SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 8-K/A
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.
--------------------------
(Exact name of Registrant as specified in its charter)
Delaware 0-2707 73-074655
-------- ------ ---------
(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
<PAGE 1>
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
---------------------------
Background
----------
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. Additionally, a
copy of the First Amendment to Settlement Motion is filed herewith as
Exhibit 1/A.
Conditions to the January 31, 1999 Motion
-----------------------------------------
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;
<PAGE 2>
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
------------------------------------
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
---------------------------------------
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.
<PAGE 4>
B. The June 30, 1999 Letter of Intent
----------------------------------
Background
----------
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
----------------------------------------------------------------
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;
<PAGE 5>
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
-----------------------------
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
<PAGE 6>
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
--------------------------------
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 7>
Release and Allowance of Claims, and (v) For Other
Relief, is filed herewith as Exhibit 1.
(b) A copy of the First Amendment to Settlement Motion is
filed herewith as Exhibit 1/A.
(c) A copy of the Order approving the Motion is filed
herewith as Exhibit 2.
(d) 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 26, 1999 By: /s/ Neal Tomlins, Esq.
-------------------------------------------
Neal Tomlins, Esq., Chapter 11 Trustee
<PAGE EX1-1>
Exhibit 1
---------
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF OKLAHOMA
IN RE: )
)
STRUTHERS INDUSTRIES, INC., )
) Case No. 98-00882-R
Debtor. ) (Chapter 11)
)
Employer's Tax Identification )
Number: 73-0746455 )
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
Struthers Industries, Inc., by and through its duly appointed Chapter
11 Trustee ("Struthers"), WINCOM Corp., debtor and debtor in possession
("WINCOM") and WINCO Corp., by and through its duly appointed Chapter 7 Trustee
("WINCO") hereby move the Court to approve several matters involving these three
bankruptcy estates. This Motion seeks approval for the following:
(a) Settlement of Adversary Case No. 99-0007-R (the "Adversary
Proceeding");
(b) The release of all claims against the Struthers bankruptcy estate
by WINCOM and WINCO;
(c) The transfer by Struthers of all of the outstanding common stock
of WINCOM to WINCO and the substantive consolidation of WINCOM into WINCO;
<PAGE EX1-2>
(d) The cancellation of all outstanding common stock of Struthers held
or owned by WINCO or WINCOM;
(e) The allowance of an unsecured claim to Struthers in each of the
WINCOM and WINCO bankruptcy estates in the amount of $3,000,000 related
solely to intercompany debt claims asserted by Struthers against WINCO and
WINCOM;
(f) The dismissal of the Adversary Proceeding with prejudice;
(g) An agreement on the classification of the unsecured claim of
Struthers in any plan of reorganization proposed by Patrick J. Malloy, III
as the WINCOM and/or WINCO bankruptcy trustee;
(h) The release and indemnification of the Struthers Trustee (as
hereafter defined) for serving as the president of WINCOM;
(i) The cancellation of conversion rights (if any) that all holders of
WINCOM common or preferred stock may have for Struthers equity security
interests;
(j) The disallowance of certain claims and the declarative relief
described in paragraph 20 below; and
(k) Consummation of the transactions described above.
In support of this Motion, Struthers, WINCO and WINCOM present to the Court
the following:
1. On March 9, 1998, the management of Struthers commenced a voluntary
Chapter 11 bankruptcy case in the United States Bankruptcy Court for the
Northern District of Oklahoma in Tulsa, Oklahoma. At the conclusion of a
multi-day hearing on April 2, 1998, the Bankruptcy Court determined that a
Chapter 11 trustee should be appointed for Struthers. On April 3, 1998, the
Bankruptcy Court appointed Neal Tomlins, Esq. as the Chapter 11 trustee for
Struthers (hereafter, the "Struthers Trustee").
<PAGE EX1-3>
2. On March 30, 1998, the management of WINCO commenced a voluntary Chapter
11 bankruptcy case in the United States Bankruptcy Court for the Central
District of California. Thereafter, the Bankruptcy Court determined that venue
of the WINCO bankruptcy case was proper in the United States Bankruptcy Court
for the Northern District of Oklahoma in Tulsa, Oklahoma and the case was
transferred to Tulsa, Oklahoma. Thereafter, on May 21, 1998, the Court entered
an Order converting the WINCO bankruptcy case to one under Chapter 7 of the
Bankruptcy Code. Patrick J. Malloy, III was appointed as the Chapter 7 trustee
for WINCO (hereafter, the "WINCO Trustee").
3. On May 28, 1998, the Struthers Trustee commenced a voluntary Chapter 11
bankruptcy case for its wholly-owned subsidiary, WINCOM. Since the commencement
of the WINCOM bankruptcy case, the Struthers Trustee has managed the affairs of
WINCOM.
4. WINCO may claim to be the majority shareholder of Struthers. On January
12, 1999, the Adversary Proceeding was commenced against WINCO. In the Adversary
Proceeding, the equity security interests of WINCO are sought to be subordinated
to the equity interests of all other Struthers shareholders.
5. The Struthers Trustee, WINCOM and the WINCO Trustee desire to settle the
Adversary Proceeding and to resolve several disputes between the various
bankruptcy estates. The Struthers Trustee, WINCOM and the WINCO Trustee believe
that the approval of this Motion by the Bankruptcy Court will facilitate the
filing of plans of reorganization for the Struthers, WINCOM and WINCO estates.
The settlement is described in the paragraphs hereafter.
6. Prior to September 1996, WINCOM was a wholly-owned subsidiary of WINCO.
In September 1996, a transaction was completed that resulted in WINCO becoming
the majority shareholder of Struthers and WINCOM becoming a wholly-owned
subsidiary of Struthers.
<PAGE EX1-4>
7. After due and careful consideration, the Struthers Trustee and the WINCO
Trustee have determined that it would be in the best interests of their
respective estates to, among other things described below, transfer the stock in
WINCOM to WINCO (as-is, where-is, with no warranty of title), to substantively
consolidate WINCOM into WINCO, to allow Struthers to be relieved from any claims
or equity security interests of WINCO or WINCOM against the Struthers bankruptcy
estate and to establish the amount of an allowed claim for Struthers in the
WINCOM and WINCO bankruptcy estates.
8. Among the claims against the Struthers and WINCO estates are those
related to debentures issued by Struthers pursuant to Regulation-S of the
Securities Act of 1933, as amended (hereafter, the "Debentures"). Debenture
holders assert claims against the Struthers estate regarding the Debentures.
Struthers and the Debenture holders may assert claims against the WINCO estate
regarding the Debentures arising from WINCO's alleged wrongful receipt and/or
dissipation of the Debenture proceeds, under various theories, including
(without limitation) conversion and breach of duty (collectively, the "WINCO
Debenture Claims"). The parties specifically agree that the releases and
settlements described herein do not relate to the claims of the Debenture
holders and/or Struthers against the WINCO estate related to WINCO Debenture
Claims, except to the limited extent set forth in paragraph 20(c) below. Without
limiting the generality of the foregoing, it is expressly declared by the
Debenture holders and the Struthers Trustee that it is not their intent to, and
this Motion shall not have the effect of, (i) releasing or satisfying in any
respect any claims held by the Debenture holders or the Struthers estate (or any
other party) against Nelson, Mullins, Riley & Scarborough, L.L.P., and its
employees, agents and affiliates, or (ii) releasing or satisfying in any respect
any claims held by the Debenture holders against the Struthers estate.
<PAGE EX1-5>
9. Among the claims against the WINCO estate are those held by the
Struthers estate related to the transaction pursuant to which Struthers acquired
100% of WINCOM's common stock, and WINCO acquired a majority of Struthers'
common stock (collectively, the "WINCOM Transaction Claims"). The parties
specifically agree that the releases and settlement described herein do not
relate to the WINCOM Transaction Claims held by Struthers, except to the limited
extent set forth in paragraph 20(c) below. Without limiting the generality of
the foregoing, it is expressly declared by the Struthers Trustee that it is not
his intent to, and this Motion shall not have the effect of, releasing or
satisfying in any respect claims held by the Struthers estate (or any other
party) against BDO Seidman, L.L.P. and/or Logan Throop & Co. (or their
respective employees, agents or affiliates) related in any fashion to WINCOM
Transaction Claims.
10. The Struthers Trustee believes that the Struthers estate may have
claims against the WINCOM and WINCO estates, exclusive of WINCO Debenture Claims
and WINCOM Transaction Claims, in excess of $3,000,000, based on intercompany
transfers. The Struthers Trustee and the WINCO Trustee believe that the
allowance of an unsecured claim to Struthers in the amount of $3,000,000 in each
of the WINCO and WINCOM bankruptcy estates (based upon the various intercompany
claims) would be reasonably close to the amount that would ultimately be allowed
to Struthers if the parties litigated the claims between the various entities.
In the event that the WINCOM and WINCO estates are substantively consolidated as
proposed herein, the Struthers estate would only have one claim in the amount of
$3,000,000. This $3,000,000 allowed claim would be treated pari passu with other
WINCOM and WINCO unsecured claims and would not be subject to subordination,
review, disallowance or other discrimination in any plan of reorganization or
liquidation. The Struthers Trustee will not object to separate classification of
the Struthers claim in any WINCOM or WINCO plan of reorganization
<PAGE EX1-6>
11. Upon approval of this Motion, control of WINCOM will pass from the
Struthers Trustee to either (i) (if the substantive consolidation requested
below is approved) the WINCO Trustee, or (ii) (if the substantive consolidation
requested below is not approved) the WINCO Trustee, in his capacity as party
responsible for discharging the duties of WINCOM, as debtor in possession.
Further, the Struthers estate, on one hand, and the WINCOM and WINCO estates
(whether or not consolidated), on another hand, will be separately administered
by different bankruptcy trustees, all claims of the WINCOM and WINCO bankruptcy
estates (whether or not consolidated) against Struthers will be released and the
WINCOM and WINCO estates (whether or not consolidated) will disclaim any
interest they may have in Struthers' assets or stock.
12. The Struthers Trustee and the WINCO Trustee believe that, absent the
approval of this Motion, any plan of reorganization would be difficult, if not
impossible, to achieve without substantial and time consuming litigation. The
exact amount of intercompany claims is quite possibly a calculation that cannot
be made with any certainty. The claim to be allowed herein is an estimate based
upon the best information available to the parties.
13. The risk to the creditors and shareholders of Struthers by the approval
of this Motion is that the rights to certain broadcast licenses and real estate
of WINCOM shall prove to have substantial value that could have accrued to the
benefit of Struthers. If this Motion is approved, the creditors and shareholders
of Struthers will not share in this value except to the extent of its $3,000,000
unsecured claim. The Struthers Trustee has made a preliminary investigation of
the WINCOM assets and believes that the residual value of the WINCOM assets is
probably nominal and in any event worth less than the $3,000,000 unsecured
claim.
14. The risk to the creditors and shareholders of the WINCOM and WINCO
estates is that, upon approval of this Motion, they will no longer be creditors
or shareholders of a debtor affiliated with a publicly owned company with the
theoretical access to capital markets now held by Struthers and the assets of
<PAGE EX1-7>
Struthers could prove to have substantial value that could have accrued to the
benefit of the WINCO estate. Approval of this Motion will result in a
cancellation of conversion rights (if any) that a holder of WINCOM preferred
stock or WINCO common or preferred stock may have for Struthers equity security
interests, with no resulting claim arising from such cancellation. The Struthers
Trustee denies that any valid conversion rights exist as against Struthers or
its bankruptcy estate.
15. The WINCO Trustee believes that it is in the best interest of the WINCO
and WINCOM creditors that, if this Motion is approved, the two estates be
substantively consolidated into WINCO and that the consolidated estate continue
in a Chapter 7 proceeding with the WINCO Trustee continuing to serve as the
Chapter 7 Trustee for the consolidated estates. The basis for such request is
that WINCO and WINCOM were alter egos of one another. The evidence of an alter
ego relationship can be summarized as follows:
(i) the entities shared the same office space and employees;
(ii) the entities shared the same officers and directors;
(iii) the entities commingled their financial affairs;
(iv) with respect to daily management of their respective business affairs,
corporate distinctions were ignored;
(v) assets of both entities were transferred to the other. As a result,
equity mandates that these assets be administered in a single estate
for the benefit of the creditors of both estates; and
(vi) in large part, the creditors of one estate are creditors of the other.
Pursuant to In re: Tureaud, 45 B. R. 658 (Bankr. N.D. Okla. 1985), this Court
has broad general equitable powers pursuant to 11 U.S.C. ss.105 (a) to
substantively consolidate the WINCOM estate into the WINCO estate when the
assets and liabilities of the respective entities were dealt with as if they
were held and incurred by a single entity.
16. In connection with the settlement of the Adversary Proceeding, the
WINCO Trustee and WINCOM will convey, discharge, release, cancel and disclaim
any claim or interest in the Struthers bankruptcy estate, including all equity
security interests. Upon information and belief, prior to the commencement of
<PAGE EX1-8>
the Struthers bankruptcy case, WINCO owned approximately 54% of the outstanding
common stock of Struthers. Accordingly, upon approval of this Motion and
cancellation of the stock position of WINCO in Struthers, the holders of
approximately 46% of the outstanding common stock of Struthers will become the
holders of 100% of the common stock of Struthers.
17. The Struthers Trustee has served as president of WINCOM since the
commencement of the WINCOM bankruptcy estate. Upon approval of this Motion, the
Struthers Trustee will resign as president of WINCOM. All attorneys' fees, costs
and expenses incurred by the Struthers Trustee and his law firm, Tomlins &
Goins, shall constitute an administrative expense in the WINCOM estate upon
approval by this Court and shall be paid by WINCOM or the WINCOM/WINCO
consolidated estate. Additionally, WINCOM shall release and hold harmless the
Struthers Trustee from his acts and activities while serving as the Director and
President of WINCOM.
18. The Struthers Trustee and the WINCO Trustee have cooperated and acted
in concert in several matters since the commencement of their bankruptcy
estates. Such cooperation shall continue upon approval of this Motion. In
particular, the WINCO Trustee shall provide all requested assistance in
connection with any lawsuit brought by the Struthers Trustee against BDO
Seidman, L.L.P. including (without limitation) the WINCO Trustee joining as
party plaintiff in such lawsuit. All value of any recovery against BDO Seidman,
L.L.P. will inure to the benefit of the Struthers bankruptcy estate.
19. The Struthers Trustee and the WINCO Trustee have investigated their
respective estates for approximately nine months. After due consideration of the
matters involved herein and consultation with various creditor and shareholder
constituencies, the Struthers Trustee and the WINCO Trustee believe that this
Motion is in the best interests of their respective estates. Moreover, approval
<PAGE EX1-9>
of this Motion is a predicate to a plan of reorganization presently being
negotiated by the Struthers Trustee.
20. Upon approval of this Motion, the WINCOM and WINCO bankruptcy estates
(whether or not consolidated) shall be deemed to have released any and all
claims, rights, interests, liens or encumbrances they may have against the
Struthers bankruptcy estate, including all equity security interests. It is the
intent of the settlement proposed herein that, in addition to resolving certain
claims that the three referenced bankruptcy estates have against each other,
certain claims of shareholders against one or more of the entities likewise
would be resolved. By notice of the Motion to all registered shareholders of
Struthers, WINCOM and WINCO, the movants would advise these "interested parties"
that the movants are seeking an Order from this Court that both approves the
proposed settlement set forth in this Motion and:
(a) disallows any claims that Struthers shareholders and/or Debenture
holders have or may assert against WINCOM or WINCO solely as a result
of Struthers shareholders holding Struthers stock, or Debenture
holders holding Debentures;
(b) disallows any claims that WINCOM or WINCO shareholders (whether
holders of common or preferred shares) have or may assert against
Struthers; and
(c) declares that (i) WINCO Debenture Claims and WINCOM Transaction Claims
are not paid, released or satisfied in any respect by this settlement;
provided neither Debenture holders nor the Struthers Trustee will
assert WINCO Debenture Claims or WINCOM Transaction Claims against the
WINCO estate, but provided further, the preceding clause shall be
without prejudice to the rights of any other party who is or becomes
liable for payment of some or all of the WINCO Debenture Claims or
WINCOM Transaction Claims to assert such claims against the WINCO
estate, (ii) the claims held by the Struthers Trustee or the Debenture
<PAGE EX1-10>
holders (and all other parties) against any party not expressly
released herein (such non-released parties to include, without
limitation, Nelson, Mullins, Riley & Scarborough, L.L.P.; BDO Seidman,
L.L.P. and Logan Throop & Co. and their respective agents and
affiliates) are not paid, released or satisfied in any respect by
virtue of the compromise and settlement contemplated hereby; and (iii)
no claims held by the Debenture holders against the Struthers estate
are paid, released or satisfied in any respect by virtue of the
compromise and settlement contemplated hereby.
21. The Plaintiff in the Adversary Proceeding supports the settlement of
the Adversary Proceeding described herein and approval of the Motion. Upon
approval of this Motion and the consummation of the transactions described
herein, an appropriate Stipulation for Dismissal will be filed in the Adversary
Proceeding.
22. Notice of this Motion is being provided to all creditors, shareholders
and parties in interest of each of the Struthers, WINCO and WINCOM estates.
WHEREFORE, the Struthers Trustee, WINCO and the WINCO Trustee respectfully
request that the Court approve (a) the settlement of the Adversary Proceeding on
the terms set forth herein; (b) the release of any claims, rights, liens or
encumbrances held against the Struthers bankruptcy estate by WINCOM or WINCO;
(c) the transfer by Struthers of all of the outstanding common stock of WINCOM
to WINCO and the substantive consolidation of WINCOM into WINCO; (d) the
cancellation of all outstanding common stock of Struthers held or owned by WINCO
or WINCOM; (e) the allowance of an unsecured claim of Struthers in each of the
consolidated WINCOM and WINCO bankruptcy estates in the amount of $3,000,000;
(f) the dismissal of the Adversary Proceeding with prejudice; (g) the agreement
on the classification of the Struthers unsecured claim in any plan of
reorganization proposed by the WINCO Trustee; (h) the release and
<PAGE EX1-11>
indemnification of the Struthers Trustee for serving as the president of WINCOM;
(i) cancellation of conversion rights (if any) that any holders of WINCOM common
or preferred stock may have for Struthers equity security interests; (j) the
disallowance of certain claims and the declarative relief described in paragraph
20 hereof; and (k) the consummation the transactions described above.
Respectfully submitted,
/s/ Neal Tomlins
-----------------------------------
Neal Tomlins, OBA No. 10499
TOMLINS & GOINS
A Professional Corporation
Utica Plaza Building
2100 South Utica, Suite 300
Tulsa, Oklahoma 74114
(918) 747-6500
Chapter 11 Trustee for Struthers Industries, Inc.
/s/ Neal Tomlins
-----------------------------------
Neal Tomlins, OBA No. 10499
/s/ Ronald E. Goins
-----------------------------------
Ronald E. Goins, OBA No. 3430
TOMLINS & GOINS
A Professional Corporation
Utica Plaza Building
2100 South Utica Avenue, Suite 300
Tulsa, Oklahoma 74114
(918) 747-6500
Attorneys for Debtor, WINCOM Corp.
<PAGE EX1-12>
/s/ Patrick J. Malloy, III
-----------------------------------
Patrick J. Malloy, III, OBA No. 5647
Malloy & Malloy, Inc.
1924 S. Utica St., Suite 810
Tulsa, OK 74104-6515
(918) 747-3491
Chapter 7 Trustee for WINCO Corp.
<PAGE EX1/A-1>
Exhibit 1/A
-----------
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF OKLAHOMA
IN RE: )
)
STRUTHERS INDUSTRIES, INC., )
) Case No. 98-00882-R
Debtor. ) (Chapter 11)
)
Employer's Tax Identification )
Number: 73-0746455 )
FIRST AMENDMENT TO SETTLEMENT MOTION
------------------------------------
Struthers Industries, Inc., by and through its duly appointed Chapter 11
Trustee, WINCOM Corp., debtor and debtor in possession and WINCO Corp., by and
through its duly appointed Chapter 7 Trustee hereby amend 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
Release and Allowance of Claims, and (v) For Other Relief" (the "Motion") filed
herein on January 29,1999. The Motion is amended to restate paragraph 18 as
follows:
18. The Struthers Trustee and the WINCO Trustee have cooperated and
acted in concert in several matters since the commencement of their
bankruptcy estates. Such cooperation shall continue upon approval of this
Motion. In particular, the WINCO Trustee shall provide all requested
assistance in connection with any lawsuit brought by the Struthers Trustee
against BDO Seidman, L.L.P. and/or Logan Throop & Co. including (without
limitation) the WINCO Trustee joining as party plaintiff in such lawsuit.
All value of any recovery against BDO Seidman, L.L.P., and/or Logan Throop
& Co. will inure to the benefit of the Struthers bankruptcy estate.
<PAGE EX1/A-2>
Respectfully submitted,
/s/ Neal Tomlins
-----------------------------------
Neal Tomlins, OBA No. 10499
TOMLINS & GOINS
A Professional Corporation
Utica Plaza Building
2100 South Utica, Suite 300
Tulsa, Oklahoma 74114
(918) 747-6500
Chapter 11 Trustee for Struthers Industries, Inc.
/s/ Neal Tomlins
-----------------------------------
Neal Tomlins, OBA No. 10499
/s/ Ronald E. Goins
-----------------------------------
Ronald E. Goins, OBA No. 3430
TOMLINS & GOINS
A Professional Corporation
Utica Plaza Building
2100 South Utica Avenue, Suite 300
Tulsa, Oklahoma 74114
(918) 747-6500
Attorneys for Debtor, WINCOM Corp.
/s/ Patrick J. Malloy
-----------------------------------
Patrick J. Malloy, III, OBA No. 5647
Malloy & Malloy, Inc.
1924 S. Utica St., Suite 810
Tulsa, OK 74104-6515
(918) 747-3491
Chapter 7 Trustee for WINCO Corp.
<PAGE EX2-1>
Exhibit 2
---------
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF OKLAHOMA
IN RE: )
)
STRUTHERS INDUSTRIES, INC., )
) Case No. 98-00882-R
Debtor. ) (Chapter 11)
)
Employer's Tax Identification )
Number: 73-0746455 )
ORDER APPROVING 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
On March 4, 1999, this Court held a hearing on 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
Release and Allowance of Claims, and (v) For Other Relief" filed on January 29,
1999 as amended by that certain "First Amendment to Settlement Motion" filed on
February 4, 1999 (collectively, the "Motion"). The Motion was filed in each of
the bankruptcy cases of Struthers Industries, Inc. ("Struthers"), WINCOM Corp.
("WINCOM") and WINCO Corp. ("WINCO"). The terms "Struthers", "WINCOM" and
"WINCO" shall include such corporations and their respective bankruptcy estates
and bankruptcy trustees. At such hearing the Court heard the testimony of
witnesses, was presented with exhibits, and heard the arguments of Counsel. At
the conclusion of the hearing on March 4, 1999, the Court took the matter under
<PAGE EX2-2>
advisement. The Court conducted a telephonic hearing on March 5, 1999 at which
time the Court approved the Motion. Accordingly,
IT IS HEREBY ORDERED, ADJUDGED AND DECREED as follows:
1. Notice of the Motion and the hearing on the Motion was properly given to
all parties required by the Bankruptcy Code and Rules and notice is proper in
all respects. The Court has jurisdiction over this "core" proceeding pursuant to
28 U.S.C. ss.ss. 157(b) and 1334, and over the parties hereto, and is empowered
to enter a final order on the merits of the Motion.
2. The Motion (as amended at the hearing on March 4, 1999) is granted.
3. The Adversary Proceeding (as defined in the Motion) is hereby settled on
the following terms and conditions:
(a) WINCOM and WINCO shall have no claims in or against the Struthers
bankruptcy estate, and any such claims are hereby disallowed.
(b) Struthers shall transfer all of the outstanding common stock of
WINCOM to WINCO. Such transfer shall be as-is, where-is basis with no
warranty of title by Struthers.
(c) The bankruptcy estates of WINCOM and WINCO are hereby
substantively consolidated into one bankruptcy estate as the WINCO
bankruptcy case.
(d) All of the outstanding common stock of Struthers now or at any
time held or owned by WINCO or WINCOM is hereby cancelled and neither WINCO
nor WINCOM shall be deemed to own or hold any shares of Struthers common
stock.
(e) Struthers shall have an allowed unsecured claim in and against the
WINCO/WINCOM consolidated estate in the amount of $3,000,000 related solely
to inter-company debt claims asserted by Struthers against WINCO and WINCOM
<PAGE EX2-3>
(the "Struthers Claim"). The Struthers Claim shall be treated pari passu
with other unsecured claims in the consolidated WINCO bankruptcy case and
shall not be subject to subordination, review, disallowance or other
discrimination in any plan of reorganization or liquidation. The Struthers
Claim may be separately classified in any WINCO plan of reorganization.
(f) The Chapter 11 Trustee for Struthers is hereby released from any
claims arising from his service as president of WINCOM and shall be
indemnified by the consolidated WINCO bankruptcy estate for any claims
arising from his service as president of WINCOM.
(g) All conversion rights (if any) that holders of WINCOM or WINCO
common or preferred stock may have for Struthers equity security interests
are hereby cancelled and of no further force or effect. No claim shall
accrue in or against Struthers on account of such cancellation.
(h) The WINCOM and WINCO bankruptcy estates are deemed to have
released any and all claims, rights, interests, liens or encumbrances they
may have against Struthers or its bankruptcy estate including (without
limitation) all assets and equity security interests. Any claims that
WINCOM or WINCO shareholders (whether holders of common or preferred
shares) have or could assert against Struthers are hereby disallowed.
(i) WINCO Debenture Claims (as defined in the Motion) and WINCOM
Transaction Claims (as defined in the Motion) are not paid, released or
satisfied in any respect by approval of the Motion or this Order; provided,
that neither holders of Debentures (as defined in the Motion) nor the
<PAGE EX2-4>
Struthers Trustee will assert WINCO Debenture Claims or WINCOM Transaction
Claims against the consolidated WINCO estate, but provided further, the
preceding clause shall be without prejudice to the rights of any other
party who is or becomes liable for payment of some or all of the WINCO
Debenture Claims or WINCOM Transaction Claims to assert such claims against
the consolidated WINCO estate.
(j) All claims held by the Struthers Trustee or the holders of
Debentures (and all other parties) against any party not expressly released
herein (such non-released parties to include, without limitation, Nelson,
Mullins, Riley & Scarborough, L.L.P., BDO Seidman, L.L.P. and Logan Throop
& Co. and their respective agents and affiliates) are not paid, released or
satisfied in any respect by virtue of the compromise and settlement
described in the Motion and approved herein.
(k) All attorneys' fees, costs and expenses incurred by the Struthers
Trustee and his law firm, Tomlins & Goins, on behalf of the WINCOM estate
shall constitute an administrative expense in the WINCOM estate upon
approval by this Court and shall be paid by WINCOM or the WINCOM/WINCO
consolidated estate.
(l) Any claims that Struthers shareholders and/or Debenture holders
have or may assert against WINCOM or WINCO solely as a result of Struthers
shareholders holding Struthers stock, or Debenture holders holding
Debentures are hereby disallowed.
(m) No claims held by the holders of Debentures against the Struthers
bankruptcy estate are paid, released or satisfied in any respect by virtue
of the compromise and settlement contemplated hereby.
<PAGE EX2-5>
(n) Upon consummation of the transactions described in the Motion, the
parties shall submit a stipulation for dismissal of the Adversary
Proceeding, with prejudice.
(o) The WINCO Trustee shall provide all requested assistance in
connection with any lawsuit brought by the Struthers Trustee against BDO
Seidman, L.L.P. including (without limitation) the WINCO Trustee joining as
party plaintiff in such lawsuit. All value of any recovery against BDO
Seidman, L.L.P. will inure to the benefit of the Struthers bankruptcy
estate. The Struthers Claim shall be reduced in amount by $.25 for each
$1.00 recovered by Struthers from Nelson, Mullins, Riley & Scarborough,
L.L.P. In no event, however, shall the Struthers Claim be reduced to less
than $1,500,000.
4. Struthers, WINCOM and WINCO are hereby authorized to consummate the
settlement described herein and in the Motion.
Dated this 25th day of March, 1999.
/s/ DANA L. RASURE
-----------------------------------
DANA L. RASURE, CHIEF JUDGE
UNITED STATES BANKRUPTCY COURT
<PAGE EX2-6>
Approved For Entry:
/s/ Neal Tomlins
- -----------------------------------
Neal Tomlins, OBA No. 10499
TOMLINS & GOINS
A Professional Corporation
Utica Plaza Building
2100 South Utica, Suite 300
Tulsa, Oklahoma 74114
(918) 747-6500
Chapter 11 Trustee for Struthers Industries, Inc.
/s/ Neal Tomlins
- -----------------------------------
Neal Tomlins, OBA No. 10499
/s/ Ronald E. Goins
- -----------------------------------
Ronald E. Goins, OBA No. 3430
TOMLINS & GOINS
A Professional Corporation
Utica Plaza Building
2100 South Utica Avenue, Suite 300
Tulsa, Oklahoma 74114
(918) 747-6500
Attorneys for Debtor, WINCOM Corp.
/s/ Patrick J. Malloy, III
- -----------------------------------
Patrick J. Malloy, III, OBA No. 5647
Malloy & Malloy, Inc.
1924 S. Utica St., Suite 810
Tulsa, OK 74104-6515
(918) 747-3491
Chapter 7 Trustee for WINCO Corp.
<PAGE EX2-7>
/s/ Thomas A. Creekmore
- -----------------------------------
Thomas A. Creekmore, OBA No. 2011
Hall, Estill, Hardwick, Gable,
Golden & Nelson
320 South Boston, Suite 400
Tulsa, OK 74103
(918) 594-0400
Attorney for First Empire Corporation
<PAGE EX3-1>
Exhibit 3
---------
May 28, 1999
Neal Tomlins, Chapter 11 Trustee
Struthers Industries, Inc.
c/o Tomlins & Goins
2100 S. Utica Ave., Suite 300
Tulsa, OK 74114
Dear Mr. Tomlins:
This letter will serve to outline the intention of Empire Technology
Corporation ("Empire") to propose a plan of reorganization with you and acquire
common stock of Struthers Industries, Inc., debtor in bankruptcy case number
98-00882-R ("Debtor"). The proposed transaction is summarized as follows:
1. On March 9, 1998 Debtor filed a petition under Chapter 11 of the
Bankruptcy Code (the "Code") with the United States Bankruptcy Court for the
Northern District of Oklahoma (the "Court").
2. Debtor is currently operating with you as Chapter 11 Trustee.
3. It is the intention of Debtor and Empire to propose as co-proponents a
plan of reorganization (the "Plan") for Debtor pursuant to which certain
existing equity interests in Debtor will be retained (subject to dilution) and
new equity interests in reorganized Debtor ("Reorganized Debtor") will be issued
on the terms set forth herein to Empire. Pending confirmation of the Plan,
Empire would commit to lend up to $250,000 to Debtor'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 bring it back on line as transfer agent
for Debtor's publicly traded securities; and (b) pay certain administrative
expenses of Debtor's bankruptcy case (i.e., fees of the Examiner, Chapter 11
<PAGE EX3-2>
Trustee, the United States Trustee and their professionals). The loan would be
secured by a first lien on all unencumbered assets of Debtor's estate (including
pending lawsuits and other causes of action), and 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.
4. Consummation of the transactions contemplated hereby will be subject to
a number of conditions precedent, including (without limitation) the following:
(a) Negotiation and execution of a definitive merger agreement (the
"Agreement") between Debtor and Empire, including therein such
representations, warranties, covenants and closing conditions as shall be
customary in a transaction of this type;
(b) Completion of the 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 the Plan, including administrative and priority
claims;
(c) Completion of a thorough due diligence investigation of the
business, financial conditions, liabilities and prospects of the Debtor,
which shall be satisfactory in all respects to Empire and its
representatives and which shall be materially completed prior to finalizing
the Agreement;
(d) Entry of a final order by the Court confirming the Plan and
authorizing the transactions contemplated by the Agreement (the
"Confirmation Order"), which Plan and Confirmation Order shall be in form
and substance reasonably satisfactory to Empire;
(e) Empire's capitalization of the Reorganized Debtor on or before the
Effective Date at a level sufficient to meet the minimum standards required
for listing on the NASDAQ National Market System;
<PAGE EX3-3>
(f) Audit requirements imposed on the Debtor by the SEC through
December 31, 1998 being acceptable to Empire, in its sole discretion;
(g) Empire's claims against the Debtor's estate being allowed in full,
and not subject to review, reconsideration or modification by the Trustee
or creditors of the estate, nor subject to setoff or recoupment for any
reason without Empire's consent; and
(h) All claims, rights and causes of action against Empire being
irrevocably waived and released.
5. 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 Debtor with Empire will be effected simultaneously with the closing, with
Reorganized Debtor as the surviving corporation of such merger.
6. Attached hereto and made a part hereof is a term sheet (the "Plan Term
Sheet") setting forth the proposed treatment of the various classes of Debtor's
creditors in the Plan. Empire anticipates that not more than $250,000 in cash
will have to be paid out 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. Such Plan Term Sheet is subject to
amendment and modification during the course of the proceeding with the consent
of Empire and the Trustee.
7. The Plan shall establish a Creditor Trust that will hold all assets of
the estate remaining as of the effective date of the Plan ("Effective Date"),
including avoidance actions of Debtor, stock in 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).
8. Allowed unsecured claims, including trade creditors, will receive a pro
rata distribution from the Creditor Trust after payment of all claims (including
<PAGE EX3-4>
the Financing) secured by Creditor Trust assets. Holders of allowed unsecured
claims will be offered the right to assign their ratable interest in the
Creditors Trust to the Reorganized Debtor in exchange for common stock of the
Reorganized Debtor, at a price to be determined by the Plan.
9. The shares of Fully Diluted Equity (hereafter defined) of Reorganized
Debtor issued pursuant to the Plan 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.
10. It is anticipated that the Fully Diluted Equity of Reorganized Debtor
will be allocated approximately as follows:
(a) Merger with Empire. Upon consummation of the contemplated
statutory merger, shareholders of Empire will acquire common stock of
Debtor. Empire shareholders will own not less than 95% of the Fully Diluted
Equity of Reorganized Debtor on account of such merger.
(b) Existing shareholders. Allowed Equity Interests (common stock of
Debtor held as of the Petition Date, other than that held by insiders,
affiliates and others to which the Trustee, Empire or other interested
parties seek and obtain disallowance or subordination) will be retained by
holders 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.
11. Definition. As used herein, the term "Fully Diluted Equity" shall mean
the aggregate number of shares of common stock of Reorganized Debtor to be
issued and outstanding on the Effective Date of the Plan, after the transactions
contemplated by the Agreement; provided however that the Fully Diluted Equity
shall be subject to dilution after the Effective Date of the Plan.
12. Additional Agreements. In addition to the foregoing, it is also
expressly understood and agreed that:
<PAGE EX3-5>
(a) Management of the Reorganized Debtor. As of the Effective Date and
until the first annual meeting of the Reorganized Debtor thereafter, it is
contemplated that following business and affairs of Reorganized Debtor
shall be managed by its board of directors and officers, comprised as
follows:
BOARD MEMBERS:
--------------
Name Title
---- -----
William S. Woulfin Chairman of the Board
W. Dale Smith
Jack Canouse
Laird Ellis
Alan B. Thomas, Jr.
OFFICERS:
---------
Name Title
---- -----
William S. Woulfin Chief Executive Officer
W. Dale Smith President
Alan B. Thomas, Jr. Executive Vice President
Jack Canouse Secretary
Carol A. Dixon Assistant Secretary
From and after such first annual meeting, members of the board of
directors of Reorganized Debtor shall be elected by the shareholders, which
shall in turn elect or appoint members of management.
(b) Due Diligence. Empire shall use its best efforts to complete its
due diligence within 21 days after the date of this letter of intent. At
all times through the preparation of definitive agreements and the closing
of the transaction, Empire, its financing sources and their respective
<PAGE EX3-6>
representatives will be afforded the opportunity to conduct a full due
diligence investigation of the assets, business, financial condition and
prospects of the Debtor, and the financial, accounting and operational
records of the Debtor, the results of which due diligence and investigation
shall be satisfactory to Empire and its financing sources. Empire and its
financing sources shall be satisfied in all respects with the results of
their due diligence investigation as contemplated hereby.
(c) Operation of Business. At all times prior to the date of closing,
the business of the Debtor will be operated in the normal course, with no
material variations in historical payment or collection practices or
experience, with no incurrence of any material obligations outside of the
normal course of business, and with no material adverse change from the
results of operations reflected in the financial information previously
provided.
(d) Timing. Immediately upon execution and delivery of this letter of
intent by Debtor, Empire will instruct its legal counsel to prepare the
initial draft of the definitive Agreement, Plan and other ancillary
documents. Nothing in this paragraph is intended to delay commencement of
preparation of the definitive Agreement and Plan following execution and
delivery of this letter by Debtor.
(e) Expenses and Fees. Except as set forth below, each party will be
responsible for the payment of its own costs and expenses (including,
without limitation, professional fees of its attorneys, accountants and
other advisors) in connection with the transactions contemplated herein.
(f) Confidentiality; Publicity. Pending the execution and delivery of
a definitive Agreement, and thereafter as provided in such definitive
Agreement, the parties shall each, except as and to the extent otherwise
required by law or upon advice of counsel, maintain strict confidentiality
with respect to all confidential information delivered to such party
<PAGE EX3-7>
pursuant hereto, and with respect to the existence of negotiations with
respect to the transactions contemplated herein. In addition, neither party
shall issue any press release or make any other public announcement
regarding the transactions contemplated herein (except as otherwise
required by law) without the prior written approval of the other party in
each instance, which approval shall not be unreasonably withheld or
delayed.
(g) Construction. This letter represents only an expression of our
mutual intention at this time and shall not be construed or deemed to
represent an agreement or agreement to agree as to any transaction. It is
expressly understood and agreed that the legal rights and obligations of
the parties shall arise only pursuant to a definitive Agreement regarding
the transactions contemplated hereby and after approval by the Court.
Certain terms and conditions of the transactions contemplated by this
letter, including but not limited to the allocation of equity described in
this letter remain subject to negotiations with, and the approval of,
persons or entities who have neither signed this letter nor agreed in
principal to the understandings described in this letter and whose actions
are beyond the control or influence of the undersigned.
If the foregoing accurately reflects the substance of our understanding at
this time, please so indicate by signing a copy of this letter of intent in the
space provided below.
Very truly yours,
EMPIRE TECHNOLOGY CORPORATION
By: /s/ W. Dale Smith
---------------------------
W. Dale Smith, President
<PAGE EX3-8>
Agreed and Accepted this 30th
day of June, 1999
STRUTHERS INDUSTRIES, INC.
By: /s/
-------------------------------
Chapter 11 Trustee
<PAGE>
<TABLE>
TERM SHEET FOR REORGANIZATION PLAN
<CAPTION>
<S> <C>
A. LIABILITIES TO BE RESTRUCTURED
Classes of Claims Treatment
----------------- ---------
1.A. Administrative Claims (attorneys, accountants) Cash
1.B. Administrative Claims Paid in ordinary course of business
(Post-petition trade payables) on customary credit terms
2. Priority claims Cash/Deferral
3. Secured Claims Assumed by Creditor Trust
4. Unsecured claims Creditor Trust
5. Existing shareholder/ equity interests Reverse split
</TABLE>
