<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
------------------------
VALLEY FORGE CORPORATION
(Name of Subject Company)
VALLEY FORGE CORPORATION
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $0.50 PER SHARE
(Title of Class of Securities)
919640102
(CUSIP Number of Class of Securities)
DAVID R. BRINING
PRESIDENT
VALLEY FORGE CORPORATION
100 SMITH RANCH ROAD, SUITE 326
SAN RAFAEL, CALIFORNIA 94903-1994
(415) 492-1500
(Name, Address and Telephone Number of Persons Authorized to
Receive Notice And Communications on Behalf of the Person(s) Filing Statement)
------------------------
COPY TO:
JAMES V. STEPLETON
HUSCH & EPPENBERGER, LLC
100 NORTH BROADWAY
SUITE 1300
ST. LOUIS, MISSOURI 63102
(314) 421-4800
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Valley Forge Corporation (the "Company").
The address of the Company's principal executive offices is 100 Smith Ranch
Road, Suite 326, San Rafael, California 94903-1994. The title of the class of
equity securities to which this Statement relates is the Company's Common Stock,
par value $0.50 per share (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the tender offer (the "Offer") disclosed in a
Tender Offer Statement on Schedule 14D-1, dated December 9, 1998 (the "Schedule
14D-1"), filed with the Securities and Exchange Commission (the "SEC") by Key
Components, LLC, a Delaware limited liability company ("Parent") and KCI
Acquisition Corp., a Delaware corporation ("Purchaser"), relating to an offer to
purchase all of the Company's outstanding Shares, for a price of $19.00 per
Share, net to each seller in cash, upon the terms and subject to the conditions
set forth in Purchaser's 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 Documents").
The Offer is being made in accordance with an Agreement and Plan of Merger,
dated as of December 2, 1998 (the "Merger Agreement"), by and among Parent,
Purchaser, and the Company. Pursuant to the Merger Agreement, as soon as
practicable after completion of the Offer and satisfaction or waiver, if
permissible, of certain conditions, Purchaser will be merged with and into the
Company (the "Merger"), and the Company (the "Surviving Corporation") will
become a wholly-owned subsidiary of Parent.
According to the Schedule 14D-1, the principal executive offices of each of
Parent and Purchaser are located at Wing Road, Rural Route 1, Post Office Box
167D, Millbrook, New York 12545.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person filing
this statement, are set forth in Item 1 above.
(b) Certain information regarding contracts, agreements, arrangements or
understandings between the Company and certain of its executive officers,
directors and affiliates is set forth in the Company's Notice of Annual
Stockholders' Meeting and Proxy Statement dated April 22, 1998, relating to its
1998 Annual Meeting of Stockholders (the "Proxy Statement"), under the headings
"Transactions with Directors" and in subheadings under the heading "Compensation
of Directors and Executive Officers." A copy of each such section or subsection
of the Proxy Statement is filed as Exhibit 1 to this statement and is
incorporated herein by reference. In addition, effective December 2, 1998, the
Company entered into a severance agreement with Monica J. Burke, the Company's
Vice President-Finance and Chief Financial Officer, under which she will receive
a payment equal to nine months of her base compensation plus health coverage if
her employment is terminated during the first year following a change of control
of the Company. In the event she secures other employment during the nine months
after the date her employment with the Company terminates, the payments to her
will be reduced by an amount equal to the compensation she receives from her new
employer during such nine-month period. This description of that severance
agreement is qualified by reference to the full text of the Severance Agreement
dated as of December 2, 1998, a copy of which is attached as Exhibit 8, and
incorporated herein by reference. Except as described herein, to the knowledge
of the Company, as of the date hereof there are no material contracts,
agreements, arrangements or understandings, or any actual or potential conflicts
of interest between the Company or its affiliates and (i) the Company, its
executive officers, directors, or affiliates, or (ii) Purchaser, KCI, or their
respective executive officers, directors or affiliates.
2
<PAGE>
Section 145 of Delaware General Corporation Law authorizes a court to award,
or a corporation's Board of Directors to grant, indemnity to directors and
officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (the "Act").
In accordance with Delaware law, Article IX of the Certificate of
Incorporation of the Company eliminates the personal liability of a director of
the Company and its stockholders for monetary damages for breaches of fiduciary
duty as a director. A copy of Article IX is filed as Exhibit 2 to this statement
and is incorporated by reference herein. Subject to certain limitations, Section
6.1 of the Bylaws of the Company also provides for indemnification of officers
and directors of the Company. A copy of Section 6.1 is filed as Exhibit 3 to
this statement and is incorporated herein by reference.
THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement.
This summary is not a complete description of the terms and conditions of the
Merger Agreement and is qualified in its entirety by reference to the full text
of the Merger Agreement which is incorporated by reference herein and a copy of
which has been filed as Exhibit 4 to this Statement. Defined terms used in this
description of the Merger Agreement and not otherwise defined in this section
shall have the definitions given them in 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
below in "Certain Conditions to the Parent's and Purchaser's Obligations."
Pursuant to the Merger Agreement, the Purchaser 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 Purchaser
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 below in "Certain Conditions to the Parent's
and Purchaser's Obligations" as of any expiration date of the Offer, the Parent
and/or the Purchaser 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, Purchaser (i) shall extend the Offer if at the
scheduled expiration date of the Offer any of the conditions set forth below in
"Certain Conditions to the Parent's and Purchaser'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
Purchaser shall be merged with and into the Company. As a result of the Merger,
the separate corporate existence of the
3
<PAGE>
Purchaser shall cease and the Company shall continue as the surviving
corporation of the Merger (the "Surviving Corporation").
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 Purchaser immediately prior to the Effective
Time shall become the directors of the Surviving Corporation, 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 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 Purchaser; (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, 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; and (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.
REPRESENTATIONS AND WARRANTIES. In the Merger Agreement, the Company has
made customary representations and warranties to the Parent and the Purchaser,
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 Purchaser 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
Purchaser 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 (as hereinafter defined) to not be
satisfied.
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
4
<PAGE>
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 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;
(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
5
<PAGE>
(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 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
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 Purchaser 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 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
6
<PAGE>
and disclosing to its stockholders any position, and making related filings with
the Commission, 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'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.
CONDITIONS PRECEDENT. The Merger Agreement provides that if the Offer is
consummated, the respective obligations of the Parent, the Purchaser 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;
7
<PAGE>
(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 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:
(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, 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; (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 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;
8
<PAGE>
(v) The financing commitment of Societe General and SG Cowen (the "SG
Cowen Commitment Letter") shall not have been terminated by SG Cowen and all
of the Conditions to Effectiveness and to Initial Borrowing set forth in the
Term Sheet accompanying 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 Purchaser, (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 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 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) Purchaser 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;
(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 below in "Certain Conditions to the Parent's and
Purchaser's Obligations," 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 the Offer; or (ii) the
Offer is terminated or expires as a result of the failure of a condition
specified below "Certain Conditions to the Parent's and Purchasers 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 Purchaser to perform in any
material respect any of its covenants and agreements contained in the Merger
Agreement;
9
<PAGE>
(f) by Parent or Purchaser, if the Company's Board of Directors 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 "Certain Conditions to the Parent's
and Purchaser's Obligations" below; 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 Purchaser 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 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 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, Purchaser or the Company, if the SG Cowen Commitment Letter
shall have been terminated by SG Cowen 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.
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
10
<PAGE>
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 Purchaser 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.
CERTAIN CONDITIONS TO THE PARENT'S AND PURCHASER'S
OBLIGATIONS. Notwithstanding any other term of the Offer, the Purchaser shall
not be required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule14e-l(c)under the Exchange Act
(relating to the 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 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 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 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 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
11
<PAGE>
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 issued by the Company will be exercisable after the
Merger; or
(g) the SG Cowen Commitment Letter shall have been terminated by SG Cowen 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;
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 right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
STOCKHOLDER AGREEMENTS
AGREEMENT TO TENDER. The Purchaser 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 Purchaser, or any nominee of the Purchaser,
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
12
<PAGE>
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.
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.
CONFIDENTIALITY AGREEMENT
On August 11, 1998, the Company entered into a confidentiality agreement
(the "Confidentiality Agreement") with Millbrook Capital Management
("Millbrook"), the financial sponsor of the Parent and Purchaser. In the
Confidentiality Agreement, Millbrook agreed to treat any information furnished
to it about the Company or that is derived therefrom by or for Millbrook
(collectively, the "Evaluation Materials"), in accordance with the provisions of
the Confidentiality Agreement, including, without limitation, that: (i)
Millbrook would use the Evaluation Materials solely for the purpose of
evaluating a possible transaction with the Company, and that such information
would be kept confidential by Millbrook and its representatives; and (ii) any
disclosure of such information would be made with only the prior written consent
of the Chief Executive Officer of the Company. In addition, Millbrook agreed not
to disclose to any person the fact that the Evaluation Materials had been made
available to it, that discussions or negotiations were taking place (or had
taken place) concerning a possible transaction between the parties, or any of
the terms, conditions or other facts with respect to a transaction. A copy of
the Confidentiality Agreement is attached hereto as Exhibit 6 and incorporated
herein by reference.
In consideration of being furnished the Evaluation Materials, Millbrook and
its representatives agreed that for a period of two years from the date of the
agreement, that, without the prior consent of the Board of Directors of the
Company confirmed in writing from the Company's Chief Executive Officer, they
would not: (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" of "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 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 or 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 or the foregoing; or (viii) take any action that might force
the Company to make a public announcement about any of the foregoing.
The parties' obligations under the Confidentiality Agreement expire two (2)
years from the date of the agreement.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(A) RECOMMENDATION OF THE BOARD: The Company's Board of Directors met
formally on November 24, 1998, and December 2, 1998, to consider the Offer, the
Merger, and related matters. During those meetings, the Board considered the
Company's business, financial condition, current business strategy and future
prospects, recent and historical market prices for the Common Stock, the terms
and conditions of, and potential alternatives to, the Offer and other matters,
including presentations by management and by the Company's financial and legal
advisors and the other factors set forth in this Item 4. After taking into
13
<PAGE>
account these matters, the Board (i) determined by unanimous vote that the Offer
and the Merger are fair to and in the best interests of the stockholders of the
Company; (ii) approved the Offer and adopted the Merger Agreement and the
transactions contemplated thereby in accordance with the DGCL; (iii) resolved to
recommend that the stockholders of the Company accept the Offer and approve the
Merger Agreement; and (iv) took action to render Section 203 of the DGCL
inapplicable to the Offer and the Merger.
ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS ACCEPT THE
OFFER AND TENDER THEIR SHARES PURSUANT THERETO.
(B) BACKGROUND OF THE OFFER; FACTORS CONSIDERED BY THE BOARD: From time to
time during the past several years, the Company's Board of Directors has
informally considered strategic alternatives for the Company that could provide
value for stockholders. The Board believed that historical market prices of the
Shares had not reflected, and were unlikely to reflect, the value of the Company
given the Company's disparate businesses, the absence of research analyst
coverage, and the thin trading market for the Shares. At a meeting on June 10,
1998, the directors reviewed the costs and benefits of continuing as an
independent public company and again considered the Company's strategic
alternatives, including a possible business combination. Following discussions,
the directors authorized Mr. Brining, President and a director of the Company,
to investigate such a transaction and to interview potential financial advisors
to assist the Company. After interviewing three investment banking firms, the
Company engaged CIBC Oppenheimer Corp. ("CIBC Oppenheimer") to act as its
financial advisor.
During late June and early July, Mr. Brining learned through a mutual
acquaintance of the existence of a financial buyer ("Party A") that was likely
to have an interest in the Company. Mr. Brining subsequently contacted Party A,
which shortly thereafter reviewed publicly available information about the
Company. On July 14, 1998, Party A and the Company entered into a
confidentiality agreement and, on July 15, 1998, representatives of Party A
visited the Company's offices to review certain nonpublic information about the
Company and discuss Party A's interest in the Company. At the end of the visit,
Party A asked whether the Company would consider receiving a preemptive offer,
indicating that a value in the range of $18 to $22 per Share might be possible
based upon a structure using recapitalization accounting.
Following the meeting, Mr. Brining consulted with the Company's legal and
financial advisors about Party A's proposal and the alternative approach of a
process in which companies that the Company believed would have an interest in a
transaction with the Company would be contacted, provided nonpublic information
about the Company, and invited to submit bids (a "controlled auction process").
On July 20, 1998, Party A requested a second meeting with the Company to obtain
more information. Following the request, CIBC Oppenheimer, at the direction of
the Company, informed Party A that the Company was contemplating undertaking a
controlled auction process, in which Party A would be invited to participate.
Party A declined, stating that it did not participate in auction processes.
From late July through mid-September 1998, representatives of the Company
contacted 28 parties, received signed confidentiality agreements from 16
interested parties and distributed to such parties a Confidential Information
Memorandum that described the Company and its operations. Recipients of the
Confidential Memorandum were asked to provide expressions of interest by
September 18, 1998.
On August 3, 1998, Party A contacted representatives of the Company and
verbally proposed a merger transaction which it valued at $20.00 per Share,
consisting of at least $19.50 in cash and the balance in a retained equity
interest in the Company sufficient to satisfy recapitalization accounting
treatment for the transaction. After discussions with representatives of the
Company and a request by such representatives for a written proposal, Party A
submitted to the Company on August 4, 1998 a letter of intent in which it
proposed a merger transaction which it valued at $22.00 per Share, consisting of
at least $21.50 in cash and the balance in a retained equity interest in the
Company. As set forth in the letter of intent, the proposal (i) was subject to
due diligence and financing, (ii) required that three directors of the Company,
Mr.
14
<PAGE>
Brining, Mr. Bloom, and Mr. Desloge, who held approximately 53% of the issued
and outstanding Shares,
grant the buyer an irrevocable option to purchase their shares in the event the
definitive agreement was terminated, including any termination upon receipt of a
better offer (the "lockup option"), and (iii) contained, in addition to the
lockup option and due diligence and financing contingencies, a breakup fee equal
to at least 3% of the Company's enterprise value, a period of exclusivity
pending execution of a definitive agreement, and numerous other conditions.
Following the receipt of Party A's proposed letter of intent, Mr. Brining
consulted with the Company's financial and legal advisors about the advisability
of pursuing a transaction with Party A. After those conversations, CIBC
Oppenheimer, at the direction of the Company, contacted Party A about the
Company's concerns with respect to the lockup option and other aspects of the
proposal. Party A indicated that it was unwilling to proceed with its proposal
without the lockup option. After further discussions with the Company's
advisors, Mr. Brining contacted each of the Company's directors to discuss the
proposal. The directors unanimously agreed that the lockup option was
unacceptable since it effectively precluded another bid and would, if exercised,
allow Party A to control the Company. The directors also believed that because
of the numerous and significant conditions to Party A's proposal, Party A would
have the opportunity to renegotiate the proposed purchase price. The directors
also did not believe that Party A's proposal was preemptive and unanimously
agreed that the Company should continue to pursue its controlled auction
process. Party A subsequently expressed interest in participating in the process
and also received the Confidential Memorandum.
In late August and early September 1998, based on requests of, and the
levels of interest expressed by, certain interested parties, the Company invited
seven parties (in addition to Party A) to meet with Mr. Brining to discuss the
Company and its operations.
During the period from the time the Company commenced its controlled auction
process to the date of receipt of expressions of interest, world financial
markets experienced significant disruptions, which resulted in the reduced
availability of credit for many transactions. In particular, issuances of high
yield debt in the United States virtually ceased, and CIBC Oppenheimer advised
management that, as a result of that and other credit contractions, the bids
that the Company would receive could be lower than those that might have been
obtained prior to these events. Mr. Brining kept the other directors advised
about these developments.
On September 17 and 18, 1998, the Company received five preliminary
indications of interest, which contemplated prices between $15.00 and $20.00 per
Share. All of the expressions of interest were conditioned upon the completion
of due diligence. Mr. Brining consulted with the directors, who elected to
proceed to the next stage with the three highest bidders.
Each of the final three bidders received a form Merger Agreement prepared by
the Company's counsel, which contemplated an initial tender offer for at least a
majority of the Company's outstanding Shares, followed by a merger. Each bidder
was also provided the opportunity to conduct due diligence and further meet with
management of the Company.
On November 9, 1998, the Company received three written proposals. One
proposal contemplated a recapitalization transaction for either a cash price of
$17.75 per Share or, in the alternative, a per Share price of $14.00 in cash and
shares of convertible preferred stock which the bidder stated would have an
initial aggregate liquidation value of $6.00. The bidder's proposed Merger
Agreement added significant provisions to the form distributed by the Company,
was conditioned on due diligence, and contemplated a lockup agreement covering
the Shares of the majority stockholders. The bidder did not provide sufficient
information for the Company to assess the value of the convertible preferred
stock.
The second bid was from Party A and contemplated an all cash transaction at
$18.50 per Share. The bidder conditioned its execution of a Merger Agreement on,
among other things, (i) the execution of a lockup agreement with the three
directors who held a majority of the Shares and (ii) completion of
15
<PAGE>
Phase II environmental assessments on certain of the Company's properties. The
bidder's proposed Merger Agreement also departed significantly from the form
prepared by the Company's counsel.
The Parent submitted an all cash bid of $18.50 per Share and proposed
structuring the transaction so that its obligation to purchase the Company's
Shares in the tender offer was contingent upon the tender of at least 90% of the
issued and outstanding Shares. If that condition were not satisfied, the
Company, Parent, and Purchaser would proceed with a merger in which the
Purchaser would be merged with and into the Company. Of the three bids, the
Parent's proposed Merger Agreement reflected the least variance from the
Company's proposed form Merger Agreement, although it contained a $10,000,000
breakup fee. The Parent's proposal also required that the majority stockholders
enter into the Stockholder Agreements that are described above in "Stockholder
Agreements" in Item 3.
Following the receipt of these bids, Mr. Brining spoke with the Company's
legal and financial advisors and directors. The directors concluded that the
first two bids were not as favorable to the Company and its stockholders as, and
were less likely to be consummated than, Parent's bid. The directors concluded
that the Company should seek to negotiate a definitive agreement with Parent and
Purchaser provided that the price could be increased and the breakup fee
reduced.
From the receipt of Parent's proposal until November 30, 1998, Parent and
the Company negotiated the terms of Parent's offer and Parent performed
additional Phase I environmental due diligence. As a result of these
negotiations, (i) the purchase price was increased to $19.00 per Share, (ii) the
breakup fee was decreased from $10,000,000 to $3,500,000 plus up to a maximum of
$1,000,000 of expense reimbursement, (iii) Parent determined that it would not
perform further environmental due diligence on the Company, (iv) certain other
revisions were made to the proposed Merger Agreement and Stockholder Agreements,
and (v) Parent's financing commitment from Societe General and SG Cowen was
revised in a manner more favorable to the Company.
At a meeting of the Board of Directors held on November 24, 1998, the
directors were informed of the status of the negotiations, proposed terms of the
transaction, their fiduciary duties under Delaware law, and related matters.
On December 1 and 2, 1998, Parent's counsel and the Company's counsel
prepared final versions of the Merger Agreement and related documents. The
Company's Board of Directors met on the evening of December 2, 1998, in St.
Louis, Missouri, with the Company's financial and legal advisors to consider the
Merger Agreement and related matters. At the conclusion of its deliberations,
the directors unanimously approved the Merger Agreement and the related
transactions, including the proposed Offer and the Merger. The Merger Agreement
was executed following the meeting, and a press release announcing the
transaction was released on the morning of December 3, 1998.
FACTORS CONSIDERED BY THE BOARD
In approving the Merger Agreement and the transactions contemplated thereby,
and recommending that all stockholders tender their Shares pursuant to the
Offer, the Board considered a number of factors, including, but not limited to,
the following:
1. The results of operations of the Company and the business and prospects
of the Company.
2. The relationship of the $19.00 per Share offer price to the historical
market prices for the Shares, including the fact that such price represents a
49.0% premium over the $12.75 closing price of the Shares on December 2, 1998,
the last full trading day prior to the public announcement of the execution of
the Merger Agreement.
3. The results of the controlled auction process conducted by the Company,
including the proposals received.
4. The Board's assessment that the likelihood of successfully and promptly
completing the transactions contemplated by the Merger Agreement was materially
higher than the likelihood of consummation
16
<PAGE>
of the transactions proposed by other bidders. In this regard, the Board noted
that Parent had received bank commitments for $90 million, had cash of $13
million, and had received equity commitments from its owners of $5 million.
5. The Merger Agreement allows the Company to furnish nonpublic
information, after consultation with the Company's financial and legal advisors,
to a third party who makes an unsolicited Acquisition Proposal, and to terminate
the Merger Agreement by paying $3,500,000 and up to $1,000,000 in expenses. In
addition, the Board of Directors noted that the Stockholder Agreements are
terminable upon the termination of the Merger Agreement.
6. The opinion of CIBC Oppenheimer dated December 2, 1998 to the effect
that, as of the such date and based upon and subject to certain matters stated
in such opinion, the $19.00 per Share cash consideration to be received by
holders of Shares (other than Parent and its affiliates) in the Offer and the
Merger was fair from a financial point of view to such holders. The full text of
CIBC Oppenheimer's written opinion dated December 2, 1998, which sets forth the
assumptions made, matters considered and limitations on the review undertaken by
CIBC Oppenheimer, is attached hereto as Exhibit 7 and is incorporated herein by
reference. CIBC Oppenheimer's opinion is directed only to the fairness, from a
financial point of view, of the $19.00 per Share cash consideration to be
received in the Offer and the Merger by holders of Shares (other than Parent and
its affiliates) and is not intended to constitute, and does not constitute, a
recommendation as to whether any stockholder should tender Shares pursuant to
the Offer. HOLDERS OF SHARES ARE URGED TO READ SUCH OPINION CAREFULLY IN ITS
ENTIRETY.
The foregoing discussion of the information and factors considered by the
Board of Directors is not meant to be exhaustive but includes the material
factors considered by the Board of Directors in reaching its conclusions and
recommendations. In view of the variety of factors considered in its reaching a
determination, the Board of Directors did not find it practicable to, and did
not, quantify or otherwise assign relative weights to the specific factors
considered in reaching its conclusions and recommendations. In addition,
individual members of the Board of Directors may have given different weights to
different factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has retained CIBC Oppenheimer to act as its exclusive financial
advisor in connection with the Offer and the Merger. Pursuant to the terms of
the CIBC Oppenheimer's engagement, the Company has agreed to pay CIBC
Oppenheimer an aggregate fee of approximately $900,000 upon consummation of the
Offer and Merger. The Company also has agreed to reimburse CIBC Oppenheimer for
reasonable out-of-pocket expenses, including fees and disbursements of its legal
counsel, and to indemnify CIBC Oppenheimer and certain related parties against
certain liabilities, including liabilities under the federal securities laws,
arising out of CIBC Oppenheimer's engagement. In the ordinary course of
business, CIBC Oppenheimer may actively trade securities of the Company and debt
securities of Parent and its affiliates for their own account or for the account
of customers and, accordingly, may at any time hold a long or short position in
such securities.
Neither the Company nor any person acting on its behalf has employed,
retained or compensated any person to make solicitations or recommendations to
stockholders with respect to the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best of the Company's knowledge, no transactions in the Shares of
the Company have been effected during the past 60 days by the Company or any
executive officer, director, affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, all of its executive officers,
directors, affiliates or subsidiaries currently intend to tender their Shares of
the Company which are held of record or beneficially owned by such persons
pursuant to the Offer (other than shares issuable upon exercise of stock options
17
<PAGE>
held by the Company's executive officers that will be canceled before the
Effective Time of the Merger in exchange for a cash payment from the Company for
each option equal to the difference between $19.00 and the exercise price of
such option).
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth herein, the Company is not engaged in any
negotiation in response to the Offer which relates to or would result in (i) an
extraordinary transaction such as a merger or reorganization involving the
Company or any subsidiary of the Company; (ii) a purchase, sale or transfer of a
material amount of assets by the Company or any subsidiary of the Company; (iii)
a tender offer for or other acquisition or securities by or of the Company; or
(iv) any material change in the present capitalization or dividend policy of the
Company.
(b) Except as set forth herein, there are no transactions, Board
resolutions, agreements in principle or signed contracts in response to the
Offer that relate to or would result in one or more of the events referred to in
Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
SHORT FROM MERGER
Under the DGCL, if Purchaser acquires, pursuant to the Offer or otherwise,
at least 90% of the outstanding Shares, Purchaser will be able to effect the
Merger after consummation of the Offer without a vote of the Company's
stockholders. However, if Purchaser does not acquire at least 90% of the Shares
pursuant to the Offer or otherwise and a vote of the Company's stockholders is
required under the DGCL, a significantly longer period of time will be required
to effect the Merger.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- --------------------- -------------------------------------------------------------------------------------------------
<S> <C>
1 Sections of the Company's Proxy Statement **
2 Article IX of the Company's Certificate of Incorporation **
3 Section 6.1 of the Company's By-laws **
4 Agreement and Plan of Merger **
5 Form of Stockholder Agreements **
6 Confidentiality Agreement **
7 Opinion of CBIC Oppenheimer Corp., dated December 2, 1998*
8 Severance Agreement**
9 Letter to Stockholders*
</TABLE>
- ------------------------
* Included in copies mailed to stockholders.
** Filed with the Securities and Exchange Commission (the "Commission") as
exhibits to this Schedule 14D-9, but not included in the mailing to
stockholders. Such documents 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 1400,
Chicago, Illinois 60661. Copies of such material may also be obtained at
prescribed rates from the Public Reference Section of the Commission, 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.
18
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
<TABLE>
<S> <C> <C>
Dated: December 9, 1998 VALLEY FORGE CORPORATION
By: /s/ DAVID R. BRINING
-----------------------------------------
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
19
<PAGE>
EXHIBIT 1
SECTIONS OF THE COMPANY'S PROXY STATEMENT
TRANSACTIONS WITH DIRECTORS
Since 1994, the Company has borrowed $400,000 from Bloom and Desloge
Enterprises, Inc., a corporation in which Messrs. Bloom and Desloge are each 50%
stockholders. The borrowing was evidenced by short-term notes with original
maturities of 13 weeks which were renewable. At December 31, 1997, the $400,000
note bore interest at 6.66% and was repaid upon maturity on March 31, 1998.
See Directors' Compensation for discussion of other transactions with
directors.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
EXECUTIVE OFFICERS' COMPENSATION
The following table shows certain summary information concerning
compensation paid or accrued by the Company to or on behalf of the Company's
Chief Executive officer and the other named executive officer ("Executive
Officers") of the company whose compensation exceeds $100,000.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
NAME AND OTHER ANNUAL LONG-TERM ALL OTHER
PRINCIPAL COMPENSATION COMPENSATION COMPENSATION
POSITION FISCAL YEAR SALARY BONUS (1) OPTIONS (2)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
David R. 1997 $317,050 $263,600 $6,328 0 $20,500
Brining, CEO(3)
- -------------------------------------------------------------------------------------------------------------------
1996 300,067 77,250 6,203 0 17,149
- -------------------------------------------------------------------------------------------------------------------
1995 276,317 135,725 6,600 0 17,073
- -------------------------------------------------------------------------------------------------------------------
Monica J. 1997 119,583 62,500 0 0 15,060
Burke, CFO(3)
- -------------------------------------------------------------------------------------------------------------------
1996 114,583 19,675 0 4,500 13,256
- -------------------------------------------------------------------------------------------------------------------
1995 109,667 31,500 0 0 13,514
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) In August 1987 and incident to the relocation of the corporate headquarters
from St. Louis, Missouri to San Rafael, California, the Company accepted a
$75,000 demand, non-interest bearing note from Mr. Brining. The amounts included
under Other Annual Compensation represent interest calculated at the prime rate
on the demand note. In January 1998, Mr. Brining paid the note in full.
(2) Represents amounts contributed to the Company's two profit sharing plans.
(3) Mr. Brining and Ms. Burke also serve as officers of each of the Company's
subsidiaries.
1
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table provides information with respect to the Executive
Officers concerning the exercise of options during the fiscal year ended
December 31, 1997, and unexercised options held by the Executive Officers as of
December 31, 1997:
AGGREGATED OPTION(1) EXERCISES IN FISCAL YEAR 1997
AND FISCAL YEAR-END OPTIONS VALUES
<TABLE>
<CAPTION>
SHARES
ACQUIRED
NAMED OF VALUE NUMBER OF UNEXERCISED VALUE OF UNEXERCISED, IN THE
EXECUTIVES EXERCISE REALIZED OPTIONS HELD AT YEAR END MONEY OPTIONS HELD AT YEAR END(2)
------------------------ ---------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
David R. Brining 0 $ 0 84,375 28,125 $ 589,359 $196,453
Monica J. Burke 10.125 88.898 1.125 3.375 5.957 17,871
</TABLE>
(1) The Company has no plans pursuant to which stock appreciation rights (SARs)
may be granted.
(2) Value of unexercised "in the money" options is the difference between the
market price of the Common Stock on December 31, 1997 ($14.375 per share)
and the exercise price of the options, multiplied by the number of shares.
EMPLOYMENT AGREEMENTS
There are no employment contracts or termination agreements with the
Executive Officers.
STOCK OPTIONS
The Board of Directors adopted the Company's 1987 Stock Option Plan ("Stock
Option Plan") on May 29, 1987, which was most recently amended, restated, and
approved by the Company's shareholders at the 1996 Annual Meeting of
Shareholders. As of March 31, 1998 there were 1,125,000 shares of Common Stock
reserved for issuance under the Stock Option Plan, of which 419,750 shares had
been issued upon exercise of options, 307,875 shares were subject to outstanding
options, and 397,375 were available for granting new options.
The purpose of the Stock Option Plan is to enable the Company and its
subsidiaries to attract, retain and motivate officers, directors, employees, and
independent contractors by providing for or increasing their proprietary
interests in the Company, and, in the case of non-employee directors, to attract
such directors and further align their interests with those of the Company's
shareholders by providing for or increasing their proprietary interests in the
Company. The Stock Option Plan authorizes the grant of options which qualify as
incentive stock options ("Incentive Stock Options") under Section 422 of the
Internal Revenue Code of 1986, as amended, and options which do not qualify as
Incentive Stock Options ("Nonqualified Stock Options").
2
<PAGE>
The Stock Option Plan is currently administered by the Compensation
Committee of the Company. The Compensation Committee has full power and
authority in its discretion to take any and all action required or permitted to
be taken under the Stock Option Plan, including the selection of participants to
whom stock options may be granted, the determination of the number of shares
which may be covered by stock options, the exercise price, and other terms and
conditions thereof.
If any option granted under the Stock Option Plan shall for any reason
expire, be canceled, or otherwise terminate without having been exercised in
full, the shares not purchased under such option shall again become available
for the Stock Option Plan. Generally, the exercise price of each option is
determined by the Board of Directors or the Compensation Committee and is not
less than 100% of the fair market value of the Common Stock subject to the
option on the date the option is granted. Typically, the purchase price of
Common Stock acquired pursuant to an option shall be paid in cash or check
payable to the order of the Company at the time the option is exercised. In
general, no option under the Stock Option Plan may extend more than ten years
from the date of grant.
Except in the case of a reincorporating merger, the Stock Option Plan and
any option or portion thereof not exercised will terminate upon the occurrence
of a termination event, including, but not limited to, a liquidation,
reorganization, merger, or consolidation of the Company with another corporation
as a result of which the Company is not the surviving or resulting corporation,
or a sale of substantially all the assets of the Company to another person, or a
reverse merger in which the Company is the surviving corporation but the shares
of the Company's stock outstanding immediately preceding in merger are converted
by virtue of the merger into other property (a "Triggering Event"). The
Committee shall notify each optionee not less than thirty days prior thereto of
the pendency of a Triggering Event. Upon delivery of such notice, any option
outstanding shall be exercisable in full and not only as to those shares with
respect to which installments, if any, have then accrued, subject, however, to
earlier expiration or termination as provided elsewhere in the Stock Option Plan
and subject to the consummation of the Triggering Event. The Board of Directors
may also suspend or terminate the Stock Option Plan at any time. Unless sooner
terminated, the Stock Option Plan shall terminate ten years from its effective
date, June 12, 1996.
DIRECTORS' COMPENSATION
The Company entered into consulting agreements with Messrs. Bloom and
Desloge in 1983. Pursuant to the terms of the agreements, Messrs. Bloom and
Desloge are to provide the Company with advice on any corporate acquisitions,
retention of corporate assets, evaluation of key personnel, evaluation of the
operators of subsidiaries, supervision of new product development, and general
strategic planning. The agreements are renewable annually on December 31 with
the consulting fee for the succeeding year set at that time. The Company agreed
to a fee of $75,000 for Mr. Bloom and $50,000 for Mr. Desloge for 1998. The
Company has also retained Mr. Warner in a consulting role for a fee of $8,400,
which is renewable each year. In addition, the Company generally pay directors
$500 for each board meeting attended.
3
<PAGE>
EXHIBIT 2
ARTICLE IX OF THE COMPANY'S CERTIFICATE OF INCORPORATION
DIRECTOR LIABILITY; INDEMNIFICATION
To the fullest extent permitted by the General Corporation Law of the State
of Delaware as the same exists or may hereafter be amended, a director of the
Corporation shall not be liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director. The liability of a
director of the Corporation to the Corporation or its stockholders for monetary
damages shall be eliminated to the fullest extent permissible under applicable
law in the event it is determined that Delaware law does not apply. The
Corporation is authorized to provide by bylaw, agreement or otherwise for
indemnification of directors, officers, employees and agents for breach of duty
to the Corporation and its stockholders to the fullest extent permitted by
applicable law. Any repeal or modification of this Article IX shall not result
in any liability for a director with respect to any action or omission occurring
prior to such repeal or modification.
1
<PAGE>
EXHIBIT 3
SECTION 6.1 OF THE COMPANY'S BY-LAWS
LIABILITIES COVERED.
The Corporation (i) shall indemnify, to the fullest extent permitted by
law, any person who was or is a party (other than a party plaintiff suing on his
own behalf or in the right of the Corporation) or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (including an action by
or in the right of the Corporation), by reason of the fact that such person is
or was or has agreed to become a director or officer of the Corporation, or is
or was serving or has agreed to serve at the request of the Corporation as a
director or officer, of another corporation, partnership, joint venture, trust
or other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, in the manner set forth by the General Corporate Law
of the State of Delaware, as from time to time in effect, ...
1
<PAGE>
Exhibit 4
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
i
<PAGE>
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
ii
<PAGE>
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>
iii
<PAGE>
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
- 2 -
<PAGE>
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
- 3 -
<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
- 4 -
<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
- 5 -
<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
- 6 -
<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
- 7 -
<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
- 8 -
<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,
- 9 -
<PAGE>
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
- 10 -
<PAGE>
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
- 11 -
<PAGE>
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
- 12 -
<PAGE>
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
- 13 -
<PAGE>
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
- 14 -
<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
- 15 -
<PAGE>
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,
- 16 -
<PAGE>
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;
- 17 -
<PAGE>
(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
- 18 -
<PAGE>
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.
- 19 -
<PAGE>
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
- 20 -
<PAGE>
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
- 21 -
<PAGE>
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
- 22 -
<PAGE>
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
- 23 -
<PAGE>
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
- 24 -
<PAGE>
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
- 25 -
<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
- 26 -
<PAGE>
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.
- 27 -
<PAGE>
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.
- 28 -
<PAGE>
(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
- 29 -
<PAGE>
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:
- 30 -
<PAGE>
(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.
- 31 -
<PAGE>
(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.
- 32 -
<PAGE>
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
- 33 -
<PAGE>
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
- 34 -
<PAGE>
(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
- 35 -
<PAGE>
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
- 36 -
<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
- 37 -
<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.
- 38 -
<PAGE>
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.
- 39 -
<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
- 40 -
<PAGE>
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
- 41 -
<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.
- 42 -
<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
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>
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.
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 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.
THEODORE P. DESLOGE, JR. TRUST KCI ACQUISITION CORP.
u/i/t dtd. 2/7/98
By:
- --------------------------------- ------------------------------
Theodore P. Desloge, Jr., Trustee 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 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>
EXHIBIT 6
CONFIDENTIALITY AGREEMENT
August 11, 1998
MILLBROOK CAPITAL MANAGEMENT
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
confidentially), and (ii) any disclosure of such information may be made with
the prior written consent of the Chief Executive 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
<PAGE>
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" of "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 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 or 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 to 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.
<PAGE>
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 investigative 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 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, other 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
obligations under this Agreement shall expire two (2) years from the date
hereof.
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.
<PAGE>
Very truly yours,
CIBC Oppenheimer Corp.
on behalf of
VALLEY FORGE CORPORATION
By:/s/ Bruce McCarthy
--------------------------------
Bruce McCarthy
Managing Director
Confirmed and Agreed to:
MILLBROOK CAPITAL MANAGEMENT
By:/s/ Alan Rivera
--------------------------------
Name: Alan Rivera
Title: CFO
Date: 8/20/98
<PAGE>
EXHIBIT 7
Opinion of CIBC Oppenheimer
December 2, 1998
The Board of Directors
Valley Forge Corporation
100 Smith Ranch Road, Suite 326
San Rafael, California 94903
Members of the Board:
You have asked CIBC Oppenheimer Corp. ("CIBC Oppenheimer") to render a written
opinion ("Opinion") to the Board of Directors as to the fairness to the holders
of the common stock of Valley Forge Corporation ("Valley Forge"), from a
financial point of view, of the consideration to be received pursuant to the
Merger Agreement, dated as of December 2, 1998 (the "Merger Agreement"), by and
among Key Components LLC ("KCI"), KCI Acquisition Corp., a wholly owned
subsidiary of KCI ("Sub"), and Valley Forge. The Merger Agreement provides for,
among other things, (A) the commencement by Sub of a tender offer to purchase
all outstanding shares of the common stock, par value $0.50 per share, of Valley
Forge ("Valley Forge Common Stock" and, such tender offer, the "Tender Offer")
at a price of $19.00 per share, net to the seller in cash (the "Cash
Consideration") and, subsequent to the Tender Offer, the merger of Sub with and
into Valley Forge pursuant to which each outstanding share of Valley Forge
Common Stock not previously tendered will be converted into the right to receive
the Cash Consideration (the "Tender Offer Transaction") or (B) if the minimum
condition for the Tender Offer is not satisfied prior to the scheduled
expiration of the Tender Offer, then the termination of the Tender Offer and the
merger of Sub with and into Valley Forge pursuant to which each outstanding
share of Valley Forge Common Stock will be converted into the right to receive
the Cash Consideration (the "Alternative Merger Transaction" and, together with
the Tender Offer Transaction, the "Transaction").
In arriving at our Opinion, we:
(a) reviewed the Merger Agreement;
(b) reviewed Valley Forge's audited financial statements for the fiscal
years ended December 31, 1995, December 31, 1996 and December 31, 1997;
(c) reviewed Valley Forge's unaudited financial statements for the three
months ended March 31, 1998, June 30, 1998 and September 30, 1998;
(d) reviewed financial projections of Valley Forge prepared by Valley
Forge's management;
(e) reviewed the historical market prices and trading volume for Valley
Forge Common Stock;
(f) held discussions with the senior management of Valley Forge and
representatives of KCI with respect to the business and prospects for future
growth of Valley Forge;
(g) reviewed and analyzed certain publicly available financial data for
certain companies we deemed comparable to Valley Forge;
(h) performed a discounted cash flow analysis of Valley Forge using certain
assumptions of future performance provided to us by the management of Valley
Forge;
(i) reviewed and analyzed certain publicly available information for
transactions that we deemed comparable to the Transaction;
(j) reviewed public information concerning Valley Forge;
(k) at the request of Valley Forge, approached and held discussions with
certain third parties to solicit indications of interest in the possible
acquisition of Valley Forge; and
<PAGE>
(l) performed such other analyses and reviewed such other information as we
deemed appropriate.
In rendering our Opinion, we relied upon and assumed, without independent
verification or investigation, the accuracy and completeness of all of the
financial and other information provided to or discussed with us by Valley Forge
and its employees, representatives and affiliates. With respect to forecasts of
future financial condition and operating results of Valley Forge provided to or
discussed with us, we assumed, at the direction of Valley Forge's management,
without independent verification or investigation, that such forecasts were
reasonably prepared on bases reflecting the best available information,
estimates and judgments of Valley Forge's management. We have neither made nor
obtained any independent evaluations or appraisals of the assets or the
liabilities of Valley Forge or such other affiliated entities. We are not
expressing any opinion as to the underlying valuation, future performance or
long-term viability of Valley Forge, or the price at which Valley Forge Common
Stock will trade subsequent to announcement of the Transaction. Our Opinion is
necessarily based on the information available to us and general economic,
financial and stock market conditions and circumstances as they exist and can be
evaluated by us on the date hereof. It should be understood that, although
subsequent developments may affect this Opinion, we do not have any obligation
to update, revise or reaffirm the Opinion.
As part of our investment banking business, we are regularly engaged in
valuations of businesses and securities in connection with acquisitions and
mergers, underwritings, secondary distributions of securities, private
placements and valuations for other purposes.
We have acted as financial advisor to Valley Forge in connection with the
Transaction and to the Board of Directors of Valley Forge in rendering this
Opinion and will receive a fee for our services, a significant portion of which
is contingent upon consummation of the Transaction. We also will receive a fee
upon the delivery of this Opinion. In the ordinary course of business, CIBC
Oppenheimer and its affiliates may actively trade securities of Valley Forge and
debt securities of KCI and its affiliates 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.
Based upon and subject to the foregoing, and such other factors as we deemed
relevant, it is our opinion that, as of the date hereof, the Cash Consideration
to be received by the holders of Valley Forge Common Stock (other than KCI and
its affiliates) in the Transaction is fair to such holders from a financial
point of view. This Opinion is for the use of the Board of Directors of Valley
Forge and does not constitute a recommendation to any stockholder as to whether
or not such stockholder should tender shares of Valley Forge Common Stock in the
Tender Offer or how such stockholder should vote on any matters relating to the
Merger. Neither this Opinion nor the services provided by CIBC Oppenheimer in
connection herewith may be publicly disclosed or referred to in any manner by
Valley Forge without the prior written approval of CIBC Oppenheimer.
Very truly yours,
CIBC OPPENHEIMER CORP.
<PAGE>
EXHIBIT 8
SEVERANCE AGREEMENT WITH MONICA J. BURKE
DATED AS OF DECEMBER 2, 1998
AGREEMENT made as of this 2nd day of December, 1998 between Valley Forge
Corporation ("Company"), a Delaware corporation and Monica J. Burke (the
"Executive") an employee of Company
1. (a) In the event the Executive's employment by Company is terminated
by Company other than for cause (as defined in paragraph 2 below) following a
Change of Control Event (as defined in paragraph 1(b)) but prior to the first
anniversary of the Change of Control Event, Company shall be obligated to pay to
the Executive for a period of nine months ("Severance Period") severance
compensation at a rate equal to the Executive's annual rate of base salary in
effect immediately before such Change of Control Event.
(b) "Change of Control Event" means the occurrence of any of the
following events: (i) the owners of the majority of shares of capital stock of
the Company terminate the business of, or liquidate or dissolve, the Company;
(ii) substantially all of the assets of the Company are sold; (iii) the owners
of the majority of shares of capital stock of the Company sell all of their
stock in the Company or sell shares constituting a majority of all outstanding
shares of the Company; or (iv) the Company merges or consolidates with any other
corporation and either (A) the Company is not the surviving corporation in such
merger or consolidation or (B) the Company is the surviving corporation in such
merger or consolidation and the owners of the majority of shares of capital
stock of the Company immediately prior to such merger or consolidation no longer
own the majority of shares of capital stock of the Company immediately after
such merger or consolidation.
(c) Severance compensation payments shall commence in the calendar
month following the effective date of termination of Executive's employment,
shall be made on the same dates salary payments are made to employees of the
Company, and shall be subject to tax withholding as required by law. The
effective date of termination of the Executive's employment shall be the end of
a calendar month, and the Company shall give Executive not less than five days
prior written notice of such termination.
(d) Company's obligation to make these severance compensation
payments shall be reduced, even up to the entire amount, by any compensation
earned during the Severance Period by the Executive from employment in a new
position or from self-employment. The Executive agrees to give Company prompt
written notice of any and all such arrangements under which Executive earns
compensation during the Severance Period. If Executive's death occurs during the
Severance Period, Company's obligations to make severance compensation payments
shall terminate as of the end of the month in which Executive's death occurs.
(e) Upon termination of employment Executive shall have the right to
continue Executive's health insurance under the Company's medical benefit plan
for the period designated by the federal law known as COBRA. If such
termination occurs other than for cause (as defined in paragraph 2 below)
following a Change of Control Event but prior to the first anniversary of the
Change of Control Event, then in addition to severance compensation payments
described above, Company shall be obligated to pay premiums for such COBRA
coverage, but only during the Severance Period and only to the same extent the
Company paid such premiums immediately before such Change of Control Event.
<PAGE>
The Company's obligation to pay Executive's COBRA premium will terminate if
Executive becomes eligible to participate in a health insurance plan maintained
by any new employer of Executive or if the obligation of the Company to make
severance compensation payments under this Agreement terminates for any reason.
(f) The Executive's entitlements under this Agreement supersede and
replace and hereby terminate entitlements Executive has or may hereafter have
to compensation payments by reason of termination of employment under Company's
policies and procedures as in effect from time to time. Notwithstanding the
foregoing, it is understood and agreed that the Executive's entitlement to
receive severance compensation payments and premiums for COBRA coverage pursuant
to this paragraph 1 shall be separate from and in addition to, and with no right
of offset against, Executive's entitlement to receive any amounts due Executive
at the time of Executive's termination under the Company's employee benefit
plans in accordance with their terms.
2. For the purposes of this Agreement, the term "cause" shall mean:
(a) Dishonesty affecting Company;
(b) Use of alcohol or illegal drugs, interfering with performance of
the obligations assigned to the Executive, continuing after warning;
(c) Conviction of an indictable offense or of any crime involving
dishonesty, moral turpitude, fraud or misrepresentation, or the commission of
any act which is in violation of any federal or state law or regulation
protecting the rights of employees;
(d) The commission of any willful or intentional act which could
reasonably be expected to injure the reputation, business or business
relationships of Company;
(e) Willful neglect or refusal to perform duties assigned to the
Executive consistent with Executive's position and performance of such position
before the Change of Control Event, continuing after warning
3. Protection of Confidential Information/Return of Property
(a) The Executive acknowledges that Executive's position with Company
necessarily requires and has and will continue to result in the disclosure to
Executive of confidential information and trade secrets of Company (such as,
without limitation, marketing plans, financial information, relationships with
lenders, budgets, customer preferences and policies, identity of appropriate
personnel of customers with sufficient authority to influence a shift in
suppliers). The Executive agrees (i) that Executive will not at any time
disclose to anyone any confidential information or trade secret of Company or
utilize such confidential information or trade secret for Executive's own
benefit, or for the benefit of third parties, and (ii) that all memoranda,
notes, records, or other documents compiled by Executive or made available to
Executive during Executive's employment concerning the business of Company
and/or its customers shall be the property of Company and shall be delivered to
Company on the termination of Executive's employment or at any time upon
request.
(b) If the Executive should breach any of Executive's agreements
under this paragraph (3) Company's obligation to make severance compensation
payments hereunder shall forthwith terminate, but the Executive shall not be
obligated to refund such payments theretofore made, if any, by
<PAGE>
Company. If the Executive should breach or is about to breach Executive's
agreement under this paragraph (3), Company shall also have the right to an
injunction, temporary restraining order, or similar relief enjoining such breach
or threatened breach issued by any court having equity jurisdiction without
being required to post bond or other security and without having to prove the
inadequacy of the available remedies at law (Executive hereby acknowledges that
any such breach or threatened breach will cause irreparable injury to Company
for which money damages will not provide an adequate remedy), and the right to
take such other actions available to it at law or in equity.
(c) For purposes of this paragraph 3, "Company" includes subsidiaries
of Company. The provisions of this paragraph 3 shall survive the termination of
this Agreement.
4. Company shall not be obligated to make severance compensation payments
hereunder in the event of the Executive's death, disability, or resignation
while in the employ of Company; provided, however, that Executive's resignation
shall be deemed to be a termination by Company without cause if such resignation
(i) is requested by Company, or (ii) follows any substantial adverse change in
the terms and conditions of Executive's employment, compared to such terms and
conditions in effect immediately preceding the Change of Control Event,
including but not limited to a reduction in Executive's base compensation,
bonus, or employee benefits, an increase in the amount of travel required of
Executive, and a requirement that Executive relocate Executive's residence.
5. The Executive understands and agrees that this Agreement does not
constitute nor have the effect of an express or implied contract for employment
by Company for any fixed period, and that, subject to the notice requirements of
paragraph 1 hereof, Executive's employment with Company is "at will".
6. This Agreement may not be orally canceled, changed, modified or
amended, and no cancellation, change, modification or amendment shall be
effective or binding, unless in writing and signed by both parties to this
Agreement.
7. This Agreement shall be governed by and construed in accordance with
the laws of the State of California, without application of the principle of the
doctrine of conflict of laws.
8. This Agreement represents the entire Agreement between the Executive
and Valley Forge Corporation with respect to the subject matter hereof, and all
prior agreements relating to compensation payments by reason of termination of
the Executive's employment, written or oral, are nullified and superseded
hereby, and neither party has relied on any representations of the other party
except as expressly set forth herein.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
VALLEY FORGE CORPORATION
By:
----------------------------------
----------------------------------
Monica J. Burke
<PAGE>
EXHIBIT 9
LETTER TO STOCKHOLDERS DATED DECEMBER 9, 1998
[LOGO]
[LOGO]
DECEMBER 9, 1998
Dear Stockholders:
I am pleased to inform you that Valley Forge Corporation (the "Company") has
entered into an Agreement and Plan of Merger dated as of December 2, 1998 (the
"Merger Agreement") with Key Components, LLC, a Delaware limited liability
company ("Key"), and KCI Acquisition Corp, a Delaware corporation ("KCI") and a
wholly-owned subsidiary of Key. Pursuant to the Merger Agreement KCI has today
commenced a cash tender offer (the "Offer") to purchase all of the outstanding
shares of common stock, par value $.50 per share ("Shares"), of the Company at a
purchase price of $19.00 per Share, net to the seller in cash. The Merger
Agreement provides for the making of the Offer which, if 90% of the issued and
outstanding Shares are tendered and not withdrawn and certain other conditions
are satisfied, will be followed by a merger of KCI with and into the Company
(the "Short Form Merger"), with the Company surviving as a wholly-owned
subsidiary of Key. If 90% of the issued and outstanding Shares are not tendered,
the Offer will terminate and KCI will be merged with and into the Company (the
"Long Form Merger"), with the Company surviving as a wholly owned subsidiary of
Key. The Short Form Merger and Long Form Merger are collectively referred to
herein as the "Merger".
In the Merger, Shares (other than Shares owned by KCI or the Company or
Shares held by shareholders who properly exercise dissenters' rights under
Delaware law) will be converted into the right to receive $19.00 per Share in
cash, without interest thereon.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE
OFFER AND THE MERGER AND DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO,
AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY. YOUR BOARD OF
DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND
TENDER THEIR SHARES PURSUANT TO THE OFFER.
Holders of approximately 53% of the outstanding Shares have agreed to tender
their Shares in the Offer and vote for the Merger.
In arriving at its recommendation, the Board of Directors gave careful
consideration to the factors described in the attached Schedule 14D-9 that is
being filed today with the Securities and Exchange Commission. The Board of
Directors has received the written opinion dated December 2, 1998 of CIBC
Oppenheimer Corp., the Company's financial advisor, 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 by the holders of Shares
(other than Key and its affiliates) in the Offer and the Merger was fair, from a
financial point of view, to such holders. A copy of such written opinion is
included as an exhibit to the attached Schedule 14D-9 and should be read
carefully and in its entirety.
In addition to the attached Schedule 14D-9, enclosed is the Offer to
Purchase dated December 9, 1998, together with related materials, including a
Letter of Transmittal, to be used for tendering your Shares pursuant to the
Offer. These documents state the terms and conditions of the Offer and the
Merger, provide detailed information about the transactions and include
instructions as to how to tender your Shares. We urge you to read these
documents carefully in making your decision with respect to tendering your
Shares pursuant to the Offer.
Very truly yours,
[LOGO]
David R. Brining
President and Chief Executive
Officer
[LOGO]
