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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): December 4, 1996.
RENTECH, INC.
(Exact name of registrant as specified in charter)
Colorado 0-19260 84-0957421
(State or other Commission I.R.S. Employer
jurisdiction of File No. Identification No.
incorporation or
organization)
1331 17th Street, Suite 720, Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 298-8008
Item 5. Other Events.
Rentech, Inc. (the Company) has entered into an agreement to
purchase the assets of Okon, Inc. of Lakewood, Colorado. The Company
intends to use the assets to engage in the business of producing and
selling water repellent sealers and stains for wood, concrete and
masonry. The purchase price is $1,300,000, of which $50,000 has been
advanced and $950,000 is to be paid in cash upon closing and $300,000 is
due by the terms of a promissory note. The note is payable in 12 monthly
installments commencing one year after the closing.
Okon, Inc. has been engaged for over 20 years in the business of
manufacturing and marketing biodegradable and environmentally clean
water-based wood stains, concrete stains, block pluggers and other water
repellent sealers. The chemistry of Okon's products exceed current
Environmental Protection Agency standards for Volatile Organic Compounds
(V.O.C.), and management therefore considers the products to be
environmentally friendly. The Company believes that the business is
well-positioned to take advantage of a nationwide movement by state and
federal agencies to further regulate and restrict the V.O.C. contents of
paints, stains and sealers. The majority of wood stains, concrete stains
and block pluggers currently on the market contain V.O.C. levels that are
increasingly considered unacceptable in several regions of the United
States. State and federal government agencies have proposed further
restrictions to limit the levels of V.O.C. contained in products. The
restrictions have effectively prohibited the sale and use of high V.O.C.
products in certain states such as California.
Management believes that the acquisition of the Okon assets by the
Company fits well into Rentech's business development plan. Okon's
assets provide an environmentally friendly line of products and are
expected to generate sales revenues that the Company believes have a
potential for growth. Okon's trade name is a recognized name within its
industry. The environmental advantages of the Okon products complement
Rentech's continued dedication to its business philosophy of producing
environmentally cleaner
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fuels and products from its patented and proprietary gas conversion
technology. The acquisition of Okon's assets will produce revenues to
Rentech and a cash flow that provides a more secure financial base from
which Rentech can expand and strengthen its core business.
Completion of the asset acquisition is subject to due diligence and
funding of the purchase by Rentech by January 24, 1997, which can be
extended to March 24, 1997 by payment of an additional $50,000 for the
extension. Rentech must obtain funding for the cash due at closing to
complete the purchase. There is no assurance that such funding can be
obtained or that acquisition of the assets will be completed. The
transaction is subject to other material terms and conditions as
disclosed in the purchase agreement filed as an exhibit to this report.
Item 7. Financial Statements and Exhibits.
Agreement for Sale and Purchase of Assets dated October 1996,
executed December 6, 1996.
1996 Stock Option Plan.
Item 8. Change in Fiscal Year.
On December 4, 1996, the Company decided to change its fiscal year
to end on September 30 rather than on December 31. The report covering
the nine-month transition period from January 1, 1996 to September 30,
1996 will be filed on Form 10-KSB.
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.
(signature)
Date: December 16, 1996 By: ---------------------------------
Dennis L. Yakobson, President
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EXHIBIT 99.1
AGREEMENT FOR SALE AND PURCHASE OF ASSETS
THIS AGREEMENT FOR SALE AND PURCHASE OF ASSETS ("Agreement") is made
and entered into as of December 6, 1996, by and among OKON, INC., a
Colorado corporation (the "Seller") and RENTECH, INC., a Colorado
corporation (the "Buyer").
Recitals
A. Seller conducts a business of producing and selling water
repellant sealers and stains for wood, concrete and masonry (the
"Business").
B. Seller is desirous of selling the Business and certain of the
assets used in the Business. Buyer desires to purchase and acquire the
Business and certain of the assets used in the Business and to assume
only specific liabilities as herein provided.
Agreement
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I.
SALE AND PURCHASE
1.1 Sale of Assets. Subject to the terms and conditions set
forth in this Agreement (and except for the assets excluded as provided
in Section 1.2 hereof), Seller shall sell, convey, transfer, assign and
deliver to Buyer, and Buyer shall purchase all of Seller's right, title
and interest in and to the Business and the assets (the "Purchased
Assets") used in the Business as a going concern including, but not
limited to, the following:
(a) All tangible personal property of all kinds used in
the Business (the "Personal Property") including all of the furniture,
fixtures and equipment listed on Schedule 1.1(a) attached hereto;
(b) The product formulations, copyrights, trademarks,
trade names (including "Okon"), logos, patterns, designs and other
intellectual property rights used in the business (the "Intellectual
Property"), including the Intellectual Property listed on Schedule 1.1(b)
attached hereto;
(c) All packaging and other supplies and expendables on
order or on hand (the "Supplies");
(d) All contracts, commitments, purchase orders and sales
orders described in Schedule 3.14 as updated through the Closing Date
pursuant to Section 4.9 hereof (the "Assigned Contracts");
(e) All of the customer lists, trade secrets, know how,
and proprietary rights used in the Business;
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(f) All of Seller's goodwill, franchises, licenses,
registrations, files, papers, books of account, sales and marketing
records, personnel files and all other books and records and files of any
kind or description relating to the Business; and
(g) Seller's finished goods and work in process inventory
(the "Purchased Inventory").
The Purchased Assets shall include all of the above-described assets of
the Seller reflected in Seller's Reports (as defined in Section 3.3) and
also including any such assets acquired thereafter and prior to the
Closing (as hereinafter defined) except for those assets transferred or
disposed of in the ordinary course of business after the dates of the
Reports.
1.2 Excluded Assets. The following assets of Seller (the
"Excluded Assets") shall be excluded from the Purchased Assets:
(a) Seller's cash and cash equivalents as of the
Effective Time (as defined below);
(b) Seller's accounts receivable as of the Effective
Time; and
(c) Two (2) four-door Volvo sedans used by Paul Miller
and Frank Livingston.
1.3 Purchase Price. Consideration for the purchase (the
"Purchase Price") shall be $1,300,000.00 to be allocated as described on
Schedule 1.3 attached hereto.
1.4 Liabilities Assumed by Buyer. At the Closing Buyer shall
assume those liabilities of Seller under the Assigned Contracts (the
"Assumed Liabilities").
1.5 Liabilities Not Assumed by Buyer. No liabilities of
Seller relating to the Business or its operation prior to the Closing
Date except Assumed Liabilities shall be assumed by Buyer including, but
not limited to, any disclosed or undisclosed liabilities of any nature,
any payments due suppliers under any contracts or commitments not
included as Assigned Contracts, taxes of any kind, accounts payable of
any nature, environmental liabilities, pension or any other liability to
any employees of Seller, and, except as provided in paragraph 11.4
hereof, liabilities resulting from any products sold by Seller prior to
the Closing Date.
ARTICLE II.
THE CLOSING
2.1 Place and Time. The closing (the "Closing") under this
Agreement shall take place on January 24, 1997 (the "Closing Date") at
the offices of Otten, Johnson, Robinson, Neff & Ragonetti, P.C., 950
Seventeenth Street, Suite 1600, Denver, Colorado 80202. At Buyer's
option, Buyer may extend the Closing Date to March 14, 1997, upon payment
to Seller on or before January 24, 1996, of $50,000.00 by cashier's
check. This extension payment shall not be refundable to Buyer and shall
not be applied in part payment of the Purchase Price. The Closing shall
be effective as of 12:01 a.m. Mountain Standard Time on the Closing Date
(the "Effective Time").
2.2 Payment and Delivery by Buyer. At the Closing, and
subject to the terms and conditions as set forth herein, Buyer shall:
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(a) pay the Purchase Price as follows:
(i) $50,000.00 by application of the non-refundable
consideration paid by Buyer to Seller upon execution hereof, the receipt
of which is acknowledged;
(ii) $950,000.00 in the form of bank cashier's
check or by wire transfer of funds to an account designated by Seller;
and
(iii) $300,000.00 by Buyer's execution and delivery
to Seller of Buyer's promissory note in the form attached hereto as
Exhibit A (the "Promissory Note") together with a security agreement in
the form attached hereto as Exhibit B granting Seller a first priority
security interest in the Business and all of the assets used therein then
owned or thereafter acquired (including the Purchased Assets) as
collateral for payment of the Promissory Note; and
(b) execute and deliver the certificate required by
Section 8.1 hereof.
2.3 Delivery by Seller. At the Closing, and subject to the
terms and conditions as set forth herein, Seller shall:
(a) execute and deliver a General Assignment and
Conveyance conveying all of the Purchased Assets to Buyer;
(b) execute and deliver such other bills of sale,
endorsements, assignments, certificates of title, and other instruments
of transfer and conveyance as are reasonably requested by Buyer;
(c) deliver fully executed releases of all filed or
recorded liens affecting the Purchased Assets;
(d) execute and deliver an Amendment to Seller's Articles
of Organization changing its name to a name that does not include "Okon";
and
(e) execute and deliver the certificate required by
Section 7.1 hereof.
Seller will from time to time after the Closing Date, at Buyer's request,
execute such further instruments as Buyer reasonably deems necessary to
carry out the sale of the Purchased Assets pursuant to this Agreement.
2.4 Other Deliveries. At the Closing: (a) Buyer and Frank
Livingston shall enter into the employment agreement attached hereto as
Exhibit C; (b) Buyer and Paul and Pat Miller (or an entity formed by
them) shall enter into the lease attached hereto as Exhibit D; and (c)
each of Seller and Paul Miller shall enter into a noncompetition
agreement with Buyer in the form attached hereto as Exhibit E.
2.5 Possession. Buyer shall be entitled to take possession of
and Seller shall deliver to Buyer the Purchased Assets as of the Closing
Date.
2.6 Prorations. Personal property taxes, equipment leases,
prepaid expenses and other customary items shall be prorated between
Seller and Buyer as of the Effective Time.
ARTICLE III.
REPRESENTATIONS OF SELLER
The Seller represents, promises and warrants to the Buyer as
follows:
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3.1 Organization. The Seller is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
Colorado and has all power and authority to own its property and carry on
its business as now conducted and has all necessary licenses, permits and
government approvals.
3.2 Authorization. The execution, delivery and performance of
this Agreement and any other documents or instruments contemplated hereby
have been duly authorized by all necessary action of the Seller, and this
Agreement has been executed and delivered by the Seller and constitutes a
legal, valid and binding obligation of the Seller enforceable in
accordance with its terms.
3.3 Financial Reports. There is attached hereto as Schedule
3.3 true and correct copies of the financial statement (including a
balance sheet and statement of income) of Seller for the year ended
December 31, 1995, and for the nine-month period ended September 30, 1996
(collectively, the "Reports"). Until Closing Seller shall deliver to
Buyer no later than the 15th day of each month a true and correct copy of
the financial statements including a balance sheet and statement of
income of Seller as of the last day of each preceding month prepared from
the books of Seller without audit (the "Interim Reports") (collectively,
the Reports and the Interim Reports shall be referred to as the
"Financial Reports"). All such Financial Reports are in accordance with
the books and records of Seller, have been prepared consistently
throughout the periods indicated, reflect all material assets and, to
Seller's knowledge, material liabilities of Seller, and present fairly
and completely, in all material respects, the financial condition of
Seller and the Business at such dates and results of its operations for
the periods then ended, subject only, in the case of the Interim Reports,
to normal year end adjustments.
3.4 Absence of Certain Changes. Except as reflected in
Financial Reports, or as contemplated by this Agreement, since the dates
of the Financial Reports, Seller has not:
(a) Suffered any material adverse change in its financial
condition; experienced any labor difficulty; or suffered any material
casualty loss (whether or not insured);
(b) Incurred any obligations or liabilities (whether
absolute, accrued, contingent, or otherwise and whether due or to become
due), except current liabilities in the ordinary course of business and
consistent with past practice;
(c) Written down or written up the value of any of its
inventory, or written off as uncollectible any of its notes or accounts
receivable or any portion thereof, except for write downs and write-offs
in the ordinary course of business, consistent with past practice;
(d) Canceled any other debts or claims, or waived any
rights of substantial value, or sold or transferred any of its properties
or assets, real, personal, or mixed, tangible or intangible, except in
the ordinary course of business and consistent with past practice;
(e) Disposed of or permitted to lapse any trademark or
copyright, or any trademark or copyright application or license, or
disposed of or disclosed to any person any trade secret, formula,
process, or know-how;
(f) Granted any increase in compensation or rate of
compensation or commission payable or to become payable to any of its
employees or agents except merit increases made in the usual course of
business; or
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(g) Made any change in any method of accounting or
accounting practice.
3.5 Title to Purchased Assets. Except for the Excluded Assets
or as disclosed in the Financial Reports or on Schedule 3.5, the
Purchased Assets constitute all of the assets used in the Business and
Seller owns, and has the right to transfer to Buyer, the Purchased
Assets, free and clear of any liens or encumbrances, whether by mortgage,
pledge, lien, conditional sale agreement, encumbrance, charge, or
otherwise other than liens for taxes not yet due. At the Closing all of
the liens and encumbrances or other matters described on Schedule 3.5
will be paid or discharged in full.
3.6 Personal Property. Schedule 1.1(a) contains a complete
and accurate list of all of the Personal Property used by Seller in the
Business other than the two Volvo automobiles that are Excluded Assets.
Except as otherwise disclosed on Schedule 3.6, the Personal Property is
in possession of Seller and located at Seller's principal place of
business and is in good and useable condition and repair.
3.7 Purchased Inventory. Except as disclosed on Schedule 3.7,
the Purchased Inventory is in good condition and consists of a quality
and type useable and saleable in the ordinary course of business.
3.8 Compliance With Other Instruments. The Seller has
complete and unrestricted power to undertake and perform all of the
obligations contained in this Agreement. Except as disclosed on Schedule
3.8, neither the execution and delivery, nor the consummation of the
transactions provided for in this Agreement, will violate the Articles of
Incorporation of Seller or any material agreement, mortgage, indenture,
license, franchise, permit, judgment, decree, order, law or regulation by
which the Seller is bound.
3.9 Litigation. There is no action, suit, litigation or
proceeding pending, or, to the best knowledge of the Seller, threatened
against or relating to the Seller or the Business.
3.10 Tax Returns. Seller has duly filed all tax reports and
returns required to be filed by it and has duly paid all taxes and other
charges due as shown thereon or claimed to be due from it by written
notice from any federal, state, or local taxing authorities, including,
without limitation, those due in respect of its properties, income,
franchise, licenses, sales, and payrolls; there are no tax liens upon any
of the Purchased Assets (other than liens for current taxes not yet due);
there are no agreements, waivers or other arrangements providing for an
extension of time with respect to the assessment of any tax or deficiency
against the Purchased Assets or Seller nor are there any actions, suits,
proceedings, investigations or claims now pending against Seller or
relating to the Business; and, there are no pending discussions or
questions relating to, or claims asserted for taxes or assessments
against the Seller.
3.11 Leases. Schedule 3.11 hereto contains an accurate and
complete description of the terms of all leases pursuant to which Seller
leases real or personal property from or to others. True, correct and
complete copies of all leases have been provided to Buyer. To the best
of Seller's knowledge, all such leases are valid, binding, and
enforceable in accordance with their terms, and are in full force and
effect with no default thereunder.
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3.12 Intellectual Property. Schedule 3.12 hereto contains an
accurate and complete description of all Intellectual Property owned or
held by Seller and used in the Business, as well as all pending
applications for registration of any rights in Intellectual Property. To
the best of Seller's knowledge, no products sold, nor any patents,
formulae, processes, designs, patterns, know-how, trade secrets,
trademarks, trade names, assumed names, copyrights, or designations used
in
its business are included in any interference proceeding or infringe on
any proprietary rights of any person. No licenses, sublicenses or
covenants have been granted or entered into by Seller in respect of any
Intellectual Property.
3.13 Employee Matters. Schedule 3.13 hereto contains an
accurate and complete (i) list of all employees showing their
compensation, accrued vacation and sick leave as of the Closing Date, and
(ii) a description of, and the annual amount payable pursuant to, each
fringe-benefit plan or arrangement payable to employees (including each
bonus, deferred compensation, pension, profit-sharing, or retirement plan
or arrangement, whether legally binding or not). There are no contracts
of employment with any employees. To the best of its knowledge, Seller
has complied with all applicable laws relative to employee benefits,
including COBRA and ERISA, and there are no unfunded liabilities relating
to any pension or welfare benefit plan for which Seller could be liable.
Seller is not a party to any collective bargaining agreement.
3.14 Contracts and Commitments. Schedule 3.14 hereto is a
list of all of the following contracts, agreements, plans, arrangements,
or commitments for the benefit of or relating to the Business:
(a) All contracts, agreements, or commitments with
respect to the sale of products;
(b) All contracts and commitments for the purchase of,
supplies, materials equipment or other products;
(c) All sales agency and distributor agreements or
franchises; and
(d) All leases of Personal Property.
Except as specified in Schedule 3.14, to the best of Seller's
knowledge, all of such contracts, agreements, and commitments, are valid,
binding, and in full force and effect and there is no existing default
thereunder.
3.15 Compliance with Law. Seller has not received any notice
of any violation of and, to the best of Seller's knowledge, has complied
in all material respects with all laws, regulations, and orders
applicable to the Business including all rules and regulations of the
Occupational Health and Safety Administration, and all federal, state and
local environmental laws, rules and regulations.
3.16 Licenses and Permits. Schedule 3.16 hereto is a list of
all licenses and permits which, to the best of Seller's knowledge, are
required for Seller's operation of the Business, all of which are in full
force and effect. Seller makes no representation regarding the
assignability of such licenses and permits.
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3.17 Disclosure. No material representation or warranty by
Seller contained in this Agreement and no statement contained in any
exhibit, schedule certificate, list, or other writing furnished to the
Buyer pursuant to the provision hereof, to the best knowledge of Seller,
contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein not
materially misleading.
ARTICLE IV.
CONDUCT OF BUSINESS PRIOR TO CLOSING
Seller covenants and agrees that prior to the Closing, except as
Buyer shall have consented in writing:
4.1 Operation in Ordinary Course. The business will be
conducted only in the ordinary course.
4.2 Operation of the Business. Seller shall use its best
efforts to keep the Business intact and to preserve the goodwill of
suppliers, customers and others having business relations with the
Seller.
4.3 Employees. Seller shall pay all salaries, wages, payroll
taxes, benefits, vacation pay, all other fringe benefit costs, and all
other costs of every nature whatsoever due or accrued at or prior to the
Closing to or for the benefit of its employees or agents, Buyer assuming
no responsibility for any of the above. Notwithstanding the foregoing,
at Buyer's election, accrued vacation pay may be prorated at the Closing
for any of Seller's employees hired by Buyer pursuant to Section 10.3
hereof, in which event Buyer shall be responsible for accrued vacation.
Effective as of the close of business on the day prior to the Closing
Date, Seller shall terminate the employment of all of Seller's employees
and Buyer shall hire such employees as contemplated by Section 11.3
hereof.
4.4 Payment of Liabilities. Seller shall pay as the same
become due all of its liabilities other than the Assumed Liabilities.
4.5 Payment of Taxes. Seller shall promptly file all tax
returns and pay all federal, state and local tax assessments and
governmental charges which are or may be lawfully levied or assessed
against Seller, the Business or the Purchased Assets for periods ending
on or prior to the Closing Date, including, but not limited to, ad
valorem, sales, use, excise, franchise, and personal property taxes.
4.6 Insurance. Seller will maintain in effect through the
Closing Date all existing insurance coverage covering the Purchased
Assets.
4.7 Maintenance of Properties, etc. Through the Closing Date,
the Seller will maintain all the properties in customary repair, order
and condition, reasonable wear and use and damage by fire or other
casualty excepted. Seller shall be responsible for all risk of loss
prior to the Closing Date.
4.8 Maintenance of Books, etc. Through the Closing Date, the
Seller will maintain the books, accounts and records in the usual manner
on a basis consistent with prior periods. The Seller will duly comply in
all material respects with all laws and decrees applicable to it.
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4.9 Update Schedules; Assigned Contracts. Seller shall advise
Buyer of any changes in the information provided in the schedules
attached hereto. On the Closing Date, Seller shall provide an updated
list of the Assigned Contracts.
ARTICLE V.
PRE-CLOSING COVENANTS OF SELLER AND BUYER
5.1 Environmental Survey. Seller and Buyer shall cooperate in
obtaining, at Buyer's expense, a Phase I environmental survey of the real
property on which the Business is operated. The Phase I survey shall be
ordered from an environmental consultant reasonably acceptable to Buyer
no later than ten (10) days after the date hereof and shall be completed
as promptly as possible. If a Phase II environmental survey is required
by the environmental consultant preparing the Phase I survey, Seller
shall pay up to $2,500.00 for the Phase II survey.
5.2 Cooperation. Each of Seller and Buyer shall use its best
efforts to cause the sale contemplated by this Agreement to be
consummated, and, without limiting the generality of the foregoing, to
obtain all consents and authorizations of third parties and to make all
filings with and give notices to third parties which may be necessary or
reasonably required in order to effect the transactions contemplated
hereby.
5.3 Access to Premises. Between the date hereof and the
Closing Date, the Seller will afford to the officers and authorized
representatives of Buyer access during normal business hours (with the
participation of Paul Miller or Frank Livingston) to the premises,
properties, books and records of Seller in order that Buyer shall have
the opportunity to make such investigations as it shall desire and to
permit Seller to review such financial and operating data and other
information regarding the Business as Buyer shall from time to time
reasonably request. Buyer shall not contact or meet with Seller's
customers or suppliers without the participation of Paul Miller or Frank
Livingston. The confidentiality agreement executed by Buyer dated
, 1996 shall remain in full force and effect. Neither party
shall make public disclosure of this Agreement prior to the Closing
except as required by Buyer in connection with its compliance with
applicable securities laws.
ARTICLE VI.
REPRESENTATIONS BY THE BUYER
The Buyer represents, promises and warrants to the Seller as
follows:
6.1 Organization. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
Colorado, and has all corporate power and authority to own its property
and carry on its business as now conducted.
6.2 Authorization. The execution, delivery and performance of
this Agreement and any other documents or instruments contemplated hereby
has been duly authorized by all necessary corporate actions of the Buyer,
and this Agreement has been executed and will be delivered by the Buyer
and will constitute a legal, valid and binding obligation of the Buyer
enforceable in accordance with their terms.
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6.3 Compliance With Other Instruments. The Buyer has complete
and unrestricted power to undertake and perform all of the obligations
contained in this Agreement. Neither the execution and delivery, nor the
consummation of the transactions provided for in this Agreement, will
violate the Articles of Incorporation or the Bylaws of the Buyer or any
material agreement, mortgage, indenture, license, franchise, permit,
lease or other instrument, judgment, decree, order, law or regulation by
which the Buyer is bound.
6.4 Litigation. There is no action, suit, litigation or
proceeding pending, or, to the best knowledge of the Buyer, threatened
against or relating to the Buyer which could adversely affect the ability
of Buyer to perform the transactions contemplated by this Agreement.
ARTICLE VII.
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
The obligation of Buyer to consummate the transactions contemplated
by this Agreement is subject to the fulfillment to its satisfaction of
the following conditions prior to or at the Closing (unless expressly
waived in writing by Buyer).
7.1 Representations, Warranties and Covenants. The
representations and warranties made by Seller shall be true and correct
in all material respects at and as of the Closing Date; and Seller shall
have performed and complied in all material respects with all covenants,
agreements and conditions contained in this Agreement required to be
performed or complied with by them prior to the Closing and Seller shall
provide to Buyer at the Closing a certificate to such effect executed by
Seller.
7.2 Litigation. There shall be no litigation pending or
threatened against Seller with respect to the consummation of this
Agreement or which could adversely affect the ability of Seller to convey
the Purchased Assets to Buyer.
7.3 Environmental Inspection. Buyer shall have received a
reasonably satisfactory environmental report regarding the real property
on which the business is located. This condition precedent shall expire
ten (10) days after delivery of the environmental survey described in
Section 5.1.
ARTICLE VIII.
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
The obligation of Seller to consummate the transactions contemplated
by this Agreement is subject to the fulfillment to its satisfaction of
the following conditions prior to at the Closing (unless expressly waived
in writing by Seller):
8.1 Representations, Warranties and Covenants. The
representations and warranties made by Buyer shall be true and correct in
all material respects at and as of the Closing Date and Buyer shall have
performed and complied in all material respects with all covenants,
agreements and conditions contained in this Agreement required to be
performed or complied with by it prior to the Closing and Buyer shall
provide to Seller at the Closing a certificate to such effect executed by
an officer of Buyer.
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8.2 Litigation. There shall be no litigation pending or
threatened against Buyer with respect to the consummation of this
Agreement.
ARTICLE IX.
FAILURE OF CONDITIONS; REMEDIES
9.1 Failure of Conditions Precedent - No Breach. In the event
any condition precedent to the obligations of either party are not
satisfied on the Closing Date and the failure to satisfy the condition
precedent is not due to a breach of this Agreement by the other party,
the party whose conditions precedent have not been satisfied shall have
the option of terminating this Agreement or waiving the unsatisfied
condition precedent and closing hereunder (and, in either event, waiving
any claim for damages or indemnity relating thereto).
9.2 Failure of Conditions Precedent - Breach. In the event
any condition precedent to the obligations of either party are not
satisfied on the Closing Date and the failure to satisfy the condition
precedent is due to a breach of this Agreement by the other party, the
party who is not in breach of this Agreement shall have the following
rights:
(a) If Seller is in breach, Buyer shall have the option
of terminating this Agreement and receiving a refund of the $50,000.00
referred to in Section 2.2(a)(i) hereof and, if applicable, the
$50,000.00 paid by Buyer under Section 2.1 hereof or closing hereunder
without, in either event, waiving its claim for damages or indemnity
resulting from the breach; and
(b) If Buyer is in breach, Seller shall have the right
to terminate this Agreement and retain the consideration described in
Section 2.2(a)(i) and, if applicable, the $50,000.00 paid by Buyer under
Section 2.1 hereof as liquidated damages as its sole and exclusive
remedy.
ARTICLE X.
INDEMNIFICATION
10.1 Survival of Representations, Warranties and Covenants.
All of the representations, covenants and warranties contained herein and
in any documents delivered pursuant to this Agreement (except those
waived pursuant to Section 9.1) shall survive the Closing hereunder;
provided that the representation and warranties shall only remain in full
force and effect for a period of twenty-four (24) months following the
Closing Date).
10.2 Indemnity by Seller. Seller shall indemnify, save, and
hold harmless Buyer from any "damages" as hereinafter defined.
"Damages," as used herein, shall mean and include any loss, cost,
expense, or other liability, including counsel fees, which Buyer may
incur or suffer (a) by reason of the inaccuracy of any of Seller's
representations contained in this Agreement or breach or default in
performance by the Seller of the covenants which it is to perform
hereunder; or (b) except for the Assumed Liabilities, liabilities not
assumed by Buyer arising out of or relating to Seller's ownership and
operation of the Business and the Purchased Assets prior to the Closing
Date, including Seller's failure to comply with federal and state
environmental laws.
<PAGE>
PAGE 13
10.3 Indemnity by Buyer. Buyer shall indemnify, save, and
hold harmless Seller from any "damages" as hereinafter defined.
"Damages," as used herein, shall mean and include any loss, cost,
expense, or other liability, including counsel fees, which Seller may
incur or suffer: (a) by reason of the inaccuracy of any representation
of the Buyer contained in this Agreement, or breach or default in
performance by the Buyer, of the covenants which it is to perform
hereunder; or as a result of (b) Buyer's ownership and operation of the
Business and the Purchased Assets from and after the Closing Date,
including the Assumed Liabilities and Damages resulting from Buyer's
failure to comply with federal and state environmental laws from and
after the Closing Date.
10.4 Procedures for Indemnification. The party entitled to
indemnification ("Indemnitee") shall, as promptly as is reasonably
practicable after it become aware thereof, notify the other party
("Indemnitor") of the existence of any claim, demand or other matter to
which Indemnitor's indemnification obligations apply and shall give
Indemnitor a reasonable opportunity to defend the same at its own expense
and with counsel of its own selection reasonably acceptable to
Indemnitee; provided, that Indemnitee shall at all times, also have the
right to fully participate in the defense at its own expense. Indemnitor
may, at its own discretion, settle any dispute, demand or claim defended
by it hereunder; provided, any such settlement shall be solely for
Indemnitor's account and Indemnitee shall not be liable for any amounts
whatsoever payable in connection with any such settlement. If Indemnitor
shall, within a reasonable time after notice to it, fail to so defend,
Indemnitee shall have the right, but not the obligation, to undertake the
defense of, and to compromise or settle (exercising reasonable business
judgment), the claim or other matter on behalf, and at the risk of,
Indemnitor.
ARTICLE XI.
POST-CLOSING RIGHTS AND OBLIGATIONS
11.1 Collection of Accounts. Subsequent to the Closing, Buyer
shall use its reasonable and customary efforts to collect all of Seller's
accounts receivable as of the Closing Date, but Buyer shall not be
required to initiate any legal action or turn over any account to a
collection agency. Any payment received by Buyer from a customer will be
applied to the invoice reflected on the payment or which matches the
payment in amount. Any payment that cannot be matched to an invoice will
be applied to the oldest invoice. All payments of Seller's accounts
receivable received by Buyer shall be held in trust for Seller. No later
than Monday of each week, Buyer shall deliver to Seller all payments
received during the preceding week by Buyer of Seller's accounts
receivable.
11.2 Cooperation. Seller and Buyer shall cooperate with each
other as reasonably required to complete a smooth transition of the
ownership of the Business from Seller to Buyer.
11.3 Employees. Buyer shall offer employment to all of
Seller's employees following the Closing on substantially the same terms
as they were employed by Seller prior to the Closing.
11.4 Product Replacement; Warranty Claims. Seller shall be
responsible for replacement of and warranty claims relating to any
defective product sold and delivered by Seller to any customer prior to
the Closing Date. Notwithstanding the foregoing, Buyer shall cooperate
with Seller in resolving such claims and shall permit its employees to
<PAGE>
PAGE 14
assist in resolving such claims without cost to Seller. In addition,
Buyer shall provide Seller with up to $500.00 (at Buyer's cost) of
replacement product without charge to Seller for Seller to utilize in
satisfying warranty claims for which Seller is responsible.
11.5 Preservation of Records. At the Closing, Seller shall
deliver to Buyer all of the books, records, and other documents or
information relating to the Business but shall not be required to deliver
any records, documents or other information regarding Seller. Buyer
shall maintain, preserve and, upon reasonable notice, provide Seller or
its representatives access during normal business hours to, and the right
to make copies of, all financial books and records, marketing and sales
records, files, data, projections, reports, correspondence, lists, record
and reports concerning customers, employees, and suppliers, or any
dealings with federal, state and local government bodies and regulatory
agencies or otherwise relating to or used in connection with the
Purchased Assets that relate to periods prior to the Closing Date. Buyer
shall provide Seller or its representatives prior written notice of
Buyer's intent to destroy or otherwise dispose of any such books,
records, correspondence, documents or files held pursuant to this
Agreement and, upon request of Seller or its representatives, shall
deliver to Seller such books, records, correspondence, documents or files
with respect to periods prior to the Closing as requested by Seller or
its representatives.
11.6 Sales and Use Tax. Buyer shall be responsible for the
payment of all sales, use or other transfer taxes resulting from the sale
of the Purchased Assets to Buyer pursuant to this Agreement.
11.7 Closing Date Financial Statement. No later than thirty
(30) days following the Closing Date, Seller shall deliver to Buyer a
copy of Seller's financial statements for the period ending on the
Closing Date.
ARTICLE XII.
GENERAL
12.1 Notice. All notices, requests, demands and other
communications hereunder shall be furnished to the other party at its
address listed below (or such other address as notified in writing),
shall be in writing, and shall be deemed to have been duly given if
delivered personally or mailed, by certified or registered mail, return
receipt requested and postage prepaid.
(a) If to Seller, to:
Okon, Inc.
6000 West 13th Avenue
Lakewood, Colorado 80214
Attn: Paul Miller, President
With a copy to:
Otten, Johnson, Robinson, Neff &
Ragonetti, P.C.
950 Seventeenth St., Suite 1600
Denver, Colorado 80202
Attention: William R. Neff, Esq.
(b) If to Buyer, to:
Rentech, Inc.
1331 Seventeenth St., Suite 720
Denver, Colorado 80202
Attn: Ronald C. Butz, Vice President
<PAGE>
PAGE 15
12.2 Amendment. This Agreement may be amended or modified
only by a written instrument executed by the party hereto against which
it is to be enforced.
12.3 Expense of Parties. Except as otherwise specifically
provided herein, each party to this Agreement shall pay its own expenses
(including, without limitation, the fees and expenses of their respective
agents, representatives, counsel and accountants) incidental to the
preparation and carrying out of this Agreement. In the event a party
commences legal action against another party to enforce its rights under
this Agreement, the prevailing party in such action shall be entitled to
recover all of its costs and expenses in connection therewith, including
reasonable attorneys' fees and costs.
12.4 Brokers. Except for IBG Business Services Incorporated,
whose commission shall be paid by Seller, no broker or third party has
been instrumental in bringing the parties hereto together. Seller agrees
to indemnify Buyer, and Buyer agrees to indemnify Seller, against any
claim by any third person for any commission, brokerage, finder's fee or
other payment based upon any alleged agreement or understanding between
such party and such third person, whether expressed or implied from the
actions of such party.
12.5 Governing Law. This Agreement is being delivered in and
shall be construed in accordance with and governed by the laws of the
State of Colorado.
12.6 Headings. The headings contained in this Agreement are
for reference purposes only and shall not in any way affect the meaning
or interpretation of this Agreement.
12.7 Prior Agreements; Counterparts. This Agreement, with its
Exhibits and Schedules, merges and integrates all prior agreements and
representations respecting this transaction, whether written or oral, and
constitutes the sole agreement of the parties in connection therewith.
This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.8 Assignment. This Agreement shall not be assignable by
Seller or Buyer, except that the Buyer may assign this Agreement to a
corporation of which the Buyer is the sole shareholder provided Buyer
remains fully liable to Seller hereunder. Subject to the foregoing, this
Agreement shall be binding upon, and inure to the benefit of, and be
enforceable by, the respective successors and permitted assigns of the
Seller and the Buyer. Nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies under or
by reason of this Agreement.
12.9 Waiver. The failure of any party to enforce any right
arising under this Agreement on one or more occasions shall not operate
as a waiver of that or any other right on that or any other occasion.
<PAGE>
PAGE 16
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
SELLER:
OKON, INC., a Colorado corporation
(signature)
By: -----------------------------------
Paul Miller, President
BUYER:
RENTECH, INC., a Colorado corporation
(signature)
By: -----------------------------------
Dennis L. Yakobson, President
<PAGE>
<PAGE>
PAGE 17
SCHEDULES
1.1(a) Personal Property
1.1(b) Intellectual Property
1.3 Purchase Price Allocation
3.3 Financial Reports
3.5 Disclosure Regarding Purchased Assets
3.6 Disclosure Regarding Personal Property
3.7 Disclosure Regarding Purchased Inventory
3.8 Disclosure Regarding Compliance
3.11 Leases
3.12 Intellectual Property
3.13 Employees and Benefit Plans
3.14 Contracts and Commitments
3.16 Licenses and Permits
EXHIBITS
A Form of Promissory Note
B Form of Security Agreement
C Form of Employment Agreement
D Form of Lease
E Form of Noncompetition Agreement
<PAGE>
<PAGE>
PAGE 18
Schedule 1.1(a)
Personal Property
1. Machines and equipment
2. Furniture and fixtures
3. Mechanical equipment
4. Automatic equipment
5. Building improvements<PAGE>
<PAGE>
PAGE 19
Schedule 1.1(b)
Intellectual Property
1. Product formulations
a. HG Emulsion (55-gallon batch size)
b. Okon W-1 (55-gallon batch size)
c. Okon W-1 Concentrate (55-gallon batch size)
d. Okon W-2 (55-gallon batch size)
e. Okon W-2 (2,000-gallon batch size)
f. Okon W-2 Concentrate (55-gallon batch size)
g. Okon Block Plugger (300-gallon batch size)
h. Okon TCS Additive (55-gallon batch size)
i. Okon Waterproofing Sealer (55-gallon batch size)
j. Okon Seal & Finish (55-gallon batch size)
k. Okon Seal & Finish High Gloss (150-gallon batch size)
l. Okon Seal & Finish High Gloss/Hoddcomm Stain (150-gallon
batch size)
m. Neutralized EPS 6211 Plus Drier (for Okon Deck Stain &
Natural Choice) (300-gallon batch size)
n. Okon Natural Choice with Pigment (Redwood or Cedar)
(55-gallon batch size)
o. Okon Natural Choice with Pigment (Fir/Pine) (55-gallon
batch size)
p. Okon Deck Stain (55-gallon batch size)
q. Neutralized EPS 6211 (for Okon Weather Pro) (300-gallon
batch size)
r. Okon Weather Pro (55-gallon batch size)
s. Weather Pro Concentrate (55-gallon batch size)
t. Weather Pro Concentrate (2,000-gallon batch size)
u. Okon Wood Cleaner (40-gallon batch size)
v. Okon Seal & Finish High Gloss (250-gallon batch size)
w. OK-AG Masonry Cleaner (125-pound batch size)
x. Okon Adhesive 201 (55-gallon batch size)
y. Okon Head Cement & Color Preservative (55-gallon batch
size)
2. Trademark registration for "Okon"
3. Trademark registration for "Weather Pro"
4. Trademark registration for "Okon Natural Choice"
<PAGE>
<PAGE>
PAGE 20
Schedule 1.3
Purchase Price Allocation
<PAGE>
<PAGE>
PAGE 21
Schedule 3.3
Financial Reports
December 1995 Year to Date Balance Sheet & Income Statements
September 1996 Year to Date Balance Sheet & Income Statements
<PAGE>
<PAGE>
PAGE 22
Schedule 3.5
Disclosure Regarding Purchased Assets
<PAGE>
<PAGE>
PAGE 23
Schedule 3.6
Disclosure Regarding Personal Property
None<PAGE>
<PAGE>
PAGE 24
Schedule 3.7
Disclosure Regarding Purchased Inventory
1. 93 - 5 gallon pails of Okon Block Plugger will be sold at the
Okon W-2 price and therefore should be adjusted down on the
inventory using W-2 costs (465 gallon total).
<PAGE>
<PAGE>
PAGE 25
Schedule 3.8
Disclosure Regarding Compliance
None<PAGE>
<PAGE>
PAGE 26
Schedule 3.11
Leases
1. GMAC Lease Agreement - 1995 Chevrolet Lumina 4-door
2. 6000 West 13th Avenue, Lakewood, Colorado lease (to be
terminated
at Closing)
<PAGE>
<PAGE>
PAGE 27
Schedule 3.12
Intellectual Property
See Schedule 1.1(b)<PAGE>
<PAGE>
PAGE 28
Schedule 3.13
Employees and Benefit Plans
1. Pension and Profit Sharing Plans including Participants
2. 1995 Pension and Profit Sharing Contributions
3. Company Benefit Policies
4. Employees Compensation and Health Insurance Premiums
a. Frank L. Livingston salary and bonus schedules
b. Jennifer H. Nellis salary and bonus schedules
c. Jeffrey W. Davis salary and bonus schedules
5. Vacation Benefit Schedule
<PAGE>
<PAGE>
PAGE 29
Schedule 3.14
Contracts and Commitments
1. A. Duie Pyle - East Coast Warehouse Contract
2. Sweet's Group/McGraw-Hill, Inc. Contracts 1996 and 1997
Note: 1996 Contract is paid up
1997 Contract is due in 1997
3. Mid South Associates, Inc. - Buying Group Agreement
4. ALLPRO Corporation - Buying Group Agreement
5. Pitney Bowes Credit Corp. - Service Agreement
6. U S West Direct - Directory Advertising Agreement
7. Selectronics, Inc. - Typewriter Service Agreement
8. F A C Associates & American Photocopy - A B Dick Service
Agreement
9. Okon Sales Representative Agreements and Rates as of 10/96
Seller also has sales and purchase orders entered into in the
ordinary course of business. A current list (to be included in the
Assigned Contracts) will be provided to Buyer at Closing.
<PAGE>
<PAGE>
PAGE 30
Schedule 3.16
Licenses and Permits
1. Colorado Sales Tax License
2. City of Lakewood Sales Tax License
<PAGE>
<PAGE>
PAGE 31
EXHIBIT A
Form of Promissory Note
<PAGE>
<PAGE>
PAGE 32
EXHIBIT B
Form of Security Agreement
<PAGE>
<PAGE>
PAGE 33
EXHIBIT C
Form of Employment Agreement
<PAGE>
<PAGE>
PAGE 34
EXHIBIT D
Form of Lease
<PAGE>
<PAGE>
PAGE 35
EXHIBIT E
Form of Noncompetition Agreement
<PAGE>
RENTECH, INC.
1996 STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT AND PURPOSE
1.1 Establishment. Rentech, Inc., a Colorado corporation
("Company"), hereby establishes a stock option plan for key employees,
directors, and consultants providing material services to the Company, as
described herein, which shall be known as the "1996 Stock Option Plan"
(the "Plan"). It is intended that certain of the options issued to
employees pursuant to the Plan may constitute incentive stock options
within the meaning of Section 422A of the Internal Revenue Code and that
other options issued pursuant to the Plan shall constitute nonstatutory
options. The Board of Directors shall determine which options are to be
incentive stock options and which are to be nonstatutory options and
shall enter into option agreements with recipients accordingly.
1.2 Purpose. The purpose of this Plan is to enhance shareholder
investment by attracting, retaining and motivating key employees,
directors and consultants of the Company, and to encourage stock
ownership by such persons by providing them with a means to acquire a
proprietary interest in the Company's success, and to align the interests
of management with those of shareholders.
ARTICLE II
DEFINITIONS
2.1 Definitions. Whenever used herein, the following terms shall
have the respective meanings set forth below, unless the context clearly
requires otherwise, and when said meaning is intended, the term shall be
capitalized.
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean the Committee provided by Article IV
hereof, which may be created at the discretion of the Board.
(d) "Company" means Rentech, Inc., a Colorado corporation.
(e) "Consultant" means any person or entity, including a Parent
Corporation or a Subsidiary Corporation, that provides services (other
than as an Employee) to the Company, a Parent Corporation or a Subsidiary
Corporation, and shall include a Non-Employee Officer or Non-Employee
Director, as defined subsequently.
(f) "Date of Exercise" means the date the Company receives notice,
by an Optionee, of the exercise of an Option pursuant to Section 8.1 of
this Plan. Such notice shall indicate the number of shares of Stock the
Optionee intends to exercise.
(g) "Employee" means any person, including an officer or director
of the Company or a Subsidiary Corporation, who is employed by the
Company or a Subsidiary Corporation.
<PAGE>
PAGE 37
(h) "Fair Market Value" means the fair market value of Stock upon
which an option is granted under this Plan, determined as the average of
the closing bid and asked prices of the Stock, as reported by Nasdaq.
(i) "Incentive Stock Option" means an Option granted under this
Plan which is intended to qualify as an "incentive stock option" within
the meaning of Section 422A of the Code.
(j) "Non-Employee Director" means a member of the Board who is not
an employee of the Company at the time an Option is granted hereunder.
(k) "Non-Employee Officer" means an officer of the Company who is
not an employee of the Company at the time an Option is granted
hereunder.
(l) "Nonstatutory Option" means an Option granted under this Plan
which is not intended to qualify as an incentive stock option within the
meaning of Section 422A of the Code. Nonstatutory Options may be granted
at such times and subject to such restrictions as the Board shall
determine without conforming to the statutory rules of Section 422A of
the Code applicable to incentive stock options.
(m) "Option" means the right, granted under this Plan, to purchase
Stock of the Company at the option price for a specified period of time.
For purposes of this Plan, an Option may be either an Incentive Stock
Option or a Nonstatutory Option.
(n) "Optionee" means an Employee or Consultant holding an Option
under the Plan.
(o) "Parent Corporation" shall have the meaning set forth in
Section 425(e) of the Code with the Company being treated as the employer
corporation for purposes of this definition.
(p) "Subsidiary Corporation" shall have the meaning set forth in
Section 425(f) of the Code with the Company being treated as the employer
corporation for purposes of this definition.
(q) "Significant Shareholder" means an individual who, within the
meaning of Section 422A(b)(6) of the Code, owns stock possessing more
than ten percent of the total combined voting power of all classes of
stock of the Company or of any Parent Corporation or Subsidiary
Corporation of the Company. In determining whether an individual is a
Significant Shareholder, an individual shall be treated as owning stock
owned by certain relatives of the individual and certain stock owned by
corporations in which the individual is a shareholder, partnerships in
which the individual is a partner, and estates or trusts of which the
individual is a beneficiary, all as provided in Section 425(d) of the
Code.
(r) "Stock" means the $.01 par value common stock of the Company.
2.2 Gender and Number. Except when otherwise indicated by the
context, any masculine terminology when used in this Plan also shall
include the feminine gender, and the definition of any term herein in the
singular also shall include the plural.
<PAGE>
PAGE 38
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 Eligibility and Participation. All Employees are eligible to
participate in this Plan and receive either or both Incentive Stock
Options and Nonstatutory Options under the Plan. All Consultants are
eligible to participate in this Plan and receive Nonstatutory Options
hereunder. Optionees in the Plan shall be selected by the Board, in its
sole discretion, from among those Employees and Consultants who, in the
opinion of the Board, are in a position to contribute materially to the
Company's continued growth and development and to its long-term financial
success.
ARTICLE IV
ADMINISTRATION
4.1 Administration. The Board shall be responsible for
administering the Plan.
(a) The Board is authorized to interpret the Plan; to
prescribe, amend, and rescind rules and regulations relating to the Plan;
to provide for conditions and assurances deemed necessary or advisable to
protect the interests of the Company; and to make all other
determinations necessary or advisable for the administration of the Plan.
Determinations, interpretations, or other actions made or taken by the
Board, pursuant to the provisions of this Plan, shall be final and
binding and conclusive for all purposes and upon all persons.
(b) At the discretion of the Board this Plan may be
administered by a Committee which shall be an executive committee of the
Board, consisting of not less than two members of the Board. The members
of such Committee may be directors who are eligible to receive Options
under this Plan, but Options may be granted to such persons only by
action of the full Board and not by action of the Committee. If the
Company determines that grant of Options by the full Board to members of
the Committee may not exempt the shares of Committee members from the
provisions of Rule 16b-3 under the Securities Exchange Act of 1934, this
Plan, without further action, hereby authorizes and grants options to
purchase 10,000 shares each to each member of the Committee for each year
of continuous service on the Committee, except that, (i) any Committee
member, for any year, may elect not to accept an option to purchase
10,000 shares or may elect to accept options for the purchase of less
than 10,000 shares; and (ii) if any Committee member elects, for any
year, to receive no option or an option to purchase less than 10,000
shares for that year, that option shall be deemed permanently waived,
shall not cumulate, and shall not be available in any future year. Such
options shall be exercisable at the fair market value of the Stock on the
date of grant and shall have the same term and may be exercised in
installments as provided in Section 7.3 of this Plan. Such Committee
shall have full power and authority, subject to the limitations of the
Plan and any limitations imposed by the Board, to construe, interpret and
administer this Plan and to make determinations which shall be final,
conclusive and binding upon all persons, including, without limitation,
the Company, the shareholders, the directors and any persons having any
interests in any Options which may be granted under this Plan, and, by
resolution or resolutions providing for the creation and issuance of any
such Option, to fix the terms upon which, the time or times at or within
which, and the price or prices at which any such shares may be purchased
from the Company upon the exercise of such Option. Such terms, time or
times and price or prices shall, in every case, be consistent with the
provisions of this Plan, and shall be set forth or incorporated by
reference in the instrument or instruments evidencing such Option.
<PAGE>
PAGE 39
(c) If the Committee has been appointed, the Board may from
time to time remove members from, or add members to, the Committee. The
Board may terminate the Committee at any time. Vacancies on the
Committee, howsoever caused, shall be filled by the Board. The Committee
shall select one of its members as Chairman, and shall hold meetings at
such times and places as the Chairman may determine. A majority of the
Committee at which a quorum is present, or acts reduced to or approved in
writing by all of the members of the Committee, shall be the valid acts
of the Committee. A quorum shall consist of a majority of the members of
the Committee.
(d) Where the Committee has been created by the Board,
references in this Plan to actions to be taken by the Board shall be
deemed to refer to the Committee as well, except where limited by this
Plan or by the Board.
(e) The Board shall have all of the enumerated powers of the
Committee, but shall not be limited to such powers. No member of the
Board or the Committee shall be liable for any action or determination
made in good faith with respect to the Plan or any Option granted under
it.
4.2 Special Provisions for Grants to Officers or Directors. Rule
16b-3 under the Securities and Exchange Act of 1934 (the "Act") provides
that the grant of a stock option to a director or officer of a company
subject to the Act will be exempt from the provisions of Section 16(b) of
the Act if the conditions set forth in said Rule are satisfied. Unless
otherwise specified by the Board, grants of Options hereunder to
individuals who are officers or directors of the Company shall be made in
a manner that satisfies the conditions of said Rule.
ARTICLE V
STOCK SUBJECT TO THE PLAN
5.1 Number. The total number of shares of Stock hereby made
available and reserved for issuance under the Plan shall be 500,000
shares for Incentive Stock Options and Nonstatutory Stock Options. The
aggregate number of shares of Stock available under this Plan shall be
subject to adjustment as provided in Section 5.3. The total number of
shares of Stock may be authorized but unissued shares of Stock, or Shares
acquired by purchase as directed by the Board from time to time in its
discretion, to be used for issuance upon exercise of Options granted
hereunder.
5.2 Unused Stock. If an Option shall expire or terminate for any
reason without having been exercised in full, the unpurchased shares of
Stock subject thereto shall (unless the Plan shall have terminated)
become available for other Options under the Plan.
5.3 Adjustment in Capitalization. In the event of any change in
the outstanding shares of Stock by reason of a stock dividend or split,
recapitalization, reclassification, or other similar corporate change,
the aggregate number of shares of Stock remaining subject to the Plan and
to Options previously granted shall be appropriately adjusted by the
Board, whose determination shall be conclusive; provided however, that
fractional shares shall be rounded to the nearest whole share. In any
such case, the number and kind of shares that are subject to any Option
(including any Option outstanding after termination of employment) and
the Option price per share shall be proportionately and appropriately
adjusted without any change in the aggregate Option price to be paid
therefor upon exercise of the Option.
<PAGE>
PAGE 40
ARTICLE VI
DURATION OF THE PLAN
6.1 Duration of the Plan. Subject to approval of shareholders, the
Plan shall be in effect for ten years from the date of its adoption by
the Board. Any Options outstanding at the end of said period shall
remain in effect in accordance with their terms. The Plan shall
terminate before the end of said period if all Stock subject to it has
been purchased pursuant to the exercise of Options granted under the
Plan.
ARTICLE VII
TERMS OF STOCK OPTIONS
7.1 Grant of Options. Subject to Section 5.1, Options may be
granted to Employees or Consultants at any time and from time to time as
determined by the Board; provided, however, that Consultants may receive
only Nonstatutory Options and may not receive Incentive Stock Options.
The Board shall have complete discretion in determining the terms and
conditions and number of Options granted to each Optionee. In making
such determinations, the Board may take into account the nature of
services rendered by such Employees or Consultants, their present and
potential contributions to the Company and its Subsidiary Corporations,
and such other factors as the Board in its discretion shall deem
relevant. The Board also shall determine whether an Option is to be an
Incentive Stock Option or a Nonstatutory Option.
(a) In the case of Incentive Stock Options, the total Fair
Market Value (determined at the date of grant) of shares of Stock with
respect to which incentive stock options granted after December 31, 1986
are exercisable for the first time by the Optionee during any calendar
year under all plans of the Company under which incentive stock options
may be granted (and all such plans of any Parent Corporations and any
Subsidiary Corporations of the Company) shall not exceed $100,000.
Hereinafter, this requirement is sometimes referred to as the "$100,000
Limitation".
(b) Nothing in this Article VII of the Plan shall be deemed to
prevent the grant of Options permitting exercise in excess of the
maximums established by the preceding paragraph where such excess amount
is treated as a Nonstatutory Option.
(c) The Board is expressly given the authority to issue
amended or replacement Options with respect to shares of Stock subject to
an Option previously granted hereunder. An amended Option amends the
terms of an Option previously granted and thereby supersedes the previous
Option. A replacement Option is similar to a new Option granted
hereunder except that it provides that it shall be forfeited to the
extent that a previously granted Option is exercised, or except that its
issuance is conditioned upon the termination of a previously granted
Option.
(d) The date of grant of an Option is either the date it is
granted or such other date as may be designed at the time of the award of
the Option.
7.2 No Tandem Options. Where an Option granted under this Plan is
intended to be an Incentive Stock Option, the Option shall not contain
terms pursuant to which the exercise of the Option would affect the
Optionee's right to exercise another Option, or vice versa, such that the
Option intended to be an Incentive Stock Option would be deemed a tandem
stock option within the meaning of the regulations under Section 422A of
the Code.
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7.3 Option Agreement: Terms and Conditions to Apply Unless
Otherwise Specified. As determined by the Board on the date of grant,
each Option shall be evidenced by an Option agreement (the "Option
Agreement") that includes the non transferability provisions required by
Section 10.2 hereof and specifies: whether the Option is an Incentive
Stock Option or a Nonstatutory option; the Option price; the duration of
the Option; the number of shares of Stock to which the Option applies;
any vesting or exercisability restrictions which the Board may impose; in
the case of an Incentive Stock Option, a provision implementing the
$100,000 Limitation; and any other terms or conditions which the Board
may impose. All such terms and conditions shall be determined by the
Board at the time of grant of the Option.
(a) If not otherwise specified by the Board, the following
terms and conditions shall apply to Options granted under the Plan:
(i) Term. The duration of the Option shall be five years
from the date of grant.
(ii) Exercise of Option. Unless an Option is terminated
as provided hereunder, an Optionee may exercise his Option for up to, but
not in excess of, the amounts of shares subject to the Option specified
hereafter in this section, based on the Optionee's number of years of
continuous service with the Company or a Subsidiary Corporation from the
date on which the Option is granted. In the case of an Optionee who is
an Employee, continuous service shall mean continuous employment; in the
case of an Optionee who is a Consultant, continuous service shall mean
the continuous provision of consulting services. In applying said
limitations, the amount of shares, if any, previously purchased by the
Optionee under the Option shall be counted in determining the amount of
shares the Optionee can purchase at any time. The Optionee may exercise
his Option in the following amounts:
(A) After one year of such continuous services, up
to but not in excess of twenty percent of the shares originally subject
to the Option;
(B) After two years of such continuous services, up
to but not in excess of forty percent of the shares originally subject to
the Option;
(C) After three years of such continuous services,
up to but not in excess of sixty percent of the shares originally subject
to the Option;
(D) After four years of such continuous services, up
to but not in excess of eighty percent of the shares originally subject
to the Option; and
(E) At the expiration of the fifth year of such
continuous services, the Option may be exercised, in whole or in part,
and at any time and from time to time within its term but it shall not be
exercisable after the expiration of five years from the date on which it
was granted.
(b) The Board shall be free to specify terms and
conditions other than those set forth above, in its discretion.
(c) All Option Agreements shall incorporate the
provisions of this Plan by reference, with certain provisions to apply
depending upon whether the Option Agreement applies to an Incentive Stock
Option or to a Nonstatutory Option.
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7.4 Option Price. No Incentive Stock Option granted pursuant to
this Plan shall have an Option price that is less than the Fair Market
Value of Stock on the date the Option is granted. Incentive Stock
Options granted to Significant Shareholders shall have an Option price of
not less than 110 percent of the Fair Market Value of Stock on the date
of grant. The Option price for Nonstatutory Options shall be established
by the Board and shall not be subject to the restrictions applicable to
Incentive Stock Options.
7.5 Term of Options. Each Option shall expire at such time as the
Board shall determine when it is granted, provided however that under no
circumstances shall a Nonstatutory Option be exercisable later than the
tenth anniversary date of its grant, nor by its terms, shall an Incentive
Stock Option granted to a Significant Shareholder be exercisable later
than the fifth year from the anniversary date of its grant.
7.6 Exercise of Options. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and
conditions as the Board shall in each instance approve, which need not be
the same for all Optionees.
7.7 Payment. Payment for all shares of Stock shall be made at the
time that an Option, or any part thereof, is exercised, and no shares
shall be issued until full payment has been made. Payment shall be made
(i) in cash, or (ii) if acceptable to the Board, in Stock or in some
other form; provided, however, in the case of an Incentive Stock Option,
that said other form of payment does not prevent the Option from
qualifying for treatment as an incentive stock option within the meaning
of the Code.
ARTICLE VIII
WRITTEN NOTICE, ISSUANCE OF STOCK
CERTIFICATES. SHAREHOLDER PRIVILEGES
8.1 Written Notice. An Optionee wishing to exercise an Option
shall give written notice to the Company, in the form and manner
prescribed by the Board. Full payment for the shares exercised pursuant
to the Option must accompany the written notice.
8.2 Issuance of Stock Certificates. As soon as practicable after
the receipt of written notice and payment, the Company shall deliver to
the Optionee or to a permitted nominee of the Optionee a certificate or
certificates for the requisite number of shares of stock.
8.3 Privileges of a Shareholder. An Optionee or any other person
entitled to exercise an Option under this Plan shall not have stockholder
privileges with respect to any Stock covered by the Option until the date
of issuance of a stock certificate for such stock.
ARTICLE IX
TERMINATION OF EMPLOYMENT OR SERVICES
9.1 Death. If an Optionee's employment in the case of an Employee,
or provision of services as a Consultant, in the case of a Consultant,
terminates by reason of death, the Option may thereafter be exercised at
any time prior to the expiration date of the Option or within 12 months
after the date of such death, whichever period is the shorter, by the
person or persons entitled to do so under the Optionee's will or, if the
Optionee shall fail to make a testamentary disposition of an Option or
shall die intestate, the Optionee's legal representative or
representatives. The Option shall be exercisable only to the extent that
such Option was exercisable as of the date of death.
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9.2 Termination other than for Cause or Due to Death. In the event
of an Optionee's termination of employment, in the case of an Employee,
or termination of the provision of services as a Consultant, in the case
of a Consultant, other than by reason of death, the Optionee may exercise
such portion of his Option as was exercisable by him at the date of such
termination (the "Termination Date") at any time within three months of
the Termination Date; provided, however, that where the Optionee is an
Employee, and is terminated due to disability within the meaning of Code
422A, he may exercise such portion of his Option as was exercisable by
him on his Termination Date within one year of his Termination Date. In
any event, the Option cannot be exercised after the expiration of the
term of the Option. Options not exercised within the applicable period
specified above shall terminate.
(a) In the case of an Employee, a change of duties or position
within the Company or an assignment of employment in a Subsidiary
Corporation or Parent Corporation of the Company, if any, or from such a
Corporation to the Company, shall not be considered a termination of
employment for purposes of this Plan.
(b) The Option Agreements may contain such provisions as the
Board shall approve with reference to the effect of approved leaves of
absence upon termination of employment.
9.3 Termination for Cause. In the event of an Optionee's
termination of employment, in the case of an Employee, or termination of
the provision of services as a Consultant, in the case of a Consultant,
which termination is by the Company or a Subsidiary Corporation for
cause, any Option or Options held by him under the Plan, to the extent
not exercised before such termination, shall terminate upon notice of
termination for cause.
ARTICLE X
RIGHTS OF OPTIONEES
10.1 Service. Nothing in this Plan shall interfere with or limit
in any way the right of the Company or a Subsidiary Corporation to
terminate any Employee's employment, or any Consultant's services, at any
time, nor confer upon any Employee any right to continue in the employ of
the Company or a Subsidiary Corporation, or upon any Consultant any right
to continue to provide services to the Company or a Subsidiary
Corporation.
10.2 Non transferability. All Options granted under this Plan
shall be non transferable by the Optionee, other than by will or the laws
of descent and distribution, and shall be exercisable during the
Optionee's lifetime only by the Optionee. No Option may be assigned,
pledged, hypothecated or otherwise alienated or encumbered (whether by
operation of law or otherwise), and any attempt to do so shall be null
and void.
ARTICLE XI
OPTIONEE-EMPLOYEE'S TRANSFER OR LEAVE OF ABSENCE
11.1 Optionee-Employee's Transfer or Leave of Absence. For
purposes of this Plan:
(a) A transfer of an Optionee who is an Employee from the
Company to a Subsidiary Corporation or Parent Corporation, or from one
such Corporation to another, or
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(b) A leave of absence for such an Optionee (i) which is duly
authorized in writing by the Company or a Subsidiary Corporation, and
(ii) if the Optionee holds an Incentive Stock Option, which qualifies
under the applicable regulations under the Code which apply in the case
of incentive stock options, shall not be deemed a termination of
employment. However, under no circumstances may an Optionee exercise an
Option during any leave of absence, unless authorized by the Board.
ARTICLE XII
AMENDMENT, MODIFICATION, AND TERMINATION OF THE PLAN
12.1 Amendment, Modification an d Termination of the Plan.
(a) The Board may at any time terminate, and from time to time
may amend or modify the Plan; provided, however, that no such action of
the Board, without approval of the shareholders, may:
(i) increase the total amount of Stock which may be
purchased through Options granted under the Plan, except as provided in
Article V;
(ii) change the class of Employees or Consultants
eligible to receive Options; or
(iii) extend the maximum option period provided in this
Plan.
(b) No amendment, modification, or termination of the Plan
shall in any manner adversely affect any outstanding Option under the
Plan without the consent of the Optionee holding the Option.
ARTICLE XIII
ACQUISITION, MERGER OR LIQUIDATION
13.1 Acquisition.
(a) In the event that an Acquisition occurs with respect to
the Company, the Company shall have the option, but not the obligation,
to cancel Options outstanding as of the effective date of Acquisition,
whether or not such Options are then exercisable, in return for payment
to the Optionees of an amount equal to a reasonable estimate of an amount
(hereinafter the "Spread") equal to the difference between the net amount
per share payable in the Acquisition or as a result of the Acquisition,
less the exercise price of the Option. In estimating the Spread,
appropriate adjustments to give effect to the existence of the Options
shall be made, such as deeming the Options to have been exercised, with
the Company receiving the exercise price payable thereunder, and treating
the stock receivable upon exercise of the Options as being outstanding in
determining the net amount per share.
(b) For purposes of this section, an "Acquisition" means any
transaction in which substantially all of the Company's assets are
acquired or in which a controlling amount of the Company's outstanding
shares of Stock are acquired, in each case by a single person or entity
or an affiliated group of persons and entities. For purposes of this
section, a controlling amount shall mean more than 50% of the issued and
outstanding shares of Stock of the Company. The Company shall have such
an option regardless of how the Acquisition is effectuated, whether by
direct purchase, through a merger or similar corporate transaction, or
otherwise. In cases where the acquisition consists of the acquisition of
assets of the Company, the net amount per share shall be calculated on
the basis of the net amount receivable with respect to shares upon a
distribution and liquidation by the Company after giving effect to
expenses and charges, including but not limited to taxes, payable by the
Company before the liquidation can be completed.
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(c) Where the Company does not exercise its option under this
Section 13.1 the remaining provisions of this Article XIII shall apply,
to the extent applicable.
13.2 Merger or Consolidation. Subject to any required action by
the shareholders, if the Company shall be the surviving corporation in
any merger or consolidation, any option granted under this Plan shall
pertain to and apply to the securities to which a holder of the number of
shares of Stock subject to the Option would have been entitled in such
merger or consolidation.
13.3 Other Transactions. A dissolution or a liquidation of the
Company or a merger and consolidation in which the Company is not the
surviving corporation shall cause every Option outstanding hereunder to
terminate as of the effective date of such dissolution, liquidation,
merger or consolidation. However, the Optionee either (i) shall be
offered a firm commitment whereby the resulting or surviving corporation
in a merger or consolidation will tender to the Optionee an option (the
"Substitute Option") to purchase its shares on terms and conditions both
as to number of shares and otherwise, that will substantially preserve to
the Optionee the rights and benefits of the Option outstanding hereunder
granted by the Company, or (ii) shall have the right immediately prior to
such dissolution, liquidation, merger, or consolidation to exercise any
unexercised Options whether or not then exercisable, subject to the
provisions of this Plan. The Board shall have absolute and uncontrolled
discretion to determine whether the Optionee has been offered a firm
commitment and whether the tendered Substitute Option will substantially
preserve to the Optionee the rights and benefits of the Option
outstanding hereunder. In any event, any Substitute Option for an
Incentive Stock Option shall comply with the requirements of Code Section
425(a).
ARTICLE XIV
SECURITIES REGISTRATION
14.1 Securities Registration. In the event that the Company shall
deem it necessary or desirable to register under the Securities Act of
1933, as amended, or any other applicable statute, any Options or any
Stock with respect to which an Option may be or shall have been granted
or exercised, or to qualify any such Options or Stock under the
Securities Act of 1933, as amended, or any other statute, then the
Optionee shall cooperate with the Company and take such action as is
necessary to permit registration or qualification of such Options or
Stock.
14.2 Representations. Unless the Company has determined that the
following representation is unnecessary, each person exercising an Option
under the Plan may be required by the Company, as a condition to the
issuance of the shares pursuant to exercise of the Option, to make a
representation in writing (i) that he is acquiring such shares for his
own account for investment and not with a view to, or for sale in
connection with, the distribution of any part thereof, (ii) that before
any transfer in connection with the resale of such shares, he will obtain
the written opinion of counsel for the Company, or other counsel
acceptable to the Company, that such shares may be transferred. The
Company may also require that the certificates representing such shares
contain legends reflecting the foregoing.
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ARTICLE XV
TAX WITHHOLDING
15.1 Tax Withholding. Whenever shares of Stock are to be issued in
satisfaction of Options exercised under this Plan, the Company shall have
the power to require the recipient of the Stock to remit to the Company
an amount sufficient to satisfy any applicable federal, state, and local
withholding tax requirements.
ARTICLE XVI
INDEMNIFICATION
16.1 Indemnification. To the extent permitted by law, each person
who is or shall have been a member of the Board shall be indemnified and
held harmless by the Company against and from any loss, cost, liability,
or expense that may be imposed upon or reasonably incurred by him in
connection with or resulting from any claim, action, suit, or proceeding
to which he may be a party or in which he may be involved by reason of
any action taken or failure to act under the Plan and against and from
any and all amounts paid by him in settlement thereof, with the Company's
approval, or paid by him in satisfaction of judgment in any such action,
suit, or proceeding against him, provided he shall give the Company an
opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing
right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company's
articles of incorporation or bylaws, as a matter of law, or otherwise, or
any power that the Company or any Subsidiary Corporation may have to
indemnify them or hold them harmless.
ARTICLE XVII
REQUIREMENTS OF LAW
17.1 Requirements of Law. The granting of Options and the issuance
of shares of Stock upon the exercise of an Option shall be subject to all
applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be
required.
17.2 Governing Law. The Plan, and all agreements hereunder, shall
be construed in accordance with and governed by the laws of the state of
Colorado.
ARTICLE XVIII
EFFECTIVE DATE OF PLAN
18.1 Effective Date. The Plan shall be effective on July 1, 1996.
ARTICLE XIX
COMPLIANCE WITH CODE
19.1 Compliance with Code. Incentive Stock Options granted
hereunder are intended to qualify as "incentive stock options" under Code
422A. If any provision of this Plan is susceptible to more than one
interpretation, such interpretation shall be given thereto as is
consistent with Incentive Stock Options granted under this Plan being
treated as incentive stock options under the Code.
ARTICLE XX
NO OBLIGATION TO EXERCISE OPTION
20.1 No Obligation to Exercise. The granting of an Option shall
impose no obligation upon the holder thereof to exercise such Option.
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THIS 1996 STOCK OPTION PLAN was adopted by the Board of Directors of
Rentech, Inc. on May 23, 1996 to be effective as of July 1, 1996. It was
approved by shareholders at the annual meeting of shareholders held on
September 19, 1996.
RENTECH, INC.
(signature)
By: ------------------------------------
Dennis L. Yakobson, President
