-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PAmJa5Qspu8zCUDo9laKOufn2l85jrf48+N4Fk+HZzuWOijswg+TW5t/NsLvM36P sOPy5pvuOgH9YGu/CagfSA== 0000905718-99-000214.txt : 19990409 0000905718-99-000214.hdr.sgml : 19990409 ACCESSION NUMBER: 0000905718-99-000214 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990331 DATE AS OF CHANGE: 19990408 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BARRINGER TECHNOLOGIES INC CENTRAL INDEX KEY: 0000010119 STANDARD INDUSTRIAL CLASSIFICATION: 8734 IRS NUMBER: 840720473 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-03207 FILM NUMBER: 99583948 BUSINESS ADDRESS: STREET 1: 219 SOUTH STREET CITY: NEW PROVIDENCE STATE: NJ ZIP: 07974 BUSINESS PHONE: 9086658200 MAIL ADDRESS: STREET 1: 219 SOUTH STREET CITY: NEW PROVIDENCE STATE: NJ ZIP: 07974 FORMER COMPANY: FORMER CONFORMED NAME: BARRINGER RESOURCES INC DATE OF NAME CHANGE: 19910331 FORMER COMPANY: FORMER CONFORMED NAME: BARRINGER RESEARCH INC DATE OF NAME CHANGE: 19800821 10-K 1 10-K U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the fiscal year ended December 31, 1998 Commission File Number: 0-3207 Barringer Technologies Inc. (Name of small business issuer in its charter) Delaware 84-0720473 (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 30 Technology Drive, Warren, NJ 07059 (Address, Including Zip Code, of Principal Executive Offices) (908) 222 - 9100 (Issuer's Telephone Number) Securities registered pursuant to Section 12(b) of the Exchange Act: NONE Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock, par value $.01 per share Common Stock Purchase Warrants Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K contained in this form and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of voting stock held by nonaffiliates computed by reference to the price at which the stock was sold, or the average bid and asked price of such stock, is $31,291,000 as of March 26, 1999. State the number of shares of each of the issuer's classes of common stock, outstanding as of the latest practicable date. Outstanding as of March 26, 1999 Common Stock, $.01 par value 7,394,072 TABLE OF CONTENTS Page PART I Item 1. Business................................................ 3 Item 2. Properties.............................................. 8 Item 3. Legal Proceedings....................................... 8 Item 4. Submission of Matters to a Vote of Security Holders..... 9 PART II Item 5. Market for Common Equity and Related Stockholder Matters.. 9 Item 6. Selected Financial Data................................... 10 tem 7. Management's Discussion and Analysis...................... 11 Item 7A.Quantitative and Qualitative Disclosures About Market Risk. 17 Item 8. Financial Statements and Supplemental Data................. 17 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures....................... 17 PART III Item 10. Directors and Executive Officers of the Registrant......... 18 Item 11. Executive Compensation..................................... 20 Item 12. Security Ownership of Certain Beneficial Owners and Management...................................... 25 Item 13. Certain Relationships and Related Transactions............. 27 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K........................................ 27 Signatures........................................................... 31 PART I Item 1. Business. Disclosure Regarding Forward Looking Statements This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are based on the beliefs of the Company's management as well as assumptions made by and information currently available to the Company's management. When used in this Annual Report, the words "estimate," "project," "believe," "anticipate," "intend," "expect," "plan," predict," "may," "should," "will," the negative thereof and similar expressions are intended to identify forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, financial and otherwise, could differ materially from those set forth in or contemplated by the forward-looking statements contained herein. Important factors that could contribute to such differences include, but are not limited to, the development and growth of markets for the Company's products, the Company's dependence on and the effect of governmental regulations on demand for the Company's products, the impact of both foreign and domestic governmental budgeting decisions and the timing of governmental expenditures, the reliance of the Company on its IONSCAN(R) products, and the dependency of the Company on its ability to successfully develop and market new products applications, the effects of competition, and the effect of general economic and market conditions, as well as conditions prevailing in the markets for the Company's products. Certain of the factors summarized above are described in more detail in the Company's Registration Statement on Form SB-2 (File no. 333-33129) and reference is hereby made thereto for additional information with respect to the matters referenced above. Other factors may be described from time to time in the Company's other filings with the Securities and Exchange Commission, news releases and other communications. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company does not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements set forth above and contained elsewhere in this Form 10-K. General The Company was incorporated under the laws of the State of Delaware on September 7, 1967. The Company is the world's leading manufacturer (based on units sold) of high sensitivity equipment used for detecting and identifying trace amounts of plastic and other explosives and illegal drugs. The Company designs and produces products that employ a proprietary application of ion mobility spectrometry ("IMS") technology that can detect and identify targeted compounds in amounts smaller than one-billionth of a gram in approximately six seconds. The Company's current principal product, the IONSCAN(R), is a portable desktop system used in explosives detection and drug interdiction applications. As of December 31, 1998, the Company had sold over 1,000 units in 53 countries. The markets for the Company's IONSCAN(R) currently include aviation security, other transport security, facilities protection, forensics, military, corrections, customs and law enforcement. The Company's customers include the Federal Aviation Administration (the "FAA"), the U.S. Air Force, the U.S. Coast Guard, the U.S. Drug Enforcement Agency (the "DEA") and the Federal Bureau of Investigation (the "FBI"), as well as customs agencies in France, Canada, Australia and Japan and various prison facilities in the U.S. and elsewhere. The IONSCAN(R) is also installed at over 40 airports and transportation centers in countries throughout the world, including Gatwick Airport and Heathrow Airport in the United Kingdom and Kuala Lumpur Airport in Malaysia, as well as the Eurotunnel. In the United States alone, there are over 250 IONSCAN(R)s installed in 30 airports such as John F. Kennedy International Airport and Chicago O'Hare International Airport in the United States. The Company believes that its principal competitive advantages are the detection capability, reliability, versatility, cost effectiveness, ease of use, portability and after-market service of the IONSCAN(R). These advantages enable the IONSCAN(R) to be used both in lieu of and in conjunction with bulk imaging technologies, such as enhanced x-ray and computer aided tomography ("CATSCAN"). The Company believes that many of the markets it serves are experiencing substantial growth, principally in reaction to heightened safety concerns caused by the threat of terrorism and growing public awareness of drug-related criminal activity. The Company believes that the deployment of advanced detection equipment, such as the IONSCAN(R), will continue to increase as the acceptance of using such equipment to combat these concerns increases. During 1998, the Company received orders totaling $9.4 million from the FAA as part of the FAA's publicly announced intention to further deploy advanced detection technology at the nation's larger airports. In addition, during 1997 and 1998, the Company sold a number of IONSCAN(R)s to the U.S. Air Force for use in securing certain U.S. Air Force bases in the U.S. and abroad. The Company believes that there are numerous potential applications for its trace detection technology. Currently, the principal applications are explosives detection and drug interdiction. Market Overview Explosives Detection In the past several years, a number of events have contributed to increased public concern regarding the threat of terrorism and have focused government attention on the limited effectiveness of currently deployed x-ray and metal detection equipment and on the need for advanced explosives detection technology. As a result, several advanced technologies have been adapted for use in explosives detection applications. These technologies include bulk imaging techniques, such as enhanced x-ray and CATSCAN, as well as trace detection techniques, such as IMS, gas chromatography and chemoluminescence. Bulk imaging techniques offer certain advantages over conventional x-ray technology, but are generally expensive to deploy (as much as $1.0 million per installation), are non-portable and generally reject a large number of objects as a result of perceived anomalies that are later determined not to be explosives. By comparison, trace detection equipment is capable of detecting and identifying minute amounts of chemical substances and is generally more portable and less expensive than bulk imaging equipment. While implementation of advanced detection strategies has varied significantly around the world, the Company believes that aviation authorities, including the FAA, have generally recognized that no one detection technology provides a complete solution to the problem of enhancing existing detection capabilities. Consequently, trace detection technology is frequently deployed as a complement to bulk imaging equipment to resolve anomalies identified by bulk detectors and in applications where it is impractical to use the larger, less mobile bulk imaging detectors, such as checking carry-on baggage. Trace detection technology is also deployed in lieu of bulk imaging equipment in certain installations because of its relatively low cost, particularly in smaller airports and in less developed countries. The development and deployment of advanced explosives detection technology is being driven by recent government initiatives in the United States and elsewhere in the world. For example, in response to the recommendations of the White House Commission on Aviation Safety and Security (the "Gore Commission"), in October 1996, the U.S. Congress appropriated $144 million for the procurement of advanced explosives detection technology and an additional $100 million for fiscal year 1999, which the FAA is using to deploy such technology in a limited number of the 400 busiest U.S. airports. Also, since the enactment of the Aviation Security Act of 1990, the FAA has funded over $200 million for research and development of advanced explosives detection technologies. Trace detection technology has a broad range of other explosives detection uses, including other transport security, facilities protection, forensics, military and law enforcement. Government agencies, military forces and private businesses have deployed trace detection equipment at facilities, such as the World Trade Center, military bases, embassies and public utilities, such as nuclear power plants, that are perceived as potential targets of terrorist attacks. Law enforcement agencies, such as the FBI and the New York City Police Department, and military forces also use trace detection technology for forensic purposes. For example, the IONSCAN(R) was used in connection with the investigations of the crash of TWA Flight 800 and the 1995 Oklahoma City bombing. Drug Interdiction As a result of increased drug usage, particularly amongst children under 18, a heightened public awareness of drug-related criminal activity generally, and the use of more sophisticated techniques by drug traffickers, government agencies have increased their spending on drug interdiction efforts. The use of conventional x-ray scanning, random searches and canines has had limited success in suppressing illegal drug trafficking. Accordingly, customs and law enforcement agencies have increasingly turned to advanced detection technology to assist in their drug detection and interdiction efforts. For example, the U.S. Coast Guard has deployed trace detection equipment onboard its ships to search vessels at sea for illegal drugs. Similarly, prisons in the U.S. and elsewhere are employing trace detection equipment to reduce drug use. Other Products On April 30, 1998, the Company acquired DigiVision, Inc. ("DigiVision"), a San Diego-based developer of video enhancement products for use in medical and various industrial applications. The Company has developed and introduced into the market place a Gas Chromatography-IONSCAN(R) ("GC-IMS"). The GC-IMS is a fully transportable field screening instrument that combines the technology of the Ionscan with the separation capabilities of a gas chromatograph. This product will now allow for dual analysis capability providing improved resolution and quantitative results. Sales and Marketing The Company sells its products through a direct sales organization comprised of 27 sales and service people located at its headquarters in New Jersey and at offices in San Diego, Toronto, London, Paris and Kuala Lumpur. In addition, the Company utilizes a network of 63 independent sales and service representatives located in the United States, Europe, the Middle East, Africa, Asia, South America and Australia. The Company's sales and marketing efforts typically involve extensive customer visits, demonstrations and field testing. Sales prospects generally are targeted by the Company or its independent sales representatives, although the Company also responds to requests for proposals. Selling prices for the IONSCAN(R) typically range from $40,000 to $55,000 per unit, depending principally on the configuration of the unit and the purchaser's location. Once a sale is consummated, the Company provides training at a customer's location to teach operators how to use the IONSCAN(R), including proper sampling techniques. The Company generally provides a one-year parts and labor warranty on its IONSCAN(R) instruments, although from time to time the Company has provided extended warranties. To date, the Company's warranty claims experience has not been significant. The Company does not actively market its specialty instruments or its contract research and development services. However, from time to time, the Company responds to appropriate requests for proposals for such instruments and services. As a result of increased sales of the IONSCAN(R), sales of specialty instruments and contract research and development services is no longer material to the Company's consolidated results of operations. For the year ended December 31, 1998, the FAA accounted for approximately 46.3% of consolidated revenues of the Company. For the year ended December 31, 1997, two customers accounted for approximately 27.8% (14.8% and 13%) of consolidated revenues of the Company. For the year ended December 31, 1996, one customer accounted for approximately 11% of consolidated revenues of the Company. Backlog The Company measures its backlog of instrument revenues as orders for which contracts or purchase orders have been signed, but that have not yet been shipped and for which revenues have not yet been recognized. The Company includes in its backlog only those customer orders that are scheduled for delivery within the next 18 months. The Company typically ships its products within three weeks of receiving an order. The Company follows the practice of manufacturing to a sales forecast in order to have inventory available to meet anticipated demand promptly. As a result, the Company has not historically maintained a material backlog of orders for its instruments and, in the ordinary course of business, intends to have sufficient inventory of IONSCAN(R)s on hand to allow shipment upon receipt of an order. However, depending on the size and timing of customer orders, the Company may, from time to time, have a backlog of orders. At December 31, 1998, the Company had a backlog of $750,000. The Company had no backlog at December 31, 1997. It is expected that the Company's backlog will ship by March 31, 1999. Manufacturing and Assembly The Company assembles IONSCAN(R)s from components supplied to it by various suppliers and parts manufactured internally. Once the IONSCAN(R) is assembled, it is "burned in" for a period of time to identify weak electrical components and to assure that it is functioning properly. After successful completion of this procedure, the IONSCAN(R) is ready for shipment to a customer. Although many of the basic components of the IONSCAN(R), such as integrated circuits, resistors, capacitors, liquid crystal displays and other similar components, are readily available from a number of sources, the Company typically purchases such components from single suppliers. A limited number of components and sub-assemblies are manufactured for the Company, pursuant to the Company's proprietary specifications, but the Company does not believe it is dependent on any single source for these items. To date, the Company has not experienced any material difficulty in obtaining any components or sub-assemblies. Competition The Company competes with other entities, including Intelligent Detection Systems, Inc., Ion Track Instruments Inc. and Thermedics Detection Inc., a number of which may have significantly greater financial, marketing and other resources than the Company. Principal competitive factors include selectivity (the ability of an instrument to identify the presence of a particular substance), sensitivity (the ability of an instrument to detect small amounts of a particular substance), false alarm rate, price, marketing, ease of use and speed of analysis. The Company believes that it competes effectively with respect to each of these factors. The Company competes for government expenditures with equipment manufacturers, such as InVision Technologies, Inc. and Vivid Technologies, Inc., which utilize other types of detection technologies, such as enhanced x-ray and CATSCAN, as well as with manufacturers of other IMS equipment and manufacturers using other trace particle detection technologies, such as gas chromatography and chemiluminescence. Because trace particle detection equipment is used in certain instances to verify detection results obtained by bulk imaging systems, the IONSCAN(R) and other trace particle detection products are often used in conjunction with bulk imaging technologies. As a result of recent government initiatives, the Company anticipates that additional technologies, including improved IMS technologies, will be developed and that new competitors will enter the Company's markets. The Company also competes with the use of canines to locate the presence of explosives or drugs. Although canines have a highly developed sense of smell and are able to follow a trail, the Company believes that its IONSCAN(R) instruments are more effective and cost-efficient than canines in most applications, because they can operate 24 hours a day, have greater selectivity than canines and can identify the composition of the substance detected. Government Regulation Although the Company's business is not subject to significant government regulation, government regulation plays a large role in determining the demand for the IONSCAN(R). In the U.S. and most foreign countries, the aviation industry is highly regulated and authorities, such as the FAA in the U.S., have the ability to recommend or mandate use of enhanced explosives detection equipment. Product Development The Company spent $2.4 million, $1.6 million and $780,000 on research and development activities for the years ended December 31, 1998, 1997 and 1996, respectively, of which $386,000, $849,000 and $551,000, respectively, were funded under various research and development grants and contracts. Substantially all of the Company's research and development activities have related to the development and enhancement of the Company's IONSCAN(R) technology and the development of new IONSCAN(R) products. During the second half of 1998, the Company introduced its latest generation of IONSCAN(R). It is a one module unit that has enhanced ergonomics, increased ease of use, decreased size and weight and lower manufacturing costs. Patents, Trademarks and Proprietary Rights Certain of the technology used in the IONSCAN(R) is licensed by the Company from the Canadian government as described below. While the Company holds patents relating to certain components, systems and techniques used in the IONSCAN(R) and while certain other elements of the IONSCAN(R) are protected by other intellectual property rights, the Company has no comprehensive patent or similar exclusive intellectual property right covering the IONSCAN(R) in its entirety. In addition, the basic IMS technology used in the IONSCAN(R) is not proprietary and is available in the public domain. Accordingly, present and potential competitors could use such basic technology to duplicate the performance of the IONSCAN(R). The initial development of the IONSCAN(R) was funded in part by Transport Canada and Revenue Canada. Pursuant to an agreement with the Canadian government, the Company has a worldwide license to use certain unpatented technology developed from such work and pays Revenue Canada a royalty equal to 1.0% of IONSCAN(R) sales. The initial term of this license agreement expires on March 31, 1999. However, the Company has entered into an agreement with Revenue Canada, pursuant to which the Company has obtained the right to renew such licensing arrangement on a year-by-year basis for up to ten additional years. Revenue Canada has retained the right to use the technology and to produce products incorporating such technology although, to date, Revenue Canada has not attempted to do so. Employees As of December 31, 1998, the Company had 135 full-time employees, of whom 51 were engaged in manufacturing, 29 were engaged in product development activities and 55 were engaged in sales, service and general administration. Twenty-two employees have advanced degrees (including thirteen doctorates). None of the Company's employees is represented by any union, and the Company considers its relationships with its employees to be satisfactory. Financial Information about Segment and Geographic Data and Export Sales For information with respect to financial information about segment and geographic data and export sales, reference is made to the information set forth in Note 10 to the Consolidated Financial Statements of the Company included herein. Item 2. Properties. The Company does not own any real property and currently conducts its operations at the following leased premises:
Approx- imate Square Annual Lease Location Description of Facility Footage Lease Cost Expiration 30 Technology Drive Corporate headquarters, 17,128 $226,000 June 2008 (1) Warren, New Jersey research, sales, customer 07059 support, assembly and warehousing 1730 Aimco Boulevard Research, manufacturing 28,380 $ 76,000 September 2005 (2) Mississauga, Ontario, customer support and and assembly, sales, administrative Canada L4W 1V1 Village Fret BAT-3453 Sales and customer 2,500 $ 43,000 February 2000 BP 10614-4 support Rue du Te 95724, Roissy C.D.G. France Unit 3 at Manor Royal Sales and customer 1,560 $ 22,000 July 2001 Crawley, West Sussex support England RH10 2QU No. 21-1 Jalan 3176 D Sales and customer 1,200 $14,000 November 2000 Desa Pandah support 55100 Kuala Lumpur Malaysia
(1) On January 1, 2000, the approximate square footage increases to 28,128 and the annual lease cost increases to $387,000. On July 1, 2003, the annual lease cost will increase based upon the increase in the Revised Consumer Price Index during the first 5 years of the lease, with a minimum increase of 2% and a maximum increase of 5% per year. (2) Increases to $115,000 on September 1, 2000. Item 3. Legal Proceedings. Ion Track Instruments, Inc. ("ITI")filed a civil action No. 98-11521-JLT in August 1998 in the United States District Court for the District of Massachusetts against the Company and one of its employees ("salesman"). The action alleges that the Company and the salesman made false and misleading statements about ITI's products in violation of the Lanham Act. ITI has moved the court for, among other things, a preliminary injunction barring the Company and the salesman from continuing to make any of the alleged statements at issue in the lawsuit. ITI also seeks preliminary injunctive relief barring the salesman from continuing his employment with the Company or, in the alternative, limiting the salesman's communication with other employees of the Company to avoid any disclosures of trade secrets ITI alleges the salesman possesses. That motion is currently pending before the court. The Company has denied the substantive allegations of this complaint and has filed a counterclaim seeking damages from ITI. The Company believes that ITI's claims are without merit and intends to vigorously defend the action. The Company does not expect that this action will materially adversely affect its consolidated financial position, results of operations or liquidity. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of the Company's security holders during the fourth quarter of the year ended December 31, 1998. PART II Item 5. Market for Common Equity and Related Stockholder Matters The Company's Common Stock has been included in the Nasdaq Stock Market under the symbol "BARR." The following table sets forth, for the periods indicated, the high and low sales price information for the Common Stock as reported on the Nasdaq Stock Market. High Low Fiscal 1997 First quarter $ 10 3/4 $ 8 1/8 Second quarter 15 9 3/8 Third quarter 16 10 3/8 Fourth quarter 14 3/8 8 3/4 Fiscal 1998 First quarter $ 15 1/4 $ 11 5/8 Second quarter 13 1/2 8 1/2 Third quarter 9 7/8 6 Fourth quarter 9 1/8 5 Fiscal 1999 First quarter (through March 26, 1999) $ 7 23/32 $ 5 13/16 On March 26, 1999, the last reported sale price of the Common Stock on the Nasdaq Stock Market was $6.563 per share. As of March 26, 1999, the Company had approximately 650 stockholders of record. 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 December 1998, the Company sold an aggregate of 153,000 shares of Common Stock held in the treasury to the senior executive offiers of the Company and certain of the Company's independent directors at a purchase price of $8.375 per share, the closing pric of the Common Stock on the date of the sale. Substantially all of the purchase price for the shares of Common Stock sold was paid in the form of five-year non-recourse promissory notes aggregating approximately $1.3 million secured by pledges of the underlying Common Stock. The notes bear interest at a rate of 4.52% per annum. In January 1999, the Company sold an additional 10,000 shares of Common Stock to Ms. Lavet at a purchase price of $9.75 per share, the closing price of the Common Stock on the date of sale. The consideration paid by Ms. Lavet was substantially the same as described above, except that Ms. Lavet's note bears interest at a rate of 4.64% per annum. Item 6. Selected Financial Data
Summary Consolidated Financial Data (In thousands, except per share data) (Unaudited) Year Ended December 31, 1994 1995 1996 1997 1998 Consolidated Statements of Operations Data(1 and 2): Revenues $5,514 $6,374 $10,923 $22,689 $20,458 Gross profit 1,414 2,773 5,560 13,681 12,504 Operating income (loss) (2,469) (886) 1,596 4,995 1,438 Income tax (provision) benefit (75) -- 391 371 1,309 Income (loss) from continuing operations (2,633) (1,178) 2,059 5,754 4,431 Net income (loss) (2,565) (827) 2,059 5,754 4,431 Preferred stock dividends (108) (82) (39) (12) (10) Net income (loss) attributable to common stockholders (2,673) (909) 2,020 5,742 4,421 Income (loss) per common share from continuing operations (diluted) $ (0.97) $ (0.39) $ 0.46 $ 0.92 $ 0.58 Net income (loss) per common share (diluted) $ (0.95) $ (0.28) $ 0.46 $ 0.92 $ 0.58 Weighted average common shares outstanding (diluted) 2,827 3,283 4,440 6,257 7,612 Consolidated Balance Sheet Data: Working capital $ 652 $ 370 $14,271 $19,664 $45,697 Current assets 5,067 3,672 16,624 24,037 49,056 Total assets 6,792 4,735 17,323 25,608 52,644 Current liabilities 4,415 3,302 2,353 4,373 3,359 Long-term liabilities 451 108 117 121 145 Stockholders' equity 1,186 1,325 14,853 21,114 49,140
_____________ (1) Amounts for all periods ending prior to December 31, 1995 reflect Barringer Laboratories Inc. ("Labco") as a discontinued operation. The Company sold a portion of its equity interest in Labco in 1995 and the remainder of its interest in 1996. (2) The amounts for the fiscal period ending December 31, 1998, includes the results of operations of DigiVision Inc. from May 1, 1998, the date of acquisition. Included in this period is the write-off of in-process research and development expenses in the amount of $435,000. Unless otherwise indicated, all information herein has been adjusted to give effect to the one-for-four reverse split of the Common Stock effected on September 25, 1995. Item 7. Management's Discussion and Analysis Results of Operations The following table sets forth certain income and expense items from the Company's consolidated statements of operations expressed as a percentage of revenues for the periods indicated.
Year Ended December 31, 1996 1997 1998 Consolidated Statements of Operations Data: Revenues 100.0% 100.0% 100.0% Cost of revenues 49.1 39.7 38.9 ----------------------------------------- Gross profit 50.9 60.3 61.1 ----------------------------------------- Operating expenses: Selling, general and administrative 34.2 35.1 41.8 Write-off of acquired technology -- -- 2.1 Amortization of goodwill -- -- 0.5 Product development 2.1 3.2 9.7 ----------------------------------------- Total operating expenses 36.3 38.3 54.1 ----------------------------------------- Operating income 14.6 22.0 7.0 Other (expense) income, net 0.7 1.7 8.3 Income tax benefit 3.6 1.6 6.4 ----------------------------------------- Net income 18.9 25.3 21.7 Preferred stock dividends (0.4) --* --* ----------------------------------------- Net income available to common stockholders 18.5% 25.3% 21.7% ========================================= * Less than 0.1%.
Comparison of the Fiscal Year Ended December 31, 1998 to the Fiscal Year Ended December 31, 1997 Revenues. For the fiscal year ended December 31, 1998, revenues decreased by $2.2 million, or 9.8%, to $20.5 million from $22.7 million for the fiscal year ended December 31, 1997. Sales of IONSCAN(R)s and related products decreased by $2.5 million, or 11.8%, due to a decrease of 15.4% in the average unit selling price of an IONSCAN(R), offset in part by a slight increase in units sold and $769,000 of sales by DigiVision, acquired May 1, 1998. The increase in unit sales was due to significant IONSCAN(R) sales to the aviation security market, primarily to the FAA. The decrease in average unit selling prices resulted primarily from increased competitive activity. Sales of specialty instruments was insignificant in both 1998 and 1997. As sales of its IONSCAN(R)s have increased, the Company has placed less emphasis on marketing its specialty instruments and anticipates that revenues from sales of such instruments will continue to be insignificant to the Company's overall results. Revenues derived from funded research and development decreased by approximately $465,000, or 54.8%, in 1998 as compared to 1997 as a result of the nearing of completion on the first phase of a $950,000 FAA project awarded to the Company to design an automated luggage explosives detection system utilizing the Company's trace detection technology. Because of the increasing sales of IONSCAN(R)s, the Company believes that revenues from funded research and development activities will continue to be less significant to the Company's overall results of operations. Gross Profit. For the fiscal year ended December 31, 1998, gross profit decreased by $1.2 million, or 8.6%, to $12.5 million from $13.7 million in 1997. As a percentage of revenues, gross profit increased to 61.1% in the year ended December 31, 1998 from 60.3% in 1997. The improvement in gross profit percentage was primarily attributable to larger, more efficient production runs of the IONSCAN(R) and a related reduction in cost of materials due to higher volume purchases, offset in part by lower margins as a result of declining average unit selling prices and lower margins attributable to DigiVision. DigiVision contributed gross profit of $135,000, or 17.6% of the related revenue. Selling, General and Administrative. For the fiscal year ended December 31, 1998, selling, general and administrative expenses increased by approximately $581,000, or 7.3%, to $8.6 million from $8.0 million in 1997. As a percentage of revenues, selling, general and administrative expenses increased to 41.8% in 1998 from 35.1% in 1997. Selling and marketing expenses decreased by approximately $210,000, primarily the result of fewer commissioned sales offset by $318,000 of selling expenses attributable to DigiVision. General and administrative expenses increased by $791,000 primarily as a result of expenses attributable to the Company's newly formed business development group, an increase in the provision for doubtful accounts and sales allowances, and expenses attributable to DigiVision, all of which were partially offset by reimbursement of certain expenses. Product Development. For the fiscal year ended December 31, 1998, product development expenses increased by $1.3 million, or 176%, to $2.0 million from $715,000 in 1997. As a percentage of revenues, product development expenses increased to 9.7% (11.5% when combined with funded research and development) for the fiscal year ended December 31, 1998 from 3.2% (6.9% when combined with funded research and development) in 1997 as a result of a higher level of internally funded new product development activity. Management expects to incur increased product development expenses in future periods in connection with the enhancement of existing products and the development of new products and applications. Write-off of Acquired Technology. On April 30, 1998, the Company completed the acquisition of DigiVision. In connection therewith, the Company acquired approximately $435,000 of certain technology that was in the research and development stage. The costs related to such technology costs were expensed at the time of the acquisition. Amortization of Goodwill. In connection with the acquisition of DigiVision, the Company recorded goodwill of $778,000 which is being amortized over a five-year period. Operating Income. For the fiscal year ended December 31, 1998, operating income decreased by $3.6 million, or 71.2%, to $1.4 million from $5.0 million in 1997. As a percentage of revenues, operating income decreased to 7.0% from 22.0% in 1997. The decrease is due to the combination of factors noted above. Other Income and expense. For the fiscal year ended December 31, 1998, other income increased by $1.3 million, or 335%, to $1.7 million from $388,000 in 1997. The increase was attributable to an increase in investment income of $1.2 million, or 265%, to $1.6 million as compared to $450,000 in 1997, primarily as a result of the investment of a portion of the net proceeds from the Company's April 1998 public offering, and licensing fees of $100,000 in 1998. Income Taxes. For the fiscal year ended December 31, 1998, the Company had a net tax benefit of $1.3 million, composed of foreign taxes of $130,000 and state taxes of $146,000, offset by a $1.6 million deferred tax benefit. Such deferred tax benefit was due to an elimination of the deferred tax valuation allowance as a result of changes in management's estimates of the utilization of U.S. tax loss carryforwards caused primarily by improved operating results over the last three fiscal years. As of December 31, 1998, the Company had net operating loss carryforwards of approximately $7.3 million and $3.2 million which will carry over to future years to offset U.S. federal and state taxable income, respectively. The substantial portion of the net operating loss carryforward will expire in the year 2010. At December 31, 1998, the Company has recorded a valuation reserve of $214,000 related to certain limitations applied to the net operating loss carryforward of DigiVision, its recently acquired subsidiary. Management believes that there is a risk that certain of this net operating loss carryforward may expire unused and, accordingly, has established a valuation allowance. Comparison of the Fiscal Year Ended December 31, 1997 to the Fiscal Year Ended December 31, 1996 Revenues. For the fiscal year ended December 31, 1997, revenues increased by $11.8 million, or 108%, to $22.7 million from $10.9 million for the fiscal year ended December 31, 1996. Sales of IONSCAN(R)s and related products increased by $12.3 million, or 131%, due to an increase in the number of units sold, offset in part by a decline in average unit selling price. The increase in unit sales was due to significant IONSCAN(R) sales to drug detection markets, primarily to law enforcement agencies, and to a lesser extent, increased sales to the aviation security market, primarily to the FAA. The decrease in average selling prices resulted primarily from an increase in the number of IONSCAN(R)s sold to U.S. government agencies, which typically are at lower unit prices than sales to other customers. Sales of specialty instruments decreased by approximately $697,000, or 85.2%, in 1997 as compared to 1996, principally due to the completion in 1996 of a heavy water analyzer contract. As sales of its IONSCAN(R)s have increased, the Company has placed less emphasis on marketing its specialty instruments and anticipates that revenues from sales of such instruments will continue to be insignificant to the Company's overall results. Revenues derived from funded research and development increased by approximately $146,000, or 20.8%, in 1997 as compared to 1996. Funded research and development revenues increased as a result of the award by the FAA in March 1997 of a $700,000 contract to design an automated luggage explosives detection system utilizing the Company's trace detection technology. The first phase of this project, which involves a proof of concept, is expected to be completed during 1998. Because of the increasing sales of IONSCAN(R)s, the Company believes that revenues from funded research and development activities will continue to be insignificant to the Company's overall results of operations. Gross Profit. For the fiscal year ended December 31, 1997, gross profit increased by $8.1 million, or 146%, to $13.7 million from $5.6 million in 1996. As a percentage of revenues, gross profit increased to 60.3% in the fiscal period ended December 31, 1997 from 50.9% in 1996. The improvement was primarily attributable to larger, more efficient production runs of the IONSCAN(R) and a related reduction in cost of materials due to higher volume purchases, coupled with higher margins on international sales, offset in part by lower margins on sales to U.S. government agencies. In addition, the Company has been able to reduce its cost of materials as a result of higher volume purchases. Selling, General and Administrative. For the fiscal year ended December 31, 1997, selling, general and administrative expenses increased by approximately $4.2 million, or 114%, to $7.9 million from $3.7 million in 1996. As a percentage of revenues, selling, general and administrative expenses increased to 35.1% in 1997 from 34.2% in 1996. Selling and marketing expenses increased by approximately $2.5 million, of which $1.6 million was due to increased sales commissions attributable to a larger percentage of sales originating through independent sales agents and distributors. The remaining increase was attributable to the addition of sales and service personnel and related costs to handle increased business volume. General and administrative expenses increased by $1.7 million primarily as a result of increased payroll and related costs and increased professional and consulting costs. Product Development. For the fiscal year ended December 31, 1997, product development expenses increased by $485,000, or 211%, to $715,000 from $230,000 in 1996. As a percentage of revenues, product development expenses increased to 3.2% (6.9% when combined with funded research and development) for the fiscal year ended December 31, 1997 from 2.1% (8.5% when combined with funded research and development) in 1996 as a result of a higher level of internally funded new product development activity. Operating Income. For the fiscal year ended December 31, 1997, operating income increased by $3.4 million, or 213%, to $5.0 million from $1.6 million in 1996. As a percentage of revenues, operating income increased to 22.0% from 14.6% in 1996. The increase is due to the greater operating leverage on higher levels of revenue. Other Income and Expense. For the fiscal year ended December 31, 1997, interest expense decreased by $219,000, or 96.1%, to $9,000 from $228,000 in 1996 as a result of the repayment of indebtedness out of the net proceeds of the Company's November 1996 public offering. Investment income for the fiscal year ended December 31, 1997 was $450,000 as compared to $72,000 in 1996, primarily as a result of the investment of a portion of the net proceeds from the Company's November 1996 public offering. Income Taxes. For the fiscal year ended December 31, 1997, the Company had a net tax benefit of $371,000, composed of foreign taxes of $404,000, offset by a $775,000 net deferred tax benefit. Such deferred tax benefit was due in part to a reduction in the deferred tax valuation allowance as a result of changes in management's estimates of the utilization of U.S. tax loss carryforwards caused primarily by improved operating results. Liquidity and Capital Resources Cash provided by operations was $2.8 million in 1998 and $2.0 million in 1997 and cash used in operations was $1.4 million in 1996. Cash provided by operations in 1998 resulted primarily from net income of $4.4 million, partially offset by an increase in inventories and other current assets and a decrease in accounts payable and accrued liabilities. Inventories increased as the Company acquired the materials necessary to support increased IONSCAN(R) production for its new Model 400B and other current assets increased as a result of an increase in prepaid insurance. The decrease in accounts payable and accrued liabilities was the result of reduced purchases in the latter part of year. Cash provided by operations in 1997 resulted primarily from net income of $5.8 million, partially offset by increases in accounts receivable and inventories. Accounts receivable increased as a result of higher sales, particularly during the month of December 1997. Inventories also increased as the Company acquired the materials to support increased IONSCAN(R) production. Cash used in operating activities during 1996 resulted primarily from increases in accounts receivable and inventory, which more than offset net income of $2.1 million for the year. Cash used in investing activities was $15.4 million during 1998 compared to net cash provided by investing activities of $639,000 during 1997 and cash used in investing activities of $3.9 million during 1996. Cash used in investing activities during 1998 resulted primarily from the purchase of investments, the purchase of equipment and the acquisition of DigiVision. Cash provided by investing activities during 1997 resulted primarily from the sale of investments, partially offset by capital expenditures. Cash used in investing activities during 1996 resulted primarily from the purchase of investments, offset in part by the receipt of $574,000 in connection with the Company's sale of its remaining interest in Labco. Cash provided by financing activities was $23.3 million during 1998, $315,000 during 1997 and $10.6 million in 1996. Cash provided by financing activities during 1998 resulted primarily from the net proceeds of the Company's April 1998 public offering of common stock offset in part by the purchase of treasury stock. Cash provided by financing activities during 1997 resulted primarily from the net proceeds of certain option and warrant exercises, offset in part by the repayment of indebtedness. Cash provided by financing activities in 1996 resulted primarily from the net proceeds of the sale of common stock and common stock purchase warrants in a public offering and the sale of $1.0 million of convertible subordinated debentures, offset in part by the repayment of indebtedness. The Company's capital expenditures in 1998 aggregated approximately $1.5 million. Such expenditures consisted primarily of fixed assets purchased to support product development projects, leasehold improvements and furniture and fixtures relating to the new corporate headquarters and computer hardware relating to the modernization of the Company's computer network. The Company believes that it will require approximately $750,000 in capital investment in additional tooling, equipment and facility improvements to meet its anticipated production levels for 1999. In March 1998, the Company established a $5.0 million unsecured credit facility with Fleet Bank, N.A. (the "Bank") to be used for general working capital purposes, including the issuance of standby letters of credit (the "Facility"). Drawings under the Facility may not be used to fund acquisitions unless approved in advance by the Bank. Amounts drawn under the Facility bear interest at a variable rate per annum selected by the Company and equal to either the Bank's prime rate less 0.75% or LIBOR (determined on the basis of a 30-, 60- or 90-day interest period, as applicable) plus 2.0%. The Facility expires on June 30, 1999, subject to renewal. The Facility is guaranteed by the Company's primary U.S. subsidiary, Barringer Instruments Inc. ("BII"). Pursuant to the Facility, the Company and BII are required to comply with certain customary covenants, including certain financial tests. In addition, BII and the Company's Canadian subsidiary, Barringer Research Limited ("BRL"), have agreed not to pledge their assets to any other creditor without the Bank's prior written consent. The Company has approximately $7.3 million of tax loss carryforwards to offset future taxable income in the U.S and $2.1 million of expenses available to offset future taxable income in Canada. As of December 31, 1998, the Company had cash and cash equivalents of $18.8 million and marketable securities of $15.6 million. The Company believes that its existing cash balances, marketable securities and income from operations in future periods will be sufficient to fund its working capital requirements for at least the next twelve months. On July 7, 1998 the Company announced that its Board of Directors had authorized the repurchase of up to 1,000,000 shares or approximately 12.7% of the Company's outstanding Common Stock. As of December 31, 1998, the Company had repurchased 212,500 shares at an aggregate cost of $1,540,000. Additional repurchases will be made from time to time in open market transactions in amounts as determined by the Company's management and will be funded out of the Company's working capital. Inflation Inflation was not a material factor in either the sales or the operating expenses of the Company during the periods presented herein. Year 2000 Issue The year 2000 issue is the result of computer programs being written using two digits rather than four to define the applicable year. Certain computer programs may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices or engage in similar normal business activity. The Company has recently established a team to assess risk, identify and correct exposures when possible, and develop contingency plans for Year 2000 compliance issues. The Company has developed an assessment plan and timetable and anticipates completion of its assessment by June 30, 1999. To date, the committee has identified several areas of potential concern to the Company, most particularly the software and hardware used as part of its own information systems, the impact of Year 2000 problems on the operation of its products, both current and discontinued, the impact of Year 2000 issues on its vendors, the impact of Year 2000 issues as it affects the physical working environment in which the Company operates, the potential impact of Year 2000 problems on the markets that the Company sells into and finally, crisis planning. The Company is currently completing its review of the software and hardware systems used by the Company's information systems. The Company believes that with modifications to existing software and hardware and conversions to new software, its internal systems and hardware will be Year 2000 compliant . The Company has substantially completed a preliminary review of its IONSCAN(R) products and believes that Year 2000 issues will have no impact on the performance of its IONSCAN(R) product line as the IONSCAN(R)'s functionality is not dependent on date or time references. The Company has sold many custom, one of a kind products other than the IONSCAN(R) over the years. It will investigate Year 2000 issues related to such products only when requested to do so by the end user. However, based upon a preliminary review the Company believes that the functionality of those products is not dependent on date or time references. The Company has initiated formal communications with its significant suppliers, customers, and critical business partners to determine the extent to which the Company may be vulnerable in the event that those parties fail to properly remediate their own Year 2000 issues. The Company intends to take steps to monitor the progress made by those parties, and intends to monitor others with whom it does business as the Year 2000 approaches. The Company has reviewed the operating environment within which it functions to assess the Year 2000 risks relating to, among other things, its heating and air conditioning systems, security systems, communication systems and related hardware. The Company has determined that such systems are Year 2000 compliant. To the extent possible, it will also assess certain market risks to try and determine, the effects, if any, Year 2000 issues could have on its customers that would affect their ability to purchase and pay for the Company's products. Based on initial assessments, the Company does not believe that Year 2000 issues will significantly alter demand for the Company's products. The Company intends to develop a crisis plan to deal with certain critical Year 2000 "what if" situations should they arise. The Company currently expects that it will either shift supply orders to suppliers that can demonstrate Year 2000 compliance or will attempt to stockpile significant supplies of critical components as January 1, 2000 approaches. The Company believes, however, that due to the widespread nature of potential Year 2000 issues, the contingency planning process is an ongoing one which will require further modifications as the Company obtains additional information regarding the Company's state of preparedness and the status of third party Year 2000 readiness. The Company believes that the actions it has taken to date and steps it intends to take in the future will allow it to be Year 2000 compliant in a timely manner. There can be no assurances, however, that the Company's internal systems and products or those of third parties on which the Company relies will be Year 2000 compliant in a timely manner or that the Company's or third parties' contingency plans will mitigate the effects of any noncompliance. The failure to achieve Year 2000 compliance or to have appropriate contingency plans in place to deal with any noncompliance could result in a significant disruption of the Company's operations and could have a material adverse effect on the Company's financial condition or results of operations. Because the Company is still in the process of assessing its Year 2000 issues, the Company cannot estimate the cost of achieving Year 2000 compliance at this time. However, based on the preliminary assessments conducted to date, the Company does not believe that the costs of achieving such compliance will be material to its results of operations or financial condition. The costs of compliance and the dates on which the Company believes it will complete its Year 2000 modifications and risk assessments, are based on managements best estimates, based upon many different assumptions of future events and other factors. However, there can be no assurances that the Company's estimates will be achieved and actual results could differ from those anticipated. Recent Pronouncements of the Financial Accounting Standards Board In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"), which establishes accounting and reporting standards for derivative instruments and hedging activities. The Company is currently reviewing the effects of SFAS No. 133 but does not expect the new guidelines to have a material impact on the Company's financial position and results of operations. This standard will be adopted by the Company no later than its year ending December 31, 2000. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Not applicable. Item 8. Financial Statements and Supplemental Data. Financial statements are contained on pages F-1 through F-22. Quarterly Results of Operations The following table sets forth certain consolidated statements of operations data for each of the quarters in the two-year period ended December 31, 1998. This data is unaudited but, in the opinion of management, reflects all adjustments, consisting only of normal recurring adjustments, necessary for fair presentation of this information in accordance with generally accepted accounting principles. See Note 12 of Notes to Consolidated Financial Statements.
Quarter Ended Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, Jun 30, Sep 30, Dec 31, 1997 1997 1997 1997 1998 1998 1998 1998 (In thousands, except per share data) Revenues $3,622 $5,816 $5,905 $7,346 $5,948 $5,188 $3,412 $5,910 Cost of revenues 1,461 2,494 2,729 2,324 2,435 1,978 1,283 2,258 ----- ----- ----- ----- ----- ----- ----- ---- Gross profit 2,161 3,322 3,176 5,022 3,513 3,210 2,129 3,652 ----- ----- ----- ----- ----- ----- ----- ---- Operating expenses: Selling, general and administrative 1,295 1,905 1,668 3,103 1,696 2,095 1,909 2,956 Write-off of acquired technology -- -- -- -- -- 435 -- -- Product development 175 163 164 213 362 423 546 644 ----- ----- ----- ----- ----- ----- ----- ----- Total operating expenses 1,470 2,068 1,832 3,316 2,058 2,953 2,445 3,600 ----- ----- ----- ----- ----- ----- ----- ----- Operating income (loss) 691 1,254 1,344 1,706 1,455 257 (326) 52 Other (expense) income, net 79 105 88 116 136 423 556 569 Income tax benefit 75 56 125 115 200 150 195 764 ----- ----- ----- ----- ----- ----- ----- ----- Net income $ 845 $1,415 $1,557 $1,937 $1,791 $ 830 $ 425 $1,385 Net income per common share*: Basic $0.16 $ 0.26 $ 0.28 $ 0.35 $ 0.32 $ 0.11 $ 0.05 $ 0.18 ===== ====== ====== ====== ====== ====== ====== ===== Diluted $0.14 $ 0.22 $ 0.24 $ 0.31 $ 0.28 $ 0.10 $ 0.05 $ 0.17 ===== ====== ====== ====== ====== ====== ====== ======
* The total of each year's quarterly results may not equal the reported results for the respective years. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures. Not applicable. PART III Item 10. Directors and Executive Officers of the Registrant Directors and Executive Officers The following table sets forth certain information regarding the Company's executive officers and directors as of March 1, 1999. Name Age Position Stanley S. Binder 57 Chairman of the Board, Chief Executive Officer John H. Davies 62 Vice Chairman and Director, President and Chief Executive Officer of BRL Kenneth S. Wood 47 Director, President and Chief Operating Officer Richard S. Rosenfeld 52 Vice President-Finance, Chief Financial Officer, Treasurer and Secretary John D. Abernathy 61 Director Richard D. Condon 64 Director John J. Harte 57 Director James C. McGrath 56 Director Lorraine M. Lavet 38 Director Mr. Stanley S. Binder, Director since 1991. Mr. Binder joined the Company in July 1989 and has served as Chairman of the Board since February 1991 and Chief Executive Officer since July 1990. Mr. Binder also served as President of the Company from July 1989 until May 1998, Chief Operating Officer from 1989 to June 1990 and Chief Financial Officer from 1989 until July 1993. Mr. Binder also is an independent general partner in the Special Situations Fund III, L.P. ("SSF III"), a substantial investor in the Company. Mr. Binder is a past director of the American Electronics Association and past chairman of its New Jersey Council. Mr. Binder is a member of the Executive, Nominating and Technology and Strategic Planning Committees of the Board. Mr. John H. Davies, Director since 1992. Mr. Davies joined the Company in October 1967 and has been Vice Chairman of the Company since May 1998. From January 1992 to May 1998 he served as Executive Vice President of the Company. He has been President and Chief Executive Officer of Barringer Research Ltd. since August 1989. He is a member of the Executive, Nominating and Technology and Strategic Planning Committees of the Board. Mr. Kenneth S. Wood, Director since 1999. Mr. Wood joined the Company in 1990 and has been President and Chief Operating Officer of the Company since May 1998. From January 1992 until May 1998, he served as Vice President of Operations of Barringer Instruments Inc. He served as Secretary of the Company from March 1993 until May 1998. Mr. Richard S. Rosenfeld. Mr. Rosenfeld is a certified public accountant. He joined the Company in January 1992 and has served as Vice President of Finance, Chief Financial Officer and Treasurer of the Company since July 1993 and as Secretary of the Company since May 1998. Mr. John D. Abernathy, Director since 1993. Mr. Abernathy is a certified public accountant. Since January 1995, he has been Executive Director of Patton Boggs, LLP, a Washington, D.C. law firm. From March 1994 to January 1995, he was an independent financial and management consultant. From March 1991 to March 1994, he was the Managing Director of Summit, Solomon & Feldesman, a law firm in dissolution since March 1993. From July 1983 until June 1990, Mr. Abernathy was Chairman and Chief Executive Partner of BDO Seidman, a public accounting firm. Mr. Abernathy is also a director of Oakhurst Company, Inc., a distributor of automotive parts and accessories. He is a member of the Executive, Audit and Finance and Executive Compensation Committees of the Board. Mr. Richard D. Condon, Director since 1992. Mr. Condon is currently an independent consultant. From January 1996 to October 1998, Mr. Condon was a consultant to and director of Amherst Process Instruments, Inc., a scientific instrumentation company. Prior thereto, from 1989 until December 1995, Mr. Condon was a consultant to and director of Analytical Technology, Inc., Boston, Massachusetts, a scientific instrumentation company. He is a member of the Executive Compensation and Technology and Strategic Planning Committees of the Board. Mr. John J. Harte, Director since 1986. Mr. Harte is a certified public accountant and, since 1978, has been Vice President of Mid-Lakes Distributing Inc., a manufacturer and distributor of heating and air conditioning parts and equipment located in Chicago, Illinois. From 1991 until January 1997, Mr. Harte also was Vice President, Special Projects, of the Company. Mr. Harte is a member of the Audit and Finance, Executive Compensation and Nominating Committees of the Board. Mr. James C. McGrath, Director since 1994. Mr. McGrath is an international security consultant. Since July 1989, he has been President of McGrath International, Inc., a management consulting firm specializing in the security field. He is a member of the Audit and Finance and Executive Compensation Committees of the Board. Ms. Lorraine M. Lavet, Director since 1999. Ms. Lavet has been Chief Operating Officer of the American Electronics Association since September 1996. Prior thereto, from September 1994 to August 1996, Ms. Lavet was President and Chief Executive Officer of the Fairfax County Chamber of Commerce. All directors hold office until the next annual meeting of stockholders and until their successors have been duly elected and qualified. The Company's Directors are elected by the holders of the Company's Common Stock, Class A Convertible Preferred Stock and Class B Convertible Preferred Stock voting as a single class. There are no family relationships among any of the directors or executive officers. 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 $100,000 or more (collectively, the "Named Executive Officers"):
Summary Compensation Table Annual Compensation Long-Term Compensation Securities Restricted Underlying All Other Name and Fiscal Salary Bonus(1) Other Annual Stock Options/ LTIP Compensation Principal Position Year ($) ($) Compensation ($) Award(s) SARs (#) Payouts ($) ($)(1) Stanley S. Binder 1998 $250,000 $182,000 -- -- 87,500 (2) -- $65,865 (3)(4) Chairman and Chief 1997 200,000 350,000 -- -- 87,500 -- 9,500 Executive Officer 1996 171,491 63,000 -- -- 55,000 -- 2,925 John H. Davies* 1998 $149,782 $ 46,000 -- -- 34,000 (2) -- $36,615 (4) Vice Chairman 1997 136,440 160,000 -- -- 34,000 -- 6,811 1996 125,775 43,200 -- -- 38,250 -- 6,317 Kenneth S. Wood 1998 $164,063 $ 65,000 -- -- 31,500 (2) -- $23,840 (4) President and Chief 1997 130,000 170,000 -- -- 31,500 -- 8,480 Operating Officer 1996 111,815 39,600 -- -- 33,750 -- 2,199 Richard S. Rosenfeld 1998 $125,000 $ 34,000 -- -- 27,300 (2) -- $20,000 (4) Vice President-Finance, 1997 107,500 115,000 -- -- 27,300 -- 7,085 Chief Financial Officer 1996 96,000 34,200 -- -- 27,500 -- 1,872
* Amounts converted to U.S. dollars at the average exchange rate for the respective year. (1) Includes amounts contributed by the Company pursuant to the Company's tax-qualified 401(k) deferred compensation plan ("401(k) Plan"). In 1998 and 1997, the 401(k) Plan provided that the Company would make matching contributions to the participants in the 401(k) Plan equal to 100% of the first 5.0% of a participant's salary contributed. In 1996 , the 401(k) Plan provided that the Company would make matching contributions to the participants in the 401(k) Plan equal to 100% of the first 2.0% of a participant's salary contributed and 50.0% of the next 5.0% of a participant's salary contributed. Company contributions to the 401(k) Plan vest proportionately over a five-year period, commencing at the end of the participant's first year with the Company. Amounts paid during 1998 on behalf of the Named Executive Officers were $10,000, $7,215, $10,000 and $10,000 for Messrs. Binder, Davies, Wood and Rosenfeld, respectively. (2) Represents repricing of options previously granted. See "Option Repricing." (3) Includes premiums paid by the Company for term life insurance for Mr. Binder during 1998 in the amount of $5,865. (4) Includes amounts accrued pursuant to the Barringer Technologies Inc. Supplemental Executive Retirement Plan (the "SERP Plan"). Amounts accrued during 1998 for the Named Executive Officers were $50,000, $29,400, $13,840, and $10,000 for Messrs. Binder, Davies, Wood and Rosenfeld, respectively. Effective January 1, 1998, the Company adopted the SERP Plan. The SERP Plan provides eligible participants with certain retirement benefits supplemental to the Company's 401(k) Plan. Pursuant to the SERP Plan, the Company will make annual contributions to the account of each participant equal to a variable percentage of the participant's base salary and annual cash bonus depending on the Company's achievement of certain performance targets. The actual percentage contribution will be determined by the Executive Compensation Committee, subject to certain parameters. A participant will become vested under the SERP Plan after five years of participation therein. A participant may elect to receive benefits under the SERP Plan commencing at age 60 and is entitled to receive either a lump-sum payment of his or her account balances upon retirement or to use the account balance to purchase an annuity. In the event of the termination of a participant's employment under certain circumstances set forth in the SERP Plan, the participant will be entitled to receive his or her account balance whether or not the participant has become vested under the SERP Plan. Currently, each of the Named Executive Officers participates in the SERP Plan. Option Grants The following table summarizes certain information relating to the grant of options to purchase Common Stock to each of the Named Executive Officers:
Option/SAR Grants in Last Fiscal Year(1) Number of Percent of Total Securities Options/SARs Potential realizable value Underlying Granted to Exercise or of assumed annual rates of Options/SARs Employees ins Base Price Expiration stock price appreciation Name Granted(#)(2,3) Fiscal Year ($/sh) Date For option term 5% 10% Stanley S. Binder 87,500 19.1% $ 6.19 10/21/08 $ 340,625 $ 863,211 John H. Davies 34,000 7.4 6.19 10/21/08 132,357 335,419 Kenneth S. Wood 31,500 6.9 6.19 10/21/08 122,625 310,756 Richard S. Rosenfeld 27,300 6.0 6.19 10/21/08 106,275 269,322
(1) The Company did not grant any stock appreciation rights in 1998. (2) Twenty-five percent of each option grant is exercisable after the first anniversary of the date of grant, 50% is exercisable after the second anniversary, 75% is exercisable after the third anniversary and 100% is exercisable after the fourth anniversary. (3) Represents repricing of options previously granted. See "Option Repricing." Options Exercised in Last Fiscal Year and Fiscal Year-End Option Values The following table sets forth information with respect to the Named Executive Officers concerning the exercise of stock options during 1998 and unexercised options held by such Named Executive Officers as of December 31, 1998.
Aggregated Option Exercises in 1998 and Fiscal Year-End Option Values Number of Unexercised Securities Underlying Value of Unexercised Shares Options/SARs in-the-money Options Acquired On Value at Year-End(#) at Year-End($)(1) Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable Stanley S. Binder -- -- 77,250 110,250 $553,031 $377,531 John H. Davies -- -- 53,688 49,813 384,367 197,110 Kenneth S. Wood -- -- 46,313 45,188 197,110 332,820 Richard S. Rosenfeld -- -- 38,625 38,675 276,516 148,710
(1) Based on a closing price of $8.625 per share for the Common Stock as of December 31, 1998. Option Repricing On October 21, 1998, the Company's Board of Directors approved the repricing of options exercisable for an aggregate of 287,700 shares of Common Stock previously granted to key employees of the Company (including the Named Executive Officers) and the Company's non-employee diresctors pursuant to the Company's 1997 Stock Compensation Program (the "Repricing"). Pursuant to the Repricing, option holders exchanged options, certain of which were vested and presently exercisable, with exercise prices ranging from $9.38 to $13.88 per share for new stock options covering the same number of shares and having an exercise price of $6.19 per share, the closing price of the Common Stock on the NASDAQ National Market on October 21, 1998. Options granted pursuant to the Repricing vest over a four-year period, with 25% of the options becoming exercisable in each year commencing one year after the date of the Repricing and will expire ten years after the Repricing. 1997 Stock Compensation Program In May 1997, the Company adopted the Barringer 1997 Stock Compensation Program (the "Stock Compensation Program") in order to promote the interests of the Company, its direct and indirect present and future subsidiaries and its stockholders by providing eligible persons with the opportunity to acquire an ownership interest, or to increase their ownership interest, in the Company as an incentive to remain in the service of the Company. The Stock Compensation Program authorizes the granting of incentive stock options, non-qualified stock options, stock appreciation rights, performance shares and stock bonus awards to employees and consultants of the Company and its subsidiaries, including those employees serving as officers or directors of the Company (the "Employee Plans"). The Stock Compensation Program also authorizes automatic option grants to directors who are not otherwise employed by the Company (the "Independent Director Plan"). In connection with the Stock Compensation Program, 600,000 shares of Common Stock are reserved for issuance, of which up to 500,000 shares may be issued under the Employee Plans and up to 100,000 shares may be issued under the Independent Director Plan. The Stock Compensation Program is administered by the Executive Compensation Committee. Options and awards granted under the Stock Compensation Program may have an exercise or payment price as established by the Executive Compensation Committee; provided that the exercise price of incentive stock options granted under the Employee Plans may not be less than the fair market value of the underlying shares on the date of grant. Options granted under the Independent Director Plan must have an exercise price equal to the fair market value of the underlying shares on the date of grant. Unless otherwise provided at the date of grant, no option or award may vest within one year of the date of grant and no option or award may be exercised more than 10 years from the date of grant. Options granted under the Independent Director Plan vest one year following the date of grant and expire if not exercised on or before the fifth anniversary thereof. Unless otherwise specified by the Executive Compensation Committee, options and awards (other than pursuant to the Independent Director Plan) vest in four equal installments on the first, second, third and fourth anniversaries of the date of grant. Vesting of any option or award granted under the Stock Compensation Program may be accelerated in certain circumstances, including upon the occurrence of a "Change in Control Event" (as defined in the Stock Compensation Program). Options and awards granted under the Stock Compensation Program are nontransferable, except by will or by the laws of descent and distribution. However, the Executive Compensation Committee may permit the recipient of a non-incentive stock option granted under the Employee Plans and options granted under the Independent Director Plan to transfer the option to a family member or a trust created for the benefit of family members. During the lifetime of a participant, an option may be exercised only by the participant or a permitted transferee. In the event that a participant's employment or service terminates as a result of death, all vested awards are paid to the participant's estate by the Company and the participant's estate or any permitted transferee has the right to exercise vested options for a period ending on the earlier of the expiration dates of such options or one year from the date of death. If the participant's employment or service terminates as a result of retirement or a "disability" (as set forth in the Stock Compensation Program), all vested awards are paid to the participant by the Company and the participant or any permitted transferee has the right to exercise vested options for a period ending on the earlier of the expiration dates of such options or one year from the date of termination. If the participant's employment or service terminates for cause, all options and awards will automatically expire upon termination. If the participant's employment or service terminates other than as a result of death, disability, retirement or termination for cause, the participant has the right to collect all vested awards immediately and the participant or any permitted transferee has the right to exercise vested options for a period ending on the earlier of the expiration dates of such options or awards or 30 days from the date of termination, subject to extension at the discretion of the Administrator, or three months from the date of termination in the case of options granted pursuant to the Independent Director Plan. In all cases, any unvested options or awards terminate as of the date of termination of employment or service. The Stock Compensation Program will terminate on February 28, 2007, unless earlier terminated by the Board of Directors. No options or awards may be granted under the Stock Compensation Program after its termination; however, termination of the Stock Compensation Program will not affect the status of any option or award outstanding on the date of termination. Prior to the Repricing, stock options exercisable for an aggregate of 403,700 shares of Common Stock were outstanding under the Employee Plans. These options expire 10 years after the date of grant and had a weighted average exercise price of $10.57 per share. Such options were exercisable annually in 25% increments beginning with the first anniversary of the date of grant. In connection with the Repricing, 263,700 of such options, certain of which were vested and presently exercisable, were canceled and new options exercisable for an aggregate of 263,700 shares of Common Stock were granted. The new options expire 10 years after the date of grant and have an exercise price of $6.19 per share. Such options vest over a four-year period and are exercisable annually in 25% increments beginning with the first anniversary of the date of grant. In addition, prior to the Repricing, options exercisable for an aggregate of 24,000 shares of Common Stock were outstanding under the Independent Director Plan. These were exercisable one year from the date of grant, were to expire five years from the date of grant and had a weighted average exercise price of $12.83 per share. In connection with the Repricing, all of such options, certain of which were vested and presently exercisable, were canceled and new options exercisable for an aggregate of 24,000 shares of Common Stock were granted outside the 1997 Stock Compensation Program. The new options expire 10 years after the date of grant and have an exercise price of $6.19 per share. Such options vest over a four-year period and are exercisable annually in 25% increments beginning with the first anniversary of the date of grant. Exercise Program In connection with the options granted by the Company to its employees, the Board of Directors has approved a stock option exercise program (the "Exercise Program"). The Exercise Program permits all employees of the Company and its subsidiaries who are granted stock options (pursuant to either qualified or non-qualified plans) to finance the exercise of such options by causing the Company to issue the shares underlying such options upon receipt by the Company from the employee of a full-recourse demand note evidencing indebtedness to the Company in an amount equal to the exercise price. Such loans, which are secured by the underlying shares of Common Stock, are interest-free for one year from the date on which the employee exercises his or her option, after which interest accrues at the prime rate, which rate is changed monthly. The loans are repaid with a portion of the proceeds from the sale of the Common Stock to be received by the employees upon the exercise of their options. As of March 1, 1999, Messrs. Binder and Wood were indebted to the Company in the approximate amounts of $277,000 and $13,050, respectively, for loans made pursuant to the Exercise Program. During 1998, the largest aggregate amount of indebtedness of Messrs. Binder and Wood pursuant to such loans were $272,525 and $13,050, respectively. The rate of interest charged on each such loan during 1998 was the prime lending rate charged by Summit Bank. Stock Purchase Program In December 1998, the Company sold an aggregate of 153,000 shares of Common Stock held in the treasury to the senior executive officers of the Company and certain of the Company's independent directors at a purchase price of $8.375 per share, the closing price of the Common Stock on the date of the sale. Substantially all of the purchase price for the shares of Common Stock sold was paid in the form of five-year non-recourse promissory notes aggregating approximately $1.3 million secured by pledges of the underlying Common Stock. The notes bear interest at a rate of 4.52% per annum. In January 1999, the Company sold an additional 10,000 shares of Common Stock to Ms. Lavet at a purchase price of $9.75 per share, the closing price of the Common Stock on the date of sale. The consideration paid by Ms. Lavet was substantially the same as described above, except that Ms. Lavet's note bears interest at a rate of 4.64% per annum. The number of shares of Common Stock purchased by each of the individuals and the principal amount of the notes due from each of the individuals is set forth below.
Number of Principal amount Name shares purchased of notes Stanley S. Binder 50,000 $418,250 John H. Davies 20,000 167,300 Kenneth S. Wood 23,000 192,395 Richard S. Rosenfeld 20,000 167,300 John D. Abernathy 10,000 83,650 Richard D. Condon 10,000 83,650 James C. McGrath 10,000 83,650 John J. Harte 10,000 83,650 Lorraine M. Lavet 10,000 97,400
Employment Agreements The Company has entered into a five-year employment agreement with Mr. Binder, the President and Chief Executive Officer of the Company (the "Employment Agreement"), effective January 1, 1998. Under the Employment Agreement Mr. Binder received a base salary of $250,000 for 1998. Mr. Binder's salary is subject to certain adjustments and to periodic increases as determined by the Board of Directors. In addition, Mr. Binder is entitled to receive up to a total of three special bonuses during the term of the Employment Agreement, in the amount of $65,000, $65,000 and $70,000, respectively, in the event that the Company's EBITDA (as defined in the Employment Agreement), exceeds certain targeted amounts for any fiscal year during the term of the Employment Agreement. Mr. Binder received the first of these special bonuses in 1998. Pursuant to the Employment Agreement, Mr. Binder is also entitled to participate in the Company's cash bonus plan and to participate in the SERP Plan. Also, under the terms of the Employment Agreement, in 1997, Mr. Binder received stock options covering 50,000 shares of Common Stock having an exercise price of $11.78 per share (equal to the fair market value on the date of grant). In the Employment Agreement, the Company has agreed to maintain a $1.0 million term life insurance policy for Mr. Binder's benefit. Mr. Binder is entitled to several perquisites, including a car allowance and reimbursement for the cost of certain financial planning services. In the event that Mr. Binder's employment is terminated pursuant to a Without Cause Termination, or Mr. Binder terminates his employment for Good Reason (as such terms are defined in the Employment Agreement), Mr. Binder will be entitled to a severance payment equal to 2.99 times his then-current base salary and to certain other severance benefits. In addition, upon the occurrence of a Change in Control Event (as such term is defined in the Employment Agreement), Mr. Binder has the right to terminate his employment within 180 days, in which event the termination will be treated as a termination for Good Reason with the effects specified above. In addition, the Company has agreed to pay Mr. Binder additional amounts, if necessary, to pay any excise tax Mr. Binder may become subject to in the event that any payment made to him under the Employment Agreement constitutes an "excess parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended. Pursuant to the Employment Agreement, Mr. Binder has agreed to certain confidentiality, work-for-hire and non-competition covenants. The Company has entered into three-year employment agreements with each of Messrs. Wood and Rosenfeld effective September 1, 1998, pursuant to which Messrs. Wood and Rosenfeld receive annual base salaries of $150,000 and $125,000, respectively, subject to periodic increases at the discretion of the Board of Directors, and are entitled to participate in any cash bonus plan maintained by the Company and to participate in the SERP Plan. In the employment agreements, the Company has agreed to maintain term life insurance policies for the benefit of each of them in an amount not less than four times Mr. Wood's base salary and not less than three times Mr. Rosenfeld's base salary. The employment agreements for each of Messrs. Wood and Rosenfeld provide, among other things, that, in the event of a termination of employment by the Company without cause, the employee will be entitled to receive a severance payment equal to his then current base salary for a period of twelve months from the effective date of such termination. In the event that Messrs. Wood and/or Rosenfeld are terminated pursuant to a Without Cause Termination (as defined in the employment agreements), they are entitled to receive their base salary as in effect at the time of such termination for a period of twelve months from the effective date of such termination. Upon the occurrence of a "change in control" of the Company, the employee will be entitled to receive the greater of his annual base salary pursuant to the employment agreement or his then current annual base salary for the remainder of the term (payable in a single lump sum). Both of the employment agreements also contain certain confidentiality, work-for-hire and non-competition provisions which continue in effect following the termination of the employee's employment by the Company. Directors' Compensation Outside directors are entitled to an annual retainer of $3,000 per quarter (plus a $500 quarterly fee for each committee chairperson) and a fee of $1,000 for each meeting attended and $500 for each committee meeting attended (regardless of whether or not the committee meeting is held on the same day as a meeting of the Board of Directors). Pursuant to the terms of the 1997 Stock Compensation Program, each director who has not been a full-time employee of the Company or any subsidiary for at least the prior 12 months receives an option to purchase 3,000 shares of Common Stock each year on the earlier of (i) the date of the Company's annual meeting of stockholders, or (ii) June 1. Options granted to such directors under the 1997 Stock Compensation Program have an exercise price equal to the fair market value per share as of the date of grant. See "1997 Stock Compensation Program." Compensation Committee Interlocks and Insider Participation The Company's Executive Compensation Committee is comprised of Messrs. Abernathy, Condon, Harte and McGrath. No executive officer of the Company and no member of the Executive Compensation Committee is a member of any other business entity that has an executive officer that sits on the Company's Board or on the Executive Compensation Committee. Section 16(a) Beneficial Ownership Reporting Compliance Under Section 16(a) of the Exchange Act, the Company's directors, executive officers, and persons holding more than ten percent of the Company's Common Stock are required to report their initial ownership of the Company's Common Stock and any changes in such ownership to the Securities and Exchange Commission. These persons are also required to furnish the Company with a copy of all Section 16(a) forms they file. The Company is obligated to disclose any failures to, on a timely basis, file such reports. To the Company's knowledge, based solely on a review of such reports and any amendments thereto which have been furnished to the Company, except as set forth below, the Company has not identified any reports required to be filed during the year ended December 31, 1998 that was not filed in a timely manner. Mr. Davies did not timely file a Form 4 in connection with his purchase of 20,000 shares of Common Stock on December 10, 1998. Item 12. Security Ownership of Certain Beneficial Owners and Management. The following table sets forth, as of March 1, 1999, the number of shares of Common Stock, Class A Convertible Preferred Stock and Class B Convertible Preferred Stock owned by (i) each Named Executive Officer, (ii) each director (iii) all directors and executive officers as a group and (iv) any person or entity known by the Company to own beneficially 5% or more of such securities. As of March 1, 1999, there were 7,773,347 shares of Common Stock, 38,616 shares of Class A Convertible Preferred Stock and 22,500 shares of Class B Convertible Preferred Stock issued and outstanding. As of that date, none of the officers and directors of the Company owned shares of the Company's Class A Convertible Preferred Stock or Class B Convertible Preferred Stock. The business address for all of the executive officers and directors of the Company is 30 Technology Drive, Warren, New Jersey 07059.
Beneficial Ownership Beneficial Ownership Beneficial Ownership of Class A Convertible of Class B Ownership of Common Stock Preferred Stock Preferred Stock (1) Number of Percent of Number of Percent Number of Percent of Name Shares Class Shares Class Shares Class Stanley S. Binder(3) -- -- -- -- 216,136 2.7% John H. Davies(4) -- -- -- -- 160,732 2.0% John J. Harte(5) -- -- -- -- 70,100 * Richard D. Condon(6) -- -- -- -- 51,250 * John D. Abernathy(7) -- -- -- -- 44,454 * James C. McGrath(8) -- -- -- -- 41,250 * Kenneth S. Wood(9) -- -- -- -- 96,636 1.2 Lorraine M. Lavet -- -- -- -- 10,000 * Richard S. Rosenfeld (10) -- -- -- -- 84,036 1.1 All directors and executive officers as a group consisting of nine (9) persons -- -- -- -- 774,594 9.5 Austin W. Marxe (11) -- -- -- -- 890,821 11.0 153 E. 53rd St. NY, NY 10022 Corbyn Investment Management, Inc.(12) -- -- -- -- 852,150 11.0 2330 W. Joppa Road Suite 108 Lutherville, MD 21093 Lionheart Group, Inc. -- -- -- -- 423,100 5.4 230 Park Avenue New York, NY 10169 William D. Witter, (13) -- -- -- -- 655,140 8.4 153 East 53rd Street New York, NY 10022 Angelo Logozzo Ex. UW 3,918 10.1% -- -- 1,417 * Frederick D'Amico (14) 415 S. 3rd St. Hamilton, MT 59840 Max Gerber(15) -- -- 12,500 55.6% 4,447 * 26 Broadway New York, NY 10004-1776 Paul Spitzberg (16) -- -- 10,000 44.4 3,558 * 16 Whiteowl Road Tenafly, NJ 07670
* Less than 1% (1) Assumes the exercise of all outstanding warrants for Common Stock, the conversion of each outstanding share of Class A Convertible Preferred Stock and Class B Convertible Preferred Stock into Common Stock and the exercise of all options exercisable within 60 days of March 1, 1999 for each person or entity. (2) Certain amounts shown are subject to adjustment in certain circumstances. (3) Includes 100,000 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of March 1, 1999 and 12,500 shares of Common Stock issuable upon exercise of warrants owned by Mr. Binder. Excludes shares of Common Stock beneficially owned by SSF III of which Mr. Binder is an independent general partner. Mr. Binder disclaims any beneficial interest in such shares. (4) Includes 69,500 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of March 1, 1999 and 12,500 shares of Common Stock issuable upon the exercise of warrants owned by Mr. Davies. (5) Includes 22,500 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of March 1, 1999 owned by Mr. Harte. (6) Includes 22,500 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of March 1, 1999 and 5,000 shares of Common Stock issuable upon the exercise of warrants owned by Mr. Condon. (7) Includes 22,500 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of March 1, 1999 and 2,500 shares of Common Stock issuable upon the exercise of warrants owned by Mr. Abernathy. (8) Includes 22,500 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of March 1, 1999 owned by Mr. McGrath. (9) Includes 60,000 Shares of Common Stock issuable upon the exercise of options exercisable within 60 days of March 1, 1999 owned by Mr. Wood. (10) Includes 50,000 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of March 1, 1999 and 5,000 shares of Common Stock issuable upon the exercise of warrants owned by Mr. Rosenfeld. Also includes 3,636 shares of Common Stock owned by Mr. Rosenfeld's child. (11) Includes (i) 393,579 shares of Common Stock and 229,167 shares of Common Stock issuable upon the exercise of warrants owned by SSF III, (ii) 134,742 shares of Common Stock and 83,333 shares of Common Stock issuable upon the exercise of warrants owned by Special Situations Cayman Fund, L.P. (the "Cayman Fund"), and (iii) 50,000 shares of Common Stock owned by Special Situations Technology Fund, L.P. ("SST"). AWM Investment Company, Inc. ("AWM") is the sole general partner of the Cayman Fund and the sole general partner of MGP Advisors Limited ("MGP"), a general partner of SSF III. Mr. Marxe is the President and Chief Executive Officer of AWM and the principal limited partner of MGP. Accordingly, Mr. Marxe may be deemed to be the beneficial owner of all of the shares of Common Stock held by SSF III, the Cayman Fund and SSTF. Mr. Binder is an independent general partner of SSF III. Mr. Binder disclaims beneficial ownership of all shares held by SSF III. (12) Consists of 446,150 shares of Common Stock owned by Corbyn Investment Management, Inc. and 406,000 shares of Common Stock owned by Greenspring Fund, Inc. (13) Includes 575,140 shares of Common Stock owned by William D. Witter, Inc. ("WDWI") and 80,000 shares of Common Stock owned by Penfield Partners, L.P. ("PP"). William D. Witter owns 98.6% of WDWI. WDWI is the sole general partner of Pine Creek Advisors Limited Partnership ("PCA") which is a general partner of PP. (14) Includes 1,417 shares of Common Stock issuable upon conversion of the Class A Convertible Preferred Stock. (15) Includes 4,447 shares of Common Stock issuable upon conversion of the Class B Convertible Preferred Stock. (16) Includes 3,558 shares of Common Stock issuable upon conversion of the Class B Convertible Preferred Stock. Item 13. Certain Relationships and Related Transactions In July 1998, the Company made a $500,000 non-recourse loan to Mr. Binder. The loan is repayable on July 5, 2003 and bears interest at the rate of 5.68% per annum, payable annually. Mr. Binder's obligation to repay the loan is secured by 49,000 shares of Common Stock. In addition, the Company has made certain loans to the Named Executive Officers and directors. See "Item 11. Executive Compensation--Exercise Program" and "Item 11. Executive Compensation - - --Stock Purchase Program." Mr. Abernathy is currently the Executive Director of Patton Boggs, LLP, a Washington, D.C. law firm. During 1998, the Company retained Patton Boggs, LLP to represent the Company in various matters and has retained such firm in 1999. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a) Exhibits. Exhibit No. Description Page 3.1 Certificate of Incorporation of the Company, as amended, (previously filed as Exhibit 3.1A to the Company's Registration Statement on Form SB-2 (File No. 333-33129) and incorporated herein by reference). 3.2 By-laws of the Company (previously filed as Exhibit 3.1 to the Company's Current Report on Form 8-K dated August 26, 1998 (File No. 0-3207) and incorporated herein by reference). 10.1 Amended and Restated Employment Agreement, dated as of December 31, 1997, between the Company and Stanley S. Binder (previously filed as Exhibit 10.1 to the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1997 (File No. 0-3207) and incorporated herein by reference) 10.2 Employment Agreement, dated as of September 1, 1998, between the Company and Richard S. Rosenfeld. 10.3 Employment Agreement, dated as of September 1, 1998, between the Company and Kenneth S. Wood. 10.4 Form of 1995 nonqualified stock option agreement (previously filed as Exhibit 10.6 to the Company's Registration Statement on Form SB-2 (File No. 333-13703) and incorporated herein by reference). 10.5 Form of 1996 nonqualified stock option agreement (previously filed as Exhibit 10.6 to the Company's Registration Statement on Form SB-2 (File No. 333-13703) and incorporated herein by reference). 10.6 Description of Exercise Plan (previously filed as Exhibit 10.9 to the Company's Registration Statement on Form SB-2 (File No. 333-13703) and incorporated herein by reference). 10.7 Barringer Technologies Inc. 1997 Stock Compensation Program (previously filed as Exhibit 10.9 to the Company's Registration Statement on Form SB-2 (File No. 333-33129) and incorporated herein by reference.) 10.8 License Agreement, dated February 27, 1989, between Canadian Patents and Development Limited--Societe Canadienne Des Brevets Et D'Exploitation Limite and Barringer Instruments Limited (the "License Agreement"), Supplement #1, dated March 4, 1991, Assignment of License Agreement, dated January 2, 1992, to Her Majesty the Queen in Right of Canada, as Represented By the Minister of National Revenue and Supplemental Letter Agreement, dated October 7, 1996 (previously filed as Exhibit 10.10 to the Company's Registration Statement on Form SB-2 (File No. 333-13703) and incorporated herein by reference). 10.9 Letter Agreement, dated July 25, 1997, by and between Barringer Research Limited and Her Majesty the Queen in Right of Canada, as Represented By the Minister of National Revenue (previously filed as Exhibit 10.11 to the Company's Registration Statement on Form SB-2 (File No. 333-33129) and incorporated herein by reference.) 10.10 Warrant Agreement by and between the Company and American Stock Transfer & Trust Company (previously filed as Exhibit 4.1 to the Company's Registration Statement on Form SB-2 (File No. 333-13703) and incorporated herein by reference). 10.11 Form of Warrant issued to Janney Montgomery Scott Inc. (previously filed as Exhibit 4.2 to the Company's Registration Statement on Form SB-2 (File No. 333-13703) and incorporated herein by reference). 10.12 Lease, dated as of July 1, 1998, between the Company and Mt. Bethel Corporate Center. 10.13 Lease, dated as of July 27, 1995, between Barringer Research Limited and Lehndorff Management Limited (previously filed as Exhibit 10.18 to the Company's Registration Statement on Form SB-2 (File No. 333-13703) and incorporated herein by reference). 10.14 Supplemental Executive Retirement Plan (previously filed as Exhibit 10.18 to the Company's Registration Statement on Form SB-2 (File No. 333-33129) and incorporated herein by reference). 10.15 Revolving Credit Note dated March 13, 1998 between the Company and Fleet Bank, (previously filed as Exhibit 10.19 to the Company's Registration Statement on Form SB-2 (File No. 333-33129) and incorporated herein by reference). 10.16 Unlimited Guaranty of Payment and Performance dated March 13, 1998 between the Company and Fleet Bank, N.A. (previously filed as Exhibit 10.20 to the Company's Registration Statement on Form SB-2 (File No. 333-33129) and incorporated herein by reference). 10.17 Revolving Credit Loan Agreement dated March 13, 1998 amongst the Company, Barringer Instruments, Inc., Barringer Research Limited and Fleet Bank, N.A. (previously filed as Exhibit 10.21 to the Company's Registration Statement on Form SB-2 (File No. 333-33129) and incorporated herein by reference). 10.18 Stockholder Protection Rights Agreement, dated as of August 26,1998, between the Company and American Stock Transfer and Trust Company, as Rights Agent, including as Exhibit A the form of Rights Certificate and of Election to Exercise and as Exhibit B the form of Certificate of Designation and the Terms of the Participating Preferred Stock of the Company (previously filed as Exhibit 4.1 to the Company's Current Report on Form 8-K dated August 26, 1998 (File No. 0-3207) and incorporated herein by reference). 10.19 Pledge Agreement, dated as of July 6, 1998, made by Stanley S. Binder. 10.20 Non-Recourse Secured Promissory Note, dated July 6, 1998, made by Stanley S. Binder in favor of the Company. 10.21 Form of Pledge Agreement. 10.22 Form of Note for Executive Officers. 10.23 Form of Note for Non-employee Directors. 21.1 List of the Company's Subsidiaries 23.1 Consent of BDO Seidman, LLP, independent certified public accountants. 27.1 Financial Data Schedule for the year ended December 31, 1998. (b) Reports on Form 8-K. None SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BARRINGER TECHNOLOGIES INC. By: /s/ Stanley S. Binder --------------------------- Stanley S. Binder, Chairman and Chief Executive Officer Dated: March 30, 1999 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Stanley S. Binder Chief Executive Officer March 30, 1999 _____________________ and Director (Principal Executive Stanley S. Binder Officer) /s/ John D. Abernathy Director March 30, 1999 ______________________ John D. Abernathy /s/ Richard D. Condon Director March 30, 1999 ______________________ Richard D. Condon /s/ John H. Davies Director March 30, 1999 ______________________ John H. Davies /s/ John J. Harte Director March 30, 1999 ______________________ John J. Harte /s/ James C. McGrath Director March 30, 1999 ______________________ James C. McGrath /s/ Kenneth Wood Director March 30, 1999 ______________________ Kenneth Wood /s/ Lorraine Lavet Director March 30, 1999 ______________________ Lorraine Lavet /s/ Richard S. Rosenfeld Vice President-Finance, March 30, 1999 ________________________ Chief Financial Officer Richard S. Rosenfeld and Treasurer (Principal Financial Officer and Principal Accounting Officer)
BARRINGER TECHNOLOGIES INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Consolidated Financial Statements Report of Independent Certified Public Accountants F-2 Consolidated Balance Sheets as of December 31, 1997 and 1998 F-3 Consolidated Statements of Operations for the Years Ended December 31, 1996, 1997 and 1998 F-4 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1996, 1997 and 1998 F-5 Consolidated Statements of Cash Flows for the Years Ended December31, 1996, 1997 and 1998 F-6 Notes to Consolidated Financial Statements F-7 Financial Statement Schedule Schedule II - Valuation and Qualifying Accounts F-22 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Barringer Technologies Inc. Warren, New Jersey We have audited the accompanying consolidated balance sheets of Barringer Technologies Inc. as of December 31, 1997 and 1998, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1998. We have also audited the schedule listed in the accompanying index. These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and schedule are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and schedule. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the presentation of the financial statements and schedule. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Barringer Technologies Inc. at December 31, 1997 and 1998, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. Also, in our opinion, the schedule presents fairly, in all material respects, the information set forth therein. BDO Seidman, LLP Woodbridge, New Jersey February 24, 1999
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except par value) December 31, 1997 1998 ASSETS Current assets: Cash and cash equivalents $ 8,188 $18,802 Marketable securities 2,499 15,606 Trade receivables, less allowances of $109 and $626 7,908 6,502 Inventories (note 2) 3,049 3,943 Prepaid expenses and other 887 1,111 Deferred tax asset (note 6) 1,506 3,092 ------ ------ Total current assets 24,037 49,056 Machinery and equipment, net (note 3) 1,505 2,349 Other (note 15) 66 1,239 ------ ------ $ 25,608 $ 52,644 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,324 $ 1,169 Accrued liabilities 473 946 Accrued payroll and related taxes 1,520 1,005 Accrued commissions 801 127 Foreign income taxes payable (note 6) 255 112 ----- ----- Total current liabilities 4,373 3,359 Non-current liabilities 121 145 Commitments (notes 4 and 7) Stockholders' equity (note 5): Convertible preferred stock, $1.25 par value, 1,000 shares authorized, none outstanding - - Preferred stock, $2.00 par value, 4,000 shares authorized 270 shares designated class A convertible preferred stock, 45 and 39 shares outstanding, respectively, less discount of $35 and $30, respectively 55 47 730 shares designated class B convertible preferred stock, 23 shares outstanding 45 45 Common stock, $0.01 par value, 20,000 shares authorized, and 5,495 and 7,851 shares issued, respectively 55 79 Additional paid-in capital 30,209 54,693 Accumulated deficit (8,780) (4,359) Cumulative foreign currency translation adjustment (457) (786) ------- ------- 21,127 49,719 Less: common stock in treasury, at cost, 31 shares and 92 shares, respectively (13) (579) ------- ------- Total stockholders' equity 21,114 49,140 ------- ------ $ 25,608 $ 52,644 ======= ====== See notes to consolidated financial statements.
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Year Ended December 31, 1996 1997 1998 Revenues $10,923 $22,689 $20,458 Cost of revenues 5,363 9,008 7,954 Gross profit 5,560 13,681 12,504 Operating expenses: Selling, general and administrative 3,734 7,971 8,552 Amortization of goodwill -- -- 104 Write-off of acquired technology (note 15) -- -- 435 Product development 230 715 1,975 ----- ----- ------ Total operating expenses 3,964 8,686 11,066 ----- ----- ------ Operating income 1,596 4,995 1,438 Other income (expense): Interest expense (228) (9) (9) Equity in earnings of unconsolidated subsidiary 117 -- -- Gain on sale of investment in unconsolidated subsidiary 123 -- -- Investment income 72 450 1,641 Other, net (12) (53) 52 ----- ------ ------ 72 388 1,684 Income before income tax benefit 1,668 5,383 3,122 Income tax benefit (note 6) 391 371 1,309 ----- ----- ----- Net income 2,059 5,754 4,431 Preferred stock dividends (39) (12) (10) Net income attributable to common stockholders $ 2,020 $ 5,742 $ 4,421 ====== ===== ===== Per share data (notes 1 and 14): Basic $ 0.55 $ 1.05 $ 0.62 ===== ==== ===== Diluted $ 0.46 $ 0.92 $ 0.58 Weighted average common and common equivalent shares outstanding: Basic 3,695 5,456 7,153 ===== ===== ===== Diluted 4,440 6,257 7,612 ======= ===== ======
See notes to consolidated financial statements.
BARRINGER TECHNOLOGIES INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands) Common Stock Class A Class B Pfd Stock Pfd Stock ------------------------------------------------------- Total Paid-in Foreign Treas. Comprehensive Equity Shrs Am't Shrs Am't Shrs Am't Capital Deficit Transl. Stock Income --------------------------------------------------------------------------------------------------- Bal - January 1, 1996 $ 1,325 3,479 $35 83 $101 258 $ 515 $17,685 $(16,542) $(456) $ (13) Net income 2,059 $ 2,059 $ 2,059 Translation adjustment 41 41 41 ------------- Comprehensive income $ 2,100 ============= Preferred stock conversion 55 1 (23) (27) (135) (270) 296 Issuance and exercise of stock options and warrants 42 15 42 Conversion of debentures 1,000 364 4 996 Preferred stock dividends (15) 7 24 (39) Sale of securities net of expenses ($741) 10,401 1,437 14 10,387 --------------------------------------------------------------------------------------------------- Bal - December 31, 1996 14,853 5,357 54 60 74 123 245 29,430 (14,522) (415) (13) Net income 5,754 5,754 5,754 Translation adjustment (42) (42) (42) ------------ Comprehensive income $ 5,712 ============ Preferred stock conversion 41 (15) (19) (100) (200) 219 Issuance and exercise of stock options and warrants 490 97 1 489 Repayment stockholder loan 71 71 Preferred stock dividends (12) (12) --------------------------------------------------------------------------------------------------- Bal - December 31, 1997 21,114 5,495 55 45 55 23 45 30,209 (8,780) (457) (13) Net income 4,431 4,431 $ 4,431 Translation adjustment (329) (329) (329) --------- Comprehensive income $ 4,102 ========== Sale of securities net of expenses ($2,394) 25,211 2,300 23 25,188 Preferred stock conversion 0 2 (6) (8) 8 Issuance and exercise of stock options and warrants 263 54 1 262 Repurchase of common stock (1,540) (1,540) Sale of treasury stock, net of notes receivable 0 ($1,281) (974) 974 Preferred stock dividends (10) (10) --------------------------------------------------------------------------------------------------- Bal - December 31, 1998 $49,140 7,851 $ 79 39 $ 47 23 $ 45 $54,693 $(4,359) $(786) $ (579) ===================================================================================================
* At December 31, 1998 and 1997 net of notes receivable of $1,484 and $203, respectively, from the sale of stock. See notes to consolidated financial statements.
BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 1996 1997 1998 Net income $ 2,059 $ 5,754 $ 4,431 Items not affecting cash: Depreciation and amortization 115 272 741 Inventory and accounts receivable reserves 22 332 382 Income from and gain on sale of investment in Labco (240) -- -- Write-off of acquired technology -- -- 435 Deferred tax benefit (506) (775) (1,586) Other 50 30 (184) Increase in non-cash working capital balances (2,947) (3,655) (1,465) Cash provided by (used in) operating activities (1,447) 1,958 2,754 Investing activities: Purchase of equipment and other (124) (1,190) (1,510) Sale of (investment in) marketable securities (4,328) 1,829 (13,107) Purchase of Digivision and related costs -- -- (821) Proceeds on sale of investment in Labco 574 -- -- Cash provided by (used in) investing activities (3,878) 639 (15,438) Financing activities: Proceeds on issuance of Convertible Subordinated Debentures 1,000 -- -- Reduction in long-term debt (300) -- -- Decrease in bank debt and other (570) (174) (67) Proceeds on sale of equity securities, net 10,443 430 25,211 Warrant and option exercise 204 Repayment from (loan to)employee -- 71 (500) Acquisition of treasury stock (1,540) Payment of dividends on preferred stock (15) (12) (10) Cash provided by financing activities 10,558 315 23,298 Increase in cash and cash equivalents 5,233 2,912 10,614 Cash and cash equivalents--beginning of year 43 5,276 8,188 Cash and cash equivalents--end of year $ 5,276 $ 8,188 $ 18,802 Changes in components of non-cash working capital balances related to operations: Trade receivables $(2,010) $(4,433) $ 951 Inventories (649) (1,065) (567) Other current assets (248) (389) (206) Other assets 39 38 -- Accounts payable and accrued liabilities (79) 2,194 (1,643) Increase in non-cash working capital balances $(2,947) $(3,655) $(1,465)
See notes to consolidated financial statements. BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements comprise the accounts of the Company and its continuing subsidiary companies. All intercompany transactions have been eliminated. Principles of Translation Assets and liabilities of the Company's foreign subsidiaries are translated by using year-end exchange rates and statement of operation items are translated at average exchange rates for the year. Translation adjustments are accumulated in a separate component of stockholders' equity. Marketable Securities Marketable securities consist primarily of commercial paper with original maturities at date of purchase of less than 12 months. The Company has both positive intent and ability to hold these securities to maturity. The Company carries these securities at cost, which approximates fair value, due to the short period of time to maturity. Inventories Materials and supplies are carried at the lower of average cost or replacement cost. Finished goods and work-in process are carried at the lower of average cost or net realizable value. Property and Equipment Property and equipment are carried at cost. Depreciation of owned equipment is computed on a straight-line basis over the estimated useful lives of the related assets, generally from three to ten years. Leasehold improvements are amortized over the term of the related lease, generally from five to ten years, which approximates the useful lives of these improvements. Equipment under capital leases is amortized on a straight-line basis over the term of the lease, generally four to ten years, which approximates the estimated useful lives of the leased equipment. Per Share Data Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed assuming the conversion of convertible preferred stock and the exercise or conversion of common equivalent shares, if dilutive, consisting of unissued shares under options and warrants. Statement of Cash Flows For purposes of the Statement of Cash Flows, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Revenue Recognition The Company recognizes revenue on the percentage of completion method for its research and development contracts with progress measured based on the ratio of costs incurred to the total estimated cost, and generally, when product is shipped for all other sales. Where the Company receives contracts for the design and construction of specialty instruments that require long manufacturing times, the Company will also recognize revenue on the percentage of completion method similar to its recognition method in the research and development business. For the years ended December 31, 1996, 1997 and 1998, the Company did not have any significant contracts in progress. Financial Instruments and Credit Risk Concentration Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of trade accounts receivable. Concentrations of credit risk with respect to such receivables are limited to primarily governmental agencies. Marketable securities consists primarily of investments in U.S. government and agency obligations and commercial paper. Long-Lived Assets Long-lived assets, such as machinery and equipment, are evaluated for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows from the use of these assets. If and when any such impairment exists, the related assets will be written down to fair value. This policy is in accordance with Statement of Financial Accounting Standards No. 121, ("SFAS 121") "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of". No write-downs have been necessary through December 31, 1998. Stock-Based Compensation The Company has adopted the disclosure only provisions of SFAS 123, "Accounting for Stock-Based Compensation", but applies Accounting Principle Board Opinion No. 25 "Accounting for Stock Issued to Employees", in accounting and measuring compensation expense related to stock option plans. There was no compensation expense related to the issuance of stock options to employees for the years ended December 31, 1996, 1997 and 1998. For the years ended December 31, 1996, 1997 and 1998, the Company recorded compensation expense in the amount of $0, $60,000 and $33,500, relating to stock options awarded to the Company's independent directors (see note 5 for pro-forma disclosure required by SFAS 123). Fair Value of Financial Instruments The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, marketable securities, accounts receivable, accounts payable, accrued liabilities and notes payable approximate fair value because of the immediate or short-term maturity of these financial instruments. The Company has the ability and intent to hold all marketable securities through their respective maturity dates. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Many of the Company's estimates and assumptions used in the financial statements relate to the Company's products, which are subject to technology and market changes. It is reasonably possible that changes may occur in the near term that would affect management's estimates with respect to accounts receivable, inventories, equipment and deferred income taxes. Recent Pronouncements of the Financial Accounting Standards Board In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"), which establishes accounting and reporting standards for derivative instruments and hedging activities. The Company is currently reviewing the effects of SFAS No. 133, but does not expect the new guidelines to have a material impact on the Company's financial position and results of operations. This statement will be adopted by the Company no later than its year ending December 31, 2000. 2. Inventories At December 31, 1997 and 1998, the Company had parts, subassemblies and work in process of $2,748,000 and $2,959,000 and finished goods of $301,000, and $984,000, respectively. 3. Machinery and Equipment The major categories of machinery and equipment are as follows:
December 31, 1997 1998 Office equipment $ 969,000 $ 1,415,000 Machinery and equipment 1,986,000 2,492,000 Leasehold improvements 70,000 325,000 3,025,000 4,232,000 Accumulated depreciation (1,520,000) (1,883,000) Totals $ 1,505,000 $ 2,349,000
4. Bank Credit Facility On March 13, 1998, the Company established a $5.0 million unsecured credit facility with Fleet Bank, N.A. (the "Bank") to be used for general working capital purposes, including the issuance of standby letters of credit (the "Facility"). Drawings under the Facility may not be used to fund acquisitions unless approved in advance by the Bank. Amounts drawn under the Facility bear interest at a variable rate per annum selected by the Company and equal to either the Bank's prime rate less 0.75% or LIBOR (determined on the basis of a 30-, 60- or 90-day interest period, as applicable) plus 2.0%. The Facility expires on June 30, 1999, subject to renewal. The Facility is guaranteed by the Company's primary U.S. subsidiary, Barringer Instruments Inc. ("BII"). Pursuant to the Facility, the Company and BII are required to comply with certain customary covenants, including certain financial tests. In addition, BII and the Company's Canadian subsidiary, Barringer Research Limited ("BRL"), have agreed not to pledge their assets to any other creditor without the Bank's prior written consent. At December 31, 1998, the Company had $4,800,000 available under this facility. Approximately $200,000 was used to secure a letter of credit. 5. Stockholders' Equity Stockholder Protection Rights Plan On August 26, 1998, the Company's Board of Directors declared a dividend payable September 9, 1998 of one right (a "Right") for each outstanding share of common stock, par value $.01 per share, of the Company held of record at the close of business on September 8, 1998, or issued thereafter and prior to the Separation Time (generally the date of the commencement of a tender or exchange offer or at such time as an acquirer becomes a 15% or more shareholder of the Company) and thereafter pursuant to options and convertible securities outstanding at the Separation Time. Each Right entitles its registered holder to purchase from the Company, after the Separation Time, one one-hundreth of a share of a new class of preferred stock designated Participating Preferred Stock, par value $2.00 per share, for $32.50, subject to adjustment. Stock Repurchase Program On July 7, 1998 the Company announced that its Board of Directors had authorized the repurchase of up to 1,000,000 shares or approximately 12.7% of the Company's outstanding Common Stock. As of December 31, 1998, the Company had repurchased 212,500 shares at an aggregate cost of $1,540,000. Additional repurchases will be made from time to time in open market transactions in amounts as determined by the Company's management and will be funded out of the Company's working capital. Public Offerings On April 3, 1998, the Company completed the sale of 2,000,000 shares of common stock in a public underwriting. On April 30, 1998, the underwriters exercised their over-allotment option and acquired an additional 300,000 shares of common stock. The aggregate net proceeds to the Company, after all expenses of the offering was approximately $25.2 million. On November 12, 1996, the Company completed the sale of 1,250,000 shares ("Shares") of common stock and 1,250,000 Common Stock Purchase Warrants ("Public Warrants") in a public underwriting. On December 12, 1996, the underwriters exercised their over-allotment option and acquired an additional 187,500 Shares and 187,500 Public Warrants. The aggregate net proceeds to the Company, after all expenses of the offering, was approximately $10,401,000. Due from Officers/Shareholders In connection with the exercise of options to acquire 190,000 shares of the Company's Common Stock, two officers of the Company signed full recourse interest bearing (no interest the first year, prime rate thereafter) unsecured promissory demand notes aggregating $274,000 under the Company's stock option purchase program. Under that program the Company has arranged for a market-maker in the Company's Common Stock, to coordinate the orderly sale in the open market of a portion of the Common Stock to be received by the employees upon the exercise of their options in an amount sufficient to repay the loan and related interest. As of December 31, 1998, and 1997, $203,000 was outstanding. In July 1998, the Company made a $500,000 non-recourse loan to its Chief Executive Officer. The loan is repayable on July 5, 2003 and bears interest at the rate of 5.68% per annum, payable annually. The obligation to repay the loan is secured by 49,000 shares of the Company's common stock. In December 1998, the Company sold an aggregate of 153,000 shares of Common Stock held in the treasury to the senior executive officers of the Company and certain of the Company's independent directors at a purchase price of $8.375 per share, the closing price of the Common Stock on the date of the sale. Substantially all of the purchase price for the shares of Common Stock sold was paid in the form of five-year non-recourse promissory notes aggregating approximately $1.3 million secured by pledges of the underlying Common Stock. The notes bear interest at a rate of 4.52% per annum. Common Stock Outstanding or Reserved for Issuance The following table sets forth the number of shares of Common Stock outstanding as of December 31, 1998 as well as the number of shares of Common Stock that would be outstanding in the event that all of the options and warrants are exercised and all Series of Convertible Preferred Stock and Debentures are converted into Common Stock.
Common stock Exercise, outstanding or conversion or reserved for option price issuance Common stock 7,759,597 Class A convertible preferred stock 0.361745 13,969 Class B convertible preferred stock 0.355839 8,006 Stock options (i) $1.00 to $11.813 852,988 Private placement warrants (ii) $1.96 349,999 Public warrants (iii) $9.847 330,825 Underwriter's warrants (iii) $10.276 125,000 Underlying warrants (iii) $9.847 31,250 Directors' warrant (iv) $7.11 3,750 --------- Total 9,475,384 =========
All outstanding warrants expire between January 12, 1999 and November 12, 2001. (i) Stock Compensation Plans From time to time, the Company has granted options to various employees and directors. The Company applies APB Opinion 25, "Accounting for Stock Issued to Employees", and related Interpretations in accounting for the plans. Under APB Opinion 25, because the exercise price of the Company's stock options issued to employees equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. SFAS 123, "Accounting for Stock-Based Compensation", requires the Company to provide pro forma information regarding net income and earnings per share as if compensation cost for the stock option grants had been determined in accordance with the fair value based method prescribed in SFAS 123. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-price model with the following weighted average assumptions used for grants in 1996, 1997 and 1998; no dividend yield; expected volatility of 46.1% in 1998, 46.5% in 1997 and 30% in 1996; risk-free weighted average interest rates of 4.75% in 1998, 6.03% in 1997 and 7.11% in 1996; and expected lives for the options of 7.4 years in 1998, 5 years in 1997 and 5 years in 1996. 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:
Year Ended December 31, 1996 1997 1998 Net income: As reported $2,059,000 $5,754,000 $4,431,000 Pro-forma $1,986,000 $5,567,000 $4,031,000 Basic earnings per share from continuing operations: As reported $ 0.55 $ 1.05 $ 0.62 Pro-forma $ 0.53 $ 1.02 $ 0.56 Diluted earnings per share from continuing operations: As reported $ 0.46 $ 0.92 $ 0.58 Pro-forma $ 0.44 $ 0.89 $ 0.53
In 1997, the Company's stockholders approved the adoption of the Company's 1997 Stock Compensation Program ("Program"). The Program authorizes the granting of incentive stock options, non-qualified supplementary options, stock appreciation rights, performance shares and stock bonus awards to employees and consultants of the Company and its subsidiaries, including those employees serving as officers or directors of the Company ("Employee Plans"). The Program also authorizes automatic option grants to directors who are not otherwise employed by the Company ("Independent Director Plan"). In connection with the Program, 600,000 shares of Common Stock are reserved for issuance, of which up to 500,000 shares may be issued under the Employee Plans and up to 100,000 shares may be issued under the Independent Director Plan. In the event that an option or award granted under the Program expires, is terminated or forfeited or certain performance objectives with respect thereto are not met prior to exercise or vesting, then the number of shares of Common Stock covered thereby will again become eligible for grant under the Program. The Company will receive no consideration for grants of options or awards under the Program. Options issued under the Employee Plan expire ten years from the dates of grant and are generally exercisable and vested as to 25% of the optioned shares after the first year, 50% after the second year, 75% after the third year and 100% after the fourth year. Options issued under the Independent Director Plan expire five years from the dates of grant and are fully exercisable after one year. At December 31, 1998, there were 96,300 options available for grant under the Employee Plans and 100,000 options available for grant under the Independent Director Plan. A summary of the status of the Company's outstanding options is presented below:
Year ended December 31, 1996 1997 1998 Weighted Weighted Weighted Average Average Average Number of Exercise Number of Exercise Number of Exercise Shares Price Shares Price Shares Price Outstanding-- beginning of year 240,125 $4.54 461,000 $2.19 691,025 $5.31 Granted 253,000 1.00 280,900 10.70 472,000 7.68 Exercised (1,250) 2.00 (19,937) 1.32 (9,087) 1.31 Forfeited -- -- -- -- (13,250) 9.95 Canceled (30,875) 10.66 (30,938) 10.32 (287,700) 10.76 Outstanding--end of year 461,000 2.19 691,025 5.31 852,988 4.71 Options exercisable--end of year 164,200 $3.49 227,663 $1.94 334,690 $1.87 Fair value of options granted during the year $ 0.40 $ 6.72 $ 5.86 ======== ======== ======
On May 13, 1997 and May 13, 1998, options to acquire 12,000 shares and 12,000 shares, respectively, of the Company's common stock at $13.875 per share and $11.813 per share, respectively, which was the market value at the respective dates of grant, were issued to the Company's independent directors pursuant to the Independent Director Plan. On October 21, 1998, the Company's Board of Directors approved the repricing of options exercisable for an aggregate of 287,700 shares of Common Stock previously granted to key employees of the Company and the Company's non-employee directors pursuant to the Company's 1997 Stock Compensation Program ("the repricing"). Pursuant to the Repricing, option holders exchanged options with exercise prices ranging from $9.375 to $13.875 per share for new stock options covering the same number of shares and having an exercise price of $6.19 per share, the closing price of the Common Stock on the NASDAQ National Market on October 21, 1998. Options granted pursuant to the Repricing vest over a four-year period, with 25% of the options becoming exercisable in each year commencing one year after the date of the Repricing and will expire ten years after the Repricing. In accordance with SFAS 123, the Company recorded compensation expense in 1997 and 1998 of $60,000 and $33,500, respectively in connection with the issuance and repricing of the above noted options relating to the non-employee directors. Options issued prior to the adoption of the Program are non-qualified stock options. Options issued in 1996, expire on April 25, 2001 and are exercisable as to 25% of the optioned shares immediately, 50% after the first year, 75% after the second year and 100% after the third year and for those issued in 1995, expire on March 10, 2000 and are exercisable as to 40% of the optioned shares after the first year, 60% after the second year, 80% after the third year and 100% after the fourth year. The following table summarizes information about stock options outstanding at December 31, 1998.
Options Outstanding Weighted- Options Exercisable Weighted Number Average Weighted Number Average Outstanding at Remaining Average Exercisable at Exercise December 31, Contractual Exercise December 31, Exercise Price 1998 Life Price 1998 Price $ 1.00 230,813 2.3 years $ 1.00 173,110 $ 1.00 2.00 164,475 1.2 years 2.00 131,580 2.00 6.19 287,700 9.9 years 6.19 0 6.38 30,000 4.7 years 6.38 30,000 6.38 8.38 50,000 9.9 years 8.38 0 11.81 90,000 9.4 years 11.81 0 ------- ------- 1.00 to 11.81 852,988 5.9 years $ 5.93 334,690 $ 1.87
(ii) Private Placement Warrants In connection with the private placement of securities in 1996, warrants to purchase 420,000 shares of the Company's common stock at $1.96 per share were sold to a group of private investors and senior management. During 1997 and 1998, 32,500 and 37,500 warrants, respectively, were exercised. The warrants expire between May 9, 2000 and June 29, 2000. (iii) Public Warrants The Public Warrants (see above) are exercisable for three years and entitle the registered holder to purchase one-quarter of a share of Common Stock at an exercise price of $9.847 per share. The Public Warrant exercise price and the number of shares issuable upon exercise of the Public Warrants are subject to adjustment under certain circumstances. The Company may redeem outstanding Public Warrants on not less than 30 days notice at a price of $0.25 per Public Warrant (subject to adjustment under certain circumstances) if the closing bid price of the Common Stock averages in excess of 200% of the exercise price for a period of 30 days' ending within 15 days of the redemption notice date. During 1997 and 1998, 66,200 and 48,000 Public Warrants, respectively were exercised. In connection with the Company's November 1996 public offering, the managing underwriter received a warrant ("Underwriter's Warrant") to purchase from the Company 125,000 shares of Common Stock at an exercise price of $10.276 per share ("Exercise Price") and 125,000 Warrants ("Underlying Warrant") at an exercise price of $0.06 per Warrant. Each Underlying Warrant entitles the holder to purchase one-quarter of a share of Common Stock at an exercise price of $9.847 per share. The Underwriter's Warrants are exercisable with respect to the Common Stock for a period of four years commencing from November 12, 1997 and with respect to the Underlying Warrants for a period of two years commencing from November 12, 1997. (iv) Directors' warrants On December 31, 1991, the Board of Directors adopted the 1991 Directors Warrant Plan ("Plan"). Pursuant to the Plan, each non-employee director was sold a five-year warrant to purchase 3,750 shares of Common Stock at an exercise price equal to the current market price for such shares at the time of issuance of the warrant. The Board of Directors terminated the Plan effective May 1997. During 1998, 3,750 warrants expired. During 1997, 3,750 warrants were exercised. During 1996, 3,750 warrants expired. 6. Income Taxes The provision (benefit) for income taxes related to continuing operations are as follows:
Year Ended December 31, 1996 1997 1998 Current tax expense (benefit): Federal $ 143,000 $ 983,000 $ 1,058,000 State 27,000 285,000 339,000 Recognition of net operating losses--U.S. (170,000) (1,268,000) (1,251,000) Foreign (primarily Canada) 297,000 952,000 421,000 Recognition of net operating losses--Canada 182,000) (548,000) (289,000) -------- ---------- ---------- Total Current 115,000 404,000 278,000 ------- ---------- ---------- Deferred tax expense (benefit): Federal (130,000) (728,000) (1,556,000) State (22,000) (128,000) 9,000 Foreign (primarily Canada) (354,000) 81,000 (40,000) --------- --------- ---------- Total deferred (506,000) (775,000) (1,587,000) --------- --------- ----------- Total income tax benefit $(391,000) $(371,000) $(1,309,000) ========= ========= ===========
Deferred tax assets are comprised of the following temporary differences and carryforwards at December 31:
1997 1998 Nondeductible allowances against trade receivables $ 20,000 $ 155,000 Nondeductible reserves and accruals 104,000 188,000 Machinery and equipment 497,000 398,000 Tax benefit of U.S. operating loss carry forwards 4,404,000 2,562,000 Other 53,000 3,000 ---------- ---------- Gross deferred tax assets 5,078,000 3,306,000 Deferred tax assets valuation allowance (3,572,000) (214,000) ----------- ---------- Net deferred tax assets $ 1,506,000 $ 3,092,000 ========== ==========
At December 31, 1998, a valuation allowance has been provided for certain limitations applied to the net operating loss carryforward of a subsidiary. At December 31, 1997, as a result of the Company's historical trend of losses, a valuation allowance has been provided for a substantial portion of the U.S. and Canadian deferred tax assets. At December 31, 1998, the net deferred tax asset of $3,092,000, included approximately $445,000 and $2,647,000 related to the Company's Canadian and U.S. operations, respectively. At December 31, 1997, the net deferred tax asset of $1,506,000, included approximately $405,000 and $1,101,000 related to the Company's Canadian and U.S. operations, respectively. Based on historical results and estimated 1999 earnings, which include earnings from certain contracts, as well as available tax planning strategies, management considers realization of the unreserved deferred tax asset more likely than not. Additional reductions to the valuation allowance will be recorded when, in the opinion of management, the Company's ability to generate taxable income is considered more likely than not. The Company's income tax provision (benefit) differed from the amount of income tax determined by applying the applicable statutory U.S. federal income tax rate to pretax income from continuing operations as a result of the following (in thousands):
Year Ended December 31, 1996 1997 1998 Income taxes (benefit) computed at the U.S. statutory rate $ 567 $ 1,830 $ 1,061 Income not subject to U.S. tax, net (225) (239) (211) U.S. losses and expenses for which no tax benefit has been recognized 25 7 184 Utilization of U.S. net operating losses (143) (777) (943) Decrease in beginning of the year deferred tax asset valuation allowance (590) (1,217) (1,546) State income taxes -- -- 146 Other (25) 25 -- Provision (benefit) for income taxes $(391) $ (371) $(1,309)
At December 31, 1998, the Company had net operating loss carry forwards in the U.S. of approximately $7.3 million and $3.2 million for federal and state income tax purposes, respectively, which expire in varying amounts through 2010. 7. Commitments The Company rents facilities, automobiles and equipment under various operating leases. Rental expenses under such leases amounted to $325,000, $324,000 and $444,000 for 1996, 1997 and 1998, respectively. At December 31, 1998, the aggregate minimum commitments pursuant to operating leases, including a lease renewal are as follows: Year ending December 31, 1999 $ 496,000 2000 582,000 2001 515,000 2002 517,000 2003 and thereafter 2,595,000 The Company has multi-year employment contracts with three key executives. Pursuant to those contracts the Company has annual minimum salary commitments aggregating $569,000, $569,000, $465,000 and $260,000 for the four years ended December 31, 2002, respectively. 8. Employee Benefit Plans The Company maintains a 401(k) salary deferral plan for all U.S. employees and a money purchase plan for its Canadian employees. As a money purchase plan, it does not establish any Company liability other than a discretionary matching formula to employee contributions. The aggregate cost of both plans for 1996, 1997, and 1998 was $87,000, $103,000 and $141,0000, respectively. Effective January 1, 1998, the Company adopted the Barringer Technologies Inc. Supplemental Executive Retirement Plan (the "SERP Plan"). The SERP Plan provides eligible participants with certain retirement benefits supplemental to the Company's 401(k) Plan. Pursuant to the SERP Plan, the Company will make annual contributions to the account of each participant equal to a variable percentage of the participant's base salary and annual cash bonus depending on the Company's achievement of certain performance targets. The actual percentage contribution will be determined by the Executive Compensation Committee, subject to certain parameters. A participant will become vested under the SERP Plan after five years of participation therein. For the year ended December 31, 1998, contributions aggregating $103,000 were made into the plan. 9. Supplemental Disclosures of Cash Flow Information The Company made cash payments for interest of $246,000, $17,000 and $10,000, for the years ended December 31, 1996, 1997 and 1998, respectively. Additionally, income taxes of $4,000, $209,000 and $498,000, were paid for the years ended December 31, 1996, 1997 and 1998, respectively. In the year ended December 31, 1996, the Company satisfied Preferred Stock dividend requirements in the amount $24,000 through issuance of 7,949 shares of common stock. Subsequent to December 31, 1996, all dividends have been paid in cash. In December 1996, the entire $1,000,000 of the Company's 6% Convertible Subordinated Debentures were converted into 363,628 shares of the Company's common stock as a result of the public offering (see note 5). 10. Segment and Geographic Data The Company's business focuses on one segment of Business - "IONSCAN", its only product. The Ionscan is currently used in the areas of drug and explosive detection for various security applications. A summary of the Company's revenues and long-lived assets by geographic area for each of the three years in the period ended December 31, 1998 is as follows (in thousands):
Revenues Long-Lived Assets 1996 1997 1998 1996 1997 1998 United States $ 3,411 $13,408 $14,473 $ 98 $ 217 $ 754 Canada 825 950 800 457 1,264 1,423 Other foreign countries 6,687 8,331 5,185 40 24 172 ------ ------ ------ ------ ----- ------ Totals $10,923 $22,689 $20,458 $ 595 $1,505 $2,349 ====== ====== ====== ===== ===== =====
Revenues are attributed to the countries based on location of the customer. For the year ended December 31, 1998, export sales, including sales from Canada to other countries, comprised 25.4% of total revenues and were made primarily to Western Europe, Asia and Central and South America. 11. Sales to Major Customers For the year ended December 31, 1998, the FAA accounted for approximately 46.3% of consolidated revenues of the Company. For the year ended December 31, 1997, two customers accounted for approximately 27.8% (14.8% and 13%) of consolidated revenues of the Company. For the year ended December 31, 1996, one customer accounted for approximately 11% of consolidated revenues of the Company. 12. Fourth Quarter Adjustments During the fourth quarter of 1996 and 1998, the Company recorded a deferred tax benefit related to a decrease in the deferred tax asset valuation allowance of $266,000 and $635,000, respectively. During the fourth quarter of 1997, the Company had no material adjustments. 13. Sale of Subsidiary During 1996, the Company sold all of its remaining shares and warrants in Labco and recognized a gain of $123,000 on the sale. In addition to the gain on the sale of its Labco investment, the Company recorded $117,000 of income representing its proportionate share of Labco's net income for 1996. 14. Earnings Per Share Basic and Diluted earnings per share has been computed as follows:
Income Shares Per Share For the Year ended December 31, 1998: (Numerator) (Denominator) Amount Basic Earnings Per Share: Income attributable to common stockholders 4,421,000 7,153,000 $0.62 Effect of dilutive securities Warrants and options 437,000 Convertible preferred dividends 10,000 22,000 Diluted Earnings Per Share: Income attributable to common stockholders and assumed conversions $4,431,000 7,612,000 $0.58 --------- --------- ----- For the Year ended December 31, 1997: Basic Earnings Per Share: Income available to common stockholders 5,742,000 5,456,000 $1.05 Effect of dilutive securities Warrants and options 777,000 Convertible preferred dividends and debentures 12,000 24,000 ---------- --------- ------ Diluted Earnings Per Share: Income available to common stockholders and assumed conversions $5,754,000 6,257,000 $0.92 ========= ========= ===== For the Year ended December 31, 1996: Basic Earnings Per Share: Income available to common stockholders 2,020,000 3,695,000 $ 0.55 Effect of dilutive securities ==== Warrants and options 27,000 228,000 Convertible preferred dividends and debentures 39,000 517,000 --------- --------- ------- Diluted Earnings Per Share: Income available to common stockholders and assumed conversions $ 2,086,000 4,440,000 $ 0.46 ========== ========= =====
Options and warrants to purchase 577,000 shares of common stock, exercisable at between $9.847 and $11.81 per share, were outstanding at December 31, 1998 but were not included in the computation of diluted earnings per share because the exercise prices were greater than the average market price of the common stock underlying the warrants and options. Options to purchase 24,268 shares of common stock, exercisable at between $11.78 and $14.00 per share, were outstanding at December 31, 1997 but were not included in the computation of diluted earnings per share because the options' exercise price was greater than the average market price of the common stock underlying the options. 15. Acquisition On April 30, 1998, the Company acquired all of the outstanding capital stock of DigiVision, Inc. ("DigiVision"), a San Diego-based developer of video enhancement products, for an aggregate cash purchase price of approximately $821,000, including related incurred acquisition costs, in a business combination accounted for as a purchase. DigiVision's results of operations are included in the accompanying financial statements from the acquisition date forward. With respect to this acquisition, DigiVision's results of operations from January 1, 1998 through the acquisition date were not material and accordingly, pro-forma operating results are not presented. Acquired in-process research and development projects of DigiVision, which could not be capitalized, were valued at $435,000 and were expensed at the time of the acquisition. The excess of the purchase price (including acquisition related costs) over the fair value of net assets acquired ($778,000) is being amortized over a five-year period.
BARRINGER TECHNOLOGIES INC VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, SCHEDULE II Balance - Balance beginning end of of period Addition Deduction Recovery period - - ------------------------------------------------------------------------------------------ Allowance for doubtful accounts and sales allowances: 1998 $109,000 $543,000 $26,000 $626,000 1997 63,000 46,000 109,000 1996 41,000 52,000 $30,000 63,000
EX-10 2 EMPLOYMENT AGREEMENT EXHIBIT 10.2 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT (this "Agreement"), dated November ___, 1998, by and between Barringer Technologies Inc. (the "Company") and Richard S. Rosenfeld (the "Executive"), residing at 105 Stonebridge Road, Montclair, New Jersey 07042. W I T N E S S E T H: WHEREAS, the Executive is currently serving as the Vice President-Finance and Chief Financial Officer of the Company; and WHEREAS, the Company wishes to assure that the Executive will continue to serve in that capacity during the term of this Agreement, and the Executive is willing to continue to serve in that capacity on the terms and conditions herein set forth; NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows: Section 1. Term of Employment. The Executive's employment under this Agreement shall commence on September 1, 1998 (the "Commencement Date") and, subject to earlier termination pursuant to Section 5 hereof, shall continue until August 31, 2001 (the "Term"). The Executive hereby represents and warrants that (i) he has the legal capacity to execute and perform this Agreement, (ii) this Agreement is a valid and binding obligation of the Executive enforceable against him in accordance with its terms, (iii) the Executive's service hereunder will not conflict with, or result in a breach of, any agreement, understanding, order, judgment or other obligation to which the Executive is presently a party or by which he may be bound, and (iv) the Executive is not subject to, or bound by, any covenant against competition, confidentiality obligation or any other agreement, order, judgment or other obligation which would conflict with, restrict or limit the performance of the services to be provided by him hereunder. Section 2. Position and Duties. During the Term, the Executive shall serve as the Vice President-Finance and Chief Financial Officer of the Company and shall have such powers and duties as are commensurate with such position and as may be conferred upon him from time to time by the Chief Executive Officer of the Company or the Board of Directors of the Company (the "Board"). During the Term, and except for illness or incapacity and reasonable vacation periods consistent with Section 3 below, the Executive shall reasonably devote all of his business time, attention, skill and efforts exclusively to the business and affairs of the Company and its subsidiaries and affiliates; provided, however, that the Executive may engage in charitable, educational, religious, civic and similar types of activities (all of which shall be deemed to benefit the Company), speaking engagements, membership on the board of directors of other organizations (to the extent approved in advance by the Board), and similar activities to the extent that such activities do not inhibit or prohibit the performance of his duties hereunder or inhibit or conflict with the business of the Company, its subsidiaries and affiliates. Section 3. Compensation. For all services rendered by the Executive in any capacity required hereunder during the Term, including, without limitation, services as an executive officer, director, or member of any committee of the Company or of any subsidiary, affiliate or division thereof, the Executive shall be compensated as follows: (a) The Company shall pay the Executive a fixed salary at the rate of $125,000 per annum or such higher (but never lower) annual amount as is being paid from time to time pursuant to the terms hereof ("Base Salary"). The Base Salary shall be subject to such periodic review and such periodic increases as the Board shall deem appropriate in accordance with the Company's customary procedures and practices regarding the salaries of senior officers. Base Salary shall be payable in accordance with the customary payroll practices of the Company, but in no event less frequently than semi-monthly. (b) The Executive shall be entitled to participate in the Company's Annual Incentive Plan or any successor plan (the "Annual Incentive Plan"), which plan provides for the payment of incentive cash compensation to key officers based upon the performance of the Company and the officer's individual performance. The Company shall pay the Executive such amounts, if any, as shall become due to the Executive from time to time under the Annual Incentive Plan. A summary description of the terms of the Annual Incentive Plan is attached hereto as Exhibit A. (c) The Executive also shall be entitled to participate in the Company's Supplemental Executive Retirement Plan or any successor plan (the "SERP Plan"), which plan provides for contributions by the Company to accounts maintained for the benefit of certain senior executive officers of the Company based upon the performance of the Company. The Company shall pay to the Executive's account such amounts, if any, as shall become due from time to time under the SERP Plan. A summary description of the terms of the SERP Plan is attached hereto as Exhibit B. (d) Subject to compliance with the terms of Section 4 hereof, the Company shall reimburse the Executive for the Executive's actual out-of-pocket expenses of leasing a car of the Executive's choice and all related maintenance, repairs, insurance and other expenses, subject to a monthly cap of $450. (e) The Company shall provide the Executive with coverage under an individual or group disability insurance policy (together with any replacement disability insurance policy, the "Disability Policy") providing the Executive with payments equal to 60% of his Base Salary as in effect from time to time in the event that the Executive becomes permanently disabled, subject to a monthly cap of $10,000 and containing such terms and conditions as the Board or the Executive Compensation Committee of the Board may approve. (f) The Company shall maintain a term insurance policy (the "Term Policy") insuring the life of the Executive with a mutually acceptable insurance company in an amount not less than three times the Executive's Base Salary at no cost to the Executive (except any associated tax liability) with the beneficiary to be designated by the Executive. In the event that the Executive's employment is terminated pursuant to the terms hereof, the Company shall assign its rights under the Term Policy to the Executive for no additional consideration and, subject to the terms of the Term Policy, the Executive shall have the right to assume the Company's obligations thereunder. Upon such assignment, the Company shall have no further obligation with respect to the Term Policy. (g) The Executive shall be entitled to four weeks of vacation and carry-over rights all in accordance with the then-current policy of the Company. (h) The Company also will furnish the Executive, without cost to him except any associated tax liability, with perquisites consistent with those afforded other senior executives holding positions with the Company comparable to the position held by the Executive. (i) Except as expressly modified by the terms hereof, the Executive shall be entitled to participate in all compensation and employee benefit plans or programs, and to receive all benefits, perquisites and emoluments, for which any salaried employees of the Company are eligible under any plan or program now or hereafter established and maintained by the Company, to the fullest extent permissible under the general terms and provisions of such plans or programs and in accordance with the provisions thereof. Notwithstanding the foregoing, nothing in this Agreement shall preclude the amendment or termination of any such plan or program, including, without limitation, the Annual Incentive Plan and the SERP Plan; provided, that, such amendment or termination is applicable generally to the senior officers of the Company or any subsidiary or affiliate. Section 4. Business Expenses. Subject to any applicable limitations set forth in Section 3, the Company shall pay or reimburse the Executive for all reasonable travel or other expenses incurred by the Executive in connection with the performance of his duties and obligations under this Agreement, subject to the Executive's presentation of appropriate vouchers in accordance with such procedures as the Company may from time to time establish for senior officers and to preserve any deductions for Federal income taxation purposes to which the Company may be entitled. Section 5. Termination of Employment; Effects Thereof. (a) The Company shall have the right, upon delivery of written notice to the Executive, to terminate the Executive's employment hereunder prior to the expiration of the Term (i) pursuant to a Termination for Cause, (ii) upon the Executive's becoming subject to a Permanent Disability, or (iii) pursuant to a Without Cause Termination; provided, however, that, without the Executive's written consent, no Without Cause Termination shall be effective until 30 days after receipt by the Executive of written notice of termination from the Company. The Executive's employment hereunder shall terminate automatically without action by any party hereto upon the Executive's death. (b) Except as provided in paragraph (c) below, in the event that the Company terminates the Executive's employment pursuant to a Without Cause Termination, the Company shall pay the Executive any earned but unpaid Base Salary as of the effective date of such termination and shall continue, subject to the provisions of Section 6 below, to pay the Executive's Base Salary as in effect at the time of such termination for a period of twelve months from the effective date of such termination. (c) At any time after the occurrence of a Change in Control Event, the Executive shall have the right, upon delivery of written notice to the Company, to terminate the Executive's employment hereunder prior to the expiration of the Term if the Company (i) requires the Executive to be based at any office or location more than 25 miles from the office at which the Executive is based on the Commencement Date, other than infrequent business trips of short duration reasonably required in the performance of the Executive's responsibilities under this Agreement; or (ii) assigns to the Executive duties materially inconsistent with, or fails to assign to the Executive duties materially consistent with, the Executive's position, duties, authority and responsibilities. In the event that either (x) the Executive resigns in accordance with the preceding sentence, or (y) the Company terminates the Executive's employment pursuant to a Without Cause Termination on or after the occurrence of a Change in Control Event, the Company shall pay the Executive any earned but unpaid Base Salary as of the effective date of such termination and shall pay to the Executive in a single lump sum within ten (10) business days of the effective date of the termination of the Executive's employment an amount equal to the greater of (i) the Executive's annual Base Salary or (ii) any Base Salary payable to the Executive for the remainder of the Term. (d) In the event of any termination of the Executive's employment pursuant to paragraph (b) or (c) above, subject to the provisions of Section 3(i), the Company shall pay the Executive an amount determined under the Annual Incentive Plan in respect of the year in which the termination of employment is effective assuming (i) the Executive has met all of his personal objectives pro rated for such year, and (ii) the total bonus pool under the Annual Incentive Plan for such year is based upon the level of the Company's performance through the end of the month immediately preceding the effective date of such termination with such performance being annualized for the year in which the termination of employment is effective. The Company also shall pay to the Executive (or as the Executive may otherwise direct) all amounts which the Executive is entitled to pursuant to the SERP Plan (whether vested or unvested). Except as provided in paragraph (l) below, all stock options or other awards previously granted to the Executive that have not vested on or before the effective date of the termination of the Executive's employment will immediately expire and shall be null and void as of the date of termination and all options or awards previously granted to the Executive that have vested on or before the effective date of the termination of the Executive's employment shall be payable or exercisable, if at all, as specified in the stock compensation program or other arrangement pursuant to which such options or awards were granted to the Executive. In addition, the Company shall pay to the Executive any other benefits to which the Executive is entitled upon termination of employment under any employee benefit plan or policy then in effect. The Company also shall continue to provide the Executive, his spouse and their eligible dependents with continued group hospitalization, health and medical insurance coverage consistent with and pursuant to the terms of the medical plan, if any, then maintained by the Company for its employees for one year following the effective date of the termination of the Executive's employment. Neither the Executive, his spouse nor their eligible dependents shall be required to contribute to the cost of such coverage (except for any deductibles and co-payments generally applicable to participants in such medical plan). The Executive acknowledges that the medical benefits coverage provided hereunder shall run concurrently with any period of coverage to which the Executive, his spouse or their eligible dependents may be entitled under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"). Any period of continuation coverage under COBRA shall be measured from the effective date of the termination of the Executive's employment hereunder. The Executive and his spouse will have the statutory period after the termination of his employment to elect continued COBRA coverage. No other payments shall be made, or benefits provided, by the Company under this Agreement except as otherwise required by law. (e) In the event that the Company terminates the Executive's employment pursuant to a Permanent Disability, the Company shall pay the Executive any earned but unpaid Base Salary as of the effective date of such termination and, subject to the provisions of Section 3(i), shall pay the Executive an amount determined under the Annual Incentive Plan in respect of the year in which the termination of employment is effective assuming (i) the Executive has met all of his personal objectives pro rated for such year, and (ii) the total bonus pool under the Annual Incentive Plan for such year is based upon the level of the Company's performance through the end of the month immediately preceding the effective date of such termination with such performance being annualized for the year in which the termination of employment is effective. The Company also shall pay to the Executive (or as the Executive may otherwise direct) all amounts which the Executive is entitled to pursuant to the SERP Plan (whether vested or unvested). All stock options or other awards previously granted to the Executive that have not vested on or before the effective date of the termination of the Executive's employment will immediately expire and shall be null and void as of the date of termination and all options or awards previously granted to the Executive that have vested on or before the effective date of the termination of the Executive's employment shall be payable or exercisable, if at all, as specified in the stock compensation program or other arrangement pursuant to which such options or awards were granted to the Executive. In addition, the Company shall pay to the Executive any other benefits to which the Executive is entitled upon termination of employment under any employee benefit plan or policy then in effect. No other payments shall be made, or benefits provided, by the Company under this Agreement except as otherwise required by law. (f) In the event that the Company terminates the Executive's employment hereunder due to a Termination for Cause or the Executive terminates his employment with the Company (including, without limitation, pursuant to any retirement plan or policy then maintained by the Company), the Company shall pay the Executive any earned but unpaid Base Salary as of the date of termination of employment. The Company also shall pay to the Executive (or as the Executive may otherwise direct) all amounts then credited to the Executive's account pursuant to the SERP Plan that have vested on or before the effective date of the termination of the Executive's employment and all amounts then so credited that have not vested on or before the effective date of the termination of the Executive's employment shall be forfeited. The Executive shall not be entitled to participate in the Annual Incentive Plan in respect of the year in which termination of his employment occurs or any subsequent year. All stock options or other awards previously granted to the Executive that have not vested on or before the effective date of the termination of the Executive's employment will immediately expire and shall be null and void as of the date of termination and all options or awards previously granted to the Executive that have vested on or before the effective date of the termination of the Executive's employment shall be payable or exercisable, if at all, as specified in the stock compensation program or other arrangement pursuant to which such options or awards were granted to the Executive. In addition, the Company shall pay to the Executive any other benefits to which the Executive is entitled upon termination of employment under any employee benefit plan or policy then in effect. No other payments shall be made, or benefits provided, by the Company under this Agreement except as otherwise required by law. (g) In the event that the Executive's employment hereunder is terminated due to the Executive's death, the Company shall pay the Executive's executor or other legal representative (the "Representative") any earned but unpaid Base Salary as of the date of termination of employment and, subject to the provisions of Section 3(i), shall pay the Representative an amount determined under the Annual Incentive Plan in respect of the year in which the Executive's death occurs assuming (i) the Executive has met all of his personal objectives pro rated for such year, and (ii) the total bonus pool under the Annual Incentive Plan for such year is based upon the level of the Company's performance through the end of the month immediately preceding the Executive's death with such performance being annualized for the year in which the Executive's death occurs; provided, that, the amount paid to the Representative shall be pro rated for the number of complete months preceding the Executive's death. In addition, the Company shall pay to the Representative (or as the Representative may otherwise direct) all amounts which the Executive is entitled to pursuant to the SERP Plan (whether vested or unvested). All stock options or other awards previously granted to the Executive that have not vested on or before the Executive's death will immediately expire and shall be null and void as of the date of death and all options or awards previously granted to the Executive that have vested on or before the Executive's death shall be payable or exercisable, if at all, by the Representative as specified in the stock compensation program or other arrangement pursuant to which such options or awards were granted to the Executive. In addition, the Company shall pay to the Representative any other benefits to which the Executive would have been entitled upon termination of employment under any employee benefit plan or policy then in effect. No other payments shall be made, or benefits provided, by the Company under this Agreement except as otherwise required by law. (h) In the event that the Term expires and the Company and the Executive have not agreed to extend this Agreement or entered into a replacement employment agreement, other than as a result of the Executive's retirement, the Executive shall have the right to terminate his employment within 30 days of the end of the Term by providing written notice to that effect to the Company. Such termination shall be effective 20 days after receipt of such notice by the Company, unless the Company and the Executive agree otherwise in writing. A termination of employment by the Executive pursuant to this Section 5(h) shall have the same effect as a Without Cause Termination. (i) Any lump-sum severance payments received by the Executive pursuant to this Section 5 upon termination of his employment shall be treated as salary for purposes of the Company's 401(k) Savings Plan to the maximum extent permitted by applicable law. (j) For purposes of this Agreement, the following terms have the following meanings: (i) The term "Termination for Cause" means, to the maximum extent permitted by applicable law, a termination of the Executive's employment by the Company because the Executive has (a) materially breached or materially failed to perform his duties under applicable law and such breach or failure to perform causes material damage to the Company or constitutes self-dealing or willful misconduct, (b) intentionally committed an act of dishonesty in the performance of his duties hereunder that either constitutes self-dealing, willful misconduct, a breach of duty to the Company or a violation of applicable law, (c) engaged in conduct detrimental to the business of the Company which causes material damage to the Company, (d) been convicted of a felony, (e) been convicted of a misdemeanor involving moral turpitude, (f) materially breached or materially failed to perform his obligations and duties hereunder, which breach or failure the Executive shall fail to remedy within 30 days after written demand from the Company, (g) repeatedly refused to follow lawful and reasonable directions from the Board or the Chief Executive Officer commensurate with the Executive's office and the terms of this Agreement, which refusal is material to the performance of the Executive's duties or (h) violated in any material respect the representations made in Section 1 above or the provisions of Section 6 below. (ii) The term "Without Cause Termination" means a termination of the Executive's employment by the Company other than due to (i) a Termination for Cause, (ii) Permanent Disability or (iii) the Executive's death. (iii) The term "Permanent Disability" means permanently disabled so as to qualify for full benefits under the Disability Policy; provided, however, that if no Disability Policy is in effect on the date of determination, "Permanent Disability" shall mean the inability of the Executive to perform his duties hereunder on a full-time basis for a period of six full calendar months during any eight consecutive calendar months due to illness or injury of a physical or mental nature, supported by the completion by the Executive's attending physician (or a physician selected by the Company and reasonably satisfactory to the Executive or his legal representative if the Executive's physician is unable or unwilling to provide the necessary certification) of a medical certification form outlining the disability and treatment. (iv) The term "Change in Control Event" means any of the following events: (A) Any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended, except that a person shall be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 50% or more of the total voting power of the Company's outstanding capital stock; (B) The individuals who (i) as of the date of this Agreement constitute the Board of Directors (the "Original Directors"), (ii) thereafter are elected to the Board of Directors and whose election or nomination for election to the Board of Directors was approved by a vote of at least 2/3 of the Original Directors then still in office (such Directors being called "Additional Original Directors"), or (iii) are elected to the Board of Directors and whose election or nomination for election to the Board of Directors was approved by a vote of at least 2/3 of the Original Directors and Additional Original Directors then still in office, cease for any reason to constitute a majority of the members of the Board of Directors; (C) The Company shall consummate a merger, consolidation, recapitalization, or reorganization of the Company, other than any such transaction which results in holders of outstanding voting securities of the Company immediately prior to the transaction having beneficial ownership of at least 50% of the total voting power represented by the voting securities of the surviving entity outstanding immediately after such transaction, with the voting power of each such continuing holder relative to such other continuing holders being not altered substantially in the transaction; or (D) The Company shall consummate a plan of complete liquidation of the Company or an agreement for the sale, assignment, conveyance, transfer, lease or other disposition by the Company of all or substantially all of its assets to any person, or group of related persons, in one or a series of related transactions. (k) Any payments to be made or benefits to be provided by the Company pursuant to this Section 5 (other than pursuant to Sections 5(e) or (g)) are subject to the receipt by the Company of an effective general release and agreement not to sue in a form reasonably satisfactory to the Company (the "Release") pursuant to which the Executive agrees (i) to release all claims against the Company and certain related parties (excluding claims for any severance benefits payable hereunder), (ii) not to maintain any action, suit, claim or proceeding against the Company and certain related parties, and (iii) to be bound by certain confidentiality and mutual non-disparagement covenants specified therein. Notwithstanding the due date of any post-employment payment, the Company shall not be obligated to make any payments under this Section 5 until after the expiration of any revocation period applicable to the Release. (l) Upon the occurrence of a Change in Control Event and provided that the Executive continues to be employed by the Company at such time, the Board shall, or shall cause the Executive Compensation Committee of the Board to, cause all stock options previously granted to the Executive to become immediately exercisable by the Executive to the extent that such acceleration is not prohibited by the terms of any plan, program, agreement or arrangement pursuant to which such options were granted. Section 6. Other Duties of Executive During and After Term. (a) The Executive recognizes and acknowledges that all information pertaining to the affairs, business, clients, or customers of the Company or any of its subsidiaries or affiliates (any or all of such entities being hereinafter referred to as the "Business"), as such information may exist from time to time, other than information that the Company has previously made publicly available, is confidential information and is a unique and valuable asset of the Business, access to and knowledge of which are essential to the performance of the Executive's duties under this Agreement. In consideration of the payments made to him hereunder, the Executive shall not, except to the extent reasonably necessary in the performance of his duties under this Agreement, divulge to any person, firm, association, corporation, or governmental agency, any information concerning the affairs, businesses, clients, or customers of the Business (except such information as is required by law to be divulged to a government agency or pursuant to lawful process), or make use of any such information for his own purposes or for the benefit of any person, firm, association or corporation (except the Business) and shall use his reasonable best efforts to prevent the disclosure of any such information by others. All records, memoranda, letters, books, papers, reports, accountings, experience or other data, and other records and documents relating to the Business, whether made by the Executive or otherwise coming into his possession, are confidential information and are, shall be, and shall remain the property of the Business. No copies thereof shall be made which are not retained by the Business, and the Executive agrees, on termination of his employment or on demand of the Company, to deliver the same to the Company. (b) The Executive recognizes and acknowledges that the Company shall own all Work Product created by the Executive during the Term. As used herein, "Work Product" includes, but is not limited to, all intellectual property rights, U.S. and international copyrights, patentable inventions, creations, discoveries and improvements, works of authorship and ideas, whether or not patentable or copyrightable and regardless of their form or state of development. All Work Product shall be considered work made for hire by the Executive and shall be owned by the Company. If any of the Work Product may not, by operation of law, be considered a work made for hire by the Executive for the Company, or if ownership of all right, title and interest of the intellectual property rights therein shall not otherwise vest exclusively in the Company, the Executive shall assign, and upon creation thereof shall be deemed to have automatically assigned, without further consideration, the ownership of all such Work Product to the Company and its successors and assigns. The Company, its successors and assigns shall have the right to obtain and hold in its or their own name copyrights, patents, registrations and other protections available to the Work Product. The Executive shall, at the Company's expense, assist the Company in obtaining and maintaining patent, copyright, trademark and other appropriate protection for all Work Product in all countries. The Executive hereby irrevocably relinquishes for the benefit of the Company, its successors and assigns any moral rights in the Work Product recognized under applicable law. The Executive shall disclose all Work Product promptly to the Company and shall not disclose the Work Product to anyone other than authorized Company personnel without the Company's prior written consent. The Executive shall not disclose to the Company or induce the Company to use any secret or confidential information or material belonging to others. The provisions of this Section 6(b) cover Work Product of any kind that is conceived or made by the Executive that (i) results from tasks assigned to the Executive by the Company, its subsidiaries and affiliates, or (ii) are conceived or made with the use of facilities or materials provided by the Company, its subsidiaries and affiliates. (c) In consideration of the payments made to him hereunder, during the one-year period commencing on the effective date of the termination of his employment for any reason, the Executive shall not, without express prior written approval of the Board, directly or indirectly, own or hold any proprietary interest in, or be employed by or receive remuneration from, any corporation, limited liability company, business trust, partnership, sole proprietorship or other entity engaged in competition with the Company or any of its affiliates (a "Competitor"), other than severance-type or retirement-type benefits from entities constituting prior employers of the Executive. The Executive also shall not, during such one-year period, solicit for the account of any Competitor, any customer or client of the Company or its affiliates, or any entity or individual that was such a customer or client during the one-year period immediately preceding the termination of the Executive's employment. The Executive also shall not, during such one-year period, act on behalf of any Competitor to interfere with the relationship between the Company or its subsidiaries and affiliates and their respective employees. For purposes of the preceding paragraph, (i) the term "proprietary interest" means legal or equitable ownership, whether through stockholding or otherwise, of an equity interest in a business, firm or entity other than ownership of less than two percent of any class of equity interest in a publicly held business, firm or entity and (ii) an entity shall be considered to be "engaged in competition" if such entity is, or is a holding company for, a company engaged in the business of designing, manufacturing, assembling, selling or servicing trace chemical detection equipment or related software or supplies anywhere in the world. (d) The Executive acknowledges that the restrictions contained in this Section 6 are reasonable and necessary to protect the legitimate interests of the Company and that any breach by the Executive of any provision contained in this Section 6 will result in irreparable injury to the Company for which a remedy at law would be inadequate. Accordingly, the Executive acknowledges that the Company shall be entitled to temporary, preliminary and permanent injunctive relief against the Executive in the event of any breach or threatened breach by the Executive of the provisions of this Section 6, in addition to any other remedy that may be available to the Company whether at law or in equity. (e) The Company's obligation to make payments, or provide for any benefits under this Agreement (except to the extent vested or exercisable) shall cease upon a violation by the Executive of the provisions of this Section 6. The provisions of this Section 6 shall survive any termination of the Executive's employment with the Company. Section 7. Withholdings. The Company may directly or indirectly withhold from any payments made under this Agreement all Federal, state, city or other taxes and all other deductions as shall be required pursuant to any law or governmental regulation or ruling or pursuant to any contributory benefit plan maintained by or on behalf of the Company. Section 8. Consolidation, Merger, or Sale of Assets. Nothing in this Agreement shall preclude the Company from consolidating or merging into or with, or transferring all or substantially all of its assets to, or engaging in any other business combination with, any other person or entity which assumes this Agreement and all obligations and undertakings of the Company hereunder. Upon such a consolidation, merger, transfer of assets or other business combination and assumption, the term "Company" as used herein shall mean such other person or entity and this Agreement shall continue in full force and effect. Section 9. Notices. All notices, requests, demands and other communications required or permitted hereunder shall be given in writing and shall be deemed to have been duly given if delivered or mailed, postage prepaid, by same day or overnight mail (i) if to the Executive, at the address set forth above, or (ii) if to the Company, as follows: Barringer Technologies Inc. 30 Technology Drive Warren, New Jersey 07059 or to such other address as either party shall have previously specified in writing to the other. Section 10. No Attachment. Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect; provided, however, that nothing in this Section 10 shall preclude the assumption of such rights by executors, administrators or other legal representatives of the Executive or his estate and their assigning any rights hereunder to the person or persons entitled thereto. Section 11. Expenses. Except as set forth herein, each party hereto shall pay its own expenses incident to the preparation, negotiation, administration and enforcement of this Agreement and the transactions contemplated herein. Section 12. Source of Payment. Subject to the terms of the SERP Plan, all payments provided for under this Agreement shall be paid in cash from the general funds of the Company. Except as may be required pursuant to the SERP Plan, the Company shall not be required to establish a special or separate fund or other segregation of assets to assure such payments, and, if the Company shall make any investments to aid it in meeting its obligations hereunder, the Executive shall have no right, title or interest whatever in or to any such investments except as may otherwise be expressly provided in a separate written instrument relating to such investments. Nothing contained in this Agreement, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship, between the Company and the Executive or any other person. To the extent that any person acquires a right to receive payments from the Company hereunder, such right, without prejudice to rights which employees may have, shall be no greater than the right of an unsecured creditor of the Company. Section 13. Binding Agreement; No Assignment. This Agreement shall be binding upon, and shall inure to the benefit of, the Executive and the Company and their respective permitted successors, assigns, heirs, beneficiaries and representatives. This Agreement is personal to the Executive and may not be assigned by him without the prior written consent of the Company. Any attempted assignment in violation of this Section 13 shall be null and void. Section 14. Dispute Resolution. At the option of either the Company or the Executive, any dispute, controversy or question arising under, out of or relating to this Agreement or the breach thereof, other than pursuant to Section 6 hereof, shall be referred for decision by arbitration in the State of New Jersey by a neutral arbitrator mutually selected by the parties hereto. Any arbitration proceeding shall be governed by the Rules of the American Arbitration Association then in effect or such rules last in effect (in the event such Association is in existence). If the parties are unable to agree upon such a neutral arbitrator within 21 days after either party has given the other written notice of the desire to submit the dispute, controversy or question for decision as aforesaid, then either party may apply to the American Arbitration Association for a final and binding appointment of a neutral arbitrator, however, if such Association is not then in existence or does not act in the matter within 45 days of any such application, either party may apply to the Presiding Judge of the Superior Court of any county in New Jersey for an appointment of a neutral arbitrator to hear the parties and such Judge is hereby authorized to make such appointment. In the event that either party exercises the right to submit a dispute, controversy or question arising hereunder to arbitration, the decision of the neutral arbitrator shall be final, conclusive and binding on all interested persons and no action at law or in equity shall be instituted or, if instituted, further prosecuted by either party other than to enforce the award of the neutral arbitrator. The award of the neutral arbitrator may be entered in any court that has jurisdiction. The Executive and the Company shall each bear all their own costs (including the fees and disbursements of counsel) incurred in connection with any such arbitration and shall each pay one-half of the costs of any arbitrator appointed hereunder. Section 15. Governing Law. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New Jersey, without reference to the choice of law principles thereof. Section 16. Entire Agreement. This Agreement shall constitute the entire agreement among the parties with respect to the matters covered hereby and shall supersede all previous written, oral or implied understandings among them with respect to such matters, including, but not limited to, the Employment Agreement, dated November 1, 1996, between the Company and the Executive. Section 17. Amendments. This Agreement may only be amended or otherwise modified, and compliance with any provision hereof may only be waived, by a writing executed by all of the parties hereto. The provisions of this Section 17 may only be amended or otherwise modified by such a writing. Section 18. Severability. The invalidity of any provision hereof shall not affect the validity, force or effect of the remaining provisions hereof. In the event that an arbitrator designated pursuant to the provisions of Section 14 or a court of competent jurisdiction determines that any provision contained herein is not enforceable as written because of the breadth or duration of such provision, such arbitrator or court shall have the authority to modify the terms of such provision so that, as so modified, such provision shall be enforceable to the maximum extent permitted by applicable law. Section 19. No Strict Construction. Each of the parties hereto acknowledges that this Agreement has been prepared jointly by the parties hereto, each of whom has been represented by counsel, and shall not be strictly construed against either party. Section 20. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, and all of which shall together constitute one and the same instrument. IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by the undersigned, thereunto duly authorized, and the Executive has signed this Agreement, all as of the date first written above. BARRINGER TECHNOLOGIES INC. By:/s/Stanley S. Binder _______________________________ Name: Stanley S. Binder Title: Chief Executive Officer /s/Richard S. Rosenfeld ________________________________ Richard S. Rosenfeld EX-10 3 EMPLOYMENT AGREEMENT EXHIBIT 10.3 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT (this "Agreement"), dated November ___, 1998, by and between Barringer Technologies Inc. (the "Company") and Kenneth S. Wood (the "Executive"), residing at 18 Brookside Drive, Warren, New Jersey 07060. W I T N E S S E T H: WHEREAS, the Executive is currently serving as the President and Chief Operating Officer of the Company; and WHEREAS, the Company wishes to assure that the Executive will continue to serve in that capacity during the term of this Agreement, and the Executive is willing to continue to serve in that capacity on the terms and conditions herein set forth; NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows: Section 1. Term of Employment. The Executive's employment under this Agreement shall commence on September 1, 1998 (the "Commencement Date") and, subject to earlier termination pursuant to Section 5 hereof, shall continue until August 31, 2001 (the "Term"). The Executive hereby represents and warrants that (i) he has the legal capacity to execute and perform this Agreement, (ii) this Agreement is a valid and binding obligation of the Executive enforceable against him in accordance with its terms, (iii) the Executive's service hereunder will not conflict with, or result in a breach of, any agreement, understanding, order, judgment or other obligation to which the Executive is presently a party or by which he may be bound, and (iv) the Executive is not subject to, or bound by, any covenant against competition, confidentiality obligation or any other agreement, order, judgment or other obligation which would conflict with, restrict or limit the performance of the services to be provided by him hereunder. Section 2. Position and Duties. During the Term, the Executive shall serve as the President and Chief Operating Officer of the Company and shall have such powers and duties as are commensurate with such position and as may be conferred upon him from time to time by the Chief Executive Officer of the Company or the Board of Directors of the Company (the "Board"). During the Term, and except for illness or incapacity and reasonable vacation periods consistent with Section 3 below, the Executive shall reasonably devote all of his business time, attention, skill and efforts exclusively to the business and affairs of the Company and its subsidiaries and affiliates; provided, however, that the Executive may engage in charitable, educational, religious, civic and similar types of activities (all of which shall be deemed to benefit the Company), speaking engagements, membership on the board of directors of other organizations (to the extent approved in advance by the Board), and similar activities to the extent that such activities do not inhibit or prohibit the performance of his duties hereunder or inhibit or conflict with the business of the Company, its subsidiaries and affiliates. Section 3. Compensation. For all services rendered by the Executive in any capacity required hereunder during the Term, including, without limitation, services as an executive officer, director, or member of any committee of the Company or of any subsidiary, affiliate or division thereof, the Executive shall be compensated as follows: (a) The Company shall pay the Executive a fixed salary at the rate of $172,500 per annum or such higher (but never lower) annual amount as is being paid from time to time pursuant to the terms hereof ("Base Salary"). The Base Salary shall be subject to such periodic review and such periodic increases as the Board shall deem appropriate in accordance with the Company's customary procedures and practices regarding the salaries of senior officers. Base Salary shall be payable in accordance with the customary payroll practices of the Company, but in no event less frequently than semi-monthly. (b) The Executive shall be entitled to participate in the Company's Annual Incentive Plan or any successor plan (the "Annual Incentive Plan"), which plan provides for the payment of incentive cash compensation to key officers based upon the performance of the Company and the officer's individual performance. The Company shall pay the Executive such amounts, if any, as shall become due to the Executive from time to time under the Annual Incentive Plan. A summary description of the terms of the Annual Incentive Plan is attached hereto as Exhibit A. (c) The Executive also shall be entitled to participate in the Company's Supplemental Executive Retirement Plan or any successor plan (the "SERP Plan"), which plan provides for contributions by the Company to accounts maintained for the benefit of certain senior executive officers of the Company based upon the performance of the Company. The Company shall pay to the Executive's account such amounts, if any, as shall become due from time to time under the SERP Plan. A summary description of the terms of the SERP Plan is attached hereto as Exhibit B. (d) Subject to compliance with the terms of Section 4 hereof, the Company shall reimburse the Executive for the Executive's actual out-of-pocket expenses of leasing a car of the Executive's choice and all related maintenance, repairs, insurance and other expenses, subject to a monthly cap of $600. (e) The Company shall provide the Executive with coverage under an individual or group disability insurance policy (together with any replacement disability insurance policy, the "Disability Policy") providing the Executive with payments equal to 60% of his Base Salary as in effect from time to time in the event that the Executive becomes permanently disabled, subject to a monthly cap of $10,000 and containing such terms and conditions as the Board or the Executive Compensation Committee of the Board may approve. (f) The Company shall maintain a term insurance policy (the "Term Policy") insuring the life of the Executive with a mutually acceptable insurance company in an amount not less than four times the Executive's Base Salary at no cost to the Executive (except any associated tax liability) with the beneficiary to be designated by the Executive. In the event that the Executive's employment is terminated pursuant to the terms hereof, the Company shall assign its rights under the Term Policy to the Executive for no additional consideration and, subject to the terms of the Term Policy, the Executive shall have the right to assume the Company's obligations thereunder. Upon such assignment, the Company shall have no further obligation with respect to the Term Policy. (g) The Executive shall be entitled to four weeks of vacation and carry-over rights all in accordance with the then-current policy of the Company. (h) The Company also will furnish the Executive, without cost to him except any associated tax liability, with perquisites consistent with those afforded other senior executives holding positions with the Company comparable to the position held by the Executive. (i) Except as expressly modified by the terms hereof, the Executive shall be entitled to participate in all compensation and employee benefit plans or programs, and to receive all benefits, perquisites and emoluments, for which any salaried employees of the Company are eligible under any plan or program now or hereafter established and maintained by the Company, to the fullest extent permissible under the general terms and provisions of such plans or programs and in accordance with the provisions thereof. Notwithstanding the foregoing, nothing in this Agreement shall preclude the amendment or termination of any such plan or program, including, without limitation, the Annual Incentive Plan and the SERP Plan; provided, that, such amendment or termination is applicable generally to the senior officers of the Company or any subsidiary or affiliate. Section 4. Business Expenses. Subject to any applicable limitations set forth in Section 3, the Company shall pay or reimburse the Executive for all reasonable travel or other expenses incurred by the Executive in connection with the performance of his duties and obligations under this Agreement, subject to the Executive's presentation of appropriate vouchers in accordance with such procedures as the Company may from time to time establish for senior officers and to preserve any deductions for Federal income taxation purposes to which the Company may be entitled. Section 5. Termination of Employment; Effects Thereof. (a) The Company shall have the right, upon delivery of written notice to the Executive, to terminate the Executive's employment hereunder prior to the expiration of the Term (i) pursuant to a Termination for Cause, (ii) upon the Executive's becoming subject to a Permanent Disability, or (iii) pursuant to a Without Cause Termination; provided, however, that, without the Executive's written consent, no Without Cause Termination shall be effective until 30 days after receipt by the Executive of written notice of termination from the Company. The Executive's employment hereunder shall terminate automatically without action by any party hereto upon the Executive's death. (b) Except as provided in paragraph (c) below, in the event that the Company terminates the Executive's employment pursuant to a Without Cause Termination, the Company shall pay the Executive any earned but unpaid Base Salary as of the effective date of such termination and shall continue, subject to the provisions of Section 6 below, to pay the Executive's Base Salary as in effect at the time of such termination for a period of twelve months from the effective date of such termination. (c) At any time after the occurrence of a Change in Control Event, the Executive shall have the right, upon delivery of written notice to the Company, to terminate the Executive's employment hereunder prior to the expiration of the Term if the Company (i) requires the Executive to be based at any office or location more than 25 miles from the office at which the Executive is based on the Commencement Date, other than infrequent business trips of short duration reasonably required in the performance of the Executive's responsibilities under this Agreement; or (ii) assigns to the Executive duties materially inconsistent with, or fails to assign to the Executive duties materially consistent with, the Executive's position, duties, authority and responsibilities. In the event that either (x) the Executive resigns in accordance with the preceding sentence, or (y) the Company terminates the Executive's employment pursuant to a Without Cause Termination on or after the occurrence of a Change in Control Event, the Company shall pay the Executive any earned but unpaid Base Salary as of the effective date of such termination and shall pay to the Executive in a single lump sum within ten (10) business days of the effective date of the termination of the Executive's employment an amount equal to the greater of (i) the Executive's annual Base Salary or (ii) any Base Salary payable to the Executive for the remainder of the Term. (d) In the event of any termination of the Executive's employment pursuant to paragraph (b) or (c) above, subject to the provisions of Section 3(i), the Company shall pay the Executive an amount determined under the Annual Incentive Plan in respect of the year in which the termination of employment is effective assuming (i) the Executive has met all of his personal objectives pro rated for such year, and (ii) the total bonus pool under the Annual Incentive Plan for such year is based upon the level of the Company's performance through the end of the month immediately preceding the effective date of such termination with such performance being annualized for the year in which the termination of employment is effective. The Company also shall pay to the Executive (or as the Executive may otherwise direct) all amounts which the Executive is entitled to pursuant to the SERP Plan (whether vested or unvested). Except as provided in paragraph (l) below, all stock options or other awards previously granted to the Executive that have not vested on or before the effective date of the termination of the Executive's employment will immediately expire and shall be null and void as of the date of termination and all options or awards previously granted to the Executive that have vested on or before the effective date of the termination of the Executive's employment shall be payable or exercisable, if at all, as specified in the stock compensation program or other arrangement pursuant to which such options or awards were granted to the Executive. In addition, the Company shall pay to the Executive any other benefits to which the Executive is entitled upon termination of employment under any employee benefit plan or policy then in effect. The Company also shall continue to provide the Executive, his spouse and their eligible dependents with continued group hospitalization, health and medical insurance coverage consistent with and pursuant to the terms of the medical plan, if any, then maintained by the Company for its employees for one year following the effective date of the termination of the Executive's employment. Neither the Executive, his spouse nor their eligible dependents shall be required to contribute to the cost of such coverage (except for any deductibles and co-payments generally applicable to participants in such medical plan). The Executive acknowledges that the medical benefits coverage provided hereunder shall run concurrently with any period of coverage to which the Executive, his spouse or their eligible dependents may be entitled under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"). Any period of continuation coverage under COBRA shall be measured from the effective date of the termination of the Executive's employment hereunder. The Executive and his spouse will have the statutory period after the termination of his employment to elect continued COBRA coverage. No other payments shall be made, or benefits provided, by the Company under this Agreement except as otherwise required by law. (e) In the event that the Company terminates the Executive's employment pursuant to a Permanent Disability, the Company shall pay the Executive any earned but unpaid Base Salary as of the effective date of such termination and, subject to the provisions of Section 3(i), shall pay the Executive an amount determined under the Annual Incentive Plan in respect of the year in which the termination of employment is effective assuming (i) the Executive has met all of his personal objectives pro rated for such year, and (ii) the total bonus pool under the Annual Incentive Plan for such year is based upon the level of the Company's performance through the end of the month immediately preceding the effective date of such termination with such performance being annualized for the year in which the termination of employment is effective. The Company also shall pay to the Executive (or as the Executive may otherwise direct) all amounts which the Executive is entitled to pursuant to the SERP Plan (whether vested or unvested). All stock options or other awards previously granted to the Executive that have not vested on or before the effective date of the termination of the Executive's employment will immediately expire and shall be null and void as of the date of termination and all options or awards previously granted to the Executive that have vested on or before the effective date of the termination of the Executive's employment shall be payable or exercisable, if at all, as specified in the stock compensation program or other arrangement pursuant to which such options or awards were granted to the Executive. In addition, the Company shall pay to the Executive any other benefits to which the Executive is entitled upon termination of employment under any employee benefit plan or policy then in effect. No other payments shall be made, or benefits provided, by the Company under this Agreement except as otherwise required by law. (f) In the event that the Company terminates the Executive's employment hereunder due to a Termination for Cause or the Executive terminates his employment with the Company (including, without limitation, pursuant to any retirement plan or policy then maintained by the Company), the Company shall pay the Executive any earned but unpaid Base Salary as of the date of termination of employment. The Company also shall pay to the Executive (or as the Executive may otherwise direct) all amounts then credited to the Executive's account pursuant to the SERP Plan that have vested on or before the effective date of the termination of the Executive's employment and all amounts then so credited that have not vested on or before the effective date of the termination of the Executive's employment shall be forfeited. The Executive shall not be entitled to participate in the Annual Incentive Plan in respect of the year in which termination of his employment occurs or any subsequent year. All stock options or other awards previously granted to the Executive that have not vested on or before the effective date of the termination of the Executive's employment will immediately expire and shall be null and void as of the date of termination and all options or awards previously granted to the Executive that have vested on or before the effective date of the termination of the Executive's employment shall be payable or exercisable, if at all, as specified in the stock compensation program or other arrangement pursuant to which such options or awards were granted to the Executive. In addition, the Company shall pay to the Executive any other benefits to which the Executive is entitled upon termination of employment under any employee benefit plan or policy then in effect. No other payments shall be made, or benefits provided, by the Company under this Agreement except as otherwise required by law. (g) In the event that the Executive's employment hereunder is terminated due to the Executive's death, the Company shall pay the Executive's executor or other legal representative (the "Representative") any earned but unpaid Base Salary as of the date of termination of employment and, subject to the provisions of Section 3(i), shall pay the Representative an amount determined under the Annual Incentive Plan in respect of the year in which the Executive's death occurs assuming (i) the Executive has met all of his personal objectives pro rated for such year, and (ii) the total bonus pool under the Annual Incentive Plan for such year is based upon the level of the Company's performance through the end of the month immediately preceding the Executive's death with such performance being annualized for the year in which the Executive's death occurs; provided, that, the amount paid to the Representative shall be pro rated for the number of complete months preceding the Executive's death. In addition, the Company shall pay to the Representative (or as the Representative may otherwise direct) all amounts which the Executive is entitled to pursuant to the SERP Plan (whether vested or unvested). All stock options or other awards previously granted to the Executive that have not vested on or before the Executive's death will immediately expire and shall be null and void as of the date of death and all options or awards previously granted to the Executive that have vested on or before the Executive's death shall be payable or exercisable, if at all, by the Representative as specified in the stock compensation program or other arrangement pursuant to which such options or awards were granted to the Executive. In addition, the Company shall pay to the Representative any other benefits to which the Executive would have been entitled upon termination of employment under any employee benefit plan or policy then in effect. No other payments shall be made, or benefits provided, by the Company under this Agreement except as otherwise required by law. (h) In the event that the Term expires and the Company and the Executive have not agreed to extend this Agreement or entered into a replacement employment agreement, other than as a result of the Executive's retirement, the Executive shall have the right to terminate his employment within 30 days of the end of the Term by providing written notice to that effect to the Company. Such termination shall be effective 20 days after receipt of such notice by the Company, unless the Company and the Executive agree otherwise in writing. A termination of employment by the Executive pursuant to this Section 5(h) shall have the same effect as a Without Cause Termination. (i) Any lump-sum severance payments received by the Executive pursuant to this Section 5 upon termination of his employment shall be treated as salary for purposes of the Company's 401(k) Savings Plan to the maximum extent permitted by applicable law. (j) For purposes of this Agreement, the following terms have the following meanings: (i) The term "Termination for Cause" means, to the maximum extent permitted by applicable law, a termination of the Executive's employment by the Company because the Executive has (a) materially breached or materially failed to perform his duties under applicable law and such breach or failure to perform causes material damage to the Company or constitutes self-dealing or willful misconduct, (b) intentionally committed an act of dishonesty in the performance of his duties hereunder that either constitutes self-dealing, willful misconduct, a breach of duty to the Company or a violation of applicable law, (c) engaged in conduct detrimental to the business of the Company which causes material damage to the Company, (d) been convicted of a felony, (e) been convicted of a misdemeanor involving moral turpitude, (f) materially breached or materially failed to perform his obligations and duties hereunder, which breach or failure the Executive shall fail to remedy within 30 days after written demand from the Company, (g) repeatedly refused to follow lawful and reasonable directions from the Board or the Chief Executive Officer commensurate with the Executive's office and the terms of this Agreement, which refusal is material to the performance of the Executive's duties or (h) violated in any material respect the representations made in Section 1 above or the provisions of Section 6 below. (ii) The term "Without Cause Termination" means a termination of the Executive's employment by the Company other than due to (i) a Termination for Cause, (ii) Permanent Disability or (iii) the Executive's death. (iii) The term "Permanent Disability" means permanently disabled so as to qualify for full benefits under the Disability Policy; provided, however, that if no Disability Policy is in effect on the date of determination, "Permanent Disability" shall mean the inability of the Executive to perform his duties hereunder on a full-time basis for a period of six full calendar months during any eight consecutive calendar months due to illness or injury of a physical or mental nature, supported by the completion by the Executive's attending physician (or a physician selected by the Company and reasonably satisfactory to the Executive or his legal representative if the Executive's physician is unable or unwilling to provide the necessary certification) of a medical certification form outlining the disability and treatment. (iv) The term "Change in Control Event" means any of the following events: (A) Any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended, except that a person shall be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 50% or more of the total voting power of the Company's outstanding capital stock; (B) The individuals who (i) as of the date of this Agreement constitute the Board of Directors (the "Original Directors"), (ii) thereafter are elected to the Board of Directors and whose election or nomination for election to the Board of Directors was approved by a vote of at least 2/3 of the Original Directors then still in office (such Directors being called "Additional Original Directors"), or (iii) are elected to the Board of Directors and whose election or nomination for election to the Board of Directors was approved by a vote of at least 2/3 of the Original Directors and Additional Original Directors then still in office, cease for any reason to constitute a majority of the members of the Board of Directors; (C) The Company shall consummate a merger, consolidation, recapitalization, or reorganization of the Company, other than any such transaction which results in holders of outstanding voting securities of the Company immediately prior to the transaction having beneficial ownership of at least 50% of the total voting power represented by the voting securities of the surviving entity outstanding immediately after such transaction, with the voting power of each such continuing holder relative to such other continuing holders being not altered substantially in the transaction; or (D) The Company shall consummate a plan of complete liquidation of the Company or an agreement for the sale, assignment, conveyance, transfer, lease or other disposition by the Company of all or substantially all of its assets to any person, or group of related persons, in one or a series of related transactions. (k) Any payments to be made or benefits to be provided by the Company pursuant to this Section 5 (other than pursuant to Sections 5(e) or (g)) are subject to the receipt by the Company of an effective general release and agreement not to sue in a form reasonably satisfactory to the Company (the "Release") pursuant to which the Executive agrees (i) to release all claims against the Company and certain related parties (excluding claims for any severance benefits payable hereunder), (ii) not to maintain any action, suit, claim or proceeding against the Company and certain related parties, and (iii) to be bound by certain confidentiality and mutual non-disparagement covenants specified therein. Notwithstanding the due date of any post-employment payment, the Company shall not be obligated to make any payments under this Section 5 until after the expiration of any revocation period applicable to the Release. (l) Upon the occurrence of a Change in Control Event and provided that the Executive continues to be employed by the Company at such time, the Board shall, or shall cause the Executive Compensation Committee of the Board to, cause all stock options previously granted to the Executive to become immediately exercisable by the Executive to the extent that such acceleration is not prohibited by the terms of any plan, program, agreement or arrangement pursuant to which such options were granted. Section 6. Other Duties of Executive During and After Term. (a) The Executive recognizes and acknowledges that all information pertaining to the affairs, business, clients, or customers of the Company or any of its subsidiaries or affiliates (any or all of such entities being hereinafter referred to as the "Business"), as such information may exist from time to time, other than information that the Company has previously made publicly available, is confidential information and is a unique and valuable asset of the Business, access to and knowledge of which are essential to the performance of the Executive's duties under this Agreement. In consideration of the payments made to him hereunder, the Executive shall not, except to the extent reasonably necessary in the performance of his duties under this Agreement, divulge to any person, firm, association, corporation, or governmental agency, any information concerning the affairs, businesses, clients, or customers of the Business (except such information as is required by law to be divulged to a government agency or pursuant to lawful process), or make use of any such information for his own purposes or for the benefit of any person, firm, association or corporation (except the Business) and shall use his reasonable best efforts to prevent the disclosure of any such information by others. All records, memoranda, letters, books, papers, reports, accountings, experience or other data, and other records and documents relating to the Business, whether made by the Executive or otherwise coming into his possession, are confidential information and are, shall be, and shall remain the property of the Business. No copies thereof shall be made which are not retained by the Business, and the Executive agrees, on termination of his employment or on demand of the Company, to deliver the same to the Company. (b) The Executive recognizes and acknowledges that the Company shall own all Work Product created by the Executive during the Term. As used herein, "Work Product" includes, but is not limited to, all intellectual property rights, U.S. and international copyrights, patentable inventions, creations, discoveries and improvements, works of authorship and ideas, whether or not patentable or copyrightable and regardless of their form or state of development. All Work Product shall be considered work made for hire by the Executive and shall be owned by the Company. If any of the Work Product may not, by operation of law, be considered a work made for hire by the Executive for the Company, or if ownership of all right, title and interest of the intellectual property rights therein shall not otherwise vest exclusively in the Company, the Executive shall assign, and upon creation thereof shall be deemed to have automatically assigned, without further consideration, the ownership of all such Work Product to the Company and its successors and assigns. The Company, its successors and assigns shall have the right to obtain and hold in its or their own name copyrights, patents, registrations and other protections available to the Work Product. The Executive shall, at the Company's expense, assist the Company in obtaining and maintaining patent, copyright, trademark and other appropriate protection for all Work Product in all countries. The Executive hereby irrevocably relinquishes for the benefit of the Company, its successors and assigns any moral rights in the Work Product recognized under applicable law. The Executive shall disclose all Work Product promptly to the Company and shall not disclose the Work Product to anyone other than authorized Company personnel without the Company's prior written consent. The Executive shall not disclose to the Company or induce the Company to use any secret or confidential information or material belonging to others. The provisions of this Section 6(b) cover Work Product of any kind that is conceived or made by the Executive that (i) results from tasks assigned to the Executive by the Company, its subsidiaries and affiliates, or (ii) are conceived or made with the use of facilities or materials provided by the Company, its subsidiaries and affiliates. (c) In consideration of the payments made to him hereunder, during the one-year period commencing on the effective date of the termination of his employment for any reason, the Executive shall not, without express prior written approval of the Board, directly or indirectly, own or hold any proprietary interest in, or be employed by or receive remuneration from, any corporation, limited liability company, business trust, partnership, sole proprietorship or other entity engaged in competition with the Company or any of its affiliates (a "Competitor"), other than severance-type or retirement-type benefits from entities constituting prior employers of the Executive. The Executive also shall not, during such one-year period, solicit for the account of any Competitor, any customer or client of the Company or its affiliates, or any entity or individual that was such a customer or client during the one-year period immediately preceding the termination of the Executive's employment. The Executive also shall not, during such one-year period, act on behalf of any Competitor to interfere with the relationship between the Company or its subsidiaries and affiliates and their respective employees. For purposes of the preceding paragraph, (i) the term "proprietary interest" means legal or equitable ownership, whether through stockholding or otherwise, of an equity interest in a business, firm or entity other than ownership of less than two percent of any class of equity interest in a publicly held business, firm or entity and (ii) an entity shall be considered to be "engaged in competition" if such entity is, or is a holding company for, a company engaged in the business of designing, manufacturing, assembling, selling or servicing trace chemical detection equipment or related software or supplies anywhere in the world. (d) The Executive acknowledges that the restrictions contained in this Section 6 are reasonable and necessary to protect the legitimate interests of the Company and that any breach by the Executive of any provision contained in this Section 6 will result in irreparable injury to the Company for which a remedy at law would be inadequate. Accordingly, the Executive acknowledges that the Company shall be entitled to temporary, preliminary and permanent injunctive relief against the Executive in the event of any breach or threatened breach by the Executive of the provisions of this Section 6, in addition to any other remedy that may be available to the Company whether at law or in equity. (e) The Company's obligation to make payments, or provide for any benefits under this Agreement (except to the extent vested or exercisable) shall cease upon a violation by the Executive of the provisions of this Section 6. The provisions of this Section 6 shall survive any termination of the Executive's employment with the Company. Section 7. Withholdings. The Company may directly or indirectly withhold from any payments made under this Agreement all Federal, state, city or other taxes and all other deductions as shall be required pursuant to any law or governmental regulation or ruling or pursuant to any contributory benefit plan maintained by or on behalf of the Company. Section 8. Consolidation, Merger, or Sale of Assets. Nothing in this Agreement shall preclude the Company from consolidating or merging into or with, or transferring all or substantially all of its assets to, or engaging in any other business combination with, any other person or entity which assumes this Agreement and all obligations and undertakings of the Company hereunder. Upon such a consolidation, merger, transfer of assets or other business combination and assumption, the term "Company" as used herein shall mean such other person or entity and this Agreement shall continue in full force and effect. Section 9. Notices. All notices, requests, demands and other communications required or permitted hereunder shall be given in writing and shall be deemed to have been duly given if delivered or mailed, postage prepaid, by same day or overnight mail (i) if to the Executive, at the address set forth above, or (ii) if to the Company, as follows: Barringer Technologies Inc. 30 Technology Drive Warren, New Jersey 07059 or to such other address as either party shall have previously specified in writing to the other. Section 10. No Attachment. Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect; provided, however, that nothing in this Section 10 shall preclude the assumption of such rights by executors, administrators or other legal representatives of the Executive or his estate and their assigning any rights hereunder to the person or persons entitled thereto. Section 11. Expenses. Except as set forth herein, each party hereto shall pay its own expenses incident to the preparation, negotiation, administration and enforcement of this Agreement and the transactions contemplated herein. Section 12. Source of Payment. Subject to the terms of the SERP Plan, all payments provided for under this Agreement shall be paid in cash from the general funds of the Company. Except as may be required pursuant to the SERP Plan, the Company shall not be required to establish a special or separate fund or other segregation of assets to assure such payments, and, if the Company shall make any investments to aid it in meeting its obligations hereunder, the Executive shall have no right, title or interest whatever in or to any such investments except as may otherwise be expressly provided in a separate written instrument relating to such investments. Nothing contained in this Agreement, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship, between the Company and the Executive or any other person. To the extent that any person acquires a right to receive payments from the Company hereunder, such right, without prejudice to rights which employees may have, shall be no greater than the right of an unsecured creditor of the Company. Section 13. Binding Agreement; No Assignment. This Agreement shall be binding upon, and shall inure to the benefit of, the Executive and the Company and their respective permitted successors, assigns, heirs, beneficiaries and representatives. This Agreement is personal to the Executive and may not be assigned by him without the prior written consent of the Company. Any attempted assignment in violation of this Section 13 shall be null and void. Section 14. Dispute Resolution. At the option of either the Company or the Executive, any dispute, controversy or question arising under, out of or relating to this Agreement or the breach thereof, other than pursuant to Section 6 hereof, shall be referred for decision by arbitration in the State of New Jersey by a neutral arbitrator mutually selected by the parties hereto. Any arbitration proceeding shall be governed by the Rules of the American Arbitration Association then in effect or such rules last in effect (in the event such Association is in existence). If the parties are unable to agree upon such a neutral arbitrator within 21 days after either party has given the other written notice of the desire to submit the dispute, controversy or question for decision as aforesaid, then either party may apply to the American Arbitration Association for a final and binding appointment of a neutral arbitrator, however, if such Association is not then in existence or does not act in the matter within 45 days of any such application, either party may apply to the Presiding Judge of the Superior Court of any county in New Jersey for an appointment of a neutral arbitrator to hear the parties and such Judge is hereby authorized to make such appointment. In the event that either party exercises the right to submit a dispute, controversy or question arising hereunder to arbitration, the decision of the neutral arbitrator shall be final, conclusive and binding on all interested persons and no action at law or in equity shall be instituted or, if instituted, further prosecuted by either party other than to enforce the award of the neutral arbitrator. The award of the neutral arbitrator may be entered in any court that has jurisdiction. The Executive and the Company shall each bear all their own costs (including the fees and disbursements of counsel) incurred in connection with any such arbitration and shall each pay one-half of the costs of any arbitrator appointed hereunder. Section 15. Governing Law. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New Jersey, without reference to the choice of law principles thereof. Section 16. Entire Agreement. This Agreement shall constitute the entire agreement among the parties with respect to the matters covered hereby and shall supersede all previous written, oral or implied understandings among them with respect to such matters, including, but not limited to, the Employment Agreement, dated November 1, 1996, between the Company and the Executive. Section 17. Amendments. This Agreement may only be amended or otherwise modified, and compliance with any provision hereof may only be waived, by a writing executed by all of the parties hereto. The provisions of this Section 17 may only be amended or otherwise modified by such a writing. Section 18. Severability. The invalidity of any provision hereof shall not affect the validity, force or effect of the remaining provisions hereof. In the event that an arbitrator designated pursuant to the provisions of Section 14 or a court of competent jurisdiction determines that any provision contained herein is not enforceable as written because of the breadth or duration of such provision, such arbitrator or court shall have the authority to modify the terms of such provision so that, as so modified, such provision shall be enforceable to the maximum extent permitted by applicable law. Section 19. No Strict Construction. Each of the parties hereto acknowledges that this Agreement has been prepared jointly by the parties hereto, each of whom has been represented by counsel, and shall not be strictly construed against either party. Section 20. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, and all of which shall together constitute one and the same instrument. IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by the undersigned, thereunto duly authorized, and the Executive has signed this Agreement, all as of the date first written above. BARRINGER TECHNOLOGIES INC. By:/s/Stanley S. Binder ________________________________ Name: Stanley S. Binder Title: Chief Executive Officer /s/Kenneth S. Wood _______________________________ Kenneth S. Wood EX-10 4 LEASE AGREEMENT Exhibit 10.12 LEASE AGREEMENT THIS LEASE AGREEMENT, made this 26th day of June , 1998 by and between MT. BETHEL CORPORATE CENTER c/o Atlantic Development & Management Corp. 30 Technology Drive, P.O. Box 4500 Warren, New Jersey 07059 (hereinafter referred to as "Landlord") and BARRINGER TECHNOLOGIES, INC. a Delaware Corporation 30 Technology Drive Warren, New Jersey 07059 (hereinafter referred to as "Tenant") WITNESSETH: The parties hereto, in consideration of the rents, covenants and conditions herein obtained, do mutually agree as follows: 1. THE DEMISE A. Landlord does hereby demise and lease to Tenant, and Tenant does hereby lease and hire from Landlord, premises consisting of approximately 21,128 square feet of "as is" offices and approximately 7,000 square feet of "as is" warehouse space subject to the performance of Landlord to install demising fence within the warehouse portion of the premises, both of which are as shown highlighted in yellow on Exhibit "A" (the "Premises") located in a high technology building comprised of approximately 95,000 sq. ft. (the "Building") commonly know as 30 Technology Drive, Warren Township, Somerset County, New Jersey together with right of access through Lots 16 & 19.03 Block 78 on the private driveway identified as "Technology Drive". The tract of land upon which the Premises are located and all improvements thereon, including the Building, are sometimes hereinafter referred to collectively as "Landlord's Tract", and as shown on Lease Exhibit "B". Landlord's tract consists of land and improvements included on the aforesaid Lots 16 and 19.03, Block 78. Landlord's Tract includes land upon which multiple buildings have been constructed (with more buildings being planned), together with the commonly used areas, including roadways and detention facilities. It is the parties' intention that when this lease obligates Tenant to pay "Tenant's Proportionate Share" (or similar term) of taxes and other costs or expenses attributable to Landlord's Tract, any such provision shall be interpreted to mean such share set forth in section 6(a) (1) applied to (a) the taxes or other costs directly attributable only to the Building, plus (b) the Buildings fair and ratable share of such costs for maintaining and repairing the common areas of the Landlord's Tract. Landlord reserves unto itself, its successors and assigns and public utility companies, the right to install, repair, replace and realign utility lines serving the Premises and/or other improvements, through and in the land beneath the Building, provided that in doing so, neither Landlord nor any public utility company shall unreasonably interfere with the use, enjoyment or business operation of Tenant, provided, however, that if Landlord needs to enter the Building for such purposes, it shall give Tenant reasonable advance notice. Subject to the provisions below, Landlord hereby grants to Tenant, at no additional cost or charge to Tenant, except as hereinafter provided, the right to use in common with other tenants the portions of the Landlord's Tract outside of the Premises which are intended to be for common use, including but not limited to lobbies, hallways, elevator, sidewalks, roofs, access roads and landscaped areas. Access and all building services shall be provided t all times during the term of this Lease on a 24 hour, 7 day basis, if allowed by governmental authorities. It is agreed that sixty five (65) unassigned parking spaces at the Premises are for the use of Tenant, its employees, agents, invitees and licensees. Landlord shall not specifically designate any parking space for any other tenant, except as already so designated as of the date hereof. Tenant, its employees, agents, invitees and licensees, shall not be permitted to utilize parking spaces anywhere except at the Premises. 2. TERM: RENEWAL A. The term of this Lease (the "Initial term") shall be for a period of ten (10) years commencing on July 1, 1998 or such later date as Landlord obtains a continuing Certificate of Occupancy for Tenant.. The expiration date of the Initial Term shall be June 30, 2008. B. If Tenant is not in default hereunder, Tenant shall have the option, exercisable by written notice by certified mail return receipt requested to Landlord not later than nine (9) months prior to the expiration of the Initial Term to extend the Term for one additional period of ten (10) years on the same conditions contained herein, except that the basic rent shall be at Fair Market Value for one such additional ten year period. In no event shall the basic rental for any renewal term be less than the basic rent being paid for the last year of the immediately preceding term. The Initial Term and any such additional periods are referred to collectively as the "Term". The basic rental for the second five years of the renewal term of the ten (10) year renewal period shall be adjusted in the same manner that the Base Rent shall be readjusted during the second five years of the initial term, except that the increase in the Index shall be measured for the first five (5) years of the renewal period. C. At any time not later than twelve (12) months prior the expiration of the initial term and not earlier than thirteen (13) months prior to the expiration of the initial term, Tenant may notify Landlord that it has an interest in renewing this Lease. Within ten (10) days following its receipt of such notice, Landlord shall give Tenant a written notice stating the per-square-foot amount which it would be willing to accept as the Fair Market Rental Value of the Premises for the Renewal Term. Within ten (10) days following Tenant's receipt of Landlord's notice, Tenant shall give Landlord a written notice stating either that Tenant accepts such amount as the Fair Market Rental Value of the Premises for the applicable Renewal Term or that Tenant does not accept such amount. If Tenant shall so accept such amount, such amount shall be the Fair Market Rental Value of the Premises for the Renewal Term. If Tenant shall give such notice that it does not accept such amount, then Landlord and Tenant shall promptly initiate, and thereafter cooperate with one another in the conduct of, negotiations to determine said Fair Market Rental Value. If the parties have not agreed as to said Fair Market Rental Value within eleven (11) months prior to the expiration date of the Term or first Renewal Term, as the case may be, Landlord and Tenant shall attempt to agree upon a single MAI appraiser to determine the Fair Market Rental Value. If landlord and Tenant cannot agree upon a single MAI appraiser within eleven (11) days after such date, then Landlord and Tenant shall each appoint an MAI real estate appraiser within five (5) days thereafter, each of whom shall have a minimum of ten year's experience in the area of High-Technology building appraisals and leasing in the County of Somerset, New Jersey, and neither of whom shall be employees or former employees of either Landlord or Tenant (although the prospective appraiser may be an independent consultant to either party). If the two MAI appraisers cannot agree upon the Fair Market Rental Value, then within ten (10) days after their selection, the two appraisers shall select a third MAI appraiser who shall meet the same standards. The three appraisers shall meet at the earliest practicable date, and in no event later than twenty (20) days after the selection of the third appraiser, and shall, by a majority vote, determine the Fair Market Rental Value. If the first two appraisers cannot agree upon a third appraiser within the aforesaid ten-day period, Landlord and/or Tenant shall promptly apply to the local office of the American Arbitration Association or a New Jersey court of competent jurisdiction for the appointment of the third appraiser. If a majority of the appraisers cannot agree upon such Fair Market Rental Value, then the third appraiser shall determine the same; provided, however, that the determination of such appraiser shall not be lower than the lowest Fair Market Rental Value or higher than the highest Fair Market Rental Value proposed by the other two appraisers. Each party hereto shall use bona fide efforts (and shall be responsible for any failure of the appraiser which it selects to use bona fide efforts) to assure that the determination of the Fair Market Rental Value is made no later than six (6) months prior to the expiration date of Initial Term or First Renewal Term, as the case may be, so that Tenant may timely notify Landlord, if at all, of Tenant's exercise of its option to renew the term of the Lease. The Fair Market Rental Value is to be determined by the appraisers based upon the condition of the Premises at the Initial Commencement Date of the Lease and shall not take into account any special tenant improvements. For purposes of this paragraph, the appraisers shall base their appraisal on the amount of office space and warehouse space being used and the "net" nature of this Lease. 3. RENT: ADDITIONAL RENT: SECURITY A. Tenant shall pay to Landlord, as fixed minimum rent ("Basic Rent") during the Term, constituting annual and monthly Basic Rent, in accordance with the Lease Payment Schedule on Exhibit "C". The Basic Rent shall be payable monthly in advance without set-off, deduction or counterclaim and without previous notice or demand therefor, with the first installment to be due and payable upon the execution hereof, and the second and each subsequent installment to be due and payable on the first day of each and every month of the Term (the installment for any partial calendar month to be pro-rated based upon the number of days in the applicable month). B. In addition to the Basic Rent, Tenant shall pay to Landlord or to the appropriate third party (as may be specified herein below), as additional rent, without previous notice or demand therefor except as otherwise herein provided (subject to no offset, deduction or counterclaim of any kind or nature), and in the manner and upon the conditions herein set forth, all other charges provided for hereunder to be paid by Tenant. Any and all sums required to be paid by Tenant hereunder, whether to Landlord or otherwise, shall for purposes of Landlord's rights including the non-payment thereof and for all other purposes for which the same shall be relevant, be deemed additional rent subject to the same duties and obligations of Tenant with respect to, and the same remedies of Landlord for the non-payment of, Basic Rent ("Additional Rent"). If Landlord shall pay any monies or incur any expenses in correction of Tenant's violation of the covenants contained in this Lease, the amounts so paid or incurred shall, upon notice to Tenant, be considered Additional Rent payable by Tenant with the next installment of Basic Rent thereafter to become due and payable or, if at expiration of the Term or at other termination of this Lease, within thirty (30) days of demand therefor by Landlord, it being agreed that the responsibility for payment thereof shall survive expiration of the Term or other termination of this Lease. All rentals of any nature shall be paid and delivered to Landlord at Landlord's address as set forth at the head of this Lease, or to such other place or person as Landlord may from time to time designate by written notice to Tenant. C. Basic Rent and Additional Rent are sometimes hereinafter collectively referred to as "Rent", "Rent" or "Rental". D. On or before August 31, 2001, Tenant shall deposit with Landlord the sum of One Hundred Twenty One Thousand Five Hundred Dollars ($121,500.00), as security for the faithful performance by Tenant of all of the terms, covenants and conditions of this Lease by Tenant to be kept and performed (the "Deposit"). If at any time during the Term, any of the rent herein reserved or provided to be paid shall be overdue and unpaid beyond any applicable grace period, then Landlord may, at its option, appropriate and apply any portion of the Deposit to the payment of any such overdue rent; and in the event of the failure of Tenant to keep and perform any other term, covenant and/or condition of this Lease to be kept and performed by Tenant, then Landlord, at its option, may appropriate and apply the Deposit, or so much thereof as may be necessary, to compensate Landlord for the loss or damage suffered by Landlord due to the breach on the part of Tenant. If there shall occur any increase in the Basic Rent during the Term, Tenant shall, at or prior to the time of such increase, deposit such additional sum(s) so that the Deposit at all times equals three (3) months of the prevailing Basic Rent and Additional Rent. Non-payment of the Security Deposit when due shall be a default in the Lease and Landlord in addition to all of its remedies under this Lease as to default shall be relieved of providing free Basic Rent as Landlord's work letter obligation specified in Exhibit "E". 4. USE OF PREMISES The Premises shall be used for offices, light assembly and warehouse operations, and distribution of Tenant's products and for no other purpose. Tenant represents that it shall not create any odors or noises (which in the reasonable opinion of Landlord, would devalue the building,) which will disturb neighboring tenants or properties, and that it will conform at all times with all applicable municipal zoning ordinances and all laws and regulations as set forth in Section 12. Tenant represents its use shall not be hazardous. 5. NET LEASE It is understood and agreed that, except as may otherwise in this Lease be expressly provided, Tenant has the responsibility of paying all charges of any kind or nature attributable to the Premises, whether or not specifically set forth in this Lease, it being the intention of the parties hereto that the Rent payable to Landlord under this Lease be absolutely net and that Landlord have no expense whatsoever attributable to the Premises or to the operation or maintenance of Tenant's operations at the Premises, unless otherwise expressly stated herein. 6. REAL ESTATE TAXES A. Tenant shall pay, as Additional Rent during the Term, upon demand from time to time by Landlord and together with the next payment of Basic Rent due after such demand (or within ten (10) days of demand if the Term is about to expire or this Lease otherwise about to terminate after the making of such demand), Tenant's Proportionate Share (as defined below) of all real estate taxes, assessments and other charges and levies which may be made or imposed upon Landlord's Tract, other than income, franchise, gross receipts, corporation, capital levy, excess profits, revenue, inheritance, gift, estate, payroll or stamp tax, or other tax not in lieu of or as substitute for real estate tax or charges stemming from Landlord's failure to pay taxes as due; provided, however, that if any time during the Term the methods of taxation prevailing at the Commencement Date shall be altered so as to cause the whole or any part of the taxes, assessments and other charges and levies referred to hereinabove in this Section to be imposed, wholly or partly, as a capital levy, on the rents received from Landlord's Tract or otherwise, or if any tax shall be measured by or based in whole or in part upon the value of Landlord's Tract and shall be imposed upon Landlord, then, to the extent that such other tax is a substitute for, and is enacted in lieu of, existing real estate tax, as described above, Tenant shall be responsible for payment, as Additional Rent, of all such taxes, assessments, levies or charges. The maximum obligation of Tenant, however, shall be achieved by computing such tax as if the Premises shall be the sole property of Landlord. Upon request of Tenant, Landlord shall execute all documents necessary for, and will cooperate with Tenant with respect to, the prosecution, in Landlord's name, of appeals of the tax assessment against Landlord's Tract, provided that no such appeal shall be prosecuted if the prosecution thereof would, in Landlord's reasonable judgment, jeopardize Landlord's ownership of the Premises or create any lien or encumbrance thereon, and further provided that Landlord shall incur no expense or obligation in connection with any such appeals. If payments are made by Tenant directly to the taxing authority or authorities, Tenant shall submit to Landlord, within ten (10) days after the due date from time to time, evidence of payment. Landlord shall provide Tenant with proof of payment of real estate taxes within a reasonable period of time, if requested. (1) For purposes of the foregoing and as elsewhere used in this Lease, "Tenant's Proportionate Share" at the Commencement Date of the Lease shall be 17.89 percent increasing to 27.59% eighteen (18) months later and to 29.61% as of August 31, 2001. It is understood that these increases may occur sooner if Tenant occupies additional space during the term of the Lease. This percentage shall be adjusted as square footage increases or decreases over the term of the Lease, or if the Building size changes. B. At the option of Landlord, the real estate taxes and/or other charges for which Tenant is responsible hereunder shall be paid in monthly installments in such amounts as are estimated and billed by Landlord, each such installment being due with each monthly basic rental payment. If Landlord elects such option, which it may do from time to time, then within sixty (60) days after receipt by Landlord of final real estate tax bills and/or a reasonable accounting of any other charges so billed for the applicable year, Landlord shall so notify Tenant and make available for Tenant's inspection, upon request, until at least 90 days after any calendar year, copies of such tax bills and/or such accounting, and the monthly payments to be made by Tenant thereafter shall be adjusted to compensate for any overpayment or underpayment made by Tenant in the preceding period. It is understood and agreed that the responsibility of Tenant to pay costs of any nature which may be due under this Lease shall, if not paid as of the time of expiration of the Term or other termination of this Lease, survive expiration of the Term or other termination of this Lease. 7. UTILITY CHARGES Tenant shall pay for all utility services of any nature serving the Premises. Said utilities for office space shall be separately metered, if reasonably possible in Tenant's name. Tenant shall not overload the electrical wiring serving the Premises nor use any other utility beyond its normal capacity. It is possible that warehouse space may not be sub-metered in which case, Tenant shall pay Tenant's Proportionate Share based upon the square footage of said space. 8. LANDLORD'S OPERATING COSTS A. Tenant shall pay to Landlord, upon demand by Landlord from time to time, Tenant's Proportionate Share of Landlord's Operating Costs (as defined below). The phrase "Landlord's Operating Costs" shall mean all reasonable costs, charges or expenses of any nature actually incurred by Landlord in connection with owning, operating, maintaining and/or carrying Landlord's Tract. By way of example, and not in limitation of the generality of the foregoing nor in limitation of the nature or types of costs, charges or expenses included in the definition of Landlords Operating Costs, it is understood that Landlord's Operating Costs shall include costs, charges and expenses for the following with respect to Landlord's Tract (including the Building and all other exterior and interior portions, common and otherwise, of Landlord's Tract): maintenance, repairs and replacements, including roof, structural frame and concrete floor slabs; paving, repaving and striping; landscaping; cleaning, lighting, snow and 0ice removal; trash removal and/or janitorial or cleaning service; utility charges, such as, but not limited to, costs or charges for providing electric energy (except for electric energy required to be paid for directly by tenants), heating, air conditioning, lighting, water, gas or other fuel; and costs or charges for any other type of service supplied to the common areas of Landlord's Tract; insurance for Landlord's Tract (e.g., fire and extended, liability, rental, workers' compensation);a management fee equal to no more than five percent (5%) of Basic Rent and costs for equipment and supplies. B. Notwithstanding the foregoing, Landlord's Operating Costs shall not include: the cost of any of the services set forth in Section 8-A above the responsibility for which are assumed by Tenant with the approval of Landlord, such as Premises janitorial or security services; costs of repair to the Premises to the extent reimbursed by payment of insurance proceeds received by Landlord or recovery from a third party (but less costs of obtaining such recovery); debt service on loans to Landlord or secured by mortgage or deed of trust covering the Premises; salaries of executive officers or other employees of Landlord; and costs relating to new improvements added to the Premises (as distinguished from repair or replacement of existing improvements), nor shall Landlord's Operating Costs include items which are capital items during the last two (2) years of the Initial Term and the last two years of the renewal term, if any, or the cot of repairs or replacement of structural members, floor slabs or footings. C. Tenant shall have the right from time to time, at Tenant's expense, upon reasonable notice during reasonable business hours, to have an independent certified public accountant or a qualified employee of Tenant inspect the portion of Landlord's books and records that are relevant to Landlord's calculation of Landlord's Operating Costs and Tenant's Proportionate Share thereof, for a preceding period not to exceed two (2) years. D. Tenant shall not be responsible for Landlord's Operating Costs and real estate taxes attributable to the time period prior to the Commencement Date. Tenant's Proportionate Share of Landlord's Operating Costs and real estate taxes for the calendar year in which Tenant's obligation to share therein commences and in the calendar year in which such obligation ceases, shall be prorated based upon the applicable time periods. E. The aforesaid Landlord's Operating Costs may be based on monthly estimates of Landlord but shall be reconciled and adjusted annually. F. It is anticipated that the Landlord may contribute the building of this Lease to a condominium association. In the event same is contributed to said association, the Tenant shall be responsible for any share of additional expenses, costs and charges of any nature incurred by the Landlord as a result of the owning, operating and maintaining of the Landlord's Tract as part of a condominium. The Tenant shall not be responsible for any share of the costs for the formation or operation of said association or related entities; but shall be responsible for its Proportionate Share of certain costs and charges as set forth in Section 1(A) of this lease. G. "Landlord's Operating Costs" as referred to in the Lease shall not include the following: (a) the cost of construction of any improvements on the Landlord's Tract, including any addition, alteration or refurbishing of space leased to other tenants in the Building, except that capital expenses for improvements which result in savings of labor other costs in connection with the operation of the common area of the Landlord's Tract shall be included at the cost of such for repairs or other work occasioned by fire, windstorm or other casualty in excess of a reasonable deductible amount provided in Landlord's insurance policy; (c) expenses incurred in leasing or procuring new tenants for the Building (e.g. commission, advertising, renovation and legal); (d) legal expenses in enforcing the terms of any lease; (e) interest or principal amortization payments on any mortgage; (f) any real estate taxes, other than as referred to in the Lease, corporate franchise or net worth taxes income taxes (state and federal), personal property taxes and excess profit taxes; (g) any expenses incurred for which Landlord has a right of reimbursement from a tenant in the Building, an insurer or other person or entity; (h) claims paid by landlord in satisfaction or settlement of liability in tort; (i) any payment to the ground lessor, if any; (j) depreciation of the Building or other improvements; (k) any expense relating to the environmental condition of the Landlord's Tract; and (1) wages of salaries (y) persons above the level of building manager, and (z) persons not engaged in full time employment at the Building, and (m) management or leasing fees or expenses other than the 5% charge set forth above. All expenses affiliated in any way with Landlord must be reasonable and comparable to similar expenses paid by landlords generally in arms-length transactions in order to be includable in operating expenses. 9. MAINTENANCE AND REPAIRS A. Tenant will take good care of the Premises and shall be responsible for maintaining the Premises in good condition and state of repair at all times; (notwithstanding anything herein to the contrary) and Tenant will surrender the Premises, at the expiration of the Term or earlier termination of the Lease, as the case may be, in as good a condition as when received. Tenant shall be directly responsible to notify Landlord promptly of any maintenance or repairs required to the Premises, to include but not limited to utilities serving the Premises, i.e.: gas, water, sewer, plumbing, electrical, or H.V.A.C. Landlord shall, at Tenant's sole cost and expense, perform any reasonable repairs in the Premises which are cosmetic, plumbing, mechanical or electrical and Tenant shall have the right to perform any other repairs at its own cost and expense. Tenant will not overload the electrical wiring serving the Premises. Tenant may install only electrical connections conforming to code to its apparatus and equipment, at Tenant's sole cost and expense. Tenant shall be responsible for changing its own light bulbs, or may request Landlord to provide such service at Tenant's cost and expense. B. Landlord shall at Tenant's cost and expense, as part of Landlord's Operating Costs, obtain appropriate annual service contracts for maintenance of the mechanical systems, including compressor replacement, and for landscape maintenance services. Any costs associated with same shall be paid by Tenant in full if only attributable to premises or if not, Tenant shall pay its Proportionate Share. C. Tenant shall comply with all present and future applicable laws, ordinances and codes and all applicable governmental rules, regulations and requirements with respect to the condition of the Premises and the use thereof, including but not limited to regulations promulgated by the Occupational Safety and Health Administration of the federal government, and shall pay any and all fines and penalties imposed upon Landlord, by reason of any violation by Tenant of the foregoing covenants made by Tenant. (See Section 12). 10. ALTERATIONS AND SIGNAGE A. Tenant shall have the right, at Tenant's cost and expense, to perform, make and effect installations, alterations, restorations, changes and replacements (hereinafter called "Alterations") in, of, or to the Premises as Tenant deems necessary or desirable, which shall require Landlord's reasonable approval which shall not be unreasonably withheld, conditioned or delayed and shall be made in full compliance with all applicable laws, orders and regulations of federal, state, county and municipal authorities, with any direction pursuant to law or given by any public officer, and with all regulations of any board of fire underwriters having jurisdiction. Landlord hereby approves Tenant's initial Alterations described on Schedule 1, Landlord shall have the right to increase the Security Deposit to cover the cost of any alteration, removal and subsequent restoration. Notwithstanding any provision in this Lease to the contrary, the office space initial Alterations need not be restored at the end of the Term, but the warehouse space Alterations must be restored at the end of the Term. B. Tenant shall obtain or cause to be obtained through Landlord, all building permits, licenses, temporary and permanent certificates of occupancy and other governmental approvals which may be required in connection with the making of the Alterations, and Landlord shall cooperate with Tenant in the obtaining thereof (at no out-of-pocket expense to Landlord) and both parties shall execute any documents reasonably required in furtherance of such purpose. C. In requesting Landlord's approval for any Alterations, Tenant shall submit to Landlord (with said request for approval) detailed working drawings of the proposed Alterations. Landlord shall have the right to charge Tenant as an item of Additional Rent a reasonable review and supervisory fee based upon the hourly rates set forth below (Principals of Landlord $300.00 per hour, Landlord Supervisory Personnel $75.00 per hour, Outside Architects and Engineers on an "as billed" basis). Landlord will use every reasonable effort to minimize any such charges. Upon completion of said Alteration, Tenant shall, as soon as is practical, provide Landlord with "as built" drawings of said Alteration. Tenant at its own cost and expense shall be responsible for any direct damages due to Tenant's Alterations. D. Each party shall indemnify and hold each other harmless against and from any claims arising out of its work or other activities at or relating to the Premises.. E. The Alterations shall be and remain the property of Landlord; provided, however, that Landlord shall have the option, to be exercised, if at all, at least sixty (60) days prior to expiration of the Term or of any other termination hereof, to give notice to Tenant that Tenant is to remove all or any part of Alterations made by Tenant, upon the giving of which notice Tenant shall be obligated to have the specified Alterations removed prior to such expiration or termination and to repair any damage caused by the removal and restore the Premises to their condition as existed prior to the making of the applicable Alterations. F. No signs may be placed or maintained on the exterior of the Premises by Tenant without the prior written approval of Landlord, and any such sign as is placed or maintained by Tenant on the exterior of the Premises, must be kept in good condition and repair at all times and must be installed and maintained in compliance with all applicable laws, rules and regulations. Tenant shall be included in the exterior monument sign and in all other Building signs or registries of Tenant, the cost of which is included in Landlord's Operating Cost. 11. ALTERATIONS BY LANDLORD Landlord hereby reserves the right at any time to make alterations at Landlord's Tract (excluding the Premises unless needed for purpose of doing work associated with other parts of the building or Tract), including additions to, subtractions from or rearrangements of the Building and parking areas thereon. Landlord also reserves the right from time to time to construct other buildings or improvements on Landlord's Tract and to make alterations thereof or additions or deletions thereto, provided that any such constructions, alterations, additions, or deletions shall result in appropriate adjustments to Tenant's Proportionate Share of real estate taxes and Landlord's Operating Costs. Landlord shall have right of access to the Premises, provided Landlord uses all reasonable efforts to minimize any inconvenience to Tenant's operation. 12. OBSERVANCE OF LAWS, ORDINANCES, RULES AND REGULATIONS A. Tenant and Landlord shall each comply with all statutes, ordinances, rules, orders, regulations and requirements of all federal, state, county and municipal and other applicable governmental authorities relating to the Premises and shall faithfully observe in the use of the Premises all municipal and county ordinances and regulations and state and federal statutes and regulations of the Board of Fire Underwriters or similar agency for the prevention of fires. In case Tenant shall fail or neglect to comply with the aforesaid statutes, ordinances, rules, orders, regulations and requirements, or any of them, within the period of time for compliance as contained therein or such shorter time as may be required in this Lease, then (not in limitation of any other rights which Landlord may have under this Lease or by law in the case of a default by Tenant) Landlord or its agents may enter the Premises and make necessary repairs and comply with any and all of the said statutes, ordinances, rules, orders, regulations or requirements, at the cost and expense of Tenant. In case of Tenant's failure to pay therefor, the said cost and expense shall be added to the next month's rent and be due and payable promptly as Additional Rent, together with interest as in this Lease provided. Each of the parties shall perform the work normally attributable to its respective responsibility. If one fails to perform within a reasonable time, the other may complete the work. B. Tenant may contest any of the above-stated statutes, ordinances, rules, orders, regulations or requirements, provided that Tenant shall indemnify Landlord for any resulting loss or liability (including but not limited to reasonable attorney's fees incurred by Landlord), and shall not do so in any circumstances as would, in Landlord's reasonable judgment, jeopardize Landlord's ownership of the Premises or cause any lien or encumbrance to be placed upon the Premises. Landlord agrees to cooperate with any said contest, provided that Landlord shall entail no out-of-pocket cost or expense. 13. ASSIGNMENT OR SUBLETTING A. Tenant may not assign this Lease in whole or in part, nor sublet all or any part of the Premises, without the prior written consent of Landlord, which consent shall not be unreasonably withheld, delayed or conditioned. In all circumstances of assignment or subletting, the assignee or Sub-Tenant shall assume in writing the obligations of Tenant hereunder (in the case of a subletting, such assumption to relate only to the premises sublet) and the existing Tenant and each subsequent assignee, Sub-Tenant and guarantor hereunder (if any) and each subsequent assignee, Sub-Tenant and guarantor shall remain liable under this Lease. Consent to any particular assignment or subletting shall not be deemed consent to any further or subsequent assignment or subletting. B. If Tenant shall assign this Lease or sublet the Premises and at any time the rent per square foot to be received by Tenant pursuant to such assignment or subletting is in excess of the then applicable rent per square foot hereunder, the Landlord and Tenant shall share the entire amount of such excess on a 50/50 basis, less Tenant's costs in arranging and obtaining approvals for such assignment or subletting, which excess shall be due and payable from time to time by Tenant promptly upon receipt by Tenant of payment of rent by the assignee or Sub-Tenant. In addition, Landlord shall be entitled to receive fifty (50&) percent of any other rental differential or lump sum payment or payment in lieu of rent paid to Tenant on account of an assignment or subletting. Anything to the contrary notwithstanding, if less than twenty-five percent (25%) of the aggregate premises is sublet or assigned, the Landlord shall not terminate this lease under Section 13 (D). Once greater than twenty-five percent (25%) of the aggregate premises is sublet or assigned, the Landlord shall share, as set forth above, in all of the rental differential for premises sublet or assigned. C. If Tenant wishes to assign this Lease or sublet to any party, Tenant first shall give written notice to Landlord of such intention ("Tenant's Notice"), specifying the name of the proposed assignee or sublessee, the name of and character of its business, the terms of the proposed assignment or sublease, and shall provide Landlord with such other information as Landlord reasonably requests including financial statements in certified form. D. Landlord may, within thirty (30) days after its receipt of Tenant's Notice, by notice to Tenant ("Landlord's Notice"), either consent to or reject the proposal, or Landlord at its option, may terminate this Lease (if, in connection with a sublease of less than the entire Premises, only to the extent of the premises sublet) and enter into a lease directly with the proposed Sub-Tenant as of a date set forth in Landlord's Notice, such date of termination having the same effect as if that date were the original expiration date of this Lease, with all rents being apportioned and adjusted as of such date of termination (and thereafter adjusted on the basis of the remaining square footage, in the case of a sublease of less than the entire Premises). 14. INSURANCE AND INDEMNITY; NONLIABILITY A. Tenant shall, during the Term, at its sole cost and expense, keep in full force and effect a Comprehensive General Liability Policy with respect to the leased Premises. The total limits of liability shall be Five Million Dollars ($5,000,000). The total limits can be on a Combined Single Limit or split limits basis listing Bodily Injury and Property Damage separately. The required limit of liability can be in combination of Primary and Umbrella Policies. The policies shall be with a company authorized to do business in the State of New Jersey. The Tenant will not change or terminate the insurance without first giving to Landlord at least thirty (30) days prior written notice. A copy of the policy or certificate of insurance shall be delivered to Landlord on or before the Commencement Date or, as the case may be, any earlier date upon which Tenant shall enter into occupancy of the Premises or any portion thereof. Each year a Certificate of Insurance outlining the required insurance coverages outlined above shall be sent to the Landlord upon written request. For each renewal term under this Lease, the insurance amounts shall be increased an appropriate amount to be agreed to by the parties. B. Tenant shall indemnify and save Landlord harmless against and from any and all claims, actions, damages, losses, liability and expense, including court costs and reasonable attorneys' fees incurred by Landlord, in connection with loss of life, personal injury and/or damage to property arising from or out of any occurrence in, upon, or at the Premises, or the occupancy or use by Tenant of the Premises, or any part thereof, or occasioned wholly or in part by any negligence of Tenant, it's agents, contractors, employees, servants, licensees or concessionaires, except to the extent any of the foregoing represents damage to the building or is caused by acts or negligence of Landlord or Landlord's agents, contractors, employees, servants, licensees or concessionaires. It is understood that Landlord shall not be liable for any damage or injury which may be sustained by Tenant or any other person as a consequence of the failure, breakage, leakage or obstruction of the water, plumbing, steam, sewer, waste or soil pipes, roof, drains, leaders, gutters, valleys, downspouts or the like, or of the electrical, gas, power, conveyor, refrigeration, sprinklers, air conditioning or heating systems; (unless any of the foregoing have not been maintained or repaired by Landlord in a timely manner after proper notification by Tenant consistent with their obligations under Section 9 hereof) or by reason of the elements; or resulting from the carelessness, negligence or improper conduct on the part of Tenant or Tenant's agents, employees, guests, licensees, invitees, subtenants, assignees or successors. Tenant shall not be liable for negligent acts of Landlord or Landlord's agents, employees, contractors, licensees, servants, or guests, or other tenants in the building. C. If Tenant shall fail, refuse or neglect to obtain any of the insurance called for by this Lease or maintain the same and to show Landlord evidence of the same as aforesaid, Landlord shall have the right (but not the obligation) after 30 days notice to Tenant, to procure any such insurance and charge the cost thereof to Tenant. D. Each party hereby releases the other from liability for property damage from any cause whatsoever to the extent such releasing party shall receive insurance proceeds (or have the availability of the receipt thereof) on account of such damage or injury. Landlord and Tenant agree to include in their respective property insurance policies, the following: (I) a waiver of the insurer's right of subrogation against the other party, or (ii) an express agreement that such policy shall not be invalidated if the assured waives the right to recovery against any party responsible for a casualty, or (iii) any other form of permission for the release of the other party. E. Landlord shall obtain and maintain throughout the Term of this Lease, fire, extended and special multi-risk coverage property insurance in an amount not less than the full replacement cost of the Building, and upon request therefor, shall provide Tenant with evidence of the same. Landlord's insurance shall include rent insurance for a period of 12 months following a casualty. In the event use by Tenant causes increase in insurance premium, Tenant shall be responsible for said premium increase. F. Tenant assumes all risk for damage to its contents and shall carry whatever insurance it deems necessary. G. Tenant shall not be liable to Landlord with respect to any damages suffered by Landlord which are covered by insurance required by this lease. The parties agree that each hereby waives any claim it might have against the other for loss, damage or destruction with respect to its property, by fire or other casualty that is generally insured against under the terms of standard fire and extended coverage insurance policies. The parties agree to use best efforts to obtain waiver of subrogation clauses in their respective insurance policies, such clauses extending to the other party and its employees and agents. H. Nothing contained in the Lease shall be construed to absolve Landlord from responsibility for acts or omissions deemed to be negligence, gross negligence or willful misconduct of Landlord, its agents, employees, servants or others acting on its behalf. Each party shall protect, indemnify, hold harmless and defend the other party and its successors and assigns and their respective employees and agents from any and all damages or liability resulting from any claims or demands, including the costs, expenses and reasonable attorneys' fees incurred, that may be made by a party's employees or any other person for bodily injury or damage to property occasioned by the acts or omissions of the other party or its subcontractors, or the employees or agents of any of them. However, any liability of Landlord shall be limited to Landlord's equity in the Landlord's Tract. 15. QUIET ENJOYMENT Upon performing its obligations under this Lease, Tenant shall have and enjoy quiet and peaceable possession of the Premises during the Term, subject to the terms of this Lease, to include, but not limited to, Sections 9, 10 and 11. 16. FIXTURES AND PERSONAL PROPERTY Any trade fixtures, equipment and other property installed in or attached to the Premises, by and at the expense of Tenant, shall remain property of Tenant, and Tenant shall have the right, at any time, and from time to time, to remove any and all of its trade fixtures, equipment and other property which it may have stored or installed in the Premises. Tenant shall make all repairs required as a result of the removal of said items so as to restore the Premises to their original condition except normal wear and tear (including but not limited to repair of any holes in the walls of the Building). 17. DAMAGES TO PREMISES A. If the Premises shall be damaged by fire, the elements, unavoidable accident or other casualty, then, subject to the provisions below, Landlord shall cause the damage to be repaired. In doing so, Landlord shall commence its repairs promptly and diligently proceed with same, but shall not be required, in any event, to expend more than the net amount of insurance proceeds received on account of the damage. B. If the Premises shall be so damaged or destroyed as would render the Premises 25% untenantable for a period in excess of one hundred eighty (180) days, or if then applicable laws or zoning requirements do not permit the necessary repair or restoration after occurrence of damage or destruction of the Premises to whatever extent, then either party shall have the right to cancel this Lease by written notice to the other served within thirty (30) days of the occurrence, effective as of the occurrence. C. Tenant shall immediately notify Landlord in case of fire or other damage to the Premises. D. The repair and restoration of any damage to the property of Tenant or to the decorations and Alterations of Tenant shall not be the responsibility of Landlord. E. In the event any damage or destruction of the Premises renders the Premises untenantable, all Rent shall be abated during such period of untenantability, except if the damage or destruction shall be due to the negligence or misconduct of Tenant, its agents or employees provided that all Rent shall be abated regardless of cause of damage or destruction to the extent that rent insurance is in effect for the Premises. If any such damage or destruction renders the Premises partially untenantable, all Rent shall be equitably apportioned, subject to the above-stated exception. For purposes of this Paragraph E, the word "Rent" shall not include any Additional Rent as may be due from Tenant by reason of default by Tenant under any term, covenant or condition of this Lease. F. Landlord's insurance proceeds shall be and remain the exclusive property of Landlord. G. Notwithstanding anything to the contrary herein, if the Premises is damaged to the extent of fifty percent (50%) or more thereof, and if insurance proceeds received on account of the damage would not be sufficient to repair or reconstruct the building or tract, Landlord shall have the right, within sixty (60) days after occurrence of the damage, to elect, upon written notice to Tenant, not to repair or reconstruct the Building or Tract, in which event, this Lease and the tenancy hereby created, shall cease as of the date of such occurrence. Upon such termination, all Rent and Additional Rent shall be apportioned as of the date of the occurrence. 18. EMINENT DOMAIN If the whole or any part of the Premises shall be taken under the power of eminent domain or acquired in lieu thereof, then this Lease shall terminate as to the part so taken on the day when Tenant is required to yield possession thereof to the condemning authority, and, subject to the rights of mortgagees and further subject to the sufficiency in amount of the award or price paid on account of the taking or acquisition in lieu thereof, Landlord shall make such repairs and alterations as may be necessary in order to restore the part not taken to useful condition; and the Basic Rent and Tenant's Proportionate Share shall be reduced, proportionately, as to the portion of the Premises so taken. If the amount of the Premises so taken or acquired is such as to impair substantially the usefulness of the Premises for the purposes for which the same are hereby leased, then either party shall have the option to terminate this Lease as of the date when Tenant is required to yield possession. All compensation awarded or paid for such taking or acquisition shall belong to and be the property of Landlord except to the extent that any such compensation is specifically designated for the leasehold interest. Anything herein to the contrary notwithstanding, if a substantial part of the Building and/or of Landlord's Tract is taken or acquired in the manner aforesaid, whether or not the Premises are so taken or acquired to any extent and irrespective of the extent of any award of proceeds to Landlord by virtue of the taking or acquisition in lieu thereof, Landlord shall have the right, upon written notice to Tenant within sixty (60) days after such taking or acquisition, to terminate this Lease. 19. DEFAULT AND REMEDIES A. If Tenant defaults in the payment of Basic Rent (and such payment is not made within ten (10) days of written notice of such default given by Landlord), or if the Premises shall be deserted, abandoned or vacated, or if Tenant defaults in a material respect in compliance with any of the other covenants or conditions of this Lease and fails to cure the same within fifteen (15) days after the receipt of notice specifying the default, then at the expiration of said ten (10) days or fifteen (15) days, as the case may be, Landlord may (a) cancel and terminate this Lease upon written notice to Tenant (whereupon the Term shall terminate and expire, and Tenant shall then quit and surrender the Premises to Landlord, but Tenant shall remain liable as hereinafter provided) and/or (b) at any time thereafter re-enter and resume possession of the Premises as if this Lease had not been made. Anything above to the contrary notwithstanding, the said fifteen (15) day period of time for cure of non-monetary defaults shall extend beyond such fifteen (15) days for the period of time necessary to effect the cure provided that Tenant shall diligently commence the cure during such fifteen (15) day period and shall diligently and continuously prosecute the cure to completion. B. If this Lease shall be terminated or if Landlord shall be entitled to re-enter the Premises, and dispossess or remove Tenant under the provisions of this Section (either or both of which events are hereinafter referred to as a "Termination"), Landlord or Landlord's agents or servants may immediately or at any time thereafter re-enter the Premises and remove therefrom Tenant, its agents, employees, servants, licensees, and any Sub-Tenants and other persons, firms or corporations, and all or any of its or their property therefrom, either by summary dispossess proceedings or by any suitable action or proceeding at law or by peaceable re-entry or otherwise, without being liable to indictment, prosecution or damages therefor, and may repossess and enjoy the Premises, including all additions, alterations and improvements thereto. C. In case of Termination, the Basic Rent and all other charges required to be paid by Tenant hereunder shall thereupon become due and shall be paid by Tenant up to the time of the Termination, and Tenant shall also pay to Landlord all reasonable expenses which Landlord may then or thereafter incur as a result of or arising out of a Termination, including but not limited to court costs, attorneys' fees, brokerage commissions, and costs of terminating the tenancy of Tenant, re-entering, dispossessing or otherwise removing Tenant and restoring the Premises to good order and condition, and from time to time altering and otherwise preparing the same for re-letting (including but not limited to costs of removing all or any part of the Alterations made by Tenant). Upon a Termination, Landlord shall, use commercially reasonably efforts to re-let the Premises, in whole or in part, either in its own name or as Tenant's agent, for a term or terms which, at Landlord's option, may be for the remainder of the Term or Renewal Term, or for any longer or shorter period. D. In addition to the payments required hereinabove in this Section, Tenant shall be obligated to, and shall, pay to Landlord, upon demand and at Landlord's option: (i) liquidated damages in an amount which, at the time of Termination, is equal to the present value, discounted at the rate of 5% per annum, of the excess, if any, of the then present amount of the installments of Basic Rent and Additional Rent reserved hereunder, for the period which would otherwise have constituted the unexpired portion of the Term over the then present rental value of the Premises for such unexpired portion of the Term or, (ii) damages payable in monthly installments, in advance, on the first day of each calendar month following the Termination, and continuing until the date originally fixed herein for the expiration of the Term, in amounts equal to the excess, if any, of the sums of the aggregate expenses paid by Landlord during the month immediately preceding such calendar month for all such items as, by the terms of this Lease, are required to be paid by Tenant, plus an amount equal to the installment of Basic Rent which would have been payable by Tenant hereunder in respect to such calendar month, had this Lease not been terminated, over the sum of rents, if any, collected by or accruing to Landlord in respect to such calendar month pursuant to a re-letting or to any holding over by any Sub-Tenants of Tenant. E. Landlord shall in no event be liable for failure to re-let the Premises, or in the event that the Premises are re-let, for failure to collect rent due under such re-letting; and in no event shall Tenant be entitled to receive any excess of rents over the sums payable by Tenant to Landlord hereunder but such excess shall be credited to the unpaid rentals due hereunder, and to the expenses of re-letting and preparing for re-letting as provided herein. F. Suit or suits for the recovery of damages hereunder, or for any installments of rent, may be brought by Landlord from time to time at its election, and nothing herein contained shall be deemed to require Landlord to postpone suit until the date when the Term would have expired if it had not been terminated under the provisions of this Lease, or under any provision of law, or had Landlord not re-entered into or upon the Premises. G. Landlord, at its option, in addition to any and all remedies available to it, shall have the right to charge a fee for payment for rent received later than five (5) days after the date due, which fee, constituting Additional Rent, shall be the greater of five percent (5%) of the delinquent payment or one and one-half percent (1-1/2%) per month for each and every month of the amount of the overdue rent. H. Tenant hereby waives all rights of redemption to which Tenant or any person claiming under Tenant might be entitled, after an abandonment of the Premises, or after a surrender and acceptance of the Premises and the Tenant's leasehold estate, or after a dispossession of Tenant from the Premises, or after a termination of this Lease, or after a judgment against Tenant in an action in ejectment, or after the issuance of a final order or warrant of dispossess in a summary proceeding, or in any other proceeding or action authorized by any rule of law or statute now or hereafter in force or effect. I. No mention in this Lease of any specific right or remedy shall preclude Landlord from exercising any other right or from having any other remedy or from maintaining any action to which Landlord may otherwise be entitled hereunder or at law or inequity. 20. NOTICES Wherever in this Lease it shall be required or permitted that notice or demand be given or served by either party to this Lease to or on the other, such notice or demand shall be in writing and shall either be served personally or sent by registered or certified mail, return receipt requested, to the parties at the addresses described below -- Landlord to , at its address stated at the head of this Lease, with a copy to Edward J. Dudzinski, 5 Brier Road, Whitehouse Station, New Jersey 08889 and Leonard H. Selesner, P.A. 225 Millburn Avenue, Suite 208, Millburn, NJ 07041; to Tenant, at its address stated at the head of this Lease, with a copy to John Hogoboom, Esq., Lowenstein Sandler, P.C., 65 Livingston Avenue, Roseland, NJ 07068. Such addresses may be changed from time to time by either party by written notices served upon the other, as above provided. Notices shall be effective upon delivery or mailing, as the case may be, except that a mailed notice changing an address for notice purposes hereunder shall be effective upon actual receipt. 21. ATTORNMENT: DEFINITION OF TERM "LANDLORD" A. Tenant shall attorn to any new owner of Landlord's Tract including Landlord's mortgagee, and shall execute such attornment instrument as shall reasonably be requested by such new owner; and Tenant waives any right it may have to surrender possession of the Premises or terminate this Lease in the event of change of ownership of Landlord's Tract. The term "Landlord", as used in this Lease, means only the owner for the time being of Landlord's Tract, so that in the event of any sale or conveyance thereof, Landlord (and any successor selling or conveying Landlord) shall be and hereby is entirely freed and relieved of all Landlord's covenants and obligations thereafter arising hereunder, and it shall be determined and construed, without further agreement between the parties and the purchaser or transferee at or of any such sale or conveyance, that the purchaser or transferee has assumed and agreed to carry out any and all covenants and obligations of Landlord hereunder. B. Upon any transfer or mortgaging of title by Landlord, Tenant agrees to give to the grantee, at the request of Landlord, an estoppel or offset statement (as provided for in Section 25 below ("Estoppel or Offset Statements") each in form reasonably requested by Landlord. 22. COST OF PERFORMING OBLIGATIONS Unless otherwise specified, the respective obligations of the parties to keep, perform and observe any terms, covenants or conditions of this Lease shall be at the sole cost and expense of the party so obligated. 23. RE-ENTRY BY LANDLORD Should Tenant make an assignment for the benefit of creditors or file a voluntary petition in bankruptcy or be adjudicated a bankrupt or take benefit of any insolvency act or if a receiver or trustee of Tenant and/or of its property shall be appointed in any proceedings other than bankruptcy proceedings and such appointment, if made in proceedings instituted by Tenant, shall not be vacated within thirty (30) days after it has been made, or if made in proceedings instituted by other than Tenant, shall not be vacated within sixty (60) days after it has been made, any of the foregoing shall constitute a default hereunder and Landlord, in addition to all other rights or remedies hereunder and by law or equity, shall have the immediate right of re-entry and may remove all persons and property from the Premises, and such property may be removed and stored in a public warehouse or elsewhere at the cost and expense of Tenant, all without Landlord being deemed guilty of trespass or becoming liable for any loss or damage which may be occasioned thereby. 24. MORTGAGE SUBORDINATION This Lease shall be subordinate to the lien of any present or future mortgage(s) on the Premises. Notwithstanding the automatic nature of the subordination described in this Section, Tenant shall, with due diligence, execute, acknowledge and deliver to Landlord or its mortgagee or other designee(s), any and all standard forms of documents evidencing such subordination as may be reasonably requested by Landlord or by any proposed mortgagee. If any mortgagee elects to have Tenant's interest in this Lease rendered superior in priority to that mortgagee's lien on the Premises, then by notice to Tenant, this Lease shall be deemed superior to that mortgagee's lien, whether this Lease was executed before or after execution or recording of the instrument creating that mortgagee's lien. Any such attornment and or subordination referenced in this Lease shall be conditioned on Tenants being allowed to remain in the Premises on the terms otherwise set forth in this Lease provided that Tenant is not in default of its obligations under the Lease. Any subordination provision contained in the Lease, relating either to ground leases or mortgages, is subject to the express condition that so long as Tenant is not in material default under the Lease, (a) Tenant will not be made a party in any action or proceeding brought by any person having rights superior to Tenant to recover possession of the Premises or to foreclose any mortgage or for any other relief sought, and (b) Tenant's possession under the Lease shall not be disturbed. Landlord agrees to deliver to Tenant letters from any holder of rights superior to Tenant, including mortgages and ground lessors, recognizing Tenant's rights hereunder, such delivery to take place as a condition of and prior to the Commencement Date of Lease. Anything to the contrary notwithstanding, Landlord shall only use its best efforts to obtain non-disturbance agreement from its present mortgage lender(s). 25. ESTOPPEL OR OFFSET STATEMENTS Each party shall, upon the reasonable request from time to time of Landlord, execute and deliver an estoppel or offset statement to the extent it's accurate in the form of Exhibit "D" annexed hereto. 26. HOLDOVER In the event that Tenant shall for any reason remain in possession of the Premises after the expiration of the Term, such possession shall at the option of Landlord be on a month-to-month basis subject to the terms and conditions of this Lease except as to duration of term and except that the Basic Rent shall be two hundred percent (200%) of that in effect at expiration of the Term. The foregoing is not intended to afford to Tenant the right to remain in possession of the Premises after expiration of the Term without Landlord's prior written consent. 27. FORCE MAJEURE The period of time during which either party is prevented or delayed in the making of any improvements or repairs (including but not limited to the initial Landlord work to ready the Premises for Tenant's occupancy) or fulfilling any obligation required under this Lease with the exception of obligations of the payment of Rent or Additional Rent, due to unavoidable delays caused by fire, catastrophe, strikes, labor trouble, civil commotion, Acts of God or public enemies, government prohibitions or regulations or inability to obtain materials or any other causes beyond such party's reasonable control, shall be added to such party's time for performance thereof, and such party shall have no liability by reason thereof. It is understood, not in limitation of the generality of the foregoing, that Landlord shall under no circumstances be liable to Tenant in damages or otherwise for any interruption in service of water, electricity, heating, air conditioning and/or other utilities and services of any nature caused by an unavoidable delay, by the making of any necessary repairs or improvements or by any cause beyond Landlord's reasonable control. 28. ENTRY BY LANDLORD For a period commencing nine (9) months prior to the termination of this Lease, Landlord may have reasonable access, during business hours, to the Premises for the purpose of exhibiting the same to prospective purchasers. Landlord shall exercise its right of access for such purposes, if exercised at all, upon reasonable advance notice to Tenant and in a manner not unreasonably to interfere with Tenant's business at the Premises. At all times during the Term, Tenant will permit Landlord, its agents, employees and contractors, and Lenders or prospective Lenders to enter the Premises during business hours in order to inspect the same and/or to enforce or carry out any provision of this Lease. 29. BROKERS Each party represents to the other it knows of no broker or other person who introduced the parties to this transaction other than Atlantic Real Estate Services and the Box Company, who Landlord authorized to represent them in this transaction and for whose commissions Landlord shall be liable by separate agreement. In the event of a claim by any broker or person for commissions arising out of a misrepresentation by one of the parties hereto, that party shall indemnify and hold the other harmless from that claim, such indemnity and hold harmless agreement to include court costs and reasonable attorneys' fees incurred in respect to or in defense against such claim. 30. END OF TERM Upon expiration of the Term or other termination of this Lease, Tenant shall peaceably and quietly quit and surrender the Premises, broom clean, in good order and condition, reasonable wear and tear and damage by fire or other casualty excepted. Tenant shall also, subject to Landlord's rights under "Default and Remedies", remove all trade fixtures and movable partitions, and shall repair any damage caused in so moving and restore the Premises to such condition as existed prior to installation of such fixtures and partitions. All Alterations of Tenant shall be left by Tenant and shall remain part of the Premises except to the extent Landlord may have otherwise specified in a notice to Tenant given pursuant to Section 10 ("Alterations and Signage"). In addition to the foregoing responsibilities, Tenant shall, upon expiration of the Term or other termination of this Lease, restore all portions of the Premises to such condition as existed at the Commencement Date, reasonable wear and tear excepted, and Tenant shall repair any damage caused in so restoring the Premises. 31. LIABILITY OF LANDLORD Tenant agrees that the liability of Landlord (or of any subsequent Landlord) in the event of breach by Landlord shall be limited to Landlord's interest in the Landlord's Tract known as 30 Technology Drive, Warren, NJ. Tenant expressly agrees that any judgment or award which Tenant may obtain against Landlord shall be recoverable and satisfied solely out of said interest. Tenant shall have no personal rights against any principals or partners of Landlord, and shall have no rights of lien or levy against other property of Landlord. 32. PERFORMANCE OF TENANT'S OBLIGATIONS If Tenant shall be in default hereunder, in any respect, Landlord may, after giving Tenant requisite notice thereof and time to cure, at Landlord's option and without waiving its rights hereunder, cure such default on behalf of Tenant, in which event Tenant shall, promptly upon demand by Landlord, reimburse Landlord for all expenses incurred by Landlord in effecting such cure, including but not limited to reasonable attorneys' fees, together with interest thereon at eighteen percent (18%) per annum (whether or not elsewhere in this Lease it is provided for Landlord to recover interest upon occurrence of a specified default by Tenant and cure thereof by Landlord). In order to collect such reimbursement, Landlord shall have all the remedies available under this Lease and/or by law or equity for a default in the payment of Rent. Tenant shall also be responsible for all reasonable attorneys' fees incurred by Landlord in connection with any default by Tenant, and the enforcement by Landlord of any covenant made by Tenant. 33. FLOOR LOADS Tenant shall not place a load upon any floor of the Premises exceeding the floor load per square foot area which it was designed to carry and which is allowed by law. Any equipment or property of any nature placed or installed by Tenant in the Premises shall be placed and maintained in settings sufficient to absorb and prevent vibration, noise and annoyance. 34. ENVIRONMENTAL PROVISIONS. A. Additional Definitions .For purposes of this Section, (a) "Regulated Substances" include any contaminants, materials, substances. pollutants, dangerous substances or any "hazardous wastes" or "hazardous substances" as defined in or pursuant to the Industrial Site Recovery Act (N.J.S.A. 13:1K-6 et seq.) ("ISRA"), the Spill Compensation and Control Act (N.J.S.A. 58:10-23.11 et seq.), the Resource Conservation and Recovery Act (42 U.S. Section 6901 et seq.), the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601 et seq.) or any other state or federal environmental or occupational health or safety law or regulation and any amendment of or rule, regulation, order, directive or guidance issued thereunder ("Environmental Requirements"). (b) "Enforcement Notice" means a summons, citation, directive, order, claim. litigation, investigation, judgment, letter or other communication, written or oral, actual or threatened, from the New Jersey Department of Environmental Protection ("NJDEP"), the United States Environmental Protection Agency("USEPA") or other federal, state or local agency or authority, or any other entity or any individual, concerning any intentional or unintentional action or omission resulting or which might result in the Releasing of Regulated Substances into the air, waters or groundwaters. or onto the lands of the State of New Jersey, or into the air or waters outside the jurisdiction of the State of New Jersey where damage may have resulted or may result to the air, lands, waters, groundwaters, fish, shellfish, wildlife, biota, air or other resources owned, managed, held in trust or otherwise controlled by, or within the jurisdiction of, the State of New Jersey, or into the "environment," as such term is defined in 42 U.S.C. 9601(8). (c) "Releasing" or "Release" means releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, disposing or dumping. B. No Regulated Substances. The Premises shall not be used and/or occupied to generate, manufacture, refine, transport, treat, store, handle, dispose, transfer or process Regulated Substances, except for the use, in accordance with law, of such substances in de minimus amounts as is customary in connection with the Permitted Use. Tenant shall comply with all applicable federal, state and local environmental laws, ordinances, rules and regulations, and shall obtain and comply with any and all permits required thereunder. The Tenant shall not suffer or permit (a) any intentional or unintentional action or omission of the Tenant or any other occupant, user and/or operator of the Premises, resulting in the Releasing of Regulated Substances into the air, waters or groundwaters, or onto the lands of the State of New Jersey, or into the air or the waters outside the jurisdiction of the State of New Jersey where damage may result to the air, lands, waters, groundwaters, fish, shellfish. wildlife, biota, air or other resources owned, managed, held in trust or otherwise controlled by, or within the jurisdiction of, the State of New Jersey, or (b) any Enforcement Notice or any facts which might result in any Enforcement Notice with respect to the Premises. C. ISRA Compliance. In connection with the termination of this Lease or Tenant's operations hereunder or the change of ownership or other status of Tenant or other person acting by, through or under Tenant. Tenant shall obtain ISRA clearance, which for the purpose of this Lease means that Tenant shall either (a) obtain from the NJDEP a "Letter of NonApplicability, " or (b) submit to and obtain the approval by the NJDEP of a "Negative Declaration" or (c) obtain the issuance by NJDEP of a "No Further Action Letter" pursuant to ISRA and applicable regulations, guidance and guidelines implementing ISRA ("ISRA Requirements") and the Environmental Requirements. As part of its obligation to obtain either a "Negative Declaration" or a "No Further Action Letter" ("ISRA Compliance"), Tenant shall prepare and submit to NJDEP a General Information Notice and perform and report to NJDEP on, as appropriate, a Preliminary Site Assessment, a Site Investigation, a Remedial Investigation and a Remedial Action Workplan. Tenant shall also, as part of its compliance with ISRA Requirements, obtain and maintain a remediation funding source in form and amount acceptable to NJDEP. The Tenant agrees not to submit any Remedial Action Workplan (or its regulatory equivalent) which would return the Premises to the Landlord at the end of the Term in a condition which includes the presence of Regulated Substances in concentrations which were not present at the Premises on the date when Tenant first used or occupied the Premises. The Tenant warrants and represents that the Standard Industrial Code ("SIC") classification for the activities to be carried on within the Premises is 3829, which is the SIC for the Permitted Use, and no other activities shall be conducted on the Premises. In any event, Tenant shall have the sole and exclusive responsibility to comply at its own cost and expense with ISRA (subject to Tenant's right of indemnification as set forth in Section 8.4.2) in connection with the termination of this Lease, any sale or other change in of Tenant, the cessation of Tenant's operations on the Premises and, to the extent any tests, sampling or remediation are required on, at, or under the Premises in connection with a change in ownership of Landlord's interest in the Premises (Landlord being responsible for filing fees in such case). Landlord shall cooperate with Tenant by supplying Tenant with relevant information within Landlord's exclusive control. Notwithstanding anything to the contrary herein, Landlord shall not be required to enter a Deed Restriction or undertake any other institutional control in aid of Tenant's ISRA compliance obligation. Tenant shall commence its compliance efforts at least 6 months prior to the end of the Term and diligently pursue such efforts to conclusion. Tenant shall keep Landlord fully informed of its progress in obtaining the ISRA clearance by sending a copy of all correspondence and documents to Landlord and by delivering an ISRA Compliance status report to Landlord every 30 days during the six-month clearance period. It is understood and agreed by Tenant that Landlord shall have the right to rely on and shall rely on all statements, representations, warranties and undertakings made by Tenant to the NJDEP pursuant to this Section 8 as if such statements, representations, warranties and undertakings had been made directly to the Landlord. If Tenant fails to obtain ISRA clearance on or before the end of the Term, and if such failure prevents Landlord from re-renting all or any portion of the Premises, then without limiting any other liability of Tenant to Landlord resulting from its default under this Lease. Tenant shall be liable to Landlord as a holdover tenant for such portion of the Premises. D. Indemnity. (a) Tenant Indemnity. Tenant hereby agrees to save, defend with counsel reasonably satisfactory to Landlord, indemnify and hold harmless Landlord and its principals. officers, directors, trustees, agents and employees, from and against any and all claims' losses, liabilities, damages and expenses (including reasonable cleanup costs and attorneys fees arising under this indemnity) which may arise directly or indirectly from any use or any Release of Regulated Substances on or under the Premises, and losses of and claims against Landlord resulting from Tenant's failure to comply strictly with the provisions of this Section 8, with respect to the Term of this Lease and any other period of possession of the Premises by Tenant. Tenant shall have no liability for any consequential, punitive, or other speculative damages suffered by Landlord or by any party claiming through Landlord. (b) Landlord Indemnity. Landlord hereby agrees to save, defend with counsel reasonably satisfactory to Tenant, indemnify and hold harmless Tenant and its principals, officers, directors, trustees, agents and employees, from and against any and all claims, losses, liabilities, damages and expenses (including reasonable cleanup costs and attorneys fees arising under this indemnity) which may arise directly or indirectly from the use or Release of Regulated Substances on or under the Premises prior to the Commencement Date. Landlord shall have no liability for any consequential damages suffered by Tenant or by any party claiming through Tenant. E. Environmental Inspections. At the request of Landlord during and after the Term, in the event of an Enforcement Notice or other circumstances leading Landlord reasonably to conclude that an Enforcement Notice could issue relating to occurrences during the Term of this Lease or otherwise attributable to Tenant's use or occupancy of the Premises and if Landlord reasonably determines that it would be advantageous to hire an environmental consultant to provide advise and/or remedy the condition, then the Tenant will retain an environmental consultant acceptable to the Landlord to conduct a complete and thorough on-site inspection of the Premises, including a geohydrological survey of soil and subsurface conditions as well as other tests, to determine the presence of Regulated Substances, and the consultant shall certify to the Landlord whether, in his professional judgment, there exists any evidence of the presence of Regulated Substances on, in or under the Premises. F. Other Laws; Survival. Whenever the terms ISRA, Spill Fund and similar terms and regulatory and statutory references are used in this Lease, they shall be deemed to include any similar, predecessor, future or successor regulatory and statutory references and/or terms under past or future laws as may apply to the Premises and its use and occupancy under this Lease. Tenant's obligations under this Section 8 shall survive the termination of this Lease. G. Landlord represents to the best of its knowledge, that there are no adverse environmental conditions in, around or affecting the Landlord's Tract, including the presence of asbestos, radon gas or PCBs. 35. INVALIDITY OF PARTICULAR PROVISIONS Wherever in this Lease any portion or part thereof has been stricken out, whether or not any relative provision has been added, this Lease shall be read and construed as if the material so stricken were never included herein and no implication shall be drawn from the text of the materials so stricken which would be inconsistent in any way with the construction or interpretation which would be appropriate if such material were never contained herein. 36. GENDER AND PERSON Words of any gender used in this Lease shall be held to include any other gender, and words in the singular number shall be held to include the plural, when the sense of the words require same. 37. MODIFICATION This Lease may not be modified except by an instrument in writing signed by the parties hereto. 38. COVENANTS TO BIND RESPECTIVE PARTIES The covenants and agreements contained in this Lease shall inure to the benefit of the parties hereto and their heirs, legal representatives, successors and permitted assigns and subject to Section 21 ("Attornment; Definition of Term "Landlord"'), shall be binding on the parties hereto, their heirs, legal representatives, successors and assigns. 39. NO WAIVER OF BREACHES The failure of Landlord or Tenant to insist upon strict performance of any of the covenants or conditions of this Lease or to exercise any option herein conferred in any one or more instances shall not be construed as a waiver or relinquishment for the future of any such covenants, conditions or options, but the same shall be and remain in full force and effect. Acceptance by Landlord of current rent shall not be deemed a waiver of past obligations of Tenant, nor shall acceptance by Landlord at any time of any monies preferred by Tenant constituting less than the entire amount of rent then due be deemed other than receipt of partial payment on account of the rent due, and shall not constitute an accord or satisfaction. 40. CAPTIONS Captions have been used solely for the sake of reference and shall in no way govern or affect the interpretation hereof. 41. THIS SECTION INTENTIONALLY DELETED. 42. INTEGRATION The agreements contained in this Lease constitute the full and final agreement between the parties hereto as to the subject matter hereof, and all prior agreements or writings of any nature between the parties hereto are hereby superseded and are integrated herein. This Lease may not be amended except in writing signed by both parties hereto. 43. JOINT AND SEVERAL LIABILITY In the event that two or more individuals, corporations, partnerships or other business associations (or any combination two or more thereof) shall sign this Lease as Tenant, the liability of each such individual, corporation, partnership or other business association to pay rent and perform all other obligations hereunder shall be joint and several. In like manner, in the event that the Tenant named in this Lease shall be a partnership or other business association the members of which are, by virtue of statute or general law, subject to personal liability, then and in that event, the liability of each such member shall be joint and several. 44. NO OPTION OR OFFER The submission of this Lease for examination does not constitute a reservation to lease, or option to lease the Premises and this Lease becomes effective only upon execution hereof by Landlord, Tenant and any guarantor, if any. 45. CHANGES REQUIRED BY LENDER Tenant shall consent in writing to any changes in this Lease required by any prospective mortgage lender provided that no such changes shall adversely affect Tenant's rights hereunder or increase Tenant's obligations hereunder. 46. CONSENTS AND APPROVALS Unless it is provided in this Lease that a party hereto shall not unreasonably withhold a consent or approval required to be received from that party, the consent or approval shall be at the sole discretion of the party required to give same. The withholding of consent or approval in contravention of any requirement of this Lease shall not afford to the other party a right to damages of any nature on account of such withholding or on account of any delay in the granting of the consent or approval, but the sole remedy of the other party shall be to maintain an action for specific performance. 47. WAIVER OF JURY TRIAL The parties waive the right to a jury trial with respect to any action, including an action for damage or injury, arising out of this Lease or Tenant's use or occupancy of the Premises. 48. NO LEASE RECORDING Tenant agrees that it will not record this Lease or any memorandum hereof. 49. AMENDMENTS This Lease form shall not be changed in format or context, except by rider or amendment. 50. SCHEDULES AND EXHIBITS The following schedules and exhibits are enclosed herein and made a part hereof: Exhibit "A" Floor Plan of Demised Premises Exhibit "B" Landlord's Tract Exhibit "C" Lease Payment Schedule Exhibit "D" Estoppel of Mortgage Exhibit "E" Landlord's Work letter Schedule 1 Initial Alterations/Reserved Space 51. RELOCATION Landlord hereby reserves the right, at its sole expense and on at least sixty (60) days prior written notice, to require Tenant to move the warehouse portion of the Premises to other space within the Building Area of comparable size (+- 700 sq. ft.) in order to permit Landlord to consolidate the space leased to Tenant with any other space leased or to be leased to another Tenant. In the event of any such relocation, Lessor will pay all expenses of preparing the new premises so that they will be substantially similar to the Premises from which Tenant is moving and Lessor will also pay the expense of moving Tenant's equipment to the relocated premises. In such event, this Lease and each and all of the terms, covenants and conditions hereof, shall remain in full force and effect and thereupon be deemed applicable to such new space except that the description of the Premises shall be revised and if applicable Tenant's Percentage and Rental shall likewise be revised. Tenant shall not be responsible for any restoration of the vacated space. 52. SATELLITE COMMUNICATION DISH A. Tenant shall have the right with Landlord's approval to install and maintain one (1) satellite communications dish on the roof of the Building in a location acceptable to Landlord. Landlord in its sole and absolute discretion may withhold its consent if the satellite dish is visible from the ground or any other building and if Landlord feels it would damage or devalue its Building. B. The Tenant shall bear the full cost of the installation of the satellite dish, including Landlord approved modifications to the Building required for the installation: (a) The Tenant shall coordinate with the Landlord the actual location of the installation on the roof of the Building, interfering to the least extent possible with the actual and/or potential use of the Building. (b) The Tenant shall secure all applicable building permits, FAA and FCC approvals, and any other state and/or local agency approvals required for the installation, and provide copies to the Landlord as required. The Tenant shall provide installation specifications and drawings required for the determination of installation suitability. (c) If required by local codes or ordinances, the Tenant shall supply stamped engineering drawings for the state in which the installation is to be accomplished, certifying that the proposed site will safely and legally support the satellite dish installation. (d) The Tenant shall install, maintain, and at the end of the Term of this Lease and its extensions, remove the satellite dish all in a manner which does not disturb the watertight integrity of the Building and restore the Building to its original condition. Landlord shall have the right to increase Tenant's security deposit to cover the cost of removing the satellite dish and restoring the Building to its original condition. If Tenant does not maintain the satellite dish, Landlord may do so and charge Tenant the cost thereof as additional rent. (e) Prior tot he operation of the satellite dish, the Tenant shall certify that the radio frequency transmissions of the satellite dish will not endanger persons in the Premises or surrounding premises. The Tenant shall hold the Landlord blameless and indemnify the landlord from any and all claims arising from satellite dish. (f) The Tenant shall insure that the installation is accomplished so that the satellite dish is securely attached to the roof, and the Tenant assumes total responsibility for any and all physical damage which might be caused by the satellite dish, its support equipment, or any consequential damages that might arise therefrom. (g) Tenant will not assign, transfer, pledge or otherwise hypothecate the rights to the use of the satellite dish. IN WITNESS WHEREOF, the parties hereto have hereunder set their hands and seals the day and year first above written. [SIGNATURES NEXT PAGE] IN WITNESS WHEREOF, the parties hereto have hereunder set theier hands and seals the day and year first above written. ATTEST: TENANT: BARRINGER TECHNOLOGIES, INC. /s/John Boyle III /s/ Richard S. Rosenfeld Vice-President WITNESS: LANDLORD: MT. BETHEL CORPORTE CENTER /s/Edward J. Darden By:/s/ John R. Gottra EXHIBIT C LEASE PAYMENT SCHEDULE for BARRINGER TECHNOLOGIES, INC. Rental Annual Monthly Period Rentable Area Basic Rent Basic Rent 7/1/98 - Office 6/30/2008 21,128 sq. feet $348,612.00 $29,051.00 7/1/98 - Warehouse $ 38,500.00 $ 3,208.33 6/30/2008 7,000 sq. feet Total Basic Rent Due $387,112.00 $32,259.33 During the first one hundred twenty days 120 days of Term, Tenant may utilize the entire Premises during Tenant's initial fix-up and Alterations, but shall only be obligated to pay Basic Rent and Additional Rental based upon 12000 square feet of office space and 5,000 square feet of warehouse space. Upon inspection of such work, the following revisions shall apply: (a) During the first 18 months of the Lease, Tenant shall pay for only 12,000 sq. feet of office space unless Tenant utilizes more than 12,000 sq. ft., in which event they will pay rent on the entire 21,128 sq. feet. If Tenant does not use the 12,000 sq. ft. during the first 18 months, Tenant will be obligated to pay Basic Rent and Additional rent for the 12,000 sq. feet but shall be obligated after 18 months to pay Basic Rent and Additional Rent for the entire 21,128 sq. ft. If Basic Rent is only being paid for 12,000 sq. ft. of office space the annual rent for that portion will be $198,000 and the monthly rent will be $16,500. (b) Tenant shall pay for warehouse space of 5,000 sq. feet until August 31, 2001 at which time it will be obligated to pay for 7,000 sq. feet until August 31, 2001 at which time it will be obligated to pay for 7,000 sq. ft. If Tenant utilizes any more than 5,000 sq. ft., before August 31, 2001, it will be obligated to pay for a full 7,000 sq. ft. If Basic Rent is only being paid for 5,000 sq. ft. of warehouse space, the annual rental will be $27,500 and the monthly rental will be $2,291.67. (c) Limited to the first one hundred twenty days (120) days of the Term the incidental use of space for temporary storage, access, to other space or similar limited purposes shall not be deemed utilization by Tenant. Increase in rent for 2nd five years of lease shall be as follows: The Yearly Basic Rent to be paid during the period 7/1/2003 through 6/30/2008 shall accrue at the rate equal to the Yearly Basic Rent paid during the fifth year of the lease Term, Three Hundred Eighty Seven Thousand One Hundred Twelve Dollars ($387,112.00), increased by the aggregate of the annual percentages of increase (subject to the limitations set forth below) in the index now know n as the Revised Consumer Price Index for All Urban Consumers of the New York, N..Y. - Northeastern, new Jersey area as published by the Bureau of Labor Statistics of the United States Department of labor (hereinafter "Index") between 7/1/1998 and 6/30/2003, but in no event less than the yearly Basic Rent paid for the Demised Premises from 7/1/1998 through 6/30/2003. If at the time required for the determination of the renewal rent the aforesaid Index is no longer published or issued, the parties shall use such other index as is then generally recognized and accepted for similar determinations of cost of living increase. The increase for consumer price index shall be a minimum of 2% and a maximum of 5% per year. For example, if the annual increases in the index are as follows, Year Applied Ending 6/30 Increase Increase 1999 1% 2% 2000 2% 2% 2001 8% 5% 2002 4% 4% 2003 -3% 2% Total 12% 15% then the Basic Rent for years 5 through 10 of the Term shall be 115% of the Basic Rent for the first 5 years of the Term. SCHEDULE D LEASE ESTOPPEL CERTIFICATE Landlord: Tenant: Premises: Area: Lease Date: The undersigned Landlord and Tenant of the above-referenced lease (the "Lease") hereby ratify the Lease and certify to Lender as mortgagee of the Real Property of which the premises demised under the Lease (the "Premises") is a part, as follows: 1. That the term of the Lease commenced on ________________________ 199 and the Tenant is in full and complete possession of the premises demised under the Lease and has commenced full occupancy and use of the Premises, such possession having been delivered by the original landlord and having been accepted by the Tenant. 2. That the Lease calls for monthly rent installments of $ ________________ to date and that the Tenant is paying monthly installments of rent of $_______________ which commenced to accrue on the ________ day of _____________________, 199 . 3. That no advance rental or other payment has been made in connection with the Lease, except rental for the current month, there is no "free rent" or other concession under the remaining term of the lease and the rent has been paid to and including __________________ 199 . 4. That a security deposit in the amount of $ _________________ is being held by Landlord, which amount is not subject to any set-off or reduction or to any increase for interest or other credit due to Tenant. 5. That all obligations and conditions under said Lease to be performed to date by landlord or Tenant have been satisfied, free of defenses and set-offs including construction work in the Premises. 6. That the Lease is a valid lease and in full force and effect and represents the entire agreement between the parties; that there is no existing default on the part of the Landlord or the Tenant in any of the terms and conditions thereof and no event has occurred which, with the passing of time or giving of notice or both, would constitute an event of default; and that said Lease has: (initial one) (__) not been amended, modified, supplemented, extended, renewed or assigned. (__) been amended modified, supplemented, extended, renewed or assigned as follows by the following described agreements. ______________________________________________________________________ 7. That the Lease provides for a primary term of ________________ months; the term of the Lease expires on the _____ day of _____________, 199 ; and that (initial one) (__) neither the Lease nor any of the documents listed above in Paragraph 6, (if any), contain an option for any additional term or terms. (__) the Lease and/or the documents listed above in Paragraph 6 contain an option for ______________ additional term(s) of _____________ year(s) and _______________ month(s) (each ) at a rent to be determined as follows: _________________________ ______________________________________________________________________ _____________________________________________________________________. 8. That Landlord has not rebated, reduced or waived any amounts due from Tenant under the lease, either orally or in writing, nor has Landlord provided financing for, made loans or advances to, or invested in the business of Tenant. 9. That, to the best of Tenant's knowledge, there is no apparent or likely contamination of the Real Property of the Premises by Hazardous Materials, and Tenant does not use, nor has Tenant disposed of, Hazardous Materials in violation of Environmental Laws on the Real Property or the Premises. 10. That there are no actions, voluntary or involuntary, pending against the Tenant under the bankruptcy laws of the United States or any state thereof. 11. That this certification is made knowing that Lender is relying upon the representations herein made. Date: Tenant _______________________________ _______________________________ By: _______________________________ Typed Name: Title Date: Landlord _____________________________ _____________________________ By: _____________________________ Typed Name: Title EXHIBIT E LANDLORD WORK LETTER Landlord will contribute the equivalent of $8.50 per sq. feet based on 21,128 sg. Ft. for the Teneant improvements ($179,588.00). This allowance shall be given in the form of free Basic Rent commencing with the August 1, 2001 rental payment. Free Basic Rent shall be given until the amount of the allowance is utilized in full. It is understood that the Landlord will erect a floor to ceiling fence in the Warehouse to separate the 7,000 sq. Ft set forth int he Lease from the balance of the warehouse space. The cost of said fence shall be the responsibility of the Landlord. EX-10 5 PLEDGE AGREEMENT EXHIBIT 10-19 PLEDGE AGREEMENT PLEDGE AGREEMENT, dated as of July 6, 1998, by and between Stanley S. Binder (the "Executive") and Barringer Technologies Inc. (the "Company"). W I T N E S S E T H: WHEREAS, the Company has loaned to the Executive the sum of $500,000; such loan being evidenced by a non-recourse secured promissory note (the "Note") in the principal amount of $500,000 made by the Executive in favor of the Company; and WHEREAS, the loan to the Executive is to be secured by a pledge by the Executive to the Company of 49,000 shares of common stock, $0.01 par value per share, of the Company owned by the Executive and the other Collateral (as defined below) referenced herein; and WHEREAS, the parties hereto desire to set forth the terms of and to evidence the Executive's grant to the Company of a security interest in the Collateral. NOW, THEREFORE, in consideration of the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Executive hereby agrees with the Company as follows: Section 1. Definitions. The following terms, when used in this Agreement, shall have the following meanings (such definitions to be equally applicable to the singular and plural forms thereof): "Default" means the failure to make any payment of principal of or interest on, or any other amounts due under, the Note when due, whether at maturity, upon acceleration or otherwise. "Distributions" means all stock dividends, liquidating dividends, shares of stock resulting from stock splits, reclassifications, warrants, options, non-cash dividends and other distributions on or with respect to the Shares, whether similar or dissimilar to the foregoing, but shall not include Dividends. "Dividends" means regular dividends declared with respect to the Shares. "Liabilities" means the Note, and all amounts becoming due thereunder, and all other payment obligations of the Executive hereunder or thereunder or any instrument executed pursuant hereto or thereto. Section 2. Grant of Security Interest. As security for payment of all Liabilities, the Executive hereby pledges, assigns and transfers to the Company, and grants to the Company a continuing security interest in and to, the Shares, together with all Dividends and Distributions, interest and other payments and rights with respect thereto, together with all proceeds thereof (collectively, the "Collateral"). The Executive further pledges, assigns and transfers to the Company, and grants to the Company a continuing security interest in and to, and agrees to duly endorse to the order of the Company, any additional Collateral, together with all proceeds thereof, delivered by the Executive to the Company for the purposes of pledge under this Agreement. Any Collateral delivered by the Executive to the Company may be endorsed by the Company, in its own name or in the name of the Executive, on behalf of the Executive to the order of the Company. Section 3. Stock Powers, Endorsements, Etc. The Executive shall, from time to time, upon request of the Company, promptly execute such endorsements and deliver to the Company such stock powers and similar documents, satisfactory in form and substance to the Company, with respect to the Collateral as the Company may reasonably request and shall, from time to time, upon request of the Company, promptly transfer any securities which are part of the Collateral into the name of any nominee designated by the Company on the books of the corporation or other entity issuing such securities; provided, however, that the Company shall not be entitled to effect or demand a transfer of the Collateral into the name of the Company or the Company's nominee without the consent of the Executive unless and until a Default shall have occurred. Section 4. Certain Other Agreements Regarding Collateral. The Executive shall deliver (properly endorsed where necessary) to the Company: (a) after a Default shall have occurred and be continuing, promptly upon receipt thereof by the Executive and without any request therefor by the Company, all Dividends and Distributions, and other proceeds of the Collateral, all of which shall be held by the Company as additional Collateral; and (b) at any time after a Default shall have occurred and be continuing, promptly upon request of the Company, such consents or proxies and other documents as may be necessary to allow the Company to exercise any voting power or other right with respect to any securities included in the Collateral; provided, however, that unless a Default shall have occurred and be continuing, the Executive shall be entitled: (i) to exercise, as the Executive shall deem appropriate, all voting or other powers with respect to securities pledged hereunder (including but not limited to the Shares); and (ii) to receive and retain for the Executive's own account any and all Dividends paid in cash. Section 5. Actions Upon Default. Whenever a Default shall have occurred and be continuing, the Company may exercise from time to time any and all rights and remedies available to it under applicable law, including but not limited to all rights of a secured party available to it under the Uniform Commercial Code. Without limiting the above, the Company may from time to time, whether before or after any of the Liabilities shall become due and payable, but only if a Default shall have occurred, without notice to the Executive, take any or all of the following actions: (a) transfer all or any part of the Collateral into the name of the Company or its nominee; and (b) execute (in the name, place and stead of the Executive) any or all endorsements, assignments, stock powers and other instruments of conveyance or transfer with respect to all or any of the Collateral. The Executive understands that compliance with the Federal securities laws, applicable blue sky or other state securities laws or similar laws analogous in purpose or effect may strictly limit the course of conduct of the Company if the Company were to attempt to dispose of all or any part of the Collateral and may also limit the extent to which or the manner in which any subsequent transferee of the Collateral may dispose of the same. Accordingly, the Executive agrees that IF ANY COLLATERAL IS SOLD AT ANY PUBLIC OR PRIVATE SALE, THE COMPANY MAY ELECT TO SELL ONLY TO A BUYER WHO WILL GIVE FURTHER ASSURANCES, SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY, RESPECTING COMPLIANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY AND ALL APPLICABLE STATE SECURITIES LAWS; AND A SALE SUBJECT TO SUCH CONDITION SHALL BE DEEMED COMMERCIALLY REASONABLE. The Company shall have the right to bid upon or purchase the Shares, or any other part of the Collateral, or all of the foregoing, at any such sale, less any and all amounts owing to the Company by the Executive under the Note, this Agreement or otherwise, and that any such purchase is commercially reasonable. Section 6. Application of Moneys. Any moneys received by the Company upon payment to it of any Collateral held by it or as proceeds of any of the Collateral may be applied by the Company first to the payment of any expenses incurred by it in connection with the Collateral, including, without limitation, reasonable attorneys' fees and legal expenses, and all other amounts payable to the Company by the Executive, and any balance of such moneys so received by the Company may be applied to all Liabilities of the Executive (including, without limitation, the principal amount of the Note outstanding whether or not such principal amount is at that time due and payable) in such order of application as the Company in its sole discretion may determine. Any amounts remaining after payment of the Liabilities may be applied by the Company to the payment of any and all other amounts owing, whether or not then due, to the Company from the Executive and any remaining balance thereafter shall be paid to the Executive. Section 7. Release of Collateral. Upon the indefeasible payment in full of the Liabilities, the Company shall, upon the request of the Executive, promptly reassign and redeliver to the Executive the Collateral which has not been sold, disposed of, retained or applied by the Company in accordance with the terms hereof, together with such endorsements, stock powers and similar documents as the Executive may reasonably request. Such reassignment and redelivery shall be without warranty by or recourse to the Company, except as to the absence of any prior assignments by the Company of its interest in the Collateral. In the event that the Executive proposes to sell, transfer or otherwise dispose of all or a portion of the Shares, upon the request of the Executive, the Company shall release from its security interest the Shares to be sold by the Executive and, at the sole expense of the Executive, shall deliver such Shares as directed by the Executive, free and clear of any security interest hereunder, upon receipt from or on behalf of the Executive of the net proceeds of such sale, transfer or other disposition in cash in next day or immediately available funds. Section 8. Non-Recourse Nature of Liabilities. The Company's sole recourse for the payment of the Liabilities shall be limited to the Collateral securing the Note. THE COMPANY SHALL NOT HAVE THE RIGHT TO ENFORCE THE LIABILITIES AGAINST THE EXECUTIVE OR ANY OF THE EXECUTIVE'S OTHER ASSETS OR PROPERTY. Section 9. Miscellaneous. (a) To the fullest extent permitted by applicable law, this Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any amount received by the Company in respect of the Liabilities is rescinded or must otherwise be restored or returned by the Company upon the insolvency or bankruptcy of the Executive or upon the appointment of any receiver, intervenor, conservator, trustee or similar official for the Executive or any substantial part of his assets, or otherwise, all as though such payments had not been made. (b) No remedy herein conferred is intended to be exclusive of any other remedy herein conferred or otherwise available to the Company, but every such remedy shall be cumulative and in addition to every other remedy herein conferred, or conferred on the Company by any other agreement or instrument or now or hereafter existing at law, in equity or by statute. (c) Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction, shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. (d) Except as otherwise expressly provided herein, no term or provision of this Agreement may be amended, waived, discharged or terminated orally, but only by an instrument in writing signed by the parties. (e) THIS AGREEMENT AND ALL RIGHTS HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW JERSEY WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PROVISIONS THEREOF. THE EXECUTIVE HEREBY CONSENTS AND SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS LOCATED IN THE STATE OF NEW JERSEY HAVING SUBJECT MATTER JURISDICTION IN CONNECTION WITH ANY AND ALL DISPUTES ARISING OUT OF OR IN CONNECTION WITH THIS Agreement, THE NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. FURTHER, THE EXECUTIVE HEREBY CONSENTS AND AGREES THAT SERVICE OF PROCESS BY THE COMPANY, OR ANY PARTY ACTING ON BEHALF OF THE COMPANY, SHALL BE DEEMED VALIDLY AND PROPERLY EFFECTED AGAINST THE EXECUTIVE UPON THE MAILING OF A COPY OF SUCH PROCESS BY CERTIFIED MAIL, POSTAGE PREPAID, TO THE EXECUTIVE AT ITS ADDRESS SET FORTH ABOVE. (f) No course of dealing and no delay on the part of any party hereto in exercising any right, power, or remedy conferred by this Agreement shall operate as a waiver thereof or otherwise prejudice such party's rights, powers and remedies hereunder or in connection herewith. No single or partial exercise of any power or remedy conferred by this Agreement shall preclude any other or further exercise thereof or the exercise of any other right, power or remedy. (g) This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors, assigns and legal representatives. (h) This Agreement constitutes the entire agreement among the parties with respect to the matters covered hereby and supersedes all previous written, oral or implied agreements and understandings among the parties with respect to such matters. (i) All notices or other communications required or permitted hereunder shall be in writing and shall be delivered personally, by facsimile or sent by certified, registered or express air mail, postage prepaid, and shall be deemed given which so delivered personally, or by facsimile, or if mailed, five days after the date of mailing, as follows: If to the Company: 219 South Street Murray Hill, New Jersey 07974 Telephone: (908) 665-8200 Facsimile: (908) 665-8298 Attention: Chairman of the Executive Compensation Committee of the Board of Directors If to the Executive: 32 Corey Lane Mendham, New Jersey 07945 Telephone: (973) 543-6664 Facsimile: (973) 543-9409 or at such other addresses as shall be furnished in writing to the other party hereto. (j) The headings in this Agreement are for reference purposes only, and shall not in any way affect the meaning or interpretation (k) This Agreement may be executed in one or more counterparts, each of which shall be deemed an original agreement, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first written above. Witness: /s/Helen Beyerl /s/Stanley S. Binder Name: Stanley S. Binder BARRINGER TECHNOLOGIES INC. By: /s/Richard S. Rosenfeld Name: Title: EX-10 6 NON-RECOURSE SECURED PROMISSORY NOTE EXHIBIT 10.20 NON-RECOURSE SECURED PROMISSORY NOTE FOR VALUE RECEIVED, Stanley S. Binder (the "Maker") hereby promises to pay to the order of Barringer Technologies Inc. or its successors, assigns and legal representatives (the "Holder"), at its offices at 219 South Street, Murray Hill, New Jersey, or at such other location as the Holder may designate from time to time, the sum of Five Hundred Thousand Dollars ($500,000) in lawful money of the United States of America (except as set forth below) on July 6, 2003 (the "Maturity Date"), together with interest thereon, compounded annually, at a rate of 5.68% per annum. Interest shall be paid annually on the anniversary of the date hereof. Principal shall be paid on the Maturity Date, together with all interest outstanding as of the Maturity Date. Interest shall be calculated on the basis of a 360-day year for the actual number of days elapsed. If the date any amount is due hereunder is not a Business Day, then such amount shall be due and payable on the Business Day next succeeding the original payment date, together with interest thereon to the date of payment. As used herein, "Business Day" means any day, other than a Saturday or Sunday or other day on which commercial banks in New York are authorized or required, by law or executive order, to be closed. If the Maker fails to pay any amount hereunder when due, whether on the Maturity Date, upon acceleration or otherwise, and such failure continues for a period of five (5) days or more, interest shall thereafter accrue on any overdue amounts at a rate of 8.68% per annum until paid in full. In such event, the Maker also shall pay to the Holder the reasonable attorneys' fees and disbursements and all other out-of-pocket costs incurred by the Holder in order to collect amounts due and owing under this Note or otherwise to enforce the Holder's rights and remedies hereunder. The Maker may prepay this Note at any time, in whole or in part, without premium or penalty. Any partial prepayments shall be applied first to accrued interest and second to the payment of principal. The Maker shall not have the right to set off or otherwise deduct from amounts payable by it hereunder, any amounts, whether liquidated or unliquidated, which the Holder may owe to the Maker, which right is hereby expressly waived to the maximum extent permitted by applicable law. In the event that the Maker sells, transfers or otherwise disposes of some or all of the Shares (as defined in the Pledge Agreement referred to below), whether on or prior to the Maturity Date, the Maker shall promptly repay this Note in an amount equal to the net proceeds, if any, received by the Maker from such disposition. Notwithstanding anything set forth herein to the contrary, in the event that (i) the Holder terminates the Maker's employment with the Holder as a result of a Termination for Cause (as defined in the Amended and Restated Employment Agreement, dated as of December 31, 1997 (the "Employment Agreement"), between the Holder and the Maker) or (ii) the Maker terminates his employment with the Holder other than as a result of a termination for Good Reason (as defined in the Employment Agreement), this Note shall mature and all amounts due hereunder shall become due and payable, without demand and without notice to the Maker, within 90 days of the date of termination. Notwithstanding anything herein to the contrary, this Note shall not mature upon the death of the Maker or the Maker becoming Permanently Disabled (as defined in the Employment Agreement). This Note is the Note referred to in the Pledge Agreement, dated the date hereof, between the Maker and the initial holder of this Note and is secured by the Shares and the other Collateral described therein. The Pledge Agreement grants the Holder certain rights with respect to the Collateral upon certain defaults specified therein. The Holder's sole recourse for the payment of amounts due under this Note shall be limited to the Collateral securing this Note. THE HOLDER SHALL NOT HAVE THE RIGHT TO ENFORCE THIS NOTE AGAINST THE MAKER OR ANY OTHER ASSETS OR PROPERTY OF THE MAKER. At the option of the Maker, the principal amount of this Note may be paid by the Collateral to the Holder, properly endorsed or otherwise in proper form for transfer. No delay on the part of the Holder in exercising any power or right hereunder shall operate as a waiver of any such power or right; nor shall any single or partial exercise of any power or right preclude any other or further exercise of such power or right, or the exercise of any other power or right, and no waiver whatsoever shall be valid unless in writing, signed by the Holder, and then only to the extent expressly set forth therein. The Maker waives presentment, demand for payment, diligence, notice of dishonor and all other notices or demands in connection with the delivery, acceptance, performance, default or indorsement of this Note. This Note shall be binding upon the Maker and its successors, assigns and legal representatives. This Note shall be governed by, and construed in accordance with, the laws of the State of New Jersey, without reference to the choice of law provisions thereof. The Maker irrevocably submits to the exclusive jurisdiction of the courts of the State of New Jersey and the United States District Court for the District of New Jersey for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Note and the transactions contemplated hereby. The Maker irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court. The Maker irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. IN WITNESS WHEREOF, the Maker has caused this Note to be duly executed by the undersigned, thereunto duly authorized, as of the date set forth below. Witness: /s/Helen Beyerl /s/Stanley S. Binder Name: Stanley S. Binder Dated: July 1, 1998 EX-10 7 PLEDGE AGREEMENT EXHIBIT 10.21 PLEDGE AGREEMENT PLEDGE AGREEMENT, dated as of ______ by and between ____________ (the "Maker") and Barringer Technologies Inc. (the "Company"). W I T N E S S E T H: WHEREAS, the Maker has purchased from the Company ____________ shares (the "Shares") of the Company's Common Stock, par value $.01 per share ("Common Stock"); and WHEREAS, in connection with such purchase the Company has loaned to the Maker the sum of $___________; such loan being evidenced by a non-recourse secured promissory note (the "Note") in the principal amount of $__________ made by the Maker in favor of the Company; and WHEREAS, the loan to the Maker is to be secured by a pledge by the Maker to the Company of the Shares and the other Collateral referenced herein; and WHEREAS, the parties hereto desire to set forth the terms of and to evidence the Maker's grant to the Company of a security interest in the Collateral. NOW, THEREFORE, in consideration of the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Maker hereby agrees with the Company as follows: Section 1. Definitions. The following terms, when used in this Agreement, shall have the following meanings (such definitions to be equally applicable to the singular and plural forms thereof): "Default" means the failure to make any payment of principal of or interest on, or any other amounts due under, the Note when due, whether at maturity, upon acceleration or otherwise. "Distributions" means all stock dividends, liquidating dividends, shares of stock resulting from stock splits, reclassifications, warrants, options, non-cash dividends and other distributions on or with respect to the Shares, whether similar or dissimilar to the foregoing, but shall not include Dividends. "Dividends" means regular dividends declared with respect to the Shares. "Liabilities" means the Note, and all amounts becoming due thereunder, and all other payment obligations of the Maker hereunder or thereunder or any instrument executed pursuant hereto or thereto. Section 2. Grant of Security Interest. As security for payment of all Liabilities, the Maker hereby pledges, assigns and transfers to the Company, and grants to the Company a continuing security interest in and to, the Shares, together with all Dividends and Distributions, interest and other payments and rights with respect thereto, together with all proceeds thereof (collectively, the "Collateral"). The Maker further pledges, assigns and transfers to the Company, and grants to the Company a continuing security interest in and to, and agrees to duly endorse to the order of the Company, any additional Collateral, together will all proceeds thereof, delivered by the Maker to the Company for the purposes of pledge under this Agreement. Any Collateral delivered by the Maker to the Company may be endorsed by the Company, in its own name or in the name of the Maker, on behalf of the Maker to the order of the Company. Section 3. Stock Powers, Endorsements, Etc. The Maker shall, from time to time, upon request of the Company, promptly execute such endorsements and deliver to the Company such stock powers and similar documents, satisfactory in form and substance to the Company, with respect to the Collateral as the Company may reasonably request and shall, from time to time, upon request of the Company, promptly transfer any securities which are part of the Collateral into the name of any nominee designated by the Company on the books of the corporation or other entity issuing such securities; provided, however, that the Company shall not be entitled to effect or demand a transfer of the Collateral into the name of the Company or the Company's nominee without the consent of the Maker unless and until a Default shall have occurred. Section 4. Certain Other Agreements Regarding Collateral. The Maker shall deliver (properly endorsed where necessary) to the Company: (a) after a Default shall have occurred and be continuing, promptly upon receipt thereof by the Maker and without any request therefor by the Company, all Dividends and Distributions, and other proceeds of the Collateral, all of which shall be held by the Company as additional Collateral; and (b) at any time after a Default shall have occurred and be continuing, promptly upon request of the Company, such consents or proxies and other documents as may be necessary to allow the Company to exercise any voting power or other right with respect to any securities included in the Collateral; provided, however, that unless a Default shall have occurred and be continuing, the Maker shall be entitled: (i) to exercise, as the Maker shall deem appropriate, all voting or other powers with respect to securities pledged hereunder (including but not limited to the Shares); and (ii) to receive and retain for the Maker's own account any and all Dividends paid in cash. Section 5. Actions Upon Default. Whenever a Default shall have occurred and be continuing, the Company may exercise from time to time any and all rights and remedies available to it under applicable law, including but not limited to all rights of a secured party available to it under the Uniform Commercial Code. Without limiting the above, the Company may from time to time, whether before or after any of the Liabilities shall become due and payable, but only if a Default shall have occurred, without notice to the Maker, take any or all of the following actions: (a) transfer all or any part of the Collateral into the name of the Company or its nominee; and (b) execute (in the name, place and stead of the Maker) any or all endorsements, assignments, stock powers and other instruments of conveyance or transfer with respect to all or any of the Collateral. The Maker understands that compliance with the Federal securities laws, applicable blue sky or other state securities laws or similar laws analogous in purpose or effect may strictly limit the course of conduct of the Company if the Company were to attempt to dispose of all or any part of the Collateral and may also limit the extent to which or the manner in which any subsequent transferee of the Collateral may dispose of the same. Accordingly, the Maker agrees that IF ANY COLLATERAL IS SOLD AT ANY PUBLIC OR PRIVATE SALE, THE COMPANY MAY ELECT TO SELL ONLY TO A BUYER WHO WILL GIVE FURTHER ASSURANCES, SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY, RESPECTING COMPLIANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY AND ALL APPLICABLE STATE SECURITIES LAWS; AND A SALE SUBJECT TO SUCH CONDITION SHALL BE DEEMED COMMERCIALLY REASONABLE. The Company shall have the right to bid upon or purchase the Shares, or any other part of the Collateral, or all of the foregoing, at any such sale, less any and all amounts owing to the Company by the Maker under the Note, this Agreement or otherwise, and that any such purchase is commercially reasonable. Section 6. Application of Moneys. Any moneys received by the Company upon payment to it of any Collateral held by it or as proceeds of any of the Collateral may be applied by the Company first to the payment of any expenses incurred by it in connection with the Collateral, including, without limitation, reasonable attorneys' fees and legal expenses, and all other amounts payable to the Company by the Maker, and any balance of such moneys so received by the Company may be applied to all Liabilities of the Maker (including, without limitation, the principal amount of the Note outstanding whether or not such principal amount is at that time due and payable) in such order of application as the Company in its sole discretion may determine. Any amounts remaining after payment of the Liabilities may be applied by the Company to the payment of any and all other amounts owing, whether or not then due, to the Company from the Maker and any remaining balance thereafter shall be paid to the Maker. Section 7. Release of Collateral. Upon the indefeasible payment in full of the Liabilities, the Company shall, upon the request of the Maker, promptly reassign and redeliver to the Maker the Collateral which has not been sold, disposed of, retained or applied by the Company in accordance with the terms hereof, together with such endorsements, stock powers and similar documents as the Maker may reasonably request. Such reassignment and redelivery shall be without warranty by or recourse to the Company, except as to the absence of any prior assignments by the Company of its interest in the Collateral. In the event that the Maker proposes to sell, transfer or otherwise dispose of all or a portion of the Shares, upon the request of the Maker, the Company shall release from its security interest the Shares to be sold by the Maker and, at the sole expense of the Maker, shall deliver such Shares as directed by the Maker, free and clear of any security interest hereunder, subject to repayment of a portion of the Obligations as provided in the Note. Section 8. Non-Recourse Nature of Liabilities. The Company's sole recourse for the payment of the Liabilities shall be limited to the Collateral securing the Note. THE COMPANY SHALL NOT HAVE THE RIGHT TO ENFORCE THE LIABILITIES AGAINST THE MAKER, HIS HEIRS, ASSIGNS AND LEGAL REPRESENTATIVES OR ANY OF THE OTHER ASSETS OR PROPERTY OF ANY OF THE FOREGOING. Section 9. Miscellaneous. (a) To the fullest extent permitted by applicable law, this Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any amount received by the Company in respect of the Liabilities is rescinded or must otherwise be restored or returned by the Company upon the insolvency or bankruptcy of the Maker or upon the appointment of any receiver, intervenor, conservator, trustee or similar official for the Maker or any substantial part of his assets, or otherwise, all as though such payments had not been made. (b) No remedy herein conferred is intended to be exclusive of any other remedy herein conferred or otherwise available to the Company, but every such remedy shall be cumulative and in addition to every other remedy herein conferred, or conferred on the Company by any other agreement or instrument or now or hereafter existing at law, in equity or by statute. (c) Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction, shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. (d) Except as otherwise expressly provided herein, no term or provision of this Agreement may be amended, waived, discharged or terminated orally, but only by an instrument in writing signed by the parties. (e) THIS AGREEMENT AND ALL RIGHTS HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW JERSEY WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PROVISIONS THEREOF. THE MAKER HEREBY CONSENTS AND SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS LOCATED IN THE STATE OF NEW JERSEY HAVING SUBJECT MATTER JURISDICTION IN CONNECTION WITH ANY AND ALL DISPUTES ARISING OUT OF OR IN CONNECTION WITH THIS Agreement, THE NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. FURTHER, THE MAKER HEREBY CONSENTS AND AGREES THAT SERVICE OF PROCESS BY THE COMPANY, OR ANY PARTY ACTING ON BEHALF OF THE COMPANY, SHALL BE DEEMED VALIDLY AND PROPERLY EFFECTED AGAINST THE MAKER UPON THE MAILING OF A COPY OF SUCH PROCESS BY CERTIFIED MAIL, POSTAGE PREPAID, TO THE MAKER AT HIS ADDRESS AS IT APPEARS IN THE PERSONNEL RECORDS OF THE COMPANY. (f) No course of dealing and no delay on the part of any party hereto in exercising any right, power, or remedy conferred by this Agreement shall operate as a waiver thereof or otherwise prejudice such party's rights, powers and remedies hereunder or in connection herewith. No single or partial exercise of any power or remedy conferred by this Agreement shall preclude any other or further exercise thereof or the exercise of any other right, power or remedy. (g) This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors, assigns and legal representatives. (h) This Agreement constitutes the entire agreement among the parties with respect to the matters covered hereby and supersedes all previous written, oral or implied agreements and understandings among the parties with respect to such matters. (i) All notices or other communications required or permitted hereunder shall be in writing and shall be delivered personally, by facsimile or sent by certified, registered or express air mail, postage prepaid, and shall be deemed given which so delivered personally, or by facsimile, or if mailed, five days after the date of mailing, (i) if to the Maker at his address as it appears in the records of the Company, and (ii) if to the Company at the address set forth below: 30 Technology Drive Warren, New Jersey 07059, Telephone: (908) 222-9100 Facsimile: (908) 222-1556 Attention: Secretary or at such other addresses as shall be furnished in writing to the other party hereto. (j) The headings in this Agreement are for reference purposes only, and shall not in any way affect the meaning or interpretation (k) This Agreement may be executed in one or more counterparts, each of which shall be deemed an original agreement, but all of which together shall constitute one and the same instrument. [Remainder of page intentionally left blank] IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first written above. Witness: _____________________________ ___________________________ Name: Name: BARRINGER TECHNOLOGIES INC. By: _________________________ Name: Title: EX-10 8 NON RECOURSE SECURED PROMISSORY NOTE EXHIBIT 10.22 NON-RECOURSE SECURED PROMISSORY NOTE FOR VALUE RECEIVED, _______________ (the "Maker") hereby promises to pay to the order of Barringer Technologies Inc. (the "Company"), at its offices at 30 Technology Drive, Warren, New Jersey, or at such other location as the Company may designate from time to time, the sum of $______________, in lawful money of the United States of America on _______________ (the "Maturity Date"), together with interest thereon, compounded annually, at a rate of ___% per annum. Interest shall be calculated on the basis of a 365-day year for the actual number of days elapsed. If the date any amount is due hereunder is not a Business Day, then such amount shall be due and payable on the Business Day next succeeding the original payment date, together with interest thereon to the date of payment. As used herein, "Business Day" means any day, other than a Saturday or Sunday or other day on which commercial banks in New Jersey are open for the general transaction of business. If the Maker fails to pay any amount hereunder when due, whether on the Maturity Date, upon acceleration or otherwise, and such failure continues for a period of five (5) days or more, interest shall thereafter accrue on any overdue amounts at a rate of ___% per annum until paid in full. In such event, the Maker also shall pay to the Company the reasonable attorneys' fees and disbursements and all other out-of-pocket costs incurred by the Company in order to collect amounts due and owing under this Note or otherwise to enforce the Company's rights and remedies hereunder. The Maker may prepay this Note at any time, in whole or in part, without premium or penalty. Any partial prepayments shall be applied first to accrued interest and second to the payment of principal. In the event that the Maker sells, transfers or otherwise disposes of some or all of the Shares (as defined in the Pledge Agreement referred to below), whether on or prior to the Maturity Date, the Maker shall promptly apply all or a portion of the net proceeds, if any, received by the Maker from such disposition to repay this Note in an amount equal to the lesser of (i) the net proceeds received from such disposition, or (ii) the product obtained by multiplying the aggregate principal and interest outstanding hereunder on the date of such disposition by a fraction, the numerator of which is the number of Shares disposed of in such disposition and the denominator of which is the total number of Shares purchased by the Maker in the transaction giving rise to this Note appropriately adjusted for any subsequent stock splits, stock dividends, reclassifications or other similar changes in the outstanding shares of the Company's common stock, par value $.01 per share (the "Common Stock"). This Note shall mature and all amounts due hereunder shall become immediately due and payable, without demand and without notice to the Maker, in the event that (a) the Maker sells, transfers or otherwise disposes of all Shares then owned by him, (b) the Maker's employment is terminated by the Company pursuant to a Termination for Cause (as defined below), (c) the Maker (i) becomes insolvent, (ii) makes an assignment for the benefit of his creditors generally, or (iii) files a petition seeking protection under the United States Bankruptcy Code or seeking the appointment of a receiver, trustee or custodian for the Maker or a substantial portion of his assets, or (d) any other person or entity (i) files an involuntary petition under the United States Bankruptcy Code with respect to the Maker, or (ii) commences an action seeking the appointment of a receiver, trustee or custodian for the Maker or a substantial portion of his assets, and such petition or action remains undismissed and unstayed for more than sixty (60) consecutive days. As used herein, "Termination for Cause" shall have the same meaning ascribed to such term (or any analogous term) in any employment agreement in effect between the Maker and the Company as of the date of this Note; provided, however, that if the Maker is not a party to any employment agreement with the Company as of the date hereof, "Termination for Cause" shall mean, to the maximum extent permitted by applicable law, a termination of the Maker's employment by the Company because the Maker has (a) materially breached or materially failed to perform his duties under applicable law and such breach or failure to perform causes material damage to the Company or constitutes self-dealing or willful misconduct, (b) intentionally committed an act of dishonesty in the performance of his duties that either constitutes self-dealing, willful misconduct, a breach of duty to the Company or a violation of applicable law, (c) engaged in conduct detrimental to the business of the Company which causes material damage to the Company, (d) been convicted of a felony, (e) been convicted of a misdemeanor involving moral turpitude, (f) materially breached or materially failed to perform his obligations and duties to the Company, which breach or failure the Maker shall fail to remedy within 30 days after written demand from the Company, (g) repeatedly refused to follow lawful and reasonable directions from the Board of Directors of the Company or the Chief Maker Officer of the Company commensurate with the Maker's office and responsibilities, which refusal is material to the performance of the Maker's duties or (h) violated in any material respect any confidentiality, non-competition or other agreement with the Company. In the event that the Maker's employment is terminated for any reason other than by the Company as a result of a Termination for Cause, this Note shall mature and become due and payable on the earlier of (i) the Maturity Date and (ii) the second anniversary of the effective date of such termination. The Maker shall have the right to repay the amounts due hereunder, in whole but not in part, by surrendering the Shares to the Company. The Maker shall effect such surrender by notifying the Company in writing that the Maker irrevocably elects to surrender the Shares to the Company as provided herein, which election shall be accompanied by stock powers endorsed in blank or other transfer documents in proper form to effect the transfer of the Shares to the Company or its nominee with all signatures guaranteed and a certification by the Maker that the Shares are owned by the Maker free and clear of any lien, claim, encumbrance or adverse claim whatsoever, other than as created pursuant to the Pledge Agreement referred to below. Upon receipt of such election and the other documentation described above, the Company shall have the right to transfer the Shares to itself or its nominee, free and clear of any claim or interest of the Maker. In the event that the Maker surrenders Shares to the Company having an aggregate Fair Market Value (as defined below) in excess of the amounts due and owing hereunder, the Company shall pay to the Maker the amount of such excess in cash, without interest, on or prior to the close of business on the third Business Day after such surrender. For purposes hereof, each Share shall have a "Fair Market Value" equal to the last reported sale price for the Common Stock as reported on the Nasdaq National Market or any national securities exchange on which the Common Stock is then traded on the trading day immediately preceding the date on which the Shares are surrendered to the Company. In the event that the Common Stock is not then included on the Nasdaq National Market or traded on a national securities exchange, the "Fair Market Value" of a share of Common Stock shall mutually agreed to in good faith by the Board of Directors of the Company (or its designee) and the Maker. This Note is the Note referred to in the Pledge Agreement, dated the date hereof, between the Maker and the Company and is secured by the Shares and the other Collateral described therein. The Pledge Agreement grants the Company certain rights with respect to the Collateral upon certain defaults specified therein. The Company's sole recourse for the payment of amounts due under this Note shall be limited to the Collateral securing this Note. . THE COMPANY SHALL NOT HAVE THE RIGHT TO ENFORCE THIS NOTE AGAINST THE MAKER, HIS HEIRS, ASSIGNS AND LEGAL REPRESENTATIVES OR ANY OF THE OTHER ASSETS OR PROPERTY OF ANY OF THE FOREGOING. No delay on the part of the holder of this Note in exercising any power or right hereunder shall operate as a waiver of any such power or right; nor shall any single or partial exercise of any power or right preclude any other or further exercise of such power or right, or the exercise of any other power or right, and no waiver whatsoever shall be valid unless in writing, signed by the holder of this Note, and then only to the extent expressly set forth therein. The Maker waives presentment, demand for payment, diligence, notice of dishonor and all other notices or demands in connection with the delivery, acceptance, performance, default or indorsement of this Note. This Note shall be governed by, and construed in accordance with, the laws of the State of New Jersey, without reference to the choice of law provisions thereof. The Maker hereby consents and submits to the exclusive jurisdiction of the federal and state courts located in the State of New Jersey having subject matter jurisdiction in connection with any and all disputes arising out of or in connection with this Note. The Maker hereby consents and agrees that service of process by the Company shall be deemed validly and properly effected against the Maker upon the mailing of a copy of such process by certified mail, postage prepaid, to the Maker at his address as it appears in the personnel records of the Company. [Remainder of page intentionally left blank] Witness: ______________________ _____________________ Name: Name: Dated: EX-10 9 NON-RECOURSE SECURED PROMISSORY NOTE EXHIBIT 10.23 NON-RECOURSE SECURED PROMISSORY NOTE FOR VALUE RECEIVED, _______________ (the "Maker") hereby promises to pay to the order of Barringer Technologies Inc. (the "Company"), at its offices at 30 Technology Drive, Warren, New Jersey, or at such other location as the Company may designate from time to time, the sum of $______________, in lawful money of the United States of America on _________ (the "Maturity Date"), together with interest thereon, compounded annually, at a rate of ______% per annum. Interest shall be calculated on the basis of a 365-day year for the actual number of days elapsed. If the date any amount is due hereunder is not a Business Day, then such amount shall be due and payable on the Business Day next succeeding the original payment date, together with interest thereon to the date of payment. As used herein, "Business Day" means any day, other than a Saturday or Sunday or other day on which commercial banks in New Jersey are open for the general transaction of business. If the Maker fails to pay any amount hereunder when due, whether on the Maturity Date, upon acceleration or otherwise, and such failure continues for a period of five (5) days or more, interest shall thereafter accrue on any overdue amounts at a rate of ____% per annum until paid in full. In such event, the Maker also shall pay to the Company the reasonable attorneys' fees and disbursements and all other out-of-pocket costs incurred by the Company in order to collect amounts due and owing under this Note or otherwise to enforce the Company's rights and remedies hereunder. The Maker may prepay this Note at any time, in whole or in part, without premium or penalty. Any partial prepayments shall be applied first to accrued interest and second to the payment of principal. In the event that the Maker sells, transfers or otherwise disposes of some or all of the Shares (as defined in the Pledge Agreement referred to below), whether on or prior to the Maturity Date, the Maker shall promptly apply all or a portion of the net proceeds, if any, received by the Maker from such disposition to repay this Note in an amount equal to the lesser of (i) the net proceeds received from such disposition, or (ii) the product obtained by multiplying the aggregate principal and interest outstanding hereunder on the date of such disposition by a fraction, the numerator of which is the number of Shares disposed of in such disposition and the denominator of which is the total number of Shares purchased by the Maker in the transaction giving rise to this Note appropriately adjusted for any subsequent stock splits, stock dividends, reclassifications or other similar changes in the outstanding shares of the Company's common stock, par value $.01 per share (the "Common Stock"). This Note shall mature and all amounts due hereunder shall become immediately due and payable, without demand and without notice to the Maker, in the event that (a) the Maker sells, transfers or otherwise disposes of all Shares then owned by him, (b) the Maker (i) becomes insolvent, (ii) makes an assignment for the benefit of his creditors generally, or (iii) files a petition seeking protection under the United States Bankruptcy Code or seeking the appointment of a receiver, trustee or custodian for the Maker or a substantial portion of his assets, or (d) any other person or entity (i) files an involuntary petition under the United States Bankruptcy Code with respect to the Maker, or (ii) commences an action seeking the appointment of a receiver, trustee or custodian for the Maker or a substantial portion of his assets, and such petition or action remains undismissed and unstayed for more than sixty (60) consecutive days. In the event that the Maker ceases for any reason to be a member of the Board of Directors of the Company, this Note shall mature and become due and payable on the earlier of (i) the Maturity Date and (ii) the second anniversary of the effective date of such cessation. The Maker shall have the right to repay the amounts due hereunder, in whole but not in part, by surrendering the Shares to the Company. The Maker shall effect such surrender by notifying the Company in writing that the Maker irrevocably elects to surrender the Shares to the Company as provided herein, which election shall be accompanied by stock powers endorsed in blank or other transfer documents in proper form to effect the transfer of the Shares to the Company or its nominee with all signatures guaranteed and a certification by the Maker that the Shares are owned by the Maker free and clear of any lien, claim, encumbrance or adverse claim whatsoever, other than as created pursuant to the Pledge Agreement referred to below. Upon receipt of such election and the other documentation described above, the Company shall have the right to transfer the Shares to itself or its nominee, free and clear of any claim or interest of the Maker. In the event that the Maker surrenders Shares to the Company having an aggregate Fair Market Value (as defined below) in excess of the amounts due and owing hereunder, the Company shall pay to the Maker the amount of such excess in cash, without interest, on or prior to the close of business on the third Business Day after such surrender. For purposes hereof, each Share shall have a "Fair Market Value" equal to the last reported sale price for the Common Stock as reported on the Nasdaq National Market or any national securities exchange on which the Common Stock is then traded on the trading day immediately preceding the date on which the Shares are surrendered to the Company. In the event that the Common Stock is not then included on the Nasdaq National Market or traded on a national securities exchange, the "Fair Market Value" of a share of Common Stock shall mutually agreed to in good faith by the Board of Directors of the Company (or its designee) and the Maker. This Note is the Note referred to in the Pledge Agreement, dated the date hereof, between the Maker and the Company and is secured by the Shares and the other Collateral described therein. The Pledge Agreement grants the Company certain rights with respect to the Collateral upon certain defaults specified therein. The Company's sole recourse for the payment of amounts due under this Note shall be limited to the Collateral securing this Note. . THE COMPANY SHALL NOT HAVE THE RIGHT TO ENFORCE THIS NOTE AGAINST THE MAKER, HIS HEIRS, ASSIGNS AND LEGAL REPRESENTATIVES OR ANY OF THE OTHER ASSETS OR PROPERTY OF ANY OF THE FOREGOING. No delay on the part of the holder of this Note in exercising any power or right hereunder shall operate as a waiver of any such power or right; nor shall any single or partial exercise of any power or right preclude any other or further exercise of such power or right, or the exercise of any other power or right, and no waiver whatsoever shall be valid unless in writing, signed by the holder of this Note, and then only to the extent expressly set forth therein. The Maker waives presentment, demand for payment, diligence, notice of dishonor and all other notices or demands in connection with the delivery, acceptance, performance, default or indorsement of this Note. This Note shall be governed by, and construed in accordance with, the laws of the State of New Jersey, without reference to the choice of law provisions thereof. The Maker hereby consents and submits to the exclusive jurisdiction of the federal and state courts located in the State of New Jersey having subject matter jurisdiction in connection with any and all disputes arising out of or in connection with this Note. The Maker hereby consents and agrees that service of process by the Company shall be deemed validly and properly effected against the Maker upon the mailing of a copy of such process by certified mail, postage prepaid, to the Maker at his address as it appears in the personnel records of the Company. [Remainder of page intentionally left blank] Witness: ______________________ _____________________ Name: Name: Dated: EX-21 10 LIST OF SUBSIDIARIES EXHIBIT 21.1 BARRINGER TECHNOLOGIES, INC. LIST OF SUBSIDIARIES NAME JURISDICTION OF INCORPORATION Barringer Instruments Inc. Delaware Barringer Consumer Products, LLC New Jersey Barringer Research Ltd. Ontario, Canada Barringer Europe, SARL France Barringer Instruments UK, Ltd. United Kingdom Barringer Instruments, Ltd. Ontario, Canada DigiVision, Inc. California EX-23 11 CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23.1 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Barringer Technologies Inc. Warren, New Jersey We hereby consent to the incorporation by reference in Registration Statements Nos. 33-78888 and 333-11629 of Barringer Technologies Inc. on Forms S-3 and Registration Statements Nos. 333-25573 and 333-35133 of Barringer Technologies Inc. on Forms S-8, of our report dated February 24, 1999, relating to the consolidated financial statements and schedule of Barringer Technologies Inc. appearing in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. BDO SEIDMAN, LLP Woodbridge, New Jersey March 30, 1999 EX-27 12 FDS --
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BARRINGER TECHNOLOGIES INC.'S FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000010119 BARRINGER TECHNOLOGIES INC. 1000 US 12-MOS DEC-31-1998 DEC-31-1998 1 18,802 15,606 7,128 626 3,943 49,056 4,232 1,883 52,644 3,359 0 0 92 79 48,969 52,644 20,458 20,458 7,954 7,954 9,373 0 9 3,122 (1,309) 4,431 0 0 0 4,431 0.62 0.58
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