SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
December 23, 1997
(Date of Report, date of earliest event reported)
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 1-3919 37-0364250
1
- -
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation or Identification No.)
organization)
5430 LBJ Freeway, Suite 1740, Three Lincoln Centre, Dallas, TX 75240-
2697
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 458-0028
Not applicable
(Former name or address, if changed since last report)
2
- -
Item 2: Acquisition or Disposition of Assets
On December 23, 1997, Keystone Consolidated Industries, Inc. ("Keystone")
completed its acquisition of Engineered Wire Products, Inc. ("EWP").
Previously, EWP operated as a joint venture between Price Brothers Company
("PBC") of Dayton, Ohio, and Keystone with Keystone owning 20 percent of the
joint venture. Keystone paid $11.2 million in cash to acquire PBC's 80%
interest in the joint venture using available funds on hand.
For financial reporting purposes, Keystone will account for the step
acquisition of the 80% of EWP not previously owned by Keystone by the purchase
method.
EWP manufactures fabricated wire products which are used primarily in the
concrete pipe and road construction business. Incorporated in the State of Ohio
in 1994, EWP's executive offices and its operating facility are located at 1200
N. Warpole Street, Upper Sandusky, Ohio 43351. EWP's telephone number is (419)
294-3817.
Item 7: Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Engineered Wire Products, Inc. Page
filed pursuant to Rule 3-05 of Regulation S-X
Independent Auditors' Report F-1
Balance Sheets - As of December 31, 1995 and 1996;
September 30, 1997 (unaudited) F-2
Statements Of Income - Years ended December 31, 1995 and 1996;
nine months ended September 30, 1996 and 1997 (unaudited) F-3
3
- -
Statements of Stockholders' Equity - Years ended December 31, 1995
and 1996; nine months ended September 30, 1997 (unaudited) F-4
Statements of Cash Flows - Years ended December 31, 1995 and 1996;
nine months ended September 30, 1996 and 1997 (unaudited) F-5
Notes to Financial Statements F-6
(b) Unaudited Pro Forma Condensed Consolidated Financial Information Filed
Pursuant to Article 11 of Regulation S-X
Unaudited Pro Forma Condensed Consolidated Balance Sheet - As of
September 30, 1997 P-2
Notes to Unaudited Pro Forma Condensed Consolidated Balance
Sheet - As of September 30, 1997 P-3
Unaudited Pro Forma Condensed Consolidated Statement of
Operations - Year ended December 31, 1996 P-4
Notes to Unaudited Pro Forma Condensed Consolidated Statement
of Operations - Year ended December 31, 1996 P-5
Unaudited Pro Forma Condensed Consolidated Statement of
Operations - Nine months ended September 30, 1997 P-8
Notes to Unaudited Pro Forma Condensed Consolidated Statement
of Operations - Nine months ended September 30, 1997 P-9
4
- -
(c) Exhibit
Exhibit No. Description of Exhibit
2.1 Share Purchase Agreement, dated as of December 23, 1997,
between Registrant and Price Brothers Company.
99.1 Press Release dated December 29, 1997 issued by Registrant.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
(Registrant)
By /s/ Harold M. Curdy
Harold M. Curdy
Vice President - Finance/Treasurer
(Principal Financial Officer)
By /s/ Bert E. Downing, Jr.
5
- -
Bert E. Downing, Jr.
Corporate Controller
(Principal Accounting Officer)
Date: January 16, 1998
6
- -
INDEPENDENT AUDITORS' REPORT
Board of Directors
Engineered Wire Products, Inc.:
We have audited the accompanying balance sheets of Engineered Wire Products,
Inc. as of December 31, 1995 and 1996, and the related statements of income,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Engineered Wire Products, Inc. at December
31, 1995 and 1996, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
February 28, 1997, (December 23, 1997 as to Note A)
Dayton, Ohio
ENGINEERED WIRE PRODUCTS, INC.
BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31, September 30,
1995 1996 1997
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash $ 290 $ 24 $ 282
Receivables - trade, less allowance for
doubtful accounts of $23, $21 and $39
(unaudited) 2,245 2,903 3,962
Inventories (Note G):
Finished products 2,720 3,728 3,149
Raw materials 1,223 1,298 3,348
Deferred income taxes (Note H) 84 96 105
Prepaid expenses - 5 4
Total current assets 6,562 8,054 10,850
Property, Plant and Equipment-Net (Note C) 8,995 8,680 8,232
Other Assets 50 91 92
Total $15,607 $16,825 $19,174
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable (Note D) $ 1,453 $ 2,095 $ 2,507
Accounts payable, including bank
overdraft of $114 in 1996 (Note G) 818 436 1,853
Due to majority shareholder (Note H) 220 532 477
Accrued salaries, wages and amounts
withheld 314 361 439
Other accrued expenses (Note F) 375 445 446
Current portion of long-term debt
(Note D) 524 -
1,180
973
Total current liabilities 3,704 5,049 6,695
Long-Term Debt (Note D) 4,131 2,954 2,105
Deferred Income Taxes (Note H) 466 418 348
Stockholders' Equity:
Common stock - no par value, 100 shares
authorized, issued and outstanding 5,302 5,302 5,302
Additional paid in capital (Note A) 1,301 1,301 1,301
Pension liability adjustment (30) (51) (51)
Retained earnings 733 1,852 3,474
Total stockholders' equity 7,306 8,404 10,026
Total $15,607 $16,825 $19,174
</TABLE>
ENGINEERED WIRE PRODUCTS, INC.
STATEMENTS OF INCOME
(In thousands, except share data)
<TABLE>
<CAPTION>
Years ended Nine months ended
December 31, September 30,
1995 1996 1996 1997
(Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Net sales $20,089 $24,539 $17,998 $ 24,706
Other (Note D) 36 143 117 167
20,125 24,682 18,115 24,873
Costs and Expenses:
Cost of sales 16,914 19,632 14,238 19,763
Selling and administrative 1,356 1,700 1,354 1,381
Depreciation 486 724 549 658
Interest 383 713 540 516
19,139 22,769 16,681 22,318
Income before taxes 986 1,913 1,434 2,555
Income taxes (Note H) 359 794 518 933
Net income $ 627 $ 1,119 $ 916 $ 1,622
Income Per Common Share $6,269.97 $11,185.56 $9,160.00 $16,220.00
Weighted average common shares
outstanding 100 100 100 100
</TABLE>
ENGINEERED WIRE PRODUCTS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share data)
<TABLE>
<CAPTION>
Additional Pension
Common Stock Paid-In Liability Retained
Shares Amount Capital Adjustment Earnings
<S> <C> <C> <C> <C> <C>
Balance - December 31, 1994 100 $5,302 $ 400 $ - $ 106
Net income - - - - 627
Pension liability adjustment
(Note F) - - - (30) -
Additional capital
contribution (Note A) - 901 - -
-
Balance - December 31, 1995 100 5,302 1,301 (30) 733
Net income - - - - 1,119
Pension liability adjustment
(Note F) - - - (21 ) -
Balance - December 31, 1996 100 5,302 1,301 (51) 1,852
Net income (unaudited) - - - - 1,622
Balance - September 30, 1997 100 $5,302 $1,301 $(51) $3,474
</TABLE>
ENGINEERED WIRE PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Years ended Nine months ended
December 31, September 30,
1995 1996 1996 1997
(Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 627 $ 1,119 $ 916 $ 1,622
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation 486 724 549 658
Deferred taxes (136) (48) (104) (79)
Foreign exchange (gain) loss 27 (147) (117) (167)
Loss on sale of fixed assets - 4 4 22
Changes in assets and liabilities:
Receivables 107 (657) (2,555) (1,060)
Inventories (2,012) (1,083) (561) (1,472)
Prepaid expenses - (5) (5) 2
Accounts payable 523 (382) 219 1,416
Accrued expenses 362 42 166 78
Due to majority shareholder 202 311 158 (54 )
Net cash (used in) provided by
operating activities 186 (122 )
(1,330 ) 966
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (4,592) (418) (323) (232)
Proceeds from sale of fixed assets - 5 6 -
Net cash used in investing activities (4,592 ) (413 ) (317 ) (232 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in notes payable 1,453 642 1,887 412
Proceeds from long-term debt 2,332 - - -
Payments on borrowings - (373) (231) (888)
Capital contribution 901 - - -
Net cash provided by financing
activities 4,686 269
1,656 (476 )
INCREASE (DECREASE) IN CASH 280 (266) 9 258
CASH:
Beginning of period 10 290 290 24
End of period $ 290 $ 24 $ 299 $ 282
NONCASH TRANSACTIONS:
Equipment acquisition $ 2,295 $ - $ - $ -
Minimum pension liability adjustment $ 76 $ 74 $ - $ -
</TABLE>
ENGINEERED WIRE PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
A. ORGANIZATION AND BASIS OF PRESENTATION
Prior to December 23, 1997, Engineered Wire Products, Inc. ("EWP") operated
as a joint venture between Price Brothers Company (Price Brothers) and Keystone
Steel & Wire, a division of Keystone Consolidated Industries, Inc. (Keystone).
Under the terms of the joint venture agreement Price Brothers and Keystone had
an 80% and 20% ownership interest in EWP, respectively. Keystone's 20%
ownership interest resulted from the contribution of net assets in 1994 and a
contribution of an additional $900,900 in cash in 1995.
On December 23, 1997, Keystone acquired Price Brothers' interest in EWP.
As a result, EWP became a wholly-owned subsidiary of Keystone on that date.
EWP fabricates and markets steel reinforcing mesh in both roll and sheet
form. Markets for EWP's products extend from the Midwest to the East Coast.
Products are marketed by a direct sales force that is supplemented by
manufacturer's representatives. The mesh is used as concrete reinforcement in
sewer and culvert pipe, structural building components and precast products.
The balance sheet at September 30, 1997 and the statements of income and
cash flows for the interim periods ended September 30, 1996 and 1997, and the
statement of stockholders' equity and related notes to financial statements for
the interim period ended September 30, 1997, have each been prepared by EWP,
without audit. In the opinion of management, all adjustments, consisting only
of normal recurring adjustments, necessary to present fairly the financial
position, results of operations and cash flows in accordance with generally
accepted accounting principles have been made. The results of operations for the
interim periods are not necessarily indicative of the operating results for a
full year or of future operations.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Inventories are stated at the lower of cost or market. Cost is determined
by the first-in, first-out method.
Property, Plant and Equipment is recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the assets.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amount of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Income per common share is based on the weighted average number of common
shares outstanding during each period.
C. PROPERTY, PLANT AND EQUIPMENT
The major classes of property, plant and equipment as cost are:
<TABLE>
<CAPTION>
December 31, September 30,
1995 1996 1997
(Unaudited)
(In thousands)
<S> <C> <C> <C>
Land and land improvements $ 404 $ 454 $ 450
Buildings 1,685 1,732 1,667
Machinery and equipment 11,094 11,402 11,352
13,183 13,588 13,469
Less accumulated depreciation 4,188 4,908 5,237
Property, plant and equipment,
net $ 8,995 $ 8,680 $ 8,232
</TABLE>
D. NOTES PAYABLE AND LONG TERM DEBT
<TABLE>
<CAPTION>
December 31, September 30,
1995 1996 1997
(Unaudited)
(In thousands)
<S> <C> <C> <C>
Equipment acquisition debt due
March 8, 2001 with semi-annual
payments of 2,338,970 Austrian
Shillings ($214,309 at
December 31, 1996 and $188,191 at
September 30, 1997), plus interest
at 8% $2,323 $1,948 $1,329
Term Loan due June 30, 2000 with
quarterly payments of $145,750
plus interest at a floating rate
(9.25% at December 31, 1996 and
9.5% at September 30, 1997)
2,332 2,186 1,749
4,655 4,134 3,078
Less: Current maturities 524 1,180 973
$4,131 $2,954 $2,105
</TABLE>
The carrying amount of the fixed rate debt approximates fair market value.
EWP has purchased forward exchange contracts for three of the Austrian
shilling payments required on the equipment acquisition debt to minimize the
risk associated with foreign currency fluctuations. As such, EWP has included
the losses on these contracts and the gains on the related acquisition debt in
other income. The market rates used for the forward contracts and to value the
foreign debt balances were based upon market rates at December 31, 1995 and
1996, and September 30, 1997. At December 31, 1996, future payments due on long
term debt, incorporating forward contracts for the next five years as of
December 31, 1996 were $1,179,552 in 1997; $1,010,678 in each of 1998 and 1999;
$719,178 in 2000 and $213,838 thereafter.
EWP has available $6,000,000 under a revolving credit agreement (credit
agreement) that expires March 31, 1998. Interest is payable at either the prime
rate or federal funds rate as defined in the agreement. At December 31, 1995 and
1996 and September 30, 1997, EWP had borrowed $1,453,000, $2,095,000 and
$2,507,000 under this agreement, respectively. EWP's inventories and accounts
receivable are collateralized under the credit agreement and term loan.
Additionally, the Company's property, plant and equipment are collateralized
under the equipment acquisition debt, credit agreement and term loan as well as
under Price Brothers' credit agreement.
Certain of the above debt agreements contain covenants with respect to
working capital, additional borrowings, payment of dividends and certain other
matters.
Cash payments for interest during the years ended December 31, 1995 and
1996 were approximately $265,000 and $661,000, respectively. Cash payments for
interest during the nine months ended September 30, 1996 and 1997 were
approximately $491,000 and $550,000, respectively.
E. LEASES
Future minimum lease payments under operating leases with initial or
remaining lease terms in excess of one year as of December 31, 1996 are as
follows:
1997 $114,000
1998 83,000
1999 65,000
2000 45,000
2001 5,000
Total $312,000
Certain lease agreements include provisions for purchasing the assets.
Rental expense was approximately $56,000 and $112,000 for the years ended
December 31, 1995 and 1996, respectively and $88,000 and $95,000 for the nine
month periods ended September 30, 1996 and 1997, respectively.
F. RETIREMENT PLANS
EWP has a non-contributory defined benefit pension plan covering its hourly
employees. EWP's funding policy is to contribute amounts to the plan sufficient
to meet or exceed the minimum requirements of the Employee Retirement Income
Security Act.
Net pension expense consists of the following components:
<TABLE>
<CAPTION>
Years ended
December 31,
1995 1996
(In thousands)
<S> <C> <C>
Service cost $ 8 $ 17
Interest cost on projected benefit obligation 15 33
Return on plan assets (28) (9)
Net amortization and deferral 20 (14 )
Net pension expense $ 15 $ 27
</TABLE>
<TABLE>
<CAPTION>
The following is a reconciliation of the funded status of the plan:
December 31,
1995 1996
(In thousands)
<S> <C> <C>
Actuarial present value of benefit obligations:
Estimated present value of vested benefits $(273) $(478)
Estimated present value of non-vested benefits (10 ) (71 )
Accumulated and projected benefit obligation (283) (549)
Market value of plan assets (consisting primarily
of stocks and bonds) 191 453
Projected benefit obligation in excess of plan assets (92) (96)
Unrecognized net loss 49 82
Unrecognized net liability to be amortized 14 13
Prior service cost not yet recognized in pension cost 35 78
Minimum pension liability adjustment (98 ) (173 )
Pension liability (included in other
accrued expenses) $ (92) $ (96)
</TABLE>
EWP recorded minimum pension liabilities for the amounts by which the
projected benefit obligations exceeded plan assets. In addition, an intangible
asset of $50,013 at December 31, 1995 and $91,672 at December 31, 1996, which
equaled the unrecognized prior service cost and unrecognized liabilities, and an
adjustment to shareholders equity of $30,304 at December 31, 1995 and $20,345 at
December 31, 1996 were also recorded. These adjustments may be reversed in
future periods if the minimum liability adjustment is reduced as the result of
investment performance or changes in the assumptions used to value the plan.
EWP also participates in a non-contributory defined benefit plan which is
overfunded, that covers all of the salaried employees and is maintained by Price
Brothers. In 1996, $58,511 was expensed as the service cost for this plan.
The following represents rates used in determining the pension liability
for both plans:
1995 1996
Assumed discount rate 6.5% 6.5%
Expected long-term rate of return on plan assets 7.5% 7.5%
Assumed rate of future pay increase (salary plan only) 4.5% 3.0%
EWP also participates in a non-contributory Employee Stock Ownership Plan
(ESOP) for exempt and non-exempt salaried employees which is maintained by Price
Brothers. Contributions to the ESOP are determined on a yearly basis by Price
Brothers. ESOP expense was $29,798 and $11,334 for the years ended December 31,
1995 and 1996, respectively.
EWP also participates in a contributory 401(k) Savings Incentive Plan (SIP)
for exempt and non-exempt employees which is maintained by Price Brothers. EWP
matches a portion of the employees' contribution to the plan. SIP expense was
$12,171 and $21,409 for the years ended December 31, 1995 and 1996,
respectively.
G. RELATED PARTY TRANSACTIONS
EWP purchases inventory from Keystone. Total purchases from Keystone were
approximately $14.2 million and $10.6 million for the years ended December 31,
1995 and 1996, respectively, and $6.9 million and $11.2 million for the nine
month periods ended September 30, 1996 and 1997, respectively. Included in
accounts payable were payables of approximately $187,000 and $169,000 due to
Keystone at December 31, 1995 and 1996, respectively, and $145,000 at September
30, 1997.
H. INCOME TAXES
Income taxes consisted of the following:
<TABLE>
<CAPTION>
Years ended Nine months ended
December 31, September 30,
1995 1996 1996 1997
(Unaudited)
(In thousands)
<S> <C> <C> <C> <C>
Currently payable:
Federal $ 447 $631 $ 565 $ 909
State 45 206 57 103
Total currently payable 492 837 622 1,012
Deferred:
Federal (119) (37) (90) (69)
State (14 ) (6 ) (14 ) (10 )
Total deferred (133 ) (43 ) (104 ) (79 )
Total income tax $ 359 $794 $ 518 $ 933
</TABLE>
Income taxes have been determined as if the Company were a separate
taxpaying entity. EWP is included in the consolidated federal and state tax
returns of Price Brothers through December 23, 1997. Therefore, the unpaid
portion of EWP's currently payable taxes have been included as amounts due to
the majority shareholder.
Total deferred income tax assets were $103,000, $130,000 and $105,000 at
December 31, 1995, 1996 and September 30, 1997, respectively, and consisted
primarily of certain accruals for financial statement purposes that were not
currently deductible for income tax purposes. Total deferred income tax
liabilities were $485,000, $452,000 and $348,000 at December 31, 1995, 1996 and
September 30, 1997, and consisted primarily of temporary differences related to
property, plant and equipment of $479,000, $399,000 and $333,000, respectively,
and temporary differences related to foreign currency transactions of $45,000 at
both December 31, 1996 and September 30, 1997 resulting in net deferred tax
liabilities of $382,000, $322,000 and $243,000 at December 31, 1995 and 1996 and
September 30, 1997, respectively.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The accompanying unaudited pro forma financial statements set forth the Pro
Forma Condensed Consolidated Balance Sheet of Keystone as of September 30, 1997,
and the Pro Forma Condensed Consolidated Statements of Operations for the year
ended December 31, 1996 and the nine month period ended September 30, 1997.
These pro forma financial statements are presented to illustrate the effect of
certain adjustments to the historical consolidated financial statements as
explained in the accompanying notes.
The accompanying Pro Forma Condensed Consolidated Financial Statements
should be read in conjunction with Keystone's, DeSoto, Inc.'s and EWP's
historical consolidated financial statements and notes thereto. The pro forma
condensed consolidated financial statements are presented for information
purposes only and are not necessarily indicative of actual results had the
transactions reflected therein occurred at the dates indicated, nor do they
purport to represent results of future operations of the Company.
KEYSTONE CONSOLIDATED INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 1997
(In thousands, except share amounts)
<TABLE>
<CAPTION>
ASSETS
Pro Forma Pro Forma
Historical
Keystone EWP Note 2 Adjustmen Consolida
ts ted
<S> <C> <C> <C> <C> <C>
Current assets
Cash and cash equivalents $ 46,261 $ 282 (a) $(11,200)
(b) (100) $ 35,243
Notes and accounts receivable 38,081 3,962 (d) (145) 41,898
Inventories 39,418 6,497 - 45,915
Deferred income taxes 19,722 105 - 19,827
Prepaid expenses 915 4 - 919
Total current assets 144,397 10,850 (11,445) 143,802
Property, plant and equipment, 96,103 8,232 (c) 2,983 107,318
net
Prepaid pension cost 109,468 - - 109,468
Restricted investments 7,507 - - 7,507
Deferred financing costs 3,762 - - 3,762
Goodwill - - (c) 1,326 1,326
Other 2,493 92 (a) 700 3,285
Investment in EWP 2,664 - (a) 10,500 -
(b) 100 -
(c) (13,264 -
)
$366,394 $19,174 $ (9,100) $376,468
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current long-$ 334 $ 3,480 $ - $ 3,814
term debt
Accounts payable 30,513 1,853 (d) (145) 32,221
Accrued OPEB cost 8,409 - - 8,409
Other accrued liabilities 37,702 1,362 (c) (119 ) 38,945
Total current liabilities 76,958 6,695 (264 ) 83,389
Noncurrent liabilities:
Long-term debt 101,143 2,105 - 103,248
Accrued OPEB cost 101,611 - - 101,611
Negative goodwill 25,760 - - 25,760
Other 15,866 348 (c) 1,190 17,404
Total noncurrent liabilities 244,380 2,453 1,190 248,023
Redeemable preferred stock, no
par value, 500,000 shares
authorized, 435,456 shares issued 3,500 - - 3,500
Common stockholders' equity:
Keystone common stock, $1 par
value, 12,000,000 shares
authorized, 9,296,533 shares
issued at stated value 10,027 - - 10,027
EWP common stock - 5,302 (c) (5,302) -
Additional paid-in capital 47,166 1,301 (c) (1,301) 47,166
Pension liability adjustment - (51) (c) 51 -
Retained earnings (accumulated
deficit) (15,625) 3,474 (c) (3,474) (15,625)
Treasury stock - 1,134 shares (12) - - (12)
Total stockholders' equity 41,556 10,026 (10,026) 41,556
$366,394 $19,174 $ (9,100) $376,468
</TABLE>
KEYSTONE CONSOLIDATED INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 1997
Note 1 - Basis of presentation:
The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
September 30, 1997 reflects the adjustments necessary to record Keystone's
acquisition of the 80% of EWP not previously owned by Keystone as though such
transaction had occurred on September 30, 1997. The step acquisition is
accounted for by the purchase method.
Note 2 - Pro forma adjustments:
(a) Keystone pays $10.5 million for the 80% of EWP not previously owned by
Keystone, and $700,000 for a non-compete agreement with the former EWP
majority shareholder.
(b) Keystone incurs $100,000 in acquisition related costs.
(c) Allocate purchase price as follows.
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Purchase price to be allocated
Cash paid for 80% interest in EWP $10,500
Keystone investment in 20% of EWP recorded under equity
method 2,664
Transaction costs 100
13,264
Historical EWP common equity 10,026
$ 3,238
Purchase price allocation:
Adjust EWP pension liability to excess of pension plan
assets over related projected benefit obligation $ 119
Adjust EWP property, plant and equipment to estimated fair
value based on appraisals 2,983
Deferred income tax consequences of the above adjustments,
at effective federal and state rate of 39% (1,190)
Goodwill 1,326
$ 3,238
(d) Eliminate intercompany receivables and payables
</TABLE>
KEYSTONE CONSOLIDATED INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1996
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Form Adjustments
Historical DeSoto and Pension
Keystone Note 2 Adjustmen Subtotal
ts
<S> <C> <C> <C> <C>
Revenues and other income $331,764 (a) $11,610 $343,374
331,764 11,610 343,374
Costs and expenses:
Cost of goods sold 297,149 (a) 10,372
(c) (119)
(d) 740
(g) (2,495) 305,647
Selling, general and
administrative 26,634 (a) 4,086
(b) (1,286)
(c) (64)
(d) 82
(g) (276) 29,176
Non recurring expense, net - (a) 444 444
Retirement security program - (a) (5,184)
(d) 2,413
(g) 2,771 -
Interest 3,741 (a) 436
(e) 303 4,480
327,524 12,223 339,747
Income (loss) before income taxes 4,240 (613) 3,627
Provision (benefit) for income
taxes 1,656 (a) 575
(g) (1,309) 922
Net income (loss) 2,584 121 2,705
Dividends on preferred stock 70 (a) 399 469
Net income (loss) available for
common shares
$ 2,514 $ (278)$2,236
Net income (loss) per common and
common equivalent share $ .38
Weighted average common and common
equivalent shares outstanding 6,560
</TABLE>
KEYSTONE CONSOLIDATED INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS (continued)
Year Ended December 31, 1996
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma Adjustments
Bond Offering EWP Pro Forma
Note 2Adjustmen Subtotal Note 2 AdjustmentsConsolidated
ts
<S> <C> <C> <C> <C> <C> <C>
Revenues and other income $ - $343,374 (j) $24,682
(k) (10,621)
(l) (225) $357,210
- 343,374 13,836 357,210
Costs and expenses:
Cost of goods sold
- 305,647 (j) 20,338
(k) (10,621)
(m) 289 315,653
Selling, general and
administrative
- 29,176 (j) 1,718
(m) 9
(n) 133
(o) 350 31,386
Non recurring expense, net - 444 - 444
Retirement security program
- - - -
Interest
(h) 5,972 10,45 (j) 713 11,165
2
5,972 345,719 12,929 358,648
Income (loss) before income
taxes (5,972) (2,345) 907 (1,438)
Provision (benefit) for
income taxes
(i) (2,329) (1,407) (j) 794
(p) (48)
(q) (341) (1,002)
Net income (loss) (3,643) (938) 502 (436)
Dividends on preferred stock - 469 - 469
Net income (loss) available
for common shares
$(3,643) $(1,407) $ 502 $ (905)
Net income (loss) per common
and commonequivalent share $ (.10)
Weighted average common and
common equivalent
shares outstanding 9,223
</TABLE>
KEYSTONE CONSOLIDATED INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1996
Note 1 - Basis of presentation:
The Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the year ended December 31, 1996 has been prepared assuming (i) the September
1996 acquisition of DeSoto by Keystone and the simultaneous merger of the two
companies' defined benefit pension plans occurred on January 1, 1996, (ii) the
April 1996 sale of DeSoto's Union City, California business occurred on December
31, 1995, (iii) Keystone's August 1997 $100 million bond offering and
application of the net proceeds therefrom occurred on January 1, 1996, and (iv)
the December 23, 1997 acquisition of the 80% of EWP not previously owned by
Keystone, occurred on January 1, 1996.
Note 2 - Pro forma adjustments:
Adjustments relating to the merger of Keystone and DeSoto and the
simultaneous merger of the pension plans.
(a) Results of operations of DeSoto from January 1, 1996 through the date
of the acquisition as adjusted to reflect the sale of DeSoto's Union
City, California business as though such sale occurred on December 31,
1995.
(b) Amortization of negative goodwill related to the DeSoto acquisition by
the straight-line method over 20 years.
(c) Reduction in depreciation expense resulting from amortization of
purchase accounting basis difference over average remaining life of
two years.
(d) Increase in pension expense due to conforming Keystone and DeSoto
mortality assumptions and purchase accounting adjustments relating to
DeSoto's defined benefit pension plan.
(e) Amortization of deferred financing costs related to the DeSoto
acquisition by the straight-line method over 3 years, and impact on
interest expense based on changes in average outstanding debt levels
using weighted average interest rate of 9.3% as follows:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Increase (decrease) in average outstanding
debt levels related to:
Payment to DeSoto trade creditors $7,412
Payment of DeSoto preferred stock dividends 1,810
Reduced defined benefit pension (9,664)
contributions
Payment of financing and transaction costs 1,258
Other 590
$1,406
(f) Income tax expense of pro forma adjustments (c) through (e) at assumed
effective federal and state rate of 39%.
(g) Reclassification to allocate approximately 90% of adjusted pension
credit to cost of goods sold and approximately 10% to selling, general
and administrative expenses based on estimated employee/ retiree
counts.
Adjustments relating to the $100 million bond offering.
(h) Impact on interest expense based on changes in average outstanding
debt levels, amortization of deferred financing costs related to the
bond offering by the straight-line method over 10 years, and 1%
prepayment penalty on Keystone's term note as follows:
</TABLE>
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Increase (decrease) in interest expenses
related to:
Revolving line of credit $(2,867)
Term note (1,286)
Bonds, at 9 5/8% 9,625
Amortization of deferred financing costs 369
Prepayment penalty on Keystone's term note 131
$ 5,972
(i) Income tax expense of pro forma adjustment (h) at assumed federal
and state rate of 39%.
Adjustments relating to the acquisition of the 80% of EWP not
previously owned by Keystone.
(j) Results of operations of EWP for 1996.
(k) Eliminate intercompany sales and purchases between Keystone and
EWP.
(l) Eliminate Keystone's recorded equity in EWP's 1996 earnings.
(m) Increase in depreciation expense resulting from amortization of
purchase accounting basis difference over average remaining life
of 10 years.
(n) Amortization of goodwill related to the acquisition of EWP by the
straight-line method over 10 years.
(o) Amortization of non compete agreement with the former majority
shareholder of EWP over the two year period of the agreement by
the straight-line method.
(p) Adjust EWP income taxes to assumed federal and state rate of 39%.
(q) Income tax expense of pro forma adjustments (k), (l), (m) and (o)
at assumed federal and state rate of 39%.
KEYSTONE CONSOLIDATED INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended September 30, 1997
(In thousands, except per share amounts)
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Adjustments
Historical Bond Offering EWP Pro Forma
Keystone Note 2 AdjustmentsSubtotal Note 2Adjustments Consolidated
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues and other income $279,662 $ - $279,662 (c) $ 24,873
(d) (11,216)
(e) (307) $293,012
279,662 - 279,662 13,350 293,012
Costs and expenses:
Cost of goods sold 247,481 - 247,481 (c) 20,396
(d) (11,216)
(f) 215 256,876
Selling, general and
administrative 16,652 - 16,652 (c) 1,406
(f) 9
(g) 99
(h) 263 18,429
Overfunded defined benefit
pension credit (4,741) - (4,741) - (4,741)
Interest 5,119 (a) 2,538 7,657 (c) 516 8,173
264,511 2,538 267,049 11,688 278,737
Income before income taxes 15,151 (2,538) 12,613 1,662 14,275
Provision for income taxes 5,481 (b) (990) 4,491 (c) 933
(i) 63
(j) (309) 5,178
Net income 9,670 (1,548) 8,122 975 9,097
Dividends on preferred stock 210 - 210 - 210
Net income available for
common shares
$ 9,460 $(1,548) $ 7,912 $ 975 $ 8,887
Net income per common and
common equivalent share
$ 1.01 $ .95
Weighted average common and
common equivalent shares
outstanding 9,386 9,386
</TABLE>
KEYSTONE CONSOLIDATED INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended September 30, 1997
Note 1 - Basis of presentation:
The Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the nine months ended September 30, 1997 has been prepared assuming both
Keystone's August 1997 $100 million bond offering and application of the net
proceeds therefrom, and the December 23, 1997 acquisition of the 80% of EWP not
previously owned by Keystone occurred on January 1, 1996.
Note 2 - Pro form adjustments:
Adjustments relating to the $100 million bond offering
(a) Impact on interest expense based on changes in average outstanding
debt levels and amortization of deferred financing costs related to
the bond offering by the straight-line method over 10 years:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Increase (decrease) in interest expense
related to:
Revolving line of credit $(2,291)
Term note (1,209)
Bonds, at 9 5/8% 5,821
Amortization of deferred financing costs 217
$ 2,538
</TABLE>
(b) Income tax expense of pro forma adjustment (a) at assumed federal
and state rate of 39%.
Adjustments relating to the acquisition of the 80% of EWP not
previously owned by Keystone.
(c) Results of operations of EWP for the nine months ended September
30, 1997.
(d) Eliminate intercompany sales and purchases between Keystone and
EWP.
(e) Eliminate Keystone's recorded equity in EWP's earnings for the
nine months ended September 30, 1997.
(f) Increase in depreciation expense resulting from amortization of
purchase accounting basis difference over average remaining life
of 10 years.
(g) Amortization of goodwill related to the acquisition of EWP by the
straight-line method over 10 years.
(h) Amortization of non compete agreement with the former majority
shareholder of EWP over the two year period of the agreement by
the straight-line method.
(i) Adjust EWP income taxes to assumed federal and state rate of 39%.
(j) Income tax expense of pro forma adjustments (d), (e), (f) and (h)
at assumed federal and state rate of 39%.
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
KEYSTONE COMPLETES ACQUISITION OF ENGINEERED WIRE PRODUCTS
Profitable Manufacturer Will Increase Higher-Margin Fabricated Wire Products
Sales by 60,000 Tons Annually
DALLAS, December 29, 1997 - Keystone Consolidated Industries, Inc. (NYSE: KES),
an integrated wire producer, today announced that it had completed its
acquisition of Engineered Wire Products, Inc. (EWP). Previously, EWP operated
as a joint venture between Price Brothers company of Dayton, Ohio, and Keystone
with Keystone owning 20 percent of the joint venture. Price Brothers Company
received $11.2 million in cash for its 80 percent interest in the joint venture.
EWP is located in Upper Sandusky, Ohio, and is engaged in the manufacture of
fabricated wire products which are used primarily in the concrete pipe and road
construction business. During 1996, EWP earned $1.1 million on revenues of
$24.7 million and for the 11-month period ended November 30, 1997, earned $2.9
million on revenues of $28.7 million. EWP's total assets at November 30, 1997
amounted to $18.1 million.
The acquisition is part of Keystone's business strategy of increasing its
productive capacity of higher-margin fabricated wire products. Keystone expects
to supply EWP with the majority of EWP's annual carbon steel rod requirement
from Keystone's Peoria, Ill., rod mill. During the 11 months ended November 30,
1997, Keystone sold approximately 37,000 tons of rod to EWP. EWP's finished
output is expected to add 60,000 tons to Keystone's annual fabricated wire
product sales.
"This acquisition is an important step toward executing our strategy of moving
our product mix to higher-margin, value-added products through selected
acquisitions," stated Robert W. Singer, Keystone's president and chief executive
officer. "Through our joint venture experience, we know EWP and are confident
that it can immediately add value for our shareholders."
Keystone Consolidated Industries, Inc. is headquartered in Dallas, Texas. The
company is a leading manufacturer and distributor of fencing and wire products,
carbon steel rod, industrial wire, nails and construction products for the
agricultural, industrial, construction, original equipment markets and the
retail consumer. Through its DeSoto subsidiary, Keystone engages in the
production and packaging of household cleaning products. Keystone is traded on
the New York Stock Exchange under the symbol of KES.
The statements in this release relating to matters that are not historical facts
are forward-looking statements that involve risks and uncertainties, including,
but not limited to, future supply and demand for and cyclicality of the
company's products, future global economic conditions, changes in government
regulations, competitive products, customer and competitive strategies, the
impact of pricing and production decisions, environmental matters, the ultimate
resolution of pending litigation, successful implementation of the company's
capital improvements plan and any possible future litigation and other risks and
uncertainties detailed in the company's SEC filings.
EXHIBIT 2.1
SHARE PURCHASE AGREEMENT
THIS AGREEMENT, made and entered into this 23rd day of December, 1997, by
and between Price Brothers Company, a Michigan corporation whose principal
offices are located at 367 West Second Street, Dayton, Ohio ("Seller") and
Keystone Consolidated Industries, Inc. a Delaware corporation whose principal
place of business is located at Three Lincoln Centre, 5430 LBJ Freeway, Dallas,
Texas ("Purchaser").
The parties have reached agreement with respect to the sale by the Seller
to the Purchaser of all of the common shares of Engineered Wire Products, Inc.,
presently owned by the Seller. Engineered Wire Products, Inc. is an Ohio
corporation, whose principal place of business is located at State Road 199,
Upper Sandusky, Ohio ("EWP").
IT IS THEREFORE AGREED, AS FOLLOWS:
1. SALE OF COMMON SHARES.
Seller will sell and Purchaser will purchase, all eighty (80) of the common
shares of EWP owned by Seller. In consideration of the sale of the common
shares by Seller, Purchaser will pay to Seller, in cash at the Closing (defined
below) the sum of
Ten Million Five Hundred Thousand and 00/100 Dollars ($10,500,000.00) (the
"Purchase Price").
2. CLOSING.
a) The Closing of the transactions described herein will take place on
December 23, 1997, at 9:00AM, at the office of the Seller, 367 West
Second Street, Dayton, Ohio (the "Closing"). At the Closing,
Purchaser will pay to the Seller the Purchase Price and the payment
for the grant of the Restrictive Covenant set forth in paragraph ten
(10) hereof. Upon receipt of the Purchase Price and the payment for
the Restrictive Covenant by Seller, the Seller will deliver to the
Purchaser, free and clear from all encumbrances, a certificate for all
eighty (80) common shares of EWP held by Seller, duly endorsed in
blank or with duly executed stock powers attached, in proper form for
transfer to Purchaser. Payment of the Purchase Price will be effected
by Purchaser, by electronic funds transfer to the account of the
Seller, as follows:
First Chicago NBD Bank
Price Brothers General Account
Account No. 663773
ABA No. 072000326
b) The parties reserve the right to conduct the Closing of these
transactions by mail, express delivery service and facsimile, in lieu
of conducting the Closing at the offices of Seller.
3. REPRESENTATIONS AND WARRANTIES OF SELLER.
The Seller represents and warrants to Purchaser as follows:
a) That EWP is a corporation duly organized, validly existing and in good
standing under the laws of the State of Ohio.
b) That the total authorized capital stock of EWP consists of one hundred
(100) common shares, validly issued, in good standing, fully paid,
non-assessable and that the Seller owns eighty (80) of the common
shares.
c) That the Seller has the authority to convey good and indefeasible
title to the eighty (80) common shares of EWP owned by it, free and
clear of all covenants, restrictions, revisions, remainders, or
interests of others and all liens, pledges, charges or encumbrances of
any nature.
d) That the balance sheet and income statement attached to this Agreement
and incorporated herein by this reference as Schedule A, set forth the
earnings, assets and liabilities of EWP for the periods and as of the
date(s) indicated in accordance with generally accepted accounting
principals (the "Schedule A Balance Sheet").
e) To Seller's knowledge, all customer and trade notes and accounts
receivable owned by EWP on the date of the Schedule A Balance Sheet
are collectible less any reserves recorded against specific accounts,
which reserves are included in the Schedule A Balance Sheet.
f) To the Seller's knowledge, EWP has no material liabilities of any
nature, whether absolute, contingent or otherwise, except as set forth
in the Schedule A Balance Sheet, other than liabilities incurred in
the ordinary course of business after the date of the Schedule A
Balance Sheet. EWP is not in breach or default nor in arrears in
respect of the terms of any such liabilities and no waiver or
forbearance has been granted by any holder of any such liability with
respect to any such liability.
g) EWP has good and marketable title to all real and personal property
reflected in the Schedule A Balance Sheet, except as set forth on
Schedule B to this Agreement, attached hereto and incorporated herein.
h) From and after the date of the Schedule A Balance Sheet, Seller has
caused and will cause EWP to operate its business in the normal, usual
and ordinary course consistent with past procedure.
i) EWP has filed all Tax Returns required to be filed and has paid or
established adequate reserves for the payment of all Taxes.
For purposes of this Agreement:
(1) "Tax" or "Taxes" shall mean any and all federal, state,
local, foreign and other taxes, levies, fees, imposts, duties and
charges of whatever kind (including any interest, penalties or
additions to the tax imposed in connection therewith or with respect
thereto), including, without limitation, taxes imposed on, or measured
by, income, franchise, profits, or gross receipts, and also ad
valorem, value added, sales, use, service, real or personal property,
capital stock, license, payroll, withholding, employment, social
security, workers' compensation, unemployment compensation, utility,
severance, production, excise, stamp, occupation, premium, windfall
profits, transfer, and gain taxes, and customs duties.
(2) "Tax Return" shall mean returns, reports, information
statements, and other documentation (including any additional or
supporting material) filed or maintained, or required to be filed or
maintained, in connection with the calculation, determination,
assessment or collection of any Tax.
j) There is no suit, action, litigation, administrative arbitration or
other proceeding nor governmental investigation or inquiry of any
kind, pending or to the Seller's knowledge, threatened, regarding EWP
or its business or properties that might, severally or in the
aggregate, materially and adversely affect the financial condition,
business, assets or prospects of EWP.
k) To the Seller's knowledge, EWP has complied with and is not in default
in any material respect of any law, ordinance, requirement, regulation
or order applicable to its business and properties and EWP has not
received notice of any claimed default with respect to the foregoing.
l) To the Seller's knowledge, neither Seller nor EWP is a party to any
agreement or instrument nor subject to any charter or other corporate
restriction nor subject to any judgment, order, writ, injunction,
decree, rule or regulation, that materially and adversely affects the
business operations, prospects, properties, assets or financial
condition of EWP.
m) EWP does not, and will not as of the Closing have any deffered gain or
loss arising from deffered intercompany transactions, within the
meaning of United States Treasury Regulations Section 1.1502-13.
n) Neither the Seller, its other affiliates or subsidiaries, nor EWP is
currently under examination, or has been notified of examination, by
any federal, state, foreign or local tax authority. Nor has the
Seller agreed to extend any statute of limitations for any Tax period
ending on or before the Closing. EWP has received an inquiry from tax
authorities from the State of Ohio regarding personal property taxes.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
The Purchaser represents and warrants to Seller as follows:
a) That Purchaser is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
b) That Purchaser has all requisite corporate power to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby; the execution and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by the Board of Directors of the Purchaser; and this
Agreement is valid and legally binding on the Purchaser, enforceable
against it in accordance with its terms.
c) That the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not conflict with or
constitute a default under any charter or other corporate documents of
the Purchaser or any contract, agreement, instrument, commitment,
mortgage, lease, judgment, order or decree or any other restriction of
any kind or character to which the Purchaser is a party to or is
bound.
d) The Purchaser acknowledges that the Seller has (i) afforded to
employees and representatives of the Purchaser access to information
(financial and other) concerning EWP, (ii) made available to employees
and representatives of the Purchaser the officers, accountants and
employees of EWP for the purpose of discussing and responding to
questions concerning EWP, its business and prospects and (iii)
furnished to the Purchaser copies of all instruments, agreements,
financial statements or other documents pertaining to EWP, its
business and prospects requested by Purchaser.
5. CONDUCT OF BUSINESS PENDING CLOSING.
The Seller covenants from and after December 3, 1997, (the date on which
Purchaser commenced its due diligence investigation related to the transactions
contemplated by this Agreement) and until Closing:
a) EWP's business will be conducted only in the ordinary course.
b) No change will be made in EWP's Articles of Incorporation or
Regulations.
c) No change will be made in EWP's authorized or issued shares.
d) No dividend or other distribution or payment will be declared or made
in respect of EWP's shares.
e) No material increase will be made in the compensation payable or to
become payable by EWP to any officer, employee, or agent, nor will any
bonus payment or arrangement or other benefits to be paid by EWP to or
with any officer, employee, or agent without the Purchaser's prior
approval, except as may have been agreed to and approved by the Board
of Directors of EWP by unanimous vote.
f) No contract or commitment will be entered into by or on behalf of EWP
extending beyond December 31, 1997, except normal commitments for the
purchase of raw materials and supplies and for the manufacture and
sale by EWP of its product, in the ordinary course of its business, as
such business has been conducted since October 31, 1994, without the
Purchaser's prior written approval.
g) No change will be made affecting the personnel, compensation, or
banking arrangements of EWP without the Purchaser's prior written
approval.
h) All debts of EWP will be paid as they become due.
i) No material contract right of EWP will be waived.
j) Except as agreed to by the Purchaser, the Seller will cause EWP to use
its best efforts (without making any commitment on the Purchaser's
behalf) to preserve EWP's business organization intact; to keep
available to EWP the services of its present officers and employees;
and to preserve for EWP the goodwill of its suppliers, customers, and
others having business relations with EWP.
6. ACTIONS EFFECTIVE AT CLOSING.
a) At the Closing, the Seller will deliver to the Purchaser the written
resignations of Gayle B. Price, Jr., Director and Chairman, Donald N.
Lorenz, Director and Treasurer and Bradley W. Evers, Director and
Secretary, of EWP.
b) Effective on the date of the Closing, the Management Agreement between
the Seller and EWP dated October 31, 1994 is terminated.
c) At the Closing, the Seller will assign all of its right, title and
interest in and all of its rights and responsibilities under the Price
Brothers Pension Plan Number 13, for employees of EWP who are members
of Local Union Number 40, International Brotherhood of Teamsters,
Chauffeurs, Warehousemen and Helpers of America to EWP; and, the
Seller will assign all of its right, title and interest in and all of
its rights and responsibilities under the Trust established for Plan
Number 13 with Bank One Trust Co., N.A., Trustee, to DeSoto, Inc., a
Delaware corporation whose main office is located at Three Lincoln
Centre, 5430 LBJ Freeway, Dallas, Texas. DeSoto, Inc., is a wholly
owned subsidiary of the Purchaser.
7. CONDITIONS PRECEDENT FOR PURCHASER.
All obligations of the Purchaser under this Agreement are, at its option,
subject to the fulfillment, prior to or at the Closing, of each of the following
conditions:
a) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The Seller's
representations and warranties contained in this Agreement shall be
true at Closing as though such representations and warranties were
made at Closing.
b) PERFORMANCE. The Seller shall have performed and complied with all
agreements and conditions required by this Agreement to be performed
or complied with by it prior to or at Closing.
c) OPINION OF SELLER'S COUNSEL. The Seller will have delivered to
Purchaser an opinion of the Seller's counsel, Bradley W. Evers, of
Chernesky, Heyman & Kress P.L.L., dated the closing date, that the
corporate existence, good standing, and authorized and issued common
shares are as stated in subparagraphs (a) and (b) of paragraph 3 of
this Agreement, and that, except as may be specified by such counsel,
there is no litigation, proceeding, or governmental investigation
pending or, to such counsel's knowledge, threatened against, or
relating to, EWP, its properties or business.
8. INDEMNIFICATION.
a) The Seller will indemnify and hold harmless EWP and the Purchaser for
a period or two (2) years after the date of this Agreement, against
and in respect of any damage or deficiency resulting from any
misrepresentation,
breach of warranty, or nonfulfillment of any agreement on the part of
the Seller under this Agreement, or from any misrepresentation in or
omission from any certificate or other instrument furnished or to be
furnished to the Purchaser hereunder;
b) Seller agrees to indemnify the Purchaser from and against any
liability of EWP for (i) any Taxes of EWP with respect to any Tax year
or portion thereof ending on or before December 31, 1997 to the extent
such Taxes are not reflected in the reserve for Tax liability (rather
than any reserve for deferred Taxes established to reflect temporary
differences between the book and tax basis of EWP's assets and
liabilities) shown on the Schedule A Balance Sheet; (ii) for the
unpaid taxes of any person (other than EWP) under United States
Treasury Department Regulations Section 1.1502-6 (or similar provision
of state, local or foreign law) as a transferee or successor, by
contract, or otherwise. For the purposes of this Agreement "Person"
means an individual, a partnership, a corporation, an association, a
joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or
political subdivision thereof). The two (2) year limitation for
indemnity, set forth above, shall not apply to indemnity owed pursuant
to this paragraph 8b.
c) No obligation of indemnity shall be owed by Seller hereunder, unless
and until Purchaser's claims for indemnification, if any, aggregate to
Twenty Five Thousand and 00/100 Dollars ($25,000.00). Provided
however, that the Twenty Five Thousand and 00/100 Dollars ($25,000.00)
threshold shall not apply to Taxes and Seller shall completely
indemnify the Purchaser from any liability for Tax as described in
Section 8(b).
d) Purchaser will indemnify and hold harmless Seller at all times after
the date of this Agreement against and in respect of any damage or
deficiency resulting from the operations of EWP after the Closing.
e) If, at any time after the Closing, either party becomes aware of any
facts which would lead a reasonable person to believe that the other
party may be called upon to fulfill its obligations of indemnity as
set forth in this Agreement, the party becoming so aware, shall
immediately and in no event more than fifteen (15) days, after
becoming aware, notify the other party. Such notification shall be in
writing and shall reveal all facts known regarding the matter in
question. The party providing such notification shall allow the party
from whom indemnity may be sought the option to challenge whatever
claim, demand or factual circumstance exists and which may be the
source of an obligation to indemnify and to resolve such claim, demand
or factual circumstance, in whatever lawful fashion it might choose,
provided that the indemnifying party in its resolution of the claim,
demand or factual circumstance, continues to indemnify and hold
harmless the other party, and if applicable, EWP. Failure by either
party to provide timely notice of and the option to challenge any
claim, demand or factual circumstance, shall void the obligation to
indemnify and hold harmless set forth herein as to that claim, demand
or factual circumstance.
9. BROKERAGE.
The Seller represents and warrants that all negotiations relative to this
Agreement have been carried on by it directly with the Purchaser without the
intervention of any person, and the Seller shall indemnify the Purchaser and
hold it harmless against and in respect of any claim for brokerage or other
commissions relative to this Agreement, or to the transactions contemplated
hereby, and also in respect of all expenses of any character incurred by the
Seller in connection with this Agreement or such transactions. The Purchaser
represents and warrants that all negotiations relative to this Agreement have
been carried on by it directly with the Seller, without the intervention of any
person, and the Purchaser shall indemnify the Seller and hold it harmless
against and in respect of any claim for brokerage or other commissions relative
to this Agreement, or to the transactions contemplated hereby, and also in
respect of all expenses of any character incurred by the Purchaser in connection
with this Agreement or such transactions.
10. RESTRICTIVE COVENANT.
a) Seller agrees that, it will not, for a period of five (5) years after
the Closing, without the Purchaser's prior written consent, directly
or indirectly own, manage, operate, control, or participate in, or be
connected with any business in any manner, directly or indirectly in
competition with, or become interested in any competitor of, EWP as
its business is composed and conducted as of Closing, nor operate
under any name similar to that of EWP. The Seller acknowledges that
the remedy at law for any breach by Seller of the foregoing will be
inadequate, and that EWP and the Purchaser will be entitled to
injunctive relief.
b) In consideration for the foregoing restrictive covenant by the Seller,
the Purchaser agrees to pay to the Seller, in cash, at Closing, the
sum of
Seven Hundred Thousand and 00/100 Dollars ($700,000.00).
11. PURCHASE FOR INVESTMENT.
The Purchaser represents that its purchase hereunder is being made for its
own account for investment, and with no present intention of resale. All stock
certificates representing the shares purchased under this Agreement shall be
endorsed with the following restrictive legend:
The Shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, nor
under any state securities law, and said Shares may not be
offered or sold and no transfer will then be made by EWP or its
transferee except in compliance with the Securities Act of 1933
and the rules and regulations promulgated thereunder and any
applicable state securities
law.
12. POST CLOSING EVENTS.
a) Adjustments
The Seller agrees to adjust the Schedule "A" Balance Sheet and the
December 23, 1997 Balance Sheet of EWP in the event that an audit of
the book and records of EWP by Delloitte & Touche LLP of the 1997
operations of EWP concludes that such adjustment is necessary. The
Purchaser agrees that under no circumstances will such adjustment
decrease the amounts owed to Seller for the Purchase Price or
Purchaser's payment for the Restrictive Covenant of Seller set forth
at paragraph 10 hereof; nor the fact that such payments are due in
full at Closing; nor will such adjustment result in any payment by
Seller to Purchaser.
b) Cooperation of the Parties, Post Closing.
Each of the parties agrees that, upon the event of an audit,
investigation, presentation of claim, initiation or threat of civil or
criminal legal action or any similar such event and upon the request of
the other party, at any time after the Closing, it will, during regular
business hours, upon reasonable notice, provide access to any of its
documents, information or personnel and in general, will assist the party
making the request, all out of pocket costs for such cooperation being
borne by the party requesting such assistance.
13. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon, and inure to the benefit of, the
successors and assigns of the Seller.
14. CONSTRUCTION.
This Agreement is being delivered and is intended to be performed in the
State of Ohio and shall be construed and enforced in accordance with the laws
of that state.
15. NOTICES.
All notices, requests, demands, and other communications hereunder shall
be in writing, and shall be deemed to have been duly given if delivered as
follows:
TO SELLER: TO PURCHASER:
PRICE BROTHERS COMPANY KEYSTONE CONSOLIDATED INDUSTRIES, INC.
367 West Second Street Three Lincoln Centre
Post Office Box 825 5430 LBJ Freeway
Dayton, Ohio 45401 Dallas, Texas 75240
Attention: President
Attention: Ralph End, Vice President
and General Counsel
16. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute this Agreement.
PRICE BROTHERS COMPANY KEYSTONE CONSOLIDATED
INDUSTRIES, INC.
By: By:
Gayle B. Price, Jr. Robert W. Singer
Chairman and President President and CEO
SCHEDULE A
BALANCE SHEET
SCHEDULE B
EXCEPTIONS TO TITLE
LEASED ASSETS
The following items are used in the operation of Engineered Wire Products,
Inc.'s business and are leased:
Telephone System (1)
Forklifts (4)
Fax Machines (2)
Copiers (2)
Automobiles Operated by:
J. Christy
M. Downie
M. Heisler
T. Mize
G. Redfern
P. Ross
J. Thomas
Truck Operated by:
S. Lahr
