<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-9
Solicitation/Recommendation Statement Pursuant to
Section 14(d)(4) of the Securities Exchange Act of 1934
----------------
SHELBY WILLIAMS INDUSTRIES, INC.
(Name of Subject Company)
SHELBY WILLIAMS INDUSTRIES, INC.
(Name of Person Filing Statement)
COMMON STOCK, $0.05 PAR VALUE PER SHARE
(Title of Class of Securities)
822135 10 9
(CUSIP Number of Class of Securities)
----------------
Paul N. Steinfeld
Chairman and Chief Executive Officer
Shelby Williams Industries, Inc.
150 Shelby Williams Drive
Morristown, Tennessee 37813
(423) 586-7000
(423) 586-2260 (Fax)
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of the Person Filing Statement)
----------------
with a copy to
Walter Roth, Esq.
D'Ancona & Pflaum LLC
111 East Wacker Drive, Suite 2800
Chicago, Illinois 60601
(312) 602-2020
(312) 602-3000 (Fax)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Item 1. Security and Subject Company
The name of the subject company is Shelby Williams Industries, Inc., a
Delaware corporation (the "Company"). The address of the principal executive
offices of the Company is 11-111 Merchandise Mart, Chicago, Illinois 60654.
The title of the class of equity securities to which this Schedule
14D-9 relates is the shares of common stock, par value $0.05 per share, of the
Company (the "Shares").
Item 2. Tender Offer of the Bidder
This Schedule 14D-9 relates to a tender offer by SY Acquisition Inc., a
Delaware corporation ("Purchaser" or "Offeror") and a wholly owned subsidiary
of Falcon Products, Inc., a Delaware corporation ("Parent" or "Falcon").
Purchaser disclosed in a Tender Offer Statement on Schedule 14D-1 (the
"Schedule 14D-1") dated May 12, 1999 its intention to purchase all outstanding
Shares at a price of $16.50 per Share, net to the seller in cash, without
interest thereon upon the terms and subject to the conditions set forth in the
Offer to Purchase dated May 12, 1999 (the "Offer to Purchase") and the related
Letter of Transmittal (which, together with the Offer to Purchase and any
amendments or supplements thereto, constitute the "Offer"). The Offer to
Purchase and the Letter of Transmittal are filed as Exhibits 1 and 2,
respectively, to this Schedule 14D-9 and are incorporated herein by reference.
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of May 5, 1999 among Falcon, Purchaser and the Company (the "Merger
Agreement"). The Merger Agreement provides that, among other things, as soon
as practicable after the consummation of the Offer and satisfaction or, if
permissible, waiver of the conditions contained in the Merger Agreement,
Purchaser shall be merged with and into the Company (the "Merger") in
accordance with the Delaware General Corporation Law ("DGCL"), the separate
corporate existence of Purchaser shall cease, and the Company shall continue
as the surviving corporation (the "Surviving Corporation"). A copy of the
Merger Agreement is filed as Exhibit 3 to this Schedule 14D-9 and is
incorporated herein by reference.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES WHICH, TOGETHER WITH ANY SHARES BENEFICIALLY OWNED BY PARENT OR
PURCHASER, REPRESENT AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY
DILUTED BASIS (THE "MINIMUM CONDITION").
"Fully Diluted Basis" means, as of any time, all of the Shares plus all
Shares required to be issued or issuable pursuant to options, warrants,
securities or obligations of any kind under employee stock or similar benefit
plans or otherwise, whether or not vested or exercisable.
According to the Offer to Purchase, the principal executive offices of
Falcon and Purchaser are located at 9387 Dielman Industrial Drive, St. Louis,
Missouri 63132.
Item 3. Identity and Background
(a) The name and address of the Company, which is the person filing this
Schedule 14D-9, are set forth in Item 1 above and are incorporated herein by
reference.
(b) Certain contracts, agreements, arrangements and understandings between
the Company and its executive officers, directors and affiliates are described
on page 11 of the Company's Proxy Statement dated March 24, 1999 for its 1999
Annual Meeting of Stockholders (the "1999 Proxy Statement"). Page 11 of the
1999 Proxy Statement is filed as Exhibit 4 to this Schedule 14D-9 and is
incorporated herein by reference.
Except as described below or incorporated herein by reference, to the
knowledge of the Company, as of the date hereof, there exists no material
contract, agreement, arrangement or understanding and no actual or potential
conflict of interest between the Company or its affiliates and (i) its
executive officers, directors or affiliates or (ii) Purchaser, Falcon or their
executive officers, directors or affiliates.
<PAGE>
The following summary of certain provisions of the Merger Agreement,
stockholder agreements dated May 5, 1999 among Parent, Offeror and certain
stockholders of the Company (the "Stockholder Agreements") and certain
collateral agreements relating to the Offer and the Merger, copies of which
agreements are filed as exhibits to this Schedule 14D-9, is qualified in its
entirety by reference to the text of such agreements.
Terms of the Offer. Upon the terms and subject to the conditions of the
Offer (including, if the Offer is extended or amended, the terms and
conditions of any such extension or amendment), Purchaser will accept for
payment and pay for all Shares validly tendered prior to the Expiration Date
and not properly withdrawn in accordance with the Offer to Purchase. The term
"Expiration Date" means 12:00 Midnight, New York City time, on June 9, 1999,
unless and until Purchaser shall have extended the period of time during which
the Offer is open, subject to the terms of the Merger Agreement, in which
event the term "Expiration Date" shall mean the latest time and date at which
the Offer, as so extended by Purchaser, shall expire. Purchaser will extend
the Offer from time to time for the shortest time periods permitted by law and
which it reasonably believes are necessary until the consummation of the
Offer, but not later than July 15, 1999, if on the scheduled Expiration Date
any of the conditions to Purchaser's obligation to accept for payment and pay
for the Shares have not been satisfied or waived. Parent and Purchaser have
the right to extend the Offer for up to ten business days notwithstanding the
prior satisfaction of all conditions to the Offer.
Consummation of the Offer is conditioned upon satisfaction of the Minimum
Condition, the expiration or termination of all waiting periods imposed by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
regulations thereunder (the "HSR Act"), and the other conditions described in
the Offer to Purchase. If such conditions are not satisfied, Purchaser,
subject to the terms of the Merger Agreement and subject to complying with
applicable rules and regulations of the Securities and Exchange Commission
(the "Commission"), shall not be required to purchase any of the Shares
tendered, and may delay the acceptance for payment of any Shares or terminate
or amend the Offer. Subject to the terms and conditions contained in the
Merger Agreement, Purchaser may (but shall not be obligated to) waive in whole
or in part, at any time and from time to time, any or all of such conditions,
provided that the Minimum Condition cannot be waived by Purchaser without the
written consent of the Company.
Pursuant to the Merger Agreement, Purchaser may not, without the written
consent of the Company, (i) decrease the price per Share payable in the Offer,
(ii) change the form of consideration to be paid in the Offer, (iii) reduce
the maximum number of Shares to be purchased in the Offer or the Minimum
Condition, (iv) impose additional conditions to the Offer or modify the
conditions in a manner adverse to the holders of Shares, (v) amend any other
term of the Offer in a manner adverse to the holders of the Shares or (vi)
extend the expiration of the Offer beyond July 15, 1999. Subject to the terms
and conditions of the Offer and the Merger Agreement, Purchaser shall, and
Parent shall cause Purchaser to, pay for all Shares validly tendered and not
withdrawn pursuant to the Offer that Purchaser becomes obligated to purchase
pursuant to the Offer as soon as practicable after the expiration of the
Offer.
There can be no assurance that Purchaser will exercise its rights to extend
the Offer (other than as required by the Merger Agreement or applicable law).
Any extension, amendment or termination of the Offer, or any waiver of any
condition of the Offer, will be followed as promptly as practicable by a
public announcement. In the case of an extension, Rule 14e-1(d) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires
that the announcement be issued no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled Expiration Date in
accordance with the public announcement requirements of Rule 14d-4(c) under
the Exchange Act. As used in this Offer to Purchase, "business day" has the
meaning set forth in Rule 14d-1 under the Exchange Act. Subject to applicable
law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which
require that any material change in the information published, sent or given
to stockholders in connection with the Offer be promptly disseminated to
stockholders in a manner reasonably designed to inform stockholders of such
change), and without limiting the manner in which Purchaser may choose to make
any public announcement, Purchaser will not have any obligation to publish,
advertise or otherwise communicate any such public announcement other than by
making a release to the Dow Jones News Service. During any extension of the
Offer, all Shares previously tendered and not properly withdrawn will
2
<PAGE>
remain subject to the Offer, subject to the rights of a tendering stockholder
to withdraw its Shares in accordance with the procedures set forth in the
Offer to Purchase. PURCHASER SHALL NOT HAVE ANY OBLIGATION TO PAY INTEREST ON
THE PURCHASE PRICE FOR TENDERED SHARES, REGARDLESS OF ANY DELAY IN SUCH
PAYMENT AND WHETHER OR NOT PURCHASER EXERCISES ITS RIGHT TO EXTEND THE OFFER.
If Purchaser extends the Offer or if Purchaser is delayed in its acceptance
for payment of or payment for Shares (whether before or after its acceptance
for payment of Shares) or it is unable to pay for Shares pursuant to the Offer
for any reason, then, without prejudice to Purchaser's rights under the Offer,
the Depositary may retain tendered Shares on behalf of Purchaser, and such
Shares may not be withdrawn except to the extent tendering stockholders are
entitled to withdrawal rights as described in the Offer to Purchase. However,
the ability of Purchaser to delay the payment for Shares that Purchaser has
accepted for payment is limited by Rule 14e-1(c) under the Exchange Act, which
requires that a bidder pay the consideration offered or return the securities
deposited by or on behalf of holders of securities promptly after the
termination or withdrawal of such bidder's offer.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer
(including, subject to the Merger Agreement, the Minimum Condition), Purchaser
will disseminate additional tender offer materials and extend the Offer to the
extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act.
The minimum period during which an offer must remain open following a material
change in the terms of the offer or information concerning the offer, other
than a change in price or a change in the percentage of securities sought,
will depend upon the facts and circumstances then existing, including the
relative materiality of the changed terms or information. In a public release,
the Commission has stated that in its view an offer must remain open for a
minimum period of time following a material change in the terms of the offer
and that waiver of a material condition, such as the Minimum Condition, is a
material change in the terms of the offer. The release states that an offer
should remain open for a minimum of five business days from the date a
material change is first published, sent or given to security holders and
that, if material changes are made with respect to information not materially
less significant than the offer price and the number of shares being sought, a
minimum of ten business days may be required to allow adequate dissemination
and investor response. The requirement to extend the Offer will not apply to
the extent that the number of business days remaining between the occurrence
of the change and the then-scheduled Expiration Date equals or exceeds the
minimum extension period that would be required because of such amendment. If,
prior to the Expiration Date, Purchaser increases the consideration offered to
holders of Shares pursuant to the Offer, such increased consideration will be
paid to all holders whose Shares are purchased in the Offer whether or not
such Shares were tendered prior to such increase in consideration. Except as
otherwise provided herein, any extension of the Offer will not constitute a
waiver by Purchaser of any of the conditions described in the Offer to
Purchase.
The Merger. Following the consummation of the Offer, the Merger Agreement
provides that, subject to the terms and conditions thereof, and in accordance
with the DGCL, as soon as practicable, Purchaser will be merged with and into
the Company. As a result of the Merger, the separate corporate existence of
Purchaser will cease and the Company will continue as the Surviving
Corporation.
The obligations of each of Parent and Purchaser, on the one hand, and the
Company, on the other hand, to effect the Merger are subject to the
satisfaction on or prior to the Closing Date (as defined in the Merger
Agreement) of each of the following conditions: (i) Purchaser shall have
purchased all Shares validly tendered and not withdrawn pursuant to the Offer;
(ii) if required by applicable law, the Merger shall have been approved and
adopted by the requisite vote of the holders of Shares; (iii) no statute,
rule, regulation, executive order, decree, ruling or injunction shall have
been enacted, entered, promulgated or enforced by any court or other tribunal
or governmental body or authority which prohibits the consummation of the
transactions contemplated by the Merger Agreement substantially on the terms
contemplated thereby; and (iv) any waiting periods applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
3
<PAGE>
At the Effective Time of the Merger (i) each issued and outstanding Share
(other than Dissenting Shares, any Shares that are owned by the Company or any
wholly owned subsidiary of the Company, and any Shares owned by Parent or any
wholly owned subsidiary of Parent) will be converted into the right to receive
$16.50 per Share, net to the seller in cash (the "Merger Consideration"), and
(ii) each issued and outstanding share of capital stock of Purchaser will be
converted into one share of common stock of the Surviving Corporation.
The Board. The Merger Agreement provides that upon the purchase and payment
by Parent or Purchaser of Shares representing at least a majority of the
outstanding Shares on a Fully Diluted Basis, Parent shall be entitled to
designate such number of directors (rounded up to the next whole number) on
the Board so that the percentage of directors that are Parent's nominees
equals the percentage of outstanding Shares beneficially owned by Parent and
its affiliates; and that the Company shall, at such time, upon the request of
Purchaser, promptly use its best efforts to take all action necessary to cause
such persons designated by Parent to be elected to the Board, either by
increasing the size of the Board or securing resignations of incumbent
directors, or both. At such time, the Company shall also cause persons
designated by Parent to constitute at least the same percentage (rounded up to
the next whole number) as is on the Board of (i) each committee of the Board,
(ii) each board of directors (or similar body) of each subsidiary of the
Company and (iii) each committee (or similar body) of each such subsidiary
board of directors.
The Merger Agreement further provides that, notwithstanding the provisions
of the foregoing paragraph, until the Effective Time of the Merger, the Board
shall include at least two directors who were directors on the date of the
Merger Agreement (the "Independent Directors"); that from and after the time,
if any, that Parent's designees constitute a majority of the Board, the
affirmative vote of a majority of Independent Directors shall be required and
shall be sufficient to authorize any termination of the Merger Agreement by
the Company, any amendment of the Merger Agreement requiring action by the
Board, any extension of time for the performance of any of the obligations or
other acts of Parent or Purchaser under the Merger Agreement, any waiver of
compliance with any of the agreements or conditions under the Merger Agreement
for the benefit of the Company, any action to seek to enforce any obligation
of Parent or Purchaser under the Merger Agreement and any other action by the
Board under or in connection with the Merger Agreement; and that the
Independent Directors shall be appointed as a Special Committee of the Board
and have full power and authority solely with respect to the matters set forth
in the previous sentence.
Stockholders' Meeting. Pursuant to the Merger Agreement, the Company will,
if required by applicable law in order to consummate the Merger: (i) duly
call, give notice of, convene and hold a special meeting of its stockholders
(the "Special Meeting") as soon as practicable following the purchase of
Shares by Purchaser pursuant to the Offer for the purpose of considering and
taking action upon the Merger and the adoption of the Merger Agreement; (ii)
prepare and file with the Commission a preliminary proxy or information
statement relating to the Merger and the Merger Agreement and include in any
preliminary or definitive proxy statement or information statement with
respect to the Special Meeting (the "Proxy Statement") the recommendation of
the Board that stockholders of the Company vote in favor of the approval of
the Merger Agreement and the transactions contemplated thereby unless the
Board determines in good faith, based on advice of its outside counsel, that
not taking any such action is necessary in order for the Board to comply with
its obligations or duties to the Company or its stockholders under applicable
law; and (iii) use all reasonable efforts (A) to obtain and furnish the
information required to be included by it in the Proxy Statement and, after
consultation with the Parent and Purchaser, respond promptly to any comments
made by the Commission with respect to the Proxy Statement and any preliminary
version thereof and cause the Proxy Statement to be mailed to its stockholders
at the earliest practicable time following the expiration or termination of
the Offer and (B) obtain the necessary approvals by its stockholders of the
Merger Agreement and the transactions contemplated thereby unless the Board
determines in good faith, based on advice of its outside counsel, that not
taking any such action is necessary in order for the Board to comply with its
obligations or duties to the Company or its stockholders under applicable law.
Purchaser and Parent have agreed to use commercially reasonable efforts to
cause the Special Meeting to occur within 90 days after the purchase of Shares
pursuant to the Offer and Parent has agreed that it will vote, or cause to be
voted, all of the Shares then owned by it, Purchaser or any of its other
4
<PAGE>
subsidiaries and affiliates in favor of the approval of the Merger and the
adoption of the Merger Agreement. If Purchaser acquires, through the Offer or
otherwise, at least a majority of the outstanding Shares, Purchaser will have
sufficient voting power to approve the Merger, even if no other stockholders
vote in favor of the Merger.
The Merger Agreement provides that if Purchaser acquires at least 90% of
the then outstanding Shares, the parties agree to take all necessary and
appropriate action to cause the Merger to become effective, in accordance with
Section 253 of the DGCL, as soon as practicable after such acquisition,
without a meeting of the stockholders of the Company.
Options. Pursuant to the Merger Agreement, each Option (as defined in the
Merger Agreement) granted to the Company's employees, consultants or directors
that is outstanding immediately prior to the purchase of Shares pursuant to
the Offer (irrespective of whether such Option is then exercisable) shall, on
the fifth business day after the purchase by Purchaser of Shares pursuant to
the Offer, be cancelled in exchange for a single lump sum cash payment equal
to the product of (i) the number of Shares subject to such Option and (ii) the
excess of $16.50 per Share over the exercise price per Share of such Option.
Subject to the previous sentence, each Option that is outstanding immediately
prior to the Effective Time, whether or not then vested or exercisable, shall,
effective as of the Effective Time, be cancelled and no payments shall be made
with respect thereto.
Interim Operations. Pursuant to the Merger Agreement, the Company has
agreed that, except as expressly contemplated by the Merger Agreement or
agreed to in writing by Parent, prior to the time the directors of the Parent
constitute a majority of the Company Board, the Company shall, and shall cause
each of its Subsidiaries to, (a) conduct its operations in all material
respects according to their ordinary and usual course of business in
substantially the same manner as conducted prior to the date of the Merger
Agreement; (b) use reasonable best efforts to preserve intact its business
organization in all material respects, keep available the services of its
executive officers and key employees as a group, subject to changes in the
ordinary course, and maintain satisfactory relationships with suppliers,
distributors, customers and others having business relationships with them;
(c) confer at such times as Parent may reasonably request with one or more
representatives of Parent to report material operational matters and the
general status of ongoing operations (in each case to the extent Parent
reasonably requires such information) and consult with Parent regarding
material operational decisions; (d) promptly notify Parent of any emergency or
other change in the normal course of its businesses or in the operation of its
properties and of any complaints, investigations or hearings (or
communications indicating that the same may be contemplated) of any
governmental body or authority; (e) not authorize or pay any dividends on or
make any distribution with respect to its outstanding shares of stock; (f)
not, except as otherwise contemplated by the Merger Agreement or as may be
required by applicable law, enter into or amend any employment, severance or
similar agreements or arrangements with any of their directors or executive
officers; (g) not, subject to the provisions described below under the heading
"No Solicitation," authorize, announce an intention to authorize, or enter
into an agreement with respect to, any merger, consolidation or business
combination other than the Merger, any acquisition of a material amount of
assets or securities, any disposition of a material amount of assets or
securities or any release or relinquishment of any material contract rights,
in each case, not in the ordinary course of business; (h) not propose or adopt
any amendments to its corporate charter or by-laws, except pursuant to the
Merger as provided in the Merger Agreement; (i) not issue any shares of
capital stock, except upon exercise of options previously issued pursuant to
existing employee plans, programs or arrangements and non-employee director
plans; (j) not grant, confer or award any options, warrants, conversion rights
or other rights not existing on the date of the Merger Agreement, to acquire
any shares of its capital stock; (k) not purchase, redeem, or offer to
purchase or redeem any shares of its stock or any securities convertible into
or exchangeable for shares of stock, except for the deemed repurchase of
options in accordance with the terms of the Merger Agreement, or purchases,
redemptions and offers to purchase in the ordinary course of business in
connection with employee incentive and benefit plans, programs or arrangements
in existence on the date of the Merger Agreement; (l) not, except as
contemplated by the Merger Agreement or as may be required by applicable law,
amend in any material respect the terms of its employee benefit plans,
programs or arrangements or any severance or similar agreements or
arrangements in existence on the date of the Merger Agreement, enter into or
amend any employment or consulting agreement, adopt or enter into any new
employee
5
<PAGE>
benefit plans, programs or arrangements or any severance or similar agreements
or arrangements or increase the base salary of any person who is a party to a
Change of Control Employment Agreement (as defined in the Offer to Purchase)
or make any payments under any benefit plan to any director, employee,
independent contractor or consultant (except in the ordinary course of
business and in amounts and in a manner consistent with past practice or as
otherwise required by law or the provisions of such benefit plan); (m) not (i)
enter into any material loan agreement or incur any indebtedness in excess of
an aggregate of $100,000 or amend any Company credit facility to increase the
amount that may be borrowed thereunder, (ii) make or enter into any agreement
or contract for capital expenditures in excess of $50,000, (iii) enter into
any lease for real property in excess of $50,000 or any lease for personal
property in excess of $20,000, or (iv) enter into any agreement or contract
outside of the ordinary course of business of the Company or any of the
Company's subsidiaries that involves performance of services or delivery of
goods or materials by or to the Company or any of the Company's subsidiaries
of an amount or value in excess of $50,000; (n) not make or change any
material Tax election, file any amendment to any federal income Tax Return
unless required by law, enter into any closing agreement, or settle or
compromise any material Tax liability; (o) not adjust, split, combine or
reclassify its capital stock; (p) not enter into any agreement, understanding
or arrangement with respect to the sale or voting of its capital stock; (q)
not create any new subsidiaries; (r) except as required by the Merger
Agreement, not take any action which could reasonably be expected to adversely
affect or delay the ability of any of the parties to obtain any approval of
any governmental or regulatory body required to consummate the transactions
contemplated thereby; (s) not directly or indirectly sell, transfer, lease,
pledge, mortgage, encumber or otherwise dispose of any material property or
assets other than in the ordinary course of business; (t) not enter into any
financial derivative contracts; (u) not change in any material respect its
accounting policies, methods or procedures except as required by GAAP; (v)
except as may be required by the Merger Agreement or applicable law, not do
any act or omit to do any act which would cause a breach of any contract,
commitment or obligation; (w) except as otherwise permitted by the Merger
Agreement, not take any action with the intent of causing the conditions to
the Offer set forth in the Merger Agreement to not be satisfied; (x) not,
other than pursuant to the Merger Agreement, take any action to cause the
Shares to cease to be quoted on any of the stock exchanges on which the Shares
are now quoted; (y) continue to provide training for employees of the Company
and its subsidiaries commensurate with the training provided by the Company
and its subsidiaries over the past twelve months; (z) subject to the
limitations contained in the Merger Agreement, continue the level of
recruiting activity and process employed by the Company and its subsidiaries
over the past twelve months; (aa) not agree, in writing or otherwise, to take
any of the foregoing actions or take any action which would make any
representation or warranty contained in the Merger Agreement (except for
representations and warranties made as of a specified date) untrue and
incorrect in any material respect as of the Effective Time; (bb) not pay,
discharge or satisfy any claim, liability or obligation (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction, in the ordinary course of business and consistent
with past practice, of liabilities reflected or reserved against in the March
31, 1999 balance sheet or subsequently incurred in the ordinary course of
business and consistent with past practice; and (cc) not settle or compromise
any pending or threatened suit, action or claim not covered by insurance
(without giving effect to deductibles in determining whether coverage exists)
that is material or which relates to the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger.
No Solicitation. Pursuant to the Merger Agreement: The Company shall not,
and shall not authorize or permit, any of its officers, directors, employees,
attorneys, financial advisors, agents or other representatives or those of any
of its Subsidiaries to, directly or indirectly, (a) solicit, initiate or
knowingly encourage any Takeover Proposal (as defined in the Offer to
Purchase), including without limitation by disclosure of non-public
information, or (b) engage in discussions or negotiations relating to or
accept any Takeover Proposal; provided, however, that nothing shall prohibit
the Company and its Board from (i) taking and disclosing a position with
respect to a tender offer by a third party pursuant to Rules 14d-9 and 14e-
2(a) promulgated by the Commission under the Exchange Act, or (ii) at any time
prior to the purchase of Shares pursuant to the Offer, engaging in discussions
or negotiations with, and furnishing information (including non-public
information) concerning the Company and its Subsidiaries, businesses,
properties or assets to, any third party which makes a Takeover Proposal
(without any solicitation or initiation, directly or indirectly, by the
Company or any of its
6
<PAGE>
representatives after the date of the Merger Agreement) if the Board
determines in good faith, based on advice of its outside counsel (who may be
its regularly engaged outside counsel), that the failure to take such action
will violate its obligations or duties to the Company or its stockholders
under applicable law, or (iii) provided the Merger Agreement is terminated as
described below in clause (iv) under the heading "Termination; Fees,"
accepting a Superior Proposal (as defined in the Offer to Purchase). Prior to
furnishing information to or entering into discussions or negotiations with
any person, the Company shall receive from such person or entity an executed
confidentiality agreement in reasonably customary form on terms not in the
aggregate materially more favorable to such person or entity than the terms
contained in the Confidentiality Agreement (as defined below). The Company
shall immediately cease and cause to be terminated any existing solicitation,
initiation, encouragement, activity, discussion or negotiation with any person
conducted prior to the date of the Merger Agreement by the Company or any of
its representatives with respect to any Takeover Proposal existing on the date
of the Merger Agreement. The Company agrees not to release any third party
from, or waive any provision of, any standstill agreement to which it is a
party or any confidentiality agreement between it and another person who has
made, or who may reasonably be considered likely to make, or who was given
access in order to consider making, a Takeover Proposal, unless the Board
determines in good faith, based on advice of its outside counsel (who may be
its regularly engaged outside counsel), that failure to take such action will
violate its obligations or duties to the Company or its stockholders under
applicable law. The Company shall notify Parent orally and in writing of any
such Takeover Proposal received (including, without limitation, the terms and
conditions of any such proposal and the identity of the person making it),
within 24 hours of the receipt thereof, and shall keep Parent informed of the
general status and any material changes in the terms and conditions of such
Takeover Proposal. The Company agrees to promptly provide to Parent any
information concerning the Company, its subsidiaries, business, properties or
assets furnished to any third party which makes a Takeover Proposal and which
has not previously been provided to Parent. Except as set forth in the Merger
Agreement, neither the Board nor any committee thereof shall (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Parent, the
approval or recommendation by the Board of the Offer, the Merger Agreement or
the Merger, (ii) approve or recommend, or propose to approve or recommend, any
Takeover Proposal or (iii) enter into any agreement with respect to any
Takeover Proposal. Subject to compliance with all of the applicable provisions
of the Merger Agreement, prior to the time of acceptance for payment of Shares
pursuant to the Offer, the Board may withdraw or modify its approval or
recommendation of the Offer, the Merger Agreement or the Merger, approve or
recommend a Superior Proposal, or enter into an agreement with respect to a
Superior Proposal, in each case at any time after the third business day
following Parent's receipt of written notice (including by facsimile) from the
Company advising Parent that the Board has received a Superior Proposal which
it intends to accept, specifying the material terms and conditions of such
Superior Proposal and identifying the person making such Superior Proposal,
but only if the Company shall have caused its financial and legal advisors to
negotiate with Parent to make such adjustments to the terms and conditions of
this Agreement as would enable the Company to proceed with the transactions
contemplated hereby on such adjusted terms.
Termination; Fees. The Merger Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time, whether before or after
approval of the stockholders of the Company, (i) by mutual written consent of
Parent and the Company; (ii) by (a) either the Company or Parent if Shares
have not been purchased pursuant to the Offer on or before July 15, 1999 and
(b) the Company if after 90 days following the commencement of the Offer the
conditions to the Offer have not been satisfied or waived and Purchaser shall
not have elected to extend the Offer; provided, that such right to terminate
pursuant to clause (ii) will not be available to any party whose failure in
any material respect to fulfill its obligations under the Merger Agreement
proximately contributed to, or resulted in, the failure of Parent or Purchaser
to purchase the Shares pursuant to the Offer on or before such date; (iii) by
either the Company or Parent if (a) a statute, rule, regulation or executive
order shall have been enacted, entered or promulgated prohibiting the purchase
of Shares pursuant to the Offer or the consummation of the Merger
substantially on the terms contemplated by the Merger Agreement or (b) an
order, decree, ruling or injunction shall have been entered permanently
restraining, enjoining or otherwise prohibiting the purchase of Shares
pursuant to the Offer or the consummation of the Merger substantially on the
terms contemplated by the Merger Agreement and such order, decree, ruling or
injunction shall have become final and non-appealable; provided, that the
party seeking to terminate the Merger Agreement
7
<PAGE>
shall have used its reasonable best efforts to remove such injunction, order or
decree; (iv) by the Company prior to the purchase of Shares pursuant to the
Offer if the Board determines in good faith based upon advice of its outside
counsel that (a) a Takeover Proposal constitutes a Superior Proposal and (b)
failure to accept such Superior Proposal will violate its obligations or duties
to the Company or the Company's stockholders under applicable law, provided,
that the Merger Agreement shall not terminate unless (Y) the Company has
provided Parent with two business days' prior written notice of its intention
to accept such Superior Proposal, together with a detailed description of the
terms and conditions of such Superior Proposal and (Z) simultaneously with such
termination the Company enters into a definitive acquisition, merger or similar
agreement to effect such Superior Proposal and pays the Termination Fee; (v) by
either the Company or Parent prior to the purchase of any Shares pursuant to
the Offer if the other party shall have breached, or failed to comply with, in
any material respect any of its obligations under the Merger Agreement or any
representation or warranty made by such other party shall have been untrue when
made or as of the time of such termination as if made on and as of such time
(except for representations and warranties made as of a specified date, which
need be true only as of the specified date), provided such breach, failure or
misrepresentation is not cured within ten days after notice thereof from the
other party or two business days prior to the date on which the Offer expires,
and with respect to any representation or warranty not qualified by "Material
Adverse Effect," such breaches, failures or misrepresentations, individually or
in the aggregate, result or are reasonably likely to result in a Material
Adverse Effect on the Company or Parent, as the case may be; (vi) by Parent if
the Board or any committee of the Board, (a) shall withdraw, modify or change
in any adverse manner (including by amendment of this Schedule 14D-9) or fail
to reconfirm upon the request of Parent its approval or recommendation of the
Merger Agreement, the Offer or the Merger, (b) shall approve or recommend any
Takeover Proposal, other than by Parent or an affiliate of Parent, or (c) shall
resolve to take any of the actions specified in clause (a) or (b); (vii) by the
Company if Purchaser fails to commence the Offer on or prior to five business
days following the date of initial public announcement of the Offer, provided
that the Company may not terminate the Merger Agreement pursuant to this
provision if the Company is at such time in breach in any material respect of
its obligations under the Merger Agreement; or (viii) by either of the Company
or Parent if the Offer shall have been terminated, or the Offer has expired
without any Shares being purchased therein; provided, however, that the right
to terminate the Merger Agreement pursuant to this provision shall not be
available to any party whose failure to fulfill any obligation under the Merger
Agreement has been the cause of, or resulted in, the termination of the Offer
or the failure of Parent or Purchaser, as the case may be, to purchase Shares
pursuant to the Offer on or prior to such date. Notwithstanding the foregoing,
no termination by the Company shall be effective pursuant to clause (iv) above
under circumstances in which a Termination Fee would be payable by the Company
unless concurrently with such termination, such Termination Fee is paid in full
by the Company in accordance with the provisions of the Merger Agreement.
Pursuant to the Merger Agreement, if (i) prior to the termination of the
Merger Agreement any person shall have commenced, publicly proposed or
communicated to the Company a Takeover Proposal and (a) the Minimum Condition
shall not have been satisfied, (b) the Merger Agreement shall have been
terminated pursuant to the provisions described in clause (ii), (iii), (v) or
(vii) of the preceding paragraph and (c) prior to the first anniversary of such
termination, the Company shall consummate with any third party any transaction
of the type described in the definition of the term "Takeover Proposal"; or
(ii) the Merger Agreement is terminated by the Company or Parent pursuant to
clause (iv) or (vi), respectively, of the preceding paragraph, then in such
event the Company shall pay Parent a termination fee of $4.75 million (the
"Termination Fee"), which amount shall be paid by wire transfer of immediately
available funds to an account designated by Parent.
Indemnification. Pursuant to the Merger Agreement, for three years after the
Effective Time, the Parent and the Surviving Corporation (or any successor to
the Surviving Corporation) will indemnify the present and former officers and
directors of the Company and its subsidiaries with respect to matters occurring
at or prior to the Effective Time to the full extent permitted under the DGCL
and the terms of the Company's charter, by-laws and indemnification agreements,
each as in effect as of the date of the Merger Agreement; and for three years
from the Effective Time, Parent shall maintain in effect the Company's
directors' and officers' liability insurance policies and shall purchase such
policy at or prior to the Closing Date.
8
<PAGE>
Representations and Warranties. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to Parent and
Purchaser with respect to, among other things, its organization,
capitalization, authority, financial statements, need for consents or
approvals, public filings, conduct of business, employee benefit plans,
intellectual property, employment matters, compliance with laws, tax matters,
insurance, litigation, title to properties, environmental matters, vote
required to approve the Merger Agreement, undisclosed liabilities, information
to be contained in the Proxy Statement, the opinion of its financial advisor
and significant vendor arrangements.
Pursuant to the Merger Agreement, Parent and Purchaser have made
substantially similar representations and warranties as to their organization,
authority, need for consents or approvals and information to be contained in
the Proxy Statement.
Confidentiality Agreement. Pursuant to the Confidentiality Agreement
entered into on April 22, 1999 by Parent and the Company (the "Confidentiality
Agreement"), the Company and Parent agreed to provide, among other things, for
the confidential treatment of their discussions regarding the Offer and the
Merger and the exchange of certain confidential information concerning the
Company. The Confidentiality Agreement is incorporated herein by reference and
a copy of it has been filed as Exhibit 11 to this Schedule 14D-9.
Stockholder Agreements. The following is a summary of certain provisions of
the Stockholder Agreements. This summary is not a complete description of the
terms and conditions of the Stockholder Agreements and is qualified in its
entirety by reference to the full text of the Stockholder Agreements, copies
of which have been filed with the Commission as exhibits to this Schedule 14D-
9 and incorporated herein by reference. Capitalized terms not otherwise
defined below shall have the same meaning set forth in the Merger Agreement or
the Stockholder Agreements, as the context may require.
As a condition and inducement to Parent's and Purchaser's entering into the
Merger Agreement and incurring the liabilities therein, Manfred Steinfeld and
Paul Steinfeld (the "Principal Stockholders"), who collectively have voting
power and dispositive power with respect to an aggregate of 1,610,500 Shares
and hold options to acquire 9,998 Shares, representing approximately 18% of
the outstanding Shares on a Fully Diluted Basis, concurrently with the
execution and delivery of the Merger Agreement entered into the Stockholder
Agreements with Parent and Purchaser. Pursuant to the Stockholder Agreements,
the Principal Stockholders have agreed, among other things, to grant Parent an
irrevocable proxy for the term of the Stockholder Agreements with respect to
the voting of their Shares in favor of the Merger and against any other
Takeover Proposal with respect to such Shares upon the terms and subject to
the conditions set forth therein. The Principal Stockholders have also agreed
to tender their Shares upon the direction of Purchaser and not to withdraw
their Shares so long as the Stockholder Agreements remain in effect. The
Stockholders Agreements will terminate on the earlier of (i) the Effective
Time and (ii) the termination of the Merger Agreement.
During the period ("Restricted Period") from May 5, 1999 through and
including the earlier of (i) the Effective Time, and (ii) the termination of
the Stockholder Agreements, each Principal Stockholder has agreed not to: (A)
except pursuant to the terms of the Stockholder Agreements and except for the
tender of Shares in the Offer, offer for sale, sell, transfer, tender, pledge,
encumber, assign or otherwise dispose of, or enter into any contract, option
or other arrangement to do so; (B) except pursuant to the terms of the
Stockholder Agreements, grant any proxies (other than proxies relating to the
election of management's slate of directors at an annual meeting of the
Company's stockholders, and other routine matters which would not require the
filing of a preliminary proxy statement under Rule 14a-6(a) of the Exchange
Act), or powers of attorney, deposit any of his Shares in a voting trust or
enter into a voting agreement with respect to any of their Shares; or (C) take
any action that would make any representation or warranty contained in the
Stockholder Agreements untrue or incorrect or have the effect of impairing the
ability of the Principal Stockholder to perform his obligations under the
applicable Stockholder Agreement or preventing or delaying the consummation of
any of the transactions contemplated by the applicable Stockholder Agreement
and the Merger Agreement.
9
<PAGE>
Each Principal Stockholder has agreed to unconditionally release, as of the
Effective Time, any and all claims and causes of action that he may have
against the Company or any of its Subsidiaries or any present or former
director, officer, employee or agent of the Company or any of its Subsidiaries
resulting from any act, omission or occurrence prior to the Effective Time;
provided, however, that such release not shall apply to any claim or cause of
action insofar as it relates to any entitlement to indemnification or to
compensation or benefits earned or accrued by or for the benefit of such
Principal Stockholder prior to the Effective Time in respect of services
performed by such Principal Stockholder to the Company as a director, officer,
consultant or employee of the Company.
Each Principal Stockholder has agreed that, in his capacity as a
stockholder, he will not respond to any inquiries or the making of any proposal
by any person or entity (other than Parent or any affiliate of Parent)
concerning any business combination, merger, tender offer, exchange offer, sale
of assets, sale of shares of capital stock or debt securities or similar
transactions involving the Company or any Subsidiary, division or operating or
principal business unit of the Company. If such Principal Stockholder, in the
capacity as a stockholder, receives any such inquiry or proposal, then the
Principal Stockholder has agreed to promptly inform Parent of the existence
thereof. Each Principal Stockholder, in the capacity as a stockholder, has
agreed to immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties previously conducted with respect
to any of the foregoing.
Certain Other Agreements. Parent has agreed to cause the Company to continue
to employ Paul N. Steinfeld for the remainder of calendar year 1999 at his
current annual base salary and benefits, including participation in the
Company's 1999 Senior Management Incentive Plan, pursuant to an employment
agreement to be executed as of the Effective Time. The agreement will also
contain a covenant that Mr. Steinfeld will not compete with the Company for a
period of one year after the termination of his employment. Certain other
officers and key management employees of the Company, including its Chief
Operating Officer and Chief Financial Officer, will be offered employment
agreements for a period of two years at the salary, with respect to each of
them, equal to such employee's salary in effect at the Effective Date.
Mr. Manfred Steinfeld has an understanding with the Company, which has been
approved by the Parent, that he will provide consulting services to the Company
for the remainder of calendar year 1999 in exchange for a consulting fee of
$12,000 per month.
Item 4. The Solicitation or Recommendation
At a special meeting held on May 5, 1999, the Board of Directors of the
Company (the "Board") unanimously approved the Merger Agreement and the
Stockholder Agreements and the transactions contemplated thereby and determined
that the Merger and the Offer, are fair to, and in the best interests of, the
Company and its stockholders, as further described below. THE BOARD UNANIMOUSLY
RECOMMENDS THAT HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER. Copies of a letter to the Company's stockholders and a
press release communicating such approval and recommendation are filed as
Exhibits 5 and 6, respectively, to this Schedule 14D-9 and are incorporated
herein by reference.
Background of the Merger and the Offer.
From time to time, the Company has discussed potential business combinations
with various third parties. Prior to the commencement of the negotiations
leading to the execution of the Merger Agreement, the Company's senior
management had discussed with Lazard Freres & Co. llc ("Lazard Freres"), which
had been the Company's underwriter in a secondary offering and was known to the
Company in other contexts, the possibility of a business combination involving
the Company. Pursuant to these discussions, Lazard Freres contacted a furniture
company in November 1998 and inquired about such a business combination.
However, the furniture company responded that it was not interested because the
Company's business would not be a good fit with the furniture company's
business.
10
<PAGE>
In December 1998, Franklin A. Jacobs, Chairman of the Board and Chief
Executive Officer of Falcon, contacted both Paul Steinfeld, Chairman of the
Board and Chief Executive Officer of the Company, and Manfred Steinfeld,
Chairman of the Executive Committee of the Board of the Company, for the
purpose of exploring a strategic alliance between the companies. During these
conversations, Mr. Jacobs indicated that Falcon might have an interest in
acquiring the Company.
In January 1999, representatives of a furniture company (the "Second
Interested Party") asked Manfred Steinfeld and Paul Steinfeld whether they
would be interested in a sale of the Company. That inquiry was repeated in
February 1999.
In February 1999, Mr. Jacobs contacted Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ") to express his interest in pursuing a possible
transaction with the Company. Also in February 1999, an entity (the "Third
Interested Party") expressed an interest in acquiring the Company for a price
in the range of $14.25 to $15.25 per Share. Lazard Freres responded on behalf
of the Company that the Company was not for sale at that time. However, the
Company and Lazard Freres conducted further meetings with the Third Interested
Party in March 1999, after which the Third Interested Party indicated that it
would be prepared to pay $16.00 per Share to acquire the Company if it could
obtain the financing to do so. The Third Interested Party then began a due
diligence investigation of the Company and attempted to obtain financing for a
proposed transaction. The Company and the Third Interested Party began
discussing the terms of a merger agreement. However, in April 1999, the Third
Interested Party indicated that it would need additional time.
On March 10, 1999, the Company formally retained Lazard Freres as its
investment banker with respect to a potential transaction involving the sale
of the Company or a significant amount of its securities or assets. In March
1999, Lazard Freres contacted the majority owner of a furniture company to
inquire about a business combination with the Company. The majority owner was
not interested in such a business combination. (Both the majority owner and
the furniture company were different than the furniture company contacted by
Lazard Freres in November 1998, Falcon, the Second Interested Party and the
Third Interested Party.)
On March 11, 1999, representatives of DLJ met with Falcon's senior managers
in St. Louis to discuss the financial impact of a potential acquisition of the
Company by Falcon.
Following this meeting, Mr. Jacobs called Manfred Steinfeld to indicate to
Mr. Steinfeld Falcon's interest in a potential transaction with the Company
and to arrange a meeting to discuss such a transaction. On March 16, 1999, Mr.
Jacobs met with Manfred Steinfeld in Chicago to discuss the possibility of a
negotiated transaction. On March 22, 1999, Manfred Steinfeld called Mr. Jacobs
to indicate to Mr. Jacobs that the Company would not be interested in
exploring a possible transaction with Falcon at that time. Shortly thereafter,
Falcon, with the assistance of DLJ, prepared a preliminary term sheet,
contemplating the purchase by Falcon of all of the Company's outstanding
shares for cash at a price of $14.00 to $15.00 per Share. On March 30, 1999,
DLJ submitted the preliminary term sheet to the Company and Lazard Freres.
On or about April 1, 1999, after consultation with the Company, Lazard
Freres informed DLJ that the Company was not for sale at that time and that in
any event the price range indicated in the term sheet was not sufficient to
warrant additional discussions. Lazard Freres indicated that a price of $17.00
per Share might be considered, and further indicated that the Company had
other options which it was then pursuing.
On April 14, 1999, DLJ contacted Lazard Freres to indicate that Falcon had
begun to take steps necessary to secure the financing for a purchase of the
Company. DLJ also indicated that Falcon was prepared to offer a price per
Share slightly higher than $15.00 per Share, subject to (i) the satisfactory
completion of business, legal and accounting due diligence of the Company and
(ii) the negotiation of a mutually satisfactory definitive merger agreement
with the Company. The following day, Manfred Steinfeld and Mr. Jacobs spoke in
a telephone conversation in which Mr. Steinfeld indicated that, although the
Company had participated in discussions with third parties with respect to a
potential sale of the Company, the Board had not made any decision to put the
Company up for sale.
11
<PAGE>
On April 20, 1999, DLJ contacted Lazard Freres, indicating that Falcon would
be willing to offer the Company's shareholders cash consideration of $16.00 per
Share to acquire the Company. After consulting with the Company, Lazard Freres
indicated to DLJ the Company's willingness to meet to discuss a potential
transaction.
On April 21, 1999, Manfred Steinfeld called Mr. Jacobs and urged Falcon to
increase its offer. A meeting was arranged between Mr. Jacobs and Manfred
Steinfeld to discuss a potential transaction.
Also on April 21, 1999, representatives of Lazard Freres and DLJ met in
Chicago, Illinois to provide DLJ an opportunity to explain Falcon's interest in
acquiring the Company. At this meeting, Lazard Freres indicated to DLJ that the
Company's management believed Falcon's valuation of the Company was too low.
The following day, April 22, 1999, Manfred Steinfeld, Paul Steinfeld and
representatives of Lazard Freres met with Mr. Jacobs and representatives of DLJ
to discuss further a potential acquisition of the Company. At this time, Mr.
Jacobs indicated that no financing condition was necessary in order to
consummate such a transaction, and that Falcon was prepared to offer $16.50 per
Share in cash for the Company. The Company and Falcon executed a
confidentiality agreement for the purpose of furthering discussions, and agreed
that Falcon would conduct its due diligence investigation of the Company
commencing on April 26, 1999. In addition, the parties agreed to direct their
efforts to the preparation of a mutually satisfactory merger agreement.
On April 22, 1999, the chief executive officer of the Second Interested
Party called Manfred Steinfeld to propose an acquisition of the Company. On
April 23, 1999, a representative of the Second Interested Party made the same
proposal to Lazard Freres. On April 26, 1999, representatives of the Second
Interested Party orally proposed, contingent on a due diligence investigation
that they stated would take at least three weeks to complete, an acquisition of
the Company at a price of $16.00 to $17.00 per Share, to be paid partly in
stock of the Second Interested Party and partly ($50 million in the aggregate)
in cash.
Throughout the week of April 26, 1999, Falcon and its legal and business
advisors conducted an extensive business and legal due diligence review of the
Company, which included reviewing certain non-public information. Such
investigation continued until May 3, 1999.
On April 26, 1999, Falcon's legal advisors, Gallop, Johnson and Neuman L.C.,
forwarded a draft merger agreement and a draft stockholder agreement to the
Company. The Company's legal advisors, D'Ancona & Pflaum LLC, and
representatives of Lazard Freres met on April 27, 1999 to discuss the Merger
Agreement. On April 29, 1999, the legal advisors of Falcon and the Company met
at the offices of D'Ancona & Pflaum LLC in Chicago, Illinois to discuss various
issues involving the Merger Agreement and related documents.
On April 29, 1999, the Company received a proposal letter from the Second
Interested Party relating to a purchase of the Company. The letter set forth
the Second Interested Party's proposal to acquire the Company for a purchase
price of $17.00 per Share, comprised of $7.00 per Share in cash and the
remainder in shares of common stock of the Second Interested Party. The
proposal was contingent on the completion of a due diligence investigation
which the Second Interested Party stated could not be completed until after May
20, 1999.
Lazard Freres contacted DLJ on April 29, 1999 to request that Falcon offer a
higher price per Share. On April 30, 1999, DLJ stated to Lazard Freres that
Falcon was unwilling to offer a higher price.
Between April 29, 1999 and May 3, 1999, Lazard Freres contacted the Second
Interested Party and the Third Interested Party and asked them to improve their
proposals. Neither the Second Interested Party nor the Third Interested Party
improved its proposal.
Negotiations between Falcon and the Company continued until May 4, 1999, the
date of the Company's regularly scheduled annual meeting of stockholders and
directors held at the Company's manufacturing plant in Morristown, Tennessee.
At the meeting of the Board, Paul Steinfeld and Manfred Steinfeld described
their conversations with representatives of Falcon and informed the Board that
Falcon was willing to pay $16.50 per
12
<PAGE>
Share for each of the Company's outstanding Shares. This meeting was also
attended by representatives of Lazard Freres, its legal advisors and the legal
advisors for the Company. At this meeting, Lazard Freres and the Company's
legal advisors reviewed key provisions of the Merger Agreement and the
Stockholder Agreements and Lazard Freres presented a valuation analysis of the
Company.
On the afternoon of May 5, 1999, after completion of the negotiations over
the proposed Merger Agreement and related documentation, the Board reconvened
the previous days' meeting, with four directors present in person and three
directors participating telephonically. The Board reviewed, with the advice and
assistance of the Company's investment banker and legal advisor, the proposed
Merger Agreement and the transactions contemplated thereby, including the Offer
and the Merger, and the terms of the Stockholder Agreements. At the meeting,
Paul Steinfeld described to the Board the outcome of the negotiations with
Falcon with respect to the substantive terms of the proposed Merger Agreement
and Stockholder Agreements. Lazard Freres delivered its opinion to the Board to
the effect that, as of such date and based upon and subject to certain matters
stated in such opinion, the cash consideration of $16.50 per Share to be
received by holders of Shares in the Offer and the Merger was fair, from a
financial point of view, to such holders. Following a number of questions from,
and discussions among, the directors, the Board (i) approved the Merger
Agreement and the Stockholder Agreements and the transactions contemplated
thereby and authorized the execution and delivery thereof, (ii) determined that
the Offer and the Merger are advisable, fair to, and in the best interests of,
the Company and its stockholders, and (iii) recommended that the Company's
stockholders accept the Offer and tender their Shares to Purchaser. On the same
date, the board of directors of Falcon and of the Offeror also approved the
Merger Agreement, the Offer and the transactions contemplated thereby.
At the conclusion of the May 5, 1999 Board meeting, Falcon, Purchaser, the
Company and certain stockholders and employees of the Company, as applicable,
executed the Merger Agreement, the Stockholder Agreements, and certain
collateral agreements. On May 6, 1999, prior to the opening of trading on the
New York Stock Exchange, Falcon and the Company issued a joint press release
announcing the execution of the Merger Agreement. A copy of the press release
is filed as Exhibit 6 to this Schedule 14D-9 and is incorporated herein by
reference. On May 12, 1999, pursuant to the terms of the Merger Agreement,
Falcon and Purchaser commenced the Offer.
Reasons for the Recommendation of the Company's Board of Directors
In light of the Board's review of the Company's competitive and financial
position, recent operating results and prospects, the Board determined that the
Offer and the Merger are fair to, and in the best interests of, the Company and
its stockholders. In making such recommendation and in approving the Merger
Agreement and the transactions contemplated thereby, the Board considered a
number of factors, including, but not limited to, the following:
(i) the terms and conditions of the Merger Agreement;
(ii) an assessment of the Company's strategic alternatives, which
include remaining a publicly owned company. In this regard, the Board
concluded, following analysis and discussion with its investment banker and
legal advisor and among the directors, that the terms of the Merger
Agreement provide the best means for holders of Shares to maximize the
value of their holdings at this time;
(iii) the familiarity of the Board with the Company's business,
financial condition, results of operations, properties and prospects as an
independent entity, and the nature of the industry in which it operates;
(iv) the recent trading price of the Shares and that the $16.50 per
Share to be paid in the Offer and as consideration in the Merger represents
a premium of approximately 20% over the $13.75 closing sale price for the
Shares on the New York Stock Exchange on May 5, 1999, the last trading day
prior to the public announcement of the execution of the Merger Agreement,
and a premium of approximately 46.7% to the most recent 30-day trading
average of $11.25 for the Shares on the New York Stock Exchange;
(v) the Board's conclusion that the proposal of the Second Interested
Party for a purchase price of $17.00 per Share (comprised of $7.00 per
Share in cash and the remainder in shares of common stock of
13
<PAGE>
the Second Interested Party) carried risks associated with the stock
portion not present with cash, was less certain because the proposal was
subject to the completion of due diligence, was not as favorable as the
proposal of Falcon because the Company's stockholders would receive
Falcon's cash consideration at an earlier date, and, therefore, was not,
taken as a whole, as favorable as the proposal of Falcon embodied in the
Merger Agreement;
(vi) the Board's conclusion that the expression of interest of the Third
Interested Party, which was at a price less than the price proposed by
Falcon and was subject to a number of contingencies, was not, taken as a
whole, as favorable as the proposal of Falcon embodied in the Merger
Agreement;
(vii) the financial presentation of Lazard Freres at the May 4, 1999
Board meeting and the opinion of Lazard Freres delivered to the Board at
the May 5, 1999 Board meeting to the effect that, as of such date and based
upon and subject to certain matters stated in such opinion, the cash
consideration of $16.50 per Share to be received by holders of Shares in
the Offer and the Merger was fair, from a financial point of view, to such
holders. The full text of the opinion of Lazard Freres, which sets forth
the assumptions made, the matters considered and the limitations on the
review undertaken by Lazard Freres, is attached hereto as Annex I to this
Schedule 14D-9 and is incorporated herein by reference. Stockholders are
urged to read the opinion of Lazard Freres carefully and in its entirety;
(viii) that the Merger Agreement, subject to certain conditions and
limitations set forth therein, permits the Board, in the exercise of its
fiduciary duties, to furnish nonpublic information and data, enter into
discussions and negotiations, in connection with an unsolicited acquisition
proposal, and recommend an unsolicited acquisition proposal to the
Company's stockholders;
(ix) that the Merger Agreement permits the Board, in the exercise of its
duties under applicable law, to terminate the Merger Agreement in favor of
an alternative acquisition proposal which the Board determines is superior
to the Offer; however, upon such termination, the Company is required to
pay Falcon a fee of $4,750,000. The Board did not view this payment
obligation as unreasonably precluding any third party from proposing an
alternative transaction and concluded that entering into the Merger
Agreement given the available strategic alternatives, was in the best
interests of the Company;
(x) that the Stockholder Agreements are terminable upon the termination
of the Merger Agreement and therefore would not impede a third party from
making a superior proposal to acquire the Company; and
(xi) that the transactions contemplated by the Merger Agreement provided
for an all cash payment to stockholders, with no financing condition.
The Board did not assign relative weights to the above factors or determine
that any factor was of particular importance. Rather, the Board viewed its
position and recommendations as being based on the totality of the information
presented to and considered by it.
The Board recognized that, while the consummation of the Offer gives the
Company's stockholders the opportunity to realize a significant premium over
the price at which the Shares were traded prior to the public announcement of
the Offer, tendering in the Offer would eliminate the opportunity for such
stockholders to participate in the future growth and profits of the Company.
The Board also recognized that there could be no assurance as to the level of
growth or profits to be attained by the Surviving Corporation in the future.
It is expected that, if the Shares are not purchased by Falcon in
accordance with the terms of the Offer or if the Merger is not consummated,
the Company's current management, under the general direction of the Board,
will continue to manage the Company as an on-going business.
Item 5. Persons Retained, Employed or to be Compensated
The Company retained Lazard Freres as its investment banker in connection
with the possible sale of the Company or a significant amount of its
securities or assets. Pursuant to its agreement with the Company, dated March
10, 1999, Lazard Freres (i) became entitled to receive $250,000 upon execution
of the Merger Agreement, and (ii) will be entitled to receive, upon the
earlier of the acquisition by the Purchaser of a beneficial interest in a
14
<PAGE>
majority of the Company's voting securities and the consummation of the Offer,
an amount equal to (x) 1.0% of the aggregate consideration to be paid by the
Purchaser less (y) the $250,000 to be paid pursuant to clause (i). In
addition, whether or not the Offer and the Merger is completed, the Company
has agreed to reimburse Lazard Freres for all its expenses, including the fees
of outside counsel and other professional advisors, incurred in connection
with this engagement; provided, however, that such expenses shall not exceed
$100,000 without the Company's prior approval. Under a separate letter
agreement dated March 10, 1999, the Company agreed to indemnify Lazard Freres
and its members, employees, agents, affiliates or controlling persons against
certain liabilities relating to or arising out of its engagement, including
liabilities under Federal securities laws.
In the ordinary course of business, Lazard Freres and its respective
affiliates may actively trade or hold the securities of the Company for its
own account or for the account of customers and, accordingly, may at any time
hold a long or short position in such securities.
Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any person to
make solicitations or recommendations to the stockholders of the Company on
its behalf with respect to the Offer and the Merger.
Item 6. Recent Transactions and Intent with Respect to Securities
(a) Except as otherwise disclosed in this Schedule 14D-9, during the past
60 days, no transaction in the Shares has been effected by the Company or, to
its knowledge, by any of its directors, executive officers, affiliates or
subsidiaries.
(b) To the best of the Company's knowledge, pursuant to the Offer, all
directors and executive officers of the Company presently intend to tender all
Shares owned by them except for those Shares, if any, (i) held by such persons
which, if tendered, could cause such persons to incur liability under Section
16(b) of the Securities Exchange Act of 1934, as amended, or (ii) with respect
to which any such person acts in a fiduciary or representative capacity or is
subject to the instructions of a third party.
Item 7. Certain Negotiations and Transactions by the Subject Company
(a) Except as otherwise disclosed in this Schedule 14D-9, the Company is
not engaged in any negotiation in response to the Offer which relates to or
would result in: (i) an extraordinary transaction, such as a merger or
reorganization, involving the Company; (ii) a purchase, sale or transfer of
material amount of assets by the Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company; or (iv) any material change in the present capitalization or dividend
policy of the Company.
(b) Except as described in Items 3 and 4 above, there are no transactions,
Board resolutions, agreements in principle or signed contracts in response to
the Offer, other than those agreements described (or whose description is
incorporated by reference in Item 3 above), that relate to or would result in
one or more of the events referred to in Item 7(a) above.
Item 8. Additional Information to be Furnished
None.
15
<PAGE>
Item 9. Material to be Filed as Exhibits
<TABLE>
<CAPTION>
Exhibit
No.
-------
<C> <S>
Exhibit 1 Offer to Purchase, dated May 12, 1999.*
Exhibit 2 Letter of Transmittal.*
Exhibit 3 Agreement and Plan of Merger, dated May 5, 1999, among Falcon,
Purchaser and the Company.
Exhibit 4 Page 11 of the Company's Proxy Statement, dated March 24, 1999,
relating to the Company's Annual Meeting of Stockholders.
Exhibit 5 Letter to stockholders of the Company, dated May 12, 1999.*
Exhibit 6 Press release issued by the Company and Falcon, dated May 6,
1999.
Exhibit 7 Opinion of Lazard Freres & Co. llc, dated May 5, 1999 (included
as Annex I to this Schedule 14D-9).*
Exhibit 8 Stockholder Agreement, dated May 5, 1999, among The Manfred
Steinfeld Irrevocable Trust UTA 9/5/97, Manfred Steinfeld, Falcon
and Purchaser.
Exhibit 9 Stockholder Agreement, dated May 5, 1999, among The Fern and
Manfred Steinfeld Charitable Remainder Trust UTA 10/17/95,
Manfred Steinfeld, Falcon and Purchaser.
Exhibit 10 Stockholder Agreement, dated May 5, 1999, among Paul Steinfeld,
Falcon and Purchaser.
Exhibit 11 Confidentiality Agreement, dated April 22, 1999, between Falcon
and the Company.
Exhibit 12 Supplement to Merger Agreement, dated May 5, 1999.
</TABLE>
- --------
* Included in copies mailed to the stockholders of the Company.
16
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Shelby Williams Industries, Inc.
/s/ Walter Roth
By: _________________________________
Name: Walter Roth
Its: Secretary
Dated: May 12, 1999
17
<PAGE>
EXHIBIT 1
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Shelby Williams Industries, Inc.
at
$16.50 Net Per Share
by
SY Acquisition, Inc.
a direct wholly owned subsidiary of
Falcon Products, Inc.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, JUNE 9, 1999, UNLESS THE OFFER IS EXTENDED.
THE BOARD OF DIRECTORS OF SHELBY WILLIAMS INDUSTRIES, INC. (THE "COMPANY") HAS
UNANIMOUSLY APPROVED THE OFFER, THE MERGER AND THE MERGER AGREEMENT (EACH AS
DEFINED HEREIN), HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER AND
THE MERGER AGREEMENT ARE ADVISABLE, FAIR TO, AND IN THE BEST INTERESTS OF, THE
COMPANY AND ITS STOCKHOLDERS, AND, PURSUANT TO THE OFFER, UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES (AS DEFINED HEREIN) WHICH, TOGETHER WITH ANY SHARES BENEFICIALLY OWNED
BY PARENT OR PURCHASER, REPRESENT AT LEAST A MAJORITY OF THE SHARES
OUTSTANDING ON A FULLY DILUTED BASIS (AS DEFINED HEREIN). THE OFFER IS ALSO
SUBJECT TO OTHER TERMS AND CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. SEE
SECTION 14. THE OFFER IS NOT CONDITIONED ON PURCHASER OBTAINING FINANCING.
---------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should either (a) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal and mail or deliver the Letter of Transmittal (or such facsimile),
together with the certificate(s) representing tendered Shares and any other
required documents, to the Depositary or, in lieu of delivering certificates
representing such Shares, tender such Shares pursuant to the procedures for
book-entry transfer set forth in Section 3, or (b) request such stockholder's
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. A stockholder whose Shares are registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
must contact such broker, dealer, commercial bank, trust company or other
nominee if such stockholder desires to tender such Shares.
A stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available or who cannot comply
with the procedures for book-entry transfer on a timely basis may tender such
Shares by following the procedures for guaranteed delivery set forth in
Section 3.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone
numbers set forth on the back cover of this Offer to Purchase. Additional
copies of this Offer to Purchase, the Letter of Transmittal, the Notice of
Guaranteed Delivery and other related materials may be obtained from the
Dealer Manager, the Information Agent or from brokers, dealers, commercial
banks and trust companies. A stockholder may also contact brokers, dealers,
commercial banks and trust companies for assistance concerning the Offer.
---------------
The Dealer Manager for the Offer is:
Donaldson, Lufkin & Jenrette
May 12, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
INTRODUCTION............................................................. 1
THE TENDER OFFER......................................................... 3
1. Terms of the Offer............................................... 3
2. Acceptance for Payment and Payment for Shares.................... 4
3. Procedures for Tendering Shares.................................. 5
4. Withdrawal Rights................................................ 8
5. Certain Federal Income Tax Consequences.......................... 9
6. Price Range of Shares; Dividends................................. 10
7. Effect of the Offer on the Market for the Shares;
Exchange Listing and Exchange Act Registration; Margin
Regulations...................................................... 10
8. Certain Information Concerning the Company....................... 11
9. Certain Information Concerning Purchaser and Parent.............. 14
10. Background of the Offer; Contacts with the Company............... 16
11. Purpose of the Offer and the Merger; Plans for the Company....... 18
12. The Merger Agreement; Certain Other Agreements................... 20
13. Sources and Amount of Funds...................................... 27
14. Certain Conditions of the Offer.................................. 28
15. Certain Legal Matters............................................ 30
16. Fees and Expenses................................................ 32
17. Miscellaneous.................................................... 32
Schedule I--Information Concerning the Directors and Executive Officers
of Parent and Purchaser................................................. I-1
</TABLE>
<PAGE>
To the Holders of Shares of Common Stock
of Shelby Williams Industries, Inc.:
INTRODUCTION
SY Acquisition, Inc., a Delaware corporation ("Purchaser") and a direct
wholly owned subsidiary of Falcon Products, Inc., a Delaware corporation
("Parent"), hereby offers to purchase all outstanding shares of the common
stock, par value $.05 per share ("Shares" or the "Common Stock"), of Shelby
Williams Industries, Inc., a Delaware corporation (the "Company"), at a
purchase price of $16.50 per Share, net to the seller in cash, without
interest (the "Offer Price"), upon the terms and subject to the conditions set
forth in this Offer to Purchase and in the related Letter of Transmittal
(which, together with any amendments or supplements thereto, collectively
constitute the "Offer").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer.
The Parent will pay all fees and expenses of Donaldson, Lufkin & Jenrette
Securities Corporation, as Dealer Manager (in such capacity, the "Dealer
Manager"), IBJ Whitehall Bank & Trust Company, as Depositary (the
"Depositary"), and D.F. King & Co., Inc., as Information Agent (the
"Information Agent"), incurred in connection with the Offer. See Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD") HAS UNANIMOUSLY
APPROVED THE OFFER AND THE MERGER AGREEMENT (AS DEFINED BELOW), HAS DETERMINED
THAT THE TERMS OF THE OFFER, THE MERGER AND THE MERGER AGREEMENT ARE
ADVISABLE, FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS
STOCKHOLDERS, AND PURSUANT TO THE OFFER, UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES.
Lazard Freres & Co. LLC, the Company's financial advisor ("Lazard Freres"),
has delivered to the Company Board its written opinion that the consideration
to be received by the stockholders of the Company pursuant to each of the
Offer and the Merger is fair to such stockholders from a financial point of
view. A copy of the full text of the opinion of Lazard Freres, which sets
forth the assumptions made, the matters considered and the limitations on the
review undertaken by Lazard Freres, is contained in the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-
9"), which is being mailed to stockholders herewith.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES WHICH, TOGETHER WITH ANY SHARES BENEFICIALLY OWNED BY PARENT OR
PURCHASER, REPRESENT AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY
DILUTED BASIS (THE "MINIMUM CONDITION").
"Fully Diluted Basis" means, as of any time, all of the Shares plus all
Shares required to be issued or issuable pursuant to options, warrants,
securities or obligations of any kind under employee stock or similar benefit
plans or otherwise, whether or not vested or exercisable.
The Company has represented and warranted to Purchaser and Parent in the
Merger Agreement that, as of March 10, 1999, a total of 8,761,417 Shares were
issued and outstanding, and 227,801 Shares were issuable pursuant to options
("Options") granted under the Company's option plans. Based on the foregoing,
and assuming no additional Shares (or options, warrants or rights exercisable
for, or convertible securities convertible into Shares) have been issued since
March 10, 1999 (other than Shares issued pursuant to the exercise of the stock
options referred to above), if 4,494,610 Shares were validly tendered and not
withdrawn prior to the Expiration Date (as hereinafter defined) pursuant to
the terms of the Offer, the Minimum Condition would be satisfied.
Certain other conditions to consummation of the Offer are described in
Section 14. Purchaser expressly reserves the right to waive any one or more of
the conditions to the Offer (except that the Minimum Condition may not be
waived without the Company's consent). See Section 14.
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of May 5, 1999 (the "Merger Agreement") among Parent, Purchaser and the
Company. The Merger Agreement provides, among
1
<PAGE>
other things, that as soon as practicable after the purchase of Shares
pursuant to the Offer and the satisfaction of the other conditions set forth
in the Merger Agreement and in accordance with the relevant provisions of the
Delaware General Corporation Law (the "DGCL"), Purchaser will be merged with
and into the Company (the "Merger"). Following consummation of the Merger, the
Company will continue as the surviving corporation (the "Surviving
Corporation") and a wholly owned subsidiary of Parent. At the effective time
of the Merger (the "Effective Time"), each Share issued and outstanding
immediately prior to the Effective Time (other than Shares owned by Purchaser,
Parent, the Company or any wholly owned subsidiary of Parent or the Company
and Shares held by stockholders who perfect their dissenters' rights under the
DGCL) will be cancelled and converted automatically into the right to receive
$16.50 in cash, or any higher price that may be paid per Share in the Offer,
without interest (the "Merger Consideration"). The Merger Agreement is more
fully described in Section 12.
The Merger Agreement provides that, promptly after the later to occur of
(i) the purchase by Purchaser of a majority of the Shares pursuant to the
Offer, and (ii) compliance with Section 14(f) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and Rule 14f-1 promulgated
thereunder, Parent shall be entitled to designate that number of directors,
rounded up to the next whole number, to serve on the Company Board such that
the percentage of Parent's nominees on the Company Board equals the then
percentage of outstanding Shares beneficially owned by Parent and its
affiliates, and that the Company shall, at such time, upon the request of
Purchaser, promptly use its best efforts to take all action necessary to cause
the persons designated by Parent to be elected to the Company Board, either by
increasing the size of the Company Board or securing resignations of incumbent
directors or both.
Consummation of the Merger is conditioned upon, among other things, the
approval and adoption by the requisite vote of stockholders of the Company of
the Merger, if required by the DGCL, other applicable law and the Company's
Certificate of Incorporation ("Certificate of Incorporation"). Under the DGCL,
the affirmative vote of the holders of the majority of the outstanding Shares
is the only vote of any class or series of the Company's capital stock that
would be necessary to approve the Merger at any required meeting of the
Company's stockholders. If the Minimum Condition is satisfied as a result of
the purchase of Shares by Purchaser pursuant to the Offer, Purchaser and its
affiliates will own at least a majority of the outstanding Shares, and
Purchaser will be able to effect the Merger without the affirmative vote of
any other stockholder. Pursuant to the Merger Agreement, Parent and Purchaser
have agreed to vote the Shares acquired by them pursuant to the Offer or
otherwise in favor of the Merger. The Merger Agreement is more fully described
in Section 12.
Under the DGCL, if Purchaser acquires, pursuant to the Offer or otherwise,
at least 90% of the outstanding Shares, Purchaser will be able to approve the
Merger Agreement and the transactions contemplated thereby without a vote of
the stockholders. In such event, Parent, Purchaser and the Company have agreed
in the Merger Agreement to take, at the request of Parent and subject to the
satisfaction of the conditions set forth in the Merger Agreement, all
necessary and appropriate action to cause the Merger to become effective as
soon as reasonably practicable after such acquisition, without a meeting of
the stockholders, in accordance with Section 253 of the DGCL.
As a condition and inducement to Parent's and Purchaser's entering into the
Merger Agreement and incurring the obligations provided for therein, Manfred
Steinfeld (through two trusts established by him) and Paul N. Steinfeld, the
principal stockholders of the Company (collectively, the "Principal
Stockholders"), who collectively have voting power and dispositive power with
respect to an aggregate of 1,610,500 Shares and own options to acquire an
additional 9,998 Shares representing approximately 18% of the outstanding
Shares calculated on a Fully Diluted Basis, concurrently with the execution
and delivery of the Merger Agreement entered into separate stockholder
agreements (collectively, the "Stockholder Agreements"), dated May 5, 1999,
with Parent and Purchaser. Pursuant to the Stockholder Agreements, the
Principal Stockholders have agreed, among other things, to grant Parent an
irrevocable proxy with respect to the voting of their Shares in favor of the
Merger upon the terms and subject to the conditions set forth therein. The
Stockholder Agreements are more fully described in Section 12.
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
2
<PAGE>
THE TENDER OFFER
1. Terms of the Offer.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such
extension or amendment), Purchaser will accept for payment and pay for all
Shares validly tendered prior to the Expiration Date and not properly
withdrawn in accordance with the procedures set forth in Section 4. The term
"Expiration Date" means 12:00 Midnight, New York City time, on June 9, 1999,
unless and until Purchaser shall have extended the period of time during which
the Offer is open, subject to the terms of the Merger Agreement, in which
event the term "Expiration Date" shall mean the latest time and date at which
the Offer, as so extended by Purchaser, shall expire. Purchaser will extend
the Offer from time to time for the shortest time periods permitted by law and
which it reasonably believes are necessary until the consummation of the
Offer, but not later than July 15, 1999, if on the scheduled Expiration Date
any of the conditions to Purchaser's obligation to accept for payment and pay
for the Shares have not been satisfied or waived. Parent and Purchaser have
the right to extend the Offer for up to ten business days notwithstanding the
prior satisfaction of all conditions to the Offer.
Consummation of the Offer is conditioned upon satisfaction of the Minimum
Condition, the expiration or termination of all waiting periods imposed by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
regulations thereunder (the "HSR Act"), and the other conditions described in
Section 14. If such conditions are not satisfied, Purchaser, subject to the
terms of the Merger Agreement and subject to complying with applicable rules
and regulations of the Securities and Exchange Commission (the "Commission"),
shall not be required to purchase any of the Shares tendered, and may delay
the acceptance for payment of any Shares or terminate or amend the Offer.
Subject to the terms and conditions contained in the Merger Agreement,
Purchaser may (but shall not be obligated to) waive in whole or in part, at
any time and from time to time, any or all of such conditions, provided that
the Minimum Condition cannot be waived by Purchaser without the written
consent of the Company. See Section 14.
Pursuant to the Merger Agreement, Purchaser may not, without the written
consent of the Company, (i) decrease the price per Share payable in the Offer,
(ii) change the form of consideration to be paid in the Offer, (iii) reduce
the maximum number of Shares to be purchased in the Offer or the Minimum
Condition, (iv) impose additional conditions to the Offer or modify the
conditions in a manner adverse to the holders of Shares, (v) amend any other
term of the Offer in a manner adverse to the holders of the Shares or (vi)
extend the expiration of the Offer beyond July 15, 1999. Subject to the terms
and conditions of the Offer and the Merger Agreement, Purchaser shall, and
Parent shall cause Purchaser to, pay for all Shares validly tendered and not
withdrawn pursuant to the Offer that Purchaser becomes obligated to purchase
pursuant to the Offer as soon as practicable after the expiration of the
Offer.
There can be no assurance that Purchaser will exercise its rights to extend
the Offer (other than as required by the Merger Agreement or applicable law).
Any extension, amendment or termination of the Offer, or any waiver of any
condition of the Offer, will be followed as promptly as practicable by a
public announcement. In the case of an extension, Rule 14e-1(d) under the
Exchange Act requires that the announcement be issued no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date in accordance with the public announcement requirements of
Rule 14d-4(c) under the Exchange Act. As used in this Offer to Purchase,
"business day" has the meaning set forth in Rule 14d-1 under the Exchange Act.
Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the
Exchange Act, which require that any material change in the information
published, sent or given to stockholders in connection with the Offer be
promptly disseminated to stockholders in a manner reasonably designed to
inform stockholders of such change), and without limiting the manner in which
Purchaser may choose to make any public announcement, Purchaser will not have
any obligation to publish, advertise or otherwise communicate any such public
announcement other than by making a release to the Dow Jones News Service.
During any extension of the Offer, all Shares previously tendered and not
properly withdrawn will remain subject to the Offer, subject to the rights of
a tendering stockholder to withdraw its Shares in accordance with the
procedures set forth in Section 4. PURCHASER SHALL NOT HAVE ANY OBLIGATION TO
PAY INTEREST ON THE PURCHASE PRICE FOR TENDERED SHARES, REGARDLESS OF ANY
DELAY IN SUCH PAYMENT AND WHETHER OR NOT PURCHASER EXERCISES ITS RIGHT TO
EXTEND THE OFFER.
3
<PAGE>
If Purchaser extends the Offer or if Purchaser is delayed in its acceptance
for payment of or payment for Shares (whether before or after its acceptance
for payment of Shares) or it is unable to pay for Shares pursuant to the Offer
for any reason, then, without prejudice to Purchaser's rights under the Offer,
the Depositary may retain tendered Shares on behalf of Purchaser, and such
Shares may not be withdrawn except to the extent tendering stockholders are
entitled to withdrawal rights as described in Section 4. However, the ability
of Purchaser to delay the payment for Shares that Purchaser has accepted for
payment is limited by Rule 14e-1(c) under the Exchange Act, which requires
that a bidder pay the consideration offered or return the securities deposited
by or on behalf of holders of securities promptly after the termination or
withdrawal of such bidder's offer.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer
(including, subject to the Merger Agreement, the Minimum Condition), Purchaser
will disseminate additional tender offer materials and extend the Offer to the
extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act.
The minimum period during which an offer must remain open following a material
change in the terms of the offer or information concerning the offer, other
than a change in price or a change in the percentage of securities sought,
will depend upon the facts and circumstances then existing, including the
relative materiality of the changed terms or information. In a public release,
the Commission has stated that in its view an offer must remain open for a
minimum period of time following a material change in the terms of the offer
and that waiver of a material condition, such as the Minimum Condition, is a
material change in the terms of the offer. The release states that an offer
should remain open for a minimum of five business days from the date a
material change is first published, sent or given to security holders and
that, if material changes are made with respect to information not materially
less significant than the offer price and the number of shares being sought, a
minimum of ten business days may be required to allow adequate dissemination
and investor response. The requirement to extend the Offer will not apply to
the extent that the number of business days remaining between the occurrence
of the change and the then-scheduled Expiration Date equals or exceeds the
minimum extension period that would be required because of such amendment. If,
prior to the Expiration Date, Purchaser increases the consideration offered to
holders of Shares pursuant to the Offer, such increased consideration will be
paid to all holders whose Shares are purchased in the Offer whether or not
such Shares were tendered prior to such increase in consideration. Except as
otherwise provided herein, any extension of the Offer will not constitute a
waiver by Purchaser of any of the conditions set forth in Section 14.
The Company has provided Purchaser with the Company's stockholder lists and
security position listing for the purpose of disseminating the Offer to
holders of the Shares. This Offer to Purchase, the related Letter of
Transmittal and other relevant materials will be mailed by Purchaser to record
holders of Shares and will be furnished by Purchaser to brokers, dealers,
commercial banks, trust companies and similar persons whose names, or the
names of whose nominees, appear on the stockholder lists or, if applicable,
who are listed as participants in a clearing agency's security position
listing, for subsequent transmittal to beneficial owners of Shares.
2. Acceptance for Payment and Payment for Shares.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such
extension or amendment), Purchaser will purchase, by accepting for payment,
and will pay for, as soon as it is permitted to do so under applicable law,
all Shares validly tendered prior to the Expiration Date and not properly
withdrawn in accordance with the procedures set forth in Section 4. All
determinations concerning the satisfaction of such terms and conditions will
be within Purchaser's discretion, which determinations will be final and
binding. See Sections 1 and 14. Purchaser expressly reserves the right, in its
sole discretion, to delay acceptance for payment of or payment for Shares in
order to comply in whole or in part with any applicable law, including,
without limitation, the HSR Act.
Any such delays will be effected in compliance with Rule 14e-1(c)
promulgated under the Exchange Act (relating to a bidder's obligation to pay
for or return tendered securities promptly after the termination or withdrawal
of such bidder's offer). In all cases, payment for Shares purchased pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
the certificates evidencing such Shares (the "Share Certificates") or timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such
Shares
4
<PAGE>
into the Depositary's account at The Depository Trust Company (the "Book-Entry
Transfer Facility") pursuant to the procedures set forth in Section 3, (ii)
the Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or, in the case of a book-
entry transfer, an Agent's Message (as defined below) and (iii) any other
documents required by the Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility
has received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares which are the subject of such Book-
Entry Confirmation, that such participant has received and agrees to be bound
by the terms of the Letter of Transmittal and that Purchaser may enforce such
agreement against the participant.
For purposes of the Offer, Purchaser shall be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered prior to the
Expiration Date and not properly withdrawn if, as and when Purchaser gives
oral or written notice to the Depositary of Purchaser's acceptance of such
Shares for payment pursuant to the Offer. Upon the terms and subject to the
conditions of the Offer, payment for Shares accepted pursuant to the Offer
will be made by deposit of the aggregate purchase price therefor with the
Depositary, which will act as agent for tendering stockholders for the purpose
of receiving payment from Purchaser and transmitting payment to such tendering
stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR
SHARES BE PAID REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING
SUCH PAYMENT. Upon the deposit of funds with the Depositary for the purpose of
making payments to tendering stockholders, Purchaser's obligation to make such
payment shall be satisfied and tendering stockholders must thereafter look
solely to the Depositary for payment of amounts owed to them by reason of the
acceptance for payment of Shares pursuant to the Offer. Tendering stockholders
will not be obligated to pay brokerage fees or commissions or, except as set
forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the
purchase of Shares pursuant to the Offer. Purchaser will pay any charges and
expenses of the Depositary and the Information Agent.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are
submitted evidencing more Shares than are tendered, Share Certificates
evidencing such unpurchased Shares or untendered Shares will be returned,
without expense to the tendering stockholder (or, in the case of Shares
tendered by book-entry transfer into the Depositary's account at the Book-
Entry Transfer Facility pursuant to the procedures set forth in Section 3,
such Shares will be credited to an account maintained at the Book-Entry
Transfer Facility), as promptly as practicable following the expiration,
termination or withdrawal of the Offer.
The Purchaser reserves the right to transfer or assign, in whole at any
time, or in part from time to time, to one or more of its affiliates, the
right to purchase all or any portion of the Shares tendered pursuant to the
Offer, but any such transfer or assignment will not relieve Purchaser of its
obligations under the Offer or prejudice the rights of tendering stockholders
to receive payment for Shares validly tendered and accepted for payment
pursuant to the Offer.
3. Procedures for Tendering Shares.
Valid Tender of Shares. In order for Shares to be validly tendered pursuant
to the Offer, the Letter of Transmittal or a facsimile thereof, properly
completed and duly executed, with any required signature guarantees, or an
Agent's Message in connection with a book-entry delivery of Shares, and any
other required documents, must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date and either (i) the Share Certificates evidencing tendered
Shares must be received by the Depositary along with the Letter of
Transmittal, or (ii) Shares must be tendered pursuant to the procedure for
book-entry transfer described below and a Book-Entry Confirmation must be
received by the Depositary, or (iii) the tendering stockholder must comply
with the guaranteed delivery procedures described below, in each case prior to
the Expiration Date.
5
<PAGE>
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND
THE DELIVERY THEREOF WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at the Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase, and any
financial institution that is a participant in any of the Book-Entry Transfer
Facility's systems may make book-entry delivery of Shares by causing the Book-
Entry Transfer Facility to transfer such Shares into the Depositary's account
at the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer
Facility's procedures for transfer. However, although delivery of Shares may
be effected through book-entry transfer at the Book-Entry Transfer Facility,
the Letter of Transmittal (or facsimile thereof), properly completed and duly
executed and with any required signature guarantees, or an Agent's Message in
connection with a book-entry delivery of Shares, and any other required
documents, must, in any case, be transmitted to, and received by, the
Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase prior to the Expiration Date or the tendering stockholder must
comply with the guaranteed delivery procedures described below. DELIVERY OF
DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-
ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of the Security
Transfer Agent's Medallion Program (each of the foregoing being referred to as
an "Eligible Institution"), unless the Shares tendered thereby are tendered
(i) by a registered holder of Shares who has not completed either the box
entitled "Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. See Instruction 1 of the Letter of Transmittal.
If a Share Certificate is registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made, or a Share
Certificate not accepted for payment or not tendered is to be returned, to a
person other than the registered holder(s), then the Share Certificate must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the Share
Certificate, with the signature(s) on such Share Certificate or stock powers
guaranteed as described above. See Instructions 1 and 5 of the Letter of
Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates are not immediately
available or time will not permit all required documents to reach the
Depositary prior to the Expiration Date or the procedure for book-entry
transfer cannot be completed on a timely basis, such Shares may nevertheless
be tendered if all the following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser herewith, is
received by the Depositary, as provided below, prior to the Expiration
Date; and
(iii) the Share Certificates for all tendered Shares, in proper form for
transfer, or a Book-Entry Confirmation, together with a properly completed
and duly executed Letter of Transmittal (or manually signed facsimile
thereof) with any required signature guarantee (or, in the case of a book-
entry transfer, an Agent's Message) and any other documents required by
such Letter of Transmittal, are received by the Depositary within three
trading days after the date of execution of the Notice of Guaranteed
Delivery. A "trading day" is any day on which the New York Stock Exchange,
Inc. ("NYSE") is open for business.
6
<PAGE>
Any Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must include
a guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares purchased
pursuant to the Offer will, in all cases, be made only after timely receipt by
the Depositary of (i) the Share Certificates evidencing such Shares, or a
Book-Entry Confirmation of the delivery of such Shares, (ii) a properly
completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof) (or, in the case of a book-entry transfer, an Agent's
Message) and (iii) any other documents required by the Letter of Transmittal.
Accordingly, tendering stockholders may be paid at different times depending
upon when the foregoing materials are actually received by the Depositary.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE
SHARES TO BE PAID BY PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR
ANY DELAY IN MAKING SUCH PAYMENT.
Backup Federal Withholding Tax. To prevent backup federal income tax
withholding with respect to payment to certain stockholders of the purchase
price of Shares purchased pursuant to the Offer, each such stockholder must,
unless an exemption applies, provide the Depositary with such stockholder's
correct taxpayer identification number ("TIN") and certify, under penalty of
perjury, that such TIN is correct and that such stockholder is not subject to
backup federal income tax withholding by completing the Substitute Form W-9
included in the Letter of Transmittal. If a stockholder does not provide such
stockholder's correct TIN or fails to provide the certifications described
above, the Internal Revenue Service (the "IRS") may impose a penalty on such
stockholder and payment of cash to such stockholder pursuant to the Offer may
be subject to backup withholding of 31%. All stockholders surrendering Shares
pursuant to the Offer should complete and sign the main signature form and the
Substitute Form W-9 included as part of the Letter of Transmittal to provide
the information and certification necessary to avoid backup withholding
(unless an applicable exemption exists and is proved in a manner satisfactory
to Purchaser and the Depositary). Certain stockholders (including, among
others, all corporations and certain foreign individuals and entities) are not
subject to backup withholding. Foreign stockholders, if exempt, should
complete and sign the main signature form and a Form W-8, Certificate of
Foreign Status, a copy of which may be obtained from the Depositary, in order
to avoid backup withholding. See Instruction 10 of the Letter of Transmittal.
Appointment as Proxy; Distributions. By executing a Letter of Transmittal
as set forth above, a tendering stockholder irrevocably appoints designees of
Purchaser as such stockholder's attorneys-in-fact and proxies, in the manner
set forth in the Letter of Transmittal, each with full power of substitution,
to the full extent of such stockholder's rights with respect to the Shares
tendered by such stockholder and accepted for payment by Purchaser (and any
and all non-cash dividends, distributions, rights, other Shares, or other
securities issued or issuable in respect of such Shares on or after the date
of the Merger Agreement). All such powers of attorney and proxies shall be
considered coupled with an interest in the tendered Shares. This appointment
will be effective if, when, and only to the extent that, Purchaser accepts
such Shares for payment pursuant to the Offer. Upon such acceptance for
payment, all prior powers of attorney and proxies given by such stockholder
with respect to such Shares and other securities will, without further action,
be revoked, and no subsequent powers of attorney or proxies may be given (and,
if given, will not be deemed effective). The designees of Purchaser will, with
respect to the Shares and other securities for which the appointment is
effective, be empowered to exercise all voting and other rights of such
stockholder as they in their sole discretion may deem proper at any annual,
special, adjourned or postponed meeting of the Company's stockholders, by
written consent or otherwise, and Purchaser reserves the right to require
that, in order for Shares or other securities to be deemed validly tendered,
immediately upon Purchaser's acceptance for payment of such Shares Purchaser
must be able to exercise full voting, consent and other rights with respect to
such Shares and other securities, including voting at any meeting of
stockholders. Such powers of attorney and proxies will be irrevocable and will
be granted in consideration of the purchase of the Shares by Purchaser in
accordance with the terms of the Offer.
7
<PAGE>
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tendered Shares pursuant to any of the procedures described above will be
determined by Purchaser, in its sole discretion, whose determination will be
final and binding on all parties. Purchaser reserves the absolute right to
reject any or all tenders of any Shares determined by it not to be in proper
form or if the acceptance for payment of, or payment for, such Shares may, in
the opinion of Purchaser's counsel, be unlawful. Purchaser also reserves the
absolute right, in its sole discretion, subject to the Merger Agreement, to
waive any of the conditions of the Offer or any defect or irregularity in any
tender with respect to Shares of any particular stockholder, whether or not
similar defects or irregularities are waived in the case of other
stockholders. No tender of Shares will be deemed to have been validly made
until all defects and irregularities have been cured or waived.
Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be
final and binding. None of Parent, Purchaser, the Dealer Manager, the
Depositary, the Information Agent or any other person will be under any duty
to give notification of any defects or irregularities in tenders or will incur
any liability for failure to give any such notification.
Binding Agreement. A tender of Shares pursuant to any of the procedures
described above will constitute the tendering stockholder's acceptance of the
terms and conditions of the Offer. Purchaser's acceptance for payment of
Shares tendered pursuant to the Offer will constitute a binding agreement
between the tendering stockholder and Purchaser upon the terms and subject to
the conditions of the Offer.
4. Withdrawal Rights.
Except as otherwise provided in this Section 4, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer
may be withdrawn pursuant to the procedures set forth below at any time prior
to the Expiration Date and, unless theretofore accepted for payment by
Purchaser pursuant to the Offer, may also be withdrawn at any time after July
11, 1999.
If Purchaser extends the Offer, is delayed in its acceptance for payment of
Shares or is unable to accept Shares for payment pursuant to the Offer for any
reason, then, without prejudice to Purchaser's rights under the Offer, the
Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares,
and such Shares may not be withdrawn except to the extent that tendering
stockholders are entitled to withdrawal rights as described in this Section 4.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase.
Any such notice of withdrawal must specify the name of the person who tendered
the Shares to be withdrawn, the number of Shares to be withdrawn and the name
of the registered holder, if different from that of the person who tendered
such Shares. If Share Certificates evidencing Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, then, prior to the
physical release of such Share Certificates, the serial numbers shown on such
Share Certificates must be submitted to the Depositary and the signature(s) on
the notice of withdrawal must be guaranteed by an Eligible Institution, unless
such Shares have been tendered for the account of an Eligible Institution. If
Shares have been tendered pursuant to the procedure for book-entry transfer as
set forth in Section 3, any notice of withdrawal must also specify the number
of the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Shares and otherwise comply with the Book-Entry Transfer Facility's
procedures.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole discretion,
whose determination will be final and binding on all parties. None of Parent,
Purchaser, the Dealer Manager, the Depositary, the Information Agent or any
other person
8
<PAGE>
will be under any duty to give notification of any defects or irregularities
in any notice of withdrawal or incur any liability for failure to give any
such notification.
Any Shares properly withdrawn will thereafter be deemed to not have been
validly tendered for purposes of the Offer. Withdrawals of tenders of Shares
may not be rescinded. However, withdrawn Shares may be retendered at any time
prior to the Expiration Date by following one of the procedures described in
Section 3 on or prior to the Expiration Date.
5. Certain Federal Income Tax Consequences.
The following is a summary of certain United States federal income tax
consequences of the Offer and the Merger to stockholders whose Shares are
purchased pursuant to the Offer or whose Shares are converted to cash in the
Merger (including pursuant to the exercise of perfected dissenter rights under
the DGCL). The discussion applies only to stockholders in whose hands Shares
are capital assets, and may not apply to Shares received pursuant to the
exercise of employee stock options or otherwise as compensation, or to
stockholders who are in special tax situations (such as insurance companies,
tax-exempt organizations or dealers in securities). This discussion does not
discuss the federal income tax consequences to a stockholder who, for United
States federal income tax purposes, is a nonresident alien individual, a
foreign corporation, a foreign partnership or a foreign estate or trust.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR
GENERAL INFORMATIONAL PURPOSES ONLY AND ARE BASED UPON CURRENT LAW. BECAUSE
INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH STOCKHOLDER SHOULD CONSULT SUCH
STOCKHOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES
DISCUSSED BELOW TO SUCH STOCKHOLDER AND THE PARTICULAR TAX EFFECTS TO SUCH
STOCKHOLDER OF THE OFFER AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT
OF STATE, LOCAL, FOREIGN AND OTHER INCOME TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger will be
a taxable transaction for federal income tax purposes (and also may be a
taxable transaction under applicable state, local and other income tax laws).
In general, for federal income tax purposes, a stockholder will recognize gain
or loss in an amount equal to the difference between his or her adjusted tax
basis in the Shares sold pursuant to the Offer or converted into cash in the
Merger and the amount of cash received therefor. Gain or loss must be
determined separately for each block of Shares (i.e., Shares acquired at the
same cost in a single transaction) sold pursuant to the Offer or converted
into cash in the Merger. Such capital gain or loss will be long-term capital
gain or loss if the Shares were held by the holder for more than one year at
the time of the consummation of the Offer or Merger. For federal income tax
purposes, net capital gain recognized by individuals (or an estate or certain
trust) from the sale of property held for more than twelve months will
generally be taxed at a maximum tax rate of 20% (or 10% if the capital gain
would be taxed at only a 15% tax rate if such gain were treated as ordinary
income). There are limitations on the deductibility of capital losses.
Payments in connection with the Offer or Merger may be subject to "back-up
withholding" at the rate of 31% unless the holder of the Shares (i) provides a
correct taxpayer identification number ("TIN") (which, for an individual
holder of Shares, is such holder's social security number) and any other
required information, or (ii) is a corporation or comes within certain other
exempt categories, and when required, demonstrates this fact, and otherwise
complies with applicable requirements of the back-up withholding rules. A
holder of Shares that does not provide a correct TIN may be subject to
penalties imposed by the IRS. Shareholders may prevent back-up withholding by
completing and signing the Substitute Form W-9 included as part of the Letter
of Transmittal. Any amount paid as back-up withholding does not constitute an
additional tax and will be creditable against such holder's federal income tax
liability, provided that the required information is given to the IRS. Each
holder of Shares should consult his or her tax advisor as to such holder's
qualifications for exemption from back-up withholding and the procedure for
obtaining such exemption.
9
<PAGE>
6. Price Range of Shares; Dividends.
The Shares are listed and traded on the NYSE under the symbol "SY." The
following table sets forth, for the fiscal quarters indicated, the high and
low reported sales prices per Share on the NYSE as reported by the Dow Jones
News Service.
<TABLE>
<CAPTION>
High Low
--------- ---------
<S> <C> <C>
Fiscal Year Ended December 31, 1996:
First Quarter....................................... $12- 7/8 $10- 5/8
Second Quarter...................................... $12- 1/2 $10- 1/8
Third Quarter....................................... $13- 1/2 $10- 5/8
Fourth Quarter...................................... $14- 3/4 $12- 1/4
Fiscal Year Ended December 31, 1997:
First Quarter....................................... $17 $11- 7/8
Second Quarter...................................... $14- 3/8 $11- 3/8
Third Quarter....................................... $19- 7/8 $13- 3/4
Fourth Quarter...................................... $20- 5/8 $14- 3/4
Fiscal Year Ended December 31, 1998:
First Quarter....................................... $17- 1/8 $14- 5/8
Second Quarter...................................... $16- 1/8 $14- 5/8
Third Quarter....................................... $15- 3/4 $11- 7/8
Fourth Quarter...................................... $13- 1/8 $11- 7/8
Fiscal Year Ended December 31, 1999:
First Quarter....................................... $13- 7/16 $ 8- 5/16
Second Quarter to May 5, 1999....................... $13- 7/8 $ 9- 5/8
</TABLE>
On May 5, 1999, the last full trading day prior to the public announcement
of the execution of the Merger Agreement and of Purchaser's intention to
commence the Offer, the closing price per Share as reported on the NYSE was
$13.75. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE
SHARES.
The Company declared and paid cash dividends on its Common Stock for the
fiscal quarters indicated below as follows:
Cash Dividends per Share
<TABLE>
<CAPTION>
1996 1997 1998 1999
Period ---- ---- ---- ----
<S> <C> <C> <C> <C>
First Quarter........................................ $.07 $.08 $.09 $.09
Second Quarter....................................... $.07 $.08 $.09 $.09*
Third Quarter........................................ $.08 $.08 $.09
Fourth Quarter....................................... $.08 $.08 $.09
---- ---- ----
Total.............................................. $.30 $.32 $.36
==== ==== ====
</TABLE>
--------
*declared, payable on May 17, 1999
7. Effect of the Offer on the Market for the Shares; Exchange Listing and
Exchange Act Registration; Margin Regulations.
Market for the Shares. The purchase of Shares pursuant to the Offer will
reduce the number of Shares that might otherwise trade publicly and could
reduce the number of holders of Shares, which could adversely affect the
liquidity and market value of the remaining Shares held by the public.
Stock Listing. Depending upon the number of Shares purchased pursuant to
the Offer, the Shares may no longer meet the requirements of the NYSE for
continued listing and may be delisted from the NYSE and deregistered under
Section 12(b) of the Exchange Act. Parent intends to cause the delisting by
the NYSE and deregistration of the Shares following consummation of the Offer.
10
<PAGE>
According to the published guidelines, the NYSE would consider delisting
the Shares if, among other things, the number of holders of at least 100
Shares should fall below 1,200, the number of publicly held Shares (exclusive
of holdings of officers, directors and their families and other concentrated
holdings of 10 percent or more ("NYSE Excluded Holdings")) should fall below
600,000 or the aggregate market value of publicly held Shares (exclusive of
NYSE Excluded Holdings) should fall below $5,000,000. The Company has advised
Purchaser that, as of March 10, 1999, there were 8,761,417 Shares outstanding,
held by approximately 3,000 holders of record. If, as a result of the purchase
of Shares pursuant to the Offer or otherwise, the Shares no longer meet the
requirements of the NYSE for continued listing and the listing of the Shares
is discontinued, the market for the Shares could be adversely affected.
If the NYSE were to delist the Shares, it is possible that the Shares would
continue to trade on another securities exchange or in the over the counter
market and that price or other quotations would be reported by such exchange
or through the Nasdaq Stock Market or other sources. The extent of the public
market therefor and the availability of such quotations would depend, however,
upon such factors as the number of stockholders and/or the aggregate market
value of such securities remaining at such time, the interest in maintaining a
market in the Shares on the part of securities firms, the possible termination
of registration under the Exchange Act as described below, and other factors.
Purchaser cannot predict whether the reduction in the number of Shares that
might otherwise trade publicly would have an adverse or beneficial effect on
the market price for or marketability of the Shares or whether it would cause
future market prices to be greater or less than the Offer Price.
Margin Regulations. The Shares are currently "margin securities," as such
term is defined under the rules of the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"), which has the effect, among
other things, of allowing banks to extend credit on the collateral of such
securities. Depending upon factors similar to those described above regarding
listing and market quotations, following the Offer it is possible that the
Shares might no longer constitute "margin securities" for purposes of the
margin regulations of the Federal Reserve Board, in which event such Shares
might no longer be eligible as collateral for loans made by banks.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the Commission if the Shares are
neither listed on a national securities exchange nor held by 300 or more
holders of record. Termination of registration of the Shares under the
Exchange Act would, subject to Section 15(d) of the Exchange Act,
substantially reduce the information required to be furnished by the Company
to its stockholders and to the Commission and would make certain provisions of
the Exchange Act no longer applicable to the Company, such as the short-swing
profit recovery provisions of Section 16(b) of the Exchange Act, the
requirement of furnishing a proxy or information statement pursuant to Section
14(a) or (c) of the Exchange Act in connection with stockholders' meetings and
the related requirement of furnishing an annual report to stockholders and the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions. Furthermore, the ability of "affiliates" of the Company
and persons holding "restricted securities" of the Company to dispose of such
securities pursuant to Rule 144 or 144A promulgated under the Securities Act
of 1933, as amended, may be impaired or eliminated.
PURCHASER INTENDS TO SEEK TO CAUSE THE COMPANY TO APPLY FOR DELISTING OF
THE SHARES FROM THE NYSE AND TERMINATION OF REGISTRATION OF THE SHARES UNDER
THE EXCHANGE ACT AS SOON AFTER THE COMPLETION OF THE OFFER AS THE REQUIREMENTS
FOR SUCH DELISTING AND/OR TERMINATION ARE MET. IF REGISTRATION OF THE SHARES
IS NOT TERMINATED PRIOR TO THE MERGER, THEN THE REGISTRATION OF THE SHARES
UNDER THE EXCHANGE ACT WILL BE TERMINATED FOLLOWING THE CONSUMMATION OF THE
MERGER.
8. Certain Information Concerning the Company.
The information concerning the Company contained in this Offer to Purchase,
including financial information, has been furnished by the Company or been
taken from or based upon publicly available documents
11
<PAGE>
and records on file with the Commission and other public sources. Neither
Parent, Purchaser nor the Dealer Manager assumes any responsibility for the
accuracy or completeness of the information concerning the Company contained
in such documents and records or for any failure by the Company to disclose
events which may have occurred or may affect the significance or accuracy of
any such information but which are unknown to Parent, Purchaser or the Dealer
Manager.
The Company is a Delaware corporation and its principal executive offices
are located at 11-111 Merchandise Mart, Chicago, Illinois 60654, telephone
(312) 527-3593. The Company has additional executive, operational and
administrative offices at 150 Shelby Williams Drive, Morristown, Tennessee
37813, telephone (423) 586-7000.
The Company is the leading designer, manufacturer and distributor of
seating products used in the hospitality (including lodging, gaming, interval
vacation and country club) and food service industries. The Company produces
and markets under the "SHELBY WILLIAMS" brand name an extensive line of
seating products, including wood, metal and rattan chairs, bar stools, sofas
and sleep sofas and stacking chairs, as well as banquet-related products under
the "KING ARTHUR" brand name, including folding tables, food service carts and
portable dance floors. In addition, the Company designs and manufactures
seating products under the "THONET" brand name for the university, health care
and other institutional markets. The Company also manufactures vinyl
wallcovering products for residential, hotel and office use. The Company
markets these products under the brand name "SELLERS & JOSEPHSON." The Company
manufactures approximately 350 standard furniture products for the hospitality
and food service industries, and approximately 200 standard products for the
university, health care and other institutional markets. The majority of these
products are supplied under special order and finished and upholstered to
customer's specifications.
The Company distributes its products both domestically and internationally.
The Company has showrooms and sales offices in 13 cities in the United States,
as well as distributors in 33 foreign countries. Many of these distributors
are concentrated in Europe and Asia. In addition, the Company utilizes its
local facilities and existing distribution channels to assemble and distribute
products in the United States imported from European sources. The Company also
exhibits at major national and international trade shows.
As of December 31, 1998, the Company had 1,720 full-time employees. Of
these, 1,513 were engaged in manufacturing, 104 in administrative and clerical
positions, and 103 in sales and marketing. Those engaged in manufacturing
included 251 employees in Mexico. Hourly manufacturing employees at two of the
Company's manufacturing facilities are represented by separate bargaining
agreements with contracts expiring in November 1999 (covering approximately
600 employees) and November 2000 (covering approximately 200 employees).
Set forth below is certain selected consolidated financial information with
respect to the Company, excerpted or derived from the Company's 1998 Annual
Report to Stockholders and its Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999, both filed with the Commission pursuant to the Exchange
Act.
More comprehensive financial information is included in such reports and in
other documents filed by the Company with the Commission. The following
summary is qualified in its entirety by reference to such reports and other
documents and all of the financial information (including any related notes)
contained therein. Such reports and other documents may be inspected and
copies may be obtained from the Commission and the NYSE in the manner set
forth below.
12
<PAGE>
SHELBY WILLIAMS INDUSTRIES, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Fiscal Year Ended December
Ended March 31, 31,
--------------- --------------------------
1999 1998 1998 1997 1996
------- ------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales......................... $43,128 $38,484 $165,937 $157,779 $149,481
Income from continuing operations
before income taxes.............. $ 3,538 $ 3,298 $ 16,805 $ 14,743 $ 11,476
Income from continuing operations. $ 2,264 $ 2,078 $ 10,614 $ 9,677 $ 7,756
Net income per share from
continuing
operations--diluted.............. $ 0.26 $ 0.22 $ 1.17 $ 1.05 $ 0.88
Weighted average shares
outstanding...................... 8,786 9,296 9,108 9,250 8,838
</TABLE>
<TABLE>
<CAPTION>
At
March 31, At December 31,
----------- ---------------
1999 1998 1997
----------- ------- -------
(unaudited)
<S> <C> <C> <C>
Balance Sheet Data:
Inventories....................................... $23,307 $22,544 $17,768
Property and equipment, net....................... $25,926 $25,985 $24,611
Total assets...................................... $88,645 $89,633 $97,238
Long-term debt, including current maturities...... $ 2,000 $ 3,000 $ 7,000
Stockholders' equity.............................. $65,024 $64,695 $71,772
</TABLE>
In the course of Parent's due diligence review of the Company, the Company
provided Parent with certain business and financial information which was not
publicly available. Such information included the Company's 1999 Summary
Business Plan prepared by management of the Company (the "Summary") which
contained estimated results of operations for the Company's fiscal year ending
December 31, 1999. The Summary does not take into account, and has not been
adjusted to reflect, any of the potential effects of the Offer or the Merger.
Moreover, the Summary was not prepared with a view to public disclosure or
compliance with published guidelines of the Commission or the guidelines
established by the American Institute of Certified Public Accountants.
The information from the Summary set forth below is included in this Offer
to Purchase solely because such information was provided to Parent in
connection with its evaluation of the Company. Parent was not furnished with
any written information regarding the assumptions used by the Company in
preparing the Summary or any schedules supporting any amounts contained
therein. Parent did not rely on the Summary to any significant degree in
formulating the Offer Price or other material terms of the Merger Agreement or
the transactions contemplated thereby.
As a matter of course, the Company does not make public projections or
forecasts of its anticipated financial position or results of operations.
Accordingly, the Company does not anticipate that it will, and it disclaims
any obligations to, furnish updated forecasts or projections to any person,
cause such information to be included in documents required to be filed with
the Commission, or otherwise make such information public.
The information from the Summary should be evaluated in conjunction with
the historical financial statements and other information regarding the
Company contained elsewhere in this Offer to Purchase and the Company's public
filings with the Commission. In light of the foregoing factors and risks
inherent in the Summary, holders of Shares are cautioned not to place undue or
significant reliance thereon. The Company's estimated results of operations
for its fiscal year 1999, as set forth in the Summary, is set forth below.
13
<PAGE>
1999 Estimated Results of Operations
<TABLE>
<CAPTION>
(Unaudited)
(Dollars in Thousands)
----------------------
<S> <C>
Net Sales.......................................... $185,600
Gross Margin....................................... 44,868
Marketing Expenses................................. 14,263
Administration Expense............................. 11,049
Interest Expense (Income).......................... (174)
Miscellaneous...................................... 280
--------
Pretax Earnings.................................. $ 19,450
========
</TABLE>
The Company is subject to the informational and reporting requirements of
the Exchange Act and is required to file reports and other information with
the Commission relating to its business, financial condition and other
matters. Information as of particular dates concerning the Company's directors
and officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities, any material interests of such persons in
transactions with the Company and other matters is required to be disclosed in
proxy statements distributed to the Company's stockholders and filed with the
Commission. These reports, proxy statements and other information should be
available for inspection at the public reference facilities of the Commission
located at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and also should be available for inspection and copying at
prescribed rates at the following regional offices of the Commission: Seven
World Trade Center, 13th Floor, New York, New York 10048; and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of this
material may also be obtained by mail, upon payment of the Commission's
customary fees, from the Commission's principal office at 450 Fifth Street,
N.W., Washington, D.C. 20549. The Commission also maintains a World Wide Web
site on the internet at http://www.sec.gov that contains reports, proxy
statements and certain other information regarding registrants including the
Company which have been filed via the Commission's EDGAR System. Reports,
proxy statements and other information concerning the Company should also be
on file at the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005.
9. Certain Information Concerning Purchaser and Parent.
Purchaser. Purchaser is a newly incorporated Delaware corporation organized
in connection with the Offer and the Merger and has not carried on any
activities other than in connection with its formation and capitalization and
the transactions contemplated by the Offer and the Merger. The principal
executive offices of Purchaser are located at 9387 Dielman Industrial Drive,
St. Louis, Missouri 63132, telephone (314) 991-9200. Purchaser is a wholly
owned subsidiary of Parent.
Parent. Parent is a corporation organized under the laws of Delaware and
its principal executive offices are located at 9387 Dielman Industrial Drive,
St. Louis, Missouri 63132, telephone (314) 991-9200.
Parent designs, manufactures and markets an extensive line of furniture and
related products for the food service, office, hospitality, health care and
retail markets, including table bases, table tops, metal and wood chairs,
booths, case goods and interior decor systems. Parent manufactures most of its
products to customer order from basic raw materials. Parent markets its
products to a wide variety of customers, including wholesale distributors,
buying groups, architectural and design firms, office furniture dealers and
end-users, through a combination of its own direct factory sales force and
independent manufacturers' representatives.
The combination of Parent's broad line of furniture products and its
vertical manufacturing capabilities enable it to offer a complete commercial
interior decor package to its customers with significant design flexibility
and short lead times. Parent integrates certain of its products into complete
interior decor systems, which include all furniture, booths, walls, wood trim
and case good components. These turnkey decor packages include case good
components such as counters, bars, divider walls, planter units, salad bars
and stands produced in a variety of high pressure laminates which are
manufactured by Parent, delivered to the customer site and installed by
employees or Parent-trained subcontractors. These packages are suitable for
either new food service installations or remodeling existing facilities.
14
<PAGE>
Parent has registered, either directly or through a subsidiary, the
"FALCON," "CHARLOTTE," "FLIGHT," "GENESIS," "HOWE," "DIFFRIENT," "STORM,"
"TUTOR" and "TEMPEST" trademarks, in addition to numerous other trademarks,
with the United States Patent and Trademark Office.
As of December 31, 1998, Parent employed approximately 1,371 persons in its
four domestic manufacturing facilities and support locations, 429 in its
manufacturing facilities in Mexico, 12 in China, 20 in Denmark and 378 in its
manufacturing facilities in Mimon, Czech Republic. Approximately 52 persons
were employed in sales, 303 persons in administration and 1,855 in
manufacturing.
Set forth below is certain selected consolidated financial information with
respect to Parent and its subsidiaries for the thirteen weeks ended January
30, 1999 and January 31, 1998 and the fiscal years ended October 31, 1998,
November 1, 1997, and November 2, 1996. Such financial information has been
taken from the periodic reports and other documents filed by Parent with the
Commission. More comprehensive information concerning Parent is included in
such reports and other documents and all of the financial information and
notes contained therein. Such reports and other documents may be inspected and
copies may be obtained from the offices of the Commission and the NYSE in the
manner set forth below.
FALCON PRODUCTS, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Fiscal Year Ended
----------------------- -----------------------------------
January 30, January 31, October 31, November 1, November 2,
1999 1998 1998 1997 1996
----------- ----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales............. $34,595 $28,060 $143,426 $113,010 $100,702
Operating profit...... $ 3,289 $ 2,786 $ 10,606 $ 7,759 $ 11,108
Net earnings from
continuing
operations........... $ 1,864 $ 1,782 $ 6,350 $ 4,926 $ 7,001
Earnings per share
from continuing
operations--basic.... $ 0.21 $ 0.19 $ 0.69 $ 0.51 $ 0.73
Earnings per share
from continuing
operations--diluted.. $ 0.21 $ 0.19 $ 0.68 $ 0.50 $ 0.71
Shares used in
computing basic
earnings per share... 8,958 9,348 9,282 9,876 9,793
Shares used in
computing diluted
earnings per share... 9,042 9,534 9,156 9,665 9,591
</TABLE>
- ---------------------
Note: All earnings per share and weighted average shares outstanding figures
have been adjusted to reflect a 10% stock dividend distributed on January 2,
1996.
<TABLE>
<CAPTION>
At At At
January 30, October 31, November 1,
1999 1998 1997
----------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
Balance Sheet Data:
Inventories, net......................... $ 26,736 $ 24,877 $22,687
Property and equipment, net.............. $ 27,826 $ 27,498 $25,211
Total assets............................. $113,965 $111,974 $99,357
Long-term debt, including current
maturities.............................. $ 19,390 $ 18,815 $ 1,794
Stockholders' equity..................... $ 73,632 $ 71,946 $73,264
</TABLE>
Parent is subject to the informational and reporting requirements of the
Exchange Act and is required to file reports and other information with the
Commission relating to its business, financial condition and other matters.
Information as of particular dates concerning Parent's directors and officers,
their remuneration, stock options granted to them, the principal holders of
Parent's securities, any material interests of such persons in transactions
15
<PAGE>
with Parent and other matters is required to be disclosed in proxy statements
distributed to Parent's stockholders and filed with the Commission. These
reports, proxy statements and other information should be available for
inspection and copies may be obtained in the same manner as set forth for the
Company in Section 8.
The name, citizenship, business address, principal occupation or employment
and five-year employment history for each of the directors and executive
officers of Purchaser and Parent are set forth in Schedule I hereto.
Except as provided in the Stockholder Agreements or otherwise described in
this Offer to Purchase, none of Parent or Purchaser, or, to the best knowledge
of Parent or Purchaser, any of the persons listed in Schedule I hereto, or any
associate or majority-owned subsidiary of such persons, beneficially owns any
equity security of the Company, and neither Parent nor Purchaser, nor, to the
best knowledge of Parent and Purchaser, any of the other persons referred to
above, or any of the respective directors, executive officers or subsidiaries
of any of the foregoing, has effected any transaction in any equity security
of the Company during the past 60 days.
Except as provided in the Stockholder Agreements or otherwise described in
this Offer to Purchase, none of Parent or Purchaser, or, to the best of the
knowledge of Parent and Purchaser, any of the persons listed in Schedule I
hereto or any associate or majority-owned subsidiary of any of the foregoing,
has any contract, arrangement, understanding or relationship with any other
person with respect to any securities of the Company, including, without
limitation, any contract, arrangement, understanding or relationship
concerning the transfer or the voting of any securities of the Company, joint
ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss or the giving or withholding of proxies. Except as set
forth in this Offer to Purchase, none of Parent or Purchaser, or, to the best
of the knowledge of Parent and Purchaser, any of the persons listed in
Schedule I hereto or any associate or majority-owned subsidiary of any of the
foregoing, has had any transactions with the Company, or any of its executive
officers, directors or affiliates that would require reporting under the rules
of the Commission.
Except as provided in the Stockholder Agreements or otherwise set forth in
this Offer to Purchase, there have been no contacts, negotiations or
transactions between Parent or Purchaser, or the subsidiaries of either of
them, or, to the best of the knowledge of Parent or Purchaser, any of the
persons listed in Schedule I hereto, on the one hand, and the Company or its
executive officers, directors or affiliates, on the other hand, concerning a
merger, consolidation or acquisition, tender offer or other acquisition of
securities, election of directors, or a sale or other transfer of a material
amount of assets.
10. Background of the Offer; Contacts with the Company.
Through Franklin A. Jacobs, the Chairman and Chief Executive Officer of
Parent, and Manfred Steinfeld, the Chairman of the Executive Committee of the
Company Board (and the former Chairman and Chief Executive Officer of the
Company), who have known each other for many years, Parent and the Company had
held informal discussions in the past to explore the possibility of a business
combination or other transaction between Parent and the Company. In December
1998, Mr. Jacobs spoke to Paul Steinfeld, Chairman of the Board and Chief
Executive Officer of the Company for the purpose of exploring a possible
transaction between the Company and Parent. At that time, Mr. Jacobs indicated
that Parent might have an interest in acquiring the Company.
In February 1999, Mr. Jacobs contacted Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ") to express his interests in pursuing a possible
transaction with the Company. On March 11, 1999, representatives of DLJ met
with Parent's senior managers in St. Louis to discuss the financial impact of
a potential acquisition of the Company by Parent. Following this meeting, Mr.
Jacobs called Manfred Steinfeld, indicating to Mr. Steinfeld his interest in a
potential transaction with the Company and to arrange a meeting to discuss
such a transaction. On March 16, 1999, Mr. Jacobs met with Manfred Steinfeld
in Chicago to discuss the possibility of a negotiated transaction. On March
22, 1999, Mr. Jacobs received a telephone call from Mr. Steinfeld indicating
that the Company would not be interested in exploring a possible transaction
with Parent at that time. In response to this telephone conversation, and to
express Parent's strong interest in exploring a transaction with the Company,
Parent, with the assistance of DLJ, prepared a preliminary term sheet,
contemplating the purchase by Parent of all of the Company's outstanding
Shares for cash at a price range of $14.00 to $15.00 per Share.
16
<PAGE>
On March 30, 1999, DLJ submitted the preliminary term sheet to the Company
and Lazard Freres.
On or about April 1, 1999, after consultation with the Company, Lazard
Freres informed DLJ that the price range indicated in the term sheet was not
sufficient to warrant additional discussions. Lazard Freres indicated that a
price of $17.00 per Share might be considered, and further indicated that the
Company had other options which it was then pursuing.
On April 5, 1999, the Board of Directors of Parent (the "Parent Board") met
to discuss a potential acquisition of the Company, following which the Parent
Board authorized Mr. Jacobs and other members of Parent's management team to
continue to explore the possibility of pursuing a transaction with the
Company, and to pursue securing appropriate financing for the transaction.
On April 14, 1999, DLJ contacted Lazard Freres to indicate that Parent had
begun to take steps necessary to secure the financing for a purchase of the
Company. DLJ also indicated that Parent was prepared to offer a price per
Share slightly higher than $15.00 per Share, subject to (i) the satisfactory
completion of business, legal and accounting due diligence of the Company, and
(ii) the negotiation of a mutually satisfactory definitive merger agreement.
On April 19, 1999, the Parent Board met again to discuss the transaction,
to receive an update on recent developments pertaining to the transaction from
Parent's senior management team, and to be advised concerning the willingness
of DLJ or its affiliates to consider providing financing for the Offer and the
Merger. The Parent Board then authorized the continued discussions of Parent's
potential acquisition of the Company at an increased cash purchase price of
$16.00 per Share.
On April 20, 1999, DLJ communicated Parent's offer to acquire the Company
to Lazard Freres, indicating that Parent would be willing to offer the
Company's shareholders cash consideration of $16.00 per Share. After
consulting with the Company, Lazard Freres indicated to DLJ the Company's
willingness to meet to discuss a potential transaction.
On April 21, 1999, Mr. Jacobs received a telephone call from Manfred
Steinfeld during which Mr. Steinfeld urged Mr. Jacobs to consider increasing
Parent's proposed offer price of $16.00 per Share. Mr. Jacobs informed DLJ of
this development and a meeting was arranged between Mr. Jacobs and Manfred
Steinfeld to discuss a potential transaction. On the same day, representatives
of Lazard Freres and DLJ met in Chicago to further discuss Parent's interest
in acquiring the Company.
On April 22, 1999, Mr. Jacobs and representatives of DLJ met in Chicago
with Manfred Steinfeld, Paul Steinfeld and representatives of Lazard Freres.
All parties expressed interest in a possible acquisition by Parent (or a
wholly owned subsidiary of Parent) of all of the outstanding capital stock of
the Company at a cash purchase price of $16.50 per Share, subject to, among
other things, customary due diligence, negotiation of definitive transaction
documentation and the approval of the Parent Board and the Company Board.
Parent and the Company then entered into the Confidentiality Agreement
described in Section 12.
On April 23, 1999, the Parent Board met with Mr. Jacobs, other senior
executives of Parent and Parent's legal and financial advisors to consider the
proposed merger transaction. Mr. Jacobs updated the directors of the results
of the negotiations that had occurred since the April 19, 1999 meeting of the
Parent Board. Mr. Jacobs advised the Directors that he believed that a cash
purchase price of $16.50 per Share would be required to gain support of the
Company Board and believed that this cash purchase price was fair and in the
best interest of Parent, subject to, among other things, Parent's due
diligence review of the Company. The Directors also reviewed a summary of the
financial aspects of the then current proposed transaction with the Company
and posed questions to Mr. Jacobs, the other senior executives of Parent
present at the meeting, the DLJ representatives and Parent's counsel regarding
the financial and operational aspects of a combined company and the legal
requirements and duties with respect to the proposed transaction. After a
thorough discussion, the Parent
17
<PAGE>
Board authorized Mr. Jacobs and DLJ to discuss a transaction with the
appropriate representatives of the Company at a cash purchase price as $16.50
per share, and instructed counsel to prepare a draft of the Merger Agreement
to reflect the transaction as discussed at the meeting.
On April 26, 1999, the Company was furnished a draft of the Merger
Agreement and commencing on April 29, 1999, representatives of Parent, the
Company, the Principal Stockholders, and their respective counsel began
negotiating the Merger Agreement and the Stockholder Agreements.
During the week of April 26, 1999, members of Parent's management team and
representatives of Parent's financial and legal advisors met at the Company's
Morristown, Tennessee facility to conduct a detailed business, financial and
legal review of the Company, including a review of the Company's operations,
technology and prospects, in order to further assess the strategic
opportunities of a business combination with the Company. During this same
time period, and as part of Parent's due diligence review of the Company,
certain members of Parent's management team and representatives of DLJ
conducted on-site facility visits and met with local plant management of each
of the Company's manufacturing plants. From time to time during such due
diligence review, representatives of Parent requested and received certain
additional information from the Company. The due diligence review continued
through April 29, 1999.
On April 29, 1999, Parent's senior management met internally to consider
the results of its due diligence review of the Company, and after having
received input from its financial and legal advisors, discussed the strategic
opportunities presented by an acquisition of the Company. Parent's senior
management decided to recommend to the Parent Board that Parent proceed with
an acquisition of the Company at a cash purchase price of $16.50 per share,
subject to the agreement by the Principal Stockholders to enter into the
Stockholder Agreements and upon the terms and subject to the conditions of the
draft Merger Agreement.
On the same day, representatives of Lazard Freres contacted representatives
of DLJ to inform Parent that the Company had received a written preliminary
indication of interest from a third party which contemplated an acquisition of
the Company for a price of $17.00 per Share and that Parent would need to
adjust its price per Share accordingly. Lazard Freres indicated that the
$17.00 per Share proposal contemplated consideration comprised of both cash
and shares of capital stock of the third party. Representatives of DLJ
promptly communicated this information to certain senior managers of Parent,
including Mr. Jacobs, and thoroughly discussed with such managers the
situation and alternatives available to Parent. Promptly thereafter, at the
direction of Parent's management, representatives of DLJ informed the Company
through representatives of Lazard Freres that Parent was unwilling to raise
its offer price per Share and emphasized the benefits of an all-cash
transaction to the Company's shareholders. The representatives of DLJ also
emphasized the speed and certainty with which a transaction could be completed
with Parent and that DLJ was prepared to provide a financing commitment letter
with respect to the entire proposed transaction at a price of $16.50 per
Share.
On May 3, 1999, the Parent Board met to discuss the status of the Merger
Agreement and Stockholder Agreements negotiations and the financing
arrangements which had been agreed to in principle by Parent and DLJ. Parent's
legal and financial advisors were present at this meeting. Parent's legal
counsel reviewed with the Parent Directors the current terms contained in the
draft agreements, the status of the negotiations with counsel for the Company,
and certain remaining unresolved issues. The DLJ representatives advised the
Parent Board that the Company Board was scheduled to meet the next day (May 4)
to review the proposed transaction and any remaining unresolved issues and
would reconvene the following day (May 5) in Chicago to act upon the proposed
transaction, subject to the resolution of all outstanding issues.
On the afternoon of May 5, 1999, the Parent Board met, at which time the
Company's legal counsel and its financial advisors updated the Parent Board as
to the resolution of those issues which had been outstanding at the May 3
meeting of the Parent Board. The DLJ representatives advised the Parent Board
that the Company Board was meeting simultaneously and would act upon the
Merger Agreement upon being advised that the Merger Agreement had been
approved by the Parent Board. After full discussion, at which time questions
were posed to the Chairman and other members of senior management present in
the meeting, and to Parent's financial
18
<PAGE>
and legal advisors, the Parent Board unanimously approved the Offer, the
Merger Agreement, the Stockholder Agreements and the financing arrangements as
specified in the Commitment Letter. Thereafter, Parent was advised that the
Company Board had received a fairness opinion from Lazard Freres and had
authorized the execution of the Merger Agreement and had approved the
Stockholder Agreements and the transactions contemplated thereby and by the
Merger Agreement. Following receipt of such advice, after the close of
business on May 5, 1999, the Merger Agreement was executed and delivered by
Parent, Purchaser and the Company and Parent, Purchaser and the Principal
Stockholders entered into the Stockholder Agreements.
On May 6, 1999, prior to the opening of trading on the New York Stock
Exchange, Parent and the Company issued a joint press release announcing the
execution of the Merger Agreement. A copy of the press release has been filed
with the Commission as an exhibit to the Schedule 14D-1. On May 12, 1999,
pursuant to the terms of the Merger Agreement, Parent and Purchaser commenced
the Offer.
11. Purpose of the Offer and the Merger; Plans for the Company.
General. The purpose of the Offer is to acquire control of, and the entire
equity interest in, the Company. The purpose of the Merger is to acquire all
Shares not beneficially owned by Purchaser following consummation of the
Offer. Upon the consummation of the Merger, the Company will become a wholly
owned subsidiary of Purchaser.
The DGCL requires, among other things, that the adoption of any plan of
merger or consolidation of the Company must be approved by the Company Board
and generally by the holders of a majority of the Company's outstanding voting
securities, unless 90% or more of such securities are owned by one person or
entity as described below. The Company Board has approved the Offer, the
Merger and the Merger Agreement and the transactions contemplated thereby;
consequently, the only additional action of the Company that may be necessary
to effect the Merger is approval by such stockholders if the "short-form"
merger procedure described below is not available.
Certain Effects of the Merger. Stockholders of the Company who sell their
Shares in the Offer will cease to have any equity interest in the Company or
any rights to participate in its earnings and future growth. If the Merger is
consummated, non-tendering stockholders will no longer have an equity interest
in the Company and instead will have only the right to receive cash
consideration pursuant to the Merger Agreement or to exercise statutory
appraisal rights under Section 262 of the DGCL, discussed below. Similarly,
after selling their shares in the offer or the subsequent Merger, stockholders
of the Company will not bear the risk of any decrease in the value of the
Company.
Plans for the Company. It is currently expected that, following
consummation of the Offer, initially the business and the operations of the
Company, except as set forth in this Offer to Purchase, will be continued by
the Company, at the discretion of the Company Board which will consist of a
majority of Parent's representatives, substantially as they are currently
being conducted with such changes as deemed appropriate by such Board. Parent
will continue to evaluate the business and operations of the Company during
the pendency of the Offer and after the consummation of the Offer and the
Merger, and will take such actions as its deems appropriate under the
circumstances then existing. Parent intends to seek additional information
about the Company during this period. Thereafter, Parent intends to review
such information as part of a comprehensive review of the Company's business,
operations, capitalization and management with a view to maximizing the
Company's potential in conjunction with Parent's businesses. It is expected
that the business and operations of the Company will form an important part of
Parent's future business plans.
Except as indicated in this Offer to Purchase, neither Parent nor Purchaser
has any present plans or proposals which relate to or would result in an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving the Company or any of its subsidiaries, a sale or
transfer of a material amount of assets of the Company or any of its
subsidiaries or any material change in the Company's capitalization or
dividend policy or any other material changes in the Company's corporate
structure, business or management.
19
<PAGE>
The Merger. In general, under the DGCL and the Company's Certificate of
Incorporation, the Merger requires the approval of the Company Board and the
approval by the holders of a majority of all outstanding Shares.
If Purchaser acquires, through the Offer or otherwise, voting power with
respect to at least a majority of the outstanding Shares (which would be the
case if the Minimum Condition is satisfied and Purchaser were to accept for
payment Shares tendered pursuant to the Offer), Purchaser would have
sufficient voting power to effect the Merger without the vote of any other
stockholders.
Further, the DGCL provides that if the Parent corporation owns 90% or more
of each class of outstanding shares of a Delaware subsidiary, the Delaware
subsidiary may be the surviving corporation of a merger with its Parent
corporation upon a majority vote of each corporation's entire board of
directors, without action or vote by the stockholders of either corporation.
Accordingly, if Purchaser acquires at least 90% or more of the outstanding
Shares pursuant to the Offer or otherwise, Purchaser will be able to approve
the Merger without a vote of the Company's stockholders. In such event,
Purchaser has agreed that it will take all necessary and appropriate action to
cause the Merger to become effective as soon as reasonably practicable after
such acquisition. If Purchaser does not acquire at least 90% of the
outstanding Shares pursuant to the Offer or otherwise, a significantly longer
time may be required to effect the Merger because a vote or the consent of the
Company's stockholders would be required under the DGCL.
Appraisal Rights. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated, stockholders of the Company at
the time of the Merger will have certain rights under the DGCL to dissent and
demand appraisal of, and to receive payment in cash of the fair value of,
their Shares. Such rights to dissent, if the statutory procedures are complied
with, could lead to a judicial determination of the fair value of the Shares
(excluding any element of value arising from the accomplishment or expectation
of the Merger), required to be paid in cash to such dissenting holders for
their Shares. In addition, such dissenting stockholders would be entitled to
receive payment of a fair rate of interest from the date of consummation of
the Merger on the amount determined to be the fair value of their Shares. In
determining the fair value of the Shares, a Delaware court would be required
to take into account all relevant factors. Accordingly, such determination
could be based upon considerations other than, or in addition to, the market
value of the Shares, including among other things, asset values and earning
capacity of the Company. In Weinberger v. UOP, Inc., the Delaware Supreme
Court stated, among other things, that "proof of value by any techniques or
methods which are generally considered acceptable in the financial community
and otherwise admissible in court" should be considered in an appraisal
proceeding. Therefore, the value so determined in any appraisal proceeding
could be different from the price being paid in the Offer. The Delaware
Supreme Court stated in Weinberger and Rabkin v. Philip A. Hunt Chemical Corp.
that although the remedy ordinarily available to minority stockholders in a
cash-out merger is the right to appraisal described above, a damages remedy or
injunctive relief may be available if a merger is found to be the product of
procedural unfairness, including fraud, misrepresentation or other misconduct.
Rule 13e-3. The Merger would have to comply with any applicable Federal law
operative at the time. Rule 13e-3 under the Exchange Act is applicable to
certain "going private" transactions. Purchaser does not believe that Rule
13e-3 will be applicable to the Merger. Rule 13e-3 requires, among other
things, that certain financial information concerning the Company, and certain
information relating to the fairness of the proposed transaction and the
consideration offered to minority stockholders in such a transaction, be filed
with the Commission and disclosed to minority stockholders prior to
consummation of the transaction.
12. The Merger Agreement; Certain Other Agreements.
The Merger Agreement. The following is a summary of certain provisions of
the Merger Agreement. The summary is qualified in its entirety by reference to
the Merger Agreement, which has been filed with the Commission as an exhibit
to the Schedule 14D-1 and is incorporated herein by reference. Capitalized
terms used in Sections 12 and 14 but not defined herein or therein shall have
the meanings given to them in the Merger Agreement.
20
<PAGE>
The Offer. The Merger Agreement provides that Purchaser will commence the
Offer and that, upon the terms and subject to prior satisfaction or waiver of
the conditions of the Offer, Purchaser will purchase all Shares validly
tendered and not properly withdrawn pursuant to the Offer. The Offer is
conditioned upon, among other things, there being tendered and not withdrawn
prior to the Expiration Date a number of Shares which, together with any
Shares beneficially owned by Parent or Purchaser, represent a majority of
Shares then outstanding on a Fully Diluted Basis. The Merger Agreement
provides that, without the written consent of the Company, Purchaser will not
decrease the Offer Price, change the form of consideration to be paid in the
Offer, reduce the maximum number of Shares to be purchased in the Offer or the
Minimum Condition, impose additional conditions to the Offer or amend any
condition of the Offer in a manner adverse to the holders of Shares.
Additionally, the Merger Agreement provides that if all conditions are not
satisfied or waived prior to the scheduled Expiration Date, Purchaser will
extend the Expiration Date of the Offer from time to time for the shortest
time periods permitted by law and which it reasonably believes are necessary,
until the earlier to occur of (i) such time as such conditions are satisfied
or waived, and (ii) July 15, 1999; and that notwithstanding the prior
satisfaction of all conditions, Purchaser may extend the Offer for up to ten
days after the initial scheduled Expiration Date. Purchaser will, on the terms
and subject to the prior satisfaction or waiver of the conditions of the
Offer, accept for payment and pay for Shares validly tendered and not properly
withdrawn as soon as practicable after expiration of the Offer.
The Merger. Following the consummation of the Offer, the Merger Agreement
provides that, subject to the terms and conditions thereof, and in accordance
with the DGCL, as soon as practicable, Purchaser will be merged with and into
the Company. As a result of the Merger, the separate corporate existence of
Purchaser will cease and the Company will continue as the Surviving
Corporation.
The obligations of each of Parent and Purchaser, on the one hand, and the
Company, on the other hand, to effect the Merger are subject to the
satisfaction on or prior to the Closing Date (as defined in the Merger
Agreement) of each of the following conditions: (i) Purchaser shall have
purchased all Shares validly tendered and not withdrawn pursuant to the Offer;
(ii) if required by applicable law, the Merger shall have been approved and
adopted by the requisite vote of the holders of Shares; (iii) no statute,
rule, regulation, executive order, decree, ruling or injunction shall have
been enacted, entered, promulgated or enforced by any court or other tribunal
or governmental body or authority which prohibits the consummation of the
transactions contemplated by the Merger Agreement substantially on the terms
contemplated thereby; and (iv) any waiting periods applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
At the Effective Time of the Merger (i) each issued and outstanding Share
(other than Dissenting Shares, any Shares that are owned by the Company or any
wholly owned subsidiary of the Company, and any Shares owned by Parent or any
wholly owned subsidiary of Parent) will be converted into the right to receive
the Merger Consideration, and (ii) each issued and outstanding share of
capital stock of Purchaser will be converted into one share of common stock of
the Surviving Corporation.
The Company Board. The Merger Agreement provides that upon the purchase and
payment by Parent or Purchaser of Shares representing at least a majority of
the outstanding Shares on a Fully Diluted Basis, Parent shall be entitled to
designate such number of directors (rounded up to the next whole number) on
the Company Board so that the percentage of directors that are Parent's
nominees equals the percentage of outstanding Shares beneficially owned by
Parent and its affiliates; and that the Company shall, at such time, upon the
request of Purchaser, promptly use its best efforts to take all action
necessary to cause such persons designated by Parent to be elected to the
Company Board, either by increasing the size of the Company Board or securing
resignations of incumbent directors, or both. At such time, the Company shall
also cause persons designated by Parent to constitute at least the same
percentage (rounded up to the next whole number) as is on the Company Board of
(i) each committee of the Company Board, (ii) each board of directors (or
similar body) of each subsidiary of the Company and (iii) each committee (or
similar body) of each such subsidiary board of directors.
The Merger Agreement further provides that, notwithstanding the provisions
of the foregoing paragraph, until the Effective Time of the Merger, the
Company Board shall include at least two directors who were
21
<PAGE>
directors on the date of the Merger Agreement (the "Independent Directors");
that from and after the time, if any, that Parent's designees constitute a
majority of the Company Board, the affirmative vote of a majority of
Independent Directors shall be required and shall be sufficient to authorize
any termination of the Merger Agreement by the Company, any amendment of the
Merger Agreement requiring action by the Company Board, any extension of time
for the performance of any of the obligations or other acts of Parent or
Purchaser under the Merger Agreement, any waiver of compliance with any of the
agreements or conditions under the Merger Agreement for the benefit of the
Company, any action to seek to enforce any obligation of Parent or Purchaser
under the Merger Agreement and any other action by the Company Board under or
in connection with the Merger Agreement; and that the Independent Directors
shall be appointed as a Special Committee of the Company Board and have full
power and authority solely with respect to the matters set forth in the
previous sentence.
Stockholders' Meeting. Pursuant to the Merger Agreement, the Company will,
if required by applicable law in order to consummate the Merger: (i) duly
call, give notice of, convene and hold a special meeting of its stockholders
(the "Special Meeting") as soon as practicable following the purchase of
Shares by Purchaser pursuant to the Offer for the purpose of considering and
taking action upon the Merger and the adoption of the Merger Agreement; (ii)
prepare and file with the Commission a preliminary proxy or information
statement relating to the Merger and the Merger Agreement and include in any
preliminary or definitive proxy statement or information statement with
respect to the Special Meeting (the "Proxy Statement") the recommendation of
the Company Board that stockholders of the Company vote in favor of the
approval of the Merger Agreement and the transactions contemplated thereby
unless the Company Board determines in good faith, based on advice of its
outside counsel, that not taking any such action is necessary in order for the
Company Board to comply with its obligations or duties to the Company or its
stockholders under applicable law; and (iii) use all reasonable efforts (A) to
obtain and furnish the information required to be included by it in the Proxy
Statement and, after consultation with the Parent and Purchaser, respond
promptly to any comments made by the Commission with respect to the Proxy
Statement and any preliminary version thereof and cause the Proxy Statement to
be mailed to its stockholders at the earliest practicable time following the
expiration or termination of the Offer and (B) obtain the necessary approvals
by its stockholders of the Merger Agreement and the transactions contemplated
thereby unless the Company Board determines in good faith, based on advice of
its outside counsel, that not taking any such action is necessary in order for
the Company Board to comply with its obligations or duties to the Company or
its stockholders under applicable law. Purchaser and Parent have agreed to use
commercially reasonable efforts to cause the Special Meeting to occur within
90 days after the purchase of Shares pursuant to the Offer and Parent has
agreed that it will vote, or cause to be voted, all of the Shares then owned
by it, Purchaser or any of its other subsidiaries and affiliates in favor of
the approval of the Merger and the adoption of the Merger Agreement. If
Purchaser acquires, through the Offer or otherwise, at least a majority of the
outstanding Shares, Purchaser will have sufficient voting power to approve the
Merger, even if no other stockholders vote in favor of the Merger.
The Merger Agreement provides that if Purchaser acquires at least 90% of
the then outstanding Shares, the parties agree to take all necessary and
appropriate action to cause the Merger to become effective, in accordance with
Section 253 of the DGCL, as soon as practicable after such acquisition,
without a meeting of the stockholders of the Company.
Options. Pursuant to the Merger Agreement, each Option granted to the
Company's employees, consultants or directors that is outstanding immediately
prior to the purchase of Shares pursuant to the Offer (irrespective of whether
such Option is then exercisable) shall, on the fifth business day after the
purchase by Purchaser of Shares pursuant to the Offer, be cancelled in
exchange for a single lump sum cash payment equal to the product of (i) the
number of shares of Common Stock subject to such Option and (ii) the excess of
the Offer Price over the exercise price per share of such Option. Subject to
the previous sentence, each Option that is outstanding immediately prior to
the Effective Time, whether or not then vested or exercisable, shall,
effective as of the Effective Time, be cancelled and no payments shall be made
with respect thereto.
Interim Operations. Pursuant to the Merger Agreement, the Company has
agreed that, except as expressly contemplated by the Merger Agreement or
agreed to in writing by Parent, prior to the time the directors of the Parent
constitute a majority of the Company Board, the Company shall, and shall cause
each of its Subsidiaries
22
<PAGE>
to, (a) conduct its operations in all material respects according to their
ordinary and usual course of business in substantially the same manner as
conducted prior to the date of the Merger Agreement; (b) use reasonable best
efforts to preserve intact its business organization in all material respects,
keep available the services of its executive officers and key employees as a
group, subject to changes in the ordinary course, and maintain satisfactory
relationships with suppliers, distributors, customers and others having
business relationships with them; (c) confer at such times as Parent may
reasonably request with one or more representatives of Parent to report
material operational matters and the general status of ongoing operations (in
each case to the extent Parent reasonably requires such information) and
consult with Parent regarding material operational decisions; (d) promptly
notify Parent of any emergency or other change in the normal course of its
businesses or in the operation of its properties and of any complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) of any governmental body or authority; (e) not authorize or pay
any dividends on or make any distribution with respect to its outstanding
shares of stock; (f) not, except as otherwise contemplated by the Merger
Agreement or as may be required by applicable law, enter into or amend any
employment, severance or similar agreements or arrangements with any of their
directors or executive officers; (g) not, subject to the provisions described
below under the heading "No Solicitation," authorize, announce an intention to
authorize, or enter into an agreement with respect to, any merger,
consolidation or business combination other than the Merger, any acquisition
of a material amount of assets or securities, any disposition of a material
amount of assets or securities or any release or relinquishment of any
material contract rights, in each case, not in the ordinary course of
business; (h) not propose or adopt any amendments to its corporate charter or
by-laws, except pursuant to the Merger as provided in the Merger Agreement;
(i) not issue any shares of capital stock, except upon exercise of options
previously issued pursuant to existing employee plans, programs or
arrangements and non-employee director plans; (j) not grant, confer or award
any options, warrants, conversion rights or other rights not existing on the
date of the Merger Agreement, to acquire any shares of its capital stock; (k)
not purchase, redeem, or offer to purchase or redeem any shares of its stock
or any securities convertible into or exchangeable for shares of stock, except
for the deemed repurchase of options in accordance with the terms of the
Merger Agreement, or purchases, redemptions and offers to purchase in the
ordinary course of business in connection with employee incentive and benefit
plans, programs or arrangements in existence on the date of the Merger
Agreement; (l) not, except as contemplated by the Merger Agreement or as may
be required by applicable law, amend in any material respect the terms of its
employee benefit plans, programs or arrangements or any severance or similar
agreements or arrangements in existence on the date of the Merger Agreement,
enter into or amend any employment or consulting agreement, adopt or enter
into any new employee benefit plans, programs or arrangements or any severance
or similar agreements or arrangements or increase the base salary of any
person who is a party to a Change of Control Employment Agreement or make any
payments under any benefit plan to any director, employee, independent
contractor or consultant (except in the ordinary course of business and in
amounts and in a manner consistent with past practice or as otherwise required
by law or the provisions of such benefit plan); (m) not (i) enter into any
material loan agreement or incur any indebtedness in excess of an aggregate of
$100,000 or amend any Company credit facility to increase the amount that may
be borrowed thereunder, (ii) make or enter into any agreement or contract for
capital expenditures in excess of $50,000, (iii) enter into any lease for real
property in excess of $50,000 or any lease for personal property in excess of
$20,000, or (iv) enter into any agreement or contract outside of the ordinary
course of business of the Company or any of the Company's subsidiaries that
involves performance of services or delivery of goods or materials by or to
the Company or any of the Company's subsidiaries of an amount or value in
excess of $50,000; (n) not make or change any material Tax election, file any
amendment to any federal income Tax Return unless required by law, enter into
any closing agreement, or settle or compromise any material Tax liability; (o)
not adjust, split, combine or reclassify its capital stock; (p) not enter into
any agreement, understanding or arrangement with respect to the sale or voting
of its capital stock; (q) not create any new subsidiaries; (r) except as
required by the Merger Agreement, not take any action which could reasonably
be expected to adversely affect or delay the ability of any of the parties to
obtain any approval of any governmental or regulatory body required to
consummate the transactions contemplated thereby; (s) not directly or
indirectly sell, transfer, lease, pledge, mortgage, encumber or otherwise
dispose of any material property or assets other than in the ordinary course
of business; (t) not enter into any financial derivative contracts; (u) not
change in any material respect its accounting policies, methods or procedures
except as required by GAAP; (v) except as may
23
<PAGE>
be required by the Merger Agreement or applicable law, not do any act or omit
to do any act which would cause a breach of any contract, commitment or
obligation; (w) except as otherwise permitted by the Merger Agreement, not
take any action with the intent of causing the conditions to the Offer set
forth in the Merger Agreement to not be satisfied; (x) not, other than
pursuant to the Merger Agreement, take any action to cause the Common Stock to
cease to be quoted on any of the stock exchanges on which the Common Stock is
now quoted; (y) continue to provide training for employees of the Company and
its subsidiaries commensurate with the training provided by the Company and
its subsidiaries over the past twelve months; (z) subject to the limitations
contained in the Merger Agreement, continue the level of recruiting activity
and process employed by the Company and its subsidiaries over the past twelve
months; (aa) not agree, in writing or otherwise, to take any of the foregoing
actions or take any action which would make any representation or warranty
contained in the Merger Agreement (except for representations and warranties
made as of a specified date) untrue and incorrect in any material respect as
of the Effective Time; (bb) not pay, discharge or satisfy any claim, liability
or obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business and consistent with past practice, of liabilities reflected
or reserved against in the March 31, 1999 balance sheet or subsequently
incurred in the ordinary course of business and consistent with past practice;
and (cc) not settle or compromise any pending or threatened suit, action or
claim not covered by insurance (without giving effect to deductibles in
determining whether coverage exists) that is material or which relates to the
Merger Agreement and the transactions contemplated thereby, including the
Offer and the Merger.
No Solicitation. Pursuant to the Merger Agreement: The Company shall not,
and shall not authorize or permit, any of its officers, directors, employees,
attorneys, financial advisors, agents or other representatives or those of any
of its Subsidiaries to, directly or indirectly, (a) solicit, initiate or
knowingly encourage any Takeover Proposal, including without limitation by
disclosure of non-public information, or (b) engage in discussions or
negotiations relating to or accept any Takeover Proposal; provided, however,
that nothing shall prohibit the Company and its Board from (i) taking and
disclosing a position with respect to a tender offer by a third party pursuant
to Rules 14d-9 and 14e-2(a) promulgated by the Commission under the Exchange
Act, or (ii) at any time prior to the purchase of Shares pursuant to the
Offer, engaging in discussions or negotiations with, and furnishing
information (including non-public information) concerning the Company and its
Subsidiaries, businesses, properties or assets to, any third party which makes
a Takeover Proposal (without any solicitation or initiation, directly or
indirectly, by the Company or any of its representatives after the date of the
Merger Agreement) if the Company Board determines in good faith, based on
advice of its outside counsel (who may be its regularly engaged outside
counsel), that the failure to take such action will violate its obligations or
duties to the Company or its stockholders under applicable law, or (iii)
provided the Merger Agreement is terminated as described below in clause (iv)
under the heading "Termination; Fees," accepting a Superior Proposal. Prior to
furnishing information to or entering into discussions or negotiations with
any person, the Company shall receive from such person or entity an executed
confidentiality agreement in reasonably customary form on terms not in the
aggregate materially more favorable to such person or entity than the terms
contained in the Confidentiality Agreement (as defined below). The Company
shall immediately cease and cause to be terminated any existing solicitation,
initiation, encouragement, activity, discussion or negotiation with any person
conducted prior to the date of the Merger Agreement by the Company or any of
its representatives with respect to any Takeover Proposal existing on the date
of the Merger Agreement. The Company agrees not to release any third party
from, or waive any provision of, any standstill agreement to which it is a
party or any confidentiality agreement between it and another person who has
made, or who may reasonably be considered likely to make, or who was given
access in order to consider making, a Takeover Proposal, unless the Company
Board determines in good faith, based on advice of its outside counsel (who
may be its regularly engaged outside counsel), that failure to take such
action will violate its obligations or duties to the Company or its
stockholders under applicable law. The Company shall notify Parent orally and
in writing of any such Takeover Proposal received (including, without
limitation, the terms and conditions of any such proposal and the identity of
the person making it), within 24 hours of the receipt thereof, and shall keep
Parent informed of the general status and any material changes in the terms
and conditions of such Takeover Proposal. The Company agrees to promptly
provide to Parent any information concerning the Company, its subsidiaries,
business, properties or assets furnished to any third party
24
<PAGE>
which makes a Takeover Proposal and which has not previously been provided to
Parent. Except as set forth in the Merger Agreement, neither the Company Board
nor any committee thereof shall (i) withdraw or modify, or propose to withdraw
or modify, in a manner adverse to Parent, the approval or recommendation by
the Company Board of the Offer, the Merger Agreement or the Merger, (ii)
approve or recommend, or propose to approve or recommend, any Takeover
Proposal or (iii) enter into any agreement with respect to any Takeover
Proposal. Subject to compliance with all of the applicable provisions of the
Merger Agreement, prior to the time of acceptance for payment of Shares
pursuant to the Offer, the Company Board may withdraw or modify its approval
or recommendation of the Offer, the Merger Agreement or the Merger, approve or
recommend a Superior Proposal, or enter into an agreement with respect to a
Superior Proposal, in each case at any time after the third business day
following Parent's receipt of written notice (including by facsimile) from the
Company advising Parent that the Company Board has received a Superior
Proposal which it intends to accept, specifying the material terms and
conditions of such Superior Proposal and identifying the person making such
Superior Proposal, but only if the Company shall have caused its financial and
legal advisors to negotiate with Parent to make such adjustments to the terms
and conditions of this Agreement as would enable the Company to proceed with
the transactions contemplated hereby on such adjusted terms.
Termination; Fees. The Merger Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time, whether before or after
approval of the stockholders of the Company, (i) by mutual written consent of
Parent and the Company; (ii) by (a) either the Company or Parent if Shares
have not been purchased pursuant to the Offer on or before July 15, 1999 and
(b) the Company if after 90 days following the commencement of the Offer the
conditions to the Offer have not been satisfied or waived and Purchaser shall
not have elected to extend the Offer; provided, that such right to terminate
pursuant to clause (ii) will not be available to any party whose failure in
any material respect to fulfill its obligations under the Merger Agreement
proximately contributed to, or resulted in, the failure of Parent or Purchaser
to purchase the Shares pursuant to the Offer on or before such date; (iii) by
either the Company or Parent if (a) a statute, rule, regulation or executive
order shall have been enacted, entered or promulgated prohibiting the purchase
of Shares pursuant to the Offer or the consummation of the Merger
substantially on the terms contemplated by the Merger Agreement or (b) an
order, decree, ruling or injunction shall have been entered permanently
restraining, enjoining or otherwise prohibiting the purchase of Shares
pursuant to the Offer or the consummation of the Merger substantially on the
terms contemplated by the Merger Agreement and such order, decree, ruling or
injunction shall have become final and non-appealable; provided, that the
party seeking to terminate the Merger Agreement shall have used its reasonable
best efforts to remove such injunction, order or decree; (iv) by the Company
prior to the purchase of Shares pursuant to the Offer if the Company Board
determines in good faith based upon advice of its outside counsel that (a) a
Takeover Proposal constitutes a Superior Proposal and (b) failure to accept
such Superior Proposal will violate its obligations or duties to the Company
or the Company's stockholders under applicable law, provided, that the Merger
Agreement shall not terminate unless (Y) the Company has provided Parent with
two business days' prior written notice of its intention to accept such
Superior Proposal, together with a detailed description of the terms and
conditions of such Superior Proposal and (Z) simultaneously with such
termination the Company enters into a definitive acquisition, merger or
similar agreement to effect such Superior Proposal and pays the Termination
Fee; (v) by either the Company or Parent prior to the purchase of any Shares
pursuant to the Offer if the other party shall have breached, or failed to
comply with, in any material respect any of its obligations under the Merger
Agreement or any representation or warranty made by such other party shall
have been untrue when made or as of the time of such termination as if made on
and as of such time (except for representations and warranties made as of a
specified date, which need be true only as of the specified date), provided
such breach, failure or misrepresentation is not cured within ten days after
notice thereof from the other party or two business days prior to the date on
which the Offer expires, and with respect to any representation or warranty
not qualified by "Material Adverse Effect," such breaches, failures or
misrepresentations, individually or in the aggregate, result or are reasonably
likely to result in a Material Adverse Effect on the Company or Parent, as the
case may be; (vi) by Parent if the Company Board or any committee of the
Company Board, (a) shall withdraw, modify or change in any adverse manner
(including by amendment of the Schedule 14D-9) or fail to reconfirm upon the
request of Parent its approval or recommendation of the Merger Agreement, the
Offer or the Merger, (b) shall approve or recommend any Takeover Proposal,
other than
25
<PAGE>
by Parent or an affiliate of Parent, or (c) shall resolve to take any of the
actions specified in clause (a) or (b); (vii) by the Company if Purchaser
fails to commence the Offer on or prior to five business days following the
date of initial public announcement of the Offer, provided that the Company
may not terminate the Merger Agreement pursuant to this provision if the
Company is at such time in breach in any material respect of its obligations
under the Merger Agreement; or (viii) by either of the Company or Parent if
the Offer shall have been terminated, or the Offer has expired without any
Shares being purchased therein; provided, however, that the right to terminate
the Merger Agreement pursuant to this provision shall not be available to any
party whose failure to fulfill any obligation under the Merger Agreement has
been the cause of, or resulted in, the termination of the Offer or the failure
of Parent or Purchaser, as the case may be, to purchase Shares pursuant to the
Offer on or prior to such date. Notwithstanding the foregoing, no termination
by the Company shall be effective pursuant to clause (iv) above under
circumstances in which a Termination Fee would be payable by the Company
unless concurrently with such termination, such Termination Fee is paid in
full by the Company in accordance with the provisions of the Merger Agreement.
Pursuant to the Merger Agreement, if (i) prior to the termination of the
Merger Agreement any person shall have commenced, publicly proposed or
communicated to the Company a Takeover Proposal and (a) the Minimum Condition
shall not have been satisfied, (b) the Merger Agreement shall have been
terminated pursuant to the provisions described in clause (ii), (iii), (v) or
(vii) of the preceding paragraph and (c) prior to the first anniversary of
such termination, the Company shall consummate with any third party any
transaction of the type described in the definition of the term "Takeover
Proposal"; or (ii) the Merger Agreement is terminated by the Company or Parent
pursuant to clause (iv) or (vi), respectively, of the preceding paragraph,
then in such event the Company shall pay Parent a termination fee of $4.75
million (the "Termination Fee"), which amount shall be paid by wire transfer
of immediately available funds to an account designated by Parent.
Indemnification. Pursuant to the Merger Agreement, for three years after
the Effective Time, the Parent and the Surviving Corporation (or any successor
to the Surviving Corporation) will indemnify the present and former officers
and directors of the Company and its subsidiaries with respect to matters
occurring at or prior to the Effective Time to the full extent permitted under
the DGCL and the terms of the Company's charter, by-laws and indemnification
agreements, each as in effect as of the date of the Merger Agreement; and for
three years from the Effective Time, Parent shall maintain in effect the
Company's directors' and officers' liability insurance policies and shall
purchase such policy at or prior to the Closing Date.
Representations and Warranties. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to Parent and
Purchaser with respect to, among other things, its organization,
capitalization, authority, financial statements, need for consents or
approvals, public filings, conduct of business, employee benefit plans,
intellectual property, employment matters, compliance with laws, tax matters,
insurance, litigation, title to properties, environmental matters, vote
required to approve the Merger Agreement, undisclosed liabilities, information
to be contained in the Proxy Statement, the opinion of its financial advisor
and significant vendor arrangements.
Pursuant to the Merger Agreement, Parent and Purchaser have made
substantially similar representations and warranties as to their organization,
authority, need for consents or approvals and information to be contained in
the Proxy Statement.
Confidentiality Agreement. Pursuant to the Confidentiality Agreement
entered into on April 22, 1999 by Parent and the Company (the "Confidentiality
Agreement"), the Company and Parent agreed to provide, among other things, for
the confidential treatment of their discussions regarding the Offer and the
Merger and the exchange of certain confidential information concerning the
Company. The Confidentiality Agreement is incorporated herein by reference and
a copy of it has been filed with the Commission as an exhibit to the Schedule
14D-1.
Stockholder Agreements. The following is a summary of certain provisions of
the Stockholder Agreements. This summary is not a complete description of the
terms and conditions of the Stockholder Agreements and is qualified in its
entirety by reference to the full text of the Stockholder Agreements, the form
of which has been
26
<PAGE>
filed with the Commission as an exhibit to the Schedule 14D-1 and incorporated
herein by reference. Capitalized terms not otherwise defined below shall have
the same meaning set forth in the Merger Agreement or the Stockholder
Agreements, as the context may require. The Stockholder Agreements may be
examined, and copies obtained, as set forth in Section 8 of this Offer to
Purchase.
As a condition and inducement to Parent's and Purchaser's entering into the
Merger Agreement and incurring the liabilities therein, the Principal
Stockholders, who collectively have voting power and dispositive power with
respect to an aggregate of 1,610,500 Shares and hold options to acquire 9,998
Shares, representing approximately 18% of the outstanding Shares on a Fully
Diluted Basis, concurrently with the execution and delivery of the Merger
Agreement entered into the Stockholder Agreements with Parent and Purchaser.
Pursuant to the Stockholder Agreements, the Principal Stockholders have
agreed, among other things, to grant Parent an irrevocable proxy for the term
of the Stockholder Agreements with respect to the voting of their Shares in
favor of the Merger and against any other Takeover Proposal with respect to
such Shares upon the terms and subject to the conditions set forth therein.
The Principal Stockholders have also agreed to tender their Shares upon the
direction of Purchaser and not to withdraw their Shares so long as the
Stockholder Agreements remain in effect. The Stockholders Agreements will
terminate on the earlier of (i) the Effective Time and (ii) the termination of
the Merger Agreement.
During the period ("Restricted Period") from May 5, 1999 through and
including the earlier of (i) the Effective Time, and (ii) the termination of
the Stockholder Agreements, each Principal Stockholder has agreed not to: (A)
except pursuant to the terms of the Stockholder Agreements and except for the
tender of Shares in the Offer, offer for sale, sell, transfer, tender, pledge,
encumber, assign or otherwise dispose of, or enter into any contract, option
or other arrangement to do so; (B) except pursuant to the terms of the
Stockholder Agreements, grant any proxies (other than proxies relating to the
election of management's slate of directors at an annual meeting of the
Company's stockholders, and other routine matters which would not require the
filing of a preliminary proxy statement under Rule 14a-6(a) of the Exchange
Act), or powers of attorney, deposit any of his Shares in a voting trust or
enter into a voting agreement with respect to any of their Shares; or (C) take
any action that would make any representation or warranty contained in the
Stockholder Agreements untrue or incorrect or have the effect of impairing the
ability of the Principal Stockholder to perform his obligations under the
applicable Stockholder Agreement or preventing or delaying the consummation of
any of the transactions contemplated by the applicable Stockholder Agreement
and the Merger Agreement.
Each Principal Stockholder has agreed to unconditionally release, as of the
Effective Time, any and all claims and causes of action that he may have
against the Company or any of its Subsidiaries or any present or former
director, officer, employee or agent of the Company or any of its Subsidiaries
resulting from any act, omission or occurrence prior to the Effective Time;
provided, however, that such release not shall apply to any claim or cause of
action insofar as it relates to any entitlement to indemnification or to
compensation or benefits earned or accrued by or for the benefit of such
Principal Stockholder prior to the Effective Time in respect of services
performed by such Principal Stockholder to the Company as a director, officer,
consultant or employee of the Company.
Each Principal Stockholder has agreed that, in his capacity as a
stockholder, he will not respond to any inquiries or the making of any
proposal by any person or entity (other than Parent or any affiliate of
Parent) concerning any business combination, merger, tender offer, exchange
offer, sale of assets, sale of shares of capital stock or debt securities or
similar transactions involving the Company or any Subsidiary, division or
operating or principal business unit of the Company. If such Principal
Stockholder, in the capacity as a stockholder, receives any such inquiry or
proposal, then the Principal Stockholder has agreed to promptly inform Parent
of the existence thereof. Each Principal Stockholder, in the capacity as a
stockholder, has agreed to immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties previously
conducted with respect to any of the foregoing.
Certain Other Agreements. Parent has agreed to cause the Company to
continue to employ Paul N. Steinfeld for the remainder of calendar year 1999
at his current annual base salary and benefits, including participation in the
Company's 1999 Senior Management Incentive Plan, pursuant to an employment
agreement to be executed
27
<PAGE>
as of the Effective Time. The agreement will also contain a covenant that Mr.
Steinfeld will not compete with the Company for a period of one year after the
termination of his employment. Certain other officers and key management
employees of the Company, including its Chief Operating Officer and Chief
Financial Officer, will be offered employment agreements for a period of two
years at the salary, with respect to each of them, equal to such employee's
salary in effect at the Effective Date.
Mr. Manfred Steinfeld has an understanding with the Company, which has been
approved by the Parent, that he will provide consulting services to the
Company for the remainder of calendar year 1999 in exchange for a consulting
fee of $12,000 per month.
13. Sources and Amount of Funds.
The amount required to purchase the Shares validly tendered pursuant to the
Offer, consummate the Merger, and pay the costs and expenses related to the
Offer and the Merger is estimated to be approximately $157.2 million. Funds
required in connection with the Offer and the Merger will be obtained from (i)
not less than $8.7 million in cash on hand of the Parent, (ii) the proceeds of
a term loan (the "Term Loan") of $70 million to be provided by DLJ Capital
Funding, Inc. ("DLJ Capital Funding") and (iii) the net proceeds of Parent's
ten year senior subordinated notes (the "Parent Notes") in the aggregate
principal amount of $100 million, to be privately placed with certain
institutional investors. Such funds will also be used for the repayment in
full of all amounts owing under Parent's current revolving credit arrangement
with an unrelated banking institution and repayment in full of certain
existing indebtedness of the Company.
In addition to the Term Loan to be provided by it, DLJ Capital Funding will
also provide Parent with a revolving credit facility (the "Revolving Credit
Facility") of up to $50 million to be used by Parent, for working capital and
general corporate purposes. Funds to be provided under the Revolving Credit
Facility may not be used by Parent in connection with the Offer or the Merger,
other than in payment of expenses. DLJ Capital Funding will syndicate the Term
Loan and the Revolving Facility (together, the "Credit Facility") among
various lenders pursuant to customary industry practices.
If the contemplated private placement of the Parent Notes has not been
completed at the time the Offer is completed, then DLJ Bridge Finance, Inc.,
an affiliate of DLJ, will purchase from Parent up to $100 million in senior
subordinated increasing rate notes (the "Bridge Notes") the proceeds of which
will be used to complete the Offer and the Merger pending completion of such
private placement of the Parent Notes.
Parent has entered into a commitment letter (the "Commitment Letter") with
DLJ Capital Funding and DLJ Bridge Finance to provide the Term Loan and the
Revolving Credit Facility and, if necessary, to purchase the Bridge Notes, all
upon the terms and subject to the conditions set forth therein.
Pursuant to the Commitment Letter, the Term Loan will have a term of six
years with quarterly amortization resulting in aggregate annual principal
payments as follows: (i) $7.0 million during the second year thereof, (ii)
$10.5 million during the third year thereof, (iii) $14.0 million during the
fourth year thereof, (iv) $17.5 million during the fifth year thereof, and (v)
$21.0 million during the sixth year thereof. The Term Loan and the Revolving
Credit Facility will bear interest, at Parent's option, at reserve-adjusted
LIBOR or the base rate, plus, in each case, a margin which will initially be
2.75% and 1.75% per annum, respectively, for the six-month period following
the closing and which will thereafter be based on the ratio of consolidated
total debt to consolidated earnings before interest, taxes, depreciation and
amortization (EBITDA) of the Parent and its subsidiaries as determined from
time to time.
The Term Loan and the Revolving Credit Facility will contain certain
representations and warranties, certain negative and affirmative covenants,
certain conditions and events of default which are customarily required for
similar financings. Such covenants will include restrictions and limitations
on dividends and stock redemptions and the redemption and/or prepayment of
other debt, capital expenditures, leases, incurrence of debt, liens,
investments, transactions with affiliates, acquisitions, mergers,
consolidations and asset sales. Furthermore, Parent will be required to
maintain compliance with certain customary financial covenants. The terms of
the
28
<PAGE>
Credit Facility will require Parent to grant a security interest in all
existing and after-acquired property of Parent, including, without limitation,
a security interest in all accounts receivable, inventory, equipment,
intellectual property and other personal property and all real property
interests, and the pledge of the capital stock of all U.S.-based subsidiaries
of Parent and 66% of the capital stock of its foreign subsidiaries.
The Credit Facility will be guaranteed by all direct and indirect
subsidiaries of Parent (the "Guarantors"). The Guarantors shall secure their
obligations with all of the existing and after-acquired property of
Guarantors.
Parent has agreed to pay the reasonable costs and expenses arising in
connection with the commitment letter, the financing agreements and the
syndication of the credit facilities and has also agreed to pay financing,
commitment, annual and other fees customary for commitments of the type
provided for in the Commitment Letter.
Parent and Purchaser anticipate that indebtedness incurred through the
above described borrowings in connection with the Offer and Merger will be
repaid from a number of possible sources, which may include, but may not be
limited to, funds generated internally by Parent and its subsidiaries, bank
financing, and/or the public or private sale of debt or equity securities. No
decision has been made concerning the method Parent and Purchaser will employ
to repay such indebtedness. Such decision will be made based on review from
time to time of the advisability of particular actions, as well as on
prevailing interest rates and financial and other economic conditions and such
other factors as Parent and Purchaser may deem appropriate.
14. Certain Conditions of the Offer.
Annex A to the Merger Agreement provides that notwithstanding any other
provision of the Offer, and in addition to (and not in limitation of)
Purchaser's rights to extend the Offer under certain circumstances (subject to
the provisions of the Merger Agreement), Purchaser shall not be required to
accept for payment or, subject to the applicable rules and regulations of the
Commission, pay for, and may delay the acceptance for payment of or, subject
to the applicable rules and regulations of the Commission, payment for, any
Shares tendered pursuant to the Offer, and may terminate the Offer and not
accept for payment any Shares, if (x) any applicable waiting period under the
HSR Act has not expired or terminated prior to the expiration of the Offer,
(y) the Minimum Condition has not been satisfied or (z) at any time on or
after the date of the Merger Agreement and before the time of acceptance of
Shares pursuant to the Offer, any of the following events shall have occurred:
(a) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated, or deemed applicable,
pursuant to an authoritative interpretation by or on behalf of a
Governmental Entity, to the Offer or the Merger, that (i) prohibits or
imposes any material limitations on Parent's or Purchaser's ownership or
operation (or that of any of their respective subsidiaries or affiliates)
of all or a portion of their or the Company's businesses or assets, or to
compel Parent or Purchaser or their respective subsidiaries and affiliates
to dispose of or hold separate any portion of the business or assets of the
Company or Parent and their respective subsidiaries, which prohibition,
limitation, disposition or hold separate obligation could reasonably be
expected to have a Material Adverse Effect on Parent, (ii) restrains or
prohibits the making or consummation of the Offer or the Merger or the
performance of any of the other transactions contemplated by the Merger
Agreement, (iii) imposes material limitations on the ability of Purchaser,
or renders Purchaser unable, to accept for payment, pay for or purchase
some or all of the Shares pursuant to the Offer and the Merger, or (iv)
imposes material limitations on the ability of Purchaser or Parent
effectively to exercise full rights of ownership of the Shares, including,
without limitation, the right to vote the Shares purchased by it on all
matters properly presented to the Company's stockholders; or
(b) (i) the Company Board (or any committee thereof) shall have
withdrawn, modified or changed in any adverse manner to Parent and
Purchaser or failed to reconfirm upon the request of Parent, its approval
or recommendation of the Offer, the Merger, or the Merger Agreement, or
shall have endorsed, approved or recommended any other Takeover Proposal or
(ii) the Company shall have entered into any agreement with respect to any
Superior Proposal pursuant to the provision described in clause (iv) under
the heading "Termination; Fees" in Section 12 hereof; or
29
<PAGE>
(c) the representations and warranties of the Company set forth in the
Merger Agreement shall not be true and correct, in each case (i) as of the
date referred to in any representation or warranty which addresses matters
as of a particular date, or (ii) as to all other representations and
warranties, as of the date of the Merger Agreement and as of the scheduled
expiration of the Offer, and with respect to any representations and
warranties not qualified by "Material Adverse Effect," unless the
inaccuracies under such representation and warranties, taking all the
inaccuracies under all such representations and warranties together in
their entirety, could not, individually or in the aggregate, result in a
Material Adverse Effect on the Company; or
(d) the Company shall have failed to perform any obligation or to comply
with any agreement or covenant to be performed or complied with by it under
the Merger Agreement other than any failure which could not, either
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company; or
(e) the Merger Agreement shall have been terminated by the Company or
Parent or Purchaser in accordance with its terms or Parent or Purchaser
shall have reached an agreement or understanding in writing with the
Company providing for termination or amendment of the Offer or delay in
payment for the Shares; which, in the reasonable judgment of Parent and
Purchaser, in any such case, and regardless of the circumstances giving
rise to any such conditions, makes it inadvisable to proceed with the Offer
and/or with such acceptance for payment of or payment for Shares; or
(f) there shall have been an event, occurrence, development, or state of
circumstances or facts that is reasonably likely to have a Material Adverse
Effect upon the Company;
(g) any person or "group" (as defined in Section 13(d)(3) of the
Exchange Act), other than Parent, Purchaser, any affiliate of either of
them, or any group of which any of them is a member, shall have acquired or
commenced a tender or exchange offer to acquire beneficial ownership (as
determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of
20% or more of the Shares; or
(h) there shall have occurred and be continuing (1) any general
suspension of trading in, or limitation on prices for, securities on the
New York Stock Exchange, Inc., or any material disruption or material
adverse change in the financial or capital markets generally or for
syndicated bank credits or high yield securities similar to those of the
Senior Facilities or Bridge Notes referred to in the Commitment Letter, (2)
the declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory), (3) the
commencement of a war, armed hostilities or other international and
national calamity directly or indirectly involving the United States and
having had or being reasonably likely to have a Material Adverse Effect or
would restrain, prohibit, or delay beyond the Final Termination Date the
consummation of the Offer, or (4) in the case of any of the situations
described in clauses (1) through (3) inclusive existing at the date of the
Merger Agreement, a material acceleration, escalation or worsening thereof.
Annex A provides that the foregoing conditions (other than the Minimum
Condition) are for the sole benefit of Parent and Purchaser and, subject to
the Merger Agreement, may be asserted by Parent or Purchaser regardless of the
circumstances giving rise to such condition or may be waived by Parent or
Purchaser in whole or in part at any time and from time to time in its sole
discretion; and that the failure by Parent or Purchaser at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
15. Certain Legal Matters.
Except as described in this Section 15, based on information provided by
the Company, none of the Company, Purchaser or Parent is aware of any license
or regulatory permit that appears to be material to the business of the
Company and its subsidiaries, taken as a whole, that might be adversely
affected by Purchaser's acquisition of Shares (and the indirect acquisition of
the stock of the Company's subsidiaries) as contemplated herein or of any
approval or other action by a domestic or foreign governmental, administrative
or regulatory agency or authority that would be required or desirable for the
acquisition and ownership of the Shares (and the
30
<PAGE>
indirect acquisition of the stock of the Company's subsidiaries) by Purchaser
as contemplated herein. Should any such approval or other action be required
or desirable, Purchaser and Parent presently contemplate that such approval or
other action will be sought, except as described below under "State Takeover
Laws." While, except as otherwise described in this Offer to Purchase,
Purchaser does not presently intend to delay the acceptance for payment of or
payment for Shares tendered pursuant to the Offer pending the outcome of any
such matter, there can be no assurance that any such approval or other action,
if needed, would be obtained, or would be obtained without substantial
conditions, or that failure to obtain any such approval or other action might
not result in consequences adverse to the Company's business or that certain
parts of the Company's business might not have to be disposed of or other
substantial conditions complied with in the event that such approvals were not
obtained or such other actions were not taken in order to obtain any such
approval or other action. If certain types of adverse action are taken with
respect to the matters discussed below, Purchaser could decline to accept for
payment or pay for any Shares tendered. See Section 14 for certain conditions
to the Offer, including conditions with respect to governmental actions.
State Anti-Takeover Laws. The Company is incorporated under the laws of the
State of Delaware. In general, Section 203 of the DGCL prevents an "interested
stockholder" (e.g., a person who owns or has the right to acquire 15% or more
of a corporation's outstanding voting stock) from engaging in a "business
combination" (defined to include mergers and certain other transactions) with
a Delaware corporation for a period of three years following the time such
person became an interested stockholder unless, among other things, the
corporation's board of directors approves such business combination or the
transaction in which the interested stockholder becomes such prior to the time
the interested stockholder becomes such. The provisions of Section 203 of the
DGCL are not applicable to any of the transactions contemplated in the Merger
Agreement or the Stockholder Agreements because the Merger Agreement, the
Stockholder Agreements and the transactions contemplated thereby were approved
by the Board of Directors of the Company, for the purposes of Section 203 of
the DGCL, prior to the execution thereof. A number of other states have
adopted laws and regulations that purport to be applicable to attempts to
acquire securities of corporations which are incorporated, or have substantial
assets, stockholders, principal executive offices or principal places of
business, or whose business operations otherwise have substantial economic
effects in such states. In Edgar v. MITE Corp., the Supreme Court of the
United States invalidated on constitutional grounds the Illinois Business
Takeover statute, which, as a matter of state securities law, made takeovers
of corporations meeting certain requirements more difficult. However in 1987,
in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the
State of Indiana may, as a matter of corporate law and, in particular, with
respect to those aspects of corporate law concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of
a target corporation without the prior approval of the remaining presenting
stockholders. The state law before the Supreme Court was by its terms
applicable only to corporations that had a substantial number of stockholders
in the state and were incorporated there.
Except as described above with respect to Section 203 of the DGCL,
Purchaser has not attempted to comply with the takeover laws of any other
state. Should any person seek to apply any state takeover law, Purchaser will
take such action as then appears desirable, which may include challenging the
validity or applicability of any such statute in appropriate court
proceedings. In the event it is asserted that one or more state takeover laws
are applicable to the Offer or the Merger, and an appropriate court does not
determine that such law or laws are inapplicable or invalid as applied to the
Offer, Purchaser might be required to file certain information with, or
receive approvals from, the relevant state authorities. In addition, if
enjoined, Purchaser might be unable to accept for payment any Shares tendered
pursuant to the Offer, or be delayed in continuing or consummating the Offer
and the Merger. In such case, Purchaser may not be obligated to accept for
payment any Shares tendered. See Section 14.
The Company and certain of its subsidiaries conduct business in a number of
other states throughout the United States, some of which have enacted takeover
laws and regulations. Neither Parent nor Purchaser knows whether any or all of
these takeover laws and regulations will by their terms apply to the Offer,
and, except as set forth above, neither Parent nor Purchaser has currently
complied with any other state takeover statute or regulation. Purchaser
reserves the right to challenge the applicability or validity of any state law
purportedly
31
<PAGE>
applicable to the Offer and nothing in this Offer to Purchase or any action
taken in connection with the Offer is intended as a waiver of such right. If
it is asserted that any state takeover statute is applicable to the Offer and
an appropriate court does not determine that it is inapplicable or invalid as
applied to the Offer, Purchaser might be required to file certain information
with, or to receive approvals from, the relevant state authorities, and
Purchaser might be unable to accept for payment or pay for Shares tendered
pursuant to the Offer, or may be delayed in consummating the Offer. In such
case, Purchaser may not be obligated to accept for payment or pay for any
Shares tendered pursuant to the Offer. See Section 14.
Antitrust. The Offer and the Merger are subject to the HSR Act, which
provides that certain acquisition transactions may not be consummated unless
certain information has been furnished to the Antitrust Division of the
Department of Justice (the "Antitrust Division") and the Federal Trade
Commission (the "FTC") and certain waiting period requirements have been
satisfied.
Parent and the Company expect to file their Notification and Report Forms
with respect to the Offer under the HSR Act in the near future. The waiting
period under the HSR Act with respect to the Offer will expire at 11:59 p.m.,
New York City time, on the 15th day after the date Parent's form is filed
unless early termination of the waiting period is granted. However, the
Antitrust Division or the FTC may extend the waiting period by requesting
additional information or documentary material from Parent or the Company. If
such a request is made, such waiting period will expire at 11:59 p.m., New
York City time, on the tenth day after substantial compliance by Parent with
such request. Only one extension of the waiting period pursuant to a request
for additional information is authorized by the HSR Act. Thereafter, such
waiting period may be extended only by court order or with the consent of
Parent. In practice, complying with a request for additional information or
material can take a significant amount of time. In addition, if the Antitrust
Division or the FTC raises substantive issues in connection with a proposed
transaction, the parties frequently engage in negotiations with the relevant
governmental agency concerning possible means of addressing those issues and
may agree to delay consummation of the transaction while such negotiations
continue. Purchaser will not accept for payment Shares tendered pursuant to
the Offer unless and until the waiting period requirements imposed by the HSR
Act with respect to the Offer have been satisfied. See Section 14.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as Purchaser's acquisition of Shares
pursuant to the Offer and the Merger. At any time before or after Purchaser's
acquisition of Shares, the Antitrust Division or the FTC could take such
action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the acquisition of Shares
pursuant to the Offer or otherwise or seeking divestiture of Shares acquired
by Purchaser or divestiture of substantial assets of Parent or its
subsidiaries. Private parties, as well as state governments, may also bring
legal action under the antitrust laws under certain circumstances. Based upon
an examination of information provided by the Company relating to the
businesses in which Parent and the Company are engaged, Parent and Purchaser
believe that the acquisition of Shares by Purchaser will not violate the
antitrust laws. Nevertheless, there can be no assurance that a challenge to
the Offer or other acquisition of Shares by Purchaser on antitrust grounds
will not be made or, if such a challenge is made, of the result. See Section
14 for certain conditions to the Offer, including conditions with respect to
injunctions and certain governmental actions.
Federal Reserve Board Regulations. Regulations G, U and X (the "Margin
Regulations") of the Federal Reserve Board restrict the extension or
maintenance of credit for the purpose of buying or carrying margin stock,
including the Shares, if the credit is secured directly or indirectly by
margin stock. Such secured credit may not be extended or maintained in an
amount that exceeds the maximum loan value of all the direct and indirect
collateral securing the credit, including margin stock and other collateral.
As described in Section 13 of this Offer to Purchase, the financing of the
Offer will not be directly or indirectly secured by the Shares or other
securities which constitute margin stock. Accordingly, all financing for the
Offer will be in full compliance with the Margin Regulations.
32
<PAGE>
16. Fees and Expenses.
Except as set forth below, neither Parent nor Purchaser will pay any fees
or commissions to any broker, dealer or other person for soliciting tenders of
Shares pursuant to the Offer.
Parent has engaged DLJ to act as its financial advisor in connection with
the Offer and the Merger. Parent will pay DLJ customary compensation for its
financial advisory services in connection with the Offer and Merger. Parent
has agreed to reimburse DLJ for all reasonable out-of-pocket fees, expenses
and costs, including reasonable fees and expenses of legal counsel, and to
indemnify DLJ and certain related persons against certain liabilities and
expenses in connection with the Offer and Merger, including certain
liabilities under the federal securities laws.
Purchaser and Parent have retained D.F. King & Co., Inc. to serve as the
Information Agent and IBJ Whitehall Bank & Trust Company to serve as the
Depositary in connection with Offer. The Information Agent may contact holders
of Shares by personal interview, mail, telephone, telex and other methods of
electronic communication and may request brokers, dealers, commercial banks,
trust companies and other nominees to forward the Offer materials to
beneficial holders. The Information Agent and the Depositary will each receive
reasonable and customary compensation for their services, be reimbursed for
certain reasonable out-of-pocket expenses and be indemnified against certain
liabilities in connection with their services, including certain liabilities
and expenses under the federal securities laws.
17. Miscellaneous.
Purchaser is not aware of any jurisdiction where the making of the Offer is
prohibited by any administrative or judicial action pursuant to any valid
state statute. If Purchaser becomes aware of any valid state statute
prohibiting the making of the Offer or the acceptance of the Shares pursuant
thereto, Purchaser will make a good faith effort to comply with such state
statute. If, after such good faith effort, Purchaser cannot comply with any
such state statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares in such state. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made
on behalf of Purchaser by the Dealer Manager or one or more registered brokers
or dealers which are licensed under the laws of such jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of Parent, Purchaser or the Company not contained in
this Offer to Purchase or in the Letter of Transmittal and, if given or made,
such information or representation must not be relied upon as having been
authorized. Neither the delivery of this Offer to Purchase nor any purchase
pursuant to the Offer, shall, under any circumstances, create any implication
that there has been no change in the affairs of Parent, Purchaser or the
Company since the date as of which information is furnished or the date of
this Offer to Purchase.
Parent and Purchaser have filed with the Commission a Schedule 14D-1,
together with exhibits, pursuant to Rule 14d-3 of the General Rules and
Regulations under the Exchange Act, furnishing certain additional information
with respect to the Offer, and may file amendments thereto. In addition, the
Company has filed with the Commission a Solicitation/Recommendation Statement
on Schedule 14D-9 (including exhibits) pursuant to Rule 14d-9 under the
Exchange Act. Such statements and any amendments thereto, including exhibits,
may be inspected at, and copies may be obtained from, the same places and in
the same manner as set forth in Section 8 (except that such material will not
be available at the regional offices of the Commission).
SY Acquisition, Inc.
May 12, 1999
33
<PAGE>
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE
OFFICERS OF PARENT AND PURCHASER
1. Directors and Executive Officers of Parent. Set forth below is the name,
current business address, citizenship and the present principal occupation or
employment and material occupations, positions, offices or employments for the
past five years of each director and executive officer of Parent.
Unless otherwise indicated, each person identified below is employed by
Parent. The principal address of Parent and, unless otherwise indicated below,
the current business address for each individual listed below is 9387 Dielman
Industrial Drive, St. Louis, Missouri 63132. Directors are identified by an
asterisk. Unless otherwise indicated, each such person is a citizen of the
United States.
<TABLE>
<CAPTION>
Name and Current Present Principal Occupation or Employment;
Business Address Material Positions Held During the Past Five Years
<S> <C>
*Franklin A. Jacobs............ Chairman of the Board and Chief Executive Officer of
Parent for more than the last five years and President of
Parent until December 1995; Director of Top Air
Manufacturing, Inc.
*Donald P. Gallop.............. Attorney-at-law; Chairman of the law firm of Gallop,
Johnson & Neuman, L.C., for more than the last five
years; Director of Data Research Associates, Inc.
*S. Lee Kling.................. Chairman of the Board of Kling Rechter & Co., L.P., a
merchant banking company, for more than the last five
years; Director of Bernard Chaus, Inc., Electro Rent
Corporation, Hanover Direct, Inc., Lewis Galoob Toys,
Inc., National Beverage Corp., Top Air Manufacturing,
Inc. and Union Planters Corporation.
*Melvin F. Brown............... Chairman Emeritus of Deutsche Financial Services, a
commercial finance company, since June 30, 1998; prior
thereto, Vice Chairman of Deutsche Financial Services,
since January 1997; prior thereto, President and Chief
Executive Officer of Deutsche Financial Services, since
May 1995; prior thereto, President of ITT Commercial
Finance Corporation, for more than five years.
*James L. Hoagland............. Retired. Prior to September 1, 1989, President and Chief
Executive Officer of Graybar Electric Company, Inc., a
distributor of electrical and telecommunications
equipment, for more than the last five years.
*Lee M. Liberman............... Chairman emeritus and consultant to Laclede Gas Company,
a retail natural gas distribution public utility, since
January 1994; prior thereto, Chairman of the Board and,
until August 1991, Chief Executive Officer of Laclede Gas
Company, for more than the last five years; Director of
CPI Corporation, Furniture Brands International and DT
Industries, Inc.
*Raynor E. Baldwin............. President of Woodsmiths, Incorporated, a manufacturer of
table tops, for more than the last five years.
*James Schneider............... Broker-International Monetary Market, Chicago Mercantile
Exchange, for more than the last five years.
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
Name and Current Present Principal Occupation or Employment;
Business Address Material Positions Held During the Past Five Years
<S> <C> <C>
*Darryl C. Rosser.............. President and Chief Operating Officer of Parent since
December 1995; prior thereto, Executive Vice President-
Operations since May 1995; prior thereto, Senior Vice
President-Operations since 1993; and prior thereto, Vice
President-Operations since January 1988.
Michael J. Dreller............. Vice President-Finance and Chief Financial Officer,
Secretary and Treasurer of Parent since January 1996;
prior thereto, Vice President and Chief Financial Officer
of JDI Group, Inc., a distributor of residential
furniture.
Stephen E. Cohen............... Vice President-Sales and Marketing of Parent since August
1998; prior thereto, Vice President-Sales since November
1996; Vice President-Sales Western Region since October
1995; Vice President-Sales Midwestern Region since March
1995.
Jackson H. Spidell............. Vice President-Operations of Parent since November 1998;
prior thereto, Director of West Michigan Manufacturing
Operations-Herman Miller, Inc., a manufacturer of office
furniture.
Michael J. Kula................ Vice PresidentCorporate Technology & Development of
Parent since November 1998; Vice President-Operations
since July 1996; prior thereto, Senior Vice President-
Operations of the Gunlocke Company, a subsidiary of HON
Industries, Inc., a manufacturer of office furniture.
Richard Hnatek................. Senior Vice President-International Sales/New Chain
Development of Parent since August 1998; Senior Vice
President-Sales since December 1993; Vice President-Sales
since November 1986.
</TABLE>
2. Directors and Executive Officers of Purchaser. Set forth below is the
name, current business address, citizenship and the present principal
occupation or employment and material occupations, positions, offices or
employments for the past five years of each director and officer of Purchaser.
Unless otherwise indicated, each person identified below is employed by
Purchaser. The principal address of Purchaser and, unless otherwise indicated
below, the current business address for each individual listed below is 9387
Dielman Industrial Drive, St. Louis, Missouri 63132. Directors are identified
by an asterisk. Unless otherwise indicated, each such person is a citizen of
the United States.
<TABLE>
<CAPTION>
Name and Current Present Principal Occupation or Employment;
Business Address Material Positions Held During the Past Five Years
<S> <C>
*Franklin A. Jacobs............ President of Purchaser since May 1999; Chairman of the
Board and Chief Executive Officer of Parent for more than
the last five years and President of the Parent until
December 1995; Director of Top Air Manufacturing, Inc.
*Darryl C. Rosser.............. Vice President and Treasurer of Purchaser since May 1999;
President and Chief Operating Officer of Parent since
December 1995; prior thereto, Executive Vice President-
Operations of Parent since May 1995; prior thereto,
Senior Vice President-Operations of Parent since 1993;
and prior thereto, Vice President-Operations of Parent
since January 1988.
*Michael J. Dreller............ Vice President and Secretary of Purchaser since May 1999;
Vice President-Finance and Chief Financial Officer,
Secretary and Treasurer of Parent since January 1996;
prior to joining the Parent, Vice President and Chief
Financial Officer of JDI Group, Inc., a distributor of
residential furniture.
</TABLE>
I-2
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for the
Shares and any other required documents should be sent by each stockholder of
the Company or his broker-dealer, commercial bank, trust company or other
nominee to the Depository as follows:
The Depository for the Offer is:
IBJ Whitehall Bank & Trust Company
Telephone: (212) 858-2103
By Mail: Facsimile Transmission: By Hand, Courier, or
(212) 858-2611(for Certified or Express
eligible institutions Mail:
only)
IBJ Whitehall Bank & Trust Company
P.O. Box 84
Bowling Green Station IBJ Whitehall Bank & Trust Company
New York, New York 10274- One State Street
0084 New York, New York 10004
Attn: Reorganization Attn: Securities
Operations Processing Window,
Subcellar One, (SC-1)
Confirmation of Receipt of
Facsimile by Telephone: (212) 858-2103
Any questions or requests for assistance or additional copies of the Offer
to Purchase and the Letter of Transmittal may be directed to the Information
Agent or the Dealer Manager at the telephone numbers and locations listed
below. You may also contact your broker, dealer, commercial bank or trust
company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect (212) 269-5550
All Others Call Toll Free (800) 735-3591
The Dealer Manager for the Offer is:
Donaldson, Lufkin & Jenrette
200 West Madison Street, Suite 1700
Chicago, Illinois 60606-3489
Toll Free: (877) 866-0927
(312) 345-7558
<PAGE>
EXHIBIT (A)(2)
Letter of Transmittal
To Tender Shares of Common Stock
of
Shelby Williams Industries, Inc.
Pursuant to the Offer to Purchase dated May 12, 1999
by
SY Acquisition, Inc.
a direct wholly owned subsidiary of
Falcon Products, Inc.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, JUNE 9, 1999, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
IBJ Whitehall Bank & Trust Company
Telephone: (212) 858-2103
By Mail: Facsimile Transmission: By Hand, Courier, or
(212) 858-2611(for Certified or Express
Eligible Institutions Mail:
only)
IBJ Whitehall Bank & Trust Company
P.O. Box 84
Bowling Green Station IBJ Whitehall Bank & Trust Company
New York, New York 10274- Confirmation of Receipt of One State Street
0084 New York, New York 10004
Facsimile by Telephone: (212) 858-2103
Attn: Reorganization Attn: Securities
Operations Processing Window,
Subcellar One, (SC-1)
Delivery of this Letter of Transmittal to an address other than as set
forth above, or transmission of instructions via facsimile to a number other
than as set forth above, will not constitute a valid delivery. You must sign
this Letter of Transmittal in the appropriate space provided below and
complete the Substitute Form W-9 set forth below.
The instructions contained within this Letter of Transmittal should be read
carefully before this Letter of Transmittal is completed.
This Letter of Transmittal is to be used by stockholders of Shelby Williams
Industries, Inc. if certificates for Shares (as such term is defined below)
are to be forwarded herewith or, unless an Agent's Message (as defined in
Instruction 2 below) is utilized, if delivery of Shares is to be made by book-
entry transfer to an account maintained by the Depositary at the Book-Entry
Transfer Facility (as defined in, and pursuant to the procedures set forth in,
Section 3 of the Offer to Purchase). Stockholders who deliver Shares by book-
entry transfer are referred to herein as "Book-Entry Stockholders" and other
stockholders who deliver Shares are referred to herein as "Certificate
Stockholders."
Stockholders whose certificates for Shares are not immediately available or
who cannot deliver either the certificates for, or a Book-Entry Confirmation
(as defined in Section 3 of the Offer to Purchase) with respect to, their
Shares and all other documents required hereby to the Depositary prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase) must tender
their Shares pursuant to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS
TO THE BOOK-ENTRY TRANSFER FACILITY WILL NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
<PAGE>
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
THE DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE
THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY TRANSFER FACILITY MAY
DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution ______________________________________________
Account Number __________________Transaction Code Number ___________________
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s) _____________________________________________
Window Ticket Number (if any)
----------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
--------------------------------------
Name of Institution that Guaranteed Delivery
-------------------------------------------
If delivered by Book-Entry Transfer, check box: [_]
Account Number __________________Transaction Code Number ___________________
DESCRIPTION OF SHARES TENDERED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Name(s) and Address(es) of Registered Holder(s)
(Please fill in, if blank, exactly as name(s) Shares Tendered
appear(s) on Share certificate(s)) (Attach additional signed list if necessary)
- ---------------------------------------------------------------------------------------------------
Total Number of
Shares Number
Certificate Represented of Shares
Number(s)(/1/) by Certificate(s) Tendered(/2/)
----------------------------------------------
<S> <C> <C> <C>
----------------------------------------------
----------------------------------------------
----------------------------------------------
<CAPTION>
Total Shares
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) Need not be completed by Book-Entry Stockholders.
(2) Unless otherwise indicated, it will be assumed that all Shares
represented by Share certificates delivered to the Depositary are being
tendered hereby. See Instruction 4.
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE
INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL CAREFULLY.
2
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to SY Acquisition, Inc., a Delaware
corporation ("Purchaser") and a direct wholly owned subsidiary of Falcon
Products, Inc., a Delaware corporation ("Parent"), the above-described shares
of common stock, par value $.05 per share (the "Shares"), of Shelby Williams
Industries, Inc., a Delaware corporation (the "Company"), pursuant to
Purchaser's offer to purchase all of the outstanding Shares at a price of
$16.50 per Share, net to the seller in cash, without interest thereon (the
"Offer Price") upon the terms and subject to the conditions set forth in the
Offer to Purchase dated May 12, 1999 and in this Letter of Transmittal (which,
together with any amendments or supplements thereto or hereto, collectively
constitute the "Offer"). The undersigned understands that Purchaser reserves
the right to transfer or assign, in whole at any time, or in part from time to
time, to one or more of its affiliates, the right to purchase all or any
portion of the Shares tendered pursuant to the Offer, but any such transfer or
assignment will not relieve Purchaser of its obligations under the Offer and
will in no way prejudice the rights of tendering stockholders to receive
payment for Shares validly tendered and accepted for payment pursuant to the
Offer. Receipt of the Offer is hereby acknowledged.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of May 5, 1999 (the "Merger Agreement"), by and among Parent, Purchaser and
the Company.
Upon the terms and subject to the conditions of the Offer (and if the Offer
is extended or amended, the terms of any such extension or amendment), subject
to, and effective upon, acceptance for payment of, and payment for, the Shares
tendered herewith in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, Purchaser all
right, title and interest in and to all the Shares that are being tendered
hereby (and any and all non-cash dividends, distributions, rights, other Shares
or other securities issued or issuable in respect thereof on or after May 5,
1999 (collectively, "Distributions")) and irrevocably constitutes and appoints
the Depositary the true and lawful agent and attorney-in-fact of the
undersigned with respect to such Shares (and all Distributions), with full
power of substitution (such power of attorney being deemed to be an irrevocable
power coupled with an interest), to (i) deliver certificates for such Shares
(and any and all Distributions), or transfer ownership of such Shares (and any
and all Distributions) on the account books maintained by the Book-Entry
Transfer Facility, together, in any such case, with all accompanying evidences
of transfer and authenticity, to or upon the order of Purchaser, (ii) present
such Shares (and any and all Distributions) for transfer on the books of the
Company, and (iii) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares (and any and all Distributions), all in
accordance with the terms of the Offer.
By executing this Letter of Transmittal, the undersigned hereby irrevocably
appoints Franklin A. Jacobs and Michael J. Dreller in their respective
capacities as officers of Purchaser, and any individual who shall thereafter
succeed to any such office of Purchaser, and each of them, as the attorneys-in-
fact and proxies of the undersigned, each with full power of substitution and
resubstitution, to vote at any annual or special meeting of the Company's
stockholders or any adjournment or postponement thereof or otherwise in such
manner as each such attorney-in-fact and proxy or his substitute shall in his
sole discretion deem proper with respect to, to execute any written consent
concerning any matter as each such attorney-in-fact and proxy or his substitute
shall in his sole discretion deem proper with respect to, and to otherwise act
as each such attorney-in-fact and proxy or his substitute shall in his sole
discretion deem proper with respect to, all of the Shares (and any and all
Distributions) tendered hereby and accepted for payment by Purchaser. This
appointment will be effective if and when, and only to the extent that,
Purchaser accepts such Shares for payment pursuant to the Offer. This power of
attorney and proxy are irrevocable and are granted in consideration of the
acceptance for payment of such Shares in accordance with the terms of the
Offer. Such acceptance for payment shall, without further action, revoke any
prior powers of attorney and proxies granted by the undersigned at any time
with respect to such Shares (and any and all Distributions), and no subsequent
powers of attorney, proxies, consents or revocations may be given by the
undersigned with respect thereto (and, if given, will not be deemed effective).
Purchaser reserves the right to require that, in order for Shares (or other
Distributions) to be deemed validly tendered,
3
<PAGE>
immediately upon Purchaser's acceptance for payment of such Shares, Purchaser
must be able to exercise full voting, consent and other rights with respect to
such Shares (and any and all Distributions), including voting at any meeting
of the Company's stockholders.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and all Distributions, that the undersigned owns the Shares
tendered hereby within the meaning of Rule 14e-4 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), that the
tender of the tendered Shares complies with Rule 14e-4 under the Exchange Act,
and that when the same are accepted for payment by Purchaser, Purchaser will
acquire good, marketable and unencumbered title thereto and to all
Distributions, free and clear of all liens, restrictions, charges and
encumbrances and the same will not be subject to any adverse claims. The
undersigned will, upon request, execute and deliver any additional documents
deemed by the Depositary or Purchaser to be necessary or desirable to complete
the sale, assignment and transfer of the Shares tendered hereby and all
Distributions. In addition, the undersigned shall remit and transfer promptly
to the Depositary for the account of Purchaser ail Distributions in respect of
the Shares tendered hereby, accompanied by appropriate documentation of
transfer, and, pending such remittance and transfer or appropriate assurance
thereof, Purchaser shall be entitled to all rights and privileges as owner of
each such Distribution and may withhold the entire purchase price of the
Shares tendered hereby or deduct from such purchase price, the amount or value
of such Distribution as determined by Purchaser in its sole discretion.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, executors, administrators, personal
representatives, trustees in bankruptcy, successors and assigns of the
undersigned. Except as stated in the Offer to Purchase this tender is
irrevocable.
The undersigned understands that the valid tender of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase and in
the Instructions hereto will constitute a binding agreement between the
undersigned and Purchaser upon the terms and subject to the conditions of the
Offer (and if the Offer is extended or amended, the terms or conditions of any
such extension or amendment). Without limiting the foregoing, if the price to
be paid in the Offer is amended in accordance with the Merger Agreement, the
price to be paid to the undersigned will be the amended price notwithstanding
the fact that a different price is stated in this Letter of Transmittal. The
undersigned recognizes that under certain circumstances set forth in the Offer
to Purchase, Purchaser may not be required to accept for payment any of the
Shares tendered hereby.
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the purchase price of all Shares purchased and/or return
any certificates for Shares not tendered or accepted for payment in the
name(s) of the registered holder(s) appearing above under "Description of
Shares Tendered." Similarly, unless otherwise indicated under "Special
Delivery Instructions," please mail the check for the purchase price of all
Shares purchased and/or return any certificates for Shares not tendered or not
accepted for payment (and any accompanying documents, as appropriate) to the
address(es) of the registered holder(s) appearing above under "Description of
Shares Tendered." In the event that the boxes entitled "Special Payment
Instructions" and "Special Delivery Instructions" are both completed, please
issue the check for the purchase price of all Shares purchased and/or return
any certificates evidencing Shares not tendered or not accepted for payment
(and any accompanying documents, as appropriate) in the name(s) of, and
deliver such check and/or return any such certificates (and any accompanying
documents, as appropriate) to, the person(s) so indicated. Unless otherwise
indicated herein in the box entitled "Special Payment Instructions," please
credit any Shares tendered herewith by book-entry transfer that are not
accepted for payment by crediting the account at the Book-Entry Transfer
Facility designated above. The undersigned recognizes that Purchaser has no
obligation, pursuant to the "Special Payment Instructions," to transfer any
Shares from the name of the registered holder thereof if Purchaser does not
accept for payment any of the Shares so tendered.
[_]CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN HAVE
BEEN LOST, DESTROYED OR STOLEN AND SEE INSTRUCTION 11.
Number of Shares represented by lost, destroyed or stolen certificates:
-----------------------------
4
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
(See Instructions 1, 5, 6 and 7)
To be completed ONLY if the check for the purchase price of Shares accepted for
payment is to be issued in name of someone other than the undersigned, if
certificates for Shares not tendered or not accepted for payment are to be
issued in the name of someone other than the undersigned or if Shares tendered
hereby and delivered by book-entry transfer that are not accepted for payment
are to be returned by credit to an account maintained at the Book-Entry
Transfer Facility other than the account indicated above.
Issue check and/or Share certificate(s) to:
Name
-------------------------------
(Please Print)
Address
------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
- --------------------------------------------------------------------------------
(Taxpayer Identification or
Social Security Number)
(See Substitute Form W-9)
Credit Shares delivered by book-entry transfer and not purchased to the
following Book-Entry Transfer Facility account:
- --------------------------------------------------------------------------------
(Account Number)
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 5, 6 and 7)
To be completed ONLY if certificates for Shares not tendered or not accepted
for payment and/or the check for the purchase price of Shares accepted for
payment is to be sent to someone other than the undersigned or to the
undersigned at an address other than that shown under "Description of Shares
Tendered."
Mail check and/or Share certificates to:
Name
-------------------------------
(Please Print)
Address
------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
- --------------------------------------------------------------------------------
(Taxpayer Identification or
Social Security Number)
(See Substitute Form W-9)
5
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Offer
1. Guarantee of Signatures. No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this Instruction 1, includes
any participant in any of the Book-Entry Transfer Facility's systems whose name
appears on a security position listing as the owner of the Shares) of Shares
tendered herewith, unless such registered holder(s) has completed either the
box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" on the Letter of Transmittal or (b) if such Shares are
tendered for the account of a financial institution (including most commercial
banks, savings and loan associations and brokerage houses) that is a
participant in the Security Transfer Agent's Medallion Program, the New York
Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program (each, an "Eligible Institution"). In all other cases, all
signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 5.
2. Delivery of Letter of Transmittal and Shares; Guaranteed Delivery
Procedures. This Letter of Transmittal is to be completed by stockholders of
the Company either if Share certificates are to be forwarded herewith or,
unless an Agent's Message is utilized, if delivery of Shares is to be made by
book-entry transfer pursuant to the procedures set forth herein and in Section
3 of the Offer to Purchase. For a stockholder to validly tender Shares pursuant
to the Offer, either (a) a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), together with any required signature
guarantees or an Agent's Message (in connection with book-entry transfer) and
any other required documents, must be received by the Depositary at one of its
addresses set forth herein prior to the Expiration Date and either (i)
certificates for tendered Shares must be received by the Depositary at one of
such addresses prior to the Expiration Date or (ii) Shares must be delivered
pursuant to the procedures for book-entry transfer set forth herein and in
Section 3 of the Offer to Purchase and a Book-Entry Confirmation must be
received by the Depositary prior to the Expiration Date or (b) the tendering
stockholder must comply with the guaranteed delivery procedures set forth
herein and in Section 3 of the Offer to Purchase.
Stockholders whose certificates for Shares are not immediately available or
who cannot deliver their certificates and all other required documents to the
Depositary prior to the Expiration Date or who cannot comply with the book-
entry transfer procedures on a timely basis may tender their Shares by properly
completing and duly executing the Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedure set forth herein and in Section 3 of the Offer to
Purchase.
Pursuant to such guaranteed delivery procedures, (i) such tender must be
made by or through an Eligible Institution, (ii) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form provided by
Purchaser, must be received by the Depositary prior to the Expiration Date and
(iii) the certificates for all tendered Shares, in proper form for transfer (or
a Book-Entry Confirmation with respect to all tendered Shares), together with a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof), with any required signature guarantees, or, in the case of a book-
entry transfer, an Agent's Message, and any other required documents must be
received by the Depositary within three trading days after the date of
execution of such Notice of Guaranteed Delivery. A "trading day" is any day on
which the New York Stock Exchange is open for business.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares, that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that Purchaser
may enforce such agreement against the participant.
The signatures on this Letter of Transmittal cover the Shares tendered
hereby.
THE METHOD OF DELIVERY OF THE SHARES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER
FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. THE SHARES
WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE
6
<PAGE>
DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY
CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. All tendering stockholders, by executing
this Letter of Transmittal (or facsimile thereof), waive any right to receive
any notice of acceptance of their Shares for payment.
3. Inadequate Space. If the space provided herein under "Description of
Shares Tendered" is inadequate, the number of Shares tendered and the Share
certificate numbers with respect to such Shares should be listed on a separate
signed schedule attached hereto.
4. Partial Tenders. (Not applicable to stockholders who tender by book-
entry transfer). If fewer than all the Shares evidenced by any Share
certificate delivered to the Depositary herewith are to be tendered hereby,
fill in the number of Shares that are to be tendered in the box entitled
"Number of Shares Tendered." In any such case, new certificate(s) for the
remainder of the Shares that were evidenced by the old certificates will be
sent to the registered holder, unless otherwise provided in the appropriate
box on this Letter of Transmittal, as soon as practicable after the Expiration
Date or the termination of the Offer. All Shares represented by certificates
delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.
5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written
on the face of the certificate(s) without alteration, enlargement or any
change whatsoever.
If any of the Shares tendered hereby are held of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any Share certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, such person should so indicate when signing, and
proper evidence satisfactory to Purchaser of the authority of such person so
to act must be submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of Share certificates or
separate stock powers are required unless payment or certificates for Shares
not tendered or not accepted for payment are to be issued in the name of a
person other than the registered holder(s). Signatures on any such Share
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares evidenced by certificates listed and
transmitted hereby, the Share certificates must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on the Share certificates. Signature(s) on any
such Share certificates or stock powers must be guaranteed by an Eligible
Institution.
6. Stock Transfer Taxes. Except as otherwise provided in this Instruction
6, Purchaser will pay all stock transfer taxes with respect to the transfer
and sale of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price of any Shares purchased is to be made to, or if
certificates for Shares not tendered or not accepted for payment are to be
registered in the name of, any person other than the registered holder(s), or
if tendered certificates are registered in the name of any person other than
the person(s) signing this Letter of Transmittal, the amount of any stock
transfer taxes (whether imposed on the registered holder(s) or
7
<PAGE>
such other person) payable on account of the transfer to such other person
will be deducted from the purchase price of such Shares purchased unless
evidence satisfactory to Purchaser of the payment of such taxes, or exemption
therefrom, is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the share certificates evidencing the
shares tendered hereby.
7. Special Payment and Delivery Instructions. If a check for the purchase
price of any Shares accepted for payment is to be issued in the name of,
and/or Share certificates for Shares not accepted for payment or not tendered
are to be issued in the name of and/or returned to, a person other than the
signer of this Letter of Transmittal or if a check is to be sent, and/or such
certificates are to be returned, to a person other than the signer of this
Letter of Transmittal, or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed. Any
stockholder(s) delivering Shares by book-entry transfer may request that
Shares not purchased be credited to such account maintained at the Book-Entry
Transfer Facility as such stockholder(s) may designate in the box entitled
"Special Payment Instructions." If no such instructions are given, any such
Shares not purchased will be returned by crediting the account at the Book-
Entry Transfer Facility designated above as the account from which such Shares
were delivered.
8. Requests for Assistance or Additional Copies. Questions and requests for
assistance or additional copies of the Offer to Purchase, this Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
directed to the Information Agent at its address and phone numbers set forth
below, or from brokers, dealers, commercial banks or trust companies.
9. Waiver of Conditions. Subject to the Merger Agreement, Purchaser
reserves the absolute right in its sole discretion to waive, at any time or
from time to time, any of the specified conditions of the Offer (other than
the Minimum Condition), in whole or in part, in the case of any Shares
tendered.
10. Backup Withholding. In order to avoid "backup withholding" of federal
income tax on payments of cash pursuant to the Offer, a stockholder
surrendering Shares in the Offer must, unless an exemption applies, provide
the Depositary with such stockholder's correct Taxpayer Identification Number
("TIN") on Substitute Form W-9 in this Letter of Transmittal and certify,
under penalties of perjury, that such TIN is correct and that such stockholder
is not subject to backup withholding.
Backup withholding is not an additional income tax. Rather, the amount of
the backup withholding can be credited against the federal income tax
liability of the person subject to the backup withholding, provided that the
required information is given to the IRS. If backup withholding results in an
overpayment of tax, a refund can be obtained by the stockholder upon filing an
income tax return.
The stockholder is required to give the Depositary the TIN (i.e., Social
Security Number or Employer Identification Number) of the record owner of the
Shares. If the Shares are held in more than one name or are not in the name of
the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is
checked, the stockholder or other payee must also complete the Certificate of
Awaiting Taxpayer Identification Number below in order to avoid backup
withholding. Notwithstanding that the box in Part 3 is checked and the
Certificate of Awaiting Taxpayer Identification Number is completed, the
Depositary will withhold 31% on all payments made prior to the time a properly
certified TIN is provided to the Depositary. However, such amounts will be
refunded to such stockholder if a TIN is provided to the Depositary within 60
days.
Certain stockholders (including, among others, all corporations and certain
foreign individuals and entities) are not subject to backup withholding.
Noncorporate foreign stockholders should complete and sign the main
8
<PAGE>
signature form and a Form W-8, Certificate of Foreign Status, a copy of which
may be obtained from the Depositary, in order to avoid backup withholding. See
the enclosed "Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9" for more instructions.
11. Lost, Destroyed or Stolen Share Certificates. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the stockholder should
promptly notify the Depositary by checking the box immediately preceding the
special payment/special delivery instructions and indicating the number of
Shares lost. The stockholder will then be instructed as to the steps that must
be taken in order to replace the Share certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen Share certificates have been followed.
Important: This Letter of Transmittal or a manually signed facsimile hereof
(together with Certificates or a Book-Entry Confirmation for Shares and any
required signature guarantees, or, in the case of a Book-Entry Transfer, an
Agent's Message, and any other required documents), or a Notice of Guaranteed
Delivery, must be received by the Depositary on or prior to the Expiration
Date.
IMPORTANT TAX INFORMATION
Under federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary (as payor) with
such stockholder's correct taxpayer identification number on Substitute Form
W-9 below. If such stockholder is an individual, the Taxpayer Identification
Number is his or her Social Security Number. If a tendering stockholder is
subject to backup withholding, such stockholder must cross out item (2) of the
Certification box on the Substitute Form W-9. If the Depositary is not
provided with the correct Taxpayer Identification Number, the stockholder may
be subject to a $50 penalty imposed by the Internal Revenue Service. In
addition, payments that are made to such stockholder with respect to Shares
purchased pursuant to the Offer may be subject to backup withholding.
Certain stockholders (including, among others, all corporations, and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, that stockholder must submit a statement, signed under
penalties of perjury, attesting to that individual's exempt status. Such
statements can be obtained from the Depositary. Exempt stockholders, other
than foreign individuals, should furnish their TIN, write "Exempt" on the face
of the Substitute Form W-9 below, and sign, date and return the Substitute
Form W-9 to the Depositary. See the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional
instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the stockholder. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
Purpose of Substitute Form W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of such stockholder's correct Taxpayer
Identification Number by completing the form contained herein certifying that
the Taxpayer Identification Number provided on Substitute Form W-9 is correct
(or that such stockholder is awaiting a Taxpayer Identification Number).
9
<PAGE>
What Number to Give the Depositary
The stockholder is required to give the Depositary the Social Security
Number or Employer Identification Number of the record owner of the Shares. If
the Shares are in more than one name or are not in the name of the actual
owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidance on which
number to report. If the tendering stockholder has not been issued a TIN and
has applied for a number or intends to apply for a number in the near future,
such stockholder should write "Applied For" in the space provided for in the
TIN in Part 1, and sign and date the Substitute Form W-9. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN within 60
days, the Depositary will withhold 31% on all payments of the purchase price
until a TIN is provided to the Depositary.
10
<PAGE>
IMPORTANT
STOCKHOLDER: SIGN HERE AND COMPLETE
SUBSTITUTE FORM W-9 ON FOLLOWING PAGE
------------------------------------------
------------------------------------------
(Signature(s) of Stockholder(s))
Dated: , 1999
-------------
(Must be signed by registered holder(s) exactly as name(s) appear(s) on the
Share certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting in
a fiduciary or representative capacity, please provide the following
information and see Instruction 5.)
Name(s)
--------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print)
Name of Firm
-----------------------------------------------------------------
Capacity (full title)
-------------------------------------------------------------
(see Instruction 5)
Address
--------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number
--------------------------------------------------
Taxpayer Identification or Social Security Number
--------------------------------------
(See Substitute Form W-9)
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 5)
Authorized Signature
-----------------------------------------------------------
- --------------------------------------------------------------------------------
Name(s)
--------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print)
Title
-----------------------------------------------------------------------
Name of Firm
-----------------------------------------------------------------
Address
---------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number
--------------------------------------------------
11
<PAGE>
PAYER'S NAME: IBJ Whitehall Bank & Trust Company
- --------------------------------------------------------------------------------
Part 1--PLEASE PROVIDE Social Security Number
YOUR TIN IN THE BOX AT (If awaiting TIN write
RIGHT AND CERTIFY BY "Applied For") or
SIGNING AND DATING BELOW. //
---------------------------
Employer Identification
Number
(If awaiting TIN write
"Applied For")
------------------------------------------------------------
Part 2--Certificate--Check under penalties of perjury, I
certify that: (1) The number shown on this form is my
correct TIN (or I am waiting for a number to be issued
for me), and (2) I am not subject to backup withholding
because: (a) I am exempt from backup withholding, or (b)
I have not been notified by the Internal Revenue Service
(the "IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends,
or (c) the IRS has notified me that I am no longer
subject to backup withholding.
------------------------------------------------------------
CERTIFICATION INSTRUCTIONS. You must
cross out item (2) above if you have
been notified by the IRS that you are
currently subject to backup withholding
because of under reporting interest or
dividends on your tax returns. However,
if after being notified by the IRS that
you are subject to backup withholding,
you receive another notification from
the IRS that you are no longer subject
to backup withholding, do not cross out
such item (2). (Also see instructions in Part 3--
the enclosed Guidelines). Awaiting
TIN (right
arrow) [_]
SIGNATURE (right arrow) DATE (right arrow)
1999
NOTE: Failure to complete and return this Form W-9 may result in backup
withholding of 31% of any cash payments made to you pursuant to the
Offer. Please review the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional
details.
You must complete the following certificate if you checked the box in part 3 of
the Substitute Form W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER ("TIN")
I certify under penalties of perjury that a TIN has not been issued to me,
and either (1) I have mailed or delivered an application to receive a TIN to
the appropriate Internal Revenue Service Center or Social Security
Administration Office or (2) I intend to mail or deliver an application in
the near future. I understand that if I do not provide a TIN to the
Depositary by the time of payment, 31% of all reportable payments made to me
thereafter will be withheld, but that such amounts will be refunded to me if
I provide a certified TIN to the Depositary within sixty (60) days.
Signature Date , 1999
-------------------------------------
--------------
SUBSTITUTE
Form W-9
Department of the
Treasury
Internal Revenue
Service
Payor's Request
for
Taxpayer
Identification
Number (TIN)
12
<PAGE>
Questions and requests for assistance or additional copies of the Offer to
Purchase, this Letter of Transmittal and other tender offer materials may be
directed to the Information Agent at its address and telephone numbers set
forth below:
The Information Agent for the Offer is:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Banks And Brokers Call Collect (212) 269-5550
All Others Call Toll Free (800) 735-3591
The Dealer Manager for the Offer is:
Donaldson, Lufkin & Jenrette
200 West Madison Street, Suite 1700
Chicago, Illinois 60606-3489
Toll Free: (877) 866-0927
(312) 345-7558
13
<PAGE>
Exhibit 3
AGREEMENT AND PLAN OF MERGER
AMONG
FALCON PRODUCTS, INC.
SY ACQUISITION, INC.
AND
SHELBY WILLIAMS INDUSTRIES, INC.
Dated as of May 5, 1999
<PAGE>
TABLE OF CONTENTS
AGREEMENT AND PLAN OF MERGER
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I THE OFFER.................................................................................. 1
Section 1.1 The Offer.................................................................................. 1
Section 1.2 Shelby Williams Actions.................................................................... 3
Section 1.3 Directors.................................................................................. 4
ARTICLE II THE MERGER................................................................................. 5
Section 2.1 The Merger................................................................................. 5
Section 2.2 Closing.................................................................................... 5
Section 2.3 Effective Time............................................................................. 5
Section 2.4 Effects of the Merger...................................................................... 6
Section 2.5 Certificate of Incorporation; Bylaws....................................................... 6
Section 2.6 Directors and Officers..................................................................... 6
ARTICLE III MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF SHARES IN THE MERGER; DISSENTING SHARES 6
Section 3.1 Consideration for the Merger; Conversion or Cancellation of Shares in the Merger........... 6
Section 3.2 Stockholders Meeting....................................................................... 7
Section 3.3 Payment for Shares in the Merger........................................................... 8
Section 3.4 Transfer of Shares After the Effective Time................................................ 9
Section 3.5 Stock Options and Associate Purchase Plan.................................................. 9
Section 3.6 Dissenting Shares.......................................................................... 9
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SHELBY WILLIAMS.......................................... 10
Section 4.1 Organization, Qualification, Etc........................................................... 10
Section 4.2 Capital Stock.............................................................................. 11
Section 4.3 Corporate Authority Relative to this Agreement; No Violation; No Conflict.................. 11
Section 4.4 Reports and Financial Statements; Corporate Records........................................ 12
Section 4.5 No Undisclosed Liabilities................................................................. 13
Section 4.6 No Violation of Law........................................................................ 13
Section 4.7 Environmental Laws and Regulations......................................................... 13
Section 4.8 Employee Matters; ERISA.................................................................... 13
Section 4.9 Absence of Certain Changes or Events....................................................... 15
Section 4.10 Investigations; Litigation................................................................. 15
Section 4.11 Proxy Statement; Offer Documents; Schedule 14D-9; Proxy Statement.......................... 16
Section 4.12 Y2K Compliance............................................................................. 16
Section 4.13 Takeover Laws.............................................................................. 16
Section 4.14 Tax Matters................................................................................ 17
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
Section 4.15 Opinion of Financial Advisor............................................................... 18
Section 4.16 Required Vote of Shelby Williams Stockholders.............................................. 18
Section 4.17 Labor Matters.............................................................................. 18
Section 4.18 Certain Agreements......................................................................... 19
Section 4.19 Title to Assets; Liens..................................................................... 19
Section 4.20 Insurance.................................................................................. 20
Section 4.21 Intellectual Property...................................................................... 20
ARTICLE V REPRESENTATIONS AND WARRANTIES OF FALCON AND SUB........................................... 21
Section 5.1 Organization, Qualification, Etc........................................................... 21
Section 5.2 Corporate Authority Relative to this Agreement; No Violation; No Conflict.................. 22
Section 5.3 Financing.................................................................................. 22
Section 5.4 Offer Documents; Schedule 14D-9; Proxy Statement........................................... 23
Section 5.5 Lack of Ownership of Shares................................................................ 23
Section 5.6 Solvency................................................................................... 23
ARTICLE VI COVENANTS AND AGREEMENTS................................................................... 23
Section 6.1 Conduct of Business by Shelby Williams..................................................... 23
Section 6.2 Investigation.............................................................................. 26
Section 6.3 Obligations of Falcon and Sub.............................................................. 26
Section 6.4 [Intentionally Omitted].................................................................... 27
Section 6.5 Employee Benefit Plans..................................................................... 27
Section 6.6 Filings; Other Action...................................................................... 27
Section 6.7 Further Assurances......................................................................... 28
Section 6.8 No Solicitation............................................................................ 28
Section 6.9 Public Announcements....................................................................... 30
Section 6.10 Indemnification and Insurance.............................................................. 30
Section 6.11 Additional Reports......................................................................... 31
Section 6.12 Notifications.............................................................................. 31
Section 6.13 Employment Agreements...................................................................... 31
Section 6.14 Termination of ESOP........................................................................ 32
ARTICLE VII CONDITIONS TO THE MERGER................................................................... 32
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger................................. 32
ARTICLE VIII TERMINATION, WAIVER, AMENDMENT AND CLOSING................................................. 32
Section 8.1 Termination or Abandonment................................................................. 32
Section 8.2 Effect of Termination...................................................................... 34
Section 8.3 Amendment or Supplement.................................................................... 35
Section 8.4 Extension of Time, Waiver, Etc............................................................. 35
ARTICLE IX MISCELLANEOUS.............................................................................. 35
Section 9.1 No Survival of Representations and Warranties.............................................. 35
Section 9.2 Expenses................................................................................... 35
Section 9.3 Counterparts; Effectiveness................................................................ 36
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
Section 9.4 Governing Law.............................................................................. 36
Section 9.5 Notices.................................................................................... 36
Section 9.6 Assignment; Binding Effect................................................................. 37
Section 9.7 Severability............................................................................... 37
Section 9.8 Enforcement of Agreement................................................................... 37
Section 9.9 Miscellaneous.............................................................................. 37
Section 9.10 Headings................................................................................... 37
Section 9.11 Certain Defined Terms...................................................................... 38
Section 9.12 Finders or Brokers......................................................................... 38
ANNEX A Certain Conditions of the Offer....................................................................... 1
</TABLE>
(iii)
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of May 5, 1999 (this
"Agreement"), is among FALCON PRODUCTS, INC., a Delaware corporation ("Falcon"),
SY ACQUISITION, INC., a Delaware corporation and a wholly-owned subsidiary of
Falcon ("Sub"), and SHELBY WILLIAMS INDUSTRIES, INC., a Delaware corporation
("Shelby Williams").
WHEREAS, the Board of Directors of each of Falcon, Sub, and Shelby
Williams, has, subject to the conditions set forth in this Agreement,
unanimously determined that it is in the best interests of its stockholders for
Sub to acquire Shelby Williams on the terms and subject to the conditions set
forth herein; and
WHEREAS, in furtherance thereof, it is proposed that Sub shall make a cash
tender offer (the "Offer") to acquire all of the outstanding shares (the
"Shares") of Common Stock, par value $ .05 per share (the "Shelby Williams
Common Stock"), of Shelby Williams, at a price of $16.50 per share (such amount,
or any greater amount per share paid pursuant to the Offer, being hereinafter
referred to as the "Per Share Amount"), net to the seller in cash, in accordance
with the terms and subject to the conditions of this Agreement; and
WHEREAS, concurrently with the execution and delivery of this Agreement,
and as a condition to Falcon's and Sub's willingness to enter into this
Agreement, Falcon and Sub have entered into separate Stockholder Agreements,
dated as of the date hereof (the "Stockholder Agreements"), with each of the
Principal Stockholders (as hereinafter defined), pursuant to which each
Principal Stockholder has agreed, among other things, to tender all Shares owned
by such Principal Stockholder pursuant to the Offer and to vote such Shares in
favor of the Merger; and
WHEREAS, the parties desire to make certain representations, warranties,
covenants and agreements in connection with the Offer and the Merger (as
hereinafter defined) and also to prescribe various conditions to the Offer and
the Merger.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
THE OFFER
SECTION 1.1 THE OFFER.
----------------------
(a) Unless this Agreement has been terminated in accordance with Section
8.1, Sub shall commence, within the meaning of Rule 14d-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Offer as promptly as
practicable (but in no event later than the fifth business day from and
including the date of initial public announcement of this Agreement). Sub shall
accept for payment Shares which have been validly tendered and not withdrawn
pursuant to the Offer following expiration of the Offer promptly following the
time that all conditions to the Offer shall have been satisfied or waived by
Sub, except that the
<PAGE>
Minimum Condition (as hereinafter defined) may not be waived. The obligation of
Sub to accept for payment, purchase and pay for Shares tendered pursuant to the
Offer shall be subject only to the conditions set forth in Annex A and to the
-------
further condition that a number of Shares which, together with any Shares
beneficially owned by Falcon or Sub, represent not less than a majority of the
Shares then outstanding on a Fully Diluted Basis (as hereinafter defined) shall
have been validly tendered and not withdrawn prior to the final expiration date
of the Offer (the "Minimum Condition"). "Fully Diluted Basis" means, as of any
time, all of the Shares plus all shares of Shelby Williams Common Stock required
to be issued or issuable pursuant to options, warrants, securities or
obligations of any kind under employee stock or similar benefit plans or
otherwise, whether or not vested or exercisable. Unless previously approved by
Shelby Williams in writing, no change in the Offer may be made (i) which
decreases the price per Share payable in the Offer, (ii) which changes the form
of consideration to be paid in the Offer, (iii) which reduces the maximum number
of Shares to be purchased in the Offer or the Minimum Condition, (iv) which
imposes conditions to the Offer in addition to those set forth in Annex A hereto
-------
or which modifies the conditions set forth in Annex A in a manner adverse to the
-------
holders of Shares, (v) which amends any other term of the Offer in a manner
adverse to the holders of the Shares, or (vi) extends the expiration of the
Offer beyond the scheduled expiration date (the initial scheduled expiration
date being 20 business days following commencement of the Offer); provided,
however, that notwithstanding the foregoing, subject to Section 8.1, if the
conditions set forth in Annex A are not satisfied or, to the extent permitted by
-------
this Agreement, waived by Falcon, Falcon will extend the Offer from time to time
for the shortest time periods permitted by law and which it reasonably believes
are necessary until the consummation of the Offer; and provided further, that
Falcon and Sub shall have the right to extend the Offer for up to ten business
days after the initial scheduled expiration date notwithstanding the prior
satisfaction of the conditions set forth in Annex A. Subject to the terms and
-------
conditions of the Offer and this Agreement, Sub shall, and Falcon shall cause
Sub to, pay for all Shares validly tendered and not withdrawn pursuant to the
Offer that Sub becomes obligated to purchase pursuant to the Offer as soon as
practicable after the expiration of the Offer.
(b) As soon as practicable on the date of commencement of the Offer,
Falcon and Sub shall file with the Securities and Exchange Commission (the
"SEC") a Tender Offer Statement on Schedule 14D-1 with respect to the Offer
(together with any supplement or amendments thereto, the "Schedule 14D-1"). The
Schedule 14D-1 will include, as exhibits, the Offer to Purchase, form of letter
of transmittal and summary advertisement (collectively, together with any
amendments and supplements thereto, the "Offer Documents"). The Offer Documents
will comply in all material respects as to form with the requirements of
applicable federal securities laws. Falcon, Sub and Shelby Williams each agree
promptly to correct any information provided by them for use in the Offer
Documents if and to the extent that it shall have become false or misleading in
any material respect and Falcon and Sub agree to take all steps necessary to
cause the Offer Documents and any amendments or supplements thereto to be filed
with the SEC and to be disseminated to holders of Shares, in each case as and to
the extent required by applicable federal securities laws. Shelby Williams and
its counsel shall be given a reasonable opportunity to review and comment upon
the Offer Documents and any amendments thereto in each case prior to the filing
thereof with the SEC. Falcon and Sub agree to provide Shelby Williams and its
counsel a written copy of any comments or other communications (whether written
or oral) that Falcon, Sub or their counsel may receive from time to time from
the SEC or its Staff with respect to the Offer Documents as soon as practicable
after receipt thereof.
2
<PAGE>
SECTION 1.2 SHELBY WILLIAMS ACTIONS.
------------------------------------
(a) Shelby Williams hereby approves of and consents to the Offer and
represents that its Board of Directors, including all of the disinterested
directors, at a meeting duly called and held, has, subject to the terms and
conditions set forth herein, (i) approved this Agreement and the transactions
contemplated hereby (including, without limitation, the Offer, the Merger, the
Stockholder Agreements, and the transactions contemplated thereby), and such
approval constitutes approval of this Agreement and the transactions
contemplated hereby (including, without limitation, the Offer, the Merger, the
Stockholder Agreements, and the transactions contemplated thereby), for purposes
of Section 203 of the Delaware General Corporation Law, as amended (the "DGCL"),
such that it will not apply to the transactions contemplated by this Agreement
(including, without limitation, the Offer, the Merger, the Stockholder
Agreements, and the transactions contemplated thereby); (ii) unanimously
determined that each of the Offer and the Merger are fair to and in the best
interests of Shelby Williams and Shelby Williams's stockholders; and (iii)
resolved to recommend that the stockholders of Shelby Williams accept the Offer,
tender their Shares thereunder to Sub and approve and adopt this Agreement and
the Merger; provided, that such recommendation may be withdrawn, modified or
amended if the Board of Directors of Shelby Williams determines in good faith,
based on advice of its outside counsel, that such action is necessary in order
for the Board to comply with its obligations or duties to Shelby Williams or its
stockholders under applicable law. Shelby Williams consents to the inclusion of
such recommendation and approval in the Offer Documents, subject to Shelby
Williams's right to withdraw, modify or amend its recommendation.
(b) Shelby Williams hereby agrees to file with the SEC, on the date the
Schedule 14D-1 is filed with the SEC, a Solicitation/Recommendation Statement on
Schedule 14D-9 (together with any amendments or supplements thereto, the
"Schedule 14D-9") containing the recommendation described in Section 1.2(a). The
Schedule 14D-9 will comply in all material respects as to form with the
requirements of applicable federal securities laws. Shelby Williams, Falcon, and
Sub each agree promptly to correct any information provided by them for use in
the Schedule 14D-9 if and to the extent that it shall have become false or
misleading in any material respect and Shelby Williams further agrees to take
all steps necessary to cause the Schedule 14D-9 and any amendments or
supplements thereto to be filed with the SEC and disseminated to holders of
Shares, in each case as and to the extent required by applicable federal
securities laws. Notwithstanding anything to the contrary in this Agreement, the
Board of Directors may withdraw, modify or amend its recommendation if the Board
of Directors of Shelby Williams reasonably determines in good faith, based on
advice of its outside counsel, that such action is necessary in order for the
Board to comply with its obligations or duties to Shelby Williams or its
stockholders under applicable law. Falcon and its counsel shall be given a
reasonable opportunity to review and comment upon the Schedule 14D-9 and any
amendments thereto in each case prior to the filing thereof with the SEC. Shelby
Williams agrees to provide Falcon and Sub and their counsel a written copy of
any comments or other communications (whether written or oral) that Shelby
Williams or its counsel may receive from time to time from the SEC or its Staff
with respect to the Schedule 14D-9 as soon as practicable after receipt thereof.
(c) In connection with the Offer, Shelby Williams will cause its transfer
agent promptly to furnish Falcon and Sub with mailing labels, security position
listings and any available listing or computer files containing the names and
addresses of the record holders of
3
<PAGE>
the Shares as of a recent date and shall furnish Sub with such additional
information and assistance (including, without limitation, updated lists of
stockholders, mailing labels and lists of securities positions) as Sub or its
agents may reasonably request in communicating, and advocating acceptance of the
Offer to the record and beneficial holders of Shares. Subject to the
requirements of applicable law, and except for such steps as are necessary to
disseminate the Offer Documents, Falcon and Sub shall hold such listings and
other information in confidence and in accordance with the terms of the Shelby
Williams Confidentiality Agreement (as hereinafter defined), and shall use the
information contained in any such labels, listings and files only in connection
with the Offer and the Merger, and, if this Agreement is terminated, will
deliver to Shelby Williams all copies of such information (and extracts and
summaries thereof) then in their or their agent's or advisor's possession in
accordance with the terms of the Shelby Williams Confidentiality Agreement.
SECTION 1.3 DIRECTORS.
-----------------------
(a) Promptly upon the purchase of and payment for any Shares by Falcon or
any of its Subsidiaries which represent at least a majority of the outstanding
Shares on a fully diluted basis, Falcon shall be entitled to designate such
number of directors, rounded up to the next whole number, on the Board of
Directors of Shelby Williams as is equal to the product of the total number of
directors on such Board (giving effect to the directors designated by Falcon
pursuant to this sentence) multiplied by the percentage that the number of
Shares so purchased bears to the total number of Shares then outstanding on a
Fully Diluted Basis. In furtherance thereof, Shelby Williams shall, upon request
of Sub, use its best efforts promptly either (at Shelby Williams's election) to
increase the size of its Board of Directors or secure the resignations of such
number of its incumbent directors, or both, as is necessary to enable Falcon's
designees to be so elected to Shelby Williams's Board, and shall take all
actions available to Shelby Williams to cause Falcon's designees to be so
elected. At such time, Shelby Williams shall, if requested by Falcon, also cause
persons designated by Falcon to constitute at least the same percentage (rounded
up to the next whole number) as is on Shelby Williams's Board of Directors of
(i) each committee of Shelby Williams's Board of Directors, (ii) each board of
directors (or similar body) of each Subsidiary (as defined in Section 9.11) of
Shelby Williams and (iii) each committee (or similar body) of each such board.
(b) Shelby Williams's obligations to appoint designees to the Board of
Directors of Shelby Williams shall be subject to Section 14(f) of the Exchange
Act. At the request and expense of Falcon, Shelby Williams shall promptly take
all actions required pursuant to Section 14(f) of the Exchange Act and Rule 14f-
1 promulgated thereunder in order to fulfill its obligations under Section
1.3(a), including mailing to stockholders the information required by such
Section 14(f) and Rule 14f-1 as is necessary to enable Falcon's designees to be
elected to Shelby Williams's Board of Directors. Falcon will provide to Shelby
Williams in writing and be solely responsible for all information required by
such Section 14(f) and Rule 14f-1 with respect to its nominees, officers,
directors and affiliates.
(c) If Falcon's designees are elected or appointed to Shelby Williams's
Board of Directors, until the Effective Time (as defined in Section 2.3), Shelby
Williams's Board shall include at least two directors who are directors on the
date hereof (the "Independent Directors"), provided that, in such event, if the
number of Independent Directors shall be reduced below two
4
<PAGE>
for any reason whatsoever, any remaining Independent Directors (or Independent
Director, if there shall be only one remaining) shall be entitled to designate
persons to fill such vacancies who shall be deemed to be Independent Directors
for purposes of this Agreement or, if no Independent Director then remains, the
other directors shall designate two persons to fill such vacancies who shall not
be stockholders, affiliates or associates of Falcon or Sub and such persons
shall be deemed to be Independent Directors for purposes of this Agreement.
Notwithstanding anything in this Agreement to the contrary, if Falcon's
designees are elected to Shelby Williams's Board, after the acceptance for
payment of Shares pursuant to the Offer and prior to the Effective Time, the
affirmative vote of a majority of the Independent Directors shall be required
and shall be sufficient to authorize any termination of this Agreement by Shelby
Williams, any amendment of this Agreement requiring action by the Board of
Directors of Shelby Williams, any extension of time for the performance of any
of the obligations or other acts of Falcon or Sub under this Agreement, any
waiver of compliance with any of the agreements or conditions under this
Agreement for the benefit of Shelby Williams, any action to seek to enforce any
obligation of Falcon or Sub under this Agreement and any other action by Shelby
Williams's Board of Directors under or in connection with this Agreement. The
Independent Directors shall be appointed as a Special Committee of the Shelby
Williams Board of Directors and shall have full power solely with respect to the
matters set forth in the previous sentence to be approved by the Independent
Directors. In connection herewith, the Independent Directors (in their capacity
as the Special Committee) shall be authorized, on behalf of and at the expense
of Shelby Williams, to retain legal advisors.
ARTICLE II
THE MERGER
SECTION 2.1 THE MERGER. Upon the terms and subject to the conditions set
-----------------------
forth in this Agreement, and in accordance with the DGCL, Sub shall be merged
with and into Shelby Williams (the "Merger") at the Effective Time. As of the
Effective Time, the separate corporate existence of Sub shall cease and Shelby
Williams shall be the surviving corporation (the "Surviving Corporation") and
shall succeed to and assume all the rights and obligations of Sub in accordance
with the DGCL.
SECTION 2.2 CLOSING. The closing of the Merger (the "Closing") will take
---------------------
place at a location mutually acceptable to the parties hereto at 10:00 a.m. on a
date to be specified by the parties (the "Closing Date"), which shall be no
later than the first business day after satisfaction or waiver of the conditions
set forth in Article VII, unless another time or date is agreed to by the
parties hereto.
SECTION 2.3 EFFECTIVE TIME. Subject to the provisions of this Agreement,
----------------------------
as soon as practicable on or after the Closing Date, the parties shall file a
certificate of merger or other appropriate documents (in any such case, the
"Certificate of Merger") executed in accordance with the relevant provisions of
the DGCL and shall make all other filings or recordings required under the DGCL.
The Merger shall become effective at such time as the Delaware Secretary of
State accepts the Certificate of Merger for record, or at such subsequent date
or time as Falcon and Shelby Williams shall agree and specify in the Certificate
of Merger (the time the Merger becomes effective being hereinafter referred to
as the "Effective Time").
5
<PAGE>
SECTION 2.4 EFFECTS OF THE MERGER. The Merger shall have the effects set
-----------------------------------
forth in the applicable provisions of the DGCL. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time, all property of
Shelby Williams and Sub shall vest in the Surviving Corporation, and all
liabilities and obligations of Shelby Williams and Sub shall become liabilities
and obligations of the Surviving Corporation.
SECTION 2.5 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of
--------------------------------------------------
Incorporation of Sub, as in effect immediately prior to the execution of this
Agreement, shall be the Certificate of Incorporation of the Surviving
Corporation except that Article FIRST thereof shall read as follows: "FIRST: The
name of the corporation is "Shelby Williams Industries, Inc." and, as so
amended, shall be the certificate of incorporation of the Surviving Corporation
until thereafter amended as provided by law and such Certificate of
Incorporation. The bylaws of Sub, as in effect immediately prior to the
execution of this Agreement, shall be the bylaws of the Surviving Corporation
until thereafter changed or amended as provided therein or by applicable law.
SECTION 2.6 DIRECTORS AND OFFICERS. The directors of Sub at the Effective
------------------------------------
Time shall be the directors of the Surviving Corporation and the officers of Sub
at the Effective Time shall be the officers of the Surviving Corporation, in
each case until their respective successors are duly elected and qualified.
ARTICLE III
MERGER CONSIDERATION; CONVERSION OR
CANCELLATION OF SHARES IN THE MERGER;
DISSENTING SHARES
SECTION 3.1 CONSIDERATION FOR THE MERGER; CONVERSION OR CANCELLATION OF
------------------------------------------------------------------------
SHARES IN THE MERGER. At the Effective Time, by virtue of the Merger and
- ---------------------
without any action on the part of the holders of any Shares or capital stock of
Sub:
(a) Each Share that is issued and outstanding immediately prior to the
Effective Time other than Dissenting Shares (as defined in Section 3.6) and
Shares owned by Falcon, Sub or any direct or indirect wholly-owned subsidiary of
Falcon (collectively, "Falcon Companies") or any of Shelby Williams's direct or
indirect wholly-owned subsidiaries or shares held in the treasury of Shelby
Williams shall, by virtue of the Merger and without any action on the part of
Sub, Shelby Williams or the holder thereof, be cancelled and extinguished and
converted into the right to receive the Per Share Amount in cash (the "Merger
Consideration"), payable to the holder thereof, without interest thereon, less
any applicable withholding of taxes, upon the surrender of the certificate
formerly representing such Share in the manner provided in Section 3.3.
(b) Each Share issued and outstanding and owned by any of the Falcon
Companies other than Sub or any of Shelby Williams's direct or indirect wholly
owned subsidiaries or authorized but unissued shares held by Shelby Williams
immediately prior to the Effective Time shall cease to be outstanding, be
cancelled and retired without payment of any consideration therefor and cease to
exist.
6
<PAGE>
(c) Each share of common stock of Sub issued and outstanding immediately
prior to the Effective Time shall be converted into one validly issued, fully
paid and non-assessable share of common stock of the Surviving Corporation.
SECTION 3.2 STOCKHOLDERS MEETING. Shelby Williams, acting through its
----------------------------------
Board of Directors, shall, if required by applicable law in order to consummate
the Merger:
(i) duly call, give notice of, convene and hold a special meeting of
its stockholders (the "Stockholders Meeting"), to be held as soon as
practicable after Sub shall have purchased Shares pursuant to the Offer,
for the purpose of considering and taking action upon this Agreement;
(ii) prepare and file with the SEC a preliminary proxy or information
statement relating to the Merger and this Agreement and include in any
preliminary or definitive proxy statement or information statement with
respect to the Stockholders' Meeting (the "Proxy Statement"), the
recommendation of the Board of Directors that stockholders of Shelby
Williams vote in favor of the approval of this Agreement and the
transactions contemplated hereby unless the Board of Directors of Shelby
Williams determines in good faith, based on advice of its outside counsel,
that not taking any such action is necessary in order for the Board of
Directors of Shelby Williams to comply with its obligations or duties to
Shelby Williams or its stockholders under applicable law; and
(iii) use all reasonable efforts to obtain and furnish the information
required to be included by it in the Proxy Statement and, after
consultation with Falcon and Sub, respond promptly to any comments made by
the SEC with respect to the Proxy Statement and any preliminary version
thereof and cause the Proxy Statement to be mailed to its stockholders at
the earliest practicable time following the expiration or termination of
the Offer and obtain the necessary approvals by its stockholders of this
Agreement and the transactions contemplated hereby unless the Board of
Directors of Shelby Williams determines in good faith, based on advice of
its outside counsel, that not taking any such action is necessary in order
for the Board of Directors of Shelby Williams to comply with its
obligations or duties to Shelby Williams or its stockholders under
applicable law.
(a) Falcon agrees that it will provide Shelby Williams with the
information concerning Falcon and Sub required by applicable law to be included
in the Proxy Statement.
Shelby Williams and Falcon agree to use commercially reasonable efforts to
cause the Special Meeting to occur within 90 days after the purchase of Shares
pursuant to the Offer. At the Stockholders' Meeting, Falcon, Sub, and their
affiliates will vote all Shares owned by them in favor of approval of this
Agreement and the transactions contemplated hereby.
(b) Notwithstanding the foregoing, if Falcon, Sub, and any of their
Subsidiaries shall acquire at least 90% of the then outstanding Shares, the
parties hereto agree, subject to Article VII, to take all necessary and
appropriate action to cause the Merger to become effective in accordance with
Section 253 of the DGCL as soon as practicable after such acquisition, without a
meeting of the stockholders of Shelby Williams.
7
<PAGE>
SECTION 3.3 PAYMENT FOR SHARES IN THE MERGER. The manner of making payment
----------------------------------------------
for Shares in the Merger shall be as follows:
(a) At or prior to the Effective Time, Falcon shall deposit with or for
the account of a bank or trust company having net capital of not less than
$100,000,000 and designated by Falcon (the "Payment Agent"), for the benefit of
the holders of Shares, the funds necessary to make the payments contemplated by
Section 3.1 (the "Payment Fund"). The Payment Agent shall, pursuant to
irrevocable instructions, deliver the Merger Consideration out of the Payment
Fund.
(b) As soon as practicable after the Effective Time, but in any event no
later than five (5) business days thereafter, the Payment Agent shall mail to
each holder of record (other than holders of certificates representing Shares
referred to in Section 3.1(b)) of a certificate or certificates which
immediately prior to the Effective Time represented outstanding Shares (the
"Certificates") a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificates to the Payment Agent and shall be in
such form and have such other customary provisions as Falcon shall specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for payment of the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Payment Agent, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Payment Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor the Merger Consideration without any interest
thereon, less any applicable withholding of taxes, and the Certificate so
surrendered shall forthwith be canceled. The Merger Consideration with respect
to the Shares represented thereby may be paid to a person other than the person
in whose name the Certificate so surrendered is registered if such Certificate
shall be properly endorsed or otherwise be in proper form for transfer and the
person requesting such issuance shall pay any transfer or other nonincome taxes
required by reason of the payment of the Merger Consideration to a person other
than the registered holder or establish to the satisfaction of the Payment Agent
that such tax has been paid or is not applicable. Until surrendered as
contemplated by this Section 3.3, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive, upon such
surrender thereof, the Merger Consideration with respect to each of the Shares
represented thereby, without interest.
(c) Any portion of the Payment Fund which remains undistributed to the
holders of the Certificates as of the date which is one year after the Effective
Time shall be delivered to Falcon, upon demand, and any holders of the
Certificates who have not theretofore complied with this Article III shall
thereafter look only to Falcon or the Surviving Corporation for payment of their
claim for Merger Consideration.
(d) None of Falcon, Shelby Williams, Sub or the Payment Agent shall be
liable to any person in respect of any cash from the Payment Fund delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificate shall not have been surrendered prior to seven
years after the Effective Time (or immediately prior to such earlier date on
which any Merger Consideration would otherwise escheat to or become the property
of any governmental body or authority), any such Merger Consideration, to the
extent permitted by applicable law, shall become the property of the Surviving
Corporation, free and clear of all claims and interest of any person previously
entitled thereto.
8
<PAGE>
(e) The Payment Agent shall invest any cash included in the Payment Fund
on a daily basis as directed by Falcon. Any interest and other income resulting
from such investments shall be paid to Falcon.
(f) If any Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such Certificate to
be lost, stolen or destroyed and, if required by the Surviving Corporation, the
posting by such person of a bond in such amount as the Surviving Corporation may
direct as indemnity against any claim that may be made against it with respect
to such Certificate, the Payment Agent will issue in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration.
SECTION 3.4 TRANSFER OF SHARES AFTER THE EFFECTIVE TIME. At the Effective
--------------------------------------------------------
Time, the stock transfer books of Shelby Williams shall be closed, and there
shall be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the Shares that were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation or the Payment Agent for any reason, they shall be
canceled and exchanged as provided in this Article III.
SECTION 3.5 STOCK OPTIONS AND ASSOCIATE PURCHASE PLAN.
------------------------------------------------------
(a) Each option granted to a Shelby Williams employee, consultant or
director to acquire shares of Shelby Williams Common Stock ("Option") that is
outstanding immediately prior to the purchase of Shares pursuant to the Offer
(irrespective of whether such Options are then exercisable) shall, on the fifth
business day after the purchase by Sub of Shares pursuant to the Offer, be
cancelled in exchange for a single lump sum cash payment equal to the product of
(i) the number of shares of Shelby Williams Common Stock subject to such Option
and (ii) the excess of the Per Share Amount over the exercise price per share of
such Option.
(b) Except as set forth in Section 3.5(a), each Option that is outstanding
immediately prior to the Effective Time, whether or not then vested or
exercisable, shall, effective as of the Effective Time, be cancelled and no
payments shall be made with respect thereto.
(c) Not later than the twentieth business day following the commencement
of the Offer, Shelby Williams shall have taken all required actions so that
following the purchase of Shares pursuant to the Offer, no holder of stock
options will have any right to receive shares of Shelby Williams Common Stock
upon exercise of a stock option.
SECTION 3.6 DISSENTING SHARES. Notwithstanding anything in this Agreement
------------------------------
to the contrary, any Shares which are held by stockholders who did not vote in
favor of the Merger and who comply with all of the relevant provisions of
Section 262 of the DGCL (the "Dissenting Shares") shall not be converted into or
be exchanged for the right to receive the Merger Consideration, but instead
shall be converted into the right to receive payment from the Surviving
Corporation with respect to such Dissenting Shares in accordance with the DGCL,
unless and until such holders shall have failed to perfect or shall have
effectively withdrawn or lost their rights to appraisal under the DGCL. If any
such holder shall have failed to perfect or shall have effectively withdrawn or
lost such right, such holder's Shares shall be entitled to the Merger
Consideration in accordance with Section 3.3. Shelby Williams shall give prompt
notice
9
<PAGE>
to Sub and Falcon of any demands received by Shelby Williams for appraisal of
Shares, and Sub and Falcon shall have the right to participate in and direct all
negotiations and proceedings with respect to such demands. Shelby Williams shall
not, except with the prior written consent of Sub and Falcon, make any payments
with respect to, or settle or offer to settle, any such demands.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SHELBY WILLIAMS
Shelby Williams represents and warrants to Falcon and Sub that, except as
set forth in the Disclosure Schedule attached to and made a part of this
Agreement, all of the statements contained in this Article IV are true and
correct as of the date of this Agreement (or, if made as of a specified date, as
of such date). Each exception set forth in the Disclosure Schedule and each
other response to this Agreement set forth in the Disclosure Schedule is
identified by reference to, or has been grouped under a heading referring to,
one or more specific sections of this Agreement. Each such exception or
response may be deemed to be an exception or response to one or more other
sections only if the level of particularity or manner of disclosure of the fact
or item expressly disclosed would permit a reasonable person to find such
disclosure relevant to another section.
SECTION 4.1 ORGANIZATION, QUALIFICATION, ETC. Shelby Williams is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power and authority to own its
properties and assets and to carry on its business as it is now being conducted
and is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its properties or the conduct of its
business requires such qualification, except for jurisdictions in which such
failure to be so qualified or to be in good standing would not, individually or
in the aggregate, have a Material Adverse Effect (as hereinafter defined) on
Shelby Williams. As used in this Agreement, any reference to any state of facts,
event, change or effect having a "Material Adverse Effect" on or with respect to
Shelby Williams or Falcon, as the case may be, means a Material Adverse Effect
on the assets, business, results of operations or financial condition of Shelby
Williams and its Subsidiaries (as defined in Section 9.11), taken as a whole or
Falcon and its Subsidiaries, taken as a whole, as the case may be. Shelby
Williams has heretofore furnished, or otherwise made available, to Falcon a
complete and correct copy, as applicable, of the Certificate or Articles of
Incorporation and the Bylaws, each as amended to, and in full force and effect
as of, the date hereof, of Shelby Williams and each of its Subsidiaries. Neither
Shelby Williams nor any of its Subsidiaries is in violation of any of the
provisions of its Certificate or Articles of Incorporation or By-laws.
(a) Shelby Williams does not own, directly or indirectly, any equity or
other ownership interest in any corporation, partnership, joint venture, or
other entity or enterprise, except for the Subsidiaries. Shelby Williams is not
subject to any corporate or contractual obligation or requirement to make any
investment, loan or capital contribution to any corporation, partnership, joint
venture or other entity or enterprise, other than its Subsidiaries. Each of
Shelby Williams's Subsidiaries is duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has the corporate power and authority to own its properties and to carry on its
business as it is now being conducted, and is duly qualified to do business and
is in good standing in each jurisdiction in which the ownership of its property
or the conduct of its business requires such qualification, except for
jurisdictions
10
<PAGE>
in which such failure to be so qualified or to be in good standing would not,
individually or in the aggregate, have a Material Adverse Effect on Shelby
Williams. All the outstanding shares of capital stock of, or other ownership
interests in, Shelby Williams's Subsidiaries are validly issued, fully paid and
non-assessable and are owned by Shelby Williams, directly or indirectly, free
and clear of all liens, claims, charges or encumbrances. There are no existing
subscriptions, options, warrants, rights of first refusal, preemptive rights,
calls, commitments, agreements or conversion rights of any character relating to
the issued or unissued capital stock or other securities of, or other ownership
interests in, any Subsidiary of Shelby Williams.
SECTION 4.2 CAPITAL STOCK.
--------------------------
(a) The authorized stock of Shelby Williams consists of 30,000,000 shares
of common stock, par value $.05 per share ("Shelby Williams Common Stock"). As
of March 10, 1999, there were 8,761,417 shares of Shelby Williams Common Stock
issued and outstanding. All the outstanding shares of Shelby Williams Common
Stock have been validly issued and are fully paid and non-assessable and have
not been issued in violation of any preemptive or similar rights. As of the date
of this Agreement, there were no outstanding subscriptions, options, warrants,
rights or other arrangements (including, without limitation, any stockholders'
rights plan) or commitments obligating Shelby Williams to issue any shares of
its capital stock nor are there outstanding any securities which are convertible
into or exchangeable for any shares of capital stock of Shelby Williams, and
Shelby Williams has no obligations of any kind to issue any additional
securities other than options and other rights to receive or acquire not in
excess of 227,801 shares of Shelby Williams Common Stock granted on or prior to
December 31, 1998, pursuant to employee incentive or benefit plans, programs and
arrangements and non-employee director plans.
(b) Except for the issuance of shares of Shelby Williams Common Stock
pursuant to the options referred to in the last sentence of Section 4.2(a) and
except as permitted in Section 6.1(i), since March 10, 1999, no shares of Shelby
Williams Common Stock have been issued.
(c) The issuance and sale of all of the outstanding shares of capital
stock described in this Section 4.2 have been in compliance with federal and
state securities laws. There are no outstanding obligations of Shelby Williams
to repurchase, redeem or otherwise acquire any shares of capital stock of Shelby
Williams and no person has any right to cause Shelby Williams to repurchase,
redeem or otherwise acquire any shares of capital stock of Shelby Williams.
SECTION 4.3 CORPORATE AUTHORITY RELATIVE TO THIS AGREEMENT; NO VIOLATION;
-------------------------------------------------------------------------
NO CONFLICT. Shelby Williams has the corporate power and authority necessary to
- -----------
enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Shelby Williams and, except, with respect to the Merger,
for the approval of its stockholders, no other corporate proceedings on the part
of Shelby Williams are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Shelby Williams and, assuming this Agreement
constitutes a valid and binding Agreement of the other parties hereto, this
Agreement constitutes a valid and binding agreement of Shelby Williams,
enforceable against Shelby Williams in accordance with its terms. Other than in
connection with or in
11
<PAGE>
compliance with the provisions of the DGCL (including the approval of the Merger
by the stockholders of Shelby Williams), the Exchange Act, and the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
(collectively, the "Shelby Williams Required Approvals"), no authorization,
consent or approval of, or filing by Shelby Williams with, any governmental body
or authority or other person is necessary for the execution and delivery of this
Agreement or for the consummation by Shelby Williams of the transactions
contemplated by this Agreement. Neither the execution and delivery of this
Agreement by Shelby Williams nor the consummation by Shelby Williams of the
transactions contemplated by this Agreement will (a) result in a breach or
violation of the organizational documents of Shelby Williams or of any of Shelby
Williams's Subsidiaries; (b) result in a breach or violation of any provision
of, or constitute a default (or an event which, with the giving of notice, the
passage of time or otherwise, would constitute a default) under, or entitle any
party (with the giving of notice, the passage of time or otherwise) to
terminate, accelerate or modify, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of Shelby
Williams or any of Shelby Williams's Subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
contract, agreement, lease or other instrument or obligation to which Shelby
Williams or any of its Subsidiaries is a party; (c) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Shelby Williams or
any of its Subsidiaries or any of the properties or assets of any of them; or
(d) give any governmental body or authority the right to revoke, withdraw,
suspend, cancel, terminate or modify any governmental authorization held by
Shelby Williams or any of its Subsidiaries.
SECTION 4.4 REPORTS AND FINANCIAL STATEMENTS; CORPORATE RECORDS. Shelby
----------------------------------------------------------------
Williams has previously made available to Falcon true and complete copies of:
(i) Shelby Williams's Annual Reports on Form 10-K filed with the SEC for each of
the years ended December 31, 1996 through 1998 (the "Annual Reports"); (ii) each
definitive proxy statement filed by Shelby Williams with the SEC from December
31, 1995 until the date of this Agreement (the "Proxy Statements"); (iii) each
final prospectus filed by Shelby Williams with the SEC from December 31, 1996
until the date of this Agreement ("Prospectuses"); and (iv) all Current Reports
on Form 8-K filed by Shelby Williams with the SEC since the end of its last
fiscal year until the date of this Agreement ("Current Reports").
(a) All of the Shelby Williams Annual Reports, Proxy Statements,
Prospectuses, and Current Reports (collectively, the "Shelby Williams SEC
Reports") at the time filed (and in the case of registration statements and
proxy statements, on the dates of their effectiveness and the dates of mailing,
respectively) (i) complied in all material respects with the applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
the Exchange Act and the rules and regulations promulgated thereunder, and (ii)
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements and unaudited
consolidated interim financial statements included in the Shelby Williams SEC
Reports (including any related notes and schedules) fairly present the financial
position of Shelby Williams and its consolidated Subsidiaries as of the dates
thereof and the results of operations and cash flows for the periods then ended
(subject, where appropriate, to normal year-end adjustments), in each case in
accordance with past practice and generally accepted accounting principles in
the United States ("GAAP") consistently applied during the periods involved
(except as otherwise disclosed in the
12
<PAGE>
notes thereto or in the case of unaudited statements, as permitted by the rules
of the SEC or Form 10-Q). Since December 31, 1995, Shelby Williams has timely
filed all reports, registration statements and other filings required to be
filed by it with the SEC under the Exchange Act, the Securities Act and the
rules and regulations of the SEC.
(b) The minute books of Shelby Williams and each of Shelby Williams's
corporate Subsidiaries contain accurate records of all meetings held of, and
corporate action taken by, the stockholders and the Board of Directors of such
companies, and no meeting of any such stockholders or Board of Directors has
been held for which minutes have not been prepared and are not contained in such
minute books.
SECTION 4.5 NO UNDISCLOSED LIABILITIES. As of the date hereof, neither
---------------------------------------
Shelby Williams nor any of its Subsidiaries has any liabilities or obligations
of any nature, whether or not accrued, contingent or otherwise, that would be
required by GAAP to be reflected on a consolidated balance sheet of Shelby
Williams, except liabilities or obligations (a) reflected in any of the Shelby
Williams SEC Reports filed prior to the date of this Agreement, or (b) incurred
in the ordinary course of business since December 31, 1998.
SECTION 4.6 NO VIOLATION OF LAW. The businesses of Shelby Williams and its
--------------------------------
Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any governmental body or authority or any judgment, decision or
order entered by any governmental authority.
SECTION 4.7 ENVIRONMENTAL LAWS AND REGULATIONS. As of the date hereof (a)
-----------------------------------------------
Shelby Williams and each of its Subsidiaries is in compliance with all
applicable federal, state, local and foreign laws and regulations relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata) (collectively, "Environmental Laws"), which compliance includes, but is
not limited to, the possession by Shelby Williams and its Subsidiaries of all
material permits and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof; (b)
neither Shelby Williams nor any of its Subsidiaries has received written notice
of, or, to the knowledge of Shelby Williams, is the subject of, any actions,
causes of action, claims, investigations, demands or notices by any person
alleging liability under or non-compliance with any Environmental Law
("Environmental Claims"); and (c) to the knowledge of Shelby Williams, there are
no circumstances that are reasonably likely to prevent or interfere with such
compliance in the future. There are no past or present actions or activities,
including, without limitation, the release, emission, discharge or disposal of
any Hazardous Material at any site presently owned by Shelby Williams or its
Subsidiaries or used in the conduct of their business, that could form the basis
of any claim against Shelby Williams or its Subsidiaries under Environmental
Laws. For purposes of this Section 4.7, "Hazardous Material" means chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products and any other substance or material regulated as
toxic or hazardous pursuant to any Environmental Law.
SECTION 4.8 EMPLOYEE MATTERS; ERISA. Set forth in Shelby Williams's
------------------------------------
Disclosure Schedule is a true and complete list of all material employee benefit
plans maintained or contributed to as of the date hereof by Shelby Williams or
any of its Subsidiaries covering their
13
<PAGE>
present and former employees or directors or their beneficiaries, or providing
benefits to such persons in respect of services provided to any such entity,
including, but not limited to, any employee benefit plan within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), any deferred compensation, bonus, stock option, restricted stock,
incentive compensation, severance or change in control agreement or plan, and
any other material benefit arrangement or payroll practice (collectively, the
"Shelby Williams Benefit Plans").
(a) All contributions and other payments required to be made by Shelby
Williams to any person pursuant to the terms thereof) have been made or the
amount of such payment or contribution obligation has been reflected in the
Shelby Williams SEC Reports.
(b) Each of the Shelby Williams Benefit Plans intended to be "qualified"
within the meaning of Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code") has received a favorable determination letter from the
Internal Revenue Service (the "IRS") as to such qualified status.
(c) All Shelby Williams Benefit Plans are in compliance with all
applicable provisions of ERISA and the Code, and Shelby Williams and its
Subsidiaries do not have any liabilities or obligations with respect to any
Shelby Williams Benefit Plan, whether or not accrued, contingent or otherwise.
(d) With respect to Shelby Williams Benefit Plans, individually and in the
aggregate, no event has occurred and, to Shelby Williams's knowledge, there does
not now exist any condition or set of circumstances that could subject Shelby
Williams or any of its Subsidiaries to any material liability arising under
ERISA or the Code (including, without limitation, any liability to any such plan
or the Pension Benefit Guaranty Corporation (the "PBGC")), or under any
indemnity agreement to which Shelby Williams or any of its Subsidiaries is a
party, except liability for benefit claims and funding obligations payable in
the ordinary course.
(e) None of the Shelby Williams Benefit Plans that are "welfare plans"
within the meaning of Section 3(1) of ERISA provides for any retiree benefits
other than continuation coverage required to be provided under Section 4980B of
the Code or Part 6 of Title I of ERISA.
(f) Except as provided in the termination benefit agreements listed and
identified as such in Shelby Williams's Disclosure Schedule which are in effect
on the date hereof (the "Change of Control Employment Agreements"), the
consummation or announcement of any transaction contemplated by this Agreement
will not (whether alone or upon the occurrence of any additional or further acts
or events) result in any (A) payment (whether of severance pay or otherwise)
becoming due from Shelby Williams or any of its Subsidiaries to any officer,
employee, former employee or director thereof or to the trustee under any "rabbi
trust" or similar arrangement, or (B) benefit under any Shelby Williams Benefit
Plan being established or becoming accelerated, vested or payable. Neither
Shelby Williams nor any of its Subsidiaries is a party to (A) any management,
employment, deferred compensation, severance (including any payment, right or
benefit resulting from a change in control), bonus or other contract for
personal services with any current or former officer, director or employee
(whether or not characterized as
14
<PAGE>
a plan for purposes of ERISA), (B) any material consulting contract with any
person who prior to entering into such contract was a director or officer of
Shelby Williams or any of its Subsidiaries, or (C) any plan, agreement,
arrangement or understanding similar to any of the items described in clause (A)
or (B) of this sentence.
(g) The consummation or announcement of any transaction contemplated by
this Agreement will not (either alone or upon the occurrence of any additional
or further acts or events) result in the disqualification of any of the Shelby
Williams Benefit Plans intended to be qualified under, result in a prohibited
transaction or breach of fiduciary duty under, or otherwise violate, ERISA or
the Code.
(h) Neither Shelby Williams nor any of its Subsidiaries nor any of their
directors, officers, employees or agents, nor any "party in interest" or
"disqualified person," as such terms are defined in Section 3 of ERISA and
Section 4975 of the Code has, with respect to any Shelby Williams Benefit Plan,
engaged in or been a party to any "prohibited transaction," as such term is
defined in Section 4975 of the Code or Section 406 of ERISA which is not
otherwise exempt, which could result in the imposition of either a penalty
assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of
the Code or which could constitute a breach of fiduciary duty, in each case
applicable to Shelby Williams.
(i) No Shelby Williams Benefit Plan subject to Section 412 of the Code has
incurred any now existing "accumulated funding deficiency" (as defined in
ERISA), whether or not waived. Neither Shelby Williams nor any of its
Subsidiaries has incurred, and none of such entities reasonably expects to
incur, any material liability to the PBGC with respect to any Shelby Williams
Benefit Plan. Neither Shelby Williams nor any of its Subsidiaries is a party to,
and neither has incurred or reasonably expects to incur, any withdrawal
liability with respect to any "multiemployer plan" (as defined in Section 3(37)
of ERISA) for which there is any outstanding liability.
(j) None of the assets of any of Shelby Williams Benefit Plans which hold
assets are invested in securities of Shelby Williams.
(k) Shelby Williams is in compliance with the notice provisions and all
other provisions of COBRA and the Health Insurance Portability and
Accountability Act of 1996.
(l) Since December 31, 1998, no change has occurred in the base salary of
any person who is a party to a Change of Control Employment Agreement.
SECTION 4.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. From December 31, 1998
-------------------------------------------------
to the date of this Agreement, the businesses of Shelby Williams and its
Subsidiaries have been conducted in all material respects in the ordinary course
and there has not been any event, occurrence, development or state of
circumstances or facts that has had or is reasonably likely to have a Material
Adverse Effect on Shelby Williams. Since December 31, 1998, neither Shelby
Williams nor any of its Subsidiaries has engaged in any transaction which, if
done after the execution of this Agreement, would violate Sections 6.1(e)
through (k), 6.1(n) through (q), or 6.1(s) through (u) hereof.
SECTION 4.10 INVESTIGATIONS; LITIGATION. As of the date of this Agreement:
---------------------------------------
15
<PAGE>
(a) no investigation or review by any governmental body or authority with
respect to Shelby Williams or any of its Subsidiaries is pending nor has any
governmental body or authority notified Shelby Williams of an intention to
conduct the same and, to the knowledge of Shelby Williams, no such investigation
or review has been threatened; and
(b) there are no actions, suits or proceedings pending (or, to Shelby
Williams's knowledge, threatened) against or affecting Shelby Williams, its
Subsidiaries, or any of the properties of any of them, at law or in equity,
before any federal, state, local or foreign governmental body or authority.
SECTION 4.11 PROXY STATEMENT; OFFER DOCUMENTS; SCHEDULE 14D-9; PROXY
---------------------------------------------------------------------
STATEMENT. None of the Schedule 14D-9, any information supplied in writing by
- ---------
Shelby Williams specifically for inclusion in the Offer Documents, and the
information to be filed by Shelby Williams in connection with the Offer pursuant
to Rule 14f-1 promulgated under the Exchange Act (the "Information Statement"),
shall at the each of the times the Schedule 14D-9, the Offer Documents, the
Information Statement, and any amendments or supplements thereto are filed with
the SEC and are first published, sent or given to stockholders of Shelby
Williams, as the case may be, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they are made, not misleading. The Proxy Statement and the
Information Statement shall not, at each of the dates any such document (or any
amendment or supplement thereto) is first mailed to stockholders of Shelby
Williams, with respect to the Information Statement at the time Shares are
accepted for payment in the Offer, and with respect to the Proxy Statement at
the time of the Stockholders' Meeting, be false or misleading with respect to
any material fact, or omit to state any material fact required to be stated
therein or necessary in order to make the statements made therein, in the light
of the circumstances under which they are made, not misleading. The Schedule
14D-9, the Information Statement and the Proxy Statement shall comply in all
material respects as to form with the applicable requirements of the Exchange
Act and the applicable rules and regulations thereunder. Notwithstanding the
foregoing, Shelby Williams makes no representation or warranty with respect to
statements made in any of the foregoing documents based on information supplied
in writing by Falcon or Sub or any of their representatives specifically for
inclusion therein.
SECTION 4.12 Y2K COMPLIANCE. None of the computer software, computer
----------------------------
firmware, computer hardware (whether general or special purpose) or other
similar or related items of automated, computerized or software systems that are
used or relied on by Shelby Williams or by any of its Subsidiaries in the
conduct of the businesses of any or all of them will malfunction, cease to
function, generate incorrect data, or produce incorrect results when processing,
providing or receiving (i) date-related data from, into and between the
twentieth and twenty-first centuries or (ii) date-related data in connection
with any date in the twentieth and twenty-first centuries, except where such
malfunctions would not have a Material Adverse Effect on Shelby Williams.
SECTION 4.13 TAKEOVER LAWS. Prior to the date hereof, the Board of
---------------------------
Directors of Shelby Williams has taken all necessary action so that the
execution of this Agreement and the consummation of the transactions
contemplated hereby, including the Offer, the Merger, and the Stockholder
Agreements, shall be exempt under or not subject to Section 203 of the DGCL and
16
<PAGE>
any other state law that purports to limit or restrict business combinations or
the ability to acquire shares of capital stock.
SECTION 4.14 TAX MATTERS.
-------------------------
(a) (i) All Tax Returns that are required to be filed on or before the
Closing Date by or with respect to Shelby Williams or any of its Subsidiaries
have been or will be duly and timely filed and reflect all tax liabilities of
Shelby Williams and its Subsidiaries required to be shown thereon; (ii) all
Taxes which are shown to be due on any Shelby Williams Tax Returns have been or
will be timely paid in full; (iii) all withholding tax requirements imposed on
or with respect to Shelby Williams or any of its Subsidiaries have been
satisfied in full in all respects; (iv) no action, suit, proceeding, audit,
claim assessment, deficiency or adjustment has been asserted, assessed or is
pending with respect to any Shelby Williams Tax Return or any of its
Subsidiaries; (v) neither Shelby Williams nor any of its Subsidiaries has any
liability for any Taxes in excess of amounts paid or reserves established
therefor; and (vi) there is not in force any extension of time with respect to
the due date for the filing of any Shelby Williams Tax Return or any waiver or
agreement for any extension of time for the assessment or payment of any tax due
with respect to the period covered by any Shelby Williams Tax Return and no
requests for such waivers or agreements are pending. Neither Shelby Williams nor
any of its Subsidiaries is the subject of any currently ongoing tax audit which
is reasonably likely to have a Material Adverse Effect on Shelby Williams. With
respect to any taxable period ended prior to December 31, 1995, all federal
income Shelby Williams Tax Returns have been audited by the IRS or are closed by
the applicable statute of limitations.
(b) There are no material liens with respect to Taxes upon any of the
properties or assets, real or personal, tangible or intangible of Shelby
Williams or any of its Subsidiaries (other than liens with respect to Taxes not
yet due). No material claim by an authority in a jurisdiction where none of
Shelby Williams or its Subsidiaries files tax returns that Shelby Williams or
any of its Subsidiaries is or may be subject to taxation by that jurisdiction is
currently pending or, to the knowledge of Shelby Williams, likely to be
asserted. Shelby Williams has not filed an election under Section 341(f) of the
Code to be treated as a consenting corporation. Neither Shelby Williams nor any
of its Subsidiaries is obligated by any contract, agreement or other arrangement
to indemnify any other person with respect to any material Taxes.
(c) None of Shelby Williams or any of its Subsidiaries is a party to any
agreement, contract, arrangement or plan that has resulted or could result,
separately or in the aggregate, in the payment of (x) any "excess parachute
payments" within the meaning of Section 280G of the Code (without regard to the
exceptions set forth in Section 280G(b)(4) and 280G(b)(5) of the Code) or (y)
any amount for which a deduction would be disallowed under Section 162 of the
Code; since January 1, 1995, none of Shelby Williams or any of its Subsidiaries
has been a member of a group filing a consolidated federal income Tax Return
(other than a group the common parent of which was Shelby Williams); no
liability has been asserted with respect to Shelby Williams or any of its
Subsidiaries for the Taxes of any Person (other than any of Shelby Williams or
its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any
corresponding provision of state, local or foreign Tax law), as a transferee or
successor, by contract, or otherwise; and none of Shelby Williams or any of its
Subsidiaries has net operating losses or other tax attributes presently subject
(without regard to the transactions contemplated by this
17
<PAGE>
Agreement) to limitation under Sections 382, 383, or 384 of the Code, or
the federal consolidated return regulations.
(d) Neither Shelby Williams nor any of its Subsidiaries is a party to, or
is bound by or has any obligation under any tax sharing agreement or similar
agreement or arrangement.
(e) Neither Shelby Williams nor any of its Subsidiaries has agreed to
make, or is required to make, any material adjustment under Section 481(a) of
the Code by reason of a change in accounting method or otherwise and the IRS has
not proposed any such adjustment or change in accounting method.
(f) Neither Shelby Williams nor any of its Subsidiaries is, or has been, a
United States Real Property Holding Corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
(g) For purposes of this Agreement: (i) "Taxes" means any and all federal,
state, local, foreign or other taxes of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any taxing authority, including, without limitation,
taxes or other charges on or with respect to income, franchises, windfall or
other profits, gross receipts, property, sales, use, occupation, transfers,
premiums, leases, services, capital stock, payroll, employment, social security,
workers' compensation, unemployment compensation, or net worth, environmental
taxes and taxes or other charges in the nature of excise, withholding, customs
duties, ad valorem or value added, and (ii) "Tax Return" means any return,
report or similar statement (including the schedules attached to it) filed or
required to be filed with respect to any Tax, including, without limitation, any
information return, claim for refund or declaration of estimated Tax (or any
amendments to any of the foregoing).
SECTION 4.15 OPINION OF FINANCIAL ADVISOR. The Board of Directors of
-------------------------------------------
Shelby Williams has received the opinion of Lazard Freres & Co. LLC ("Lazard
Freres"), dated the date of this Agreement, to the effect that as of such date
the cash consideration to be received by Shelby Williams's stockholders pursuant
to the Offer and the Merger is fair to such stockholders from a financial point
of view. A copy of the written opinion of Lazard Freres has been delivered to
Falcon.
SECTION 4.16 REQUIRED VOTE OF SHELBY WILLIAMS STOCKHOLDERS. The
------------------------------------------------------------
affirmative vote of the holders of a majority of the outstanding shares of
Shelby Williams Common Stock is required to approve the Merger. No other vote of
the stockholders of Shelby Williams is required by law, the Certificate or
Incorporation or the bylaws of Shelby Williams, or otherwise to approve this
Agreement and the transactions contemplated hereby.
SECTION 4.17 LABOR MATTERS. None of Shelby Williams or any of its
----------------------------
Subsidiaries is a party to or bound by any collective bargaining or similar
agreement with any labor organization, and there are no employment, labor, or
collective bargaining agreements which pertain to employees of Shelby Williams
or any of its Subsidiaries. No employees of Shelby Williams or any of its
Subsidiaries are represented by any labor organization. No labor organization or
group of employees of Shelby Williams or any of its Subsidiaries has made a
pending demand for
18
<PAGE>
recognition or certification. There are no representation or certification
proceedings or petitions seeking a representation proceeding presently pending
or, to the knowledge of Shelby Williams, threatened to be brought or filed, with
the National Labor Relations Board or any other labor relations tribunal or
authority. There are no unfair labor practice charges, grievances, complaints,
strikes, work stoppages, lockouts, material arbitrations or material grievances,
or other material labor disputes pending, or, to the knowledge of Shelby
Williams, threatened against or involving Shelby Williams or any of its
Subsidiaries.
SECTION 4.18 CERTAIN AGREEMENTS. Neither Shelby Williams nor any of its
---------------------------------
Subsidiaries is a party or subject to any oral or written agreement, contract,
policy, license, document, instrument, arrangement or commitment relating to or
constituting (i) Indebtedness (as hereinafter defined) in an amount exceeding
$500,000; (ii) leases for real or personal property in which the amounts of
payments which Shelby Williams or any Subsidiary is required to make on an
annual basis exceeds $250,000; (iii) agreement, contract, policy, license
document, instrument, arrangement or commitment that limits in any material
respect the freedom of Shelby Williams or any Subsidiary of Shelby Williams to
compete in any line of business or with any person or in any geographical area
or which would so limit the freedom of Shelby Williams or any Subsidiary of
Shelby Williams after the Effective Time; (iv) agreement or contract outside of
the ordinary course of business of Shelby Williams or any of Shelby Williams's
Subsidiaries that involves performance of services or delivery of goods or
materials by or to Shelby Williams or any of Shelby Williams's Subsidiaries of
an amount or value in excess of $250,000; (v) joint venture or partnership
agreements involving a sharing of profits, losses, costs, or liabilities by
Shelby Williams or any of Shelby Williams's Subsidiaries with any person other
than Shelby Williams and its Subsidiaries; (vi) power of attorney granted by
Shelby Williams or any of Shelby Williams's Subsidiaries that is currently
effective and outstanding; (vii) agreement or contract entered into other than
in the ordinary course of business that contains or provides for an express
undertaking by Shelby Williams or any of Shelby Williams's Subsidiaries to be
responsible for consequential damages; (viii) agreement or contract for capital
expenditures in excess of $200,000; (ix) written warranty, guaranty, and/or
other similar undertaking with respect to contractual performance extended by
Shelby Williams or any of Shelby Williams's Subsidiaries other than in the
ordinary course of business; or (x) other document or undertaking which, after
giving effect to the transactions contemplated by this Agreement, purports to
restrict or bind Falcon or any of its Subsidiaries other than the Surviving
Corporation and its Subsidiaries in any respect. "Indebtedness" means any
liability in respect of (A) borrowed money, (B) capitalized lease obligations,
(C) the deferred purchase price of property or services (other than trade
payables in the ordinary course of business) and (D) guarantees of any of the
foregoing. Neither Shelby Williams nor any of its Subsidiaries is in default (or
would be in default with notice or lapse of time, or both) under any indenture,
note, credit agreement, loan document, lease, contract, policy, license,
document, instrument, arrangement or commitment, whether or not such default has
been waived, which default, alone or in the aggregate with other such defaults,
is reasonably likely to have a Material Adverse Effect on Shelby Williams.
SECTION 4.19 TITLE TO ASSETS; LIENS. Shelby Williams owns, holds through
-------------------------------------
valid leases, or otherwise has the common law or contractual right to use,
directly or through its Subsidiaries, all of its inventory, accounts receivable,
property, equipment and other assets, and such assets are free and clear of any
mortgages, liens, charges, encumbrances, or title defects of any nature
19
<PAGE>
whatsoever, except for such mortgages, liens, charges, encumbrances or title
defects which are not reasonably likely to adversely affect the value of such
property as carried on Shelby Williams's financial statements contained in
Shelby Williams's SEC Reports filed prior to the date of this Agreement and
would not have a Material Adverse Effect on Shelby Williams. Shelby Williams and
its Subsidiaries have valid and enforceable leases for the premises and the
equipment, furniture and fixtures purported to be leased by them, except for
leases, the failure of which to have or be enforceable, are not reasonably
likely to have a Material Adverse Effect on Shelby Williams. Set forth in the
Disclosure Schedule is a complete list of all items of personal property located
on the Shelby Williams premises that are owned by Mr. Manfred Steinfeld and are
not included among the assets of ShelbyWilliams.
SECTION 4.20 INSURANCE. Shelby Williams and each of its Subsidiaries are
------------------------
insured, and during each of the past five calendar years have been insured, with
insurers whose current rating by A M Best is at least B+6 against such risks and
in such amounts as companies engaged in a similar business would, in accordance
with good business practice, customarily be insured. The policies of fire,
theft, liability and other insurance maintained with respect to the assets or
businesses of Shelby Williams and its Subsidiaries (copies of which have been
made available to Falcon) (i) provide coverage which Shelby Williams deems to be
adequate coverage against loss, (ii) are sufficient for Shelby Williams and its
Subsidiaries to be in compliance with all legal requirements applicable to
Shelby Williams or any of its Subsidiaries and all agreements and contracts to
which Shelby Williams or any of its Subsidiaries is a party or by which any of
them are bound, (iii) will continue (absent affirmative action by Falcon to
cancel such policies) in full force and effect following consummation of the
Merger and (iv) do not provide for any retrospective premium adjustment or other
experienced-based liability on the part of Shelby Williams or any of Shelby
Williams's Subsidiaries. Neither Shelby Williams nor any of its Subsidiaries has
received written notice of cancellation, termination, or current or prospective
nonrenewal with respect to any material insurance policy of Shelby Williams or
its Subsidiaries or notice that the issuer of any material insurance policy is
not willing or able to perform its obligations thereunder. The insurance
policies of Shelby Williams and its Subsidiaries are valid and enforceable
policies. Each of Shelby Williams and each of its Subsidiaries has paid all
premiums due, has otherwise performed all of its respective material obligation
under, and has given notice to all appropriate insurers of all material claims
that may be insured by any material insurance policy.
SECTION 4.21 INTELLECTUAL PROPERTY.
------------------------------------
(a) The Disclosure Schedule sets forth a true, correct and complete list
(including, to the extent applicable, registration, application or file numbers)
of all patents, trademarks, trade names, service marks, domain names and
registered copyrights and material non-registered copyrights used by Shelby
Williams or any of its Subsidiaries which are material to the conduct of their
business, and all registrations of or application for registration of any of the
foregoing, including any additions thereto or extensions, continuations,
renewals of divisions thereof (setting forth the registration, issue or serial
number and a description of the same) (collectively, together with all trade
dress, trade secrets, processes, formulae, designs, know-how and other
intellectual property rights that are so used, the "Intellectual Property").
Falcon has heretofore been furnished with true, correct and complete copies of
each registration or application for
20
<PAGE>
registration covering any of the Intellectual Property which is registered with,
or in respect of which any application for registration has been filed with, any
governmental body or authority.
(b) The Intellectual Property includes all of the material intellectual
property rights owned or licensed by Shelby Williams and its Subsidiaries that
are reasonably necessary to conduct their business as it is now conducted or is
expected to be conducted. Shelby Williams, directly or through its Subsidiaries,
has good, marketable and exclusive title to, and the valid and enforceable power
and unqualified right to use, the Intellectual Property free and clear of all
liens or other encumbrances and (B) no person or entity other than Shelby
Williams and its Subsidiaries has any right or interest of any kind or nature in
or with respect to the Intellectual Property or any portion thereof or any
rights to use, market or exploit the Intellectual Property or any portion
thereof.
(c) Neither the existence nor the sale, license, lease, transfer, use,
reproduction, distribution, modification or other exploitation by Shelby
Williams or any of its Subsidiaries of any of the Intellectual Property does,
did or will (i) infringe on any patent, trademark, copyright or other right of
any other person, (ii) constitute a misuse or misappropriation of any trade
secret, know-how, process, proprietary information or other right of any other
person, or (iii) entitle any other person to any interest therein, or right to
compensation from Shelby Williams or any of its Subsidiaries or any of their
respective successors or assigns (it being understood and agreed that, insofar
as the foregoing representation and warranty relates to Intellectual Property
that is licensed to Shelby Williams or any of its Subsidiaries by any third
party, such representation and warranty is made only to the knowledge of Shelby
Williams. Neither Shelby Williams nor any of its Subsidiaries has received any
complaint, assertion, threat or allegation or otherwise has notice of any
lawsuit, claim, demand, proceeding or investigation involving matters of the
type contemplated by the immediately preceding sentence or is aware of any facts
or circumstances that could reasonably be expected to give rise to any such
lawsuit, claim, demand, proceeding or investigation. There are no restrictions
on the ability of Shelby Williams, any of its Subsidiaries, or any of the
successors or assigns to sell, license, lease, transfer, use, reproduce,
distribute, modify or otherwise exploit any Intellectual Property.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF FALCON AND SUB
Falcon and Sub jointly and severally represent and warrant to Shelby
Williams that all of the statements contained in this Article V are true and
correct as of the date of this Agreement (or if made as of a specified date, as
of such date).
SECTION 5.1 ORGANIZATION, QUALIFICATION, ETC. Each of Falcon and Sub is a
----------------------------------------------
corporation duly organized, validly existing and of active status or in good
standing under the laws of its jurisdiction of organization and has the
corporate power and authority to own its properties and assets and to carry on
its business as it is now being conducted and is duly qualified to do business
and is of active status or in good standing in each jurisdiction in which the
ownership of its properties or the conduct of its business requires such
qualification, except for jurisdictions in which such failure to be so qualified
or to be in good standing would not, individually or in the aggregate, have a
Material Adverse Effect on Falcon. The copies of Falcon's and Sub's Certificate
of Incorporation and bylaws which have been made available to
21
<PAGE>
Shelby Williams are complete and correct and in full force and effect on the
date hereof. Neither Falcon nor Sub is in violation of any of the provisions of
its Certificate of Incorporation or By-laws.
SECTION 5.2 CORPORATE AUTHORITY RELATIVE TO THIS AGREEMENT; NO VIOLATION; NO
- -----------------------------------------------------------------------------
CONFLICT. Each of Falcon and Sub has the corporate power and authority
- ---------
necessary to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
the Boards of Directors of Falcon and Sub and no other corporate proceedings on
the part of Falcon or Sub are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Falcon and Sub and, assuming this Agreement
constitutes a valid and binding Agreement of the other parties hereto, this
Agreement constitutes a valid and binding agreement of Falcon and Sub,
enforceable against each of them in accordance with its terms (except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally,
or by principles governing the availability of equitable remedies). Other than
in connection with or in compliance with the provisions of the DGCL, the
Exchange Act, and the HSR Act (collectively, the "Falcon Required Approvals"),
no authorization, consent or approval of, or filing by Falcon or Sub with, any
governmental body or authority or other person is necessary for the execution
and delivery of this Agreement or the consummation by Falcon or Sub of the
transactions contemplated hereby except where the failure to obtain such
authorizations, consents or approvals or make such filing is not reasonably
likely to have a Material Adverse Effect on Falcon. Neither the execution and
delivery of this Agreement by Falcon and Sub nor the consummation by Falcon and
Sub of the transactions contemplated by this Agreement will (a) result in a
breach or violation of the organizational documents of Falcon or Sub or of any
of Falcon's Subsidiaries; (b) result in a breach or violation of any provision
of, or constitute a default (or an event which, with the giving of notice, the
passage of time or otherwise, would constitute a default) under, or entitle any
party (with the giving of notice, the passage of time or otherwise) to
terminate, accelerate or modify, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of Falcon
or Sub or any of Falcon's Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, contract,
agreement, lease or other instrument or obligation to which Falcon or Sub or any
of its Falcon's Subsidiaries is a party; (c) subject to the matters set forth in
the preceding sentence, violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Falcon or Sub or any of Falcon's Subsidiaries
or any of the properties or assets of any of them; or (d) give any governmental
body or authority the right to revoke, withdraw, suspend, cancel, terminate or
modify any governmental authorization held by Falcon or any of its Subsidiaries,
except as would not, individually or in the aggregate, have a Material Adverse
Effect on Falcon.
SECTION 5.3 FINANCING. Falcon has obtained a commitment letter (the
-----------------------
"Commitment Letter") from financially responsible third parties providing for
sufficient funds to (a) pay the Per Share Amount pursuant to the Offer, (b) pay
the Merger Consideration pursuant to the Merger, and (c) pay all fees and
expenses in connection with this Agreement and the transactions contemplated
hereby.
22
<PAGE>
SECTION 5.4 OFFER DOCUMENTS; SCHEDULE 14D-9; PROXY STATEMENT. None of the
--------------------------------------------------------------
Offer Documents nor any of the information supplied by Falcon or any of its
Subsidiaries in writing specifically for inclusion in the Schedule 14D-9 shall,
at each of the times the Offer Documents, the Schedule 14D-9, and any amendments
or supplements thereto are filed with the SEC and are first published, sent or
given to stockholders of Shelby Williams, as the case may be, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they are made, not misleading. The
information supplied in writing by Falcon specifically for inclusion in the
Proxy Statement or Information Statement shall not, at each of the dates any
such document (or any amendment or supplement thereto) is first mailed to
stockholders of Shelby Williams, with respect to the Information Statement at
the time Shares are accepted for payment in the Offer, and with respect to the
Proxy Statement at the time of the Stockholders' Meeting, be false or misleading
with respect to any material fact, or omit to state any material fact required
to be stated therein or necessary in order to make the statements made therein,
in the light of the circumstances under which they are made, not misleading.
Notwithstanding the foregoing, Falcon and Sub make no representation or warranty
with respect to any of the foregoing documents based on information supplied by
Shelby Williams or any of its representatives. The Offer Documents shall comply
in all material respects as to form with the applicable requirements of the
Exchange Act and the applicable rules and regulations thereunder.
SECTION 5.5 LACK OF OWNERSHIP OF SHARES. Neither Falcon nor any of its
-----------------------------------------
Subsidiaries owns any Shares or other securities convertible into Shares.
SECTION 5.6 SOLVENCY. Immediately after the Effective Time and after
----------------------
giving effect to the changes in the Surviving Corporation's assets and
liabilities as a result of the Merger, neither Falcon nor the Surviving
Corporation shall be insolvent, have unreasonably small capital with which to
engage in its business, or have incurred debts beyond its ability to pay AS
they become due.
ARTICLE VI
COVENANTS AND AGREEMENTS
It is further agreed as follows:
SECTION 6.1 CONDUCT OF BUSINESS BY SHELBY WILLIAMS. From the date hereof
----------------------------------------------------
and prior to the time the directors of Falcon have been elected to, and shall
constitute a majority of, the Board of Directors of Shelby Williams pursuant to
Section 1.3(a) or the date, if any, on which this Agreement is earlier
terminated pursuant to Section 8.1 (the "Termination Date"), and except as
specifically set forth in Shelby Williams's Disclosure Schedule or as may be
agreed to in writing by Falcon hereto or as may be permitted pursuant to this
Agreement, Shelby Williams shall, and shall cause each of its Subsidiaries to:
(a) conduct its operations in all material respects according to their
ordinary and usual course of business in substantially the same manner as
heretofore conducted;
23
<PAGE>
(b) use reasonable best efforts to preserve intact its business
organization in all material respects, keep available the services of its
executive officers and key employees as a group, subject to changes in the
ordinary course, and maintain satisfactory relationships with suppliers,
distributors, customers and others having business relationships with them;
(c) confer at such times as Falcon may reasonably request with one or more
representatives of Falcon to report material operational matters and the general
status of ongoing operations (in each case to the extent Falcon reasonably
requires such information) and consult with Falcon regarding material
operational decisions;
(d) promptly notify Falcon of any emergency or other change in the normal
course of its businesses or in the operation of its properties and of any
complaints, investigations or hearings (or communications indicating that the
same may be contemplated) of any governmental body or authority;
(e) not authorize or pay any dividends on or make any distribution with
respect to its outstanding shares of stock;
(f) not, except as contemplated by Section 6.5 hereof or as may be
required by applicable law, enter into or amend any employment, severance or
similar agreements or arrangements with any of their directors or executive
officers;
(g) not (subject to the provisions of Section 6.8) authorize, announce an
intention to authorize, or enter into an agreement with respect to, any merger,
consolidation or business combination (other than this Agreement and the
transactions contemplated hereby), any acquisition of a material amount of
assets or securities, any disposition of a material amount of assets or
securities, or any release or relinquishment of any material contract rights, in
each case, not in the ordinary course of business;
(h) except pursuant to the Merger as provided for in Section 2.5, not
propose or adopt a ny amendments to its corporate charter or by-laws;
(i) not issue any shares of capital stock, except upon exercise of options
heretofore issued pursuant to existing employee plans, programs or arrangements
and non-employee director plans;
(j) not grant, confer or award any options, warrants, conversion rights or
other rights not existing on the date hereof to acquire any shares of its
capital stock;
(k) not purchase, redeem, or offer to purchase or redeem any shares of its
stock or any securities convertible into or exchangeable for shares of stock,
except for the deemed repurchase of options in accordance with Section 3.5 of
this Agreement, or purchases, redemptions and offers to purchase in the ordinary
course of business in connection with employee incentive and benefit plans,
programs or arrangements in existence on the date hereof;
(l) not, except as contemplated by this Agreement or as may be required by
applicable law, amend in any material respect the terms of its employee benefit
plans, programs or arrangements or any severance or similar agreements or
arrangements in existence on the date
24
<PAGE>
hereof, enter into or amend any employment or consulting agreement, adopt or
enter into any new employee benefit plans, programs or arrangements or any
severance or similar agreements or arrangements or increase the base salary of
any person who is a party to a Change of Control Employment Agreement or make
any payments under any Shelby Williams Benefit Plan to any director, employee,
independent contractor or consultant (except in the ordinary course of business
and in amounts and in a manner consistent with past practice or as other wise
required by law or the provisions of such Shelby Williams Benefit Plan);
(m) not (i) enter into any material loan agreement or incur any
indebtedness in excess of an aggregate of $100,000 or amend any Shelby Williams
credit facility to increase the amount that may be borrowed thereunder, (ii)
make or enter into any agreement or contract for capital expenditures in excess
of $50,000, (iii) enter into any lease for any real property in excess of
$50,000 or any lease for personal property in excess of $20,000 or (iv) enter
into any agreement or contract outside of the ordinary course of business that
involves performance of services or delivery of goods or materials of an amount
or value in excess of $50,000;
(n) not make or change any material Tax election, file any amendment to
any federal income Tax Return unless required by law, enter into any closing
agreement, or settle or compromise any material Tax liability;
(o) not adjust, split, combine or reclassify its capital stock;
(p) not enter into any agreement, understanding or arrangement with
respect to the sale or voting of its capital stock;
(q) not create any new subsidiaries;
(r) except as required by this Agreement, not take any action which could
reasonably be expected to adversely affect or delay the ability of any of the
parties hereto to obtain any approval of any governmental or regulatory body
required to consummate the transactions contemplated hereby;
(s) not directly or indirectly sell, transfer, lease, pledge, mortgage,
encumber or otherwise dispose of any material property or assets other than in
the ordinary course of business;
(t) not enter into any financial derivative contracts;
(u) not change in any material respect its accounting policies, methods or
procedures except as required by GAAP;
(v) except as may be required by this Agreement or applicable law, not do
any act or omit to do any act which would cause a breach of any contract,
commitment or obligation by which it is bound;
(w) except as otherwise permitted by Section 6.8, not take any action
which could cause the conditions to the Offer set forth on Annex A hereto to not
be satisfied;
25
<PAGE>
(x) not, other than pursuant to this Agreement, take any action to cause
the shares of Shelby Williams Common Stock to cease to be quoted on any of the
stock exchanges on which such shares are now quoted;
(y) continue to provide training for employees of Shelby Williams and its
Subsidiaries commensurate with the training provided by Shelby Williams and its
Subsidiaries over the past twelve months;
(z) subject to the limitations contained in this Agreement, continue the
level of recruiting activity and process employed over the past twelve months;
(aa) not agree, in writing or otherwise, to take any of the foregoing
actions or take any action which would make any representation or warranty
contained in Article IV hereof (except for representations and warranties made
as of a specified date) untrue and incorrect in any material respect as of the
Effective Time;
(bb) not pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction, in the ordinary course of business and
consistent with past practice, of liabilities reflected or reserved against in
the March 31, 1999 balance sheet or subsequently incurred in the ordinary course
of business and consistent with past practice; and
(cc) not settle or compromise any pending or threatened suit, action or
claim not covered by insurance (without giving effect to deductibles in
determining whether coverage exists) that is material or which relates to the
Agreement or any of the transactions contemplated thereby, including the Offer
and the Merger.
SECTION 6.2 INVESTIGATION. Shelby Williams shall afford to Falcon and to
---------------------------
Falcon's officers, employees, accountants, counsel and other authorized
representatives full and complete access during normal business hours,
throughout the period prior to the earlier of the Effective Time or the
Termination Date, to its and its Subsidiaries' facilities, properties,
contracts, commitments, books, and records (including but not limited to tax
returns) and any report, schedule or other document filed or received by it
pursuant to the requirements of federal or state securities laws and shall use
its reasonable best efforts to cause its representatives to furnish promptly
such additional financial and operating data and other information as to the
businesses and properties of each of Shelby Williams and each of its
Subsidiaries as may from time to time be reasonably requested; provided, that
nothing herein shall require Shelby Williams or any of its Subsidiaries to
disclose any information to the other that would cause a violation of any
contractual confidentiality obligation. The parties hereby agree that each of
them will treat any such information in accordance with the Confidentiality
Agreement dated as of April 22, 1999, between Shelby Williams and Falcon (the
"Shelby Williams Confidentiality Agreement"). Notwithstanding any provision of
this Agreement to the contrary, no party shall be obligated to make any
disclosure in violation of applicable laws or regulations.
SECTION 6.3 OBLIGATIONS OF FALCON AND SUB. Neither Falcon nor Sub or any
-------------------------------------------
of their Subsidiaries shall take any action which would make any representation
or warranty contained in Article V hereof (except for representations and
warranties made as of a specific date) untrue or
26
<PAGE>
incorrect in any material respect or cause any of the conditions to the Offer
set forth in Annex A or the conditions to the Merger set forth in Article VII
not to be satisfied.
SECTION 6.4 [INTENTIONALLY OMITTED]
------------------------------------
SECTION 6.5 EMPLOYEE BENEFIT PLANS. Simultaneously with the consummation
------------------------------------
of the Offer, Falcon shall take all actions necessary or appropriate with
respect to employees employed by Shelby Williams or any of its Subsidiaries from
and after the purchase of any Shares pursuant to the Offer ("Shelby Williams
Employees") to accomplish the following:
(i) with respect to the Shelby Williams Industries, Inc. Employees' Pension
Plan, the Shelby Williams Industries, Inc. Salaried Employees' Pension
Plan, and the Sellers & Josephson, Inc. Employees' Pension Plan, each as
amended and restated as of January 1, 1994, to allow Shelby Williams
Employees participating in any of such plans as of the Closing Date to
continue to participate in such plan (without amendment thereto, except as
may be required by applicable law) from and after the Closing Date for a
period of not less than three years thereafter; and
(ii) with respect to the employee benefit plans and programs maintained by
Shelby Williams immediately prior to the Closing Date other than the plans
identified in clause (i) and the Employee Stock Ownership Plan, either, at
the sole election of Falcon, to (A) allow Shelby Williams Employees
continue to participate from and after the Closing Date in such plans or
(B) permit Shelby Williams Employees to immediately thereafter participate
in the employee benefit plans or programs maintained by Falcon or any of
its Subsidiaries for their employees generally (the "Falcon Plans") other
than Falcon's stock option plans or any employee stock purchase plan
meeting the requirements of Section 423 of the Code; provided, however,
that, if Shelby Williams's group health plan is terminated or discontinued,
Falcon shall permit each Shelby Williams Employee and his or her eligible
dependents (including, without limitation, all such Shelby Williams
Employee's dependents covered by Shelby Williams's group health plan as of
the time such coverage ceases) to be covered under a Falcon Plan that (x)
provides medical and dental benefits to the Shelby Williams Employee and
such eligible dependents effective immediately upon the cessation of
coverage of such individuals under Shelby Williams's group health plan, (y)
credits such Shelby Williams Employee, for the year during which such
coverage under such Falcon Plan begins, with any deductibles and co-payment
already incurred during such year under Shelby Williams's group health
plan, and (z) waives any preexisting condition restrictions to the extent
necessary to provide immediate coverage. Each of Falcon, the Surviving
Corporation, the Subsidiaries of each of them, and the Falcon Plans shall
recognize each Shelby Williams Employee's years of service and level of
seniority with Shelby Williams and its Subsidiaries for purposes of terms
of employment and eligibility, vesting and benefit determination under the
Falcon Plans. The provisions of this Section 6.5 shall be applicable only
during an employee's employment with Shelby Williams, Falcon or a
Subsidiary of either of them and shall not constitute an agreement to
employ or continue the employment of any person.
SECTION 6.6 FILINGS; OTHER ACTION. Subject to the terms and conditions
-----------------------------------
herein provided, each of Shelby Williams and Falcon shall (a) as soon as
practicable, make the filings
27
<PAGE>
and thereafter make any other required submissions under the HSR Act; (b) use
reasonable efforts to cooperate with one another in (i) determining whether any
filings are required to be made with, or consents, permits, authorizations or
approvals are required to be obtained from any third party, governmental or
regulatory bodies or authorities of federal, state and local jurisdictions in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and thereby, and (ii)
timely making all such filings and timely seeking all such consents, permits,
authorizations or approvals; and (c) use reasonable efforts to take, or cause to
be taken, all other actions and do, or cause to be done, all other things
necessary, proper or advisable to consummate and make effective the transactions
contemplated hereby, including, without limitation, taking all such further
action as reasonably may be necessary to resolve such objections, if any, as the
Federal Trade Commission, the Antitrust Division of the Department of Justice,
state antitrust enforcement authorities, or any other person may assert under
relevant antitrust or competition laws with respect to the transactions
contemplated hereby.
SECTION 6.7 FURTHER ASSURANCES. Each of the Parties shall use its
--------------------------------
reasonable best efforts to take all action and to do all things necessary,
proper or advisable to consummate the transactions contemplated by this
Agreement (including, without limitation, using its reasonable efforts to cause
the conditions to the consummation of the Offer set forth in Annex A hereto and
the conditions to the Merger set forth in Article VII for which they are
responsible to be satisfied as soon as reasonably practicable and to prepare,
execute and deliver such further instruments and take or cause to be taken such
other and further action as any other party hereto shall reasonably request).
Without limiting the generality of the foregoing, Shelby Williams shall provide,
and shall cause its employees and advisers to provide, all necessary cooperation
in connection with the arrangement of any financing to be consummated
contemporaneously with or at or after the consummation of the transactions
contemplated by this Agreement, including without limitation the preparation of
offering memoranda, private placement memoranda, prospectuses and similar
documents and the execution and delivery of those certificates or documents
required in connection therewith, such as any certificate of the chief financial
officer of Shelby Williams with respect to solvency matters, comfort letters of
accountants, and legal opinions as may be requested by Falcon. All fees, costs
and expenses incurred in connection therewith shall be the responsibility of
Falcon.
SECTION 6.8 NO SOLICITATION.
-----------------------------
(a) From the date hereof until the termination of this Agreement, Shelby
Williams will not, and shall not authorize or permit, any of its officers,
directors, employees, attorneys, financial advisors, agents or other
representatives or those of any of its Subsidiaries ("Shelby Williams's
Representatives") to, directly or indirectly, (a) solicit or initiate any
Takeover Proposal (as hereinafter defined), including without limitation by
disclosure of non-public information, or (b) engage in discussions or
negotiations relating to or accept any Takeover Proposal; provided, however,
that nothing contained in this Section 6.8 shall prohibit Shelby Williams and
its Board of Directors from (i) taking and disclosing a position with respect to
a tender offer by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated
by the SEC under the Exchange Act, or (ii) at any time prior to the purchase of
Shares pursuant to the Offer, engaging in discussions or negotiations with, and
furnishing information (including non-public information) concerning Shelby
Williams and its Subsidiaries, and their respective businesses,
28
<PAGE>
properties or assets to, any third party which makes a Takeover Proposal
(without any solicitation or initiation, directly or indirectly, by Shelby
Williams or any of Shelby Williams's Representatives after the date of this
Agreement) if the Board of Directors of Shelby Williams determines in good
faith, based on advice of its outside counsel (who may be its regularly engaged
outside counsel), that the failure to take such action will violate its
obligations or duties to Shelby Williams or its stockholders under applicable
law, or (iii) provided this Agreement is terminated pursuant to Section 8.1(d),
accepting a Superior Proposal. Prior to furnishing information to or entering
into discussions or negotiations with any person, Shelby Williams shall receive
from such person or entity an executed confidentiality agreement in reasonably
customary form on terms not in the aggregate materially more favorable to such
person or entity than the terms contained in Shelby Williams Confidentiality
Agreement (as defined in Section 6.2 hereof). Shelby Williams shall immediately
cease and cause to be terminated any existing solicitation, initiation,
encouragement, activity, discussion or negotiation with any person conducted
heretofore by Shelby Williams or any Shelby Williams Representative with respect
to any Takeover Proposal existing on the date hereof. Shelby Williams agrees not
to release any third party from, or waive any provision of, any standstill
agreement to which it is a party or any confidentiality agreement between it and
another person who has made, or who may reasonably be considered likely to make,
or who was given access in order to consider making, a Takeover Proposal, unless
its Board of Directors determines in good faith, based on advice of its outside
counsel (who may be its regularly engaged outside counsel), that failure to take
such action will violate its obligations or duties to Shelby Williams or its
stockholders under applicable law. Shelby Williams shall notify Falcon orally
and in writing of any such Takeover Proposal received (including, without
limitation, the terms and conditions of any such proposal and the identity of
the person making it), within 24 hours of the receipt thereof, and shall keep
Falcon informed of the general status and any material changes in the terms and
conditions of such Takeover Proposal. Shelby Williams agrees to promptly provide
to Falcon any information concerning Shelby Williams, its Subsidiaries,
business, properties or assets furnished to any third party which makes a
Takeover Proposal and which has not previously been provided to Falcon.
(b) Except as set forth in this Section 6.8, neither the Board of
Directors of Shelby Williams nor any committee thereof shall (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Falcon, the
approval or recommendation by the Board of Directors of Shelby Williams of the
Offer, this Agreement or the Merger, (ii) approve or recommend, or propose to
approve or recommend, any Takeover Proposal or (iii) enter into any agreement
with respect to any Takeover Proposal. Subject to compliance with all of the
applicable provisions of this Section 6.8, prior to the time of acceptance for
payment of Shares pursuant to the Offer, Shelby Williams' Board of Directors may
withdraw or modify its approval or recommendation of the Offer, this Agreement
or the Merger, approve or recommend a Superior Proposal, or enter into an
agreement with respect to a Superior Proposal, in each case at any time after
the third business day following Falcon's receipt of written notice (including
by facsimile) from Shelby Williams advising Falcon that the Board of Directors
of Shelby Williams has received a Superior Proposal which it intends to accept,
specifying the material terms and conditions of such Superior Proposal and
identifying the person making such Superior Proposal, but only if Shelby
Williams shall have caused its financial and legal advisors to negotiate with
Falcon to make such adjustments to the terms and conditions of this Agreement as
would enable Shelby Williams to proceed with the transactions contemplated
hereby on such adjusted terms.
29
<PAGE>
(c) For purposes of this Agreement, "Takeover Proposal" means any bona
fide offer, proposal or other indication of interest regarding any of the
following (other than the transactions provided for in this Agreement): (i) any
merger, consolidation, share exchange, recapitalization, business combination or
other similar transaction involving Shelby Williams or any of its Subsidiaries;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition
of a significant portion of the assets of Shelby Williams and its Subsidiaries,
taken as a whole, in a single transaction or series of related transactions
(other than sales of inventory or used equipment in the ordinary course of
business); (iii) any purchase of, or tender offer or exchange offer for, 20
percent or more of the outstanding shares of capital stock of Shelby Williams by
any person or the filing of a registration statement under the Securities Act in
connection therewith; or (iv) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing. For purposes of this Agreement, "Superior Proposal" means an
unsolicited Takeover Proposal on terms which the Board of Directors of Shelby
Williams determines in good faith to be more favorable to Shelby Williams'
stockholders than the Offer and the Merger (based on advice of Shelby Williams's
independent financial advisor that the value of the consideration provided for
in such proposal is superior to the value of the consideration provided for in
the Offer and the Merger) for which financing, to the extent required, is then
committed or which, in the good faith reasonable judgment of the Board of
Directors of Shelby Williams (based on advice from Shelby Williams' independent
financial advisor) is reasonably capable of being financed by such third party
provided that the Board of Directors of Shelby Williams has also, among other
things, duly considered the timing of such Takeover Proposal and the likelihood
that such Takeover Proposal will be consummated.
SECTION 6.9 PUBLIC ANNOUNCEMENTS. Shelby Williams and Falcon will consult
----------------------------------
with each other before issuing any press release relating to this Agreement or
the transactions contemplated herein and shall not issue any such press release
prior to such consultation except as may be required by law or by obligations
pursuant to any listing agreement with any national securities exchange.
SECTION 6.10 INDEMNIFICATION AND INSURANCE.
--------------------------------------------
(a) Falcon and Sub agree that all rights to exculpation and
indemnification for acts or omissions occurring prior to the Effective Time now
existing in favor of the current or former directors or officers (the
"Indemnified Parties") of Shelby Williams as provided in its Certificate of
Incorporation or By-laws or in any agreement, in each case as in effect as of
the date hereof, shall survive the Merger and shall continue in full force and
effect in accordance with their terms without amendment thereof. For three years
from the Effective Time, Falcon shall indemnify the Indemnified Parties to the
same extent as such Indemnified Parties are entitled to indemnification pursuant
to the preceding sentence.
(b) For three years from the Effective Time, Falcon shall maintain in
effect Shelby Williams's current directors' and officers' liability insurance
covering those persons who are currently covered by Shelby Williams's directors'
and officers' liability insurance policies and shall purchase such policy on or
prior to the Closing Date; provided, however, that in no event shall Falcon be
required to expend in the aggregate an amount in excess of 150% of the annual
premiums currently paid by Shelby Williams for such insurance, and, provided,
further, that if the aggregate premiums of such insurance coverage exceed such
amount, Falcon shall be
30
<PAGE>
obligated to obtain a policy with the greatest coverage available for a cost not
exceeding such amount.
(c) Falcon shall use reasonable efforts to cause any person or entity that
purchases all or substantially all of the assets of Shelby Williams within three
years after the Effective Time to become bound by the covenants contained in
this Section.
SECTION 6.11 ADDITIONAL REPORTS. Shelby Williams shall furnish to Falcon
-------------------------------
copies of any reports of the type referred to in Section 4.4 which it files with
the SEC on or after the date hereof, and Shelby Williams represents and warrants
that as of the dates of each of such reports, such reports will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statement therein, in light of the
circumstances under which they were made, not misleading. Any unaudited
consolidated interim financial statements included in such reports (including
any related notes and schedules) will fairly present the financial position of
Shelby Williams and its consolidated Subsidiaries as of the dates thereof and
the results of operations and changes in financial position or other information
included therein for the periods or as of the date then ended (subject, where
appropriate, to normal year-end adjustments), in each case in accordance with
past practice and GAAP consistently applied during the periods involved (except
as otherwise disclosed in the notes thereto).
SECTION 6.12 NOTIFICATIONS
---------------------------
(a) Between the date of this Agreement and the Closing Date, Shelby
Williams will promptly notify Falcon in writing if Shelby Williams becomes aware
that any of Shelby Williams's representations and warranties were materially
untrue as of the date of this Agreement or if Shelby Williams becomes aware of
any fact or condition that causes any of Shelby Williams's representations or
warranties to be materially untrue as of such date as if made on and as of such
date (except for representations and warranties made as of a specified date,
which need be true only as of such specified date). During the same period,
Shelby Williams will promptly notify Falcon of the occurrence of any material
breach of any covenant of Shelby Williams in this Article VI or of the
occurrence of any event that may make the satisfaction of the conditions in
Annex A hereto or Article VII impossible or unlikely.
(b) Between the date of this Agreement and the Closing Date, Falcon will
promptly notify Shelby Williams in writing if Falcon becomes aware that any of
Falcon's representations and warranties were materially untrue as of the date of
this Agreement or if Falcon becomes aware of any fact or condition that causes
any of Falcon's representations or warranties to be materially untrue as of such
date as if made on and as of such date (except for representations and
warranties made as of a specified date, which need be true only as of such
specified date). During the same period, Falcon will promptly notify Shelby
Williams of the occurrence of any material breach of any covenant of Falcon in
this Article VI or of the occurrence of any event that may make the satisfaction
of the conditions in Annex A hereto or Article VII impossible or unlikely.
SECTION 6.13 EMPLOYMENT AGREEMENTS. Simultaneously with the consummation of
----------------------------------
the Offer, Falcon shall offer to each of Messrs. Peter W. Barile, Robert P.
Coulter, Sam Ferrell,
31
<PAGE>
Dennis E. Gurley, John McCalla, and Jeff O'Hara employment agreements in the
form set forth in Schedule 6.13 of the attached Disclosure Schedule.
SECTION 6.14 TERMINATION OF ESOP. Prior to the Effective time, Shelby
--------------------------------
Williams shall take all actions necessary or appropriate to terminate the Shelby
Williams Employee Stock Ownership Plan subject to and effective upon the
occurrence of the Effective Time.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
----------- -----------------------------------------------------------
The obligations of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions:
(a) Falcon shall have accepted for payment and paid for all Shares validly
tendered in the Offer and not withdrawn; provided, however, that neither Falcon
nor Sub may invoke this condition if Sub shall have failed to purchase Shares so
tendered and not withdrawn in violation of the terms of this Agreement or the
Offer.
(b) The holders of issued and outstanding shares of Shelby Williams Common
Stock shall have duly approved the Merger in the manner, if any, required by
applicable law; provided that Falcon and Sub shall vote all of their Shares in
favor of the Merger.
(c) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
court or other tribunal or governmental body or authority which prohibits the
consummation of the transactions contemplated herein substantially on the terms
contemplated hereby. If any order, decree or injunction is issued, each party
shall use its reasonable efforts to remove any such order, decree or injunction.
(d) Any waiting periods applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated and all consents and
authorizations shall have been obtained the failure to have obtained which would
violate any applicable law, rule, or regulation or have a Material Adverse
Effect.
(e) Sub shall have purchased Shares pursuant to the Offer.
ARTICLE VIII
TERMINATION, WAIVER, AMENDMENT AND CLOSING
SECTION 8.1 TERMINATION OR ABANDONMENT. Notwithstanding anything contained
--------------------------------------
in this Agreement to the contrary, this Agreement may be terminated and
abandoned at any time prior to the Effective Time, whether before or after any
approval of the matters presented in connection with the Merger by the
stockholders of Shelby Williams:
(a) by the mutual written consent of Shelby Williams and Falcon;
32
<PAGE>
(b) (i) by either Shelby Williams or Falcon if Shares shall not have been
purchased pursuant to the Offer on or before July 15, 1999 and (ii) by Shelby
Williams if after 90 days following the commencement of the Offer, the
conditions to the Offer have not been satisfied or waived and Sub shall not have
elected to extend the Offer; provided, that the party seeking to terminate this
Agreement pursuant to this Section 8.1(b) shall not have breached in any
material respect its obligations under this Agreement in any manner that shall
have proximately contributed to the failure to purchase Shares pursuant to the
Offer on or before such date;
(c) by either Shelby Williams or Falcon if (i) a statute, rule, regulation
or executive order shall have been enacted, entered or promulgated prohibiting
the purchase of Shares pursuant to the Offer or the consummation of the Merger
substantially on the terms contemplated hereby or (ii) an order, decree, ruling
or injunction shall have been entered permanently restraining, enjoining or
otherwise prohibiting the purchase of Shares pursuant to the Offer or
consummation of the Merger substantially on the terms contemplated hereby and
such order, decree, ruling or injunction shall have become final and non-
appealable; provided, that the party seeking to terminate this Agreement
pursuant to this Section 8.1(c)(ii) shall have used its reasonable best efforts
to remove such injunction, order or decree;
(d) by Shelby Williams prior to the purchase of Shares pursuant to the
Offer if the Board of Directors of Shelby Williams determines in good faith
(based upon advice of its independent financial advisor and outside counsel, as
appropriate) that (i) a Takeover Proposal constitutes a Superior Proposal and
(ii) the failure to accept such Superior Proposal will violate its obligations
or duties to Shelby Williams or its stockholders under applicable law, provided,
that this Agreement shall not terminate pursuant to this Section 8.1(d) unless
(A) Shelby Williams has provided Falcon with two business days' prior written
notice of its intention to accept such Superior Proposal, together with a
detailed description of the terms and conditions of such Superior Proposal and
(B) simultaneously with such termination Shelby Williams enters into a
definitive acquisition, merger or similar agreement to effect such Superior
Proposal and pays the Termination Fee (as defined in Section 8.2(b)) required
pursuant to Section 8.2(b);
(e) by either Shelby Williams or Falcon prior to the purchase of any Shares
pursuant to the Offer if the other shall have breached, or failed to comply
with, in any material respect any of its obligations under this Agreement or any
representation or warranty made by such other party shall have been untrue when
made or as of the time of such termination as if made on and as of such time
(except for representations and warranties made as of a specified date, which
need be true only as of the specified date), provided such breach, failure or
misrepresentation is not cured prior to the earlier of ten (10) days after
notice thereof from the other party or two (2) business days prior to the date
upon which the Offer expires, and with respect to any covenant or agreement or
any representation or warranty not qualified by "Material Adverse Effect," such
breaches, failures or misrepresentations, individually or in the aggregate,
results or is reasonably likely to result in a Material Adverse Effect on Shelby
Williams or Falcon, as the case may be;
(f) by Falcon (i) if the Board of Directors of Shelby Williams or any
committee of the Board of Directors of Shelby Williams (A) shall withdraw,
modify or change in any adverse manner (including by amendment of the Schedule
14D-9) to Falcon or Sub, or fail to reconfirm upon the request of Falcon, its
approval or recommendation of this Agreement, the Offer or the Merger, (B) shall
approve or recommend any Takeover Proposal, in each case, other than by
33
<PAGE>
Falcon or an affiliate of Falcon, or (C) shall resolve to take any of the
actions specified in clauses (A) or (B) above;
(g) by Shelby Williams if Sub fails to commence the Offer on or prior to
five business days following the date of initial public announcement of the
Offer, provided that Shelby Williams may not terminate this Agreement pursuant
to this Section 8.1(g) if Shelby Williams is at such time in breach in any
material respect of its obligations under this Agreement; or
(h) by either of Shelby Williams or Falcon if the Offer shall have been
terminated, or the Offer has expired without any Shares being purchased therein;
provided, however that the right to terminate this Agreement under this Section
8.1(h) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
termination of the Offer or the failure of Falcon or Sub, as the case may be, to
purchase Shares pursuant to the Offer on or prior to such date; and provided,
further, that no termination by Shelby Williams shall be effective pursuant to
Section 8.1(d) under circumstances in which a Termination Fee would be payable
by Shelby Williams under Section 8.2 unless concurrently with such termination,
such Termination Fee is paid in full by Shelby Williams in accordance with the
provisions of Section 8.2.
SECTION 8.2 EFFECT OF TERMINATION. If this Agreement is terminated as
---------------------------------
provided in Section 8.1, and subject to the provisions of Section 9.1, this
Agreement (except for the Shelby Williams Confidentiality Agreement referred to
in Section 6.2) shall forthwith become void and there shall be no liability on
the part of any of the Parties, except (i) as set forth in this Section 8.2 and
in Section 4.11, Section 5.4, Section 9.2, and Section 9.12 hereof, and (ii)
nothing herein shall relieve any party from liability for any willful breach
hereof.
(a) If (i) prior to the termination of this Agreement, any person shall
have commenced, publicly proposed or communicated to Shelby Williams a Takeover
Proposal and (X) the Minimum Condition shall not have been satisfied, (Y) this
Agreement shall have been terminated pursuant to Section 8.1(b)(c)(e) or (g),
and (Z) prior to the first anniversary of such termination Shelby Williams shall
consummate with any third party any transaction described in clauses (i), (ii),
and (iii) of the definition of "Takeover Proposal" contained in Section 6.8(c);
or if (ii) this Agreement is terminated by Shelby Williams or Falcon pursuant to
Section 8.1(d) or Section 8.1(f), respectively; then, in any such event, Shelby
Williams shall pay to Falcon a termination fee of $4,750,000 (the "Termination
Fee"), which amount shall be paid by wire transfer of immediately available
funds to an account designated by Falcon.
(b) (i) The Termination Fee payable to Falcon under Section 8.2(a)(i) shall
be paid promptly but in no event later than one business day after the last of
the specified events shall have occurred; and (ii) the Termination Fee payable
to Falcon under Section 8.2(a)(ii) shall be paid (A) in the case of a
termination by Falcon pursuant to Section 8.1(f), within three business days
after notice of termination, and (B) in the case of a termination by Shelby
Williams pursuant to Section 8.1(d), concurrently with such termination.
(c) Shelby Williams and Falcon agree that the agreements contained in
Section 8.2(b) above are an integral part of the transactions contemplated by
this Agreement. If Shelby
34
<PAGE>
Williams fails to promptly pay to Falcon or Sub any fee due under such Section
8.2(b), Shelby Williams shall pay the costs and expenses (including legal fees
and expenses) in connection with any action, including the filing of any lawsuit
or other legal action, taken to collect payment, together with interest on the
amount of any unpaid fee at the publicly announced prime rate of [NAME OF BANK]
from the date such fee was required to be paid. If Falcon receives any fee
pursuant to Section 8.2(b), Falcon shall not assert or pursue in any manner,
directly or indirectly, any claim or cause of action against Shelby Williams or
any of its affiliates, officers or directors based in whole or in part upon a
breach of this Agreement by them or their receipt, consideration, negotiation,
recommendation, or approval of a Takeover Proposal or the exercise by Shelby
Williams of its right of termination under Section 8.1(d).
SECTION 8.3 AMENDMENT OR SUPPLEMENT. Subject to applicable law, at any time
-----------------------------------
before or after approval of the matters presented in connection with the Merger
by the stockholders of Shelby Williams and prior to the Effective Time, this
Agreement may be amended or supplemented in writing by Shelby Williams and
Falcon with respect to any of the terms contained in this Agreement, except that
following approval by the stockholders of Shelby Williams, no such amendment or
supplement shall reduce the amount or change the form of the Merger
Consideration, without further approval by the stockholders of Shelby Williams.
SECTION 8.4 EXTENSION OF TIME, WAIVER, ETC. At any time prior to the
------------------------------------------
Effective Time, Shelby Williams and Falcon may to the extent legally allowed:
(a) extend the time for the performance of any of the obligations or acts of the
other party; (b) waive any inaccuracies in the representations and warranties of
the other party contained herein or in any document delivered pursuant hereto;
or (c) waive compliance with any of the agreements or conditions of the other
party contained herein. Notwithstanding the foregoing, no failure or delay by
Shelby Williams or Falcon in exercising any right hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right hereunder.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed each of the
parties.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
---------------------------------------------------------
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Merger, except
for the agreements set forth in Article I and Article II, the provisions of
Section 6.5, Section 6.7, and Section 6.10 and this Article IX.
SECTION 9.2 EXPENSES. Whether or not the Merger is consummated, all costs
--------------------
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby and thereby shall be paid by the party incurring such
expenses, and the filing fee required in connection with the premerger
notification under the HSR Act shall be paid by Falcon; provided, that if Falcon
terminates this Agreement other than as permitted under Section 8.1, Falcon
shall pay all reasonable and customary expenses actually incurred by Shelby
Williams and its Subsidiaries in connection with the Offer, it being understood
and agreed that such payment shall
35
<PAGE>
not be in lieu of any other remedy otherwise available to the Company as a
result of such termination by Falcon.
SECTION 9.3 COUNTERPARTS; EFFECTIVENESS. This Agreement may be executed in
---------------------------------------
two or more counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument,
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered (by telecopy or otherwise) to the other
parties.
SECTION 9.4 GOVERNING LAW. This Agreement shall be governed by and
-------------------------
construed in accordance with the laws of the State of Delaware, without regard
to the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
SECTION 9.5 NOTICES. All notices and other communications which are
-------------------
required or may be given under this Agreement shall be in writing and shall be
deemed to have been duly given when received if personally delivered; when
transmitted and the appropriate telecopy confirmation is received if transmitted
by telecopy or similar electronic transmission method; one working day after it
is sent, if sent by recognized expedited delivery service; and five days after
it is sent, if mailed, first class mail, certified mail, return receipt
requested, with postage prepaid. In each case notice shall be sent to:
To Shelby Williams:
Shelby Williams Industries, Inc.
11-111 Merchandise Mart
Chicago, Illinois 60654
Attention: Paul N. Steinfeld
Chairman of the Board and Chief Executive Officer
Telecopy: (312) 527-3597
With a copy to:
D'Ancona & Pflaum LLC
111 East Wacker Drive, Suite 2800
Chicago, Illinois 60601-4205
Attention: Walter Roth, Esq.
Telecopy: (312) 602-3000
To Falcon:
Falcon Products, Inc.
9387 Dielman Industrial Drive
St. Louis, Missouri 63132
Attention: Franklin A. Jacobs
Chairman and Chief Executive Officer
Telecopy: (314) 991-9295
36
<PAGE>
With a copy to:
Gallop, Johnson & Neuman, L.C.
101 S. Hanley, Suite 1600
St. Louis, Missouri 63105
Attention: Robert H. Wexler, Esq.
Telecopy: (314) 862-1219
or to such other address as either party may have specified in writing to the
other using the procedures specified above in this Section 9.5.
SECTION 9.6 ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of
--------------------------------------
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.
SECTION 9.7 SEVERABILITY. Any term or provision of this Agreement which is
------------------------
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, such provision shall be interpreted to be only so
broad as is enforceable.
SECTION 9.8 ENFORCEMENT OF AGREEMENT. The parties hereto agree that money
------------------------------------
damages or other remedy at law would not be sufficient or adequate remedy for
any breach or violation of, or a default under, this Agreement by them and that
in addition to all other remedies available to them, each of them shall be
entitled to the fullest extent permitted by law to an injunction restraining
such breach, violation or default or threatened breach, violation or default and
to any other equitable relief, including, without limitation, specific
performance, without bond or other security being required.
SECTION 9.9 MISCELLANEOUS. This Agreement:
-------------------------
(a) along with the Shelby Williams Confidentiality Agreement and
Stockholder's Agreements constitutes the entire agreement, and supersedes all
other prior agreements and understandings, both written and oral, between the
parties, or any of them, with respect to the subject matter hereof and thereof;
and
(b) except for the provisions of Section 6.5, Section 6.10, and Section
6.13 hereof, which shall be enforceable by the persons who are to benefit
thereunder, is not intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder.
SECTION 9.10 HEADINGS. Headings of the Articles and Sections of this
---------------------
Agreement are for convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
37
<PAGE>
SECTION 9.11 CERTAIN DEFINED TERMS. References in this Agreement to
----------------------------------
"Subsidiaries" of Shelby Williams or Falcon shall mean any corporation or other
form of legal entity of which more than 50% of the outstanding voting securities
or ownership are on the date hereof directly or indirectly owned by Shelby
Williams or Falcon, as the case may be. Shelby Williams's Disclosure Schedule
contains a full and complete list of Shelby Williams's Subsidiaries as of the
date hereof. References in this Agreement (except as specifically otherwise
defined) to "affiliates" shall mean, as to any person, any other person which,
directly or indirectly, controls, or is controlled by, or is under common
control with, such person. As used in this definition, "control" (including,
with its correlative meanings, "controlled by" and "under common control with")
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of management or policies of a person, whether through the
ownership of securities or partnership of other ownership interests, by contract
or otherwise. References in the Agreement to "person" shall mean an individual,
a corporation, a partnership, an association, a trust or any other entity or
organization, including, without limitation, a governmental body or authority.
References to "Principal Stockholders" means each of Manfred Steinfeld and Paul
N. Steinfeld. References in this Agreement to "knowledge" mean the actual
knowledge of any of Messrs. Manfred Steinfeld, Paul N. Steinfeld, Peter W.
Barile, Robert P. Coulter, Sam Ferrell, Dennis E. Gurley, John McCalla, and Jeff
O'Hara, in each case after due investigation.
SECTION 9.12 FINDERS OR BROKERS. Except for Lazard Freres with respect to
-------------------------------
Shelby Williams and Donaldson Lufkin & Jenrette Securities Corporation with
respect to Falcon, neither Shelby Williams nor Falcon nor any Subsidiary of
either of them has employed any investment banker, broker, finder or
intermediary in connection with the transactions contemplated hereby who might
be entitled to any fee or any commission in connection with or upon consummation
of the Merger.
38
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first above written.
SHELBY WILLIAMS INDUSTRIES, INC.
By: /s/ Paul N. Steinfeld
----------------------------------
Name: Paul N. Steinfeld
Title: Chairman of the Board and
Chief Executive Officer
FALCON PRODUCTS, INC.
By: /s/ Franklin A. Jacobs
----------------------------------
Name: Franklin A. Jacobs
Title: Chairman and CEO
SY ACQUISITION, INC.
By: /s/ Franklin A. Jacobs
----------------------------------
Name: Franklin A. Jacobs
Title: President
39
<PAGE>
ANNEX A
CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the Offer, and in addition to (and
not in limitation of) Sub's rights to extend the Offer (subject to the
provisions of the Merger Agreement), Sub shall not be required to accept for
payment or, subject to any applicable rules and regulations of the SEC,
including Rule 14e-1(c) under the Exchange Act (relating to the Sub's obligation
to pay for or return tendered Shares promptly after termination or withdrawal of
the Offer), pay for, and may delay the acceptance for payment of or, subject to
other restrictions referred to above, the payment for, any tendered Shares, and
may terminate the Offer and not accept for payment any Shares, if (i) any
applicable waiting period under the HSR Act has not expired or terminated prior
to the expirations of the Offer, (ii) the Minimum Condition has not been
satisfied, or (iii) at any time on or after the date of the Merger Agreement and
before the time of acceptance of Shares for payment pursuant to the Offer, any
of the follo wing events shall have occurred.
(a) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated, or deemed applicable,
pursuant to an authoritative interpretation by or on behalf of a Governmental
Entity, to the Offer or the Merger that (i) prohibits or imposes any limitations
on Falcon's or Sub's ownership or operation (or that of any of their respective
Subsidiaries or affiliates) of all or a portion of their or Shelby Williams's
businesses or assets, or to compel Falcon or Sub or their respective
Subsidiaries and affiliates to dispose of or hold separate any portion of the
business or assets of Shelby Williams or Falcon and their respective
subsidiaries, which prohibition, limitation, disposition or hold separate
obligation could reasonably be expected to have a Material Adverse Effect on
Falcon and its Subsidiaries, (ii) restrains or prohibits the making or
consummation of the Offer or the Merger or the performance of any of the other
transactions contemplated by the Agreement, (iii) imposes material limitations
on the ability of Sub, or renders Sub unable, to accept for payment, pay for or
purchase some or all of the Shares pursuant to the Offer and the Merger or (iv)
imposes material limitations on the ability of Sub or Falcon effectively to
exercise full rights of ownership of the Shares, including, without limitation,
the right to vote the Shares purchased by it on all matters properly presented
to Shelby Williams's stockholders;
(b) (i) the Board of Directors of Shelby Williams (or any committee
thereof) shall have withdrawn, modified or changed in any adverse manner to
Falcon and Sub, or failed to reconfirm upon the request of Falcon, its approval
or recommendation of the Offer, the Merger, or the Agreement, or shall have
endorsed, approved or recommended any other Takeover Proposal or (ii) Shelby
Williams shall have entered into any agreement with respect to any Superior
Proposal in accordance with Section 8.1(d) of the Agreement;
(c) the representations and warranties of Shelby Williams set forth in the
Agreement shall not be true and correct, in each case (i) as of the date
referred to in any representation or warranty which addresses matters as of a
particular date, or (ii) as to all other representations and warranties, as of
the date of the Agreement and as of the scheduled expiration of the Offer, and
with respect to any representations or warranties not qualified by "Material
Adverse Effect," unless the inaccuracies under such representations and
warranties, taking all the inaccuracies under all such representations and
warranties together in their entirety, could not, individually or
<PAGE>
in the aggregate, reasonably be expected to result in a Material Adverse Effect
on Shelby Williams;
(d)Shelby Williams shall have failed to perform any obligation or to comply
with any agreement or covenant to be performed or complied with by it under the
Agreement other than any failure which would not have, either individually or in
the aggregate, a Material Adverse Effect on Shelby Williams;
(e)the Agreement shall have been terminated by Shelby Williams or Falcon or
Sub in accordance with its terms or Falcon or Sub shall have reached an
agreement or understanding in writing with Shelby Williams providing for
termination or amendment of the Offer or delay in payment for the Shares, which,
in the reasonable judgment of Falcon and Sub, in any such case, and regardless
of the circumstances giving rise to any such conditions, makes it inadvisable to
proceed with the Offer and/or with such acceptance for payment of or payment for
Shares;
(f) there shall have been an event, occurrence, development, or state of
circumstances or facts that is reasonably likely to have a Material Adverse
Effect on Shelby Williams; or
(g) any Person or "group" (as defined in Section 13(d)(3) of the Exchange
Act), other than Falcon, Sub, any affiliate of either of them, or any group of
which any of them is a member, shall have acquired or commenced a tender or
exchange offer to acquire beneficial ownership (as determined pursuant to Rule
13d-3 promulgated under the Exchange Act) of 20% or more of the Shares; or
(h) there shall have occurred and be continuing (1) any general suspension
of trading in, or limitation on prices for, securities on the New York Stock
Exchange, Inc., or any material disruption or material adverse change in the
financial or capital markets generally or for syndicated bank credits or high
yield securities similar to those of the Senior Facilities or Bridge Notes
referred to in the Commitment Letter, (2) the declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory), (3) the commencement of a war, armed
hostilities or other international or national calamity directly or indirectly
involving the United States and having had or being reasonably likely to have a
Material Adverse Effect or would restrain, prohibit or delay beyond the Final
Termination Date the consummation of the Offer, or (4) in the case of any of the
situations described in clauses (1) through (3) inclusive existing at the date
of this Agreement, a material acceleration, escalation or worsening thereof.
The foregoing conditions (other than the Minimum Condition) are for the
sole benefit of Falcon and Sub and, subject to the Merger Agreement, may be
asserted by Falcon or Sub regardless of the circumstances giving rise to such
condition or may be waived by Falcon or Sub in whole or in part at any time and
from time to time in its sole discretion. The failure by Falcon or Sub at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right, and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
2
<PAGE>
Exhibit 4
CERTAIN TRANSACTIONS
William B. Kaplan, a director of the Company, is chairman and CEO and 50%
shareholder of Senior Lifestyle Corporation ("SLC"). Affiliates of SLC have
selected and from time to time in the future may select the Company's products
for purchase by building projects managed, but not owned, by such affiliates.
Neither Mr. Kaplan, SLC nor such affiliates receive any compensation from the
Company for such selections.
Douglas A. Parker, a director of the Company, is president and CEO of
Leonard Parker Company, Inc. ("LPC"). LPC purchased products from the Company
for resale in the normal course of business in 1998 and such purchases are
continuing in 1999. Net sales by the Company to LPC in 1998 amounted to
approximately $7,216,000.
Trisha Wilson, a director of the Company, has recommended or specified and
from time to time in the future may recommend or specify the Company's
products for projects in connection with which she or her company renders
interior architectural hospitality design services. Neither Ms. Wilson nor her
company receives any compensation from the Company for such recommendations or
specifications.
1
<PAGE>
Exhibit 5
SHELBY WILLIAMS INDUSTRIES, INC.
11-111 Merchandise Mart
[LOGO OF SHELBY WILLIAMS]
Chicago, Illinois 60654
(312) 527-3593
May 12, 1999
Dear Stockholders:
I am pleased to inform you that Shelby Williams Industries, Inc. (the
"Company") has entered into an Agreement and Plan of Merger dated as of May 5,
1999 (the "Merger Agreement") with Falcon Products, Inc., a Delaware
corporation ("Falcon"), and SY Acquisition, Inc., a Delaware corporation and a
wholly-owned subsidiary of Falcon ("Merger Subsidiary"), pursuant to which
Merger Subsidiary has today commenced a cash tender offer (the "Offer") to
purchase all of the outstanding shares ("Shares") of common stock, $.05 par
value per share ("Common Stock"), of the Company at a purchase price of $16.50
per Share, net to the seller in cash. The Merger Agreement provides for the
making of the Offer which, if consummated and certain conditions are
satisfied, will be followed by a merger of Merger Subsidiary with and into the
Company (the "Merger"), with the Company surviving as a wholly-owned
subsidiary of Falcon.
In the Merger, Shares (other than Shares owned by Falcon, Merger Subsidiary
or the Company) will be converted into the right to receive an amount in cash
equal to the price per Share paid pursuant to the Offer, without interest
thereon.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE
OFFER AND THE MERGER AND DETERMINED THAT THE OFFER AND THE MERGER ARE
ADVISABLE, FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE
COMPANY. YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS
OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
In arriving at its recommendation, the Directors of your Company each gave
consideration to the factors described in the attached Schedule 14D-9 that is
being filed today with the Securities and Exchange Commission, including,
among other things, the opinion of Lazard Freres & Co. LLC, the Company's
financial advisors, that, subject to the various assumptions and limitations
set forth therein, as of the date of such opinion, the $16.50 cash price to be
received by the holders of Shares in the Offer and the Merger pursuant to the
Merger Agreement is fair to such holders from a financial point of view.
In addition to the attached Schedule 14D-9, enclosed is the Offer to
Purchase dated May 12, 1999, together with related materials, including a
Letter of Transmittal, to be used for tendering your Shares pursuant to the
Offer. These documents state the terms and conditions of the Offer and the
Merger, provide detailed information about the transactions and include
instructions as to how to tender your Shares. We urge you to read these
documents carefully in making your decision with respect to tendering your
Shares pursuant to the Offer.
Very truly yours,
/s/ Paul N. Steinfeld
Chairman of the Board
and Chief Executive Officer
<PAGE>
EXHIBIT 6
At Falcon Products:
Michael J. Dreller
Vice President--Finance and Chief Financial Officer
9387 Dielman Industrial Drive
St. Louis, Missouri 63132
(314) 991-9200
FOR IMMEDIATE RELEASE
THURSDAY, MAY 6, 1999
FALCON PRODUCTS AGREES TO ACQUIRE SHELBY WILLIAMS
Transaction to produce meaningful synergies
ST. LOUIS, MISSOURI and CHICAGO, ILLINOIS, May 6, 1999--Falcon Products, Inc.
(NYSE: FCP) (Falcon Products) and Shelby Williams Industries, Inc. (NYSE: SY)
(Shelby Williams) announced today that they have entered into a definitive
merger agreement pursuant to which Falcon Products will purchase, for cash,
all of the outstanding common stock of Shelby Williams for $16.50 per share,
or approximately $148 million.
Under the agreement, a subsidiary of Falcon Products will commence a tender
offer to purchase all of Shelby Williams' approximately 8.8 million shares of
common stock outstanding for cash of $16.50 per share. Following completion of
the tender offer, the acquisition subsidiary will be merged into Shelby
Williams and any remaining shares of Shelby Williams will be converted into
the right to receive $16.50 per share.
The offer is conditioned on the tender of a majority of the outstanding shares
of Shelby Williams common stock on a fully diluted basis, the expiration or
termination of any applicable antitrust waiting period, and certain other
customary conditions.
In connection with the transaction, Falcon Products has entered into
stockholder agreements with Paul N. Steinfeld, Shelby Williams Chairman and
Chief Executive Officer, and Manfred Steinfeld, former Shelby Williams
Chairman and Chief Executive Officer and current board member. Under these
agreements, the Steinfelds have agreed, as long as the merger agreement is in
effect, to tender their shares in the Falcon Products' tender offer and have
granted Falcon Products a proxy right to vote these shares.
This transaction will create the premier manufacturer of commercial furniture
for the hospitality, food service, contract/office, healthcare and leisure
industries. Following completion of the transaction, Falcon Products will have
14 manufacturing facilities around the world, over 3,900 employees, and annual
revenues greater than $320 million. In addition, this transaction positions
Falcon Products to be a leading consolidator in the highly fragmented
commercial furniture manufacturing industry.
Shelby Williams' Chairman and Chief Executive Officer, Paul N. Steinfeld, will
help manage the integration of the two companies through a consulting
agreement into which he will enter in connection with the transaction. In
addition, key members of Shelby Williams' senior management will enter into
employment contracts with Falcon Products.
"I am delighted to announce this landmark transaction for Falcon Products,"
said Franklin A. Jacobs, Falcon Products' Chairman and Chief Executive
Officer. "We look forward to welcoming the management and employees of Shelby
Williams to the Falcon Products' organization and working together to achieve
the meaningful synergies that we are confident can be realized in this
combination."
<PAGE>
Paul N. Steinfeld, Shelby Williams' Chairman and Chief Executive Officer, and
Robert P. Coulter, President of Shelby Williams, expressed confidence that the
merger of Shelby Williams and Falcon Products will be beneficial to all of the
1,700 Shelby Williams employees and that the combined entities will become an
even more important resource for the entire worldwide contract furnishings
market.
The transaction was unanimously approved by the boards of directors of both
companies. Funding for the tender offer and completion of the transaction will
be provided with financing commitments made by affiliates of Donaldson, Lufkin
& Jenrette Securities Corporation.
Falcon Products was advised in this transaction by the investment bank of
Donaldson, Lufkin & Jenrette and the law firm of Gallop, Johnson & Neuman, L.C.
The investment bank of Lazard Freres & Co. LLC acted as financial advisor to
Shelby Williams, and the law firm of D'Ancona & Pflaum LLC provided legal
services.
Falcon Products and its subsidiaries design, manufacture and market furniture
products for the hospitality and lodging, food service, and office furniture
industries. Falcon Products, headquartered in St. Louis, Missouri, operates
nine production facilities throughout the world--Belmont, Mississippi; City of
Industry, California; Lewisville, Arkansas; Newport, Tennessee; Juarez, Mexico;
Tijuana, Mexico; Mimon, Czech Republic; Shenzen, China; and Middelfart,
Denmark--and has showrooms in Chicago, Illinois. Falcon Products has more than
2,200 employees worldwide and had revenues of $143.4 million in fiscal year
1998.
Shelby Williams is the nation's leading manufacturer of contract seating for
the restaurant, lodging, healthcare, and university and college markets.
Headquartered in Chicago, Illinois, Shelby Williams has more than 1,700
employees and had revenues of $165.9 million in fiscal year 1998.
# # #
This release contains forward-looking statements as defined in Section 21E of
the Securities Exchange Act of 1934 and involves known and unknown risks,
uncertainties and other factors. Such uncertainties and risks include, among
others: certain risks associated with the closing and integration of
acquisitions; competition; government regulation; and general economic and
business conditions. Actual events, circumstances, effects and results may be
materially different from the results, performance or achievements expressed or
implied by the forward-looking statements. Consequently, the forward-looking
statements contained herein should not be regarded as representations by Falcon
Products, Shelby Williams or any other person that the projected outcomes can
or will be achieved, including statements about future business operations.
Such forward-looking statements involve risks and uncertainties inherent in
business forecasts. There can be no assurances that future results will be
achieved, and actual results could differ materially from forecasts and
estimates. Important factors that could cause actual results to differ
materially are included in both Falcon Products' and Shelby Williams' periodic
reports filed with the Securities and Exchange Commission.
2
<PAGE>
Exhibit 7
Lazard Freres & Co. LLC
200 West Madison Street
Suite 2200
Chicago, Illinois 60606-3416
----
Telephone (312) 407-6600 Chicago
Facsimile (312) 407-6620
May 5, 1999
Board of Directors
Shelby Williams Industries, Inc.
150 Shelby Williams Drive
Morristown, Tennessee 37813
Dear Members of the Board:
We understand that Falcon Products, Inc. ("Falcon") and Shelby Williams
Industries, Inc. ("Shelby") have entered into an Agreement dated as of May 5,
1999 (the "Agreement"), pursuant to which Falcon will make a cash tender offer
to acquire all of the outstanding shares of common stock of Shelby at a price of
$16.50 per share to be followed by a merger of a wholly-owned subsidiary of
Falcon into Shelby in which each remaining share of Shelby not acquired in the
tender offer would be converted into the right to receive $16.50 per share (the
"Acquisition").
You have requested our opinion as to the fairness, from a financial point
of view, to the shareholders of Shelby of the consideration to be paid in the
Acquisition. In connection with this opinion, we have:
(i) Reviewed the financial terms and conditions of the Agreement;
(ii) Analyzed certain historical business and financial information
relating to Shelby;
(iii) Reviewed certain financial forecasts and other data provided to us
by Shelby relating to its business;
(iv) Held discussions with members of the senior management of Shelby
with respect to the business, prospects and strategic objectives of
Shelby;
(v) Reviewed public information with respect to certain other companies
in lines of businesses we believe to be generally comparable to the
businesses of Falcon and Shelby;
(vi) Reviewed the financial terms of certain business combinations
involving companies in lines of businesses we believe to be
generally comparable to those of Falcon and Shelby;
(vii) Reviewed the historical stock prices and trading volumes of Shelby's
common stock; and
(viii) Conducted such other financial studies, analyses and investigations
as we deemed appropriate.
We have relied upon the accuracy and completeness of the foregoing
information, and have not assumed any responsibility for any independent
verification of such information or any
<PAGE>
Lazard Freres & Co. LLC
independent verification of such information or any independent valuation or
appraisal of any of the assets or liabilities of Falcon or Shelby, or concerning
the solvency or fair value of either of the foregoing entities. With respect to
financial forecasts, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of
management of Shelby as to the future financial performance of Shelby. We assume
no responsibility for and express no view as to such forecasts or the
assumptions on which they are based.
Further, our opinion is necessarily based on economic, monetary, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof.
In rendering our opinion, we have assumed that (i) the Acquisition will be
consummated on the terms described in the Agreement, without any waiver of any
material terms or conditions by Shelby and that obtaining the necessary
regulatory approvals for the Acquisition will not have an adverse effect on
Shelby and (ii) we have been fully informed about other contracts relating to
the Acquisition entered into at the same time as the Agreement by Falcon and the
Company or certain of its shareholders and that those contracts will not be
modified or waived in any material respect. We were not requested to, and did
not, solicit third party indications of interest in acquiring Shelby. This
opinion does not address the Company's underlying business decision to effect
the Acquisition.
We are aware that Shelby has received a conditional offer from a third
party. With your consent, we did not address the relative merits of the
Acquisition and any alternative potential transaction.
Lazard Freres & Co. LLC is acting as investment banker to Shelby in
connection with the Acquisition and will receive a fee for our services, a
substantial portion of which is contingent upon the consummation of the
Acquisition. We acted as the lead underwriter for Shelby's offer of shares of
common stock in March 1997, for which we received a customary fee.
Our engagement and the opinion expressed herein are solely for the benefit
of Shelby's Board of Directors and are not on behalf of, and are not intended to
confer rights or remedies upon, Falcon, any stockholders of Shelby or Falcon or
any other person. It is understood that this letter may not be disclosed or
otherwise referred to without our prior consent, except as may otherwise be
required by law or by a court of competent jurisdiction.
Based on and subject to the foregoing, we are of the opinion that the
consideration to be paid in the Acquisition is fair to the shareholders of
Shelby from a financial point of view.
Very truly yours,
LAZARD FRERES & CO. LLC
By /s/ Jeffrey A. Golman
---------------------------
Jeffrey A. Golman
Managing Director
-2-
<PAGE>
Exhibit 8
STOCKHOLDER AGREEMENT
---------------------
THIS STOCKHOLDER AGREEMENT dated May 5, 1999 (this "Agreement"), is made
and entered into among Falcon Products, Inc., a Delaware corporation ("Parent"),
SY Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of
Parent ("Purchaser"), on the one hand, and the Manfred Steinfeld Irrevocable
Trust UTA 9/5/97 (the "Trust") and Manfred Steinfeld ("Steinfeld"), on the other
hand.
RECITALS:
--------
A. Parent, Purchaser, and Shelby Williams Industries, Inc., a Delaware
corporation ("Company"), propose to enter into an Agreement and Plan of Merger,
dated as of the date hereof (the "Merger Agreement"), pursuant to which the
Purchaser will merge with and into Company (the "Merger") on the terms and
subject to the conditions set forth in the Merger Agreement. Except as otherwise
defined herein, terms used herein with initial capital letters have the
respective meanings ascribed thereto in the Merger Agreement.
B. As of the date hereof, the Trust is the record holder of 685,500
shares of the common stock, par value $.05 per share (the "Common Stock"), of
Company and Steinfeld is the beneficial owner of such shares, having the power
to dispose of and to vote such shares. As used herein, (i) the Trust and
Steinfeld shall collectively be referred to as the "Stockholder", and (ii) the
685,000 shares of Common Stock, together with any shares of Common Stock issued
to or acquired by Stockholder after the date of this Agreement, shall be
referred to as the "Shares." The Shares as of the date of this Agreement are
described on Exhibit A hereto.
---------
C. Pursuant to the Merger Agreement, Purchaser shall commence a cash
tender offer (the "Offer") to purchase at a price of $16.50 per share all of the
Common Stock of Company. Stockholder has advised Parent and Purchaser that it
intends to tender the Shares in the Offer.
D. As a condition and inducement to Parent's and Purchaser's willingness
to enter into the Merger Agreement, Parent and Purchaser have requested that
Stockholder agree, and Stockholder has agreed, to enter into this Agreement.
E. The Board of Directors of the Company has approved this Agreement, the
Merger Agreement and the transactions contemplated hereby and thereby so as to
render inapplicable Section 203 of the Delaware General Corporation Law to the
transactions contemplated hereby and thereby.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements contained in this Agreement and the Merger
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
<PAGE>
ARTICLE I
VOTING AGREEMENT
----------------
Section 1.1 Agreement to Vote Shares. During the term of this Agreement,
------------------------
at any meeting of the stockholders of Company called to consider and vote upon
the adoption of the Merger Agreement (and at any and all postponements and
adjournments thereof), and in connection with any action to be taken in respect
of the adoption of the Merger Agreement by written consent of stockholders of
Company, Stockholder shall vote or cause to be voted (including by written
consent, if applicable) all of the Shares in favor of the adoption of the Merger
Agreement and in favor of any other matter necessary for the consummation of the
transactions contemplated by the Merger Agreement and considered and voted upon
at any such meeting or made the subject of any such written consent, as
applicable. During the term of this Agreement, at any meeting of the
stockholders of Company called to consider and vote upon any Other Proposal (as
hereinafter defined), and at any and all postponements and adjournments thereof,
and in connection with any action to be taken in respect of any Other Proposal
by written consent of stockholders of Company, Stockholder shall vote or cause
to be voted (including by written consent, if applicable) all of the Shares
against such Other Proposal. For purposes of this Agreement, the term "Other
Proposal" means any (a) Takeover Proposal (as defined in the Merger Agreement)
or (b) other action which is intended or could reasonably be expected to
materially impede, interfere with, delay or materially and adversely affect the
consummation of the Merger or any of the other transactions contemplated by the
Merger Agreement or this Agreement; provided, however, that neither the Merger
nor any other transaction contemplated by the Merger Agreement to be consummated
by Company, Parent or Purchaser in connection with the Merger shall constitute
an Other Proposal. Stockholder shall not enter into any agreement or
understanding with any person or entity the effect of which would be violative
of the provisions and agreements contained in this Section 1.1.
Section 1.2 Irrevocable Proxy.
-----------------
(a) Grant of Proxy. STOCKHOLDER HEREBY APPOINTS PARENT AND ANY DESIGNEE
--------------
OF PARENT, AND EACH OF THEM INDIVIDUALLY, STOCKHOLDER'S AGENT, PROXY AND
ATTORNEY-IN-FACT DURING THE TERM HEREOF, PURSUANT TO THE PROVISIONS OF SECTION
212 OF THE DELAWARE GENERAL CORPORATION LAW, WITH FULL POWER OF SUBSTITUTION AND
RESUBSTITUTION, TO VOTE OR ACT BY WRITTEN CONSENT DURING THE OPTION PERIOD WITH
RESPECT TO THE SHARES IN ACCORDANCE WITH SECTION 1.1 HEREOF. THIS PROXY IS GIVEN
TO SECURE THE PERFORMANCE OF THE DUTIES OF STOCKHOLDER UNDER THIS AGREEMENT.
STOCKHOLDER AFFIRMS THAT THIS PROXY IS COUPLED WITH AN INTEREST AND SHALL BE
IRREVOCABLE. STOCKHOLDER SHALL TAKE SUCH FURTHER ACTION OR EXECUTE SUCH OTHER
INSTRUMENTS AS MAY BE NECESSARY TO EFFECTUATE THE INTENT OF THIS PROXY.
(b) Other Proxies Revoked. Stockholder represents that any proxies
---------------------
heretofore given in respect of the Shares, if any, are not irrevocable, and that
all such proxies are hereby revoked.
2
<PAGE>
ARTICLE II
CUSTODY AND TENDER OF SHARES
----------------------------
2.1 Delivery of Shares to Custodian. As soon as practicable after the date
-------------------------------
hereof, Stockholder shall deliver the certificates representing the Shares
(together with related stock powers duly endorsed for transferability) to
D'Ancona & Pflaum, LLC (the "Custodian"), which shall retain custody of the
Shares and stock powers until they are tendered pursuant to Section 2.3.
2.2 Delivery of Letter of Transmittal to Custodian. As soon as
----------------------------------------------
practicable after the date on which the Offer is commenced, Stockholder shall
deliver a Letter of Transmittal covering the Shares, duly executed in accordance
with the terms of the offer materials used in connection with the Offer, to the
Custodian, which shall retain custody of the Letter of Transmittal until it is
delivered to the Depository pursuant to Section 2.3.
2.3 Tender of Shares and Delivery of Letter of Transmittal to Depository.
--------------------------------------------------------------------
Prior to the expiration or termination of the Offer, Stockholder shall cause
Custodian to and Custodian shall deliver all, but not part, of the Shares,
together with the related stock powers and Letter of Transmittal, to the
depository for the Offer and such delivery shall constitute a tender by the
Stockholder under the Offer. The tendered Shares may not be withdrawn except
following the termination of this Agreement pursuant to Section 5.2. Except as
otherwise set forth in this Agreement, all rights of ownership with respect to
the Shares shall remain with Stockholder until the Effective Time or the
purchase of the Shares pursuant to the Offer.
2.4 Right of Purchaser. If the Shares, stock powers, and Letter of
------------------
Transmittal have not been tendered to the depository by the fifteenth (15/th/)
business day following the commencement of the Offer, Purchaser shall have the
right to instruct the Custodian to effect the tender of the Shares as provided
in Section 2.3, whereupon Custodian shall promptly, but in any event within one
(1) business day, deliver such Shares, stock powers, and Letter of Transmittal
to said Depository. Such instruction shall be given to Custodian in the same
manner as provided in Section 5.6 with respect to D'Ancona & Pflaum, LLC.
2.5 Further Assurances. Stockholder shall take all actions necessary or
------------------
appropriate to cause the Custodian to tender the Shares to the depository for
the Offer prior to the expiration or termination of the Offer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 3.1 Certain Representations and Warranties of Stockholder.
-----------------------------------------------------
Stockholder represents and warrants to Parent and Purchaser as follows:
(a) Ownership. Stockholder is the sole record and beneficial owner of the
---------
Shares and has full and unrestricted power to dispose of and to vote the Shares.
Other than as set forth in the Company's Proxy Statement dated March 24, 1999,
Stockholder does not beneficially own any securities of Company on the date
hereof other than the Shares. Stockholder has sole voting power and sole power
to issue instructions with respect to the matters set forth in Articles I and II
hereof, sole power of disposition, sole power of conversion, sole power to
demand appraisal
3
<PAGE>
rights and sole power to agree to all of the matters set forth in this
Agreement, in each case with respect to all of the Shares with no limitations,
qualifications or restrictions on such rights, subject to applicable securities
laws and the terms of this Agreement.
(b) Power and Authority; Execution and Delivery. Stockholder has all
-------------------------------------------
requisite legal capacity, power and authority to enter into this Agreement and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by Stockholder and the consummation by Stockholder of the
transactions contemplated hereby have been duly authorized by all necessary
action on the part of Stockholder. This Agreement has been duly executed and
delivered by Stockholder and, assuming that this Agreement constitutes the valid
and binding obligation of the other parties hereto, constitutes a valid and
binding obligation of Stockholder, enforceable against Stockholder in accordance
with its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and to general principles of equity.
(c) No Conflicts. The execution and delivery of this Agreement do not,
------------
and, subject to compliance with the HSR Act and securities laws, to the extent
applicable, the consummation of the transactions contemplated hereby and
compliance with the provisions hereof, will not (i) conflict with or result in
any breach of any organizational documents applicable to Stockholder or (ii)
conflict with, result in a breach or violation of or default (with or without
notice or lapse of time or both) under, or give rise to a material obligation, a
right of termination, cancellation, or acceleration of any obligation or a loss
of a material benefit under, or require notice to or the consent of any person
under any agreement, instrument, undertaking, law, rule, regulation, judgment,
order, injunction, decree, determination or award binding on Stockholder, other
than any such conflicts, breaches, violations, defaults, obligations, rights or
losses that individually or in the aggregate would not (i) materially impair the
ability of Stockholder to perform Stockholder's obligations under this Agreement
or (ii) prevent or delay the consummation of any of the transactions
contemplated hereby.
(d) No Encumbrances. Except as applicable in connection with the
---------------
transactions contemplated by Articles I and II hereof, the Shares and the
certificates representing the Shares are now, and at all times during the term
hereof will be, held by Stockholder, or by a nominee or custodian for the
benefit of Stockholder, free and clear of all liens, claims, security interests,
proxies, voting trusts or agreements, understandings or arrangements or any
other encumbrances whatsoever except for any such encumbrances or proxies
arising hereunder or any such encumbrances not caused or created by Stockholder.
(e) No Finder's Fees. No broker, investment banker, financial advisor or
----------------
other person is entitled to any broker's, finder's, financial adviser's or other
similar fee or commission in connection with the transactions contemplated
hereby based upon arrangements made by or on behalf of Stockholder.
Section 3.2 Representations and Warranties of Parent and Purchaser.
------------------------------------------------------
Parent and Purchaser hereby represent and warrant to Stockholder that:
(a) Power and Authority; Execution and Delivery. Parent and Purchaser
-------------------------------------------
each has all requisite legal capacity, corporate power and authority to enter
into this Agreement and to
4
<PAGE>
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Parent and Purchaser and the consummation by Parent and
Purchaser of the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of Parent and Purchaser. This
Agreement has been duly executed and delivered by Parent and Purchaser and,
assuming that this Agreement constitutes the valid and binding obligation of
Stockholder, constitutes a valid and binding obligation of Parent and Purchaser,
enforceable against Parent and Purchaser in accordance with its terms, subject
to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and to general principles of equity.
(b) No Conflicts. The execution and delivery of this Agreement do not,
------------
and, subject to compliance with the HSR Act, to the extent applicable, the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not (i) conflict with or result in any breach of any
organizational documents applicable to Parent or Purchaser or (ii) conflict
with, result in a breach or violation of or default (with or without notice or
lapse of time or both) under, or give rise to a material obligation, right of
termination, cancellation, or acceleration of any obligation or a loss of a
material benefit under, or require notice to or the consent of any person under
any agreement, instrument, undertaking, law, rule, regulation, judgment, order,
injunction, decree, determination or award binding on Parent or Purchaser, other
than any such conflicts, breaches, violations, defaults, obligations, rights or
losses that individually or in the aggregate would not (i) impair the ability of
Parent and Purchaser to perform their obligations under this Agreement or (ii)
prevent or delay the consummation of any of the transactions contemplated
hereby.
ARTICLE IV
CERTAIN COVENANTS
-----------------
Section 4.1 Certain Covenants of Stockholder.
--------------------------------
(a) Restriction on Transfer of Shares, Proxies and Noninterference.
--------------------------------------------------------------
During the term of this Agreement, Stockholder shall not, directly or
indirectly: (A) except pursuant to the terms of this Agreement and except for
the tender of Shares in the Offer, offer for sale, sell, transfer, tender,
pledge, encumber, assign or otherwise dispose of, or enter into any contract,
option or other arrangement or understanding with respect to or consent to the
offer for sale, sale, transfer, tender, pledge, encumbrance, assignment or other
disposition of, any or all of the Shares; (B) except pursuant to the terms of
this Agreement, grant any proxies (other than proxies relating to the election
of management's slate of directors at an annual meeting of Company's
stockholders, and other routine matters which would not require the filing of a
preliminary proxy statement under Rule 14a-6(a) of the Exchange Act), or powers
of attorney, deposit any of the Shares into a voting trust or enter into a
voting agreement with respect to any of the Shares; or (C) take any action that
would make any representation or warranty contained herein untrue or incorrect
or have the effect of impairing the ability of Stockholder to perform
Stockholder's obligations under this Agreement or preventing or delaying the
consummation of any of the transactions contemplated hereby or by the Merger
Agreement; provided, however, that notwithstanding the foregoing, Steinfeld may
transfer Shares to any charitable foundation established by him if, and only if,
such charitable foundation (i) acknowledges in writing its
5
<PAGE>
understanding and agreement that the Shares so transferred to it shall remain
subject to this Agreement, and (ii) further agrees to be bound by the terms
hereof with respect to such Shares.
(b) Cooperation. Stockholder, in the capacity as a stockholder, shall
-----------
cooperate fully with Parent, Purchaser and Company in connection with their
respective efforts to fulfill the conditions to the Merger set forth in Article
VII of the Merger Agreement.
(c) Releases. Stockholder hereby fully, unconditionally and irrevocably
--------
releases, effective as of the Effective Time, any and all claims and causes of
action that Stockholder has or may have against Company or any of its
Subsidiaries or any present or former director, officer, employee or agent of
Company or any of its Subsidiaries (collectively, the "Released Parties")
arising or resulting from or relating to any alleged breach of fiduciary duty by
any officer or director of the Company occurring prior to the Effective Time;
provided, however, that such release shall not apply to any currently effective
contract or agreement between Stockholder and Company (the "Existing Contracts")
or any claim or cause of action arising therefrom.
(d) No Solicitation. Stockholder shall not, in the capacity as a
---------------
stockholder, respond to any inquiries or the making of any proposal by any
person or entity (other than Parent or any affiliate of Parent) concerning any
business combination merger, tender offer, exchange offer, sale of assets, sale
of shares of capital stock or debt securities or similar transactions involving
Company or any Subsidiary, division or operating or principal business unit of
Company. If Stockholder, in the capacity as a stockholder of the Company,
receives any such inquiry or proposal, then Stockholder shall promptly inform
Parent of the existence thereof. Stockholder, in the capacity as a stockholder
of the Company, will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. For purposes of this paragraph (d),
Steinfeld shall not be deemed to be acting in the capacity as a stockholder of
the Company if, and to the extent that, the Board of Directors of the Company or
any committee thereof authorizes and directs Steinfeld to hold discussions with
any third party in response to the Company's receipt of an unsolicited Takeover
Proposal on behalf of the Company provided that Steinfeld informs such third
party that in holding any such discussions with such third party, Steinfeld is
speaking on behalf of the Corporation and not for himself as a stockholder of
the Company.
(e) Reliance by Parent. Stockholder understands and acknowledges that
------------------
Parent and Purchaser are entering into, the Merger Agreement in reliance upon
Stockholder's execution and delivery of this Agreement.
ARTICLE V
MISCELLANEOUS
-------------
Section 5.1 Fees and Expenses. Each party hereto shall pay its own
-----------------
expenses incident to preparing for, entering into and carrying out this
Agreement and the consummation of the transactions contemplated hereby.
Section 5.2 Amendment; Termination. This Agreement may not be amended
----------------------
except by an instrument in writing signed on behalf of each of the parties
hereto. This Agreement and the proxies granted pursuant to Section 1.2 shall
terminate on the earlier of (i) the Effective Time
6
<PAGE>
and (ii) the termination of the Merger Agreement in accordance with its terms.
If, following the termination of this Agreement as contemplated by clause (ii)
of the previous sentence, Stockholder notifies Parent and Purchaser that the
Shares have been tendered, that it desires to withdraw the Shares from the
Offer, and that it has so notified the depository, Parent and Purchaser shall,
so long as Shares may then be withdrawn from the Offer, cooperate with
Stockholder in its request for the return of the Shares and instruct the
depository to return the Shares to Stockholder at its earliest convenience.
Section 5.3 Extension; Waiver. Any agreement on the part of a party to
-----------------
waive any provision of this Agreement, or to extend the time for any performance
hereunder, shall be valid only if set forth in an instrument in writing signed
on behalf of such party. The failure of any party to this Agreement to assert
any of its rights under this Agreement or otherwise shall not constitute a
waiver of such rights.
Section 5.4 Entire Agreement; No Third-Party Beneficiaries. This
----------------------------------------------
Agreement constitutes the entire agreement, and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement, and is not intended to confer upon any person
other than the parties any rights or remedies; provided, however, that the
provisions of Section 4.1(c) are intended to inure to the benefit of, and to be
enforceable by, the Released Parties. This Agreement shall not affect or in any
way amend any of the Existing Contracts.
Section 5.5 Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflict of
laws thereof.
Section 5.6 Notices. All notices, requests, claims, demands and other
-------
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, or sent by overnight courier or telecopy
(providing proof of delivery) to the address set forth below (or, in each case,
at such other address as shall be specified by like notice).
If to Parent or Purchaser:
Falcon Products
9387 Dielman Industrial Drive
St. Louis, Missouri 63132
Attention: Franklin A. Jacobs
Chairman and Chief Executive Officer
Telecopy: (314) 991-9295
with a copy (which shall not constitute notice) to:
Gallop, Johnson & Neuman, L.C.
101 South Hanley / Suite 1600
St. Louis, Missouri 63105
Attention: Robert H. Wexler, Esq.
Telecopy: (314) 862-1219
7
<PAGE>
If to Stockholder:
c/o Manfred Steinfeld
4679 Bocaire Boulevard
Boca Raton, Florida 33487
Telecopy: (561) 241-3508
with copies (which shall not constitute notice) to:
D'Ancona & Pflaum, LLC
111 East Wacker Drive / Suite 2800
Chicago, Illinois 60601-4205
Attention: Walter Roth, Esq.
Telecopy: (314) 602-3000
and
c/o Shelby Williams Industries, Inc.
11-111 Merchandise Mart
Chicago, Illinois 60654
Section 5.7 Assignment. Neither this Agreement nor any of the rights,
----------
interests, or obligations under this Agreement may be assigned or delegated, in
whole or in part, by Stockholder without the prior written consent of Parent,
and any such assignment or delegation that is not consented to shall be null and
void. This Agreement, together with any rights, interests, or obligations of
Parent and Purchaser hereunder, may be assigned or delegated, in whole or in
part, by Parent and Purchaser without the consent of or any action by
Stockholder upon notice by Parent or Purchaser to Stockholder as herein
provided. Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns (including without limitation any person to
whom any Shares are sold, transferred, assigned or passed, whether by operation
of law or otherwise).
Section 5.8 Confidentiality. Stockholder recognizes that successful
---------------
consummation of the transactions contemplated by this Agreement may be dependent
upon confidentiality with respect to the matters referred to herein. In this
connection, pending public disclosure thereof, Stockholder hereby agrees not to
disclose or discuss such matters with anyone not a party to this Agreement
(other than its counsel and advisors, if any) without the prior written consent
of Parent, except for filings required pursuant to the Exchange Act and the
rules and regulations thereunder or disclosures its counsel advises are
necessary in order to fulfill its obligations imposed by law, in which event
Stockholder shall give notice of such disclosure to Parent as promptly as
practicable so as to enable Parent to seek a protective order from a court of
competent jurisdiction with respect thereto.
Section 5.9 Further Assurances. Stockholder shall execute and deliver
------------------
such other documents and instruments and take such further actions as may be
necessary or appropriate or
8
<PAGE>
as may be reasonably requested by Parent or Purchaser in order to ensure that
Parent and Purchaser receive the full benefit of this Agreement.
Section 5.10 Enforcement. Irreparable damage would occur in the event
-----------
that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. Accordingly, the parties
shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this Agreement
in the Court of Chancery in and for New Castle County in the State of Delaware
(or, if such court lacks subject matter jurisdiction, any appropriate state or
federal court in New Castle County in the State of Delaware), this being in
addition to any other remedy to which they are entitled at law or in equity.
Each of the parties hereto (i) shall submit itself to the personal jurisdiction
of the Court of Chancery in and for New Castle County in the State of Delaware
(or, if such court lacks subject matter jurisdiction, any appropriate state or
federal court in New Castle County in the State of Delaware) in the event any
dispute arises out of this Agreement or any of the transactions contemplated
hereby, (ii) shall not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court, and (iii) shall not bring
any action relating to this Agreement or any of the transactions contemplated
hereby in any court other than the Court of Chancery in and for New Castle
County in the State of Delaware (or, if such court lacks subject matter
jurisdiction, any appropriate state or federal court in New Castle County in the
State of Delaware).
Section 5.11 Severability. Whenever possible, each provision or portion
------------
of any provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
Section 5.12 Descriptive Headings. The descriptive headings used herein
--------------------
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
Section 5.13 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same instrument and
shall become effective when one or more counterparts have been signed by each
party and delivered to the other parties.
[signature page follows]
9
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be signed as of the day and year first written above.
FALCON PRODUCTS, INC.
By: /s/ Franklin A. Jacobs
_______________________________________
Name: Franklin A. Jacobs
Title: Chairman and Chief Executive Officer
SY ACQUISITION, INC.
By: /s/ Franklin A. Jacobs
_______________________________________
Name: Franklin A. Jacobs
Title: President
MANFRED STEINFELD IRREVOCABLE TRUST UTA 9/5/97
By: /s/ Paul N. Steinfeld
_______________________________________
Name: Paul N. Steinfeld, Trustee
/s/ Manfred Steinfeld
______________________________________________
Manfred Steinfeld, Individually and as the
Beneficial Owner of the Shares
10
<PAGE>
This Stockholder Agreement dated May 5, 1999 among Falcon Products, Inc., a
Delaware corporation, SY Acquisition, Inc., a Delaware corporation, the Manfred
Steinfeld Irrevocable Trust UTA 9/5/97 and Manfred Steinfeld is hereby executed
effective as of May 5, 1999 on behalf of D'Ancona & Pflaum, LLC, as Custodian,
solely to evidence that it is bound by the obligations contained in Article II.
D'Ancona & Pflaum, LLC
/s/ Walter Roth
By: ____________________________
Walter Roth, Member
May 5, 1999
Date: ____________________________
11
<PAGE>
Exhibit A
---------
Certificate Number Number of Shares
------------------ ----------------
12
<PAGE>
Exhibit 9
STOCKHOLDER AGREEMENT
---------------------
THIS STOCKHOLDER AGREEMENT dated May 5, 1999 (this "Agreement"), is made
and entered into among Falcon Products, Inc., a Delaware corporation ("Parent"),
SY Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of
Parent ("Purchaser"), on the one hand, and The Fern and Manfred Steinfeld
Charitable Remainder Trust UTA 10/17/95 (the "Trust") and Manfred Steinfeld
("Steinfeld"), on the other hand.
RECITALS:
--------
Parent, Purchaser, and Shelby Williams Industries, Inc., a Delaware
corporation ("Company"), propose to enter into an Agreement and Plan of Merger,
dated as of the date hereof (the "Merger Agreement"), pursuant to which the
Purchaser will merge with and into Company (the "Merger") on the terms and
subject to the conditions set forth in the Merger Agreement. Except as otherwise
defined herein, terms used herein with initial capital letters have the
respective meanings ascribed thereto in the Merger Agreement.
As of the date hereof, the Trust is the record holder of 300,000
shares of the common stock, par value $.05 per share (the "Common Stock"), of
Company and Steinfeld is the beneficial owner of such shares, having the power
to dispose of and to vote such shares. As used herein, (i) the Trust and
Steinfeld shall collectively be referred to as the "Stockholder", and (ii) the
300,000 shares of Common Stock, together with any shares of Common Stock issued
to or acquired by Stockholder after the date of this Agreement, shall be
referred to as the "Shares." The Shares as of the date of this Agreement are
described on Exhibit A hereto.
---------
Pursuant to the Merger Agreement, Purchaser shall commence a cash
tender offer (the "Offer") to purchase at a price of $16.50 per share all of the
Common Stock of Company. Stockholder has advised Parent and Purchaser that it
intends to tender the Shares in the Offer.
As a condition and inducement to Parent's and Purchaser's willingness
to enter into the Merger Agreement, Parent and Purchaser have requested that
Stockholder agree, and Stockholder has agreed, to enter into this Agreement.
E. The Board of Directors of the Company has approved this Agreement, the
Merger Agreement and the transactions contemplated hereby and thereby so as to
render inapplicable Section 203 of the Delaware General Corporation Law to the
transactions contemplated hereby and thereby.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements contained in this Agreement and the Merger
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
<PAGE>
ARTICLE I
VOTING AGREEMENT
----------------
Section 1.1 Agreement to Vote Shares. During the term of this Agreement,
------------------------
at any meeting of the stockholders of Company called to consider and vote upon
the adoption of the Merger Agreement (and at any and all postponements and
adjournments thereof), and in connection with any action to be taken in respect
of the adoption of the Merger Agreement by written consent of stockholders of
Company, Stockholder shall vote or cause to be voted (including by written
consent, if applicable) all of the Shares in favor of the adoption of the Merger
Agreement and in favor of any other matter necessary for the consummation of the
transactions contemplated by the Merger Agreement and considered and voted upon
at any such meeting or made the subject of any such written consent, as
applicable. During the term of this Agreement, at any meeting of the
stockholders of Company called to consider and vote upon any Other Proposal (as
hereinafter defined), and at any and all postponements and adjournments thereof,
and in connection with any action to be taken in respect of any Other Proposal
by written consent of stockholders of Company, Stockholder shall vote or cause
to be voted (including by written consent, if applicable) all of the Shares
against such Other Proposal. For purposes of this Agreement, the term "Other
Proposal" means any (a) Takeover Proposal (as defined in the Merger Agreement)
or (b) other action which is intended or could reasonably be expected to
materially impede, interfere with, delay or materially and adversely affect the
consummation of the Merger or any of the other transactions contemplated by the
Merger Agreement or this Agreement; provided, however, that neither the Merger
nor any other transaction contemplated by the Merger Agreement to be consummated
by Company, Parent or Purchaser in connection with the Merger shall constitute
an Other Proposal. Stockholder shall not enter into any agreement or
understanding with any person or entity the effect of which would be violative
of the provisions and agreements contained in this Section 1.1.
Section 1.2 Irrevocable Proxy.
-----------------
(a) Grant of Proxy. STOCKHOLDER HEREBY APPOINTS PARENT AND ANY DESIGNEE
--------------
OF PARENT, AND EACH OF THEM INDIVIDUALLY, STOCKHOLDER'S AGENT, PROXY AND
ATTORNEY-IN-FACT DURING THE TERM HEREOF, PURSUANT TO THE PROVISIONS OF SECTION
212 OF THE DELAWARE GENERAL CORPORATION LAW, WITH FULL POWER OF SUBSTITUTION AND
RESUBSTITUTION, TO VOTE OR ACT BY WRITTEN CONSENT DURING THE OPTION PERIOD WITH
RESPECT TO THE SHARES IN ACCORDANCE WITH SECTION 1.1 HEREOF. THIS PROXY IS GIVEN
TO SECURE THE PERFORMANCE OF THE DUTIES OF STOCKHOLDER UNDER THIS AGREEMENT.
STOCKHOLDER AFFIRMS THAT THIS PROXY IS COUPLED WITH AN INTEREST AND SHALL BE
IRREVOCABLE. STOCKHOLDER SHALL TAKE SUCH FURTHER ACTION OR EXECUTE SUCH OTHER
INSTRUMENTS AS MAY BE NECESSARY TO EFFECTUATE THE INTENT OF THIS PROXY.
(b) Other Proxies Revoked. Stockholder represents that any proxies
---------------------
heretofore given in respect of the Shares, if any, are not irrevocable, and that
all such proxies are hereby revoked.
2
<PAGE>
ARTICLE II
CUSTODY AND TENDER OF SHARES
----------------------------
2.1 Delivery of Shares to Custodian. As soon as practicable after the date
-------------------------------
hereof, Stockholder shall deliver the certificates representing the Shares
(together with related stock powers duly endorsed for transferability) to
D'Ancona & Pflaum, LLC (the "Custodian"), which shall retain custody of the
Shares and stock powers until they are tendered pursuant to Section 2.3.
2.2 Delivery of Letter of Transmittal to Custodian. As soon as
----------------------------------------------
practicable after the date on which the Offer is commenced, Stockholder shall
deliver a Letter of Transmittal covering the Shares, duly executed in accordance
with the terms of the offer materials used in connection with the Offer, to the
Custodian, which shall retain custody of the Letter of Transmittal until it is
delivered to the Depository pursuant to Section 2.3.
2.3 Tender of Shares and Delivery of Letter of Transmittal to Depository.
--------------------------------------------------------------------
Prior to the expiration or termination of the Offer, Stockholder shall cause
Custodian to and Custodian shall deliver all, but not part, of the Shares,
together with the related stock powers and Letter of Transmittal, to the
depository for the Offer and such delivery shall constitute a tender by the
Stockholder under the Offer. The tendered Shares may not be withdrawn except
following the termination of this Agreement pursuant to Section 5.2. Except as
otherwise set forth in this Agreement, all rights of ownership with respect to
the Shares shall remain with Stockholder until the Effective Time or the
purchase of the Shares pursuant to the Offer.
2.4 Right of Purchaser. If the Shares, stock powers, and Letter of
------------------
Transmittal have not been tendered to the depository by the fifteenth (15/th/)
business day following the commencement of the Offer, Purchaser shall have the
right to instruct the Custodian to effect the tender of the Shares as provided
in Section 2.3, whereupon Custodian shall promptly, but in any event within one
(1) business day, deliver such Shares, stock powers, and Letter of Transmittal
to said Depository. Such instruction shall be given to Custodian in the same
manner as provided in Section 5.6 with respect to D'Ancona & Pflaum, LLC.
2.5 Further Assurances. Stockholder shall take all actions necessary or
------------------
appropriate to cause the Custodian to tender the Shares to the depository for
the Offer prior to the expiration or termination of the Offer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 3.1 Certain Representations and Warranties of Stockholder.
-----------------------------------------------------
Stockholder represents and warrants to Parent and Purchaser as follows:
(a) Ownership. Stockholder is the sole record and beneficial owner of the
---------
Shares and has full and unrestricted power to dispose of and to vote the Shares.
Other than as set forth in the Company's Proxy Statement dated March 24, 1999,
Stockholder does not beneficially own any securities of Company on the date
hereof other than the Shares. Stockholder has sole voting power and sole power
to issue instructions with respect to the matters set forth in Articles I and II
hereof, sole power of disposition, sole power of conversion, sole power to
demand appraisal
3
<PAGE>
rights and sole power to agree to all of the matters set forth in this
Agreement, in each case with respect to all of the Shares with no limitations,
qualifications or restrictions on such rights, subject to applicable securities
laws and the terms of this Agreement.
(b) Power and Authority; Execution and Delivery. Stockholder has all
-------------------------------------------
requisite legal capacity, power and authority to enter into this Agreement and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by Stockholder and the consummation by Stockholder of the
transactions contemplated hereby have been duly authorized by all necessary
action on the part of Stockholder. This Agreement has been duly executed and
delivered by Stockholder and, assuming that this Agreement constitutes the valid
and binding obligation of the other parties hereto, constitutes a valid and
binding obligation of Stockholder, enforceable against Stockholder in accordance
with its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and to general principles of equity.
(c) No Conflicts. The execution and delivery of this Agreement do not,
------------
and, subject to compliance with the HSR Act and securities laws, to the extent
applicable, the consummation of the transactions contemplated hereby and
compliance with the provisions hereof, will not (i) conflict with or result in
any breach of any organizational documents applicable to Stockholder or (ii)
conflict with, result in a breach or violation of or default (with or without
notice or lapse of time or both) under, or give rise to a material obligation, a
right of termination, cancellation, or acceleration of any obligation or a loss
of a material benefit under, or require notice to or the consent of any person
under any agreement, instrument, undertaking, law, rule, regulation, judgment,
order, injunction, decree, determination or award binding on Stockholder, other
than any such conflicts, breaches, violations, defaults, obligations, rights or
losses that individually or in the aggregate would not (i) materially impair the
ability of Stockholder to perform Stockholder's obligations under this Agreement
or (ii) prevent or delay the consummation of any of the transactions
contemplated hereby.
(d) No Encumbrances. Except as applicable in connection with the
---------------
transactions contemplated by Articles I and II hereof, the Shares and the
certificates representing the Shares are now, and at all times during the term
hereof will be, held by Stockholder, or by a nominee or custodian for the
benefit of Stockholder, free and clear of all liens, claims, security interests,
proxies, voting trusts or agreements, understandings or arrangements or any
other encumbrances whatsoever except for any such encumbrances or proxies
arising hereunder or any such encumbrances not caused or created by Stockholder.
(e) No Finder's Fees. No broker, investment banker, financial advisor or
----------------
other person is entitled to any broker's, finder's, financial adviser's or other
similar fee or commission in connection with the transactions contemplated
hereby based upon arrangements made by or on behalf of Stockholder.
Section 3.2 Representations and Warranties of Parent and Purchaser.
------------------------------------------------------
Parent and Purchaser hereby represent and warrant to Stockholder that:
(a) Power and Authority; Execution and Delivery. Parent and Purchaser
-------------------------------------------
each has all requisite legal capacity, corporate power and authority to enter
into this Agreement and to
4
<PAGE>
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Parent and Purchaser and the consummation by Parent and
Purchaser of the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of Parent and Purchaser. This
Agreement has been duly executed and delivered by Parent and Purchaser and,
assuming that this Agreement constitutes the valid and binding obligation of
Stockholder, constitutes a valid and binding obligation of Parent and Purchaser,
enforceable against Parent and Purchaser in accordance with its terms, subject
to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and to general principles of equity.
(b) No Conflicts. The execution and delivery of this Agreement do not,
------------
and, subject to compliance with the HSR Act, to the extent applicable, the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not (i) conflict with or result in any breach of any
organizational documents applicable to Parent or Purchaser or (ii) conflict
with, result in a breach or violation of or default (with or without notice or
lapse of time or both) under, or give rise to a material obligation, right of
termination, cancellation, or acceleration of any obligation or a loss of a
material benefit under, or require notice to or the consent of any person under
any agreement, instrument, undertaking, law, rule, regulation, judgment, order,
injunction, decree, determination or award binding on Parent or Purchaser, other
than any such conflicts, breaches, violations, defaults, obligations, rights or
losses that individually or in the aggregate would not (i) impair the ability of
Parent and Purchaser to perform their obligations under this Agreement or (ii)
prevent or delay the consummation of any of the transactions contemplated
hereby.
ARTICLE IV
CERTAIN COVENANTS
-----------------
Section 4.1 Certain Covenants of Stockholder.
--------------------------------
(a) Restriction on Transfer of Shares, Proxies and Noninterference.
--------------------------------------------------------------
During the term of this Agreement, Stockholder shall not, directly or
indirectly: (A) except pursuant to the terms of this Agreement and except for
the tender of Shares in the Offer, offer for sale, sell, transfer, tender,
pledge, encumber, assign or otherwise dispose of, or enter into any contract,
option or other arrangement or understanding with respect to or consent to the
offer for sale, sale, transfer, tender, pledge, encumbrance, assignment or other
disposition of, any or all of the Shares; (B) except pursuant to the terms of
this Agreement, grant any proxies (other than proxies relating to the election
of management's slate of directors at an annual meeting of Company's
stockholders, and other routine matters which would not require the filing of a
preliminary proxy statement under Rule 14a-6(a) of the Exchange Act), or powers
of attorney, deposit any of the Shares into a voting trust or enter into a
voting agreement with respect to any of the Shares; or (C) take any action that
would make any representation or warranty contained herein untrue or incorrect
or have the effect of impairing the ability of Stockholder to perform
Stockholder's obligations under this Agreement or preventing or delaying the
consummation of any of the transactions contemplated hereby or by the Merger
Agreement; provided, however, that notwithstanding the foregoing, Steinfeld may
transfer Shares to any charitable foundation established by him if, and only if,
such charitable foundation (i) acknowledges in writing its
5
<PAGE>
understanding and agreement that the Shares so transferred to it shall remain
subject to this Agreement, and (ii) further agrees to be bound by the terms
hereof with respect to such Shares.
(b) Cooperation. Stockholder, in the capacity as a stockholder, shall
-----------
cooperate fully with Parent, Purchaser and Company in connection with their
respective efforts to fulfill the conditions to the Merger set forth in Article
VII of the Merger Agreement.
(c) Releases. Stockholder hereby fully, unconditionally and irrevocably
--------
releases, effective as of the Effective Time, any and all claims and causes of
action that Stockholder has or may have against Company or any of its
Subsidiaries or any present or former director, officer, employee or agent of
Company or any of its Subsidiaries (collectively, the "Released Parties")
arising or resulting from or relating to any alleged breach of fiduciary duty by
any officer or director of the Company occurring prior to the Effective Time;
provided, however, that such release shall not apply to any currently effective
contract or agreement between Stockholder and Company (the "Existing Contracts")
or any claim or cause of action arising therefrom.
(d) No Solicitation. Stockholder shall not, in the capacity as a
---------------
stockholder, respond to any inquiries or the making of any proposal by any
person or entity (other than Parent or any affiliate of Parent) concerning any
business combination merger, tender offer, exchange offer, sale of assets, sale
of shares of capital stock or debt securities or similar transactions involving
Company or any Subsidiary, division or operating or principal business unit of
Company. If Stockholder, in the capacity as a stockholder of the Company,
receives any such inquiry or proposal, then Stockholder shall promptly inform
Parent of the existence thereof. Stockholder, in the capacity as a stockholder
of the Company, will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. For purposes of this paragraph (d),
Steinfeld shall not be deemed to be acting in the capacity as a stockholder of
the Company if, and to the extent that, the Board of Directors of the Company or
any committee thereof authorizes and directs Steinfeld to hold discussions with
any third party in response to the Company's receipt of an unsolicited Takeover
Proposal on behalf of the Company provided that Steinfeld informs such third
party that in holding any such discussions with such third party, Steinfeld is
speaking on behalf of the Corporation and not for himself as a stockholder of
the Company.
(e) Reliance by Parent. Stockholder understands and acknowledges that
------------------
Parent and Purchaser are entering into, the Merger Agreement in reliance upon
Stockholder's execution and delivery of this Agreement.
ARTICLE V
MISCELLANEOUS
-------------
Section 5.1 Fees and Expenses. Each party hereto shall pay its own
-----------------
expenses incident to preparing for, entering into and carrying out this
Agreement and the consummation of the transactions contemplated hereby.
Section 5.2 Amendment; Termination. This Agreement may not be amended
----------------------
except by an instrument in writing signed on behalf of each of the parties
hereto. This Agreement and the proxies granted pursuant to Section 1.2 shall
terminate on the earlier of (i) the Effective Time
6
<PAGE>
and (ii) the termination of the Merger Agreement in accordance with its terms.
If, following the termination of this Agreement as contemplated by clause (ii)
of the previous sentence, Stockholder notifies Parent and Purchaser that the
Shares have been tendered, that it desires to withdraw the Shares from the
Offer, and that it has so notified the depository, Parent and Purchaser shall,
so long as Shares may then be withdrawn from the Offer, cooperate with
Stockholder in its request for the return of the Shares and instruct the
depository to return the Shares to Stockholder at its earliest convenience.
Section 5.3 Extension; Waiver. Any agreement on the part of a party to
-----------------
waive any provision of this Agreement, or to extend the time for any performance
hereunder, shall be valid only if set forth in an instrument in writing signed
on behalf of such party. The failure of any party to this Agreement to assert
any of its rights under this Agreement or otherwise shall not constitute a
waiver of such rights.
Section 5.4 Entire Agreement; No Third-Party Beneficiaries. This
----------------------------------------------
Agreement constitutes the entire agreement, and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement, and is not intended to confer upon any person
other than the parties any rights or remedies; provided, however, that the
provisions of Section 4.1(c) are intended to inure to the benefit of, and to be
enforceable by, the Released Parties. This Agreement shall not affect or in any
way amend any of the Existing Contracts.
Section 5.5 Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflict of
laws thereof.
Section 5.6 Notices. All notices, requests, claims, demands and other
-------
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, or sent by overnight courier or telecopy
(providing proof of delivery) to the address set forth below (or, in each case,
at such other address as shall be specified by like notice).
If to Parent or Purchaser:
Falcon Products
9387 Dielman Industrial Drive
St. Louis, Missouri 63132
Attention: Franklin A. Jacobs
Chairman and Chief Executive Officer
Telecopy: (314) 991-9295
with a copy (which shall not constitute notice) to:
Gallop, Johnson & Neuman, L.C.
101 South Hanley / Suite 1600
St. Louis, Missouri 63105
Attention: Robert H. Wexler, Esq.
Telecopy: (314) 862-1219
7
<PAGE>
If to Stockholder:
c/o Manfred Steinfeld
4679 Bocaire Boulevard
Boca Raton, Florida 33487
Telecopy: (561) 241-3508
with copies (which shall not constitute notice) to:
D'Ancona & Pflaum, LLC
111 East Wacker Drive / Suite 2800
Chicago, Illinois 60601-4205
Attention: Walter Roth, Esq.
Telecopy: (314) 602-3000
and
c/o Shelby Williams Industries, Inc.
11-111 Merchandise Mart
Chicago, Illinois 60654
Section 5.7 Assignment. Neither this Agreement nor any of the rights,
----------
interests, or obligations under this Agreement may be assigned or delegated, in
whole or in part, by Stockholder without the prior written consent of Parent,
and any such assignment or delegation that is not consented to shall be null and
void. This Agreement, together with any rights, interests, or obligations of
Parent and Purchaser hereunder, may be assigned or delegated, in whole or in
part, by Parent and Purchaser without the consent of or any action by
Stockholder upon notice by Parent or Purchaser to Stockholder as herein
provided. Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns (including without limitation any person to
whom any Shares are sold, transferred, assigned or passed, whether by operation
of law or otherwise).
Section 5.8 Confidentiality. Stockholder recognizes that successful
---------------
consummation of the transactions contemplated by this Agreement may be dependent
upon confidentiality with respect to the matters referred to herein. In this
connection, pending public disclosure thereof, Stockholder hereby agrees not to
disclose or discuss such matters with anyone not a party to this Agreement
(other than its counsel and advisors, if any) without the prior written consent
of Parent, except for filings required pursuant to the Exchange Act and the
rules and regulations thereunder or disclosures its counsel advises are
necessary in order to fulfill its obligations imposed by law, in which event
Stockholder shall give notice of such disclosure to Parent as promptly as
practicable so as to enable Parent to seek a protective order from a court of
competent jurisdiction with respect thereto.
Section 5.9 Further Assurances. Stockholder shall execute and deliver
------------------
such other documents and instruments and take such further actions as may be
necessary or appropriate or
8
<PAGE>
as may be reasonably requested by Parent or Purchaser in order to ensure that
Parent and Purchaser receive the full benefit of this Agreement.
Section 5.10 Enforcement. Irreparable damage would occur in the event
-----------
that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. Accordingly, the parties
shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this Agreement
in the Court of Chancery in and for New Castle County in the State of Delaware
(or, if such court lacks subject matter jurisdiction, any appropriate state or
federal court in New Castle County in the State of Delaware), this being in
addition to any other remedy to which they are entitled at law or in equity.
Each of the parties hereto (i) shall submit itself to the personal jurisdiction
of the Court of Chancery in and for New Castle County in the State of Delaware
(or, if such court lacks subject matter jurisdiction, any appropriate state or
federal court in New Castle County in the State of Delaware) in the event any
dispute arises out of this Agreement or any of the transactions contemplated
hereby, (ii) shall not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court, and (iii) shall not bring
any action relating to this Agreement or any of the transactions contemplated
hereby in any court other than the Court of Chancery in and for New Castle
County in the State of Delaware (or, if such court lacks subject matter
jurisdiction, any appropriate state or federal court in New Castle County in the
State of Delaware).
Section 5.11 Severability. Whenever possible, each provision or portion
------------
of any provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
Section 5.12 Descriptive Headings. The descriptive headings used herein
--------------------
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
Section 5.13 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same instrument and
shall become effective when one or more counterparts have been signed by each
party and delivered to the other parties.
[signature page follows]
9
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be signed as of the day and year first written above.
FALCON PRODUCTS, INC.
/s/ Franklin A. Jacobs
By: ______________________________
Name: Franklin A. Jacobs
Title: Chairman and Chief Executive Officer
SY ACQUISITION, INC.
/s/ Franklin A. Jacobs
By: ______________________________
Name: Franklin A. Jacobs
Title: President
THE FERN AND MANFRED STEINFELD CHARITABLE
REMAINDER TRUST UTA 10/17/95
/s/ Manfred Steinfeld
By: ______________________________
Name: Manfred Steinfeld, Trustee
/s/ Fern Steinfeld
______________________________
Fern Steinfeld, Trustee
/s/ Manfred Steinfeld
_____________________________________
Manfred Steinfeld, Individually and as the
Beneficial Owner of the Shares
10
<PAGE>
This Stockholder Agreement dated May 5, 1999 among Falcon Products, Inc., a
Delaware corporation, SY Acquisition, Inc., a Delaware corporation, The Fern and
Manfred Steinfeld Charitable Remainder Trust UTA 10/17/95 and Manfred Steinfeld
is hereby executed effective as of May 5, 1999 on behalf of D'Ancona & Pflaum,
LLC, as Custodian, solely to evidence that it is bound by the obligations
contained in Article II.
D'Ancona & Pflaum, LLC
/s/ Walter Roth
By: ____________________________
Walter Roth, Member
May 5, 1999
Date: __________________________
11
<PAGE>
Exhibit A
---------
Certificate Number Number of Shares
------------------ ----------------
<PAGE>
Exhibit 10
STOCKHOLDER AGREEMENT
---------------------
THIS STOCKHOLDER AGREEMENT dated May 5, 1999 (this "Agreement"), is made
and entered into among Falcon Products, Inc., a Delaware corporation ("Parent"),
SY Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of
Parent ("Purchaser"), on the one hand, and Paul N. Steinfeld ("Stockholder"), on
the other hand.
RECITALS:
--------
A. Parent, Purchaser, and Shelby Williams Industries, Inc., a Delaware
corporation ("Company"), propose to enter into an Agreement and Plan of Merger,
dated as of the date hereof (the "Merger Agreement"), pursuant to which the
Purchaser will merge with and into Company (the "Merger") on the terms and
subject to the conditions set forth in the Merger Agreement. Except as otherwise
defined herein, terms used herein with initial capital letters have the
respective meanings ascribed thereto in the Merger Agreement.
B. As of the date hereof, Stockholder beneficially owns and is entitled
to dispose of (or to direct the disposition of) and to vote (or to direct the
voting of) 625,000 shares (together with any shares issued to Stockholder after
the date of this Agreement pursuant to the exercise of options, the "Shares") of
the common stock, par value $.05 per share (the "Common Stock"), of Company. The
Shares as of the date of this Agreement are described on Exhibit A hereto.
---------
C. Pursuant to the Merger Agreement, Purchaser shall commence a cash
tender offer (the "Offer") to purchase at a price of $16.50 per share all of the
Common Stock of Company. Stockholder has advised Parent and Purchaser that it
intends to tender the Shares in the Offer.
D. As a condition and inducement to Parent's and Purchaser's willingness
to enter into the Merger Agreement, Parent and Purchaser have requested that
Stockholder agree, and Stockholder has agreed, to enter into this Agreement.
E. The Board of Directors of the Company has approved this Agreement, the
Merger Agreement and the transactions contemplated hereby and thereby so as to
render inapplicable Section 203 of the Delaware General Corporation Law to the
transactions contemplated hereby and thereby.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements contained in this Agreement and the Merger
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
ARTICLE I
VOTING AGREEMENT
----------------
Section 1.1 Agreement to Vote Shares. During the term of this Agreement,
------------------------
at any meeting of the stockholders of Company called to consider and vote upon
the adoption of the Merger Agreement (and at any and all postponements and
adjournments thereof), and in connection with any action to be taken in respect
of the adoption of the Merger Agreement by
<PAGE>
written consent of stockholders of Company, Stockholder shall vote or cause to
be voted (including by written consent, if applicable) all of the Shares in
favor of the adoption of the Merger Agreement and in favor of any other matter
necessary for the consummation of the transactions contemplated by the Merger
Agreement and considered and voted upon at any such meeting or made the subject
of any such written consent, as applicable. During the term of this Agreement,
at any meeting of the stockholders of Company called to consider and vote upon
any Other Proposal (as hereinafter defined), and at any and all postponements
and adjournments thereof, and in connection with any action to be taken in
respect of any Other Proposal by written consent of stockholders of Company,
Stockholder shall vote or cause to be voted (including by written consent, if
applicable) all of the Shares against such Other Proposal. For purposes of this
Agreement, the term "Other Proposal" means any (a) Takeover Proposal (as defined
in the Merger Agreement) or (b) other action which is intended or could
reasonably be expected to materially impede, interfere with, delay or materially
and adversely affect the consummation of the Merger or any of the other
transactions contemplated by the Merger Agreement or this Agreement; provided,
however, that neither the Merger nor any other transaction contemplated by the
Merger Agreement to be consummated by Company, Parent or Purchaser in connection
with the Merger shall constitute an Other Proposal. Stockholder shall not enter
into any agreement or understanding with any person or entity the effect of
which would be violative of the provisions and agreements contained in this
Section 1.1.
Section 1.2 Irrevocable Proxy.
-----------------
(a) Grant of Proxy. STOCKHOLDER HEREBY APPOINTS PARENT AND ANY DESIGNEE OF
--------------
PARENT AND EACH OF THEM INDIVIDUALLY, STOCKHOLDER'S AGENT, PROXY AND ATTORNEY-
IN-FACT DURING THE TERM HEREOF, PURSUANT TO THE PROVISIONS OF SECTION 212 OF THE
DELAWARE GENERAL CORPORATION LAW, WITH FULL POWER OF SUBSTITUTION AND
RESUBSTITUTION, TO VOTE OR ACT BY WRITTEN CONSENT DURING THE OPTION PERIOD WITH
RESPECT TO THE SHARES IN ACCORDANCE WITH SECTION 1.1 HEREOF. THIS PROXY IS GIVEN
TO SECURE THE PERFORMANCE OF THE DUTIES OF STOCKHOLDER UNDER THIS AGREEMENT.
STOCKHOLDER AFFIRMS THAT THIS PROXY IS COUPLED WITH AN INTEREST AND SHALL BE
IRREVOCABLE. STOCKHOLDER SHALL TAKE SUCH FURTHER ACTION OR EXECUTE SUCH OTHER
INSTRUMENTS AS MAY BE NECESSARY TO EFFECTUATE THE INTENT OF THIS PROXY.
(b) Other Proxies Revoked. Stockholder represents that any proxies
---------------------
heretofore given in respect of the Shares, if any, are not irrevocable, and that
all such proxies are hereby revoked.
ARTICLE II
CUSTODY AND TENDER OF SHARES
----------------------------
2.1 Delivery of Shares to Custodian. As soon as practicable after the date
-------------------------------
hereof, Stockholder shall deliver the certificates representing the Shares
(together with related stock powers duly endorsed for transferability) to
D'Ancona & Pflaum, LLC (the "Custodian"), which shall retain custody of the
Shares and stock powers until they are tendered pursuant to Section 2.3.
2
<PAGE>
2.2 Delivery of Letter of Transmittal to Custodian. As soon as
----------------------------------------------
practicable after the date on which the Offer is commenced, Stockholder shall
deliver a Letter of Transmittal covering the Shares, duly executed in accordance
with the terms of the offer materials used in connection with the Offer, to the
Custodian, which shall retain custody of the Letter of Transmittal until it is
delivered to the Depository pursuant to Section 2.3.
2.3 Tender of Shares and Delivery of Letter of Transmittal to Depository.
--------------------------------------------------------------------
Prior to the expiration or termination of the Offer, Stockholder shall cause
Custodian to and Custodian shall deliver all, but not part, of the Shares,
together with the related stock powers and Letter of Transmittal, to the
depository for the Offer and such delivery shall constitute a tender by the
Stockholder under the Offer. The tendered Shares may not be withdrawn except
following the termination of this Agreement pursuant to Section 5.2. Except as
otherwise set forth in this Agreement, all rights of ownership with respect to
the Shares shall remain with Stockholder until the Effective Time or the
purchase of the Shares pursuant to the Offer.
2.4 Right of Purchaser. If the Shares, stock powers, and Letter of
------------------
Transmittal have not been tendered to the depository by the fifteenth (15th)
business day following the commencement of the Offer, Purchaser shall have the
right to instruct the Custodian to effect the tender of the Shares as provided
in Section 2.3, whereupon Custodian shall promptly, but in any event within one
(1) business day, deliver such Shares, stock powers, and Letter of Transmittal
to said Depository. Such instruction shall be given to Custodian in the same
manner as provided in Section 5.6 with respect to D'Ancona & Pflaum, LLC.
2.5 Further Assurances. Stockholder shall take all actions necessary or
------------------
appropriate to cause the Custodian to tender the Shares to the depository for
the Offer prior to the expiration or termination of the Offer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 3.1 Certain Representations and Warranties of Stockholder.
-----------------------------------------------------
Stockholder represents and warrants to Parent and Purchaser as follows:
(a) Ownership. Stockholder is the sole record and beneficial owner of the
---------
Shares and has full and unrestricted power to dispose of and to vote the Shares.
Other than as set forth in the Company's Proxy Statement dated March 24, 1999,
Stockholder does not beneficially own any securities of Company on the date
hereof other than the Shares. Stockholder has sole voting power and sole power
to issue instructions with respect to the matters set forth in Articles I and II
hereof, sole power of disposition, sole power of conversion, sole power to
demand appraisal rights and sole power to agree to all of the matters set forth
in this Agreement, in each case with respect to all of the Shares with no
limitations, qualifications or restrictions on such rights, subject to
applicable securities laws and the terms of this Agreement.
(b) Power and Authority; Execution and Delivery. Stockholder has all
-------------------------------------------
requisite legal capacity, power and authority to enter into this Agreement and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by Stockholder and the consummation by Stockholder of the
transactions contemplated hereby have been duly
3
<PAGE>
authorized by all necessary action on the part of Stockholder. This Agreement
has been duly executed and delivered by Stockholder and, assuming that this
Agreement constitutes the valid and binding obligation of the other parties
hereto, constitutes a valid and binding obligation of Stockholder, enforceable
against Stockholder in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and to general
principles of equity.
(c) No Conflicts. The execution and delivery of this Agreement do not,
------------
and, subject to compliance with the HSR Act and securities laws, to the extent
applicable, the consummation of the transactions contemplated hereby and
compliance with the provisions hereof, will not (i) conflict with or result in
any breach of any organizational documents applicable to Stockholder or (ii)
conflict with, result in a breach or violation of or default (with or without
notice or lapse of time or both) under, or give rise to a material obligation, a
right of termination, cancellation, or acceleration of any obligation or a loss
of a material benefit under, or require notice to or the consent of any person
under any agreement, instrument, undertaking, law, rule, regulation, judgment,
order, injunction, decree, determination or award binding on Stockholder, other
than any such conflicts, breaches, violations, defaults, obligations, rights or
losses that individually or in the aggregate would not (i) materially impair the
ability of Stockholder to perform Stockholder's obligations under this Agreement
or (ii) prevent or delay the consummation of any of the transactions
contemplated hereby.
(d) No Encumbrances. Except as applicable in connection with the
---------------
transactions contemplated by Articles I and II hereof, the Shares and the
certificates representing the Shares are now, and at all times during the term
hereof will be, held by Stockholder, or by a nominee or custodian for the
benefit of Stockholder, free and clear of all liens, claims, security interests,
proxies, voting trusts or agreements, understandings or arrangements or any
other encumbrances whatsoever except for any such encumbrances or proxies
arising hereunder or any such encumbrances not caused or created by Stockholder.
(e) No Finder's Fees. No broker, investment banker, financial advisor or
----------------
other person is entitled to any broker's, finder's, financial adviser's or other
similar fee or commission in connection with the transactions contemplated
hereby based upon arrangements made by or on behalf of Stockholder.
Section 3.2 Representations and Warranties of Parent and Purchaser.
------------------------------------------------------
Parent and Purchaser hereby represent and warrant to Stockholder that:
(a) Power and Authority; Execution and Delivery. Parent and Purchaser each
-------------------------------------------
has all requisite legal capacity, corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by Parent and Purchaser and the
consummation by Parent and Purchaser of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Parent and Purchaser. This Agreement has been duly executed and delivered by
Parent and Purchaser and, assuming that this Agreement constitutes the valid and
binding obligation of Stockholder, constitutes a valid and binding obligation of
Parent and Purchaser, enforceable against Parent and Purchaser in accordance
with its terms, subject to applicable
4
<PAGE>
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and to general
principles of equity.
(b) No Conflicts. The execution and delivery of this Agreement do not, and
------------
subject to compliance with the HSR Act, to the extent applicable, the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not (i) conflict with or result in any breach of any
organizational documents applicable to Parent or Purchaser or (ii) conflict
with, result in a breach or violation of or default (with or without notice or
lapse of time or both) under, or give rise to a material obligation, right of
termination, cancellation, or acceleration of any obligation or a loss of a
material benefit under, or require notice to or the consent of any person under
any agreement, instrument, undertaking, law, rule, regulation, judgment, order,
injunction, decree, determination or award binding on Parent or Purchaser, other
than any such conflicts, breaches, violations, defaults, obligations, rights or
losses that individually or in the aggregate would not (i) impair the ability of
Parent and Purchaser to perform their obligations under this Agreement or (ii)
prevent or delay the consummation of any of the transactions contemplated
hereby.
ARTICLE IV
CERTAIN COVENANTS
-----------------
Section 4.1 Certain Covenants of Stockholder.
--------------------------------
(a) Restriction on Transfer of Shares, Proxies and Noninterference. During
--------------------------------------------------------------
the term of this Agreement, Stockholder shall not, directly or indirectly: (A)
except pursuant to the terms of this Agreement and except for the tender of
Shares in the Offer, offer for sale, sell, transfer, tender, pledge, encumber,
assign or otherwise dispose of, or enter into any contract, option or other
arrangement or understanding with respect to or consent to the offer for sale,
sale, transfer, tender, pledge, encumbrance, assignment or other disposition of,
any or all of the Shares; (B) except pursuant to the terms of this Agreement,
grant any proxies (other than proxies relating to the election of management's
slate of directors at an annual meeting of Company's stockholders, and other
routine matters which would not require the filing of a preliminary proxy
statement under Rule 14a-6(a) of the Exchange Act), or powers of attorney,
deposit any of the Shares into a voting trust or enter into a voting agreement
with respect to any of the Shares; or (C) take any action that would make any
representation or warranty contained herein untrue or incorrect or have the
effect of impairing the ability of Stockholder to perform Stockholder's
obligations under this Agreement or preventing or delaying the consummation of
any of the transactions contemplated hereby or by the Merger Agreement;
provided, however, that notwithstanding the foregoing, Stockholder may transfer
Shares to any charitable foundation established by him if, and only if, such
charitable foundation (i) acknowledges in writing its understanding and
agreement that the Shares so transferred to it shall remain subject to this
Agreement, and (ii) further agrees to be bound by the terms hereof with respect
to such Shares.
(b) Cooperation. Stockholder, in the capacity as a stockholder, shall
-----------
cooperate fully with Parent, Purchaser and Company in connection with their
respective efforts to fulfill the conditions to the Merger set forth in Article
VII of the Merger Agreement.
5
<PAGE>
(c) Releases. Stockholder hereby fully, unconditionally and irrevocably
--------
releases, effective as of the Effective Time, any and all claims and causes of
action that Stockholder has or may have against Company or any of its
Subsidiaries or any present or former director, officer, employee or agent of
Company or any of its Subsidiaries (collectively, the "Released Parties")
arising or resulting from or relating to any alleged breach of fiduciary duty by
any officer or director of the Company occurring prior to the Effective Time;
provided, however, that such release shall not apply to any currently effective
contract or agreement between Stockholder and Company (the "Existing Contracts")
or any claim or cause of action arising therefrom.
(d) No Solicitation. Stockholder shall not, in the capacity as a
---------------
stockholder, respond to any inquiries or the making of any proposal by any
person or entity (other than Parent or any affiliate of Parent) concerning any
business combination merger, tender offer, exchange offer, sale of assets, sale
of shares of capital stock or debt securities or similar transactions involving
Company or any Subsidiary, division or operating or principal business unit of
Company. If Stockholder, in the capacity as a Stockholder, receives any such
inquiry or proposal, then Stockholder shall promptly inform Parent of the
existence thereof. Stockholder, in the capacity as a Stockholder, will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing. For purposes of this paragraph (d), Stockholder shall
not be deemed to be acting in the capacity as a stockholder if, and to the
extent that, the Board of Directors of the Company or any committee thereof
authorizes and directs Stockholder to hold discussions with any third party in
response to the Company's receipt of an unsolicited Takeover Proposal on behalf
of the Company provided that Stockholder informs such third party that in
holding any such discussions with such third party, Stockholder is speaking on
behalf of the Corporation and not for himself as a stockholder of the Company.
(e) Reliance by Parent. Stockholder understands and acknowledges that
------------------
Parent and Purchaser are entering into, the Merger Agreement in reliance upon
Stockholder's execution and delivery of this Agreement.
ARTICLE V
MISCELLANEOUS
-------------
Section 5.1 Fees and Expenses. Each party hereto shall pay its own
-----------------
expenses incident to preparing for, entering into and carrying out this
Agreement and the consummation of the transactions contemplated hereby.
Section 5.2 Amendment; Termination. This Agreement may not be amended
----------------------
except by an instrument in writing signed on behalf of each of the parties
hereto. This Agreement and the proxies granted pursuant to Section 1.2 shall
terminate on the earlier of (i) the Effective Time, (ii) the termination of the
Merger Agreement in accordance with its terms. If, following the termination of
this Agreement as contemplated by clause (ii) of the previous sentence,
Stockholder notifies Parent and Purchaser that the Shares have been tendered,
that it desires to withdraw the Shares from the Offer, and that it has so
notified the depository, Parent and Purchaser shall, so long as Shares may then
be withdrawn from the Offer, cooperate with
6
<PAGE>
Stockholder in its request for the return of the Shares and instruct the
depository to return the Shares to Stockholder at its earliest convenience.
Section 5.3 Extension; Waiver. Any agreement on the part of a party to
-----------------
waive any provision of this Agreement, or to extend the time for any performance
hereunder, shall be valid only if set forth in an instrument in writing signed
on behalf of such party. The failure of any party to this Agreement to assert
any of its rights under this Agreement or otherwise shall not constitute a
waiver of such rights.
Section 5.4 Entire Agreement; No Third-Party Beneficiaries. This
----------------------------------------------
Agreement constitutes the entire agreement, and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement, and is not intended to confer upon any person
other than the parties any rights or remedies; provided, however, that the
provisions of Section 4.1(c) are intended to inure to the benefit of, and to be
enforceable by, the Released Parties. This Agreement shall not affect or in any
way amend any of the Existing Contracts.
Section 5.5 Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflict of
laws thereof.
Section 5.6 Notices. All notices, requests, claims, demands and other
-------
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, or sent by overnight courier or telecopy
(providing proof of delivery) to the address set forth below (or, in each case,
at such other address as shall be specified by like notice).
If to Parent or Purchaser:
Falcon Products
9387 Dielman Industrial Drive
St. Louis, Missouri 63132
Attention: Franklin A. Jacobs
Chairman and Chief Executive Officer
Telecopy: (314) 991-9295
with a copy (which shall not constitute notice) to:
Gallop, Johnson & Neuman, L.C.
101 South Hanley / Suite 1600
St. Louis, Missouri 63105
Attention: Robert H. Wexler, Esq.
Telecopy: (314) 862-1219
7
<PAGE>
If to Stockholder:
Manfred Steinfeld
4679 Bocaire Boulevard
Boca Raton, Florida 33487
Telecopy: (561) 241-3508
with a copy (which shall not constitute notice) to:
D'Ancona & Pflaum, LLC
111 East Wacker Drive / Suite 2800
Chicago, Illinois 60601-4205
Attention: Walter Roth, Esq.
Telecopy: (314) 602-3000
Section 5.7 Assignment. Neither this Agreement nor any of the rights,
----------
interests, or obligations under this Agreement may be assigned or delegated, in
whole or in part, by Stockholder without the prior written consent of Parent,
and any such assignment or delegation that is not consented to shall be null and
void. This Agreement, together with any rights, interests, or obligations of
Parent and Purchaser hereunder, may be assigned or delegated, in whole or in
part, by Parent and Purchaser without the consent of or any action by
Stockholder upon notice by Parent or Purchaser to Stockholder as herein
provided. Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns (including without limitation any person to
whom any Shares are sold, transferred, assigned or passed, whether by operation
of law or otherwise).
Section 5.8 Confidentiality. Stockholder recognizes that successful
---------------
consummation of the transactions contemplated by this Agreement may be dependent
upon confidentiality with respect to the matters referred to herein. In this
connection, pending public disclosure thereof, Stockholder hereby agrees not to
disclose or discuss such matters with anyone not a party to this Agreement
(other than its counsel and advisors, if any) without the prior written consent
of Parent, except for filings required pursuant to the Exchange Act and the
rules and regulations thereunder or disclosures its counsel advises are
necessary in order to fulfill its obligations imposed by law, in which event
Stockholder shall give notice of such disclosure to Parent as promptly as
practicable so as to enable Parent to seek a protective order from a court of
competent jurisdiction with respect thereto.
Section 5.9 Further Assurances. Stockholder shall execute and deliver
------------------
such other documents and instruments and take such further actions as may be
necessary or appropriate or as may be reasonably requested by Parent or
Purchaser in order to ensure that Parent and Purchaser receive the full benefit
of this Agreement.
Section 5.10 Enforcement. Irreparable damage would occur in the event
-----------
that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. Accordingly, the parties
shall be entitled to an injunction or injunctions to
8
<PAGE>
prevent breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement in the Court of Chancery in and for New Castle
County in the State of Delaware (or, if such court lacks subject matter
jurisdiction, any appropriate state or federal court in New Castle County in the
State of Delaware), this being in addition to any other remedy to which they are
entitled at law or in equity. Each of the parties hereto (i) shall submit itself
to the personal jurisdiction of the Court of Chancery in and for New Castle
County in the State of Delaware (or, if such court lacks subject matter
jurisdiction, any appropriate state or federal court in New Castle County in the
State of Delaware) in the event any dispute arises out of this Agreement or any
of the transactions contemplated hereby, (ii) shall not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, and (iii) shall not bring any action relating to this Agreement or
any of the transactions contemplated hereby in any court other than the Court of
Chancery in and for New Castle County in the State of Delaware (or, if such
court lacks subject matter jurisdiction, any appropriate state or federal court
in New Castle County in the State of Delaware).
Section 5.11 Severability. Whenever possible, each provision or portion
------------
of any provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
Section 5.12 Descriptive Headings. The descriptive headings used herein
--------------------
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
Section 5.13 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same instrument and
shall become effective when one or more counterparts have been signed by each
party and delivered to the other parties.
[signature page follows]
9
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be signed as of the day and year first written above.
FALCON PRODUCTS, INC.
By: /s/ Franklin A. Jacobs
-----------------------------------------
Name: Franklin A. Jacobs
Title: Chairman and Chief Executive Officer
SY ACQUISITION, INC.
By: /s/ Franklin A. Jacobs
-----------------------------------------
Name: Franklin A. Jacobs
Title: President
By: /s/ Paul N. Steinfeld
-----------------------------------------
Name: Paul N. Steinfeld
10
<PAGE>
This Stockholder Agreement dated May 5, 1999 among Falcon Products, Inc., a
Delaware corporation, SY Acquisition, Inc., a Delaware corporation, and Paul N.
Steinfeld is hereby executed effective as of May 5, 1999 on behalf of D'Ancona &
Pflaum, LLC, as Custodian, solely to evidence that it is bound by the
obligations contained in Article II.
D'Ancona & Pflaum, LLC
By: /s/ Walter Roth
---------------------------
Walter Roth, Member
Date: May 5, 1999
-------------------------
11
<PAGE>
Exhibit A
---------
Certificate Number Number of Shares*
------------------ ----------------
* Does not include options held by Mr. Steinfeld to acquire a total of 9,998
shares which shares, if issued, pursuant to the exercise thereof shall be deemed
Shares for purposes of this Stockholder Agreement.
<PAGE>
EXHIBIT 11
Confidentiality Agreement dated April 22, 1999 between Shelby Williams
Industries, Inc. ("Shelby Williams") and Falcon Products, Inc. ("Falcon"). As
used in this Agreement, the party disclosing Evaluation Material (as defined
Herein) is referred to as the "Disclosing Party" and the party receiving
Evaluation Material is referred to as the "Recipient."
The parties to this Agreement have requested certain non-public information
regarding each other in connection with a possible transaction between them. As
a condition to furnishing such information, each of the parties hereto is
requiring that the other party agree, as set forth below, to treat
confidentially such information and any other information that may be furnished
by it hereunder, whether furnished before or after the date of this letter
(collectively, the "Evaluation Material").
The Recipient agrees not to use any of the Disclosing Party's Evaluation
Material in any way for any purpose other than in connection with the purposes
for which such material has been provided. The Recipient agrees that such
Evaluation Material will not be used for competitive purposes or to obtain any
commercial advantage with respect to the Disclosing Party, and that such
information will be kept confidential by the Recipient; provided, however, that
any of such information may be disclosed to such of the Recipient's directors,
officers, employees, representatives, affiliates (as defined in Rule 405 under
the Securities Act of 1933, "Affiliates") and other agents (collectively, the
"Agents") who need to know such information (it being understood that such
Agents shall be informed by the Recipient of the confidential nature of such
information, shall be directed by the Recipient to treat such information
confidentially and shall be informed that by receiving such information they are
agreeing to be bound by this agreement).
In the event that the Recipient or its Agents should be requested or
required (by oral questions, interrogatories, requests for information or
documents subpoena, Civil Investigative Demand or similar process) to disclose
any information supplied to it in the course of its dealing with the Disclosing
Party, it is agreed that, unless prohibited by law, the Recipient will provide
the Disclosing Party with prompt notice of any such request, so that the
Disclosing Party may seek an appropriate protective order and/or waive the
Recipient's compliance with the provisions of this agreement. It is further
agreed that if, in the absence of a protective order or the receipt of a waiver
hereunder, the Recipient is nonetheless, in the opinion of counsel, compelled to
disclose information concerning the Disclosing Party to any tribunal, or else to
be liable for contempt or suffer other censure or
<PAGE>
penalty, the Recipient or its Agents may disclose such information to such
tribunal without liability hereunder, provided, however, that the Recipient give
the Disclosing Party advance written notice of the information to be disclosed
as far in advance of its disclosure as is practical and, at the Disclosing
Party's request, seek to obtain assurances that it will be accorded confidential
treatment.
Upon the Disclosing Party's request, the Recipient will promptly deliver to
the Disclosing Party the Evaluation Material and will promptly destroy all
memoranda, notes, and other writings prepared by the Recipient or its Agents
based thereon.
The term "Evaluation Material" does not include information which (i)
becomes generally available to the public other than as a result of a disclosure
by the Recipient or its Agents, (ii) was available to the Recipient on a non-
confidential basis prior to its disclosure to the Recipient by the Disclosing
Party, or (iii) becomes available to the Recipient on a non-confidential basis
from a source other than the Disclosing Party, provided that such source is not
known to you to be bound by a confidentiality agreement with the Disclosing
Party.
Without the other party to this Agreement's prior written consent, neither
party will, and will direct its Agents not to, disclose to any person either the
fact that discussions or negotiations are taking place concerning a possible
transaction between the parties, or any of the terms, conditions or other facts
with respect to any such possible transaction, including the timing or status
thereof. The term "person" as used in this letter shall be broadly interpreted
to include, without limitation, any corporation, company, partnership or
individual.
Although each party understands that the other party will endeavor to
include in the Evaluation Material information which it believes to be relevant
for the purpose of such other party's investigation, each party understands that
neither party makes any representation or warranty as to the accuracy or
completeness of the Evaluation Material or any other information which it shall
furnish to the other party orally or in writing. Each party agrees that the
other party shall have no liability resulting from the use of the Evaluation
Material.
It is understood and agreed that no failure or delay by either party hereto
in exercising any right, power or privilege hereunder shall operate as a waiver
hereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any right, power or privilege
hereunder. Each party agrees that money damages would not be a sufficient remedy
for any breach of this agreement, and that in addition to all other remedies
each party shall be entitled to specific performance and injunctive or other
equitable relief as a remedy for any such breach, and each party further
-2-
<PAGE>
agrees to waive, and to use its best efforts to cause its Agents to waive, any
requirement for the securing or posting of any bond in connection with such
remedy.
This letter agreement shall terminate two years from the date hereof.
This letter agreement shall be governed and construed in accordance with
the laws of the State of Illinois without giving effect to the conflicts of laws
principles thereof.
Each party confirms its agreement with the foregoing by its signature
below, which will constitute each party's agreement with respect to the subject
matter of this letter.
Shelby Williams Industries, Inc.
By: /s/ Manfred Steinfeld
-----------------------------
Falcon Products, Inc.
By: /s/ Franklin Jacobs
-----------------------------
-3-
<PAGE>
EXHIBIT 12
May 5, 1999
Shelby Williams Industries, Inc.
11-111 Merchandise Mart
Chicago, IL 60654
Attention: Paul N. Steinfeld
Chairman of the Board and Chief Executive Officer
Gentlemen:
Reference is made to the Agreement and Plan of Merger (the "Merger
Agreement") among Falcon Products, Inc. ("Falcon"), SY Acquisition, Inc.
("Sub") and Shelby Williams, Inc. ("Shelby Williams") of even date herewith
providing for, among other things, the acquisition of Shelby Williams by
Falcon, indirectly through Sub.
In addition to the covenants and agreements of Falcon and Sub contained in
Article VI of the Merger Agreement, Falcon and Sub have also agreed, effective
as of the "Effective Time" (as defined in the Merger Agreement) as follows:
1. Shelby Williams shall continue the employment of Paul N. Steinfeld for
the remainder of calendar year 1999 at his current annual base salary
and on such other terms as set forth in the form of Employment Agreement
previously furnished to you with respect to the continued employment of
those individuals named in Section 6.13 of the Merger Agreement,
including participation in the Shelby Williams 1999 Senior Management
Incentive Plan, except that the duration of the covenant of non-
competition set forth in Section 6 shall be one year.
2. Falcon shall cause Shelby Williams to adopt the severance policy
described in Annex I attached hereto.
The foregoing undertakings by Falcon and Sub shall be a supplement to the
Merger Agreement.
Very truly yours,
Falcon Products, Inc.
/s/ Franklin A. Jacobs
By: _________________________________
Chairman and Chief Executive
Officer
Title: ______________________________
SY Acquisition, Inc.
/s/ Franklin A. Jacobs
By: _________________________________
President
Title: ______________________________
<PAGE>
ANNEX I TO LETTER SUPPLEMENT
SEVERANCE POLICY
All office and administrative employees in Morristown, Tennessee and the
executive office in Chicago, Illinois, as well as Middle Managers, will
receive severance pay based on the following schedule:
<TABLE>
<CAPTION>
Period of service Amount of severance
----------------- -------------------
<S> <C>
Less than five years......................... 1 week's salary per year
Five years but less than ten years........... 1 1/2 weeks' salary per year
Ten or more years............................ 2 weeks' salary per year
</TABLE>
in the event of the termination by Shelby Williams of the employment of any
of them for any reason other than cause, disability, or retirement. "Cause"
means (i) the breach by the Employee of the terms of his or her employment
which is not cured within five (5) days following receipt of written notice,
(ii) neglect of duty, (iii) gross negligence, (iv) reckless or willful
misconduct, or (v) the conviction (or plea of nolo contendere) of a crime
which constitutes a felony in the jurisdiction involved. "Disability" means
that the Employee is unable to perform his or her duties as a result of
physical or mental incapacity which continues for a period of thirteen (13)
consecutive weeks or twenty-six (26) weeks in any fifty-two (52) week period.
"Middle Manager" means a person who on the date of the Agreement and Plan of
Merger was an Employee of Shelby Williams (other than the persons named in
Section 6.13 of the Agreement), has the word manager in his or her title, and
either (i) manages at least three other full time Employees (makes hiring
decisions, conducts performance appraisals, etc.) or (ii) has spending
authority in excess of $1,000.
