SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
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 15, 1996.
RENTECH, INC.
(Exact name of registrant as specified in charter)
Colorado 0-19260 84-0957421
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(State or other jurisdiction Commission I.R.S. Employer
of incorporation or File No. Identification No.
organization)
1331 17th Street, Suite 720, Denver, Colorado 80202
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 298-8008
Item 5. Other Events.
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Rentech, Inc. ("Rentech") has entered into a letter of intent to acquire
the assets of Okon, Inc., a Colorado corporation. Okon has been engaged for
over 18 years in the business of making biodegradable, environmentally clean
paints, stains and cement and block coatings. It is the intent of Rentech to
acquire the assets and continue in the same line of business.
The purchase price for the Okon assets is to consist of $1,000,000 in
cash and a promissory note for $300,000 payable over two years. Closing of
the purchase is scheduled to occur on January 24, 1997 but may be extended for
three weeks upon Rentech's payment of an additional $50,000.
The purchase is subject to Rentech's completion of due diligence and
negotiation of a definitive agreement with additional terms customary for
asset purchases. Rentech's ability to complete the purchase depends upon
obtaining a bridge loan for the cash payment or raising additional capital
through a private placement of its equity securities. There are no assurances
that these conditions will occur or that the asset purchase will be
successfully completed.
Item 7. Financial Statements and Exhibits.
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Letter of Intent dated October 21, 1996 between Rentech, Inc. and Okon,
Inc.
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PAGE 2
SIGNATURE
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 hereunto duly authorized.
RENTECH, INC.
Date: November 15, 1996 By: (signature)
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Dennis L. Yakobson, President
PAGE PAGE 1
Letterhead of Rentech, Inc.
LETTER OF INTENT
October 21, 1996
Mr. Paul Miller
President
Okon, Inc.
6000 West 13th Avenue
Lakewood, CO 80214
RE: Acquisition of Assets of Okon, Inc. - Letter of Intent
Dear Mr. Miller:
This letter will confirm the terms and conditions under which Okon, Inc.
(hereinafter "Okon"), a Colorado corporation, and Rentech, Inc. (hereinafter
"Rentech"), a Colorado corporation, are prepared to proceed with the
negotiation of a definitive agreement regarding the acquisition of the assets
of Okon by Rentech.
Okon and Rentech are prepared to proceed in good faith with negotiation
and execution of a definitive agreement (the "Asset Transfer Agreement")
within ten (10) business days, if possible, but in no event not more than
thirty (30) calendar days of acceptance and execution by Okon of this letter
of intent.
A. In proceeding with such negotiations, Rentech and Okon have agreed
on the following terms to be included in the definitive Asset Transfer
Agreement:
1. Rentech will pay to Okon the purchase price of $1,300,000 as
follows:
- $50,000 As earnest money, which shall be deposited by
Rentech in escrow with IBG Business Services, Inc. Within two (2) business
days from the acceptance and execution of this Letter of Intent by Okon. Upon
execution by the parties of a definitive Asset Transfer Agreement, this
earnest money shall be paid by IBG Business Services, Inc. to Okon as a
non-refundable deposit which shall be applied at Closing in part payment
of the purchase price.
- $950,000 Additional cash or good funds at Closing on
January 24, 1997.
- $300,000 Promissory note with interest at 9% per annum,
secured in first position by all assets of the business then owned, or
thereafter acquired for the benefit of this business, including the assets
conveyed at the Closing and accounts receivable and inventory, and payable as
follows: interest only for one year from the date of Closing and principal
and interest monthly thereafter for one year. Total payout period of two
years. The promissory note will be due and payable in full upon an earlier
sale by Rentech of the business.
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- Rentech will have the option to extend the Closing Date to
March 14, 1997, for an additional $50,000 paid to Okon on or before January
24, 1997, which amount will be non-refundable and will not be applied to the
purchase price.
2. At Closing Okon will convey to Rentech the following:
- All tangible personal property of Okon located at 6000 West
13th Avenue, Lakewood, Colorado including but not limited to furniture,
fixtures, product formulations, trade names trade marks, etc., equipment and
inventory in an amount and as substantially described in the most recent
financial statement, and all on-hand inventory and work in progress to be
delivered free and clear of all indebtedness except as outlined hereunder,
exclusive of cash and equivalents.
- All accounts receivable outstanding at the date of Closing
for units that have been shipped shall remain the property of Okon and are not
included as part of this transaction. Any and all accounts payable
outstanding at the date of Closing are, and shall remain, the sole
responsibility of Okon and are not included in this transaction. Any and all
accounts receivable and payable which shall accrue after Closing shall be the
sole property and obligation of Purchaser.
3. Rentech shall have the right to lease the real property at 6000
West 13th Avenue, Lakewood, Colorado on the following terms:
- $2,000/month triple net for a three (3) year period (with
the rent to be adjusted each year based upon changes in the consumer price
index) with an option to lease for an additional five (5) years at a market
lease rate. Rentech shall also have a first right of refusal and an option
to purchase the real property at Fair Market Value; provided, that the option
shall terminate if Rentech fails to exercise its first right of refusal.
4. If a Purchase Order is negotiated with American Cemwoods within
twelve (12) months of the Closing Date, Rentech shall pay a royalty of 20% of
the gross profits generated by that amount to Okon monthly for a period of
twenty-four (24) months from the date of the Purchase Order.
5. Okon will indemnify Rentech against environmental liabilities
related to the assets that have accrued before the assets are transferred to
Rentech, and Rentech will indemnify Okon against environmental liabilities
that may accrue to the assets after transfer.
B. In addition to the foregoing terms that have been agreed upon and
will not be renegotiated by the parties in finalizing a definitive Asset
Transfer Agreement, Okon and Rentech will negotiate in good faith the other
terms and conditions of a definitive Asset Transfer Agreement which shall
include all the terms and provisions which may be necessary or advisable to
implement this Letter of Intent but which have not been agreed upon, such as
the following: (a) customary Buyer and Seller warranties; (b) a provision
for "Phase One/Phase Two" environmental Land Survey; (c) an Employment
Agreement with Mr. Frank Livingston (which shall be for a period of three (3)
years at not less than his current compensation and with his current duties);
(d) a reasonable and appropriate Covenant Not to Compete from the principals
of Okon; (e) allocation of the purchase price and responsibility for any
sales or use tax resulting from the transaction; (f) Rentech's cooperation
following the Closing in the collection of Okon's accounts receivable; and
(g) suitable arrangements for replacement of product and warranty claims.
PAGE
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C. 1. From and after the acceptance and execution of this Letter of
Intent by Okon, Rentech may initiate its reasonable due diligence inquiries;
provided, that Rentech shall not contact Okon's employees, and shall not
contact Okon's customers or suppliers prior to execution of a definitive Asset
Transfer Agreement and without the participation of Paul Miller or Frank
Livingston.
2. From and after the acceptance and execution of this Letter of
Intent by Okon, Okon shall remove itself from the market until the execution
of a definitive Asset Transfer Agreement, and Okon will make no other or
further attempts during such period to sell the corporation or its assets.
Following execution of a definitive Asset Transfer Agreement, Okon shall have
the right to negotiate and accept a backup contract with any party with whom
Okon has had contact prior to the date of this Letter of Intent.
3. Except for Okon's obligations under paragraph C.2 hereof,
Rentech's obligations under the existing confidentiality agreement and
paragraph C.1. hereof, and the agreement of the parties not to renegotiate the
provisions of Section A hereof, this letter shall not impose any legally
binding or enforceable obligations on either Okon or Rentech with respect to
Rentech's acquisition of Okon's business and assets. Any such obligations
will arise only in the event of execution of the definitive Asset Transfer
Agreement by both parties. Okon will provide Rentech with a draft of a
definitive Asset Transfer Agreement not later than 1 week after the date of
this letter and Rentech will respond in good faith as soon as reasonably
possible it being the intent of the parties to execute a definitive Asset
Transfer Agreement within ten (10) business days but, in no event, in more
than thirty (30) calendar days of acceptance and execution by Okon of this
Letter of Intent. Unless the parties otherwise agree in writing, either party
may terminate this Letter of Intent by written notice if a definitive Asset
Transfer Agreement is not executed within thirty (30) days after Okon's
acceptance of this Letter of Intent unless such failure is caused by such
party's renegotiation of the terms set forth in Section A hereof.
If you are in agreement with the terms and provisions set forth herein,
please sign below and return a signed copy of this letter to the undersigned.
Very truly yours,
RENTECH, INC.
(signature)
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James P. Samuels
Vice President - Finance
and Chief Financial Officer
Read, approved and agreed to this 21st day of October, 1996.
OKON, INC.
By: (signature)
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Paul Miller
President
