UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of the earliest event reported)
August 31, 2005
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 1-3919 37-0364250
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) No.)
5430 LBJ Freeway, Suite 1740, Dallas, TX 75240-2697
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(972) 458-0028
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
At 5:30 p.m., central daylight time, on August 31, 2005 (the "Effective
Time"), Keystone Consolidated Industries, Inc., a Delaware corporation
("Keystone"), together with five of its direct and indirect subsidiaries (FV
Steel and Wire Company, DeSoto Environmental Management, Inc., J.L. Prescott
Company, Sherman Wire Company (f/k/a/ DeSoto, Inc.) and Sherman Wire of
Caldwell, Inc.) (collectively, the "Debtors") emerged from Chapter 11 bankruptcy
proceedings. The Debtors had previously received confirmation of the Third
Amended Joint Reorganization Plan (the "Reorganization Plan") from the U.S.
Bankruptcy Court for the Eastern District of Wisconsin in Milwaukee (the
"Court") at a confirmation hearing held on August 10, 2005, as previously
reported on Keystone's Current Report on Form 8-K filed with the U.S. Securities
and Exchange Commission (the "SEC") on August 19, 2005 (Exchange Act File No.
1-3919).
Item 1.01 Entry into a Material Definitive Agreement.
A. $80 Million Secured Credit Facility
Effective August 31, 2005 and pursuant to the Reorganization Plan, Keystone
entered into a five-year, $80 million secured credit facility with Wachovia
Capital Finance Corporation (Central). Proceeds from this credit facility were
used to extinguish Keystone's debtor-in-possession credit facilities and to
provide working capital for Keystone. Subject to the appraised values of
Keystone's real estate and equipment, up to $25 million of this credit facility
will be available for Keystone to borrow under term notes. The remainder of the
credit facility will be available to Keystone under revolving loans, subject to
limitations based upon formula-determined amounts of trade receivables and
inventories.
Principal payments under the term note portion of the credit facility are
due in monthly installments based on either an 84- or 60-month amortization,
depending on whether the advances were made based on real estate or equipment
appraised values, with any unpaid balances due at maturity. Keystone may also be
required to, under certain conditions, make additional annual principal payments
on the term note portion of this credit facility based on Keystone's excess cash
flow, as defined in the agreement. Such additional payments are limited to $2
million annually or $5 million over the term of the credit facility. Under
certain conditions, Keystone has the right to borrow up to an additional $10
million under the term note portion of the credit facility subject to the
overall $25 million term note limit.
Borrowings under this credit facility bear interest ranging from the prime
rate to the prime rate plus one half of one percent based on Keystone's excess
availability as defined in the agreement. Keystone also has the option, under
certain conditions, to choose a Eurodollar Rate that varies from the Euro Dollar
Rate, as defined in the agreement, plus 2.0% to the Euro Dollar Rate plus 2.75%,
based on Keystone's excess availability and whether the borrowings are under the
term note or revolving loan portion of this facility.
This credit facility is collateralized by substantially all of the assets
of Keystone and its wholly owned subsidiaries, Engineered Wire Products, Inc.
("EWP"), Keystone Wire Products, Inc. and FV Steel and Wire Company.
This credit facility requires Keystone's daily net cash receipts be used to
reduce the revolving loan portion of the credit facility, which will result in
Keystone maintaining zero cash balances so long as there is a balance
outstanding under the revolving loan portion of the credit facility. This credit
facility also contains certain restrictive covenants relating to, among other
things, minimum levels of cash flow, excess availability levels and a fixed
charge coverage ratio, limitations on payment of dividends on Keystone's common
stock and other provisions customary in lending transactions of this type.
B. Note Payable to the Unsecured Creditors
Effective August 31, 2005 and pursuant to the Reorganization Plan, Keystone
has entered into a four-year, $4.8 million promissory note (the "New Secured
Note") to a trustee (the "Creditor Trustee") for the benefit of certain of
Keystone's pre-petition unsecured creditors. The note accrues interest at 12%
per annum until January 1, 2007. During this period, interest will be converted
to principal on a quarterly basis. In January 2007, interest will begin to
accrue at 8% per annum until maturity. This promissory note requires a principal
payment of approximately $1.5 million in January 2007, followed by quarterly
principal payments of approximately $392,000 until maturity.
The promissory note is collateralized by a subordinated security interest
in Keystone's equity interest in its wholly owned subsidiary, EWP. This
promissory note also contains restrictive covenants identical to Keystone's $80
million secured credit facility as well as certain other restrictive covenants,
including, but not limited to, restrictions upon Keystone's ability to sell EWP
and a sale of all or substantially all of the equity interests of Keystone.
C. Intercorporate Services Agreement
Effective August 31, 2005 and pursuant to the Reorganization Plan, Keystone
entered into an intercorporate services agreement ("ISA") with Contran
Corporation ("Contran"), Keystone's majority shareholder. Under the terms of the
ISA, employees of Contran will provide certain management, tax planning,
financial and administrative services to Keystone on a fee basis. Such charges
are based upon estimates of the time devoted by the employees of Contran to the
affairs of Keystone, and the compensation and associated expensed of such
persons. Because of the large number of companies affiliated with Contran,
Keystone believes it benefits from cost savings and economies of scale gained by
not having certain management, financial and administrative staffs duplicated at
each entity, thus allowing certain individuals to provide services to multiple
companies but only be compensated by one entity. The ISA agreement requires
Keystone to pay Contran quarterly payments of approximately $261,250 and expires
in December 2006.
Item 1.02 Termination of a Material Definitive Agreement.
A. Cancellation of Keystone's Unsecured 9 5/8% (face value $6.15 million) and
6% (face value $14.475 million) Notes
During August 1997, Keystone issued $100.0 million of 9 5/8% Notes that
matured in 2007. These notes were collateralized by a lien on substantially all
of the existing and future assets of Keystone and were issued pursuant to an
indenture that placed many restrictive covenants on Keystone.
During March 2002, Keystone completed an exchange offer (the "Exchange
Offer") with respect to the 9 5/8% Notes pursuant to which, among other things,
holders of $93.9 million principal amount of the 9 5/8% Notes exchanged their 9
5/8% Notes (along with accrued interest) for various forms of consideration,
including newly-issued debt and equity securities of Keystone, including, among
other things, $14.475 million of the 6% Notes, and such 9 5/8% Notes were
retired.
As a result of the Exchange Offer, only $6.15 million of 9 5/8% Notes
remained outstanding. In addition, the collateral previously securing the 9 5/8%
Notes was released, and the 9 5/8% Note indenture was amended to eliminate
substantially all covenants related to the 9 5/8% Notes.
The 6% Notes accrued simple interest at 6% per annum, of which one-fourth
was to be paid in cash on a semi-annual basis and three-fourths was to accrue
and be paid together with the principal in four installments, one-fourth in each
of March 2009, 2010, 2011 and May 2011. Keystone had the right to redeem the 6%
Notes, at its option, in whole or in part at any time with no prepayment
penalty. The 6% Notes were subordinated to substantially all existing and future
senior or secured indebtedness of Keystone that was not expressly subordinated
to the 6% Notes.
Holders of Keystone's unsecured 9 5/8% (face value $6.15 million) and 6%
(face value $14.475 million) Notes (collectively, the "Notes") had allowed
claims in Keystone's bankruptcy proceedings for both unpaid principal and
accrued interest at February 26, 2004 (the petition date). As such, these Note
holders will share pro-rata with Keystone's other unsecured creditors with
allowed claims in a distribution of $5.2 million in cash, a $4.8 million note
and 4.9 million shares of Keystone's common stock issued pursuant to the
Reorganization Plan. Effective August 31, 2005 and pursuant to the
Reorganization Plan, the Notes were cancelled.
B. Termination of Prior Intercorporate Services Agreement
The ISA terminated and replaced a prior Intercorporate Services Agreement
dated as of January 1, 2001 between Keystone and Contran, the terms of which are
incorporated herein by reference to Exhibit 10.1 to Keystone's Annual Report on
Form 10-K for the fiscal year ended December 31, 2001 that was filed with the
SEC on April 15, 2002 (Exchange Act File No. 1-3919). The prior Intercorporate
Services Agreement required Keystone to pay Contran quarterly payments of
approximately $251,250 commencing on January 1, 2001 and extending on a
quarter-to-quarter basis after December 31, 2001 until terminated by either
party upon notice thirty days in advance of the first day of each successive
quarter.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under
an Off-Balance Sheet Arrangement of a Registrant.
The description of the $80 Million Secured Credit Facility described in
Item 1.01 of this current report is incorporated herein by reference.
Item 3.02 Unregistered Sales of Equity Securities.
Effective August 31, 2005 and pursuant to the Reorganization Plan,
Keystone issued 5.1 million shares of its common stock, par value $0.01 per
share ("Common Stock"), to Contran and is obligated to issue 4.9 million shares
of Common Stock to its unsecured creditors in exchange for claims such creditors
held against Keystone. For a description of the claims exchanged by the Contran
and the unsecured creditors for the issuance of the shares of Common Stock, see
the Reorganization Plan, the terms of which are incorporated herein by reference
to Exhibit 2.1 of Keystone's Current Report on Form 8-K filed with the SEC on
August 19, 2005 (Exchange Act File No. 1-3919). Since the Court approved
Keystone's issuance of the shares of Common Stock pursuant to the Reorganization
Plan, the issuance is exempt from registration under Section 5 of the Securities
Act of 1933, as amended, pursuant to Section 1145 of the U.S. Bankruptcy Code
and subject, in the case of affiliates, to compliance with Section 1145(b)(1)
with respect to ordinary trading transactions.
Item 3.03 Material Modification to Rights of Security Holders.
Effective August 31, 2005 and pursuant to the Reorganization Plan, all
shares of Keystone's common and preferred stock outstanding prior to the
Effective Time were cancelled. New shares of Keystone's common stock, $0.01 par
value per share, having the rights set forth in Keystone's Amended and Restated
Certificate of Incorporation, a copy of which is filed as exhibit 3.1 to this
Current Report on Form 8-K, have been, and will be, issued as described in Item
3.02 above.
Item 5.02 Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers.
The following directors are no longer on Keystone's board of directors:
Dr. Thomas E. Barry
Keith R. Coogan William
Spier J. Walter Tucker, Jr.; and
Effective August 31, 2005 and pursuant to the Reorganization Plan, the
following directors are newly appointed to Keystone's board of directors:
Richard R. Burkhart
John R. Parker
Troy T. Taylor
Donald P. Zima
Pursuant to a Lock-Up Agreement dated March 21, 2005 by and among the
Debtors, Contran, the Official Committee of Unsecured Creditors appointed in the
Debtors' bankruptcy proceedings (the "OCUC"), the members of the OCUC, the
representatives in the bankruptcy proceedings of certain retirees and the
Independent Steel Workers Alliance, at the Effective Time the board of directors
for Keystone consisted of seven individuals. Of these seven individuals, two
directors were designated by Contran, two directors were designated by the OCUC,
and the remaining three directors a believed to qualify as independent directors
in accordance with the rules governing companies traded on the NASDAQ National
Market System (the "Independent Directors"). Two of the Independent Directors
were designated by Contran with the OCUC's consent and the third Independent
Director was designated by the OCUC with Contran's consent. So long as the New
Secured Note is outstanding, but no less than three years after August 31, 2005,
if a vacancy is created by any of the four directors appointed by Contran or
their successors, the vacancy shall be filled by the remaining directors
appointed by Contran or their successors. So long as the New Secured Note is
outstanding, but no less than three years after August 31, 2005, if a vacancy is
created by any of the three directors appointed by the OCUC or their successors,
the vacancy shall be filled by the remaining directors appointed by the OCUC or
their successors, with the consent of the Creditor Trustee, if the Creditor
Trustee is still in existence.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
Effective August 31, 2005 and pursuant to the Reorganization Plan, Keystone
amended and restated its certificate of incorporation and bylaws, the terms of
each of which are incorporated herein by reference to Exhibits 3.1 and 3.2,
respectively, to this current report.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
Item No. Exhibit Index
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2.1 Debtors' Third Amended Joint Reorganization Plan Pursuant to
Chapter 11 of the U.S. Bankruptcy Code (incorporated by reference to
Exhibit 2.1 of the Current Report on Form 8-K Keystone Consolidated
Industries, Inc. filed with the U.S. Securities and Exchange
Commission on August 19, 2005 (Exchange Act File No. 1-3919)).
3.1 Amended and Restated Certificate of Incorporation of Keystone
Consolidated Industries, Inc. filed with the Secretary of State of
the state of Delaware on August 31, 2005.
3.2 Amended and Restated Bylaws of Keystone Consolidated Industries,
Inc. (Amended and Restated as of August 31, 2005).
10.1 Intercorporate Services Agreement dated as of January 1, 2001
between Keystone Consolidated Industries, Inc. and Contran
Corporation (incorporated by reference to Exhibit 10.1 to the Annual
Report on Form 10-K for the fiscal year ended December 31, 2001 that
Keystone Consolidated Industries, Inc. filed with the U.S.
Securities and Exchange Commission on April 15, 2002 (Exchange Act
File No. 1-3919)).
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
(Registrant)
By: /s/ Bert E. Downing, Jr.
---------------------------------
Bert E. Downing, Jr.
Vice President, Chief Financial Officer,
Corporate Controller and Treasurer
Date: September 7, 2005
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------------------------------------------------------------
2.1 Debtors' Third Amended Joint Reorganization Plan Pursuant
to Chapter 11 of the U.S. Bankruptcy Code (incorporated by
reference to Exhibit 2.1 of the Current Report on Form 8-K
Keystone Consolidated Industries, Inc. filed with the U.S.
Securities and Exchange Commission on August 19, 2005 (Exchange
Act File No. 1-3919)).
3.1* Amended and Restated Certificate of Incorporation of Keystone
Consolidated Industries, Inc. filed with the Secretary of State
of the state of Delaware on August 31, 2005.
3.2* Amended and Restated Bylaws of Keystone Consolidated Industries,
Inc. (Amended and Restated as of August 31, 2005).
10.1 Intercorporate Services Agreement dated as of January 1, 2001
between Keystone Consolidated Industries, Inc. and Contran
Corporation (incorporated by reference to Exhibit 10.1 to the
Annual Report on Form 10-K for the fiscal year ended December 31,
2001 that Keystone Consolidated Industries, Inc. filed with the
U.S. Securities and Exchange Commission on April 15, 2002
(Exchange Act File No. 1-3919)).
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* Filed herewith.