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, 1999
Commission File Number: 0-3207
Barringer Technologies Inc.
(Name of issuer in its charter)
Delaware 84-0720473
(State or Other Jurisdiction of Incorporation or (I.R.S. Employer
Organization) Identification No.)
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
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 non affiliates computed by
reference to the price at which the stock was sold, or the average bid and asked
price of such stock, is $22,012,000 as of March 1, 2000.
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 1, 2000
-------------------------------
Common Stock, $.01 par value 7,221,002
<PAGE>
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business...................................................... 3
Item 2. Properties.................................................... 9
Item 3. Legal Proceedings............................................. 9
Item 4. Submission of Matters to a Vote of Security Holders........... 9
PART II
Item 5. Market for Common Equity and Related Stockholder Matters...... 10
Item 6. Selected Financial Data....................................... 11
Item 7. Management's Discussion and Analysis.......................... 12
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.... 16
Item 8. Financial Statements and Supplemental Data.................... 16
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........................................ 19
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................... 24
Item 13. Certain Relationships and Related Transactions................ 26
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.......................................... 26
Signatures ............................................................. 30
2
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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) and SABRE 2000 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. Other factors may be described from time to time in the Company's
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 products, the IONSCAN(R), a portable desktop system, and the
SABRE 2000(R), a handheld particle and vapor system, are used in explosives
detection and drug interdiction applications. As of December 31, 1999, the
Company had sold over 1,500 IONSCAN(R) 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
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 75
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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 approximately 400 IONSCAN(R)s installed in 64 airports such as John F.
Kennedy International Airport and Chicago O'Hare International Airport. 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 its products. 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 increased 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
1999, the Company received orders totaling $7.7 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, 1998 and
1999, 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 that can be applied to new markets with greater
revenue and profit potential. The Company has developed a long-term strategic
plan designed to develop a variety of platforms and new applications in order to
expand into diversified markets. The Company has now completed the development
of three new platforms, with two additional platforms expected to be introduced
during the year 2000. The Company expects that these five platforms will enable
the Company to grow its business more rapidly by expanding its product lines,
not only in its core markets but also, more significantly, in new markets of
substantially greater size. These new markets include chemical warfare agent
detection, both for military and civilian preparedness, as well as the detection
of bacteria and other contaminants for the food, life sciences and healthcare
industries.
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 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 chemiluminescence. Enhanced 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, is generally more portable and less expensive than bulk
imaging equipment and has an extremely low false alarm rate.
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
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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.
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 2000, which the FAA is using to deploy such technology in an
expanded number of the 400 busiest U.S. airports.
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 EgyptAir 990 and TWA Flight 800 and the 1995
Oklahoma City bombing.
Drug Interdiction
As a result of increased illegal drug usage, particularly among 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 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
During the second quarter of 1999, the Company introduced a Gas
Chromatography-IONSCAN(R) ("GC-IMS") which is a fully transportable field
screening instrument that combines the technology of the IONSCAN(R) with the
separation capabilities of a gas chromatograph. This product provides dual
analysis capability for improved resolution and quantitative results.
The Company has developed and in the fourth quarter of 1999, introduced the
SABRE 2000 which is a small lightweight handheld detector capable of detecting a
variety of substances, including explosives, narcotics, and chemical warfare
agents. Like the IONSCAN(R), the SABRE is programmed to simultaneously detect
and identify over thirty individual substances, providing an audio visual alarm
to the operator when one of the programmed substances is detected. The SABRE can
analyze both vapor and particle samples in a matter of seconds. At approximately
half the price of the IONSCAN(R), and being a handheld product, the SABRE is
expected to penetrate markets that require mobility, or may have limited budgets
for buying new technology.
In addition, the Company was granted a license from Sandia National
Laboratories ("Sandia") to commercialize a patented walk-through chemical
detection portal that was developed for the FAA. The Company intends to market
the portal during the second half of the year 2000, initially to the aviation
security market and also expects to target sales of the portal to military and
other security agencies. In addition, the Company believes that the portal will
have applications for the detection of chemical warfare
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agents.
Also during 1999, the Company received Phase II approval from the FAA for
its automated luggage screening system. The Company successfully completed Phase
I earlier in 1999 and under Phase II will prepare a detailed engineering design
for the detection system. Phase II is expected to be completed by the end of the
second quarter 2000.
Sales and Marketing
The Company sells its products through a direct sales organization
comprised of 34 sales and service employees located at its headquarters in New
Jersey and at offices in Toronto, London, Paris and Kuala Lumpur. In addition,
the Company utilizes a network of 53 independent sales and service
representatives located in North America, 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.
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 instruments, although from time to time the Company has provided extended
warranties. To date, the Company's warranty claims experience has not been
significant.
Currently, approximately 20% - 25% of the Company's revenues are from the
sale of consumables, accessories, spare parts, service and maintenance
contracts. As more units are operationally deployed, the Company believes that
this revenue source will grow.
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 years ended December 31, 1999 and 1998, the FAA accounted for
approximately 48.3% and 48.1%, respectively, 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.
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 product 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, 1999, 1998 and 1997, the Company had backlog of $1.1
million, $750,000 and none, respectively. It is expected that the Company's
backlog will ship by June 30, 2000.
Manufacturing and Assembly
The Company assembles its products from components supplied to it by
various
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suppliers and parts manufactured internally. Once an instrument is assembled, it
is "burned in" for a period of time to assure that it is functioning properly.
After successful completion of this procedure, the instrument is ready for
shipment to a customer.
Although many of the basic components of the instruments, 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
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.
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 detectors 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 detectors. 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 $2.7 million, $2.2 million and $1.6 million, on product
development activities for the years ended December 31, 1999, 1998 and 1997,
respectively, of which $324,000, $386,000 and $849,000, respectively, were
funded under various grants and contracts. Substantially all of the Company's
product development activities have related to the development and enhancement
of the Company's IMS technology and the development of new products.
During 1999, the Company completed the development of three new platforms,
the Model 400B, the GC-IMS and the SABRE 2000. See "Other Products" above. The
Company currently expects to complete two additional platforms during the year
2000.
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Patents, Trademarks and Proprietary Rights
Certain of the technology used in the Company's products 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 its
products and while certain other elements of its products are protected by other
intellectual property rights, the Company has no comprehensive patent or similar
exclusive intellectual property right covering its products in their entirety.
In addition, the basic IMS technology used in the Company's products 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) products.
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) product sales. The initial term of this license agreement
expired on March 31, 1999. However, the Company has entered into an agreement
with Revenue Canada, pursuant to which the Company has obtained the right to
renew such licensing arrangement on a year-by-year basis for up to ten
additional years. Revenue Canada has retained the right to use the technology
and to produce products incorporating such technology although, to date, Revenue
Canada has not attempted to do so.
Employees
As of December 31, 1999, the Company had 134 full-time employees, of whom
53 were engaged in manufacturing, 30 were engaged in product development
activities and 51 were engaged in sales, service and general administration. 17
employees have advanced degrees (including 12 doctorates). None of the Company's
employees is represented by a union, and the Company considers its relationships
with its employees to be satisfactory.
Financial Information about Geographic Data and Export Sales
For information with respect to financial information about 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.
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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, 28,128 $387,000 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, and assembly, sales,
Canada L4W 1V1 customer support and
administrative
Village Fret BAT-3453 Sales and customer 2,500 $ 43,000 February 2001
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 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.
Item 3. Legal Proceedings.
The Company is not a party to any material legal proceedings.
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, 1999.
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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 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 $10 9/16 $ 5 13/16
Second quarter 7 1/2 5 1/4
Third quarter 6 1/2 5
Fourth quarter 7 1/8 4 7/8
Fiscal 2000
First quarter (through March 20, 2000) $ 7 11/16 $ 4 13/32
On March 20, 2000, the last reported sale price of the Common Stock on the
Nasdaq Stock Market was $6.75 per share. As of March 20, 2000, the Company had
approximately 557 stockholders of record.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its Common Stock.
The Board of Directors currently intends to retain future earnings to support
its growth strategy and does not anticipate paying dividends in the foreseeable
future. Payment of future dividends, if any, will be at the discretion of the
Board of Directors after taking into account various factors, including the
Company's financial condition, results of operations, current and anticipated
cash needs and plans for expansion. The Company is prohibited from paying cash
dividends on the Common Stock unless full cumulative dividends have been paid or
set aside for payment on its Class A Convertible Preferred Stock and Class B
Convertible Preferred Stock at an annual rate of $0.16 per share, which
dividends, at the option of the Company, are payable in cash or shares of Common
Stock.
RECENT SALES OF UNREGISTERED SECURITIES
In January 1999, the Company sold 10,000 shares of Common Stock to one of
its Directors at a purchase price of $9.75 per share, the closing price of the
Common Stock on the date of sale. Substantially all of the purchase price for
the shares of Common Stock sold was paid in the form of a five-year non-recourse
promissory note secured by a pledge of the underlying Common Stock. There was no
underwriter for this issuance. The shares of Common Stock were not registered
under the Securities Act of 1933, as amended, in reliance on the exemption
contained in Section 4(2) thereof.
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Item 6. Selected Financial Data
Summary Consolidated Financial Data
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Consolidated Statements of
Operations Data (1):
Revenues $ 6,374 $ 10,923 $ 22,689 $ 19,689 $ 20,155
Gross profit 2,773 5,560 13,681 12,368 11,551
Operating income (loss) from
continuing operations (886) 1,596 4,995 2,565 2,383
Income tax (provision)
benefit -- 391 371 1,107 (1,468)
Income (loss) from
continuing operations (1,178) 2,059 5,754 5,258 2,578
Net income (loss) (827) 2,059 5,754 4,431 1,278
Preferred stock dividends (82) (39) (12) (10) (9)
Net income (loss)
attributable to common
stockholders (909) 2,020 5,742 4,421 1,269
Income (loss) per common
share from continuing
operations (diluted) $ (0.39) $ 0.46 $ 0.92 $ 0.69 $ 0.33
Net income (loss) per
common share (diluted) $ (0.28) $ 0.46 $ 0.92 $ 0.58 $ 0.16
Weighted average common
shares outstanding (diluted) 3,283 4,440 6,257 7,612 7,752
Consolidated Balance Sheet Data:
Working capital $ 370 $ 14,271 $ 19,664 $ 45,697 $ 41,969
Current assets 3,672 16,624 24,037 49,056 44,882
Total assets 4,735 17,323 25,608 52,644 48,765
Current liabilities 3,302 2,353 4,373 3,359 2,913
Long-term liabilities 108 117 121 145 599
Stockholders' equity 1,325 14,853 21,114 49,140 45,253
</TABLE>
(1) Amounts for the year ending December 31, 1998, have been restated to
reflect DigiVision as an operation held for sale. DigiVision was acquired
on April 30, 1998 and sold December 16, 1999.
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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.
Year Ended December 31,
--------------------------
1997 1998 1999
------ ------ ------
Consolidated Statements of Operations Data
Continuing operations:
Revenues 100.0% 100.0% 100.0%
Cost of revenues 39.7 37.2 42.7
------ ------ ------
Gross profit 60.3 62.8 57.3
------ ------ ------
Operating expenses:
Selling, general and administrative 35.1 38.1 33.4
Business development -- 2.6 4.6
Product development 9.7 9.1 7.5
------ ------ ------
Total operating expenses 38.3 49.8 45.5
------ ------ ------
Operating income 22.0 13.0 11.8
Other income, net 1.7 8.1 8.3
Income tax (provision) benefit 1.6 5.6 (7.3)
------ ------ ------
Income from continuing operations 25.3 26.7 12.8
Preferred stock dividends --* --* --*
------ ------ ------
Income from continuing operations
attributable to common stockholders 25.3% 26.7% 12.8%
====== ====== ======
* Less than 0.1%.
Comparison of the Fiscal Year Ended December 31, 1999 to the Fiscal Year Ended
December 31, 1998
Continuing Operations:
Revenues. For the fiscal year ended December 31, 1999 revenues increased by
$466,000, or 2.4%, to $20.2 million from $19.7 million for the fiscal year ended
December 31, 1998. Sales of IONSCAN(R)s and related products increased by
$437,000, or 2.3%, due to an increase of 1.4% in the number of units sold and an
increase of 46.3% in the sale of consumables and related products, offset in
part by a 9.2% decrease in the average unit selling price. The increase in sales
of consumables and related products was due to significant IONSCAN(R) sales to
the aviation security market, primarily to the airlines whose usage is high. The
decrease in average unit selling prices resulted primarily from increased
competitive activity. The Company believes that competitive factors will
continue to pressure gross margins in future periods.
Gross Profit. For the fiscal year ended December 31, 1999, gross profit
decreased by $817,000, or 6.6%, to $11.6 million from $12.4 million in 1998. As
a percentage of revenues, gross profit decreased to 57.3% in the year ended
December 31, 1999 from 62.8% in 1998. The decrease in gross profit percentage
was primarily attributable to a decrease in the average unit selling price of
the Company's IONSCAN(R) instruments that was only partially offset by reduced
production costs.
Selling, General and Administrative. For the fiscal year ended December 31,
1999, selling, general and administrative expenses decreased by approximately
$771,000, or 11.4%, to $6.7 million from $7.5 million in 1998. As a percentage
of revenues, selling, general and administrative expenses decreased to 33.4% in
the year ended December 31, 1999 from 38.1% in 1998. Selling and marketing
expenses decreased by approximately $539,000, primarily due to a $115,000
recovery of certain marketing and selling expenses, reduced payroll and related
costs associated with personnel transferred to the service department whose
costs are recorded in cost of revenues and
12
<PAGE>
reduced sales and other meeting expenses. General and administrative expenses
decreased by $232,000 primarily as a result of reduced bad debt expense and
reduced incentive compensation, partially offset by increased payroll and
related expense and increased occupancy expense.
Business Development. For the fiscal year ended December 31, 1999, business
development expenses increased by $415,000, or 80.1%, to $933,000 from $518,000
in 1998. The increase was attributable primarily to costs associated with a
proposed acquisition that was not completed, additional payroll and related
costs and investment banking fees.
Product Development. For the fiscal year ended December 31, 1999, product
development expenses decreased by $279,000, or 15.7%, to $1.5 million from $1.8
million in 1998. As a percentage of revenues, product development expenses
decreased to 7.4% (13.3% when combined with funded research and development and
capitalized costs) for the fiscal year ended December 31, 1999 from 9.0% (11.2%
when combined with funded research and development) in 1998. 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.
Operating Income. For the fiscal year ended December 31, 1999, operating
income decreased by $182,000, or 7.1%, to $2.4 million from $2.6 million in
1998. As a percentage of revenues, operating income decreased to 11.8% from
13.0% in 1998. The decrease is due to the combination of factors noted above.
Other Income and expense. For the fiscal year ended December 31, 1999,
other income increased by $77,000, or 4.9%, to $1.7 million from $1.6 million in
1998. The increase was attributable primarily to an increase in foreign exchange
gain, partially offset by reduced investment income.
Income Taxes. For the fiscal year ended December 31, 1999, the Company had
a tax provision of $1.5 million composed of net foreign taxes of $106,000 and US
federal and state taxes of $1.4 million, as compared to a net tax benefit of
$1.2 million in 1998.
As of December 31, 1999, the Company had net operating loss carryforwards
of approximately $5.8 million and $600,000 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. In
addition, the Company has approximately $2.2 million of excess expenses relating
to its Canadian operations that can be used to offset future Canadian income.
Operation Sold:
Effective June 30, 1999, the Company decided to dispose of its video-
enhancement business, DigiVision, and on December 16, 1999 sold the business to
certain members of DigiVision's senior management. Accordingly, amounts relating
to DigiVision have been accounted for as discontinued operations and presented
as an operation sold. See note 13 of Notes to Financial Statements for the
details of the disposition.
Comparison of the Fiscal Year Ended December 31, 1998 to the Fiscal Year Ended
December 31, 1997
Continuing Operations:
Revenues. For the fiscal year ended December 31, 1998, revenues decreased
by $3.0 million, or 13.2%, to $19.7 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. The increase in unit sales was due to significant IONSCAN(R) sales
to the aviation security market, primarily to the FAA.
13
<PAGE>
The decrease in average unit selling prices resulted primarily from increased
competitive activity.
Gross Profit. For the fiscal year ended December 31, 1998, gross profit
decreased by $1.3 million, or 9.6%, to $12.4 million from $13.7 million in 1997.
As a percentage of revenues, gross profit increased to 62.8% 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.
Selling, General and Administrative. For the fiscal year ended December 31,
1998, selling, general and administrative expenses decreased by approximately
$463,000, or 5.8%, to $7.5 million from $7.9 million in 1997. As a percentage of
revenues, selling, general and administrative expenses increased to 38.1% in
1998 from 35.1% in 1997. Selling and marketing expenses decreased by
approximately $528,000, primarily the result of fewer commissioned sales.
General and administrative expenses increased by $65,000 primarily as a result
of an increase in the provision for doubtful accounts and sales allowances,
which were partially offset by reimbursement of certain expenses.
Business Development. During 1998, the Company formed the business
development group and incurred expenses, primarily travel and salaries and costs
related thereto of approximately $518,000.
Product Development. For the fiscal year ended December 31, 1998, product
development expenses increased by $1.1 million, or 149%, to $1.8 million from
$715,000 in 1997. As a percentage of revenues, product development expenses
increased to 9.0% (11.0% 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.
Operating Income. For the fiscal year ended December 31, 1998, operating
income decreased by $2.4 million, or 48.6%, to $2.6 million from $5.0 million in
1997. As a percentage of revenues, operating income decreased to 13.0% 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 $1.2 million, or 300%, to $1.6 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.
Income Taxes. For the fiscal year ended December 31, 1998, the Company had
a net tax benefit of $1.1 million, composed of foreign taxes of $130,000 and
state taxes of $146,000, offset by a $1.4 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.
Liquidity and Capital Resources
Cash provided by operating activities was $663,000 in 1999, $2.8 million in
1998 and $2.0 million in 1997. Cash provided by operations in 1999 resulted
primarily from net income of $1.3 million and $3.4 million in non-cash operating
items, partially offset by net increases in working capital balances. The
Company incurred increases in its accounts receivable working capital
requirements as a result of slow payments from the FAA. It also incurred
increases in its inventory working capital requirements due partially to the
buildup of inventory for its new SABRE 2000 instrument and lower than
anticipated sales during the fourth quarter of 1999. Cash provided by operations
14
<PAGE>
in 1998 resulted primarily from net income of $4.4 million, partially offset by
$212,000 in non-cash operating items and by net increases in working capital
balances. Cash provided by operations in 1997 resulted primarily from net income
of $5.8 million, partially offset by $141,000 in non-cash operating items and by
net increases in working capital balances.
Cash provided by investing activities was $12.7 million during 1999 and
resulted primarily from the sale of marketable securities of $14.4 million,
partially offset by capital expenditures of $1.7 million. Cash used in investing
activities was $15.4 million during 1998 and resulted primarily from the
purchase of marketable securities, capital expenditures and the acquisition of
DigiVision. Cash provided by investing activities during 1997 resulted primarily
from the sale of marketable securities, partially offset by capital
expenditures.
Cash used in financing activities was $5.2 million during 1999 and was
primarily the result of the acquisition of treasury stock aggregating $5.3
million. Cash provided by financing activities was $23.3 million during 1998 and
resulted primarily from the net proceeds of the Company's public offering of
common stock aggregating $25.2 million, offset in part by the purchase of
treasury stock aggregating $1.5 million. Cash provided by financing activities
during 1997 resulted primarily from the net proceeds of certain option and
warrant exercises aggregating $430,000, offset in part by the repayment of
indebtedness.
The Company's capital expenditures in 1999 aggregated approximately $1.7
million. Such expenditures consisted primarily of leasehold improvements,
production equipment, computer hardware and related software and cost related to
the development of the Company's SABRE 2000 product. 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 2000.
The Company has a $5.0 million unsecured credit facility with Fleet Bank,
N.A. to be used for general working capital purposes, including the issuance of
standby letter of credit. At December 31, 1999, $4.8 million was available under
this facility.
The Company has approximately $5.8 million of tax loss carryforwards to
offset future taxable income in the U.S and $2.2 million of expenses available
to offset future taxable income in Canada.
As of December 31, 1999, the Company had cash and cash equivalents of $26.9
million and marketable securities of $1.2 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.
The Company's Board of Directors approved a common stock repurchase program
under which it is authorized to repurchase up to 2,000,000 shares of the
Company's outstanding common stock. As of December 31, 1999, the Company had
repurchased 1,089,000 shares at an aggregate cost of approximately $6.9 million.
Inflation
Inflation was not a material factor in either the sales or the operating
expenses of the Company during the periods presented herein.
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,
15
<PAGE>
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar normal business activity.
The Company had established a team that assessed risk, identified and
corrected exposures, and developed a contingency plan to deal with any Year 2000
compliance issues. As of March 1, 2000, the Company has not experienced any Year
2000 related problems with its software and hardware systems, with its products,
with its significant suppliers, customers and critical business partners, or
with its operating environment. Accordingly, the Company believes that Year 2000
issues no longer pose a threat to the Company's results of operations or
financial condition.
The Company's cost of achieving Year 2000 compliance was not material to
its results of operations or financial condition.
Recent Pronouncements of the Financial Accounting Standards Board
None applicable
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company's exposure to interest rate risk relates primarily to its
investment portfolio. The primary objective of the Company's investment policy
is to preserve principal while maximizing yields. The Company's investment
portfolio consists of cash and cash equivalents and marketable securities
consisting of a diverse mix of high credit quality securities, including U.S.
government agency and corporate obligations, certificates of deposit and money
market funds. The Company's portfolio has a weighted average maturity of 0.23
years, therefore changes in interest rate will not materially impact the
Company's consolidated financial condition. However, such interest rate changes
can cause fluctuations in the Company's results of operations and cash flows.
The Company's $5 million unsecured credit facility has an interest rate
based on the prime rate or LIBOR, at the Company's option. The Company currently
has no borrowings outstanding under the unsecured credit facility. If the
Company should draw down on the unsecured credit facility, interest rate
fluctuations could have an impact on the Company's results of operations and
cashflows.
The Company's exposure to foreign currency exchange rate fluctuations is
the result of operating throughout the world. The Company has several foreign
subsidiaries whose financial statements are recorded in currencies other than
U.S. dollars. As these foreign currency financial statements are translated at
the end of each reporting period during consolidation, fluctuations in exchange
rates between the foreign currency and the U.S. dollar increase or decrease the
value of those investments. These fluctuations are recorded as a component of
accumulated comprehensive income within stockholders' equity. In addition, from
time to time, the Company enters into sales transactions in currencies other
than U.S. dollars. Accordingly, the Company may be impacted by changes in the
exchange rate between the time the sale is recorded and the time the trade
receivable is collected. Where appropriate, the Company may from time to time
hedge these transactions against foreign currency fluctuations. During 1999, the
Company did not engage in any hedging transactions. The impact of foreign
exchange transactions is reflected in the statement of operations and has not
been material.
Item 8. Financial Statements and Supplemental Data.
Financial statements are contained on pages F-1 through F-21.
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, 1999. These data are unaudited but, in the opinion of management, reflect
all adjustments, consisting only
16
<PAGE>
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. On December 16, 1999, the
Company sold its DigiVision operation, accordingly where appropriate, results
have been re-stated. See Note 13 of Notes to Consolidated Financial Statements.
<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------------------------------------------------------
Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, Jun 30, Sep 30, Dec 31,
1998 1998 1998 1998 1999 1999 1999 1999
------- ------- ------- ------- ------- ------- ------- -------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 5,948 $ 4,865 $ 3,075 $ 5,801 $ 4,953 $ 5,476 $ 5,304 $ 4,422
Cost of revenues 2,435 1,826 1,107 1,953 1,960 2,198 2,314 2,132
------- ------- ------- ------- ------- ------- ------- -------
Gross profit 3,513 3,039 1,968 3,848 2,993 3,278 2,990 2,290
------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Selling, general and
administrative 1,696 1,847 1,443 2,522 1,788 1,744 1,756 1,449
Business development -- 72 210 236 194 150 118 471
Product development 362 378 475 562 506 301 340 351
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses 2,058 2,297 2,128 3,320 2,488 2,195 2,214 2,271
------- ------- ------- ------- ------- ------- ------- -------
Operating income (loss) from
continuing operations 1,455 742 (160) 528 505 1,083 776 19
Other (expense) income, net 136 449 498 503 502 447 384 330
Income tax (provision)benefit 200 150 195 562 (377) (588) (440) (63)
------- ------- ------- ------- ------- ------- ------- -------
Income from continuing
operations 1,791 1,341 533 1,593 630 942 720 286
Operation sold, net of tax -- (511) (108) (208) (130) (1,123) -- (47)
------- ------- ------- ------- ------- ------- ------- -------
Net income $ 1,791 $ 830 $ 425 $ 1,385 $ 500 $ (181) $ 720 $ 239
======= ======= ======= ======= ======= ======= ======= =======
Net income per common share*:
Continuing operations:
Basic $ 0.32 $ 0.17 $ 0.07 $ 0.21 $ 0.08 $ 0.13 $ 0.10 $ 0.04
======= ======= ======= ======= ======= ======= ======= =======
Diluted $ 0.28 $ 0.16 $ 0.06 $ 0.19 $ 0.08 $ 0.12 $ 0.10 $ 0.04
======= ======= ======= ======= ======= ======= ======= =======
Net income:
Basic $ 0.32 $ 0.11 $ 0.06 $ 0.18 $ 0.06 $ (0.03) $ 0.10 $ 0.03
======= ======= ======= ======= ======= ======= ======= =======
Diluted $ 0.28 $ 0.10 $ 0.05 $ 0.17 $ 0.06 $ (0.03) $ 0.10 $ 0.03
======= ======= ======= ======= ======= ======= ======= =======
</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.
17
<PAGE>
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, 2000.
Name Age Position
---- --- --------
Stanley S. Binder 58 Chairman of the Board and Chief Executive
Officer
John H. Davies 63 Vice Chairman and Director, Chief Executive
Officer of BRL
Kenneth S. Wood 48 President, Chief Operating Officer and
Director
Richard S. Rosenfeld 53 Vice President-Finance, Chief Financial
Officer, Treasurer and Secretary
John D. Abernathy 62 Director
Richard D. Condon 65 Director
John J. Harte 58 Director
Lorraine M. Lavet 39 Director
James C. McGrath 57 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.
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 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. He is a member of the Executive and Strategic
Planning and Technology Committees of the Board.
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
18
<PAGE>
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 is President and CEO 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 also serves as a
director and Chairman of the board of IBNET Inc., a global internet company. Mr.
Harte is a member of the Audit and Finance, Executive Compensation, Strategic
Planning and Technology, and Nominating 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. She is a
member of the Nominating and Technology and Strategic Planning 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.
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.
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 that were not filed in a timely manner. Form 4s, relating
to the granting of Directors Options pursuant to the 1997 Stock Compensation
Program on May 12, 1999, for Messrs Abernathy, Condon, Harte, McGrath and Mrs.
Lavet, were not timely filed.
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 $100,000 or more (collectively, the "Named Executive Officers"):
19
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------- ----------------------
Securities
Restricted Underlying All Other
Name and Fiscal Salary Bonus(1) Other Annual Stock Options/ LTIP Compensation
Principal Position Year ($) ($) Compensation($) Award(s) SARs (#) Payouts ($) ($)(1)
------------------ ---- -------- -------- --------------- -------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stanley S. Binder 1999 $260,000 $100,000 -- -- -- -- $ 89,385(3,4)
Chairman and Chief 1998 250,000 182,000 -- -- 87,500(2) -- 69,265
Executive Officer 1997 200,000 350,000 -- -- 67,500 -- 9,500
John H. Davies* 1999 152,888 -- -- -- -- -- 38,232(4)
Vice Chairman 1998 149,782 46,000 -- -- 34,000(2) -- 45,815
1997 136,440 160,000 -- -- 34,000 -- 6,317
Kenneth S. Wood 1999 170,625 65,000 -- -- -- -- 28,670(3,4)
President and Chief 1998 164,063 65,000 -- -- 31,500(2) -- 29,040
Operating Officer 1997 130,000 170,000 -- -- 31,500 -- 8,480
Richard S. Rosenfeld 1999 130,000 25,000 -- -- -- -- 21,960(3,4)
Vice President-Finance, 1998 125,000 34,000 -- -- 27,300(2) -- 22,720
Chief Financial Officer 1997 107,500 115,000 -- -- 27,300 -- 7,065
</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"). The Plan
provides for the Company to 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. 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 1999 on
behalf of the Named Executive Officers were $8,000, $7,656, $8,000 and
$8,000 for Messrs. Binder, Davies, Wood and Rosenfeld, respectively.
(2) Represents repricing of options previously granted.
(3) Includes premiums paid by the Company for term life insurance for Mr.
Binder, Mr. Wood and Mr. Rosenfeld during 1999 in the amounts of $9,385,
$1,118 and $1,560, respectively.
(4) Includes amounts accrued pursuant to the Barringer Technologies Inc.
Supplemental Executive Retirement Plan (the "SERP Plan"). Amounts accrued
during 1999 for the Named Executive Officers were $72,000, $30,576,
$19,552, and $12,400 for Messrs. Binder, Davies, Wood and Rosenfeld,
respectively.
Effective January 1, 1998, the Company adopted the SERP Plan. The SERP Plan
provides eligible participants with certain retirement benefits supplemental to
the Company's 401(k) Plan. Pursuant to the SERP Plan, the Company will make
annual contributions to the account of each participant equal to a variable
percentage of the participant's base salary and annual cash bonus depending on
the Company's achievement of certain performance targets. The actual percentage
contribution will be determined by the Executive Compensation Committee, subject
to certain parameters. A participant will become vested under the SERP Plan
after five years of participation therein. A participant may elect to receive
benefits under the SERP Plan commencing at age 60 and is entitled to receive
either a lump-sum payment of his or her account balances upon retirement or to
use the account balance to purchase an annuity. In the event of the termination
of a participant's employment under certain circumstances set forth in the SERP
Plan, the participant will be entitled to receive his or her account balance
whether or not the participant has become vested under the SERP Plan. Currently,
each of the Named Executive Officers participates in the SERP Plan.
Option Grants - No options were granted in 1999.
Options Exercised in Last Fiscal Year and Fiscal Year-End Option Values
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of stock options during 1999 and
unexercised options held by such Named Executive Officers as of December 31,
1999.
20
<PAGE>
Aggregated Option Exercises in 1999 and
Last Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Unexercised
Securities Underlying Value of Unexercised
Options/SARs in-the-money Options
Shares at Year-End(#) at Year-End($)(1)
Acquired On Value ----------------------------- -----------------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable(2)
---- ----------- ----------- ----------- ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Stanley S. Binder -- -- 121,875 65,625 $332,094 $ --
John H. Davies -- -- 78,000 25,500 272,323 --
Kenneth S. Wood -- -- 67,875 23,625 232,504 --
Richard S. Rosenfeld -- -- 56,825 20,475 191,503 --
</TABLE>
(1) Based on the closing price of $6.125 per share for the Common Stock as of
December 31, 1999.
(2) Based on the closing price of $6.125 per share for the Common Stock as of
December 31, 1999, none of these options were in the money at that date.
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 Compensation Program, 1,100,000
shares of Common Stock are reserved for issuance, of which up to 1,000,000
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
21
<PAGE>
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.
Stock options exercisable for an aggregate of 310,600 shares of Common
Stock are outstanding under the Employee Plans. These options expire 10 years
after the date of grant and have a weighted average exercise price of $6.54 per
share. Such options are exercisable annually in 25% increments beginning with
the first anniversary of the date of grant. In addition, options exercisable for
an aggregate of 15,000 shares of Common Stock are outstanding under the
Independent Director Plan. Such options are exercisable one year from the date
of grant, and expire five years from the date of grant and have an exercise
price of $6.18 per share.
Exercise Program
In 1991, the Board of Directors 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, 2000, Messrs. Binder and Wood were indebted to the
Company in the approximate amounts of $146,870 and $13,050, respectively, for
loans made pursuant to the Exercise Program. During 1999, the largest aggregate
amount of indebtedness of Messrs. Binder and Wood pursuant to such loans were
$211,870 and $13,050, respectively. The rate of interest charged on each such
loan during 1999 was the prime lending rate charged by Summit Bank.
Employment Agreements
Effective January 1,998, the Company entered into a five-year employment
agreement with Mr. Binder, the Chairman and Chief Executive Officer of the
Company (the "Employment Agreement"). Under the Employment Agreement Mr. Binder
received a base salary of $260,000 for 1999. Mr. Binder's salary is subject to
certain adjustments and
22
<PAGE>
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 two
of these special bonuses in 1998 and 1999. 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.
Effective September 1, 1998, the Company entered into three-year employment
agreements with each of Messrs. Wood and Rosenfeld, pursuant to which Messrs.
Wood and Rosenfeld received annual base salaries in 1999 of $179,400 and
$130,000, respectively, subject to periodic increases at the discretion of the
Board of Directors. Under their employment agreements, Messrs Wood and
Rosenfeld, 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. 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, among other
things, 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.
Other Indebtedness of Management and Directors
Senior executive officers and directors are indebted to the Company
pursuant to the purchase, in December 1998 and January 1999, of shares of the
Company's Common Stock in exchange for interest bearing five-year non-recourse
promissory notes. As of December 31, 1999, Messrs. Binder, Davies, Wood,
Rosenfeld, Abernathy, Condon, Harte, Lavet and McGrath were indebted to the
Company (including accrued interest)in the amounts of $438,294, $175,317,
$201,615, $175,317, $87,658, $87,658, $87,658, $101,597, and $87,658.
respectively related to such loans.
23
<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.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of March 1, 2000, the number of shares
of Common Stock, Class A Convertible Preferred Stock and Class B Convertible
Preferred Stock owned by each (i) 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, 2000, there were 7,221,002 shares of Common Stock, 34,698 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. To our knowledge, there
is no 5% holder of the Class A 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.
24
<PAGE>
<TABLE>
<CAPTION>
Beneficial
Ownership Beneficial
of Class B Ownership of
Convertible Common Stock
Preferred Stock (1)(2)
------------------------ ----------------------------
Number Percent Number Percent
of of of of
Name Shares Class Shares Class
---- ------ ------- ------ -------
<S> <C> <C> <C> <C>
Stanley S. Binder(3) -- 238,011 3.3%
John H. Davies(4) -- -- 169,232 2.3
John J. Harte(5) -- -- 71,600 *
Richard D. Condon(6) -- -- 44,000 *
John D. Abernathy(7) -- -- 45,954 *
James C. McGrath(8) -- -- 42,750 *
Kenneth S. Wood(9) -- -- 94,511 1.3
Lorraine M. Lavet -- -- 10,000 *
Richard S. Rosenfeld (10) -- -- 90,861 1.3
All directors and executive
officers as a group
consisting of nine
(9) persons -- -- 806,919 10.9
Austin W. Marxe (11) -- -- 941,621 12.5
153 E. 53rd St
NY, NY 10022
William D. Witter, -- -- 834,300 11.6
153 East 53rd Street
New York, NY 10022
Benson Associates, LLC -- -- 528,600 7.3
111 Southwest Fifth Avenue
Portland, OR 97204
Wentworth, Hauser & Violich -- -- 413,395 5.7
333 Sacramento Street
San Francisco, CA 94111
J O Hambro Capital Management
(Holdings) Limited (12) -- -- 370,000 5.1
10 Park Place
London SW1A 1LP England
Christopher H.B. Mills (12) -- -- 370,000 5.1
10 Park Place
London SW1A 1LP England
Dimensional Fund Advisors -- -- 370,900 5.1
1299 Ocean Avenue
Santa Monica, CA 90401
Max Gerber (13) 12,500 55.6% 4,447 *
26 Broadway
New York, NY 10004-1776
Paul Spitzberg (14) 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, 2000 for each person
or entity.
(2) Certain amounts shown are subject to adjustment in certain circumstances.
(3) Includes 21,875 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of March 1, 2000 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 ownership of such shares.
(4) Includes 8,500 shares of Common Stock issuable upon the exercise of options
exercisable within 60 days of March 1, 2000 and 12,500 shares of Common
Stock issuable upon the exercise of warrants owned by Mr. Davies.
(5) Includes 16,500 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of March 1, 2000 owned by Mr. Harte.
25
<PAGE>
(6) Includes 16,500 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of March 1, 2000 and 5,000 shares of
Common Stock issuable upon the exercise of warrants owned by Mr. Condon.
(7) Includes 16,500 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of March 1, 2000 and 2,500 shares of
Common Stock issuable upon the exercise of warrants owned by Mr. Abernathy.
(8) Includes 16,500 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of March 1, 2000 owned by Mr. McGrath.
(9) Includes 7,875 shares of Common Stock issuable upon the exercise of options
exercisable within 60 days of March 1, 2000 owned by Mr. Wood.
(10) Includes 6,825 shares of Common Stock issuable upon the exercise of options
exercisable within 60 days of March 1, 2000 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.
(11) Includes (i) 428,079 shares of Common Stock and 229,167 shares of Common
Stock issuable upon the exercise of warrants owned by SSF III, (ii) 150,042
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) 51,000 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) Includes 250,000 shares of Common Stock held by American Opportunity Trust
plc ("American Opportunity") and 120 shares of Common Stock held by the
Trident North Atlantic Fund ("Trident"). J O Hambro Capital Management
Limited ("Management"), a subsidiary of J O Hambro Capital Management
(Holdings) Limited ("Holdings"), serves as co-investment adviser to
American Opportunity and as investment adviser to Trident. Christopher H.B.
Mills serves as a director of Management and Trident and as co-investment
adviser to American Opportunity. Holdings, Management and American
Opportunity, Trident and Mr. Mills have jointly filed a Schedule 13D with
Lionheart Group, Inc. ("Lionheart"), the beneficial owner of 235,500
shares, but have not affirmed or disclaimed the existence of a group with
Lionheart.
(13) Includes 4,447 shares of Common Stock issuable upon conversion of the Class
B Convertible Preferred Stock.
(14) 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. At December 31, 1999, interest in the amount of
$42,920 has been accrued. 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 1999, the Company retained Patton Boggs, LLP
to represent the Company in various matters and has retained such firm in 2000.
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).
26
<PAGE>
10.1 Amended and Restated Employment Agreement, dated as of
December 31, 1997, between the Company and Stanley S.
Binder (previously 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
(previously filed as Exhibit 10.2 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 (file No. 0-3207) and incorporated
herein by reference).
10.3 Employment Agreement, dated as of September 1, 1998,
between the Company and Kenneth S. Wood (previously
filed as Exhibit 10.3 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1998
(file No. 0-3207) and incorporated herein by
reference).
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. Amended and Restated 1997
Stock Compensation Program.
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 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).
10.11 Lease, dated as of July 1, 1998, between the Company
and Mt. Bethel Corporate Center (previously filed as
Exhibit 10.12 to
27
<PAGE>
the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998 (file No. 0-3207) and
incorporated herein by reference).
10.12 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).
10.13 Barringer Technologies Inc. Supplemental Executive
Retirement Plan as amended.
10.14 The Merrill Lynch Non-Qualified Deferred Compensation
Plan Trust Agreement between Barringer Technologies
Inc. and Merrill Lynch Trust Company dated November 15,
1999.
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 Amended and Restated Unlimited Guaranty of Payment and
Performance dated July 1, 1999 between the Company and
Fleet Bank, N.A.
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 First Amendment to Revolving Credit Loan Agreement
dated July 1, 1999 amongst the Company, Barringer
Instruments, Inc., Barringer Research Limited and Fleet
Bank, N.A.
10.19 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).
10.20 Pledge Agreement, dated as of July 6, 1998, made by
StanleyS. Binder (previously filed as Exhibit 10.19 to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1998 (file No. 0-3207) and
incorporated herein by reference).
10.21 Non-Recourse Secured Promissory Note, dated July 6,
1998, made by Stanley S. Binder in favor of the Company
(previously filed as Exhibit 10.20 to the Company's
Annual Report on Form 10-K for the year ended December
31, 1998(file No.0-3207) and incorporated herein by
reference).
10.22 Form of Pledge Agreement (previously filed as Exhibit
10.21 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998 (file No.
0-3207) and incorporated herein by reference).
28
<PAGE>
10.23 Form of Note for Executive Officers (previously filed
as Exhibit 10.22 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1998 (file
No. 0-3207) and incorporated herein by reference).
10.24 Form of Note for Non-employee Directors (previously
filed as Exhibit 10.23 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31,
1998 (file No. 0-3207) and incorporated herein by
reference).
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,
1999.
(b) Reports on Form 8-K.
None
29
<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 24, 2000
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.
Signature Title Date
--------- ----- ----
/s/ Stanley S. Binder Chief Executive Officer March 24, 2000
- ----------------------- and Director
Stanley S. Binder (Principal Executive
Officer)
/s/ John D. Abernathy Director March 24, 2000
- -----------------------
John D. Abernathy
/s/ Richard D. Condon Director March 24, 2000
- -----------------------
Richard D. Condon
/s/ John H. Davies Director March 24, 2000
- -----------------------
John H. Davies
/s/ John J. Harte Director March 24, 2000
- -----------------------
John J. Harte
/s/ Lorraine Lavet Director March 24, 2000
- -----------------------
Lorraine Lavet
/s/ James C. McGrath Director March 24, 2000
- -----------------------
James C. McGrath
/s/ Kenneth Wood Director March 24, 2000
- -----------------------
Kenneth Wood
/s/ Richard S. Rosenfeld Vice President-Finance, March 24, 2000
- -------------------------
Richard S. Rosenfeld Chief Financial Officer
and Treasurer
(Principal Financial Officer
and Principal Accounting Officer)
30
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Consolidated Financial Statements
Report of Independent Certified Public Accountants....................... F-2
Consolidated Balance Sheets as of December 31, 1998 and 1999............. F-3
Consolidated Statements of Operations
for the Years Ended December 31, 1997, 1998 and 1999................... F-4
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1997, 1998 and 1999....................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1997, 1998 and 1999.................................................... F-6
Notes to Consolidated Financial Statements............................... F-7
Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts.......................... F-19
F - 1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Barringer Technologies Inc.
We have audited the accompanying consolidated balance sheets of Barringer
Technologies Inc. and subsidiaries as of December 31, 1998 and 1999, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1999. 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. and subsidiaries at December 31, 1998 and 1999, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999, 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 9, 2000
F - 2
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
<TABLE>
<CAPTION>
December 31,
---------------------------
1998 1999
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 18,802 $ 26,933
Marketable securities 15,606 1,178
Trade receivables, less allowances of $626 and $393 (note 11) 6,502 7,397
Inventories (note 2) 3,943 5,543
Prepaid expenses and other 1,111 1,154
Deferred tax asset (note 6) 3,092 2,677
-------- --------
Total current assets 49,056 44,882
Machinery and equipment, net (note 3) 2,349 2,309
Other (note 5) 1,239 1,574
-------- --------
$ 52,644 $ 48,765
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,169 $ 1,055
Accrued liabilities 904 228
Accrued payroll and related taxes 1,005 1,122
Accrued commissions 127 175
Unearned revenue 42 314
Foreign income taxes payable (note 6) 112 19
-------- --------
Total current liabilities 3,359 2,913
Non-current liabilities 145 286
Deferred tax liability (note 6) -- 313
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, 39 and 35 shares outstanding, respectively,
less discount of $31 and $28, respectively 47 42
730 shares designated class B convertible preferred
stock, 23 shares outstanding 45 45
Common stock, $0.01 par value, 20,000 shares authorized;
7,851 and 7,865 shares issued, respectively 79 79
Additional paid-in capital 54,693 54,776
Accumulated deficit (4,359) (3,090)
Cumulative other comprehensive income (loss) (786) (742)
-------- --------
49,719 51,110
Less: common stock in treasury, at cost, 92 shares and
958 shares, respectively (579) (5,857)
-------- --------
Total stockholders' equity 49,140 45,253
-------- --------
$ 52,644 $ 48,765
======== ========
</TABLE>
See notes to consolidated financial statements.
F - 3
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Revenues (note 11) $ 22,689 $ 19,689 $ 20,155
Cost of revenues 9,008 7,321 8,604
-------- -------- --------
Gross profit 13,681 12,368 11,551
Operating expenses:
Selling, general and administrative 7,971 7,508 6,737
Business development -- 518 933
Product development 715 1,777 1,498
-------- -------- --------
Total operating expenses 8,686 9,803 9,168
-------- -------- --------
Operating income 4,995 2,565 2,383
Other income (expense):
Investment income 450 1,641 1,612
Other, net (62) (55) 51
-------- -------- --------
388 1,586 1,663
-------- -------- --------
Income from continuing operations
before income tax provision (benefit) 5,383 4,151 4,046
Income tax provision (benefit) (note 6) (371) (1,107) 1,468
-------- -------- --------
Income from continuing operations 5,754 5,258 2,578
Operation Sold (note 13)
Operating loss, net of tax benefit -- (827) (366)
of $0, $202 and $188
Disposition loss, net of tax benefit
of $480 -- -- (934)
-------- -------- --------
-- (827) (1,300)
-------- -------- --------
Net income 5,754 4,431 1,278
Preferred stock dividends (12) (10) (9)
-------- -------- --------
Net income attributable to common stockholders $ 5,742 $ 4,421 $ 1,269
======== ======== ========
Basic earnings per common share (notes 1 and 14):
Continuing operations $ 1.05 $ 0.74 $ 0.36
Operation sold - operating loss -- (0.12) (0.05)
Operation sold - disposition loss -- -- (0.13)
-------- -------- --------
$ 1.05 $ 0.62 $ 0.18
======== ======== ========
Diluted earnings per common share (notes 1 and 14):
Continuing operations $ 0.92 $ 0.69 $ 0.33
Operation sold - operating loss -- (0.11) (0.05)
Operation sold - disposition loss -- -- (0.12)
-------- -------- --------
$ 0.92 $ 0.58 $ 0.16
======== ======== ========
Weighted average common and common
equivalent shares outstanding:
Basic 5,456 7,153 7,181
======== ======== ========
Diluted 6,257 7,612 7,752
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F - 4
<PAGE>
BARRINGER TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Cumulative
Class A Class B comprehen-
Common Stock Pfd Stock Pfd Stock Additional sive Compre-
Total --------------------------------------------- Paid-in income Treasury hensive
Equity Shrs Am't Shrs Am't Shrs Am't Capital* Deficit (loss) Stock Income
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bal - January 1, 1997 $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 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
of $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)
Net income 1,278 1,278 $1,278
Translation adjustment 44 44 28
------
Comprehensive income $1,306
======
Preferred stock conversion 1 (4) (5) 5
Issuance and exercise of
stock options and
warrants 76 13 76
Repurchase of common stock (5,341) (5,341)
Repayment stockholder loan 65 65
Sale of treasury stock,
net of note receivable
of $97 (63) 63
Preferred stock dividends (9) (9)
------------------------------------------------------------------------------------------------
Bal - December 31, 1999 $45,253 7,865 $ 79 35 $ 42 23 $ 45 $54,776 $ (3,090) $ (742) $(5,857)
================================================================================================
</TABLE>
* At December 31, 1999 and 1998 net of notes receivable of $1,515 and $1,484,
respectively, from the sale of stock.
See notes to consolidated financial statement.
F - 5
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Net income $ 5,754 $ 4,431 $ 1,278
Items not affecting cash:
Depreciation and amortization 272 741 859
Inventory and accounts receivable reserves 332 382 366
Loss from operation sold -- 827 1,300
Write-off of acquired technology -- 435 --
Deferred (tax benefit) provision (775) (1,586) 728
Other 30 (184) 35
Increase in non-cash working capital balances -
continuing operations (3,655) (1,465) (3,555)
-------- -------- --------
Cash provided by operating activities -
continuing operations 1,958 3,581 1,011
Net cash used in operation sold -- (827) (348)
-------- -------- --------
Cash provided by operating activities 1,958 2,754 663
-------- -------- --------
Investing activities:
Purchase of equipment and other (1,190) (1,510) (1,714)
Sale of (investment in) marketable securities 1,829 (13,107) 14,428
Purchase of Digivision and related costs -- (821) --
-------- -------- --------
Cash provided by (used in) investing
activities 639 (15,438) 12,714
-------- -------- --------
Financing activities:
Decrease in bank debt and other (174) (67) --
Proceeds on sale of equity securities, net 430 25,211 --
Warrant and option exercises -- 204 39
Repayment from (loan to)employees 71 (500) 65
Acquisition of treasury stock -- (1,540) (5,341)
Payment of dividends on preferred stock (12) (10) (9)
-------- -------- --------
Cash provided by (used in)financing
activities 315 23,298 (5,246)
-------- -------- --------
Increase in cash and cash equivalents 2,912 10,614 8,131
Cash and cash equivalents--beginning of year 5,276 8,188 18,802
-------- -------- --------
Cash and cash equivalents--end of year $ 8,188 $ 18,802 $ 26,933
======== ======== ========
Changes in components of non-cash working
capital balances related to operations:
Trade receivables $ (4,433) $ 951 $ (1,013)
Inventories (1,065) (567) (2,130)
Other current assets (389) (206) (81)
Other assets 38 -- --
Accounts payable and accrued liabilities 2,194 (1,643) (331)
-------- -------- --------
Increase in non-cash working capital balances $ (3,655) $ (1,465) $ (3,555)
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F - 6
<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 all of its subsidiary companies. All intercompany transactions
have been eliminated.
Principles of Translation
Assets and liabilities of the Company's foreign subsidiaries are translated
into U.S. dollars by using year-end exchange rates and statement of operation
items are translated at average exchange rates for the year. Resulting
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 market.
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 lease 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. Cash equivalents at December 31, 1998 and 1999 of $25.6
million and $17.3 million, respectively, consist of commercial paper, government
obligations, time deposits and other money market instruments.
Revenue Recognition
The Company recognizes product revenue upon shipment of its product. The
Company provides a reserve for its estimated warranty costs at the time of
shipment. Where the Company receives contracts for the design and construction
of specialty instruments that
F - 7
<PAGE>
require long manufacturing times, the Company will recognize revenue on the
percentage of completion method.
Financial Instruments and Credit Risk Concentration
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of investments and trade
receivables. Marketable securities consist primarily of investments in U.S.
government and agency obligations and commercial paper. The Company has not
experienced any material losses on these investments to date. Concentrations of
credit risk with respect to trade receivables are limited primarily to
governmental agencies. The Company has not experienced any material losses
related to trade receivables to date.
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,
1999.
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, 1997, 1998 and 1999.
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 and accrued liabilities 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.
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 fiscal year ending December
F - 8
<PAGE>
31, 2001.
Other pronouncements issued by authoritative bodies with future effective
dates are either not applicable or not material to the consolidated financial
statements of the Company.
2. Inventories
At December 31, 1998 and 1999, the Company had parts, subassemblies and
work in process of $2,959,000 and $3,797,000 and finished goods of $984,000 and
$1,746,000, respectively.
3. Machinery and Equipment
The major categories of machinery and equipment are as follows:
December 31,
------------------------------
1998 1999
----------- -----------
Office equipment $ 1,415,000 $ 1,641,000
Machinery and equipment 2,492,000 2,974,000
Leasehold improvements 325,000 473,000
----------- -----------
4,232,000 5,088,000
Accumulated depreciation (1,883,000) (2,779,000)
----------- -----------
Totals $ 2,349,000 $ 2,309,000
=========== ===========
4. Bank Credit Facility
The Company has 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
1.00% or LIBOR (determined on the basis of a 30, 60 or 90-day interest period,
as applicable) plus 1.5%. The Facility expires on June 30, 2000, 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 is
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, 1999, 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 Separation Time. Each Right entitles its registered holder to
purchase from the Company, after the Separation Time, one one- hundredth 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
The Company has a common stock repurchase program under which it is
authorized to repurchase up to 2,000,000 shares or approximately 25% of the
Company's outstanding
F - 9
<PAGE>
Common Stock. As of December 31, 1999, the Company had repurchased 1,089,050
shares at an aggregate cost of $6,881,000. 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.
Due from Officers and Directors
In connection with the exercise of options to acquire an aggregate of
150,000 shares of the Company's Common Stock, an officer of the Company signed
full recourse interest bearing (no interest the first year, prime rate
thereafter) unsecured promissory demand notes aggregating $203,000 under the
Company's stock option purchase program. As of December 31, 1999, and 1998,
notes in the amount of $138,000 and $203,000, respectively, were outstanding and
included in additional paid-in-capital on the balance sheet.
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. At December 31, 1998
and 1999, the loan was included with other assets on the balance sheet.
In December 1998, the Company sold an aggregate of 153,000 shares of Common
Stock held in 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 a new independent
director at a purchase price of $9.75 per share, the closing price of the Common
Stock on the date of sale. The consideration paid was substantially the same as
described above, except that the note bears interest at a rate of 4.64% per
annum. Such interest represents a non-recourse obligation and, accordingly, the
purchase of company shares through the use of non-recourse notes is being
accounted for in a manner similar to a variable option plan. Under these
guidelines any increase in the fair market value of the related shares in excess
of their original purchase price will be recorded as a compensation expense by
the Company. At December 31, 1998 and 1999, $1,279,845 and $1,377,245,
respectively of such notes were outstanding and included in additional
paid-in-capital on the balance sheet.
F - 10
<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, 1999 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.
Common stock
Exercise, outstanding or
conversion or reserved for
option price issuance
------------ --------
Common stock 6,907,502
Class A convertible preferred stock 0.361745 12,552
Class B convertible preferred stock 0.355839 8,006
Stock options (i) $1.00 to $8.375 735,600
Private placement warrants (ii) $1.96 349,999
Underwriter's warrants (iii) $10.276 125,000
---------
Total 8,138,659
=========
(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-pricing model with the following weighted average
assumptions used for grants in 1997 and 1998; no dividend yield; expected
volatility of 46.1% in 1998 and 46.5% in 1997; risk-free weighted average
interest rates of 4.75% in 1998 and 6.03% in 1997; and expected lives for the
options of 7.4 years in 1998 and 5 years in 1997. The Company did not grant any
options to employees in 1999.
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:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------
1997 1998 1999
------------- ------------- -------------
<S> <C> <C> <C>
Net income- continuing operations:
As reported $ 5,754,000 $ 5,258,000 $ 2,578,000
Pro-forma $ 5,567,000 $ 4,858,000 $ 2,278,000
Basic earnings per share from continuing operations:
As reported $ 1.05 $ 0.74 $ 0.36
Pro-forma $ 1.02 $ 0.68 $ 0.32
Diluted earnings per share from continuing operations:
As reported $ 0.92 $ 0.69 $ 0.33
Pro-forma $ 0.89 $ 0.64 $ 0.29
</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
F - 11
<PAGE>
directors who are not otherwise employed by the Company ("Independent Director
Plan"). In connection with the Program, 1,100,000 shares of Common Stock are
reserved for issuance, of which up to 1,000,000 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 receives no consideration for grants of options
or awards under the Program. Options granted under the Employee Plans are at
market value on the date of grant, 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, 1999, there were 189,400 options available for grant under the
Employee Plans and 85,000 options available for grant under the Independent
Director Plan.
On January 19, 2000, the Company granted options to acquire 37,500 shares
of the Company's Common Stock to 10 employees at an exercise price of $5.75.
These options were issued under the Employee Plans. On February 21, 2000, the
Company granted options to the Company's executive officers and directors to
acquire 465,000 shares of the Company's Common Stock at $5.03 per share. These
options are exercisable on November 21, 2006 and expire on February 21, 2007.
However, they can be exercised as to 25% at an earlier time if and when the
Company's Common Stock trades for $8.50 or higher for at least 30 consecutive
days; as to 50% if and when the Company's Common Stock trades for $11.00 or
higher for at least 30 consecutive days; as to 75% if and when the Company's
Common Stock trades for $12.50 or higher for at least 30 consecutive days; and
as to 100% if and when the Company's Common Stock trades for $15.00 or higher
for at least 30 consecutive days. These options were issued under the Employee
Plans.
A summary of the status of the Company's outstanding options is presented
below:
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------------------------------------------
1997 1998 1999
---------------------- ------------------------ ------------------------
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 461,000 $2.19 691,025 $5.31 852,988 $4.71
Granted 280,900 10.70 472,000 7.68 15,000 6.18
Exercised (19,937) 1.32 (9,087) 1.31 (9,288) 1.32
Forfeited -- -- (13,250) 9.95 (123,100) 10.35
Canceled (30,938) 10.32 (287,700) 10.76 -- --
-------- -------- --------
Outstanding--end of year 691,025 5.31 852,988 4.71 735,600 3.83
======== ======== ========
Options exercisable--end
of year 227,663 $1.94 334,690 $1.87 469,650 $2.33
Fair value of options
granted during the year $ 6.72 $ 5.86 $ 2.48
======== ======== ========
</TABLE>
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.
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,
F - 12
<PAGE>
2000 and are exercisable as to 40% of the optioned shares after the first year,
60% after the second year, 80% after the third year and 100% after the fourth
year.
The following table summarizes information about stock options outstanding.
Options Outstanding Options Exercisable
------------------- -------------------
Weighted-
Weighted Number Average Weighted Number
Average Outstanding at Remaining Average Exercisable at
Exercise December 31, Contractual Exercise December 31,
Price 1999 Life Price 1999
------- -------- --------- ------- --------
$ 1.00 224,500 1.3 years $ 1.00 224,500
2.00 161,500 0.2 years 2.00 161,500
6.19 299,600 9.0 years 6.19 71,150
8.38 50,000 8.9 years 8.38 12,500
-------- --------
$ 3.83 735,600 4.7 years $ 2.33 469,650
(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, 1998
and 1999, 32,500, 37,500 and 0 warrants, respectively, were exercised. The
warrants expire between May 9, 2000 and June 29, 2000.
(iii) Underwriters' Warrants
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 up through November 12, 2001. The Underlying warrants expired on
November 12, 1999.
6. Income Taxes
Income (loss) from continuing operations before income taxes consisted of
the following:
Year Ended December 31,
--------------------------------
1997 1998 1999
------- ------- -------
Domestic $ 3,301 $ 4,242 $ 2,897
Foreign (primarily Canadian) 2,082 (91) 1,149
------- ------- -------
Total $ 5,383 $ 4,151 $ 4,046
======= ======= =======
F - 13
<PAGE>
The provision (benefit) for income taxes is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Current tax expense (benefit):
Federal $ 983,000 $ 1,058,000 $ 337,000
State 285,000 339,000 145,000
Recognition of net operating losses--U.S (1,268,000) (1,251,000) (482,000)
Foreign (primarily Canada) 404,000 132,000 72,000
----------- ----------- -----------
Total Current 404,000 278,000 72,000
----------- ----------- -----------
Deferred tax expense (benefit):
Federal (728,000) (1,556,000) 524,000
State (128,000) 9,000 204,000
Foreign (primarily Canada) 81,000 (40,000) --
----------- ----------- -----------
Total deferred (775,000) (1,587,000) 728,000
----------- ----------- -----------
Total income tax provision (benefit) $ (371,000) $(1,309,000) $ 800,000
=========== =========== ===========
Allocated as follows:
Continuing operations $ (371,000) $(1,107,000) $ 1,468,000
Discontinued operation -- (202,000) (668,000)
----------- ----------- -----------
Total income provision (benefit) $ (371,000) $(1,309,000) $ 800,000
=========== =========== ===========
</TABLE>
Significant components of the Company's deferred tax assets and liabilities
at December 31 are as follows:
1998 1999
----------- -----------
Nondeductible allowances against trade
receivables $ 155,000 $ 151,000
Nondeductible reserves and accruals 188,000 145,000
Machinery and equipment 398,000 398,000
Tax benefit of U.S. operating loss carry
forwards 2,562,000 1,983,000
Other 3,000 --
----------- -----------
Gross deferred tax assets 3,306,000 2,677,000
Deferred tax assets valuation allowance (214,000) --
----------- -----------
Total deferred tax assets 3,092,000 2,677,000
----------- -----------
Temporary difference for capital assets -- 313,000
----------- -----------
Total deferred tax liabilities -- 313,000
----------- -----------
$ 3,092,000 $ 2,364,000
=========== ===========
At December 31, 1999, the gross deferred tax asset of $2,677,000, included
$445,000 and $2,232,000 related to the Company's Canadian and U.S. operations,
respectively. The deferred tax liability of $313,000 is due to product
development costs of the Company's U.S. operations. At December 31, 1998, a
valuation allowance had been provided for certain limitations applied to the net
operating loss carryforward of a subsidiary, which was subsequently sold in
December 1999. Accordingly, the valuation reserve is a component of the loss
from operation sold in 1999. 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. Based on historical
results and estimated 2000 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.
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):
F - 14
<PAGE>
Year Ended December 31,
---------------------------------
1997 1998 1999
------- ------- -------
Income taxes (benefit) computed at the
U.S. statutory rate $ 1,830 $ 1,061 $ 1,376
Income not subject to U.S. tax, net (239) (211) (390)
U.S. losses and expenses for which no tax
benefit has been recognized 7 184 370
Utilization of U.S. net operating losses (777) (943) --
Decrease in beginning of the year deferred
tax asset valuation allowance (1,217) (1,344) --
State income taxes -- 146 --
Other 25 -- 112
------- ------- -------
Provision (benefit) for income taxes $ (371) $(1,107) $ 1,468
======= ======= =======
At December 31, 1999, the Company had net operating loss carry forwards in
the U.S. of approximately $5.8 million and $600,000 for federal and state income
tax purposes, respectively, which expire in varying amounts through 2010.
At December 31, 1999, undistributed earnings of the Company's foreign
subsidiaries amounted to approximately $5.1 million. Deferred income taxes are
not provided on these earnings as it is intended that the majority of these
earnings will be indefinitely invested in those entities.
7. Commitments
The Company rents facilities, automobiles and equipment under various
operating leases. Rental expenses under such leases amounted to $324,000,
$444,000, and $474,000 for 1997, 1998 and 1999, respectively.
At December 31, 1999, the aggregate minimum commitments pursuant to
operating leases, including a lease renewal are as follows:
Year ending December 31,
2000 $ 582,000
2001 528,000
2002 525,000
2003 531,000
2004 530,000
Thereafter 1,559,000
The Company has multi-year employment contracts with three key executives.
Pursuant to those contracts the Company has annual minimum salary commitments
aggregating $592,000, $485,000, and $270,000 for the three 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. The money purchase plan
does not establish any Company liability other than a discretionary matching
formula to employee contributions.
The aggregate cost of both plans for 1997, 1998, and 1999 was $103,000,
$141,0000, and $172,000 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
F - 15
<PAGE>
Executive Compensation Committee, subject to certain parameters. A participant
will become vested under the SERP Plan after five years of participation
therein. For the years ended December 31, 1998 and 1999, contributions
aggregating $144,000 and $135,000, respectively, were made into the plan.
9. Supplemental Disclosures of Cash Flow Information
The Company made cash payments for interest of $17,000 and $10,000 and
none, for the years ended December 31, 1997, 1998 and 1999, respectively.
Additionally, income taxes of $209,000, $498,000, and $347,000, were paid for
the years ended December 31, 1997, 1998 and 1999, respectively.
10. Segment and Geographic Data
The Company has determined that it has only one business segment.
A summary of the Company's revenues and long-lived assets by geographic
area is as follows (in thousands):
<TABLE>
<CAPTION>
Revenues Long-Lived Assets
For the year ended December 31, As of December 31,
------------------------------- -------------------------------
1997 1998 1999 1997 1998 1999
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
United States $13,408 $13,704 $13,514 $ 217 $ 754 $ 1,607
Canada 950 800 308 1,264 1,423 1,523
Other foreign countries 8,331 5,185 6,333 24 172 47
------- ------- ------- ------- ------- -------
Totals $22,689 $19,689 $20,155 $ 1,505 $ 2,349 $ 3,177
======= ======= ======= ======= ======= =======
</TABLE>
Revenues are attributed to the countries based on location of the customer.
For the year ended December 31, 1997, 1998 and 1999, export sales,
including sales from Canada to other countries, comprised 38.8%, 25.8% and 31.4%
of total revenues and were made primarily to Western Europe, Asia and Central
and South America.
11. Sales to Major Customers
For the years ended December 31, 1999, 1998 and 1997, the Federal Aviation
Administration ("FAA") accounted for approximately 48.3%, 48.1%, and 14.8%,
respectively, of consolidated revenues of the Company. For the year ended
December 31, 1997, one additional customer accounted for approximately 13.0% of
consolidated revenues of the Company. At December 31, 1999 and 1998, total
amounts due from the FAA was $3.3 million and $4.0 million, respectively.
12. Fourth Quarter Adjustments
During the fourth quarter of 1999 and 1997, the Company had no material
adjustments. During the fourth quarter of 1998, the Company recorded a deferred
tax benefit related to a decrease in the deferred tax asset valuation allowance
of $635,000.
13. Sale of Subsidiary
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 incurred acquisition costs, in a business combination
accounted for as a purchase. The excess of the purchase price (including
acquisition related costs) over the fair value of net assets acquired was
$778,000. Effective June 30, 1999, the Company determined that it would dispose
of DigiVision and on December 15, 1999, sold all of the outstanding capital
stock of DigiVision to a group comprised of DigiVision senior management.
Accordingly, the financial results of DigiVision have been accounted for as a
discontinued operation and reported as an operation sold. The Company has
conformed 1998 to this change. The selling price consisted of a $500,000
interest bearing note which, if not paid by December 31, 2000, will increase to
$1,000,000. In addition, the Company will be entitled to receive an earn-out
based upon annual revenues
F - 16
<PAGE>
in excess of $2,000,000. The Company will recognize income on the note
receivable and the earn-out when collectability is reasonably assured.
For the years ended December 31, 1998 and 1999, DigiVision's revenues were
$769,000 and $720,000 and its operating losses were $1,029,000 and $554,000,
respectively. For the year ended December 31, 1999, the Company recognized a
disposition loss of $1,414,000 which related primarily to the write-off of
goodwill. 14. Earnings Per Share
Basic and Diluted earnings per share for continuing operations has been
computed as follows:
<TABLE>
<CAPTION>
Income Shares Per Share
For the Year ended December 31, 1999: (Numerator) (Denominator) Amount
----------- ------------- ------
<S> <C> <C> <C>
Basic Earnings Per Share:
Income attributable to common
stockholders from continuing operations $2,569,000 7,181,000 $0.36
=====
Effect of dilutive securities
Warrants and options 550,000
Convertible preferred dividends 9,000 21,000
---------- ---------
Diluted Earnings Per Share:
Income attributable to common
stockholders and assumed conversions
from continuing operations $2,578,000 7,752,000 $0.33
========== ========= =====
For the Year ended December 31, 1998:
Basic Earnings Per Share:
Income attributable to common
stockholders from continuing operations $5,248,000 7,153,000 $0.74
=====
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
from continuing operations $5,258,000 7,612,000 $0.69
========== ========= =====
For the Year ended December 31, 1997:
Basic Earnings Per Share:
Income available to common
stockholders from continuing operations $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
from continuing operations $5,754,000 6,257,000 $0.92
========== ========= =====
</TABLE>
Options and warrants to purchase 175,000 shares of common stock,
exercisable at between $8.375 and $10.276 per share, were outstanding at
December 31, 1999 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.
F - 17
<PAGE>
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(concluded)
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.
F - 18
<PAGE>
BARRINGER TECHNOLOGIES INC
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31,
SCHEDULE II
<TABLE>
<CAPTION>
Balance - Balance -
beginning end of
of period Addition Deduction Recovery period
------------ ------------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts and sales
allowances:
1999 $ 626,000 $ 108,000 $ 341,000 $ 393,000
1998 109,000 543,000 $ (26,000) 626,000
1997 63,000 46,000 109,000
</TABLE>
F - 19
BARRINGER TECHNOLOGIES INC.
AMENDED AND RESTATED 1997 STOCK COMPENSATION PROGRAM
A. Purposes. This Barringer Technologies Inc. 1997 Stock Compensation
Program (the "Program") is intended to promote the interests of Barringer
Technologies Inc. (the "Company"), its direct and indirect present and future
subsidiaries (the "Subsidiaries"), and its stockholders, by providing eligible
persons with the opportunity to acquire a proprietary interest, or to increase
their proprietary interest in the Company as an incentive to remain in the
service of the Company.
B. Elements of the Program. In order to maintain flexibility in the award
of benefits, the Program is comprised of six parts -- the Incentive Stock Option
Plan ("Incentive Plan"), the Supplemental Stock Option Plan ("Supplemental
Plan"), the Stock Appreciation Rights Plan ("SAR Plan"), the Performance Share
Plan ("Performance Share Plan"), the Stock Bonus Plan ("Stock Bonus Plan") and
the Independent Director Plan (the "Independent Director Plan"). Copies of the
Incentive Plan, Supplemental Plan, SAR Plan, Performance Share Plan, Stock Bonus
Plan and Independent Director Plan are attached hereto as Parts I, II, III, IV,
V, and VI, respectively, and are collectively referred to herein as the "Plans."
The grant of an option, stock appreciation right, performance share, or stock
bonus under one of the Plans shall not be construed to prohibit the grant of an
option, stock appreciation right, performance share, or stock bonus under any of
the other Plans.
C. Applicability of General Provisions. Unless any Plan specifically
indicates to the contrary, all Plans shall be subject to the General Provisions
of the Program set forth below under the heading "General Provisions of Stock
Compensation Program."
<PAGE>
GENERAL PROVISIONS OF STOCK COMPENSATION PROGRAM
Article 1. Administration. The Program shall be administered by the Board
of Directors of the Company (the "Board of Directors") or any duly created
committee appointed by the Board of Directors and charged with administration of
the Program. The Board of Directors, or any duly appointed committee, when
acting to administer the Program, is referred to as the "Program Administrator."
Any action of the Program Administrator shall be taken by majority vote at a
meeting or by unanimous written consent of all members without a meeting. No
Program Administrator or member of the Board of Directors shall be liable for
any action or determination made in good faith with respect to the Program or
with respect to any option, stock appreciation right performance share, or stock
bonus granted thereunder. Notwithstanding any other provision of the Program,
administration of the Independent Director Plan, set forth as Part VI of this
Program, shall be self-executing in accordance with the terms of the Independent
Director Plan, and no Program Administrator shall exercise any discretionary
functions with respect to option grants made under such Independent Director
Plan.
Article 2. Authority of Program Administrator. Subject to the other
provisions of this Program, and with a view to effecting its purpose, the
Program Administrator shall have the authority: (a) to construe and interpret
the Program; (b) to define the terms used herein; (c) to prescribe, amend, and
rescind rules and regulations relating to the Program; (d) to determine to whom
options, stock appreciation rights, performance shares, and stock bonuses shall
be granted under the Program; (e) to determine the time or times at which
options, stock appreciation rights, performance shares, or stock bonuses shall
be granted under the Program; (f) to determine the number of shares subject to
any discretionary option or stock appreciation right under the Program and the
number of shares to be awarded as performance shares or stock bonuses under the
Program, as well as the option price and the duration of each option, stock
appreciation right performance share and stock bonus, and any other terms and
conditions of options, stock appreciation rights, performance shares, and stock
bonuses; and (g) to make any other determinations necessary or advisable for the
administration of the Program and to do everything necessary or appropriate to
administer the Program. All decisions, determinations and interpretations made
by the Program Administrator shall be binding and conclusive on all participants
in the Program and on their legal representatives, heirs, and beneficiaries.
Article 3. Maximum Number of Shares Subject to the Program. The maximum
aggregate number of shares of the Company's Common Stock, par value $.O1 per
share ("Common Stock"), available pursuant to the Program, subject to adjustment
as provided in Article 6 hereof, shall be 1,100,000 shares of Common Stock. Up
to
-2-
<PAGE>
1,000,000 of such shares may be issued under any Plan that is part of the
Program other than the Independent Director Plan. Up to 100,00 shares may be
issued under the Independent Director Plan. If any of the options or stock
appreciation rights granted under the Program expire or terminate for any reason
before they have been exercised in full, the unissued shares subject to those
expired or terminated options and/or stock appreciation rights shall again be
available for the purposes of the Program. If the performance objectives
associated with the grant of any performance shares are not achieved within the
specified performance objective period, or if the performance share grant
terminates for any reason before the performance objective date arrives, the
shares of Common Stock associated with such performance shares shall again be
available for the purposes of the Program. If any stock provided to a recipient
as a stock bonus is forfeited, the shares of Common Stock so forfeited shall
again be available for purposes of the Program. Any shares of Common Stock
delivered pursuant to the Program may consist, in whole or in part, of newly
issued shares or treasury shares.
Article 4. Eligibility and Participation. All employees of the Company and
the Subsidiaries, whether or not officers or directors of the Company or the
Subsidiaries, all consultants of the Company and the Subsidiaries, whether or
not directors of the Company or the Subsidiaries, and all non-employee directors
of the Company shall be eligible to participate in the Program; provided,
however, that (i) only employees of the Company or the Subsidiaries may
participate in the Incentive Plan, and (ii) only Independent Directors (as
defined in the Independent Director Plan) may participate in the Independent
Director Plan. The term "employee" shall include any person who has agreed to
become an employee and the term "consultant" shall include any person who has
agreed to become a consultant.
Article 5. Effective Date and Term of Program. The Program shall become
effective upon its adoption by the Board of Directors and the stockholders of
the Company; provided, however, that awards may be granted under the Program
prior to obtaining stockholder approval of the Program so long as such awards
are contingent upon such stockholder approval being obtained and may not be
exercised prior to such approval. The Program shall continue in effect for a
term of ten years from the date the Program is adopted by the Board of Directors
unless sooner terminated by the Board of Directors.
Article 6. Adjustments. Subject to the provisions of Articles 18 and 19, in
the event that the outstanding shares of Common Stock of the Company are
hereafter increased, decreased, changed into, or exchanged for a different
number or kind of shares or securities through merger, consolidation,
combination, exchange of shares, other reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse stock split an
appropriate and proportionate adjustment shall be made by the Program
Administrator in the maximum number and kind of shares as to which
-3-
<PAGE>
options, stock appreciation rights, and performance shares may be granted under
the Program. A corresponding adjustment changing the number or kind of shares
allocated to unexercised options, stock appreciation rights, performance shares
and stock bonuses or portions thereof, which shall have been granted prior to
any such change, shall likewise be made. Any such adjustment in outstanding
options and stock appreciation rights shall be made without change in the
aggregate purchase price applicable to the unexercised portion of the option or
stock appreciation right but with a corresponding adjustment in the price for
each share or other unit of any security covered by the option or stock
appreciation right. In making any adjustment pursuant to this Article 6, any
fractional shares shall be disregarded.
Article 7. Termination and Amendment of Program. No options, stock
appreciation rights, performance shares or stock bonuses shall be granted under
the Program after the termination of the Program. The Program Administrator may
at any time amend or revise the terms of the Program or of any outstanding
option, stock appreciation right performance share or stock bonus issued under
the Program, provided, however, that any stockholder approval necessary or
desirable in order to comply with Rule 16b-3 under the Securities Exchange Act
of 1934, as amended, or with Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code") or other applicable law or regulation shall be obtained
prior to the effectiveness of any such amendment or revision. No amendment,
suspension or termination of the Program or of any outstanding option, stock
appreciation right performance share or stock bonus shall, without the consent
of the person who has received an option, stock appreciation right, performance
share or stock bonus, impair any of that person's rights or obligations under
any option, stock appreciation right performance share or stock bonus granted
under the Program prior to such amendment, suspension or termination without
that person's written consent.
Article 8. Privileges of Stock Ownership Notwithstanding the exercise of
any options granted pursuant to the terms of the Program or the achievement of
any performance objective specified in any performance share granted pursuant to
the terms of the Program, no person shall have any of the rights or privileges
of a stockholder of the Company in respect of any shares of stock issuable upon
the exercise of his or her option or achievement of his or her performance
objective until certificates representing the shares have been issued and
delivered. No adjustment shall be made for dividends or any other distributions
for which the record date is prior to the date on which any stock certificate is
issued pursuant to the Program.
Article 9. Reservation of Shares of Common Stock. The Company, during the
term of the Program, will at all times reserve and keep available such number of
shares of its Common Stock as shall be sufficient to satisfy the requirements of
the Program.
-4-
<PAGE>
Article 10. Tax Withholding. The exercise of any option, stock appreciation
right or performance share, and the grant of any stock bonus under the Program,
are subject to the condition that if at any time the Company shall determine, in
its discretion, that the satisfaction of withholding tax or other withholding
liabilities under any state or federal law is necessary or desirable as a
condition of, or in any connection with, such exercise or the delivery or
purchase of shares pursuant thereto, then, in such event the exercise of the
option, stock appreciation right or performance share or the grant of such stock
bonus or the elimination of the risk of forfeiture relating thereto shall not be
effective unless such withholding tax or other withholding liabilities shall
have been satisfied in a manner acceptable to the Company.
Article 11. Employment; Service as Director or Consultant. Nothing in the
Program gives to any person any right to continued employment by or service as a
director of or consultant to the Company or the Subsidiaries or limits in any
way the right of the Company, the Subsidiaries or the Company's stockholders at
any time to terminate or alter the terms of that employment or service.
Article 12. Investment Letter; Restrictions or Obligation of the Company to
Issue Securities; Restrictive Legend. Any person acquiring Common Stock or other
securities of the Company pursuant to the Program, as a condition precedent to
receiving the shares of Common Stock or other securities, may be required by the
Program Administrator to submit a letter to the Company stating that the shares
of Common Stock or other securities are being acquired for investment and not
with a view to the distribution thereof. The Company shall not be obligated to
sell or issue any shares of Common Stock or other securities pursuant to the
Program unless, on the date of sale and issuance thereof, the shares of Common
Stock or other securities are either registered under the Securities Act of
1933, as amended, and all applicable state securities laws, or exempt from
registration thereunder. All shares of Common Stock and other securities issued
pursuant to the Program shall bear a restrictive legend summarizing the
restrictions on transferability applicable thereto, including those imposed by
federal and state securities laws.
Article 13. Covenant Against Competition. The Program Administrator shall
have the right to condition the award to an employee of any option, stock
appreciation right performance share, or stock bonus under the Program upon the
recipient's execution and delivery to the Company of an agreement not to compete
with the Company during the recipient's employment and for such period
thereafter as shall be determined by the Program Administrator. Such covenant
against competition shall be in a form satisfactory to the Program
Administrator.
Article 14. Rights Upon Termination. If a recipient of an award under the
Program ceases to be a director of the Company or to be employed by or to
provide consulting services to the Company or any Subsidiary (or a corporation
or a parent or
-5-
<PAGE>
subsidiary of such corporation issuing or assuming a stock option in a
transaction to which Section 424(a) of the Code applies), as the case may be,
for any reason other than death or disability, then, unless any other provision
of the Program provides for earlier termination:
(a) subject to Article 21, all options or stock appreciation rights
(other than Naked Rights) shall terminate immediately in the event the
recipient's service or employment is terminated for cause and in all other
circumstances may be exercised, to the extent exercisable on the date of
termination, until (i) three months after the date of termination in the
case of grants under the Independent Director Plan, and (ii) 30 days after
the date of termination in all other cases; provided, however, that the
Program Administrator may, in its discretion, allow such options or stock
appreciation rights (other than Naked Rights) to be exercised (to the
extent exercisable on the date of termination) at any time within three
months after the date of termination;
(b) subject to Section 5(b) of the SAR Plan, all Naked Rights not
payable on the date of termination of employment shall terminate
immediately;
(c) all performance share awards shall terminate immediately unless
the performance objectives have been achieved and the performance objective
period has expired; and
(d) all stock bonuses which are subject to forfeiture shall be
forfeited as of the date of termination.
Article 15. Rights Upon Disability. If a recipient becomes disabled, within
the meaning of Section 22(e)(3) of the Code, while serving as a director of the
Company or while employed by or rendering consulting services to the Company or
any Subsidiary (or a corporation or a parent or subsidiary of such corporation
issuing or assuming a stock option in a transaction to which Section 424(a) of
the Code applies), as the case may be, then, unless any other provision of the
Program provides for earlier termination:
(a) subject to Article 21, all options or stock appreciation rights
(other than Naked Rights) may be exercised, to the extent exercisable on
the date of termination, at any time within one year after the date of
termination due to disability;
(b) all Naked Rights shall be fully paid by the Company as of the date
of disability;
-6-
<PAGE>
(c) all performance share awards for which all performance objectives
have been achieved (other than continued employment or service on the
Vesting Date) shall be paid in full by the Company; all other performance
shares shall terminate immediately; and
(d) all stock bonuses which are subject to forfeiture shall be
forfeited as of the date of disability.
Article 16. Rights Upon Death of Recipient. If a recipient dies while
serving as a director of the Company or while employed by or rendering
consulting services to the Company or any Subsidiary (or a corporation or a
parent or subsidiary of such corporation issuing or assuming a stock option in a
transaction to which Section 424(a) of the Code applies), as the case may be,
then, unless any other provision of the Program provides for earlier
termination:
(a) subject to Article 21, all options or stock appreciation rights
(other than Naked Rights) may be exercised by the person or persons to whom
the recipient's rights shall pass by will or by the laws of descent and
distribution, to the extent exercisable on the date of death, at any time
within one year after the date of death, unless any other provision of the
Program provides for earlier termination;
(b) all Naked Rights shall be fully paid by the Company as of the date
of death;
(c) all performance share awards for which all performance objectives
have been achieved (other than continued employment or service on the
Vesting Date) shall be paid in full by the Company; all other performance
share awards shall terminate immediately; and
(d) all stock bonuses which are subject to forfeiture shall be
forfeited as of the date of death.
Article 17. Transferability. Options and stock appreciation rights granted
under the Program may not be sold, pledged, assigned or transferred in any
manner by the recipient otherwise than by will or by the laws of descent and
distribution and shall be exercisable (a) during the recipient's lifetime only
by the recipient and (b) after the recipient's death only by the recipient's
executor, administrator or personal representative, provided, however that (i)
the Program Administrator may permit the recipient of a non-incentive stock
option under the Supplemental Plan to transfer the option to a family member or
a trust created for the benefit of family members and (ii) recipients of options
under the Independent Director Plan may transfer such options to a family member
or a trust created for the benefit of
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<PAGE>
family members. In the case of such a transfer, the transferee's rights and
obligations with respect to the option shall be determined by reference to the
recipient and the recipient's rights and obligations with respect to the option
had no transfer been made. The recipient shall remain obligated pursuant to
Articles 10 and 12 hereunder if required by applicable law. Common Stock which
represents either performance shares prior to the satisfaction of the stated
performance objectives and the expiration of the stated performance objective
periods or stock bonus shares prior to the time that they are no longer subject
to risk of forfeiture may not be sold, pledged, assigned or transferred in any
manner.
Article 18 Change in Control. All options granted pursuant to the
Independent Director Plan shall become immediately exercisable upon the
occurrence of a Change in Control Event. With respect to other awards, the
Program Administrator shall have the authority to provide, either at the time
any option, stock appreciation right performance share or stock bonus is granted
or thereafter, that an option or stock appreciation right shall become fully
exercisable upon the occurrence of a Change in Control Event or that all
restrictions, performance objectives, performance objective periods and risks of
forfeiture pertaining to a performance share or stock bonus award shall lapse
upon the occurrence of a Change in Control Event. As used in the Program, a
"Change in Control Event" shall be deemed to have occurred if:
(a) any person, firm or corporation acquires directly or indirectly
the Beneficial Ownership (as defined in Section 13(d) of the Securities
Exchange Act of 1934, as amended) of any voting security of the Company
and, immediately after such acquisition, the acquirer has Beneficial
Ownership of voting securities representing 50% or more of the total voting
power of all the then-outstanding voting securities of the Company;
(b) the individuals who (i) as of the effective date of the Program
constitute the Board of Directors (the "Original Directors"), (ii)
thereafter are elected to the Board of Directors and whose election or
nomination for election to the Board of Directors was approved by a vote of
at least 2/3 of the Original Directors then still in office (such Directors
being called "Additional Original Directors"), or (iii) are elected to the
Board of Directors and whose election or nomination for election to the
Board of Directors was approved by a vote of at least 2/3 of the Original
Directors and Additional Original Directors then still in office, cease for
any reason to constitute a majority of the members of the Board of
Directors;
(c) the stockholders of the Company shall approve a merger,
consolidation, recapitalization, or reorganization of the Company or the
Company shall consummate any such transaction if stockholder approval is
not sought or obtained, other than any such transaction which would result
in
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<PAGE>
holders of outstanding voting securities of the Company immediately prior
to the transaction having Beneficial Ownership of at least 50% of the total
voting power represented by the voting securities of the surviving entity
outstanding immediately after such transaction, with the voting power of
each such continuing holder relative to such other continuing holders being
not altered substantially in the transaction; or
(d) the stockholders of the Company shall approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or a substantial portion of the Company's assets (i.e.,
50% or more in value of the total assets of the Company).
Article 19. Mandatory Exercise. Upon the occurrence of or in anticipation
of a contemplated Change in Control Event, the Company may give a holder of an
option or stock appreciation right written notice requiring such person either
(a) to exercise within a period of time established by the Company after receipt
of the notice each option and stock appreciation right to the fullest extent
exercisable at the end of that period, or (b) to surrender such option or stock
appreciation right or any unexercised portion thereof. Any portion of such
option or stock appreciation right which shall not have been exercised in
accordance with the provisions of the Program by the end of such period shall
automatically lapse irrevocably and the holder shall have no further rights
thereunder.
Article 20. Method of Exercise. Any holder of an option may exercise his or
her option from time to time by giving written notice thereof to the Company at
its principal office, together with payment in full for the shares of Common
Stock to be purchased. The date of such exercise shall be the date on which the
Company receives such notice. Such notice shall state the number of shares to be
purchased. The purchase price of any shares purchased upon the exercise of any
option granted pursuant to the Program shall be paid in full at the time of
exercise of the option by certified or bank cashier's check payable to the order
of the Company or, if permitted by the Program Administrator, by shares of
Common Stock which have been held by the optionee for at least six months, or by
a combination of checks and such shares of Common Stock. The Program
Administrator may, in its sole discretion, permit an optionee to make "cashless
exercise" arrangements, to the extent permitted by applicable law, and may
require optionees to utilize the services of a single broker selected by the
Program Administrator in connection with any cashless exercise. No option may be
exercised for a fraction of a share of Common Stock. If any portion of the
purchase price is paid in shares of Common Stock, those shares shall be valued
at their then Fair Market Value as determined by the Program Administrator in
accordance with Section 4 of the Incentive Plan.
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<PAGE>
Article 21. Limitation. Notwithstanding any other provision of the Program,
(a) no option may be granted pursuant to the Program more than ten years after
the date on which the Program was adopted by the Board of Directors, and (b) any
option granted under the Program shall, by its terms, not be exercisable more
than ten years after the date of grant provided, however, that any option
granted under the Independent Director Plan shall, by its terms, not be
exercisable more than five years after the date of grant.
Article 22. Sunday or Holiday. In the event that the time for the
performance of any action or the giving of any notice is called for under the
Program within a period of time which ends or falls on a Sunday or legal
holiday, such period shall be deemed to end or fall on the next day following
such Sunday or legal holiday which is not a Sunday or legal holiday.
Article 23. Governing Law. The Program shall be governed by and construed
in accordance with the laws of the State of New Jersey.
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<PAGE>
PLAN I
BARRINGER TECHNOLOGIES INC.
INCENTIVE STOCK OPTION PLAN
Section 1. General. This Barringer Technologies Inc. Incentive Stock Option
Plan ("Incentive Plan") is Part I of the Company's Program. The Company intends
that options granted pursuant to the provisions of the Incentive Plan will
qualify and will be identified as "incentive stock options" within the meaning
of Section 422 of the Code. Unless any provision herein indicates to the
contrary, the Incentive Plan shall be subject to the General Provisions of the
Program.
Section 2. Terms and Conditions. The Program Administrator may grant
incentive stock options to any person eligible under Article 4 of the General
Provisions. The terms and conditions of options granted under the Incentive Plan
may differ from one another as the Program Administrator shall, in its
discretion, determine, as long as all options granted under the Incentive Plan
satisfy the requirements of the Incentive Plan.
Section 3. Duration of Options. Each option and all rights thereunder
granted pursuant to the terms of the Incentive Plan shall expire on the date
determined by the Program Administrator, but in no event shall any option
granted under the Incentive Plan expire later than ten years from the date on
which the option is granted. Notwithstanding the foregoing, any option granted
under the Incentive Plan to any person who owns more than 10% of the combined
voting power of all classes of stock of the Company or a Subsidiary shall expire
no later than five years from the date on which the option is granted.
Section 4. Purchase Price. The option price with respect to any option
granted pursuant to the Incentive Plan shall not be less than the Fair Market
Value of the shares on the date of the grant of the option; except that the
option price with respect to any option granted pursuant to the Incentive Plan
to any person who owns more than 10% of the combined voting power of all classes
of stock of the Company shall not be less than 110% of the Fair Market Value of
the shares on the date the option is granted. "Fair Market Value" shall mean the
fair market value of the Common Stock on the date of grant or other relevant
date. If on such date the Common Stock is listed on a stock exchange or is
quoted on the automated quotation system of NASDAQ, the Fair Market Value shall
be the closing sale price (or if such price is unavailable, the average of the
high bid price and the low asked price) on such date. If no such closing sale
price or bid and asked prices are available, the Fair Market Value shall be
determined in good faith by the Program Administrator in accordance with
generally
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<PAGE>
accepted valuation principles and such other factors as the Program
Administrator reasonably deems relevant.
Section 5. Maximum Amount of Options in Any Calendar Year. The aggregate
Fair Market Value of the Common Stock with respect to which incentive stock
options are exercisable for the first time by any employee during any calendar
year (under the terms of the Incentive Plan and all incentive stock option plans
of the Company and the Subsidiaries) shall not exceed $100,000.
Section 6. Exercise of Options. Unless otherwise provided by the Program
Administrator at the time of grant or unless the installment provisions set
forth herein are subsequently accelerated pursuant to Article 18 of the General
Provisions of the Program or otherwise by the Program Administrator with respect
to any one or more previously granted options, options may only be exercised to
the following extent during the following periods of employment:
Period Following Maximum Percentage of
Date of Grant Shares Covered by
- --------------- Option Which May be
Purchased
---------
Less than 12 months 0%
12 months or more and less than 24 25%
months
24 months or more and less than 36 months 50%
36 months or more and less than 48 months 75%
48 months or more 100%
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<PAGE>
PLAN II
BARRINGER TECHNOLOGIES INC.
SUPPLEMENTAL STOCK OPTION PLAN
Section 1. General. This Barringer Technologies Inc. Supplemental Stock
Option Plan ("Supplemental Plan") is Part II of the Company's Program. Any
option granted pursuant to the Supplemental Plan shall not be an incentive stock
option as defined in Section 422 of the Code. Unless any provision herein
indicates to the contrary, this Supplemental Plan shall be subject to the
General Provisions of the Program.
Section 2. Terms and Conditions. The Program Administrator may grant
supplemental stock options to any person eligible under Article 4 of the General
Provisions. The terms and conditions of options granted under the Supplemental
Plan may differ from one another as the Program Administrator shall, in its
discretion, determine, as long as all options granted under the Supplemental
Plan satisfy the requirements of the Supplemental Plan.
Section 3. Duration of Options. Each option and all rights thereunder
granted pursuant to the terms of the Supplemental Plan shall expire on the date
determined by the Program Administrator, but in no event shall any option
granted under the Supplemental Plan expire later than ten years from the date on
which the option is granted.
Section 4. Purchase Price. The option price with respect to any option
granted pursuant to the Supplemental Plan shall be determined by the Program
Administrator at the time of grant.
Section 5. Exercise of Options. Unless otherwise provided by the Program
Administrator at the time of grant or unless the installment provisions set
forth herein are subsequently accelerated pursuant to Article 18 of the General
Provisions of the Program or otherwise by the Program Administrator, with
respect to any one or more previously granted options, options may only be
exercised to the following extent during the following periods of employment or
service:
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<PAGE>
Period Following Maximum Percentage of
Date of Grant Shares Covered by
- --------------- Option Which May be
Purchased
---------
Less than 12 months 0%
12 months or more and less than 24 25%
months
24 months or more and less than 36 months 50%
36 months or more and less than 48 months 75%
48 months or more 100%
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<PAGE>
PLAN III
BARRINGER TECHNOLOGIES INC.
STOCK APPRECIATION RIGHTS PLAN
Section 1. General. This Barringer Technologies Inc. Stock Appreciation
Rights Plan ("SAR Plan") is Part III of the Company's Program.
Section 2. Terms and Conditions. The Program Administrator may grant stock
appreciation rights to any person eligible under Article 4 of the General
Provisions. Stock appreciation rights may be granted either in tandem with
incentive stock options or supplemental stock options as described in Section 4
of the SAR Plan, or as naked stock appreciation rights as described in Section 5
of the SAR Plan.
Section 3. Mode of Payment. At the discretion of the Program Administrator,
payments to recipients upon exercise of stock appreciation rights may be made in
(a) cash by bank check, (b) shares of Common Stock having a Fair Market Value
(determined in the manner provided in Section 4 of the Incentive Plan) equal to
the amount of the payment (c) a note in the amount of the payment containing
such terms as are approved by the Program Administrator, or (d) any combination
of the foregoing in an aggregate amount equal to the amount of the payment.
Section 4. Stock Appreciation Rights in Tandem with Incentive or
Supplemental Stock Options. A SAR granted in tandem with an incentive stock
option or a supplemental stock option (each, an "Option") shall be on the
following terms and conditions:
(a) Each SAR shall relate to a specific Option or portion of an Option
granted under the Incentive Plan or the Supplemental Plan, as the case may
be, and may be granted by the Program Administrator at the same time that
the Option is granted or at any time thereafter prior to the last day on
which the Option may be exercised.
(b) A SAR shall entitle a recipient upon surrender of the unexpired
related Option, or a portion thereof, to receive from the Company an amount
equal to the excess of (i) the Fair Market Value (determined in accordance
with Section 4 of the Incentive Plan) of the shares of Common Stock which
the recipient would have been entitled to purchase on that date pursuant to
the portion of the Option surrendered, over (ii) the amount which the
recipient would have been required to pay to purchase such shares upon
exercise of such Option.
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<PAGE>
(c) A SAR shall be exercisable only for the same number of shares of
Common Stock, and only at the same times, as the Option to which it
relates. SARs shall be subject to such other terms and conditions as the
Program Administrator may specify.
(d) A SAR shall lapse at such time as the related Option is exercised
or lapses pursuant to the terms of the Program. On exercise of the SAR, the
related Option shall lapse as to the number of shares exercised.
Section 5. Naked Stock Appreciation Rights. SARs granted by the Program
Administrator as naked stock appreciation rights ("Naked Rights") shall be
subject to the following terms and conditions:
(a) The Program Administrator may award Naked Rights to recipients for
periods not exceeding ten years. Each Naked Right shall represent the right
to receive the excess of (i) the Fair Market Value of one share of Common
Stock (determined in accordance with Section 4 of the Incentive Plan) on
the date of exercise of the Naked Right, over (ii) the Fair Market Value of
one share of Common Stock (determined in accordance with Section 4 of the
Incentive Plan) on the date the Naked Right was awarded to the recipient.
(b) Unless otherwise provided by the Program Administrator at the time
of award or unless the installment provisions set forth herein are
subsequently accelerated pursuant to Article 18 of the General Provisions
of the Program or otherwise by the Program Administrator with respect to
any one or more previously granted Naked Rights, Naked Rights may only be
exercised to the following extent during the following periods of
employment or service:
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<PAGE>
Period Following Maximum Percentage of
Date of Grant Naked Rights
- --------------- Which May be
Purchased
---------
Less than 12 months 0%
12 months or more and less than 24 25%
months
24 months or more and less than 36 months 50%
36 months or more and less than 48 months 75%
48 months or more 100%
(c) The Naked Rights solely measure and determine the amounts to be paid to
recipients upon exercise as provided in Section 5(a). Naked Rights do not
represent Common Stock or any right to receive Common Stock. The Company shall
not hold in trust or otherwise segregate amounts which may become payable to
recipients of Naked Rights; such funds shall be part of the general funds of the
Company. Naked Rights shall constitute an unfunded contingent promise to make
future payments to the recipient.
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<PAGE>
PLAN IV
BARRINGER TECHNOLOGIES INC.
PERFORMANCE SHARE PLAN
Section 1. General. This Barringer Technologies Inc. Performance Share Plan
("Performance Share Plan") is Part IV of the Company's Program. Unless any
provision herein indicates to the contrary, the Performance Share Plan shall be
subject to the General Provisions of the Program.
Section 2. Terms and Conditions. The Program Administrator may grant
performance shares to any person eligible under Article 4 of the General
Provisions. Each performance share grant shall confer upon the recipient thereof
the right to receive a specified number of shares of Common Stock of the Company
contingent upon the achievement of specified performance objectives within a
specified performance objective period including, but not limited to, the
recipient's continued employment or service as a consultant through the period
set forth in Section 5 of this Performance Share Plan. At the time of an award
of a performance share, the Program Administrator shall specify the performance
objectives, the performance objective period or periods and the period of
duration of the performance share grant. Any performance shares granted under
this Plan shall constitute an unfunded promise to make future payments to the
affected person upon the completion of specified conditions.
Section 3. Mode of Payment. At the discretion of the Program Administrator,
payments of performance shares may be made in (a) shares of Common Stock, (b) a
check in an amount equal to the Fair Market Value (determined in the manner
provided in Section 4 of the Incentive Plan) of the shares of Common Stock to
which the performance share award relates, (c) a note in the amount specified
above in Section 3(b) containing such terms as are approved by the Program
Administrator, or (d) any combination of the foregoing in the aggregate amount
equal to the amount specified above in Section 3(b).
Section 4. Performance Objective Period. The duration of the period within
which to achieve the performance objectives shall be determined by the Program
Administrator. The period may not be less than one year nor more than ten years
from the date that the performance share is granted. The Program Administrator
shall determine whether performance objectives have been met with respect to
each applicable performance objective period. Such determination shall be made
promptly after the end of each applicable performance objective period, but in
no event later than 90 days after the end of each applicable performance
objective period. All determinations by the Program Administrator with respect
to the achievement of
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<PAGE>
performance objectives shall be final, binding on and conclusive with respect to
each recipient.
Section 5. Vesting of Performance Shares. Unless otherwise provided by the
Program Administrator at the time of grant or unless the installment provisions
set forth herein are subsequently accelerated pursuant to Article 18 of the
General Provisions of the Program or otherwise by the Program Administrator,
with respect to any one or more previously granted performance shares, the
Company shall pay to the recipient on the date set forth in Column 1 below
("Vesting Date") the percentage of the recipient's performance share award set
forth in Column 2 below.
Column 1 Column 2
Vesting Date Percentage
------------ ----------
1 year from Date of Grant 25%
2 years from Date of Grant 25%
3 years from Date of Grant 25%
4 years from Date of Grant 25%
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<PAGE>
PLAN V
BARRINGER TECHNOLOGIES INC.
STOCK BONUS PLAN
Section 1. General. This Barringer Technologies Inc. Stock Bonus Plan
("Stock Bonus Plan") is Part V of the Company's Program. Unless any provision
herein indicates to the contrary, the Stock Bonus Plan shall be subject to the
General Provisions of the Program.
Section 2. Terms and Conditions. The Program Administrator may grant
bonuses in the form of shares of Common Stock to any person eligible under
Article 4 of the General Provisions. Each such stock bonus shall be forfeited by
the recipient in the event that the recipient's employment by or service as a
director or consultant to the Company or any Subsidiary terminates within the
time periods specified in Section 3 of the Stock Bonus Plan or within such other
time period as the Program Administrator also may provide at the time of grant.
The Program Administrator also may provide at the time of grant that the Common
Stock subject to the stock bonus shall be forfeited by the recipient upon the
occurrence of other events.
Section 3. Forfeiture of Bonus Shares. Unless otherwise provided by the
Program Administrator at the time of grant or unless the installment provisions
set forth herein are subsequently accelerated pursuant to Article 18 of the
General Provisions of the Program or otherwise by the Program Administrator with
respect to any one or more previously granted bonus shares, the percentage set
forth in Column 2 below of shares of Common Stock issued as a stock bonus shall
be forfeited and transferred back to the Company by the recipient without
payment of any consideration from the Company if the recipient's employment by
or service as a director or consultant to the Company or any Subsidiary is
terminated for any reason during the time periods specified in Column 1 below:
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<PAGE>
Column 1 Column 2
Employment or Service Percentage of Bonus
Terminated Within Shares Which are
--------------------- Forfeitable
-------------------
First 12 months after grant 100%
First 24 months after grant 75%
First 36 months after grant 50%
First 48 months after grant 25%
Beyond 48 months after grant 0%
Section 4. Rights as a Stockholder; Stock Certificates. A recipient shall
have rights as a stockholder with respect to any shares of Common Stock received
as a stock bonus represented by a stock certificate issued in his name even
though all or a portion of such shares remains subject to a risk of forfeiture
hereunder, except that shares subject to forfeiture shall not be transferable.
Stock certificates representing such shares which remain subject to forfeiture
together with a related stock power shall be held by the Company, and shall be
canceled and returned to the Company's treasury if thereafter forfeited. Stock
certificates representing such shares which are vested and no longer subject to
forfeiture shall be delivered to the recipient.
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<PAGE>
PLAN VI
BARRINGER TECHNOLOGIES INC.
INDEPENDENT DIRECTOR PLAN
Section 1. General. This Barringer Technologies Inc. Independent Director
Plan ("Independent Director Plan") is Part VI of the Company's Program. Any
option granted pursuant to this Independent Director Plan shall not be an
incentive stock option as defined in Section 422 of the Code. Unless any
provision herein indicates to the contrary, this Independent Director Plan shall
be subject to the General Provisions of the Program.
Section 2. Terms and Conditions. Every year on the earlier of (i) the date
of the Company's annual meeting of stockholders, and (ii) June 1, the Company
shall grant to each Independent Director (as defined below) elected as a
director at such annual meeting (or nominated for election as a director by the
Board of Directors or any nominating committee thereof in the event that such
annual meeting does not occur prior to June 1), or, in the event that the Board
of Directors is divided into two or more classes, continuing or expected to
continue to serve as a director of the Company following such annual meeting, an
option to purchase 3,000 shares of Common Stock. As used in the Independent
Director Plan, the term "Independent Director" means any member of the Board of
Directors who, as of the relevant date of determination, has not been a
full-time employee of the Company or any Subsidiary for at least twelve months
preceding such date.
Section 3. Duration of Options. Each option and all rights thereunder
granted pursuant to the terms of the Independent Director Plan shall expire five
years from the date on which the option is granted. In addition, each option
shall be subject to early termination as provided in the Independent Director
Plan.
Section 4. Purchase Price. The option price with respect to any option
granted pursuant to the Independent Director Plan shall be the Fair Market Value
(determined in accordance with Section 4 of the Incentive Plan) of the shares of
Common Stock to which the option relates.
Section 5. Exercise of Options.
(a) Options granted under the Independent Director Plan shall become fully
exercisable as to 100% of the shares of Common Stock covered thereby one year
after the date of grant, subject to acceleration as set forth in Article 18 of
the General Provisions of Stock Compensation Program.
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<PAGE>
(b) Except as provided in the General Provisions of Stock Compensation
Program, no option may be exercised unless the holder thereof is then a director
of the Company.
(c) Other than as provided in the General Provisions Compensation Program,
options granted under the Independent Director Plan shall not be affected by any
change of duties or position so long as the holder continues to be a director of
the Company.
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Barringer Technologies Inc.
Supplemental Retirement Plan
Preamble
Establishment and Intent. Barringer Technologies Inc., together with its
subsidiaries (the "Employer") establishes, effective as of January 1, 1998, a
nonqualified, unfunded, deferred contribution supplemental executive retirement
plan on behalf of certain designated management or highly compensated employees.
The Plan is intended to be an unfunded deferred compensation plan for a select
group of management or highly compensated employees, as described in the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). This
document defines the provisions of such nonqualified plan and shall be known as
the "Barringer Technologies Inc. Supplemental Retirement Plan."
Purpose. The Plan has three purposes: (1) to provide the Participants with
additional retirement benefits to supplement retirement benefits available to
them from other sources, including the qualified retirement plan maintained by
the Employer; (2) to provide an incentive to Participants to perform at high
levels; and (3) to encourage Participants to remain in the employ of the
Employer.
<PAGE>
Table of Contents
Page
Article I. Definitions 1
Article II. Participation 5
Article III. Performance Account 6
Article IV. Vesting 8
Article V. Payment of Benefits 9
Article VI. Administration 10
Article VII. Miscellaneous 12
Appendix - List of Plan Participants 14
2
<PAGE>
Article I. Definitions
When used herein, the following shall have the meanings below unless the
context clearly indicates otherwise:
1.1 "Administrator" means the Executive Compensation Committee of Barringer
Technologies Inc. appointed by the Board of Directors to administer this Plan.
1.2 "Appendix" means a written supplement attached to the Plan and made a
part hereof which has been added in accordance with the provisions of the Plan.
1.3 "Beneficiary" means the Participant's spouse or other person designated
by the Participant. If the Participant has no spouse and makes no effective
Beneficiary designation, then the Participant's Beneficiary shall be the
Participant's estate.
1.4 "Board of Directors" means the Board of Directors of Barringer
Technologies Inc.
1.5 "Change in Control" means any of the following events:
(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 stockholders of the Company shall approve a merger,
consolidation, recapitalization, or reorganization of the Company or the
Company shall consummate any such transaction if stockholder approval is
not sought or obtained, other than any such transaction which would result
in holders of outstanding voting securities of the Company immediately
prior to the transaction having beneficial ownership of at least 50% of the
total voting power represented by the voting securities of the surviving
entity
<PAGE>
outstanding immediately after such transaction, with the voting power of
each such continuing holder relative to such other continuing holders being
not altered substantially in the transaction; or
(D) The stockholders of the Company shall approve a plan of complete
liquidation of the Company or an agreement for the sale, 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.
1.6 "Code" means the Internal Revenue Code of 1986, as amended.
1.7 "Company" means Barringer Technologies Inc.
1.8 "Compensation" means a Participant's base salary and the amount payable
to such Participant under the Annual Incentive Plan or any successor cash bonus
plan for services rendered to the Employer for the applicable period.
Compensation shall include amounts that would be paid to the Participant with
respect to the Plan Year but for the Participant's election under a cash or
deferred arrangement described in Section 401(k) of the Code or a cafeteria plan
described in Section 125 of the Code. Except as expressly provided in the
preceding sentence, Compensation shall not include Employer Allocations or
contributions to this or any other plan for the benefit of its employees.
1.9 "EBITDA" means, for any period, the sum (without duplication) of (i)
Consolidated Net Income, (ii) to the extent Consolidated Net Income has been
reduced thereby, all income taxes of the Company and its subsidiaries paid or
accrued for such period (other than income taxes attributable to extraordinary,
unusual or non-recurring gains or losses), all interest expenses, amortization
expenses and depreciation expenses of the Company and its subsidiaries paid or
accrued for such period, and (iii) other non-cash items reducing Consolidated
Net Income, less other non-cash items increasing Consolidated Net Income, all as
determined on a consolidated basis for the Company and its subsidiaries in
conformity with generally accepted accounting principles, consistently applied
for all relevant periods. "Consolidated Net Income" means, for any period, the
aggregate net income (or loss) of the Company and its subsidiaries for such
period on a consolidated basis, determined in accordance with generally accepted
accounting principles, consistently applied for all relevant periods, less (i)
gains and losses from any sale, lease, conveyance, transfer or other disposition
of any assets or property of the Company and its subsidiaries, other than in the
ordinary course of business, including the tax effects thereof, (ii) items
classified under generally accepted accounting principles, consistently applied
for all relevant periods, as extraordinary or non-recurring gains and losses,
and the related tax effects thereof, and (iii) the net income or loss of any
entity acquired in a transaction accounting for as a pooling of interests
accrued prior to the date such entity is acquired by the Company.
2
<PAGE>
All determinations of EBITDA hereunder shall be made by the Company's
independent public accountants, which determinations shall be final, binding and
conclusive for all purposes under this Plan, absent clear mistake or other
manifest error.
1.10 "Effective Date" means January 1,1998.
1.11 "Employer" means the Company and any of its direct or indirect
wholly-owned subsidiaries which adopt, with the approval of the Company, the
Plan.
1.12 "Employer Allocation" means the amount allocated to each Participant's
Performance Account each Plan Year pursuant to Section 3.1.
1.13 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
1.14 "Good Reason" with respect to an individual Participant, shall have
the meaning ascribed to such term in such Participant's employment agreement
with the Employer. In all other cases, references to "Good Reason" shall be
given no effect.
1.15 "Investment Fund or Funds" means one or more of the investment
alternatives which are used by the Plan as a measurement of investment return on
Performance Accounts.
1.16 "Normal Retirement Date" means the first day of the month coincident
with or next following the later of the date a Participant reaches age 60 and
the date he or she completes five Years of Plan Participation.
1.17 "Participant" means an individual employed by the Employer who
satisfies the requirements described in Article II. The names of the initial
Tier I and Tier II Participants are listed in the Appendix.
1.18 "Performance Account" means the bookkeeping account established and
maintained for each Participant to which Employer Allocations and any investment
earnings or losses thereon are credited.
1.19 "Permanent Disability" (i) with respect to an individual Participant,
shall have the meaning ascribed thereto in such Participant's employment
agreement with the Employer or (ii) in the event that no such agreement exists,
such term shall mean the total and permanent incapacity of a Participant as a
result of which the Participant is entitled to receive and is receiving
disability benefits under the Federal Social Security Act.
1.20 "Plan" means the Barringer Technologies Inc. Supplemental Retirement
Plan set forth herein, as the same may be amended or supplemented from time to
time.
1.21 "Plan Year" means the calendar year.
3
<PAGE>
1.22 "Supplemental Retirement Benefit" means the benefits payable to the
Participant in accordance with Article V.
1.23 "Targeted EBITDA" means the amount of EBITDA determined by the
Administrator with respect to a particular Plan Year and used in the
determination of Employer Allocations described in Section 3.1.2.
1.24 "Termination for Cause" (i) with respect to an individual Participant,
shall have the meaning ascribed thereto in such Participant's employment
agreement with the Employer or (ii) in the event that no such agreement exists,
such term shall mean, to the maximum extent permitted by applicable law, a
termination of the Participant's employment by the Employer because the
Participant has (a) materially breached or materially failed to perform his or
her duties under applicable law and such breach or failure to perform
constitutes self-dealing, willful misconduct or recklessness, (b) committed an
act of dishonesty in the performance of his or her duties to the Employer or
engaged in conduct materially detrimental to the business of the Employer, (c)
been convicted of a felony, (d) been convicted of a misdemeanor involving moral
turpitude, (e) materially breached or materially failed to perform his or her
obligations and duties hereunder, which breach or failure the Participant shall
fail to remedy within 30 days after written demand from the Employer, or (f)
violated in any material respect the representations made in any Participant's
employment agreement between the Employer and the Participant or any covenant
contained therein.
1.25 "Tier I Participant" means an individual employed by the Employer who
satisfies the requirements described in Article II for Tier I Participants. The
names of Tier I Participants as of the date hereof are listed in the Appendix.
1.26 "Tier II Participant" means an individual employed by the Employer who
satisfies the requirements described in Article II for Tier II Participants. The
names of Tier II Participants as of the date hereof are listed in the Appendix.
1.27 "Year of Plan Participation" means each calendar year period beginning
on an Employee's Effective Date of Participation, as set forth in Section 2.3,
and each anniversary thereof on which the Participant is still employed on the
last day of said calendar year.
1.28 "Without Cause Termination" (i) with respect to an individual
Participant, shall have the meaning ascribed thereto in such Participant's
employment agreement with the Employer or (ii) in the event that no such
agreement exists, such term shall mean a termination of the Participant's
employment by the Employer other than due to (a) a Termination for Cause (as
defined in Section 1.24 above), (b) Permanent Disability (as defined in Section
1.19 above) or (c) the Participant's death.
4
<PAGE>
Article II. Participation
2.1 Board of Directors Approval. The Administrator, in its sole discretion,
shall designate the Employees who shall participate under the Plan as
Participants solely from a select group of management or highly compensated
employees.
2.2 Tier. Employees shall be designated as either Tier I or Tier II
Participants. The names of the initial Tier I and Tier II Participants as of the
date hereof are listed in the Appendix.
2.3 Effective Date of Participation. A selected Employee shall become a
Participant on the later of the Effective Date of the Plan, or the January 1
designated by the Administrator.
5
<PAGE>
Article III. Performance Account
3.1 Employer Allocations.
3.1.1 Entitlement. For each Plan Year beginning on or after the
Effective Date that a Participant receives credit for a Year of Plan
Participation, the Employer shall allocate to the Performance Account
established for such Participant the amount determined under Section 3.1.2,
provided that the Participant is employed by the Employer on the last day
of the Plan Year or terminated employment during such Plan Year on account
of death, Permanent Disability or attainment of his Normal Retirement Date.
Employer Allocations shall be credited, as soon as administratively
possible, after the last day of the Plan Year to which they relate.
3.1.2 Determination of Amount. The amount allocated to an eligible
Participant's Performance Account under Section 3.1.1 for each Plan Year,
if any, shall be a percentage of the Participant's Compensation for such
Plan Year. Such percentage shall be determined by the Administrator, in its
sole discretion, subject to the following guidelines:
- --------------------------------------------------------------------------------
PARTICIPANT IF N0 EBJTDA IF TARGETED MAXIMUM IF EBITDA
EBITDA IS ACHIEVED EXCEEDS TARGETED EBITDA
- --------------------------------------------------------------------------------
TIER I 0% 20% 22%
TIER II 0% 8% 10%
- --------------------------------------------------------------------------------
In addition, in determining each Participant's percentage (within the ranges set
forth above), the Administrator may consider the amount of current net income of
the Employer, the relationship of current net income of the Employer to that of
prior years, the overall economic environment and any other factors it considers
relevant.
3.2 Investment Elections. The Administrator shall select Investment Funds
to be used as a measurement of investment returns on Performance Accounts, or
may appoint one or more investment managers to select such Funds. Each
Participant may specify the percentage of Employer Allocations to his
Performance Account for each Plan Year to be credited with the investment
returns earned by each such Investment Fund, by filing an investment election
form with the Administrator in accordance with procedures established by the
Administrator. A Participant may change his Investment Fund selections for
future Employer Allocations, or for amounts already credited to his Performance
Account, in accordance with procedures established by the Administrator. No such
selection shall obligate the Administrator or the Plan to invest any amounts in
any Investment Fund.
6
<PAGE>
3.3 Crediting of Investment Returns to Performance Accounts. As of the end
of each Plan Year, the Administrator shall credit or debit each Participant's
Performance Account with the investment returns attributable to the balance of
such Performance Account.
7
<PAGE>
Article IV. Vesting
4.1 Vesting Based on Years of Participation. A Participant shall have a 0%
vested interest in his or her Performance Account until the Participant
completes five Years of Plan Participation, at which time his or her interest
shall become 100% vested.
4.2 Vesting Based on Permanent Disability or Death. A Participant's
interest in his or her Performance Account shall in any case become 100% vested
if, while employed by the Employer, he or she sustains a Permanent Disability or
dies.
4.3 Vesting Based on Without Cause Termination or Resignation for Good
Reason. A Participant's interest in his or her Performance Account shall in any
case become 100% vested if his or her service with the Employer is terminated as
a result of a Without Cause Termination. In the event that the employment
agreement between an individual Participant and the Employer provides for
resignation for Good Cause, then such Participant's interest in his or her
Performance Account shall in any case become 100% vested if he or she terminates
employment with the Employer by resignation for Good Reason.
4.4 Vesting Based on Change in Control. A Participant's interest in his
Performance Account shall in any case become 100% vested if his or her service
with the Employer terminates as a result of a Change in Control.
4.4 Forfeiture. If a Participant's employment terminates for any reason
other than those described in this Article, before the Participant completes
five Years of Plan Participation, the Participant shall forfeit his or her
entire interest in his or her Performance Account.
8
<PAGE>
Article V. Payment of Benefits
5.1 Payment at Normal Retirement Date. A Participant whose employment with
the Employer terminates on or after his Normal Retirement Date, shall be
entitled to receive the value of his Performance Account as soon as
administratively practicable thereafter.
5.2 Form of Benefit. Any benefit to which a Participant is entitled in this
Article V shall be paid in cash in a single lump sum. As an alternative, a
Participant may instruct the Administrator to purchase an annuity with the
single lump sum.
5.3 Death Benefits. As soon as administratively practicable following a
Participant's death, the Participant's Beneficiary shall be paid in a single
cash lump sum equal to the Participant's vested interest in his or her
Performance Account not otherwise distributed to such Participant hereunder.
5.4 Disability Benefit. As soon as administratively practicable following
the Administrator's determination that a Participant has suffered a Permanent
Disability, the Participant shall be entitled to receive the Participant's
vested interest in his or her Performance Account.
5.5 Vested Terminated Participants. A Participant, on the date determined
under Sections 5.5.1 or 5.5.2, who terminates employment with the Employer
before his or her Normal Retirement Date shall be entitled to receive the
Participant's vested interest in his or her Performance Account.
5.5.1 Without Cause Termination or Resignation for Good Reason. In the
event that a Participant leaves the service of the Employer as a result of
a Without Cause Termination, he or she shall be entitled to receive the
vested value of his or her Performance Account as soon as administratively
practicable following his or her date of termination. In the event that the
employment agreement between an individual Participant and the Employer
provides for resignation for Good Reason and such Participant leaves the
service of the Employer as a result thereof, than such Participant shall be
entitled to receive the vested value of his or her Performance Account as
soon as administratively practicable following his or her date of
termination.
5.5.2 Termination for Cause and Other Termination or Resignation. In
the event that a Participant leaves the service of the Employer as a result
of a Termination for Cause, retirement or any reason (other than Without
Cause Termination, Permanent Disability, resignation for Good Reason (where
applicable), resignation or termination in connection with a Change in
Control or death), he or she shall be entitled to receive the vested value
of his or her Performance Account as soon as administratively practicable
following the later of the date of termination or attainment of age 60.
9
<PAGE>
Article VI. Administration
6.1 Administration. The Administrator shall have the authority to interpret
the Plan and to determine the amount and time of payment of benefits and other
issues arising in the administration of the Plan. Any construction or
interpretation of the Plan and any determination of fact in administering the
Plan made in good faith by the Administrator shall be final and conclusive for
all Plan purposes.
6.2 Claims Procedure.
6.2.1 Initial Determination. Upon presentation to the Administrator of
a claim for benefits under the Plan, the Administrator shall make a
determination of the validity thereof. If the determination is adverse to
the claimant, the Administrator shall furnish to the claimant within 90
days after the receipt of the claim a written notice setting forth the
following:
a) the specific reason or reasons for the denial;
b) specific references to pertinent provisions of the Plan on which
the denial is based;
c) if applicable, a description of any additional material or
information necessary for the claimant to perfect the claim and
an explanation of why such material or information is necessary;
and
d) appropriate information as to the steps to be taken if the
claimant wishes to submit his or her claim for review.
6.2.2 Appeal Procedure. In the event of a denial of a claim, the
claimant or his or her authorized representative may appeal such denial to
the Administrator for a full and fair review of the adverse determination.
The claimant's request for review must be in writing and made to the
Administrator within 60 days after receipt by claimant of the written
notification described in Section 6.2.1; provided, however, that such
60-day period may be extended by the Administrator in its sole discretion
if circumstances so warrant. During this period, the claimant or his or her
duly authorized representative may review pertinent documents, and may
submit issues and comments in writing which shall be given full
consideration by the Administrator in its review.
6.2.3 Decision on Appeal. A decision on a request for review shall (i)
state in writing the specific reasons and references to the Plan provisions
on which it is based; (ii) shall be promptly provided to the claimant and
(iii) be made by the Administrator not later than 60 days after receipt of
the request; provided, however, that the Administrator, in its sole
discretion, may postpone such decision for a period of time
10
<PAGE>
not to exceed 60 days if circumstances so warrant. If it is necessary to
extend the period of time for making a decision beyond 60 days after the
receipt of the request, the claimant shall be notified in writing of the
extension of time prior to the beginning of such extension.
11
<PAGE>
Article VII. Miscellaneous
7.1 No Effect on Employment Rights. Nothing contained herein will confer
upon any Participant the right to be retained in the service of the Employer nor
limit the right of the Employer to discharge or otherwise deal with any
Participant without regard to the existence of the Plan.
7.2 Funding. The Employer may establish a grantor trust for the purpose of
funding Supplemental Retirement Benefits. Any trust so created shall conform to
the terms of the model trust provided by the Internal Revenue Service as
described in Revenue Procedure 92-64. Notwithstanding the establishment of such
trust, it is the intention of the Employer and the Participants that the Plan
shall be unfunded for tax purposes and for purposes of Title I of ERISA. All
amounts credited under the Plan shall constitute general assets of the Employer.
The Plan constitutes a mere promise by the Employer to pay benefits in the
future. To the extent that any Participant or any other person acquires a right
to receive benefits under this Plan, such right shall be no greater than the
right of any unsecured general creditor of the Employer.
7.3 Spendthrift Provisions. No benefit payable under the Plan shall be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, or charge prior to actual receipt thereof by the payee; and
any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber
or charge prior to such receipt shall be void; and the Employer shall not be
liable in any manner for or subject to the debts, contracts, liabilities,
engagements or torts of any person entitled to any benefit under the Plan. The
Plan shall honor a qualified domestic relations order (within the meaning of
Section 206(d) (3) (B) (i) of ERISA).
7.4 Governing Law. The Plan is established under and will be construed
according to the laws of the State of New Jersey, to the extent that such laws
are not preempted by ERISA and valid regulations promulgated thereunder.
7.5 Incapacity of Recipient. In the event a Participant is declared
incompetent and a conservator or other person legally charged with the care of
the person or the estate of such Participant is appointed, any benefits under
the Plan to which such Participant is entitled shall be paid to the conservator
or other person legally charged with the care of such Participant. Except as
provided in the preceding sentence, should the Administrator, in its discretion,
determine that a Participant is unable to manage his or her personal affairs,
the Administrator may take distributions to any person for the benefit of such
Participant, provided the Administrator makes a reasonable good faith judgment
that such person shall expend the funds so distributed for the benefit of such
Participant.
7.6 Amendment or Termination. The Company reserves the right to amend or
terminate the Plan when, in the sole opinion of the Company, an amendment or
termination is advisable. Any such amendment or termination shall be made
pursuant to a
12
<PAGE>
resolution of the Board of Directors and shall be effective as of the date
specified in the resolution. No amendment or termination of the Plan shall
directly or indirectly deprive any Participant of all or any portion of the
Participant's Performance Account considered to be accrued under the Plan before
the date of amendment or termination.
7.7 Withholding. The Employer reserves the right, notwithstanding any other
provision of the Plan, to withhold applicable federal, state or local taxes from
payments under the Plan.
7.8 Construction. The singular includes the plural, unless the context
clearly indicates otherwise.
13
<PAGE>
Appendix - List of Plan Participants
As of January 1, 1998 the following employees have been designated by the
Administrator as Tier I participants:
Stanley S. Binder
John H. Davies
As of January 1, 1998, the following employees have been designated by the
Administrator as Tier II participants:
Kenneth S. Wood
Richard S. Rosenfeld
14
<PAGE>
AMENDMENT TO THE
BARRINGER TECHNOLOGIES INC.
SUPPLEMENTAL RETIREMENT PLAN
AMENDMENT to the Barringer Technologies Inc. Supplemental Retirement Plan
(the "Plan") dated the 20th day of October, 1999.
WITNESSETH:
WHEREAS, Barringer Technologies Inc. (the "Company") heretofore adopted the
Plan effective as of January 1, 1998; and
WHEREAS, Section 7.6 of the Plan reserves to the Company the right to amend
the Plan from time to time;
NOW, THEREFORE, the Plan is hereby amended as follows:
FIRST
Section 6.2.4 is hereby added to the Plan, to read as follows:
6.2.4 In the event that, on or after a Change in Control, a
litigation, arbitration or other proceeding is commenced by a Participant
to compel the Company to make a distribution under the Plan of amounts
which the Participant is due, the Company shall bear all of the
Participant's reasonable costs and expenses arising in connection with such
dispute or controversy and shall advance or reimburse the Participant, on a
current basis (upon delivery of receipts or invoices), for all reasonable
legal fees and expenses incurred in connection with any such dispute or
controversy (regardless of the result thereof). Pending resolution of any
such dispute or controversy, the Company shall pay or continue to pay all
amounts due the Participant under the Plan (determined without regard to
the matter in dispute). If the Participant's position is not substantially
upheld in connection with any suit or other proceeding to enforce the terms
of the Plan, the Participant shall reimburse the Company for any attorney's
fees and other expenses advanced or paid by the Company to the Participant.
15
<PAGE>
SECOND
Amendment FIRST above shall be effective as of the date first above
written.
IN WITNESS WHEREOF, the undersigned, being a duly authorized officer of the
Company, has executed this Amendment as evidence of its adoption by the Company.
BARRINGER TECHNOLOGIES INC.
By: /s/ RICHARD S. ROSENFELD
------------------------------------
Title: Vice President Finance - CFO
Date: 10/20/99
-16-
The Merrill Lynch Non-Qualified Deferred
Compensation Plan Trust Agreement
TRUST UNDER:
BARRINGER TECHNOLOGIES INC. SUPPLEMENTAL
RETIREMENT PLAN(1)
THIS TRUST AGREEMENT, made this 15th day of November, 1999, by and between
Barringer Technologies Inc. (the "Company") and Merrill Lynch Trust Company, FSB
(the "Trustee");
WHEREAS, the Company has adopted the Barringer Technologies Inc.
Supplemental Retirement Plan (hereinafter referred to as the "Plan"); and
WHEREAS, the Company has incurred or expects to incur liability under the
terms of such Plan with respect to the individuals participating in such Plan;
and
WHEREAS, the Company wishes to establish a trust (hereinafter referred to
as the "Trust") and to contribute to the Trust assets that shall be held therein
subject to the claims of the Company's creditors in the event of the Company's
Insolvency, as herein defined, until paid to the Plan participants and their
beneficiaries in such manner and at such times as specified in the Plan; and
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974,
as amended; and
- ----------
(1) This trust is intended to comply with the model grantor trust requirement
of Revenue Procedure 92-64. While Merrill Lynch believes that this Trust
Agreement complies with the Revenue Procedure it provides no assurance that
modifications to the terms contained herein would not be required by the
Internal Revenue Service during the review process in the event the Company
were to apply for a ruling as to the tax consequences of its plan and this
trust. If the Company desires to obtain such a ruling from the Internal
Revenue Service, a copy of this Trust Agreement with all substituted or
additional language underlined as required by the Revenue Procedure is
available through your Merrill Lynch Financial Consultant.
<PAGE>
WHEREAS, it is the intention of the Company to make contributions to the
Trust to provide itself with a source of funds to assist it in meeting its
liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish the Trust and agree that
the Trust shall be comprised, held and disposed of as follows:
Section 1. Establishment of Trust.
(a) The Company hereby deposits with the Trustee in trust such cash and/or
marketable securities, if any, listed in Appendix A, which shall
become the principal of the Trust to be held, administered and
disposed of by the Trustee as provided in this Trust Agreement.
(b) The Trust hereby established shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which the Company is
the grantor, within the meaning of subpart E, Part I, subchapter J,
chapter 1, subtitle A of the Internal Revenue Code of 1986, as
amended, and shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon shall be held
separate and apart from other funds of the Company and shall be used
exclusively for the uses and purposes of Plan participants and general
creditors as herein set forth. Plan participants and their
beneficiaries shall have no preferred claim on, or any beneficial
ownership interest in, any assets of the Trust. Any rights created
under the Plan and this Trust Agreement shall be mere unsecured
contractual rights of Plan participants and their beneficiaries
against the Company. Any assets held by the Trust will be subject to
the claims of the Company's general creditors under federal and state
law in the event of Insolvency, as defined in Section 3(a) herein.
(e) The Company, in its sole discretion, may at any time; or from time to
time, make additional deposits of cash or other property in trust with
the Trustee to augment the principal to be held, administered and
disposed of by the Trustee as provided in this Trust Agreement.
Neither the Trustee nor any Plan participant or beneficiary shall have
any right to compel such additional deposits.
2
<PAGE>
After a Change of Control, if the Trust assets become insufficient to
pay all amounts to which participants are entitled under the Plan, as
determined by the benefit determiner described in Section 2(b) (the
"Benefit Determiner"), the Company shall contribute to the Trust the
additional amounts necessary to fully fund the liabilities under the
Plan as determined by the Benefit Determiner. A copy of any such
determination by the Benefit Determiner shall be provided to the
Trustee. For purposes of this Trust Agreement, the term "Change in
Control" shall have the meaning assigned thereto under the Plan.
(f) The Trustee shall not be obligated to receive such cash and/or
property unless prior thereto the Trustee has agreed that such cash
and/or property is acceptable to the Trustee and the Trustee has
received such reconciliation, allocation, investment or other
information concerning, or representation with respect to, the cash
and/or property as the Trustee may require. The Trustee shall have no
duty or authority to (a) require any deposits to be made under the
Plan or to the Trustee; (b) compute any amount to be deposited under
the Plan to the Trustee; or (c) determine whether amounts received by
Trustee comply with the Plan. Assets of the Trust may, in the
Trustee's discretion, be held in an account with an affiliate of the
Trustee.
Section 2. Payments to Plan Participants and Beneficiaries.
(a) With respect to each participant of the Plan, the Company (or, after a
Change of Control, the Benefit Determiner) shall deliver to the
Trustee a schedule (the "Payment Schedule") that (i) indicates the
amounts payable in respect of the participant (and his or her
beneficiaries), (ii) that provides a formula or other instructions
acceptable to the Trustee for determining the amounts so payable,
(iii) provides the form in which such amounts are to be paid (as
provided for or available under the Plan), and (iv) provides the time
of commencement for payment of such amounts. The Payment Schedule
shall be delivered to the Trustee not more than 30 business days nor
fewer than 15 business days prior to the first date on which a payment
is to be made to the Plan participant. Any change to a Payment
Schedule shall be delivered to the Trustee not more than 30 days nor
fewer than 15 days prior to the date on which the first payment is to
be made in accordance with the changed Payment Schedule. Except as
otherwise
3
<PAGE>
provided herein, the Trustee shall make payments to Plan participants
and their beneficiaries in accordance with such Payment Schedule. The
Trustee shall make provision for the reporting and withholding of any
federal, state or local taxes that may be required to be withheld with
respect to the payment of benefits pursuant to the terms of the Plan
and shall pay amounts withheld to the appropriate taxing authorities
or determine that such amounts have been reported, withheld and paid
by the Company, it being understood among the parties hereto that (1)
the Company shall on a timely basis provide the Trustee specific
information as to the amount of taxes to be withheld and (2) the
Company shall be obligated to receive such withheld taxes from the
Trustee and properly pay and report such amounts to the appropriate
taxing authorities.
(b) Prior to a Change of Control, the entitlement of a participant in the
Plan (or his or her beneficiaries) to benefits under the Plan shall be
determined by the Company. On and after a Change in Control, the
entitlement of a participant (or his or her beneficiaries) to benefits
under the Plan shall be determined by a Benefit Determiner appointed
by the Company (or his successor appointed in accordance with Section
2(e)). The Trustee shall not be responsible for any action taken
pursuant to a direction, request or approval given by the Benefit
Determiner which is in conformity with, the terms of this Trust
Agreement and is given in writing by the Benefit Determiner and
Trustee may rely on any calculation made by the Benefit Determiner in
accordance with the terms of the Plan. The fees and expenses of the
Benefit Determiner shall be paid by the Company.
(c) The Company may make payment of benefits directly to Plan participants
or their beneficiaries as they become due under the terms of the Plan.
The Company shall notify the Trustee and the Benefit Determiner of its
decision to make payment of benefits directly prior to the time
amounts are payable to participants or their beneficiaries. In
addition, if the principal of the Trust, and any earnings thereon, are
not sufficient to make payments of benefits in accordance with the
terms of the Plan, the Company shall make the balance of each payment
as it falls due. The Trustee shall notify the Company where principal
and earnings are not sufficient.
4
<PAGE>
(d) The Trustee shall have no responsibility to determine whether the
Trust is sufficient to meet the liabilities under the Plan, and shall
not be liable for payments or Plan liabilities in excess of the value
of the Trust's assets.
(e) In the event that the Benefit Determiner resigns or dies after a
Change of Control, the Company shall designate a successor Benefit
Determiner; provided, however, that any successor Benefit Determiner
designated by the Company shall be independent of the Company; and
provided further, however, that if the Company fails to appoint a
successor Benefit Determiner within fifteen (15) days following the
effective date of the Benefit Determiner's resignation or death, the
Plan participants may appoint a successor Benefit Determiner. The
Benefit Determiner may resign at any time upon sixty (60) days written
notice to the Company.
Section 3. Trustee Responsibility Regarding Payments to the Trust Beneficiary
When Company is Insolvent.
(a) The Trustee shall cease payment of benefits to Plan participants and
their beneficiaries if the Company is insolvent. The Company shall be
considered "insolvent" for purposes of this Trust Agreement if:
(i) the Company is unable to pay its debts as they become due; or
(ii) the Company is subject to a pending proceeding as a debtor under
the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof the principal and income of the Trust shall be
subject to claims of general creditors of the Company under federal
and state law as set forth below:
(i) The Board of Directors and the Chief Executive Officer of the
Company (or, if there is no Chief Executive Officer, the highest
ranking officer of the Company) shall have the duty to inform the
Trustee in writing of the Company's Insolvency. If a person
claiming to be a creditor of the Company alleges in writing to
the Trustee that the Company has become Insolvent, the Trustee
shall determine whether the Company is Insolvent
5
<PAGE>
and, pending such determination, the Trustee shall
discontinue payment of benefits to Plan participants or
their beneficiaries.
(ii) Unless the Trustee has actual knowledge of the Company's
Insolvency, or has received notice from the Company or a
person claiming to be a creditor alleging that the Company
is Insolvent, the Trustee shall have no duty to inquire
whether the Company is Insolvent. The Trustee may in all
events rely on such evidence concerning the Company's
solvency as may be furnished to the Trustee and that
provides the Trustee with a reasonable basis for making a
determination concerning the Company's solvency.
(iii) If at any time the Trustee has determined that the Company
is Insolvent, the Trustee shall discontinue payments to Plan
participants or their beneficiaries and shall hold the
assets of the Trust for the benefit of the Company's general
creditors. Nothing in this Trust Agreement shall in any way
diminish any rights of Plan participants or their
beneficiaries to pursue their rights as general creditors of
the Company with respect to benefits due under the Plan or
otherwise.
(iv) The Trustee shall resume the payment of benefits to Plan
participants or their beneficiaries in accordance with
Section 2 of this Trust Agreement only after the Trustee has
determined that the Company is not insolvent (or is no
longer insolvent).
(c) Provided that there are sufficient assets, if the Trustee discontinues
the payment of benefits from the Trust pursuant to Section 3(b) hereof
and subsequently resumes such payments, the first payment following
such discontinuance shall include the aggregate amount of all payments
due to Plan participants or their beneficiaries under the terms of the
Plan for the period of such discontinuance, less the aggregate amount
of any payments made to Plan participants or their beneficiaries by
the Company in lieu of the payments provided for hereunder during any
such period of discontinuance; provided that the Company has given the
Trustee the information with respect to such payments made during the
period of discontinuance prior to resumption of payments by the
Trustee.
6
<PAGE>
Section 4. Payments to Company. Except as provided in Section 3 hereof, since
the Trust is irrevocable in accordance with Section 1(b) hereof, the Company
shall have no right or power to direct the Trustee to return to the Company or
to divert to others any of the Trust assets before all payment of benefits have
been made to Plan participants and their beneficiaries pursuant to the terms of
the Plan.
Section 5. Investment Authority.
(a) The Trustee shall invest and reinvest the principal and income of the
Trust as directed by the Company (including directions that the
Trustee follow Plan participants' deemed investment elections made in
accordance with the terms of the Plan), which directions may be
changed from time to time, all in accordance with procedures
established by the Trustee. The Trustee may limit the categories of
assets in which the Trust may be invested.
(b) The Trustee may invest in securities (including stock or rights to
acquire stock) or obligations issued by the Company. All rights
associated with assets of the Trust shall be exercised by the Trustee
or the person designated by the Trustee, and shall in no event be
exercisable by or rest with Plan participants, except that voting
rights with respect to Trust assets will be exercised by the Company
unless an investment adviser has been appointed pursuant to Section
5(d) and voting authority has been delegated to such investment
adviser.
(c) The Company shall have the right at any time, and from time to time in
its sole discretion, to substitute assets of equal fair market value
for any asset held by the Trust. This right is exercised by the
Company in a nonfiduciary capacity without the approval or consent of
any person in a fiduciary capacity.
(d) The Company may appoint one or more investment managers, including any
entities affiliated with the Trustee, who shall have the power to
manage, acquire, or dispose of such portion of the assets of the Trust
as the Company shall determine subject to the following:
(i) An investment manager shall act in accordance with the provisions
of an investment management agreement entered into between it and
the
7
<PAGE>
Company, an executed copy of which investment management
agreement shall be filed with the Trustee;
(ii) Each such investment manager must be registered as an
investment adviser under the investment Advisers Act of
1940; and shall provide investment advice on a discretionary
or nondiscretionary basis with respect to that portion of
the assets of the Trust as the Company shall specify from
time to time by written direction(s) to the Trustee;
(iii) The indicia of ownership of the assets of the Trust shall be
held by the Trustee at all times;
(iv) Any entity affiliated with the Trustee may act as broker or
dealer to execute transactions, including the purchase of
any securities directly distributed, underwritten, or issued
by an entity affiliated with the Trustee, at standard
commission rates, mark-ups or concessions, and to provide
other management or investment services with respect to such
trust, including the custody of assets;
(v) Any direction given to the Trustee by an investment manager
shall be given in writing or given orally and confirmed in
writing as soon as practicable. Alternatively, an investment
manager may provide investment instructions directly to the
broker or dealer and receipt by the Trustee of a
confirmation of the transaction from the broker or dealer
shall be conclusive evidence of such transactions. In either
case, the Trustee shall have the authority within 24 hours
of receipt of such direction from the investment manager or
confirmation of a transaction to instruct the investment
manager to rescind the transaction if the Trustee finds that
the investment is inconsistent with its operational or
administrative requirements; and
(vi) The Trustee may pay any such investment manager for any such
services from the assets at the Trust without reduction for
any fees or compensation paid to the Trustee for its
services as trustee.
Notwithstanding any other provision of the Agreement, with
respect to the
8
<PAGE>
investment of the assets of the Trust managed by an
investment manager, the Trustee shall have only the duty to
follow the directions of the investment manager and the
Trustee shall not be liable to anyone:
(1) for an act or omission of the investment manager with
respect to the investment of such assets;
(2) for failing to act with respect to the investment of
such assets absent direction from the investment
manager; or
(3) for failing to invest, periodically review or otherwise
deal with the investment of such assets.
In the event the Company is "insolvent" for purposes of
Section 3 of this Trust Agreement and the Company fails to
provide effective investment instructions to the Trustee as
provided in Section 5(a) of this Trust Agreement, the
Trustee may appoint one or more investment advisers who are
registered as investment advisers under the Investment
Advisers Act of 1940, who may be affiliates of Trustee, to
provide investment advice on a discretionary or
non-discretionary basis with respect to all or a specified
portion of the assets of the Trust.
(e) Subject to Section 5(a), Trustee, or the Trustee's designee, is
authorized and empowered:
(i) To invest and reinvest Trust assets, together with the income
therefrom, in common stock, preferred stock, convertible
preferred stock, bonds, debentures, convertible debentures and
bonds, mortgages, notes, commercial paper and other evidences of
indebtedness (including those issued by the Trustee), shares of
mutual funds (which funds may be sponsored, managed or offered by
an affiliate of the Trustee), guaranteed investment contracts,
bank investment contracts, other securities, policies of life
insurance, annuity contracts, options, options to buy or sell
securities or other assets, and all other property of any type
(personal, real or mixed, and tangible or intangible);
9
<PAGE>
(ii) To deposit or invest all or any part of the assets of the
Trust in savings accounts or certificates of deposit or
other deposits in a bank or savings and loan association or
other depository institution, including the Trustee or any
of its affiliates, provided with respect to such deposits
with the Trustee or an affiliate the deposits bear a
reasonable interest rate;
(iii) To hold, manage, improve, repair and control all property,
real or personal, forming part of the Trust; to sell,
convey, transfer, exchange, partition, lease for any term,
even extending beyond the duration of this Trust, and
otherwise dispose of the same from time to time;
(iv) To hold in cash, without liability for interest, such
portion of the Trust as is pending investments, or payment
of expenses, or the distribution of benefits;
(v) To take such actions as may be necessary or desirable to
protect the Trust from loss due to the default on mortgages
held in the Trust including the appointment of agents or
trustees in such other jurisdictions as may seem desirable,
to transfer property to such agents or trustees, to grant to
such agents such powers as are necessary or desirable to
protect the Trust, to direct such agent or trustee, or to
delegate such power to direct, and to remove such agent or
trustee;
(vi) To settle, compromise or abandon all claims and demands in
favor of the or against the Trust;
(vii) To exercise all of the further rights, powers, options and
privileges granted, provided for, or vested in trustees
generally under the laws of the state in which the Trustee
is incorporated as set forth above, so that the powers
conferred upon the Trustee herein shall not be in limitation
of any authority conferred by law, but shall be in addition
thereto;
(viii) To borrow money from any source and execute promissory
notes, mortgages or other obligations and pledge or mortgage
any Trust assets as security; and
10
<PAGE>
(ix) To maintain accounts at, execute transactions through, and lend
on an adequately secured basis stocks, bonds or other securities
to, any brokerage or other firm, including any, firm that is an
affiliate of the Trustee.
Section 6. Additional Powers of the Trustee. To the extent necessary or which it
deems appropriate to implement its powers under Section 5 or otherwise to
fulfill any of its duties and responsibilities as Trustee of the Trust, the
Trustee shall have the following additional powers and authority:
(a) To register securities, or any other property, in its name or in the
name of any nominee, including the name of any affiliate or the
nominee name designated by any affiliate, with or without indication
of the capacity in which property shall be held, or to hold securities
in bearer form and to deposit any securities or other property in a
depository or clearing corporation;
(b) To designate and engage the services of, and to delegate powers and
responsibilities to, such agents, representatives, advisers, counsel
and accountants as the Trustee considers necessary or appropriate, any
of whom may be an affiliate of the Trustee or a person who renders
services to such an affiliate, and, as a part of its expenses under
the Trust Agreement, to pay their reasonable expenses and
compensation;
(c) To make, execute and deliver, as Trustee, any and all deeds, leases,
mortgages, conveyances, waivers, releases or other instruments in
writing necessary or appropriate for the accomplishment of any of the
powers listed in this Trust Agreement; and
(d) Generally to do all other acts that the Trustee deems necessary or
appropriate for the protection of the Trust.
Section 7. Disposition of Income. During the term of this Trust, all income
received, by the Trust, net of expenses and taxes, shall be accumulated and
reinvested.
Section 8. Accounting by Trustee. The Trustee shall keep accurate and detailed
records of all investments, receipts, disbursements, and all other transactions
required to be made
11
<PAGE>
including such specific records as shall be agreed upon in writing between
the Company and the Trustee. Within ninety (90) days following the close of
each calendar year and within ninety (90) days after the removal or
resignation of the Trustee, the Trustee shall deliver to the Company a
written account of its administration of the Trust during such year or
during the period from the close of the last preceding year to the date of
such removal or resignation, setting forth all investments, receipts,
disbursements and other transactions effected by it, including a
description of all securities and investments purchased and sold with the
cost or net proceeds of such purchases or sales (accrued interest paid or
receivable being shown separately), and showing all cash, securities and
other property held in the Trust at the end of such year or as of the date
of such removal or resignation as the case may be. The Trustee may satisfy
its obligation under this Section 8 by rendering to the Company monthly
statements setting forth the information required by this Section
separately for the month covered by the statement.
Upon a change of control, all written accounts or statements provided to
the Company shall also be provided to the Benefit Determiner at an address
provided to the Trustee by the Benefit Determiner.
Section 9. Responsibility of Trustee.
(a) The Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting
in a like capacity and familiar with such matters would use in the
conduct of an enterprise of a like character and with like aims,
provided, however, that the Trustee shall incur no liability to any
person for any action taken pursuant to a direction, request or
approval given by the Company which is contemplated by, and in
conformity with, the terms of the Plan or this Trust and is given in
writing by the Company or in such other manner prescribed by the
Trustee. The Trustee shall also incur no liability to any person for
any failure to act in the absence of direction, request or approval
from the Company which is contemplated by, and in conformity with, the
terms of this Trust. In the event of a dispute between the Company and
a party, the Trustee may apply to a court of competent jurisdiction to
resolve the dispute.
(b) The Company hereby indemnifies the Trustee and each of its affiliates
(collectively, the "Indemnified Parties") against, and shall hold them
harmless
12
<PAGE>
from, any and all loss, claims, liability, and expense, including
reasonable attorneys' fees, imposed upon or incurred by any
Indemnified Party as a result of any acts taken, or any failure to act
in accordance with the directions from the Company or any designee of
the Company or by reason of the Indemnified Party's good faith
execution of its duties with respect to the Trust, including, but not
limited to, its holding of assets of the Trust, the Company's
obligations in the foregoing regard to be satisfied promptly by the
Company, provided that in the event the loss, claim, liability or
expense involved is determined by a no longer appealable final
judgment entered in a lawsuit or proceeding to have resulted from the
gross negligence or willful misconduct of the Trustee, the Trustee
shall promptly on request thereafter return to the Company any amount
previously received by the Trustee under this Section with respect to
such loss, claim, liability or expense. If the Company does not pay
such costs, expenses and liabilities in a reasonably timely manner,
the Trustee may obtain payment from the Trust without direction from
the Company.
(c) The Trustee may consult with legal counsel (who may also be counsel
for the Company generally) with respect to any of its duties or
obligations hereunder.
(d) The Trustee may hire agents, accountants, actuaries, investment
advisers, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder.
(e) The Trustee shall have, without exclusion, all powers conferred on the
Trustee by applicable law, unless expressly provided otherwise herein,
provided, however, that if an insurance policy is held as an asset of
the Trust, the Trustee shall have no power to name a beneficiary of
the policy other than the Trust, to assign the policy (as distinct
from conversion of the policy to a different form) other than to a
successor Trustee, or to loan to any person the proceeds of any
borrowing against such policy.
(f) However, notwithstanding the provisions of Section 9(e) above, the
Trustee may loan to the Company the proceeds of any borrowing against
an insurance policy held as an asset of the Trust.
13
<PAGE>
(g) Notwithstanding any powers granted to the Trustee pursuant to this
Trust Agreement or to applicable law, the Trustee shall not have any
power that could give this Trust the objective of carrying on a
business and dividing the gains therefrom, within the meaning of
Section 301.7701-2 of the Procedure and Administrative Regulations
promulgated pursuant to the Internal Revenue Code.
(h) The Trustee hereby indemnifies the Company and shall hold the Company
harmless from, any and all loss, claims liability and expense,
including reasonable attorney's fees, asserted against the Company by
a non-party to this Agreement, to the extent that such claim, loss,
liability or expense directly results from the negligence or willful
misconduct of the Indemnified Parties in the performance of its
services under this Agreement.
Section 10. Compensation and Expenses of the Trustee. The Trustee is authorized,
unless otherwise agreed by the Trustee, to withdraw from the Trust without
direction from Company, the amount of its fees in accordance with the fee
schedule agreed to by the Company and the Trustee. The Company shall pay all
administrative expenses, but if not so paid, the expenses shall be paid from the
Trust.
Section 11. Resignation and Removal of Trustee.
(a) The Trustee may resign at any time by written notice to the Company,
which shall be effective thirty (30) days after receipt of such notice
unless the Company and the Trustee agree otherwise.
(b) The Trustee may be removed by the Company upon thirty (30) days notice
or upon shorter notice accepted by the Trustee; provided, however,
that the Company may not remove the Trustee at any time following a
Change in Control (as defined in the Plan) without the written consent
of a majority of Plan participants.
(c) Upon resignation or removal of the Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to the
successor Trustee. The transfer shall be completed within sixty (60)
days after receipt of notice of resignation, removal or transfer,
unless the Company extends the time limit,
14
<PAGE>
provided that the Trustee is provided assurance by the Company
satisfactory to the Trustee that all fees and expenses reasonably
anticipated will be paid.
(d) If the Trustee resigns or is removed, a successor shall be appointed,
in accordance with Section 12 hereof, by the effective date of the
resignation or removal under paragraph (a) or (b) of this section. If
no such appointment has been made, the Trustee may apply to a court of
competent jurisdiction for appointment of a successor or for
instructions. All expenses of the Trustee in connection with the
proceeding shall be allowed as administrative expenses of the Trust.
(e) Upon settlement of the account and transfer of the Trust assets to the
successor Trustee, all rights and privileges under the Trust Agreement
shall vest in the successor Trustee and all responsibility and
liability of the Trustee with respect to the Trust and assets thereof
shall terminate subject only to the requirement that the Trustee
execute all necessary documents to transfer the Trust assets to the
successor Trustee.
Section 12. Appointment of Successor.
(a) If the Trustee resigns (or is removed) in accordance with Section
11(a) or (b) hereof, the Company may appoint any third party, such as
a bank trust department or other party that may be granted corporate
trustee powers under state law, as a successor to replace the Trustee
upon resignation or removal; provided, however, that following a
Change in Control (as defined in the Plan), the Company may not
appoint a successor trustee without the consent of a majority of
participants of the Plan. The appointment shall be effective when
accepted in writing by the new Trustee, who shall have all of the
rights and powers of the former Trustee, including ownership rights in
the Trust assets. The former Trustee shall execute any instrument
necessary or reasonably requested by the Company or the
successor Trustee to evidence the transfer.
(b) The successor Trustee need not examine the records and acts of any
prior Trustee and may retain or dispose of existing Trust assets,
subject to Sections 7 and 8 hereof. The successor Trustee shall not be
responsib1e for and the Company shall indemnify and defend the
successor Trustee from any claim or liability resulting
15
<PAGE>
from any action or inaction of any prior Trustee or from any other
past event, or any condition existing at the time it becomes successor
Trustee.
Section 13. Amendment or Termination.
(a) This Trust may be amended by a written instrument executed by the
Trustee and the Company. Notwithstanding the foregoing, no such
amendment shall conflict with the terms of the Plan, make the Trust
revocable, since the Trust is irrevocable in accordance with Section
1(b) hereof, or otherwise impair any of the rights of participants and
beneficiaries under the Plan or this Agreement. In addition,
notwithstanding anything herein to the contrary, the Agreement may not
be amended following a Change in Control (as defined in the Plan)
unless a majority of Plan participants consent to such amendment or
termination.
(b) This Trust shall not terminate until the date on which Plan
participants and their beneficiaries are no longer entitled to
benefits pursuant to the terms of the Plan. Upon termination of this
Trust any assets remaining in this Trust shall be returned to the
Company.
(c) This Agreement may be terminated by the Company if a majority of Plan
participants consent to such termination.
(d) Upon written approval of participants or beneficiaries entitled to
payment of benefits pursuant to the terms of the Plan, the Company may
terminate this Trust prior to the time all benefit payments under the
Plan have been made. All assets in the Trust at termination shall be
returned to the Company.
Section 14. Miscellaneous.
(a) Any provision of this Trust prohibited by law shall be ineffective to
the extent of any such prohibition, without invalidating the remaining
provisions hereof.
(b) Benefits payable to Plan participants and their beneficiaries under
this Trust may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered or subjected to attachment,
garnishment, levy, execution or other legal or equitable process.
16
<PAGE>
(c) This Trust shall be governed by and construed in accordance with the
laws of the State of New Jersey.
(d) The provisions of Sections 2(d), 3(b)(3), 9(b) and 15 of this
Agreement shall survive termination of this Agreement.
(e) The rights, duties, responsibilities, obligations and liabilities of
the Trustee are as set forth in this Trust Agreement, and no provision
of the Plan or any other documents shall affect such rights,
responsibi1ities, obligations and liabilities. If there is a conflict
between provisions of the Plan and this Trust Agreement with respect
to any subject involving the Trustee, including but not limited to the
responsibility, authority or powers of the Trustee, the provisions of
this Trust Agreement shall be controlling.
Section 15. Arbitration.
(a) Arbitration is final and binding on the parties.
(b) The parties waive their right to seek remedies in court, including the
right to jury trial.
(c) Pre-arbitration discovery is generally more limited than and different
from court proceedings.
(d) The arbitrator's award is not required to include factual findings or
legal reasoning and any party's right to appeal or seek modification
of rulings by the arbitrators is strictly limited.
(e) The panel of arbitrators will typically include a minority of
arbitrators who were or are affiliated with the securities industry.
Company agrees that all controversies which may arise between Company
and either or both the Trustee and its affiliate Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("MLPF&S") in connection with the
Trust, including, but not limited to, those involving any
transactions, or the construction, performance, or
17
<PAGE>
breach of this or any other agreement between Company and either or
both the Trustee and MLPF&S, whether entered into prior, on, or
subsequent to the date hereof, shall be determined by arbitration. Any
arbitration under this Agreement shall be conducted only before the
New York Stock Exchange, Inc., the American Stock Exchange, Inc., or
arbitration facility provided by any other exchange of which MLPF&S is
a member, the National Association of Securities Dealers, Inc., or the
Municipal Securities Rulemaking Board, and in accordance with its
arbitration rules then in force. Company may elect in the first
instance whether arbitration shall be conducted before the New York
Stock Exchange, Inc., the American Stock Exchange, Inc., other
exchange of which MLPF&S is a member, the National Association of
Securities Dealers, Inc., or the Municipal Securities Rulemaking
Board, but if the Company fails to make such election, by registered
letter or telegram addressed to Merrill Lynch Trust Company, Employee
Benefit Trust Operations, P.O. Box 30532, New Brunswick, New Jersey
08989-0532, before the expiration of five days after receipt of a
written request from MLPF&S and/or the Trustee to make such election
then MLPF&S and/or the Trustee may make such election. Judgment upon
the award of arbitrators may be entered in any court, state or
federal, having jurisdiction. No person shall bring a putative or
certified class action to arbitration, nor seek to enforce any
pre-dispute arbitration agreement against any person who has initiated
in court a putative class action; who is a member of putative class
who has not opted out of the class with respect to any claims
encompassed by the putative class action until:
(i) the class certification is denied;
(ii) the class is decertified; or
(iii) the customer is excluded from the class by the court. Such
forbearance to enforce an agreement to arbitrate shall not
constitute a waiver of any rights under this agreement except to
the extent stated herein.
Section 16. Effective Date. The effective date of this Trust shall be as first
above written.
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<PAGE>
IN WITNESS WHEREOF, the Company and the Trustee have executed this Trust
Agreement each by action of a duly authorized person.
By signing this Agreement, the undersigned Company acknowledges (1) that,
in accordance with Section 15 of this Agreement, the Company is agreeing in
advance to arbitrate any controversies which may arise with either or both the
Trustee or MLPF&S and (2) receipt of a copy of this Agreement.
BARRINGER TECHNOLOGIES INC.
By: /s/ Richard S Rosenfeld
----------------------------
(Signature)
Name/Title: Richard S Rosenfeld
--------------------
Vice Pres - Finance
Chief Financial Officer
MERRILL LYNCH TRUST COMPANY, FSB
By: Melanie Madeira
----------------------------
(Signature)
Name/Title: Melanie Maderia
New Account Trust Officer
--------------------
"Company Copy"
19
--------------------------
AMENDED AND RESTATED
UNLIMITED GUARANTY OF PAYMENT AND PERFORMANCE
--------------------------
THIS AGREEMENT OF GUARANTY, dated as of this 1st day of July, 1999, between
Barringer Instruments Incorporated, a Delaware corporation, with offices at 30
Technology Drive, Warren, New Jersey 07059, and Digivision, Inc., a California
corporation, with offices at 4775 Viewridge Avenue, San Diego, California 92123
(each being a "Guarantor", and collectively, the "Guarantors") and FLEET BANK,
N.A. with offices at 1125 Route 22 West, Bridgewater, New Jersey 08807
(hereinafter, together with any successor and assigns, "Lender").
WITNESSETH:
WHEREAS, Barringer Technologies Inc., a Delaware corporation (the
"Borrower") is indebted to Bank pursuant to a certain Revolving Credit Note,
dated March 13, 1998 (the "Note"), which evidences an obligation in the original
maximum principal balance of $5,000,000.00 (the "Loan"); and
WHEREAS, Barringer Instruments Incorporated, executed and delivered an
Unlimited Guaranty of Payment and Performance, dated March 13, 1998, which
guaranteed the Borrower's obligations under the Note; and
WHEREAS, Borrower has since acquired Digivision, Inc.; and
WHEREAS, Borrower has requested that (i) Bank renew the Loan; and
WHEREAS, Lender is unwilling to renew the Loan without further security in
the form of an unconditional guaranty by the Guarantors; and
WHEREAS, to induce Lender to grant the Loan to the Borrower, each Guarantor
herein executes the within instrument; and
NOW, THEREFORE, in consideration of the premises contained herein and the
sum of ONE ($1.00) DOLLAR, the receipt of which is hereby acknowledged, the
undersigned agree as follows:
1. Guaranty. Each Guarantor, jointly, severally, absolutely and
unconditionally guarantees to Lender the due and prompt payment, whether at
maturity or by acceleration or otherwise, of the Loan including all principal,
interest and other monies due or that may become due under the documents
evidencing the Loan (collectively, the "Loan Documents") and the due and
punctual performance and observance by Borrower of any other terms, covenants
and conditions of the Loan Documents on the part of Borrower to be kept,
observed or performed together with all reasonable legal and other expenses of
collection and enforcement, including payment of the Loan. Each Guarantor hereby
expressly and unconditionally waives demand, notice of presentment and
non-payment, protest and notice of protest, of said Note and consents that the
time for payment thereof may be extended by Lender without notice to or further
consent from any Guarantor.
2. Actions of Lender Do Not Affect Liability. In addition to (but not in
limitation of) all of the foregoing provisions, Lender may take any of the
following actions (with or without notice to any Guarantor) without affecting
the liability of any Guarantor in any way:
(a) Release, exchange, increase, decrease or surrender all or any part
of the security held by Lender for the said obligation, or substitute new
security for all or any portion thereof, whether or not the new security
shall be equal in value with the security substituted.
<PAGE>
(b) Recast, extend or modify all or any portion of Note.
(c) Grant waivers, extensions, renewals or other indulgences under any
of the Loan Documents.
(d) Modify or amend any of the terms, provisions or agreements
contained in any of the Loan Documents.
(e) Vary, exchange, release or discharge, wholly or partially, or
delay in or abstain from perfecting or enforcing any security or guaranty
of the Loan Documents by any other person.
(f) Accept partial payment or performance of any of the obligations
due under the Loan Documents from the Borrower or any Guarantor.
(g) Compromise or make any settlement or other arrangement with the
Borrower or any Guarantor.
3. Liability Unconditional. Liability on this Guaranty shall not be
conditional or contingent upon the pursuance by Lender of whatever remedies that
Lender may have against Borrower, nor shall Lender be required to foreclose,
exhaust, or in any other way look for any security that Lender now has or that
Lender may obtain or acquire in the future. Lender shall not be obligated or
required to pursue any remedies it may have against Borrower, upon default of
Borrower, prior to pursuing any remedy against any Guarantor. Not in limitation
of the generality of the foregoing, the liability of any Guarantor hereunder
shall remain effective and enforceable even though Borrower's liability under
the Loan Documents may be unenforceable or even though recovery against the
Borrower may be barred by a statute of limitations or otherwise. Guarantor
waives any defense arising by reason of any disability or other defense of
Borrower or by reason of the cessation, from any cause whatsoever, of the
liability of Borrower.
4. Continuing Liability. Liability of the Guarantor hereunder shall be a
continuing one and shall extend to any and all notes or other evidences of
indebtedness that may be given in extension or renewal of the Note.
5. Representations and Warrants. Each Guarantor hereby represents and
warrants that:
(a) Barringer Instruments, Incorporated, is a New Jersey corporation
in good standing and qualified to do business in New Jersey and all other
jurisdictions in which it conducts business or owns assets. Digivision,
Inc., is a California corporation in good standing and qualified to do
business in all other jurisdictions in which it conducts business or owns
assets.
(b) The execution of this guaranty by each Guarantor has been duly
authorized by proper action of its respective board of directors and the
persons executing this guaranty on behalf of each Guarantor have been
authorized to act on the Guarantor's behalf and to bind each respective
Guarantor to the terms hereof.
(c) Each Guarantor has the legal capacity to enter into this Guaranty
and to perform its obligations hereunder.
(d) This Guaranty constitutes the legal, valid and binding obligation
of each Guarantor and is enforceable against each Guarantor in accordance
with its terms, subject to creditors, rights in general and bankruptcy and
insolvency laws.
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<PAGE>
(e) There is no action, suit, proceeding, inquiry or investigation, at
law or in equity, or before or by any court, public board or body, pending
or within the knowledge of any Guarantor threatened, wherein an unfavorable
decision, ruling or finding would (i) to the extent not covered by
insurance, result in any material, adverse change in the business,
financial condition, properties or operations of any Guarantor; (ii)
materially adversely affect the transactions contemplated in the Loan
Documents or this Guaranty; or (iii) adversely affect the validity or
enforceability of the Loan Documents or this Guaranty. All authorizations,
consents and approvals of governmental bodies or agencies required in
connection with the execution and delivery of this Guaranty or in
connection with the performance of each Guarantor's obligations hereunder
have been obtained and will be obtained whenever required hereunder by law.
(f) Neither the execution and delivery of this Guaranty, the
consummation of the transactions contemplated hereunder, nor the
fulfillment of or compliance with the terms and conditions contained herein
is prevented, limited by, conflicts with or results in a breach of the
terms, conditions or provisions of any law, rule, regulation, order of any
court or governmental agency, or any evidence of indebtedness, agreement or
instrument of whatever nature to which any Guarantor (or any company,
corporation or other business entity controlled by Guarantor or affiliated
with it) is now a party, or to which any Guarantor or any such entity is
bound, or constitutes a default under any of the foregoing. Such execution,
delivery, consummation and performance will not result in the creation or
imposition of any lien, charge or encumbrance upon any of the property or
assets of any Guarantor or any such entity.
(g) The granting of the credit facility to the Borrower will result in
material benefits to each Guarantor.
(h) Neither this Guaranty nor any other document, certificate or
statement furnished to the Lender by or on behalf of the Borrower or any
Guarantor contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
herein and therein not misleading or incomplete.
(i) The representations and warranties of the Borrower to the Lender
were wholly true and accurate when made and are wholly true and accurate as
of the execution hereof.
6. Covenants of Guarantor. Each Guarantor hereby covenants and agrees that:
(a) Guarantor guarantees, unconditionally, that the Loan and other
obligations of Borrower under the Loan Documents will be paid and performed
in accordance with their terms, promptly upon demand of the Lender.
(b) Guarantor shall cause the Borrower to fully perform and observe
all of the covenants, agreements and obligations of the Borrower under each
of the Loan Documents.
(c) If Guarantor shall receive any monies, by reason of the exercise
of any rights of subrogation or contribution, prior to the payment in full
and performance of the Obligations contained herein and under the Loan
Documents, such amounts shall be paid by such Guarantor directly to the
Lender.
(d) If Borrower is now or shall hereafter become indebted to
Guarantor, the amount of each sum and such indebtedness shall at all times
be subordinate, as to lien, time of payment and in all other respects to
the amounts owing to the Lender under the Loan Documents, and Guarantor
shall not be entitled to enforce or receive payment thereof until all sums
owing to the Lender have been paid. Nothing herein contained is intended or
shall be construed to give Guarantor any right of
3
<PAGE>
subrogation in or under the Note, or any right to participate in any way
therein, notwithstanding any payments made by Guarantor under the Guaranty.
The obligations of the Guarantor hereunder shall continue in full force and
effect until the obligations and all obligations of the Borrower shall have
been fully paid and performed.
(e) At all times during the term of this Guaranty, Guarantor shall
operate and maintain its assets and properties in a reasonable manner and
keep their property in good repair, and shall not despoil their assets.
(f) Guarantor shall promptly notify Lender of any material and adverse
changes in Guarantor's financial condition during the period of time that
the Loan remains outstanding.
(g) Guarantor shall promptly notify Lender of any litigations,
actions, proceedings, claims or investigations, pending or threatened
against Guarantor, that may materially and adversely affect the financial
condition of Guarantor.
7. Events of Default. Any one or more of the following shall constitute an
"Event of Default" hereunder:
(a) Failure of any Guarantor to perform its obligations herein or
under the terms of the Revolving Credit Loan Agreement, dated March 13,
1998, as amended.
8. Remedies Upon Default. If any one or more Events of Default shall occur
under this Guaranty, then in each case, the Lender shall have all rights and
remedies, including but not limited to the right to:
(a) cause all amounts payable hereunder and pursuant to the Loan
Documents to be immediately due and payable, whereupon the same shall
become immediately due and payable;
(b) take any other action available, either in law or in equity to
enforce performance or collect any amounts due or thereafter to become due
under this Guaranty, or any of the Loan Documents and exercise all rights
and remedies of the Lender thereunder;
(c) enforce the observance of any of the covenants or obligations of
any Guarantor under this Guaranty or any of the obligations of the Borrower
under the Loan Documents.
9. Costs of Collection. This Guaranty also includes all reasonable
attorneys' fees and expenses and disbursements incurred by Lender in the
collection, enforcement of payment or performance by Borrower of any obligation
of Borrower to Lender, and in the collection, enforcement of payment or
performance by each Guarantor hereunder, including all reasonable expenses
incurred in enforcing all rights under this Guaranty.
10. No Waiver. Any waiver by Lender on default of Borrower, and any failure
on the part of Lender to enforce its rights against Borrower, shall be limited
to that particular instance, shall not operate or be deemed to waive any future
default or defaults, and shall not affect the absolute and unconditional
liability of any Guarantor. Any extensions of time granted by Lender to Borrower
shall not release any Guarantor from its obligations hereunder.
11. Indemnification. Each Guarantor shall indemnify and save the Lender
harmless from any loss, claim, demand or charge whatsoever incurred by Lender
arising out of or resulting from default of the Borrower under any of the Loan
Documents.
4
<PAGE>
12. Continuing Effect. This Guaranty shall continue in full effect,
notwithstanding any insolvency or bankruptcy of the Borrower.
13. Consent and Waiver By Guarantor. Each Guarantor hereby consents to all
the terms and provisions of each of the Loan Documents, as the same may be from
time to time amended or modified. Each Guarantor hereby irrevocably waives:
(a) Notice of acceptance of this Guaranty and notice that credit has
been extended by the Lender in reliance thereon;
(b) Notice of any amendment or any change in the terms of any of the
Loan Documents, or any other present or future agreement relating directly
or indirectly thereto;
(c) Notice of any default or Event of Default under any of the Loan
Documents, or any other present or future agreement relating directly or
indirectly thereto;
(d) Demand for performance, observance of and enforcement of any
provisions, or any pursuit or exhaustion of any rights or remedies against
the Borrower, or any other Guarantor or obligor who becomes liable in any
manner for any of the obligations, and any requirements of diligence or
promptness on the part of the Lender or any assignee of Lender in
connection therewith;
(e) Diligence, presentment, protest, notice of dishonor and notice of
default in the payment of any amount at any time payable by the Borrower
under or in connection with any of the Loan Documents;
(f) The benefit of any statute of limitations affecting Guarantor's
liability hereunder or the enforcement thereof, and agrees that any payment
of any indebtedness or other act that shall toll any statute of limitations
applicable thereto shall similarly operate to toll such statute of
limitations applicable to Guarantor's liability hereunder; or
(g) The benefit of laws exempting property from levy or execution.
14. Binding Effect. Each Guarantor hereto agrees that this Guaranty shall
bind and inure to the benefit of its successors and assigns.
15. Governing Law. This Guaranty shall be governed by the substantive law
of New Jersey. Each Guarantor hereby consents to the jurisdiction of the courts
of the State of New Jersey or the federal courts located in the federal district
of New Jersey.
16. Assignment By Lender. Lender may, without notice, assign this Guaranty
in whole or in part to a party to whom the Loan is assigned.
17. Setoff. In addition to all liens upon, and rights of setoff against,
the monies, securities or other property of each Guarantor given to Lender by
law, Lender shall have a lien upon and a right of setoff against, all monies,
securities and other property of each Guarantor now or hereafter in the
possession of Lender. Every such lien and right of setoff may be exercised
without demand upon or notice to any Guarantor. No lien or right of setoff shall
be deemed to have been waived by any act or conduct on the part of Lender, or by
any neglect to exercise such right of setoff or to enforce such lien, or by any
delay in so doing. Every right of setoff and lien shall continue in full force
and effect until such right of setoff or lien is assigned to Lender as security
for this Guaranty and the Loan, without reducing or affecting in any manner the
liability of any Guarantor under the other provisions of this Guaranty. Any
notes now or hereafter evidencing indebtedness of Borrower to any Guarantor
5
<PAGE>
shall be marked with a legend that the same are subject to this Agreement and,
if Lender so requests, shall be delivered to Lender.
18. Notices. All notices, requests and other communication pursuant to this
Guaranty shall be in writing, addressed to the Lender at its place of business
first indicated above or to the Guarantor at its address first indicated above
or at such other address as either party may give notice to the other as herein
provided. Any notice shall be by certified mail, return receipt requested, and
shall be effective upon mailing. If hand delivered, the notice shall be
effective upon receipt.
19. Obligations Absolute. The obligations of each Guarantor hereunder shall
be joint, several and absolute.
20. Severability. If any term, provision, covenant or condition hereof
should be held by a court of competent jurisdiction to be invalid, void or
unenforceable, all other provisions, covenants and conditions hereof not held
invalid, void or unenforceable shall continue in full force and effect and shall
in no way be affected, impaired or invalidated thereby.
21. Payment Without Deduction. Each Guarantor shall make all payments
required hereunder, free of any deductions, and without abatements, deduction or
setoff.
22. Waiver of Jury Trial. Each Guarantor waives any right to a jury trial
in any litigation in any court with respect to, in connection with or arising
out of the Loan or any instrument or document delivered pursuant to the Loan, or
with respect to the validity, protection, interpretation, collection or
enforcement of the Loan.
6
<PAGE>
IN WITNESS WHEREOF, each Guarantor has executed this Guaranty as of the
date first written above.
ATTEST: GUARANTOR:
Barringer Instruments Incorporated,
a Delaware corporation
/s/ Richard S. Rosenfeld By: /s/ Stanley Binder
- ----------------------------- ------------------------------
Richard S. Rosenfeld Name: Stanley Binder
Vice President Finance Title: President
Digivision, Inc.
a California corporation
/s/ Richard S. Rosenfeld By: /s/ Stanley Binder
- ----------------------------- ------------------------------
Richard S. Rosenfeld Name: Stanley Binder
Vice President Finance Title: President
7
FIRST AMENDMENT TO REVOLVING CREDIT LOAN AGREEMENT
THIS AGREEMENT (the "Agreement") dated as of the 1st day of July, 1999,
between FLEET BANK, N.A., with offices at 1125 Route 22 West, Bridgewater, New
Jersey 08807 (the "Bank") and BARRINGER TECHNOLOGIES INC., a Delaware
corporation, with offices at 30 Technology Drive, Warren, New Jersey 07059
("BTI" or "Borrower"), BARRINGER INSTRUMENTS INCORPORATED, a New Jersey
corporation, with offices at 30 Technology Drive, Warren, New Jersey 07059
("BII"), BARRINGER RESEARCH LIMITED, a Canadian corporation with offices at 1730
Aimes Boulevard, Mississauga, Ontario, Canada L4W IVI ("BRL"), and DIGIVISION,
INC., a California corporation with offices at 4775 Viewridge Avenue, San Diego,
California 92123.
WITNESSETH:
WHEREAS, Borrower executed and delivered a revolving credit note to Bank in
the current principal sum not to exceed Five Million and 00/100 Dollars
($5,000,000) (the "Revolving Credit Line"); and
WHEREAS, the advances under the Revolving Credit Line are made by Bank in
accordance with and subject to the terms, covenants, conditions and provisions
of the Revolving Credit Loan Agreement, dated as of March 13, 1998 (as further
amended herein, the "Loan Agreement");
WHEREAS, the terms of Loan Agreement provide that the Borrower may request
advances under the Loan Agreement up to and until June 30, 1999 (the "Revolving
Credit Termination Date"); and
WHEREAS, Borrower has acquired Digivision, Inc., since the date of the Loan
Agreement, and the Bank requires that Digivision, Inc., guaranty Borrower's
obligations under the Revolving Credit Line and the Loan Agreement (together
with all related documents, the "Loan Documents"); and
WHEREAS, the Borrower and Bank have agreed to further amend the terms and
conditions of the Loan Agreement upon the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the parties hereby agree as follows:
1. Preamble. Each and every part of the preamble hereof is incorporated
herein by reference as if set forth at length.
2. Amendment of Loan Agreement.
a. The definition of Revolving Credit Termination Date is revised to June
28, 2000.
b. The definition of "LIBOR Interest Rate" is revised to mean an interest
rate based upon the LIBOR Rate, plus 1.50%.
3. The definition of "Base Interest Rate" is revised to mean a variable
interest rate equal to the Prime Rate, less 1 .0%.
d. Section 2.4 (Fees) is deleted and replaced with the following:
Borrower shall pay an annual commitment fee to Lender on the Revolving
Credit, which fee shall equal one-quarter of one percent (0.25%) of
the Revolving Credit measured on
<PAGE>
a per annum basis and payable as of the end of each of Borrower's
fiscal quarters.
e. Section 6.5 (Borrower and BII Financial Covenants) is in its entirety.
f. Section the following: 6.6 (Borrower and Subsidiary Financial Covenants)
is deleted and replaced with
SECTION 6.6.1 Total Liabilities to Tangible Net Worth. The ratio of
Total Liabilities to Tangible Net Worth shall not equal or exceed
0.40.
SECTION 6.6.2 Net Income. The consolidated Net Income shall exceed
$2,000,000 on a rolling four quarter basis, without a loss in any two
(2) consecutive calendar year quarters (non-cash writeoffs shall be
excluded from this calculation).
SECTION 6.6.3 Capital Expenditures/Acquisitions. The aggregate of
capital expenditures, loans, investments or advances to entities which
are not or do not become a Guarantor (specifically to include BRL), or
funds used for acquisitions shall not exceed $10,000,000 in any
aggregate four (4) consecutive calendar year quarters, without
Lender's prior written consent.
SECTION 6.6.4 Borrower and Guarantor Financial Covenants. Borrower and
Guarantor shall have combined assets that represent at least 80% of
the assets of the Borrower and all of Borrower's subsidiaries.
3. Representations and Warranties of Borrower. Borrower hereby represents
and warrants to the Bank that the statements, representations and warranties
made by Borrower in the Loan Agreement are true and correct in all material
respects as of the date hereof.
4. Affirmation. Except as expressly modified herein, the Loan Agreement, as
amended, and all other documents related to the Revolving Credit Line
(collectively, the "Loan Documents") remain in full force and effect in
accordance with the terms thereof. The Borrower hereby ratifies, confirms and
approves all of the terms of the Loan Documents.
5. Binding Effect. This Agreement shall be binding upon the parties hereto
and their successors and assigns.
6. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of New Jersey.
7. Guaranty. Digivision, Inc., by executing the Amended and Restated
Unlimited Guaranty of Payment and Performance of same date, hereby guarantees
the Borrower's obligations to Bank under the Loan Documents.
2
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above
WITNESS/ATTEST: BORROWER:
BARRINGER TECHNOLOGIES INC. BARRINGER INSTRUMENTS INCORPORATED
By: /s/ Stanley Binder By: /s/ Stanley Binder
--------------------------------- -------------------------------
Name: Name:
Title: Title:
Attest: /s/ Richard S. Rosenfeld Attest: /s/ Richard S. Rosenfeld
----------------------------- ---------------------------
BARRINGER RESEARCH LIMITED
By: /s/ Stanley Binder
---------------------------------
Name:
Title:
Attest: /s/ Richard S. Rosenfeld
-----------------------------
DIGIVISION, INC.
By: /s/ Stanley Binder
---------------------------------
Name:
Title:
Attest: /s/ Richard S. Rosenfeld
-----------------------------
FLEET BANK, N.A.
By: /s/ Craig W. Heal
---------------------------------
Name: Craig W. Heal
Title: Vice President
3
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
EXHIBIT 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Barringer Technologies Inc.
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 9, 2000 relating to
the consolidated financial statements and schedule of Barringer Technologies
Inc. and subsidiaries appearing in the Company's Annual Report on Form 10-K for
the year ended December 31, 1999.
BDO SEIDMAN, LLP
Woodbridge, New Jersey
March 24, 2000
<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, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 26933
<SECURITIES> 1178
<RECEIVABLES> 7790
<ALLOWANCES> 393
<INVENTORY> 5543
<CURRENT-ASSETS> 44882
<PP&E> 5956
<DEPRECIATION> 2779
<TOTAL-ASSETS> 48765
<CURRENT-LIABILITIES> 2913
<BONDS> 0
0
87
<COMMON> 79
<OTHER-SE> 45087
<TOTAL-LIABILITY-AND-EQUITY> 48765
<SALES> 20155
<TOTAL-REVENUES> 20155
<CGS> 8604
<TOTAL-COSTS> 8604
<OTHER-EXPENSES> 9168
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4046
<INCOME-TAX> 1468
<INCOME-CONTINUING> 2578
<DISCONTINUED> (1300)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1278
<EPS-BASIC> 0.18
<EPS-DILUTED> 0.16
</TABLE>
