-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Sstk1z1uugJxGghuqJNlgTkIEjFmebmFmpcJVwMTaMGNsi+UpptxyQBEuH5dT0XG cVt74bBHCnCX4dGLDY8sew== 0000024240-98-000002.txt : 19980119 0000024240-98-000002.hdr.sgml : 19980119 ACCESSION NUMBER: 0000024240-98-000002 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19971230 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980116 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KEYSTONE CONSOLIDATED INDUSTRIES INC CENTRAL INDEX KEY: 0000055604 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 370364250 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-03919 FILM NUMBER: 98508606 BUSINESS ADDRESS: STREET 1: 5430 LBJ FWY STE 1740 STREET 2: THREE LINCOLN CENTRE CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 2144580028 MAIL ADDRESS: STREET 1: 5430 LBJ FWY STE 1740 STREET 2: THREE LINCOLN CENTRE CITY: DALLAS STATE: TX ZIP: 75240 FORMER COMPANY: FORMER CONFORMED NAME: KEYSTONE STEEL & WIRE CO DATE OF NAME CHANGE: 19710506 8-K 1 KEYSTONE CONSOLIDATED FORM 8-K 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)
December 31, September 30, 1995 1996 1997 (Unaudited) 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
ENGINEERED WIRE PRODUCTS, INC. STATEMENTS OF INCOME (In thousands, except share data)
Years ended Nine months ended December 31, September 30, 1995 1996 1996 1997 (Unaudited) 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
ENGINEERED WIRE PRODUCTS, INC. STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands, except share data)
Additional Pension Common Stock Paid-In Liability Retained Shares Amount Capital Adjustment Earnings 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
ENGINEERED WIRE PRODUCTS, INC. STATEMENTS OF CASH FLOWS (In thousands)
Years ended Nine months ended December 31, September 30, 1995 1996 1996 1997 (Unaudited) 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 $ - $ -
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:
December 31, September 30, 1995 1996 1997 (Unaudited) (In thousands) 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
D. NOTES PAYABLE AND LONG TERM DEBT
December 31, September 30, 1995 1996 1997 (Unaudited) (In thousands) 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
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:
Years ended December 31, 1995 1996 (In thousands) 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
The following is a reconciliation of the funded status of the plan: December 31, 1995 1996 (In thousands) 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)
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:
Years ended Nine months ended December 31, September 30, 1995 1996 1996 1997 (Unaudited) (In thousands) 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
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)
ASSETS Pro Forma Pro Forma Historical Keystone EWP Note 2 Adjustmen Consolida ts ted 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
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.
(In thousands) 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
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)
Pro Form Adjustments Historical DeSoto and Pension Keystone Note 2 Adjustmen Subtotal ts 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
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)
Pro Forma Adjustments Bond Offering EWP Pro Forma Note 2Adjustmen Subtotal Note 2 AdjustmentsConsolidated ts 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
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:
(In thousands) 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:
(In thousands) 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)
Pro Forma Adjustments Historical Bond Offering EWP Pro Forma Keystone Note 2 AdjustmentsSubtotal Note 2Adjustments Consolidated 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
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:
(In thousands) 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
(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%. EX-99.1 2 EXHIBIT 99.1 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. EX-2.1 3 SHARE PUCHASE AGREEMENT 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 -----END PRIVACY-ENHANCED MESSAGE-----