FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-14617
RHEOMETRIC SCIENTIFIC, INC.
(Exact name of registrant as specified in its charter)
New Jersey 61-070841
________________________________ ___________________________
(State or other jurisdiction of (I.R.S. Employer Identi-
incorporation or organization) fication Number)
One Possumtown Road, Piscataway, NJ 08854
_________________________________________ _____________
(Address of principal executive offices) (Zip Code)
(908) 560-8550
____________________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (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
_____ _____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at August 1, 1995
__________________________ ______________________________
Common Stock, no par value 13,161,739
RHEOMETRIC SCIENTIFIC, INC.
FORM 10-Q
INDEX
Page
PART I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
June 30, 1995 and December 31, 1994 3
Condensed Consolidated Statements of Operations
Three and Six Months Ended June 30,
1995 and 1994 4
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 1995 and 1994 5
Notes to Condensed Consolidated Financial
Statements 6-8
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition
Results of Operations 8-9
Liquidity and Capital Resources 10-12
PART II - Other Information
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 12
RHEOMETRIC SCIENTIFIC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) (Unaudited) (Audited)
June December
ASSETS 30, 1995 31, 1994
Current Assets
Cash $ 763 $ 747
Net receivables 13,250 10,106
Net inventories
Finished goods 2,554 2,952
Work in process 1,474 2,247
Assembled Components, materials,and parts 7,017 4,607
_______ _______
11,045 9,806
Prepaid expenses and other assets 1,202 687
________ ________
Total current assets 26,260 21,346
_______ _______
Property, Plant, and Equipment 21,339 21,311
Less accumulated depreciation and
amortization 11,145 10,827
_______ _______
Net property, plant, and equipment 10,194 10,484
Goodwill and other intangible assets 3,658 2,283
Other Assets 1,274 997
_______ _______
Total Assets $41,386 $35,110
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term bank borrowings $ 6,983 $ 6,429
Current maturities of long-term debt 499 595
Short-term debt - affiliate 6,115 --
Accounts payable 4,175 3,648
Restructuring reserve -- 132
Payable to affiliate 225 150
Accrued liabilities 4,412 4,200
Other current liabilities 300 --
_______ _______
Total current liabilities 22,709 15,154
Long-term debt 5,523 5,688
Long-term debt - affiliate -- 3,715
Other Non-Current Liabilities 1,438 0
_______ _______
Total liabilities 29,670 24,557
Shareholders' Equity
Common stock, stated value of $.001,
authorized 20,000 shares; issued and 13 13
outstanding 13,162 shares
Additional paid-in capital 24,759 24,759
Accumulated deficit (13,473) (14,262)
Cumulative translation adjustment 417 43
_______ _______
Total shareholders' equity 11,716 10,553
_______ _______
$41,386 $35,110
======= =======
See Notes to Condensed Consolidated Financial Statements.
RHEOMETRIC SCIENTIFIC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
Sales $11,875 $10,160 $20,476 $16,898
Cost of sales 6,037 5,324 10,617 8,863
Gross profit 5,838 4,836 9,859 8,035
General and administrative
expenses 915 860 1,743 1,523
Marketing and selling expenses 2,442 2,713 4,932 4,670
Research and development
expenses 720 704 1,474 1,306
Goodwill and intangible
amortization 163 92 325 122
Total Operating Expenses 4,240 4,369 8,474 7,621
Operating income 1,598 467 1,385 414
Interest (expense) - Banks (261) (285) (534) (562)
Interest (expense) - Affiliate (141) (157) (287) (207)
Interest income 15 2 16 3
Foreign currency gain 30 246 265 460
_______ ________ _______ ________
Income before income taxes 1,241 273 845 108
Income tax expense (50) (319) (57) (319)
_______ ________ _______ ________
Net income (loss) $ 1,191 $ (46) $ 788 $(211)
======= ======== ======= ========
Net income (loss) per share $ 0.09 $(0.003) $ 0.06 $(0.019)
======= ======== ======= ========
Average number of shares 13,162 13,162 13,162 11,363
outstanding ======= ======== ======= ========
See Notes to Consolidated Financial Statements.
RHEOMETRIC SCIENTIFIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited) Six Months Ended
June 30,
1995 1994
Cash Flows from Operating Activities:
Net income (loss) $ 788 $ (211)
Adjustments to reconcile net income (loss)
to net cash (used in) provided by
operating activities:
Depreciation and amortization of plant and
equipment 480 446
Amortization of goodwill and intangibles 325 122
Provision for slow moving inventory 146 --
Loss on sale/retirement of property, plant
and equipment 89 (9)
Unrealized currency gain (183) (571)
Changes in assets and liabilities:
Receivables (2,288) (1,002)
Inventories (988) 193
Prepaid expenses and other current
assets (351) --
Accounts payable and accrued
liabilities 409 183
Income tax payable 25 --
Other assets (273) (6)
Other Non-Current Liabilities 30 --
Net cash used in operating activities (1,851) (855)
Cash Flows from Investing Activities:
Purchases of property, plant, and
equipment (215) (22)
Net cash used in investing activities (215) (22)
Cash Flows from Financing Activities:
Net borrowings (repayments) under line of
credit agreements (41) 414
Repayment of long-term debt (166) (323)
Proceeds from short-term debt - affiliate 2,400 500
Proceeds from long-term debt - affiliate -- 375
Net cash provided by financing activities 2,193 966
Effect of exchange rate changes on cash (111) 126
Net increase in cash 16 215
Cash at beginning of period 747 401
Cash at end of period $ 763 $ 616
===== ======
Cash payments for interest $ 689 $ 709
===== =====
Cash payments for income taxes $ 29 $ --
===== =====
See Notes to Condensed Consolidated Financial Statements.
RHEOMETRIC SCIENTIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting Policies
The information included in the foregoing interim financial state-
ments is unaudited. In the opinion of management, all adjustments,
consisting of normal recurring accruals, necessary for a fair
presentation of financial position and results of operations for the
interim periods presented have been reflected herein. The results
of operations for the interim periods are not necessarily indicative
of the results to be expected for the entire year. Prior year
results have been restated to reflect the results of the Polymer
Laboratories Thermal Sciences Business ("PL Thermal Sciences
Business") acquired as of March 3, 1994 (see Note 3).
2. Liquidity
Management believes that the cash generated from operations, funds
available under the lines of credit, and funds received from Axess's
investments, should be sufficient to meet the Company's working
capital needs for the remainder of the fiscal year. Adequacy of
cash flows generated beyond 1995 will depend upon continued
relationships with banks or other lenders and the Company's ability
to achieve expected sales volumes to support profitable operations.
3. Acquisition
On November 10, 1994, at the Annual Meeting of Shareholders, the
shareholders approved the issuance by Rheometrics of 4,226,348
shares of Rheometrics Common Stock to Axess in exchange for the
contribution by Axess of all the outstanding capital stock of two
wholly-owned subsidiaries of Axess, ATS US and ATS UK. Shareholders
also approved the issuance of 1,023,652 shares of Rheometrics Common
Stock to Axess in connection with the exercise by Axess of the
convertible note of Rheometrics (the "Convertible Note") in the
principal amount of $1,339,000. These transactions represent the
transfer by Axess to Rheometrics of all of the PL Thermal Sciences
Business previously acquired by Axess.
The acquisition of the PL Thermal Sciences Business by Axess was
accounted for as a purchase for accounting and financial reporting
purposes and the subsequent acquisition of the PL Thermal Sciences
Business by Rheometrics was accounted for as a transfer and exchange
between companies under common control in a manner similar to a
pooling of interests. The Company's consolidated financial
statements reflect the assets and the liabilities so transferred at
historical cost (representing Axess's cost of the PL Thermal
Sciences Business). The transfer from Axess to Rheometrics
indicated above principally consisted of accounts receivable of
$2,576,000, inventory of $3,159,000, certain other assets of
$495,000, certain accounts payable and other liabilities of
$1,676,000 and goodwill of $2,592,000. The Company's consolidated
financial statements reflect the acquisition from March 3, 1994,
since at that date both the Company and the PL Thermal Sciences
Business were under the common control of Axess.
4. Mettler-Toledo Agreement
On January 1, 1995, the Company acquired from Mettler-Toledo AG
("Mettler") the exclusive, worldwide rights for two rheological test
instruments, the RM180 and RM260, that serve the coatings, paints,
biological fluids, cosmetics, and lubricants industries.
The Company will pay Mettler for manufacturing the products plus a
10% royalty payment on sales. After the Company assumes
manufacturing, Mettler will receive quarterly royalty payments based
upon a percentage of sales or a minimum payment formula.
The Company established the liability by discounting the expected
payments at the Company's incremental borrowing rates. An
intangible asset was established and is being amortized over the six-
year life of the agreement on a straight-line basis
6. Income (loss) Per Share
Income (loss) per share is computed based on the weighted average
number of common shares outstanding during each period. The
earnings (loss) per share calculation does not include shares
reserved for stock options and convertible securities since the
effects are immaterial or antidilutive.
7. Long-term Debt and Short-term Borrowings
Long-term debt consists June 30, December 31,
of the following: 1995 1994
Mortgage loans payable through $ 6,020,000 $ 6,185,000
November 1997, with interest at
prime plus 1/2% (9.5% at June 30,
1995 and 9.0% at December 31, 1994)
and fixed interest at 9.6%
Obligations under capital leases, 2,000 98,000
with interest imputed at a
weighted-average rate of 12% __________ _________
6,022,000 6,283,000
Less current maturities 499,000 595,000
__________ __________
$ 5,523,000 $ 5,688,000
========== ==========
The Company has working capital lines of credit with certain
domestic and foreign banks aggregating $7,603,000 of which
approximately $620,000 was available at June 30, 1995.
Borrowings at June 30, 1995 amounted to $3,420,000 with
domestic banks and $3,563,000 with foreign banks. Interest on
the domestic lines of credit at June 30, 1995 is 10%, 9.5% at
December 31, 1994. Interest rates on the foreign lines of
credit range between 2.6% to 11.5% as of June 30, 1995 and
between 3.875% to 11.5% at December 31, 1994. The long-term
and short-term borrowings with domestic banks are cross-
collateralized by the Company's assets. The borrowings with
foreign banks are partially collateralized by letters of credit
issued by a domestic bank ($2,400,000) and a lease deposit held
by a foreign bank. Under the terms of the letters of credit,
the Company must maintain a cash collateral account on behalf
of the domestic bank. As of June 30, 1995, this restricted
cash was approximately $992,000 and is included in prepaid
expenses and other current assets.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Sales for the three and six months ended June 30, 1995 increased
$1,716,000 and $3,578,000 (or 16.9% and 21.2%), respectively, as
compared to the corresponding periods in 1994. The growth in
revenues for the six-month period resulted from increases of:
$1,100,000, $1,299,000 and $1,179,000 in the Americas, Europe and
the Far East respectively. The growth in revenues for the three-
month period represents an increase in Far East and European sales
of $1,811,000 and $295,000, respectively. This increase was
offset by a decline in the Americas of $390,000. For the six-
month period total international sales of $14,054,000 represented
69% of total sales compared to 1994's international sales of
$11,575,000 which also amounted to 69% of total sales. For the
second quarter international sales equaled $9,074,000 or 76% of
total sales compared to last year's second quarter sales of
$6,969,000 or 69%. For both the three and six-month periods sales
were favorably impacted by foreign currency trends. In addition,
the six-month period benefited from a full two quarters of the PL
Thermal Sciences Business as well as the recently acquired Mettler
instruments.
The gross profit percentages for the three and six-months ended
June 30, 1995 were 49.2% and 48.1%, respectively. This compares
to 47.6% and 47.6% for the same periods in the prior year. The
increase in gross profit percentage can be attributed to product
mix and favorable foreign currency trends as well as on-going cost
containment programs.
Operating expenses for the three and six-months ended June 30,
1995 were down $385,000 and up $531,000 compared to the
corresponding periods in the prior year. For both the three and
six-month periods operating expenses were adversely affected by
foreign currency trends, which accounted for approximately
$440,000 of the six-month increase. In addition, operating
expenses were also impacted in the six-month period by two full
quarters of the PL Thermal Sciences Business as opposed to
approximately four months in the prior year.
Net interest expense for the three and six-months ended June 30,
1995 decreased by $53,000 and increased by $39,000 compared to the
corresponding periods in the prior year. The changes can be
attributed to the average debt balances outstanding during the
respective periods as interest rates remained relatively stable.
The foreign currency gains for the three and six-months ended June
30, 1995 were $30,000 and $265,000, respectively. The gains were
primarily due to unrealized translation gains resulting from the
French Franc, German Mark, Japanese Yen and British Pound against
the U.S. Dollar, which were offset by an unrealized loss in Swiss
Francs resulting from the Mettler agreement. The foreign currency
gains for the three and six-months ended June 30, 1994 of
$246,000 and $460,000, respectively was due to unrealized
translation gains resulting from the French Franc, German Mark and
Japanese Yen against the U.S. Dollar.
Inherent in the Company's business is the potential for inventory
obsolescence for older products as the Company develops new
products. Obsolescence has historically related to parts
inventory. The Company continuously monitors its exposure
relating to excess and obsolete inventory and establishes
appropriate valuation reserves. The Company's development efforts
generally enhance existing products or relate to new markets for
existing technology and, therefore, existing products are
generally not rendered obsolete.
The Financial Accounting Standards Board issued Statement of
Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
("FAS 121") in March 1995. FAS 121 requires companies to review
its long-lived assets and certain identifiable intangibles
(collectively, "Long-Lived Assets") for impairment whenever events
or changes in circumstances indicate that the carrying value of a
Long-Lived asset may not be recoverable. Impairment is measured
using the lower of a Long-Lived Asset's book value or fair value,
as defined. Management believes that the future adoption of FAS
121 will not have a material impact on the Company's financial
position or results of operations.
Liquidity and Capital Resources
Management believes that cash generated from operations, funds
available under lines of credit, and funds received from Axess's
investments, should be sufficient to meet the Company's working
capital needs for the remainder of the fiscal year. Adequacy of
cash flows beyond 1995 will depend upon continued relationships
with banks and other lenders and the Company's ability to achieve
expected sales volumes to support profitable operations.
Cash Flows from Operations. Net cash used in operating
activities during the six-months ended June 30, 1995 was
$1,608,000, an increase of $753,000 over the same period last
year. Net income for the six-months ended June 30, 1995 was
$788,000 compared to a loss of $211,000 during the same period
last year. However, during the first half accounts receivable
increased by $2,288,000 which can be attributed to second quarter
1995 sales which were $2,800,000 higher than fourth quarter 1994
sales. In addition, inventories increased by $988,000 during the
first half in order to meet both the higher sales volume during
the first half and forecasted demand during the balance of 1995.
Management continuously monitors inventory levels on a world-wide
basis in order to insure that excess inventory is kept to a
minimum.
Cash Flows From Investing. Net cash used in investing activities
during the six-months ended June 30, 1995 was $215,000 as compared
to $22,000 during the same period in 1994. The majority of the
expenditure relates to lease-hold improvements made during the
relocation of the Company's Japanese sales office subsidiary.
Cash Flows From Financing. Net cash provided by financing
activities during the six-month period ended June 30, 1995 was
$2,193,000 as compared to $966,000 during the same period in the
prior year. As further described in the following paragraph Axess
extended the Company additional working capital of $2,400,000
during the second quarter.
On April 13, 1995, Axess agreed that it would provide $2,400,000
in additional working capital to the Company in the form of
subordinated debt. The subordinated debt will mature on April 30,
1996 and will bear interest at 12% payable monthly. In addition,
Axess agreed that it would extend the maturities on all debt
obligations ($3,715,000 at March 31, 1995) of the Company to Axess
until April 30, 1996, the interest of which would also be subject
to deferral. On April 13, 1995 Axess also agreed to defer interest
payments on all debt obligations (including the $2,400,000)
through September 30, 1995. On April 17, 1995, Axess funded the
$2,400,000 to the Company as subordinated debt.
On April 26, 1995, the Company and the domestic banks revised and
extended the existing line of credit agreements to April 30, 1996.
Under the terms of the commitment, the Company's domestic lines of
credit were extended to April 30, 1996 and will remain at
$3,720,000 until September 30, 1995, and will be reduced to
$3,545,000 on September 30, 1995, to $3,220,000 on December 31,
1995, and to $2,720,000 on March 31, 1996. Under the revised
agreements (including the mortgage loans payable), the most
restrictive financial covenants are (a) the maintenance of minimum
tangible net worth, as defined, of at least $4,753,000 as of March
31, 1995, $5,900,000 as of June 30, 1995, $5,800,000 as of
September 30, 1995 and $6,720,000 as of December 31, 1995; (b) the
maintenance of a maximum debt to tangible net worth ratio, as
defined, of 5.56 to 1 as of March 31, 1995, 4.55 to 1 as of June
30, 1995, 4.37 to 1 as of September 30, 1995 and 3.66 to 1 as of
December 31, 1995; (c) the maintenance of a current ratio, as
defined, of at least 0.98 to 1 as of March 31, 1995, 1.07 to 1 as
of June 30, 1995, 1.08 to 1 as of September 30, 1995 and 1.13 to 1
as of December 31, 1995.
On April 26, 1995, the domestic banks extended the Company's
letters of credit of approximately $2,400,000 which partially
collateralized its foreign bank borrowings to April 30, 1996.
On April 26, 1995, the Company and the domestic banks agreed to a
moratorium on the mortgage loan principal payments from April 26,
1995 to September 29, 1995 (amounting to $41,416 per month), at
which time the Company shall pay in full the deferred principal
payments. Commencing on October 1, 1995, the Company will resume
scheduled principal payments.
On August 15, 1995 the domestic banks waived a certain covenant
violations with respect to restrictive covenants as of the June
30, 1995 period. Specifically, the waived covenant violations
were: (i) the Inter-Company Accounts Receivable, whereas no
intercompany transactions with the British Subsidiaries will
result in an aggregate net account receivable due to the Borrower
in excess of $150,000. At June 30, 1995, the Company's accounts
receivable balance from the British Subsidiary amounted to
$818,000. The Inter-Company Accounts Receivable terms are
currently under negotiation; and (ii) Capital Expenditure Limit,
whereas the Company, on a consolidated basis, shall not enter or
become obligated to pay for capital expenditures during any fiscal
quarter in an amount aggregating in excess of One Hundred Twenty-
Five Thousand Dollars ($125,000). During the period ended June
30, 1995, the Company's subsidiary in Japan entered into a new
lease agreement and had leaseheld improvements of approximately
$184,000.
Also on August 15, 1995, the domestic banks extended the condition
that the Company would obtain, within sixty (60) days of signing
the Third Amendment to the Restructuring Loan and Security
Agreement dated November 22, 1991, as amended May 26, 1992,
December 31, 1993 and as of April 26, 1995, all obtainable
guarantees and pledges which remain outstanding pursuant to
Section 11. Foreign Subsidiaries, Guarantees/Pledges and agreed
that the Company would use their best efforts to comply with said
requirements.
The Company's mortgage loans, lines and letters of credit are
subject to acceleration in the event that there is a material and
adverse change in the condition or affairs, financial or
otherwise, of the Company which in the reasonable opinion of the
domestic banks impairs the banks' collateral or increases their
risk so as to jeopardize the repayment of the obligations.
See Statement of Cash Flows for further details of the Company's
cash flows.
PART II. OTHER INFORMATION
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.23 Third Amendment to the Restructuring Loan
and Security Agreement
27 Financial Data Schedule
(b) Reports on Form 8-K:
None.
SIGNATURES
Pursuant to the requirements 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.
RHEOMETRIC SCIENTIFIC, INC.
(Registrant)
August 18, 1995 By /s/ J. C. Fuhrmeister
John C. Fuhrmeister
Vice President and
Chief Financial Officer
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THIRD AMENDMENT TO RESTRUCTURING LOAN AND SECURITY
AGREEMENT DATED NOVEMBER 22, 1991
This Third Amendment to the Restructuring Loan and Security
Agreement, dated November 22, 1991, is made as of the 26th day of
April, 1995, by and between RHEOMETRIC SCIENTIFIC, INC. formerly
known as Rheometrics, Inc., a corporation of the State of New
Jersey, located at One Possumtown Road, Piscataway, New Jersey
08854 (the "Borrower"), RHEOMETRICS FAR EAST LTD., about to be
known as Rheometric Scientific F.E. Ltd., a corporation organized
and existing under the laws of the country of Japan, located at 1-
7-6 Higashi Gotanda, Shinagawa-Ku, Tokyo, Japan ("R. Far East"),
RHEOMETRIC SCIENTIFIC GmbH, formerly known as Rheometrics Europe
GmbH, a corporation organized and existing under the laws of the
country of Germany, located at Schwanheimer Strasse 144A, 64626
Bensheim, Germany ("R. Europe"), RHEOMETRIC SCIENTIFIC FRANCE,
SARL formerly known as Rheometrics France, SARL, a corporation
organized and existing under the laws of the country of France,
located at Espace Discartes, 7, Rue Albert Einstein, Champs Sur
Marne, 77436 Marne La Valle Cedex 2, France ("R. France") and
RHEOMETRICS, V.I., INC., a corporation organized and existing
under the laws of the United States Virgin Islands, located at
Poinsettia House at Bluebeard's Castle, P.O. Box 1858, St. Thomas,
Virgin Islands 00801 ("R.V.I." and, collectively with R. Far East,
R. Europe and R. France hereinafter sometimes referred to as the
"Foreign Subsidiaries"); AXESS THERMAL SCIENCES, LTD., a
corporation organized under the laws of the United Kingdom ("Axess
Great Britain") and its subsidiary, RHEOMETRIC SCIENTIFIC LTD., a
corporation organized under the laws of the United Kingdom ("R.
Great Britain" and, collectively with Axess Great Britain, the
"British Subsidiaries") both located at Jubilee Drive, Belton
Park, Loughborough, LE11 OXS, England; NATWEST BANK N.A., formerly
known as National Westminster Bank NJ, a banking association
organized and existing under the laws of the United States of
America , with an office at 51 Cragwood Road, South Plainfield,
New Jersey 07080 ("NatWest") and CHEMICAL BANK, a New York banking
corporation with offices at 270 Park Avenue, New York, New York
("Chemical").
WITNESSETH:
WHEREAS, NatWest for itself and as Agent, Chemical, Borrower
and the Foreign Subsidiaries, together with Joseph M. Starita,
have previously entered into a Restructuring Loan and Security
Agreement dated November 22, 1991, as amended on May 26, 1992 and
as further amended on December 31, 1993 (as so amended the
"Restructuring Agreement"); and
WHEREAS, as a result of Borrower's acquisition of (i) the
stock of (and merger with) Axess Thermal Sciences, Inc., aDelaware
corporation; (ii) the stock of Axess Great Britain; (iii) a Note
in the sum of Two Million Six Hundred Twenty-Two Thousand Five
Hundred ($2,622,500.00) Dollars due from Axess Great Britain; and
(iv) a product line from Mettler Toledo, A.G., it is necessary to
amend certain of the terms and conditions of the Restructuring
Agreement including, inter alia, the financial covenants; and
WHEREAS, the Borrower has requested and the Co-Lenders have
agreed that the maturity date of the Revolving Loan Credit
Facility be extended; and
WHEREAS, the parties seek to amend the terms and conditions
of the Restructuring Agreement in accordance with the terms and
conditions hereinafter set forth and to set forth certain other
understandings agreed upon among the parties.
NOW, THEREFORE, for and in consideration of the mutual
covenants and agreements herein contained and for other good and
valuable consideration, receipt of which is hereby acknowledged,
it is agreed as follows:
1. Paragraph 1., DEFINITIONS., of the Restructuring
Agreement, subparagraphs P., KK. and SS., the definitions of the
terms "Dresdner Bank Letter of Credit", "Pro Rata Percentage" and
"Sanwa Bank Limited Letter of Credit", respectively, are hereby
amended and restated as follows:
P. The term "Dresdner Bank Letter of Credit" shall
mean the Letter of Credit issued by NatWest for the benefit of
Dresdner Bank AG at the request of Borrower now outstanding or as
may be hereafter amended, extended, renewed or issued, but not
increased, (whether to Dresdner Bank AG or to such other bank as
Borrower shall identify in substitution of Dresdner Bank AG) and
any documents executed in furtherance thereof.
KK. The term "Pro Rata Percentage" shall mean as to
NatWest 62.1% of the Revolving Loan Credit Facility and as to
Chemical 37.9% of the Revolving Loan Credit Facility, which
percentages shall apply until such date(s) as the Dresdner Bank
Letter of Credit and/or the Sanwa Bank Limited Letter of Credit
expire or are terminated, in either case without being drawn upon,
whereupon the Pro Rata Percentage shall be recalculated taking
into account which, if any, letter of credit remains outstanding
and the maximum amount of each of the Co-Lender's contingent
liabilities under the Revolving Loan Credit Facility at the time
of such recalculation, after giving effect to the periodic
permanent reductions required by this Third Amendment.
SS. The term "Sanwa Bank Limited Letter of Credit"
shall mean the Letter of Credit issued by NatWest for the benefit
of Sanwa Bank Limited at the request of Borrower now outstanding
or as may be hereafter amended, extended, renewed or issued, but
not increased, (whether to Sanwa Bank Limited or to such other
bank as Borrower shall identify in substitution of Sanwa Bank
Limited) and any documents executed in furtherance thereof.
2. Paragraph 2., of the Restructuring Agreement, Section
A., is hereby amended as follows:
OUTSTANDING INDEBTEDNESS:
2. Borrower and each of the Foreign and British
Subsidiaries hereby acknowledge and agree that, as of
the close of business on April 25, 1995, there is owing
to NatWest and Chemical from the Borrower, without
offset, defense or counterclaim, the following amounts;
A. As to NatWest:
(i) On the First NatWest Mortgage
Loan the principal sum of Five Million Three
Hundred Thirty-Two Thousand Three Hundred
Ninety-Nine Dollars and Twenty Cents
($5,332,399.20) plus accrued interest;
(ii) On the Second NatWest Mortgage
Loan the principal sum of Six Hundred Eighty-
Seven Thousand Four Hundred Ninety-Nine
Dollars and Seventy-Five Cents ($687,499.75)
plus accrued interest;
(iii) On the Second Amended and
Restated Revolving
Loan Credit Facility Note, to
be replaced by the third such Note
contemporaneously herewith, the principal sum
of Two Hundred Fifty-One Thousand Twenty
($251,020.00) Dollars plus accrued interest;
(iv) Such sums as may be drawn upon
under the Dresdner Bank Letter of Credit in
the sum of Six Hundred Thousand ($600,000.00)
Dollars and such other documents as have or
shall be executed pursuant thereto; and
(v) Such sums as may be drawn upon
under the Sanwa Bank Limited Letter of Credit
in the sum of Two Hundred Forty Million
(240,000,000) Yen or its equivalent in dollars
and such other documents as have or shall be
executed pursuant thereto; and
B. As to Chemical:
On the Second Amended and Restated
Revolving Loan Credit Facility Note, to be replaced
by the third such Note contemporaneously herewith,
the principal sum of One Million Six Hundred
Eighteen Thousand Nine Hundred Eighty
(1,618,980.00) Dollars plus accrued interest.
3. Paragraph 3, of the Restructuring Agreement, Section
C.(i), is hereby amended as follows:
C. (i) The Revolving Loan Credit
Facility: NatWest and Chemical agree to
provide Borrower with a Revolving Loan Credit
Facility in an amount equal to Three Million
Seven Hundred Twenty Thousand ($3,720,000.00)
Dollars. Borrower shall execute two (2) Third
Amended and Restated Revolving Loan Credit
Facility Notes, one such Note payable to
NatWest in the face amount of One Million Four
Hundred Thousand Five Hundred Twenty
($1,400,520.00) Dollars and the other such
Note payable to Chemical in the face amount of
Two Million Three Hundred Nineteen Thousand
Four Hundred Eighty ($2,319,480.00) Dollars.
From time to time hereafter, the aggregate
amount available to be drawn upon under the
Third Amended and Restated Revolving Loan
Facility Notes shall be permanently reduced by
the following amounts on the following dates:
(s) On September 30,
1995, by One Hundred Seventy-Five
Thousand ($175,000.00) Dollars;
(t) On December 31, 1995,
by an additional Three Hundred Twenty-
Five Thousand ($325,000.00) Dollars;
(u) On March 31, 1995, by
an additional Five Hundred Thousand
($500,000.00) Dollars; and
(v) On April 30, 1996,
the entire unpaid principal balance
together with accrued and unpaid interest
and costs shall be due and payable and
provided also that each reduction
required hereunder shall reduce the
NatWest and Chemical Third Amended and
Restated Revolving Credit Facility Notes
in accordance with their Pro Rata
Percentage.
4. Paragraph 3 of the Restructuring Agreement, Section D.,
Letters of Credit., is hereby amended and changed to read as
follows:
D. Letters of Credit.
In addition to the indebtedness referred
to in Paragraph 3.C, NatWest, as part of the
Revolving Loan Credit Facility, agrees that:
(i) Provided no Event of Default or
event which with the giving of notice or
passage of time would become an Event of
Default then exists, the Dresdner Bank Letter
of Credit and the Sanwa Bank Limited Letter of
Credit shall be extended on their expiration
to April 30, 1996, on the further condition
that, at all times during which the Sanwa Bank
Limited Letter of Credit is denominated in Yen
and not in Dollars, Borrower shall maintain a
hedge option contract in the name of NatWest
for the benefit of NatWest, for a period
coterminous with such Letter of Credit, which
together with a cash collateral account to be
maintained at NatWest shall limit, at all
times, the contingent liability of NatWest on
the Sanwa Bank Limited Letter of Credit to not
more than One Million Eight Hundred Thousand
($1,800,000.00) Dollars.
(ii) All Letters of Credit issued or
extended pursuant to this Paragraph D shall be
further evidenced by the NatWest Letter of
Credit Reimbursement Agreement and related
documents executed or reasonably required by
NatWest to be executed in connection
therewith.
5. Paragraph 10 of the Restructuring Agreement, Subsection
O.(ii), is hereby amended and changed to read as follows in order
to delete the requirement that semi-annual financial statements be
reviewed:
O. Financial Reports.
Borrower shall provide Agent:
(ii) As soon as delivered to any
other creditor but in no event later than
forty-five (45) days after the end of each
semi-annual period, its balance sheet as of
the end of such period, and Borrower's and
each Foreign and British Subsidiary's
statement of cash flows for such period and
income and surplus statement, on a
consolidated and consolidating basis, all in
reasonable detail, all prepared in accordance
with GAAP applied on a consistent basis, and
in addition to such statements, any
supplementary information to the financial
reports as Agent shall reasonably require.
6. Paragraph 10 of the Restructuring Agreement is hereby
amended to add a Section V. as follows:
AFFIRMATIVE COVENANTS:
10. Until payment in full of all of the Obligations and
the termination of this Agreement, Borrower, the Foreign
Subsidiaries and the British Subsidiaries covenant and
agree that they will:
V. Cause Polymer Laboratories, GmbH to be
merged into Borrower or one of its Subsidiaries
within one hundred twenty (120) days of the date of
this Third Amendment and until such merger cause
Polymer Laboratories to refrain from acquiring any
assets in addition to those in existence as of the
date hereof.
7. The following Sections of Paragraph 11 of the Restruc
turing Agreement are hereby amended and restated as follows (with
the remaining Sections to remain in full force and effect):
NEGATIVE COVENANTS:
11. Until payment in full of all the Obligations,
Borrower and each Guarantor (if any), Foreign Subsidiary
and British Subsidiary covenant and agree that:
C. Other Liens: They will not incur, create
or permit to exist any mortgage, assignment,
pledge, hypothecation, security interest, lien or
other encumbrance on any of its property or assets,
whether now owned or hereafter acquired, except:
(i) liens for taxes not delinquent; (ii) those
liens in favor of Co-Lenders created by this
Agreement; (iii) those liens disclosed in Schedule
9.L.; (iv) purchase money liens on machinery and
equipment purchased in the ordinary course of
business and not in excess of that permitted under
Paragraph 11.Q. hereof; and (v) liens in and to
accounts receivable and/or other assets granted by
R. Great Britain to Barclays Bank PLC or in the
future to any other commercial lender or lenders to
secure a working capital loan or loans in a maximum
aggregate amount of 500,000.00 pounds.
D. Other Liabilities. Borrower, the Foreign
Subsidiaries and the British Subsidiaries will not
incur, create, assume or permit to exist any
indebtedness or liability on account of either
borrowed money or the deferred purchase price of
property, except:
(i) Obligations to Co-Lenders;
(ii) indebtedness subordinated to
payment of the Obligations on terms approved
by Agent in writing;
(iii) Obligations of R. Far East, R.
France, R.
Europe, Axess Great Britain and
R. Great Britain referred to in Schedule 9.L.;
(iv) Obligations permitted pursuant
to Paragraph 11.Q. of the Restructuring
Agreement;
(v) Obligations of Borrower or R.
Great Britain to Axess or its Affiliates with
respect to
(a) the Subordinated
Unsecured Term Note in the sum of One
Million Three Hundred Forty Thousand
($1,340,000.00) Dollars dated November 1,
1993;
(b) unsecured credit
facilities in the sum of Four Million
Four Hundred Thousand ($4,400,000.00)
Dollars (inclusive of the $1,000,000.00
Unsecured Working Capital Note dated
April 14, 1994 and the Subordinated
Unsecured Working Capital Notes executed
on or about October 7, 1994, October 21,
1994, and November 11, 1994, in the sums
of Three Hundred Thousand [$300,000.00]
Dollars, Four Hundred Thousand
[$400,000.00] Dollars and Three Hundred
Thousand [$300,000.00] Dollars,
respectively and the advance of Two
Million Four Hundred Thousand
[$2,400,000.00] Dollars made on or about
April 25, 1995 as evidenced by a certain
Subordinated Unsecured Working Capital
Note); and
(c) a Three Hundred
Seventy-Five Thousand ($375,000.00)
Dollar promissory note due from R. Great
Britain to Axess, all of which Notes
noted in (a), (b) and (c) are subject to
the terms and conditions of the Amended
and Restated Subordination Agreement
dated May 26, 1992 which is being amended
contemporaneously herewith;
(vi) a certain Promissory Note in
the sum of Two Million Six Hundred Twenty-Two
Thousand Five Hundred ($2,622,500.00) Dollars
due from Axess Great Britain to Borrower; and
(vii) Obligations owed to Mettler
Toledo AG in the
sum of approximately Two
Million ($2,000,000.00) Dollars for the
acquisition of distribution and manufacturing
rights as to certain products as evidenced by
an Agreement dated December 21, 1994.
O. Minimum Tangible Net Worth. Borrower,
together with its Foreign Subsidiaries and the
British Subsidiaries on a consolidated basis, shall
not cause, suffer or permit their Tangible Net
Worth (as hereinafter defined), to be or become
less than the following:
(i) Four Million Seven Hundred
Fifty-Three Thousand ($4,753,000.00) Dollars
as at March 31, 1995;
(ii) Five Million Nine Hundred
Thousand ($5,900,000.00) Dollars as at June
30, 1995;
(iii) Five Million Eight Hundred
Thousand
($5,800,000.00) Dollars as at
September 30, 1995;
(iv) Six Million Seven Hundred
Twenty Thousand ($6,720,000.00) Dollars as at
December 31, 1995 and at any time of the
determination thereof thereafter.
For the purposes of this Agreement, the
term "Tangible Net Worth" shall mean as of the time
of any determination thereof, the difference
between (A) the sum of (x) the par value (or the
value stated on the books of Borrower) of the
capital stock of all classes of Borrower, plus (or
minus in the case of a deficit), (y) the amount of
the surplus, whether capital or earned of Borrower,
plus (z) the sum of all debt subordinated to the
Obligations, less (B) the sum of treasury stock,
unamortized debt discount and expenses, goodwill,
trademarks, tradenames, patents, deferred charges,
and other similar intangible assets, and any write-
up after the date hereof or the value of any
assets, all determined in accordance with GAAP,
applied on a consistent basis.
P. Maximum Debt to Tangible Net Worth.
Borrower, the Foreign Subsidiaries and the British
Subsidiaries on a consolidated basis, shall not
cause, suffer or permit the ratio, determined in
accordance with GAAP consistently applied, of their
total debt, to their Tangible Net Worth to be or
become more than the following:
(i) 5.56 to 1.00 as at March 31,
1995;
(ii) 4.55 to 1.00 as at June 30,
1995;
(iii) 4.37 to 1.00 as at September 30, 1995;
and
(iv) 3.66 to 1.00 as at December 31,
1995, and at any time of the determination
thereof thereafter.
R. Current Ratio. Borrower, the Foreign
Subsidiaries and the British Subsidiaries on a
consolidated basis, shall not cause, suffer or
permit the ratio of their consolidated current
assets to their consolidated current liabilities
(including the Revolving Loan Credit Facility),
determined in accordance with GAAP consistently
applied, to be or become less than the following:
(i) 0.98 to 1.00 as at March 31,
1995;
(ii) 1.07 to 1.00 as at June 30,
1995;
(iii) 1.08 to 1.00 as at September
30, 1995; and
(iv) 1.13 to 1.00 as at December 31,
1995.
S. Inter-Company Accounts Receivable. In no
event shall inter-company transactions with the
British Subsidiaries result in an aggregate net
account receivable due to the Borrower and/or to
any one or more Foreign Subsidiaries from the
British Subsidiaries exceeding One Hundred Fifty
Thousand ($150,000.00) Dollars during any calendar
month or Zero ($0) Dollars as at the end of any
calendar month, exclusive of the sums due under a
certain Subordinated Unsecured Note dated March 3,
1994 in the sum of Two Million Six Hundred Twenty-
Two Thousand Five Hundred ($2,622,500.00) Dollars
from the British Subsidiaries to Borrower.
8. CONDITIONS TO THIRD AMENDMENT TO RESTRUCTURING
AGREEMENT:
As a condition to entering into this Third Amendment to the
Restructuring Agreement there shall have been delivered to Co-
Lenders and/or Borrower shall have fulfilled the following:
A. Resolutions by Borrower's Board of Directors, in
form and substance acceptable to Co-Lenders and their
counsel, authorizing the execution and delivery of this
Amendment and all related documents.
B. Evidence that Axess has made additional unsecured
subordinated debt in the aggregate sum of Four Million
Four Hundred Thousand ($4,400,000.00) Dollars available
to the Borrower during the period from April 14, 1994
through the execution of this Third Amendment. The Note
or Notes evidencing said loans shall be unsecured and
subordinated to the loans and security interests of Co-
Lenders in accordance with the terms of the Amended and
Restated Subordination Agreement, as amended.
C. All indebtedness of Borrower or Borrower's
Subsidiaries to Axess shall be paid only in accordance
with the terms and conditions of the Amended and
Restated Subordination Agreement, as amended.
D. Delivery by Borrower to Agent, for the benefit of
the Co-Lenders, of the original Two Million Six Hundred
Twenty-Two Thousand Five Hundred ($2,622,500.00) Dollar
note receivable due from Axess Great Britain.
E. Delivery by Borrower of a pledge of sixty-five
(65%) percent of the stock of and a guaranty of the
Obligations by the British Subsidiaries in form and
substance satisfactory to Co-Lenders and their counsel
within sixty (60) days of the date hereof.
F. Evidence that the One Million Three Hundred Seventy-
Six Thousand ($1,376,000.00) Dollar Unsecured
Convertible Subordinated Credit Promissory Note from
Borrower to Axess executed on or about December 31, 1993
has been converted to Borrower's common stock.
G. Termination by Axess of all security interests and
mortgage liens, if any, it holds in and to any assets of
Borrower.
H. Borrower shall pay to Co-Lenders a restructuring
fee of One Hundred Twenty-Five Thousand ($125,000.00)
Dollars to be shared by Co-Lenders in their Pro Rata
Percentages, which fee shall be deemed fully earned as
of the date hereof but shall be due and payable in full
on December 31, 1995. Such fee shall be eliminated or
reduced in the event that all Obligations of Borrower to
NatWest and Chemical are paid in full together with all
accrued interest, fees and charges, if any, as follows:
(i) If all Obligations are paid on or before
June 30, 1995, the restructuring fee will be
eliminated;
(ii) If all Obligations are paid after June
30, 1995, but on or before September 30, 1995, the
restructuring fee will be reduced to the sum of
Thirty-One Thousand Two Hundred Fifty ($31,250.00)
Dollars;
(iii) If all Obligations are paid after
September 30,
1995, but on or before December 31, 1995,
the restructuring fee will be reduced to Sixty-Two
Thousand Five Hundred ($62,500.00) Dollars; and
(iv) If any of the Obligations remain unpaid
after December 31, 1995, the entire restructuring
fee shall be deemed due and payable as of December
31, 1995, and from that date as an Obligation under
the Restructuring Agreement any unpaid portion
thereof shall bear interest at the Default Rate.
I. Borrower shall pay all fees expenses and charges
with respect to this Third Amendment to the
Restructuring Agreement and related documents, which
fees, expenses and charges shall be paid, in full, upon
the execution of this Amendment together with any past
due fees, expenses and charges, including, without
limiting the generality thereof, recording and filing
fees, fees and expenses of attorneys for Co-Lenders, and
fees and expenses of Co-Lenders, if any, and other
taxes, fees and assessments payable in connection with
this Third Amendment to the Restructuring Agreement and
related documents. So long as all such fees and
expenses are paid as of the execution hereof, attorneys
for Co-Lenders shall agree to limit their fees
(exclusive of out-of-pocket expenses), with respect to
the negotiation and documentation of this Third
Amendment, up to an aggregate sum of Thirty Thousand
($30,000.00) Dollars.
9. WAIVER OF DEFAULTS/CONSENT TO ACQUISITIONS:
It is understood that, by the execution and delivery of this
Amendment:
A. Co-Lenders hereby have agreed to waive any and all
rights and remedies available to them with respect to
Borrower's failure to comply as of December 31, 1994
with the terms of the Minimum Tangible Net Worth,
Maximum Debt to Tangible Net Worth and Current Ratio
covenants as set forth in the Restructuring Agreement.
It is further understood, however, that this waiver is
specific to the noted covenant violations as of the date
specified and is not and shall not be construed to be a
waiver of any other Events of Default or events which,
but for the lapse of time or giving of notice or both,
would become Events of Default under the Restructuring
Agreement. All rights and remedies available to Co-
Lenders with respect to the existence of and such
defaults or Events of Default are hereby reserved by Co-
Lenders.
B. Co-Lenders hereby consent to the acquisition by
Borrower of a product line from Mettler Toledo, A.G.
Provided, however, Borrower hereby represents and
warrants that all the terms and conditions pertaining to
such acquisition have been disclosed to Co-Lenders.
C. Although Co-Lenders consented to Borrower's
acquisition of and merger with Axess Thermal Sciences,
Inc., by executing a letter from Borrower dated January
23, 1995, Co-Lenders hereby agree that such consent
shall be deemed effective as of December 31, 1994.
D. Co-Lenders hereby agree that so long as Borrower's
final 1994 fiscal year-end financial statement (i) is
delivered to Co-Lenders within two (2) business days of
the execution of this Third Amendment, (ii) is audited
without qualification (but audited only as to the
consolidated financial statement), and (iii) is sub
stantially similar to, with no material deviation from,
the draft statement previously delivered to Co-Lenders
for review, the deviations from the requirements set
forth in the Restructuring Agreement with respect to
timely delivery of financial statements and audits as to
both the consolidated and consolidating statements shall
not be deemed Events of Default.
10. MORATORIUM AS TO MORTGAGE LOAN PRINCIPAL PAYMENTS:
A. It is hereby acknowledged that:
(i) Under the terms of the Restructuring
Agreement, the Borrower delivered to NatWest a
certain Amended and Restated First NatWest Mortgage
Loan Promissory Note and a certain Amended and
Restated Second NatWest Mortgage Loan Promissory
Note;
(ii) Each such Note requires scheduled monthly
principal payments of Thirty Seven Thousand Two
Hundred Fifty ($37,250.00) Dollars each (with
respect to the First NatWest Mortgage Loan) and
Four Thousand One Hundred Sixty-Six Dollars and
Sixty-Seven Cents ($4,166.67) each with respect to
the Second NatWest Mortgage Loan;
(iii) Each such installment is due on the first
day of each consecutive month together with
interest calculated as set forth in the respective
Notes; and
(iv) Borrower has requested that Borrower be
allowed to defer the payment of some or all of the
principal payments due upon the First and/or Second
NatWest Mortgage Loans from the date of this
Amendment through September 29, 1995.
B. NatWest has agreed to such a moratorium upon the
following terms and conditions:
(i) The maturity date of the First and Second
NatWest Mortgage Loans shall not be extended beyond
the present November 1, 1997 maturity date;
(ii) As of September 30, 1995, the Borrower
shall pay in full any deferred principal payments
which remain unpaid as of such date;
(iii) Commencing October 1, 1995, Borrower
shall resume
making scheduled principal payments as
required by the First and Second NatWest Notes;
(iv) This moratorium with regard to principal
payments shall be effective only for so long as
there occurs no Event of Default under the terms of
the Restructuring Agreement or the Mortgages
securing the said Mortgage Loans for which there is
not a waiver or forbearance by Co-Lenders;
(v) With the exception of payments due to Co-
Lenders, to Mettler Toledo, AG and current payments
for inventory or other business related items due
to trade creditors or lessors no principal or
interest shall be repaid on indebtedness owed to
Axess or to any other Person; and
(vi) All interest payments upon the
Obligations shall be kept current during this
moratorium period.
11. FOREIGN SUBSIDIARIES/GUARANTEES/PLEDGES:
A. It is hereby acknowledged that the Foreign
Subsidiaries executed certain Continuing Guaranty
Agreements of all the then existing and thereafter
arising Obligations of Borrower to NatWest and Chemical
and Security Agreements with respect to same, such
Guarantees and Security Agreements being dated as of
November 22, 1991, some of which were delivered into
escrow pending resolution of issues which arose as to
their legality, validity and enforceability. It is
further acknowledged that Borrower executed a certain
Pledge Agreement, pledging a number of shares of each of
the Foreign Subsidiaries equal to sixty-five (65%)
percent of the issued and outstanding shares of the
Foreign Subsidiaries as further Collateral for the Loans
of Borrower from NatWest and Chemical. Although the
parties have diligently attempted to verify and conclude
the finalization of the Guarantees, security interests
and Pledges, as of the date hereof, the parties have not
been able, in all respects, to do so. Because the
Guarantees, collateral for the Guarantees and the stock
pledge are conditions of the Loans of NatWest and
Chemical to Borrower, the failure either to deliver same
or for same to be enforceable in all respects
constitutes an Event of Default under the terms and
conditions of the Restructuring Agreement. However, at
this time, the parties wish to acknowledge the
following:
(i) R.V.I. has delivered its Guaranty, a
security interest in its assets and Borrower has
pledged sixty-five (65%) percent of the stock of
R.V.I. as Collateral for the Obligations, which
Guaranty, Security Agreement and Pledge have been
verified to be effective by an opinion of counsel
for R.V.I.
(ii) R. Far East has delivered its Guaranty
and Borrower has pledged sixty-five (65%) percent
of the stock of R. Far East, which Guaranty and
pledge have been verified to be effective by
counsel for R. Far East. Borrower has advised Co-
Lenders that R. Far East periodically assigns its
accounts receivable to Japanese lenders in order to
finance same so that the assets of R. Far East have
not been pledged.
(iii) R. Europe and R. France each delivered a
Guaranty
and a Security Agreement and Borrower
delivered a pledge of sixty-five (65%) percent of
the stock of each of these companies, each of which
were held in escrow. Subsequently, opinions of
counsel for each of these Subsidiaries were
provided to the Co-Lenders, indicating that
impediments exist in both Germany and France with
regard to the pledge of stock, the granting of a
lien upon assets for the debts of a parent and with
a regard to a subsidiary guaranteeing the debts of
a parent. Therefore, Guarantees, Security
Agreements and pledges which are in all respects
valid, effective and enforceable have not been
obtained with respect to these Subsidiaries.
B. Co-Lenders hereby agree that although Borrower's
failure to deliver valid, effective and enforceable
Guarantees by, security interests in the assets of and
the stock certificates of R. Europe and R. France
constitutes a continuing Event of Default under the
terms and conditions of the Restructuring Agreement, Co-
Lenders shall forbear exercising any rights and remedies
available to them, whether under the Restructuring
Agreement, at law or in equity, as a result of the
existence of such Events of Default, through April 30,
1996, so long as Borrower shall at the sole cost and
expense of Borrower: (i) obtain a notarial deed in order
to effectuate the pledge of R. Europe's stock within
sixty (60) days of the execution of this Third Amendment
followed promptly thereafter by an opinion of counsel as
to the validity of such deed; (ii) if Co-Lenders shall
elect, promptly upon receipt of a secured indemnity
agreement prepared by counsel selected by Co-Lenders,
running to NatWest as issuer of the Dresdner Bank Letter
of Credit (but for the benefit of Co-Lenders), either
(y) cause R. Europe to execute same, or (z) present Co-
Lenders with an opinion of counsel specifically stating
why R. Europe cannot execute and deliver same; and (iii)
in the event the state of the law or other circumstances
should change in any jurisdiction to permit delivery of
the security interests, guarantees and/or pledges not
heretofore obtained, proceed in good faith, to deliver
such security interests, guarantees or pledges with
reference to the Foreign Subsidiaries.
C. Within sixty (60) days of the exectution of this Third
Amendment, Borrower shall (i) provide Co-Lenders with
an executed pledge of sixty-five (65%) percent of the
stock of the British Subsidiaries; (ii) provide a
Guaranty of Borrower's Obligations by the British
Subsidiaries; (iii) provide a security interest (or its
British equivalent) in the assets of the British Sub-
sidiaries; and (iv) an opinion of British counsel as to validity
and enforceability as to each. Provided also, however,
same are only to be provided to the extent that they are
(a) obtainable under British Law; and (b) do not violate
existing agreements with the British Subsidiaries'
lender. Finally, in the event the British Subsidiaries
obtain other financing, the terms of which are no less
favorable than those currently provided by Barclays Bank
PLC, so long as such terms are fully disclosed to Co-
Lenders and no Event of Default (for which there is no
waiver or forebearance) then exists, Co-Lenders' lien or
security interest shall be released, in whole or in
part, if necessary to allow the British Subsidiaries to
obtain such financing which in the aggregate with all
other financing will not exceed the sum of Five Hundred
Thousand (500,000) Pounds.
12. OTHER TERMS:
All of the terms and conditions of the Restructuring
Agreement shall remain in full force and effect as though set
forth herein at length, except to the extent they are specifically
modified hereby. Except as may be modified hereby, the
representations and warranties and the granting of security
interest and the recitals of Collateral set forth in Paragraphs 9
and 7.A., respectively, of the Restructuring Agreement shall be
deemed re-affirmed and restated with the same force and effect as
though set forth herein at length. Any capitalized terms not
defined herein shall be defined by the definition of such term
contained in the Restructuring Agreement.
13. RELEASE:
In consideration of the extension, waivers and forbearance
granted by Co-Lenders as set forth herein, Borrower, the Foreign
Subsidiaries and the British Subsidiaries each hereby releases and
discharges Co-Lenders from any and all claims, causes of action,
defenses, demands, damages or suits at law or in equity, which
they or any of them may have or claim to have against Co-Lenders
or either of them, relating to, arising out of or resulting from
any lending or other relationship with Co-Lenders or either of
them, from the beginning of time through the date hereof.
14. COUNTERPARTS:
This Amendment may be executed in counterparts and by
facsimile signatures, each of which shall be deemed an original,
but all of which taken together constitute one and the same
instrument. To the extent that this Agreement is signed by
facsimile signatures, the parties shall take such steps as shall
be necessary to provide the original signatures as soon as
practicable after closing.
SIGNATURES COMMENCE ON NEXT PAGE
IN WITNESS WHEREOF, the undersigned have set their hands and
seals or caused these presents to be signed by their proper
corporate officers and sealed with their seal the day and year
first written above.
ATTEST: RHEOMETRIC SCIENTIFIC, INC.,
formerly known as RHEOMETRICS,
INC.
By:_/s/ J C Fuhrmeister ____ By:_/s/ Robert E. Davis___
John C. Fuhrmeister, Robert E. Davis,
Assistant Secretary President
ATTEST: RHEOMETRICS, V.I., INC.
By:_/s/ J C Fuhrmeister_____ By:_/s/ Alan R. Eschbach_
John C. Fuhrmeister, Alan R. Eschbach,
Secretary President
ATTEST: RHEOMETRICS FAR EAST LTD. about
to be known as RHEOMETRIC
SCIENTIFIC, F.E.
By:_/s/ Alan R. Eschbach_____ By:_/s/ J C Fuhrmeister____
John C. Fuhrmeister,
ATTEST: RHEOMETRIC SCIENTIFIC GmbH
formerly known as RHEOMETRICS
EUROPE, GmbH
By:_/s/ Alan R. Eschbach______ By:_/s/ J C Fuhrmeister_____
John C. Fuhrmeister,
ATTEST: RHEOMETRIC SCIENTIFIC FRANCE,
SARL, formerly known as
RHEOMETRICS FRANCE, SARL
By:_/s/ Alan R. Eschbach______ By:_/s/ J C Fuhrmeister_____
John C. Fuhrmeister,
ATTEST: AXESS THERMAL SCIENCES, LTD.
By:_/s/ Alan R. Eschbach______ By:_/s/ J C Fuhrmeister______
John C. Fuhrmeister,
ATTEST: RHEOMETRIC SCIENTIFIC LTD.
By:_/s/ Alan R. Eschbach_____ By:_/s/ J C Fuhrmeister______
John C. Fuhrmeister,
NATWEST BANK N.A., formerly
known as National Westminster
Bank NJ, Agent
By:__/s/ D J McInnes__________
Douglas J. MacInnes,
Vice President
NATWEST BANK N.A., formerly
known as National Westminster
Bank NJ
By:_/s/ D J McInnes___________
Douglas J. MacInnes,
Vice President
CHEMICAL BANK
By:_/s/ Steven C Pickhardt_____
Steven C. Pickhardt,
Vice President
AMENDED AND RESTATED SCHEDULE 9.D.
PENDING ACTIONS, SUITS OR
PROCEEDINGS AND OTHER MATTERS
I. Pending Actions
(a) Naomi Tvintikis, a former employee, allegedly
suffered pulmonary irritants in connection with her
employment with Rheometrics.
(b) Patent infringement claim by Auburn International
concerning on-line nuclear magnetic resonance (NMR)
analysis.
AMENDED AND RESTATED SCHEDULE 9.K.
BORROWER'S CHIEF EXECUTIVE OFFICE IS LOCATED AT:
One Possumtown Road
Piscataway, New Jersey 08854
LOCATION OF EACH FOREIGN SUBSIDIARY:
Europe
Rheometric Scientific GmbH
Schwanheimer Strasse 144A
64625 Bensheim, Germany
Polymer Laboratories GmbH
Schwanheimer Strasse 144A
64625 Bensheim, Germany
Rheometric Scientific France SARL
Espace Descartes
7, Rue Albert Einstein
Champs Sur Marne
77436 Marne La Vallee Cedex 2
United Kingdom
Axess Thermal Sciences, Ltd.
Jubilee Drive, Belton Park
Loughborough LE11 OXS, England
Rheometric Scientific Limited
Jubilee Drive, Belton Park
Loughborough LE11 OXS, England
Rheometric Scientific Limited
Surrey Business Park
Weston Road
Epsom, Surrey, KT 17 1 JF, England
Far East
Rheometrics Far East Ltd.
1-7-6 Higashi Gotanda
Shinagawa-Ku, Tokyo, Japan
United States Virgin Islands
Rheometrics, V.I., Inc.
Poinsettia House at Bluebeard's Castle
P.O. Box 1197
U.S. V.I. 00804
AMENDED AND RESTATED SCHEDULE 9.L.
LIENS, JUDGMENTS, MORTGAGES, LIABILITIES
I. Rheometrics, Inc. now known as Rheometric Scientific, Inc.
Liens
1. Lien of First Jersey National Bank now
known as NatWest Bank N.A. (formerly known as
National Westminster Bank NJ) in and to all
fixtures, equipment, machinery, chattel and other
articles of tangible personal property as more
particularly set forth in the Uniform Commercial
Code Financing Statement filed with the Secretary
of State of New Jersey on March 19, 1987 as filed
number 1091825 and with the Clerk of Middlesex
County on March 16, 1987 as file number 1885-855.
2. Lien of New Jersey National Bank now
known as NatWest Bank N.A. (formerly known as
National Westminster Bank NJ) in and to certain
machinery and equipment as more particularly set
forth in the Uniform Commercial Code Financing
Statement filed with the Secretary of State of New
Jersey on August 12, 1987 as file number 1126411
and with the Clerk of Middlesex County on August
19, 1987 as file number 1885-2892.
3. Lien of National Westminster Bank NJ now
known as NatWest Bank N.A. in and to certain
inventory, accounts receivable, general intangibles
and other personal property as more particularly
set forth in the Uniform Commercial Code Financing
Statement filed with the Secretary of State of New
Jersey on July 27, 1990 as file number 1351848 and
with the Clerk of Middlesex County on July 23, 1990
as file number 1902-2001.
4. Lien of NatWest Bank N.A. as Agent for
the Co-Lenders, in and to substantially all assets
as more particularly set forth in the Uniform
Commercial Code Financing Statement filed with the
Secretary of State of New Jersey on November 25,
1991 as file number 1427712 and with the Clerk of
Middlesex County on November 25, 1991 as file
number 1908-2820.
5. Lien of Machine Tool Finance Corporation
in and to certain machinery and equipment as more
particularly set forth in the Uniform Commercial
Code Financing Statement filed with the Secretary
of State of New Jersey on July 13, 1990 as file
number 1349127.
6. Lien of Chemical Bank in and to certain
inventory, accounts receivable and other personal
property assets of Borrower as more particularly
set forth in the Uniform Commercial Code Financing
Statement filed with the Secretary of State of New
Jersey on August 16, 1990 as file number 1356189
and with the Clerk of Middlesex County on August
19, 1990 as file number 1902-2204.
7. Mechanic's Lien Claim recorded in the
County of Middlesex on October 26, 1988 in Book 003
at Page 696, which is subject to an unfiled
release.
8. Lien of Amplicon, Inc. in and to certain
equipment as more particularly set forth in the
Uniform Commercial Code Financing Statement filed
with the Secretary of State of New Jersey on
February 11, 1993 as file number 1496166.
9. Lien of Sanwa Leasing Corporation in and
to certain machinery and equipment as more
particularly set forth in the Uniform Commercial
Code Financing Statement filed with the Secretary
of State of New Jersey on May 16, 1994 as file
number 1570673.
10. Lien of Greyrock Capital Group, Inc. in
and to specified equipment as more particularly set
forth in Uniform Commercial Code Financing
Statement filed with the Secretary of State of New
Jersey on February 28, 1991 as file number 1620714.
11. Lien of Bankers Leasing Association,
Inc., as assigned to Allied Bank/Coal City National
in and to specified equipment as more particularly
set forth in Uniform Commercial Code Financing
Statement filed with the Secretary of State of New
Jersey on May 21, 1991 as file number 1400447.
12. Lien of Axess Corporation in and to all
assets as more particularly set forth in Uniform
Commercial Code Financing Statement filed with the
Secretary of State of New Jersey on December 18,
1991 as file number 1432291 and with the Clerk of
Middlesex County on December 18, 1991 as file
number 1908-3065 (To be terminated as a result of
this transaction).
13. Lien of Capital Associates International,
Inc. in and to certain equipment as specified in
the Master Lease Agreement dated as of June 21,
1990 as more particularly set forth in Uniform
Commercial Code Financing Statement filed with the
Secretary of State of New Jersey on August 10, 1990
as file number 1354746 and with the Clerk of
Middlesex County on August 25, 1990 as file number
1902-2175.
14. Lien of Digital Equipment Corporation, as
assigned to NEMLC Leasing Corporation in and to a
digital equipment system as more fully described in
Equipment Schedule (DEClease #90-4160-00-00 dated
June 4, 1990) as more particularly set forth in
Uniform Commercial Code Financing Statement filed
with the Secretary of State of New Jersey on July
13, 1990 as file number 1349013.
15. Lien of Axess Corporation in and to
specified monitoring modules as more particularly
set forth in Uniform Commercial Code Financing
Statement filed with the Secretary of State of New
Jersey on July 14, 1993 as file number 1519971 and
with the Clerk of Middlesex County on July 12, 1993
as file number 1926-1847 (To be terminated as a
result of this transaction).
Mortgages
1. Mortgage liens of NatWest Bank N.A.
(formerly known as First Jersey National Bank), (as
consolidated and modified for the benefit of
NatWest as Agent for Co-Lenders).
2. Mortgage lien of Axess Corporation which
is subject and subordinate to the NatWest Bank N.A.
(to be terminated as a result of this transaction).
Liabilities
Liabilities in and relating to the liens and
mortgages referred to above.
II. Rheometrics Far East Ltd.
Liens
None except for discounting of evidences of
accounts receivable with Dai-Ichi Kangyo Bank.
Liabilities
1. Liabilities incurred relating to
discounting referred to above.
2. Liabilities incurred under and to the
amount outstanding pursuant to the currently
existing loan arrangements with Sanwa Bank Limited.
III. Rheometric Scientific GmbH formerly known as Rheometrics GmbH
Liens
None
Judgments
None
Mortgages
None
Liabilities
Liabilities incurred under and to the amount
outstanding pursuant to the currently existing loan
arrangements with Dresdner Bank, AG and Hypo Bank.
IV. Rheometric Scientific France, SARL, formerly known as
Rheometrics France, SARL
Liens
Lien to Banque Veuve Morin-Pons and/or Credit
Lyonnais on accounts receivable of R. France resulting
from factoring of accounts receivable.
Judgments
None
Mortgages
None
Liabilities
Liabilities incurred by R. France relating to the
liens referred to above.
V. Rheometrics, V.I., Inc.
Liens
None
Judgments
None
Mortgages
None
VI. Axess Thermal Scientific, Ltd.
VII. Rheometric Scientific Ltd.
Liens
1. Lien to Barclays Bank PLC on accounts
receivable of Axess Great Britain resulting from
factoring of accounts receivable.
SCHEDULE 9.0
OTHER NAMES USED BY BORROWER
AND EACH FOREIGN SUBSIDIARY
I. Rheometric Scientific, Inc.
Rheometrics, Inc.
II. Rheometric Scientific GmbH
Rheometrics Europe GmbH
Polymer Laboratories GmbH
III. Rheometric Scientific France SARL
Rheometrics France SARL
IV. Rheometrics Far East Ltd.
About to be known as Rheometric Scientific Far East Ltd.
V. Rheometrics, V.I., Inc.
None
VI. Rheometric Scientific Limited
Axess Thermal Sciences Limited
