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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
