STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of , 1998 (the "Agreement"), by and
between IAC Holdings Corp., a Delaware corporation (the "Grantor") and IAC
Management Partners, a [ ] general partnership (the "Grantee").
RECITALS
WHEREAS, the Grantor has acquired approximately 79% of the outstanding
Common Stock, par value $.10 per share (the "Common Stock"), of Industrial
Acoustics Company, Inc., a New York corporation ("IAC"); and
WHEREAS, the Grantee provided certain advisory services to the Grantor in
connection with such acquisition by the Grantor of IAC stock; and
WHEREAS, as partial compensation for such services, the Grantor agreed to
grant to the Grantee an option (the "Option") to acquire Common Stock, par value
$.01 per share, of the Grantor (the "Common Stock") equal to 12% of the Common
Stock on a fully diluted basis; and
WHEREAS, the Grantor and IAC have entered into an Agreement and Plan of
Merger pursuant to which the Grantor will merge with and into IAC (the "Merger")
and International Mezzanine Investment N.V. ("IMI") will become the owner of
100% of the Common Stock of IAC;
WHEREAS, the Grantor and the Grantee desire to set forth the terms of the
Option.
NOW THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. THE OPTION; EXERCISE; ADJUSTMENTS. (a) Subject to the other terms and
conditions set forth herein, the Grantor hereby grants to the Grantee an
irrevocable option (the "Option") to purchase up to [ ] shares of Common Stock
(the "Shares") at an initial cash purchase price of $[ *]
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* The amount of the equity contribution made by International Mezzaine
Investment N.V. to the Grantor used by
Footnote continued on next page.
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per share. The Option may be exercised by the Grantee, in whole or in part, at
any time, or from time to time, (i) prior to the Merger and following the sale
by the Grantor of all or a majority of its interest in IAC or (ii) after the
Merger and following the sale by IMI of all or a majority of its interest in IAC
and, in the case of clause (i) or (ii), prior to the termination of the Option
in accordance with the terms of this Agreement.
(b) In the event the Grantee wishes to exercise the Option, the Grantee
shall send a written notice to the Grantor (the "Stock Exercise Notice")
specifying its intention to exercise the Option, the total number of Shares it
wishes to purchase and a date not later than 10 business days and not earlier
than the next business day following the date such notice is given for the
closing of such purchase.
(c) In the event of any change in the number of issued and outstanding
shares of Common Stock of the Grantor by reason of any stock dividend, stock
split, recapitalization, merger (including the Merger), rights offering, share
exchange or other change in the corporate or capital structure of the Grantor,
the Grantee shall receive, upon exercise of the Option, the stock or other
securities, cash or property to which the Grantee would have been entitled if
the Grantee had exercised the Option and had been a holder of record of shares
of Common Stock of the Grantor on the record date fixed for determination of
holders of shares of Common Stock of the Grantor entitled to receive such stock
or other securities, cash or property and the purchase price per Share shall be
increased or decreased proportionately so that the aggregate purchase price for
the Shares subject to the Option shall remain the same as immediately prior to
such event. In the event that any additional shares of Common Stock are issued
after the date hereof (other than pursuant to an event described in the
preceding sentence of this Agreement), the number of shares of Common Stock
subject to the Option shall be adjusted (but not decreased) so that, after such
issuance, the number of shares of
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Footnote continued from previous page.
the Grantor to acquire stock of the Grantee in the intitial acquisition and
the subsequent merger divided by the aggregate number of outstanding shares
of Common Stock of IAC.
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Common Stock subject to the Option equals at least ten percent (10%) of the
number of shares of Common Stock of IAC then issued and outstanding on a fully
diluted basis.
2. CONDITIONS TO DELIVERY OF SHARES. The Grantor's obligation to deliver
Shares upon exercise of the Option is subject only to the conditions that:
(a) No preliminary or permanent injunction or other order issued by any
federal or state court of competent jurisdiction in the United States
prohibiting the delivery of the Shares shall be in effect; and
(b) Any applicable waiting periods under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976 shall have expired or been terminated; and
(c) The representations and warranties of the Guarantee made in Section 5
of this Agreement shall be true and correct in all material respects as of the
date of the Closing for the issuance of the Shares being purchased pursuant to
the Option.
3. THE CLOSING. (a) Any closing hereunder shall take place on the date
specified by the Grantee in its Stock Exercise Notice at 9:00 a.m., local time,
at the offices of Xxxxxx Xxxxxx & Xxxxxxx, 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx,
or, if the conditions set forth in Section 2 have not been satisfied, on the
second business day following the satisfaction of such conditions, or at such
other time and place as the parties hereto may agree (the "Closing Date"). On
the Closing Date, the Grantor will deliver to the Grantee a certificate or
certificates, duly endorsed (or accompanied by duly executed stock powers),
representing the Shares in the denominations designated by the Grantee in its
Stock Exercise Notice and the Grantee will purchase such Shares from the Grantor
at the price per Share equal to the Purchase Price. Any payment made pursuant to
this Agreement shall be made by certified or official bank check or by wire
transfer or federal funds to a bank designated by the Grantor.
(b) The certificates representing the Shares may bear an appropriate legend
relating to the fact that such Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act") and may not be
transferred in the absence of such registration or an exemption therefrom (which
exemption is confirmed by an opinion of counsel to the Grantee reasonably
acceptable to the Grantor).
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4. REPRESENTATIONS AND WARRANTIES OF THE GRANTOR. The Grantor represents
and warrants to the Grantee that (a) the Grantor is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware and has the requisite corporate power and authority to enter into and
perform this Agreement; (b) the execution and delivery of this Agreement by the
Grantor and the consummation by it of the transactions contemplated hereby have
been duly authorized by the Board of Directors of the Grantor, and this
Agreement has been duly executed and delivered by a duly authorized officer of
the Grantor and constitute a valid and binding obligation of the Grantor,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity; and (c) the Grantor has taken all necessary corporate
action to authorize and reserve the Shares issuable upon exercise of the Option
and the Shares, when issued and delivered by the Grantor upon exercise of the
Option, will be duly authorized, validly issued, fully paid and non-assessable
and free of preemptive rights.
5. REPRESENTATIONS AND WARRANTIES OF THE GRANTEE. Grantee represents and
warrants to the Grantor that (a) the execution and delivery of this Agreement by
the Grantee and the consummation by it of the transactions contemplated hereby
have been duly authorized by all necessary action on the part of the Grantee and
this Agreement has been duly executed and delivered by a duly authorized officer
of the Grantee and will constitute a valid and binding obligation of Grantee;
(b) the Grantee is acquiring the Option and, if and when it exercises the
Option, will be acquiring the Shares issuable upon the exercise thereof for its
own account and not with a view to distribution or resale in any manner which
would be in violation of the Securities Act; and (c) the Grantee and each of its
partners is an accredited investor as such term is used in the rules under the
Securities Act, has received such information as is necessary to make an
informed decision with respect to the acquisition and exercise of the Option, is
experienced in investments of the type contemplated hereby and is capable of
bearing the loss of its investment.
6. CONSENTS. Each of the parties hereto will use its best efforts to obtain
the consents of all third parties and governmental authorities, if any,
necessary to the consummation of the transactions contemplated.
7. SPECIFIC PERFORMANCE. The Grantor acknowledges that if the Grantor fails
to perform any of its obligations un-
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der this Agreement immediate and irreparable harm or injury would be caused to
the Grantee for which money damages would not be an adequate remedy. In such
event, the Grantor agrees that the Grantee shall have the right, in addition to
any other rights it may have, to specific performance of this Agreement.
Accordingly, if the Grantee should institute an action or proceeding seeking
specific enforcement of the provisions hereof, the Grantor hereby waives the
claim or defense that the Grantee has an adequate remedy at law and hereby
agrees not to assert in any such action or proceeding the claim or defense that
such a remedy at law exists. The Grantor further agrees to waive any
requirements for the securing or posting of any bond in connection with
obtaining any such equitable relief.
8. NOTICES. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given and made if in writing and if
served by personal delivery upon the party for whom it is intended or delivered
by registered or certified mail, return receipt requested, or if sent by
facsimile transmission, upon receipt of oral confirmation that such transmission
has been received, to the person at the address set forth below, or such other
address as may be designated in writing hereafter, in the same manner, by such
person:
If to the Grantor:
IAC Holdings Corp.
c/o Mezzanine Management Limited
000 Xxxxx Xxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxx X. Read
If to the Grantee:
IAC Management Partners
000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
with a copy to:
IAC Management Partners
00 Xxxxxx Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Maarten X. Xxxxxxx
9. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
agreement between the parties hereto with
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respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, oral or written, with respect to
such transactions. This Agreement may not be changed, amended or modified
orally, but may be changed only by an agreement in writing signed by the party
against whom any waiver, change, amendment, modification or discharge may be
sought.
10. ASSIGNMENT. No party to this Agreement may assign any of its rights or
obligations under this Agreement without the prior written consent of the other
party hereto.
11. HEADINGS. The section headings herein are for convenience only and
shall not affect the construction of this Agreement.
12. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall constitute one and the same document.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
conflicts of law principles of such State.
14. TERMINATION. The right to exercise the Option granted pursuant to this
Agreement shall terminate on .
15. SEVERABILITY. If any term, provisions, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
16. PUBLIC ANNOUNCEMENT. The Grantee will consult with the Grantor and the
Grantor will consult with the Grantee before issuing any press release with
respect to the initial announcement of this Agreement, the Option or the
transactions contemplated hereby and neither party shall issue any such press
release prior to such consultation except as may be required by law.
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IN WITNESS WHEREOF, the Grantee and the Grantor have caused this Agreement
to be duly executed and delivered on the date and year first above written.
IAC HOLDINGS CORP.
By: ________________________________
Name:
Title:
IAC MANAGEMENT PARTNERS
By: ________________________________
Name:
Title:
