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
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
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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
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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.
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"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
"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
"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
"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
"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
"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
(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
"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
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
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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:
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(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
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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
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(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
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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
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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
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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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
(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
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
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
(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 Schedule
4.7, (a) each of the Company and the Company Subsidiaries is in compliance with
all Laws applicable to the Company and the Company Subsidiaries, respectively,
except for such instances of non-compliance which does not have and are not
reasonably likely to have, in the aggregate, a Material Adverse Effect, (b) each
of the Company and the Company Subsidiaries has all governmental permits,
licenses and authorizations necessary for the conduct of its respective business
as presently conducted ("Permits") and is in compliance with the terms of its
respective Permits, except where the failure to have any such Permit or any such
non-compliance, in either case, does not have and is not reasonably likely to
have, in the aggregate, a Material Adverse Effect and (c) neither the Company
nor any Company Subsidiary has received any written or, to the Knowledge of the
Company, oral communication during the past three years from a Governmental
Authority that alleges that the Company or a Company Subsidiary is not in
compliance in any material respect with any applicable Law, except if such
non-compliance does not have and is not reasonably likely to have a Material
Adverse Effect; provided, however, that the Company makes no representation or
warranty in this Section 4.7 with respect to Tax matters, employee benefit
matters or Environmental Laws, which matters are exclusively addressed in
Sections 4.10, 4.13 and 4.14, respectively. The Company's common stock is not
required to be registered pursuant to Section 12 of the Exchange Act.
Section 4.8 Litigation. Except as set forth on Schedule 4.8, there is no
Action pending, or to the Knowledge of the Company, threatened in writing,
against the Company or any Company Subsidiary that (a) involves a claim in
excess of $100,000, (b) involves a claim for an unspecified amount which has had
or is reasonably likely to have a Material Adverse Effect, (c) seeks injunctive
relief or (d) individually or in the aggregate, would materially impair the
ability of the Company to perform its obligations under this Agreement. Except
as set forth on Schedule 4.8, there are no outstanding writs, judgments,
injunctions, decrees, settlement agreements or similar orders by which the
Company, the Company Subsidiaries or any of their respective assets or
properties, are bound that has had or could reasonably be expected to have, in
the aggregate, a Material Adverse Effect. Except as set forth in Schedule 4.8,
since September 30, 2003, there has not been any change, circumstance or event
which has or is reasonably likely to have a Material Adverse Effect with respect
to any liability relating to or arising from any of the Actions set forth on
Schedule 4.8.
Section 4.9 No Undisclosed Liabilities. Except as set forth in the Company
Group Financial Statements or as set forth on Schedule 4.9, neither the Company
nor any of the Company Subsidiaries has any material indebtedness, obligations
or liabilities of any kind (whether accrued, absolute, contingent or otherwise,
and whether due or to become due) which is of a nature required by GAAP to be
reflected in a balance sheet or the notes thereto and which is not accrued or
reserved against in the December 31, 2003 balance sheet included in the Company
Group Financial Statements, other than liabilities or obligations (i) otherwise
specifically disclosed in this Agreement or in the Schedules hereto or (ii)
incurred since December 31, 2003 in the Ordinary Course.
22
Section 4.10 Taxes. (a) Except as set forth on Schedule 4.10: (a) all
material Tax Returns required to be filed by or on behalf of the Company and
each of the Company Subsidiaries have been duly and timely filed with the
appropriate Tax Authority (after giving effect to any valid extensions of time
in which to make such filings); (b) such Tax Returns were true, correct and
complete in all material respects when filed; (c) all amounts shown on such Tax
Returns as due, and all other material Taxes that have become due and payable by
any member of the Company Group, have been fully and timely paid; (d) all
material deficiencies asserted or assessments made, as a result of any
examinations by any Tax Authority of Tax Returns of or covering the Company or
the Company Subsidiaries, have been fully paid or are being contested in good
faith and adequate reserves have been established on the applicable Company
Group Financial Statements in connection therewith, and no other material audits
or investigations by any Tax Authority relating to any Tax Returns of or
covering the Company or the Company Subsidiaries are in progress; (e) the
Company has made available to the Buyer Parent (1) all material Tax Returns
filed by or on behalf of any member of the Company Group for all completed Tax
years that remain open for audit or review by the relevant Tax Authority and (2)
all material ruling requests, private letter rulings, notices of proposed
deficiencies, closing agreements and settlement agreements, and any similar
documents or communications sent or received by the Company Group relating to
Taxes to the extent still pending or in effect; (f) the Company and the Company
Subsidiaries have not incurred any material liability for Taxes from and after
January 31, 2004 other than Taxes incurred in the Ordinary Course; (g) the
Company and the Company Subsidiaries are not, and have not made an election to
be treated as, a "consenting corporation" under Section 341(f) of the Code; (h)
the Company and the Company Subsidiaries have complied in all material respects
with all applicable laws relating to the collection or withholding of Taxes
(such as sales Taxes or withholding of Taxes from the wages of employees); (i)
neither the Company nor any Subsidiary has been a member of a combined,
consolidated, affiliated or unitary group for Tax filing purposes, other than
the group in which it currently is a member, for which it has any current or
future liability for Taxes; (j) the Company and the Company Subsidiaries are
not, and have not ever been, a party to any Tax sharing indemnity or similar
agreement allocating tax liability that will not be terminated on the Closing
Date without any future liability to the Company or a Company Subsidiary
(including for past Taxes); (k) except with respect to any employment agreement
or any other agreement or arrangement that has been or may be negotiated between
an employee of the Company or a Company Subsidiary, on the one hand, and Buyer
Parent or Buyer Sub (on behalf of Buyer Parent, Buyer Sub, the Company, any
Company Subsidiary or the Surviving Corporation), on the other hand, the Company
and the Company Subsidiaries have not incurred any material liability to make or
possibly make any payments, either alone or in conjunction with any other
payments, that (A) are non-deductible under, or would otherwise constitute a
"parachute payment" within the meaning of, Section 280G of the Code or (B) are
or may be subject to the imposition of an excise Tax under Section 4999 of the
Code; (l) the Company and the Company Subsidiaries have not agreed to, and are
not required to, made any adjustments or changes either on, before or after the
Closing Date, to its accounting methods pursuant to Section 481 of the Code (or
similar provisions of state, local or foreign law), and neither the Internal
Revenue Service nor any other Tax Authority has, to the Knowledge of the
Company, proposed in writing any such adjustments or changes in the accounting
methods of the Company and the Company Subsidiaries; (m) to the Knowledge of the
Company, no material claim has ever been made in writing by any Tax Authority in
23
a jurisdiction in which the Company or the Company Subsidiaries do not file Tax
Returns that any such person is or may be subject to Taxation by that
jurisdiction; and (n) the Company and the Company Subsidiaries are not and have
never been "United States real property holding corporations" within the meaning
of Section 897(c)(2) of the Code.
Section 4.11 Brokers' and Finders' Fees. Except pursuant to the Contracts
with Deutsche Bank Securities Inc. and Vestar Capital Partners provided to Buyer
Parent, the Company has not employed any broker or finder or incurred any
liability for any investment banking fees, brokerage fees, commissions or
finders' fees in connection with the transactions contemplated by this Agreement
for which the Company, Buyer Parent or Buyer Sub has or could have any
liability.
Section 4.12 Intellectual Property.
(a) Except as otherwise indicated on Schedule 4.8 or Schedule 4.12(a),
the Company or one of the Company Subsidiaries owns or has a valid right to
use each material patent, trademark, service mark, logo, trade name,
proprietary trade dress, copyright, trade secret, proprietary information
and proprietary method used by the Company Group in its business (the
"Intellectual Property").
(b) Neither the Company nor any of the Company Subsidiaries is in
material default under any material license concerning use of the
Intellectual Property and, to the Knowledge of the Company, there are no
threatened claims that the Company or any of the Company Subsidiaries is in
material default under any material license concerning use of the
Intellectual Property. All material licenses to use such Intellectual
Property to which the Company or any of the Company Subsidiaries is a party
are in full force and effect according to their terms.
(c) Except as otherwise indicated on Schedule 4.8 or Schedule 4.12(a):
(i) neither the Company nor any of the Company Subsidiaries has received
any written communication from any Person other than the Company or one of
the Company Subsidiaries alleging that the operation of its business as
currently conducted, or the use by the Company or any of the Company
Subsidiaries of its Intellectual Property, infringes the intellectual
property rights of any such Person; and (ii) there is no material Action
relating to the Intellectual Property affecting the business or operations
of the Company which are pending or, to the Knowledge of the Company,
threatened against the Company or any of its officers or directors.
(d) The Company or one of the Company Subsidiaries is listed in the
records of the United States Patent and Trademark Office as the holder of
record of the patents listed on Schedule 4.12(d)(1) (the "Patents") and
each of the applications listed on Schedule 4.12(d)(2) (the
"Applications"). To the Knowledge of the Company: (i) there are no claims
of third parties to any ownership interest, and except for the security
interest of the Company's lenders under existing credit facilities, there
exists no lien with respect to any of the Patents or Applications; and (ii)
none of the Applications has been abandoned.
(e) The Company or one of the Company Subsidiaries is listed in the
records of the appropriate foreign offices as the sole holder of record of
the foreign patents listed on Schedule 4.12(e)(1) (the "Foreign Patents")
and each of the applications listed on Schedule 4.12(e)(2) (the "Foreign
24
Applications"). To the Knowledge of the Company: (i) there are no claims of
third parties to any ownership interest, and except for the security
interest of the Company's lenders under existing credit facilities, there
exists no lien with respect to any of the Foreign Patents or Foreign
Applications; and (ii) none of the Foreign Applications has been abandoned.
(f) The Company or one of the Company Subsidiaries is listed in the records
of the United States Patent and Trademark Office as the holder of record of
the trademarks listed on Schedule 4.12
(f) (the "Trademarks"). To the Knowledge of the Company, there are no
claims of third parties to any ownership interest, and except for the
security interest of the Company's lenders under existing credit
facilities, there exists no lien with respect to any of the Trademarks.
(g) The Company, the Company Subsidiaries, or their respective
predecessors are listed in the records of the appropriate foreign offices
as the sole holder of record of the foreign trademarks listed on Schedule
4.12(g) (the "Foreign Trademarks"). To the Knowledge of the Company, there
are no claims of third parties to any ownership interest, and except for
the security interest of the Company's lenders under existing credit
facilities, there exists no lien with respect to any of the Foreign
Trademarks.
(h) Except as otherwise indicated on Schedule 4.8 or Schedule 4.12(a),
to the Knowledge of the Company, (i) neither the Company nor any of the
Company Subsidiaries has received any communication from any Person other
than the Company or one of the Company Subsidiaries alleging that the
Patents, Foreign Patents, Trademarks, or Foreign Trademarks are not valid
and enforceable as issued; and (ii) there is no material action, suit,
claim or proceeding relating to the validity or enforceability of the
Patents, Foreign Patents, Trademarks, or Foreign Trademarks as issued.
Section 4.13 Employee Benefit Plans; Employees.
(a) General.
(i) Schedule 4.13(a)(i) lists all employee benefit plans and
employment or severance agreements or other similar arrangements to
which Company or any Company Subsidiary is a party or by which any of
them is bound, legally or otherwise (collectively, the "Benefit
Plans"), including, without limitation, (a) any profit-sharing,
deferred compensation, bonus, stock option, phantom stock, stock
purchase, pension, retainer, consulting, retirement, severance, change
of control, supplemental unemployment benefits, welfare or incentive
plan, agreement or arrangement, (b) any plan, agreement or arrangement
providing for "fringe benefits" or perquisites to employees, officers,
directors or agents, (c) any hospitalization, health, welfare, dental,
disability, life insurance or other benefit plan, or (d) any other
"employee benefit plan" within the meaning of Section 3(3) of ERISA.
(ii) Except as set forth on Schedule 4.13(a)(ii), Seller has made
available to Buyer Parent true and complete copies of all Benefit
Plans and, with respect to each Benefit Plan, if applicable, (a) the
summary plan description, (b) the Form 5500 filed in each of the most
recent plan year, including but not limited to all schedules thereto
and financial statements with attached opinions of independent
25
accountants, (c) the most recent determination letter from the IRS,
(d) the Form PBGC-1 filed in the most recent plan year, and (e) the
most recent actuarial report.
(iii) Except as set forth on Schedule 4.13(a)(ii), the Benefit
Plans have been operated in compliance with their terms and the
applicable provisions of ERISA, the regulations and published
authorities thereunder, and all other Laws applicable to the Benefit
Plans, except to the extent such noncompliance would not reasonably be
expected to have a Material Adverse Effect. There are no actions
(other than routine claims for benefits) pending or, to the Knowledge
of the Company, threatened against the Benefit Plans or their assets
or arising out of the Benefit Plans which could reasonably be expected
to result in material liability to the Company and the Company
Subsidiaries.
(iv) Except as set forth on Schedule 4.13(a)(iv), none of the
Benefit Plans provides for payments or benefit increases (or the
acceleration of or an increase in funding) that are contingent upon or
will become effective upon the entering into of this Agreement or the
completion of the transactions contemplated hereby.
(v) Except as set forth on Schedule 4.13(a)(v), no Benefit Plan
is subject to the terms of any collective bargaining agreement.
(b) Qualified Plans. Except as set forth on Schedule 4.13(b), each Benefit
Plan that is intended to be qualified under Section 401(a) of the Code and any
trust maintained pursuant thereto has received a determination letter to such
effect and that any such trust is exempt from federal income taxation under
Section 501(c) of the Code, and nothing has occurred with respect to the
operations of the Benefit Plans which is reasonably likely to cause the loss of
such qualification or exemption. No prohibited transaction (within the meaning
of Section 4975 of the Code) or party-in-interest transaction (within the
meaning of Section 406 of ERISA) has occurred with respect to any of such
Benefit Plan that could reasonably be expected to result in material liability
to the Company and the Company Subsidiaries.
(c) Title IV Plans. With respect to each Benefit Plan subject to Title IV
of ERISA (other than a Multiemployer Plan as defined below) in which the
Company, any Company Subsidiary or any trade or business (whether or not
incorporated) that is a member of a group of which the Company or a Company
Subsidiary is a member and which is under common control within the meaning of
Section 414(b), (c) or (m) of the Code (an "ERISA Affiliate") participates, (i)
neither the Company nor any Company Subsidiary nor any ERISA Affiliate has
withdrawn from such Benefit Plan during a plan year in which it was a
"substantial employer" (as defined in Section 4001(a) (2) of ERISA), (ii)
neither the Company nor any Company Subsidiary nor any ERISA Affiliate has filed
a notice of intent to terminate any such Benefit Plan or adopted any amendment
to treat any such Benefit Plan as terminated, (iii) the Pension Benefit Guaranty
Corporation ("PBGC") has not instituted proceedings to terminate any such
Benefit Plan, (iv) no accumulated funding deficiency, whether or not waived,
exists with respect to any such Benefit Plan, and no condition has occurred or
exists which by the passage of time would be expected to result in an
accumulated funding deficiency as of the last day of the current plan year of
any such Benefit Plan, (v) no reportable event (as described in Section 4043 of
ERISA) (other than those events as to which the thirty day notice period is
waived) has occurred with respect to any such Benefit Plan, (vi) no amendment
26
with respect to which security is required under Section 307 of ERISA has been
made or is reasonably expected to be made, (vii) except for the transactions
contemplated by this Agreement, no other event or condition has occurred which
might constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any such Benefit Plan and that would
result in a material liability to the Company and the Company Subsidiaries and
(viii) since the last valuation date for each such Benefit Plan there has been
no amendment or change to such Benefit Plan that would increase the amount of
benefits thereunder. No event has occurred and no condition exists that would be
reasonably expected to subject the Company or any of the Company Subsidiaries to
any material liability imposed under Section 4069 of ERISA.
(d) Multiemployer Plans. Except as set forth in Schedule 4.13(d), neither
the Company, the Company Subsidiaries or any ERISA Affiliate participates or has
participated in the last five years in any multiemployer plan, as defined under
Section 3(37) of ERISA (a "Multiemployer Plan").
(e) Health Benefit Plans. Except as required under Section 4980B of the
Code or as set forth on Schedule 4.13(e), neither the Company, nor any Company
Subsidiary has any obligation to provide welfare benefits to any employee
following termination of employment and no Benefit Plan provides for such
benefits.
(f) Except as set forth in Schedule 4.8 or Schedule 4.13(f), with respect
to the Company Group employees, (i) within the last twelve (12) months, there
has not been pending nor, to the Knowledge of the Company, threatened, (A) any
strike, slowdown, stoppage, organizational effort, picketing, handbilling
activity, representation or certification campaign, grievance, arbitration,
administrative hearing, or claim of unfair labor practice, not including
workers' compensation claims, or (B) any Action for wrongful discharge, Action
for employment discrimination, Action for sexual harassment or other Action
involving an employment dispute of any nature against the Company or any of the
Company Subsidiaries which is, in the aggregate, reasonably likely to result in
a Material Adverse Effect; (ii) neither the Company nor the Company Subsidiaries
are a party to any collective bargaining agreement or other Contract with any
labor union or any other similar organization, no labor union or similar
organization currently represents the employees of the Company and the Company
Subsidiaries, and to the Knowledge of the Company, no labor union or similar
organization, or any Company Group employees have taken any action with respect
to organizing the employees of the Company or the Company Subsidiaries; (iii)
the Company has not, in the last six years, effectuated a "plant closing" or
"mass layoff" as those terms are defined in WARN, affecting in whole or in part
any site of employment, facility, operating unit or Company Group employee
without complying with the notice requirements and other provisions of WARN
which could cause any liability to the Company or any of the Company
Subsidiaries with respect to the Company Group employees nor in the prior
three-month period has any current or former Company Group employee located in
the United Kingdom been made redundant, had their contract of employment
terminated or otherwise left their employment nor has any Group Company been
party to a "relevant transfer" as defined by the Transfer of Undertakings
(Protection of Employment) Regulations 1987 at any time in the 3 years prior to
the date of this Agreement; (iv) to the Knowledge of the Company, no Company
Group employee is subject to any secrecy or noncompetition agreement or any
other agreement or restriction of any kind that would impede in any way the
ability of such employee to carry out fully all of his or her activities; and
27
(v) the Company and the Company Subsidiaries are not delinquent in payments to
any Company Group employees for any wages, salaries, commissions, bonuses or
other compensation or benefits for any services performed by them to date or
amounts required to be reimbursed to such employees that have or would
reasonably be expected to have, in the aggregate, a Material Adverse Effect.
(g) Subject to the terms and conditions of the Buyer Support Agreement, no
awards other than the Phantom Payments will be granted by the Company pursuant
to the phantom equity plan described on Schedule 3.1(c). Notwithstanding
anything to the contrary in this Agreement, none of the Phantom Payments shall
be paid 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
Phantom Payments.
Section 4.14 Environmental Matters. Except as set forth on Schedule 4.14,
(a) the Company and each of the Company Subsidiaries possess, and in the past
have possessed, all Permits, licenses and authorizations required by
Environmental Laws for the conduct of its respective business (collectively,
"Environmental Permits"), except where the failure to possess such Environmental
Permits does not have and would not reasonably be expected to have, in the
aggregate, a Material Adverse Effect; (b) the Company and each of the Company
Subsidiaries is in compliance, and in the past have been in compliance, with all
applicable Environmental Laws and Environmental Permits, except for
noncompliance that does not have and would not reasonably be expected to have,
in the aggregate, a Material Adverse Effect; (c) there are no claims or
proceedings pending or, to the Knowledge of the Company, threatened in writing
against the Company or the Company Subsidiaries alleging the violation of or
noncompliance with any applicable Environmental Laws that has or would
reasonably be expected to have, in the aggregate, a Material Adverse Effect, (d)
no Hazardous Substances are present or have been Released on, under or about any
real property or facility owned or operated by the Company or any Company
Subsidiary, or formerly owned or operated by the Company or any Company
Subsidiary, except for Hazardous Substances stored in reasonable amounts in the
ordinary course of business and in compliance with Environmental Laws and except
for Hazardous Substances the presence or Release of which does not have and
would not reasonably be expected to have, in the aggregate, a Material Adverse
Effect, (e) no material written notice under any Environmental Law has been
received from any Governmental Authority concerning the Release or possible
Release of Hazardous Substances, or requiring an investigation for Hazardous
Substances, at any location owned or operated, now or in the past, by the
Company or any Company Subsidiary, or for which the Company or any Company
Subsidiary is liable, (f) no material capital expenditures beyond currently
budgeted amounts are as of the date hereof expected to be expended in the future
to maintain compliance, or to bring the operations of the Company or any Company
Subsidiary into compliance, with present or pending Environmental Laws, (g)
neither the Company nor any Company Subsidiary has manufactured or distributed
products containing an amount of asbestos that reasonably could be expected to
cause material harm to human health or are the subject of any material written
claim arising out of the asbestos content of any product containing asbestos
that was manufactured or distributed by the Company or a Company Subsidiary and
(h) all material environmental reports procured by or prepared on behalf of the
Company or any Company Subsidiary or that are otherwise in the custody or
control of the Company or any Company Subsidiary concerning the environmental
28
condition of any facility owned or operated, now or in the past, by the Company
or any Company Subsidiary, or concerning the compliance by the Company or any
Company Subsidiary, now or in the past, with Environmental Laws, are listed in
Section 11 of the Index of Due Diligence Documents previously delivered to Buyer
Parent and have been made available to Buyer Parent. Finally, the items
disclosed on Schedule 4.14 do not have and are not reasonably expected to have,
in the aggregate, a Material Adverse Effect.
Section 4.15 Material Contracts.
(a) Except as set forth on Schedule 4.15(a), Schedule 4.15(a)(i) or any
other Schedule to this Agreement, neither the Company nor any of the Company
Subsidiaries is a party to any Contract of the following kinds:
(i) any indebtedness for borrowed money, or commitment to incur
indebtedness for borrowed money, of the Company or any of the Company
Subsidiaries or any guarantee of indebtedness of any other Person in excess
of $250,000 or any Hedging Contract or Contract relating to the issuance of
performance bonds, surety bonds, letters of credit or other credit support;
(ii) any Contract providing for the sale, assignment, license or other
disposition of any asset with a value in excess of $250,000 or any material
right of the Company or any Company Subsidiary;
(iii) any Contract granting an Encumbrance upon any asset of the
Company or any Company Subsidiary, the foreclosure of which has had or
would reasonably be expected to have a Material Adverse Effect;
(iv) any Contract containing any covenant or provision currently in
effect prohibiting the Company or any of the Company Subsidiaries from
engaging in any line of business or competing with any Person in any
geographic area;
(v) any written partnership or joint venture agreement in which the
Company or any of the Company Subsidiaries participates as a general
partner or joint venturer;
(vi) any Contract which calls for the payment by or on behalf of the
Company or any of the Company Subsidiaries in excess of $250,000 per annum,
or the delivery by the Company or any of the Company Subsidiaries of goods
or services with a fair market value in excess of $250,000 per annum, or
provides for the Company or any of the Company Subsidiaries to receive any
payments in excess of, or any property with a fair market value in excess
of $250,000 per annum;
(vii) any Contract pursuant to which the Company or any Company
Subsidiary provides an indemnification to any other Person, other than
Contracts with suppliers, distributors, sales representatives and customers
entered into in the Ordinary Course or indemnification provided in
connection with any Real Property Lease or in connection with personal
property leases entered into in the Ordinary Course or any acquisition by
the Company of all or substantially all of the shares and/or assets of a
third-party;
29
(viii) any Contract under which it has advanced or loaned any amount
to any of its directors, officers or employees outside the Ordinary Course
of the Company Group's business, other than in connection with the
Management Loan Amounts; or
(ix) any Contract under which the consequences of a default or
termination has had or could reasonably be expected to have a Material
Adverse Effect, in the aggregate.
(b) The Company has made available to Parent Buyer or its agents or
representatives a correct and complete copy of each written Material Contract.
Each Material Contract is in full force and effect and constitutes the legal,
valid and binding obligation of the member of the Company Group party thereto
and, to the Knowledge of the Company, each other party thereto, enforceable
against such party in accordance with its terms. Neither the Company nor any of
the Company Subsidiaries or, to the Knowledge of the Company, any other party,
is in breach of, or in default under, any Material Contract, except for such
breaches or defaults which have not had and are not reasonably likely to have,
in the aggregate, a Material Adverse Effect. No party has given any written
notice of termination or cancellation of any Material Contract or that it
intends to assert a breach of, or seek to terminate or cancel, any Material
Contract as a result of the transactions contemplated hereby or by any of the
Transaction Documents, in each case, that does not have or is not reasonably
likely to have a Material Adverse Effect.
(c) The Cabot Asset Transfer Agreement is in full force and effect and the
Company has timely paid all amounts to Cabot Corporation and its Affiliates
required in order to maintain and otherwise keep in effect the Respirator
Liability Retention arrangements pursuant to Section 4.12 thereof.
Section 4.16 Related-Party Transactions. Except as set forth on Schedule
4.16 or contemplated by this Agreement, since October 1, 2002, no Affiliate,
officer, director or employee of the Company or any Company Subsidiary (other
than the Company and the Company Subsidiaries) has been a party to any Contract,
or has otherwise entered into any transaction, with the Company or a Company
Subsidiary that calls for the payment by or on behalf of the Company or any of
the Company Subsidiaries in excess of $25,000 per annum, or the delivery by the
Company or any of the Company Subsidiaries of goods or services with a fair
market value in excess of $25,000 per annum, or provides for the Company or any
of the Company Subsidiaries to receive any payments in excess of, or any
property with a fair market value in excess of, $25,000 per annum, or that do
not provide for any payment, delivery of goods or services or receipt of
property but which otherwise are material to the Company and the Company
Subsidiaries taken as a whole. Except as set forth in Section 4.11, since
October 1, 2002, none of VEP and its Affiliates and any of their partners,
officers or employees has been a party to any Contract, or has otherwise entered
into any transaction, with the Company or a Company Subsidiary. Since October 1,
2002, no Affiliate, officer, director or employee of the Company, any Company
Subsidiary or VEP (other than the Company or a Company Subsidiary) has owned any
interest in any asset or property (real or personal, tangible or intangible),
business or Contract used or intended for use or otherwise relating to the
business currently conducted by the Company Group. Each of the Contracts and
transactions listed on Schedule 4.16 which must terminate or expire in order to
satisfy the condition set forth in Section 7.3(h) will terminate or expire prior
to the Effective Time.
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Section 4.17 Real Property.
(a) Schedule 4.17(a) lists all real property owned by each of the Company
and the Company Subsidiaries as of the date of this Agreement. With respect to
each parcel of real property (a "Parcel") listed on Schedule 4.17(a), except as
does not have and is not reasonably likely to have, individually or in the
aggregate with other Parcels, a Material Adverse Effect:
(i) except as disclosed on Schedule 4.17(a) or the Company Group
Financial Statements, the entity owning such Parcel has good, marketable
and insurable title to such Parcel, free and clear of all Encumbrances and
easements other than Permitted Encumbrances, which do not have and are not
reasonably likely to, individually or in the aggregate, impair in any
material respect the current use or occupancy of the property subject
thereto;
(ii) all facilities have received all material approvals of
Governmental Authorities (including Permits) required in connection with
the ownership or operation thereof and have been operated and maintained in
accordance with applicable Law in all material respects;
(iii) except as set forth on Schedule 4.17(a), there are no subleases,
licenses, concessions or other written agreements granting to any party the
right of use or occupancy of any portion of any material Parcel or rights
to purchase any material Parcel or any portion thereof or interest therein;
(iv) there are no parties (other than the Company or any of the
Company Subsidiaries) in possession of any Parcel, other than tenants under
any leases who are in possession of space to which they are entitled;
(v) each material structure on any Parcel is in sufficient repair and
operating condition for the conduct of the business of the Company and the
Company Subsidiaries as currently conducted;
(vi) to the Knowledge of the Company there is no threatened or
contemplated special assessment or condemnation against any such Parcel;
and
(vii) no material portion of any material Parcel is subject to any
pending condemnation proceeding and, to the Knowledge of the Company, there
is no threatened condemnation proceeding with respect thereto.
(b) Schedule 4.17(b) sets forth all real property and interests in real
property used by the Company or one of the Company Subsidiaries, pursuant to
leases, subleases, licenses and/or any other types of occupancy agreements,
material to the continued operation of the business of the Company or such
Company Subsidiary as currently operated (any such lease or other occupancy
agreement, individually, a "Real Property Lease", with the real properties
specified in such leases being referred to herein individually as a "Company
Property" and collectively as the "Company Properties").
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(c) The Company or one of the Company Subsidiaries has, and after the
Closing the Company or any one of the Company Subsidiaries will have, a valid
and enforceable leasehold interest under each of the Real Property Leases,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar Laws affecting creditors' rights and remedies generally and subject, as
to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity), and, to the
Knowledge of the Company, none of the Company and/or the Company Subsidiaries
has received any written notice of any default or event, which, with notice or
lapse of time, or both, would constitute a default by the Company or such
Company Subsidiary under any of the Real Property Leases, except such defaults
that do not have and are not reasonably likely to have, in the aggregate, a
Material Adverse Effect. The Company and the Company Subsidiaries and, to the
Company's Knowledge, each other party to the Real Property Leases is not in
material default thereunder. No consent or approval is required with respect to
the transactions contemplated by this Agreement from the other parties to any
Real Property Lease. Neither the Company nor any Company Subsidiary has
transferred any interest in any of the Real Property Leases. The Company has
made available to Buyer Parent true and complete copies of the Real Property
Leases as in effect as of the date hereof, together with all material
amendments, modifications or supplements, if any, thereto.
Section 4.18 Personal Property. Except as set forth on Schedule 4.18, the
Company and the Company Subsidiaries (a) own, lease or license from third
parties all tangible personal property required to conduct its and their
respective businesses in the Ordinary Course, (b) have good and valid title to
all such tangible personal property owned by it or them, free and clear of all
Encumbrances, and (c) upon consummation of the transactions contemplated by this
Agreement, will be entitled to continue to use all such tangible personal
property which is currently employed by it or them in the conduct of their
respective businesses as presently conducted. All such material tangible
personal property is in sufficient repair and operating condition for the
conduct of the business of the Company and the Company Subsidiaries as currently
conducted.
Section 4.19 Insurance.
(a) Schedule 4.19(a) contains a true and complete list of all material
policies of liability, theft, fidelity, business interruption, key man life,
fire, product liability, worker's compensation and other material forms of
insurance held by the Company or any Company Subsidiary (specifying the insurer,
amount of coverage, type of insurance, policy number, the amount of any
deductible or retention, any material pending claims thereunder and the date
through which coverage will continue based upon currently paid premiums). Such
policies are in full force and effect. Except as set forth on Schedule 4.19(a),
neither the Company nor any Company Subsidiary has reached or exceeded its
policy limits for any insurance policy in effect at any time during the past
five (5) years.
(b) With respect to each policy of insurance listed on Schedule 4.19(a):
(i) all premiums due with respect thereto are currently paid; (ii) to the
Knowledge of the Company, there are no outstanding claims currently pending
under any such policy that would reasonably be expected to cause a material
32
increase in the insurance rates of the Company or any Company Subsidiary; (iii)
neither the Company nor any Company Subsidiary has received any written notice
that such policy has been or shall be canceled or terminated or will not be
renewed on substantially the same terms as are now in effect or the premium on
such policy shall be increased on the renewal thereof; (iv) no such policy will
terminate or lapse by reason of the transactions contemplated by this Agreement,
in each case, except where such non-payment, increase, cancellation, termination
or nonrenewal does not have and is not reasonably likely to have a Material
Adverse Effect. Except as set forth on Schedule 4.19(b), there have not been any
claim(s) against a member of the Company Group in which the insurer has denied
coverage. The Company Group Financial Statements reflect adequate reserves for
any insurance programs which require (or have required) the Company or a Company
Subsidiary to retain a portion of each loss, including deductible and
self-insurance programs.
Section 4.20 Products Liability. Except as set forth on Schedule 4.20 or
except as does not have and is not reasonably likely to have a Material Adverse
Effect, all products designed, manufactured, sold, distributed, leased,
installed, delivered or held in inventory by the Company or any Company
Subsidiary (including, without limitation, all documentation furnished in
connection therewith) are either (i) free from any material defects and conform
in all material respects with all customary and reasonable standards for
products of such type or (ii) covered by an applicable effective warranty of the
manufacturer of any such product or some additional Person in the chain of
distribution of any such product, such that, in either event, neither the
Company nor any Company Subsidiary has any liability for replacement or repair
thereof or other damages in connection therewith, in each case, subject only to
the reserve for product warranty claims set forth on the face of the Company
Group Financial Statements.
Section 4.21 Customers and Suppliers. Schedule 4.21(a) lists the names of
the ten largest customers of the business of the Company Group as of September
30, 2003 (determined by reference to sales revenue from such customer during the
twelve (12) months preceding September 30, 2003) and the ten largest suppliers
of the Company Group business as of September 30, 2003 (determined by reference
to payments actually made during the twelve (12) months preceding September 30,
2003). Except as set forth on Schedule 4.21(b), none of the customers or
suppliers listed on Schedule 4.21(a) has materially curtailed its business with
the Company Group or provided written or, to the Knowledge of the Company, oral
notice indicating that such customer or supplier intends to terminate or
materially alter its respective relationship with the Company Group.
Section 4.22 Disclosure. No representation or warranty of the Company
contained in this Agreement, and no statement contained in any document,
certificate or Schedule furnished or to be furnished by or on behalf of the
Company to Buyer Parent, Buyer Sub or any of their Representatives pursuant to
this Agreement, contains or omits to state any material fact necessary, in light
of the circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading or necessary in order to fully and
fairly provide the information required to be provided in any such document,
certificate or Schedule.
Section 4.23 No Other Representations or Warranties. Except for the
representations and warranties contained in this Agreement or in the Transaction
Documents, the Company makes no express or implied representation or warranty.
33
ARTICLE V
Representations and Warranties
of Buyer Parent and Buyer Sub
Each of Buyer Parent and Buyer Sub represents and warrants to the Company
as follows:
Section 5.1 Organization, Etc. Each of Buyer Parent and Buyer Sub is duly
organized, validly existing and in good standing (where such status is
recognized) under the laws of the jurisdiction of its organization and has all
requisite corporate power and authority to conduct its business as it is now
being conducted and to own, lease and operate its property and assets 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 does not have
and is not reasonably likely to have, in the aggregate, a Buyer Material Adverse
Effect.
Section 5.2 Buyer Parent Capitalization. Schedule 5.2 sets forth the
authorized and the issued and outstanding capital stock of Buyer Parent, and the
owners thereof. All issued and outstanding shares of capital stock of Buyer
Parent are duly authorized, validly issued, fully paid, nonassessable and free
of preemptive rights and held of record by the Persons indicated on Schedule
5.2, free and clear of any Encumbrances. Except as contemplated by this
Agreement or any of the documents referred to herein, there are no outstanding
(i) securities convertible into or exchangeable for the capital stock of Buyer
Parent, (ii) options, warrants, calls or other rights to purchase or subscribe
for capital stock of Buyer Parent or (iii) Contracts of any kind to which any of
Buyer Parent is subject or by which it is bound requiring the issuance after the
date hereof of (x) any capital stock of Buyer Parent, (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 as
contemplated by this Agreement or any of the documents referred to herein, there
are no voting trusts, proxies or other agreements or understandings to which
Buyer Parent or any of its stockholders or equity owners is a party or by which
Buyer Parent or its 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 Buyer Parent. Neither Buyer Parent nor any of Buyer Parent's
subsidiaries is the subject of any bankruptcy, dissolution, liquidation,
reorganization or similar proceeding.
Section 5.3 Authority Relative to this Agreement, Etc. Each of Buyer Parent
and Buyer Sub has all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Buyer Parent or Buyer Sub and
the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Buyer Parent and the Board of
Directors of Buyer Sub. This Agreement has been duly and validly executed and
delivered by Buyer Parent or Buyer Sub and, assuming this Agreement has been
duly authorized, executed and delivered by the Company, this Agreement
constitutes a valid and binding obligation of Buyer Parent or Buyer Sub,
enforceable against it in accordance with its respective terms, in each case,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
34
similar Laws affecting creditors' rights and remedies generally. The requisite
stockholders of Buyer Sub have adopted the Merger Agreement and authorized and
approved the Merger, in accordance with the applicable provisions of Buyer Sub's
certificate of incorporation and by-laws and the DGCL.
Section 5.4 Consents and Approvals; No Violations. Neither the execution,
delivery and performance of this Agreement by Buyer Parent or Buyer Sub nor the
consummation by Buyer Parent or Buyer Sub of the transactions contemplated
hereby will (a) violate any provision of the certificate of incorporation or
by-laws (or other comparable governing documents) of Buyer Parent or Buyer Sub,
(b) require any consent, waiver, approval, license, authorization or Permit of,
or filing with or notification to, any Governmental Authority, except for
compliance with all applicable antitrust Laws and 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 Buyer 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
or any liability or obligation to repay) under any of the terms, conditions or
provisions of any Contract to which Buyer Parent or Buyer Sub is a party or by
which any of its 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 Buyer Material Adverse Effect or (d) violate any Law or
order, writ, judgment, injunction, settlement agreement or decree applicable to
Buyer Parent or Buyer Sub or by which any of its properties or assets are bound,
except such violations which does not have and are not reasonably likely to
have, in the aggregate, a Buyer Material Adverse Effect.
Section 5.5 Compliance with Law; Permits. Each of Buyer Parent and its
subsidiaries has been and is in compliance with all applicable Laws except for
such instances of noncompliance which does not have and are not reasonably
likely to have, in the aggregate, a Buyer Material Adverse Effect.
Section 5.6 Litigation. There is no Action pending or, to the knowledge of
Buyer Parent, threatened in writing, against any of Buyer Parent and its
subsidiaries that (a) involves a claim which does have or is reasonably likely
to have a Buyer Material Adverse Effect, (b) seeks injunctive relief or (c)
individually or in the aggregate, could materially impair the ability of Buyer
Parent or Buyer Sub to perform their obligations under this Agreement. There are
no outstanding writs, judgments, decrees, injunctions, settlement agreements or
similar orders by which Buyer Parent and its subsidiaries or any of their assets
or properties are bound that has had or could reasonably be expected to have, in
the aggregate, a Buyer Material Adverse Effect. There are no outstanding writs,
judgments, decrees, injunctions or similar orders of any Governmental Authority
by which Buyer Parent, Buyer Sub or any of their respective assets or
properties, are bound that could reasonably be expected to have, in the
aggregate, a Buyer Material Adverse Effect.
Section 5.7 Brokers' and Finders' Fees. None of Buyer Parent and its
subsidiaries or any of their respective directors or employees has employed any
investment banker, broker or finder or incurred any liability for any investment
banking fees, brokerage fees, commissions or finders' fees in connection with
the transactions contemplated by this Agreement for which the Company, the
Company Subsidiaries or any of their respective Affiliates, officers, directors
or employees has or could have any liability.
35
Section 5.8 Financing. Buyer Parent either (a) has available under existing
credit facilities or (b) has obtained financing commitment letters, copies of
which are attached as Schedule 5.8, as amended, supplemented or replaced by the
other financing commitment letters contemplated by the financing commitment
letters attached as Schedule 5.8, which other financing commitment letters shall
have conditions precedent no less favorable to the Company than the conditions
precedent in the financing commitment letters attached as Schedule 5.8 (each
individually, a "Commitment Letter" and, collectively, the "Commitment
Letters"), from certain financial institutions and investors providing for the
commitments set forth therein, subject to the terms and conditions set forth
therein. Assuming the satisfaction or waiver of the conditions set forth in the
Commitment Letters, the financing commitments contained therein are sufficient
to provide all funds necessary to consummate the transactions contemplated
hereby (including the repayment of Outstanding Debt pursuant to Section 3.1(j),
the payment of the Transaction Related Expenses pursuant to Section 3.1(k) and
the payment of all of Buyer Parent's related fees and expenses). Assuming the
accuracy of the representations and warranties of the Company set forth in
Article IV of this Agreement, as of the date hereof, Buyer Parent has no reason
to believe that such financing commitments shall not be available or that such
financing commitments shall not be funded. Assuming the accuracy of the
representations and warranties of the Company set forth in Article IV of this
Agreement, to its actual knowledge without due inquiry, Buyer Parent has not
made any material misrepresentation in connection with obtaining the Commitment
Letters.
Section 5.9 Investigation. Buyer Parent acknowledges that, except for the
matters that are expressly covered by the provisions of this Agreement and the
Transaction Documents, Buyer Parent is relying on its own investigation and
analysis in entering into the transactions contemplated hereby. Buyer Parent is
knowledgeable about the industries in which the Company and the Company
Subsidiaries operate and is capable of evaluating the merits and risks of the
transactions contemplated by this Agreement. Buyer Parent has been afforded full
access to the books and records, facilities and personnel of the Company and the
Company Subsidiaries for purposes of conducting a due diligence investigation of
the Company and the Company Subsidiaries and has conducted a full due diligence
investigation of the Company and the Company Subsidiaries. Notwithstanding the
foregoing, no action taken by any party to this Agreement, including any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty or agreement contained herein.
Section 5.10 Disclaimer Regarding Projections. In connection with Buyer
Parent's investigation of the Company and the Company Subsidiaries, Buyer Parent
has received from the Company and its Affiliates and their respective
representatives and agents certain projections and other forecasts, including,
without limitation, projected financial statements, cash flow items, certain
business plan information and other data related to the Company and the Company
Subsidiaries. Buyer Parent acknowledges that (a) there are uncertainties
inherent in attempting to make such projections, forecasts and plans and,
accordingly, is not relying on them, (b) Buyer Parent is familiar with such
uncertainties and is taking full responsibility for making its own evaluation of
the adequacy and accuracy of all projections, forecasts and plans so furnished
to it and (c) Buyer Parent shall have no claim against anyone with respect to
36
any of the foregoing. Accordingly, Buyer Parent acknowledges that none of the
Company and its Affiliates has made any representation or warranty with respect
to such projections and other forecasts and plans.
Section 5.11 No Other Representations or Warranties. Except for the
representations and warranties contained in this Agreement or in the Transaction
Documents, neither Buyer Parent nor Buyer Sub makes any other express or implied
representation or warranty.
ARTICLE VI
Covenants
Section 6.1 Conduct of Business.
(a) From the date hereof to Closing, except as (i) expressly contemplated
by this Agreement, (ii) required by applicable Law or any Material Contract or
(iii) set forth on Schedule 6.1(a), the Company agrees, subject to Section
6.1(c) and unless otherwise consented to by Buyer Parent (which consent shall
not be unreasonably withheld or delayed) in writing, that it shall conduct its
business, and shall cause each Company Subsidiary to conduct their respective
businesses, in the Ordinary Course.
(b) From the date hereof to Closing, except as (i) expressly contemplated
by this Agreement, (ii) required by applicable Law or any Material Contract or
(iii) set forth on Schedule 6.1(b), subject to Section 6.1(c), the Company shall
not, and shall not permit any Company Subsidiary to (unless otherwise consented
to in writing by Buyer Parent, such consent not to be unreasonably withheld or
delayed):
(1) declare, set aside, make or pay any dividend or other distribution
in respect of the capital stock of the Company or any of the Company
Subsidiaries (excluding dividends or distributions by the Company
Subsidiaries to the Company) or repurchase, redeem or otherwise acquire any
outstanding shares of the capital stock or other securities of, or other
ownership interests in the Company or the Company Subsidiaries;
(2) transfer, issue, sell or dispose of any shares of capital stock or
other equity interests of the Company or any of the Company Subsidiaries
(other than transfer, issuances, sales or dispositions to the Company and
issuances in connection with the exercise of outstanding Options) or grant
options, warrants, calls or other rights to purchase or otherwise acquire
shares of the capital stock or other equity interests of the Company or any
of the Company Subsidiaries;
(3) effect any recapitalization, reclassification, stock split or like
change in the capitalization of the Company or any of the Company
Subsidiaries;
(4) (A) incur any indebtedness or guarantee any such indebtedness of
another Person, issue or sell any debt securities or warrants or other
rights to acquire any debt securities of the Company or any Company
Subsidiary (other than incurrence of indebtedness under the Company's
37
revolving credit facility or equipment financing in the Ordinary Course of
the Company Group's business), guarantee any debt securities of another
Person or enter into any arrangement having the economic effect of any of
the foregoing, or (B) make any loans, advances (other than advances to
Company Subsidiaries or among Company Subsidiaries) or capital
contributions to, or investments in, any other Person;
(5) amend the certificate of incorporation or by-laws (or other
comparable governing documents) of the Company or any of the Company
Subsidiaries;
(6) grant or take any other action that will result in the imposition
of any Encumbrance granted on any property or assets (whether tangible or
intangible) of any of the Company or the Company Subsidiaries (other than
Permitted Encumbrances or in the Ordinary Course of the Company Group's
business);
(7) (A) adopt, enter into, terminate or amend any Benefit Plan, other
than, in the case of non-executive officer employees, in the Ordinary
Course of the Company Group's business, (B) materially increase in any
manner the compensation or fringe benefits of, or pay any material bonus
to, any director or executive officer, (C) pay any material benefit to any
director or executive officer not provided for under any Benefit Plan
(other than customary director fees and expenses), (D) grant any
equity-based awards or (E) except as required pursuant to any Benefit Plan,
fund or secure the payment of material compensation or benefits under any
Benefit Plan other than in the Ordinary Course of the Company Group's
business;
(8) institute any general layoff of employees or implement any early
retirement plan or announce the planning of such a program;
(9) change the Company's or any Company Subsidiary's methods of
accounting, except as required by changes in GAAP, make any material Tax
elections or settle or compromise any material Tax liability;
(10) purchase, sell, exchange, license or otherwise dispose or acquire
(whether by merger or otherwise) any property or assets or enter into any
lease of real property (other than, in each case, in the Ordinary Course of
the Company Group's business) for which the aggregate consideration paid or
payable (A) in any individual transaction is in excess of $250,000 or (B)
in the aggregate is in excess of $1,000,000;
(11) pay, discharge, settle or satisfy any claims, accounts payable,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction, in the Ordinary Course of the Company Group's business or in
accordance with their terms, of liabilities reflected or reserved against
in the Company Consolidated Financial Statements (or the notes thereto) or
incurred thereafter in the Ordinary Course of the Company Group's business;
(12) accelerate the collection of or fail to collect any Company Group
accounts receivable, in each case other than in the Ordinary Course;
(13) (A) modify, amend or terminate any Material Contract or Real
Property Lease or waive, release or assign any material rights or claims
under any Material Contract or Real Property Lease, other than in the
Ordinary Course of the Company Group's business, or (B) fail to timely pay
38
amounts pursuant to Section 4.12 of the Cabot Asset Transfer Agreement or
take or fail to take any other action that would reasonably be expected to
have the effect of terminating the Respirator Liability Retention
arrangements contained therein;
(14) terminate the employment of any of the Persons listed on Schedule
1.1;
(15) allow or permit to be done, any act by which any of the insurance
policies set forth on Schedule 4.19(a) may be suspended, materially
impaired or canceled;
(16) enter into, renew, modify or revise any Contract or transaction
with any Affiliate, officer, director or employee of the Company or any
Company Subsidiary (other than the Company or a Company Subsidiary) or VEP;
(17) willfully take or fail to take any action that, to the Knowledge
of the Company, would be reasonably likely to cause any of the
representations and warranties set forth in Article IV not to be true and
correct in all material respects at and as of the Effective Time; or
(18) authorize any of, or commit or agree to take any of, the
foregoing actions.
(c) Notwithstanding anything to the contrary in this Agreement, the Company
and its representatives may fully participate in a process pursuant to which the
sale of control of a competitor of the Company is being conducted, provided that
the Company shall keep Buyer Parent and its representatives fully informed
thereof and shall afford Buyer Parent and its representatives the opportunity to
participate with the Company and its representatives in such process to the
extent permitted by such competitor. However, after the date hereof the Company
shall not submit to such competitor any legally binding offers or enter into any
legally binding agreements with such competitor, or take any action that would
require public disclosures with respect to such sale of control, in each case
without Buyer Parent's prior written consent. In connection with its
participation in any such process, any advisors retained by the Company shall be
designated by Buyer Parent and shall be reasonably acceptable to the Company.
Section 6.2 Access to Information; Confidentiality.
(a) From the date of this Agreement until the Closing Date, upon reasonable
prior notice, and subject to such exceptions determined by the Company in good
faith to be appropriate to ensure compliance with any applicable Laws and
subject to any applicable privileges (including the attorney-client privilege)
and contractual confidentiality obligations, the Company shall, and shall cause
the Company Subsidiaries to, (i) afford the Representatives of Buyer Parent
reasonable access, during normal business hours, to the offices, properties,
books and records of the Company Group and (ii) furnish to the Representatives
of Buyer Parent such additional financial and operating data and other
information regarding the Company Group as Buyer Parent may from time to time
reasonably request; provided, however, that such investigation or request shall
not interfere with any of the businesses or operations of the Company Group; and
provided, further, that the auditors and accountants of the Company Group shall
not be obligated to make any work papers available to any Person unless and
39
until such Person has signed a customary agreement relating to such access to
work papers in form and substance reasonably acceptable to such auditors or
accountants.
(b) From the date of this Agreement until the Closing Date, Buyer Parent
and its subsidiaries and each of their respective Representatives shall hold in
confidence in accordance with the provisions of the confidentiality agreement,
dated December 15, 2003 (the "Confidentiality Agreement"), between Buyer Parent
and the Company any information regarding the financial condition or business
operations of the Company Group that is received or obtained in connection with
consummating the transactions contemplated hereby, including during any due
diligence.
Section 6.3 Retention of Records. Following the Closing, Buyer Parent shall
cause the Company and the Company Subsidiaries to (i) subject to the last
sentence of this Section 6.3, preserve and keep the records held by them at the
Effective Time relating to the businesses of the Company Group for so long as
and to the extent required by applicable Law (in the case of Tax Returns and
other materials relating to Tax matters for periods or portions thereof ending
on or before the Closing Date, until the expiration of the applicable statute of
limitations) and (ii) make such records and personnel available to VEP as may be
reasonably requested by VEP, including in connection with any insurance claims
by, legal proceedings against or investigations by any Governmental Authority
of, VEP or to enable VEP to comply with its obligations under applicable Law,
this Agreement, and each Transaction Document. In the event Buyer Parent, the
Company or any of the Company Subsidiaries wishes to destroy any such records
other than in accordance with the schedules in the Company's document retention
policy attached hereto as Schedule 6.3, Buyer Parent shall (or Buyer Parent
shall cause the Company or such Company Subsidiary to, as the case may be) give
ninety (90) days' prior written notice to VEP and VEP shall have the right at
its option and expense, upon prior written notice given within such ninety (90)
day period, to take possession of the records within one hundred and eighty
(180) days after the date such notice is given.
Section 6.4 Consents and Approvals; Conditions. Each of the parties hereto
shall use (a) their commercially reasonable efforts, and shall cooperate with
each other and the Company, to obtain, prior to Closing, all consents and
approvals required to consummate the transactions contemplated by this
Agreement, including the consents and approvals referred to on Schedule 4.4 and
Schedule 5.4, (b) their commercially reasonable efforts to cause the conditions
set forth in Article VII to be satisfied and to consummate the transactions
contemplated herein and (c) their commercially reasonable efforts to promptly
take, or cause to be taken, all other actions and do, or cause to be done, all
other things necessary, proper or appropriate to consummate and make effective
the transactions contemplated by this Agreement. The Company and the Company
Subsidiaries shall, and shall request their advisors and representatives to,
cooperate, at Buyer Parent's expense, with all sources of financing to the
Company and Buyer Parent in connection with the transactions contemplated hereby
and shall, and shall request their advisors and representatives to, at Buyer
Parent's expense, take all reasonable steps as may be necessary or advisable
with such sources of financing, including the Company and the Company
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Subsidiaries (i) causing the senior management to participate in "road shows"
with respect to the issuance of securities in one or more private placements or
transactions registered under the Securities Act, (ii) taking reasonable actions
as may be necessary or advisable to consummate such financing transactions as
contemplated by the Commitment Letters, (iii) requesting their legal counsel to
provide customary legal opinions requested by such sources of financing and (iv)
requesting their independent auditors to consent to the inclusion of the audit
reports relating to the Company Group Financial Statements in any offering
memorandum or registration statement relating to such private placement or
transaction registered under the Securities Act.
Section 6.5 Filings with Governmental Authorities.
(a) Each party hereto shall cooperate with respect to the notices and
filings to be made in connection with the consents, approvals, waivers and
authorizations under Law required prior to Closing in connection with the
transactions contemplated hereby. Each party hereto shall use reasonable efforts
to effect all necessary notifications, registrations and filings with any
Governmental Authority in connection with transactions contemplated by this
Agreement, including any filings in respect of the Required Consents, the
consents, waivers, approvals, licenses, authorizations, Permits, filings and
notifications set forth on Schedule 4.4 and the submissions of information
requested or required by any Governmental Authority (including any such
notifications, registrations or filings required post-Closing).
(b) In furtherance and not in limitation of the foregoing, each of the
Company and Buyer Parent shall use its commercially reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary under applicable antitrust laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including, without
limitation, (i) to comply promptly with all legal requirements which may be
imposed on it with respect to this Agreement and the transactions contemplated
hereby by any Governmental Authority with regulatory jurisdiction over
enforcement of any applicable antitrust Laws ("Governmental Antitrust
Authority") (which actions shall include, without limitation, furnishing all
information required by applicable Law in connection with approvals of or
filings with any Governmental Antitrust Authority), including filing, or causing
to be filed, as promptly as practicable, any required notification and report
forms (x) under the HSR Act with the FTC and the Antitrust Division of the
United States Department of Justice (the "Antitrust Division") or (y) under
other applicable non-U.S. laws with the applicable non-U.S. Governmental
Antitrust Authority, including, without limitation, filings required pursuant to
Council Regulation No. 4064/89 of the European Community, as amended (the "EC
Merger Regulation"), (ii) to obtain any consent, authorization, order, writ,
judgment, decree, injunction, or approval of, or any exemption by, any
Governmental Antitrust Authority required to be obtained or made by the Company
and Buyer Parent, or any of their respective subsidiaries or Affiliates in
connection with the transaction contemplated by this Agreement or the taking of
any action contemplated by this Agreement and (iii) to take any action necessary
to defend vigorously, lift, mitigate or rescind the effect of any Action
involving any Governmental Antitrust Authority adversely affecting the
transactions contemplated by this Agreement or this Agreement, including
promptly appealing any adverse court or administrative decision. Without
limitation of the foregoing, the Company, Buyer Parent and their respective
Affiliates shall not extend any waiting period under the HSR Act, the EC Merger
Regulation or any other foreign antitrust merger control Laws or enter into any
agreement with the FTC or the Antitrust Division not to consummate the
transactions contemplated by this Agreement, except with the prior written
consent of the other parties hereto.
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(c) Without limiting the generality of the undertakings and subsections (b)
and (d) of this Section 6.5 and subject to appropriate confidentiality
protections, the Company and Buyer Parent shall each furnish to the other such
necessary information and reasonable assistance as the other party may request
in connection with the foregoing and shall each provide counsel for the other
party with copies of all filings made by such party, and all correspondence
between such party (and its advisors) with any Governmental Antitrust Authority
and any other information supplied by such party and such party's Affiliates to
a Governmental Antitrust Authority in connection with this Agreement and the
transactions contemplated hereby. Each party shall, subject to applicable Law,
permit counsel for the other party to review in advance (to the extent
practical) any proposed written communication to any Governmental Antitrust
Authority. Upon the terms and subject to the conditions herein provided, in case
at any time after the Closing Date any further action is necessary or desirable
to secure the approvals from any and all Governmental Antitrust Authorities
necessary to carry out the purposes of this Agreement, the proper officers
and/or directors of the parties shall use their best efforts to take or cause to
be taken all such necessary action.
(d) Without limiting the generality of the undertakings and subsections (b)
and (c) of this Section 6.5, the Company and Buyer Parent agree to take or cause
to be taken the following actions: (i) provide as promptly as practicable
information and documents requested by any Governmental Antitrust Authority
necessary, proper or advisable to permit consummation of the transactions
contemplated by this Agreement, (ii) without in any way limiting the provisions
of (c)(i) above, use its best efforts to certify as soon as practicable its
substantial compliance with any requests for additional information or
documentary material that may be made under the HSR Act, (iii) proffer no later
than the date that is two months from the date of this Agreement by Buyer Parent
of its willingness to (X) sell or otherwise dispose of, or hold separate and
agree to sell or otherwise dispose of, any entities, assets or facilities of the
Company or the Company Subsidiaries or any entity, facility or asset of Buyer
Parent or its subsidiaries or affiliates, (Y) terminate such existing
relationships and contractual rights and obligations (other than termination
that would result in a breach of a contractual obligation to a third party) and
(Z) amend or terminate such existing licenses or other agreements (other than a
termination that would result in a breach of a license or such other agreement
with a third party) and to enter into such new licenses or other agreements
(and, in each case, to enter into agreements with the relevant Governmental
Antitrust Authority giving effect thereto) in each case with respect to the
foregoing clauses (X), (Y) or (Z) if such action is necessary or reasonably
advisable or as may be required by any Governmental Antitrust Authority,
provided that any such action contemplated by this clause (iii) shall not be
required to be effective prior to the Closing and (iv) take promptly, in the
event that any permanent or preliminary injunction or other writ, judgment,
decree or similar order is entered or becomes reasonably foreseeable to be
entered in any proceeding that would make consummation of the transactions
contemplated by this Agreement in accordance with the terms of this Agreement
unlawful or that would prevent or delay consummation of any such transactions,
any and all commercially reasonable steps (including the appeal thereof, the
posting of a bond or the taking of the steps contemplated by clause (iii) of
this subsection (d)) necessary to vacate, modify or suspend such injunction or
writ, judgment, decree or order so as to permit such consummation on a schedule
as close as possible to that contemplated by this Agreement. The Company and
Buyer Parent agree to offer the other party, if possible, a reasonable
opportunity to participate in all telephonic calls and all meetings with a
Governmental Antitrust Authority in which these matters are discussed.
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(e) The filing fees under the HSR Act, the EC Merger Regulation or any
other foreign antitrust merger control laws shall be borne by Buyer Parent.
Section 6.6 Directors' and Officers' Indemnification and Insurance.
(a) The certificate of incorporation, by-laws and all other organization
documents of the Company and the Company Subsidiaries shall not be amended,
repealed or otherwise modified for a period of six (6) years from the Closing
Date in any manner that would adversely affect the rights thereunder of
individuals who at the Closing Date were directors, officers, agents or
employees of the Company or otherwise entitled to indemnification pursuant to
the Certificate of Incorporation or the Company's by-laws.
(b) Each of Buyer Parent and Buyer Sub shall use its best efforts to cause
to be maintained in effect for six (6) years from the Closing Date the current
policies of the directors' and officers' liability insurance maintained by the
Company and the Company Subsidiaries (provided Buyer Parent or Buyer Sub may
substitute therefor policies of at least the same coverage containing other
terms and conditions which are not less advantageous) with respect to matters
occurring on or prior to the Closing Date to the extent available; provided,
however, that (i) in no event shall Buyer Parent, Buyer Sub, the Company or a
Company Subsidiary be required to expend more than an amount per year equal to
150% of the current annual premiums paid by the Company or any of the Company
Subsidiaries to maintain or procure insurance coverage pursuant hereto, as set
forth in Schedule 4.19(a) and (ii) such policies may in the sole discretion of
the Surviving Corporation be one or more "tail" policies for all or a portion of
the full six (6) years.
Section 6.7 Employee Matters.
(a) Buyer Parent agrees that, effective as of the Closing Date and for a
two-year period thereafter, Buyer Parent shall provide Company Group Employees
(as hereinafter defined) on the Closing Date with employee benefits that are no
less favorable in the aggregate than those provided to Company Group Employees
immediately prior to the date hereof except as expressly agreed otherwise in
writing by the Chief Executive Officer of the Company. With respect to any
employee benefits that are provided to Company Group Employees under employee
benefit plans of Buyer Parent or its affiliates ("Buyer Parent Plans"), service
accrued by Company Group Employees during employment with the Company or any of
the Company Subsidiaries prior to Closing Date shall be recognized for all
purposes, except to the extent necessary to prevent duplication of benefits.
With respect to any medical, dental or other welfare benefits that are provided
at any time to Company Group Employees under Buyer Parent Plans, any applicable
pre-existing condition exclusions (except to the extent not satisfied under the
comparable Benefit Plan as of such time) shall be waived, and any expenses
incurred before such time under the comparable Benefit Plan shall be taken into
account under such Buyer Parent Plan for purposes of satisfying applicable
deductible, coinsurance and maximum out-of-pocket provisions for the plan year
in which the Closing occurs.
(b) Buyer Parent agrees to assume and honor, or cause the Company (and each
of the Company Subsidiaries, as applicable) to assume and honor all of the
Company's (and each Company Subsidiary's) employment, severance, retention,
43
bonus, other incentive agreements and arrangements, and medical, dental and life
insurance arrangements, as amended through the date hereof (each, an "Employee
Arrangement"), for the benefit of any employees and former employees of the
Company and each of the Company Subsidiaries, as applicable, and their
respective survivors, beneficiaries and dependents set forth in Schedule
4.13(a)(i), provided that copies of such Employee Arrangements have been
provided to Buyer Parent prior to the date of this Agreement.
(c) For purposes of this Section 6.7, the term "Company Group Employees"
shall mean all current and former employees of the Company and of each of the
Company Subsidiaries immediately prior to the Closing Date, including those on
vacation, sick leave, maternity leave, military service, lay-off, retirement,
disability or other leave of absence, paid or unpaid, from which an employee's
return to active employment is protected by Law, and their survivors,
beneficiaries and dependents.
(d) Buyer Parent shall, or shall cause the Company and the Company
Subsidiaries to, effective as of the Closing Date, and for a two-year period
thereafter, provide to those employees of the Company or any of the Company
Subsidiaries set forth in Schedule 6.7(d), the severance benefits described in
Schedule 6.7(d).
(e) Notwithstanding anything to the contrary, effective as of the Closing
Date, Buyer Parent shall assume, or shall cause the Company to assume, all
liabilities and obligations arising under the Benefit Plans and Employee
Arrangements in respect of current or former non-U.S. Company Group Employees,
directors and independent contractors whether or not such Benefit Plans and
Employee Arrangements are sponsored or maintained by the Company and the Company
Subsidiaries and the Buyer Parent shall indemnify VEP and all other stockholders
of the Company against any and all losses arising out of or related to such
liabilities and obligations under the Benefit Plans and Employee Arrangements in
respect of current or former non-U.S. Company Group Employees, directors and
independent contractors.
(f) Buyer Parent shall not, within ninety (90) days after the Closing Date,
effectuate a "plant closing" or "mass layoff" as those terms are defined in
WARN, affecting in whole or in part any site of employment, facility, operating
unit or Company Group Employee without complying with the notice requirements
and other provisions of WARN which could cause any liability to the Company or
any of the Company Subsidiaries with respect to the Company Group Employees.
Section 6.8 "As Is" Condition. Buyer Parent agrees that it shall accept the
Company and the Company Subsidiaries in an "As Is" "Where Is" condition at the
Effective Time, subject to the representations and warranties contained herein
and in the Transaction Documents. THE COMPANY MAKES NO WARRANTY WITH RESPECT TO
THE VALUE, CONDITION OR USE OF THE COMPANY OR THE COMPANY SUBSIDIARIES OR THEIR
RESPECTIVE BUSINESSES OR ASSETS, WHETHER EXPRESSED OR IMPLIED, INCLUDING,
WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, OTHER THAN AS EXPRESSLY SET FORTH HEREIN OR IN THE
TRANSACTION DOCUMENTS.
44
Section 6.9 Taxes. Following the Closing, Buyer Parent shall pay or cause
the Surviving Corporation to pay when due all sales (including, without
limitation, bulk sales), use, value added, documentary, stamp, gross receipts,
registration, transfer, conveyance, excise, recording, license and other similar
fees or Taxes or governmental charges, if any, as levied by any Tax Authority or
Governmental Authority arising out of, in connection with or attributable to the
transactions contemplated by the Agreement. Buyer Parent hereby agrees to file
all necessary documents (including all Tax Returns) with respect to all such
amounts in a timely manner.
Section 6.10 Maintenance of Cabot Agreement. From the date hereof until the
seventh anniversary of the Closing Date, the Company shall pay, or cause to be
paid, the amounts required in order to maintain, and otherwise keep in effect,
the Respirator Liability Retention arrangements pursuant to Section 4.12 of the
Cabot Asset Transfer Agreement, unless VEP consents in writing otherwise.
Section 6.11 Satisfaction of Notes.
(a) The Company shall take, and Buyer Parent shall cause the Company to
take, all steps required by Sections 3.01, 3.03 and 3.05 of the Indenture to
redeem the 1995 Notes in whole at the redemption price designated in paragraph 6
of the 1995 Notes within 60 days after the Closing.
(b) The Company shall take, and Buyer Parent shall cause the Company to
take, all steps required by Section 8.2 of the Note Purchase Agreement to prepay
the 2003 Notes in whole at or promptly after the Closing.
Section 6.12 Stockholder Meeting. A meeting of the stockholders of the
Company will be convened as soon as practicable after the date hereof (but in
any event within 15 days of the date hereof) to vote on the adoption of the
Merger Agreement and the authorization and approval of the Merger, in accordance
with the applicable provisions of the Company's certificate of incorporation and
by-laws and the DGCL.
Section 6.13 Further Assurances. After the Closing, each party hereto shall
from time to time, at the request of the other parties and without further cost
or expense to such other party, execute and deliver such other instruments and
documents and take such other actions as such other party may reasonably request
in order to consummate the transactions contemplated hereby.
ARTICLE VII
Conditions to the Closing
Section 7.1 Conditions to the Obligations of Each Party to Effect the
Closing. The obligations of the parties hereto to effect the Closing shall be
subject to the fulfillment, or written waiver by Buyer Parent and the Company at
or prior to the Closing, of each of the following conditions:
45
(a) No Injunction or Proceeding. No Law, order, decree, writ, judgment or
preliminary or permanent injunction shall have been enacted, entered,
promulgated or enforced by any Governmental Authority which prohibits or
restricts the consummation of the transactions contemplated hereby.
(b) Certificate of Merger. The Certificate of Merger shall have been
accepted for filing with the Secretary of State of the State of Delaware in
accordance with the DGCL.
(c) Stockholder Approval. Holders of a majority of the outstanding shares
of Common Stock shall have adopted this Agreement and approved the Merger.
(d) Antitrust Approvals. All required waiting periods and approvals
applicable to this Agreement and the transactions contemplated hereby with
respect to the waiting period under the HSR Act, including any extension
thereof, or any applicable foreign antitrust law or rule shall have expired or
been received or terminated.
Section 7.2 Conditions to the Obligations of the Company to Effect the
Closing. The obligation of the Company to effect the Closing shall be subject to
the fulfillment, or written waiver by the Company at or prior to the Closing, of
each of the following conditions:
(a) Accuracy of Representations and Warranties of each of Buyer Parent and
Buyer Sub. The representations and warranties of each of Buyer Parent and Buyer
Sub contained in this Agreement shall be true and correct in all respects on and
as of the Closing Date as though made on and as of that date (or, if any such
representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date), except for any failures to be true and
correct (without giving effect to any qualifications or limitations as to
materiality or material adverse effect) which do not have and are not reasonably
like to have, in the aggregate, a Buyer Material Adverse Effect.
(b) Performance by Buyer Parent and Buyer Sub. Buyer Parent and Buyer Sub
each shall have performed and complied in all material respects with all
agreements and covenants contained in this Agreement required to be performed or
complied with by it on or prior to the Closing.
(c) Certificate. Buyer Parent and Buyer Sub each shall have furnished the
Company with a certificate signed by its President and Chief Financial Officer
to the effect that, to the knowledge of such officer, the conditions set forth
in Sections 7.2(a) and 7.2(b) have been satisfied.
(d) Secretary's Certificate. Buyer Parent and Buyer Sub each shall have
furnished a certificate executed by its duly appointed secretary or assistant
secretary dated as of the Closing Date, certifying, respectively, (A) that true
and complete copies of its certificate of incorporation and by-laws, as in
effect on the Closing Date, are attached to such certificate; (B) as to the
incumbency and genuineness of the signatures of each officer of such entity
executing this Agreement, any certificate delivered by it in connection with
this Agreement and any of the Transaction Documents to which it is a party; (C)
the genuineness of the resolutions of its board of directors (which shall be
attached to such certificate) authorizing the execution, delivery and
performance of this Agreement, each of the Transaction Documents to which it is
46
a party, and the consummation of the transactions contemplated hereby and
thereby; and (D) the genuineness of the resolutions of its stockholders (which
shall be attached to such certificate) approving and authorizing the Merger
pursuant to this Agreement and the consummation of the transactions contemplated
hereby.
(e) Legal Opinion. Buyer Parent shall have delivered to the Company a legal
opinion of O'Melveny & Myers LLP, counsel to Buyer Parent and Buyer Sub,
consistent with the terms set forth on Exhibit B.
(f) Co-Investment Rights Agreements. Buyer Parent shall have executed and
delivered to Vestar Capital Partners IV, L.P. each of the Co-Investment Rights
Agreements in forms reasonably satisfactory to Vestar Capital Partners IV, L.P.
(g) Stockholder Agreement. If VEP makes a Non-Cash Election, Buyer Parent
shall have executed and delivered to VEP a Stockholders Agreement in form
reasonably satisfactory to VEP consistent with the terms set forth on Exhibit C.
(h) Buyer Support Agreement. The Buyer Support Agreement shall have been
executed and delivered by all parties thereto other than VEP.
Section 7.3 Conditions to the Obligations of Buyer Parent and Buyer Sub to
Effect the Closing. The obligations of Buyer Parent and Buyer Sub to effect the
Closing shall be subject to the fulfillment, or written waiver by Buyer Parent
at or prior to the Closing, of each of the following conditions:
(a) Accuracy of Representations and Warranties of the Company. The
representations and warranties of the Company contained in this Agreement shall
be true and correct in all respects on and as of the Closing Date as though made
on and as of that date (or, if any such representation or warranty is expressly
stated to have been made as of a specific date, as of such specific date),
except for any failures to be true and correct (without giving effect to any
qualifications or limitations as to materiality or material adverse effect)
which do not have and are not reasonably likely to have, in the aggregate, a
Material Adverse Effect.
(b) Performance by the Company. The Company shall have performed and
complied in all material respects with all agreements and covenants contained in
this Agreement to be performed or complied with by it on or prior to the
Closing.
(c) Certificate. The Company shall have furnished Buyer Parent with two
certificates signed by the Company's Chief Financial Officer and Chief Executive
Officer to the effect that, (i) to the knowledge of such Person, the conditions
set forth in Sections 7.3(a) and 7.3(b) have been satisfied and (ii) the
transactions contemplated herein are exempt from withholding under Section 1445
of the Code. The certificate set forth in the preceding clause (ii) shall be
reasonably satisfactory to Buyer Parent and shall comply with the Treasury
Regulations issued under Section 1445 of the Code.
(d) Funding. The financing contemplated by the Commitment Letters
(excluding each Management Commitment Letter) shall have been consummated on the
47
terms and conditions contemplated therein or upon terms and conditions which are
substantially equivalent thereto.
(e) Required Consents. All required waiting periods and approvals
applicable to this Agreement and the transactions contemplated hereby with
respect to the Required Consents shall have expired or been received or
terminated.
(f) Secretary's Certificate. The Company shall have furnished a certificate
executed by the duly appointed secretary or assistant secretary of the Company
dated as of the Closing Date, certifying (A) that true and complete copies of
the Company's certificate of incorporation and by-laws, as in effect on the
Closing Date, are attached to such certificate; (B) as to the incumbency and
genuineness of the signatures of each officer of such entity executing this
Agreement, any certificate delivered by it in connection with this Agreement and
any of the Transaction Documents to which it is a party; (C) the genuineness of
the resolutions of the board of directors of the Company (which shall be
attached to such certificate) authorizing the execution, delivery and
performance of this Agreement, each of the Transaction Documents to which it is
a party, and the consummation of the transactions contemplated hereby and
thereby; and (D) the genuineness of the resolutions of the stockholders of the
Company (which shall be attached to such certificate) approving and authorizing
the Merger pursuant to this Agreement and the consummation of the transactions
contemplated hereby.
(g) Payment and Cancellation of Outstanding Debt. The Company shall have
delivered to Buyer Parent duly executed letter agreements in form and substance
reasonably satisfactory to Buyer Parent and its counsel, providing for (i) the
payment and cancellation of all of the Outstanding Debt (other than as described
in Section 3.1(j)) as of the Closing Date and (ii) the release of any
Encumbrances on the assets of the Company and the Company Subsidiaries relating
thereto.
(h) Termination of Affiliate Agreements. Each Contract and other
transaction between (1) any officer, director or employee of the Company or any
Company Subsidiary (other than the Company or a Company Subsidiary) that are
Transaction Related Expenses, or (2) VEP and its Affiliates, on the one hand,
and the Company or any Company Subsidiary, on the other hand, other than the
Transaction Documents, shall have been terminated without further liability (it
being understood that all amounts payable thereunder or in connection therewith
shall be paid prior to the Effective Time), and all obligations and liabilities
of the Company and the Company Subsidiaries and each of their respective
Affiliates, officers, directors and employees to the other parties thereto shall
be cancelled, and Buyer Parent shall have received reasonably satisfactory
evidence of the foregoing.
(i) Legal Opinion. The Company shall have delivered to Buyer Parent a legal
opinion of (1) Simpson Thacher & Bartlett LLP, counsel to the Company, in
substantially the form attached hereto as Exhibit D-1 and (2) Bingham McHale
LLP, counsel to the Company, consistent with the terms set forth on Exhibit D-2.
(j) Stockholder Agreement. If VEP makes a Non-Cash Election, VEP shall have
executed and delivered to Buyer Parent a Stockholders Agreement in form
reasonably satisfactory to Buyer Parent consistent with the terms set forth on
Exhibit C.
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ARTICLE VIII
Survival of Representation and Warranties
None of the representations, warranties, agreements and covenants set forth
in this Agreement and in any certificates delivered at the Closing in connection
with this Agreement shall survive the Closing Date and the consummation of the
transactions contemplated hereby, and none of the parties shall have any
post-Closing remedy for breaches of the representations, warranties, agreements
and covenants set forth in this Agreement or in any certificates delivered at
the Closing; provided that notwithstanding the foregoing, the agreements and
covenants set forth in Articles II, VIII and X hereof and Sections 6.2, 6.3,
6.6, 6.7, 6.8, 6.9, 6.11 and 6.13 hereof shall survive the Closing.
ARTICLE IX
Termination and Abandonment
Section 9.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing:
(a) by mutual written consent of Buyer Parent and the Company;
(b) by either Buyer Parent or the Company upon written notice to the other
if the Closing shall not have occurred on or before May 14, 2004; provided,
however, that the right to terminate this Agreement pursuant to this Section
9.1(b) shall not be available to a party if the failure of the Closing to occur
prior to such date shall be primarily due to such party's breach of this
Agreement; or
(c) by either Buyer Parent or the Company if any court of competent
jurisdiction shall have issued any writ, order, decree or ruling or taken any
other action enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such writ, order, decree or ruling or other action shall have
become final and nonappealable.
Section 9.2 Procedure and Effect of Termination. If this Agreement is terminated
and the transactions contemplated hereby are not consummated as provided in
Section 9.1, then except as otherwise expressly set forth herein, no party to
this Agreement shall have any obligation hereunder to any other party hereto,
except (i) for any breach by such Person of any covenant or agreement of such
Person set forth in this Agreement, (ii) as provided in the Confidentiality
Agreement or (iii) as provided in Section 10.8 and 10.9.
ARTICLE X
Miscellaneous
Section 10.1 Amendment and Modifications. This Agreement may be amended,
modified or supplemented at any time by the parties hereto; provided such
amendment, modification or supplement shall only be made by an instrument in
writing signed on behalf of the parties herein; and provided further that after
49
the Closing any amendment, modification or supplement of Sections 6.3, 6.6 and
6.10 must be consented to in writing by the third party beneficiaries thereof
under Section 10.14.
Section 10.2 Extension; Waiver. At any time prior to the Closing, the parties
hereto entitled to the benefits of the respective term or provision may (a)
extend the time for the performance of any of the obligations or other acts of
the parties hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document, certificate or writing delivered
pursuant hereto or (c) waive compliance with any obligation, covenant, agreement
or condition contained herein. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of the party not entitled to the benefits of such extended or
waived term or provision. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a further or
continuing waiver of such breach or as a waiver of any other or subsequent
breach. No failure on the part of any party to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of such right, power or remedy
by such party preclude any other or further exercise thereof or the exercise of
any other right, power or remedy.
Section 10.3 Entire Agreement; Assignment. This Agreement and the other
Transaction Documents (a) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersedes all other prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof (other than the Confidentiality Agreement) and (b) shall
not be assigned by operation of law or otherwise without the prior written
consent of the parties hereto, except that Buyer Parent and Buyer Sub shall each
have the right to transfer and assign its respective rights hereunder to any
Person which is controlled solely by Buyer Parent or by Affiliates of Buyer
Parent controlled solely by Bear Stearns Merchant Banking.
Section 10.4 Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, each of which shall remain in full force and
effect, and the parties hereto shall use commercially reasonable efforts to
arrive at an accommodation which effectuates to the greatest extent legally
permissible the intent of the parties with respect to the benefits and
obligations of the invalid or unenforceable provision.
Section 10.5 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered personally, telecopied (which is confirmed) or sent by
registered or certified mail (postage prepaid, return receipt requested) to the
parties at the following addresses:
If to Buyer Parent or Buyer Sub, to:
AC Safety Holding Corp.
c/o Bear Stearns Merchant Banking
383 Madison Avenue, 40th Floor
50
New York, NY 10179
Telephone: (212) 272-4154
Facsimile: (212) 272-7425
Attn: Mr. Douglas Korn
With a copy to:
O'Melveny & Myers LLP
30 Rockefeller Plaza
New York, NY 10112
Telephone: (212) 408-2400
Facsimile: (212) 408-2420
Attn: Adam K. Weinstein, Esq.
If to the Company, to:
Aearo Corporation
5457 West 79th Street
Indianapolis, IN 46268
Telephone: (317) 692-6557
Facsimile: (317) 692-6784
Attn: Michael McLain
With a copy to:
Vestar Equity Partners, L.P.
245 Park Avenue, 41st Floor
New York, NY 10167
Telephone: (212) 949-6500
Facsimile: (212) 808-4922
Attn: Norman W. Alpert
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, NY 10017
Telephone: (212) 445-2000
Facsimile: (212) 455-2502
Attn: Peter J. Gordon, Esq.
or to such other address as the Person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
Section 10.6 Specific Performance. The parties hereto agree that if any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or equity.
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Section 10.7 Publicity. None of the parties and their respective
representatives shall issue any news release or make any public announcement
concerning this Agreement or any of the transactions contemplated hereby without
the advance approval thereof by Buyer Parent and the Company; provided, however,
that any party may make any public disclosure that it reasonably believes, upon
advice of its outside counsel, is required by applicable Laws, in which case the
disclosing party shall use its reasonable best efforts to advise the other party
or parties of such disclosure as soon as practicable and, in any event, at least
concurrently with making such disclosure. Subject to the prior sentence, Buyer
Parent and the Company shall cooperate with each other in the development and
distribution of all news releases and other public announcements with respect to
this Agreement or any of the transactions contemplated hereby.
Section 10.8 Alternative Dispute Resolution. The parties or relevant third
party beneficiaries, as the case may be, shall attempt in good faith to resolve
any dispute arising out of or relating to this Agreement promptly by
negotiations between executives who have authority to settle the controversy.
Any Person may give the other relevant Persons written notice of any dispute not
resolved in the normal course of business. Within twenty (20) days after
delivery of said notice, executives of all relevant Persons shall meet at a
mutually acceptable time and place, and thereafter as often as they reasonably
deem necessary, to exchange relevant information and to attempt to resolve the
dispute. If the matter has not been resolved within sixty (60) days of the
disputing Person's original notice, or if the relevant Persons fail to meet
within twenty (20) days, any party or affected third party beneficiary may
initiate legal proceedings to resolve the controversy or claim. If a Person's
negotiator intends to be accompanied at a meeting by an attorney or is an
attorney, the other negotiators shall be given at least three (3) working days'
notice of such intention and may be accompanied by an attorney. All negotiations
pursuant to this clause are confidential and shall be treated as compromise and
settlement negotiations for purposes of the Federal Rules of Evidence and state
rules of evidence.
Section 10.9 Governing Law; Submission to Jurisdiction; Waivers. This
Agreement and each other Transaction Document shall be governed by, and
construed in accordance with, the Laws of the State of New York. Each of the
parties agrees that if any dispute is not resolved by pursuant to Section 10.8,
such dispute shall be resolved only in the Courts of the State of New York
sitting in the County of New York or the United States District Court for the
Southern District of New York and the appellate courts having jurisdiction of
appeals in such courts. In that context, and without limiting the generality of
the foregoing, each of the parties irrevocably and unconditionally (a) submits
for itself and its property in any Action relating to the Transaction Documents,
or for recognition and enforcement of any judgment in respect thereof, to the
jurisdiction of the Courts of the State of New York sitting in the County of New
York, the court of the United States of America for the Southern District of New
York, and appellate courts having jurisdiction of appeals from any of the
foregoing, and agrees that all claims in respect of any such Action shall be
heard and determined in such New York State court or, to the extent permitted by
law, in such federal court; (b) consents that any such Action may and shall be
brought in such courts and waives any objection that it may now or thereafter
have to the venue or jurisdiction of any such Action in any such court or that
such Action was brought in an inconvenient court and agrees not to plead or
52
claim the same; (c) waives all right to trial by jury in any Action (whether
based on contract, tort or otherwise) arising out of or relating to any of the
Transaction Documents, or its performance under or the enforcement of the
Transaction Documents; (d) agrees that service of process in any such Action may
be effected by mailing a copy of such process by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such party at
its address as provided in Section 10.5; and (e) agrees that nothing in the
Transaction Documents shall affect the right to effect service of process in any
other manner permitted by the Laws of the State of New York.
Section 10.10 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
Section 10.11 Severability. It is the desire and intent of the parties that
the provisions of this Agreement be enforced to the fullest extent permissible
under the Laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any particular provision of this
Agreement shall be adjudicated by a court of competent jurisdiction to be
invalid, prohibited or unenforceable for any reason, such provision, as to such
jurisdiction, shall be ineffective, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of this
Agreement or affecting the validity or enforceability of such provision in any
other jurisdiction. Notwithstanding the foregoing, if such provision could be
more narrowly drawn so as not to be invalid, prohibited or unenforceable in such
jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
Section 10.12 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
Section 10.13 Expenses. Whether or not the transactions contemplated by
this Agreement are consummated, and except as otherwise expressly set forth
herein, all legal and other costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the Person
incurring such expenses.
Section 10.14 Parties in Interest. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement, express or implied,
is intended to confer upon any Person other than the parties hereto or their
successors or permitted assigns, any rights or remedies under or by reason of
this Agreement; provided, however, that the foregoing shall not limit the right
of (a) each of the directors and officers of the Company and the Company
Subsidiaries from being a direct and irrevocable third party beneficiary of the
agreement and covenant contained in Section 6.6 with the right to enforce such
agreement and covenant as fully as if such director or officer was a party
hereto or (b) VEP from being a direct and irrevocable third party beneficiary of
the agreements and covenants contained in Section 6.3 as fully as if it was a
party hereto.
Section 10.15 Interpretation. An item arising with respect to a specific
representation or warranty shall be deemed to be "reflected on" or "set forth
in" a balance sheet or financial statements, to the extent any such phrase
appears in such representation or warranty, if (a) there is a reserve, accrual
or other similar item underlying a number on such balance sheet or financial
53
statements that relates to the subject matter of such representation and such
subject matter is specifically identified in the notes thereto, (b) such item is
otherwise specifically set forth on the balance sheet or financial statements or
(c) such item is reflected on the balance sheet or financial statements and is
specifically set forth in the notes thereto.
* * * * *
54
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
AEARO CORPORATION
By:_____________________________________________
Name:_________________________________________
Title:________________________________________
AC SAFETY HOLDING CORP.
By:_____________________________________________
Name:_________________________________________
Title:________________________________________
AC SAFETY ACQUISITION CORP.
By:_____________________________________________
Name:_________________________________________
Title:________________________________________