<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )(1)
VALLEY FORGE CORPORATION
---------------
(Name of Subject Company [Issuer])
KCI ACQUISITION CORP.
KEY COMPONENTS, LLC
---------------
(Bidders)
COMMON STOCK, $.50 PAR VALUE
------------------------
(Title of Class of Securities)
919640102
------------------------
(CUSIP Number of Class of Securities)
COPY TO:
<TABLE>
<S> <C>
Alan L. Rivera Michael J. Emont
Key Components, LLC Rubin Baum Levin Constant & Friedman
c/o Millbrook Capital Management, Inc. 30 Rockefeller Plaza
Carnegie Hall Tower 29(th) Floor
152 West 57th Street New York, New York 10112
New York, New York 10019
</TABLE>
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications on Behalf of Bidder)
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
TRANSACTION VALUE(2) AMOUNT OF FILING FEE(3)
<S> <C>
$78,638,989 $15,727.78
</TABLE>
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration number, or the form or schedule
and the date of its filing.
<TABLE>
<S> <C> <C> <C>
Amount previously paid: Not Applicable Filing Party: Not Applicable
Form or Registration No.: Not Applicable Date Filed: Not Applicable
(Continued on following page(s))
</TABLE>
Note: The remainder of this cover page is only to be completed if this Schedule
14D-1 (or amendment thereto) is being filed, inter alia, to satisfy the
reporting requirements of Section 13(d) of the Securities Exchange Act of 1934.
See General Instructions D, E and F to Schedule 14D-1.
(1) The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosure provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that
section of the Act but shall be subject to all other provisions of the Act
(however, see the Notes).
(2) For purposes of calculating filing fee only. This calculations assumes the
purchase of 4,138,889 shares of common stock, par value $.50 per share of
Valley Forge Corporation, at $19.00 net per share in cash.
(3) The amount of the filing fee, calculated in accordance with Rule 0-11(c)
of the Securities Exchange Act of 1934, as amended equals 1/50th of one
percent of the aggregate value of cash offered by KCI Acquisition Corp. for
such number of Shares.
<PAGE>
14D-1
CUSIP No. 919640102 Page 2 of 8
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
Key Components, LLC
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) /X/
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
BK, AF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,186,161 shares (1)
- --------------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES* / /
- --------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
52.8%
- --------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON*
OO
- --------------------------------------------------------------------------------
(1) The Reporting Person disclaims beneficial ownership of such shares and this
statement shall not be construed as an admission that the Reporting Person
is the beneficial owner of any securities covered by this statement.
*SEE INSTRUCTIONS BEFORE FILLING OUT!
2
<PAGE>
14D-1
CUSIP NO. 919640102 Page 3 of 8 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
KCI Acquisition Corp.
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) /X/
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
BK, AF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,186,161 shares (1)
- --------------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES* / /
- --------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
52.8%
- --------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
(1) The Reporting Person disclaims beneficial ownership of such shares and this
statement shall not be construed as an admission that the Reporting Person
is the beneficial owner of any securities covered by this statement.
*SEE INSTRUCTIONS BEFORE FILLING OUT!
3
<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Valley Forge Corporation, a Delaware
corporation (the "Company"), which has its principal executive offices at 100
Smith Ranch Road, Suite 326, San Rafael, California 94903.
(b) The class of equity securities to which this statement relates is common
stock, par value $.50 per share. The information set forth in the Introduction
of the Offer to Purchase is incorporated herein by reference.
(c) The information set forth in Section 6 ("Price Range of Shares;
Dividends") of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Statement is filed by KCI Acquisition Corp., a Delaware
corporation (the "Offeror"), and Key Components, LLC, a Delaware limited
liability Company (the "Parent"). The information set forth in the Introduction,
Section 9 ("Certain Information Concerning Key Components, Inc., the Parent and
the Offeror") and Schedule I ("Directors and Executive Officers of Key
Components, Inc., the Parent and the Offeror") of the Offer to Purchase is
incorporated herein by reference.
(e) and (f) During the last five years, none of the Parent or the Offeror
and, to the best knowledge of the Parent and the Offeror, none of the persons
listed in Schedule I of the Offer to Purchase has been (i) convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any
violations of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY
(a) The information set forth in Section 9 ("Certain Information Concerning
Key Components, Inc., the Parent and the Offeror") and Section 11 ("Background
of the Offer; Past Contacts, Transactions or Negotiations with the Company") of
the Offer to Purchase is incorporated herein by reference.
(b) The information set forth in the Introduction, Section 8 ("Certain
Information Concerning the Company"), Section 9 ("Certain Information Concerning
Key Components, Inc., the Parent and the Offeror"), Section 11 ("Background of
the Offer; Past Contacts, Transactions or Negotiations with the Company") and
Section 12 ("Purpose of the Offer and the Merger; Plans for the Company") of the
Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(a)-(c) The information set forth in Section 10 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the Introduction, Section 11
("Background of the Offer; Past Contacts, Transactions or Negotiations with the
Company") and Section 12 ("Purpose of the Offer and the Merger; Plans for the
Company") of the Offer to Purchase is incorporated herein by reference.
(f) and (g) The information set forth in Section 7 ("Certain Effects of the
Transaction on Market for Shares, AMEX Listing and Exchange Act Registration")
of the Offer to Purchase is incorporated herein by reference.
4
<PAGE>
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in the Introduction, Section 9
("Certain Information Concerning Key Components, Inc., the Parent and the
Offeror"), Section 11 ("Background of the Offer; Past Contacts, Transactions or
Negotiations with the Company") and Section 12 ("Purpose of the Offer and the
Merger; Plans for the Company") of the Offer to Purchase is incorporated herein
by reference. As a result of the six Stockholder Agreements, each dated as of
December 2, 1998 with the Offeror, the Parent and the Offeror may be deemed to
beneficially own an aggregate of 2,186,161 Shares (representing approximately
53% of the Shares issued and outstanding on December 2, 1998). However, each of
the Parent and the Offeror have disclaimed beneficial ownership to such shares,
and this statement shall not be construed as an admission that either the Parent
or the Offeror are the beneficial owners of any securities covered by this
statement.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE
SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction, Section 9 ("Certain
Information Concerning Key Components, Inc., the Parent and the Offeror"),
Section 11 ("Background of the Offer; Past Contacts, Transactions or
Negotiations with the Company") Section 12 ("Purpose of the Offer; and the
Merger Plans for the Company") and Section 13 ("Merger Agreement, the
Stockholder Agreements and the SG Cowen Commitment Letter") of the Offer to
Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The information set forth in the Introduction and Section 16 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS
The information set forth in Section 9 ("Certain Information Concerning Key
Components, Inc., the Parent and the Offeror") of the Offer to Purchase is
incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in the Introduction, Section 9 ("Certain
Information Concerning Key Components, Inc., the Parent and the Offeror"),
Section 11 ("Background of the Offer; Past Contacts, Transactions and
Negotiations with the Company") and Section 12 ("Purpose of the Offer and the
Merger; Plans for the Company") of the Offer to Purchase is incorporated herein
by reference.
(b) and (c) The information set forth in the Introduction and Section 15
("Certain Legal Matters") of the Offer to Purchase is incorporated herein by
reference.
(d) The information set forth in Section 7 ("Certain Effects of the
Transaction on Market for Shares, AMEX Listing and Exchange Act Registration")
of the Offer to Purchase is incorporated herein by reference.
(e) Not applicable.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, copies of which are attached hereto as exhibits (a)(1) and (a)(2),
respectively, is incorporated herein by reference.
5
<PAGE>
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a)(1) Form of Offer to Purchase dated December 9, 1998.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter from SG Cowen Securities Corporation to Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(a)(5) Form of Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees to Clients.
(a)(6) Form of Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9.
(a)(7) Summary Advertisement to be published in Investor's Business Daily on December 9,
1998.
(a)(8) Joint Press Release issued by the Company and Key Components, Inc. on December 3,
1998
(b)(1) Letter from SG Cowen Securities Corporation and Societe Generale to the Parent dated
December 2, 1998
(b)(2) Commitment Letter from SG Cowen Securities Corporation and Societe Generale to the
Parent dated December 2, 1998
(c)(1) Agreement and Plan of Merger, dated as of December 2, 1998, among the Parent, the
Offeror and the Company.
(c)(2) Form of Stockholder Agreement, dated as of December 2, 1998, between the Offeror and
Martin J. Bloom, Trustee of the Martin J. Bloom Family Trust, u/a/d/ 5/18/93
(c)(3) Form of Stockholder Agreement, dated as of December 2, 1998, between the Offeror and
Theodore P. Desloge, Jr., Trustee of the Theodore P. Desloge, Jr. Trust u/i/t dtd.
2/7/78 f/b/o Theodore P. Desloge, Jr.
(c)(4) Form of Stockholder Agreement, dated as of December 2, 1998, between the Offeror and
Theodore P. Desloge, Jr., Trustee of the Desloge Consulting Corporation Profit
Sharing Plan and Trust.
(c)(5) Form of Stockholder Agreement, dated as of December 2, 1998, between the Offeror and
David R. Brining.
(c)(6) Form of Stockholder Agreement, dated as of December 2, 1998, between the Offeror and
Bloom & Desloge Enterprises, Inc.
(c)(7) Form of Stockholder Agreement, dated as of December 2, 1998, between the Offeror and
Bloom Consulting Corporation Profit Sharing Plan and Trust, Martin J. Bloom, Trustee
(c)(8) Confidentiality Agreement, dated as of August 11, 1998, between CIBC Oppenheimer
Corp. and Millbrook Capital Management Inc.
(d) Not applicable.
(e) Not applicable.
(f) None.
</TABLE>
6
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
<TABLE>
<S> <C> <C>
Dated: December 9, 1998 KCI ACQUISITION CORP.
By: /s/ ALAN L. RIVERA
-----------------------------------------
Name: Alan L. Rivera
Title: Vice President
</TABLE>
7
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
<TABLE>
<S> <C> <C>
Dated: December 9, 1998 KEY COMPONENTS, LLC
By: /s/ ALAN L. RIVERA
-----------------------------------------
Name: Alan L. Rivera
Title: Vice President
</TABLE>
8
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
VALLEY FORGE CORPORATION
AT
$19.00 NET PER SHARE
BY
KCI ACQUISITION CORP.
A DIRECT WHOLLY-OWNED SUBSIDIARY OF
KEY COMPONENTS, LLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON JANUARY 15, 1999, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING VALIDLY
TENDERED BY THE EXPIRATION DATE (AS DEFINED HEREIN) AND NOT WITHDRAWN AT LEAST
90% OF THE OUTSTANDING SHARES OF COMMON STOCK, PAR VALUE $.50 PER SHARE
("SHARES"), OF VALLEY FORGE CORPORATION (THE "COMPANY"), (ii) THE SG COWEN
COMMITMENT LETTER (AS DEFINED HEREIN) NOT HAVING BEEN TERMINATED AND THE
CONDITIONS TO BORROWING THEREUNDER HAVING BEEN SATISFIED OR WAIVED AND (iii) THE
SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS. SEE SECTION 14-"CERTAIN
CONDITIONS TO THE PARENT'S AND OFFEROR'S OBLIGATIONS," WHICH SETS FORTH IN FULL
THE CONDITIONS OF THE OFFER.
THE OFFER IS BEING MADE IN CONNECTION WITH THE AGREEMENT AND PLAN OF MERGER,
DATED AS OF DECEMBER 2, 1998, BY AND AMONG KEY COMPONENTS, LLC (THE "PARENT"),
KCI ACQUISITION CORP. (THE "OFFEROR") AND THE COMPANY. THE BOARD OF DIRECTORS OF
THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER, THE MERGER AND THE MERGER
AGREEMENT, HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO,
AND IN THE BEST INTERESTS OF, THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT THE
COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE
OFFER.
IN THE EVENT THE MINIMUM CONDITION (AS DEFINED HEREIN) IS NOT SATISFIED, THE
PARENT, OFFEROR AND COMPANY ARE REQUIRED TO PROCEED WITH A LONG-FORM MERGER AT
THE SAME PRICE PER SHARE AS THE OFFER PRICE (AS DEFINED HEREIN). SEE SECTION
12-"PURPOSE OF THE OFFER AND MERGER; PLANS FOR THE COMPANY." PURSUANT TO
STOCKHOLDER AGREEMENTS WITH THE OFFEROR, SIX STOCKHOLDERS, WHO BENEFICIALLY OWN
APPROXIMATELY 53% OF THE OUTSTANDING SHARES, HAVE AGREED TO TENDER THEIR SHARES
INTO THE OFFER AND HAVE APPOINTED NOMINEES OF THE OFFEROR TO VOTE THEIR SHARES
IN CONNECTION WITH A LONG-FORM MERGER AT A SPECIAL MEETING OF THE STOCKHOLDERS
OF THE COMPANY, IF CALLED.
IMPORTANT
Any stockholder desiring to tender Shares should either (i) complete and
sign the Letter of Transmittal (or a facsimile thereof) in accordance with the
instructions contained in the Letter of Transmittal and deliver the Letter of
Transmittal with the Shares and all other required documents to the Depositary,
or follow the procedure for book-entry transfer set forth in Section
3-"Procedure for Tendering Shares" or (ii) request such stockholder's broker,
dealer, commercial bank, trust company or other nominee to effect the
transaction for the stockholder. Stockholders having Shares registered in the
name of a broker, dealer, commercial bank, trust company or other nominee must
contact such person if they desire to tender their Shares.
Any stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available, or who cannot comply
with the procedures for book-entry transfer on a timely basis, may tender such
Shares pursuant to the guaranteed delivery procedure set forth in Section
3-"Procedure for Tendering Shares."
Questions and requests for assistance or additional copies of this Offer to
Purchase, Letter of Transmittal or any other tender offer materials may be
directed to the Information Agent or the Dealer Manager at their respective
addresses and telephone numbers set forth on the back cover of this Offer to
Purchase.
The Dealer Manager for the Offer is:
[LOGO]
December 9, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C> <C>
INTRODUCTION................................................................................................... 3
1. Terms of the Offer.................................................................................. 5
2. Acceptance for Payment and Payment for Shares....................................................... 6
3. Procedure for Tendering Shares...................................................................... 7
4. Withdrawal Rights................................................................................... 10
5. Certain United States Federal Income Tax Considerations............................................. 11
6. Price Range of Shares; Dividends.................................................................... 12
7. Certain Effects of the Transaction on the Market for Shares, AMEX Listing and Exchange Act
Registration.................................................................................... 12
8. Certain Information Concerning the Company.......................................................... 13
9. Certain Information Concerning Key Components, Inc., the Parent and the Offeror..................... 16
10. Sources and Amount of Funds......................................................................... 18
11. Background of the Offer; Past Contacts, Transactions or Negotiations with the Company............... 19
12. Purpose of the Offer and the Merger; Plans for the Company.......................................... 20
13. The Merger Agreement, the Stockholder Agreements and the SG Cowen Commitment Letter................. 22
14. Certain Conditions to the Parent's and Offeror's Obligations........................................ 33
15. Certain Legal Matters............................................................................... 34
16. Fees and Expenses................................................................................... 36
17. Miscellaneous....................................................................................... 36
Schedule I--Directors and Executive Officers of Key Components, Inc., the Parent and the Offeror.... 38
</TABLE>
2
<PAGE>
To the Holders of Common Stock,
par value $.50 per share, of Valley Forge Corporation:
INTRODUCTION
KCI Acquisition Corp., a Delaware corporation (the "Offeror") and a direct
wholly-owned subsidiary of Key Components, LLC, a Delaware limited liability
company (the "Parent"), hereby offers to purchase all outstanding shares of
common stock, par value $.50 per share (the "Common Stock" or the "Shares"), of
Valley Forge Corporation, a Delaware corporation (the "Company"), at a purchase
price of $19.00 per Share net to the seller in cash (such price, or such other
price per Share as may be paid in the Offer (as defined below), referred to
herein as the "Offer Price"), without interest thereon, upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the related
Letter of Transmittal (which, together with any amendments or supplements
thereto, constitute the "Offer"). Tendering holders of record of Shares who
tender directly will not be obligated to pay brokerage fees or commissions or,
except as set forth in the Letter of Transmittal, transfer taxes on the purchase
of Shares by the Offeror pursuant to the Offer. Stockholders who hold their
Shares through a bank or broker should check with such institution as to whether
it charges any service fees. The Offeror will pay all charges and expenses of SG
Cowen Securities Corporation, which is acting as Dealer Manager for the Offer
(in such capacity, the "Dealer Manager"), SunTrust Bank, Atlanta (the
"Depositary") and D.F. King & Co., Inc. (the "Information Agent") in connection
with the Offer. See Section 16-"Fees and Expenses."
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER,
THE MERGER (AS DEFINED BELOW) AND THE MERGER AGREEMENT (AS DEFINED BELOW), HAS
UNANIMOUSLY DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE
BEST INTERESTS OF, THE COMPANY'S STOCKHOLDERS, AND RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES IN THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED BY THE EXPIRATION DATE (AS DEFINED BELOW) AND NOT WITHDRAWN AT LEAST
90% OF THE OUTSTANDING SHARES (THE "MINIMUM CONDITION") AND (II) THE SG COWEN
COMMITMENT LETTER NOT HAVING BEEN TERMINATED AND THE CONDITIONS TO BORROWING
THEREUNDER HAVING BEEN SATISFIED OR WAIVED. THE OFFER IS ALSO CONDITIONED UPON
THE SATISFACTION OF OTHER TERMS AND CONDITIONS. SEE SECTION 14-"CERTAIN
CONDITIONS TO THE PARENT'S AND OFFEROR'S OBLIGATIONS."
CIBC Oppenheimer Corp. ("CIBC"), the Company's financial advisor, has
delivered to the Company's Board of Directors its written opinion dated December
2, 1998 to the effect that, as of such date and based upon and subject to
certain matters stated in such opinion, the $19.00 per Share cash consideration
to be received in the Offer and the Merger by holders of Shares (other than the
Parent and its affiliates) was fair, from a financial point of view, to such
holders. A copy of such opinion is contained in the Company's Statement on
Schedule 14D-9 which is being distributed to the Company's stockholders.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of December 2, 1998 (the "Merger Agreement"), by and among the Parent, the
Offeror and the Company. The Merger Agreement provides that, among other things,
as soon as practicable after the purchase of Shares pursuant to the Offer and
the satisfaction of the other conditions set forth in the Merger Agreement and
in accordance with the relevant short-form merger provisions of the Delaware
General Corporation Law, as amended (the "Delaware GCL"), the Offeror will be
merged with and into the Company (the "Short-Form Merger"). See Section
12-"Purpose of the Offer and the Merger; Plans for the Company." Following
consummation of the Merger (as defined below), the Company will continue as the
surviving corporation (the "Surviving Corporation") and will be a direct
wholly-owned subsidiary of the Parent. At the effective time of the Merger (the
"Effective Time"), each Share (other than Shares held by the Parent, the
Offeror, or their respective affiliates, or in the treasury of the Company,
which shall be canceled, and Shares held by any stockholders who have properly
exercised appraisal rights under Delaware law), will be converted into
3
<PAGE>
the right to receive the Offer Price, without interest thereon, upon surrender
of the certificates formerly representing such Shares. See Section 5-"Certain
United States Federal Income Tax Considerations" for a description of certain
tax consequences of the Offer and the Merger. Societe Generale ("SG") has
committed, subject to conditions set forth therein, to provide a credit facility
of up to $90 million, to fund the obligations of the Parent and the Offeror,
pursuant to a letter, dated December 2, 1998, from SG Cowen Securities
Corporation ("SG Cowen") and SG to the Offeror (the "SG Cowen Commitment
Letter"). See Section 13-"The Merger Agreement, the Stockholder Agreements and
the SG Cowen Commitment Letter." In addition, Key Components, Inc., a New York
corporation of which the Parent is a wholly-owned subsidiary, has committed to
make capital contributions to the Parent of up to $5 million, in order to fund
the obligations of the Parent and Offeror. See Section 13-"The Merger Agreement,
the Stockholder Agreements and the SG Cowen Commitment Letter."
The Offeror has entered into six Stockholder Agreements, each dated as of
December 2, 1998 (the "Stockholder Agreements"), with the stockholders
identified therein (each, a "Stockholder" and collectively, the "Stockholders")
beneficially owning an aggregate of 2,186,161 Shares, representing approximately
53% of the outstanding Shares (the "Stockholders' Shares") pursuant to which the
Stockholders have, among other things, agreed to tender into the Offer all of
the Stockholders' Shares and not withdraw any of the Stockholders' Shares prior
to the expiration of the Offer or termination of the Merger Agreement. In
addition, each Stockholder has agreed to appoint the Offeror or any nominee of
the Offeror as such Stockholder's proxy to vote such Stockholder's Shares at a
special meeting of the stockholders of the Company on all matters in connection
with the consummation of the transactions contemplated by the Merger Agreement,
including a Long-Form Merger (as defined below). The tender by the Stockholders
of the Stockholders' Shares alone will not cause the Minimum Condition to be
satisfied. In the event the Minimum Condition is not satisfied, the parties are
required under the Merger Agreement to proceed with a Long-Form Merger at the
same price per Share as the Offer Price. The Delaware GCL and the Company's
Certificate of Incorporation, require that any merger other than a Short-Form
Merger be approved by the affirmative vote of the stockholders of the Company (a
"Long-Form Merger;" the term "Merger," as used herein, refers to the Short-Form
Merger or Long-Form Merger, as applicable). The Stockholders' Shares are
sufficient to approve a Long-Form Merger. A Long-Form Merger would require a
longer period of time to effect than a Short-Form Merger under the Delaware GCL.
See Section 12-"Purpose of the Offer and the Merger; Plans for the Company." The
Stockholder Agreements terminate upon the first to occur of (i) the closing of
the transactions contemplated by the Merger Agreement or (ii) the valid
termination of the Merger Agreement. See Section 13-"The Merger Agreement, the
Stockholder Agreements and the SG Cowen Commitment Letter."
The Company has advised the Offeror that as of December 2, 1998, there were
4,138,889 Shares issued and outstanding. The Company has further advised the
Offeror that as of December 2, 1998, the Company has (i) 353,750 shares of
capital stock reserved for future issuance pursuant to outstanding options to
purchase any shares of capital stock, (ii) 319,500 shares of capital stock
reserved for future issuance in respect of future grants of stock options, (iii)
7,519 shares of capital stock held in treasury. Pursuant to the Merger
Agreement, the Company will use reasonable efforts to cancel all outstanding
options in exchange for payment prior to the Effective Time of the excess of the
Offer Price over the exercise price of such options. As of the date hereof,
neither the Offeror nor the Parent beneficially owns any Shares. If the Offeror
acquires at least 3,725,001 Shares in the Offer (including the 2,186,161 Shares
subject to the Stockholder Agreements), the Minimum Condition will be satisfied.
In the event that the Offer is successful and the Offeror acquires 90% or more
of the Shares (as provided above), the Parent would be able to effectuate the
Merger by appropriate resolutions of the Board of Directors of the Offeror
without any meeting or action by the stockholders of the Company, which
resolutions have already been approved.
4
<PAGE>
The Offeror has been advised by the Company that, to the best of the
Company's knowledge, all of the Company's directors and executive officers
currently intend to tender all Shares owned by them pursuant to the Offer.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any extension or
amendment), the Offeror will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 4-"Withdrawal Rights." The term "Expiration Date" means
12:00 Midnight, New York City time, on Friday, January 15, 1999, unless and
until the Offeror shall have extended the period of time for which the Offer is
open, in which event the term "Expiration Date" shall mean the latest time and
date at which the Offer, as so extended by the Offeror, shall expire.
If the Offeror shall decide, in its sole discretion, to increase the
consideration offered in the Offer to holders of Shares and if, at the time that
notice of such increase is first published, sent or given to holders of Shares
in the manner specified below, the Offer is scheduled to expire at any time
earlier than the expiration of a period ending on the tenth business day from,
and including, the date that such notice is first so published, sent or given,
then the Offer will be extended until the expiration of such period of ten
business days. For purposes of the Offer, a "business day" means any day other
than a Saturday, Sunday or a federal holiday, and consists of the time period
from 12:01 a.m. through 12:00 Midnight, New York City time.
THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM CONDITION, THE SG
COWEN COMMITMENT LETTER NOT HAVING BEEN TERMINATED AND THE CONDITIONS TO
BORROWING THEREUNDER HAVING BEEN SATISFIED OR WAIVED. THE MERGER AGREEMENT AND
THE OFFER MAY BE TERMINATED BY THE OFFEROR AND THE PARENT IF CERTAIN EVENTS
OCCUR. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS. SEE SECTION
14-"CERTAIN CONDITIONS TO THE PARENT'S AND OFFEROR'S OBLIGATIONS." The Offeror
expressly reserves the right (but shall not be obligated), in accordance with
applicable rules and regulations of the United States Securities and Exchange
Commission (the "Commission"), and subject to the limitations set forth in the
Merger Agreement and described below, to waive any condition (other than the
Minimum Condition) to the Offer prior to the Expiration Date. If the Minimum
Condition or any of the other conditions set forth in Section 14-"Certain
Conditions to the Parent's and Offeror's Obligations" have not been satisfied,
by 12:00 Midnight, New York City time, then on January 15, 1999 (or any other
time then set as the Expiration Date), the Offeror may, subject to the terms of
the Merger Agreement as described below, elect to (i) extend the Offer and,
subject to applicable withdrawal rights, retain all tendered Shares until the
expiration of the Offer, as extended, (ii) subject to complying with applicable
rules and regulations of the Commission and the modification or waiver of the
terms of the SG Cowen Commitment Letter and the Merger Agreement, accept for
payment all Shares so tendered and not extend the Offer, or (iii) terminate the
Offer and not accept for payment any Shares and return all tendered Shares to
tendering stockholders.
Pursuant to the Merger Agreement, without the prior written consent of the
Company, the Offeror may not (i) decrease or change the form of the
consideration payable in the Offer, (ii) decrease the number of Shares sought
pursuant to the Offer, (iii) impose additional conditions to the Offer, (iv)
change the conditions to the Offer, except that Parent or Offeror in their sole
discretion may waive any of the conditions to the Offer other than the Minimum
Condition which may not be waived without the Company's prior written consent,
or (v) make any other change in the terms or conditions of the Offer that is
materially adverse to the holders of Shares. Subject to the terms of the Offer
and the Merger Agreement and the satisfaction or waiver of all the conditions of
the Offer set forth Section 14-"Certain Conditions to
5
<PAGE>
the Parent's and Offeror's Obligations" to the Merger Agreement as of the
Expiration Date, the Offeror will accept for payment and pay for all Shares
validly tendered and not withdrawn pursuant to the Offer promptly after the
Expiration Date, PROVIDED that, Offeror (i) shall extend the Offer if at the
scheduled expiration date of the Offer any of the conditions set forth in
Section 14-"Certain Conditions to the Parent's and Offeror's Obligations" shall
not be satisfied or waived, PROVIDED the extension shall be no longer than
reasonably necessary to satisfy such condition, (ii) shall extend the Offer for
any period required by any rule, regulation, interpretation, or position of the
Commission or the staff thereof applicable to the Offer, and (iii) may extend
the Offer up to the tenth business day beyond the latest expiration date that
would otherwise be permitted under clause (i) or (ii) of this sentence.
The Offeror's right to delay payment for any Shares or not to pay for any
Shares theretofore accepted for payment is subject to the applicable rules and
regulations of the Commission, including Rule 14e-l(c) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), relating to the Offeror's
obligation to pay for or return tendered Shares promptly after the termination
or withdrawal of the Offer. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE
PURCHASE PRICE FOR TENDERED SHARES, WHETHER OR NOT THE OFFEROR EXERCISES ITS
RIGHT TO EXTEND THE OFFER. There can be no assurance that the Offeror will
exercise its rights to extend the Offer.
Any extension of the period during which the Offer is open, delay in
acceptance for payment or termination or amendment of the Offer will be
followed, as promptly as practicable, by public announcement thereof, such
announcement in the case of an extension to be issued not later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date in accordance with the public announcement requirements of Rules
14d-4(c) and 14e-l(d) under the Exchange Act. Without limiting the obligation of
the Offeror under such rule or the manner in which the Offeror may choose to
make any public announcement, the Offeror currently intends to make
announcements by issuing a press release through Business Wire and making any
appropriate filing with the Commission.
If, subject to the terms of the Merger Agreement, the Offeror makes a
material change in the terms of the Offer or the information concerning the
Offer, or if it waives a material condition of the Offer, the Offeror will
disseminate additional tender offer materials and extend the Offer if and to the
extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act or
otherwise. The minimum period during which a tender offer must remain open
following material changes in the terms of the offer or the information
concerning the offer, other than a change in price or a change in percentage of
securities sought, will depend upon the facts and circumstances, including the
relative materiality of the terms or information changes. With respect to a
change in price or a change in percentage of securities sought, a minimum ten
business day period is generally required to allow for adequate dissemination to
stockholders and investor response.
The Company has provided the Offeror its list of stockholders and security
position listings for the purpose of disseminating the Offer to holders of
Shares. This Offer to Purchase, Letter of Transmittal and other related
materials will be mailed to record holders of Shares whose names appear on the
Company's stockholder list and will be furnished to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Offeror will accept for payment and will pay for all Shares
validly tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 4-"Withdrawal Rights" promptly after the later to occur
of (a) the Expiration Date and (b) subject to compliance with Rule 14e-l(c)
under the Exchange Act, the satisfaction
6
<PAGE>
or waiver of the conditions set forth in Section 14-"Certain Conditions to the
Parent's and Offeror's Obligations." SG has agreed to fund the obligations of
the Parent and the Offeror under the Merger Agreement in accordance with, and
subject to, the terms of the SG Cowen Commitment Letter. See Section 13-"The
Merger Agreement, the Stockholder Agreements and the SG Cowen Commitment
Letter." Subject to compliance with Rule 14e-l(c) under the Exchange Act, the
Offeror expressly reserves the right to delay payment for Shares in order to
comply in whole or in part with any applicable law. See Section 1-"Terms of the
Offer" and Section 15-"Certain Legal Matters." In all cases, payment for Shares
tendered and accepted for payment pursuant to the Offer will be made only after
timely receipt by the Depositary of (i) certificates for such Shares or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares into the Depositary's account at The Depository Trust Company (the
"Book-Entry Transfer Facility"), pursuant to the procedures set forth in Section
3-"Procedure for Tendering Shares," (ii) a properly completed and duly executed
Letter of Transmittal (or a manually signed facsimile thereof) with all required
signature guarantees or in the case of a book-entry transfer, an Agent's Message
(as defined below), and (iii) any other documents required by the Letter of
Transmittal.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Offeror may enforce such agreement against the participant.
For purposes of the Offer, the Offeror will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn as, if
and when the Offeror gives written notice to the Depositary of the Offeror's
acceptance of such Shares for payment. In all cases, payment for Shares
purchased pursuant to the Offer will be made by deposit of the purchase price
with the Depositary, which will act as agent for tendering stockholders for the
purpose of receiving payment from the Offeror and transmitting such payment to
tendering stockholders. If, for any reason whatsoever, acceptance for payment of
any Shares tendered pursuant to the Offer is delayed, or the Offeror is unable
to accept for payment Shares tendered pursuant to the Offer, then, without
prejudice to the Offeror's rights under Section 1-"Terms of the Offer," the
Depositary may, nevertheless, on behalf of the Offeror, retain tendered Shares,
and such Shares may not be withdrawn, except to the extent that the tendering
stockholders are entitled to withdrawal rights as described in Section
4-"Withdrawal Rights" below and as otherwise required by Rule 14e-l(c) under the
Exchange Act. Under no circumstances will interest be paid by the Offeror
because of any delay in making such payment.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted for
more Shares than are tendered, certificates for such unpurchased or untendered
Shares will be returned, without expense to the tendering stockholder (or, in
the case of Shares delivered by book-entry transfer to the Book-Entry Transfer
Facility, such Shares will be credited to an account maintained within the
Book-Entry Transfer Facility), as promptly as practicable after the expiration,
termination or withdrawal of the Offer.
If, prior to the Expiration Date, the Offeror increases the price being paid
for Shares accepted for payment pursuant to the Offer, such increased
consideration will be paid to all stockholders whose Shares are purchased
pursuant to the Offer, whether or not such Shares were tendered prior to such
increase in consideration.
3. PROCEDURE FOR TENDERING SHARES.
VALID TENDERS. For Shares to be validly tendered pursuant to the Offer, a
properly completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof), with any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message, and any other required
7
<PAGE>
documents, must be received by the Depositary at the address set forth on the
back cover of this Offer to Purchase prior to the Expiration Date, or the
tendering stockholder must comply with the guaranteed delivery procedure set
forth below. In addition, either (i) certificates representing such Shares must
be received by the Depositary along with the Letter of Transmittal or such
Shares must be tendered pursuant to the procedure for book-entry transfer set
forth below, and a Book-Entry Confirmation must be received by the Depositary,
in each case prior to the Expiration Date, or (ii) the guaranteed delivery
procedures set forth below must be complied with. No alternative, conditional or
contingent tenders will be accepted. Delivery of documents to the Book-Entry
Transfer Facility in accordance with the Book-Entry Transfer Facility's
procedures does not constitute delivery to the Depositary.
BOOK-ENTRY TRANSFER. The Depositary will make a request to establish an
account with respect to the Shares at the Book-Entry Transfer Facility for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in the Book-Entry
Transfer Facility's system may make book-entry delivery of Shares by causing the
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at the Book-Entry Transfer Facility in accordance with the Book-Entry
Transfer Facility procedures for transfer. Although delivery of Shares may be
effected through book-entry at the Book-Entry Transfer Facility prior to the
Expiration Date, (i) the Letter of Transmittal (or a manually signed facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message in connection with a book-entry transfer and
any other required documents, must, in any case, be transmitted to and received
by the Depositary at the address set forth on the back cover of this Offer to
Purchase or (ii) the guaranteed delivery procedures described below must be
complied with.
DELIVERY OF THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS TO
THE BOOK-ENTRY TRANSFER FACILITY WILL NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
SIGNATURE GUARANTEE. Signatures on the Letter of Transmittal must be
guaranteed by a member in good standing of the Securities Transfer Agents
Medallion Program, or by any other bank, broker, dealer, credit union, savings
association or other entity which is an "eligible guarantor institution," as
such term is defined in Rule 17Ad-15 under the Exchange Act (each of the
foregoing being referred to as an "Eligible Institution" and collectively, as
"Eligible Institutions"), unless the Shares tendered thereby are tendered (i) by
a registered holder of Shares who has not completed either the box labeled
"Special Delivery Instructions" or the box labeled "Special Payment
Instructions" on the Letter of Transmittal or (ii) for the account of any
Eligible Institution. If the certificates evidencing Shares are registered in
the name of a person or persons other than the signer of the Letter of
Transmittal, or if payment is to be made, or delivered to, or certificates for
unpurchased Shares are to be issued or returned to, a person other than the
registered owner or owners, then the tendered certificates must be endorsed or
accompanied by duly executed stock powers, in either case signed exactly as the
name or names of the registered owner or owners appear on the certificates, with
the signatures on the certificates or stock powers guaranteed by an Eligible
Institution as provided in the Letter of Transmittal. See Instructions 1 and 5
to the Letter of Transmittal.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or time will not permit all required documents to reach the Depositary
prior to the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if all of
the following guaranteed delivery procedures are duly complied with:
(i) the tender is made by or through an Eligible Institution;
8
<PAGE>
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by the Offeror, is
received by the Depositary, as provided below, prior to the Expiration Date;
and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation), together with a properly completed
and duly executed Letter of Transmittal (or a manually signed facsimile
thereof), and any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message, and any other documents required by
the Letter of Transmittal, are received by the Depositary within three
trading days after the date of such Notice of Guaranteed Delivery. The term
"trading day" is any day on which the American Stock Exchange is open for
business.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile transmission or mail to the Depositary and must include a guarantee by
an Eligible Institution in the form set forth in the Notice of Guaranteed
Delivery.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY,
IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for such Shares or the Book-Entry
Confirmation, (ii) a properly completed and duly executed Letter of Transmittal
(or a manually signed facsimile thereof), with all required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message, and
(iii) any other documents required by the Letter of Transmittal.
BACKUP FEDERAL INCOME TAX WITHHOLDING. TO PREVENT "BACKUP" WITHHOLDING WITH
RESPECT TO PAYMENT OF THE PURCHASE PRICE OF SHARES PURCHASED PURSUANT TO THE
OFFER OR PURSUANT TO THE MERGER, EACH STOCKHOLDER MUST EITHER PROVIDE THE
DEPOSITARY WITH SUCH STOCKHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER
("TIN") AND CERTIFY THAT SUCH STOCKHOLDER IS NOT SUBJECT TO BACKUP FEDERAL
INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED IN THE
LETTER OF TRANSMITTAL OR ESTABLISH SOME OTHER EXEMPTION TO BACKUP WITHHOLDING.
FOREIGN HOLDERS MUST SUBMIT A COMPLETED FORM W-8 TO AVOID BACKUP WITHHOLDING.
THIS FORM MAY BE OBTAINED FROM THE DEPOSITARY. SEE INSTRUCTIONS 8 AND 9 SET
FORTH IN THE LETTER OF TRANSMITTAL AND SECTION 5-"CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSIDERATIONS."
DETERMINATION OF VALIDITY. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares will be determined by the Offeror, in its sole
discretion, and whose determination will be final and binding on all parties.
The Offeror reserves the absolute right to reject any or all tenders of any
Shares that are determined by it not to be in proper form or the acceptance of
or payment for which may, in the opinion of the Offeror, be unlawful. The
Offeror also reserves the absolute right to waive any of the conditions of the
Offer, subject to the limitations set forth in the Merger Agreement, or any
defect or irregularity in the tender of any Shares. The Offeror's interpretation
of the terms and conditions of the Offer (including the Letter of Transmittal
and the Instructions to the Letter of Transmittal) will be final and binding on
all parties. No tender of Shares will be deemed to have been validly made until
all defects and irregularities have been cured or waived. None of the Offeror,
the Parent, the Dealer Manager, the Depositary, the Information Agent or any
other person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification.
APPOINTMENT AS PROXY. By executing the Letter of Transmittal as set forth
above (including through delivery of an Agent's Message), a tendering
stockholder irrevocably appoints designees of the Offeror as such stockholder's
attorneys-in-fact and proxies, each with full power of substitution, in the
manner set forth in the Letter of Transmittal, to the full extent of such
stockholder's rights with respect to the Shares
9
<PAGE>
tendered by such stockholder and accepted for payment by the Offeror (and any
and all other Shares or other securities issued or issuable in respect of such
Shares on or after December 2, 1998). All such powers of attorney and proxies
shall be considered coupled with an interest in the tendered Shares. This
appointment is effective when, and only to the extent that, the Offeror accepts
for payment the Shares deposited with the Depositary. Upon acceptance for
payment, all prior powers of attorney and proxies given by the stockholder with
respect to such Shares or other securities or rights will, without further
action, be revoked and no subsequent proxies may be given or written consent
executed (and, if given or executed, will not be deemed effective). The
designees of the Offeror will, with respect to the Shares and other securities
or rights, be empowered to exercise all voting and other rights of such
stockholder as they in their sole judgment deem proper in respect of any annual
or special meeting of the Company's stockholders, or any adjournment or
postponement thereof. The Offeror reserves the right to require that, in order
for Shares to be deemed validly tendered, immediately upon the Offeror's payment
for such Shares, the Offeror must be able to exercise full voting and other
rights with respect to such Shares and the other securities or rights issued or
issuable in respect of such Shares, including voting at any meeting of
stockholders (whether annual or special or whether or not adjourned) in respect
of such Shares.
A tender of Shares pursuant to any one of the procedures described above
will constitute the tendering stockholder's acceptance of the terms and
conditions of the Offer, as well as the tendering stockholder's representation
and warranty that (i) such stockholder has the full power and authority to
tender, sell, assign and transfer the tendered Shares (and any and all other
Shares or other securities issued or issuable in respect of such Shares on or
after December 2, 1998) and (ii) when the same are accepted for payment by the
Offeror, the Offeror will acquire good and unencumbered title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claims. The Offeror's acceptance for payment of Shares tendered
pursuant to the Offer will constitute a binding agreement between the tendering
stockholder and the Offeror upon the terms and subject to the conditions of the
Offer.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4-"Withdrawal Rights," tenders
of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant
to the Offer may be withdrawn at any time prior to the Expiration Date and,
unless theretofore accepted for payment pursuant to the Offer, may also be
withdrawn at any time after February 6, 1999. If purchase of or payment for
Shares is delayed for any reason or if the Offeror is unable to purchase or pay
for Shares for any reason, then, without prejudice to the Offeror's rights under
the Offer, tendered Shares may be retained by the Depositary on behalf of the
Offeror and may not be withdrawn except to the extent that tendering
stockholders are entitled to withdrawal rights as set forth in this Section
4-"Withdrawal Rights," subject to Rule 14e-1(c) under the Exchange Act, which
provides that no person who makes a tender offer shall fail to pay the
consideration offered or return the securities deposited by or on behalf of
security holders promptly after the termination or withdrawal of the Offer.
For a withdrawal of Shares tendered pursuant to the Offer to be effective, a
written, telegraphic, telex or facsimile transmission notice of withdrawal must
be timely received by the Depositary at the address set forth on the back cover
of this Offer to Purchase and must specify the name of the person who tendered
the Shares to be withdrawn, the number of Shares to be withdrawn and the name of
the registered holders, if different from the name of the person who tendered
such Shares. If certificates for Shares to be withdrawn have been delivered or
otherwise identified to the Depositary, then, prior to the release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Depositary and, unless such Shares have been tendered by an Eligible
Institution, the signatures on the notice of withdrawal must be guaranteed by an
Eligible Institution. If Shares have been tendered pursuant to the procedures
for book-entry transfer set forth in Section 3-"Procedure for Tendering Shares,"
any notice of withdrawal must also specify the name and number of the account at
the Book-Entry Transfer Facility to be credited with
10
<PAGE>
the withdrawn Shares and must otherwise comply with such Book-Entry Transfer
Facility's procedures. All questions as to the form and validity (including time
of receipt) of notices of withdrawal will be determined by the Offeror, in its
sole discretion, and whose determination will be final and binding on all
parties. None of the Offeror, the Parent, the Dealer Manager, the Depositary,
the Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
Any Shares properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be retendered at any subsequent time prior to the
Expiration Date by following any of the procedures described in Section
3-"Procedure for Tendering Shares."
5. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS.
The following is a summary of certain United States federal income tax
considerations of the Offer and the Merger to holders whose Shares are purchased
pursuant to the Offer or whose Shares are converted to cash in the Merger
(including pursuant to the exercise of appraisal rights). The discussion is for
general information only and does not purport to consider all aspects of United
States federal income taxation that may be relevant to holders of Shares. The
discussion is based on current provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), existing, proposed and temporary regulations
promulgated thereunder and administrative and judicial interpretations thereof,
all of which are subject to change. The discussion applies only to holders of
Shares in whose hands Shares are capital assets within the meaning of Section
1221 of the Code, and may not apply to Shares received pursuant to the exercise
of employee stock options or otherwise as compensation, or to certain types of
holders of Shares (such as insurance companies, tax-exempt organizations and
broker-dealers) who may be subject to special rules under the United States
federal income tax laws. This discussion does not discuss the United States
federal income tax consequences to a holder of Shares who, for United States
federal income tax purposes, is a non-resident alien individual, a foreign
corporation, a foreign partnership or a foreign estate or trust, nor does it
consider the effect of any foreign, state or local tax laws.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF SHARES SHOULD
CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE
RULES DISCUSSED BELOW TO SUCH HOLDER AND THE PARTICULAR TAX EFFECTS TO SUCH
HOLDER OF THE OFFER AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF
STATE, LOCAL AND OTHER INCOME TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger will be a
taxable transaction for United States federal income tax purposes. In general,
for United States federal income tax purposes, a holder of Shares will recognize
gain or loss equal to the difference between (i) the holder's adjusted tax basis
in the Shares sold pursuant to the Offer or converted to cash in the Merger and
(ii) the amount of cash received therefor. Gain or loss must be determined
separately for each block of Shares (i.e., Shares acquired at the same cost in a
single transaction) sold pursuant to the Offer or converted to cash in the
Merger. Assuming that Shares are held as a capital asset, such gain or loss will
be a capital gain or loss. Any such capital gain will be a long-term capital
gain taxable to a non-corporate holder at a maximum rate of 20% if the holder's
Shares have been held for more than 12 months on the date of sale (in the case
of the Offer) or the Effective Time of the Merger (in the case of the Merger)
and a short-term capital gain taxable to a non-corporate holder at a maximum
rate of 39.6% if the Shares have been held for one year or less on the date of
sale (or the Effective Time of the Merger).
Payments in connection with the Offer or the Merger may be subject to
"backup withholding" at a rate of 31%, unless a holder of Shares (i) is a
corporation or comes within certain exempt categories and, when required,
demonstrates this fact or (ii) provides a correct TIN to the payor, certifies as
to no loss of exemption from backup withholding and otherwise complies with
applicable requirements of the backup withholding rules. A holder who does not
provide a correct TIN may be subject to penalties imposed by the Internal
Revenue Service. Any amount paid as backup withholding does not constitute an
additional tax
11
<PAGE>
and will be creditable against the holder's United States federal income tax
liability. Each holder of Shares should consult with his or her own tax advisor
as to his or her qualification for exemption from backup withholding and the
procedure for obtaining such exemption. Holders tendering their Shares in the
Offer may prevent backup withholding by completing the Substitute Form W-9
included in the Letter of Transmittal. See Section 3-"Procedure for Tendering
Shares." Similarly, holders who convert their Shares into cash in the Merger may
prevent backup withholding by completing a Substitute Form W-9 and submitting it
to the paying agent for the Merger.
6. PRICE RANGE OF SHARES; DIVIDENDS.
The Shares are listed and traded on the American Stock Exchange ("AMEX")
under the symbol "VF." The following table sets forth for the periods indicated
the high and low sales prices and dividends per Share as reported in the
Company's Forms 10-K for the fiscal years ended December 31, 1996 and December
31, 1997, the Company's Form 10-Q for the third quarter ended September 30, 1998
and by AMEX:
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
--------- --------- -------------
<S> <C> <C> <C>
Year Ended December 31, 1996:
Fourth Quarter................................................................... $ 9.250 $ 8.500 $ .05
Year Ended December 31, 1997:
First Quarter.................................................................... 11.250 8.583 .05
Second Quarter................................................................... 12.750 10.083 .05
Third Quarter.................................................................... 16.333 11.667 .05
Fourth Quarter................................................................... 15.938 12.563 .05
Year Ended December 31, 1998:
First Quarter.................................................................... 15.750 13.125 .05
Second Quarter................................................................... 15.875 14.250 .05
Third Quarter.................................................................... 13.500 11.500 .05
Fourth Quarter (through 11/30/98)................................................ 13.500 11.250 .05
</TABLE>
On December 2, 1998, the last full trading day prior to the public
announcement of the Company's execution of the Merger Agreement and the last
full trading day prior to the announcement of the Offer, the closing price per
Share as reported on AMEX was $12.75.
7. CERTAIN EFFECTS OF THE TRANSACTION ON THE MARKET FOR SHARES, AMEX LISTING
AND EXCHANGE ACT REGISTRATION.
It is currently anticipated that as soon as practicable after the purchase
of at least 90% of the Shares, the Offeror will be merged with and into the
Company with the result that the Company will become a wholly-owned subsidiary
of the Parent, and all Shares not purchased in the Offer will be converted into
a right to receive cash, subject to appraisal rights. In the event the Offer is
amended and the Offeror purchases less than 90% of the Shares, then the purchase
of such Shares by the Offeror will reduce the number of Shares that might
otherwise trade publicly and will reduce the number of holders of Shares, which
will adversely affect the liquidity and market value of the remaining Shares
held by stockholders other than the Offeror. The Company has advised the Offeror
that, as of December 3, 1998, there were approximately 450 stockholders of
record of the Shares.
MARKET FOR SHARES. Depending upon the aggregate market value and per Share
price of any Shares not purchased pursuant to the Offer, the Shares may no
longer meet the standards for continued inclusion on AMEX, which generally
requires that an issuer have at least 700,000 publicly held shares with a market
value of one million dollars held by at least 300 stockholders holding round
lots and have an aggregate market value of shares publicly held of at least one
million dollars. Shares held directly or indirectly by an officer or director of
the Company or controlling shareholder or other family or concentrated holdings
ordinarily will not be considered as being publicly held for this purpose.
12
<PAGE>
In the event the Common Stock no longer meets the requirements for inclusion
on AMEX, quotations might still be available from other sources. The extent of
the public market for such Shares and availability of such quotations would,
however, depend upon the remaining number of holders of such Shares at such
time, the interest in maintaining a market in the Shares on the part of
securities firms, the possible termination of registration under the Exchange
Act, as described below, and other factors.
EXCHANGE ACT REGISTRATION. The Shares are currently registered under the
Exchange Act. Such registration may be terminated upon application by the
Company to the Commission if there are fewer than 300 record holders of Shares.
It is the intention of the Offeror to seek to cause an application for such
termination to be made as soon after consummation of the Offer as the
requirements for termination of registration of the Shares are met. If such
registration were terminated, the Company would no longer legally be required to
disclose publicly in proxy materials distributed to stockholders the information
which it now must provide under the Exchange Act or to make public disclosure of
financial and other information in annual, quarterly and other reports required
to be filed with the Commission under the Exchange Act, and the officers,
directors and 10% stockholders of the Company would no longer be subject to the
"short-swing" insider trading reporting and profit recovery provisions of the
Exchange Act. Furthermore, if such registration were terminated, persons holding
"restricted securities" of the Company may be deprived of their ability to
dispose of such securities under Rule 144 promulgated under the Securities Act
of 1933, as amended (the "Securities Act").
MARGIN REGULATIONS. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of allowing
brokers to extend credit on the collateral of the Shares. Depending upon factors
similar to those described above regarding listing and market quotations, it is
possible that, following the consummation of the Offer, the Shares would no
longer constitute "margin securities" for the purposes of the margin regulations
of the Federal Reserve Board and therefore could no longer be used as collateral
for loans made by brokers. If registration of Shares under the Exchange Act were
terminated, the Shares would no longer be "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
Except as otherwise set forth herein, the information concerning the Company
contained in this Offer to Purchase, including financial information, has been
furnished by the Company or has been taken from or based upon publicly available
documents and records on file with the Commission and other public sources.
Although neither the Offeror nor the Parent has any knowledge that would
indicate that statements contained herein based upon such information or
documents are untrue, neither the Offeror, the Parent nor the Dealer Manager
assumes any responsibility for the accuracy or completeness of the information
concerning the Company, furnished by the Company, or contained in such documents
and records or for any failure by the Company to disclose events which may have
occurred or may affect the significance or accuracy of any such information but
which are unknown to the Offeror or the Parent.
The Company is a Delaware corporation with its principal executive offices
located at 100 Smith Ranch Road, Suite 326, San Rafael, California 94903. The
Company operates through ten subsidiaries organized under the Recreational
Marine Products ("Recreational Group") and Industrial Products ("Industrial
Group") groups. The majority of the Company's products are specialized in
electrical connections and switching, as well as power conversion, control and
monitoring. The Recreational Group is engaged in the manufacture and
distribution of products primarily for marine applications. The Industrial Group
serves a variety of industrial markets for which it manufactures and distributes
a range of products. The Company's operating subsidiaries in the Industrial
Group (and their respective operating offices) are (i) Gits Manufacturing Co.
(Creston, Iowa), (ii) Turner Electric Corp. (Fairview Heights,
13
<PAGE>
Illinois), and (iii) Multiplex Technology, Inc. (Brea, California) (of which 68%
is owned by the Company). The Company's operating subsidiaries in the
Recreational Group (and their respective operating offices) are (i) Marine
Industries Co. (Napa, California), (ii) Heart Interface Corp. (Kent,
Washington), (iii) Cruising Equipment Co. (Seattle, Washington), (iv) Force 10
Marine, Ltd. (Richmond, British Columbia), (v) Glendinning Marine Products, Inc.
(Conway, South Carolina), (vi) The Guest Company, Inc. (Meriden, Connecticut)
(of which 93% is owned by the Company) and (vii) Mastervolt B.V. (Amsterdam, The
Netherlands) (of which 47% is owned by the Company).
Set forth below is certain summary consolidated financial data with respect
to the Company excerpted from the Company's annual report on Form 10-K for the
fiscal year ended December 31, 1997 and quarterly report on Form 10-Q for the
fiscal quarter ended September 30, 1998. More comprehensive financial
information is included in the reports and other documents filed by the Company
with the Commission, and the following summary is qualified in its entirety by
reference to the reports and other documents and all the financial information
(including any related notes) contained in the Company's annual reports on Form
10-K and quarterly reports on Form 10-Q. Such reports and other documents should
be available for inspection and copies thereof should be obtainable in the
manner set forth below.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- ----------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Revenues................................................. $ 75,128 $ 81,063 $ 93,252 $ 69,398 $ 82,084
Costs of goods sold...................................... 45,639 49,086 55,703 41,237 49,618
--------- --------- --------- --------- -----------
Gross profit............................................. 29,489 31,977 37,549 28,161 32,466
Selling and administrative expenses...................... 22,750 24,953 28,685 21,328 24,279
--------- --------- --------- --------- -----------
Operating Income......................................... 6,739 7,024 8,864 6,833 8,187
Other income (expense):
Interest expense......................................... (1,205) (1,234) (1,182) (910) (852)
Other, net............................................... 51 410 269 182 271
--------- --------- --------- --------- -----------
Income Before Income Taxes and Minority Interests........ 5,585 6,200 7,951 6,105 7,606
Income taxes............................................. 2,111 2,363 3,107 2,412 2,890
Minority interests....................................... 108 207 11 11 142
--------- --------- --------- --------- -----------
Net Income............................................... $ 3,366 $ 3,630 $ 4,833 $ 3,682 $ 4,574
--------- --------- --------- --------- -----------
--------- --------- --------- --------- -----------
Basic earnings per Share................................. $ .84 $ .91 $ 1.20 $ .92 $ 1.11
Diluted earnings per Share............................... $ .82 $ .88 $ 1.15 $ .88 $ 1.08
Basic weighted average Shares outstanding................ 3,993 4,002 4,031 4,024 4,108
Diluted weighted average Shares outstanding.............. 4,098 4,121 4,209 4,197 4,252
</TABLE>
14
<PAGE>
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------- AS OF
1996 1997 SEPTEMBER 30, 1998
--------- --------- ------------------
<S> <C> <C> <C>
(UNAUDITED)
Accounts receivable, less allowance of $255 in 1997 and $257 in 1996.... $ 11,288 $ 13,935 $ 13,851
Inventories, less allowance of $806 in 1997 and $734 in 1996............ 17,102 19,121 23,547
Other current assets.................................................... 1,623 2,258 2,506
--------- --------- -------
Total current assets.............................................. 30,013 35,314 39,904
Property, plant and equipment, net...................................... 9,652 10,683 11,491
Goodwill, net of accumulated amortization of $6,016 in 1997 and $5,181
in 1996............................................................... 12,601 11,762 11,098
Investment in and advances to affiliate................................. 2,721 3,054 3,268
Working Capital......................................................... 20,849 20,456 25,126
Other assets............................................................ 1,362 1,137 1,213
--------- --------- -------
Total Assets...................................................... $ 56,349 $ 61,950 $ 66,974
--------- --------- -------
--------- --------- -------
Loans and notes payable................................................. $ 830 $ 1,065 $ 2,995
Current portion of long-term debt....................................... 1,433 4,385 1,221
Accounts payable and accrued expenses................................... 6,901 9,408 10,562
--------- --------- -------
Total current liabilities......................................... 9,164 14,858 14,778
Long-term debt.......................................................... 12,667 8,268 8,846
Deferred income taxes................................................... 806 815 889
--------- --------- -------
Total liabilities................................................. 22,637 23,941 24,513
--------- --------- -------
Minority interests...................................................... 1,486 1,375 1,440
--------- --------- -------
Common stock, $.50 par value, authorized 5,000,000 shares, issued
4,145,358 shares in 1997 and 1996..................................... 2,073 2,073 --
Capital in excess of par value.......................................... 7,775 7,892 --
Cumulative foreign currency translation adjustment...................... (167) (385) --
Retained earnings....................................................... 23,465 27,651 --
Less treasury stock, at cost, 83,269 shares in 1997 and 144,832 shares
in 1996............................................................... (920) (597) --
--------- --------- -------
Stockholders' equity.................................................... 32,226 36,634 41,021
--------- --------- -------
Total Liabilities and Stockholders' equity........................ $ 56,349 $ 61,950 $ 66,974
--------- --------- -------
--------- --------- -------
</TABLE>
The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files periodic reports, proxy statements and other
information with the Commission relating to its business, financial condition
and other matters. The Company is required to disclose in such proxy statements,
certain information, as of particular dates, concerning the Company's directors
and officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities and any material interests of such persons
in transactions with the Company. Such reports, proxy statements and other
information may be inspected at the public reference facilities maintained by
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the regional offices of the Commission located at Seven World Trade Center,
13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison
Street (Suite 400), Chicago, Illinois 60661. Copies of such material may also be
obtained by mail, at prescribed rates, from the Commission's principal office at
450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains a
World Wide Web site on the internet at http://www.sec.gov that contains reports
and other information regarding registrants that file electronically with the
Commission. Such material should also be available for inspection at the offices
of NASDAQ, 1735 K Street, N.W., Washington D.C. 20006.
15
<PAGE>
9. CERTAIN INFORMATION CONCERNING KEY COMPONENTS, INC., THE PARENT AND THE
OFFEROR.
The Offeror is a Delaware corporation which was formed as an acquisition
vehicle in connection with the Offer, the Merger and the other transactions
contemplated by the Merger Agreement and will be merged with and into the
Company pursuant to the Merger. The Offeror is a wholly owned subsidiary of the
Parent, which is a wholly owned subsidiary of Key Components, Inc., a New York
corporation ("KCI"). The Parent is a holding company formed by KCI solely for
the purpose of holding shares of capital stock of indirect subsidiaries of KCI.
The name, citizenship, business address, present principal occupation or
employment and five-year employment history of each of the directors and
executive officers of KCI, the Parent and the Offeror are set forth in Schedule
I hereto.
Set forth below is certain summary consolidated financial data with respect
to KCI and its subsidiaries which has been derived from the audited consolidated
financial statements of KCI which were filed by KCI with the Commission as a
part of its registration statement on Form S-4 dated July 8, 1998 Registration
No. 333-58675, as well as on its Form 10-Q for the fiscal quarter ended
September 30, 1998, both of which are incorporated by reference. More
comprehensive financial information is included in such Registration Statement,
reports and other documents filed by KCI with the Commission and the following
summary is qualified in its entirety by reference to the reports and other
documents and all the financial information (including any related notes)
contained in such Registration Statement and quarterly report on Form 10-Q. Such
reports and other documents should be available for inspection and copies
thereof should be obtainable in the manner set forth above.
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1995 1996 1997 1997(A) 1998
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales.................................................. $ 13,185 $ 13,449 $ 27,318 $ 17,451 $ 47,444
Cost of goods sold (b)..................................... 7,356 8,361 15,798 9,586 29,927
Gross profit............................................... 5,829 5,088 11,520 7,865 17,517
Selling, general, and administrative expenses (b).......... 3,457 4,641 6,405 4,013 8,030
--------- --------- --------- --------- ---------
Income from operations..................................... 2,372 447 5,115 3,852 9,487
Other income (expense)..................................... 26 5 31 48 276
Interest expense........................................... (427) (254) (3,007) (1,682) (5,460)
--------- --------- --------- --------- ---------
Income before taxes, extraordinary charge and change in
accounting principle..................................... 1,971 198 2,139 2,218 4,303
Provision for income taxes (c)............................. 724 21 889 828 26
Extraordinary charge--early repayment of debt.............. -- -- -- -- 4,616
Cumulative effect of change in accounting principle (d).... -- (313) -- -- --
--------- --------- --------- --------- ---------
Net income................................................. $ 1,247 $ 490 $ 1,250 $ 1,390 $ (339)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
CONSOLIDATED BALANCE SHEET DATA (AS OF THE END OF PERIOD):
Cash....................................................... $ 821 $ 331 $ 1,440 $ 1,418 $ 12,671
Working capital............................................ 4,738 4,702 10,681 6,749 23,507
Total assets............................................... 10,709 11,454 79,757 53,973 93,774
Long term debt (including current maturities).............. 3,608 3,428 66,855 42,848 81,401
Stockholders' equity....................................... 6,483 6,974 8,848 9,103 5,331
EARNINGS (LOSS) PER SHARE:
Basic earnings (loss) per share:
Income before extraordinary charge..................... $ 12,475 $ 4,903 $ 12,503 $ 13,902 $ 42,263
Extraordinary charge................................... -- -- -- -- (45,616)
--------- --------- --------- --------- ---------
Net income................................................. $ 12,475 $ 4,903 $ 12,503 $ 13,902 $ (3,353)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Diluted earnings (loss) per share:
Income before extraordinary charge..................... $ 12,475 $ 4,903 $ 11,471 $ 12,956 $ 39,275
Extraordinary charge................................... -- -- -- -- (42,391)
--------- --------- --------- --------- ---------
Net income................................................. $ 12,475 $ 4,903 $ 11,471 $ 12,956 $ (3,116)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Excess cost of assets acquired over book value............. $ 1,026 $ 776 $ 47,404 $ 31,297 $ 46,137
</TABLE>
(a) For the fiscal years ended December 31, 1995 and December 31, 1996, the
financial data set forth above represents the results and balance sheet
data of B.W. Elliott Manufacturing Co., Inc., the predecessor of KCI
("Elliott"), only. KCI acquired Hudson Lock, Inc. ("Hudson") on May 15,
1997 and ESP Lock Products, Inc. ("ESP") on December 10, 1997. The
financial data set forth above with respect to the fiscal year ended
December 31, 1997 and for the nine months ended September 30, 1998
includes the results of Hudson and ESP from their respective acquisition
dates.
17
<PAGE>
(b) For the fiscal year ended December 31, 1996, cost of goods sold includes
a provision for inventory obsolescence of $431 and selling, general and
administrative expenses include a nonrecurring business relocation charge
of $786.
(c) KCI elected to be treated as an S corporation under the Internal Revenue
Code effective May 31, 1997. As an S corporation, the shareholders are
personally liable for most taxes on the income of the KCI. Accordingly,
subsequent to May 31, 1997 the provision for income taxes includes only
those taxes applicable to certain states. Due to the change in tax
status, the 1997 tax provision includes a charge of $469 representing the
write-off of net deferred tax assets.
(d) Effective January 1, 1996, Elliott changed the composition of costs
included in inventory. Accordingly, Elliott recorded an adjustment to
inventory cost at January 1, 1997 as the cumulative effect of a change in
accounting principle. Had KCI applied this new accounting principle in
the year ended December 31, 1995, income before income taxes and net
income would not have been materially affected.
Except as provided in the Merger Agreement and the Stockholder Agreements
and as otherwise described in this Offer to Purchase, none of KCI, the Parent or
the Offeror, or, to the best knowledge of the Parent and the Offeror, any of the
persons listed on Schedule I hereto, has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Company, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any securities of the Company, joint ventures, loan or option arrangements,
puts or calls, guarantees of loans, guarantees against loss or the giving or
withholding of proxies. Except as set forth in this Offer to Purchase, none of
KCI, the Parent or the Offeror, or, to the best knowledge of the Parent and the
Offeror, any of the persons listed on Schedule I hereto, has had, since January
1, 1995, any business relationships or transactions with the Company or any of
its executive officers, directors or affiliates that would require reporting
under the rules of the Commission applicable to this Offer to Purchase. Except
as set forth in this Offer to Purchase, since January 1, 1995, there have been
no contacts, negotiations or transactions between KCI, the Parent or the Offeror
or any of their respective subsidiaries, or, to the best knowledge of the Parent
and the Offeror, any of the persons listed on Schedule I hereto, and the Company
or its affiliates, concerning a merger, consolidation or acquisition, tender
offer or other acquisition of securities, election of directors or a sale or
other transfer of a material amount of assets. Except as set forth in this Offer
to Purchase, neither the Parent nor the Offeror, nor, to the best knowledge of
the Parent and the Offeror, any of the persons listed on Schedule I hereto,
beneficially owns any Shares or has effected any transactions in the Shares
during the past 60 days.
10. SOURCES AND AMOUNT OF FUNDS.
The total amount of funds required by the Offeror and the Parent to
consummate the Offer and the Merger is estimated to be approximately $82.1
million, which amount excludes related fees and expenses. The Offeror intends to
obtain the required funds from a combination of capital contributions from
Parent and loans from SG pursuant to the terms of the SG Cowen Commitment
Letter. In addition, the Parent will receive capital contributions from KCI. KCI
will make such contributions using funds obtained from its shareholders. See
Section 13-"The Merger Agreement, the Stockholder Agreements and the SG Cowen
Commitment Letter."
It is currently anticipated that funds borrowed will be repaid from
internally generated funds of the Parent and its subsidiaries or the Company.
The Parent may, however, employ alternative methods for refinancing such
borrowings, including, without limitation, debt or equity financing, depending
on prevailing interest rates and financial and other economic conditions.
18
<PAGE>
11. BACKGROUND OF THE OFFER; PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH
THE COMPANY.
On August 6, 1998, at the direction of the Company, CIBC contacted Millbrook
Capital Management, Inc. ("Millbrook") to discuss whether Millbrook's
manufacturing platform, KCI, would be interested in pursuing a business
combination with the Company. Following Millbrook's review of certain public
information as to the Company's business and financials, Millbrook requested
receipt of additional business and financial information relating to the
Company.
On August 11, 1998, Millbrook, on behalf of KCI, entered into a
confidentiality agreement with the Company (the "Confidentiality Agreement")
pursuant to which certain non-public information concerning the Company would be
made available to Millbrook and its affiliates and representatives on a
confidential basis.
On August 25, 1998, the President and Vice President of the Parent and KCI
met with the Company's President and representatives of CIBC to discuss the
business and prospects of the Company and its operating subsidiaries.
On September 18, 1998, Millbrook, on behalf of KCI, sent a letter to CIBC,
on behalf of the Company, indicating its initial interest in pursuing a merger
transaction with the Company. Such interest was contingent upon, among other
things, the completion of satisfactory financial and legal due diligence.
On October 6 and 7, 1998, KCI and its accountants visited the Company's
headquarters in San Rafael, California to review certain financial and operating
data of the Company.
On October 8, 1998, senior members of the management team of Millbrook, the
Parent and KCI ("Senior Management"), together with SG Cowen conducted a site
visit of Marine Industries Co. ("Marinco") and discussed Marinco's business and
prospects with Marinco's senior management. Following the site visit, Senior
Management and SG Cowen, KCI's senior financing arranger, and KCI's accountants
attended a presentation hosted by the Company with senior members of several of
its operating subsidiaries.
Between October 9, 1998 and October 21, 1998, Senior Management conducted
site visits of several other operating subsidiaries of the Company, including
Heart Interface Corp., Cruising Equipment, Turner Electric Corporation, Gits
Manufacturing and The Guest Company Inc., and met with senior members of such
subsidiaries' management to discuss the businesses and prospects of the
subsidiaries.
On October 15, 1998, the Company sent KCI a letter setting forth procedures
to be followed in submitting a proposal for a transaction with the Company and a
draft Merger Agreement.
On November 9, 1998, KCI submitted a written proposal for the purchase of
all outstanding Shares for a cash purchase price of $18.50 per Share, together
with proposed changes to the Company's draft Merger Agreement. On November 10,
1998, KCI submitted to the Company documentation evidencing a financing
commitment of SG. Over the next two weeks, the parties held a series of
telephone conferences at which various business, financial and legal issues were
discussed and negotiated, including the Company's request that KCI increase the
price offered and reduce the termination fee contemplated by the KCI proposal.
On November 16, 1998, KCI submitted a revised proposal increasing the price per
Share to $19.00 in cash, together with certain additional modifications to the
Merger Agreement. From November 16, 1998 through December 1, 1998, the parties
continued to negotiate the terms of the Merger Agreement.
Late in the day on December 2, 1998, the Merger Agreement and the
Stockholder Agreements were executed. Prior to the opening of trading on the
morning of December 3, 1998, the Company and KCI issued a joint press release
announcing the proposed Offer and Merger.
On December 9, 1998, the Parent and the Offeror commenced the Offer.
19
<PAGE>
12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY.
The purpose of the Offer, the Merger, the Merger Agreement and the
Stockholder Agreements is to enable the Parent to acquire control of, and the
entire equity interest in, the Company. The Offer, the Merger Agreement and the
Stockholder Agreements are intended to increase the likelihood that the Merger
will be effected as promptly as practicable. The Board of Directors of the
Company has unanimously approved the Offer, the Merger and the Merger Agreement
and the transactions contemplated thereby.
In the event that the Offer is successful and the Offeror acquires 90% or
more of the Shares, under the short-form merger provisions of the Delaware GCL,
the Parent will be able to effectuate the Short-Form Merger by appropriate
resolutions of the Board of Directors of the Offeror without any meeting or
action by the stockholders of the Company. Under the Delaware GCL and the
Certificate of Incorporation of the Company, a Long-Form Merger must be approved
by the Board of Directors of the Company and the affirmative vote of the holders
of a majority of the Shares outstanding. The Company has agreed (if required by
applicable law to consummate the Merger) to take all action necessary to convene
a meeting of its stockholders as soon as reasonably practicable following the
consummation of the Offer for the purpose of considering and taking action upon
the Merger Agreement. Approval of a Long-Form Merger is assured pursuant to the
terms of the Stockholder Agreements. See Section 13-"The Merger Agreement, the
Stockholder Agreements and the SG Cowen Commitment Letter."
APPRAISAL RIGHTS. No appraisal rights are available in connection with the
Offer. After the Offer is completed, the Offeror anticipates that the Shares
will cease to be listed or traded on the AMEX. However, if the Merger is
consummated, either through a Short-Form Merger or Long-Form Merger,
stockholders of the Company have certain rights under the Delaware GCL to
dissent and/or demand appraisal of, and payment in cash of the fair value of,
their Shares. Stockholders who perfect such rights by complying with the
procedures set forth in Section 262 of the Delaware GCL ("Section 262"), as
provided below, will have the fair value of their Shares (exclusive of any
element of value arising from the accomplishment or expectation of the Merger)
determined by the Delaware Court of Chancery and will be entitled to receive a
cash payment equal to such fair value from the Surviving Corporation. In
addition, such dissenting stockholders would be entitled to receive payment of a
fair rate of interest from the date of consummation of the Merger on the amount
determined to be the fair value of their Shares. In determining the fair value
of the Shares, the court is required to take into account all relevant factors.
Accordingly, such determination could be based upon considerations other than,
or in addition to, the market value of the Shares, including, among other
things, asset values and earning capacity. In WEINBERGER V. UOP, INC., the
Delaware Supreme court stated that "proof of value by any techniques or methods
which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered in an appraisal proceeding.
The court in such case also noted that under Section 262, fair value is to be
determined "exclusive of any element of value arising from the accomplishment of
exception of the merger." The fair value determined in any appraisal proceeding
could be more or less than the consideration to be paid in the Offer and the
Merger.
The Parent does not intend to object, assuming the proper procedures are
followed, to the exercise of appraisal rights by any stockholder and the demand
for appraisal of, and payment in cash for the fair value of, the Shares. The
Parent intends, however, to cause the Surviving Corporation to argue in an
appraisal proceeding that, for purposes of such proceeding, the fair value of
each Share is less than the price paid in the Merger. In this regard,
stockholders should be aware that opinions of investment banking firms as to the
fairness from a financial point of view (including CIBC's opinion described
herein) are not necessarily opinions as to "fair value" under Section 262.
NOTIFICATION. In the event the Offer is successful and the Short-Form Merger
is effected, either the Company before the Effective Date or the Surviving
Corporation within ten days thereafter, is required to notify each stockholder
entitled to appraisal rights of the approval of the Merger and that appraisal
rights
20
<PAGE>
are available. Within 20 days after the mailing of such notice, any stockholder
that did not tender his shares in the Offer may demand in writing from the
Surviving Corporation the appraisal of such stockholders' Shares. In the event
of a Long-Form Merger, the Company shall, not less than 20 days prior to the
meeting of the stockholders called in order to vote on the Merger, notify each
stockholder of record that appraisal rights are available.
PERFECTION OF APPRAISAL RIGHTS. As set forth in Section 262, before the
vote of the stockholders is taken on the Long-Form Merger, a stockholder seeking
to exercise his appraisal rights must deliver to the Company a written notice of
intention to demand that he be paid the fair value of such stockholder's Shares
if the Long-Form Merger is effected. Neither the tendering of Shares in the
Offer, nor a vote against the Merger, is sufficient to satisfy the requirement
of delivering a written notice to the Company. In addition, the stockholder must
not effect any change in the beneficial ownership of such stockholder's Shares
from the date of filing the notice with the Company through the consummation of
the Long-Form Merger, and Shares for which payment of fair value is sought must
not be voted in favor of the Long-Form Merger, and the stockholder must not
consent in writing to and must vote against, or abstain from voting in favor of,
the Long-Form Merger. Failure of a stockholder to comply with any of the
foregoing will result in the forfeiture of any right to payment of fair value
for such stockholder's Shares.
THE PRESERVATION AND EXERCISE OF DISSENTERS' RIGHTS REQUIRE STRICT ADHERENCE
TO THE APPLICABLE PROVISIONS OF THE DELAWARE GCL.
Once appraisal rights become available, an objecting stockholder will cease
to have any rights as a stockholder with respect to the Shares except the right
to receive payment of the fair value thereof. The stockholder's rights will be
restored only upon the withdrawal, with the consent of the Company, of the
demand for payment, no filing of a petition for appraisal within the time
required, a determination of the court that the stockholder is not entitled to
an appraisal, or the abandonment or rescission of the transaction to which the
stockholder objected.
The foregoing summary of the rights of objecting stockholders does not
purport to be a complete statement of the procedures to be followed by
stockholders desiring to exercise their dissenters' appraisal rights. The
preservation and exercise of dissenters' rights are conditioned on strict
adherence to the applicable provisions of the Delaware GCL.
RULE 13E-3. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may under
certain circumstances be applicable to the Merger or another business
combination following the purchase of Shares pursuant to the Offer or otherwise
in which the Offeror seeks to acquire the remaining Shares not held by it. The
Offeror believes, however, that Rule 13e-3 will not be applicable to the Merger
if the Merger is consummated within one year after the termination of the Offer
at the same per Share price as paid in the Offer. If applicable, Rule 13e-3
requires, among other things, that certain financial information concerning the
Company and certain information relating to the fairness of the proposed
transaction and the consideration offered to minority stockholders in such
transaction be filed with the Commission and disclosed to stockholders prior to
consummation of the transaction.
PLANS FOR THE COMPANY. It is expected that, initially following the Merger,
the business and operations of the Company will, except as set forth in this
Offer to Purchase, be continued by the Company substantially as they are
currently being conducted.
Except as indicated in this Offer to Purchase, the Parent does not have any
present plans or proposals which relate to or would result in an extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving the Company, a sale or transfer of a material amount of assets of the
Company or any material changes in the Company's capitalization or dividend
policy or any other material changes in the Company's corporate structure or
business. However, the Parent has been and will continue to evaluate the
business and operations of the Company during the pendency of the Offer and
after the consummation
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of the Offer and the Merger, and will take such actions as it deems appropriate
under the circumstances then existing. The Parent intends to seek additional
information about the Company during this period. Thereafter, the Parent intends
to review such information as part of a comprehensive review of the Company's
business, operations, capitalization and management with a view to optimizing
exploitation of the Company's potential in conjunction with the Parent's
business. It is expected that the business and the operations of the Company
would form an important part of the Parent's future business plans in the United
States.
13. THE MERGER AGREEMENT, THE STOCKHOLDER AGREEMENTS, AND THE SG COWEN
COMMITMENT LETTER.
The following is a summary of certain material provisions of the Merger
Agreement, the Stockholder Agreements and the SG Cowen Commitment Letter, copies
of which are filed with the Commission as exhibits to the Offeror's and Parent's
Schedule 14D-1. These summaries do not purport to be complete and are qualified
in their entirety by reference to the respective texts of the Merger Agreement,
the Stockholder Agreements and the SG Cowen Commitment Letter. Capitalized terms
not otherwise defined below shall have the meanings set forth in the Merger
Agreement.
THE MERGER AGREEMENT
THE OFFER. The Merger Agreement provides for the commencement of the Offer
not later than the fifth business day from the public announcement of the
execution of the Merger Agreement. The Merger Agreement also provides that the
Offer shall be subject solely to the condition that there be validly tendered
and not withdrawn prior to the expiration of the Offer that number of Shares
which satisfies the Minimum Condition and to the other conditions set forth in
Section 14-"Certain Conditions to the Parent's and Offeror's Obligations."
Pursuant to the Merger Agreement, the Offeror may (i) decrease or change the
form of the consideration payable in the Offer, (ii) decrease the number of
Shares sought pursuant to the Offer, (iii) impose additional conditions to the
Offer, (iv) change the conditions to the Offer, except that Parent or Offeror in
their sole discretion may waive any of the conditions to the Offer other than
the Minimum Condition which may not be waived without the Company's prior
written consent, or (v) make any other change in the terms or conditions of the
Offer that is materially adverse to the holders of Shares. Subject to the terms
of the Offer and the Merger Agreement and the satisfaction or waiver of all the
conditions of the Offer set forth in Section 14-"Certain Conditions to the
Parent's and Offeror's Obligations" as of any expiration date of the Offer, the
Parent and/or the Offeror will accept for payment and pay for all Shares validly
tendered and not withdrawn pursuant to the Offer promptly after such expiration
date of the Offer; PROVIDED that, Offeror (i) shall extend the Offer if at the
scheduled expiration date of the Offer any of the conditions set forth in
Section 14-"Certain Conditions to the Parent's and Offeror's Obligations" shall
not be satisfied or waived, PROVIDED the extension shall be no longer than
reasonably necessary to satisfy such condition, (ii) shall extend the Offer for
any period required by any rule, regulation, interpretation, or position of the
Commission or the staff thereof applicable to the Offer, and (iii) may extend
the Offer up to the tenth business day beyond the latest expiration date that
would otherwise be permitted under clause (i) or (ii) of this sentence.
COMPANY ACTIONS. Pursuant to the Merger Agreement, the Company has agreed
that, upon commencement of the Offer, it shall file or cause to be filed with
the Commission and to be disseminated to holders of Shares, in each case as and
to the extent required by applicable federal securities laws, a
Solicitation/Recommendation Statement on Schedule 14D-9 containing the
recommendation of the Board of Directors.
THE MERGER. The Merger Agreement provides that at the Effective Time, the
Offeror shall be merged with and into the Company. As a result of the Merger,
the separate corporate existence of the Offeror shall cease and the Company
shall continue as the surviving corporation of the Merger (the "Surviving
Corporation").
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Pursuant to the Merger Agreement, at the Effective Time, the Certificate of
Incorporation and the By-Laws of the Company, in each case as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation and By-Laws of the Surviving Corporation. The Merger Agreement
also provides that the directors of Offeror immediately prior to the Effective
Time shall become the directors of the Surviving Corporation, and the officers
of the Offeror immediately prior to the Effective Time shall become the officers
of the Surviving Corporation, each to hold office from the Effective Time until
their respective successors are duly elected or appointed and qualified in the
manner provided in the Certificate of Incorporation and By-Laws of the Surviving
Corporation as applicable.
CONVERSION OF SECURITIES. At the Effective Time, by virtue of the Merger
and without any action on the part of any of the parties to the Merger Agreement
or the holders of any shares of capital stock of the Company or Offeror; (a)
each Share that is issued and outstanding immediately prior to the Effective
Time (other than any Shares to be canceled pursuant to clause (b) below and any
Dissenting Shares) shall be converted into and represent the right to receive
$19.00 in cash, or any higher price paid per Share in the Offer (the "Per Share
Merger Consideration"). All such Shares shall no longer be outstanding and shall
automatically be canceled and extinguished and shall cease to exist, and each
certificate that immediately prior to the Effective Time evidenced any such
Shares (other than Shares to be canceled pursuant to clause (b) below and any
Dissenting Shares) shall thereafter represent the right to receive (without
interest), upon surrender of such certificate in accordance with the provisions
of Section 2.8 of the Merger Agreement, the Per Share Merger Consideration
multiplied by the number of Shares evidenced by such certificate (the "Merger
Consideration"). The holders of certificates previously evidencing Shares
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect thereto (including, without limitation, any rights to vote
or to receive dividends and distributions in respect of such Shares), except as
otherwise provided herein or by law; (b) all Shares that immediately prior to
the Effective Time are owned by Parent, Offeror or their respective affiliates
or held by the Company in its treasury shall be canceled and extinguished and
shall cease to exist and no consideration shall be delivered with respect
thereto; and (c) each share of capital stock of Offeror issued and outstanding
immediately prior to the Effective Time shall be converted into and exchanged
for one validly issued, fully paid and nonassessable share of common stock of
the Surviving Corporation.
REPRESENTATIONS AND WARRANTIES. In the Merger Agreement, the Company has
made customary representations and warranties to the Parent and the Offeror,
including, but not limited to, representations and warranties as to organization
and qualification, capitalization, authority to enter into the Merger Agreement
and to consummate the transactions contemplated thereby, required consents and
approvals, filings made by the Company with the Commission under the Securities
Act or the Exchange Act (including financial statements included in the
documents filed by the Company under those acts), absence of certain changes,
absence of litigation, employee benefit matters, environmental matters,
intellectual property and, tax matters.
The Offeror and the Parent have also made customary representations and
warranties to the Company, including, but not limited to, representations and
warranties as to organization and qualification, authority to enter into the
Merger Agreement and to consummate the transactions contemplated thereby,
required consents and approvals and financing. In addition, the Parent and
Offeror have represented that neither has any actual knowledge of any facts or
circumstances that could reasonably be expected to result in any condition set
forth in the SG Cowen Commitment Letter not being satisfied. See Section 13-"The
Merger Agreement, the Stockholder Agreements and the SG Cowen Commitment
Letter."
COVENANTS RELATING TO THE CONDUCT OF BUSINESS. The Merger Agreement
provides that from the date of the Merger Agreement until the Effective Time,
the Company shall, and shall cause its subsidiaries to, conduct their respective
businesses in all material respects only in the ordinary course consistent with
past practice, and shall use commercially reasonable efforts to keep available
the services of their present key officers and employees and preserve intact the
Company's business organization and relationships with
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those persons having business dealings with them, and except as otherwise
required by applicable law or as set forth in Section 5.1 of the Company
Disclosure Schedule to the Merger Agreement, the Company shall not, and shall
cause each of its subsidiaries not to, without the prior consent of Parent
(which shall not be unreasonably withheld):
(a) amend its Certificate of Incorporation or By-Laws or comparable
organizational documents;
(b) declare, set aside or pay any dividend or other distribution or payment
in cash, stock or property in respect of its capital stock (other than
regular quarterly dividends of $0.05 per share payable at such times, and
in respect of holders of Shares on such record dates, as are consistent
with historical practice and other than dividends by a wholly owned
subsidiary of the Company to its parent), and not reclassify, combine,
split, subdivide or redeem, purchase or otherwise acquire, directly or
indirectly, any of its or its subsidiaries' capital stock (excluding,
however, redemptions or purchases of shares of the capital stock of the
Company's subsidiaries pursuant to contractual commitments entered into
before the date of this Agreement);
(c) issue, grant, sell or pledge or agree to or authorize the issuance,
grant, sale or pledge of any shares of, or rights of any kind to acquire
any shares of, the capital stock of the Company or any of its
subsidiaries other than the grant of Stock Options in the ordinary course
of business under current employee benefit plan arrangements and other
than Shares issuable upon the exercise of Stock Options;
(d) acquire, sell, transfer, lease or encumber any material assets except in
the ordinary course of business and consistent with past practice; or
incur or modify any material indebtedness or other material liability,
other than in the ordinary and usual course of business and consistent
with past practice;
(e) adopt a plan of complete or partial liquidation or adopt resolutions
providing for the complete or partial liquidation, dissolution,
consolidation, merger, restructuring or recapitalization;
(f) grant any severance or termination pay to, or enter into any employment
or severance agreement with, any of its executive officers or directors,
other than in the ordinary course of business;
(g) except in the ordinary course of business or pursuant to obligations
imposed by collective bargaining agreements, increase the compensation
payable or to become payable to its executive officers or employees,
enter into any contract with or other binding commitment to any of its
directors, executive officers, or other employees, with respect to any
such increase (other than pursuant to a Company Benefit Plan or policy or
agreement existing as of the date hereof), or enter into any severance
agreement with any of its employees other than executive officers and
directors, and the Company shall not establish, adopt, enter into, or
make any new grants or awards under or amend, any Company Benefit Plan,
except as required by applicable law, including any obligation to engage
in good faith collective bargaining, to maintain tax-qualified status or
as may be required by any Company Benefit Plan as of the date hereof;
(h) settle or compromise any material claims or litigation or, except in the
ordinary course of business consistent with past practice, enter into any
material contract or agreement, modify, amend or terminate any of its
material contracts or waive, release or assign any material rights or
claims, or make any payment, direct or indirect, of any material
liability before the same becomes due and payable in accordance with its
terms;
(i) take any action, other than in the ordinary course of business, with
respect to accounting policies or procedures (including tax accounting
policies and procedures), except as may be required by law or generally
accepted accounting principles;
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(j) make any material tax election or permit any material insurance policy
naming it as a beneficiary or a loss payable payee to be canceled or
terminated without notice to Parent, except in the ordinary course of
business and consistent with past practice; and
(k) (i) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the material
obligations of any other person, except in the ordinary course of
business and consistent with past practice; or (ii) make any material
loans, advances or capital contributions to, or investments in, any other
person (other than to subsidiaries of the Company) other than in the
ordinary course of business and consistent with past practice; provided,
that the Company shall not make any loans, advances or capital
contributions to, or investments in, Mastervolt International B.V. and
its subsidiaries or M.V. Investments, a Dutch partnership, except for a
capital contribution to M.V. Investments not to exceed 250,000 Dutch
guilders.
(l) cause a material change in investment policy or a material change in
investment vehicles related to the assets in any pension plan, other than
actions taken in the ordinary course of business or that are consistent
with or required by its fiduciary duties;
(m) authorize or enter into an agreement to do any of the foregoing.
CONFIDENTIALITY. Pursuant to the Merger Agreement, from the date thereof
until the Effective Time, upon reasonable prior notice to the Company, the
Company shall (and shall cause each of its subsidiaries to) give Parent and its
authorized representatives full access during normal business hours to its
executive officers, properties, books and records, provided, that Parent and its
authorized representatives shall not unreasonably interfere in the business and
operations of the Company and its subsidiaries, and furnish Parent and its
authorized representative with such financial and operating data and other
information concerning the business and properties of the Company as Parent may
from time to time reasonably request. In addition, the Merger Agreement provides
that Parent and Offeror will hold and treat, and will cause their respective
affiliates, agents and other representatives to hold and treat, all documents
and information concerning the Company furnished to Parent, Offeror or their
respective representatives in connection with the transactions contemplated by
the Merger Agreement confidential in accordance with the Confidentiality
Agreement dated August 11, 1998, between the Company (or its representative) and
Millbrook Capital Management Inc., which Confidentiality Agreement (i) Parent
and Offeror have adopted and agreed to be bound by and (ii) shall remain in full
force and effect in accordance with its terms.
ACQUISITION PROPOSALS. Except as contemplated by the Merger Agreement, the
Company shall not (and shall use reasonable efforts to cause its officers,
directors and employees and any investment banker, attorney, accountant, or
other agent retained by it not to) initiate, solicit or encourage, directly or
indirectly, or knowingly take any action to facilitate, the making of, or engage
in any negotiations or discussions concerning, any proposal or offer to acquire
all or any significant part of the business and properties or capital stock of
the Company, whether by merger, purchase of assets, tender offer or otherwise
(an "Acquisition Proposal"), or provide any non-public information concerning
the Company to any third party in connection with an Acquisition Proposal. The
Company shall immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. In the event the Company receives an
Acquisition Proposal, it shall, subject to any confidentiality obligations
imposed upon the Company in connection with such Acquisition Proposal, promptly
(and in any event within 24 hours) inform Parent as to the receipt thereof.
Notwithstanding the foregoing, nothing shall prohibit the Company from (a)
furnishing information to, participating in discussions and negotiations
directly or through its representatives or entering into an agreement relating
to an Acquisition Proposal with any third party (including parties with whom the
Company or its representatives have had discussions on any basis on or prior to
the date hereof) who makes an unsolicited proposal or offer to the Company or
makes an unsolicited request for non-public
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information about the Company (pursuant to appropriate confidentiality
agreements), which proposal, offer or request did not result from a breach of
the first sentence of this paragraph, if the Company's Board of Directors
determines in good faith, after receiving advice from its financial advisors and
independent legal counsel at a meeting of the Company's Board of Directors, that
such action is required for the Company's Board of Directors to comply with its
fiduciary duties under applicable law, (b) taking and disclosing to its
stockholders any position, and making related filings with the Commission, as
required by Rules 14e-2 and 14d-9 under the Exchange Act with respect to any
tender offer or (c) taking any action and making any disclosure which the
Company's Board of Directors determines, after receiving advice from its
financial advisors and independent legal counsel at a meeting of the Company's
Board of Directors, is required to be taken or made under applicable law
(including, without limitation, laws relating to the fiduciary duties of
directors), provided that at least 48 hours prior to the entry into or
announcement of an intention to enter into a definitive agreement with respect
to an Acquisition Proposal, the Company shall have provided written notice to
Parent advising Parent of its intention to enter into a definitive agreement
with respect to an Acquisition Proposal and specifying the material terms and
conditions of such Acquisition Proposal.
INDEMNIFICATION. The Merger Agreement provides that (i) from the Effective
Time through the later of the sixth anniversary of the date on which the
Effective Time occurs and (ii) the expiration of any statute of limitations
applicable to any Covered Claim (defined below), Parent shall, or shall cause
the Surviving Corporation to, indemnify and hold harmless each present and
former officer, director, employee or agent of the Company, including, without
limitation, each person controlling any of the foregoing persons (the
"Indemnified Parties"), against all claims, losses, liabilities, damages,
judgments, fines, fees, costs or expenses, including, without limitation,
attorneys' fees and disbursements (collectively, "Costs"), incurred in
connection with any claim, action, suit, proceeding or investigation ("Claim"),
whether civil, criminal, administrative or investigative, arising out of or
pertaining to (A) the fact that such person is or was a director, officer,
employee or agent of the Company or any subsidiaries or is or was serving at the
request of the Company or any of its subsidiaries as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, or (B) the Merger Agreement, or any of the transactions
contemplated thereby, in each case to the extent that any such Claim pertains to
matters existing or occurring at or prior to the Effective Time (including,
without limitation, the Merger Agreement and the transactions and actions
contemplated thereby), whether asserted or claimed prior to, at or after the
Effective Time ("Covered Claims"), to the fullest extent permitted under
applicable law and the Certificate of Incorporation or By-Laws of the Company or
under indemnification agreements in effect on the date thereof, including
without limitation provisions relating to advancement of expenses incurred in
the defense of any Claim, subject to the provision by such Indemnified Party of
an undertaking to reimburse the amounts so advanced in the event of a final
non-appealable determination by a court of competent jurisdiction that such
Indemnified Party is not entitled thereto. Without limiting the foregoing, in
the event that any Covered Claim is brought against any Indemnified Party
(whether arising before or after the Effective Time), the Indemnified Party may
retain counsel satisfactory to such Indemnified Party, and Parent shall, or
shall cause the Surviving Corporation to, advance the fees and expenses of such
counsel for the Indemnified Party in accordance with the Certificate of
Incorporation or By-Laws of the Company in effect on the date of the Merger
Agreement. In addition, the Merger Agreement provides that Parent shall keep in
effect, or shall cause the Surviving Corporation to keep in effect provisions in
its Limited Liability Company Agreement (in the case of the Parent) or
Certificate of Incorporation and By-Laws (in the case of the Surviving
Corporation) providing for exculpation of director and officer liability and its
indemnification of the Indemnified Parties to the fullest extent permitted by
law, which provisions shall not be amended except as required by applicable law
or except to make changes permitted by law that would enlarge the Indemnified
Parties' right to indemnification.
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CONDITIONS PRECEDENT. The Merger Agreement provides that if the Offer is
consummated the respective obligations of the Parent, the Offeror and the
Company to effect the Merger shall be subject to the satisfaction of, at or
before the Effective Time, each of the following conditions, any or all of which
may be waived, in whole or in part, to the extent permitted by applicable law:
(a) Parent will have accepted for payment and purchased all Shares validly
tendered and not withdrawn pursuant to the Offer;
(b) No federal or state governmental or regulatory body or court of
competent jurisdiction shall have enacted, issued, promulgated or
enforced any statute, rule, regulation, executive order, decree,
judgment, preliminary or permanent injunction or other order that is in
effect and that prohibits, enjoins or otherwise restrains the
consummation of the Merger; provided, that the parties shall use
commercially reasonable efforts to cause any such decree, judgment,
injunction or order to be vacated or lifted; and
(c) No statute, rule, order, decree or regulation shall have been enacted or
promulgated by any foreign or domestic Governmental Entity or authority
of competent jurisdiction which prohibits the consummation of the Merger
and all material foreign or domestic governmental consents, orders and
approvals required for the consummation of the Merger and the
transactions contemplated thereby shall have been obtained and shall be
in effect at the Effective Time.
If Section 1.4 of the Merger Agreement shall have become applicable
(requiring Stockholder approval of the Merger), the obligations of the Parent
and Offeror to effect the Merger shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions, any or all of which may
be waived, in whole or in part, to the extent permitted by applicable law:
(i) The Merger Agreement shall have been adopted, and the Merger shall
have been approved, by a vote of the holders of a majority of the
outstanding Shares as required by the Delaware GCL and the Company's
Certificate of Incorporation and By-Laws.
(ii) (x) There shall not be pending (or have been entered any order or
injunction in) any action or proceeding brought by any federal or
state governmental, regulatory or administrative agency, authority or
commission having jurisdiction, (y) there shall not have been
instituted or be pending any action or proceeding (other than actions
or proceedings which do not have any basis in fact or reasonable
likelihood of success on the merits) in, and no order or injunction
shall have been entered in any action or proceeding before, any court
or arbitrator having jurisdiction, and (z) there shall not have been
enacted, promulgated, entered, enforced or deemed applicable to the
Company or to the Merger any statute, rule, regulation, judgment, or
administrative interpretation, in each case which has or is
reasonably likely to have the effect of (A) making illegal or
otherwise restraining or prohibiting the Merger; (B) prohibiting or
materially limiting the ownership or operation by Parent, Offeror or
their respective affiliates of any material portion of the business
or assets of the Company or compelling Parent or Offeror to dispose
of or hold separate all or any material portion of the business or
assets of the Company, in each case as a result of the transactions
contemplated by the Merger Agreement; (C) imposing material
limitations on the ability of Parent or any of its affiliates to
exercise full rights of ownership of the shares of the Surviving
Corporation; or (D) preventing Parent or any of its affiliates from
acquiring, or requiring divestiture by Parent or any of its
affiliates of, any shares of the Surviving Corporation; or
(iii) The Company shall not have breached or failed to comply with any of
its obligations under the Merger Agreement (which breach, if curable,
has not been cured within thirty (30) days following receipt of
written notice thereof by Parent specifying in reasonable detail the
basis of such alleged breach), and without giving effect to any
limitation based on "materiality" or "material adverse effect," the
representations and warranties of the Company contained in the Merger
Agreement shall have been true and correct when made and (except for
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representations and warranties made as of a particular date which
need only be true and correct as of such date) shall be true and
correct as of the Effective Time as though made on and as of such
date, except in each case (A) for changes specifically permitted or
contemplated by the Merger Agreement or (B) where the failure of any
such representations and warranties to be true and correct, or the
failure of performance of or compliance with such obligations would
not have a material adverse effect on the Company; or
(iv) No stock options issued by the Company will be exercisable after the
Effective Time;
(v) The SG Cowen Commitment Letter shall not have been terminated by SG
and all of the Conditions to Effectiveness and to Initial Borrowing
set forth in the Term Sheet accompanying the SG Cowen Commitment
Letter and set forth in Section 13-"The Merger Agreement, the
Stockholders Agreement and the SG Cowen Commitment Letter" shall be
satisfied or waived.
TERMINATION. Section 7.1 of the Merger Agreement provides that it may be
terminated and the Merger contemplated thereunder may be abandoned at any time
(notwithstanding approval of the Merger by the stockholders of the Company, if
required by applicable provisions of the Delaware GCL), prior to the Effective
Time:
(a) by mutual written consent of the Company and Parent;
(b) by the Company, Parent or Offeror, (i) if the consummation of the Offer
shall not have occurred on or before 60 days from the date of the Merger
Agreement, unless the Offer has been terminated and the parties are
required to proceed with the Merger in accordance with Section 1.4 of the
Merger Agreement (requiring Stockholder approval of the Merger), or (ii)
if the consummation of the Merger shall not have occurred on or before
150 days from the date of the termination of the Offer in accordance with
Section 1.4 of the Merger Agreement; provided, that the right to
terminate the Merger Agreement under this clause (b) shall not be
available to any party whose misrepresentation in the Merger Agreement or
whose failure to perform any of its covenants and agreements or to
satisfy any obligation under the Merger Agreement has been the cause of
or resulted in the failure of the Offer or the Merger to be consummated
on or before such date;
(c) by the Company, Parent or Offeror, if (i) any federal or state court of
competent jurisdiction or other federal or state governmental or
regulatory body shall have issued any judgment, injunction, order or
decree prohibiting, enjoining or otherwise restraining the transactions
contemplated by the Merger Agreement and such judgment, injunction, order
or decree shall have become final and nonappealable (provided, that the
party seeking to terminate the Merger Agreement pursuant to this clause
(c) shall have used commercially reasonable efforts to remove such
judgment, injunction, order or decree) or (ii) any statute, rule,
regulation or executive order is promulgated or enacted by any federal or
state governmental authority after the date of the Merger Agreement which
prohibits the consummation of the Offer or the Merger shall be in effect;
(d) by the Company, if (i) Offeror fails to commence the Offer as provided
in Section 1.1 of the Merger Agreement, (ii) the Offer expires or is
terminated without a number of Shares being purchased thereunder that
constitutes at least 90% of the issued and outstanding Shares, unless the
parties are required to proceed with the Merger as provided in Section
1.4 of the Merger Agreement (requiring Stockholder approval of the
Merger), or (iii) Parent fails to purchase validly tendered Shares in
violation of the terms and conditions of the Offer or the Merger
Agreement, unless in any such case such termination or expiration has
been caused by or resulted from the failure of the Company to perform in
any material respect any of its covenants and agreements contained in the
Merger Agreement;
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(e) by Parent or Offeror, if (i) due to an occurrence that if occurring
after the commencement of the Offer would result in a failure to satisfy
any of the conditions set forth in Section 14-"Certain Conditions to the
Parent's and Offeror's Obligations," Parent, the Offeror, or any of their
affiliates shall have failed to commence the Offer on or prior to five
business days following the date of the initial public announcement of
the Offer; or (ii) the Offer is terminated or expires as a result of the
failure of a condition specified in Section 14-"Certain Conditions to the
Parent's and Offeror's Obligations" hereto or on the expiration of the
Offer without the purchase of any Shares thereunder, unless the parties
are required to proceed with the Merger as provided in Section 1.4 of the
Merger Agreement (requiring Stockholder approval of the Merger, or unless
in either case such termination or expiration has been caused by or
resulted from the failure of Parent or Offeror to perform in any material
respect any of its covenants and agreements contained in the Merger
Agreement;
(f) by Parent or Offeror, if the Company's Board of Directors withdraws or
modifies in a manner adverse to Parent or Offeror its favorable
recommendation of the Offer or the Merger (other than due to a breach by
Parent or Offeror) or shall have approved or recommended any Acquisition
Proposal or entered into, or announced an intention of entering into, an
agreement in principle (or similar agreement) or definitive agreement in
respect of an Acquisition Proposal with a party other than Parent or any
of its affiliates or the Board of Directors of the Company resolves to do
any of the foregoing; or there occurs the condition described in
paragraph (b) of Section 14-"Certain Conditions to the Parent's and
Offeror's Obligations;" or
(g) by the Company, if (i) the Company's Board of Directors shall withdraw,
modify, or change its approval or recommendation of the Offer or the
Merger or shall have resolved to do any of the foregoing pursuant to
Section 5.7 of the Merger Agreement or (ii) any Person or group of
Persons shall have made an Acquisition Proposal the acceptance of which
the Company's Board of Directors determines, after receiving at a meeting
of the Board of Directors advice from its financial advisors and
independent legal counsel, is required to comply with its fiduciary
duties under applicable law, provided, that the right to terminate the
Merger Agreement pursuant hereto shall not be available to the Company
unless (x) the Company has complied in all material respects with its
obligations in this clause and (y) immediately after such termination,
the Company enters into a definitive agreement to effect the Acquisition
Proposal referred to herein and complies with its obligations with
respect to the payment of certain fees under Section 7.3(b) of the Merger
Agreement;
(h) by the Company, if Parent or Offeror shall have breached or failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in the Merger Agreement, which
breach or failure to perform (i) would give rise to the failure of the
conditions to Closing set forth in clauses (a) through (c) above and (ii)
either is not reasonably capable of being cured or, if it is reasonably
capable of being cured, has not been cured within the earlier of (x) 30
days after giving of written notice to Parent of such breach or (y) the
expiration of the Offer (if applicable);
(i) by Parent or Offeror, if the Company shall have breached or failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in the Merger Agreement, which
breach or failure to perform (i) would give rise to the failure of the
conditions to Closing set forth in clauses (a) through (c) above and (ii)
either is not reasonably capable of being cured or, if it is reasonably
capable of being cured, has not been cured within the earlier of (x) 30
days after giving of written notice to the Company of such breach or (y)
the expiration of the Offer (if applicable); and
(j) by Parent, Offeror or the Company, if the SG Cowen Commitment Letter
shall have been terminated by SG or any of the Conditions to
Effectiveness and to Initial Borrowing set forth in the Term Sheet
accompanying The SG Cowen Commitment Letter shall fail to be satisfied or
waived. See "The SG Cowen Commitment Letter" below.
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EFFECT OF TERMINATION; TERMINATION FEE. The Merger Agreement provides that
in the event of the termination of the Merger Agreement, pursuant to Section 7.1
thereof, the Merger Agreement forthwith shall become void and of no further
force or effect, and no party thereto (or any of its affiliates, directors,
officers, agents or representatives) shall have any liability or obligation
hereunder, except in any such case (a) as provided in Sections 5.2(b)
(Confidentiality), 5.6 (Public Announcements), and 7.3 (Fees and Expenses)
thereof, which Sections shall survive any such termination and (b) to the extent
such termination results from the breach by such party of any of its
representations, warranties, covenants or agreements contained in the Merger
Agreement. In addition, whether or not the Offer or the Merger is consummated,
all costs and expenses incurred in connection with the Merger Agreement and the
transactions contemplated thereby (including, without limitation, fees and
disbursements of counsel, financial advisors and accountants) shall be borne by
the party which incurs such cost or expense; provided, that if the Merger
Agreement is terminated pursuant to Section 7.1 thereof as a result of the
willful and material misrepresentation by a party or the willful and material
breach by a party of any of its covenants or arrangements set forth herein, such
party shall pay the costs and expenses incurred by the other party in connection
with the Merger Agreement. Notwithstanding the foregoing, provided that neither
Parent nor Offeror shall be in material breach of their respective obligations
under the Merger Agreement, if the Company terminates the Merger Agreement
pursuant to Section 7.1(g) thereof or Parent terminates the Merger Agreement
pursuant to Section 7.1(f) thereof, then the Company shall pay to Parent a fee
of $3,500,000 plus out-of-pocket expenses not to exceed $1,000,000.
THE STOCKHOLDER AGREEMENTS
AGREEMENT TO TENDER. The Offeror has entered into six Stockholder
Agreements, each dated as of December 2, 1998, with the Stockholders identified
therein (each, a "Stockholder" and collectively, the "Stockholders")
beneficially owning an aggregate of 2,186,161 Shares representing approximately
53% of the outstanding Shares on a fully diluted basis (the "Stockholders'
Shares") pursuant to which the Stockholders have agreed to tender into the Offer
all of the Stockholders' Shares and not withdraw any of the Stockholders' Shares
prior to the expiration of the Offer or termination of the Merger Agreement.
NO DISPOSITION OF STOCKHOLDERS' SHARES AND NO ACQUISITION OF SHARES. In the
Stockholder Agreements, each Stockholder severally agreed that, except as
contemplated by the Stockholder Agreements, such Stockholder will not (a) sell,
pledge or otherwise dispose of any Shares, (b) deposit the Shares into a voting
trust or enter into a voting agreement or arrangement with respect to the Shares
or grant any proxy with respect thereto, or (c) enter into any contract, option
or other arrangement or undertaking with respect to the director indirect sale,
assignment, transfer or other disposition of any of the Shares.
VOTING AGREEMENT. During and for the term of the Stockholder Agreements,
each Stockholder has appointed the Offeror, or any nominee of the Offeror, with
full power of substitution, as each such Stockholder's true and lawful attorney
and proxy, for and in such Stockholders' name, place and stead, to vote each of
the Stockholder's Shares as such Stockholder's proxy, at the special meeting of
the Stockholders of the Company (including the right to sign the Stockholder's
name (as a stockholder) to any consent, certificate or other document relating
to the Company that the Delaware GCL may permit or require) (a) in favor of the
adoption of the Merger Agreement and approval of the Transaction contemplated
thereby, (b) in favor of any other matter necessary to the consummation of the
transactions contemplated by the Merger Agreement and considered and voted upon
at such special meeting of the Company, and (c) against any acquisition proposal
or any other action or agreement that would result in a breach of any covenant,
representation or warranty or another obligation or agreement of the Company
under the Merger Agreement or that could result in any of the conditions to the
Parent's or Offeror's obligations under the Merger Agreement not being
fulfilled.
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TERMINATION. The Stockholder Agreements will terminate on the first to
occur of (a) the closing of the transactions contemplated by the Merger
Agreement, or (b) the valid termination of the Merger Agreement.
SG COWEN COMMITMENT LETTER
Pursuant to the SG Cowen Commitment Letter, the Parent intends to enter into
a new credit facility (the "SG Credit Facility") with Societe Generale, as
administrative agent ("SG" or the "Agent") for a group of financial institutions
(the "Lenders").
GENERAL. The SG Credit Facility will provide for borrowings in an aggregate
principal amount of $90,000,000 at any one time outstanding, and SG Cowen has
agreed, subject to certain conditions, to use its best efforts to obtain
commitments for an additional $10 million from other banks and financial
institutions, comprised of up to (i) $30.0 million under a revolving credit
facility, subject to increase to $40 million to the extent such additional
commitments are obtained (the "Revolving Credit Facility") and (ii) $60.0
million under two separate term loan facilities (collectively the "Term Loans").
Borrowings under the SG Credit Facility may only be used to acquire all of the
capital stock of the Company and for general corporate purposes of the Parent.
INTEREST. For purposes of calculating interest, at the election of the
Borrower, the Loans will be either Base Rate Loans or LIBOR Loans. Base Rate
Loans under the Revolving Credit Facility and one of the Term Loans will bear
interest at the Agent's base rate plus 2 1/4% and LIBOR Loans under such loans
will bear interest at the Agent's LIBOR (Reserve Adjusted) plus 3 1/4%. Base
Rate Loans under the Second Term Loan will bear interest at the Agent's Base
Rate plus 2 3/4% and LIBOR Loans under the Second Term Loan will bear interest
at the Agent's LIBOR (Reserve Adjusted) plus 3 3/4%. The foregoing interest
rates will be subject to step downs based upon the provisions of the SG Credit
Facility.
AVAILABILITY AND REPAYMENT. Subject to the provisions of the SG Credit
Facility, the Parent may, from time to time, borrow, repay and reborrow under
the Revolving Credit Facility, amounts based on specified percentages of
outstanding accounts receivable, cash equivalents and inventory. Subject to the
provisions of the SG Credit Facility, borrowings under the Term Loans may be
made up to the full amount available thereunder, subject to satisfaction of
certain financial and non-financial conditions to the satisfaction of the
Lenders. Availability under the Term Loans will be permanently reduced by any
amounts borrowed under the Term Loans, and amounts repaid under the Term Loans
may not be reborrowed. Subject to certain exceptions, the SG Credit Facility
will require mandatory prepayments in certain circumstances, including 75% of
Excess Cash Flow (to be defined in the SG Credit Facility), 100% of net cash
proceeds from certain asset sales, and proceeds from certain issuances of
capital stock and certain issuances of additional indebtedness. Such prepayments
will first be applied to repay outstanding Term Loans and then to Revolving
Loans.
SECURITY. Borrowings under the SG Credit Facility will be secured, for the
ratable benefit of the Lenders, by a first priority perfected security interest
in (a) all of the capital stock of the Guarantors (as defined below) owned
directly or indirectly by the Parent, (b) all current and hereinafter acquired
tangible and intangible assets of the Parent and the Guarantors (as defined
below) and interests in property of the Parent, Guarantors (as defined below)
and the Parent's and Company's other direct and indirect subsidiaries.
GUARANTEES. The terms of the SG Credit Facility will require that the
Parent's payment obligations be jointly and severally guaranteed by both the
Parent's and the Company's future direct and indirect subsidiaries, excluding
Key Components Finance Corp. (collectively, the "Guarantors").
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COVENANTS. The SG Credit Facility will contain financial covenants pursuant
to which the Company and its direct and indirect subsidiaries will be required,
on a consolidated basis, to maintain (i) a Minimum Fixed Charge Coverage Ratio
(to be defined in the SG Credit Facility); (ii) a Minimum Interest Coverage
Ratio (to be defined in the SG Credit Facility) and (iii) a Maximum Funded Debt
to EBITDA Ratio (to be defined in the SG Credit Facility). In addition, the SG
Credit Facility will contain covenants customarily found in facilities of this
type pertaining to the management and operation of the Parent and its
subsidiaries. These covenants will include, among others, requirements that each
of the Parent and its subsidiaries (i) preserve its corporate existence and not
amend its charter or bylaws; (ii) maintain adequate insurance coverage; (iii)
maintain its properties; (iv) not enter into new lines of business; and (v)
comply with applicable laws and regulations, including those related to tax,
employee, pension and environmental matters; and a requirement that Parent shall
cause the Merger to occur promptly after the closing of such facilities.
The SG Credit Facility will subject the Parent and its subsidiaries to
significant limitations on indebtedness, guarantees, capital expenditures, liens
or encumbrances, mergers, consolidations, divestitures, acquisitions,
investments, capital contributions, joint ventures, partnerships, creation of
new subsidiaries, changes of business, loans and advances, dividends and other
stock payments, repurchases or redemptions of equity, asset sales or transfers,
leases, voluntary prepayments or repurchases or redemptions of debt,
transactions with affiliates and management fees.
EVENTS OF DEFAULT. The SG Credit Facility will provide for events of
default customarily found in facilities of this type, including: (i) non-payment
of principal or interest or fees when due; (ii) inaccuracy of any representation
or warranty in any material respect; (iii) failure to perform or observe
covenants after any applicable grace period; (iv) cross-defaults to other
material indebtedness; (v) bankruptcy or insolvency defaults; (vi) material
judgment defaults; (vii) change of ownership or control; (viii) "ERISA"
defaults; and (ix) impairment of security.
The effectiveness of the SG Credit Facility and the initial borrowings
thereunder will be subject to conditions precedent that are usual for facilities
and transactions of this type, and to such additional conditions precedent as
may be required by the Lenders, including but not limited to:
(1) The Parent or the Offeror shall have acquired no less than 90% of the
capital stock of the Company (the "Acquisition") for an aggregate
consideration not to exceed the sum of (x) $88,500,000 plus (y) the
aggregate amount of cash proceeds received by the Parent from the issuance
of additional common equity to finance the Acquisition; and the Merger
Agreement shall have been duly approved by the boards of directors of the
Offeror and the Company. In addition, the Agent shall be satisfied that the
funds available to the Parent (including the proceeds of the Term Loans)
will be sufficient to consummate the Acquisition.
(2) All indebtedness of the Company and it subsidiaries shall have been paid in
full and any liens securing any such indebtedness shall have been terminated
of record.
(3) The form and substance of the Merger Agreement shall be reasonably
satisfactory to the Agent. All conditions to the Merger set forth in the
Merger Agreement shall have been satisfied, and certain representations
regarding environmental matters shall be true and correct.
(4) The Acquisition and the Merger shall have been made in compliance with all
applicable laws, statutes, rules and regulations.
(5) There shall be no governmental or judicial action, actual or threatened,
that is reasonably likely to restrain, prevent or impose burdensome
conditions on the Acquisition or the Merger, or that would cause a material
adverse change on the Parent, any of the Guarantors, the Company or any of
the Company's subsidiaries.
(6) The lease arrangement relating to the facilities of the Company located at
2655 Corporate Drive, Napa, California, shall have been modified to provide
for the payment of rent thereunder on terms comparable to those existing
prior to the Merger.
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(7) The Agent shall have received a certificate from the Chief Financial
Officers of the Parent and all Guarantors, satisfactory in all respects to
the Lenders, to the effect that, after giving effect to the Acquisition, the
Merger and the making of the Term Loans, the Parent and the Guarantors
(taken as a whole) will not be insolvent, will not be rendered insolvent and
will not have insufficient capital with which to engage in their businesses
or will have incurred debts within its ability to pay such debts as they
mature.
(8) There shall not have occurred or become known any material adverse condition
affecting, or any material adverse change with respect to, the condition
(financial or otherwise), operations, business, assets or liabilities of the
Parent, Company and their respective subsidiaries (taken as a whole), since
December 31, 1997.
(9) The representations and warranties in the SG Credit Facility shall be true
and correct.
(10) No event shall have occurred which would constitute an Event of Default
under the SG Credit Facility.
(11) The SG Credit Facility and all documentation with respect to the SG Credit
Facility shall be satisfactory to the Agent, the Lenders and their counsel.
14. CERTAIN CONDITIONS TO THE PARENT'S AND OFFEROR'S OBLIGATIONS.
Notwithstanding any other term of the Offer, the Offeror shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-l(c) under the Exchange Act
(relating to the Offeror's obligation to pay for or return tendered Shares after
the termination or withdrawal of the Offer), or, subject to the terms and
conditions of the Merger Agreement, amend the Offer as to any Shares not then
accepted for payment, shall not be required to accept for payment or pay for any
Shares, or may delay the acceptance for payment of Shares tendered, if (1) at
the expiration of the Offer, the number of Shares validly tendered and not
withdrawn, together with the Shares beneficially owned by Parent and its
affiliates, shall not constitute at least 90% of the outstanding Shares or (2)
at any time after December 2, 1998 and prior to the expiration date of the
Offer, any of the following events shall occur:
(a) (x) there shall be pending (or there shall have been entered any order
or injunction in) any action or proceeding brought by any federal or
state governmental, regulatory or administrative agency, authority or
commission having jurisdiction, (y) there shall have been instituted or
be pending any action or proceeding (other than actions or proceedings
which do not have any basis in fact or a reasonable likelihood of success
on the merits) in, or any order or injunction shall have been entered in
any action or proceeding before, any court or arbitrator having
jurisdiction, or (z) there shall have been enacted, promulgated, entered,
enforced or deemed applicable to the Company or to the Offer or the
Merger any statute, rule, regulation, judgment, or administrative
interpretation, in each case which has or is reasonably likely to have
the effect of (i) making illegal or otherwise restraining or prohibiting
the Offer or the Merger or the acquisition by Parent or Offeror of any
Shares; (ii) prohibiting or materially limiting the ownership or
operation by Parent, Offeror or their respective affiliates of the Shares
or any material portion of the Shares or business or assets of the
Company or compelling Parent or Offeror to dispose of or hold separate
all or any material portion of the Shares or the business or assets of
the Company, in each case as a result of the transactions contemplated by
the Offer or the Merger Agreement; (iii) imposing material limitations on
the ability of Parent or any of its affiliates to exercise full rights of
ownership of the Shares, including, without limitation, the right to vote
any Shares purchased by them on all matters properly presented to the
stockholders of the Company; or (iv) preventing Parent or any of its
affiliates from acquiring, or requiring divestiture by Parent or any of
its affiliates of, any Shares; or
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(b) any Person, entity or "group" (as such term is used in Section 13(d)(3)
of the Exchange Act) other than Parent or any of its affiliates shall
have become the beneficial owner (as that term is used in Rule 13d-3
under the Exchange Act) of more than 50% of the outstanding Shares,
provided that the directors of the Company on the date of the Merger
Agreement shall not be deemed to constitute any such Person, entity, or
"group" or the Company shall have entered into a definitive agreement or
agreement in principle with any person with respect to an Acquisition
Proposal or similar business combination with the Company; or
(c) the Company shall have breached or failed to comply with any of its
obligations under the Merger Agreement (which breach, if curable, has not
been cured within thirty (30) days following receipt of written notice
thereof by Parent specifying in reasonable detail the basis of such
alleged breach), or, without giving effect to any limitation based on
"materiality" or "material adverse effect, "any representation or
warranty of the Company contained in the Merger Agreement shall not have
been true and correct when made or (except for representations and
warranties made as of a particular date which need only be true and
correct as of such date) shall not be true and correct as of the date of
consummation of the Offer as though made on and as of such date, except
in each case (i) for changes specifically permitted or contemplated by
the Merger Agreement, or (ii) where the failure of any such
representations and warranties to be true and correct or the failure of
performance of or compliance with such obligations would not have a
material adverse effect on the Company; or
(d) the Merger Agreement shall have been terminated pursuant to its terms or
amended pursuant to its terms to provide for such termination or
amendment of the Offer; or
(e) the Board of Directors of the Company shall have modified or amended in
any manner adverse to Parent or Offeror or shall have withdrawn its
recommendation of the Offer or the Merger, or recommended any Acquisition
Proposal or shall have resolved to do any of the foregoing; or
(f) any stock options issued by the Company will be exercisable after the
Merger; or
(g) the SG Cowen Commitment Letter shall have been terminated by SG or any
of the Conditions to Effectiveness and to Initial Borrowing set forth in
the Term Sheet accompanying the SG Cowen Commitment Letter and Section
13-"The Merger Agreement, The Stockholder Agreement and the SG Cowen
Commitment Letter," shall fail to be satisfied or waived;
which, in the good faith judgement of Parent makes it inadvisable to proceed
with the Offer or with acceptance for payment or payment for Shares.
The foregoing conditions are for the sole benefit of Parent and Offeror and
may be asserted or waived by Parent or Offeror in whole or in part at any time
or from time to time in its reasonable discretion subject to the terms and
conditions of the Merger Agreement. The failure of Parent or Offeror at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
15. CERTAIN LEGAL MATTERS.
Except as set forth in this Section, the Offeror is not aware of any
approval or other action by any governmental or administrative agency which
would be required for the acquisition or ownership of Shares by the Offeror as
contemplated herein. Should any such approval or other action be required, it
will be sought, but the Offeror has no current intention to delay the purchase
of Shares tendered pursuant to the Offer pending the outcome of any such matter,
subject, however, to the Offeror's right to decline to purchase Shares if any of
the conditions specified in Section 14-"Certain Conditions to the Parent's and
Offeror's Obligations" shall have occurred. There can be no assurance that any
such approval or other action, if needed, would be obtained or would be obtained
without substantial conditions, or that adverse consequences might not result to
the Company's business or that certain parts of the Company's business might not
have to be disposed of if any such approvals were not obtained or other action
taken.
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APPRAISAL RIGHTS. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated, stockholders of the Company would
have certain rights under the Delaware GCL to dissent and/or demand appraisal
of, and payment in cash of the fair value of, their Shares. Such rights, if the
statutory procedures are complied with, could lead to a judicial determination
of the fair value (excluding any element of value arising from the
accomplishment or expectation of the Merger) required to be paid in cash to such
dissenting holders for their Shares. Any such judicial determination of the fair
value of Shares could be based upon considerations other than or in addition to
the price paid in the Offer and the market value of the Shares, including asset
values and the investment value of the Shares. The value so determined could be
more or less than the purchase price per Share pursuant to the Offer or the
consideration per Share to be paid in the Merger. See Section 12-"Purpose of the
Offer and the Merger; Plans for the Company."
DELAWARE STATE TAKEOVER LAWS. Under the Delaware GCL, if the Offeror
acquires less than 90% of each class of the understanding Shares, the Merger
would require, among other things, the affirmative vote of the holders of at
least a majority of all the outstanding Shares. If the Offeror acquires,
pursuant to the Offer or otherwise, including pursuant to the Stockholder
Agreements, voting power with respect to at least a majority of the outstanding
Shares which would be the case if the Minimum Condition is satisfied, will have
the voting power to effect the merger without the vote of any other stockholder,
which it intends to do. The Delaware GCL also provides that if a parent company
owns at least 90% of each class of stock of a subsidiary, the parent company can
effect a merger with the subsidiary without the authorization of the other
stockholders of the subsidiary. Accordingly, if the Offeror acquires 90% or more
of the outstanding Shares pursuant to the Offer and the Stockholder Agreements
or otherwise, the Offeror could, and intends to, consummate the Merger without
the approval of any other stockholders of the Company.
In addition, several decisions by Delaware courts have held that, in certain
instances, a controlling stockholder of a corporation involved in a merger has a
fiduciary duty to the other stockholders that requires the merger to be fair to
such other stockholders. In determining whether a merger is fair to minority
stockholders, the Delaware courts have considered, among other things, the type
and amount of consideration to be received by the stockholders and whether there
were fair dealings among the parties. The Delaware Supreme Court has indicated
in recent decisions that in most cases the remedy available in a merger that is
found not to be "fair" to minority stockholders is the right to appraisal
described above or a damages remedy based on essentially the same principles.
Section 203 of the Delaware GCL prohibits business combination transactions
involving a Delaware corporation and an "interested stockholder" (defined
generally as any person that directly or indirectly beneficially owns 15% or
more of the outstanding voting stock of the subject corporation) for three years
following the date such person became an "interested stockholder," unless
certain exceptions apply, including that prior to such date the Board of
Directors of the Company approved either the business combination or the
transaction which resulted in such person being an interested stockholder. As
set forth below, the Company's Board of Directors has taken actions to make
Delaware GCL Section 203 inapplicable to the Parent and the Offeror in
connection with the Offer, the Merger and Stockholder Agreements.
In the Merger Agreement, the Company represented that its Board of Directors
has unanimously approved the Merger Agreement and the Stockholder Agreements and
the transactions contemplated thereby, including the Offer and the Merger, for
purposes of Delaware GCL Section 203, such approval occurring prior to the time
the Offeror became an "interested stockholder" as defined in Delaware GCL
Section 203, so that the provisions thereof are not applicable to such
transactions.
OTHER STATE TAKEOVER LAWS. A number of other states have adopted laws and
regulations applicable to attempts to acquire securities of corporations which
are incorporated, or have substantial assets, stockholders, principal executive
offices or principal places of business, or whose business operations otherwise
have substantial economic effects in such states. In EDGAR V. MITE CORP., in
1982, the Supreme Court of the United States (the "U.S. Supreme Court")
invalidated on constitutional grounds the Illinois Business
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Takeover statute, which, as a matter of state securities law, made takeovers of
corporations meeting certain requirements more difficult. However, in 1987, in
CTS CORP. V. DYNAMICS CORP. OF AMERICA, the U.S. Supreme Court held that the
State of Indiana may, as a matter of corporate law and, in particular, with
respect to those aspects of corporate law concerning corporate governance,
constitutionally disqualify a potential acquirer from voting on the affairs of a
target corporation without the prior approval of the remaining stockholders. The
state law before the U.S. Supreme Court was by its terms applicable only to
corporations that had a substantial number of stockholders in the state and were
incorporated there.
The Company, directly or through subsidiaries, conducts business in a number
of states throughout the United States, some of which have enacted takeover
laws. The Offeror does not know whether any of these laws will, by their terms,
apply to the Offer or the Merger and has not complied with any such laws. Should
any person seek to apply any state takeover law, the Offeror will take such
action as then appears desirable, which may include challenging the validity or
applicability of any such statute in appropriate court proceedings. In the event
it is asserted that one or more state takeover laws is applicable to the Offer
or the Merger, and an appropriate court does not determine that it is
inapplicable or invalid as applied to the Offer, the Offeror might be required
to file certain information with, or receive approvals from, the relevant state
authorities. In addition, if enjoined, the Offeror might be unable to accept for
payment any Shares tendered pursuant to the Offer, or be delayed in continuing
or consummating the Offer and the Merger. In such case, the Offeror may not be
obligated to accept for payment any Shares tendered. See Section 14-"Certain
Conditions to the Parent's and Offeror's Obligations."
16. FEES AND EXPENSES.
Neither the Offeror nor the Parent, nor any officer, director, stockholder,
agent or other representative of the Offeror or the Parent, will pay any fees or
commissions to any broker, dealer or other person (other than the Dealer Manager
and the Information Agent) for soliciting tenders of Shares pursuant to the
Offer. Brokers, dealers, commercial banks and trust companies and other nominees
will, upon request, be reimbursed by the Offeror for customary mailing and
handling expenses incurred by them in forwarding materials to their customers.
SG Cowen Securities Corporation ("SG Cowen") is acting as the Dealer Manager
in connection with the Offer. KCI has agreed to reimburse SG Cowen for its
out-of-pocket expenses, including the fees and expenses of legal counsel and
other advisors, incurred in connection with its engagement, and to indemnify SG
Cowen and certain related persons against certain liabilities and expenses in
connection with its engagement, including certain liabilities under the federal
securities laws. See also Section 13-"The Merger Agreement, the Stockholder
Agreements and the SG Cowen Commitment Letter." In the ordinary course of
business, SG Cowen and its affiliates may actively trade the debt and equity
securities of KCI and the equity securities of the Company for their own account
and for the accounts of customers and, accordingly, may at any time hold a long
or short position in such securities.
The Offeror has retained D.F. King & Co., Inc., as Information Agent, and
SunTrust Bank, Atlanta, as Depositary, in connection with the Offer. The
Information Agent and the Depositary will receive reasonable and customary
compensation for their services hereunder and reimbursement for their reasonable
out-of-pocket expenses. The Information Agent and the Depositary will also be
indemnified by the Offeror against certain liabilities in connection with the
Offer. The Information Agent may contact holders of Shares by mail, telex,
telegraph and personal interviews and may request brokers, dealers and other
nominee stockholders to forward materials relating to the Offer to beneficial
owners of Shares.
36
<PAGE>
17. MISCELLANEOUS.
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares residing in any jurisdiction in which the making or
acceptance thereof would not be in compliance with the securities, blue sky or
other laws of such jurisdiction. In any jurisdiction where the securities, blue
sky or other laws require the Offer to be made by a licensed broker or dealer,
the Offer shall be deemed to be made on behalf of the Offeror by the Dealer
Manager or one or more registered brokers or dealers licensed under the laws of
such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE OFFEROR OTHER THAN AS CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF ANY SUCH INFORMATION OR
REPRESENTATION IS GIVEN OR MADE, IT SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
The Offeror and the Parent have filed with the Commission (i) a Schedule
14D-l, pursuant to Section 14(d)(1) of the Exchange Act and Rule 14d-3
promulgated thereunder, furnishing certain information with respect to the Offer
and (ii) a Schedule 13D, pursuant to Section 13(d)(1) of the Exchange Act. Such
Schedule 14D-l and Schedule 13D, and any amendments thereto, including exhibits,
may be examined and copies may be obtained at the same places and in the same
manner as set forth with respect to the Company in Section 8-"Certain
Information Concerning the Company" (except that they will not be available at
the regional offices of the Commission).
KCI ACQUISITION CORP.
December 9, 1998
37
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
OF
KEY COMPONENTS, INC., THE PARENT AND THE OFFEROR
The following table sets forth the name, business address and present
principal occupation or employment and material occupations, positions, offices
or employments for the past five years of each Director and Executive Officer of
KCI, the Parent and the Offeror.
<TABLE>
<CAPTION>
NAME AND
BUSINESS ADDRESS OFFICE PRINCIPAL OCCUPATION OR EMPLOYMENT (PAST/PRESENT)
- ------------------------------ --------------------------- ---------------------------------------------------
<S> <C> <C>
John S. Dyson................. Chairman of the Board of John S. Dyson has been Chairman of the Board of
c/o Millbrook Capital Directors of KCI, the Directors of KCI, the Parent, and the Offeror since
Management Inc. Parent and the Offeror their inception. Since 1996, Mr. Dyson has been
Wing Road Chairman of the Board of Directors of Millbrook
RRT, Box 167D Capital Management Inc. ("Millbrook"), a management
Millbrook, NY 12545 company providing executive level services to KCI
and its subsidiaries under a Management Agreement,
and he currently serves as Chairman of the Mayor of
the City of New York's Council of Economic
Advisors. From 1994 to 1996, Mr. Dyson served as
Deputy Mayor for Finance and Economic Development
for the City of New York. From 1982 to 1993 Mr.
Dyson was the Chairman of Dyson-Sinclair
Associates, a management company and the
predecessor of Millbrook. From 1976 to 1979, he
served as Commissioner of the New York State
Department of Commerce. Mr. Dyson was Vice Chair-
man of Dyson-Kissner-Moran Corporation from 1970 to
1975, at which time he was appointed to the
position of Commissioner of the New York State
Department of Agriculture.
Clay B. Lifflander............ President and Director of Clay B. Lifflander has been the President and a
c/o Millbrook Capital KCI, the Parent and the Director of KCI, the Parent and the Offeror since
Management Inc. Offeror their inception. Mr. Lifflander has been President
Carnegie Hall Tower of Millbrook since 1995, and from 1994 to 1995, Mr.
152 W. 57th Street Lifflander was President of the New York City
New York, NY 10019 Economic Development Corporation. Previously, Mr.
Lifflander was Managing Director in the Mergers and
Acquisitions Group at Smith Barney Inc., where he
worked from 1984 to 1994.
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
NAME AND
BUSINESS ADDRESS OFFICE PRINCIPAL OCCUPATION OR EMPLOYMENT (PAST/PRESENT)
- ------------------------------ --------------------------- ---------------------------------------------------
<S> <C> <C>
Alan L. Rivera................ Vice President, Secretary Alan L. Rivera has been the Vice President,
c/o Millbrook Capital and Director of KCI, the Secretary and a Director of KCI, the Parent and the
Management Inc. Parent and the Offeror Offeror since their inception. Since September
Carnegie Hall Tower 1996, Mr. Rivera has also been employed by
152 W. 57th Street Millbrook, where he serves as Chief Financial
New York, NY 10019 Officer and General Counsel. From 1994 to 1996, Mr.
Rivera served as Executive Vice President of
Finance and Administration and General Counsel of
the New York City Economic Development Corporation.
From 1990 to 1994, Mr. Rivera was an attorney with
the New York City law firm of Townley & Updike,
specializing in corporate finance matters, and from
1987 to 1990, Mr. Rivera was an attorney with
Mudge, Rose, Guthrie, Alexander and Ferdon,
specializing in public finance matters.
David H. Bova................. Vice President--Devel- David H. Bova has been the Vice President--
c/o Millbrook Capital opment and Director of KCI, Development and a Director of KCI, the Parent, and
Management Inc. the Parent and the Offeror the Offeror since their inception. He has also
Wing Road served as President of Millbrook Vineyards Winery,
RRT, Box 167D Inc., and Pebble Ridge Vineyards, Inc. since 1994
Millbrook, NY 12545 and 1992, respectively, and he has been Vice
President--Development of Millbrook since 1995.
George M. Scherer............. Vice President--Manu- George M. Scherer has been the Vice Presi-
c/o B.W. Elliott Manufac- facturing and Director of dent--Manufacturing and Director of KCI, the
turing Co., Inc. KCI, the Parent, and the Parent, and the Offeror since their inception. Mr.
11 Beckwith Avenue Offeror Scherer has been with B.W. Elliott Manufacturing
Binghamton, NY 13902 Co., Inc. ("Elliott") since 1978 when he began as
Engineering Manager. He has served as the President
and a Director of Elliott since 1982. Prior to
joining Elliott, Mr. Scherer was a product
application engineer for Stow Manufacturing
Company, Inc. in Binghamton, NY from 1975 to 1978.
Prior to his position at Stow Manufacturing
Company, Inc., Mr. Scherer was a plant engineer at
GAF Corporation in Binghamton, NY from 1973 to
1975.
James D. Wilcox............... Chief Financial Officer and James D. Wilcox joined KCI and its subsidiaries as
c/o Hudson Lock, Inc. Vice President of KCI, the Chief Financial Officer in April 1998. Before
81 Apsley Street Parent, and the Offeror joining KCI, Mr. Wilcox had, since 1992, been the
Hudson, MA 01749 Chief Financial Officer of Systems Engineering and
Manufacturing Corp., an international manufacturer
of automated capital equipment. From 1990 to 1992,
Mr. Wilcox was the Vice President--Finance and
Administration of Docktor Pet Holdings, Ltd., a
national chain of specialty retail and franchised
stores and a subsidiary of publicly held company.
</TABLE>
39
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates evidencing
Shares and any other required documents should be sent or delivered by each
stockholder or its broker, dealer, commercial bank or other nominee to the
Depositary as follows:
THE DEPOSITARY FOR THE OFFER IS:
SUNTRUST BANK, ATLANTA
<TABLE>
<S> <C>
BY MAIL: BY HAND AND OVERNIGHT COURIER:
SunTrust Bank, Atlanta SunTrust Bank, Atlanta
P.O. Box 4625 25 Edgewood Avenue
Atlanta, GA 30302-4625 Room 225
Atlanta, GA 30303
</TABLE>
BY FACSIMILE TRANSMISSION:
(404) 865-5371
CONFIRM BY TELEPHONE:
(404) 588-7819
Questions or requests for assistance may be directed to the Information
Agent or to the Dealer Manager at their respective addresses and telephone
numbers set forth below. Additional copies of this Offer to Purchase, the Letter
of Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent or the Dealer Manager and will be furnished promptly at the
Offeror's expense. A stockholder may also contact its broker, dealer, commercial
bank or trust company for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
77 WATER STREET
NEW YORK, NEW YORK 10005
BANKS AND BROKERS CALL COLLECT (212) 269-5500
ALL OTHERS CALL TOLL FREE (800) 848-3094
THE DEALER MANAGER FOR THE OFFER IS:
[LOGO]
1221 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10020
(212) 278-5741
CALL TOLL FREE (877) 227-9431
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER
SHARES OF COMMON STOCK
OF
VALLEY FORGE CORPORATION
PURSUANT TO THE OFFER TO PURCHASE
DATED DECEMBER 9, 1998
BY
KCI ACQUISITION CORP.
A DIRECT WHOLLY-OWNED SUBSIDIARY OF
KEY COMPONENTS, LLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON JANUARY 15, 1999, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
SUNTRUST BANK, ATLANTA
<TABLE>
<S> <C>
BY MAIL: BY HAND:
SunTrust Bank, SunTrust Bank, Atlanta
Atlanta 58 Edgewood Avenue
P.O. Box 4625 Room 225
Atlanta, GA 30302 Atlanta, GA 30303
BY FACSIMILE
BY OVERNIGHT COURIER: TRANSMISSION:
SunTrust Bank, 404-865-5371
Atlanta 404-332-3875
58 Edgewood Avenue
Room 225 CONFIRM BY TELEPHONE:
Atlanta, GA 30303 800-568-3476
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders of Valley
Forge Corporation either if certificates evidencing shares of Common Stock (as
defined below) are to be forwarded herewith or if a tender of such shares is to
be made by book-entry transfer to the account of SunTrust Bank, Atlanta, as
Depositary (the "Depositary"), at The Depository Trust Company ("DTC" or the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in Section
3--"Procedure for Tendering Shares" of the Offer to Purchase (as defined below).
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
Holders of shares of Common Stock whose certificates are not immediately
available, or who are unable to deliver their certificates and all other
documents required by this Letter of Transmittal to the Depositary on or prior
to the Expiration Date (as defined in Section 1--"Terms of the Offer" of the
Offer to Purchase) or who cannot complete the procedure for delivery by
book-entry transfer on a timely basis and who wish to tender their shares must
tender their shares pursuant to the guaranteed delivery procedure set forth in
Section 3--"Procedure for Tendering Shares" of the Offer to Purchase. See
Instruction 2 of this Letter of Transmittal.
<PAGE>
/ / CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING:
Name(s) of Tendering Institution____________________________________________
Account Number______________________________________________________________
Transaction Code Number_____________________________________________________
/ / CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)_____________________________________________
Window Ticket Number (if any)_______________________________________________
Date of Execution of Notice of Guaranteed Delivery__________________________
Name of Institution Which Guaranteed Delivery_______________________________
If Delivery by Book-Entry Transfer:
DTC Account Number__________________________________________________________
Transaction Code Number_____________________________________________________
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES OF COMMON STOCK
- --------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF
REGISTERED HOLDER(S) CERTIFICATE(S) TENDERED
(PLEASE FILL IN, IF BLANK, EXACTLY (ATTACH ADDITIONAL LIST IF NECESSARY)
AS NAME(S) APPEAR(S)
ON CERTIFICATE(S))
- --------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES
EVIDENCED NUMBER
CERTIFICATE BY OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
TOTAL SHARES OF COMMON STOCK
- --------------------------------------------------------------------------------
* Need not be completed by stockholders delivering shares of Common Stock by
book-entry transfer.
** Unless otherwise indicated, it will be assumed that all shares of Common
Stock evidenced by each certificate delivered to the Depositary are being
tendered. See Instruction 4 of this Letter of Transmittal.
- --------------------------------------------------------------------------------
The names and addresses of the registered holders should be printed, if not
already printed above, exactly as they appear on the certificates representing
shares of Common Stock tendered hereby. The certificates and the number of
shares of Common Stock that the undersigned wishes to tender should be indicated
in the appropriate boxes.
/ / CHECK HERE IF TENDER IS BEING MADE OF LOST OR MUTILATED SECURITIES.
SEE INSTRUCTION 10.
2
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to KCI Acquisition Corp., a Delaware
corporation (the "Offeror") and a direct wholly-owned subsidiary of Key
Components, LLC, a Delaware limited liability company (the "Parent"), the above-
described shares of Common Stock, par value $.50 per share (the "Common Stock"),
of Valley Forge Corporation, a Delaware corporation (the "Company"), pursuant to
the Offeror's offer to purchase all outstanding shares of Common Stock (the
"Shares"), at a purchase price of $19.00 per Share net to the seller in cash,
without interest thereon (such price or such higher price per share as may be
paid in the Offer (as defined below), referred to herein as the "Offer Price"),
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated December 9, 1998 (the "Offer to Purchase"), receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which, together with any
amendments or supplements thereto, constitute the "Offer").
Subject to, and effective upon, the acceptance for payment of the Shares
tendered herewith, in accordance with the terms and subject to the conditions of
the Offer (including, if the Offer is extended or amended, the terms and
conditions of such extension or amendment), the undersigned hereby sells,
assigns and transfers to, or upon the order of, the Offeror, all right, title
and interest in and to all of the Shares tendered hereby and all dividends
(other than quarterly cash dividends having a record date prior to the Offeror
purchasing and becoming a record holder of such Shares), distributions
(including, without limitation, distributions of additional Shares) and rights
declared, issued, paid or distributed in respect of such Shares on or after
December 2, 1998 and payable or distributable to the undersigned on a date prior
to the transfer to the name of the Offeror (or nominee or transferee of the
Offeror) on the Company's stock transfer records of the Shares tendered herewith
(collectively, "Distributions"), and irrevocably constitutes and appoints Alan
L. Rivera and James D. Wilcox, and each of them, as the true and lawful agent
and attorney-in-fact of the undersigned with respect to such Shares and all
Distributions with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest) to (i) deliver
certificates for such Shares and all Distributions or transfer ownership of such
Shares and all Distributions on the account books maintained by the Book-Entry
Transfer Facility, together, in either case, with all accompanying evidences of
transfer and authenticity, to or upon the order of the Offeror, upon receipt by
the Depositary, as the undersigned's agent, of the Offer Price, (ii) present
such Shares and all Distributions for transfer on the books of the Company and
(iii) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares and all Distributions, all in accordance with the terms
and subject to the conditions of the Offer.
The undersigned hereby irrevocably appoints Alan L. Rivera and James D.
Wilcox and each of them, as the attorney-in-fact and proxy of the undersigned,
each with full power of substitution, to vote in such manner as each such
attorney and proxy or the substitute for any such attorney and proxy shall, in
the sole discretion of each such attorney and proxy, deem proper, and otherwise
act (by written consent or otherwise) with respect to all of the Shares tendered
hereby (and any Distributions) which the undersigned is entitled to vote at any
meeting of stockholders of the Company (whether annual or special and whether or
not adjourned or postponed), or consent in lieu of any such meeting or
otherwise. This power of attorney and proxy is irrevocable and is granted in
consideration of, and is effective upon, the Offeror's oral or written notice to
the Depositary of its acceptance for payment of such shares in accordance with
the terms of the Offer. Such acceptance for payment shall revoke all other
powers of attorney and proxies given by the undersigned at any time with respect
to such shares (and any Distributions), and no subsequent powers of attorney or
proxies may be given (and if given or executed shall not be effective) by the
undersigned with respect thereto. The undersigned acknowledges and understands
that in order for shares to be deemed validly tendered, immediately upon the
Offeror's acceptance for payment of such shares, the Offeror must be able to
exercise full voting power and other rights of a record and beneficial holder,
including, without limitation, voting at any meeting of the Company's
stockholders or acting by written consent, with respect to such shares (and any
Distributions).
3
<PAGE>
The undersigned hereby represents and warrants that: (i) the undersigned has
full power and authority to tender, sell, assign and transfer the shares
tendered hereby (and any Distributions) and (ii) when the same are accepted for
payment by the Offeror, the Offeror will acquire good, marketable and
unencumbered title thereto, free and clear of all liens, restrictions, charges,
claims and encumbrances, and that none of such Shares and Distributions will be
subject to any adverse claim. The undersigned, upon request, shall execute and
deliver all additional documents deemed by the Depositary or the Offeror to be
necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby and all Distributions. In addition, the undersigned shall
remit and transfer promptly to the Depositary for the account of the Offeror all
Distributions in respect of the shares tendered hereby, accompanied by
appropriate documentation of transfer, and, pending such remittance and transfer
or appropriate assurance thereof, the Offeror shall be entitled, subject to
applicable law, to all rights and privileges as owner of each such Distribution
and may withhold the entire Offer Price or deduct from the Offer Price the
amount or value of such Distribution as determined by the Offeror in its sole
discretion.
No authority conferred herein or agreed to be conferred herein shall be
affected by, and all such authority shall survive, the death or incapacity of
the undersigned. All obligations of the undersigned hereunder shall be binding
upon the heirs, executors, administrators, trustees in bankruptcy, personal and
legal representatives, successors and assigns of the undersigned. Except as
described in Section 4--"Withdrawal Rights" of the Offer to Purchase, this
tender is irrevocable.
The undersigned understands that the acceptance for payment of tendered
Shares by the Offeror pursuant to any of the procedures described in Section
2--"Acceptance for Payment and Payment for Shares" of the Offer to Purchase and
in the instructions hereto will constitute the undersigned's acceptance of the
terms and conditions of the Offer. The undersigned recognizes that under certain
circumstances set forth in the Offer to Purchase, the Offeror may not be
required to accept for payment any of the Shares tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions," please issue the check for the Offer Price for all shares
purchased and return any certificates for Shares not tendered or not purchased,
in the name(s) of the registered holder(s) appearing above under "Description of
Shares of Common Stock Tendered." Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions," please mail the check for the
Offer Price for all Shares purchased and return any certificates for any Shares
not tendered or not purchased (and accompanying documents, as appropriate) to
the address(es) of the registered holder(s) appearing above under "Description
of Shares of Common Stock Tendered." If the boxes entitled "Special Delivery
Instructions" and "Special Payment Instructions" are both completed, please
issue the check for the Offer Price for all Shares purchased and return any
certificates for Shares not tendered or not purchased in the name(s) of, and
deliver said check and/or certificate(s) to, the person(s) so indicated. Unless
otherwise indicated in the box entitled "Special Payment Instructions," in the
case of a book-entry delivery of Shares, please credit the account maintained at
the Book-Entry Transfer Facility with any Shares not purchased. The undersigned
recognizes that the Offeror has no obligation pursuant to the Special Payment
Instructions to transfer any Shares from the name(s) of the registered holder(s)
thereof if the Offeror does not accept for payment any of the Shares tendered
hereby.
4
<PAGE>
________________________________________________________________________________
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the Offer Price of Shares
purchased or certificates for Shares not tendered or not purchased are to be
issued in the name of someone other than the undersigned.
Issue / / Check / / Certificate(s) to:
Name _______________________________________________________________________
(PLEASE PRINT)
Address ____________________________________________________________________
(INCLUDE ZIP CODE)
__________________________________________________________________________
(RECIPIENT'S TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE W-9 ON REVERSE SIDE)
________________________________________________________________________________
________________________________________________________________________________
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the Offer Price of Shares purchased
or certificates for Shares not tendered or not purchased are to be sent to
someone other than the undersigned, or to the undersigned at an address
other than that shown under "Description of Shares of Common Stock
Tendered."
Issue / / Check / / Certificate(s) to:
Name _______________________________________________________________________
(PLEASE PRINT)
Address ____________________________________________________________________
(INCLUDE ZIP CODE)
________________________________________________________________________________
5
<PAGE>
- --------------------------------------------------------------------------------
IMPORTANT
STOCKHOLDERS: SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 ON PAGE 11)
______________________________________________________________________________
______________________________________________________________________________
(SIGNATURES OF STOCKHOLDER(S))
Dated: ________________
(Must be signed by registered holder(s) exactly as name(s) appear(s) on stock
certificates or on a security position listing or by person(s) authorized to
become registered holder(s) by certificate(s) and documents transmitted
herewith. If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, please provide the following
information. See Instruction 5.)
Name(s) ______________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
(PLEASE PRINT)
Capacity (Full Title) ________________________________________________________
Address ______________________________________________________________________
______________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number _______________________________________________
Tax Identification or Social Security Number _________________________________
(See Substitute Form W-9 on Page 11)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY.
PLACE MEDALLION GUARANTEE OVER THE BELOW INFORMATION.
Authorized Signature(s) ______________________________________________________
Name _________________________________________________________________________
(PLEASE PRINT)
Name of Firm _________________________________________________________________
Address ______________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number _______________________________________________
Dated: _______________________________________________________________________
- --------------------------------------------------------------------------------
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. SIGNATURE GUARANTEE. No signature guarantee on this Letter of
Transmittal is required if (i) this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this document, shall include
any participant in the Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of Shares tendered herewith, unless such
holder(s) have completed either the box entitled "Special Delivery Instructions"
or "Special Payment Instructions" on this Letter of Transmittal) or (ii) such
Shares are tendered for the account of a financial institution (including most
commercial banks, savings and loan associations and brokerage houses) that is a
participant in the Security Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program (each, an "Eligible Institution"). In all other cases, all
signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be completed by stockholders either if certificates are to be
forwarded herewith, or unless an Agent's Message (as defined in Section 2--
"Acceptance for Payment and Payment for Shares" of the Offer to Purchase) is
utilized, if tenders are to be made pursuant to the procedures for delivery by
book-entry transfer set forth in Section 3--"Procedure for Tendering Shares" of
the Offer to Purchase. Certificates for all physically tendered Shares, or
timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") into
the Depositary's account at the Book-Entry Transfer Facility of all Shares
delivered by book-entry transfer, this Letter of Transmittal (or manually signed
facsimile hereof) properly completed and duly executed with all required
signature guarantees and any other documents required by this Letter of
Transmittal, must be received by the Depositary at the address set forth herein
on or prior to the Expiration Date (as defined in Section 1--"Terms of the
Offer" of the Offer to Purchase), or the tendering stockholder must comply with
the guaranteed delivery procedures set forth below. If certificates are
forwarded to the Depositary in multiple deliveries, this Letter of Transmittal
(or manually signed facsimile hereof) properly completed and duly executed with
all required signature guarantees must accompany each such delivery.
Stockholders whose certificates for Shares are not immediately available,
who cannot deliver their certificates and all other required documents to the
Depositary on or prior to the Expiration Date, or who cannot complete the
procedure for delivery by book-entry transfer on a timely basis, may tender
their Shares pursuant to the guaranteed delivery procedures set forth in Section
3--"Procedure for Tendering Shares" of the Offer to Purchase. Pursuant to such
procedures, (i) such tender must be made by or through an Eligible Institution,
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by the Offeror, must be received by the
Depositary, either by hand delivery, mail or facsimile transmission, on or prior
to the Expiration Date and (iii) the certificates for all physically tendered
shares, in proper form for transfer (or Book-Entry Confirmation) together with
this Letter of Transmittal (or manually signed facsimile thereof) properly
completed and duly executed with all required signature guarantees or, in the
case of a book-entry transfer, an Agent's Message, and any other documents
required by this Letter of Transmittal, must be received by the Depositary
within three trading days after the date of the execution and delivery to the
Depositary of the Notice of Guaranteed Delivery. A trading day is any day on
which the American Stock Exchange is open for business.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE CERTIFICATES FOR
SHARES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE
BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING
STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED FOR SUCH DOCUMENTS TO REACH THE DEPOSITARY. EXCEPT AS
OTHERWISE PROVIDED IN THIS INSTRUCTION 2, DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE DEPOSITARY.
No alternative, conditional or contingent tenders will be accepted and no
fractional shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal (or a facsimile hereof), waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares of Common Stock Tendered" is inadequate, the certificate numbers, the
number of Shares evidenced by such certificates and the number of Shares
tendered should be listed on a separate signed schedule and attached hereto.
7
<PAGE>
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all the Shares evidenced by any certificate delivered
to the Depositary herewith are to be tendered, fill in the number of Shares that
are to be tendered in the box entitled "Number of Shares Tendered." In such
case, as soon as practicable after the Expiration Date, new certificate(s)
evidencing the remainder of the Shares that were evidenced by the certificates
delivered to the Depositary herewith will be sent to the person(s) signing this
Letter of Transmittal, unless otherwise provided in the box entitled "Special
Delivery Instructions." All Shares represented by certificates delivered to the
Depositary will be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the certificates without alteration, enlargement or any other change whatsoever.
DO NOT SIGN THE BACK OF THE CERTIFICATES.
If any Share tendered hereby is held of record by two or more holders, all
such holders must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in names of different
holders, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of certificates or separate stock powers
are required unless payment is to be made, or certificates for Shares not
tendered or not purchased are to be issued in the name of, a person other than
the registered holder(s), in which case the certificate(s) tendered hereby must
be endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear(s) on such
certificate(s), and stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Shares tendered hereby, the certificates tendered
hereby must be endorsed or accompanied by appropriate stock powers, in either
case signed as the name(s) of the registered holder(s) appear(s) on such
certificates. Signatures on such certificates and stock powers must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificate or stock power is signed by
a trustee, executor, administrator, guardian, attorney-in-fact, agent, officer
of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Offeror of such person's authority to so act must be
submitted.
6. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the Offer
Price of any Shares tendered hereby is to be issued or certificate(s) not
tendered or not purchased are to be issued in the name of a person other than
the person signing this Letter of Transmittal, or to the person(s) signing this
Letter of Transmittal but at an address other than that shown above, the
appropriate boxes on this Letter of Transmittal must be completed.
7. STOCK TRANSFER TAXES. Except as set forth in this Instruction 7, the
Offeror will pay or cause to be paid any stock transfer taxes with respect to
the transfer and sale of the purchased Shares to it, or to its order, pursuant
to the Offer. If, however, payment of the Offer Price of any Shares purchased is
to be made to, or certificate(s) for Shares not tendered or not purchased are to
be issued in the name of, a person other than the registered owner(s), or if
tendered certificates are registered in the name of any persons other than the
persons signing this Letter of Transmittal, the amount of any stock transfer
taxes (whether imposed on the registered holder(s), such other person or
otherwise) payable on account of the transfer to such other person will be
deducted from the Offer Price of such shares purchased, unless evidence
satisfactory to the Offeror of the payment of such taxes or exemption therefrom
is submitted.
8. WAIVER OF CONDITIONS. Subject to the terms of the Merger Agreement (as
defined in the Offer to Purchase), the conditions of the Offer may be waived by
the Offeror, in whole or in part, at any time and from time to time in Offeror's
sole discretion, in the case of any Shares tendered.
8
<PAGE>
9. SUBSTITUTE FORM W-9. Each tendering stockholder is required to provide
the Depositary with a correct taxpayer identification number ("TIN"), generally
the stockholder's social security or federal employer identification number, and
with certain other information, on the Substitute Form W-9, which is provided
under "Important Tax Information" below, and to certify, under penalties of
perjury, that such number is correct and that the stockholder is not subject to
backup withholding of federal income tax. If a tendering stockholder has been
notified by the Internal Revenue Service that such stockholder is subject to
backup withholding, such stockholder must cross out item (2) of the
Certification box (Part 2) of the Substitute Form W-9, unless such stockholder
has since been notified by the Internal Revenue Service that such stockholder is
no longer subject to backup withholding. Failure to provide the information on
the Substitute Form W-9 may subject the tendering stockholder to 31% federal
income tax withholding on the payment of the Offer Price of all Shares purchased
from such stockholder. The box in Part 3 of the Substitute Form W-9 may be
checked if the tendering stockholder has not been issued a TIN and has applied
for a TIN or intends to apply for a TIN in the near future. If the box in Part 3
is checked and the Depositary is not provided with the TIN within 60 days, the
Depositary will withhold 31% on all payments of the Purchase Price to such
stockholder until a TIN is provided to the Depositary.
10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s)
representing shares has been lost, destroyed or stolen, the stockholder should
promptly notify SunTrust Bank, Atlanta at (800) 568-3476. The stockholder will
then be instructed as to the steps that must be taken in order to replace the
certificate(s). This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost or destroyed certificates have
been followed.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests for
assistance may be directed to the Information Agent or the Dealer Manager at
their respective addresses and telephone numbers set forth below. Additional
copies of the Offer to Purchase, this Letter of Transmittal, the Notice of
Guaranteed Delivery and the Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 may be obtained from the
Information Agent or the Dealer Manager at the addresses set forth below or from
brokers, dealers, commercial banks or trust companies and such materials will be
furnished at the Offeror's expense.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR MANUALLY SIGNED FACSIMILE HEREOF)
PROPERLY COMPLETED AND DULY EXECUTED (WITH ALL REQUIRED GUARANTEES AND
CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS) OR THE NOTICE OF GUARANTEED DELIVERY PROPERLY COMPLETED AND DULY
EXECUTED MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary (as payer) with such
stockholder's current TIN on Substitute Form W-9 below. If such stockholder is
an individual, the TIN is such stockholder's social security number. If the
Depositary is not provided with the correct TIN, the stockholder or other payee
may be subject to a $50 penalty imposed by the Internal Revenue Service. In
addition, payments that are made to such stockholder or other payee with respect
to shares purchased pursuant to the Offer may be subject to backup withholding
of 31%.
Certain stockholders (including, among others, all corporation, and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual or a foreign entity to qualify
as an exempt recipient, that stockholder must submit to the Depositary a
properly completed Internal Revenue Service Form W-8 (a "Form W-8"), signed
under penalties of perjury, attesting to that individual's exempt status. A Form
W-8 can be obtained from the Depositary. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payment made to the stockholder or other payee. Backup withholding is not an
additional tax. Rather, the federal income tax liability of persons subject to
backup withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
9
<PAGE>
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made to a stockholder or other
payee with respect to shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of the stockholder's current TIN (or the TIN
of any other payee) by completing the form below, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such stockholder is awaiting
a TIN), and that (1) the stockholder has not been notified by the Internal
Revenue Service that the stockholder is subject to backup withholding as a
result of failure to report all interest or dividends or (2) the Internal
Revenue Service has notified the stockholder that the stockholder is no longer
subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
shares tendered hereby. If the shares are registered in more than one name or
are not registered in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional guidance on which number to report.
10
<PAGE>
PAYER'S NAME: SUNTRUST BANK, ATLANTA
<TABLE>
<S> <C> <C>
SUBSTITUTE FORM W-9 PART 1--PLEASE PROVIDE YOUR TIN IN Social Security number
DEPARTMENT OF THE THE BOX AT RIGHT AND CERTIFY BY or
TREASURY SIGNING AND DATING BELOW. Employer identification
INTERNAL REVENUE SERVICE number
PAYER'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER ("TIN")
PART 2--Certification--Under penalties of perjury, I certify
that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am
waiting for a number to be issued to me); and
(2) I am not subject to backup withholding either because I am exempt from backup
withholding, I have not been notified by the Internal Revenue Service (the "IRS") that I
am subject to backup withholding as a result of a failure to report all interest or
dividends, or the IRS has notified me that I am no longer subject to backup withholding.
CERTIFICATE INSTRUCTIONS--You must cross out item (2) in Part 2 above if you have been
notified by the IRS that you are subject to backup withholding because of underreporting
interest or dividends on your tax return. However, if after being notified by the IRS that
you were subject to backup withholding you received another notification from the IRS stating
that you are no longer subject to backup withholding, do not cross out item (2).
PART 3--
Awaiting TIN / /
SIGNATURE ------------------------ DATE ------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ALL REPORTABLE PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number, 31
percent of all reportable payments made to me will be withheld but such
amounts will be refunded to me if I then provide a taxpayer identification
number within 60 days.
Signature Date
- ----------------------------------- ---------------------------------
11
<PAGE>
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Banks and Brokers Call (212) 269-5500 (collect)
All Others Call Toll Free (800) 848-3094
THE DEALER MANAGER FOR THE OFFER IS:
[LOGO]
1221 Avenue of the Americas
New York, New York 10020
(212) 278-5741
Call Toll Free (877) 227-9431
12
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
VALLEY FORGE COMPANY
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON JANUARY 15, 1999 UNLESS THE OFFER IS EXTENDED.
This form, or one substantially equivalent hereto, must be used to accept
the Offer (as defined below) if certificates for shares of Common Stock, par
value $.50 per share (the "Shares"), of Valley Forge Corporation, a Delaware
corporation (the "Company"), are not immediately available or if the procedure
for book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach the Depositary on or prior to the
Expiration Date (as defined in the Offer to Purchase). This form may be
delivered by hand, facsimile transmission, or mail to the Depositary. See
Section 3--"Procedure for Tendering Shares" of the Offer to Purchase, dated
December 9, 1998 (the "Offer to Purchase").
The Depositary for the Offer is:
SUNTRUST BANK, ATLANTA
<TABLE>
<S> <C>
BY MAIL: BY HAND:
SunTrust Bank, SunTrust Bank, Atlanta
Atlanta 58 Edgewood Avenue
P.O. Box 4625 Room 225
Atlanta, GA 30302 Atlanta, GA 30303
BY OVERNIGHT COURIER: BY FACSIMILE
SunTrust Bank, TRANSMISSION:
Atlanta 404-865-5371
58 Edgewood Avenue 404-332-3875
Room 225 CONFIRM BY TELEPHONE:
Atlanta, GA 30303 800-568-3476
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION OF INSTRUMENTS VIA A FACSIMILE, OTHER THAN AS SET FORTH ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal or an
Agent's Message and certificates for Shares to the Depositary within the time
period shown herein. Failure to do so could result in a financial loss to such
Eligible Institution.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to KCI Acquisition Corp., a Delaware
corporation, upon the terms and subject to the conditions set forth in the Offer
to Purchase and in the related Letter of Transmittal (which, together with all
amendments or supplements thereto, constitute the "Offer"), receipt of which is
hereby acknowledged, the number of Shares of the Company indicated below,
pursuant to the guaranteed delivery procedure set forth in Section 3--"Procedure
for Tendering Shares" of the Offer to Purchase.
<TABLE>
<S> <C>
Number of Shares: -------------------------- SIGN HERE
Certificate No(s). (if available): Name(s):
- ------------------------------------------- -------------------------------------------
- ------------------------------------------- -------------------------------------------
If Securities will be tendered by book-entry
transfer:
Name of Tendering Institution: Address: ----------------------------------
(Zip Code)
- ------------------------------------------- Area Code and Telephone No: ---------------
Account No.: ---------------------------- at
- ------------------------------------------- SIGNATURE(S):
(Please Print)
--------------------------------------------
--------------------------------------------
</TABLE>
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a bank, broker, dealer, credit union, savings association
or other entity which is a member in good standing of the Securities Transfer
Agents Medallion Program or a bank, broker, dealer, credit union, savings
association or other entity which is an "eligible guarantor institution," as
such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934,
as amended, guarantees the delivery to the Depositary of the Shares tendered
hereby, together with a properly completed and duly executed Letter of
Transmittal (or manually signed facsimile(s) thereof) and any other required
documents, or an Agent's Message (as defined in the Offer to Purchase) in the
case of a book-entry delivery of Shares, all within three American Stock
Exchange trading days of the date hereof.
Name of Firm:___________________________________________________________________
Address:________________________________________________________________________
(ZIP CODE)
AUTHORIZED SIGNATURE:___________________________________________________________
Title:__________________________________________________________________________
Name:___________________________________________________________________________
(Please Print or Type)
Area Code & Telephone No.:______________________________________________________
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE OF GUARANTEED
DELIVERY. SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
Date: ___________, 199__
<PAGE>
[LOGO]
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF
COMMON STOCK
OF
VALLEY FORGE CORPORATION
AT
$19.00 NET PER SHARE
BY
KCI ACQUISITION CORP.
A DIRECT WHOLLY-OWNED SUBSIDIARY OF
KEY COMPONENTS, LLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON JANUARY 15, 1999 UNLESS THE OFFER IS EXTENDED.
December 9, 1998
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by KCI Acquisition Corp., a Delaware corporation (the
"Offeror") and a direct wholly-owned subsidiary of Key Components, LLC, a
Delaware limited liability company (the "Parent"), to act as Dealer Manager in
connection with the Offeror's offer to purchase all outstanding shares of common
stock, par value $.50 per share (the "Shares"), of Valley Forge Corporation, a
Delaware corporation (the "Company"), at a purchase price of $19.00 per Share,
net to the seller in cash (the "Offer Price"), without interest thereon, upon
the terms and subject to the conditions set forth in the Offer to Purchase,
dated December 9, 1998 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which, together with any amendments or supplements thereto,
constitute the "Offer") enclosed herewith. The Offer is being made pursuant to
the Agreement and Plan of Merger, dated as of December 2, 1998 (the "Merger
Agreement"), by and among the Parent, the Offeror and the Company.
The Offer is conditioned upon, among other things, (i) there being validly
tendered by the Expiration Date (as defined in the Offer to Purchase) and not
withdrawn at least 90% of the Shares outstanding (the "Minimum Condition") (ii)
the commitment letter from SG Cowen Securities Corporation and Societe Generale,
dated December 2, 1998, not having been terminated and the conditions to
borrowing thereunder having been satisfied or waived and (iii) the satisfaction
of certain other terms and conditions. In connection with entering into the
Merger Agreement, the Offeror has entered into six Stockholder Agreements, each
dated as of December 2, 1998 (the "Stockholder Agreements"), with the
stockholders identified therein (each, a "Stockholder" and collectively, the
"Stockholders") beneficially owning an aggregate of 2,186,161 Shares
representing approximately 53% of the outstanding Shares (the "Stockholders'
Shares") pursuant to which the Stockholders have, among other things, agreed to
tender into the Offer all of the Stockholders' Shares and not withdraw any of
the Stockholders' Shares prior to the expiration of
[LOGO]
<PAGE>
the Offer or the termination of the Merger Agreement. In addition, the
Stockholders have agreed to appoint the Offeror or any nominee of Offeror as
such Stockholders' proxy to vote such Stockholders' Shares on all matters in
connection with the consummation of the transactions contemplated by the Merger
Agreement. THE TENDER BY THE STOCKHOLDERS OF THE STOCKHOLDERS' SHARES ALONE WILL
NOT CAUSE THE MINIMUM CONDITION TO BE SATISFIED. IN THE EVENT THE MINIMUM
CONDITION IS NOT SATISFIED, THE PARENT, OFFEROR AND COMPANY ARE REQUIRED TO
PROCEED WITH A LONG-FORM MERGER AT THE SAME PRICE PER SHARE AS THE OFFER PRICE
AND THE STOCKHOLDERS' SHARES WILL ASSURE THE APPROVAL THEREOF.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, or who hold
Shares registered in their own names, we are enclosing the following documents:
1. Offer to Purchase dated December 9, 1998;
2. Letter of Transmittal to be used by holders of Shares in accepting the
Offer and tendering Shares (manually signed facsimile copies of the Letter of
Transmittal may be used to tender such Shares);
3. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares are not immediately available or time will not permit
certificates for Shares and all other required documents to reach SunTrust Bank,
Atlanta (the "Depositary") by the Expiration Date or if the procedures for
book-entry transfer cannot be completed on a timely basis;
4. A letter from the President and Chief Executive Officer of the Company
and the Company's Solicitation/Recommendation Statement on Schedule 14D-9 filed
with the Securities and Exchange Commission;
5. A form of letter which may be sent to your clients for whose accounts you
hold Shares in your name or in the name of a nominee, with space provided for
obtaining such clients' instructions with regard to the Offer;
6. Guidelines of the Internal Revenue Service for Certification of Taxpayer
Identification Number on Substitute Form W-9; and
7. A return envelope addressed to the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON JANUARY 15, 1999, UNLESS THE OFFER IS EXTENDED.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extensions or
amendments), the Offeror will be deemed to have accepted for payment (and
thereby purchased) all Shares validly tendered on or prior to the Expiration
Date and not properly withdrawn if, as and when the Offeror gives oral or
written notice to the Depositary of the Offeror's acceptance of such Shares for
payment pursuant to the Offer. Payment for Shares purchased pursuant to the
Offer will in all cases be made only after timely receipt by the Depositary of
(i) certificates for such Shares, or timely confirmation of a book-entry
transfer of such Shares into the Depositary's account at The Depository Trust
Company, pursuant to the procedures described in Section 3--"Procedure for
Tendering Shares" of the Offer to Purchase and (ii) the Letter of Transmittal
(or manually signed facsimile thereof), properly completed and duly executed
with all required signature guarantees or an Agent's Message (as defined in the
Offer to Purchase) in connection with a book-entry transfer of Shares, together
with any other documents required by the Letter of Transmittal.
In order to take advantage of the Offer, the Letter of Transmittal (or
manually signed facsimile thereof) duly executed and properly completed with any
required signature guarantees or an Agent's Message in connection with a
book-entry transfer of Shares, and any other required documents, should be
2
<PAGE>
sent to the Depositary, and certificates representing the tendered Shares should
be delivered, all in accordance with the instructions set forth in the Letter of
Transmittal and the Offer to Purchase.
If holders of Shares wish to tender their Shares, but it is impracticable
for them to tender their certificates on or prior to the Expiration Date or to
comply with the book-entry transfer procedures on a timely basis, a tender may
be effected by following the guaranteed delivery procedures specified in Section
3--"Procedure for Tendering Shares" of the Offer to Purchase.
Neither the Parent nor the Offeror nor any officer, director, stockholder,
agent or other representative of the Parent or the Offeror will pay any fees or
commissions to any broker, dealer, or other person (other than the Dealer
Manager, the Information Agent and the Depositary as described in the Offer to
Purchase) in connection with the solicitation of tenders of Shares pursuant to
the Offer. The Offeror will, however, upon request, reimburse brokers, dealers,
commercial banks and trust companies and other nominees for reasonable and
necessary costs and expenses incurred by them in forwarding the Offer to
Purchase and the related documents to the beneficial owners of Shares held by
them as nominee or in a fiduciary capacity.
The Offeror will pay or cause to be paid all stock transfer taxes applicable
to the purchase of Shares pursuant to the Offer, except as set forth in
Instruction 7 of the Letter of Transmittal.
Any inquiries you have with respect to the Offer should be addressed to D.F.
King & Co., Inc., the Information Agent, or SG Cowen Securities Corporation, the
Dealer Manager, at their respective addresses and telephone numbers set forth on
the back cover of the Offer to Purchase. Additional copies of the enclosed
material may be obtained from the Information Agent or the Dealer Manager or
from brokers, dealers, commercial banks or trust companies.
Very truly yours,
SG COWEN SECURITIES CORPORATION
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
OTHER PERSON AS THE AGENT OF THE OFFEROR, THE PARENT, THE COMPANY, THE DEALER
MANAGER, THE DEPOSITARY, THE INFORMATION AGENT OR OF ANY AFFILIATE OF ANY OF
THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY
STATEMENTS ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER, EXCEPT FOR
STATEMENTS EXPRESSLY MADE IN THE OFFER TO PURCHASE OR THE LETTER OF TRANSMITTAL.
3
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF
COMMON STOCK
of
VALLEY FORGE CORPORATION
at
$19.00 NET PER SHARE
by
KCI ACQUISITION CORP.
A DIRECT WHOLLY-OWNED SUBSIDIARY OF
KEY COMPONENTS, LLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON JANUARY 15, 1999, UNLESS THE OFFER IS EXTENDED.
December 9, 1998
To Our Clients:
Enclosed for your consideration is an Offer to Purchase, dated December 9,
1998 (the "Offer to Purchase"), and the related Letter of Transmittal (which,
together with any amendments or supplements thereto, constitute the "Offer"), in
connection with the offer by KCI Acquisition Corp., a Delaware corporation (the
"Offeror") and a direct wholly-owned subsidiary of Key Components, LLC, a
Delaware limited liability company (the "Parent"), to purchase all outstanding
shares of Common Stock par value $.50 per share (the "Shares"), of Valley Forge
Corporation, a Delaware corporation (the "Company"), at a purchase price of
$19.00 per Share net to the seller in cash (the "Offer Price"), without interest
thereon, upon the terms and subject to the conditions set forth in the Offer.
WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER
OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.
We request instructions as to whether you wish to have us tender on your
behalf any or all of the Shares held by us for your account, upon the terms and
subject to the conditions set forth in the Offer.
Your attention is directed to the following:
1. The Offer Price is $19.00 per Share net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer.
2. The Offer for all outstanding Shares is being made pursuant to the
Agreement and Plan of Merger, dated as of December 2, 1998, by and among the
Parent, the Offeror and the Company (the "Merger Agreement").
3. The Board of Directors of the Company has unanimously approved the Merger
Agreement, the Offer and the Merger (as defined in the Offer to Purchase), has
unanimously determined that the Offer and the Merger are fair to, and in the
best interests of, the Company's stockholders and recommends that the Company's
stockholders accept the Offer and tender their Shares pursuant to the Offer.
4. The Offer and withdrawal rights will expire at 12:00 Midnight, New York
City time, on January 15, 1999, unless the Offer is extended.
5. The Offer is being made for all Shares outstanding. The Offer is
conditioned upon, among other things, (i) there being validly tendered by the
Expiration Date (as defined in the Offer to Purchase) and not withdrawn at least
90% of the outstanding Shares (the "Minimum Condition"), (ii) the commitment
letter from SG Cowen Securities Corporation and Societe Generale, dated December
2, 1998, not having
<PAGE>
been terminated and the conditions to borrowing thereunder having been satisfied
or waived, and (iii) the satisfaction of certain other terms and conditions. In
connection with the Merger Agreement, the Offeror has entered into six
Stockholder Agreements, each dated as of December 2, 1998 (the "Stockholder
Agreements"), with the stockholders identified therein (each, a "Stockholder"
and collectively, the "Stockholders") beneficially owning an aggregate of
2,186,161 Shares representing approximately 53% of the outstanding Shares, on a
fully diluted basis (the "Stockholders' Shares") pursuant to which the
Stockholders have, among other things, agreed to tender into the Offer all of
the Stockholders' Shares and not withdraw any of the Stockholders' Shares until
the expiration of the Offer or the termination of the Merger Agreement. In
addition, the Stockholders have agreed to appoint the Offeror as such
Stockholders' proxy to vote such Stockholders' Shares on all matters in
connection with the consummation of the transactions contemplated by the Merger
Agreement. THE TENDER BY THE STOCKHOLDERS OF THE STOCKHOLDERS' SHARES ALONE WILL
NOT CAUSE THE MINIMUM CONDITION TO BE SATISFIED. IN THE EVENT THE MINIMUM
CONDITION IS NOT SATISFIED, THE PARENT, OFFEROR AND COMPANY ARE REQUIRED TO
PROCEED WITH A LONG-FORM MERGER AT THE SAME PRICE PER SHARE AS THE OFFER PRICE
AND THE STOCKHOLDERS' SHARES WILL ASSURE THE APPROVAL THEREOF.
6. Except as set forth in Instruction 7 of the Letter of Transmittal,
tendering stockholders will not be obligated to pay stock transfer taxes on the
purchase of Shares by the Offeror pursuant to the Offer. However, federal income
tax backup withholding at a rate of 31% may be required, unless an exemption is
provided or unless the required taxpayer identification information is provided
(see Instruction 9 to the Letter of Transmittal).
7. Notwithstanding any other provision of the Offer, payment for Shares
purchased pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for such Shares, or timely
confirmation of a book-entry transfer of such shares into the Depositary's
account at The Depositary Trust Company, pursuant to the procedures described in
Section 3--"Procedure for Tendering Shares" of the Offer to Purchase and (ii)
the Letter of Transmittal (or manually signed facsimile thereof) properly
completed and duly executed with all required signature guarantees, or an
Agent's Message (as defined in the Offer to Purchase) in connection with a
book-entry transfer of Shares, together with any other documents required by the
Letter of Transmittal. Accordingly, payment may not be made to all tendering
stockholders at the same time depending upon when certificates representing
Shares or confirmations for book-entry transfer of such Shares into the
Depositary's account are actually received by the Depositary.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form contained
in this letter. An envelope in which to return your instructions to us is
enclosed. If you authorize the tender of your Shares, all such Shares will be
tendered unless otherwise specified in your instructions. YOUR INSTRUCTIONS
SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR
BEHALF PRIOR TO THE EXPIRATION DATE.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and is being made to all holders of Shares. The Offeror is not aware
of any jurisdiction in which the making of the Offer or the tender of Shares in
connection therewith would not be in compliance with applicable law. If the
Parent or the Offeror becomes aware of any jurisdiction in which the making of
the Offer or the tender of Shares in connection therewith would not be in
compliance with applicable law, the Parent or the Offeror will make a good faith
effort to comply with any such law. If, after such good faith effort, the Parent
or the Offeror cannot comply with any such law, the Offer will not be made to
(nor will tenders be accepted from or on behalf of) the holders of Shares
residing in any such jurisdiction. In any jurisdiction where the securities,
blue sky or other laws require the Offer to be made by licensed brokers or
dealers, the Offer shall be deemed to be made on behalf of the Parent or the
Offeror by the Dealer Manager (as defined in the Offer to Purchase) or one or
more registered brokers or dealers licensed under the laws of such jurisdiction.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE
FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK
OF VALLEY FORGE CORPORATION
The undersigned acknowledges receipt of your letter and the enclosed Offer
to Purchase, dated December 9, 1998 and the related Letter of Transmittal
(which, together with any amendments or supplements thereto, constitute the
"Offer"), in connection with the offer by KCI Acquisition Corp., a Delaware
corporation and a direct wholly-owned subsidiary of Key Components, LLC, a
Delaware limited liability company, to purchase all outstanding shares of Common
Stock, par value $.50 per share ("Shares"), of Valley Forge Corporation, a
Delaware corporation, at a purchase price of $19.00 per Share net to the seller
in cash, without interest thereon, upon the terms and subject to the conditions
set forth in the Offer.
This will instruct you to instruct your nominee to tender the number of
Shares indicated below (or, if no number is indicated below, all Shares) that
are held for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer.
Number of Shares to be Tendered(*)
______ shares of Common Stock
Dated: ________________, 199_
SIGN HERE
__________________________________________
__________________________________________
Signature(s)
__________________________________________
__________________________________________
Please Type or Print Name(s)
__________________________________________
__________________________________________
Please Type or Print Address(es)
__________________________________________
Area Code and Telephone Number
__________________________________________
Taxpayer Identification or
Social Security Number
- ------------------------------
* Unless otherwise indicated, it will be assumed that all your Shares held by
us for your account are to be tendered.
3
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
- ------------------------------------------------------------------------
GIVE THE TAXPAYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ------------------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of the account or,
account) if combined funds, the first
individual on the account(1)
3. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
4. a. The usual revocable savings The grantor-trustee(1)
trust (grantor is also
trustee)
b. So-called trust account that The actual owner(1)
is not a legal or valid trust
under state law.
5. Sole proprietorship The owner(3)
6. A valid trust, estate, or The legal entity (Do not furnish
pension trust the identifying number of the
personal representative or trustee
unless the legal entity itself is
not designated in the account
title.)(4)
- ------------------------------------------------------------------------
GIVE THE TAXPAYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ------------------------------------------------------------------------
7. Corporate account The corporation
8. Religious, charitable, or The organization
educational organization
account
9. Partnership account The partnership
10. Association, club, or other The organization
tax-exempt organization
11. A broker or registered nominee The broker or nominee
12. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a state
or local government, school
district, or prison) that
receives agricultural program
payments
- ------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has an SSN, that person's number must be
furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show your individual name. You may also enter your business or "doing
business as" name. You may use either your social security number or your
employer identification number.
(4) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name listed, the number
will be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
Note: Section references are to the Internal Revenue Code unless otherwise
noted.
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service (the "IRS") and apply for a
number.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees exempt from backup withholding and for which
no information reporting is required. For interest and dividends, all listed
payees are exempt except item (9). For broker transactions, payees listed in
items (1) through (13) and a person registered under the Investment Advisors Act
of 1940 who regularly acts as a broker are exempt. Payments subject to reporting
under sections 6041 and 6041A are generally exempt from backup withholding only
if made to payees described in items (1) through (7), except a corporation
(other than certain hospitals described in Regulations section 1.6041-3(c)) that
provides medical and health care services or bills and collects payments for
such services is not exempt from backup withholding or information reporting.
Only payees described in items (1) through (5) are exempt from backup
withholding for barter exchange transactions and patronage dividends.
(1) An organization exempt from tax under section 501(a), or an IRA, or a
custodial account under section 403(b)(7), if the account satisfies the
requirements of section 401(f)(2).
(2) The United States or any of its agencies or instrumentalities.
(3) A state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities.
(4) A foreign government or any of its political subdivisions, agencies or
instrumentalities.
(5) An international organization or any of its agencies or instrumentalities.
(6) A corporation.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the United
States, the District of Columbia or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures Trading
Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the Investment
Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
Payments of dividends and patronage dividends that generally are exempt from
backup withholding include the following:
- - Payments to nonresident aliens subject to withholding under section 1441.
- - Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident alien partner.
- - Payments of patronage dividends not paid in money.
- - Payments made by certain foreign organizations.
- - Section 404(k) payments made by an ESOP.
Payments of interest that generally are exempt from backup withholding include
the following:
- - Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have not provided your
correct taxpayer identification number to the payor.
- - Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- - Payments described in section 6049(b)(5) to non-resident aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
- - Payments of mortgage interest to you.
Exempt payees described above should file substitute Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND
DATE THE FORM AND RETURN IT TO THE PAYER. IF YOU ARE A NON-RESIDENT ALIEN OR A
FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A COMPLETED
INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS).
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see sections 6041, 6041A, 6042, 6044, 6045,
6049, 6050A and 6050N and the regulations promulgated thereunder.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payors
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must generally withhold 31% of taxable interest,
dividend, and certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your correct taxpayer identification number to a requester, you
are subject to a penalty of $50 for each such failure unless your failure is
due to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER
TO SELL SHARES. THE OFFER IS MADE SOLELY BY THE OFFER TO PURCHASE DATED
DECEMBER 9, 1998 (THE "OFFER TO PURCHASE") AND THE RELATED LETTER OF
TRANSMITTAL, AND IS BEING MADE AVAILABLE TO ALL HOLDERS OF SHARES. OFFEROR IS
NOT AWARE OF ANY STATE WHERE THE MAKING OF THE OFFER IS PROHIBITED BY
ADMINISTRATIVE OR JUDICIAL ACTION PURSUANT TO ANY VALID STATE STATUTE. IF
OFFEROR BECOMES AWARE OF ANY VALID STATE STATUTE PROHIBITING THE MAKING OF THE
OFFER OR THE ACCEPTANCE OF THE SHARES PURSUANT THERETO, OFFEROR WILL MAKE A GOOD
FAITH EFFORT TO COMPLY WITH SUCH STATE STATUTE. IF, AFTER SUCH GOOD FAITH
EFFORT, OFFEROR CANNOT COMPLY WITH SUCH STATE STATUTE, THE OFFER WILL NOT BE
MADE TO (NOR WILL TENDERS BE ACCEPTED FROM OR ON BEHALF OF) THE HOLDERS OF
SHARES IN SUCH STATE. IN ANY JURISDICTION WHERE THE SECURITIES, BLUE SKY OR
OTHER LAWS REQUIRE THE OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE
OFFER SHALL BE DEEMED TO BE MADE ON BEHALF OF OFFEROR BY SG COWEN SECURITIES
CORPORATION OR ONE OR MORE REGISTERED BROKERS OR DEALERS LICENSED UNDER THE LAWS
OF SUCH JURISDICTION.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
VALLEY FORGE CORPORATION
AT
$19.00 NET PER SHARE
BY
KCI ACQUISITION CORP.
A DIRECT WHOLLY-OWNED SUBSIDIARY OF
KEY COMPONENTS, LLC
KCI Acquisition Corp., a Delaware corporation ("Offeror") and a direct
wholly-owned subsidiary of Key Components, LLC (the "Parent"), a Delaware
limited liability company, is offering to purchase all outstanding shares of
common stock, par value $.50 per share (the "Shares"), of Valley Forge
Corporation (the "Company"), at a price of $19.00 per Share, net to the seller
in cash (the "Offer Price"), upon the terms and subject to the conditions set
forth in the Offer to Purchase dated December 9, 1998 and in the related Letter
of Transmittal (which, together with the Offer to Purchase, constitute the
"Offer").
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, JANUARY 15, 1999, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST 90% OF
THE OUTSTANDING SHARES (THE "MINIMUM CONDITION") AND (ii) THE COMMITMENT LETTER
FROM SG COWEN SECURITIES CORPORATION AND SOCIETE GENERALE, DATED DECEMBER 2,
1998, NOT HAVING BEEN TERMINATED AND THE CONDITIONS TO BORROWING THEREUNDER
HAVING BEEN SATISFIED OR WAIVED. THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER
CONDITIONS DESCRIBED IN THE OFFER TO PURCHASE.
<PAGE>
The Offer is being made in connection with the Agreement and Plan
of Merger, dated as of December 2, 1998 (the "Merger Agreement"), by and
among the Offeror, the Parent and the Company. The Merger Agreement provides
that, among other things, as soon as practicable after the purchase of Shares
pursuant to the Offer and the satisfaction of the other conditions set forth
in the Merger Agreement and in accordance with the relevant provisions of the
Delaware General Corporation Law, as amended (the "Delaware GCL"), the
Offeror will be merged with and into the Company (the "Merger"). Following
consummation of the Merger, the Company will continue as the surviving
corporation (the "Surviving Corporation") and will be a direct wholly-owned
subsidiary of the Parent. At the effective time of the Merger, each Share
(other than Shares held by the Parent, the Offeror, or their respective
affiliates, or in the treasury of the Company, which shall be canceled, and
Shares held by any stockholders who have properly exercised appraisal rights
under Delaware law), will be converted into the right to receive the
Offer Price, without interest thereon, upon surrender of the certificates
formerly representing such Shares.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER,
THE MERGER AND THE MERGER AGREEMENT, HAS UNANIMOUSLY DETERMINED THAT THE OFFER
AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S
STOCKHOLDERS AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND
TENDER THEIR SHARES PURSUANT TO THE OFFER.
In connection with the Merger Agreement, the Offeror has entered into six
Stockholder Agreements, each dated as of December 2, 1998, with certain
stockholders (each, a "Stockholder" and collectively, the "Stockholders")
beneficially owning an aggregate of 2,186,161 Shares representing approximately
53% of the outstanding Shares (the "Stockholders' Shares"), pursuant to which
the Stockholders have, among other things, agreed to tender into the Offer all
of the Stockholders' Shares and not withdraw any of the Stockholders' Shares
prior to the expiration of the Offer or termination of the Merger Agreement. In
addition, each Stockholder has agreed to appoint the Offeror or any nominee of
the Offeror as such Stockholder's proxy to vote such Stockholder's Shares at a
special meeting of the stockholders of the Company on all matters in connection
with the consummation of the transactions contemplated by the Merger Agreement,
including a long-form merger.
THE TENDER BY THE STOCKHOLDERS OF THE STOCKHOLDERS' SHARES ALONE WILL
NOT SATISFY THE MINIMUM CONDITION. In the event all the conditions to the
Offer are met but the Minimum Condition is not satisfied, the Parent,
Offeror and the Company are required to proceed with a long-form merger at
the same price per Share as the Offer Price. The Stockholders' Shares are
sufficient to approve a long-form merger at a special meeting of the
Stockholders of the Company, if called.
For purposes of the Offer, the Offeror will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn as, if
and when the Offeror gives written notice to SunTrust Bank, Atlanta (the
"Depositary") of the Offeror's acceptance of such Shares for payment. In all
cases, payment for Shares purchased pursuant to the Offer will be made by
deposit of the purchase price with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from the Offeror and
transmitting such payment to tendering stockholders. Under no circumstances
will interest be paid on the purchase price for tendered Shares, whether or not
the Offeror exercises its right to extend the Offer.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
certificates for such Shares or timely confirmation of a book-entry transfer of
such Shares into the Depositary's account at The Depository Trust Company (the
"Book-Entry Transfer Facility"), pursuant to the procedures set forth in Section
3--"Procedure for Tendering Shares" of the Offer to Purchase, (ii) a properly
completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof) with all required signature guarantees or in the case of a
book-entry transfer, an Agent's Message (as defined in Section 2--"Acceptance
for Payment and Payment for Shares" of the Offer to Purchase) and (iii) any
other documents required by the Letter of Transmittal.
Offeror may, subject to the terms of the Merger Agreement, as described in
Section 1-"Terms of the Offer" of the Offer to Purchase and applicable
withdrawal rights, elect to extend the Offer, by giving oral or written notice
of such extensions to the Depositary. Any extension of the period during which
the Offer is open, delay in acceptance for payment or termination or amendment
of the Offer will be followed, as promptly as practicable, by public
announcement thereof, such announcement in the case of an extension to be issued
not later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date in accordance with the
2
<PAGE>
public announcement requirements of Rules 14d-4(c) and 14e-l(d) of the General
Rules and Regulations under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). During any such extension, all Shares previously tendered and
not withdrawn will remain subject to the Offer, subject to the rights of
tendering stockholders to withdraw their Shares.
Tenders of Shares made pursuant to the Offer are irrevocable. Shares
tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment pursuant to the
Offer, may also be withdrawn at any time after February 6, 1999. For a
withdrawal of Shares tendered pursuant to the Offer to be effective, a written,
telegraphic, telex or facsimile transmission notice of withdrawal must be timely
received by the Depositary at the address set forth on the back cover of the
Offer to Purchase and must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holders, if different from the name of the person who tendered such
Shares. If certificates for Shares to be withdrawn have been delivered or
otherwise identified to the Depositary, then, prior to the release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Depositary and, unless such Shares have been tendered by an Eligible
Institution (as defined in Section 3-"Procedure for Tendering Shares" of the
Offer to Purchase), the signatures on the notice of withdrawal must be
guaranteed by an Eligible Institution. If Shares have been tendered pursuant to
the procedures for book-entry transfer set forth in Section 3--"Procedure for
Tendering Shares," of the Offer to Purchase, any notice of withdrawal must also
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Shares and must otherwise comply with such
Book-Entry Transfer Facility's procedures. All questions as to the form and
validity (including time of receipt) of notices of withdrawal will be determined
by the Offeror, in its sole discretion, and whose determination will be final
and binding on all parties. None of the Offeror, the Parent, the Dealer
Manager, the Depositary, the Information Agent or any other person will be under
any duty to give notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
The information required to be disclosed by Rule 14d-6(e)(1)(vii),
promulgated under the Exchange Act , is contained in the Offer to Purchase and
is incorporated herein by reference.
The Company has provided the Offeror its list of stockholders and security
position listings for the purpose of disseminating the Offer to holders of
Shares. The Offer to Purchase, Letter of Transmittal and other related
materials will be mailed to record holders of Shares whose names appear on the
Company's stockholder list and will be furnished to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
Questions and requests for assistance or additional copies of the Offer to
Purchase, the related Letter of Transmittal and other tender offer materials may
be directed to the Information Agent or the Dealer Manager as set forth below,
and copies will be furnished promptly at Offeror's expense. No fees or
commissions will be paid to brokers, dealers or other persons (other than the
Information Agent) for soliciting tenders of Shares pursuant to the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Banks and Brokers call collect (212) 269-5500
CALL TOLL FREE (800) 848-3094
3
<PAGE>
THE DEALER MANAGER FOR THE OFFER IS:
SG COWEN
1221 Avenue of the Americas
New York, New York 10020
(212) 278-5741
Call Toll Free (877) 227-9431
4
<PAGE>
Millbrook, NY, and San Rafael, CA (December 2, 1998) Key Components,
LLC (CUSIP No. 9859Z US), and Valley Forge Corporation (AMEX: VF) announced
today that they have entered into a definitive merger agreement under which K
will acquire V for $19.00 per share, or an aggregate of $82.1 million. The
directors and members of Key Components and the board of directors of Valley
Forge Corporation have unanimously approved the transaction.
Pursuant to the agreement, a subsidiary of Key Components will promptly
commence a tender offer for all of the outstanding Valley Forge shares at $19.00
per share. The offer will remain open until at least January 15, 1999. The offer
will be conditioned upon the valid tender of 90% of the outstanding Valley
Forges shares. Any shares not purchased in the offer in which at least 90% of
the outstanding shares are tendered will be acquired for the same cash price in
a merger immediately after the closing of the tender offer. If the 90% condition
is not met, the transaction will proceed as a one step cash merger at $19.00 per
share. The transaction is also subject to a financing commitment letter and term
sheet obtained by Key Components not being terminated and other customary
conditions.
Holders of over approximately 53% of the outstanding Valley Forge
shares have agreed to tender their shares in the offer and vote for the merger.
Clay Lifflander, President of Key Components, said "The acquisition of
Valley Forge is a major step forward in the realization of Key Components'
business plan. Valley Forge's businesses fit perfectly with Key Components' goal
of becoming a premier supplier of critical components to niche markets. Key
Components looks forward to working with Valley Forge's managers and customers
and is committed to providing the quality and service expected in today's
markets."
David R. Brining, President of Valley Forge, said "We are very pleased
to announce this transaction with Key Components. By combining the resources and
businesses of Key Components with the management, employees, and businesses of
Valley Forge, we believe we have created a diversified provider of quality
products for our customers. We look forward to working together in partnership
with Key Components to achieve even greater success in the future."
CIBC Oppenheimer Corp. has acted as exclusive financial advisor to
Valley Forge in connection with the transaction.
SG Cowen Securities Corporation will act as Dealer Manager in
connection with the tender offer.
The offer will be made pursuant to an offer to purchase and other
documents that are expected to be filed with the SEC within five business days
and distributed to shareholders shortly thereafter.
Key Components is a leading manufacturer of custom engineered,
essential components for application in a diverse array of end use products,
with sales principally to OEM's. Through its Hudson Lock, Inc., and ESP Lock
Products, Inc., subsidiaries, Key Components is a leading designer and
manufacturer of medium security, custom, and specialty locks and locking
systems. Through another wholly owned subsidiary, B.W. Elliott Manufacturing
Co., Inc., it designs and manufactures flexible metal shaft components.
Key Components is an affiliate of Millbrook Capital Management, Inc.,
of Millbrook, New York, an investment firm specializing in acquisitions and
management services.
Valley Forge Corporation is a holding company that owns a group of
recreational product companies and a group of industrial companies. The
recreational products group is one of the largest manufacturers of products
for the recreational marine industry and consists of Marinco, Heart Interface
Corporation, The Guest Company,
<PAGE>
Glendinning Marine Products, Force 10 Marine, and Cruising Equipment Company.
The industrial group, which consists of Gits Manufacturing Company, Turner
Electric Company, and Multiplex Technology, manufactures turbo-charger
actuators, lubricating devices for machinery and equipment, high-voltage
switches, and high-performance video distribution equipment. Valley Forge also
has an interest in Mastervolt International B.V., a Dutch manufacturer of power
inverters and battery chargers for the European marine and industrial markets.
<PAGE>
December 2, 1998
Key Components LLC
Wing Road
Rural Route 1
Post Office Box 167D
Millbrook, New York 12545
Attention: Mr. Alan L. Rivera
Vice President and Secretary
Re: PROPOSED $100,000,000 SENIOR SECURED CREDIT FACILITIES
Ladies and Gentlemen:
We refer to the letter dated December 2, 1998 (the "COMMITMENT LETTER")
from SG Cowen Securities Corporation and Societe Generale to you relating to
senior financing for Key Components LLC in an aggregate principal amount up to
$100,000,000. Terms used but not defined herein have the respective meanings
given to those terms in the Commitment Letter.
This is to confirm that, for purposes of condition precedent (3) to
effectiveness and the initial borrowing set forth in the Term Sheet, the
November 30 draft of the Merger Agreement and the December 1 draft of the
related Schedules are satisfactory to the Agent.
We look forward to working with you to complete this transaction.
SG COWEN SECURITIES CORPORATION
By /s/ Bradford C. Yates
----------------------------
Title: Managing Director
SOCIETE GENERALE
By /s/ Migdalia Lagoa
----------------------------
Title: Managing Director
<PAGE>
December 2, 1998
Key Components LLC
Wing Road
Rural Route 1
Post Office Box 167D
Millbrook, New York 12545
Attention: Mr. Alan L. Rivera
Vice President and Secretary
Re: PROPOSED $100,000,000 SENIOR SECURED CREDIT FACILITIES
Ladies and Gentlemen:
You have advised SG Cowen Securities Corporation ("SG COWEN") and Societe
Generale ("SG") that (a) Key Components LLC ("KC LLC") wishes to purchase all of
the capital stock of Valley Forge Corporation ("VALLEY FORGE"), either directly
or through a wholly-owned subsidiary of KC LLC (the "ACQUISITION"), and (b) KC
LLC will require senior financing in an aggregate principal amount up to
$100,000,000 to finance the Acquisition and to refinance outstanding
indebtedness under KC LLC's existing senior secured credit facility.
We are pleased to advise you that (a) SG hereby offers to commit to provide
$90,000,000 of the required senior financing and (b) SG Cowen hereby offers to
commit to use its best efforts to arrange for other banks or financial
institutions to provide the $10,000,000 balance of the Senior Secured Facilities
(provided that, if the aggregate amount of commitments under the Senior Secured
Facilities held by SG (or any of its affiliates) on the Closing Date (as defined
below) is greater than $30,000,000, the aggregate amount of the Senior Secured
Facilities shall not exceed $90,000,000), all on the terms and conditions
described in the Summary of Terms and Conditions for Senior Secured Facilities
attached hereto as Exhibit A (the "TERM SHEET"), including the conditions
precedent set forth therein, and on the terms and conditions set forth herein
and in the letter of even date herewith (the "FEE LETTER") addressed by SG Cowen
to you providing, among other things, for certain fees relating to the senior
financing (such required senior financing is hereinafter referred to as the
"SENIOR SECURED FACILITIES"). SG Cowen reserves the right to syndicate the
Senior Secured Facilities among a group of banks and/or other financial
institutions (including SG, the "LENDERS") selected by SG Cowen in consultation
with you and Millbrook Capital Management, Inc. ("MILLBROOK").
SG Cowen has submitted this letter after reviewing certain historical
financial statements and other information provided to SG Cowen by you, by
Millbrook (your advisors), by Valley Forge and by CIBC Oppenheimer Corp. (Valley
Forge's advisors). SG Cowen shall be entitled to terminate its obligations
under the preceding paragraph to provide the Senior Secured Facilities: (i) if
the terms of the Acquisition are changed in any material respect (including any
material change in the sources and uses of funds for the Acquisition from that
described in Exhibit B hereto), or if any information submitted to SG Cowen
proves to have been inaccurate or incomplete or if any adverse change occurs, or
any additional information is disclosed to or discovered by SG Cowen, that SG
Cowen deems materially adverse in respect of the condition (financial or
otherwise), business, operations, assets, nature of assets or liabilities of KC
LLC, Valley Forge and their respective subsidiaries (taken as a whole); (ii) if
any of the fees provided for by the Fee Letter are not paid when due; (iii) if
SG Cowen is not satisfied that, prior to and during the syndication of the
Senior Secured Facilities, there is no competing offering, placement or
arrangement of any debt securities (other than the Senior Secured Facilities) or
bank financing by or
<PAGE>
on behalf of KC LLC or any of its subsidiaries; (iv) if a banking moratorium is
declared by federal or New York banking officials; or (v) if the other
conditions set forth or referred to in the Term Sheet are not fulfilled.
SG Cowen shall be entitled, after consultation with you, to change pricing,
terms and structure of the Senior Secured Credit Facilities, if SG Cowen
determines that such changes are reasonably necessary to ensure successful
syndication of the Senior Secured Credit Facilities, provided the total amount
of the Senior Secured Credit Facilities remains unchanged.
You hereby indemnify and hold harmless each of SG Cowen, SG and the other
Lenders and each director, officer, employee and affiliate thereof (each, an
"INDEMNIFIED PERSON") from and against any and all losses, claims, damages,
liabilities (or actions or other proceedings commenced or threatened in respect
thereof) and expenses that arise out of, result from or in any way relate to
this letter, the Term Sheet or the Fee Letter, the other transactions
contemplated hereby or the provision or syndication of the Senior Secured
Facilities, and to reimburse each indemnified person, upon its demand, for any
legal or other expenses incurred in connection with investigating, defending or
participating in any such loss, claim, damage, liability or action or other
proceeding (whether or not such indemnified person is a party to any action or
proceeding out of which any such expenses arise), other than any of the
foregoing claimed by any indemnified person to the extent finally judicially
determined to have arisen out of the gross negligence or willful misconduct of
such person. Neither SG Cowen, SG nor any other Lender shall be responsible or
liable to the Company, any of its shareholders or any other person for any
consequential damages that may be alleged as a result of this letter. In
addition, you hereby agree to reimburse SG Cowen and SG from time to time upon
their demand for their reasonable out-of-pocket costs and expenses (including,
without limitation, legal fees and expenses, provided that, in the event that
you are not selected by Valley Forge to proceed to consummate the Acquisition on
the basis outlined in this letter and the Term Sheet, such legal fees (exclusive
of disbursements) shall be reimbursable in an amount not to exceed $18,000)
incurred in connection with the syndication of the Senior Secured Facilities and
the preparation, review, negotiation, execution and delivery of this letter, the
Term Sheet, the Fee Letter, the definitive financing agreements and the other
documents relating to the Senior Secured Facilities. Your obligations under
this paragraph shall survive any termination of this letter and shall be
effective regardless of whether the definitive financing agreements are
executed.
You acknowledge that SG Cowen and its affiliates may be providing financing
or other services to other companies in respect of which you or your affiliates
may have conflicting interests. SG Cowen and its affiliates will not use
confidential information obtained from you by virtue of the transactions
contemplated by this letter or their other relationships with you in connection
with the engagements of SG Cowen and its affiliates with other companies, and SG
Cowen and its affiliates will not furnish any such information to such other
companies. You also acknowledge that SG Cowen and its affiliates have no
obligation to use in connection with the transactions contemplated by this
letter, or to furnish to you or any of your affiliates, confidential information
obtained from other companies.
This letter is delivered to you upon the condition that, prior to your
acceptance of this offer, neither the existence of this letter, the Term Sheet
or the Fee Letter nor any of their contents shall be disclosed by you except (i)
as may be compelled to be disclosed in a judicial or administrative proceeding
or as otherwise required by law or (ii) on a confidential and "need to know"
basis, to your directors, officers, employees, advisors and agents.
SG Cowen's offer set forth in this letter will terminate at 5:00 p.m. (New
York City time) on December 2, 1998 unless you accept this letter and the Fee
Letter at or prior to that time by signing and returning to SG Cowen
counterparts of this letter and the Fee Letter. SG Cowen's commitment under
this letter, if accepted by you, will in any event terminate at 5:00 p.m. (New
York City time) on April 15, 1999 (subject to extension by SG Cowen if, in SG
Cowen's reasonable judgment, each of the parties to the Merger Agreement
referred to in the Term Sheet is making a good faith effort to consummate the
Merger referred to in the Term Sheet as soon as practicable) if the Acquisition
and the initial borrowings under the Senior Secured Facilities (the date on
which the Acquisition and such borrowings occur, the "CLOSING DATE") shall not
have occurred on or prior to such date.
-2-
<PAGE>
This letter and the Fee Letter may be executed in any number of
counterparts, each of which shall be an original and all of which, when taken
together, shall constitute one agreement, and this letter, the Term Sheet and
the Fee Letter may not be assigned by you without the prior written consent of
SG Cowen and may not be amended or any provision hereof or thereof waived or
modified except by an instrument in writing signed by each of the parties
hereto. No person or entity other than the parties hereto shall have any rights
under or be entitled to rely upon this letter, the Term Sheet or the Fee Letter.
This letter, the Term Sheet and the Fee Letter shall be governed by and
construed in accordance with the law of the State of New York.
We look forward to working with you to complete this transaction.
SG COWEN SECURITIES CORPORATION
By /s/ Bradford C. Yates
----------------------------
Title: Managing Director
SOCIETE GENERALE
By /s/ Migdalia Lagoa
----------------------------
Title: Managing Director
ACCEPTED AND AGREED:
KEY COMPONENTS LLC
By /s/ Alan L. Rivera
--------------------------
Title: Vice President
Date: December 2, 1998
-3-
<PAGE>
MBP Draft of 12/2/98
EXHIBIT A
KEY COMPONENTS, LLC
PROPOSED SENIOR SECURED FACILITIES
SUMMARY OF INDICATIVE TERMS AND CONDITIONS
BORROWER: Key Components, LLC.
ARRANGER: SG Cowen Securities Corporation.
AGENT: Societe Generale.
LENDERS: Societe Generale, acting individually or with or through one or
more of its subsidiaries or affiliates, including branches or
agencies thereof ("SG"), together with a group of financial
institutions (collectively with SG, the "Lenders") to be selected
by the Arranger in consultation with Millbrook Capital
Management, Inc. and the Borrower.
PURPOSE: To finance the acquisition by the Borrower of all of the capital
stock of Valley Forge Corporation ("Valley Forge"), and for
general corporate and working capital purposes. If the amount
of the Revolver described below is increased to up to $40,000,000
as described below, such increase will be available to finance
(i) the acquisition of G&H, provided that such acquisition falls
within the definition of Permitted Acquisitions or (ii) any other
acquisition as shall be consented to by Lenders holding 50.1% or
more of the commitments.
FACILITIES: REVOLVER: $30,000,000 senior secured revolving credit
facility (subject to increase to up to $40,000,000
at the Borrower's option, provided and to the
extent that the aggregate amount of the
commitments with respect to the Facilities made by
the Lenders (other than SG) shall exceed
$60,000,000).
TERM LOAN: $60,000,000 senior secured term loan.
AVAILABILITY: REVOLVER: Draws may be made and standby letters of credit
may be issued under the Revolver at any time after
closing until the Revolving Credit Final Maturity
Date (as defined below). Availability will be
subject to borrowing base equal to the sum of the
following:
(x) 85% of Eligible Accounts Receivable, plus
(y) 60% of Eligible Inventory, plus
<PAGE>
(z) 100% of cash on hand and in bank
accounts, and commercial paper rated "AA" or
better in which the Agent has a perfected
first priority security interest.
Amounts repaid under the Revolver may be
reborrowed.
TERM LOAN: The Term Loan will be made in a single drawing at
closing. Amounts outstanding under the Term Loan
that are repaid may not be reborrowed.
FINAL MATURITY
AND
AMORTIZATION: REVOLVER: The Revolver will have a final maturity (the
"Revolving Credit Final Maturity Date") of the
earlier of six years following closing and the
date on which the Term Loan is repaid in full. If
the amount of the Revolver is increased to greater
than $30,000,000 as described above, such
increase, if drawn, shall amortize in a manner to
be determined.
TERM LOAN: The Term Loan will have a final maturity of six
years after the closing, and will amortize in
equal quarterly installments with aggregate annual
amortization requirements as follows:
YEAR FOLLOWING CLOSING ANNUAL AGGREGATE AMORTIZATION
First $ 5,000,000
Second $ 6,000,000
Third $ 10,000,000
Fourth $ 11,000,000
Fifth $ 14,000,000
Sixth $ 14,000,000
INTEREST RATES:REVOLVER AND
TERM LOAN: LIBOR + 3-1/4%, or ABR, as defined by SG, +
2-1/4%.
Interest margins on loans drawn under the Revolver and
the Term Loan will step-down based on a grid of
leverage ratios to be determined.
COMMITMENT FEES: 0.50% per annum on the undrawn and unutilized amount of
the Revolver.
LETTER OF CREDIT FEES: Equal to the Applicable LIBOR Margin then in effect for
loans outstanding under the Revolver. Additionally, a
Letter of Credit Issuance Fee, equal to the greater of
$500 or 0.25% will be paid to the Letter of Credit
Issuer.
DEFAULT RATE: Upon the occurrence of any Default or Event of Default, the
Applicable Margin for each facility will increase by 2% over
the Applicable Margin in effect just prior to the occurrence
of the Default or Event of Default. If such loan is a LIBOR
loan, it shall convert to a base rate loan at the end of the
interest period then in effect for such loan.
<PAGE>
GUARANTEES: The Facilities and drawings thereunder shall be
unconditionally guaranteed (the "Guarantees") by each
existing and hereinafter acquired direct and indirect
subsidiary of the Borrower (including, after the
consummation of the Merger referred to below, Valley Forge
and each of the direct and indirect subsidiaries of Valley
Forge), other than Key Components Finance Corp.
(collectively, the "Guarantors").
SECURITY : The Facilities and drawings thereunder and the related
Guarantees shall be secured by a perfected first priority
security interest in all current and hereinafter acquired
tangible and intangible assets of the Borrower and the
Guarantors and a first priority pledge of all capital stock
of the Guarantors owned directly or indirectly by the
Borrower.
VOLUNTARY REDUCTION
OR CANCELLATION OF
UNUSED REVOLVER
COMMITMENTS: The Borrower may permanently reduce without premium or
penalty all or a portion of the Revolver unused for
advances, subject to one business day's prior notice,
provided that any partial reduction shall be in a minimum
amount of $1,000,000 and in multiples of $500,000 in excess
thereof.
OPTIONAL
PREPAYMENTS: Voluntary prepayments shall be permitted in whole or in part
without premium or penalty, in a minimum amount of $500,000
and in multiples of $100,000 in excess thereof (except in
the case of Revolving Loans for which optional prepayments
in a minimum amount of $100,000 and in integral multiples of
$50,000 shall be permitted), subject to at least one but no
more than five business days' prior notice and reimbursement
of "break funding" costs and related expenses, if any. The
amount of any optional prepayment shall be applied to prepay
the amounts outstanding under the Term Loan in the inverse
order of maturity of the remaining installments thereof.
MANDATORY
PREPAYMENTS: Mandatory Prepayment Events will be customary for leveraged
transactions of this nature, but in any event will include
75% of Excess Cashflow and 100% of the Net Proceeds from
certain assets sales (unless the proceeds thereof are
reinvested in a Permitted Acquisition or in other assets
within 180 days after receipt), certain issuances of capital
stock (unless the proceeds thereof are reinvested in a
Permitted Acquisition or in other assets within 180 days
after receipt) and certain incurrences of additional
indebtedness (unless the proceeds thereof are reinvested in
a Permitted Acquisition or in other assets within 180 days
after receipt). Proceeds received in respect of any
Mandatory Prepayment Event shall be applied first to prepay
amounts outstanding in respect of the Term Loan, in the
inverse order of the maturity of the installments thereof,
and then to Revolving Loans.
"Permitted Acquisition" means an acquisition of a business
so long as the following conditions are satisfied:
(a) if, after giving effect thereto, the ratio of the
Borrower's consolidated senior indebtedness (other than
the Borrower's 10 1/2% Senior Notes Due 2008 (the
"Senior Notes")) to consolidated EBITDA (calculated on
a rolling four-quarter basis) does not exceed 2.50 to
1, the aggregate consideration payable in connection
therewith (including indebtedness assumed) does not
exceed $15,000,000.
3
<PAGE>
(b) the Permitted Acquisition is in a permitted line of
business;
(c) no more than three Permitted Acquisitions are made
during any rolling six-month period;
(d) the aggregate consideration payable in connection with
Permitted Acquisitions (including indebtedness assumed)
does not exceed $15,000,000 during any rolling
six-month period;
(e) at least 10 business days prior to the making of any
proposed acquisition, the Borrower shall furnish a
reasonably detailed description of the proposed
Permitted Acquisition, a certified compliance
certificate and a reasonably detailed financial model
demonstrating proforma compliance with all of the
conditions precedent to Permitted Acquisitions and
projected compliance with all covenants for the term of
the Facilities, audited financials of the target (or,
if not reasonably available, certified financials by
the target's senior financial officer), an executed
stock or asset purchase agreement (or such an agreement
in execution form) and a "due diligence" report from a
nationally recognized accounting firm (if such a report
is obtained by the Borrower), all of the above in
reasonably acceptable form to the Agent and the
Lenders;
(f) after giving effect thereto, the Borrower will be in
compliance with the covenants set forth in the Credit
Agreement;
(g) the Agent shall have a perfected first priority
security interest in the capital stock of any entities
acquired, all of the assets of any entities acquired
and any assets acquired; and
(h) the Borrower's borrowing base availability shall be at
least $5,000,000.
CONDITIONS TO
EFFECTIVENESS
AND TO INITIAL
BORROWING: The effectiveness of the Facilities and the initial
borrowings thereunder shall be subject to conditions
precedent that are usual for facilities and transactions of
this type, and to such additional conditions precedent as
may be required by the Lenders, including but not limited
to:
(1) The Borrower (or a wholly-owned subsidiary of the
Borrower ("Acquisition Co")) shall have acquired no
less than 90% of the capital stock of Valley Forge (the
"Acquisition") for an aggregate consideration, which,
when taken together with any merger consideration
payable to any shareholders of Valley Forge, does not
exceed the sum of (x) $88,500,000 PLUS (y) the
aggregate amount of cash proceeds received by the
Borrower from the issuance of additional common equity
to finance the Acquisition; and the agreement for the
merger (the "Merger") of Valley Forge and Acquisition
Co (the "Merger Agreement") shall have been duly
approved by the boards of directors of Acquisition Co
and Valley Forge. In addition, the Agent shall be
satisfied that the funds available to the Borrower will
be sufficient to consummate the Acquisition.
4
<PAGE>
(2) All indebtedness of Valley Forge and its subsidiaries
shall have been paid in full and any liens securing any
such indebtedness shall have been terminated of record.
(3) The form and substance of the Merger Agreement shall be
reasonably satisfactory to the Agent (it being
understood that, except as expressly provided herein,
the draft thereof prepared by Valley Forge and
heretofore furnished to the Arranger is reasonably
satisfactory). All conditions to the Merger set forth
in the Merger Agreement shall have been satisfied. The
representations regarding environmental matters set
forth in the Borrower's comments to the Merger
Agreement draft referred to above shall be true and
correct.
(4) The Acquisition and the Merger shall have been made in
compliance with all applicable laws, statutes, rules
and regulations.
(5) There shall be no governmental or judicial action,
actual or threatened, that is reasonably likely to
restrain, prevent or impose burdensome conditions on
the Acquisition or the Merger, or that would cause a
material adverse change on the Borrower, any of the
Guarantors, Valley Forge or any of Valley Forge's
subsidiaries.
(6) The lease arrangement relating to the facilities of
Valley Forge located at 2655 Corporate Drive, Napa,
California, shall have been modified to provide for the
payment of rent thereunder on terms comparable to those
existing prior to the Merger.
(7) The Agent shall have received a certificate from the
Chief Financial Officers of the Borrower and all
Guarantors, satisfactory in all respects to the
Lenders, to the effect that, after giving effect to the
Acquisition, the Merger and the making of the Term
Loan, the Borrower and the Guarantors (taken as a
whole) will not be insolvent, will not be rendered
insolvent and will not have insufficient capital with
which to engage in their businesses or will have
incurred debts within its ability to pay such debts as
they mature.
(8) There shall not have occurred or become known any
material adverse condition affecting, or any material
adverse change with respect to, the condition
(financial or otherwise), operations, business, assets
or liabilities of the Borrower, Valley Forge and their
respective subsidiaries (taken as a whole), since
December 31, 1997.
(9) The Representations and Warranties shall be true and
correct.
(10) No event has occurred which would constitute an Event
of Default.
(11) The Senior Credit Agreement and all documentation with
respect to the Facilities shall be satisfactory to the
Agent, the Lenders and their counsel.
CONDITIONS PRECEDENT
TO SUBSEQUENT
5
<PAGE>
BORROWINGS: Customary in credit agreements of this type including,
without limitation:
(1) Absence of Default or Events of Default;
(2) Accuracy of representations and warranties in all
material respects, including no material adverse change
representation to be made upon each drawing.
REPRESENTATION AND
WARRANTIES: Customary for facilities and transactions of this type.
Representations and warranties that may be required include,
but are not limited to, no Default or Event of Default;
maintenance of business prospects, including absence of
material adverse change; accuracy of financial statements
(including proforma financial statements); absence of
undisclosed liabilities; compliance with Federal Reserve
Board regulations (including margin regulations);
compliance with laws (including environmental laws and
ERISA); solvency; no conflicts with laws, charter
documents, or agreements; organization, power and good
standing; payment of taxes; ownership of properties; and
absence of liens and security interests; in each case with
such materiality and other qualifications as shall be
negotiated.
NON-FINANCIAL
COVENANTS: Customary for facilities and transactions of this type,
including but not limited to: providing financial and other
business information; material compliance with laws;
insurance; inspection and maintenance of books and records
and properties; material compliance with environmental and
ERISA laws; conduct of and line of business; maintenance of
existence; limitations on liens, debts, mergers, investments
(including capital expenditures and acquisitions),
prepayment of other debt, purchase and sale of assets,
operating lease expenses, transactions with affiliates,
management or advisory fees and modifications of core
documents, in each case with such carve-outs and other
exceptions as shall be negotiated. The Borrower will agree
to cause Valley Forge and Acquisition Co to be duly merged
promptly after the Closing Date. The covenant restricting
the payment of management or advisory fees will permit the
Borrower to pay an advisory fee to Millbrook Capital
Management Inc. in connection with the Merger in an amount
not to exceed $900,000, provided that, at the time such fee
is paid and after giving effect thereto, (i) no default
shall have occurred and be continuing and (ii) the ratio of
Funded Debt to EBITDA (for the preceding four-quarter
period, and based on the Borrower's financial statements for
such period after giving pro forma effect to (a) such
payment, (b) any indebtedness incurred to finance such
payment, and (c) a $2,200,000 net add-back to EBITDA to
reflect net anticipated cost savings from the elimination of
overhead, and anticipated synergies, in connection with the
Acquisition (such add-back to be credited as follows: for
the period ending on December 31, 1998, 100% thereof; for
the period ending on March 31, 1999, 75% thereof; for the
period ending on June 30, 1999, 50% thereof; for the period
ending on September 30, 1999, 25% thereof; and thereafter,
no such add-back)) shall not exceed 4.9 to 1.
DIVIDENDS AND OTHER
DISTRIBUTIONS: Dividends and other distributions will not be permitted
except as follows:
(a) To the extent necessary to enable the Borrower's
members to pay income taxes arising out of their
membership interests in the Borrower.
6
<PAGE>
(b) If (after giving effect to such dividend or other
distribution) the ratio of the Borrower's consolidated
senior indebtedness (other than the Senior Notes) to
consolidated EBITDA (calculated on a rolling
four-quarter basis) is equal to or less than 2.00 to 1,
additional distributions in an aggregate amount not to
exceed 25% of Excess Cash Flow for the prior year (in
each case, including any amounts paid in such year
pursuant to the foregoing clause (b)), so long as at
the time of such distribution and after giving effect
thereto, no default shall be continuing.
FINANCIAL
COVENANTS: Minimum Interest Coverage, minimum Fixed Charge Coverage and
maximum Funded Debt/EBITDA ratios, in each case as shall be
negotiated.
EVENTS OF DEFAULT: Customary for transactions of this type, including (but not
limited to) non-payment, misrepresentation, financial and
non-financial covenant defaults, bankruptcy, ERISA,
judgments, change of ownership or control, cross-default,
cross-acceleration and impairment of security; with respect
to certain Events of Default, with notice and cure periods
as shall be mutually agreed and customary.
YIELD PROTECTION AND
INCREASED COSTS: The usual for facilities of this type, including but not
limited to, compensation in respect of redeployment costs,
reserve requirements, taxes (including gross-up provisions
for withholding taxes) and decreased profitability resulting
from U.S. or foreign capital adequacy requirements,
guidelines or policies or their interpretation or
application, whether or not having the force of law, and any
other customary yield and increased costs protection deemed
appropriate by the Lenders to provide customary protection
for U.S. and non-U.S. banks. Compensation will be payable
by the Borrower upon presentation by the affected Lender of
a notice as to the amounts involved, which will be
conclusive absent manifest error.
ASSIGNMENTS AND
PARTICIPATIONS: Neither the Borrower nor any Guarantor may assign its rights
or obligations in connection with the Senior Secured
Facilities without the prior written consent of all the
Lenders. Lenders are permitted to participate and assign
loans, notes and commitments.
Assignments are subject to an administrative fee to the
Agent of $3,500 per occurrence and subject to the consent of
the Borrower and the Agent (such consent not to be
unreasonably withheld). Each assignment will be in a
minimum amount of $5,000,000. Assignees would assume all
the rights and obligations of the assigning Lender.
Participations will be without restriction (except
participants shall have no voting rights other than, to the
extent agreed to between such participant and the applicable
Lender, as to matters which require the vote of 100% of the
Lenders) and participants will have the same benefits as the
original syndicate Lenders with regard to yield protection
and increased costs (subject to limitation of amounts
claimed to the amounts that could have been claimed by the
selling Lender), rights in the collateral and provision of
information on the Borrower.
VOTING: Banks holding 50.1% or more of commitments for amendments
and waivers; 100% for i) reductions in principal due, the
interest rate or fees payable thereon or extensions in the
7
<PAGE>
payments thereof, ii) increases or extensions of term of
commitments, iii) releases of any substantial part of
collateral, or iv) changes in percentage needed to amend or
waive.
MISCELLANEOUS: Governing Law and Forum (New York); waiver of jury trial;
customary acquisition finance and environmental indemnity;
payment by the Borrower of all out-pocket expenses of the
Agent, including legal, consultant, due diligence,
syndication and enforcement, filing and other collateral
expenses, and post-closing publicity.
AGENT'S COUNSEL : Mayer, Brown & Platt
This Summary of Indicative Terms and Conditions is intended as an outline only
and does not purport to summarize or contain all of the conditions, covenants,
representations, warranties and other provisions that would be contained in the
definitive credit documentation. The Borrower and Millbrook Capital Management
agree that this Summary of Indicative Terms and Conditions is for the
confidential use of the Borrower and Millbrook Capital Management and may not be
distributed, disclosed or summarized in any way, in whole or in part, without
the prior written consent of the Arranger. The financing described herein is
subject to definitive documentation satisfactory to the Arranger, the Agent, the
Lenders and their counsel.
8
<PAGE>
AGREEMENT AND PLAN OF MERGER
among
KEY COMPONENTS, LLC
KCI ACQUISITION CORP.
and
VALLEY FORGE CORPORATION
Dated as of December 2, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I THE OFFER...................................................................................1
1.1 The Offer...................................................................................1
1.2 Company Actions.............................................................................2
1.3 Stockholder Lists...........................................................................3
1.4 Alternative Transaction Structure...........................................................3
ARTICLE II THE MERGER..................................................................................4
2.1 The Merger..................................................................................4
2.2 Closing.....................................................................................4
2.3 Effective Time..............................................................................4
2.4 Effect of the Merger........................................................................4
2.5 Certificate of Incorporation and By-Laws....................................................5
2.6 Directors and Officers......................................................................5
2.7 Conversion of Shares........................................................................5
2.8 Exchange of Certificates....................................................................5
2.9 Stock Transfer Books........................................................................7
2.10 Options and Other Purchase Rights...........................................................7
2.11 Dissenting Shares...........................................................................8
2.12 Company Stockholders' Meeting...............................................................8
2.13 Merger Without Meeting of Stockholders......................................................8
2.14 Withholding Taxes...........................................................................8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
THE COMPANY.................................................................................9
3.1 Organization and Qualification..............................................................9
3.2 Capitalization..............................................................................9
3.3 Authorization and Validity of Agreement....................................................10
3.4 Consents and Approvals.....................................................................11
3.5 No Violation...............................................................................11
3.6 SEC Reports; Financial Statements..........................................................12
3.7 Schedule 14D-9; Offer Documents and Company Proxy Statement................................12
3.8 Compliance with Law; Permits...............................................................13
3.9 Absence of Certain Changes.................................................................13
3.10 No Undisclosed Liabilities.................................................................13
3.11 Litigation.................................................................................13
3.12 Employee Benefit Matters...................................................................14
3.13 Taxes......................................................................................16
3.14 Intellectual Property......................................................................17
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3.15 Brokers and Finders........................................................................17
3.16 Real Property..............................................................................17
3.17 Environmental Matters......................................................................17
3.18 Labor Matters..............................................................................19
3.19 Voting Requirements........................................................................19
3.20 Opinion of Financial Advisor...............................................................20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER.......................................................................20
4.1 Organization and Qualification.............................................................20
4.2 Authorization and Validity of Agreement....................................................20
4.3 Consents and Approvals.....................................................................20
4.4 No Violation...............................................................................21
4.5 Offer Documents; Company Proxy Statement; Schedule 14D-9...................................21
4.6 Financing..................................................................................22
4.7 Brokers and Finders........................................................................22
4.8 Operations of Purchaser....................................................................22
ARTICLE V COVENANTS..................................................................................22
5.1 Conduct of the Business of the Company Pending the Merger..................................22
5.2 Access; Confidentiality....................................................................24
5.3 Company Proxy Statement....................................................................25
5.4 State Takeover Statutes....................................................................25
5.5 Further Actions............................................................................25
5.6 Public Announcements.......................................................................26
5.7 Acquisition Proposals......................................................................26
5.8 D&O Indemnification and Insurance..........................................................27
5.9 Company Plans..............................................................................29
5.10. Notification of Certain Matters............................................................29
ARTICLE VI CLOSING CONDITIONS.........................................................................30
6.1 Conditions to Obligations of Each Party to Effect the Short-Form
Merger.....................................................................................30
ARTICLE VII TERMINATION................................................................................32
7.1 Termination................................................................................32
7.2 Effect of Termination......................................................................34
7.3 Fees and Expenses..........................................................................35
ARTICLE VIII MISCELLANEOUS..............................................................................35
8.1 Nonsurvival of Representations, Warranties and Covenants...................................35
8.2 Notices....................................................................................35
8.3 Certain Definitions........................................................................37
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8.4 Entire Agreement...........................................................................37
8.5 Assignment; Binding Effect.................................................................37
8.6 Amendments.................................................................................38
8.7 Waivers....................................................................................38
8.8 Validity...................................................................................38
8.9 Captions...................................................................................38
8.10 Counterparts...............................................................................38
8.11 Governing Law..............................................................................38
8.12 Purchaser..................................................................................39
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of December 2, 1998, by and among
Key Components, LLC, a Delaware limited liability company ("Parent"), KCI
Acquisition Corp., a Delaware corporation and wholly owned subsidiary of Parent
("Purchaser"), and Valley Forge Corporation, a Delaware corporation (the
"Company").
RECITALS
WHEREAS, the respective Boards of Directors of the Company, Parent and
Purchaser have approved the acquisition of the Company by Parent, upon the terms
and subject to the conditions set forth herein; and
WHEREAS, the Purchaser and certain stockholders of the Company
concurrently with the execution and delivery of this Agreement have entered into
Stockholder Agreements ("Stockholder Agreements") in which the stockholders (i)
agreed to tender their Shares (as defined in Section 1. 1) into the Offer (as
defined in Section 1.1) and (ii) granted a proxy to designees of Purchaser,
among other things, to vote their Shares in favor of the Merger (as defined in
Section 2.1), if applicable; and
WHEREAS, it is intended that the acquisition be accomplished by
Purchaser commencing a cash tender offer for Shares to be followed by a merger
of Purchaser with and into the Company;
NOW, THEREFORE, in consideration of the foregoing and of the respective
representations, warranties, covenants, and agreements set forth in this
Agreement, the parties hereto hereby agree as follows:
ARTICLE I
THE OFFER
1.1 The Offer. (a) As promptly as practicable (but in no event later
than five business days following the public announcement of the execution
hereof), Purchaser shall commence (within the meaning of Rule 14d-2 under the
Securities Exchange Act of 1934, as amended (the"Exchange Act"), an offer to the
Company's stockholders to purchase all of the Company's outstanding shares of
common stock, par value $0.50 per share (the "Shares"), at a price of $19.00 per
Share, net to each seller in cash (as such offer may be amended in accordance
with the terms of this Agreement, the "Offer"), subject to the conditions set
forth in Annex A hereto. Purchaser will not, without the prior written consent
of the Company, (i) decrease or change the form of the consideration payable in
the Offer, (ii) decrease the number of Shares sought pursuant to the Offer,
(iii) impose additional conditions to the Offer, (iv) change the conditions to
the Offer, except that Parent or Purchaser in their sole discretion may waive
any of the conditions to the Offer other than the condition ("Minimum
Condition") set forth in clause (1) of the second
<PAGE>
paragraph of Annex A, which may not be waived without the Company's prior
written consent, or (v) make any other change in the terms or conditions of the
Offer that is materially adverse to the holders of Shares. Purchaser will, on
the terms and subject to the prior satisfaction or waiver of the conditions of
the Offer, accept for payment and pay for all Shares validly tendered and not
withdrawn pursuant to the Offer promptly after expiration of the Offer; provided
that, Purchaser (i) shall extend the Offer if at the scheduled expiration date
of the Offer any of the conditions set forth in Annex A shall not be satisfied
or waived, provided the extension shall be no longer than reasonably necessary
to satisfy such condition, (ii) shall extend the Offer for any period required
by any rule, regulation, interpretation, or position of the Securities and
Exchange Commission (the "SEC") or the staff thereof applicable to the Offer,
and (iii) may extend the Offer up to the tenth business day beyond the latest
expiration date that would otherwise be permitted under clause (i) or (ii) of
this sentence. The initial expiration date of the Offer shall be January 15,
1999. The Company agrees that no Shares held by the Company will be tendered to
Purchaser pursuant to the Offer; provided, that Shares held beneficially or of
record by any plan, program or arrangement sponsored or maintained for the
benefit of employees of the Company shall not be deemed to be held by the
Company, regardless of whether the Company has, directly or indirectly, the
power to vote or control the disposition of such Shares. The obligations of
Purchaser to commence the Offer and to accept for payment and to pay for Shares
validly tendered on or prior to the expiration of the Offer and not withdrawn
shall be subject only to the conditions set forth in Annex A hereto.
(b) On the date of commencement of the Offer, Parent and
Purchaser shall file or cause to be filed with the SEC a Tender Offer Statement
on Schedule 14D-1 (together with all supplements and amendments thereto, the
"Schedule 14D-1") with respect to the Offer, which shall contain the offer to
purchase and related letter of transmittal and other ancillary offer documents
and instruments pursuant to which the Offer will be made (collectively, together
with any supplements or amendments thereto, the "Offer Documents"). Parent and
Purchaser will disseminate the Offer Documents to holders of Shares. Each of
Parent, Purchaser and the Company will promptly correct any information provided
by it for use in the Offer Documents that becomes false or misleading in any
material respect, and Parent and Purchaser will take all steps necessary to
cause the Offer Documents as so corrected to be filed with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent required by
applicable law. The Company and its counsel shall be given a reasonable
opportunity to review and comment on the Offer Documents prior to their filing
with the SEC. Parent and Purchaser agree to provide the Company with any
comments that may be received from the SEC or its staff with respect to the
Offer Documents promptly after receipt thereof.
1.2 Company Actions. The Company hereby consents to the Offer and
represents and warrants that its Board of Directors (at meetings duly called and
held) has (a) determined that the Offer and the Merger are advisable and are
fair to and in the best interests of the stockholders of the Company and (b)
approved this Agreement and the Merger and resolved to recommend acceptance of
the Offer and, if required by applicable law, approval and adoption of this
Agreement and the Merger by the stockholders of the Company; provided, that such
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recommendation may be withdrawn, modified or amended if, in the good faith
opinion of the Board of Directors, after receiving advice from independent legal
counsel at a meeting of the Board of Directors, such recommendation would be
inconsistent with its fiduciary duties to the Company's shareholders under
applicable law. Upon commencement of the Offer, the Company shall file or cause
to be filed with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 (the "Schedule 14D-9") containing the recommendation of its Board of
Directors in favor of the Offer and the Merger and shall permit the inclusion in
the Schedule 14D-1 of such recommendation, in each case subject to the fiduciary
duties of the Board of Directors of the Company. The Schedule 14D-9 will comply
in all material respects with the provisions of applicable federal securities
laws and, on the date filed with the SEC and on the date first published, sent
or given to the Company's shareholders, shall not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information supplied by
Parent or the Purchaser in writing for inclusion in the Offer Documents. The
Company further agrees to take all steps necessary to cause the Schedule 14D-9
to be filed with the SEC and to be disseminated to holders of Shares, in each
case as and to the extent required by applicable federal securities laws. Each
of the Company, Parent and Purchaser will promptly correct any information
provided by it for use in the Schedule 14D-9 that becomes false or misleading in
any material respect and the Company will take all steps necessary to cause the
Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated
to holders of Shares, in each case as and to the extent required by applicable
law. Purchaser and its counsel shall be given a reasonable opportunity to review
and comment on the Schedule 14D-9 prior to its filing with the SEC. The Company
agrees to provide Purchaser with any comments that may be received from the SEC
or its staff with respect to the Schedule 14D-9 promptly after receipt thereof.
1.3 Stockholder Lists. In connection with the Offer, the Company shall
furnish or cause to be furnished to Purchaser mailing labels and security
position listings and any available listing or computer file containing the
names and addresses of the record holders of Shares as of a recent date and
shall furnish Purchaser with such information reasonably available to the
Company and such assistance as Purchaser or its agents may reasonably request in
communicating the Offer to the record and beneficial holders of Shares. Subject
to the requirements of applicable law and except for such steps as are necessary
to disseminate the Offer Documents and any other documents necessary to
consummate the Offer and the Merger, Parent, Purchaser and their respective
affiliates will hold in confidence such listings and other information, shall
use such information only in connection with the Offer and the Merger and, if
this Agreement is terminated, shall, and shall cause their respective employees,
agents or other representatives to, promptly deliver to the Company all copies
of all such information (and extracts or summaries thereof) then in their
possession.
1.4 Alternative Transaction Structure. Notwithstanding anything to the
contrary set forth in this Agreement, if the Minimum Condition has not been
satisfied prior to the scheduled
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<PAGE>
expiration of the Offer (as such Offer may have been extended pursuant to
Section 1.1 hereof), Purchaser shall terminate the Offer and Parent, Purchaser
and the Company shall proceed with the Merger in accordance Article II of this
Agreement.
ARTICLE II
THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions of this
Agreement and in accordance with applicable provisions of the General
Corporation Law of the State of Delaware (the "DGCL"), at the Effective Time (as
defined below), Purchaser shall be merged with and into the Company (the
"Merger"). As a result of the Merger, the separate corporate existence of
Purchaser shall cease and the Company shall continue as the surviving
corporation of the Merger (the "Surviving Corporation").
2.2 Closing. Unless this Agreement shall have been terminated pursuant
to Article VII and subject to the satisfaction or, if permitted by applicable
law, waiver of the applicable conditions set forth in Article VI, the
consummation of the Merger and the other transactions contemplated hereby (the
"Closing") shall take place at the offices of Rubin Baum Levin Constant &
Friedman, 30 Rockefeller Plaza, New York, New York 10112, as promptly as
practicable (and in any event within two business days) following the
satisfaction or, if permitted by applicable law, waiver of the applicable
conditions set forth in Article VI, unless another place, date or time is agreed
to in writing by Parent and the Company.
2.3 Effective Time. As promptly as practicable after the satisfaction
or, if permitted by applicable law, waiver of the applicable conditions set
forth in Article VI, the parties hereto will cause a certificate of merger or,
if applicable, a certificate of ownership and merger (the "Certificate of
Merger") to be executed, acknowledged and filed with the Secretary of State of
Delaware in accordance with the DGCL. The Merger shall become effective at such
time as the Certificate of Merger is filed with the Secretary of State of the
State of Delaware in accordance with the DGCL, or at such later time as may be
agreed to by Parent or Purchaser and the Company and specified in the
Certificate of Merger in accordance with applicable law. The date and time when
the Merger shall become effective is referred to herein as the "Effective Time."
2.4 Effect of the Merger. At the Effective Time, the Merger shall have
the effects set forth in the applicable provisions of the DGCL. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time, all
properties, rights, privileges, powers and franchises of the Company and
Purchaser shall vest in the Surviving Corporation, and all debts, liabilities
and duties of the Company and Purchaser shall become the debts, liabilities and
duties of the Surviving Corporation.
2.5 Certificate of Incorporation and By-Laws. At the Effective Time,
the Certificate of Incorporation and the By-Laws of the Company, in each case as
in effect immediately prior to
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<PAGE>
the Effective Time, shall be the Certificate of Incorporation and the By-Laws of
the Surviving Corporation until thereafter amended as provided by law.
2.6 Directors and Officers. At the Effective Time, the directors of
Purchaser immediately prior to the Effective Time shall become the directors,
and the officers of the Purchaser immediately prior to the Effective Time shall
become the officers, of the Surviving Corporation, each to hold office from the
Effective Time until their respective successors are duly elected or appointed
and qualified in the manner provided in the Certificate of Incorporation and
By-Laws of the Surviving Corporation and applicable law.
2.7 Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of any of the parties hereto or the
holders of any shares of the capital stock of the Company or Purchaser:
(a) Each Share that is issued and outstanding immediately
prior to the Effective Time (other than any Shares to be canceled pursuant to
Section 2.7(b) and any Dissenting Shares, as defined below) shall be converted
into and represent the right to receive $19.00 in cash, or any higher price paid
per Share in the Offer (the "Per Share Merger Consideration"). All such Shares
shall no longer be outstanding and shall automatically be canceled and
extinguished and shall cease to exist, and each certificate that immediately
prior to the Effective Time evidenced any such Shares (other than Shares to be
canceled pursuant to Section 2.7(b) and any Dissenting Shares) shall thereafter
represent the right to receive (without interest), upon surrender of such
certificate in accordance with the provisions of Section 2.8, the Per Share
Merger Consideration multiplied by the number of Shares evidenced by such
certificate (the "Merger Consideration"). The holders of certificates previously
evidencing Shares outstanding immediately prior to the Effective Time shall
cease to have any rights with respect thereto (including, without limitation,
any rights to vote or to receive dividends and distributions in respect of such
Shares), except as otherwise provided herein or by law.
(b) All Shares, that immediately prior to the Effective Time
are owned by Parent, Purchaser or their respective affiliates or held by the
Company in its treasury shall be canceled and extinguished and shall cease to
exist and no consideration shall be delivered with respect thereto.
(c) Each share of capital stock of Purchaser issued and
outstanding immediately prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid and nonassessable share of common
stock of the Surviving Corporation.
2.8 Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, Purchaser
shall, pursuant to an agreement with a paying agent mutually reasonably
acceptable to Purchaser and the Company (the "Paying Agent"), deposit, or cause
to be deposited, with or for the account of the Paying Agent in
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<PAGE>
trust for the benefit of the holders of Shares (other than Shares to be canceled
pursuant to Section 2.7(b) and any Dissenting Shares) for exchange through the
Paying Agent in accordance with this Article II, cash in the aggregate amount
required to be exchanged for Shares pursuant to Section 2.7 (the "Payment
Fund"). The Paying Agent shall, pursuant to irrevocable instructions, deliver
the Merger Consideration out of the Payment Fund to holders of Shares. The
Payment Fund shall not be used for any other purpose. The Paying Agent shall
invest funds in the Payment Fund only in short-term securities issued or
guaranteed by the United States government or certificates of deposit of
commercial banks that have consolidated total assets of not less than
$5,000,000,000 and are "well capitalized" within the meaning of the applicable
Federal bank regulations. Any interest or other income earned on the investment
of funds in the Payment Fund shall be for the account of and payable to the
Surviving Corporation. Purchaser shall replace any monies lost through any
investment made pursuant to this Section 2.8.
(b) Payment Procedure. Promptly after the Effective Time,
Purchaser will cause the Paying Agent to mail to each holder of record of a
certificate or certificates that immediately prior to the Effective Time
evidenced outstanding Shares (other than Shares to be canceled pursuant to
Section 2.7(b) and any Dissenting Shares) ("Certificates"), (i) a notice of the
effectiveness of the Merger and (ii) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Paying
Agent) and instructions to effect the surrender of the Certificates in exchange
for the Merger Consideration, in each case customary for transactions such as
the Merger. Upon surrender of a Certificate for cancellation to the Paying
Agent, together with such letter of transmittal, duly executed, and such other
customary documents as may be required pursuant to such instructions, the holder
of such Certificate shall be entitled to receive in exchange therefor the Merger
Consideration, and the Certificate so surrendered shall forthwith be canceled.
Payment of the Merger Consideration to such a holder in accordance with this
Section 2.8 shall be made, at the election of such holder, by wire transfer to
an account with a U.S. financial institution designated with appropriate wire
instructions in writing by such holder to the Paying Agent. In the event of a
transfer of ownership of Shares that is not registered in the transfer records
of the Company, the Merger Consideration may be paid or issued to the transferee
if the Certificate representing such Shares is presented to the Paying Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. In the
event that any Certificate shall have been lost, stolen or destroyed, the Paying
Agent shall issue in exchange therefor, upon receipt of an affidavit of that
fact by the holder thereof and such bond, security or indemnity as may be
reasonably required, the Merger Consideration that such holder has the right to
receive pursuant to the provisions of this Article II. Until surrendered as
contemplated by this Section 2.8, each Certificate shall be deemed at any time
after the Effective Time to evidence only the right to receive upon such
surrender the Merger Consideration applicable to the Shares evidenced by such
Certificate.
(c) Termination of Payment Fund. Any portion of the Payment
Fund that remains undistributed to the holders of Shares for one year after the
Effective Time shall be
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<PAGE>
delivered to the Surviving Corporation upon demand, and any holders of Shares
who have not theretofore complied with this Article II shall thereafter look,
subject to Section 2.8(d), only to the Surviving Corporation for the Merger
Consideration to which they are entitled pursuant to this Article II. If any
Certificate has not been surrendered prior to the expiration of the applicable
statute of limitations after the Effective Time (or immediately prior to such
earlier date on which any Merger Consideration payable to the holder of such
Certificate representing Shares pursuant to this Article II would otherwise
escheat to or become the property of any Governmental Entity (as hereinafter
defined)), any such Merger Consideration in respect of such Certificate will
become the property of the Surviving Corporation, free and clear of all claims
or interest of any individual, corporation, partnership, limited liability
company, joint venture, association, trust, unincorporated organization or other
entity previously entitled thereto.
(d) Abandoned Property Laws. Neither the Surviving Corporation
nor the Paying Agent shall be liable to any holder of a Certificate for any cash
from the Payment Fund properly delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(e) Transfer Taxes. Except as provided in paragraph (b) above,
Parent shall pay or cause to be paid any transfer or gains tax (including,
without limitation, any real property gains or transfer tax) imposed in
connection with or as a result of the Merger, including any such tax that is
imposed on a stockholder of the Company.
2.9 Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed, and there shall be no further registration
of transfers of Shares thereafter on the records of the Company other than to
reflect transfers of shares effected on or prior to the date on which the
Effective Time occurs. At and after the Effective Time, any Certificates
presented to the Paying Agent or the Surviving Corporation for any reason shall
be converted into the Merger Consideration applicable to the Shares evidenced
thereby.
2.10 Options and Other Purchase Rights. All outstanding options and
other rights to acquire Shares granted to employees under any stock option or
purchase plan, commitment, program or similar arrangement of the Company (each,
as amended, an "Option Plan" and, such options and other rights, "Stock
Options"), whether or not then exercisable or vested, will, subject to the
Company's receipt of any required consents ("Option Consent") of holders of
Stock options, be canceled, and the holders thereof shall be entitled to receive
from the Company, for each Share subject to such Stock Option, in settlement and
cancellation thereof, an amount in cash equal to the excess, if any, of the Per
Share Merger Consideration over the exercise price per share of such Stock
Option, which amount shall be paid by the Company at the Effective Time;
provided, that with respect to any person subject to Section 16 of the Exchange
Act, any such amount shall be paid as soon as practicable after the first date
payment can be made without liability to such person under Section 16(b) of the
Exchange Act. The foregoing payments shall be subject to all withholding tax
requirements. The Company will use reasonable efforts to obtain Option Consents
to the cancellation of Stock Options in accordance with this Section 2.10. The
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<PAGE>
Company will give all holders of Stock Options the notice required for all Stock
Options that are not so canceled to terminate and cease to be exercisable at the
Effective Time.
2.11 Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, Shares that are outstanding immediately prior to the Effective
Time and that are held by stockholders who shall have perfected dissenters'
rights in accordance with Section 262 of the DGCL (the "Dissenting Shares")
shall not be converted into or represent the right to receive the Merger
Consideration, unless and until such holder shall have failed to perfect or
shall have effectively withdrawn or lost such holder's rights to appraisal under
the DGCL. If any such holder shall have failed to perfect or shall have
effectively withdrawn or lost such holder's rights to appraisal of such Shares
under the DGCL, such holder's shares shall thereupon be deemed to have been
converted into and to have become exchangeable for, at the Effective Time, the
right to receive, upon surrender as provided above, the Merger Consideration for
the Certificate or Certificates that formerly evidenced such Shares.
2.12 Company Stockholders' Meeting. Unless the Merger is consummated in
accordance with Section 253 of the DGCL as contemplated by Section 2.13, the
Company, acting through its Board of Directors, shall, in accordance with the
DGCL, its Certificate of Incorporation and its By-Laws, (a) duly call, give
notice of, convene and hold a special meeting of its stockholders as soon as
reasonably practicable following the termination of the Offer pursuant to
Section 1.4 hereof for the purpose of considering and taking action upon this
Agreement (the "Company Stockholders' Meeting") and (b) subject to the fiduciary
duties of its Board of Directors, include in the proxy statement or information
statement prepared by the Company for distribution to stockholders of the
Company in advance of the Company Stockholders' Meeting in accordance with
Regulation 14A or Regulation 14C promulgated under the Exchange Act (the
"Company Proxy Statement") the recommendation of its Board of Directors referred
to in Section 1.2 hereof. Parent will provide the Company with the information
concerning Parent and Purchaser required to be included in the Company Proxy
Statement.
2.13 Merger Without Meeting of Stockholders. Notwithstanding anything
to the contrary in this Agreement, if Parent, Purchaser or their respective
affiliates shall acquire at least 90% of the outstanding Shares, each of Parent,
Purchaser and the Company shall take all necessary and appropriate action to
cause the Merger to become effective, as soon as practicable (and in any event
within two business days) after the consummation of the Offer, without a meeting
of stockholders of the Company, in accordance with Section 253 of the DGCL.
Without affecting any of the representations, warranties or covenants of the
parties or any other terms or conditions of this Agreement, to the extent
permitted by generally accepted accounting principals and applicable law, a
merger effected under this Section 2.13 shall be given effect as of January 1,
1999.
2.14 Withholding Taxes. Parent and Purchaser shall be entitled to
deduct and withhold, or cause the Paying Agent to deduct and withhold, from the
consideration otherwise payable to a holder of Shares pursuant to the Offer or
the Merger any stock transfer taxes and such amounts as
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<PAGE>
are required under the Internal Revenue Code of 1986, as amended (the "Code"),
or any applicable provision of state, local or foreign tax law, as specified in
the Offer Documents. To the extent that amounts are so withheld by Parent or
Purchaser, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Shares in respect of which
such deduction and withholding was made by Parent or Purchaser, in the
circumstances described in the Offer Documents, and Parent shall provide, or
cause the Paying Agent to provide, to the holders of such Certificates written
notice of the amounts so deducted or withheld.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
Except as set forth in the Company's disclosure Schedule delivered to
Parent in connection with this Agreement (the "Company Disclosure Schedule") or
the Company SEC Documents (as defined in Section 3.6 below), the Company hereby
represents and warrants to Parent as follows:
3.1 Organization and Qualification. Each of the Company and its
subsidiaries (a) is duly organized, validly existing and in good standing under
the laws of the Jurisdiction of its incorporation or organization, (b) has the
requisite corporate or other power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted and (c) is
in good standing and duly qualified to do business in each jurisdiction in which
the transaction of its business makes such qualification necessary, except where
the failure to be so organized, existing, qualified and in good standing or to
have such power or authority would not have a Material Adverse Effect (as
defined in Section 8.3(e) below) on the Company. True and complete copies of the
Certificate of Incorporation and the By-Laws or other organizational documents,
as amended to date, of the Company and its subsidiaries have been made available
to Parent. Except as set forth on Section 3.1 of the Company Disclosure
Schedule, hereof, none of the Company and its subsidiaries owns any minority
interests in any other corporation representing at least 5% of the equity
interest of such corporation or participates in joint ventures with any other
Person.
3.2 Capitalization. (a) The authorized capital stock of the Company
consists of 10,000,000 Shares and 1,000,000 shares of preferred stock, par value
$0.01 per share (the "Preferred Stock"). As of the date of this Agreement, (i)
4,138,839 Shares were issued and outstanding and 7,519 Shares were held in
treasury, (ii) 353,750 Shares were reserved for issuance pursuant to outstanding
Stock Options and 319,500 Shares were reserved for issuance in respect of future
grants of Stock Options and (iii) no shares of Preferred Stock were issued and
outstanding. All outstanding Shares are validly issued, fully paid and
nonassessable and are not subject to preemptive rights. Except as disclosed in
the Company SEC Documents (as defined in Section 3.6) or in Section 3.2(a) of
the Company Disclosure Schedule, there are no outstanding subscriptions,
options, warrants, calls, rights, convertible or exchangeable securities,
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commitments or any other agreements to which the Company is a party or by which
the Company is bound that obligate the Company to (i) issue, deliver or sell or
cause to be issued, delivered or sold any additional Shares or any other capital
stock of the Company or any other securities convertible into, or exercisable or
exchangeable for, or evidencing the right to subscribe for, any such Shares or
(ii) purchase, redeem or otherwise acquire any Shares and any other capital
stock of the Company. There are no bonds, debentures, notes or other
indebtedness having general voting rights (or convertible into securities having
such rights) of the Company or any of its Subsidiaries issued and outstanding.
(b) Except as disclosed in Section 3.2(b) of the Disclosure
Schedule, the Company owns, directly or indirectly, all of the outstanding
shares of or other equity interests in each of its subsidiaries, which
subsidiaries are listed in Section 3.2(b) of the Company Disclosure Schedule.
Section 3.2(b) of the Company Disclosure Schedule lists shareholders of the
Company's subsidiaries other than the Company and such other shareholders'
holdings in such subsidiaries. Each of the outstanding shares of capital stock
of or other equity interest in each of the Company's subsidiaries has been duly
authorized and is validly paid and nonassessable. Except as set forth in Section
3.2(b) of the Company Disclosure Schedule, each outstanding share of or other
equity interest in the Company's subsidiaries owned by the Company is free and
clear of all liens, pledges, security interests, claims or other encumbrances,
except for such liens, pledges, security interests, claims or encumbrances that
would not have a Material Adverse Effect on the Company. Except as set forth in
Section 3.2(b) of the Company Disclosure Schedule, there are no outstanding
subscriptions, options, warrants, calls, rights, convertible or exchangeable
securities, commitments or any other agreements to which any of the Company's
subsidiaries is a party or by which it is bound that obligate the subsidiary to
(i) issue, deliver or sell or cause to be issued, delivered or sold any
additional other capital stock or other equity interest of the subsidiary or any
other securities convertible into, or exercisable or exchangeable for, or
evidencing the right to subscribe for, any such capital stock or other equity
interest or (ii) purchase, redeem or otherwise acquire any capital stock or
other equity interest of the subsidiary.
(c) Except as set forth in Section 3.2(c) of the Company
Disclosure Schedule, the Company does not own, directly or indirectly, any
equity interest or investment in any corporation, partnership, joint venture,
business, trust or entity (other than investments in short term investment
securities). Except as set forth in the Company SEC Documents or in Section
3.2(c) of the Company Disclosure Schedule, there are no voting trusts or
shareholder agreements to which the Company is a party with respect to the
voting of the capital stock of the Company.
3.3 Authorization and Validity of Agreement. The Company has the
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby in accordance with the terms
hereof. The Company's Board of Directors (the "Company Board") has duly
authorized the execution, delivery and performance of this Agreement by the
Company, and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or the transactions contemplated hereby
(other than the approval and adoption of this Agreement and the Merger by the
holders of a majority of the
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outstanding Shares, if required by applicable law). This Agreement has been duly
executed and delivered by the Company and, assuming this Agreement constitutes
the legal, valid and binding obligation of Parent and Purchaser, constitutes the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as may be limited by any
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors' rights generally or
by general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
3.4 Consents and Approvals. (a) Neither the execution and delivery of
this Agreement by the Company nor the consummation by the Company of the
transactions contemplated hereby will require on the part of the Company or any
of its subsidiaries any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority, except (i)
pursuant to the applicable requirements of the Exchange Act, and the rules and
regulations promulgated thereunder, and state securities or "blue sky" laws and
state takeover laws, (ii) the filing and recordation of the Certificate of
Merger pursuant to the DGCL and appropriate documents with the relevant
authorities of other states in which the Company is authorized to do business,
(iii) as set forth in Section 3.4 of the Company Disclosure Schedule, or (iv)
where the failure to obtain such consent, approval, authorization or permit, or
to make such filing or notification, would not have a Material Adverse Effect on
the Company or prevent the consummation of the transactions contemplated hereby.
(b) The Company Board has approved this Agreement and the
transactions contemplated hereby for purposes of Section 203 of the DGCL so that
Section 203 of the DGCL is not applicable to the transactions provided for in
this Agreement. Unless the Merger is otherwise consummated as contemplated by
Section 2.13 hereof, the affirmative vote of the holders of a majority of the
outstanding Shares is the only vote of the holders of capital stock of the
Company necessary to approve the Merger.
3.5 No Violation. Except as set forth in Section 3.5 of the Company
Disclosure Schedule, assuming the Merger has been duly approved by the holders
of a majority of the outstanding Shares if required by applicable law or the
Merger is consummated as contemplated by Section 2.13 hereof, neither the
execution and delivery of this Agreement by the Company nor the consummation by
the Company of the transactions contemplated hereby will (a) conflict with or
violate the Certificate of Incorporation or By-Laws of the Company or any of its
subsidiaries, (b) result in a violation or breach of, constitute a default (with
or without notice or lapse of time, or both) under, give rise to any right of
termination, cancellation or acceleration of, or result in the imposition of any
lien, charge or other encumbrance on any assets or property of the Company or
any of its subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license or other instrument or obligation to which
the Company or any of its subsidiaries is a party or by which the Company or any
of its subsidiaries or any of their respective assets or properties are bound,
except for such violations, breaches and defaults (or rights of termination,
cancellation or acceleration or lien or other charge or encumbrance) that would
not have a
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Material Adverse Effect on the Company or prevent the consummation of the
transactions contemplated hereby or (c) assuming the consents, approvals,
authorizations or permits and filings or notifications referred to in Section
3.4 and this Section 3.5 are duly and timely obtained or made and the approval
of the Merger by the holders of a majority of the outstanding Shares has been
obtained if required by applicable law or the Merger is consummated as
contemplated by Section 2.13 hereof, violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company, any of its
subsidiaries or any of their respective assets and properties, except for such
violations that would not have a Material Adverse Effect on the Company or
prevent the consummation of the transactions contemplated hereby.
3.6 SEC Reports; Financial Statements. (a) Since January 1, 1996, the
Company has filed with the SEC all forms, reports, schedules, statements and
other documents required to be filed by it with the SEC pursuant to the Exchange
Act, the Securities Act of 1933, as amended (the "Securities Act"), and the
SEC's rules and regulations thereunder (collectively, the "Company SEC
Documents"). The Company SEC Documents, including, without limitation, any
financial statements or schedules included therein, at the time filed (or, if
amended, at the time of such amended filing), or in the case of registration
statements on their respective effective dates, (i) complied as to form in all
material respects with the applicable requirements of the Exchange Act and the
Securities Act, as the case may be, and the applicable rules and regulations of
the SEC thereunder and (ii) did not at the time filed (or, if amended, at the
time of such amended filing and, in the case of registration statements, at the
time of effectiveness), contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
(b) Each of the consolidated financial statements of the
Company (including any related notes thereto) included in the Company SEC
Documents (excluding the Company SEC Documents described in Section 3.7 hereof)
comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the period involved
(except as may be indicated in Such financial statements or in the notes thereto
or, in the case of unaudited financial statements, as permitted by the
requirements of Form 10-Q) and fairly present in all material respects (subject,
in the case of the unaudited statements, to normal year-end adjustments and the
absence of footnotes) the financial position of the Company and its subsidiaries
as of the dates thereof and the results of the Company's and its subsidiaries'
operations and cash flows for the periods presented therein.
3.7 Schedule 14D-9; Offer Documents and Company Proxy Statement. None
of the Schedule 14D-9, the Company Proxy Statement nor any information supplied
by the Company specifically for inclusion in the Offer Documents will, at the
respective times filed with the SEC or first published, sent or given to
stockholders, as the case may be, or, in the case of the Company Proxy
Statement, at the date mailed to the Company stockholders and at the time of the
Company
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Stockholders' Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The Schedule 14D-9 and the Company Proxy Statement
will, when filed by the Company with the SEC, comply as to form in all material
respects with the applicable provisions of the Exchange Act and the rules and
regulations thereunder. Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to the statements made in any of the
foregoing documents based on information supplied by or on behalf of Parent or
Purchaser or any of their respective affiliates specifically for inclusion
therein.
3.8 Compliance with Law; Permits. Except as set forth in the Company
SEC Documents or in Section 3.8 of the Company Disclosure Schedule, the business
of the Company and each of its subsidiaries is not in default or violation of
any term, condition or provision of (a) its respective articles of incorporation
or by-laws or similar organizational documents, (b) any note, bond, mortgage,
indenture, contract, agreement, lease, license or other instrument or obligation
to which it is a party or by which any of its assets are subject, or (c) any
federal, state, local or foreign statute, law, ordinance, rule, regulation,
judgment, decree, order, concession, grant, franchise, permit or license or
other governmental authorization or approval applicable to the Company or any of
its subsidiaries, excluding from the foregoing clauses (b) and (c), defaults or
violations which would not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
3.9 Absence of Certain Changes. Except as disclosed in the Company SEC
Documents or in Section 3.9 of the Company Disclosure Schedule, since December
31, 1997, through the date of this Agreement, the Company and its subsidiaries
have conducted their respective businesses only in the ordinary course
consistent with past practice and there has not been (a) any Material Adverse
Effect on the Company; or (b) the occurrence of any event, or the taking of any
action, of the sort described in Sections 5.1(b) through (l).
3.10 No Undisclosed Liabilities. Except (a) for liabilities incurred in
the ordinary course of business, (b) liabilities incurred in connection with the
transactions contemplated by this Agreement, (c) liabilities that would not have
a Material Adverse Effect on the Company and (d) as disclosed in the Company SEC
Documents or as set forth in Section 3. 10 of the Company Disclosure Schedule,
from January 1, 1998, until the date of this Agreement, the Company and its
subsidiaries have not incurred any material liabilities that would be required
to be reflected in or reserved against a consolidated balance sheet of the
Company prepared in accordance with generally accepted accounting principles.
3.11 Litigation. Except as disclosed in the Company SEC Documents or in
Section 3.11 of the Company Disclosure Schedule, as of the date of this
Agreement there are no claims, actions, proceedings or governmental
investigations pending, or to the Knowledge of the Company, threatened against
the Company or any of its subsidiaries by or before any court or other
governmental or regulatory body that are reasonably likely to have a Material
Adverse
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Effect on the Company. None of the Company, its subsidiaries, nor any of their
respective assets is subject to any outstanding and unsatisfied order, writ,
judgment, injunction or decree that would have a Material Adverse Effect on the
Company.
3.12 Employee Benefit Matters. (a) All employee benefit plans and other
benefit arrangements and agreements covering current or former employees,
officers, independent contractors, agents or consultants ("Employees") of the
Company and its subsidiaries are listed in the Company SEC Documents or in
Section 3.12 of the Company Disclosure Schedule, except such benefit plans and
other benefit arrangements and agreements that are not material (the "Company
Benefit Plans"). The Company will provide to Parent prior to the Closing true
and complete copies of all documents, if any, embodying each Company Benefit
Plan, including all amendments thereto and written interpretations thereof; the
three most recent annual reports filed (Form 5500 Series with applicable
schedules) with respect to each Company Benefit Plan required under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"); the most recent
summary plan description, if any, with respect to each Company Benefit Plan
required under ERISA; the most recent favorable determination letter from the
Internal Revenue Service ("IRS"), if applicable, with respect to each Company
Benefit Plan; and all material communications, if any, to any Employee relating
to each Company Benefit Plan.
(b) Except as set forth in Section 3.12 of the Company
Disclosure Schedule, to the extent applicable, the Company Benefit Plans comply
in all material respects with the requirements of ERISA and the Code, and to the
Knowledge of the Company any Company Benefit Plan intended to be qualified under
Section 401(a) of the Code meets the requirements for qualification under the
Code and the regulations thereunder and has received a determination letter from
the IRS stating that it is so qualified and no such determination letter has
been revoked, nor to the Knowledge of the Company has revocation been
threatened. To the Knowledge of the Company, nothing has occurred or is expected
to occur that would adversely affect the qualified status of such plan
subsequent to the issuance of such determination letter.
(c) Except as disclosed in Section 3.12 of the Company
Disclosure Schedule, no Company Benefit Plan is covered by Title IV of ERISA or
Section 412 of the Code. Except as disclosed in Section 3.12 of the Company
Disclosure Schedule, neither the Company nor its subsidiaries nor any entity
under "common control" with the Company or its subsidiaries within the meaning
of Section 4001 of ERISA has contributed to, or been required to contribute to,
any "defined benefit plan" (as defined in Section 3(35) of ERISA). With respect
to any such defined benefit plan, there has been no failure to make any
contribution or pay any amount due as required by Section 412 of the Code,
Section 302 of ERISA or the terms of such defined benefit plan, and there has
been no request for or receipt of any funding waiver from the IRS. No lien
has been attached and neither the Pension Benefit Guaranty Corporation ("PBGC")
nor the IRS has threatened to attach a lien on any assets of the Company or its
subsidiaries or any entity under "common control" with the Company or its
subsidiaries as a result of any failure to comply with the Code or the Treasury
regulations thereunder or ERISA. Neither the Company nor its subsidiaries nor
any entity under "common control" with the Company or its subsidiaries has
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<PAGE>
provided or is required to provide security to any such defined benefit plan
pursuant to Section 401(a) of the Code. Neither the Company nor its subsidiaries
nor any entity under "common control" with the Company or its subsidiaries has
incurred or reasonably expects to incur any liabilities under Title IV or ERISA
(except for the payment of benefits and PBGC premiums in the ordinary course).
As of the most recently completed applicable plan year, no such defined benefit
plan had any amount of "unfunded benefit liability," within the meaning of
Section 4001(a)(18) of ERISA, and termination of any such defined benefit plan
has not resulted and will not result in any liability to the Company or its
subsidiaries or any entity under "common control" with the Company or its
subsidiaries.
(d) Neither the Company nor any of its subsidiaries has
incurred any liability or penalty under Section 4975 of the Code or Section
502(i) of ERISA with respect to any Company Benefit Plan, except as would not
have a Material Adverse Effect on the Company. Each Company Benefit Plan can be
amended, terminated, or otherwise discontinued after the Closing in accordance
with its terms, without liability to the Company, its subsidiaries, Parent,
Purchaser or any of their respective affiliates. All premiums required by any
Company Benefit Plan have been paid thereunder; all outstanding indebtedness for
services performed or accrued vacation, holiday pay, earned commissions, accrued
bonuses or other benefits owed to any Employees have been paid when due or
accrued on the books of the Company; all contributions due to and payments from,
the Company Benefit Plans that may have been required to be made have been made.
No action or failure to act with respect to any Company Benefit Plan could
subject the Company, its subsidiaries, Parent or any of its affiliates or any
Company Benefit Plan to any material tax, penalty or other liability, for breach
of fiduciary duty, failure to file Form 5500 or otherwise, under ERISA or any
other applicable law, whether by way of indemnity or otherwise. The Company and
its subsidiaries have performed in all material respects all obligations
required to be performed under each Company Benefit Plan. Each Company Benefit
Plan has been maintained and administered in all material respects in compliance
with its terms and with ERISA and the Code to the extent applicable thereto. To
the Knowledge of the Company, there are no pending, nor has the Company or any
of its subsidiaries received notice of any threatened, claims, investigations,
suits or proceedings against or otherwise involving any of the Company Benefit
Plans, except as would not have a Material Adverse Effect on the Company.
(e) Neither the Company nor its subsidiaries nor any entity
under "common control" with the Company has contributed to, or been required to
contribute to, any "multiemployer plan" (as defined in Sections 3(37) and 4001
(a)(3) of ERISA) or any plan described in Section 4063(a) of ERISA.
(f) Except as disclosed on Section 3.12 of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries maintains
or contributes to any employee benefit plan that provides, or has any liability
to provide, life insurance, medical or other employee welfare benefits (other
than severance and accrued vacation and holiday pay) to any Employee upon his or
her retirement or termination of employment, except as may be required by
statute. Each "group health plan" within the meaning of Section 4980B(g)(2) of
the Code maintained by
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the Company or any of its subsidiaries or any entity under "common control" with
the Company or its subsidiaries has been administered in good faith in
compliance with the continuation coverage requirements contained in the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), as
set forth at Section 4980B of the Code and any regulations promulgated or
proposed thereunder.
(g) Except as set forth on Section 3.12 of the Company
Disclosure Schedule, the execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or when taken together
with any additional or subsequent events) constitute an event under any Company
Benefit Plan that will or may result in any payment, upon a change in control or
otherwise, whether of severance, accrued vacation, or otherwise, acceleration,
vesting, distribution, increase in benefits or obligation to fund benefits with
respect to any Employee. No payment or benefit which will or may be made by the
Company, its subsidiaries, Parent or any of its affiliates with respect to any
Employee as a result of the transactions contemplated hereby will be
characterized as an "excess parachute payment" within the meaning of Section
280G(b)(1) of the Code.
(h) To the Knowledge of the Company, all foreign employee
benefit plans comply in all material respects with all applicable law, and the
Company and its subsidiaries have performed all material obligations with
respect to such plans and have obtained all necessary approvals from
governmental agencies to ensure beneficial tax treatment and otherwise.
3.13 Taxes. Except as disclosed in the Company SEC Documents or in
Section 3.13 of the Company Disclosure Schedule, the Company and each of its
subsidiaries (a) have filed all federal, state and foreign tax returns required
to be filed by the Company or any of its subsidiaries prior to the date of this
Agreement, except for those tax returns the failure of which to file would not
have a Material Adverse Effect on the Company or for which requests for
extensions have been timely filed, and all such returns are true, correct and
complete in all material respects, (b) have paid or accrued all taxes shown to
be due and payable on such returns, (c) have accrued all such taxes for such
periods subsequent to the periods covered by such returns and (d) have "open"
years for federal income tax returns only as set forth in the Company SEC
Documents or in Section 3.13 of the Company Disclosure Schedule. There are no
liens for taxes on the assets of the Company or any of its subsidiaries, except
for liens that would not have a Material Adverse Effect on the Company, and
there is no pending, nor to the Knowledge of the Company has the Company or any
of its subsidiaries received notice of any threatened, tax audit, examination,
refund litigation or adjustment in controversy which, if determined adversely,
would have a Material Adverse Effect on the Company. Except as disclosed in the
Company SEC Documents or in Section 3.13 of the Company Disclosure Schedule,
neither the Company nor any of its subsidiaries is a party to any agreement
providing for the allocation or sharing of taxes. The Company has not filed a
request with the Internal Revenue Service for changes in accounting methods
within the last two years, which change would materially affect the accounting
for tax purposes, directly or indirectly, of the Company. For purposes of this
Agreement, "taxes" shall mean any and all taxes, charges, fees, levies or other
assessments, including, without limitation,
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income, gross receipts, excise, real or personal property, sales,
withholding, social security, occupation, use, service, service use, license,
net worth, payroll, franchise, transfer and recording taxes, fees and
charges, imposed by the United States Internal Revenue Service or any taxing
authority (domestic or foreign), including, without limitation, any state,
county, local or foreign government or any subdivision or taxing agency
thereof (including a United States possession)), whether computed on a
separate, consolidated, unitary, combined or any other basis; and such term
shall include any interest, penalties or additional amounts attributable to,
or imposed upon, or with respect to, any such taxes, charges, fees, levies or
other assessments; and "tax return" shall mean any report, return, document,
declaration or other information or filing required to be supplied to any
taxing authority or jurisdiction (domestic or foreign) with respect to taxes.
3.14 Intellectual Property. To the Knowledge of the Company, the
Company and its subsidiaries own or possess rights in all patents, trademarks,
tradenames, copyrights and other intellectual property rights used in or
necessary for the conduct of the businesses of the Company and its subsidiaries
as now operated (collectively, "Intellectual Property"), except where the
failure to own or possess any such Intellectual Property would not have a
Material Adverse Effect on the Company. Neither the Company nor any of its
subsidiaries has received any notice that the products of the Company and its
subsidiaries, or the use thereof, violate, infringe or otherwise conflict with
the Intellectual Property of third parties, except for such violations,
infringements or conflicts that would not have a Material Adverse Effect on the
Company or as disclosed in the Company SEC Documents or in Section 3.14 of the
Company Disclosure Schedule.
3.15 Brokers and Finders. No broker, finder or investment bank has
acted directly or indirectly for the Company, nor has the Company incurred any
obligation to pay any brokerage, finder's or other fee or commission in
connection with the transactions contemplated hereby, other than CIBC
Oppenheimer Corp., the fees and expenses of which shall be borne by the Company.
3.16 Real Property. The Company and the subsidiaries, as the case may
be, have good and insurable title or valid leasehold rights to all real property
purported to be owned by them or used in the conduct of their respective
businesses as currently conducted with only such encumbrances and exceptions as
individually or in the aggregate would not have a Material Adverse Effect on the
Company.
3.17 Environmental Matters. (a) Except as set forth in the
Company's SEC Documents prior to the date hereof, and except as would not,
individually or in the aggregate, have a Material Adverse Effect on the Company:
(i) no written notice, notification, demand,
complaint, penalty, request for information, citation, summons or order has been
received, no complaint has been filed, no penalty has been assessed and no
action, claim, suit, legal proceeding or, to the Knowledge of the Company,
investigation or review is pending, or to the Knowledge of the Company,
threatened by any Governmental Entity or other Person with respect to any
matters relating to the Company or any of its subsidiaries and relating to or
arising out of any Environmental Law;
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(ii) to the Knowledge of the Company there are no
liabilities of or relating to the Company or any of its subsidiaries of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, arising under or relating to any Environmental Law, and there are no
facts, conditions, situations or set of circumstances which would reasonably be
expected to result in or be the basis for any such liability;
(iii) except as set forth in Schedule 3.17, no
property now or, to the Knowledge of the Company, previously, owned, leased or
operated by the Company or any of its subsidiaries or, to the Knowledge of the
Company, any property to which the Company or any of its subsidiaries has,
directly or indirectly, transported or arranged for the transportation of any
Hazardous Substances is listed or, to the Knowledge of the Company, proposed for
listing, on the National Priorities List promulgated pursuant to CERCLA, on
CERCLIS (as defined in CERCLA) or on any similar federal, state or foreign list
of sites requiring investigation or clean-up; and
(iv) to the Knowledge of the Company, the Company
and its subsidiaries are in compliance with all Environmental Laws and have
obtained and are in compliance with all Environmental Permits; such
Environmental Permits are valid and in full force and effect and will not be
terminated or impaired or become terminable, in whole or in part, as a result of
the transactions contemplated hereby.
(b) There has been no material written report regarding any
environmental investigation, study, audit, test, review or other analysis
conducted of which the Company has Knowledge in relation to the current or prior
business of the Company or any of its subsidiaries or any property or facility
now or previously owned, leased or operated by the Company or any of its
subsidiaries which has not either been made available to Purchaser prior to the
date hereof or (with respect to any such report over which the Company does not
have control or custody) disclosed on Section 3.17 of the Company Disclosure
Schedule.
(c) Neither the Company nor any of its subsidiaries owns,
leases or operates or has owned, leased or operated any property or has
conducted any operations in New Jersey or Connecticut that would result in the
New Jersey Industrial Site Recovery Act or the Connecticut Transfer Act being
applicable to the transactions contemplated by this Agreement.
(d) For purposes of this Section and, to the extent applicable
therein, Section 3.17 hereof, the following terms shall have the meanings set
forth below:
"ENVIRONMENTAL LAWS" means any applicable federal, state, local,
provincial or foreign law (including, without limitation, common law), treaty,
judicial decision, regulation, rule, judgment, order, decree, injunction,
permit, or legally binding governmental restriction or requirement, or any
legally binding agreement with any governmental authority or other third party,
relating to human health and safety (as relating to the environment), the
environment or, as impacting human health or the environment, to pollutants,
contaminants, wastes or chemicals or
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any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous
substances, wastes or materials.
"ENVIRONMENTAL PERMITS" means all permits, licenses, franchises,
certificates, approvals and other similar authorizations of governmental
authorities required by Environmental Laws regarding the business of the Company
or any of its subsidiaries as currently conducted.
"HAZARDOUS SUBSTANCES" means, in each case as regulated under any
Environmental Law, any pollutant, contaminant, waste or chemical or any toxic,
radioactive, ignitable, corrosive, reactive or otherwise hazardous substance,
waste or material, or any substance, waste or material having any constituent
elements displaying any of the foregoing characteristics, including, with out
limitation, petroleum, its derivatives, by-products and other hydrocarbons, and
any substance, waste or material regulated under any Environmental Law.
3.18 Labor Matters. The Company and its subsidiaries are in compliance
with all currently applicable legislation in the various jurisdictions where
they operate, with respect to terms and conditions of employment of their
workforce, including legislation governing unionized labor, and wages and laws,
and are not engaged in any unfair labor practice, failure to comply with which
or engagement in which, as the case may be, would reasonably be expected to have
a Material Adverse Effect on the Company. Except as disclosed in Section 3.18 of
the Company Disclosure Schedule, (i) none of the Company and its subsidiaries is
a party, or is otherwise subject, to any collective bargaining agreement or
other labor union contract applicable to its employees, (ii) to the Knowledge of
the Company, there are no material activities or proceedings by a labor union or
representative thereof to organize any employees of the Company or any
subsidiary outside of the ordinary course of business and (iii) there are no
pending negotiations between the Company and any subsidiary and any labor union
or representative thereof regarding any proposed material changes to any
existing national collective bargaining agreement.
3.19 Voting Requirements. The affirmative vote of the holders of a
majority of the voting power of all outstanding Shares, voting as a single
class, at the Company's Stockholders Meeting to adopt this Agreement is the only
vote of the holders of any class or series of the Company's capital stock
necessary to approve and adopt this Agreement and the transactions contemplated
hereby. No "fair price", "moratorium", "control share acquisition" or other
similar antitakeover statute or regulation enacted under state or federal laws
in the United States (with the exception of Section 203 of the DGCL) is
applicable to the Merger or the other transactions contemplated hereby. As of
the date of this Agreement, the Company does not have any shareholder rights
plan or similar antitakeover device in effect. The action of the Board of
Directors of the Company in approving the Merger and this Agreement is
sufficient to render inapplicable to the Merger and this Agreement (and the
transactions provided for herein and therein) the restrictions on "business
combinations" (as defined in Section 203 of the DGCL) set forth in Section 203
of the DGCL.
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3.20 Opinion of Financial Advisor. CIBC Oppenheimer Corp., the
Company's financial advisor, has delivered its opinion to the Company Board to
the effect that, as of the date of this Agreement, the cash consideration to be
received by the holders of Shares (other than Parent and its affiliates) in the
Offer and Merger is fair, from a financial point of view, to such holders, and
such opinion has not been withdrawn. The Company will make available to
Purchaser a copy of such opinion.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER
Parent and Purchaser hereby represent and warrant, jointly and
severally, to the Company as follows:
4.1 Organization and Qualification. Each of Parent and Purchaser (a) is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (b) has the requisite power and authority to
own, lease and operate its properties and to carry on its business as it is now
being conducted and (c) is in good standing and duly qualified to do business in
each jurisdiction in which the transaction of its business makes such
qualification necessary, except where the failure to be so organized, existing,
qualified and in good standing or to have such power or authority would not have
a Material Adverse Effect on Parent or Purchaser.
4.2 Authorization and Validity of Agreement. Each of Parent and
Purchaser has the requisite power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby in accordance
with the terms hereof. The Boards of Directors of Parent and Purchaser,
respectively, and Parent, as the sole stockholder of Purchaser, have duly
authorized the execution, delivery and performance of this Agreement by each of
Parent and Purchaser, and no corporate or other proceedings on the part of
either Parent or Purchaser are necessary to authorize this Agreement or the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by each of Parent and Purchaser and, assuming this Agreement
constitutes the legal, valid and binding obligation of the Company, constitutes
the legal, valid and binding obligation of each of Parent and Purchaser,
enforceable against each of Parent and Purchaser in accordance with its terms,
except as may be limited by any bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws affecting the
enforcement of creditors' rights generally or by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
4.3 Consents and Approvals. Neither the execution and delivery of this
Agreement by Parent and Purchaser nor the consummation by Parent and Purchaser
of the transactions contemplated hereby will require on the part of Parent or
Purchaser any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory
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authority, except (a) pursuant to the applicable requirements of the Exchange
Act, and the rules and regulations promulgated thereunder and state takeover
laws, (b) the filing and recordation of the Certificate of Merger pursuant to
the DGCL, (c) as set forth in Section 4.3 of Parent's disclosure Schedule
delivered to the Company in connection with this Agreement (the "Parent
Disclosure Schedule") or (d) where the failure to obtain such consent, approval,
authorization or permit, or to make such filing or notification, would not have
a Material Adverse Effect on either of Parent or Purchaser or prevent the
consummation of the transactions contemplated hereby.
4.4 No Violation. Except as set forth in Section 4.4 of the Parent
Disclosure Schedule, neither the execution and delivery of this Agreement by
Parent and Purchaser nor the consummation by Parent and Purchaser of the
transactions contemplated hereby will (a) conflict with or violate the
Certificate of Incorporation or By-Laws of Purchaser or the Limited Liability
Company Agreement of Parent, (b) result in a violation or breach of, constitute
a default (with or without notice or lapse of time, or both) under, give rise to
any night of termination, cancellation or acceleration of, or result in the
imposition of any lien, charge or other encumbrance on any assets or property of
either of Parent or Purchaser pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license or other instrument or obligation to which
either of parent or Purchaser is a party or by which either of Parent or
Purchaser or any of their respective assets or properties are bound, except for
such violations, breaches and defaults (or rights of termination, cancellation
or acceleration or lien or other charge or encumbrance) that would not have a
Material Adverse Effect on either of Parent or Purchaser or prevent the
consummation of the transactions contemplated hereby or (c) assuming the
consents, approvals, authorizations or permits and filings or notifications
referred to in Section 4.3 and this Section 4.4 are duly and timely obtained or
made, violate any order, writ, injunction, decree, statute, rule or Regulation
applicable to either of Parent or Purchaser or any of their respective assets or
properties, except for such violations which would not in the aggregate have a
Material Adverse Effect on either of Parent or Purchaser or prevent the
consummation of the transactions contemplated hereby.
4.5 Offer Documents; Company Proxy Statement; Schedule 14D-9. Neither
the Offer Documents nor any other document filed or to be filed by or on behalf
of Parent or Purchaser with the SEC or any other governmental entity in
connection with the transactions contemplated by this Agreement nor any
information supplied by or on behalf of Parent or Purchaser specifically for
inclusion in the Schedule 14D-9 or Company Proxy Statement will, at the
respective times filed with the SEC or other governmental entity, or at any time
thereafter when the information included therein is required to be updated
pursuant to applicable law, or, in the case of the Company Proxy Statement, at
the date mailed to the Company's stockholders and at the time of the Company
Stockholders' Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading. The Offer Documents will, when filed by Parent
or Purchaser with the SEC or other governmental entity, comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder. Notwithstanding the foregoing, Parent and Purchaser make
no representation or warranty with respect to the statements made in the
foregoing documents based
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on information supplied by or on behalf of the Company or any of its affiliates
specifically for inclusion therein.
4.6 Financing. Parent has received executed commitments (including the
term sheet attached thereto, the "Commitment Letter") from one or more financial
institutions and an executed commitment of Key Components, Inc ("Inc"), Parent's
sole shareholder, to purchase additional equity interests in Parent ( the
"Parent Commitment"), and Inc has received executed commitments from its
shareholders to purchase additional equity interests in Inc (together with the
Parent Commitment, the "Equity Commitments"), copies of all of which have been
delivered to the Company, to provide, subject in the case of the Commitment
Letter to the conditions specified therein and subject in the case of the Equity
Commitments to funding under the Commitment Letter, funds to be used by the
Parent and the Purchaser to consummate the Offer and the Merger and the
transactions contemplated thereby (the "Financing"). Parent's and Purchaser's
cash on hand and the funds provided by the Financing will be available at the
consummation of the Offer and the Merger and will be sufficient to consummate
the Offer and the Merger and the transactions contemplated thereby in accordance
with their terms. Neither Parent nor Purchaser has any actual knowledge of any
facts or circumstances that could reasonably be expected to result in any of the
conditions set forth in the Commitment Letter (or the definitive documentation
therefor) or the Equity Commitments or to cause the conditions in clause (g) of
Annex A hereto or Section 6.2(a)(v) hereof not being satisfied or that otherwise
could reasonably be expected to result in the inability of the Parent to obtain
and use the funds available thereunder in the consummation of the Offer and the
Merger and the transactions contemplated thereby.
4.7 Brokers and Finders. No broker, finder or investment bank has acted
directly or indirectly for either of Parent or Purchaser, nor has either of
Parent or Purchaser incurred any obligation to pay any brokerage, finder's or
other fee or commission in connection with the transactions contemplated hereby.
4.8 Operations of Purchaser. Purchaser has been formed solely for the
purpose of engaging in the transactions contemplated hereby and prior to the
Effective Time will have engaged in no other business activities and will have
incurred no liabilities or obligations other than as contemplated herein.
ARTICLE V
COVENANTS
5.1 Conduct of the Business of the Company Pending the Merger. From the
date hereof until the Effective Time, the Company shall, and shall cause its
subsidiaries to, conduct their respective businesses in all material respects
only in the ordinary course consistent with past practice, and shall use
commercially reasonable efforts to keep available the services of their present
key officers and employees and preserve intact the Company's business
organization and relationships with those persons having business dealings with
them, and except as otherwise
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required by applicable law or as set forth in Section 5.1 of the Company
Disclosure Schedule, the Company shall not, and shall cause each of its
subsidiaries not to, without the prior consent of Parent (which shall not be
unreasonably withheld):
(a) amend its Certificate of Incorporation or By-Laws or
comparable organizational documents;
(b) declare, set aside or pay any dividend or other
distribution or payment in cash, stock or property in respect of its capital
stock (other than regular quarterly dividends of $0.05 per share payable at such
times, and in respect of holders of Shares on such record dates, as are
consistent with historical practice and other than dividends by a wholly owned
subsidiary of the Company to its parent), and not reclassify, combine, split,
subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any
of its or its subsidiaries' capital stock (excluding, however, redemptions or
purchases of shares of the capital stock of the Company's subsidiaries pursuant
to contractual commitments entered into before the date of this Agreement);
(c) issue, grant, sell or pledge or agree to or authorize the
issuance, grant, sale or pledge of any shares of, or rights of any kind to
acquire any shares of, the capital stock of the Company or any of its
subsidiaries other than the grant of Stock Options in the ordinary course of
business under current employee benefit plan arrangements and other than Shares
issuable upon the exercise of Stock Options;
(d) acquire, sell, transfer, lease or encumber any material
assets except in the ordinary course of business and consistent with past
practice; or incur or modify any material indebtedness or other material
liability, other than in the ordinary and usual course of business and
consistent with past practice;
(e) adopt a plan of complete or partial liquidation or adopt
resolutions providing for the complete or partial liquidation, dissolution,
consolidation, merger, restructuring or recapitalization;
(f) grant any severance or termination pay to, or enter into
any employment or severance agreement with, any of its executive officers or
directors, other than in the ordinary course of business;
(g) except in the ordinary course of business or pursuant to
obligations imposed by collective bargaining agreements, increase the
compensation payable or to become payable to its executive officers or
employees, enter into any contract with or other binding commitment to any of
its directors, executive officers, or other employees, with respect to any such
increase (other than pursuant to a Company Benefit Plan or policy or agreement
existing as of the date hereof), or enter into any severance agreement with any
of its employees other than executive officers and directors, and the Company
shall not establish, adopt, enter into, or make any new grants or awards under
or amend, any Company Benefit Plan, except as required by
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applicable law, including any obligation to engage in good faith collective
bargaining, to maintain tax-qualified status or as may be required by any
Company Benefit Plan as of the date hereof;
(h) settle or compromise any material claims or litigation or,
except in the ordinary course of business consistent with past practice, enter
into any material contract or agreement, modify, amend or terminate any of its
material contracts or waive, release or assign any material rights or claims, or
make any payment, direct or indirect, of any material liability before the same
becomes due and payable in accordance with its terms;
(i) take any action, other than in the ordinary course of
business, with respect to accounting policies or procedures (including tax
accounting policies and procedures), except as may be required by law or
generally accepted accounting principles;
(j) make any material tax election or permit any material
insurance policy naming it as a beneficiary or a loss payable payee to be
canceled or terminated without notice to Parent, except in the ordinary course
of business and consistent with past practice; and
(k) (i) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise) for the material
obligations of any other person, except in the ordinary course of business and
consistent with past practice; or (ii) make any material loans, advances or
capital contributions to, or investments in, any other person (other than to
subsidiaries of the Company), other than in the ordinary course of business and
consistent with past practice; provided, that the Company shall not make any
loans, advances or capital contributions to, or investments in, Mastervolt
International B.V. and its subsidiaries or M.V. Investments, a Dutch
partnership, except for a capital contribution to M.V. Investments not to exceed
250,000 Dutch guilders;
(l) cause a material change in investment policy or a material
change in investment vehicles related to the assets in any pension plan, other
than actions taken in the ordinary course of business or that are consistent
with or required by its fiduciary duties;
(m) authorize or enter into an agreement to do any of the
foregoing.
5.2 Access; Confidentiality. (a) From the date of this Agreement until
the Effective Time, upon reasonable prior notice to the Company, the Company
shall (and shall cause each of its subsidiaries to) give Parent and its
authorized representatives full access during normal business hours to its
executive officers, properties, books and records, provided, that Parent and its
authorized representatives shall not unreasonably interfere in the business and
operations of the Company and its subsidiaries, and furnish Parent and its
authorized representative with such financial and operating data and other
information concerning the business and properties of the Company as Parent may
from time to time reasonably request. Notwithstanding the foregoing sentence,
Parent and Purchaser agree that they will not conduct any further investigations
and due diligence with respect to (i) environmental conditions on properties
owned or leased by the
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Company or its subsidiaries and (ii) compliance with Environmental Laws by the
Company and its subsidiaries.
(b) Parent and Purchaser will hold and treat, and will cause
their respective affiliates, agents and other representatives to hold and treat,
all documents and information concerning the Company furnished to Parent,
Purchaser or their respective representatives in connection with the
transactions contemplated by this Agreement confidential in accordance with the
Confidentiality Agreement dated August 11, 1998, between the Company (or its
representative) and Millbrook Capital Management, Inc., which Confidentiality
Agreement shall remain in full force and effect in accordance with its terms,
Parent and Purchaser hereby adopting and agreeing to be bound by the terms
thereof.
5.3 Company Proxy Statement. If Section 1.4 becomes applicable, the
Company shall, as soon as reasonably practicable after the termination of the
Offer pursuant to Section 1.4, prepare a preliminary form of the Company Proxy
Statement (the "Company Preliminary Proxy Statement"). The Company shall (i)
file the Company Preliminary Proxy Statement with the SEC promptly after it has
been prepared in a form reasonably satisfactory to the Company and Parent and
(ii) use commercially reasonable efforts to promptly prepare any amendments to
the Company Preliminary Proxy Statement required in response to comments of the
SEC or its staff or which the Company with the advice of counsel deems necessary
or advisable and to cause the Company Proxy Statement to be mailed to the
Company's stockholders as soon as reasonably practicable after the Company
Preliminary Proxy Statement, as so amended, is cleared by the SEC.
5.4 State Takeover Statutes. The Company, Parent and Purchaser will
cooperate to take reasonable steps to (a) exempt the Offer and the Merger from
the requirements of any applicable state takeover law and (b) assist in any
challenge by any of the parties to the validity or applicability to the Offer or
the Merger of any state takeover law.
5.5 Further Actions. (a) Upon the terms and subject to conditions of
this Agreement and applicable law, each of the parties shall act in good faith
and use commercially reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable, to consummate and make effective the transactions contemplated by
this Agreement as soon as practicable, including such actions or things as any
other party may reasonably request in order to cause any of the conditions to
such other party's obligation to consummate the transactions contemplated by
this Agreement to be fully satisfied. Without limiting the foregoing, the
parties shall (and shall cause their respective subsidiaries, and use
commercially reasonable efforts to cause their respective affiliates, directors,
officers, employees, agents, attorneys, accountants and representatives, to)
consult and fully cooperate with and provide assistance to each other in (i) the
preparation and filing with the SEC of the Offer Documents, the Schedule 14D-9,
the Company Preliminary Proxy Statement and the Company Proxy Statement, and any
necessary amendments or supplements thereto; (ii) seeking to have the Company
Preliminary Proxy Statement cleared by the SEC as soon as reasonably practicable
after filing; (iii) obtaining all necessary consents, approvals, waivers,
licenses, permits, authorizations, registrations, qualifications, or other
permission or action by, and giving all necessary notices to
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<PAGE>
and making all necessary filings with and applications and submissions to, any
court, administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (collectively, "Governmental Entity") or
other person or entity as soon as reasonably practicable after filing; (iv)
providing all such information concerning such party, its subsidiaries and its
officers, directors, partners and affiliates and making all applications and
filings as may be necessary or reasonably requested in connection with any of
the foregoing; and (v) in general, consummating and making effective the
transactions contemplated hereby. Without limiting the generality of the
foregoing, Parent will use all reasonable efforts to satisfy the condition set
forth in clause (g) of Annex A and, if Section 1.4 becomes applicable, the
condition set forth in Section 6.2(a)(v), and will promptly inform the Company
of all developments with respect thereto and the Financing and the Commitment
Letter. Prior to making any application to or filing with any Governmental
Entity or other person or entity in connection with this Agreement, each party
shall provide the other party with drafts thereof and afford the other party a
reasonable opportunity to comment on such drafts. Subject to the terms and
conditions hereof, no party hereto shall take, or commit to take, any actions
that would cause any conditions set forth in Article VI not to be satisfied.
(b) Parent shall (i) provide the Purchaser with the funds
necessary to consummate the transactions contemplated by this Agreement, and
(ii) cause the Purchaser to comply with its obligations under this Agreement.
5.6 Public Announcements. Except as may be required by applicable law
or any listing agreement with a national securities exchange by which the
Company, Parent, or Purchaser is bound, such parties will consult with one
another prior to issuing any release or otherwise making any public statements
with respect to the transactions contemplated hereby and shall not issue any
such press release or make any public statement prior to such consultation.
5.7 Acquisition Proposals. Except as contemplated hereby, the Company
shall not (and shall use reasonable efforts to cause its officers, directors and
employees and any investment banker, attorney, accountant, or other agent
retained by it not to) initiate, solicit or encourage, directly or indirectly,
or knowingly take any action to facilitate, the making of, or engage in any
negotiations or discussions concerning, any proposal or offer to acquire all or
any significant part of the business and properties or capital stock of the
Company, whether by merger, purchase of assets, tender offer or otherwise (an
"Acquisition Proposal"), or provide any non-public information concerning the
Company to any third party in connection with an Acquisition Proposal. The
Company shall immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. In the event the Company receives an
Acquisition Proposal, it shall, subject to any confidentiality obligations
imposed upon the Company in connection with such Acquisition Proposal, promptly
(and in any event within 24 hours) inform Parent as to the receipt thereof.
Notwithstanding the foregoing, nothing shall prohibit the Company from (a)
furnishing information to, participating in discussions and negotiations
directly or through its representatives or entering into an agreement relating
to an Acquisition Proposal with, any third party (including
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parties with whom the Company or its representatives have had discussions on any
basis on or prior to the date hereof) who makes an unsolicited proposal or offer
to the Company or makes an unsolicited request for non-public information about
the Company (pursuant to appropriate confidentiality agreements), which
proposal, offer or request did not result from a breach of the first sentence of
this Section 5.7, if the Company Board determines in good faith, after receiving
advice from its financial advisors and independent legal counsel at a meeting of
the Company Board, that such action is required for the Company Board to comply
with its fiduciary duties under applicable law, (b) taking and disclosing to its
stockholders any position, and making related filings with the SEC, as required
by Rules l4e-2 and 14d-9 under the Exchange Act with respect to any tender offer
or (c) taking any action and making any disclosure which the Company Board
determines, after receiving advice from its financial advisors and independent
legal counsel at a meeting of the Company Board, is required to be taken or made
under applicable law (including, without limitation, laws relating to the
fiduciary duties of directors), provided that at least 48 hours prior to the
entry into or announcement of an intention to enter into a definitive agreement
with respect to an Acquisition Proposal, the Company shall have provided written
notice to Parent advising Parent of its intention to enter into a definitive
agreement with respect to an Acquisition Proposal and specifying the material
terms and conditions of such Acquisition Proposal.
5.8 D&O Indemnification and Insurance. (a) From the Effective Time
through the later of (i) the sixth anniversary of the date on which the
Effective Time occurs and (ii) the expiration of any statute of limitations
applicable to any Covered Claim (defined below), Parent shall, or shall cause
the Surviving Corporation to, indemnify and hold harmless each present and
former officer, director, employee or agent of the Company, including, without
limitation, each person controlling any of the foregoing persons (the
"Indemnified Parties"), against all claims, losses, liabilities, damages,
judgments, fines, fees, costs or expenses, including, without limitation,
attorneys' fees and disbursements (collectively, "Costs"), incurred in
connection with any claim, action, suit, proceeding or investigation ("Claim"),
whether civil, criminal, administrative or investigative, arising out of or
pertaining to (i) the fact that such person is or was a director, officer,
employee or agent of the Company or any subsidiaries or is or was serving at the
request of the Company or any of its subsidiaries as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, or (ii) this Agreement, or any of the transactions
contemplated hereby, in each case to the extent that any such Claim pertains to
matters existing or occurring at or prior to the Effective Time (including,
without limitation, this Agreement and the transactions and actions contemplated
hereby), whether asserted or claimed prior to, at or after the Effective Time
("Covered Claims"), to the fullest extent permitted under applicable law and the
Certificate of Incorporation or By-Laws of the Company or under indemnification
agreements in effect on the date hereof, including without limitation provisions
relating to advancement of expenses incurred in the defense of any Claim,
subject to the provision by such Indemnified Party of an undertaking to
reimburse the amounts so advanced in the event of a final non-appealable
determination by a court of competent jurisdiction that such Indemnified Party
is not entitled thereto.
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Without limiting the foregoing, in the event that any Covered
Claim is brought against any Indemnified Party (whether arising before or after
the Effective Time), the Indemnified Party may retain counsel satisfactory to
such Indemnified Party, and Parent shall, or shall cause the Surviving
Corporation to, advance the fees and expenses of such counsel for the
Indemnified Party in accordance with the Certificate of Incorporation or By-Laws
of the Company in effect on the date of this Agreement.
(b) Parent shall keep in effect, or shall cause the Surviving
Corporation to keep in effect, provisions in its Limited Liability Company
Agreement (in the case of Parent) or Certificate of Incorporation and By-Laws
(in the case of the Surviving Corporation) providing for exculpation of director
and officer liability and its indemnification of the Indemnified Parties to the
fullest extent permitted by law, which provisions shall not be amended except as
required by applicable law or except to make changes permitted by law that would
enlarge the Indemnified Parties' right to indemnification.
(c) Parent shall maintain, or shall cause the Surviving
Corporation to maintain, in effect for six years after the Effective Time at no
expense to the beneficiaries, policies of directors' and officers' liability
insurance and fiduciary liability insurance comparable to the policies
maintained by the Company in effect on the date of this Agreement ("D&O
Insurance"), the terms of which the Company has disclosed to Parent, for the
Indemnified Parties with respect to Covered Claims, by purchasing at or before
the Effective Time a six year extended reporting endorsement to such D&O
Insurance (with a one-time premium cost not to exceed $100,000), effective as of
the Effective Time. If such an endorsement for D&O Insurance is not available,
the Parent shall maintain, or cause the Surviving Corporation to maintain, the
Company's D&O Insurance in effect on the date of this Agreement or policies
providing not less than equivalent coverage (in each case with respect to
Covered Claims) for at least six years from the Effective Time, at no expense to
the beneficiaries, provided that in no event shall Parent be required to expend
in excess of 200% of the per annum premiums paid by the Company for such
insurance for its last full fiscal year, which amount has been disclosed to
Parent, and provided further that if the annual premiums of such insurance
coverage exceeds such 200% amount, Parent shall use its best efforts to obtain a
policy with the greatest coverage available for a cost not exceeding such 200%
amount. In the event any claim is made against present or former directors,
officers or employees of the Company that is covered or potentially covered by
insurance, neither the Surviving Corporation nor Parent shall do anything that
would forfeit, jeopardize, restrict, or limit the insurance coverage available
for that claim until the final disposition thereof.
(d) Notwithstanding anything herein to the contrary, if any
claim, action, suit, proceeding or investigation (whether arising before, at or
after the Effective Time) is made against any Indemnified Party, on or prior to
the sixth anniversary of the Effective Time, the provisions of this Section 5.8
shall continue in effect until the final disposition of such claim, action,
suit, proceeding or investigation.
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(e) This covenant is intended to be for the benefit of, and
shall be enforceable by, each of the Indemnified Parties and their respective
heirs and legal representatives. The indemnification provided for herein shall
not be deemed exclusive of any other rights to which an Indemnified Party is
entitled, whether pursuant to law, contract or otherwise. Parent shall pay all
expenses, including attorney's fees, that may be incurred by any Indemnified
Party in enforcing the indemnity and other obligations provided for in this
Section 5.8.
(f) In the event that the Surviving Corporation or Parent or
any of their respective successors or assigns (i) consolidates with or merges
into any other person and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or (ii) transfers or conveys all or
substantially all of its properties and assets to any person, then, and in each
such case, to the extent necessary to effectuate the purposes of this Section
5.8, proper provision shall be made so that the successors and assigns of the
Surviving Corporation or Parent shall succeed to the obligations set forth in
this Section 5.8 and none of the actions described in clauses (i) or (ii) shall
be taken until such provision is made.
5.9 Company Plans. (a) Until December 31, 1999, Parent shall maintain
employee benefits and programs for officers and employees of the Company and its
subsidiaries that are substantially similar in the aggregate to those being
provided to similarly situated officers and employees of the Parent or any of
its affiliates (it being understood that Parent will not be obligated to
continue any one or more employee benefits or programs being provided to
officers and employees of the Company and its subsidiaries on the date hereof).
For purposes of eligibility to participate in and vesting in all benefits
provided to officers and employees of the Company and its subsidiaries, such
officers and employees of the Company and its subsidiaries will be granted their
years of service with the Company and its subsidiaries to the extent permitted
by the applicable benefit plan and applicable law.. To the extent officers or
employees of the Company or its subsidiaries shall be covered by any medical
plan of Parent, amounts paid under any medical plans of the Company during the
year such coverage becomes effective shall be taken into account in calculating
deductibles and maximum out-of-pocket limits applicable under the medical plan
of Parent as if such amounts had been paid under such medical plan of Parent (to
the extent permitted by the applicable medical plan and applicable law).
(b) In the event that the Surviving Corporation or Parent or
any of their respective successors or assigns (i) consolidates with or merges
into any other person and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or (ii) transfers or conveys all or
substantially all of its properties and assets to any person, then, and in each
such case, to the extent necessary to effectuate the purposes of this Section
5.9, proper provision shall be made so that the successors and assigns of the
Surviving Corporation or Parent shall succeed to the obligations set forth in
this Section 5.9 and none of the actions described in clauses (i) or (ii) shall
be taken until such provision is made.
5.10. Notification of Certain Matters. The Company shall give prompt
notice to Parent and Parent shall give prompt notice to the Company, of (i) the
occurrence, or non-occurrence of
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any event the occurrence, or non-occurrence of which would cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Effective Time and (ii)
any material failure of the Company, Parent or Purchaser, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 5.10 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
ARTICLE VI
CLOSING CONDITIONS
6.1 Conditions to Obligations of Each Party to Effect the Short-Form
Merger. If the Offer is consummated, the respective obligations of each party
hereto to effect the Merger pursuant to Article II (including Section 2.13
hereof) shall be subject to the satisfaction at or prior to the Effective Time
of the following conditions, any or all of which may be waived, in whole or in
part, to the extent permitted by applicable law:
(a) Purchase of Shares. Parent will have accepted for payment
and purchased all Shares validly tendered and not withdrawn pursuant to the
Offer;
(b) No Injunction. No federal or state governmental or
regulatory body or court of competent jurisdiction shall have enacted, issued,
promulgated or enforced any statute, rule, regulation, executive order, decree,
judgment, preliminary or permanent injunction or other order that is in effect
and that prohibits, enjoins or otherwise restrains the consummation of the
Merger; provided, that the parties shall use commercially reasonable efforts to
cause any such decree, judgment, injunction or order to be vacated or lifted;
and
(c) Statutes; Consents. No statute, rule, order, decree or
regulation shall have been enacted or promulgated by any foreign or domestic
Governmental Entity or authority of competent jurisdiction which prohibits the
consummation of the Merger and all material foreign or domestic governmental
consents, orders and approvals required for the consummation of the Merger and
the transactions contemplated hereby shall have been obtained and shall be in
effect at the Effective Time.
6.2 Conditions to the Long-Form Merger.
(a) If Section 1.4 shall have become applicable, the
obligations of the Parent and Purchaser to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following conditions,
any or all of which may be waived, in whole or in part, to the extent permitted
by applicable law:
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(i) Stockholder Approval. This Agreement shall have been
adopted, and the Merger shall have been approved, by a vote of the holders of a
majority of the outstanding Shares as required by the DGCL and the Company's
Certificate of Incorporation and By-Laws;
(ii) No Injunction; Statutes. (x) There shall not be pending
(or have been entered any order or injunction in) any action or proceeding
brought by any federal or state governmental, regulatory or administrative
agency, authority or commission having jurisdiction, (y) there shall not have
been instituted or be pending any action or proceeding (other than actions or
proceedings which do not have any basis in fact or a reasonable likelihood of
success on the merits) in, and no order or injunction shall have been entered in
any action or proceeding before, any court or arbitrator having jurisdiction,
and (z) there shall not have been enacted, promulgated, entered, enforced or
deemed applicable to the Company or to the Merger any statute, rule, regulation,
judgment, or administrative interpretation, in each case which has or is
reasonably likely to have the effect of (i) making illegal or otherwise
restraining or prohibiting the Merger; (ii) prohibiting or materially limiting
the ownership or operation by Parent, Purchaser or their respective affiliates
of any material portion of the business or assets of the Company or compelling
Parent or Purchaser to dispose of or hold separate all or any material portion
of the business or assets of the Company, in each case as a result of the
transactions contemplated by the Merger Agreement; (iii) imposing material
limitations on the ability of Parent or any of its affiliates to exercise full
rights of ownership of the shares of the Surviving Corporation; or (iv)
preventing Parent or any of its affiliates from acquiring, or requiring
divestiture by Parent or any of its affiliates of, any shares of the Surviving
Corporation;
(iii) No Breach. The Company shall not have breached or failed
to comply with any of its obligations under the Merger Agreement (which breach,
if curable, has not been cured within thirty (30) days following receipt of
written notice thereof by Parent specifying in reasonable detail the basis of
such alleged breach), and without giving effect to any limitation based on
"materiality" or "Material Adverse Effect," the representations and warranties
of the Company contained in the Merger Agreement shall have been true and
correct when made and (except for representations and warranties made as of a
particular date which need only be true and correct as of such date) shall be
true and correct as of the Effective Time as though made on and as of such date,
except in each case (i) for changes specifically permitted or contemplated by
the Merger Agreement or (ii) where the failure of any such representations and
warranties to be true and correct or the failure of performance of or compliance
with such obligations would not have a Material Adverse Effect on the Company;
(iv) Options. No Stock Options will be exercisable after
the Effective Time; and
(v) Conditions in Commitment Letter. That certain commitment
letter, dated December 2, 1998, from SG Cowen to Parent ("SG Cowen Commitment")
shall not have been terminated by SG Cowen and all of the Conditions to
Effectiveness and to Initial Borrowing set forth in the accompanying Term Sheet
shall be satisfied or waived.
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(b) If Section 1.4 shall have become applicable, the
obligations of the Company to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions, any
or all of which may be waived, in whole or in part, to the extent permitted by
applicable law:
(i) Stockholder Approval. This Agreement shall have
been adopted, and the Merger shall have been approved, by a vote of the holders
of a majority of the outstanding Shares as required by the DGCL and the
Company's Certificate of Incorporation and By-Laws;
(ii) No Injunction; Statutes. (x) There shall not be
pending (or have been entered any order or injunction in) any action or
proceeding brought by any federal or state governmental, regulatory or
administrative agency, authority or commission having jurisdiction, (y) there
shall not have been instituted or be pending any action or proceeding (other
than actions or proceedings which do not have any basis in fact or a reasonable
likelihood of success on the merits) in, and no order or injunction shall have
been entered in any action or proceeding before, any court or arbitrator having
jurisdiction, and (z) there shall not have been enacted, promulgated, entered,
enforced or deemed applicable to the Company or to the Merger any statute, rule,
regulation, judgment, or administrative interpretation, in each case which has
or is reasonably likely to have the effect of making illegal or otherwise
restraining or prohibiting the Merger; and
(iii) No Breach. The Parent and Purchaser shall not
have breached or failed to comply with any of their respective obligations under
the Merger Agreement (which breach, if curable, has not been cured within thirty
(30) days following receipt of written notice thereof by the Company specifying
in reasonable detail the basis of such alleged breach), and without giving
effect to any limitation based on "materiality" or "Material Adverse Effect,"
the representations or warranties of the Parent and Purchaser contained in the
Merger Agreement shall have been true and correct when made and (except for
representations and warranties made as of a particular date which need only be
true and correct as of such date) shall be true and correct as of the date of
consummation as though made on and as of such date, except for (i) changes
specifically permitted or contemplated by the Merger Agreement or (ii) where the
failure of any such representations and warranties to be true and correct or the
failure of performance of or compliance with such obligations would not have a
material adverse effect on the ability of the Parent or Purchaser to consummate
the Merger.
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ARTICLE VII
TERMINATION
7.1 Termination. This Agreement may be terminated and the Offer and the
Merger may be abandoned at any time (notwithstanding approval of the Merger by
the stockholders of the Company, if required by applicable provisions of the
DGCL), prior to the Effective Time:
(a) by mutual written consent of the Company and Parent;
(b) by the Company, Parent or Purchaser, (i) if the
consummation of the Offer shall not have occurred on or before 60 days from the
date hereof, unless the Offer has been terminated and the parties are required
to proceed with the Merger in accordance with Section 1.4, or (ii) if the
consummation of the Merger shall not have occurred on or before 150 days from
the date of the termination of the Offer in accordance with Section 1.4,
provided, that the right to terminate this Agreement under this clause (b) shall
not be available to any party whose misrepresentation in this Agreement or whose
failure to perform any of its covenants and agreements or to satisfy any
obligation under this Agreement has been the cause of or resulted in the failure
of the Offer or the Merger to be consummated on or before such date;
(c) by the Company, Parent or Purchaser, if (i) any federal or
state court of competent jurisdiction or other federal or state governmental or
regulatory body shall have issued any judgment, injunction, order or decree
prohibiting, enjoining or otherwise restraining the transactions contemplated by
this Agreement and such judgment, injunction, order or decree shall have become
final and nonappealable (provided, that the party seeking to terminate this
Agreement pursuant to this clause (c) shall have used commercially reasonable
efforts to remove such judgment, injunction, order or decree) or (ii) any
statute, rule, regulation or executive order is promulgated or enacted by any
federal or state governmental authority after the date of this Agreement which
prohibits the consummation of the Offer or the Merger shall be in effect;
(d) by the Company, if (i) Purchaser fails to commence the
Offer as provided in Section 1.1, (ii) the Offer expires or is terminated
without a number of Shares being purchased thereunder that constitutes at least
90% of the issued and outstanding Shares, unless the parties are required to
proceed with the Merger as provided in Section 1.4, or (iii) Parent fails to
purchase validly tendered Shares in violation of the terms and conditions of the
Offer or this Agreement, unless in any such case such termination or expiration
has been caused by or resulted from the failure of the Company to perform in any
material respect any of its covenants and agreements contained in this
Agreement;
(e) by Parent or Purchaser, if (i) due to an occurrence that
if occurring after the commencement of the Offer would result in a failure to
satisfy any of the conditions set forth in Annex A hereto, Parent, the
Purchaser, or any of their affiliates shall have failed to commence the Offer on
or prior to five business days following the date of the initial public
announcement of
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the Offer; or (ii) the Offer is terminated or expires as a result of the failure
of a condition specified in Annex A hereto or on the expiration of the Offer
without the purchase of any Shares thereunder, unless the parties are required
to proceed with the Merger as provided in Section 1.4, or unless in either case
such termination or expiration has been caused by or resulted from the failure
of Parent or Purchaser to perform in any material respect any of its covenants
and agreements contained in this Agreement;
(f) by Parent or Purchaser, if the Company Board withdraws or
modifies in a manner adverse to Parent or Purchaser its favorable recommendation
of the Offer or the Merger (other than due to a breach by Parent or Purchaser)
or shall have approved or recommended any Acquisition Proposal or entered into,
or announced an intention of entering into, an agreement in principle (or
similar agreement) or definitive agreement in respect of an Acquisition Proposal
with a party other than Parent or any of its affiliates or the Board of
Directors of the Company resolves to do any of the foregoing; or there occurs
the condition described in paragraph (b) of Annex A; or
(g) by the Company, if (i) the Company Board shall withdraw,
modify, or change its approval or recommendation of the Offer or the Merger or
shall have resolved to do any of the foregoing pursuant to Section 5.7 or (ii)
any Person or group of Persons shall have made an Acquisition Proposal the
acceptance of which the Company Board determines, after receiving at a meeting
of the Board of Directors advice from its financial advisors and independent
legal counsel, is required to comply with its fiduciary duties under applicable
law, provided, that the right to terminate this Agreement pursuant to this
Section 7.1(g) shall not be available to the Company unless (x) the Company has
complied in all material respects with its obligations in Section 5.7 of this
Agreement and (y) immediately after such termination, the Company enters into a
definitive agreement to effect the Acquisition Proposal referred to herein and
complies with its obligations under Section 7.3(b);
(h) by the Company, if Parent or Purchaser shall have breached
or failed to perform in any material respect any of its representations,
warranties, covenants or other agreements contained in this Agreement, which
breach or failure to perform (i) would give rise to the failure of the
conditions set forth in Article VI and (ii) either is not reasonably capable of
being cured or, if it is reasonably capable of being cured, has not been cured
within the earlier of (x) 30 days after giving of written notice to Parent of
such breach or (y) the expiration of the Offer (if applicable);
(i) by Parent or Purchaser, if the Company shall have breached
or failed to perform in any material respect any of its representations,
warranties, covenants or other agreements contained in this Agreement, which
breach or failure to perform (i) would give rise to the failure of the
conditions set forth in Article VI and (ii) either is not reasonably capable of
being cured or, if it is reasonably capable of being cured, has not been cured
within the earlier of (x) 30 days after giving of written notice to the Company
of such breach or (y) the expiration of the Offer (if applicable); and
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(j) by Parent, Purchaser or the Company if the SG Cowen
Commitment shall have been terminated by SG Cowen or any of the Conditions to
Effectiveness and to Initial Borrowing set forth in the accompanying Term Sheet
shall fail to be satisfied or waived.
7.2 Effect of Termination. In the event of any termination of this
Agreement pursuant to Section 7.1, this Agreement forthwith shall become void
and of no further force or effect, and no party hereto (or any of its
affiliates, directors, officers, agents or representatives) shall have any
liability or obligation hereunder, except in any such case (a) as provided in
Sections 5.2(b) (Confidentiality), 5.6 (Public Announcements), and 7.3 (Fees and
Expenses), which shall survive any such termination and (b) to the extent such
termination results from the breach by such party of any of its representations,
warranties, covenants or agreements contained in this Agreement.
7.3 Fees and Expenses. (a) Whether or not the Offer or the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby (including, without limitation, fees
and disbursements of counsel, financial advisors and accountants) shall be borne
by the party which incurs such cost or expense; provided, that if this Agreement
is terminated pursuant to Section 7.1 as a result of the willful and material
misrepresentation by a party or the willful and material breach by a party of
any of its covenants or arrangements set forth herein, such party shall pay the
costs and expenses incurred by the other party in connection with this
Agreement.
(b) Notwithstanding the foregoing, provided that neither
Parent nor Purchaser shall be in material breach of their respective obligations
under this Agreement, if the Company terminates this Agreement pursuant to
Section 7.1(g) or Parent terminates this Agreement pursuant to Section 7.1(f),
then the Company shall pay to Parent a fee of $3,500,000 plus out-of-pocket
expenses not to exceed $1,000,000. The Company acknowledges that the provisions
of this Section 7.3(b) are an integral part of the transactions contemplated in
this Agreement and that, without such provisions, Parent and Purchaser would not
enter into this Agreement. Parent and Purchaser hereby agree that, so long as
Parent has received the fee pursuant to this Section 7.3(b), neither Parent nor
Purchaser shall assert or pursue in any manner, directly or indirectly, (i) any
claim or cause of action based in whole or in part upon alleged tortious or
other interference with rights under this Agreement against any third party
submitting an Acquisition Proposal or (ii) any claim or cause of action against
the Company or any of its officers, directors, employees, agents or other
representatives based in whole or in part upon its or their receipt,
consideration, recommendation or approval of, or other action taken with respect
to, an Acquisition Proposal or based in whole or in part upon the failure of the
transactions contemplated by this Agreement to be consummated.
ARTICLE VIII
MISCELLANEOUS
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8.1 Nonsurvival of Representations, Warranties and Covenants. None of
the representations or warranties contained in this Agreement or in any
certificate or other instrument delivered pursuant to this Agreement shall
survive the Effective Time. The covenants and agreements contained herein shall
survive in accordance with their respective terms.
8.2 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered, mailed or transmitted, and shall be effective
upon receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) or sent by fax (with immediate
confirmation) or nationally recognized overnight courier service, as follows:
(a) if to Parent or Purchaser, to:
Key Components, LLC
c/o Millbrook Capital Management, Inc.
152 West 57th Street
New York, New York 10019
Attn: Alan L. Rivera
Fax: (212) 586-0340
With a copy to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Attn: Michael J. Emont
Fax: (212) 698-7825
(b) if to the Company, to:
Valley Forge Corporation
100 Smith Ranch Road
Suite 326
San Rafael, California 94903
Attn: David R. Brining
Fax: (415) 492-0128
With a copy to:
Husch & Eppenberger, LLC
100 N. Broadway
Suite 1300
St. Louis, Missouri 63102
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<PAGE>
Attn: James V. Stepleton
Fax: (314) 421-0239
or to such other Person or address or facsimile number as any party shall
specify by like written notice to the other parties hereto (any such notice of a
change of address to be effective only upon actual receipt thereof).
8.3 Certain Definitions. The following terms, when used in this
Agreement, shall have the following respective meanings:
(a) "affiliate" shall have the meaning assigned to such term
in Section 12(b)-2 of the Exchange Act.
(b) "business day" shall have the meaning set forth in Rule
14d-l(c)(6) under the Exchange Act.
(c) The words "include ... .. includes," or "including" shall
be deemed to be followed by the words "without limitation."
(d) "Knowledge" means the actual knowledge of the
executive officers of the Company.
(e) "Material Adverse Effect" means, with respect to any
Person, any change or effect that is materially adverse to the financial
condition or results of operations of such Person and its subsidiaries, taken as
a whole, excluding in all cases: (i) events or conditions generally affecting
the industry in which such Person and its subsidiaries operate or arising from
changes in general business or economic conditions; (ii) any effect resulting
from any change in law or generally accepted accounting principles, which affect
generally entities such as such Person; (iii) events resulting from the
execution and/or announcement of this Agreement; and (iv) any effect resulting
from compliance by such Person with the terms of this Agreement.
(f) "Person" means any natural person, corporation, limited
liability company, partnership, unincorporated organization or other entity.
(g) "subsidiary" of any Person means any other corporation or
entity of which such Person owns, directly or indirectly, stock or other equity
interests having at least 50% of the votes entitled to be cast in the election
of directors of such corporation or entity under ordinary circumstances or of
which such Person owns a majority beneficial interest, [provided, that the term
"subsidiary" shall also include Mastervolt International B.V. and its
subsidiaries].
8.4 Entire Agreement. This Agreement (including the schedules, exhibits
and other documents referred to herein), together with the Confidentiality
Agreement referred to in Section 5.2(b), constitutes the entire agreement
between and among the parties hereto and supersedes all
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<PAGE>
prior agreements and understandings, oral and written, between or among any of
the parties with respect to the subject matter hereof.
8.5 Assignment; Binding Effect. Neither this Agreement nor any of the
rights, benefits or obligations hereunder may be assigned, in whole or in part,
by any party (whether by operation of law or otherwise) without the prior
written consent of the other parties hereto, except that the Purchaser may
assign, in its sole discretion, any or all of its rights, interests and
obligations hereunder to Parent or to any direct or indirect wholly owned
subsidiary of Parent, provided that no such assignment shall release Purchaser
from its obligations hereunder. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns. Nothing in this
Agreement, expressed or implied, is intended to confer on any person other than
the parties or their respective successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, other than
rights conferred upon Indemnified Parties under Section 5.8.
8.6 Amendments. This Agreement may be amended by the parties at any
time prior to the Effective Time; provided, that, after approval of the Merger
and this Agreement by the stockholders of the Company if required under
applicable law, no amendment shall be made which by law requires further
approval by the stockholders of the Company, without such approval. This
Agreement may not be amended or modified except by an instrument in writing
signed on behalf of each of the parties hereto.
8.7 Waivers. At any time prior to the Effective Time, Parent (for
Parent and Purchaser), on the one hand, or the Company, on the other hand, may,
to the extent legally allowed, (a) extend the time specified herein for the
performance of any of the obligations or other acts of the other, (b) waive any
inaccuracies in the representations and warranties of the other contained herein
or in any document delivered pursuant hereto, or (c) waive compliance by the
other with any of the agreements or covenants of such other party or parties (as
the case may be) contained herein. Any such extension or waiver shall be valid
only if set forth in a written instrument signed on behalf of the party or
parties to be bound thereby. No such extension or waiver shall constitute a
waiver of, or estoppel with respect to, any subsequent or other breach or
failure to strictly comply with the provisions of this Agreement. The failure of
any party to insist on strict compliance with this Agreement or to assert any of
its rights or remedies hereunder or with respect hereto shall not constitute a
waiver of such rights or remedies.
8.8 Validity. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
8.9 Captions. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
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8.10 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, and all of which together shall be
deemed to be one and the same instrument.
8.11 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Delaware, without regard to
any applicable principles of conflicts of law.
8.12 Purchaser. Parent will cause Purchaser to perform its obligations
hereunder.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement and Plan
of Merger as of the date first above written.
VALLEY FORGE CORPORATION
By: /s/ D. R. Brining
---------------------------------
Name: D. R. Brining
Title: President
KEY COMPONENTS, LLC
By: /s/ Clay B. Lifflander
---------------------------------
Name: Clay B. Lifflander
Title: President
KCI ACQUISITION CORP.
By: /s/ Clay B. Lifflander
---------------------------------
Name: Clay B. Lifflander
Title: President
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ANNEX A
CONDITIONS TO THE OFFER
Capitalized terms used in this Annex A shall have the meanings assigned
to them in the Agreement to which it is attached (the "Merger Agreement").
Purchaser shall not be required to accept for payment or, subject to
any applicable rules or regulations of the SEC, including Rule 14e-l(c) under
the Exchange Act (relating to Purchaser's obligation to pay for or return
tendered Shares after the termination or withdrawal of the Offer), or, subject
to the terms and conditions of the Merger Agreement, amend the Offer as to any
Shares not then accepted for payment, shall not be required to accept for
payment or pay for any Shares, or may delay the acceptance for payment of Shares
tendered, if (1) at the expiration of the Offer, the number of Shares validly
tendered and not withdrawn, together with the Shares beneficially owned by
Parent and its affiliates, shall not constitute at least 90% of the outstanding
Shares or (2) at any time after December 2, 1998 and prior to the expiration
date of the Offer, any of the following events shall occur:
(a) (x) there shall be pending (or have been entered any order
or injunction in) any action or proceeding brought by any federal or state
governmental, regulatory or administrative agency, authority or commission
having jurisdiction, (y) there shall have been instituted or be pending any
action or proceeding (other than actions or proceedings which do not have any
basis in fact or a reasonable likelihood of success on the merits) in, or any
order or injunction shall have been entered in any action or proceeding before,
any court or arbitrator having jurisdiction, or (z) there shall have been
enacted, promulgated, entered, enforced or deemed applicable to the Company or
to the Offer or the Merger any statute, rule, regulation, judgment, or
administrative interpretation, in each case which has or is reasonably likely to
have the effect of (i) making illegal or otherwise restraining or prohibiting
the Offer or the Merger or the acquisition by Parent or Purchaser of any Shares;
(ii) prohibiting or materially limiting the ownership or operation by Parent,
Purchaser or their respective affiliates of the Shares or any material portion
of the Shares or of the business or assets of the Company or compelling Parent
or Purchaser to dispose of or hold separate all or any material portion of the
Shares or the business or assets of the Company, in each case as a result of the
transactions contemplated by the Offer or the Merger Agreement; (iii) imposing
material limitations on the ability of Parent or any of its affiliates to
exercise full rights of ownership of the Shares, including, without limitation,
the right to vote any Shares purchased by them on all matters properly presented
to the stockholders of the Company; or (iv) preventing Parent or any of its
affiliates from acquiring, or requiring divestiture by Parent or any of its
affiliates of, any Shares; or
(b) any Person, entity or "group" (as such term is used in
Section 13(d)(3) of the Exchange Act) other than Parent or any of its affiliates
shall have become the beneficial owner (as that term is used in Rule 13d-3 under
the Exchange Act) of more than 50% of the outstanding Shares, provided that the
directors of the Company on the date of the Merger Agreement shall not
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<PAGE>
be deemed to constitute any such Person, entity, or "group" or the Company shall
have entered into a definitive agreement or agreement in principle with any
person with respect to an Acquisition Proposal or similar business combination
with the Company; or
(c) the Company shall have breached or failed to comply with
any of its obligations under the Merger Agreement (which breach, if curable, has
not been cured within thirty (30) days following receipt of written notice
thereof by Parent specifying in reasonable detail the basis of such alleged
breach), or, without giving effect to any limitation based on "materiality" or
"Material Adverse Effect," any representation or warranty of the Company
contained in the Merger Agreement shall not have been true and correct when made
or (except for representations and warranties made as of a particular date which
need only be true and correct as of such date) shall not be true and correct as
of the date of consummation of the Offer as though made on and as of such date,
except in each case (i) for changes specifically permitted or contemplated by
the Merger Agreement or (ii) where the failure of any such representations and
warranties to be true and correct or the failure of performance of or compliance
with such obligations would not have a Material Adverse Effect on the Company;
or
(d) the Merger Agreement shall have been terminated pursuant
to its terms or amended pursuant to its terms to provide for such termination or
amendment of the Offer; or
(e) the Board of Directors of the Company shall have modified
or amended in any manner adverse to Parent or Purchaser or shall have withdrawn
its recommendation of the Offer or the Merger, or recommended any Acquisition
Proposal or shall have resolved to do any of the foregoing; or
(f) any Stock Options will be exercisable after the
Merger; or
(g) the SG Cowen Commitment shall have been terminated by SG
Cowen or any of the Conditions to Effectiveness and to Initial Borrowing set
forth in the accompanying Term Sheet shall fail to be satisfied or waived;
which, in the good faith judgement of Parent makes it inadvisable to proceed
with the Offer or with acceptance for payment or payment for Shares.
The foregoing conditions are for the sole benefit of Parent and
Purchaser and may be asserted or waived by Parent or Purchaser in whole or in
part at any time or from time to time in its reasonable discretion subject to
the terms and conditions of the Merger Agreement. The failure of Parent or
Purchaser at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such night shall be deemed an ongoing
right which may be asserted at any time and from time to time.
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<PAGE>
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT (the "Agreement") dated as of December 2, 1998, by
and between KCI Acquisition Corp., a Delaware corporation (the "Company"), and
Martin J. Bloom, Trustee of the Martin J. Bloom Family Trust, u/a/d 8/18/93
(the "Stockholder").
WHEREAS, as of the date hereof the Stockholder owns beneficially and of
record 666,694 shares of Common Stock of Valley Forge Corporation, a Delaware
corporation ("VFC") (all such shares and any shares hereafter acquired by the
Stockholder prior to the termination of this Agreement being referred to herein
as the "Shares");
WHEREAS, concurrently herewith, Key Components, Inc., a New York
corporation, VFC and the Company are entering into an Agreement and Plan of
Merger (as such Agreement may hereafter be amended from time to time, the
"Merger Agreement"); and
WHEREAS, as a condition to the willingness of the Company to enter into the
Merger Agreement, the Company has requested that the Stockholder agree, and, in
order to induce the Company to enter into the Merger Agreement, the Stockholder
has agreed, to vote the Shares as set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations warranties, covenants and agreements set forth herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
1.1 TENDER OF THE SHARES. On or after January 4, 1999 the Stockholder
shall tender the Shares to the Company, pursuant to the Offer contemplated in
Article I of the Merger Agreement and shall not withdraw the Shares therefrom
prior to the termination or expiration of the Offer or the termination of the
Merger Agreement.
1.2 TRANSFER OF SHARES. Except as required by Section 1.1, until the
close of business on the date of the special meeting of stockholders of VFC
(including any adjournments thereof, the "VFC Special Meeting") called to
consider and vote upon the transactions contemplated by the Merger Agreement
(the "Transactions"), the Stockholder will not (a) sell, pledge or otherwise
dispose of any of the Shares, (b) deposit the Shares into a voting trust or
enter into a voting agreement or arrangement with respect to the Shares (other
than this Agreement), or grant any proxy with respect thereto (other than a
proxy naming the Stockholder as one of the proxyholders), or (c) enter into any
contract, option or other arrangement or undertaking with respect to the direct
or indirect sale, assignment, transfer or other disposition of any of the
Shares.
1.3 VOTING OF SHARES; FURTHER ASSURANCES. The Stockholder, by this
Agreement, does hereby constitute and appoint the Purchaser, or any nominee of
the Purchaser, with full power of substitution, during and for the term of this
Agreement, as such Stockholder's true and lawful attorney and proxy, for and in
its name, place and stead, to vote each of the Stockholder's
<PAGE>
Shares as such Stockholder's proxy, at the VFC Special Meeting (including the
right to sign the Stockholder's name (as a stockholder) to any consent,
certificate or other document relating to the Company that the DGCL may permit
or require) (a) in favor of the adoption of the Merger Agreement and approval of
the Transactions, (b) in favor of any other matter necessary to the consummation
of the transactions contemplated by the Merger Agreement and considered and
voted upon at the VFC Special Meeting, and (c) against any Acquisition Proposal
or any other action or agreement that would result in a breach of any covenant,
representation or warranty or another obligation or agreement of the Company
under the Merger Agreement or that could result in any of the conditions to the
Parent's or Purchaser's obligations under the Merger Agreement not being
fulfilled. THIS PROXY AND POWER OF ATTORNEY IS IRREVOCABLE AND COUPLED WITH AN
INTEREST. The Stockholder acknowledges receipt and review of a copy of the
Merger Agreement. Nothing in this Section 1.3 or elsewhere in this Agreement
shall affect the Stockholders fiduciary obligations as an officer or director of
VFC.
ARTICLE II
2.1 NOTICES. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered, mailed or transmitted, and shall be effective upon
receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the fax number
specified below:
(a) If to the Company:
KCI Acquisition Corp.
c/o Millbrook Capital management, Inc.
152 West 57th Street, 17th Floor
New York, New York 10019
Attn: Alan L. Rivera
Fax: 212-586-0340
with a copy to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza, 29th Floor
New York, New York 10112
Attn: Michael J. Emont
Fax: 212-698-7825
(b) If to the Stockholder:
Martin J. Bloom
c/o Valley Forge Corporation
2
<PAGE>
100 Smith Ranch Road, Suite 326
San Rafael, CA 94903-1994
Fax No.: 415-492-0128
with a copy to:
Husch & Eppenberger, LLC
100 N. Broadway, Suite 1300
St. Louis, MO 63102
Attn: James V. Stepleton, Esq.
Fax: 314-421-0239
2.2 HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
2.3 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the provisions hereof are
fulfilled to the extent possible.
2.4 ENTIRE AGREEMENT. This Agreement, together with the Merger Agreement
and the other agreements contemplated thereby, constitute the entire agreement
of the parties and supersedes all prior agreements and undertakings, both
written and oral, between the parties, or any of them, with respect to the
subject matter hereof. The parties hereto agree that until the sale of the
Shares or the termination of the Offer the stockholder shall retain all benefits
and burdens of ownership of the shares except as otherwise expressly provided
herein.
2.5 CERTAIN EVENTS. The Stockholder agrees that this Agreement and the
obligations hereunder shall be binding upon any person to which legal or
beneficial ownership (as such term is applied under Rule 13d-3 of the Securities
Exchange Act of 1934, as amended) of the Shares shall pass, whether by operation
of law or otherwise. Notwithstanding any transfer of Shares, the transferor
shall remain liable for the performance of all obligations under this Agreement
of the transferor.
3
<PAGE>
2.6 ASSIGNMENT. This Agreement shall not be assigned by operation of law
or otherwise.
2.7 PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, intended to or shall confer upon any person any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
2.8 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damages would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
2.9 GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without giving effect to
principles of conflicts of laws.
2.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which, taken
together, shall constitute one and the same agreement.
2.11 TERM. The term of this Agreement shall commence as of the date hereof
and shall continue until the first to occur of (a) the closing of the
transactions contemplated by the Merger Agreement, or (b) the valid termination
of the Merger Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
THE MARTIN J. BLOOM KCI ACQUISITION CORP.
FAMILY TRUST, U/A/D 8/18/93
By:
- ------------------------------- ----------------------------------
Martin J. Bloom, Trustee Name:
Title:
4
<PAGE>
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT (the "Agreement") dated as of December 2, 1998,
by and between KCI Acquisition Corp., a Delaware corporation (the "Company"),
and Theodore P. Desloge, Jr., Trustee of the Theodore P. Desloge, Jr. Trust
u/i/t dtd. 2/7/78 f/b/o Theodore P. Desloge, Jr. (the "Stockholder").
WHEREAS, as of the date hereof the Stockholder owns beneficially and of
record 709,840 shares of Common Stock of Valley Forge Corporation, a Delaware
corporation ("VFC") (all such shares and any shares hereafter acquired by the
Stockholder prior to the termination of this Agreement being referred to herein
as the "Shares");
WHEREAS, concurrently herewith, Key Components, Inc., a New York
corporation, VFC and the Company are entering into an Agreement and Plan of
Merger (as such Agreement may hereafter be amended from time to time, the
"Merger Agreement"); and
WHEREAS, as a condition to the willingness of the Company to enter into
the Merger Agreement, the Company has requested that the Stockholder agree, and,
in order to induce the Company to enter into the Merger Agreement, the
Stockholder has agreed, to vote the Shares as set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations warranties, covenants and agreements set forth herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
1.1 Tender of the Shares. On or after January 4, 1999 the Stockholder
shall tender the Shares to the Company, pursuant to the Offer contemplated in
Article I of the Merger Agreement and shall not withdraw the Shares therefrom
prior to the termination or expiration of the Offer or the termination of the
Merger Agreement.
1.2 Transfer of Shares. Except as required by Section 1.1, until the
close of business on the date of the special meeting of stockholders of VFC
(including any adjournments thereof, the "VFC Special Meeting") called to
consider and vote upon the transactions contemplated by the Merger Agreement
(the "Transactions"), the Stockholder will not (a) sell, pledge or otherwise
dispose of any of the Shares, (b) deposit the Shares into a voting trust or
enter into a voting agreement or arrangement with respect to the Shares (other
than this Agreement), or grant any proxy with respect thereto (other than a
proxy naming the Stockholder as one of the proxyholders), or (c) enter into any
contract, option or other arrangement or undertaking with respect to the direct
or indirect sale, assignment, transfer or other disposition of any of the
Shares.
1.3 Voting of Shares; Further Assurances. The Stockholder, by this
Agreement, does hereby constitute and appoint the Purchaser, or any nominee of
the Purchaser, with full power of substitution, during and for the term of this
Agreement, as such Stockholder's true and
<PAGE>
lawful attorney and proxy, for and in its name, place and stead, to vote each of
the Stockholder's Shares as such Stockholder's proxy, at the VFC Special Meeting
(including the right to sign the Stockholder's name (as a stockholder) to any
consent, certificate or other document relating to the Company that the DGCL may
permit or require) (a) in favor of the adoption of the Merger Agreement and
approval of the Transactions, (b) in favor of any other matter necessary to the
consummation of the transactions contemplated by the Merger Agreement and
considered and voted upon at the VFC Special Meeting, and (c) against any
Acquisition Proposal or any other action or agreement that would result in a
breach of any covenant, representation or warranty or another obligation or
agreement of the Company under the Merger Agreement or that could result in any
of the conditions to the Parent's or Purchaser's obligations under the Merger
Agreement not being fulfilled. THIS PROXY AND POWER OF ATTORNEY IS IRREVOCABLE
AND COUPLED WITH AN INTEREST. The Stockholder acknowledges receipt and review of
a copy of the Merger Agreement. Nothing in this Section 1.3 or elsewhere in this
Agreement shall affect the Stockholders fiduciary obligations as an officer or
director of VFC.
ARTICLE II
2.1 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered, mailed or transmitted, and shall be effective
upon receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the fax number
specified below:
(a) If to the Company:
KCI Acquisition Corp.
c/o Millbrook Capital management, Inc.
152 West 57th Street, 17th Floor
New York, New York 10019
Attn: Alan L. Rivera
Fax: 212-586-0340
with a copy to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza, 29th Floor
New York, New York 10112
Attn: Michael J. Emont
Fax: 212-698-7825
(b) If to the Stockholder:
Theodore P. Desloge, Jr.
<PAGE>
c/o Valley Forge Corporation
100 Smith Ranch Road, Suite 326
San Rafael, CA 94903-1994
Fax No.: 415-492-0128
with a copy to:
Husch & Eppenberger, LLC
100 N. Broadway, Suite 1300
St. Louis, MO 63102
Attn: James V. Stepleton, Esq.
Fax: 314-421-0239
2.2 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
2.3 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the provisions hereof are
fulfilled to the extent possible.
2.4 Entire Agreement. This Agreement, together with the Merger
Agreement and the other agreements contemplated thereby, constitute the entire
agreement of the parties and supersedes all prior agreements and undertakings,
both written and oral, between the parties, or any of them, with respect to the
subject matter hereof. The parties hereto agree that until the sale of the
Shares or the termination of the Offer the stockholder shall retain all benefits
and burdens of ownership of the shares except as otherwise expressly provided
herein.
2.5 Certain Events. The Stockholder agrees that this Agreement and the
obligations hereunder shall be binding upon any person to which legal or
beneficial ownership (as such term is applied under Rule 13d-3 of the Securities
Exchange Act of 1934, as amended) of the Shares shall pass, whether by operation
of law or otherwise. Notwithstanding any transfer of Shares, the transferor
shall remain liable for the performance of all obligations under this Agreement
of the transferor.
<PAGE>
2.6 Assignment. This Agreement shall not be assigned by operation
of law or otherwise.
2.7 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, intended to or shall confer upon any person any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
2.8 Specific Performance. The parties hereto agree that irreparable
damages would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
2.9 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware, without giving effect to
principles of conflicts of laws.
2.10 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which, taken
together, shall constitute one and the same agreement.
2.11 Term. The term of this Agreement shall commence as of the date
hereof and shall continue until the first to occur of (a) the closing of the
transactions contemplated by the Merger Agreement, or (b) the valid termination
of the Merger Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THEODORE P. DESLOGE, JR. TRUST KCI ACQUISITION CORP.
u/i/t dtd. 2/7/78
By:
- ------------------------------ --------------------------------
Theodore P. Desloge, Jr. Name:
Title:
<PAGE>
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT (the "Agreement") dated as of December 2, 1998,
by and between KCI Acquisition Corp., a Delaware corporation (the "Company"),
and Theodore P. Desloge, Jr., Trustee of the Desloge Consulting Corporation
Profit Sharing Plan and Trust (the "Stockholder").
WHEREAS, as of the date hereof the Stockholder owns beneficially and of
record 51,600 shares of Common Stock of Valley Forge Corporation, a Delaware
corporation ("VFC") (all such shares and any shares hereafter acquired by the
Stockholder prior to the termination of this Agreement being referred to herein
as the "Shares");
WHEREAS, concurrently herewith, Key Components, Inc., a New York
corporation, VFC and the Company are entering into an Agreement and Plan of
Merger (as such Agreement may hereafter be amended from time to time, the
"Merger Agreement"); and
WHEREAS, as a condition to the willingness of the Company to enter into
the Merger Agreement, the Company has requested that the Stockholder agree, and,
in order to induce the Company to enter into the Merger Agreement, the
Stockholder has agreed, to vote the Shares as set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations warranties, covenants and agreements set forth herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
1.1 Tender of the Shares. On or after January 4, 1999 the Stockholder
shall tender the Shares to the Company, pursuant to the Offer contemplated in
Article I of the Merger Agreement and shall not withdraw the Shares therefrom
prior to the termination or expiration of the Offer or the termination of the
Merger Agreement.
1.2 Transfer of Shares. Except as required by Section 1.1, until the
close of business on the date of the special meeting of stockholders of VFC
(including any adjournments thereof, the "VFC Special Meeting") called to
consider and vote upon the transactions contemplated by the Merger Agreement
(the "Transactions"), the Stockholder will not (a) sell, pledge or otherwise
dispose of any of the Shares, (b) deposit the Shares into a voting trust or
enter into a voting agreement or arrangement with respect to the Shares (other
than this Agreement), or grant any proxy with respect thereto (other than a
proxy naming the Stockholder as one of the proxyholders), or (c) enter into any
contract, option or other arrangement or undertaking with respect to the direct
or indirect sale, assignment, transfer or other disposition of any of the
Shares.
1.3 Voting of Shares; Further Assurances. The Stockholder, by this
Agreement, does hereby constitute and appoint the Purchaser, or any nominee of
the Purchaser, with full power of substitution, during and for the term of this
Agreement, as such Stockholder's true and
<PAGE>
lawful attorney and proxy, for and in its name, place and stead, to vote each of
the Stockholder's Shares as such Stockholder's proxy, at the VFC Special Meeting
(including the right to sign the Stockholder's name (as a stockholder) to any
consent, certificate or other document relating to the Company that the DGCL may
permit or require) (a) in favor of the adoption of the Merger Agreement and
approval of the Transactions, (b) in favor of any other matter necessary to the
consummation of the transactions contemplated by the Merger Agreement and
considered and voted upon at the VFC Special Meeting, and (c) against any
Acquisition Proposal or any other action or agreement that would result in a
breach of any covenant, representation or warranty or another obligation or
agreement of the Company under the Merger Agreement or that could result in any
of the conditions to the Parent's or Purchaser's obligations under the Merger
Agreement not being fulfilled. THIS PROXY AND POWER OF ATTORNEY IS IRREVOCABLE
AND COUPLED WITH AN INTEREST. The Stockholder acknowledges receipt and review of
a copy of the Merger Agreement. Nothing in this Section 1.3 or elsewhere in this
Agreement shall affect the Stockholders fiduciary obligations as an officer or
director of VFC.
ARTICLE II
2.1 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered, mailed or transmitted, and shall be effective
upon receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the fax number
specified below:
(a) If to the Company:
KCI Acquisition Corp.
c/o Millbrook Capital management, Inc.
152 West 57th Street, 17th Floor
New York, New York 10019
Attn: Alan L. Rivera
Fax: 212-586-0340
with a copy to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza, 29th Floor
New York, New York 10112
Attn: Michael J. Emont
Fax: 212-698-7825
(b) If to the Stockholder:
Theodore P. Desloge, Jr.
- 2 -
<PAGE>
c/o Valley Forge Corporation
100 Smith Ranch Road, Suite 326
San Rafael, CA 94903-1994
Fax No.: 415-492-0128
with a copy to:
Husch & Eppenberger, LLC
100 N. Broadway, Suite 1300
St. Louis, MO 63102
Attn: James V. Stepleton, Esq.
Fax: 314-421-0239
2.2 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
2.3 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the provisions hereof are
fulfilled to the extent possible.
2.4 Entire Agreement. This Agreement, together with the Merger
Agreement and the other agreements contemplated thereby, constitute the entire
agreement of the parties and supersedes all prior agreements and undertakings,
both written and oral, between the parties, or any of them, with respect to the
subject matter hereof. The parties hereto agree that until the sale of the
Shares or the termination of the Offer the stockholder shall retain all benefits
and burdens of ownership of the shares except as otherwise expressly provided
herein.
2.5 Certain Events. The Stockholder agrees that this Agreement and the
obligations hereunder shall be binding upon any person to which legal or
beneficial ownership (as such term is applied under Rule 13d-3 of the Securities
Exchange Act of 1934, as amended) of the Shares shall pass, whether by operation
of law or otherwise. Notwithstanding any transfer of Shares, the transferor
shall remain liable for the performance of all obligations under this Agreement
of the transferor.
- 3 -
<PAGE>
2.6 Assignment. This Agreement shall not be assigned by operation
of law or otherwise.
2.7 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, intended to or shall confer upon any person any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
2.8 Specific Performance. The parties hereto agree that irreparable
damages would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
2.9 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware, without giving effect to
principles of conflicts of laws.
2.10 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which, taken
together, shall constitute one and the same agreement.
2.11 Term. The term of this Agreement shall commence as of the date
hereof and shall continue until the first to occur of (a) the closing of the
transactions contemplated by the Merger Agreement, or (b) the valid termination
of the Merger Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
DESLOGE CONSULTING CORPORATION KCI ACQUISITION CORP.
PROFIT SHARING PLAN AND TRUST
By:
- ---------------------------- ------------------------------
Theodore P. Desloge, Jr., Name:
Trustee Title:
<PAGE>
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT (the "Agreement") dated as of December 2, 1998,
by and between KCI Acquisition Corp., a Delaware corporation (the "Company"),
and David R. Brining, an individual (the "Stockholder").
WHEREAS, as of the date hereof the Stockholder owns beneficially and of
record 297,987 shares of Common Stock of Valley Forge Corporation, a Delaware
corporation ("VFC") (all such shares and any shares hereafter acquired by the
Stockholder prior to the termination of this Agreement being referred to herein
as the "Shares");
WHEREAS, concurrently herewith, Key Components, Inc., a New York
corporation, VFC and the Company are entering into an Agreement and Plan of
Merger (as such Agreement may hereafter be amended from time to time, the
"Merger Agreement"); and
WHEREAS, as a condition to the willingness of the Company to enter into
the Merger Agreement, the Company has requested that the Stockholder agree, and,
in order to induce the Company to enter into the Merger Agreement, the
Stockholder has agreed, to vote the Shares as set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations warranties, covenants and agreements set forth herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
1.1 Tender of the Shares. On or after January 4, 1999 the Stockholder
shall tender the Shares to the Company, pursuant to the Offer contemplated in
Article I of the Merger Agreement and shall not withdraw the Shares therefrom
prior to the termination or expiration of the Offer or the termination of the
Merger Agreement.
1.2 Transfer of Shares. Except as required by Section 1.1, until the
close of business on the date of the special meeting of stockholders of VFC
(including any adjournments thereof, the "VFC Special Meeting") called to
consider and vote upon the transactions contemplated by the Merger Agreement
(the "Transactions"), the Stockholder will not (a) sell, pledge or otherwise
dispose of any of the Shares, (b) deposit the Shares into a voting trust or
enter into a voting agreement or arrangement with respect to the Shares (other
than this Agreement), or grant any proxy with respect thereto (other than a
proxy naming the Stockholder as one of the proxyholders), or (c) enter into any
contract, option or other arrangement or undertaking with respect to the direct
or indirect sale, assignment, transfer or other disposition of any of the
Shares.
1.3 Voting of Shares; Further Assurances. The Stockholder, by this
Agreement, does hereby constitute and appoint the Purchaser, or any nominee of
the Purchaser, with full power of substitution, during and for the term of this
Agreement, as such Stockholder's true and
<PAGE>
lawful attorney and proxy, for and in its name, place and stead, to vote each of
the Stockholder's Shares as such Stockholder's proxy, at the VFC Special Meeting
(including the right to sign the Stockholder's name (as a stockholder) to any
consent, certificate or other document relating to the Company that the DGCL may
permit or require) (a) in favor of the adoption of the Merger Agreement and
approval of the Transactions, (b) in favor of any other matter necessary to the
consummation of the transactions contemplated by the Merger Agreement and
considered and voted upon at the VFC Special Meeting, and (c) against any
Acquisition Proposal or any other action or agreement that would result in a
breach of any covenant, representation or warranty or another obligation or
agreement of the Company under the Merger Agreement or that could result in any
of the conditions to the Parent's or Purchaser's obligations under the Merger
Agreement not being fulfilled. THIS PROXY AND POWER OF ATTORNEY IS IRREVOCABLE
AND COUPLED WITH AN INTEREST. The Stockholder acknowledges receipt and review of
a copy of the Merger Agreement. Nothing in this Section 1.3 or elsewhere in this
Agreement shall affect the Stockholders fiduciary obligations as an officer or
director of VFC.
ARTICLE II
2.1 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered, mailed or transmitted, and shall be effective
upon receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the fax number
specified below:
(a) If to the Company:
KCI Acquisition Corp.
c/o Millbrook Capital management, Inc.
152 West 57th Street, 17th Floor
New York, New York 10019
Attn: Alan L. Rivera
Fax: 212-586-0340
with a copy to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza, 29th Floor
New York, New York 10112
Attn: Michael J. Emont
Fax: 212-698-7825
(b) If to the Stockholder:
- 2 -
<PAGE>
David R. Brining
c/o Valley Forge Corporation
100 Smith Ranch Road, Suite 326
San Rafael, CA 94903-1994
Fax No.: 415-492-0128
with a copy to:
Husch & Eppenberger, LLC
100 N. Broadway, Suite 1300
St. Louis, MO 63102
Attn: James V. Stepleton, Esq.
Fax: 314-421-0239
2.2 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
2.3 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the provisions hereof are
fulfilled to the extent possible.
2.4 Entire Agreement. This Agreement, together with the Merger
Agreement and the other agreements contemplated thereby, constitute the entire
agreement of the parties and supersedes all prior agreements and undertakings,
both written and oral, between the parties, or any of them, with respect to the
subject matter hereof. The parties hereto agree that until the sale of the
Shares or the termination of the Offer the stockholder shall retain all benefits
and burdens of ownership of the shares except as otherwise expressly provided
herein.
2.5 Certain Events. The Stockholder agrees that this Agreement and the
obligations hereunder shall be binding upon any person to which legal or
beneficial ownership (as such term is applied under Rule 13d-3 of the Securities
Exchange Act of 1934, as amended) of the Shares shall pass, whether by operation
of law or otherwise. Notwithstanding any transfer of Shares, the transferor
shall remain liable for the performance of all obligations under this Agreement
of the transferor.
- 3 -
<PAGE>
2.6 Assignment. This Agreement shall not be assigned by operation
of law or otherwise.
2.7 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, intended to or shall confer upon any person any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
2.8 Specific Performance. The parties hereto agree that irreparable
damages would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
2.9 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware, without giving effect to
principles of conflicts of laws.
2.10 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which, taken
together, shall constitute one and the same agreement.
2.11 Term. The term of this Agreement shall commence as of the date
hereof and shall continue until the first to occur of (a) the closing of the
transactions contemplated by the Merger Agreement, or (b) the valid termination
of the Merger Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
DAVID R. BRINING KCI ACQUISITION CORP.
By:
- -------------------------------- ---------------------------------
Name:
Title:
<PAGE>
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT (the "Agreement") dated as of December 2, 1998,
by and between KCI Acquisition Corp., a Delaware corporation (the "Company"),
and Bloom & Desloge Enterprises, Inc., a corporation (the "Stockholder").
WHEREAS, as of the date hereof the Stockholder owns beneficially and of
record 380,556 shares of Common Stock of Valley Forge Corporation, a Delaware
corporation ("VFC") (all such shares and any shares hereafter acquired by the
Stockholder prior to the termination of this Agreement being referred to herein
as the "Shares");
WHEREAS, concurrently herewith, Key Components, Inc., a New York
corporation, VFC and the Company are entering into an Agreement and Plan of
Merger (as such Agreement may hereafter be amended from time to time, the
"Merger Agreement"); and
WHEREAS, as a condition to the willingness of the Company to enter into
the Merger Agreement, the Company has requested that the Stockholder agree, and,
in order to induce the Company to enter into the Merger Agreement, the
Stockholder has agreed, to vote the Shares as set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations warranties, covenants and agreements set forth herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
1.1 Tender of the Shares. On or after January 4, 1999 the Stockholder
shall tender the Shares to the Company, pursuant to the Offer contemplated in
Article I of the Merger Agreement and shall not withdraw the Shares therefrom
prior to the termination or expiration of the Offer or the termination of the
Merger Agreement.
1.2 Transfer of Shares. Except as required by Section 1.1, until the
close of business on the date of the special meeting of stockholders of VFC
(including any adjournments thereof, the "VFC Special Meeting") called to
consider and vote upon the transactions contemplated by the Merger Agreement
(the "Transactions"), the Stockholder will not (a) sell, pledge or otherwise
dispose of any of the Shares, (b) deposit the Shares into a voting trust or
enter into a voting agreement or arrangement with respect to the Shares (other
than this Agreement), or grant any proxy with respect thereto (other than a
proxy naming the Stockholder as one of the proxyholders), or (c) enter into any
contract, option or other arrangement or undertaking with respect to the direct
or indirect sale, assignment, transfer or other disposition of any of the
Shares.
1.3 Voting of Shares; Further Assurances. The Stockholder, by this
Agreement, does hereby constitute and appoint the Purchaser, or any nominee of
the Purchaser, with full power of substitution, during and for the term of this
Agreement, as such Stockholder's true and
<PAGE>
lawful attorney and proxy, for and in its name, place and stead, to vote each of
the Stockholder's Shares as such Stockholder's proxy, at the VFC Special Meeting
(including the right to sign the Stockholder's name (as a stockholder) to any
consent, certificate or other document relating to the Company that the DGCL may
permit or require) (a) in favor of the adoption of the Merger Agreement and
approval of the Transactions, (b) in favor of any other matter necessary to the
consummation of the transactions contemplated by the Merger Agreement and
considered and voted upon at the VFC Special Meeting, and (c) against any
Acquisition Proposal or any other action or agreement that would result in a
breach of any covenant, representation or warranty or another obligation or
agreement of the Company under the Merger Agreement or that could result in any
of the conditions to the Parent's or Purchaser's obligations under the Merger
Agreement not being fulfilled. THIS PROXY AND POWER OF ATTORNEY IS IRREVOCABLE
AND COUPLED WITH AN INTEREST. The Stockholder acknowledges receipt and review of
a copy of the Merger Agreement.
ARTICLE II
2.1 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered, mailed or transmitted, and shall be effective
upon receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the fax number
specified below:
(a) If to the Company:
KCI Acquisition Corp.
c/o Millbrook Capital management, Inc.
152 West 57th Street, 17th Floor
New York, New York 10019
Attn: Alan L. Rivera
Fax: 212-586-0340
with a copy to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza, 29th Floor
New York, New York 10112
Attn: Michael J. Emont
Fax: 212-698-7825
(b) If to the Stockholder:
Bloom & Desloge Enterprises, Inc.
- 2 -
<PAGE>
c/o Valley Forge Corporation
100 Smith Ranch Road, Suite 326
San Rafael, CA 94903-1994
Attn: Martin J. Bloom
Fax No.: 415-492-0128
with a copy to:
Husch & Eppenberger, LLC
100 N. Broadway, Suite 1300
St. Louis, MO 63102
Attn: James V. Stepleton, Esq.
Fax: 314-421-0239
2.2 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
2.3 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the provisions hereof are
fulfilled to the extent possible.
2.4 Entire Agreement. This Agreement, together with the Merger
Agreement and the other agreements contemplated thereby, constitute the entire
agreement of the parties and supersedes all prior agreements and undertakings,
both written and oral, between the parties, or any of them, with respect to the
subject matter hereof. The parties hereto agree that until the sale of the
Shares or the termination of the Offer the Stockholder shall retain all benefits
and burdens of ownership of the Shares except as otherwise expressly provided
herein.
2.5 Certain Events. The Stockholder agrees that this Agreement and the
obligations hereunder shall be binding upon any person to which legal or
beneficial ownership (as such term is applied under Rule 13d-3 of the Securities
Exchange Act of 1934, as amended) of the Shares shall pass, whether by operation
of law or otherwise. Notwithstanding any transfer of Shares, the transferor
shall remain liable for the performance of all obligations under this Agreement
of the transferor.
- 3 -
<PAGE>
2.6 Assignment. This Agreement shall not be assigned by operation
of law or otherwise.
2.7 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, intended to or shall confer upon any person any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
2.8 Specific Performance. The parties hereto agree that irreparable
damages would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
2.9 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware, without giving effect to
principles of conflicts of laws.
2.10 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which, taken
together, shall constitute one and the same agreement.
2.11 Term. The term of this Agreement shall commence as of the date
hereof and shall continue until the first to occur of (a) the closing of the
transactions contemplated by the Merger Agreement, or (b) the valid termination
of the Merger Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
BLOOM & DESLOGE ENTERPRISES, INC. KCI ACQUISITION CORP.
By: By:
------------------------------ ----------------------------
Name: Name:
Title: Title:
By:
- ---------------------------------
Name:
Title:
<PAGE>
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT (the "Agreement") dated as of December 2, 1998, by
and between KCI Acquisition Corp., a Delaware corporation (the "Company"), and
Bloom Consulting Corporation Profit Sharing Plan and Trust, Martin J. Bloom,
Trustee (the "Stockholder").
WHEREAS, as of the date hereof the Stockholder owns beneficially and of
record 79,484 shares of Common Stock of Valley Forge Corporation, a Delaware
corporation ("VFC") (all such shares and any shares hereafter acquired by the
Stockholder prior to the termination of this Agreement being referred to herein
as the "Shares");
WHEREAS, concurrently herewith, Key Components, Inc., a New York
corporation, VFC and the Company are entering into an Agreement and Plan of
Merger (as such Agreement may hereafter be amended from time to time, the
"Merger Agreement"); and
WHEREAS, as a condition to the willingness of the Company to enter into the
Merger Agreement, the Company has requested that the Stockholder agree, and, in
order to induce the Company to enter into the Merger Agreement, the Stockholder
has agreed, to vote the Shares as set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations warranties, covenants and agreements set forth herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
1.1 TENDER OF THE SHARES. On or after January 4, 1999 the Stockholder
shall tender the Shares to the Company, pursuant to the Offer contemplated in
Article I of the Merger Agreement and shall not withdraw the Shares therefrom
prior to the termination or expiration of the Offer or the termination of the
Merger Agreement.
1.2 TRANSFER OF SHARES. Except as required by Section 1.1, until the
close of business on the date of the special meeting of stockholders of VFC
(including any adjournments thereof, the "VFC Special Meeting") called to
consider and vote upon the transactions contemplated by the Merger Agreement
(the "Transactions"), the Stockholder will not (a) sell, pledge or otherwise
dispose of any of the Shares, (b) deposit the Shares into a voting trust or
enter into a voting agreement or arrangement with respect to the Shares (other
than this Agreement), or grant any proxy with respect thereto (other than a
proxy naming the Stockholder as one of the proxyholders), or (c) enter into any
contract, option or other arrangement or undertaking with respect to the direct
or indirect sale, assignment, transfer or other disposition of any of the
Shares.
1.3 VOTING OF SHARES; FURTHER ASSURANCES. The Stockholder, by this
Agreement, does hereby constitute and appoint the Purchaser, or any nominee of
the Purchaser, with full power of substitution, during and for the term of this
Agreement, as such Stockholder's true and
<PAGE>
lawful attorney and proxy, for and in its name, place and stead, to vote each of
the Stockholder's Shares as such Stockholder's proxy, at the VFC Special Meeting
(including the right to sign the Stockholder's name (as a stockholder) to any
consent, certificate or other document relating to the Company that the DGCL may
permit or require) (a) in favor of the adoption of the Merger Agreement and
approval of the Transactions, (b) in favor of any other matter necessary to the
consummation of the transactions contemplated by the Merger Agreement and
considered and voted upon at the VFC Special Meeting, and (c) against any
Acquisition Proposal or any other action or agreement that would result in a
breach of any covenant, representation or warranty or another obligation or
agreement of the Company under the Merger Agreement or that could result in any
of the conditions to the Parent's or Purchaser's obligations under the Merger
Agreement not being fulfilled. THIS PROXY AND POWER OF ATTORNEY IS IRREVOCABLE
AND COUPLED WITH AN INTEREST. The Stockholder acknowledges receipt and review
of a copy of the Merger Agreement. Nothing in this Section 1.3 or elsewhere in
this Agreement shall affect the Stockholders fiduciary obligations as an officer
or director of VFC.
ARTICLE II
2.1 NOTICES. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered, mailed or transmitted, and shall be effective upon
receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the fax number
specified below:
(a) If to the Company:
KCI Acquisition Corp.
c/o Millbrook Capital management, Inc.
152 West 57th Street, 17th Floor
New York, New York 10019
Attn: Alan L. Rivera
Fax: 212-586-0340
with a copy to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza, 29th Floor
New York, New York 10112
Attn: Michael J. Emont
Fax: 212-698-7825
(b) If to the Stockholder:
Martin J. Bloom
2
<PAGE>
c/o Valley Forge Corporation
100 Smith Ranch Road, Suite 326
San Rafael, CA 94903-1994
Fax No.: 415-492-0128
with a copy to:
Husch & Eppenberger, LLC
100 N. Broadway, Suite 1300
St. Louis, MO 63102
Attn: James V. Stepleton, Esq.
Fax: 314-421-0239
2.2 HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
2.3 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the provisions hereof are
fulfilled to the extent possible.
2.4 ENTIRE AGREEMENT. This Agreement, together with the Merger Agreement
and the other agreements contemplated thereby, constitute the entire agreement
of the parties and supersedes all prior agreements and undertakings, both
written and oral, between the parties, or any of them, with respect to the
subject matter hereof. The parties hereto agree that until the sale of the
Shares or the termination of the Offer the stockholder shall retain all benefits
and burdens of ownership of the shares except as otherwise expressly provided
herein.
2.5 CERTAIN EVENTS. The Stockholder agrees that this Agreement and the
obligations hereunder shall be binding upon any person to which legal or
beneficial ownership (as such term is applied under Rule 13d-3 of the Securities
Exchange Act of 1934, as amended) of the Shares shall pass, whether by operation
of law or otherwise. Notwithstanding any transfer of Shares, the transferor
shall remain liable for the performance of all obligations under this Agreement
of the transferor.
3
<PAGE>
2.6 ASSIGNMENT. This Agreement shall not be assigned by operation of law
or otherwise.
2.7 PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, intended to or shall confer upon any person any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
2.8 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damages would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
2.9 GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without giving effect to
principles of conflicts of laws.
2.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which, taken
together, shall constitute one and the same agreement.
2.11 TERM. The term of this Agreement shall commence as of the date hereof
and shall continue until the first to occur of (a) the closing of the
transactions contemplated by the Merger Agreement, or (b) the valid termination
of the Merger Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
BLOOM CONSULTING CORPORATION KCI ACQUISITION CORP.
PROFIT SHARING PLAN AND TRUST
By:
- ------------------------------- --------------------------------
Martin J. Bloom, Trustee Name:
Title:
4
<PAGE>
Exhibit 99(c)(8)
CIBC OPPENHEIMER CORP.
CIBC Oppenheimer Tower
World Financial Center
New York, New York 10281
August 11, 1998
MILLBROOK CAPITAL MANAGEMENT INC.
152 West 57th Street
17th Floor
NY, NY 10019
Attention: Clay Lifflander
President
Confidentiality Agreement
Ladies and Gentlemen:
In connection with your consideration of the possible strategic
transaction with, investment in or purchase of, Valley Forge Corporation (the
"Company"), by way of merger, a sale of assets or stock or otherwise (a
"Transaction"), you have requested information about the Company, including
nonpublic information and trade secrets. As a condition to your being furnished
with such information, you agree to treat any information that is furnished to
you concerning the Company or is derived therefrom by or for you (collectively,
the "Evaluation Materials"), in accordance with the provisions of this letter.
The term "Evaluation Materials" does not include information which (i) was or
becomes generally available to the public other than as a result of a disclosure
by you or your directors, officers, employees, agents or advisors (collectively,
the "Representatives"), (ii) was or becomes available to you on a
non-confidential basis from a source other than the Company, or its advisors,
provided that such source is not known to you to be bound by a confidentiality
agreement with the Company, or (iii) was within your possession prior to its
being furnished to you by or on behalf of the Company.
You hereby agree that the Evaluation Materials will be used solely for
the purpose of evaluating a possible transaction between the Company and you,
and that such information will be kept confidential by you and your
Representatives; provided, however, that (i) any of such information may be
disclosed to your Representatives who need to know such information for the
purpose of evaluating any such possible transaction between the Company and you
(it being understood that such Representatives shall be informed by you of the
confidential nature of such information and shall be directed by you to treat
such information confidentiality), and (ii) any disclosure of such information
may be made with the prior written consent of the Chief Executive
<PAGE>
MILLBROOK CAPITAL MANAGEMENT INC.
August 11, 1998
Page 2
Officer of the Company. You agree to be responsible for enforcing the terms of
this Agreement with respect to your Representatives.
In addition, without the prior written consent of the Company, you will
not, and will direct such Representatives not to, disclose to any person the
fact that the Evaluation Materials have been made available to you, that
discussions or negotiations are taking place (or have taken place) concerning a
possible Transaction between the Company and you, or any of the terms,
conditions or other facts with respect to any such possible Transaction,
including the status thereof, except as required by law and then only with
proper written notice as soon as possible to the Chief Executive Officer of the
Company (which notice shall be prior to such disclosure). The term "person" as
used in this Agreement shall be broadly interpreted to include without
limitation any corporation, company, group, partnership or individual.
Until the earliest of (i) the consummation by you of a Transaction,
(ii) the acquisition of the Company by a third party, or (iii) two years from
the date of this Agreement, you agree not to initiate or maintain contact with
any officer, director or employee of the Company regarding the business,
operations, prospects or finances of the Company or the solicitation of
employment or employment of any such officer, director or employee, except with
the express prior written permission of this Company. Unless otherwise agreed to
by the Chief Executive Officers of the Company in writing, all (i)
communications regarding any possible Transaction, (ii) requests for additional
information, (iii) requests for facility tours or management meetings, and (iv)
discussions or questions regarding procedures, will be submitted or directed to
CIBC Oppenheimer Corp., the Company's investment banking firm.
In consideration of your being furnished the Evaluation Materials and
in view of the fact that the Evaluation Materials consist and will consist of
confidential, non-public and proprietary information, you agree that for a
period of two years from the date of this Agreement, that, without the prior
consent of the Board of Directors of the Company confirmed in writing from the
Company's Chief Executive Officer, none of you, your Representatives or any of
your or their affiliates will: (i) purchase, offer or agree to purchase, or
announce an intention to purchase, directly or indirectly, any securities or
assets of the Company or any subsidiary or rights or options to acquire the
same; (ii) make, or in any way participate, directly or indirectly, in any
"solicitation" or "proxies" to vote or "consents" (as such terms are used in the
rules and regulations of the Securities and Exchange Commission), or seek to
advise or influence any person with respect to the voting of any voting
securities of the Company; (iii) initiate or support, directly or indirectly,
any stockholder proposal with respect to the Company; (iv) directly or
indirectly make any public statements and/or announcement with respect to, or
submit a proposal for, or offer of (with or without conditions) any
extraordinary transaction involving the Company or its securities or assets or
any subsidiary thereof; or of any successor to or person in control of the
Company or any of its businesses, or any assets of
- 2 -
<PAGE>
MILLBROOK CAPITAL MANAGEMENT INC.
August 11, 1998
Page 3
the Company or any subsidiary or division thereof or of any successor or
controlling person; (v) seek or propose to influence or control the Company's
management on policies; (vi) disclose any intention, plan arrangement
inconsistent with the foregoing; (vii) form, join or in any way participate in a
"group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934
(the "Exchange Act") in connection with any of the foregoing, or (viii) take any
action that might force the Company to make a public announcement about any of
the foregoing. Nothing contained herein shall restrict you from taking any
action in the event the Company publicly announces that it is considering, or
has entered into, any arrangement or understanding with respect to the sale of
all or any substantial portion of the Company (other than any such arrangement
or understanding with you), or from making a tender offer from all of the
outstanding capital stock of the Company after such time as a third party has
commenced, within the meaning of Rule 14d-2 of the Exchange Act, a tender offer
for the Company at a lower value.
You understand and acknowledge that any and all information contained
in the Evaluation Materials is being provided without any representation or
warranty, express or implied, as the accuracy, completeness or scope of the
Evaluation Materials or of any representations and warranties to be given by the
Company, which will be negotiated along with other terms and conditions in
arriving at a mutually acceptable form of definitive agreement should
discussions between you and the Company progress to such a point.
In the event that you do not proceed with the Transaction which is the
subject of this Agreement, within five days, or at the Company's request, you
shall promptly return to the Company any written material containing or
reflecting any information contained in the Evaluation Materials and will not
retain any copies, extracts or other reproductions in whole or in part of such
written material and you will thereafter not disclose any matters set forth in
the Evaluation Materials as provided in the second paragraph of this letter. All
documents, memoranda, notes and other writing whatsoever prepared by you or your
Representatives based on the information contained in the Evaluation Materials
shall be destroyed and you shall provide the Company with written certification
of such destruction.
In the event that you, your Representatives or any of your or their
affiliates or any person who receives the Evaluation Materials pursuant to this
Agreement is requested or becomes legally compelled (by oral questions,
interrogatories, request for information or documents, subpoena, civil
investigation demand or similar process) to disclose any of the Evaluation
Materials, such person will provide the Company with prompt written notice so
that the Company may seek a protective order or other appropriate remedy and/or
waive compliance with the provisions of this Agreement. In the event that such
protective order or other remedy is not obtained, or that the Company waives
compliance with the provisions of this Agreement, the disclosing person will
furnish only that portion
- 3 -
<PAGE>
MILLBROOK CAPITAL MANAGEMENT INC.
August 11, 1998
Page 4
of the Evaluation Materials that counsel reasonably acceptable to the Company
advises you is legally required.
You agree that money damages would not be a sufficient remedy for any
breach of this Agreement by you, your Representatives or any of your or their
affiliates, and the Company shall be entitled to equitable relief, including
injunction and specific performance, in the event of any breach, or threatened
breach, of the provisions of this Agreement. Such remedies shall not be deemed
to be the exclusive remedies of the Company for a breach or threatened breach of
this Agreement but shall be in addition to all other remedies available at law
or equity. You understand and agree that in the event that there is a sale of a
controlling interest in the Company, the acquiror of such interest shall, should
the Company so elect, also acquire all rights of the Company pursuant to this
Agreement, including, without limitation, the right to enforce all of the terms
of this Agreement.
It is further understood and agreed that no failure or delay by the
Company in exercising any right, power or privilege under this Agreement shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise of any right, power or privilege
hereunder.
Nothing in this Agreement requires that you or the Company or any of
its stockholders enter into a transaction or a definitive agreement regarding a
Transaction or to negotiate the terms of a Transaction for any specified period
of time. In the absence of a definitive agreement between you and the Company
about a Transaction, nothing in this Agreement precludes the Company from
contacting, or negotiating or agreeing with, or persons with respect to a
Transaction.
This Agreement is for the benefit of the Company, and shall be governed
and construed in accordance with the laws of the State of Delaware. Your
obligation under this Agreement shall expire two (2) years from the date hereof.
-4-
<PAGE>
MILLBROOK CAPITAL MANAGEMENT INC.
August 11, 1998
Page 5
If you agree with the foregoing, please sign and return one copy of
this Agreement which will constitute our agreement with respect to the subject
matter of this Agreement.
Very truly yours,
CIBC Oppenheimer Corp.
on behalf of
VALLEY FORGE CORPORATION
By:/s/ Bruce McCarthy
------------------------------------
Bruce McCarthy
Managing Director
Confirmed and Agree to:
MILLBROOK CAPITAL MANAGEMENT, INC.
By:/s/ Alan L. Rivera
---------------------------------------
Name: Alan L. Rivera
Title:
Date: August 30, 1998
