U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934.
For the fiscal year ended December 31, 1998
Commission File Number: 0-3207
Barringer Technologies Inc.
(Name of small business issuer in its charter)
Delaware 84-0720473
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
30 Technology Drive, Warren, NJ 07059
(Address, Including Zip Code, of Principal Executive Offices)
(908) 222 - 9100
(Issuer's Telephone Number)
Securities registered pursuant to Section 12(b) of the Exchange Act: NONE
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, par value $.01 per share
Common Stock Purchase Warrants
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes X No
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-K contained in this form and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by nonaffiliates computed
by reference to the price at which the stock was sold, or the average bid and
asked price of such stock, is $31,291,000 as of March 26, 1999.
State the number of shares of each of the issuer's classes of common stock,
outstanding as of the latest practicable date.
Outstanding as of March 26, 1999
Common Stock, $.01 par value 7,394,072
<PAGE>
TABLE OF CONTENTS
Page
PART I
Item 1. Business................................................ 3
Item 2. Properties.............................................. 8
Item 3. Legal Proceedings....................................... 8
Item 4. Submission of Matters to a Vote of Security Holders..... 9
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.. 9
Item 6. Selected Financial Data................................... 10
tem 7. Management's Discussion and Analysis...................... 11
Item 7A.Quantitative and Qualitative Disclosures About Market Risk. 17
Item 8. Financial Statements and Supplemental Data................. 17
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures....................... 17
PART III
Item 10. Directors and Executive Officers of the Registrant......... 18
Item 11. Executive Compensation..................................... 20
Item 12. Security Ownership of Certain Beneficial
Owners and Management...................................... 25
Item 13. Certain Relationships and Related Transactions............. 27
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K........................................ 27
Signatures........................................................... 31
<PAGE>
PART I
Item 1. Business.
Disclosure Regarding Forward Looking Statements
This Annual Report on Form 10-K contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, that are based
on the beliefs of the Company's management as well as assumptions made by and
information currently available to the Company's management. When used in this
Annual Report, the words "estimate," "project," "believe," "anticipate,"
"intend," "expect," "plan," predict," "may," "should," "will," the negative
thereof and similar expressions are intended to identify forward-looking
statements.
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 include, but are not limited to, the development
and growth of markets for the Company's products, the Company's dependence on
and the effect of governmental regulations on demand for the Company's products,
the impact of both foreign and domestic governmental budgeting decisions and the
timing of governmental expenditures, the reliance of the Company on its
IONSCAN(R) products, and the dependency of the Company on its ability to
successfully develop and market new products applications, the effects of
competition, and the effect of general economic and market conditions, as well
as conditions prevailing in the markets for the Company's products. Certain of
the factors summarized above are described in more detail in the Company's
Registration Statement on Form SB-2 (File no. 333-33129) and reference is hereby
made thereto for additional information with respect to the matters referenced
above. Other factors may be described from time to time in the Company's other
filings with the Securities and Exchange Commission, news releases and other
communications. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The Company
does not undertake any obligation to release publicly any revisions to these
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
Subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the cautionary statements set forth above and contained elsewhere in
this Form 10-K.
General
The Company was incorporated under the laws of the State of Delaware on
September 7, 1967.
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
current principal product, the IONSCAN(R), is a portable desktop system used in
explosives detection and drug interdiction applications. As of December 31,
1998, the Company had sold over 1,000 units in 53 countries.
The markets for the Company's IONSCAN(R) currently include aviation
security, other transport security, facilities protection, forensics, military,
corrections, customs and law enforcement. The Company's customers include the
<PAGE>
Federal Aviation Administration (the "FAA"), the U.S. Air Force, 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,
Australia 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 in
countries throughout the world, including Gatwick Airport and Heathrow Airport
in the United Kingdom and Kuala Lumpur Airport in Malaysia, as well as the
Eurotunnel. In the United States alone, there are over 250 IONSCAN(R)s installed
in 30 airports such as John F. Kennedy International Airport and Chicago O'Hare
International Airport in the United States. The Company believes that its
principal competitive advantages are the detection capability, reliability,
versatility, cost effectiveness, ease of use, portability and after-market
service 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, principally in reaction to heightened safety concerns caused
by the threat of terrorism and growing public awareness of drug-related criminal
activity. The Company believes that the deployment of advanced detection
equipment, such as the IONSCAN(R), will continue to increase as the acceptance
of using such equipment to combat these concerns increases. During 1998, the
Company received orders totaling $9.4 million from the FAA as part of the FAA's
publicly announced intention to further deploy advanced detection technology at
the nation's larger airports. In addition, during 1997 and 1998, the Company
sold a number of IONSCAN(R)s to the U.S. Air Force for use in securing certain
U.S. Air Force bases in the U.S. and abroad.
The Company believes that there are numerous potential applications for its
trace detection technology. Currently, the principal applications are explosives
detection and drug interdiction.
Market Overview
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, the Company believes that aviation authorities,
including the FAA, 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 bulk imaging equipment in
certain installations because of its relatively low cost, particularly in
smaller airports and in less developed countries.
<PAGE>
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 and an additional $100 million for
fiscal year 1999, which the FAA is using to deploy such technology in a limited
number of the 400 busiest U.S. airports. Also, since the enactment of the
Aviation Security Act of 1990, the FAA has funded over $200 million for research
and development of advanced explosives detection technologies.
Trace detection technology has a broad range of other explosives detection
uses, including other transport security, facilities protection, forensics,
military and law enforcement. Government agencies, military forces and private
businesses have deployed trace detection equipment at facilities, such as the
World Trade Center, military bases, 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 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, particularly amongst children under
18, a heightened public awareness of 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. The use of
conventional x-ray scanning, random searches and canines has had limited success
in suppressing 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.
Other Products
On April 30, 1998, the Company acquired DigiVision, Inc. ("DigiVision"), a
San Diego-based developer of video enhancement products for use in medical and
various industrial applications.
The Company has developed and introduced into the market place a Gas
Chromatography-IONSCAN(R) ("GC-IMS"). The GC-IMS is a fully transportable field
screening instrument that combines the technology of the Ionscan with the
separation capabilities of a gas chromatograph. This product will now allow for
dual analysis capability providing improved resolution and quantitative results.
Sales and Marketing
The Company sells its products through a direct sales organization
comprised of 27 sales and service people located at its headquarters in New
Jersey and at offices in San Diego, Toronto, London, Paris and Kuala Lumpur. In
addition, the Company utilizes a network of 63 independent sales and service
representatives located in the United States, Europe, the Middle East, Africa,
Asia, South America and Australia. 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) typically range from $40,000 to $55,000
per unit, depending principally on the configuration of the unit and the
<PAGE>
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 specialty instruments or its
contract research and development services. However, from time to time, the
Company responds to appropriate requests for proposals for such instruments and
services. As a result of increased sales of the IONSCAN(R), sales of specialty
instruments and contract research and development services is no longer material
to the Company's consolidated results of operations.
For the year ended December 31, 1998, the FAA accounted for approximately
46.3% of consolidated revenues of the Company. For the year ended December 31,
1997, two customers accounted for approximately 27.8% (14.8% and 13%) of
consolidated revenues of the Company. For the year ended December 31, 1996, one
customer accounted for approximately 11% of consolidated revenues of the
Company.
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 weeks of receiving an order. The Company follows the practice of
manufacturing to a sales forecast in order to have inventory available to meet
anticipated demand promptly. As a result, the Company has not historically
maintained 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, depending on the size and
timing of customer orders, the Company may, from time to time, have a backlog of
orders. At December 31, 1998, the Company had a backlog of $750,000. The Company
had no backlog at December 31, 1997. It is expected that the Company's backlog
will ship by March 31, 1999.
Manufacturing and Assembly
The Company assembles IONSCAN(R)s from components supplied to it by various
suppliers and parts manufactured internally. Once the IONSCAN(R) is assembled,
it is "burned in" for a period of time to identify weak electrical components
and to assure that it is functioning properly. 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 integrated
circuits, 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 material difficulty in obtaining any components or
sub-assemblies.
Competition
The Company competes with other entities, including Intelligent Detection
Systems, Inc., Ion Track Instruments Inc. and Thermedics Detection Inc., a
number of which may 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
<PAGE>
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, such as InVision Technologies, Inc. and Vivid Technologies, Inc.,
which utilize other types of detection technologies, such as enhanced x-ray and
CATSCAN, as well as with manufacturers of other IMS equipment and manufacturers
using other trace particle detection technologies, such as gas chromatography
and chemiluminescence. 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 bulk imaging 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.
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 in most applications, 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.
Product Development
The Company spent $2.4 million, $1.6 million and $780,000 on research and
development activities for the years ended December 31, 1998, 1997 and 1996,
respectively, of which $386,000, $849,000 and $551,000, respectively, 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.
During the second half of 1998, the Company introduced its latest
generation of IONSCAN(R). It is a one module unit that has enhanced ergonomics,
increased ease of use, decreased size and weight and lower manufacturing costs.
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 IMS 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).
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 license to use certain unpatented
technology developed from such work and pays Revenue Canada a royalty equal to
1.0% of IONSCAN(R) sales. The initial term of this license agreement expires on
<PAGE>
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.
Employees
As of December 31, 1998, the Company had 135 full-time employees, of whom
51 were engaged in manufacturing, 29 were engaged in product development
activities and 55 were engaged in sales, service and general administration.
Twenty-two employees have advanced degrees (including thirteen doctorates). None
of the Company's employees is represented by any union, and the Company
considers its relationships with its employees to be satisfactory.
Financial Information about Segment and Geographic Data and Export Sales
For information with respect to financial information about segment and
geographic data and export sales, reference is made to the information set forth
in Note 10 to the Consolidated Financial Statements of the Company included
herein.
Item 2. Properties.
The Company does not own any real property and currently conducts its
operations at the following leased premises:
<TABLE>
<CAPTION>
Approx-
imate
Square Annual Lease
Location Description of Facility Footage Lease Cost Expiration
<S> <C> <C> <C> <C>
30 Technology Drive Corporate headquarters, 17,128 $226,000 June 2008 (1)
Warren, New Jersey research, sales, customer
07059 support, assembly and
warehousing
1730 Aimco Boulevard Research, manufacturing 28,380 $ 76,000 September 2005 (2)
Mississauga, Ontario, customer support and
and assembly, sales, administrative
Canada L4W 1V1
Village Fret BAT-3453 Sales and customer 2,500 $ 43,000 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 $ 22,000 July 2001
Crawley, West Sussex support
England RH10 2QU
No. 21-1 Jalan 3176 D Sales and customer 1,200 $14,000 November 2000
Desa Pandah support
55100 Kuala Lumpur
Malaysia
</TABLE>
(1) On January 1, 2000, the approximate square footage increases to 28,128 and
the annual lease cost increases to $387,000. On July 1, 2003, the annual lease
cost will increase based upon the increase in the Revised Consumer Price Index
during the first 5 years of the lease, with a minimum increase of 2% and a
maximum increase of 5% per year.
(2) Increases to $115,000 on September 1, 2000.
<PAGE>
Item 3. Legal Proceedings.
Ion Track Instruments, Inc. ("ITI")filed a civil action No. 98-11521-JLT in
August 1998 in the United States District Court for the District of
Massachusetts against the Company and one of its employees ("salesman"). The
action alleges that the Company and the salesman made false and misleading
statements about ITI's products in violation of the Lanham Act. ITI has moved
the court for, among other things, a preliminary injunction barring the Company
and the salesman from continuing to make any of the alleged statements at issue
in the lawsuit. ITI also seeks preliminary injunctive relief barring the
salesman from continuing his employment with the Company or, in the alternative,
limiting the salesman's communication with other employees of the Company to
avoid any disclosures of trade secrets ITI alleges the salesman possesses. That
motion is currently pending before the court.
The Company has denied the substantive allegations of this complaint and
has filed a counterclaim seeking damages from ITI. The Company believes that
ITI's claims are without merit and intends to vigorously defend the action. The
Company does not expect that this action will materially adversely affect its
consolidated financial position, results of operations or liquidity.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the year ended December 31, 1998.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The Company's Common Stock has been included in the Nasdaq Stock Market
under the symbol "BARR." The following table sets forth, for the periods
indicated, the high and low sales price information for the Common Stock as
reported on the Nasdaq Stock Market.
High Low
Fiscal 1997
First quarter $ 10 3/4 $ 8 1/8
Second quarter 15 9 3/8
Third quarter 16 10 3/8
Fourth quarter 14 3/8 8 3/4
Fiscal 1998
First quarter $ 15 1/4 $ 11 5/8
Second quarter 13 1/2 8 1/2
Third quarter 9 7/8 6
Fourth quarter 9 1/8 5
Fiscal 1999
First quarter (through March 26, 1999) $ 7 23/32 $ 5 13/16
On March 26, 1999, the last reported sale price of the Common Stock on the
Nasdaq Stock Market was $6.563 per share. As of March 26, 1999, the Company had
approximately 650 stockholders of record.
<PAGE>
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
<PAGE>
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.
RECENT SALES OF UNREGISTERED SECURITIES
In December 1998, the Company sold an aggregate of 153,000 shares of Common
Stock held in the treasury to the senior executive offiers of the Company and
certain of the Company's independent directors at a purchase price of $8.375 per
share, the closing pric of the Common Stock on the date of the sale.
Substantially all of the purchase price for the shares of Common Stock sold was
paid in the form of five-year non-recourse promissory notes aggregating
approximately $1.3 million secured by pledges of the underlying Common Stock.
The notes bear interest at a rate of 4.52% per annum. In January 1999, the
Company sold an additional 10,000 shares of Common Stock to Ms. Lavet at a
purchase price of $9.75 per share, the closing price of the Common Stock on the
date of sale. The consideration paid by Ms. Lavet was substantially the same as
described above, except that Ms. Lavet's note bears interest at a rate of 4.64%
per annum.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Summary Consolidated Financial Data
(In thousands, except per share data)
(Unaudited)
Year Ended December 31,
1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
Consolidated Statements of
Operations Data(1 and 2):
Revenues $5,514 $6,374 $10,923 $22,689 $20,458
Gross profit 1,414 2,773 5,560 13,681 12,504
Operating income (loss) (2,469) (886) 1,596 4,995 1,438
Income tax (provision)
benefit (75) -- 391 371 1,309
Income (loss) from
continuing operations (2,633) (1,178) 2,059 5,754 4,431
Net income (loss) (2,565) (827) 2,059 5,754 4,431
Preferred stock dividends (108) (82) (39) (12) (10)
Net income (loss)
attributable to common
stockholders (2,673) (909) 2,020 5,742 4,421
Income (loss) per common
share from continuing
operations (diluted) $ (0.97) $ (0.39) $ 0.46 $ 0.92 $ 0.58
Net income (loss) per
common share (diluted) $ (0.95) $ (0.28) $ 0.46 $ 0.92 $ 0.58
Weighted average common
shares outstanding (diluted) 2,827 3,283 4,440 6,257 7,612
Consolidated Balance Sheet Data:
Working capital $ 652 $ 370 $14,271 $19,664 $45,697
Current assets 5,067 3,672 16,624 24,037 49,056
Total assets 6,792 4,735 17,323 25,608 52,644
Current liabilities 4,415 3,302 2,353 4,373 3,359
Long-term liabilities 451 108 117 121 145
Stockholders' equity 1,186 1,325 14,853 21,114 49,140
</TABLE>
<PAGE>
_____________
(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.
(2) The amounts for the fiscal period ending December 31, 1998, includes the
results of operations of DigiVision Inc. from May 1, 1998, the date of
acquisition. Included in this period is the write-off of in-process
research and development expenses in the amount of $435,000.
<PAGE>
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.
Item 7. Management's Discussion and Analysis
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>
Year Ended December 31,
1996 1997 1998
Consolidated Statements of
Operations Data:
<S> <C> <C> <C>
Revenues 100.0% 100.0% 100.0%
Cost of revenues 49.1 39.7 38.9
-----------------------------------------
Gross profit 50.9 60.3 61.1
-----------------------------------------
Operating expenses:
Selling, general and administrative 34.2 35.1 41.8
Write-off of acquired technology -- -- 2.1
Amortization of goodwill -- -- 0.5
Product development 2.1 3.2 9.7
-----------------------------------------
Total operating expenses 36.3 38.3 54.1
-----------------------------------------
Operating income 14.6 22.0 7.0
Other (expense) income, net 0.7 1.7 8.3
Income tax benefit 3.6 1.6 6.4
-----------------------------------------
Net income 18.9 25.3 21.7
Preferred stock dividends (0.4) --* --*
-----------------------------------------
Net income available to common stockholders 18.5% 25.3% 21.7%
=========================================
* Less than 0.1%.
</TABLE>
Comparison of the Fiscal Year Ended December 31, 1998 to the Fiscal Year Ended
December 31, 1997
Revenues. For the fiscal year ended December 31, 1998, revenues
decreased by $2.2 million, or 9.8%, to $20.5 million from $22.7 million for the
fiscal year ended December 31, 1997. Sales of IONSCAN(R)s and related products
decreased by $2.5 million, or 11.8%, due to a decrease of 15.4% in the average
unit selling price of an IONSCAN(R), offset in part by a slight increase in
units sold and $769,000 of sales by DigiVision, acquired May 1, 1998. The
increase in unit sales was due to significant IONSCAN(R) sales to the aviation
security market, primarily to the FAA. The decrease in average unit selling
prices resulted primarily from increased competitive activity. Sales of
specialty instruments was insignificant in both 1998 and 1997. As sales of its
IONSCAN(R)s have increased, the Company has placed less emphasis on marketing
its specialty instruments and anticipates that revenues from sales of such
instruments will continue to be insignificant to the Company's overall results.
Revenues derived from funded research and development decreased by
<PAGE>
approximately $465,000, or 54.8%, in 1998 as compared to 1997 as a result of the
nearing of completion on the first phase of a $950,000 FAA project awarded to
the Company to design an automated luggage explosives detection system utilizing
the Company's trace detection technology. Because of the increasing sales of
IONSCAN(R)s, the Company believes that revenues from funded research and
development activities will continue to be less significant to the Company's
overall results of operations.
Gross Profit. For the fiscal year ended December 31, 1998, gross profit
decreased by $1.2 million, or 8.6%, to $12.5 million from $13.7 million in 1997.
As a percentage of revenues, gross profit increased to 61.1% in the year ended
December 31, 1998 from 60.3% in 1997. The improvement in gross profit percentage
was primarily attributable to larger, more efficient production runs of the
IONSCAN(R) and a related reduction in cost of materials due to higher volume
purchases, offset in part by lower margins as a result of declining average unit
selling prices and lower margins attributable to DigiVision. DigiVision
contributed gross profit of $135,000, or 17.6% of the related revenue.
Selling, General and Administrative. For the fiscal year ended December 31,
1998, selling, general and administrative expenses increased by approximately
$581,000, or 7.3%, to $8.6 million from $8.0 million in 1997. As a percentage of
revenues, selling, general and administrative expenses increased to 41.8% in
1998 from 35.1% in 1997. Selling and marketing expenses decreased by
approximately $210,000, primarily the result of fewer commissioned sales offset
by $318,000 of selling expenses attributable to DigiVision. General and
administrative expenses increased by $791,000 primarily as a result of expenses
attributable to the Company's newly formed business development group, an
increase in the provision for doubtful accounts and sales allowances, and
expenses attributable to DigiVision, all of which were partially offset by
reimbursement of certain expenses.
Product Development. For the fiscal year ended December 31, 1998, product
development expenses increased by $1.3 million, or 176%, to $2.0 million from
$715,000 in 1997. As a percentage of revenues, product development expenses
increased to 9.7% (11.5% when combined with funded research and development) for
the fiscal year ended December 31, 1998 from 3.2% (6.9% when combined with
funded research and development) in 1997 as a result of a higher level of
internally funded 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.
Write-off of Acquired Technology. On April 30, 1998, the Company completed
the acquisition of DigiVision. In connection therewith, the Company acquired
approximately $435,000 of certain technology that was in the research and
development stage. The costs related to such technology costs were expensed at
the time of the acquisition.
Amortization of Goodwill. In connection with the acquisition of DigiVision,
the Company recorded goodwill of $778,000 which is being amortized over a
five-year period.
Operating Income. For the fiscal year ended December 31, 1998, operating
income decreased by $3.6 million, or 71.2%, to $1.4 million from $5.0 million in
1997. As a percentage of revenues, operating income decreased to 7.0% from 22.0%
in 1997. The decrease is due to the combination of factors noted above.
Other Income and expense. For the fiscal year ended December 31, 1998,
other income increased by $1.3 million, or 335%, to $1.7 million from $388,000
in 1997. The increase was attributable to an increase in investment income of
$1.2 million, or 265%, to $1.6 million as compared to $450,000 in 1997,
primarily as a result of the investment of a portion of the net proceeds from
the Company's April 1998 public offering, and licensing fees of $100,000 in
1998.
<PAGE>
Income Taxes. For the fiscal year ended December 31, 1998, the Company had
a net tax benefit of $1.3 million, composed of foreign taxes of $130,000 and
state taxes of $146,000, offset by a $1.6 million deferred tax benefit. Such
deferred tax benefit was due to an elimination of the deferred tax valuation
allowance as a result of changes in management's estimates of the utilization of
U.S. tax loss carryforwards caused primarily by improved operating results over
the last three fiscal years.
As of December 31, 1998, the Company had net operating loss carryforwards
of approximately $7.3 million and $3.2 million which will carry over to future
years to offset U.S. federal and state taxable income, respectively. The
substantial portion of the net operating loss carryforward will expire in the
year 2010. At December 31, 1998, the Company has recorded a valuation reserve of
$214,000 related to certain limitations applied to the net operating loss
carryforward of DigiVision, its recently acquired subsidiary. Management
believes that there is a risk that certain of this net operating loss
carryforward may expire unused and, accordingly, has established a valuation
allowance.
Comparison of the Fiscal Year Ended December 31, 1997 to the Fiscal Year Ended
December 31, 1996
Revenues. For the fiscal year ended December 31, 1997, revenues increased
by $11.8 million, or 108%, to $22.7 million from $10.9 million for the fiscal
year ended December 31, 1996. Sales of IONSCAN(R)s and related products
increased by $12.3 million, or 131%, due to an increase 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 drug detection markets,
primarily to law enforcement agencies, and to a lesser extent, increased sales
to the aviation security market, primarily to the FAA. 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 $697,000, or 85.2%, in 1997 as compared to 1996, principally due
to the completion in 1996 of a heavy water analyzer contract. As sales of its
IONSCAN(R)s have increased, the Company has placed less emphasis on marketing
its specialty instruments and anticipates that revenues from sales of such
instruments will continue to be insignificant to the Company's overall results.
Revenues derived from funded research and development increased by approximately
$146,000, or 20.8%, in 1997 as compared to 1996. Funded research and development
revenues increased as a result of the award by the FAA in March 1997 of a
$700,000 contract to design an automated luggage explosives detection system
utilizing the Company's trace detection technology. The first phase of this
project, which involves a proof of concept, is expected to be completed during
1998. Because of the increasing sales of IONSCAN(R)s, the Company believes that
revenues from funded research and development activities will continue to be
insignificant to the Company's overall results of operations.
Gross Profit. For the fiscal year ended December 31, 1997, gross profit
increased by $8.1 million, or 146%, to $13.7 million from $5.6 million in 1996.
As a percentage of revenues, gross profit increased to 60.3% in the fiscal
period ended December 31, 1997 from 50.9% in 1996. The improvement was primarily
attributable to larger, more efficient production runs of the IONSCAN(R) and a
related reduction in cost of materials due to higher volume purchases, coupled
with higher margins on international sales, 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 fiscal year ended December 31,
1997, selling, general and administrative expenses increased by approximately
$4.2 million, or 114%, to $7.9 million from $3.7 million in 1996. As a
percentage of revenues, selling, general and administrative expenses increased
to 35.1% in 1997 from 34.2% in 1996. Selling and marketing expenses increased by
approximately $2.5
<PAGE>
million, of which $1.6 million was due to increased sales commissions
attributable to a larger percentage of sales originating through independent
sales agents and distributors. 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 $1.7 million
primarily as a result of increased payroll and related costs and increased
professional and consulting costs. Product Development. For the fiscal year
ended December 31, 1997, product development expenses increased by $485,000, or
211%, to $715,000 from $230,000 in 1996. As a percentage of revenues, product
development expenses increased to 3.2% (6.9% when combined with funded research
and development) for the fiscal year ended December 31, 1997 from 2.1% (8.5%
when combined with funded research and development) in 1996 as a result of a
higher level of internally funded new product development activity.
Operating Income. For the fiscal year ended December 31, 1997, operating
income increased by $3.4 million, or 213%, to $5.0 million from $1.6 million in
1996. As a percentage of revenues, operating income increased to 22.0% from
14.6% in 1996. The increase is due to the greater operating leverage on higher
levels of revenue.
Other Income and Expense. For the fiscal year ended December 31, 1997,
interest expense decreased by $219,000, or 96.1%, to $9,000 from $228,000 in
1996 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 fiscal year
ended December 31, 1997 was $450,000 as compared to $72,000 in 1996, primarily
as a result of the investment of a portion of the net proceeds from the
Company's November 1996 public offering.
Income Taxes. For the fiscal year ended December 31, 1997, the Company had
a net tax benefit of $371,000, composed of foreign taxes of $404,000, offset by
a $775,000 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 U.S. tax loss carryforwards caused
primarily by improved operating results.
Liquidity and Capital Resources
Cash provided by operations was $2.8 million in 1998 and $2.0 million in
1997 and cash used in operations was $1.4 million in 1996. Cash provided by
operations in 1998 resulted primarily from net income of $4.4 million, partially
offset by an increase in inventories and other current assets and a decrease in
accounts payable and accrued liabilities. Inventories increased as the Company
acquired the materials necessary to support increased IONSCAN(R) production for
its new Model 400B and other current assets increased as a result of an increase
in prepaid insurance. The decrease in accounts payable and accrued liabilities
was the result of reduced purchases in the latter part of year. Cash provided by
operations in 1997 resulted primarily from net income of $5.8 million, partially
offset by increases in accounts receivable and inventories. Accounts receivable
increased as a result of higher sales, particularly during the month of December
1997. Inventories also increased as the Company acquired the materials to
support increased IONSCAN(R) production. 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 investing activities was $15.4 million during 1998 compared to
net cash provided by investing activities of $639,000 during 1997 and cash used
in investing activities of $3.9 million during 1996. Cash used in investing
activities during 1998 resulted primarily from the purchase of investments, the
purchase of equipment and the acquisition of DigiVision. Cash provided by
investing activities during 1997 resulted primarily from the sale of
investments, partially offset by
<PAGE>
capital expenditures. Cash used in investing activities during 1996 resulted
primarily from the purchase of investments, offset in part by the receipt of
$574,000 in connection with the Company's sale of its remaining interest in
Labco.
Cash provided by financing activities was $23.3 million during 1998,
$315,000 during 1997 and $10.6 million in 1996. Cash provided by financing
activities during 1998 resulted primarily from the net proceeds of the Company's
April 1998 public offering of common stock offset in part by the purchase of
treasury stock. Cash provided by financing activities during 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 net proceeds of the sale of common stock and
common stock purchase warrants in a public offering and the sale of $1.0 million
of convertible subordinated debentures, offset in part by the repayment of
indebtedness.
The Company's capital expenditures in 1998 aggregated approximately $1.5
million. Such expenditures consisted primarily of fixed assets purchased to
support product development projects, leasehold improvements and furniture and
fixtures relating to the new corporate headquarters and computer hardware
relating to the modernization of the Company's computer network. The Company
believes that it will require approximately $750,000 in capital investment in
additional tooling, equipment and facility improvements to meet its anticipated
production levels for 1999.
In March 1998, the Company established a $5.0 million unsecured credit
facility with Fleet Bank, N.A. (the "Bank") to be used for general working
capital purposes, including the issuance of standby letters of credit (the
"Facility"). Drawings under the Facility may not be used to fund acquisitions
unless approved in advance by the Bank. Amounts drawn under the Facility bear
interest at a variable rate per annum selected by the Company and equal to
either the Bank's prime rate less 0.75% or LIBOR (determined on the basis of a
30-, 60- or 90-day interest period, as applicable) plus 2.0%. The Facility
expires on June 30, 1999, subject to renewal. The Facility is guaranteed by the
Company's primary U.S. subsidiary, Barringer Instruments Inc. ("BII"). Pursuant
to the Facility, the Company and BII are required to comply with certain
customary covenants, including certain financial tests. In addition, BII and the
Company's Canadian subsidiary, Barringer Research Limited ("BRL"), have agreed
not to pledge their assets to any other creditor without the Bank's prior
written consent.
The Company has approximately $7.3 million of tax loss carryforwards to
offset future taxable income in the U.S and $2.1 million of expenses available
to offset future taxable income in Canada.
As of December 31, 1998, the Company had cash and cash equivalents of $18.8
million and marketable securities of $15.6 million. The Company believes that
its existing cash balances, marketable securities and income from operations in
future periods will be sufficient to fund its working capital requirements for
at least the next twelve months.
On July 7, 1998 the Company announced that its Board of Directors had
authorized the repurchase of up to 1,000,000 shares or approximately 12.7% of
the Company's outstanding Common Stock. As of December 31, 1998, the Company had
repurchased 212,500 shares at an aggregate cost of $1,540,000. Additional
repurchases will be made from time to time in open market transactions in
amounts as determined by the Company's management and will be funded out of the
Company's working capital.
Inflation
Inflation was not a material factor in either the sales or the operating
expenses of the Company during the periods presented herein.
<PAGE>
Year 2000 Issue
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Certain computer
programs may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices or engage in similar normal business
activity.
The Company has recently established a team to assess risk, identify and
correct exposures when possible, and develop contingency plans for Year 2000
compliance issues. The Company has developed an assessment plan and timetable
and anticipates completion of its assessment by June 30, 1999. To date, the
committee has identified several areas of potential concern to the Company, most
particularly the software and hardware used as part of its own information
systems, the impact of Year 2000 problems on the operation of its products, both
current and discontinued, the impact of Year 2000 issues on its vendors, the
impact of Year 2000 issues as it affects the physical working environment in
which the Company operates, the potential impact of Year 2000 problems on the
markets that the Company sells into and finally, crisis planning.
The Company is currently completing its review of the software and hardware
systems used by the Company's information systems. The Company believes that
with modifications to existing software and hardware and conversions to new
software, its internal systems and hardware will be Year 2000 compliant .
The Company has substantially completed a preliminary review of its
IONSCAN(R) products and believes that Year 2000 issues will have no impact on
the performance of its IONSCAN(R) product line as the IONSCAN(R)'s functionality
is not dependent on date or time references. The Company has sold many custom,
one of a kind products other than the IONSCAN(R) over the years. It will
investigate Year 2000 issues related to such products only when requested to do
so by the end user. However, based upon a preliminary review the Company
believes that the functionality of those products is not dependent on date or
time references.
The Company has initiated formal communications with its significant
suppliers, customers, and critical business partners to determine the extent to
which the Company may be vulnerable in the event that those parties fail to
properly remediate their own Year 2000 issues. The Company intends to take steps
to monitor the progress made by those parties, and intends to monitor others
with whom it does business as the Year 2000 approaches.
The Company has reviewed the operating environment within which it
functions to assess the Year 2000 risks relating to, among other things, its
heating and air conditioning systems, security systems, communication systems
and related hardware. The Company has determined that such systems are Year 2000
compliant. To the extent possible, it will also assess certain market risks to
try and determine, the effects, if any, Year 2000 issues could have on its
customers that would affect their ability to purchase and pay for the Company's
products. Based on initial assessments, the Company does not believe that Year
2000 issues will significantly alter demand for the Company's products.
The Company intends to develop a crisis plan to deal with certain critical
Year 2000 "what if" situations should they arise. The Company currently expects
that it will either shift supply orders to suppliers that can demonstrate Year
2000 compliance or will attempt to stockpile significant supplies of critical
components as January 1, 2000 approaches. The Company believes, however, that
due to the widespread nature of potential Year 2000 issues, the contingency
planning process is an ongoing one which will require further modifications as
the Company obtains
<PAGE>
additional information regarding the Company's state of preparedness and the
status of third party Year 2000 readiness.
The Company believes that the actions it has taken to date and steps it
intends to take in the future will allow it to be Year 2000 compliant in a
timely manner. There can be no assurances, however, that the Company's internal
systems and products or those of third parties on which the Company relies will
be Year 2000 compliant in a timely manner or that the Company's or third
parties' contingency plans will mitigate the effects of any noncompliance. The
failure to achieve Year 2000 compliance or to have appropriate contingency plans
in place to deal with any noncompliance could result in a significant disruption
of the Company's operations and could have a material adverse effect on the
Company's financial condition or results of operations.
Because the Company is still in the process of assessing its Year 2000
issues, the Company cannot estimate the cost of achieving Year 2000 compliance
at this time. However, based on the preliminary assessments conducted to date,
the Company does not believe that the costs of achieving such compliance will be
material to its results of operations or financial condition.
The costs of compliance and the dates on which the Company believes it will
complete its Year 2000 modifications and risk assessments, are based on
managements best estimates, based upon many different assumptions of future
events and other factors. However, there can be no assurances that the Company's
estimates will be achieved and actual results could differ from those
anticipated.
Recent Pronouncements of the Financial Accounting Standards Board
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"), which establishes accounting and
reporting standards for derivative instruments and hedging activities. The
Company is currently reviewing the effects of SFAS No. 133 but does not expect
the new guidelines to have a material impact on the Company's financial
position and results of operations. This standard will be adopted by the Company
no later than its year ending December 31, 2000.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8. Financial Statements and Supplemental Data.
Financial statements are contained on pages F-1 through F-22.
Quarterly Results of Operations
The following table sets forth certain consolidated statements of
operations data for each of the quarters in the two-year period ended December
31, 1998. 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. See Note 12 of Notes to Consolidated Financial
Statements.
<PAGE>
<TABLE>
<CAPTION>
Quarter Ended
Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, Jun 30, Sep 30, Dec 31,
1997 1997 1997 1997 1998 1998 1998 1998
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $3,622 $5,816 $5,905 $7,346 $5,948 $5,188 $3,412 $5,910
Cost of revenues 1,461 2,494 2,729 2,324 2,435 1,978 1,283 2,258
----- ----- ----- ----- ----- ----- ----- ----
Gross profit 2,161 3,322 3,176 5,022 3,513 3,210 2,129 3,652
----- ----- ----- ----- ----- ----- ----- ----
<PAGE>
Operating expenses:
Selling, general and
administrative 1,295 1,905 1,668 3,103 1,696 2,095 1,909 2,956
Write-off of acquired
technology -- -- -- -- -- 435 -- --
Product development 175 163 164 213 362 423 546 644
----- ----- ----- ----- ----- ----- ----- -----
Total operating expenses 1,470 2,068 1,832 3,316 2,058 2,953 2,445 3,600
----- ----- ----- ----- ----- ----- ----- -----
Operating income (loss) 691 1,254 1,344 1,706 1,455 257 (326) 52
Other (expense) income, net 79 105 88 116 136 423 556 569
Income tax benefit 75 56 125 115 200 150 195 764
----- ----- ----- ----- ----- ----- ----- -----
Net income $ 845 $1,415 $1,557 $1,937 $1,791 $ 830 $ 425 $1,385
Net income per common share*:
Basic $0.16 $ 0.26 $ 0.28 $ 0.35 $ 0.32 $ 0.11 $ 0.05 $ 0.18
===== ====== ====== ====== ====== ====== ====== =====
Diluted $0.14 $ 0.22 $ 0.24 $ 0.31 $ 0.28 $ 0.10 $ 0.05 $ 0.17
===== ====== ====== ====== ====== ====== ====== ======
</TABLE>
* The total of each year's quarterly results may not equal the reported results
for the respective years.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors and Executive Officers
The following table sets forth certain information regarding the Company's
executive officers and directors as of March 1, 1999.
Name Age Position
Stanley S. Binder 57 Chairman of the Board, Chief
Executive Officer
John H. Davies 62 Vice Chairman and Director, President
and Chief Executive Officer of BRL
Kenneth S. Wood 47 Director, President and Chief
Operating Officer
Richard S. Rosenfeld 52 Vice President-Finance, Chief
Financial Officer, Treasurer and
Secretary
John D. Abernathy 61 Director
Richard D. Condon 64 Director
John J. Harte 57 Director
James C. McGrath 56 Director
Lorraine M. Lavet 38 Director
Mr. Stanley S. Binder, Director since 1991. Mr. Binder joined the Company
in July 1989 and has served as Chairman of the Board since February 1991 and
Chief Executive Officer since July 1990. Mr. Binder also served as President of
the Company from July 1989 until May 1998, Chief Operating Officer from 1989 to
June 1990 and Chief Financial Officer from 1989 until July 1993. Mr. Binder also
is an independent general partner in the Special Situations Fund III, L.P. ("SSF
III"), a substantial investor in the Company. Mr. Binder is a past director of
the American Electronics Association and past chairman of its New Jersey
Council. Mr. Binder is a member of the Executive, Nominating and Technology and
Strategic Planning Committees of the Board.
<PAGE>
Mr. John H. Davies, Director since 1992. Mr. Davies joined the Company in
October 1967 and has been Vice Chairman of the Company since May 1998. From
January 1992 to May 1998 he served as Executive Vice President of the Company.
He has been President and Chief Executive Officer of Barringer Research Ltd.
since August 1989. He is a member of the Executive, Nominating and Technology
and Strategic Planning Committees of the Board.
Mr. Kenneth S. Wood, Director since 1999. Mr. Wood joined the Company in
1990 and has been President and Chief Operating Officer of the Company since May
1998. From January 1992 until May 1998, he served as Vice President of
Operations of Barringer Instruments Inc. He served as Secretary of the Company
from March 1993 until May 1998.
Mr. Richard S. Rosenfeld. Mr. Rosenfeld is a certified public accountant.
He joined the Company in January 1992 and has served as Vice President of
Finance, Chief Financial Officer and Treasurer of the Company since July 1993
and as Secretary of the Company since May 1998.
Mr. John D. Abernathy, Director since 1993. Mr. Abernathy is a certified
public accountant. Since January 1995, he has been Executive Director of Patton
Boggs, LLP, a Washington, D.C. law firm. 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. Mr. Abernathy is also a director of Oakhurst Company, Inc.,
a distributor of automotive parts and accessories. He is a member of the
Executive, Audit and Finance and Executive Compensation Committees of the Board.
Mr. Richard D. Condon, Director since 1992. Mr. Condon is currently an
independent consultant. From January 1996 to October 1998, Mr. Condon was a
consultant to and director of Amherst Process Instruments, Inc., a scientific
instrumentation company. Prior thereto, from 1989 until December 1995,
Mr. Condon was a consultant to and director of Analytical Technology, Inc.,
Boston, Massachusetts, a scientific instrumentation company. He is a member of
the Executive Compensation and Technology and Strategic Planning Committees of
the Board.
Mr. John J. Harte, Director since 1986. Mr. Harte is a certified public
accountant and, since 1978, has been Vice President of Mid-Lakes Distributing
Inc., a manufacturer and distributor of heating and air conditioning parts and
equipment located in Chicago, Illinois. From 1991 until January 1997, Mr. Harte
also was Vice President, Special Projects, of the Company. Mr. Harte is a member
of the Audit and Finance, Executive Compensation and Nominating Committees of
the Board.
Mr. James C. McGrath, Director since 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. He is a member of the Audit and Finance and Executive Compensation
Committees of the Board.
Ms. Lorraine M. Lavet, Director since 1999. Ms. Lavet has been Chief
Operating Officer of the American Electronics Association since September 1996.
Prior thereto, from September 1994 to August 1996, Ms. Lavet was President and
Chief Executive Officer of the Fairfax County Chamber of Commerce.
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.
<PAGE>
Item 11. Executive Compensation
The following table sets forth a summary of all compensation paid for the
last three fiscal years to the Chief Executive Officer of the Company and each
of the other executive officers of the Company whose total annual salary and
bonus are $100,000 or more (collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long-Term Compensation
Securities
Restricted Underlying All Other
Name and Fiscal Salary Bonus(1) Other Annual Stock Options/ LTIP Compensation
Principal Position Year ($) ($) Compensation ($) Award(s) SARs (#) Payouts ($) ($)(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stanley S. Binder 1998 $250,000 $182,000 -- -- 87,500 (2) -- $65,865 (3)(4)
Chairman and Chief 1997 200,000 350,000 -- -- 87,500 -- 9,500
Executive Officer 1996 171,491 63,000 -- -- 55,000 -- 2,925
John H. Davies* 1998 $149,782 $ 46,000 -- -- 34,000 (2) -- $36,615 (4)
Vice Chairman 1997 136,440 160,000 -- -- 34,000 -- 6,811
1996 125,775 43,200 -- -- 38,250 -- 6,317
Kenneth S. Wood 1998 $164,063 $ 65,000 -- -- 31,500 (2) -- $23,840 (4)
President and Chief 1997 130,000 170,000 -- -- 31,500 -- 8,480
Operating Officer 1996 111,815 39,600 -- -- 33,750 -- 2,199
Richard S. Rosenfeld 1998 $125,000 $ 34,000 -- -- 27,300 (2) -- $20,000 (4)
Vice President-Finance, 1997 107,500 115,000 -- -- 27,300 -- 7,085
Chief Financial Officer 1996 96,000 34,200 -- -- 27,500 -- 1,872
</TABLE>
* Amounts converted to U.S. dollars at the average exchange rate for the
respective year.
(1) Includes amounts contributed by the Company pursuant to the Company's
tax-qualified 401(k) deferred compensation plan ("401(k) Plan"). In 1998
and 1997, 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 5.0% of a participant's salary contributed. 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. Company contributions to the 401(k) Plan
vest proportionately over a five-year period, commencing at the end of the
participant's first year with the Company. Amounts paid during 1998 on
behalf of the Named Executive Officers were $10,000, $7,215, $10,000 and
$10,000 for Messrs. Binder, Davies, Wood and Rosenfeld, respectively.
(2) Represents repricing of options previously granted. See "Option Repricing."
(3) Includes premiums paid by the Company for term life insurance for Mr.
Binder during 1998 in the amount of $5,865.
(4) Includes amounts accrued pursuant to the Barringer Technologies Inc.
Supplemental Executive Retirement Plan (the "SERP Plan"). Amounts accrued
during 1998 for the Named Executive Officers were $50,000, $29,400,
$13,840, and $10,000 for Messrs. Binder, Davies, Wood and Rosenfeld,
respectively.
Effective January 1, 1998, the Company adopted the SERP Plan. The SERP Plan
provides eligible participants with certain retirement benefits supplemental to
the Company's 401(k) Plan. Pursuant to the SERP Plan, the Company will make
annual contributions to the account of each participant equal to a variable
percentage of the participant's base salary and annual cash bonus depending on
the Company's achievement of certain performance targets. The actual percentage
contribution will be determined by the Executive Compensation Committee, subject
to certain parameters. A participant will become vested under the SERP Plan
after five years of participation therein. A participant may elect to receive
benefits under the SERP Plan commencing at age 60 and is entitled to receive
either a lump-sum payment of his or her account balances upon retirement or to
use the account balance to purchase an annuity. In the event of the termination
of a participant's employment under certain circumstances set forth in the SERP
Plan, the participant will be entitled to receive his or her account balance
whether or not the participant has become vested under the SERP Plan. Currently,
each of the Named Executive Officers participates in the SERP Plan.
Option Grants
The following table summarizes certain information relating to the grant of
options to purchase Common Stock to each of the Named Executive Officers:
<PAGE>
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year(1)
Number of Percent of Total
Securities Options/SARs Potential realizable value
Underlying Granted to Exercise or of assumed annual rates of
Options/SARs Employees ins Base Price Expiration stock price appreciation
Name Granted(#)(2,3) Fiscal Year ($/sh) Date For option term
5% 10%
<S> <C> <C> <C> <C> <C> <C> <C>
Stanley S. Binder 87,500 19.1% $ 6.19 10/21/08 $ 340,625 $ 863,211
John H. Davies 34,000 7.4 6.19 10/21/08 132,357 335,419
Kenneth S. Wood 31,500 6.9 6.19 10/21/08 122,625 310,756
Richard S. Rosenfeld 27,300 6.0 6.19 10/21/08 106,275 269,322
</TABLE>
(1) The Company did not grant any stock appreciation rights in 1998.
(2) Twenty-five percent of each option grant is exercisable after the first
anniversary of the date of grant, 50% is exercisable after the second
anniversary, 75% is exercisable after the third anniversary and 100% is
exercisable after the fourth anniversary.
(3) Represents repricing of options previously granted. See "Option Repricing."
Options Exercised in Last Fiscal Year and Fiscal Year-End Option Values
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of stock options during 1998 and
unexercised options held by such Named Executive Officers as of December 31,
1998.
<TABLE>
<CAPTION>
Aggregated Option Exercises in 1998 and
Fiscal Year-End Option Values
Number of Unexercised
Securities Underlying Value of Unexercised
Shares Options/SARs in-the-money Options
Acquired On Value at Year-End(#) at Year-End($)(1)
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Stanley S. Binder -- -- 77,250 110,250 $553,031 $377,531
John H. Davies -- -- 53,688 49,813 384,367 197,110
Kenneth S. Wood -- -- 46,313 45,188 197,110 332,820
Richard S. Rosenfeld -- -- 38,625 38,675 276,516 148,710
</TABLE>
(1) Based on a closing price of $8.625 per share for the Common Stock as of
December 31, 1998.
Option Repricing
On October 21, 1998, the Company's Board of Directors approved the
repricing of options exercisable for an aggregate of 287,700 shares of Common
Stock previously granted to key employees of the Company (including the Named
Executive Officers) and the Company's non-employee diresctors pursuant to the
Company's 1997 Stock Compensation Program (the "Repricing"). Pursuant to the
Repricing, option holders exchanged options, certain of which were vested and
presently exercisable, with exercise prices ranging from $9.38 to $13.88 per
share for new stock options covering the same number of shares and having an
exercise price of $6.19 per share, the closing price of the Common Stock on the
NASDAQ National Market on October 21, 1998. Options granted pursuant to the
Repricing vest over a four-year period, with 25% of the options becoming
exercisable in each year commencing one year after the date of the Repricing
and will expire ten years after the Repricing.
1997 Stock Compensation Program
In May 1997, the Company adopted the Barringer 1997 Stock Compensation
Program (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
<PAGE>
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.
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.
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 are paid to the participant's estate by
the Company and the participant's estate or any permitted transferee has 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
are paid to the participant by the Company and the participant or any permitted
transferee has 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 has the right
to collect all vested awards immediately and the participant or any permitted
transferee has 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 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.
Prior to the Repricing, stock options exercisable for an aggregate
of 403,700 shares of Common Stock were outstanding under the Employee Plans.
These options expire 10 years after the date of grant and had a weighted
average exercise price of $10.57 per share. Such options were exercisable
annually in 25% increments beginning with the first anniversary of the date of
grant. In connection with the Repricing, 263,700 of such options, certain of
which were vested and presently exercisable,
<PAGE>
were canceled and new options exercisable for an aggregate of 263,700 shares of
Common Stock were granted. The new options expire 10 years after the date of
grant and have an exercise price of $6.19 per share. Such options vest over a
four-year period and are exercisable annually in 25% increments beginning with
the first anniversary of the date of grant. In addition, prior to the Repricing,
options exercisable for an aggregate of 24,000 shares of Common Stock were
outstanding under the Independent Director Plan. These were exercisable one year
from the date of grant, were to expire five years from the date of grant and had
a weighted average exercise price of $12.83 per share. In connection with the
Repricing, all of such options, certain of which were vested and presently
exercisable, were canceled and new options exercisable for an aggregate of
24,000 shares of Common Stock were granted outside the 1997 Stock Compensation
Program. The new options expire 10 years after the date of grant and have an
exercise price of $6.19 per share. Such options vest over a four-year period and
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. As of March 1, 1999,
Messrs. Binder and Wood were indebted to the Company in the approximate amounts
of $277,000 and $13,050, respectively, for loans made pursuant to the Exercise
Program. During 1998, the largest aggregate amount of indebtedness of Messrs.
Binder and Wood pursuant to such loans were $272,525 and $13,050, respectively.
The rate of interest charged on each such loan during 1998 was the prime
lending rate charged by Summit Bank.
Stock Purchase Program
In December 1998, the Company sold an aggregate of 153,000 shares of Common
Stock held in the treasury to the senior executive officers of the Company and
certain of the Company's independent directors at a purchase price of $8.375 per
share, the closing price of the Common Stock on the date of the sale.
Substantially all of the purchase price for the shares of Common Stock sold was
paid in the form of five-year non-recourse promissory notes aggregating
approximately $1.3 million secured by pledges of the underlying Common Stock.
The notes bear interest at a rate of 4.52% per annum. In January 1999, the
Company sold an additional 10,000 shares of Common Stock to Ms. Lavet at a
purchase price of $9.75 per share, the closing price of the Common Stock on the
date of sale. The consideration paid by Ms. Lavet was substantially the same as
described above, except that Ms. Lavet's note bears interest at a rate of 4.64%
per annum. The number of shares of Common Stock purchased by each of the
individuals and the principal amount of the notes due from each of the
individuals is set forth below.
<TABLE>
<CAPTION>
Number of Principal amount
Name shares purchased of notes
<S> <C> <C>
Stanley S. Binder 50,000 $418,250
John H. Davies 20,000 167,300
Kenneth S. Wood 23,000 192,395
Richard S. Rosenfeld 20,000 167,300
John D. Abernathy 10,000 83,650
Richard D. Condon 10,000 83,650
James C. McGrath 10,000 83,650
<PAGE>
John J. Harte 10,000 83,650
Lorraine M. Lavet 10,000 97,400
</TABLE>
Employment Agreements
The Company has entered into a five-year employment agreement with Mr.
Binder, the President and Chief Executive Officer of the Company (the
"Employment Agreement"), effective January 1, 1998. Under the Employment
Agreement Mr. Binder received a base salary of $250,000 for 1998. Mr. Binder's
salary is subject to certain adjustments and to periodic increases as determined
by the Board of Directors. In addition, Mr. Binder is entitled to receive up to
a total of three special bonuses during the term of the Employment Agreement, in
the amount of $65,000, $65,000 and $70,000, respectively, in the event that the
Company's EBITDA (as defined in the Employment Agreement), exceeds certain
targeted amounts for any fiscal year during the term of the Employment
Agreement. Mr. Binder received the first of these special bonuses in 1998.
Pursuant to the Employment Agreement, Mr. Binder is also entitled to participate
in the Company's cash bonus plan and to participate in the SERP Plan. Also,
under the terms of the Employment Agreement, in 1997, Mr. Binder received stock
options covering 50,000 shares of Common Stock having an exercise price of
$11.78 per share (equal to the fair market value on the date of grant). In the
Employment Agreement, the Company has agreed to maintain a $1.0 million term
life insurance policy for Mr. Binder's benefit. Mr. Binder is entitled to
several perquisites, including a car allowance and reimbursement for the cost of
certain financial planning services.
In the event that Mr. Binder's employment is terminated pursuant to a
Without Cause Termination, or Mr. Binder terminates his employment for Good
Reason (as such terms are defined in the Employment Agreement), Mr. Binder will
be entitled to a severance payment equal to 2.99 times his then-current base
salary and to certain other severance benefits. In addition, upon the occurrence
of a Change in Control Event (as such term is defined in the Employment
Agreement), Mr. Binder has the right to terminate his employment within 180
days, in which event the termination will be treated as a termination for Good
Reason with the effects specified above. In addition, the Company has agreed to
pay Mr. Binder additional amounts, if necessary, to pay any excise tax
Mr. Binder may become subject to in the event that any payment made to him under
the Employment Agreement constitutes an "excess parachute payment" within the
meaning of Section 280G of the Internal Revenue Code of 1986, as amended.
Pursuant to the Employment Agreement, Mr. Binder has agreed to certain
confidentiality, work-for-hire and non-competition covenants.
The Company has entered into three-year employment agreements with each of
Messrs. Wood and Rosenfeld effective September 1, 1998, pursuant to which
Messrs. Wood and Rosenfeld receive annual base salaries of $150,000 and
$125,000, 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 and to participate in the SERP Plan. In the employment
agreements, the Company has agreed to maintain term life insurance policies for
the benefit of each of them in an amount not less than four times Mr. Wood's
base salary and not less than three times Mr. Rosenfeld's base salary. The
employment agreements for each of Messrs. Wood and Rosenfeld provide, among
other things, that, in the event of a termination of employment by the Company
without cause, the employee will be entitled to receive a severance payment
equal to his then current base salary for a period of twelve months from the
effective date of such termination. In the event that Messrs. Wood and/or
Rosenfeld are terminated pursuant to a Without Cause Termination (as defined in
the employment agreements), they are entitled to receive their base salary as in
effect at the time of such termination for a period of twelve months from the
effective date of such termination. Upon the occurrence of a "change in control"
of the Company, the employee will be entitled to receive the greater of his
annual base salary pursuant to the employment agreement or his then current
annual base salary for the remainder of the term (payable in a single lump sum).
Both of the employment agreements also contain certain confidentiality,
work-for-hire and non-competition provisions which continue in effect following
the termination of the employee's employment by the Company.
<PAGE>
Directors' Compensation
Outside directors are entitled to an annual retainer of $3,000 per quarter
(plus a $500 quarterly fee for each committee chairperson) and a fee of $1,000
for each meeting attended and $500 for each committee meeting attended
(regardless of whether or not the committee meeting is held on the same day as a
meeting of the Board of Directors). Pursuant to the terms of the 1997 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 1997 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 Executive Compensation Committee is comprised of
Messrs. Abernathy, Condon, Harte and McGrath. No executive officer of the
Company and no member of the Executive 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 Executive Compensation Committee.
Section 16(a) Beneficial Ownership Reporting Compliance
Under Section 16(a) of the Exchange Act, the Company's directors, executive
officers, and persons holding more than ten percent of the Company's Common
Stock are required to report their initial ownership of the Company's Common
Stock and any changes in such ownership to the Securities and Exchange
Commission. These persons are also required to furnish the Company with a copy
of all Section 16(a) forms they file. The Company is obligated to disclose any
failures to, on a timely basis, file such reports. To the Company's knowledge,
based solely on a review of such reports and any amendments thereto which have
been furnished to the Company, except as set forth below, the Company has
not identified any reports required to be filed during the year ended December
31, 1998 that was not filed in a timely manner. Mr. Davies did not timely file
a Form 4 in connection with his purchase of 20,000 shares of Common Stock on
December 10, 1998.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of March 1, 1999, the number of shares
of Common Stock, Class A Convertible Preferred Stock and Class B Convertible
Preferred Stock owned by (i) each Named Executive Officer, (ii) each director
(iii) all directors and executive officers as a group and (iv) any person or
entity known by the Company to own beneficially 5% or more of such securities.
As of March 1, 1999, there were 7,773,347 shares of Common Stock, 38,616 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 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 30 Technology Drive, Warren, New Jersey 07059.
<PAGE>
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership Beneficial Ownership
of Class A Convertible of Class B Ownership of Common Stock
Preferred Stock Preferred Stock (1)
Number of Percent of Number of Percent Number of Percent of
Name Shares Class Shares Class Shares Class
<S> <C> <C> <C>
Stanley S. Binder(3) -- -- -- -- 216,136 2.7%
John H. Davies(4) -- -- -- -- 160,732 2.0%
John J. Harte(5) -- -- -- -- 70,100 *
Richard D. Condon(6) -- -- -- -- 51,250 *
John D. Abernathy(7) -- -- -- -- 44,454 *
James C. McGrath(8) -- -- -- -- 41,250 *
Kenneth S. Wood(9) -- -- -- -- 96,636 1.2
Lorraine M. Lavet -- -- -- -- 10,000 *
Richard S. Rosenfeld (10) -- -- -- -- 84,036 1.1
All directors and executive
officers as a group
consisting of nine
(9) persons -- -- -- -- 774,594 9.5
Austin W. Marxe (11) -- -- -- -- 890,821 11.0
153 E. 53rd St.
NY, NY 10022
Corbyn Investment
Management, Inc.(12) -- -- -- -- 852,150 11.0
2330 W. Joppa Road
Suite 108
Lutherville, MD 21093
Lionheart Group, Inc. -- -- -- -- 423,100 5.4
230 Park Avenue
New York, NY 10169
William D. Witter, (13) -- -- -- -- 655,140 8.4
153 East 53rd Street
New York, NY 10022
Angelo Logozzo Ex. UW 3,918 10.1% -- -- 1,417 *
Frederick D'Amico (14)
415 S. 3rd St.
Hamilton, MT 59840
Max Gerber(15) -- -- 12,500 55.6% 4,447 *
26 Broadway
New York, NY 10004-1776
Paul Spitzberg (16) -- -- 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 March 1, 1999 for each person
or entity.
(2) Certain amounts shown are subject to adjustment in certain circumstances.
(3) Includes 100,000 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of March 1, 1999 and 12,500 shares of
Common Stock issuable upon exercise of warrants owned by Mr. Binder.
Excludes shares of Common Stock beneficially owned by SSF III of which
Mr. Binder is an independent general partner. Mr. Binder disclaims any
beneficial interest in such shares.
(4) Includes 69,500 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of March 1, 1999 and 12,500 shares of
Common Stock issuable upon the exercise of warrants owned by Mr. Davies.
(5) Includes 22,500 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of March 1, 1999 owned by Mr. Harte.
(6) Includes 22,500 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of March 1, 1999 and 5,000 shares of
Common Stock issuable upon the exercise of warrants owned by Mr. Condon.
(7) Includes 22,500 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of March 1, 1999 and 2,500 shares of
Common Stock issuable upon the exercise of warrants owned by Mr. Abernathy.
(8) Includes 22,500 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of March 1, 1999 owned by Mr. McGrath.
(9) Includes 60,000 Shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of March 1, 1999 owned by Mr. Wood.
(10) Includes 50,000 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of March 1, 1999 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's child.
<PAGE>
(11) Includes (i) 393,579 shares of Common Stock and 229,167 shares of Common
Stock issuable upon the exercise of warrants owned by SSF III, (ii) 134,742
shares of Common Stock and 83,333 shares of Common Stock issuable upon the
exercise of warrants owned by Special Situations Cayman Fund, L.P. (the
"Cayman Fund"), and (iii) 50,000 shares of Common Stock owned by Special
Situations Technology Fund, L.P. ("SST"). 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, the Cayman Fund and SSTF. 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 446,150 shares of Common Stock owned by Corbyn Investment
Management, Inc. and 406,000 shares of Common Stock owned by Greenspring
Fund, Inc.
<PAGE>
(13) Includes 575,140 shares of Common Stock owned by William D. Witter, Inc.
("WDWI") and 80,000 shares of Common Stock owned by Penfield Partners, L.P.
("PP"). William D. Witter owns 98.6% of WDWI. WDWI is the sole general
partner of Pine Creek Advisors Limited Partnership ("PCA") which is a
general partner of PP.
(14) Includes 1,417 shares of Common Stock issuable upon conversion of the Class
A Convertible Preferred Stock.
(15) Includes 4,447 shares of Common Stock issuable upon conversion of the Class
B Convertible Preferred Stock. (16) Includes 3,558 shares of Common Stock
issuable upon conversion of the Class B Convertible Preferred Stock.
Item 13. Certain Relationships and Related Transactions
In July 1998, the Company made a $500,000 non-recourse loan to Mr. Binder.
The loan is repayable on July 5, 2003 and bears interest at the rate of 5.68%
per annum, payable annually. Mr. Binder's obligation to repay the loan is
secured by 49,000 shares of Common Stock. In addition, the Company has made
certain loans to the Named Executive Officers and directors. See "Item 11.
Executive Compensation--Exercise Program" and "Item 11. Executive Compensation
- - --Stock Purchase Program."
Mr. Abernathy is currently the Executive Director of Patton Boggs, LLP, a
Washington, D.C. law firm. During 1998, the Company retained Patton Boggs, LLP
to represent the Company in various matters and has retained such firm in 1999.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Exhibits.
Exhibit
No. Description Page
3.1 Certificate of Incorporation of the Company,
as amended, (previously filed as Exhibit
3.1A to the Company's Registration Statement
on Form SB-2 (File No. 333-33129) and
incorporated herein by reference).
3.2 By-laws of the Company (previously filed as
Exhibit 3.1 to the Company's Current Report
on Form 8-K dated August 26, 1998 (File
No. 0-3207) and incorporated herein by
reference).
10.1 Amended and Restated Employment Agreement,
dated as of December 31, 1997, between the
Company and Stanley S. Binder (previously
<PAGE>
filed as Exhibit 10.1 to the Company's
Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1997 (File No.
0-3207) and incorporated herein by
reference)
10.2 Employment Agreement, dated as of September
1, 1998, between the Company and Richard S.
Rosenfeld.
10.3 Employment Agreement, dated as of September
1, 1998, between the Company and Kenneth S.
Wood.
10.4 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).
10.5 Form of 1996 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 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).
10.7 Barringer Technologies Inc. 1997 Stock
Compensation Program (previously filed as
Exhibit 10.9 to the Company's Registration
Statement on Form SB-2 (File No. 333-33129)
and incorporated herein by reference.)
10.8 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).
10.9 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 (previously filed as Exhibit 10.11
to the Company's Registration Statement on
Form SB-2 (File No. 333-33129) and
incorporated herein by reference.)
10.10 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).
10.11 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).
10.12 Lease, dated as of July 1, 1998, between the
Company and Mt. Bethel Corporate Center.
<PAGE>
10.13 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).
10.14 Supplemental Executive Retirement Plan
(previously filed as Exhibit 10.18 to the
Company's Registration Statement on Form
SB-2 (File No. 333-33129) and incorporated
herein by reference).
10.15 Revolving Credit Note dated March 13, 1998
between the Company and Fleet Bank,
(previously filed as Exhibit 10.19 to the
Company's Registration Statement on Form
SB-2 (File No. 333-33129) and incorporated
herein by reference).
10.16 Unlimited Guaranty of Payment and
Performance dated March 13, 1998 between the
Company and Fleet Bank, N.A. (previously
filed as Exhibit 10.20 to the Company's
Registration Statement on Form SB-2 (File
No. 333-33129) and incorporated herein by
reference).
10.17 Revolving Credit Loan Agreement dated March
13, 1998 amongst the Company, Barringer
Instruments, Inc., Barringer Research
Limited and Fleet Bank, N.A. (previously
filed as Exhibit 10.21 to the Company's
Registration Statement on Form SB-2 (File
No. 333-33129) and incorporated herein by
reference).
10.18 Stockholder Protection Rights Agreement,
dated as of August 26,1998, between the
Company and American Stock Transfer and
Trust Company, as Rights Agent, including as
Exhibit A the form of Rights Certificate and
of Election to Exercise and as Exhibit B the
form of Certificate of Designation and the
Terms of the Participating Preferred Stock
of the Company (previously filed as Exhibit
4.1 to the Company's Current Report on Form
8-K dated August 26, 1998 (File No. 0-3207)
and incorporated herein by reference).
10.19 Pledge Agreement, dated as of July 6, 1998,
made by Stanley S. Binder.
10.20 Non-Recourse Secured Promissory Note, dated
July 6, 1998, made by Stanley S. Binder in
favor of the Company.
10.21 Form of Pledge Agreement.
<PAGE>
10.22 Form of Note for Executive Officers.
10.23 Form of Note for Non-employee Directors.
21.1 List of the Company's Subsidiaries
23.1 Consent of BDO Seidman, LLP, independent
certified public accountants.
27.1 Financial Data Schedule for the year ended
December 31, 1998.
(b) Reports on Form 8-K.
None
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BARRINGER TECHNOLOGIES INC.
By: /s/ Stanley S. Binder
---------------------------
Stanley S. Binder, Chairman
and Chief Executive Officer
Dated: March 30, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
Signature Title Date
<S> <C> <C> <C>
/s/ Stanley S. Binder Chief Executive Officer March 30, 1999
_____________________ and Director (Principal Executive
Stanley S. Binder Officer)
/s/ John D. Abernathy Director March 30, 1999
______________________
John D. Abernathy
/s/ Richard D. Condon Director March 30, 1999
______________________
Richard D. Condon
/s/ John H. Davies Director March 30, 1999
______________________
John H. Davies
/s/ John J. Harte Director March 30, 1999
______________________
John J. Harte
/s/ James C. McGrath Director March 30, 1999
______________________
James C. McGrath
/s/ Kenneth Wood Director March 30, 1999
______________________
Kenneth Wood
/s/ Lorraine Lavet Director March 30, 1999
______________________
Lorraine Lavet
/s/ Richard S. Rosenfeld Vice President-Finance, March 30, 1999
________________________ Chief Financial Officer
Richard S. Rosenfeld and Treasurer
(Principal Financial Officer
and Principal Accounting Officer)
</TABLE>
<PAGE>
BARRINGER TECHNOLOGIES INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Consolidated Financial Statements
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998 F-3
Consolidated Statements of Operations
for the Years Ended December 31, 1996, 1997 and 1998 F-4
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1996, 1997 and 1998 F-5
Consolidated Statements of Cash Flows for the Years Ended December31,
1996, 1997 and 1998 F-6
Notes to Consolidated Financial Statements F-7
Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts F-22
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Barringer Technologies Inc.
Warren, New Jersey
We have audited the accompanying consolidated balance sheets of Barringer
Technologies Inc. as of December 31, 1997 and 1998, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1998. We have also audited the
schedule listed in the accompanying index. These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule 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 and schedule are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
schedule. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
presentation of the financial statements and schedule. 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, 1997 and 1998, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
Also, in our opinion, the schedule presents fairly, in all material
respects, the information set forth therein.
BDO Seidman, LLP
Woodbridge, New Jersey
February 24, 1999
<PAGE>
<TABLE>
<CAPTION>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
December 31,
1997 1998
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,188 $18,802
Marketable securities 2,499 15,606
Trade receivables, less allowances of $109 and $626 7,908 6,502
Inventories (note 2) 3,049 3,943
Prepaid expenses and other 887 1,111
Deferred tax asset (note 6) 1,506 3,092
------ ------
Total current assets 24,037 49,056
Machinery and equipment, net (note 3) 1,505 2,349
Other (note 15) 66 1,239
------ ------
$ 25,608 $ 52,644
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,324 $ 1,169
Accrued liabilities 473 946
Accrued payroll and related taxes 1,520 1,005
Accrued commissions 801 127
Foreign income taxes payable (note 6) 255 112
----- -----
Total current liabilities 4,373 3,359
Non-current liabilities 121 145
Commitments (notes 4 and 7)
Stockholders' equity (note 5):
Convertible preferred stock, $1.25 par value, 1,000 shares
authorized, none outstanding - -
Preferred stock, $2.00 par value, 4,000 shares authorized
270 shares designated class A convertible preferred
stock, 45 and 39 shares outstanding, respectively, less
discount of $35 and $30, respectively 55 47
730 shares designated class B convertible preferred
stock, 23 shares outstanding 45 45
Common stock, $0.01 par value, 20,000 shares authorized,
and 5,495 and 7,851 shares issued, respectively 55 79
Additional paid-in capital 30,209 54,693
Accumulated deficit (8,780) (4,359)
Cumulative foreign currency translation adjustment
(457) (786)
------- -------
21,127 49,719
Less: common stock in treasury, at cost, 31 shares and
92 shares, respectively (13) (579)
------- -------
Total stockholders' equity 21,114 49,140
------- ------
$ 25,608 $ 52,644
======= ======
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Year Ended December 31,
1996 1997 1998
<S> <C> <C> <C>
Revenues $10,923 $22,689 $20,458
Cost of revenues 5,363 9,008 7,954
Gross profit 5,560 13,681 12,504
Operating expenses:
Selling, general and administrative 3,734 7,971 8,552
Amortization of goodwill -- -- 104
Write-off of acquired technology (note 15) -- -- 435
Product development 230 715 1,975
----- ----- ------
Total operating expenses 3,964 8,686 11,066
----- ----- ------
Operating income 1,596 4,995 1,438
Other income (expense):
Interest expense (228) (9) (9)
Equity in earnings of unconsolidated
subsidiary 117 -- --
Gain on sale of investment in
unconsolidated subsidiary 123 -- --
Investment income 72 450 1,641
Other, net (12) (53) 52
----- ------ ------
72 388 1,684
Income before income tax benefit 1,668 5,383 3,122
Income tax benefit (note 6) 391 371 1,309
----- ----- -----
Net income 2,059 5,754 4,431
Preferred stock dividends (39) (12) (10)
Net income attributable to common stockholders $ 2,020 $ 5,742 $ 4,421
====== ===== =====
Per share data (notes 1 and 14):
Basic $ 0.55 $ 1.05 $ 0.62
===== ==== =====
Diluted $ 0.46 $ 0.92 $ 0.58
Weighted average common and common
equivalent shares outstanding:
Basic 3,695 5,456 7,153
===== ===== =====
Diluted 4,440 6,257 7,612
======= ===== ======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BARRINGER TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
Common Stock Class A Class B
Pfd Stock Pfd Stock
-------------------------------------------------------
Total Paid-in Foreign Treas. Comprehensive
Equity Shrs Am't Shrs Am't Shrs Am't Capital Deficit Transl. Stock Income
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bal - January 1, 1996 $ 1,325 3,479 $35 83 $101 258 $ 515 $17,685 $(16,542) $(456) $ (13)
Net income 2,059 $ 2,059 $ 2,059
Translation adjustment 41 41 41
-------------
Comprehensive income $ 2,100
=============
Preferred stock conversion 55 1 (23) (27) (135) (270) 296
Issuance and exercise of
stock options and
warrants 42 15 42
Conversion of debentures 1,000 364 4 996
Preferred stock dividends (15) 7 24 (39)
Sale of securities net of
expenses ($741) 10,401 1,437 14 10,387
---------------------------------------------------------------------------------------------------
Bal - December 31, 1996 14,853 5,357 54 60 74 123 245 29,430 (14,522) (415) (13)
Net income 5,754 5,754 5,754
Translation adjustment (42) (42) (42)
------------
Comprehensive income $ 5,712
============
Preferred stock conversion 41 (15) (19) (100) (200) 219
Issuance and exercise of
stock options and
warrants 490 97 1 489
Repayment stockholder loan 71 71
Preferred stock dividends (12) (12)
---------------------------------------------------------------------------------------------------
Bal - December 31, 1997 21,114 5,495 55 45 55 23 45 30,209 (8,780) (457) (13)
Net income 4,431 4,431 $ 4,431
Translation adjustment (329) (329) (329)
---------
Comprehensive income $ 4,102
==========
Sale of securities net of
expenses ($2,394) 25,211 2,300 23 25,188
Preferred stock conversion 0 2 (6) (8) 8
Issuance and exercise of
stock options and
warrants 263 54 1 262
Repurchase of common stock (1,540) (1,540)
Sale of treasury stock,
net of notes receivable 0
($1,281) (974) 974
Preferred stock dividends (10) (10)
---------------------------------------------------------------------------------------------------
Bal - December 31, 1998 $49,140 7,851 $ 79 39 $ 47 23 $ 45 $54,693 $(4,359) $(786) $ (579)
===================================================================================================
</TABLE>
* At December 31, 1998 and 1997 net of notes receivable of $1,484 and $203,
respectively, from the sale of stock. See notes to consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
1996 1997 1998
<S> <C> <C> <C>
Net income $ 2,059 $ 5,754 $ 4,431
Items not affecting cash:
Depreciation and amortization 115 272 741
Inventory and accounts receivable reserves 22 332 382
Income from and gain on sale of investment
in Labco (240) -- --
Write-off of acquired technology -- -- 435
Deferred tax benefit (506) (775) (1,586)
Other 50 30 (184)
Increase in non-cash working capital balances (2,947) (3,655) (1,465)
Cash provided by (used in) operating
activities (1,447) 1,958 2,754
Investing activities:
Purchase of equipment and other (124) (1,190) (1,510)
Sale of (investment in) marketable securities (4,328) 1,829 (13,107)
Purchase of Digivision and related costs -- -- (821)
Proceeds on sale of investment in Labco 574 -- --
Cash provided by (used in) investing
activities (3,878) 639 (15,438)
Financing activities:
Proceeds on issuance of Convertible
Subordinated Debentures 1,000 -- --
Reduction in long-term debt (300) -- --
Decrease in bank debt and other (570) (174) (67)
Proceeds on sale of equity securities, net 10,443 430 25,211
Warrant and option exercise 204
Repayment from (loan to)employee -- 71 (500)
Acquisition of treasury stock (1,540)
Payment of dividends on preferred stock (15) (12) (10)
Cash provided by financing activities 10,558 315 23,298
Increase in cash and cash equivalents 5,233 2,912 10,614
Cash and cash equivalents--beginning of year 43 5,276 8,188
Cash and cash equivalents--end of year $ 5,276 $ 8,188 $ 18,802
Changes in components of non-cash working
capital balances related to operations:
Trade receivables $(2,010) $(4,433) $ 951
Inventories (649) (1,065) (567)
Other current assets (248) (389) (206)
Other assets 39 38 --
Accounts payable and accrued liabilities (79) 2,194 (1,643)
Increase in non-cash working capital balances $(2,947) $(3,655) $(1,465)
</TABLE>
See notes to consolidated financial statements.
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
Marketable Securities
Marketable securities consist primarily of commercial paper with original
maturities at date of purchase of less than 12 months. The Company has both
positive intent and ability to hold these securities to maturity. The Company
carries these securities at cost, which approximates fair value, due to the
short period of time to maturity.
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
Basic earnings per share 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 assuming the conversion of
convertible preferred stock and the exercise or conversion of common equivalent
shares, if dilutive, consisting of unissued shares under options and warrants.
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
<PAGE>
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.
For the years ended December 31, 1996, 1997 and 1998, 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 machinery 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". No write-downs have been necessary through December 31,
1998.
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 "Accounting for Stock Issued to Employees", in accounting
and measuring compensation expense related to stock option plans. There was no
compensation expense related to the issuance of stock options to employees for
the years ended December 31, 1996, 1997 and 1998. For the years ended December
31, 1996, 1997 and 1998, the Company recorded compensation expense in the amount
of $0, $60,000 and $33,500, relating to stock options awarded to the Company's
independent directors (see note 5 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.
<PAGE>
Recent Pronouncements of the Financial Accounting Standards Board
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"), which establishes accounting and
reporting standards for derivative instruments and hedging activities. The
Company is currently reviewing the effects of SFAS No. 133, but does not expect
the new guidelines to have a material impact on the Company's financial position
and results of operations. This statement will be adopted by the Company no
later than its year ending December 31, 2000.
2. Inventories
At December 31, 1997 and 1998, the Company had parts, subassemblies and
work in process of $2,748,000 and $2,959,000 and finished goods of $301,000, and
$984,000, respectively.
3. Machinery and Equipment
The major categories of machinery and equipment are as follows:
<TABLE>
<CAPTION>
December 31,
1997 1998
<S> <C> <C>
Office equipment $ 969,000 $ 1,415,000
Machinery and equipment 1,986,000 2,492,000
Leasehold improvements 70,000 325,000
3,025,000 4,232,000
Accumulated depreciation (1,520,000) (1,883,000)
Totals $ 1,505,000 $ 2,349,000
</TABLE>
4. Bank Credit Facility
On March 13, 1998, the Company established a $5.0 million unsecured credit
facility with Fleet Bank, N.A. (the "Bank") to be used for general working
capital purposes, including the issuance of standby letters of credit (the
"Facility"). Drawings under the Facility may not be used to fund acquisitions
unless approved in advance by the Bank. Amounts drawn under the Facility bear
interest at a variable rate per annum selected by the Company and equal to
either the Bank's prime rate less 0.75% or LIBOR (determined on the basis of a
30-, 60- or 90-day interest period, as applicable) plus 2.0%. The Facility
expires on June 30, 1999, subject to renewal. The Facility is guaranteed by the
Company's primary U.S. subsidiary, Barringer Instruments Inc. ("BII"). Pursuant
to the Facility, the Company and BII are required to comply with certain
customary covenants, including certain financial tests. In addition, BII and the
Company's Canadian subsidiary, Barringer Research Limited ("BRL"), have agreed
not to pledge their assets to any other creditor without the Bank's prior
written consent. At December 31, 1998, the Company had $4,800,000 available
under this facility. Approximately $200,000 was used to secure a letter of
credit.
5. Stockholders' Equity
Stockholder Protection Rights Plan
On August 26, 1998, the Company's Board of Directors declared a dividend
payable September 9, 1998 of one right (a "Right") for each outstanding share of
common stock, par value $.01 per share, of the Company held of record at the
close of business on September 8, 1998, or issued thereafter and prior to the
Separation Time (generally the date of the commencement of a tender or exchange
offer or at such time as an acquirer becomes a 15% or more shareholder of the
Company) and thereafter pursuant to options and convertible securities
outstanding at the
<PAGE>
Separation Time. Each Right entitles its registered holder to purchase from the
Company, after the Separation Time, one one-hundreth of a share of a new class
of preferred stock designated Participating Preferred Stock, par value $2.00 per
share, for $32.50, subject to adjustment.
Stock Repurchase Program
On July 7, 1998 the Company announced that its Board of Directors had
authorized the repurchase of up to 1,000,000 shares or approximately 12.7% of
the Company's outstanding Common Stock. As of December 31, 1998, the Company had
repurchased 212,500 shares at an aggregate cost of $1,540,000. Additional
repurchases will be made from time to time in open market transactions in
amounts as determined by the Company's management and will be funded out of the
Company's working capital.
Public Offerings
On April 3, 1998, the Company completed the sale of 2,000,000 shares of
common stock in a public underwriting. On April 30, 1998, the underwriters
exercised their over-allotment option and acquired an additional 300,000 shares
of common stock. The aggregate net proceeds to the Company, after all expenses
of the offering was approximately $25.2 million.
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 ("Public
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 Public Warrants. The aggregate net proceeds to the Company, after
all expenses of the offering, was approximately $10,401,000.
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 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 December 31, 1998, and 1997, $203,000 was outstanding.
In July 1998, the Company made a $500,000 non-recourse loan to its Chief
Executive Officer. The loan is repayable on July 5, 2003 and bears interest at
the rate of 5.68% per annum, payable annually. The obligation to repay the loan
is secured by 49,000 shares of the Company's common stock.
In December 1998, the Company sold an aggregate of 153,000 shares of Common
Stock held in the treasury to the senior executive officers of the Company and
certain of the Company's independent directors at a purchase price of $8.375 per
share, the closing price of the Common Stock on the date of the sale.
Substantially all of the purchase price for the shares of Common Stock sold was
paid in the form of five-year non-recourse promissory notes aggregating
approximately $1.3 million secured by pledges of the underlying Common Stock.
The notes bear interest at a rate of 4.52% per annum.
<PAGE>
Common Stock Outstanding or Reserved for Issuance
The following table sets forth the number of shares of Common Stock
outstanding as of December 31, 1998 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
Exercise, outstanding or
conversion or reserved for
option price issuance
<S> <C> <C>
Common stock 7,759,597
Class A convertible preferred stock 0.361745 13,969
Class B convertible preferred stock 0.355839 8,006
Stock options (i) $1.00 to $11.813 852,988
Private placement warrants (ii) $1.96 349,999
Public warrants (iii) $9.847 330,825
Underwriter's warrants (iii) $10.276 125,000
Underlying warrants (iii) $9.847 31,250
Directors' warrant (iv) $7.11 3,750
---------
Total 9,475,384
=========
</TABLE>
All outstanding warrants expire between January 12, 1999 and November 12,
2001.
(i) Stock Compensation Plans
From time to time, the Company has granted 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 expense is recognized.
SFAS 123, "Accounting for Stock-Based Compensation", requires the Company
to provide pro forma information regarding net income and earnings per share as
if compensation cost for the stock option grants 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 1996, 1997 and 1998; no dividend yield; expected volatility
of 46.1% in 1998, 46.5% in 1997 and 30% in 1996; risk-free weighted average
interest rates of 4.75% in 1998, 6.03% in 1997 and 7.11% in 1996; and expected
lives for the options of 7.4 years in 1998, 5 years in 1997 and 5 years in 1996.
<PAGE>
Under the accounting provisions of SFAS 123, the Company's net income,
basic earnings per share and diluted earnings per share on a pro-forma basis are
as follows:
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1997 1998
Net income:
<S> <C> <C> <C>
As reported $2,059,000 $5,754,000 $4,431,000
Pro-forma $1,986,000 $5,567,000 $4,031,000
Basic earnings per share from
continuing operations:
As reported $ 0.55 $ 1.05 $ 0.62
Pro-forma $ 0.53 $ 1.02 $ 0.56
Diluted earnings per share from
continuing operations:
As reported $ 0.46 $ 0.92 $ 0.58
Pro-forma $ 0.44 $ 0.89 $ 0.53
</TABLE>
In 1997, 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. Options
issued under the Employee Plan expire ten years from the dates of grant and are
generally exercisable and vested 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. Options issued under the Independent Director Plan expire five
years from the dates of grant and are fully exercisable after one year. At
December 31, 1998, there were 96,300 options available for grant under the
Employee Plans and 100,000 options available for grant under the Independent
Director Plan.
<PAGE>
A summary of the status of the Company's outstanding options is presented
below:
<TABLE>
<CAPTION>
Year ended December 31,
1996 1997 1998
Weighted Weighted Weighted
Average Average Average
Number of Exercise Number of Exercise Number of Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding--
beginning of year 240,125 $4.54 461,000 $2.19 691,025 $5.31
Granted 253,000 1.00 280,900 10.70 472,000 7.68
Exercised (1,250) 2.00 (19,937) 1.32 (9,087) 1.31
Forfeited -- -- -- -- (13,250) 9.95
Canceled (30,875) 10.66 (30,938) 10.32 (287,700) 10.76
Outstanding--end of year 461,000 2.19 691,025 5.31 852,988 4.71
Options exercisable--end
of year 164,200 $3.49 227,663 $1.94 334,690 $1.87
Fair value of options
granted during the year $ 0.40 $ 6.72 $ 5.86
======== ======== ======
</TABLE>
On May 13, 1997 and May 13, 1998, options to acquire 12,000 shares and
12,000 shares, respectively, of the Company's common stock at $13.875 per share
and $11.813 per share, respectively, which was the market value at the
respective dates of grant, were issued to the Company's independent directors
pursuant to the Independent Director Plan.
On October 21, 1998, the Company's Board of Directors approved the
repricing of options exercisable for an aggregate of 287,700 shares of Common
Stock previously granted to key employees of the Company and the Company's
non-employee directors pursuant to the Company's 1997 Stock Compensation Program
("the repricing"). Pursuant to the Repricing, option holders exchanged options
with exercise prices ranging from $9.375 to $13.875 per share for new stock
options covering the same number of shares and having an exercise price of $6.19
per share, the closing price of the Common Stock on the NASDAQ National Market
on October 21, 1998. Options granted pursuant to the Repricing vest over a
four-year period, with 25% of the options becoming exercisable in each year
commencing one year after the date of the Repricing and will expire ten years
after the Repricing. In accordance with SFAS 123, the Company recorded
compensation expense in 1997 and 1998 of $60,000 and $33,500, respectively in
connection with the issuance and repricing of the above noted options relating
to the non-employee directors.
Options issued prior to the adoption of the Program are non-qualified stock
options. 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 and for those 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.
<PAGE>
The following table summarizes information about stock options outstanding
at December 31, 1998.
<TABLE>
<CAPTION>
Options Outstanding
Weighted- Options Exercisable
Weighted Number Average Weighted Number
Average Outstanding at Remaining Average Exercisable at
Exercise December 31, Contractual Exercise December 31, Exercise
Price 1998 Life Price 1998 Price
<S> <C> <C> <C> <C> <C> <C>
$ 1.00 230,813 2.3 years $ 1.00 173,110 $ 1.00
2.00 164,475 1.2 years 2.00 131,580 2.00
6.19 287,700 9.9 years 6.19 0
6.38 30,000 4.7 years 6.38 30,000 6.38
8.38 50,000 9.9 years 8.38 0
11.81 90,000 9.4 years 11.81 0
------- -------
1.00 to 11.81 852,988 5.9 years $ 5.93 334,690 $ 1.87
</TABLE>
(ii) Private Placement Warrants
In connection with the private placement of securities in 1996, 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. During 1997 and
1998, 32,500 and 37,500 warrants, respectively, were exercised. The warrants
expire between May 9, 2000 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 Public Warrant exercise price and the
number of shares issuable upon exercise of the Public Warrants are subject to
adjustment under certain circumstances. The Company may redeem outstanding
Public Warrants on not less than 30 days notice at a price of $0.25 per Public
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. During
1997 and 1998, 66,200 and 48,000 Public Warrants, respectively were exercised.
In connection with the Company's November 1996 public offering, the
managing 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.
(iv) Directors' warrants
On December 31, 1991, the Board of Directors adopted the 1991 Directors
Warrant Plan ("Plan"). Pursuant to the Plan, each non-employee director was sold
a five-year warrant to purchase 3,750 shares of Common Stock at an exercise
price equal to the current market price for such shares at the time of issuance
of the warrant. The Board of Directors terminated the Plan effective May 1997.
During 1998, 3,750 warrants expired. During 1997, 3,750 warrants were exercised.
During 1996, 3,750 warrants expired.
6. Income Taxes
The provision (benefit) for income taxes related to continuing operations
are as follows:
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1997 1998
<S> <C> <C> <C>
Current tax expense (benefit):
Federal $ 143,000 $ 983,000 $ 1,058,000
State 27,000 285,000 339,000
Recognition of net operating losses--U.S. (170,000) (1,268,000) (1,251,000)
Foreign (primarily Canada) 297,000 952,000 421,000
Recognition of net operating losses--Canada 182,000) (548,000) (289,000)
-------- ---------- ----------
Total Current 115,000 404,000 278,000
------- ---------- ----------
Deferred tax expense (benefit):
Federal (130,000) (728,000) (1,556,000)
State (22,000) (128,000) 9,000
Foreign (primarily Canada) (354,000) 81,000 (40,000)
--------- --------- ----------
Total deferred (506,000) (775,000) (1,587,000)
--------- --------- -----------
Total income tax benefit $(391,000) $(371,000) $(1,309,000)
========= ========= ===========
</TABLE>
Deferred tax assets are comprised of the following temporary differences
and carryforwards at December 31:
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
Nondeductible allowances against trade
receivables $ 20,000 $ 155,000
Nondeductible reserves and accruals 104,000 188,000
Machinery and equipment 497,000 398,000
Tax benefit of U.S. operating loss carry
forwards 4,404,000 2,562,000
Other 53,000 3,000
---------- ----------
Gross deferred tax assets 5,078,000 3,306,000
Deferred tax assets valuation allowance (3,572,000) (214,000)
----------- ----------
Net deferred tax assets $ 1,506,000 $ 3,092,000
========== ==========
</TABLE>
<PAGE>
At December 31, 1998, a valuation allowance has been provided for certain
limitations applied to the net operating loss carryforward of a subsidiary. At
December 31, 1997, 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, 1998, the net deferred tax asset
of $3,092,000, included approximately $445,000 and $2,647,000 related to the
Company's Canadian and U.S. operations, respectively. At December 31, 1997, the
net deferred tax asset of $1,506,000, included approximately $405,000 and
$1,101,000 related to the Company's Canadian and U.S. operations, respectively.
Based on historical results and estimated 1999 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.
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):
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1997 1998
<S> <C> <C> <C>
Income taxes (benefit) computed at the
U.S. statutory rate $ 567 $ 1,830 $ 1,061
Income not subject to U.S. tax, net (225) (239) (211)
U.S. losses and expenses for which no tax
benefit has been recognized 25 7 184
Utilization of U.S. net operating losses (143) (777) (943)
Decrease in beginning of the year deferred
tax asset valuation allowance (590) (1,217) (1,546)
State income taxes -- -- 146
Other (25) 25 --
Provision (benefit) for income taxes $(391) $ (371) $(1,309)
</TABLE>
At December 31, 1998, the Company had net operating loss carry forwards in
the U.S. of approximately $7.3 million and $3.2 million for federal and state
income tax purposes, respectively, which expire in varying amounts through 2010.
7. Commitments
The Company rents facilities, automobiles and equipment under various
operating leases. Rental expenses under such leases amounted to $325,000,
$324,000 and $444,000 for 1996, 1997 and 1998, respectively.
At December 31, 1998, the aggregate minimum commitments pursuant to
operating leases, including a lease renewal are as follows:
Year ending December 31,
1999 $ 496,000
2000 582,000
2001 515,000
2002 517,000
2003 and thereafter 2,595,000
The Company has multi-year employment contracts with three key executives.
Pursuant to those contracts the Company has annual minimum salary commitments
aggregating $569,000, $569,000, $465,000 and $260,000 for the four years ended
December 31, 2002, respectively.
8. Employee Benefit Plans
The Company maintains a 401(k) salary deferral plan for all U.S. employees
and a money purchase plan for its Canadian employees. As a money purchase plan,
it does not establish any Company liability other than a discretionary matching
formula to employee contributions.
The aggregate cost of both plans for 1996, 1997, and 1998 was $87,000,
$103,000 and $141,0000, respectively.
Effective January 1, 1998, the Company adopted the Barringer Technologies
Inc. Supplemental Executive Retirement Plan (the "SERP Plan"). The SERP Plan
provides eligible participants with certain retirement benefits supplemental to
the Company's 401(k) Plan. Pursuant to the SERP Plan, the Company will make
annual contributions to the account of each participant equal to a variable
percentage of the participant's base salary and annual cash bonus depending on
the Company's achievement of certain performance targets. The actual percentage
contribution will be determined by the Executive Compensation Committee, subject
to certain parameters. A participant will
<PAGE>
become vested under the SERP Plan after five years of participation therein. For
the year ended December 31, 1998, contributions aggregating $103,000 were made
into the plan.
9. Supplemental Disclosures of Cash Flow Information
The Company made cash payments for interest of $246,000, $17,000 and
$10,000, for the years ended December 31, 1996, 1997 and 1998, respectively.
Additionally, income taxes of $4,000, $209,000 and $498,000, were paid for the
years ended December 31, 1996, 1997 and 1998, respectively.
In the year ended December 31, 1996, the Company satisfied Preferred Stock
dividend requirements in the amount $24,000 through issuance of 7,949 shares of
common stock. Subsequent to December 31, 1996, all dividends have been paid in
cash.
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 5).
10. Segment and Geographic Data
The Company's business focuses on one segment of Business - "IONSCAN", its
only product. The Ionscan is currently used in the areas of drug and explosive
detection for various security applications.
A summary of the Company's revenues and long-lived assets by geographic
area for each of the three years in the period ended December 31, 1998 is as
follows (in thousands):
<PAGE>
<TABLE>
<CAPTION>
Revenues Long-Lived Assets
1996 1997 1998 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
United States $ 3,411 $13,408 $14,473 $ 98 $ 217 $ 754
Canada 825 950 800 457 1,264 1,423
Other foreign countries 6,687 8,331 5,185 40 24 172
------ ------ ------ ------ ----- ------
Totals $10,923 $22,689 $20,458 $ 595 $1,505 $2,349
====== ====== ====== ===== ===== =====
</TABLE>
<PAGE>
Revenues are attributed to the countries based on location of the customer.
For the year ended December 31, 1998, export sales, including sales from
Canada to other countries, comprised 25.4% of total revenues and were made
primarily to Western Europe, Asia and Central and South America.
11. Sales to Major Customers
For the year ended December 31, 1998, the FAA accounted for approximately
46.3% of consolidated revenues of the Company. For the year ended December 31,
1997, two customers accounted for approximately 27.8% (14.8% and 13%) of
consolidated revenues of the Company. For the year ended December 31, 1996, one
customer accounted for approximately 11% of consolidated revenues of the
Company.
12. Fourth Quarter Adjustments
During the fourth quarter of 1996 and 1998, the Company recorded a deferred
tax benefit related to a decrease in the deferred tax asset valuation allowance
of $266,000 and $635,000, respectively. During the fourth quarter of 1997, the
Company had no material adjustments.
<PAGE>
13. Sale of Subsidiary
During 1996, the Company sold all of its remaining shares and warrants in
Labco and recognized a gain of $123,000 on the sale. 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.
14. Earnings Per Share
Basic and Diluted earnings per share has been computed as follows:
<TABLE>
<CAPTION>
Income Shares Per Share
For the Year ended December 31, 1998: (Numerator) (Denominator) Amount
Basic Earnings Per Share:
<S> <C> <C> <C>
Income attributable to common
stockholders 4,421,000 7,153,000 $0.62
Effect of dilutive securities
Warrants and options 437,000
Convertible preferred dividends 10,000 22,000
Diluted Earnings Per Share:
Income attributable to common
stockholders and assumed
conversions $4,431,000 7,612,000 $0.58
--------- --------- -----
For the Year ended December 31, 1997:
Basic Earnings Per Share:
Income available to common
stockholders 5,742,000 5,456,000 $1.05
Effect of dilutive securities
Warrants and options 777,000
Convertible preferred dividends
and debentures 12,000 24,000
---------- --------- ------
Diluted Earnings Per Share:
Income available to common stockholders
and assumed conversions $5,754,000 6,257,000 $0.92
========= ========= =====
For the Year ended December 31, 1996:
Basic Earnings Per Share:
Income available to common
stockholders 2,020,000 3,695,000 $ 0.55
Effect of dilutive securities ====
Warrants and options 27,000 228,000
Convertible preferred dividends
and debentures 39,000 517,000
--------- --------- -------
Diluted Earnings Per Share:
Income available to common
stockholders
and assumed conversions $ 2,086,000 4,440,000 $ 0.46
========== ========= =====
</TABLE>
<PAGE>
Options and warrants to purchase 577,000 shares of common stock,
exercisable at between $9.847 and $11.81 per share, were outstanding at
December 31, 1998 but were not included in the computation of diluted earnings
per share because the exercise prices were greater than the average market price
of the common stock underlying the warrants and options.
Options to purchase 24,268 shares of common stock, exercisable at between
$11.78 and $14.00 per share, were outstanding at December 31, 1997 but were not
included in the computation of diluted earnings per share because the options'
exercise price was greater than the average market price of the common stock
underlying the options.
15. Acquisition
On April 30, 1998, the Company acquired all of the outstanding capital
stock of DigiVision, Inc. ("DigiVision"), a San Diego-based developer of video
enhancement products, for an aggregate cash purchase price of approximately
$821,000, including related incurred acquisition costs, in a business
combination accounted for as a purchase. DigiVision's results of operations are
included in the accompanying financial statements from the acquisition date
forward. With respect to this acquisition, DigiVision's results of operations
from January 1, 1998 through the acquisition date were not material and
accordingly, pro-forma operating results are not presented. Acquired in-process
research and development projects of DigiVision, which could not be capitalized,
were valued at $435,000 and were expensed at the time of the acquisition. The
excess of the purchase price (including acquisition related costs) over the fair
value of net assets acquired ($778,000) is being amortized over a five-year
period.
<PAGE>
<TABLE>
<CAPTION>
BARRINGER TECHNOLOGIES INC
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31,
SCHEDULE II
Balance - Balance
beginning end of
of period Addition Deduction Recovery period
- - ------------------------------------------------------------------------------------------
Allowance for doubtful
accounts and
sales allowances:
<S> <C> <C> <C>
1998 $109,000 $543,000 $26,000 $626,000
1997 63,000 46,000 109,000
1996 41,000 52,000 $30,000 63,000
</TABLE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated November ___, 1998, by
and between Barringer Technologies Inc. (the "Company") and Richard S. Rosenfeld
(the "Executive"), residing at 105 Stonebridge Road, Montclair, New Jersey
07042.
W I T N E S S E T H:
WHEREAS, the Executive is currently serving as the Vice
President-Finance and Chief Financial Officer of the Company; and
WHEREAS, the Company wishes to assure that the Executive will continue
to serve in that capacity during the term of this Agreement, and the Executive
is willing to continue to serve in that capacity on the terms and conditions
herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
Section 1. Term of Employment. The Executive's employment under this
Agreement shall commence on September 1, 1998 (the "Commencement Date") and,
subject to earlier termination pursuant to Section 5 hereof, shall continue
until August 31, 2001 (the "Term"). The Executive hereby represents and warrants
that (i) he has the legal capacity to execute and perform this Agreement, (ii)
this Agreement is a valid and binding obligation of the Executive enforceable
against him in accordance with its terms, (iii) the Executive's service
hereunder will not conflict with, or result in a breach of, any agreement,
understanding, order, judgment or other obligation to which the Executive is
presently a party or by which he may be bound, and (iv) the Executive is not
subject to, or bound by, any covenant against competition, confidentiality
obligation or any other agreement, order, judgment or other obligation which
would conflict with, restrict or limit the performance of the services to be
provided by him hereunder.
Section 2. Position and Duties. During the Term, the Executive shall
serve as the Vice President-Finance and Chief Financial Officer of the Company
and shall have such powers and duties as are commensurate with such position and
as may be conferred upon him from time to time by the Chief Executive Officer of
the Company or the Board of Directors of the Company (the "Board"). During the
Term, and except for illness or incapacity and reasonable vacation periods
consistent with Section 3 below, the Executive shall reasonably devote all of
his business time, attention, skill and efforts exclusively to the business and
affairs of the Company and its subsidiaries and affiliates; provided, however,
that the Executive may engage in charitable, educational, religious, civic and
similar types of activities (all of which shall be deemed to benefit the
Company), speaking engagements, membership on the board of directors of other
organizations (to the extent approved in advance by the Board), and similar
activities to the extent that such activities do not inhibit or prohibit the
performance of his duties hereunder or inhibit or conflict with the business of
the Company, its subsidiaries and affiliates.
<PAGE>
Section 3. Compensation. For all services rendered by the Executive in
any capacity required hereunder during the Term, including, without limitation,
services as an executive officer, director, or member of any committee of the
Company or of any subsidiary, affiliate or division thereof, the Executive shall
be compensated as follows:
(a) The Company shall pay the Executive a fixed salary at the rate of
$125,000 per annum or such higher (but never lower) annual amount as is being
paid from time to time pursuant to the terms hereof ("Base Salary"). The Base
Salary shall be subject to such periodic review and such periodic increases as
the Board shall deem appropriate in accordance with the Company's customary
procedures and practices regarding the salaries of senior officers. Base Salary
shall be payable in accordance with the customary payroll practices of the
Company, but in no event less frequently than semi-monthly.
(b) The Executive shall be entitled to participate in the Company's
Annual Incentive Plan or any successor plan (the "Annual Incentive Plan"), which
plan provides for the payment of incentive cash compensation to key officers
based upon the performance of the Company and the officer's individual
performance. The Company shall pay the Executive such amounts, if any, as shall
become due to the Executive from time to time under the Annual Incentive Plan. A
summary description of the terms of the Annual Incentive Plan is attached hereto
as Exhibit A.
(c) The Executive also shall be entitled to participate in the
Company's Supplemental Executive Retirement Plan or any successor plan (the
"SERP Plan"), which plan provides for contributions by the Company to accounts
maintained for the benefit of certain senior executive officers of the Company
based upon the performance of the Company. The Company shall pay to the
Executive's account such amounts, if any, as shall become due from time to time
under the SERP Plan. A summary description of the terms of the SERP Plan is
attached hereto as Exhibit B.
(d) Subject to compliance with the terms of Section 4 hereof, the
Company shall reimburse the Executive for the Executive's actual out-of-pocket
expenses of leasing a car of the Executive's choice and all related maintenance,
repairs, insurance and other expenses, subject to a monthly cap of $450.
(e) The Company shall provide the Executive with coverage under an
individual or group disability insurance policy (together with any replacement
disability insurance policy, the "Disability Policy") providing the Executive
with payments equal to 60% of his Base Salary as in effect from time to time in
the event that the Executive becomes permanently disabled, subject to a monthly
cap of $10,000 and containing such terms and conditions as the Board or the
Executive Compensation Committee of the Board may approve.
(f) The Company shall maintain a term insurance policy (the "Term
Policy") insuring the life of the Executive with a mutually acceptable insurance
company in an amount not less than three times the Executive's Base Salary at no
cost to the Executive (except any associated tax liability) with the beneficiary
<PAGE>
to be designated by the Executive. In the event that the Executive's employment
is terminated pursuant to the terms hereof, the Company shall assign its rights
under the Term Policy to the Executive for no additional consideration and,
subject to the terms of the Term Policy, the Executive shall have the right to
assume the Company's obligations thereunder. Upon such assignment, the Company
shall have no further obligation with respect to the Term Policy.
(g) The Executive shall be entitled to four weeks of vacation and
carry-over rights all in accordance with the then-current policy of the Company.
(h) The Company also will furnish the Executive, without cost to him
except any associated tax liability, with perquisites consistent with those
afforded other senior executives holding positions with the Company comparable
to the position held by the Executive.
(i) Except as expressly modified by the terms hereof, the Executive
shall be entitled to participate in all compensation and employee benefit plans
or programs, and to receive all benefits, perquisites and emoluments, for which
any salaried employees of the Company are eligible under any plan or program now
or hereafter established and maintained by the Company, to the fullest extent
permissible under the general terms and provisions of such plans or programs and
in accordance with the provisions thereof. Notwithstanding the foregoing,
nothing in this Agreement shall preclude the amendment or termination of any
such plan or program, including, without limitation, the Annual Incentive Plan
and the SERP Plan; provided, that, such amendment or termination is applicable
generally to the senior officers of the Company or any subsidiary or affiliate.
Section 4. Business Expenses. Subject to any applicable limitations
set forth in Section 3, the Company shall pay or reimburse the Executive for all
reasonable travel or other expenses incurred by the Executive in connection with
the performance of his duties and obligations under this Agreement, subject to
the Executive's presentation of appropriate vouchers in accordance with such
procedures as the Company may from time to time establish for senior officers
and to preserve any deductions for Federal income taxation purposes to which the
Company may be entitled.
Section 5. Termination of Employment; Effects Thereof.
(a) The Company shall have the right, upon delivery of written notice
to the Executive, to terminate the Executive's employment hereunder prior to the
expiration of the Term (i) pursuant to a Termination for Cause, (ii) upon the
Executive's becoming subject to a Permanent Disability, or (iii) pursuant to a
Without Cause Termination; provided, however, that, without the Executive's
written consent, no Without Cause Termination shall be effective until 30 days
after receipt by the Executive of written notice of termination from the
Company. The Executive's employment hereunder shall terminate automatically
without action by any party hereto upon the Executive's death.
(b) Except as provided in paragraph (c) below, in the event that the
Company terminates the Executive's employment pursuant to a Without Cause
Termination, the Company shall pay the Executive any earned but unpaid Base
<PAGE>
Salary as of the effective date of such termination and shall continue, subject
to the provisions of Section 6 below, to pay the Executive's Base Salary as in
effect at the time of such termination for a period of twelve months from the
effective date of such termination.
(c) At any time after the occurrence of a Change in Control Event, the
Executive shall have the right, upon delivery of written notice to the Company,
to terminate the Executive's employment hereunder prior to the expiration of the
Term if the Company (i) requires the Executive to be based at any office or
location more than 25 miles from the office at which the Executive is based on
the Commencement Date, other than infrequent business trips of short duration
reasonably required in the performance of the Executive's responsibilities under
this Agreement; or (ii) assigns to the Executive duties materially inconsistent
with, or fails to assign to the Executive duties materially consistent with, the
Executive's position, duties, authority and responsibilities. In the event that
either (x) the Executive resigns in accordance with the preceding sentence, or
(y) the Company terminates the Executive's employment pursuant to a Without
Cause Termination on or after the occurrence of a Change in Control Event, the
Company shall pay the Executive any earned but unpaid Base Salary as of the
effective date of such termination and shall pay to the Executive in a single
lump sum within ten (10) business days of the effective date of the termination
of the Executive's employment an amount equal to the greater of (i) the
Executive's annual Base Salary or (ii) any Base Salary payable to the Executive
for the remainder of the Term.
(d) In the event of any termination of the Executive's employment
pursuant to paragraph (b) or (c) above, subject to the provisions of Section
3(i), the Company shall pay the Executive an amount determined under the Annual
Incentive Plan in respect of the year in which the termination of employment is
effective assuming (i) the Executive has met all of his personal objectives pro
rated for such year, and (ii) the total bonus pool under the Annual Incentive
Plan for such year is based upon the level of the Company's performance through
the end of the month immediately preceding the effective date of such
termination with such performance being annualized for the year in which the
termination of employment is effective. The Company also shall pay to the
Executive (or as the Executive may otherwise direct) all amounts which the
Executive is entitled to pursuant to the SERP Plan (whether vested or unvested).
Except as provided in paragraph (l) below, all stock options or other awards
previously granted to the Executive that have not vested on or before the
effective date of the termination of the Executive's employment will immediately
expire and shall be null and void as of the date of termination and all options
or awards previously granted to the Executive that have vested on or before the
effective date of the termination of the Executive's employment shall be payable
or exercisable, if at all, as specified in the stock compensation program or
other arrangement pursuant to which such options or awards were granted to the
Executive. In addition, the Company shall pay to the Executive any other
benefits to which the Executive is entitled upon termination of employment under
any employee benefit plan or policy then in effect. The Company also shall
continue to provide the Executive, his spouse and their eligible dependents with
continued group hospitalization, health and medical insurance coverage
consistent with and pursuant to the terms of the medical plan, if any, then
maintained by the Company for its employees for one year following the effective
date of the termination of the Executive's employment. Neither the Executive,
his spouse nor their eligible dependents shall be required to contribute to the
cost of such coverage (except for any deductibles and co-payments generally
applicable to participants in such medical plan). The Executive acknowledges
that the medical benefits coverage provided hereunder shall run concurrently
with any period of coverage to which the Executive, his spouse or their eligible
dependents may be entitled under the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended ("COBRA"). Any period of continuation coverage under
COBRA shall be measured from the effective date of the termination of the
<PAGE>
Executive's employment hereunder. The Executive and his spouse will have the
statutory period after the termination of his employment to elect continued
COBRA coverage. No other payments shall be made, or benefits provided, by the
Company under this Agreement except as otherwise required by law.
(e) In the event that the Company terminates the Executive's
employment pursuant to a Permanent Disability, the Company shall pay the
Executive any earned but unpaid Base Salary as of the effective date of such
termination and, subject to the provisions of Section 3(i), shall pay the
Executive an amount determined under the Annual Incentive Plan in respect of the
year in which the termination of employment is effective assuming (i) the
Executive has met all of his personal objectives pro rated for such year, and
(ii) the total bonus pool under the Annual Incentive Plan for such year is based
upon the level of the Company's performance through the end of the month
immediately preceding the effective date of such termination with such
performance being annualized for the year in which the termination of employment
is effective. The Company also shall pay to the Executive (or as the Executive
may otherwise direct) all amounts which the Executive is entitled to pursuant to
the SERP Plan (whether vested or unvested). All stock options or other awards
previously granted to the Executive that have not vested on or before the
effective date of the termination of the Executive's employment will immediately
expire and shall be null and void as of the date of termination and all options
or awards previously granted to the Executive that have vested on or before the
effective date of the termination of the Executive's employment shall be payable
or exercisable, if at all, as specified in the stock compensation program or
other arrangement pursuant to which such options or awards were granted to the
Executive. In addition, the Company shall pay to the Executive any other
benefits to which the Executive is entitled upon termination of employment under
any employee benefit plan or policy then in effect. No other payments shall be
made, or benefits provided, by the Company under this Agreement except as
otherwise required by law.
(f) In the event that the Company terminates the Executive's
employment hereunder due to a Termination for Cause or the Executive terminates
his employment with the Company (including, without limitation, pursuant to any
retirement plan or policy then maintained by the Company), the Company shall pay
the Executive any earned but unpaid Base Salary as of the date of termination of
employment. The Company also shall pay to the Executive (or as the Executive may
otherwise direct) all amounts then credited to the Executive's account pursuant
to the SERP Plan that have vested on or before the effective date of the
termination of the Executive's employment and all amounts then so credited that
have not vested on or before the effective date of the termination of the
Executive's employment shall be forfeited. The Executive shall not be entitled
to participate in the Annual Incentive Plan in respect of the year in which
termination of his employment occurs or any subsequent year. All stock options
or other awards previously granted to the Executive that have not vested on or
<PAGE>
before the effective date of the termination of the Executive's employment will
immediately expire and shall be null and void as of the date of termination and
all options or awards previously granted to the Executive that have vested on or
before the effective date of the termination of the Executive's employment shall
be payable or exercisable, if at all, as specified in the stock compensation
program or other arrangement pursuant to which such options or awards were
granted to the Executive. In addition, the Company shall pay to the Executive
any other benefits to which the Executive is entitled upon termination of
employment under any employee benefit plan or policy then in effect. No other
payments shall be made, or benefits provided, by the Company under this
Agreement except as otherwise required by law.
(g) In the event that the Executive's employment hereunder is
terminated due to the Executive's death, the Company shall pay the Executive's
executor or other legal representative (the "Representative") any earned but
unpaid Base Salary as of the date of termination of employment and, subject to
the provisions of Section 3(i), shall pay the Representative an amount
determined under the Annual Incentive Plan in respect of the year in which the
Executive's death occurs assuming (i) the Executive has met all of his personal
objectives pro rated for such year, and (ii) the total bonus pool under the
Annual Incentive Plan for such year is based upon the level of the Company's
performance through the end of the month immediately preceding the Executive's
death with such performance being annualized for the year in which the
Executive's death occurs; provided, that, the amount paid to the Representative
shall be pro rated for the number of complete months preceding the Executive's
death. In addition, the Company shall pay to the Representative (or as the
Representative may otherwise direct) all amounts which the Executive is entitled
to pursuant to the SERP Plan (whether vested or unvested). All stock options or
other awards previously granted to the Executive that have not vested on or
before the Executive's death will immediately expire and shall be null and void
as of the date of death and all options or awards previously granted to the
Executive that have vested on or before the Executive's death shall be payable
or exercisable, if at all, by the Representative as specified in the stock
compensation program or other arrangement pursuant to which such options or
awards were granted to the Executive. In addition, the Company shall pay to the
Representative any other benefits to which the Executive would have been
entitled upon termination of employment under any employee benefit plan or
policy then in effect. No other payments shall be made, or benefits provided, by
the Company under this Agreement except as otherwise required by law.
(h) In the event that the Term expires and the Company and the
Executive have not agreed to extend this Agreement or entered into a replacement
employment agreement, other than as a result of the Executive's retirement, the
Executive shall have the right to terminate his employment within 30 days of the
end of the Term by providing written notice to that effect to the Company. Such
termination shall be effective 20 days after receipt of such notice by the
Company, unless the Company and the Executive agree otherwise in writing. A
termination of employment by the Executive pursuant to this Section 5(h) shall
have the same effect as a Without Cause Termination.
<PAGE>
(i) Any lump-sum severance payments received by the Executive pursuant
to this Section 5 upon termination of his employment shall be treated as salary
for purposes of the Company's 401(k) Savings Plan to the maximum extent
permitted by applicable law.
(j) For purposes of this Agreement, the following terms have the
following meanings:
(i) The term "Termination for Cause" means, to the maximum extent
permitted by applicable law, a termination of the Executive's employment by
the Company because the Executive has (a) materially breached or materially
failed to perform his duties under applicable law and such breach or
failure to perform causes material damage to the Company or constitutes
self-dealing or willful misconduct, (b) intentionally committed an act of
dishonesty in the performance of his duties hereunder that either
constitutes self-dealing, willful misconduct, a breach of duty to the
Company or a violation of applicable law, (c) engaged in conduct
detrimental to the business of the Company which causes material damage to
the Company, (d) been convicted of a felony, (e) been convicted of a
misdemeanor involving moral turpitude, (f) materially breached or
materially failed to perform his obligations and duties hereunder, which
breach or failure the Executive shall fail to remedy within 30 days after
written demand from the Company, (g) repeatedly refused to follow lawful
and reasonable directions from the Board or the Chief Executive Officer
commensurate with the Executive's office and the terms of this Agreement,
which refusal is material to the performance of the Executive's duties or
(h) violated in any material respect the representations made in Section 1
above or the provisions of Section 6 below.
(ii) The term "Without Cause Termination" means a termination of
the Executive's employment by the Company other than due to (i) a
Termination for Cause, (ii) Permanent Disability or (iii) the Executive's
death.
(iii) The term "Permanent Disability" means permanently disabled
so as to qualify for full benefits under the Disability Policy; provided,
however, that if no Disability Policy is in effect on the date of
determination, "Permanent Disability" shall mean the inability of the
Executive to perform his duties hereunder on a full-time basis for a period
of six full calendar months during any eight consecutive calendar months
due to illness or injury of a physical or mental nature, supported by the
completion by the Executive's attending physician (or a physician selected
by the Company and reasonably satisfactory to the Executive or his legal
representative if the Executive's physician is unable or unwilling to
provide the necessary certification) of a medical certification form
outlining the disability and treatment.
(iv) The term "Change in Control Event" means any of the
following events:
<PAGE>
(A) Any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended), is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended,
except that a person shall be deemed to have "beneficial ownership" of
all securities that such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time),
directly or indirectly, of 50% or more of the total voting power of
the Company's outstanding capital stock;
(B) The individuals who (i) as of the date of this Agreement
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 Company shall consummate a merger, consolidation,
recapitalization, or reorganization of the Company, other than any
such transaction which results 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 Company shall consummate a plan of complete
liquidation of the Company or an agreement for the sale, assignment,
conveyance, transfer, lease or other disposition by the Company of all
or substantially all of its assets to any person, or group of related
persons, in one or a series of related transactions.
(k) Any payments to be made or benefits to be provided by the Company
pursuant to this Section 5 (other than pursuant to Sections 5(e) or (g)) are
subject to the receipt by the Company of an effective general release and
agreement not to sue in a form reasonably satisfactory to the Company (the
"Release") pursuant to which the Executive agrees (i) to release all claims
against the Company and certain related parties (excluding claims for any
severance benefits payable hereunder), (ii) not to maintain any action, suit,
claim or proceeding against the Company and certain related parties, and (iii)
to be bound by certain confidentiality and mutual non-disparagement covenants
specified therein. Notwithstanding the due date of any post-employment payment,
the Company shall not be obligated to make any payments under this Section 5
until after the expiration of any revocation period applicable to the Release.
<PAGE>
(l) Upon the occurrence of a Change in Control Event and provided that
the Executive continues to be employed by the Company at such time, the Board
shall, or shall cause the Executive Compensation Committee of the Board to,
cause all stock options previously granted to the Executive to become
immediately exercisable by the Executive to the extent that such acceleration is
not prohibited by the terms of any plan, program, agreement or arrangement
pursuant to which such options were granted.
Section 6. Other Duties of Executive During and After Term. (a) The
Executive recognizes and acknowledges that all information pertaining to the
affairs, business, clients, or customers of the Company or any of its
subsidiaries or affiliates (any or all of such entities being hereinafter
referred to as the "Business"), as such information may exist from time to time,
other than information that the Company has previously made publicly available,
is confidential information and is a unique and valuable asset of the Business,
access to and knowledge of which are essential to the performance of the
Executive's duties under this Agreement. In consideration of the payments made
to him hereunder, the Executive shall not, except to the extent reasonably
necessary in the performance of his duties under this Agreement, divulge to any
person, firm, association, corporation, or governmental agency, any information
concerning the affairs, businesses, clients, or customers of the Business
(except such information as is required by law to be divulged to a government
agency or pursuant to lawful process), or make use of any such information for
his own purposes or for the benefit of any person, firm, association or
corporation (except the Business) and shall use his reasonable best efforts to
prevent the disclosure of any such information by others. All records,
memoranda, letters, books, papers, reports, accountings, experience or other
data, and other records and documents relating to the Business, whether made by
the Executive or otherwise coming into his possession, are confidential
information and are, shall be, and shall remain the property of the Business. No
copies thereof shall be made which are not retained by the Business, and the
Executive agrees, on termination of his employment or on demand of the Company,
to deliver the same to the Company.
(b) The Executive recognizes and acknowledges that the Company shall
own all Work Product created by the Executive during the Term. As used herein,
"Work Product" includes, but is not limited to, all intellectual property
rights, U.S. and international copyrights, patentable inventions, creations,
discoveries and improvements, works of authorship and ideas, whether or not
patentable or copyrightable and regardless of their form or state of
development. All Work Product shall be considered work made for hire by the
Executive and shall be owned by the Company.
If any of the Work Product may not, by operation of law, be considered
a work made for hire by the Executive for the Company, or if ownership of all
right, title and interest of the intellectual property rights therein shall not
otherwise vest exclusively in the Company, the Executive shall assign, and upon
creation thereof shall be deemed to have automatically assigned, without further
consideration, the ownership of all such Work Product to the Company and its
successors and assigns. The Company, its successors and assigns shall have the
right to obtain and hold in its or their own name copyrights, patents,
<PAGE>
registrations and other protections available to the Work Product. The Executive
shall, at the Company's expense, assist the Company in obtaining and maintaining
patent, copyright, trademark and other appropriate protection for all Work
Product in all countries. The Executive hereby irrevocably relinquishes for the
benefit of the Company, its successors and assigns any moral rights in the Work
Product recognized under applicable law.
The Executive shall disclose all Work Product promptly to the Company
and shall not disclose the Work Product to anyone other than authorized Company
personnel without the Company's prior written consent. The Executive shall not
disclose to the Company or induce the Company to use any secret or confidential
information or material belonging to others.
The provisions of this Section 6(b) cover Work Product of any kind
that is conceived or made by the Executive that (i) results from tasks assigned
to the Executive by the Company, its subsidiaries and affiliates, or (ii) are
conceived or made with the use of facilities or materials provided by the
Company, its subsidiaries and affiliates.
(c) In consideration of the payments made to him hereunder, during the
one-year period commencing on the effective date of the termination of his
employment for any reason, the Executive shall not, without express prior
written approval of the Board, directly or indirectly, own or hold any
proprietary interest in, or be employed by or receive remuneration from, any
corporation, limited liability company, business trust, partnership, sole
proprietorship or other entity engaged in competition with the Company or any of
its affiliates (a "Competitor"), other than severance-type or retirement-type
benefits from entities constituting prior employers of the Executive. The
Executive also shall not, during such one-year period, solicit for the account
of any Competitor, any customer or client of the Company or its affiliates, or
any entity or individual that was such a customer or client during the one-year
period immediately preceding the termination of the Executive's employment. The
Executive also shall not, during such one-year period, act on behalf of any
Competitor to interfere with the relationship between the Company or its
subsidiaries and affiliates and their respective employees.
For purposes of the preceding paragraph, (i) the term "proprietary
interest" means legal or equitable ownership, whether through stockholding or
otherwise, of an equity interest in a business, firm or entity other than
ownership of less than two percent of any class of equity interest in a publicly
held business, firm or entity and (ii) an entity shall be considered to be
"engaged in competition" if such entity is, or is a holding company for, a
company engaged in the business of designing, manufacturing, assembling, selling
or servicing trace chemical detection equipment or related software or supplies
anywhere in the world.
(d) The Executive acknowledges that the restrictions contained in this
Section 6 are reasonable and necessary to protect the legitimate interests of
the Company and that any breach by the Executive of any provision contained in
this Section 6 will result in irreparable injury to the Company for which a
remedy at law would be inadequate. Accordingly, the Executive acknowledges that
the Company shall be entitled to temporary, preliminary and permanent injunctive
<PAGE>
relief against the Executive in the event of any breach or threatened breach by
the Executive of the provisions of this Section 6, in addition to any other
remedy that may be available to the Company whether at law or in equity.
(e) The Company's obligation to make payments, or provide for any
benefits under this Agreement (except to the extent vested or exercisable) shall
cease upon a violation by the Executive of the provisions of this Section 6. The
provisions of this Section 6 shall survive any termination of the Executive's
employment with the Company.
Section 7. Withholdings. The Company may directly or indirectly
withhold from any payments made under this Agreement all Federal, state, city or
other taxes and all other deductions as shall be required pursuant to any law or
governmental regulation or ruling or pursuant to any contributory benefit plan
maintained by or on behalf of the Company.
Section 8. Consolidation, Merger, or Sale of Assets. Nothing in this
Agreement shall preclude the Company from consolidating or merging into or with,
or transferring all or substantially all of its assets to, or engaging in any
other business combination with, any other person or entity which assumes this
Agreement and all obligations and undertakings of the Company hereunder. Upon
such a consolidation, merger, transfer of assets or other business combination
and assumption, the term "Company" as used herein shall mean such other person
or entity and this Agreement shall continue in full force and effect.
Section 9. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be given in writing and
shall be deemed to have been duly given if delivered or mailed, postage prepaid,
by same day or overnight mail (i) if to the Executive, at the address set forth
above, or (ii) if to the Company, as follows:
Barringer Technologies Inc.
30 Technology Drive
Warren, New Jersey 07059
or to such other address as either party shall have previously specified in
writing to the other.
Section 10. No Attachment. Except as required by law, no right to
receive payments under this Agreement shall be subject to anticipation,
commutation, alienation, sale, assignment, encumbrance, charge, pledge, or
hypothecation or to execution, attachment, levy, or similar process or
assignment by operation of law, and any attempt, voluntary or involuntary, to
effect any such action shall be null, void and of no effect; provided, however,
that nothing in this Section 10 shall preclude the assumption of such rights by
executors, administrators or other legal representatives of the Executive or his
estate and their assigning any rights hereunder to the person or persons
entitled thereto.
Section 11. Expenses. Except as set forth herein, each party hereto
shall pay its own expenses incident to the preparation, negotiation,
administration and enforcement of this Agreement and the transactions
contemplated herein.
<PAGE>
Section 12. Source of Payment. Subject to the terms of the SERP Plan,
all payments provided for under this Agreement shall be paid in cash from the
general funds of the Company. Except as may be required pursuant to the SERP
Plan, the Company shall not be required to establish a special or separate fund
or other segregation of assets to assure such payments, and, if the Company
shall make any investments to aid it in meeting its obligations hereunder, the
Executive shall have no right, title or interest whatever in or to any such
investments except as may otherwise be expressly provided in a separate written
instrument relating to such investments. Nothing contained in this Agreement,
and no action taken pursuant to its provisions, shall create or be construed to
create a trust of any kind, or a fiduciary relationship, between the Company and
the Executive or any other person. To the extent that any person acquires a
right to receive payments from the Company hereunder, such right, without
prejudice to rights which employees may have, shall be no greater than the right
of an unsecured creditor of the Company.
Section 13. Binding Agreement; No Assignment. This Agreement shall be
binding upon, and shall inure to the benefit of, the Executive and the Company
and their respective permitted successors, assigns, heirs, beneficiaries and
representatives. This Agreement is personal to the Executive and may not be
assigned by him without the prior written consent of the Company. Any attempted
assignment in violation of this Section 13 shall be null and void.
Section 14. Dispute Resolution. At the option of either the Company or
the Executive, any dispute, controversy or question arising under, out of or
relating to this Agreement or the breach thereof, other than pursuant to Section
6 hereof, shall be referred for decision by arbitration in the State of New
Jersey by a neutral arbitrator mutually selected by the parties hereto. Any
arbitration proceeding shall be governed by the Rules of the American
Arbitration Association then in effect or such rules last in effect (in the
event such Association is in existence). If the parties are unable to agree upon
such a neutral arbitrator within 21 days after either party has given the other
written notice of the desire to submit the dispute, controversy or question for
decision as aforesaid, then either party may apply to the American Arbitration
Association for a final and binding appointment of a neutral arbitrator,
however, if such Association is not then in existence or does not act in the
matter within 45 days of any such application, either party may apply to the
Presiding Judge of the Superior Court of any county in New Jersey for an
appointment of a neutral arbitrator to hear the parties and such Judge is hereby
authorized to make such appointment. In the event that either party exercises
the right to submit a dispute, controversy or question arising hereunder to
arbitration, the decision of the neutral arbitrator shall be final, conclusive
and binding on all interested persons and no action at law or in equity shall be
instituted or, if instituted, further prosecuted by either party other than to
enforce the award of the neutral arbitrator. The award of the neutral arbitrator
may be entered in any court that has jurisdiction. The Executive and the Company
shall each bear all their own costs (including the fees and disbursements of
counsel) incurred in connection with any such arbitration and shall each pay
one-half of the costs of any arbitrator appointed hereunder.
Section 15. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New Jersey,
without reference to the choice of law principles thereof.
<PAGE>
Section 16. Entire Agreement. This Agreement shall constitute the
entire agreement among the parties with respect to the matters covered hereby
and shall supersede all previous written, oral or implied understandings among
them with respect to such matters, including, but not limited to, the Employment
Agreement, dated November 1, 1996, between the Company and the Executive.
Section 17. Amendments. This Agreement may only be amended or
otherwise modified, and compliance with any provision hereof may only be waived,
by a writing executed by all of the parties hereto. The provisions of this
Section 17 may only be amended or otherwise modified by such a writing.
Section 18. Severability. The invalidity of any provision hereof shall
not affect the validity, force or effect of the remaining provisions hereof. In
the event that an arbitrator designated pursuant to the provisions of Section 14
or a court of competent jurisdiction determines that any provision contained
herein is not enforceable as written because of the breadth or duration of such
provision, such arbitrator or court shall have the authority to modify the terms
of such provision so that, as so modified, such provision shall be enforceable
to the maximum extent permitted by applicable law.
Section 19. No Strict Construction. Each of the parties hereto
acknowledges that this Agreement has been prepared jointly by the parties
hereto, each of whom has been represented by counsel, and shall not be strictly
construed against either party.
Section 20. Counterparts. This 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.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by the undersigned, thereunto duly authorized, and the Executive has
signed this Agreement, all as of the date first written above.
BARRINGER TECHNOLOGIES INC.
By:/s/Stanley S. Binder
_______________________________
Name: Stanley S. Binder
Title: Chief Executive Officer
/s/Richard S. Rosenfeld
________________________________
Richard S. Rosenfeld
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated November ___, 1998, by
and between Barringer Technologies Inc. (the "Company") and Kenneth S. Wood (the
"Executive"), residing at 18 Brookside Drive, Warren, New Jersey 07060.
W I T N E S S E T H:
WHEREAS, the Executive is currently serving as the President and Chief
Operating Officer of the Company; and
WHEREAS, the Company wishes to assure that the Executive will continue
to serve in that capacity during the term of this Agreement, and the Executive
is willing to continue to serve in that capacity on the terms and conditions
herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
Section 1. Term of Employment. The Executive's employment under this
Agreement shall commence on September 1, 1998 (the "Commencement Date") and,
subject to earlier termination pursuant to Section 5 hereof, shall continue
until August 31, 2001 (the "Term"). The Executive hereby represents and warrants
that (i) he has the legal capacity to execute and perform this Agreement, (ii)
this Agreement is a valid and binding obligation of the Executive enforceable
against him in accordance with its terms, (iii) the Executive's service
hereunder will not conflict with, or result in a breach of, any agreement,
understanding, order, judgment or other obligation to which the Executive is
presently a party or by which he may be bound, and (iv) the Executive is not
subject to, or bound by, any covenant against competition, confidentiality
obligation or any other agreement, order, judgment or other obligation which
would conflict with, restrict or limit the performance of the services to be
provided by him hereunder.
Section 2. Position and Duties. During the Term, the Executive shall
serve as the President and Chief Operating Officer of the Company and shall have
such powers and duties as are commensurate with such position and as may be
conferred upon him from time to time by the Chief Executive Officer of the
Company or the Board of Directors of the Company (the "Board"). During the Term,
and except for illness or incapacity and reasonable vacation periods consistent
with Section 3 below, the Executive shall reasonably devote all of his business
time, attention, skill and efforts exclusively to the business and affairs of
the Company and its subsidiaries and affiliates; provided, however, that the
Executive may engage in charitable, educational, religious, civic and similar
types of activities (all of which shall be deemed to benefit the Company),
speaking engagements, membership on the board of directors of other
organizations (to the extent approved in advance by the Board), and similar
activities to the extent that such activities do not inhibit or prohibit the
performance of his duties hereunder or inhibit or conflict with the business of
the Company, its subsidiaries and affiliates.
<PAGE>
Section 3. Compensation. For all services rendered by the Executive in
any capacity required hereunder during the Term, including, without limitation,
services as an executive officer, director, or member of any committee of the
Company or of any subsidiary, affiliate or division thereof, the Executive shall
be compensated as follows:
(a) The Company shall pay the Executive a fixed salary at the rate of
$172,500 per annum or such higher (but never lower) annual amount as is being
paid from time to time pursuant to the terms hereof ("Base Salary"). The Base
Salary shall be subject to such periodic review and such periodic increases as
the Board shall deem appropriate in accordance with the Company's customary
procedures and practices regarding the salaries of senior officers. Base Salary
shall be payable in accordance with the customary payroll practices of the
Company, but in no event less frequently than semi-monthly.
(b) The Executive shall be entitled to participate in the Company's
Annual Incentive Plan or any successor plan (the "Annual Incentive Plan"), which
plan provides for the payment of incentive cash compensation to key officers
based upon the performance of the Company and the officer's individual
performance. The Company shall pay the Executive such amounts, if any, as shall
become due to the Executive from time to time under the Annual Incentive Plan. A
summary description of the terms of the Annual Incentive Plan is attached hereto
as Exhibit A.
(c) The Executive also shall be entitled to participate in the
Company's Supplemental Executive Retirement Plan or any successor plan (the
"SERP Plan"), which plan provides for contributions by the Company to accounts
maintained for the benefit of certain senior executive officers of the Company
based upon the performance of the Company. The Company shall pay to the
Executive's account such amounts, if any, as shall become due from time to time
under the SERP Plan. A summary description of the terms of the SERP Plan is
attached hereto as Exhibit B.
(d) Subject to compliance with the terms of Section 4 hereof, the
Company shall reimburse the Executive for the Executive's actual out-of-pocket
expenses of leasing a car of the Executive's choice and all related maintenance,
repairs, insurance and other expenses, subject to a monthly cap of $600.
(e) The Company shall provide the Executive with coverage under an
individual or group disability insurance policy (together with any replacement
disability insurance policy, the "Disability Policy") providing the Executive
with payments equal to 60% of his Base Salary as in effect from time to time in
the event that the Executive becomes permanently disabled, subject to a monthly
cap of $10,000 and containing such terms and conditions as the Board or the
Executive Compensation Committee of the Board may approve.
(f) The Company shall maintain a term insurance policy (the "Term
Policy") insuring the life of the Executive with a mutually acceptable insurance
company in an amount not less than four times the Executive's Base Salary at no
cost to the Executive (except any associated tax liability) with the beneficiary
to be designated by the Executive. In the event that the Executive's employment
is terminated pursuant to the terms hereof, the Company shall assign its rights
<PAGE>
under the Term Policy to the Executive for no additional consideration and,
subject to the terms of the Term Policy, the Executive shall have the right to
assume the Company's obligations thereunder. Upon such assignment, the Company
shall have no further obligation with respect to the Term Policy.
(g) The Executive shall be entitled to four weeks of vacation and
carry-over rights all in accordance with the then-current policy of the Company.
(h) The Company also will furnish the Executive, without cost to him
except any associated tax liability, with perquisites consistent with those
afforded other senior executives holding positions with the Company comparable
to the position held by the Executive.
(i) Except as expressly modified by the terms hereof, the Executive
shall be entitled to participate in all compensation and employee benefit plans
or programs, and to receive all benefits, perquisites and emoluments, for which
any salaried employees of the Company are eligible under any plan or program now
or hereafter established and maintained by the Company, to the fullest extent
permissible under the general terms and provisions of such plans or programs and
in accordance with the provisions thereof. Notwithstanding the foregoing,
nothing in this Agreement shall preclude the amendment or termination of any
such plan or program, including, without limitation, the Annual Incentive Plan
and the SERP Plan; provided, that, such amendment or termination is applicable
generally to the senior officers of the Company or any subsidiary or affiliate.
Section 4. Business Expenses. Subject to any applicable limitations
set forth in Section 3, the Company shall pay or reimburse the Executive for all
reasonable travel or other expenses incurred by the Executive in connection with
the performance of his duties and obligations under this Agreement, subject to
the Executive's presentation of appropriate vouchers in accordance with such
procedures as the Company may from time to time establish for senior officers
and to preserve any deductions for Federal income taxation purposes to which the
Company may be entitled.
Section 5. Termination of Employment; Effects Thereof.
(a) The Company shall have the right, upon delivery of written notice
to the Executive, to terminate the Executive's employment hereunder prior to the
expiration of the Term (i) pursuant to a Termination for Cause, (ii) upon the
Executive's becoming subject to a Permanent Disability, or (iii) pursuant to a
Without Cause Termination; provided, however, that, without the Executive's
written consent, no Without Cause Termination shall be effective until 30 days
after receipt by the Executive of written notice of termination from the
Company. The Executive's employment hereunder shall terminate automatically
without action by any party hereto upon the Executive's death.
(b) Except as provided in paragraph (c) below, in the event that the
Company terminates the Executive's employment pursuant to a Without Cause
Termination, the Company shall pay the Executive any earned but unpaid Base
<PAGE>
Salary as of the effective date of such termination and shall continue, subject
to the provisions of Section 6 below, to pay the Executive's Base Salary as in
effect at the time of such termination for a period of twelve months from the
effective date of such termination.
(c) At any time after the occurrence of a Change in Control Event, the
Executive shall have the right, upon delivery of written notice to the Company,
to terminate the Executive's employment hereunder prior to the expiration of the
Term if the Company (i) requires the Executive to be based at any office or
location more than 25 miles from the office at which the Executive is based on
the Commencement Date, other than infrequent business trips of short duration
reasonably required in the performance of the Executive's responsibilities under
this Agreement; or (ii) assigns to the Executive duties materially inconsistent
with, or fails to assign to the Executive duties materially consistent with, the
Executive's position, duties, authority and responsibilities. In the event that
either (x) the Executive resigns in accordance with the preceding sentence, or
(y) the Company terminates the Executive's employment pursuant to a Without
Cause Termination on or after the occurrence of a Change in Control Event, the
Company shall pay the Executive any earned but unpaid Base Salary as of the
effective date of such termination and shall pay to the Executive in a single
lump sum within ten (10) business days of the effective date of the termination
of the Executive's employment an amount equal to the greater of (i) the
Executive's annual Base Salary or (ii) any Base Salary payable to the Executive
for the remainder of the Term.
(d) In the event of any termination of the Executive's employment
pursuant to paragraph (b) or (c) above, subject to the provisions of Section
3(i), the Company shall pay the Executive an amount determined under the Annual
Incentive Plan in respect of the year in which the termination of employment is
effective assuming (i) the Executive has met all of his personal objectives pro
rated for such year, and (ii) the total bonus pool under the Annual Incentive
Plan for such year is based upon the level of the Company's performance through
the end of the month immediately preceding the effective date of such
termination with such performance being annualized for the year in which the
termination of employment is effective. The Company also shall pay to the
Executive (or as the Executive may otherwise direct) all amounts which the
Executive is entitled to pursuant to the SERP Plan (whether vested or unvested).
Except as provided in paragraph (l) below, all stock options or other awards
previously granted to the Executive that have not vested on or before the
effective date of the termination of the Executive's employment will immediately
expire and shall be null and void as of the date of termination and all options
or awards previously granted to the Executive that have vested on or before the
effective date of the termination of the Executive's employment shall be payable
or exercisable, if at all, as specified in the stock compensation program or
other arrangement pursuant to which such options or awards were granted to the
Executive. In addition, the Company shall pay to the Executive any other
benefits to which the Executive is entitled upon termination of employment under
any employee benefit plan or policy then in effect. The Company also shall
continue to provide the Executive, his spouse and their eligible dependents with
continued group hospitalization, health and medical insurance coverage
consistent with and pursuant to the terms of the medical plan, if any, then
maintained by the Company for its employees for one year following the effective
date of the termination of the Executive's employment. Neither the Executive,
his spouse nor their eligible dependents shall be required to contribute to the
cost of such coverage (except for any deductibles and co-payments generally
applicable to participants in such medical plan). The Executive acknowledges
that the medical benefits coverage provided hereunder shall run concurrently
<PAGE>
with any period of coverage to which the Executive, his spouse or their eligible
dependents may be entitled under the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended ("COBRA"). Any period of continuation coverage under
COBRA shall be measured from the effective date of the termination of the
Executive's employment hereunder. The Executive and his spouse will have the
statutory period after the termination of his employment to elect continued
COBRA coverage. No other payments shall be made, or benefits provided, by the
Company under this Agreement except as otherwise required by law.
(e) In the event that the Company terminates the Executive's
employment pursuant to a Permanent Disability, the Company shall pay the
Executive any earned but unpaid Base Salary as of the effective date of such
termination and, subject to the provisions of Section 3(i), shall pay the
Executive an amount determined under the Annual Incentive Plan in respect of the
year in which the termination of employment is effective assuming (i) the
Executive has met all of his personal objectives pro rated for such year, and
(ii) the total bonus pool under the Annual Incentive Plan for such year is based
upon the level of the Company's performance through the end of the month
immediately preceding the effective date of such termination with such
performance being annualized for the year in which the termination of employment
is effective. The Company also shall pay to the Executive (or as the Executive
may otherwise direct) all amounts which the Executive is entitled to pursuant to
the SERP Plan (whether vested or unvested). All stock options or other awards
previously granted to the Executive that have not vested on or before the
effective date of the termination of the Executive's employment will immediately
expire and shall be null and void as of the date of termination and all options
or awards previously granted to the Executive that have vested on or before the
effective date of the termination of the Executive's employment shall be payable
or exercisable, if at all, as specified in the stock compensation program or
other arrangement pursuant to which such options or awards were granted to the
Executive. In addition, the Company shall pay to the Executive any other
benefits to which the Executive is entitled upon termination of employment under
any employee benefit plan or policy then in effect. No other payments shall be
made, or benefits provided, by the Company under this Agreement except as
otherwise required by law.
(f) In the event that the Company terminates the Executive's
employment hereunder due to a Termination for Cause or the Executive terminates
his employment with the Company (including, without limitation, pursuant to any
retirement plan or policy then maintained by the Company), the Company shall pay
the Executive any earned but unpaid Base Salary as of the date of termination of
employment. The Company also shall pay to the Executive (or as the Executive may
otherwise direct) all amounts then credited to the Executive's account pursuant
to the SERP Plan that have vested on or before the effective date of the
termination of the Executive's employment and all amounts then so credited that
have not vested on or before the effective date of the termination of the
Executive's employment shall be forfeited. The Executive shall not be entitled
to participate in the Annual Incentive Plan in respect of the year in which
termination of his employment occurs or any subsequent year. All stock options
<PAGE>
or other awards previously granted to the Executive that have not vested on or
before the effective date of the termination of the Executive's employment will
immediately expire and shall be null and void as of the date of termination and
all options or awards previously granted to the Executive that have vested on or
before the effective date of the termination of the Executive's employment shall
be payable or exercisable, if at all, as specified in the stock compensation
program or other arrangement pursuant to which such options or awards were
granted to the Executive. In addition, the Company shall pay to the Executive
any other benefits to which the Executive is entitled upon termination of
employment under any employee benefit plan or policy then in effect. No other
payments shall be made, or benefits provided, by the Company under this
Agreement except as otherwise required by law.
(g) In the event that the Executive's employment hereunder is
terminated due to the Executive's death, the Company shall pay the Executive's
executor or other legal representative (the "Representative") any earned but
unpaid Base Salary as of the date of termination of employment and, subject to
the provisions of Section 3(i), shall pay the Representative an amount
determined under the Annual Incentive Plan in respect of the year in which the
Executive's death occurs assuming (i) the Executive has met all of his personal
objectives pro rated for such year, and (ii) the total bonus pool under the
Annual Incentive Plan for such year is based upon the level of the Company's
performance through the end of the month immediately preceding the Executive's
death with such performance being annualized for the year in which the
Executive's death occurs; provided, that, the amount paid to the Representative
shall be pro rated for the number of complete months preceding the Executive's
death. In addition, the Company shall pay to the Representative (or as the
Representative may otherwise direct) all amounts which the Executive is entitled
to pursuant to the SERP Plan (whether vested or unvested). All stock options or
other awards previously granted to the Executive that have not vested on or
before the Executive's death will immediately expire and shall be null and void
as of the date of death and all options or awards previously granted to the
Executive that have vested on or before the Executive's death shall be payable
or exercisable, if at all, by the Representative as specified in the stock
compensation program or other arrangement pursuant to which such options or
awards were granted to the Executive. In addition, the Company shall pay to the
Representative any other benefits to which the Executive would have been
entitled upon termination of employment under any employee benefit plan or
policy then in effect. No other payments shall be made, or benefits provided, by
the Company under this Agreement except as otherwise required by law.
(h) In the event that the Term expires and the Company and the
Executive have not agreed to extend this Agreement or entered into a replacement
employment agreement, other than as a result of the Executive's retirement, the
Executive shall have the right to terminate his employment within 30 days of the
end of the Term by providing written notice to that effect to the Company. Such
termination shall be effective 20 days after receipt of such notice by the
Company, unless the Company and the Executive agree otherwise in writing. A
termination of employment by the Executive pursuant to this Section 5(h) shall
have the same effect as a Without Cause Termination.
<PAGE>
(i) Any lump-sum severance payments received by the Executive pursuant
to this Section 5 upon termination of his employment shall be treated as salary
for purposes of the Company's 401(k) Savings Plan to the maximum extent
permitted by applicable law.
(j) For purposes of this Agreement, the following terms have the
following meanings:
(i) The term "Termination for Cause" means, to the maximum extent
permitted by applicable law, a termination of the Executive's employment by
the Company because the Executive has (a) materially breached or materially
failed to perform his duties under applicable law and such breach or
failure to perform causes material damage to the Company or constitutes
self-dealing or willful misconduct, (b) intentionally committed an act of
dishonesty in the performance of his duties hereunder that either
constitutes self-dealing, willful misconduct, a breach of duty to the
Company or a violation of applicable law, (c) engaged in conduct
detrimental to the business of the Company which causes material damage to
the Company, (d) been convicted of a felony, (e) been convicted of a
misdemeanor involving moral turpitude, (f) materially breached or
materially failed to perform his obligations and duties hereunder, which
breach or failure the Executive shall fail to remedy within 30 days after
written demand from the Company, (g) repeatedly refused to follow lawful
and reasonable directions from the Board or the Chief Executive Officer
commensurate with the Executive's office and the terms of this Agreement,
which refusal is material to the performance of the Executive's duties or
(h) violated in any material respect the representations made in Section 1
above or the provisions of Section 6 below.
(ii) The term "Without Cause Termination" means a termination of
the Executive's employment by the Company other than due to (i) a
Termination for Cause, (ii) Permanent Disability or (iii) the Executive's
death.
(iii) The term "Permanent Disability" means permanently disabled
so as to qualify for full benefits under the Disability Policy; provided,
however, that if no Disability Policy is in effect on the date of
determination, "Permanent Disability" shall mean the inability of the
Executive to perform his duties hereunder on a full-time basis for a period
of six full calendar months during any eight consecutive calendar months
due to illness or injury of a physical or mental nature, supported by the
completion by the Executive's attending physician (or a physician selected
by the Company and reasonably satisfactory to the Executive or his legal
representative if the Executive's physician is unable or unwilling to
provide the necessary certification) of a medical certification form
outlining the disability and treatment.
(iv) The term "Change in Control Event" means any of the
following events:
<PAGE>
(A) Any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended), is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended,
except that a person shall be deemed to have "beneficial ownership" of
all securities that such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time),
directly or indirectly, of 50% or more of the total voting power of
the Company's outstanding capital stock;
(B) The individuals who (i) as of the date of this Agreement
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 Company shall consummate a merger, consolidation,
recapitalization, or reorganization of the Company, other than any
such transaction which results 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 Company shall consummate a plan of complete
liquidation of the Company or an agreement for the sale, assignment,
conveyance, transfer, lease or other disposition by the Company of all
or substantially all of its assets to any person, or group of related
persons, in one or a series of related transactions.
(k) Any payments to be made or benefits to be provided by the Company
pursuant to this Section 5 (other than pursuant to Sections 5(e) or (g)) are
subject to the receipt by the Company of an effective general release and
agreement not to sue in a form reasonably satisfactory to the Company (the
"Release") pursuant to which the Executive agrees (i) to release all claims
against the Company and certain related parties (excluding claims for any
severance benefits payable hereunder), (ii) not to maintain any action, suit,
claim or proceeding against the Company and certain related parties, and (iii)
to be bound by certain confidentiality and mutual non-disparagement covenants
specified therein. Notwithstanding the due date of any post-employment payment,
the Company shall not be obligated to make any payments under this Section 5
until after the expiration of any revocation period applicable to the Release.
<PAGE>
(l) Upon the occurrence of a Change in Control Event and provided that
the Executive continues to be employed by the Company at such time, the Board
shall, or shall cause the Executive Compensation Committee of the Board to,
cause all stock options previously granted to the Executive to become
immediately exercisable by the Executive to the extent that such acceleration is
not prohibited by the terms of any plan, program, agreement or arrangement
pursuant to which such options were granted.
Section 6. Other Duties of Executive During and After Term. (a) The
Executive recognizes and acknowledges that all information pertaining to the
affairs, business, clients, or customers of the Company or any of its
subsidiaries or affiliates (any or all of such entities being hereinafter
referred to as the "Business"), as such information may exist from time to time,
other than information that the Company has previously made publicly available,
is confidential information and is a unique and valuable asset of the Business,
access to and knowledge of which are essential to the performance of the
Executive's duties under this Agreement. In consideration of the payments made
to him hereunder, the Executive shall not, except to the extent reasonably
necessary in the performance of his duties under this Agreement, divulge to any
person, firm, association, corporation, or governmental agency, any information
concerning the affairs, businesses, clients, or customers of the Business
(except such information as is required by law to be divulged to a government
agency or pursuant to lawful process), or make use of any such information for
his own purposes or for the benefit of any person, firm, association or
corporation (except the Business) and shall use his reasonable best efforts to
prevent the disclosure of any such information by others. All records,
memoranda, letters, books, papers, reports, accountings, experience or other
data, and other records and documents relating to the Business, whether made by
the Executive or otherwise coming into his possession, are confidential
information and are, shall be, and shall remain the property of the Business. No
copies thereof shall be made which are not retained by the Business, and the
Executive agrees, on termination of his employment or on demand of the Company,
to deliver the same to the Company.
(b) The Executive recognizes and acknowledges that the Company shall
own all Work Product created by the Executive during the Term. As used herein,
"Work Product" includes, but is not limited to, all intellectual property
rights, U.S. and international copyrights, patentable inventions, creations,
discoveries and improvements, works of authorship and ideas, whether or not
patentable or copyrightable and regardless of their form or state of
development. All Work Product shall be considered work made for hire by the
Executive and shall be owned by the Company.
If any of the Work Product may not, by operation of law, be considered
a work made for hire by the Executive for the Company, or if ownership of all
right, title and interest of the intellectual property rights therein shall not
otherwise vest exclusively in the Company, the Executive shall assign, and upon
creation thereof shall be deemed to have automatically assigned, without further
consideration, the ownership of all such Work Product to the Company and its
successors and assigns. The Company, its successors and assigns shall have the
right to obtain and hold in its or their own name copyrights, patents,
registrations and other protections available to the Work Product. The Executive
<PAGE>
shall, at the Company's expense, assist the Company in obtaining and maintaining
patent, copyright, trademark and other appropriate protection for all Work
Product in all countries. The Executive hereby irrevocably relinquishes for the
benefit of the Company, its successors and assigns any moral rights in the Work
Product recognized under applicable law.
The Executive shall disclose all Work Product promptly to the Company
and shall not disclose the Work Product to anyone other than authorized Company
personnel without the Company's prior written consent. The Executive shall not
disclose to the Company or induce the Company to use any secret or confidential
information or material belonging to others.
The provisions of this Section 6(b) cover Work Product of any kind
that is conceived or made by the Executive that (i) results from tasks assigned
to the Executive by the Company, its subsidiaries and affiliates, or (ii) are
conceived or made with the use of facilities or materials provided by the
Company, its subsidiaries and affiliates.
(c) In consideration of the payments made to him hereunder, during the
one-year period commencing on the effective date of the termination of his
employment for any reason, the Executive shall not, without express prior
written approval of the Board, directly or indirectly, own or hold any
proprietary interest in, or be employed by or receive remuneration from, any
corporation, limited liability company, business trust, partnership, sole
proprietorship or other entity engaged in competition with the Company or any of
its affiliates (a "Competitor"), other than severance-type or retirement-type
benefits from entities constituting prior employers of the Executive. The
Executive also shall not, during such one-year period, solicit for the account
of any Competitor, any customer or client of the Company or its affiliates, or
any entity or individual that was such a customer or client during the one-year
period immediately preceding the termination of the Executive's employment. The
Executive also shall not, during such one-year period, act on behalf of any
Competitor to interfere with the relationship between the Company or its
subsidiaries and affiliates and their respective employees.
For purposes of the preceding paragraph, (i) the term "proprietary
interest" means legal or equitable ownership, whether through stockholding or
otherwise, of an equity interest in a business, firm or entity other than
ownership of less than two percent of any class of equity interest in a publicly
held business, firm or entity and (ii) an entity shall be considered to be
"engaged in competition" if such entity is, or is a holding company for, a
company engaged in the business of designing, manufacturing, assembling, selling
or servicing trace chemical detection equipment or related software or supplies
anywhere in the world.
(d) The Executive acknowledges that the restrictions contained in this
Section 6 are reasonable and necessary to protect the legitimate interests of
the Company and that any breach by the Executive of any provision contained in
this Section 6 will result in irreparable injury to the Company for which a
remedy at law would be inadequate. Accordingly, the Executive acknowledges that
the Company shall be entitled to temporary, preliminary and permanent injunctive
relief against the Executive in the event of any breach or threatened breach by
<PAGE>
the Executive of the provisions of this Section 6, in addition to any other
remedy that may be available to the Company whether at law or in equity.
(e) The Company's obligation to make payments, or provide for any
benefits under this Agreement (except to the extent vested or exercisable) shall
cease upon a violation by the Executive of the provisions of this Section 6. The
provisions of this Section 6 shall survive any termination of the Executive's
employment with the Company.
Section 7. Withholdings. The Company may directly or indirectly
withhold from any payments made under this Agreement all Federal, state, city or
other taxes and all other deductions as shall be required pursuant to any law or
governmental regulation or ruling or pursuant to any contributory benefit plan
maintained by or on behalf of the Company.
Section 8. Consolidation, Merger, or Sale of Assets. Nothing in this
Agreement shall preclude the Company from consolidating or merging into or with,
or transferring all or substantially all of its assets to, or engaging in any
other business combination with, any other person or entity which assumes this
Agreement and all obligations and undertakings of the Company hereunder. Upon
such a consolidation, merger, transfer of assets or other business combination
and assumption, the term "Company" as used herein shall mean such other person
or entity and this Agreement shall continue in full force and effect.
Section 9. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be given in writing and
shall be deemed to have been duly given if delivered or mailed, postage prepaid,
by same day or overnight mail (i) if to the Executive, at the address set forth
above, or (ii) if to the Company, as follows:
Barringer Technologies Inc.
30 Technology Drive
Warren, New Jersey 07059
or to such other address as either party shall have previously specified in
writing to the other.
Section 10. No Attachment. Except as required by law, no right to
receive payments under this Agreement shall be subject to anticipation,
commutation, alienation, sale, assignment, encumbrance, charge, pledge, or
hypothecation or to execution, attachment, levy, or similar process or
assignment by operation of law, and any attempt, voluntary or involuntary, to
effect any such action shall be null, void and of no effect; provided, however,
that nothing in this Section 10 shall preclude the assumption of such rights by
executors, administrators or other legal representatives of the Executive or his
estate and their assigning any rights hereunder to the person or persons
entitled thereto.
Section 11. Expenses. Except as set forth herein, each party hereto
shall pay its own expenses incident to the preparation, negotiation,
administration and enforcement of this Agreement and the transactions
contemplated herein.
<PAGE>
Section 12. Source of Payment. Subject to the terms of the SERP Plan,
all payments provided for under this Agreement shall be paid in cash from the
general funds of the Company. Except as may be required pursuant to the SERP
Plan, the Company shall not be required to establish a special or separate fund
or other segregation of assets to assure such payments, and, if the Company
shall make any investments to aid it in meeting its obligations hereunder, the
Executive shall have no right, title or interest whatever in or to any such
investments except as may otherwise be expressly provided in a separate written
instrument relating to such investments. Nothing contained in this Agreement,
and no action taken pursuant to its provisions, shall create or be construed to
create a trust of any kind, or a fiduciary relationship, between the Company and
the Executive or any other person. To the extent that any person acquires a
right to receive payments from the Company hereunder, such right, without
prejudice to rights which employees may have, shall be no greater than the right
of an unsecured creditor of the Company.
Section 13. Binding Agreement; No Assignment. This Agreement shall be
binding upon, and shall inure to the benefit of, the Executive and the Company
and their respective permitted successors, assigns, heirs, beneficiaries and
representatives. This Agreement is personal to the Executive and may not be
assigned by him without the prior written consent of the Company. Any attempted
assignment in violation of this Section 13 shall be null and void.
Section 14. Dispute Resolution. At the option of either the Company or
the Executive, any dispute, controversy or question arising under, out of or
relating to this Agreement or the breach thereof, other than pursuant to Section
6 hereof, shall be referred for decision by arbitration in the State of New
Jersey by a neutral arbitrator mutually selected by the parties hereto. Any
arbitration proceeding shall be governed by the Rules of the American
Arbitration Association then in effect or such rules last in effect (in the
event such Association is in existence). If the parties are unable to agree upon
such a neutral arbitrator within 21 days after either party has given the other
written notice of the desire to submit the dispute, controversy or question for
decision as aforesaid, then either party may apply to the American Arbitration
Association for a final and binding appointment of a neutral arbitrator,
however, if such Association is not then in existence or does not act in the
matter within 45 days of any such application, either party may apply to the
Presiding Judge of the Superior Court of any county in New Jersey for an
appointment of a neutral arbitrator to hear the parties and such Judge is hereby
authorized to make such appointment. In the event that either party exercises
the right to submit a dispute, controversy or question arising hereunder to
arbitration, the decision of the neutral arbitrator shall be final, conclusive
and binding on all interested persons and no action at law or in equity shall be
instituted or, if instituted, further prosecuted by either party other than to
enforce the award of the neutral arbitrator. The award of the neutral arbitrator
may be entered in any court that has jurisdiction. The Executive and the Company
shall each bear all their own costs (including the fees and disbursements of
counsel) incurred in connection with any such arbitration and shall each pay
one-half of the costs of any arbitrator appointed hereunder.
Section 15. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New Jersey,
without reference to the choice of law principles thereof.
<PAGE>
Section 16. Entire Agreement. This Agreement shall constitute the
entire agreement among the parties with respect to the matters covered hereby
and shall supersede all previous written, oral or implied understandings among
them with respect to such matters, including, but not limited to, the Employment
Agreement, dated November 1, 1996, between the Company and the Executive.
Section 17. Amendments. This Agreement may only be amended or
otherwise modified, and compliance with any provision hereof may only be waived,
by a writing executed by all of the parties hereto. The provisions of this
Section 17 may only be amended or otherwise modified by such a writing.
Section 18. Severability. The invalidity of any provision hereof shall
not affect the validity, force or effect of the remaining provisions hereof. In
the event that an arbitrator designated pursuant to the provisions of Section 14
or a court of competent jurisdiction determines that any provision contained
herein is not enforceable as written because of the breadth or duration of such
provision, such arbitrator or court shall have the authority to modify the terms
of such provision so that, as so modified, such provision shall be enforceable
to the maximum extent permitted by applicable law.
Section 19. No Strict Construction. Each of the parties hereto
acknowledges that this Agreement has been prepared jointly by the parties
hereto, each of whom has been represented by counsel, and shall not be strictly
construed against either party.
Section 20. Counterparts. This 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.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by the undersigned, thereunto duly authorized, and the Executive has
signed this Agreement, all as of the date first written above.
BARRINGER TECHNOLOGIES INC.
By:/s/Stanley S. Binder
________________________________
Name: Stanley S. Binder
Title: Chief Executive Officer
/s/Kenneth S. Wood
_______________________________
Kenneth S. Wood
Exhibit 10.12
LEASE AGREEMENT
THIS LEASE AGREEMENT, made this 26th day of June , 1998 by and between
MT. BETHEL CORPORATE CENTER
c/o Atlantic Development & Management Corp.
30 Technology Drive, P.O. Box 4500
Warren, New Jersey 07059
(hereinafter referred to as "Landlord")
and
BARRINGER TECHNOLOGIES, INC.
a Delaware Corporation
30 Technology Drive
Warren, New Jersey 07059
(hereinafter referred to as "Tenant")
WITNESSETH:
The parties hereto, in consideration of the rents, covenants and
conditions herein obtained, do mutually agree as follows:
1. THE DEMISE
A. Landlord does hereby demise and lease to Tenant, and Tenant does
hereby lease and hire from Landlord, premises consisting of approximately 21,128
square feet of "as is" offices and approximately 7,000 square feet of "as is"
warehouse space subject to the performance of Landlord to install demising fence
within the warehouse portion of the premises, both of which are as shown
highlighted in yellow on Exhibit "A" (the "Premises") located in a high
technology building comprised of approximately 95,000 sq. ft. (the "Building")
commonly know as 30 Technology Drive, Warren Township, Somerset County, New
Jersey together with right of access through Lots 16 & 19.03 Block 78 on the
private driveway identified as "Technology Drive". The tract of land upon which
the Premises are located and all improvements thereon, including the Building,
are sometimes hereinafter referred to collectively as "Landlord's Tract", and as
shown on Lease Exhibit "B". Landlord's tract consists of land and improvements
included on the aforesaid Lots 16 and 19.03, Block 78. Landlord's Tract includes
land upon which multiple buildings have been constructed (with more buildings
being planned), together with the commonly used areas, including roadways and
detention facilities. It is the parties' intention that when this lease
obligates Tenant to pay "Tenant's Proportionate Share" (or similar term) of
taxes and other costs or expenses attributable to Landlord's Tract, any such
provision shall be interpreted to mean such share set forth in section 6(a) (1)
applied to (a) the taxes or other costs directly attributable only to the
Building, plus (b) the Buildings fair and ratable share of such costs for
maintaining and repairing the common areas of the Landlord's Tract.
Landlord reserves unto itself, its successors and assigns and public
utility companies, the right to install, repair,
<PAGE>
replace and realign utility lines serving the Premises and/or other
improvements, through and in the land beneath the Building, provided that in
doing so, neither Landlord nor any public utility company shall unreasonably
interfere with the use, enjoyment or business operation of Tenant, provided,
however, that if Landlord needs to enter the Building for such purposes, it
shall give Tenant reasonable advance notice.
Subject to the provisions below, Landlord hereby grants to Tenant, at
no additional cost or charge to Tenant, except as hereinafter provided, the
right to use in common with other tenants the portions of the Landlord's Tract
outside of the Premises which are intended to be for common use, including but
not limited to lobbies, hallways, elevator, sidewalks, roofs, access roads and
landscaped areas. Access and all building services shall be provided t all times
during the term of this Lease on a 24 hour, 7 day basis, if allowed by
governmental authorities. It is agreed that sixty five (65) unassigned parking
spaces at the Premises are for the use of Tenant, its employees, agents,
invitees and licensees. Landlord shall not specifically designate any parking
space for any other tenant, except as already so designated as of the date
hereof. Tenant, its employees, agents, invitees and licensees, shall not be
permitted to utilize parking spaces anywhere except at the Premises.
2. TERM: RENEWAL
A. The term of this Lease (the "Initial term") shall be for a period
of ten (10) years commencing on July 1, 1998 or such later date as Landlord
obtains a continuing Certificate of Occupancy for Tenant.. The expiration date
of the Initial Term shall be June 30, 2008.
B. If Tenant is not in default hereunder, Tenant shall have the
option, exercisable by written notice by certified mail return receipt requested
to Landlord not later than nine (9) months prior to the expiration of the
Initial Term to extend the Term for one additional period of ten (10) years on
the same conditions contained herein, except that the basic rent shall be at
Fair Market Value for one such additional ten year period. In no event shall the
basic rental for any renewal term be less than the basic rent being paid for the
last year of the immediately preceding term. The Initial Term and any such
additional periods are referred to collectively as the "Term". The basic rental
for the second five years of the renewal term of the ten (10) year renewal
period shall be adjusted in the same manner that the Base Rent shall be
readjusted during the second five years of the initial term, except that the
increase in the Index shall be measured for the first five (5) years of the
renewal period.
C. At any time not later than twelve (12) months prior the expiration
of the initial term and not earlier than thirteen (13)
<PAGE>
months prior to the expiration of the initial term, Tenant may notify Landlord
that it has an interest in renewing this Lease. Within ten (10) days following
its receipt of such notice, Landlord shall give Tenant a written notice stating
the per-square-foot amount which it would be willing to accept as the Fair
Market Rental Value of the Premises for the Renewal Term. Within ten (10) days
following Tenant's receipt of Landlord's notice, Tenant shall give Landlord a
written notice stating either that Tenant accepts such amount as the Fair Market
Rental Value of the Premises for the applicable Renewal Term or that Tenant does
not accept such amount. If Tenant shall so accept such amount, such amount shall
be the Fair Market Rental Value of the Premises for the Renewal Term. If Tenant
shall give such notice that it does not accept such amount, then Landlord and
Tenant shall promptly initiate, and thereafter cooperate with one another in the
conduct of, negotiations to determine said Fair Market Rental Value. If the
parties have not agreed as to said Fair Market Rental Value within eleven (11)
months prior to the expiration date of the Term or first Renewal Term, as the
case may be, Landlord and Tenant shall attempt to agree upon a single MAI
appraiser to determine the Fair Market Rental Value. If landlord and Tenant
cannot agree upon a single MAI appraiser within eleven (11) days after such
date, then Landlord and Tenant shall each appoint an MAI real estate appraiser
within five (5) days thereafter, each of whom shall have a minimum of ten year's
experience in the area of High-Technology building appraisals and leasing in the
County of Somerset, New Jersey, and neither of whom shall be employees or former
employees of either Landlord or Tenant (although the prospective appraiser may
be an independent consultant to either party). If the two MAI appraisers cannot
agree upon the Fair Market Rental Value, then within ten (10) days after their
selection, the two appraisers shall select a third MAI appraiser who shall meet
the same standards. The three appraisers shall meet at the earliest practicable
date, and in no event later than twenty (20) days after the selection of the
third appraiser, and shall, by a majority vote, determine the Fair Market Rental
Value. If the first two appraisers cannot agree upon a third appraiser within
the aforesaid ten-day period, Landlord and/or Tenant shall promptly apply to the
local office of the American Arbitration Association or a New Jersey court of
competent jurisdiction for the appointment of the third appraiser. If a majority
of the appraisers cannot agree upon such Fair Market Rental Value, then the
third appraiser shall determine the same; provided, however, that the
determination of such appraiser shall not be lower than the lowest Fair Market
Rental Value or higher than the highest Fair Market Rental Value proposed by the
other two appraisers. Each party hereto shall use bona fide efforts (and shall
be responsible for any failure of the appraiser which it selects to use bona
fide efforts) to assure that the determination of the Fair Market Rental Value
is made no later than six (6) months prior to the expiration date of Initial
Term or First Renewal Term, as the case may be, so that Tenant may timely notify
Landlord, if at all, of
<PAGE>
Tenant's exercise of its option to renew the term of the Lease.
The Fair Market Rental Value is to be determined by the appraisers
based upon the condition of the Premises at the Initial Commencement Date of the
Lease and shall not take into account any special tenant improvements. For
purposes of this paragraph, the appraisers shall base their appraisal on the
amount of office space and warehouse space being used and the "net" nature of
this Lease.
3. RENT: ADDITIONAL RENT: SECURITY
A. Tenant shall pay to Landlord, as fixed minimum rent ("Basic Rent")
during the Term, constituting annual and monthly Basic Rent, in accordance with
the Lease Payment Schedule on Exhibit "C". The Basic Rent shall be payable
monthly in advance without set-off, deduction or counterclaim and without
previous notice or demand therefor, with the first installment to be due and
payable upon the execution hereof, and the second and each subsequent
installment to be due and payable on the first day of each and every month of
the Term (the installment for any partial calendar month to be pro-rated based
upon the number of days in the applicable month).
B. In addition to the Basic Rent, Tenant shall pay to Landlord or to
the appropriate third party (as may be specified herein below), as additional
rent, without previous notice or demand therefor except as otherwise herein
provided (subject to no offset, deduction or counterclaim of any kind or
nature), and in the manner and upon the conditions herein set forth, all other
charges provided for hereunder to be paid by Tenant. Any and all sums required
to be paid by Tenant hereunder, whether to Landlord or otherwise, shall for
purposes of Landlord's rights including the non-payment thereof and for all
other purposes for which the same shall be relevant, be deemed additional rent
subject to the same duties and obligations of Tenant with respect to, and the
same remedies of Landlord for the non-payment of, Basic Rent ("Additional
Rent"). If Landlord shall pay any monies or incur any expenses in correction of
Tenant's violation of the covenants contained in this Lease, the amounts so paid
or incurred shall, upon notice to Tenant, be considered Additional Rent payable
by Tenant with the next installment of Basic Rent thereafter to become due and
payable or, if at expiration of the Term or at other termination of this Lease,
within thirty (30) days of demand therefor by Landlord, it being agreed that the
responsibility for payment thereof shall survive expiration of the Term or other
termination of this Lease. All rentals of any nature shall be paid and delivered
to Landlord at Landlord's address as set forth at the head of this Lease, or to
such other place or person as Landlord may from time to time designate by
written notice to Tenant.
<PAGE>
C. Basic Rent and Additional Rent are sometimes hereinafter
collectively referred to as "Rent", "Rent" or "Rental".
D. On or before August 31, 2001, Tenant shall deposit with Landlord
the sum of One Hundred Twenty One Thousand Five Hundred Dollars ($121,500.00),
as security for the faithful performance by Tenant of all of the terms,
covenants and conditions of this Lease by Tenant to be kept and performed (the
"Deposit"). If at any time during the Term, any of the rent herein reserved or
provided to be paid shall be overdue and unpaid beyond any applicable grace
period, then Landlord may, at its option, appropriate and apply any portion of
the Deposit to the payment of any such overdue rent; and in the event of the
failure of Tenant to keep and perform any other term, covenant and/or condition
of this Lease to be kept and performed by Tenant, then Landlord, at its option,
may appropriate and apply the Deposit, or so much thereof as may be necessary,
to compensate Landlord for the loss or damage suffered by Landlord due to the
breach on the part of Tenant. If there shall occur any increase in the Basic
Rent during the Term, Tenant shall, at or prior to the time of such increase,
deposit such additional sum(s) so that the Deposit at all times equals three (3)
months of the prevailing Basic Rent and Additional Rent. Non-payment of the
Security Deposit when due shall be a default in the Lease and Landlord in
addition to all of its remedies under this Lease as to default shall be relieved
of providing free Basic Rent as Landlord's work letter obligation specified in
Exhibit "E".
4. USE OF PREMISES
The Premises shall be used for offices, light assembly and warehouse
operations, and distribution of Tenant's products and for no other purpose.
Tenant represents that it shall not create any odors or noises (which in the
reasonable opinion of Landlord, would devalue the building,) which will disturb
neighboring tenants or properties, and that it will conform at all times with
all applicable municipal zoning ordinances and all laws and regulations as set
forth in Section 12. Tenant represents its use shall not be hazardous.
5. NET LEASE
It is understood and agreed that, except as may otherwise in this
Lease be expressly provided, Tenant has the responsibility of paying all charges
of any kind or nature attributable to the Premises, whether or not specifically
set forth in this Lease, it being the intention of the parties hereto that the
Rent payable to Landlord under this Lease be absolutely net and that Landlord
have no expense whatsoever attributable to the Premises or to the operation or
maintenance of Tenant's operations at the Premises, unless otherwise expressly
stated herein.
<PAGE>
6. REAL ESTATE TAXES
A. Tenant shall pay, as Additional Rent during the Term, upon demand
from time to time by Landlord and together with the next payment of Basic Rent
due after such demand (or within ten (10) days of demand if the Term is about to
expire or this Lease otherwise about to terminate after the making of such
demand), Tenant's Proportionate Share (as defined below) of all real estate
taxes, assessments and other charges and levies which may be made or imposed
upon Landlord's Tract, other than income, franchise, gross receipts,
corporation, capital levy, excess profits, revenue, inheritance, gift, estate,
payroll or stamp tax, or other tax not in lieu of or as substitute for real
estate tax or charges stemming from Landlord's failure to pay taxes as due;
provided, however, that if any time during the Term the methods of taxation
prevailing at the Commencement Date shall be altered so as to cause the whole or
any part of the taxes, assessments and other charges and levies referred to
hereinabove in this Section to be imposed, wholly or partly, as a capital levy,
on the rents received from Landlord's Tract or otherwise, or if any tax shall be
measured by or based in whole or in part upon the value of Landlord's Tract and
shall be imposed upon Landlord, then, to the extent that such other tax is a
substitute for, and is enacted in lieu of, existing real estate tax, as
described above, Tenant shall be responsible for payment, as Additional Rent, of
all such taxes, assessments, levies or charges. The maximum obligation of
Tenant, however, shall be achieved by computing such tax as if the Premises
shall be the sole property of Landlord. Upon request of Tenant, Landlord shall
execute all documents necessary for, and will cooperate with Tenant with respect
to, the prosecution, in Landlord's name, of appeals of the tax assessment
against Landlord's Tract, provided that no such appeal shall be prosecuted if
the prosecution thereof would, in Landlord's reasonable judgment, jeopardize
Landlord's ownership of the Premises or create any lien or encumbrance thereon,
and further provided that Landlord shall incur no expense or obligation in
connection with any such appeals. If payments are made by Tenant directly to the
taxing authority or authorities, Tenant shall submit to Landlord, within ten
(10) days after the due date from time to time, evidence of payment. Landlord
shall provide Tenant with proof of payment of real estate taxes within a
reasonable period of time, if requested.
(1) For purposes of the foregoing and as elsewhere used in this
Lease, "Tenant's Proportionate Share" at the Commencement Date of the Lease
shall be 17.89 percent increasing to 27.59% eighteen (18) months later and to
29.61% as of August 31, 2001. It is understood that these increases may occur
sooner if Tenant occupies additional space during the term of the Lease. This
percentage shall be adjusted as square
<PAGE>
footage increases or decreases over the term of the Lease, or if the Building
size changes.
B. At the option of Landlord, the real estate taxes and/or other
charges for which Tenant is responsible hereunder shall be paid in monthly
installments in such amounts as are estimated and billed by Landlord, each such
installment being due with each monthly basic rental payment. If Landlord elects
such option, which it may do from time to time, then within sixty (60) days
after receipt by Landlord of final real estate tax bills and/or a reasonable
accounting of any other charges so billed for the applicable year, Landlord
shall so notify Tenant and make available for Tenant's inspection, upon request,
until at least 90 days after any calendar year, copies of such tax bills and/or
such accounting, and the monthly payments to be made by Tenant thereafter shall
be adjusted to compensate for any overpayment or underpayment made by Tenant in
the preceding period. It is understood and agreed that the responsibility of
Tenant to pay costs of any nature which may be due under this Lease shall, if
not paid as of the time of expiration of the Term or other termination of this
Lease, survive expiration of the Term or other termination of this Lease.
7. UTILITY CHARGES
Tenant shall pay for all utility services of any nature serving the
Premises. Said utilities for office space shall be separately metered, if
reasonably possible in Tenant's name. Tenant shall not overload the electrical
wiring serving the Premises nor use any other utility beyond its normal
capacity. It is possible that warehouse space may not be sub-metered in which
case, Tenant shall pay Tenant's Proportionate Share based upon the square
footage of said space.
8. LANDLORD'S OPERATING COSTS
A. Tenant shall pay to Landlord, upon demand by Landlord from time to
time, Tenant's Proportionate Share of Landlord's Operating Costs (as defined
below). The phrase "Landlord's Operating Costs" shall mean all reasonable costs,
charges or expenses of any nature actually incurred by Landlord in connection
with owning, operating, maintaining and/or carrying Landlord's Tract. By way of
example, and not in limitation of the generality of the foregoing nor in
limitation of the nature or types of costs, charges or expenses included in the
definition of Landlords Operating Costs, it is understood that Landlord's
Operating Costs shall include costs, charges and expenses for the following with
respect to Landlord's Tract (including the Building and all other exterior and
interior portions, common and otherwise, of Landlord's Tract): maintenance,
repairs and replacements, including roof, structural frame and concrete floor
<PAGE>
slabs; paving, repaving and striping; landscaping; cleaning, lighting, snow and
0ice removal; trash removal and/or janitorial or cleaning service; utility
charges, such as, but not limited to, costs or charges for providing electric
energy (except for electric energy required to be paid for directly by tenants),
heating, air conditioning, lighting, water, gas or other fuel; and costs or
charges for any other type of service supplied to the common areas of Landlord's
Tract; insurance for Landlord's Tract (e.g., fire and extended, liability,
rental, workers' compensation);a management fee equal to no more than five
percent (5%) of Basic Rent and costs for equipment and supplies.
B. Notwithstanding the foregoing, Landlord's Operating Costs shall not
include: the cost of any of the services set forth in Section 8-A above the
responsibility for which are assumed by Tenant with the approval of Landlord,
such as Premises janitorial or security services; costs of repair to the
Premises to the extent reimbursed by payment of insurance proceeds received by
Landlord or recovery from a third party (but less costs of obtaining such
recovery); debt service on loans to Landlord or secured by mortgage or deed of
trust covering the Premises; salaries of executive officers or other employees
of Landlord; and costs relating to new improvements added to the Premises (as
distinguished from repair or replacement of existing improvements), nor shall
Landlord's Operating Costs include items which are capital items during the last
two (2) years of the Initial Term and the last two years of the renewal term, if
any, or the cot of repairs or replacement of structural members, floor slabs or
footings.
C. Tenant shall have the right from time to time, at Tenant's expense,
upon reasonable notice during reasonable business hours, to have an independent
certified public accountant or a qualified employee of Tenant inspect the
portion of Landlord's books and records that are relevant to Landlord's
calculation of Landlord's Operating Costs and Tenant's Proportionate Share
thereof, for a preceding period not to exceed two (2) years.
D. Tenant shall not be responsible for Landlord's Operating Costs and
real estate taxes attributable to the time period prior to the Commencement
Date. Tenant's Proportionate Share of Landlord's Operating Costs and real estate
taxes for the calendar year in which Tenant's obligation to share therein
commences and in the calendar year in which such obligation ceases, shall be
prorated based upon the applicable time periods.
E. The aforesaid Landlord's Operating Costs may be based on monthly
estimates of Landlord but shall be reconciled and adjusted annually.
<PAGE>
F. It is anticipated that the Landlord may contribute the building of
this Lease to a condominium association. In the event same is contributed to
said association, the Tenant shall be responsible for any share of additional
expenses, costs and charges of any nature incurred by the Landlord as a result
of the owning, operating and maintaining of the Landlord's Tract as part of a
condominium. The Tenant shall not be responsible for any share of the costs for
the formation or operation of said association or related entities; but shall be
responsible for its Proportionate Share of certain costs and charges as set
forth in Section 1(A) of this lease.
G. "Landlord's Operating Costs" as referred to in the Lease shall not
include the following: (a) the cost of construction of any improvements on the
Landlord's Tract, including any addition, alteration or refurbishing of space
leased to other tenants in the Building, except that capital expenses for
improvements which result in savings of labor other costs in connection with the
operation of the common area of the Landlord's Tract shall be included at the
cost of such for repairs or other work occasioned by fire, windstorm or other
casualty in excess of a reasonable deductible amount provided in Landlord's
insurance policy; (c) expenses incurred in leasing or procuring new tenants for
the Building (e.g. commission, advertising, renovation and legal); (d) legal
expenses in enforcing the terms of any lease; (e) interest or principal
amortization payments on any mortgage; (f) any real estate taxes, other than as
referred to in the Lease, corporate franchise or net worth taxes income taxes
(state and federal), personal property taxes and excess profit taxes; (g) any
expenses incurred for which Landlord has a right of reimbursement from a tenant
in the Building, an insurer or other person or entity; (h) claims paid by
landlord in satisfaction or settlement of liability in tort; (i) any payment to
the ground lessor, if any; (j) depreciation of the Building or other
improvements; (k) any expense relating to the environmental condition of the
Landlord's Tract; and (1) wages of salaries (y) persons above the level of
building manager, and (z) persons not engaged in full time employment at the
Building, and (m) management or leasing fees or expenses other than the 5%
charge set forth above. All expenses affiliated in any way with Landlord must be
reasonable and comparable to similar expenses paid by landlords generally in
arms-length transactions in order to be includable in operating expenses.
<PAGE>
9. MAINTENANCE AND REPAIRS
A. Tenant will take good care of the Premises and shall be responsible
for maintaining the Premises in good condition and state of repair at all times;
(notwithstanding anything herein to the contrary) and Tenant will surrender the
Premises, at the expiration of the Term or earlier termination of the Lease, as
the case may be, in as good a condition as when received. Tenant shall be
directly responsible to notify Landlord promptly of any maintenance or repairs
required to the Premises, to include but not limited to utilities serving the
Premises, i.e.: gas, water, sewer, plumbing, electrical, or H.V.A.C. Landlord
shall, at Tenant's sole cost and expense, perform any reasonable repairs in the
Premises which are cosmetic, plumbing, mechanical or electrical and Tenant shall
have the right to perform any other repairs at its own cost and expense. Tenant
will not overload the electrical wiring serving the Premises. Tenant may install
only electrical connections conforming to code to its apparatus and equipment,
at Tenant's sole cost and expense. Tenant shall be responsible for changing its
own light bulbs, or may request Landlord to provide such service at Tenant's
cost and expense.
B. Landlord shall at Tenant's cost and expense, as part of Landlord's
Operating Costs, obtain appropriate annual service contracts for maintenance of
the mechanical systems, including compressor replacement, and for landscape
maintenance services. Any costs associated with same shall be paid by Tenant in
full if only attributable to premises or if not, Tenant shall pay its
Proportionate Share.
C. Tenant shall comply with all present and future applicable laws,
ordinances and codes and all applicable governmental rules, regulations and
requirements with respect to the condition of the Premises and the use thereof,
including but not limited to regulations promulgated by the Occupational Safety
and Health Administration of the federal government, and shall pay any and all
fines and penalties imposed upon Landlord, by reason of any violation by Tenant
of the foregoing covenants made by Tenant. (See Section 12).
10. ALTERATIONS AND SIGNAGE
A. Tenant shall have the right, at Tenant's cost and expense, to
perform, make and effect installations, alterations, restorations, changes and
replacements (hereinafter called
<PAGE>
"Alterations") in, of, or to the Premises as Tenant deems necessary or
desirable, which shall require Landlord's reasonable approval which shall not be
unreasonably withheld, conditioned or delayed and shall be made in full
compliance with all applicable laws, orders and regulations of federal, state,
county and municipal authorities, with any direction pursuant to law or given by
any public officer, and with all regulations of any board of fire underwriters
having jurisdiction. Landlord hereby approves Tenant's initial Alterations
described on Schedule 1, Landlord shall have the right to increase the Security
Deposit to cover the cost of any alteration, removal and subsequent restoration.
Notwithstanding any provision in this Lease to the contrary, the office space
initial Alterations need not be restored at the end of the Term, but the
warehouse space Alterations must be restored at the end of the Term.
B. Tenant shall obtain or cause to be obtained through Landlord, all
building permits, licenses, temporary and permanent certificates of occupancy
and other governmental approvals which may be required in connection with the
making of the Alterations, and Landlord shall cooperate with Tenant in the
obtaining thereof (at no out-of-pocket expense to Landlord) and both parties
shall execute any documents reasonably required in furtherance of such purpose.
C. In requesting Landlord's approval for any Alterations, Tenant shall
submit to Landlord (with said request for approval) detailed working drawings of
the proposed Alterations. Landlord shall have the right to charge Tenant as an
item of Additional Rent a reasonable review and supervisory fee based upon the
hourly rates set forth below (Principals of Landlord $300.00 per hour, Landlord
Supervisory Personnel $75.00 per hour, Outside Architects and Engineers on an
"as billed" basis). Landlord will use every reasonable effort to minimize any
such charges. Upon completion of said Alteration, Tenant shall, as soon as is
practical, provide Landlord with "as built" drawings of said Alteration. Tenant
at its own cost and expense shall be responsible for any direct damages due to
Tenant's Alterations.
D. Each party shall indemnify and hold each other harmless against and
from any claims arising out of its work or other activities at or relating to
the Premises..
E. The Alterations shall be and remain the property of Landlord;
provided, however, that Landlord shall have the option, to be exercised, if at
all, at least sixty (60) days prior to expiration of the Term or of any other
termination hereof, to give notice to Tenant that Tenant is to remove all or any
part of Alterations made by Tenant, upon the giving of which notice Tenant shall
be obligated to have the specified Alterations removed prior to such expiration
or termination and to repair any damage caused by the removal and restore the
Premises to their condition as existed prior to the making of the applicable
Alterations.
<PAGE>
F. No signs may be placed or maintained on the exterior of the
Premises by Tenant without the prior written approval of Landlord, and any such
sign as is placed or maintained by Tenant on the exterior of the Premises, must
be kept in good condition and repair at all times and must be installed and
maintained in compliance with all applicable laws, rules and regulations. Tenant
shall be included in the exterior monument sign and in all other Building signs
or registries of Tenant, the cost of which is included in Landlord's Operating
Cost.
11. ALTERATIONS BY LANDLORD
Landlord hereby reserves the right at any time to make alterations at
Landlord's Tract (excluding the Premises unless needed for purpose of doing work
associated with other parts of the building or Tract), including additions to,
subtractions from or rearrangements of the Building and parking areas thereon.
Landlord also reserves the right from time to time to construct other buildings
or improvements on Landlord's Tract and to make alterations thereof or additions
or deletions thereto, provided that any such constructions, alterations,
additions, or deletions shall result in appropriate adjustments to Tenant's
Proportionate Share of real estate taxes and Landlord's Operating Costs.
Landlord shall have right of access to the Premises, provided Landlord uses all
reasonable efforts to minimize any inconvenience to Tenant's operation.
12. OBSERVANCE OF LAWS, ORDINANCES, RULES AND REGULATIONS
A. Tenant and Landlord shall each comply with all statutes,
ordinances, rules, orders, regulations and requirements of all federal, state,
county and municipal and other applicable governmental authorities relating to
the Premises and shall faithfully observe in the use of the Premises all
municipal and county ordinances and regulations and state and federal statutes
and regulations of the Board of Fire Underwriters or similar agency for the
prevention of fires. In case Tenant shall fail or neglect to comply with the
aforesaid statutes, ordinances, rules, orders, regulations and requirements, or
any of them, within the period of time for compliance as contained therein or
such shorter time as may be required in this Lease, then (not in limitation of
any other rights which Landlord may have under this Lease or by law in the case
of a default by Tenant) Landlord or its agents may enter the Premises and make
necessary repairs and comply with any and all of the said statutes, ordinances,
rules, orders, regulations or requirements, at the cost and expense of Tenant.
In case of Tenant's failure to pay therefor, the said cost and expense shall be
added to the next month's rent and be due and payable promptly as Additional
Rent, together with interest as in this Lease provided. Each of the parties
shall perform the work normally attributable to its respective
<PAGE>
responsibility. If one fails to perform within a reasonable time, the other may
complete the work.
B. Tenant may contest any of the above-stated statutes, ordinances,
rules, orders, regulations or requirements, provided that Tenant shall indemnify
Landlord for any resulting loss or liability (including but not limited to
reasonable attorney's fees incurred by Landlord), and shall not do so in any
<PAGE>
circumstances as would, in Landlord's reasonable judgment, jeopardize Landlord's
ownership of the Premises or cause any lien or encumbrance to be placed upon the
Premises. Landlord agrees to cooperate with any said contest, provided that
Landlord shall entail no out-of-pocket cost or expense.
13. ASSIGNMENT OR SUBLETTING
A. Tenant may not assign this Lease in whole or in part, nor sublet
all or any part of the Premises, without the prior written consent of Landlord,
which consent shall not be unreasonably withheld, delayed or conditioned. In all
circumstances of assignment or subletting, the assignee or Sub-Tenant shall
assume in writing the obligations of Tenant hereunder (in the case of a
subletting, such assumption to relate only to the premises sublet) and the
existing Tenant and each subsequent assignee, Sub-Tenant and guarantor hereunder
(if any) and each subsequent assignee, Sub-Tenant and guarantor shall remain
liable under this Lease. Consent to any particular assignment or subletting
shall not be deemed consent to any further or subsequent assignment or
subletting.
B. If Tenant shall assign this Lease or sublet the Premises and at any
time the rent per square foot to be received by Tenant pursuant to such
assignment or subletting is in excess of the then applicable rent per square
foot hereunder, the Landlord and Tenant shall share the entire amount of such
excess on a 50/50 basis, less Tenant's costs in arranging and obtaining
approvals for such assignment or subletting, which excess shall be due and
payable from time to time by Tenant promptly upon receipt by Tenant of payment
of rent by the assignee or Sub-Tenant. In addition, Landlord shall be entitled
to receive fifty (50&) percent of any other rental differential or lump sum
payment or payment in lieu of rent paid to Tenant on account of an assignment or
subletting. Anything to the contrary notwithstanding, if less than twenty-five
percent (25%) of the aggregate premises is sublet or assigned, the Landlord
shall not terminate this lease under Section 13 (D). Once greater than
twenty-five percent (25%) of the aggregate premises is sublet or assigned, the
Landlord shall share, as set forth above, in all of the rental differential for
premises sublet or assigned.
C. If Tenant wishes to assign this Lease or sublet to any party,
Tenant first shall give written notice to Landlord of such intention ("Tenant's
Notice"), specifying the name of the
<PAGE>
proposed assignee or sublessee, the name of and character of its business, the
terms of the proposed assignment or sublease, and shall provide Landlord with
such other information as Landlord reasonably requests including financial
statements in certified form.
D. Landlord may, within thirty (30) days after its receipt of Tenant's
Notice, by notice to Tenant ("Landlord's Notice"), either consent to or reject
the proposal, or Landlord at its option, may terminate this Lease (if, in
connection with a sublease of less than the entire Premises, only to the extent
of the premises sublet) and enter into a lease directly with the proposed
Sub-Tenant as of a date set forth in Landlord's Notice, such date of termination
having the same effect as if that date were the original expiration date of this
Lease, with all rents being apportioned and adjusted as of such date of
termination (and thereafter adjusted on the basis of the remaining square
footage, in the case of a sublease of less than the entire Premises).
14. INSURANCE AND INDEMNITY; NONLIABILITY
A. Tenant shall, during the Term, at its sole cost and expense, keep
in full force and effect a Comprehensive General Liability Policy with respect
to the leased Premises. The total limits of liability shall be Five Million
Dollars ($5,000,000). The total limits can be on a Combined Single Limit or
split limits basis listing Bodily Injury and Property Damage separately. The
required limit of liability can be in combination of Primary and Umbrella
Policies. The policies shall be with a company authorized to do business in the
State of New Jersey. The Tenant will not change or terminate the insurance
without first giving to Landlord at least thirty (30) days prior written notice.
A copy of the policy or certificate of insurance shall be delivered to Landlord
on or before the Commencement Date or, as the case may be, any earlier date upon
which Tenant shall enter into occupancy of the Premises or any portion thereof.
Each year a Certificate of Insurance outlining the required insurance coverages
outlined above shall be sent to the Landlord upon written request. For each
renewal term under this Lease, the insurance amounts shall be increased an
appropriate amount to be agreed to by the parties.
B. Tenant shall indemnify and save Landlord harmless against and from
any and all claims, actions, damages, losses, liability and expense, including
court costs and reasonable attorneys' fees incurred by Landlord, in connection
with loss of life, personal injury and/or damage to property arising from or out
of any occurrence in, upon, or at the Premises, or the occupancy or use by
Tenant of the Premises, or any part thereof, or occasioned wholly or in part by
any negligence of Tenant, it's agents, contractors, employees, servants,
licensees or
<PAGE>
concessionaires, except to the extent any of the foregoing represents damage to
the building or is caused by acts or negligence of Landlord or Landlord's
agents, contractors, employees, servants, licensees or concessionaires. It is
understood that Landlord shall not be liable for any damage or injury which may
be sustained by Tenant or any other person as a consequence of the failure,
breakage, leakage or obstruction of the water, plumbing, steam, sewer, waste or
soil pipes, roof, drains, leaders, gutters, valleys, downspouts or the like, or
of the electrical, gas, power, conveyor, refrigeration, sprinklers, air
conditioning or heating systems; (unless any of the foregoing have not been
maintained or repaired by Landlord in a timely manner after proper notification
by Tenant consistent with their obligations under Section 9 hereof) or by reason
of the elements; or resulting from the carelessness, negligence or improper
conduct on the part of Tenant or Tenant's agents, employees, guests, licensees,
invitees, subtenants, assignees or successors. Tenant shall not be liable for
negligent acts of Landlord or Landlord's agents, employees, contractors,
licensees, servants, or guests, or other tenants in the building.
C. If Tenant shall fail, refuse or neglect to obtain any of the
insurance called for by this Lease or maintain the same and to show Landlord
evidence of the same as aforesaid, Landlord shall have the right (but not the
obligation) after 30 days notice to Tenant, to procure any such insurance and
charge the cost thereof to Tenant.
D. Each party hereby releases the other from liability for property
damage from any cause whatsoever to the extent such releasing party shall
receive insurance proceeds (or have the availability of the receipt thereof) on
account of such damage or injury. Landlord and Tenant agree to include in their
respective property insurance policies, the following: (I) a waiver of the
insurer's right of subrogation against the other party, or (ii) an express
agreement that such policy shall not be invalidated if the assured waives the
right to recovery against any party responsible for a casualty, or (iii) any
other form of permission for the release of the other party.
E. Landlord shall obtain and maintain throughout the Term of this
Lease, fire, extended and special multi-risk coverage property insurance in an
amount not less than the full replacement cost of the Building, and upon request
therefor, shall provide Tenant with evidence of the same. Landlord's insurance
shall include rent insurance for a period of 12 months following a casualty. In
the event use by Tenant causes increase in insurance premium, Tenant shall be
responsible for said premium increase.
F. Tenant assumes all risk for damage to its contents and shall carry
whatever insurance it deems necessary.
<PAGE>
G. Tenant shall not be liable to Landlord with respect to any damages
suffered by Landlord which are covered by insurance required by this lease. The
parties agree that each hereby waives any claim it might have against the other
for loss, damage or destruction with respect to its property, by fire or other
casualty that is generally insured against under the terms of standard fire and
extended coverage insurance policies. The parties agree to use best efforts to
obtain waiver of subrogation clauses in their respective insurance policies,
such clauses extending to the other party and its employees and agents.
H. Nothing contained in the Lease shall be construed to absolve
Landlord from responsibility for acts or omissions deemed to be negligence,
gross negligence or willful misconduct of Landlord, its agents, employees,
servants or others acting on its behalf. Each party shall protect, indemnify,
hold harmless and defend the other party and its successors and assigns and
their respective employees and agents from any and all damages or liability
resulting from any claims or demands, including the costs, expenses and
reasonable attorneys' fees incurred, that may be made by a party's employees or
any other person for bodily injury or damage to property occasioned by the acts
or omissions of the other party or its subcontractors, or the employees or
agents of any of them. However, any liability of Landlord shall be limited to
Landlord's equity in the Landlord's Tract.
15. QUIET ENJOYMENT
Upon performing its obligations under this Lease, Tenant shall have
and enjoy quiet and peaceable possession of the Premises during the Term,
subject to the terms of this Lease, to include, but not limited to, Sections 9,
10 and 11.
16. FIXTURES AND PERSONAL PROPERTY
Any trade fixtures, equipment and other property installed in or
attached to the Premises, by and at the expense of Tenant, shall remain property
of Tenant, and Tenant shall have the right, at any time, and from time to time,
to remove any and all of its trade fixtures, equipment and other property which
it may have stored or installed in the Premises. Tenant shall make all repairs
required as a result of the removal of said items so as to restore the Premises
to their original condition except normal wear and tear (including but not
limited to repair of any holes in the walls of the Building).
17. DAMAGES TO PREMISES
A. If the Premises shall be damaged by fire, the elements, unavoidable
accident or other casualty, then, subject to the provisions below, Landlord
shall cause the damage to be repaired. In doing so, Landlord shall commence its
repairs
<PAGE>
promptly and diligently proceed with same, but shall not be required, in any
event, to expend more than the net amount of insurance proceeds received on
account of the damage.
B. If the Premises shall be so damaged or destroyed as would render
the Premises 25% untenantable for a period in excess of one hundred eighty (180)
days, or if then applicable laws or zoning requirements do not permit the
necessary repair or restoration after occurrence of damage or destruction of the
Premises to whatever extent, then either party shall have the right to cancel
this Lease by written notice to the other served within thirty (30) days of the
occurrence, effective as of the occurrence.
C. Tenant shall immediately notify Landlord in case of fire or other
damage to the Premises.
D. The repair and restoration of any damage to the property of Tenant
or to the decorations and Alterations of Tenant shall not be the responsibility
of Landlord.
E. In the event any damage or destruction of the Premises renders the
Premises untenantable, all Rent shall be abated during such period of
untenantability, except if the damage or destruction shall be due to the
negligence or misconduct of Tenant, its agents or employees provided that all
Rent shall be abated regardless of cause of damage or destruction to the extent
that rent insurance is in effect for the Premises. If any such damage or
destruction renders the Premises partially untenantable, all Rent shall be
equitably apportioned, subject to the above-stated exception. For purposes of
this Paragraph E, the word "Rent" shall not include any Additional Rent as may
be due from Tenant by reason of default by Tenant under any term, covenant or
condition of this Lease.
F. Landlord's insurance proceeds shall be and remain the exclusive
property of Landlord.
G. Notwithstanding anything to the contrary herein, if the Premises is
damaged to the extent of fifty percent (50%) or more thereof, and if insurance
proceeds received on account of the damage would not be sufficient to repair or
reconstruct the building or tract, Landlord shall have the right, within sixty
(60) days after occurrence of the damage, to elect, upon written notice to
Tenant, not to repair or reconstruct the Building or Tract, in which event, this
Lease and the tenancy hereby created, shall cease as of the date of such
occurrence. Upon such termination, all Rent and Additional Rent shall be
apportioned as of the date of the occurrence.
<PAGE>
18. EMINENT DOMAIN
If the whole or any part of the Premises shall be taken under the
power of eminent domain or acquired in lieu thereof, then this Lease shall
terminate as to the part so taken on the day when Tenant is required to yield
possession thereof to the condemning authority, and, subject to the rights of
mortgagees and further subject to the sufficiency in amount of the award or
price paid on account of the taking or acquisition in lieu thereof, Landlord
shall make such repairs and alterations as may be necessary in order to restore
the part not taken to useful condition; and the Basic Rent and Tenant's
Proportionate Share shall be reduced, proportionately, as to the portion of the
Premises so taken. If the amount of the Premises so taken or acquired is such as
to impair substantially the usefulness of the Premises for the purposes for
which the same are hereby leased, then either party shall have the option to
terminate this Lease as of the date when Tenant is required to yield possession.
All compensation awarded or paid for such taking or acquisition shall belong to
and be the property of Landlord except to the extent that any such compensation
is specifically designated for the leasehold interest. Anything herein to the
contrary notwithstanding, if a substantial part of the Building and/or of
Landlord's Tract is taken or acquired in the manner aforesaid, whether or not
the Premises are so taken or acquired to any extent and irrespective of the
extent of any award of proceeds to Landlord by virtue of the taking or
acquisition in lieu thereof, Landlord shall have the right, upon written notice
to Tenant within sixty (60) days after such taking or acquisition, to terminate
this Lease.
19. DEFAULT AND REMEDIES
A. If Tenant defaults in the payment of Basic Rent (and such payment
is not made within ten (10) days of written notice of such default given by
Landlord), or if the Premises shall be deserted, abandoned or vacated, or if
Tenant defaults in a material respect in compliance with any of the other
covenants or conditions of this Lease and fails to cure the same within fifteen
(15) days after the receipt of notice specifying the default, then at the
expiration of said ten (10) days or fifteen (15) days, as the case may be,
Landlord may (a) cancel and terminate this Lease upon written notice to Tenant
(whereupon the Term shall terminate and expire, and Tenant shall then quit and
surrender the Premises to Landlord, but Tenant shall remain liable as
hereinafter provided) and/or (b) at any time thereafter re-enter and resume
possession of the Premises as if this Lease had not been made. Anything above to
the contrary notwithstanding, the said fifteen (15) day period of time for cure
of non-monetary defaults shall extend beyond such fifteen (15) days for the
period of time necessary to effect the cure provided that Tenant shall
diligently commence the cure during
<PAGE>
such fifteen (15) day period and shall diligently and continuously prosecute the
cure to completion.
B. If this Lease shall be terminated or if Landlord shall be entitled
to re-enter the Premises, and dispossess or remove Tenant under the provisions
of this Section (either or both of which events are hereinafter referred to as a
"Termination"), Landlord or Landlord's agents or servants may immediately or at
any time thereafter re-enter the Premises and remove therefrom Tenant, its
agents, employees, servants, licensees, and any Sub-Tenants and other persons,
firms or corporations, and all or any of its or their property therefrom, either
by summary dispossess proceedings or by any suitable action or proceeding at law
or by peaceable re-entry or otherwise, without being liable to indictment,
prosecution or damages therefor, and may repossess and enjoy the Premises,
including all additions, alterations and improvements thereto.
C. In case of Termination, the Basic Rent and all other charges
required to be paid by Tenant hereunder shall thereupon become due and shall be
paid by Tenant up to the time of the Termination, and Tenant shall also pay to
Landlord all reasonable expenses which Landlord may then or thereafter incur as
a result of or arising out of a Termination, including but not limited to court
costs, attorneys' fees, brokerage commissions, and costs of terminating the
tenancy of Tenant, re-entering, dispossessing or otherwise removing Tenant and
restoring the Premises to good order and condition, and from time to time
altering and otherwise preparing the same for re-letting (including but not
limited to costs of removing all or any part of the Alterations made by Tenant).
Upon a Termination, Landlord shall, use commercially reasonably efforts to
re-let the Premises, in whole or in part, either in its own name or as Tenant's
agent, for a term or terms which, at Landlord's option, may be for the remainder
of the Term or Renewal Term, or for any longer or shorter period.
D. In addition to the payments required hereinabove in this Section,
Tenant shall be obligated to, and shall, pay to Landlord, upon demand and at
Landlord's option:
(i) liquidated damages in an amount which, at the time of
Termination, is equal to the present value, discounted at the rate of 5% per
annum, of the excess, if any, of the then present amount of the installments of
Basic Rent and Additional Rent reserved hereunder, for the period which would
otherwise have constituted the unexpired portion of the Term over the then
present rental value of the Premises for such unexpired portion of the Term or,
(ii) damages payable in monthly installments, in advance, on the
first day of each calendar month following the Termination, and continuing until
the date originally fixed herein for the expiration of the Term, in amounts
equal to the
<PAGE>
excess, if any, of the sums of the aggregate expenses paid by Landlord during
the month immediately preceding such calendar month for all such items as, by
the terms of this Lease, are required to be paid by Tenant, plus an amount equal
to the installment of Basic Rent which would have been payable by Tenant
hereunder in respect to such calendar month, had this Lease not been terminated,
over the sum of rents, if any, collected by or accruing to Landlord in respect
to such calendar month pursuant to a re-letting or to any holding over by any
Sub-Tenants of Tenant.
E. Landlord shall in no event be liable for failure to re-let the
Premises, or in the event that the Premises are re-let, for failure to collect
rent due under such re-letting; and in no event shall Tenant be entitled to
receive any excess of rents over the sums payable by Tenant to Landlord
hereunder but such excess shall be credited to the unpaid rentals due hereunder,
and to the expenses of re-letting and preparing for re-letting as provided
herein.
F. Suit or suits for the recovery of damages hereunder, or for any
installments of rent, may be brought by Landlord from time to time at its
election, and nothing herein contained shall be deemed to require Landlord to
postpone suit until the date when the Term would have expired if it had not been
terminated under the provisions of this Lease, or under any provision of law, or
had Landlord not re-entered into or upon the Premises. G. Landlord, at its
option, in addition to any and all remedies available to it, shall have the
right to charge a fee for payment for rent received later than five (5) days
after the date due, which fee, constituting Additional Rent, shall be the
greater of five percent (5%) of the delinquent payment or one and one-half
percent (1-1/2%) per month for each and every month of the amount of the overdue
rent.
H. Tenant hereby waives all rights of redemption to which Tenant or
any person claiming under Tenant might be entitled, after an abandonment of the
Premises, or after a surrender and acceptance of the Premises and the Tenant's
leasehold estate, or after a dispossession of Tenant from the Premises, or after
a termination of this Lease, or after a judgment against Tenant in an action in
ejectment, or after the issuance of a final order or warrant of dispossess in a
summary proceeding, or in any other proceeding or action authorized by any rule
of law or statute now or hereafter in force or effect.
I. No mention in this Lease of any specific right or remedy shall
preclude Landlord from exercising any other right or from having any other
remedy or from maintaining any action to which Landlord may otherwise be
entitled hereunder or at law or inequity.
<PAGE>
20. NOTICES
Wherever in this Lease it shall be required or permitted that notice
or demand be given or served by either party to this Lease to or on the other,
such notice or demand shall be in writing and shall either be served personally
or sent by registered or certified mail, return receipt requested, to the
parties at the addresses described below -- Landlord to , at its address stated
at the head of this Lease, with a copy to Edward J. Dudzinski, 5 Brier Road,
Whitehouse Station, New Jersey 08889 and Leonard H. Selesner, P.A. 225 Millburn
Avenue, Suite 208, Millburn, NJ 07041; to Tenant, at its address stated at the
head of this Lease, with a copy to John Hogoboom, Esq., Lowenstein Sandler,
P.C., 65 Livingston Avenue, Roseland, NJ 07068. Such addresses may be changed
from time to time by either party by written notices served upon the other, as
above provided. Notices shall be effective upon delivery or mailing, as the case
may be, except that a mailed notice changing an address for notice purposes
hereunder shall be effective upon actual receipt.
21. ATTORNMENT: DEFINITION OF TERM "LANDLORD"
A. Tenant shall attorn to any new owner of Landlord's Tract including
Landlord's mortgagee, and shall execute such attornment instrument as shall
reasonably be requested by such new owner; and Tenant waives any right it may
have to surrender possession of the Premises or terminate this Lease in the
event of change of ownership of Landlord's Tract. The term "Landlord", as used
in this Lease, means only the owner for the time being of Landlord's Tract, so
that in the event of any sale or conveyance thereof, Landlord (and any successor
selling or conveying Landlord) shall be and hereby is entirely freed and
relieved of all Landlord's covenants and obligations thereafter arising
hereunder, and it shall be determined and construed, without further agreement
between the parties and the purchaser or transferee at or of any such sale or
conveyance, that the purchaser or transferee has assumed and agreed to carry out
any and all covenants and obligations of Landlord hereunder.
B. Upon any transfer or mortgaging of title by Landlord, Tenant agrees
to give to the grantee, at the request of Landlord, an estoppel or offset
statement (as provided for in Section 25 below ("Estoppel or Offset Statements")
each in form reasonably requested by Landlord.
22. COST OF PERFORMING OBLIGATIONS
Unless otherwise specified, the respective obligations of the parties
to keep, perform and observe any terms, covenants or conditions of this Lease
shall be at the sole cost and expense of the party so obligated.
<PAGE>
23. RE-ENTRY BY LANDLORD
Should Tenant make an assignment for the benefit of creditors or file
a voluntary petition in bankruptcy or be adjudicated a bankrupt or take benefit
of any insolvency act or if a receiver or trustee of Tenant and/or of its
property shall be appointed in any proceedings other than bankruptcy proceedings
and such appointment, if made in proceedings instituted by Tenant, shall not be
vacated within thirty (30) days after it has been made, or if made in
proceedings instituted by other than Tenant, shall not be vacated within sixty
(60) days after it has been made, any of the foregoing shall constitute a
default hereunder and Landlord, in addition to all other rights or remedies
hereunder and by law or equity, shall have the immediate right of re-entry and
may remove all persons and property from the Premises, and such property may be
removed and stored in a public warehouse or elsewhere at the cost and expense of
Tenant, all without Landlord being deemed guilty of trespass or becoming liable
for any loss or damage which may be occasioned thereby.
24. MORTGAGE SUBORDINATION
This Lease shall be subordinate to the lien of any present or future
mortgage(s) on the Premises. Notwithstanding the automatic nature of the
subordination described in this Section, Tenant shall, with due diligence,
execute, acknowledge and deliver to Landlord or its mortgagee or other
designee(s), any and all standard forms of documents evidencing such
subordination as may be reasonably requested by Landlord or by any proposed
mortgagee. If any mortgagee elects to have Tenant's interest in this Lease
rendered superior in priority to that mortgagee's lien on the Premises, then by
notice to Tenant, this Lease shall be deemed superior to that mortgagee's lien,
whether this Lease was executed before or after execution or recording of the
instrument creating that mortgagee's lien. Any such attornment and or
subordination referenced in this Lease shall be conditioned on Tenants being
allowed to remain in the Premises on the terms otherwise set forth in this Lease
provided that Tenant is not in default of its obligations under the Lease. Any
subordination provision contained in the Lease, relating either to ground leases
or mortgages, is subject to the express condition that so long as Tenant is not
in material default under the Lease, (a) Tenant will not be made a party in any
action or proceeding brought by any person having rights superior to Tenant to
recover possession of the Premises or to foreclose any mortgage or for any other
relief sought, and (b) Tenant's possession under the Lease shall not be
disturbed. Landlord agrees to deliver to Tenant letters from any holder of
rights superior to Tenant, including mortgages and ground lessors, recognizing
Tenant's rights hereunder, such delivery to take place as a condition of and
prior to the Commencement Date of Lease. Anything to the contrary
notwithstanding, Landlord shall
<PAGE>
only use its best efforts to obtain non-disturbance agreement from its present
mortgage lender(s).
25. ESTOPPEL OR OFFSET STATEMENTS
Each party shall, upon the reasonable request from time to time of
Landlord, execute and deliver an estoppel or offset statement to the extent it's
accurate in the form of Exhibit "D" annexed hereto.
26. HOLDOVER
In the event that Tenant shall for any reason remain in possession of
the Premises after the expiration of the Term, such possession shall at the
option of Landlord be on a month-to-month basis subject to the terms and
conditions of this Lease except as to duration of term and except that the Basic
Rent shall be two hundred percent (200%) of that in effect at expiration of the
Term. The foregoing is not intended to afford to Tenant the right to remain in
possession of the Premises after expiration of the Term without Landlord's prior
written consent.
27. FORCE MAJEURE
The period of time during which either party is prevented or delayed
in the making of any improvements or repairs (including but not limited to the
initial Landlord work to ready the Premises for Tenant's occupancy) or
fulfilling any obligation required under this Lease with the exception of
obligations of the payment of Rent or Additional Rent, due to unavoidable delays
caused by fire, catastrophe, strikes, labor trouble, civil commotion, Acts of
God or public enemies, government prohibitions or regulations or inability to
obtain materials or any other causes beyond such party's reasonable control,
shall be added to such party's time for performance thereof, and such party
shall have no liability by reason thereof. It is understood, not in limitation
of the generality of the foregoing, that Landlord shall under no circumstances
be liable to Tenant in damages or otherwise for any interruption in service of
water, electricity, heating, air conditioning and/or other utilities and
services of any nature caused by an unavoidable delay, by the making of any
necessary repairs or improvements or by any cause beyond Landlord's reasonable
control.
28. ENTRY BY LANDLORD
For a period commencing nine (9) months prior to the termination of
this Lease, Landlord may have reasonable access, during business hours, to the
Premises for the purpose of exhibiting the same to prospective purchasers.
Landlord shall exercise its right of access for such purposes, if exercised at
all, upon reasonable advance notice to Tenant and in a manner not
<PAGE>
unreasonably to interfere with Tenant's business at the Premises. At all times
during the Term, Tenant will permit Landlord, its agents, employees and
contractors, and Lenders or prospective Lenders to enter the Premises during
business hours in order to inspect the same and/or to enforce or carry out any
provision of this Lease.
29. BROKERS
Each party represents to the other it knows of no broker or other
person who introduced the parties to this transaction other than Atlantic Real
Estate Services and the Box Company, who Landlord authorized to represent them
in this transaction and for whose commissions Landlord shall be liable by
separate agreement. In the event of a claim by any broker or person for
commissions arising out of a misrepresentation by one of the parties hereto,
that party shall indemnify and hold the other harmless from that claim, such
indemnity and hold harmless agreement to include court costs and reasonable
attorneys' fees incurred in respect to or in defense against such claim.
30. END OF TERM
Upon expiration of the Term or other termination of this Lease, Tenant
shall peaceably and quietly quit and surrender the Premises, broom clean, in
good order and condition, reasonable wear and tear and damage by fire or other
casualty excepted. Tenant shall also, subject to Landlord's rights under
"Default and Remedies", remove all trade fixtures and movable partitions, and
shall repair any damage caused in so moving and restore the Premises to such
condition as existed prior to installation of such fixtures and partitions. All
Alterations of Tenant shall be left by Tenant and shall remain part of the
Premises except to the extent Landlord may have otherwise specified in a notice
to Tenant given pursuant to Section 10 ("Alterations and Signage"). In addition
to the foregoing responsibilities, Tenant shall, upon expiration of the Term or
other termination of this Lease, restore all portions of the Premises to such
condition as existed at the Commencement Date, reasonable wear and tear
excepted, and Tenant shall repair any damage caused in so restoring the
Premises.
<PAGE>
31. LIABILITY OF LANDLORD
Tenant agrees that the liability of Landlord (or of any subsequent
Landlord) in the event of breach by Landlord shall be limited to Landlord's
interest in the Landlord's Tract known as 30 Technology Drive, Warren, NJ.
Tenant expressly agrees that any judgment or award which Tenant may obtain
against Landlord shall be recoverable and satisfied solely out of said interest.
Tenant shall have no personal rights against any principals or partners of
Landlord, and shall have no rights of lien or levy against other property of
Landlord.
32. PERFORMANCE OF TENANT'S OBLIGATIONS
If Tenant shall be in default hereunder, in any respect, Landlord may,
after giving Tenant requisite notice thereof and time to cure, at Landlord's
option and without waiving its rights hereunder, cure such default on behalf of
Tenant, in which event Tenant shall, promptly upon demand by Landlord, reimburse
Landlord for all expenses incurred by Landlord in effecting such cure, including
but not limited to reasonable attorneys' fees, together with interest thereon at
eighteen percent (18%) per annum (whether or not elsewhere in this Lease it is
provided for Landlord to recover interest upon occurrence of a specified default
by Tenant and cure thereof by Landlord). In order to collect such reimbursement,
Landlord shall have all the remedies available under this Lease and/or by law or
equity for a default in the payment of Rent. Tenant shall also be responsible
for all reasonable attorneys' fees incurred by Landlord in connection with any
default by Tenant, and the enforcement by Landlord of any covenant made by
Tenant.
33. FLOOR LOADS
Tenant shall not place a load upon any floor of the Premises exceeding
the floor load per square foot area which it was designed to carry and which is
allowed by law. Any equipment or property of any nature placed or installed by
Tenant in the Premises shall be placed and maintained in settings sufficient to
absorb and prevent vibration, noise and annoyance.
34. ENVIRONMENTAL PROVISIONS.
A. Additional Definitions .For purposes of this Section,
(a) "Regulated Substances" include any contaminants, materials,
substances. pollutants, dangerous substances or any "hazardous wastes" or
"hazardous substances" as defined in or pursuant to the Industrial Site Recovery
Act (N.J.S.A. 13:1K-6 et seq.) ("ISRA"), the Spill Compensation and Control Act
(N.J.S.A. 58:10-23.11 et seq.), the Resource Conservation and Recovery Act (42
U.S. Section 6901 et seq.), the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 et seq.) or any other
state or federal environmental or occupational health or safety law or
regulation and any amendment of or rule, regulation, order, directive or
guidance issued thereunder ("Environmental Requirements").
(b) "Enforcement Notice" means a summons, citation, directive,
order, claim. litigation, investigation, judgment, letter or other
communication, written or oral, actual or threatened, from the New Jersey
Department of Environmental Protection ("NJDEP"), the United States
Environmental Protection
<PAGE>
Agency("USEPA") or other federal, state or local agency or authority, or any
other entity or any individual, concerning any intentional or unintentional
action or omission resulting or which might result in the Releasing of Regulated
Substances into the air, waters or groundwaters. or onto the lands of the State
of New Jersey, or into the air or waters outside the jurisdiction of the State
of New Jersey where damage may have resulted or may result to the air, lands,
waters, groundwaters, fish, shellfish, wildlife, biota, air or other resources
owned, managed, held in trust or otherwise controlled by, or within the
jurisdiction of, the State of New Jersey, or into the "environment," as such
term is defined in 42 U.S.C. 9601(8).
(c) "Releasing" or "Release" means releasing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing or dumping.
B. No Regulated Substances. The Premises shall not be used and/or
occupied to generate, manufacture, refine, transport, treat, store, handle,
dispose, transfer or process Regulated Substances, except for the use, in
accordance with law, of such substances in de minimus amounts as is customary in
connection with the Permitted Use. Tenant shall comply with all applicable
federal, state and local environmental laws, ordinances, rules and regulations,
and shall obtain and comply with any and all permits required thereunder. The
Tenant shall not suffer or permit (a) any intentional or unintentional action or
omission of the Tenant or any other occupant, user and/or operator of the
Premises, resulting in the Releasing of Regulated Substances into the air,
waters or groundwaters, or onto the lands of the State of New Jersey, or into
the air or the waters outside the jurisdiction of the State of New Jersey where
damage may result to the air, lands, waters, groundwaters, fish, shellfish.
wildlife, biota, air or other resources owned, managed, held in trust or
otherwise controlled by, or within the jurisdiction of, the State of New Jersey,
or (b) any Enforcement Notice or any facts which might result in any Enforcement
Notice with respect to the Premises.
C. ISRA Compliance. In connection with the termination of this Lease
or Tenant's operations hereunder or the change of ownership or other status of
Tenant or other person acting by, through or under Tenant. Tenant shall obtain
ISRA clearance, which for the purpose of this Lease means that Tenant shall
either (a) obtain from the NJDEP a "Letter of NonApplicability, " or (b) submit
to and obtain the approval by the NJDEP of a "Negative Declaration" or (c)
obtain the issuance by NJDEP of a "No Further Action Letter" pursuant to ISRA
and applicable regulations, guidance and guidelines implementing ISRA ("ISRA
Requirements") and the Environmental Requirements. As part of its obligation to
obtain either a "Negative Declaration" or a "No Further Action Letter" ("ISRA
Compliance"), Tenant shall prepare and submit to NJDEP a General Information
Notice and perform and
<PAGE>
report to NJDEP on, as appropriate, a Preliminary Site Assessment, a Site
Investigation, a Remedial Investigation and a Remedial Action Workplan. Tenant
shall also, as part of its compliance with ISRA Requirements, obtain and
maintain a remediation funding source in form and amount acceptable to NJDEP.
The Tenant agrees not to submit any Remedial Action Workplan (or its regulatory
equivalent) which would return the Premises to the Landlord at the end of the
Term in a condition which includes the presence of Regulated Substances in
concentrations which were not present at the Premises on the date when Tenant
first used or occupied the Premises. The Tenant warrants and represents that the
Standard Industrial Code ("SIC") classification for the activities to be carried
on within the Premises is 3829, which is the SIC for the Permitted Use, and no
other activities shall be conducted on the Premises. In any event, Tenant shall
have the sole and exclusive responsibility to comply at its own cost and expense
with ISRA (subject to Tenant's right of indemnification as set forth in Section
8.4.2) in connection with the termination of this Lease, any sale or other
change in of Tenant, the cessation of Tenant's operations on the Premises and,
to the extent any tests, sampling or remediation are required on, at, or under
the Premises in connection with a change in ownership of Landlord's interest in
the Premises (Landlord being responsible for filing fees in such case). Landlord
shall cooperate with Tenant by supplying Tenant with relevant information within
Landlord's exclusive control. Notwithstanding anything to the contrary herein,
Landlord shall not be required to enter a Deed Restriction or undertake any
other institutional control in aid of Tenant's ISRA compliance obligation.
Tenant shall commence its compliance efforts at least 6 months prior to the end
of the Term and diligently pursue such efforts to conclusion. Tenant shall keep
Landlord fully informed of its progress in obtaining the ISRA clearance by
sending a copy of all correspondence and documents to Landlord and by delivering
an ISRA Compliance status report to Landlord every 30 days during the six-month
clearance period. It is understood and agreed by Tenant that Landlord shall have
the right to rely on and shall rely on all statements, representations,
warranties and undertakings made by Tenant to the NJDEP pursuant to this Section
8 as if such statements, representations, warranties and undertakings had been
made directly to the Landlord. If Tenant fails to obtain ISRA clearance on or
before the end of the Term, and if such failure prevents Landlord from
re-renting all or any portion of the Premises, then without limiting any other
liability of Tenant to Landlord resulting from its default under this Lease.
Tenant shall be liable to Landlord as a holdover tenant for such portion of the
Premises.
D. Indemnity.
(a) Tenant Indemnity. Tenant hereby agrees to save, defend with
counsel reasonably satisfactory to Landlord,
<PAGE>
indemnify and hold harmless Landlord and its principals. officers, directors,
trustees, agents and employees, from and against any and all claims' losses,
liabilities, damages and expenses (including reasonable cleanup costs and
attorneys fees arising under this indemnity) which may arise directly or
indirectly from any use or any Release of Regulated Substances on or under the
Premises, and losses of and claims against Landlord resulting from Tenant's
failure to comply strictly with the provisions of this Section 8, with respect
to the Term of this Lease and any other period of possession of the Premises by
Tenant. Tenant shall have no liability for any consequential, punitive, or other
speculative damages suffered by Landlord or by any party claiming through
Landlord.
(b) Landlord Indemnity. Landlord hereby agrees to save, defend
with counsel reasonably satisfactory to Tenant, indemnify and hold harmless
Tenant and its principals, officers, directors, trustees, agents and employees,
from and against any and all claims, losses, liabilities, damages and expenses
(including reasonable cleanup costs and attorneys fees arising under this
indemnity) which may arise directly or indirectly from the use or Release of
Regulated Substances on or under the Premises prior to the Commencement Date.
Landlord shall have no liability for any consequential damages suffered by
Tenant or by any party claiming through Tenant.
E. Environmental Inspections. At the request of Landlord during and
after the Term, in the event of an Enforcement Notice or other circumstances
leading Landlord reasonably to conclude that an Enforcement Notice could issue
relating to occurrences during the Term of this Lease or otherwise attributable
to Tenant's use or occupancy of the Premises and if Landlord reasonably
determines that it would be advantageous to hire an environmental consultant to
provide advise and/or remedy the condition, then the Tenant will retain an
environmental consultant acceptable to the Landlord to conduct a complete and
<PAGE>
thorough on-site inspection of the Premises, including a geohydrological survey
of soil and subsurface conditions as well as other tests, to determine the
presence of Regulated Substances, and the consultant shall certify to the
Landlord whether, in his professional judgment, there exists any evidence of the
presence of Regulated Substances on, in or under the Premises.
F. Other Laws; Survival. Whenever the terms ISRA, Spill Fund and
similar terms and regulatory and statutory references are used in this Lease,
they shall be deemed to include any similar, predecessor, future or successor
regulatory and statutory references and/or terms under past or future laws as
may apply to the Premises and its use and occupancy under this
<PAGE>
Lease. Tenant's obligations under this Section 8 shall survive the termination
of this Lease.
G. Landlord represents to the best of its knowledge, that there are no
adverse environmental conditions in, around or affecting the Landlord's Tract,
including the presence of asbestos, radon gas or PCBs.
35. INVALIDITY OF PARTICULAR PROVISIONS
Wherever in this Lease any portion or part thereof has been stricken
out, whether or not any relative provision has been added, this Lease shall be
read and construed as if the material so stricken were never included herein and
no implication shall be drawn from the text of the materials so stricken which
would be inconsistent in any way with the construction or interpretation which
would be appropriate if such material were never contained herein.
36. GENDER AND PERSON
Words of any gender used in this Lease shall be held to include any
other gender, and words in the singular number shall be held to include the
plural, when the sense of the words require same.
37. MODIFICATION
This Lease may not be modified except by an instrument in writing
signed by the parties hereto.
38. COVENANTS TO BIND RESPECTIVE PARTIES
The covenants and agreements contained in this Lease shall inure to
the benefit of the parties hereto and their heirs, legal representatives,
<PAGE>
successors and permitted assigns and subject to Section 21 ("Attornment;
Definition of Term "Landlord"'), shall be binding on the parties hereto, their
heirs, legal representatives, successors and assigns.
39. NO WAIVER OF BREACHES
The failure of Landlord or Tenant to insist upon strict performance of
any of the covenants or conditions of this Lease or to exercise any option
herein conferred in any one or more instances shall not be construed as a waiver
or relinquishment for the future of any such covenants, conditions or options,
but the same shall be and remain in full force and effect. Acceptance by
Landlord of current rent shall not be deemed a waiver of past obligations of
Tenant, nor shall acceptance by Landlord at any time of any monies preferred by
Tenant constituting less than the entire amount of rent then due be deemed other
than receipt of
<PAGE>
partial payment on account of the rent due, and shall not constitute an accord
or satisfaction.
40. CAPTIONS
Captions have been used solely for the sake of reference and shall in
no way govern or affect the interpretation hereof.
41. THIS SECTION INTENTIONALLY DELETED.
42. INTEGRATION
The agreements contained in this Lease constitute the full and final
agreement between the parties hereto as to the subject matter hereof, and all
prior agreements or writings of any nature between the parties hereto are hereby
superseded and are integrated herein. This Lease may not be amended except in
writing signed by both parties hereto.
43. JOINT AND SEVERAL LIABILITY
In the event that two or more individuals, corporations, partnerships
or other business associations (or any combination two or more thereof) shall
sign this Lease as Tenant, the liability of each such individual, corporation,
partnership or other business association to pay rent and perform all other
obligations hereunder shall be joint and several. In like manner, in the event
that the Tenant named in this Lease shall be a partnership or other business
association the members of which are, by virtue of statute or general law,
subject to personal liability, then and in that event, the liability of each
such member shall be joint and several.
44. NO OPTION OR OFFER
The submission of this Lease for examination does not constitute a
reservation to lease, or option to lease the Premises and this Lease becomes
effective only upon execution hereof by Landlord, Tenant and any guarantor, if
any.
45. CHANGES REQUIRED BY LENDER
Tenant shall consent in writing to any changes in this Lease required
by any prospective mortgage lender provided that no such changes shall adversely
affect Tenant's rights hereunder or increase Tenant's obligations hereunder.
46. CONSENTS AND APPROVALS
Unless it is provided in this Lease that a party hereto shall not
unreasonably withhold a consent or approval required to
<PAGE>
be received from that party, the consent or approval shall be at the sole
discretion of the party required to give same. The withholding of consent or
approval in contravention of any requirement of this Lease shall not afford to
the other party a right to damages of any nature on account of such withholding
or on account of any delay in the granting of the consent or approval, but the
sole remedy of the other party shall be to maintain an action for specific
performance.
47. WAIVER OF JURY TRIAL
The parties waive the right to a jury trial with respect to any
action, including an action for damage or injury, arising out of this Lease or
Tenant's use or occupancy of the Premises.
48. NO LEASE RECORDING
Tenant agrees that it will not record this Lease or any memorandum
hereof.
49. AMENDMENTS
This Lease form shall not be changed in format or context, except by
rider or amendment.
50. SCHEDULES AND EXHIBITS
The following schedules and exhibits are enclosed herein and made a
part hereof:
Exhibit "A" Floor Plan of Demised Premises
Exhibit "B" Landlord's Tract
Exhibit "C" Lease Payment Schedule
Exhibit "D" Estoppel of Mortgage
Exhibit "E" Landlord's Work letter
Schedule 1 Initial Alterations/Reserved Space
<PAGE>
51. RELOCATION
Landlord hereby reserves the right, at its sole expense and on at
least sixty (60) days prior written notice, to require Tenant to move the
warehouse portion of the Premises to other space within the Building Area of
comparable size (+- 700 sq. ft.) in order to permit Landlord to consolidate the
space leased to Tenant with any other space leased or to be leased to another
Tenant. In the event of any such relocation, Lessor will pay all expenses of
preparing the new premises so that they will be substantially similar to the
Premises from which Tenant is moving and Lessor will also pay the expense of
moving Tenant's equipment to the relocated premises. In such event, this Lease
and each and all of the terms, covenants and conditions hereof, shall remain in
full force and effect and thereupon be deemed applicable to such new space
except that the description of the Premises shall be revised and if applicable
Tenant's Percentage and Rental shall likewise be revised. Tenant shall not be
responsible for any restoration of the vacated space.
52. SATELLITE COMMUNICATION DISH
A. Tenant shall have the right with Landlord's approval to install and
maintain one (1) satellite communications dish on the roof of the Building in a
location acceptable to Landlord. Landlord in its sole and absolute discretion
may withhold its consent if the satellite dish is visible from the ground or any
other building and if Landlord feels it would damage or devalue its Building.
B. The Tenant shall bear the full cost of the installation of the
satellite dish, including Landlord approved modifications to the Building
required for the installation:
(a) The Tenant shall coordinate with the Landlord the actual location
of the installation on the roof of the Building, interfering to
the least extent possible with the actual and/or potential use of
the Building.
(b) The Tenant shall secure all applicable building permits, FAA and
FCC approvals, and any other state and/or local agency approvals
required for the installation, and provide copies to the Landlord
as required. The Tenant shall provide installation specifications
and drawings required for the determination of installation
suitability.
(c) If required by local codes or ordinances, the Tenant shall supply
stamped engineering drawings for the state in which the
installation is to be accomplished, certifying that the proposed
site will safely and legally support the satellite dish
installation.
(d) The Tenant shall install, maintain, and at the end of the Term of
this Lease and its extensions, remove the satellite dish all in a
manner which does not disturb the watertight integrity of the
Building and restore the Building to its original condition.
Landlord shall have the right to increase Tenant's security
deposit to cover the cost of removing the satellite dish and
restoring the Building to its original condition. If Tenant does
not maintain the satellite dish, Landlord may do so and charge
Tenant the cost thereof as additional rent.
<PAGE>
(e) Prior tot he operation of the satellite dish, the Tenant shall
certify that the radio frequency transmissions of the satellite
dish will not endanger persons in the Premises or surrounding
premises. The Tenant shall hold the Landlord blameless and
indemnify the landlord from any and all claims arising from
satellite dish.
(f) The Tenant shall insure that the installation is accomplished so
that the satellite dish is securely attached to the roof, and the
Tenant assumes total responsibility for any and all physical
damage which might be caused by the satellite dish, its support
equipment, or any consequential damages that might arise
therefrom.
(g) Tenant will not assign, transfer, pledge or otherwise hypothecate
the rights to the use of the satellite dish. IN WITNESS WHEREOF,
the parties hereto have hereunder set their hands and seals the
day and year first above written.
[SIGNATURES NEXT PAGE]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunder set theier hands and
seals the day and year first above written.
ATTEST: TENANT:
BARRINGER TECHNOLOGIES, INC.
/s/John Boyle III /s/ Richard S. Rosenfeld
Vice-President
WITNESS: LANDLORD:
MT. BETHEL CORPORTE CENTER
/s/Edward J. Darden By:/s/ John R. Gottra
<PAGE>
EXHIBIT C
LEASE PAYMENT SCHEDULE
for
BARRINGER TECHNOLOGIES, INC.
Rental Annual Monthly
Period Rentable Area Basic Rent Basic Rent
7/1/98 - Office
6/30/2008 21,128 sq. feet $348,612.00 $29,051.00
7/1/98 - Warehouse $ 38,500.00 $ 3,208.33
6/30/2008 7,000 sq. feet
Total Basic Rent Due $387,112.00 $32,259.33
During the first one hundred twenty days 120 days of Term, Tenant may
utilize the entire Premises during Tenant's initial fix-up and Alterations, but
shall only be obligated to pay Basic Rent and Additional Rental based upon 12000
square feet of office space and 5,000 square feet of warehouse space. Upon
inspection of such work, the following revisions shall apply:
(a) During the first 18 months of the Lease, Tenant shall pay for only
12,000 sq. feet of office space unless Tenant utilizes more than 12,000 sq. ft.,
in which event they will pay rent on the entire 21,128 sq. feet. If Tenant does
not use the 12,000 sq. ft. during the first 18 months, Tenant will be obligated
to pay Basic Rent and Additional rent for the 12,000 sq. feet but shall be
obligated after 18 months to pay Basic Rent and Additional Rent for the entire
21,128 sq. ft. If Basic Rent is only being paid for 12,000 sq. ft. of office
space the annual rent for that portion will be $198,000 and the monthly rent
will be $16,500.
(b) Tenant shall pay for warehouse space of 5,000 sq. feet until
August 31, 2001 at which time it will be obligated to pay for 7,000 sq. feet
<PAGE>
until August 31, 2001 at which time it will be obligated to pay for 7,000 sq.
ft. If Tenant utilizes any more than 5,000 sq. ft., before August 31, 2001, it
will be obligated to pay for a full 7,000 sq. ft. If Basic Rent is only being
paid for 5,000 sq. ft. of warehouse space, the annual rental will be $27,500 and
the monthly rental will be $2,291.67.
(c) Limited to the first one hundred twenty days (120) days of the
Term the incidental use of space for temporary storage, access, to other space
or similar limited purposes shall not be deemed utilization by Tenant.
Increase in rent for 2nd five years of lease shall be as follows:
The Yearly Basic Rent to be paid during the period 7/1/2003 through
6/30/2008 shall accrue at the rate equal to the Yearly Basic Rent paid during
the fifth year of the lease Term, Three Hundred Eighty Seven Thousand One
Hundred Twelve Dollars ($387,112.00), increased by the aggregate of the annual
percentages of increase (subject to the limitations set forth below) in the
index now know n as the Revised Consumer Price Index for All Urban Consumers of
the New York, N..Y. - Northeastern, new Jersey area as published by the Bureau
of Labor Statistics of the United States Department of labor (hereinafter
"Index") between 7/1/1998 and 6/30/2003, but in no event less than the yearly
Basic Rent paid for the Demised Premises from 7/1/1998 through 6/30/2003. If at
the time required for the determination of the renewal rent the aforesaid Index
is no longer published or issued, the parties shall use such other index as is
then generally recognized and accepted for similar determinations of cost of
living increase. The increase for consumer price index shall be a minimum of 2%
and a maximum of 5% per year.
For example, if the annual increases in the index are as follows,
Year Applied
Ending 6/30 Increase Increase
1999 1% 2%
2000 2% 2%
2001 8% 5%
2002 4% 4%
2003 -3% 2%
Total 12% 15%
then the Basic Rent for years 5 through 10 of the Term shall be 115% of the
Basic Rent for the first 5 years of the Term.
<PAGE>
SCHEDULE D
LEASE ESTOPPEL CERTIFICATE
Landlord:
Tenant:
Premises:
Area: Lease Date:
The undersigned Landlord and Tenant of the above-referenced lease (the
"Lease") hereby ratify the Lease and certify to Lender as mortgagee of the Real
Property of which the premises demised under the Lease (the "Premises") is a
part, as follows:
1. That the term of the Lease commenced on ________________________ 199 and
the Tenant is in full and complete possession of the premises demised under the
Lease and has commenced full occupancy and use of the Premises, such possession
having been delivered by the original landlord and having been accepted by the
Tenant.
2. That the Lease calls for monthly rent installments of $ ________________
to date and that the Tenant is paying monthly installments of rent of
$_______________ which commenced to accrue on the ________ day of
_____________________, 199 .
3. That no advance rental or other payment has been made in connection with
the Lease, except rental for the current month, there is no "free rent" or other
concession under the remaining term of the lease and the rent has been paid to
and including __________________ 199 .
4. That a security deposit in the amount of $ _________________ is being
held by Landlord, which amount is not subject to any set-off or reduction or to
any increase for interest or other credit due to Tenant.
5. That all obligations and conditions under said Lease to be performed to
date by landlord or Tenant have been satisfied, free of defenses and set-offs
including construction work in the Premises.
6. That the Lease is a valid lease and in full force and effect and
represents the entire agreement between the parties; that there is no existing
default on the part of the Landlord or the Tenant in any of the terms and
conditions thereof and no event has occurred which, with the passing of time or
giving of notice or both, would constitute an event of default; and that said
Lease has: (initial one)
(__) not been amended, modified, supplemented, extended, renewed or
assigned.
(__) been amended modified, supplemented, extended, renewed or assigned as
follows by the following described agreements.
______________________________________________________________________
7. That the Lease provides for a primary term of ________________ months;
the term of the Lease expires on the _____ day of _____________, 199 ; and that
(initial one)
(__) neither the Lease nor any of the documents listed above in Paragraph
6, (if any), contain an option for any additional term or terms.
(__) the Lease and/or the documents listed above in Paragraph 6 contain an
option for ______________ additional term(s) of _____________ year(s)
and _______________ month(s) (each ) at a rent to be determined as
follows: _________________________
______________________________________________________________________
_____________________________________________________________________.
8. That Landlord has not rebated, reduced or waived any amounts due from
Tenant under the lease, either orally or in writing, nor has Landlord provided
financing for, made loans or advances to, or invested in the business of Tenant.
9. That, to the best of Tenant's knowledge, there is no apparent or likely
contamination of the Real Property of the Premises by Hazardous Materials, and
Tenant does not use, nor has Tenant disposed of, Hazardous Materials in
violation of Environmental Laws on the Real Property or the Premises.
10. That there are no actions, voluntary or involuntary, pending against
the Tenant under the bankruptcy laws of the United States or any state thereof.
11. That this certification is made knowing that Lender is relying upon the
representations herein made.
Date: Tenant _______________________________
_______________________________
By: _______________________________
Typed Name:
Title
Date: Landlord _____________________________
_____________________________
By: _____________________________
Typed Name:
Title
<PAGE>
EXHIBIT E
LANDLORD WORK LETTER
Landlord will contribute the equivalent of $8.50 per sq. feet based on
21,128 sg. Ft. for the Teneant improvements ($179,588.00). This allowance shall
be given in the form of free Basic Rent commencing with the August 1, 2001
rental payment. Free Basic Rent shall be given until the amount of the allowance
is utilized in full. It is understood that the Landlord will erect a floor to
ceiling fence in the Warehouse to separate the 7,000 sq. Ft set forth int he
Lease from the balance of the warehouse space. The cost of said fence shall be
the responsibility of the Landlord.
EXHIBIT 10-19
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of July 6, 1998, by and between Stanley S.
Binder (the "Executive") and Barringer Technologies Inc. (the "Company").
W I T N E S S E T H:
WHEREAS, the Company has loaned to the Executive the sum of $500,000;
such loan being evidenced by a non-recourse secured promissory note (the "Note")
in the principal amount of $500,000 made by the Executive in favor of the
Company; and
WHEREAS, the loan to the Executive is to be secured by a pledge by the
Executive to the Company of 49,000 shares of common stock, $0.01 par value per
share, of the Company owned by the Executive and the other Collateral (as
defined below) referenced herein; and
WHEREAS, the parties hereto desire to set forth the terms of and to
evidence the Executive's grant to the Company of a security interest in the
Collateral.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Executive hereby agrees with
the Company as follows:
Section 1. Definitions. The following terms, when used in this
Agreement, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Default" means the failure to make any payment of principal of or
interest on, or any other amounts due under, the Note when due, whether at
maturity, upon acceleration or otherwise.
"Distributions" means all stock dividends, liquidating dividends,
shares of stock resulting from stock splits, reclassifications, warrants,
options, non-cash dividends and other distributions on or with respect to the
Shares, whether similar or dissimilar to the foregoing, but shall not include
Dividends.
"Dividends" means regular dividends declared with respect to the
Shares.
"Liabilities" means the Note, and all amounts becoming due thereunder,
and all other payment obligations of the Executive hereunder or thereunder or
any instrument executed pursuant hereto or thereto.
Section 2. Grant of Security Interest. As security for payment of all
Liabilities, the Executive hereby pledges, assigns and transfers to the Company,
and grants to the Company
<PAGE>
a continuing security interest in and to, the Shares, together with all
Dividends and Distributions, interest and other payments and rights with respect
thereto, together with all proceeds thereof (collectively, the "Collateral").
The Executive further pledges, assigns and transfers to the Company, and grants
to the Company a continuing security interest in and to, and agrees to duly
endorse to the order of the Company, any additional Collateral, together with
all proceeds thereof, delivered by the Executive to the Company for the purposes
of pledge under this Agreement. Any Collateral delivered by the Executive to the
Company may be endorsed by the Company, in its own name or in the name of the
Executive, on behalf of the Executive to the order of the Company.
Section 3. Stock Powers, Endorsements, Etc. The Executive shall, from
time to time, upon request of the Company, promptly execute such endorsements
and deliver to the Company such stock powers and similar documents, satisfactory
in form and substance to the Company, with respect to the Collateral as the
Company may reasonably request and shall, from time to time, upon request of the
Company, promptly transfer any securities which are part of the Collateral into
the name of any nominee designated by the Company on the books of the
corporation or other entity issuing such securities; provided, however, that the
Company shall not be entitled to effect or demand a transfer of the Collateral
into the name of the Company or the Company's nominee without the consent of the
Executive unless and until a Default shall have occurred.
Section 4. Certain Other Agreements Regarding Collateral. The
Executive shall deliver (properly endorsed where necessary) to the Company:
(a) after a Default shall have occurred and be continuing, promptly
upon receipt thereof by the Executive and without any request therefor by the
Company, all Dividends and Distributions, and other proceeds of the Collateral,
all of which shall be held by the Company as additional Collateral; and
(b) at any time after a Default shall have occurred and be continuing,
promptly upon request of the Company, such consents or proxies and other
documents as may be necessary to allow the Company to exercise any voting power
or other right with respect to any securities included in the Collateral;
provided, however, that unless a Default shall have occurred and be continuing,
the Executive shall be entitled:
(i) to exercise, as the Executive shall deem appropriate, all
voting or other powers with respect to securities pledged hereunder
(including but not limited to the Shares); and
(ii) to receive and retain for the Executive's own account any
and all Dividends paid in cash.
Section 5. Actions Upon Default. Whenever a Default shall have
occurred and be continuing, the Company may exercise from time to time any and
all rights and remedies available to it under applicable law, including but not
limited to all rights of a secured party
<PAGE>
available to it under the Uniform Commercial Code. Without limiting the above,
the Company may from time to time, whether before or after any of the
Liabilities shall become due and payable, but only if a Default shall have
occurred, without notice to the Executive, take any or all of the following
actions:
(a) transfer all or any part of the Collateral into the name of the
Company or its nominee; and
(b) execute (in the name, place and stead of the Executive) any or all
endorsements, assignments, stock powers and other instruments of conveyance or
transfer with respect to all or any of the Collateral.
The Executive understands that compliance with the Federal securities
laws, applicable blue sky or other state securities laws or similar laws
analogous in purpose or effect may strictly limit the course of conduct of the
Company if the Company were to attempt to dispose of all or any part of the
Collateral and may also limit the extent to which or the manner in which any
subsequent transferee of the Collateral may dispose of the same. Accordingly,
the Executive agrees that IF ANY COLLATERAL IS SOLD AT ANY PUBLIC OR PRIVATE
SALE, THE COMPANY MAY ELECT TO SELL ONLY TO A BUYER WHO WILL GIVE FURTHER
ASSURANCES, SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY, RESPECTING
COMPLIANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
ANY AND ALL APPLICABLE STATE SECURITIES LAWS; AND A SALE SUBJECT TO SUCH
CONDITION SHALL BE DEEMED COMMERCIALLY REASONABLE. The Company shall have the
right to bid upon or purchase the Shares, or any other part of the Collateral,
or all of the foregoing, at any such sale, less any and all amounts owing to the
Company by the Executive under the Note, this Agreement or otherwise, and that
any such purchase is commercially reasonable.
Section 6. Application of Moneys. Any moneys received by the Company
upon payment to it of any Collateral held by it or as proceeds of any of the
Collateral may be applied by the Company first to the payment of any expenses
incurred by it in connection with the Collateral, including, without limitation,
reasonable attorneys' fees and legal expenses, and all other amounts payable to
the Company by the Executive, and any balance of such moneys so received by the
Company may be applied to all Liabilities of the Executive (including, without
limitation, the principal amount of the Note outstanding whether or not such
principal amount is at that time due and payable) in such order of application
as the Company in its sole discretion may determine. Any amounts remaining after
payment of the Liabilities may be applied by the Company to the payment of any
and all other amounts owing, whether or not then due, to the Company from the
Executive and any remaining balance thereafter shall be paid to the Executive.
<PAGE>
Section 7. Release of Collateral. Upon the indefeasible payment in
full of the Liabilities, the Company shall, upon the request of the Executive,
promptly reassign and redeliver to the Executive the Collateral which has not
been sold, disposed of, retained or applied by the Company in accordance with
the terms hereof, together with such endorsements, stock powers and similar
documents as the Executive may reasonably request. Such reassignment and
redelivery shall be without warranty by or recourse to the Company, except as to
the absence of any prior assignments by the Company of its interest in the
Collateral. In the event that the Executive proposes to sell, transfer or
otherwise dispose of all or a portion of the Shares, upon the request of the
Executive, the Company shall release from its security interest the Shares to be
sold by the Executive and, at the sole expense of the Executive, shall deliver
such Shares as directed by the Executive, free and clear of any security
interest hereunder, upon receipt from or on behalf of the Executive of the net
proceeds of such sale, transfer or other disposition in cash in next day or
immediately available funds.
Section 8. Non-Recourse Nature of Liabilities. The Company's sole
recourse for the payment of the Liabilities shall be limited to the Collateral
securing the Note. THE COMPANY SHALL NOT HAVE THE RIGHT TO ENFORCE THE
LIABILITIES AGAINST THE EXECUTIVE OR ANY OF THE EXECUTIVE'S OTHER ASSETS OR
PROPERTY.
Section 9. Miscellaneous.
(a) To the fullest extent permitted by applicable law, this Agreement
shall continue to be effective or be reinstated, as the case may be, if at any
time any amount received by the Company in respect of the Liabilities is
rescinded or must otherwise be restored or returned by the Company upon the
insolvency or bankruptcy of the Executive or upon the appointment of any
receiver, intervenor, conservator, trustee or similar official for the Executive
or any substantial part of his assets, or otherwise, all as though such payments
had not been made.
(b) No remedy herein conferred is intended to be exclusive of any
other remedy herein conferred or otherwise available to the Company, but every
such remedy shall be cumulative and in addition to every other remedy herein
conferred, or conferred on the Company by any other agreement or instrument or
now or hereafter existing at law, in equity or by statute.
(c) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction, shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(d) Except as otherwise expressly provided herein, no term or
provision of this Agreement may be amended, waived, discharged or terminated
orally, but only by an instrument in writing signed by the parties.
<PAGE>
(e) THIS AGREEMENT AND ALL RIGHTS HEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW JERSEY WITHOUT
GIVING EFFECT TO THE CONFLICTS OF LAWS PROVISIONS THEREOF. THE EXECUTIVE HEREBY
CONSENTS AND SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE
COURTS LOCATED IN THE STATE OF NEW JERSEY HAVING SUBJECT MATTER JURISDICTION IN
CONNECTION WITH ANY AND ALL DISPUTES ARISING OUT OF OR IN CONNECTION WITH THIS
Agreement, THE NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. FURTHER,
THE EXECUTIVE HEREBY CONSENTS AND AGREES THAT SERVICE OF PROCESS BY THE COMPANY,
OR ANY PARTY ACTING ON BEHALF OF THE COMPANY, SHALL BE DEEMED VALIDLY AND
PROPERLY EFFECTED AGAINST THE EXECUTIVE UPON THE MAILING OF A COPY OF SUCH
PROCESS BY CERTIFIED MAIL, POSTAGE PREPAID, TO THE EXECUTIVE AT ITS ADDRESS SET
FORTH ABOVE.
(f) No course of dealing and no delay on the part of any party hereto
in exercising any right, power, or remedy conferred by this Agreement shall
operate as a waiver thereof or otherwise prejudice such party's rights, powers
and remedies hereunder or in connection herewith. No single or partial exercise
of any power or remedy conferred by this Agreement shall preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
(g) This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors, assigns and legal
representatives.
(h) This Agreement constitutes the entire agreement among the parties
with respect to the matters covered hereby and supersedes all previous written,
oral or implied agreements and understandings among the parties with respect to
such matters.
(i) All notices or other communications required or permitted
hereunder shall be in writing and shall be delivered personally, by facsimile or
sent by certified, registered or express air mail, postage prepaid, and shall be
deemed given which so delivered personally, or by facsimile, or if mailed, five
days after the date of mailing, as follows:
If to the Company: 219 South Street
Murray Hill, New Jersey 07974
Telephone: (908) 665-8200
Facsimile: (908) 665-8298
Attention: Chairman of the Executive Compensation
Committee of the Board of Directors
<PAGE>
If to the Executive: 32 Corey Lane
Mendham, New Jersey 07945
Telephone: (973) 543-6664
Facsimile: (973) 543-9409
or at such other addresses as shall be furnished in writing to the other party
hereto.
(j) The headings in this Agreement are for reference purposes only,
and shall not in any way affect the meaning or interpretation
(k) This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original agreement, but all of which together shall
constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first written above.
Witness:
/s/Helen Beyerl /s/Stanley S. Binder
Name: Stanley S. Binder
BARRINGER TECHNOLOGIES INC.
By: /s/Richard S. Rosenfeld
Name:
Title:
EXHIBIT 10.20
NON-RECOURSE SECURED PROMISSORY NOTE
FOR VALUE RECEIVED, Stanley S. Binder (the "Maker") hereby promises to
pay to the order of Barringer Technologies Inc. or its successors, assigns and
legal representatives (the "Holder"), at its offices at 219 South Street, Murray
Hill, New Jersey, or at such other location as the Holder may designate from
time to time, the sum of Five Hundred Thousand Dollars ($500,000) in lawful
money of the United States of America (except as set forth below) on July 6,
2003 (the "Maturity Date"), together with interest thereon, compounded annually,
at a rate of 5.68% per annum. Interest shall be paid annually on the anniversary
of the date hereof. Principal shall be paid on the Maturity Date, together with
all interest outstanding as of the Maturity Date. Interest shall be calculated
on the basis of a 360-day year for the actual number of days elapsed.
If the date any amount is due hereunder is not a Business Day, then
such amount shall be due and payable on the Business Day next succeeding the
original payment date, together with interest thereon to the date of payment. As
used herein, "Business Day" means any day, other than a Saturday or Sunday or
other day on which commercial banks in New York are authorized or required, by
law or executive order, to be closed.
If the Maker fails to pay any amount hereunder when due, whether on
the Maturity Date, upon acceleration or otherwise, and such failure continues
for a period of five (5) days or more, interest shall thereafter accrue on any
overdue amounts at a rate of 8.68% per annum until paid in full. In such event,
the Maker also shall pay to the Holder the reasonable attorneys' fees and
disbursements and all other out-of-pocket costs incurred by the Holder in order
to collect amounts due and owing under this Note or otherwise to enforce the
Holder's rights and remedies hereunder.
The Maker may prepay this Note at any time, in whole or in part,
without premium or penalty. Any partial prepayments shall be applied first to
accrued interest and second to the payment of principal. The Maker shall not
have the right to set off or otherwise deduct from amounts payable by it
hereunder, any amounts, whether liquidated or unliquidated, which the Holder may
owe to the Maker, which right is hereby expressly waived to the maximum extent
permitted by applicable law. In the event that the Maker sells, transfers or
otherwise disposes of some or all of the Shares (as defined in the Pledge
Agreement referred to below), whether on or prior to the Maturity Date, the
Maker shall promptly repay this Note in an amount equal to the net proceeds, if
any, received by the Maker from such disposition.
Notwithstanding anything set forth herein to the contrary, in the
event that (i) the Holder terminates the Maker's employment with the Holder as a
result of a Termination for Cause (as defined in the Amended and Restated
Employment Agreement, dated as of December 31, 1997 (the "Employment
Agreement"), between the Holder and the Maker) or (ii) the Maker terminates his
employment with the Holder other than as a result of a termination for Good
Reason (as defined in the Employment Agreement), this Note shall mature and all
amounts due hereunder shall become due and payable, without demand and without
notice to the Maker,
<PAGE>
within 90 days of the date of termination. Notwithstanding anything herein to
the contrary, this Note shall not mature upon the death of the Maker or the
Maker becoming Permanently Disabled (as defined in the Employment Agreement).
This Note is the Note referred to in the Pledge Agreement, dated the
date hereof, between the Maker and the initial holder of this Note and is
secured by the Shares and the other Collateral described therein. The Pledge
Agreement grants the Holder certain rights with respect to the Collateral upon
certain defaults specified therein.
The Holder's sole recourse for the payment of amounts due under this
Note shall be limited to the Collateral securing this Note. THE HOLDER SHALL NOT
HAVE THE RIGHT TO ENFORCE THIS NOTE AGAINST THE MAKER OR ANY OTHER ASSETS OR
PROPERTY OF THE MAKER. At the option of the Maker, the principal amount of this
Note may be paid by the Collateral to the Holder, properly endorsed or otherwise
in proper form for transfer.
No delay on the part of the Holder in exercising any power or right
hereunder shall operate as a waiver of any such power or right; nor shall any
single or partial exercise of any power or right preclude any other or further
exercise of such power or right, or the exercise of any other power or right,
and no waiver whatsoever shall be valid unless in writing, signed by the Holder,
and then only to the extent expressly set forth therein. The Maker waives
presentment, demand for payment, diligence, notice of dishonor and all other
notices or demands in connection with the delivery, acceptance, performance,
default or indorsement of this Note.
This Note shall be binding upon the Maker and its successors, assigns
and legal representatives. This Note shall be governed by, and construed in
accordance with, the laws of the State of New Jersey, without reference to the
choice of law provisions thereof. The Maker irrevocably submits to the exclusive
jurisdiction of the courts of the State of New Jersey and the United States
District Court for the District of New Jersey for the purpose of any suit,
action, proceeding or judgment relating to or arising out of this Note and the
transactions contemplated hereby. The Maker irrevocably consents to the
jurisdiction of any such court in any such suit, action or proceeding and to the
laying of venue in such court. The Maker irrevocably waives any objection to the
laying of venue of any such suit, action or proceeding brought in such courts
and irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
<PAGE>
IN WITNESS WHEREOF, the Maker has caused this Note to be duly executed
by the undersigned, thereunto duly authorized, as of the date set forth below.
Witness:
/s/Helen Beyerl /s/Stanley S. Binder
Name: Stanley S. Binder
Dated: July 1, 1998
EXHIBIT 10.21
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of ______ by and between ____________ (the
"Maker") and Barringer Technologies Inc. (the "Company").
W I T N E S S E T H:
WHEREAS, the Maker has purchased from the Company ____________ shares
(the "Shares") of the Company's Common Stock, par value $.01 per share ("Common
Stock"); and
WHEREAS, in connection with such purchase the Company has loaned to
the Maker the sum of $___________; such loan being evidenced by a non-recourse
secured promissory note (the "Note") in the principal amount of $__________ made
by the Maker in favor of the Company; and
WHEREAS, the loan to the Maker is to be secured by a pledge by the
Maker to the Company of the Shares and the other Collateral referenced herein;
and
WHEREAS, the parties hereto desire to set forth the terms of and to
evidence the Maker's grant to the Company of a security interest in the
Collateral.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Maker hereby agrees with the
Company as follows:
Section 1. Definitions. The following terms, when used in this
Agreement, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Default" means the failure to make any payment of principal of or
interest on, or any other amounts due under, the Note when due, whether at
maturity, upon acceleration or otherwise.
"Distributions" means all stock dividends, liquidating dividends,
shares of stock resulting from stock splits, reclassifications, warrants,
options, non-cash dividends and other distributions on or with respect to the
Shares, whether similar or dissimilar to the foregoing, but shall not include
Dividends.
"Dividends" means regular dividends declared with respect to the
Shares.
"Liabilities" means the Note, and all amounts becoming due thereunder,
and all other payment obligations of the Maker hereunder or thereunder or any
instrument executed pursuant hereto or thereto.
<PAGE>
Section 2. Grant of Security Interest. As security for payment of all
Liabilities, the Maker hereby pledges, assigns and transfers to the Company, and
grants to the Company a continuing security interest in and to, the Shares,
together with all Dividends and Distributions, interest and other payments and
rights with respect thereto, together with all proceeds thereof (collectively,
the "Collateral"). The Maker further pledges, assigns and transfers to the
Company, and grants to the Company a continuing security interest in and to, and
agrees to duly endorse to the order of the Company, any additional Collateral,
together will all proceeds thereof, delivered by the Maker to the Company for
the purposes of pledge under this Agreement. Any Collateral delivered by the
Maker to the Company may be endorsed by the Company, in its own name or in the
name of the Maker, on behalf of the Maker to the order of the Company.
Section 3. Stock Powers, Endorsements, Etc. The Maker shall, from time
to time, upon request of the Company, promptly execute such endorsements and
deliver to the Company such stock powers and similar documents, satisfactory in
form and substance to the Company, with respect to the Collateral as the Company
may reasonably request and shall, from time to time, upon request of the
Company, promptly transfer any securities which are part of the Collateral into
the name of any nominee designated by the Company on the books of the
corporation or other entity issuing such securities; provided, however, that the
Company shall not be entitled to effect or demand a transfer of the Collateral
into the name of the Company or the Company's nominee without the consent of the
Maker unless and until a Default shall have occurred.
Section 4. Certain Other Agreements Regarding Collateral. The Maker
shall deliver (properly endorsed where necessary) to the Company:
(a) after a Default shall have occurred and be continuing, promptly
upon receipt thereof by the Maker and without any request therefor by the
Company, all Dividends and Distributions, and other proceeds of the Collateral,
all of which shall be held by the Company as additional Collateral; and
(b) at any time after a Default shall have occurred and be continuing,
promptly upon request of the Company, such consents or proxies and other
documents as may be necessary to allow the Company to exercise any voting power
or other right with respect to any securities included in the Collateral;
provided, however, that unless a Default shall have occurred and be continuing,
the Maker shall be entitled:
(i) to exercise, as the Maker shall deem appropriate, all voting
or other powers with respect to securities pledged hereunder (including but
not limited to the Shares); and
(ii) to receive and retain for the Maker's own account any and
all Dividends paid in cash.
<PAGE>
Section 5. Actions Upon Default. Whenever a Default shall have
occurred and be continuing, the Company may exercise from time to time any and
all rights and remedies available to it under applicable law, including but not
limited to all rights of a secured party available to it under the Uniform
Commercial Code. Without limiting the above, the Company may from time to time,
whether before or after any of the Liabilities shall become due and payable, but
only if a Default shall have occurred, without notice to the Maker, take any or
all of the following actions:
(a) transfer all or any part of the Collateral into the name of the
Company or its nominee; and
(b) execute (in the name, place and stead of the Maker) any or all
endorsements, assignments, stock powers and other instruments of conveyance or
transfer with respect to all or any of the Collateral.
The Maker understands that compliance with the Federal securities
laws, applicable blue sky or other state securities laws or similar laws
analogous in purpose or effect may strictly limit the course of conduct of the
Company if the Company were to attempt to dispose of all or any part of the
Collateral and may also limit the extent to which or the manner in which any
subsequent transferee of the Collateral may dispose of the same. Accordingly,
the Maker agrees that IF ANY COLLATERAL IS SOLD AT ANY PUBLIC OR PRIVATE SALE,
THE COMPANY MAY ELECT TO SELL ONLY TO A BUYER WHO WILL GIVE FURTHER ASSURANCES,
SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY, RESPECTING COMPLIANCE WITH
THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY AND ALL
APPLICABLE STATE SECURITIES LAWS; AND A SALE SUBJECT TO SUCH CONDITION SHALL BE
DEEMED COMMERCIALLY REASONABLE. The Company shall have the right to bid upon or
purchase the Shares, or any other part of the Collateral, or all of the
foregoing, at any such sale, less any and all amounts owing to the Company by
the Maker under the Note, this Agreement or otherwise, and that any such
purchase is commercially reasonable.
Section 6. Application of Moneys. Any moneys received by the Company
upon payment to it of any Collateral held by it or as proceeds of any of the
Collateral may be applied by the Company first to the payment of any expenses
incurred by it in connection with the Collateral, including, without limitation,
reasonable attorneys' fees and legal expenses, and all other amounts payable to
the Company by the Maker, and any balance of such moneys so received by the
Company may be applied to all Liabilities of the Maker (including, without
limitation, the principal amount of the Note outstanding whether or not such
principal amount is at that time due and payable) in such order of application
as the Company in its sole discretion may determine. Any amounts remaining after
payment of the Liabilities may be applied by the Company to the payment of any
and all other amounts owing, whether or not then due, to the Company from the
Maker and any remaining balance thereafter shall be paid to the Maker.
<PAGE>
Section 7. Release of Collateral. Upon the indefeasible payment in
full of the Liabilities, the Company shall, upon the request of the Maker,
promptly reassign and redeliver to the Maker the Collateral which has not been
sold, disposed of, retained or applied by the Company in accordance with the
terms hereof, together with such endorsements, stock powers and similar
documents as the Maker may reasonably request. Such reassignment and redelivery
shall be without warranty by or recourse to the Company, except as to the
absence of any prior assignments by the Company of its interest in the
Collateral. In the event that the Maker proposes to sell, transfer or otherwise
dispose of all or a portion of the Shares, upon the request of the Maker, the
Company shall release from its security interest the Shares to be sold by the
Maker and, at the sole expense of the Maker, shall deliver such Shares as
directed by the Maker, free and clear of any security interest hereunder,
subject to repayment of a portion of the Obligations as provided in the Note.
Section 8. Non-Recourse Nature of Liabilities. The Company's sole
recourse for the payment of the Liabilities shall be limited to the Collateral
securing the Note. THE COMPANY SHALL NOT HAVE THE RIGHT TO ENFORCE THE
LIABILITIES AGAINST THE MAKER, HIS HEIRS, ASSIGNS AND LEGAL REPRESENTATIVES OR
ANY OF THE OTHER ASSETS OR PROPERTY OF ANY OF THE FOREGOING.
Section 9. Miscellaneous.
(a) To the fullest extent permitted by applicable law, this Agreement
shall continue to be effective or be reinstated, as the case may be, if at any
time any amount received by the Company in respect of the Liabilities is
rescinded or must otherwise be restored or returned by the Company upon the
insolvency or bankruptcy of the Maker or upon the appointment of any receiver,
intervenor, conservator, trustee or similar official for the Maker or any
substantial part of his assets, or otherwise, all as though such payments had
not been made.
(b) No remedy herein conferred is intended to be exclusive of any
other remedy herein conferred or otherwise available to the Company, but every
such remedy shall be cumulative and in addition to every other remedy herein
conferred, or conferred on the Company by any other agreement or instrument or
now or hereafter existing at law, in equity or by statute.
(c) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction, shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(d) Except as otherwise expressly provided herein, no term or
provision of this Agreement may be amended, waived, discharged or terminated
orally, but only by an instrument in writing signed by the parties.
(e) THIS AGREEMENT AND ALL RIGHTS HEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW JERSEY WITHOUT
<PAGE>
GIVING EFFECT TO THE CONFLICTS OF LAWS PROVISIONS THEREOF. THE MAKER HEREBY
CONSENTS AND SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE
COURTS LOCATED IN THE STATE OF NEW JERSEY HAVING SUBJECT MATTER JURISDICTION IN
CONNECTION WITH ANY AND ALL DISPUTES ARISING OUT OF OR IN CONNECTION WITH THIS
Agreement, THE NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. FURTHER,
THE MAKER HEREBY CONSENTS AND AGREES THAT SERVICE OF PROCESS BY THE COMPANY, OR
ANY PARTY ACTING ON BEHALF OF THE COMPANY, SHALL BE DEEMED VALIDLY AND PROPERLY
EFFECTED AGAINST THE MAKER UPON THE MAILING OF A COPY OF SUCH PROCESS BY
CERTIFIED MAIL, POSTAGE PREPAID, TO THE MAKER AT HIS ADDRESS AS IT APPEARS IN
THE PERSONNEL RECORDS OF THE COMPANY.
(f) No course of dealing and no delay on the part of any party hereto
in exercising any right, power, or remedy conferred by this Agreement shall
operate as a waiver thereof or otherwise prejudice such party's rights, powers
and remedies hereunder or in connection herewith. No single or partial exercise
of any power or remedy conferred by this Agreement shall preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
(g) This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors, assigns and legal
representatives.
(h) This Agreement constitutes the entire agreement among the parties
with respect to the matters covered hereby and supersedes all previous written,
oral or implied agreements and understandings among the parties with respect to
such matters.
(i) All notices or other communications required or permitted
hereunder shall be in writing and shall be delivered personally, by facsimile or
sent by certified, registered or express air mail, postage prepaid, and shall be
deemed given which so delivered personally, or by facsimile, or if mailed, five
days after the date of mailing, (i) if to the Maker at his address as it appears
in the records of the Company, and (ii) if to the Company at the address set
forth below:
30 Technology Drive
Warren, New Jersey 07059,
Telephone: (908) 222-9100
Facsimile: (908) 222-1556
Attention: Secretary
or at such other addresses as shall be furnished in writing to the other party
hereto.
(j) The headings in this Agreement are for reference purposes only,
and shall not in any way affect the meaning or interpretation
<PAGE>
(k) This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original agreement, but all of which together shall
constitute one and the same instrument.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first written above.
Witness:
_____________________________ ___________________________
Name: Name:
BARRINGER TECHNOLOGIES INC.
By: _________________________
Name:
Title:
EXHIBIT 10.22
NON-RECOURSE SECURED PROMISSORY NOTE
FOR VALUE RECEIVED, _______________ (the "Maker") hereby promises to
pay to the order of Barringer Technologies Inc. (the "Company"), at its offices
at 30 Technology Drive, Warren, New Jersey, or at such other location as the
Company may designate from time to time, the sum of $______________, in lawful
money of the United States of America on _______________ (the "Maturity
Date"), together with interest thereon, compounded annually, at a rate of ___%
per annum. Interest shall be calculated on the basis of a 365-day year for the
actual number of days elapsed.
If the date any amount is due hereunder is not a Business Day, then
such amount shall be due and payable on the Business Day next succeeding the
original payment date, together with interest thereon to the date of payment. As
used herein, "Business Day" means any day, other than a Saturday or Sunday or
other day on which commercial banks in New Jersey are open for the general
transaction of business.
If the Maker fails to pay any amount hereunder when due, whether on
the Maturity Date, upon acceleration or otherwise, and such failure continues
for a period of five (5) days or more, interest shall thereafter accrue on any
overdue amounts at a rate of ___% per annum until paid in full. In such event,
the Maker also shall pay to the Company the reasonable attorneys' fees and
disbursements and all other out-of-pocket costs incurred by the Company in order
to collect amounts due and owing under this Note or otherwise to enforce the
Company's rights and remedies hereunder.
The Maker may prepay this Note at any time, in whole or in part,
without premium or penalty. Any partial prepayments shall be applied first to
accrued interest and second to the payment of principal. In the event that the
Maker sells, transfers or otherwise disposes of some or all of the Shares (as
defined in the Pledge Agreement referred to below), whether on or prior to the
Maturity Date, the Maker shall promptly apply all or a portion of the net
proceeds, if any, received by the Maker from such disposition to repay this Note
in an amount equal to the lesser of (i) the net proceeds received from such
disposition, or (ii) the product obtained by multiplying the aggregate principal
and interest outstanding hereunder on the date of such disposition by a
fraction, the numerator of which is the number of Shares disposed of in such
disposition and the denominator of which is the total number of Shares purchased
by the Maker in the transaction giving rise to this Note appropriately adjusted
for any subsequent stock splits, stock dividends, reclassifications or other
similar changes in the outstanding shares of the Company's common stock, par
value $.01 per share (the "Common Stock").
This Note shall mature and all amounts due hereunder shall become
immediately due and payable, without demand and without notice to the Maker, in
the event that (a) the Maker sells, transfers or otherwise disposes of all
Shares then owned by him, (b) the Maker's employment is terminated by the
Company pursuant to a Termination for Cause (as defined below), (c) the Maker
(i) becomes insolvent, (ii) makes an assignment for the benefit of his creditors
generally, or (iii) files a petition seeking protection under the United States
Bankruptcy Code or seeking the
<PAGE>
appointment of a receiver, trustee or custodian for the Maker or a substantial
portion of his assets, or (d) any other person or entity (i) files an
involuntary petition under the United States Bankruptcy Code with respect to the
Maker, or (ii) commences an action seeking the appointment of a receiver,
trustee or custodian for the Maker or a substantial portion of his assets, and
such petition or action remains undismissed and unstayed for more than sixty
(60) consecutive days.
As used herein, "Termination for Cause" shall have the same meaning
ascribed to such term (or any analogous term) in any employment agreement in
effect between the Maker and the Company as of the date of this Note; provided,
however, that if the Maker is not a party to any employment agreement with the
Company as of the date hereof, "Termination for Cause" shall mean, to the
maximum extent permitted by applicable law, a termination of the Maker's
employment by the Company because the Maker has (a) materially breached or
materially failed to perform his duties under applicable law and such breach or
failure to perform causes material damage to the Company or constitutes
self-dealing or willful misconduct, (b) intentionally committed an act of
dishonesty in the performance of his duties that either constitutes
self-dealing, willful misconduct, a breach of duty to the Company or a violation
of applicable law, (c) engaged in conduct detrimental to the business of the
Company which causes material damage to the Company, (d) been convicted of a
felony, (e) been convicted of a misdemeanor involving moral turpitude, (f)
materially breached or materially failed to perform his obligations and duties
to the Company, which breach or failure the Maker shall fail to remedy within 30
days after written demand from the Company, (g) repeatedly refused to follow
lawful and reasonable directions from the Board of Directors of the Company or
the Chief Maker Officer of the Company commensurate with the Maker's office and
responsibilities, which refusal is material to the performance of the Maker's
duties or (h) violated in any material respect any confidentiality,
non-competition or other agreement with the Company.
In the event that the Maker's employment is terminated for any reason
other than by the Company as a result of a Termination for Cause, this Note
shall mature and become due and payable on the earlier of (i) the Maturity Date
and (ii) the second anniversary of the effective date of such termination.
The Maker shall have the right to repay the amounts due hereunder, in
whole but not in part, by surrendering the Shares to the Company. The Maker
shall effect such surrender by notifying the Company in writing that the Maker
irrevocably elects to surrender the Shares to the Company as provided herein,
which election shall be accompanied by stock powers endorsed in blank or other
transfer documents in proper form to effect the transfer of the Shares to the
Company or its nominee with all signatures guaranteed and a certification by the
Maker that the Shares are owned by the Maker free and clear of any lien, claim,
encumbrance or adverse claim whatsoever, other than as created pursuant to the
Pledge Agreement referred to below. Upon receipt of such election and the other
documentation described above, the Company shall have the right to transfer the
Shares to itself or its nominee, free and clear of any claim or interest of the
Maker. In the event that the Maker surrenders Shares to the Company having an
aggregate Fair Market Value (as defined below) in excess of the amounts due and
<PAGE>
owing hereunder, the Company shall pay to the Maker the amount of such excess in
cash, without interest, on or prior to the close of business on the third
Business Day after such surrender.
For purposes hereof, each Share shall have a "Fair Market Value" equal
to the last reported sale price for the Common Stock as reported on the Nasdaq
National Market or any national securities exchange on which the Common Stock is
then traded on the trading day immediately preceding the date on which the
Shares are surrendered to the Company. In the event that the Common Stock is not
then included on the Nasdaq National Market or traded on a national securities
exchange, the "Fair Market Value" of a share of Common Stock shall mutually
agreed to in good faith by the Board of Directors of the Company (or its
designee) and the Maker.
This Note is the Note referred to in the Pledge Agreement, dated the
date hereof, between the Maker and the Company and is secured by the Shares and
the other Collateral described therein. The Pledge Agreement grants the Company
certain rights with respect to the Collateral upon certain defaults specified
therein.
The Company's sole recourse for the payment of amounts due under this
Note shall be limited to the Collateral securing this Note. . THE COMPANY SHALL
NOT HAVE THE RIGHT TO ENFORCE THIS NOTE AGAINST THE MAKER, HIS HEIRS, ASSIGNS
AND LEGAL REPRESENTATIVES OR ANY OF THE OTHER ASSETS OR PROPERTY OF ANY OF THE
FOREGOING.
No delay on the part of the holder of this Note in exercising any
power or right hereunder shall operate as a waiver of any such power or right;
nor shall any single or partial exercise of any power or right preclude any
other or further exercise of such power or right, or the exercise of any other
power or right, and no waiver whatsoever shall be valid unless in writing,
signed by the holder of this Note, and then only to the extent expressly set
forth therein. The Maker waives presentment, demand for payment, diligence,
notice of dishonor and all other notices or demands in connection with the
delivery, acceptance, performance, default or indorsement of this Note.
This Note shall be governed by, and construed in accordance with, the
laws of the State of New Jersey, without reference to the choice of law
provisions thereof. The Maker hereby consents and submits to the exclusive
jurisdiction of the federal and state courts located in the State of New Jersey
having subject matter jurisdiction in connection with any and all disputes
arising out of or in connection with this Note. The Maker hereby consents and
agrees that service of process by the Company shall be deemed validly and
properly effected against the Maker upon the mailing of a copy of such process
by certified mail, postage prepaid, to the Maker at his address as it appears in
the personnel records of the Company.
[Remainder of page intentionally left blank]
<PAGE>
Witness:
______________________ _____________________
Name: Name:
Dated:
EXHIBIT 10.23
NON-RECOURSE SECURED PROMISSORY NOTE
FOR VALUE RECEIVED, _______________ (the "Maker") hereby promises to
pay to the order of Barringer Technologies Inc. (the "Company"), at its offices
at 30 Technology Drive, Warren, New Jersey, or at such other location as the
Company may designate from time to time, the sum of $______________, in lawful
money of the United States of America on _________ (the "Maturity Date"),
together with interest thereon, compounded annually, at a rate of ______% per
annum. Interest shall be calculated on the basis of a 365-day year for the
actual number of days elapsed.
If the date any amount is due hereunder is not a Business Day, then
such amount shall be due and payable on the Business Day next succeeding the
original payment date, together with interest thereon to the date of payment. As
used herein, "Business Day" means any day, other than a Saturday or Sunday or
other day on which commercial banks in New Jersey are open for the general
transaction of business.
If the Maker fails to pay any amount hereunder when due, whether on
the Maturity Date, upon acceleration or otherwise, and such failure continues
for a period of five (5) days or more, interest shall thereafter accrue on any
overdue amounts at a rate of ____% per annum until paid in full. In such event,
the Maker also shall pay to the Company the reasonable attorneys' fees and
disbursements and all other out-of-pocket costs incurred by the Company in order
to collect amounts due and owing under this Note or otherwise to enforce the
Company's rights and remedies hereunder.
The Maker may prepay this Note at any time, in whole or in part,
without premium or penalty. Any partial prepayments shall be applied first to
accrued interest and second to the payment of principal. In the event that the
Maker sells, transfers or otherwise disposes of some or all of the Shares (as
defined in the Pledge Agreement referred to below), whether on or prior to the
Maturity Date, the Maker shall promptly apply all or a portion of the net
proceeds, if any, received by the Maker from such disposition to repay this Note
in an amount equal to the lesser of (i) the net proceeds received from such
disposition, or (ii) the product obtained by multiplying the aggregate principal
and interest outstanding hereunder on the date of such disposition by a
fraction, the numerator of which is the number of Shares disposed of in such
disposition and the denominator of which is the total number of Shares purchased
by the Maker in the transaction giving rise to this Note appropriately adjusted
for any subsequent stock splits, stock dividends, reclassifications or other
similar changes in the outstanding shares of the Company's common stock, par
value $.01 per share (the "Common Stock").
This Note shall mature and all amounts due hereunder shall become
immediately due and payable, without demand and without notice to the Maker, in
the event that (a) the Maker sells, transfers or otherwise disposes of all
Shares then owned by him, (b) the Maker (i) becomes insolvent, (ii) makes an
assignment for the benefit of his creditors generally, or (iii) files a petition
seeking protection under the United States Bankruptcy Code or seeking the
appointment of a receiver, trustee or custodian for the Maker or a substantial
portion of his assets, or (d) any other person
<PAGE>
or entity (i) files an involuntary petition under the United States Bankruptcy
Code with respect to the Maker, or (ii) commences an action seeking the
appointment of a receiver, trustee or custodian for the Maker or a substantial
portion of his assets, and such petition or action remains undismissed and
unstayed for more than sixty (60) consecutive days.
In the event that the Maker ceases for any reason to be a member of
the Board of Directors of the Company, this Note shall mature and become due and
payable on the earlier of (i) the Maturity Date and (ii) the second anniversary
of the effective date of such cessation.
The Maker shall have the right to repay the amounts due hereunder, in
whole but not in part, by surrendering the Shares to the Company. The Maker
shall effect such surrender by notifying the Company in writing that the Maker
irrevocably elects to surrender the Shares to the Company as provided herein,
which election shall be accompanied by stock powers endorsed in blank or other
transfer documents in proper form to effect the transfer of the Shares to the
Company or its nominee with all signatures guaranteed and a certification by the
Maker that the Shares are owned by the Maker free and clear of any lien, claim,
encumbrance or adverse claim whatsoever, other than as created pursuant to the
Pledge Agreement referred to below. Upon receipt of such election and the other
documentation described above, the Company shall have the right to transfer the
Shares to itself or its nominee, free and clear of any claim or interest of the
Maker. In the event that the Maker surrenders Shares to the Company having an
aggregate Fair Market Value (as defined below) in excess of the amounts due and
owing hereunder, the Company shall pay to the Maker the amount of such excess in
cash, without interest, on or prior to the close of business on the third
Business Day after such surrender.
For purposes hereof, each Share shall have a "Fair Market Value" equal
to the last reported sale price for the Common Stock as reported on the Nasdaq
National Market or any national securities exchange on which the Common Stock is
then traded on the trading day immediately preceding the date on which the
Shares are surrendered to the Company. In the event that the Common Stock is not
then included on the Nasdaq National Market or traded on a national securities
exchange, the "Fair Market Value" of a share of Common Stock shall mutually
agreed to in good faith by the Board of Directors of the Company (or its
designee) and the Maker.
This Note is the Note referred to in the Pledge Agreement, dated the
date hereof, between the Maker and the Company and is secured by the Shares and
the other Collateral described therein. The Pledge Agreement grants the Company
certain rights with respect to the Collateral upon certain defaults specified
therein.
The Company's sole recourse for the payment of amounts due under this
Note shall be limited to the Collateral securing this Note. . THE COMPANY SHALL
NOT HAVE THE RIGHT TO ENFORCE THIS NOTE AGAINST THE MAKER, HIS HEIRS, ASSIGNS
AND LEGAL REPRESENTATIVES OR ANY OF THE OTHER ASSETS OR PROPERTY OF ANY OF THE
FOREGOING.
<PAGE>
No delay on the part of the holder of this Note in exercising any
power or right hereunder shall operate as a waiver of any such power or right;
nor shall any single or partial exercise of any power or right preclude any
other or further exercise of such power or right, or the exercise of any other
power or right, and no waiver whatsoever shall be valid unless in writing,
signed by the holder of this Note, and then only to the extent expressly set
forth therein. The Maker waives presentment, demand for payment, diligence,
notice of dishonor and all other notices or demands in connection with the
delivery, acceptance, performance, default or indorsement of this Note.
This Note shall be governed by, and construed in accordance with, the
laws of the State of New Jersey, without reference to the choice of law
provisions thereof. The Maker hereby consents and submits to the exclusive
jurisdiction of the federal and state courts located in the State of New Jersey
having subject matter jurisdiction in connection with any and all disputes
arising out of or in connection with this Note. The Maker hereby consents and
agrees that service of process by the Company shall be deemed validly and
properly effected against the Maker upon the mailing of a copy of such process
by certified mail, postage prepaid, to the Maker at his address as it appears in
the personnel records of the Company.
[Remainder of page intentionally left blank]
<PAGE>
Witness:
______________________ _____________________
Name: Name:
Dated:
EXHIBIT 21.1
BARRINGER TECHNOLOGIES, INC.
LIST OF SUBSIDIARIES
NAME JURISDICTION OF INCORPORATION
Barringer Instruments Inc. Delaware
Barringer Consumer Products, LLC New Jersey
Barringer Research Ltd. Ontario, Canada
Barringer Europe, SARL France
Barringer Instruments UK, Ltd. United Kingdom
Barringer Instruments, Ltd. Ontario, Canada
DigiVision, Inc. California
EXHIBIT 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Barringer Technologies Inc.
Warren, New Jersey
We hereby consent to the incorporation by reference in Registration
Statements Nos. 33-78888 and 333-11629 of Barringer Technologies Inc. on Forms
S-3 and Registration Statements Nos. 333-25573 and 333-35133 of Barringer
Technologies Inc. on Forms S-8, of our report dated February 24, 1999, relating
to the consolidated financial statements and schedule of Barringer Technologies
Inc. appearing in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998.
BDO SEIDMAN, LLP
Woodbridge, New Jersey
March 30, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
BARRINGER TECHNOLOGIES INC.'S FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000010119
<NAME> BARRINGER TECHNOLOGIES INC.
<MULTIPLIER> 1000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 18,802
<SECURITIES> 15,606
<RECEIVABLES> 7,128
<ALLOWANCES> 626
<INVENTORY> 3,943
<CURRENT-ASSETS> 49,056
<PP&E> 4,232
<DEPRECIATION> 1,883
<TOTAL-ASSETS> 52,644
<CURRENT-LIABILITIES> 3,359
<BONDS> 0
0
92
<COMMON> 79
<OTHER-SE> 48,969
<TOTAL-LIABILITY-AND-EQUITY> 52,644
<SALES> 20,458
<TOTAL-REVENUES> 20,458
<CGS> 7,954
<TOTAL-COSTS> 7,954
<OTHER-EXPENSES> 9,373
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9
<INCOME-PRETAX> 3,122
<INCOME-TAX> (1,309)
<INCOME-CONTINUING> 4,431
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,431
<EPS-PRIMARY> 0.62
<EPS-DILUTED> 0.58
</TABLE>
