SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
INDUSTRIAL ACOUSTICS COMPANY, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
Common Stock, par value $.10
2) Aggregate number of securities to which transaction applies: 627,307
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was
determined): $11.00
4) Proposed maximum aggregate value of transaction: $6,900,377
5) Total fee paid: $1,380
[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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Preliminary Proxy Statement
dated June 12, 1998
INDUSTRIAL ACOUSTICS COMPANY, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of INDUSTRIAL
ACOUSTICS COMPANY, INC. will be held at the offices of the Company, 1160
Commerce Avenue, Bronx, New York on , 1998 at 10:00 a.m., New York time, for the
following purposes:
(1) to consider and vote upon a proposal to adopt an Agreement and Plan of
Merger pursuant to which (a) IAC Holdings Corp. ("Holdings"), a
Delaware corporation, will be merged with and into Industrial
Acoustics Company, Inc. (the "Company"), a New York corporation, and
(b) each outstanding share of common stock of the Company ("Common
Stock") owned by Holdings will be cancelled and each outstanding share
of Common Stock owned by shareholders other than Holdings will be
converted into the right to receive $11.00 per share in cash and the
outstanding Shares of Holdings will be converted into new shares of
the Common Stock; and
(2) to transact such other business as may properly come before the
meeting and at any postponements or adjournments thereof.
Pursuant to the By-Laws of the Company, the Board of Directors has fixed the
close of business on June 8, 1998 as the record date for the determination of
shareholders entitled to notice of and to vote at the meeting and at any
postponements or adjournments thereof.
If you cannot be present in person please complete, date, sign, and return the
accompanying Proxy without delay. A business reply envelope which does not
require any postage, if mailed in the United States, is enclosed for your
convenience.
Dated: , 1998
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By order of the Board of Directors
INDUSTRIAL ACOUSTICS COMPANY, INC.
Robert N. Bertrand
Secretary
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Preliminary Proxy Statement
dated June 12, 1998
INDUSTRIAL ACOUSTICS COMPANY, INC.
1160 COMMERCE AVENUE
BRONX, NEW YORK 10462
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PROXY STATEMENT
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SPECIAL MEETING OF SHAREHOLDERS
, 1998
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THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Introduction and Summary
Place; Record Date; Quorum; Solicitation. This Proxy Statement is furnished
in connection with the solicitation by Industrial Acoustics Company, Inc., a New
York corporation (the "Company") for use at a special meeting (the "Meeting") of
the Company's shareholders (the "Shareholders") to be held on , 1998 at 10:00
a.m. at the Company's principal executive offices located at 1160 Commerce
Avenue, Bronx, New York, 10462, and at any postponements or adjournments
thereof. The approximate date on which a definitive Proxy Statement and the
accompanying proxy will first be mailed to shareholders is , 1998.
Only Shareholders of record at the close of business on June 8, 1998 (the
"Record Date"), will be entitled to vote at the Meeting. On that date, there
were 2,981,211 shares of the Common Stock of the Company, par value $.10 (the
"Common Stock") outstanding and entitled to vote at the Meeting held by
approximately 600 shareholders of rec-
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ord. Based on a statement filed by IAC Holdings Corp. ("Holdings") (a holding
company whose principal assets consist of Common Stock of the Company and whose
principal executive offices are located at 100 First Stamford Place, Stamford,
Connecticut 06902), on Schedule 13D, the Company believes that Holdings owns
2,353,904 shares of Common Stock, representing approximately 79% of the
outstanding shares of Common Stock. The presence at the Meeting, in person or by
proxy, of a majority of the outstanding shares of Common Stock entitled to vote
shall constitute a quorum for the meeting.
Common Stock represented by properly executed proxies, unless previously
revoked, will be voted at the Meeting in accordance with the instructions
thereon. Each proxy granted may be revoked by a Shareholder giving such proxy at
any time before it is exercised by filing with the Secretary of the Company a
revoking instrument or a duly executed proxy bearing a later date. The powers of
any proxy holder will be suspended if the person who executed the proxy held by
such proxy holder attends the Meeting in person and so requests. Attendance at
the Meeting will not in itself constitute revocation of the proxy.
The Company will bear the cost of soliciting proxies in the form enclosed.
In addition to solicitation by mail, proxies may be solicited personally, or by
telephone, or by employees of the Company, without additional compensation for
such services. The Company may reimburse brokers holding Common Stock in their
names or in the names of their nominees for their expenses in sending proxy
material to the beneficial owners of such Common Stock.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROXY STATEMENT IN CONNECTION WITH THE SOLICITATION OF PROXIES AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
Purpose; Merger Agreement. At the Meeting, Shareholders will consider and
vote upon a proposal to adopt an Agreement and Plan of Merger dated as of May
20, 1998 (the "Merger Agreement") between the Company and Holdings. The Merger
Agreement provides, subject to the approval of Shareholders at the Meeting, for
the merger of Holdings with and into the Company, with the Company being the
surviving corporation (the "Merger"). Approval of the Merger Agreement requires
the affirmative vote of the holders of two-thirds of the outstanding shares of
Common Stock. Since Holdings owns approximately 79% of the Common Stock,
adoption of the Merger Agreement is assured if Holdings votes in its favor.
Holdings has indicated its intention to vote in favor of the Merger. Pursuant to
the Merger Agreement, each outstanding share of Common Stock (other than Common
Stock held by the Company as treasury stock and Common Stock held by Holdings),
will be converted into the right to receive $11.00 per share in cash (the
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"Merger Consideration"). Outstanding shares of common stock of Holdings will be
converted into the right to receive newly issued shares of common stock of the
Company. See "The Merger Agreement." A copy of the Merger Agreement is attached
to this Proxy Statement as Exhibit A.
Since the Common Stock is designated as a national market system security
on the Nasdaq National Market, pursuant to Section 910 of the New York Business
Corporation Law (the "BCL"), appraisal rights will not be available to
shareholders of the Company. Accordingly, although a Shareholder who objects to
the Merger may vote against its adoption, since Holdings has indicated that it
will vote in favor of the Merger, the approval by Shareholders is assured and an
objecting Shareholder's available alternative may be limited to selling the
Shareholder's Common Stock before the Merger takes place.
The Merger Agreement provides that as a condition to consummation of the
Merger, Holdings obtain the funds necessary to pay the Merger Consideration. The
Company has been informed by Holdings that Holdings will amend its existing loan
agreement with International Mezzanine Capital, B.V. ("IMC"), an affiliate of
Holdings, dated as of March 19, 1998 to permit Holdings to borrow funds
sufficient to pay all or a portion of the Merger Consideration and that the
balance of the Merger Consideration (if any) will be made available to Holdings
by way of a capital contribution by Holdings' sole shareholder, International
Mezzanine Investment, N.V. ("IMI"). The aggregate amount of the Merger
Consideration to be paid to the Company's Shareholders is expected to be
$6,900,377.
Recent Stock Prices. On June 1, 1998, the high and low bid prices for the
Common Stock as reported on the Nasdaq National Market were 10 and 9 1/2,
respectively, and the last reported sale price was 9 15/16 per share. The last
reported trade of the Common Stock prior to the announcement of the Merger took
place on May 13, 1998 at a price of $9.25. See "Stock Prices and Suspension of
Dividends."
Recommendation of the Board of Directors. The Board of Directors of the
Company has determined that the Merger Agreement is fair to, and in the best
interests of, the Company and its Shareholders and has unanimously approved and
adopted the Merger Agreement. See "Special Factors -- Acquisition; Purpose of
the Merger; Fairness Factors."
Certain Results of the Merger. As a result of the Merger, Shareholders of
the Company will no longer have any continuing interest in the Company, the
Company's Common Stock will no longer be traded on the Nasdaq National Market
and the registration of the Company's Common Stock under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and the Company's reporting
obligations thereunder will be terminated. After giving effect to the Merger,
IMI, the sole shareholder of Holdings, will be the sole shareholder of the
Company.
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Interests of Certain Persons in the Merger. Messrs. Maarten D. Hemsley,
Robert M. Davies and Robert N. Haidinger (Directors of the Company) are
directors of Holdings. Messrs. James A. Read and Martin Dineen (Directors of the
Company) are officers and directors of Holdings. Mr. Haidinger is the president
of a company in which IMI, the sole shareholder of Holdings, has a substantial
interest. See "Interests of Certain Persons in the Merger; Conflicts of
Interest."
Exchange of Certificates. If the Merger is consummated, the Company will
send instructions to Shareholders regarding the surrender of stock certificates.
SHAREHOLDERS SHOULD NOT SUBMIT ANY STOCK CERTIFICATES AT THE PRESENT TIME.
Effective Time of the Merger. The Merger will become effective upon the
filing of a certificate of merger with the Secretary of State of New York (the
"Effective Time"). The filing will occur after all conditions to the Merger
contained in the Merger Agreement have been satisfied or waived. The Company and
Holdings anticipate that the Merger will be consummated as promptly as
practicable following the Meeting.
Conditions to Consummation of the Merger. The respective obligations of the
Company and Holdings to consummate the Merger are subject to the satisfaction or
waiver at or prior to the Effective Time of the following conditions, among
others: (i) adoption of the Merger Agreement by the holders of the Company's
Common Stock; (ii) the absence of any statute, rule, injunction or order that
would prevent consummation of the Merger; (iii) the receipt of all required
authorizations, consents and approvals; (iv) Holdings having obtained funds or
arranged financing sufficient to pay the Merger Consideration and (v) the
performance of and compliance with all agreements and obligations of the parties
under the Merger Agreement.
Termination of the Merger Agreement. The Merger Agreement may be terminated
and the Merger abandoned at any time prior to the Effective Time by the Board of
Directors of the Company or by Holdings. See "The Merger Agreement --
Termination."
Special Factors
Acquisition; Purpose of the Merger; Fairness Factors. On March 19, 1998,
Holdings became the owner of 2,353,904 shares of the Common Stock, or
approximately 79% of the issued and outstanding shares of the Common Stock of
the Company. Holdings acquired 1,914,429 of such shares from Martin Hirschorn,
the Company's founder and, until May 1998, its Chief Executive Officer, and
439,475 of such shares from certain other management and institutional
shareholders, in each case for $11.00 per share. On March 19, 1998, Messrs. John
M. Handley, Michael W. Hirschorn, Arnold W. Kanarek and Jorgen Svendsen resigned
from the Board of Directors of the Company and on March 20, 1998 the remaining
Directors appointed Messrs. Robert M. Davies, Martin Dineen, Robert
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Haidinger, Maarten D. Hemsley and James A. Read as Directors of the Company. See
"-- Background of Change of Control."
The Board of Directors, after Holdings' acquisition of shares of the Common
Stock, considered the position, prospects and future of the Company generally
and as a company with public shareholders specifically and discussed such
matters with representatives of Holdings. For the reasons discussed below, the
Board of Directors concluded that it was not in the interests of the Company or
its Shareholders to remain a company with public shareholders and that the
Merger would be both fair and in the best interests of the Company and all of
its Shareholders. Accordingly, the Board of Directors, which includes Martin
Hirschorn and Frederic M. Oran (the Company's Chief Executive Officer since May
1998), both of whom previously sold all the shares in the Company that they
owned to Holdings at a price of $11.00 per share, unanimously approved the
Merger Agreement on May 20, 1998. The Company and Holdings entered into the
Merger Agreement on May 20, 1998. In approving the Merger Agreement and reaching
its conclusions as to the fairness of Merger, the Board of Directors considered
the following factors in particular:
1. providing Shareholders with an opportunity to dispose of their
shares at the same price as that obtained from Holdings by the Company's
founder, management and certain institutional holders and at a premium to
the recent market price; 2. a limited market for the Company's Common Stock
for several years and the resulting limited ability of Shareholders to
realize on their investment in the Company; 3. the ongoing cost to the
Company of regulatory compliance as a public company without the benefit of
having a ready market for its securities; 4. greater operating flexibility
in the management of the business to remedy recent adverse operating
results; and 5. disappointing results of operations which, as a result of
the Company's public status, become available to competitors.
Equivalent Price; Premium Over Market Price. In transactions with Holdings,
the founder and former Chief Executive Officer of the Company, Martin Hirschorn,
Frederic M. Oran, and other members of management and certain institutional
holders were able to receive $11.00 per share on their investment. This price
was negotiated on an arms-length basis between these unaffiliated parties after
giving effect to the recent trading range for the Common Stock and the Company's
financial position and prospects. See "-- Background of Change of Control." In
considering the fairness of the Merger, the Board of Directors gave particular
weight to this factor.
The average market price of the Common Stock for the period from March 19,
1998 (the date Holdings acquired its interest in the Company) to May 20, 1998
(the date the Merger Agreement was executed) was $9.71. The last reported trade
of the Common Stock during that period took place on May 13, 1998 at a price of
$9.25. The Merger Consideration of $11.00 per share represents a premium of 19%
to such last reported trade. See "Stock Prices and Suspension of Dividends."
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Limited Trading Market. For several years there has a been a limited market
for the Company's Common Stock on the NASDAQ system. There are currently only
two market makers for the Common Stock.
At June 8, 1998, the Company had approximately 600 holders of 627,307
shares of Common Stock, excluding shares held by Holdings. The Company
understands that during the twelve months ended March 31, 1998, there were only
111 trades of the Common Stock involving an aggregate of 138,618 shares of its
Common Stock.
Cost of Regulatory Compliance. The Company estimates that it spends
approximately $160,000 on an annual basis on costs solely related to being a
publicly-held entity, including legal, accounting, insurance, printing and
mailing costs. Given the ongoing costs associated with remaining a public
company without the benefit of having a ready market for its securities,
combined with the other factors considered by the Board of Directors, the Board
of Directors determined that private ownership of the Company is the most
effective way to improve its financial performance.
Operating Flexibility. The Board is of the opinion that the Merger would
enable management to concentrate their efforts on reversing the Company's
operating losses and improving long-term growth of its businesses and to make
business decisions and acquisitions free from the constraints of public
ownership, which the Board of Directors believes often places undue emphasis on
short-term considerations. The Board of Directors believes that the short-term
effect of such restructuring efforts on the future market value of Common Stock
may be negative. The Board therefore believes that prospects for achieving the
necessary business turnaround would improve if it were no longer a public
company.
Competitive Disadvantages. As a consequence of its publicly-held status,
the Company is required to file and make public detailed and periodic reports
about its operations and its financial status. The Company's detailed financial
reports disclose to the public (including the Company's competitors, customers,
suppliers and employee labor unions) operating losses which may be used to the
detriment of the Company by its competitors and in negotiations and dealings
with others. Certain of the Company's competitors are privately-owned companies,
not required to disclose publicly such sensitive financial details of their
operations. At the same time, competitors have the advantage of examining the
Company's financial statements. Those of the Company's competitors which are
publicly-held are either significantly larger, and engaged in a broader spectrum
of activities, or are subsidiaries of larger, diversified public companies whose
financial information is disclosed on a consolidated basis with other lines of
business. As to such competitors, required financial disclosures do not reveal
detailed information regarding the operations of those components directly
competitive with the Company. The Board of Directors believes that private
ownership of the Company would not only eliminate the requirement to disclose
results of operations but, as discussed above, would also provide management of
the Company with the
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operating flexibility to focus on and improve the Company's results of
operations on a long-term basis. The value of such flexibility cannot be
quantified.
Certain Results of Merger. As a result of the Merger, IMI will own all of
the outstanding equity interests of the Company (subject to agreements to grant
options in Common Stock to IAC Partners), so that IMI's interest in the Company,
including its future net earnings, will increase from approximately 79% to 100%
in return for the aggregate Merger Consideration of $6,900,377. According to the
terms of the Merger Agreement, each share of Common Stock (except treasury
shares and shares owned by Holdings) will be converted into the right to receive
the Merger Consideration of $11.00 per share. As a result, the Common Stock held
by existing Shareholders will no longer represent an equity interest in the
Company and will no longer share in future earnings or losses of the Company,
the risks associated with such earnings and losses, or the potential to realize
greater value in the event that strategic acquisitions, divestitures or other
extraordinary corporate transactions are pursued by the Company in the future.
Neither the Company nor, to the knowledge of the Company, Holdings now has any
such transactions under consideration. At March 31, 1998, the net book value of
the Company was approximately $39,221,000 or $13.17 per share of Common Stock.
Before giving effect to the Merger, Holdings' 79% interest had a net book value
to Holdings (that is, its investment including the principal amount of the Loan
but excluding transactional expenses) of approximately $25,893,000, or $11.00
per share of Common Stock. After giving effect to the Merger, Holdings will own
all of the outstanding shares of Common Stock of the Company and will have made
an investment, on a comparable basis, of approximately $32,793,000 or $11.00 per
share of pre-Merger Common Stock. The Company reported net losses of $.58 and
$.41 per share for the quarter ended March 31, 1998 and the year ended December
31, 1997, respectively, and net income of $.12 per share for the year ended
December 31, 1996. The Company cannot predict when its recent operating losses
may be reversed.
Following the Merger, it is anticipated that the registration of the Common
Stock under the Exchange Act will be terminated and that the Company will no
longer file reports under the Exchange Act. In addition, upon consummation of
the Merger, Holdings' obligation under the Loan will become an obligation of the
Company's and the option held by IAC Partners to acquire 12% of the common stock
of Holdings will become an option to acquire 12% of the Common Stock of the
Company. See "-- Background of Change of Control."
Federal Income Tax Considerations. The receipt of cash for Common Stock
pursuant to the Merger will be a taxable transaction for federal income tax
purposes under the Code, and also may be a taxable transaction under applicable
state, local and other tax laws. In general, a Shareholder will recognize gain
or loss equal to the difference between the tax basis for the Common Stock held
by such Shareholder and the amount of cash received in exchange therefor. See
"Certain Federal Income Tax Consequences of the Merger."
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Board and Shareholder Approval; No Independent Opinions. The Board of
Directors of the Company approved the Merger unanimously. No unaffiliated
advisor to the Board, any group of Directors or the Shareholders has been
retained for purposes of negotiating or reporting on the fairness of the Merger.
In reaching these conclusions, the Board considered the recent completion of
Holdings acquisition and its willingness to effect the Merger at the same price
per share, which price Holdings and Mr. Hirchorn had negotiated at arms-length.
Adoption of the Merger Agreement requires that it be approved by the holders of
two-thirds of the shares of Common Stock. Given the approximately 79% interest
of Holdings, the favorable vote of Holdings would assure such approval. The
Merger has not been structured to require the approval of a majority of
unaffiliated Shareholders.
Background of Change of Control. In November 1997, IAC Acquisition Partners
("IAC Partners"), a partnership in which Messrs. Davies and Hemsley are
partners, approached Mr. Hirschorn with a view toward arranging a purchase of
Mr. Hirschorn's stock in the Company. After a lengthy due diligence
investigation, IAC Partners negotiated a preliminary agreement with Mr.
Hirschorn and IAC Partners approached IMI, a Netherlands Antilles company
engaged in the business of investing in companies in the United States and
Europe, about investing in the Company.
IMI decided to pursue an acquisition of the Common Stock of the Company
held by Mr. Hirschorn and certain other management and institutional
shareholders of the Company.
IMI organized Holdings as a wholly-owned subsidiary of IMI to effect the
stock acquisition. In January 1998, Holdings entered into separate stock
purchase agreements with Mr. Hirschorn and the other selling Shareholders. On
March 19, 1998, Holdings and Mr. Hirschorn signed an amendment to the stock
purchase agreement between them waiving certain financial conditions to closing
and effecting a minor change in the number of shares being purchased. On that
date, Holdings acquired 2,353,904 shares of the Common Stock of the Company, or
approximately 79% of the issued and outstanding shares of the Common Stock of
the Company, 1,914,429 of which were purchased from Mr. Hirschorn and 439,475 of
which were purchased from the other selling Shareholders, all at a price of
$11.00 per share.
In order to effect the acquisition, Holdings received an equity
contribution of approximately $10 million from IMI and an uncollaterized loan of
approximately $17 million (the "Loan") from IMC, a subsidiary of IMI. Interest
on the unpaid principal amount of the Loan accrues at a rate per annum equal to
LIBOR (as defined in the IMC-Holdings loan agreement) plus 3.50 percent. The
Loan matures on March 19, 2000. The Company has been informed by Holdings that
Holdings will amend the IMC-Holdings loan agreement to allow for additional
borrowings by Holdings in order to pay all or a portion of the Merger
Consideration. If the Merger is consummated, the Loan, including any additional
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borrowings, will become an obligation of the Company and its maturity could be
accelerated. No arrangements have been made to repay or refinance the Loan. IMI
will make a capital contribution to Holdings in an amount sufficient to pay the
balance, if any, of the Merger Consideration.
Holdings and IAC Partners have agreed that IAC Partners would receive a due
diligence and consulting fee equal to 1.5% of the total consideration paid by
Holdings in the acquisition and would be granted an option to acquire 12% of the
common stock of Holdings on a fully diluted basis, exercisable upon the sale by
Holdings of all or a majority of its interest in the Company, at an exercise
price equal to the net cost of IMI's equity investment in Holdings on a per
share basis. Upon consummation of the Merger, such option would become an option
to acquire 12% of the Common Stock of the Company on a fully diluted basis,
exercisable upon the sale by IMI of all or a majority of its interest in the
Company. Holdings and Messrs. Hemsley and Davies also expect to enter into a
management agreement pursuant to which Messrs. Hemsley and Davies will agree to
provide certain management services to Holdings relating to its investment in
the Company, including providing the services of Messrs. Hemsley and Davies as
officers or directors of the Company, if so requested.
Immediately after the closing of the acquisition by Holdings, Messrs.
Handley, Michael Hirschorn, Kanarek and Svendsen resigned from the Board of
Directors of the Company and, on March 20, 1998, the remaining Directors
appointed Messrs. Davies, Dineen, Haidinger, Hemsley and Read to join Mr.
Hirschorn and Frederic Oran as members of the Board of Directors. On April 28,
1998, the Board of Directors accepted the resignations of Arnold Kanarek and
John Handley as senior officers of the Company, which resignations became
effective on May 1, 1998. Mr. Hirschorn also resigned as an executive officer of
the Company but remains the Chairman of the Board of Directors. On April 28,
1998, the Board of Directors elected Frederic Oran as President and Chief
Executive Officer of the Company, Robert N. Bertrand as Senior Vice President of
Finance and Administration and Secretary, and Robert A. Schmidt as Senior Vice
President of Marketing and Sales, all as of May 1, 1998.
Interests of Certain Persons in the Merger; Conflicts of Interest
Messrs. Maarten D. Hemsley, Robert M. Davies and Robert N. Haidinger
(Directors of the Company) are directors of Holdings. Messrs. James A. Read and
Martin Dineen (Directors of the Company) are officers and directors of Holdings.
Messrs. Read and Dineen are affiliated with a private management group which is
the sole investment advisor to IMI, which owns 100% of the capital stock of
Holdings. Mr. Haidinger is president of a company in which IMI has a substantial
interest. The nature of these conflicts is such that the Directors may have an
interest in the Company beyond their status as directors. Any increase in the
value of the Company may benefit not only Holdings and persons
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affiliated or associated with Holdings (including its directors), but also
management and employees of the Company.
Regulatory Approvals
The Company does not believe that any federal or state requirements must be
complied with or that approval must be obtained in connection with the Merger,
other than filings required pursuant to federal securities laws and the filing
of the Certificate of Merger with the Secretary of State of New York and the
Secretary of State of Delaware.
Certain Federal Income Tax Consequences of the Merger
The receipt of cash for Common Stock pursuant to the Merger will be a
taxable transaction for federal income tax purposes under the Code, and also may
be a taxable transaction under applicable state, local and other tax laws.
In general, a Shareholder will recognize gain or loss equal to the
difference between the tax basis for the Common Stock held by such stockholder
and the amount of cash received in exchange therefor. Such gain or loss will be
capital gain or loss if the Common Stock in the hands of the Shareholder is a
capital asset and, in the case of non-corporate Shareholders, generally will be
long-term gain or loss if the holding period for the Common Stock is more than
eighteen months prior to the Effective Date and mid-term gain or loss if the
holding period is more than one year but not more than eighteen months prior
thereto. In certain circumstances, Shareholders who are individuals may be
entitled to preferential treatment for long-term and mid-term capital gains;
however, the ability to offset capital losses against ordinary income is
limited. If the holding period is less than one year then the gain or loss will
be short term gain or loss.
Long-term capital gains recognized by Shareholders who are individuals are
taxable at a maximum rate of 20% and mid-term capital gains are taxable at a
maximum rate of 28% (as compared with a maximum rate of 39.6% on ordinary
income). Corporations generally are subject to tax at a maximum rate of 35% on
both capital gains and ordinary income. The distinction between capital gain and
ordinary income may be relevant for certain other purposes, including the
taxpayer's ability to utilize capital loss carryovers to offset any gain
recognized.
If a Shareholder has long-term, mid-term and short-term capital
transactions during the year, a multi-step netting process occurs. First, gains
and losses within each group are netted separately. The long-term capital gains,
if any, are offset by net short-term capital losses, if any. Short-term capital
losses are then applied to reduce any mid-term capital gain from the 28% group.
A net loss from the 20% group is used first to reduce net gain from the 28%
group. A net loss in the 28% group may be used to offset gain from the 20%
group.
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If the result of combining all of the Shareholder's capital gains and
losses during the taxable year is a net capital gain, the full amount of such
gain will be included in the Shareholder's gross income. Any net capital gain
that is attributable to a particular rate group is taxed at that group's
marginal tax rate. In general, if the result of combining all such capital gains
and losses recognized during the taxable year is a net capital loss, a
Shareholder that is a corporation may not deduct any portion of such loss, and a
Shareholder that is not a corporation (such as an individual) may deduct such
loss only to the extent that it does not exceed $3,000 ($1,500 in the case of a
married individual filing a separate return), with the remainder available for
carryover into future taxable years.
The foregoing discussion may not be applicable to Shareholders who acquired
their Common Stock pursuant to the exercise of options or other compensation
arrangements or who are not citizens or residents of the United States or who
are otherwise subject to special tax treatment under the Code.
THE FOREGOING DISCUSSION IS THE COMPANY'S INTERPRETATION OF THE TAX
CONSEQUENCES OF THE MERGER AND IS BASED ON THE PROVISIONS OF THE CODE, TREASURY
REGULATIONS, RULINGS AND JUDICIAL DECISIONS NOW IN EFFECT, ALL OF WHICH ARE
SUBJECT TO CHANGE. ANY SUCH CHANGES MAY BE APPLIED RETROACTIVELY IN A MANNER
THAT COULD ADVERSELY AFFECT SHAREHOLDERS. EACH SHAREHOLDER SHOULD CONSULT ITS
OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO IT, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS OF THE RECEIPT OF
CASH FOR COMMON STOCK PURSUANT TO THE MERGER.
The Merger Agreement
The following is a summary of the material terms of the Merger Agreement, a
copy of which is attached as Exhibit A to this Proxy Statement. Such summary is
qualified in its entirety by reference to the Merger Agreement.
The Merger Agreement provides that, upon the terms and subject to the
conditions thereof, and in accordance with the BCL, at the Effective Time of the
Merger, Holdings shall be merged with and into the Company, with the Company
being the surviving corporation.
The Merger Agreement provides that at the Effective Time, by virtue of the
Merger and without any action on the part of Holdings, the Company or the
holders of Common Stock:
(a) Each share of Common Stock issued and outstanding immediately
prior to the Effective Time (other than Common Stock owned by Holdings and
Common Stock held by the Company as treasury stock) will be cancelled and
will be
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<PAGE>
converted automatically into the right to receive, in cash, from the
Company an amount equal to $11.00 per share payable, without interest, to
the holder of each such share, upon surrender of the certificate that
formerly evidenced such share;
(b) Each share of common stock of Holdings issued and outstanding
immediately prior to the Effective Time will be cancelled and converted
into a new share of common stock of the Company issued and outstanding, and
no payment or distribution will be made with respect thereto; and
(c) Each share of Common Stock held by Holdings or in the Company's
treasury will be cancelled.
Employees holding options under the Company's 1995 Stock Option Plan, as
amended, will be entitled, under the terms of the plan, to receive the
difference between the exercise price of each such option per share and $11.00
multiplied by the number of shares of Common Stock subject to such options.
Under the Merger Agreement, the respective obligations of each party to
effect the Merger are subject to the satisfaction at or prior to the Effective
Time of the following conditions: (a) the Merger Agreement and the transactions
contemplated thereby have been approved and adopted by the affirmative vote of
the holders of a two-thirds of the Company's Common Stock; (b) there is no
statute, rule, injunction or order that would prevent consummation of the
Merger; (c) all required authorizations, consents and approvals have been
obtained; (d) Holdings having obtained funds or arranged financing sufficient to
pay the Merger Consideration; and (e) all agreements and obligations of the
parties under the Merger Agreement have been performed and complied with.
Termination. The Merger Agreement may be terminated and the Merger and the
other transactions contemplated by the Merger Agreement may be abandoned at any
time prior to the Effective Time, notwithstanding any requisite approval and
adoption of the Merger Agreement and the transactions contemplated thereby by
the shareholders of the Company or by Holdings.
Amendment and Waiver. The Merger Agreement may be amended in writing by the
parties thereto or by their respective Boards of Directors at any time prior to
the Effective Time. Except as otherwise provided by the Merger Agreement, any
party thereto may (i) extend the time for the performance of any obligation or
other act of any other party thereto, (ii) waive any inaccuracy in the
representations and warranties contained therein and (iii) waive compliance with
any agreement or condition contained therein.
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<PAGE>
Accounting Treatment
The Merger wll be treated as a pooling of interests for accounting
purposes.
Stock Prices and Suspension of Dividends
The Company's Common Stock is traded over the counter on the Nasdaq
National Market under the symbol IACI. As of May 29, 1998, there were
approximately 600 shareholders of record. Market price ranges (high and low bid
quotations) obtained from the Nasdaq Stock Market's Summary of Activity for the
Common Stock for the second calendar quarter through June 1, 1998 and the first
calendar quarter ended March 31, 1998 and for each quarter of the fiscal years
ended December 31, 1995, 1996 and 1997 were as follows:
High Low
1995
First Quarter 16 1/4 15
Second Quarter 16 14 1/2
Third Quarter 16 9 3/4
Fourth Quarter 11 1/2 10
1996
First Quarter 11 9 3/4
Second Quarter 11 1/2 10
Third Quarter 11 9 1/2
Fourth Quarter 11 1/4 8 1/2
1997
First Quarter 16 8 3/4
Second Quarter 11 1/4 8
Third Quarter 9 1/2 8 1/4
Fourth Quarter 11 1/4 8 1/2
1998
First Quarter 11 9 7/8
Second Quarter (through June 1, 1998)(1) 10 7/8 9 1/16
- - ----------
1 The Merger was announced on May 20, 1998.
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<PAGE>
The Board of Directors did not declare a dividend for the year ended
December 31, 1997. A dividend of $.10 per share was paid on March 21, 1997 to
shareholders of record on March 14, 1997 for the year ended December 31, 1996. A
dividend of $.10 per share was paid on March 22, 1996 to shareholders of record
on March 15, 1996 for the year ended December 31, 1995.
Information With Respect to Holdings and IMI
The sole stockholder of Holdings is IMI. The address of the principal
executive offices of IMI is Herengracht 424, 101713Z, Amsterdam, The
Netherlands. IMI is a private company which invests in the debt and equity
securities of corporations in Europe and the United States. Set forth below is
certain information concerning the Directors and Executive Officers of Holdings
and IMI.
Directors and Executive Officers of Holdings
Name and Business Address Principal Occupation Citizenship
James A. Read Managing Director USA
c/o Mezzanine Management Ltd. Mezzanine Management Ltd
Mansfield House (an investment advisor
One Southampton Street to IMI)
London WC2/ROLR England
Robert M. Davies Merchant Banking United Kingdom
c/o The Menai Group LLC Managing Director
100 First Stamford Place Menai Capital LLC
6th Floor
Stamford, Connecticut 06902
Maarten D. Hemsley Merchant Banking United Kingdom
c/o Bryanston Management Ltd. Managing Director
82 Powder Point Avenue Menai Capital LLC
Duxbury, Massachusetts 02332
Martin P. Dineen Vice President USA
c/o Mezzanine Management Ltd. Mezzanine Management LLC
100 First Stamford Place -
6th Floor
Stamford, Connecticut 06902
Robert M. Haidinger President, CEO USA
c/o JJI Lighting Group JJI Lighting Group
67 Holly Hill Lane
Greenwich, Connecticut 06830
- - --------------------
-14-
<PAGE>
Messrs. Read and Haidinger have been at their respective present positions for
more than the last 5 years. Prior to his current employment, Mr. Davies was Vice
President of Wexford Capital Corporation from 1994 to March 1997. From September
1993 to May 1994, he was Managing Director of Steinhardt Enterprises, Inc. and
from 1987 to August 1993, he was Executive Vice President of the Hallwood Group
Incorporated. Mr. Dineen was involved in banking with Chase Manhattan Bank from
1989 to 1995 and with Bank of Boston from 1995 to 1997. In addition to his
position with Menai Capital LLC, Mr. Hemsley has been President of Bryanston
Management Ltd. since 1993.
Directors and Executive Officers of IMI
Name and Business Address Principal Occupation Citizenship
Franz Horhager Investment Manager Austria
c/o Bank Austria A/G
Am Hof 2
A-1010 Vienna, Austria
Ian Cotterill Investment Manager United Kingdom
c/o HSBC Investment Bank plc
Thames Exchange
10 Queen Street Place
London EC4R 1BL
D. Thomas Abbott Chairman USA
c/o Mees Pierson Holdings, Inc. Mees Pierson Holdings,
3 Stamford Plaza Inc.
301 Tresser Boulevard
Stamford, CT 06901-3239
Charles E. Symington Vice President USA
c/o Metropolitan Life Insurance Metropolitan Life
Company Insurance Company
43 Pippins Way
Morristown, N.J. 07960
Stephen Weber Director United Kingdom
c/o Norwich Union Life & Insurance Norwich Union Life &
Society Insurance Society
37 Surrey Street
Norwich NR1 3UZ UK
Hamish Mair Associate Director United Kingdom
c/o Scottish Eastern Investment Scottish Eastern
Trust plc Investment Trust plc
Saltire Court
20 Castle Terrace
Edinburgh EH1 2ES Scotland
A. Kipp Koester Managing Director USA
c/o The Northwestern Mutual Life Northwestern Independent
Insurance Company Management Company
-15-
<PAGE>
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-4797
MeesPierson Trust (Curacao) N.V. Managing Director
John B. Gorsiraweg 14 International Mezzanine Netherlands
P.O. Box 3889 Investment N.V. Antilles Company
Curacao
Netherlands Antilles
Muneet Othman Investment Management United Arab
Abu Dhabi Investment Authority Emirates
P.O. Box 3600
Abu Dhabi, United Arab Emirates
- - -----------------------------
From December 1993 to May 1995, Mr. Abbot was Chairman and Chief Executive
Officer of Savin Corp. Prior to December 1993, he was President of Harvest
Group, Inc. Messrs. Horhager, Cotterill, Symington, Weber, Mair and Othman have
been at their respective present positions for more than the last five years.
From 1993 to 1997, Mr. Koester was Vice President of Northwestern Mutual Life
Insurance Company.
Expenses
It is estimated that the following expenses will be incurred in connection
with the Merger, all of which have been or will be paid by the Company:
SEC Filing Fee.................................. $ 1,380
Legal Fees and Expenses......................... 50,000
Accounting Fees and Expenses.................... 10,000
Printing Expenses............................... 5,000
Miscellaneous................................... 3,620
------------
Total.................................. $ 70,000
============
In connection with the Merger, neither the Company nor Holdings anticipate
incurring any appraisal, fairness opinion or solicitation fees or expenses.
Proxies may be solicited by employees of the Company without additional
compensation.
Independent Auditors
Coopers & Lybrand LLP are the Company's independent auditors.
Representatives of Coopers & Lybrand LLP are expected to be present at the
Meeting. They will have the opportunity to make a statement if they so desire
and are expected to be available to respond to appropriate questions.
-16-
<PAGE>
Other Matters
The Board of Directors knows of no other matters which will be presented
for consideration at the Meeting. However, if any other matter is properly
brought before the Meeting, it is the intention of the persons named in the
proxy forms to vote the Proxies in accordance with their best judgment.
Shareholder Proposals
If the Merger is consummated, no public annual meetings of shareholders of
the Company will be held in the future. If the Merger is not consummated,
because the date of any such meeting cannot currently be determined,
Shareholders will be informed (by press release or other means determined
reasonable by the Company) of the date of such meeting and the date that
Shareholder proposals for inclusion in the proxy material must be received by
the Company, which proposals must comply with the rules and regulations of the
Securities and Exchange Commission ("SEC") then in effect.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors and persons who own more than 10 percent of the outstanding Common
Stock to file reports of ownership and changes in ownership with the SEC. Based
solely on reports and other information submitted by executive officers and
directors, the Company believes that during the year ended December 31, 1997,
and prior fiscal years, each of its executive officers, directors and persons
who owns more than 10 percent of the outstanding Common Stock filed all reports
required by Section 16(a).
Available Information
The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files reports, proxy statements and other
information with the SEC. Such reports and other information may be inspected
and copied or obtained by mail upon payment of the SEC's prescribed rates at the
public reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549 and at the New York Regional Office of the
SEC, 7 World Trade Center, New York, New York 10048.
Incorporation of Certain Documents by Reference; Accompanying Documents
The following documents or portions thereof filed by the Company with the
SEC are incorporated herein by reference and are made a part hereof:
(a) Annual Report on Form 10-K for the year ended December 31, 1997;
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<PAGE>
(b) Quarterly Report on Form 10-Q for the quarterly period ended March 31,
1998; and
(c) Current Reports on Form 8-K dated March 19, 1998 and April 1, 1998.
All documents filed by the Company pursuant to Sections 13, 14 or 15(d) of
the Exchange Act subsequent to the date of this Proxy Statement and prior to the
date of the Meeting shall be deemed to be incorporated by reference in this
Proxy Statement and to be a part hereof from the respective dates of filing of
such documents with the SEC. Any statement contained in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Proxy Statement to the extent that a
statement contained herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as modified or
superseded, to constitute part of this Proxy Statement.
Accompanying this Proxy Statement is the Company's Annual Report on Form
10-K (the "Annual Report") for the year ended December 31, 1997, as amended,
which contains the following information which is specifically incorporated by
reference in this Proxy Statement:
(i) Item 6 of the Annual Report - Selected Financial Data
(ii) Item 7 of the Annual Report - Management's Discussion and Analysis of
Financial Conditions and Results of Operations
(iii) Item 8 of the Annual Report - Financial Statements and Supplementary
Data
(iv) Item 9 of the Annual Report - Changes in and Disagreements with
Accountants on Accounting and Financial Disclosures.
In addition, the Company's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1998 accompanies this Proxy Statement.
-18-
<PAGE>
THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE THAT ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN EXHIBITS TO
SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE)
ARE AVAILABLE TO ANY PERSON TO WHOM THIS PROXY STATEMENT IS DELIVERED, ON
WRITTEN OR ORAL REQUEST TO THE COMPANY AT 1160 COMMERCE AVENUE, BRONX, NEW YORK
10462, ATTENTION: CHIEF FINANCIAL OFFICER. IN ORDER TO ENSURE DELIVERY OF THE
DOCUMENTS PRIOR TO THE MEETING, REQUESTS MUST BE RECEIVED BY , 1998.
By order of the Board of Directors
INDUSTRIAL ACOUSTICS COMPANY, INC.
-19-
<PAGE>
[FORM OF PROXY]
- - -------------------------------------------------------------------------------
INDUSTRIAL ACOUSTICS COMPANY, INC.
1160 Commerce Avenue, Bronx, New York 10462
Proxy Solicited on Behalf of the Board of Directors of the Company
The undersigned hereby constitutes and appoints James A. Read and Robert M.
Davies, and each of them, as true and lawful agents and proxies with full power
of substitution in each, to represent the undersigned at the Special Meeting of
Shareholders of Industrial Acoustics Company, Inc. to be held at 1160 Commerce
Avenue, Bronx, New York 10462, on , 1998 at 10:00 a.m. New York time and at
any postponements and adjournments thereof, on all matters coming before said
meeting.
1. Approval of the Agreement and Plan of Merger.
/ / FOR
/ / AGAINST
2. In their discretion, upon other matters as they may properly come before
the meeting.
(Continued and to be signed on the other side.)
- - -------------------------------------------------------------------------------
<PAGE>
- - -------------------------------------------------------------------------------
(Continued from other side.)
You are encouraged to specify your choices by marking the appropriate box, see
reverse side, but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors' recommendations. The persons named on the reverse
side as agents and proxies cannot vote your share unless you sign and return
this card.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned. If no direction is made, this proxy will be voted FOR
Proposal 1.
Dated_______________________________________________
1998
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
Signature(s)
Please mark, sign and return
promptly using the enclosed
envelope. Executors, administrators,
trustees, etc. should give a title
as such. If the signer is a
corporation, please sign full
corporate name by duly authorized
officer.
- - -------------------------------------------------------------------------------
-2-
<PAGE>
EXHIBIT A
<PAGE>
AGREEMENT
AND PLAN OF MERGER
BETWEEN
IAC HOLDINGS CORP.
AND
INDUSTRIAL ACOUSTICS COMPANY, INC.
Agreement and Plan of Merger (the "Agreement"), dated as of May 20, 1998,
between IAC HOLDINGS CORP., a Delaware corporation ("Holdings") and INDUSTRIAL
ACOUSTICS COMPANY, INC., a New York corporation (the "Company").
WHEREAS, Holdings is a corporation duly organized and existing under the
laws of the State of Delaware and has an authorized capital of 1,000 shares of
common stock, par value $.01. As of the date hereof, 1,000 shares of Common
Stock of Holdings are issued and outstanding and entitled to one vote per share.
WHEREAS, the Company is a corporation duly organized and existing under the
laws of the State of New York and has an authorized capital of 5,000,000 shares
of common stock, $.10 par value (the "Common Stock"). As of the date hereof,
2,981,211 shares of Common Stock are issued and outstanding and entitled to one
vote per share.
<PAGE>
-2-
WHEREAS, the Board of Directors of the Company has determined that (i) a
merger between Holdings and the Company is fair and in the best interests of the
Company and its shareholders and (ii) among other things, the business purpose
in effecting such a merger is to ultimately increase the value of the Company
and improve its management structure.
WHEREAS, notwithstanding anything contained herein to the contrary, at any
time prior to filing a certificate of merger with the Secretary of State of New
York, the plan of merger may be abandoned by the Board of Directors of the
Company or Holdings.
WHEREAS, the respective Boards of Directors of Holdings and the Company and
the stockholders of Holdings have approved this Agreement and have directed that
this Agreement be submitted to a vote of the shareholders of the Company.
NOW THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, Holdings and the Company hereby agree, subject to the terms and
conditions hereinafter set forth, as follows:
<PAGE>
-3-
ARTICLE I
MERGER
1.1 Merger. Subject to the terms and conditions of this agreement, Holdings
shall be merged with and into the Company in accordance with the New York
Business Corporation Law (the "NYBCL") and the General Corporation Law of the
State of Delaware (the "DGCL") (the "Merger").
The separate existence of Holdings shall cease, and the Company shall be
the surviving corporation and continue its corporate existence under the laws of
the State of New York. Thereafter, without further action, the Company shall
succeed, insofar as permitted by law, to all the rights, assets, privileges,
franchises, liabilities and obligations of Holdings.
1.2 Filing and Effectiveness. The Merger shall become effective upon the
completion of the following actions:
(a) This Agreement and the Merger shall have been approved by the
shareholders of the Company in accordance with the provisions of the NYBCL;
(b) All of the conditions precedent to the consummation of the Merger
specified in this Agreement shall have been satisfied or duly waived by the
party entitled to satisfaction thereof;
<PAGE>
-4-
(c) An executed Certificate of Merger, in the form attached hereto as
Exhibit A, meeting the requirements of the DGCL or an executed counterpart of
this Agreement shall have been filed with the Secretary of State of Delaware;
and
(d) An executed Certificate of Merger, in the form attached hereto as
Exhibit B, meeting the requirements of the NYBCL shall have been filed with the
Secretary of State of New York.
(e) Holdings shall have the funds necessary, or shall have arranged to
borrow the funds on terms reasonably acceptable to its Board of Directors, to
pay the Merger Consideration (as defined herein).
The date and time when the Merger shall become effective, as set forth
above, is hereinafter referred to as the "Effective Date."
1.3 Certificate of Incorporation. The Certificate of Incorporation of the
Company, attached hereto as Exhibit C, in effect immediately prior to the
Effective Date shall continue in full force and effect as the Certificate of
Incorporation of the Company until duly amended in accordance with the
provisions thereof and applicable law, and the name of the surviving Corporation
shall be Industrial Acoustics Company, Inc.
<PAGE>
-5-
1.4 By-laws. The By-laws of the Company in effect immediately prior to the
Effective Date shall continue in full force and effect as the By-laws of the
Company until duly amended in accordance with the provisions thereof and
applicable law.
1.5 Directors and Officers. The directors and officers of the Company
immediately prior to the Effective Date shall continue as the directors and
officers of the Company until their successors shall have been elected or until
otherwise provided by law, the Certificate of Incorporation of the Company or
the By-laws of the Company.
1.6 Effect of Merger. Upon the Effective Date, the separate existence of
Holdings shall cease and the Company, (i) shall continue to possess all of its
assets, rights, powers and property as constituted immediately prior to the
Effective Date, shall be subject to all actions previously taken by its Board of
Directors and shall succeed, without other transfer, to all of the assets,
rights, powers and property of Holdings in the manner and as more fully set
forth in Section 259 of the DGCL, and (ii) shall continue to be subject to all
of its debts, liabilities and obligations as constituted immediately prior to
the Effective Date and succeed, without other transfer, to all of the debts,
liabilities and obligations of Hold-
<PAGE>
-6-
ings in the same manner as if the Company had incurred them, all as more fully
provided under the applicable provisions of the DGCL and the NYBCL.
ARTICLE II
MANNER OF CONVERSION OF STOCK
2.1 Outstanding stock of the Company. Upon the Effective Date, by virtue of
the Merger, each share of Common Stock outstanding immediately prior thereto
(other than Common Stock held by Holdings and Common Stock held by the Company
as treasury stock) shall be converted into the right to receive $11.00 per share
in cash (the "Merger Consideration"), upon surrender of the stock certificates
representing such Common Stock in accordance with Section 2.2 herein, with any
fractional shares issuable to a registered owner of Common Stock in the
aggregate to be rounded up to the nearest whole share.
Each outstanding share of Common Stock owned by Holdings or held by the
Company as treasury stock will be cancelled.
2.2 Stock Certificates. (a) After the Effective Date, each holder of a
certificate(s) formerly evidencing Common Stock which has been converted into
the right to receive the Merger Consideration, upon surrender of the same to an
ex-
<PAGE>
-7-
change agent appointed by the Company (the "Exchange Agent"), shall be entitled
to receive the Merger Consideration.
(b) Promptly after the Effective Date, the Exchange Agent shall send a
notice and a transmittal form (which shall specify that the delivery shall be
effected, and risk of loss and title shall pass, only upon proper delivery of
the certificates formerly representing Common Stock to the Exchange Agent
(subject to Section 2.2(d)) to each holder of certificates formerly evidencing
Common Stock advising such holder of the effectiveness of the Merger and the
procedure for surrendering to the Exchange Agent such certificates for exchange
into the Merger Consideration. The notice and transmittal form provided for in
this Section 2.2(b) shall be sent by the Exchange Agent to the address for each
holder of Common Stock contained in the stock record books of the Company
promptly after the Effective Date. Each holder of certificates formerly
evidencing Common Stock, upon proper surrender thereof to the Exchange Agent
together and in accordance with such transmittal form, shall be entitled to
receive in exchange therefor the Merger Consideration. Notwithstanding the
foregoing, neither the Exchange Agent nor any party shall be liable to a holder
of certificates formerly evidencing Common Stock for any amount which may be
required to be paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
<PAGE>
-8-
(c) If any portion of the Merger Consideration is to be delivered to a
Person other than the Person in whose name the certificates surrendered in
exchange therefor are registered, it shall be a condition to such payment that
the certificates so surrendered shall be properly endorsed or accompanied by
appropriate stock powers and otherwise in proper form for transfer, that such
transfer otherwise be proper and that the Person requesting such transfer shall
pay to the Exchange Agent any transfer or other taxes payable by reason of the
foregoing or establish to the satisfaction of the Exchange Agent that such taxes
have been paid or are not required to be paid. For purposes of this Agreement,
"Person" means an individual, a corporation, a limited liability company, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or any agency or instrumentality
thereof.
(d) In the event any certificate theretofore representing Common Stock
shall have been lost, stolen or destroyed, upon the making of an appropriate
affidavit of that fact by the shareholder claiming such certificate to be lost,
stolen or destroyed, such shareholder shall be paid the Merger Consideration;
provided that when the Merger Consideration is paid to such shareholder, the
Board of Directors of the Company may, in its discretion and as a condition
precedent to the issuance
<PAGE>
-9-
thereof, require the claiming Person to give the Company a bond or
indemnification in such form and sum as the Company may reasonably direct as
indemnity against any claim that may be made against the Company with respect to
the certificate alleged to have been lost, stolen or destroyed.
2.3 Outstanding Common Stock of Holdings. Upon the Effective Date, by
virtue of the merger, each issued and outstanding common stock of Holdings shall
be cancelled and converted into one share of Common Stock of the Company.
ARTICLE III
GENERAL
3.1 Termination and Abandonment. At any time prior to the Effective Date,
this Agreement may be terminated and the Merger abandoned by the Board of
Directors of either Holdings or the Company if (a) approval by the shareholders
of the Company specified in Article I hereof shall not have been obtained, or
(b) the respective Board of Directors of either Holdings or the Company
determines that in its sole discretion the Merger does not appear to be in the
best interests of either of Holdings or the Company or their respective
shareholders or is otherwise not advisable.
<PAGE>
-10-
3.2 Amendment. This Agreement may be amended, modified, supplemented or
abandoned at any time (before or after shareholder approval) prior to the
Effective Date with the mutual consent of the Boards of Directors of Holdings
and the Company; provided, however, that this Agreement may not be amended,
modified or supplemented after it has been approved by the shareholders of the
Company in any manner which, in the judgment of the Board of Directors of the
Company, would have a material adverse effect on the rights of such shareholders
or in any manner not permitted under applicable law.
3.3 Headings. The headings set forth herein are inserted for convenience or
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
3.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, and all of which, when
taken together, shall constitute one and the same instrument.
3.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of law, except to the extent that the laws of the State of Delaware
require application herein.
<PAGE>
-11-
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed on its behalf and attested by its officers hereunto duly authorized,
all as of the date and year first above written.
INDUSTRIAL ACOUSTICS COMPANY, INC.
By: /s/ Frederic M. Oran
-------------------------------------
Name: Frederic M. Oran
Title: President
Attest:
By: /s/ Robert N. Bertrand
---------------------------------
Name: Robert N. Bertrand
Title: Secretary
IAC HOLDINGS CORP.
By: /s/ James A. Read
-----------------------------------
Name: James A. Read
Title: President
Attest:
By: /s/ Martin P. Dineen
---------------------------------
Name: Martin P. Dineen
Title: Secretary
