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
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 & Xxxxx LLP, Times
Square Tower, 0 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. The Closing shall occur
immediately
2
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
Xxxxxxx 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.
3
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.
4
(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.
5
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 the transactions
contemplated hereby. The Purchaser has not been or 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 Purchaser of this Agreement.
3.2 CERTAIN INVESTMENT REPRESENTATIONS.
6
(a) The Purchaser is an "accredited investor" as that term is defined in
Rule 501(a) of Regulation D under the Securities Act.
(b) The Purchaser is acquiring the Purchased Securities and the securities
issuable with respect to the Purchaser's benefits under the Deferred
Compensation Plan for investment for the Purchaser's own account and not with a
view to, or for resale in connection with, the distribution or other disposition
thereof except in compliance with the Stockholders' Agreement and as permitted
by law, including without limitation the Securities Act. The Purchaser does not
have any present intent to resell or distribute all or any part of the Purchased
Securities or the securities issuable with respect to the Purchaser's benefits
under the Deferred Compensation Plan. If the Purchaser is a corporation, trust,
partnership or other organization, it was not organized for the specific purpose
of acquiring the Purchased Securities or the securities issuable with respect to
the Purchaser's benefits under the Deferred Compensation Plan.
(c) The Purchaser has been advised that the Purchased Securities and the
securities issuable with respect to the Purchaser's benefits under the Deferred
Compensation Plan have not been registered under the Securities Act, that the
Purchased Securities and the securities issuable with respect to the Purchaser's
benefits under the Deferred Compensation Plan may not be sold or otherwise
disposed of unless they are registered thereunder or an exemption from
registration is available and that accordingly the Purchaser may be required to
bear the economic risk of the investment in the Purchased Securities and the
securities issuable with respect to the Purchaser's benefits under the Deferred
Compensation Plan for an indefinite period of time. The Purchaser also
understands that the Corporation does not have any intention of registering the
Purchased Securities or the securities issuable with respect to the Purchaser's
benefits under the Deferred Compensation Plan, in either case, under the
Securities Act or of supplying the information which may be necessary to enable
the Purchaser to sell the Purchased Securities or the securities issuable with
respect to the Purchaser's benefits under the Deferred Compensation Plan
pursuant to Rule 144 under the Securities Act.
(d) The Purchaser has been given the opportunity to obtain any information
or documents, and to ask questions and receive answers about such documents, the
Corporation and its subsidiaries and the business and prospects of the
Corporation and its subsidiaries (including, without limitation, the
transactions to be consummated pursuant to the terms of the Merger Agreement),
as it deems necessary to evaluate the merits and risks related to its investment
in the Purchased Securities and the securities issuable with respect to the
Purchaser's benefits under the Deferred Compensation Plan and no representations
concerning such matters or any other matters related to such investment have
been made to the Purchaser except as set forth in this Agreement. The Purchaser
has had the opportunity to consult its own attorney, accountant or investment
advisor with respect to the investment contemplated hereby and its suitability
for the Purchaser, including the tax and other economic considerations related
to the investment.
(e) The Purchaser (i) has knowledge and experience in financial and
business matters such that the Purchaser is capable of evaluating the merits and
risks of the purchase of the Purchased Securities and the securities issuable
with respect to the Purchaser's benefits under the Deferred Compensation Plan as
contemplated by this Agreement, (ii) understands and has taken cognizance of all
risk factors related to the purchase of the Purchased Securities and the
securities issuable with respect to the Purchaser's benefits under the Deferred
Compensation Plan and (iii) is able to bear the economic risk of the investment
in the Purchased Securities and
7
the securities issuable with respect to the Purchaser's benefits under the
Deferred Compensation Plan for an indefinite period of time and can afford to
suffer a complete loss of the investment in such Purchased Securities and
securities issuable with respect to the Purchaser's benefits under the Deferred
Compensation Plan.
(f) The Purchaser has been informed that the offer of the Purchased
Securities and the securities issuable with respect to the Purchaser's benefits
under the Deferred Compensation Plan is being made pursuant to an exemption from
the registration requirements of the Securities Act relating to transactions by
an issuer not involving a public offering, and that, consequently, the materials
relating to the offer have not been subject to review and comment by the staff
of the Securities and Exchange Commission or any other Governmental Authority.
(g) The Purchaser is not subscribing for the Purchased Securities or the
securities issuable with respect to the Purchaser's benefits under the Deferred
Compensation Plan as a result of or subsequent to any advertisement, article,
notice or other communication published in any newspapers, magazine or similar
media or broadcast over television or radio, or presented at any seminar or
meeting, or any solicitation of a subscription by a Person not previously known
to the Purchaser in connection with investments in securities generally.
(h) Each party hereby acknowledges, to the extent applicable, that
simultaneous with the consummation of the transactions contemplated by the
Merger Agreement, including without limitation the transactions contemplated by
this Agreement, the Purchaser Loan Balance (as hereinafter defined) shall be
repaid in full by wire transfer of immediately available funds and/or by
directing Aearo to set off and net such Purchaser Loan Balance against any
amounts the Purchaser would otherwise be entitled to receive in connection with
the Merger to the Corporation, on behalf and in the name of the Corporation. For
purposes of this Section 3.2(h), the "Purchaser Loan Balance" shall mean the
outstanding principal amount and interest owed by the Purchaser to the
Corporation pursuant to a promissory note executed pursuant to an Executive
Security Purchase Agreement in connection with the purchase of the Contributed
Shares by the Purchaser in the amount set forth on the signature page hereto
adjacent to the words "Purchaser Loan Balance."
(i) The Purchaser shall have no rights as a stockholder of the Corporation
with respect to the shares of Common Stock and Preferred Stock issuable with
respect to the Purchaser's benefits under the Deferred Compensation Plan unless
and until those securities are actually issued in the name of the Purchaser and
delivered to the Purchaser upon or after the time that such benefits become
payable to the Purchaser in accordance with the terms of the Deferred
Compensation Plan. Further, the Purchaser acknowledges that the aggregate value
of the shares of Common Stock and Preferred Stock delivered to the Purchaser
with respect to the Purchaser's benefits under the Deferred Compensation Plan,
when such securities are delivered to the Purchaser in accordance with the terms
of the Deferred Compensation Plan, may be less than the aggregate value, as of
the date hereof, of the shares of Common Stock and Preferred Stock issuable with
respect to the Purchaser's benefits under the Deferred Compensation Plan.
ARTICLE IV
SECURITIES LAW COMPLIANCE; LEGENDS
8
4.1 RESTRICTIVE LEGENDS.
(a) The Purchaser hereby acknowledges and agrees that the Purchased
Securities and the securities issuable with respect to the Purchaser's benefits
under the Deferred Compensation Plan shall be subject to the Stockholders'
Agreement and the repurchase rights contained therein.
(b) The Purchased Securities and the securities issuable with respect to
the Purchaser's benefits under the Deferred Compensation Plan shall be subject
to the Stockholders' Agreement, including, without limitation, the legending
requirements set forth therein and shall bear the following legends:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO DISTRIBUTION OR RESALE. THESE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT COVERING SUCH
SECURITIES UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS, OR THE AVAILABILITY, IN THE OPINION OF COUNSEL, OF AN EXEMPTION FROM
REGISTRATION THEREUNDER."
4.2 REMOVAL OF LEGENDS, ETC.
Except as otherwise set forth in the Stockholders' Agreement, the legends
and restrictions imposed by Section 4.1 shall cease and terminate when (a) the
Purchased Securities or the securities issuable with respect to the Purchaser's
benefits under the Deferred Compensation Plan are sold or otherwise disposed of
in accordance with the intended method of disposition by the seller or sellers
thereof set forth in a registration statement or are sold or otherwise disposed
of in a transaction which does not require that the securities transferred bear
the legends set forth in Section 4.1, or (b) the holder of the Purchased
Securities or the securities issuable with respect to the Purchaser's benefits
under the Deferred Compensation Plan has met the requirement for transfer of
such securities pursuant to the Securities Act. Whenever the restrictions
imposed by Section 4.1 shall terminate, as herein provided, the holder of the
Purchased Securities or the securities issuable with respect to the Purchaser's
benefits under the Deferred Compensation Plan shall be entitled to receive from
the Corporation, without expense, a new certificate not bearing the restrictive
legend set forth in Section 4.1 and not containing any other reference to the
restrictions imposed by Section 4.1.
ARTICLE V
NON-COMPETITION; NON-SOLICITATION
5.1 NON-COMPETITION.
9
(a) As an inducement for the Corporation entering into the Merger
Agreement, as consideration for the right to make the investment contemplated by
this Agreement and for other good and valuable consideration, the sufficiency of
which is hereby acknowledged, the undersigned Purchaser hereby covenants and
agrees that during the period commencing on the Closing Date and ending on the
third anniversary thereof (the "Non-Compete Termination Date," and such period
(as may be extended pursuant to Section 5.1(b)) below, the "Non-Compete
Period"), such Purchaser will not, directly or indirectly, either as principal,
manager, agent, consultant, officer, stockholder, partner, investor, lender or
employee or in any other capacity, carry on, be engaged in or have any financial
interest in, any business which is in competition with the business of the
Corporation or any of its subsidiaries or any group, division or affiliate of
the Corporation who is engaged in the same business or businesses as the
Corporation or any of its affiliates (the "Restricted Group") at any time during
the Non-Compete Period. For purposes of this Section 5.1, a business will be
deemed to be in competition with the Restricted Group if, at any time during the
Non-Compete Period, it is involved in the sale, or other dealing in any property
or the rendering of any service sold, dealt in or rendered by the Restricted
Group as a part of the business of the Corporation or any of its subsidiaries
during the Non-Compete Period within the same geographic area in which the
Restricted Group effects such sales or dealings or renders such services.
Nothing in this Section 5.1 will be construed so as to preclude the Purchaser
from (a) investing in any publicly-held company, provided his beneficial
ownership of any class of such company's securities does not exceed 5% of the
outstanding securities of such class, (b) working in any sector of the safety
industry where neither the Corporation nor any subsidiary thereof is (i)
marketing or manufacturing products or (ii) to the knowledge of the Purchaser,
acquiring, establishing or planning to acquire or establish a company that
markets or manufactures such products in that sector of the market or (c)
working for any employer if (i) such employer's aggregate revenues during the
then immediately preceding twelve (12) months derived from operations which are
in competition with the Restricted Group represent less than 10% of such
employer's gross revenues and the Purchaser does not provide any services
directly or indirectly for such competing operations or (ii) the Restricted
Group has de minimis revenues resulting from businesses that are in competition
with such employer.
(b) The Corporation may extend the Non-Compete Termination Date to the
fifth anniversary of the Closing Date in the event that the Corporation
repurchases all of the Purchased Securities from the Purchaser prior to the
fifth anniversary of the Closing Date. Notwithstanding the foregoing, the
Corporation may only exercise its right to extend the Non-Compete Period if it
pays the cash purchase price for the Purchased Securities within 60 days of (i)
the repurchase of such shares by the Corporation or (ii) the determination of
the fair market value of such shares (as determined by the Board in good faith).
5.2 NON-SOLICITATION.
As an inducement for the Corporation entering into the Merger Agreement, as
consideration for the right to make the investment contemplated by this
Agreement and for other good and valuable consideration, the sufficiency of
which is hereby acknowledged, received in connection with the Merger, the
undersigned Purchaser hereby covenants and agrees that during the period
commencing on the Closing Date and ending five (5) years from such date (the
"Non-Solicit Termination Date"), such Purchaser hereby will not, directly or
indirectly, on his own
10
behalf or on behalf of any Person, firm or company, hire any Person who has been
employed by any member of the Restricted Group at any time during the
twenty-four (24) months immediately preceding such hiring, or solicit or induce
any such employee or any customer of the Restricted Group to leave the employ
of, or cease doing business with, as applicable, the Restricted Group, or
interfere, in any material way, with the business of the Restricted Group. For
purposes of clarification, this Section 5.2 shall not apply to any action taken
solely by any of the Purchaser's employers following the date of written notice
of such Purchaser's termination of employment if (i) such Purchaser did not
provide any assistance or recommendation for the benefit of such future employer
relating to the solicitation or hiring of any Person referred to above and (ii)
such Person referred to above does not become employed by the same division,
department or group within such future employer in which the Purchaser is
employed and does not report to the Purchaser.
5.3 REASONABLENESS.
The Purchaser hereby agrees that the covenants set forth in this Article V
are reasonable under the circumstances and will not interfere with his ability
to earn a living or to otherwise meet his financial obligations. The Purchaser
further acknowledges that he has experience and expertise in industries and
businesses other than those that compete, either directly or indirectly, with
the Restricted Group and that the restrictions contained in this Article V will
not interfere with or otherwise impair the Purchaser's ability to earn a living
or to otherwise meet his financial obligations in such other industries or
businesses. The Purchaser believes that he has received sufficient consideration
and other benefits hereunder and in connection with the Merger to clearly
justify the restrictions contained in this Article V which, in any event (given
the Purchaser's education, skills and ability and his substantial experience in
industries other than that of the Restricted Group), the Purchaser does not
believe would prevent him from otherwise earning a living. The Purchaser has
carefully considered the nature and extent of the restrictions placed upon him
by this Agreement, and hereby acknowledges and agrees that the same are
reasonable in time and territory and do not confer a benefit upon the Company
disproportionate to the detriment of the Purchaser. The Purchaser and the
Corporation agree that if in the opinion of any court of competent jurisdiction
such restraint is not reasonable in any respect, such court will have the right,
power and authority to excise and modify such provision or provisions of this
covenant as so amended. The Purchaser agrees that any breach of the covenants
contained in this Article V would irreparably injure the Corporation.
Accordingly, the Purchaser agrees that the Corporation may, in addition to
pursuing any remedies it may have in law or in equity, cease making any payments
to the Purchaser otherwise required by any contract between the Corporation and
the Purchaser and obtain an injunction against the Purchaser from any court
having competent jurisdiction over the matter restraining any further violation
of this Article V. The Purchaser acknowledges and agrees that, in the event of a
termination of his employment with the Corporation or any of its subsidiaries,
this Article V will remain in force and effect and he will remain bound by such
provisions in accordance with their terms. The parties acknowledge and agree
that the covenants and agreements set forth in this Article V shall in no way
affect, restrict, impair or otherwise limit any other covenants or agreements
between the Purchaser and the Corporation or any of its subsidiaries that relate
to the same or similar subject matter as this Article V and have been entered
into on or prior to the Closing Date.
11
ARTICLE VI
MISCELLANEOUS
6.1 DEFINITIONS.
Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Deferred Compensation Plan.
6.2 PURCHASER'S EMPLOYMENT.
Nothing in this Agreement shall confer upon the Purchaser any right to
continue in the employ of the Corporation or any of its Affiliates or interfere
in any way with the right of the Corporation or its Affiliates, as the case may
be, in its sole discretion, to terminate the Purchaser's employment or to
increase or decrease the Purchaser's compensation at any time.
6.3 NO THIRD PARTY BENEFICIARIES.
Except as expressly provided herein, this Agreement shall not confer any
rights or remedies upon any Person other than the parties hereto and their
respective successors and permitted assigns, personal representatives and heirs
and estates.
6.4 ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement among the parties hereto
and supersedes any prior understandings, agreements or representations by or
among the parties hereto, written or oral, with respect to the transactions
contemplated hereby.
6.5 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns; provided, however,
that the Corporation may not assign any of its rights under this Agreement
without the express prior written consent of the Purchaser.
6.6 COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument. Facsimile execution and delivery of this Agreement is
legal, valid and binding for all purposes.
6.7 NOTICES.
All notices or other communications which are required or otherwise
delivered hereunder shall be deemed to be sufficient and duly given if contained
in a written instrument and (a) personally delivered or sent by facsimile; (b)
sent by nationally-recognized overnight courier guaranteeing next business day
delivery; or (c) sent by first class registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
(i) if to the Corporation, to:
12
AC Safety Holding Corp.
c/o Bear Xxxxxxx Merchant Banking
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xx. Xxxxxxx Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000;
with a copy to:
O'Melveny & Xxxxx LLP
Times Square Tower
0 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000;
(ii) if to the Purchaser, to the Purchaser at the address set forth on
the signature page hereto;
with a copy to:
Xxxxxx Xxxxxx Xxxxx Xxxxxxxx
000 X. Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or to such other address as the party to whom notice is to be given may have
furnished to each other party in writing in accordance herewith. Any such notice
or communication shall be deemed to have been received (i) when delivered, if
personally delivered or sent by facsimile, (ii) on the first business day after
dispatch, if sent by nationally recognized, overnight courier guaranteeing next
business day delivery and (iii) on the fifth business day following the date on
which the piece of mail containing such communication is posted, if sent by
mail.
6.8 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
domestic laws of the State of Delaware without giving effect to any choice or
conflict of law, provision or rule (whether of the State of Delaware) or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware.
6.9 AMENDMENTS.
13
This Agreement may be modified, supplemented or amended only by a written
instrument executed by all parties hereto.
6.10 HEADINGS.
The headings contained in this Agreement are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
6.11 FURTHER ASSURANCES.
At all times on and after the date hereof, each party hereto, at the
reasonable request of another party hereto, shall execute and deliver such other
documents or instruments and do and perform such other acts and things as may be
necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
6.12 SEVERABILITY.
If any particular provision of this Agreement shall be determined to be
illegal and unenforceable by any court of law, the remaining provisions shall be
severable and enforceable in accordance with their terms.
* * * * *
14
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CORPORATION:
AC SAFETY HOLDING CORP.
By: /s/ Xxxxxxx X. Xxxx
------------------------------------
Name: Xxxxxxx X. Xxxx
Title: President
THE PURCHASER:
----------------------------------------
Name:
----------------------------------
Address:
-------------------------------
-------------------------------
Contributed Shares:
--------------------
Dollar Value of
Contributed Shares:
--------------------
Additional Cash
Consideration:
-------------------------
AC Safety Holding
Corp. Common Stock:
--------------------
AC Safety Holding
Corp. Preferred Stock:
-----------------
Transaction Bonus:
---------------------
Deferred Common
Stock Units:
---------------------------
Deferred Preferred
Stock Units:
---------------------------
Purchaser Loan Balance:
----------------
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CORPORATION:
AC SAFETY HOLDING CORP.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
THE PURCHASER:
/s/ D. Xxxxxx Xxxxxx III
----------------------------------------
Name:
----------------------------------
Address: 0000 Xxxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Contributed Shares: 600
Dollar Value of
Contributed Shares: $749,977
Additional Cash
Consideration: $143,174
AC Safety Holding
Corp. Common Stock: 22,329
AC Safety Holding
Corp. Preferred Stock: 670
Transaction Bonus: $295,550
Deferred Common
Stock Units: 7,388
Deferred Preferred
Stock Units: 221
Purchaser Loan Balance: $249,070
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CORPORATION:
AC SAFETY HOLDING CORP.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
THE PURCHASER:
/s/ Xxxxxxx X. Xxxxx
----------------------------------------
Name:
----------------------------------
Address: 0000 Xxxxxxxxx Xxxxx Xxxxx
Xxxxxx, Xxxxxxx 00000
Contributed Shares: 50
Dollar Value of
Contributed Shares: $62,498
Additional Cash
Consideration: $0
AC Safety Holding
Corp. Common Stock: 1,562
AC Safety Holding
Corp. Preferred Stock: 47
Transaction Bonus: $637,502
Deferred Common
Stock Units: 15,938
Deferred Preferred
Stock Units: 478
Purchaser Loan Balance: $0
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CORPORATION:
AC SAFETY HOLDING CORP.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
THE PURCHASER:
/s/ Xxxxx X. Xxxxxxxx, Trustee
----------------------------------------
/s/ Xxxxxx X. Xxxxxxxx, Trustee
----------------------------------------
Name: Xxxxx X. Xxxxxxxx and
Xxxxx X. Xxxxxxxx, Trustees of the
Xxxxx X. Xxxxxxxx Trust
dated December 19, 2000
Address: 00000 Xxxxx Xxx Xxxxx
Xxxxxx, Xxxxxxx 00000
Contributed Shares: 500
Dollar Value of
Contributed Shares: $624,981
Additional Cash
Consideration: $0
AC Safety Holding
Corp. Common Stock: 15,625
AC Safety Holding
Corp. Preferred Stock: 469
Transaction Bonus: $75,019
Deferred Common
Stock Units: 1,875
Deferred Preferred
Stock Units: 56
Purchaser Loan Balance: $36,367
