AGREEMENT AND PLAN OF MERGER
by and among
AEARO CORPORATION,
AC SAFETY HOLDING CORP.
and
AC SAFETY ACQUISITION CORP.
dated as of March 10, 2004
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I Definitions 1
Section 1.1
Definitions.............................................1
Section 1.2
Interpretation and Rules of Construction...............10
ARTICLE II The Merger 10
Section 2.1
Surviving Corporation..................................10
Section 2.2
Effective Time.........................................10
Section 2.3
Closing................................................11
Section 2.4
Certificate of
Incorporation..........................11
Section 2.5
By-Laws................................................11
Section 2.6
Officers and Directors.................................11
ARTICLE III Status and Conversion of
Securities...............................11
Section 3.1
Status and Conversion of Securities....................11
Section 3.2
Options................................................13
Section 3.3
Closing of the Company Transfer Books..................13
Section
3.4 Dissenting
Shares......................................13
ARTICLE IV Representations and Warranties
of the Company......................13
Section 4.1
Organization, Etc......................................13
Section 4.2
Capitalization of the Company and the Company
Subsidiaries; Minute Books.............................13
Section 4.3
Authority Relative to this Agreement, Etc..............13
Section 4.4
Consents and Approvals; No Violations..................13
Section 4.5
Financial Statements; SEC Documents....................13
Section 4.6
Absence of Certain Changes.............................13
Section 4.7
Compliance with Law; Permits...........................13
Section 4.8
Litigation.............................................13
Section 4.9 No
Undisclosed Liabilities.............................13
Section 4.10
Taxes..................................................13
Section 4.11 Brokers'
and Finders' Fees.............................13
Section 4.12
Intellectual Property..................................13
Section 4.13 Employee
Benefit Plans; Employees......................13
Section 4.14
Environmental Matters..................................13
Section 4.15 Material
Contracts.....................................13
Section 4.16
Related-Party Transactions.............................13
Section 4.17 Real
Property..........................................13
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Section 4.18 Personal
Property......................................13
Section 4.19
Insurance..............................................13
Section 4.20 Products
Liability.....................................13
Section 4.21 Customers
and Suppliers................................13
Section 4.22
Disclosure.............................................13
Section 4.23 No Other
Representations or Warranties.................13
ARTICLE V Representations and Warranties of
Buyer Parent and Buyer Sub........13
Section 5.1
Organization, Etc......................................13
Section 5.2
Buyer Parent Capitalization............................13
Section 5.3
Authority Relative to this Agreement, Etc..............13
Section 5.4
Consents and Approvals; No Violations..................13
Section 5.5
Compliance with Law; Permits...........................13
Section 5.6
Litigation.............................................13
Section 5.7
Brokers' and Finders' Fees.............................13
Section 5.8
Financing..............................................13
Section 5.9
Investigation..........................................13
Section 5.10
Disclaimer Regarding Projections.......................13
Section 5.11 No Other
Representations or Warranties.................13
ARTICLE VI
Covenants..........................................................13
Section 6.1
Conduct of Business....................................13
Section 6.2
Access to Information; Confidentiality.................13
Section 6.3
Retention of Records...................................13
Section 6.4
Consents and Approvals; Conditions.....................13
Section 6.5
Filings with Governmental Authorities..................13
Section 6.6
Directors' and Officers' Indemnification and Insurance.13
Section 6.7
Employee Matters.......................................13
Section 6.8 "As
Is" Condition......................................13
Section 6.9
Taxes..................................................13
Section 6.10
Maintenance of Cabot Agreement.........................13
Section 6.11
Satisfaction of Notes..................................13
Section 6.12
Stockholder
Meeting....................................13
Section 6.13 Further
Assurances.....................................13
ARTICLE VII Conditions to the
Closing.........................................13
Section 7.1
Conditions to the Obligations of Each Party
to Effect the Closing..................................13
Section 7.2
Conditions to the Obligations of the Company
to Effect the Closing..................................13
Section 7.3
Conditions to the Obligations of Buyer Parent
and Buyer Sub to Effect the Closing....................13
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ARTICLE VIII Survival of Representation and
Warranties........................13
ARTICLE IX Termination and
Abandonment........................................13
Section 9.1
Termination............................................13
Section 9.2
Procedure and Effect of Termination....................13
ARTICLE X
Miscellaneous.......................................................13
Section 10.1
Amendment and Modifications...........................13
Section 10.2
Extension; Waiver.....................................13
Section 10.3
Entire Agreement; Assignment..........................13
Section 10.4
Validity..............................................13
Section 10.5
Notices...............................................13
Section 10.6
Specific Performance..................................13
Section 10.7
Publicity.............................................13
Section 10.8
Alternative Dispute Resolution........................13
Section 10.9
Governing Law; Submission to Jurisdiction; Waivers....13
Section 10.10
Descriptive Headings.................................13
Section 10.11
Severability.........................................13
Section 10.12
Counterparts.........................................13
Section 10.13
Expenses.............................................13
Section 10.14
Parties in Interest..................................13
Section 10.15
Interpretation.......................................13
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SCHEDULES
Schedule 1.1
Knowledge
Schedule 1.2
Management Loan Amount
Schedule 1.3
Option Plans
Schedule 1.5
Permitted Encumbrances
Schedule 1.6
Stockholder Support Agreement
Schedule 1.7
Co-Investment Rights Agreements
Schedule 2.6
Officers and Directors
Schedule 3.1(c)
Payments to Employees
Schedule 4.2(a)
Shares
Schedule 4.2(b)
Company Subsidiaries
Schedule 4.4
Consents and Approvals
Schedule 4.5
Exceptions to Company Group Financial Statements
Schedule 4.6
Exceptions to Absence of Material Change
Schedule 4.7
Exceptions to Compliance with Law; Permits
Schedule 4.8
Litigation
Schedule 4.9
Certain Liabilities
Schedule 4.10
Taxes
Schedule 4.12(a)
Exceptions to Intellectual Property Rights
Schedule 4.12(d)(1)
Domestic Patents
Schedule 4.12(d)(2)
Domestic Patent Applications
Schedule 4.12(e)(1)
Foreign Patents
Schedule 4.12(e)(2)
Foreign Patent Applications
Schedule 4.12(f)
Trademarks
Schedule 4.12(g)
Foreign Trademarks
Schedule 4.13(a)(i)
Benefit Plans
Schedule 4.13(a)(ii)
Exceptions to Benefit Plans
Schedule 4.13(a)(iv)
Certain Benefit Plan Payments
Schedule 4.13(a)(v)
Collective Bargaining Agreement Exceptions
to Benefit Plans
Schedule 4.13(b)
Exceptions to Qualified Plans
Schedule 4.13(d)
Multiemployer Plans
Schedule 4.13(e)
Welfare Benefits
Schedule 4.13(f)
Labor Matters
Schedule 4.14
Environmental Matters
Schedule 4.15(a)
Material Contracts
Schedule 4.15(a)(i)
Indebtedness
Schedule 4.16
Exceptions to Related-Party Transactions
Schedule 4.17(a)
Parcels
Schedule 4.17(b)
Leased Real Property
Schedule 4.18
Exceptions to Personal Property
Schedule 4.19(a)
Insurance
Schedule 4.19(b)
Exceptions to Insurance
Schedule 4.20
Product Liabilities
Schedule 4.21(a)
Top Ten Customers and Suppliers
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Schedule 4.21(b)
Exceptions to Top Ten Customers and Suppliers
Schedule 5.2
Buyer Capitalization
Schedule 5.8
Commitment Letters
Schedule 6.1(a)
Exceptions to Conduct of Business
Schedule 6.1(b)
Prohibited
Transactions
Schedule 6.3
Document Retention Policy
Schedule 6.7(d)
Employee Severance Benefits
v
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EXHIBITS
Exhibit A
[Intentionally Omitted]
Exhibit B
Terms of Opinion of O'Melveny & Myers LLP
Exhibit C
Terms of Stockholder Agreement
Exhibit D-1
Form of Opinion of Simpson Thacher & Bartlett LLP
Exhibit D-2
Terms of Opinion of Bingham McHale LLP
Exhibit E
Form of Buyer Support Agreement
vi
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT
AND PLAN OF
MERGER (this "Agreement"), dated as of March 10,
2004, among Aearo Corporation, a Delaware
corporation (the "Company"), AC Safety
Holding Corp., a Delaware corporation ("Buyer Parent"), and AC Safety
Acquisition Corp., a Delaware corporation
("Buyer Sub").
WHEREAS,
the respective
Boards of Directors of
the Company, Buyer
Parent
and Buyer Sub and the requisite
stockholders
of the Company each
have approved
the merger of Buyer Sub into the Company (the "Merger") upon the terms and
subject to the conditions set forth
herein.
NOW,
THEREFORE,
in consideration of the premises and
the mutual promises
contained herein, the parties hereby agree
as follows:
ARTICLE I
Definitions
Section 1.1 Definitions. The terms defined in this Article I,
whenever used
herein, shall have the following meanings
for all purposes of this Agreement:
"1995
Notes" shall mean the 12 1/2%
senior subordinated notes due 2005
issued by Cabot Safety Acquisition
Corporation pursuant to the Indenture.
"2003
Notes" shall mean the senior subordinated notes due July 15, 2005
issued by the Company pursuant to the Note
Purchase Agreement.
"Action" shall
mean any action,
claim, suit,
arbitration,
proceeding or
investigation by or before any Governmental
Authority or arbitration tribunal.
"Aearo
Company Nonqualified Deferred Compensation Plan" shall mean the
Aearo Company Nonqualified Deferred
Compensation Plan, effective August 5, 1999,
as amended on December 8, 2003.
"Affiliate"
shall mean, with
respect to any specified Person, any Person
that, directly or indirectly, through one or more
intermediaries,
controls, or
is controlled by, or is under common
control with, such
specified Person.
For
purposes of this definition, "control", when used with respect
to any specified
Person, means the power to direct the
management
and policies of such
Person,
directly or indirectly, whether through ownership of voting securities, by
Contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Aggregate
Buyer Parent
Common Stock Value"
shall mean the product of (1)
the Buyer Parent Common Stock Per Share
Cost, multiplied by (2) the total number
of shares of Buyer Parent Common Stock to
be outstanding
immediately after
the
Effective Time.
1
<PAGE>
"Aggregate
Buyer Parent
Preferred Stock Value" shall mean the
product of
(1) the Buyer Parent Preferred Stock Per
Share Cost, multiplied by (2) the total
number of shares of Buyer Parent
Preferred Stock to be
outstanding
immediately
after the Effective Time.
"Aggregate Stock
Consideration Value"
shall mean the sum of (1) 10% of the
Aggregate Buyer Parent Common Stock Value
plus (2) 10% of the
Aggregate Buyer
Parent Preferred Stock Value.
"Agreement"
shall have the meaning set forth in the preamble to this
Agreement.
"Antitrust
Division" shall have the meaning set forth in Section 6.5(b).
"Applications"
shall have the meaning set forth in Section 4.12(d).
"Benefit Plans"
shall have the meaning set forth in Section 4.13(a)(i).
"BSMB" shall
mean Bear Stearns Merchant Banking Partners II, L.P.
"BSMM" shall
mean Bear Stearns Merchant Manager II, LLC.
"Business Day"
shall mean any day other than a Saturday, a Sunday or a day
on which banks in New York, New York are
closed generally.
"Buyer Material
Adverse Effect" shall mean a material adverse effect on the
ability of Buyer Parent or Buyer Sub to
consummate the transactions contemplated
by this Agreement or perform its
obligations
under this Agreement
or the other
Transaction Documents.
"Buyer
Parent" shall have the meaning
set forth in the
preamble to this
Agreement.
"Buyer Parent
Common Stock" shall mean the common stock, par value $.01 per
share, of Buyer Parent.
"Buyer Parent
Common Stock
Percentage" shall mean
the quotient of (1) the
Aggregate Buyer Parent Common Stock Value, divided by (2) the sum of (x)
the
Aggregate Buyer Parent Common Stock Value,
plus (y) the Aggregate
Buyer Parent
Preferred Stock Value.
"Buyer
Parent Common Stock Per Share Cost" shall
mean the quotient of (1)
the aggregate amount of cash to be paid at or
prior to the Effective
Time by
BSMB and its Affiliates for the total number of shares of
Buyer Parent
Common
Stock to be outstanding immediately after the Effective Time and
beneficially
owned by BSMB and its Affiliates, divided by (2) the total number of those
shares.
"Buyer Parent
Preferred Stock" shall mean the preferred
stock, par value
$.01 per share, of Buyer Parent.
2
<PAGE>
"Buyer Parent
Preferred Stock
Percentage"
shall mean the
quotient of (1)
Aggregate Buyer Parent Preferred Stock
Value, divided by (2)
the sum of (x) the
Aggregate Buyer Parent Common Stock Value,
plus (y) the Aggregate
Buyer Parent
Preferred Stock Value.
"Buyer
Parent Preferred Stock Per Share Cost" shall mean
the quotient of
(1) the aggregate amount of cash to be paid
at or prior to the Effective Time by
BSMB and its Affiliates for the total
number of shares of Buyer Parent Preferred
Stock to be outstanding immediately after the Effective Time and
beneficially
owned by BSMB and its Affiliates, divided by (2) the total number of those
shares.
"Buyer Parent
Plans" shall have the meaning set forth in Section 6.7(a).
"Buyer Sub" shall have the meaning set forth in the preamble to this
Agreement.
"Buyer Support
Agreement" shall mean
the Buyer Support
Agreement dated as
of the Closing Date among (i) BSMB, (ii)
VEP and (iii) the other parties thereto
in substantially the form of Exhibit E.
"Cabot Asset
Transfer Agreement"
shall mean the Asset
Transfer Agreement
dated June 13, 1995 among Cabot Safety
Corporation,
Cabot Canada Ltd., Cabot
Safety Limited, Cabot Corporation, the Company and Cabot Safety
Acquisition
Corporation.
"Capital
Stock Unit" shall mean the sum of (1) the
number of shares
of
Buyer Parent Common Stock equal to the quotient of (A)
the product of (x) the
Buyer Parent Common Stock Percentage, multiplied by (y) the Per Share Cash
Common Merger Consideration, divided by (B) the Buyer Parent
Common Stock Per
Share Cost, plus (2) the number of shares
of Buyer Parent
Preferred Stock equal
to the quotient of (A) the product of (x) the Buyer
Parent Preferred Stock
Percentage, multiplied by (y) the Per Share
Cash Common Merger
Consideration,
divided by (B) the Buyer Parent Preferred
Stock Per Share Cost.
"Certificate"
shall have the meaning set forth in Section 3.1(g).
"Certificate
of Incorporation" shall mean the Amended and Restated
Certificate of Incorporation of the
Company, as amended.
"Certificate of
Merger" shall have the meaning set forth in Section 2.3(b).
"Closing" shall
have the meaning set forth in Section 2.3(a).
"Closing Date"
shall have the meaning set forth in Section 2.3(a).
"Code" shall
mean the Internal Revenue Code of 1986, as amended.
"Co-Investment
Rights Agreements"
shall mean the definitive documentation
referred to in Schedule 1.7 under
"Definitive Documentation."
"Commitment
Letter" shall have the meaning set forth in Section 5.8.
3
<PAGE>
"Common
Stock" shall mean the
common stock, par
value $.01 per share,
of
the Company.
"Company"
shall have the meaning set forth in the preamble to this
Agreement.
"Company
Group" shall mean, collectively, the Company and the Company
Subsidiaries.
"Company
Group Employees" shall have the meaning set forth in Section
6.7(c).
"Company Group
Financial Statements" shall have the meaning set forth
in
Section 4.5(a).
"Company
Property" shall have the meaning set forth in Section 4.17(b).
"Company
Subsidiaries" shall mean the subsidiaries of the Company listed
in
Schedule 4.2(b).
"Confidentiality
Agreement"
shall have the
meaning set forth in Section
6.2(b).
"Contract" shall
mean any written or oral contract, agreement, arrangement,
instrument or other commitment that is intended to be legally binding and
enforceable on the parties thereto and, in the case of such oral
contracts,
agreements, arrangements, instruments or
other commitments, of which the Company
has Knowledge.
"DGCL" shall
mean the Delaware General Corporation Law, as amended.
"Dissenting
Shares" shall have the meaning set forth in Section 3.4.
"EC Merger
Regulation" shall have the meaning set forth in Section 6.5(b).
"Effective Time"
shall have the meaning set forth in Section 2.2.
"Electing
Shares" shall have the meaning set forth in Section 3.1(b)(i).
"Employee
Arrangement" shall have the meaning set forth in Section
6.7(b).
"Encumbrance"
shall mean any lien,
security interest,
charge, mortgage,
hypothecation, right of first refusal or
pledge.
"Environmental
Law" shall mean any
Law relating to the protection of human
health (to the extent relating to human
exposure to Hazardous Substances) or the
environment that is applicable to the Company
Group and enforceable and binding
as of or prior to the date of this Agreement, and as amended prior to the
closing.
"Environmental
Permits" shall have the meaning set forth in Section 4.14.
"Equity
Securities" shall have the meaning set forth in Section
3.1(i)(i).
4
<PAGE>
"ERISA"
shall mean the U.S.
Employee Retirement Income Security Act of
1974, as amended from time to time.
"Exchange Act"
shall mean the Securities Exchange Act of 1934, as amended.
"Foreign
Applications" shall have the meaning set forth in Section
4.12(e).
"Foreign
Patents" shall have the meaning set forth in Section 4.12(e).
"Foreign
Trademarks" shall have the meaning set forth in Section
4.12(g).
"Form of
Election" shall have the meaning set forth in Section 3.1(g).
"FTC" shall mean
the United States Federal Trade Commission.
"GAAP" shall
mean United States generally accepted accounting principles as
in effect on the date or for the period
with respect to which such principles
are applied.
"Governmental
Antitrust Authority" shall have the meaning set forth in
Section 6.5(b).
"Governmental
Authority"
shall mean any
supranational,
federal, state,
provincial, local, county or municipal
government,
governmental,
regulatory or
administrative agency, department, court, commission, board, bureau or other
authority or instrumentality, domestic or foreign, including any arbitrator or
arbitral body.
"Hazardous
Substance" shall mean any hazardous or toxic substance,
material
or waste that is controlled, regulated or
governed by any Environmental Law.
"Hedging
Contracts" shall mean
any interest rate swap agreement, interest
collar agreement, interest hedging agreement, foreign exchange contract,
currency swap agreement or any agreement designed to protect against
fluctuations in currency values.
"HSR Act" shall
mean the
Hart-Scott-Rodino
Antitrust Improvement
Act of
1976, as amended.
"Indenture"
shall mean the
Indenture,
dated as of July 11,
1995, among
Cabot Safety Acquisition Corporation, as Issuer, Cabot Safety Holdings
Corporation, as Guarantor, and Shawmut Bank
Connecticut, National
Association,
as Trustee.
"Intellectual
Property" shall have the meaning set forth in Section 4.12.
"Knowledge
of the Company" shall mean the actual knowledge, after due
inquiry, of the persons listed on Schedule
1.1.
"Law" shall mean
any law, statute,
ordinance,
rule (including the
common
law), regulation, order, writ, judgment,
injunction,
settlement agreement
or
decree of any Governmental Authority,
and includes rules and
regulations of any
regulatory or self-regulatory
authority.
5
<PAGE>
"Management
Commitment
Letters" shall mean
the equity commitment
letters
from members of the Company's management attached to Schedule 5.8 relating
to
the rollover equity investment and related transactions applicable to the
Persons named therein.
"Management
Loan Amount" shall
mean the aggregate
principal amount of the
loans set forth on Schedule 1.2 plus the
interest accrued thereon at the time of
payment thereof.
"Management
Roll" shall have the meaning set forth in Section 3.1(c).
"Management Roll
Amount" shall mean the product obtained by multiplying the
number of Management Roll Shares by the Per Share Cash Common Merger
Consideration.
"Management
Roll Shares" shall mean the aggregate number of shares of
Common Stock being contributed to Buyer Parent by members of the
Company's
management pursuant to the definitive documentation under the Management
Commitment Letters.
"Material
Adverse Effect" shall
mean (i) a material
adverse effect on the
ability of the Company to consummate the transactions contemplated by this
Agreement or to perform its obligations under this Agreement or the other
Transaction Documents or (ii) a material
adverse effect on the business, assets,
liabilities, properties, results of operations or financial condition of the
Company Group, taken as a whole (after taking into account any insurance
recoveries available in respect thereof); provided, however, that any such
effect attributable to or resulting from (A) the public disclosure of this
Agreement, the announcement or public
disclosure
thereof, the transactions
contemplated hereby and the identity or involvement by Buyer Parent or its
Affiliates or (B) any action or omission
required to be taken
or omitted by the
Company or any Company Subsidiary pursuant to this Agreement or which is
otherwise taken or omitted with the prior
written consent of Buyer Parent shall,
in each case, be deemed not to constitute or give rise to a "Material
Adverse
Effect" but only to the extent that such
Material Adverse Effect is attributable
to or results from the events and
conditions set forth in any of clauses (A) and
(B) hereof or (iii) Michael McLain ceasing
to act as Chief Executive Officer of
the Company for any reason.
"Material
Contracts" shall mean, collectively, the Contracts listed on the
Schedules listed under Section 4.16 and the
Contracts of the kinds described in
Section 4.15 and listed on Schedule
4.15(a), Schedule 4.15(a)(i) or any other
Schedule to this Agreement.
"Merger"
shall have the meaning set forth in the preamble to this
Agreement.
"Non-Cash
Election" shall have the meaning set forth in Section
3.1(d)(i).
"Non-Cash
Election Number" shall have the meaning set forth in Section
3.1(e).
"Non-Cash
Proration Factor" shall have the meaning set forth in Section
3.1(e)(ii)(A).
"Note Purchase
Agreement" shall mean the Note Purchase Agreement, dated as
of August 18, 2003, between the Company and
Deutsche Bank Securities Inc.
6
<PAGE>
"Options"
shall mean the options to purchase shares of Common Stock
described on Schedule 4.2(a).
"Option Plans"
shall mean the option plans set forth in Schedule 1.3.
"Ordinary
Course" means, with respect to the business of the Company
Group,
the ordinary course of commercial operations customarily engaged in by the
Company Group, consistent with recent past
practice.
"Outstanding
Debt" shall mean the
aggregate principal
amount of, premium,
if any, and accrued interest on, the indebtedness and obligations for
borrowed
money outstanding as of immediately prior to the Closing, and any other (i)
indebtedness or liability of the Company or the Company Subsidiaries for
borrowed money, (ii) obligations of the Company or any Company Subsidiary
evidenced by bonds, debentures, notes or other similar instruments, (iii)
obligations of the Company or any Company
Subsidiary with respect to capitalized
leases, and (iv) guarantees of or other
assurances of payment by the Company or
any Company Subsidiary with respect to any
obligations described in subparts (i)
through (iii) immediately above of another Person,
in each case,
outstanding
immediately prior to the Closing. For the avoidance of doubt, the parties
acknowledge that Outstanding Debt does not include obligations under Hedging
Contracts, trade payables, taxes payable
(including deferred taxes and reserves
for taxes), accrued expenses, product liability reserves, pension related
liabilities or the aggregate amount of any
letters of credit and any obligations
of the Company or any Company Subsidiaries
thereunder.
"Parcel" shall
have the meaning set forth in Section 4.17(a).
"Patents" shall
have the meaning set forth in Section 4.12(d).
"PBGC" shall
have the meaning set forth in Section 4.13(c).
"Permits" shall
have the meaning set forth in Section 4.7.
"Permitted
Encumbrances" shall mean:
(i) all Encumbrances (a) identified on
Schedule 1.5 or any other Schedule
attached hereto or (b) specifically identified on, or with respect
for
which provision
has been made on, the Company Group Financial
Statements (in each case, including in the notes thereto);
(ii) all
Encumbrances
for Taxes or
assessments,
to the extent not yet
delinquent or, if
delinquent, to the
extent being contested
in good
faith by appropriate proceedings, in each case, reflected as a
current
liability on the Company Group Financial Statements;
(iii)all
materialmen's,
mechanics', repairmen's, employees', contractors'
or operators' liens or
similar Encumbrances
arising in the
Ordinary
Course of the Company Group's business securing amounts that are not
yet delinquent;
7
<PAGE>
(iv) all
Encumbrances created
by, arising under or existing as a result of
any Law;
(v) all rights reserved to or vested in any Governmental Authority to
control or regulate
any asset or property
in any manner and all Laws
applicable to assets or properties, including all zoning and
similar
Laws; and
(vi) with
respect to any real property or interests in real property, any
title defects, easements, rights of way, Encumbrances,
restrictions,
covenants,
options, claims
or other similar charges, which,
individually or in the
aggregate,
do not have or are not
reasonably
likely to have a Material Adverse Effect on the use or possession
of
such real property.
"Per Share Cash
Common Merger Consideration" shall have the meaning set
forth in Section 3.1(b)(ii).
"Per Share
Preferred Merger Consideration" shall have the meaning set
forth
in Section 3.1(f).
"Person"
shall mean any domestic or foreign individual, partnership,
company, association, limited liability company, trust,
joint venture, estate,
corporation, custodian, trustee, executor,
administrator, nominee
or any other
entity.
"Phantom
Payments" shall have the meaning set forth in Section 3.1(c).
"Preferred
Stock" shall mean the
12.5% Preferred Stock, par value $.01 per
share, of the Company.
"Real Property
Lease" shall have the meaning set forth in Section 4.17(b).
"Release" shall
mean any spilling,
leaking, pumping,
pouring, emitting,
emptying, discharging, injecting, escaping, leaching,
dumping or disposing into
the environment (including the abandonment
or discarding of barrels, containers
and other closed receptacles containing any
Hazardous Substance).
"Representative"
shall mean, with respect to any Person, each of such
Person's directors, officers, employees, representatives,
attorneys,
accountants, advisors and agents.
"Required
Consents" shall mean the consents set forth on Schedule 4.4.
"Securities Act"
means the Securities Act of 1933, as amended.
"SEC" means the
Securities and Exchange Commission.
"SEC Documents"
shall have the meaning set forth in Section 4.5(b).
"Stockholder
Support Agreement" shall mean the agreement dated as
of the
date hereof among Buyer Parent,
Buyer Sub, VEP, the
Company and Vestar
Capital
Partners IV, L.P., in substantially the
form attached hereto as Schedule 1.6.
8
<PAGE>
"Surviving
Corporation" shall have the meaning set forth in Section 2.1.
"Tax" shall mean
any of the Taxes and "Taxes" means, with respect to any
Person, (A) all income Taxes (including
any tax on or based upon net income, or
gross income, or income as specially defined, or earnings, or profits, or
selected items of income, earnings or profits) and all gross
receipts, sales,
use, ad valorem, transfer, franchise,
license, withholding,
payroll employment,
excise, severance, stamp, occupation, premium, property or windfall profits
taxes, alternative or add-on minimum taxes,
customs duties or other taxes, fees,
assessments or charges of any kind
whatsoever,
together with any
interest and
any penalties, additions to tax or additional amounts imposed by any taxing
authority (domestic or foreign) on such Person and (B)
any liability
for the
payment of any amount of the type described
in the immediately
preceding clause
(A) as a result of (1) being a "transferee"
(within the meaning of
Section 6901
of the Code or any other applicable law) or another Person,
(2) being a member
of an affiliated, combined, consolidated or unitary
group (pursuant to Treasury
Regulation Section 1.1502-6 or otherwise)
or (3) any contractual liability
"Tax
Authority"
shall
mean
any Governmental Authority or any
quasi-governmental or private body having jurisdiction over the assessment,
determination, collection or imposition of
any Tax.
"Tax Return"
shall mean any return,
report, certificate,
form or similar
statement or document (including any related or supporting information or
schedule attached thereto and any
information return,
amended Tax return, claim
for refund or declaration of estimated Tax)
required or permitted to be supplied
to, or filed with, a Tax Authority in connection with the determination,
assessment or collection of any Tax or the
administration of any Laws, relating
to any Tax.
"Trademarks"
shall have the meaning set forth in Section 4.12(f).
"Transaction
Documents"
shall mean (i) this Agreement, (ii) the Buyer
Support Agreement, (iii) the Co-Investment Rights Agreements and (iv) the
Stockholder Support Agreement, as each has been amended, restated or
supplemented from time to time.
"Transaction
Related Expenses" shall mean the aggregate amount of all fees,
costs, charges, obligations and expenses
payable to Deutsche
Bank Securities,
Inc., Vestar Capital Partners and any of its
Affiliates,
Simpson Thacher &
Bartlett LLP, Bingham McHale LLP, Deloitte & Touche LLP, and any
other banker,
counsel, accountant, advisor, consultant,
agent or representative retained by or
on behalf of the Company or any Company
Subsidiary
(but excluding
LECG, LLC,
Williams Mullen, Willis Environmental and Simon,
Peragrine,
Smith &
Redfearn,
L.L.P.), in each case, relating to the sale of the Company Group and its
business, including, without limitation,
the preparation, negotiation, execution
and delivery of this Agreement and the Transaction Documents and the
consummation of the transactions
contemplated herein, excluding the financing of
such transactions (and all fees, costs, interest, charges, obligations and
expenses payable to Deutsche Bank
Securities, Inc. and others relating thereto),
but including the repayment and
defeasance of
Outstanding Debt
(including all
fees, costs, interest, charges, obligations and expenses
relating thereto,
incurred before, on or after the Closing Date);
it being understood that (1)
9
<PAGE>
sufficient funds will be deposited with the
applicable
trustee to defease
the
1995 Notes and (2) the Company will cause
such Persons to provide final invoices
prior to Closing for all services that are included in Transaction Related
Expenses. Transaction Related Expenses also shall include all
amounts paid or
payable to any officer, director, employee,
consultant,
stockholder,
agent or
other representatives of the Company or
any Company Subsidiary
contingent upon
the consummation of the transactions
contemplated by this
Agreement (other than
any such amount paid solely in
consideration for
securities of the Company held
by such Person), without duplication of any amounts
otherwise paid or
payable
under Section 3.1(c).
"VEP"
shall mean Vestar Equity Partners, L.P., a Delaware limited
partnership.
"WARN" shall
mean the Workers
Adjustment and Retraining Notification Act,
29 U.S.C. Sec. 2101 et seq., as amended,
and any other similar
state, local or
government regulation or ordinance.
Section 1.2
Interpretation
and Rules of
Construction. In this
Agreement,
except to the extent that the context
otherwise requires:
(a) when a reference is made in this Agreement to an Article, Section,
Exhibit or Schedule, such reference is to an Article or Section of,
or
an Exhibit
or a Schedule to, this Agreement unless otherwise
indicated;
(b) whenever the words "include," "includes" or "including"
are used in
this Agreement,
they are deemed to be
followed by the words "without
limitation";
(c) the words "hereof," "herein" and "hereunder" and words of similar
import, when used in
this Agreement,
refer to this
Agreement as a
whole and not to any particular provision of this Agreement;
and
(d) the definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms.
ARTICLE II
The Merger
Section 2.1
Surviving Corporation.
At the Effective Time and in accordance
with the provisions of this Agreement and the DGCL,
Buyer Sub shall be
merged
into the Company and shall cease to exist, and the Company shall be the
surviving corporation in the Merger
(hereinafter sometimes called the "Surviving
Corporation") and shall continue its corporate
existence under the
laws of the
State of Delaware and shall succeed to all rights, privileges, powers,
franchises, assets, liabilities and
obligations of the Company and Buyer Sub in
accordance with the provisions of the DGCL. The name of the Surviving
Corporation shall be "Aearo Corporation" at
and after the Effective Time.
Section 2.2
Effective Time. The
Merger shall become
effective at the time
of the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware (or at such later time as shall be
agreed upon by the Company
10
<PAGE>
and Buyer Parent and as shall be set forth
in such certificate)
in accordance
with the DGCL, which Certificate of Merger shall be so
filed at the time of the
Closing. The date and time when the Merger
becomes effective are herein referred
to as the "Effective Time."
Section 2.3
Closing. (a) The
closing of the
transactions
contemplated by
this Agreement (the "Closing") shall, subject to the satisfaction or
waiver of
the conditions set forth in Article VII, be held at the offices of Simpson
Thacher & Bartlett LLP in New York, New
York, commencing at 9:00 a.m. local time
(or such other place and time as the
parties shall mutually agree), on the third
Business Day after the conditions precedent set forth in Article VII are
satisfied or waived or at such other time as
the parties may
mutually agree;
provided, however, that the Closing Date shall not be
extended beyond the date
on which this Agreement terminates pursuant
to Section 9.1(b). The date on which
the Closing is to occur is hereinafter
referred to as the "Closing Date."
(a) At the Closing,
the Company and Buyer Sub shall execute a
certificate
of merger (the "Certificate of Merger") and cause the
Certificate of
Merger to be delivered for filing and recordation with the
Secretary of
State of the State of Delaware in accordance with the DGCL.
Section 2.4
Certificate of Incorporation. The Certificate of Incorporation,
as in effect at the Effective Time,
shall continue in
effect as the certificate
of incorporation of the Surviving Corporation until thereafter amended as
provided by Law.
Section
2.5 By-Laws. The by-laws of Buyer Sub, as in effect at the
Effective Time, shall be the by-laws of the
Surviving Corporation, until amended
as therein provided.
Section 2.6
Officers and Directors. From and after the Effective Time,
the
officers and directors listed on Schedule 2.6 shall be the officers and
directors of the Surviving Corporation, each to hold office in accordance
with
the certificate of incorporation and
by-laws of the Surviving Corporation.
ARTICLE III
Status and Conversion of Securities
Section 3.1
Status and Conversion of Securities. The manner of converting
or canceling the shares of the Company and
Buyer Sub in the Merger shall be as
set forth below. At the Effective Time, by virtue
of the Merger and without any
action on the part of the holders
thereof:
(a) All shares of Common Stock and Preferred Stock held by the
Company
as treasury
shares shall be cancelled and retired without payment therefor.
(b) Each share of Common Stock outstanding immediately prior to the
Effective Time
(other than Dissenting
Shares and Management
Roll Shares)
shall be
converted into the following:
11
<PAGE>
(i) for each such share of Common Stock with respect to which an
election to receive a Capital Stock Unit has been effectively made
and
not validly
revoked or lost, pursuant to Section 3.1(d) and (g)
("Electing Shares"), the right to receive fully paid and
nonassessable
Capital Stock Units (and cash in lieu of fractional shares of Capital
Stock Units); and
(ii) for each share of Common Stock (other than Electing
Shares),
the right to receive
an amount in cash (the "Per Share Cash Common
Merger Consideration"), as determined in Section 3.1(c) below.
(c) The Per Share Cash Common Merger Consideration shall be
determined
by dividing (i)
the result of (A) $385 million, minus (B) Outstanding Debt
less (x) the
aggregate amount of all cash and cash equivalents of the
Company Group
immediately prior to
the Effective Time, minus the aggregate
amount of checks
of the Company Group
outstanding at the
Effective Time,
and (y) the
aggregate exercise price of the Options outstanding immediately
prior to the
Effective Time, minus (C) any payments by the Company Group to
be made to
employees of the
Company Group under a
phantom equity plan
in
respect of the
Closing as
described on Schedule 3.1(c) (the "Phantom
Payments") or,
if Phantom Payments are not to be made, $17.9 million, minus
(D) all
Transaction
Related Expenses to the extent not paid
prior to the
Closing, minus
(E) the aggregate amount payable pursuant to Section 3.1(f),
plus (F) the
Management
Loan Amount minus (G)
fifty percent (50%) of
the
aggregate
amount
of compensation payable under the Aearo Company
Nonqualified
Deferred Compensation Plan at or after the
Effective Time in
respect of periods
ending at or prior to
the Effective
Time, by (ii) the
number
of shares of Common Stock outstanding immediately prior to the
Effective
Time (which shall be deemed to include
for purposes of this
clause
(ii) the Management Roll Shares), plus shares of Common Stock
issuable upon
the exercise of Options outstanding immediately prior to the
Effective
Time. Notwithstanding the foregoing, if Buyer Parent shall
purchase or
otherwise acquire shares of Common Stock prior to the Effective
Time (the
"Management
Roll"), a number of
such shares of Common Stock, to
be determined in
Buyer Parent's
discretion,
may be contributed by Buyer
Parent to Buyer
Sub immediately
prior to the Effective
Time and shall be
cancelled
and shall cease to
exist as of the
Effective Time
without any
consideration
being payable therefor. Any other shares of Common Stock
purchased
by Buyer Parent shall be retained by Buyer Parent
and shall be
entitled
to receive the Per
Share Cash Common
Merger Consideration.
The
aggregate Per
Share Cash Common Merger Consideration shall be paid by Buyer
Parent at
Closing (subject to the Company utilizing such payment to pay
any
Management Loan
Amount owed by such holder) by wire transfer of immediately
available
funds to an account
(or accounts)
specified at least two days
prior to the
Closing by the Company on behalf of each holder of Common
Stock.
(d) (i) Each
Person who,
on or prior to the
date hereof,
is a
record holder of shares of Common Stock (other than Dissenting
Shares)
will be entitled,
with respect to all or any portion of his shares
other than Management Roll Shares, to make an unconditional
election
(a "Non-Cash
Election")
on or prior to the
Closing Date to
receive
Capital Stock Units
pursuant to Section
3.1(b)(i), on the
basis set
forth in this Section 3.1.
(ii) Any Form of Election submitted to the Company by a
stockholder may be
revoked by such
stockholder
by written notice
12
<PAGE>
received by the
Company prior to 5:00
p.m., New York City
time, on
Wednesday, March 24,
2004. In addition, all
Forms of Election
shall
automatically be revoked if the transactions contemplated herein have
been abandoned.
(iii) If the Company
determines
that any election to receive
Capital Stock Units
was not properly
made with respect to
shares of
Common Stock,
such shares
shall be treated by
the Company as shares
which were not Electing Shares at the Effective Time, and
such shares
shall be converted
at the Effective Time into the right to receive
cash pursuant to Section 3.1(b)(ii). The Company shall also make
all
computations as to the
allocation and the proration contemplated by
Section 3.1(e),
and any such
computation
shall be conclusive and
binding on the holders of shares of Common Stock.
(e) Notwithstanding
anything in this
Agreement to the contrary, the
aggregate
number of shares of
Common Stock to be converted into the right
to receive
Capital Stock Units at
the Effective Time
shall not exceed the
quotient of (1)
the Aggregate Stock Consideration Value, divided by (2) the
Per Share Cash Common Merger Consideration (the "Non-Cash Election
Number").
(i) If the
number of Electing Shares exceeds the Non-Cash
Election Number, then
each Electing Share shall be converted into the
right to receive
Capital Stock Units or
receive cash in
accordance
with the terms of Section 3.1(b) in the following manner:
(A) a proration factor
(the "Non-Cash
Proration Factor")
shall be determined by
dividing the Non-Cash
Election Number by
the total number of Electing Shares;
(B) the number of Electing Shares covered by each Non-Cash
Election to be converted into the right to receive Capital Stock
Units shall be determined by multiplying the Non-Cash Proration
Factor by the total
number of Electing
Shares covered by such
Non-Cash Election rounded down to the nearest whole number; and
(C) all Electing
Shares, other than
those shares converted
into the right to receive Capital Stock Units in accordance
with
Section 3.1(e)(i)(B),
shall be converted into the right to
receive cash (on a consistent basis among stockholders who made
the election
referred to in Section 3.1(b)(i), pro rata in
accordance with the
number of shares as to
which they made such
election) as if such shares were not Electing Shares in
accordance with the terms of Section 3.1(b)(ii).
(ii) If the Number of Electing Shares is less than the
Non-Election Number, then:
(A) all Electing Shares shall be converted into the right to
receive Capital
Stock Units in accordance with the terms of
Section 3.1(b)(i); and
13
<PAGE>
(B) at the option of VEP, by written notice delivered on or
prior to 5:00 p.m., New York City time, on Thursday, March, 25,
2004, a number of the
shares of Common
Stock held by VEP up
to
(1) the Non-Cash Election Number minus (2) the number of
Electing
Shares, shall be
converted into the right to receive Capital
Stock Units in accordance with Section 3.1(b)(i) (on a
consistent
basis among
stockholders who held
shares of Common Stock
as to
which they did not
make the election referred to in Section
3.1(b)(i), pro rata in accordance with the number of shares as
to
which they did not make such election).
(f) Each share of Preferred Stock outstanding immediately prior to
the
Effective
Time shall be converted into the right to receive from the
Surviving
Corporation an amount
in cash equal to the aggregate liquidation
preference of
Preferred Stock plus all accrued and unpaid dividends thereon
through and
including the Closing Date (the "Per Share
Preferred Merger
Consideration").
The aggregate Per
Share Preferred
Merger Consideration
shall be paid by
the Surviving
Corporation pursuant to this Section 3.1(g)
by wire transfer
of immediately available funds to an account (or accounts)
specified
to Buyer Parent at least two days
prior to the
Closing by the
Company on
behalf of each holder of Preferred Stock.
(g) As soon as
reasonably practicable
after the date hereof, the
Company
shall mail to each
holder of record, as
of the date hereof, of
a
certificate
representing
any Common Stock or Preferred Stock (each a
"Certificate"
and, collectively, the "Certificates") (i) a letter of
transmittal in a
form reasonably
satisfactory to the parties hereto (which
shall contain
customary
representations and
warranties as to title, shall
specify that
delivery shall be effected, and risk of loss and title to
the
Certificates
shall pass, only upon
proper delivery of the
Certificates to
the Company and
shall contain an
indemnification by the
stockholder
for
such
stockholder's
pro rata share (in the
same proportion as such holders
would have been
entitled to receive the aggregate Per Share Cash Common
Merger
Consideration
and the aggregate Per Share Preferred Merger
Consideration
to be issued
and paid pursuant to Section 3.1(b) hereof
(without
regard to the Management Roll)) of any Transaction Related
Expenses not
paid on or prior to the Closing Date), (ii) instructions for
use in effecting
the surrender of the
Certificates for
payment therefor,
and (iii) to
each holder of a Certificate representing any Common Stock,
a
form of election
in a form reasonably
satisfactory
to the parties
hereto
(the
"Form of Election"), which shall be used by each holder of a
Certificate
of Common Stock who wishes to elect (with respect to such
holder's
shares of Common
Stock) to receive
Capital Stock Units (and cash
in lieu of
fractional
shares of Capital Stock Units), subject to the
provisions
of Section
3.1(e) hereof. Upon surrender to the Surviving
Corporation of a
Certificate, together with such letter of transmittal duly
executed and
completed in accordance with the instructions thereto and any
other required
documents, the holder
of such Certificate shall be entitled
to receive for
each of the shares
represented by such
Certificate the Per
Share Cash
Common Merger
Consideration, the
Capital Stock Units (and cash
in lieu of
fractional
shares of Capital Stock Units) or the Per Share
Preferred Merger
Consideration, as the
case may be, which shall be paid or
delivered by the
Surviving Corporation promptly following the Effective
Time pursuant to
Section 3.1(b) or (f), as applicable, and such Certificate
shall be
cancelled.
The Company shall
establish a procedure
pursuant to
which
transmittal
letters are made
available to
stockholders as soon
as
reasonably
practicable after the date hereof for completion and delivery
to
the Company, so
that Persons entitled to receive payment under this Section
14
<PAGE>
3.1 can
receive payment for their shares on the Closing Date by wire
transfer.
Until so surrendered,
such Certificates
shall represent
solely
the right to receive the Per Share Cash Common Merger Consideration,
certificates of
Capital Stock Units (and cash in lieu of fractional shares
of Capital Stock
Units) or Per Share Preferred Merger Consideration, as the
case may be,
payable or deliverable pursuant to Section 3.1(b) and (f) with
respect to each
of the shares represented thereby. Any election by a holder
of a
Certificate
representing
Common Stock (other than VEP) to receive
Capital Stock
Units shall have been properly made only if the Company shall
have received at
its designated office,
prior to 5:00 p.m.,
New York City
time, on
Wednesday, March 24,
2004 a Form of Election properly completed
and signed by
such holder.
Any election by VEP to
receive Capital
Stock
Units shall have
been properly made only if the Company shall have received
at its
designated
office, prior to 5:00 p.m., New York City time, on
Thursday,
March 25, 2004 a Form
of Election properly
completed and signed
by VEP.
Notwithstanding the foregoing, the Surviving Corporation may
reduce
the cash amount
payable to any holder by the Management Loan Amount owed to
the Company by
such holder. Upon
Buyer Parent's request
the Company shall
deliver copies
of completed letters of transmittal and Forms of Election.
(h) Each share of common stock, par value $.01 per share, of Buyer
Sub
outstanding
immediately prior to the Effective Time shall be converted into
one fully paid
and nonassessable
share of common stock, par value $.01 per
share, of the
Surviving Corporation.
(i) (i) At the Effective Time, all rights in respect of
Preferred
Stock or Common Stock or securities convertible into or exchangeable
for or exercisable into Common Stock (collectively, "Equity
Securities") shall
cease to exist,
other than the right to receive
cash or Capital Stock Units (and cash in lieu of fractional
shares of
Capital Stock
Units) as described in Sections 3.1(b) and (f) and
Section 3.2.
(ii) No dividends or other distributions with respect to
Capital
Stock Units with a record date after the Effective Time shall be paid
to the holder of any
unsurrendered
Certificate for shares
of Common
Stock with respect
to the Capital Stock Units to be received in
respect thereof and no cash payment in lieu of fractional
shares of a
Capital Stock
Unit shall be paid to any such holder pursuant to
Section 3.1(i)(iii)
until the surrender of such Certificate in
accordance with this Article III. Subject to the effect of
applicable
Laws, following surrender of any such Certificate, there shall be
paid
to the holder of the Certificate representing whole shares of Common
Stock
issued in connection
therewith, without
interest, (i) at the
time of such surrender
the amount of any cash payable in lieu of a
fractional share of
Capital Stock Units to which such holder is
entitled pursuant to Section 3.1(i)(iii) and the proportionate
amount
of dividends
or other distributions with a record date after the
Effective Time
theretofore paid with
respect to such whole shares of
Common Stock,
and (ii) at the appropriate payment date, the
proportionate amount of dividends or other distributions with a
record
date after
the Effective Time but prior to such surrender and a
payment date subsequent to such surrender payable with respect to
such
whole shares of Common Stock.
(iii) No certificates or scrip representing fractional shares of
a Capital Stock Unit shall be issued in connection herewith,
and such
fractional share
interests will not entitle the owner thereof to vote
15
<PAGE>
or to any rights of a
stockholder
of Buyer Parent or the Company.
Notwithstanding any other provision of this Agreement, no
certificates
or scrip representing
fractional shares of
Capital Stock Units shall
be issued upon the
surrender for exchange
of Certificates
and such
fractional shares
shall not entitle the
owner thereof to vote
or to
any other rights of a
holder of Capital
Stock Units. Each record
holder of shares of Common Stock exchanged pursuant hereto who would
otherwise have been
entitled to receive a fraction of a Capital Stock
Unit (after taking
into account all shares of Common Stock delivered
by such holder)
shall receive, in lieu thereof, a cash payment
(without interest) in lieu of such fractional share.
(j) Simultaneously
with the Closing, the
Surviving
Corporation
shall repay,
or cause to be repaid, on behalf of the Surviving
Corporation and the Company Subsidiaries, the Outstanding Debt
(except
for amounts
outstanding
pursuant to Items 1, 2 and 5 of Schedule
4.15(a)(i)) by wire
transfer of
immediately
available funds to be
provided at the
Closing by Buyer
Parent or Buyer Sub, as directed by
the holders
of such Outstanding Debt, and the Company shall use
commercially
reasonable efforts
to deliver to Buyer Parent all
appropriate payoff
letters and to make
arrangements to deliver UCC-3
termination statements or similar documents evidencing the
termination
of all liens, security
interests,
mortgages and other
Encumbrances
held by the lenders under such Outstanding Debt.
(k) Simultaneously
with the Closing, the
Surviving
Corporation
shall pay,
or cause to be paid, on behalf of the Company, the
Transaction Related Expenses by wire transfer of immediately
available
funds as directed by the Company.
Section 3.2
Options. Effective as of the Effective Time, each Option,
whether or not then exercisable or vested, shall, immediately prior to the
Effective Time, be cancelled and, in
consideration
of such cancellation, the
holder of such Option shall be entitled to receive payment by the Surviving
Corporation (subject to the Surviving
Corporation
withholding
from each such
holder a portion of such amount for any
applicable withholding, excise or other
applicable Tax) of an amount in cash equal
to the product of (a) the excess, if
any, of the Per Share Cash Common Merger
Consideration
over the exercise
price
of such Option multiplied by (b) the number of
shares subject thereto
without
regard to whether previously vested.
Notwithstanding anything to the contrary in
this Agreement, to the extent that the
exchange of cash for
Options held by a
holder would subject such holder to an excise tax
pursuant to Section 4999 of
the Code, such Options shall not be exchanged
for cash unless the
requisite
approval of the stockholders of the Company
pursuant to Section
280G(b)(5)(ii)
of the Code is obtained with respect to such exchange for cash. If such
stockholder approval is not obtained,
then such Options
shall not be exchanged
for cash as provided in the first sentence of this Section 3.2, but shall
instead be converted/adjusted in accordance with the terms of the applicable
Option Plan and any applicable award agreement. Payment by the Surviving
Corporation in consideration of cancellation of
the Option shall be made at the
Closing by wire transfer of immediately available funds to an account that is
specified at least two days prior to the
Closing by the Company on behalf of
each holder of such Options. Buyer Parent shall cause the
Surviving Corporation
to make timely payment to the appropriate
taxing authority or authorities of any
amounts withheld from payment to the
holders of Options under this Section 3.2.
Prior to (but effective at) the Effective Time, the Company shall use
commercially reasonable efforts to (i) obtain any consents
from all holders of
Options and (ii) make any amendments to the terms of the Option
Plans or any
applicable award agreements that, in the case
of either clause (i) or (ii), are
16
<PAGE>
necessary to give effect to the
transactions
contemplated
by this Section
3.2
and to assure that, as of the Effective
Time, the Option Plans
shall terminate
and all rights under any provision of any other plan,
program or
arrangement
providing for the issuance or grant of any other interest in respect of the
capital stock of the Company or any Company
Subsidiary shall be
cancelled. For
purposes of the preceding sentence, commercially reasonable efforts shall
include (x) accelerating the date of vesting and exercisability of any
unexercised and unexpired portion of each Option to a date
specified by the
Board of Directors of the Company prior to
the Closing Date and (y) terminating
each Option as of the Effective Date,
provided that notice
of such
termination
is given to the holder of the Option at
least 10 days prior to the Closing Date
and the holder of the Option shall have the right to exercise so much of the
Option as is then vested and exercisable
during said 10-day period, including if
the Option becomes exercisable due to
acceleration of exercisability as provided
in clause (x). The Company shall provide notice to each holder of an
Option
which includes an acknowledgement that,
among other things, upon the cash-out of
the Option as provided for in this
Section 3.2,
such Option shall be
cancelled
and the former holders of such Option shall have
no further rights with respect
to such Option.
Section 3.3
Closing of the Company
Transfer Books. At the
Effective Time,
the stock transfer books of the Company shall be closed and no
transfer of
Equity Securities shall thereafter be made. If, after the Effective Time,
certificates previously representing Equity Securities are presented to the
Surviving Corporation, they shall be canceled and
exchanged for the applicable
amount of Per Share Cash Common Merger Consideration or Per Share Preferred
Merger Consideration or the applicable
number of Capital
Stock Units (and cash
in lieu of fractional shares of Capital
Stock Units) as provided in Section 3.1.
Section 3.4
Dissenting Shares.
Notwithstanding
anything in this Agreement
to the contrary, shares of Common Stock
outstanding
immediately
prior to the
Effective Time and held by a holder who has
not voted in favor of the Merger or
consented thereto in writing and who has
demanded appraisal for
such shares in
accordance with the DGCL, if the DGCL
provides for
appraisal rights for such
shares in the Merger ("Dissenting Shares"),
shall not be converted
into a right
to receive the Per Share Cash Common Merger
Consideration or Capital Stock Units
(and cash in lieu of fractional
shares of Capital
Stock Units), but
shall have
the rights set forth in Section
262 of the DGCL (or
any successor
provision),
unless such holder fails to perfect or
withdraws or otherwise loses his right to
appraisal. If, after the Effective Time, such holder fails to perfect or
withdraws or loses his right to appraisal, such Dissenting Shares shall be
treated as if they had been converted as of the Effective
Time into a right
to
receive the consideration, if any, to which the holder of such shares is
entitled as provided in Section 3.1 hereof without interest or dividends
thereon. The Company shall give Buyer Parent prompt notice of any demands
received by the Company for appraisal of
shares of Common Stock, and, prior to
the Effective Time, Buyer Parent shall have the right
to participate
in all
negotiations and proceedings with respect to such demands. Prior to the
Effective Time, the Company shall not,
except with the prior written consent of
Buyer Parent, make any payment with respect to, or settle or
offer to settle,
any such demands.
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<PAGE>
ARTICLE IV
Representations and Warranties of the Company
The Company
hereby represents and warrants to each of Buyer
Parent and
Buyer Sub as follows:
Section
4.1 Organization, Etc. Each of the Company and the Company
Subsidiaries is duly organized, validly existing and in good standing
(where
such status is recognized) under the laws of the jurisdiction of its
organization, with all corporate power and
authority necessary to own, lease or
operate the properties and assets owned, leased or operated by it and to
carry
on its business as currently conducted, except where the failure to be so
organized, existing and in good standing
(where such status is recognized) or to
have such corporate power or authority is not and is
not reasonably
likely to
be, material, and except, in the case of
any immaterial Company Subsidiary only,
where the failure to be so organized,
existing and in good
standing (where such
status is recognized) or to have such
corporate power or authority does not have
and is not reasonably likely to have, in the aggregate, a Material Adverse
Effect. Each of the Company and the Company Subsidiaries is qualified or
licensed to do business in each
jurisdiction in which
ownership of its property
or assets or the conduct of its business
requires such qualification or license,
except where the failure to be so
qualified or licensed
has not had and is not
reasonably likely to have, in the
aggregate, a Material Adverse Effect. True and
complete copies of the certificate of incorporation and by-laws (or other
comparable governing documents) of each of the Company and the Company
Subsidiaries, as in effect as of the date
hereof and in effect immediately prior
to the Effective Time, have been heretofore
made available to Buyer Parent.
Section 4.2
Capitalization
of the Company and the Company
Subsidiaries;
Minute Books.
(a) Schedule
4.2(a) sets forth the authorized and the issued and
outstanding
capital stock of the Company, and the owners thereof. Except as
set forth on
Schedule 4.2(a), all
issued and outstanding shares of capital
stock of the
Company are duly authorized, validly issued, fully paid,
nonassessable
and free of
preemptive
rights and held of record by the
Persons
indicated on Schedule
4.2(a), free and clear
of any Encumbrances.
Except as set
forth on Schedule 4.2(a), there are no outstanding (i)
securities
convertible
into or exchangeable
for the capital stock
of the
Company,
(ii) options, warrants, calls or other rights to purchase or
subscribe for
capital stock of the
Company or (iii)
Contracts of any kind
to which any of
the Company
and the Company Subsidiaries is subject or
bound requiring
the issuance after the date hereof of (x) any capital stock
of the Company,
(y) any convertible or
exchangeable
security of the
type
referred to in
clause (i) or (z) any options, warrants, calls or rights of
the type
referred to in clause (ii). There are no voting trusts, proxies
or
other
agreements
or understandings to which the Company, any Company
Subsidiary or
any of their
respective
stockholders or equity
owners is a
party
or by which the Company or any of Company Subsidiary or their
respective
stockholders
or equity owners is bound with respect to the
voting
of any shares of capital stock, or any other equity or voting
security or
interest of the Company or any Company Subsidiary. Neither the
Company
nor any Company Subsidiary is the subject of any bankruptcy,
dissolution,
liquidation, reorganization or similar proceeding.
18
<PAGE>
(b) Schedule
4.2(b) sets forth a complete list of the Company
Subsidiaries
and the authorized and the issued and outstanding capital
stock
or other ownership interests, as the case may be, of each of the
Company
Subsidiaries
and the owners thereof. Except as set forth on
Schedule
4.2(b), all issued and outstanding shares of capital stock or
other
ownership interests of each of the Company
Subsidiaries
are duly
authorized,
validly
issued, fully paid, nonassessable and free of
preemptive
rights and held of record and owned beneficially by the Persons
indicated on
Schedule 4.2(b), free and clear of any Encumbrances other than
Permitted
Encumbrances. There are no outstanding (i) securities
convertible
into or
exchangeable for the capital stock or other ownership interests of
any of the
Company Subsidiaries,
(ii) options,
warrants, calls or other
rights to
purchase or subscribe for capital stock or other ownership
interests of any
of the Company Subsidiaries or (iii) Contracts of any kind
by which any of
the Company
and the Company Subsidiaries is subject or
bound requiring
the issuance after the date hereof of (x) any capital stock
or any other
ownership interests of
any of the Company
Subsidiaries, (y)
any convertible
or exchangeable
security of the type referred to in clause
(i) or (z) any
options, warrants,
calls or rights of the
type referred to
in clause (ii).
Except for the
Company's direct and
indirect interest
in
the Company Subsidiaries as set forth in Schedule 4.2(b), neither the
Company nor any
Company Subsidiary owns directly or indirectly any interest
or investment in the form of equity in, and
neither the Company nor any
Company
Subsidiary is subject
to any obligation or
requirement to provide
for or to make
any investment in, any Person.
(c) The minute books of the Company and each of Aearo Company, Aearo
Canada Ltd.,
Peltor AB and Aearo
Ltd. accurately
reflect in all
respects
all material
actions taken by
written consent or
resolution and
meetings
held on or after
September 30, 2002, by their respective stockholders and
boards of
directors. The stock record books of the Company and each
Company
Subsidiary
accurately reflect in
all material respects all transactions in
their
respective
capital stock (or other ownership interests) of all
classes of which
the Company has been given notice. Correct and complete
copies of such
minute books and stock
record books of the Company and each
Company
Subsidiary
have been made
available to Buyer
Parent prior to the
date hereof.
Section 4.3
Authority Relative to this Agreement, Etc. The Company has all
requisite corporate power and authority to execute and
deliver this
Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery by the Company of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action of the Company. This Agreement has been duly and validly
executed and delivered by the Company and,
assuming this Agreement has been duly
authorized, executed and delivered by Buyer
Parent and Buyer Sub, this Agreement
constitutes a valid and binding obligation
of the Company,
enforceable
against
it in accordance with its respective terms, in each case subject to
applicable
bankruptcy, insolvency, reorganization, moratorium and similar Laws
affecting
creditors' rights and remedies
generally.
Section 4.4
Consents and Approvals; No Violations. Except for the Required
Consents or otherwise as set forth on Schedule 4.4, neither the execution,
delivery and performance of this Agreement by
the Company nor the
consummation
by the Company of the transactions contemplated hereby will (a) violate any
provision of the certificate of
incorporation
or by-laws (or other
comparable
governing documents) of the Company or any of the Company
Subsidiaries,
(b)
require any consent, waiver, approval,
license, authorization or Permit of, or
19
<PAGE>
filing with or notification to, any Governmental Authority except for (i)
compliance with all applicable antitrust Laws and (ii) such
consents, waivers,
approvals, licenses, authorizations,
Permits, filings or notifications which, if
not obtained or made, does not have and are not
reasonably
likely to have, in
the aggregate, a Material Adverse Effect, (c) result in a violation or
breach
of, or constitute (with or without notice or lapse of time or both) a
default
(or give rise to any right of termination, cancellation or acceleration of
any
liability or obligation to repay or other right
to receive payment)
under any
Contract, to which the Company or any of the
Company Subsidiaries is a party or
by which the Company or any of the Company Subsidiaries or any of their
respective properties or assets may be bound,
except such violations, breaches
and defaults which does not have and are
not reasonably
likely to have, in
the
aggregate, a Material Adverse Effect, or (d) violate any Law or order,
writ,
judgment, injunction, settlement agreement or decree
applicable to the Company
or any of the Company Subsidiaries or by which any of their respective
properties or assets are bound, except such
violations which do not have and are
not reasonably likely to have, in the
aggregate, a Material Adverse Effect.
Section 4.5
Financial Statements; SEC Documents.
(a) The Company has made available to Buyer Parent true and
complete
copies of (i)
the audited
consolidated balance
sheets and
statements of
income and cash
flows of the Company
Group as at, and for the fiscal years
ended,
September 30, 2002 and
September 30, 2003 and the notes thereto and
(ii) the
unaudited consolidated
balance sheet and
statement of income and
cash flows of
the Company Group as
at and for the four month period ended
January 31, 2004
(collectively, the
"Company Group Financial Statements").
Except as
otherwise indicated in the Company Group Financial Statements or
as set forth on
Schedule 4.5, the balance sheets and statements of income
and cash flows
included in the Company Group Financial Statements have been
prepared in
accordance with GAAP
consistently
applied during the
periods
involved and
fairly present, in all
material respects,
the consolidated
financial
position and the results of operations and cash flows of the
Company
and the Company Subsidiaries for the period presented therein
(subject,
in the case of
unaudited statements, to the normal year-end
adjustments
(none of which are
expected to be material) and the absence of
footnotes).
THE COMPANY MAKES NO REPRESENTATION WITH RESPECT TO ANY
FINANCIAL
INFORMATION
OF ANY OF THE COMPANY
AND THE COMPANY
SUBSIDIARIES
OTHER THAN AS
CONTAINED IN OR PURSUANT TO THIS AGREEMENT.
(b) The Company has filed with the SEC all reports, forms, schedules
and statements required to be filed by it since
January 1, 2001 (the "SEC
Documents").
As of their respective filing dates, the SEC Documents
complied as to
form in all material
respects with the
requirements of the
Securities
Act, or the Exchange
Act, as the case may be, and the rules and
regulations
of the SEC
promulgated
thereunder
applicable
to such SEC
Documents.
Neither the
Company's Annual Report on Form 10-K for the
year
ended
September 30, 2003 or
any SEC Documents filed thereafter contained
any untrue
statement of a material fact or omitted to state a material
fact
required to be
stated therein under applicable federal securities laws in
order to make
the statements
therein, in light of
the circumstances under
which they were
made, not materially
misleading. The
financial statements
included in the
SEC Documents complied, as of their respective filing dates
as to form in
all material respects with applicable accounting requirements
and the
published rules and
regulations of the SEC
with respect
thereto,
20
<PAGE>
were
prepared in accordance
with GAAP (except, in the case of unaudited
statements,
as permitted by Form 10-Q of the SEC)
applied on a consistent
basis during the
periods involved
(except as may be indicated in the notes
thereto) and
fairly present, in all
material respects,
the consolidated
financial
position of the
Company and the Company Subsidiaries as of the
dates
thereof and the results of its operations and cash flows for the
periods then
ended (subject, in the case of unaudited statements, to normal
year-end
adjustments
(none of which are
expected to be material) and the
absence of
footnotes).
Section 4.6
Absence of Certain Changes. Since September 30, 2003, except as
set forth on Schedule 4.6 or as expressly contemplated by the Transaction
Documents, the Company and the Company Subsidiaries have conducted their
respective businesses in the Ordinary
Course and there has not been:
(a) any change,
development, event,
occurrence, condition
or effect
that,
individually or in the aggregate, has had or is reasonably likely
to
have a Material
Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or
other
distribution
(whether in cash,
stock or property)
with respect to any
of
the Company's
capital stock;
(c) except in the Ordinary Course of business (i) any
granting by the
Company or any
Company Subsidiary to any officer of the Company of any
material
increase in compensation, (ii) any granting by the Company
or any
Company
Subsidiary to any officer, employee, director or consultant of any
increase in
severance or termination pay, (iii) any entry by the Company or
any Company Subsidiary into any written employment agreement, or any
severance
or termination agreement or arrangement, with any officer,
employee,
director or
consultant or (iv) any
adoption or amendment of any
Benefits
Plans, in the case of
clauses (i) through (iv) that has had or is
reasonably
likely to have a Material Adverse Effect;
(d) any material change in accounting methods, principles or
practices
by the Company
or any Company
Subsidiary or any material revaluation for
financial
statement purposes by the Company or any
Company Subsidiary
of
any asset
(including, without
limitation, any material writing down of the
value of any
material property, investment or assets);
(e) any material
adverse change in its
relationship with any
of the
suppliers,
customers, distributors, lessors, licensors, licensees or
other
third parties
which are material to the business;
(f) any sale, lease,
license or disposition by the Company or a
Company
Subsidiary
of any assets with a
fair market value of
$250,000 or
higher;
(g) any amendment, restatement, supplement or waiver of any
provision
of the
certificate
of incorporation or by-laws (or other comparable
governing
documents) of the Company or any Company Subsidiary; or
21
<PAGE>
(h) any agreement by
the Company or any Company Subsidiary to do any
of the
foregoing.
Section 4.7
Compliance with Law;
Permits. Except as set
forth on
