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.
(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 and IMI
Item 2(b) Information With Respect to Holdings and IMI
Item 2(c) Information With Respect to Holdings and IMI
Item 2(d) Information With Respect to Holdings and IMI
Item 2(e) *
Item 2(f) *
Item 2(g) Information With Respect to Holdings and IMI
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
Item 5(c) Not Applicable
Item 5(d) Not Applicable
Item 5(e) Not Applicable
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Schedule 13E-3 Item Number Location in Proxy Statement
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
Item 8(c) Special Factors -- Board and Shareholder
Approval; No Independent Opinions
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Schedule 13E-3 Item Number Location in Proxy Statement
Item 8(d) Special Factors -- Board and Shareholder
Approval; No Independent Opinions
Item 8(e) Special Factors -- Acquisition; Purpose of the
Merger; Fairness Factors, -- Board and Share-
holder Approval; No Independent Opinions
Item 8(f) Not Applicable
Item 9(a) Special Factors -- Board and Shareholder
Approval; No Independent Opinions
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) Incorporation of Certain Documents by
Reference; 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; Solicitation.
Item 16 Not Applicable.
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Schedule 13E-3 Item Number Location in Proxy Statement
Item 17(a) *
Item 17(b) Not Applicable
Item 17(c) *
Item 17(d) *
Item 17(e) Not Applicable
Item 17(f) Not Applicable
- ------------
* 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 and IAC Holdings
Corp. ("Holdings"), a Delaware corporation that owns approximately 79% of the
outstanding shares of Common Stock of the Issuer. The address of Holdings'
principal executive offices is 100 First Stamford Place, Stamford, Connecticut
06902. The information appearing under the captions "Introduction and Summary --
Place; Record Date; Quorum; Solicitation" and "Information With Respect to
Holdings and IMI" in the Proxy Statement is incorporated herein by reference.
(e) - (f) During the five years prior to the date hereof, neither Holdings
nor International Mezzanine Investment, N.V., a Netherlands Antilles corporation
("IMI") (the sole stockholder of Holdings), nor to Issuer's and Holdings'
knowledge, any of the directors or executive officers of IMI or Holdings 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 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 and IMI" in the Proxy Statement is incorporated herein by reference.
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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) Following consummation of the Merger, the Company's obligation to file
reports pursuant to Section 15(d) of the Exchange Act will be suspended. 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.
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 International Mezzanine Capital, B.V. ("IMC"), an affiliate
of Holdings, 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.
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, --
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<PAGE>
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; No Independent Opinions" in the Proxy Statement is
incorporated herein by reference.
(d) The information appearing under the caption "Special Factors -- Board
and Shareholder Approval; No Independent Opinions" 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; No Independent Opinions" 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; No Independent Opinions" in the Proxy Statement is
incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
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.
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<PAGE>
(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 in the financial statements included in the
Annual Report on Form 10-K for the year ended December 31, 1997 and the
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 accompanying
the Proxy Statement and the information appearing under the captions
"Incorporation of Certain Documents by Reference; 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.
(b) Not applicable.
(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.
(d) Proxy Statement of Issuer, in preliminary form, dated June 12, 1998.
(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: June 12 , 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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Amendment No. 1 to Loan Agreement
Amendment No. 1, dated as of , 1998, to LOAN AGREEMENT (the "Original
Agreement") dated as of March 19, 1998 by and between IAC Holdings Corp. (the
"Borrower") and International Mezzanine Capital B.V. (the "Lender").
WHEREAS, pursuant to the Original Agreement, the Borrower has outstanding
indebtedness evidenced by a Promissory Note (the "Original Note") held by the
Lender in the aggregate principal amount of U.S. $16,918,667; and
WHEREAS, to provide financing in part for the merger (the "Merger")
contemplated by the Agreement and Plan of Merger dated as of , 1998 (the "Merger
Agreement") between the Borrower and Industrial Acoustics Company, Inc. and for
related fees and expenses, the Lender is willing to increase the principal
amount of the indebtedness available under the Original Agreement by $ , to be
evidenced by a $ Promissory Note having the same maturity as the Original Note
in substantially the form of Exhibit A attached hereto (the "New Note") and
subject to the other terms, conditions and Events of Default set forth in the
Original Agreement.
NOW THEREFORE, in consideration of the premises and agreements herein
contained, and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto intending to
the legally bound hereby agree and amend the Original Agreement as follows:
1. Defined Terms. All capitalized terms used herein but not defined herein
shall have the meanings ascribed to such terms in the Original Agreement.
2. Closing. (a) The closing (the "Closing") of the borrowings evidenced by
the New Note shall take place at the offices of Cahill Gordon & Reindel, 80 Pine
Street, New York, New York 10005 at 10:00 A.M., New York time, on the third
Business Day following the date of the Merger or such other place and time as
may be designated by Borrower on two Business Days' notice.
(b) The Lender shall make its loan evidenced by the New Note on the date of
Closing by paying or causing to be paid $ in immediately available funds to an
account of the Borrower specified by the Borrower.
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(c) In consideration of the loan made by the Lender to the Borrower at the
Closing, the Borrower shall deliver to the Lender the New Note, duly executed on
behalf of the Borrower and dated the date of the Closing.
3. Representations and Warranties of Borrower. The Borrower represents and
warrants to the Investor as follows:
(a) Each of the representations and warranties made by the Borrower in
the Original Agreement is true and correct on the date hereof with the same
effect as though such representations and warranties had been made on the
date hereof.
(b) There is no Default or Event of Default existing under the
Original Agreement.
(c) The Borrower has all requisite corporate power and authority to
enter into this Amendment No. 1 and to issue the New Note, to perform its
obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby.
(d) The Borrower has taken all corporate action necessary to authorize
its execution and delivery of this Amendment No. 1 and the New Note, the
performance of its obligations hereunder and thereunder, and its
consummation of the transactions contemplated hereby and thereby. This
Amendment No. 1 and the New Note have been executed and delivered by an
officer of the Borrower in accordance with such authorization. This
Amendment No. 1 (and the Original Agreement as amended hereby) and the New
Note constitute valid and binding obligations of the Borrower, enforceable
in accordance with their terms, subject to applicable bankruptcy,
reorganization, insolvency, and similar laws affecting creditors' rights
generally and to general principles of equity.
(e) The execution and delivery by the Borrower of this Amendment No.
1, the New Notes and the Acquisition Agreement, its consummation of the
transactions contemplated hereby and thereby, and its compliance with the
provisions hereof and thereof, will not (i) violate or conflict with any
provision of its Charter or By-laws, (ii) violate, conflict with, or give
rise to any right of termination, cancellation, or acceleration under any
agreement, security, license, permit, or instrument to which the Borrower
or any of its subsidiaries is a party,
<PAGE>
-3-
or to which it or any of its assets is subject, (iii) violate or conflict
with any law, statute, rule or regulation or any order of any court or
other governmental agency binding upon the Borrower or any of its
subsidiaries, or (iv) require any consent, approval or other action of,
notice to, or filing with any entity or person (governmental or private),
other than those which have been obtained or made.
4. Related Agreements and Covenants. (a) The Borrower hereby agrees that
the New Note shall be governed by all of the terms and conditions of the
Original Agreement, including, without limitation, the interest and payment and
prepayment provisions, the affirmative and negative covenants and the Events of
Default and the expense and indemnity provisions. Unless the context otherwise
requires, all references in the Original Agreement to the Notes shall be deemed
to include the New Note and all reference in the Original Agreement to the Loan
shall be deemed to include the indebtedness evidenced by the New Note.
(b) The Borrower shall use the borrowings evidenced by the New Note for the
purposes specified in the second recital to this Agreement.
5. Prior or Simultaneous Actions. Prior to or at the Closing, the following
actions have been or are being taken:
(a) All consents, approvals and other actions of, and notices and
filings with, all entities and persons as may be necessary or required with
respect to the execution and delivery by the parties of this Amendment No.
1 and the New Note, and the consummation by the parties of the transactions
contemplated hereby and thereby, shall have been obtained or made.
(b) The Lender is receiving certified copies of all requisite
corporate actions taken by the Borrower to authorize its execution and
delivery of this Amendment No. 1 and the New Note, its performance of its
obligations hereunder and thereunder, and its consummation of the
transactions contemplated hereby and thereby, and such other corporate
documents and other papers as the Lender or its counsel may reasonably
request.
(c) The Borrower shall have received an additional cash equity
contribution of at least $ .
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6. Miscellaneous. Section 12 of the Original Agreement is hereby
incorporated by reference in this Amendment and all references in Section 12 of
the Original Agreement to the Agreement shall be deemed to be references to the
Original Agreement as amended by this Amendment.
IN WITNESS WHEREOF, the parties have executed and delivered this Amendment
No. 1 to the Loan Agreement on the date first above written.
IAC HOLDINGS CORP.
By:___________________________________
Name:
Title:
INTERNATIONAL MEZZANINE CAPITAL
B.V.
By:___________________________________
Name:
Title:
<PAGE>
EXHIBIT A
PROMISSORY NOTE
IAC HOLDINGS CORP.
U.S. $ New York, New York
, 1998
FOR VALUE RECEIVED, IAC HOLDINGS CORP., a Delaware corporation (the
"Borrower"), hereby promises to pay to INTERNATIONAL MEZZANINE CAPITAL B.V. (the
"Lender") or its registered assigns, in lawful money of the United States of
America in immediately available funds, on the dates and in the amounts set
forth in the Agreement (as defined below), the aggregate principal sum of U.S.
DOLLARS ($ ).
This Note is a Note referred to in the Loan Agreement, dated as of March
19, 1998, as amended by Amendment No. 1 on the date hereof (the "Agreement"), by
and between the Borrower and the Lender, and is entitled to the benefits thereof
and shall be subject to the provisions thereof. This Note is also entitled to
the benefits of each of the Loan Documents (as defined in the Agreement). As
provided in the Agreement, this Note is subject to mandatory and voluntary
prepayment, in whole or in part.
The Borrower promises to pay interest on the aggregate unpaid principal
amount hereof in like money from the date hereof until paid at the rates and at
the times provided in the Agreement.
If an Event of Default (as defined in the Agreement) shall occur and be
continuing, the principal of and accrued interest on this Note may be declared
to be due and payable in the manner and with the effect provided in the
Agreement.
The Borrower hereby waives presentment, demand for payment, protest, notice
of dishonor, and, except as expressly set forth in the Agreement, any and all
other notices or demands of any kind in connection with the delivery,
performance, default or enforcement of this Note.
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THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.
IAC HOLDINGS CORP.
By:___________________________________
Name:
Title:
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of , 1998 (the "Agreement"), by and
between IAC Holdings Corp., a Delaware corporation (the "Grantor") and IAC
Management Partners, a [ ] general partnership (the "Grantee").
RECITALS
WHEREAS, the Grantor has acquired approximately 79% of the outstanding
Common Stock, par value $.10 per share (the "Common Stock"), of Industrial
Acoustics Company, Inc., a New York corporation ("IAC"); and
WHEREAS, the Grantee provided certain advisory services to the Grantor in
connection with such acquisition by the Grantor of IAC stock; and
WHEREAS, as partial compensation for such services, the Grantor agreed to
grant to the Grantee an option (the "Option") to acquire Common Stock, par value
$.01 per share, of the Grantor (the "Common Stock") equal to 12% of the Common
Stock on a fully diluted basis; and
WHEREAS, the Grantor and IAC have entered into an Agreement and Plan of
Merger pursuant to which the Grantor will merge with and into IAC (the "Merger")
and International Mezzanine Investment N.V. ("IMI") will become the owner of
100% of the Common Stock of IAC;
WHEREAS, the Grantor and the Grantee desire to set forth the terms of the
Option.
NOW THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. THE OPTION; EXERCISE; ADJUSTMENTS. (a) Subject to the other terms and
conditions set forth herein, the Grantor hereby grants to the Grantee an
irrevocable option (the "Option") to purchase up to [ ] shares of Common Stock
(the "Shares") at an initial cash purchase price of $[ *]
- ----------
* The amount of the equity contribution made by International Mezzaine
Investment N.V. to the Grantor used by
Footnote continued on next page.
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per share. The Option may be exercised by the Grantee, in whole or in part, at
any time, or from time to time, (i) prior to the Merger and following the sale
by the Grantor of all or a majority of its interest in IAC or (ii) after the
Merger and following the sale by IMI of all or a majority of its interest in IAC
and, in the case of clause (i) or (ii), prior to the termination of the Option
in accordance with the terms of this Agreement.
(b) In the event the Grantee wishes to exercise the Option, the Grantee
shall send a written notice to the Grantor (the "Stock Exercise Notice")
specifying its intention to exercise the Option, the total number of Shares it
wishes to purchase and a date not later than 10 business days and not earlier
than the next business day following the date such notice is given for the
closing of such purchase.
(c) In the event of any change in the number of issued and outstanding
shares of Common Stock of the Grantor by reason of any stock dividend, stock
split, recapitalization, merger (including the Merger), rights offering, share
exchange or other change in the corporate or capital structure of the Grantor,
the Grantee shall receive, upon exercise of the Option, the stock or other
securities, cash or property to which the Grantee would have been entitled if
the Grantee had exercised the Option and had been a holder of record of shares
of Common Stock of the Grantor on the record date fixed for determination of
holders of shares of Common Stock of the Grantor entitled to receive such stock
or other securities, cash or property and the purchase price per Share shall be
increased or decreased proportionately so that the aggregate purchase price for
the Shares subject to the Option shall remain the same as immediately prior to
such event. In the event that any additional shares of Common Stock are issued
after the date hereof (other than pursuant to an event described in the
preceding sentence of this Agreement), the number of shares of Common Stock
subject to the Option shall be adjusted (but not decreased) so that, after such
issuance, the number of shares of
- ----------
Footnote continued from previous page.
the Grantor to acquire stock of the Grantee in the intitial acquisition and
the subsequent merger divided by the aggregate number of outstanding shares
of Common Stock of IAC.
<PAGE>
-3-
Common Stock subject to the Option equals at least ten percent (10%) of the
number of shares of Common Stock of IAC then issued and outstanding on a fully
diluted basis.
2. CONDITIONS TO DELIVERY OF SHARES. The Grantor's obligation to deliver
Shares upon exercise of the Option is subject only to the conditions that:
(a) No preliminary or permanent injunction or other order issued by any
federal or state court of competent jurisdiction in the United States
prohibiting the delivery of the Shares shall be in effect; and
(b) Any applicable waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 shall have expired or been terminated; and
(c) The representations and warranties of the Guarantee made in Section 5
of this Agreement shall be true and correct in all material respects as of the
date of the Closing for the issuance of the Shares being purchased pursuant to
the Option.
3. THE CLOSING. (a) Any closing hereunder shall take place on the date
specified by the Grantee in its Stock Exercise Notice at 9:00 a.m., local time,
at the offices of Cahill Gordon & Reindel, 80 Pine Street, New York, New York,
or, if the conditions set forth in Section 2 have not been satisfied, on the
second business day following the satisfaction of such conditions, or at such
other time and place as the parties hereto may agree (the "Closing Date"). On
the Closing Date, the Grantor will deliver to the Grantee a certificate or
certificates, duly endorsed (or accompanied by duly executed stock powers),
representing the Shares in the denominations designated by the Grantee in its
Stock Exercise Notice and the Grantee will purchase such Shares from the Grantor
at the price per Share equal to the Purchase Price. Any payment made pursuant to
this Agreement shall be made by certified or official bank check or by wire
transfer or federal funds to a bank designated by the Grantor.
(b) The certificates representing the Shares may bear an appropriate legend
relating to the fact that such Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act") and may not be
transferred in the absence of such registration or an exemption therefrom (which
exemption is confirmed by an opinion of counsel to the Grantee reasonably
acceptable to the Grantor).
<PAGE>
-4-
4. REPRESENTATIONS AND WARRANTIES OF THE GRANTOR. The Grantor represents
and warrants to the Grantee that (a) the Grantor is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware and has the requisite corporate power and authority to enter into and
perform this Agreement; (b) the execution and delivery of this Agreement by the
Grantor and the consummation by it of the transactions contemplated hereby have
been duly authorized by the Board of Directors of the Grantor, and this
Agreement has been duly executed and delivered by a duly authorized officer of
the Grantor and constitute a valid and binding obligation of the Grantor,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity; and (c) the Grantor has taken all necessary corporate
action to authorize and reserve the Shares issuable upon exercise of the Option
and the Shares, when issued and delivered by the Grantor upon exercise of the
Option, will be duly authorized, validly issued, fully paid and non-assessable
and free of preemptive rights.
5. REPRESENTATIONS AND WARRANTIES OF THE GRANTEE. Grantee represents and
warrants to the Grantor that (a) the execution and delivery of this Agreement by
the Grantee and the consummation by it of the transactions contemplated hereby
have been duly authorized by all necessary action on the part of the Grantee and
this Agreement has been duly executed and delivered by a duly authorized officer
of the Grantee and will constitute a valid and binding obligation of Grantee;
(b) the Grantee is acquiring the Option and, if and when it exercises the
Option, will be acquiring the Shares issuable upon the exercise thereof for its
own account and not with a view to distribution or resale in any manner which
would be in violation of the Securities Act; and (c) the Grantee and each of its
partners is an accredited investor as such term is used in the rules under the
Securities Act, has received such information as is necessary to make an
informed decision with respect to the acquisition and exercise of the Option, is
experienced in investments of the type contemplated hereby and is capable of
bearing the loss of its investment.
6. CONSENTS. Each of the parties hereto will use its best efforts to obtain
the consents of all third parties and governmental authorities, if any,
necessary to the consummation of the transactions contemplated.
7. SPECIFIC PERFORMANCE. The Grantor acknowledges that if the Grantor fails
to perform any of its obligations un-
<PAGE>
-5-
der this Agreement immediate and irreparable harm or injury would be caused to
the Grantee for which money damages would not be an adequate remedy. In such
event, the Grantor agrees that the Grantee shall have the right, in addition to
any other rights it may have, to specific performance of this Agreement.
Accordingly, if the Grantee should institute an action or proceeding seeking
specific enforcement of the provisions hereof, the Grantor hereby waives the
claim or defense that the Grantee has an adequate remedy at law and hereby
agrees not to assert in any such action or proceeding the claim or defense that
such a remedy at law exists. The Grantor further agrees to waive any
requirements for the securing or posting of any bond in connection with
obtaining any such equitable relief.
8. NOTICES. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given and made if in writing and if
served by personal delivery upon the party for whom it is intended or delivered
by registered or certified mail, return receipt requested, or if sent by
facsimile transmission, upon receipt of oral confirmation that such transmission
has been received, to the person at the address set forth below, or such other
address as may be designated in writing hereafter, in the same manner, by such
person:
If to the Grantor:
IAC Holdings Corp.
c/o Mezzanine Management Limited
100 First Stamford Place
Stamford, Connecticut 06902
Attention: James A. Read
If to the Grantee:
IAC Management Partners
434 North Street
Greenwich, Connecticut 06830
Attention: Robert M. Davies
with a copy to:
IAC Management Partners
82 Powder Point Avenue
Duxbury, Massachusetts 02332
Attention: Maarten D. Hemsley
9. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
agreement between the parties hereto with
<PAGE>
-6-
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, oral or written, with respect to
such transactions. This Agreement may not be changed, amended or modified
orally, but may be changed only by an agreement in writing signed by the party
against whom any waiver, change, amendment, modification or discharge may be
sought.
10. ASSIGNMENT. No party to this Agreement may assign any of its rights or
obligations under this Agreement without the prior written consent of the other
party hereto.
11. HEADINGS. The section headings herein are for convenience only and
shall not affect the construction of this Agreement.
12. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall constitute one and the same document.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
conflicts of law principles of such State.
14. TERMINATION. The right to exercise the Option granted pursuant to this
Agreement shall terminate on .
15. SEVERABILITY. If any term, provisions, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
16. PUBLIC ANNOUNCEMENT. The Grantee will consult with the Grantor and the
Grantor will consult with the Grantee before issuing any press release with
respect to the initial announcement of this Agreement, the Option or the
transactions contemplated hereby and neither party shall issue any such press
release prior to such consultation except as may be required by law.
<PAGE>
-7-
IN WITNESS WHEREOF, the Grantee and the Grantor have caused this Agreement
to be duly executed and delivered on the date and year first above written.
IAC HOLDINGS CORP.
By: ________________________________
Name:
Title:
IAC MANAGEMENT PARTNERS
By: ________________________________
Name:
Title:
AGREEMENT
AND PLAN OF MERGER
BETWEEN
IAC HOLDINGS CORP.
AND
INDUSTRIAL ACOUSTICS COMPANY, INC.
Agreement and Plan of Merger (the "Agreement"), dated as of May 20, 1998,
between IAC HOLDINGS CORP., a Delaware corporation ("Holdings") and INDUSTRIAL
ACOUSTICS COMPANY, INC., a New York corporation (the "Company").
WHEREAS, Holdings is a corporation duly organized and existing under the
laws of the State of Delaware and has an authorized capital of 1,000 shares of
common stock, par value $.01. As of the date hereof, 1,000 shares of Common
Stock of Holdings are issued and outstanding and entitled to one vote per share.
WHEREAS, the Company is a corporation duly organized and existing under the
laws of the State of New York and has an authorized capital of 5,000,000 shares
of common stock, $.10 par value (the "Common Stock"). As of the date hereof,
2,981,211 shares of Common Stock are issued and outstanding and entitled to one
vote per share.
<PAGE>
-2-
WHEREAS, the Board of Directors of the Company has determined that (i) a
merger between Holdings and the Company is fair and in the best interests of the
Company and its shareholders and (ii) among other things, the business purpose
in effecting such a merger is to ultimately increase the value of the Company
and improve its management structure.
WHEREAS, notwithstanding anything contained herein to the contrary, at any
time prior to filing a certificate of merger with the Secretary of State of New
York, the plan of merger may be abandoned by the Board of Directors of the
Company or Holdings.
WHEREAS, the respective Boards of Directors of Holdings and the Company and
the stockholders of Holdings have approved this Agreement and have directed that
this Agreement be submitted to a vote of the shareholders of the Company.
NOW THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, Holdings and the Company hereby agree, subject to the terms and
conditions hereinafter set forth, as follows:
<PAGE>
-3-
ARTICLE I
MERGER
1.1 Merger. Subject to the terms and conditions of this agreement, Holdings
shall be merged with and into the Company in accordance with the New York
Business Corporation Law (the "NYBCL") and the General Corporation Law of the
State of Delaware (the "DGCL") (the "Merger").
The separate existence of Holdings shall cease, and the Company shall be
the surviving corporation and continue its corporate existence under the laws of
the State of New York. Thereafter, without further action, the Company shall
succeed, insofar as permitted by law, to all the rights, assets, privileges,
franchises, liabilities and obligations of Holdings.
1.2 Filing and Effectiveness. The Merger shall become effective upon the
completion of the following actions:
(a) This Agreement and the Merger shall have been approved by the
shareholders of the Company in accordance with the provisions of the NYBCL;
(b) All of the conditions precedent to the consummation of the Merger
specified in this Agreement shall have been satisfied or duly waived by the
party entitled to satisfaction thereof;
<PAGE>
-4-
(c) An executed Certificate of Merger, in the form attached hereto as
Exhibit A, meeting the requirements of the DGCL or an executed counterpart of
this Agreement shall have been filed with the Secretary of State of Delaware;
and
(d) An executed Certificate of Merger, in the form attached hereto as
Exhibit B, meeting the requirements of the NYBCL shall have been filed with the
Secretary of State of New York.
(e) Holdings shall have the funds necessary, or shall have arranged to
borrow the funds on terms reasonably acceptable to its Board of Directors, to
pay the Merger Consideration (as defined herein).
The date and time when the Merger shall become effective, as set forth
above, is hereinafter referred to as the "Effective Date."
1.3 Certificate of Incorporation. The Certificate of Incorporation of the
Company, attached hereto as Exhibit C, in effect immediately prior to the
Effective Date shall continue in full force and effect as the Certificate of
Incorporation of the Company until duly amended in accordance with the
provisions thereof and applicable law, and the name of the surviving Corporation
shall be Industrial Acoustics Company, Inc.
<PAGE>
-5-
1.4 By-laws. The By-laws of the Company in effect immediately prior to the
Effective Date shall continue in full force and effect as the By-laws of the
Company until duly amended in accordance with the provisions thereof and
applicable law.
1.5 Directors and Officers. The directors and officers of the Company
immediately prior to the Effective Date shall continue as the directors and
officers of the Company until their successors shall have been elected or until
otherwise provided by law, the Certificate of Incorporation of the Company or
the By-laws of the Company.
1.6 Effect of Merger. Upon the Effective Date, the separate existence of
Holdings shall cease and the Company, (i) shall continue to possess all of its
assets, rights, powers and property as constituted immediately prior to the
Effective Date, shall be subject to all actions previously taken by its Board of
Directors and shall succeed, without other transfer, to all of the assets,
rights, powers and property of Holdings in the manner and as more fully set
forth in Section 259 of the DGCL, and (ii) shall continue to be subject to all
of its debts, liabilities and obligations as constituted immediately prior to
the Effective Date and succeed, without other transfer, to all of the debts,
liabilities and obligations of Hold-
<PAGE>
-6-
ings in the same manner as if the Company had incurred them, all as more fully
provided under the applicable provisions of the DGCL and the NYBCL.
ARTICLE II
MANNER OF CONVERSION OF STOCK
2.1 Outstanding stock of the Company. Upon the Effective Date, by virtue of
the Merger, each share of Common Stock outstanding immediately prior thereto
(other than Common Stock held by Holdings and Common Stock held by the Company
as treasury stock) shall be converted into the right to receive $11.00 per share
in cash (the "Merger Consideration"), upon surrender of the stock certificates
representing such Common Stock in accordance with Section 2.2 herein, with any
fractional shares issuable to a registered owner of Common Stock in the
aggregate to be rounded up to the nearest whole share.
Each outstanding share of Common Stock owned by Holdings or held by the
Company as treasury stock will be cancelled.
2.2 Stock Certificates. (a) After the Effective Date, each holder of a
certificate(s) formerly evidencing Common Stock which has been converted into
the right to receive the Merger Consideration, upon surrender of the same to an
ex-
<PAGE>
-7-
change agent appointed by the Company (the "Exchange Agent"), shall be entitled
to receive the Merger Consideration.
(b) Promptly after the Effective Date, the Exchange Agent shall send a
notice and a transmittal form (which shall specify that the delivery shall be
effected, and risk of loss and title shall pass, only upon proper delivery of
the certificates formerly representing Common Stock to the Exchange Agent
(subject to Section 2.2(d)) to each holder of certificates formerly evidencing
Common Stock advising such holder of the effectiveness of the Merger and the
procedure for surrendering to the Exchange Agent such certificates for exchange
into the Merger Consideration. The notice and transmittal form provided for in
this Section 2.2(b) shall be sent by the Exchange Agent to the address for each
holder of Common Stock contained in the stock record books of the Company
promptly after the Effective Date. Each holder of certificates formerly
evidencing Common Stock, upon proper surrender thereof to the Exchange Agent
together and in accordance with such transmittal form, shall be entitled to
receive in exchange therefor the Merger Consideration. Notwithstanding the
foregoing, neither the Exchange Agent nor any party shall be liable to a holder
of certificates formerly evidencing Common Stock for any amount which may be
required to be paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
<PAGE>
-8-
(c) If any portion of the Merger Consideration is to be delivered to a
Person other than the Person in whose name the certificates surrendered in
exchange therefor are registered, it shall be a condition to such payment that
the certificates so surrendered shall be properly endorsed or accompanied by
appropriate stock powers and otherwise in proper form for transfer, that such
transfer otherwise be proper and that the Person requesting such transfer shall
pay to the Exchange Agent any transfer or other taxes payable by reason of the
foregoing or establish to the satisfaction of the Exchange Agent that such taxes
have been paid or are not required to be paid. For purposes of this Agreement,
"Person" means an individual, a corporation, a limited liability company, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or any agency or instrumentality
thereof.
(d) In the event any certificate theretofore representing Common Stock
shall have been lost, stolen or destroyed, upon the making of an appropriate
affidavit of that fact by the shareholder claiming such certificate to be lost,
stolen or destroyed, such shareholder shall be paid the Merger Consideration;
provided that when the Merger Consideration is paid to such shareholder, the
Board of Directors of the Company may, in its discretion and as a condition
precedent to the issuance
<PAGE>
-9-
thereof, require the claiming Person to give the Company a bond or
indemnification in such form and sum as the Company may reasonably direct as
indemnity against any claim that may be made against the Company with respect to
the certificate alleged to have been lost, stolen or destroyed.
2.3 Outstanding Common Stock of Holdings. Upon the Effective Date, by
virtue of the merger, each issued and outstanding common stock of Holdings shall
be cancelled and converted into one share of Common Stock of the Company.
ARTICLE III
GENERAL
3.1 Termination and Abandonment. At any time prior to the Effective Date,
this Agreement may be terminated and the Merger abandoned by the Board of
Directors of either Holdings or the Company if (a) approval by the shareholders
of the Company specified in Article I hereof shall not have been obtained, or
(b) the respective Board of Directors of either Holdings or the Company
determines that in its sole discretion the Merger does not appear to be in the
best interests of either of Holdings or the Company or their respective
shareholders or is otherwise not advisable.
<PAGE>
-10-
3.2 Amendment. This Agreement may be amended, modified, supplemented or
abandoned at any time (before or after shareholder approval) prior to the
Effective Date with the mutual consent of the Boards of Directors of Holdings
and the Company; provided, however, that this Agreement may not be amended,
modified or supplemented after it has been approved by the shareholders of the
Company in any manner which, in the judgment of the Board of Directors of the
Company, would have a material adverse effect on the rights of such shareholders
or in any manner not permitted under applicable law.
3.3 Headings. The headings set forth herein are inserted for convenience or
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
3.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, and all of which, when
taken together, shall constitute one and the same instrument.
3.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of law, except to the extent that the laws of the State of Delaware
require application herein.
<PAGE>
-11-
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed on its behalf and attested by its officers hereunto duly authorized,
all as of the date and year first above written.
INDUSTRIAL ACOUSTICS COMPANY, INC.
By: /s/ Frederic M. Oran
-------------------------------------
Name: Frederic M. Oran
Title: President
Attest:
By: /s/ Robert N. Bertrand
---------------------------------
Name: Robert N. Bertrand
Title: Secretary
IAC HOLDINGS CORP.
By: /s/ James A. Read
-----------------------------------
Name: James A. Read
Title: President
Attest:
By: /s/ Martin P. Dineen
---------------------------------
Name: Martin P. Dineen
Title: Secretary
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.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
Common Stock, par value $.10
2) Aggregate number of securities to which transaction applies: 627,307
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was
determined): $11.00
4) Proposed maximum aggregate value of transaction: $6,900,377
5) Total fee paid: $1,380
[ ] Fee paid previously with preliminary materials.
<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:
-2-
<PAGE>
Preliminary Proxy Statement
dated June 12, 1998
INDUSTRIAL ACOUSTICS COMPANY, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of INDUSTRIAL
ACOUSTICS COMPANY, INC. will be held at the offices of the Company, 1160
Commerce Avenue, Bronx, New York on , 1998 at 10:00 a.m., New York time, for the
following purposes:
(1) to consider and vote upon a proposal to adopt an Agreement and Plan of
Merger pursuant to which (a) IAC Holdings Corp. ("Holdings"), a
Delaware corporation, will be merged with and into Industrial
Acoustics Company, Inc. (the "Company"), a New York corporation, and
(b) each outstanding share of common stock of the Company ("Common
Stock") owned by Holdings will be cancelled and each outstanding share
of Common Stock owned by shareholders other than Holdings will be
converted into the right to receive $11.00 per share in cash and the
outstanding Shares of Holdings will be converted into new shares of
the Common Stock; and
(2) to transact such other business as may properly come before the
meeting and at any postponements or adjournments thereof.
Pursuant to the By-Laws of the Company, the Board of Directors has fixed the
close of business on June 8, 1998 as the record date for the determination of
shareholders entitled to notice of and to vote at the meeting and at any
postponements or adjournments thereof.
If you cannot be present in person please complete, date, sign, and return the
accompanying Proxy without delay. A business reply envelope which does not
require any postage, if mailed in the United States, is enclosed for your
convenience.
Dated: , 1998
<PAGE>
By order of the Board of Directors
INDUSTRIAL ACOUSTICS COMPANY, INC.
Robert N. Bertrand
Secretary
-2-
<PAGE>
Preliminary Proxy Statement
dated June 12, 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") for use at a special meeting (the "Meeting") of
the Company's shareholders (the "Shareholders") to be held on , 1998 at 10:00
a.m. at the Company's principal executive offices located at 1160 Commerce
Avenue, Bronx, New York, 10462, and at any postponements or adjournments
thereof. The approximate date on which a definitive Proxy Statement and the
accompanying proxy will first be mailed to shareholders is , 1998.
Only Shareholders of record at the close of business on June 8, 1998 (the
"Record Date"), will be entitled to vote at the Meeting. On that date, there
were 2,981,211 shares of the Common Stock of the Company, par value $.10 (the
"Common Stock") outstanding and entitled to vote at the Meeting held by
approximately 600 shareholders of rec-
<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 presence at the Meeting, in person or by
proxy, of a majority of the outstanding shares of Common Stock entitled to vote
shall constitute a quorum for the meeting.
Common Stock represented by properly executed proxies, unless previously
revoked, will be voted at the Meeting in accordance with the instructions
thereon. Each proxy granted may be revoked by a Shareholder giving such proxy at
any time before it is exercised by filing with the Secretary of the Company a
revoking instrument or a duly executed proxy bearing a later date. The powers of
any proxy holder will be suspended if the person who executed the proxy held by
such proxy holder attends the Meeting in person and so requests. Attendance at
the Meeting will not in itself constitute revocation of the proxy.
The Company will bear the cost of soliciting proxies in the form enclosed.
In addition to solicitation by mail, proxies may be solicited personally, or by
telephone, or by employees of the Company, without additional compensation for
such services. The Company may reimburse brokers holding Common Stock in their
names or in the names of their nominees for their expenses in sending proxy
material to the beneficial owners of such Common Stock.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROXY STATEMENT IN CONNECTION WITH THE SOLICITATION OF PROXIES AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
Purpose; Merger Agreement. At the Meeting, Shareholders will consider and
vote upon a proposal to adopt an Agreement and Plan of Merger dated as of May
20, 1998 (the "Merger Agreement") between the Company and Holdings. The Merger
Agreement provides, subject to the approval of Shareholders at the Meeting, for
the merger of Holdings with and into the Company, with the Company being the
surviving corporation (the "Merger"). Approval of the Merger Agreement requires
the affirmative vote of the holders of two-thirds of the outstanding shares of
Common Stock. Since Holdings owns approximately 79% of the Common Stock,
adoption of the Merger Agreement is assured if Holdings votes in its favor.
Holdings has indicated its intention to vote in favor of the Merger. Pursuant to
the Merger Agreement, each outstanding share of Common Stock (other than Common
Stock held by the Company as treasury stock and Common Stock held by Holdings),
will be converted into the right to receive $11.00 per share in cash (the
-2-
<PAGE>
"Merger Consideration"). Outstanding shares of common stock of Holdings will be
converted into the right to receive newly issued shares of common stock of the
Company. See "The Merger Agreement." A copy of the Merger Agreement is attached
to this Proxy Statement as Exhibit A.
Since the Common Stock is designated as a national market system security
on the Nasdaq National Market, pursuant to Section 910 of the New York Business
Corporation Law (the "BCL"), appraisal rights will not be available to
shareholders of the Company. Accordingly, although a Shareholder who objects to
the Merger may vote against its adoption, since Holdings has indicated that it
will vote in favor of the Merger, the approval by Shareholders is assured and an
objecting Shareholder's available alternative may be limited to selling the
Shareholder's Common Stock before the Merger takes place.
The Merger Agreement provides that as a condition to consummation of the
Merger, Holdings obtain the funds necessary to pay the Merger Consideration. The
Company has been informed by Holdings that Holdings will amend its existing loan
agreement with International Mezzanine Capital, B.V. ("IMC"), an affiliate of
Holdings, dated as of March 19, 1998 to permit Holdings to borrow funds
sufficient to pay all or a portion of the Merger Consideration and that the
balance of the Merger Consideration (if any) will be made available to Holdings
by way of a capital contribution by Holdings' sole shareholder, International
Mezzanine Investment, N.V. ("IMI"). The aggregate amount of the Merger
Consideration to be paid to the Company's Shareholders is expected to be
$6,900,377.
Recent Stock Prices. On June 1, 1998, the high and low bid prices for the
Common Stock as reported on the Nasdaq National Market were 10 and 9 1/2,
respectively, and the last reported sale price was 9 15/16 per share. The last
reported trade of the Common Stock prior to the announcement of the Merger took
place on May 13, 1998 at a price of $9.25. See "Stock Prices and Suspension of
Dividends."
Recommendation of the Board of Directors. The Board of Directors of the
Company has determined that the Merger Agreement is fair to, and in the best
interests of, the Company and its Shareholders and has unanimously approved and
adopted the Merger Agreement. See "Special Factors -- Acquisition; Purpose of
the Merger; Fairness Factors."
Certain Results of the Merger. As a result of the Merger, Shareholders of
the Company will no longer have any continuing interest in the Company, the
Company's Common Stock will no longer be traded on the Nasdaq National Market
and the registration of the Company's Common Stock under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and the Company's reporting
obligations thereunder will be terminated. After giving effect to the Merger,
IMI, the sole shareholder of Holdings, will be the sole shareholder of the
Company.
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Interests of Certain Persons in the Merger. Messrs. Maarten D. Hemsley,
Robert M. Davies and Robert N. Haidinger (Directors of the Company) are
directors of Holdings. Messrs. James A. Read and Martin Dineen (Directors of the
Company) are officers and directors of Holdings. Mr. Haidinger is the president
of a company in which IMI, the sole shareholder of Holdings, has a substantial
interest. See "Interests of Certain Persons in the Merger; Conflicts of
Interest."
Exchange of Certificates. If the Merger is consummated, the Company will
send instructions to Shareholders regarding the surrender of stock certificates.
SHAREHOLDERS SHOULD NOT SUBMIT ANY STOCK CERTIFICATES AT THE PRESENT TIME.
Effective Time of the Merger. The Merger will become effective upon the
filing of a certificate of merger with the Secretary of State of New York (the
"Effective Time"). The filing will occur after all conditions to the Merger
contained in the Merger Agreement have been satisfied or waived. The Company and
Holdings anticipate that the Merger will be consummated as promptly as
practicable following the Meeting.
Conditions to Consummation of the Merger. The respective obligations of the
Company and Holdings to consummate the Merger are subject to the satisfaction or
waiver at or prior to the Effective Time of the following conditions, among
others: (i) adoption of the Merger Agreement by the holders of the Company's
Common Stock; (ii) the absence of any statute, rule, injunction or order that
would prevent consummation of the Merger; (iii) the receipt of all required
authorizations, consents and approvals; (iv) Holdings having obtained funds or
arranged financing sufficient to pay the Merger Consideration and (v) the
performance of and compliance with all agreements and obligations of the parties
under the Merger Agreement.
Termination of the Merger Agreement. The Merger Agreement may be terminated
and the Merger abandoned at any time prior to the Effective Time by the Board of
Directors of the Company or by Holdings. See "The Merger Agreement --
Termination."
Special Factors
Acquisition; Purpose of the Merger; Fairness Factors. On March 19, 1998,
Holdings became the owner of 2,353,904 shares of the Common Stock, or
approximately 79% of the issued and outstanding shares of the Common Stock of
the Company. Holdings acquired 1,914,429 of such shares from Martin Hirschorn,
the Company's founder and, until May 1998, its Chief Executive Officer, and
439,475 of such shares from certain other management and institutional
shareholders, in each case for $11.00 per share. On March 19, 1998, Messrs. John
M. Handley, Michael W. Hirschorn, Arnold W. Kanarek and Jorgen Svendsen resigned
from the Board of Directors of the Company and on March 20, 1998 the remaining
Directors appointed Messrs. Robert M. Davies, Martin Dineen, Robert
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Haidinger, Maarten D. Hemsley and James A. Read as Directors of the Company. See
"-- Background of Change of Control."
The Board of Directors, after Holdings' acquisition of shares of the Common
Stock, considered the position, prospects and future of the Company generally
and as a company with public shareholders specifically and discussed such
matters with representatives of Holdings. For the reasons discussed below, the
Board of Directors concluded that it was not in the interests of the Company or
its Shareholders to remain a company with public shareholders and that the
Merger would be both fair and in the best interests of the Company and all of
its Shareholders. Accordingly, the Board of Directors, which includes Martin
Hirschorn and Frederic M. Oran (the Company's Chief Executive Officer since May
1998), both of whom previously sold all the shares in the Company that they
owned to Holdings at a price of $11.00 per share, unanimously approved the
Merger Agreement on May 20, 1998. The Company and Holdings entered into the
Merger Agreement on May 20, 1998. In approving the Merger Agreement and reaching
its conclusions as to the fairness of Merger, the Board of Directors considered
the following factors in particular:
1. providing Shareholders with an opportunity to dispose of their
shares at the same price as that obtained from Holdings by the Company's
founder, management and certain institutional holders and at a premium to
the recent market price; 2. a limited market for the Company's Common Stock
for several years and the resulting limited ability of Shareholders to
realize on their investment in the Company; 3. the ongoing cost to the
Company of regulatory compliance as a public company without the benefit of
having a ready market for its securities; 4. greater operating flexibility
in the management of the business to remedy recent adverse operating
results; and 5. disappointing results of operations which, as a result of
the Company's public status, become available to competitors.
Equivalent Price; Premium Over Market Price. In transactions with Holdings,
the founder and former Chief Executive Officer of the Company, Martin Hirschorn,
Frederic M. Oran, and other members of management and certain institutional
holders were able to receive $11.00 per share on their investment. This price
was negotiated on an arms-length basis between these unaffiliated parties after
giving effect to the recent trading range for the Common Stock and the Company's
financial position and prospects. See "-- Background of Change of Control." In
considering the fairness of the Merger, the Board of Directors gave particular
weight to this factor.
The average market price of the Common Stock for the period from March 19,
1998 (the date Holdings acquired its interest in the Company) to May 20, 1998
(the date the Merger Agreement was executed) was $9.71. The last reported trade
of the Common Stock during that period took place on May 13, 1998 at a price of
$9.25. The Merger Consideration of $11.00 per share represents a premium of 19%
to such last reported trade. See "Stock Prices and Suspension of Dividends."
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Limited Trading Market. For several years there has a been a limited market
for the Company's Common Stock on the NASDAQ system. There are currently only
two market makers for the Common Stock.
At June 8, 1998, the Company had approximately 600 holders of 627,307
shares of Common Stock, excluding shares held by Holdings. The Company
understands that during the twelve months ended March 31, 1998, there were only
111 trades of the Common Stock involving an aggregate of 138,618 shares of its
Common Stock.
Cost of Regulatory Compliance. The Company estimates that it spends
approximately $160,000 on an annual basis on costs solely related to being a
publicly-held entity, including legal, accounting, insurance, printing and
mailing costs. Given the ongoing costs associated with remaining a public
company without the benefit of having a ready market for its securities,
combined with the other factors considered by the Board of Directors, the Board
of Directors determined that private ownership of the Company is the most
effective way to improve its financial performance.
Operating Flexibility. The Board is of the opinion that the Merger would
enable management to concentrate their efforts on reversing the Company's
operating losses and improving long-term growth of its businesses and to make
business decisions and acquisitions free from the constraints of public
ownership, which the Board of Directors believes often places undue emphasis on
short-term considerations. The Board of Directors believes that the short-term
effect of such restructuring efforts on the future market value of Common Stock
may be negative. The Board therefore believes that prospects for achieving the
necessary business turnaround would improve if it were no longer a public
company.
Competitive Disadvantages. As a consequence of its publicly-held status,
the Company is required to file and make public detailed and periodic reports
about its operations and its financial status. The Company's detailed financial
reports disclose to the public (including the Company's competitors, customers,
suppliers and employee labor unions) operating losses which may be used to the
detriment of the Company by its competitors and in negotiations and dealings
with others. Certain of the Company's competitors are privately-owned companies,
not required to disclose publicly such sensitive financial details of their
operations. At the same time, competitors have the advantage of examining the
Company's financial statements. Those of the Company's competitors which are
publicly-held are either significantly larger, and engaged in a broader spectrum
of activities, or are subsidiaries of larger, diversified public companies whose
financial information is disclosed on a consolidated basis with other lines of
business. As to such competitors, required financial disclosures do not reveal
detailed information regarding the operations of those components directly
competitive with the Company. The Board of Directors believes that private
ownership of the Company would not only eliminate the requirement to disclose
results of operations but, as discussed above, would also provide management of
the Company with the
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operating flexibility to focus on and improve the Company's results of
operations on a long-term basis. The value of such flexibility cannot be
quantified.
Certain Results of Merger. As a result of the Merger, IMI will own all of
the outstanding equity interests of the Company (subject to agreements to grant
options in Common Stock to IAC Partners), so that IMI's interest in the Company,
including its future net earnings, will increase from approximately 79% to 100%
in return for the aggregate Merger Consideration of $6,900,377. According to the
terms of the Merger Agreement, each share of Common Stock (except treasury
shares and shares owned by Holdings) will be converted into the right to receive
the Merger Consideration of $11.00 per share. As a result, the Common Stock held
by existing Shareholders will no longer represent an equity interest in the
Company and will no longer share in future earnings or losses of the Company,
the risks associated with such earnings and losses, or the potential to realize
greater value in the event that strategic acquisitions, divestitures or other
extraordinary corporate transactions are pursued by the Company in the future.
Neither the Company nor, to the knowledge of the Company, Holdings now has any
such transactions under consideration. At March 31, 1998, the net book value of
the Company was approximately $39,221,000 or $13.17 per share of Common Stock.
Before giving effect to the Merger, Holdings' 79% interest had a net book value
to Holdings (that is, its investment including the principal amount of the Loan
but excluding transactional expenses) of approximately $25,893,000, or $11.00
per share of Common Stock. After giving effect to the Merger, Holdings will own
all of the outstanding shares of Common Stock of the Company and will have made
an investment, on a comparable basis, of approximately $32,793,000 or $11.00 per
share of pre-Merger Common Stock. The Company reported net losses of $.58 and
$.41 per share for the quarter ended March 31, 1998 and the year ended December
31, 1997, respectively, and net income of $.12 per share for the year ended
December 31, 1996. The Company cannot predict when its recent operating losses
may be reversed.
Following the Merger, it is anticipated that the registration of the Common
Stock under the Exchange Act will be terminated and that the Company will no
longer file reports under the Exchange Act. In addition, upon consummation of
the Merger, Holdings' obligation under the Loan will become an obligation of the
Company's and the option held by IAC Partners to acquire 12% of the common stock
of Holdings will become an option to acquire 12% of the Common Stock of the
Company. See "-- Background of Change of Control."
Federal Income Tax Considerations. The receipt of cash for Common Stock
pursuant to the Merger will be a taxable transaction for federal income tax
purposes under the Code, and also may be a taxable transaction under applicable
state, local and other tax laws. In general, a Shareholder will recognize gain
or loss equal to the difference between the tax basis for the Common Stock held
by such Shareholder and the amount of cash received in exchange therefor. See
"Certain Federal Income Tax Consequences of the Merger."
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Board and Shareholder Approval; No Independent Opinions. The Board of
Directors of the Company approved the Merger unanimously. No unaffiliated
advisor to the Board, any group of Directors or the Shareholders has been
retained for purposes of negotiating or reporting on the fairness of the Merger.
In reaching these conclusions, the Board considered the recent completion of
Holdings acquisition and its willingness to effect the Merger at the same price
per share, which price Holdings and Mr. Hirchorn had negotiated at arms-length.
Adoption of the Merger Agreement requires that it be approved by the holders of
two-thirds of the shares of Common Stock. Given the approximately 79% interest
of Holdings, the favorable vote of Holdings would assure such approval. The
Merger has not been structured to require the approval of a majority of
unaffiliated Shareholders.
Background of Change of Control. In November 1997, IAC Acquisition Partners
("IAC Partners"), a partnership in which Messrs. Davies and Hemsley are
partners, approached Mr. Hirschorn with a view toward arranging a purchase of
Mr. Hirschorn's stock in the Company. After a lengthy due diligence
investigation, IAC Partners negotiated a preliminary agreement with Mr.
Hirschorn and IAC Partners approached IMI, a Netherlands Antilles company
engaged in the business of investing in companies in the United States and
Europe, about investing in the Company.
IMI decided to pursue an acquisition of the Common Stock of the Company
held by Mr. Hirschorn and certain other management and institutional
shareholders of the Company.
IMI organized Holdings as a wholly-owned subsidiary of IMI to effect the
stock acquisition. In January 1998, Holdings entered into separate stock
purchase agreements with Mr. Hirschorn and the other selling Shareholders. On
March 19, 1998, Holdings and Mr. Hirschorn signed an amendment to the stock
purchase agreement between them waiving certain financial conditions to closing
and effecting a minor change in the number of shares being purchased. On that
date, Holdings acquired 2,353,904 shares of the Common Stock of the Company, or
approximately 79% of the issued and outstanding shares of the Common Stock of
the Company, 1,914,429 of which were purchased from Mr. Hirschorn and 439,475 of
which were purchased from the other selling Shareholders, all at a price of
$11.00 per share.
In order to effect the acquisition, Holdings received an equity
contribution of approximately $10 million from IMI and an uncollaterized loan of
approximately $17 million (the "Loan") from IMC, a subsidiary of IMI. Interest
on the unpaid principal amount of the Loan accrues at a rate per annum equal to
LIBOR (as defined in the IMC-Holdings loan agreement) plus 3.50 percent. The
Loan matures on March 19, 2000. The Company has been informed by Holdings that
Holdings will amend the IMC-Holdings loan agreement to allow for additional
borrowings by Holdings in order to pay all or a portion of the Merger
Consideration. If the Merger is consummated, the Loan, including any additional
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<PAGE>
borrowings, will become an obligation of the Company and its maturity could be
accelerated. No arrangements have been made to repay or refinance the Loan. IMI
will make a capital contribution to Holdings in an amount sufficient to pay the
balance, if any, of the Merger Consideration.
Holdings and IAC Partners have agreed that IAC Partners would receive a due
diligence and consulting fee equal to 1.5% of the total consideration paid by
Holdings in the acquisition and would be granted an option to acquire 12% of the
common stock of Holdings on a fully diluted basis, exercisable upon the sale by
Holdings of all or a majority of its interest in the Company, at an exercise
price equal to the net cost of IMI's equity investment in Holdings on a per
share basis. Upon consummation of the Merger, such option would become an option
to acquire 12% of the Common Stock of the Company on a fully diluted basis,
exercisable upon the sale by IMI of all or a majority of its interest in the
Company. Holdings and Messrs. Hemsley and Davies also expect to enter into a
management agreement pursuant to which Messrs. Hemsley and Davies will agree to
provide certain management services to Holdings relating to its investment in
the Company, including providing the services of Messrs. Hemsley and Davies as
officers or directors of the Company, if so requested.
Immediately after the closing of the acquisition by Holdings, Messrs.
Handley, Michael Hirschorn, Kanarek and Svendsen resigned from the Board of
Directors of the Company and, on March 20, 1998, the remaining Directors
appointed Messrs. Davies, Dineen, Haidinger, Hemsley and Read to join Mr.
Hirschorn and Frederic Oran as members of the Board of Directors. On April 28,
1998, the Board of Directors accepted the resignations of Arnold Kanarek and
John Handley as senior officers of the Company, which resignations became
effective on May 1, 1998. Mr. Hirschorn also resigned as an executive officer of
the Company but remains the Chairman of the Board of Directors. On April 28,
1998, the Board of Directors elected Frederic Oran as President and Chief
Executive Officer of the Company, Robert N. Bertrand as Senior Vice President of
Finance and Administration and Secretary, and Robert A. Schmidt as Senior Vice
President of Marketing and Sales, all as of May 1, 1998.
Interests of Certain Persons in the Merger; Conflicts of Interest
Messrs. Maarten D. Hemsley, Robert M. Davies and Robert N. Haidinger
(Directors of the Company) are directors of Holdings. Messrs. James A. Read and
Martin Dineen (Directors of the Company) are officers and directors of Holdings.
Messrs. Read and Dineen are affiliated with a private management group which is
the sole investment advisor to IMI, which owns 100% of the capital stock of
Holdings. Mr. Haidinger is president of a company in which IMI has a substantial
interest. The nature of these conflicts is such that the Directors may have an
interest in the Company beyond their status as directors. Any increase in the
value of the Company may benefit not only Holdings and persons
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affiliated or associated with Holdings (including its directors), but also
management and employees of the Company.
Regulatory Approvals
The Company does not believe that any federal or state requirements must be
complied with or that approval must be obtained in connection with the Merger,
other than filings required pursuant to federal securities laws and the filing
of the Certificate of Merger with the Secretary of State of New York and the
Secretary of State of Delaware.
Certain Federal Income Tax Consequences of the Merger
The receipt of cash for Common Stock pursuant to the Merger will be a
taxable transaction for federal income tax purposes under the Code, and also may
be a taxable transaction under applicable state, local and other tax laws.
In general, a Shareholder will recognize gain or loss equal to the
difference between the tax basis for the Common Stock held by such stockholder
and the amount of cash received in exchange therefor. Such gain or loss will be
capital gain or loss if the Common Stock in the hands of the Shareholder is a
capital asset and, in the case of non-corporate Shareholders, generally will be
long-term gain or loss if the holding period for the Common Stock is more than
eighteen months prior to the Effective Date and mid-term gain or loss if the
holding period is more than one year but not more than eighteen months prior
thereto. In certain circumstances, Shareholders who are individuals may be
entitled to preferential treatment for long-term and mid-term capital gains;
however, the ability to offset capital losses against ordinary income is
limited. If the holding period is less than one year then the gain or loss will
be short term gain or loss.
Long-term capital gains recognized by Shareholders who are individuals are
taxable at a maximum rate of 20% and mid-term capital gains are taxable at a
maximum rate of 28% (as compared with a maximum rate of 39.6% on ordinary
income). Corporations generally are subject to tax at a maximum rate of 35% on
both capital gains and ordinary income. The distinction between capital gain and
ordinary income may be relevant for certain other purposes, including the
taxpayer's ability to utilize capital loss carryovers to offset any gain
recognized.
If a Shareholder has long-term, mid-term and short-term capital
transactions during the year, a multi-step netting process occurs. First, gains
and losses within each group are netted separately. The long-term capital gains,
if any, are offset by net short-term capital losses, if any. Short-term capital
losses are then applied to reduce any mid-term capital gain from the 28% group.
A net loss from the 20% group is used first to reduce net gain from the 28%
group. A net loss in the 28% group may be used to offset gain from the 20%
group.
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If the result of combining all of the Shareholder's capital gains and
losses during the taxable year is a net capital gain, the full amount of such
gain will be included in the Shareholder's gross income. Any net capital gain
that is attributable to a particular rate group is taxed at that group's
marginal tax rate. In general, if the result of combining all such capital gains
and losses recognized during the taxable year is a net capital loss, a
Shareholder that is a corporation may not deduct any portion of such loss, and a
Shareholder that is not a corporation (such as an individual) may deduct such
loss only to the extent that it does not exceed $3,000 ($1,500 in the case of a
married individual filing a separate return), with the remainder available for
carryover into future taxable years.
The foregoing discussion may not be applicable to Shareholders who acquired
their Common Stock pursuant to the exercise of options or other compensation
arrangements or who are not citizens or residents of the United States or who
are otherwise subject to special tax treatment under the Code.
THE FOREGOING DISCUSSION IS THE COMPANY'S INTERPRETATION OF THE TAX
CONSEQUENCES OF THE MERGER AND IS BASED ON THE PROVISIONS OF THE CODE, TREASURY
REGULATIONS, RULINGS AND JUDICIAL DECISIONS NOW IN EFFECT, ALL OF WHICH ARE
SUBJECT TO CHANGE. ANY SUCH CHANGES MAY BE APPLIED RETROACTIVELY IN A MANNER
THAT COULD ADVERSELY AFFECT SHAREHOLDERS. EACH SHAREHOLDER SHOULD CONSULT ITS
OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO IT, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS OF THE RECEIPT OF
CASH FOR COMMON STOCK PURSUANT TO THE MERGER.
The Merger Agreement
The following is a summary of the material terms of the Merger Agreement, a
copy of which is attached as Exhibit A to this Proxy Statement. Such summary is
qualified in its entirety by reference to the Merger Agreement.
The Merger Agreement provides that, upon the terms and subject to the
conditions thereof, and in accordance with the BCL, at the Effective Time of the
Merger, Holdings shall be merged with and into the Company, with the Company
being the surviving corporation.
The Merger Agreement provides that at the Effective Time, by virtue of the
Merger and without any action on the part of Holdings, the Company or the
holders of Common Stock:
(a) Each share of Common Stock issued and outstanding immediately
prior to the Effective Time (other than Common Stock owned by Holdings and
Common Stock held by the Company as treasury stock) will be cancelled and
will be
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converted automatically into the right to receive, in cash, from the
Company an amount equal to $11.00 per share payable, without interest, to
the holder of each such share, upon surrender of the certificate that
formerly evidenced such share;
(b) Each share of common stock of Holdings issued and outstanding
immediately prior to the Effective Time will be cancelled and converted
into a new share of common stock of the Company issued and outstanding, and
no payment or distribution will be made with respect thereto; and
(c) Each share of Common Stock held by Holdings or in the Company's
treasury will be cancelled.
Employees holding options under the Company's 1995 Stock Option Plan, as
amended, will be entitled, under the terms of the plan, to receive the
difference between the exercise price of each such option per share and $11.00
multiplied by the number of shares of Common Stock subject to such options.
Under the Merger Agreement, the respective obligations of each party to
effect the Merger are subject to the satisfaction at or prior to the Effective
Time of the following conditions: (a) the Merger Agreement and the transactions
contemplated thereby have been approved and adopted by the affirmative vote of
the holders of a two-thirds of the Company's Common Stock; (b) there is no
statute, rule, injunction or order that would prevent consummation of the
Merger; (c) all required authorizations, consents and approvals have been
obtained; (d) Holdings having obtained funds or arranged financing sufficient to
pay the Merger Consideration; and (e) all agreements and obligations of the
parties under the Merger Agreement have been performed and complied with.
Termination. The Merger Agreement may be terminated and the Merger and the
other transactions contemplated by the Merger Agreement may be abandoned at any
time prior to the Effective Time, notwithstanding any requisite approval and
adoption of the Merger Agreement and the transactions contemplated thereby by
the shareholders of the Company or by Holdings.
Amendment and Waiver. The Merger Agreement may be amended in writing by the
parties thereto or by their respective Boards of Directors at any time prior to
the Effective Time. Except as otherwise provided by the Merger Agreement, any
party thereto may (i) extend the time for the performance of any obligation or
other act of any other party thereto, (ii) waive any inaccuracy in the
representations and warranties contained therein and (iii) waive compliance with
any agreement or condition contained therein.
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Accounting Treatment
The Merger wll be treated as a pooling of interests for accounting
purposes.
Stock Prices and Suspension of Dividends
The Company's Common Stock is traded over the counter on the Nasdaq
National Market under the symbol IACI. As of May 29, 1998, there were
approximately 600 shareholders of record. Market price ranges (high and low bid
quotations) obtained from the Nasdaq Stock Market's Summary of Activity for the
Common Stock for the second calendar quarter through June 1, 1998 and the first
calendar quarter ended March 31, 1998 and for each quarter of the fiscal years
ended December 31, 1995, 1996 and 1997 were as follows:
High Low
1995
First Quarter 16 1/4 15
Second Quarter 16 14 1/2
Third Quarter 16 9 3/4
Fourth Quarter 11 1/2 10
1996
First Quarter 11 9 3/4
Second Quarter 11 1/2 10
Third Quarter 11 9 1/2
Fourth Quarter 11 1/4 8 1/2
1997
First Quarter 16 8 3/4
Second Quarter 11 1/4 8
Third Quarter 9 1/2 8 1/4
Fourth Quarter 11 1/4 8 1/2
1998
First Quarter 11 9 7/8
Second Quarter (through June 1, 1998)(1) 10 7/8 9 1/16
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1 The Merger was announced on May 20, 1998.
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The Board of Directors did not declare a dividend for the year ended
December 31, 1997. A dividend of $.10 per share was paid on March 21, 1997 to
shareholders of record on March 14, 1997 for the year ended December 31, 1996. A
dividend of $.10 per share was paid on March 22, 1996 to shareholders of record
on March 15, 1996 for the year ended December 31, 1995.
Information With Respect to Holdings and IMI
The sole stockholder of Holdings is IMI. The address of the principal
executive offices of IMI is Herengracht 424, 101713Z, Amsterdam, The
Netherlands. IMI is a private company which invests in the debt and equity
securities of corporations in Europe and the United States. Set forth below is
certain information concerning the Directors and Executive Officers of Holdings
and IMI.
Directors and Executive Officers of Holdings
Name and Business Address Principal Occupation Citizenship
James A. Read Managing Director USA
c/o Mezzanine Management Ltd. Mezzanine Management Ltd
Mansfield House (an investment advisor
One Southampton Street to IMI)
London WC2/ROLR England
Robert M. Davies Merchant Banking United Kingdom
c/o The Menai Group LLC Managing Director
100 First Stamford Place Menai Capital LLC
6th Floor
Stamford, Connecticut 06902
Maarten D. Hemsley Merchant Banking United Kingdom
c/o Bryanston Management Ltd. Managing Director
82 Powder Point Avenue Menai Capital LLC
Duxbury, Massachusetts 02332
Martin P. Dineen Vice President USA
c/o Mezzanine Management Ltd. Mezzanine Management LLC
100 First Stamford Place -
6th Floor
Stamford, Connecticut 06902
Robert M. Haidinger President, CEO USA
c/o JJI Lighting Group JJI Lighting Group
67 Holly Hill Lane
Greenwich, Connecticut 06830
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Messrs. Read and Haidinger have been at their respective present positions for
more than the last 5 years. Prior to his current employment, Mr. Davies was Vice
President of Wexford Capital Corporation from 1994 to March 1997. From September
1993 to May 1994, he was Managing Director of Steinhardt Enterprises, Inc. and
from 1987 to August 1993, he was Executive Vice President of the Hallwood Group
Incorporated. Mr. Dineen was involved in banking with Chase Manhattan Bank from
1989 to 1995 and with Bank of Boston from 1995 to 1997. In addition to his
position with Menai Capital LLC, Mr. Hemsley has been President of Bryanston
Management Ltd. since 1993.
Directors and Executive Officers of IMI
Name and Business Address Principal Occupation Citizenship
Franz Horhager Investment Manager Austria
c/o Bank Austria A/G
Am Hof 2
A-1010 Vienna, Austria
Ian Cotterill Investment Manager United Kingdom
c/o HSBC Investment Bank plc
Thames Exchange
10 Queen Street Place
London EC4R 1BL
D. Thomas Abbott Chairman USA
c/o Mees Pierson Holdings, Inc. Mees Pierson Holdings,
3 Stamford Plaza Inc.
301 Tresser Boulevard
Stamford, CT 06901-3239
Charles E. Symington Vice President USA
c/o Metropolitan Life Insurance Metropolitan Life
Company Insurance Company
43 Pippins Way
Morristown, N.J. 07960
Stephen Weber Director United Kingdom
c/o Norwich Union Life & Insurance Norwich Union Life &
Society Insurance Society
37 Surrey Street
Norwich NR1 3UZ UK
Hamish Mair Associate Director United Kingdom
c/o Scottish Eastern Investment Scottish Eastern
Trust plc Investment Trust plc
Saltire Court
20 Castle Terrace
Edinburgh EH1 2ES Scotland
A. Kipp Koester Managing Director USA
c/o The Northwestern Mutual Life Northwestern Independent
Insurance Company Management Company
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720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-4797
MeesPierson Trust (Curacao) N.V. Managing Director
John B. Gorsiraweg 14 International Mezzanine Netherlands
P.O. Box 3889 Investment N.V. Antilles Company
Curacao
Netherlands Antilles
Muneet Othman Investment Management United Arab
Abu Dhabi Investment Authority Emirates
P.O. Box 3600
Abu Dhabi, United Arab Emirates
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From December 1993 to May 1995, Mr. Abbot was Chairman and Chief Executive
Officer of Savin Corp. Prior to December 1993, he was President of Harvest
Group, Inc. Messrs. Horhager, Cotterill, Symington, Weber, Mair and Othman have
been at their respective present positions for more than the last five years.
From 1993 to 1997, Mr. Koester was Vice President of Northwestern Mutual Life
Insurance Company.
Expenses
It is estimated that the following expenses will be incurred in connection
with the Merger, all of which have been or will be paid by the Company:
SEC Filing Fee.................................. $ 1,380
Legal Fees and Expenses......................... 50,000
Accounting Fees and Expenses.................... 10,000
Printing Expenses............................... 5,000
Miscellaneous................................... 3,620
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Total.................................. $ 70,000
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In connection with the Merger, neither the Company nor Holdings anticipate
incurring any appraisal, fairness opinion or solicitation fees or expenses.
Proxies may be solicited by employees of the Company without additional
compensation.
Independent Auditors
Coopers & Lybrand LLP are the Company's independent auditors.
Representatives of Coopers & Lybrand LLP are expected to be present at the
Meeting. They will have the opportunity to make a statement if they so desire
and are expected to be available to respond to appropriate questions.
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Other Matters
The Board of Directors knows of no other matters which will be presented
for consideration at the Meeting. However, if any other matter is properly
brought before the Meeting, it is the intention of the persons named in the
proxy forms to vote the Proxies in accordance with their best judgment.
Shareholder Proposals
If the Merger is consummated, no public annual meetings of shareholders of
the Company will be held in the future. If the Merger is not consummated,
because the date of any such meeting cannot currently be determined,
Shareholders will be informed (by press release or other means determined
reasonable by the Company) of the date of such meeting and the date that
Shareholder proposals for inclusion in the proxy material must be received by
the Company, which proposals must comply with the rules and regulations of the
Securities and Exchange Commission ("SEC") then in effect.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors and persons who own more than 10 percent of the outstanding Common
Stock to file reports of ownership and changes in ownership with the SEC. Based
solely on reports and other information submitted by executive officers and
directors, the Company believes that during the year ended December 31, 1997,
and prior fiscal years, each of its executive officers, directors and persons
who owns more than 10 percent of the outstanding Common Stock filed all reports
required by Section 16(a).
Available Information
The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files reports, proxy statements and other
information with the SEC. Such reports and other information may be inspected
and copied or obtained by mail upon payment of the SEC's prescribed rates at the
public reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549 and at the New York Regional Office of the
SEC, 7 World Trade Center, New York, New York 10048.
Incorporation of Certain Documents by Reference; Accompanying Documents
The following documents or portions thereof filed by the Company with the
SEC are incorporated herein by reference and are made a part hereof:
(a) Annual Report on Form 10-K for the year ended December 31, 1997;
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(b) Quarterly Report on Form 10-Q for the quarterly period ended March 31,
1998; and
(c) Current Reports on Form 8-K dated March 19, 1998 and April 1, 1998.
All documents filed by the Company pursuant to Sections 13, 14 or 15(d) of
the Exchange Act subsequent to the date of this Proxy Statement and prior to the
date of the Meeting shall be deemed to be incorporated by reference in this
Proxy Statement and to be a part hereof from the respective dates of filing of
such documents with the SEC. Any statement contained in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Proxy Statement to the extent that a
statement contained herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as modified or
superseded, to constitute part of this Proxy Statement.
Accompanying this Proxy Statement is the Company's Annual Report on Form
10-K (the "Annual Report") for the year ended December 31, 1997, as amended,
which contains the following information which is specifically incorporated by
reference in this Proxy Statement:
(i) Item 6 of the Annual Report - Selected Financial Data
(ii) Item 7 of the Annual Report - Management's Discussion and Analysis of
Financial Conditions and Results of Operations
(iii) Item 8 of the Annual Report - Financial Statements and Supplementary
Data
(iv) Item 9 of the Annual Report - Changes in and Disagreements with
Accountants on Accounting and Financial Disclosures.
In addition, the Company's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1998 accompanies this Proxy Statement.
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THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE THAT ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN EXHIBITS TO
SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE)
ARE AVAILABLE TO ANY PERSON TO WHOM THIS PROXY STATEMENT IS DELIVERED, ON
WRITTEN OR ORAL REQUEST TO THE COMPANY AT 1160 COMMERCE AVENUE, BRONX, NEW YORK
10462, ATTENTION: CHIEF FINANCIAL OFFICER. IN ORDER TO ENSURE DELIVERY OF THE
DOCUMENTS PRIOR TO THE MEETING, REQUESTS MUST BE RECEIVED BY , 1998.
By order of the Board of Directors
INDUSTRIAL ACOUSTICS COMPANY, INC.
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[FORM OF PROXY]
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INDUSTRIAL ACOUSTICS COMPANY, INC.
1160 Commerce Avenue, Bronx, New York 10462
Proxy Solicited on Behalf of the Board of Directors of the Company
The undersigned hereby constitutes and appoints James A. Read and Robert M.
Davies, and each of them, as true and lawful agents and proxies with full power
of substitution in each, to represent the undersigned at the Special Meeting of
Shareholders of Industrial Acoustics Company, Inc. to be held at 1160 Commerce
Avenue, Bronx, New York 10462, on , 1998 at 10:00 a.m. New York time and at
any postponements and adjournments thereof, on all matters coming before said
meeting.
1. Approval of the Agreement and Plan of Merger.
/ / FOR
/ / AGAINST
2. In their discretion, upon other matters as they may properly come before
the meeting.
(Continued and to be signed on the other side.)
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(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
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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.
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