UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
__________________________________________
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 61-0708419
_____________________________ ____________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Possumtown Road, Piscataway, N.J. 08854
_________________________________________ __________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (732) 560-8550
__________________________
_______________________________________________________________
(Former name, former address, and former fiscal year if changed since
last report.)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, No Par Value
________________________________________________________________
Title of Class
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___ No X
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not 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. [ X ]
The aggregate market value of the voting stock held by nonaffiliates of
the registrant as of March 13, 1998: $3,000,507 (For purposes of this
filing only, all executive officers and directors have been classified as
affiliates.)
The number of shares of the registrant's Common Stock outstanding as of
March 13, 1998 was 13,161,739.
DOCUMENTS OR PARTS THEREOF INCORPORATED BY REFERENCE: None
The Exhibit Index appears on page: 31
<PAGE>
PART I
(Items either not applicable or not material have been excluded)
Item I. Business
BACKGROUND
General
Rheometric Scientific, Inc., and subsidiaries (referred to as
"Rheometric" or the "Company"), was incorporated in New Jersey in 1981.
The Company's corporate executive offices and manufacturing operation are
located in Piscataway, New Jersey. Sales offices are located in England,
France, Germany, and Japan.
History
The Company was co-founded under the name Rheometrics, Inc. in 1970 by
Dr. Joseph M. Starita and Dr. Chris Macosko. In 1985, following
completion of a $7 million stock offering, Rheometrics became a public
company. Through a series of transactions between 1991 and 1993, Axess
Corporation ("Axess") owns 76.6% of the common stock of the Company. The
Company changed its name to Rheometric Scientific, Inc. in November 1994.
In 1994, the Company acquired the Polymer Laboratories Thermal Sciences
Business (the "PL Thermal Sciences Business") through a series of
transactions involving Axess. In 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. See Note 1 of
Notes to Consolidated Financial Statements.
In 1997, the Company completed the consolidation of all manufacturing of
rheology and thermal analysis instruments and engineering functions at
its Piscataway, NJ facility. See Note 12 of Notes to Consolidated
Financial Statements.
Recent Developments
On March 2, 1998 the Company announced its strategic marketing alliance
with Perkin-Elmer Corporation, a world leader of thermal analysis
equipment that will broaden the range of solutions available to customers
for material characterizations. Under the agreement, Perkin-Elmer's
Analytical Instruments Division will market certain RSI products in
combination with Perkin-Elmer thermal analysis products. RSI will
continue to independently market all of its products in North America,
Western Europe, and Japan and certain other select areas, while Perkin-
Elmer will market and distribute RSI's complete line of laboratory
rheology systems to the rest of the world.
On August 27, 1998 the Company consummated the assignment of lease of its
Epsom facility in the United Kingdom to a third party and moved its sales
and service personnel to offices located in Leatherhead.
The Company's Loan and Security Agreement (the "Loan Agreement") expires
on February 23, 1999, and the lender notified the Company in August 1998
that the Loan Agreement will not be extended beyond the expiration date.
Following that notification, the Company has commenced discussions with
other prospective lenders to replace the credit facility provided by the
Loan Agreement with a credit facility with a maximum available credit of
$10,000,000. The ability to proceed with a lesser maximum credit than
available under the current Loan Agreement is based on existing
improvements in the management of the Company's working capital. While
the Company believes it will be able to secure a new credit facility on
or prior to the expiration date of the Loan Agreement, it has not yet
received a commitment for such a facility and there can be no assurance
that it will do so.
Page 2 of 34
<PAGE>
DESCRIPTION OF BUSINESS
Financial Information About Industry Segments
The Company operates in one industry segment.
Narrative
The Company designs, manufactures, markets, and services computer-
controlled materials test systems used to make physical property
measurements, such as viscosity, elasticity, and thermal analysis
behavior, on various materials including, plastics, composites,
petrochemicals, rubber, chemicals, paints, coatings, pharmaceuticals,
cosmetics, and foods. The Company's product offering, most of which is
proprietary or patented, consists of rheological and thermal analytical
laboratory instruments used for research and product development; on-line
rheological sensors for controlling and assuring product quality in
various manufacturing processes; and integrated systems for direct on-
line control of manufacturing processes. These integrated systems combine
special sampling technologies and multiple sensor technologies to provide
various real-time measures of product quality. The Company sells its
products worldwide, primarily to Fortune 500 and other leading
international corporations, as well as independent research laboratories
and educational and governmental institutions.
Customers. The Company's customers fall generally into three major
categories based on the nature of their products and the processes by
which their products are developed: (1) materials manufacturers, (2)
product manufacturers, and (3) independent and nonprofit research
laboratories and governmental and educational institutions. The Company
does not have any customer that accounts for more than 10 percent of the
Company's sales.
Technologies. Each instrument system consists of components, some of
which include actuators, which manipulate or impart force upon a sample,
while others thermally activate samples using controlled furnaces;
sensors, which measure the results of such activities upon the sample;
and microprocessors, which analyze such results. The design and
manufacture of these components requires expertise in several disparate
technologies, including electronics, software, mechanics, machining, and
environmental control. Most of the Company's instrument systems contain
a microcomputer system developed and manufactured by the Company, which
incorporates proprietary expertise in microprocessor applications, data
acquisition and analysis, control feedback, and systems development
software, including assembly language programming. The Company's
laboratory instruments can control motion with high precision, some to
within two-millionths of an inch.
The testing of materials ranging from low viscosity water-like fluids to
tough steel-like composites requires the precise measurement of forces
over a wide dynamic range. The Company has combined its engineering
resources to develop sophisticated sensors capable of measuring forces as
small as 10 milligrams to as large as 5,000 pounds.
Raw Material & Components. The Company's products consist of mechanical
and electronic assemblies. A number of raw materials, primarily
stainless steel and aluminum, are used to fabricate the Company's
mechanical assemblies, and electronic components are used to build its
electronic assemblies. The Company depends upon, and will continue to
depend upon, a number of outside suppliers for the components it uses.
The Company believes that the raw materials and component parts it uses
are available from alternate suppliers and does not believe it is
dependent upon any one supplier.
Page 3 of 34
<PAGE>
Patents & Trademarks. The Company currently has patents for the design
and manufacture of certain of its instruments and systems. Due to the
rapidly changing technology relative to the Company's product lines, the
Company does not believe that technological patent protection is
significant as a competitive factor. The Company's name and its logo are
protected under Federal trademark laws and the Company believes that
there is significant value associated with the Company's name.
Seasonal Operations & Backlog. Historically, the Company's sales, (loss)
earnings before income taxes, and net (loss) earnings have been cyclical.
Typically the quarters ending June and December outperform the quarters
ending March and September. This cyclicality is primarily attributable to
the capital goods budgeting cycle. Many customers place their orders in
the first calendar quarter (after capital budgets have been approved)
with delivery in the second calendar quarter due to three- or four- month
average delivery times. Moreover, as the fourth calendar
quarter approaches, many customers review their annual budgets and
determine that they are able to place an order for delivery by the end of
December.
Competition. The Company believes that its principal competitors are
several domestic and foreign manufacturers, some with greater financial
and marketing resources than the Company. The Company competes with
these companies and others by offering products of high performance,
quality and reliability, backed by service capabilities. The Company
believes that technological requirements and high initial capital
expenditures represent significant barriers to entry to this market.
However, there can be no assurance that a larger company with greater
financial resources than the Company will not enter this market at a
later date, and that such entry would not have a material adverse impact
on the operations of the Company.
The Company believes that it is well-positioned in the field of
engineering and technology to remain competitive in the face of
technological changes that may occur in the marketplace. There can be no
assurance, however, that technology superior to the Company's will not be
developed which would have a material adverse effect on the Company's
operations.
Product Research & Development. The Company's research and development
activities primarily focus on the development of new products and new
applications and enhancements for existing products. In its development
and testing of new products and applications, the Company consults with
professionals at universities and in the industry worldwide. The Company
believes that its research and development activities are necessary to
maintain competitiveness and to better serve its customers.
Year 2000 Compliance The Company has consulted with its main software
provider regarding potential year 2000 problems. The majority of this
potential problem has been addressed and the remaining problem area will
be addressed via upgrades, which will be available prior to the year
2000. In addition, the Company has proactively identified program
modifications that may require a change in programming code. Such code
modifications are being actively made and the Company anticipates that
all program modifications will be completed well before the year 2000.
The Company plans to initiate in 1998 communication with its significant
suppliers to determine the effect that it may be impacted by third
parties failure to address this issue. The Company will continue to
monitor and evaluate the impact of year 2000 on its operations.
Employees. At December 31, 1997, the Company had approximately 241 full-
time employees worldwide, none of whom is party to a collective
bargaining agreement.
Financial Information About Foreign and Domestic Operations and Export
Sales
See Note 9 of Notes to Consolidated Financial Statements.
Page 4 of 34
<PAGE>
Item 2. Properties
The Company leases a 100,000 square foot building on 19 acres of land in
Piscataway, New Jersey. This facility presently accommodates the
Company's manufacturing, marketing, research and development, and general
administrative activities. The Company expects this facility to
accommodate its needs for the foreseeable future.
The Company also leases space for use as sales and service centers in
various locations overseas. The Company leases an aggregate of
approximately 25,000 square feet of space in Epsom, England; Bensheim,
Germany; Marne La Vallee, France; and Tokyo, Japan.
On August 27, 1998, the Company consummated the assignment of lease of
its Epsom facility in the United Kingdom to a third party and moved its
sales and service personnel to offices located in Leatherhead.
Item 3. Legal Proceedings
There are no known material pending legal proceedings involving the
Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the quarter
ended December 31, 1997.
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder
Matters
Common Stock Market Prices and Dividends
The Company's Common Stock was traded on the Nasdaq National Market under
the symbol "RHEM." The table below presents the high and low sales
prices for each quarter for the years ended December 31, 1997 and 1996.
Rheometric Scientific's common stock moved to The Nasdaq SmallCap Market
from The Nasdaq National Market on February 13, 1998 via an exception
from the bid price, net tangible assets and market value of public float
initial inclusion requirements. The Company met all the initial
inclusion requirements as set forth by The Nasdaq Stock Market with the
exception of minimum bid price. The exception expires on April 10, 1998.
On April 14, 1998, due to the expiration of an exception from the minimum
bid price of the NASDAQ SmallCap Market, the Company's common stock was
moved to the OTC-Bulletin Board Market.
Since its initial public offering in December 1985, the Company has not
paid any cash dividends. The Company's current borrowing arrangements
prohibit the payment of cash dividends. At March 9, 1998, there were
approximately 170 holders of record of the Company's Common Stock. In
addition, there are approximately 485 beneficial holders of Common Stock
held in street name.
<TABLE>
12 Months Ended December 31,
_______________________________
1997 1996
<CAPTION>
QUARTER ENDED High Low High Low
<S> <C> <C> <C> <C>
March 31 $2.75 $1.63 $2.13 $1.50
June 30 2.13 1.38 3.25 1.63
September 30 1.88 1.00 2.24 1.63
December 31 1.25 0.69 3.13 1.56
</TABLE>
Page 5 of 34
<PAGE>
Item 6. Selected Financial Data
<TABLE>
(In thousands of dollars, except per share data)
12 Months Ended December 31,
___________________________________________________
<CAPTION>
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Sales $37,539 $41,115 $41,244 $34,571 $26,881
Restructuring expense 940 -- -- (98) 1,400
Net (loss) earnings (2,329) (6,347) 391 (1,463) (4,550)
Basic and diluted (loss)
earnings per share (0.18) (0.48) 0.03 (0.12) (0.73)
Total assets 35,434 36,045 40,093 35,110 27,235
Long-term debt 11,055 11,361 10,973 9,403 7,622
The PL Thermal Sciences Business acquisition has been included as of March
3, 1994.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
12 Months Ended December 31, 1997 vs. 12 Months Ended December 31, 1996
In the year ended December 31, 1997, the Company achieved sales of
$37,539,000 compared to $41,115,000 for the year ended December 31, 1996.
Japanese sales increased by 4%, while domestic and European sales
decreased 5% and 21%, respectively. Sales for 1997 were adversely
affected by foreign exchange of $1,620,000 compared to 1996.
International and export sales decreased to 56% of consolidated sales
from 61% in 1996. Gross profit for the year ended December 31,1997 was
44.8% of sales, compared to 45.9% for the same period in 1996. Gross
profit in 1997 includes a one-time charge for obsolescence expense of
$600,000. See Note 1. Without this charge, gross profit for 1997 would
have been 46.4% of sales.
Operating expenses of $16,176,000 decreased by $6,516,000 for the period
ended December 31, 1997, compared to the corresponding period in 1996.
Included in the 1997 amount is $940,000 relating to the European
restructuring. Included in the 1996 amount is $2,368,000, a one-time
charge related to the sale/leaseback transaction and $2,438,000, related
to the write-down of long-lived assets whose value has been deemed
impaired. Excluding these one-time charges, the decrease over the period
was $2,650,000. This decrease is largely due to the Company's aggressive
expense reduction efforts in the U.S. and the U.K. Exchange difference in
1997 versus 1996 on foreign expenses accounted for approximately $400,000
of the decrease.
Interest expense decreased $91,000 for the period ended December 31, 1997
compared to the corresponding period in 1996. This decrease is due to a
lower interest rate on the lease agreement. This decrease was offset by
approximately $136,000 as a result of carrying higher loan balances
throughout the period.
Net loss for the year ended December 31, 1997 was $2,329,000 compared to
net loss of $6,347,000 in 1996. The 1997 results include a one-time
charge of $940,000 related to restructuring and a one-time charge for
obsolescence expense of $600,000. Net income in 1997 was favorably
affected by a decrease in operating expenses of $2,650,000, a decrease in
net interest expense of $91,000, and an increase in gross profit
percentage after adjusting for the 1997 one-time charges. These were
offset by an increase in currency loss of $432,000 as compared to 1996.
Backlog as of December 31, 1997 and 1996 was $3,532,000 and $1,745,000,
respectively. The Company expects that all of the items in its backlog
will be delivered in the current calendar year.
Page 6 of 34
<PAGE>
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
continually monitors its exposure relating to excess and obsolete
inventory and establishes an appropriate valuation account. 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.
12 Months Ended December 31, 1996 vs. 12 Months Ended December 31, 1995
In the year ended December 31, 1996, the Company achieved sales of
$41,115,000 compared to $41,244,000 for the year ended December 31, 1995.
The Japanese and European sales decreased by 23% and 3% respectively,
while domestic sales increased 20%. International and export sales
decreased to 61% of consolidated sales from 66% in 1995. Gross profit
for the year ended December 31,1996 was 45.9% of sales, compared to 46.3%
for the same period in 1995. This small decrease was due in part to the
additional costs incurred relating to the consolidation of all
manufacturing at the Piscataway facility.
Operating expenses of $22,692,000 increased by $6,051,000 for the period
ended December 31, 1996, compared to the corresponding period in 1995.
Of this amount, $2,368,000 (See Note 2) is a one-time charge related to
the sale/leaseback transaction and $2,438,000 (See Note 1) is related to
the write-down of long-lived assets whose value has been deemed impaired.
Excluding these one-time charges the increase over the period is
$1,245,000. This increase is largely due to salary increases that went
into effect in April 1996, severance costs related to the consolidation
of engineering at the Piscataway facility, and the favorable effect on
1995 expenses of both recorded gains related to a foreign exchange
contract, and the capitalization of software development costs.
Interest expense increased $930,000 for the period ended December 31, 1996
compared to the corresponding period in 1995. Approximately $340,000 of
this increase is attributable to the amortization of the lease obligation
recorded under the sale/leaseback arrangement. The remainder of the
increase is a result of carrying higher loan balances throughout the
period with slightly higher interest rates. The increase in interest
expense is partially offset by an increase in interest income due to
interest earned on our mortgage participation.
Net loss for the year ended December 31, 1996 was $6,347,000 compared to
net income of $391,000 in 1995. The 1996 results include a one-time
charge of $2,368,000 related to the sale/leaseback transaction as well as
a one-time charge of $2,438,000 related to the write-down of long-lived
assets. Excluding these one-time charges, net income in 1996 was
adversely affected by an increase in operating expenses of $1,245,000, an
increase in net interest expense of $744,000, and a decrease in gross
profit of $232,000. These were offset by a decrease in the currency loss
of $302,000.
Backlog as of December 31, 1996 and 1995 was $1,745,000 and $2,073,500,
respectively. The Company expects that all of the items in its backlog
will be delivered in the current calendar year.
Financing, Liquidity, and Capital Resources
Management believes that the cash generated from operations and funds
available under its current loan agreement, should be sufficient to meet
the Company's working capital needs for the next year. On February 23,
1996 the Company entered into a three-year Loan and Security Agreement
(the "Loan Agreement"). The Loan Agreement provides a working capital
revolving credit facility with a maximum available credit of $11,500,000.
The amount of available credit is determined by the level of certain
eligible receivables and inventories. Adequacy of cash flows generated
beyond will depend upon the Company's ability to achieve expected sales
volumes to support profitable operations.
Page 7 of 34
<PAGE>
On March 31, 1998, the Company's bank amended the Loan Agreement with
regards to the facility limit and inventory sublimit. Effective April 1,
1998 and on the opening of business on Wednesday of each consecutive week
thereafter, both the facility limit and inventory sublimit will decrease
by $25,000. As of December 31, 1997 the facility limit is $11,500,000
and the inventory sublimit is $6,000,000.
The Company's Loan Agreement expires on February 23, 1999, and the lender
notified the Company in August 1998 that the Loan Agreement will not be
extended beyond the expiration date. Following that notification, the
Company has commenced discussions with other prospective lenders to
replace the credit facility provided by the Loan Agreement with a credit
facility with a maximum available credit of $10,000,000. The ability to
proceed with a lesser maximum credit than available under the current
Loan Agreement is based on existing improvements in the management of the
Company's working capital. While the Company believes it will be able to
secure a new credit facility on or prior to the expiration date of the
Loan Agreement, it has not yet received a commitment for such a facility
and there can be no assurance that it will do so.
Cash Flows from Operations
Net cash used in operating activities in the fiscal years ended
December 31, 1997, 1996, and 1995, was $2,924,000, $1,082,000, and
$590,000, respectively. The negative cash flow from operations in 1997
was comprised primarily of an increase in inventories of $3,606,000 as
well as a $2,329,000 net loss. The inventory increase is related to a
planned increase in certain products as well as a shortfall in fourth
quarter sales. Management continuously monitors inventory levels on a
worldwide basis and has implemented plans to reduce inventories in
1998. The above are offset by the following: a one-time charge of
$940,000 related to the European restructuring, non-cash depreciation
and amortization charges of $1,158,000 and an increase in the inventory
reserve of $819,000. A large portion of the reserve increase is to
address obsolescence resulting from product redesign.
Cash Flows from Investing
The Company made capital expenditures of $158,000, $469,000, and
$373,000, respectively, in the fiscal years ended December 31, 1997,
1996, and 1995.
Cash Flows from Financing
Net cash provided by financing activities in the fiscal years ended
December 31, 1997, 1996, and 1995, was $2,904,000, $661,000, and
$1,927,000, respectively.
The funds provided by financing activities are due to an increase in
our short-term borrowings of $1,214,000 and borrowings against
receivables of $1,018,000. This was offset by repayments of long term
debt and the company's lease obligation of $189,000. On February 20,
1997 the Landlord refinanced the Mortgage Loan and the Company's
participation in the Mortgage Loan of $861,000 was repaid. The
proceeds from the Company's interest in the Mortgage Loan were applied
to its revolving credit line.
Total borrowings with foreign and domestic banks at December 31, 1997
were $8,769,000 with remaining availability of approximately
$2,400,000.
See Statement of Cash Flows for further details of the Company's cash
flows.
See Notes 3 and 4 of the Notes to Consolidated Financial Statements for
additional information.
Page 8 of 34
<PAGE>
Item 8. Financial Statements and Supplementary Data
PricewaterhouseCoopers L.L.P.
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia PA 19103-2962
Telephone (215) 963 8000
Facsimile (215) 963 8700
Report of Independent Accountants
To the Board of Directors and
Shareholders of Rheometric Scientific, Inc.:
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, shareholders' equity and
cash flows present fairly, in all material respects, the financial
position of Rheometric Scientific, Inc. and its subsidiaries at December
31, 1997 and 1996, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1997,
in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
August 12, 1998, except as to information presented in
Notes 8 and 12, for which the date is August 27, 1998.
Page 9 of 34
<PAGE>
<TABLE>
RHEOMETRIC SCIENTIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
December 31,
1997 1996
________ ________
<S> <C> <C>
ASSETS
Current Assets
Cash $ 297 $ 486
Receivables - less allowance for doubtful
accounts of $198 and $224 as of
December 1997 and 1996 14,916 15,823
Inventories, net
Finished goods 5,659 2,372
Work in process 2,650 2,006
Assembled components, materials, and parts 3,550 5,040
_______ _______
11,859 9,418
Prepaid expenses and other assets 813 764
_______ _______
Total current assets 27,885 26,491
_______ _______
Property, plant, and equipment 15,904 15,947
Less, accumulated depreciation and amortization 9,475 8,844
_______ _______
Property, plant, and equipment, net 6,429 7,103
Goodwill, net -- 100
Other assets 1,120 2,351
_______ _______
Total Assets $35,434 $36,045
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term bank borrowings $ 8,769 $ 7,896
Current maturities of long-term debt 227 110
Accounts payable 3,931 3,750
Borrowings against accounts receivable 958 --
Payable to affiliate 1,064 794
Accrued liabilities 5,360 5,239
_______ _______
Total current liabilities 20,309 17,789
_______ _______
Long-term note payable 79 246
Long-term debt lease obligation 4,718 4,857
Long-term debt - affiliate 6,258 6,258
Other long-term liabilities 1,240 1,519
_______ _______
Total liabilities 32,604 30,669
_______ _______
Commitments and Contingencies
Shareholders' Equity
Common stock, stated value of $.001,
authorized 20,000 shares; issued and
outstanding 13,162 shares at
December 31, 1997 and 1996 13 13
Additional paid-in capital 25,492 25,492
Accumulated deficit (22,547) (20,218)
Cumulative translation adjustment (128) 89
_______ _______
Total shareholders' equity 2,830 5,376
_______ _______
Total Liabilities & Shareholders' Equity $35,434 $36,045
======= =======
See Notes to Consolidated Financial Statements
</TABLE>
Page 10 of 34
<PAGE>
<TABLE>
Rheometric Scientific, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
<CAPTION>
12 Months Ended December 31,
1997 1996 1995
_______ _______ _______
<S> <C> <C> <C>
Sales $37,539 $41,115 $41,244
Cost of sales 20,728 22,240 22,137
_______ _______ _______
Gross profit 16,811 18,875 19,107
Marketing and selling expenses 9,122 10,537 10,240
Research and development expenses 3,145 3,055 2,705
General and administrative expenses 2,597 3,532 3,115
Impairment of long-lived assets -- 2,438 --
Restructuring expense 940 -- --
Goodwill amortization 96 405 327
Intangible amortization 276 357 254
Loss on sale/leaseback -- 2,368 --
_______ _______ _______
16,176 22,692 16,641
_______ _______ _______
Operating income (loss) 635 (3,817) 2,466
Interest expense (1,523) (1,847) (1,037)
Interest expense - Affiliate (835) (786) (666)
Interest income 12 196 10
Foreign currency loss (437) (5) (307)
______ _______ _______
(Loss) earnings before income taxes (2,148) (6,259) 466
Income tax expense 181 88 75
_______ _______ _______
Net (loss) earnings $ (2,329) $ (6,347) $ 391
======= ======= =======
Net (loss) earnings per share
Basic $(0.18) $(0.48) $0.03
======= ======= =======
Diluted $(0.18) $(0.48) $0.03
======= ======= =======
Average number of shares outstanding
Basic 13,162 13,162 13,162
======= ======= =======
Diluted 13,162 13,162 13,262
======= ======= =======
See Notes to Consolidated Financial Statements
</TABLE>
Page 11 of 34
<PAGE>
<TABLE>
Rheometric Scientific, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
<CAPTION>
12 Months Ended December 31,
1997 1996 1995
______ ______ ______
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net (loss) earnings $(2,329) $ (6,347) $ 391
Adjustments to reconcile net (loss) earnings
to net cash used in operating activities:
Depreciation and amortization of plant
and equipment 786 874 1,029
Amortization of goodwill 96 405 327
Provision for slow moving inventory 819 398 267
Amortization of intangibles 276 357 254
Loss on sale/leaseback financing -- 2,368 --
Loss on sale/retirement of property, plant, and
Equipment -- 9 93
Unrealized currency (gain) loss 418 (140) 456
Impairment of long-lived assets -- 2,438 --
Changes in assets and liabilities:
Receivables (224) (1,771) (4,515)
Inventories (3,606) (1,177) 956
Prepaid expenses and other assets (78) 808 (866)
Accounts payable and accrued liabilities (330) 224 439
Payable to affiliate 271 493 668
Other assets 59 (301) (13)
Restructuring reserve 940 -- --
Other non-current liabilities (22) 280 (76)
_______ _______ _______
Net cash used in operating activities (2,924) (1,082) (590)
Cash Flows from Investing Activities:
Purchases of property, plant, and equipment (158) (469) (373)
_______ _______ _______
Net cash used in investing activities (158) (469) (373)
Cash Flows from Financing Activities
Repayment under line of credit agreement -- (3,020) --
Borrowings against accounts receivables 1,018 -- --
Borrowings under line of credit agreements 1,214 4,700 80
Repayment of long-term debt/lease obligation (189) (5,763) (553)
Proceeds from long-term note payable -- 246 --
Repayment of short-term debt affiliate -- (375) --
Proceeds from long-term debt affiliate -- -- 2,400
Net proceeds from sale/leaseback arrangement -- 5,734 --
Mortgage participation 861 (861) --
_______ _______ _______
Net cash provided by financing activities 2,904 661 1,927
Effect of Exchange Rate Changes on Cash (11) 12 (347)
_______ _______ _______
Net (decrease) increase in cash (189) (878) 617
Cash at beginning of period 486 1,364 747
_______ _______ _______
Cash at end of period $ 297 $ 486 $ 1,364
======= ======= =======
See Notes to Consolidated Financial Statements
</TABLE>
Page 12 of 34
<PAGE>
<TABLE>
Rheometric Scientific, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
<CAPTION>
Additional Cumulative Total
(In thousands) Common Stock Paid-in (Accumulated Translation Shareholders'
Shares Amount Capital Deficit) Adjustment Equity
________ _____ _______ ________ _________ __________
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 13,162 $13 $24,759 $(14,262) $ 43 $10,553
______ ___ _______ ________ _____ _______
Net Income -- -- -- 391 -- 391
Translation adjustment -- -- -- -- (56) (56)
______ ___ _______ ________ _____ _______
Balance at December 31, 1995 13,162 13 24,759 (13,871) (13) 10,888
______ ___ _______ ________ _____ _______
Net Income -- -- -- (6,347) -- (6,347)
Warrants -- -- 733 -- -- 733
Translation adjustment -- -- -- -- 102 102
______ ___ _______ ________ _____ _______
Balance at December 31, 1996 13,162 13 25,492 (20,218) 89 5,376
______ ___ _______ ________ _____ _______
Net Income -- -- -- (2,329) -- (2,329)
Translation adjustment -- -- -- -- (217) (217)
______ ___ _______ ________ _____ _______
Balance at December 31, 1997 13,162 $13 $25,492 $(22,547) $ (128) $ 2,830
====== === ======= ======== ====== =======
See Notes to Consolidated Financial Statements
</TABLE>
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Principles of Consolidation and Operations
The consolidated financial statements include the accounts of Rheometric
Scientific, Inc., and its wholly-owned subsidiaries (referred to as
"Rheometric" or the "Company"). All significant intercompany balances and
transactions have been eliminated in consolidation. Axess Corporation
("Axess" or the "Affiliate") owns 76.6% of the outstanding shares of the
Company's Common Stock as of December 31, 1997.
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,
the disclosure of contingent assets and liabilities at the date of the
financial statements, and revenues and expenses during the reporting
period. Actual results could differ from those estimates.
The Company designs, manufactures, markets, and services computer-
controlled material testing systems for use in material and product
research and development, on-line process monitoring, and quality
control.
Revenue Recognition
Product sales are recorded upon shipment. Service revenues are recorded
as services are performed. Maintenance agreement revenues are recorded
on a straight-line basis over the terms of the respective agreements.
Service revenues for the years ended December 31, 1997, 1996, and 1995,
were $3,397,000, $3,820,000, and $3,706,000, respectively. Deferred
revenue relating to maintenance agreements amounted to $813,394 and
$896,098 at December 31, 1997 and 1996, respectively, and is included in
Accrued liabilities in the accompanying Consolidated Balance Sheets.
Inventories
Inventories, consisting of purchased materials, direct labor, and
manufacturing overhead, are stated at the lower of cost (determined on
the first-in, first-out method) or market. As of December 31, 1997 and
1996 the Company had a reserve of approximately $1,979,000 and
$1,339,000, respectively, for excess and obsolete inventory. The Company
reserved $600,000
Page 13 of 34
<PAGE>
of inventory in connection with the completion of the redesign of the
thermal product line. The redesign was completed in the third quarter of
1997.
Property, Plant and Equipment
Property, plant and equipment is carried at cost. Depreciation and
amortization of plant and equipment are computed based on the estimated
service lives of the assets or lease terms, if shorter, using the
straight-line method. Betterments and major renewals are capitalized,
while repairs, maintenance and minor renewals are expensed. When assets
are disposed of, the assets and related allowances for depreciation are
eliminated from the accounts and any resulting gain or loss is reflected
in operations.
The estimated useful lives for each class of fixed assets are as follows:
Buildings 30 years Office equipment 5-8 years
Assets under direct Transportation equipment 3-5 years
financing lease 15 years Leasehold improvements 5 years
Machinery and equipment 5-8 years Assets under capital lease 5 years
Income Taxes
Deferred income taxes are recognized for the tax consequences of
"temporary differences" by applying enacted statutory tax rates
applicable to future years to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities.
The effect on deferred taxes of a change in tax rates is recognized in
income in the period that includes the enactment date. Valuation
allowances are established when necessary to reduce deferred tax assets
to the amount expected to be realized. Income tax expense is the tax
payable for the period plus the change during the period in deferred tax
assets and liabilities.
No provision has been made for U.S. income taxes which would be payable
if undistributed earnings of approximately $498,000 as of December 31,
1997 of foreign subsidiaries were distributed to the Company in the form
of dividends, since it is management's intention to permanently reinvest
such earnings in the related foreign operations.
Goodwill and Intangibles
Goodwill is amortized using the straight-line method over seven years.
All other intangibles are amortized using the straight-line method over
the respective useful life. (See Accounting for the Impairment of Long-
Lived Assets.)
Total accumulated amortization of capitalized software for the year ended
December 31, 1997 and 1996 was $503,000 and $357,000, respectively. The
unamortized balance of capitalized software development costs totaled
$167,000 in 1997, and $313,000 in 1996, which is amortized using a three-
year useful life. Amortization expense relating to capitalized software
development costs for the year ended December 31, 1997 and 1996 totaled
$146,000 and $43,000, respectively.
Translation of Foreign Currencies
Assets and liabilities of foreign subsidiaries are translated at current
exchange rates and the effects of these translation adjustments are
reported as a separate component of shareholders' equity. Realized gains
and losses from foreign currency transactions are included in the
consolidated statements of operations, as are unrealized gains and losses
arising from the translation of the foreign subsidiaries' intercompany
liability accounts into U.S. dollars. The Company's foreign currency
exposure policy is to not enter into foreign currency derivative
instruments.
Research and Development Costs
Research and development costs are charged to expense as incurred.
Page 14 of 34
<PAGE>
Cash Flow Information
Foreign currency cash flows have been converted to U.S. dollars at an
appropriately weighted-average exchange rate or the exchange rates in
effect at the time of the cash flows, where determinable.
Net cash used in operating activities for the years ended December 31,
1997, 1996, and 1995, respectively, reflects cash payments for interest
of $2,044,600, $2,114,700, and $1,165,700, and income taxes of $49,200,
$102,700, and $44,300, respectively. The bad debt expense for the years
ended December 31, 1997, 1996, and 1995 was $108,200, $37,600, and
$182,700, respectively.
Fair Value of Financial Instruments
The estimated fair value of the Company's debt instruments as of December
31, 1997 and 1996 approximates the carrying amount. The fair value of
the debt instruments is estimated based on the discounted future cash
flows using currently available interest rates. The Company's letter of
credit instrument is not recognized in the Company's consolidated balance
sheet and a reasonable estimate of fair value could not be made.
Concentration of Credit Risk
The Company's product line, consisting of rheological and thermal
analytical laboratory instruments, is sold worldwide, principally to
large corporations, and research, educational, and governmental
institutes. The Company does not require collateral from its customers.
The accounts receivable are spread among a number of customers and are
geographically dispersed such that in management's opinion credit risk is
minimized.
Accounting for the Impairment of Long-Lived Assets
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 their 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. As a
result of this review, an impairment was recognized in 1996 relating to
the goodwill generated by the acquisition of PL Thermal Sciences Business
in 1994 and the intangible asset recorded in connection with the 1995
purchase of the Mettler property rights for the RM180 and the RM260.
In 1994, the Company acquired the PL Thermal Sciences Business which
included an engineering, manufacturing, sales, and service operation in
the United Kingdom. Goodwill of $2,592,000 was recorded and was being
amortized over seven years. In late 1995, management reviewed the design
of the core thermal products and in early 1996 implemented a plan to
redesign the core products and incorporate its new Windowsr95 RSI
Orchestrator software. It was determined that these redesigns were
necessary to remain competitive. Additionally, in mid 1996, management
decided it would be cost effective to consolidate the UK's engineering
and manufacturing operations in the United States. As a result of the
significant physical change in the product line acquired, management
reviewed the recoverability of the carrying amount of the goodwill
balance. An evaluation was made of the future cash inflows and outflows
related to the thermal products acquired in connection with the
aforementioned acquisition. Based on this evaluation, an impairment of
$1.7 million was recognized. This loss of $1,742,000 is included in 1996
operating expenses under Impairment of long-lived assets.
In 1995, the Company acquired from Mettler-Toledo AG ("Mettler") the
exclusive-worldwide rights for two rheological test instruments, the
RM180 and the RM260. The Company recorded an intangible asset of
$1,525,000 related to these property rights and was amortizing this asset
on a straight-line basis over six years. At the end of 1996, based on
the performance of the products over the past year, an evaluation was
made of the future cash inflows and outflows of these products. Based on
this evaluation, an impairment of $696,000 was realized. The remaining
balance of $400,000 will be amortized on a straight-line basis over the
remaining four
Page 16 of 34
<PAGE>
years of the agreement. The loss of $696,000 is included in 1996
operating expenses under Impairment of long-lived assets.
(Loss) Earnings Per Share
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" ("SFAS 128"). SFAS 128 establishes standards for computing and
presenting earnings per share ("EPS") and supersedes APB Opinion No. 15.
"Earnings Per Share" ("Opinion 15"). SFAS 128 replaces the presentation
of primary EPS with a presentation of basic EPS which excludes dilution
and is computed by dividing income available to common stockholders by
the weighted-average number of common shares outstanding during the
period. Diluted reflects the potential dilution that could occur if
outstanding options and warrants were exercised. The company has adopted
SFAS 128 and has restated all prior-period EPS data presented.
Other Matters
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," and No. 131, "Disclosures about Segments of an
Enterprise and Related Information," for fiscal years beginning after
December 15, 1997. The provisions of SFAS No. 130 establish standards
for reporting and display of comprehensive income and its components in
the financial statements. This statement requires all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in the financial statements and
displayed with the same prominence as other financial statements. The
provisions of SFAS No. 131 establish standards for the way that
enterprises report information about operating segments in annual
financial statements and require that selected information about
operating segments in interim financial statements be reported. It also
establishes standards for related disclosure about products and services,
geographic areas, and major customers. The Company is reviewing these
standards of disclosure for adoption in 1998.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting
for Derivative Instruments and Hedging Activities," for fiscal years
beginning after June 15, 1999. The provisions of SFAS No. 133 require
all derivatives to be recognized in the statement of financial position
as either assets or liabilities and measured at fair value. In addition,
all hedging relationships must be designated, reassessed and documented
pursuant to the provisions of SFAS 133. At present time the Company is
reviewing the potential impact of this standard.
2. Property, Plant and Equipment
Property, plant and equipment as of December 31 consisted of the
following:
<TABLE>
<CAPTION>
1997 1996
___________ __________
<S> <C> <C>
Assets under direct financing lease $ 6,300,000 $ 6,300,000
Buildings 133,000 133,000
Machinery and equipment 2,367,000 2,362,000
Office equipment 5,622,000 5,633,000
Transportation equipment 195,000 205,000
Leasehold improvements 434,000 461,000
Assets under capital lease 853,000 853,000
__________ __________
$15,904,000 $15,947,000
========== ==========
</TABLE>
On February 23, 1996, the Company entered into a sale/leaseback
arrangement whereby the Company sold the Company's corporate headquarters
and main manufacturing facility, and the 19 acres of real property on
which the facility is located (the facility and the real estate being
referred to herein as the "Facility") for $6,300,000. The transaction was
treated as a financing.
Page 16 of 34
<PAGE>
A lease obligation was recorded and the asset written down to the amount
of the proceeds. As a result of the sale, the Company recognized a loss
on its income statement of $2,368,000, the differences between the
proceeds of the sale and the cost of the facility as carried on the
Company's balance sheet. The assets will be amortized over the life of
the lease on a straight-line basis. Accumulated amortization on these
assets under direct financing was $766,000 and $352,000 as of December
31,1997 and 1996, respectively.
Simultaneously with the sale to the Landlord, the Company entered into a
long-term lease of the Facility from the Landlord. The initial term of
the lease is 15 years, subject to five-year extensions through 2026.
Under the terms of the lease, the Company has certain rights of first
refusal to purchase the Facility and the right to acquire up to 11 acres
of undeveloped real estate constituting a portion of the facility (the
"Excess Land") under certain circumstances.
Assets under capital lease consisted primarily of computer equipment
which was purchased at the end of the lease term. As of December 31,
1995, the equipment was fully depreciated with an accumulated
depreciation balance of $853,000. The Company's property, plant and
equipment are pledged as collateral under the existing lines of credit.
3. Long-term Debt and Short-term Borrowings
Long-term debt as of December 31 consisted of the following:
1997 1996
________ ________
Obligation under sale/leaseback
payable through February 2011,
with interest imputed at a rate of
13.9% and 22.8%for 1997 and
1996, respectfully $4,857,000 $4,967,000
Note payable through November
1999 with interest at 9.54% 167,000 246,000
___________ ___________
5,024,000 5,213,000
Less current maturities 227,000 110,000
___________ __________
$ 4,797,000 $ 5,103,000
========== ==========
On February 20, 1997, as a result of the Landlord refinancing the
mortgage on the property, the Company's annual lease payment was
significantly reduced for the remaining life of the lease. This
resulted in the reduction of the imputed interest rate to 13.9% from
22.8% in the original lease.
The annual maturities of the long-term note payable are as follows: 1998
- - $88,000 and 1999 - $79,000. For details of the lease obligation, see
Note 8 - Commitments and Contingencies.
Short-term Borrowings
On February 23, 1996, simultaneously with the consummation of the
sale/leaseback arrangement, the Company entered into the Loan Agreement,
which provides for a working capital revolving credit facility in the
amount of $11,500,000 with an initial three-year term, expiring on
February 23, 1999.
On March 31, 1998, the Company's bank amended the Loan Agreement with
regards to the facility limit and inventory sublimit. Effective April 1,
1998 and on the opening of business on Wednesday of each consecutive week
thereafter, both the facility limit and inventory sublimit will decrease
by $25,000. As of December 31, 1997 the facility limit is $11,500,000
and the inventory sublimit is $6,000,000.
Page 17 of 34
<PAGE>
The amount of available credit is determined by the level of certain
eligible receivables and inventory. The Company's obligations under the
Loan Agreement are collateralized by substantially all of the Company's
assets.
The Company has working capital lines of credit with certain domestic and
foreign banks. The foreign working capital lines of credit are supported
by letters of credit issued under the Loan Agreement. Total borrowings
were $8,769,000 with remaining availability of approximately $2,400,000
at December 31, 1997. Borrowings at December 31, 1997 were $5,216,000
with domestic banks and $3,553,000 with foreign banks.
The domestic line of credit bears interest at prime plus 1.5% (10.0% at
December 31, 1997 and 9.75% at December 31, 1996). Interest rates on
the foreign lines of credit range between 1.9% and 3.0% in Japan and
between 6.0% and 8.3% in Europe as of December 31, 1997 and between 1.9%
and 3.0% in Japan and between 6.0% and 6.8% in Europe as of December 31,
1996. The weighted-average interest rate on short-term debt outstanding
was 7.7% and 6.8% as of December 31, 1997 and 1996, respectively.
The amended Loan Agreement requires the Company to maintain a minimum
tangible net worth and working capital, generate minimum consolidated and
domestic cash flows, and achieve a minimum adjusted funded debt to
adjusted tangible net worth ratio. In addition, the Loan Agreement
prohibits the payment of cash dividends or cash distributions to
shareholders.
During 1997 and the first half of 1998, the Company had been in violation
of certain debt covenants associated with its obligation under a
sale/leaseback arrangement and its short-term loan agreement. The
Company has obtained waivers covering these violations and believes that
they will be in compliance with applicable debt covenants for periods
subsequent to June 30, 1998. Financial covenants under the
sale/leaseback arrangement have been waived through December 31, 1998.
The Loan Agreement also provides certain letters of credit facilities for
operations of the Company's foreign subsidiaries.
The Company's Loan and Security Agreement (the "Loan Agreement") expires
on February 23, 1999, and the lender notified the Company in August 1998
that the Loan Agreement will not be extended beyond the expiration date.
Following that notification, the Company has commenced discussions with
other prospective lenders to replace the credit facility provided by the
Loan Agreement with a credit facility with a maximum available credit of
$10,000,000. The ability to proceed with a lesser maximum credit than
available under the current Loan Agreement is based on existing
improvements in the management of the Company's working capital. While
the Company believes it will be able to secure a new credit facility on
or prior to the expiration date of the Loan Agreement, it has not yet
received a commitment for such a facility and there can be no assurance
that it will do so.
The Company's foreign subsidiaries sell certain accounts receivable
balances to financial institutions. At December 31, 1997 trade
receivables discounted with recourse amounted to $958,000 and is shown
as borrowings on the balance sheet. During the years ended December 31,
1997, 1996, and 1995, approximately $4,678,536, $3,205,000, and
$5,276,000, respectively, of trade receivables were sold, with recourse,
to banks.
Page 18 of 34
<PAGE>
4. Long-term Debt - Affiliate
Long-term debt - affiliate as of December 31 consisted of the following:
1997 1996
________ ________
Subordinated term note due February 28,
1999 with interest at 12% per annum $ 6,258,000 $ 6,258,000
========= =========
The Company and Axess executed various subordinated term loans during the
years ended December 31, 1993, 1994 and 1995 aggregating $5,740,000. On
February 23, 1996, Axess and the Company consolidated all of the
outstanding notes and deferred interest amounting to $517,972 into a new
subordinated note for an aggregate amount of $6,258,000. The new note
bears interest at 12% payable monthly and is due February 28, 1999.
Payment of interest is contingent upon cash flow availability.
5. Income Taxes
The components of deferred tax assets and (liabilities) as of December 31
consisted of the following:
1997 1996
__________ __________
Inventory reserves, inventory capitalization,
and intercompany profit in inventory $1,248,000 $1,012,000
Other 2,098,000 1,140,000
Net operating loss carryforwards 8,250,000 6,191,000
Research and development and other tax
credit carryforwards 1,030,000 1,025,000
__________ __________
Gross deferred tax assets 12,626,000 9,368,000
__________ __________
Gross deferred tax liabilities (308,000) ( 73,000)
__________ __________
Net deferred tax asset before valuation
allowance 12,318,000 9,295,000
Valuation allowance on deferred tax assets (12,318,000) (9,295,000)
__________ __________
Net deferred tax asset $ -- $ --
=========== ==========
A valuation allowance is established when it is more likely than not that
a portion or all of the deferred tax assets will not be realized.
At December 31, 1997, the Company had Federal net operating loss
carryforwards for income tax purposes of approximately $8,565,000 which
expire in 2005 through 2011, State net operating losses of $12,649,000,
which expire 1998 through 2003, and foreign loss carryforwards of
approximately $12,878,000, a portion of which may be carried forward
indefinitely. The Company also has other tax credit carryforwards
aggregating approximately
$1,030,000 at December 31, 1997, which expire in 2001 through 2010.
The change in ownership resulting from the August 21, 1992 sale of Common
Stock and a subordinated convertible debenture will result in a
limitation on future annual utilization of domestic tax credits and net
operating losses, pursuant to Internal Revenue Code Sections 382 and 383.
(Loss) income before income taxes as of December 31 consisted of the
following:
1997 1996 1995
__________ __________ __________
Domestic $ 73,000 $(4,157,000) $ 34,000
Foreign (2,905,000) (2,102,000) 432,000
__________ __________ __________
$(2,832,000) $(6,259,000) $ 466,000
========= ========== =========
Page 19 of 34
<PAGE>
The components of income tax expense for the years ended December 31
consisted of the following:
1997 1996 1995
_________ _________ _________
Federal:
Current $ 30,000 $ -- $ --
Deferred -- -- --
_________ _________ _________
30,000 -- --
_________ _________ _________
Foreign:
Current 143,000 83,000 72,000
Deferred -- -- --
_________ __________ _________
143,000 83,000 72,000
_________ __________ _________
State:
Current 8,000 5,000 3,000
Deferred -- -- --
_________ _________ _________
8,000 5,000 3,000
_________ __________ __________
$ 181,000 $ 88,000 $ 75,000
========= ========== ==========
The Company's effective tax rate varies from the statutory federal tax
rate as of December 31 as a result of the following:
1997 1996 1995
__________ _________ _________
Computed statutory income
tax (benefit) provision $ (974,000) $(2,128,000) $158,000
State income taxes, net Federal
tax benefit 7,000 3,000 2,000
Foreign taxes in excess of statutory rate 75,000 11,000 9,000
Utilization of net operating losses -- -- (146,000)
Effect of loss carryforwards not
recognized 1,067,000 2,195,000 42,000
Goodwill and other nondeductible
acquisition costs -- -- 2,000
Other 6,000 7,000 8,000
_________ _________ _________
$ 181,000 $ 88,000 $ 75,000
========= ========= ==========
6. Capital Stock and Stock Option and Incentive Plans
The Company has one stock option plan under which stock options may be
granted, the 1996 Stock Option Plan (the "1996 Plan"). The 1996 Plan
authorizes the issuance of up to 250,000 shares of the Company's common
stock pursuant to incentive stock options granted under the 1996 Plan.
Stock options are granted at prices which equate to the market value of
the stock on the date of option grant. Options generally become
exercisable in ratable installments over a four-year period, with
unexercised options expiring no later than 10 years from the date of
grant.
In September 1997, the Board of Directors amended the plan to include
outside members of the Board of Directors who are not officers or
employees of the Company. The Board of Directors then granted stock
options totaling 50,000 shares at an option price of $1.38. The options
expire no later than 10 years from the date of grant.
In February 1998, the Board of directors amended the 1996 Plan to
increase the number of shares of common stock issuable pursuant to its
terms to 500,000 shares.
Page 20 of 34
<PAGE>
Stock option activity for the years 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
___________________ __________________
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
________ ________ ________ ________
<S> <C> <C> <C> <C>
Outstanding at January 1, 145,900 $1.75 146,400 $1.75
Granted 50,000 1.38 -- --
Exercised -- -- -- --
Canceled 29,500 1.75 500 1.75
Outstanding at December 31, 166,400 1.64 145,900 1.75
Excercisable at December 31, 29,100 1.75 18,238 1.75
Available for grant at
December 31, 83,600 104,100
Weighted average fair value of
Options granted during the period $1.38 $1.75
</TABLE>
The following table summarizes the information about stock options
outstanding at December 31, 1997.
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
__________________________ ___________________
Weighted
Number Average Weighted Number Weighted
Outstanding at Remaining Average Outstanding at Average
Range of December 31, Contractual Exercise December 31, Exercise
Exercise Prices 1997 Life (Years) Price 1997 Price
____________ ___________ _________ ________ __________ _________
<S> <C> <C> <C> <C> <C>
$1.38 - $1.75 166,400 2.5 $1.64 29,100 $1.75
</TABLE>
The Company has adopted the "disclosure only" provisions of Statement of
Financial Accounting Standards No. 123, Accounting for Stock Based
Compensation ("SFAS 123") and, accordingly, no compensation cost has been
recognized in the Statements of Operations. Had the Company accounted
for stock options under the fair value method of SFAS 123, net loss would
have increased by less than $25,000 for 1997 and 1996. There was no
impact on loss per share for 1997 or 1996.
The fair value for the option grants was estimated at the date of grant
using the Black-Scholes option- pricing model with the following weighted-
average assumptions:
1997 1996
_____ _____
Risk free interest rate 6.67% 6.67%
Expected Volatility 50.48% 50.48%
Expected life (years) 4 4
Dividend yield 0% 0%
In connection with the sale/leaseback arrangement, the Company issued the
following three warrants to acquire shares of its Common Stock, all
having an exercise price of $2.00 per share: (1) a warrant to the
Landlord to purchase 132,617 shares of Common Stock of the Company,
exercisable during the term of the lease; (2) a conditional warrant to
the Landlord to purchase 331,543 shares of Common Stock of the Company
which shall only be exercisable if the indebtedness owed by Landlord
under the Mortgage Loan is repaid prior to February 23, 1997; or if the
Landlord is unable to refinance the indebtedness owed under the Mortgage
Loan
Page 21 of 34
<PAGE>
prior to February 23, 1997, solely as a result of environmental
contamination relating to the 11 acres of undeveloped real estate
constituting a portion of the facility (the "Excess Land"); and (3) a
conditional warrant to the Landlord's Lender (the "Lender") to purchase
331,543 shares of Common Stock which shall only be exercisable if the
indebtedness owed under the Mortgage Loan by Landlord to Lender is not
refinanced prior to February 23, 1997. On February 20, 1997, the Landlord
refinanced the Mortgage Loan and the Company's interest in the Mortgage
Loan was repaid. On that same day, the conditional warrant to the
Landlord to purchase 331,543 shares of Common Stock of the Company became
exercisable and the conditional warrant to Lender terminated.
7. Employee Benefit Plans
The Company has a 401(k) Savings and Investment Retirement Plan (the
"401(k) Plan") under which the Company matches a portion of the
employees' salary deduction contributions. Substantially all domestic
employees are eligible to participate in the 401(k) Plan. Contributions
by the Company were $150,000, $140,000, and $129,000, for the years ended
December 31, 1997, 1996, and 1995, respectively. The Company's foreign
subsidiaries also sponsor employee retirement plans. The expense
recorded by the Company for such plans was insignificant for the years
ended December 31, 1997, 1996, and 1995. The Company does not sponsor
any post-retirement health, life insurance, or related benefit plans, nor
any significant post-employment benefit plans.
8. Commitments and Contingencies
The Company and its subsidiaries are parties to various operating leases
relating to office facilities, transportation vehicles, and certain other
equipment, principally data processing. Real estate taxes, insurance,
and maintenance expenses are normally obligations of the Company. All
leasing arrangements contain normal leasing terms without unusual
purchase options or
escalation clauses. Rent expense was $707,000, $760,000, and $857,000,
for the years ended December 31, 1997, 1996, and 1995, respectively.
On February 23, 1996, the Company entered into a sale/leaseback
arrangement which is recorded as a financing on its facility in
Piscataway, New Jersey. As a result of this transaction, the Company is
committed to a 15-year lease with an initial annual payment of $1,180,000
payable quarterly. The facility lease is treated as debt for financial
reporting purposes. See Note 3 - Long-term Debt.
On February 20, 1997, as a result of the Landlord refinancing the
mortgage on the property, the Company's annual lease payment was
significantly reduced for the remaining life of the lease. This resulted
in the reduction of the imputed interest rate to 13.9% from 22.8% in the
original lease. The resulting annual payment was $805,361, payable
monthly. The lease is subject to an annual CPI adjustment which is capped
at 3% per year. This decrease was the result of the Landlord refinancing
the mortgage on the property. On March 1, 1998 the basic rent payment
was adjusted to $820,000.
Page 22 of 34
<PAGE>
The minimum commitments under noncancellable leases consisted of the
following at December 31, 1997:
<TABLE>
<CAPTION>
Direct
Operating Financing
Year Leases Lease
_________ _________ ___________
<C> <C> <C>
1998 474,000 818,000
1999 412,000 820,000
2000 304,000 820,000
2001 268,000 820,000
2002 257,000 820,000
Thereafter 2,000 6,702,000
_________ _________
Total minimum lease payments $1,717,000 10,800,000
Less amounts representing interest 5,943,000
_________
Total lease obligation 4,857,000
Current maturities 139,000
_________
Long term lease obligation under refinancing $ 4,718,000
==========
</TABLE>
On August 27, 1998, the Company consummated the assignment of lease of
its Epsom facility in the United Kingdom to a third party and moved its
sales and service personnel to offices located in Leatherhead. In the
event of non-performance by the third party, the Company is liable.
Should they not perform the Company's additional cash outflow would be
$213,000 per year in years 1998, 1999, 2000, 2001, 2002, and $2,453,000
thereafter.
The Company amended and restated written employment agreements with key
management executives in September 1996 and March 1998, as well as
entered into an employment agreement in March 1998 with a certain key
management executive. Two agreements are for one year and one agreement
is for three years. The minimum obligation under those contracts for
1998 aggregates approximately $385,000, and for 1999 and 2000
approximately $150,000. After the initial terms of the agreements, they
will continue on a year-to-year basis. Additionally, the Company has
entered into consulting agreements. The minimum obligation under the
terms of the consultancy agreements is $61,000. The Company entered into
a 15-year royalty agreement in August 1991 for the Elongational Rheometer
Products. This royalty agreement is based on sales of the product. The
Company paid royalties of $9,000 and $25,600 in 1997 and 1996,
respectively.
In the ordinary conduct of its business, the Company may be party to
litigation. At December 31, 1997, in the opinion of management, there
are no matters pending or threatened which would have a material adverse
effect on the consolidated financial position or results of operations of
the Company.
Page 23 of 34
<PAGE>
9. Foreign Operations and Geographic Information
Information concerning sales, operating (loss) income, and identifiable
assets by geographic area and foreign operations for the years ended
December 31 are presented below (in $'000s):
1997 1996 1995
_____ _____ _____
Sales:
Domestic $ 16,804 $ 17,694 $ 14,782
Europe 11,527 14,577 15,029
Japan 9,208 8,844 11,433
________ ________ ________
Consolidated $ 37,539 $ 41,115 $ 41,244
======== ======== ========
Operating income (loss):
Domestic $ 2,083 $ (3,913) $ 1,604
Europe (1,959) (256) 281
Japan 511 352 581
________ ________ _________
Consolidated $ 635 $ (3,817) $ 2,466
======== ======== ========
Identifiable assets:
Domestic $ 28,447 $ 25,025 $ 29,035
Europe 2,967 7,539 6,066
Japan 4,020 3,481 4,992
________ ________ ________
Consolidated $ 35,434 $ 36,045 $ 40,093
======== ======== ========
Sales from domestic operations to foreign subsidiaries amounted to
$11,530,000, $9,078,000, and $9,428,000, for the years ended December 31,
1997, 1996, and 1995, respectively. Such sales between geographic areas
are priced on a basis that yields an appropriate rate of return based on
assets employed, risk, and other factors. Included in domestic sales are
export sales of $257,000, $1,731,000, and $555,000, for the years ended
December 31, 1997, 1996, and 1995, respectively.
10. Property Rights Acquisition
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 has established a distribution network while Mettler
continues to manufacture the two instruments and maintain necessary
levels of spare parts. The Company will assume responsibility for the
manufacturing, sales, and service of the two products in 1999.
The Company recorded an intangible asset of $1,525,000, included in other
assets, related to the property rights acquired. The intangible asset
was amortized using the straight-line method over six years. In the
fourth quarter of 1996, an impairment loss of $696,000 was recognized.
(See Note 1 - Accounting for the Impairment of Long-Lived Assets.)
The original cost of the property rights was 2,500,000 Swiss Francs or
$1,905,500 U.S. dollars.
During the transition phase, the Company will pay Mettler for
manufacturing the products plus a 10% royalty payment on sales. After
the Company assumes manufacturing, Mettler will receive
Page 24 of 34
<PAGE>
quarterly royalty payments based upon a percentage of sales or a minimum
payment formula. Beginning in 1995, interest accrues on the unpaid
balance at 6% per annum. The original cost of $1,905,500 was adjusted
for anticipated interest costs to arrive at total estimated payments of
$2,225,500. This amount was discounted using a 12.9% effective rate of
interest. The Company recorded a liability of $1,525,000, included in
other long-term liabilities. The discount is being amortized over a six-
year period using the interest method. The liability balance at December
31, 1997 is $1,540,000.
11. Related Parties
Mr. Robert E. Davis was president and CEO of the Company from September
20, 1993 through August 31, 1997. Effective January 1, 1994, the Company
and Axess verbally agreed that the Company would pay to Axess a
management fee, equal to $150,000 per year for Mr. Davis's services paid
by Axess. The amount included in payable to affiliate at December 31,
1997 and 1996 for said services is $517,000 and $450,000, respectively.
12. Restructuring of Operations
In the third quarter of 1997, a restructuring provision totaling
$1,624,000 was recorded for the restructuring of the international
manufacturing and sales and marketing operations. The restructuring
charge consists of approximately $1,300,000 for costs associated with the
planned sub-lease of the UK manufacturing facility, $100,000 for
termination of other leases in Europe and $224,000 of severance costs for
the UK manufacturing employees. At December 31, 1997 the restructuring
reserve of $1,624,000 was reduced by $684,000 as the result of the
assignment of the UK lease to a third party at more favorable terms than
initially anticipated. The restructuring reserve of $940,000 as of
December 31, 1997 is a component of accrued liabilities in the
Consolidated Balance Sheet. No amounts were charged to the restructuring
reserve in the fourth quarter.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Executive Officers. Officers of the Company are appointed to serve,
subject to the discretion of the Company's Board of Directors, until the
meeting of the Board of Directors following the next annual meeting of
shareholders and until their successors have been elected and qualified.
The following is a list of names and ages of all the executive officers
of the Registrant, as of December 31, 1997, indicating all positions and
offices held with the registrant by each such person and each such
person's principal occupations or employment during the past five years.
Age as of
Name March 13, 1998 Offices and Positions Held
Alan R. Eschbach 51 President and Chief Executive Officer
from August 31, 1997 to February 6, 1998 and
Director since August 31, 1997; Executive Vice
President, Chief Operating Officer since
November 10, 1994; prior thereto, Vice
President, Domestic & International Sales &
Marketing since October 1988. Mr. Eschbach was
an officer of the Company from February 1982
to February 1998.
Page 25 of 34
<PAGE>
Age as of
Name March 13, 1998 Offices and Positions Held
Joseph Musanti 40 Vice President, Finance & Materials and Chief
Financial Officer since June 1,
1997 and Treasurer and Assistant Secretary
since July 17, 1997; prior thereto Director
of Operations from November 1994 to June 1,
1997; UK Financial Manager from April 1994 to
November 1994; Manager, Materials, Cost, and
Inventory from October 1992 to April 1994;
and Cost Accountant from February 1989 to
October 1992.
Ronald F. Garritano 59 Vice President, Technology since June
1992, Vice President of Engineering
since July 1977.
Matthew Bilt 55 Vice President, Human Resources and
Administration since July 17, 1997; prior
thereto Vice President, Human Resources from
November 10, 1994 to July 17, 1997; prior
thereto, Vice President, Human Resources and
Administration from May 3, 1994 to November
10, 1994 and Director of Human Resources
from June 2, 1986 to May 3, 1994.
Board of Directors. Directors of the Company are elected to hold office
for one year, until the next annual meeting of shareholders or until
their respective successors have been elected and qualified. The
following is a list of Directors with biographical information.
<TABLE>
<CAPTION>
Principal Occupation or Employment
During the Past Five Years and Office Director
Name Age (if any) Held in the Company Since
<S> <C> <C> <C>
Alexander F. Giacco 78 Chairman of the Board since August 31, 1997, 1993
President and Chief Executive Officer since
February 6, 1998. Managing Director, Axess
Corporation since its inception in 1991;
prior thereto Chairman of the Board of
Directors of HIMONTIncorporated, a plastics
manufacturing company, since its formation
(1983-1991), and served as CEO (1987-1990).
Mr. Giacco is the father of Richard J. Giacco.
Leonard Bogner 57 President, Bogner Business Consultants, Inc. 1995
since its formation in November 1994; prior
thereto, Senior Chemicals Research Department
Analyst, Prudential Securities Brokerage Firm,
from May 1986 to October 1994.
Walter M. Bromm 63 Retired; prior thereto, Senior Vice President, 1998
Montell, Inc., a polyolefin materials company, from 1993 to
1997, and Senior Vice President, HIMONT
Incorporated, a plastics
manufacturing company from 1987 to 1993.
Page 26 of 34
<PAGE>
Principal Occupation or Employment
During the Past Five Years and Office Director
Name Age (if any) Held in the Company Since
Alan R. Eschbach 51 President, Flow Technology, Inc. an 1997
instrumentation Company specializing in flow
measurement products since February 1998;
prior thereto President and Chief
Executive Officer, Rheometric Scientific, Inc.
from August 31, 1997 to February 6, 1998 and
Director since August 31, 1997; Executive Vice
President, Chief Operating Officer from
November 1994 to August 1997; and Vice
President, Domestic & International Sales &
Marketing from October 1988 to November 1994.
Richard J. Giacco 45 Vice President and General Counsel, Axess 1992
Corporation since its inception in 1991;
prior thereto served as
associate general counsel for Safeguard
Scientifics, Inc., a computer software and
electronics company since 1985. Mr. Giacco is
the son of Alexander F. Giacco.
R. Michael Hendricks 60 President, Axess Corporation since its 1992
inception in 1991; Prior thereto served as
president and chief operating officer of
HIMONT Incorporated, a plastics manufacturing
company, since 1983.
Robert K. Prud'homme 50 Professor of Chemical Engineering at 1981
Princeton University since 1978; Consultant
to Dow Chemical Company, Block Drug, Helene
Curtis, and Rhodia Incorporated.
Item 11. Executive Compensation
The following table sets forth a summary of all compensation paid or accrued
by the Company for services rendered during the 12-month periods ended
December 31, 1997, 1996, and 1995, to the Company's chief executive officer
and the four most highly compensated executives of the Company whose
aggregate salary and bonus exceeded $100,000 for the 12-month period ended
December 31, 1997 (the "Named Executive Officers"):
</TABLE>
<TABLE>
Executive Compensation
<CAPTION>
Annual Compensation Long Term
__________________ Compensation
___________
Awards
All other Securities
Name and Salary Compensation Underlying
Principal Position Year ($) Bonus ($) Options
_________________________ _____ _______ _____ ___________ _________
<S> <C> <C> <C> <C> <C>
Alan R. Eschbach (2) 1997 $165,614 0 $2,235 0
President, Chief Executive 1996 161,313 0 3,289 28,000
Officer, and Director 1995 153,948 $4,996 3,150 0
Robert E. Davis (3) 1997 100,000 0 0 0
Chief Executive Officer and 1996 150,000 0 0 0
President 1995 150,000 0 0 0
</TABLE>
Page 27 of 34
<PAGE>
<TABLE>
<CAPTION>
Awards
All other Securities
Name and Salary Compensation Underlying
Principal Position Year ($) Bonus ($) Options
___________________________ _____ _______ _____ __________ _________
<S> <C> <C> <C> <C> <C>
Ronald F. Garritano 1997 146,506 0 2,672 0
Vice President, Technology 1996 144,687 0 2,889 18,000
1995 140,658 3,293 2,809 0
Matthew Bilt 1997 116,693 0 1,660 0
Vice President, Human 1996 115,582 0 1,425 9,400
Resources 1995 114,423 2,585 1,386 0
John Fuhrmeister (4) 1997 120,383 0 2,235 0
Vice President, Finance 1996 124,363 0 2,430 0
& Administration 1995 121,047 2,770 1,986 0
__________________________
(1) Company contributions under the Savings and Investment Retirement
Plan.
(2) Mr. Eschbach resigned on February 6, 1998. Mr. Alexander F. Giacco
became president and chief executive officer effective that date.
(3) Mr. Davis served as president and CEO of the Company from September
20, 1993 to August 31, 1997. Rheometric and Axess verbally agreed that
Rheometric would pay to Axess a management fee, equal to $150,000 per
year, for said services. See Item 13. Certain Relationships and Related
Transactions.
(4) Mr. John Fuhrmeister left the Company effective May 23, 1997.
</TABLE>
Options Exercises and Holdings
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options during the last
fiscal year and unexercised options held as of the end of the last fiscal
year.
Aggregated Option Exercises in Last Fiscal year and FY-End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at 12-31-97 (#) 12-31-97 ($) (1)
Exercisable Unexercisable Exercisable Unexercisable
Alan R. Eschbach 7,000 21,000 $0 $0
Ronald F. Garritano 4,500 13,500 $0 $0
Matthew Bilt 2,350 7,050 $0 $0
______________
(1) Market value of in-the-money shares on December 31, 1997 ($0.938),
less option exercise price.
Stock Options
The Company currently has a Non-Qualified Stock Option Plan (the "1996
Plan"). The 1996 Plan was adopted by the Board of Directors in February
1996 and approved by the shareholders in June 1996. No options were granted
to employees during the 12-month period ended December 31, 1997.
Option Exercises and Year-End Value
To date, no options under the Option Plan have been exercised.
Compensation of Directors. Non-employee directors of the Company are
paid an annual retainer fee of $3,000, plus $1,000 per Board meeting
attended and reimbursement of their travel expenses. No fees are paid
for committee meetings or special telephone meetings. In 1997, two non-
employee directors were granted options for 25,000 shares of common
stock.
Page 28 of 34
<PAGE>
Employment Agreements. The Company amended and restated written
employment agreements with Mr. Bilt in September 1996 and with Mr.
Garritano in March 1998. In addition, the Company entered into a written
employment agreement with Mr. Musanti in March 1998. Under these
agreements, base annual salary is $150,000 for Mr. Garritano, $115,000
for Mr. Bilt, and $120,000 for Mr. Musanti, all subject to discretionary
increase by the Board of Directors. Messrs. Bilt and Musanti's
employment agreements have an initial term of one year and can be
continued from year to year thereafter. Mr. Garritano's agreement, which
was amended in March 1998, has an initial term of three years and can be
continued from year to year thereafter.
The employment agreements contain a provision that provides for the
executives to be compensated should their employment be terminated upon a
change of control. Messrs. Bilt and Musanti's agreements indicate that
they would be entitled to receive one year's base pay, plus any bonus
participation or other benefit that the executive may be entitled to for
up to one year. Upon a termination due to a change of control, Mr.
Garritano's employment agreement provides for the greater of the term of
the agreement or one year's base pay, plus any bonus participation or
other benefit that the he may be entitled to. If a change of control
were to occur today and Mr. Garritano's employment was terminated, Mr.
Garritano would be entitled to receive $491,538.
Mr. M. Starita, father of Dr. Joseph M. Starita, past Chairman of the
Board, was party to a contract entered into in 1982, which entitled him
to be paid $15,000 per year for a period of 10 years following his
retirement. During fiscal year ended June 30, 1985, Mr. M. Starita
received an advance payment of $45,115 with respect to such post-
retirement payments. The amount so advanced will be deducted from the
post-retirement payments to be made to him. Mr. M. Starita's post-
retirement payments commenced during 1994.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information with respect to persons known
by the Company, as of March 13, 1998, to be the beneficial owners of more
than 5% of outstanding Common Stock.
Unless otherwise indicated, each such person has sole voting and
dispositive power over the shares indicated.
Name and Address No. of Shares Percent
_______________________ ____________ _________
Axess Corporation
100 Interchange Blvd.
Newark, Delaware 19711-3549 10,076,257 76.6%
Dr. Joseph M. Starita
20553 State Route 245
Marysville, OH 43040-0648 711,135 5.4%
Security Ownership of Management
Rheometric Scientific, Inc. Common Stock Ownership
The following table sets forth information as of March 13, 1998 with
respect to shares of Common Stock beneficially owned by each director and
named executive officer (see "Item 11. Executive Compensation") of the
Company and by all directors and Named Executive Officers as a group.
Page 29 of 34
<PAGE>
<TABLE>
<CAPTION>
No. of Shares
Name and Title Beneficially Owned (1) Percent
__________________________________ __________________ ________
<S> <C> <C>
Alexander F. Giacco, Chief Executive
Officer, Chairman of the Board 66,000 (2) *
Alan R. Eschbach, Ex-Chief Executive
Officer, Director (3) 2,240 *
Robert E. Davis, Ex-Chief Executive
Officer and Ex-Director 5,000 *
Leonard Bogner, Director (4) -- --
Walter M. Bromm, Director (5) -- --
Richard J. Giacco, Director 3,000 (6) *
R. Michael Hendricks, Director 3,000 *
Robert K. Prud'homme, Director (7) -- --
Matthew Bilt, Vice President, Human
Resources & Administration 4,350 *
Ronald F. Garritano, Vice President,
Technology 8,235 *
Joseph Musanti, Vice President,
Finance & Materials 1,625 *
John C. Fuhrmeister, Ex-Vice President,
Finance & Administration -- --
All directors and executive officers as
a group (12 persons) (8) 93,450 *
* Denotes less than 1% of the outstanding shares of Common Stock.
(1) In accordance with Rule 13d-3 under the Securities Exchange Act of
1934 ("1934 Act"), a person is deemed to be the beneficial owner, for
purposes of this table, of any shares of Common Stock (1) over which he
or she has or shares voting or investment power, or (2) of which he or
she has the right to acquire beneficial ownership at any time within
60 days from March 13, 1998. "Voting power" is the power to vote or
direct the voting of shares and "investment power" is the power to
dispose or direct the disposition of shares. All persons shown in the
table above have sole voting and investment power, except as otherwise
indicated.
(2) Includes beneficial ownership of 10,000 shares held as custodian for
grandchildren.
(3) Does not include (i) 28,000 shares underlying options canceled due
to Mr. Eschbach's resignation as an officer of the Company and (ii)
25,000 shares underlying options granted subject to shareholder approval.
(4) Does not include 25,000 shares underlying options granted subject to
shareholder approval.
(5) Does not include 25,000 shares underlying options granted subject to
shareholder approval.
(6) Includes beneficial ownership of 1,000 shares held in an investment
partnership for the benefit of his children and managed by Mr. Giacco.
(7) Does not include 25,000 shares underlying options granted subject to
shareholder approval.
(8) Does not include 100,000 shares underlying options granted subject
to shareholder approval.
</TABLE>
Page 30 of 34
<PAGE>
Axess Corporation Common Stock Ownership
The following table sets forth information as of March 13, 1998 with
respect to shares of Axess Corporation Common Stock beneficially owned by
directors and Named Executive Officers of Rheometric Scientific, Inc.:
No. of Shares
Name and Title Beneficially Owned (1) Percent
__________________________________ ________________ _______
Robert E. Davis, Ex-CEO, Ex-Director (2) 469,565 21.6%
Alexander F. Giacco, Chief Executive Officer
and Chairman of the Board 469,565 (3) 21.6%
Richard J. Giacco, Director 46,957 2.6%
R. Michael Hendricks, Director 187,826 (4) 8.6%
(1) Axess Corporation is a privately held Delaware corporation
established in 1991. See note 1 above under "Rheometric Scientific,
Inc. Common Stock Ownership."
(2) Robert E. Davis retired effective August 31, 1997.
(3) 446,087 shares (20.3%) are owned by revocable trust. 23,478 shares
(1.3%) held by a company in which Mr. Giacco has sole voting power.
(4) Owned by revocable trust.
Item 13. Certain Relationships and Related Transactions
Mr. Robert E. Davis was president and CEO of the Company from September
20, 1993 to August 31, 1997. In January 1994, the Company and Axess
verbally agreed that the Company would pay to Axess a management fee,
equal to $150,000 per year. Included in accrued liabilities at
December 31, 1997 is $517,000 for said services.
On February 23, 1996, Axess and the Company consolidated all
outstanding debt of the Company to Axess, totaling $5,740,000, along
with deferred interest amounting to $517,972, into a new subordinated
note for an aggregate amount of $6,257,972. The new note bears
interest at 12% payable monthly and is due February 28, 1999.
At December 31, 1997, the Company owed to Axess $148,088.20 for
insurance premium advances.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as a part of this Report.
(1) Financial statements - All financial statements
are set forth under Item 8, pages 10 through 25
Independent auditor's report on consolidated financial
statements
and on schedules is on page 9
(2) Financial statement schedules: none
The required information is inapplicable or the information is
presented in the financial statements or related notes
Page 31 of 34
<PAGE>
(3) Exhibits (numbered in accordance with Item 601 of Regulation
S-K).
3.1 Certificate of Incorporation of the Registrant, as Amended,
incorporated by reference to Exhibit 3.1 to the Company's
Quarterly Report on Form 10-Q for the period ended March 31,
1995 (File No. 0-14617).
3.2 By-Laws of the Registrant, as Amended, incorporated by
reference to Exhibit 3.2 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1993 (File No. 0-
14617).
4.1 Specimen Certificate representing Common Stock of the
Registrant, incorporated by reference to the exhibits to the
Company's Registration Statement on Form S-1, File No. 33-807
filed on October 10, 1985.
4.2 Warrant to Purchase 132,617 shares Common Stock of Rheometric
Scientific, Inc. issued to RSI (NJ) QRS 12-13, Inc., incorporated by
reference to Exhibit 1 to the Company's Current Report on Form 8-K
dated February 23, 1996 (File No. 0-14617).
4.3 Warrant to Purchase 331,543 shares of Common Stock of
Rheometric Scientific, Inc. issued to RSI (NJ) QRS 12-13, Inc.,
incorporated by reference to Exhibit 2 to the Company's Current
Report on Form 8-K dated February 23, 1996 (File No. 0-14617).
*4.4 Rheometric Scientific, Inc. 1996 Stock Option Plan,
incorporated by reference to Exhibit 4.3 to the Company's
Quarterly Report on Form 10-Q for the period ended June 30,
1996 (File No. 0-14617).
*10.3 Amended and Restated Employment Agreement between
Ronald F. Garritano and the Company.
*10.4 Employment Agreement between Matthew Bilt and the
Company, incorporated by reference to Exhibit 10.4 to the
Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1996 (File No. 0-14617).
*10.5 Employment Agreement between Joseph Musanti and the
Company
10.6 Loan and Security Agreement with Fleet Capital
Corporation dated February 23, 1996, incorporated by
reference to Exhibit 1 to the Company's Current Report on
Form 8-K dated February 23, 1996 (File No. 0-14617).
10.7 Lease Agreement by and between RSI (NJ) QRS 12-13, Inc., and
Rheometric Scientific, Inc. dated as of February 23, 1996,
incorporated by reference to Exhibit 5 to the Company's Current
Report on Form 8-K dated February 23, 1996 (File No. 0-14617).
10.8 Revolving Credit Facility Note - Fleet Capital Corporation,
incorporated by reference to Exhibit 6 to the Company's Current
Report on Form 8-K dated February 23, 1996 (File No. 0-14617).
10.9 Subordination Agreement between Axess Corporation and Fleet
Capital Corporation, incorporated by reference to Exhibit 10.26 to
the Company's Annual Report on Form 10-K dated December 31, 1995
(File No. 0-14617).
10.10 Subordination Agreement between Axess Corporation and RSI (NJ)
QRS 12-13, Inc., incorporated by reference to Exhibit 10.27 to the
Company's Annual Report on Form 10-K dated December 31, 1995 (File
No. 0-14617).
10.11 Amended and Restated Subordinated Unsecured Working Capital
Note - Axess Corporation, incorporated by reference to Exhibit
10.28 to the Company's Annual Report on Form 10-K dated December
31, 1995 (File No. 0-14617).
10.12 First Amendment to Lease Agreement dated June 10, 1996 between
RSI (NJ) QRS 12-13, Inc. and Rheometric Scientific, Inc.
incorporated by reference to Exhibit 10.12 to the Company's Annual
Report on Form 10-K dated December 31, 1996 (File No. 0-14617).
10.13 Second Amendment to Lease Agreement dated February 20, 1997
between RSI (NJ) QRS 12-13, Inc. and Rheometric Scientific, Inc.
incorporated by reference to Exhibit 10.13 to the Company's Annual
Report on Form 10-K dated December 31, 1996 (File No. 0-14617).
Page 32 of 34
<PAGE>
10.14 Amendment Letter dated May 2, 1997 by Fleet Capital Corporation,
amending Sections 9.1(J) and 9.3(D) of the Loan and Security
Agreement dated February 23, 1996, incorporated by reference to
Exhibit 10.14 to the Company's Annual Report on Form 10-K dated
December 31, 1996 (File No. 0-14617).
10.15 Amendment Letter dated May 6, 1997 by RSI (NJ) QRS-12-13,
Inc., amending paragraphs 7 and 8 of Exhibit D to the Lease
Agreement dated as of February 23, 1996, incorporated by reference
to Exhibit 10.15 to the Company's Annual Report on Form 10-K dated
December 31, 1996 (File No. 0-14617).
10.16 Amendment to Loan and Security Agreement with Fleet Capital
Corporation dated March 31, 1998
22 Subsidiaries of the Registrant, incorporated by reference to
Exhibit 22 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1994 (File No. 0-14617).
23 Consent of Independent Auditors.
* Management contract or compensatory plan or arrangements
(b) No report on Form 8-K was filed during the quarter ended
December 31, 1997.
(c) Exhibits to this Form 10-K are incorporated by reference as
stated above.
Page 33 of 34
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS
ANNUAL REPORT ON FORM 10-K TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED.
RHEOMETRIC SCIENTIFIC, INC.
By: /s/ A F Giacco
Date: September 10, 1998 Alexander F. Giacco,Chairman,
President and Chief Executive Officer
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/ A F Giacco Chairman, President, and September 10, 1998
Alexander F. Giacco Chief Executive Officer
(principal executive officer)
/s/ Joseph Musanti Vice President, Finance September 10, 1998
Joseph Musanti and Materials; Chief
Financial Officer; and Assistant
Secretary (principal financial and
(principal accounting officer)
/s/ Leonard Bogner Director September 10, 1998
Leonard Bogner
Director
Walter M. Bromm
/s/ Alan R. Eschbach Director September 10, 1998
Alan R. Eschbach
/s/ Richard J. Giacco Director September 10, 1998
Richard J. Giacco
/s/ R. M. Hendricks Director September 10, 1998
R. Michael Hendricks
Director
Robert K. Prud'homme
Page 34 of 34
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the year
ended December 31, 1997 Form 10-K and is qualified in its entirety by reference
to such 10-K.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 297
<SECURITIES> 0
<RECEIVABLES> 14,916
<ALLOWANCES> 0
<INVENTORY> 11,859
<CURRENT-ASSETS> 27,885
<PP&E> 15,904
<DEPRECIATION> 9,475
<TOTAL-ASSETS> 35,434
<CURRENT-LIABILITIES> 20,309
<BONDS> 4,797
0
0
<COMMON> 13
<OTHER-SE> 2,817
<TOTAL-LIABILITY-AND-EQUITY> 35,434
<SALES> 37,539
<TOTAL-REVENUES> 37,539
<CGS> 20,728
<TOTAL-COSTS> 20,728
<OTHER-EXPENSES> 16,176
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,358
<INCOME-PRETAX> (2,148)
<INCOME-TAX> 181
<INCOME-CONTINUING> (2,329)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,329)
<EPS-PRIMARY> (0.18)
<EPS-DILUTED> (0.18)
</TABLE>
Exhibit 10.3
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This Agreement is entered into on March __, 1998, by and
between Rheometric Scientific, Inc., a New Jersey corporation
("Company") and Ronald F. Garritano, a New Jersey resident
("Executive").
Background
A. Executive is currently the Vice President, Technology,
of the Company.
B. Executive and the Company are parties to an Employment
Agreement dated May 26, 1992 ("1992 Agreement"), as amended and
restated, which they now wish to amend and restate again.
C. Each of the Company and Executive acknowledge that it
is to their mutual and respective benefit to enter into this
Amended and Restated Employment Agreement ("Agreement").
Now, therefore, in consideration of the foregoing and of the
respective covenants and agreements of the parties herein
contained, the Company and Executive hereby agree as follows:
1. Employment and Term..
(a) The Company hereby agrees to continue to employ
Executive and the Executive hereby agrees to continue to serve
the Company, subject to and upon the terms and conditions set
forth below.
(b) Subject to the provisions of Section 6 hereof, the
period of the Executive's employment by the Company under this
1
<PAGE>
Agreement (the "Employment Term") will commence on the date of
this Agreement and will continue through February 28, 2001. The
Employment Term will continue thereafter on a year-to-year basis,
unless the Company provides Executive notice (at least 3 months
prior to February 28, 2001 or the first anniversary of the
continuation then in effect) that the Company has elected not to
continue the Employment Term for the next year. The last day of
the Employment Term, without regard to any early termination
pursuant to Section 6, is herein referred to as the "Expiration
Date."
2. Executive Position and Duties and Responsibilities.
During the Employment Term, the Executive will continue to
serve as the Vice President, Technology, the Company, with such
management and executive duties and responsibilities as may be
assigned to him from time to time by the Company's Board of
Directors and the Company's Chief Executive Officer, provided
that such duties and responsibilities are consistent with the
current duties and responsibilities of the Executive's positions.
3. Compensation and Reimbursement of Expenses.
During the Employment Term, Executive will receive the
following compensation and benefits from the Company:
(a) Base Salary. The Executive will receive an annual
base salary, payable no less frequently than bi-weekly, at the
annual rate of $ 150,000.00, subject to any increase the Board of
2
<PAGE>
Directors may provide in its sole discretion (the "Base Salary").
(b) Bonus. Executive will be entitled to receive incentive
compensation based on the performance of the Executive and the
Company in accordance with and subject to the terms and
conditions of the Management Incentive Bonus Program of the
Company.
(c) Reimbursement of Expenses. The Executive will be
reimbursed for all reasonable expenses incurred by him in
performing services hereunder upon presentation to the Company by
the Executive of documentation acceptable to the Company under
its standard policies.
(d) Benefits. The Executive will be entitled to participate
in or receive the benefits he currently receives (as listed on
Schedule A) and such other benefits as the Company may generally
grant to its executive officers.
(e) Vacation and Leave. The Executive will be entitled
to four (4) weeks annually of vacation during which his
compensation pursuant to this Section 3 will be paid in full,
provided that the Executive will give reasonable notice to the
Chief Executive Officer of the Company of desired vacation
periods and no more than two (2) weeks of vacation will be taken
within any thirty (30) day period. Vacation time not taken by
the Executive in any given year will not accrue to succeeding
years unless the standard policies of the Company provide
3
<PAGE>
otherwise. Leaves of absence may be granted by the Board of
Directors in its sole discretion. The Company shall pay the
Executive for past unused vacation time accrued prior to December
31, 1995 at the time of a Change in Control (as defined in
Section 12).
4. Performance of Duties.
During the Employment Term the Executive will devote his
entire business time and attention to the performance of his
duties under this Agreement and will serve the Company diligently
and to the best of his abilities and will not engage in any other
business activity without the prior written approval of the Board
of Directors, provided that the Executive may, with the prior
approval of the Board of Directors, serve on boards of directors
of other corporations or institutions, if such service, in the
opinion of the Board of Directors, presents no conflict with the
Company.
5. Restrictive Covenants.
(a) Acknowledgments. The Executive acknowledges that:
(i) His position with the Company requires the
performance of services that are special, unique and intellectual
in character and he is and will be in a position of confidence
and trust with the employees and customers of the Company and its
subsidiaries and their joint venture partners, through which he
has obtained or will obtain, among other things, knowledge of
4
<PAGE>
such organizations and their customers, in which those
organizations have a proprietary interest, and
(ii) The restrictive covenants set forth in this
Agreement are necessary in order to protect such proprietary
information and other legitimate business interests of the
Company and its subsidiaries and their joint venture partners and
that the Company would not have entered into this Agreement
unless those restrictive covenants were included, and
(iii) The business and sales efforts of the Company are
conducted on a worldwide basis and that he has personally
supervised or engaged in such business and will continue to do so
pursuant and subject to the terms of this Agreement, and
(iv) The enforcement of the restrictive covenants set
forth in this Agreement will not prevent him from maintaining a
livelihood.
(b) Noncompetition and Nonsolicitation.
(i) Mandatory Restrictions during Employment. Subject
to the further provisions of this Section 5, for so long as the
Executive is employed pursuant to the terms of this Agreement and
without any requirement of further payment therefor, Executive
shall not take any of the actions set forth in Section 5(b)(iii)
hereof anywhere in the world without the prior express written
consent of the Company.
5
<PAGE>
(ii) Mandatory Restrictions following term of
Employment. (A) Subject to the further provisions of this
Section 5, in the event of Voluntary Termination (as defined
hereinafter) by the Executive or in the event of Company
Termination for Cause (as defined hereinafter) and without any
requirement of further payment therefor, Executive shall not take
any of the actions set forth in Section 5(b)(iii)(A)or
5(b)(iii)(B)(I)hereof anywhere in the world for one (1) year
following termination of employment hereunder and Executive shall
not take any of the actions set forth in Section 5(b)(iii)(B)(II)
or Section 5(b)(iii)(B)(III) hereof anywhere in the world for
two(2) years following termination of employment hereunder.
(B) Subject to the further provisions of this
Section 5, in the event of an Involuntary Termination by
Executive (as defined hereinafter); Company Termination Without
Cause (as defined hereinafter); or Termination Upon Disability
(as defined hereinafter), the Executive shall not, without the
prior written consent of the Company take any of the actions set
forth in Section 5(b)(iii)(A)or 5(b)(iii)(B)(I) within the
"Restricted Period" (as defined below)and shall not take any of
the actions set forth in Section 5(b)(iii)(B)(II) or Section
5(b)(iii)(B)(III)for a period of two (2) years following the
termination of employment hereunder anywhere in the world. For
purposes of this Agreement "Restricted Period" means the period
6
<PAGE>
of time in which Executive is entitled to receive payments and
benefits under Section 7(a), 7(b) or 7(c), as the case may be,
notwithstanding any reduction or elimination of those payments
and benefits pursuant to the second sentence of Section 7(d).
(iii) Prohibited Actions. To the extent that this
Section 5(b)(iii) is expressly made applicable by other
provisions of this Agreement, the Executive shall not:
(A) directly or indirectly (whether for
compensation or otherwise), alone or as an agent, principal,
partner, officer, employee, trustee, director, shareholder,
consultant or in any other capacity, own, manage, operate,
control, or participate in the ownership, management, operation
or control of any business which competes with the business of
the Company or its subsidiaries or their joint venture partners
as it may be conducted at the time of termination of employment
provided, however that nothing in this Section 5(b)(iii)(A) will
prohibit the Executive from acquiring or holding not greater than
one percent of any class of publicly traded securities of any
business; or
(B) directly or indirectly (I) approach or
solicit for business or otherwise deal with any customer of the
Company or its subsidiaries or their joint venture partners other
than on behalf of the Company, (II) approach or attempt to induce
any employee of the Company or its subsidiaries or their joint
7
<PAGE>
venture partners to leave the employ of the Company or its
subsidiaries or their joint venture partners, (III) employ any
person who is an employee of the Company or its subsidiaries or
their joint venture partners on the date of, or within the six
months preceding, the termination of the employment of
Executive, or (IV) aid or counsel any other person to undertake
any action listed in (I),(II) or (III) above.
For the purposes of this Section 5, "customer" means any customer
of the Company during the last two years of the Executive's
employment with the Company or any prospective customer to whom
the Company made a presentation (or similar offering of services)
during the last year of Executive's employment with the Company.
(c) Confidentiality. Executive shall comply with the
terms of a certain agreement containing (a) restrictions of
confidential information and (b) inventions and discoveries by
executive (among other provisions) (the "Confidentiality
Agreement") as attached hereto as Exhibit A.
(d) The parties hereby agree that the restrictions
contained in this Section 5 and the Confidentiality Agreement are
reasonable in scope and duration. However, in the event a court
of competent jurisdiction determines finally that the duration or
scope of any provision of this Section 5 and the Confidentiality
Agreement is unreasonable or unenforceable in part, then this
8
<PAGE>
Section 5 and the Confidentiality Agreement will be deemed to be
amended so as to contain such provisions as the court will deem
reasonable and enforceable.
(e) Notwithstanding any provision to the contrary in
Section 5 (b), the restrictions contained in subsections (A) and
(B) of Section 5(b)(iii) will continue for any period in excess
of the applicable period following termination of employment in
which Executive continues to receive compensation under Section 7
of this Agreement.
6. Termination of Employment. Subject to the further
provisions of this Agreement, the Company and Executive may
terminate the employment of Executive under this Agreement prior
to the Expiration Date as follows:
(a) Voluntary Termination by the Executive. The Executive
may terminate his employment under this Agreement at any time (a
"Voluntary Termination by Executive").
(b) Involuntary Termination by Executive. The Executive
may terminate his employment under this Agreement at any time for
good reason. "Good reason" means (i) the assignment to the
Executive of any duties inconsistent with his present duties and
responsibilities or any reduction or elimination of those duties
or responsibilities as Vice President, Technology, (ii) the
withdrawal by the Company of the title of Vice President,
Technology, from the Executive without his consent; (iii) the
9
<PAGE>
Company's requirement that the Executive maintain his principal
office or conduct his principal activities (other than business
trips) from anywhere other than the present principal executive
offices of the Company in Piscataway, New Jersey; (iv) the
failure by the Company to obtain the assumption and agreement to
perform this Agreement on the terms described in Section 12; or
(v) the breach by the Company of any material obligation of the
Company under this Agreement, provided that any breach of a
payment obligation to the Executive under this Agreement will
constitute "good reason" only if the breach is not cured within
five days of notice by Executive.
(c) Termination Without Cause. The Company may, at any
time, terminate the Executive's employment under this Agreement
without cause (a "Company Termination Without Cause").
(d) Termination for Cause. Notwithstanding anything to
the contrary contained in this Agreement, the Company may
terminate the Executive's employment under this Agreement at any
time for cause (a "Company Termination for Cause"). As used
herein, the term "for cause" means (1) the Executive's conviction
for a felony under the laws of the United States or any state or
political subdivision, (2) misappropriation by the Executive of
company funds or other misconduct materially injurious to the
Company, (3) breach of the Executive's fiduciary duty to the
Company involving personal profit or (4) material breach of this
10
<PAGE>
Agreement by the Executive.
(e) Termination Upon Death or Disability of the Executive.
In the event that the Executive dies, his employment hereunder
will be deemed terminated without further action ("Termination
Upon Death"). In the event that the Executive is declared
incompetent by a court of appropriate jurisdiction, or is unable
to perform his duties hereunder for a continuous period exceeding
six (6) months by reason of illness or disability, then, upon at
least thirty (30) days' advance notice following the event giving
rise to the power to terminate hereunder, the Company may
terminate the Executive's employment under this Agreement
("Termination Upon Disability"). Executive agrees to take such
reasonable actions (including providing full and accurate
information requested by insurers) as may be necessary to allow
the Company to obtain and maintain, for its own benefit, life and
disability insurance covering the Executive.
(f) Notice of Termination. Except for a Termination Upon
Death, any purported termination of employment under Sections
6(a) through 6(e) of this Agreement will be communicated by a
written notice of termination from the party exercising its right
to terminate ("Notifying Party") to the other party ("Responding
Party"). For the purposes of this Agreement, a "Notice of
Termination" will indicate the specific termination provision in
this Agreement relied upon and will set forth in reasonable
11
<PAGE>
detail the facts and circumstances then known to the Notifying
Party which are claimed to provide a basis for termination under
the provision so indicated, provided, however, that no recitation
of facts and circumstances will be required in respect to a
Company Termination Without Cause or a Voluntary Termination by
Executive.
7. Payments and Benefits Following Termination Pursuant to
Section 6.
(a) Before a Change in Control. Following a Company
Termination Without Cause, an Involuntary Termination by
Executive, a Termination for Death or a Termination for
Disability, to the extent such a termination occurs before a
Change in Control (as defined in Section 12 hereof), the
Executive (or his personal representative) will receive until the
Expiration Date:
(i) One hundred percent of the salary set forth in
Section 3(a) as the same may have been increased from time to
time, payment of which will be at the time provided for in this
Agreement as if the Executive's employment under this Agreement
had not terminated, minus, in the event of a Termination for
Disability, the amount of any disability benefits provided for
the Executive under any sickness, retirement or other benefit
plans provided by the Company,
(ii) Health (as to the Executive and his dependents who
12
<PAGE>
are covered as of the termination), life and disability insurance
coverage substantially comparable to those furnished to the
Executive by the Company immediately prior to the termination of
employment hereunder,
(iii) the full amount of reimbursement of expenses
incurred through the date of termination of employment in
accordance with Section 3(d), and
(iv) the full amount which would have been due under
any bonus or profit-sharing plan, or similar arrangement, under
which the Executive was eligible prior to termination for the
full fiscal year (or other applicable period) during which the
termination occurred, subject to a prorated reduction in the
event of a Section 6(e) Termination for the period of time in
such fiscal year (or other applicable period) following the
termination.
(b) Within Three Months Following a Change in Control.
Following a Company Termination Without Cause, an Involuntary
Termination by Executive, a Termination for Death or a
Termination for Disability, to the extent such a termination
occurs on a Change in Control (as defined in Section 12 hereof)
or within the three months following such Change in Control, the
Executive (or his personal representative) will receive the
salary, payments and benefits described in Section 7(a) above
until the later of the first annual anniversary of the
13
<PAGE>
termination or the Expiration Date. Following a Voluntary
Termination by Executive, to the extent such a termination occurs
on a Change in Control (as defined in Section 12 hereof) or
within the three months following such Change in Control, the
Executive (or his personal representative) will receive the
salary, payments and benefits described in Section 7(a) above
until of the first annual anniversary of the termination.
(c) Following the Three Month Anniversary of a Change in
Control. Following a Company Termination Without Cause, an
Involuntary Termination by Executive, a Termination for Death or
a Termination for Disability, to the extent such a termination
occurs on or after the three month anniversary of a Change in
Control (as defined in Section 12 hereof), the Executive (or his
personal representative) will receive the salary, payments and
benefits described in Section 7(a) above until the later of the
sixth month anniversary of the termination or the Expiration
Date.
(d) In the event of a Company Termination Without Cause, an
Involuntary Termination by Executive, or a Voluntary Termination
by Executive under Section 7(b), the above payments and benefits
will constitute the sole damages to which Executive will be
entitled as a result of such termination. Executive will not be
required to mitigate his damages under this Agreement by seeking
employment or otherwise; provided, however, that in the event the
14
<PAGE>
Executive does provide personal services to a third party in
exchange for compensation or benefits, or both, the payments and
benefits hereunder, to the extent they have not yet been paid or
received, will be appropriately reduced to reflect the
compensation and benefits that result to Executive from such
other employment. In addition, in the event Executive is paid
under Section 7(b) following a Voluntary Termination by Executive
or if an Involuntary Termination by Executive occurs for the
reason described in (iii) of Section 6(b), the Executive will
provide from time to time though the Expiration Date and at the
request of the Company, notwithstanding such termination, part-
time (i.e., no more than 10 hours per week) consultation and
advice on such executive and technical matters as are consistent
with the Executive's background at mutually convenient times and
places without interference with the Executive's ability to
perform employment elsewhere and he shall be reimbursed for
reasonable expenses in accordance with this Agreement.
(e) The Executive will have no right to receive
compensation or any other benefits for any period after a Company
Termination for Cause or a Voluntary Termination by Executive
(except as provided in Section 7(b) above), other than the
reimbursement or expenses pursuant to Section 3(c) incurred
through the date of termination or as required by law.
8. Reserved.
15
<PAGE>
9. Survival. This Agreement (except for Sections 1, 2, 3,
and 4) will remain in full force and effect notwithstanding any
termination of Executive's employment prior to the Expiration
Date. This Agreement (except for Sections 1, 2, 4 and 3 (other
than in respect to compensation and expense reimbursements earned
but not paid)) will remain in full force and effect
notwithstanding the termination of Executive's employment under
this Agreement on the Expiration Date. Nothing in this Agreement
will be construed (i) to provide the Executive any continued
right to employment with the Company or its affiliates following
the Employment Term or (ii) to provide the Company or its
affiliates any continued right to employ the Executive following
the Employment Term.
10. Withholding of Taxes. The Company may withhold from
any payments under this Agreement all applicable taxes, as will
be required pursuant to any law or governmental regulation or
ruling.
11. Prior Agreements. This Agreement constitutes the
entire agreement and understanding between the parties with
respect to the subject matter hereof. This Agreement amends and
restates the 1992 Agreement and supersedes all other prior
agreements and understandings with respect to such subject matter
between and among the Company and the Executive.
12. Consolidation or Merger, Change in Control. Nothing in
16
<PAGE>
this Agreement will preclude the Company from consolidating or
merging into or with, or transferring all or substantially all of
the Company's assets to (any of the foregoing, a "Purchase
Transaction")any person or entity ("Purchaser"). In the event
such person or entity assumes all obligations of the Company
hereunder by written agreement reasonably acceptable to the
Executive, then upon the closing of the Purchase Transaction the
terms "Company" will refer to the Purchaser and this Agreement
will continue in full force and effect. For purposes of this
Agreement, "Change in Control" means:
(a) any event by which (i) an "Acquiring Person"(as defined
below)has become such, or (ii) "Continuing Directors (as defined
below) cease to comprise a majority of the members of the board
of directors of the Company (the "Board"). For purposes of this
definition an "Acquiring Person" means any person or group (as
defined in Section 13(d)(3) of the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated
thereunder as in effect on the date of this Agreement (the
"Exchange Act")) who or which, together with all affiliates and
associates (as defined in Rule 12b-2 under the Exchange Act)
becomes the beneficial owner of shares of the Company having 50%
or more of the total number of votes that may be cast for the
election of directors of the Company; and "Continuing Director"
means any member of the Board, while such person is a member of
17
<PAGE>
the Board, who is not an Acquiring Person, or an affiliate or
associate of an Acquiring Person or a representative of an
Acquiring Person or of any such affiliate or associate and who
(i) was a member of the Board prior to the date of this
Agreement, or (ii) subsequently becomes a member of such Board
and whose nomination for election or election to the Board is
recommended or approved by resolution of a majority of the
Continuing Directors or who is included as a nominee in a proxy
statement of the Company distributed when a majority of the Board
consists of Continuing Directors, or
(b) The consolidation or merger of the Company with, or the
transfer of all or substantially all of the Company's assets to,
any person or entity not controlled by the Company or by an
affiliate or affiliates of the Company (as defined in Rule 12b-2
under the Exchange Act).
13. Arbitration; Availability of Equitable Relief.
(a) Except as provided in subsection (b) of this Section,
any dispute, controversy or claim arising under or in connection
with this Agreement will be settled by arbitration in the City of
Newark, State of New Jersey, conducted in accordance with the
rules of the American Arbitration Association, and judgment upon
the award rendered in such arbitration may be entered in any
court of competent jurisdiction. The hearing or any such claim,
controversy or dispute will be heard with 60 days of written
18
<PAGE>
notice of the same, and such hearing will not exceed five
business days. Each party will pay its own expenses.
(b) Executive acknowledges that the remedy at law for any
breach or threatened breach of Section 5 of this Agreement will
be inadequate, and that the Company will, in addition to all
other available remedies, be entitled to injunctive relief
restraining the Executive from such breach without being required
to post bond or other security and without having to prove the
inadequacy of the available remedies at law.
14. General Provision.
(a) Non-Assignability. In the event of the Executive's
death, this Agreement and the Executive's rights hereunder will
inure to the benefit of his personal representatives and heirs.
Except as set forth in the preceding sentence and in Section 12,
neither this Agreement nor any right or interest hereunder will
be assignable by the Company or the Executive.
(b) No Attachment. Except as otherwise required by law,
including the laws of descent and distribution, no right to
receive payments under this Agreement will 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 will be null, void and of no effect.
19
<PAGE>
15. Amendment. No amendment or modification of this
Agreement will be deemed effective unless executed in writing by
the parties hereto, and approved by the Board of Directors of the
Company.
16. Severability. If for any reason any provision of this
Agreement will be held invalid, such invalidity will not affect
any other provision of this Agreement not held so invalid, and
all other such provisions will to the full extent consistent with
law continue in full force and effect. If any such provision
will be held invalid in part, such invalidity will in no way
affect the rest of such provision not held so invalid, and the
rest of such provision, together with all other provisions of
this Agreement, will likewise to the full extent consistent with
law continue in full force and effect.
17. Headings. The headings are included solely for
convenience of reference and will not control the meaning or
interpretation of any of the provisions of this Agreement.
18. Governing Law. This Agreement has been executed and
delivered in the State of New Jersey and its validity,
interpretation, performance and enforcement will be governed by
and construed in accordance with the laws thereof applicable to
contracts executed and to be wholly performed in the State of New
Jersey.
19. Consent to Jurisdiction. The Executive hereby
20
<PAGE>
irrevocably consents to the exclusive jurisdiction of the courts
of the State of New Jersey and of any federal courts located
within the State of New Jersey for all purposes in connection
with any action or proceeding which arises out of or relates to
this Agreement and agrees that service of summons, complaint or
process in connection therewith may be made as set forth in this
Agreement with respect to giving notices and that service so made
will be as effective as if personally made.
20. Notices. All notices, requests, demands and other
communications hereunder will be in writing and will be deemed to
have been duly given if delivered by hand or mailed, certified or
registered mail, return receipt requested, with postage prepaid,
to the following addresses or to such other address as any party
hereto may designated by like notice:
A. If to Executive, to:
Ronald F. Garritano
6 Osage Court
Flemington, NJ 08822
B. With a copy to:
_________________________________
_________________________________
_________________________________
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C. If to the Company, to:
Rheometric Scientific, Inc.
One Possumtown Road
Piscataway NJ 08854
D. With copies to:
Thomas Lyons, Esquire
Crummy Del Deo Dolan Griffinger
& Vecchione
1 Riverfront Plaza
Newark NJ 07102
and
Richard J. Giacco, Vice President
Axess Corporation
100 Interchange Blvd.
Newark DE 19711
and to such other or additional person or persons (but no more
than two persons) as either party will have designated to the
other party in writing by like notice.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by its duly authorized officers, and the Executive
has signed this Agreement, all as of the day and year first above
written.
RHEOMETRIC SCIENTIFIC, INC.
By:___________________________
Title:
EXECUTIVE
WITNESS:
__________________________ _________________________________
Ronald F. Garritano
22
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Schedule A
Current Benefits
1. Medical and dental insurance as per the company's overall
plan.
2. Reimbursement of medical and dental expenses in excess of
the company plan for officers and their dependents in an amount
not to exceed $10,000,00 per year.
3. Company vacation policy with option to take pay in lieu of
vacation days, as limited by policy.
4. Provided company car or appropriate car allowance as per
present company policy.
5. Long term disability policy.
Life insurance as per company policy.
Accidental death and business travel coverage as per Company
provided plan.
Company provided plan
6. 401(k) as per the Company ERISA qualified plan.
7. Stock option plan or equivalent.
8. Membership in one health club.
9. Severance: Greater of contract amount or company policy
23
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EXHIBIT A
CONFIDENTIALITY AGREEMENT
24
<PAGE>
TO: Rheometric Scientific, Inc.
Piscataway, New Jersey
RE: Employee Confidential and Proprietary Information Agreement
In consideration of my employment with Rheometric
Scientific, Inc. ("Company") and of the salary or wages paid for
my services in the course of such employment, I agree as follows:
(A) to communicate to the Company promptly and fully and to
assign to the Company all inventions or significant technical or
business innovations developed or conceived solely by me or
jointly with others from the time of entering the Company's
employ until any termination of my employment, (1) which are
along the lines of the business, work or investigations of the
Company, of (2) which result from or are suggested by any work
which I may do for or on behalf of the Company;
(B) to execute all necessary papers and otherwise to assist the
Company during and subsequent to such employment in every proper
way (entirely at its expense) to obtain for its own benefit
patents, copyrights or other legal protection for such
inventions, or for publications pertaining to them, in any and
all countries, said inventions and innovations to be the
exclusive property of the Company, whether or not patented or
copyrighted;
(C) to make and maintain adequate and current written records of
all such inventions or innovations, in the form of notes,
sketches, drawings, or reports relating thereto, which records
shall be and remain the property of and available to the Company
at all times;
(D) upon any termination of my employment, promptly to deliver
to the Company, all drawings, blueprints, manuals, letters,
notes, notebooks, reports, models and other materials (including
all copies) which are of a secret or confidential nature relating
to the business of the Company, and which are in my possession or
under my control;
(E) except as the Company may otherwise consent in writing, not
to publish or otherwise disclose (except as my Company duties may
require) either during or subsequent to my employment, any
information, knowledge, or data of the Company or its customers
which I may receive or develop during the course of my employment
relating to inventions, discoveries, formulas, processes,
machines, manufactures, compositions, computer programs,
accounting methods, information systems or business or financial
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plans or reports, or relating to other matters which are of a
secret or confidential nature;
(F) to notify the Company in writing before I make any
disclosure or perform or cause to be performed any work for or on
behalf of the Company which appears to threaten conflict with (1)
rights I claim in any invention or idea (a) conceived by me or
others prior to my employment of (b) otherwise outside the scope
of this agreement, or (2) rights of others arising out of
obligations incurred by me (d) prior to this agreement or (b)
otherwise outside the scope of this agreement. In the event of
my failure to give notice under the circumstances specified in
(1) of the foregoing, the Company may assume that no such
conflicting invention or idea exists, and I agree that I will
make no claim against the Company with respect to the use of any
such invention or idea in any work or the product of any work
which I perform or cause to be performed for or on behalf of the
Company.
Discharge of my undertakings in this agreement shall be an
obligation of my executors, administrators, or other legal
representatives of assigns.
This agreement may not on behalf of or in respect to the
Company be changed or modified or released, discharged,
abandoned, or otherwise terminated, in while or in part, except
by an instrument in writing signed by an officer or other
authorized executive of the Company.
I represent that except as stated on the reverse side of
this agreement, I have no agreements with or obligations to
others in conflict with the foregoing.
Discharge of my undertakings to the Company in this
agreement shall apply with equal vigor to any present or future
subsidiaries or affiliates of the Company and to any successor(s)
interest to the business and/or assets of the Company by way of
acquisition, merger, consolidation or liquidation at any time in
the future and shall be enforceable by any of the foregoing
entities. I recognize that the remedies provided to Rheometric
Scientific, Inc. (and to any other entities in whose favor this
agreement shall run) are inadequate at law and this undertaking
on my part
26
<PAGE>
shall be enforceable to the extent of all forms of equitable
relief permitted by the laws of the State of New Jersey or any
other jurisdiction in which this agreement may become
enforceable.
(Signed) /s/ Ronald F. Garritano
_______________________
Ronald F. Garritano
(Date)
_______________________________
WITNESS:
__________________________
___________________________________
President, Rheometric Scientific, Inc.
27
Exhibit 10.5
EMPLOYMENT AGREEMENT
This Agreement is entered into on March __, 1998, by and
between Rheometric Scientific, Inc., a New Jersey corporation
("Company") and Joseph Musanti, a New Jersey resident
("Executive").
Background
A. Executive is currently the Vice President, Finance and
Materials, of the Company.
B. Each of the Company and Executive acknowledge that it
is to their mutual and respective benefit to enter into this
Employment Agreement ("Agreement").
Now, therefore, in consideration of the foregoing and of the
respective covenants and agreements of the parties herein
contained, the Company and Executive hereby agree as follows:
1. Employment and Term..
(a) The Company hereby agrees to continue to employ
Executive and the Executive hereby agrees to continue to serve
the Company, subject to and upon the terms and conditions set
forth below.
(b) Subject to the provisions of Section 6 hereof, the
period of the Executive's employment by the Company under this
Agreement (the "Employment Term") will commence on the date of
this Agreement and will continue through February 28, 1999. The
Employment Term will continue thereafter on a year-to-year basis,
1
<PAGE>
unless the Company provides Executive notice (at least 3 months
prior to February 28, 1999 or the first anniversary of the
continuation then in effect) that the Company has elected not to
continue the Employment Term for the next year. The last day of
the Employment Term, without regard to any early termination
pursuant to Section 6, is herein referred to as the "Expiration
Date."
2. Executive Position and Duties and Responsibilities.
During the Employment Term, the Executive will continue to
serve as the Vice President, Finance and Materials, of the
Company, with such management and executive duties and
responsibilities as may be assigned to him from time to time by
the Company's Board of Directors and the Company's Chief
Executive Officer, provided that such duties and responsibilities
are consistent with the current duties and responsibilities of
the Executive's positions.
3. Compensation and Reimbursement of Expenses.
During the Employment Term, Executive will receive the
following compensation and benefits from the Company:
(a) Base Salary. The Executive will receive an annual
base salary, payable no less frequently than bi-weekly, at the
annual rate of $ 120,000.00, subject to any increase the Board of
Directors may provide in its sole discretion (the "Base Salary").
(b) Bonus. Executive will be entitled to receive incentive
2
<PAGE>
compensation based on the performance of the Executive and the
Company in accordance with and subject to the terms and
conditions of the Management Incentive Bonus Program of the
Company.
(c) Reimbursement of Expenses. The Executive will be
reimbursed for all reasonable expenses incurred by him in
performing services hereunder upon presentation to the Company by
the Executive of documentation acceptable to the Company under
its standard policies.
(d) Benefits. The Executive will be entitled to participate
in or receive the benefits he currently receives (as listed on
Schedule A) and such other benefits as the Company may generally
grant to its executive officers.
(e) Vacation and Leave. The Executive will be entitled
to four (4) weeks annually of vacation during which his
compensation pursuant to this Section 3 will be paid in full,
provided that the Executive will give reasonable notice to the
Chief Executive Officer of the Company of desired vacation
periods and no more than two (2) weeks of vacation will be taken
within any thirty (30) day period. Vacation time not taken by
the Executive in any given year will not accrue to succeeding
years unless the standard policies of the Company provide
otherwise. Leaves of absence may be granted by the Board of
Directors in its sole discretion. The Company shall pay the
3
<PAGE>
Executive for past unused vacation time accrued prior to December
31, 1995 at the time of a Change in Control (as defined in
Section 12).
4. Performance of Duties.
During the Employment Term the Executive will devote his
entire business time and attention to the performance of his
duties under this Agreement and will serve the Company diligently
and to the best of his abilities and will not engage in any other
business activity without the prior written approval of the Board
of Directors, provided that the Executive may, with the prior
approval of the Board of Directors, serve on boards of directors
of other corporations or institutions, if such service, in the
opinion of the Board of Directors, presents no conflict with the
Company.
5. Restrictive Covenants.
(a) Acknowledgments. The Executive acknowledges that:
(i) His position with the Company requires the
performance of services that are special, unique and intellectual
in character and he is and will be in a position of confidence
and trust with the employees and customers of the Company and its
subsidiaries and their joint venture partners, through which he
has obtained or will obtain, among other things, knowledge of
such organizations and their customers, in which those
organizations have a proprietary interest, and
4
<PAGE>
(ii) The restrictive covenants set forth in this
Agreement are necessary in order to protect such proprietary
information and other legitimate business interests of the
Company and its subsidiaries and their joint venture partners and
that the Company would not have entered into this Agreement
unless those restrictive covenants were included, and
(iii) The business and sales efforts of the Company are
conducted on a worldwide basis and that he has personally
supervised or engaged in such business and will continue to do so
pursuant and subject to the terms of this Agreement, and
(iv) The enforcement of the restrictive covenants set
forth in this Agreement will not prevent him from maintaining a
livelihood.
(b) Noncompetition and Nonsolicitation.
(i) Mandatory Restrictions during Employment. Subject
to the further provisions of this Section 5, for so long as the
Executive is employed pursuant to the terms of this Agreement and
without any requirement of further payment therefor, Executive
shall not take any of the actions set forth in Section 5(b)(iii)
hereof anywhere in the world without the prior express written
consent of the Company.
(ii) Mandatory Restrictions following term of
Employment. (A) Subject to the further provisions of this
5
<PAGE>
Section 5, in the event of Voluntary Termination (as defined
hereinafter) by the Executive or in the event of Company
Termination for Cause (as defined hereinafter) and without any
requirement of further payment therefor, Executive shall not take
any of the actions set forth in Section 5(b)(iii)(A)or
5(b)(iii)(B)(I)hereof anywhere in the world for one (1) year
following termination of employment hereunder and Executive shall
not take any of the actions set forth in Section 5(b)(iii)(B)(II)
or Section 5(b)(iii)(B)(III) hereof anywhere in the world for
two(2) years following termination of employment hereunder.
(B) Subject to the further provisions of this
Section 5, in the event of an Involuntary Termination by
Executive (as defined hereinafter); Company Termination Without
Cause (as defined hereinafter); or Termination Upon Disability
(as defined hereinafter), the Executive shall not, without the
prior written consent of the Company take any of the actions set
forth in Section 5(b)(iii)(A)or 5(b)(iii)(B)(I) within the
"Restricted Period" (as defined below)and shall not take any of
the actions set forth in Section 5(b)(iii)(B)(II) or Section
5(b)(iii)(B)(III)for a period of two (2) years following the
termination of employment hereunder anywhere in the world. For
purposes of this Agreement "Restricted Period" means the period
of time in which Executive is entitled to receive payments and
benefits under Section 7(a), 7(b) or 7(c), as the case may be,
6
<PAGE>
notwithstanding any reduction or elimination of those payments
and benefits pursuant to the second sentence of Section 7(d).
(iii) Prohibited Actions. To the extent that this
Section 5(b)(iii) is expressly made applicable by other
provisions of this Agreement, the Executive shall not:
(A) directly or indirectly (whether for
compensation or otherwise), alone or as an agent, principal,
partner, officer, employee, trustee, director, shareholder,
consultant or in any other capacity, own, manage, operate,
control, or participate in the ownership, management, operation
or control of any business which competes with the business of
the Company or its subsidiaries or their joint venture partners
as it may be conducted at the time of termination of employment
provided, however that nothing in this Section 5(b)(iii)(A) will
prohibit the Executive from acquiring or holding not greater than
one percent of any class of publicly traded securities of any
business; or
(B) directly or indirectly (I) approach or
solicit for business or otherwise deal with any customer of the
Company or its subsidiaries or their joint venture partners other
than on behalf of the Company, (II) approach or attempt to induce
any employee of the Company or its subsidiaries or their joint
venture partners to leave the employ of the Company or its
subsidiaries or their joint venture partners, (III) employ any
7
<PAGE>
person who is an employee of the Company or its subsidiaries or
their joint venture partners on the date of, or within the six
months preceding, the termination of the employment of
Executive, or (IV) aid or counsel any other person to undertake
any action listed in (I),(II) or (III) above.
For the purposes of this Section 5, "customer" means any customer
of the Company during the last two years of the Executive's
employment with the Company or any prospective customer to whom
the Company made a presentation (or similar offering of services)
during the last year of Executive's employment with the Company.
(c) Confidentiality. Executive shall comply with the
terms of a certain agreement containing (a) restrictions of
confidential information and (b) inventions and discoveries by
executive (among other provisions) (the "Confidentiality
Agreement") as attached hereto as Exhibit A.
(d) The parties hereby agree that the restrictions
contained in this Section 5 and the Confidentiality Agreement are
reasonable in scope and duration. However, in the event a court
of competent jurisdiction determines finally that the duration or
scope of any provision of this Section 5 and the Confidentiality
Agreement is unreasonable or unenforceable in part, then this
Section 5 and the Confidentiality Agreement will be deemed to be
amended so as to contain such provisions as the court will deem
8
<PAGE>
reasonable and enforceable.
(e) Notwithstanding any provision to the contrary in
Section 5 (b), the restrictions contained in subsections (A) and
(B) of Section 5(b)(iii) will continue for any period in excess
of the applicable period following termination of employment in
which Executive continues to receive compensation under Section 7
of this Agreement.
6. Termination of Employment. Subject to the further
provisions of this Agreement, the Company and Executive may
terminate the employment of Executive under this Agreement prior
to the Expiration Date as follows:
(a) Voluntary Termination by the Executive. The Executive
may terminate his employment under this Agreement at any time (a
"Voluntary Termination by Executive").
(b) Involuntary Termination by Executive. The Executive
may terminate his employment under this Agreement at any time for
good reason. "Good reason" means (i) the assignment to the
Executive of any duties inconsistent with his present duties and
responsibilities or any reduction or elimination of those duties
or responsibilities as Vice President, Finance and Materials,
(ii) the withdrawal by the Company of the title of Vice
President, Finance and Materials, from the Executive without his
consent; (iii) the Company's requirement that the Executive
maintain his principal office or conduct his principal
9
<PAGE>
activities (other than business trips) from anywhere other than
the present principal executive offices of the Company in
Piscataway, New Jersey; (iv) the failure by the Company to obtain
the assumption and agreement to perform this Agreement on the
terms described in Section 12; or (v) the breach by the Company
of any material obligation of the Company under this Agreement,
provided that any breach of a payment obligation to the Executive
under this Agreement will constitute "good reason" only if the
breach is not cured within five days of notice by Executive.
(c) Termination Without Cause. The Company may, at any
time, terminate the Executive's employment under this Agreement
without cause (a "Company Termination Without Cause").
(d) Termination for Cause. Notwithstanding anything to
the contrary contained in this Agreement, the Company may
terminate the Executive's employment under this Agreement at any
time for cause (a "Company Termination for Cause"). As used
herein, the term "for cause" means (1) the Executive's conviction
for a felony under the laws of the United States or any state or
political subdivision, (2) misappropriation by the Executive of
company funds or other misconduct materially injurious to the
Company, (3) breach of the Executive's fiduciary duty to the
Company involving personal profit or (4) material breach of this
Agreement by the Executive.
(e) Termination Upon Death or Disability of the Executive.
10
<PAGE>
In the event that the Executive dies, his employment
hereunder will be deemed terminated without further action
("Termination Upon Death"). In the event that the Executive is
declared incompetent by a court of appropriate jurisdiction, or
is unable to perform his duties hereunder for a continuous period
exceeding six (6) months by reason of illness or disability,
then, upon at least thirty (30) days' advance notice following
the event giving rise to the power to terminate hereunder, the
Company may terminate the Executive's employment under this
Agreement ("Termination Upon Disability"). Executive agrees to
take such reasonable actions (including providing full and
accurate information requested by insurers) as may be necessary
to allow the Company to obtain and maintain, for its own benefit,
life and disability insurance covering the Executive.
(f) Notice of Termination. Except for a Termination Upon
Death, any purported termination of employment under Sections
6(a) through 6(e) of this Agreement will be communicated by a
written notice of termination from the party exercising its right
to terminate ("Notifying Party") to the other party ("Responding
Party"). For the purposes of this Agreement, a "Notice of
11
<PAGE>
Termination" will indicate the specific termination provision in
this Agreement relied upon and will set forth in reasonable
detail the facts and circumstances then known to the Notifying
Party which are claimed to provide a basis for termination under
the provision so indicated, provided, however, that no recitation
of facts and circumstances will be required in respect to a
Company Termination Without Cause or a Voluntary Termination by
Executive.
7. Payments and Benefits Following Termination Pursuant to
Section 6.
(a) Before a Change in Control. Following a Company
Termination Without Cause, an Involuntary Termination by
Executive, a Termination for Death or a Termination for
Disability, to the extent such a termination occurs before a
Change in Control (as defined in Section 12 hereof), the
Executive (or his personal representative) will receive until the
later of the six month anniversary of the termination or the
Expiration Date:
(i) One hundred percent of the salary set forth in
Section 3(a) as the same may have been increased from time to
time, payment of which will be at the time provided for in this
Agreement as if the Executive's employment under this Agreement
had not terminated, minus, in the event of a Termination for
Disability, the amount of any disability benefits provided for
the Executive under any sickness, retirement or other benefit
plans provided by the Company,
(ii) Health (as to the Executive and his dependents who
are covered as of the termination), life and disability insurance
12
<PAGE>
coverage substantially comparable to those furnished to the
Executive by the Company immediately prior to the termination of
employment hereunder,
(iii) the full amount of reimbursement of expenses
incurred through the date of termination of employment in
accordance with Section 3(d), and
(iv) the full amount which would have been due under
any bonus or profit-sharing plan, or similar arrangement, under
which the Executive was eligible prior to termination for the
full fiscal year (or other applicable period) during which the
termination occurred, subject to a prorated reduction in the
event of a Section 6(e) Termination for the period of time in
such fiscal year (or other applicable period) following the
termination.
(b) Within Three Months Following a Change in Control.
Following a Company Termination Without Cause, an Involuntary
Termination by Executive, a Termination for Death or a
Termination for Disability, to the extent such a termination
occurs on a Change in Control (as defined in Section 12 hereof)
or within the three months following such Change in Control, the
Executive (or his personal representative) will receive the
salary, payments and benefits described in Section 7(a) above
until the first annual anniversary of the termination.
(c) Following the Three Month Anniversary of a Change in
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Control. Following a Company Termination Without Cause, an
Involuntary Termination by Executive, a Termination for Death or
a Termination for Disability, to the extent such a termination
occurs on or after the three month anniversary of a Change in
Control (as defined in Section 12 hereof), the Executive (or his
personal representative) will receive the salary, payments and
benefits described in Section 7(a) above until the later of the
sixth month anniversary of the termination or the Expiration
Date.
(d) In the event of a Company Termination Without Cause, an
Involuntary Termination by Executive, or a Voluntary Termination
by Executive under Section 7(b), the above payments and benefits
will constitute the sole damages to which Executive will be
entitled as a result of such termination. Executive will not be
required to mitigate his damages under this Agreement by seeking
employment or otherwise; provided, however, that in the event the
Executive does provide personal services to a third party in
exchange for compensation or benefits, or both, the payments and
benefits hereunder, to the extent they have not yet been paid or
received, will be appropriately reduced to reflect the
compensation and benefits that result to Executive from such
other employment. In addition, in the event Executive is paid
under Section 7(b) following a Voluntary Termination by Executive
or if an Involuntary Termination by Executive occurs for the
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<PAGE>
reason described in (iii) of Section 6(b), the Executive will
provide from time to time though the Expiration Date and at the
request of the Company, notwithstanding such termination, part-
time (i.e., no more than 10 hours per week) consultation and
advice on such executive and technical matters as are consistent
with the Executive's background at mutually convenient times and
places without interference with the Executive's ability to
perform employment elsewhere and he shall be reimbursed for
reasonable expenses in accordance with this Agreement.
(e) The Executive will have no right to receive
compensation or any other benefits for any period after a Company
Termination for Cause or a Voluntary Termination by Executive
(except as provided in Section 7(b) above), other than the
reimbursement or expenses pursuant to Section 3(c) incurred
through the date of termination or as required by law.
8. Reserved.
9. Survival. This Agreement (except for Sections 1, 2, 3,
and 4) will remain in full force and effect notwithstanding any
termination of Executive's employment prior to the Expiration
Date. This Agreement (except for Sections 1, 2, 4 and 3 (other
than in respect to compensation and expense reimbursements earned
but not paid)) will remain in full force and effect
notwithstanding the termination of Executive's employment under
this Agreement on the Expiration Date. Nothing in this Agreement
15
<PAGE>
will be construed (i) to provide the Executive any continued
right to employment with the Company or its affiliates following
the Employment Term or (ii) to provide the Company or its
affiliates any continued right to employ the Executive following
the Employment Term.
10. Withholding of Taxes. The Company may withhold from
any payments under this Agreement all applicable taxes, as will
be required pursuant to any law or governmental regulation or
ruling.
11. Prior Agreements. This Agreement constitutes the
entire agreement and understanding between the parties with
respect to the subject matter hereof. This Agreement supersedes
all other prior agreements and understandings with respect to
such subject matter between and among the Company and the
Executive.
12. Consolidation or Merger, Change in Control. Nothing in
this Agreement will preclude the Company from consolidating or
merging into or with, or transferring all or substantially all of
the Company's assets to (any of the foregoing, a "Purchase
Transaction")any person or entity ("Purchaser"). In the event
such person or entity assumes all obligations of the Company
hereunder by written agreement reasonably acceptable to the
Executive, then upon the closing of the Purchase Transaction the
terms "Company" will refer to the Purchaser and this Agreement
16
<PAGE>
will continue in full force and effect. For purposes of this
Agreement, "Change in Control" means:
(a) any event by which (i) an "Acquiring Person"(as defined
below)has become such, or (ii) "Continuing Directors (as defined
below) cease to comprise a majority of the members of the board
of directors of the Company (the "Board"). For purposes of this
definition an "Acquiring Person" means any person or group (as
defined in Section 13(d)(3) of the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated
thereunder as in effect on the date of this Agreement (the
"Exchange Act")) who or which, together with all affiliates and
associates (as defined in Rule 12b-2 under the Exchange Act)
becomes the beneficial owner of shares of the Company having 50%
or more of the total number of votes that may be cast for the
election of directors of the Company; and "Continuing Director"
means any member of the Board, while such person is a member of
the Board, who is not an Acquiring Person, or an affiliate or
associate of an Acquiring Person or a representative of an
Acquiring Person or of any such affiliate or associate and who
(i) was a member of the Board prior to the date of this
Agreement, or (ii) subsequently becomes a member of such Board
and whose nomination for election or election to the Board is
recommended or approved by resolution of a majority of the
Continuing Directors or who is included as a nominee in a proxy
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statement of the Company distributed when a majority of the Board
consists of Continuing Directors, or
(b) The consolidation or merger of the Company with, or the
transfer of all or substantially all of the Company's assets to,
any person or entity not controlled by the Company or by an
affiliate or affiliates of the Company (as defined in Rule 12b-2
under the Exchange Act).
13. Arbitration; Availability of Equitable Relief.
(a) Except as provided in subsection (b) of this Section,
any dispute, controversy or claim arising under or in connection
with this Agreement will be settled by arbitration in the City of
Newark, State of New Jersey, conducted in accordance with the
rules of the American Arbitration Association, and judgment upon
the award rendered in such arbitration may be entered in any
court of competent jurisdiction. The hearing or any such claim,
controversy or dispute will be heard with 60 days of written
notice of the same, and such hearing will not exceed five
business days. Each party will pay its own expenses.
(b) Executive acknowledges that the remedy at law for any
breach or threatened breach of Section 5 of this Agreement will
be inadequate, and that the Company will, in addition to all
other available remedies, be entitled to injunctive relief
restraining the Executive from such breach without being required
to post bond or other security and without having to prove the
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inadequacy of the available remedies at law.
14. General Provision.
(a) Non-Assignability. In the event of the Executive's
death, this Agreement and the Executive's rights hereunder will
inure to the benefit of his personal representatives and heirs.
Except as set forth in the preceding sentence and in Section 12,
neither this Agreement nor any right or interest hereunder will
be assignable by the Company or the Executive.
(b) No Attachment. Except as otherwise required by law,
including the laws of descent and distribution, no right to
receive payments under this Agreement will 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 will be null, void and of no effect.
15. Amendment. No amendment or modification of this
Agreement will be deemed effective unless executed in writing by
the parties hereto, and approved by the Board of Directors of the
Company.
16. Severability. If for any reason any provision of this
Agreement will be held invalid, such invalidity will not affect
any other provision of this Agreement not held so invalid, and
all other such provisions will to the full extent consistent with
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law continue in full force and effect. If any such provision
will be held invalid in part, such invalidity will in no way
affect the rest of such provision not held so invalid, and the
rest of such provision, together with all other provisions of
this Agreement, will likewise to the full extent consistent with
law continue in full force and effect.
17. Headings. The headings are included solely for
convenience of reference and will not control the meaning or
interpretation of any of the provisions of this Agreement.
18. Governing Law. This Agreement has been executed and
delivered in the State of New Jersey and its validity,
interpretation, performance and enforcement will be governed by
and construed in accordance with the laws thereof applicable to
contracts executed and to be wholly performed in the State of New
Jersey.
19. Consent to Jurisdiction. The Executive hereby
irrevocably consents to the exclusive jurisdiction of the courts
of the State of New Jersey and of any federal courts located
within the State of New Jersey for all purposes in connection
with any action or proceeding which arises out of or relates to
this Agreement and agrees that service of summons, complaint or
process in connection therewith may be made as set forth in this
Agreement with respect to giving notices and that service so made
will be as effective as if personally made.
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20. Notices. All notices, requests, demands and other
communications hereunder will be in writing and will be deemed to
have been duly given if delivered by hand or mailed, certified or
registered mail, return receipt requested, with postage prepaid,
to the following addresses or to such other address as any party
hereto may designated by like notice:
A. If to Executive, to:
Joseph Musanti
14 West Franklin Street
Bound Brook, NJ 08805
B. With a copy to:
_________________________________
_________________________________
_________________________________
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C. If to the Company, to:
Rheometric Scientific, Inc.
One Possumtown Road
Piscataway NJ 08854
D. With copies to:
Thomas Lyons, Esquire
Crummy Del Deo Dolan Griffinger
& Vecchione
1 Riverfront Plaza
Newark NJ 07102
and
Richard J. Giacco, Vice President
Axess Corporation
100 Interchange Blvd.
Newark DE 19711
and to such other or additional person or persons (but no more
than two persons) as either party will have designated to the
other party in writing by like notice.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by its duly authorized officers, and the Executive
has signed this Agreement, all as of the day and year first above
written.
RHEOMETRIC SCIENTIFIC, INC.
By:___________________________
Title:
EXECUTIVE
WITNESS:
__________________________ _________________________________
Joseph Musanti
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Schedule A
Current Benefits
1. Medical and dental insurance as per the company's overall
plan.
2. Reimbursement of medical and dental expenses in excess of
the company plan for officers and their dependents in an amount
not to exceed $10,000,00 per year.
3. Company vacation policy with option to take pay in lieu of
vacation days, as limited by policy.
4. Provided company car or appropriate car allowance as per
present company policy.
5. Long term disability policy.
Life insurance as per company policy.
Accidental death and business travel coverage as per Company
provided plan.
Company provided plan
6. 401(k) as per the Company ERISA qualified plan.
7. Stock option plan or equivalent.
8. Membership in one health club.
9. Severance: Greater of contract amount or company policy
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EXHIBIT A
CONFIDENTIALITY AGREEMENT
24
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TO: Rheometric Scientific, Inc.
Piscataway, New Jersey
RE: Employee Confidential and Proprietary Information Agreement
In consideration of my employment with Rheometric
Scientific, Inc. ("Company") and of the salary or wages paid for
my services in the course of such employment, I agree as follows:
(A) to communicate to the Company promptly and fully and to
assign to the Company all inventions or significant technical or
business innovations developed or conceived solely by me or
jointly with others from the time of entering the Company's
employ until any termination of my employment, (1) which are
along the lines of the business, work or investigations of the
Company, of (2) which result from or are suggested by any work
which I may do for or on behalf of the Company;
(B) to execute all necessary papers and otherwise to assist the
Company during and subsequent to such employment in every proper
way (entirely at its expense) to obtain for its own benefit
patents, copyrights or other legal protection for such
inventions, or for publications pertaining to them, in any and
all countries, said inventions and innovations to be the
exclusive property of the Company, whether or not patented or
copyrighted;
(C) to make and maintain adequate and current written records of
all such inventions or innovations, in the form of notes,
sketches, drawings, or reports relating thereto, which records
shall be and remain the property of and available to the Company
at all times;
(D) upon any termination of my employment, promptly to deliver
to the Company, all drawings, blueprints, manuals, letters,
notes, notebooks, reports, models and other materials (including
all copies) which are of a secret or confidential nature relating
to the business of the Company, and which are in my possession or
under my control;
(E) except as the Company may otherwise consent in writing, not
to publish or otherwise disclose (except as my Company duties may
require) either during or subsequent to my employment, any
information, knowledge, or data of the Company or its customers
which I may receive or develop during the course of my employment
relating to inventions, discoveries, formulas, processes,
machines, manufactures, compositions, computer programs,
accounting methods, information systems or business or financial
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plans or reports, or relating to other matters which are of a
secret or confidential nature;
(F) to notify the Company in writing before I make any
disclosure or perform or cause to be performed any work for or on
behalf of the Company which appears to threaten conflict with (1)
rights I claim in any invention or idea (a) conceived by me or
others prior to my employment of (b) otherwise outside the scope
of this agreement, or (2) rights of others arising out of
obligations incurred by me (d) prior to this agreement or (b)
otherwise outside the scope of this agreement. In the event of
my failure to give notice under the circumstances specified in
(1) of the foregoing, the Company may assume that no such
conflicting invention or idea exists, and I agree that I will
make no claim against the Company with respect to the use of any
such invention or idea in any work or the product of any work
which I perform or cause to be performed for or on behalf of the
Company.
Discharge of my undertakings in this agreement shall be an
obligation of my executors, administrators, or other legal
representatives of assigns.
This agreement may not on behalf of or in respect to the
Company be changed or modified or released, discharged,
abandoned, or otherwise terminated, in while or in part, except
by an instrument in writing signed by an officer or other
authorized executive of the Company.
I represent that except as stated on the reverse side of
this agreement, I have no agreements with or obligations to
others in conflict with the foregoing.
Discharge of my undertakings to the Company in this
agreement shall apply with equal vigor to any present or future
subsidiaries or affiliates of the Company and to any successor(s)
interest to the business and/or assets of the Company by way of
acquisition, merger, consolidation or liquidation at any time in
the future and shall be enforceable by any of the foregoing
entities. I recognize that the remedies provided to Rheometric
Scientific, Inc. (and to any other entities in whose favor this
agreement shall run) are inadequate at law and this undertaking
on my part
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shall be enforceable to the extent of all forms of equitable
relief permitted by the laws of the State of New Jersey or any
other jurisdiction in which this agreement may become
enforceable.
(Signed)__________________________
Joseph Musanti
(Date)_______________________________
WITNESS:__________________________
___________________________________
President, Rheometric Scientific, Inc.
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EXHIBIT 10.16
AMENDMENT TO LOAN AND SECURITY AGREEMENT
This Amendment to Loan and Security Agreement ("Amendment")
dated as of March 31,1998 by and among FLEET CAPITAL CORPORATION
("Lender"), a Rhode Island corporation with an office at 200
Glastonbury Boulevard, Glastonbury, Connecticut 06033; and
RHEOMETRIC SCIENTIFIC, INC. ("Borrower"), a New Jersey
corporation with its chief executive office and principal place
of business at One Possumtown Road, Piscataway, New Jersey 08854.
B A C K G R O U N D
A. On February 23, 1996, Lender entered into a Loan and
Security Agreement (as amended to date, the "Loan Agreement")
with Borrower, the terms of which are incorporated herein by
reference, and, in connection therewith, Borrower executed and
delivered certain other documents and instruments (together with
the Loan Agreement, the "Loan Documents").
B. The parties desire to amend the Loan Agreement in the
manner hereinafter set forth.
C. Capitalized terms used herein which are not defined
herein shall have the meanings given thereto in the Loan
Agreement.
D. All amendments effected hereby are, unless otherwise
stated herein to the contrary, effective as of the date hereof.
NOW THEREFORE, intending to be legally bound, the parties
agree as follows:
1. Reduction of Facility Limit, Inventory Sublimit.
a. Facility Limit. Commencing on the opening of
business on April 1, 1998 and on the opening of business on
Wednesday (or, if not a Business Day, on the first Business Day
thereafter) of each consecutive week thereafter, the Facility
Limit will decrease by $25,000.
b. Inventory Sublimit. Commencing on the opening of
business on April 1, 1998 and on the opening of business on
Wednesday (or, if not a Business Day, on the first Business Day
thereafter) of each consecutive week thereafter, the "$6,000,000"
referred to in subsection (b)(ii)(A) of the definition of
"Borrowing Base" set forth in the Loan Agreement will decrease by
$25,000.
2. Covenant Modifications. The following provisions of
the Loan Agreement are hereby modified as follows:
(1) Effective as of January 1,1998, Subsection (A)
of Section 9.3 of the Loan Agreement is hereby deleted and
Subsections (B), (C) and (D) of Section 9.3 of the Loan Agreement
are hereby amended and restated in their entirety as follows:
"(B) Minimum Adjusted Tangible Net Worth.
Maintain on a consolidated basis at all times an Adjusted
Tangible Net Worth of not less than the amount shown below for
the period corresponding thereto:
Period
Amount
As of 3/31/98
$ 5,750,000
As of 6/30/98
$ 6,500,000
As of 9/30/98
$ 6,500,000
As of 12/31/98 and at
all times thereafter $ 7,500,000
(C) Cash Flow. Achieve Cash Flow of not
less than the amount shown below for the period corresponding
thereto:
Period
Amount
The three months ending March 31, 1998 <$ 500,000>
The six months ending June 30, 1998 $ 500,000
The nine months ending September 30, 1998 $ 500,000
The twelve months ending December 31, 1998
and for the twelve months ending on
the last day of each subsequent month $1,000,000
(D) Consolidated Cash Flow. Achieve
Consolidated Cash Flow of not less than the amount shown below
for the period corresponding thereto:
Period
Amount
The three months ending March 31, 1998 <$ 500,000>
The six months ending June 30, 1998 $ 500,000
The nine months ending September 30, 1998 $ 500,000
The twelve months ending December 31, 1998
and for the twelve months ending on
the last day of each subsequent month $1,000,000."
(2) Effective as of January 1, 1998, the
definition of "Adjusted Tangible Net Worth" is hereby modified in
order to delete subsection (iii) thereof in its entirety.
(3) Lender hereby waives any Default or Event of
Default arising from noncompliance by Borrower as of December 31,
1997 with the covenants set forth in Subsections (B), (C) and (D)
of Section 9.3 of the Loan Agreement as in effect prior to the
amendment thereof pursuant to the forgoing.
3. Conditions. As a condition to the effectiveness of the
other terms and provisions hereof, Borrower will, prior to or
concurrently with the execution hereof, pay to Lender an
amendment fee in the amount of $10,000.
4. Reimbursement of Expense. Borrower shall, upon
Lender's demand, reimburse Lender for all reasonable costs and
expenses (including, without limitation, reasonable attorneys'
fees) incurred by Lender in the negotiation and preparation of
this Amendment.
5. Reaffirmation. Borrower hereby confirms that except to
the extent set forth above, the Loan Agreement and other Loan
Documents will remain unchanged and in full force and affect and
Borrower hereby ratifies and reaffirms all of its obligations
thereunder and agrees that all Collateral, liens, and security
interests at any time granted by Borrower to Lender shall
continue unimpaired and in full force and effect and shall
continue to cover and secure all Obligations. In consideration
of Lender's undertakings herein, Borrower hereby releases,
remises and forever discharges (and agrees never to assert,
defend or counterclaim against) Lender, its agents,
representatives, employees, successors and assigns, whether such
persons are known or unknown, from all actions, suits, claims,
covenants, judgments, liabilities, rights, setoffs, demands and
defenses of every kind and nature whether now known or unknown or
now or hereafter existing or arising, at law or in equity, which
Borrower now has, arising from or related to any act or omission
by Lender or any such agents, representatives, employees,
successors or assigns through the date hereof in connection with
the consideration, negotiation, consummation, administration
and/or enforcement of the Loans and/or the Loan Documents,
including this Amendment.
6. Counterparts. This Amendment may be executed in any
number of counterparts, each of which so executed shall be deemed
to be an original, and such counterparts together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed and delivered by their duly authorized
officers as of the day and year first above written.
ATTEST: RHEOMETRIC SCIENTIFIC, INC.
/s/ Matthew Bilt By: /s/ Joseph Musanti
_______________________ ______________________
Vice President Title: V.P. Finance
___________________
ATTEST: FLEET CAPITAL CORPORATION
("Lender")
/s/Lisa Giampaolo
______________________ By:/s/ John W. Stanescki
Asst. Secretary lisa Giampaolo ____________________
Title: V.P.
________________
PriceWaterhouseCoopers LLP
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Rheometric Scientific, Inc.
We consent to the incorporation by reference in the registration statement of
Rheometric Scientific, Inc. on Form S-8 (File No. 333-33941) of our report
dated August 12, 1998, except as to information presented in Notes 8 and 12,
for which the date is August 27, 1998, on our audits of the consolidated
financial statements of Rheometric Scientific, Inc. as of December 31, 1997
and 1996, and for the years ended December 31, 1997, 1996, and 1995, which
report is included in the 1997 Annual Report of Rheometric Scientific, Inc.
on Form 10-K.
PricewaterhouseCoopers L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
September 11,1998
