-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LW/A8UZPD0bMt3IUtBbtLgZI8ZagLimn1zZR4n8T8bcbmsaFJFyC0/OPrOAQmiH8 wm50CaxwQEU/TrEOacU+Gg== 0000950162-98-000873.txt : 19980813 0000950162-98-000873.hdr.sgml : 19980813 ACCESSION NUMBER: 0000950162-98-000873 CONFORMED SUBMISSION TYPE: PRE13E3 PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 19980811 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: INDUSTRIAL ACOUSTICS CO INC CENTRAL INDEX KEY: 0000050253 STANDARD INDUSTRIAL CLASSIFICATION: GENERAL INDUSTRIAL MACHINERY & EQUIPMENT, NEC [3569] IRS NUMBER: 131713318 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: PRE13E3 SEC ACT: SEC FILE NUMBER: 005-48599 FILM NUMBER: 98683029 BUSINESS ADDRESS: STREET 1: 1160 COMMERCE AVE CITY: BRONX STATE: NY ZIP: 10462 BUSINESS PHONE: 7189318000 MAIL ADDRESS: STREET 1: 1160 COMMERCE AVENUE CITY: BRONX STATE: NY ZIP: 10462 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: IAC ACQUISITION PARTNERS CENTRAL INDEX KEY: 0001066727 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 043411911 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: PRE13E3 BUSINESS ADDRESS: STREET 1: 82 POWDER POINT AVENUE CITY: DUXBURY STATE: MA ZIP: 02332 BUSINESS PHONE: 7819342219 MAIL ADDRESS: STREET 1: 82 POWDER POINT AVENUE CITY: DUXBURY STATE: MA ZIP: 02332 PRE13E3 1 RULE 13E-3 TRANSACTION STATEMENT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Rule 13e-3 Transaction Statement (Pursuant to Section 13(e) of the Securities Exchange Act of 1934) INDUSTRIAL ACOUSTICS COMPANY, INC. (Name of Issuer) INDUSTRIAL ACOUSTICS COMPANY, INC. IAC HOLDINGS CORP. INTERNATIONAL MEZZANINE INVESTMENT, N.V. INTERNATIONAL MEZZANINE CAPITAL, B.V. IAC ACQUISITION PARTNERS (Name of Persons Filing Statement) Title CUSIP Number Common Stock 45583010 (Title and CUSIP Number of Class of Securities) Robert N. Bertrand Secretary 1160 Commerce Avenue Bronx, New York 10462 (718) 931-8000 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of the Persons Filing Statement) with a copy to: John P. Mitchell, Esq. Cahill Gordon & Reindel 80 Pine Street New York, New York 10005 (212) 701-3000 This statement is filed in connection with (check the appropriate box): a. [X] The filing of solicitation materials or an information statement subject to Regulation 14A [17 CFR 240.14a-1 to 240.14b-1], Regulation 14C [17 CFR 240.14c-1 to 240.14c-101] or Rule 13e-3(c) [Sec. 240.13e-3(c)] under the Securities Exchange Act of 1934. b. [ ] The filing of a registration statement under the Securities Act of 1933. c. [ ] A tender offer. d. [ ] None of the above. Check the following box if the soliciting materials or information statement referred to in checking box (a) are preliminary copies: /X/ Calculation of Filing Fee Transaction Valuation* Amount of Filing Fee $6,900,377 $1,380 * Solely for purposes of calculating the filing fee and computed pursuant to Section 13(e)(3) of the Securities Exchange Act of 1934, as amended, and Rule 0-11(b)(1). The transaction value equals the product of $11.00 (the "Merger Consideration" per share) and the number of shares of Common Stock of Industrial Acoustics Company, Inc. that are not held by IAC Holdings Corp. or held in Industrial Acoustic Company, Inc.'s treasury. /X/ Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. Amount Previously Paid: $1,380 Form or Registration No.: Schedule 14A Filing Party: Industrial Acoustics Company, Inc. Date Filed: June 12, 1998 This Rule 13e-3 Transaction Statement (the "Statement") is being jointly filed by Industrial Acoustics Company, Inc. a New York corporation (the "Company" or "Issuer") and IAC Holdings Corp., a Delaware corporation, ("Holdings") in connection with a proposed merger (the "Merger") of Holdings with and into the Company. References to "IMI" in this statement are to International Mezzanine Investment, N.V., a Netherlands Antilles corporation, the sole stockholder of Holdings. Information contained in the Proxy Statement (in preliminary form) on Schedule 14A with respect to the solicitation of proxies to approve the Merger (the "Proxy Statement") filed with the Securities and Exchange Commission (the "Commission") on the date hereof is incorporated by reference in response to items of this Statement. The cross-reference sheet which follows shows the location in the Proxy Statement of information required to be included in response to the items of this Statement. Schedule 13E-3 Item Number Location in Proxy Statement Item l(a) Introduction and Summary -- Place; Record Date; Quorum; Solicitation Item l(b) Introduction and Summary -- Place; Record Date; Quorum; Solicitation Item l(c) Stock Prices and Suspension of Dividends Item l(d) Stock Prices and Suspension of Dividends Item l(e) Not Applicable Item l(f) Special Factors -- Background of Change of Control Item 2(a) Introduction and Summary -- Place; Record Date; Quorum; Solicitation. Information With Respect to Holdings, IMI, IAC and IAC Partners Item 2(b) Information With Respect to Holdings, IMI, IMC and IAC Partners Item 2(c) Information With Respect to Holdings, IMI, IMC and IAC Partners Item 2(d) Information With Respect to Holdings, IMI, IMC and IAC Partners Item 2(e) * Item 2(f) * Item 2(g) Information With Respect to Holdings, IMI, IMC and IAC Partners Item 3(a) Special Factors -- Acquisition; Purpose of the Merger; Fairness Factors, -- Background of Change of Control Item 3(b) Special Factors -- Acquisition; Purpose of the Merger; Fairness Factors, -- Background of Change of Control Item 4(a) The Merger Agreement Item 4(b) The Merger Agreement Item 5(a) Not Applicable Item 5(b) Not Applicable Schedule 13E-3 Item Number Location in Proxy Statement Item 5(c) Not Applicable Item 5(d) Not Applicable Item 5(e) Not Applicable Item 5(f) Introduction and Summary -- Certain Results of the Merger. Special Factors -- Certain Results of the Merger Item 5(g) Introduction and Summary -- Certain Results of the Merger. Special Factors -- Certain Results of the Merger Item 6(a) Introduction and Summary -- Purpose; Merger Agreement. Special Factors -- Background of Change of Control Item 6(b) Expenses Item 6(c) Introduction and Summary -- Purpose; Merger Agreement. Special Factors -- Background of Change of Control Item 6(d) Not Applicable Item 7(a) Special Factors -- Acquisition; Purpose of the Merger; Fairness Factors, -- Equivalent Price; Premium Over Market Price, -- Limited Trading Market, -- Cost of Regulatory Compliance, -- Operating Flexibility, -- Competitive Disadvantages Item 7(b) Not Applicable Item 7(c) Special Factors-- Acquisition; Purpose of the Merger; Fairness Factors,-- Equivalent Price; Premium Over Market Price,-- Limited Trading Market,-- Cost of Regulatory Compliance,-- Operating Flexibility, -- Competitive Disadvantages,-- Certain Results of Merger,-- Background of Change of Control. Introduction and Summary-- Certain Results of the Merger Item 7(d) Special Factors-- Acquisition; Purpose of the Merger; Fairness Factors,-- Cost of Regulatory Compliance, -- Operating Flexibility,-- Competitive Disadvantages, -- Certain Results of Merger,--Federal Income Tax Considerations. The Merger Agreement. Certain Federal Income Tax Consequences of the Merger Item 8(a) Special Factors -- Acquisition; Purpose of the Merger; Fairness Factors Item 8(b) Special Factors -- Acquisition; Purpose of the Merger; Fairness Factors, -- Equivalent Price; Premium Over Market Price, -- Limited Trading Market, -- Certain Results of Merger -2- Schedule 13E-3 Item Number Location in Proxy Statement Item 8(c) Special Factors -- Board and Shareholder Approval; Independent Opinion Item 8(d) Special Factors -- Board and Shareholder Approval; Independent Opinion Item 8(e) Special Factors -- Acquisition; Purpose of the Merger; Fairness Factors, -- Board and Shareholder Approval; Independent Opinion Item 8(f) Not Applicable Item 9(a) Special Factors -- Board and Shareholder Approval; Independent Opinion; -- Laidlaw Review Item 9(b) Not Applicable Item 9(c) Not Applicable Item 10(a) Introduction and Summary-- Place; Record Date; Quorum; Solicitation. Special Factors-- Background of Change of Control Item 10(b) Special Factors -- Acquisition; Purpose of the Merger; Fairness Factors, -- Background of Change of Control Item 11 Special Factors-- Background of Change of Control Item 12(a) Introduction and Summary-- Purpose; Merger Agreement Item 12(b) Introduction and Summary-- Recommendation of the Board of Directors. Special Factors --Acquisition; Purpose of the Merger; Fairness Factors Item 13(a) Introduction and Summary-- Purpose; Merger Agreement Item 13(b) Not Applicable Item 13(c) Not Applicable Item 14(a) Financial Statements -- Accompanying Documents. Special Factors -- Certain Results of the Merger Item 14(b) Not Applicable Item 15(a) Introduction and Summary-- Place; Record Date; Quorum; Solicitation Item 15(b) Introduction and Summary-- Place; Record Date; Quorum; Solicitatio. -3- Schedule 13E-3 Item Number Location in Proxy Statement Item 16 Not Applicable Item 17(a) * Item 17(b) * Item 17(c) * Item 17(d) * Item 17(e) Not Applicable Item 17(f) Not Applicable - ------------ * The Item is located only in the Schedule 13E-3. Item 1. Issuer and Class of Security Subject to the Transaction. (a) The name of the Issuer is Industrial Acoustics Company, Inc. (the "Issuer"), a New York corporation that has its principal executive offices at 1160 Commerce Avenue, Bronx, New York 10462. The information appearing under the caption "Introduction and Summary -- Place; Record Date; Quorum; Solicitation" in the Proxy Statement is incorporated herein by reference. (b) The information appearing under the caption "Introduction and Summary - -- Place; Record Date; Quorum; Solicitation" in the Proxy Statement is incorporated herein by reference. (c) - (d) The information appearing under the caption "Stock Prices and Suspension of Dividends" in the Proxy Statement is incorporated herein by reference. (e) Not applicable. (f) The information appearing under the caption "Special Factors -- Background of Change of Control" in the Proxy Statement is incorporated herein by reference. Item 2. Identity and Background. (a) - (d) This statement is being filed by the Issuer, IAC Holdings Corp. ("Holdings"), a Delaware corporation that owns approximately 79% of the outstanding shares of Common Stock of the Issuer, International Mezzanine Investment, N.V., a Netherlands Antilles Corporation ("IMI") (the sole stockholder of Holdings), International Mezzanine Capital, B.V., a corporation which is an affiliate of IMI ("IMC"), and IAC Acquisition Partners, a partnership, ("IAC Partners") which is an affiliate of Holdings. The address of Holdings' principal executive offices is 100 First Stamford Place, Stamford, Connecticut 06902. The address of IMI's principal executive offices is Herengracht 424, 101713Z, Amsterdam, The Netherlands. IMC's principal executive offices are located at Herengracht 424, 1017BZ, Amsterdam, The Netherlands and IAC Partner's principal executive offices are located at 82 Powder Point Avenue, Duxbury, Massachusetts 02332. The information appearing under the captions "Introduction and Summary -- Place; Record Date; Quorum; Solicitation" and "Information With Respect to Holdings, IMI, IMC and IAC Partners" in the Proxy Statement is incorporated herein by reference. (e) - (f) During the five years prior to the date hereof, neither Holdings, IMI, IMC nor IAC Partners, nor to their knowledge, any of their respective directors or executive officers has been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to any civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is -4- subject to a judgment, decree, or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities law or finding any violation with respect to such laws. (g) The information appearing under the caption "Information With Respect to Holdings, IMI, IMC and IAC Partners" in the Proxy Statement is incorporated herein by reference. Item 3. Past Contracts, Transactions or Negotiations. (a) - (b) The information appearing under the caption "Special Factors -- Acquisition; Purpose of the Merger; Fairness Factors, -- Background of Change of Control" in the Proxy Statement is incorporated herein by reference. Item 4. Terms of the Transaction. (a) - (b) The information appearing under the caption "The Merger Agreement" in the Proxy Statement is incorporated herein by reference. Item 5. Plans or Proposals of the Issuer or Affiliate (a) - (e) Not applicable. (f) Following consummation of the Merger, the Common Stock of the Company will be eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The information appearing under the captions "Introduction and Summary -- Certain Results of the Merger" and "Special Factors -- Certain Results of the Merger" in the Proxy Statement is incorporated herein by reference. (g) Not applicable. Item 6. Source and Amounts of Funds or Other Consideration. (a) The total amount of funds to be used to pay the Merger Consideration is expected to be approximately $6,990,377 which will be made available to Holdings by way of an amendment, to be entered into, to an existing loan agreement between Holdings and IMC, or to the extent not so funded, a capital contribution to Holdings by IMI. The information appearing under the captions "Introduction and Summary -- Purpose; Merger Agreement" and "Special Factors -- Background of Change of Control" in the Proxy Statement is incorporated herein by reference. (b) The information appearing under the caption "Expenses" in the Proxy Statement is incorporated herein by reference. (c) Holdings will borrow the funds to pay the Merger Consideration from IMC at an interest rate of LIBOR (as defined in the Loan Agreement) plus 3.50 percent. The loan will become due on March 19, 2000. Holdings does not currently have in place any plans or arrangements to finance or repay such borrowings. The information appearing under the captions "Introduction and Summary -- Purpose; Merger Agreement" and "Special Factors -- Background of Change of Control" in the Proxy Statement is incorporated herein by reference. (d) Not applicable. -5- Item 7. Purpose(s), Alternatives, Reasons and Effects. (a) The information appearing under the captions "Special Factors -- Acquisition; Purpose of the Merger; Fairness Factors, -- Equivalent Price; Premium Over Market Price, -- Limited Trading Market, -- Cost of Regulatory Compliance, -- Operating Flexibility, -- Competitive Disadvantages" and "Introduction and Summary -- Certain Results of the Merger " in the Proxy Statement is incorporated herein by reference. (b) Not applicable. (c) The information appearing under the caption "Special Factors -- Acquisition; Purpose of the Merger; Fairness Factors, -- Equivalent Price; Premium Over Market Price, -- Limited Trading Market, -- Cost of Regulatory Compliance, -- Operating Flexibility, -- Competitive Disadvantages, -- Certain Results of Merger, -- Background of Change of Control" in the Proxy Statement is incorporated herein by reference. (d) The information appearing under the caption "Special Factors -- Acquisition; Purpose of the Merger; Fairness Factors, -- Cost of Regulatory Compliance, -- Operating Flexibility, -- Competitive Disadvantages, -- Certain Results of Merger, --Federal Income Tax Considerations. The Merger Agreement. Certain Federal Income Tax Consequences of the Merger" in the Proxy Statement is incorporated herein by reference. Item 8. Fairness of the Transaction. (a) The information appearing under the caption "Special Factors -- Acquisition; Purpose of the Merger; Fairness Factors" in the Proxy Statement is incorporated herein by reference. (b) The information appearing under the caption "Special Factors -- Acquisition; Purpose of the Merger; Fairness Factors, -- Equivalent Price; Premium Over Market Price, -- Limited Trading Market, -- Certain Results of Merger" in the Proxy Statement is incorporated herein by reference. (c) The information appearing under the caption "Special Factors -- Board and Shareholder Approval; Independent Opinion" in the Proxy Statement is incorporated herein by reference. (d) The information appearing under the caption "Special Factors -- Board and Shareholder Approval; Independent Opinion" in the Proxy Statement is incorporated herein by reference. (e) The information appearing under the caption "Special Factors -- Acquisition; Purpose of the Merger; Fairness Factors, -- Board and Shareholder Approval; Independent Opinion" in the Proxy Statement is incorporated herein by reference. (f) Not applicable. Item 9. Reports, Opinions, Appraisals and Certain Negotiations. (a) The information appearing under the caption "Special Factors -- Board and Shareholder Approval; Independent Opinion; Laidlaw -- Review" in the Proxy Statement is incorporated herein by reference. (b) The information appearing under the caption "Special Factors -- Laidlaw Review" in the Proxy Statement is incorporated herein by reference. (c) The information appearing under the caption "Special Factors -- Laidlaw Review" in the Proxy Statement is incorporated herein by reference. -6- Item 10. Interest in Securities of the Issuer. (a) The information appearing under the caption "Introduction and Summary - -- Place; Record Date; Quorum; Solicitation. Special Factors -- Background of Change of Control" in the Proxy Statement is incorporated herein by reference. (b) The information appearing under the caption "Special Factors -- Acquisition; Purpose of the Merger; Fairness Factors, -- Background of Change of Control" in the Proxy Statement is incorporated herein by reference. Item 11. Contracts, Arrangements or Understandings with Respect to the Issuer's Securities. The information appearing under the caption "Special Factors -- Background of Change of Control" in the Proxy Statement is incorporated herein by reference. Item 12. Present Intention and Recommendation of Certain Persons with Regard to the Transaction. (a) The information appearing under the caption "Introduction and Summary - -- Purpose; Merger Agreement" in the Proxy Statement is incorporated herein by reference. (b) The information appearing under the caption "Introduction and Summary - -- Recommendation of the Board of Directors. Special Factors --Acquisition; Purpose of the Merger; Fairness Factors" in the Proxy Statement is incorporated herein by reference. Item 13. Other Provisions of the Transaction. (a) The information appearing under the caption "Introduction and Summary - -- Purpose; Merger Agreement" in the Proxy Statement is incorporated herein by reference. (b) Not applicable. (c) Not applicable. Item 14. Financial Information. (a) The information appearing under the captions "Financial Statements," "Accompanying Documents" and "Special Factors -- Certain Results of the Merger" with respect to Book Value is incorporated herein by reference. (b) Not applicable. Item 15. Persons and Assets Employed, Retained or Utilized. (a) The information appearing under the caption "Introduction and Summary - -- Place; Record Date; Quorum; Solicitation" in the Proxy Statement is incorporated herein by reference. (b) The information appearing under the caption "Introduction and Summary - -- Place; Record Date; Quorum; Solicitation" in the Proxy Statement is incorporated herein by reference. Item 16. Additional Information. Not applicable. -7- Item 17. Material to be Filed as Exhibits. (a) Form of Amended Loan Agreement between IAC Holdings Corp. and International Mezzanine Capital, B.V.1 (b) Opinion of Laidlaw & Co. (c) 1. Form of Stock Option Agreement between IAC Holdings Corp. and IAC Acquisition Partners.* 2. Agreement and Plan of Merger dated as of May 20, 1998 between Industrial Acoustics Company, Inc. and IAC Holdings Corp.* 3. Stock Purchase Agreement dated as of January 26, 1998 by Holdings and Martin Hirschorn, as amended. 4. Stock Purchase Agreement dated as of January 23, 1998 by and between Holdings and Community Funds, Inc. 5. Stock Purchase Agreement dated as of January 23, 1998 by and between Holdings and Barnard College. 6. Stock Purchase Agreement dated as of January 23, 1998 by and between Holdings and Michael Hirschorn. 7. Stock Purchase Agreement dated as of January 23, 1998 by and between Holdings and Frederic M. Oran. 8 Stock Purchase Agreement dated as of January 23, 1998 by and between Holdings and Arnold W. Kanarek. 9. Stock Purchase Agreement dated as of January 23, 1998 by and between Holdings and ARK International. 10. Stock Purchase Agreement dated as of January 23, 1998 by and between Holdings and George J. Sotos. 11. Stock Purchase Agreement dated as of January 23, 1998 by and between Holdings and Robert J. Buelow. 12 Stock Purchase Agreement dated as of January 23, 1998 by and between Holdings and Morton I. Schiff. 13. Stock Purchase Agreement dated as of January 23, 1998 by and between Holdings and Henry Allen. (d) Proxy Statement of Issuer, in preliminary form, dated August , 1998. - ---------- * Previously filed. -8- (e) Not applicable. (f) Not applicable. -9- SIGNATURE After due inquiry and to the best of our knowledge and belief, the undersigned certify that the information set forth in this statement is true, complete and correct. Dated: August 11, 1998 INDUSTRIAL ACOUSTICS COMPANY, INC. By: /s/ Frederic M. Oran ---------------------------- Name: Frederic M. Oran Title: President IAC HOLDINGS CORP. By: /s/ James A. Read ---------------------------- Name: James A. Read Title: President -10- EX-1.A 2 OPINION OF LAIDLAW & CO. Laidlaw & Co.(R) July 31, 1998 Board of Directors Industrial Acoustics Company, Inc. 1160 Commerce Ave. Bronx, NY 10462 Dear Sirs: You have asked us to advise you with respect to the fairness to the minority, public stockholders of IAC Inc. (the "Company") from a financial point of view of the consideration to be paid by IAC Holdings ("Holdings") pursuant to the terms of the Agreement and Plan of Merger (the "Merger Agreement"), between the Company and Holdings. The Merger Agreement provides that for each outstanding share of the Company's Common Stock the shareholder will receive $11.00 in cash. In arriving at our opinion, we have reviewed certain publicly available business and financial information relating to the Company. We have also reviewed certain other information, including financial forecasts, provided to us by the Company, and have met with the Company's and Holdings' management to discuss the business and prospects of the Company. We have also considered certain financial and stock market data of the Company. We also considered such other information, financial studies, analyses and investigations and financial, economic and market criteria which we deemed relevant. In connection with our review, we have not independently verified any of the foregoing information and have relied on its being complete and accurate in all material respects. With respect to the financial forecasts, we have assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of the Company's and Holdings' management as to the future financial performance of the Company. In addition, we have not made an independent evaluation or appraisal of the as- -2- sets of the Company, nor have we been furnished with any such appraisals. Laidlaw will receive a fee for rendering this opinion. It is understood that this letter is for the information of the Board of Directors of IAC Inc. only and may be published in its entirety in the prospectus/proxy statement to be distributed to stockholders of the Company so long as we give our prior written consent to any summary of, excerpt from or reference to such opinion which consent shall not be unreasonably withheld. This letter is not to be quoted or referred to, in whole or in part, in any other proxy statement or in any other registration statement or prospectus, or in any other document used in connection with the offering or sale of securities, nor shall this letter be used for any other purposes, without Laidlaw & Co.'s prior written consent. Based upon and subject to the foregoing, it is our opinion that, as of the date hereof, the consideration to be paid to the Company's minority, public stockholders pursuant to the Merger Agreement is fair from a financial point of view. Sincerely, Laidlaw Global Securities, Inc. By: /s/ Frank A. Klepetko --------------------------- Frank A. Klepetko Managing Director EX-3 3 STK. PUR. AGREE. - HOLDINGS & MARTIN HIRSCHORN STOCK PURCHASE AGREEMENT This Stock Purchase Agreement ("Agreement") is made as of January 26, 1998, by IAC HOLDINGS CORP., a Delaware corporation, with offices located at ("Buyer") and MARTIN HIRSCHORN, an individual resident in New York, New York ("Hirschorn" or "Seller"). RECITALS Seller desires to sell, and Buyer desires to purchase, a total of 1,913,429 of the issued and outstanding shares (the "Shares") of capital stock, $. 10 par value of Industrial Acoustics Company, Inc., a New York corporation (the "Company"), for the consideration and on the terms set forth in this Agreement. AGREEMENT The parties, intending to be legally bound, agree as follows: 1. DEFINITIONS. For purposes of this Agreement, the following terms have the meanings specified or referred to in this Section 1: "Breach" -- a "Breach" of a representation, warranty, covenant, obligation, or other provision of this Agreement or any instrument delivered pursuant to this Agreement will be deemed to have occurred if there is or has been any material inaccuracy in or material breach of, or any material failure to perform or comply with, such representation, warranty, covenant, obligation, or other provision, and the term "Breach" means any such inaccuracy, breach, failure, claim, occurrence, or circumstance. "Buyer" -- as defined in the first paragraph of this Agreement. "Closing" -- as defined in Section 2.3. "Closing Date" -- the date and time as of which the Closing actually takes place. "Company" -- Industrial Acoustics Company, Inc., a New York corporation. -2- "Consent" -- any approval, consent, ratification, waiver, or other authorization (including any Governmental Authorization). "Contemplated Transactions" -- all of the transactions contemplated by this Agreement, including: (a) the sale of the Shares by Seller to Buyer; (b) the performance by Buyer and Seller of their respective covenants and obligations under this Agreement; and (c) Buyer's acquisition and ownership of the Shares and exercise of control over the Company and its Subsidiaries. "Contract" -- any agreement, contract, obligation, promise, or undertaking (whether written or oral and whether express or implied) that is legally binding. "Damages" -- as defined in Section 10.2. "Disclosure Schedule" -- the Disclosure Schedule delivered by Seller to Buyer concurrently with the execution and delivery of this Agreement. "EBITDA" -- consolidated operating profit for the fiscal year ended December 31, 1997 (i) after all sales, general and administrative expenses, before interest income and expense, taxation, depreciation and amortization, (ii) inclusive of royalty income and after bonus expenses, and (iii) excluding any non-recurring income and adding back redundancy costs relating to the operations of Industrial Acoustics Company, Ltd. For purposes of computing EBITDA, bonus expense shall not be less than $1,300,000, and any provision for potential late penalties on the "Penick/Miramar" contract #50-0833 shall not exceed $90,000. "Encumbrance" -- any charge, claim, community property interest, condition, equitable interest, lien, option, pledge, security interest, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership. "Environmental Claim" -- means any notice, claim, demand, order, direction (conditional or otherwise) or other communication by any governmental authority or any Person alleging liability for any response or corrective action, any damage, including, without limitation, personal injury, property damage, contribution, indemnity, indirect or consequential damages, damage to natural resources, nuisance, pollution, contamination or other adverse effects on the environment, or for fines or penalties, in each case arising under any Environmental Law, including without limitation, relating to, resulting from or in connection with Hazardous Materials and relating to the Company, any of its Subsidiaries or any of their respective properties or predecessors in interest. "Environmental Laws" -- means the common law and all statutes, ordinances, orders, rules, regulations, judgments, writs, decrees or injunctions relating to pollution -3- or protection of human health, safety or the environment including, without limitation, ambient air, indoor air, soil, surface water, groundwater, wetlands and other natural resources, land or subsurface strata, including, without limitation, those relating to the Release or threatened Release of Hazardous Materials or otherwise relating to the generation, manufacture, use, storage, transport, treatment, distribution, or disposal of Hazardous Materials, each as amended or supplemented and each as in effect as of the date of determination. "Environmental Lien" -- means a Lien in favor of a Tribunal or other Person (i) for any liability under an Environmental Law or (ii) for damages arising from or costs incurred by such Tribunal or other Person in response to a release or threatened release of any Hazardous Materials. "Facilities" -- any real property, leaseholds, or other interests currently or formerly owned or operated by the Company or any of its Subsidiaries and any buildings, plants, structures, or equipment (including motor vehicles, tank cars, and rolling stock) currently or formerly owned or operated by the Company or any of its Subsidiaries. "GAAP" -- generally accepted United States accounting principles. "Governmental Authorization" any approval, consent, license, permit, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement. "Governmental Body" -- any (a) nation, state, county, city, town, village, district, or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign, or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); (d) multinational organization or body; or (e) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature. "Hazardous Materials" -- means any pollutant, contaminant, toxic, hazardous or extremely hazardous substance, constituent or waste, or any other constituent, waste, material, compound, chemical or substance including, without limitation, petroleum including crude oil or any fraction thereof, or any petroleum product, subject to regulation under any Environmental Law. "HSR Act -- the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or any successor law, and regulations and rules issued pursuant to that Act or any successor law. "Intellectual Property Assets" -- includes (i) the name Industrial Acoustics Company, all fictional business names, trading names, registered and unregistered trademarks, -4- service marks, and applications (collectively, "Marks"); (ii) all patents, patent applications, and inventions and discoveries that may be patentable (collectively, "Patents"); (iii) a copyrights in both published works and unpublished works (collectively, "Copyrights"); and (iv) all know-how, trade secrets, confidential information, customer lists, software, technical information, data, process technology, plans, drawings, and blue prints (collectively, "Trade Secrets"); owned, used, or licensed by the Company or any Subsidiary as licensee or licensor. "Interim Balance Sheet" -- as defined in Section 3.7. "IRC" -- the Internal Revenue Code of 1986 or any successor law, and regulations issued by the IRS pursuant to the Internal Revenue Code or any successor law. "IRS" -- the United States Internal Revenue Service or any successor agency, and, to the "tent relevant, the United States Department of the Treasury. "Knowledge" -- an individual will be deemed to have "Knowledge" of a particular fact or other matter if (a) such individual is actually aware of such fact or other matter; or (b) a prudent individual could be expected to discover or otherwise become aware of such fact or other matter in the course of conducting a reasonably comprehensive investigation concerning the existence of such fact or other matter. A Person (other than an individual) will be deemed to have "Knowledge" of a particular fact or other matter if any individual who is serving, or who has at any time served, as a director, officer, partner, executor, or trustee of such Person (or in any similar capacity) has, or at any time had, or should have had (based on the standard set forth in clause (b) above) Knowledge of such fact or other matter. "Licensed Intellectual Property Assets" -- Intellectual Property Assets licensed by the Company or any Subsidiary as licensee or licensor. "Legal Requirement" -- any federal, state, local, municipal, foreign, international, multinational, or other administrative order, constitution, law, ordinance, principle of common law, regulation, statute, or treaty. "Material Adverse Effect" -- any circumstance, change in, or effect on the business of the Company or any Subsidiary that, individually or in the aggregate with any other circumstances, changes in, or effects on, the business of the Company or any Subsidiary: (a) is materially adverse to the business, operations, assets or liabilities, employee relationships, customer or supplier relationships, prospects, results of operations or the condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (b) adversely affects the ability of the Buyer, the Company or the Subsidiaries to operate or -5- conduct their business in the manner in which it is currently operated or conducted by Hirschorn, the Company and the Subsidiaries. "Order" -- any award, decision, injunction, judgment, order, ruling, subpoena, or verdict entered, issued, made, or rendered by any court, administrative agency, or other Governmental Body or by any arbitrator. "Organizational Documents" -- (a) the articles or certificate of incorporation and the bylaws of a corporation; (b) the partnership agreement and any statement of partnership of a general partnership; (c) the limited partnership agreement and the certificate of limited partnership of a limited partnership; (d) any charter or similar document adopted or filed in connection with the creation, formation, or organization of a Person; and (e) any amendment to any of the foregoing. "Owned Intellectual Property Assets" -- Intellectual Property Assets owned by the Company or any Subsidiary. "Permitted Encumbrance" -- any of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: (a) liens for taxes, assessments and governmental charges or levies not yet due and payable which are not in excess of the amount accrued therefor on the Reference Balance Sheet; (b) Encumbrances imposed by law, such as materialmen's, mechanics', carriers', workmen's and repairmen's liens and other similar liens arising in the ordinary course of business securing obligations that (i) are not overdue for a period of more than 30 days and (ii) are not in excess of $5,000 in the case of a single property or $50,000 in the aggregate at any time; (c) pledges or deposits to secure obligations under workers' compensation laws or similar legislation or to secure public or statutory obligations; and (d) minor survey exceptions, reciprocal easement agreements and other customary encumbrances on title to real property that (i) were not incurred in connection with any Indebtedness, (ii) do not render title to the property encumbered thereby unmarketable and (iii) do not, individually or in the aggregate, materially adversely affect the value or use of such property for its current and anticipated purposes. "Person" -- any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or Governmental Body. "Proceeding" -- any action, arbitration, audit, hearing, investigation, litigation, or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Body or arbitrator. -6- "Reference Balance Sheet" -- the unaudited consolidated financial statements for the Company and its Subsidiaries for the year ending December 31, 1997, which are subject to confirmation by the audited consolidated financial statements of the Company and its Subsidiaries for the year ending December 31, 1997 described in Section 5. 1 (b). "Related Person" -- means, with respect to a particular individual: (a) each other member of such individual's Family; (b) any Person that is directly or indirectly controlled by such individual or one or more members of such individual's Family; (c) any Person in which such individual or members of such individual's Family hold (individually or in the aggregate) a Material Interest; and (d) any Person with respect to which such individual or one or more members of such individual's Family serves as a director, officer, partner, executor, or trustee (or in a similar capacity)- With respect to a specified Person other than an individual: (a) any Person that directly or indirectly controls, is directly or indirectly controlled by, or is directly or indirectly under common control with such specified Person; (b) any Person that holds a Material Interest in such specified Person; (c) each Person that serves as a director, officer, partner, executor, or trustee of such specified Person (or in a similar capacity); (d) any Person in which such specified Person holds a Material Interest; (e) any Person with respect to which such specified Person serves as a general partner or a trustee (or in a similar capacity); and (f) any Related Person of any individual described in clause (b) or (c). For purposes of this definition, (a) the "Family" of an individual includes (i) the individual, (ii) the individual's spouse, (iii) any other natural person who is related to the individual or the individual's spouse within the second degree, and (iv) any other natural person who resides with such individual, and (b) "Material Interest" means direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting securities or other voting interests representing at least 10% of the outstanding voting -7- power of a Person or equity securities or other equity interests representing at least 10% of the outstanding equity securities or equity interests in a Person. "Release" -- means any spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, emitting, leaching or migration of Hazardous Materials into the indoor or outdoor environment (including, without limitation, the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Materials), including without limitation the movement of any Hazardous Material through the air, soil, surface water, groundwater or property. "Representative" -- with respect to a particular Person, any director, officer, employee, agent, consultant, advisor, or other representative of such Person, including legal counsel, accountants, and financial advisors. "Securities Act" -- the Securities Act of 1933 or any successor law, and regulations and rules issued pursuant to that Act or any successor law. "Seller" -- as defined in the first paragraph of this Agreement. "Shares" -- as defined in the Recitals of this Agreement. "Subsidiary" -- with respect to any Person (the "Owner"), any corporation or other Person of which securities or other interests having the power to elect a majority of that corporation's or other Person's board of directors or similar governing body, or otherwise having the power to direct the business and policies of that corporation or other Person (other than securities or other interests having such power only upon the happening of a contingency that has not occurred) are held by the Owner or one or more of its Subsidiaries; when used without reference to a particular Person, "Subsidiary" means a Subsidiary of the Company. "Tax" or "Taxes" -- (i) all federal, state, local or foreign taxes, charges, fees, imposts, levies or other assessments, including, without limitation, all net income, alternative minimum, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property and estimated taxes, customs duties, fees, assessments and charges of any kind whatsoever, (ii) all interest, penalties, fines, additions to tax or other additional amounts imposed by any taxing authority in connection with any item described in clause (i), and (iii) all transferee, successor, joint and several or contractual liability in respect of any items described in clause (i) or (ii) above. "Tax Return" -- any return (including any information return), report, statement, schedule, notice, form, or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the de- -8- termination, assessment, collection, or payment of any Tax or in connection with the administration, implementation, or enforcement of or compliance with any Legal Requirement relating to any Tax. "Threatened" -- a claim, Proceeding, dispute, action, or other matter will be deemed to have been "Threatened" if any demand or statement has been made (orally or in writing) or any notice has been given (orally or in writing), or if any other event has occurred or any other circumstances exist, that would lead a prudent Person to conclude that such a claim, Proceeding, dispute, action, or other matter is likely to be asserted, commenced, taken, or otherwise pursued in the future. 2. SALE AND TRANSFER OF SHARES; CLOSING. 2.1. SHARES. Subject to the terms and conditions of this Agreement, at the Closing, Seller will sell and transfer the Shares to Buyer, and Buyer will purchase the Shares from Seller. 2.2. PURCHASE PRICE. The purchase price for each of the Shares will be $11.00; therefor, the total purchase price for the Shares is $21,047,719 (the "Purchase Price"). 2.3. CLOSING. The purchase and sale (the "Closing") provided for in this Agreement will take place at the offices of Rand Rosenzweig Smith Radley Gordon & Burstein LLP, 605 Third Avenue, 24th Floor, New York, NY 10158, at 10:00 A.M. on the later of (i) March 15, 1998, (ii) 15 days following the delivery of consolidated audited financial statements of the Company and its Subsidiaries for the year ending December 31, 1997 as required by Section 5. l(b), or (iii) the date that is two business days following the termination of the applicable waiting period under the HSR Act, or at such other time and place as the parties may agree in writing. 2.4. CLOSING OBLIGATIONS. At the Closing (a) Seller will deliver to Buyer: (i) certificates representing the Shares, duly endorsed (or accompanied by duly executed stock powers), with signatures guaranteed by a commercial bank or by a member firm of the New York Stock Exchange, for transfer to Buyer; and -9- (ii) a certificate executed by Hirschorn representing and warranting to Buyer- that each of Hirschorn's representations and warranties in this Agreement was accurate in all respects as of the date of this Agreement and is accurate in all respects as of the Closing Date as if made on the Closing Date (giving full effect to any supplements to the Disclosure Schedule that were delivered by Hirschorn to Buyer prior to the Closing Date in accordance with Section 5.5); and (b) Buyer will deliver: (i) to Seller, by bank cashier's or certified check payable to the order of, or by wire transfer to accounts specified by the Seller, the amount set forth on Schedule A attached hereto; (ii) to the Escrow Agent by bank cashier's or certified check or by wire transfer $1,750,000 pursuant to the Escrow Agreement referred to in Section 7.4(c); and (iii) a certificate executed by Buyer to the effect that, except as otherwise stated in such certificate, each of Buyer's representations and warranties in this Agreement was accurate in all respects as of the date of this Agreement and is accurate in all respects as of the Closing Date as if made on the Closing Date. 2.5. CONDITIONS TO CLOSING. The Closing shall be conditioned and subject to (a) EBITDA, as calculated from the consolidated audited financial statements of the Company and its Subsidiaries for the year ending December 31, 1997 referred to in Section 5. 1 (b), being not less than $783,000, (b) audited Net Cash (cash, investments and marketable securities held for sale less all long term and short term indebtedness and capital lease obligations), as calculated from the consolidated audited financial statements of the Company and its Subsidiaries for the year ending December 31, 1997 referred to in Section 5. 1 (b), being equal to or greater than $10,600,000. In the event that the Winchester, U.K. property sale has not been closed, $2,200,000 shall be added to the calculation of audited Net Cash, and (c) the disclosure by Seller to Buyer, for informational purposes only, of the amount provided by Coopers & Lybrand of any withdrawal liability that the Company and its Subsidiaries would incur in a complete withdrawal on the date of such disclosure from any multi-employer plan and Buyer shall be satisfied with such amount. In the event that any of (a), (b) or (c) hereof is not met, this Agreement shall terminate and no longer have any further force or effect unless the requirement of (a) and/or (b) and/or (c) is waived by Buyer in its sole discretion. -10- 3. REPRESENTATIONS AND WARRANTIES OF SELLER. 3.1. ORGANIZATION, AUTHORITY AND QUALIFICATION OF THE COMPANY. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of New York and has all necessary power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on its business as it has been and is currently conducted. The Company is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business makes such licenses or qualification necessary or desirable and all such jurisdictions are set forth in Section 3.1 of the Disclosure Schedule. All corporate actions taken by the Company have been duly authorized, and the Company has not taken any action that in any respect conflicts with, constitutes a default under or results in a violation of any provision of its Certificate of Incorporation or By-laws. True and correct copies of the Certificate of Incorporation and By-laws of the Company, each as in effect on the date hereof, have been delivered by Hirschorn to the Buyer. 3.2. CAPITAL STOCK OF THE COMPANY; OWNERSHIP OF THE SHARES. The authorized capital stock of the Company consists of 5,000,000 shares of Common Stock, $. 10 par value. As of the date hereof, (i) 2,978,961 shares of Common Stock are issued and outstanding, all of which are validly issued, fully paid and nonassessable, and which do not include 86,698 shares held in the Company's treasury, and (ii) 200,000 shares of Common Stock are reserved for issuance pursuant to employee stock options granted pursuant to the Industrial Acoustics Company, Inc. 1995 Stock Option Plan, as amended (the "Stock Option Plan"). None of the issued and outstanding shares of Common Stock was issued in violation of any preemptive rights. Except for the Stock Option Plan, there are no options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to the capital stock to the Company or obligating Hirschorn or the Company to issue or sell any shares of capital stock of, or any other interest in, the Company. There are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any shares of Common Stock or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in any other Person. The Shares are owned of record and beneficially solely by Seller free and clear of all Encumbrances. Upon consummation of the transactions contemplated by this Agreement, the Shares will be fully paid and nonassessable. Upon consummation of the transactions contemplated by this Agreement and registration of the Shares in name of the Buyer in the stock records of the Company, the Buyer, assuming it shall have purchased the Shares for value in good faith and without notice of any adverse claim, will own the Shares free and clear of all -11- Encumbrances. There are no voting trusts, stockholder agreements, proxies, other agreements or understandings in effect with respect to the voting or transfer of any of the Shares. 3.3. SUBSIDIARIES. (a) Section 3.3(a) of the Disclosure Schedule sets forth a true and complete list of all Subsidiaries, listing for each Subsidiary its name, type of entity, the jurisdiction and date of its incorporation or organization, its authorized capital stock, partnership capital or equivalent, the number and type of its issued and outstanding shares of capital stock, partnership interests or similar ownership interests and the current ownership of such shares, partnership interests or similar ownership interests. (b) Other than the Subsidiaries, there are no other corporations, partnerships, joint ventures, associations or other entities in which the Company owns, of record or beneficially, any direct or indirect equity or other interest or any right (contingent or otherwise) to acquire the same. Other than the Subsidiaries, the Company is not a member of, nor is any part of the business of the Company conducted through, any partnership. Except as set forth in Section 3.3(b) of the Disclosure Schedule, the Company is not a participant in any joint venture or similar arrangement. (c) Each Subsidiary that is a corporation: (i) is a corporation duly organized and validly existing under the laws of its jurisdiction of incorporation, (ii) has all necessary power and authority to own, operate or lease the properties and assets owned, operated or leased by such Subsidiary and to carry on its business as it has been and is currently conducted by such Subsidiary, and (iii) is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary or desirable, except for such failures which, when taken together with all other such failures, would not have a Material Adverse Effect. Each Subsidiary that is not a corporation: (i) is duly organized and validly existing under the laws of its jurisdiction of organization, (ii) has all necessary power and authority to own, operate or lease the properties and assets owned, operated or leased by such Subsidiary and to carry on its business as it has been and is currently conducted by such Subsidiary and (iii) is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary or desirable, except for such failures which, when taken together with all other such failures, would not have a Material Adverse Effect. (d) All the outstanding shares of capital stock of each Subsidiary that is a corporation are validly issued, fully paid, nonassessable and, except with respect to wholly owned Subsidiaries, free of preemptive rights and are owned by the Company, whether directly or indirectly, free and clear of all Encumbrances. -12- (e) Other than the Stock Option Plan, there are no options, warrants, convertible securities, or other rights, agreements, arrangements or commitments of any character relating to the capital stock of any Subsidiary or obligating the Company or any Subsidiary to issue or sell any shares of capital stock of, or any other interest in, any Subsidiary. (f) All corporate actions taken by each Subsidiary have been duly authorized and no Subsidiary has taken any action that in any respect conflicts with, constitutes a default under, or results in a violation of any provision of its charter or by-laws (or similar organizational documents). True and complete copies of the charter and by-laws (or similar organizational documents), in each case as in effect on the date hereof, of each Subsidiary have been made available to the Buyer. (g) Except as set forth in Section 3.3(g) of the Disclosure Schedule, no Subsidiary is a member of, nor is any part of its business conducted through, any partnership nor is any Subsidiary a participant in any joint venture or similar arrangement. (h) There are no voting trusts, stockholder agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any shares of capital stock of or any other interests in any Subsidiary. (i) The stock register of each Subsidiary accurately records: (i) the name and address of each Person owning shares of capital stock of such Subsidiary and (ii) the certificate number of each certificate evidencing shares of capital stock issued by such Subsidiary, the number of shares evidenced each such certificate, the date of issuance thereof and, in the case of cancellation, the date of cancellation. 3.4. CORPORATE BOOKS AND RECORDS. The minute books of the Company and the Subsidiaries contain accurate records of all meetings and accurately reflect all other actions taken by the stockholders, Boards of Directors and all committees of the Boards of Directors of the Company and the Subsidiaries. Complete and accurate copies of all such minute books and of the stock register of the Company and each Subsidiary have been provided by Hirschorn to the Buyer. 3.5. NO CONFLICT. Assuming that all consents, approvals, authorizations and other actions described in Section 3.6 have been obtained and all filings and notifications listed in 3.6 of the Disclosure Schedule have been made, the execution, delivery and performance of this Agreement by Hirschorn does not and will not (a) violate, conflict with or result in the breach of any provision of the charter or by-laws (or similar organizational documents) of the Company or any Subsidiary, (b) conflict with or violate (or cause an event which could have a Material -13- Adverse Effect as a result of) any Law or Governmental Order applicable to the Company, any Subsidiary or any of their respective assets, properties or businesses, including, without limitation, the business of the Company and its Subsidiaries, or (c) except as set forth in Section 3.5(c) of the Disclosure Schedule, conflict with, result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, or result in the creation of an Encumbrance on any of the Shares or on any of the assets or properties of, the Company or any Subsidiary pursuant to any note, bond, mortgage or indenture, contract agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which the Company or any Subsidiary is a party or by which any of the Shares or any of such assets or properties is bound or affected. 3.6. GOVERNMENTAL CONSENTS AND APPROVALS. The execution, delivery and performance of this Agreement by Hirschorn do not and will not require any consent, approval, authorization or other order of, action by, filing with, or notification to, any Governmental Authority, except (a) as described in Section 3.6 of the Disclosure Schedule, and (b) the notification requirements of the HSR Act. 3.7. FINANCIAL STATEMENTS. (a) True and complete copies of (i) the audited consolidated balance sheet of the Company for each of the three fiscal years ended as of December 31, 1994, December 31, 1995, and December 31, 1996, and the related audited consolidated statements of income, retained earnings, stockholders' equity and changes in financial position of the Company, together with all related notes and schedules thereto, accompanied by the opinions thereon of Coopers & Lybrand and, with respect to Industrial Acoustics Company Limited, Kidsons Impey (collectively referred to herein as the "Financial Statements"), (ii) the unaudited consolidated balance sheet of the Company as of November 30, 1997 (referred to herein as the "Interim Financial Statements") and, (iii) the Reference Balance Sheet are attached as Section 3.7(a) of the Disclosure Schedule. The Financial Statements, the Interim Financial Statements and the Reference Balance Sheet (i) were prepared in accordance with the books of account and other financial records to the Company, (ii) present fairly the consolidated financial condition and results of operations of the Company and the Subsidiaries as of the dates thereof or for the periods covered thereby, (iii) have been prepared in accordance with GAAP applied on a basis consistent with the past practices of the Company and (iv) include all adjustments (consisting only of normal recurring accruals) that are necessary for a fair presentation of the consolidated financial condition of the Company and the Subsidiaries and the results of the operations of the Company and the Subsidiaries as of the dates thereof or for the periods covered thereby. -14- (b) The books of account and other financial records of the Company and the Subsidiaries: (i) reflect all items of income and expense and all assets and liabilities required to be reflected therein in accordance with GAAP applied on a basis consistent with the past practices of the Company and the Subsidiaries, respectively, (ii) are in all material respects complete and correct, and do not contain or reflect any material inaccuracies or discrepancies, and (iii) have been maintained in accordance with good business and accounting practices. Section 3.7(b) of the Disclosure Schedule identifies all unusual or nonrecurring income included in the Reference Balance Sheet profit and loss statement. (c) True and complete copies of projections of the Company and the Subsidiaries for each of the fiscal years ended as of December 31, 1998, December 31, 1999, and December 31, 2000, prepared by senior management of the Company (the "Projections") are attached as Section 3.7(c) of the Disclosure Schedule. The Projections reflect the best currently available estimates and judgment of the Company's senior management as to the expected future financial performance of the Company and the Subsidiaries, have been prepared on a basis consistent with prior year financial statements and have been prepared and presented for informational purposes only and shall not be relied upon by Buyers for any reason or purpose whatsoever. (d) Section 3.7(d) of the Disclosure Schedule contains the "management letters" delivered by Coopers & Lybrand and Kidsons Impey in respect of their audits as of December 31, 1996, identifying any material weaknesses, in the Company's internal controls, together with communications received by the Company and its Subsidiaries since January 1, 1997 from Coopers & Lybrand and Kidsons Impey in connection with their respective reviews of the 1997 quarterly financial statements of the Company. (e) Section 3.7(e) of the Disclosure Schedule contains true and complete calculations of (a) EBITDA and (b) Net Cash (as defined in Section 2.5(b)). (f) Section 3.7(f) of the Disclosure Schedule contains a true and complete list of all audited adjustments recommended by Coopers & Lybrand and by Kidsons Impey, respectively, in connection with their 1996 audits, indicating whether and, if so, to what extent, such adjustments were recorded in the audited consolidated financial statements of the Company for 1996. 3.8. NO UNDISCLOSED LIABILITIES. There are no liabilities of the Company or any Subsidiary, other than liabilities (i) reflected or reserved against on the Reference Balance Sheet, or (ii) disclosed in Section 3.8 of the Disclosure Schedule or (iii) incurred since December 31, 1997 in the ordinary course of business of the Company and the Subsidiaries and which do not and could not have a Material Adverse Effect. Reserves are reflected on the Reference Balance Sheet against all -15- Liabilities of the Company and the Subsidiaries in amounts that have been established on a basis consistent with the past practices of the Company and the Subsidiaries and in accordance with GAAP. Section 3.8(a) of the Disclosure Schedule contains a list of all liabilities for borrowed funds, and complete copies of all agreements relating thereto. Section 3.8(b) identifies all sales contracts as to which the Company currently has knowledge of a pending or threatened penalty for late delivery, cost overruns or other matters. 3.9. RECEIVABLES. Section 3.9 of the Disclosure Schedule sets forth an aged list of the receivables of the Company and the Subsidiaries as of the date of the Reference Balance Sheet showing separately those receivables that as of such date had been outstanding (i) 29 days or less, (ii) 30 to 59 days, (iii) 60 to 89 days, and (iv) 90 days and above. Except to the extent, if any, reserved for on the Reference Balance Sheet, all receivables reflected on the Reference Balance Sheet and the audited consolidated balance sheet of the Company and the Subsidiaries delivered pursuant to Section 5.1(b) arose from, and the receivables existing on the Closing Date will have arisen from. the sale of Inventory or services to Persons not affiliated with Hirschorn, the Company or any Subsidiary and in the ordinary course of business and, except as reserved against on the Reference Balance Sheet or the audited consolidated financial statements of the Company and its Subsidiaries for the year ending December 31, 1997 required pursuant to Section 5.1 (b), constitute, or will constitute, as the case may be, only valid, undisputed claims of the Company or a Subsidiary not subject to valid claims of set-offs or other defenses or counterclaims other than normal cash discounts accrued in the ordinary course of business. All Receivables reflected on the Reference Balance Sheet or arising from the date thereof until the Closing (subject to the reserve for bad debts, if any, reflected on the Reference Balance Sheet) are or will be good and have been collected or are or will be collectible. 3.10. INVENTORIES. (a) Subject to amounts reserved therefor on the Reference Balance Sheet and the audited consolidated balance sheet of the Company and the Subsidiaries delivered pursuant to Section 5.1(b), the values at which all inventories are carried on the Reference Balance Sheet reflect the historical inventory valuation policy of the Company and the Subsidiaries of stating such inventories at the lower of cost (determined on the first-in first-out method) or market value and all inventories are valued such that the Company and the Subsidiaries will earn their customary gross margins thereon. Except as set forth in Section 3.10 of the Disclosure Schedule, the Company or a Subsidiary, as the case may be, has good and marketable title to the inventories free and clear of all Encumbrances. The inventories do not consist of, in any material amount, items that are obsolete, damaged or slow-moving. The inventories do not consist of any items held on consignment. Neither the Company nor any Subsidiary is under -16- any obligation or liability with respect to accepting returns of items of inventory or merchandise in the possession of their customers other than in the ordinary course of business. No clearance or extraordinary sale of the inventories has been conducted since December 31, 1997. Neither the Company nor any Subsidiary has acquired or committed to acquire or manufacture inventory for sale which is not of a quality and quantity usable in the ordinary course of business within a reasonable period of time, nor has the Company or any Subsidiary changed the price of inventory except for (i) price reductions to reflect any reduction in the cost thereof to the Company or such Subsidiary, (ii) reductions and increases responsive to normal competitive conditions and consistent with the Company's or such Subsidiary's past sales practices, (iii) increases to reflect any increase in the cost thereof to the Company or such Subsidiary, and (iv) increases and reductions made with the written consent of the Buyer. (b) The Inventories are in good and merchantable condition in all material respects, are suitable and usable for the purposes for which they are intentioned and are in a condition such that they can be sold in the ordinary course of business. (c) Amounts reflected in the Reference Balance Sheet as "Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts" represent (i) costs properly incurred in respect of valid open sales contracts which had not been invoiced to customers at December 31, 1997 and (ii) earnings on such contracts computed on a cost of completion basis applied consistently with prior periods. Section 3. 10(c) of the Disclosure Schedule identifies each such contract amount exceeding S 100,000 at December 31, 1997. 3.11. ACQUIRED ASSETS. Except as disclosed in Section 3.11(a) of the Disclosure Schedule, each asset of the Company and the Subsidiaries (including without limitation, the benefit of any licenses, leases or other agreements or arrangements) acquired since the date of the Reference Balance Sheet has been acquired for consideration not less than the fair market value of such asset at the date of such acquisition. Section 3.11(b) of the Disclosure Schedule identifies all commitments for capital expenditures outstanding at December 31, 1997. 3.12. CURRENT REAL PROPERTY TRANSACTIONS. (a) The Company is party to a certain Exchange Agreement with Deferred Exchange Option dated March 29, 1995 ("Exchange Agreement") which is included in Section 3.12(a) of the Disclosure Schedule. Pursuant to the terms of the Exchange Agreement, the transaction contemplated thereby is scheduled to close on March 1, 1998. Buyer and Seller have discussed various approaches which may be undertaken with regard to the Exchange Agreement. Seller agrees that neither he nor the Company will take any action with regard to the Exchange Agreement without the advice of Buyer. If a decision is made to acquire the premises which is the subject of the Exchange Agreement, such acquisition will be -17- accomplished through the use of a mortgage on such property, the terms of watch shall be reasonable in light of this Agreement and the Contemplated Transactions. (b) The Company is the owner of real property in Winchester, U.K. which is utilized by its Subsidiary, Industrial Acoustics Company Limited, as its manufacturing facilities. The Seller and Company have disclosed to the Buyer that negotiations have occurred in connection with the possible sale and lease back of the Winchester property owned by the Company. Seller agrees that neither he nor the Company will take any action with regard to the Winchester property without the advice and consent of Buyer. 3.13. BACKLOG. (a) As of December 31, 1997, open sales orders accepted by the Company or any Subsidiary, determined on a revenue recognition basis, totaled $45,637,084. Section 3.13(a) of the Disclosure Schedule lists all sales orders exceeding $100,000 per order which have been accepted by the Company or any Subsidiary, and which were open as of December 31, 1997. No orders included in the backlog at December 31, 1997 have been accepted at prices which will lead to profit margins substantially below historical levels (according to the product category), nor on payment terms which will require any material change in the Company's future requirement for working capital. All contracts to which the Company (specifically excluding Industrial Acoustics Company Limited) is a party for delivery outside of the United States in the backlog at December 31, 1997 determined on a billing recognition basis of the Company and its Subsidiaries are fully supported by valid bank letters of credit. All material contracts as to which Industrial Acoustics Company Limited is a party for delivery outside of the continent of Europe and North America in the backlog as of December 31, 1997 have been accepted with appropriate downpayments. (b) Section 3.13(b) of the Disclosure Schedule lists all purchase orders exceeding $500,000.00 per order, which have been issued by the Company or any Subsidiary, and which were open as of December 31, 1997. No purchase orders have been issued on payment terms which are materially different from those available to the Company in the past. 3.14. CONDUCT IN THE ORDINARY COURSE, ABSENCE OF CERTAIN CHANGES, EVENTS AND CONDITIONS. Since December 31, 1997, except as disclosed in Section 3.14 of the Disclosure Schedule, the business of the Company and the Subsidiaries has been conducted in the ordinary course and consistent with past practice. As amplification and not limitation of the foregoing, except as disclosed in Section 3.14 of the Disclosure Schedule and except as would not have a Material Adverse Effect since the Reference Balance Sheet Date, neither the Company nor any Subsidiary has: -18- (i) permitted or allowed any of the assets or properties (whether tangible or intangible) of the Company or any Subsidiary to be subjected to any Encumbrance other than Permitted Encumbrances; (ii) except in the ordinary course of business consistent with past practice, discharged or otherwise obtained the release of any Encumbrance or paid or otherwise discharged any Liability, other than current liabilities reflected on the Reference Balance Sheet and current liabilities incurred in the ordinary course of business consistent with past practice since the Reference Balance Sheet Date; (iii) made any loan to, guaranteed any Indebtedness on behalf of any Person; (iv) failed to pay any creditor any amount owed to such creditor more than 30 days past the due date; (v) redeemed any of the capital stock or declared, made or paid any dividends or distributions (whether in cash, securities or other property) to the holders of capital stock of the Company or any Subsidiary or otherwise, other than dividends, distributions and redemptions declared, made or paid by any Subsidiary solely to the Company; (vi) made any material changes in the customary methods of operations of the Company or any Subsidiary, including, without limitation, practices and policies relating to manufacturing, purchasing, Inventories, marketing, selling, recognition of profits on contracts and pricing; (vii) merged with, entered into a consolidation with or acquired an interest of 5 % or more in any Person or acquired a substantial portion of the assets or business of any business thereof, or otherwise acquired any material assets other than in the ordinary course of business consistent with past practice; (viii) made any capital expenditure or commitment for any capital expenditure in excess of S25,000 individually or $100,000 in the aggregate; (ix) issued any purchase orders or otherwise agreed to make any purchases involving exchanges in value in excess of $100,000 individually or $1,000,000 in the aggregate; (x) except as relates to Industrial Acoustics Company Limited, accepted any sales order for delivery outside of the United States not fully covered by a valid bank letter of credit; -19- (xi) sold, transferred, leased, licensed or otherwise disposed of any properties, assets, real, personal or mixed (including, without limitation, leasehold interests and intangible assets), other than the sale of Inventories in the ordinary course of business consistent with past practice; (xii) issued or sold any capital stock, bonds or other securities, or any option, warrant or other right to acquire the same, of, or any other interest in, the Company or any Subsidiary; (xiii) entered into any agreement, arrangement or transaction with any of its directors, officers, employees or shareholders (or with any relative, beneficiary, spouse or Affiliate of such Person); (xiv) (A) granted any increase, or announced any increase, in the wages, salaries, compensation, bonuses, incentives, pension or other benefits payable by the Company or any Subsidiary to any of its employees, including, without limitation, any increase or change pursuant to any Plan, (B) established or increased or promised to increase any benefits under any Plan, in either case except as required by Law or any collective bargaining agreement and involving ordinary increases consistent with the past practices of the Company or such Subsidiary or (C) introduced any new bonus programs; (xv) written down or written up (or failed to write down or write up in accordance with GAAP consistent with past practice) the value of any inventories or receivable or revalued any assets of the Company or any Subsidiary other than in the ordinary course of business consistent with past practice and in accordance with GAAP; (xvi) amended, terminated, canceled or compromised any material claims of the Company or any Subsidiary or waived any other rights of substantial value to the Company or any Subsidiary; (xvii) made any change in any method of accounting or accounting practice or policy used by the Company or any Subsidiary, other than such changes required by GAAP or disclosed in Section 3.14 of the Disclosure Schedule; (xviii) failed to maintain the Assets in accordance with good business practice and in good operating condition and repair; (xix) allowed any Permit or Environmental Permit that was issued or relates to the Company or any Subsidiary or otherwise relates to any Asset to lapse or terminate or failed to renew any such Permit or Environmental Permit or any insurance pol- -20- icy that is scheduled to terminate or expire within 45 calendar days of the Closing Date; (xx) incurred any indebtedness for borrowed money; (xxi) changed the type of short-term investments and marketable securities contained in its portfolio; (xxii) amended, modified or consented to the termination of any Material Contract or the Company's or any Subsidiary's rights thereunder; (xxiii) amended or restated the Organizational Documents of the Company or any Subsidiary; (xxiv) terminated, discontinued, closed or disposed of any plant, facility or other business operation, or laid off any employees or implemented any early retirement, separation or program providing early retirement window benefits within the meaning of Section 1.40(a)-4 of the Regulations or announced or planned any such action or program for the future; (xxv) made any material charitable contribution; (xxvi) disclosed any secret or confidential Intellectual Property Asset (except by way of issuance of a Patent) or permitted to lapse or go abandoned any Intellectual Property Asset (or any registration or grant thereto or any application thereto to which, or under which, the Company or any Subsidiary has any right, title, interest or license; (xxvii) made any express or deemed election or settled or compromised any liability, with respect to Taxes of the Company or any Subsidiary; (xxviii) suffered any casualty loss or damage with respect to any of the Assets which in the aggregate have a replacement cost of more than $25,000, whether or not such loss or damage shall have been covered by insurance; or (xxix) agreed, whether in writing or otherwise, to take any of the actions specified in this Section 3.14 or granted any options to purchase, rights of first refusal, rights of first offer or any other similar rights or commitments, with respect to any of the actions specified in this Section 3.14, except as expressly contemplated by this Agreement. -21- 3.15. LITIGATION. Except as set forth in Section 3.15 of the Disclosure Schedule (which, with respect to each Proceeding disclosed therein, sets forth: the parties, nature of the proceeding, date and method commenced, amount of damages or other relief sought, and, if applicable, paid or granted), there are no Proceedings by or against the Company or any Subsidiary (or by or against Hirschorn and relating to the Company or any Subsidiary), or affecting any of the Assets, pending before any Governmental Authority (or, to the Knowledge of Seller, threatened to be brought by or before any Governmental Authority). None of the matters disclosed in Section 3.15 of the Disclosure Schedule has or has had a Material Adverse Effect or could affect the legality, validity or enforceability of this Agreement or the consummation of the transactions contemplated hereby or thereby except as set forth in Section 3.15 of the Disclosure Schedule. None of the Company, the Subsidiaries nor any of the Assets nor Seller is subject to any Governmental Order (nor to the Knowledge of Seller are there any such Governmental Orders threatened to be imposed by any Governmental Authority) which has or has had a Material Adverse Effect. Section 3.15 of the Disclosure Schedule lists all Proceedings to which the Company has been a party in the past five years except for collections matters and matters in which the amount in controversy did not exceed $ 10,000, and all product liability claims brought against the Company during such period of which the Company has Knowledge, regardless of whether such claim resulted in litigation, including all such claims in respect of which notice of a claim was made under the Company's insurance policies. 3.16. CERTAIN INTERESTS. (a) Except as disclosed in Section 3.16(a) of the Disclosure Schedule, no officer or director of the Company or any Subsidiary and no relative or spouse (or relative of such spouse) who resides with or is a dependent of, any such officer or director: (i) has any direct or indirect financial interest in any competitor, supplier or customer of the Company or any Subsidiary; provided, however, that the ownership of securities representing no more than one (1%) percent of the outstanding voting power of any competitor, supplier or customer, and which are listed on any national securities exchange or traded actively in the national over-the-counter market shall not be deemed to be a "financial interest" so long as the Person owning such securities has no other connection or relationship with such competitor, supplier or customer; (ii) owns, directly or indirectly, in whole or in part, or has any other interest in any tangible or intangible property which the Company or any Subsidiary uses or has used in the conduct of the Business or otherwise: or (iii) has outstanding any Indebtedness to the Company or any Subsidiary. -22- (b) Except as disclosed in Section 3.16(b) of the Disclosure Schedule, no officer or director of the Company or any Subsidiary and no relative or spouse (or relative of such spouse) who resides with, or is a dependent of, any such officer or director, has outstanding any Indebtedness to Hirschorn or the Company or any Subsidiary. (c) Except as disclosed in Section 3.16(c) of the Disclosure Schedule, neither the Company nor any Subsidiary has any liability or any other obligation of any nature whatsoever to any officer, director or shareholder of the Company or any Subsidiary or to any relative or spouse (or relative of such spouse) who resides with, or is a dependent of, any such officer, director or shareholder. (d) Except as disclosed in Section 3.16(d) of the Disclosure Statement, no employee of the Company or its Subsidiaries is a relative or spouse of a director, officer or senior manager of Industrial Acoustics Company, Inc. or Industrial Acoustics Company Limited. 3.17. COMPLIANCE WITH LAWS. (a) Except as set forth in Section 3.17(a) of the Disclosure Schedule, the Company and the Subsidiaries have each conducted and continue to conduct the Business in accordance with all Laws and Governmental Orders applicable to the Company or any Subsidiary or any of the Assets or the Business, and neither the Company nor any Subsidiary is in violation of any such Law or Governmental Order. None of Hirschorn, the Company, any Subsidiary nor any officer, director, employee, agent or representative of Hirschorn, the Company or any Subsidiary has furthered or supported any foreign boycott in violation of the Anti-Boycott laws and regulations promulgated pursuant to the Export Administration Act of 1979 (50 U.S.C.A. Appx ss. 2407, and regulations promulgated thereunder), nor violated the provisions of the Foreign Corrupt Practices Act of 1977, as amended, (15 U. S. C. A. ss.ss. 78dd-1 et seq.). (b) Section 3.17(b) of the Disclosure Schedule sets forth a brief description of each Governmental Order applicable to the Company or any Subsidiary or any of the Assets or the Business, and no such Governmental Order has or has had a Material Adverse Effect. 3.18. ENVIRONMENTAL COMPLIANCE. Except as disclosed in Section 3.18(a)(i) of the Disclosure Schedule and except as would not reasonably be expected to have a Material Adverse Effect (a) the Company and the Subsidiaries currently hold all permits, licenses, authorizations and approvals of Governmental Authorities (collectively, "Permits"), -23- including those required under Environmental Laws, necessary for the current use, occupancy and operation of each Asset of the Company and the Subsidiaries and the conduct of the Business, and all such Permits are in full force and effect; (b) the Company and its Subsidiaries are, and their business is being conducted, in compliance with Environmental Laws and the Permits; (c) there is no practice, action or activity of the Company or any Subsidiary or, with respect to any portion of the business of the Company or any Subsidiary, and no existing condition of the Assets of the Company or any Subsidiary or their business which could reasonably be expected to give rise to liability under, or violate or prevent compliance with, any Environmental Law; (d) none of the Seller, the Company nor any Subsidiary has received any notice from any Governmental revoking, canceling, rescinding, materially modifying or refusing to renew any Permit or any Environmental Claim; (e) none of the Company or its Subsidiaries is involved in any investigation, response or corrective action relating to or in connection with any Hazardous Materials at any Real Property or at any other location; (f) none of the Company or its Subsidiaries or any Real Property are subject to any judicial or administrative proceeding alleging the violation of or liability under any Environmental Laws; (g) none of the Company or its Subsidiaries or any Real Property or any of their respective operations are subject to any outstanding written order, decree or agreement with any governmental authority or private party relating to (i) any actual or potential violation of or liability under Environmental Laws or (ii) any Environmental Claims; (h) none of the Company or its Subsidiaries has assumed by contract, law or otherwise any obligation or liability under any Environmental Law; (i) no Real Properties are listed or proposed for listing on the National Priorities List under CERCLA or listed on the Comprehensive Environmental Response, Compensation and Liability Information System List promulgated pursuant to CERCLA, or included on any similar list maintained by any governmental authority; (j) no Hazardous Materials exist on, at or under any Real Property in a manner that would reasonably be expected to give rise to an Environmental Claim, and -24- none of the Company or its Subsidiaries has filed any notice or report of a Release of any Hazardous Materials; (k) none of the Company or its Subsidiaries or, to the best of the Company's knowledge, any of their respective predecessors has disposed of, or arranged for the disposal or treatment of, any Hazardous Materials in a manner or at any location that would reasonably be expected to give rise to an Environmental Claim; and (l) no underground storage ranks, landfills or surface impoundments are on, at or under any Real Property. Section 3.18(a)(v) of the Disclosure Schedule identifies all Permits that are nontransferable or which will require the consent of any Governmental Authority in the event of the consummation of the transactions contemplated by this Agreement. Section 3.18(a)(vi) of the Disclosure Schedule includes all reports of the Environmental Protection Agency issued with respect to any property of the Company, including those for the Bronx and South Carolina and all environmental reports with respect to any property of the Company, including for Winchester, England. Section 3.18(a)(vii) of the Disclosure Schedule includes true and complete copies of (x) the most recent Phase I environmental audits with respect to any U.S. property of the Company, including those for the Bronx and South Carolina and (y) an environmental audit of the property of Industrial Acoustics Company Limited in Winchester, England. Section 3.18(a)(viii) of the Disclosure Schedule contains a true and complete copy of the indemnification by Owens/Corning relating to fiberglass. 3.19. MATERIAL CONTRACTS. (a) Section 3.19(a) of the Disclosure Schedule lists each of the following contracts and agreements (including without limitation, oral and informal arrangements) of the Company and the Subsidiaries (such contracts and agreements together with all contracts, agreements, leases and subleases concerning the management or operation of any Real Property (including without limitation, brokerage contracts) listed or otherwise disclosed in Section 3.21 (a) or 3.21(b) of the Disclosure Schedule to which the Company or any Subsidiary is a party and all agreements relating to Intellectual Property set forth in Section 3.20(a) of the Disclosure Schedule, being "Material Contracts"): (i) each contract and agreement for the purchase of inventory, spare parts, other materials or personal property with any supplier or for the furnishing of services to the Company, any Subsidiary or otherwise related to the Business under the terms of -25- which the Company or any Subsidiary which (A) is likely to pay or otherwise give consideration of more than $100,000.00 in the aggregate during the calendar year ended December 31, 1998, (B) is likely to pay or otherwise give consideration of more than $500,000.00 in the aggregate over the remaining term of such contract, or (C) cannot be canceled by the Company or such Subsidiary without penalty or further payment and without more than 30 days notice; (ii) each contract and agreement for the sale of inventory or other personal property or for the furnishing of services by the Company or any Subsidiary which (A) is likely to involve consideration of more than $100,000.00 in the aggregate during the calendar year ending December 31, 1998, (B) is likely to involve consideration of more than $500,000.00 in the aggregate over the remaining term to the contract, or (C) cannot be canceled by the Company or such Subsidiary without penalty or further payment and without more than 30 days notice; (iii) all broker, distributor, dealer, manufacturer's representative, franchise, agency sales, promotion, market research, marketing consultants and advertising contracts and agreements to which the Company or any Subsidiary is a party; (iv) all management contracts and contracts with independent contractors or consultants (or similar arrangements) to which the Company or any Subsidiary is a party and which are not cancelable without penalty or further payment and without more than 30 days notice; (v) all contracts and agreements relating to indebtedness to the Company or any Subsidiary; (vi) all contracts and agreements with any Governmental Authority to which the Company or any Subsidiary is a party; (vii) all contracts and agreements that limit or purport to limit the ability of the Company or any Subsidiary to compete in any line of business or with any Person or in any geographic area or during any period of time. (viii) all contracts and agreements between or among the Company or any Subsidiary and Hirschorn or any Affiliate of Hirschorn. (ix) all contracts and agreements providing for benefits under any Plan; and (x) all other contracts and agreements whether or not made in the ordinary course of business, which are material to the Company, any Subsidiary or the conduct of the Business or the absence of which would have a Material Adverse Effect. -26- For purposes of this Section 3.19 and Sections 3.20, 3.21 and 3.22, the terms "lease" shall include any and all leases, subleases, sale/leaseback agreements or similar arrangements. (b) Except as disclosed in Section 3.19(b) of the Disclosure Schedule, each Material Contract: (i) is valid and binding on the respective parties thereto and is in full force and effect and (ii) upon consummation of the transactions contemplated by this Agreement, except to the extent that any consents set forth in Section 3.7 of the Disclosure Schedule are not obtained, shall continue in full force and effect without penalty or other adverse consequence. Neither the Company nor any Subsidiary is in breach of, or default under, any Material Contract. (c) Except as disclosed in Section 3.19(c) of the Disclosure Schedule, no other party to any Material Contract is in breach thereof or default thereunder. (d) Except as disclosed in Section 3.19(d) of the Disclosure Schedule, there is no contract, agreement or other arrangement granting any Person any preferential right to purchase, other than in the ordinary course of business, any of the properties or assets of the Company or any Subsidiary. (e) Schedule 3.19(e) of the Disclosure Schedule identifies (i) all assets of the Company and its Subsidiaries that are pledged as security for the payment of any liabilities, (ii) any crosscollateralization agreements to which the Company and its Subsidiaries are a party, (iii) any guarantees by the Company and its Subsidiaries of the liabilities of any person, (iv) all guarantee, performance, warranty and similar obligations outside the ordinary course of business outstanding in favor of customers or others, where bonds or letters of credit have not been issued in respect thereof, details are set forth on such Schedule 3.19(e). 3.20. INTELLECTUAL PROPERTY ASSETS. (a) Section 3.20(a)(i) of the Disclosure Schedule sets forth a true and complete list and a brief description, including a complete identification of each Patent and each registration or application for registration thereof, of all Owned Intellectual Property Assets and Section 3.20(a)(ii) of the Disclosure Schedule sets forth a true and complete list and a brief description, including a description of any license or sublicense thereof, of all Licensed Intellectual Property Assets. Except as otherwise described in Section 3.20(a)(i) of the Disclosure Schedule, in each case where a registration or Patent or application for registration or Patent listed in Section 3.20(a)(i) of the Disclosure Schedule is held by assignment, the assignment has been duly recorded with the State or national Trademark Office from which the original registration issued or before which the application for registration is pending. Except as disclosed in Section 3.20(a)(iii) of the Disclosure Schedule, the rights of the Company or any Subsidiary, as the case may be, in or to such Intellectual Property Asset do not conflict -27- with or infringe on the rights of any other Person, and none of Seller, the Company nor any Subsidiary has received any claim or written notice from any Person to such effect. (b) Except as disclosed in Section 3.20(b) of the Disclosure Schedule: (i) all the Owned Intellectual Property Assets are owned by either the Company or a Subsidiary, as the case may be, free and clear of any Encumbrance and (ii) no Proceedings have been made or asserted or are pending (nor, to the Knowledge of Seller, has any such Proceeding been threatened) against the Company or any Subsidiary either (A) based upon or challenging or seeking to deny or restrict the use by the Company or any Subsidiary of any of the Owned Intellectual Property Assets or (B) alleging that any services provided, or products manufactured or sold by the Company or any Subsidiary are being provided, manufactured or sold in violation of any Patents or Trademarks, or any other rights of any Person. To the Knowledge of Seller, no Person is using any Patents, Copyrights, Trademarks, service marks, trade names, trade secrets or similar property that are confusingly similar to the Owned Intellectual Property Assets or that infringe upon the Owned Intellectual Property Assets or upon the rights of the Company or any Subsidiary therein. Except as disclosed in Section 3.20(b) of the Disclosure Schedule, none of Seller, the Company nor any Subsidiary has granted any license or other right to any other Person with respect to the Owned Intellectual Property Assets. The consummation of the transactions contemplated by this Agreement will not result in the termination or impairment of any of the Owned Intellectual Property Assets. (c) With respect to all Licensed Intellectual Property Assets and Owned Intellectual Property Assets, the registered user provisions of all nations requiring such registrations have been complied with. (d) Seller has made available to the Buyer correct and complete copies of all the licenses and sublicenses for Licensed Intellectual Property Assets listed in Section 3.20(a)(ii) of the Disclosure Schedule and any and all ancillary documents pertaining thereto (including, but not limited to, all amendments, consents and evidence of commencement dates and expiration dates). With respect to each of such licenses and sublicenses: (i) such license or sublicense, together with all ancillary documents delivered pursuant to the first sentence of this Section 3.20(d), is valid and binding and in full force and effect and represents the entire agreement between the respective licensor and licensee with respect to the subject matter of such license or sublicense; (ii) except as otherwise set forth in Section 3.20(a)(ii) of the Disclosure Schedule, such license or sublicense will not cease to be valid and binding and in full force and effect on terms identical to those currently in effect as a result of the consummation of the transactions contemplated by this Agreement, nor will the consummation of the transactions contemplated by this Agreement constitute a breach or de- -28- fault under such license or sublicense or otherwise give the licensor or sublicensor a right to terminate such license or sublicense; (iii) except as otherwise disclosed in Section 3.20(a)(ii) of the Disclosure Schedule, with respect to each such license or sublicense: (A) none of Seller, the Company nor any Subsidiary has received any notice of termination or cancellation under such license or sublicense and no licensor or sublicensor has any right of termination or cancellation under such license or sublicense except in connection with the default of the Company or any Subsidiary thereunder, (B) none of Seller, the Company nor any Subsidiary has received any notice of a breach or default under such license or sublicense, which breach or default has not been cured, and (C) none of Seller, the Company nor any Subsidiary has granted to any other Person any rights, adverse or otherwise, under such license or sublicense; (iv) none of the Company, any Subsidiary nor (to the Knowledge of Seller) any other party to such license or sublicense is in breach or default in any material respect, and, to the Knowledge of Seller, no event has occurred that, with notice or lapse of time would constitute such a breach or default or permit termination, modification or acceleration under such license or sublicense; (v) no Proceedings have been made or asserted or are pending (nor, to the Knowledge of Seller, has any such Proceeding been threatened) against the Company or any Subsidiary either (A) based upon or challenging or seeking to deny or restrict the use by the Company or any Subsidiary of any of the Licensed Intellectual Property Assets or (B) alleging that any Licensed Intellectual Property Asset is being licensed, sublicensed or used in violation of any patents or trademarks, or any other rights of any Person; and (vi) to the Knowledge of Seller, no Person is using any patents, copyrights, trademarks, service marks, trade names, trade secrets or similar property that are confusingly similar to the Licensed Intellectual Property Assets or that infringe upon the Licensed Intellectual Property Assets or upon the rights of the Company or any Subsidiary therein. (e) Except as set forth in Section 3.20(e) of the Disclosure Schedule, Seller is not aware of any reason that would prevent any pending applications to register trademarks, service marks or copyrights or any pending patent applications from being granted. (f) The Intellectual Property Assets described in Sections 3.20(a)(i) and (ii) of the Disclosure Schedule constitute all the Intellectual Property Assets used or held or intended to be used by the Company or any Subsidiary, and constitutes all such Intellectual -29- Property Assets necessary in the conduct of the business of the Company and there are no other items of Intellectual Property Assets that are material to the Company or any Subsidiary. 3.21. REAL PROPERTY. (a) Section 3.21(a) of the Disclosure Schedule lists: (i) the street address of each parcel of Owned Real Property, (ii) the date on which each parcel of Owned Real Property was acquired, (iii) the current owner of each such parcel of Owned Real Property, and (iv) the current use of each such parcel of Owned Real Property. (b) Section 3.21(b) of the Disclosure Schedule lists: (i) the street address of each parcel of Leased Real Property, (ii) the identity of the lessor, lessee and current occupant (if different from lessee) of each such parcel of Leased Real Property, (iii) the term (referencing applicable renewal periods) and rental payment terms of the laws (and any subleases) pertaining to each such parcel of Leased Real Property and (iv) the current use of each such parcel of Leased Real Property. (c) Except as described in Section 3.21(c) of the Disclosure Schedule, there is no material violation of any Law (including, without limitation, any building, planning or zoning law) relating to any of the Real Property. Hirschorn has made available to the Buyer true and complete copies of each deed for each parcel of Owned Real Property and, to the extent available, for each parcel of Leased Real Property and all the title insurance policies, title reports, surveys, certificates of occupancy, environmental reports and audits, appraisals, Permits, other title documents and other documents relating to, or otherwise affecting the Real Property, the operations of the Company or any Subsidiary thereon or any other uses thereof. Either the Company or a Subsidiary, as the case may be, is in peaceful and undisturbed possession of each parcel of Real Property and there are no contractual or legal restrictions that preclude or restrict the ability to use the premises for the purposes for which they are currently being used. All existing water, sewer, steam, gas, electricity, telephone and other utilities required for the construction, use, occupancy, operation and maintenance of the Real Property are adequate for the conduct of the business of the Company and the Subsidiaries as it has been and currently is conducted. There are no material latent defects or material adverse physical conditions affecting the Real Property or any of the facilities, buildings, structures, erections, improvements, fixtures, fixed assets and personally of a permanent nature annexed, affixed or attached to, located on or forming part of the Real Property, except as set forth in Section 3.2 1 (c) of the Disclosure Schedule, neither the Company nor any Subsidiary has leased or subleased any parcel or any portion of any parcel of Real Property to any other Person, nor has the Company or any Subsidiary assigned its interest under any lease or sublease listed in Section 3.21(b) of the Disclosure Schedule to any third party. (d) Hirschorn has made available to the Buyer true and complete copies of all leases and subleases listed in Section 3.2 1 (b) of the Disclosure Schedule and any and all -30- ancillary documents pertaining thereto (including, but not limited to, all amendments, consents for alterations and documents recording variations and evidence of commencement dates and expiration dates). With respect to each of such leases and subleases: (i) such lease or sublease, together with all ancillary documents made available pursuant to the first sentence of this Section 3.21(d), is legal, valid, binding, enforceable and in full force and effect and represents the entire agreement between the respective landlord and tenant with respect to such property; (ii) except as otherwise set forth in Sections 3.6(c) and 3.21(b) of the Disclosure Schedule, such lease or sublease will not cease to be legal, valid, binding, enforceable and in full force and effect on terms identical to those currently in effect as a result of the consummation of the transactions contemplated by this Agreement, nor will the consummation of the transactions contemplated by this Agreement constitute a breach or default under such lease or sublease or otherwise give the landlord a right to terminate such lease or sublease; (iii) except as otherwise disclosed in Section 3.21(b) of the Disclosure Schedule, with respect to each such lease or sublease: (A) none of Hirschorn, the Company nor any Subsidiary has received any notice of cancellation or termination under such lease or sublease and no lessor has any right of termination or cancellation under such lease or sublease except upon a breach or default by the Company or any Subsidiary thereunder, (B) none of Hirschorn, the Company nor any Subsidiary has received any notice of a breach or default under such lease or sublease, which breach or default has not been cured, and (C) none of Hirschorn, the Company nor any Subsidiary has granted to any other Person any rights, adverse or otherwise, under such lease or sublease; and (iv) none of the Company, any Subsidiary nor (to the Knowledge of Hirschorn) any other party to such lease or sublease, is in breach or default in any material respect, and, to the Knowledge of Hirschorn, no event has occurred that, with notice or lapse of time, would constitute such a breach or default or permit termination, modification or acceleration under such lease or sublease. (e) There are no condemnation proceedings or eminent domain proceedings of any kind pending or, to the Knowledge of Hirschorn, threatened against the Real Property. (f) All the Real Property is occupied under a valid and current certificate of occupancy or similar permit, the transactions contemplated by this Agreement will not require the issuance of any new or amended certificate of occupancy and, to the Knowledge of Hirschorn, there are no facts that would prevent the Real Property from being occupied by the -31- Company or any Subsidiary, as the case may be, after the Closing in the same manner as occupied by the Company or such Subsidiary immediately prior to the Closing. (g) All improvements on the Real Property constructed by or on behalf of the Company or any Subsidiary or, to the Knowledge of Hirschorn, constructed by or on behalf of any other Person were constructed in compliance with all applicable Laws (including, but not limited to, any building, planning or zoning Laws) affecting such Real Property. (h) No improvements on the Real Property and none of the current uses and conditions thereof violate any applicable deed restrictions or other applicable covenants, restrictions, agreements, existing site plan approvals, zoning or subdivision regulations or urban redevelopment plans as modified by any duly issued variances, and no permits, licenses or certificates pertaining to the ownership or operation of all improvements on the Real Property, other than those which are transferable with the Real Property, are required by any Governmental Authority having jurisdiction over the Real Property. (i) All improvements on any Real Property are wholly within the lot limits of such Real Property and do not materially encroach on any adjoining premises, and there are no material encroachments on any Real Property by any improvements located on any adjoining premises. (j) Except as otherwise set forth in Section 3.21j) of the Disclosure Schedule, there have been no improvements of a value in excess of $10,000 in the aggregate made to or construction on any Real Property within the applicable period for the filing of mechanics' liens. (k) The rental set forth in each lease or sublease of the Leased Real Property is the actual rental being paid, and there are no separate agreements or understandings with respect to the same. (l) Either the Company or a Subsidiary, as the case may be, has the full fight to exercise any renewal options contained in the leases and subleases pertaining to the Leased Real Property on the terms and conditions contained therein and upon due exercise would be entitled to enjoy the use of each Leased Real Property for the full term of such renewal options. 3.22. TANGIBLE PERSONAL PROPERTY. (a) Section 3.22 of the Disclosure Schedule lists each item or distinct group of machinery, equipment, tools, supplies, furniture, fixtures, personalty, vehicles, rolling stock and other tangible personal property with a value in excess of $25,000 per item or -32- per category of items (the "Tangible Personal Property") used in the Business or owned or leased by the Company or any Subsidiary. (b) Seller has, or has caused to be, delivered to the Buyer true and complete copies of all leases and subleases for Tangible Personal Property and any and all material ancillary documents pertaining thereto (including, but not limited to, all amendments, consents and evidence of commencement dates and expiration dates). With respect to each of such leases and subleases: (i) such lease or sublease, together with all ancillary documents delivered pursuant to the first sentence of this Section 3.22(b), is legal, valid, binding, enforceable and in full force and effect and represents the entire agreement between the respective lessor and lessee with respect to such property; (ii) except as set forth in Section 3.22(b) of the Disclosure Schedule, such lease or sublease will not cease to be legal, valid, binding, enforceable and in full force and effect on terms identical to those currently in effect as a result of the consummation of the transactions contemplated by this Agreement, nor will the consummation of the transactions contemplated by this Agreement constitute a breach or default under such lease or sublease or otherwise give the lessor a right to terminate such lease or sublease; (iii) except as otherwise disclosed in Section 3.22(b) of the Disclosure Schedule, with respect to each such lease or sublease: (A) none of Hirschorn, the Company nor any Subsidiary has received any notice of cancellation or termination under such lease or sublease and no lessor has any right of termination or cancellation, under such lease or sublease except upon a breach or default by the Company or any Subsidiary thereunder, (B) none of Hirschorn, the Company nor any Subsidiary has received any notice of a breach or default under such lease or sublease, which breach or default has not been cured, and (C) none of Hirschorn, the Company nor. any Subsidiary has granted to any other Person any rights, adverse or otherwise, under such lease or sublease; and (iv) none of the Company, any Subsidiary nor (to the best knowledge of Hirschorn) any other party to such lease or sublease, is in breach or default in any material respect, and to the best knowledge of Hirschorn, no event has occurred that, with notice or lapse of time would constitute such a breach or default or permit termination, modification or acceleration under such lease or sublease. (c) Either the Company or a Subsidiary, as the case may be, has the full right to exercise any renewal options contained in the leases and subleases pertaining to the Tangible Personal Property on the terms and conditions contained therein and upon due exer- -33- cise would be entitled to enjoy the use of each item of leased Tangible Personal Property for the full term of such renewal options. 3.23. ASSETS. (a) Except as disclosed in Section 3.23 of the Disclosure Schedule, either the Company or a Subsidiary, as the case may be, owns, leases or has the legal right to use all the properties and assets, including, without limitation, the Intellectual Property Assets, the Real Property and the Tangible Personal Property, used or intended to be used in the conduct of the Business or otherwise owned, leased or used by the Company or any Subsidiary and, with respect to contract rights, is a party to and enjoys the right to the benefits of all contracts, agreements and other arrangements used or intended to be used by the Company or any Subsidiary or in or relating to the conduct of the Business (all such properties, assets and contract rights being, the "Assets"). Either the Company or a Subsidiary, as the case may be, has good and marketable title to, or, in the case of leased or subleased Assets, valid and subsisting leasehold interests in, all the Assets, free and clear of all Encumbrances, except (i) as disclosed in Section 3.20, 3.21 (a), 321(b), 3.22 or 3.23(a) of the Disclosure Schedule and (ii) Permitted Encumbrances. (b) The Assets constitute all the properties, assets and rights forming a part of, used, held or intended to be used in, and all such properties, assets and rights as are necessary in the conduct of, the business of the Company and its Subsidiaries. At all times since the date of the Reference Balance Sheet, the Company has caused the Assets to be maintained in accordance with good business practice, and all the Assets are in good operating condition and repair and are suitable for the purposes for which they are used and intended. (c) Following the consummation of the transactions contemplated by this Agreement, either the Company or a Subsidiary, as the case may be, will continue to own, pursuant to good and marketable title, or lease, under valid and subsisting leases, or otherwise retain its respective interest in the Assets without incurring any penalty or other adverse consequence, including, without limitation, any increase in rentals, royalties, or licenses or other fees imposed as a result of, or arising from, the consummation of the transactions contemplated by this Agreement. Immediately following the Closing, either the Company or a Subsidiary, as the case may be, shall own and possess all documents, books, records, agreements and financial data of any sort used by the Company or such Subsidiary in the conduct of the Business or otherwise. (d) Section 3.23(d) of the Disclosure Schedule contains a true and complete schedule of the Company's portfolio of short-term investments and marketable securities as at December 31, 1997. -34- 3.24. CUSTOMERS. Listed in Section 3.24 of the Disclosure Schedule are the names and addresses of the ten most significant customers (by revenue) of the Company and the Subsidiaries for the twelve-month period ended December 31, 1997 and the amount for which each such customer was invoiced during such period. Except as disclosed in Section 3.24 of the Disclosure Schedule, none of Hirschorn, the Company nor any Subsidiary has received any notice or has any reason to believe that any significant customer of the Company has ceased, or will cease, to use the products, equipment, goods or services of the Company or any Subsidiary, or has substantially reduced, or will substantially reduce, the use of such products, equipment, goods or services at any time. 3.25. SUPPLIERS. Listed in Section 3.25 of the Disclosure Schedule are the names and addresses of each of the ten most significant suppliers of raw materials, supplies, merchandise and other goods for the Company and the Subsidiaries with an aggregate purchase price of $100,000.00 or more during the twelve-month period ended December 31, 1997 and the amount for which each such supplier invoiced the Company and the Subsidiaries during such period. Except as disclosed in Section 3.25 of the Disclosure Schedule, none of Hirschorn, the Company nor any Subsidiary has received any notice or has any reason to believe that any such supplier will not sell raw materials, supplies, merchandise and other goods to the Company or any Subsidiary at any time after the Closing Date on terms and conditions substantially similar to those used in its current sales to the Company and the Subsidiaries, subject only to general and customary price increases. 3.26. EMPLOYEE BENEFIT MATTERS. (a) Plans and Material Documents. Section 3.26(a) of the Disclosure Schedule lists (i) all employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option, stock purchase, restricted stock, incentive, deferred compensation, retiree medical or life insurance, supplemental retirement, severance or other benefit plans, programs or arrangements, and all employment, termination, severance or other contracts or agreements, whether legally enforceable or not, to which the Company or any Subsidiary is a party, with respect to which the Company or any Subsidiary has any obligation or which are maintained, contributed to or sponsored by the Company or any Subsidiary for the benefit of any current or former employee, officer or director of the Company or any Subsidiary, (ii) each employee benefit plan for which the Company or any Subsidiary could incur liability under Section 4069 of ERISA in the event such plan has been or were to be terminated, (iii) any plan in respect of which the Company or any Subsidiary could incur liability under Section 4212(c) of ERISA and (iv) any contracts, arrangements or understandings between Hirschorn or any of its Affiliates and any -35- employee of the Company or of any Subsidiary, including, without limitation, any contracts, arrangements or understandings relating to the sale of the Company (collectively, the "Plans"). Each Plan is in writing and Hirschorn has made available to the Buyer complete and accurate copies of each Plan and a complete and accurate copy of each material document prepared in connection with each such Plan including, without limitation, (i) a copy of each trust or other funding arrangement, (ii) each summary plan description and summary of material modifications, (iii) the most recently filed IRS Form 5500, (iv) the most recently received IRS determination letter for each such Plan, and (v) the most recently prepared actuarial report and financial statement in connection with each such Plan. Except as disclosed on Section 3.26(a) of the Disclosure Schedule, there are no other employee benefit plans, programs, arrangements or agreements, whether formal or informal, whether in writing or not, to which the Company or any Subsidiary is a party, with respect to which the Company or any Subsidiary has any obligation or which are maintained, contributed to or sponsored by the Company or any Subsidiary for the benefit of any current or former employee, officer or director of the Company or any Subsidiary. Neither the Company nor any Subsidiary has any express or implied material commitment, whether legally enforceable or not, (i) to create, incur liability with respect to or cause to exist any other employee benefit plan, program or arrangement, (ii) to enter into any contract or agreement to provide compensation or benefits to any individual or (iii) to modify, change or terminate any Plan, other than with respect to a modification, change or termination required by ERISA or the Code. (b) Absence of Certain Types of Plans. None of the Plans is a single employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) for which the Company or any Subsidiary could incur liability under Section 4063 or 4064 of ERISA. None of the Plans provides for the payment of separation, severance, termination or similar-type benefits to any Person or obligates the Company or any Subsidiary to pay separation, severance, termination or similar-type benefits solely as a result of any transaction contemplated by this Agreement or as a result of a "change in control," within the meaning of such term under Section 280G of the Code. None of the Plans provides for or promises retiree medical, disability or life insurance benefits to any current or former employee, officer or director of the Company or any Subsidiary for which accruals have not been taken. Any such accruals are listed on the Reference Balance Sheet. Except for those Plans of Industrial Acoustics Company Limited, each of the Plans is subject only to the laws of the United States or a political subdivision thereof. (c) Compliance with Applicable Law. Each Plan is now and always has been operated in all respects in accordance with the requirements of all applicable Law, including, without limitation, ERISA and the Code, and all persons who participate in the operation of such Plans and all Plan "fiduciaries" (within the meaning of Section 3(21) of ERISA) have always acted in accordance with the provisions of all applicable Law, including, without limitation, ERISA and the IRC. The Company and each Subsidiary has performed all -36- obligations required to be performed by it under, is not in any respect in default under, or in violation of, and has no knowledge of any default or violation by any party to any Plan. No legal action, suit or claim is pending or threatened with respect to any Plan (other than claims for benefits in the ordinary course) and no fact or event exists that could give rise to any such action, suit or claim. (d) Qualification of Certain Plans. Each Plan which is intended to be qualified under Section 401(a) of the IRC or Section 401(k) of the IRC has received a favorable determination letter from the IRS that it is so qualified and each trust established in connection with any Plan which is intended to be exempt from federal income taxation under Section 501(a) of the IRC has received a determination letter from the IRS that it is so exempt and no fact or event has occurred since the date of such determination letter from the IRS to adversely affect the qualified status of any such Plan or the exempt status of any such trust. Each trust maintained or contributed to by the Company or any Subsidiary which is intended to be qualified as a voluntary employees' beneficiary association and which is intended to be exempt from federal income taxation under Section 501(c)(9) of the IRC has received a favorable determination letter from the IRS that it is so qualified and so exempt, and no fact or event has occurred since the date of such determination by the IRS to adversely affect such qualified or exempt status. (e) Absence of Certain Liabilities and Events. There has been no prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the IRC) with respect to any Plan. Neither the Company nor any Subsidiary has incurred any liability for any penalty or tax arising under Section 4971, 4972, 4980, 4980B or 6652 of the IRC or any liability under Section 502 of ERISA and no fact or event exists which could give rise to any such liability. Neither the Company nor any Subsidiary has incurred any liability under, arising out of or by operation of Title IV of ERISA (other than liability for premiums to the Pension Benefit Guaranty Corporation arising in the ordinary course), including, without limitation, any liability in connection with (i) the termination or reorganization of any employee benefit plan subject to Title IV of ERISA or (ii) the withdrawal from any multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA, and no fact or event exists which could give rise to any such liability. Except as set forth on Section 3.26(e) of the Disclosure Schedule, no complete or partial termination has occurred within the five years preceding the date hereof with respect to any Plan. No reportable event (within the meaning of Section 4043 of ERISA) has occurred or is expected to occur with respect to any Plan subject to Title IV of ERISA. No Plan had an accumulated funding deficiency (within the meaning of Section 302 of ERISA or Section 412 of the Code) whether or not waived as of the most recently ended plan year of such Plan. None of the assets of the Company or any Subsidiary is the subject of any lien arising under Section 302(f) of ERISA or Section 412(n) of the Code; neither the Company nor any Subsidiary has been required to post any security un- -37- der Section 307 of ERISA or Section 401(a)(29) of the Code; and no fact or event exists which could give rise to any such lien or requirement to post any such security. (f) Plan Contributions and Funding. All contributions, premiums or payments required to be made with respect to any Plan (and any other employee benefit plan for which the Company or any Subsidiary may have liability for funding) have been made on or before their due dates. All such contributions have been fully deducted for income tax purposes and no such deduction has been challenged or disallowed by any government entity and no fact or event exists which could give rise to any such challenge or disallowance. As of the Closing Date, no Plan which is subject to Title IV of ERISA will have an "unfunded benefit liability" (within the meaning of Section 4001(a)(18) of ERISA). (g) Certain Employee-Benefits Assets. Each of the guaranteed investment contracts and other funding contracts with any insurance company that are held by any of the Plans and any annuity contracts purchased by (i) any of the Plans or (ii) any pension benefit plans (as defined in Section 3(2) of ERISA) that provided benefits to any current or former employees of the Company or any Subsidiary was issued by an insurance company which carried the highest rating from each of Duff & Phelps Credit Rating Co., Standard & Poor's Insurance Rating Services, A.M. Best Company and Moody's Investors Service, as of the date such contract was issued, the date hereof and the Closing Date. (h) WARN Act. The Company and the Subsidiaries are in compliance with the requirements of the Workers Adjustment and Retraining Notification Act ("WARN") and have no liabilities pursuant to WARN. (i) Americans With Disability Act. Except as set forth in Section 3.26(i) of the Disclosure Schedule, the Seller has no Knowledge that the Company and each Subsidiary are not in compliance with the requirements of the Americans With Disabilities Act. (j) Withdrawal Liability. Neither the Company nor any Subsidiary has announced an intention to withdraw, but has not yet completed withdrawal, from a multiemployer plan. No action has been taken that could result in either a partial or complete withdrawal from a multiemployer plan by the Company or any Subsidiary. 3.27. LABOR RELATIONS; COMPLIANCE. The Company or one of its Subsidiaries is a party to those collective bargaining or other labor Contracts set forth on Section 3.27 of the Disclosure Schedule. Except as set forth on Section 3.27 of the Disclosure Schedule, since January 1, 1994, there has not been, there is not presently pending or existing, and to Hirschorn's Knowledge there is not threatened, (a) any strike, slowdown, picketing, work stoppage, or employee grievance process, (b) any Proceeding against or affecting the Company or any of its Subsidiaries relating to the -38- alleged violation of any Legal Requirement pertaining to labor relations or employment matters, including any charge or complaint filed by an employee or union with the National Labor Relations Board, the Equal Employment Opportunity Commission, or any comparable Governmental Body, organizational activity, or other labor or employment dispute against or affecting any of the Company and its Subsidiaries or their premises, or (c) any application for certification of a collective bargaining agent. To Hirschorn's Knowledge, no event has occurred or circumstance exists that could provide the basis for any work stoppage or other labor dispute. There is no lockout of any employees by the Company or any of its Subsidiaries, and no such action is contemplated by the Company or any of its Subsidiaries. The Company and each of the Subsidiaries have complied in all respects with all Legal Requirements relating to employment, equal employment opportunity, nondiscrimination, immigration, wages, hours, benefits, collective bargaining, the payment of social security and similar taxes, occupational safety and health, and plant closing. Neither the Company nor any Subsidiary is liable for the payment of any compensation, damages, taxes, fines, penalties, or other amounts, however designated, for failure to comply with any of the foregoing Legal Requirements. 3.28. KEY EMPLOYEES. (a) Section 3.28 of the Disclosure Schedule lists the name, place of employment, the current annual salary rates, bonuses, deferred or contingent compensation, pension, accrued vacation, "golden parachute" and other like benefits paid or payable (in cash or otherwise) in 1996 and 1997, the date of employment, nature of employment (whether contractual or at will), and a description of position and job function of each current salaried employee, officer, director, consultant or agent of the Company or any Subsidiary whose annual compensation exceeded (or, in 1997, is expected to exceed) $100,000.00. (b) All directors, officers, management employees, and technical and professional employees of the Company and each Subsidiary are under written obligation to the Company or such Subsidiary to maintain in confidence all confidential or proprietary information acquired by them in the course of their employment and to assign to the Company or such Subsidiary all inventions made by them within the scope of their employment during such employment and for a reasonable period thereafter. 3.29. TAXES. (a) The Company and its Subsidiaries have filed or caused to be filed all Tax Returns that are or were required to be filed by or with respect to any of them, either separately or as a member of a group of corporations, pursuant to applicable Legal Requirements. The Company has made available to Buyer copies of all such Tax Returns relating to income or franchise taxes filed since January 1, 1992. The Company and its Subsidiaries (i) have timely paid, or made provision for the payment of, all Taxes that have or may have become due pursuant to those Tax Returns or otherwise, or pursuant to any assessment received by the -39- Company or any of its Subsidiaries, except such Taxes, if any, as are listed in Section 3.29 of the Disclosure Schedule and are being contested in good faith and as to which adequate reserves (determined in accordance with GAAP) have been provided in the Reference Balance Sheet and the Interim Balance Sheet, and (ii) have made adequate provision (through a current accrual on the Reference Balance Sheet) for any Taxes attributable to any taxable period (or portion thereof) of the Company and/or its Subsidiaries ending on or prior to the date hereof that are not yet due and payable. (b) The United States federal income Tax Returns of the Company and each of its subsidiaries subject to such Taxes have been audited by the IRS or are closed by the applicable statute of limitations for all taxable years through December 31, 1995. The New York State income Tax Returns of the Company and each of its subsidiaries subject to such Taxes have been audited by the relevant state tax authorities or are closed by the applicable statute of limitations for all taxable years through December 31, 1994. The New York City income Tax Returns of the Company and each of its subsidiaries subject to such Taxes have been audited by the relevant tax authorities or are closed by the applicable statute of limitations for all taxable years through December 31, 1992. The United Kingdom income Tax Returns of the Company and each of its subsidiaries subject to such Taxes have been audited by Inland Reserve or are closed by the applicable statute of limitations for all taxable years through December 31, 1996. Hirschorn has made available to Buyer a complete and accurate list of all audits of all such Tax Returns, including a reasonably detailed description of the nature and outcome of each audit. All deficiencies proposed as a result of such audits have been paid, reserved against or settled. Except as described in Section 3.29 of the Disclosure Schedule, neither the Company nor any of the Subsidiaries has given or been requested to give waivers or extensions (or is or would be subject to a waiver or extension given by any other Person) of any statute of limitations relating to the payment of Taxes of the Company or any of its Subsidiaries or for which the Company or any of its Subsidiaries may be liable. (c) The charges, accruals, and reserves with respect to Taxes on the respective books of the Company and each of its Subsidiaries are adequate (determined in accordance with GAAP) and are at least equal to the Company's or such Subsidiary's liability for Taxes. There exists no proposed tax assessment against the Company or any of its Subsidiaries except as disclosed in the Balance Sheet or in Section 3.29 of the Disclosure Schedule. No consent to the application of Section 3.41(f)(2) of the IRC has been filed with respect to any property or assets held, acquired, or to be acquired by the Company or any of its Subsidiaries. All Taxes that the Company or any of its Subsidiaries is or was required by Legal Requirements to withhold or collect have been duly withheld or collected and, to the extent required, have been paid to the proper Governmental Body or other Person. (d) All Tax Returns filed by (or that include on a consolidated basis) the Company or any of its Subsidiaries are true, correct, and complete. There is no tax sharing -40- agreement to which the Company or any of its Subsidiaries is a party. Neither the Company nor any Subsidiary is, or within the five-year period preceding the Closing Date has been, an "S" corporation. (e) Except as set forth in Section 3.29(e) of the Disclosure Schedule, (i) no liens have been filed with respect to any Taxes; (ii) neither the Company nor any of its Subsidiaries is a party to any agreement or arrangement that would result, separately or in the aggregate, in the payment of any "excess parachute payments" within the meaning of IRC Section 280G; (iii) neither the Company nor any of its Subsidiaries has been a "United States real property holding corporation" within the meaning of IRC Section 897(c)(2); (iv) neither the Company nor any Subsidiary owns any interest in any "passive foreign investment company" as defined in IRC Section 1296 or other entity the income of which is required to be included in the income of the Company or its Subsidiaries whether or not distributed; (v) neither the Company nor any Subsidiary has any income reportable for a period ending after the Closing Date but attributable to a transaction (e.g., "an installment sale") occurring in or a change in accounting method made for a period ending on or prior to the Closing Date which resulted in a deferred reporting of income from such transaction or from such change in accounting method (other than a deferred intercompany transaction); (vi) neither the Company nor any Subsidiary has any deferred gain or loss (a) arising out of any intercompany transactions or (b) with respect to the stock or obligations of any other member of the affiliated group of which the Company is the common parent; (vii) the Company or any Subsidiary has no Knowledge that there are any reassessments of any property owned by the Company or any Subsidiary or other proposals that could increase the amount of any Tax to which the Company or any Subsidiary would be subject; (viii) no power of attorney currently in force has been granted with respect to any matter relating to Taxes that could affect the Company or a Subsidiary; (ix) no assets of the Company or its Subsidiaries are held in an arrangement for which partnership Tax Returns are being filed and neither the Company nor any of its Subsidiaries is a partner in any partnership; (x) neither the Company nor any of its Subsidiaries has requested a ruling from any taxing authority; (xi) there are no "excess loss accounts" (as defined in Treas. Reg. ss. 1. 1502-19) with respect to any stock of any Subsidiary; and (xii) none of the assets of the Company nor any of its Subsidiaries is "tax exempt use property" as defined in IRC Section 168(h)(1) or may be treated as owned by any other person pursuant to IRC Section 168(f)(8) of the Internal Revenue Code of 1954 (as in effect prior to the Tax Reform Act of 1986). (f) All transfer, documentary, sales, use, stamp, registration and other such taxes and fees (including any penalties and interest) incurred in connection with the transactions contemplated by this Agreement (including, without limitation, any New York State Real Estate Transfer Tax and any similar tax imposed in other states or subdivisions), shall be paid by the party obligated by Legal Requirement to make such payment when due, and such responsible party will, at their own expense, file all necessary Tax Returns and other -41- documentation with respect to all such transfer, documentary, sales, use, stamp, registration and other Taxes and fees, and, if required by applicable law, the party not obligated to make such payment shall join in the execution of any such Tax Returns and other documentation. 3.30. INSURANCE. (a) Section 3.30(a) of the Disclosure Schedule sets forth the following information with respect to each insurance policy (including policies providing property, casualty, liability, workers' compensation, any bond and surety arrangements) under which the Company or any Subsidiary has been an insured, a named insured or otherwise the principal beneficiary of coverage at any time within the past three years: (i) the name, address and telephone number of the agent or broker; (ii) the name of the insurer and the names of the principal insured and each named insured; (iii) the policy number and the period of coverage; (iv) the type, scope (including an indication of whether the coverage was on a claims made, occurrence or other basis) and amount (including a description of how deductibles, retentions and aggregates are calculated and operate) of coverage; and (v) the premium charged for the policy, including, without limitation, a description of any retroactive premium adjustments or other loss-sharing arrangements. (b) With respect to each such insurance policy: (i) the policy is legal, valid, binding and enforceable in accordance with its terms and, except for policies that have expired under their terms in the ordinary course, is in full force and effect; (ii) neither the Company nor any Subsidiary is in breach or default (including any breach or default with respect to the payment of premiums or the giving of notice), and no event has occurred which, with notice or the lapse of time, would constitute such a breach or default or permit termination or modification, under the policy; (iii) no party to the policy has repudiated, or given notice of an intent to repudiate, any provision thereof; and (iv) to the Knowledge of Hirschorn, no insurer on the policy has been declared insolvent or placed in receivership, conservatorship or liquidation or currently has a rating of "B+" or below from A.M. Best & Co. or a claims paying ability rating of "BBB" or below from Standard & Poor's, Inc. (c) Section 3.30(c) of the Disclosure Schedule sets forth all risks against which the Company or any Subsidiary is self-insured or which are covered under any risk retention program in which the Company or any Subsidiary participates, together with details for -42- the last five years of the Company's and each Subsidiary's loss experience with respect to such risks. (d) All material assets, properties and risks of the Company and each Subsidiary are, and for the past five years have been, covered by valid and, except for policies that have expired under their terms in the ordinary course, currently effective insurance policies or binders of insurance (including, without limitation, general liability insurance, property insurance and workers' compensation insurance) issued in favor of the Company or a Subsidiary. as the case may be, in each case with responsible insurance companies, in such types and amounts and covering such risks as are consistent with customary practices and standards of companies engaged in businesses and operations similar to those of the Company or such Subsidiary, as the case may be. (e) At no time subsequent to January 1, 1994 has the Company or any Subsidiary (i) been denied any insurance or indemnity bond coverage which it has requested, (ii) made any material reduction in the scope or amount of its insurance coverage, or, except as set forth in Section 3.30(e) of the Disclosure Schedule, received notice from any of its insurance carriers that any insurance premiums will be subject to increase in an amount materially disproportionate to the amount of the increases with respect thereto (or with respect to similar insurance) in prior years or that any insurance coverage listed in Section 3.30(a) of the Disclosure Schedule will not be available in the future substantially on the same terms as are now in effect or (iii) suffered any extraordinary increase in premium for renewed coverage. Since January 1, 1994, no insurance carrier has canceled, failed to renew or materially reduced any insurance coverage for the Company or any Subsidiary or given any notice or other indication of its intention to cancel, not renew or reduce any such coverage. (f) At the time of the Closing, all insurance policies currently in effect will be outstanding and duly in force. (g) No insurance policy listed in Section 3.30(a) of the Disclosure Schedule will cease to be legal, valid, binding, enforceable in accordance with its terms and in full force and effect on terms identical to those in effect as of the date hereof as a result of the consummation of the transactions contemplated by this Agreement. 3.31. ACCOUNTS, LOCKBOXES, SAFE DEPOSIT BOXES, POWERS OF ATTORNEY. Section 3.31 of the Disclosure Schedule is a true and complete list of (a) the names of each bank, savings and loan association, securities or commodities broker or other financial institution in which the Company or any Subsidiary has an account, including cash contribution accounts, and the names of all persons authorized to draw thereon or have access thereto, (b) the location of all lockboxes and safe deposit boxes of the Company and each -43- Subsidiary and the names of all Persons authorized to draw thereon or have access thereto and (c) the names of all Persons, if any, holding powers of attorney from Seller relating to the Company, any Subsidiary or the Business, or from the Company or any Subsidiary. Section 3.31 of the Disclosure Schedule sets forth a list of all authorizations by the Board of Directors of the Company for any officer, director or employee to enter into negotiations or otherwise interact with any foreign entity. At the time of the Closing, without the prior written consent of the Buyer, neither the Company nor any Subsidiary shall have any such amount, lockbox or safe deposit box other than those listed in Section 3.31 of the Disclosure Schedule, nor shall any additional Person have been authorized, from the date of this Agreement, to draw thereon or have access thereto or to hold any such power of attorney relating to the Company, any Subsidiary or the Business or from the Company or any Subsidiary. Except as disclosed in Section 3.31 of the Disclosure Schedule, Hirschorn has not commingled monies or accounts of the Company or any Subsidiary with other monies or accounts of Hirschorn nor has Hirschorn transferred monies or accounts of the Company or any Subsidiary other than to an account of the Company or such Subsidiary. At the time of the Closing, all monies and accounts of the Company and each Subsidiary shall be held by, and be accessible only to, the Company or such Subsidiary. 3.32. FULL DISCLOSURE. (a) Hirschorn is not aware of any facts pertaining to the Company, any Subsidiary or the Business which could have a Material Adverse Effect and which have not been disclosed in this Agreement, the Disclosure Schedule or the Financial Statements or otherwise disclosed to the Buyer by Hirschorn in writing. (b) No representation or warranty of Hirschorn in this Agreement, nor any statement or certificate furnished or to be furnished to the Buyer pursuant to this Agreement, or in connection with the transactions contemplated by this Agreement, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading. 3.33. BROKERS OR FINDERS. Hirschorn has incurred no obligation or liability, contingent or otherwise, for brokerage or finders' fees or agents' commissions or other similar payment in connection with this Agreement. 3.34. YEAR 2000 COMPUTER CONVERSION. Section 3.34 of the Disclosure Schedule sets forth the Company's proposal regarding its computer conversion for the year 2000. The changes necessary to be made to the computer system could not reasonably be expected to have a Material Adverse Effect. -44- 3.35. SECURITIES EXCHANGE ACT FILINGS. All reports of the Company pursuant to the Securities Exchange Act of 1934 have been filed when due and in accordance with the provisions of such at and the rules and regulations thereunder of the Securities and Exchange Commission. Neither the Company or Seller has any Knowledge of any investigation or inquiry (whether or not formally authorized) with respect to securities of the Company or any report or registration statement filed, or required to be filed, by the Company with such Commission. 4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to Sellers as follows: 4.1. ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all necessary corporate power and authority to enter into this Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Buyer, the performance by the Buyer of its obligations hereunder and the consummation by the Buyer of the transactions contemplated hereby have been duly authorized by all requisite action on the part of the Buyer. This Agreement has been, and (assuming due authorization, execution and delivery by the Sellers) this Agreement constitutes, a legal, valid and binding obligation of the Buyer enforceable against the Buyer in accordance with its terms. Buyer does also specifically represent that it has the financial wherewithal to undertake and consummate the transactions contemplated by this Agreement. 4.2. NO CONFLICT. Assuming compliance with the notification requirements of the HSR Act and the making and obtaining of all filings, notifications, consents, approvals, authorizations and other actions referred to in Section 4.3, except as may result from any facts or circumstances relating solely to Hirschorn, the execution, delivery and performance of this Agreement by Buyer do not and will not (a) violate, conflict with or result in the breach of any provision of the charter or by-laws (or similar organizational documents) of the Buyer, (b) conflict with or violate (or cause an event which could have a Material Adverse Effect as a result of) any Law or Governmental Order applicable to the Buyer, or (c) conflict with, result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, or result in the creation of an Encumbrance on any of the assets or properties of the Buyer pursuant to any note, bond, mortgage or indenture, contract agreement, lease, sublease, license, permit, franchise or -45- other instrument or arrangement to which the Buyer is a party or by which any of such assets or properties are bound or affected which would have a Material Adverse Effect on the ability of the Buyer to consummate the transactions contemplated by this Agreement. 4.3. GOVERNMENTAL CONSENTS AND APPROVAL. The execution, delivery and performance of this Agreement by the Buyer do not and will not require any consent, approval, authorization or other order of, action by, filing with, or notification to, any Governmental Authority, except (a) in a writing given to Hirschorn by the Buyer on the date of this Agreement, and (b) the notification requirements of the HSR Act. 4.4. INVESTMENT INTENT. Buyer is acquiring the Shares for its own account and not with a view to their distribution within the meaning of Section 2(l1) of the Securities Act. 4.5. CERTAIN PROCEEDINGS. There is no pending Proceeding that has been commenced against Buyer and that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been Threatened. 4.6. BROKERS OR FINDERS. Buyer and its officers and agents have incurred no obligation or liability, contingent or otherwise, for brokerage or finders' fees or agents' commissions or other similar payment in connection with this Agreement and will indemnify and hold Sellers harmless from any such payment alleged to be due by or through Buyer as a result of the action of Buyer or its officers or agents. 5. COVENANTS OF HIRSCHORN PRIOR TO CLOSING DATE. 5.1. ACCESS AND INVESTIGATION; AUDIT. Between the date of this Agreement and the Closing Date, Hirschorn will, and will cause the Company and the Subsidiaries and its Representatives to, (a) furnish Buyer and Buyer's Advisors with copies of all such contracts, books and records, and other existing documents and data as Buyer may reasonably request, (b) furnish Buyer and Buyer's Advisors with such additional financial, operating, and other data and information as Buyer may rea- -46- sonably request, and (c) furnish Buyer true and complete copies of the audited consolidated balance sheet of the Company and the Subsidiaries for the fiscal year ended as of December 31, 1997, and the related audited consolidated statements of income, retained earnings, stockholders' equity and changes in financial position of the Company and the Subsidiaries, together with all related notes and schedules thereto, accompanied by the audit opinion and management letters thereon of Coopers & Lybrand and, with respect to Industrial Acoustics Company Limited, Kidsons Impey. 5.2. OPERATION OF THE BUSINESS OF THE COMPANY AND ITS SUBSIDIARIES. (a) Between the date of this Agreement and the Closing Date, Hirschorn will, and will cause the Company and the Subsidiaries to: (i) conduct the business of the Company and the Subsidiaries only in the ordinary course of business; (ii) use his Best Efforts to preserve intact the current business organization of the Company and the Subsidiaries, keep available the services of the current officers, employees, and agents of the Company and the Subsidiaries, and maintain the relations and good will with suppliers, customers, landlords, creditors, employees, agents, and others having business relationships with the Company and the Subsidiaries; (iii) confer with Buyer concerning operational matters of a material nature; and (iv) otherwise report periodically to Buyer concerning the status of the business, operations, and finances of the Company and the Subsidiaries. (b) Except as disclosed in Section 5.2(a) of the Disclosure Schedule, the Seller covenants and agrees that, prior to Closing, without the prior written consent of the Buyer, neither the Company nor any Subsidiary will do any of the things enumerated in the second sentence of Section 3.14 (including, without limitation, clauses (i) through (xxix) thereof). (c) The Seller covenants and agrees that, prior to Closing, the Company will not engage in any practice, take any action, fail to take any action or enter into any transaction which would cause any representation or warranty of the Seller to be untrue or result in the Breach of any covenant made by the Seller in this Agreement. -47- 5.3. NEGATIVE COVENANT. Except as otherwise expressly permitted by this Agreement, between the date of this Agreement and the Closing Date, Seller will not, and will cause the Company and the Subsidiaries not to, without the prior consent of Buyer, take any affirmative action, or fail to take any reasonable action within his or its control, as a result of which any of the changes or events listed in Section 3.14 is authorized or is likely to occur. 5.4. REQUIRED APPROVALS. As promptly as practicable after the date of this Agreement, Hirschorn will, and will cause the Company and the Subsidiaries to, make all filings required by Legal Requirements to be made by them in order to consummate the Contemplated Transactions (including all filings under the HSR Act). Between the date of this Agreement and the Closing Date, Hirschorn will, and will cause the Company and the Subsidiaries to, (a) cooperate with Buyer with respect to all filings that Buyer elects to make or is required by Legal Requirements to make in connection with the Contemplated Transactions, and (b) cooperate with Buyer in obtaining all consents identified in Schedule 4.3 (including taking all actions requested by Buyer to cause early termination of any applicable waiting period under the HSR Act). 5.5. NOTIFICATION. Between the date of this Agreement and the Closing Date, Seller will promptly notify Buyer in writing if such Seller or the Company or any of its Subsidiaries becomes aware of any fact or condition that causes or constitutes a Breach of any of Seller's representations and warranties as of the date of this Agreement, or if Seller or the Company or any of its Subsidiaries becomes aware of the occurrence after the date of this Agreement of any fact or condition that would (except as expressly contemplated by this Agreement) cause or constitute a Breach of any such representation or warranty had such representation or warranty been made as of the time of occurrence or discovery of such fact or condition. Should any such fact or condition require any change in the Disclosure Schedule if the Disclosure Schedule were dated the date of the occurrence or discovery of any such fact or condition, Seller will promptly deliver to Buyer a supplement to the Disclosure Schedule specifying such change. During the same period, Seller will promptly notify Buyer of the occurrence of any Breach of any covenant of Seller in this Section 5 or of the occurrence of any event that may make the satisfaction of the conditions in Section 7 impossible or unlikely. -48- 5.6. PAYMENT OF INDEBTEDNESS BY RELATED PERSONS. Except as expressly provided in this Agreement and except as is set forth on Section 5.6 of the Disclosure Schedule, Seller will cause all indebtedness owed to the Company and the Subsidiaries by any Seller or any Related Person to be paid in full prior to Closing. The obligation of Michael Hirschorn to the Company shall continue and the terms of such obligation shall be amended to include the payment of interest on the outstanding balance calculated monthly at the prime rate of Chase Manhattan Bank as of the first day of such month. 5.7. NO NEGOTIATION. Until such time, if any, as this Agreement is terminated pursuant to Section 9, Seller will not, and will cause the Company and the Subsidiaries and each of their Representatives not to, directly or indirectly solicit, initiate, or encourage any inquiries or proposals from, discuss or negotiate with, provide any non-public information to, or consider the merits of any unsolicited inquiries or proposals from, any Person (other than Buyer) relating to any transaction involving the sale of the Shares (other than in the ordinary course of business) of the Company, or any merger, consolidation, business combination, or similar transaction involving the Company or any of its Subsidiaries. 5.8. BEST EFFORTS. Between the date of this Agreement and the Closing Date, Seller will use his Best Efforts to cause the conditions in Sections 7 and 8 to be satisfied. 5.9. TERMINATION OF AUTHORIZATIONS. Seller will cause the Company to terminate all existing authorizations by the Board of Directors of the Company for any officer, director or employee to enter into negotiations or otherwise interact with any foreign entity except in the ordinary course of business relating to specific transactions. 6. COVENANTS OF BUYER PRIOR TO CLOSING DATE. 6.1. APPROVALS OF GOVERNMENTAL BODIES. As promptly as practicable after the date of this Agreement, Buyer will, and will cause each of its Related Persons to, make all filings required by Legal Requirements to be made by them to consummate the Contemplated Transactions (including all filings under the HSR Act). Between the date of this Agreement and the Closing Date, Buyer will, and will -49- cause each Related Person to, (i) cooperate with Seller with respect to all filings that Seller is required by Legal Requirements to make in connection with the Contemplated Transactions, and (ii) cooperate with Seller in obtaining all consents identified in Parts 3.5, 3.6 and 4.3 of the Disclosure Schedule; provided that this Agreement will not require Buyer to dispose of or make any change in any portion of its business or to incur any other burden to obtain a Governmental Authorization. 6.2. BEST EFFORTS. Except as set forth in the proviso to Section 6.1, between the date of this Agreement and the Closing Date, Buyer will use its Best Efforts to cause the conditions in Sections 7 and 8 to be satisfied. 7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. Buyer's obligation to purchase the Shares and to take the other actions required to be taken by Buyer at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by Buyer, in whole or in part): 7.1. ACCURACY OF REPRESENTATIONS. All of Seller's representations and warranties in this Agreement (considered collectively), and each of these representations and warranties (considered individually), must be accurate as of the date of this Agreement and as of the Closing Date without giving effect to any notice or supplement delivered by Hirschorn pursuant to Section 5.5. 7.2. SELLER'S PERFORMANCE (a) All of the covenants and obligations that Seller is required to perform or to comply with pursuant to this Agreement at or prior to the Closing (considered collectively), and each of these covenants and obligations (considered individually), must have been duly performed and complied with in all material respects. (b) Each document required to be delivered pursuant to Section 2.4 must have been delivered, and each of the other covenants and obligations in Section 5.4 must have been performed and complied with in all material respects. 7.3. CONSENTS. Each of the Consents identified in Parts 3.5(c), 3.6 and 4.3 of the Disclosure Schedule must have been obtained and must be in full force and effect. -50- 7.4. ADDITIONAL DOCUMENTS. Each of the following documents must have been delivered to Buyer: (a) an opinion of Rand Rosenzweig Smith Radley Gordon & Burstein LLP, dated the Closing Date, in the form of Exhibit 7.4(a); (b) such other documents as Buyer may reasonably request for the purpose of (i) enabling its counsel to provide the opinion referred to in Section 8.4(a), (ii) evidencing the accuracy of any of Seller's representations and warranties, (iii) evidencing the performance by Seller of, or the compliance by Seller with, any covenant or obligation required to be performed or complied with by Seller, (iv) evidencing the satisfaction of any condition referred to in this Section 7, or (v) otherwise facilitating the consummation or performance of any of the Contemplated Transactions; and (c) a copy of the Escrow Agreement substantially in the form attached hereto as Exhibit A, executed by Seller. 7.5. NO INJUNCTION. Them must not be in effect any Legal Requirement or any injunction or other Order that prohibits the sale of the Shares by Seller to Buyer. 7.6. NO PROHIBITION. Neither the consummation nor the performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time), materially contravene, or conflict with, or result in a material violation of, or cause Buyer or any Person affiliated with Buyer to suffer any Material Adverse Effect under, any applicable Legal Requirement or Order. 7.7. BOARD ACTION. The Board of Directors of the Company shall have specifically approved (i) the Contemplated Transactions and (ii) the contemporaneous acquisition by Buyers of the shares listed in Schedule A, such approval being effective prior to the signing of this Agreement, in effect as of the Closing and evidenced by a certified resolution of such Board satisfactory to Buyer. -51- 7.8. HSR ACT AND EXON-FLORIO AMENDMENT. The waiting period (including any extension thereof by reason of a request for additional information) relating to the notification and report forms under the HSR Act filed by Buyer and Seller with respect to the transactions contemplated by this Agreement shall have expired or been terminated, and no conditions to the transactions contemplated by this Agreement shall have been imposed by any Governmental Body and clearance shall have been received from the Committee on Foreign Investment in the United States for the transactions contemplated by this Agreement under Section 721 of the Defense Production Act of 1950, as amended. 8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE. Seller's obligation to sell the Shares and to take the other actions required to be taken by Seller at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by Seller, in whole or in part): 8.1. ACCURACY OF REPRESENTATIONS. All of Buyer's representations and warranties in this Agreement (considered collectively), and each of these representations and warranties (considered individually), must be accurate as of the date of this Agreement and as of the Closing Date. 8.2. BUYER'S PERFORMANCE. (a) All of the covenants and obligations that Buyer is required to perform or to comply with pursuant to this Agreement at or prior to the Closing (considered collectively), and each of these covenants and obligations (considered individually), must have been performed and complied with in all material respects. (b) Buyer must have delivered each of the documents required to be delivered by Buyer pursuant to Section 2.4 and must have made the cash payments required to be made by Buyer pursuant to Sections 2.4(b)(i) and 2.4(b)(ii). 8.3. CONSENTS. Each of the Consents identified in Parts 3.6(c), 3.7 and 4.3 of the Disclosure Schedule must have been obtained and must be in full force and effect. -52- 8.4. ADDITIONAL DOCUMENTS. Buyer must have caused the following documents to be delivered to Seller: (a) an opinion of Cahill Gordon & Reindel, dated the Closing Date, in the form of Exhibit 8.4(a); and (b) such other documents as Seller may reasonably request for the purpose of (i) enabling their counsel to provide the opinion referred to in Section 7.4(a), (ii) evidencing the accuracy of any representation or warranty of Buyer, (iii) evidencing the performance by Buyer of, or the compliance by Buyer with, any covenant or obligation required to be performed or complied with by Buyer, (iv) evidencing the satisfaction of any condition referred to in this Section 8, or (v) otherwise facilitating the consummation of any of the Contemplated Transactions; and (c) a copy of the Escrow Agreement substantially in the form attached hereto as Exhibit A, executed by Buyer. 8.5. NO INJUNCTION. There must not be in effect any Legal Requirement or any injunction or other Order that prohibits the sale of the Shares by Seller to Buyer. 9. TERMINATION. 9.1. TERMINATION EVENTS. This Agreement may, by notice given prior to or at the Closing, be terminated: (a) by either Buyer or Seller if a material Breach of any provision of this Agreement has been committed by the other party, such material Breach has not been cured after notice and a reasonable period of time to cure, and such Breach has not been waived; (b) (i) by Buyer if any of the conditions in Section 7 has not been satisfied as of the Closing Date or if satisfaction of such a condition is or becomes impossible (other than through the failure of Buyer to comply with its obligations under this Agreement) and Buyer has not waived such condition on or before the Closing Date; or (ii) by Seller, if any of the conditions in Section 8 has not been satisfied of the Closing Date or if satisfaction of such a condition is or becomes impossible (other than through -53- the failure of Seller to comply with his obligations under this Agreement) and Seller has not waived such condition on or before the Closing Date; (c) by Buyer if, between the date hereof and the Closing Date: (i) an event or condition occurs that has resulted in or that may be expected to result in a Material Adverse Effect, (ii) any material representation or warranty of Seller contained in this Agreement shall not have been true and correct when made, (iii) Seller shall not have complied with any material covenant or agreement to be complied with by it and contained in this Agreement; or (iv) Seller, the Company or any Subsidiary makes a general assignment for the benefit of creditors, or any proceeding shall be instituted by or against Seller, the Company or any Subsidiary seeking to adjudicate any of them a bankrupt or insolvent, or seeking liquidation, winding up or reorganization, arrangement, adjustment, protection, relief or composition of its debts under any law relating to bankruptcy, insolvency or reorganization; (d) by mutual consent of Buyer and Seller; or (e) by either Buyer or Seller if the Closing has not occurred (other than through the failure of any party seeking to terminate this Agreement to comply fully with its obligations under this Agreement) on or before April 30, 1998 or such later date as the parties may agree upon. 9.2. EFFECT OF TERMINATION. Each party's right of termination under Section 9.1 is in addition to any other rights it may have under this Agreement or otherwise, and the exercise of a right of termination will not be an election of remedies. If this Agreement is terminated pursuant to Section 9.1, all further obligations of the parties under this Agreement will terminate, except that the obligations in Sections 11.1 and 11. 3 will survive; provided, however, that if this Agreement is terminated by a party because of the Breach of the Agreement by the other party or because one or more of the conditions to the terminating party's obligations under this Agreement is not satisfied as a result of the other party's failure to comply with its obligations under this Agreement, the terminating party's right to pursue all legal remedies will survive such termination unimpaired. 10. INDEMNIFICATION; REMEDIES. 10.1. SURVIVAL. All representations, warranties, covenants, and obligations in this Agreement, the Disclosure Schedule, the supplements to the Disclosure Schedule, the certificate delivered -54- pursuant to Section 2.4(a)(ii), and any other certificate or document delivered pursuant to this Agreement will survive the Closing. 10.2. INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER. Seller will indemnify and hold harmless Buyer, the Company and its Subsidiaries, and their respective Representatives, stockholders, controlling persons, and affiliates (collectively, the "Indemnified Persons") for, and will pay to the Indemnified Persons the amount of, 74% any loss, liability, claim, damage (including incidental and consequential damages), expense (including costs of investigation and defense and reasonable attorneys' fees) or diminution of value, whether or not involving a third-party claim (collectively, "Damages"), arising, directly or indirectly, from or in connection with: (a) any Breach of any representation or warranty made by Seller in this Agreement, the Disclosure Schedule, the supplements to the Disclosure Schedule, or any other certificate or document delivered by Seller pursuant to this Agreement; (b) any Breach of any representation or warranty made by Seller in this Agreement as if such representation or warranty were made on and as of the Closing Date, other than any such Breach that is disclosed in a supplement to the Disclosure Schedule and is expressly identified in the certificate delivered pursuant to Section 2.4(a)(ii) as having caused the condition specified in Section 7.1 not to be satisfied; (c) any Breach by Seller of any covenant or obligation of Seller in this Agreement; (d) any product shipped or manufactured by, or any services provided by, the Company or any of its Subsidiaries prior to the Closing Date; (e) any claim by any Person for brokerage or finder's fees or commissions or similar payments based upon any agreement or understanding alleged to have been made by any such Person with either Seller or the Company or any of its Subsidiaries (or any Person acting on their behalf) in connection with any of the Contemplated Transactions; and (f) any Taxes of the Company and/or its Subsidiaries with respect to any Tax year or portion thereof ending on or before the Closing Date (or for any Tax year beginning before and ending after the Closing Date, to the extent allocable to the portion of such period beginning before and ending on the Closing Date), to the extent such Taxes are not reflected in the reserve for Tax liabilities shown on the Interim Bal- -55- ance Sheet, as such reserve is adjusted for the passage of time through the closing date in accordance with the past practice and custom of the Company and its Subsidiaries in filing their Tax Returns. Buyer shall request payment of Damages to be made by a claim against funds held in escrow pursuant to the Escrow Agreement. 10.3. TIME LIMITATIONS. If the Closing occurs, Seller will have no liability (for indemnification or otherwise) with respect to any representation or warranty, or covenant or obligation to be performed and complied with prior to the Closing Date, other than those in Section 3.2, 3.18 and 3.29, unless on or before eighteen (18) months from the Closing Date Buyer notifies Seller of a claim specifying the factual basis of that claim in reasonable detail to the extent then known by Buyer; a claim with respect to Section 3.2 or 3.29 may be made at any time until five (5) years from the Closing Date; and a claim with respect to Section 3.18 may be made at any time until thirty (30) months from the Closing Date. 10.4. LIMITATIONS ON AMOUNT -- SELLER. Seller will have no liability (for indemnification or otherwise) with respect to the matters described in clause (a), clause (b), to the extent relating to any failure to perform or comply prior to the Closing Date, clause (c), clause (d) or clause (f) of Section 10.2, until the total of all Damages with respect to such matters exceeds $250,000.00, at which time all such Damages shall become due (not just the amounts in excess of $250,000.00). For purposes of the preceding sentences, Damages shall not include amounts that individually do not result in a loss of at least $5,000.00. The maximum amount of Seller's total liability (for indemnification or otherwise) shall be $1,750,000.00. 10.5. PROCEDURE FOR INDEMNIFICATION -- THIRD-PARTY CLAMS. (a) Promptly after receipt by an indemnified party under Section 10.2 of notice of the commencement of any Proceeding against it, such indemnified party will, if a claim is to be made against an indemnifying party under such Section, give notice to the indemnifying party of the commencement of such claim, but the failure to notify the indemnifying party will not relieve the indemnifying party of any liability that it may have to any indemnified party, except to the extent that the indemnifying party demonstrates that the defense of such action is prejudiced by the indemnifying party's failure to give such notice. (b) If any Proceeding referred to in Section 10.5(a) is brought against an indemnified party and it gives notice to the indemnifying party of the commencement of such -56- Proceeding, the indemnifying party will, unless the claim involves Taxes, be entitled to participate in such Proceeding and, to the extent that it wishes (unless (i) the indemnifying party is also a party to such Proceeding and the indemnified party determines in good faith that joint representation would be inappropriate, or (ii) the indemnifying party fails to provide reasonable assurance to the indemnified party of its financial capacity to defend such Proceeding and provide indemnification with respect to such Proceeding), to assume the defense of such Proceeding with counsel satisfactory to the indemnified party and, after notice from the indemnifying party to the indemnified party of its election to assume the defense of such Proceeding, the indemnifying party will not, as long as it diligently conducts such defense, be liable to the indemnified party under this Section 10 for any fees of other counsel or any other expenses with respect to the defense of such Proceeding, in each case subsequently incurred by the indemnified party in connection with the defense of such Proceeding, other than reasonable costs of investigation. If the indemnifying party assumes the defense of a Proceeding, (i) it will be conclusively established for purposes of this Agreement that the claims made in that Proceeding are within the scope of and subject to indemnification; (ii) no compromise or settlement of such claims may be effected by the indemnifying party without the indemnified party's consent unless (A) there is no finding or admission of any violation of Legal Requirements or any violation of the rights of any Person and no effect on any other claims that may be made against the indemnified party, and (B) the sole relief provided is monetary damages that are paid in full by the indemnifying party; and (iii) the indemnified party will have no liability with respect to any compromise or settlement of such claims effected without its consent. If notice is given to an indemnifying party of the commencement of any Proceeding and the indemnifying party does not, within ten days after the indemnified party's notice is given, give notice to the indemnified party of its election to assume the defense of such Proceeding, the indemnifying party will be bound by any determination made in such Proceeding or any compromise or settlement effected by the indemnified party. (c) Notwithstanding the foregoing, if an indemnified party determines in good faith that there is a reasonable probability that a Proceeding may adversely affect it or its affiliates other than as a result of monetary damages for which it would be entitled to indemnification under this Agreement, the indemnified party may, by notice to the indemnifying party, assume the exclusive right to defend, compromise, or settle such Proceeding, but the indemnifying party will not be bound by any determination of a Proceeding so defended or any compromise or settlement effected without its consent (which may not be unreasonably withheld). 10.6. PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS. A claim for indemnification for any matter not involving a third-party claim may be asserted by notice to the party from whom indemnification is sought. -57- 11. GENERAL PROVISIONS. 11.1. EXPENSES. Except as otherwise expressly provided in this Agreement, each party to this Agreement will bear its respective expenses incurred in connection with the preparation, execution, and performance of this Agreement and the Contemplated Transactions, including all fees and expenses of agents, representatives, counsel, and accountants. Buyer and Seller will each pay their respective HSR Act filing fees. Seller will cause the Company and its Subsidiaries not to incur any out-of-pocket expenses in connection with this Agreement except for professional fees and environmental survey fees not in excess of $50,000.00. In the event of termination of this Agreement, the obligation of each party to pay its own expenses will be subject to any rights of such party arising from a breach of this Agreement by another party. 11.2. PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity with respect to this Agreement or the Contemplated Transactions will be issued, if at all, at such time and in such manner as Seller and the Buyer jointly determine. Unless consented to by Buyer in advance or required by Legal Requirements, prior to the Closing Seller shall, and shall cause the Company and its Subsidiaries to, keep this Agreement strictly confidential and may not make any disclosure of this Agreement to any Person. Seller and Buyer will consult with each other concerning the means by which the Company's and its Subsidiaries' employees, customers, and suppliers and others having dealings with the Company and its Subsidiaries will be informed of the Contemplated Transactions, and Buyer will have the right to be present for any such communication. 11.3. CONFIDENTIALITY. Between the date of this Agreement and the Closing Date, Buyer and Seller will maintain in confidence, and will cause the directors, officers, employees, agents, and advisors of Buyer and the Company and its Subsidiaries to maintain in confidence, and not use to the detriment of another party or the Company or any of its Subsidiaries, any written, oral, or other information obtained in confidence from, written information stamped "confidential" when originally furnished by another party or the Company or any of its Subsidiaries in connection with this Agreement or the Contemplated Transactions, unless (a) such information is already known to such party or to others not bound by a duty of confidentiality or such information becomes publicly available through no fault of such party, (b) the use of such information is necessary or appropriate in making any filing or obtaining any consent or approval required for the consummation of the Contemplated Transactions, or (c) the furnishing or use of such information is required by legal proceedings. -58- If the Contemplated Transactions are not consummated, each party will return or destroy as much of such written information as the other party may reasonably request. 11.4. NOTICES. All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt); provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties): Seller: Mr. Martin Hirschorn 420 East 51st Street New York, New York 10022 Facsimile No.: with a copy to: Rand Rosenzweig Smith Radley Gordon & Burstein LLP 605 Third Avenue -- 24th Floor New York, NY 10158 Attn.: David L. Smith, Esq. Facsimile No.: (212) 557-1475 Buyer: IAC Acquisition Corp. Attention: Mr. James A. Read, President Facsimile No.: with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Attention: John P. Mitchell, Esq. Facsimile No.: (212) 269-5420 11.5. JURISDICTION; SERVICE OF PROCESS. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against any of the parties in the courts of the State of New York, County of New York, or, if it has or can acquire jurisdiction, in the United States District Court for the Southern District of New York, and each of the parties -59- consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue laid therein. Process in any action or proceeding referred to in the preceding sentence may be served on any party anywhere in the world. 11.6. FURTHER ASSURANCES. The parties agree (a) to furnish upon request to each other such further information, (b) to execute and deliver to each other such other documents, and (c) to do such other acts and things, all as the other party may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement. 11.7. WAIVER. The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by any party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement. 11.8. ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all prior agreements between the parties with respect to its subject matter, including the Letter of Intent between the predecessor to the Buyer and Seller dated November 3, 1997 and the modification to the Letter of Intent dated December 23, 1997, and constitutes (along with the documents referred to in this Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter. This Agreement may not be amended except by a written agreement executed by the party to be charged with the amendment. -60- 11.9. DISCLOSURE SCHEDULE. (a) The disclosures in the Disclosure Schedule, and those in any Supplement thereto, must relate only to the representations and warranties in the Section of the Agreement to which they expressly relate and not to any other representation or warranty in this Agreement. (b) In the event of any inconsistency between the statements in the body of this Agreement and those in the Disclosure Schedule (other than an exception expressly set forth as such in the Disclosure Schedule with respect to a specifically identified representation or warranty), the statements in the body of this Agreement will control. 11.10. ASSIGNMENT; SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither party may assign any of its rights under this Agreement without the prior consent of the other parties. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will be construed to give any Person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns. 11.11. SEVERABILITY. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. 11.12. SECTION HEADINGS; CONSTRUCTION. The headings of Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to "Section" or "Sections" refer to the corresponding Section or Sections of this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word "including" does not limit the preceding words or terms. -61- 11.13. GOVERNING LAW. This Agreement will be governed by the laws of the State of New York without regard to conflicts of laws principles. 11.14. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above. Buyer: Seller: IAC HOLDINGS CORP. By: /s/ James A. Read /s/ Martin Hirschorn ------------------------ ---------------------------- James A. Read Martin Hirschorn President IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above. Buyer: Seller: IAC HOLDINGS CORP. By: --------------------------- -------------------------------- James A. Read Martin Hirschorn President/Secretary SCHEDULE A SELLING NUMBER SHAREHOLDERS OF SHARES PURCHASE PRICE - ------------ --------- -------------- Martin Hirschorn 1,913,429 $21,047,719 Michael Hirschorn 1,000 $ 11,000 Frederic M. Oran 58,300 $ 661,300 Arnold W. Kanarek 2,500 $ 27,500 Trustees of Barnard College 116,666 $ 1,283,326 Community Fund, Inc. 233,334 $ 2,566,674 ARK International (Christine Svendsen) 2,500 $ 27,500 George J. Sotos 16,325 $ 179,575 --------- ----------- Total 2,344,054 $25,784,594 ========= =========== AMENDMENT TO STOCK PURCHASE AGREEMENT This Amendment to a certain Stock Purchase Agreement made as of January 26, 1998 ("Agreement") is made as of March 19, 1998 ("Amendment"), by IAC HOLDINGS CORP., a Delaware corporation, with offices located at Greenwich, Connecticut ("Buyer") and MARTIN HIRSCHORN, an individual resident in New York, New York ("Hirschhorn" or "Seller"). 1. The Recitals of the Agreement are amended to read: "Seller desires to sell, and Buyer desires to purchase, a total of 1,914,929 of the issued and outstanding shares (the "Shares") of capital stock, $.10 par value of Industrial Acoustics Company, Inc. a New York corporation (the "Company"), for the consideration and on the terms set forth in this Agreement." 2. Paragraph 2.2 of the Agreement is amended to read: "2.2 Purchase Price The purchase price for each of the Shares will be $11.00; therefore, the total purchase price for the Shares is $21,064,219 (the 'Purchase Price')." 3. The Buyer hereby expressly waives the Conditions to Closing set forth in Paragraph 2.5 of the Agreement. 4. Schedule A as attached to the Agreement is deleted and is replaced by a revised Schedule A attached hereto. IN WITNESS WHEREOF, the parties have executed and delivered this Amendment as of the date first written above. Buyer: Seller: IAC HOLDINGS CORP. By: /s/ James A. Read /s/ Martin Hirschorn ---------------------- --------------------------- James A. Read Martin Hirschorn President EX-4 4 STK. PUR. AGREE. - HOLDINGS & COMM. FUNDS, INC. STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT dated as of January 23, 1998 by and between IAC Holdings Corp., a Delaware corporation ("Purchaser"), and Community Funds, Inc., a New York not-for-profit corporation ("Seller"). WHEREAS, Seller is the owner of 233,334 shares (the "Seller Shares") of the outstanding shares of Common Stock, par value $0.10 per share (the "Company Common Stock"), of Industrial Acoustics Company, Inc., a New York corporation (the "Company"); WHEREAS, Seller has agreed to sell the Seller Shares to Purchaser, and Purchaser has agreed to purchase such Seller Shares from Seller, in accordance with the terms of this Agreement; NOW THEREFORE, in consideration of the premises and of the mutual agreements and covenants set forth herein the parties hereto agree as follows: ARTICLE I THE STOCK PURCHASE Section 1.1. Sale of Shares. Subject to the terms and conditions of this Agreement, Seller hereby agrees to sell the Seller Shares to Purchaser, and Purchaser hereby agrees to purchase the Seller Shares, in the manner set forth below, at a price per Share equal to $11.00 (the "Purchase Price"). Section 1.2. Payment and Delivery of Certificates for Seller Shares. The closing for the purchase and sale of the Seller Shares shall occur following the satisfaction of the conditions specified in Section 1.3 and simultaneously with the closing of Purchaser's purchase of 1,913,429 shares of the Company's Common Stock from Martin Hirschorn (the "Hirschorn Shares") which is scheduled to occur at the offices of Rand Rosenzweig Smith Radley Gordon & Burstein LLP, 605 Third Avenue, 24th Floor, New York, NY 10158, at 10:00 A.M. on the later of (i) March 15, 1998, (ii) 15 days following the delivery of consolidated audited financial statements of the Company and its subsidiaries for the -2- year ended December 31, 1997, or (iii) the date that is two business days following the termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") or at such other time and place as Purchaser and Martin Hirschorn may agree. Purchaser will provide Seller with at least two business days notice of the date of closing for the purchase and sale of the Seller Shares. At the closing, (a) Purchaser will make payment to Seller for the aggregate Purchase Price of the Seller Shares by delivery to Seller of a certified or bank cashier's check payable in New York Clearing House funds to the order of Seller, or by wire transfer to an account specified by Seller, and (b) Seller will deliver to Purchaser (i) a certificate or certificates representing the Seller Shares so purchased together with duly executed stock powers with respect to such Seller Shares in favor of Purchaser or its designee in form reasonably satisfactory to Purchaser and (ii) a receipt evidencing payment of requisite transfer taxes, if any. Section 1.3. Conditions to Closing of Share Purchase. The obligation of Purchaser to purchase, and of Seller to sell, the Seller Shares shall be subject to the condition that there shall not have been instituted and be continuing any preliminary or permanent injunction or other order issued by any court or governmental or regulatory authority, domestic or foreign, or any statute, rule, regulation, decree or executive order promulgated or enacted by any government or governmental or regulatory authority, which prohibits the acquisition of Seller Shares pursuant to this Agreement in any respect; and no action or proceeding before any court or governmental or regulatory authority, domestic or foreign, shall have been instituted and be pending by any government or governmental or regulatory authority, domestic or foreign, which seeks to prevent the consummation of the transactions contemplated by this Agreement. Section 1.4. Purchaser's Conditions to Closing of Share Purchase. The obligation of Purchaser to purchase the Shares shall be subject to the further conditions: (a) the representations and warranties of Seller in this Agreement shall be true and correct in all material respects, in each case as if such representations and warranties were made as of such time; and -3- (b) Purchaser shall have acquired all of the Hirschorn Shares. Section 1.5. No Transactions Relating to Seller Shares. Seller hereby covenants and agrees that, except as otherwise provided herein, it will not, and will not agree to, sell, transfer, assign, pledge, hypothecate or otherwise dispose of any Seller Shares and will not, and will not agree to, limit its rights to vote in any manner any of the Seller Shares. ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and warrants to Purchaser as follows: Section 2.1. Power and Authority; Binding Effect. Seller has all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by Seller have been duly and validly authorized by all necessary corporate action and no other proceedings on the part of Seller are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Seller and, assuming its due authorization, execution and delivery by Purchaser, constitutes a legal, valid and binding obligation of Seller. Section 2.2. Required Filings and Consents. The execution and delivery of this Agreement by Seller does not, and the performance of this Agreement by Seller shall not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for the HSR Act and the rules and regulations thereunder and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay the performance by Seller of its obligations under this Agreement. -4- Section 2.3. Title to Seller Shares. Seller has not taken any action that would cause Seller not to have good and marketable title to the Seller Shares free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction or encumbrance of any kind, other than pursuant to this Agreement; Seller has full right, power and authority to sell, transfer and deliver the Seller Shares pursuant to this Agreement and Seller has not taken any action that would cause Purchaser, upon receipt of the Seller Shares and payment of the purchase price therefor as contemplated herein, not to receive good and marketable title to the Seller Shares free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction or encumbrance of any kind. The Seller Shares are all of the securities of the Company owned of record or beneficially by Seller on the date of this Agreement; and Seller has not granted any proxy with respect to the Seller Shares, deposited the Seller Shares into a voting trust or entered into any voting agreement or other arrangement with respect to the Seller Shares. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser hereby represents and warrants as follows: Section 3.1. Corporate Organization. Purchaser is a corporation duly organized and validly existing under the laws of the State of Delaware. Purchaser has all necessary corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement by Purchaser and the consummation by Purchaser of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser and, assuming its due authorization, execution and delivery by Seller, constitutes a legal, valid and binding obligation of Purchaser. Section 3.2. Required Filings and Consents. The execution and delivery of this Agreement by Purchaser do not, and the performance of this Agreement by Purchaser -5- shall not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for applicable requirements, if any, of the HSR Act, and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay consummation of the transactions contemplated hereby, or otherwise prevent Purchaser from performing its obligations under this Agreement. Section 3.3. Investment Interest. The purchase of Shares from Seller pursuant to this Agreement is for the account of Purchaser for investment and not with a view to the sale or distribution thereof within the meaning of the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "Securities Act"); and any sale, transfer or other disposition of Seller Shares purchased pursuant to this Agreement will be made in compliance with all applicable provisions of the Securities Act. ARTICLE IV MISCELLANEOUS Section 4.1. Consents. Each of the parties hereto will use its best efforts to obtain the consents of all third parties and governmental authorities necessary to the consummation of the transactions contemplated by this Agreement. Section 4.2. Further Assurances. Seller and Purchaser will execute and deliver all such further documents and instruments and make all such further action as may be necessary in order to consummate the transactions contemplated hereby. Section 4.3. Confidentiality. Seller shall not disclose the existence of this Agreement or its contents to any third party without Seller's prior written consent. Neither Purchaser nor Seller shall issue any press release or make any public announcement regarding the proposed transaction without the prior approval of the other party. -6- Section 4.4. Specific Performance. The parties hereto acknowledge that damages would be an inadequate remedy for a breach of this Agreement and that the obligations of the parties hereto shall be specifically enforceable. Section 4.5. Entire Agreement. This Agreement constitutes the entire agreement among Seller and Purchaser with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, among them with respect to the subject matter hereof. Section 4.6. Assignment, Successors and No Third-Party Rights. Neither party may assign any of its rights under this Agreement without the prior consent of the other parties. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will be construed to give any person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns. Section 4.7. Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect. Section 4.8. Survival of Representations and Warranties. All representations and warranties contained in this Agreement shall survive the closing of the Share purchase. Section 4.9. Notices. All notices, comments, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a -7- nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties): Buyer: IAC Holdings Corp. Attention: Facsimile No.: with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Attention: John P. Mitchell, Esq. Facsimile No.: (212) 269-5420 Seller: Community Funds, Inc. 2 Park Avenue New York, NY 10016 Attention: Karen Metcalf Facsimile No.: (212) 532-8528 with a copy to: Community Funds, Inc. 2 Park Avenue New York, NY 10016 Attention: Jane Wilton, Esq. Facsimile No.: (212) 532-8528 Section 4.10. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that State. Section 4.11. Headings. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. Section 4.12. Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to confer upon -8- any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. Section 4.13. Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. COMMUNITY FUNDS, INC. By: _________________________ Title: IAC HOLDINGS CORP. By: _________________________ Title: EX-5 5 STK. PUR. AGREE. - HOLDINGS & BARNARD COLLEGE STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT dated as of January 23, 1998 by and between IAC Holdings Corp., a Delaware corporation ("Purchaser"), and Barnard College, a New York not-for-profit corporation chartered by the Board of Regents("Seller"). WHEREAS, Seller is the owner of 116,666 shares (the "Seller Shares") of the outstanding shares of Common Stock, par value $0.10 per share (the "Company Common Stock"), of Industrial Acoustics Company, Inc., a New York corporation (the "Company"); WHEREAS, Seller has agreed to sell the Seller Shares to Purchaser, and Purchaser has agreed to purchase such Seller Shares from Seller, in accordance with the terms of this Agreement; NOW THEREFORE, in consideration of the premises and of the mutual agreements and covenants set forth herein the parties hereto agree as follows: ARTICLE I THE STOCK PURCHASE Section 1.1. Sale of Shares. Subject to the terms and conditions of this Agreement, Seller hereby agrees to sell the Seller Shares to Purchaser, and Purchaser hereby agrees to purchase the Seller Shares, in the manner set forth below, at a price per Share equal to $11.00 (the "Purchase Price"). Section 1.2. Payment and Delivery of Certificates for Seller Shares. The closing for the purchase and sale of the Seller Shares shall occur following the satisfaction of the conditions specified in Section 1.3 and simultaneously with the closing of Purchaser's purchase of 1,913,429 shares of the Company's Common Stock from Martin Hirschorn (the "Hirschorn Shares") which is scheduled to occur at the offices of Rand Rosenzweig Smith Radley Gordon & Burstein LLP, 605 Third Avenue, 24th Floor, New York, NY 10158, at 10:00 A.M. on the later of (i) March 15, 1998, (ii) 15 days following the delivery of consolidated audited financial statements of the Company and its subsidiaries for the -2- year ended December 31, 1997, or (iii) the date that is two business days following the termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") or at such other time and place as Purchaser and Martin Hirschorn may agree. Purchaser will provide Seller with at least two business days notice of the date of closing for the purchase and sale of the Seller Shares. At the closing, (a) Purchaser will make payment to Seller for the aggregate Purchase Price of the Seller Shares by delivery to Seller of a certified or bank cashier's check payable in New York Clearing House funds to the order of Seller, or by wire transfer to an account specified by Seller, and (b) Seller will deliver to Purchaser (i) a certificate or certificates representing the Seller Shares so purchased together with duly executed stock powers with respect to such Seller Shares in favor of Purchaser or its designee in form reasonably satisfactory to Purchaser and (ii) a receipt evidencing payment of requisite transfer taxes, if any. Section 1.3. Conditions to Closing of Share Purchase. The obligation of Purchaser to purchase, and of Seller to sell, the Seller Shares shall be subject to the condition that there shall not have been instituted and be continuing any preliminary or permanent injunction or other order issued by any court or governmental or regulatory authority, domestic or foreign, or any statute, rule, regulation, decree or executive order promulgated or enacted by any government or governmental or regulatory authority, which prohibits the acquisition of Seller Shares pursuant to this Agreement in any respect; and no action or proceeding before any court or governmental or regulatory authority, domestic or foreign, shall have been instituted and be pending by any government or governmental or regulatory authority, domestic or foreign, which seeks to prevent the consummation of the transactions contemplated by this Agreement. Section 1.4. Purchaser's Conditions to Closing of Share Purchase. The obligation of Purchaser to purchase the Shares shall be subject to the further conditions: (a) the representations and warranties of Seller in this Agreement shall be true and correct in all material respects, in each case as if such representations and warranties were made as of such time; and -3- (b) Purchaser shall have acquired all of the Hirschorn Shares. Section 1.5. No Transactions Relating to Seller Shares. Seller hereby covenants and agrees that, except as otherwise provided herein, it will not, and will not agree to, sell, transfer, assign, pledge, hypothecate or otherwise dispose of any Seller Shares and will not, and will not agree to, limit its rights to vote in any manner any of the Seller Shares. ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and warrants to Purchaser as follows: Section 2.1. Power and Authority; Binding Effect. Seller has all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by Seller have been duly and validly authorized by all necessary corporate action and no other proceedings on the part of Seller are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Seller and, assuming its due authorization, execution and delivery by Purchaser, constitutes a legal, valid and binding obligation of Seller. Section 2.2. Required Filings and Consents. The execution and delivery of this Agreement by Seller does not, and the performance of this Agreement by Seller shall not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for the HSR Act and the rules and regulations thereunder and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay the performance by Seller of its obligations under this Agreement. -4- Section 2.3. Title to Seller Shares. Seller has good and marketable title to the Seller Shares free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction or encumbrance of any kind, other than pursuant to this Agreement; Seller has full right, power and authority to sell, transfer and deliver the Seller Shares pursuant to this Agreement and upon delivery of the Seller Shares and payment of the purchase price therefor as contemplated herein, Purchaser will receive good and marketable title to the Seller Shares free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction or encumbrance of any kind. The Seller Shares are all of the securities of the Company owned of record or beneficially by Seller on the date of this Agreement; and Seller has not granted any proxy with respect to the Seller Shares, deposited the Seller Shares into a voting trust or entered into any voting agreement or other arrangement with respect to the Seller Shares. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser hereby represents and warrants as follows: Section 3.1. Corporate Organization. Purchaser is a corporation duly organized and validly existing under the laws of the State of Delaware. Purchaser has all necessary corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement by Purchaser and the consummation by Purchaser of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser and, assuming its due authorization, execution and delivery by Seller, constitutes a legal, valid and binding obligation of Purchaser. Section 3.2. Required Filings and Consents. The execution and delivery of this Agreement by Purchaser do not, and the performance of this Agreement by Purchaser shall not, require any consent, approval, authorization or permit of, or filing with or notification to, any -5- governmental or regulatory authority, domestic or foreign, except (i) for applicable requirements, if any, of the HSR Act, and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay consummation of the transactions contemplated hereby, or otherwise prevent Purchaser from performing its obligations under this Agreement. Section 3.3. Investment Interest. The purchase of Shares from Seller pursuant to this Agreement is for the account of Purchaser for investment and not with a view to the sale or distribution thereof within the meaning of the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "Securities Act"); and any sale, transfer or other disposition of Seller Shares purchased pursuant to this Agreement will be made in compliance with all applicable provisions of the Securities Act. ARTICLE IV MISCELLANEOUS Section 4.1. Consents. Each of the parties hereto will use its best efforts to obtain the consents of all third parties and governmental authorities necessary to the consummation of the transactions contemplated by this Agreement. Section 4.2. Further Assurances. Seller and Purchaser will execute and deliver all such further documents and instruments and make all such further action as may be necessary in order to consummate the transactions contemplated hereby. Section 4.3. Confidentiality. Seller shall not disclose the existence of this Agreement or its contents to any third party without Seller's prior written consent. Neither Purchaser nor Seller shall issue any press release or make any public announcement regarding the proposed transaction without the prior approval of the other party. Section 4.4. Specific Performance. The parties hereto acknowledge that damages would be an -6- inadequate remedy for a breach of this Agreement and that the obligations of the parties hereto shall be specifically enforceable. Section 4.5. Entire Agreement. This Agreement constitutes the entire agreement among Seller and Purchaser with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, among them with respect to the subject matter hereof. Section 4.6. Assignment, Successors and No Third-Party Rights. Neither party may assign any of its rights under this Agreement without the prior consent of the other parties. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will be construed to give any person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns. Section 4.7. Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect. Section 4.8. Survival of Representations and Warranties. All representations and warranties contained in this Agreement shall survive the closing of the Share purchase. Section 4.9. Notices. All notices, comments, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and -7- telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties): Buyer: IAC Holdings Corp. Attention: Facsimile No.: with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Attention: John P. Mitchell, Esq. Facsimile No.: (212) 269-5420 Seller: Barnard College 3009 Broadway New York, NY 10027 Attention: Barry Kaufman Vice President for Finance and Administration Facsimile No.: (212) 854-7550 with a copy to: Barnard College 3009 Broadway New York, NY 10027 Attention: Melinda W. Davis Facsimile No.: (212) 854-7550 Section 4.10. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that State. Section 4.11. Headings. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. Section 4.12. Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. -8- Section 4.13. Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. BARNARD COLLEGE By: _________________________ Title: IAC HOLDINGS CORP. By: _________________________ Title: EX-6 6 STK. PUR. AGREE. - HOLDINGS & MICHAEL HIRSCHORN STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT dated as of January 23, 1998 by and between IAC Holdings Corp., a Delaware corporation ("Purchaser"), and Michael Hirschorn. WHEREAS, Seller is the owner of 1,000 shares (the "Seller Shares") of the outstanding shares of Common Stock, par value $0.10 per share (the "Company Common Stock"), of Industrial Acoustics Company, Inc., a New York corporation (the "Company"); WHEREAS, Seller has agreed to sell the Seller Shares to Purchaser, and Purchaser has agreed to purchase such Seller Shares from Seller, in accordance with the terms of this Agreement; NOW THEREFORE, in consideration of the premises and of the mutual agreements and covenants set forth herein the parties hereto agree as follows: ARTICLE I THE STOCK PURCHASE Section 1.1. Sale of Shares. Subject to the terms and conditions of this Agreement, Seller hereby agrees to sell the Seller Shares to Purchaser, and Purchaser hereby agrees to purchase the Seller Shares, in the manner set forth below, at a price per Share equal to $11.00 (the "Purchase Price"). Section 1.2. Payment and Delivery of Certificates for Seller Shares. The closing for the purchase and sale of the Seller Shares shall occur following the satisfaction of the conditions specified in Section 1.3 and simultaneously with the closing of Purchaser's purchase of 1,913,429 shares of the Company's Common Stock from Martin Hirschorn (the "Hirschorn Shares") which is scheduled to occur at the offices of Rand Rosenzweig Smith Radley Gordon & Burstein LLP, 605 Third Avenue, 24th Floor, New York, NY 10158, at 10:00 A.M. on the later of (i) March 15, 1998, (ii) 15 days following the delivery of consolidated audited financial statements of the Company and its subsidiaries for the year ended December 31, 1997, or (iii) the date that is two business days following the termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") or at such other time -2- and place as Purchaser and Martin Hirschorn may agree. Purchaser will provide Seller with at least two business days notice of the date of closing for the purchase and sale of the Seller Shares. At the closing, (a) Purchaser will make payment to Seller for the aggregate Purchase Price of the Seller Shares by delivery to Seller of a certified or bank cashier's check payable in New York Clearing House funds to the order of Seller, or by wire transfer to an account specified by Seller, and (b) Seller will deliver to Purchaser (i) a certificate or certificates representing the Seller Shares so purchased together with duly executed stock powers with respect to such Seller Shares in favor of Purchaser or its designee in form reasonably satisfactory to Purchaser and (ii) a receipt evidencing payment of requisite transfer taxes, if any. Section 1.3. Conditions to Closing of Share Purchase. The obligation of Purchaser to purchase, and of Seller to sell, the Seller Shares shall be subject to the condition that there shall not have been instituted and be continuing any preliminary or permanent injunction or other order issued by any court or governmental or regulatory authority, domestic or foreign, or any statute, rule, regulation, decree or executive order promulgated or enacted by any government or governmental or regulatory authority, which prohibits the acquisition of Seller Shares pursuant to this Agreement in any respect; and no action or proceeding before any court or governmental or regulatory authority, domestic or foreign, shall have been instituted and be pending by any government or governmental or regulatory authority, domestic or foreign, which seeks to prevent the consummation of the transactions contemplated by this Agreement. Section 1.4. Purchaser's Conditions to Closing of Share Purchase. The obligation of Purchaser to purchase the Shares shall be subject to the further conditions: (a) the representations and warranties of Seller in this Agreement shall be true and correct in all material respects, in each case as if such representations and warranties were made as of such time; and (b) Purchaser shall have acquired all of the Hirschorn Shares. Section 1.5. No Transactions Relating to Seller Shares. Seller hereby covenants and agrees that, except as otherwise provided herein, it will not, and will not agree to, sell, transfer, assign, pledge, hypothecate or otherwise dis- -3- pose of any Seller Shares and will not, and will not agree to, limit its rights to vote in any manner any of the Seller Shares. ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and warrants to Purchaser as follows: Section 2.1. Power and Authority; Binding Effect. Seller has all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by Seller have been duly and validly authorized by all necessary corporate action and no other proceedings on the part of Seller are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Seller and, assuming its due authorization, execution and delivery by Purchaser, constitutes a legal, valid and binding obligation of Seller. Section 2.2. Required Filings and Consents. The execution and delivery of this Agreement by Seller does not, and the performance of this Agreement by Seller shall not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for the HSR Act and the rules and regulations thereunder and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay the performance by Seller of its obligations under this Agreement. Section 2.3. Title to Seller Shares. Seller has good and marketable title to the Seller Shares free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction or encumbrance of any kind, other than pursuant to this Agreement; Seller has full right, power and authority to sell, transfer and deliver the Seller Shares pursuant to this Agreement and upon delivery of the Seller Shares and payment of the purchase price therefor as contemplated herein, Purchaser will receive good and marketable -4- title to the Seller Shares free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction or encumbrance of any kind. The Seller Shares are all of the securities of the Company owned of record or beneficially by Seller on the date of this Agreement; and Seller has not granted any proxy with respect to the Seller Shares, deposited the Seller Shares into a voting trust or entered into any voting agreement or other arrangement with respect to the Seller Shares. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser hereby represents and warrants as follows: Section 3.1. Corporate Organization. Purchaser is a corporation duly organized and validly existing under the laws of the State of Delaware. Purchaser has all necessary corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement by Purchaser and the consummation by Purchaser of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser and, assuming its due authorization, execution and delivery by Seller, constitutes a legal, valid and binding obligation of Purchaser. Section 3.2. Required Filings and Consents. The execution and delivery of this Agreement by Purchaser do not, and the performance of this Agreement by Purchaser shall not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for applicable requirements, if any, of the HSR Act, and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay consummation of the transactions contemplated hereby, or otherwise prevent Purchaser from performing its obligations under this Agreement. Section 3.3. Investment Interest. The purchase of Shares from Seller pursuant to this Agreement is for the account of Purchaser for investment and not with a view to the sale or distribution thereof within the meaning of the Securi- -5- ties Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "Securities Act"); and any sale, transfer or other disposition of Seller Shares purchased pursuant to this Agreement will be made in compliance with all applicable provisions of the Securities Act. ARTICLE IV MISCELLANEOUS Section 4.1. Consents. Each of the parties hereto will use its best efforts to obtain the consents of all third parties and governmental authorities necessary to the consummation of the transactions contemplated by this Agreement. Section 4.2. Further Assurances. Seller and Purchaser will execute and deliver all such further documents and instruments and make all such further action as may be necessary in order to consummate the transactions contemplated hereby. Section 4.3. Confidentiality. Seller shall not disclose the existence of this Agreement or its contents to any third party without Seller's prior written consent. Neither Purchaser nor Seller shall issue any press release or make any public announcement regarding the proposed transaction without the prior approval of the other party. Section 4.4. Specific Performance. The parties hereto acknowledge that damages would be an inadequate remedy for a breach of this Agreement and that the obligations of the parties hereto shall be specifically enforceable. Section 4.5. Entire Agreement. This Agreement constitutes the entire agreement among Seller and Purchaser with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, among them with respect to the subject matter hereof. Section 4.6. Assignment, Successors and No Third-Party Rights. Neither party may assign any of its rights under this Agreement without the prior consent of the other parties. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will be con- -6- strued to give any person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns. Section 4.7. Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect. Section 4.8. Survival of Representations and Warranties. All representations and warranties contained in this Agreement shall survive the closing of the Share purchase. Section 4.9. Notices. All notices, comments, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties): Buyer: IAC Holdings Corp. Attention: Facsimile No.: with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Attention: John P. Mitchell, Esq. Facsimile No.: (212) 269-5420 Seller: Michael Hirschorn 121 West 17th St., Floor 8 New York, NY 10011 -7- Section 4.10. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that State. Section 4.11. Headings. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. Section 4.12. Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. Section 4.13. Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. Michael Hirschorn By: _________________________ Title: IAC HOLDINGS CORP. By: _________________________ Title: EX-7 7 STK. PUR. AGREE. - HOLDINGS & FREDERIC M. ORAN STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT dated as of January 23, 1998 by and between IAC Holdings Corp., a Delaware corporation ("Purchaser"), and Frederic M. Oran. WHEREAS, Seller is the owner of 58,300 shares (the "Seller Shares") of the outstanding shares of Common Stock, par value $0.10 per share (the "Company Common Stock"), of Industrial Acoustics Company, Inc., a New York corporation (the "Company"); WHEREAS, Seller has agreed to sell the Seller Shares to Purchaser, and Purchaser has agreed to purchase such Seller Shares from Seller, in accordance with the terms of this Agreement; NOW THEREFORE, in consideration of the premises and of the mutual agreements and covenants set forth herein the parties hereto agree as follows: ARTICLE I THE STOCK PURCHASE Section 1.1. Sale of Shares. Subject to the terms and conditions of this Agreement, Seller hereby agrees to sell the Seller Shares to Purchaser, and Purchaser hereby agrees to purchase the Seller Shares, in the manner set forth below, at a price per Share equal to $11.00 (the "Purchase Price"). Section 1.2. Payment and Delivery of Certificates for Seller Shares. The closing for the purchase and sale of the Seller Shares shall occur following the satisfaction of the conditions specified in Section 1.3 and simultaneously with the closing of Purchaser's purchase of 1,913,429 shares of the Company's Common Stock from Martin Hirschorn (the "Hirschorn Shares") which is scheduled to occur at the offices of Rand Rosenzweig Smith Radley Gordon & Burstein LLP, 605 Third Avenue, 24th Floor, New York, NY 10158, at 10:00 A.M. on the later of (i) March 15, 1998, (ii) 15 days following the delivery of consolidated audited financial statements of the Company and its subsidiaries for the year ended December 31, 1997, or (iii) the date that is two business days following the termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") or at such other time -2- and place as Purchaser and Martin Hirschorn may agree. Purchaser will provide Seller with at least two business days notice of the date of closing for the purchase and sale of the Seller Shares. At the closing, (a) Purchaser will make payment to Seller for the aggregate Purchase Price of the Seller Shares by delivery to Seller of a certified or bank cashier's check payable in New York Clearing House funds to the order of Seller, or by wire transfer to an account specified by Seller, and (b) Seller will deliver to Purchaser (i) a certificate or certificates representing the Seller Shares so purchased together with duly executed stock powers with respect to such Seller Shares in favor of Purchaser or its designee in form reasonably satisfactory to Purchaser and (ii) a receipt evidencing payment of requisite transfer taxes, if any. Section 1.3. Conditions to Closing of Share Purchase. The obligation of Purchaser to purchase, and of Seller to sell, the Seller Shares shall be subject to the condition that there shall not have been instituted and be continuing any preliminary or permanent injunction or other order issued by any court or governmental or regulatory authority, domestic or foreign, or any statute, rule, regulation, decree or executive order promulgated or enacted by any government or governmental or regulatory authority, which prohibits the acquisition of Seller Shares pursuant to this Agreement in any respect; and no action or proceeding before any court or governmental or regulatory authority, domestic or foreign, shall have been instituted and be pending by any government or governmental or regulatory authority, domestic or foreign, which seeks to prevent the consummation of the transactions contemplated by this Agreement. Section 1.4. Purchaser's Conditions to Closing of Share Purchase. The obligation of Purchaser to purchase the Shares shall be subject to the further conditions: (a) the representations and warranties of Seller in this Agreement shall be true and correct in all material respects, in each case as if such representations and warranties were made as of such time; and (b) Purchaser shall have acquired all of the Hirschorn Shares. Section 1.5. No Transactions Relating to Seller Shares. Seller hereby covenants and agrees that, except as otherwise provided herein, it will not, and will not agree to, sell, transfer, assign, pledge, hypothecate or otherwise dis- -3- pose of any Seller Shares and will not, and will not agree to, limit its rights to vote in any manner any of the Seller Shares. ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and warrants to Purchaser as follows: Section 2.1. Power and Authority; Binding Effect. Seller has all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by Seller have been duly and validly authorized by all necessary corporate action and no other proceedings on the part of Seller are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Seller and, assuming its due authorization, execution and delivery by Purchaser, constitutes a legal, valid and binding obligation of Seller. Section 2.2. Required Filings and Consents. The execution and delivery of this Agreement by Seller does not, and the performance of this Agreement by Seller shall not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for the HSR Act and the rules and regulations thereunder and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay the performance by Seller of its obligations under this Agreement. Section 2.3. Title to Seller Shares. Seller has good and marketable title to the Seller Shares free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction or encumbrance of any kind, other than pursuant to this Agreement; Seller has full right, power and authority to sell, transfer and deliver the Seller Shares pursuant to this Agreement and upon delivery of the Seller Shares and payment of the purchase price therefor as contemplated herein, Purchaser will receive good and marketable -4- title to the Seller Shares free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction or encumbrance of any kind. The Seller Shares are all of the securities of the Company owned of record or beneficially by Seller on the date of this Agreement; and Seller has not granted any proxy with respect to the Seller Shares, deposited the Seller Shares into a voting trust or entered into any voting agreement or other arrangement with respect to the Seller Shares. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser hereby represents and warrants as follows: Section 3.1. Corporate Organization. Purchaser is a corporation duly organized and validly existing under the laws of the State of Delaware. Purchaser has all necessary corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement by Purchaser and the consummation by Purchaser of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser and, assuming its due authorization, execution and delivery by Seller, constitutes a legal, valid and binding obligation of Purchaser. Section 3.2. Required Filings and Consents. The execution and delivery of this Agreement by Purchaser do not, and the performance of this Agreement by Purchaser shall not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for applicable requirements, if any, of the HSR Act, and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay consummation of the transactions contemplated hereby, or otherwise prevent Purchaser from performing its obligations under this Agreement. Section 3.3. Investment Interest. The purchase of Shares from Seller pursuant to this Agreement is for the account of Purchaser for investment and not with a view to the sale or distribution thereof within the meaning of the Securi- -5- ties Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "Securities Act"); and any sale, transfer or other disposition of Seller Shares purchased pursuant to this Agreement will be made in compliance with all applicable provisions of the Securities Act. ARTICLE IV MISCELLANEOUS Section 4.1. Consents. Each of the parties hereto will use its best efforts to obtain the consents of all third parties and governmental authorities necessary to the consummation of the transactions contemplated by this Agreement. Section 4.2. Further Assurances. Seller and Purchaser will execute and deliver all such further documents and instruments and make all such further action as may be necessary in order to consummate the transactions contemplated hereby. Section 4.3. Confidentiality. Seller shall not disclose the existence of this Agreement or its contents to any third party without Seller's prior written consent. Neither Purchaser nor Seller shall issue any press release or make any public announcement regarding the proposed transaction without the prior approval of the other party. Section 4.4. Specific Performance. The parties hereto acknowledge that damages would be an inadequate remedy for a breach of this Agreement and that the obligations of the parties hereto shall be specifically enforceable. Section 4.5. Entire Agreement. This Agreement constitutes the entire agreement among Seller and Purchaser with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, among them with respect to the subject matter hereof. Section 4.6. Assignment, Successors and No Third-Party Rights. Neither party may assign any of its rights under this Agreement without the prior consent of the other parties. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will be con- -6- strued to give any person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns. Section 4.7. Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect. Section 4.8. Survival of Representations and Warranties. All representations and warranties contained in this Agreement shall survive the closing of the Share purchase. Section 4.9. Notices. All notices, comments, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties): Buyer: IAC Holdings Corp. Attention: Facsimile No.: with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Attention: John P. Mitchell, Esq. Facsimile No.: (212) 269-5420 Seller: Frederic M. Oran 14 Oak Lane Old Brookville, NY 11545 -7- Section 4.10. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that State. Section 4.11. Headings. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. Section 4.12. Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. Section 4.13. Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. Frederic M. Oran By: _________________________ Title: IAC HOLDINGS CORP. By: _________________________ Title: EX-8 8 STK. PUR. AGREE. - HOLDINGS & ARNOLD W. KANAREK STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT dated as of January 23, 1998 by and between IAC Holdings Corp., a Delaware corporation ("Purchaser"), and Arnold W. Kanarek. WHEREAS, Seller is the owner of 2,500 shares (the "Seller Shares") of the outstanding shares of Common Stock, par value $0.10 per share (the "Company Common Stock"), of Industrial Acoustics Company, Inc., a New York corporation (the "Company"); WHEREAS, Seller has agreed to sell the Seller Shares to Purchaser, and Purchaser has agreed to purchase such Seller Shares from Seller, in accordance with the terms of this Agreement; NOW THEREFORE, in consideration of the premises and of the mutual agreements and covenants set forth herein the parties hereto agree as follows: ARTICLE I THE STOCK PURCHASE Section 1.1. Sale of Shares. Subject to the terms and conditions of this Agreement, Seller hereby agrees to sell the Seller Shares to Purchaser, and Purchaser hereby agrees to purchase the Seller Shares, in the manner set forth below, at a price per Share equal to $11.00 (the "Purchase Price"). Section 1.2. Payment and Delivery of Certificates for Seller Shares. The closing for the purchase and sale of the Seller Shares shall occur following the satisfaction of the conditions specified in Section 1.3 and simultaneously with the closing of Purchaser's purchase of 1,913,429 shares of the Company's Common Stock from Martin Hirschorn (the "Hirschorn Shares") which is scheduled to occur at the offices of Rand Rosenzweig Smith Radley Gordon & Burstein LLP, 605 Third Avenue, 24th Floor, New York, NY 10158, at 10:00 A.M. on the later of (i) March 15, 1998, (ii) 15 days following the delivery of consolidated audited financial statements of the Company and its subsidiaries for the year ended December 31, 1997, or (iii) the date that is two business days following the termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") or at such other time -2- and place as Purchaser and Martin Hirschorn may agree. Purchaser will provide Seller with at least two business days notice of the date of closing for the purchase and sale of the Seller Shares. At the closing, (a) Purchaser will make payment to Seller for the aggregate Purchase Price of the Seller Shares by delivery to Seller of a certified or bank cashier's check payable in New York Clearing House funds to the order of Seller, or by wire transfer to an account specified by Seller, and (b) Seller will deliver to Purchaser (i) a certificate or certificates representing the Seller Shares so purchased together with duly executed stock powers with respect to such Seller Shares in favor of Purchaser or its designee in form reasonably satisfactory to Purchaser and (ii) a receipt evidencing payment of requisite transfer taxes, if any. Section 1.3. Conditions to Closing of Share Purchase. The obligation of Purchaser to purchase, and of Seller to sell, the Seller Shares shall be subject to the condition that there shall not have been instituted and be continuing any preliminary or permanent injunction or other order issued by any court or governmental or regulatory authority, domestic or foreign, or any statute, rule, regulation, decree or executive order promulgated or enacted by any government or governmental or regulatory authority, which prohibits the acquisition of Seller Shares pursuant to this Agreement in any respect; and no action or proceeding before any court or governmental or regulatory authority, domestic or foreign, shall have been instituted and be pending by any government or governmental or regulatory authority, domestic or foreign, which seeks to prevent the consummation of the transactions contemplated by this Agreement. Section 1.4. Purchaser's Conditions to Closing of Share Purchase. The obligation of Purchaser to purchase the Shares shall be subject to the further conditions: (a) the representations and warranties of Seller in this Agreement shall be true and correct in all material respects, in each case as if such representations and warranties were made as of such time; and (b) Purchaser shall have acquired all of the Hirschorn Shares. Section 1.5. No Transactions Relating to Seller Shares. Seller hereby covenants and agrees that, except as otherwise provided herein, it will not, and will not agree to, sell, transfer, assign, pledge, hypothecate or otherwise dis- -3- pose of any Seller Shares and will not, and will not agree to, limit its rights to vote in any manner any of the Seller Shares. ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and warrants to Purchaser as follows: Section 2.1. Power and Authority; Binding Effect. Seller has all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by Seller have been duly and validly authorized by all necessary corporate action and no other proceedings on the part of Seller are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Seller and, assuming its due authorization, execution and delivery by Purchaser, constitutes a legal, valid and binding obligation of Seller. Section 2.2. Required Filings and Consents. The execution and delivery of this Agreement by Seller does not, and the performance of this Agreement by Seller shall not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for the HSR Act and the rules and regulations thereunder and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay the performance by Seller of its obligations under this Agreement. Section 2.3. Title to Seller Shares. Seller has good and marketable title to the Seller Shares free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction or encumbrance of any kind, other than pursuant to this Agreement; Seller has full right, power and authority to sell, transfer and deliver the Seller Shares pursuant to this Agreement and upon delivery of the Seller Shares and payment of the purchase price therefor as contemplated herein, Purchaser will receive good and marketable -4- title to the Seller Shares free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction or encumbrance of any kind. The Seller Shares are all of the securities of the Company owned of record or beneficially by Seller on the date of this Agreement; and Seller has not granted any proxy with respect to the Seller Shares, deposited the Seller Shares into a voting trust or entered into any voting agreement or other arrangement with respect to the Seller Shares. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser hereby represents and warrants as follows: Section 3.1. Corporate Organization. Purchaser is a corporation duly organized and validly existing under the laws of the State of Delaware. Purchaser has all necessary corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement by Purchaser and the consummation by Purchaser of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser and, assuming its due authorization, execution and delivery by Seller, constitutes a legal, valid and binding obligation of Purchaser. Section 3.2. Required Filings and Consents. The execution and delivery of this Agreement by Purchaser do not, and the performance of this Agreement by Purchaser shall not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for applicable requirements, if any, of the HSR Act, and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay consummation of the transactions contemplated hereby, or otherwise prevent Purchaser from performing its obligations under this Agreement. Section 3.3. Investment Interest. The purchase of Shares from Seller pursuant to this Agreement is for the account of Purchaser for investment and not with a view to the sale or distribution thereof within the meaning of the Securi- -5- ties Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "Securities Act"); and any sale, transfer or other disposition of Seller Shares purchased pursuant to this Agreement will be made in compliance with all applicable provisions of the Securities Act. ARTICLE IV MISCELLANEOUS Section 4.1. Consents. Each of the parties hereto will use its best efforts to obtain the consents of all third parties and governmental authorities necessary to the consummation of the transactions contemplated by this Agreement. Section 4.2. Further Assurances. Seller and Purchaser will execute and deliver all such further documents and instruments and make all such further action as may be necessary in order to consummate the transactions contemplated hereby. Section 4.3. Confidentiality. Seller shall not disclose the existence of this Agreement or its contents to any third party without Seller's prior written consent. Neither Purchaser nor Seller shall issue any press release or make any public announcement regarding the proposed transaction without the prior approval of the other party. Section 4.4. Specific Performance. The parties hereto acknowledge that damages would be an inadequate remedy for a breach of this Agreement and that the obligations of the parties hereto shall be specifically enforceable. Section 4.5. Entire Agreement. This Agreement constitutes the entire agreement among Seller and Purchaser with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, among them with respect to the subject matter hereof. Section 4.6. Assignment, Successors and No Third-Party Rights. Neither party may assign any of its rights under this Agreement without the prior consent of the other parties. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will be con- -6- strued to give any person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns. Section 4.7. Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect. Section 4.8. Survival of Representations and Warranties. All representations and warranties contained in this Agreement shall survive the closing of the Share purchase. Section 4.9. Notices. All notices, comments, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties): Buyer: IAC Holdings Corp. Attention: Facsimile No.: with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Attention: John P. Mitchell, Esq. Facsimile No.: (212) 269-5420 Seller: Arnold W. Kanarek 719 Othello Avenue Franklin Square, NY 11010 -7- Section 4.10. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that State. Section 4.11. Headings. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. Section 4.12. Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. Section 4.13. Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. Arnold W. Kanarek By: _________________________ Title: IAC HOLDINGS CORP. By: _________________________ Title: EX-9 9 STK. PUR. AGREE. - HOLDINGS & ARK INTERNATIONAL STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT dated as of January 23, 1998 by and between IAC Holdings Corp., a Delaware corporation ("Purchaser"), and ARK International. WHEREAS, Seller is the owner of 2,500 shares (the "Seller Shares") of the outstanding shares of Common Stock, par value $0.10 per share (the "Company Common Stock"), of Industrial Acoustics Company, Inc., a New York corporation (the "Company"); WHEREAS, Seller has agreed to sell the Seller Shares to Purchaser, and Purchaser has agreed to purchase such Seller Shares from Seller, in accordance with the terms of this Agreement; NOW THEREFORE, in consideration of the premises and of the mutual agreements and covenants set forth herein the parties hereto agree as follows: ARTICLE I THE STOCK PURCHASE Section 1.1. Sale of Shares. Subject to the terms and conditions of this Agreement, Seller hereby agrees to sell the Seller Shares to Purchaser, and Purchaser hereby agrees to purchase the Seller Shares, in the manner set forth below, at a price per Share equal to $11.00 (the "Purchase Price"). Section 1.2. Payment and Delivery of Certificates for Seller Shares. The closing for the purchase and sale of the Seller Shares shall occur following the satisfaction of the conditions specified in Section 1.3 and simultaneously with the closing of Purchaser's purchase of 1,913,429 shares of the Company's Common Stock from Martin Hirschorn (the "Hirschorn Shares") which is scheduled to occur at the offices of Rand Rosenzweig Smith Radley Gordon & Burstein LLP, 605 Third Avenue, 24th Floor, New York, NY 10158, at 10:00 A.M. on the later of (i) March 15, 1998, (ii) 15 days following the delivery of consolidated audited financial statements of the Company and its subsidiaries for the year ended December 31, 1997, or (iii) the date that is two business days following the termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") or at such other time -2- and place as Purchaser and Martin Hirschorn may agree. Purchaser will provide Seller with at least two business days notice of the date of closing for the purchase and sale of the Seller Shares. At the closing, (a) Purchaser will make payment to Seller for the aggregate Purchase Price of the Seller Shares by delivery to Seller of a certified or bank cashier's check payable in New York Clearing House funds to the order of Seller, or by wire transfer to an account specified by Seller, and (b) Seller will deliver to Purchaser (i) a certificate or certificates representing the Seller Shares so purchased together with duly executed stock powers with respect to such Seller Shares in favor of Purchaser or its designee in form reasonably satisfactory to Purchaser and (ii) a receipt evidencing payment of requisite transfer taxes, if any. Section 1.3. Conditions to Closing of Share Purchase. The obligation of Purchaser to purchase, and of Seller to sell, the Seller Shares shall be subject to the condition that there shall not have been instituted and be continuing any preliminary or permanent injunction or other order issued by any court or governmental or regulatory authority, domestic or foreign, or any statute, rule, regulation, decree or executive order promulgated or enacted by any government or governmental or regulatory authority, which prohibits the acquisition of Seller Shares pursuant to this Agreement in any respect; and no action or proceeding before any court or governmental or regulatory authority, domestic or foreign, shall have been instituted and be pending by any government or governmental or regulatory authority, domestic or foreign, which seeks to prevent the consummation of the transactions contemplated by this Agreement. Section 1.4. Purchaser's Conditions to Closing of Share Purchase. The obligation of Purchaser to purchase the Shares shall be subject to the further conditions: (a) the representations and warranties of Seller in this Agreement shall be true and correct in all material respects, in each case as if such representations and warranties were made as of such time; and (b) Purchaser shall have acquired all of the Hirschorn Shares. Section 1.5. No Transactions Relating to Seller Shares. Seller hereby covenants and agrees that, except as otherwise provided herein, it will not, and will not agree to, sell, transfer, assign, pledge, hypothecate or otherwise dis- -3- pose of any Seller Shares and will not, and will not agree to, limit its rights to vote in any manner any of the Seller Shares. ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and warrants to Purchaser as follows: Section 2.1. Power and Authority; Binding Effect. Seller has all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by Seller have been duly and validly authorized by all necessary corporate action and no other proceedings on the part of Seller are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Seller and, assuming its due authorization, execution and delivery by Purchaser, constitutes a legal, valid and binding obligation of Seller. Section 2.2. Required Filings and Consents. The execution and delivery of this Agreement by Seller does not, and the performance of this Agreement by Seller shall not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for the HSR Act and the rules and regulations thereunder and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay the performance by Seller of its obligations under this Agreement. Section 2.3. Title to Seller Shares. Seller has good and marketable title to the Seller Shares free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction or encumbrance of any kind, other than pursuant to this Agreement; Seller has full right, power and authority to sell, transfer and deliver the Seller Shares pursuant to this Agreement and upon delivery of the Seller Shares and payment of the purchase price therefor as contemplated herein, Purchaser will receive good and marketable -4- title to the Seller Shares free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction or encumbrance of any kind. The Seller Shares are all of the securities of the Company owned of record or beneficially by Seller on the date of this Agreement; and Seller has not granted any proxy with respect to the Seller Shares, deposited the Seller Shares into a voting trust or entered into any voting agreement or other arrangement with respect to the Seller Shares. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser hereby represents and warrants as follows: Section 3.1. Corporate Organization. Purchaser is a corporation duly organized and validly existing under the laws of the State of Delaware. Purchaser has all necessary corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement by Purchaser and the consummation by Purchaser of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser and, assuming its due authorization, execution and delivery by Seller, constitutes a legal, valid and binding obligation of Purchaser. Section 3.2. Required Filings and Consents. The execution and delivery of this Agreement by Purchaser do not, and the performance of this Agreement by Purchaser shall not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for applicable requirements, if any, of the HSR Act, and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay consummation of the transactions contemplated hereby, or otherwise prevent Purchaser from performing its obligations under this Agreement. Section 3.3. Investment Interest. The purchase of Shares from Seller pursuant to this Agreement is for the account of Purchaser for investment and not with a view to the sale or distribution thereof within the meaning of the Securi- -5- ties Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "Securities Act"); and any sale, transfer or other disposition of Seller Shares purchased pursuant to this Agreement will be made in compliance with all applicable provisions of the Securities Act. ARTICLE IV MISCELLANEOUS Section 4.1. Consents. Each of the parties hereto will use its best efforts to obtain the consents of all third parties and governmental authorities necessary to the consummation of the transactions contemplated by this Agreement. Section 4.2. Further Assurances. Seller and Purchaser will execute and deliver all such further documents and instruments and make all such further action as may be necessary in order to consummate the transactions contemplated hereby. Section 4.3. Confidentiality. Seller shall not disclose the existence of this Agreement or its contents to any third party without Seller's prior written consent. Neither Purchaser nor Seller shall issue any press release or make any public announcement regarding the proposed transaction without the prior approval of the other party. Section 4.4. Specific Performance. The parties hereto acknowledge that damages would be an inadequate remedy for a breach of this Agreement and that the obligations of the parties hereto shall be specifically enforceable. Section 4.5. Entire Agreement. This Agreement constitutes the entire agreement among Seller and Purchaser with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, among them with respect to the subject matter hereof. Section 4.6. Assignment, Successors and No Third-Party Rights. Neither party may assign any of its rights under this Agreement without the prior consent of the other parties. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will be con- -6- strued to give any person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns. Section 4.7. Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect. Section 4.8. Survival of Representations and Warranties. All representations and warranties contained in this Agreement shall survive the closing of the Share purchase. Section 4.9. Notices. All notices, comments, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties): Buyer: IAC Holdings Corp. Attention: Facsimile No.: with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Attention: John P. Mitchell, Esq. Facsimile No.: (212) 269-5420 Seller: ARK International Emerald Bay Key Colony III, Apt. 1200 151 Crandon Blvd. Key Biscayne, FL 33149 -7- Section 4.10. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that State. Section 4.11. Headings. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. Section 4.12. Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. Section 4.13. Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. ARK International By: _________________________ Title: IAC HOLDINGS CORP. By: _________________________ Title: EX-10 10 STK. PUR. AGREE. - HOLDINGS & GEORGE J. SOTOS STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT dated as of January 23, 1998 by and between IAC Holdings Corp., a Delaware corporation ("Purchaser"), and George J. Sotos. WHEREAS, Seller is the owner of 16,325 shares (the "Seller Shares") of the outstanding shares of Common Stock, par value $0.10 per share (the "Company Common Stock"), of Industrial Acoustics Company, Inc., a New York corporation (the "Company"); WHEREAS, Seller has agreed to sell the Seller Shares to Purchaser, and Purchaser has agreed to purchase such Seller Shares from Seller, in accordance with the terms of this Agreement; NOW THEREFORE, in consideration of the premises and of the mutual agreements and covenants set forth herein the parties hereto agree as follows: ARTICLE I THE STOCK PURCHASE Section 1.1. Sale of Shares. Subject to the terms and conditions of this Agreement, Seller hereby agrees to sell the Seller Shares to Purchaser, and Purchaser hereby agrees to purchase the Seller Shares, in the manner set forth below, at a price per Share equal to $11.00 (the "Purchase Price"). Section 1.2. Payment and Delivery of Certificates for Seller Shares. The closing for the purchase and sale of the Seller Shares shall occur following the satisfaction of the conditions specified in Section 1.3 and simultaneously with the closing of Purchaser's purchase of 1,913,429 shares of the Company's Common Stock from Martin Hirschorn (the "Hirschorn Shares") which is scheduled to occur at the offices of Rand Rosenzweig Smith Radley Gordon & Burstein LLP, 605 Third Avenue, 24th Floor, New York, NY 10158, at 10:00 A.M. on the later of (i) March 15, 1998, (ii) 15 days following the delivery of consolidated audited financial statements of the Company and its subsidiaries for the year ended December 31, 1997, or (iii) the date that is two business days following the termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") or at such other time -2- and place as Purchaser and Martin Hirschorn may agree. Purchaser will provide Seller with at least two business days notice of the date of closing for the purchase and sale of the Seller Shares. At the closing, (a) Purchaser will make payment to Seller for the aggregate Purchase Price of the Seller Shares by delivery to Seller of a certified or bank cashier's check payable in New York Clearing House funds to the order of Seller, or by wire transfer to an account specified by Seller, and (b) Seller will deliver to Purchaser (i) a certificate or certificates representing the Seller Shares so purchased together with duly executed stock powers with respect to such Seller Shares in favor of Purchaser or its designee in form reasonably satisfactory to Purchaser and (ii) a receipt evidencing payment of requisite transfer taxes, if any. Section 1.3. Conditions to Closing of Share Purchase. The obligation of Purchaser to purchase, and of Seller to sell, the Seller Shares shall be subject to the condition that there shall not have been instituted and be continuing any preliminary or permanent injunction or other order issued by any court or governmental or regulatory authority, domestic or foreign, or any statute, rule, regulation, decree or executive order promulgated or enacted by any government or governmental or regulatory authority, which prohibits the acquisition of Seller Shares pursuant to this Agreement in any respect; and no action or proceeding before any court or governmental or regulatory authority, domestic or foreign, shall have been instituted and be pending by any government or governmental or regulatory authority, domestic or foreign, which seeks to prevent the consummation of the transactions contemplated by this Agreement. Section 1.4. Purchaser's Conditions to Closing of Share Purchase. The obligation of Purchaser to purchase the Shares shall be subject to the further conditions: (a) the representations and warranties of Seller in this Agreement shall be true and correct in all material respects, in each case as if such representations and warranties were made as of such time; and (b) Purchaser shall have acquired all of the Hirschorn Shares. Section 1.5. No Transactions Relating to Seller Shares. Seller hereby covenants and agrees that, except as otherwise provided herein, it will not, and will not agree to, sell, transfer, assign, pledge, hypothecate or otherwise dis- -3- pose of any Seller Shares and will not, and will not agree to, limit its rights to vote in any manner any of the Seller Shares. ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and warrants to Purchaser as follows: Section 2.1. Power and Authority; Binding Effect. Seller has all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by Seller have been duly and validly authorized by all necessary corporate action and no other proceedings on the part of Seller are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Seller and, assuming its due authorization, execution and delivery by Purchaser, constitutes a legal, valid and binding obligation of Seller. Section 2.2. Required Filings and Consents. The execution and delivery of this Agreement by Seller does not, and the performance of this Agreement by Seller shall not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for the HSR Act and the rules and regulations thereunder and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay the performance by Seller of its obligations under this Agreement. Section 2.3. Title to Seller Shares. Seller has good and marketable title to the Seller Shares free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction or encumbrance of any kind, other than pursuant to this Agreement; Seller has full right, power and authority to sell, transfer and deliver the Seller Shares pursuant to this Agreement and upon delivery of the Seller Shares and payment of the purchase price therefor as contemplated herein, Purchaser will receive good and marketable -4- title to the Seller Shares free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction or encumbrance of any kind. The Seller Shares are all of the securities of the Company owned of record or beneficially by Seller on the date of this Agreement; and Seller has not granted any proxy with respect to the Seller Shares, deposited the Seller Shares into a voting trust or entered into any voting agreement or other arrangement with respect to the Seller Shares. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser hereby represents and warrants as follows: Section 3.1. Corporate Organization. Purchaser is a corporation duly organized and validly existing under the laws of the State of Delaware. Purchaser has all necessary corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement by Purchaser and the consummation by Purchaser of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser and, assuming its due authorization, execution and delivery by Seller, constitutes a legal, valid and binding obligation of Purchaser. Section 3.2. Required Filings and Consents. The execution and delivery of this Agreement by Purchaser do not, and the performance of this Agreement by Purchaser shall not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for applicable requirements, if any, of the HSR Act, and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay consummation of the transactions contemplated hereby, or otherwise prevent Purchaser from performing its obligations under this Agreement. Section 3.3. Investment Interest. The purchase of Shares from Seller pursuant to this Agreement is for the account of Purchaser for investment and not with a view to the sale or distribution thereof within the meaning of the Securi- -5- ties Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "Securities Act"); and any sale, transfer or other disposition of Seller Shares purchased pursuant to this Agreement will be made in compliance with all applicable provisions of the Securities Act. ARTICLE IV MISCELLANEOUS Section 4.1. Consents. Each of the parties hereto will use its best efforts to obtain the consents of all third parties and governmental authorities necessary to the consummation of the transactions contemplated by this Agreement. Section 4.2. Further Assurances. Seller and Purchaser will execute and deliver all such further documents and instruments and make all such further action as may be necessary in order to consummate the transactions contemplated hereby. Section 4.3. Confidentiality. Seller shall not disclose the existence of this Agreement or its contents to any third party without Seller's prior written consent. Neither Purchaser nor Seller shall issue any press release or make any public announcement regarding the proposed transaction without the prior approval of the other party. Section 4.4. Specific Performance. The parties hereto acknowledge that damages would be an inadequate remedy for a breach of this Agreement and that the obligations of the parties hereto shall be specifically enforceable. Section 4.5. Entire Agreement. This Agreement constitutes the entire agreement among Seller and Purchaser with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, among them with respect to the subject matter hereof. Section 4.6. Assignment, Successors and No Third-Party Rights. Neither party may assign any of its rights under this Agreement without the prior consent of the other parties. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will be con- -6- strued to give any person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns. Section 4.7. Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect. Section 4.8. Survival of Representations and Warranties. All representations and warranties contained in this Agreement shall survive the closing of the Share purchase. Section 4.9. Notices. All notices, comments, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties): Buyer: IAC Holdings Corp. Attention: Facsimile No.: with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Attention: John P. Mitchell, Esq. Facsimile No.: (212) 269-5420 Seller: George J. Sotos -7- Section 4.10. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that State. Section 4.11. Headings. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. Section 4.12. Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. Section 4.13. Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. George J. Sotos By: _________________________ Title: IAC HOLDINGS CORP. By: _________________________ Title: EX-11 11 STK. PUR. AGREE. - HOLDINGS & ROBERT J. BUELOW STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT dated as of January 23, 1998 by and between IAC Holdings Corp., a Delaware corporation ("Purchaser"), and Robert J. Buelow. WHEREAS, Seller is the owner of 2,000 shares (the "Seller Shares") of the outstanding shares of Common Stock, par value $0.10 per share (the "Company Common Stock"), of Industrial Acoustics Company, Inc., a New York corporation (the "Company"); WHEREAS, Seller has agreed to sell the Seller Shares to Purchaser, and Purchaser has agreed to purchase such Seller Shares from Seller, in accordance with the terms of this Agreement; NOW THEREFORE, in consideration of the premises and of the mutual agreements and covenants set forth herein the parties hereto agree as follows: ARTICLE I THE STOCK PURCHASE Section 1.1. Sale of Shares. Subject to the terms and conditions of this Agreement, Seller hereby agrees to sell the Seller Shares to Purchaser, and Purchaser hereby agrees to purchase the Seller Shares, in the manner set forth below, at a price per Share equal to $11.00 (the "Purchase Price"). Section 1.2. Payment and Delivery of Certificates for Seller Shares. The closing for the purchase and sale of the Seller Shares shall occur following the satisfaction of the conditions specified in Section 1.3 and simultaneously with the closing of Purchaser's purchase of 1,913,429 shares of the Company's Common Stock from Martin Hirschorn (the "Hirschorn Shares") which is scheduled to occur at the offices of Rand Rosenzweig Smith Radley Gordon & Burstein LLP, 605 Third Avenue, 24th Floor, New York, NY 10158, at 10:00 A.M. on the later of (i) March 15, 1998, (ii) 15 days following the delivery of consolidated audited financial statements of the Company and its subsidiaries for the year ended December 31, 1997, or (iii) the date that is two business days following the termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") or at such other time -2- and place as Purchaser and Martin Hirschorn may agree. Purchaser will provide Seller with at least two business days notice of the date of closing for the purchase and sale of the Seller Shares. At the closing, (a) Purchaser will make payment to Seller for the aggregate Purchase Price of the Seller Shares by delivery to Seller of a certified or bank cashier's check payable in New York Clearing House funds to the order of Seller, or by wire transfer to an account specified by Seller, and (b) Seller will deliver to Purchaser (i) a certificate or certificates representing the Seller Shares so purchased together with duly executed stock powers with respect to such Seller Shares in favor of Purchaser or its designee in form reasonably satisfactory to Purchaser and (ii) a receipt evidencing payment of requisite transfer taxes, if any. Section 1.3. Conditions to Closing of Share Purchase. The obligation of Purchaser to purchase, and of Seller to sell, the Seller Shares shall be subject to the condition that there shall not have been instituted and be continuing any preliminary or permanent injunction or other order issued by any court or governmental or regulatory authority, domestic or foreign, or any statute, rule, regulation, decree or executive order promulgated or enacted by any government or governmental or regulatory authority, which prohibits the acquisition of Seller Shares pursuant to this Agreement in any respect; and no action or proceeding before any court or governmental or regulatory authority, domestic or foreign, shall have been instituted and be pending by any government or governmental or regulatory authority, domestic or foreign, which seeks to prevent the consummation of the transactions contemplated by this Agreement. Section 1.4. Purchaser's Conditions to Closing of Share Purchase. The obligation of Purchaser to purchase the Shares shall be subject to the further conditions: (a) the representations and warranties of Seller in this Agreement shall be true and correct in all material respects, in each case as if such representations and warranties were made as of such time; and (b) Purchaser shall have acquired all of the Hirschorn Shares. Section 1.5. No Transactions Relating to Seller Shares. Seller hereby covenants and agrees that, except as otherwise provided herein, it will not, and will not agree to, sell, transfer, assign, pledge, hypothecate or otherwise dis- -3- pose of any Seller Shares and will not, and will not agree to, limit its rights to vote in any manner any of the Seller Shares. ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and warrants to Purchaser as follows: Section 2.1. Power and Authority; Binding Effect. Seller has all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by Seller have been duly and validly authorized by all necessary corporate action and no other proceedings on the part of Seller are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Seller and, assuming its due authorization, execution and delivery by Purchaser, constitutes a legal, valid and binding obligation of Seller. Section 2.2. Required Filings and Consents. The execution and delivery of this Agreement by Seller does not, and the performance of this Agreement by Seller shall not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for the HSR Act and the rules and regulations thereunder and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay the performance by Seller of its obligations under this Agreement. Section 2.3. Title to Seller Shares. Seller has good and marketable title to the Seller Shares free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction or encumbrance of any kind, other than pursuant to this Agreement; Seller has full right, power and authority to sell, transfer and deliver the Seller Shares pursuant to this Agreement and upon delivery of the Seller Shares and payment of the purchase price therefor as contemplated herein, Purchaser will receive good and marketable -4- title to the Seller Shares free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction or encumbrance of any kind. The Seller Shares are all of the securities of the Company owned of record or beneficially by Seller on the date of this Agreement; and Seller has not granted any proxy with respect to the Seller Shares, deposited the Seller Shares into a voting trust or entered into any voting agreement or other arrangement with respect to the Seller Shares. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser hereby represents and warrants as follows: Section 3.1. Corporate Organization. Purchaser is a corporation duly organized and validly existing under the laws of the State of Delaware. Purchaser has all necessary corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement by Purchaser and the consummation by Purchaser of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser and, assuming its due authorization, execution and delivery by Seller, constitutes a legal, valid and binding obligation of Purchaser. Section 3.2. Required Filings and Consents. The execution and delivery of this Agreement by Purchaser do not, and the performance of this Agreement by Purchaser shall not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for applicable requirements, if any, of the HSR Act, and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay consummation of the transactions contemplated hereby, or otherwise prevent Purchaser from performing its obligations under this Agreement. Section 3.3. Investment Interest. The purchase of Shares from Seller pursuant to this Agreement is for the account of Purchaser for investment and not with a view to the sale or distribution thereof within the meaning of the Securi- -5- ties Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "Securities Act"); and any sale, transfer or other disposition of Seller Shares purchased pursuant to this Agreement will be made in compliance with all applicable provisions of the Securities Act. ARTICLE IV MISCELLANEOUS Section 4.1. Consents. Each of the parties hereto will use its best efforts to obtain the consents of all third parties and governmental authorities necessary to the consummation of the transactions contemplated by this Agreement. Section 4.2. Further Assurances. Seller and Purchaser will execute and deliver all such further documents and instruments and make all such further action as may be necessary in order to consummate the transactions contemplated hereby. Section 4.3. Confidentiality. Seller shall not disclose the existence of this Agreement or its contents to any third party without Seller's prior written consent. Neither Purchaser nor Seller shall issue any press release or make any public announcement regarding the proposed transaction without the prior approval of the other party. Section 4.4. Specific Performance. The parties hereto acknowledge that damages would be an inadequate remedy for a breach of this Agreement and that the obligations of the parties hereto shall be specifically enforceable. Section 4.5. Entire Agreement. This Agreement constitutes the entire agreement among Seller and Purchaser with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, among them with respect to the subject matter hereof. Section 4.6. Assignment, Successors and No Third-Party Rights. Neither party may assign any of its rights under this Agreement without the prior consent of the other parties. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will be con- -6- strued to give any person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns. Section 4.7. Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect. Section 4.8. Survival of Representations and Warranties. All representations and warranties contained in this Agreement shall survive the closing of the Share purchase. Section 4.9. Notices. All notices, comments, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties): Buyer: IAC Holdings Corp. Attention: Facsimile No.: with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Attention: John P. Mitchell, Esq. Facsimile No.: (212) 269-5420 Seller: Robert J. Buelow 141 Duffy Allendale, NJ 07401 -7- Section 4.10. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that State. Section 4.11. Headings. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. Section 4.12. Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. Section 4.13. Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. Robert J. Buelow By: _________________________ Title: IAC HOLDINGS CORP. By: _________________________ Title: EX-12 12 STK. PUR. AGREE. - HOLDINGS & MORTON I. SCHIFF STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT dated as of January 23, 1998 by and between IAC Holdings Corp., a Delaware corporation ("Purchaser"), and Morton I. Schiff. WHEREAS, Seller is the owner of 12,500 shares (the "Seller Shares") of the outstanding shares of Common Stock, par value $0.10 per share (the "Company Common Stock"), of Industrial Acoustics Company, Inc., a New York corporation (the "Company"); WHEREAS, Seller has agreed to sell the Seller Shares to Purchaser, and Purchaser has agreed to purchase such Seller Shares from Seller, in accordance with the terms of this Agreement; NOW THEREFORE, in consideration of the premises and of the mutual agreements and covenants set forth herein the parties hereto agree as follows: ARTICLE I THE STOCK PURCHASE Section 1.1. Sale of Shares. Subject to the terms and conditions of this Agreement, Seller hereby agrees to sell the Seller Shares to Purchaser, and Purchaser hereby agrees to purchase the Seller Shares, in the manner set forth below, at a price per Share equal to $11.00 (the "Purchase Price"). Section 1.2. Payment and Delivery of Certificates for Seller Shares. The closing for the purchase and sale of the Seller Shares shall occur following the satisfaction of the conditions specified in Section 1.3 and simultaneously with the closing of Purchaser's purchase of 1,913,429 shares of the Company's Common Stock from Martin Hirschorn (the "Hirschorn Shares") which is scheduled to occur at the offices of Rand Rosenzweig Smith Radley Gordon & Burstein LLP, 605 Third Avenue, 24th Floor, New York, NY 10158, at 10:00 A.M. on the later of (i) March 15, 1998, (ii) 15 days following the delivery of consolidated audited financial statements of the Company and its subsidiaries for the year ended December 31, 1997, or (iii) the date that is two business days following the termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") or at such other time -2- and place as Purchaser and Martin Hirschorn may agree. Purchaser will provide Seller with at least two business days notice of the date of closing for the purchase and sale of the Seller Shares. At the closing, (a) Purchaser will make payment to Seller for the aggregate Purchase Price of the Seller Shares by delivery to Seller of a certified or bank cashier's check payable in New York Clearing House funds to the order of Seller, or by wire transfer to an account specified by Seller, and (b) Seller will deliver to Purchaser (i) a certificate or certificates representing the Seller Shares so purchased together with duly executed stock powers with respect to such Seller Shares in favor of Purchaser or its designee in form reasonably satisfactory to Purchaser and (ii) a receipt evidencing payment of requisite transfer taxes, if any. Section 1.3. Conditions to Closing of Share Purchase. The obligation of Purchaser to purchase, and of Seller to sell, the Seller Shares shall be subject to the condition that there shall not have been instituted and be continuing any preliminary or permanent injunction or other order issued by any court or governmental or regulatory authority, domestic or foreign, or any statute, rule, regulation, decree or executive order promulgated or enacted by any government or governmental or regulatory authority, which prohibits the acquisition of Seller Shares pursuant to this Agreement in any respect; and no action or proceeding before any court or governmental or regulatory authority, domestic or foreign, shall have been instituted and be pending by any government or governmental or regulatory authority, domestic or foreign, which seeks to prevent the consummation of the transactions contemplated by this Agreement. Section 1.4. Purchaser's Conditions to Closing of Share Purchase. The obligation of Purchaser to purchase the Shares shall be subject to the further conditions: (a) the representations and warranties of Seller in this Agreement shall be true and correct in all material respects, in each case as if such representations and warranties were made as of such time; and (b) Purchaser shall have acquired all of the Hirschorn Shares. Section 1.5. No Transactions Relating to Seller Shares. Seller hereby covenants and agrees that, except as otherwise provided herein, it will not, and will not agree to, sell, transfer, assign, pledge, hypothecate or otherwise dis- -3- pose of any Seller Shares and will not, and will not agree to, limit its rights to vote in any manner any of the Seller Shares. ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and warrants to Purchaser as follows: Section 2.1. Power and Authority; Binding Effect. Seller has all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by Seller have been duly and validly authorized by all necessary corporate action and no other proceedings on the part of Seller are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Seller and, assuming its due authorization, execution and delivery by Purchaser, constitutes a legal, valid and binding obligation of Seller. Section 2.2. Required Filings and Consents. The execution and delivery of this Agreement by Seller does not, and the performance of this Agreement by Seller shall not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for the HSR Act and the rules and regulations thereunder and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay the performance by Seller of its obligations under this Agreement. Section 2.3. Title to Seller Shares. Seller has good and marketable title to the Seller Shares free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction or encumbrance of any kind, other than pursuant to this Agreement; Seller has full right, power and authority to sell, transfer and deliver the Seller Shares pursuant to this Agreement and upon delivery of the Seller Shares and payment of the purchase price therefor as contemplated herein, Purchaser will receive good and marketable -4- title to the Seller Shares free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction or encumbrance of any kind. The Seller Shares are all of the securities of the Company owned of record or beneficially by Seller on the date of this Agreement; and Seller has not granted any proxy with respect to the Seller Shares, deposited the Seller Shares into a voting trust or entered into any voting agreement or other arrangement with respect to the Seller Shares. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser hereby represents and warrants as follows: Section 3.1. Corporate Organization. Purchaser is a corporation duly organized and validly existing under the laws of the State of Delaware. Purchaser has all necessary corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement by Purchaser and the consummation by Purchaser of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser and, assuming its due authorization, execution and delivery by Seller, constitutes a legal, valid and binding obligation of Purchaser. Section 3.2. Required Filings and Consents. The execution and delivery of this Agreement by Purchaser do not, and the performance of this Agreement by Purchaser shall not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for applicable requirements, if any, of the HSR Act, and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay consummation of the transactions contemplated hereby, or otherwise prevent Purchaser from performing its obligations under this Agreement. Section 3.3. Investment Interest. The purchase of Shares from Seller pursuant to this Agreement is for the account of Purchaser for investment and not with a view to the sale or distribution thereof within the meaning of the Securi- -5- ties Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "Securities Act"); and any sale, transfer or other disposition of Seller Shares purchased pursuant to this Agreement will be made in compliance with all applicable provisions of the Securities Act. ARTICLE IV MISCELLANEOUS Section 4.1. Consents. Each of the parties hereto will use its best efforts to obtain the consents of all third parties and governmental authorities necessary to the consummation of the transactions contemplated by this Agreement. Section 4.2. Further Assurances. Seller and Purchaser will execute and deliver all such further documents and instruments and make all such further action as may be necessary in order to consummate the transactions contemplated hereby. Section 4.3. Confidentiality. Seller shall not disclose the existence of this Agreement or its contents to any third party without Seller's prior written consent. Neither Purchaser nor Seller shall issue any press release or make any public announcement regarding the proposed transaction without the prior approval of the other party. Section 4.4. Specific Performance. The parties hereto acknowledge that damages would be an inadequate remedy for a breach of this Agreement and that the obligations of the parties hereto shall be specifically enforceable. Section 4.5. Entire Agreement. This Agreement constitutes the entire agreement among Seller and Purchaser with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, among them with respect to the subject matter hereof. Section 4.6. Assignment, Successors and No Third-Party Rights. Neither party may assign any of its rights under this Agreement without the prior consent of the other parties. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will be con- -6- strued to give any person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns. Section 4.7. Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect. Section 4.8. Survival of Representations and Warranties. All representations and warranties contained in this Agreement shall survive the closing of the Share purchase. Section 4.9. Notices. All notices, comments, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties): Buyer: IAC Holdings Corp. Attention: Facsimile No.: with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Attention: John P. Mitchell, Esq. Facsimile No.: (212) 269-5420 Seller: Morton I. Schiff 28 Pecan Valley Drive New City, NY 10956 -7- Section 4.10. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that State. Section 4.11. Headings. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. Section 4.12. Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. Section 4.13. Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. Morton I. Schiff By: _________________________ Title: IAC HOLDINGS CORP. By: _________________________ Title: EX-13 13 STK. PUR. AGREE. - HOLDINGS & HENRY ALLEN STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT dated as of January 23, 1998 by and between IAC Holdings Corp., a Delaware corporation ("Purchaser"), and Henry Allen. WHEREAS, Seller is the owner of 7,000 shares (the "Seller Shares") of the outstanding shares of Common Stock, par value $0.10 per share (the "Company Common Stock"), of Industrial Acoustics Company, Inc., a New York corporation (the "Company"); WHEREAS, Seller has agreed to sell the Seller Shares to Purchaser, and Purchaser has agreed to purchase such Seller Shares from Seller, in accordance with the terms of this Agreement; NOW THEREFORE, in consideration of the premises and of the mutual agreements and covenants set forth herein the parties hereto agree as follows: ARTICLE I THE STOCK PURCHASE Section 1.1. Sale of Shares. Subject to the terms and conditions of this Agreement, Seller hereby agrees to sell the Seller Shares to Purchaser, and Purchaser hereby agrees to purchase the Seller Shares, in the manner set forth below, at a price per Share equal to $11.00 (the "Purchase Price"). Section 1.2. Payment and Delivery of Certificates for Seller Shares. The closing for the purchase and sale of the Seller Shares shall occur following the satisfaction of the conditions specified in Section 1.3 and simultaneously with the closing of Purchaser's purchase of 1,913,429 shares of the Company's Common Stock from Martin Hirschorn (the "Hirschorn Shares") which is scheduled to occur at the offices of Rand Rosenzweig Smith Radley Gordon & Burstein LLP, 605 Third Avenue, 24th Floor, New York, NY 10158, at 10:00 A.M. on the later of (i) March 15, 1998, (ii) 15 days following the delivery of consolidated audited financial statements of the Company and its subsidiaries for the year ended December 31, 1997, or (iii) the date that is two business days following the termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") or at such other time -2- and place as Purchaser and Martin Hirschorn may agree. Purchaser will provide Seller with at least two business days notice of the date of closing for the purchase and sale of the Seller Shares. At the closing, (a) Purchaser will make payment to Seller for the aggregate Purchase Price of the Seller Shares by delivery to Seller of a certified or bank cashier's check payable in New York Clearing House funds to the order of Seller, or by wire transfer to an account specified by Seller, and (b) Seller will deliver to Purchaser (i) a certificate or certificates representing the Seller Shares so purchased together with duly executed stock powers with respect to such Seller Shares in favor of Purchaser or its designee in form reasonably satisfactory to Purchaser and (ii) a receipt evidencing payment of requisite transfer taxes, if any. Section 1.3. Conditions to Closing of Share Purchase. The obligation of Purchaser to purchase, and of Seller to sell, the Seller Shares shall be subject to the condition that there shall not have been instituted and be continuing any preliminary or permanent injunction or other order issued by any court or governmental or regulatory authority, domestic or foreign, or any statute, rule, regulation, decree or executive order promulgated or enacted by any government or governmental or regulatory authority, which prohibits the acquisition of Seller Shares pursuant to this Agreement in any respect; and no action or proceeding before any court or governmental or regulatory authority, domestic or foreign, shall have been instituted and be pending by any government or governmental or regulatory authority, domestic or foreign, which seeks to prevent the consummation of the transactions contemplated by this Agreement. Section 1.4. Purchaser's Conditions to Closing of Share Purchase. The obligation of Purchaser to purchase the Shares shall be subject to the further conditions: (a) the representations and warranties of Seller in this Agreement shall be true and correct in all material respects, in each case as if such representations and warranties were made as of such time; and (b) Purchaser shall have acquired all of the Hirschorn Shares. Section 1.5. No Transactions Relating to Seller Shares. Seller hereby covenants and agrees that, except as otherwise provided herein, it will not, and will not agree to, sell, transfer, assign, pledge, hypothecate or otherwise dis- -3- pose of any Seller Shares and will not, and will not agree to, limit its rights to vote in any manner any of the Seller Shares. ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and warrants to Purchaser as follows: Section 2.1. Power and Authority; Binding Effect. Seller has all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by Seller have been duly and validly authorized by all necessary corporate action and no other proceedings on the part of Seller are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Seller and, assuming its due authorization, execution and delivery by Purchaser, constitutes a legal, valid and binding obligation of Seller. Section 2.2. Required Filings and Consents. The execution and delivery of this Agreement by Seller does not, and the performance of this Agreement by Seller shall not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for the HSR Act and the rules and regulations thereunder and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay the performance by Seller of its obligations under this Agreement. Section 2.3. Title to Seller Shares. Seller has good and marketable title to the Seller Shares free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction or encumbrance of any kind, other than pursuant to this Agreement; Seller has full right, power and authority to sell, transfer and deliver the Seller Shares pursuant to this Agreement and upon delivery of the Seller Shares and payment of the purchase price therefor as contemplated herein, Purchaser will receive good and marketable -4- title to the Seller Shares free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction or encumbrance of any kind. The Seller Shares are all of the securities of the Company owned of record or beneficially by Seller on the date of this Agreement; and Seller has not granted any proxy with respect to the Seller Shares, deposited the Seller Shares into a voting trust or entered into any voting agreement or other arrangement with respect to the Seller Shares. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser hereby represents and warrants as follows: Section 3.1. Corporate Organization. Purchaser is a corporation duly organized and validly existing under the laws of the State of Delaware. Purchaser has all necessary corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement by Purchaser and the consummation by Purchaser of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser and, assuming its due authorization, execution and delivery by Seller, constitutes a legal, valid and binding obligation of Purchaser. Section 3.2. Required Filings and Consents. The execution and delivery of this Agreement by Purchaser do not, and the performance of this Agreement by Purchaser shall not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for applicable requirements, if any, of the HSR Act, and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay consummation of the transactions contemplated hereby, or otherwise prevent Purchaser from performing its obligations under this Agreement. Section 3.3. Investment Interest. The purchase of Shares from Seller pursuant to this Agreement is for the account of Purchaser for investment and not with a view to the sale or distribution thereof within the meaning of the Securi- -5- ties Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "Securities Act"); and any sale, transfer or other disposition of Seller Shares purchased pursuant to this Agreement will be made in compliance with all applicable provisions of the Securities Act. ARTICLE IV MISCELLANEOUS Section 4.1. Consents. Each of the parties hereto will use its best efforts to obtain the consents of all third parties and governmental authorities necessary to the consummation of the transactions contemplated by this Agreement. Section 4.2. Further Assurances. Seller and Purchaser will execute and deliver all such further documents and instruments and make all such further action as may be necessary in order to consummate the transactions contemplated hereby. Section 4.3. Confidentiality. Seller shall not disclose the existence of this Agreement or its contents to any third party without Seller's prior written consent. Neither Purchaser nor Seller shall issue any press release or make any public announcement regarding the proposed transaction without the prior approval of the other party. Section 4.4. Specific Performance. The parties hereto acknowledge that damages would be an inadequate remedy for a breach of this Agreement and that the obligations of the parties hereto shall be specifically enforceable. Section 4.5. Entire Agreement. This Agreement constitutes the entire agreement among Seller and Purchaser with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, among them with respect to the subject matter hereof. Section 4.6. Assignment, Successors and No Third-Party Rights. Neither party may assign any of its rights under this Agreement without the prior consent of the other parties. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will be con- -6- strued to give any person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns. Section 4.7. Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect. Section 4.8. Survival of Representations and Warranties. All representations and warranties contained in this Agreement shall survive the closing of the Share purchase. Section 4.9. Notices. All notices, comments, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties): Buyer: IAC Holdings Corp. Attention: Facsimile No.: with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Attention: John P. Mitchell, Esq. Facsimile No.: (212) 269-5420 Seller: Henry Allen Techmet Corp. 411 Theodore Fremd Ave. Rye, NY 10580 -7- Section 4.10. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that State. Section 4.11. Headings. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. Section 4.12. Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. Section 4.13. Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. Henry Allen By: _________________________ Title: IAC HOLDINGS CORP. By: _________________________ Title: EX-14 14 PROXY STATEMENT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check the appropriate box: [X] Preliminary Proxy Statement [ ] Confidential, for use of the Commission only (as permitted by Rule 14a-6(e)(2)) [ ] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12 INDUSTRIAL ACOUSTICS COMPANY, INC. - ------------------------------------------------------------------------------- (Name of Registrant as Specified in Its Charter) - ------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [ ] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. 1) Title of each class of securities to which transaction applies: Common Stock, par value $.10 2) Aggregate number of securities to which transaction applies: 627,307 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): $11.00 4) Proposed maximum aggregate value of transaction: $6,900,377 5) Total fee paid: $1,380 [X] Fee paid previously with preliminary materials. [ ] 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- Preliminary Proxy Statement dated August , 1998 INDUSTRIAL ACOUSTICS COMPANY, INC. NOTICE OF SPECIAL MEETING OF SHAREHOLDERS , 1998 NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of INDUSTRIAL ACOUSTICS COMPANY, INC. will be held at the offices of the Company, 1160 Commerce Avenue, Bronx, New York on , 1998 at 10:00 a.m., New York time, for the following purposes: (1) to consider and vote upon a proposal to adopt an Agreement and Plan of Merger pursuant to which (a) IAC Holdings Corp. ("Holdings"), a Delaware corporation, will be merged with and into Industrial Acoustics Company, Inc. (the "Company"), a New York corporation, and (b) each outstanding share of common stock of the Company ("Common Stock") owned by Holdings will be cancelled and each outstanding share of Common Stock owned by shareholders other than Holdings will be converted into the right to receive $11.00 per share in cash and the outstanding Shares of Holdings will be converted into new shares of the Common Stock; and (2) to transact such other business as may properly come before the meeting and at any postponements or adjournments thereof. Pursuant to the By-Laws of the Company, the Board of Directors has fixed the close of business on , 1998 as the record date for the determination of shareholders entitled to notice of and to vote at the meeting and at any postponements or adjournments thereof. If you cannot be present in person please complete, date, sign, and return the accompanying Proxy without delay. A business reply envelope which does not require any postage, if mailed in the United States, is enclosed for your convenience. Dated: , 1998 By order of the Board of Directors INDUSTRIAL ACOUSTICS COMPANY, INC. Robert N. Bertrand Secretary -2- Preliminary Proxy Statement dated August , 1998 INDUSTRIAL ACOUSTICS COMPANY, INC. 1160 COMMERCE AVENUE BRONX, NEW YORK 10462 -------------------- PROXY STATEMENT -------------------- --------------------------------------- SPECIAL MEETING OF SHAREHOLDERS , 1998 --------------------------------------- THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. Introduction and Summary Place; Record Date; Quorum; Solicitation. This Proxy Statement is furnished in connection with the solicitation by Industrial Acoustics Company, Inc., a New York corporation (the "Company" or "IAC") for use at a special meeting (the "Meeting") of the Company's shareholders (the "Shareholders") to be held on __________, 1998 at 10:00 a.m. at the Company's principal executive offices located at 1160 Commerce Avenue, Bronx, New York, 10462, and at any postponements or adjournments thereof. The approximate date on which a definitive Proxy Statement and the accompanying proxy will first be mailed to shareholders is __________, 1998. Only Shareholders of record at the close of business on , 1998 (the "Record Date"), will be entitled to vote at the Meeting. On that date, there were 2,981,211 shares of the Common Stock of the Company, par value $.10 (the "Common Stock") outstanding and entitled to vote at the Meeting held by approximately 600 shareholders of rec- ord. Based on a statement filed by IAC Holdings Corp. ("Holdings") (a holding company whose principal assets consist of Common Stock of the Company and whose principal executive offices are located at 100 First Stamford Place, Stamford, Connecticut 06902), on Schedule 13D, the Company believes that Holdings owns 2,353,904 shares of Common Stock, representing approximately 79% of the outstanding shares of Common Stock. The sole shareholder of Holdings is International Mezzanine Investment, N.V. ("IMI"), a Netherlands Antilles corporation whose principal executive offices are located at John B. Gorsiraweg 14 Curacao, Netherlands Antilles. The presence at the Meeting, in person or by proxy, of a majority of the outstanding shares of Common Stock entitled to vote shall constitute a quorum for the meeting. Common Stock represented by properly executed proxies, unless previously revoked, will be voted at the Meeting in accordance with the instructions thereon. Each proxy granted may be revoked by a Shareholder giving such proxy at any time before it is exercised by filing with the Secretary of the Company a revoking instrument or a duly executed proxy bearing a later date. The powers of any proxy holder will be suspended if the person who executed the proxy held by such proxy holder attends the Meeting in person and so requests. Attendance at the Meeting will not in itself constitute revocation of the proxy. The Company will bear the cost of soliciting proxies in the form enclosed. In addition to solicitation by mail, proxies may be solicited personally, or by telephone, or by employees of the Company, without additional compensation for such services. The Company may reimburse brokers holding Common Stock in their names or in the names of their nominees for their expenses in sending proxy material to the beneficial owners of such Common Stock. NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT IN CONNECTION WITH THE SOLICITATION OF PROXIES AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. Purpose; Merger Agreement. At the Meeting, Shareholders will consider and vote upon a proposal to adopt an Agreement and Plan of Merger dated as of May 20, 1998 (the "Merger Agreement") between the Company and Holdings. The Merger Agreement provides, subject to the approval of Shareholders at the Meeting, for the merger of Holdings with and into the Company, with the Company being the surviving corporation (the "Merger"). Approval of the Merger Agreement requires the affirmative vote of the holders of two-thirds of the outstanding shares of Common Stock. Since Holdings owns approximately 79% of the Common Stock, adoption of the Merger Agreement is assured if Holdings votes in its favor. Holdings has indicated its intention to vote in favor of the -2- Merger. Pursuant to the Merger Agreement, each outstanding share of Common Stock (other than Common Stock held by the Company as treasury stock and Common Stock held by Holdings), will be converted into the right to receive $11.00 per share in cash (the "Merger Consideration"). Outstanding shares of common stock of Holdings will be converted into the right to receive newly issued shares of common stock of the Company. See "The Merger Agreement." A copy of the Merger Agreement is attached to this Proxy Statement as Exhibit A. Since the Common Stock is designated as a national market system security on the Nasdaq National Market, pursuant to Section 910 of the New York Business Corporation Law (the "BCL"), appraisal rights will not be available to shareholders of the Company. Accordingly, although a Shareholder who objects to the Merger may vote against its adoption, since Holdings has indicated that it will vote in favor of the Merger, the approval by Shareholders is assured and an objecting Shareholder's available alternative may be limited to selling the Shareholder's Common Stock before the Merger takes place. The Merger Agreement provides that as a condition to consummation of the Merger, Holdings obtain the funds necessary to enable the Company to pay the Merger Consideration. The Company has been informed by Holdings that Holdings will amend its existing loan agreement with International Mezzanine Capital, B.V. ("IMC"), an affiliate of Holdings dated as of March 19, 1998 to permit Holdings to borrow funds sufficient to pay all or a portion of the Merger Consideration and that the balance of the Merger Consideration (if any) will be made available to Holdings by way of a capital contribution by Holdings' sole shareholder, IMI. The aggregate amount of the Merger Consideration to be paid to the Company's Shareholders is expected to be $6,900,377. Recent Stock Prices. On July 31, 1998, the high and low bid prices for the Common Stock as reported on the Nasdaq National Market were $10 1/2 and $10 1/8, respectively, and the last reported sale price was $10 1/8 per share. The last reported trade of the Common Stock prior to the announcement of the Merger took place on May 13, 1998 at a price of $9 1/4. The closing bid price of the Company's Common Stock on May 19, 1998, the day before the Merger was announced to the public was $9 1/4. See "Stock Prices and Suspension of Dividends." Recommendation of the Board of Directors. The Board of Directors of the Company has determined that the Merger Agreement is fair to, and in the best interests of, the Company and its Shareholders and has unanimously approved and adopted the Merger Agreement. Certain members of the Board of Directors have conflicts of interest. See "Interests of Certain Persons in the Merger; Conflicts of Interest." See "Special Factors -- Acquisition; Purpose of the Merger; Fairness Factors." Subsequent to its initial determination, the Board of Directors received the opinion of Laidlaw & Co. as to the fairness of the Merger Consideration -3- and thereafter the Board unanimously confirmed its conclusion that the Merger Agreement is fair to, and in the best interests of the Company and its Shareholders. See "Special Factors--Laidlaw Review." Certain Results of the Merger. As a result of the Merger, Shareholders of the Company will no longer have any continuing interest in the Company, the Company's Common Stock will no longer be traded on the Nasdaq National Market and the registration of the Company's Common Stock under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the Company's reporting obligations thereunder will be terminated. After giving effect to the Merger, IMI, the sole shareholder of Holdings, will be the sole shareholder of the Company. Interests of Certain Persons in the Merger. Messrs. Maarten D. Hemsley, Robert M. Davies and Robert N. Haidinger (Directors of the Company) are directors of Holdings. Messrs. James A. Read and Martin P. Dineen (Directors of the Company) are officers and directors of Holdings. Mr. Haidinger is the president of a company in which IMI, the sole shareholder of Holdings, has a substantial interest. Menai Group, LLC and Bryanston Management Ltd (companies which are wholly owned by Messrs. Davies and Hemsley, respectively) are partners in IAC Acquisition Partners ("IAC Partners"), a partnership which provides advisory and consulting services to Holdings. See "Interests of Certain Persons in the Merger; Conflicts of Interest." Exchange of Certificates. If the Merger is consummated, the Company will send instructions to Shareholders regarding the surrender of stock certificates. SHAREHOLDERS SHOULD NOT SUBMIT ANY STOCK CERTIFICATES AT THE PRESENT TIME. Effective Time of the Merger. The Merger will become effective upon the filing of a certificate of merger with the Secretary of State of New York (the "Effective Time"). The filing will occur after all conditions to the Merger contained in the Merger Agreement have been satisfied or waived. The Company and Holdings anticipate that the Merger will be consummated as promptly as practicable following the Meeting. Conditions to Consummation of the Merger. The respective obligations of the Company and Holdings to consummate the Merger are subject to the satisfaction or waiver at or prior to the Effective Time of the following conditions, among others: (i) adoption of the Merger Agreement by the holders of the Company's Common Stock; (ii) the absence of any statute, rule, injunction or order that would prevent consummation of the Merger; (iii) the receipt of all required authorizations, consents and approvals; (iv) Holdings having obtained funds or arranged financing sufficient to enable the Company to pay the Merger Consideration and (v) the performance of and compliance with all agreements and obligations of the parties under the Merger Agreement. -4- Termination of the Merger Agreement. The Merger Agreement may be terminated and the Merger abandoned at any time prior to the Effective Time by the Board of Directors of the Company or by Holdings. See "The Merger Agreement -- Termination." Special Factors Acquisition; Purpose of the Merger; Fairness Factors. On March 19, 1998, Holdings became the owner of 2,353,904 shares of the Common Stock, or approximately 79% of the issued and outstanding shares of the Common Stock of the Company. Holdings acquired 1,914,429 of such shares from Martin Hirschorn, the Company's founder and, until May 1998, its Chief Executive Officer, and 439,475 of such shares from certain other management and institutional shareholders, in each case for $11.00 per share. On March 19, 1998, Messrs. John M. Handley, Michael W. Hirschorn, Arnold W. Kanarek and Jorgen Svendsen resigned from the Board of Directors of the Company and on March 20, 1998 the remaining Directors appointed Messrs. Robert M. Davies, Martin P. Dineen, Robert N. Haidinger, Maarten D. Hemsley and James A. Read as Directors of the Company. See "--Background of Change of Control." The Board of Directors, after Holdings' acquisition of 79% of the Common Stock, considered the position, prospects and future of the Company generally and as a company with public shareholders specifically and discussed such matters with representatives of Holdings. For the reasons discussed below, the Board of Directors determined in May of 1998 that it was not in the best interests of the Company or its Shareholders for IAC to remain a company with public shareholders and therefore the Board considered the proposed merger of Holdings with and into the Company, and concluded that such Merger would be both fair and in the best interests of the Company, its employees and both its affiliated and unaffiliated Shareholders. Certain members of the Board of Directors have conflicts of interests. See "Interests of Certain Persons in the Merger; Conflicts of Interest." The same conclusion was reached by Holdings, and by those members of the Board of Directors affiliated with Holdings, IMI, IMC and IAC Partners. However, none of IMI, IMC or IAC Partners or their respective executive officers, directors or partners made any recommendation in support of or opposed to the Merger (other than the recommendation of the Merger as directors by those persons who are also directors of the Company). The negative factors considered by the Board which weighed against consummation of the Merger were the time and cost involved in effecting the transaction and the fact that the Company would no longer be registered under the Exchange Act, which would make it difficult for the Company to pursue financing publicly. However, these countervailing factors were viewed as being less significant than the ultimate benefits of the Merger to the Company and its employees. The Board of Directors, which includes Martin Hirschorn and Frederic M. Oran (the Company's Chief Executive Officer since May 1998), both of whom sold all the -5- shares in the Company that they owned to Holdings in March 1998 at a price of $11.00 per share, unanimously approved the Merger Agreement on May 20, 1998. Certain members of the Board of Directors have conflicts of interests. See "Interests of Certain Persons in the Merger; Conflicts of Interest." The Company and Holdings entered into the Merger Agreement on May 20, 1998. In approving the Merger Agreement and reaching its conclusions as to the fairness of the Merger to unaffiliated Shareholders, the Board of Directors considered the following factors in particular: (a) providing minority Shareholders with the same opportunity to dispose of their shares at the price obtained from Holdings by the Company's founder, management and certain institutional holders, which was at a premium to the recent market price and reflected a "control premium"; (b) the limited market for the Company's Common Stock as has existed in recent years and the resulting limited ability of minority Shareholders to realize on their investment in the Company; and (c) the urgent need for the Company's management to take actions to reverse operating losses, which may, in the short term, adversely affect the Company's operating results. Equivalent Price; Premium Over Market Price. In transactions with Holdings, the founder and former Chief Executive Officer of the Company, Martin Hirschorn, Frederic M. Oran, and other members of management and certain institutional holders were able to receive $11.00 per share on their investment. This price was negotiated on an arms-length basis between these unaffiliated parties after giving effect to the recent trading range for the Common Stock and the Company's financial position and prospects and recognizing a "control premium". See "-- Background of Change of Control." In considering the fairness of the Merger, the Board of Directors gave particular weight to this factor. The average market price of the Common Stock for the period from March 19, 1998 (the date Holdings acquired its interest in the Company) to May 20, 1998 (the date the Merger Agreement was executed) was $9.71. The closing bid price for the Common Stock on May 19, 1998, the day before the Merger was announced to the public, was $9 1/4. The last reported trade of the Common Stock during that period took place on May 13, 1998 at a price of $9 1/4. The Merger Consideration of $11.00 per share represents a premium of 19% to such last reported trade. See "Stock Prices and Suspension of Dividends." In considering the fairness of the Merger to minority shareholders, the Board of Directors also gave significant weight to this factor. Limited Trading Market. For several years there has a been a limited market for the Company's Common Stock on the NASDAQ system. There are currently only two market makers for the Common Stock. Additional purchases of some, but not all of the outstanding shares of Common Stock by Holdings would only serve to further contract the market for the Common Stock, thus resulting in an increasingly illiquid minority. At July 31, 1998, the Company had approximately 600 holders of 627,307 shares of Common Stock, excluding shares held by Holdings. The Company understands -6- that during the twelve months ended July 31, 1998, there were only 117 trades of the Common Stock involving an aggregate of 97,365 shares of its Common Stock. Other factors considered by the Board of Directors in determining that the Company and its employees would be better served by private ownership included: 1. the ongoing cost to the Company of regulatory compliance as a public company without the benefit of having a ready market for its securities; 2. greater operating flexibility in the management of the business to remedy recent adverse operating results; and 3. disappointing results of operations which, as a result of the Company's public status, become available to its competitors. Cost of Regulatory Compliance. The Company estimates that it spends approximately $160,000 on an annual basis on costs solely related to being a publicly-held entity, including legal, accounting, insurance, printing and mailing costs. The Board considered the ongoing costs of remaining a public company without the benefit of having a ready market for its securities in its determination to approve the Merger. Operating Flexibility. The Board is of the opinion that the Merger would enable management to concentrate their efforts on reversing the Company's operating losses and improving long-term growth of its businesses and to make business decisions and acquisitions free from the constraints of public ownership, which the Board of Directors believes often places undue emphasis on short-term considerations. The Board of Directors also believes that the short-term effect of such restructuring efforts on the future market value of Common Stock may be negative. The Board therefore believes that prospects for achieving the necessary business turnaround would improve if it were no longer a public company. Competitive Disadvantages. As a consequence of its publicly-held status, the Company is required to file and make public detailed and periodic reports about its operations and its financial status. The Company's detailed financial reports disclose to the public (including the Company's competitors, customers, suppliers and employee labor unions) operating losses which may be used to the detriment of the Company by its competitors and in negotiations and dealings with others. Certain of the Company's competitors are privately-owned companies, not required to disclose publicly such sensitive financial details of their operations. At the same time, competitors have the advantage of examining the Company's financial statements. Those of the Company's competitors which are publicly-held are either significantly larger, and engaged in a broader spectrum of activities, or are subsidiaries of larger, diversified public companies whose financial information is disclosed on a consolidated basis with other lines of business. As to such competitors, required financial disclosures do not reveal detailed information regarding the operations of those components directly competitive with the Company. The Board of Directors believes that private ownership of the Company would not only eliminate the requirement to disclose results of operations but, as discussed above, would also provide management of the Company with the -7- operating flexibility to focus on and improve the Company's results of operations on a long-term basis. The value of such flexibility cannot be quantified. Certain Results of Merger. As a result of the Merger, IMI will own all of the outstanding equity interests of the Company (subject to agreements to grant options in Common Stock to IAC Partners), so that IMI's interest in the Company, including its future net earnings, will increase from approximately 79% to 100% in return for the aggregate Merger Consideration of $6,900,377. According to the terms of the Merger Agreement, each share of Common Stock (except treasury shares and shares owned by Holdings) will be converted into the right to receive the Merger Consideration of $11.00 per share. As a result, the Common Stock held by existing Shareholders will no longer represent an equity interest in the Company and will no longer share in future earnings or losses of the Company, the risks associated with such earnings and losses, or the potential to realize greater value in the event that strategic acquisitions, divestitures or other extraordinary corporate transactions are pursued by the Company in the future. Neither the Company nor, to the knowledge of the Company, Holdings now has any such transactions under consideration. At September 30, 1997, the last quarterly reporting date prior to the execution of a letter of intent between IAC Partners and Martin Hirschorn for the sale of his shares, net book value of the Company was approximately $41,009,000 or $13.77 per share. At March 31, 1998, the net book value of the Company had declined to approximately $39,221,000, or $13.17 per share of Common Stock and at June 30, 1998 had further declined to approximately $36,784,000 or $12.34 per share. Before giving effect to the Merger, Holdings' 79% interest had a net book value to Holdings (that is, its investment including the principal amount of the Loan but excluding transactional expenses) of approximately $25,893,000, or $11.00 per share of Common Stock. After giving effect to the Merger, Holdings will own all of the outstanding shares of Common Stock of the Company and will have made an investment, on a comparable basis, of approximately $32,793,000 or $11.00 per share of pre-Merger Common Stock. The Company has reported net losses of $.78, $.58 and $.41 per share for the quarters ended June 30 and March 31, 1998 and the year ended December 31, 1997, respectively, and net income of $.12 per share for the year ended December 31, 1996. The Company cannot predict when its recent operating losses may be reversed. Following the Merger, it is anticipated that the registration of the Common Stock under the Exchange Act will be terminated and that the Company will no longer file reports under the Exchange Act. In addition, upon consummation of the Merger, Holdings' obligation under an uncollateralized loan of approximately $17 million from IMC, a subsidiary of IMI (the "Loan"), will become an obligation of the Company's and the option held by IAC Partners to acquire 12% of the common stock of Holdings will become an option to acquire 12% of the Common Stock of the Company. See "-- Background of Change of Control." Federal Income Tax Considerations. The receipt of cash for Common Stock pursuant to the Merger will be a taxable transaction for federal income tax purposes under -8- the Code, and also may be a taxable transaction under applicable state, local and other tax laws. In general, a Shareholder will recognize gain or loss equal to the difference between the tax basis for the Common Stock held by such Shareholder and the amount of cash received in exchange therefor. See "Certain Federal Income Tax Consequences of the Merger." Board and Shareholder Approval; Independent Opinion. On May 20, 1998, the Board of Directors of the Company approved the Merger unanimously. Certain members of the Board of Directors have conflicts of interest. See "Interests of Certain Persons in the Merger; Conflicts of Interest." No unaffiliated advisor to the Board, any group of Directors or the Shareholders was retained prior to May 20, 1998 for purposes of negotiating or reporting on the fairness of the Merger. Subsequently, the Board engaged Laidlaw & Co. ("Laidlaw"), an investment bank, to perform a financial analysis and to consider the fairness of the Merger Consideration. See - "Laidlaw Review." In approving the Merger, the Board considered the recent completion of Holdings' acquisition and its willingness to effect the Merger at the same price per share being paid to minority shareholders, which price Holdings and Mr. Hirschorn had negotiated at arms-length. Holdings, IMI and IAC Partners considered the historic financial results and position of the Company generally when the price between Holdings and Mr. Hirschorn was agreed, made numerous inquiries to confirm the nature and extent of the Company's assets and liabilities, and performed extensive financial analyses. However, prior to approval of the Merger by the Board on May 20, 1998, no going concern or liquidation valuations were performed for the Board. In considering the Merger, the Board of Directors did not undertake any additional financial analyses to determine whether the Merger Consideration was fair to unaffiliated shareholders. Based primarily on the fact that the Merger Consideration of $11.00 per share represents a premium over the recent market price of the Common Stock and that the price was agreed as a result of arms-length negotiations between Holdings and Mr. Hirschorn, the Board of Directors determined that additional financial analysis was not necessary to reach a fairness determination. The Board of Directors also concluded that as a result of the arms-length nature of the negotiations between Holdings and Mr. Hirschorn and the fact that the price per share reflected a premium over the market value of the Company, the process used in arriving at the Merger Consideration was procedurally fair to all shareholders, including those not affiliated with Holdings, IMI, IMC or IAC Partners. Certain members of the Board of Directors have conflicts of interest. See "Interests of Certain Persons in the Merger; Conflicts of Interest." Adoption of the Merger Agreement requires that it be approved by the holders of two-thirds of the shares of Common Stock. Given the approximately 79% interest of Holdings, the favorable vote of Holdings would assure such approval. The Merger has not been structured to require the approval of a majority of unaffiliated Shareholders. Although the net book value per share of Common Stock was $13.71 at March 31, 1998, the Board of Directors, Holdings, IMI, IMC and IAC Partners concluded -9- that recent net losses incurred by the Company of $.78, $.58 and $.41 per share for the quarters ended June 30 and March 31, 1998 and the year ended December 31, 1997, respectively, and the lack of certainty as to when these losses may be reversed, did not make book value a reliable indicator as to the going-concern value of the Company. At June 30, 1998 the net book value per share of Common Stock was $12.34. Although it is impracticable to assign a specific weight given to each of the factors considered by the Board, the most heavily weighted factors in the Board's decision were the premium being paid over the market price of the Common Stock and the arm's length negotiation of the $11.00 price per share paid by Holdings to Mr. Hirschorn. See "-- Acquisition; Purpose of the Merger; Fairness Factors." Laidlaw Review. On July 22, 1998, the Company retained Laidlaw to perform a financial analysis of the Merger and to consider the fairness of the Merger Consideration previously approved by the Board of Directors, from the perspective of shareholders not affiliated with Holdings, IMI, IMC or IAC Partners. Laidlaw was engaged to provide an additional level of procedural fairness to such unaffiliated holders. Laidlaw has no other relationship to the Company, Holdings, IMI, IMC or IAC Partners. Laidlaw, founded in 1842, is a privately held, full service, international investment bank which serves domestic and international corporations and investors. Laidlaw's capabilities include asset management, institutional and retail sales, trading, research and investment banking. As part of its investment banking services, Laidlaw is engaged in public offerings and private placements of both debt and equity securities. Additionally, Laidlaw offers its clients a wide array of advisory services including merger and acquisitions, divestitures, recapitalizations and fairness opinions. On July 31, 1998, Laidlaw delivered its conclusions (the "Laidlaw Review") with respect to the Merger and the fairness of the Merger Consideration to the Board of Directors of the Company. In summary, among other things, Laidlaw (i) reviewed certain publicly available business and financial information, (ii) reviewed certain other information, including financial forecasts provided by the Company, and (iii) met with the Company's and Holdings' management to discuss the business and prospects of the Company. Based on the above procedures Laidlaw concluded that the consideration of $11.00 per share to be paid to the Company's shareholders was fair from a financial point of view. On July 31, 1998 the Board of Directors met to consider the Laidlaw Review. Based on the Laidlaw Review, as well as the various factors relating to the Merger which it had previously considered, and further operating losses incurred since the May 20, 1998 approval of the Merger, the Board of Directors unanimously reapproved the Merger. -10- A copy of the opinion of Laidlaw is available for inspection and copying at the principal executive offices of the Company located at 1160 Commerce Avenue, Bronx, New York during regular business hours (9:00 a.m. to 5:00 p.m.) by any interested Shareholder or representative of a Shareholder who has been so designated in writing. Background of Change of Control. In November 1997, IAC Partners approached Mr. Hirschorn with a view toward arranging a purchase of Mr. Hirschorn's stock in the Company. After a lengthy due diligence investigation, IAC Partners negotiated a preliminary agreement with Mr. Hirschorn and IAC Partners approached IMI, a Netherlands Antilles company engaged in the business of investing in companies in the United States and Europe, about investing in the Company. IMI decided to pursue an acquisition of the Common Stock of the Company held by Mr. Hirschorn and certain other management and institutional shareholders of the Company. IMI organized Holdings as a wholly-owned subsidiary of IMI to effect the stock acquisition. In January 1998, Holdings entered into separate stock purchase agreements with Mr. Hirschorn and the other selling Shareholders. On March 19, 1998, Holdings and Mr. Hirschorn signed an amendment to the stock purchase agreement between them waiving certain financial conditions to closing and effecting a minor change in the number of shares being purchased. On that date, Holdings acquired 2,353,904 shares of the Common Stock of the Company, or approximately 79% of the issued and outstanding shares of the Common Stock of the Company, 1,914,429 of which were purchased from Mr. Hirschorn and 439,475 of which were purchased from the other selling Shareholders, all at a price of $11.00 per share. In order to effect the acquisition, Holdings received an equity contribution of approximately $10 million from IMI and an uncollaterized loan of approximately $17 million from IMC, a subsidiary of IMI. Interest on the unpaid principal amount of the Loan accrues at a rate per annum equal to LIBOR (as defined in the IMC-Holdings loan agreement) plus 3.50 percent. The Loan matures on March 19, 2000. The Company has been informed by Holdings that Holdings will amend the IMC-Holdings loan agreement to allow for additional borrowings by Holdings in order to enable the Company to pay all or a portion of the Merger Consideration. If the Merger is consummated, the Loan, including any additional borrowings, will become an obligation of the Company and its maturity could be accelerated. No arrangements have been made to repay or refinance the Loan. IMI will make a capital contribution to Holdings in an amount sufficient to pay the balance, if any, of the Merger Consideration. Holdings and IAC Partners have agreed that IAC Partners would receive a due diligence and consulting fee equal to 1.5% of the total consideration paid by Holdings in the acquisition and would be granted an option to acquire 12% of the common stock of -11- Holdings on a fully diluted basis, exercisable upon the sale by Holdings of all or a majority of its interest in the Company, at an exercise price equal to the net cost of IMI's equity investment in Holdings on a per share basis. Upon consummation of the Merger, such option would become an option to acquire 12% of the Common Stock of the Company on a fully diluted basis, exercisable upon the sale by IMI of all or a majority of its interest in the Company. Holdings and Messrs. Hemsley and Davies also expect to enter into a management agreement pursuant to which Messrs. Hemsley and Davies will agree to provide certain management services to Holdings relating to its investment in the Company, including providing the services of Messrs. Hemsley and Davies as officers or directors of the Company, if so requested. Immediately after the closing of the acquisition by Holdings, Messrs. Handley, Michael Hirschorn, Kanarek and Svendsen resigned from the Board of Directors of the Company and, on March 20, 1998, the remaining Directors appointed Messrs. Davies, Dineen, Haidinger, Hemsley and Read to join Mr. Hirschorn and Frederic Oran as members of the Board of Directors. On April 28, 1998, the Board of Directors accepted the resignations of Arnold Kanarek and John Handley as senior officers of the Company, which resignations became effective on May 1, 1998. Mr. Hirschorn also resigned as an executive officer of the Company but remains the Chairman of the Board of Directors. On April 28, 1998, the Board of Directors elected Frederic Oran as President and Chief Executive Officer of the Company, Robert N. Bertrand as Senior Vice President of Finance and Administration and Secretary, and Robert A. Schmidt as Senior Vice President of Marketing and Sales, all as of May 1, 1998. Interests of Certain Persons in the Merger; Conflicts of Interest Messrs. Maarten D. Hemsley, Robert M. Davies and Robert N. Haidinger (Directors of the Company) are directors of Holdings. Messrs. James A. Read and Martin Dineen (Directors of the Company) are officers and directors of Holdings. Messrs. Read and Dineen are affiliated with a private management group which is the sole investment advisor to IMI, which owns 100% of the capital stock of Holdings. As a principal of Mezzanine Management Ltd., an investment advisor to IMI, Mr. Read may receive fees from IMI in connection with the provision of services. Mr. Dineen is a salaried employee of Mezzanine Management Ltd. Through companies owned by them, Messrs. Davies and Hemsley control IAC Partners which, if requested, has agreed to provide advisory and consulting services to Holdings. In addition, IAC Partners holds an option to acquire 12% of the common stock of Holdings on a fully diluted basis. Upon consummation of the Merger, such option would become an option to acquire 12% of the Common Stock of the Company on a fully diluted basis. Through IAC Partners, Mr. Davies and Mr. Hemsley have an indirect interest in 80% of such option and 80% to 100% of fees for such advisory and consulting services depending on the type of services provided. Mr. Haidinger is president of a company in which IMI has a substantial interest. Although Mr. Haidinger may not have a conflict of interest that is financial in nature, his relationship with IMI may be such that -12- scenarios may arise where the interests of the Company differ from those of IMI. The nature of these conflicts is such that the Directors indicated may have an interest in the Company beyond their status as directors. Any increase in the value of the Company may benefit not only Holdings and persons affiliated or associated with Holdings (including its directors), but also management and employees of the Company. Regulatory Approvals The Company does not believe that any federal or state requirements must be complied with or that approval must be obtained in connection with the Merger, other than filings required pursuant to federal securities laws and the filing of the Certificate of Merger with the Secretary of State of New York and the Secretary of State of Delaware. Material Federal Income Tax Consequences of the Merger The receipt of cash for Common Stock pursuant to the Merger will be a taxable transaction for federal income tax purposes under the Code, and also may be a taxable transaction under applicable state, local and other tax laws. In general, a Shareholder will recognize gain or loss equal to the difference between the tax basis for the Common Stock held by such stockholder and the amount of cash received in exchange therefor. Such gain or loss will be capital gain or loss if the Common Stock in the hands of the Shareholder is a capital asset and, in the case of non-corporate Shareholders, generally will be long-term gain or loss if the holding period for the Common Stock is more than eighteen months prior to the Effective Date and mid-term gain or loss if the holding period is more than one year but not more than eighteen months prior thereto. In certain circumstances, Shareholders who are individuals may be entitled to preferential treatment for long-term and mid-term capital gains; however, the ability to offset capital losses against ordinary income is limited. If the holding period is less than one year then the gain or loss will be short term gain or loss. Long-term capital gains recognized by Shareholders who are individuals are taxable at a maximum rate of 20% and mid-term capital gains are taxable at a maximum rate of 28% (as compared with a maximum rate of 39.6% on ordinary income). Corporations generally are subject to tax at a maximum rate of 35% on both capital gains and ordinary income. The distinction between capital gain and ordinary income may be relevant for certain other purposes, including the taxpayer's ability to utilize capital loss carryovers to offset any gain recognized. If a Shareholder has long-term, mid-term and short-term capital transactions during the year, a multi-step netting process occurs. First, gains and losses within each group are netted separately. The long-term capital gains, if any, are offset by net short-term capital losses, if any. Short-term capital losses are then applied to reduce any mid-term capital gain from the 28% group. A net loss from the 20% group is used first to re- -13- duce net gain from the 28% group. A net loss in the 28% group may be used to offset gain from the 20% group. If the result of combining all of the Shareholder's capital gains and losses during the taxable year is a net capital gain, the full amount of such gain will be included in the Shareholder's gross income. Any net capital gain that is attributable to a particular rate group is taxed at that group's marginal tax rate. In general, if the result of combining all such capital gains and losses recognized during the taxable year is a net capital loss, a Shareholder that is a corporation may not deduct any portion of such loss, and a Shareholder that is not a corporation (such as an individual) may deduct such loss only to the extent that it does not exceed $3,000 ($1,500 in the case of a married individual filing a separate return), with the remainder available for carryover into future taxable years. The foregoing discussion may not be applicable to Shareholders who acquired their Common Stock pursuant to the exercise of options or other compensation arrangements or who are not citizens or residents of the United States or who are otherwise subject to special tax treatment under the Code. THE FOREGOING DISCUSSION IS THE COMPANY'S INTERPRETATION OF THE TAX CONSEQUENCES OF THE MERGER AND IS BASED ON THE PROVISIONS OF THE CODE, TREASURY REGULATIONS, RULINGS AND JUDICIAL DECISIONS NOW IN EFFECT, ALL OF WHICH ARE SUBJECT TO CHANGE. ANY SUCH CHANGES MAY BE APPLIED RETROACTIVELY IN A MANNER THAT COULD ADVERSELY AFFECT SHAREHOLDERS. EACH SHAREHOLDER SHOULD CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO IT, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS OF THE RECEIPT OF CASH FOR COMMON STOCK PURSUANT TO THE MERGER. The Merger Agreement The following is a summary of the material terms of the Merger Agreement, a copy of which is attached as Exhibit A to this Proxy Statement. Such summary is qualified in its entirety by reference to the Merger Agreement. The Merger Agreement provides that, upon the terms and subject to the conditions thereof, and in accordance with the BCL, at the Effective Time of the Merger, Holdings shall be merged with and into the Company, with the Company being the surviving corporation. The Merger Agreement provides that at the Effective Time, by virtue of the Merger and without any action on the part of Holdings, the Company or the holders of Common Stock: -14- (a) Each share of Common Stock issued and outstanding immediately prior to the Effective Time (other than Common Stock owned by Holdings and Common Stock held by the Company as treasury stock) will be cancelled and will be converted automatically into the right to receive, in cash, from the Company an amount equal to $11.00 per share payable, without interest, to the holder of each such share, upon surrender of the certificate that formerly evidenced such share; (b) Each share of common stock of Holdings issued and outstanding immediately prior to the Effective Time will be cancelled and converted into a new share of common stock of the Company issued and outstanding, and no payment or distribution will be made with respect thereto; and (c) Each share of Common Stock held by Holdings or in the Company's treasury will be cancelled. Employees holding options under the Company's 1995 Stock Option Plan, as amended, will be entitled, under the terms of the plan, to receive the difference between the exercise price of each such option per share and $11.00 multiplied by the number of shares of Common Stock subject to such options. Under the Merger Agreement, the respective obligations of each party to effect the Merger are subject to the satisfaction at or prior to the Effective Time of the following conditions: (a) the Merger Agreement and the transactions contemplated thereby have been approved and adopted by the affirmative vote of the holders of a two-thirds of the Company's Common Stock; (b) there is no statute, rule, injunction or order that would prevent consummation of the Merger; (c) all required authorizations, consents and approvals have been obtained; (d) Holdings having obtained funds or arranged financing sufficient to pay the Merger Consideration; and (e) all agreements and obligations of the parties under the Merger Agreement have been performed and complied with. Termination. The Merger Agreement may be terminated and the Merger and the other transactions contemplated by the Merger Agreement may be abandoned at any time prior to the Effective Time, notwithstanding any requisite approval and adoption of the Merger Agreement and the transactions contemplated thereby by the shareholders of the Company or by Holdings. Amendment and Waiver. The Merger Agreement may be amended in writing by the parties thereto or by their respective Boards of Directors at any time prior to the Effective Time. Except as otherwise provided by the Merger Agreement, any party thereto may (i) extend the time for the performance of any obligation or other act of any other party thereto, (ii) waive any inaccuracy in the representations and warranties contained therein and (iii) waive compliance with any agreement or condition contained therein. -15- Accounting Treatment The Merger wll be treated as a pooling of interests for accounting purposes. Stock Prices and Suspension of Dividends The Company's Common Stock is traded over the counter on the Nasdaq National Market under the symbol IACI. As of August 3, 1998, there were approximately 600 shareholders of record. Market price ranges (high and low bid quotations) obtained from the Nasdaq Stock Market's Summary of Activity for the Common Stock for the third calendar quarter through August 3, 1998 and the first and second calendar quarters of 1998 and for each quarter of the fiscal years ended December 31, 1995, 1996 and 1997 were as follows: High Low ---- --- 1995 First Quarter 16 1/4 15 Second Quarter 16 14 1/2 Third Quarter 16 9 3/4 Fourth Quarter 11 1/2 10 1996 First Quarter 11 9 3/4 Second Quarter 11 1/2 10 Third Quarter 11 9 1/2 Fourth Quarter 11 1/4 8 1/2 1997 First Quarter 16 8 3/4 Second Quarter 11 1/4 8 Third Quarter 9 1/2 8 1/4 Fourth Quarter 11 1/4 8 1/2 1998 First Quarter 11 9 7/8 Second Quarter 10 7/8 9 1/16 Third Quarter (through August 3, 1998) 10 1/8 10 The closing bid price of the Company's Common Stock on May 19, 1998, the day before the Merger was announced to the public, was $9.25. -16- The Board of Directors did not declare a dividend for the year ended December 31, 1997. A dividend of $.10 per share was paid on March 21, 1997 to shareholders of record on March 14, 1997 for the year ended December 31, 1996. A dividend of $.10 per share was paid on March 22, 1996 to shareholders of record on March 15, 1996 for the year ended December 31, 1995. Information With Respect to Holdings, IMI, IMC and IAC Partners The sole stockholder of Holdings is IMI. The address of the principal executive offices of IMI is John B. Gorsiraweg 14, P.O. Box 3889, Curacao, Netherlands Antilles. IMI is a private company which invests in the debt and equity securities of corporations in Europe and the United States. IMC is a wholly owned subsidiary of IMI. Its principal executive offices are located at Herengracht 424, 1017BZ, Amsterdam, The Netherlands and its principal business is investing in the debt and equity securities of corporations in Europe and the United States. IAC Partners is a partnership whose principal executive offices are located at 82 Powder Point Avenue, Duxbury, Massachusetts 02332. IAC Partners was formed in connection with the Acquisition and its only continuing business is providing advisory and consulting services to Holdings. Set forth below is certain information concerning the Directors and Executive Officers of Holdings, IMI, IMC and IAC Partners.
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 to IMI) One Southampton Street London WC2/ROLR England Robert M. Davies Merchant Banking United Kingdom c/o The Menai Group LLC Managing Director 100 First Stamford Place Menai Capital LLC 6th Floor Stamford, Connecticut 06902 Maarten D. Hemsley Merchant Banking United Kingdom c/o Bryanston Management Ltd. Managing Director 82 Powder Point Avenue Menai Capital LLC Duxbury, Massachusetts 02332 Martin P. Dineen Vice President USA c/o Mezzanine Management LLC Mezzanine Management LLC 100 First Stamford Place - 6th Floor Stamford, Connecticut 06902 -17- Robert M. Haidinger President, CEO USA c/o JJI Lighting Group JJI Lighting Group 67 Holly Hill Lane Greenwich, Connecticut 06830
- -------------------- Messrs. Read and Haidinger have been at their respective present positions for more than the last 5 years. Prior to his current employment, Mr. Davies was Vice President of Wexford Capital Corporation from 1994 to March 1997. From September 1993 to May 1994, he was Managing Director of Steinhardt Enterprises, Inc. and from 1987 to August 1993, he was Executive Vice President of the Hallwood Group Incorporated. Mr. Dineen was involved in banking with Chase Manhattan Bank from 1989 to 1995 and with Bank of Boston from 1995 to 1997. In addition to his position with Menai Capital LLC, Mr. Hemsley has been President of Bryanston Management Ltd. since 1993. Directors of IMI and IMC Each of the persons named below is a director of both IMI and IMC other than MeesPierson Trust (Curacao) N.V. which is a director of IMI but not IMC and Mr. Schouten who is a director of IMC but not IMI. Other than Mr. Schouten, whose principal occupation is to act as a director of IMC (and First Britannia Mezzanine Capital B.V., an unrelated investing corporation advised by Mezzanine Management Ltd.), IMI and IMC have no executive officers.
Name and Business Address Principal Occupation Citizenship D. Thomas Abbott Chairman USA c/o Mees Pierson Holdings, Inc. Mees Pierson Holdings, Inc. 31 Stamford Plaza 310 Tresser Boulevard Stamford, CT 06901-3239 Ian Cotterill Director, United Kingdom c/o HSBC Investment Bank plc Hongkong Shanghai Bank Vintner's Place 68 Upper Thames Street London EC4V 3BJ, England Franz Horhager Director, Austria c/o Bank Austria AG Bank Austria AG Am Hof 2 A-1010 Vienna, Austria A. Kipp Koester Managing Director, USA c/o The Northwestern Mutual Life The Northwestern Mutual Life Insurance Company Insurance Company 720 East Wisconsin Avenue Milwaukee, Wisconsin 53202-4797 -18- Hamish Mair Associate Director, United Kingdom c/o Scottish Eastern Investment Martin Currie Investment Trust plc Management Ltd. Saltire Court 20 Castle Terrace Edinburgh EH1 2ES Scotland MeesPierson Trust (Curacao) N.V. Trust company John B. Gorsiraweg 14 Netherlands Antilles P.O. Box 3889 Curacao Netherlands Antilles Muneef Othman Executive Director United Arab Abu Dhabi Investment Authority Abu Dhabi Investment Authority Emirates P.O. Box 3600 Abu Dhabi, United Arab Emirates Jacobus Schouten Director, IMC The Netherlands c/o International Mezzanine and First Britannia Mezzanine Capital B.V. Capital B.V. Herengracht 424 1017 BZ Amsterdam The Netherlands Charles E. Symington Vice President, USA c/o Metropolitan Life Investment Metropolitan Life Investment Company Company 43 Pippins Way Morristown, N.J. 07960 Stephen Weber Director Equities United Kingdom c/o Norwich Union Life & Pensions Norwich Union Life & Insurance Limited Society P.O. Box 150 37 Surrey Street Norwich NR1 3UZ England
- ----------------------------- From December 1993 to May 1995, Mr. Abbot was Chairman and Chief Executive Officer of Savin Corp. Prior to December 1993, he was President of Harvest Group, Inc. Messrs. Horhager, Cotterill, Symington, Weber, Mair, Othman and Schouten have been at their respective present positions for more than the last five years. From 1993 to 1997, Mr. Koester was Vice President of Northwestern Mutual Life Insurance Company.
Partners of IAC Partners Name and Business Address Principal Occupation Citizenship Robert M. Davies(1) Merchant Banking United Kingdom c/o The Menai Group LLC Managing Director -19- 100 First Stamford Place Menai Capital LLC 6th Floor Stamford, Connecticut 06902 Maarten D. Hemsley(1) Merchant Banking United Kingdom c/o Bryanston Management Ltd. Managing Director 82 Powder Point Avenue Menai Capital LLC Duxbury, Massachusetts 02332 Robert P. Schreimer Attorney USA c/o StoneRidge Partners, Inc. 650 Third Avenue - 3rd Floor New York, New York 10016 David Stoller Attorney USA c/o Millbank, Tweed, Hadley & McCloy 1 Chase Manhattan Plaza New York, New York 10005
- ----------------------------- (1) The interests of Messrs. Davies and Hemsley in IAC Partners are held by the Menai Group LLC, which is wholly owned by Mr. Davies , and Bryanston Management Ltd., which is wholly owned by Mr. Hemsley. Expenses It is estimated that the following expenses will be incurred in connection with the Merger, all of which have been or will be paid by the Company: SEC Filing Fee.................................. $ 1,380 Laidlaw & Co opinion fee........................ 50,000 Legal Fees and Expenses......................... 100,000 Accounting Fees and Expenses.................... 10,000 Printing Expenses............................... 5,000 Miscellaneous................................... 3,620 ------- Total.................................. $170,000 ======= In connection with the Merger, neither the Company nor Holdings anticipate incurring any appraisal or solicitation fees or expenses. Proxies may be solicited by employees of the Company without additional compensation. -20- Independent Auditors PriceWaterhouseCoopers LLP are the Company's independent auditors. Representatives of PriceWaterhouseCoopers LLP are expected to be present at the Meeting. They will have the opportunity to make a statement if they so desire and are expected to be available to respond to appropriate questions. Other Matters The Board of Directors knows of no other matters which will be presented for consideration at the Meeting. However, if any other matter is properly brought before the Meeting, it is the intention of the persons named in the proxy forms to vote the Proxies in accordance with their best judgment. Shareholder Proposals If the Merger is consummated, no public annual meetings of shareholders of the Company will be held in the future. If the Merger is not consummated, and because the date of any such meeting cannot currently be determined, Shareholders will be informed (by press release or other means determined reasonable by the Company) of the date of such meeting and the date that Shareholder proposals for inclusion in the proxy material must be received by the Company, which proposals must comply with the rules and regulations of the Securities and Exchange Commission ("SEC") then in effect. Compliance with Section 16(a) of the Securities Exchange Act of 1934 Section 16(a) of the Exchange Act requires the Company's executive officers and directors and persons who own more than 10 percent of the outstanding Common Stock to file reports of ownership and changes in ownership with the SEC. Based solely on reports and other information submitted by executive officers and directors, the Company believes that during the year ended December 31, 1997, and prior fiscal years, each of its executive officers, directors and persons who owns more than 10 percent of the outstanding Common Stock filed all reports required by Section 16(a). Available Information The Company is subject to the informational requirements of the Exchange Act and, in accordance therewith, files reports, proxy statements and other information with the SEC. Such reports and other information may be inspected and copied or obtained by mail upon payment of the SEC's prescribed rates at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the New York Regional Office of the SEC, 7 World Trade Center, New York, New York 10048. The SEC also maintains a Web site that contains reports, proxy, information state- -21- ments and other information regarding registrants that file electronically with the SEC. The address of such site is http://www.sec.gov. Accompanying and forming a part of this Proxy Statement is the Company's Annual Report on Form 10-K (the "Annual Report") for the year ended December 31, 1997, as amended. In addition, the Company's Quarterly Reports on Form 10-Q for the quarterly periods ended March 31 and June 30, 1998 accompany and form a part of this Proxy Statement. Financial Information Selected Financial Data The following table sets forth selected consolidated financial data of the Company for each of the last five years:
1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- (In thousands, except per share amounts) Net Sales $ 72,911 $ 73,623 $ 70,633 $ 71,736 $ 86,571 Net (Loss) Income $ (1,218) $ 364 $ (448) $ (1,701) $ 3,918 Basic and Diluted (Loss) Income per common share $ (0.41) $ 0.12 $ (0.15) $ (0.57) $ 1.32 ---------- ---------- ---------- ----------- ---------- Total Assets $ 74,262 $ 72,845 $ 75,716 $ 71,730 $ 73,124 Long Term Obligations $ 5,081 $ 4,499 $ 4,683 $ 2,431 $ 2,504 Cash Dividends per Common Share* None $ 0.10 $ 0.10 $ 0.10 $ 0.30
* Declared and paid in March of subsequent year. -22- REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Industrial Acoustics Company, Inc.: We have audited the consolidated financial statements and financial statement schedule of INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES as appearing in of this Proxy Statement. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We did not audit the financial statements and financial statement schedule of Industrial Acoustics Company Limited and Subsidiaries, a wholly owned subsidiary, which statements reflect total assets of $17,104,000 and $18,690,000 at December 31, 1997 and 1996, respectively, and total revenues of $19,310,000, $22,126,000 and $23,731,000 for the years ended December 31, 1997, 1996 and 1995, respectively. Those statements and schedule were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Industrial Acoustics Company Limited and Subsidiaries, is based solely on the report of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Industrial Acoustics Company, Inc. and Subsidiaries as of December 3l, 1997 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 3l,1997 in conformity with generally accepted accounting principles. In addition, in our opinion, based on our audits and the report of other auditors, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. Coopers & Lybrand L. L. P. New York, New York March 11, 1998 -23- REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of Industrial Acoustics Company Limited We have audited the consolidated balance sheets of Industrial Acoustics Company Limited and subsidiaries (a wholly owned subsidiary of Industrial Acoustics Company Inc.) as of 31st December 1997 and 1996 and the related consolidated statements of income and retained earnings, and cash flows and the financial statement schedule for each of the three years in the period ended 31st December 1997. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Industrial Acoustics Company Limited and subsidiaries as of 31st December 1997 and 1996 and the consolidated results of their operations and their cash flows for each of the three years in the period ended 31st December 1997 in conformity with accounting principles generally accepted in the United States. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly. in all material respects, the information required to be included therein. Kidsons Impey Registered Auditors Chartered Accountants London February 12, 1998 -24-
INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 1997 and 1996 (in thousands, except per share data) 1997 1998 ---- ---- ASSETS: CURRENT ASSETS: Cash and cash equivalents.................................................. $ 3,032 $ 1,254 Short-term investments, available for sale................................. 457 218 Receivables................................................................ 17,843 22,713 Costs and estimated earnings in excess of billings on uncompleted contracts................................................................ 6,774 5,108 Inventories................................................................ 5,856 4,605 Income tax receivable...................................................... 685 Deferred income taxes...................................................... 215 130 Prepaid expenses........................................................... 1,609 1,473 ----- ----- Total Current Assets 35,786 36,186 MARKETABLE SECURITIES, available for sale....................................... 22,328 20,584 PROPERTY, PLANT AND EQUIPMENT, net.............................................. 12,540 13,028 DEFERRED INCOME TAXES........................................................... 975 124 OTHER ASSETS.................................................................... 2,633 2,923 ----- ----- Total Assets $74,262 $72,845 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY: CURRENT LIABILITIES: Loans payable................................................................ $ 9,656 $ 8,775 Accounts payable and accrued expenses........................................ 16,167 15,606 Income taxes................................................................. 193 Customer deposits............................................................ 730 389 Current portion of long-term debt and capital lease obligations.............. 78 71 Billings In excess of costs and estimated earnings on uncompleted contracts.................................................................. 1,491 1,128 ----- ----- Total Current Liabilities 28,315 25,969 CAPITAL LEASE OBLIGATIONS....................................................... 3,055 3,132 DEFERRED INCOME TAXES........................................................... 687 DEFERRED COMPENSATION........................................................... 1,339 1,367 ----- ----- Total Liabilities 33,396 30,468 ====== ====== COMMITMENTS SHAREHOLDERS' EQUITY: Common Stock, par value $.1 0 per share; authorized 5,000 shares; issued and outstanding 2,979 shares, excluding 87 shares held in treasury at par value 298 298 Additional paid-in capital................................................... 2,223 2,223 Equity Adjustments: Cumulative currency translation adjustment................................. (117) 152 Net unrealized gain (loss) on marketable securities........................ 107 (167) Retained earnings............................................................ 38,355 39,871 ------ ------ -25- Total Shareholders' Equity 40,866 42,377 ------ ------ Total Liabilities and Shareholders' Equity $74,262 $72,845 ======= =======
See notes to consolidated financial statements. -26-
INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS of OPERATIONS for the years ended December 31, 1997,1996 and 1995 (in thousands, except per share daft) 1997 1996 1995 ---- ---- ---- REVENUES Net sales.................................................... $72,911 $73,623 $70,633 Interest..................................................... 1,615 1,609 1,553 Other........................................................ 738 918 574 ------ ------ ------ 75,264 76,150 72,760 ------ ------ ------ COST AND EXPENSES Cost of products sold........................................ 61,934 62,105 59,657 Selling, administrative and general.......................... 13,474 12,680 13,068 Interest..................................................... 939 1,078 586 ------ ------ ------ 76,347 75,863 73,311 ------ ------ ------ (Loss) income before income taxes (1,083) 287 (551) Provision (benefit) for income taxes............................ 135 (77) (103) ------ ------ ------ Net (loss) income ($1,218) $364 ($448) ======= ====== ====== Basic and diluted net (loss) income per common share............ ($0.41) $0.12 ($0.15) ======= ====== ====== Weighted Average Number of Shares Outstanding: Basic........................................................ 2,979 2,979 2,979 ======= ====== ====== Diluted...................................................... 2,979 2,990 2,979 ======= ====== ======
See notes to consolidated financial statements -27- INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS of SHAREHOLDERS' EQUITY for the years ended December 31, 1997, 1996 and 1995 (in thousands, except per share data) Common Stock* Equity Adjustments ------------- ------------------ Net Unrealized Number Additional Cumulative Gain (Loss) on of Paid-in Currency Marketable Retained Shares Amount Capital Translation Securities Earnings Total ------ ------ ------- ----------- ---------- -------- ----- Balance at December 3l, 1994.. 2,979 $298 $2,223 ($325) ($580) $40,550 $42,166 Net loss for 1995........... (448) (448) Cash dividends paid -- $.10 per share.................. (298) (298) Equity adjustments: Currency translation....... (20) (20) Net unrealized gain on marketable securities, net of income taxes of $306................... 1,034 1,304 ------- ------ ------- ------ ------ ------ ------ Balance at December 31, 1995.. 2,979 298 2,223 (345) 454 39,804 42,434 Net income for 1996......... 364 364 Cash dividends paid -- $.10 per share.................. (297) (297) Equity adjustments: Currency translation....... 497 497 Not unrealized loss on marketable securities, net of income taxes (621) of $111................... (621) ------- ------ ------- ------ ------ ------ ------ Balance at December 31, 1996.. 2,979 298 2,223 152 (167) 39,871 $42,377 Net loss for 1997........... (1,218) (1,218) Cash dividends paid -- $.1 0 per share.................. (298) (298) Equity adjustments: Currency translation....... (269) (269) Not unrealized gain on marketable securities, net of Income taxes 274 274 of $182................... ------- ------ ------- ------ ------ ------ ------ Balance at December 31, 1997 2,979 $298 $2,223 ($117) $ 107 $38,355 $40,866 ======= ====== ======= ====== ====== ======= ======= * Excluding common stock held in treasury of 87 shares for all years presented.
See notes to consolidated financial statements -28-
INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS of CASH FLOWS for the years ended December 31, 1997, 1996 and 1995 (in thousands, except per share data) 1997 `1996 1995 ---- ----- ---- OPERATING ACTIVITIES Net (loss) income............................................ ($1,218) 364 ($448) Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization.............................. 1,267 1,305 1,204 Deferred income taxes...................................... (431) (184) 102 Deferred compensation...................................... (28) 90 50 Changes in operating assets and liabilities: Receivables................................................ 4,489 4,731 2,736 Costs and estimated earnings in excess of billings on uncompleted contracts..................................... (1,667) 2,230 (3,288) Inventories and prepaid expenses........................... (1,447) (834) 395 Income tax receivable...................................... 685 (685) -- Accounts payable and accrued expenses...................... 820 (776) 400 Income taxes 193 (131) 1,329 Billings in excess of costs and estimated earnings on uncompleted contracts..................................... 364 103 (2,105) Customer deposits.......................................... 346 103 (444) Other assets............................................... 345 (2,537) (121) ------ ------- ------- Net cash Provided by (used in) operating activities 3,718 3,779 (190) ------ ------- ------- INVESTING ACTIVITIES Purchase of property, plant and equipment.................... (1,024) (1,956) (3,964) Sales of short-term investments and marketable securities.... 3,564 15,184 3,176 Purchases of short-term investments and marketable securities (5,091) (14,103) (3,738) ------ ------- ------- Net cash used in investing activities (2,551) (875) (4,526) ------ ------- ------- FINANCING ACTIVITIES Loans payable, net........................................... 1,018 (2,720) 3,412 Payments on long-term debt and capital lease obligations..... (72) (13) (194) Dividends paid............................................... (298) (297) (298) ------ ------- ------- Net cash provided by (used in) financing activities 648 (3,030) 2,920 ------ ------- ------- FOREIGN EXCHANGE Effect of exchange rate changes on cash...................... (37) (126) 29 Increase (decrease) in cash and cash equivalents 1,778 (252) (1,767) Cash and cash equivalents at beginning of year.................. 1,254 1,506 3,273 ------ ------- ------- Cash and cash equivalents at end of year $ 3,032 $1,254 $1,506 ======= ======= ======= -29-
See notes to consolidated financial statements. -30- INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES NOTES to CONSOLIDATED FINANCIAL STATEMENTS (Dollars and shares in thousands, except per share data) NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All significant intercompany accounts and transactions have been eliminated. Management's Use of Estimates: In conformity with generally accepted accounting principles, management must make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash Equivalents: The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Inventories: Inventories are stated at the lower of cost (first-in, first-out method) or market. Long-term Construction Contracts: Estimated earnings on long-term construction type contracts are recognized on the percentage-of-completion method, measured by the percentage of costs incurred to date to estimated total costs for each contract. Periodic reviews of estimated final revenues and costs during the terms of such contracts may result in revisions of contract estimates, the effects of which are recognized in the periods in which the revisions are determined. Provision for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Included in receivables are retainages of $1,054 and $844 at December 31, 1997 and 1996, respectively. The Company expects to collect the open retainage in 1998. -31- INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued (Dollars and shares in thousands, except per share data) Before tax operating results for 1997 and 1996 were decreased by $1,066 and $2,250, net, due to changes in revenues and cost estimates on long-term contracts. Property, Plant and Equipment: Property, plant and equipment are carried at cost. Depreciation and amortization of property, plant and equipment, including leased property, are provided principally by the straight-line method based over the estimated useful lives of the depreciable assets or the term of the related leases, if less. The cost and accumulated depreciation or amortization of assets refined or sold are removed from the respective accounts and any gain or loss is recognized in operations. Research and Development: Research and development expenditures, which are expensed as incurred, amounted to $825, $944 and $872 in 1997, 1996 and 1995, respectively. Short-Term Investments and Marketable Securities: The Company primarily invests its available funds into U.S. federal, state and local government and corporate debt securities. The Company considers such investments to be "available-for-sale" as defined by Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for certain Investments in Debt and Equity Securities". SFAS 115 requires that the difference between the carrying value and market value, as of the balance sheet date, of available for-sale-investments be recorded as an adjustment to shareholders' equity. In the event of a decline in market value below carrying value ("Decline"), which is other than temporary and resulting from factors other than changes in interest rate, such Decline would be included in the operating results of the Company in the period in which it occurs. In addition, if a Decline exists for an investment which has been identified to be sold, such Decline would also be included in operating results in the period in which it is identified to be sold. During the year ended December 31, 1997, there were no Declines. Earnings per Common Share Data: The Company adopted SFAS No. 128, "Earnings per Share," in 1997. As required by the statement, the Company restated all prior-period per share data presented. SFAS No. 128 requires presentation of both basic and diluted earnings per share. Basic -32- INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued (Dollars and shares in thousands, except per share data) earnings per share are calculated based on the weighted average number of shares of common stock outstanding during the reporting period. Diluted earnings per share are calculated giving effect to all potentially dilutive common shares, assuming such shares were outstanding during the reporting period. As required by SFAS No. 128, the Company has provided a reconciliation of basic weighted average shares to diluted weighted average shares within the table outlined below. The conversion of diluted shares has no impact on the Company's operating results. Options to purchase 200,000 shares of common stock were also outstanding at December 31, 1997 and 1995 but were not included in the computation of diluted earnings per share because they would have had an anti-dilutive effect on the earnings per share.
1997 1996 1995 ---- ---- ---- Weighted average number of shares - basic............................. 2,979 2,979 2,979 Dilutive effect of shares issuable as of year end under the stock option plan.................................................. -- 11 -- ----- ----- ----- Weighted average number of shares - diluted........................... 2,979 2,990 2,979 ===== ===== =====
Concentration of Credit Risk: Financial instruments which potentially subject the Company to concentrations of credit risk include cash, cash equivalents, short-term investments, marketable securities and accounts receivable. The Company holds no collateral for these financial instruments. The Company places its available funds into government and corporate debt securities as well as investments with financial institutions and, by policy, limits the amount of credit exposure to any one issuer. Except for contracts with the United States Government, concentration of credit risk with respect to accounts receivables are limited due to a large diversified customer bass which is not concentrated in any one geographic area. Some of the Company's contracts with the United States Government have delivery schedules extending for more than one year. Under applicable United States Government procedures, such contracts may be subject to annual funding. Accordingly, there is some risk, even after a United States Government contract has been awarded to the Company, that the necessary funding for purposes of the contract may not be made available, in subsequent years, to the relevant United States Government agency. United States Government contracts may also be subject to cancellation, in which event, the Company would be entitled to recover incurred costs on completed units, work in progress and profits associated with such costs. -33- INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued (Dollars and shares in thousands, except per share data) Recently Issued Accounting Standards: In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information." SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in full set general purpose financial statements. SFAS No. 131 establishes accounting standards for the way that public business enterprises report selected information about operating segments and requires that those enterprises report selected information about operating segments in interim financial reports issued to shareholders. SFAS No. 130 and SFAS No. 131 are required to be adopted by 1998. The Company is currently evaluating the impact, if any, of SFAS No. 130 and SFAS No. 131. Foreign Currency Translation: All non-U.S. subsidiaries consider their local currencies to be their functional currencies. Net assets of non-U.S. subsidiaries are translated into U.S. dollars based on the current rates of exchange. Income and expense items are translated at the average exchange rate for the year. The resulting translation adjustments are recorded directly into a separate component of shareholders' equity. Foreign currency transaction gains and losses result from the periodic fluctuation in exchange rates, as measured at the respective balance sheet dates, for transactions denominated in currencies other than the respective functional currencies used by the Company and its subsidiaries. Such gains and losses are included in the Company's operating results in the period in which the exchange rate changes. The net foreign currency transaction (losses) gains included in (loss) income before taxes for 1 997,1996 and 1995 were ($169), $211 and ($52), respectively. These net foreign currency translation (losses) gains include ($149) and $366 in 1997and 1966, respectively, applicable to a U.S. dollar demand loan payable to the Company by its subsidiary, Industrial Acoustics Company Ltd (IAC Ltd). Reclassification: Certain items in 1996 and 1995 have been reclassified to conform to the 1997 presentation. -34- INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued (Dollars and shares in thousands, except per share data) NOTE B - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES The Company considers its marketable securities to be "available-for-sale", as defined by SFAS 115, and, accordingly, unrealized holding gains and losses are excluded from operations and reported as a net amount in a separate component of shareholders' equity. The following table summarizes the aggregate fair value of short-term investments and marketable securities, gross unrealized holding gains and losses, and the amortized cost basis of short term investments and marketable securities at December 31, 1997:
Unrealized Holding ------------------ Amortized Market Description Cost Basis Value Gains (Losses) Net - ----------- ---------- ----- ----- -------- --- Maturities within one year: Corporate debt securities............... $ 452 $ 457 $ 5 $ 0 $ 5 ------- ------- ------ ------ ------ 452 457 5 0 5 ------- ------- ------ ------ ------ Maturities between one and five years: Corporate debt securities............... 3,616 3,698 116 (34) 82 U.S. Government securities.............. 501 518 17 0 17 State and Local Government securities... 186 191 5 0 5 ------- ------- ------ ------ ------ 4,303 4,407 138 (34) 104 ------- ------- ------ ------ ------ Maturities between five and ten years: Corporate debt securities............... 7,393 7,393 103 (103) (0) U.S. Government securities.............. 254 251 0 (3) (3) State and local government securities... 120 122 3 (1) 2 ------- ------- ------ ------ ------ 7,767 7,766 106 (107) (1) ------- ------- ------ ------ ------ Maturities after ten years Corporate debt securities............... 9,495 9,572 165 (88) 77 State and local government securities... 590 583 9 (16) (7) ------- ------- ------ ------ ------ 10,085 10,155 174 (104) 70 ------- ------- ------ ------ ------ $22,607 $22,785 $ 423 ($245) $178 ======= ======= ====== ====== ======
The aggregate net unrealized gain of $178, less applicable taxes of $71, has been included as a $107 addition to shareholders' equity at December 31, 1997. At December 31, 1996, the aggregate net unrealized loss of $278, less applicable taxes of $111, was included as a $167 reduction in shareholders' equity. Realized gains and losses are included as a component of other income. For the year ended December 31, 1997, gross realized gains were $89 and gross realized losses were $38 for a total not realized gain of $51. For the years ended December 31, 1996 and 1995, net realized gains (losses) were $249 and ($120), respectively. In computing realized -35- INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued (Dollars and shares in thousands, except per share data) gains and losses, the Company computes the cost of its investments on a specific identification basis. Such cost includes the direct costs to acquire the securities, adjusted for the amortization of any discount or premium. The fair value of investments has been estimated based on quoted market prices. -36- INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued (Dollars and shares in thousands, except per share data) NOTE C - SUPPLEMENTAL BALANCE SHEET INFORMATION
December 31 1997 1998 ---- ---- RECEIVABLES: Completed orders, less allowances for doubtful accounts (1997-- $534 1996-- $913).............................................. $15,266 $18,082 Billings on uncompleted contracts........................................ 1,560 3,648 Other.................................................................... 1,017 983 ------- ------- $17,843 $22,713 ======= ======= COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS: Direct costs incurred on uncompleted contracts........................... $32,983 $45,776 Estimated earnings....................................................... 15,376 21,049 ------- ------- 48,359 66,825 Low billings to date..................................................... (43,076) (62,845) ------- ------- $5,283 $3,980 ======= ======= Theabove balance is included in the accompanying balance sheets under the following captions: Costs and estimated eamings in excess of billings on uncompleted contracts $6,774 $5,108 Billings in excess of costs and estimated earnings on uncompleted contracts (1,491) (1,128) ------- ------- $5,283 $3,980 ======= ======= INVENTORIES: Materials and supplies................................................... $2,246 $1,492 Work in process.......................................................... 3,610 3,113 ------- ------- $5,856 $4,605 ======= ======= PROPERTY, PLANT AND EQUIPMENT: Land..................................................................... $203 $203 Buildings................................................................ 12,252 12,537 Machinery, fixtures and equipment........................................ 10,796 9,931 Leasehold improvements................................................... 565 539 Lab and wind tunnel...................................................... 245 245 ------- ------- 24,061 23,455 Less allowances for depreciation and amortization........................... (11,521) (10,427) ------- ------- $12,540 $13,028 ======= =======
In 1995, IAC Ltd. completed the acquisition of a 90,000 square foot factory in Winchester, England for $3,146. This purchase price and costs related to factory renovations were substantially financed with the proceeds of a short-term loan from Midland Bank. IAC Ltd moved to the Winchester facilities during the second quarter of 1996. For 1996, selling, administrative and general expenses include $683 attributable to the relocation. -37- INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued (Dollars and shares in thousands, except per share data) Fully depreciated assets were $4,181 and $3,317 in 1997 and 1996, respectively. OTHER ASSETS: In 1992, the Company entered into a Split-Dollar Life Insurance Agreement with Michael Hirschorn, a director of the Company, wherein the Company agreed to advance up to one-half of the amount of premiums on an insurance policy owned by Michael Hirschorn on the life of Martin Hirschorn, his father and President of the Company. The Company shall be reimbursed for such advances, which are non-interest bearing, by Michael Hirschorn upon the earlier to occur of the surrender of such policy or the payment of proceeds upon the death of Martin Hirschorn. As of December 31, 1997 and 1996, advances totaling approximately $391 and $344, respectively, are included in other assets. ACCOUNTS PAYABLE AND ACCRUED EXPENSES: Accounts payable............................. $ 9,374 $ 9,764 Accrued commissions.......................... 1,726 1,844 Salaries, wages and related items............ 2,267 1,752 Accrued expenses............................. 2,800 2,246 ------- ------- $16,167 $15,606 ======= ======= NOTE D - BORROWINGS Loans Payable -- The Company, as of December 31, 1997 and 1996, had outstanding $9,656 and $8,775 of short-term borrowings. At December 31, 1997, the Company borrowed $6,250 ($5,150 at December 31, 1996) under a $10,000 line of credit from a commercial bank. Such amount accrues interest, payable monthly, at a variable rate of 7.31% (7.1% at December 31, 1996) and is collateralized by marketable securities with a market value of $11,850. In addition, the Company owes $3,406 in the United Kingdom ($3,625 at December, 31, 1996) in connection with the purchase of property. The loan is payable on demand, is collateralized by the purchased property, and accrues interest, payable monthly, at 8.75% per annum at December 3l, 1997 (8% at December 3l, 1996). For the years ended December 31, 1997 and 1996, the weighted average interest rate on all short-term loans payable was 7.52% and 7.35% respectively. Interest paid amounted to $940, $1,100 and $563 in 1997, 1996 and 1995, respectively. -38- INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued (Dollars and shares in thousands, except per share data) The carrying amount for the bank borrowings approximates fair value because the loans are short term. NOTE E - INCOME TAXES The components of (loss) income before income taxes are as follows:
1997 1996 1995 ---- ---- ---- Domestic........................................................ $703 ($28) $985 Foreign......................................................... (1,786) 315 (1,536) ------- ------- ------ ($1,083) $287 ($551) ======= ======= ====== Provision (benefit) for federal, foreign, state and local income taxes consist of the following: 1997 1996 1995 ---- ---- ---- Current: Federal.............................................. $ 352 ($72) $304 Foreign.............................................. (21) 32 (471) State and local...................................... 235 95 60 ------- ------- ------ 566 55 (107) ------- ------- ------ Deferred: Federal.............................................. (231) (212) (102) Foreign.............................................. (259) 86 (22) State and local...................................... 59 (6) 128- ------- ------- ------ (431) (132) 4 ------- ------- ------ $ 135 ($77) ($103) ======= ======= ======
Deferred taxes at December 31, 1997 and 1996 consist of the following: 1997 1996 ---- ---- Deferred tax assets: Inventory and accounts receivable reserves....................... $ 135 $ 106 Accrued expenses................................................. 80 115 Deferred compensation............................................ 701 618 Marketable securities............................................ - Deferred gain in United Kingdom from intercompany -39- INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued (Dollars and shares in thousands, except per share data) sale of building 309 111 State and local net operating loss carry forwards................ 274 120 ------- ------- Total deferred tax assets 1,499 1,070 ------- ------- Deferred tax liabilities:.......................................... Property, plant and equipment.................................... 297 534 Marketable securities............................................ 71 - Pension liability................................................ 319 282 ------- ------- Total deferred tax liabilities..................................... 687 816 ------- ------- Net deferred tax asset............................................. $ 812 $ 254 Less: valuation allowance.......................................... (309) -- ------- ------- $ 503 $ 254 ======= =======
The valuation allowance was established for the amount by which deferred tax assets exceed deferred tax liabilities in ther United Kingdom as a result of the recent losses at IAC Ltd. The following table accounts for the differences between the actual provision and the amounts obtained by applying the statutory U.S. Federal Income tax rate of 34% to the income before Income taxes:
1997 1996 1995 ---- ---- ---- Federal statutory tax rates............................... (34)% 34% (34)% State and local Income taxes, net of federal benefit...... 18 (1) 29 Nontaxable interest....................................... -- (69) (19) Different effective tax rate in the United Kingdom........ 30 4 6 Other..................................................... (2) 5 (1) ---- --- --- 12% (27)% (19)% ==== === ===
Accumulated undistributed earnings of foreign subsidiaries at December 31, 1997 aggregated $2,229. No federal income taxes have been provided, since the Company plans to reinvest undistributed earnings of the subsidiaries to finance expansion and meet operating requirements. If such earnings were distributed, foreign tax credits should be- -40- INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued (Dollars and shares in thousands, except per share data) come available under current law to reduce or eliminate the resulting U.S. income tax liability. Federal, foreign, state and local income taxes paid amounted to approximately $118, $488 and $70 in 1997, 1996 and 1995, respectively. NOTE F - EMPLOYEE BENEFIT PLANS The Company has a Defined Contribution Tax Deferred Savings Plan covering all U.S. employees not covered by collective bargaining agreements. The Company's elective contribution is allocated to employees based on a five year average salary basis and is integrated with Social Security. In 1997, the Company expensed $300 in connection with this Plan. The Company has a defined benefit pension plan in the United Kingdom covering certain eligible employees. The Plan provides benefits based on years of service and an employee's average compensation for the last three years of employment before retirement. The Company's funding policy is to contribute amounts sufficient to meet the minimum funding requirements. Assets of the plan are comprised of a "with profits group" bond effected with an United Kingdom assurance company. Pension costs include the following components:
1997 1`996 1995 Service cost-- benefits earned during the period.......... $ 312 $ 309 $ 450 Interest cost on projected benefit obligation............. 465 389 1,137 Actual return on plan assets.............................. (373) (891) (2,125) Net amortization and deferral............................. (378) 275 1,026 ----- ----- ------ Pension cost of the defined benefit plans................. $ 26 $ 82 $ 488 ===== ===== ======
The funded status of the defined benefit plan and amounts recognized In the consolidated balance sheets at December 31, 1997 and 1996 are as follows:
1997 1996 Accumulated benefit obligation..................................... $ 5,535 $ 5,233 ------- ------- Projected benefit obligation....................................... $ 5,989 $ 5,696 -41- INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued (Dollars and shares in thousands, except per share data) Plan assets at fair value.......................................... 8,043 7,890 ------- ------- Plan assets in excess of projected benefit obligation.............. 2,054 2,194 Unrecognized net gain.............................................. (1,924) (2,332) Unrecognized prior service cost.................................... 1,053 1,195 Unrecognized not transition asset.................................. (155) (202) ------- ------- Prepaid pension costs recognized in the balance sheet.............. $ 1,028 $ 855 ======= =======
Assumptions used to calculate the actuarial present value of the projected benefit obligation and the expected long-term return on assets for the defined benefit plan are as follows: 1997 1996 ---- ---- Discount rate.......................................... 8.5% 8.5% Rate of increase in future compensation levels......... 6.5% 6.5% Expected long term rate of return on plan assets....... 8.5% 8.5% The Company contributes to multi-employer pension plans on behalf of employees who are members of collective bargaining units. Benefit and asset information comparable to that shown above for the Company's plans are not determinable. Under the Employee Retirement Income Security Act of 1974, as amended, an employer upon withdrawal from a multi-employer plan is required to continue funding its proportionate share of the plan's unfunded vested benefits. The plan administrator has not provided the Company with information regarding its proportionate share of the plan's unfunded vested benefits (for withdrawal liability purposes); however, the Company has no immediate intention of withdrawing from the plan. Expenditures incurred amounted to $122, $145 and $119 In 1997, 1996 and 1995, respectively. The Company has deferred compensation agreements with certain present and past key officers, directors and employees ("participants"). The agreements provide for the participants to receive defined amounts after reaching age 65. The Company provides for the cost of the benefits payable under the agreements over the participants' active employment. During the years ended December 31, 1997, 1996 and 1995, the Company incurred expenses related to these agreements of $178, $202 and $164, respectively. As of December 31, 1997 and 1996, the accrued liability totaled $1,339 and $1,367, respectively. The Company has insured the lives of the participants to assist In the funding of this liability. -42- INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued (Dollars and shares in thousands, except per share data) NOTE G - LEASES The Company conducts a large part of Its operations from leased facilities which include manufacturing and office facilities. Certain leases include options to renew for periods ranging from 5 to 67 years. Certain Company leases also require it to pay all real estate taxes and operating costs and one lease is subject to periodic rental escalations. The following represents the amounts of assets under capital leases included in property, plant and equipment: December 31 1997 1996 ---- ---- Buildings and computer equipment....... $3,295 $3,295 Less accumulated amortization.......... (693) (554) ------ ------ $2,602 $2,741 ====== ====== The building lease pertains to the New York manufacturing facility which expires in 2019. However, the Company has entered into an agreement with the landlord to purchase for $4,000 the approximately 72.500 square feet of manufacturing space it now leases from the landlord. Future minimum payments, by yearand in the aggregate, under capital leases and noncancellable operating leases with initial or remaining terms of one year or more consist of the following at December 31, 1997 (net of annual sub-lease income of $98 through 2002): Capital Operating Leases Losses ------ ------ Year ending December 31: 1998...................................... $ 304 $ 409 1999...................................... 304 383 2000...................................... 304 110 2001...................................... 304 59 2002...................................... 291 19 Later years............................... 4,645 851 ------ ------ Total minimum lease payments................ $6,152 $1,831 ====== -43- INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued (Dollars and shares in thousands, except per share data) Less amounts representing Interest............... (3,019) Present value of minimum lease payments.......... (3,133) Less current portion............................. (78) ------ $3,055 ====== The composition of rental expense is as follows: Year Ended December 31 1997 1996 1995 ---- ---- ---- Minimum rentals.................. $1,030 $908 $1,275 Sublease rental income........... (145) -- ------ ----- ------ $885 $908 $1,275 ====== ===== ====== NOTE H - STOCK OPTION PLAN On September 20, 1995, the Company adopted a stock option plan and granted options to key employees to purchase 200,000 shares of common stock, the maximum amount permitted under the plan, at $9.75 per share, the market value on the date of grant. Options became exercisable after one year at the rate of 25% per year for four consecutive years. In January 1997. the options granted in 1995 were rescinded and new options to purchase another 200,000 shares of common stock were granted at $8.00 per share, the market value on the date of grant. The options will become exercisable after one year at the rate of 25% per year for four consecutive years. Effective January 1, 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation", which allows companies to measure compensation cost in connection with employee stock compensation plans using a fair value based method or to continue to use an intrinsic value based method. The Company will continue to use the intrinsic value based method which generally does not result in compensation cost. Had compensation cost been determined under the fair value based method for the -44- INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued (Dollars and shares in thousands, except per share data) stock options granted In 1995, the Company's 1997 and 1996 net (loss) income per common share would have been changed to the pro forma amounts indicated below: As Reported Pro Forma ----------- --------- Net (loss) Income 1997...................................... ($1,218) ($1,366) 1996...................................... $364 $275 Net (loss) Income per common share 1997 Basic and diluted.............................. ($0.41) ($0.46) 1996 Basic and diluted.............................. $0.12 $0.09 The fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for the options granted in l995: -- dividend yield 1.17%; expected volatility 40%; risk free interest rate of 6.33%; and expected lives of 6 years. NOTE I - GEOGRAPHIC INFORMATION The Company and its subsidiaries operate within a single industry segment which is the development, manufacturing, fabrication, and sale of products designed for noise control and acoustically conditioned environments. The Company's customers include governmental entities and companies in diversified industries. The Company primarily operates in two geographic areas: North America and Europe. North America includes the United States and Canada. Europe includes the United Kingdom and Germany. The following information sets forth the data by geographic area. During 1997, 1996 and 1995, revenues from the United States Government amounted to approximately $l2,282, $15,510 and $13,169, respectively.
North American(1) European(2) Elimination Consolidated Year ended December 31, 1997: Net sales to unaffiliated customers. $53,645 $19,266 $72,911 -45- INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued (Dollars and shares in thousands, except per share data) Inter-area net sales................ 139 ($139) ------- ------- ------- ------- $53,784 $19,266 ($139) $72,911 ======= ======= ======= ======= Operating profit (loss)(3).......... 1,322 (1,107) (359) (144)(4) Identifiable assets(5).............. 57,158 17,104 74,262 Year ended December 31, 1996: Net sales to unaffiliated customers. $51,521 $22,102 $73,623 Inter-area net sales................ 226 1,864 ($2,090) -- ------- ------- ------- ------- $51,747 $23,966 ($2,090) $73,623 ======= ======= ======= ======= Operating profit(3)................. 832 791 (258) 1,365(4) Identifiable assets................. 54,155 18,690 72,845 Year ended December 31, 1995: Net sales to unaffiliated customers. $46,974 $23,659 $70,633 Inter-area net sales(3)............. 336 1,368 ($1,704) ------- ------- ------- ------- $47,310 $25,027 ($1,704) $70,633 ======= ======= ======= ======= Operating profit (loss)(3).......... 1,572 (1,537) 35(4) Identifiable assets(s)(5)........... 58,850 16,866 75,716
(1) Includes Canadian sales of $25, $114 and $448 in 1997, 1996 and 1995, respectively. (2) Includes German sales of $4,000, $3,891 and $4,691 in 1997,1996 and 1995, respectively. (3) North American operating profit includes royalty income of $101 (1997), $74 (1996) and $419 (1995) charged against European operating profit and Canadian operating profit of $1 (1997), $1 (1996), and $1 (1995). European operating (loss) profit includes German operating profit (loss) of $61 (1997), ($152) (1996) and $124 (1995). (4) Excludes interest expense of $940, $1,078 and $586 in 1997, 1996 and 1995, respectively. The 1997 and 1996 elimination of $359 and $258, respectively, relates to interest on an intercompany loan. (5) North American includes Canadian assets of $202 (1997), $253 (1996) and $244 (1995). European includes German assets of $1,722 (1997), $2041 (1996) and $1,862 (1995). -46- INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES NOTES to CONSOLIDATED FINANCIAL STATEMENTS, continued (Dollars and shares in thousands, except per share data) NOTE J - SUBSEQUENT EVENT The principal stockholder of the Company entered into a stock-purchase agreement, in January 1998, to sell his shareholdings, representing approximately 64% of the outstanding common stock of the Company, to IAC Holding Corp. whose principal investor is a European investment company. -47-
INDUSTRIAL ACOUSTICS COMPANY, INC. and SUBSIDIARIES SCHEDULE 11 - VALUATION and OUALIFYING ACCOUNTS (in thousands) Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Additions (Deductions) ---------------------- Balance at Charged to Other Balance at Beginning Costs and Accounts- Deductions - End of Description of Period Expenses Describe(1) Describe(2) Period --------- -------- ----------- ----------- ------ Year ended December 31, 1997 Allowances for doubtful accounts.... $ 913 ($391) ($8) $20 $ 534 Year ended December 31, 1996: Allowances for doubtful accounts.... $ 613 302 20 (22) $ 913 Year ended December 31, 1995: Allowances for doubtful accounts.... $1,090 (362) 1 (116) $ 613
(1) Represents the effect of exchange rate changes on translation of foreign currencies into U.S. dollars. (2) Represents write-offs (recoveries). [FORM OF PROXY] - ------------------------------------------------------------------------------- INDUSTRIAL ACOUSTICS COMPANY, INC. 1160 Commerce Avenue, Bronx, New York 10462 Proxy Solicited on Behalf of the Board of Directors of the Company The undersigned hereby constitutes and appoints James A. Read and Robert M. Davies, and each of them, as true and lawful agents and proxies with full power of substitution in each, to represent the undersigned at the Special Meeting of Shareholders of Industrial Acoustics Company, Inc. (the "Company") to be held at 1160 Commerce Avenue, Bronx, New York 10462, on __________, 1998 at 10:00 a.m. New York time and at any postponements and adjournments thereof, on all matters coming before said meeting. 1. Approval of the Agreement and Plan of Merger between IAC Holdings Corp. ("Holdings") and the Company dated as of May 20, 1998, pursuant to which Holdings will be merged with and into the Company and shareholders of the Company (other than Holdings) will receive $11.00 in cash for each share of Common Stock of the Company. / / FOR / / AGAINST 2. In their discretion, upon other matters as they may properly come before the meeting. (Continued and to be signed on the other side.) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (Continued from other side.) You are encouraged to specify your choices by marking the appropriate box, see reverse side, but you need not mark any boxes if you wish to vote in accordance with the Board of Directors' recommendations. The persons named on the reverse side as agents and proxies cannot vote your share unless you sign and return this card. This proxy when properly executed will be voted in the manner directed herein by the undersigned. If no direction is made, this proxy will be voted FOR Proposal 1. Dated____________________________________ 1998 ----------------------------------------- ---------------------------------------- ----------------------------------------- Signature(s) Please mark, sign and return promptly using the enclosed envelope. Executors, administrators, trustees, etc. should give a title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer. - ------------------------------------------------------------------------------ -2- -----END PRIVACY-ENHANCED MESSAGE-----