AMENDMENT NO. 1, dated as of December 28, 1998, to the Agreement and
Plan of Merger, dated as of December 2, 1998 (the "Agreement"), by and among Key
Components, LLC, a Delaware limited liability company ("Parent"), KCI
Acquisition Corp., a Delaware corporation ("Purchaser"), and Valley Forge
Corporation, a Delaware corporation (the "Company").
RECITALS
WHEREAS, pursuant to Section 2.10 of the Agreement (terms defined in
the Agreement being used herein as therein defined), all outstanding Stock
Options, whether or not then exercisable or vested, will, subject to the
Company's receipt of any required Option Consents, 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;
WHEREAS, the Company's Amended and Restated 1987 Stock Option Plan (the
"Plan") provides that upon the effective date of a Triggering Event (as defined
in the Plan), any Stock Option or portion thereof not exercised shall terminate,
unless provision is made in connection with the Triggering Event for the
assumption of options theretofore granted, or substitution for such Stock
Options of new options covering stock a successor employer corporation or a
parent or subsidiary corporation thereof, solely at the option of such successor
corporation or parent or subsidiary corporation with appropriate adjustments as
to number and kind of shares and prices; and
WHEREAS, the Parent and the Purchaser wish to make available to certain
holders of Stock Options the right to elect to have substituted for such Stock
Options stock appreciation rights in Key Components, Inc., a New York
corporation ("KCI") and the sole member of Parent granted under the 1998
Long Term Incentive Plan of KCI, as amended, and the Company wishes to
enable such holders to accept such offers;
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
hereby agree as follows:
1. Section 2.10 of the Agreement is hereby amended to read in its
entirety as follows:
2.10 OPTIONS AND OTHER PURCHASE RIGHTS. (a) EXCEPT AS OTHERWISE
PROVIDED IN SECTION 2.10(B), 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.
(b) NOTWITHSTANDING THE PROVISIONS OF SECTION 2.10(a) HEREOF, PARENT
AND PURCHASER MAY OFFER TO ONE OR MORE HOLDERS OF STOCK OPTIONS THE
RIGHT TO HAVE SUBSTITUTED FOR THE STOCK OPTIONS OF SUCH HOLDERS STOCK
APPRECIATION RIGHTS ("SUBSTITUTE SARs") GRANTED BY KEY COMPONENTS,
INC., A NEW YORK CORPORATION("KCI") AND THE SOLE MEMBER OF PARENT,
GRANTED UNDER THE 0000 XXXX XXXX XXXXXXXXX XXXX XX XXX, XX SUCH TERMS
AND CONDITIONS, INCLUDING LIMITATIONS ON THE AGGREGATE AMOUNT OF
SUBSTITUTE SARs TO BE OFFERED AND OVER-ALLOTMENT PROCEDURES, AS KCI
MAY IN ITS SOLE DISCRETION DETERMINE. HOLDERS OF ANY STOCK OPTIONS FOR
WHICH SUBSTITUTE SARs SHALL HAVE BEEN SUBSTITUTED ON OR BEFORE THE
EFFECTIVE TIME SHALL NOT BE ENTITLED TO RECEIVE ANY AMOUNT IN
SETTLEMENT AND CANCELLATION THEREOF PURSUANT TO SECTION 2.10(a), AND
UPON SUCH SUBSTITUTION SUCH STOCK OPTIONS SHALL CEASE TO BE
OUTSTANDING.
(c) THE COMPANY WILL USE REASONABLE EFFORTS TO OBTAIN OPTION CONSENTS
TO THE CANCELLATION OF STOCK OPTIONS IN ACCORDANCE WITH THIS SECTION
2.10. THE 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. Except as amended hereby, the Agreement shall remain in full force
and effect.
3. This Amendment No. 1 may be executed in counterparts, each of which
shall be deemed to be an original but all of which together shall be deemed to
constitute one and same instrument.
4. This Amendment No. 1 shall be governed by and construed in
accordance with the internal laws of the State of Delaware, without regard to
applicable principles of conflicts of laws.
[signature page to Amendment No. 1]
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 as
of the date first above written.
VALLEY FORGE CORPORATION
By: /s/ XXXXX X. XXXXXXX
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Name: Xxxxx X. Xxxxxxx
Title: President and Chief
Executive Officer
KEY COMPONENTS, LLC
By: /s/ XXXX X. XXXXXXXXXX
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Name: Xxxx X. Xxxxxxxxxx
Title: President
KCI ACQUISITION CORP.
By: /s/ XXXX X. XXXXXXXXXX
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Name: Xxxx X. Xxxxxxxxxx
Title: President
