.R.
Barringer the last and acting President, and R.J. Armstrong, the last and acting
Secretary of Barringer Resources Inc., have hereunto set their hands to this
certificate this 30th day of July 1986.
/s/ A. R. Barringer
_______________________________
Last and Acting President
/s/ R.J. Armstrong
___________________________________
Attest: Last and Acting Secretary
<PAGE> 13
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
BARRINGER RESOURCES INC.
(Pursuant to Section 242 of the General Corporation Law)
THE UNDERSIGNED, ANTHONY R. BARRINGER and DENIS R. PINKERNELL, being
the duly elected President and Assistant Secretary, respectively, of BARRINGER
RESOURCES INC., a Delaware corporation (the "Corporation"), for the purposes of
amending the Certificate of Incorporation pursuant to Section 242 of the General
Corporation Law, DO HEREBY CERTIFY THAT:
FIRST: The name of the Corporation is BARRINGER RESOURCES INC. The
original Certificate of Incorporation was filed with the Secretary of State of
the State of Delaware on September 7, 1967, under the name of BARRINGER RESEARCH
INC.
SECOND: The Board of Directors of the Corporation at a meeting thereof
duly called and held on January 20, 1988, duly adopted and approved and declared
advisable the following resolution with respect to the amendment of Article.
FOURTH of the Certificate of Incorporation of the Corporation to
increase the authorized capitalization to 11,100,000 shares comprised of
10,000,000 shares of Common Stock, par value $.01 per share, and 100,000 shares
of Class B Common Stock, par value $.01 per share ("Class B Common Stock"), and
1,000,000 shares of Preferred Stock, per value $1.25 per share, in accordance
with the provisions of Section 242 of the General Corporation Law:
RESOLVED, that subject to the approval of the Stockholders of
the Corporation, Article FOURTH of the Certificate of Incorporation of
the Corporation be amended to read and provide in its entirety as
follows:
FOURTH: Section 1. Authorized Shares.
The total number of shares of stock the Corporation shall
have authority to issue is eleven million one hundred thousand
(11,100,000) shares comprised of 10,000,000 shares of Common Stock, par
value $.01 per share ("Common Stock"), and 100,000 shares of Class B
Common Stock, par value $.01 per share ("Class B Common Stock") and
1,000,000 of Preferred Stock, par value $l.25 per share ("Preferred
Stock").
Section 2. Preferred Stock
The designations, voting powers, preferences and
relative, participating, optional or other special rights,
and the qualifications, limitations or restrictions
thereof, of the Preferred Stock are as follows:
A. Dividends. The holders of the Preferred Stock
shall be entitled to receive or have set apart for payment
dividends thereon at the rate of $.10 per share per annum,
and no more, payable semi-annually for the last preceding
dividend period on the last days of June and December in
each year in shares of Common Stock valued for such
purpose-at the average closing price of the Common Stock in
the over-the-counter market over the 20 trading days
immediately prior to the record date for each semi-annual
payment as quoted by NASDAQ in
<PAGE> 14
the over-the-counter market (or organized exchange). No
dividend shall be paid or set apart for payment on the Common
Stock or Class B Common Stock of the Corporation or any other
class of stock or series thereof ranking junior to the
Preferred Stock, unless and until dividends at the rate of
$.10 per share per annum on the Preferred Stock shall have
been paid or set apart for payment in full.
B. Liquidation Preference. In the event of any
voluntary or involuntary liquidation, dissolution or winding
up of the Corporation under any circumstances or any voluntary
liquidation or winding up of the Corporation, which shall be
deemed to have occurred upon the sale of all or substantially
all of its assets, the holders of Preferred Stock will be
entitled to receive, prior to and in preference to any
distribution of the assets or surplus funds of the Corporation
to the holder of any other shares of Capital Stock by reason
of the ownership thereof, an amount equal to $1.25 per share
and no more (the "Preferential Amount"). If, upon the
occurrence of such an event, the assets and funds thus
distributed among the holders of Preferred Stock shall be
insufficient to permit the payment to such holder of the full
Preferential Amount, then the entire assets and funds of the
Corporation legally available for distribution shall be
distributed ratably among the holders of Preferred Stock.
After the payment or setting apart of the full Preferential
Amount required to be paid to the holders of the Preferred
Stock, the holders of Capital Stock ranking in liquidation
junior to the Preferred Stock shall be entitled to receive all
remaining assets or surplus funds of the Corporation.
C. Consents of Preferred Stock. Without the
affirmative vote or written consent of the holders of a
majority of the shares of Preferred Stock at the time
outstanding, the Corporation shall not:
(a) agree to be acquired, directly or indirectly, by
another entity by means of merger, consolidation or otherwise,
resulting in the exchange of outstanding shares of Capital
Stock for securities or other consideration issued or paid by
the acquiring corporation or its subsidiaries, or sell all, or
substantially all, of its assets; or
(b) alter, change or amend the preferences, rights or
privileges of holders of the Preferred Stock contained herein
or in the Certificate of Incorporation or By-Laws of the
Corporation or elsewhere as in effect on the date that this
Certificate of Amendment is filed with the Secretary of the
State of Delaware; or
(c) alter, change or amend the Certificate of
Incorporation or the By-Laws of the Corporation or otherwise
to provide for the authorization and issuance of any
additional class or series of Capital Stock, including
additional shares of Preferred Stock having any rights,
preferences or priorities equivalent to or greater than
(either in any particular aspect or in the aggregate) the
Preferred Stock; or
(d) agree to a voluntary liquidation, dissolution, or
winding up of the Corporation; or
(e) adopt and/or implement any stock option or
similar employee stock bonus or incentive plan, except the
Permitted Stock Plans.
D. Voting Rights. In addition to the voting rights
granted to the holders of the Preferred Stock by the laws of
the State of Delaware and by Section C hereof, each holder of
Preferred Stock shall be entitled at each meeting of the
stockholders of the Corporation to that number of votes which
is equal to the number of shares of Common Stock into which
each share of Preferred Stock is convertible on the record
date with respect to such meeting for each share of such stock
standing in his name on the books of the Corporation.
<PAGE> 15
E. Conversion.
(a) Conversion by Holder. Each share of Preferred
Stock shall be convertible, at the option of the holder
thereof, at any time prior to the fourth anniversary of the
date of issuance thereof, into fully paid and nonassessable
shares of Common Stock, in accordance with the Conversion
Formula (as defined below).
Before any holder of Preferred Stock shall be
entitled to convert the same into shares of Common Stock, the
holder shall (i) surrender the certificate(s) therefor, duly
endorsed, at the office of the Corporation or of any transfer
agent for the Common Stock, or (ii) notify the Corporation or
any transfer agent that such certificates have been lost,
stolen or destroyed and execute an agreement satisfactory to
the Corporation to indemnify the Corporation against any loss
incurred by it in connection therewith, and shall give written
notice to the Corporation at such office that the holder
elects to convert the same and shall state therein the number
of shares of Preferred Stock being converted. Thereupon, the
Corporation shall promptly issue and deliver at such office to
such holder(s) of Preferred Stock a certificate(s) for the
number of shares of Common Stock to which the holder shall be
entitled.
Such conversion shall be deemed to have been made
immediately prior to the closing of business on the date of
such surrender of the shares of Preferred Stock to be
converted or delivery of the aforementioned indemnification
agreement, and the person or persons entitled to receive the
shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of
such shares of Common Stock on such date.
(b) Conversion by the Corporation. The Corporation
may require the conversion of all (but not less than all) of
the Preferred Stock in accordance with the Conversion Formula
(as defined below) (i) at any time after the fourth
anniversary of the date of issuance of such Preferred Stock,
or (ii) immediately upon a consolidation, merger or sale of
substantially all of the assets of the Corporation under
circumstances where the Corporation is not the surviving
entity, or (iii) upon the repurchase by the Corporation of all
of its then outstanding Class A Warrants or all of its Class B
Warrants issued by the Corporation in connection with the sale
of Units under a certain Purchase Agreement dated May 10, 1988
between the Corporation and Purchasers named therein.
Upon the occurrence of such an event specified in
this Section E, and upon the election of the Corporation to
require the conversion of all of the Preferred Stock, the
outstanding shares of Preferred Stock shall be converted
automatically without any further action by the holders of
such shares and whether or not the certificates representing
such shares are surrendered to the Corporation or its transfer
agent. The Corporation, however, shall give prompt written
notice of such conversion to each holder of Preferred Stock at
his last address listed in the Corporation records.
The Corporation shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable
upon such conversion unless certificates evidencing shares of
the Preferred Stock being converted are either delivered to
the Corporation or any transfer agent, as hereinafter
provided, or the holder notifies the Corporation or any
transfer agent that such certificates have been lost, stolen,
or destroyed and executes an agreement satisfactory to the
Corporation to indemnify the Corporation against any loss
incurred by it in connection therewith. Thereupon, there shall
be issued and delivered to such holder, promptly at such
office in the holder's name as shown on such surrendered
certificate or certificates, a certificate or certificates for
the number of shares of Common Stock into which the shares of
<PAGE> 16
the Preferred Stock surrendered were convertible on the date
on which such conversion occurred.
(c) Conversion Price and Conversion Formula. The
Purchase Price per share (the "Purchase Price Per Share")
shall be $l.25 and the initial Conversion Price per share for
Preferred Stock (the "Conversion Price") shall be $l.25,
subject to adjustment from time to time as provided herein.
Each share of the Preferred Stock shall be convertible into
that number of shares of Common Stock that results from
dividing the Purchase Price Per Share by the Conversion Price
in effect at the time of conversion (the "Conversion
Formula").
(d) Adjustment of Conversion Price for Stock Splits
and Combinations. If the Corporation shall at any time, or
from time to time, after the date of the issuance of the
Preferred Stock, effect a subdivision of the outstanding
Common Stock, the Conversion Price in effect immediately
before that subdivision shall be proportionately decreased,
and conversely, if the Corporation shall at any time or from
time to time after the original issue date of the Preferred
Stock combine the outstanding shares of Common Stock, the
Conversion Price in effect immediately before the combination
shall be proportionately increased. Any adjustment under this
subsection (d) shall become effective at the close of business
on the date the subdivision or combination becomes effective.
(e) Adjustment of Conversion Price for Certain
Dividends and Distributions. If the Corporation at any time,
or from time to time, after the date of the issuance of the
Preferred Stock, shall make or issue, or fix a record date for
the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in
additional shares of Common Stock, then, and in each such
event, the Conversion Price then in effect shall be decreased
as of the date of such issuance or, at the time or upon the
event such a record date shall have been fixed, as of the
close of business on such record date (the "Record Date"), by
multiplying the Conversion Price then in effect by a fraction,
determined as follows:
(i) the numerator of which shall be the total
number of shares of Common Stock issued and outstanding
immediately prior to the Record Date; and
(ii) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding
immediately prior to the Record Date plus the number of shares
of Common Stock issuable in payment of such dividend or
distribution; provided, however, if such Record Date shall
have been fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, the
Conversion Price shall be recomputed accordingly as of the
closing of the business on such Record Date, and thereafter
the Conversion Price for such Preferred Stock shall be
adjusted pursuant to this section (e) as of the time of each
action, or payment of such dividends or distributions.
(f) Adjustment for Reclassification, Exchange or
Substitution. If the Common Stock issuable upon the conversion
of the Preferred Stock shall be changed into the same or a
different number of shares of a different class or classes of
stock, or other securities or property, whether by
reclassification, exchange, substitution or other transaction
having similar effect (other than a subdivision or combination
of shares or stock dividend provided for above, or a
reorganization, merger, consolidation, or sale of assets
provided for elsewhere in this Section E) then and in each
such event the holder of each share of Preferred Stock shall
have the right thereafter to convert such share into the kind
and amount of shares of stock and other securities and
property receivable upon such reclassification, exchange,
substitution or other transaction having similar effect, as
did or shall the holders of shares of Common Stock, as if such
shares of Preferred Stock had been converted into Common Stock
<PAGE> 17
immediately prior to the Record Date with respect to such
reclassification, exchange or substitution, all subject to
further adjustment as provided herein.
(g) Reorganization, Mergers, Consolidations, or Sales
of Assets. If at any time, or from time to time, there shall
be (other than a subdivision, combination, reclassification,
exchange or substitution of shares provided for elsewhere in
this Section E) a capital reorganization involving a merger or
consolidation of the Corporation with or into another
corporation, or the sale or transfer of all or substantially
all of the Corporation's properties and assets to any other
person (a "sale"), then, as a part of such reorganization,
merger, consolidation or sale, due and adequate provision
shall be made so that the holders of the Preferred Stock shall
thereafter be entitled to receive upon conversion of the
Preferred Stock, the number of shares or other securities or
property of the Corporation, or of the successor corporation
resulting from such merger reorganization, consolidation or
sale, as to which a holder of Common Stock deliverable upon
conversion would have been entitled to receive as a result of
such reorganization, merger, consolidation, or sale. In any
such case, appropriate adjustment shall be made in respect to
the rights of the holders of the Preferred Stock after the
reorganization, merger, consolidation or sale to the end that
the provisions of this Section E (including adjustment of the
Conversion Price then in effect and the number of shares
purchasable upon conversion of the Preferred Stock) shall be
applicable after that event as nearly equivalent as may be
practicable.
(h) Sale of Shares Below Conversion Price. If at any
time, or from time to time, after the date of issuance of the
Preferred Stock and while any shares of the Preferred Stock
are outstanding, the Corporation shall issue or sell
Additional Shares of Common Stock (as hereinafter defined) or
options, warrants, convertible securities or other rights to
acquire Common Stock other than as (i) a dividend or other
distribution on any class of stock permitted by (e), (ii) a
subdivision or combination of shares of Common Stock as
provided for in (d) hereof, or (iii) a reclassification,
exchange, substitution or other transaction having similar
effect as provided for in (f) hereof, for a consideration per
share less than the Conversion Price in effect immediately
prior to the event, or without consideration, then, and
thereafter successively upon each such issuance, the
Conversion 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 Conversion Price in effect immediately prior
to such issuance, plus (ii) the consideration, if any,
received by the Company upon such issuance by (b) the total
number of shares of Common Stock outstanding immediately after
such issuance provided, however, that no adjustment otherwise
required hereunder, shall be made unless the reduction in
Conversion Price required by this Section, together with all
prior reductions which have not resulted in an adjustment to
the Conversion Price, shall result in a reduction of the
Conversion Price by at least $0.05 per share.
For purposes of this (h), the price received by the
Corporation for such Additional Shares of Common Stock shall
be computed as follows:
(x) Cash and Property. If such consideration consists
of:
(a) cash, the consideration shall be aggregate
amount of cash received by the Corporation;
(b) property (including intellectual property)
other than cash, the consideration shall be the fair market
value thereof at the time of such issue, as determined in good
faith by the Board; and
<PAGE> 18
(c) part of cash or part property and/or stock or
other securities of the Corporation or both, the consideration
shall be the amount equal to the sum of cash and fair market
value of the property actually received by the Corporation
computed consistently with the prior paragraphs herein and
determined in good faith by the Board.
(y) Options. Shares of the Corporation called for
pursuant to options and warrants which are held as of the date
of a conversion of Preferred Stock by option or warrant
holders, and which are not exercised, and have not terminated
or lapsed, at the time of such conversion, will be deemed to
have been issued, for purposes of the definitions and
calculations hereof, at a price per share determined by
dividing:
(a) the total amount, if any, received and
receivable by the Corporation as consideration for the
issuance of such options or warrants, plus the minimum
aggregate amount of additional consideration (as set forth in
the instrument relating thereto, without regard to any
provision contained therein for a subsequent adjustment of
such consideration) payable to the Corporation upon the
exercise of such options or warrants, by
(b) the maximum number of such shares (as set
forth in the instrument relating thereto, without regard to
any provisions contained therein for a subsequent adjustment
of such number) issuable upon the exercise of such options or
warrants.
(i) Definitions. The terms "Additional Shares of
Common Stock" as used herein shall mean all shares of Common
Stock issued or deemed issued by the Corporation after the
issuance date of the Preferred Stock, whether or not
subsequently reacquired or retired by the Corporation, other
than shares of Common Stock issued (i) upon conversion of the
Preferred Stock, (ii) upon conversion of $696,000 principal
amount of the Corporation's 12 1/2% Convertible Subordinated
Debentures due in 1996, or any options or warrants or (iii)
upon exercise of options granted to purchase up to 1,197,500
shares of Common Stock of the Corporation under its stock
option plans.
(j) Accountants' Certificate of Adjustment. In
each case of an adjustment of readjustment of the Conversion
Price for the number of shares of Common Stock or other
securities issuable upon conversion of the Preferred Stock,
the Corporation, at its expense, shall cause independent
certified public accountants of recognized standing selected
by the Corporation (who may be the independent certified
Public accountants then auditing the books of the Corporation)
to compute such adjustment or readjustment in accordance
herewith and prepare a certificate showing such adjustment or
readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to each registered holder or Preferred
Stock at the holder's address as shown in the Corporation's
books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of
(i) the consideration received or to be received by the
Corporation for any Additional Shares of Common Stock issued
or sold, (ii) the Conversion Price both before and after such
adjustment or readjustment, and (iii) the number of Additional
Shares of Common Stock and the type and amount, if any, of
other property which at the time would be received upon
conversion of the Preferred Stock.
(k) Fractional Shares. No fractional shares of
Common Stock shall be issued upon conversion of Preferred
Stock. In lieu of any fractional shares to which the holder
would otherwise be entitled, the Corporation shall pay, in
cash, an amount equal to the product of (i) such fraction of a
share, multiplied by (ii) the fair market value of one share
of the Corporation's Common Stock on the date of conversion,
as determined in good faith by the Board.
<PAGE> 19
(1) Reservation of Stock Issuable Upon
Conversion. The Corporation shall at all times reserve and
keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the
conversion of the shares of the Preferred Stock, such number
of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares
of the Preferred Stock, and if at any time the number of
authorized but unissued, shares of Common Stock shall not be
sufficient to effect the conversion of all the outstanding
shares of Preferred Stock, the Corporation will, subject to
the requirements of applicable state law, take such corporate
action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to
such number of shares of Common Stock as shall be sufficient
for such purposes.
F. Nonassessable Status of Stock. All the share of
Preferred Stock for which the full consideration determined by
the Board of Directors (which shall be not less than the par
value of such shares) has been paid or delivered, in cash or
property in accordance with the resolutions of the Board of
Directors authorizing the issuance of such shares, shall be
deemed fully paid-stock and the holder of such shares shall
not be liable for any further call or assessment or any other
payment thereon.
Section 3. Rights of the Classes of Common Stock.
The shares of common Stock and Class B Common Stock shall be
identical in every respect and shall be entitled to all of the
rights and privileges pertaining to common stock without
limitations, prohibitions, restrictions or qualifications,
except as otherwise expressly set forth in this Article
Fourth.
Section 4. Voting Powers.
The holders of Common Stock shall be entitled to one (1) vote
per share on all matters on which holders of common stock are
entitled to vote. The holders of Class B Common Stock shall be
entitled to one hundred (100) votes per share on all matters
on which holders of common stock of the Corporation are
entitled to vote. The holders of Common Stock, Class B Common
Stock and the Preferred Stock shall vote as a single class on
all matters, except as otherwise required herein or by law. No
holder of Common Stock or Class B Common Stock shall have
preemptive or preferential rights of subscription to any
shares of any class of stock in this Corporation, whether nor
or hereafter authorized.
Section 5. Conversion of Class B Common Stock into Common
Stock.
Any holder of Class B Common Stock may, at any time and from
time to time, by written notice to the Secretary of the
Corporation, convert said shares into a like number of shares
of Common Stock.
Section 6. Restrictions on the Right to Transfer or
Hypothecate Class B Common Stock.
No holder of Class B Common Stock shall have the right or
power to sell, transfer, assign, pledge, hypothecate, or
otherwise dispose of any share of Class B Common Stock,
provided, however, that in the event the Board of Directors of
the Corporation, at a meeting thereof duly called and held or
by unanimous written consent, shall consent to a sale,
transfer, assignment, pledge, hypothecation or other
disposition, upon the recording thereof in the minutes of such
meeting or the filing of a copy of such written consent with
the Secretary of the Corporation, such sale, transfer,
assignment, pledge, hypothecation or other disposition of
shares of Class B Common Stock may be effected in accordance
with the terms of such consent, and such shares of Class B
Common Stock shall remain outstanding.
<PAGE> 20
In the event that any holder of Class B Common Stock
shall sell, assign, transfer, pledge, hypothecate or otherwise
dispose of any share of Class B Common Stock without consent,
such shares shall automatically and immediately upon the
occurrence of such event be converted into, and shall be, an
equal number of shares of Common Stock.
THIRD: In accordance with the provisions of Section
242 of the General Corporation Law of the State of Delaware
the holders of the majority of the outstanding Common Stock
and Class B Common Stock of the Corporation, authorized the
amendment of the Certificate of Incorporation as set forth
herein, by written consent pursuant to Section 228 of the
General Corporation Law.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands this
15th day of June, 1988
/s/ Anthony R. Barringer
______________________________
Anthony R. Barringer
President
/s/ Denis R. Pinkernell
______________________________
Denis R. Pinkernell
Assistant Secretary
<PAGE> 21
CERTIFICATE OF RESTORATION, RENEWAL AND REVIVAL OF
CERTIFICATE OF INCORPORATION
OF
BARRINGER RESOURCES INC.
UNDER SECTION 312 OF THE DELAWARE
GENERAL CORPORATION CODE
The last acting President and assistant secretary of Barringer
Resources Inc., a corporation organized and existing under the laws of the State
of Delaware, HEREBY CERTIFY AS FOLLOWS:
1. The name of the corporation is Barringer Resources Inc. The date of
filing of its original Certificate of Incorporation in the office of the
Secretary of State is September 7, 1967.
2. The registered office of the corporation in the State of Delaware is
located at 1209 Orange Street, City of Wilmington, County of New Castle, and the
name of its registered agent at said address is the Corporation Trust Company.
3. The date when the restoration, renewal and revival of the
certificate of incorporation of the corporation is to be effective is the 28th
day of February, 1989, same being prior to the date of the expiration of the
certificate of incorporation of said corporation and its becoming void by
operation of law and by proclamation of the Governor. The restoration, renewal
and revival of the certificate of incorporation of this corporation is to be for
a perpetual term.
4. The corporation was organized under the laws of the State of
Delaware.
5. The corporation was duly organized and was authorized to engage in
the business activities set forth in its Certificate of Incorporation until the
1st day of March, 1989, at which time its charter became inoperative and void by
operation of law and was subsequently repealed by proclamation of the Governor
for non-payment of taxes.
6. This Certificate for Restoration, Renewal and Revival is filed by
the authority of the last acting Director of the corporation in accordance with
the laws of the State of Delaware.
IN WITNESS WHEREOF, we have signed this certificate this _____ day
of October, 1989.
/s/ Frank J. Abella
______________________________
Frank J. Abella, Jr.,
Last Acting President
ATTEST:
/s/ Denis R. Pinkernell
________________________
Denis R. Pinkernell,
Last Acting Assistant
Secretary
<PAGE> 22
Denis R. Pinkernell,
Last Acting Assistant
Secretary
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
BARRINGER RESOURCES INC.
(Pursuant to Section 242 of the General Corporation Law)
THE UNDERSIGNED, STANLEY S. BINDER and DENIS R. PINKERNELL, being the
duly elected President and Assistant Secretary, respectively, of BARRINGER
RESOURCES INC., a Delaware corporation (the "Corporation"), for the purposes of
amending the Certificate of Incorporation pursuant to Section 242 of the General
Corporation Law, DO HEREBY CERTIFY THAT:
FIRST: The name of the Corporation is BARRINGER RESOURCES INC. The
original Certificate of Incorporation was filed with the Secretary of State of
the State of Delaware on September 7, 1967, under the name of BARRINGER RESEARCH
INC.
SECOND: The Board of Directors of the Corporation at a meeting thereof
duly called and held on January 4, 1990, duly adopted and approved and declared
advisable the following resolution with respect to the amendment of Article
FOURTH of the Certificate of Incorporation of the Corporation to:
RESOLVED, that subject to the approval of the Stockholders of the
Corporation, Article FOURTH of the Certificate of Incorporation of the
Corporation be amended to read and provide in its entirety as follows:
FOURTH: Section 1. Authorizing Shares. The total number of shares of
stock the Corporation shall have authority to issue is twenty-two
million shares (22,000,000) comprised of 20,000,000 shares of Common
Stock, par value S.01 per share ("Common Stock"), and 1,000,000 shares
of Convertible Preferred Stock, par value $l.25
<PAGE> 23
per share ("Convertible Preferred Stock") and 1,000,000 shares of
Preferred Stock, par value $2.00 per share ("Preferred Stock").
Section 2. Convertible Preferred Stock
The designations, voting powers, preferences and relative,
participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, of the
Convertible Preferred Stock are as follows:
A. Dividends. The holders of the Convertible Preferred Stock shall be
entitled to receive or have set apart for payment dividends thereon at the rate
of $.10 per share per annum, and no more, payable semi-annually for the last
preceding dividend period on the last days of June and December in each year in
shares of Common Stock valued for such purpose at the average closing price of
the Common Stock in the over-the-counter market over the 20 trading days
immediately prior to the record date for each semi-annual payment as quoted by
NASDAQ in the over-the-counter market (or set apart for payment on the Common
Stock of the Corporation or any other class of stock or series thereof ranking
junior to the Preferred Stock, unless and until dividends at the rate of $.10
per share per annum on the Convertible Preferred Stock shall have been paid or
set apart for payment in full.
B. Liquidating Preferences. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation under any
circumstances or any voluntary liquidation or winding up of the Corporation,
which shall be deemed to have occurred upon the sale of all or substantially all
of its assets, the holders of Convertible Preferred Stock will be entitled to
receive, prior to and in preference to any distribution of the assets or surplus
funds of the Corporation to the holder of any other shares of Capital Stock by
reason of the ownership thereof, an amount equal to $1.25 per share and no more
(the "Preferential Amount"). If, upon the occurrence of such an event, the
assets and funds thus distributed among the holders of Convertible Preferred
Stock shall be insufficient to permit the payment to such holder of the full
Preferential Amount, then the entire assets and funds of the Corporation legally
available for distribution shall be distributed ratably among the holders of
Convertible Preferred Stock. After the payment or setting apart of the full
Preferential Amount required to be paid to the holders of the Convertible
Preferred Stock, the holders of Convertible Preferred Stock shall be entitled to
receive all remaining assets or surplus funds of the Corporation.
C. Consents of Convertible Preferred Stock. Without the affirmative vote or
written consent of the holders of a majority of the shares of Convertible
Preferred Stock at the time outstanding, the Corporation shall not:
(a) agree to be acquired, directly or indirectly, by another entity by
means of merger, consolidation or otherwise, resulting in the exchange of
outstanding shares of Capital Stock for securities or other consideration issued
or paid by the acquiring corporation or its subsidiaries, or sell all, or
substantially all, of its assets; or
<PAGE> 24
(b) alter, change or amend the preferences, rights or privileges of
holders of the Convertible Preferred Stock contained herein or in the By-Laws of
the Corporation or elsewhere as in effect on the date that this Certificate of
Amendment is filed with the Secretary of the State of Delaware; or
(c) alter, change or amend the Certificate of Incorporation or the
By-Laws of the Corporation or otherwise to provide for the authorization and
issuance of any additional class or series of Capital Stock, including
additional shares of preferred stock having any rights, preferences or
priorities equivalent to or greater than (either in any particular aspect or in
the aggregate) the Convertible Preferred Stock; or
(d) agree to a voluntary liquidation, dissolution, or winding up of
the Corporation; or
(e) adopt and/or implement any stock option or similar employee stock
bonus or incentive plan, except the Permitted Stock Plans.
D. Voting Rights. In addition to the voting rights granted to the holders
of the Convertible Preferred Stock by the laws of the State of Delaware and by
Section C hereof, each holder of Convertible Preferred Stock shall be entitled
at each meeting of the stockholders of the Corporation to that number of votes
which is equal to the number of shares of Common Stock into which each share of
Convertible Preferred Stock is convertible on the record date with respect to
such meeting for each share of such stock standing in his name on the books of
the Corporation.
E. Conversion.
(a) Conversion by Holder. Each share of Convertible Preferred Stock
shall be convertible, at the option of the holder thereof, at any time prior to
the fourth anniversary of the date of issuance thereof, into fully paid and
nonassessable shares of Common Stock, in accordance with the Conversion Formula
(as defined below).
Before any holder of Convertible Preferred Stock shall be entitled to
convert the same into shares of Common Stock, the holder shall (i) surrender the
certificate(s) therefor, duly endorsed, at the office of the Corporation or of
any transfer agent for the Common Stock, or (ii) notify the Corporation or any
transfer agent that such certificates have been lost, stolen or destroyed and
execute an agreement satisfactory to the Corporation to indemnify the
Corporation against any loss incurred by it in connection therewith, and shall
give written notice to the Corporation at such office that the holder elects to
convert the same and shall state therein the number of shares of Convertible
Preferred Stock being converted. Thereupon, the Corporation shall promptly issue
and deliver at such office to such holder(s) of Convertible Preferred Stock a
certificate(s) for the number of shares of Common Stock to which the holder
shall be entitled.
Such conversion shall be deemed to have been made immediately prior to the
closing of business on the date of such surrender of the shares of Convertible
Preferred Stock to be converted or delivery of the aforementioned
indemnification agreement, and the
<PAGE> 25
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date.
(b) Conversion by the Corporation. The Corporation may require the
conversion of all (but not less than all) of the Convertible Preferred Stock in
accordance with the Conversion Formula (as defined below) (i) at any time after
the fourth anniversary of the date of issuance of such Convertible Preferred
Stock, or (ii) immediately upon a consolidation, merger or sale of substantially
all of the assets of the Corporation under circumstances where the Corporation
is not the surviving entity, or (iii) upon the repurchase by the Corporation of
all of its then outstanding Class A warrants or all of its Class B Warrants
issued by the Corporation in connection with the sale of Units under a certain
Purchase Agreement dated May 10, 1988 between the Corporation and Purchasers
named therein.
Upon the occurrence of such an event specified in this Section E, and upon
the election of the Corporation to require the conversion of all of the
Convertible Preferred Stock, the outstanding shares of Convertible Preferred
Stock shall be converted automatically without any further action by the holders
of such shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent. The Corporation, however,
shall give prompt written notice of such conversion to each holder of
Convertible Preferred Stock at his last address listed in the Corporation's
records.
The Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless certificates
evidencing shares of the Convertible Preferred Stock being converted are either
delivered to the Corporation or any transfer agent, as hereinafter provided, or
the holder notifies the Corporation or any transfer agent that such certificates
have been lost, stolen, or destroyed and executes an agreement satisfactory to
the Corporation to indemnify the Corporation against any loss incurred by it in
connection therewith. Thereupon, there shall be issued and delivered to such
holder, promptly at such office in the holder's name as shown on such
surrendered certificate or certificates, a certificate or certificates for the
number of shares of Common Stock into which the shares of the Convertible
Preferred Stock surrendered were convertible on the date on which such
conversion occurred.
(c) Conversion Price and Conversion Formula. The Purchase Price per share
(the "Purchase Price Per Share") shall be $1.25 and the initial Conversion Price
per share for Convertible Preferred Stock (the "Conversion Price") shall be
$1.25, subject to adjustment from time to time as provided herein. Each share of
the Convertible Preferred Stock shall be convertible into that number of shares
of Common Stock that results from dividing the Purchase Price Per Share by the
Conversion Price in effect at the time of conversion (the "Conversion Formula").
(d) Adjustment of Conversion Price for Stock splits and Combinations. If
the Corporation shall at any time, or from time to time, after the date of the
issuance of the Convertible Preferred Stock, effect a subdivision of the
outstanding Common Stock, the Conversion Price in effect immediately before that
<PAGE> 26
subdivision shall be proportionately decreased, and conversely, if the
Corporation shall at any time or from time to time after the original issue date
of the Convertible Preferred Stock combine the outstanding shares of Common
Stock, the Conversion Price in effect immediately before the combination shall
be proportionately increased. Any adjustment under this subsection (d) shall
become effective at the close of business on the date the subdivision or
combination becomes effective.
(e) Adjustment of Conversion Price for Certain Dividends and Distributions.
If the Corporation at any time, or from time to time, after the date of the
issuance of the Convertible Preferred Stock, shall make or issue, or fix a
record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in additional shares of Common
Stock, then, and in each such event, the Conversion Price then in effect shall
be decreased as of the date of such issuance or, at the time or upon the event
such a record date shall have been fixed, as of the close of business on such
record date (the "Record Date"), by multiplying the Conversion Price then in
effect by a fraction, determined as follows:
(i) the numerator of which shall be the total number of shares of Common
Stock issued and outstanding immediately prior to the Record Date; and
(ii) the denominator of which shall be the total number of shares of Common
Stock issued and outstanding immediately prior to the Record Date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution; provided however, if such Record Date shall have been fixed and
such dividend is not fully paid or if such distribution is not fully made on the
date fixed therefor, the Conversion Price shall be recomputed accordingly as of
the closing of the business on such Record Date, and thereafter the Conversion
Price for such Convertible Preferred Stock shall be adjusted pursuant to this
section (e) as of the time of each action, or payment of such dividends or
distributions.
(f) Adjustment for Reclassification, Exchange or Substitution. If the
Common Stock issuable upon the conversion of the Convertible Preferred Stock
shall be changed into the same or a different number of shares of a different
class or classes of stock, or other securities or property, whether by
reclassification, exchange, substitution or other transaction having similar
effect (other than a subdivision or combination of shares or stock dividend
provided for above, or a reorganization, merger, consolidation, or sale of
assets provided for elsewhere in this Section E) then and in each such event the
holder of each share of Convertible Preferred Stock shall have the right
thereafter to convert such share into the kind and amount of shares of stock and
other securities and property receivable upon such reclassification, exchange,
substitution or other transaction having similar effect, as did or shall the
holders of shares of Common Stock, as if such shares of Convertible Preferred
Stock had been converted into Common Stock immediately prior to the Record Date
with respect to such reclassification, exchange or substitution, all subject to
further adjustment as provided herein.
(g) Reorganization, Mergers Consolidations, or Sales of Assets. If at any
time, or from time to time, there shall be
<PAGE> 27
(other than a subdivision combination, reclassification, exchange or
substitution of shares provided for elsewhere in this Section E) a capital
reorganization involving a merger or consolidation of the Corporation with or
into another corporation, or the sale or transfer of all or substantially all of
the Corporation's properties and assets to any other person (a "sale"), then, as
a part of such reorganization, merger, consolidation or sale, due and adequate
provision shall be made so that the holders of the Convertible Preferred Stock
shall thereafter be entitled to receive upon conversion of the Convertible
Preferred Stock, the number of shares or other securities or property of the
Corporation, or of the successor corporation resulting from such merger,
reorganization, consolidation or sale, as to which a holder of Common Stock
deliverable upon conversion would have been entitled to receive as a result of
such reorganization, merger, consolidation, or sale. In any such case,
appropriate adjustment shall be made in respect to the rights of the holders of
the Convertible Preferred Stock after the reorganization, merger, consolidation
or sale to the end that the provisions of this Section E (including adjustment
of the Conversion Price then in effect and the number of shares purchasable upon
conversion of the Convertible Preferred Stock) shall be applicable after that
event as nearly equivalent as may be practicable.
(h) Sale of Shares Below Conversion Price. If at any time, or from
time to time, after the date of issuance of the Convertible Preferred Stock and
while any shares of the Convertible Preferred Stock are outstanding, the
Corporation shall issue or sell Additional Shares of Common Stock (as
hereinafter defined) or options, warrants, convertible securities or other
rights to acquire Common Stock other than as (i) a dividend or other
distribution on any class of stock permitted by subsection (e) above, (ii) a
subdivision or combination of shares of Common Stock as provided for in
subsection (d) above, or (iii) a reclassification, exchange, substitution or
other transaction having similar effect as provided for in subsection (f) above,
for a consideration per share less than the Conversion Price in effect
immediately prior to the event, or without consideration, then, and thereafter
successively upon each such issuance, the Conversion 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 Conversion Price in effect immediately prior
to such issuance, plus (ii) the consideration, if any, received by the
Corporation upon such issuance by (b) the total number of shares of Common Stock
outstanding immediately after such issuance provided, however, that no
adjustment otherwise required hereunder, shall be made unless the reduction in
Conversion Price required by this subsection (h), together with all prior
reductions which have not resulted in an adjustment to the Conversion Price,
shall result in a reduction of the Conversion Price by at least $0.05 per share.
For purposes of this subsection (h), the price received by the Corporation
for such Additional Shares of Common Stock shall be computed as follows:
(x) Cash and Property. If such consideration
<PAGE> 28
consists of:
(a) cash, the consideration shall be aggregate amount of cash received by
the Corporation;
(b) property (including intellectual property) other than cash, the
consideration shall be the fair market value thereof at the time of such issue,
as determined in good faith by the Board; and
(c) part of cash or part property and/or stock or other securities of the
Corporation or both, the consideration shall be the amount equal to the sum of
cash and fair market value of the property actually received by the Corporation
computed consistently with the prior paragraphs herein and determined in good
faith by the Board.
(y) Options. Shares of the Corporation called for pursuant to options
and warrants which are held as of the date of a conversion of Convertible
Preferred Stock by option or warrant holders, and which are not exercised, and
have not terminated or lapsed, at the time of such conversion, will be deemed to
have been issued, for purposes of the definitions and calculations hereof, at a
price per share determined by dividing:
(a) the total amount, if any, received and receivable by the Corporation as
consideration for the issuance of such options or warrants, plus the minimum
aggregate amount of additional consideration (as set forth in the instrument
relating thereto, without regard to any provision contained therein for a
subsequent adjustment of such consideration) payable to the Corporation upon the
exercise of such options or warrants, by
(b) the maximum number of such shares (as set forth in the instrument
relating thereto, without regard to any provisions contained therein for a
subsequent adjustment of such number) issuable upon the exercise of such options
or warrants.
(i) Definitions. The terms "Additional Shares of Common Stock" as used
herein shall mean all shares of Common Stock issued or deemed issued by the
Corporation after the issuance date of the Convertible Preferred Stock, whether
or not subsequently reacquired or retired by the Corporation, other than shares
of Common Stock issued (i) upon conversion of the Convertible Preferred Stock,
(ii) upon conversion of $693,000 principal amount of the Corporation's 12 1/2%
Convertible Subordinated Debentures due in 1996, or any options or warrants or
(iii) upon exercise of options granted to purchase up to 1,197,500 shares of
Common Stock of the Corporation under its stock option plans.
(i) Accountants' Certificate of Adjustment. In each case of an
adjustment of readjustment of the Conversion Price for the number of shares of
Common Stock or other securities issuable upon conversion of the Convertible
Preferred Stock, the Corporation, at its expense, shall cause independent
certified public accountants of recognized standing selected by the Corporation
(who may be the independent certified public accountants then auditing the books
of the Corporation) to compute such adjustment or readjustment in accordance
herewith and prepare a certificate showing such adjustment or readjustment, and
shall
<PAGE> 29
mail such certificate by first class mail, postage prepaid, to each registered
holder or Convertible Preferred Stock at the holder's address as shown in the
Corporation's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based, including a statement of (i) the consideration received
or to be received by the Corporation for any Additional Shares of Common Stock
issued or sold, (ii) the Conversion Price both before and after such adjustment
or readjustment, and (iii) the number of Additional Shares of Common Stock and
the type and amount, if any, of other property which at the time would be
received upon conversion of the Convertible Preferred Stock.
(k) Fractional Shares. No fractional shares of Common Stock shall be issued
upon conversion of Convertible Preferred Stock. In lieu of any fractional shares
to which the holder would otherwise be entitled, the Corporation shall pay, in
cash, an amount equal to the product of (i) such fraction of a share, multiplied
by (ii) the fair market value of one share of the Corporation's Common Stock on
the date of conversion, as determined in good faith by the Board.
(1) Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Convertible Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Convertible Preferred Stock, and if at any time
the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all the outstanding shares of Convertible
Preferred Stock, the Corporation will, subject to the requirements of applicable
state law, take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares of Common Stock as shall be sufficient for such purposes.
F. Nonassessable Status of Stock. All the share of Convertible Preferred
Stock for which the full consideration determined by the Board of Directors
(which shall be not less than the par value of such shares) has been paid or
delivered, in cash or property in accordance with the resolutions of the Board
of Directors authorizing the issuance of such shares, shall be deemed fully paid
stock and the holder of such shares shall not be liable for any further call or
assessment or any other payment thereon.
SECTION 3. Preferred Stock
The Preferred Stock may be issued from time to time in one or more series with
such designations, preferences and relative participating, optional or other
special rights and qualifications, limitations or restrictions thereof, as shall
be stated in the resolutions adopted by the Board of Directors providing for the
issuance of such Preferred Stock or series thereof; and the Board of Directors
is hereby expressly vested with authority to fix such designations, preferences
and relative participating, optional or other special rights or qualifications,
limitations or restrictions for each series, including, but not by way of
limitation, the power to fix the redemption and liquidation preferences, the
rate of dividends payable and the time for and priority of payment thereof and
<PAGE> 30
to determine whether such dividends shall be cumulative or not and to provide
for and fix the terms of conversion of such Preferred Stock or any series
thereof into Common Stock of the Corporation and fix the voting power, if any,
of shares of Preferred Stock or any series thereof.
THIRD: At a Special Meeting of the Stockholders of the Corporation
duly called and held on February 13, 1990, in accordance with the provisions of
Section 242 of the General Corporation law of the State of Delaware, the holders
of the majority of the outstanding Common Stock and Convertible Preferred Stock
of the Corporation voted in favor of the amendment of the Certificate of
Incorporation as set forth herein.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands this 13th day
of February, 1990 and affirm that the statements made therein are true and
correct under the penalties of perjury.
/s/ Stanley S. Binder
----------------------------
Stanley S. Binder
President
/s/ Denis R. Pinkernell
----------------------------
Denis R. Pinkernell
Assistant Secretary
CERTIFICATE OF DESIGNATION
OF
CLASS A CONVERTIBLE PREFERRED STOCK
(Pursuant to Section 151 of the General Corporation Law of the
State of Delaware)
BARRINGER RESOURCES INC., a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"), in
accordance with the provisions of Section 103 thereof, HEREBY CERTIFIES:
That pursuant to the authority conferred upon the Board of Directors
by the Certificate of Incorporation of the Corporation as amended, the Board of
Directors on February 13, 1990 adopted the following resolution creating a
series of 500,000 shares of Preferred Stock designated as Class A Convertible
Preferred Stock:
<PAGE> 31
RESOLVED, that pursuant to the authority conferred upon the Board of
Directors of the Corporation by Article FOURTH of the Amended Certificate of
Incorporation of the Corporation, there is hereby established a Class A
Convertible Preferred Stock of the par value of $2.00 per share (hereinafter
called the "Class A Convertible Preferred Stock") consisting of 500,000 shares
and designated Class A Convertible Preferred Stock, and that, subject to the
limitations provided by law and by Article FOURTH of the Amended Certificate of
Incorporation, the designations, voting powers, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof, of the Class A Convertible Preferred Stock
are as follows:
A. Dividends. The holders of shares of Class A Convertible Preferred Stock
shall be entitled to receive or have set apart for payment dividends thereon at
the rate of $.16 per share per annum, payable semiannually for the last
preceding dividend on the last days of June and December in each year in, at the
option of the Corporation, cash or shares of Common Stock valued for such
purpose at the average closing price of the Common Stock in the over-the-counter
market over the twenty (20) trading days immediately prior to the recorded date
for each semiannual payment as quoted on NASDAQ, as the average of the bid and
offer prices quoted for such period in the pink sheets published by the National
Quotation Bureau. The amount of dividends payable per share for each dividend
period will be computed by dividing by two the $.16 annual rate.
B. Liquidating Preferences. In the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation under any
circumstances or any voluntary liquidation or winding-up of the Corporation,
which shall be deemed to have occurred upon the sale of all or substantially all
of its assets, the holders of Class A Convertible Preferred Stock will be
entitled to receive, prior to and in preference to any distribution of the
assets of surplus funds of the Corporation to the holder of any other shares of
Capital Stock by reason of the ownership thereof, but on a parity with the
holders of the Convertible Preferred Stock, an amount equal to $2.00 per share
plus accrued and unpaid dividends up to and inclusive of the date of liquidation
(the "Class A Preferential Amount"). If, upon the occurrence of such an event,
the assets and funds thus distributed among the holders of Class A Convertible
Preferred Stock shall be insufficient to permit the payment to such holder of
the full Class A Preferential Amount, then the entire assets and funds of the
Corporation legally available for distribution shall be distributed ratably
among the holders of Class A Convertible Preferred Stock and the Convertible
Preferred Stock. After
<PAGE> 32
payment or setting apart of the full Class A Preferential Amount required to be
paid to the holders of the Class A Convertible Preferred Stock, the holders of
the Class A Convertible Preferred Stock shall be entitled to receive all
remaining assets or surplus funds of the Corporation on a parity with the
holders of the Convertible Preferred Stock.
C. Consents of Class A Convertible Preferred Stock. Without the affirmative
vote or consent of the holders of the majority of the shares of Class A
Convertible Stock at the time outstanding, the Corporation shall not:
(a) Alter, change or amend the preferences, rights or privileges of holders
of the Class A Convertible Preferred Stock contained herein or in the By-laws of
the Corporation or elsewhere as in effect on the date that this Certificate of
Designation is filed with the Secretary of the State of Delaware; or
(b) Alter, change or amend the Certificate of Incorporation or the By-laws
of the Corporation or otherwise to provide for the authorization and issuance of
any additional class or series of Capital Stock, including additional shares of
Preferred Stock having any rights, preferences or priorities equivalent to or
any greater than (either in any particular aspect or in the aggregate) the Class
A Convertible Preferred Stock; or
(c) Agree to a voluntary liquidation, dissolution, or winding-up of the
Corporation.
D. Voting Rights. In addition to the voting rights granted to the holders
of the Class A Convertible Preferred Stock by the laws of the state of Delaware
and by Section C hereof, each holder of Class A Convertible Preferred Stock
shall be entitled at each meeting of the stockholders of the Corporation to that
number of votes which is equal to the number of shares of Common Stock into
which each share of Convertible Preferred Stock is convertible on the record
date with respect to such meeting for each share of such stock outstanding in
his name on the books of the Corporation.
E. Conversion.
(a) Conversion by Holder. Each share of Class A Convertible Preferred Stock
shall be convertible, at the option of the holder thereof, at any time after (i)
one (1) year after the date of issuance of the Class A Convertible Preferred
Stock; or (ii) the closing price of Common Stock shall have been $3.00 or more
per share for sixty (60) consecutive trading days, in accordance with the
conversion formula (as defined below), subject to adjustment as described below.
Before any holder of Class A Convertible Preferred
<PAGE> 33
Stock shall be entitled to convert the same into shares of Common Stock, the
holders shall (i) surrender the Certificate(s) therefor, duly endorsed, at the
office of the Corporation or of any transfer agent for the Common Stock, or (ii)
notify the Corporation or any transfer agent that such certificate has been
lost, stolen or destroyed and execute an agreement satisfactory to the
Corporation to indemnify the Corporation against any loss incurred by it in
connection therewith, and shall give written notice to the Corporation at such
office that the holder elects to convert the same and shall state therein the
number of shares of Class A Convertible Preferred Stock being converted.
Thereupon, the Corporation shall promptly issue and deliver at such office to
such holder(s) of Class A Convertible Preferred Stock a certificate(s) for the
number of shares of Common Stock to which the holder shall be entitled.
Such conversion shall be deemed to have been made immediately prior to the
closing of business on the date of such surrender of the shares of Class A
Convertible Preferred Stock to be converted or delivery of the aforementioned
Indemnification Agreement, and the person or persons entitled to receive these
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on such
date.
(b) Conversion Price and Conversion Formula. The initial conversion price
per share for Class A Convertible Preferred Stock (the "Conversion Price") shall
be $2.00, subject to adjustment from time to time as provided herein. Each share
of Class A Convertible Preferred Stock shall be convertible into that number of
shares of Common Stock that results from dividing $2.00 by the Conversion Price
in effect at the time of conversion (the "Conversion Formula").
(c) Adjustments of Conversion Price for Stock Splits and Combinations. If
the Corporation shall at any time, or from time to time, after the date of the
issuance of the Class A Convertible Preferred Stock, effect a subdivision of the
outstanding Common Stock, the Conversion Price in effect immediately before
that: subdivision shall be proportionately decreased, and conversely, if the
Corporation shall at any time or from to time after the original issue date of
the Class A Convertible Preferred Stock combine the outstanding shares of Common
Stock, the Conversion Price in effect immediately before the combination shall
be proportionately increased. Any adjustment under this Subsection (c) shall
become effective at the close of business on the date the subdivision or
combination becomes effective.
(d) Adjustment of Conversion Price for Certain Dividends and Distributions.
If the Corporation at any time, or from time to time, after the date of the
issuance of the Class A Convertible Preferred Stock,
<PAGE> 34
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then, and in each such event, the Conversion
Price then in effect shall be decreased as of the date of such issuance or, at
the time or upon the event such a record date shall have been fixed, as of the
close of business on such record date (the "Record Date"), by multiplying the
Conversion Price then in effect by a fraction, determined as follows:
(i) The numerator of which shall be the total number of shares of Common
stack issued and outstanding immediately prior to the Record Date; and
(ii) The denominator of which shall be the total number of shares of Common
Stock issued and outstanding immediately prior to the Record Date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, if such Record Date shall have been fixed and
such dividend is not fully paid or if such distribution is not fully made on the
date fixed therefor, the Conversion Price shall be recomputed accordingly as of
the closing of the business on such Record Date and thereafter the Conversion
Price for such Class A Convertible Preferred Stock shall be adjusted pursuant to
this Section (d) at the time of such action, or payment of such dividends or
distributions.
(e) Adjustment for Reclassification, Exchange or Substitution. If the
Common Stock issuable upon the conversion of the Class A Convertible Preferred
Stock shall be changed into the same or different number of shares of a
different class or classes of stock, or other securities or property, whether by
reclassification, exchange, substitution or other transaction having similar
effect (other than a subdivision or combination of shares or stock dividend
provided for above, or a reorganization, merger, consolidation, or sale of
assets provided for elsewhere in this Section E) then and in each such event the
holder of each share of Class A Convertible Preferred Stock shall have the right
thereafter to convert such shares into the kind and amount of shares of stock
and other securities and property receivable upon such reclassification,
exchange, substitution or other transaction having similar effect, as did or
shall the holders of shares of Common Stock have, as if such shares of Class A
Convertible Preferred Stock had been converted into Common Stock immediately
prior to the Record Date with respect to such reclassification, exchange or
substitution, all subject to further adjustment as provided herein.
(f) Reorganization, Mergers, Consolidations, or Sales of Assets. If at any
time, or from time to time, there shall be (other than at subdivision,
combination, reclassification, exchange or substitution or shares
<PAGE> 35
provided for elsewhere in this Section E) a capital reorganization involving a
merger or consolidation of the Corporation with or into another corporation, or
the sale or transfer of all or substantially all of the Corporation's properties
and assets to any other person (a "sale"), then, as a part of such
reorganization, merger, consolidation or sale, there shall be due and adequate
provision shall be made so that the holders of the Class A Convertible Preferred
Stock shall thereafter be entitled to receive upon conversion of the Class A
Convertible Preferred Stock, the number of shares or other securities or
property of the Corporation, or of the successor corporation resulting from such
merger, reorganization, consolidation or sale, as to which a holder of Common
Stock deliverable upon conversion would have been entitled to receive as a
result of such reorganization, merger, consolidation, or sale. In any such case,
appropriate adjustment shall be made in respect to the rights of the holders of
the Class A Convertible Preferred Stock after the reorganization, merger,
consolidation or sale to the end that the provisions of this Section E
(including adjustment of the Conversion Price then in effect and the number of
shares purchasable upon conversion of the Class A Convertible Preferred Stock)
shall be applicable after that event as nearly equivalent as may be practicable.
(g) Sale of Shares Below Conversion Price. If at any time, or from time to
time, after the date of issuance of the Class A Convertible Preferred Stock and
while any shares of the Class A Convertible Preferred Stock are outstanding, the
Corporation shall issue or sell Additional Shares of Common Stock (as
hereinafter defined) or options, warrants, convertible securities or other
rights to acquire Common Stock other than an (i) a dividend or other
distribution of any class of stock permitted by subsection (d) above, (ii) a
subdivision or combination of shares of Common Stock as provided for in
subsection (c) above, or (iii) a reclassification, exchange, resubstitution or
other transaction having similar effect as provided for in subsection (e) above,
for a consideration per share less than the Conversion Price in effect
immediately prior to the event, or without consideration, then, and thereafter
successively upon each such issuance, the Conversion 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 conversion Price in effect immediately prior
to such issuance, plus (ii) the consideration, if any, received by the
Corporation upon such issuance by (b) the total number of shares of Common Stock
outstanding immediately after such issuance provided, however, that no
adjustment otherwise required hereunder, shall be made unless the reduction in
Conversion Price required by this subsection (h), together with all prior
reductions
<PAGE> 36
which have not resulted in an adjustment to the Conversion Price, shall result
in a reduction of the Conversion Price by at lease $0.05 per share.
For purposes of this subsection (h), the price received by the Corporation
for such Additional Shares of Common Stock shall be computed as follows:
(x) Cash and Property. If such consideration consists of:
(a) cash, the consideration shall be the aggregate amount of cash received
by the Corporation;
(b) property (including intellectual property) other than cash, the
consideration shall be the fair market value thereof at the time of such issue,
as determined in good faith by the Board; and
(c) part cash or part property and/or stock or other securities of the
Corporation or both, the consideration shall be the amount equal to the sum of
the cash and fair market value of the property actually received by the
Corporation computed consistently with the prior paragraphs herein and
determined in good faith by the Board.
(y) Options. Shares of the Corporation called for pursuant to options and
warrants which are held as of the date of a conversion of Class A Convertible
Preferred Stock by option or warrant holders, and which are not exercised, and
have not terminated or lapsed, at the time of such conversion, will be deemed to
have been issued, for purposes of the definitions and calculations hereof, at a
price per share determined by dividing:
(a) the total amount, if any, received and receivable by the Corporation as
consideration for the issuance of such options or warrants, plus the minimum
aggregate amount of additional consideration (as set forth in the instrument
relating thereto, without regard to any provision contained therein for a
subsequent adjustment of such consideration) payable to the Corporation upon the
exercise of such options or warrants, by
(b) the maximum number of such shares (as set forth in the instrument
relating thereto, without regard to any provisions contained therein for a
subsequent adjustment of such number) issuable upon the exercise of such options
or warrants.
(h) Definitions. The terms "Additional Shares of Common Stock" as used
herein shall mean all shares of Common Stock issued or deemed issued by the
Corporation after the issuance date of the Class A Convertible Preferred Stock,
whether or not subsequently reacquired or retired by the Corporation, other than
shares of Common Stock issued (i) upon conversion of the Class A
<PAGE> 37
Convertible Preferred Stock, (ii) upon conversion of $693,000 principal amount
of the Corporation's 12-1/2% Class A Convertible Subordinated Debentures due in
1996, or any options or warrants or (iii) upon exercise of options or warrants
or (iv) upon exercise of options granted to purchase shares of Common Stock of
the Corporation under its stock option plans.
(i) Accountant's Certificate of Adjustment. In each case of an adjustment
of readjustment of the Conversion Price for the number of shares of Common Stock
or the securities issuable upon conversion of the Class A Convertible Preferred
Stock, the Corporation, at its expense, shall cause independent certified public
accountants of recognized standing selected by the Corporation (who may be the
independent certified public accountants then auditing the books of the
Corporation) to compute such adjustment or readjustment in accordance herewith
and prepare a certificate showing such adjustment or readjustment, and shall
mail such certificate by first class mail, postage prepaid, to each registered
holder of Class A Convertible Preferred Stock at the holder's address as shown
in the Corporation's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based, including a statement of (i) the consideration received
or to be received by the Corporation for any Additional Shares of Common Stock
issued or sold, (ii) the Conversion Price both before and after such adjustment
(or readjustment, and (iii) the number of Additional Shares of Common Stock and
the type and amount, if any, of other property which at the time would be
received upon conversion of the Class A Convertible Preferred Stock.
(j) Fractional Shares. No fractional shares of Common Stock shall be issued
upon conversion of Class A Convertible Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay, in cash. an amount equal to the product of (i) such
fraction of a share, multiplied by (ii) the fair market value of one share of
the Corporations' Common Stock on the date of conversion, as determined in good
faith by the Board.
(k) Reservation of Stock Issuable Upon Conversion. The Corporation shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the conversion of the
shares of the Class A Convertible Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Class A Convertible Preferred Stock, and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all the outstanding shares of Class A
Convertible Preferred Stock, the Corporation
<PAGE> 38
will, subject to the requirements of applicable state law, take such
corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Common Stock to such
number of shares of Common Stock as shall be sufficient for such
purposes.
F. Nonassessable Status of Stock. All the shares of Class A
Convertible Preferred Stock for which the full consideration
determined by the Board of Directors (which shall be not less than the
par value of such shares) has been paid or delivered, in cash or
property in accordance with the resolutions of the Board of Directors
authorizing the issuance of such shares, shall be deemed fully paid
stock and the holder of such shares shall not be liable for any
further call or assessment or any other payment thereon.
G. Redemption of Class A Convertible Preferred Stock.
Subject to the limitations of the laws of the State of Delaware, the
Corporation may, any time after the closing price of the Common Stock
has been $3.00 or more for ninety (90) consecutive trading days,
redeem all or a portion of such shares of Class A Convertible
Preferred Stock at a redemption price equal to $2.00 per share, plus
an amount equal to any accumulated and accrued but unpaid dividends
upon thirty (30) days written notice to the holders of the Class A
Convertible Preferred Stock. If less than all of the outstanding
shares of the Class A Convertible Preferred Stock are to be redeemed,
the Corporation shall redeem from each holder of Class A Convertible
Preferred Stock on a pro rata basis.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands this
27th day of November, 1990 and affirm that the statements made herein are true
and correct under the penalties of perjury.
BARRINGER RESOURCES INC.
By: /s/ Stanley S. Binder
____________________________
Stanley S. Binder, President
Attest:
/s/ Denis R. Pinkernell
________________________________________
Denis R. Pinkernell, Assistant Secretary
<PAGE> 39
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
<PAGE> 40
OF
BARRINGER RESOURCES INC.
(Pursuant to Section 242 of the General Corporation Law)
THE UNDERSIGNED, Stanley S. Binder and Denis R. Pinkernell, being the
duly elected and acting President and Secretary, respectively, of BARRINGER
RESOURCES INC., a Delaware corporation (the "Corporation"), for the purpose of
amending the Certificate of Incorporation of the Corporation pursuant to Section
242 of the General Corporation Law, DO HEREBY CERTIFY THAT:
FIRST: The name of the Corporation is BARRINGER RESOURCES INC. The
original Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on September 7, 1967 under the name
of Barringer Research, Inc.
SECOND: The Board of Directors of the Corporation, at a meeting
thereof duly called and held on September 14, 1990, duly adopted and approved
and declared advisable the following resolution with respect to the amendment to
Article FIRST of the Certificate of Incorporation of the Corporation to change
the name of the Corporation in accordance with the provisions of Section 242 of
the General Corporation Law:
RESOLVED, that, subject to approval of stockholders of the
Corporation, Article FIRST of the Certificate of Incorporation of the
Corporation be amended to read and provide in its entirety to read as
follows:
"FIRST: The name of the Corporation is BARRINGER
TECHNOLOGIES INC.hereinafter called the "Corporation")."
THIRD: The holders of a majority of the outstanding shares of Common
Stock ($.01 par value) and the outstanding shares of $1.25 Convertible Preferred
Stock of the Corporation, the only outstanding classes of stock of the
Corporation entitled to notice of and to vote at the deferred Annual Meeting of
Stockholders of the Corporation held on February 12, 1991 approved the
amendment of
<PAGE> 41
the Certificate of Incorporation as herein set forth in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands this
13th day of February, 1991.
/s/ Stanley S. Binder
-------------------------------
Stanley S. Binder, President
/s/ Denis R. Pinkernell
-------------------------------
Denis R. Pinkernell, Secretary
<PAGE> 42
CERTIFICATE OF DECREASE IN THE NUMBER OF
SHARES OF CLASS A CONVERTIBLE PREFERRED STOCK
AND
CERTIFICATE OF DESIGNATION OF CLASS B
CONVERTIBLE PREFERRED STOCK
(Pursuant to Section 151 of the General Corporation Law of
the State of Delaware)
BARRINGER TECHNOLOGIES INC., a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation"),
in accordance with the provisions of Section 103 thereof, HEREBY CERTIFIES:
That pursuant to the authority conferred upon the Board of Directors
by the Certificate of Incorporation of the Corporation, as amended, the Board of
Directors on November 18, 1991 adopted the following resolutions decreasing the
number of shares of Class A Convertible Preferred Stock previously designated by
Certificate of Designation filed with the Secretary of State of Delaware on
November 27, 1991 from 500,000 shares to 270,000 shares, and designating a
series of 730,000 shares of Class B Convertible Preferred Stock:
<PAGE> 43
RESOLVED, that the resolutions designating an additional 500,000 shares of
Class A Convertible Preferred Stock be rescinded, and pursuant to Section 151(g)
of the General Corporation Law of the State of Delaware, the number of shares of
Class A Convertible Preferred Stock previously designated by Certificate of
Designation filed with the Secretary of State of Delaware on November 27, 1991
be decreased to 270,000 shares of such Class A Convertible Stock; and
RESOLVED, that pursuant to the authority conferred upon the Board of
Directors of the Corporation by Article FOURTH of the Amended Certificate of
Incorporation of the Corporation, there is hereby designated a Class B
Convertible Preferred Stock, par value $2.00 per share (hereinafter called the
"Class B Convertible Preferred Stock") , and that, subject to the limitations
provided by law and by Article FOURTH of the Amended Certificate of
Incorporation, the designations, voting powers, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof, of the Class B Convertible Preferred Stock
are as follows:
A. Dividends. The holders of shares of Class A Convertible Preferred Stock
shall be entitled to receive or have set apart for payment dividends thereon at
the rate of $.16 per share per annum, payable semiannually from the last
preceding dividend on the last days of June and December in each year in, at the
option of the Corporation, cash or shares of Common Stock valued for such
purpose at the average daily bid and offer price of the Common Stock in the
over-the-counter market over the twenty (20) trading days immediately prior to
the record date for each semiannual payment as quoted on the National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ")
or, if the Common Stock is not quoted on NASDAQ during such period, the average
of the bid and offer prices quoted for such period in the pink sheets published
by the National Quotation Bureau. The amount of dividends payable per share for
each dividend period will be computed by dividing by two the $.16 annual rate.
B. Liquidating Preferences. In the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation under any
circumstances or any voluntary liquidation or winding-up of the Corporation,
which shall be deemed to have occurred upon the sale of all or substantially all
of its assets, the holders of Class B Convertible Preferred Stock will be
entitled to receive, prior to and in preference to any distribution of the
assets of surplus funds of the Corporation to the holder of any other shares of
capital stock of the Corporation by reason of the ownership thereof, but on a
parity with the holders
<PAGE> 44
of the Class A Convertible Preferred Stock and the Convertible Preferred Stock,
par value $1.25 per share of the Corporation (the "Convertible Preferred
Stock"), an amount equal to $2.00 per share plus accrued and unpaid dividends up
to and inclusive of the date of liquidation (the "Class B Preferential Amount").
If, upon the occurrence of such an event, the assets and funds thus distributed
among the holders of Class B Convertible Preferred Stock shall be insufficient
to permit the payment to such holder of the full Class B Preferential Amount,
then the entire assets and funds of the Corporation legally available for
distribution shall be distributed ratably among the holders of Class B
Convertible Preferred Stock, Class A Convertible Preferred Stock and the
Convertible Preferred Stock. After payment or setting apart of the full Class B
Preferential Amount required to be paid to the holders of the Class B
Convertible Preferred Stock, the holders of the Class B Convertible Preferred
Stock shall be entitled to receive all remaining assets or surplus funds of the
Corporation on a parity with the holders of the Class A Convertible Preferred
Stock and Convertible Preferred Stock.
C. Consents of Class A Convertible Preferred Stock. Without the affirmative
vote or consent of the holders of the majority of the shares of Class B
Convertible Stock at the time outstanding, the Corporation shall not:
(a) Alter, change or amend the preferenced, rights or privileges of holders
of the Class B Convertible Preferred Stock contained herein or in the By-laws of
the Corporation elsewhere as in effect on the date that this Certificate of
Designation is filed with the Secretary of the State of Delaware; or
(b) Alter, change or amend the Certificate of Incorporation or the By-laws
of the Corporation or otherwise provide for the authorization and issuance of
any additional class or series of capital stock, including additional shares of
Preferred Stock having any rights, preferences or priorities equivalent to or
any greater than (either in any particular aspect or in the aggregate) the Class
B Convertible Preferred Stock; or
(c) Agree to a voluntary liquidation, dissolution, or winding-up of the
Corporation.
D. Voting Rights. In addition to the voting rights granted to the holders
of the Class B Convertible Preferred Stock by the laws of the State of Delaware
and by Section C hereof, each holder of Class B Convertible Preferred Stock
shall be entitled at each meeting of the stockholders of the Corporation 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 is convertible on the
record date with respect to such meeting for each share of Class B Convertible
Preferred Stock is convertible on the record date with respect to such
meeting for each share
<PAGE> 45
of such stock outstanding in his name on the books of the Corporation.
E. Conversion.
(a) Conversion by Holder. Each share of Class B Convertible Preferred Stock
shall be convertible at the option of the holder thereof, at any time after the
date of issuance into one share of Common Stock, at the conversion price and
subject to adjustment as described below.
Before any holder of Class B Convertible Preferred Stock shall be entitled
to convert the same into shares of Common Stock, the holders shall (i) surrender
the Certificate(s) therefor, duly endorsed, at the office of the Corporation or
of any transfer agent for the Common Stock, or (ii) notify the Corporation or
any transfer agent that such certificate has been lost, stolen or destroyed and
execute an agreement satisfactory to the Corporation to indemnify the
Corporation against any loss incurred by it in connection therewith, and shall
give written notice to the Corporation at such office that the holder elects to
convert the same and shall state therein the number of shares of Class B
Convertible Preferred Stock being converted. Thereupon, the Corporation shall
promptly issue and deliver at such office to such holder(s) of Class B
Convertible Preferred Stock a certificate(s) for the number of shares of Common
Stock to which the holder shall be entitled.
Such conversion shall be deemed to have been made immediately prior to the
closing of business on the date of such surrender of the shares of Class B
Convertible Preferred Stock to be converted or delivery of the aforementioned
Indemnification Agreement, and the person or persons entitled to receive these
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on such
date.
(b) Conversion Price and Conversion Formula. The conversion price per share
for Class B Convertible Preferred Stock (the "Conversion Price") shall be $2.00,
subject to adjustment from time to time as provided herein. Each share of Class
B Convertible Preferred Stock shall be convertible into that number of shares of
Common Stock that results from dividing $2.00 by the Conversion Price in effect
at the time of conversion (the "Conversion Formula").
(c) Adjustments of Conversion Price for Stock Splits and Combinations. If
the Corporation shall at any time, or from time to time, after the date of the
issuance of the Class B Convertible Preferred Stock, effect a subdivision of the
outstanding Common Stock, the Conversion Price in effect immediately before the
subdivision shall be proportionately decreased, and conversely, if the
Corporation shall at any time or
<PAGE> 46
from time to time after the original date of the Class B Convertible Preferred
Stock combine the outstanding shares of Common Stock, the Conversion Price in
effect immediately before the combination shall be proportionately increased.
Any adjustment at the close of business on the date the subdivision or
combination becomes effective.
(d) Adjustment of Conversion Price for Certain Dividends and Distributions.
If the Corporation at any time, or from time to time, after the date of the
issuance of the Class B Convertible Preferred Stock, shall make or issue, or fix
a record date for the determination of holders of Common Stock, entitled to
receive, a dividend or other distribution payable in additional shares of Common
Stock, then, and in each such event, the Conversion Price then in effect shall
be decreased as of the date of such issuance or, at the time or upon the event
such a record date shall have been fixed, as of the close of business on such
record date (the "Record Date"), by multiplying the Conversion Price then in
effect by a fraction, determined as follows:
(i) The numerator of which shall be the total number of shares of Common
Stock issued and outstanding immediately prior to the Record Date; and
(ii) The denominator of which shall be the total number of shares of Common
Stock issued and outstanding immediately prior to the Record Date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, if such Record Date shall have been fixed and
such dividend is not fully paid or if such distribution is not fully made on the
date fixed therefor, the Conversion shall be recomputed accordingly as of the
closing of the business on such Record Date and thereafter the Conversion Price
for such Class B Convertible Preferred Stock shall be adjusted pursuant to this
Section (d) at the time of such action, or payment of such dividends or
distributions.
(e) Adjustments for Reclassification, Exchange or Substitution. If the
Common Stock issuable upon the conversion of the Class B Convertible Preferred
Stock shall be changed into the same or different number of shares of a
different class or classes of stock, or other securities or property, whether by
reclassification, exchange, substitution or other transaction having similar
effect (other than a subdivision or combination of shares or stock dividend
provided for above, or a reorganization, merger, consolidation, or sale of
assets provide for elsewhere in this Section E) then and in each such event the
holder of each shares of Class B Convertible Preferred Stock shall have the
right thereafter to convert such shares into the kind and amount of shares of
stock and other securities and property receivable upon such reclassification,
exchange, substitution or other transaction having
<PAGE> 47
similar effect, as did or shall the holders of shares of Class B Convertible
Preferred Stock had been converted into Common Stock immediately prior to the
Record Date with respect to such reclassification, exchange or substitution,
all subject to further adjustments as provided herein.
(f) Reorganization, Mergers, Consolidations, or Sales of Assets. If at any
time, or from time to time, there shall be (other than a subdivision,
combination, reclassification, exchange or substitution or shares provided for
elsewhere in this Section E) a capital reorganization involving a merger or
consolidation of the Corporation with or into another corporation, or the sale
or transfer of all or substantially all of the Corporation's properties and
assets to any other person (a "sale"), then, as a part of such reorganization,
merger, consolidation or sale, there shall be due and adequate provision shall
be made so that the holders of the Class B Convertible Preferred Stock shall
thereafter be entitled to receipt upon conversion of the Class B Convertible
Preferred Stock, the number of shares or other securities or property of the
Corporation, or of the successor corporation resulting from such merger,
reorganization, consolidation or sale, as to which a holder of Common Stock
deliverable upon conversion would have been entitled to receive as a result of
such reorganization, merger, consolidation, or sale. In any such case,
appropriate adjustment shall be made in respect to the rights of the holders of
the Class B Convertible Preferred Stock after the reorganization, merger,
consolidation or sale to the end that the provisions of this Section E
(including adjustment of the Conversion Price then in effect and the number of
shares purchasable upon conversion of the Class B Convertible Preferred Stock)
shall be applicable after that event as nearly equivalent as may be practicable.
(g) Sale of Shares Below Conversion Price. If at any time, or from time to
time, after the date of issuance of the Class B Convertible Preferred Stock and
while any shares of the Class B Convertible Preferred Stock are outstanding, the
Corporation shall issue or sell Additional Shares of Common Stock (as
hereinafter defined) or options, warrants, convertible securities or other
rights to acquire Common Stock other than as (i) a dividend or other
distribution of any class of stock permitted by subsection (d) above, (ii) a
subdivision or combination of shares of Common Stock as provided for in
subsection (c) above, or (iii) a reclassification, exchange, substitution or
other transaction having similar effect as provided for in subsection (e) above,
for a consideration per share less than the Conversion Price in effect
immediately prior to the event, or without consideration, then, and thereafter
successively upon each such issuance, the Conversion 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
<PAGE> 48
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
Conversion Price in effect immediately prior to such issuance, plus (ii) the
consideration, if any, received by the Corporation upon such issuance by (b) the
total number of shares of Common stock outstanding immediately after such
issuance provided, however, that no adjustment otherwise required hereunder,
shall be made unless the reduction in Conversion Price required by this
subsection (g), together with all prior reductions which have not resulted in an
adjustment to the Conversion Price, shall result in a reduction of the
Conversion Price by at least $0.05 per share.
For purposes of this subsection (g), the price received by the Corporation
for such Additional Shares of Common Stock shall be computed as follows:
(x) Cash and Property. If such consideration consists of:
(a) cash, the consideration shall be the aggregate amount of cash received
by the Corporation;
(b) property (including intellectual property) other than cash, the
consideration shall be the fair market value thereof at the time of such issue,
as determined in good faith by the Board; and
(c) part cash or part property and/or stock or other securities of the
Corporation or both, the consideration shall be the amount equal to the sum of
the cash and fair market value of the property actually received by the
Corporation computed consistently with the prior paragraphs herein and
determined in good faith by the Board.
(y) Options. Shares of the Corporation called for pursuant to options
and warrants which are held as of the date of a conversion of Class B
Convertible Preferred Stock by option or warrant holders, and which are not
exercised, and have not terminated or lapsed, at the time of such conversion,
will be deemed to have been issued, for purposes of the definitions and
calculations hereof, at a price per share determined by dividing;
(a) the total amount, if any, received and receivable by the Corporation as
consideration for the issuance of such options or warrants, plus the minimum
aggregate amount of additional consideration (as set forth in the instrument
relating thereto, without regard to any provision contained therein for a
subsequent adjustment of such consideration) payable to the Corporation upon the
exercise of such options or warrants, by
(b) the maximum number of such shares (as set forth in the instrument
relating thereto, without
<PAGE> 49
regard to any provisions contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such options or warrants.
(h) Definitions. The terms "Additional Shares of Common Stock" as used
therein shall mean all shares of Common Stock issued or deemed issued by the
Corporation after the issuance date of the Class B Convertible Preferred Stock,
whether or not subsequently reacquired or retired by the Corporation, other than
shares of Common Stock issued (i) upon conversion of the Class A or Class B
Convertible Preferred Stock, (ii) upon conversion of the Corporation's 12 1/2%
Class A Convertible Subordinated Debentures due in 1996, or any options or
warrants or (iii) upon exercise of options or warrants or (iv) upon exercise of
options granted to purchase shares of Common Stock of the Corporation under its
stock option plans.
(i) Accountants' Certificate of Adjustment. In each case of an adjustment
of readjustment of the Conversion Price for the number of shares of Common Stock
or the securities issuable upon conversion of the Class B convertible Preferred
Stock, the Corporation, at its expense, shall cause independent certified public
accountants of recognized standing selected by the Corporation (who may be the
independent certified public accountants then auditing the books of the
Corporation) to compute such adjustment or readjustment in accordance herewith
and prepare a certificate showing such adjustment or readjustment, and shall
mail such certificate by first class mail, postage prepaid, to each registered
holder of Class B Convertible Preferred Stock at the holder's address as shown
in the Corporation's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based, including a statement of (i) the consideration received
or to be received by the Corporation for any Additional Shares of Common Stock
issued or sold, (ii) the Conversion Price both before and after such adjustment
or readjustment, and (iii) the number of Additional Shares of Common Stock and
the type and amount, if any, of other property which at the time would be
received upon conversion of the Class B Convertible Preferred Stock.
(j) Fractional Shares. No fractional shares of Common Stock shall be issued
upon conversion of Class B Convertible Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay, in cash, an amount, equal to the product of (i) such
fraction of a share, multiplied by (ii) the fair market value of one share of
the Corporation's Common Stock on the date of conversion, as determined in good
faith by the Board.
(k) Reservation of Stock Issuable Upon Conversion. The Corporation shall at
all times reserve and keep available out of its authorized but unissued
<PAGE> 50
shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Class B Convertible Preferred Stock,
such number of its shares of Common Stock as shall from time to time
be sufficient to effect the conversion of all outstanding shares of
Class B Convertible Preferred Stock, and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all the outstanding shares of Class B
Convertible Preferred Stock, the Corporation will, subject to the
requirements of applicable state law, take such corporate action as
may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of
shares of Common Stock as shall be sufficient for such purposes.
F. Nonassessable Status of Stock. All the shares of Class B
Convertible Preferred Stock for which the full consideration
determined by the Board of Directors (which shall be not less than the
par value of such shares) has been paid or delivered, in cash or
property in accordance with the resolutions of the Board of Directors
authorizing the issuance of such shares, shall be deemed fully paid
stock and the holder of such shares shall not be liable for any
further call or assessment or any other payment thereon.
G. Redemption of Class B Convertible Preferred Stock.
Subject to the limitations of the laws of the State of Delaware, the
Corporation may, at any time after the average bid and offer price of
the Common Stock has been $3.00 or more for ninety (90) consecutive
trading days, as quoted on NASDAQ, or, if the Common Stock is not
quoted on NASDAQ during such period, the average of the bid and offer
prices quoted for such period in the pink sheets published by the
National Quotation Bureau, redeem all or a portion of such shares of
Class B Convertible Preferred Stock at redemption price equal to $2.00
per share, plus an amount equal to any accumulated and accrued but
unpaid dividends upon thirty (30) days written notice to the holders
of the Class B Convertible Preferred Stock. If less than all of the
outstanding shares of Class B Convertible Preferred Stock are to be
redeemed, the Corporation shall redeem from each holder of Class B
Convertible Preferred Stock on a pro rata basis.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands this
day of November, 1991 and affirm that the statements made herein are true and
correct under the penalties of perjury.
BARRINGER TECHNOLOGIES, INC.
By: /s/ Stanley S. Binder
-------------------------------
Stanley S. Binder, President
Attest:
/s/ Denis R. Pinkernell
- -------------------------------
Denis R. Pinkernell, Secretary
<PAGE> 51
CERTIFICATE OF CORRECTION
OF
CERTIFICATE OF DECREASE IN THE
NUMBER OF SHARES OF CLASS A
CONVERTIBLE PREFERRED STOCK
AND
CERTIFICATE OF DESIGNATION OF CLASS B
CONVERTIBLE PREFERRED STOCK
(Pursuant to Section 103(f) of the General Corporation Law of the
State of Delaware)
BARRINGER TECHNOLOGIES INC., a Delaware corporation (the
"Corporation") , pursuant to Section 103 (f ) of the General Corporation Law of
the State of Delaware, HEREBY CERTIFIES:
That the Certificate Of Decrease In The Number Of Shares Of Class A
Convertible Preferred Stock And Certificate of Designation Of Class B
Convertible Preferred Stock filed in the Office of the Secretary of the State of
Delaware on December 2, 1991, contained certain inaccuracies therein, namely,
the words "consisting of 730,000 shares and designated Class B Convertible
Preferred Stock" were erroneously dropped at the end of the seventh line of the
second "Resolved" paragraph, and references to "Class A" on the first line of
paragraph "A. Dividends" and the heading "C. Consent of Class A Convertible
Preferred Stock" should in each instance refer to Class B Convertible Preferred
Stock; and
That the Resolution adopted by the Board of Directors of the
Corporation on November 18, 1991 decreasing the designation of Class A
Convertible Preferred Stock and designating 730,000 shares of Class B
Convertible Preferred Stock reads and provides in its entirety is as follows:
<PAGE> 52
RESOLVED, that the resolutions designating an additional 500,000 shares of
Class A Convertible Preferred Stock be rescinded, and pursuant to Section 151(g)
of the General Corporation Law of the State of Delaware, the number of shares of
Class A Convertible Preferred Stock previously designated by Certificate of
Designation filed with the Secretary of State of Delaware on November 11, 1990
be decreased to 270,000 shares of such Class A Convertible Stock; and
RESOLVED, that pursuant to the authority conferred upon the Board of
Directors of the Corporation by Article FOURTH of the Amended Certificate of
Incorporation of the Corporation, there is hereby designated a Class B
Convertible Preferred Stock, par value $2.00 per share (hereinafter called the
"Class B Convertible Preferred Stock"), consisting of 730,000 shares and
designated Class B Convertible Preferred Stock and that, subject to the
limitations provided by law and by Article FOURTH of the Amended Certificate of
Incorporation, the designations, voting powers, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof, of the Class B Convertible Preferred Stock
are as follows:
A. Dividends. The holders of shares of Class B Convertible Preferred Stock
shall be entitled to receive or have set apart for payment dividends thereon at
the rate of $.16 per share per annum, payable semiannually from the last
preceding dividend on the last days of June and December in each year in, at the
option of the Corporation, cash or shares of Common Stock valued for such
purpose at the average daily bid and offer price of the Common Stock in the
over-the-counter market over the twenty (20) trading days immediately prior to
the record date for each semiannual payment as quoted on the National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ")
or, if the Common Stock is not quoted on NASDAQ during such period, the average
of the bid and offer prices quoted for such period in the pink sheets published
by the National Quotation Bureau. The amount of dividends payable per share for
each dividend period will be computed by dividing by two the $.16 annual rate.
B. Liquidating Preferences. In the event of any voluntary or involuntary
<PAGE> 53
liquidation, dissolution or winding-up of the Corporation under any
circumstances or any voluntary liquidation or winding-up of the Corporation,
which shall be deemed to have occurred upon the sale of all or substantially all
of its assets, the holders of Class B Convertible Preferred Stock will be
entitled to receive, prior to and in preference to any distribution of the
assets of surplus funds of the Corporation to the holder of any other shares of
capital stock of the Corporation by reason of the ownership thereof, but on a
parity with the holders of the Class A Convertible Preferred Stock and the
Convertible Preferred Stock, par value $1.25 per share of the Corporation (the
"Convertible Preferred Stock"), an amount equal to $2.00 per share plus accrued
and unpaid dividends up to and inclusive of the date of liquidation (the "Class
B Preferential Amount"). If, upon the occurrence of such an event, the assets
and funds thus distributed among the holders of Class B Convertible Preferred
Stock shall be insufficient to permit the payment to such holder of the full
Class B Preferential Amount, then the entire assets and funds of the Corporation
legally available for distribution shall be distributed ratably among the
holders of Class B Convertible Preferred Stock, Class A Convertible Preferred
Stock and the Convertible Preferred Stock. After payment or setting apart of the
full Class B Preferential Amount required to be paid to the holders of the Class
B Convertible Preferred stock, the holders of the Class B Convertible Preferred
Stock shall be entitled to receive all remaining assets or surplus funds of the
Corporation on a parity with the holders of the Class A Convertible Preferred
Stock and Convertible Preferred Stock.
C. Consents of Class B Convertible Preferred Stock. Without the affirmative
vote or consent of the holders of the majority of the shares of Class B
Convertible Stock at the time outstanding, the Corporation shall not:
(a) Alter, change or amend the preferenced, rights or privileges of holders
of the Class B Convertible Preferred Stock contained herein or in the By-laws of
the Corporation elsewhere as in effect on the date that this Certificate of
Designation is filed with the Secretary of the State of Delaware; or
(b) Alter, change or amend the
<PAGE> 54
Certificate of Incorporation or the By-laws of the Corporation or otherwise
provide for the authorization and issuance of any additional class or series of
capital stock, including additional shares of Preferred Stock having any rights,
preferences or priorities equivalent to or any greater than (either in any
particular aspect or in the aggregate) the Class B Convertible Preferred Stock;
or
(c) Agree to a voluntary liquidation, dissolution, or winding-up of the
Corporation.
D. Voting Rights. In addition to the voting rights granted to the holders
of the Class B Convertible Preferred Stock by the laws of the State of Delaware
and by Section C hereof, each holder of Class B Convertible Preferred Stock
shall be entitled at each meeting of the stockholders of the Corporation 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 is convertible on the
record date with respect to such meeting for each share of such stock
outstanding in his name on the books of the Corporation.
E. Conversion.
(a) Conversion by Holder. Each share of Class B Convertible Preferred Stock
shall be convertible, at the option of the holder thereof, at any time after the
date of issuance into one share of Common Stock, at the conversion price and
subject to adjustment as described below.
Before any holder of Class B Convertible Preferred Stock shall be entitled
to convert the same into shares of Common Stock, the holders shall (i) surrender
the Certificate(s) therefor, duly endorsed, at the office of the Corporation or
of any transfer agent for the Common Stock, or (ii) notify the Corporation or
any transfer agent that such certificate has been lost, stolen or destroyed and
execute an agreement satisfactory to the Corporation to indemnify the
Corporation against any loss incurred by it in connection therewith, and shall
give written notice to the Corporation at such office that the holder elects to
convert the same and shall state therein the number of shares of Class B
Convertible Preferred Stock being converted. Thereupon, the Corporation shall
promptly issue and deliver at such office to such holder(s) of Class B
<PAGE> 55
Convertible Preferred Stock a certificate(s) for the number of shares of (Common
Stock to which the holder shall be entitled.
Such conversion shall be deemed to have been made immediately prior to the
closing of business on the date of such surrender of the shares of Class B
Convertible Preferred Stock to be converted or delivery of the aforementioned
Indemnification Agreement, and the person or persons entitled to receive these
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on such
date.
(b) Conversion Price and Conversion Formula. The conversion price per share
for Class B Convertible Preferred Stock (the "Conversion Price") shall be $2.00,
subject to adjustment from time to time as provided herein. Each share of Class
B Convertible Preferred stock shall be convertible into that number of shares of
Common Stock that results from dividing $2.00 by the Conversion Price in effect
at the time of conversion (the "Conversion Formula").
(c) Adjustments of Conversion Price for Stock Splits and Combinations. If
the Corporation shall at any time, or from time to time, after the date of the
issuance of the Class B Convertible Preferred Stock, effect a subdivision of the
outstanding Common Stock, the Conversion Price in effect immediately before the
subdivision shall be proportionately decreased, and conversely, if the
Corporation shall at any time or from time to time after the original date of
the Class B Convertible Preferred Stock combine the outstanding shares of Common
Stock, the Conversion Price in effect immediately before the combination shall
be proportionately increased. Any adjustment at the close of business on the
date the subdivision or combination becomes effective.
(d) Adjustment of Conversion Price for Certain Dividends and Distributions.
If the Corporation at any time, or from time to time, after the date of the
issuance of the Class B Convertible Preferred Stock, shall make or issue, or fix
a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in additional shares of Common
Stock, then, and in each such event, the Conversion Price then in effect shall
be decreased as of the date of such issuance or, at the time or upon the event
such a record
<PAGE> 56
date shall have been fixed, as of the close of business on such record date (the
"Record Date"), by multiplying the Conversion Price then in effect by a
fraction, determined as follows:
(i) The numerator of which shall be the total number of shares of Common
Stock issued and outstanding immediately prior to the Record Date; and
(ii) The denominator of which shall be the total number of shares of Common
Stock issued and outstanding immediately prior to the Record Date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, if such Record Date shall have been fixed and
such dividend is riot fully paid or if such distribution is not fully made on
the date fixed therefor, the Conversion shall be recomputed accordingly as of
the closing of the business on such Record Date and thereafter the Conversion
Price for such Class B Convertible Preferred Stock shall be adjusted pursuant to
this Section (d) at the time of such action, or payment of such dividends or
distributions.
(e) Adjustments for Reclassification, Exchange or Substitution. If the
Common Stock issuable upon the conversion of the Class B Convertible Preferred
Stock shall be changed into the same or different number of shares of a
different class or classes of stock, or other securities or property, whether by
reclassification, exchange, substitution or other transaction having similar
effect (other than a subdivision or combination of shares or stock dividend
provided for above, or a reorganization, merger, consolidation, or sale of
assets provide for elsewhere in this Section E) then and in each such event the
holder of each shares of Class B Convertible Preferred Stock shall have the
right thereafter to convert such shares into the kind and amount of shares of
stock and other securities and property receivable upon such reclassification,
exchange, substitution or other transaction having similar effect, as did or
shall the holders of shares of Class B Convertible Preferred Stock had been
converted into Common Stock immediately prior to the Record Date with respect to
such reclassification, exchange or substitution, all subject to further
adjustments as provided herein.
(f) Reorganization, Mergers,
<PAGE> 57
Consolidations, or Sales of Assets. If at any time, or from time to time, there
shall be (other than a subdivision, combination, reclassification, exchange or
substitution or shares provided for elsewhere in this Section E) a capital
reorganization involving a merger or consolidation of the Corporation with or
into another corporation, or the sale or transfer of all or substantially all of
the Corporation's properties and assets to any other person (a "sale"), then, as
a part of such reorganization, merger, consolidation or sale, there shall be due
and adequate provision shall be made so that the holders of the Class B
Convertible Preferred Stock shall thereafter be entitled to receipt upon
conversion of the Class B Convertible Preferred Stock, the number of shares or
other securities or property of the Corporation, or of the successor corporation
resulting from such merger, reorganization, consolidation or sale, as to which a
holder of Common Stock deliverable upon conversion would have been entitled to
receive as a result of such reorganization, merger, consolidation, or sale. In
any such case, appropriate adjustment shall be made in respect to the rights of
the holders of the Class B Convertible Preferred Stock after the reorganization,
merger, consolidation or sale to the end that the provisions of this Section E
(including adjustment of the Conversion Price then in effect and the number of
shares purchasable upon conversion of the Class B Convertible Preferred Stock)
shall be applicable after that event as nearly equivalent as may be practicable.
(g) Sale of Shares Below Conversion Price. If at any time, or from time to
time, after the date of issuance of the Class B Convertible Preferred Stock and
while any shares of the Class B Convertible Preferred Stock are outstanding, the
Corporation shall issue or sell Additional Shares of Common Stock (as
hereinafter defined) or options, warrants, convertible securities or other
rights to acquire Common Stock other than as (i) a dividend or other
distribution of any class of stock permitted by subsection (d) above, (ii) a
subdivision or combination of shares of Common Stock as provided for in
subsection (c) above, or (iii) a reclassification, exchange, substitution or
other transaction having similar effect as provided for in subsection (e)
above, for a consideration per share less than the Conversion Price in effect
immediately prior to the event, or without consideration, then, and thereafter
successively upon each such
<PAGE> 58
issuance, the Conversion 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 Conversion Price in effect immediately prior to such issuance, plus (ii)
the consideration, if any, received by the Corporation upon such issuance by (b)
the total number of shares of Common stock outstanding immediately after such
issuance provided, however, that no adjustment otherwise required hereunder,
shall be made unless the reduction in Conversion Price required by this
subsection (g), together with all prior reductions which have not resulted in an
adjustment to the Conversion Price, shall result in a reduction of the
Conversion Price by at least $0.05 per share.
For purposes of this subsection (g), the price received by the Corporation
for such Additional Shares of Common Stock shall be computed as follows:
(x) Cash and Property. If such consideration consists of:
(a) cash, the consideration shall be the aggregate amount of cash received
by the Corporation;
(b) property (including intellectual property) other than cash, the
consideration shall be the fair market value thereof at the time of such issue,
as determined in good faith by the Board; and
(c) part cash or part property and/or stock or other securities of the
Corporation or both, the consideration shall be the amount equal to the sum of
the cash and fair market value of the property actually received by the
Corporation computed consistently with the prior paragraphs herein and
determined in good faith by the Board.
(y) Options. Shares of the Corporation called for pursuant to options
and warrants which are held as of the date of a conversion of Class B
Convertible Preferred Stock by option or warrant holders, and which are not
exercised, and have not terminated or lapsed, at the time of such conversion,
will be deemed to have been issued, for purposes of the definitions and
calculations hereof, at a price per share determined by dividing;
<PAGE> 59
(a) the total amount, if any, received and receivable by the Corporation as
consideration for the issuance of such options or warrants, plus the minimum
aggregate amount of additional consideration (as set forth in the instrument
relating thereto, without regard to any provision contained therein for a
subsequent adjustment of such consideration) payable to the Corporation upon the
exercise of such options or warrants, by
(b) the maximum number of such shares (as set forth in the instrument
relating thereto, without regard to any provisions contained therein for a
subsequent adjustment of such number) issuable upon the exercise of such options
or warrants.
(h) Definitions. The terms "Additional Shares of Common Stock" as used
therein shall mean all shares of Common Stock issued or deemed issued by the
Corporation after the issuance date of the Class B Convertible Preferred Stock,
whether or not subsequently reacquired or retired by the Corporation, other than
shares of Common Stock issued (i) upon conversion of the Class A or Class B
Convertible Preferred Stock, (ii) upon conversion of the Corporation's 12 1/2%
Class A Convertible Subordinated Debentures due in 1996, or any options or
warrants or (iii) upon exercise of options or warrants or (iv) upon exercise of
options granted to purchase shares of Common Stock of the Corporation under its
stock option plans.
(i) Accountants' Certificate of Adjustment. In each case of an adjustment
of readjustment of the Conversion Price for the number of shares of Common Stock
or the securities issuable upon conversion of the Class B convertible Preferred
Stock, the Corporation, at its expense, shall cause independent certified public
accountants of recognized standing selected by the Corporation (who may be the
independent certified public accountants then auditing the books of the
Corporation) to compute each adjustment or readjustment in accordance herewith
and prepare a certificate showing such adjustment or readjustment, and shall
mail such certificate by first class mail, postage prepaid, to each registered
holder of Class B Convertible preferred stock at the holder's address as shown
in the Corporation's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based,
<PAGE> 60
including a statement of (i) the consideration received or to be received by the
Corporation for any Additional Shares of Common Stock issued or sold, (ii) the
Conversion Price both before and after such adjustment or readjustment, and
(iii) the number of Additional Shares of Common Stock and the type and amount,
if any, of other property which at the time would be received upon conversion of
the Class B Convertible Preferred Stock.
(j) Fractional Shares. No fractional shares of Common Stock shall be issued
upon conversion of Class B Convertible Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay, in cash, an amount equal to the product of (i) such
fraction of a share, multiplied by (ii) the fair market value of one share of
the Corporation's Common Stock on the date of conversion, as determined in good
faith by the Board.
(k) Reservation of Stock Issuable Upon Conversion. The Corporation shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the conversion of the
shares of the Class B Convertible Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of Class B Convertible Preferred Stock, and if at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all the outstanding shares of Class B
Convertible Preferred Stock, the Corporation will, subject to the requirements
of applicable state law, take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares of Common Stock as shall be sufficient for
such purposes.
F. Nonassessable Status of Stock. All the shares of Class B Convertible
Preferred Stock for which the full consideration determined by the Board of
Directors (which shall be not less than the par value of such shares) has been
paid or delivered, in cash or property in accordance with the resolutions of the
Board of Directors authorizing the issuance of such shares, shall be deemed
fully paid stock and the holder of such shares shall not be liable for any
further call or assessment or any other
<PAGE> 61
payment thereon.
G. Redemption of Class B Convertible Preferred Stock.
Subject to the limitations of the laws of the State of Delaware, the
Corporation may, at any time after the average bid and offer price of
the Common Stock has been $3.00 or more for ninety (90) consecutive
trading days, as quoted on NASDAQ, or, if the Common Stock is not
quoted on NASDAQ during such period, the average of the bid and offer
prices quoted for such period in the pink sheets published by the
National Quotation Bureau, redeem all or a portion of such shares of
Class B (Convertible Preferred Stock at a redemption price equal to
$2.00 per share, plus an amount equal to any accumulated and accrued
but unpaid dividends upon thirty (30) days written notice to the
holders of the Class B Convertible Preferred Stock. If less than all
of the outstanding shares of Class B Convertible Preferred Stock are
to be redeemed, the Corporation shall redeem from each holder of Class
B Convertible Preferred Stock on a pro rata basis.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands this 4th
day of December, 1991 and affirm that the statements made herein are true and
correct under the penalties of perjury.
BARRINGER TECHNOLOGIES, INC.
/s/ Stanley S. Binder
-----------------------------
Stanley S. Binder, President
Attest:
/s/ Denis R. Pinkernell
------------------------------
Denis R. Pinkernell, Secretary
<PAGE> 62
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
BARRINGER TECHNOLOGIES, INC.
Barringer Technologies, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify that:
FIRST: At a meeting of the Board of Directors of the Corporation
resolutions were adopted setting forth a proposed amendment to the Certificate
of Incorporation of the Corporation, declaring the said amendment to be
advisable and calling a meeting of the stockholders of the Corporation for
consideration thereof. The resolution setting forth the proposed amendment is as
follows:
RESOLVED, that the Certificate of Incorporation of the Corporation be
amended by changing Article TENTH to read and provide in its entirety as
follows:
"TENTH: (a) A director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of the law, (iii) under Section 174 of
the Delaware General Corporation Law, or (iv) for any transaction from
which the director derived an improper personal benefit. This Article shall
not limit the liability of a director for any act or omission occurring
prior to the date this Article TENTH becomes effective.
(b) The Corporation shall indemnify any person who is or was a
director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, to the fullest extent permitted by applicable law. The
determination as to whether such person has met the standard required for
indemnification shall be made in accordance with applicable law.
Expenses incurred by such director, officer, employee or agent in
defending a civil or criminal action, suit or proceeding shall be paid by
the
<PAGE> 63
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this Article
TENTH.
(c) The provisions of this Article TENTH shall be deemed to be a
contract between the Corporation and each person who serves as such
director, officer, employee or agent of the Corporation in any such
capacity at any time while this Article TENTH is in effect. No repeal or
modification of the foregoing provisions of this Article TENTH nor, to the
fullest extent permitted by law, any modification of law shall adversely
affect any right of protection of a director, officer, employee or agent of
the Corporation existing at the time of such repeal or modification."
SECOND: Thereafter, pursuant to resolution of its Board of Directors, the
annual meeting of the stockholders of the Corporation was duly called and held,
upon notice in accordance with Section 222 of the General Corporation Law of the
State of Delaware, at which meeting the holders of the majority of the
outstanding stock of the Corporation voted in favor of the amendment of the
Certificate of Incorporation as set forth herein.
THIRD: The amendment was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by its President and attested by its Secretary this 5th day of May, 1993.
BARRINGER TECHNOLOGIES, INC.
By: /s/ Stanley S. Binder
--------------------------------
Stanley S. Binder, President
ATTEST:
/s/ Kenneth S. Wood
- -------------------------------
Kenneth S. Wood, Secretary
<PAGE> 64
CERTIFICATE OF AMENDMENT
of
CERTIFICATE OF INCORPORATION
of
BARRINGER TECHNOLOGIES INC.
Barringer Technologies Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify that:
The following amendment to the Corporation's Certificate of Incorporation
approved by the Corporation's Board of Directors and stockholders was duly
adopted in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware:
"Section 1 of Article FOURTH of the Certificate of Incorporation, as
amended, of Barringer Technologies Inc. is hereby amended to read in its
entirety as follows:
FOURTH: Section 1. Authorized Shares. The total number of shares of
stock which the Corporation shall have authority to issue is 12,000,000
shares, consisting of 7,000,000 shares of Common Stock, having a par value
of $.01 per share ("Common Stock"), 1,000,000 shares of Convertible
Preferred Stock, having a par value of $1.25 per share ("Convertible
Preferred Stock"), and 4,000,000 shares of Preferred Stock, having a par
value of $2.00 per share ("Preferred Stock").
Effective at 11:58 p.m. (the "Effective Time") on September 22, 1995
(the "Effective Date"), each four (4) shares of authorized Common Stock
issued and outstanding or held in the treasury of the Corporation
immediately prior to the Effective Time shall automatically be reclassified
and changed into one (1) validly issued, fully paid and nonassessable share
of Common Stock (a "New Share"). Each holder of record of shares of Common
Stock so reclassified and changed shall at the Effective Time automatically
become the record owner of the number of New Shares as shall result from
such reclassification and change. Each such record holder shall be entitled
to receive, upon the surrender of the certificate or certificates
representing the shares of Common Stock so reclassified and changed at the
office of the transfer agent of the Corporation in such form and
accompanied by such documents, if any, as may be prescribed by the transfer
agent of the Corporation, a new certificate or certificates representing
the number of New Shares of which he or she is the record owner after
giving effect to the provisions of this Article FOURTH. The Corporation
shall not issue fractional New Shares. Stockholders entitled to receive
fractional New Shares shall receive, in lieu thereof, cash in an amount
equal to the product of (a) the number of shares of the Common Stock held
by such holder immediately prior to the Effective Time which have not been
<PAGE> 65
classified into a whole New Share, (b) multiplied by (i) the average of the
closing bid and closing asked prices of the Common Stock as reported on the
NASDAQ Small Capitalization Market on the Effective Date, or (ii) if the
Common Stock is not listed on the NASDAQ Small Capitalization Market on the
Effective Date, the average of the bid and offer prices on the last day
prior to the Effective Date on which such prices were published by the
National Quotation Bureau."
In accordance with Section 103(e) of the General Corporation Law of the
State of Delaware, the amendment set forth in this Certificate shall not become
effective until 11:58 p.m. on September 22, 1995.
IN WITNESS WHEREOF, Barringer Technologies Inc. has caused this Certificate
to be signed and attested by its duly authorized officers, this day of
September, 1995.
BARRINGER TECHNOLOGIES INC.
By: /s/ Richard S. Rosenfeld
----------------------------------
Richard S. Rosenfeld,
Vice President
ATTEST:
/s/ Kenneth S. Wood
----------------------------------
Kenneth S. Wood, Secretary
<PAGE> 66
CERTIFICATE OF AMENDMENT
of
CERTIFICATE OF INCORPORATION
of
BARRINGER TECHNOLOGIES INC.
Barringer Technologies Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify that:
The following amendment to the Corporation's Certificate of Incorporation,
approved by the Corporation's Board of Directors and stockholders, was duly
adopted in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware:
"Section 1 of Article FOURTH of the Certificate of Incorporation, as
amended, of Barringer Technologies Inc. is hereby amended to read in its
entirety as follows:
FOURTH: Section 1. Authorized Shares. The total number of shares of stock
which the Corporation shall have authority to issue is 25,000,000 shares,
consisting of 20,000,000 shares of Common Stock, having a par value of $.01 per
share ("Common Stock"), 1,000,000 shares of Convertible Preferred Stock, having
a par value of $1.25 per share ("Convertible Preferred Stock"), and 4,000,000
shares of Preferred Stock, having a par value of $2.00 per share ("Preferred
Stock")."
IN WITNESS WHEREOF, Barringer Technologies Inc. has caused this Certificate
to be signed and attested by its duly authorized officers, this 13th day of May,
1997.
BARRINGER TECHNOLOGIES INC.
By: /s/ Stanley S. Binder
----------------------------
Stanley S. Binder,
Chairman of the Board, President
and Chief Executive Officer
ATTEST:
/s/ Kenneth S. Wood
- -----------------------------
Kenneth S. Wood, Secretary
<PAGE> 1
Exhibit 10.9
BARRINGER TECHNOLOGIES INC.
1997 STOCK COMPENSATION PROGRAM
A. Purposes. This Barringer Technologies Inc. 1997 Stock
Compensation Program (the "Program") is intended to promote the interests of
Barringer Technologies Inc. (the "Company"), its direct and indirect present and
future subsidiaries (the "Subsidiaries"), and its stockholders, by providing
eligible persons with the opportunity to acquire a proprietary interest, or to
increase their proprietary interest, in the Company as an incentive to remain in
the service of the Company.
B. Elements of the Program. In order to maintain flexibility
in the award of benefits, the Program is comprised of six parts -- the Incentive
Stock Option Plan ("Incentive Plan"), the Supplemental Stock Option Plan
("Supplemental Plan"), the Stock Appreciation Rights Plan ("SAR Plan"), the
Performance Share Plan ("Performance Share Plan"), the Stock Bonus Plan ("Stock
Bonus Plan") and the Independent Director Plan (the "Independent Director
Plan"). Copies of the Incentive Plan, Supplemental Plan, SAR Plan, Performance
Share Plan, Stock Bonus Plan and Independent Director Plan are attached hereto
as Parts I, II, III, IV, V, and VI, respectively, and are collectively referred
to herein as the "Plans." The grant of an option, stock appreciation right,
performance share, or stock bonus under one of the Plans shall not be construed
to prohibit the grant of an option, stock appreciation right, performance share,
or stock bonus under any of the other Plans.
C. Applicability of General Provisions. Unless any Plan
specifically indicates to the contrary, all Plans shall be subject to the
General Provisions of the Program set forth below under the heading "General
Provisions of Stock Compensation Program."
<PAGE> 2
GENERAL PROVISIONS OF STOCK COMPENSATION PROGRAM
Article 1. Administration. The Program shall be administered
by the Board of Directors of the Company (the "Board of Directors") or any duly
created committee appointed by the Board of Directors and charged with
administration of the Program. The Board of Directors, or any duly appointed
committee, when acting to administer the Program, is referred to as the "Program
Administrator." Any action of the Program Administrator shall be taken by
majority vote at a meeting or by unanimous written consent of all members
without a meeting. No Program Administrator or member of the Board of Directors
shall be liable for any action or determination made in good faith with respect
to the Program or with respect to any option, stock appreciation right,
performance share, or stock bonus granted thereunder. Notwithstanding any other
provision of the Program, administration of the Independent Director Plan, set
forth as Part VI of this Program, shall be self-executing in accordance with the
terms of the Independent Director Plan, and no Program Administrator shall
exercise any discretionary functions with respect to option grants made under
such Independent Director Plan.
Article 2. Authority of Program Administrator. Subject to the
other provisions of this Program, and with a view to effecting its purpose, the
Program Administrator shall have the authority: (a) to construe and interpret
the Program; (b) to define the terms used herein; (c) to prescribe, amend, and
rescind rules and regulations relating to the Program; (d) to determine to whom
options, stock appreciation rights, performance shares, and stock bonuses shall
be granted under the Program; (e) to determine the time or times at which
options, stock appreciation rights, performance shares, or stock bonuses shall
be granted under the Program; (f) to determine the number of shares subject to
any discretionary option or stock appreciation right under the Program and the
number of shares to be awarded as performance shares or stock bonuses under the
Program, as well as the option price and the duration of each option, stock
appreciation right, performance share and stock bonus, and any other terms and
conditions of options, stock appreciation rights, performance shares, and stock
bonuses; and (g) to make any other determinations necessary or advisable for the
administration of the Program and to do everything necessary or appropriate to
administer the Program. All decisions, determinations and interpretations made
by the Program Administrator shall be binding and conclusive on all participants
in the Program and on their legal representatives, heirs, and beneficiaries.
Article 3. Maximum Number of Shares Subject to the Program.
The maximum aggregate number of shares of the Company's Common Stock, par value
$.01 per share ("Common Stock"), available pursuant to the Program, subject to
adjustment as provided in Article 6 hereof, shall be 600,000 shares of Common
Stock. Up to 500,000 of such shares may be issued under any Plan that is part of
the Program other than the Independent Director Plan. Up to 100,000 shares may
be issued under the Independent Director Plan. If any of the options or stock
appreciation rights granted under the Program expire or terminate for any reason
before they have been exercised in full, the unissued shares subject to those
expired or terminated options and/or stock appreciation rights shall again be
available for the purposes of the Program. If the performance objectives
associated with the grant of any performance shares are not achieved within the
specified performance objective period, or if the performance share grant
terminates for any reason before the performance objective date arrives, the
shares of Common Stock associated with such performance shares shall again be
available for the purposes of the Program. If any stock provided to a recipient
as a stock bonus is forfeited, the shares of Common Stock so forfeited shall
again be available for purposes of the Program. Any shares of Common Stock
delivered pursuant to the Program may consist, in whole or in part, of newly
issued shares or treasury shares.
Article 4. Eligibility and Participation. All employees of the
Company and the Subsidiaries, whether or not officers or directors of the
Company or the Subsidiaries, all consultants of the Company and the
Subsidiaries, whether or not directors of the Company or the Subsidiaries, and
all non-employee directors of the Company shall be eligible to participate in
the Program; provided, however, that (i) only employees of the Company or the
Subsidiaries may participate in the Incentive Plan, and (ii) only Independent
Directors (as defined in the Independent Director Plan) may participate in the
Independent Director Plan. The term "employee" shall include any person who has
agreed to become an employee and the term "consultant" shall include any person
who has agreed to become a consultant.
<PAGE> 3
Article 5. Effective Date and Term of Program. The Program
shall become effective upon its adoption by the Board of Directors and the
stockholders of the Company; provided, however, that awards may be granted under
the Program prior to obtaining stockholder approval of the Program so long as
such awards are contingent upon such stockholder approval being obtained and may
not be exercised prior to such approval. The Program shall continue in effect
for a term of ten years from the date the Program is adopted by the Board of
Directors unless sooner terminated by the Board of Directors.
Article 6. Adjustments. Subject to the provisions of Articles
18 and 19, in the event that 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 stock split, an
appropriate and proportionate adjustment shall be made by the Program
Administrator in the maximum number and kind of shares as to which options,
stock appreciation rights, and performance shares may be granted under the
Program. A corresponding adjustment changing the number or kind of shares
allocated to unexercised options, stock appreciation rights, performance shares
and stock bonuses or portions thereof, which shall have been granted prior to
any such change, shall likewise be made. Any such adjustment in outstanding
options and stock appreciation rights shall be made without change in the
aggregate purchase price applicable to the unexercised portion of the option or
stock appreciation right but with a corresponding adjustment in the price for
each share or other unit of any security covered by the option or stock
appreciation right. In making any adjustment pursuant to this Article 6, any
fractional shares shall be disregarded.
Article 7. Termination and Amendment of Program. No options,
stock appreciation rights, performance shares or stock bonuses shall be granted
under the Program after the termination of the Program. The Program
Administrator may at any time amend or revise the terms of the Program or of any
outstanding option, stock appreciation right, performance share or stock bonus
issued under the Program, provided, however, that any stockholder approval
necessary or desirable in order to comply with Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, or with Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") or other applicable law or regulation
shall be obtained prior to the effectiveness of any such amendment or revision.
No amendment, suspension or termination of the Program or of any outstanding
option, stock appreciation right, performance share or stock bonus shall,
without the consent of the person who has received an option, stock appreciation
right, performance share or stock bonus, impair any of that person's rights or
obligations under any option, stock appreciation right, performance share or
stock bonus granted under the Program prior to such amendment, suspension or
termination without that person's written consent.
Article 8. Privileges of Stock Ownership Notwithstanding the
exercise of any options granted pursuant to the terms of the Program or the
achievement of any performance objective specified in any performance share
granted pursuant to the terms of the Program, no person shall have any of the
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 or achievement of his or
her performance objective until certificates representing the shares have been
issued and delivered. No adjustment shall be made for dividends or any other
distributions for which the record date is prior to the date on which any stock
certificate is issued pursuant to the Program.
Article 9. Reservation of Shares of Common Stock. The Company,
during the term of the Program, 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 the Program.
Article 10. Tax Withholding. The exercise of any option, stock
appreciation right or performance share, and the grant of any stock bonus under
the Program, are subject to the condition that, if at any time the Company shall
determine, in its discretion, that the satisfaction of withholding tax or other
withholding liabilities under any state or federal law 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, stock appreciation right or performance share or the grant of such stock
bonus or the elimination of the risk of forfeiture
<PAGE> 4
relating thereto shall not be effective unless such withholding tax or other
withholding liabilities shall have been satisfied in a manner acceptable to the
Company.
Article 11. Employment; Service as Director or Consultant.
Nothing in the Program gives to any person any right to continued employment by
or service as a director of or consultant to the Company or the Subsidiaries or
limits in any way the right of the Company, the Subsidiaries or the Company's
stockholders at any time to terminate or alter the terms of that employment or
service.
Article 12. Investment Letter; Restrictions or Obligation of
the Company to Issue Securities; Restrictive Legend. Any person acquiring Common
Stock or other securities of the Company pursuant to the Program, as a condition
precedent to receiving the shares of Common Stock or other securities, may be
required by the Program Administrator to submit a letter to the Company stating
that the shares of Common Stock or other securities are being acquired for
investment and not with a view to the distribution thereof. The Company shall
not be obligated to sell or issue any shares of Common Stock or other securities
pursuant to the Program unless, on the date of sale and issuance thereof, the
shares of Common Stock or other securities are either registered under the
Securities Act of 1933, as amended, and all applicable state securities laws, or
exempt from registration thereunder. All shares of Common Stock and other
securities issued pursuant to the Program shall bear a restrictive legend
summarizing the restrictions on transferability applicable thereto, including
those imposed by federal and state securities laws.
Article 13. Covenant Against Competition. The Program
Administrator shall have the right to condition the award to an employee of any
option, stock appreciation right, performance share, or stock bonus under the
Program upon the recipient's execution and delivery to the Company of an
agreement not to compete with the Company during the recipient's employment and
for such period thereafter as shall be determined by the Program Administrator.
Such covenant against competition shall be in a form satisfactory to the Program
Administrator.
Article 14. Rights Upon Termination. If a recipient of an
award under the Program ceases to be a director of the Company or to be employed
by or to provide consulting services to the Company or any Subsidiary (or a
corporation or a parent or subsidiary of such corporation issuing or assuming a
stock option in a transaction to which Section 424(a) of the Code applies), as
the case may be, for any reason other than death or disability, then, unless any
other provision of the Program provides for earlier termination:
(a) subject to Article 21, all options or stock appreciation
rights (other than Naked Rights) shall terminate immediately in the
event the recipient's service or employment is terminated for cause and
in all other circumstances may be exercised, to the extent exercisable
on the date of termination, until (i) three months after the date of
termination in the case of grants under the Independent Director Plan,
and (ii) 30 days after the date of termination in all other cases;
provided, however, that the Program Administrator may, in its
discretion, allow such options or stock appreciation rights (other than
Naked Rights) to be exercised (to the extent exercisable on the date of
termination) at any time within three months after the date of
termination;
(b) subject to Section 5(b) of the SAR Plan, all Naked Rights
not payable on the date of termination of employment shall terminate
immediately;
(c) all performance share awards shall terminate immediately
unless the performance objectives have been achieved and the
performance objective period has expired; and
(d) all stock bonuses which are subject to forfeiture shall be
forfeited as of the date of termination.
Article 15. Rights Upon Disability. If a recipient becomes
disabled, within the meaning of Section 22(e)(3) of the Code, while serving as a
director of the Company or while employed by or rendering consulting services to
the Company or any Subsidiary (or a corporation or a parent or subsidiary of
such
<PAGE> 5
corporation issuing or assuming a stock option in a transaction to which
Section 424(a) of the Code applies), as the case may be, then, unless any other
provision of the Program provides for earlier termination:
(a) subject to Article 21, all options or stock appreciation
rights (other than Naked Rights) may be exercised, to the extent
exercisable on the date of termination, at any time within one year
after the date of termination due to disability;
(b) all Naked Rights shall be fully paid by the Company as of
the date of disability;
(c) all performance share awards for which all performance
objectives have been achieved (other than continued employment or
service on the Vesting Date) shall be paid in full by the Company; all
other performance shares shall terminate immediately; and
(d) all stock bonuses which are subject to forfeiture shall be
forfeited as of the date of disability.
Article 16. Rights Upon Death of Recipient. If a recipient
dies while serving as a director of the Company or while employed by or
rendering consulting services to the Company or any Subsidiary (or a corporation
or a parent or subsidiary of such corporation issuing or assuming a stock option
in a transaction to which Section 424(a) of the Code applies), as the case may
be, then, unless any other provision of the Program provides for earlier
termination:
(a) subject to Article 21, all options or stock appreciation
rights (other than Naked Rights) may be exercised by the person or
persons to whom the recipient's rights shall pass by will or by the
laws of descent and distribution, to the extent exercisable on the date
of death, at any time within one year after the date of death, unless
any other provision of the Program provides for earlier termination;
(b) all Naked Rights shall be fully paid by the Company as of
the date of death;
(c) all performance share awards for which all performance
objectives have been achieved (other than continued employment or
service on the Vesting Date) shall be paid in full by the Company; all
other performance share awards shall terminate immediately; and
(d) all stock bonuses which are subject to forfeiture shall be
forfeited as of the date of death.
Article 17. Transferability. Options and stock appreciation
rights granted under the Program may not be sold, pledged, assigned or
transferred in any manner by the recipient otherwise than by will or by the laws
of descent and distribution and shall be exercisable (a) during the recipient's
lifetime only by the recipient and (b) after the recipient's death only by the
recipient's executor, administrator or personal representative, provided,
however that (i) the Program Administrator may permit the recipient of a
non-incentive stock option under the Supplemental Plan to transfer the option to
a family member or a trust created for the benefit of family members and (ii)
recipients of options under the Independent Director Plan may transfer such
options to a family member or a trust created for the benefit of family members.
In the case of such a transfer, the transferee's rights and obligations with
respect to the option shall be determined by reference to the recipient and the
recipient's rights and obligations with respect to the option had no transfer
been made. The recipient shall remain obligated pursuant to Articles 10 and 12
hereunder if required by applicable law. Common Stock which represents either
performance shares prior to the satisfaction of the stated performance
objectives and the expiration of the stated performance objective periods or
stock bonus shares prior to the time that they are no longer subject to risk of
forfeiture may not be sold, pledged, assigned or transferred in any manner.
Article 18 Change in Control. All options granted pursuant to
the Independent Director Plan shall become immediately exercisable upon the
occurrence of a Change in Control Event. With respect to other awards, the
Program Administrator shall have the authority to provide, either at the time
any option, stock appreciation right, performance share or stock bonus is
granted or thereafter, that an option or stock appreciation
<PAGE> 6
right shall become fully exercisable upon the occurrence of a Change in Control
Event or that all restrictions, performance objectives, performance objective
periods and risks of forfeiture pertaining to a performance share or stock bonus
award shall lapse upon the occurrence of a Change in Control Event. As used in
the Program, 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 who (i) as of the effective date of the
Program constitute the Board of Directors (the "Original Directors"),
(ii) thereafter are elected to the Board of Directors and whose
election or nomination for election to the Board of Directors 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 (iii) are elected to the Board of Directors and whose
election or nomination for election to the Board of Directors 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 a majority of the members of the Board of
Directors;
(c) the stockholders of the Company shall approve a merger,
consolidation, recapitalization, or reorganization of the Company or
the Company shall consummate any such transaction if stockholder
approval is not sought or obtained, other than any such transaction
which would result in holders of outstanding voting securities of the
Company immediately prior to the transaction having Beneficial
Ownership of at least 50% of the total voting power represented by the
voting securities of the surviving entity outstanding immediately after
such transaction, with the voting power of each such continuing holder
relative to such other continuing holders being not altered
substantially in the transaction; or
(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 (i.e., 50% or more in value of the total assets of the
Company).
Article 19. Mandatory Exercise. Upon the occurrence of or in
anticipation of a contemplated Change in Control Event, the Company may give a
holder of an option or stock appreciation right written notice requiring such
person either (a) to exercise within a period of time established by the Company
after receipt of the notice each option and stock appreciation right to the
fullest extent exercisable at the end of that period, or (b) to surrender such
option or stock appreciation right or any unexercised portion thereof. Any
portion of such option or stock appreciation right which shall not have been
exercised in accordance with the provisions of the Program by the end of such
period shall automatically lapse irrevocably and the holder shall have no
further rights thereunder.
Article 20. Method of Exercise. Any holder of an option may
exercise his or her option from time to time by giving written notice thereof to
the Company at its principal office, together with payment in full for the
shares of Common Stock to be purchased. The date of such exercise shall be the
date on which the Company receives such notice. Such notice shall state the
number of shares to be purchased. The purchase price of any shares purchased
upon the exercise of any option granted pursuant to the Program shall be paid in
full at the time of exercise of the option by certified or bank cashier's check
payable to the order of the Company or, if permitted by the Program
Administrator, by shares of Common Stock which have been held by the optionee
for at least six months, or by a combination of checks and such shares of Common
Stock. The Program Administrator may, in its sole discretion, permit an optionee
to make "cashless exercise" arrangements, to the extent permitted by applicable
law, and may require optionees to utilize the services of a single broker
selected by the Program Administrator in connection with any cashless exercise.
No option may be exercised for a fraction of a share of Common Stock. If any
portion of the purchase price is paid in shares of Common Stock, those shares
<PAGE> 7
shall be valued at their then Fair Market Value as determined by the Program
Administrator in accordance with Section 4 of the Incentive Plan.
Article 21. Limitation. Notwithstanding any other provision of
the Program, (a) no option may be granted pursuant to the Program more than ten
years after the date on which the Program was adopted by the Board of Directors,
and (b) any option granted under the Program shall, by its terms, not be
exercisable more than ten years after the date of grant; provided, however, that
any option granted under the Independent Director Plan shall, by its terms, not
be exercisable more than five years after the date of grant.
Article 22. Sunday or Holiday. In the event that the time for
the performance of any action or the giving of any notice is called for under
the Program within a period of time which ends or falls on a Sunday or legal
holiday, such period shall be deemed to end or fall on the next day following
such Sunday or legal holiday which is not a Sunday or legal holiday.
Article 23. Governing Law. The Program shall be governed by
and construed in accordance with the laws of the State of New Jersey.
<PAGE> 8
PLAN I
BARRINGER TECHNOLOGIES INC.
INCENTIVE STOCK OPTION PLAN
SECTION 1. GENERAL. This Barringer Technologies Inc. Incentive Stock
Option Plan ("Incentive Plan") is Part I of the Company's Program. The
Company intends that options granted pursuant to the provisions of the
Incentive Plan will qualify and will be identified as "incentive stock
options" within the meaning of Section 422 of the Code. Unless any
provision herein indicates to the contrary, the Incentive Plan shall be
subject to the General Provisions of the Program.
SECTION 2. TERMS AND CONDITIONS. The Program Administrator may grant
incentive stock options to any person eligible under Article 4 of the
General Provisions. The terms and conditions of options granted under the
Incentive Plan may differ from one another as the Program Administrator
shall, in its discretion, determine, as long as all options granted under
the Incentive Plan satisfy the requirements of the Incentive Plan.
SECTION 3. DURATION OF OPTIONS. Each option and all rights thereunder
granted pursuant to the terms of the Incentive Plan shall expire on the
date determined by the Program Administrator, but in no event shall any
option granted under the Incentive Plan expire later than ten years from
the date on which the option is granted. Notwithstanding the foregoing,
any option granted under the Incentive Plan to any person who owns more
than 10% of the combined voting power of all classes of stock of the
Company or a Subsidiary shall expire no later than five years from the
date on which the option is granted.
SECTION 4. PURCHASE PRICE. The option price with respect to any
option granted pursuant to the Incentive Plan shall not be less than the
Fair Market Value of the shares on the date of the grant of the option;
except that the option price with respect to any option granted pursuant
to the Incentive Plan to any person who owns more than 10% of the combined
voting power of all classes of stock of the Company shall not be less than
110% of the Fair Market Value of the shares on the date the option is
granted. "Fair Market Value" shall mean the fair market value of the
Common Stock on the date of grant or other relevant date. If on such date
the Common Stock is listed on a stock exchange or is quoted on the
automated quotation system of NASDAQ, the Fair Market Value shall be the
closing sale price (or if such price is unavailable, the average of the
high bid price and the low asked price) on such date. If no such closing
sale price or bid and asked prices are available, the Fair Market Value
shall be determined in good faith by the Program Administrator in
accordance with generally accepted valuation principles and such other
factors as the Program Administrator reasonably deems relevant.
SECTION 5. MAXIMUM AMOUNT OF OPTIONS IN ANY CALENDAR YEAR. The
aggregate Fair Market Value of the Common Stock with respect to which
incentive stock options are exercisable for the first time by any employee
during any calendar year (under the terms of the Incentive Plan and all
incentive stock option plans of the Company and the Subsidiaries) shall
not exceed $100,000.
SECTION 6. EXERCISE OF OPTIONS. Unless otherwise provided by the
Program Administrator at the time of grant or unless the installment
provisions set forth herein are subsequently accelerated pursuant to
Article 18 of the General Provisions of the Program or otherwise by the
Program Administrator with respect to any one or more previously granted
options, options may only be exercised to the following extent during the
following periods of employment:
<TABLE>
<CAPTION>
MAXIMUM PERCENTAGE OF
SHARES COVERED BY
PERIOD FOLLOWING OPTION WHICH MAY BE
DATE OF GRANT PURCHASED
---------------- ---------------------
<S> <C>
Less than 12 months........................ 0%
12 months or more and less than 24 months.. 25%
24 months or more and less than 36 months.. 50%
36 months or more and less than 48 months.. 75%
48 months or more.......................... 100%
</TABLE>
<PAGE> 9
PLAN II
BARRINGER TECHNOLOGIES INC.
SUPPLEMENTAL STOCK OPTION PLAN
SECTION 1. GENERAL. This Barringer Technologies Inc. Supplemental
Stock Option Plan ("Supplemental Plan") is Part II of the Company's Program. Any
option granted pursuant to the Supplemental Plan shall not be an incentive stock
option as defined in Section 422 of the Code. Unless any provision herein
indicates to the contrary, this Supplemental Plan shall be subject to the
General Provisions of the Program.
SECTION 2. TERMS AND CONDITIONS. The Program Administrator may grant
supplemental stock options to any person eligible under Article 4 of the
General Provisions. The terms and conditions of options granted under the
Supplemental Plan may differ from one another as the Program Administrator
shall, in its discretion, determine, as long as all options granted under the
Supplemental Plan satisfy the requirements of the Supplemental Plan.
SECTION 3. DURATION OF OPTIONS. Each option and all rights thereunder
granted pursuant to the terms of the Supplemental Plan shall expire on the date
determined by the Program Administrator, but in no event shall any option
granted under the Supplemental Plan expire later than ten years from the date
on which the option is granted.
SECTION 4. PURCHASE PRICE. The option price with respect to any
option granted pursuant to the Supplemental Plan shall be determined by the
Program Administrator at the time of grant.
SECTION 5. EXERCISE OF OPTIONS. Unless otherwise provided by the
Program Administrator at the time of grant, or unless the installment
provisions set forth herein are subsequently accelerated pursuant to Article 18
of the General Provisions of the Program or otherwise by the Program
Administrator, with respect to any one or more previously granted options,
options may only be exercised to the following extent during the following
periods of employment or service:
<TABLE>
<CAPTION>
Maximum Percentage of
Shares Covered by
Period Following Option Which May be
Date of Grant Purchased
---------------- ---------------------
<S> <C>
Less than 12 months......................... 0%
12 months or more and less than 24 months... 25%
24 months or more and less than 36 months... 50%
36 months or more and less than 48 months... 75%
48 months or more........................... 100%
</TABLE>
<PAGE> 10
PLAN III
BARRINGER TECHNOLOGIES INC.
STOCK APPRECIATION RIGHTS PLAN
SECTION 1. GENERAL. This Barringer Technologies Inc. Stock
Appreciation Rights Plan ("SAR Plan") is Part III of the Company's Program.
SECTION 2. TERMS AND CONDITIONS. The Program Administrator may grant
stock appreciation rights to any person eligible under Article 4 of the General
Provisions. Stock appreciation rights may be granted either in tandem with
incentive stock options or supplemental stock options as described in Section 4
of the SAR Plan, or as naked stock appreciation rights as described in Section 5
of the SAR Plan.
SECTION 3. MODE OF PAYMENT. At the discretion of the Program
Administrator, payments to recipients upon exercise of stock appreciation
rights may be made in (a) cash by bank check, (b) shares of Common Stock having
a Fair Market Value (determined in the manner provided in Section 4 of the
Incentive Plan) equal to the amount of the payment, (c) a note in the amount of
the payment containing such terms as are approved by the Program Administrator,
or (d) any combination of the foregoing in an aggregate amount equal to the
amount of the payment.
SECTION 4. STOCK APPRECIATION RIGHTS IN TANDEM WITH INCENTIVE OR
SUPPLEMENTAL STOCK OPTIONS. A SAR granted in tandem with an incentive stock
option or a supplemental stock option (each, an "Option") shall be on the
following terms and conditions:
(a) Each SAR shall relate to a specific Option or portion of an
Option granted under the Incentive Plan or the Supplemental Plan, as the
case may be, and may be granted by the Program Administrator at the same
time that the Option is granted or at any time thereafter prior to the
last day on which the Option may be exercised.
(b) A SAR shall entitle a recipient, upon surrender of the
unexpired related Option, or a portion thereof, to receive from the
Company an amount equal to the excess of (i) the Fair Market Value
(determined in accordance with Section 4 of the Incentive Plan) of the
shares of Common Stock which the recipient would have been entitled to
purchase on that date pursuant to the portion of the Option surrendered,
over (ii) the amount which the recipient would have been required to pay
to purchase such shares upon exercise of such Option.
(c) A SAR shall be exercisable only for the same number of shares
of Common Stock, and only at the same times, as the Option to which it
relates. SARs shall be subject to such other terms and conditions as the
Program Administrator may specify.
(d) A SAR shall lapse at such time as the related Option is
exercised or lapses pursuant to the terms of the Program. On exercise of
the SAR, the related Option shall lapse as to the number of shares
exercised.
SECTION 5. NAKED STOCK APPRECIATION RIGHTS. SARs granted by the
Program Administrator as naked stock appreciation rights ("Naked Rights") shall
be subject to the following terms and conditions:
(a) The Program Administrator may award Naked Rights to recipients
for periods not exceeding ten years. Each Naked Right shall represent
the right to receive the excess of (i) the Fair Market Value of one
share of Common Stock (determined in accordance with Section 4 of the
Incentive Plan) on the date of exercise of the Naked Right, over (ii)
the Fair Market Value of one share of Common Stock (determined in
accordance with Section 4 of the Incentive Plan) on the date the Naked
Right was awarded to the recipient.
(b) Unless otherwise provided by the Program Administrator at the
time of award or unless the installment provisions set forth herein are
subsequently accelerated pursuant to Article 18 of the General
Provisions of the Program or otherwise by the Program Administrator with
respect to any one or more
<PAGE> 11
previously granted Naked Rights, Naked Rights may only be exercised to the
following extent during the following periods of employment or service:
MAXIMUM PERCENTAGE OF
PERIOD FOLLOWING NAKED RIGHTS WHICH
DATE OF GRANT MAY BE PURCHASED
---------------- ---------------------
Less than 12 months .......................... 0%
12 months or more and less than 24 months .... 25%
24 months or more and less than 36 months .... 50%
36 months or more and less than 48 months .... 75%
48 months or more ............................ 100%
(c) The Naked Rights solely measure and determine the amounts to be paid to
recipients upon exercise as provided in Section 5(a). Naked Rights do not
represent Common Stock or any right to receive Common Stock. The Company shall
not hold in trust or otherwise segregate amounts which may become payable to
recipients of Naked Rights; such funds shall be part of the general funds of
the Company. Naked Rights shall constitute an unfunded contingent promise to
make future payments to the recipient.
<PAGE> 12
PLAN IV
BARRINGER TECHNOLOGIES INC.
PERFORMANCE SHARE PLAN
SECTION 1. GENERAL. This Barringer Technologies Inc. Performance Share
Plan ("Performance Share Plan") is Part IV of the Company's Program. Unless any
provision herein indicates to the contrary, the Performance Share Plan shall be
subject to the General Provisions of the Program.
SECTION 2. TERMS AND CONDITIONS. The Program Administrator may grant
performance shares to any person eligible under Article 4 of the General
Provisions. Each performance share grant shall confer upon the recipient
thereof the right to receive a specified number of shares of Common Stock of
the Company contingent upon the achievement of specified performance objectives
within a specified performance objective period including, but not limited to,
the recipient's continued employment or service as a consultant through the
period set forth in Section 5 of this Performance Share Plan. At the time of an
award of a performance share, the Program Administrator shall specify the
performance objectives, the performance objective period or periods and the
period of duration of the performance share grant. Any performance shares
granted under this Plan shall constitute an unfunded promise to make future
payments to the affected person upon the completion of specified conditions.
SECTION 3. MODE OF PAYMENT. At the discretion of the Program
Administrator, payments of performance shares may be made in (a) shares of
Common Stock, (b) a check in an amount equal to the Fair Market Value
(determined in the manner provided in Section 4 of the Incentive Plan) of the
shares of Common Stock to which the performance share award relates, (c) a note
in the amount specified above in Section 3(b) containing such terms as are
approved by the Program Administrator, or (d) any combination of the foregoing
in the aggregate amount equal to the amount specified above in Section 3(b).
SECTION 4. PERFORMANCE OBJECTIVE PERIOD. The duration of the period
within which to achieve the performance objectives shall be determined by the
Program Administrator. The period may not be less than one year nor more than
ten years from the date that the performance share is granted. The Program
Administrator shall determine whether performance objectives have been met with
respect to each applicable performance objective period. Such determination
shall be made promptly after the end of each applicable performance objective
period, but in no event later than 90 days after the end of each applicable
performance objective period. All determinations by the Program Administrator
with respect to the achievement of performance objectives shall be final,
binding on and conclusive with respect to each recipient.
SECTION 5. VESTING OF PERFORMANCE SHARES. Unless otherwise provided by
the Program Administrator at the time of grant, or unless the installment
provisions set forth herein are subsequently accelerated pursuant to Article 18
of the General Provisions of the Program or otherwise by the Program
Administrator, with respect to any one or more previously granted performance
shares, the Company shall pay to the recipient on the date set forth in Column
1 below ("Vesting Date") the percentage of the recipient's performance share
award set forth in Column 2 below.
<TABLE>
<CAPTION>
COLUMN 1 COLUMN 2
VESTING DATE PERCENTAGE
- ------------ ----------
<S> <C>
1 year from Date of Grant...................................... 25%
2 years from Date of Grant..................................... 25%
3 years from Date of Grant..................................... 25%
4 years from Date of Grant..................................... 25%
</TABLE>
<PAGE> 13
PLAN V
BARRINGER TECHNOLOGIES INC.
STOCK BONUS PLAN
SECTION 1. GENERAL. This Barringer Technologies Inc. Stock Bonus Plan
("Stock Bonus Plan") is Part V of the Company's Program. Unless any provision
herein indicates to the contrary, the Stock Bonus Plan shall be subject to the
General Provisions of the Program.
SECTION 2. TERMS AND CONDITIONS. The Program Administrator may grant
bonuses in the form of shares of Common Stock to any person eligible under
Article 4 of the General Provisions. Each such stock bonus shall be forfeited by
the recipient in the event that the recipient's employment by or service as a
director or consultant to the Company or any Subsidiary terminates within the
time periods specified in Section 3 of the Stock Bonus Plan or within such other
time period as the Program Administrator also may provide at the time of grant.
The Program Administrator also may provide at the time of grant that the Common
Stock subject to the stock bonus shall be forfeited by the recipient upon the
occurrence of other events.
SECTION 3. FORFEITURE OF BONUS SHARES. Unless otherwise provided by
the Program Administrator at the time of grant, or unless the installment
provisions set forth herein are subsequently accelerated pursuant to Article 18
of the General Provisions of the Program or otherwise by the Program
Administrator with respect to any one or more previously granted bonus shares,
the percentage set forth in Column 2 below of shares of Common Stock issued as
a stock bonus shall be forfeited and transferred back to the Company by the
recipient without payment of any consideration from the Company if the
recipient's employment by or service as a director or consultant to the Company
or any Subsidiary is terminated for any reason during the time periods
specified in Column 1 below:
COLUMN 1 COLUMN 2
EMPLOYMENT OR SERVICE PERCENTAGE OF BONUS
TERMINATED WITHIN SHARES WHICH ARE FORFEITABLE
--------------------- ----------------------------
First 12 months after grant ........... 100%
First 24 months after grant ........... 75%
First 36 months after grant ........... 50%
First 48 months after grant ........... 25%
Beyond 48 months after grant .......... 0%
SECTION 4. RIGHTS AS A STOCKHOLDER; STOCK CERTIFICATES. A recipient
shall have rights as a stockholder with respect to any shares of Common Stock
received as a stock bonus represented by a stock certificate issued in his name
even though all or a portion of such shares remains subject to a risk of
forfeiture hereunder, except that shares subject to forfeiture shall not be
transferable. Stock certificates representing such shares which remain subject
to forfeiture together with a related stock power shall be held by the Company,
and shall be canceled and returned to the Company's treasury if thereafter
forfeited. Stock certificates representing such shares which are vested and no
longer subject to forfeiture shall be delivered to the recipient.
<PAGE> 14
PLAN VI
BARRINGER TECHNOLOGIES INC.
INDEPENDENT DIRECTOR PLAN
SECTION 1. GENERAL. This Barringer Technologies Inc. Independent
Director Plan ("Independent Director Plan") is Part VI of the Company's
Program. Any option granted pursuant to this Independent Director Plan shall
not be an incentive stock option as defined in Section 422 of the Code. Unless
any provision herein indicates to the contrary, this Independent Director Plan
shall be subject to the General Provisions of the Program.
SECTION 2. TERMS AND CONDITIONS. Every year on the earlier of (i) the
date of the Company's annual meeting of stockholders, and (ii) June 1, the
Company shall grant to each Independent Director (as defined below) elected as
a director at such annual meeting (or nominated for election as a director by
the Board of Directors or any nominating committee thereof in the event that
such annual meeting does not occur prior to June 1), or, in the event that the
Board of Directors is divided into two or more classes, continuing or expected
to continue to serve as a director of the Company following such annual
meeting, an option to purchase 3,000 shares of Common Stock. As used in the
Independent Director Plan, the term "Independent Director" means any member of
the Board of Directors who, as of the relevant date of determination, has not
been a full-time employee of the Company or any Subsidiary for at least twelve
months preceding such date.
SECTION 3. DURATION OF OPTIONS. Each option and all rights thereunder
granted pursuant to the terms of the Independent Director Plan shall expire
five years from the date on which the option is granted. In addition, each
option shall be subject to early termination as provided in the Independent
Director Plan.
SECTION 4. PURCHASE PRICE. The option price with respect to any option
granted pursuant to the Independent Director Plan shall be the Fair Market
Value (determined in accordance with Section 4 of the Incentive Plan) of the
shares of Common Stock to which the option relates.
SECTION 5. EXERCISE OF OPTIONS.
(a) Options granted under the Independent Director Plan
shall become fully exercisable as to 100% of the shares of Common Stock
covered thereby one year after the date of grant, subject to
acceleration as set forth in Article 18 of the General Provisions of
Stock Compensation Program.
(b) Except as provided in the General Provisions of Stock
Compensation Program, no option may be exercised unless the holder
thereof is then a director of the Company.
(c) Other than as provided in the General Provisions of
Stock Compensation Program, options granted under the Independent
Director Plan shall not be affected by any change of duties or position
so long as the holder continues to be a director of the Company.
<PAGE> 1
1730 AIMCO BOULEVARD
MISSISSAUGA, ONTARIO
CANADA L4W 1V1
TEL: (905)238-8837
FAX:(905)238-3018
EXHIBIT 10.11
[BARRINGER LOGO]
25 July 1997
Mr. Keith Forgues
Director General
Laboratory and Scientific Service
Revenue Canada Customs and Excise
79 Bentley Ave.
Ottawa, Ontario
K1A OL5
Dear Keith:
Reference is hereby made to the Agreement, dated as of February 27, 1989, as
amended by Supplement Number 1, dated March 4, 1991, 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 (the "Agreement"), by and between Barringer Instruments Limited
("BIL") and Canadian Patents and Development Limited -- Societe Canadienne des
Brevets et D'Exploitation Limitee ("CPDL"). As you are aware, pursuant to an
Assignment of Agreement, dated January 2, 1992 (the "Assignment"), CPDL has
assigned its rights under the Agreement to Her Majesty the Queen in Right of
Canada as represented by the Minister of National Revenue (the "Department").
Capitalized terms used herein have the meanings ascribed thereto in the
Agreement unless otherwise defined herein.
Pursuant to the Agreement, the Department has granted to Barringer Research
Ltd., as the successor to BIL ("BRL"), the 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 to use
the Licensed Process, including the right to grant sublicenses thereof to
purchasers of Licensed Products (collectively, the "License"), subject to the
reservation of certain rights by the Canadian government. Under Section 10.6 of
the Agreement and because no patents were ever issued, this exclusive License
expires on March 31, 1999 (the "Expiration Date").
As previously discussed by us, the Department hereby grants to BRL the option,
exercisable at BRL's discretion, to extend the term of the exclusive License
(by extending the Expiration Date thereof) for additional one-year periods;
provided, that in no event shall BRL have the right, without the further
consent of the Department, to extend the Expiration Date beyond March 31, 2009.
BRL shall be deemed to have elected to extend the term of the exclusive License
for an additional one-year period unless BRL provides written notice to the
Department not less than 30 days prior to the then-current Expiration Date that
it elects not to exercise its option to extend the License. Such notice shall
be given
<PAGE> 2
Page 2
25 July 1997
Mr. Keith Forgues
as provided in Section 12 of the Agreement, as modified by the Assignment.
During any extension of the License, the terms of the Agreement and BRL's
exclusive License shall continue in full force and effect as if the original
Expiration Date (and any previous extension thereof) had not occurred.
In exchange for the grant of the option referred to above, BRL hereby agrees to
the following indemnification of the Crown, which indemnification shall be
deemed to be incorporated by reference into the Agreement and the License:
BRL 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 BRL or
by any of its clients or customers including any infringement or
alleged infringement of a patent or invention of any other kind of
intellectual property.
If the foregoing accurately summarizes our agreement, please so indicate by
executing a copy of this letter in the space provided below, at which time this
letter agreement will become a binding agreement between BRL and the
Department and shall inure to each of BRL and the Department their respective
successors and assigns. This letter agreement shall supersede the terms of the
letter agreement dated October 7, 1996, between BRL and the Department. This
letter agreement may be executed in counterparts, each of which shall be deemed
to be an original and all of which shall together constitute one and the same
instrument.
Yours sincerely,
BARRINGER RESEARCH LTD.
/s/ John H. Davies
- -------------------------
John H. Davies
President
cc: Dr. A. Lawrence, Revenue Canada Customs and Excise, Ottawa
ACCEPTED AND AGREED:
Dr. A. Lawrence Aug. 1, 1997
- ------------------------ -------------
Authorized Signatory Date
<PAGE> 1
Exhibit 11.1
BARRINGER TECHNOLOGIES INC.
EARNINGS PER SHARE
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRIMARY PER SHARE
------------------------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------ ---------------------------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income (loss) from continuing operations $ (2,633) $ (1,178) $ 2,059 $ 564 $ 2,220
Income (loss) from operation held for sale 68 351 - - -
Preferred dividend requirements (108) (82) (39) (24) (6)
Interest adjustment (1) - - - - -
------------ ------------ ------------ ------------ ------------
$ (2,673) $ (909) $ 2,020 $ 540 $ 2,254
============ ============ ============ ============ ============
Weighted average shares outstanding 2,827 3,283 3,695 3,483 5,423
Assumed exercise of outstanding options and
warrants n/a n/a 841 n/a n/a
Assumed conversion of preferred stock and
convertible subordinated debentures n/a n/a n/a n/a n/a
Assumed repurchase (treasury stock method) n/a n/a (315) n/a 753
------------ ------------ ------------ ------------ ------------
Revised share basis 2,827 3,283 4,221 3,483 6,176
============ ============ ============ ============ ============
Earnings per share:
Continuing operations $ (0.97) $ (0.38) $ 0.48 $ 0.16 $ 0.36
Income from operations held for sale 0.02 0.11 - - -
------------ ------------ ------------ ------------ ------------
Net income (loss) per share $ (0.95) $ (0.28) $ 0.48 $ 0.16 $ 0.36
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
FULLY-DILUTED PER SHARE
------------------------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------ ---------------------------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income (loss) from continuing operations $ (2,633) $ (1,178) $ 2,059 $ 564 $ 2,260
Income (loss) from operation held for sale 68 351 - -
Preferred dividend requirements (108) (82) (39) (6)
Interest adjustment (1) - - 27 17 -
------------ ------------ ------------ ------------ ------------
$ (2,673) $ (909) $ 2,047 $ 581 $ 2,254
============ ============ ============ ============ ============
Weighted average shares outstanding 2,827 3,283 3,694 3,485 5,423
Assumed exercise of outstanding options and
warrants n/a n/a 884 958 1,474
Assumed conversion of preferred stock and
convertible subordinated debentures n/a n/a 228 105 29
Assumed repurchase (treasury stock method) n/a n/a (199) (694) (538)
------------ ------------ ------------ ------------ ------------
Revised share basis 2,827 3,283 4,607 3,854 6,388
============ ============ ============ ============ ============
Earnings per share:
Continuing operations $ (0.97) $ (0.38) $ 0.44 $ 0.15 $ 0.35
Income from operations held for sale 0.02 0.11 - - -
------------ ------------ ------------ ------------ ------------
Net income (loss) per share $ (0.95) $ (0.28) $ 0.44 $ 0.15 $ 0.35
============ ============ ============ ============ ============
</TABLE>
1) Add back of interest on the 6% Convertible Subordinated Debentures assumed to
be converted as of July 10, 1996, the date of issuance of such debentures.
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Barringer Technologies Inc.
New Providence, New Jersey
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated February 12, 1997, relating to the
consolidated financial statements and schedule of Barringer Technologies Inc.
which is contained in that Prospectus.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO Seidman, LLP
BDO SEIDMAN, LLP
Woodbridge, New Jersey
August 7, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,896
<SECURITIES> 4,055
<RECEIVABLES> 6,509
<ALLOWANCES> 157
<INVENTORY> 3,424
<CURRENT-ASSETS> 19,253
<PP&E> 2,408
<DEPRECIATION> 1,342
<TOTAL-ASSETS> 20,385
<CURRENT-LIABILITIES> 2,839
<BONDS> 0
0
116
<COMMON> 55
<OTHER-SE> 17,254
<TOTAL-LIABILITY-AND-EQUITY> 20,385
<SALES> 9,438
<TOTAL-REVENUES> 9,438
<CGS> 3,955
<TOTAL-COSTS> 3,538
<OTHER-EXPENSES> (189)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5
<INCOME-PRETAX> 2,129
<INCOME-TAX> (131)
<INCOME-CONTINUING> 2,260
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,260
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.36
</TABLE>
