SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Rule 13e-3 Transaction Statement
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
INDUSTRIAL ACOUSTICS COMPANY, INC.
(Name of Issuer)
INDUSTRIAL ACOUSTICS COMPANY, INC.
IAC HOLDINGS CORP.
INTERNATIONAL MEZZANINE INVESTMENT, N.V.
INTERNATIONAL MEZZANINE CAPITAL, B.V.
IAC ACQUISITION PARTNERS
(Name of Persons Filing Statement)
Title CUSIP Number
Common Stock 45583010
(Title and CUSIP Number of Class of Securities)
Robert N. Bertrand
Secretary
1160 Commerce Avenue
Bronx, New York 10462
(718) 931-8000
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications on Behalf of the Persons Filing Statement)
with a copy to:
John P. Mitchell, Esq.
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
(212) 701-3000
This statement is filed in connection with (check the appropriate box):
a. [X] The filing of solicitation materials or an
information statement subject to Regulation 14A [17 CFR
240.14a-1 to 240.14b-1], Regulation 14C [17 CFR 240.14c-1
to 240.14c-101] or Rule 13e-3(c) [Sec. 240.13e-3(c)]
under the Securities Exchange Act of 1934.
b. [ ] The filing of a registration statement under the Securities Act of 1933.
c. [ ] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: /X/
Calculation of Filing Fee
Transaction Valuation* Amount of Filing Fee
$6,900,377 $1,380
* Solely for purposes of calculating the filing fee and computed pursuant to
Section 13(e)(3) of the Securities Exchange Act of 1934, as amended, and Rule
0-11(b)(1). The transaction value equals the product of $11.00 (the "Merger
Consideration" per share) and the number of shares of Common Stock of Industrial
Acoustics Company, Inc. that are not held by IAC Holdings Corp. or held in
Industrial Acoustic Company, Inc.'s treasury.
/X/ Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
Amount Previously Paid: $1,380
Form or Registration No.: Schedule 14A
Filing Party: Industrial Acoustics Company, Inc.
Date Filed: June 12, 1998
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This Rule 13e-3 Transaction Statement (the "Statement") is being jointly
filed by Industrial Acoustics Company, Inc. a New York corporation (the
"Company" or "Issuer") and IAC Holdings Corp., a Delaware corporation,
("Holdings") in connection with a proposed merger (the "Merger") of Holdings
with and into the Company. References to "IMI" in this statement are to
International Mezzanine Investment, N.V., a Netherlands Antilles corporation,
the sole stockholder of Holdings.
Information contained in the Proxy Statement (in preliminary form) on
Schedule 14A with respect to the solicitation of proxies to approve the Merger
(the "Proxy Statement") filed with the Securities and Exchange Commission (the
"Commission") on the date hereof is incorporated by reference in response to
items of this Statement. The cross-reference sheet which follows shows the
location in the Proxy Statement of information required to be included in
response to the items of this Statement.
Schedule 13E-3 Item Number Location in Proxy Statement
Item l(a) Introduction and Summary -- Place; Record Date;
Quorum; Solicitation
Item l(b) Introduction and Summary -- Place; Record Date;
Quorum; Solicitation
Item l(c) Stock Prices and Suspension of Dividends
Item l(d) Stock Prices and Suspension of Dividends
Item l(e) Not Applicable
Item l(f) Special Factors -- Background of Change of Control
Item 2(a) Introduction and Summary -- Place; Record Date;
Quorum; Solicitation. Information With Respect to
Holdings, IMI, IAC and IAC Partners
Item 2(b) Information With Respect to Holdings, IMI, IMC and
IAC Partners
Item 2(c) Information With Respect to Holdings, IMI, IMC and
IAC Partners
Item 2(d) Information With Respect to Holdings, IMI, IMC and
IAC Partners
Item 2(e) *
Item 2(f) *
Item 2(g) Information With Respect to Holdings, IMI, IMC and
IAC Partners
Item 3(a) Special Factors -- Acquisition; Purpose of the Merger;
Fairness Factors, -- Background of Change of Control
Item 3(b) Special Factors -- Acquisition; Purpose of the Merger;
Fairness Factors, -- Background of Change of Control
Item 4(a) The Merger Agreement
Item 4(b) The Merger Agreement
Item 5(a) Not Applicable
Item 5(b) Not Applicable
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Schedule 13E-3 Item Number Location in Proxy Statement
Item 5(c) Not Applicable
Item 5(d) Not Applicable
Item 5(e) Not Applicable
Item 5(f) Introduction and Summary -- Certain Results of the
Merger. Special Factors -- Certain Results of the
Merger
Item 5(g) Introduction and Summary -- Certain Results of the
Merger. Special Factors -- Certain Results of the
Merger
Item 6(a) Introduction and Summary -- Purpose; Merger
Agreement. Special Factors -- Background of Change of
Control
Item 6(b) Expenses
Item 6(c) Introduction and Summary -- Purpose; Merger
Agreement. Special Factors -- Background of Change of
Control
Item 6(d) Not Applicable
Item 7(a) Special Factors -- Acquisition; Purpose of the
Merger; Fairness Factors, -- Equivalent Price; Premium
Over Market Price, -- Limited Trading Market, -- Cost
of Regulatory Compliance, -- Operating Flexibility,
-- Competitive Disadvantages
Item 7(b) Not Applicable
Item 7(c) Special Factors-- Acquisition; Purpose of the Merger;
Fairness Factors,-- Equivalent Price; Premium Over
Market Price,-- Limited Trading Market,-- Cost of
Regulatory Compliance,-- Operating Flexibility,
-- Competitive Disadvantages,-- Certain Results of
Merger,-- Background of Change of Control.
Introduction and Summary-- Certain Results of the
Merger
Item 7(d) Special Factors-- Acquisition; Purpose of the Merger;
Fairness Factors,-- Cost of Regulatory Compliance,
-- Operating Flexibility,-- Competitive Disadvantages,
-- Certain Results of Merger,--Federal Income Tax
Considerations. The Merger Agreement. Certain
Federal Income Tax Consequences of the Merger
Item 8(a) Special Factors -- Acquisition; Purpose of the Merger;
Fairness Factors
Item 8(b) Special Factors -- Acquisition; Purpose of the Merger;
Fairness Factors, -- Equivalent Price; Premium Over
Market Price, -- Limited Trading Market, -- Certain
Results of Merger
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Schedule 13E-3 Item Number Location in Proxy Statement
Item 8(c) Special Factors -- Board and Shareholder Approval;
Independent Opinion
Item 8(d) Special Factors -- Board and Shareholder Approval;
Independent Opinion
Item 8(e) Special Factors -- Acquisition; Purpose of the Merger;
Fairness Factors, -- Board and Shareholder Approval;
Independent Opinion
Item 8(f) Not Applicable
Item 9(a) Special Factors -- Board and Shareholder Approval;
Independent Opinion; -- Laidlaw Review
Item 9(b) Not Applicable
Item 9(c) Not Applicable
Item 10(a) Introduction and Summary-- Place; Record Date;
Quorum; Solicitation. Special Factors-- Background
of Change of Control
Item 10(b) Special Factors -- Acquisition; Purpose of the Merger;
Fairness Factors, -- Background of Change of Control
Item 11 Special Factors-- Background of Change of Control
Item 12(a) Introduction and Summary-- Purpose; Merger Agreement
Item 12(b) Introduction and Summary-- Recommendation of the
Board of Directors. Special Factors --Acquisition;
Purpose of the Merger; Fairness Factors
Item 13(a) Introduction and Summary-- Purpose; Merger Agreement
Item 13(b) Not Applicable
Item 13(c) Not Applicable
Item 14(a) Financial Statements -- Accompanying Documents.
Special Factors -- Certain Results of the Merger
Item 14(b) Not Applicable
Item 15(a) Introduction and Summary-- Place; Record Date;
Quorum; Solicitation
Item 15(b) Introduction and Summary-- Place; Record Date;
Quorum; Solicitatio.
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Schedule 13E-3 Item Number Location in Proxy Statement
Item 16 Not Applicable
Item 17(a) *
Item 17(b) *
Item 17(c) *
Item 17(d) *
Item 17(e) Not Applicable
Item 17(f) Not Applicable
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* The Item is located only in the Schedule 13E-3.
Item 1. Issuer and Class of Security Subject to the Transaction.
(a) The name of the Issuer is Industrial Acoustics Company, Inc. (the
"Issuer"), a New York corporation that has its principal executive offices at
1160 Commerce Avenue, Bronx, New York 10462. The information appearing under the
caption "Introduction and Summary -- Place; Record Date; Quorum; Solicitation"
in the Proxy Statement is incorporated herein by reference.
(b) The information appearing under the caption "Introduction and Summary
- -- Place; Record Date; Quorum; Solicitation" in the Proxy Statement is
incorporated herein by reference.
(c) - (d) The information appearing under the caption "Stock Prices and
Suspension of Dividends" in the Proxy Statement is incorporated herein by
reference.
(e) Not applicable.
(f) The information appearing under the caption "Special Factors --
Background of Change of Control" in the Proxy Statement is incorporated herein
by reference.
Item 2. Identity and Background.
(a) - (d) This statement is being filed by the Issuer, IAC Holdings Corp.
("Holdings"), a Delaware corporation that owns approximately 79% of the
outstanding shares of Common Stock of the Issuer, International Mezzanine
Investment, N.V., a Netherlands Antilles Corporation ("IMI") (the sole
stockholder of Holdings), International Mezzanine Capital, B.V., a corporation
which is an affiliate of IMI ("IMC"), and IAC Acquisition Partners, a
partnership, ("IAC Partners") which is an affiliate of Holdings. The address of
Holdings' principal executive offices is 100 First Stamford Place, Stamford,
Connecticut 06902. The address of IMI's principal executive offices is
Herengracht 424, 101713Z, Amsterdam, The Netherlands. IMC's principal executive
offices are located at Herengracht 424, 1017BZ, Amsterdam, The Netherlands and
IAC Partner's principal executive offices are located at 82 Powder Point Avenue,
Duxbury, Massachusetts 02332. The information appearing under the captions
"Introduction and Summary -- Place; Record Date; Quorum; Solicitation" and
"Information With Respect to Holdings, IMI, IMC and IAC Partners" in the Proxy
Statement is incorporated herein by reference.
(e) - (f) During the five years prior to the date hereof, neither Holdings,
IMI, IMC nor IAC Partners, nor to their knowledge, any of their respective
directors or executive officers has been (i) convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) a party to any
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is
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subject to a judgment, decree, or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities law
or finding any violation with respect to such laws.
(g) The information appearing under the caption "Information With Respect
to Holdings, IMI, IMC and IAC Partners" in the Proxy Statement is incorporated
herein by reference.
Item 3. Past Contracts, Transactions or Negotiations.
(a) - (b) The information appearing under the caption "Special Factors --
Acquisition; Purpose of the Merger; Fairness Factors, -- Background of Change of
Control" in the Proxy Statement is incorporated herein by reference.
Item 4. Terms of the Transaction.
(a) - (b) The information appearing under the caption "The Merger
Agreement" in the Proxy Statement is incorporated herein by reference.
Item 5. Plans or Proposals of the Issuer or Affiliate
(a) - (e) Not applicable.
(f) Following consummation of the Merger, the Common Stock of the Company
will be eligible for termination of registration pursuant to Section 12(g)(4) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
information appearing under the captions "Introduction and Summary -- Certain
Results of the Merger" and "Special Factors -- Certain Results of the Merger" in
the Proxy Statement is incorporated herein by reference.
(g) Not applicable.
Item 6. Source and Amounts of Funds or Other Consideration.
(a) The total amount of funds to be used to pay the Merger Consideration is
expected to be approximately $6,990,377 which will be made available to Holdings
by way of an amendment, to be entered into, to an existing loan agreement
between Holdings and IMC, or to the extent not so funded, a capital contribution
to Holdings by IMI. The information appearing under the captions "Introduction
and Summary -- Purpose; Merger Agreement" and "Special Factors -- Background of
Change of Control" in the Proxy Statement is incorporated herein by reference.
(b) The information appearing under the caption "Expenses" in the Proxy
Statement is incorporated herein by reference.
(c) Holdings will borrow the funds to pay the Merger Consideration from IMC
at an interest rate of LIBOR (as defined in the Loan Agreement) plus 3.50
percent. The loan will become due on March 19, 2000. Holdings does not currently
have in place any plans or arrangements to finance or repay such borrowings. The
information appearing under the captions "Introduction and Summary -- Purpose;
Merger Agreement" and "Special Factors -- Background of Change of Control" in
the Proxy Statement is incorporated herein by reference.
(d) Not applicable.
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<PAGE>
Item 7. Purpose(s), Alternatives, Reasons and Effects.
(a) The information appearing under the captions "Special Factors --
Acquisition; Purpose of the Merger; Fairness Factors, -- Equivalent Price;
Premium Over Market Price, -- Limited Trading Market, -- Cost of Regulatory
Compliance, -- Operating Flexibility, -- Competitive Disadvantages" and
"Introduction and Summary -- Certain Results of the Merger " in the Proxy
Statement is incorporated herein by reference.
(b) Not applicable.
(c) The information appearing under the caption "Special Factors --
Acquisition; Purpose of the Merger; Fairness Factors, -- Equivalent Price;
Premium Over Market Price, -- Limited Trading Market, -- Cost of Regulatory
Compliance, -- Operating Flexibility, -- Competitive Disadvantages, -- Certain
Results of Merger, -- Background of Change of Control" in the Proxy Statement is
incorporated herein by reference.
(d) The information appearing under the caption "Special Factors --
Acquisition; Purpose of the Merger; Fairness Factors, -- Cost of Regulatory
Compliance, -- Operating Flexibility, -- Competitive Disadvantages, -- Certain
Results of Merger, --Federal Income Tax Considerations. The Merger Agreement.
Certain Federal Income Tax Consequences of the Merger" in the Proxy Statement is
incorporated herein by reference.
Item 8. Fairness of the Transaction.
(a) The information appearing under the caption "Special Factors --
Acquisition; Purpose of the Merger; Fairness Factors" in the Proxy Statement is
incorporated herein by reference.
(b) The information appearing under the caption "Special Factors --
Acquisition; Purpose of the Merger; Fairness Factors, -- Equivalent Price;
Premium Over Market Price, -- Limited Trading Market, -- Certain Results of
Merger" in the Proxy Statement is incorporated herein by reference.
(c) The information appearing under the caption "Special Factors -- Board
and Shareholder Approval; Independent Opinion" in the Proxy Statement is
incorporated herein by reference.
(d) The information appearing under the caption "Special Factors -- Board
and Shareholder Approval; Independent Opinion" in the Proxy Statement is
incorporated herein by reference.
(e) The information appearing under the caption "Special Factors --
Acquisition; Purpose of the Merger; Fairness Factors, -- Board and Shareholder
Approval; Independent Opinion" in the Proxy Statement is incorporated herein by
reference.
(f) Not applicable.
Item 9. Reports, Opinions, Appraisals and Certain Negotiations.
(a) The information appearing under the caption "Special Factors -- Board
and Shareholder Approval; Independent Opinion; Laidlaw -- Review" in the Proxy
Statement is incorporated herein by reference.
(b) The information appearing under the caption "Special Factors -- Laidlaw
Review" in the Proxy Statement is incorporated herein by reference.
(c) The information appearing under the caption "Special Factors -- Laidlaw
Review" in the Proxy Statement is incorporated herein by reference.
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<PAGE>
Item 10. Interest in Securities of the Issuer.
(a) The information appearing under the caption "Introduction and Summary
- -- Place; Record Date; Quorum; Solicitation. Special Factors -- Background of
Change of Control" in the Proxy Statement is incorporated herein by reference.
(b) The information appearing under the caption "Special Factors --
Acquisition; Purpose of the Merger; Fairness Factors, -- Background of Change of
Control" in the Proxy Statement is incorporated herein by reference.
Item 11. Contracts, Arrangements or Understandings with Respect to the Issuer's
Securities.
The information appearing under the caption "Special Factors -- Background
of Change of Control" in the Proxy Statement is incorporated herein by
reference.
Item 12. Present Intention and Recommendation of Certain Persons with Regard to
the Transaction.
(a) The information appearing under the caption "Introduction and Summary
- -- Purpose; Merger Agreement" in the Proxy Statement is incorporated herein by
reference.
(b) The information appearing under the caption "Introduction and Summary
- -- Recommendation of the Board of Directors. Special Factors --Acquisition;
Purpose of the Merger; Fairness Factors" in the Proxy Statement is incorporated
herein by reference.
Item 13. Other Provisions of the Transaction.
(a) The information appearing under the caption "Introduction and Summary
- -- Purpose; Merger Agreement" in the Proxy Statement is incorporated herein by
reference.
(b) Not applicable.
(c) Not applicable.
Item 14. Financial Information.
(a) The information appearing under the captions "Financial Statements,"
"Accompanying Documents" and "Special Factors -- Certain Results of the Merger"
with respect to Book Value is incorporated herein by reference.
(b) Not applicable.
Item 15. Persons and Assets Employed, Retained or Utilized.
(a) The information appearing under the caption "Introduction and Summary
- -- Place; Record Date; Quorum; Solicitation" in the Proxy Statement is
incorporated herein by reference.
(b) The information appearing under the caption "Introduction and Summary
- -- Place; Record Date; Quorum; Solicitation" in the Proxy Statement is
incorporated herein by reference.
Item 16. Additional Information.
Not applicable.
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<PAGE>
Item 17. Material to be Filed as Exhibits.
(a) Form of Amended Loan Agreement between IAC Holdings Corp. and
International Mezzanine Capital, B.V.1
(b) Opinion of Laidlaw & Co.
(c) 1. Form of Stock Option Agreement between IAC Holdings Corp. and IAC
Acquisition Partners.*
2. Agreement and Plan of Merger dated as of May 20, 1998 between Industrial
Acoustics Company, Inc. and IAC Holdings Corp.*
3. Stock Purchase Agreement dated as of January 26, 1998 by Holdings and
Martin Hirschorn, as amended.
4. Stock Purchase Agreement dated as of January 23, 1998 by and between
Holdings and Community Funds, Inc.
5. Stock Purchase Agreement dated as of January 23, 1998 by and between
Holdings and Barnard College.
6. Stock Purchase Agreement dated as of January 23, 1998 by and between
Holdings and Michael Hirschorn.
7. Stock Purchase Agreement dated as of January 23, 1998 by and between
Holdings and Frederic M. Oran.
8 Stock Purchase Agreement dated as of January 23, 1998 by and between
Holdings and Arnold W. Kanarek.
9. Stock Purchase Agreement dated as of January 23, 1998 by and between
Holdings and ARK International.
10. Stock Purchase Agreement dated as of January 23, 1998 by and between
Holdings and George J. Sotos.
11. Stock Purchase Agreement dated as of January 23, 1998 by and between
Holdings and Robert J. Buelow.
12 Stock Purchase Agreement dated as of January 23, 1998 by and between
Holdings and Morton I. Schiff.
13. Stock Purchase Agreement dated as of January 23, 1998 by and between
Holdings and Henry Allen.
(d) Proxy Statement of Issuer, in preliminary form, dated August , 1998.
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* Previously filed.
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(e) Not applicable.
(f) Not applicable.
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<PAGE>
SIGNATURE
After due inquiry and to the best of our knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
Dated: August 11, 1998
INDUSTRIAL ACOUSTICS COMPANY, INC.
By: /s/ Frederic M. Oran
----------------------------
Name: Frederic M. Oran
Title: President
IAC HOLDINGS CORP.
By: /s/ James A. Read
----------------------------
Name: James A. Read
Title: President
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Laidlaw & Co.(R)
July 31, 1998
Board of Directors
Industrial Acoustics Company, Inc.
1160 Commerce Ave.
Bronx, NY 10462
Dear Sirs:
You have asked us to advise you with respect to the fairness to the
minority, public stockholders of IAC Inc. (the "Company") from a financial point
of view of the consideration to be paid by IAC Holdings ("Holdings") pursuant to
the terms of the Agreement and Plan of Merger (the "Merger Agreement"), between
the Company and Holdings. The Merger Agreement provides that for each
outstanding share of the Company's Common Stock the shareholder will receive
$11.00 in cash.
In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to the Company. We have also
reviewed certain other information, including financial forecasts, provided to
us by the Company, and have met with the Company's and Holdings' management to
discuss the business and prospects of the Company.
We have also considered certain financial and stock market data of the
Company. We also considered such other information, financial studies, analyses
and investigations and financial, economic and market criteria which we deemed
relevant.
In connection with our review, we have not independently verified any of
the foregoing information and have relied on its being complete and accurate in
all material respects. With respect to the financial forecasts, we have assumed
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the Company's and Holdings' management as
to the future financial performance of the Company. In addition, we have not
made an independent evaluation or appraisal of the as-
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sets of the Company, nor have we been furnished with any such appraisals.
Laidlaw will receive a fee for rendering this opinion.
It is understood that this letter is for the information of the Board of
Directors of IAC Inc. only and may be published in its entirety in the
prospectus/proxy statement to be distributed to stockholders of the Company so
long as we give our prior written consent to any summary of, excerpt from or
reference to such opinion which consent shall not be unreasonably withheld. This
letter is not to be quoted or referred to, in whole or in part, in any other
proxy statement or in any other registration statement or prospectus, or in any
other document used in connection with the offering or sale of securities, nor
shall this letter be used for any other purposes, without Laidlaw & Co.'s prior
written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the consideration to be paid to the Company's minority, public
stockholders pursuant to the Merger Agreement is fair from a financial point of
view.
Sincerely,
Laidlaw Global Securities, Inc.
By: /s/ Frank A. Klepetko
---------------------------
Frank A. Klepetko
Managing Director
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made as of January 26, 1998,
by IAC HOLDINGS CORP., a Delaware corporation, with offices located at ("Buyer")
and MARTIN HIRSCHORN, an individual resident in New York, New York ("Hirschorn"
or "Seller").
RECITALS
Seller desires to sell, and Buyer desires to purchase, a total of 1,913,429
of the issued and outstanding shares (the "Shares") of capital stock, $. 10 par
value of Industrial Acoustics Company, Inc., a New York corporation (the
"Company"), for the consideration and on the terms set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS.
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"Breach" -- a "Breach" of a representation, warranty, covenant, obligation,
or other provision of this Agreement or any instrument delivered pursuant to
this Agreement will be deemed to have occurred if there is or has been any
material inaccuracy in or material breach of, or any material failure to perform
or comply with, such representation, warranty, covenant, obligation, or other
provision, and the term "Breach" means any such inaccuracy, breach, failure,
claim, occurrence, or circumstance.
"Buyer" -- as defined in the first paragraph of this Agreement.
"Closing" -- as defined in Section 2.3.
"Closing Date" -- the date and time as of which the Closing actually takes
place.
"Company" -- Industrial Acoustics Company, Inc., a New York corporation.
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"Consent" -- any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Contemplated Transactions" -- all of the transactions contemplated by this
Agreement, including: (a) the sale of the Shares by Seller to Buyer; (b) the
performance by Buyer and Seller of their respective covenants and obligations
under this Agreement; and (c) Buyer's acquisition and ownership of the Shares
and exercise of control over the Company and its Subsidiaries.
"Contract" -- any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"Damages" -- as defined in Section 10.2.
"Disclosure Schedule" -- the Disclosure Schedule delivered by Seller to
Buyer concurrently with the execution and delivery of this Agreement.
"EBITDA" -- consolidated operating profit for the fiscal year ended
December 31, 1997 (i) after all sales, general and administrative expenses,
before interest income and expense, taxation, depreciation and amortization,
(ii) inclusive of royalty income and after bonus expenses, and (iii) excluding
any non-recurring income and adding back redundancy costs relating to the
operations of Industrial Acoustics Company, Ltd. For purposes of computing
EBITDA, bonus expense shall not be less than $1,300,000, and any provision for
potential late penalties on the "Penick/Miramar" contract #50-0833 shall not
exceed $90,000.
"Encumbrance" -- any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
"Environmental Claim" -- means any notice, claim, demand, order, direction
(conditional or otherwise) or other communication by any governmental authority
or any Person alleging liability for any response or corrective action, any
damage, including, without limitation, personal injury, property damage,
contribution, indemnity, indirect or consequential damages, damage to natural
resources, nuisance, pollution, contamination or other adverse effects on the
environment, or for fines or penalties, in each case arising under any
Environmental Law, including without limitation, relating to, resulting from or
in connection with Hazardous Materials and relating to the Company, any of its
Subsidiaries or any of their respective properties or predecessors in interest.
"Environmental Laws" -- means the common law and all statutes, ordinances,
orders, rules, regulations, judgments, writs, decrees or injunctions relating to
pollution
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or protection of human health, safety or the environment including, without
limitation, ambient air, indoor air, soil, surface water, groundwater, wetlands
and other natural resources, land or subsurface strata, including, without
limitation, those relating to the Release or threatened Release of Hazardous
Materials or otherwise relating to the generation, manufacture, use, storage,
transport, treatment, distribution, or disposal of Hazardous Materials, each as
amended or supplemented and each as in effect as of the date of determination.
"Environmental Lien" -- means a Lien in favor of a Tribunal or other Person
(i) for any liability under an Environmental Law or (ii) for damages arising
from or costs incurred by such Tribunal or other Person in response to a release
or threatened release of any Hazardous Materials.
"Facilities" -- any real property, leaseholds, or other interests currently
or formerly owned or operated by the Company or any of its Subsidiaries and any
buildings, plants, structures, or equipment (including motor vehicles, tank
cars, and rolling stock) currently or formerly owned or operated by the Company
or any of its Subsidiaries.
"GAAP" -- generally accepted United States accounting principles.
"Governmental Authorization" any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"Governmental Body" -- any (a) nation, state, county, city, town, village,
district, or other jurisdiction of any nature; (b) federal, state, local,
municipal, foreign, or other government; (c) governmental or quasi-governmental
authority of any nature (including any governmental agency, branch, department,
official, or entity and any court or other tribunal); (d) multinational
organization or body; or (e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"Hazardous Materials" -- means any pollutant, contaminant, toxic, hazardous
or extremely hazardous substance, constituent or waste, or any other
constituent, waste, material, compound, chemical or substance including, without
limitation, petroleum including crude oil or any fraction thereof, or any
petroleum product, subject to regulation under any Environmental Law.
"HSR Act -- the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"Intellectual Property Assets" -- includes (i) the name Industrial
Acoustics Company, all fictional business names, trading names, registered and
unregistered trademarks,
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service marks, and applications (collectively, "Marks"); (ii) all patents,
patent applications, and inventions and discoveries that may be patentable
(collectively, "Patents"); (iii) a copyrights in both published works and
unpublished works (collectively, "Copyrights"); and (iv) all know-how, trade
secrets, confidential information, customer lists, software, technical
information, data, process technology, plans, drawings, and blue prints
(collectively, "Trade Secrets"); owned, used, or licensed by the Company or any
Subsidiary as licensee or licensor.
"Interim Balance Sheet" -- as defined in Section 3.7.
"IRC" -- the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS" -- the United States Internal Revenue Service or any successor
agency, and, to the "tent relevant, the United States Department of the
Treasury.
"Knowledge" -- an individual will be deemed to have "Knowledge" of a
particular fact or other matter if (a) such individual is actually aware of such
fact or other matter; or (b) a prudent individual could be expected to discover
or otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the existence of
such fact or other matter.
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, partner, executor, or trustee of such
Person (or in any similar capacity) has, or at any time had, or should have had
(based on the standard set forth in clause (b) above) Knowledge of such fact or
other matter.
"Licensed Intellectual Property Assets" -- Intellectual Property Assets
licensed by the Company or any Subsidiary as licensee or licensor.
"Legal Requirement" -- any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"Material Adverse Effect" -- any circumstance, change in, or effect on the
business of the Company or any Subsidiary that, individually or in the aggregate
with any other circumstances, changes in, or effects on, the business of the
Company or any Subsidiary: (a) is materially adverse to the business,
operations, assets or liabilities, employee relationships, customer or supplier
relationships, prospects, results of operations or the condition (financial or
otherwise) of the Company and the Subsidiaries, taken as a whole, or (b)
adversely affects the ability of the Buyer, the Company or the Subsidiaries to
operate or
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conduct their business in the manner in which it is currently operated or
conducted by Hirschorn, the Company and the Subsidiaries.
"Order" -- any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"Organizational Documents" -- (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any amendment
to any of the foregoing.
"Owned Intellectual Property Assets" -- Intellectual Property Assets owned
by the Company or any Subsidiary.
"Permitted Encumbrance" -- any of the following as to which no enforcement,
collection, execution, levy or foreclosure proceeding shall have been commenced:
(a) liens for taxes, assessments and governmental charges or levies not yet due
and payable which are not in excess of the amount accrued therefor on the
Reference Balance Sheet; (b) Encumbrances imposed by law, such as materialmen's,
mechanics', carriers', workmen's and repairmen's liens and other similar liens
arising in the ordinary course of business securing obligations that (i) are not
overdue for a period of more than 30 days and (ii) are not in excess of $5,000
in the case of a single property or $50,000 in the aggregate at any time; (c)
pledges or deposits to secure obligations under workers' compensation laws or
similar legislation or to secure public or statutory obligations; and (d) minor
survey exceptions, reciprocal easement agreements and other customary
encumbrances on title to real property that (i) were not incurred in connection
with any Indebtedness, (ii) do not render title to the property encumbered
thereby unmarketable and (iii) do not, individually or in the aggregate,
materially adversely affect the value or use of such property for its current
and anticipated purposes.
"Person" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Proceeding" -- any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
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"Reference Balance Sheet" -- the unaudited consolidated financial
statements for the Company and its Subsidiaries for the year ending December 31,
1997, which are subject to confirmation by the audited consolidated financial
statements of the Company and its Subsidiaries for the year ending December 31,
1997 described in Section 5. 1 (b).
"Related Person" -- means, with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity)-
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control
with such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner, executor,
or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or
(c).
For purposes of this definition, (a) the "Family" of an individual includes
(i) the individual, (ii) the individual's spouse, (iii) any other natural person
who is related to the individual or the individual's spouse within the second
degree, and (iv) any other natural person who resides with such individual, and
(b) "Material Interest" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting
securities or other voting interests representing at least 10% of the
outstanding voting
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power of a Person or equity securities or other equity interests representing at
least 10% of the outstanding equity securities or equity interests in a Person.
"Release" -- means any spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, emitting,
leaching or migration of Hazardous Materials into the indoor or outdoor
environment (including, without limitation, the abandonment or disposal of any
barrels, containers or other closed receptacles containing any Hazardous
Materials), including without limitation the movement of any Hazardous Material
through the air, soil, surface water, groundwater or property.
"Representative" -- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"Securities Act" -- the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"Seller" -- as defined in the first paragraph of this Agreement.
"Shares" -- as defined in the Recitals of this Agreement.
"Subsidiary" -- with respect to any Person (the "Owner"), any corporation
or other Person of which securities or other interests having the power to elect
a majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of the Company.
"Tax" or "Taxes" -- (i) all federal, state, local or foreign taxes,
charges, fees, imposts, levies or other assessments, including, without
limitation, all net income, alternative minimum, gross receipts, capital, sales,
use, ad valorem, value added, transfer, franchise, profits, inventory, capital
stock, license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, property and estimated taxes, customs
duties, fees, assessments and charges of any kind whatsoever, (ii) all interest,
penalties, fines, additions to tax or other additional amounts imposed by any
taxing authority in connection with any item described in clause (i), and (iii)
all transferee, successor, joint and several or contractual liability in respect
of any items described in clause (i) or (ii) above.
"Tax Return" -- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the de-
<PAGE>
-8-
termination, assessment, collection, or payment of any Tax or in connection with
the administration, implementation, or enforcement of or compliance with any
Legal Requirement relating to any Tax.
"Threatened" -- a claim, Proceeding, dispute, action, or other matter will
be deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
2. SALE AND TRANSFER OF SHARES; CLOSING.
2.1. SHARES.
Subject to the terms and conditions of this Agreement, at the Closing,
Seller will sell and transfer the Shares to Buyer, and Buyer will purchase the
Shares from Seller.
2.2. PURCHASE PRICE.
The purchase price for each of the Shares will be $11.00; therefor, the
total purchase price for the Shares is $21,047,719 (the "Purchase Price").
2.3. CLOSING.
The purchase and sale (the "Closing") provided for in this Agreement will
take place at the offices of Rand Rosenzweig Smith Radley Gordon & Burstein LLP,
605 Third Avenue, 24th Floor, New York, NY 10158, at 10:00 A.M. on the later of
(i) March 15, 1998, (ii) 15 days following the delivery of consolidated audited
financial statements of the Company and its Subsidiaries for the year ending
December 31, 1997 as required by Section 5. l(b), or (iii) the date that is two
business days following the termination of the applicable waiting period under
the HSR Act, or at such other time and place as the parties may agree in
writing.
2.4. CLOSING OBLIGATIONS.
At the Closing (a) Seller will deliver to Buyer:
(i) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers), with signatures guaranteed by a
commercial bank or by a member firm of the New York Stock Exchange, for
transfer to Buyer; and
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(ii) a certificate executed by Hirschorn representing and warranting
to Buyer- that each of Hirschorn's representations and warranties in this
Agreement was accurate in all respects as of the date of this Agreement and
is accurate in all respects as of the Closing Date as if made on the
Closing Date (giving full effect to any supplements to the Disclosure
Schedule that were delivered by Hirschorn to Buyer prior to the Closing
Date in accordance with Section 5.5); and
(b) Buyer will deliver:
(i) to Seller, by bank cashier's or certified check payable to the
order of, or by wire transfer to accounts specified by the Seller, the
amount set forth on Schedule A attached hereto;
(ii) to the Escrow Agent by bank cashier's or certified check or by
wire transfer $1,750,000 pursuant to the Escrow Agreement referred to in
Section 7.4(c); and
(iii) a certificate executed by Buyer to the effect that, except as
otherwise stated in such certificate, each of Buyer's representations and
warranties in this Agreement was accurate in all respects as of the date of
this Agreement and is accurate in all respects as of the Closing Date as if
made on the Closing Date.
2.5. CONDITIONS TO CLOSING.
The Closing shall be conditioned and subject to (a) EBITDA, as calculated
from the consolidated audited financial statements of the Company and its
Subsidiaries for the year ending December 31, 1997 referred to in Section 5. 1
(b), being not less than $783,000, (b) audited Net Cash (cash, investments and
marketable securities held for sale less all long term and short term
indebtedness and capital lease obligations), as calculated from the consolidated
audited financial statements of the Company and its Subsidiaries for the year
ending December 31, 1997 referred to in Section 5. 1 (b), being equal to or
greater than $10,600,000. In the event that the Winchester, U.K. property sale
has not been closed, $2,200,000 shall be added to the calculation of audited Net
Cash, and (c) the disclosure by Seller to Buyer, for informational purposes
only, of the amount provided by Coopers & Lybrand of any withdrawal liability
that the Company and its Subsidiaries would incur in a complete withdrawal on
the date of such disclosure from any multi-employer plan and Buyer shall be
satisfied with such amount. In the event that any of (a), (b) or (c) hereof is
not met, this Agreement shall terminate and no longer have any further force or
effect unless the requirement of (a) and/or (b) and/or (c) is waived by Buyer in
its sole discretion.
<PAGE>
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3. REPRESENTATIONS AND WARRANTIES OF SELLER.
3.1. ORGANIZATION, AUTHORITY AND QUALIFICATION OF THE COMPANY.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York and has all necessary power and
authority to own, operate or lease the properties and assets now owned, operated
or leased by it and to carry on its business as it has been and is currently
conducted. The Company is duly licensed or qualified to do business and is in
good standing in each jurisdiction in which the properties owned or leased by it
or the operation of its business makes such licenses or qualification necessary
or desirable and all such jurisdictions are set forth in Section 3.1 of the
Disclosure Schedule. All corporate actions taken by the Company have been duly
authorized, and the Company has not taken any action that in any respect
conflicts with, constitutes a default under or results in a violation of any
provision of its Certificate of Incorporation or By-laws. True and correct
copies of the Certificate of Incorporation and By-laws of the Company, each as
in effect on the date hereof, have been delivered by Hirschorn to the Buyer.
3.2. CAPITAL STOCK OF THE COMPANY; OWNERSHIP OF THE SHARES.
The authorized capital stock of the Company consists of 5,000,000 shares of
Common Stock, $. 10 par value. As of the date hereof, (i) 2,978,961 shares of
Common Stock are issued and outstanding, all of which are validly issued, fully
paid and nonassessable, and which do not include 86,698 shares held in the
Company's treasury, and (ii) 200,000 shares of Common Stock are reserved for
issuance pursuant to employee stock options granted pursuant to the Industrial
Acoustics Company, Inc. 1995 Stock Option Plan, as amended (the "Stock Option
Plan"). None of the issued and outstanding shares of Common Stock was issued in
violation of any preemptive rights. Except for the Stock Option Plan, there are
no options, warrants, convertible securities or other rights, agreements,
arrangements or commitments of any character relating to the capital stock to
the Company or obligating Hirschorn or the Company to issue or sell any shares
of capital stock of, or any other interest in, the Company. There are no
outstanding contractual obligations of the Company to repurchase, redeem or
otherwise acquire any shares of Common Stock or to provide funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) in any
other Person. The Shares are owned of record and beneficially solely by Seller
free and clear of all Encumbrances. Upon consummation of the transactions
contemplated by this Agreement, the Shares will be fully paid and nonassessable.
Upon consummation of the transactions contemplated by this Agreement and
registration of the Shares in name of the Buyer in the stock records of the
Company, the Buyer, assuming it shall have purchased the Shares for value in
good faith and without notice of any adverse claim, will own the Shares free and
clear of all
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Encumbrances. There are no voting trusts, stockholder agreements, proxies, other
agreements or understandings in effect with respect to the voting or transfer of
any of the Shares.
3.3. SUBSIDIARIES.
(a) Section 3.3(a) of the Disclosure Schedule sets forth a true and
complete list of all Subsidiaries, listing for each Subsidiary its name, type of
entity, the jurisdiction and date of its incorporation or organization, its
authorized capital stock, partnership capital or equivalent, the number and type
of its issued and outstanding shares of capital stock, partnership interests or
similar ownership interests and the current ownership of such shares,
partnership interests or similar ownership interests.
(b) Other than the Subsidiaries, there are no other corporations,
partnerships, joint ventures, associations or other entities in which the
Company owns, of record or beneficially, any direct or indirect equity or other
interest or any right (contingent or otherwise) to acquire the same. Other than
the Subsidiaries, the Company is not a member of, nor is any part of the
business of the Company conducted through, any partnership. Except as set forth
in Section 3.3(b) of the Disclosure Schedule, the Company is not a participant
in any joint venture or similar arrangement.
(c) Each Subsidiary that is a corporation: (i) is a corporation duly
organized and validly existing under the laws of its jurisdiction of
incorporation, (ii) has all necessary power and authority to own, operate or
lease the properties and assets owned, operated or leased by such Subsidiary and
to carry on its business as it has been and is currently conducted by such
Subsidiary, and (iii) is duly licensed or qualified to do business and is in
good standing in each jurisdiction in which the properties owned or leased by it
or the operation of its business makes such licensing or qualification necessary
or desirable, except for such failures which, when taken together with all other
such failures, would not have a Material Adverse Effect. Each Subsidiary that is
not a corporation: (i) is duly organized and validly existing under the laws of
its jurisdiction of organization, (ii) has all necessary power and authority to
own, operate or lease the properties and assets owned, operated or leased by
such Subsidiary and to carry on its business as it has been and is currently
conducted by such Subsidiary and (iii) is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the properties
owned or leased by it or the operation of its business makes such licensing or
qualification necessary or desirable, except for such failures which, when taken
together with all other such failures, would not have a Material Adverse Effect.
(d) All the outstanding shares of capital stock of each Subsidiary that is
a corporation are validly issued, fully paid, nonassessable and, except with
respect to wholly owned Subsidiaries, free of preemptive rights and are owned by
the Company, whether directly or indirectly, free and clear of all Encumbrances.
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(e) Other than the Stock Option Plan, there are no options, warrants,
convertible securities, or other rights, agreements, arrangements or commitments
of any character relating to the capital stock of any Subsidiary or obligating
the Company or any Subsidiary to issue or sell any shares of capital stock of,
or any other interest in, any Subsidiary.
(f) All corporate actions taken by each Subsidiary have been duly
authorized and no Subsidiary has taken any action that in any respect conflicts
with, constitutes a default under, or results in a violation of any provision of
its charter or by-laws (or similar organizational documents). True and complete
copies of the charter and by-laws (or similar organizational documents), in each
case as in effect on the date hereof, of each Subsidiary have been made
available to the Buyer.
(g) Except as set forth in Section 3.3(g) of the Disclosure Schedule, no
Subsidiary is a member of, nor is any part of its business conducted through,
any partnership nor is any Subsidiary a participant in any joint venture or
similar arrangement.
(h) There are no voting trusts, stockholder agreements, proxies or other
agreements or understandings in effect with respect to the voting or transfer of
any shares of capital stock of or any other interests in any Subsidiary.
(i) The stock register of each Subsidiary accurately records: (i) the name
and address of each Person owning shares of capital stock of such Subsidiary and
(ii) the certificate number of each certificate evidencing shares of capital
stock issued by such Subsidiary, the number of shares evidenced each such
certificate, the date of issuance thereof and, in the case of cancellation, the
date of cancellation.
3.4. CORPORATE BOOKS AND RECORDS.
The minute books of the Company and the Subsidiaries contain accurate
records of all meetings and accurately reflect all other actions taken by the
stockholders, Boards of Directors and all committees of the Boards of Directors
of the Company and the Subsidiaries. Complete and accurate copies of all such
minute books and of the stock register of the Company and each Subsidiary have
been provided by Hirschorn to the Buyer.
3.5. NO CONFLICT.
Assuming that all consents, approvals, authorizations and other actions
described in Section 3.6 have been obtained and all filings and notifications
listed in 3.6 of the Disclosure Schedule have been made, the execution, delivery
and performance of this Agreement by Hirschorn does not and will not (a)
violate, conflict with or result in the breach of any provision of the charter
or by-laws (or similar organizational documents) of the Company or any
Subsidiary, (b) conflict with or violate (or cause an event which could have a
Material
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Adverse Effect as a result of) any Law or Governmental Order applicable to the
Company, any Subsidiary or any of their respective assets, properties or
businesses, including, without limitation, the business of the Company and its
Subsidiaries, or (c) except as set forth in Section 3.5(c) of the Disclosure
Schedule, conflict with, result in any breach of, constitute a default (or event
which with the giving of notice or lapse of time, or both, would become a
default) under, require any consent under, or give to others any rights of
termination, amendment, acceleration, suspension, revocation or cancellation of,
or result in the creation of an Encumbrance on any of the Shares or on any of
the assets or properties of, the Company or any Subsidiary pursuant to any note,
bond, mortgage or indenture, contract agreement, lease, sublease, license,
permit, franchise or other instrument or arrangement to which the Company or any
Subsidiary is a party or by which any of the Shares or any of such assets or
properties is bound or affected.
3.6. GOVERNMENTAL CONSENTS AND APPROVALS.
The execution, delivery and performance of this Agreement by Hirschorn do
not and will not require any consent, approval, authorization or other order of,
action by, filing with, or notification to, any Governmental Authority, except
(a) as described in Section 3.6 of the Disclosure Schedule, and (b) the
notification requirements of the HSR Act.
3.7. FINANCIAL STATEMENTS.
(a) True and complete copies of (i) the audited consolidated balance sheet
of the Company for each of the three fiscal years ended as of December 31, 1994,
December 31, 1995, and December 31, 1996, and the related audited consolidated
statements of income, retained earnings, stockholders' equity and changes in
financial position of the Company, together with all related notes and schedules
thereto, accompanied by the opinions thereon of Coopers & Lybrand and, with
respect to Industrial Acoustics Company Limited, Kidsons Impey (collectively
referred to herein as the "Financial Statements"), (ii) the unaudited
consolidated balance sheet of the Company as of November 30, 1997 (referred to
herein as the "Interim Financial Statements") and, (iii) the Reference Balance
Sheet are attached as Section 3.7(a) of the Disclosure Schedule. The Financial
Statements, the Interim Financial Statements and the Reference Balance Sheet (i)
were prepared in accordance with the books of account and other financial
records to the Company, (ii) present fairly the consolidated financial condition
and results of operations of the Company and the Subsidiaries as of the dates
thereof or for the periods covered thereby, (iii) have been prepared in
accordance with GAAP applied on a basis consistent with the past practices of
the Company and (iv) include all adjustments (consisting only of normal
recurring accruals) that are necessary for a fair presentation of the
consolidated financial condition of the Company and the Subsidiaries and the
results of the operations of the Company and the Subsidiaries as of the dates
thereof or for the periods covered thereby.
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(b) The books of account and other financial records of the Company and the
Subsidiaries: (i) reflect all items of income and expense and all assets and
liabilities required to be reflected therein in accordance with GAAP applied on
a basis consistent with the past practices of the Company and the Subsidiaries,
respectively, (ii) are in all material respects complete and correct, and do not
contain or reflect any material inaccuracies or discrepancies, and (iii) have
been maintained in accordance with good business and accounting practices.
Section 3.7(b) of the Disclosure Schedule identifies all unusual or nonrecurring
income included in the Reference Balance Sheet profit and loss statement.
(c) True and complete copies of projections of the Company and the
Subsidiaries for each of the fiscal years ended as of December 31, 1998,
December 31, 1999, and December 31, 2000, prepared by senior management of the
Company (the "Projections") are attached as Section 3.7(c) of the Disclosure
Schedule. The Projections reflect the best currently available estimates and
judgment of the Company's senior management as to the expected future financial
performance of the Company and the Subsidiaries, have been prepared on a basis
consistent with prior year financial statements and have been prepared and
presented for informational purposes only and shall not be relied upon by Buyers
for any reason or purpose whatsoever.
(d) Section 3.7(d) of the Disclosure Schedule contains the "management
letters" delivered by Coopers & Lybrand and Kidsons Impey in respect of their
audits as of December 31, 1996, identifying any material weaknesses, in the
Company's internal controls, together with communications received by the
Company and its Subsidiaries since January 1, 1997 from Coopers & Lybrand and
Kidsons Impey in connection with their respective reviews of the 1997 quarterly
financial statements of the Company.
(e) Section 3.7(e) of the Disclosure Schedule contains true and complete
calculations of (a) EBITDA and (b) Net Cash (as defined in Section 2.5(b)).
(f) Section 3.7(f) of the Disclosure Schedule contains a true and complete
list of all audited adjustments recommended by Coopers & Lybrand and by Kidsons
Impey, respectively, in connection with their 1996 audits, indicating whether
and, if so, to what extent, such adjustments were recorded in the audited
consolidated financial statements of the Company for 1996.
3.8. NO UNDISCLOSED LIABILITIES.
There are no liabilities of the Company or any Subsidiary, other than
liabilities (i) reflected or reserved against on the Reference Balance Sheet, or
(ii) disclosed in Section 3.8 of the Disclosure Schedule or (iii) incurred since
December 31, 1997 in the ordinary course of business of the Company and the
Subsidiaries and which do not and could not have a Material Adverse Effect.
Reserves are reflected on the Reference Balance Sheet against all
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Liabilities of the Company and the Subsidiaries in amounts that have been
established on a basis consistent with the past practices of the Company and the
Subsidiaries and in accordance with GAAP. Section 3.8(a) of the Disclosure
Schedule contains a list of all liabilities for borrowed funds, and complete
copies of all agreements relating thereto. Section 3.8(b) identifies all sales
contracts as to which the Company currently has knowledge of a pending or
threatened penalty for late delivery, cost overruns or other matters.
3.9. RECEIVABLES.
Section 3.9 of the Disclosure Schedule sets forth an aged list of the
receivables of the Company and the Subsidiaries as of the date of the Reference
Balance Sheet showing separately those receivables that as of such date had been
outstanding (i) 29 days or less, (ii) 30 to 59 days, (iii) 60 to 89 days, and
(iv) 90 days and above. Except to the extent, if any, reserved for on the
Reference Balance Sheet, all receivables reflected on the Reference Balance
Sheet and the audited consolidated balance sheet of the Company and the
Subsidiaries delivered pursuant to Section 5.1(b) arose from, and the
receivables existing on the Closing Date will have arisen from. the sale of
Inventory or services to Persons not affiliated with Hirschorn, the Company or
any Subsidiary and in the ordinary course of business and, except as reserved
against on the Reference Balance Sheet or the audited consolidated financial
statements of the Company and its Subsidiaries for the year ending December 31,
1997 required pursuant to Section 5.1 (b), constitute, or will constitute, as
the case may be, only valid, undisputed claims of the Company or a Subsidiary
not subject to valid claims of set-offs or other defenses or counterclaims other
than normal cash discounts accrued in the ordinary course of business. All
Receivables reflected on the Reference Balance Sheet or arising from the date
thereof until the Closing (subject to the reserve for bad debts, if any,
reflected on the Reference Balance Sheet) are or will be good and have been
collected or are or will be collectible.
3.10. INVENTORIES.
(a) Subject to amounts reserved therefor on the Reference Balance Sheet and
the audited consolidated balance sheet of the Company and the Subsidiaries
delivered pursuant to Section 5.1(b), the values at which all inventories are
carried on the Reference Balance Sheet reflect the historical inventory
valuation policy of the Company and the Subsidiaries of stating such inventories
at the lower of cost (determined on the first-in first-out method) or market
value and all inventories are valued such that the Company and the Subsidiaries
will earn their customary gross margins thereon. Except as set forth in Section
3.10 of the Disclosure Schedule, the Company or a Subsidiary, as the case may
be, has good and marketable title to the inventories free and clear of all
Encumbrances. The inventories do not consist of, in any material amount, items
that are obsolete, damaged or slow-moving. The inventories do not consist of any
items held on consignment. Neither the Company nor any Subsidiary is under
<PAGE>
-16-
any obligation or liability with respect to accepting returns of items of
inventory or merchandise in the possession of their customers other than in the
ordinary course of business. No clearance or extraordinary sale of the
inventories has been conducted since December 31, 1997. Neither the Company nor
any Subsidiary has acquired or committed to acquire or manufacture inventory for
sale which is not of a quality and quantity usable in the ordinary course of
business within a reasonable period of time, nor has the Company or any
Subsidiary changed the price of inventory except for (i) price reductions to
reflect any reduction in the cost thereof to the Company or such Subsidiary,
(ii) reductions and increases responsive to normal competitive conditions and
consistent with the Company's or such Subsidiary's past sales practices, (iii)
increases to reflect any increase in the cost thereof to the Company or such
Subsidiary, and (iv) increases and reductions made with the written consent of
the Buyer.
(b) The Inventories are in good and merchantable condition in all material
respects, are suitable and usable for the purposes for which they are
intentioned and are in a condition such that they can be sold in the ordinary
course of business.
(c) Amounts reflected in the Reference Balance Sheet as "Costs and
Estimated Earnings in Excess of Billings on Uncompleted Contracts" represent (i)
costs properly incurred in respect of valid open sales contracts which had not
been invoiced to customers at December 31, 1997 and (ii) earnings on such
contracts computed on a cost of completion basis applied consistently with prior
periods. Section 3. 10(c) of the Disclosure Schedule identifies each such
contract amount exceeding S 100,000 at December 31, 1997.
3.11. ACQUIRED ASSETS.
Except as disclosed in Section 3.11(a) of the Disclosure Schedule, each
asset of the Company and the Subsidiaries (including without limitation, the
benefit of any licenses, leases or other agreements or arrangements) acquired
since the date of the Reference Balance Sheet has been acquired for
consideration not less than the fair market value of such asset at the date of
such acquisition. Section 3.11(b) of the Disclosure Schedule identifies all
commitments for capital expenditures outstanding at December 31, 1997.
3.12. CURRENT REAL PROPERTY TRANSACTIONS.
(a) The Company is party to a certain Exchange Agreement with Deferred
Exchange Option dated March 29, 1995 ("Exchange Agreement") which is included in
Section 3.12(a) of the Disclosure Schedule. Pursuant to the terms of the
Exchange Agreement, the transaction contemplated thereby is scheduled to close
on March 1, 1998. Buyer and Seller have discussed various approaches which may
be undertaken with regard to the Exchange Agreement. Seller agrees that neither
he nor the Company will take any action with regard to the Exchange Agreement
without the advice of Buyer. If a decision is made to acquire the premises which
is the subject of the Exchange Agreement, such acquisition will be
<PAGE>
-17-
accomplished through the use of a mortgage on such property, the terms of watch
shall be reasonable in light of this Agreement and the Contemplated
Transactions.
(b) The Company is the owner of real property in Winchester, U.K. which is
utilized by its Subsidiary, Industrial Acoustics Company Limited, as its
manufacturing facilities. The Seller and Company have disclosed to the Buyer
that negotiations have occurred in connection with the possible sale and lease
back of the Winchester property owned by the Company. Seller agrees that neither
he nor the Company will take any action with regard to the Winchester property
without the advice and consent of Buyer.
3.13. BACKLOG.
(a) As of December 31, 1997, open sales orders accepted by the Company or
any Subsidiary, determined on a revenue recognition basis, totaled $45,637,084.
Section 3.13(a) of the Disclosure Schedule lists all sales orders exceeding
$100,000 per order which have been accepted by the Company or any Subsidiary,
and which were open as of December 31, 1997. No orders included in the backlog
at December 31, 1997 have been accepted at prices which will lead to profit
margins substantially below historical levels (according to the product
category), nor on payment terms which will require any material change in the
Company's future requirement for working capital. All contracts to which the
Company (specifically excluding Industrial Acoustics Company Limited) is a party
for delivery outside of the United States in the backlog at December 31, 1997
determined on a billing recognition basis of the Company and its Subsidiaries
are fully supported by valid bank letters of credit. All material contracts as
to which Industrial Acoustics Company Limited is a party for delivery outside of
the continent of Europe and North America in the backlog as of December 31, 1997
have been accepted with appropriate downpayments.
(b) Section 3.13(b) of the Disclosure Schedule lists all purchase orders
exceeding $500,000.00 per order, which have been issued by the Company or any
Subsidiary, and which were open as of December 31, 1997. No purchase orders have
been issued on payment terms which are materially different from those available
to the Company in the past.
3.14. CONDUCT IN THE ORDINARY COURSE, ABSENCE OF CERTAIN CHANGES, EVENTS
AND CONDITIONS.
Since December 31, 1997, except as disclosed in Section 3.14 of the
Disclosure Schedule, the business of the Company and the Subsidiaries has been
conducted in the ordinary course and consistent with past practice. As
amplification and not limitation of the foregoing, except as disclosed in
Section 3.14 of the Disclosure Schedule and except as would not have a Material
Adverse Effect since the Reference Balance Sheet Date, neither the Company nor
any Subsidiary has:
<PAGE>
-18-
(i) permitted or allowed any of the assets or properties (whether
tangible or intangible) of the Company or any Subsidiary to be subjected to
any Encumbrance other than Permitted Encumbrances;
(ii) except in the ordinary course of business consistent with past
practice, discharged or otherwise obtained the release of any Encumbrance
or paid or otherwise discharged any Liability, other than current
liabilities reflected on the Reference Balance Sheet and current
liabilities incurred in the ordinary course of business consistent with
past practice since the Reference Balance Sheet Date;
(iii) made any loan to, guaranteed any Indebtedness on behalf of any
Person;
(iv) failed to pay any creditor any amount owed to such creditor more
than 30 days past the due date;
(v) redeemed any of the capital stock or declared, made or paid any
dividends or distributions (whether in cash, securities or other property)
to the holders of capital stock of the Company or any Subsidiary or
otherwise, other than dividends, distributions and redemptions declared,
made or paid by any Subsidiary solely to the Company;
(vi) made any material changes in the customary methods of operations
of the Company or any Subsidiary, including, without limitation, practices
and policies relating to manufacturing, purchasing, Inventories, marketing,
selling, recognition of profits on contracts and pricing;
(vii) merged with, entered into a consolidation with or acquired an
interest of 5 % or more in any Person or acquired a substantial portion of
the assets or business of any business thereof, or otherwise acquired any
material assets other than in the ordinary course of business consistent
with past practice;
(viii) made any capital expenditure or commitment for any capital
expenditure in excess of S25,000 individually or $100,000 in the aggregate;
(ix) issued any purchase orders or otherwise agreed to make any
purchases involving exchanges in value in excess of $100,000 individually
or $1,000,000 in the aggregate;
(x) except as relates to Industrial Acoustics Company Limited,
accepted any sales order for delivery outside of the United States not
fully covered by a valid bank letter of credit;
<PAGE>
-19-
(xi) sold, transferred, leased, licensed or otherwise disposed of any
properties, assets, real, personal or mixed (including, without limitation,
leasehold interests and intangible assets), other than the sale of
Inventories in the ordinary course of business consistent with past
practice;
(xii) issued or sold any capital stock, bonds or other securities, or
any option, warrant or other right to acquire the same, of, or any other
interest in, the Company or any Subsidiary;
(xiii) entered into any agreement, arrangement or transaction with any
of its directors, officers, employees or shareholders (or with any
relative, beneficiary, spouse or Affiliate of such Person);
(xiv) (A) granted any increase, or announced any increase, in the
wages, salaries, compensation, bonuses, incentives, pension or other
benefits payable by the Company or any Subsidiary to any of its employees,
including, without limitation, any increase or change pursuant to any Plan,
(B) established or increased or promised to increase any benefits under any
Plan, in either case except as required by Law or any collective bargaining
agreement and involving ordinary increases consistent with the past
practices of the Company or such Subsidiary or (C) introduced any new bonus
programs;
(xv) written down or written up (or failed to write down or write up
in accordance with GAAP consistent with past practice) the value of any
inventories or receivable or revalued any assets of the Company or any
Subsidiary other than in the ordinary course of business consistent with
past practice and in accordance with GAAP;
(xvi) amended, terminated, canceled or compromised any material claims
of the Company or any Subsidiary or waived any other rights of substantial
value to the Company or any Subsidiary;
(xvii) made any change in any method of accounting or accounting
practice or policy used by the Company or any Subsidiary, other than such
changes required by GAAP or disclosed in Section 3.14 of the Disclosure
Schedule;
(xviii) failed to maintain the Assets in accordance with good business
practice and in good operating condition and repair;
(xix) allowed any Permit or Environmental Permit that was issued or
relates to the Company or any Subsidiary or otherwise relates to any Asset
to lapse or terminate or failed to renew any such Permit or Environmental
Permit or any insurance pol-
<PAGE>
-20-
icy that is scheduled to terminate or expire within 45 calendar days of the
Closing Date;
(xx) incurred any indebtedness for borrowed money;
(xxi) changed the type of short-term investments and marketable
securities contained in its portfolio;
(xxii) amended, modified or consented to the termination of any
Material Contract or the Company's or any Subsidiary's rights thereunder;
(xxiii) amended or restated the Organizational Documents of the
Company or any Subsidiary;
(xxiv) terminated, discontinued, closed or disposed of any plant,
facility or other business operation, or laid off any employees or
implemented any early retirement, separation or program providing early
retirement window benefits within the meaning of Section 1.40(a)-4 of the
Regulations or announced or planned any such action or program for the
future;
(xxv) made any material charitable contribution;
(xxvi) disclosed any secret or confidential Intellectual Property
Asset (except by way of issuance of a Patent) or permitted to lapse or go
abandoned any Intellectual Property Asset (or any registration or grant
thereto or any application thereto to which, or under which, the Company or
any Subsidiary has any right, title, interest or license;
(xxvii) made any express or deemed election or settled or compromised
any liability, with respect to Taxes of the Company or any Subsidiary;
(xxviii) suffered any casualty loss or damage with respect to any of
the Assets which in the aggregate have a replacement cost of more than
$25,000, whether or not such loss or damage shall have been covered by
insurance; or
(xxix) agreed, whether in writing or otherwise, to take any of the
actions specified in this Section 3.14 or granted any options to purchase,
rights of first refusal, rights of first offer or any other similar rights
or commitments, with respect to any of the actions specified in this
Section 3.14, except as expressly contemplated by this Agreement.
<PAGE>
-21-
3.15. LITIGATION.
Except as set forth in Section 3.15 of the Disclosure Schedule (which, with
respect to each Proceeding disclosed therein, sets forth: the parties, nature of
the proceeding, date and method commenced, amount of damages or other relief
sought, and, if applicable, paid or granted), there are no Proceedings by or
against the Company or any Subsidiary (or by or against Hirschorn and relating
to the Company or any Subsidiary), or affecting any of the Assets, pending
before any Governmental Authority (or, to the Knowledge of Seller, threatened to
be brought by or before any Governmental Authority). None of the matters
disclosed in Section 3.15 of the Disclosure Schedule has or has had a Material
Adverse Effect or could affect the legality, validity or enforceability of this
Agreement or the consummation of the transactions contemplated hereby or thereby
except as set forth in Section 3.15 of the Disclosure Schedule. None of the
Company, the Subsidiaries nor any of the Assets nor Seller is subject to any
Governmental Order (nor to the Knowledge of Seller are there any such
Governmental Orders threatened to be imposed by any Governmental Authority)
which has or has had a Material Adverse Effect. Section 3.15 of the Disclosure
Schedule lists all Proceedings to which the Company has been a party in the past
five years except for collections matters and matters in which the amount in
controversy did not exceed $ 10,000, and all product liability claims brought
against the Company during such period of which the Company has Knowledge,
regardless of whether such claim resulted in litigation, including all such
claims in respect of which notice of a claim was made under the Company's
insurance policies.
3.16. CERTAIN INTERESTS.
(a) Except as disclosed in Section 3.16(a) of the Disclosure Schedule, no
officer or director of the Company or any Subsidiary and no relative or spouse
(or relative of such spouse) who resides with or is a dependent of, any such
officer or director:
(i) has any direct or indirect financial interest in any competitor,
supplier or customer of the Company or any Subsidiary; provided, however,
that the ownership of securities representing no more than one (1%) percent
of the outstanding voting power of any competitor, supplier or customer,
and which are listed on any national securities exchange or traded actively
in the national over-the-counter market shall not be deemed to be a
"financial interest" so long as the Person owning such securities has no
other connection or relationship with such competitor, supplier or
customer;
(ii) owns, directly or indirectly, in whole or in part, or has any
other interest in any tangible or intangible property which the Company or
any Subsidiary uses or has used in the conduct of the Business or
otherwise: or
(iii) has outstanding any Indebtedness to the Company or any
Subsidiary.
<PAGE>
-22-
(b) Except as disclosed in Section 3.16(b) of the Disclosure Schedule, no
officer or director of the Company or any Subsidiary and no relative or spouse
(or relative of such spouse) who resides with, or is a dependent of, any such
officer or director, has outstanding any Indebtedness to Hirschorn or the
Company or any Subsidiary.
(c) Except as disclosed in Section 3.16(c) of the Disclosure Schedule,
neither the Company nor any Subsidiary has any liability or any other obligation
of any nature whatsoever to any officer, director or shareholder of the Company
or any Subsidiary or to any relative or spouse (or relative of such spouse) who
resides with, or is a dependent of, any such officer, director or shareholder.
(d) Except as disclosed in Section 3.16(d) of the Disclosure Statement, no
employee of the Company or its Subsidiaries is a relative or spouse of a
director, officer or senior manager of Industrial Acoustics Company, Inc. or
Industrial Acoustics Company Limited.
3.17. COMPLIANCE WITH LAWS.
(a) Except as set forth in Section 3.17(a) of the Disclosure Schedule, the
Company and the Subsidiaries have each conducted and continue to conduct the
Business in accordance with all Laws and Governmental Orders applicable to the
Company or any Subsidiary or any of the Assets or the Business, and neither the
Company nor any Subsidiary is in violation of any such Law or Governmental
Order. None of Hirschorn, the Company, any Subsidiary nor any officer, director,
employee, agent or representative of Hirschorn, the Company or any Subsidiary
has furthered or supported any foreign boycott in violation of the Anti-Boycott
laws and regulations promulgated pursuant to the Export Administration Act of
1979 (50 U.S.C.A. Appx ss. 2407, and regulations promulgated thereunder), nor
violated the provisions of the Foreign Corrupt Practices Act of 1977, as
amended, (15 U. S. C. A. ss.ss. 78dd-1 et seq.).
(b) Section 3.17(b) of the Disclosure Schedule sets forth a brief
description of each Governmental Order applicable to the Company or any
Subsidiary or any of the Assets or the Business, and no such Governmental Order
has or has had a Material Adverse Effect.
3.18. ENVIRONMENTAL COMPLIANCE.
Except as disclosed in Section 3.18(a)(i) of the Disclosure Schedule and
except as would not reasonably be expected to have a Material Adverse Effect
(a) the Company and the Subsidiaries currently hold all permits,
licenses, authorizations and approvals of Governmental Authorities
(collectively, "Permits"),
<PAGE>
-23-
including those required under Environmental Laws, necessary for the
current use, occupancy and operation of each Asset of the Company and the
Subsidiaries and the conduct of the Business, and all such Permits are in
full force and effect;
(b) the Company and its Subsidiaries are, and their business is being
conducted, in compliance with Environmental Laws and the Permits;
(c) there is no practice, action or activity of the Company or any
Subsidiary or, with respect to any portion of the business of the Company
or any Subsidiary, and no existing condition of the Assets of the Company
or any Subsidiary or their business which could reasonably be expected to
give rise to liability under, or violate or prevent compliance with, any
Environmental Law;
(d) none of the Seller, the Company nor any Subsidiary has received
any notice from any Governmental revoking, canceling, rescinding,
materially modifying or refusing to renew any Permit or any Environmental
Claim;
(e) none of the Company or its Subsidiaries is involved in any
investigation, response or corrective action relating to or in connection
with any Hazardous Materials at any Real Property or at any other location;
(f) none of the Company or its Subsidiaries or any Real Property are
subject to any judicial or administrative proceeding alleging the violation
of or liability under any Environmental Laws;
(g) none of the Company or its Subsidiaries or any Real Property or
any of their respective operations are subject to any outstanding written
order, decree or agreement with any governmental authority or private party
relating to (i) any actual or potential violation of or liability under
Environmental Laws or (ii) any Environmental Claims;
(h) none of the Company or its Subsidiaries has assumed by contract,
law or otherwise any obligation or liability under any Environmental Law;
(i) no Real Properties are listed or proposed for listing on the
National Priorities List under CERCLA or listed on the Comprehensive
Environmental Response, Compensation and Liability Information System List
promulgated pursuant to CERCLA, or included on any similar list maintained
by any governmental authority;
(j) no Hazardous Materials exist on, at or under any Real Property in
a manner that would reasonably be expected to give rise to an Environmental
Claim, and
<PAGE>
-24-
none of the Company or its Subsidiaries has filed any notice or report of a
Release of any Hazardous Materials;
(k) none of the Company or its Subsidiaries or, to the best of the
Company's knowledge, any of their respective predecessors has disposed of,
or arranged for the disposal or treatment of, any Hazardous Materials in a
manner or at any location that would reasonably be expected to give rise to
an Environmental Claim; and
(l) no underground storage ranks, landfills or surface impoundments
are on, at or under any Real Property.
Section 3.18(a)(v) of the Disclosure Schedule identifies all Permits that
are nontransferable or which will require the consent of any Governmental
Authority in the event of the consummation of the transactions contemplated by
this Agreement.
Section 3.18(a)(vi) of the Disclosure Schedule includes all reports of the
Environmental Protection Agency issued with respect to any property of the
Company, including those for the Bronx and South Carolina and all environmental
reports with respect to any property of the Company, including for Winchester,
England.
Section 3.18(a)(vii) of the Disclosure Schedule includes true and complete
copies of (x) the most recent Phase I environmental audits with respect to any
U.S. property of the Company, including those for the Bronx and South Carolina
and (y) an environmental audit of the property of Industrial Acoustics Company
Limited in Winchester, England.
Section 3.18(a)(viii) of the Disclosure Schedule contains a true and
complete copy of the indemnification by Owens/Corning relating to fiberglass.
3.19. MATERIAL CONTRACTS.
(a) Section 3.19(a) of the Disclosure Schedule lists each of the following
contracts and agreements (including without limitation, oral and informal
arrangements) of the Company and the Subsidiaries (such contracts and agreements
together with all contracts, agreements, leases and subleases concerning the
management or operation of any Real Property (including without limitation,
brokerage contracts) listed or otherwise disclosed in Section 3.21 (a) or
3.21(b) of the Disclosure Schedule to which the Company or any Subsidiary is a
party and all agreements relating to Intellectual Property set forth in Section
3.20(a) of the Disclosure Schedule, being "Material Contracts"):
(i) each contract and agreement for the purchase of inventory, spare
parts, other materials or personal property with any supplier or for the
furnishing of services to the Company, any Subsidiary or otherwise related
to the Business under the terms of
<PAGE>
-25-
which the Company or any Subsidiary which (A) is likely to pay or otherwise
give consideration of more than $100,000.00 in the aggregate during the
calendar year ended December 31, 1998, (B) is likely to pay or otherwise
give consideration of more than $500,000.00 in the aggregate over the
remaining term of such contract, or (C) cannot be canceled by the Company
or such Subsidiary without penalty or further payment and without more than
30 days notice;
(ii) each contract and agreement for the sale of inventory or other
personal property or for the furnishing of services by the Company or any
Subsidiary which (A) is likely to involve consideration of more than
$100,000.00 in the aggregate during the calendar year ending December 31,
1998, (B) is likely to involve consideration of more than $500,000.00 in
the aggregate over the remaining term to the contract, or (C) cannot be
canceled by the Company or such Subsidiary without penalty or further
payment and without more than 30 days notice;
(iii) all broker, distributor, dealer, manufacturer's representative,
franchise, agency sales, promotion, market research, marketing consultants
and advertising contracts and agreements to which the Company or any
Subsidiary is a party;
(iv) all management contracts and contracts with independent
contractors or consultants (or similar arrangements) to which the Company
or any Subsidiary is a party and which are not cancelable without penalty
or further payment and without more than 30 days notice;
(v) all contracts and agreements relating to indebtedness to the
Company or any Subsidiary;
(vi) all contracts and agreements with any Governmental Authority to
which the Company or any Subsidiary is a party;
(vii) all contracts and agreements that limit or purport to limit the
ability of the Company or any Subsidiary to compete in any line of business
or with any Person or in any geographic area or during any period of time.
(viii) all contracts and agreements between or among the Company or
any Subsidiary and Hirschorn or any Affiliate of Hirschorn.
(ix) all contracts and agreements providing for benefits under any
Plan; and
(x) all other contracts and agreements whether or not made in the
ordinary course of business, which are material to the Company, any
Subsidiary or the conduct of the Business or the absence of which would
have a Material Adverse Effect.
<PAGE>
-26-
For purposes of this Section 3.19 and Sections 3.20, 3.21 and 3.22, the
terms "lease" shall include any and all leases, subleases, sale/leaseback
agreements or similar arrangements.
(b) Except as disclosed in Section 3.19(b) of the Disclosure Schedule, each
Material Contract: (i) is valid and binding on the respective parties thereto
and is in full force and effect and (ii) upon consummation of the transactions
contemplated by this Agreement, except to the extent that any consents set forth
in Section 3.7 of the Disclosure Schedule are not obtained, shall continue in
full force and effect without penalty or other adverse consequence. Neither the
Company nor any Subsidiary is in breach of, or default under, any Material
Contract.
(c) Except as disclosed in Section 3.19(c) of the Disclosure Schedule, no
other party to any Material Contract is in breach thereof or default thereunder.
(d) Except as disclosed in Section 3.19(d) of the Disclosure Schedule,
there is no contract, agreement or other arrangement granting any Person any
preferential right to purchase, other than in the ordinary course of business,
any of the properties or assets of the Company or any Subsidiary.
(e) Schedule 3.19(e) of the Disclosure Schedule identifies (i) all assets
of the Company and its Subsidiaries that are pledged as security for the payment
of any liabilities, (ii) any crosscollateralization agreements to which the
Company and its Subsidiaries are a party, (iii) any guarantees by the Company
and its Subsidiaries of the liabilities of any person, (iv) all guarantee,
performance, warranty and similar obligations outside the ordinary course of
business outstanding in favor of customers or others, where bonds or letters of
credit have not been issued in respect thereof, details are set forth on such
Schedule 3.19(e).
3.20. INTELLECTUAL PROPERTY ASSETS.
(a) Section 3.20(a)(i) of the Disclosure Schedule sets forth a true and
complete list and a brief description, including a complete identification of
each Patent and each registration or application for registration thereof, of
all Owned Intellectual Property Assets and Section 3.20(a)(ii) of the Disclosure
Schedule sets forth a true and complete list and a brief description, including
a description of any license or sublicense thereof, of all Licensed Intellectual
Property Assets. Except as otherwise described in Section 3.20(a)(i) of the
Disclosure Schedule, in each case where a registration or Patent or application
for registration or Patent listed in Section 3.20(a)(i) of the Disclosure
Schedule is held by assignment, the assignment has been duly recorded with the
State or national Trademark Office from which the original registration issued
or before which the application for registration is pending. Except as disclosed
in Section 3.20(a)(iii) of the Disclosure Schedule, the rights of the Company or
any Subsidiary, as the case may be, in or to such Intellectual Property Asset do
not conflict
<PAGE>
-27-
with or infringe on the rights of any other Person, and none of Seller, the
Company nor any Subsidiary has received any claim or written notice from any
Person to such effect.
(b) Except as disclosed in Section 3.20(b) of the Disclosure Schedule: (i)
all the Owned Intellectual Property Assets are owned by either the Company or a
Subsidiary, as the case may be, free and clear of any Encumbrance and (ii) no
Proceedings have been made or asserted or are pending (nor, to the Knowledge of
Seller, has any such Proceeding been threatened) against the Company or any
Subsidiary either (A) based upon or challenging or seeking to deny or restrict
the use by the Company or any Subsidiary of any of the Owned Intellectual
Property Assets or (B) alleging that any services provided, or products
manufactured or sold by the Company or any Subsidiary are being provided,
manufactured or sold in violation of any Patents or Trademarks, or any other
rights of any Person. To the Knowledge of Seller, no Person is using any
Patents, Copyrights, Trademarks, service marks, trade names, trade secrets or
similar property that are confusingly similar to the Owned Intellectual Property
Assets or that infringe upon the Owned Intellectual Property Assets or upon the
rights of the Company or any Subsidiary therein. Except as disclosed in Section
3.20(b) of the Disclosure Schedule, none of Seller, the Company nor any
Subsidiary has granted any license or other right to any other Person with
respect to the Owned Intellectual Property Assets. The consummation of the
transactions contemplated by this Agreement will not result in the termination
or impairment of any of the Owned Intellectual Property Assets.
(c) With respect to all Licensed Intellectual Property Assets and Owned
Intellectual Property Assets, the registered user provisions of all nations
requiring such registrations have been complied with.
(d) Seller has made available to the Buyer correct and complete copies of
all the licenses and sublicenses for Licensed Intellectual Property Assets
listed in Section 3.20(a)(ii) of the Disclosure Schedule and any and all
ancillary documents pertaining thereto (including, but not limited to, all
amendments, consents and evidence of commencement dates and expiration dates).
With respect to each of such licenses and sublicenses:
(i) such license or sublicense, together with all ancillary documents
delivered pursuant to the first sentence of this Section 3.20(d), is valid
and binding and in full force and effect and represents the entire
agreement between the respective licensor and licensee with respect to the
subject matter of such license or sublicense;
(ii) except as otherwise set forth in Section 3.20(a)(ii) of the
Disclosure Schedule, such license or sublicense will not cease to be valid
and binding and in full force and effect on terms identical to those
currently in effect as a result of the consummation of the transactions
contemplated by this Agreement, nor will the consummation of the
transactions contemplated by this Agreement constitute a breach or de-
<PAGE>
-28-
fault under such license or sublicense or otherwise give the licensor or
sublicensor a right to terminate such license or sublicense;
(iii) except as otherwise disclosed in Section 3.20(a)(ii) of the
Disclosure Schedule, with respect to each such license or sublicense: (A)
none of Seller, the Company nor any Subsidiary has received any notice of
termination or cancellation under such license or sublicense and no
licensor or sublicensor has any right of termination or cancellation under
such license or sublicense except in connection with the default of the
Company or any Subsidiary thereunder, (B) none of Seller, the Company nor
any Subsidiary has received any notice of a breach or default under such
license or sublicense, which breach or default has not been cured, and (C)
none of Seller, the Company nor any Subsidiary has granted to any other
Person any rights, adverse or otherwise, under such license or sublicense;
(iv) none of the Company, any Subsidiary nor (to the Knowledge of
Seller) any other party to such license or sublicense is in breach or
default in any material respect, and, to the Knowledge of Seller, no event
has occurred that, with notice or lapse of time would constitute such a
breach or default or permit termination, modification or acceleration under
such license or sublicense;
(v) no Proceedings have been made or asserted or are pending (nor, to
the Knowledge of Seller, has any such Proceeding been threatened) against
the Company or any Subsidiary either (A) based upon or challenging or
seeking to deny or restrict the use by the Company or any Subsidiary of any
of the Licensed Intellectual Property Assets or (B) alleging that any
Licensed Intellectual Property Asset is being licensed, sublicensed or used
in violation of any patents or trademarks, or any other rights of any
Person; and
(vi) to the Knowledge of Seller, no Person is using any patents,
copyrights, trademarks, service marks, trade names, trade secrets or
similar property that are confusingly similar to the Licensed Intellectual
Property Assets or that infringe upon the Licensed Intellectual Property
Assets or upon the rights of the Company or any Subsidiary therein.
(e) Except as set forth in Section 3.20(e) of the Disclosure Schedule,
Seller is not aware of any reason that would prevent any pending applications to
register trademarks, service marks or copyrights or any pending patent
applications from being granted.
(f) The Intellectual Property Assets described in Sections 3.20(a)(i) and
(ii) of the Disclosure Schedule constitute all the Intellectual Property Assets
used or held or intended to be used by the Company or any Subsidiary, and
constitutes all such Intellectual
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Property Assets necessary in the conduct of the business of the Company and
there are no other items of Intellectual Property Assets that are material to
the Company or any Subsidiary.
3.21. REAL PROPERTY.
(a) Section 3.21(a) of the Disclosure Schedule lists: (i) the street
address of each parcel of Owned Real Property, (ii) the date on which each
parcel of Owned Real Property was acquired, (iii) the current owner of each such
parcel of Owned Real Property, and (iv) the current use of each such parcel of
Owned Real Property.
(b) Section 3.21(b) of the Disclosure Schedule lists: (i) the street
address of each parcel of Leased Real Property, (ii) the identity of the lessor,
lessee and current occupant (if different from lessee) of each such parcel of
Leased Real Property, (iii) the term (referencing applicable renewal periods)
and rental payment terms of the laws (and any subleases) pertaining to each such
parcel of Leased Real Property and (iv) the current use of each such parcel of
Leased Real Property.
(c) Except as described in Section 3.21(c) of the Disclosure Schedule,
there is no material violation of any Law (including, without limitation, any
building, planning or zoning law) relating to any of the Real Property.
Hirschorn has made available to the Buyer true and complete copies of each deed
for each parcel of Owned Real Property and, to the extent available, for each
parcel of Leased Real Property and all the title insurance policies, title
reports, surveys, certificates of occupancy, environmental reports and audits,
appraisals, Permits, other title documents and other documents relating to, or
otherwise affecting the Real Property, the operations of the Company or any
Subsidiary thereon or any other uses thereof. Either the Company or a
Subsidiary, as the case may be, is in peaceful and undisturbed possession of
each parcel of Real Property and there are no contractual or legal restrictions
that preclude or restrict the ability to use the premises for the purposes for
which they are currently being used. All existing water, sewer, steam, gas,
electricity, telephone and other utilities required for the construction, use,
occupancy, operation and maintenance of the Real Property are adequate for the
conduct of the business of the Company and the Subsidiaries as it has been and
currently is conducted. There are no material latent defects or material adverse
physical conditions affecting the Real Property or any of the facilities,
buildings, structures, erections, improvements, fixtures, fixed assets and
personally of a permanent nature annexed, affixed or attached to, located on or
forming part of the Real Property, except as set forth in Section 3.2 1 (c) of
the Disclosure Schedule, neither the Company nor any Subsidiary has leased or
subleased any parcel or any portion of any parcel of Real Property to any other
Person, nor has the Company or any Subsidiary assigned its interest under any
lease or sublease listed in Section 3.21(b) of the Disclosure Schedule to any
third party.
(d) Hirschorn has made available to the Buyer true and complete copies of
all leases and subleases listed in Section 3.2 1 (b) of the Disclosure Schedule
and any and all
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ancillary documents pertaining thereto (including, but not limited to, all
amendments, consents for alterations and documents recording variations and
evidence of commencement dates and expiration dates). With respect to each of
such leases and subleases:
(i) such lease or sublease, together with all ancillary documents made
available pursuant to the first sentence of this Section 3.21(d), is legal,
valid, binding, enforceable and in full force and effect and represents the
entire agreement between the respective landlord and tenant with respect to
such property;
(ii) except as otherwise set forth in Sections 3.6(c) and 3.21(b) of
the Disclosure Schedule, such lease or sublease will not cease to be legal,
valid, binding, enforceable and in full force and effect on terms identical
to those currently in effect as a result of the consummation of the
transactions contemplated by this Agreement, nor will the consummation of
the transactions contemplated by this Agreement constitute a breach or
default under such lease or sublease or otherwise give the landlord a right
to terminate such lease or sublease;
(iii) except as otherwise disclosed in Section 3.21(b) of the
Disclosure Schedule, with respect to each such lease or sublease: (A) none
of Hirschorn, the Company nor any Subsidiary has received any notice of
cancellation or termination under such lease or sublease and no lessor has
any right of termination or cancellation under such lease or sublease
except upon a breach or default by the Company or any Subsidiary
thereunder, (B) none of Hirschorn, the Company nor any Subsidiary has
received any notice of a breach or default under such lease or sublease,
which breach or default has not been cured, and (C) none of Hirschorn, the
Company nor any Subsidiary has granted to any other Person any rights,
adverse or otherwise, under such lease or sublease; and
(iv) none of the Company, any Subsidiary nor (to the Knowledge of
Hirschorn) any other party to such lease or sublease, is in breach or
default in any material respect, and, to the Knowledge of Hirschorn, no
event has occurred that, with notice or lapse of time, would constitute
such a breach or default or permit termination, modification or
acceleration under such lease or sublease.
(e) There are no condemnation proceedings or eminent domain proceedings of
any kind pending or, to the Knowledge of Hirschorn, threatened against the Real
Property.
(f) All the Real Property is occupied under a valid and current certificate
of occupancy or similar permit, the transactions contemplated by this Agreement
will not require the issuance of any new or amended certificate of occupancy
and, to the Knowledge of Hirschorn, there are no facts that would prevent the
Real Property from being occupied by the
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Company or any Subsidiary, as the case may be, after the Closing in the same
manner as occupied by the Company or such Subsidiary immediately prior to the
Closing.
(g) All improvements on the Real Property constructed by or on behalf of
the Company or any Subsidiary or, to the Knowledge of Hirschorn, constructed by
or on behalf of any other Person were constructed in compliance with all
applicable Laws (including, but not limited to, any building, planning or zoning
Laws) affecting such Real Property.
(h) No improvements on the Real Property and none of the current uses and
conditions thereof violate any applicable deed restrictions or other applicable
covenants, restrictions, agreements, existing site plan approvals, zoning or
subdivision regulations or urban redevelopment plans as modified by any duly
issued variances, and no permits, licenses or certificates pertaining to the
ownership or operation of all improvements on the Real Property, other than
those which are transferable with the Real Property, are required by any
Governmental Authority having jurisdiction over the Real Property.
(i) All improvements on any Real Property are wholly within the lot limits
of such Real Property and do not materially encroach on any adjoining premises,
and there are no material encroachments on any Real Property by any improvements
located on any adjoining premises.
(j) Except as otherwise set forth in Section 3.21j) of the Disclosure
Schedule, there have been no improvements of a value in excess of $10,000 in the
aggregate made to or construction on any Real Property within the applicable
period for the filing of mechanics' liens.
(k) The rental set forth in each lease or sublease of the Leased Real
Property is the actual rental being paid, and there are no separate agreements
or understandings with respect to the same.
(l) Either the Company or a Subsidiary, as the case may be, has the full
fight to exercise any renewal options contained in the leases and subleases
pertaining to the Leased Real Property on the terms and conditions contained
therein and upon due exercise would be entitled to enjoy the use of each Leased
Real Property for the full term of such renewal options.
3.22. TANGIBLE PERSONAL PROPERTY.
(a) Section 3.22 of the Disclosure Schedule lists each item or distinct
group of machinery, equipment, tools, supplies, furniture, fixtures, personalty,
vehicles, rolling stock and other tangible personal property with a value in
excess of $25,000 per item or
<PAGE>
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per category of items (the "Tangible Personal Property") used in the Business or
owned or leased by the Company or any Subsidiary.
(b) Seller has, or has caused to be, delivered to the Buyer true and
complete copies of all leases and subleases for Tangible Personal Property and
any and all material ancillary documents pertaining thereto (including, but not
limited to, all amendments, consents and evidence of commencement dates and
expiration dates). With respect to each of such leases and subleases:
(i) such lease or sublease, together with all ancillary documents
delivered pursuant to the first sentence of this Section 3.22(b), is legal,
valid, binding, enforceable and in full force and effect and represents the
entire agreement between the respective lessor and lessee with respect to
such property;
(ii) except as set forth in Section 3.22(b) of the Disclosure
Schedule, such lease or sublease will not cease to be legal, valid,
binding, enforceable and in full force and effect on terms identical to
those currently in effect as a result of the consummation of the
transactions contemplated by this Agreement, nor will the consummation of
the transactions contemplated by this Agreement constitute a breach or
default under such lease or sublease or otherwise give the lessor a right
to terminate such lease or sublease;
(iii) except as otherwise disclosed in Section 3.22(b) of the
Disclosure Schedule, with respect to each such lease or sublease: (A) none
of Hirschorn, the Company nor any Subsidiary has received any notice of
cancellation or termination under such lease or sublease and no lessor has
any right of termination or cancellation, under such lease or sublease
except upon a breach or default by the Company or any Subsidiary
thereunder, (B) none of Hirschorn, the Company nor any Subsidiary has
received any notice of a breach or default under such lease or sublease,
which breach or default has not been cured, and (C) none of Hirschorn, the
Company nor. any Subsidiary has granted to any other Person any rights,
adverse or otherwise, under such lease or sublease; and
(iv) none of the Company, any Subsidiary nor (to the best knowledge of
Hirschorn) any other party to such lease or sublease, is in breach or
default in any material respect, and to the best knowledge of Hirschorn, no
event has occurred that, with notice or lapse of time would constitute such
a breach or default or permit termination, modification or acceleration
under such lease or sublease.
(c) Either the Company or a Subsidiary, as the case may be, has the full
right to exercise any renewal options contained in the leases and subleases
pertaining to the Tangible Personal Property on the terms and conditions
contained therein and upon due exer-
<PAGE>
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cise would be entitled to enjoy the use of each item of leased Tangible Personal
Property for the full term of such renewal options.
3.23. ASSETS.
(a) Except as disclosed in Section 3.23 of the Disclosure Schedule, either
the Company or a Subsidiary, as the case may be, owns, leases or has the legal
right to use all the properties and assets, including, without limitation, the
Intellectual Property Assets, the Real Property and the Tangible Personal
Property, used or intended to be used in the conduct of the Business or
otherwise owned, leased or used by the Company or any Subsidiary and, with
respect to contract rights, is a party to and enjoys the right to the benefits
of all contracts, agreements and other arrangements used or intended to be used
by the Company or any Subsidiary or in or relating to the conduct of the
Business (all such properties, assets and contract rights being, the "Assets").
Either the Company or a Subsidiary, as the case may be, has good and marketable
title to, or, in the case of leased or subleased Assets, valid and subsisting
leasehold interests in, all the Assets, free and clear of all Encumbrances,
except (i) as disclosed in Section 3.20, 3.21 (a), 321(b), 3.22 or 3.23(a) of
the Disclosure Schedule and (ii) Permitted Encumbrances.
(b) The Assets constitute all the properties, assets and rights forming a
part of, used, held or intended to be used in, and all such properties, assets
and rights as are necessary in the conduct of, the business of the Company and
its Subsidiaries. At all times since the date of the Reference Balance Sheet,
the Company has caused the Assets to be maintained in accordance with good
business practice, and all the Assets are in good operating condition and repair
and are suitable for the purposes for which they are used and intended.
(c) Following the consummation of the transactions contemplated by this
Agreement, either the Company or a Subsidiary, as the case may be, will continue
to own, pursuant to good and marketable title, or lease, under valid and
subsisting leases, or otherwise retain its respective interest in the Assets
without incurring any penalty or other adverse consequence, including, without
limitation, any increase in rentals, royalties, or licenses or other fees
imposed as a result of, or arising from, the consummation of the transactions
contemplated by this Agreement. Immediately following the Closing, either the
Company or a Subsidiary, as the case may be, shall own and possess all
documents, books, records, agreements and financial data of any sort used by the
Company or such Subsidiary in the conduct of the Business or otherwise.
(d) Section 3.23(d) of the Disclosure Schedule contains a true and complete
schedule of the Company's portfolio of short-term investments and marketable
securities as at December 31, 1997.
<PAGE>
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3.24. CUSTOMERS.
Listed in Section 3.24 of the Disclosure Schedule are the names and
addresses of the ten most significant customers (by revenue) of the Company and
the Subsidiaries for the twelve-month period ended December 31, 1997 and the
amount for which each such customer was invoiced during such period. Except as
disclosed in Section 3.24 of the Disclosure Schedule, none of Hirschorn, the
Company nor any Subsidiary has received any notice or has any reason to believe
that any significant customer of the Company has ceased, or will cease, to use
the products, equipment, goods or services of the Company or any Subsidiary, or
has substantially reduced, or will substantially reduce, the use of such
products, equipment, goods or services at any time.
3.25. SUPPLIERS.
Listed in Section 3.25 of the Disclosure Schedule are the names and
addresses of each of the ten most significant suppliers of raw materials,
supplies, merchandise and other goods for the Company and the Subsidiaries with
an aggregate purchase price of $100,000.00 or more during the twelve-month
period ended December 31, 1997 and the amount for which each such supplier
invoiced the Company and the Subsidiaries during such period. Except as
disclosed in Section 3.25 of the Disclosure Schedule, none of Hirschorn, the
Company nor any Subsidiary has received any notice or has any reason to believe
that any such supplier will not sell raw materials, supplies, merchandise and
other goods to the Company or any Subsidiary at any time after the Closing Date
on terms and conditions substantially similar to those used in its current sales
to the Company and the Subsidiaries, subject only to general and customary price
increases.
3.26. EMPLOYEE BENEFIT MATTERS.
(a) Plans and Material Documents. Section 3.26(a) of the Disclosure
Schedule lists (i) all employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and all
bonus, stock option, stock purchase, restricted stock, incentive, deferred
compensation, retiree medical or life insurance, supplemental retirement,
severance or other benefit plans, programs or arrangements, and all employment,
termination, severance or other contracts or agreements, whether legally
enforceable or not, to which the Company or any Subsidiary is a party, with
respect to which the Company or any Subsidiary has any obligation or which are
maintained, contributed to or sponsored by the Company or any Subsidiary for the
benefit of any current or former employee, officer or director of the Company or
any Subsidiary, (ii) each employee benefit plan for which the Company or any
Subsidiary could incur liability under Section 4069 of ERISA in the event such
plan has been or were to be terminated, (iii) any plan in respect of which the
Company or any Subsidiary could incur liability under Section 4212(c) of ERISA
and (iv) any contracts, arrangements or understandings between Hirschorn or any
of its Affiliates and any
<PAGE>
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employee of the Company or of any Subsidiary, including, without limitation, any
contracts, arrangements or understandings relating to the sale of the Company
(collectively, the "Plans"). Each Plan is in writing and Hirschorn has made
available to the Buyer complete and accurate copies of each Plan and a complete
and accurate copy of each material document prepared in connection with each
such Plan including, without limitation, (i) a copy of each trust or other
funding arrangement, (ii) each summary plan description and summary of material
modifications, (iii) the most recently filed IRS Form 5500, (iv) the most
recently received IRS determination letter for each such Plan, and (v) the most
recently prepared actuarial report and financial statement in connection with
each such Plan. Except as disclosed on Section 3.26(a) of the Disclosure
Schedule, there are no other employee benefit plans, programs, arrangements or
agreements, whether formal or informal, whether in writing or not, to which the
Company or any Subsidiary is a party, with respect to which the Company or any
Subsidiary has any obligation or which are maintained, contributed to or
sponsored by the Company or any Subsidiary for the benefit of any current or
former employee, officer or director of the Company or any Subsidiary. Neither
the Company nor any Subsidiary has any express or implied material commitment,
whether legally enforceable or not, (i) to create, incur liability with respect
to or cause to exist any other employee benefit plan, program or arrangement,
(ii) to enter into any contract or agreement to provide compensation or benefits
to any individual or (iii) to modify, change or terminate any Plan, other than
with respect to a modification, change or termination required by ERISA or the
Code.
(b) Absence of Certain Types of Plans. None of the Plans is a single
employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) for
which the Company or any Subsidiary could incur liability under Section 4063 or
4064 of ERISA. None of the Plans provides for the payment of separation,
severance, termination or similar-type benefits to any Person or obligates the
Company or any Subsidiary to pay separation, severance, termination or
similar-type benefits solely as a result of any transaction contemplated by this
Agreement or as a result of a "change in control," within the meaning of such
term under Section 280G of the Code. None of the Plans provides for or promises
retiree medical, disability or life insurance benefits to any current or former
employee, officer or director of the Company or any Subsidiary for which
accruals have not been taken. Any such accruals are listed on the Reference
Balance Sheet. Except for those Plans of Industrial Acoustics Company Limited,
each of the Plans is subject only to the laws of the United States or a
political subdivision thereof.
(c) Compliance with Applicable Law. Each Plan is now and always has been
operated in all respects in accordance with the requirements of all applicable
Law, including, without limitation, ERISA and the Code, and all persons who
participate in the operation of such Plans and all Plan "fiduciaries" (within
the meaning of Section 3(21) of ERISA) have always acted in accordance with the
provisions of all applicable Law, including, without limitation, ERISA and the
IRC. The Company and each Subsidiary has performed all
<PAGE>
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obligations required to be performed by it under, is not in any respect in
default under, or in violation of, and has no knowledge of any default or
violation by any party to any Plan. No legal action, suit or claim is pending or
threatened with respect to any Plan (other than claims for benefits in the
ordinary course) and no fact or event exists that could give rise to any such
action, suit or claim.
(d) Qualification of Certain Plans. Each Plan which is intended to be
qualified under Section 401(a) of the IRC or Section 401(k) of the IRC has
received a favorable determination letter from the IRS that it is so qualified
and each trust established in connection with any Plan which is intended to be
exempt from federal income taxation under Section 501(a) of the IRC has received
a determination letter from the IRS that it is so exempt and no fact or event
has occurred since the date of such determination letter from the IRS to
adversely affect the qualified status of any such Plan or the exempt status of
any such trust. Each trust maintained or contributed to by the Company or any
Subsidiary which is intended to be qualified as a voluntary employees'
beneficiary association and which is intended to be exempt from federal income
taxation under Section 501(c)(9) of the IRC has received a favorable
determination letter from the IRS that it is so qualified and so exempt, and no
fact or event has occurred since the date of such determination by the IRS to
adversely affect such qualified or exempt status.
(e) Absence of Certain Liabilities and Events. There has been no prohibited
transaction (within the meaning of Section 406 of ERISA or Section 4975 of the
IRC) with respect to any Plan. Neither the Company nor any Subsidiary has
incurred any liability for any penalty or tax arising under Section 4971, 4972,
4980, 4980B or 6652 of the IRC or any liability under Section 502 of ERISA and
no fact or event exists which could give rise to any such liability. Neither the
Company nor any Subsidiary has incurred any liability under, arising out of or
by operation of Title IV of ERISA (other than liability for premiums to the
Pension Benefit Guaranty Corporation arising in the ordinary course), including,
without limitation, any liability in connection with (i) the termination or
reorganization of any employee benefit plan subject to Title IV of ERISA or (ii)
the withdrawal from any multiemployer plan (within the meaning of Section 3(37)
or 4001(a)(3) of ERISA, and no fact or event exists which could give rise to any
such liability. Except as set forth on Section 3.26(e) of the Disclosure
Schedule, no complete or partial termination has occurred within the five years
preceding the date hereof with respect to any Plan. No reportable event (within
the meaning of Section 4043 of ERISA) has occurred or is expected to occur with
respect to any Plan subject to Title IV of ERISA. No Plan had an accumulated
funding deficiency (within the meaning of Section 302 of ERISA or Section 412 of
the Code) whether or not waived as of the most recently ended plan year of such
Plan. None of the assets of the Company or any Subsidiary is the subject of any
lien arising under Section 302(f) of ERISA or Section 412(n) of the Code;
neither the Company nor any Subsidiary has been required to post any security
un-
<PAGE>
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der Section 307 of ERISA or Section 401(a)(29) of the Code; and no fact or event
exists which could give rise to any such lien or requirement to post any such
security.
(f) Plan Contributions and Funding. All contributions, premiums or payments
required to be made with respect to any Plan (and any other employee benefit
plan for which the Company or any Subsidiary may have liability for funding)
have been made on or before their due dates. All such contributions have been
fully deducted for income tax purposes and no such deduction has been challenged
or disallowed by any government entity and no fact or event exists which could
give rise to any such challenge or disallowance. As of the Closing Date, no Plan
which is subject to Title IV of ERISA will have an "unfunded benefit liability"
(within the meaning of Section 4001(a)(18) of ERISA).
(g) Certain Employee-Benefits Assets. Each of the guaranteed investment
contracts and other funding contracts with any insurance company that are held
by any of the Plans and any annuity contracts purchased by (i) any of the Plans
or (ii) any pension benefit plans (as defined in Section 3(2) of ERISA) that
provided benefits to any current or former employees of the Company or any
Subsidiary was issued by an insurance company which carried the highest rating
from each of Duff & Phelps Credit Rating Co., Standard & Poor's Insurance Rating
Services, A.M. Best Company and Moody's Investors Service, as of the date such
contract was issued, the date hereof and the Closing Date.
(h) WARN Act. The Company and the Subsidiaries are in compliance with the
requirements of the Workers Adjustment and Retraining Notification Act ("WARN")
and have no liabilities pursuant to WARN.
(i) Americans With Disability Act. Except as set forth in Section 3.26(i)
of the Disclosure Schedule, the Seller has no Knowledge that the Company and
each Subsidiary are not in compliance with the requirements of the Americans
With Disabilities Act.
(j) Withdrawal Liability. Neither the Company nor any Subsidiary has
announced an intention to withdraw, but has not yet completed withdrawal, from a
multiemployer plan. No action has been taken that could result in either a
partial or complete withdrawal from a multiemployer plan by the Company or any
Subsidiary.
3.27. LABOR RELATIONS; COMPLIANCE.
The Company or one of its Subsidiaries is a party to those collective
bargaining or other labor Contracts set forth on Section 3.27 of the Disclosure
Schedule. Except as set forth on Section 3.27 of the Disclosure Schedule, since
January 1, 1994, there has not been, there is not presently pending or existing,
and to Hirschorn's Knowledge there is not threatened, (a) any strike, slowdown,
picketing, work stoppage, or employee grievance process, (b) any Proceeding
against or affecting the Company or any of its Subsidiaries relating to the
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alleged violation of any Legal Requirement pertaining to labor relations or
employment matters, including any charge or complaint filed by an employee or
union with the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable Governmental Body, organizational activity, or
other labor or employment dispute against or affecting any of the Company and
its Subsidiaries or their premises, or (c) any application for certification of
a collective bargaining agent. To Hirschorn's Knowledge, no event has occurred
or circumstance exists that could provide the basis for any work stoppage or
other labor dispute. There is no lockout of any employees by the Company or any
of its Subsidiaries, and no such action is contemplated by the Company or any of
its Subsidiaries. The Company and each of the Subsidiaries have complied in all
respects with all Legal Requirements relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours, benefits, collective
bargaining, the payment of social security and similar taxes, occupational
safety and health, and plant closing. Neither the Company nor any Subsidiary is
liable for the payment of any compensation, damages, taxes, fines, penalties, or
other amounts, however designated, for failure to comply with any of the
foregoing Legal Requirements.
3.28. KEY EMPLOYEES.
(a) Section 3.28 of the Disclosure Schedule lists the name, place of
employment, the current annual salary rates, bonuses, deferred or contingent
compensation, pension, accrued vacation, "golden parachute" and other like
benefits paid or payable (in cash or otherwise) in 1996 and 1997, the date of
employment, nature of employment (whether contractual or at will), and a
description of position and job function of each current salaried employee,
officer, director, consultant or agent of the Company or any Subsidiary whose
annual compensation exceeded (or, in 1997, is expected to exceed) $100,000.00.
(b) All directors, officers, management employees, and technical and
professional employees of the Company and each Subsidiary are under written
obligation to the Company or such Subsidiary to maintain in confidence all
confidential or proprietary information acquired by them in the course of their
employment and to assign to the Company or such Subsidiary all inventions made
by them within the scope of their employment during such employment and for a
reasonable period thereafter.
3.29. TAXES.
(a) The Company and its Subsidiaries have filed or caused to be filed all
Tax Returns that are or were required to be filed by or with respect to any of
them, either separately or as a member of a group of corporations, pursuant to
applicable Legal Requirements. The Company has made available to Buyer copies of
all such Tax Returns relating to income or franchise taxes filed since January
1, 1992. The Company and its Subsidiaries (i) have timely paid, or made
provision for the payment of, all Taxes that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to any assessment
received by the
<PAGE>
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Company or any of its Subsidiaries, except such Taxes, if any, as are listed in
Section 3.29 of the Disclosure Schedule and are being contested in good faith
and as to which adequate reserves (determined in accordance with GAAP) have been
provided in the Reference Balance Sheet and the Interim Balance Sheet, and (ii)
have made adequate provision (through a current accrual on the Reference Balance
Sheet) for any Taxes attributable to any taxable period (or portion thereof) of
the Company and/or its Subsidiaries ending on or prior to the date hereof that
are not yet due and payable.
(b) The United States federal income Tax Returns of the Company and each of
its subsidiaries subject to such Taxes have been audited by the IRS or are
closed by the applicable statute of limitations for all taxable years through
December 31, 1995. The New York State income Tax Returns of the Company and each
of its subsidiaries subject to such Taxes have been audited by the relevant
state tax authorities or are closed by the applicable statute of limitations for
all taxable years through December 31, 1994. The New York City income Tax
Returns of the Company and each of its subsidiaries subject to such Taxes have
been audited by the relevant tax authorities or are closed by the applicable
statute of limitations for all taxable years through December 31, 1992. The
United Kingdom income Tax Returns of the Company and each of its subsidiaries
subject to such Taxes have been audited by Inland Reserve or are closed by the
applicable statute of limitations for all taxable years through December 31,
1996. Hirschorn has made available to Buyer a complete and accurate list of all
audits of all such Tax Returns, including a reasonably detailed description of
the nature and outcome of each audit. All deficiencies proposed as a result of
such audits have been paid, reserved against or settled. Except as described in
Section 3.29 of the Disclosure Schedule, neither the Company nor any of the
Subsidiaries has given or been requested to give waivers or extensions (or is or
would be subject to a waiver or extension given by any other Person) of any
statute of limitations relating to the payment of Taxes of the Company or any of
its Subsidiaries or for which the Company or any of its Subsidiaries may be
liable.
(c) The charges, accruals, and reserves with respect to Taxes on the
respective books of the Company and each of its Subsidiaries are adequate
(determined in accordance with GAAP) and are at least equal to the Company's or
such Subsidiary's liability for Taxes. There exists no proposed tax assessment
against the Company or any of its Subsidiaries except as disclosed in the
Balance Sheet or in Section 3.29 of the Disclosure Schedule. No consent to the
application of Section 3.41(f)(2) of the IRC has been filed with respect to any
property or assets held, acquired, or to be acquired by the Company or any of
its Subsidiaries. All Taxes that the Company or any of its Subsidiaries is or
was required by Legal Requirements to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the proper
Governmental Body or other Person.
(d) All Tax Returns filed by (or that include on a consolidated basis) the
Company or any of its Subsidiaries are true, correct, and complete. There is no
tax sharing
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agreement to which the Company or any of its Subsidiaries is a party. Neither
the Company nor any Subsidiary is, or within the five-year period preceding the
Closing Date has been, an "S" corporation.
(e) Except as set forth in Section 3.29(e) of the Disclosure Schedule, (i)
no liens have been filed with respect to any Taxes; (ii) neither the Company nor
any of its Subsidiaries is a party to any agreement or arrangement that would
result, separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of IRC Section 280G; (iii) neither the Company nor
any of its Subsidiaries has been a "United States real property holding
corporation" within the meaning of IRC Section 897(c)(2); (iv) neither the
Company nor any Subsidiary owns any interest in any "passive foreign investment
company" as defined in IRC Section 1296 or other entity the income of which is
required to be included in the income of the Company or its Subsidiaries whether
or not distributed; (v) neither the Company nor any Subsidiary has any income
reportable for a period ending after the Closing Date but attributable to a
transaction (e.g., "an installment sale") occurring in or a change in accounting
method made for a period ending on or prior to the Closing Date which resulted
in a deferred reporting of income from such transaction or from such change in
accounting method (other than a deferred intercompany transaction); (vi) neither
the Company nor any Subsidiary has any deferred gain or loss (a) arising out of
any intercompany transactions or (b) with respect to the stock or obligations of
any other member of the affiliated group of which the Company is the common
parent; (vii) the Company or any Subsidiary has no Knowledge that there are any
reassessments of any property owned by the Company or any Subsidiary or other
proposals that could increase the amount of any Tax to which the Company or any
Subsidiary would be subject; (viii) no power of attorney currently in force has
been granted with respect to any matter relating to Taxes that could affect the
Company or a Subsidiary; (ix) no assets of the Company or its Subsidiaries are
held in an arrangement for which partnership Tax Returns are being filed and
neither the Company nor any of its Subsidiaries is a partner in any partnership;
(x) neither the Company nor any of its Subsidiaries has requested a ruling from
any taxing authority; (xi) there are no "excess loss accounts" (as defined in
Treas. Reg. ss. 1. 1502-19) with respect to any stock of any Subsidiary; and
(xii) none of the assets of the Company nor any of its Subsidiaries is "tax
exempt use property" as defined in IRC Section 168(h)(1) or may be treated as
owned by any other person pursuant to IRC Section 168(f)(8) of the Internal
Revenue Code of 1954 (as in effect prior to the Tax Reform Act of 1986).
(f) All transfer, documentary, sales, use, stamp, registration and other
such taxes and fees (including any penalties and interest) incurred in
connection with the transactions contemplated by this Agreement (including,
without limitation, any New York State Real Estate Transfer Tax and any similar
tax imposed in other states or subdivisions), shall be paid by the party
obligated by Legal Requirement to make such payment when due, and such
responsible party will, at their own expense, file all necessary Tax Returns and
other
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documentation with respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees, and, if required by applicable law, the
party not obligated to make such payment shall join in the execution of any such
Tax Returns and other documentation.
3.30. INSURANCE.
(a) Section 3.30(a) of the Disclosure Schedule sets forth the following
information with respect to each insurance policy (including policies providing
property, casualty, liability, workers' compensation, any bond and surety
arrangements) under which the Company or any Subsidiary has been an insured, a
named insured or otherwise the principal beneficiary of coverage at any time
within the past three years:
(i) the name, address and telephone number of the agent or broker;
(ii) the name of the insurer and the names of the principal insured
and each named insured;
(iii) the policy number and the period of coverage;
(iv) the type, scope (including an indication of whether the coverage
was on a claims made, occurrence or other basis) and amount (including a
description of how deductibles, retentions and aggregates are calculated
and operate) of coverage; and
(v) the premium charged for the policy, including, without limitation,
a description of any retroactive premium adjustments or other loss-sharing
arrangements.
(b) With respect to each such insurance policy: (i) the policy is legal,
valid, binding and enforceable in accordance with its terms and, except for
policies that have expired under their terms in the ordinary course, is in full
force and effect; (ii) neither the Company nor any Subsidiary is in breach or
default (including any breach or default with respect to the payment of premiums
or the giving of notice), and no event has occurred which, with notice or the
lapse of time, would constitute such a breach or default or permit termination
or modification, under the policy; (iii) no party to the policy has repudiated,
or given notice of an intent to repudiate, any provision thereof; and (iv) to
the Knowledge of Hirschorn, no insurer on the policy has been declared insolvent
or placed in receivership, conservatorship or liquidation or currently has a
rating of "B+" or below from A.M. Best & Co. or a claims paying ability rating
of "BBB" or below from Standard & Poor's, Inc.
(c) Section 3.30(c) of the Disclosure Schedule sets forth all risks against
which the Company or any Subsidiary is self-insured or which are covered under
any risk retention program in which the Company or any Subsidiary participates,
together with details for
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the last five years of the Company's and each Subsidiary's loss experience with
respect to such risks.
(d) All material assets, properties and risks of the Company and each
Subsidiary are, and for the past five years have been, covered by valid and,
except for policies that have expired under their terms in the ordinary course,
currently effective insurance policies or binders of insurance (including,
without limitation, general liability insurance, property insurance and workers'
compensation insurance) issued in favor of the Company or a Subsidiary. as the
case may be, in each case with responsible insurance companies, in such types
and amounts and covering such risks as are consistent with customary practices
and standards of companies engaged in businesses and operations similar to those
of the Company or such Subsidiary, as the case may be.
(e) At no time subsequent to January 1, 1994 has the Company or any
Subsidiary (i) been denied any insurance or indemnity bond coverage which it has
requested, (ii) made any material reduction in the scope or amount of its
insurance coverage, or, except as set forth in Section 3.30(e) of the Disclosure
Schedule, received notice from any of its insurance carriers that any insurance
premiums will be subject to increase in an amount materially disproportionate to
the amount of the increases with respect thereto (or with respect to similar
insurance) in prior years or that any insurance coverage listed in Section
3.30(a) of the Disclosure Schedule will not be available in the future
substantially on the same terms as are now in effect or (iii) suffered any
extraordinary increase in premium for renewed coverage. Since January 1, 1994,
no insurance carrier has canceled, failed to renew or materially reduced any
insurance coverage for the Company or any Subsidiary or given any notice or
other indication of its intention to cancel, not renew or reduce any such
coverage.
(f) At the time of the Closing, all insurance policies currently in effect
will be outstanding and duly in force.
(g) No insurance policy listed in Section 3.30(a) of the Disclosure
Schedule will cease to be legal, valid, binding, enforceable in accordance with
its terms and in full force and effect on terms identical to those in effect as
of the date hereof as a result of the consummation of the transactions
contemplated by this Agreement.
3.31. ACCOUNTS, LOCKBOXES, SAFE DEPOSIT BOXES, POWERS OF ATTORNEY.
Section 3.31 of the Disclosure Schedule is a true and complete list of (a)
the names of each bank, savings and loan association, securities or commodities
broker or other financial institution in which the Company or any Subsidiary has
an account, including cash contribution accounts, and the names of all persons
authorized to draw thereon or have access thereto, (b) the location of all
lockboxes and safe deposit boxes of the Company and each
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Subsidiary and the names of all Persons authorized to draw thereon or have
access thereto and (c) the names of all Persons, if any, holding powers of
attorney from Seller relating to the Company, any Subsidiary or the Business, or
from the Company or any Subsidiary. Section 3.31 of the Disclosure Schedule sets
forth a list of all authorizations by the Board of Directors of the Company for
any officer, director or employee to enter into negotiations or otherwise
interact with any foreign entity. At the time of the Closing, without the prior
written consent of the Buyer, neither the Company nor any Subsidiary shall have
any such amount, lockbox or safe deposit box other than those listed in Section
3.31 of the Disclosure Schedule, nor shall any additional Person have been
authorized, from the date of this Agreement, to draw thereon or have access
thereto or to hold any such power of attorney relating to the Company, any
Subsidiary or the Business or from the Company or any Subsidiary. Except as
disclosed in Section 3.31 of the Disclosure Schedule, Hirschorn has not
commingled monies or accounts of the Company or any Subsidiary with other monies
or accounts of Hirschorn nor has Hirschorn transferred monies or accounts of the
Company or any Subsidiary other than to an account of the Company or such
Subsidiary. At the time of the Closing, all monies and accounts of the Company
and each Subsidiary shall be held by, and be accessible only to, the Company or
such Subsidiary.
3.32. FULL DISCLOSURE.
(a) Hirschorn is not aware of any facts pertaining to the Company, any
Subsidiary or the Business which could have a Material Adverse Effect and which
have not been disclosed in this Agreement, the Disclosure Schedule or the
Financial Statements or otherwise disclosed to the Buyer by Hirschorn in
writing.
(b) No representation or warranty of Hirschorn in this Agreement, nor any
statement or certificate furnished or to be furnished to the Buyer pursuant to
this Agreement, or in connection with the transactions contemplated by this
Agreement, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
3.33. BROKERS OR FINDERS.
Hirschorn has incurred no obligation or liability, contingent or otherwise,
for brokerage or finders' fees or agents' commissions or other similar payment
in connection with this Agreement.
3.34. YEAR 2000 COMPUTER CONVERSION.
Section 3.34 of the Disclosure Schedule sets forth the Company's proposal
regarding its computer conversion for the year 2000. The changes necessary to be
made to the computer system could not reasonably be expected to have a Material
Adverse Effect.
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3.35. SECURITIES EXCHANGE ACT FILINGS.
All reports of the Company pursuant to the Securities Exchange Act of 1934
have been filed when due and in accordance with the provisions of such at and
the rules and regulations thereunder of the Securities and Exchange Commission.
Neither the Company or Seller has any Knowledge of any investigation or inquiry
(whether or not formally authorized) with respect to securities of the Company
or any report or registration statement filed, or required to be filed, by the
Company with such Commission.
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Sellers as follows:
4.1. ORGANIZATION AND GOOD STANDING.
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all necessary corporate
power and authority to enter into this Agreement, to carry out its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by the Buyer, the performance by the Buyer of its
obligations hereunder and the consummation by the Buyer of the transactions
contemplated hereby have been duly authorized by all requisite action on the
part of the Buyer. This Agreement has been, and (assuming due authorization,
execution and delivery by the Sellers) this Agreement constitutes, a legal,
valid and binding obligation of the Buyer enforceable against the Buyer in
accordance with its terms. Buyer does also specifically represent that it has
the financial wherewithal to undertake and consummate the transactions
contemplated by this Agreement.
4.2. NO CONFLICT.
Assuming compliance with the notification requirements of the HSR Act and
the making and obtaining of all filings, notifications, consents, approvals,
authorizations and other actions referred to in Section 4.3, except as may
result from any facts or circumstances relating solely to Hirschorn, the
execution, delivery and performance of this Agreement by Buyer do not and will
not (a) violate, conflict with or result in the breach of any provision of the
charter or by-laws (or similar organizational documents) of the Buyer, (b)
conflict with or violate (or cause an event which could have a Material Adverse
Effect as a result of) any Law or Governmental Order applicable to the Buyer, or
(c) conflict with, result in any breach of, constitute a default (or event which
with the giving of notice or lapse of time, or both, would become a default)
under, require any consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation or cancellation of, or result in
the creation of an Encumbrance on any of the assets or properties of the Buyer
pursuant to any note, bond, mortgage or indenture, contract agreement, lease,
sublease, license, permit, franchise or
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other instrument or arrangement to which the Buyer is a party or by which any of
such assets or properties are bound or affected which would have a Material
Adverse Effect on the ability of the Buyer to consummate the transactions
contemplated by this Agreement.
4.3. GOVERNMENTAL CONSENTS AND APPROVAL.
The execution, delivery and performance of this Agreement by the Buyer do
not and will not require any consent, approval, authorization or other order of,
action by, filing with, or notification to, any Governmental Authority, except
(a) in a writing given to Hirschorn by the Buyer on the date of this Agreement,
and (b) the notification requirements of the HSR Act.
4.4. INVESTMENT INTENT.
Buyer is acquiring the Shares for its own account and not with a view to
their distribution within the meaning of Section 2(l1) of the Securities Act.
4.5. CERTAIN PROCEEDINGS.
There is no pending Proceeding that has been commenced against Buyer and
that challenges, or may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the Contemplated Transactions. To Buyer's
Knowledge, no such Proceeding has been Threatened.
4.6. BROKERS OR FINDERS.
Buyer and its officers and agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement and will indemnify
and hold Sellers harmless from any such payment alleged to be due by or through
Buyer as a result of the action of Buyer or its officers or agents.
5. COVENANTS OF HIRSCHORN PRIOR TO CLOSING DATE.
5.1. ACCESS AND INVESTIGATION; AUDIT.
Between the date of this Agreement and the Closing Date, Hirschorn will,
and will cause the Company and the Subsidiaries and its Representatives to, (a)
furnish Buyer and Buyer's Advisors with copies of all such contracts, books and
records, and other existing documents and data as Buyer may reasonably request,
(b) furnish Buyer and Buyer's Advisors with such additional financial,
operating, and other data and information as Buyer may rea-
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sonably request, and (c) furnish Buyer true and complete copies of the audited
consolidated balance sheet of the Company and the Subsidiaries for the fiscal
year ended as of December 31, 1997, and the related audited consolidated
statements of income, retained earnings, stockholders' equity and changes in
financial position of the Company and the Subsidiaries, together with all
related notes and schedules thereto, accompanied by the audit opinion and
management letters thereon of Coopers & Lybrand and, with respect to Industrial
Acoustics Company Limited, Kidsons Impey.
5.2. OPERATION OF THE BUSINESS OF THE COMPANY AND ITS SUBSIDIARIES.
(a) Between the date of this Agreement and the Closing Date, Hirschorn
will, and will cause the Company and the Subsidiaries to:
(i) conduct the business of the Company and the Subsidiaries only in
the ordinary course of business;
(ii) use his Best Efforts to preserve intact the current business
organization of the Company and the Subsidiaries, keep available the
services of the current officers, employees, and agents of the Company and
the Subsidiaries, and maintain the relations and good will with suppliers,
customers, landlords, creditors, employees, agents, and others having
business relationships with the Company and the Subsidiaries;
(iii) confer with Buyer concerning operational matters of a material
nature; and
(iv) otherwise report periodically to Buyer concerning the status of
the business, operations, and finances of the Company and the Subsidiaries.
(b) Except as disclosed in Section 5.2(a) of the Disclosure Schedule, the
Seller covenants and agrees that, prior to Closing, without the prior written
consent of the Buyer, neither the Company nor any Subsidiary will do any of the
things enumerated in the second sentence of Section 3.14 (including, without
limitation, clauses (i) through (xxix) thereof).
(c) The Seller covenants and agrees that, prior to Closing, the Company
will not engage in any practice, take any action, fail to take any action or
enter into any transaction which would cause any representation or warranty of
the Seller to be untrue or result in the Breach of any covenant made by the
Seller in this Agreement.
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5.3. NEGATIVE COVENANT.
Except as otherwise expressly permitted by this Agreement, between the date
of this Agreement and the Closing Date, Seller will not, and will cause the
Company and the Subsidiaries not to, without the prior consent of Buyer, take
any affirmative action, or fail to take any reasonable action within his or its
control, as a result of which any of the changes or events listed in Section
3.14 is authorized or is likely to occur.
5.4. REQUIRED APPROVALS.
As promptly as practicable after the date of this Agreement, Hirschorn
will, and will cause the Company and the Subsidiaries to, make all filings
required by Legal Requirements to be made by them in order to consummate the
Contemplated Transactions (including all filings under the HSR Act). Between the
date of this Agreement and the Closing Date, Hirschorn will, and will cause the
Company and the Subsidiaries to, (a) cooperate with Buyer with respect to all
filings that Buyer elects to make or is required by Legal Requirements to make
in connection with the Contemplated Transactions, and (b) cooperate with Buyer
in obtaining all consents identified in Schedule 4.3 (including taking all
actions requested by Buyer to cause early termination of any applicable waiting
period under the HSR Act).
5.5. NOTIFICATION.
Between the date of this Agreement and the Closing Date, Seller will
promptly notify Buyer in writing if such Seller or the Company or any of its
Subsidiaries becomes aware of any fact or condition that causes or constitutes a
Breach of any of Seller's representations and warranties as of the date of this
Agreement, or if Seller or the Company or any of its Subsidiaries becomes aware
of the occurrence after the date of this Agreement of any fact or condition that
would (except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition require any change in the
Disclosure Schedule if the Disclosure Schedule were dated the date of the
occurrence or discovery of any such fact or condition, Seller will promptly
deliver to Buyer a supplement to the Disclosure Schedule specifying such change.
During the same period, Seller will promptly notify Buyer of the occurrence of
any Breach of any covenant of Seller in this Section 5 or of the occurrence of
any event that may make the satisfaction of the conditions in Section 7
impossible or unlikely.
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5.6. PAYMENT OF INDEBTEDNESS BY RELATED PERSONS.
Except as expressly provided in this Agreement and except as is set forth
on Section 5.6 of the Disclosure Schedule, Seller will cause all indebtedness
owed to the Company and the Subsidiaries by any Seller or any Related Person to
be paid in full prior to Closing. The obligation of Michael Hirschorn to the
Company shall continue and the terms of such obligation shall be amended to
include the payment of interest on the outstanding balance calculated monthly at
the prime rate of Chase Manhattan Bank as of the first day of such month.
5.7. NO NEGOTIATION.
Until such time, if any, as this Agreement is terminated pursuant to
Section 9, Seller will not, and will cause the Company and the Subsidiaries and
each of their Representatives not to, directly or indirectly solicit, initiate,
or encourage any inquiries or proposals from, discuss or negotiate with, provide
any non-public information to, or consider the merits of any unsolicited
inquiries or proposals from, any Person (other than Buyer) relating to any
transaction involving the sale of the Shares (other than in the ordinary course
of business) of the Company, or any merger, consolidation, business combination,
or similar transaction involving the Company or any of its Subsidiaries.
5.8. BEST EFFORTS.
Between the date of this Agreement and the Closing Date, Seller will use
his Best Efforts to cause the conditions in Sections 7 and 8 to be satisfied.
5.9. TERMINATION OF AUTHORIZATIONS.
Seller will cause the Company to terminate all existing authorizations by
the Board of Directors of the Company for any officer, director or employee to
enter into negotiations or otherwise interact with any foreign entity except in
the ordinary course of business relating to specific transactions.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE.
6.1. APPROVALS OF GOVERNMENTAL BODIES.
As promptly as practicable after the date of this Agreement, Buyer will,
and will cause each of its Related Persons to, make all filings required by
Legal Requirements to be made by them to consummate the Contemplated
Transactions (including all filings under the HSR Act). Between the date of this
Agreement and the Closing Date, Buyer will, and will
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cause each Related Person to, (i) cooperate with Seller with respect to all
filings that Seller is required by Legal Requirements to make in connection with
the Contemplated Transactions, and (ii) cooperate with Seller in obtaining all
consents identified in Parts 3.5, 3.6 and 4.3 of the Disclosure Schedule;
provided that this Agreement will not require Buyer to dispose of or make any
change in any portion of its business or to incur any other burden to obtain a
Governmental Authorization.
6.2. BEST EFFORTS.
Except as set forth in the proviso to Section 6.1, between the date of this
Agreement and the Closing Date, Buyer will use its Best Efforts to cause the
conditions in Sections 7 and 8 to be satisfied.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
7.1. ACCURACY OF REPRESENTATIONS.
All of Seller's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must be accurate as of the date of this Agreement and
as of the Closing Date without giving effect to any notice or supplement
delivered by Hirschorn pursuant to Section 5.5.
7.2. SELLER'S PERFORMANCE
(a) All of the covenants and obligations that Seller is required to perform
or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and complied with in
all material respects.
(b) Each document required to be delivered pursuant to Section 2.4 must
have been delivered, and each of the other covenants and obligations in Section
5.4 must have been performed and complied with in all material respects.
7.3. CONSENTS.
Each of the Consents identified in Parts 3.5(c), 3.6 and 4.3 of the
Disclosure Schedule must have been obtained and must be in full force and
effect.
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7.4. ADDITIONAL DOCUMENTS.
Each of the following documents must have been delivered to Buyer:
(a) an opinion of Rand Rosenzweig Smith Radley Gordon & Burstein LLP,
dated the Closing Date, in the form of Exhibit 7.4(a);
(b) such other documents as Buyer may reasonably request for the
purpose of (i) enabling its counsel to provide the opinion referred to in
Section 8.4(a), (ii) evidencing the accuracy of any of Seller's
representations and warranties, (iii) evidencing the performance by Seller
of, or the compliance by Seller with, any covenant or obligation required
to be performed or complied with by Seller, (iv) evidencing the
satisfaction of any condition referred to in this Section 7, or (v)
otherwise facilitating the consummation or performance of any of the
Contemplated Transactions; and
(c) a copy of the Escrow Agreement substantially in the form attached
hereto as Exhibit A, executed by Seller.
7.5. NO INJUNCTION.
Them must not be in effect any Legal Requirement or any injunction or other
Order that prohibits the sale of the Shares by Seller to Buyer.
7.6. NO PROHIBITION.
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
Material Adverse Effect under, any applicable Legal Requirement or Order.
7.7. BOARD ACTION.
The Board of Directors of the Company shall have specifically approved (i)
the Contemplated Transactions and (ii) the contemporaneous acquisition by Buyers
of the shares listed in Schedule A, such approval being effective prior to the
signing of this Agreement, in effect as of the Closing and evidenced by a
certified resolution of such Board satisfactory to Buyer.
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7.8. HSR ACT AND EXON-FLORIO AMENDMENT.
The waiting period (including any extension thereof by reason of a request
for additional information) relating to the notification and report forms under
the HSR Act filed by Buyer and Seller with respect to the transactions
contemplated by this Agreement shall have expired or been terminated, and no
conditions to the transactions contemplated by this Agreement shall have been
imposed by any Governmental Body and clearance shall have been received from the
Committee on Foreign Investment in the United States for the transactions
contemplated by this Agreement under Section 721 of the Defense Production Act
of 1950, as amended.
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE.
Seller's obligation to sell the Shares and to take the other actions
required to be taken by Seller at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Seller, in whole or in part):
8.1. ACCURACY OF REPRESENTATIONS.
All of Buyer's representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must be accurate as of the date of this Agreement and as of the
Closing Date.
8.2. BUYER'S PERFORMANCE.
(a) All of the covenants and obligations that Buyer is required to perform
or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been performed and complied with in all
material respects.
(b) Buyer must have delivered each of the documents required to be
delivered by Buyer pursuant to Section 2.4 and must have made the cash payments
required to be made by Buyer pursuant to Sections 2.4(b)(i) and 2.4(b)(ii).
8.3. CONSENTS.
Each of the Consents identified in Parts 3.6(c), 3.7 and 4.3 of the
Disclosure Schedule must have been obtained and must be in full force and
effect.
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8.4. ADDITIONAL DOCUMENTS.
Buyer must have caused the following documents to be delivered to Seller:
(a) an opinion of Cahill Gordon & Reindel, dated the Closing Date, in
the form of Exhibit 8.4(a); and
(b) such other documents as Seller may reasonably request for the
purpose of (i) enabling their counsel to provide the opinion referred to in
Section 7.4(a), (ii) evidencing the accuracy of any representation or
warranty of Buyer, (iii) evidencing the performance by Buyer of, or the
compliance by Buyer with, any covenant or obligation required to be
performed or complied with by Buyer, (iv) evidencing the satisfaction of
any condition referred to in this Section 8, or (v) otherwise facilitating
the consummation of any of the Contemplated Transactions; and
(c) a copy of the Escrow Agreement substantially in the form attached
hereto as Exhibit A, executed by Buyer.
8.5. NO INJUNCTION.
There must not be in effect any Legal Requirement or any injunction or
other Order that prohibits the sale of the Shares by Seller to Buyer.
9. TERMINATION.
9.1. TERMINATION EVENTS.
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) by either Buyer or Seller if a material Breach of any provision of
this Agreement has been committed by the other party, such material Breach
has not been cured after notice and a reasonable period of time to cure,
and such Breach has not been waived;
(b) (i) by Buyer if any of the conditions in Section 7 has not been
satisfied as of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of Buyer to comply
with its obligations under this Agreement) and Buyer has not waived such
condition on or before the Closing Date; or (ii) by Seller, if any of the
conditions in Section 8 has not been satisfied of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than
through
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the failure of Seller to comply with his obligations under this Agreement)
and Seller has not waived such condition on or before the Closing Date;
(c) by Buyer if, between the date hereof and the Closing Date: (i) an
event or condition occurs that has resulted in or that may be expected to
result in a Material Adverse Effect, (ii) any material representation or
warranty of Seller contained in this Agreement shall not have been true and
correct when made, (iii) Seller shall not have complied with any material
covenant or agreement to be complied with by it and contained in this
Agreement; or (iv) Seller, the Company or any Subsidiary makes a general
assignment for the benefit of creditors, or any proceeding shall be
instituted by or against Seller, the Company or any Subsidiary seeking to
adjudicate any of them a bankrupt or insolvent, or seeking liquidation,
winding up or reorganization, arrangement, adjustment, protection, relief
or composition of its debts under any law relating to bankruptcy,
insolvency or reorganization;
(d) by mutual consent of Buyer and Seller; or
(e) by either Buyer or Seller if the Closing has not occurred (other
than through the failure of any party seeking to terminate this Agreement
to comply fully with its obligations under this Agreement) on or before
April 30, 1998 or such later date as the parties may agree upon.
9.2. EFFECT OF TERMINATION.
Each party's right of termination under Section 9.1 is in addition to any
other rights it may have under this Agreement or otherwise, and the exercise of
a right of termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 9.1, all further obligations of the parties under
this Agreement will terminate, except that the obligations in Sections 11.1 and
11. 3 will survive; provided, however, that if this Agreement is terminated by a
party because of the Breach of the Agreement by the other party or because one
or more of the conditions to the terminating party's obligations under this
Agreement is not satisfied as a result of the other party's failure to comply
with its obligations under this Agreement, the terminating party's right to
pursue all legal remedies will survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES.
10.1. SURVIVAL.
All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Schedule, the supplements to the Disclosure Schedule,
the certificate delivered
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pursuant to Section 2.4(a)(ii), and any other certificate or document delivered
pursuant to this Agreement will survive the Closing.
10.2. INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER.
Seller will indemnify and hold harmless Buyer, the Company and its
Subsidiaries, and their respective Representatives, stockholders, controlling
persons, and affiliates (collectively, the "Indemnified Persons") for, and will
pay to the Indemnified Persons the amount of, 74% any loss, liability, claim,
damage (including incidental and consequential damages), expense (including
costs of investigation and defense and reasonable attorneys' fees) or diminution
of value, whether or not involving a third-party claim (collectively,
"Damages"), arising, directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by Seller in
this Agreement, the Disclosure Schedule, the supplements to the Disclosure
Schedule, or any other certificate or document delivered by Seller pursuant
to this Agreement;
(b) any Breach of any representation or warranty made by Seller in
this Agreement as if such representation or warranty were made on and as of
the Closing Date, other than any such Breach that is disclosed in a
supplement to the Disclosure Schedule and is expressly identified in the
certificate delivered pursuant to Section 2.4(a)(ii) as having caused the
condition specified in Section 7.1 not to be satisfied;
(c) any Breach by Seller of any covenant or obligation of Seller in
this Agreement;
(d) any product shipped or manufactured by, or any services provided
by, the Company or any of its Subsidiaries prior to the Closing Date;
(e) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with either Seller or the
Company or any of its Subsidiaries (or any Person acting on their behalf)
in connection with any of the Contemplated Transactions; and
(f) any Taxes of the Company and/or its Subsidiaries with respect to
any Tax year or portion thereof ending on or before the Closing Date (or
for any Tax year beginning before and ending after the Closing Date, to the
extent allocable to the portion of such period beginning before and ending
on the Closing Date), to the extent such Taxes are not reflected in the
reserve for Tax liabilities shown on the Interim Bal-
<PAGE>
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ance Sheet, as such reserve is adjusted for the passage of time through the
closing date in accordance with the past practice and custom of the Company
and its Subsidiaries in filing their Tax Returns.
Buyer shall request payment of Damages to be made by a claim against funds
held in escrow pursuant to the Escrow Agreement.
10.3. TIME LIMITATIONS.
If the Closing occurs, Seller will have no liability (for indemnification
or otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date, other
than those in Section 3.2, 3.18 and 3.29, unless on or before eighteen (18)
months from the Closing Date Buyer notifies Seller of a claim specifying the
factual basis of that claim in reasonable detail to the extent then known by
Buyer; a claim with respect to Section 3.2 or 3.29 may be made at any time until
five (5) years from the Closing Date; and a claim with respect to Section 3.18
may be made at any time until thirty (30) months from the Closing Date.
10.4. LIMITATIONS ON AMOUNT -- SELLER.
Seller will have no liability (for indemnification or otherwise) with
respect to the matters described in clause (a), clause (b), to the extent
relating to any failure to perform or comply prior to the Closing Date, clause
(c), clause (d) or clause (f) of Section 10.2, until the total of all Damages
with respect to such matters exceeds $250,000.00, at which time all such Damages
shall become due (not just the amounts in excess of $250,000.00). For purposes
of the preceding sentences, Damages shall not include amounts that individually
do not result in a loss of at least $5,000.00. The maximum amount of Seller's
total liability (for indemnification or otherwise) shall be $1,750,000.00.
10.5. PROCEDURE FOR INDEMNIFICATION -- THIRD-PARTY CLAMS.
(a) Promptly after receipt by an indemnified party under Section 10.2 of
notice of the commencement of any Proceeding against it, such indemnified party
will, if a claim is to be made against an indemnifying party under such Section,
give notice to the indemnifying party of the commencement of such claim, but the
failure to notify the indemnifying party will not relieve the indemnifying party
of any liability that it may have to any indemnified party, except to the extent
that the indemnifying party demonstrates that the defense of such action is
prejudiced by the indemnifying party's failure to give such notice.
(b) If any Proceeding referred to in Section 10.5(a) is brought against an
indemnified party and it gives notice to the indemnifying party of the
commencement of such
<PAGE>
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Proceeding, the indemnifying party will, unless the claim involves Taxes, be
entitled to participate in such Proceeding and, to the extent that it wishes
(unless (i) the indemnifying party is also a party to such Proceeding and the
indemnified party determines in good faith that joint representation would be
inappropriate, or (ii) the indemnifying party fails to provide reasonable
assurance to the indemnified party of its financial capacity to defend such
Proceeding and provide indemnification with respect to such Proceeding), to
assume the defense of such Proceeding with counsel satisfactory to the
indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section 10 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within ten
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding or
any compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party determines in
good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the indemnifying
party will not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
10.6. PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS.
A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification is
sought.
<PAGE>
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11. GENERAL PROVISIONS.
11.1. EXPENSES.
Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants. Buyer and Seller will each pay their respective HSR
Act filing fees. Seller will cause the Company and its Subsidiaries not to incur
any out-of-pocket expenses in connection with this Agreement except for
professional fees and environmental survey fees not in excess of $50,000.00. In
the event of termination of this Agreement, the obligation of each party to pay
its own expenses will be subject to any rights of such party arising from a
breach of this Agreement by another party.
11.2. PUBLIC ANNOUNCEMENTS.
Any public announcement or similar publicity with respect to this Agreement
or the Contemplated Transactions will be issued, if at all, at such time and in
such manner as Seller and the Buyer jointly determine. Unless consented to by
Buyer in advance or required by Legal Requirements, prior to the Closing Seller
shall, and shall cause the Company and its Subsidiaries to, keep this Agreement
strictly confidential and may not make any disclosure of this Agreement to any
Person. Seller and Buyer will consult with each other concerning the means by
which the Company's and its Subsidiaries' employees, customers, and suppliers
and others having dealings with the Company and its Subsidiaries will be
informed of the Contemplated Transactions, and Buyer will have the right to be
present for any such communication.
11.3. CONFIDENTIALITY.
Between the date of this Agreement and the Closing Date, Buyer and Seller
will maintain in confidence, and will cause the directors, officers, employees,
agents, and advisors of Buyer and the Company and its Subsidiaries to maintain
in confidence, and not use to the detriment of another party or the Company or
any of its Subsidiaries, any written, oral, or other information obtained in
confidence from, written information stamped "confidential" when originally
furnished by another party or the Company or any of its Subsidiaries in
connection with this Agreement or the Contemplated Transactions, unless (a) such
information is already known to such party or to others not bound by a duty of
confidentiality or such information becomes publicly available through no fault
of such party, (b) the use of such information is necessary or appropriate in
making any filing or obtaining any consent or approval required for the
consummation of the Contemplated Transactions, or (c) the furnishing or use of
such information is required by legal proceedings.
<PAGE>
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If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request.
11.4. NOTICES.
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt); provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Seller: Mr. Martin Hirschorn
420 East 51st Street
New York, New York 10022
Facsimile No.:
with a copy to: Rand Rosenzweig Smith Radley
Gordon & Burstein LLP
605 Third Avenue -- 24th Floor
New York, NY 10158
Attn.: David L. Smith, Esq.
Facsimile No.: (212) 557-1475
Buyer: IAC Acquisition Corp.
Attention: Mr. James A. Read, President
Facsimile No.:
with a copy to: Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Attention: John P. Mitchell, Esq.
Facsimile No.: (212) 269-5420
11.5. JURISDICTION; SERVICE OF PROCESS.
Any action or proceeding seeking to enforce any provision of, or based on
any right arising out of, this Agreement may be brought against any of the
parties in the courts of the State of New York, County of New York, or, if it
has or can acquire jurisdiction, in the United States District Court for the
Southern District of New York, and each of the parties
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consents to the jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to venue laid
therein. Process in any action or proceeding referred to in the preceding
sentence may be served on any party anywhere in the world.
11.6. FURTHER ASSURANCES.
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
11.7. WAIVER.
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Agreement or the documents referred to
in this Agreement will operate as a waiver of such right, power, or privilege,
and no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
11.8. ENTIRE AGREEMENT AND MODIFICATION.
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter, including the Letter of Intent between the
predecessor to the Buyer and Seller dated November 3, 1997 and the modification
to the Letter of Intent dated December 23, 1997, and constitutes (along with the
documents referred to in this Agreement) a complete and exclusive statement of
the terms of the agreement between the parties with respect to its subject
matter. This Agreement may not be amended except by a written agreement executed
by the party to be charged with the amendment.
<PAGE>
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11.9. DISCLOSURE SCHEDULE.
(a) The disclosures in the Disclosure Schedule, and those in any Supplement
thereto, must relate only to the representations and warranties in the Section
of the Agreement to which they expressly relate and not to any other
representation or warranty in this Agreement.
(b) In the event of any inconsistency between the statements in the body of
this Agreement and those in the Disclosure Schedule (other than an exception
expressly set forth as such in the Disclosure Schedule with respect to a
specifically identified representation or warranty), the statements in the body
of this Agreement will control.
11.10. ASSIGNMENT; SUCCESSORS, AND NO THIRD-PARTY RIGHTS.
Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors
and assigns.
11.11. SEVERABILITY.
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
11.12. SECTION HEADINGS; CONSTRUCTION.
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
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11.13. GOVERNING LAW.
This Agreement will be governed by the laws of the State of New York
without regard to conflicts of laws principles.
11.14. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together, will be deemed to constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
Buyer: Seller:
IAC HOLDINGS CORP.
By: /s/ James A. Read /s/ Martin Hirschorn
------------------------ ----------------------------
James A. Read Martin Hirschorn
President
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
Buyer: Seller:
IAC HOLDINGS CORP.
By: --------------------------- --------------------------------
James A. Read Martin Hirschorn
President/Secretary
<PAGE>
SCHEDULE A
SELLING NUMBER
SHAREHOLDERS OF SHARES PURCHASE PRICE
- ------------ --------- --------------
Martin Hirschorn 1,913,429 $21,047,719
Michael Hirschorn 1,000 $ 11,000
Frederic M. Oran 58,300 $ 661,300
Arnold W. Kanarek 2,500 $ 27,500
Trustees of Barnard College 116,666 $ 1,283,326
Community Fund, Inc. 233,334 $ 2,566,674
ARK International (Christine
Svendsen) 2,500 $ 27,500
George J. Sotos 16,325 $ 179,575
--------- -----------
Total 2,344,054 $25,784,594
========= ===========
<PAGE>
AMENDMENT TO STOCK PURCHASE AGREEMENT
This Amendment to a certain Stock Purchase Agreement made as of January 26,
1998 ("Agreement") is made as of March 19, 1998 ("Amendment"), by IAC HOLDINGS
CORP., a Delaware corporation, with offices located at Greenwich, Connecticut
("Buyer") and MARTIN HIRSCHORN, an individual resident in New York, New York
("Hirschhorn" or "Seller").
1. The Recitals of the Agreement are amended to read:
"Seller desires to sell, and Buyer desires to purchase, a total of
1,914,929 of the issued and outstanding shares (the "Shares") of capital
stock, $.10 par value of Industrial Acoustics Company, Inc. a New York
corporation (the "Company"), for the consideration and on the terms set
forth in this Agreement."
2. Paragraph 2.2 of the Agreement is amended to read:
"2.2 Purchase Price
The purchase price for each of the Shares will be $11.00; therefore, the
total purchase price for the Shares is $21,064,219 (the 'Purchase Price')."
3. The Buyer hereby expressly waives the Conditions to Closing set
forth in Paragraph 2.5 of the Agreement.
4. Schedule A as attached to the Agreement is deleted and is replaced
by a revised Schedule A attached hereto.
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment as of the date first written above.
Buyer: Seller:
IAC HOLDINGS CORP.
By: /s/ James A. Read /s/ Martin Hirschorn
---------------------- ---------------------------
James A. Read Martin Hirschorn
President
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of January 23, 1998 by and between IAC
Holdings Corp., a Delaware corporation ("Purchaser"), and Community Funds, Inc.,
a New York not-for-profit corporation ("Seller").
WHEREAS, Seller is the owner of 233,334 shares (the "Seller Shares") of the
outstanding shares of Common Stock, par value $0.10 per share (the "Company
Common Stock"), of Industrial Acoustics Company, Inc., a New York corporation
(the "Company");
WHEREAS, Seller has agreed to sell the Seller Shares to Purchaser, and
Purchaser has agreed to purchase such Seller Shares from Seller, in accordance
with the terms of this Agreement;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and covenants set forth herein the parties hereto agree as follows:
ARTICLE I
THE STOCK PURCHASE
Section 1.1. Sale of Shares. Subject to the terms and conditions of this
Agreement, Seller hereby agrees to sell the Seller Shares to Purchaser, and
Purchaser hereby agrees to purchase the Seller Shares, in the manner set forth
below, at a price per Share equal to $11.00 (the "Purchase Price").
Section 1.2. Payment and Delivery of Certificates for Seller Shares. The
closing for the purchase and sale of the Seller Shares shall occur following the
satisfaction of the conditions specified in Section 1.3 and simultaneously with
the closing of Purchaser's purchase of 1,913,429 shares of the Company's Common
Stock from Martin Hirschorn (the "Hirschorn Shares") which is scheduled to occur
at the offices of Rand Rosenzweig Smith Radley Gordon & Burstein LLP, 605 Third
Avenue, 24th Floor, New York, NY 10158, at 10:00 A.M. on the later of (i) March
15, 1998, (ii) 15 days following the delivery of consolidated audited financial
statements of the Company and its subsidiaries for the
<PAGE>
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year ended December 31, 1997, or (iii) the date that is two business days
following the termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") or at such
other time and place as Purchaser and Martin Hirschorn may agree. Purchaser will
provide Seller with at least two business days notice of the date of closing for
the purchase and sale of the Seller Shares. At the closing, (a) Purchaser will
make payment to Seller for the aggregate Purchase Price of the Seller Shares by
delivery to Seller of a certified or bank cashier's check payable in New York
Clearing House funds to the order of Seller, or by wire transfer to an account
specified by Seller, and (b) Seller will deliver to Purchaser (i) a certificate
or certificates representing the Seller Shares so purchased together with duly
executed stock powers with respect to such Seller Shares in favor of Purchaser
or its designee in form reasonably satisfactory to Purchaser and (ii) a receipt
evidencing payment of requisite transfer taxes, if any.
Section 1.3. Conditions to Closing of Share Purchase. The obligation of
Purchaser to purchase, and of Seller to sell, the Seller Shares shall be subject
to the condition that there shall not have been instituted and be continuing any
preliminary or permanent injunction or other order issued by any court or
governmental or regulatory authority, domestic or foreign, or any statute, rule,
regulation, decree or executive order promulgated or enacted by any government
or governmental or regulatory authority, which prohibits the acquisition of
Seller Shares pursuant to this Agreement in any respect; and no action or
proceeding before any court or governmental or regulatory authority, domestic or
foreign, shall have been instituted and be pending by any government or
governmental or regulatory authority, domestic or foreign, which seeks to
prevent the consummation of the transactions contemplated by this Agreement.
Section 1.4. Purchaser's Conditions to Closing of Share Purchase. The
obligation of Purchaser to purchase the Shares shall be subject to the further
conditions:
(a) the representations and warranties of Seller in this Agreement shall be
true and correct in all material respects, in each case as if such
representations and warranties were made as of such time; and
<PAGE>
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(b) Purchaser shall have acquired all of the Hirschorn Shares.
Section 1.5. No Transactions Relating to Seller Shares. Seller hereby
covenants and agrees that, except as otherwise provided herein, it will not, and
will not agree to, sell, transfer, assign, pledge, hypothecate or otherwise
dispose of any Seller Shares and will not, and will not agree to, limit its
rights to vote in any manner any of the Seller Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
Section 2.1. Power and Authority; Binding Effect. Seller has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by Seller have been duly and validly authorized
by all necessary corporate action and no other proceedings on the part of Seller
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Seller and, assuming its due authorization, execution and delivery
by Purchaser, constitutes a legal, valid and binding obligation of Seller.
Section 2.2. Required Filings and Consents. The execution and delivery of
this Agreement by Seller does not, and the performance of this Agreement by
Seller shall not, require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) for the HSR Act and the rules and regulations
thereunder and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay the performance by Seller of its obligations under this
Agreement.
<PAGE>
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Section 2.3. Title to Seller Shares. Seller has not taken any action that
would cause Seller not to have good and marketable title to the Seller Shares
free and clear of any pledge, lien, security interest, charge, claim, equity,
option, proxy, voting restriction or encumbrance of any kind, other than
pursuant to this Agreement; Seller has full right, power and authority to sell,
transfer and deliver the Seller Shares pursuant to this Agreement and Seller has
not taken any action that would cause Purchaser, upon receipt of the Seller
Shares and payment of the purchase price therefor as contemplated herein, not to
receive good and marketable title to the Seller Shares free and clear of any
pledge, lien, security interest, charge, claim, equity, option, proxy, voting
restriction or encumbrance of any kind. The Seller Shares are all of the
securities of the Company owned of record or beneficially by Seller on the date
of this Agreement; and Seller has not granted any proxy with respect to the
Seller Shares, deposited the Seller Shares into a voting trust or entered into
any voting agreement or other arrangement with respect to the Seller Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants as follows:
Section 3.1. Corporate Organization. Purchaser is a corporation duly
organized and validly existing under the laws of the State of Delaware.
Purchaser has all necessary corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement by Purchaser and the consummation by Purchaser of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Purchaser. This Agreement has been duly executed
and delivered by Purchaser and, assuming its due authorization, execution and
delivery by Seller, constitutes a legal, valid and binding obligation of
Purchaser.
Section 3.2. Required Filings and Consents. The execution and delivery of
this Agreement by Purchaser do not, and the performance of this Agreement by
Purchaser
<PAGE>
-5-
shall not, require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority, domestic or
foreign, except (i) for applicable requirements, if any, of the HSR Act, and
(ii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or delay
consummation of the transactions contemplated hereby, or otherwise prevent
Purchaser from performing its obligations under this Agreement.
Section 3.3. Investment Interest. The purchase of Shares from Seller
pursuant to this Agreement is for the account of Purchaser for investment and
not with a view to the sale or distribution thereof within the meaning of the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "Securities Act"); and any sale, transfer or other disposition
of Seller Shares purchased pursuant to this Agreement will be made in compliance
with all applicable provisions of the Securities Act.
ARTICLE IV
MISCELLANEOUS
Section 4.1. Consents. Each of the parties hereto will use its best efforts
to obtain the consents of all third parties and governmental authorities
necessary to the consummation of the transactions contemplated by this
Agreement.
Section 4.2. Further Assurances. Seller and Purchaser will execute and
deliver all such further documents and instruments and make all such further
action as may be necessary in order to consummate the transactions contemplated
hereby.
Section 4.3. Confidentiality. Seller shall not disclose the existence of
this Agreement or its contents to any third party without Seller's prior written
consent. Neither Purchaser nor Seller shall issue any press release or make any
public announcement regarding the proposed transaction without the prior
approval of the other party.
<PAGE>
-6-
Section 4.4. Specific Performance. The parties hereto acknowledge that
damages would be an inadequate remedy for a breach of this Agreement and that
the obligations of the parties hereto shall be specifically enforceable.
Section 4.5. Entire Agreement. This Agreement constitutes the entire
agreement among Seller and Purchaser with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, among them with respect to the subject matter hereof.
Section 4.6. Assignment, Successors and No Third-Party Rights. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
Section 4.7. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
Section 4.8. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall survive the
closing of the Share purchase.
Section 4.9. Notices. All notices, comments, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a
<PAGE>
-7-
nationally recognized overnight delivery service (receipt requested), in each
case to the appropriate addresses and telecopier numbers set forth below (or to
such other addresses and telecopier numbers as a party may designate by notice
to the other parties):
Buyer: IAC Holdings Corp.
Attention:
Facsimile No.:
with a copy to: Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Attention: John P. Mitchell, Esq.
Facsimile No.: (212) 269-5420
Seller: Community Funds, Inc.
2 Park Avenue
New York, NY 10016
Attention: Karen Metcalf
Facsimile No.: (212) 532-8528
with a copy to: Community Funds, Inc.
2 Park Avenue
New York, NY 10016
Attention: Jane Wilton, Esq.
Facsimile No.: (212) 532-8528
Section 4.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts executed in and to be performed in that State.
Section 4.11. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
Section 4.12. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon
<PAGE>
-8-
any other person any rights or remedies of any nature whatsoever under or by
reason of this Agreement.
Section 4.13. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original, but all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
COMMUNITY FUNDS, INC.
By: _________________________
Title:
IAC HOLDINGS CORP.
By: _________________________
Title:
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of January 23, 1998 by and between IAC
Holdings Corp., a Delaware corporation ("Purchaser"), and Barnard College, a New
York not-for-profit corporation chartered by the Board of Regents("Seller").
WHEREAS, Seller is the owner of 116,666 shares (the "Seller Shares") of the
outstanding shares of Common Stock, par value $0.10 per share (the "Company
Common Stock"), of Industrial Acoustics Company, Inc., a New York corporation
(the "Company");
WHEREAS, Seller has agreed to sell the Seller Shares to Purchaser, and
Purchaser has agreed to purchase such Seller Shares from Seller, in accordance
with the terms of this Agreement;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and covenants set forth herein the parties hereto agree as follows:
ARTICLE I
THE STOCK PURCHASE
Section 1.1. Sale of Shares. Subject to the terms and conditions of this
Agreement, Seller hereby agrees to sell the Seller Shares to Purchaser, and
Purchaser hereby agrees to purchase the Seller Shares, in the manner set forth
below, at a price per Share equal to $11.00 (the "Purchase Price").
Section 1.2. Payment and Delivery of Certificates for Seller Shares. The
closing for the purchase and sale of the Seller Shares shall occur following the
satisfaction of the conditions specified in Section 1.3 and simultaneously with
the closing of Purchaser's purchase of 1,913,429 shares of the Company's Common
Stock from Martin Hirschorn (the "Hirschorn Shares") which is scheduled to occur
at the offices of Rand Rosenzweig Smith Radley Gordon & Burstein LLP, 605 Third
Avenue, 24th Floor, New York, NY 10158, at 10:00 A.M. on the later of (i) March
15, 1998, (ii) 15 days following the delivery of consolidated audited financial
statements of the Company and its subsidiaries for the
<PAGE>
-2-
year ended December 31, 1997, or (iii) the date that is two business days
following the termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") or at such
other time and place as Purchaser and Martin Hirschorn may agree. Purchaser will
provide Seller with at least two business days notice of the date of closing for
the purchase and sale of the Seller Shares. At the closing, (a) Purchaser will
make payment to Seller for the aggregate Purchase Price of the Seller Shares by
delivery to Seller of a certified or bank cashier's check payable in New York
Clearing House funds to the order of Seller, or by wire transfer to an account
specified by Seller, and (b) Seller will deliver to Purchaser (i) a certificate
or certificates representing the Seller Shares so purchased together with duly
executed stock powers with respect to such Seller Shares in favor of Purchaser
or its designee in form reasonably satisfactory to Purchaser and (ii) a receipt
evidencing payment of requisite transfer taxes, if any.
Section 1.3. Conditions to Closing of Share Purchase. The obligation of
Purchaser to purchase, and of Seller to sell, the Seller Shares shall be subject
to the condition that there shall not have been instituted and be continuing any
preliminary or permanent injunction or other order issued by any court or
governmental or regulatory authority, domestic or foreign, or any statute, rule,
regulation, decree or executive order promulgated or enacted by any government
or governmental or regulatory authority, which prohibits the acquisition of
Seller Shares pursuant to this Agreement in any respect; and no action or
proceeding before any court or governmental or regulatory authority, domestic or
foreign, shall have been instituted and be pending by any government or
governmental or regulatory authority, domestic or foreign, which seeks to
prevent the consummation of the transactions contemplated by this Agreement.
Section 1.4. Purchaser's Conditions to Closing of Share Purchase. The
obligation of Purchaser to purchase the Shares shall be subject to the further
conditions:
(a) the representations and warranties of Seller in this Agreement shall be
true and correct in all material respects, in each case as if such
representations and warranties were made as of such time; and
<PAGE>
-3-
(b) Purchaser shall have acquired all of the Hirschorn Shares.
Section 1.5. No Transactions Relating to Seller Shares. Seller hereby
covenants and agrees that, except as otherwise provided herein, it will not, and
will not agree to, sell, transfer, assign, pledge, hypothecate or otherwise
dispose of any Seller Shares and will not, and will not agree to, limit its
rights to vote in any manner any of the Seller Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
Section 2.1. Power and Authority; Binding Effect. Seller has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by Seller have been duly and validly authorized
by all necessary corporate action and no other proceedings on the part of Seller
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Seller and, assuming its due authorization, execution and delivery
by Purchaser, constitutes a legal, valid and binding obligation of Seller.
Section 2.2. Required Filings and Consents. The execution and delivery of
this Agreement by Seller does not, and the performance of this Agreement by
Seller shall not, require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) for the HSR Act and the rules and regulations
thereunder and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay the performance by Seller of its obligations under this
Agreement.
<PAGE>
-4-
Section 2.3. Title to Seller Shares. Seller has good and marketable title
to the Seller Shares free and clear of any pledge, lien, security interest,
charge, claim, equity, option, proxy, voting restriction or encumbrance of any
kind, other than pursuant to this Agreement; Seller has full right, power and
authority to sell, transfer and deliver the Seller Shares pursuant to this
Agreement and upon delivery of the Seller Shares and payment of the purchase
price therefor as contemplated herein, Purchaser will receive good and
marketable title to the Seller Shares free and clear of any pledge, lien,
security interest, charge, claim, equity, option, proxy, voting restriction or
encumbrance of any kind. The Seller Shares are all of the securities of the
Company owned of record or beneficially by Seller on the date of this Agreement;
and Seller has not granted any proxy with respect to the Seller Shares,
deposited the Seller Shares into a voting trust or entered into any voting
agreement or other arrangement with respect to the Seller Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants as follows:
Section 3.1. Corporate Organization. Purchaser is a corporation duly
organized and validly existing under the laws of the State of Delaware.
Purchaser has all necessary corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement by Purchaser and the consummation by Purchaser of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Purchaser. This Agreement has been duly executed
and delivered by Purchaser and, assuming its due authorization, execution and
delivery by Seller, constitutes a legal, valid and binding obligation of
Purchaser.
Section 3.2. Required Filings and Consents. The execution and delivery of
this Agreement by Purchaser do not, and the performance of this Agreement by
Purchaser shall not, require any consent, approval, authorization or permit of,
or filing with or notification to, any
<PAGE>
-5-
governmental or regulatory authority, domestic or foreign, except (i) for
applicable requirements, if any, of the HSR Act, and (ii) where failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or delay consummation of the
transactions contemplated hereby, or otherwise prevent Purchaser from performing
its obligations under this Agreement.
Section 3.3. Investment Interest. The purchase of Shares from Seller
pursuant to this Agreement is for the account of Purchaser for investment and
not with a view to the sale or distribution thereof within the meaning of the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "Securities Act"); and any sale, transfer or other disposition
of Seller Shares purchased pursuant to this Agreement will be made in compliance
with all applicable provisions of the Securities Act.
ARTICLE IV
MISCELLANEOUS
Section 4.1. Consents. Each of the parties hereto will use its best efforts
to obtain the consents of all third parties and governmental authorities
necessary to the consummation of the transactions contemplated by this
Agreement.
Section 4.2. Further Assurances. Seller and Purchaser will execute and
deliver all such further documents and instruments and make all such further
action as may be necessary in order to consummate the transactions contemplated
hereby.
Section 4.3. Confidentiality. Seller shall not disclose the existence of
this Agreement or its contents to any third party without Seller's prior written
consent. Neither Purchaser nor Seller shall issue any press release or make any
public announcement regarding the proposed transaction without the prior
approval of the other party.
Section 4.4. Specific Performance. The parties hereto acknowledge that
damages would be an
<PAGE>
-6-
inadequate remedy for a breach of this Agreement and that the obligations of the
parties hereto shall be specifically enforceable.
Section 4.5. Entire Agreement. This Agreement constitutes the entire
agreement among Seller and Purchaser with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, among them with respect to the subject matter hereof.
Section 4.6. Assignment, Successors and No Third-Party Rights. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
Section 4.7. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
Section 4.8. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall survive the
closing of the Share purchase.
Section 4.9. Notices. All notices, comments, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and
<PAGE>
-7-
telecopier numbers set forth below (or to such other addresses and telecopier
numbers as a party may designate by notice to the other parties):
Buyer: IAC Holdings Corp.
Attention:
Facsimile No.:
with a copy to: Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Attention: John P. Mitchell, Esq.
Facsimile No.: (212) 269-5420
Seller: Barnard College
3009 Broadway
New York, NY 10027
Attention: Barry Kaufman
Vice President for Finance
and Administration
Facsimile No.: (212) 854-7550
with a copy to: Barnard College
3009 Broadway
New York, NY 10027
Attention: Melinda W. Davis
Facsimile No.: (212) 854-7550
Section 4.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts executed in and to be performed in that State.
Section 4.11. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
Section 4.12. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
<PAGE>
-8-
Section 4.13. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original, but all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
BARNARD COLLEGE
By: _________________________
Title:
IAC HOLDINGS CORP.
By: _________________________
Title:
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of January 23, 1998 by and between IAC
Holdings Corp., a Delaware corporation ("Purchaser"), and Michael Hirschorn.
WHEREAS, Seller is the owner of 1,000 shares (the "Seller Shares") of the
outstanding shares of Common Stock, par value $0.10 per share (the "Company
Common Stock"), of Industrial Acoustics Company, Inc., a New York corporation
(the "Company");
WHEREAS, Seller has agreed to sell the Seller Shares to Purchaser, and
Purchaser has agreed to purchase such Seller Shares from Seller, in accordance
with the terms of this Agreement;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and covenants set forth herein the parties hereto agree as follows:
ARTICLE I
THE STOCK PURCHASE
Section 1.1. Sale of Shares. Subject to the terms and conditions of this
Agreement, Seller hereby agrees to sell the Seller Shares to Purchaser, and
Purchaser hereby agrees to purchase the Seller Shares, in the manner set forth
below, at a price per Share equal to $11.00 (the "Purchase Price").
Section 1.2. Payment and Delivery of Certificates for Seller Shares. The
closing for the purchase and sale of the Seller Shares shall occur following the
satisfaction of the conditions specified in Section 1.3 and simultaneously with
the closing of Purchaser's purchase of 1,913,429 shares of the Company's Common
Stock from Martin Hirschorn (the "Hirschorn Shares") which is scheduled to occur
at the offices of Rand Rosenzweig Smith Radley Gordon & Burstein LLP, 605 Third
Avenue, 24th Floor, New York, NY 10158, at 10:00 A.M. on the later of (i) March
15, 1998, (ii) 15 days following the delivery of consolidated audited financial
statements of the Company and its subsidiaries for the year ended December 31,
1997, or (iii) the date that is two business days following the termination of
the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act") or at such other time
<PAGE>
-2-
and place as Purchaser and Martin Hirschorn may agree. Purchaser will provide
Seller with at least two business days notice of the date of closing for the
purchase and sale of the Seller Shares. At the closing, (a) Purchaser will make
payment to Seller for the aggregate Purchase Price of the Seller Shares by
delivery to Seller of a certified or bank cashier's check payable in New York
Clearing House funds to the order of Seller, or by wire transfer to an account
specified by Seller, and (b) Seller will deliver to Purchaser (i) a certificate
or certificates representing the Seller Shares so purchased together with duly
executed stock powers with respect to such Seller Shares in favor of Purchaser
or its designee in form reasonably satisfactory to Purchaser and (ii) a receipt
evidencing payment of requisite transfer taxes, if any.
Section 1.3. Conditions to Closing of Share Purchase. The obligation of
Purchaser to purchase, and of Seller to sell, the Seller Shares shall be subject
to the condition that there shall not have been instituted and be continuing any
preliminary or permanent injunction or other order issued by any court or
governmental or regulatory authority, domestic or foreign, or any statute, rule,
regulation, decree or executive order promulgated or enacted by any government
or governmental or regulatory authority, which prohibits the acquisition of
Seller Shares pursuant to this Agreement in any respect; and no action or
proceeding before any court or governmental or regulatory authority, domestic or
foreign, shall have been instituted and be pending by any government or
governmental or regulatory authority, domestic or foreign, which seeks to
prevent the consummation of the transactions contemplated by this Agreement.
Section 1.4. Purchaser's Conditions to Closing of Share Purchase. The
obligation of Purchaser to purchase the Shares shall be subject to the further
conditions:
(a) the representations and warranties of Seller in this Agreement shall be
true and correct in all material respects, in each case as if such
representations and warranties were made as of such time; and
(b) Purchaser shall have acquired all of the Hirschorn Shares.
Section 1.5. No Transactions Relating to Seller Shares. Seller hereby
covenants and agrees that, except as otherwise provided herein, it will not, and
will not agree to, sell, transfer, assign, pledge, hypothecate or otherwise
dis-
<PAGE>
-3-
pose of any Seller Shares and will not, and will not agree to, limit its rights
to vote in any manner any of the Seller Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
Section 2.1. Power and Authority; Binding Effect. Seller has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by Seller have been duly and validly authorized
by all necessary corporate action and no other proceedings on the part of Seller
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Seller and, assuming its due authorization, execution and delivery
by Purchaser, constitutes a legal, valid and binding obligation of Seller.
Section 2.2. Required Filings and Consents. The execution and delivery of
this Agreement by Seller does not, and the performance of this Agreement by
Seller shall not, require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) for the HSR Act and the rules and regulations
thereunder and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay the performance by Seller of its obligations under this
Agreement.
Section 2.3. Title to Seller Shares. Seller has good and marketable title
to the Seller Shares free and clear of any pledge, lien, security interest,
charge, claim, equity, option, proxy, voting restriction or encumbrance of any
kind, other than pursuant to this Agreement; Seller has full right, power and
authority to sell, transfer and deliver the Seller Shares pursuant to this
Agreement and upon delivery of the Seller Shares and payment of the purchase
price therefor as contemplated herein, Purchaser will receive good and
marketable
<PAGE>
-4-
title to the Seller Shares free and clear of any pledge, lien, security
interest, charge, claim, equity, option, proxy, voting restriction or
encumbrance of any kind. The Seller Shares are all of the securities of the
Company owned of record or beneficially by Seller on the date of this Agreement;
and Seller has not granted any proxy with respect to the Seller Shares,
deposited the Seller Shares into a voting trust or entered into any voting
agreement or other arrangement with respect to the Seller Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants as follows:
Section 3.1. Corporate Organization. Purchaser is a corporation duly
organized and validly existing under the laws of the State of Delaware.
Purchaser has all necessary corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement by Purchaser and the consummation by Purchaser of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Purchaser. This Agreement has been duly executed
and delivered by Purchaser and, assuming its due authorization, execution and
delivery by Seller, constitutes a legal, valid and binding obligation of
Purchaser.
Section 3.2. Required Filings and Consents. The execution and delivery of
this Agreement by Purchaser do not, and the performance of this Agreement by
Purchaser shall not, require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) for applicable requirements, if any, of the HSR
Act, and (ii) where failure to obtain such consents, approvals, authorizations
or permits, or to make such filings or notifications, would not prevent or delay
consummation of the transactions contemplated hereby, or otherwise prevent
Purchaser from performing its obligations under this Agreement.
Section 3.3. Investment Interest. The purchase of Shares from Seller
pursuant to this Agreement is for the account of Purchaser for investment and
not with a view to the sale or distribution thereof within the meaning of the
Securi-
<PAGE>
-5-
ties Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "Securities Act"); and any sale, transfer or other disposition
of Seller Shares purchased pursuant to this Agreement will be made in compliance
with all applicable provisions of the Securities Act.
ARTICLE IV
MISCELLANEOUS
Section 4.1. Consents. Each of the parties hereto will use its best efforts
to obtain the consents of all third parties and governmental authorities
necessary to the consummation of the transactions contemplated by this
Agreement.
Section 4.2. Further Assurances. Seller and Purchaser will execute and
deliver all such further documents and instruments and make all such further
action as may be necessary in order to consummate the transactions contemplated
hereby.
Section 4.3. Confidentiality. Seller shall not disclose the existence of
this Agreement or its contents to any third party without Seller's prior written
consent. Neither Purchaser nor Seller shall issue any press release or make any
public announcement regarding the proposed transaction without the prior
approval of the other party.
Section 4.4. Specific Performance. The parties hereto acknowledge that
damages would be an inadequate remedy for a breach of this Agreement and that
the obligations of the parties hereto shall be specifically enforceable.
Section 4.5. Entire Agreement. This Agreement constitutes the entire
agreement among Seller and Purchaser with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, among them with respect to the subject matter hereof.
Section 4.6. Assignment, Successors and No Third-Party Rights. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be con-
<PAGE>
-6-
strued to give any person other than the parties to this Agreement any legal or
equitable right, remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
Section 4.7. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
Section 4.8. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall survive the
closing of the Share purchase.
Section 4.9. Notices. All notices, comments, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other parties):
Buyer: IAC Holdings Corp.
Attention:
Facsimile No.:
with a copy to: Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Attention: John P. Mitchell, Esq.
Facsimile No.: (212) 269-5420
Seller: Michael Hirschorn
121 West 17th St., Floor 8
New York, NY 10011
<PAGE>
-7-
Section 4.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts executed in and to be performed in that State.
Section 4.11. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
Section 4.12. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 4.13. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original, but all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
Michael Hirschorn
By: _________________________
Title:
IAC HOLDINGS CORP.
By: _________________________
Title:
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of January 23, 1998 by and between IAC
Holdings Corp., a Delaware corporation ("Purchaser"), and Frederic M. Oran.
WHEREAS, Seller is the owner of 58,300 shares (the "Seller Shares") of the
outstanding shares of Common Stock, par value $0.10 per share (the "Company
Common Stock"), of Industrial Acoustics Company, Inc., a New York corporation
(the "Company");
WHEREAS, Seller has agreed to sell the Seller Shares to Purchaser, and
Purchaser has agreed to purchase such Seller Shares from Seller, in accordance
with the terms of this Agreement;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and covenants set forth herein the parties hereto agree as follows:
ARTICLE I
THE STOCK PURCHASE
Section 1.1. Sale of Shares. Subject to the terms and conditions of this
Agreement, Seller hereby agrees to sell the Seller Shares to Purchaser, and
Purchaser hereby agrees to purchase the Seller Shares, in the manner set forth
below, at a price per Share equal to $11.00 (the "Purchase Price").
Section 1.2. Payment and Delivery of Certificates for Seller Shares. The
closing for the purchase and sale of the Seller Shares shall occur following the
satisfaction of the conditions specified in Section 1.3 and simultaneously with
the closing of Purchaser's purchase of 1,913,429 shares of the Company's Common
Stock from Martin Hirschorn (the "Hirschorn Shares") which is scheduled to occur
at the offices of Rand Rosenzweig Smith Radley Gordon & Burstein LLP, 605 Third
Avenue, 24th Floor, New York, NY 10158, at 10:00 A.M. on the later of (i) March
15, 1998, (ii) 15 days following the delivery of consolidated audited financial
statements of the Company and its subsidiaries for the year ended December 31,
1997, or (iii) the date that is two business days following the termination of
the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act") or at such other time
<PAGE>
-2-
and place as Purchaser and Martin Hirschorn may agree. Purchaser will provide
Seller with at least two business days notice of the date of closing for the
purchase and sale of the Seller Shares. At the closing, (a) Purchaser will make
payment to Seller for the aggregate Purchase Price of the Seller Shares by
delivery to Seller of a certified or bank cashier's check payable in New York
Clearing House funds to the order of Seller, or by wire transfer to an account
specified by Seller, and (b) Seller will deliver to Purchaser (i) a certificate
or certificates representing the Seller Shares so purchased together with duly
executed stock powers with respect to such Seller Shares in favor of Purchaser
or its designee in form reasonably satisfactory to Purchaser and (ii) a receipt
evidencing payment of requisite transfer taxes, if any.
Section 1.3. Conditions to Closing of Share Purchase. The obligation of
Purchaser to purchase, and of Seller to sell, the Seller Shares shall be subject
to the condition that there shall not have been instituted and be continuing any
preliminary or permanent injunction or other order issued by any court or
governmental or regulatory authority, domestic or foreign, or any statute, rule,
regulation, decree or executive order promulgated or enacted by any government
or governmental or regulatory authority, which prohibits the acquisition of
Seller Shares pursuant to this Agreement in any respect; and no action or
proceeding before any court or governmental or regulatory authority, domestic or
foreign, shall have been instituted and be pending by any government or
governmental or regulatory authority, domestic or foreign, which seeks to
prevent the consummation of the transactions contemplated by this Agreement.
Section 1.4. Purchaser's Conditions to Closing of Share Purchase. The
obligation of Purchaser to purchase the Shares shall be subject to the further
conditions:
(a) the representations and warranties of Seller in this Agreement shall be
true and correct in all material respects, in each case as if such
representations and warranties were made as of such time; and
(b) Purchaser shall have acquired all of the Hirschorn Shares.
Section 1.5. No Transactions Relating to Seller Shares. Seller hereby
covenants and agrees that, except as otherwise provided herein, it will not, and
will not agree to, sell, transfer, assign, pledge, hypothecate or otherwise
dis-
<PAGE>
-3-
pose of any Seller Shares and will not, and will not agree to, limit its rights
to vote in any manner any of the Seller Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
Section 2.1. Power and Authority; Binding Effect. Seller has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by Seller have been duly and validly authorized
by all necessary corporate action and no other proceedings on the part of Seller
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Seller and, assuming its due authorization, execution and delivery
by Purchaser, constitutes a legal, valid and binding obligation of Seller.
Section 2.2. Required Filings and Consents. The execution and delivery of
this Agreement by Seller does not, and the performance of this Agreement by
Seller shall not, require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) for the HSR Act and the rules and regulations
thereunder and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay the performance by Seller of its obligations under this
Agreement.
Section 2.3. Title to Seller Shares. Seller has good and marketable title
to the Seller Shares free and clear of any pledge, lien, security interest,
charge, claim, equity, option, proxy, voting restriction or encumbrance of any
kind, other than pursuant to this Agreement; Seller has full right, power and
authority to sell, transfer and deliver the Seller Shares pursuant to this
Agreement and upon delivery of the Seller Shares and payment of the purchase
price therefor as contemplated herein, Purchaser will receive good and
marketable
<PAGE>
-4-
title to the Seller Shares free and clear of any pledge, lien, security
interest, charge, claim, equity, option, proxy, voting restriction or
encumbrance of any kind. The Seller Shares are all of the securities of the
Company owned of record or beneficially by Seller on the date of this Agreement;
and Seller has not granted any proxy with respect to the Seller Shares,
deposited the Seller Shares into a voting trust or entered into any voting
agreement or other arrangement with respect to the Seller Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants as follows:
Section 3.1. Corporate Organization. Purchaser is a corporation duly
organized and validly existing under the laws of the State of Delaware.
Purchaser has all necessary corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement by Purchaser and the consummation by Purchaser of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Purchaser. This Agreement has been duly executed
and delivered by Purchaser and, assuming its due authorization, execution and
delivery by Seller, constitutes a legal, valid and binding obligation of
Purchaser.
Section 3.2. Required Filings and Consents. The execution and delivery of
this Agreement by Purchaser do not, and the performance of this Agreement by
Purchaser shall not, require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) for applicable requirements, if any, of the HSR
Act, and (ii) where failure to obtain such consents, approvals, authorizations
or permits, or to make such filings or notifications, would not prevent or delay
consummation of the transactions contemplated hereby, or otherwise prevent
Purchaser from performing its obligations under this Agreement.
Section 3.3. Investment Interest. The purchase of Shares from Seller
pursuant to this Agreement is for the account of Purchaser for investment and
not with a view to the sale or distribution thereof within the meaning of the
Securi-
<PAGE>
-5-
ties Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "Securities Act"); and any sale, transfer or other disposition
of Seller Shares purchased pursuant to this Agreement will be made in compliance
with all applicable provisions of the Securities Act.
ARTICLE IV
MISCELLANEOUS
Section 4.1. Consents. Each of the parties hereto will use its best efforts
to obtain the consents of all third parties and governmental authorities
necessary to the consummation of the transactions contemplated by this
Agreement.
Section 4.2. Further Assurances. Seller and Purchaser will execute and
deliver all such further documents and instruments and make all such further
action as may be necessary in order to consummate the transactions contemplated
hereby.
Section 4.3. Confidentiality. Seller shall not disclose the existence of
this Agreement or its contents to any third party without Seller's prior written
consent. Neither Purchaser nor Seller shall issue any press release or make any
public announcement regarding the proposed transaction without the prior
approval of the other party.
Section 4.4. Specific Performance. The parties hereto acknowledge that
damages would be an inadequate remedy for a breach of this Agreement and that
the obligations of the parties hereto shall be specifically enforceable.
Section 4.5. Entire Agreement. This Agreement constitutes the entire
agreement among Seller and Purchaser with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, among them with respect to the subject matter hereof.
Section 4.6. Assignment, Successors and No Third-Party Rights. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be con-
<PAGE>
-6-
strued to give any person other than the parties to this Agreement any legal or
equitable right, remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
Section 4.7. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
Section 4.8. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall survive the
closing of the Share purchase.
Section 4.9. Notices. All notices, comments, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other parties):
Buyer: IAC Holdings Corp.
Attention:
Facsimile No.:
with a copy to: Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Attention: John P. Mitchell, Esq.
Facsimile No.: (212) 269-5420
Seller: Frederic M. Oran
14 Oak Lane
Old Brookville, NY 11545
<PAGE>
-7-
Section 4.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts executed in and to be performed in that State.
Section 4.11. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
Section 4.12. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 4.13. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original, but all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
Frederic M. Oran
By: _________________________
Title:
IAC HOLDINGS CORP.
By: _________________________
Title:
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of January 23, 1998 by and between IAC
Holdings Corp., a Delaware corporation ("Purchaser"), and Arnold W. Kanarek.
WHEREAS, Seller is the owner of 2,500 shares (the "Seller Shares") of the
outstanding shares of Common Stock, par value $0.10 per share (the "Company
Common Stock"), of Industrial Acoustics Company, Inc., a New York corporation
(the "Company");
WHEREAS, Seller has agreed to sell the Seller Shares to Purchaser, and
Purchaser has agreed to purchase such Seller Shares from Seller, in accordance
with the terms of this Agreement;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and covenants set forth herein the parties hereto agree as follows:
ARTICLE I
THE STOCK PURCHASE
Section 1.1. Sale of Shares. Subject to the terms and conditions of this
Agreement, Seller hereby agrees to sell the Seller Shares to Purchaser, and
Purchaser hereby agrees to purchase the Seller Shares, in the manner set forth
below, at a price per Share equal to $11.00 (the "Purchase Price").
Section 1.2. Payment and Delivery of Certificates for Seller Shares. The
closing for the purchase and sale of the Seller Shares shall occur following the
satisfaction of the conditions specified in Section 1.3 and simultaneously with
the closing of Purchaser's purchase of 1,913,429 shares of the Company's Common
Stock from Martin Hirschorn (the "Hirschorn Shares") which is scheduled to occur
at the offices of Rand Rosenzweig Smith Radley Gordon & Burstein LLP, 605 Third
Avenue, 24th Floor, New York, NY 10158, at 10:00 A.M. on the later of (i) March
15, 1998, (ii) 15 days following the delivery of consolidated audited financial
statements of the Company and its subsidiaries for the year ended December 31,
1997, or (iii) the date that is two business days following the termination of
the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act") or at such other time
<PAGE>
-2-
and place as Purchaser and Martin Hirschorn may agree. Purchaser will provide
Seller with at least two business days notice of the date of closing for the
purchase and sale of the Seller Shares. At the closing, (a) Purchaser will make
payment to Seller for the aggregate Purchase Price of the Seller Shares by
delivery to Seller of a certified or bank cashier's check payable in New York
Clearing House funds to the order of Seller, or by wire transfer to an account
specified by Seller, and (b) Seller will deliver to Purchaser (i) a certificate
or certificates representing the Seller Shares so purchased together with duly
executed stock powers with respect to such Seller Shares in favor of Purchaser
or its designee in form reasonably satisfactory to Purchaser and (ii) a receipt
evidencing payment of requisite transfer taxes, if any.
Section 1.3. Conditions to Closing of Share Purchase. The obligation of
Purchaser to purchase, and of Seller to sell, the Seller Shares shall be subject
to the condition that there shall not have been instituted and be continuing any
preliminary or permanent injunction or other order issued by any court or
governmental or regulatory authority, domestic or foreign, or any statute, rule,
regulation, decree or executive order promulgated or enacted by any government
or governmental or regulatory authority, which prohibits the acquisition of
Seller Shares pursuant to this Agreement in any respect; and no action or
proceeding before any court or governmental or regulatory authority, domestic or
foreign, shall have been instituted and be pending by any government or
governmental or regulatory authority, domestic or foreign, which seeks to
prevent the consummation of the transactions contemplated by this Agreement.
Section 1.4. Purchaser's Conditions to Closing of Share Purchase. The
obligation of Purchaser to purchase the Shares shall be subject to the further
conditions:
(a) the representations and warranties of Seller in this Agreement shall be
true and correct in all material respects, in each case as if such
representations and warranties were made as of such time; and
(b) Purchaser shall have acquired all of the Hirschorn Shares.
Section 1.5. No Transactions Relating to Seller Shares. Seller hereby
covenants and agrees that, except as otherwise provided herein, it will not, and
will not agree to, sell, transfer, assign, pledge, hypothecate or otherwise
dis-
<PAGE>
-3-
pose of any Seller Shares and will not, and will not agree to, limit its rights
to vote in any manner any of the Seller Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
Section 2.1. Power and Authority; Binding Effect. Seller has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by Seller have been duly and validly authorized
by all necessary corporate action and no other proceedings on the part of Seller
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Seller and, assuming its due authorization, execution and delivery
by Purchaser, constitutes a legal, valid and binding obligation of Seller.
Section 2.2. Required Filings and Consents. The execution and delivery of
this Agreement by Seller does not, and the performance of this Agreement by
Seller shall not, require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) for the HSR Act and the rules and regulations
thereunder and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay the performance by Seller of its obligations under this
Agreement.
Section 2.3. Title to Seller Shares. Seller has good and marketable title
to the Seller Shares free and clear of any pledge, lien, security interest,
charge, claim, equity, option, proxy, voting restriction or encumbrance of any
kind, other than pursuant to this Agreement; Seller has full right, power and
authority to sell, transfer and deliver the Seller Shares pursuant to this
Agreement and upon delivery of the Seller Shares and payment of the purchase
price therefor as contemplated herein, Purchaser will receive good and
marketable
<PAGE>
-4-
title to the Seller Shares free and clear of any pledge, lien, security
interest, charge, claim, equity, option, proxy, voting restriction or
encumbrance of any kind. The Seller Shares are all of the securities of the
Company owned of record or beneficially by Seller on the date of this Agreement;
and Seller has not granted any proxy with respect to the Seller Shares,
deposited the Seller Shares into a voting trust or entered into any voting
agreement or other arrangement with respect to the Seller Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants as follows:
Section 3.1. Corporate Organization. Purchaser is a corporation duly
organized and validly existing under the laws of the State of Delaware.
Purchaser has all necessary corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement by Purchaser and the consummation by Purchaser of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Purchaser. This Agreement has been duly executed
and delivered by Purchaser and, assuming its due authorization, execution and
delivery by Seller, constitutes a legal, valid and binding obligation of
Purchaser.
Section 3.2. Required Filings and Consents. The execution and delivery of
this Agreement by Purchaser do not, and the performance of this Agreement by
Purchaser shall not, require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) for applicable requirements, if any, of the HSR
Act, and (ii) where failure to obtain such consents, approvals, authorizations
or permits, or to make such filings or notifications, would not prevent or delay
consummation of the transactions contemplated hereby, or otherwise prevent
Purchaser from performing its obligations under this Agreement.
Section 3.3. Investment Interest. The purchase of Shares from Seller
pursuant to this Agreement is for the account of Purchaser for investment and
not with a view to the sale or distribution thereof within the meaning of the
Securi-
<PAGE>
-5-
ties Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "Securities Act"); and any sale, transfer or other disposition
of Seller Shares purchased pursuant to this Agreement will be made in compliance
with all applicable provisions of the Securities Act.
ARTICLE IV
MISCELLANEOUS
Section 4.1. Consents. Each of the parties hereto will use its best efforts
to obtain the consents of all third parties and governmental authorities
necessary to the consummation of the transactions contemplated by this
Agreement.
Section 4.2. Further Assurances. Seller and Purchaser will execute and
deliver all such further documents and instruments and make all such further
action as may be necessary in order to consummate the transactions contemplated
hereby.
Section 4.3. Confidentiality. Seller shall not disclose the existence of
this Agreement or its contents to any third party without Seller's prior written
consent. Neither Purchaser nor Seller shall issue any press release or make any
public announcement regarding the proposed transaction without the prior
approval of the other party.
Section 4.4. Specific Performance. The parties hereto acknowledge that
damages would be an inadequate remedy for a breach of this Agreement and that
the obligations of the parties hereto shall be specifically enforceable.
Section 4.5. Entire Agreement. This Agreement constitutes the entire
agreement among Seller and Purchaser with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, among them with respect to the subject matter hereof.
Section 4.6. Assignment, Successors and No Third-Party Rights. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be con-
<PAGE>
-6-
strued to give any person other than the parties to this Agreement any legal or
equitable right, remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
Section 4.7. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
Section 4.8. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall survive the
closing of the Share purchase.
Section 4.9. Notices. All notices, comments, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other parties):
Buyer: IAC Holdings Corp.
Attention:
Facsimile No.:
with a copy to: Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Attention: John P. Mitchell, Esq.
Facsimile No.: (212) 269-5420
Seller: Arnold W. Kanarek
719 Othello Avenue
Franklin Square, NY 11010
<PAGE>
-7-
Section 4.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts executed in and to be performed in that State.
Section 4.11. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
Section 4.12. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 4.13. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original, but all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
Arnold W. Kanarek
By: _________________________
Title:
IAC HOLDINGS CORP.
By: _________________________
Title:
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of January 23, 1998 by and between IAC
Holdings Corp., a Delaware corporation ("Purchaser"), and ARK International.
WHEREAS, Seller is the owner of 2,500 shares (the "Seller Shares") of the
outstanding shares of Common Stock, par value $0.10 per share (the "Company
Common Stock"), of Industrial Acoustics Company, Inc., a New York corporation
(the "Company");
WHEREAS, Seller has agreed to sell the Seller Shares to Purchaser, and
Purchaser has agreed to purchase such Seller Shares from Seller, in accordance
with the terms of this Agreement;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and covenants set forth herein the parties hereto agree as follows:
ARTICLE I
THE STOCK PURCHASE
Section 1.1. Sale of Shares. Subject to the terms and conditions of this
Agreement, Seller hereby agrees to sell the Seller Shares to Purchaser, and
Purchaser hereby agrees to purchase the Seller Shares, in the manner set forth
below, at a price per Share equal to $11.00 (the "Purchase Price").
Section 1.2. Payment and Delivery of Certificates for Seller Shares. The
closing for the purchase and sale of the Seller Shares shall occur following the
satisfaction of the conditions specified in Section 1.3 and simultaneously with
the closing of Purchaser's purchase of 1,913,429 shares of the Company's Common
Stock from Martin Hirschorn (the "Hirschorn Shares") which is scheduled to occur
at the offices of Rand Rosenzweig Smith Radley Gordon & Burstein LLP, 605 Third
Avenue, 24th Floor, New York, NY 10158, at 10:00 A.M. on the later of (i) March
15, 1998, (ii) 15 days following the delivery of consolidated audited financial
statements of the Company and its subsidiaries for the year ended December 31,
1997, or (iii) the date that is two business days following the termination of
the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act") or at such other time
<PAGE>
-2-
and place as Purchaser and Martin Hirschorn may agree. Purchaser will provide
Seller with at least two business days notice of the date of closing for the
purchase and sale of the Seller Shares. At the closing, (a) Purchaser will make
payment to Seller for the aggregate Purchase Price of the Seller Shares by
delivery to Seller of a certified or bank cashier's check payable in New York
Clearing House funds to the order of Seller, or by wire transfer to an account
specified by Seller, and (b) Seller will deliver to Purchaser (i) a certificate
or certificates representing the Seller Shares so purchased together with duly
executed stock powers with respect to such Seller Shares in favor of Purchaser
or its designee in form reasonably satisfactory to Purchaser and (ii) a receipt
evidencing payment of requisite transfer taxes, if any.
Section 1.3. Conditions to Closing of Share Purchase. The obligation of
Purchaser to purchase, and of Seller to sell, the Seller Shares shall be subject
to the condition that there shall not have been instituted and be continuing any
preliminary or permanent injunction or other order issued by any court or
governmental or regulatory authority, domestic or foreign, or any statute, rule,
regulation, decree or executive order promulgated or enacted by any government
or governmental or regulatory authority, which prohibits the acquisition of
Seller Shares pursuant to this Agreement in any respect; and no action or
proceeding before any court or governmental or regulatory authority, domestic or
foreign, shall have been instituted and be pending by any government or
governmental or regulatory authority, domestic or foreign, which seeks to
prevent the consummation of the transactions contemplated by this Agreement.
Section 1.4. Purchaser's Conditions to Closing of Share Purchase. The
obligation of Purchaser to purchase the Shares shall be subject to the further
conditions:
(a) the representations and warranties of Seller in this Agreement shall be
true and correct in all material respects, in each case as if such
representations and warranties were made as of such time; and
(b) Purchaser shall have acquired all of the Hirschorn Shares.
Section 1.5. No Transactions Relating to Seller Shares. Seller hereby
covenants and agrees that, except as otherwise provided herein, it will not, and
will not agree to, sell, transfer, assign, pledge, hypothecate or otherwise
dis-
<PAGE>
-3-
pose of any Seller Shares and will not, and will not agree to, limit its rights
to vote in any manner any of the Seller Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
Section 2.1. Power and Authority; Binding Effect. Seller has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by Seller have been duly and validly authorized
by all necessary corporate action and no other proceedings on the part of Seller
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Seller and, assuming its due authorization, execution and delivery
by Purchaser, constitutes a legal, valid and binding obligation of Seller.
Section 2.2. Required Filings and Consents. The execution and delivery of
this Agreement by Seller does not, and the performance of this Agreement by
Seller shall not, require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) for the HSR Act and the rules and regulations
thereunder and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay the performance by Seller of its obligations under this
Agreement.
Section 2.3. Title to Seller Shares. Seller has good and marketable title
to the Seller Shares free and clear of any pledge, lien, security interest,
charge, claim, equity, option, proxy, voting restriction or encumbrance of any
kind, other than pursuant to this Agreement; Seller has full right, power and
authority to sell, transfer and deliver the Seller Shares pursuant to this
Agreement and upon delivery of the Seller Shares and payment of the purchase
price therefor as contemplated herein, Purchaser will receive good and
marketable
<PAGE>
-4-
title to the Seller Shares free and clear of any pledge, lien, security
interest, charge, claim, equity, option, proxy, voting restriction or
encumbrance of any kind. The Seller Shares are all of the securities of the
Company owned of record or beneficially by Seller on the date of this Agreement;
and Seller has not granted any proxy with respect to the Seller Shares,
deposited the Seller Shares into a voting trust or entered into any voting
agreement or other arrangement with respect to the Seller Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants as follows:
Section 3.1. Corporate Organization. Purchaser is a corporation duly
organized and validly existing under the laws of the State of Delaware.
Purchaser has all necessary corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement by Purchaser and the consummation by Purchaser of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Purchaser. This Agreement has been duly executed
and delivered by Purchaser and, assuming its due authorization, execution and
delivery by Seller, constitutes a legal, valid and binding obligation of
Purchaser.
Section 3.2. Required Filings and Consents. The execution and delivery of
this Agreement by Purchaser do not, and the performance of this Agreement by
Purchaser shall not, require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) for applicable requirements, if any, of the HSR
Act, and (ii) where failure to obtain such consents, approvals, authorizations
or permits, or to make such filings or notifications, would not prevent or delay
consummation of the transactions contemplated hereby, or otherwise prevent
Purchaser from performing its obligations under this Agreement.
Section 3.3. Investment Interest. The purchase of Shares from Seller
pursuant to this Agreement is for the account of Purchaser for investment and
not with a view to the sale or distribution thereof within the meaning of the
Securi-
<PAGE>
-5-
ties Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "Securities Act"); and any sale, transfer or other disposition
of Seller Shares purchased pursuant to this Agreement will be made in compliance
with all applicable provisions of the Securities Act.
ARTICLE IV
MISCELLANEOUS
Section 4.1. Consents. Each of the parties hereto will use its best efforts
to obtain the consents of all third parties and governmental authorities
necessary to the consummation of the transactions contemplated by this
Agreement.
Section 4.2. Further Assurances. Seller and Purchaser will execute and
deliver all such further documents and instruments and make all such further
action as may be necessary in order to consummate the transactions contemplated
hereby.
Section 4.3. Confidentiality. Seller shall not disclose the existence of
this Agreement or its contents to any third party without Seller's prior written
consent. Neither Purchaser nor Seller shall issue any press release or make any
public announcement regarding the proposed transaction without the prior
approval of the other party.
Section 4.4. Specific Performance. The parties hereto acknowledge that
damages would be an inadequate remedy for a breach of this Agreement and that
the obligations of the parties hereto shall be specifically enforceable.
Section 4.5. Entire Agreement. This Agreement constitutes the entire
agreement among Seller and Purchaser with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, among them with respect to the subject matter hereof.
Section 4.6. Assignment, Successors and No Third-Party Rights. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be con-
<PAGE>
-6-
strued to give any person other than the parties to this Agreement any legal or
equitable right, remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
Section 4.7. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
Section 4.8. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall survive the
closing of the Share purchase.
Section 4.9. Notices. All notices, comments, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other parties):
Buyer: IAC Holdings Corp.
Attention:
Facsimile No.:
with a copy to: Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Attention: John P. Mitchell, Esq.
Facsimile No.: (212) 269-5420
Seller: ARK International
Emerald Bay
Key Colony III, Apt. 1200
151 Crandon Blvd.
Key Biscayne, FL 33149
<PAGE>
-7-
Section 4.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts executed in and to be performed in that State.
Section 4.11. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
Section 4.12. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 4.13. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original, but all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
ARK International
By: _________________________
Title:
IAC HOLDINGS CORP.
By: _________________________
Title:
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of January 23, 1998 by and between IAC
Holdings Corp., a Delaware corporation ("Purchaser"), and George J. Sotos.
WHEREAS, Seller is the owner of 16,325 shares (the "Seller Shares") of the
outstanding shares of Common Stock, par value $0.10 per share (the "Company
Common Stock"), of Industrial Acoustics Company, Inc., a New York corporation
(the "Company");
WHEREAS, Seller has agreed to sell the Seller Shares to Purchaser, and
Purchaser has agreed to purchase such Seller Shares from Seller, in accordance
with the terms of this Agreement;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and covenants set forth herein the parties hereto agree as follows:
ARTICLE I
THE STOCK PURCHASE
Section 1.1. Sale of Shares. Subject to the terms and conditions of this
Agreement, Seller hereby agrees to sell the Seller Shares to Purchaser, and
Purchaser hereby agrees to purchase the Seller Shares, in the manner set forth
below, at a price per Share equal to $11.00 (the "Purchase Price").
Section 1.2. Payment and Delivery of Certificates for Seller Shares. The
closing for the purchase and sale of the Seller Shares shall occur following the
satisfaction of the conditions specified in Section 1.3 and simultaneously with
the closing of Purchaser's purchase of 1,913,429 shares of the Company's Common
Stock from Martin Hirschorn (the "Hirschorn Shares") which is scheduled to occur
at the offices of Rand Rosenzweig Smith Radley Gordon & Burstein LLP, 605 Third
Avenue, 24th Floor, New York, NY 10158, at 10:00 A.M. on the later of (i) March
15, 1998, (ii) 15 days following the delivery of consolidated audited financial
statements of the Company and its subsidiaries for the year ended December 31,
1997, or (iii) the date that is two business days following the termination of
the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act") or at such other time
<PAGE>
-2-
and place as Purchaser and Martin Hirschorn may agree. Purchaser will provide
Seller with at least two business days notice of the date of closing for the
purchase and sale of the Seller Shares. At the closing, (a) Purchaser will make
payment to Seller for the aggregate Purchase Price of the Seller Shares by
delivery to Seller of a certified or bank cashier's check payable in New York
Clearing House funds to the order of Seller, or by wire transfer to an account
specified by Seller, and (b) Seller will deliver to Purchaser (i) a certificate
or certificates representing the Seller Shares so purchased together with duly
executed stock powers with respect to such Seller Shares in favor of Purchaser
or its designee in form reasonably satisfactory to Purchaser and (ii) a receipt
evidencing payment of requisite transfer taxes, if any.
Section 1.3. Conditions to Closing of Share Purchase. The obligation of
Purchaser to purchase, and of Seller to sell, the Seller Shares shall be subject
to the condition that there shall not have been instituted and be continuing any
preliminary or permanent injunction or other order issued by any court or
governmental or regulatory authority, domestic or foreign, or any statute, rule,
regulation, decree or executive order promulgated or enacted by any government
or governmental or regulatory authority, which prohibits the acquisition of
Seller Shares pursuant to this Agreement in any respect; and no action or
proceeding before any court or governmental or regulatory authority, domestic or
foreign, shall have been instituted and be pending by any government or
governmental or regulatory authority, domestic or foreign, which seeks to
prevent the consummation of the transactions contemplated by this Agreement.
Section 1.4. Purchaser's Conditions to Closing of Share Purchase. The
obligation of Purchaser to purchase the Shares shall be subject to the further
conditions:
(a) the representations and warranties of Seller in this Agreement
shall be true and correct in all material respects, in each case as if such
representations and warranties were made as of such time; and
(b) Purchaser shall have acquired all of the Hirschorn Shares.
Section 1.5. No Transactions Relating to Seller Shares. Seller hereby
covenants and agrees that, except as otherwise provided herein, it will not, and
will not agree to, sell, transfer, assign, pledge, hypothecate or otherwise
dis-
<PAGE>
-3-
pose of any Seller Shares and will not, and will not agree to, limit its rights
to vote in any manner any of the Seller Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
Section 2.1. Power and Authority; Binding Effect. Seller has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by Seller have been duly and validly authorized
by all necessary corporate action and no other proceedings on the part of Seller
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Seller and, assuming its due authorization, execution and delivery
by Purchaser, constitutes a legal, valid and binding obligation of Seller.
Section 2.2. Required Filings and Consents. The execution and delivery of
this Agreement by Seller does not, and the performance of this Agreement by
Seller shall not, require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) for the HSR Act and the rules and regulations
thereunder and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay the performance by Seller of its obligations under this
Agreement.
Section 2.3. Title to Seller Shares. Seller has good and marketable title
to the Seller Shares free and clear of any pledge, lien, security interest,
charge, claim, equity, option, proxy, voting restriction or encumbrance of any
kind, other than pursuant to this Agreement; Seller has full right, power and
authority to sell, transfer and deliver the Seller Shares pursuant to this
Agreement and upon delivery of the Seller Shares and payment of the purchase
price therefor as contemplated herein, Purchaser will receive good and
marketable
<PAGE>
-4-
title to the Seller Shares free and clear of any pledge, lien, security
interest, charge, claim, equity, option, proxy, voting restriction or
encumbrance of any kind. The Seller Shares are all of the securities of the
Company owned of record or beneficially by Seller on the date of this Agreement;
and Seller has not granted any proxy with respect to the Seller Shares,
deposited the Seller Shares into a voting trust or entered into any voting
agreement or other arrangement with respect to the Seller Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants as follows:
Section 3.1. Corporate Organization. Purchaser is a corporation duly
organized and validly existing under the laws of the State of Delaware.
Purchaser has all necessary corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement by Purchaser and the consummation by Purchaser of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Purchaser. This Agreement has been duly executed
and delivered by Purchaser and, assuming its due authorization, execution and
delivery by Seller, constitutes a legal, valid and binding obligation of
Purchaser.
Section 3.2. Required Filings and Consents. The execution and delivery of
this Agreement by Purchaser do not, and the performance of this Agreement by
Purchaser shall not, require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) for applicable requirements, if any, of the HSR
Act, and (ii) where failure to obtain such consents, approvals, authorizations
or permits, or to make such filings or notifications, would not prevent or delay
consummation of the transactions contemplated hereby, or otherwise prevent
Purchaser from performing its obligations under this Agreement.
Section 3.3. Investment Interest. The purchase of Shares from Seller
pursuant to this Agreement is for the account of Purchaser for investment and
not with a view to the sale or distribution thereof within the meaning of the
Securi-
<PAGE>
-5-
ties Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "Securities Act"); and any sale, transfer or other disposition
of Seller Shares purchased pursuant to this Agreement will be made in compliance
with all applicable provisions of the Securities Act.
ARTICLE IV
MISCELLANEOUS
Section 4.1. Consents. Each of the parties hereto will use its best efforts
to obtain the consents of all third parties and governmental authorities
necessary to the consummation of the transactions contemplated by this
Agreement.
Section 4.2. Further Assurances. Seller and Purchaser will execute and
deliver all such further documents and instruments and make all such further
action as may be necessary in order to consummate the transactions contemplated
hereby.
Section 4.3. Confidentiality. Seller shall not disclose the existence of
this Agreement or its contents to any third party without Seller's prior written
consent. Neither Purchaser nor Seller shall issue any press release or make any
public announcement regarding the proposed transaction without the prior
approval of the other party.
Section 4.4. Specific Performance. The parties hereto acknowledge that
damages would be an inadequate remedy for a breach of this Agreement and that
the obligations of the parties hereto shall be specifically enforceable.
Section 4.5. Entire Agreement. This Agreement constitutes the entire
agreement among Seller and Purchaser with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, among them with respect to the subject matter hereof.
Section 4.6. Assignment, Successors and No Third-Party Rights. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be con-
<PAGE>
-6-
strued to give any person other than the parties to this Agreement any legal or
equitable right, remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
Section 4.7. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
Section 4.8. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall survive the
closing of the Share purchase.
Section 4.9. Notices. All notices, comments, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other parties):
Buyer: IAC Holdings Corp.
Attention:
Facsimile No.:
with a copy to: Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Attention: John P. Mitchell, Esq.
Facsimile No.: (212) 269-5420
Seller: George J. Sotos
<PAGE>
-7-
Section 4.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts executed in and to be performed in that State.
Section 4.11. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
Section 4.12. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 4.13. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original, but all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
George J. Sotos
By: _________________________
Title:
IAC HOLDINGS CORP.
By: _________________________
Title:
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of January 23, 1998 by and between IAC
Holdings Corp., a Delaware corporation ("Purchaser"), and Robert J. Buelow.
WHEREAS, Seller is the owner of 2,000 shares (the "Seller Shares") of the
outstanding shares of Common Stock, par value $0.10 per share (the "Company
Common Stock"), of Industrial Acoustics Company, Inc., a New York corporation
(the "Company");
WHEREAS, Seller has agreed to sell the Seller Shares to Purchaser, and
Purchaser has agreed to purchase such Seller Shares from Seller, in accordance
with the terms of this Agreement;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and covenants set forth herein the parties hereto agree as follows:
ARTICLE I
THE STOCK PURCHASE
Section 1.1. Sale of Shares. Subject to the terms and conditions of this
Agreement, Seller hereby agrees to sell the Seller Shares to Purchaser, and
Purchaser hereby agrees to purchase the Seller Shares, in the manner set forth
below, at a price per Share equal to $11.00 (the "Purchase Price").
Section 1.2. Payment and Delivery of Certificates for Seller Shares. The
closing for the purchase and sale of the Seller Shares shall occur following the
satisfaction of the conditions specified in Section 1.3 and simultaneously with
the closing of Purchaser's purchase of 1,913,429 shares of the Company's Common
Stock from Martin Hirschorn (the "Hirschorn Shares") which is scheduled to occur
at the offices of Rand Rosenzweig Smith Radley Gordon & Burstein LLP, 605 Third
Avenue, 24th Floor, New York, NY 10158, at 10:00 A.M. on the later of (i) March
15, 1998, (ii) 15 days following the delivery of consolidated audited financial
statements of the Company and its subsidiaries for the year ended December 31,
1997, or (iii) the date that is two business days following the termination of
the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act") or at such other time
<PAGE>
-2-
and place as Purchaser and Martin Hirschorn may agree. Purchaser will provide
Seller with at least two business days notice of the date of closing for the
purchase and sale of the Seller Shares. At the closing, (a) Purchaser will make
payment to Seller for the aggregate Purchase Price of the Seller Shares by
delivery to Seller of a certified or bank cashier's check payable in New York
Clearing House funds to the order of Seller, or by wire transfer to an account
specified by Seller, and (b) Seller will deliver to Purchaser (i) a certificate
or certificates representing the Seller Shares so purchased together with duly
executed stock powers with respect to such Seller Shares in favor of Purchaser
or its designee in form reasonably satisfactory to Purchaser and (ii) a receipt
evidencing payment of requisite transfer taxes, if any.
Section 1.3. Conditions to Closing of Share Purchase. The obligation of
Purchaser to purchase, and of Seller to sell, the Seller Shares shall be subject
to the condition that there shall not have been instituted and be continuing any
preliminary or permanent injunction or other order issued by any court or
governmental or regulatory authority, domestic or foreign, or any statute, rule,
regulation, decree or executive order promulgated or enacted by any government
or governmental or regulatory authority, which prohibits the acquisition of
Seller Shares pursuant to this Agreement in any respect; and no action or
proceeding before any court or governmental or regulatory authority, domestic or
foreign, shall have been instituted and be pending by any government or
governmental or regulatory authority, domestic or foreign, which seeks to
prevent the consummation of the transactions contemplated by this Agreement.
Section 1.4. Purchaser's Conditions to Closing of Share Purchase. The
obligation of Purchaser to purchase the Shares shall be subject to the further
conditions:
(a) the representations and warranties of Seller in this Agreement
shall be true and correct in all material respects, in each case as if such
representations and warranties were made as of such time; and
(b) Purchaser shall have acquired all of the Hirschorn Shares.
Section 1.5. No Transactions Relating to Seller Shares. Seller hereby
covenants and agrees that, except as otherwise provided herein, it will not, and
will not agree to, sell, transfer, assign, pledge, hypothecate or otherwise
dis-
<PAGE>
-3-
pose of any Seller Shares and will not, and will not agree to, limit its rights
to vote in any manner any of the Seller Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
Section 2.1. Power and Authority; Binding Effect. Seller has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by Seller have been duly and validly authorized
by all necessary corporate action and no other proceedings on the part of Seller
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Seller and, assuming its due authorization, execution and delivery
by Purchaser, constitutes a legal, valid and binding obligation of Seller.
Section 2.2. Required Filings and Consents. The execution and delivery of
this Agreement by Seller does not, and the performance of this Agreement by
Seller shall not, require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) for the HSR Act and the rules and regulations
thereunder and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay the performance by Seller of its obligations under this
Agreement.
Section 2.3. Title to Seller Shares. Seller has good and marketable title
to the Seller Shares free and clear of any pledge, lien, security interest,
charge, claim, equity, option, proxy, voting restriction or encumbrance of any
kind, other than pursuant to this Agreement; Seller has full right, power and
authority to sell, transfer and deliver the Seller Shares pursuant to this
Agreement and upon delivery of the Seller Shares and payment of the purchase
price therefor as contemplated herein, Purchaser will receive good and
marketable
<PAGE>
-4-
title to the Seller Shares free and clear of any pledge, lien, security
interest, charge, claim, equity, option, proxy, voting restriction or
encumbrance of any kind. The Seller Shares are all of the securities of the
Company owned of record or beneficially by Seller on the date of this Agreement;
and Seller has not granted any proxy with respect to the Seller Shares,
deposited the Seller Shares into a voting trust or entered into any voting
agreement or other arrangement with respect to the Seller Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants as follows:
Section 3.1. Corporate Organization. Purchaser is a corporation duly
organized and validly existing under the laws of the State of Delaware.
Purchaser has all necessary corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement by Purchaser and the consummation by Purchaser of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Purchaser. This Agreement has been duly executed
and delivered by Purchaser and, assuming its due authorization, execution and
delivery by Seller, constitutes a legal, valid and binding obligation of
Purchaser.
Section 3.2. Required Filings and Consents. The execution and delivery of
this Agreement by Purchaser do not, and the performance of this Agreement by
Purchaser shall not, require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) for applicable requirements, if any, of the HSR
Act, and (ii) where failure to obtain such consents, approvals, authorizations
or permits, or to make such filings or notifications, would not prevent or delay
consummation of the transactions contemplated hereby, or otherwise prevent
Purchaser from performing its obligations under this Agreement.
Section 3.3. Investment Interest. The purchase of Shares from Seller
pursuant to this Agreement is for the account of Purchaser for investment and
not with a view to the sale or distribution thereof within the meaning of the
Securi-
<PAGE>
-5-
ties Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "Securities Act"); and any sale, transfer or other disposition
of Seller Shares purchased pursuant to this Agreement will be made in compliance
with all applicable provisions of the Securities Act.
ARTICLE IV
MISCELLANEOUS
Section 4.1. Consents. Each of the parties hereto will use its best efforts
to obtain the consents of all third parties and governmental authorities
necessary to the consummation of the transactions contemplated by this
Agreement.
Section 4.2. Further Assurances. Seller and Purchaser will execute and
deliver all such further documents and instruments and make all such further
action as may be necessary in order to consummate the transactions contemplated
hereby.
Section 4.3. Confidentiality. Seller shall not disclose the existence of
this Agreement or its contents to any third party without Seller's prior written
consent. Neither Purchaser nor Seller shall issue any press release or make any
public announcement regarding the proposed transaction without the prior
approval of the other party.
Section 4.4. Specific Performance. The parties hereto acknowledge that
damages would be an inadequate remedy for a breach of this Agreement and that
the obligations of the parties hereto shall be specifically enforceable.
Section 4.5. Entire Agreement. This Agreement constitutes the entire
agreement among Seller and Purchaser with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, among them with respect to the subject matter hereof.
Section 4.6. Assignment, Successors and No Third-Party Rights. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be con-
<PAGE>
-6-
strued to give any person other than the parties to this Agreement any legal or
equitable right, remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
Section 4.7. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
Section 4.8. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall survive the
closing of the Share purchase.
Section 4.9. Notices. All notices, comments, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other parties):
Buyer: IAC Holdings Corp.
Attention:
Facsimile No.:
with a copy to: Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Attention: John P. Mitchell, Esq.
Facsimile No.: (212) 269-5420
Seller: Robert J. Buelow
141 Duffy
Allendale, NJ 07401
<PAGE>
-7-
Section 4.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts executed in and to be performed in that State.
Section 4.11. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
Section 4.12. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 4.13. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original, but all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
Robert J. Buelow
By: _________________________
Title:
IAC HOLDINGS CORP.
By: _________________________
Title:
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of January 23, 1998 by and between IAC
Holdings Corp., a Delaware corporation ("Purchaser"), and Morton I. Schiff.
WHEREAS, Seller is the owner of 12,500 shares (the "Seller Shares") of the
outstanding shares of Common Stock, par value $0.10 per share (the "Company
Common Stock"), of Industrial Acoustics Company, Inc., a New York corporation
(the "Company");
WHEREAS, Seller has agreed to sell the Seller Shares to Purchaser, and
Purchaser has agreed to purchase such Seller Shares from Seller, in accordance
with the terms of this Agreement;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and covenants set forth herein the parties hereto agree as follows:
ARTICLE I
THE STOCK PURCHASE
Section 1.1. Sale of Shares. Subject to the terms and conditions of this
Agreement, Seller hereby agrees to sell the Seller Shares to Purchaser, and
Purchaser hereby agrees to purchase the Seller Shares, in the manner set forth
below, at a price per Share equal to $11.00 (the "Purchase Price").
Section 1.2. Payment and Delivery of Certificates for Seller Shares. The
closing for the purchase and sale of the Seller Shares shall occur following the
satisfaction of the conditions specified in Section 1.3 and simultaneously with
the closing of Purchaser's purchase of 1,913,429 shares of the Company's Common
Stock from Martin Hirschorn (the "Hirschorn Shares") which is scheduled to occur
at the offices of Rand Rosenzweig Smith Radley Gordon & Burstein LLP, 605 Third
Avenue, 24th Floor, New York, NY 10158, at 10:00 A.M. on the later of (i) March
15, 1998, (ii) 15 days following the delivery of consolidated audited financial
statements of the Company and its subsidiaries for the year ended December 31,
1997, or (iii) the date that is two business days following the termination of
the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act") or at such other time
<PAGE>
-2-
and place as Purchaser and Martin Hirschorn may agree. Purchaser will provide
Seller with at least two business days notice of the date of closing for the
purchase and sale of the Seller Shares. At the closing, (a) Purchaser will make
payment to Seller for the aggregate Purchase Price of the Seller Shares by
delivery to Seller of a certified or bank cashier's check payable in New York
Clearing House funds to the order of Seller, or by wire transfer to an account
specified by Seller, and (b) Seller will deliver to Purchaser (i) a certificate
or certificates representing the Seller Shares so purchased together with duly
executed stock powers with respect to such Seller Shares in favor of Purchaser
or its designee in form reasonably satisfactory to Purchaser and (ii) a receipt
evidencing payment of requisite transfer taxes, if any.
Section 1.3. Conditions to Closing of Share Purchase. The obligation of
Purchaser to purchase, and of Seller to sell, the Seller Shares shall be subject
to the condition that there shall not have been instituted and be continuing any
preliminary or permanent injunction or other order issued by any court or
governmental or regulatory authority, domestic or foreign, or any statute, rule,
regulation, decree or executive order promulgated or enacted by any government
or governmental or regulatory authority, which prohibits the acquisition of
Seller Shares pursuant to this Agreement in any respect; and no action or
proceeding before any court or governmental or regulatory authority, domestic or
foreign, shall have been instituted and be pending by any government or
governmental or regulatory authority, domestic or foreign, which seeks to
prevent the consummation of the transactions contemplated by this Agreement.
Section 1.4. Purchaser's Conditions to Closing of Share Purchase. The
obligation of Purchaser to purchase the Shares shall be subject to the further
conditions:
(a) the representations and warranties of Seller in this Agreement
shall be true and correct in all material respects, in each case as if such
representations and warranties were made as of such time; and
(b) Purchaser shall have acquired all of the Hirschorn Shares.
Section 1.5. No Transactions Relating to Seller Shares. Seller hereby
covenants and agrees that, except as otherwise provided herein, it will not, and
will not agree to, sell, transfer, assign, pledge, hypothecate or otherwise
dis-
<PAGE>
-3-
pose of any Seller Shares and will not, and will not agree to, limit its rights
to vote in any manner any of the Seller Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
Section 2.1. Power and Authority; Binding Effect. Seller has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by Seller have been duly and validly authorized
by all necessary corporate action and no other proceedings on the part of Seller
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Seller and, assuming its due authorization, execution and delivery
by Purchaser, constitutes a legal, valid and binding obligation of Seller.
Section 2.2. Required Filings and Consents. The execution and delivery of
this Agreement by Seller does not, and the performance of this Agreement by
Seller shall not, require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) for the HSR Act and the rules and regulations
thereunder and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay the performance by Seller of its obligations under this
Agreement.
Section 2.3. Title to Seller Shares. Seller has good and marketable title
to the Seller Shares free and clear of any pledge, lien, security interest,
charge, claim, equity, option, proxy, voting restriction or encumbrance of any
kind, other than pursuant to this Agreement; Seller has full right, power and
authority to sell, transfer and deliver the Seller Shares pursuant to this
Agreement and upon delivery of the Seller Shares and payment of the purchase
price therefor as contemplated herein, Purchaser will receive good and
marketable
<PAGE>
-4-
title to the Seller Shares free and clear of any pledge, lien, security
interest, charge, claim, equity, option, proxy, voting restriction or
encumbrance of any kind. The Seller Shares are all of the securities of the
Company owned of record or beneficially by Seller on the date of this Agreement;
and Seller has not granted any proxy with respect to the Seller Shares,
deposited the Seller Shares into a voting trust or entered into any voting
agreement or other arrangement with respect to the Seller Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants as follows:
Section 3.1. Corporate Organization. Purchaser is a corporation duly
organized and validly existing under the laws of the State of Delaware.
Purchaser has all necessary corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement by Purchaser and the consummation by Purchaser of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Purchaser. This Agreement has been duly executed
and delivered by Purchaser and, assuming its due authorization, execution and
delivery by Seller, constitutes a legal, valid and binding obligation of
Purchaser.
Section 3.2. Required Filings and Consents. The execution and delivery of
this Agreement by Purchaser do not, and the performance of this Agreement by
Purchaser shall not, require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) for applicable requirements, if any, of the HSR
Act, and (ii) where failure to obtain such consents, approvals, authorizations
or permits, or to make such filings or notifications, would not prevent or delay
consummation of the transactions contemplated hereby, or otherwise prevent
Purchaser from performing its obligations under this Agreement.
Section 3.3. Investment Interest. The purchase of Shares from Seller
pursuant to this Agreement is for the account of Purchaser for investment and
not with a view to the sale or distribution thereof within the meaning of the
Securi-
<PAGE>
-5-
ties Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "Securities Act"); and any sale, transfer or other disposition
of Seller Shares purchased pursuant to this Agreement will be made in compliance
with all applicable provisions of the Securities Act.
ARTICLE IV
MISCELLANEOUS
Section 4.1. Consents. Each of the parties hereto will use its best efforts
to obtain the consents of all third parties and governmental authorities
necessary to the consummation of the transactions contemplated by this
Agreement.
Section 4.2. Further Assurances. Seller and Purchaser will execute and
deliver all such further documents and instruments and make all such further
action as may be necessary in order to consummate the transactions contemplated
hereby.
Section 4.3. Confidentiality. Seller shall not disclose the existence of
this Agreement or its contents to any third party without Seller's prior written
consent. Neither Purchaser nor Seller shall issue any press release or make any
public announcement regarding the proposed transaction without the prior
approval of the other party.
Section 4.4. Specific Performance. The parties hereto acknowledge that
damages would be an inadequate remedy for a breach of this Agreement and that
the obligations of the parties hereto shall be specifically enforceable.
Section 4.5. Entire Agreement. This Agreement constitutes the entire
agreement among Seller and Purchaser with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, among them with respect to the subject matter hereof.
Section 4.6. Assignment, Successors and No Third-Party Rights. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be con-
<PAGE>
-6-
strued to give any person other than the parties to this Agreement any legal or
equitable right, remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
Section 4.7. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
Section 4.8. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall survive the
closing of the Share purchase.
Section 4.9. Notices. All notices, comments, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other parties):
Buyer: IAC Holdings Corp.
Attention:
Facsimile No.:
with a copy to: Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Attention: John P. Mitchell, Esq.
Facsimile No.: (212) 269-5420
Seller: Morton I. Schiff
28 Pecan Valley Drive
New City, NY 10956
<PAGE>
-7-
Section 4.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts executed in and to be performed in that State.
Section 4.11. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
Section 4.12. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 4.13. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original, but all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
Morton I. Schiff
By: _________________________
Title:
IAC HOLDINGS CORP.
By: _________________________
Title:
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of January 23, 1998 by and between IAC
Holdings Corp., a Delaware corporation ("Purchaser"), and Henry Allen.
WHEREAS, Seller is the owner of 7,000 shares (the "Seller Shares") of the
outstanding shares of Common Stock, par value $0.10 per share (the "Company
Common Stock"), of Industrial Acoustics Company, Inc., a New York corporation
(the "Company");
WHEREAS, Seller has agreed to sell the Seller Shares to Purchaser, and
Purchaser has agreed to purchase such Seller Shares from Seller, in accordance
with the terms of this Agreement;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and covenants set forth herein the parties hereto agree as follows:
ARTICLE I
THE STOCK PURCHASE
Section 1.1. Sale of Shares. Subject to the terms and conditions of this
Agreement, Seller hereby agrees to sell the Seller Shares to Purchaser, and
Purchaser hereby agrees to purchase the Seller Shares, in the manner set forth
below, at a price per Share equal to $11.00 (the "Purchase Price").
Section 1.2. Payment and Delivery of Certificates for Seller Shares. The
closing for the purchase and sale of the Seller Shares shall occur following the
satisfaction of the conditions specified in Section 1.3 and simultaneously with
the closing of Purchaser's purchase of 1,913,429 shares of the Company's Common
Stock from Martin Hirschorn (the "Hirschorn Shares") which is scheduled to occur
at the offices of Rand Rosenzweig Smith Radley Gordon & Burstein LLP, 605 Third
Avenue, 24th Floor, New York, NY 10158, at 10:00 A.M. on the later of (i) March
15, 1998, (ii) 15 days following the delivery of consolidated audited financial
statements of the Company and its subsidiaries for the year ended December 31,
1997, or (iii) the date that is two business days following the termination of
the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act") or at such other time
<PAGE>
-2-
and place as Purchaser and Martin Hirschorn may agree. Purchaser will provide
Seller with at least two business days notice of the date of closing for the
purchase and sale of the Seller Shares. At the closing, (a) Purchaser will make
payment to Seller for the aggregate Purchase Price of the Seller Shares by
delivery to Seller of a certified or bank cashier's check payable in New York
Clearing House funds to the order of Seller, or by wire transfer to an account
specified by Seller, and (b) Seller will deliver to Purchaser (i) a certificate
or certificates representing the Seller Shares so purchased together with duly
executed stock powers with respect to such Seller Shares in favor of Purchaser
or its designee in form reasonably satisfactory to Purchaser and (ii) a receipt
evidencing payment of requisite transfer taxes, if any.
Section 1.3. Conditions to Closing of Share Purchase. The obligation of
Purchaser to purchase, and of Seller to sell, the Seller Shares shall be subject
to the condition that there shall not have been instituted and be continuing any
preliminary or permanent injunction or other order issued by any court or
governmental or regulatory authority, domestic or foreign, or any statute, rule,
regulation, decree or executive order promulgated or enacted by any government
or governmental or regulatory authority, which prohibits the acquisition of
Seller Shares pursuant to this Agreement in any respect; and no action or
proceeding before any court or governmental or regulatory authority, domestic or
foreign, shall have been instituted and be pending by any government or
governmental or regulatory authority, domestic or foreign, which seeks to
prevent the consummation of the transactions contemplated by this Agreement.
Section 1.4. Purchaser's Conditions to Closing of Share Purchase. The
obligation of Purchaser to purchase the Shares shall be subject to the further
conditions:
(a) the representations and warranties of Seller in this Agreement
shall be true and correct in all material respects, in each case as if such
representations and warranties were made as of such time; and
(b) Purchaser shall have acquired all of the Hirschorn Shares.
Section 1.5. No Transactions Relating to Seller Shares. Seller hereby
covenants and agrees that, except as otherwise provided herein, it will not, and
will not agree to, sell, transfer, assign, pledge, hypothecate or otherwise
dis-
<PAGE>
-3-
pose of any Seller Shares and will not, and will not agree to, limit its rights
to vote in any manner any of the Seller Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
Section 2.1. Power and Authority; Binding Effect. Seller has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by Seller have been duly and validly authorized
by all necessary corporate action and no other proceedings on the part of Seller
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Seller and, assuming its due authorization, execution and delivery
by Purchaser, constitutes a legal, valid and binding obligation of Seller.
Section 2.2. Required Filings and Consents. The execution and delivery of
this Agreement by Seller does not, and the performance of this Agreement by
Seller shall not, require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) for the HSR Act and the rules and regulations
thereunder and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay the performance by Seller of its obligations under this
Agreement.
Section 2.3. Title to Seller Shares. Seller has good and marketable title
to the Seller Shares free and clear of any pledge, lien, security interest,
charge, claim, equity, option, proxy, voting restriction or encumbrance of any
kind, other than pursuant to this Agreement; Seller has full right, power and
authority to sell, transfer and deliver the Seller Shares pursuant to this
Agreement and upon delivery of the Seller Shares and payment of the purchase
price therefor as contemplated herein, Purchaser will receive good and
marketable
<PAGE>
-4-
title to the Seller Shares free and clear of any pledge, lien, security
interest, charge, claim, equity, option, proxy, voting restriction or
encumbrance of any kind. The Seller Shares are all of the securities of the
Company owned of record or beneficially by Seller on the date of this Agreement;
and Seller has not granted any proxy with respect to the Seller Shares,
deposited the Seller Shares into a voting trust or entered into any voting
agreement or other arrangement with respect to the Seller Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants as follows:
Section 3.1. Corporate Organization. Purchaser is a corporation duly
organized and validly existing under the laws of the State of Delaware.
Purchaser has all necessary corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement by Purchaser and the consummation by Purchaser of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Purchaser. This Agreement has been duly executed
and delivered by Purchaser and, assuming its due authorization, execution and
delivery by Seller, constitutes a legal, valid and binding obligation of
Purchaser.
Section 3.2. Required Filings and Consents. The execution and delivery of
this Agreement by Purchaser do not, and the performance of this Agreement by
Purchaser shall not, require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) for applicable requirements, if any, of the HSR
Act, and (ii) where failure to obtain such consents, approvals, authorizations
or permits, or to make such filings or notifications, would not prevent or delay
consummation of the transactions contemplated hereby, or otherwise prevent
Purchaser from performing its obligations under this Agreement.
Section 3.3. Investment Interest. The purchase of Shares from Seller
pursuant to this Agreement is for the account of Purchaser for investment and
not with a view to the sale or distribution thereof within the meaning of the
Securi-
<PAGE>
-5-
ties Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "Securities Act"); and any sale, transfer or other disposition
of Seller Shares purchased pursuant to this Agreement will be made in compliance
with all applicable provisions of the Securities Act.
ARTICLE IV
MISCELLANEOUS
Section 4.1. Consents. Each of the parties hereto will use its best efforts
to obtain the consents of all third parties and governmental authorities
necessary to the consummation of the transactions contemplated by this
Agreement.
Section 4.2. Further Assurances. Seller and Purchaser will execute and
deliver all such further documents and instruments and make all such further
action as may be necessary in order to consummate the transactions contemplated
hereby.
Section 4.3. Confidentiality. Seller shall not disclose the existence of
this Agreement or its contents to any third party without Seller's prior written
consent. Neither Purchaser nor Seller shall issue any press release or make any
public announcement regarding the proposed transaction without the prior
approval of the other party.
Section 4.4. Specific Performance. The parties hereto acknowledge that
damages would be an inadequate remedy for a breach of this Agreement and that
the obligations of the parties hereto shall be specifically enforceable.
Section 4.5. Entire Agreement. This Agreement constitutes the entire
agreement among Seller and Purchaser with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, among them with respect to the subject matter hereof.
Section 4.6. Assignment, Successors and No Third-Party Rights. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be con-
<PAGE>
-6-
strued to give any person other than the parties to this Agreement any legal or
equitable right, remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
Section 4.7. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
Section 4.8. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall survive the
closing of the Share purchase.
Section 4.9. Notices. All notices, comments, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other parties):
Buyer: IAC Holdings Corp.
Attention:
Facsimile No.:
with a copy to: Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Attention: John P. Mitchell, Esq.
Facsimile No.: (212) 269-5420
Seller: Henry Allen
Techmet Corp.
411 Theodore Fremd Ave.
Rye, NY 10580
<PAGE>
-7-
Section 4.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts executed in and to be performed in that State.
Section 4.11. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
Section 4.12. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 4.13. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original, but all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
Henry Allen
By: _________________________
Title:
IAC HOLDINGS CORP.
By: _________________________
Title:
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.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] 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
[X] Fee paid previously with preliminary materials.
<PAGE>
[ ] 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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<PAGE>
Preliminary Proxy Statement
dated August , 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 , 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
<PAGE>
By order of the Board of Directors
INDUSTRIAL ACOUSTICS COMPANY, INC.
Robert N. Bertrand
Secretary
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<PAGE>
Preliminary Proxy Statement
dated August , 1998
INDUSTRIAL ACOUSTICS COMPANY, INC.
1160 COMMERCE AVENUE
BRONX, NEW YORK 10462
--------------------
PROXY STATEMENT
--------------------
---------------------------------------
SPECIAL MEETING OF SHAREHOLDERS
, 1998
---------------------------------------
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" or "IAC") 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 , 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-
<PAGE>
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 sole shareholder of Holdings is
International Mezzanine Investment, N.V. ("IMI"), a Netherlands Antilles
corporation whose principal executive offices are located at John B. Gorsiraweg
14 Curacao, Netherlands Antilles. 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
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<PAGE>
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 "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 enable the Company 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, 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 July 31, 1998, the high and low bid prices for the
Common Stock as reported on the Nasdaq National Market were $10 1/2 and $10 1/8,
respectively, and the last reported sale price was $10 1/8 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 1/4. The closing bid price of the
Company's Common Stock on May 19, 1998, the day before the Merger was announced
to the public was $9 1/4. 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. Certain members of the Board of Directors have
conflicts of interest. See "Interests of Certain Persons in the Merger;
Conflicts of Interest." See "Special Factors -- Acquisition; Purpose of the
Merger; Fairness Factors."
Subsequent to its initial determination, the Board of Directors received
the opinion of Laidlaw & Co. as to the fairness of the Merger Consideration
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<PAGE>
and thereafter the Board unanimously confirmed its conclusion that the Merger
Agreement is fair to, and in the best interests of the Company and its
Shareholders. See "Special Factors--Laidlaw Review."
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.
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 P. 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. Menai Group, LLC and Bryanston Management Ltd (companies
which are wholly owned by Messrs. Davies and Hemsley, respectively) are partners
in IAC Acquisition Partners ("IAC Partners"), a partnership which provides
advisory and consulting services to Holdings. 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 enable the Company to pay the Merger
Consideration and (v) the performance of and compliance with all agreements and
obligations of the parties under the Merger Agreement.
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<PAGE>
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 P. Dineen, Robert N.
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 79% 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 determined in May of 1998 that it was not in the best
interests of the Company or its Shareholders for IAC to remain a company with
public shareholders and therefore the Board considered the proposed merger of
Holdings with and into the Company, and concluded that such Merger would be both
fair and in the best interests of the Company, its employees and both its
affiliated and unaffiliated Shareholders. Certain members of the Board of
Directors have conflicts of interests. See "Interests of Certain Persons in the
Merger; Conflicts of Interest." The same conclusion was reached by Holdings, and
by those members of the Board of Directors affiliated with Holdings, IMI, IMC
and IAC Partners. However, none of IMI, IMC or IAC Partners or their respective
executive officers, directors or partners made any recommendation in support of
or opposed to the Merger (other than the recommendation of the Merger as
directors by those persons who are also directors of the Company).
The negative factors considered by the Board which weighed against
consummation of the Merger were the time and cost involved in effecting the
transaction and the fact that the Company would no longer be registered under
the Exchange Act, which would make it difficult for the Company to pursue
financing publicly. However, these countervailing factors were viewed as being
less significant than the ultimate benefits of the Merger to the Company and its
employees.
The Board of Directors, which includes Martin Hirschorn and Frederic M.
Oran (the Company's Chief Executive Officer since May 1998), both of whom sold
all the
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<PAGE>
shares in the Company that they owned to Holdings in March 1998 at a price of
$11.00 per share, unanimously approved the Merger Agreement on May 20, 1998.
Certain members of the Board of Directors have conflicts of interests. See
"Interests of Certain Persons in the Merger; Conflicts of Interest." 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 the Merger
to unaffiliated Shareholders, the Board of Directors considered the following
factors in particular: (a) providing minority Shareholders with the same
opportunity to dispose of their shares at the price obtained from Holdings by
the Company's founder, management and certain institutional holders, which was
at a premium to the recent market price and reflected a "control premium"; (b)
the limited market for the Company's Common Stock as has existed in recent years
and the resulting limited ability of minority Shareholders to realize on their
investment in the Company; and (c) the urgent need for the Company's management
to take actions to reverse operating losses, which may, in the short term,
adversely affect the Company's operating results.
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 and recognizing a "control premium". 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 closing bid price
for the Common Stock on May 19, 1998, the day before the Merger was announced to
the public, was $9 1/4. The last reported trade of the Common Stock during that
period took place on May 13, 1998 at a price of $9 1/4. 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." In considering the fairness of the
Merger to minority shareholders, the Board of Directors also gave significant
weight to this factor.
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. Additional purchases of some, but not
all of the outstanding shares of Common Stock by Holdings would only serve to
further contract the market for the Common Stock, thus resulting in an
increasingly illiquid minority.
At July 31, 1998, the Company had approximately 600 holders of 627,307
shares of Common Stock, excluding shares held by Holdings. The Company
understands
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<PAGE>
that during the twelve months ended July 31, 1998, there were only 117 trades of
the Common Stock involving an aggregate of 97,365 shares of its Common Stock.
Other factors considered by the Board of Directors in determining that the
Company and its employees would be better served by private ownership included:
1. the ongoing cost to the Company of regulatory compliance as a public company
without the benefit of having a ready market for its securities; 2. greater
operating flexibility in the management of the business to remedy recent adverse
operating results; and 3. disappointing results of operations which, as a result
of the Company's public status, become available to its competitors.
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. The Board considered the ongoing costs of remaining a public
company without the benefit of having a ready market for its securities in its
determination to approve the Merger.
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 also 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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<PAGE>
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 September 30, 1997, the last quarterly
reporting date prior to the execution of a letter of intent between IAC Partners
and Martin Hirschorn for the sale of his shares, net book value of the Company
was approximately $41,009,000 or $13.77 per share. At March 31, 1998, the net
book value of the Company had declined to approximately $39,221,000, or $13.17
per share of Common Stock and at June 30, 1998 had further declined to
approximately $36,784,000 or $12.34 per share. 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 has reported net losses of $.78,
$.58 and $.41 per share for the quarters ended June 30 and 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 an uncollateralized loan of approximately
$17 million from IMC, a subsidiary of IMI (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
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<PAGE>
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."
Board and Shareholder Approval; Independent Opinion. On May 20, 1998, the
Board of Directors of the Company approved the Merger unanimously. Certain
members of the Board of Directors have conflicts of interest. See "Interests of
Certain Persons in the Merger; Conflicts of Interest." No unaffiliated advisor
to the Board, any group of Directors or the Shareholders was retained prior to
May 20, 1998 for purposes of negotiating or reporting on the fairness of the
Merger. Subsequently, the Board engaged Laidlaw & Co. ("Laidlaw"), an investment
bank, to perform a financial analysis and to consider the fairness of the Merger
Consideration. See - "Laidlaw Review." In approving the Merger, the Board
considered the recent completion of Holdings' acquisition and its willingness to
effect the Merger at the same price per share being paid to minority
shareholders, which price Holdings and Mr. Hirschorn had negotiated at
arms-length. Holdings, IMI and IAC Partners considered the historic financial
results and position of the Company generally when the price between Holdings
and Mr. Hirschorn was agreed, made numerous inquiries to confirm the nature and
extent of the Company's assets and liabilities, and performed extensive
financial analyses. However, prior to approval of the Merger by the Board on May
20, 1998, no going concern or liquidation valuations were performed for the
Board. In considering the Merger, the Board of Directors did not undertake any
additional financial analyses to determine whether the Merger Consideration was
fair to unaffiliated shareholders. Based primarily on the fact that the Merger
Consideration of $11.00 per share represents a premium over the recent market
price of the Common Stock and that the price was agreed as a result of
arms-length negotiations between Holdings and Mr. Hirschorn, the Board of
Directors determined that additional financial analysis was not necessary to
reach a fairness determination. The Board of Directors also concluded that as a
result of the arms-length nature of the negotiations between Holdings and Mr.
Hirschorn and the fact that the price per share reflected a premium over the
market value of the Company, the process used in arriving at the Merger
Consideration was procedurally fair to all shareholders, including those not
affiliated with Holdings, IMI, IMC or IAC Partners. Certain members of the Board
of Directors have conflicts of interest. See "Interests of Certain Persons in
the Merger; Conflicts of Interest."
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.
Although the net book value per share of Common Stock was $13.71 at March
31, 1998, the Board of Directors, Holdings, IMI, IMC and IAC Partners concluded
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<PAGE>
that recent net losses incurred by the Company of $.78, $.58 and $.41 per share
for the quarters ended June 30 and March 31, 1998 and the year ended December
31, 1997, respectively, and the lack of certainty as to when these losses may be
reversed, did not make book value a reliable indicator as to the going-concern
value of the Company. At June 30, 1998 the net book value per share of Common
Stock was $12.34.
Although it is impracticable to assign a specific weight given to each of
the factors considered by the Board, the most heavily weighted factors in the
Board's decision were the premium being paid over the market price of the Common
Stock and the arm's length negotiation of the $11.00 price per share paid by
Holdings to Mr. Hirschorn. See "-- Acquisition; Purpose of the Merger; Fairness
Factors."
Laidlaw Review. On July 22, 1998, the Company retained Laidlaw to perform a
financial analysis of the Merger and to consider the fairness of the Merger
Consideration previously approved by the Board of Directors, from the
perspective of shareholders not affiliated with Holdings, IMI, IMC or IAC
Partners. Laidlaw was engaged to provide an additional level of procedural
fairness to such unaffiliated holders. Laidlaw has no other relationship to the
Company, Holdings, IMI, IMC or IAC Partners.
Laidlaw, founded in 1842, is a privately held, full service, international
investment bank which serves domestic and international corporations and
investors. Laidlaw's capabilities include asset management, institutional and
retail sales, trading, research and investment banking. As part of its
investment banking services, Laidlaw is engaged in public offerings and private
placements of both debt and equity securities. Additionally, Laidlaw offers its
clients a wide array of advisory services including merger and acquisitions,
divestitures, recapitalizations and fairness opinions.
On July 31, 1998, Laidlaw delivered its conclusions (the "Laidlaw Review")
with respect to the Merger and the fairness of the Merger Consideration to the
Board of Directors of the Company.
In summary, among other things, Laidlaw (i) reviewed certain publicly
available business and financial information, (ii) reviewed certain other
information, including financial forecasts provided by the Company, and (iii)
met with the Company's and Holdings' management to discuss the business and
prospects of the Company.
Based on the above procedures Laidlaw concluded that the consideration of
$11.00 per share to be paid to the Company's shareholders was fair from a
financial point of view.
On July 31, 1998 the Board of Directors met to consider the Laidlaw Review.
Based on the Laidlaw Review, as well as the various factors relating to the
Merger which it had previously considered, and further operating losses incurred
since the May 20, 1998 approval of the Merger, the Board of Directors
unanimously reapproved the Merger.
-10-
<PAGE>
A copy of the opinion of Laidlaw is available for inspection and copying at
the principal executive offices of the Company located at 1160 Commerce Avenue,
Bronx, New York during regular business hours (9:00 a.m. to 5:00 p.m.) by any
interested Shareholder or representative of a Shareholder who has been so
designated in writing.
Background of Change of Control. In November 1997, IAC 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 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 enable the Company to pay all or a portion of the Merger
Consideration. If the Merger is consummated, the Loan, including any additional
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
-11-
<PAGE>
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. As a principal of Mezzanine Management Ltd., an investment advisor to
IMI, Mr. Read may receive fees from IMI in connection with the provision of
services. Mr. Dineen is a salaried employee of Mezzanine Management Ltd. Through
companies owned by them, Messrs. Davies and Hemsley control IAC Partners which,
if requested, has agreed to provide advisory and consulting services to
Holdings. In addition, IAC Partners holds an option to acquire 12% of the common
stock of Holdings on a fully diluted 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. Through IAC Partners, Mr. Davies and Mr.
Hemsley have an indirect interest in 80% of such option and 80% to 100% of fees
for such advisory and consulting services depending on the type of services
provided. Mr. Haidinger is president of a company in which IMI has a substantial
interest. Although Mr. Haidinger may not have a conflict of interest that is
financial in nature, his relationship with IMI may be such that
-12-
<PAGE>
scenarios may arise where the interests of the Company differ from those of IMI.
The nature of these conflicts is such that the Directors indicated 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 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.
Material 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 re-
-13-
<PAGE>
duce net gain from the 28% group. A net loss in the 28% group may be used to
offset gain from the 20% group.
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:
-14-
<PAGE>
(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 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.
-15-
<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 August 3, 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 third calendar quarter through August 3, 1998 and the first
and second calendar quarters of 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 10 7/8 9 1/16
Third Quarter (through August 3, 1998) 10 1/8 10
The closing bid price of the Company's Common Stock on May 19, 1998, the
day before the Merger was announced to the public, was $9.25.
-16-
<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, IMI, IMC and IAC Partners
The sole stockholder of Holdings is IMI. The address of the principal
executive offices of IMI is John B. Gorsiraweg 14, P.O. Box 3889, Curacao,
Netherlands Antilles. IMI is a private company which invests in the debt and
equity securities of corporations in Europe and the United States. IMC is a
wholly owned subsidiary of IMI. Its principal executive offices are located at
Herengracht 424, 1017BZ, Amsterdam, The Netherlands and its principal business
is investing in the debt and equity securities of corporations in Europe and the
United States. IAC Partners is a partnership whose principal executive offices
are located at 82 Powder Point Avenue, Duxbury, Massachusetts 02332. IAC
Partners was formed in connection with the Acquisition and its only continuing
business is providing advisory and consulting services to Holdings. Set forth
below is certain information concerning the Directors and Executive Officers of
Holdings, IMI, IMC and IAC Partners.
<TABLE>
<CAPTION>
Directors and Executive Officers of Holdings
Name and Business Address Principal Occupation Citizenship
<S> <C> <C>
James A. Read Managing Director USA
c/o Mezzanine Management Ltd. Mezzanine Management Ltd.
Mansfield House (an investment advisor to IMI)
One Southampton Street
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 LLC Mezzanine Management LLC
100 First Stamford Place - 6th Floor
Stamford, Connecticut 06902
-17-
<PAGE>
Robert M. Haidinger President, CEO USA
c/o JJI Lighting Group JJI Lighting Group
67 Holly Hill Lane
Greenwich, Connecticut 06830
</TABLE>
- --------------------
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 of IMI and IMC
Each of the persons named below is a director of both IMI and IMC other
than MeesPierson Trust (Curacao) N.V. which is a director of IMI but not IMC and
Mr. Schouten who is a director of IMC but not IMI. Other than Mr. Schouten,
whose principal occupation is to act as a director of IMC (and First Britannia
Mezzanine Capital B.V., an unrelated investing corporation advised by Mezzanine
Management Ltd.), IMI and IMC have no executive officers.
<TABLE>
<CAPTION>
Name and Business Address Principal Occupation Citizenship
<S> <C> <C>
D. Thomas Abbott Chairman USA
c/o Mees Pierson Holdings, Inc. Mees Pierson Holdings, Inc.
31 Stamford Plaza
310 Tresser Boulevard
Stamford, CT 06901-3239
Ian Cotterill Director, United Kingdom
c/o HSBC Investment Bank plc Hongkong Shanghai Bank
Vintner's Place
68 Upper Thames Street
London EC4V 3BJ, England
Franz Horhager Director, Austria
c/o Bank Austria AG Bank Austria AG
Am Hof 2
A-1010 Vienna, Austria
A. Kipp Koester Managing Director, USA
c/o The Northwestern Mutual Life The Northwestern Mutual Life
Insurance Company Insurance Company
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-4797
-18-
<PAGE>
Hamish Mair Associate Director, United Kingdom
c/o Scottish Eastern Investment Martin Currie Investment
Trust plc Management Ltd.
Saltire Court
20 Castle Terrace
Edinburgh EH1 2ES Scotland
MeesPierson Trust (Curacao) N.V. Trust company
John B. Gorsiraweg 14 Netherlands Antilles
P.O. Box 3889
Curacao
Netherlands Antilles
Muneef Othman Executive Director United Arab
Abu Dhabi Investment Authority Abu Dhabi Investment Authority Emirates
P.O. Box 3600
Abu Dhabi, United Arab Emirates
Jacobus Schouten Director, IMC The Netherlands
c/o International Mezzanine and First Britannia Mezzanine
Capital B.V. Capital B.V.
Herengracht 424
1017 BZ Amsterdam
The Netherlands
Charles E. Symington Vice President, USA
c/o Metropolitan Life Investment Metropolitan Life Investment
Company Company
43 Pippins Way
Morristown, N.J. 07960
Stephen Weber Director Equities United Kingdom
c/o Norwich Union Life & Pensions Norwich Union Life & Insurance
Limited Society
P.O. Box 150
37 Surrey Street
Norwich NR1 3UZ England
</TABLE>
- -----------------------------
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, Othman and
Schouten 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.
<TABLE>
<CAPTION>
Partners of IAC Partners
Name and Business Address Principal Occupation Citizenship
<S> <C> <C>
Robert M. Davies(1) Merchant Banking United Kingdom
c/o The Menai Group LLC Managing Director
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<PAGE>
100 First Stamford Place Menai Capital LLC
6th Floor
Stamford, Connecticut 06902
Maarten D. Hemsley(1) Merchant Banking United Kingdom
c/o Bryanston Management Ltd. Managing Director
82 Powder Point Avenue Menai Capital LLC
Duxbury, Massachusetts 02332
Robert P. Schreimer Attorney USA
c/o StoneRidge Partners, Inc.
650 Third Avenue - 3rd Floor
New York, New York 10016
David Stoller Attorney USA
c/o Millbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
</TABLE>
- -----------------------------
(1) The interests of Messrs. Davies and Hemsley in IAC Partners are held by
the Menai Group LLC, which is wholly owned by Mr. Davies , and
Bryanston Management Ltd., which is wholly owned by Mr. Hemsley.
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
Laidlaw & Co opinion fee........................ 50,000
Legal Fees and Expenses......................... 100,000
Accounting Fees and Expenses.................... 10,000
Printing Expenses............................... 5,000
Miscellaneous................................... 3,620
-------
Total.................................. $170,000
=======
In connection with the Merger, neither the Company nor Holdings anticipate
incurring any appraisal or solicitation fees or expenses. Proxies may be
solicited by employees of the Company without additional compensation.
-20-
<PAGE>
Independent Auditors
PriceWaterhouseCoopers LLP are the Company's independent auditors.
Representatives of PriceWaterhouseCoopers 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.
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, and
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. The SEC also maintains a
Web site that contains reports, proxy, information state-
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<PAGE>
ments and other information regarding registrants that file electronically with
the SEC. The address of such site is http://www.sec.gov.
Accompanying and forming a part of 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. In addition, the Company's Quarterly Reports on Form 10-Q for
the quarterly periods ended March 31 and June 30, 1998 accompany and form a part
of this Proxy Statement.
Financial Information
Selected Financial Data
The following table sets forth selected consolidated financial data of the
Company for each of the last five years:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Net Sales $ 72,911 $ 73,623 $ 70,633 $ 71,736 $ 86,571
Net (Loss) Income $ (1,218) $ 364 $ (448) $ (1,701) $ 3,918
Basic and Diluted
(Loss) Income per common share $ (0.41) $ 0.12 $ (0.15) $ (0.57) $ 1.32
---------- ---------- ---------- ----------- ----------
Total Assets $ 74,262 $ 72,845 $ 75,716 $ 71,730 $ 73,124
Long Term Obligations $ 5,081 $ 4,499 $ 4,683 $ 2,431 $ 2,504
Cash Dividends per Common Share* None $ 0.10 $ 0.10 $ 0.10 $ 0.30
</TABLE>
* Declared and paid in March of subsequent year.
-22-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Industrial Acoustics Company, Inc.:
We have audited the consolidated financial statements and financial
statement schedule of INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES as
appearing in of this Proxy Statement. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We did not audit the financial
statements and financial statement schedule of Industrial Acoustics Company
Limited and Subsidiaries, a wholly owned subsidiary, which statements reflect
total assets of $17,104,000 and $18,690,000 at December 31, 1997 and 1996,
respectively, and total revenues of $19,310,000, $22,126,000 and $23,731,000 for
the years ended December 31, 1997, 1996 and 1995, respectively. Those statements
and schedule were audited by other auditors whose report has been furnished to
us, and our opinion, insofar as it relates to the amounts included for
Industrial Acoustics Company Limited and Subsidiaries, is based solely on the
report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Industrial Acoustics Company, Inc. and
Subsidiaries as of December 3l, 1997 and 1996, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 3l,1997 in conformity with generally accepted accounting
principles. In addition, in our opinion, based on our audits and the report of
other auditors, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
Coopers & Lybrand L. L. P.
New York, New York
March 11, 1998
-23-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Industrial Acoustics Company Limited
We have audited the consolidated balance sheets of Industrial Acoustics
Company Limited and subsidiaries (a wholly owned subsidiary of Industrial
Acoustics Company Inc.) as of 31st December 1997 and 1996 and the related
consolidated statements of income and retained earnings, and cash flows and the
financial statement schedule for each of the three years in the period ended
31st December 1997. These financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Industrial
Acoustics Company Limited and subsidiaries as of 31st December 1997 and 1996 and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended 31st December 1997 in conformity with
accounting principles generally accepted in the United States. In addition, in
our opinion, the financial statement schedule referred to above, when considered
in relation to the basic financial statements taken as a whole, present fairly.
in all material respects, the information required to be included therein.
Kidsons Impey
Registered Auditors
Chartered Accountants
London
February 12, 1998
-24-
<PAGE>
<TABLE>
<CAPTION>
INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
(in thousands, except per share data)
1997 1998
---- ----
<S> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents.................................................. $ 3,032 $ 1,254
Short-term investments, available for sale................................. 457 218
Receivables................................................................ 17,843 22,713
Costs and estimated earnings in excess of billings on uncompleted
contracts................................................................ 6,774 5,108
Inventories................................................................ 5,856 4,605
Income tax receivable...................................................... 685
Deferred income taxes...................................................... 215 130
Prepaid expenses........................................................... 1,609 1,473
----- -----
Total Current Assets 35,786 36,186
MARKETABLE SECURITIES, available for sale....................................... 22,328 20,584
PROPERTY, PLANT AND EQUIPMENT, net.............................................. 12,540 13,028
DEFERRED INCOME TAXES........................................................... 975 124
OTHER ASSETS.................................................................... 2,633 2,923
----- -----
Total Assets $74,262 $72,845
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
Loans payable................................................................ $ 9,656 $ 8,775
Accounts payable and accrued expenses........................................ 16,167 15,606
Income taxes................................................................. 193
Customer deposits............................................................ 730 389
Current portion of long-term debt and capital lease obligations.............. 78 71
Billings In excess of costs and estimated earnings on uncompleted
contracts.................................................................. 1,491 1,128
----- -----
Total Current Liabilities 28,315 25,969
CAPITAL LEASE OBLIGATIONS....................................................... 3,055 3,132
DEFERRED INCOME TAXES........................................................... 687
DEFERRED COMPENSATION........................................................... 1,339 1,367
----- -----
Total Liabilities 33,396 30,468
====== ======
COMMITMENTS
SHAREHOLDERS' EQUITY:
Common Stock, par value $.1 0 per share; authorized 5,000 shares; issued and
outstanding 2,979 shares, excluding 87 shares held in treasury at par value 298 298
Additional paid-in capital................................................... 2,223 2,223
Equity Adjustments:
Cumulative currency translation adjustment................................. (117) 152
Net unrealized gain (loss) on marketable securities........................ 107 (167)
Retained earnings............................................................ 38,355 39,871
------ ------
-25-
<PAGE>
Total Shareholders' Equity 40,866 42,377
------ ------
Total Liabilities and Shareholders' Equity $74,262 $72,845
======= =======
</TABLE>
See notes to consolidated financial statements.
-26-
<PAGE>
<TABLE>
<CAPTION>
INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS of OPERATIONS
for the years ended December 31, 1997,1996 and 1995
(in thousands, except per share daft)
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
REVENUES
Net sales.................................................... $72,911 $73,623 $70,633
Interest..................................................... 1,615 1,609 1,553
Other........................................................ 738 918 574
------ ------ ------
75,264 76,150 72,760
------ ------ ------
COST AND EXPENSES
Cost of products sold........................................ 61,934 62,105 59,657
Selling, administrative and general.......................... 13,474 12,680 13,068
Interest..................................................... 939 1,078 586
------ ------ ------
76,347 75,863 73,311
------ ------ ------
(Loss) income before income taxes (1,083) 287 (551)
Provision (benefit) for income taxes............................ 135 (77) (103)
------ ------ ------
Net (loss) income ($1,218) $364 ($448)
======= ====== ======
Basic and diluted net (loss) income per common share............ ($0.41) $0.12 ($0.15)
======= ====== ======
Weighted Average Number of Shares Outstanding:
Basic........................................................ 2,979 2,979 2,979
======= ====== ======
Diluted...................................................... 2,979 2,990 2,979
======= ====== ======
</TABLE>
See notes to consolidated financial statements
-27-
<PAGE>
INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS of SHAREHOLDERS' EQUITY
for the years ended December 31, 1997, 1996 and 1995
(in thousands, except per share data)
Common Stock* Equity Adjustments
------------- ------------------
Net
Unrealized
Number Additional Cumulative Gain (Loss) on
of Paid-in Currency Marketable Retained
Shares Amount Capital Translation Securities Earnings Total
------ ------ ------- ----------- ---------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 3l, 1994.. 2,979 $298 $2,223 ($325) ($580) $40,550 $42,166
Net loss for 1995........... (448) (448)
Cash dividends paid -- $.10
per share.................. (298) (298)
Equity adjustments:
Currency translation....... (20) (20)
Net unrealized gain on
marketable securities, net
of income taxes
of $306................... 1,034 1,304
------- ------ ------- ------ ------ ------ ------
Balance at December 31, 1995.. 2,979 298 2,223 (345) 454 39,804 42,434
Net income for 1996......... 364 364
Cash dividends paid -- $.10
per share.................. (297) (297)
Equity adjustments:
Currency translation....... 497 497
Not unrealized loss on
marketable securities, net
of income taxes (621)
of $111................... (621)
------- ------ ------- ------ ------ ------ ------
Balance at December 31, 1996.. 2,979 298 2,223 152 (167) 39,871 $42,377
Net loss for 1997........... (1,218) (1,218)
Cash dividends paid -- $.1 0
per share.................. (298) (298)
Equity adjustments:
Currency translation....... (269) (269)
Not unrealized gain on
marketable securities, net
of Income taxes 274 274
of $182...................
------- ------ ------- ------ ------ ------ ------
Balance at December 31, 1997 2,979 $298 $2,223 ($117) $ 107 $38,355 $40,866
======= ====== ======= ====== ====== ======= =======
* Excluding common stock held in treasury of 87 shares for all years presented.
</TABLE>
See notes to consolidated financial statements
-28-
<PAGE>
<TABLE>
<CAPTION>
INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS of CASH FLOWS
for the years ended December 31, 1997, 1996 and 1995
(in thousands, except per share data)
1997 `1996 1995
---- ----- ----
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net (loss) income............................................ ($1,218) 364 ($448)
Adjustments to reconcile net (loss) income to net cash provided by (used in)
operating activities:
Depreciation and amortization.............................. 1,267 1,305 1,204
Deferred income taxes...................................... (431) (184) 102
Deferred compensation...................................... (28) 90 50
Changes in operating assets and liabilities:
Receivables................................................ 4,489 4,731 2,736
Costs and estimated earnings in excess of billings on
uncompleted contracts..................................... (1,667) 2,230 (3,288)
Inventories and prepaid expenses........................... (1,447) (834) 395
Income tax receivable...................................... 685 (685) --
Accounts payable and accrued expenses...................... 820 (776) 400
Income taxes 193 (131) 1,329
Billings in excess of costs and estimated earnings on
uncompleted contracts..................................... 364 103 (2,105)
Customer deposits.......................................... 346 103 (444)
Other assets............................................... 345 (2,537) (121)
------ ------- -------
Net cash Provided by (used in) operating activities 3,718 3,779 (190)
------ ------- -------
INVESTING ACTIVITIES
Purchase of property, plant and equipment.................... (1,024) (1,956) (3,964)
Sales of short-term investments and marketable securities.... 3,564 15,184 3,176
Purchases of short-term investments and marketable securities (5,091) (14,103) (3,738)
------ ------- -------
Net cash used in investing activities (2,551) (875) (4,526)
------ ------- -------
FINANCING ACTIVITIES
Loans payable, net........................................... 1,018 (2,720) 3,412
Payments on long-term debt and capital lease obligations..... (72) (13) (194)
Dividends paid............................................... (298) (297) (298)
------ ------- -------
Net cash provided by (used in)
financing activities 648 (3,030) 2,920
------ ------- -------
FOREIGN EXCHANGE
Effect of exchange rate changes on cash...................... (37) (126) 29
Increase (decrease) in cash and
cash equivalents 1,778 (252) (1,767)
Cash and cash equivalents at beginning of year.................. 1,254 1,506 3,273
------ ------- -------
Cash and cash equivalents at end of year $ 3,032 $1,254 $1,506
======= ======= =======
-29-
</TABLE>
<PAGE>
See notes to consolidated financial statements.
-30-
<PAGE>
INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands, except per share data)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned. All significant
intercompany accounts and transactions have been eliminated.
Management's Use of Estimates:
In conformity with generally accepted accounting principles, management
must make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash Equivalents:
The Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash equivalents.
Inventories:
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
Long-term Construction Contracts:
Estimated earnings on long-term construction type contracts are recognized
on the percentage-of-completion method, measured by the percentage of costs
incurred to date to estimated total costs for each contract. Periodic reviews of
estimated final revenues and costs during the terms of such contracts may result
in revisions of contract estimates, the effects of which are recognized in the
periods in which the revisions are determined. Provision for estimated losses on
uncompleted contracts are made in the period in which such losses are
determined.
Included in receivables are retainages of $1,054 and $844 at December 31,
1997 and 1996, respectively. The Company expects to collect the open retainage
in 1998.
-31-
<PAGE>
INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollars and shares in thousands, except per share data)
Before tax operating results for 1997 and 1996 were decreased by $1,066 and
$2,250, net, due to changes in revenues and cost estimates on long-term
contracts.
Property, Plant and Equipment:
Property, plant and equipment are carried at cost. Depreciation and
amortization of property, plant and equipment, including leased property, are
provided principally by the straight-line method based over the estimated useful
lives of the depreciable assets or the term of the related leases, if less. The
cost and accumulated depreciation or amortization of assets refined or sold are
removed from the respective accounts and any gain or loss is recognized in
operations.
Research and Development:
Research and development expenditures, which are expensed as incurred,
amounted to $825, $944 and $872 in 1997, 1996 and 1995, respectively.
Short-Term Investments and Marketable Securities:
The Company primarily invests its available funds into U.S. federal, state
and local government and corporate debt securities. The Company considers such
investments to be "available-for-sale" as defined by Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for certain Investments in
Debt and Equity Securities". SFAS 115 requires that the difference between the
carrying value and market value, as of the balance sheet date, of available
for-sale-investments be recorded as an adjustment to shareholders' equity.
In the event of a decline in market value below carrying value ("Decline"),
which is other than temporary and resulting from factors other than changes in
interest rate, such Decline would be included in the operating results of the
Company in the period in which it occurs. In addition, if a Decline exists for
an investment which has been identified to be sold, such Decline would also be
included in operating results in the period in which it is identified to be
sold. During the year ended December 31, 1997, there were no Declines.
Earnings per Common Share Data:
The Company adopted SFAS No. 128, "Earnings per Share," in 1997. As
required by the statement, the Company restated all prior-period per share data
presented. SFAS No. 128 requires presentation of both basic and diluted earnings
per share. Basic
-32-
<PAGE>
INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollars and shares in thousands, except per share data)
earnings per share are calculated based on the weighted average number of shares
of common stock outstanding during the reporting period. Diluted earnings per
share are calculated giving effect to all potentially dilutive common shares,
assuming such shares were outstanding during the reporting period.
As required by SFAS No. 128, the Company has provided a reconciliation of
basic weighted average shares to diluted weighted average shares within the
table outlined below. The conversion of diluted shares has no impact on the
Company's operating results. Options to purchase 200,000 shares of common stock
were also outstanding at December 31, 1997 and 1995 but were not included in the
computation of diluted earnings per share because they would have had an
anti-dilutive effect on the earnings per share.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Weighted average number of shares - basic............................. 2,979 2,979 2,979
Dilutive effect of shares issuable as of year end under the
stock option plan.................................................. -- 11 --
----- ----- -----
Weighted average number of shares - diluted........................... 2,979 2,990 2,979
===== ===== =====
</TABLE>
Concentration of Credit Risk:
Financial instruments which potentially subject the Company to
concentrations of credit risk include cash, cash equivalents, short-term
investments, marketable securities and accounts receivable. The Company holds no
collateral for these financial instruments. The Company places its available
funds into government and corporate debt securities as well as investments with
financial institutions and, by policy, limits the amount of credit exposure to
any one issuer. Except for contracts with the United States Government,
concentration of credit risk with respect to accounts receivables are limited
due to a large diversified customer bass which is not concentrated in any one
geographic area. Some of the Company's contracts with the United States
Government have delivery schedules extending for more than one year. Under
applicable United States Government procedures, such contracts may be subject to
annual funding. Accordingly, there is some risk, even after a United States
Government contract has been awarded to the Company, that the necessary funding
for purposes of the contract may not be made available, in subsequent years, to
the relevant United States Government agency. United States Government contracts
may also be subject to cancellation, in which event, the Company would be
entitled to recover incurred costs on completed units, work in progress and
profits associated with such costs.
-33-
<PAGE>
INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollars and shares in thousands, except per share data)
Recently Issued Accounting Standards:
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" and SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information." SFAS No. 130 establishes standards for reporting and
display of comprehensive income and its components (revenues, expenses, gains
and losses) in full set general purpose financial statements. SFAS No. 131
establishes accounting standards for the way that public business enterprises
report selected information about operating segments and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. SFAS No. 130 and SFAS No. 131 are
required to be adopted by 1998. The Company is currently evaluating the impact,
if any, of SFAS No. 130 and SFAS No. 131.
Foreign Currency Translation:
All non-U.S. subsidiaries consider their local currencies to be their
functional currencies. Net assets of non-U.S. subsidiaries are translated into
U.S. dollars based on the current rates of exchange. Income and expense items
are translated at the average exchange rate for the year. The resulting
translation adjustments are recorded directly into a separate component of
shareholders' equity.
Foreign currency transaction gains and losses result from the periodic
fluctuation in exchange rates, as measured at the respective balance sheet
dates, for transactions denominated in currencies other than the respective
functional currencies used by the Company and its subsidiaries. Such gains and
losses are included in the Company's operating results in the period in which
the exchange rate changes. The net foreign currency transaction (losses) gains
included in (loss) income before taxes for 1 997,1996 and 1995 were ($169), $211
and ($52), respectively. These net foreign currency translation (losses) gains
include ($149) and $366 in 1997and 1966, respectively, applicable to a U.S.
dollar demand loan payable to the Company by its subsidiary, Industrial
Acoustics Company Ltd (IAC Ltd).
Reclassification:
Certain items in 1996 and 1995 have been reclassified to conform to the
1997 presentation.
-34-
<PAGE>
INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollars and shares in thousands, except per share data)
NOTE B - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES
The Company considers its marketable securities to be "available-for-sale",
as defined by SFAS 115, and, accordingly, unrealized holding gains and losses
are excluded from operations and reported as a net amount in a separate
component of shareholders' equity.
The following table summarizes the aggregate fair value of short-term
investments and marketable securities, gross unrealized holding gains and
losses, and the amortized cost basis of short term investments and marketable
securities at December 31, 1997:
<TABLE>
<CAPTION>
Unrealized Holding
------------------
Amortized Market
Description Cost Basis Value Gains (Losses) Net
- ----------- ---------- ----- ----- -------- ---
<S> <C> <C> <C> <C> <C>
Maturities within one year:
Corporate debt securities............... $ 452 $ 457 $ 5 $ 0 $ 5
------- ------- ------ ------ ------
452 457 5 0 5
------- ------- ------ ------ ------
Maturities between one and five years:
Corporate debt securities............... 3,616 3,698 116 (34) 82
U.S. Government securities.............. 501 518 17 0 17
State and Local Government securities... 186 191 5 0 5
------- ------- ------ ------ ------
4,303 4,407 138 (34) 104
------- ------- ------ ------ ------
Maturities between five and ten years:
Corporate debt securities............... 7,393 7,393 103 (103) (0)
U.S. Government securities.............. 254 251 0 (3) (3)
State and local government securities... 120 122 3 (1) 2
------- ------- ------ ------ ------
7,767 7,766 106 (107) (1)
------- ------- ------ ------ ------
Maturities after ten years
Corporate debt securities............... 9,495 9,572 165 (88) 77
State and local government securities... 590 583 9 (16) (7)
------- ------- ------ ------ ------
10,085 10,155 174 (104) 70
------- ------- ------ ------ ------
$22,607 $22,785 $ 423 ($245) $178
======= ======= ====== ====== ======
</TABLE>
The aggregate net unrealized gain of $178, less applicable taxes of $71,
has been included as a $107 addition to shareholders' equity at December 31,
1997. At December 31, 1996, the aggregate net unrealized loss of $278, less
applicable taxes of $111, was included as a $167 reduction in shareholders'
equity.
Realized gains and losses are included as a component of other income. For
the year ended December 31, 1997, gross realized gains were $89 and gross
realized losses were $38 for a total not realized gain of $51. For the years
ended December 31, 1996 and 1995, net realized gains (losses) were $249 and
($120), respectively. In computing realized
-35-
<PAGE>
INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollars and shares in thousands, except per share data)
gains and losses, the Company computes the cost of its investments on a specific
identification basis. Such cost includes the direct costs to acquire the
securities, adjusted for the amortization of any discount or premium. The fair
value of investments has been estimated based on quoted market prices.
-36-
<PAGE>
INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollars and shares in thousands, except per share data)
NOTE C - SUPPLEMENTAL BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
December 31
1997 1998
---- ----
RECEIVABLES:
<S> <C> <C>
Completed orders, less allowances for doubtful accounts
(1997-- $534 1996-- $913).............................................. $15,266 $18,082
Billings on uncompleted contracts........................................ 1,560 3,648
Other.................................................................... 1,017 983
------- -------
$17,843 $22,713
======= =======
COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS:
Direct costs incurred on uncompleted contracts........................... $32,983 $45,776
Estimated earnings....................................................... 15,376 21,049
------- -------
48,359 66,825
Low billings to date..................................................... (43,076) (62,845)
------- -------
$5,283 $3,980
======= =======
Theabove balance is included in the accompanying balance sheets under the
following captions:
Costs and estimated eamings in excess of billings on uncompleted contracts $6,774 $5,108
Billings in excess of costs and estimated earnings on uncompleted contracts (1,491) (1,128)
------- -------
$5,283 $3,980
======= =======
INVENTORIES:
Materials and supplies................................................... $2,246 $1,492
Work in process.......................................................... 3,610 3,113
------- -------
$5,856 $4,605
======= =======
PROPERTY, PLANT AND EQUIPMENT:
Land..................................................................... $203 $203
Buildings................................................................ 12,252 12,537
Machinery, fixtures and equipment........................................ 10,796 9,931
Leasehold improvements................................................... 565 539
Lab and wind tunnel...................................................... 245 245
------- -------
24,061 23,455
Less allowances for depreciation and amortization........................... (11,521) (10,427)
------- -------
$12,540 $13,028
======= =======
</TABLE>
In 1995, IAC Ltd. completed the acquisition of a 90,000 square foot factory
in Winchester, England for $3,146. This purchase price and costs related to
factory renovations were substantially financed with the proceeds of a
short-term loan from Midland Bank. IAC Ltd moved to the Winchester facilities
during the second quarter of 1996. For 1996, selling, administrative and general
expenses include $683 attributable to the relocation.
-37-
<PAGE>
INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollars and shares in thousands, except per share data)
Fully depreciated assets were $4,181 and $3,317 in 1997 and 1996,
respectively.
OTHER ASSETS:
In 1992, the Company entered into a Split-Dollar Life Insurance Agreement
with Michael Hirschorn, a director of the Company, wherein the Company agreed to
advance up to one-half of the amount of premiums on an insurance policy owned by
Michael Hirschorn on the life of Martin Hirschorn, his father and President of
the Company. The Company shall be reimbursed for such advances, which are
non-interest bearing, by Michael Hirschorn upon the earlier to occur of the
surrender of such policy or the payment of proceeds upon the death of Martin
Hirschorn. As of December 31, 1997 and 1996, advances totaling approximately
$391 and $344, respectively, are included in other assets.
ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable............................. $ 9,374 $ 9,764
Accrued commissions.......................... 1,726 1,844
Salaries, wages and related items............ 2,267 1,752
Accrued expenses............................. 2,800 2,246
------- -------
$16,167 $15,606
======= =======
NOTE D - BORROWINGS
Loans Payable -- The Company, as of December 31, 1997 and 1996, had
outstanding $9,656 and $8,775 of short-term borrowings. At December 31, 1997,
the Company borrowed $6,250 ($5,150 at December 31, 1996) under a $10,000 line
of credit from a commercial bank. Such amount accrues interest, payable monthly,
at a variable rate of 7.31% (7.1% at December 31, 1996) and is collateralized by
marketable securities with a market value of $11,850. In addition, the Company
owes $3,406 in the United Kingdom ($3,625 at December, 31, 1996) in connection
with the purchase of property. The loan is payable on demand, is collateralized
by the purchased property, and accrues interest, payable monthly, at 8.75% per
annum at December 3l, 1997 (8% at December 3l, 1996). For the years ended
December 31, 1997 and 1996, the weighted average interest rate on all short-term
loans payable was 7.52% and 7.35% respectively. Interest paid amounted to $940,
$1,100 and $563 in 1997, 1996 and 1995, respectively.
-38-
<PAGE>
INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollars and shares in thousands, except per share data)
The carrying amount for the bank borrowings approximates fair value because
the loans are short term.
NOTE E - INCOME TAXES
The components of (loss) income before income taxes are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Domestic........................................................ $703 ($28) $985
Foreign......................................................... (1,786) 315 (1,536)
------- ------- ------
($1,083) $287 ($551)
======= ======= ======
Provision (benefit) for federal, foreign, state and local income taxes
consist of the following:
1997 1996 1995
---- ---- ----
Current:
Federal.............................................. $ 352 ($72) $304
Foreign.............................................. (21) 32 (471)
State and local...................................... 235 95 60
------- ------- ------
566 55 (107)
------- ------- ------
Deferred:
Federal.............................................. (231) (212) (102)
Foreign.............................................. (259) 86 (22)
State and local...................................... 59 (6) 128-
------- ------- ------
(431) (132) 4
------- ------- ------
$ 135 ($77) ($103)
======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
Deferred taxes at December 31, 1997 and 1996 consist of the following:
1997 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Inventory and accounts receivable reserves....................... $ 135 $ 106
Accrued expenses................................................. 80 115
Deferred compensation............................................ 701 618
Marketable securities............................................ -
Deferred gain in United Kingdom from intercompany
-39-
<PAGE>
INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollars and shares in thousands, except per share data)
sale of building 309 111
State and local net operating loss carry forwards................ 274 120
------- -------
Total deferred tax assets 1,499 1,070
------- -------
Deferred tax liabilities:..........................................
Property, plant and equipment.................................... 297 534
Marketable securities............................................ 71 -
Pension liability................................................ 319 282
------- -------
Total deferred tax liabilities..................................... 687 816
------- -------
Net deferred tax asset............................................. $ 812 $ 254
Less: valuation allowance.......................................... (309) --
------- -------
$ 503 $ 254
======= =======
</TABLE>
The valuation allowance was established for the amount by which
deferred tax assets exceed deferred tax liabilities in ther United
Kingdom as a result of the recent losses at IAC Ltd.
The following table accounts for the differences between the actual
provision and the amounts obtained by applying the statutory U.S. Federal Income
tax rate of 34% to the income before Income taxes:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Federal statutory tax rates............................... (34)% 34% (34)%
State and local Income taxes, net of federal benefit...... 18 (1) 29
Nontaxable interest....................................... -- (69) (19)
Different effective tax rate in the United Kingdom........ 30 4 6
Other..................................................... (2) 5 (1)
---- --- ---
12% (27)% (19)%
==== === ===
</TABLE>
Accumulated undistributed earnings of foreign subsidiaries at December 31,
1997 aggregated $2,229. No federal income taxes have been provided, since the
Company plans to reinvest undistributed earnings of the subsidiaries to finance
expansion and meet operating requirements. If such earnings were distributed,
foreign tax credits should be-
-40-
<PAGE>
INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollars and shares in thousands, except per share data)
come available under current law to reduce or eliminate the resulting U.S.
income tax liability.
Federal, foreign, state and local income taxes paid amounted to
approximately $118, $488 and $70 in 1997, 1996 and 1995, respectively.
NOTE F - EMPLOYEE BENEFIT PLANS
The Company has a Defined Contribution Tax Deferred Savings Plan covering
all U.S. employees not covered by collective bargaining agreements. The
Company's elective contribution is allocated to employees based on a five year
average salary basis and is integrated with Social Security. In 1997, the
Company expensed $300 in connection with this Plan.
The Company has a defined benefit pension plan in the United Kingdom
covering certain eligible employees. The Plan provides benefits based on years
of service and an employee's average compensation for the last three years of
employment before retirement. The Company's funding policy is to contribute
amounts sufficient to meet the minimum funding requirements. Assets of the plan
are comprised of a "with profits group" bond effected with an United Kingdom
assurance company.
Pension costs include the following components:
<TABLE>
<CAPTION>
1997 1`996 1995
<S> <C> <C> <C>
Service cost-- benefits earned during the period.......... $ 312 $ 309 $ 450
Interest cost on projected benefit obligation............. 465 389 1,137
Actual return on plan assets.............................. (373) (891) (2,125)
Net amortization and deferral............................. (378) 275 1,026
----- ----- ------
Pension cost of the defined benefit plans................. $ 26 $ 82 $ 488
===== ===== ======
</TABLE>
The funded status of the defined benefit plan and amounts recognized In the
consolidated balance sheets at December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Accumulated benefit obligation..................................... $ 5,535 $ 5,233
------- -------
Projected benefit obligation....................................... $ 5,989 $ 5,696
-41-
<PAGE>
INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollars and shares in thousands, except per share data)
Plan assets at fair value.......................................... 8,043 7,890
------- -------
Plan assets in excess of projected benefit obligation.............. 2,054 2,194
Unrecognized net gain.............................................. (1,924) (2,332)
Unrecognized prior service cost.................................... 1,053 1,195
Unrecognized not transition asset.................................. (155) (202)
------- -------
Prepaid pension costs recognized in the balance sheet.............. $ 1,028 $ 855
======= =======
</TABLE>
Assumptions used to calculate the actuarial present value of the projected
benefit obligation and the expected long-term return on assets for the defined
benefit plan are as follows:
1997 1996
---- ----
Discount rate.......................................... 8.5% 8.5%
Rate of increase in future compensation levels......... 6.5% 6.5%
Expected long term rate of return on plan assets....... 8.5% 8.5%
The Company contributes to multi-employer pension plans on behalf of
employees who are members of collective bargaining units. Benefit and asset
information comparable to that shown above for the Company's plans are not
determinable. Under the Employee Retirement Income Security Act of 1974, as
amended, an employer upon withdrawal from a multi-employer plan is required to
continue funding its proportionate share of the plan's unfunded vested benefits.
The plan administrator has not provided the Company with information regarding
its proportionate share of the plan's unfunded vested benefits (for withdrawal
liability purposes); however, the Company has no immediate intention of
withdrawing from the plan. Expenditures incurred amounted to $122, $145 and $119
In 1997, 1996 and 1995, respectively.
The Company has deferred compensation agreements with certain present and
past key officers, directors and employees ("participants"). The agreements
provide for the participants to receive defined amounts after reaching age 65.
The Company provides for the cost of the benefits payable under the agreements
over the participants' active employment. During the years ended December 31,
1997, 1996 and 1995, the Company incurred expenses related to these agreements
of $178, $202 and $164, respectively. As of December 31, 1997 and 1996, the
accrued liability totaled $1,339 and $1,367, respectively. The Company has
insured the lives of the participants to assist In the funding of this
liability.
-42-
<PAGE>
INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollars and shares in thousands, except per share data)
NOTE G - LEASES
The Company conducts a large part of Its operations from leased facilities
which include manufacturing and office facilities. Certain leases include
options to renew for periods ranging from 5 to 67 years. Certain Company leases
also require it to pay all real estate taxes and operating costs and one lease
is subject to periodic rental escalations.
The following represents the amounts of assets under capital leases
included in property, plant and equipment:
December 31
1997 1996
---- ----
Buildings and computer equipment....... $3,295 $3,295
Less accumulated amortization.......... (693) (554)
------ ------
$2,602 $2,741
====== ======
The building lease pertains to the New York manufacturing facility which
expires in 2019. However, the Company has entered into an agreement with the
landlord to purchase for $4,000 the approximately 72.500 square feet of
manufacturing space it now leases from the landlord.
Future minimum payments, by yearand in the aggregate, under capital leases
and noncancellable operating leases with initial or remaining terms of one year
or more consist of the following at December 31, 1997 (net of annual sub-lease
income of $98 through 2002):
Capital Operating
Leases Losses
------ ------
Year ending December 31:
1998...................................... $ 304 $ 409
1999...................................... 304 383
2000...................................... 304 110
2001...................................... 304 59
2002...................................... 291 19
Later years............................... 4,645 851
------ ------
Total minimum lease payments................ $6,152 $1,831
======
-43-
<PAGE>
INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollars and shares in thousands, except per share data)
Less amounts representing Interest............... (3,019)
Present value of minimum lease payments.......... (3,133)
Less current portion............................. (78)
------
$3,055
======
The composition of rental expense is as follows:
Year Ended December 31
1997 1996 1995
---- ---- ----
Minimum rentals.................. $1,030 $908 $1,275
Sublease rental income........... (145) --
------ ----- ------
$885 $908 $1,275
====== ===== ======
NOTE H - STOCK OPTION PLAN
On September 20, 1995, the Company adopted a stock option plan and granted
options to key employees to purchase 200,000 shares of common stock, the maximum
amount permitted under the plan, at $9.75 per share, the market value on the
date of grant. Options became exercisable after one year at the rate of 25% per
year for four consecutive years.
In January 1997. the options granted in 1995 were rescinded and new options
to purchase another 200,000 shares of common stock were granted at $8.00 per
share, the market value on the date of grant. The options will become
exercisable after one year at the rate of 25% per year for four consecutive
years.
Effective January 1, 1996, the Company adopted SFAS No. 123, "Accounting
for Stock-Based Compensation", which allows companies to measure compensation
cost in connection with employee stock compensation plans using a fair value
based method or to continue to use an intrinsic value based method. The Company
will continue to use the intrinsic value based method which generally does not
result in compensation cost. Had compensation cost been determined under the
fair value based method for the
-44-
<PAGE>
INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollars and shares in thousands, except per share data)
stock options granted In 1995, the Company's 1997 and 1996 net (loss) income per
common share would have been changed to the pro forma amounts indicated below:
As Reported Pro Forma
----------- ---------
Net (loss) Income
1997...................................... ($1,218) ($1,366)
1996...................................... $364 $275
Net (loss) Income per common share
1997
Basic and diluted.............................. ($0.41) ($0.46)
1996
Basic and diluted.............................. $0.12 $0.09
The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions used for the options granted in l995: -- dividend yield 1.17%;
expected volatility 40%; risk free interest rate of 6.33%; and expected lives of
6 years.
NOTE I - GEOGRAPHIC INFORMATION
The Company and its subsidiaries operate within a single industry segment
which is the development, manufacturing, fabrication, and sale of products
designed for noise control and acoustically conditioned environments. The
Company's customers include governmental entities and companies in diversified
industries.
The Company primarily operates in two geographic areas: North America and
Europe. North America includes the United States and Canada. Europe includes the
United Kingdom and Germany. The following information sets forth the data by
geographic area.
During 1997, 1996 and 1995, revenues from the United States Government
amounted to approximately $l2,282, $15,510 and $13,169, respectively.
<TABLE>
<CAPTION>
North
American(1) European(2) Elimination Consolidated
Year ended December 31, 1997:
<S> <C> <C> <C>
Net sales to unaffiliated customers. $53,645 $19,266 $72,911
-45-
<PAGE>
INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollars and shares in thousands, except per share data)
Inter-area net sales................ 139 ($139)
------- ------- ------- -------
$53,784 $19,266 ($139) $72,911
======= ======= ======= =======
Operating profit (loss)(3).......... 1,322 (1,107) (359) (144)(4)
Identifiable assets(5).............. 57,158 17,104 74,262
Year ended December 31, 1996:
Net sales to unaffiliated customers. $51,521 $22,102 $73,623
Inter-area net sales................ 226 1,864 ($2,090) --
------- ------- ------- -------
$51,747 $23,966 ($2,090) $73,623
======= ======= ======= =======
Operating profit(3)................. 832 791 (258) 1,365(4)
Identifiable assets................. 54,155 18,690 72,845
Year ended December 31, 1995:
Net sales to unaffiliated customers. $46,974 $23,659 $70,633
Inter-area net sales(3)............. 336 1,368 ($1,704)
------- ------- ------- -------
$47,310 $25,027 ($1,704) $70,633
======= ======= ======= =======
Operating profit (loss)(3).......... 1,572 (1,537) 35(4)
Identifiable assets(s)(5)........... 58,850 16,866 75,716
</TABLE>
(1) Includes Canadian sales of $25, $114 and $448 in 1997, 1996 and 1995,
respectively.
(2) Includes German sales of $4,000, $3,891 and $4,691 in 1997,1996 and 1995,
respectively.
(3) North American operating profit includes royalty income of $101 (1997), $74
(1996) and $419 (1995) charged against European operating profit and
Canadian operating profit of $1 (1997), $1 (1996), and $1 (1995). European
operating (loss) profit includes German operating profit (loss) of $61
(1997), ($152) (1996) and $124 (1995).
(4) Excludes interest expense of $940, $1,078 and $586 in 1997, 1996 and 1995,
respectively. The 1997 and 1996 elimination of $359 and $258, respectively,
relates to interest on an intercompany loan.
(5) North American includes Canadian assets of $202 (1997), $253 (1996) and
$244 (1995). European includes German assets of $1,722 (1997), $2041 (1996)
and $1,862 (1995).
-46-
<PAGE>
INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollars and shares in thousands, except per share data)
NOTE J - SUBSEQUENT EVENT
The principal stockholder of the Company entered into a
stock-purchase agreement, in January 1998, to sell his shareholdings,
representing approximately 64% of the outstanding common stock of the Company,
to IAC Holding Corp. whose principal investor is a European investment company.
-47-
<PAGE>
<TABLE>
<CAPTION>
INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES
SCHEDULE 11 - VALUATION and OUALIFYING ACCOUNTS
(in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions (Deductions)
----------------------
Balance at Charged to Other Balance at
Beginning Costs and Accounts- Deductions - End of
Description of Period Expenses Describe(1) Describe(2) Period
--------- -------- ----------- ----------- ------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997
Allowances for doubtful accounts.... $ 913 ($391) ($8) $20 $ 534
Year ended December 31, 1996:
Allowances for doubtful accounts.... $ 613 302 20 (22) $ 913
Year ended December 31, 1995:
Allowances for doubtful accounts.... $1,090 (362) 1 (116) $ 613
</TABLE>
(1) Represents the effect of exchange rate changes on translation of foreign
currencies into U.S. dollars.
(2) Represents write-offs (recoveries).
<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. (the "Company") 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 between IAC Holdings Corp.
("Holdings") and the Company dated as of May 20, 1998, pursuant to which
Holdings will be merged with and into the Company and shareholders of the
Company (other than Holdings) will receive $11.00 in cash for each share of
Common Stock of the Company.
/ / 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-
