SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
AMENDMENT NO. 1 TO
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended Commission File Number
December 31, 1999 0-5613
- ------------------ ----------------
REXX ENVIRONMENTAL CORPORATION
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-2625545
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
445 Park Avenue, New York, New York 10022
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 750-7755
- ------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, par value $.02
- ------------------------------------------------------------------------------
(Title of Class)
1 of 13 pages
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT.
The following table gives certain information as of April 30,
2000 concerning the Company's directors and executive officers.
Name Age Positions and Offices with REXX Director
Since
---- --- ------------------------------- --------
Arthur L. Asch 58 Chairman of the Board of Directors and 1979
Chief Executive Officer. Member of
Executive and Nominating Committees
of the Board Of Directors.
Michael A. Asch 33 President, Chief Operating Officer, 1996
Treasurer and Chief Financial Officer.
Member of the Executive, Compensation
and Nominating Committees of the
Board of Directors.
Joseph Greenberger 64 Secretary. Member of the Executive, 1979
Nominating, Audit and Stock Option
Committees of the Board of Directors.
James L. Hochfelder 55 Member of the Audit, Compensation and 1997
Stock Option Committees of the Board
of Directors
Brian A. Wasserman 34 Member of the Audit, Compensation and 1997
Stock Option Committees of the Board
of Directors
Set forth below are the current positions of the executive officers of
the Company's Watkins Contracting, Inc. ("Watkins") operating subsidiary.
Name Age Positions and Offices with Watkins
- ---- --- ----------------------------------
Greg S. Watkins 35 President
Daren J. Barone 35 Chief Executive Officer
John Sullivan, III 33 Chief Financial Officer
Set forth below is a brief description of the background of the
executive officers and directors of REXX and the executive officers of Watkins,
based on information provided by them to REXX.
Arthur L. Asch has been Chairman of the Board of Directors and Chief
Executive Officer of REXX since 1979. Mr. A. Asch served as Chairman of the Oak
Hill Sportswear Division of Donnkenny Apparel, Inc., a clothing and accessory
manufacturer, importer and
2 of 13 pages
<PAGE>
marketer, from July 1995 through December 1997. Mr. A. Asch is the father of
Michael A. Asch.
Michael A. Asch has been President, Chief Operating Officer and Treasurer
of REXX since January 1997 and its Chief Financial Officer since March 1994.
From March 1994 through December 1996, Mr. M. Asch served as Vice President of
REXX. From July 1995 through December 1996, he was Vice President and Chief
Financial Officer of the Oak Hill Sportswear Division of Donnkenny Apparel, Inc.
Since February 1992, Mr. M. Asch has also served as President and a principal of
Anniston Capital, Inc., an investment banking firm. Michael A. Asch is the son
of Arthur L. Asch.
Daren J. Barone has served as Chief Executive Officer of Watkins since
November 1997 and as Secretary and Treasurer of Watkins since January 1995. Mr.
Barone also served as Sales Manager of Watkins from February 1992 to January
1995.
Joseph Greenberger has been Secretary of REXX since 1979. Mr. Greenberger
has been engaged in the practice of law in New York City since 1962.
James L. Hochfelder has been the President of Beldoch Industries Corp.
(women's apparel) for more than the past ten years.
John Sullivan, III has served as Chief Financial Officer of Watkins since
April 1998. Prior to joining Watkins, he served as Chief Financial Officer of TC
Construction Co. for more than five years.
Brian A. Wasserman is Chief Executive Officer of Wilshire Investors, LLC,
Wilshire Louisiana Advisers, LLC, Wilshire Advisers, LLC and Wilshire Partners,
LLC. He is also currently Chief Executive Officer of The Whitestone Group, LLC,
which is a full service investment banking and venture capital firm which
specializes in identifying and investing in early-stage growth opportunities,
fund management, mergers and acquisitions and general corporate finance advisory
consulting.
From December 1997 until December 1999 Mr.Wasserman was the general partner
of two private venture capital limited partnerships with very diverse public and
private investments. The partnerships had in excess of $30,000,000 in partners'
capital and investment holdings. From April 1992 through December 1997, Mr.
Wasserman acted as an investment consultant/analyst for these partnerships. From
December 1997 until December 1999 Mr. Wasserman was an investment
consultant/analyst for two other private venture capital partnerships with very
diverse public and private investments. These partnerships had in excess of
$20,000,000 of partners' capital and investment holdings.
Mr. Wasserman previously founded and was the Chief Financial Officer of
First
3 of 13 pages
<PAGE>
Lawrence Capital Corp., an investment banking firm specializing in mergers and
acquisitions for small to medium-sized emerging companies. From December 1997
until November 1999, Mr. Wasserman served on the board of directors of Heuristic
Development Group (now know as Virtual Communities Inc.), a company which
engaged in the development, marketing, sale and licensing of the Intellifit
System, a computerized system which generates personalized exercise
prescriptions. Mr. Wasserman currently serves on the board of directors of REXX
Environmental Corporation and is also the Managing Member of Sharp Management,
LLC, a financial consulting company.
From April 1992 through September 1998, Mr. Wasserman was the Treasurer of
Engex, Inc., a closed-end mutual fund which makes early stage venture capital
investments in both public and private companies. The fund generally invests in
high technology, biotechnology and early stage pharmaceutical companies. From
April 1992 through December 1997, Mr. Wasserman acted as chief financial officer
of D.H. Blair Investment Banking Corp., a New York Stock Exchange and NASD
member firm, which is an investment banking and merchant banking firm which
specializes in public offerings and private placements of early stage and
emerging new companies. From September 1987 through April 1992, Mr. Wasserman
was an audit/tax manager and a staff investment analyst for
PricewaterhouseCoopers LLP. Mr. Wasserman is a Certified Public Accountant in
the state of New York and a member of the American Institute of Certified Public
Accountants and the New York State Society of Certified Public Accountants.
Greg S. Watkins has served as the President of Watkins since January 1995.
Prior to his appointment as President of Watkins, he served as its Secretary and
Treasurer (July 1991 to January 1995) and Vice President (June 1992 to January
1995).
Directors Compensation
Directors who are not also officers or employees of REXX are paid a
director's fee of $10,000 per year. The only directors who received this
director's fee from REXX for 1999 were James L. Hochfelder and Brian A.
Wasserman. In addition, upon joining REXX's board of directors, each person who
is not an employee of REXX is automatically granted under the REXX Option Plan
an option to purchase 15,000 shares of REXX common stock at an exercise price
per share equal to the then current per share market price of the REXX common
stock. Messrs. Hochfelder and Wasserman were each granted such an option upon
their joining REXX's board of directors in 1997.
Board Meetings and Committees
During 1999, REXX's board of directors met nine times. All current
directors of REXX attended all of these meetings of the board and all meetings
of each board committee on which they serve.
4 of 13 pages
<PAGE>
REXX's board of directors has an Executive Committee, an Audit Committee, a
Compensation Committee, a Nominating Committee and a Stock Option Committee.
The Executive Committee has been granted all of the authority which, under
the New York Business Corporation Law, may be delegated to this committee. It
consists of Messrs. A. Asch, M. Asch and Greenberger. The Executive Committee
did not meet during 1999.
The Audit Committee recommends the firm of independent public accountants
to be engaged as REXX's auditors and participates in such accounting reviews as
it deems appropriate. It consists of Messrs. Greenberger, Hochfelder and
Wasserman. The Audit Committee held one meeting during 1999.
The Nominating Committee recommends to the Board the slate of nominees for
election as directors of REXX and also recommends individuals for various
offices with REXX. It consists of Messrs. A. Asch, M. Asch and Greenberger. The
Nominating Committee will consider nominations by shareholders made in writing
to REXX's Chairman of the Board. The Nominating Committee held one meeting
during 1999.
The Stock Option Committee is authorized to award options under the REXX
Option Plan. It consists of Messrs. Greenberger, Hochfelder and Wasserman. The
Stock Option Committee did not meet during 1999.
The Compensation Committee is empowered to authorize executive officers'
compensation. It consists of Messrs. M. Asch, Hochfelder and Wasserman. The
Compensation Committee held one meeting during 1999.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of REXX's board of directors consists of Michael
A. Asch, James L. Hochfelder and Brian A. Wasserman. Anniston Capital, Inc., a
corporation controlled by Michael A. Asch, a REXX director and executive
officer, paid REXX $7,200 in 1999 for its use of REXX's office facilities and
other office expenses.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely upon a review of Forms 3, 4 and 5, and amendments thereto,
furnished to REXX, together with written representations received by REXX from
applicable parties that no Form 5 was required to be filed by these parties, all
parties subject to the reporting requirements of Section 16(a) of the Exchange
Act filed all these required reports during and with respect to the 1999 Fiscal
Year.
5 of 13 pages
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth, for the Company's fiscal year ended
December 31, 1999 and for the two prior fiscal years, the cash and other
compensation paid to all individuals serving as REXX's Chief Executive Officer,
or acting in a similar capacity, during 1999 and all other individuals serving
as executive officers of REXX and its Watkins subsidiary at December 31, 1999
whose total compensation, for services rendered to REXX during 1999, was
$100,000 or more.
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Awards
-------------------------------------- -------------
Other Annual Securities All Other
Name and Principal Position Year Salary Bonus Compensation Underlying Compensation(3)
- ---------------------------- ---- ------ ----- (1) Options (2)
------------ ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Arthur L. Asch, REXX's 1999 $ 37,500 (4) $ -- $ -- -- $ --
Chief Executive Officer 1998 225,000 (4) -- -- -- --
1997 50,000 (4) 120,000 -- -- 1,820
Michael A. Asch, REXX's 1999 $ 35,833 (5) -- $ -- -- --
Chief Operating Officer 1998 215,000 (5) -- -- -- --
1997 215,000 (5) -- -- -- 8,400
Greg S. Watkins, Watkin's 1999 $ 180,000 (6) -- $ -- -- $ 1,443
President 1998 180,000 (6) -- -- 20,000 1,415
Daren J. Barone, Watkins' 1999 $ 180,000 (6) -- $ -- -- $ 1,500
Chief Executive Officer 1998 180,000 (6) -- -- 20,000 1,500
</TABLE>
- ---------
(1) The value of all perquisites provided did not exceed lesser of $50,000
or 10% of the officer's salary and bonus.
(2) No options were granted in the 1999 fiscal year.
(3) Represents amounts paid under REXX's defined contribution pension and
profit sharing plans in 1997 and under Watkins' 401(k) Plan in 1998
and 1999.
(4) Until July 24, 1995, when the sale of REXX's Sportswear Division was
consummated, Mr. A. Asch was compensated by REXX at the rate of $500,000
per year, and he was compensated by the new owner of the Sportswear
Division from July 25, 1995 through December 31, 1997 at the rate of
$450,000 per year. As negotiated in connection with the sale of the
Sportswear Division, from July 25, 1995 through December 31, 1997,
Mr. A. Asch was paid regular compensation by REXX at the rate of $50,000
per year. Although on January 22, 1998, the Board's Compensation Committee
authorized compensation to Mr. A. Asch at the rate of $325,000 per year, on
March 19, 1999, his rate of compensation was reduced to $225,000 a year for
1998 through February 28, 1999. Mr. A. Asch has agreed that he would be
paid no compensation by REXX from March 1, 1999 until further Compensation
Committee action.
(5) Although on January 22, 1998, the Board's Compensation Committee authorized
compensation to Mr. M. Asch at the rate of $215,000 per year, on March 19,
1999, Mr. M. Asch agreed that he
6 of 13 pages
<PAGE>
would be paid no compensation by REXX from March 1, 1999 until further
Compensation Committee action.
(6) See also "Certain Relationships and Related Transactions."
Stock Option Grants in 1999
No stock options were granted in 1999.
Aggregate Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
Set forth in the table below is information, with respect to each of the
individuals listed in the table to the "Executive Compensation" section above,
as to:
* the number of shares acquired during 1999 upon each exercise of
options granted to these individuals;
* the aggregate value realized upon each such exercise, calculated as
the difference between the market value of the shares at exercise and
their exercise price;
* the total number of unexercised option held on December 31, 1999,
separately identified between those exercisable and those not
exercisable as of such date; and
* the aggregate value of in-the-money, unexercised options held on
December 31, 1999, separately identified between those exercisable
and those not exercisable.
<TABLE>
<CAPTION>
Number of Value of Unexercised
Shares Unexercised Options In-the-Money Options
Acquired Value at December 31, 1999 at December 31, 1999
-------------------- ---------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Arthur L. Asch -0- -0- 30,000 0 $ 26,250 $ 0
Michael A. Asch -0- -0- 50,000 0 43,750 0
Daren J. Barone -0- -0- 5,000 15,000 4,375 13,125
Greg S. Watkins -0- -0- 5,000 15,000 4,375 13,125
</TABLE>
Employment Agreements
Watkins has entered into employment agreements with Daren J. Barone and
Greg S. Watkins. These employment agreements each provide for:
* base salaries of $180,000 per year;
7 of 13 pages
<PAGE>
* incentive compensation equal to 5% of the annual pretax income of
Watkins above $2,700,000; and
* additional incentive compensation equal to 2.5% of the annual pretax
income of Watkins above the greater of Watkins' previous year's pretax
income or $2,700,000.
These employment agreements further provide that, if the agreement is
terminated by the executive for good reason, which includes a material breach of
the employment agreement or that the executive be based outside the original
employment area, he shall be entitled to six months, base salary plus a pro rata
portion of any additional compensation for the year of termination. The
employment agreements also contain provisions protecting Watkins' proprietary
rights and information.
REXX Stock Plans
On October 11, 1994, REXX's board of directors adopted the REXX Option Plan
covering up to 199,250 shares of REXX common stock. The REXX Option Plan
provides, among other matters, that:
* the option price per share is to be not less than 50% of the fair
market value of the stock on the date of the grant;
* options granted shall be for a term of not more than five years and
shall become exercisable in equal installments in each year of the
term on a cumulative basis, other than the first year, or to the
extent that REXX's board of directors shall otherwise determine; and
* no option may be granted under the REXX Option Plan after October 11,
2004.
On April 22, 1996, the REXX board of directors approved an amendment to the
REXX Option Plan, which was also approved by the REXX shareholders on June 26,
1996. This amendment provides that the REXX Option Plan is permitted to grant
options to non-employee directors and provides that each director who is not an
employee of REXX shall receive options to purchase 15,000 shares of REXX common
stock at the then- current market price for the REXX common stock upon joining
the board.
On December 3, 1997, the REXX board of directors approved further
amendments to the REXX Option Plan, which were also approved by the REXX
shareholders on February 17, 1998. These amendments provide for:
* reserving from REXX's authorized but unissued shares of REXX common
stock 250,000 shares for issuance on exercise of options which may be
granted under the REXX Option Plan;
8 of 13 pages
<PAGE>
* increasing the maximum number of shares for which a person may receive
options under the REXX Option Plan from 100,000 shares to 150,000
shares of REXX common stock; and
* adding the incentive to key employees of any business which REXX
acquires or in which REXX acquires an interest to continue in its
employ, by the grants of options under the REXX Option Plan to these
employees, as a purpose of the REXX Option Plan.
As of March 24, 2000, there were outstanding options granted under the REXX
Option Plan to purchase 230,000 shares of REXX common stock, at exercise prices
ranging from $2.00 to $5.00 per share.
Deferred Compensation Plans
REXX has non-contributory defined contribution pension and profit sharing
plans covering certain employees including its executive officers. Contributions
to these plans ceased permanently in October 1997 and final distributions were
made from these plans in December 1999. In addition, Watkins has a matching
contribution 401(k) retirement plan covering certain employees including its
executive officers. Neither REXX nor Watkins has a defined benefit or actuarial
plan.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth, as of March 24, 2000, the beneficial
ownership of shares of REXX common stock by:
* each person known by REXX to beneficially own 5 or more of the
outstanding shares of REXX common stock, based on filings with the
SEC and certain other information;
* each director of REXX;
* each current executive officer of REXX for whom information is given
in the "Executive Compensation" section above; and
* all executive officers and directors of REXX as a group.
The REXX common stock is the only outstanding class of voting securities of
REXX. Except as otherwise indicated, all shares are beneficially owned, and
investment and voting power is held by the persons named as owners. Unless
otherwise indicated, the address for each beneficial owner listed in the table
is c/o REXX Environmental Corporation, 445 Park Avenue, New York, New York 10022
and REXX believes that all persons named in the table have sole voting and
investment power with respect to all shares of REXX common stock beneficially
owned by them. A person is deemed to be the beneficial owner of
9 of 13 pages
<PAGE>
securities which may be acquired by that person within 60 days from the date
on which beneficial ownership is to be determined upon the exercise of
options, warrants or convertible securities. Each beneficial owner's
percentage ownership is determined by assuming that stock options and warrants
that are held by this person (but not those held by any other person) and
which are exercisable within 60 days from the date on which beneficial
ownership is to be determined have been exercised.
<TABLE>
<CAPTION>
Amount and Nature Percentage
Name and Address of of Common Stock Amount of Options Ownership of
Beneficial Owner Directly Owned Currently Exercisable Common Stock
- ----------------------------------------- ---------------- --------------------- --------------
<S> <C> <C> <C>
Arthur L. Asch........................ 396,051 (1) 30,000 17.1%
Daren J. Barone....................... 200,000 (2) 5,000 8.3
c/o Watkins Contracting, Inc.
8690 Aero Drive, M321
San Diego, CA 92133
Greg S. Watkins....................... 100,000 5,000 4.2
c/o Watkins Contracting, Inc.
8690 Aero Drive, M321
San Diego, CA 92133
Michael A. Asch....................... 96,000 (3) 50,000 5.8
James L. Hochfelder................... 5,000 10,000 *
Brian A. Wasserman.................... -0- 10,000 *
Joseph Greenberger.................... -0- -0- 0.0
All executive officers and directors as a
group (8 persons)..................... 797,051 115,000(4) 35.5%
</TABLE>
- -----------------------
* Less than 1.0%.
(1) Includes 25,000 shares of REXX common stock held by his spouse, which
shares Mr. A. Asch disclaims beneficial ownership.
(2) Mr. Barone assigned these 200,000 shares to Hilltop Investment Co., Inc.,
an affiliate of Mr. Barone.
(3) Includes (a) 26,000 shares of REXX common stock held by Mr. M. Asch as
custodian for his minor children, which shares Mr. M. Asch disclaims
beneficial ownership and (b) 20,000 shares of REXX common stock held by
his spouse, which shares Mr. M. Asch disclaims beneficial ownership.
(4) Includes an additional 5,000 shares of REXX common stock issuable upon
exercise of an option granted to another Watkins executive officer under
the REXX Option Plan which are exercisable within the next 60 days.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Greg S. Watkins and Daren J. Barone are executive officers of Watkins. REXX
acquired Watkins from these individuals in October 1997. The consideration paid
to Messrs. Watkins and Barone for REXX's acquisition of Watkins included:
* $3,600,000 in cash;
10 of 13 pages
<PAGE>
* 400,000 shares of REXX common stock; and
* rights entitling each of them to sell to REXX, at $5.00 per share,
up to:
* 25,000 shares of REXX common stock per quarter, starting April 1,
1999, if Watkins earned in excess of $2,700,000 in pretax income
during 1998, and
* 25,000 shares of REXX common stock per quarter, starting April 1,
2000, if Watkins earned in excess of $2,700,000 in pretax income
during 1999.
Employment agreements, each dated October 21, 1997, between Watkins and
each of Messrs. Watkins and Barone were executed in accordance with the stock
purchase agreement pursuant to which REXX purchased Watkins. These employment
agreements entitle Mr. Watkins and Mr. Barone to each receive from Watkins:
* a salary at the rate of $180,000 a year;
* incentive compensation equal to 5% of the annual pretax income of
Watkins above $2,700,000; and
* additional incentive compensation equal to 2.5% of the annual pretax
income of Watkins above the greater of Watkins' previous year's pretax
income or $2,700,000.
Pursuant to the terms of a stock purchase agreement dated as of June 10,
1999 Messrs. Greg S. Watkins and an assignee of Daren J. Barone will purchase
all of the shares of Watkins common stock presently owned by REXX (the "Watkins
transaction"). These shares represent all of the issued and outstanding common
stock of Watkins. Accordingly, upon completion of the Watkins transaction,
Watkins will be owned solely by the buyers. The purchase price to be paid by the
buyers is:
* $1,300,000 in cash;
* the assignment and transfer t REXX of 125,000 shares of REXX common
stock presently owned by the buyers or the payment of $171,875 in cash
at buyers' option;
* Watkins repayment of a $6,001 inter-company loan due REXX; and
* the buyers and Watkins using their best efforts to obtain the release
of REXX and the termination of REXX's obligations under specified
agreements, guarantees and other instruments, under which REXX
estimates its potential aggregate liabilities to be approximately
$7,000,000, or, if the buyers and Watkins are unable to obtain these
releases and termination, the buyers shall guarantee and agree to
indemnify REXX against these potential liabilities.
11 of 13 pages
<PAGE>
REXX has the option to have a third party purchase all or a part of the
125,000 shares of REXX common stock that comprise a part of the purchase price
for consideration at or above $1.375 per share. If exercised, the buyers would
sell these shares to the third party and deliver to REXX the net proceeds of
this sale, after payment of all applicable taxes, in lieu of delivery of the
shares so sold.
In addition, the stock purchase agreement provides for Watkins to pay REXX,
upon closing the Watkins transaction, 50% of the net recovery by Watkins with
respect to a claim of Watkins against the National Aeronautics and Space
Administration in connection with work done by Watkins at a NASA facility. This
claim was settled for $145,000 and was paid to Watkins in December 1999.
Anniston Capital, Inc., a corporation controlled by Michael A. Asch, a REXX
director and executive officer, paid REXX $7,200 in 1999 for its use of REXX's
office facilities and other office expenses.
Joseph Greenberger, a REXX director, performed certain legal services for
REXX during 1999 and in prior years. Mr. Greenberger was paid approximately
$90,000 for legal services rendered in 1999.
12 of 13 pages
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
REXX ENVIRONMENTAL CORPORATION
------------------------------
(Registrant)
By: /s/ Arthur L. Asch
-------------------------------------
Arthur L. Asch, Chairman of the Board
Date: May 1, 2000
13 of 13 pages
