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EXHIBIT 10.12
EXECUTION COPY
MANAGEMENT SUBSCRIPTION AND CONTRIBUTION AGREEMENT, dated as of
April 7, 2004
(this "Agreement"), by and among AC SAFETY HOLDING CORP., a
Delaware corporation
(the "Corporation"), and the PURCHASER set forth on the
signature page hereto
(the "Purchaser").
RECITALS
WHEREAS, pursuant to the Agreement and Plan of Merger dated as
of March 10,
2004 (as amended, supplemented or restated from time to time,
the "Merger
Agreement"), by and among the Corporation, its wholly owned
subsidiary AC Safety
Acquisition Corp., a Delaware corporation ("Acquisition"), and
Aearo
Corporation, a Delaware corporation ("Aearo"), Acquisition will
merge with and
into Aearo, with Aearo being the surviving corporation and a
wholly owned
subsidiary of the Corporation (the "Merger");
WHEREAS, in connection with the Merger, the Purchaser desires
to
contribute, assign, convey, transfer and deliver to the
Corporation, and the
Corporation desires to purchase, the number of shares of common
stock, par value
$0.01 per share, of Aearo set forth on the signature page hereto
(the
"Contributed Shares") valued at the dollar amount listed
immediately below the
Contributed Shares number on the signature page hereto, subject
to the terms and
conditions set forth herein;
WHEREAS, in connection with the Merger, the Corporation desires
to issue to
the Purchaser, and the Purchaser desires to purchase from the
Corporation, the
number of shares set forth on the signature page hereto of (i)
the Corporation's
common stock, $0.01 par value per share (the "Common Stock"),
and (ii) the
Corporation's Series A Preferred Stock, $0.01 par value per
share (the
"Preferred Stock"), in return for the Contributed Shares and
certain additional
cash consideration, if any, set forth on the signature page
hereto (the
"Additional Cash Consideration") and subject to the terms and
conditions set
forth herein;
WHEREAS, in connection with the Merger, the Corporation has
established the
AC Safety Holding Corp. 2004 nonqualified deferred compensation
plan for the
benefit of certain employees of the Corporation (the "Deferred
Compensation
Plan");
WHEREAS, in connection with the Merger and as consideration for
the
Purchaser's employment with the Corporation, the Corporation has
determined to
give the Purchaser a bonus in the amount set forth on the
signature page hereto
(the "Transaction Bonus") payable by crediting the Purchaser's
Deferred
Compensation Account, as established under the Deferred
Compensation Plan, with
Deferred Common Stock Units and Deferred Preferred Stock Units
in the amounts
set forth on the signature page hereto; and
WHEREAS, the Purchaser agreed to enter into this Agreement as an
inducement
for the Corporation to enter into the Merger Agreement and the
other agreements
contemplated thereby and the Purchaser hereby agrees to be bound
by the terms
and provisions hereof, including, without limitation, the
restrictions contained
herein, as an inducement for the Corporation to
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enter into this Agreement and to consummate the Merger and the
other
transactions contemplated by the Merger Agreement.
NOW THEREFORE, in consideration of the mutual promises herein
made, and in
consideration of the representations, warranties, and covenants
herein
contained, the Corporation and the Purchaser hereby agree as set
forth below.
ARTICLE I
PURCHASE AND SALE OF THE SECURITIES; CLOSING
1.1 AUTHORIZATION OF ISSUANCE AND SALE OF THE PURCHASED
SECURITIES.
Subject to the terms and conditions hereof, the Corporation has
authorized
the issuance, sale and delivery to the Purchaser of the number
of shares of
Common Stock and Preferred Stock as set forth on the signature
page hereto
(collectively, the "Purchased Securities").
1.2 ISSUANCE AND SALE OF THE PURCHASED SECURITIES; APPLICATION
OF TRANSACTION
BONUS; ISSUANCE OF DEFERRED UNITS.
(a) In accordance with, and subject to, the provisions of this
Agreement,
at the Closing (as such term is defined in the Merger
Agreement), (i) the
Purchaser shall contribute, assign, transfer, convey and deliver
to the
Corporation the Contributed Shares, free and clear of all
encumbrances and the
Corporation shall acquire the Contributed Shares for the
consideration set forth
in this Section 1.2, (ii) to the extent applicable, the
Purchaser shall pay to
the Corporation, in the manner provided in Section 1.3, the
Additional Cash
Consideration, and (iii) in consideration for "(i)" and "(ii)",
the Corporation
shall issue, sell and deliver to the Purchaser, as consideration
for the
Contributed Shares and the Additional Cash Consideration, the
Purchased
Securities.
(b) In accordance with, and subject to, the provisions of this
Agreement,
at the Closing, the Corporation shall grant to the Purchaser the
Transaction
Bonus, as consideration for the Purchaser's commitment to
acquire the Purchased
Securities and for other good and valuable consideration, by
crediting the
Purchaser's Deferred Compensation Account and crediting such
Deferred
Compensation Account with Deferred Common Stock Units and
Deferred Preferred
Stock Units (collectively, the "Deferred Units") in amounts
equal to the amounts
set forth on the signature page hereto.
(c) Subject to the terms and conditions contained in this
Agreement, each
party shall use commercially reasonable efforts to take or cause
to be taken all
actions and do or cause to be done all things required under all
applicable
laws, in order to consummate the transactions contemplated by
this Agreement.
1.3 CLOSING; CONDITIONS.
(a) The Closing shall occur at the offices of O'Melveny &
Myers LLP, Times
Square Tower, 7 Times Square, New York, New York 10036. The
Closing shall occur
immediately
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prior to the consummation of the Merger and the other
transactions contemplated
by the Merger Agreement.
(b) At the Closing, the Corporation shall:
(i) deliver to the Purchaser a counterpart to this Agreement
duly
executed by the Corporation;
(ii) deliver to the Purchaser a counterpart to the
Stockholders'
Agreement, dated as of the date hereof (the "Stockholders'
Agreement"),
among the Corporation and the other parties thereto, duly
executed by the
Corporation;
(iii) a counterpart to the Buyer Support Agreement, dated as of
the
Closing Date (the "Buyer Support Agreement"), among the
Corporation, Bear
Stearns Merchant Banking Partners II, L.P., Vestar Equity
Partners, L.P.
and the other stockholders of the Corporation whose names are
set forth on
the signature pages thereto;
(iv) deliver to the Purchaser certificates representing the
Purchased
Securities being purchased by the Purchaser registered in the
name of the
Purchaser; and
(v) credit the Purchaser's Deferred Compensation Account with
Deferred
Common Stock Units and Deferred Preferred Stock Units in amounts
equal to
the amounts set forth on the signature page hereto.
(c) At the Closing, the Purchaser shall deliver to the
Corporation:
(i) a counterpart to this Agreement duly executed by such
Purchaser;
(ii) a counterpart to the Stockholders' Agreement;
(iii) if applicable, a Spousal Acknowledgment and Consent as
required
by the Stockholders' Agreement duly executed by the spouse of
the
Purchaser;
(iv) a counterpart to the Buyer Support Agreement;
(v) one or more certificates representing the number of
Contributed
Shares set forth on the signature page hereto duly endorsed in
blank for
transfer or accompanied by stock powers duly executed in blank,
free and
clear of any and all encumbrances, sufficient in form and
substance to
convey to the Corporation title to the Contributed Shares (or an
affidavit
of lost certificate with respect to such Contributed Shares in
form and
substance reasonably satisfactory to the Corporation); and
(vi) to the extent applicable, the Additional Cash
Consideration, by
wire transfer of immediately available funds to an account
designated by
the Corporation within two days prior to the Closing.
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1.4 SECTION 351 TRANSACTION.
The Corporation and the Purchaser agree that the transaction
effected
hereby is entered into in connection with the transaction
contemplated by (i)
the Merger Agreement, (ii) the Securities Purchase Agreement,
dated as of the
date hereof, by and among the Corporation and the Purchasers
parties thereto,
(iii) the Management Contribution Agreements, dated as of the
date hereof, by
and between the Corporation and the Contributors whose names are
set forth on
the signature pages thereto and (iv) the Management Subscription
and
Contribution Agreements, dated as of the date hereof, by and
between the
Corporation and the Purchasers whose names are set forth on the
signature pages
thereto (collectively, the "Related Transactions"), and is
intended to, together
with the Related Transactions, constitute a single transaction
under Section 351
of the Internal Revenue Code of 1986, as amended, and the
regulations
promulgated thereunder (collectively, "Section 351"), so that
the Purchasers,
along with any other party receiving shares of capital stock in
the Corporation
pursuant to the Related Transactions, are treated as
contributing property to
the Corporation in exchange for its shares of capital stock and
controlling the
Corporation under Section 351 immediately after the Related
Transactions are
effected. The Corporation and the Purchaser shall report the
transaction
effected hereby as a contribution under Section 351, and not
take any position
inconsistent with such treatment.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
As a material inducement to the Purchaser to enter into and to
perform its
respective obligations under this Agreement, the Corporation
represents and
warrants to the Purchaser as of the date hereof as set forth
below.
2.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER.
The Corporation is duly organized, validly existing and in good
standing
under the laws of the State of Delaware, and has all requisite
power and
authority to own, lease and operate its properties and assets
and to carry on
its business as presently being conducted. The Corporation is
qualified or
licensed to do business and is in good standing in every
jurisdiction in which
the failure to so qualify, be licensed or be in good standing,
individually or
in the aggregate, could have a material adverse effect on the
Corporation.
2.2 AUTHORIZATION.
(a) The Corporation has all requisite power and authority to
execute and
deliver this Agreement and any and all instruments necessary or
appropriate in
order to effectuate fully the terms and conditions of this
Agreement, and the
transactions contemplated hereby. This Agreement has been duly
authorized by all
necessary action (corporate or otherwise) on the part of the
Corporation and
this Agreement has been duly executed and delivered by the
Corporation and
constitutes the valid and legally binding obligation of the
Corporation,
enforceable in accordance with its terms and conditions,
subject, as to
enforcement, to bankruptcy, insolvency, reorganization,
moratorium and similar
laws of general applicability relating to or affecting
creditors' rights and to
general equity principles.
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(b) The authorization, issuance, sale and delivery of the
Purchased
Securities and the securities issuable with respect to the
Purchaser's benefits
under the Deferred Compensation Plan have been duly authorized
by all requisite
action of the Corporation's board of directors (the "Board").
The Purchased
Securities and the securities issuable with respect to the
Purchaser's benefits
under the Deferred Compensation Plan will be validly issued and
outstanding,
fully paid and nonassessable, with no personal liability
attaching to the
ownership thereof, free and clear of any encumbrances whatsoever
and with no
restrictions on the voting rights thereof and other incidents of
record and
beneficial ownership pertaining thereto, in each case, created
by the
Corporation, other than as contemplated by the Stockholders'
Agreement.
(c) The execution, delivery and performance of this Agreement by
the
Corporation and the consummation of the transactions
contemplated hereby shall
not (i) violate any law applicable to the Corporation or any of
its assets or
(ii) conflict with, or result in any breach of, any of the
terms, conditions or
provisions of, or constitute (with due notice or lapse of time,
or both) a
default or give rise to any right of termination, cancellation
or acceleration,
or result in the creation of any encumbrance (x) upon any of the
Corporation's
assets or (y) under any provision of (A) the Corporation's
certificate of
incorporation or bylaws, (B) any permit or (C) any other
contract to which the
Corporation is a party or by which its assets is or may be
bound. The
Corporation has not been and is not required to give any notice
to, or make any
filing with, any Governmental Authority or any other Person, or
obtain any
permit, in each case, for the valid execution, delivery and
performance by the
Corporation.
2.3 CAPITALIZATION OF THE CORPORATION.
(a) Immediately after the Closing, the authorized capital stock
of the
Corporation shall consist of 4,000,000 shares, of which (i)
3,849,999 shares
will be Common Stock, of which (A) 2,510,499 shares will be
issued and
outstanding, fully paid and nonassessable and (B) 633,923 shares
will be
reserved for issuance pursuant to the Corporation's 2004 Stock
Incentive Plan,
(ii) one share will be Class A Common Stock, of which one share
will be issued
and outstanding, fully paid and nonassessable, and (iii) 150,000
shares of
preferred stock, $0.01 par value per share, of which 76,000
shares will be
designated as Series A Preferred Stock, 75,188 shares of which
will be issued
and outstanding, fully paid and nonassessable.
(b) Except as described in Section 2.3(a) and as contemplated by
the
Stockholders' Agreement, there are no (i) outstanding warrants,
options,
agreements, convertible securities or other commitments or
instruments pursuant
to which the Corporation is or may become obligated to issue or
sell any shares
of its capital stock or other securities or (ii) preemptive or
similar rights to
purchase or otherwise acquire shares of the capital stock or
other securities of
the Corporation.
2.4 OFFERING EXEMPTION.
Assuming the accuracy of the representations and warranties of
the
Purchaser made in Article III, the offering, sale and issuance
of the Purchased
Securities and the securities issuable with respect to the
Purchaser's benefits
under the Deferred Compensation Plan have been, are, and will
be, exempt from
registration under the Securities Act of 1933, as amended, and
the rules and
regulations in effect thereunder (the "Securities Act"), and
such offering, sale
and issuance is also exempt from registration under applicable
state securities
and "blue sky" laws.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As a material inducement to the Corporation to enter into and
perform its
obligations under this Agreement, the Purchaser represents and
warrants as to
the Corporation as of the date hereof as set forth below.
3.1 VALID TITLE; POWER AND AUTHORITY; NO CONFLICTS.
(a) The Purchaser beneficially owns and has valid title of
record to the
Contributed Shares, free and clear of any encumbrance, subject
only to
restrictions as to marketability imposed by securities laws.
(b) Subject only to restrictions as to marketability imposed by
securities
laws, the Purchaser has full right, power, authority and
capacity and all
approvals required by law, if any, to sell, transfer, assign and
deliver the
Contributed Shares hereunder and to enter into this Agreement,
and the
Corporation will acquire valid title to the Contributed Shares,
free and clear
of any encumbrance, upon the consummation of the transactions
contemplated by
this Agreement.
(c) The Purchaser has all requisite power and authority
(corporate or
otherwise) to execute and deliver this Agreement and any and all
instruments
necessary or appropriate in order to effectuate fully the terms
and conditions
of this Agreement and to perform and consummate such Purchaser's
obligations
hereunder. This Agreement and the performance of the Purchaser's
obligations
hereunder, have been duly authorized by all requisite action on
the part of the
Purchaser, and this Agreement has been duly and validly executed
and delivered
by the Purchaser and constitutes a valid and legally binding
obligation of the
Purchaser, enforceable against the Purchaser in accordance with
its terms and
conditions, except as enforceability thereof may be limited by
any applicable
bankruptcy, reorganization, insolvency or other laws affecting
creditors' rights
generally or by general principles of equity.
(d) The execution, delivery and performance by the Purchaser of
this
Agreement, and the consummation of the transactions contemplated
hereby, shall
not (i) violate any law applicable to the Purchaser or any of
its assets or (ii)
conflict with, or result in any violation or breach of, any of
the terms,
conditions or provisions of, or constitute (with due notice or
lapse of time, or
both) a default under, or give rise to any right of termination,
cancellation or
acceleration or result in the creation of any encumbrance upon
any of the assets
of the Purchaser, the Purchaser's organizational documents, to
the extent
applicable, any permit, any contracts to which the Purchaser is
a party or by
which it or any of the Purchaser's assets is or may be bound, in
each case,
which would prohibit the Purchaser from consummating
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