SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------
INFORMATION STATEMENT
PURSUANT TO SECTION 14(F) OF THE
SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
--------------------------------
RHEOMETRIC SCIENTIFIC, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
NEW JERSEY 0-14617 61-0708419
- ---------- ------- ----------
(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
---------------------------------
One Possumtown Road
Piscataway, New Jersey 08854
(Address of Principal Executive Offices)
(732) 560-8550
(Registrant's Telephone Number, Including Area Code)
RHEOMETRIC SCIENTIFIC, INC.
One Possumtown Road
Piscataway, New Jersey 08854
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INFORMATION STATEMENT PURSUANT TO SECTION 14(F) OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 14F-1 THEREUNDER
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This Information Statement is being mailed on or about February 18, 2000
to holders of record as of February 17, 2000 of shares of common stock, no par
value ("Common Stock"), of Rheometric Scientific, Inc., a New Jersey corporation
(the "Company"), in connection with the appointment of four persons nominated by
Andlinger Capital XXVI LLC ("Andlinger"), as directors of the Company otherwise
than at a meeting of the stockholders of the Company pursuant to a Securities
Purchase Agreement, dated as of February 17, 2000 (the
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"Purchase Agreement"), between the Company, Andlinger and Axess Corporation
("Axess"), and the resignation of five of the seven directors of the Company.
Pursuant to the Purchase Agreement, the Company has agreed to sell to
Andlinger for an aggregate purchase of one million eight hundred and twenty-five
thousand dollars ($1,825,000), (i) 10,606,000 shares of Common Stock ("Andlinger
Shares"), and (ii) warrants to purchase (x) 2,000,000 shares of Common Stock
exercisable at an exercise price of $1.00 per share and (y) 4,000,000 shares of
Common Stock exercisable at an exercise price of $3.00 per share ("Andlinger
Warrants"). In connection with the transaction contemplated under the Purchase
Agreement, Axess has agreed to cancel the Company's indebtedness to Axess of
approximately $8,205,907, plus interest accrued after January 1, 1999 in
exchange for (x) the payment by the Company to Axess of three million five
hundred thousand dollars ($3,500,000); (y) the issuance to Axess of a promissory
note ("Axess Note") in the principal amount of one million dollars ($1,000,000)
payable upon the sole of a business unit of the Company, and (z) the issuance to
Axess of a warrant ("Preferred Stock Warrant") to purchase 1,000 shares of the
Company's non-voting Convertible Redeemable Preferred Stock, no par value
("Preferred Stock") to be issued, subject to stockholder approval.
Concurrently with the closing of the Purchase Agreement, the Company,
Andlinger and Axess will enter into a registration rights agreement (the
"Registration Rights Agreement") providing for the registration under the
Securities Act of 1933, as amended (the "Securities Act"), of the (i) Andlinger
Shares and the shares of Common Stock owned by Axess; (ii) shares of common
stock issuable upon exercise of the Andlinger Warrants; and (iii) the shares of
Common Stock issuable upon conversion of the Preferred Stock. Furthermore, the
Company, Andlinger and Axess (i) will enter into a stockholder's agreement (the
"Stockholders' Agreement") with respect to certain matters related to the shares
of Common Stock and Preferred Stock owned by or to be owned by such stockholders
and (ii) a voting agreement (the "Voting Agreement") pursuant to which Axess and
Andlinger have agreed to vote their respective shares in favor of the matters
submitted for stockholder approval.
Simultaneously with the closing, five members of the Company's Board of
Directors (Messrs. Bogner, Bromm, Eschbach, A. Giacco and Hendricks) will resign
from their positions as directors of the Company effective (the "Resignation
Effective Date") not sooner than ten days after the date this Schedule 14F was
mailed to the stockholders of record of the Company on February 17, 2000 and
transmitted to the Securities and Exchange Commission (the "SEC"). In connection
with the transactions contemplated by the Purchase Agreement, four individuals
nominated by Andlinger became directors of the Company (the "Designees").
Information with respect to the Designees is set forth below.
It is contemplated that the Company will promptly after the Closing,
submit to its stockholders for approval proposals to (i) increase the authorized
number of shares of Common Stock to 49,000,000 shares; (ii) authorize 1,000,000
shares of preferred stock and (iii) authorize the issuance of the preferred
stock (collectively, "Charter Amendment") in order to facilitate the
transactions contemplated hereby. At the Closing, Axess is contributing an
additional 4,400,000 shares of Common Stock to the Company, in exchange for the
Company's agreement to reissue from the Company 4,400,000 shares of Common Stock
(the "Axess Reissue Shares") subject to the effectiveness of the Charter
Amendment.
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No action is required on the part of the stockholders of the Company in
order to effect the appointment of the Designees. Nevertheless, Section 14(f) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires
the mailing to the Company's stockholders of record of the information set forth
in this Information Statement at least ten days prior to a change in a majority
of the Company's directors otherwise than at a meeting of the Company's
stockholders. As a result of the resignation of five directors effective on the
Resignation Effective Date, on such date the newly appointed directors will
constitute a majority of the members of the Board of Directors. As of February
17, 2000 there were 13,161,739 shares of common stock issued and outstanding,
the holders of which shares are entitled to cast one vote per share on all
matters submitted to a vote of stockholders.
The information contained in this Information Statement concerning the
Designees has been furnished to the Company by Andlinger and the Company assumes
no responsibility for such information. The principal executive offices of the
Company are located at one Possumtown Road, Piscataway, New Jersey 08854 and the
principal executive offices of Andlinger are located at 105 Harbor Drive, Suite
125, Stamford, Connecticut 06902.
Information Regarding the Designees
None of the Designees is a director of, or holds any position with, the
Company, and none of the Designees owns any shares of Common Stock. The name,
age, present principal occupation of employment and five-year employment history
of each of the Designees are set forth below. Each Designee's term of office as
a director of the Company will expire at the 2000 Annual Meeting of Stockholders
or at the time such Designee's successor is duly elected and appointed
qualified. Unless otherwise indicated, the business address of each of the
Designees is One Possumtown Avenue, Piscataway, New Jersey 08854.
Board of Directors - Designees
Robert M. Castello 59 Principal, Andlinger & Company, Inc. since
1995; Chairman, X.O. Tec, a medical products
company, since 1997. Was President and CEO
of CBI Holding Co., a pharmaceutical
wholesaler. Previously Mr. Castello held
Vice Presidential positions at McKesson Drug
Co., Seatrain Lines, and W.R. Grace.
Mark F. Callaghan 48 Principal, Andlinger & Company, Inc. since
1999; Independent consultant in mergers and
acquisitions from 1995 to 1999. Vice
President, Panorama Press from 1994 to 1995.
Mr. Callaghan
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is a member of the Board of Directors of
CyberAlert Inc., and of Craftshop.com.
David R. Smith 70 Chairman, M-Tec, a manufacturer of
specialized materials used in extreme
temperature and harsh environments servicing
the automotive and aerospace industries, as
well as paper, chemical, refining and
electrical power plant exhaust systems,
since August 1995; formerly a principal at
Andlinger & Company since June 1, 1984 and
President from June 1, 1994 to October 1998.
Mr. Smith formerly served on the Board of
United Stationers.
Merrick G. Andlinger 41 Principal, Andlinger & Company since 1999;
President and CEO of Pure Energy
Corporation, a motor fuel and chemical
development company from 1996 to 1999;
Managing Director and co-head of the Global
Energy and Power Group in the Corporate
Finance department of Smith Barney Inc. from
1994 to 1996; member of the Board of
Directors of CyberAlert Inc. and formerly
Pure Energy Corporation.
Information Regarding Directors of the Company prior to the Closing
The Board of Directors of the Company each have a term expiring at the
2000 Annual Meeting of Stockholders. At each Annual Meeting, Directors are
elected for a term ending year or until on the date of the next Annual Meeting.
The name, age, principal occupation for the last five years, selected
biographical information and period of service as a Director of the Company of
each of the nominee for election as a director are set forth below. Information
regarding the Directors of the Company prior to the Closing is as of December
31, 1999.
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<TABLE>
<CAPTION>
Principal Occupation or Employment During the Past
Five Years and
Name Age Office (if any) Held in the Company Director Since
---- --- ----------------------------------- --------------
<S> <C> <C> <C>
Alexander F. Giacco 80 Chairman of the Board since August 1993
31, 1997, President and Chief
Executive Officer since February 6,
1998. Managing Director, Axess
Corporation, since its inception in
1991; prior thereto Chairman of
HIMONT Incorporated, 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 59 President, Bogner Business 1995
Consultants, Inc. 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 65 Retired; prior thereto, Senior Vice 1998
President, Montell, Inc., a
polyolefin materials company, from
1993 to 1997, and Senior Vice
President, HIMONT Incorporated, a
plastics manufacturing company from
1987 to 1993.
Alan R. Eschbach 53 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 47 Vice President, Rheometric 1992
Scientific, Inc. since February 19,
1998; Vice President
</TABLE>
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<TABLE>
<S> <C> <C> <C>
and General Counsel, Axess 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 62 President, Axess Corporation since 1992
its 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 52 Professor of Chemical Engineering at 1981
Princeton University since 1978;
Consultant to Dow Chemical Company,
Block Drug, Helene Curtis, and
Rhodia Incorporated.
</TABLE>
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 in person and reimbursement of
their travel expenses. No fees are paid for committee meetings or special
telephonic meetings. On March 1, 1999, Richard J. Giacco, a Director of the
Company received a grant of an option to purchase 75,000 shares of Common Stock
of the Company for $.29 per share.
Board Committees
The Board of Directors has a Stock Option and Compensation Committee (the
"Compensation Committee"), which is responsible for administering the Option
Plan. The members of the Compensation Committee are Messrs. Bogner, Hendricks,
and Bromm. During the last fiscal period ended December 31, 1999, the
Compensation Committee held one meeting.
The Board of Directors has an Audit Committee which reviews the scope and
procedures of the audit activities of the independent auditors and their reports
on their audits. It also reviews reports from the Company's financial management
and independent auditors on compliance with corporation policies and the
adequacy of the Company's internal accounting controls. The members of the Audit
Committee are Messrs. Hendricks and Bogner, and Dr. Prud'homme. The Audit
Committee held one meeting during the last fiscal period ended December 31,
1999.
During the last fiscal period ended December 31, 1999, the Board of
Directors held seven meetings. No director attended fewer than 75% of the
aggregate of the meetings of the board and committees to which such directors
was assigned.
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Executive Officers
The following is a list of names and ages of all the executive officers of
the Company, as of December 31, 1999, 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.
<TABLE>
<CAPTION>
Name Age as of December 31, 1999 Offices and Positions Held
---- --------------------------- --------------------------
<S> <C> <C>
Alexander F. Giacco 80 Chairman of the Board since August 31, 1997,
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 HIMONT Incorporated, a plastics
manufacturing company, since its formation
(1983-1991), and served as CEO (1987-1990).
Mr. Giacco is the father of Richard J.
Giacco.
Joseph Musanti 42 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.
Ronald F. Garritano 61 Vice President, Technology since June 1992,
Vice President of Engineering since July
1977.
Matthew Bilt 57 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
</TABLE>
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<TABLE>
<S> <C> <C>
and Director of Human Resources from June 2,
1986 to May 3, 1994.
Donald W. Becker 42 Vice President, Sales and Marketing, Americas
since April 1999, prior thereto Sales and
Marketing Manager 1998, prior thereto to
Marketing Manager 1997-1998, and Rheology
Product Manager, Americas 1989-1997.
Richard J. Giacco 47 Vice President and General Counsel, Axess
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.
</TABLE>
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of all compensation paid or
accrued by the Company for services rendered during the last fiscal years
December 31, 1999, 1998, and 1997, to the Company's chief executive officer and
the four most highly compensated executives of the Company whose aggregate
salary and bonus exceeded $100,000 for the last fiscal period ended December 31,
1999 (the "Named Executive Officers"):
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
------------------- ------
Securities
Name and Principal All other Underlying
Position Year Salary($) Bonus compensation ($)(1) Options
-------- ---- --------- ----- ------------------- -------
<S> <C> <C> <C> <C> <C>
Alexander F. Giacco (2) 1999 0 0 0 0
President, Chief
Executive Officer, and
Director
</TABLE>
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<S> <C> <C> <C> <C> <C>
Ronald F. Garritano 1999 $165,385 $ 0 $ 2,813 0
Vice President 1998 162,860 0 2,813 50,000
1997 146,506 0 2,672 0
Matthew Bilt 1999 $127,500 0 $ 2,586 0
Vice President, Human 1998 128,049 0 2,414 15,000
Resources 1997 116,693 0 1,660 0
Joseph Musanti, 1999 $134,807 0 $ 2,250 0
Vice President, Finance 1998 128,616 0 2,250 40,000
and Chief Financial Officer
Donald W. Becker, 1999 $125,468 0 $ 2,250 15,000
Vice President, Sales
and Marketing, Americas
</TABLE>
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(1) Company contributions under the Savings and Investment Retirement Plan.
(2) Mr. Alexander F. Giacco is the managing director of the Company's parent
and serves as CEO. In that capacity, he received no compensation either
directly or indirectly.
(3) Mr. Eschbach resigned on February 6, 1998.
(4) Mr. Davis served as President and CEO of the Company from September 20,
1993 to August 31, 1997. The Company and Axess verbally agreed that the
Company would pay to Axess a management fee, equal to $150,000 per year,
for said services.
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Option Exercises and Holdings
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options during the last fiscal
year and unexercised options held as of the end of the last fiscal year.
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised In-the-
Unexercised Options at 12-31-99 (#) Money Options at 12-31-99 ($)
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Ronald F. Garritano 26,000 42,000 $ 1,375 $4,125
Matthew Bilt 10,800 13,600 $ 413 $1,238
Joseph Musanti 14,875 31,625 $ 1,100 $3,300
Donald W. Becker 4,125 11,375 $ 413 $1,238
</TABLE>
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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. Options to purchase 170,000
shares of common stock were granted to employees during the 12-month period
ended December 31, 1999.
Employment Agreements
The Company amended and restated written employment agreements with Mr.
Bilt in December 1998 and with Mr. Garritano in March 1998, and with Mr. Musanti
in October 1999. In addition, the Company entered into a written employment
agreement with Mr. Becker in May 1999. Under these agreements, base annual
salary is $150,000 for Mr. Garritano, $115,000 for Mr. Bilt, $120,000 for Mr.
Musanti, and $80,000 for Mr. Becker, all subject to discretionary increase by
the Board of Directors. Messrs. Bilt, Musanti and Becker's employment agreements
had or have an initial term of one year and can be continued from year to year
thereafter at the option of the Company. 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,
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Musanti and Becker'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 resulting
from 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 to which he may be entitled to in that period. If
a change of control were to occur today and Mr. Garritano's employment was
terminated, Mr. Garritano would be entitled to receive one year's base pay, plus
any bonus participation or other benefit to which he may be entitled to in that
period.
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.
SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth certain information as of February 17,
2000 concerning the ownership of common stock by (i) each person known to the
Company to be the beneficial owner of more than five percent of the Company's
outstanding shares of common stock, and the beneficial ownership of each such
person, (ii) each current member of the Board of Directors of the Company, (iii)
the Company's five most highly compensated executed officers and (iv) all
current directors and executive officers of the Company as a group.
Shares
Beneficially Owned
(1)
----------------------
Name and Address* Number Percent
- ----------------- ------ -------
Axess Corporation 10,076,257 76.6%
100 Interchange Blvd
Newark, Delaware 19711-3549
Alexander F. Giacco, Chief Executive Officer,
Chairman of the Board 81,000(2) **
Alan R. Eschbach, Ex-Chief Executive Officer,
Director 27,240 **
Leonard Bogner, Director 25,000 --
Walter M. Bromm, Director 25,000 --
Richard J. Giacco, Vice President and Director 78,000(3) **
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R. Michael Hendricks, Director 3,000 **
Robert K. Prud'homme, Director 25,000 --
Matthew Bilt, Vice President, Human Resources
& Administration 12,900 **
Ronald F. Garritano, Vice President, Technology 29,735 **
Joseph Musanti, Vice President, Finance &
Materials 14,875 **
Donald W. Becker, Vice President, Sales &
Marketing, Americas 4,125 **
All Directors and executive officers as a group
(11 persons) 325,875 **
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* Addresses are given for beneficial owners of more than five percent of the
Company's common stock only.
** Represents beneficial ownership of less than 1% of the Company's common
stock.
(1) In accordance with Rule 13d-3 under the 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 February 16, 2000. "Voting power" is the
power to vote or direct the voting 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) Includes beneficial ownership of 1,000 shares held in an investment
partnership for the benefit of his children and managed by Mr. Giacco.
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Axess Corporation Common Stock Ownership
The following table sets forth information as of December 31, 1999 with
respect to shares of Axess common stock beneficially owned by Company directors,
director nominees, Named Executive Officers, and all directors and executive
officers as a group. Individuals in each group who are not listed own no shares
of Axess.
Shares
Beneficially Owned
(1)
---------------------
Name and Title with Company Number Percent
- --------------------------- ------ -------
Robert E. Davis, Ex-Chief Executive 469,565 21.6%
Officer and Ex-Director(2)
Alexander F. Giacco, President, Chief Executive 469,565(3) 21.6%
Officer and Chairman of the Board
Richard J. Giacco, Vice President and Director 46,957 2.6%
R. Michael Hendricks, Director 187,826(4) 8.6%
All RSI directors and executive officers as a 704,348 32.8%
group
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(1) Axess is a privately held Delaware corporation established in 1991. See
footnote 1 above.
(2) Robert E. Davis retired effective August 31, 1997.
(3) 446,087 shares (20.3%) are owned by revocable trust for which Mr. A.
Giacco is the settlor, a beneficiary and trustee. 23,478 shares (1.3%) are
held by a company in which Mr. A. Giacco has sole voting power.
(4) Held by a revocable trust for which Mr. Hendricks is the settlor, a
beneficiary and a trustee.
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Compensation Committee Report on Executive Compensation
Decisions on compensation of the Company's executives generally are made
by the three-member Compensation Committee. Each member of the Compensation
Committee is a non-employee director. All decisions by the Compensation
Committee relating to the compensation of Company's executive officers are
approved by the full Board of Directors.
Executive Compensation Policies. The Compensation Committee's executive
compensation policies are designed to provide competitive levels of compensation
that integrate compensation with the Company's annual and long-term performance
goals, reward above-average corporate performance, recognize individual
initiative and achievements, and assist the Company in attracting and retaining
qualified executives. Target levels of the executive officer's overall
compensation are intended to be consistent with others in the Company's
industry.
All the Named Executive Officers, other than Messrs. Davis, A. Giacco and
R. Giacco, are employed pursuant to written employment agreements which
establish their base annual salary. The terms of the agreements in the judgment
of the Compensation Committee are standard and appropriate for these executives
and accordingly were endorsed by the Compensation Committee and ratified by the
remaining members of the Board.
The Compensation Committee endorses the position that stock ownership by
management and stock-based performance compensation arrangements are beneficial
in aligning management's and shareholder's interests in the enhancement of
shareholder value. Thus, the Compensation Committee has utilized these elements
in compensation packages for its executive officers by providing significant
Incentive Stock Options.
Named Executive Officers, other than Mr. A. Giacco, may be granted options
to purchase common stock and are eligible to participate on the same terms as
non-executive employees in the Company's Savings and Investment Retirement Plan
(the "Savings Plan"), a broad-based plan which accords benefits based on
pre-established formulas and eligibility criteria, as well as Company group life
and health insurance plans. All decisions with respect to option grants will be
made solely by the Compensation Committee, subject to approval by the full Board
of Directors.
President and CEO Compensation. As Chief Executive Officer of the Company
from September 20, 1993 until August 31, 1997, Mr. Davis did not receive any
compensation from the Company. The Company agreed to pay Axess a management fee
of $150,000 per year for services to be rendered by Mr. Davis. Mr. Davis had
devoted substantially all of his time on behalf of Axess to the Company during
his tenure. Mr. Davis retired on August 31, 1997. The management fee for the
fiscal year ended December 31, 1997 was $100,000.
Mr. Eschbach became President and Chief Executive Officer on August 31,
1997 when Mr. Davis retired. During Mr. Eschbach's tenure as President and Chief
Executive Officer (August 31, 1997 to February 6, 1998), he was compensated
pursuant to his employment agreement with the Company and received no additional
compensation upon becoming President and CEO. On February 6, 1998, Mr. Alexander
F. Giacco became President and Chief Executive
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Officer. Mr. A. Giacco receives no compensation from the Company, and Axess has
elected not to require the Company to pay a management fee for said services.
Respectfully submitted,
Leonard Bogner
R. Michael Hendricks
Walter Bromm
Stock Performance Chart
The following table sets forth comparative information regarding the
Company's cumulative shareholder return on common stock over the last five
fiscal years ended December 31, 1999. Total shareholder return is measured by
dividing total dividends (assuming dividend reinvestment) plus share price
change for a period by the share price at the beginning of the measurement
period. The Company's cumulative shareholder return based on an investment of
$100 at the beginning of the five-year period beginning January 1, 1995, is
compared to the cumulative total return of the Nasdaq Market Index and an index
comprised of public companies whose securities have been trading publicly since
January 1, 1995 and which report under the standard industrial classification
code 3826 (34 companies excluding the Company) (the "Peer Group Index").
Comparison of Cumulative Total
Return Among RSI,
SIC Code Index, and NASDAQ Market Index
For the Five Years December 31, 1999
[PERFORMANCE CHART]
[The following was depicted as a line chart in the original printed material]
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------
COMPANY/INDEX/MARKET 1994 1995 1996 1997 1998 1999
- -------------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Rheometric Scientific, Inc. 100.00 120.00 155.01 75.01 22.51 40.01
SIC Code Index 100.00 160.26 191.77 227.51 285.70 462.23
NASDAQ Market Index 100.00 129.71 161.18 197.16 278.08 490.46
</TABLE>
ASSUMES $100 INVESTED ON JAN 1, 1995
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 1999
Source: Media General Financial Services
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SOURCE AND AMOUNT OF FUNDS FOR CHANGE IN CONTROL
Pursuant to the Purchase Agreement, the Company has agreed to sell to
Andlinger, for an aggregate purchase price of $1,825,000, (i) Adlinger Shares
and (ii) Andlinger Warrants to purchase (x) 2,000,000 shares of Common Stock
exercisable at an exercise price of $1.00 per share and (y) 4,000,000 shares of
Common Stock exercisable at an exercise price of $3.00 per share. Axess is
canceling $8,205,907 (plus accrued interest) of debt owed to Axess by the
Company in exchange for (x) the payment of cash of $3,500,000; (y) issuance of a
promissory note by the Company for the principal amount of $1,000,000 payable
upon the sale of a business unit of the Company, and (2) a warrant to purchase
1,000 shares of the Company's Preferred Stock.
Closing under the Purchase Agreement is subject to Andlinger securing a
new senior credit facility for the Company, for which Andlinger has received a
commitment letter, which is subject to the satisfactory completion of other
refinancing arrangements and due diligence and third party approvals as
required. The three year credit facility is proposed to be for an aggregate
amount of $13,000,000 payable with interest at the Eurodollar plus 2 1/2 percent
per annum.
CERTAIN TRANSACTIONS
On September 30, 1999, Axess and the Company consolidated all outstanding
debt of the Company to Axess, in an Amended and Restated Subordinated Unsecured
Working Capital Note (the "Note") made by the Company in favor of Axess in the
amount of $8,205,907.09. The debt consolidated under the Note included
outstanding principal, unpaid interest through December 31, 1998, amounts due to
Axess under a management agreement with the Company and amounts due to Axess for
insurance premium advances. The Note bears interest at 12% payable monthly and
is due February 28, 2002.
At the Closing, Axess has agreed to cancel $8,205,907 (plus interest
thereon) owned to it by the Company in exchange for (x) the payment by the
Company to Axess of $3,500,00 in cash; (y) the issuance to Axess of the Axess
Note in the principal amount of $1,000,000 payable upon the sale of a business
unit of the Company; and (z) the issuance to Axess of a Warrant to purchase
1,000 shares of the Company's non-voting Convertible
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Redeemable Preferred Stock to be issued, subject to stockholder approval,
pursuant to the Company's Certificate of Incorporation.
Pursuant to the Purchase Agreement, the Company has agreed to sell to
Andlinger for an aggregate purchase of one million eight hundred and twenty-five
thousand dollars ($1,825,000), (i) Andlinger Shares and (ii) Andlinger Warrants
to purchase (x) 2,000,000 shares of Common Stock exercisable at an exercise
price of $1.00 per share and (y) 4,000,000 shares of Common Stock exercisable at
an exercise price of $3.00 per share. In connection with the transactions
contemplated under the Purchase Agreement, Axess has agreed to cancel the
Company's indebtedness to Axess of approximately $8,205,907, plus interest
accrued after January 1, 1999 in exchange for (x) the payment by the Company to
Axess of three million five hundred thousand dollars ($3,500,000); (y) the
issuance to Axess of the Axess Note in the principal amount of one million
dollars ($1,000,000) payable upon the sale of a business unit and (z) the
issuance to Axess of a warrant to purchase 1,000 shares of the Company's
Preferred Stock to be issued, subject to stockholder approval.
Concurrently with the closing of the Purchase Agreement, the Company,
Andlinger and Axess will enter into the Registration Rights Agreement providing
for the registration under the Securities Act of 1933, as amended (the
"Securities Act"), of the (i) Anglinger Shares; (ii) shares of common stock
issuable upon exercise of the Andlinger Warrants; and (iii) the shares of Common
Stock issuable upon conversion of the Preferred Stock. Furthermore, the Company,
Andlinger and Axess (i) will enter into the Stockholders' Agreement with respect
to certain matters related to the shares of Common Stock and Preferred Stock
owned by or to be owned by such stockholders, and (ii) have entered into the
Voting Areement pursuant to which Axess and Andlinger have agreed to vote their
respective shares in favor of the matters submitted for stockholder approval.
Securities Purchase Agreement
On February 18, 2000, the Company, Andlinger and Axess entered into the
Purchase Agreement, pursuant to which the Company has agreed to sell to
Andlinger for an aggregate purchase of one million eight hundred and twenty-five
thousand dollars ($1,825,000), (i) the Andlinger Shares and (ii) Andlinger
Warrants to purchase (x) 2,000,000 shares of Common Stock exercisable at an
exercise price of $1.00 per share and (y) 4,000,000 shares of Common Stock
exercisable at an exercise price of $3.00 per share. In connection with the
transactions contemplated under the Purchase Agreement, Axess has agreed to the
cancellation of the Company's indebtedness to Axess of approximately $8,205,907,
plus interest accrued after January 1, 1999 in exchange for (x) the payment by
the Company to Axess of three million five hundred thousand dollars
($3,500,000); (y) the issuance to Axess of the Axess Note in the principal
amount of one million dollars ($1,000,000) payable upon the sale of a business
unit of the Company; and (z) the issuance to Axess of the Preferred Stock
Warrant to purchase 1,000 shares of the Company's Series A Stock to be issued,
subject to stockholder approval. In order to lessen the dilution to the
stockholders, Axess is contributing 2,800,000 shares of Common Stock of the
Copany owned by Axess to the Compay owned by Axess to the Company. Axess is also
contributing 4,400,000 shares to the Company in exchange for the Axess Reissue
Shares.
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Registration Rights Agreement
On February 18, 2000, the Company, Andlinger and Axess entered into the
Registration Rights Agreement providing for the registration under the
Securities Act, of the (i) Andlinger Shares; (ii) shares of Common Stock
issuable upon exercise of the Andlinger Warrants; (iii) the shares of Common
Stock issuable upon conversion of the Preferred Stock Warrant; and (iv) the
Axess Reissue Shares.
Subordinated Promissory Note
The Company will issue the Axess Note to Axess at the closing of the
Purchase Agreement (the "Closing"), pursuant to which the Company promises to
pay to Axess the aggregate principal sum of $1,000,000, bearing interest at 6%
per year. The interest on the Axess Note is due and payable in quarterly
installments commencing on March 31, 2001 and on the first day of each calendar
quarter thereafter, until the loan has been paid in full. Subject to the
Company's prepayment obligation discussed below, commencing on March 31, 2001
and on the first day of each calendar quarter thereafter through and including
December 31, 2005, the Company is obligated to make a payment of $50,000 as
repayment of a portion of the principal amount of the loan. The entire unpaid
principal balance and unpaid accrued interest shall become due and payable on
February 28, 2006. Additionally, at the time of the closing of the sale of the
Company's business division, currently operated under the name "Process Control
Rheometer Business", the Company is required to pay to Axess, as a prepayment on
the Axess Note, the net proceeds received by the Company to the extent such net
proceeds exceed $820,000. In the event that the net proceeds are insufficient to
satisfy in full the then outstanding principal balance on the loan, the net
proceeds shall be applied in inverse order of maturity and the quarterly
payments of principal and is obligated to continue until the Axess Note is
repaid in full. The Company may upon at least three days notice to Axess, prepay
the principal amount under the Axess Note.
Warrant for Series A Convertible Redeemable Stock
At the Closing, Axess will be granted the Preferred Stock Warrant to
purchase 1,000 shares of the Series A Stock at any time or from time to time
after the Closing at an aggregate purchase price of
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$1.00 through 5:00 p.m. (New York City time) on February 18, 2009 or ten
years after the date of original issue. The Preferred Stock Warrant shall not be
exercisable until, and must be exercised upon, the completion of the filing of
an amendment to the Company's Certificate of Incorporation. The Preferred Stock
Warrant and shares of Series A Stock are subject to the anti-dilution provisions
set forth in the Preferred Stock Warrant.
Terms of Series A Stock
No dividends shall accrue or be payable with respect to the Series A
Stock. The Preferred Stock shall rank, with respect to distributions upon
liquidation, dissolution or winding-up of the Company, senior to all classes or
series of Common Stock, preferred stock or other capital stock of the Company
except that the Company may issue up to 1,000 shares of preferred stock on a
pari pasu basis with the Series A Stock, provided the terms of such preferred
stock relating to the conversion price, conversion ratio and redemption or
distribution are the same as the Series A Stock. Each share of Series A Stock
shall be convertible at the Holder's option, during the redemption period, into
1,000 shares of the Company's Common Stock, subject to adjustments, at a
conversion price per share of Common Stock of $1.00. In order to prevent
dilution of the conversion right granted, the conversion price and the number of
shares of Common Stock into which each share of Series A Stock shall be
convertible shall be subject to adjustment from time to time as provided in the
Amendment to the Company's Certificate of Incorporation.
The Series A Stock is subject to certain mandatory redemption dates,
commencing on the first anniversary of the Closing Date (as such term is defined
in the Purchase Agreement and ending on the fifth anniversary of such Closing
Date. Two hundred shares of Series A Stock shall be converted at each such
anniversary date at a price per share of $1,000. The Holders of Series A Stock
shall not be entitled or permitted to vote, except as otherwise required under
New Jersey law or as follows: without approval of at least 90% of the shares of
Series A Stock then outstanding, voting or consenting, as the case may be,
separately as a single class, given in person or by proxy, either in writing or
by resolution adopted at an annual or special meeting called for the purpose,
the Company will not, directly or indirectly, amend, modify or repeal the
Certificate of Incorporation (including without limitation by filing any other
certificate of designation) or by-laws of the Company so as to adversely affect
in any manner, or take any action other that may adversely affect in any manner,
the specified designations, rights, preferences, privileges or voting rights of
the Series A Stock.
Stockholders' Agreement
At Closing, the Company, Andlinger and Axess will enter into a
Stockholders' Agreement pursuant to which the parties agreed, without the prior
written consent of the other stockholders, not to transfer any securities except
in accordance with certain conditions.
Voting Agreement
On February 17, 2000, the Company, Andlinger and Axess entered into the
Voting Agreement, pursuant to which Andlinger and Axess each agreed to vote any
shares of capital stock of the Company, now or hereafter owned by them, in favor
of the Charter Amendment and for all matters relating thereto. The Voting
Agreement terminates upon the earlier of (i) the effectiveness of the Charter
Amendment, (ii) the termination of the Purchase Agreement, or (iii) ten years
from the date of the Purchase Agreement.
Material Proceedings
No director, officer or affiliate of the Company, owner of record or
beneficially of more than five percent of any class of voting securities of the
Company or any associate of any such director, officer, affiliate of the Company
or security holder is a party adverse to the Company or any of its subsidiaries
or has a material interest adverse to the Company or any of its subsidiaries.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the 1934 Act requires the Company's officers, directors,
and beneficial owners of more than 10% of the outstanding Common Stock to file
reports of their ownership of common stock and changes in such ownership with
the Securities and Exchange Commission. The Company believes that during 1999
all such filings were made on a timely basis.
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