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): June 30, 1999
STRUTHERS INDUSTRIES, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 0-2707 73-074655
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
c/o Chapter 11 Trustee,
Utica Plaza Building, 2100 S. Utica Ave. Suite 300, Tulsa, Oklahoma 74114
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(Address of principal executive offices)
Registrant's telephone number, including area code: (918) 747-6500
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Item 3. Bankruptcy or Receivership
As previously reported, on March 9, 1998, the Registrant filed a
voluntary petition in the United States Bankruptcy Court for the Northern
District of Oklahoma, Case No. 98-00882-R, seeking to reorganize under Chapter
11 of the United States Bankruptcy Code. On March 20, 1998, the Bankruptcy Court
ordered the appointment of an Examiner, P. David Newsome, Jr., to investigate
and report on matters concerning the Registrant's business and affairs. The
Bankruptcy Court commenced a hearing on March 31, 1998, which was completed on
April 2, 1998, to consider a creditor request seeking appointment of a trustee
to administer the Registrant's operations and reorganization. At the conclusion
of the hearing on April 2, 1998, the Court ordered the appointment of a Chapter
11 trustee and on April 3, 1998, approved the appointment of Neal Tomlins, Esq.,
as Chapter 11 Bankruptcy Trustee for the Registrant (the "Trustee").
Item 5. Other Events
A. The January 31, 1999 Motion
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Background
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On January 31, 1999, following extended discussions and
negotiations between the Trustee and Patrick J. Malloy, III, the
Chapter 7 Trustee appointed for WINCO Corp. ("WINCO," a corporation
that has claimed to be the majority shareholder of the Registrant), the
Trustee, the WINCO trustee, and WINCOM Corp. ("WINCOM," at the time a
wholly-owned subsidiary of the Registrant) jointly filed a "Motion to
(i) Approve Compromise and Settlement Between Struthers Industries,
Inc., WINCOM Corp. and WINCO Corp., (ii) Approve the Transfer of Stock
of WINCOM Corp., (iii) Substantively Consolidate WINCOM Corp. into
WINCO Corp., (iv) Approve the Release and Allowance of Claims, and (v)
For Other Relief" (the "January 31, 1999 Motion"). A copy of the
January 31, 1999 Motion is filed herewith as Exhibit 1.
Conditions to the January 31, 1999 Motion
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Pursuant to the January 31, 1999 Motion, the Trustee, WINCOM,
and the trustee for WINCO requested that the Bankruptcy Court approve
the settlement of Adversary Case No. 99-0007-R (the "Adversary
Proceeding") in which the equity security interests of the Registrant
held by WINCO are sought to be canceled on the following terms and
conditions:
1. The release of all claims against the Registrant's
bankruptcy estate by WINCO and WINCOM;
2. The transfer by the Registrant of all outstanding
common stock of WINCOM to WINCO and the substantive
consolidation of WINCOM into WINCO;
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3. The cancellation of all outstanding common stock or
other equity interests of the Registrant held or owned
by WINCO, and the cancellation of any conversion rights
that holders of WINCOM common or preferred stock may
have with respect to any equity interests in the
Registrant;
4. The allowance of the Registrant's unsecured claim in
each of the WINCOM and WINCO bankruptcy estates in the
amount of $3,000,000 (which claims relate solely to
intercompany debt claims asserted by the Registrant
against WINCO and WINCOM), and the agreement regarding
the classification of such claim in any plan of
reorganization proposed by the WINCO trustee and by the
future WINCOM trustee; and
5. The dismissal of the Adversary Proceeding with
prejudice.
Terms of the January 31, 1999 Motion
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Pursuant to the January 31, 1999 Motion and after Bankruptcy
Court approval, the following would occur:
A. The Registrant would transfer its WINCOM stock (as-is,
where-is, without warranty of title) to WINCO, and
would have allowed for its benefit an unsecured
$3,000,000 claim against each of the WINCOM and WINCO
bankruptcy estates.
B. In exchange for the transfer of the WINCOM stock, all
outstanding common stock or other equity interests in
the Registrant held by WINCO will be canceled and any
conversion rights held by WINCOM common stockholders or
preferred stockholders with respect to any equity
interests in the Registrant will also be canceled.
Further, the Registrant will be relieved from any and
all claims of WINCO or WINCOM against the Registrant's
bankruptcy estate.
C. After transfer of the WINCOM stock described above,
WINCOM and WINCO would be substantively consolidated
into WINCO, and the consolidation of the Registrant's
separate unsecured $3,000,000 claims into a single
$3,000,000 unsecured claim against the consolidated
bankruptcy estates.
D. The Trustee will resign from his positions as President
and Director of WINCOM (which positions he has held
since his appointment as Trustee of the Registrant),
and WINCOM shall release and hold harmless the Trustee
from his actions while serving in such capacity.
<PAGE 3>
The approval of the January 31, 1999 Motion by the Bankruptcy
Court will not affect certain specific claims identified below,
however.
I. Among the claims against the Registrant's and WINCO's
bankruptcy estates are claims related to debentures
("Debentures") issued by the Registrant pursuant to
Regulation S of the Securities Act of 1933, as amended.
Further, the Registrant (and the Debenture holders) may
assert claims against the WINCO bankruptcy estate
regarding the alleged wrongful receipt and/or
dissipation of the Debenture proceeds under various
theories (the "WINCO Debenture Claims"). Nothing in the
January 31, 1999 Motion is intended to relate to or
effect a release of (i) any claims held by the
Debenture holders against the Registrant's bankruptcy
estate, (ii) the WINCO Debenture Claims of the
Registrant and/or the Debenture holders, or (iii) any
claims held by the Registrant or the Debenture holders
(or any other party) against Nelson, Mullins, Riley &
Scarborough, L.L.P., and its employees, agents or
affiliates.
II. Among the claims against the WINCO bankruptcy estate
are those claims held by the Registrant which are
related to the 1996 transaction in which the Registrant
acquired all of the WINCOM common stock and WINCO
acquired a majority of Registrant's common stock (the
"WINCOM Transaction Claims"). If approved, the January
31, 1999 Motion would release the WINCO Debenture
Claims and the WINCOM Transaction Claims held by each
of the Debenture holders or the Registrant against the
WINCO bankruptcy estate, but the January 31, 1999
Motion would not prejudice the rights of any other
party who is or becomes liable for the payment of some
or all of the WINCO Debenture Claims or the WINCOM
Transaction Claims to assert such claims against the
WINCO bankruptcy estate.
III. The claims held by the Registrant and/or the Debenture
holders against any other party not expressly released
pursuant to the January 31, 1999 Motion, including but
not limited to Nelson, Mullins, Riley & Scarborough,
L.L.P., BDO Seidman, L.L.P., and Logan Throop &
Company, would remain unaffected by the January 31,
1999 Motion.
Approval of the January 31, 1999 Motion
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At a hearing on the January 31, 1999 Motion held on March 4,
1999, at 10:00 a.m., the Bankruptcy Court approved the January 31, 1999
Motion. Consequently, the Bankruptcy Court entered an order approving
the January 31, 1999 Motion on March 25, 1999. A copy of the Order is
filed herewith as Exhibit 2.
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B. The June 30, 1999 Letter of Intent
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Background
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On June 30, 1999, following extended discussions and
negotiations, the Registrant and Empire Technology Corporation
("Empire") each agreed to and accepted the terms of that certain letter
agreement dated May 28, 1999 (the "Letter Agreement"). In accordance
with the Letter Agreement, the Registrant and Empire jointly agreed to
prepare and submit a plan of reorganization for the Registrant pursuant
to which certain existing equity interests in Registrant would be
retained (subject to dilution) and new equity interests in the
reorganized Registrant ("Reorganized Registrant") would be issued to
Empire as dictated by the terms of the Letter Agreement outlined below.
A copy of the Letter Agreement is filed herewith as Exhibit 3.
Conditions to the Transactions described in the Letter Agreement
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Consummation of the transactions contemplated under the
Letter Agreement will be subject to a number of conditions precedent,
including, without limitation, the following:
1. Negotiation and execution of a definitive merger
agreement (the "Agreement") between Registrant and
Empire, including therein such representations,
warranties, covenants, and closing conditions as shall
be customary in a transaction of this type;
2. Completion of a financing to provide a $250,000 line of
credit for working capital and sufficient funds to pay
the cash requirements on the effective date of a Plan
of Reorganization (the "Plan"), including
administrative and priority claims;
3. Completion of a thorough due diligence investigation of
the business, financial conditions, liabilities, and
prospects of the Registrant, which shall be
satisfactory in all respects to Empire and its
representatives and which shall be materially completed
prior to finalizing the Agreement;
4. Entry of a final order by the Court confirming the Plan
and authorizing the transactions contemplated by the
Letter Agreement (the "Confirmation Order"), which Plan
and Confirmation Order shall be in form and substance
reasonably satisfactory to Empire;
5. Empire's capitalization of the Reorganized Registrant
on or before the effective date at a level sufficient
to meet the minimum standards required for listing on
The NASDAQ Stock Market;
6. Certain audit requirements imposed on the Registrant
through December 31, 1998 being acceptable to Empire,
in its sole discretion;
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7. Empire's claims against the Registrant's estate being
allowed in full, and not subject to review,
reconsideration, or modification by the Trustee or
creditors of the bankruptcy estate, nor subject to
setoff or recoupment for any reason without Empire's
consent; and
8. All claims, rights, and causes of action against Empire
being irrevocably waived and released.
Additionally, in order to issue common stock of the surviving
or successor corporation under the Plan, pursuant to the Code Section
1145 exemption, a statutory merger of Registrant with Empire must be
effected simultaneously with the closing, with the Reorganized
Registrant as the surviving corporation of such merger.
Terms of the Letter Agreement
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Pending confirmation of the Plan, Empire will commit to lend
up to $250,000 to the Registrant's bankruptcy estate under a line of
credit at a market interest rate (the "Financing"). The proceeds of the
Financing would be used to (a) pay the pre-petition debt of Chase
Mellon Shareholder Services, L.L.C. in order to allow the Registrant to
continue to utilize its services as transfer agent for the Registrant's
publicly traded securities, and (b) pay certain administrative expenses
of the Registrant's bankruptcy case (i.e., fees of the Examiner,
Chapter 11 Trustee, the United States Trustee and their professionals).
The loan would be secured by a first lien on all unencumbered assets of
the Registrant's bankruptcy estate, including pending lawsuit claims,
and other causes of action, in addition to a junior lien on all
presently encumbered assets. Further, Empire would be granted a limited
"superpriority" administrative expenses status, meaning that no other
administrative claim could be paid ahead of Empire's loan.
The Plan Term Sheet attached to the Letter Agreement and made
a part thereof sets forth the proposed treatment of the various classes
of the Registrant's creditors in the Plan. Empire anticipates that not
more than $250,000 in cash will have to be paid in connection with the
Plan to (a) pay administrative claims, (b) pay that portion of priority
claims required to be paid on the Plan effective date, (c) pay or
reinstate miscellaneous secured claims, and (d) pay miscellaneous
transaction costs and expenses. The Letter Agreement provides that the
Plan Term Sheet is subject to amendment and modification during the
course of the proceeding with the consent of Empire and the Trustee.
The Letter Agreement contemplates that the Plan will establish
a Creditor Trust that will hold all assets of the estate remaining as
of the effective date of the Plan (the "Effective Date"), including
avoidance actions of the Registrant, stock in the Liberal Hull Company,
and real estate located in Liberal, Kansas, subject to liens in favor
of Empire securing the Financing (unless the Financing has been paid or
otherwise satisfied pursuant to the Plan). Allowed unsecured claims,
including trade creditors, will receive a pro rata distribution from
the Creditor Trust after payment of all claims (including the
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Financing) secured by Creditor Trust assets. Holders of allowed
unsecured claims will be offered the right to assign their ratable
interest in the Creditor Trust to the Reorganized Debtor in exchange
for common stock of the Reorganized Registrant, at a price to be
determined by the Plan.
Pursuant to the Letter Agreement, it is intended that the
aggregate number of shares of common stock of the Reorganized
Registrant to be issued and outstanding on the Effective Date of the
Plan, after the transactions contemplated by the Agreement (the "Fully
Diluted Equity") shall be exempt from the registration requirements of
the federal Securities Act of 1933, as amended, pursuant to the Section
1145 exemption of the Code; provided, however, that the Fully Diluted
Equity shall be subject to dilution after the Effective Date of the
Plan. It is anticipated that the Fully Diluted Equity of the
Reorganized Registrant will be allocated approximately as follows:
1. Merger with Empire. Upon consummation of the
contemplated statutory merger, shareholders of Empire
will acquire common stock of the Reorganized
Registrant. Empire shareholders will own not less than
95% of the Fully Diluted Equity of the Reorganized
Registrant on account of such merger.
2. Existing Shareholders. Allowed Equity Interests (common
stock of the Registrant held as of the Petition Date,
other than that held by insiders, affiliates, and
others to whom the Trustee, Empire, or other interested
parties seek and obtain disallowance or subordination)
will be retained by the holder of record as of a record
date to be established by the Plan, subject to a
reverse split which, in the aggregate, reduces Allowed
Equity Interests to not more than 5% of the Fully
Diluted Equity of the Reorganized Registrant.
The Letter Agreement is not binding upon the parties and is
subject to change. No assurance can be given that the transactions
described in the Letter Agreement will be consummated or approved by
the Bankruptcy Court.
Approval of the Letter Agreement
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As of the date of the submission of this Form 8-K, the Plan
has not been submitted to the Bankruptcy Court. Consequently, the
Bankruptcy Court has yet to approve the Letter Agreement or the Plan.
Item 7. Financial Statements and Exhibits.
(a) A copy of the Motion to (i) Approve Compromise and
Settlement Between Struthers Industries, Inc., WINCOM
Corp. and WINCO Corp., (ii) Approve the Transfer of
Stock of WINCOM Corp., (iii) Substantively Consolidate
WINCOM Corp. into WINCO Corp., (iv) Approve the
<PAGE 6>
Release and Allowance of Claims, and (v) For Other
Relief, is filed herewith as Exhibit 1.
(b) A copy of the Order approving the Motion is filed
herewith as Exhibit 2.
(c) A copy of the Letter Agreement is filed herewith as
Exhibit 3.
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.
STRUTHERS INDUSTRIES, INC.
Date: July 21, 1999 By: /s/ Neal Tomlins, Esq.
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Neal Tomlins, Esq., Chapter 11 Trustee
