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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report
(Date of earliest event reported): November 23, 1995
REXON INCORPORATED
(Exact name of Registrant as specified in its charter.)
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Delaware 2-76563 95-3280670
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(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification
incorporation) Number)
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1900 Pike Road, Suite E, Longmont, Colorado 80501
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (303) 682-3700
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REXON INCORPORATED
REPORT ON
FORM 8-K
NOVEMBER 23, 1995
ITEM 5. OTHER EVENTS.
Rexon Incorporated (the "Company" or "Rexon") remains under
the protection of Chapter 11 of the Bankruptcy Code in the United States
Bankruptcy Court for the District of Colorado (Bankruptcy Case No. 95-19439
CEM). The Company's wholly-owned subsidiary, Rexon/Tecmar, Inc., also is in a
Chapter 11 proceeding in the District of Colorado (Bankruptcy Case No. 95-19438
PAC). The two bankruptcy cases are being jointly administered under Case No.
95-19438 PAC.
The Company has reached an agreement-in-principle with Legacy
Storage Systems International, Inc. ("Legacy") to sell to Legacy substantially
all of the assets of the Company and its subsidiaries and, at the option of
Legacy, the acquisition of the outstanding shares of Rexon. Any purchase
obligation would be subject to a definitive agreement being reached between
Legacy and the Company. The agreement-in-principle does not purport to deal
exclusively or exhaustively with all of the matters to be negotiated in any
definitive agreement between Rexon and Legacy.
The sale of assets would include all cash on hand, certain
accounts receivable, selected inventory, tangible assets, certain contracts and
leases, all books and records pertaining to the business, all patents,
trademarks, copyrights and other intellectual property and all shares of Rexon
Singapore PTE. Ltd. The proposal excludes certain assets, including any
"multimedia assets" pertaining to the multimedia business of the Company, any
real property owned by Rexon/Tecmar in Solon, Ohio, all real property leases
(other than the Longmont facility), and certain other assets. The structure of
the sale remains to be settled, although it could be effected pursuant to a
plan of reorganization.
The agreement-in-principle states that it is the objective of
Legacy to preserve a listing on the NASDAQ and, in order to facilitate this
objective, Legacy proposes to issue an unspecified nominal number of shares of
its common stock to Rexon shareholders in exchange for their shares. These
shares, if issued, would be in addition to any Legacy shares being issued to
Rexon's creditors. Legacy may, at its sole option, elect not to proceed with
this offering of its shares to the Rexon shareholders and, in such event, the
Rexon shareholders would not receive any distribution from this transaction
with Legacy.
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The proposed purchase price for the assets is approximately
$20.25 million (U.S.), which would be satisfied by (1) Legacy's assumption of
approximately $5.7 million of secured debt held by Sanwa Business Credit
Corporation ("Sanwa"); (2) Legacy's assumption of approximately $4 million of
debt owing to Legacy and the Company's management under the
debtor-in-possession financing (of which approximately $3.6 million has been
advanced to date); (3) the cash payment of approximately $5.55 million to the
bankruptcy estates of Rexon and Rexon/Tecmar for payment of administrative and
priority claims and the balance to be distributed to unsecured creditors; and
(4) the issuance to the creditors of Rexon and Rexon/Tecmar of approximately
$5,000,000 of shares of Legacy Common Stock (which shares may be escrowed for
up to six months). The actual purchase price will be subject to adjustment to
reflect the actual amounts of cash, accounts receivable and inventory at the
closing.
The Legacy proposal sets forth numerous conditions which would
need to be satisfied under any negotiated definitive agreement, including
(1) Sanwa shall not have obtained any order granting relief from the bankruptcy
automatic stay; (2) Legacy shall be satisfied with the terms of any and all
cash collateral agreements; (3) the approval of the United States Bankruptcy
Court to any definitive agreement shall be obtained no later than February 20,
1996; (4) completion of a due diligence review by Legacy; (5) stock exchange
approval; and (6) other conditions that would be set forth in the definitive
agreement. The definitive agreement is required to be entered into on or
before December 6, 1995 and the closing date is currently set for February
21, 1996.
No assurance is given that the agreement-in-principle with
Legacy will be consummated or all of the conditions will be satisfied.
The Company has also received notice from the National
Association of Securities Dealers ("NASD") that it currently is not in
compliance with NASD's Bylaws to remain listed on the National Market System.
The Bylaws require, among other things, that the Company satisfy a certain
threshold of net tangible assets, the minimum bid price for the Company's stock
must equal at least $1 and the Company must have another independent director
on its Board. The Company has previously requested an extension to comply with
these requirements. A telephonic hearing was held on Monday, October 30, 1995
with the NASDAQ Listing Qualifications Committee (the "Committee") which
reviewed the request of the Company for continued listing on the NASDAQ
National Market System. Following a review, the Committee determined to grant
a temporary exception until November 21, 1995, by which time the Company had to
file with
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NASDAQ an update regarding its plan of compliance with the listing criteria. By
such date, the Company informed the Committee of the appointment of James W.
Adkisson to the Board of Directors and updated the Committee on its current
negotiations with Legacy and requested a further extension until February 20,
1996. Presently the Company believes that unless a transaction with Legacy
occurs (or a similar transaction) that it will have difficulty satisfying the
listing requirements and the conditions imposed by the Committee. Presently
the Company has not received a formal response from the Committee as to its
request for an extension, and if such extension is not granted its shares
would be delisted from the National Market System effective upon the
Committee's determination. Such a delisting could negatively impact the
transferability and the receiving of quotes on the Company's shares of
Common Stock.
The Company has also informally received notice from some of
its management and directors of their intent to sell shares of the Company
stock prior to year end for tax loss reasons.
For the three month period ended October 1, 1995, the
Company's revenues are expected to be approximately $6 million. Losses are
expected to be approximately $24 million, which includes additional reserves
against inventory and fixed asset write-downs of approximately $5 million.
Approximately $12,500,000 was spent on research and
development expenses in fiscal 1994, including software research and
development expenses. During fiscal 1995 research and development was
approximately $8.5 million, representing a decrease of at least $4 million.
This decrease is substantially due to various cutbacks, the consolidation of
all engineering activities into the Longmont, Colorado, facility and the sale
of Sytron Corporation's assets and the termination of its employees.
The Company's Sytron Corporation subsidiary produced tape
backup and data management software products. The operating assets of Sytron
Corporation were sold in July, 1995 for approximately $4.5 million and the
principal amount of these funds were used to partially pay down the debt owed
to the Company's secured lender, Sanwa Business Credit Corporation. The
Company retained the TapeWare product line, which is used for backup of servers
and clients in the NetWare operating system environment. The TapeWare product
line is currently being handled out of the Company's small Fresno, California,
facility.
The Company shut down its multimedia division in November,
1995, and is attempting to sell its assets.
The Company also shut down its repair center in Puerto Rico in
August, 1995. The Company does not presently operate any
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business from Puerto Rico. The inventory and repair equipment in Puerto Rico
were transferred and consigned to an independent third-party repair company
located in Southern California. This repair company is now performing all of
the Company's "in-warranty" repair obligations and "out-of-warranty" repair
business.
The Solon (near Cleveland), Ohio, facility which handled the
Tecmar line of products was sold in August, 1995, and the operation was
relocated to the Longmont, Colorado facility. The Netherlands distribution
center was also previously closed and the operation was transferred to
Singapore. In addition, the Company's corporate headquarters in St.
Petersburg, Florida, has been moved to Longmont, Colorado.
As of November, 1995, the Company (including its subsidiaries)
employed on a full-time basis a total of approximately 350 employees, as
compared to approximately 1,000 employees as of November, 1994.
Currently, the executive officers of the Company are Robert C.
Genesi, Chairman of the Board and Chief Executive Officer, Ernie Wassmann,
President and Chief Operating Officer, Irvin R. Reuling, Chief Financial
Officer and Secretary, Venu Menon, Executive Vice-President and General
Manager, Singapore, and Joe Daiutolo, Executive Vice-President and Chief
Technology Officer.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DATED: November 27, 1995
REXON INCORPORATED
By /s/ IRVIN R. REULING
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Irvin R. Reuling
Chief Financial Officer
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