<PAGE>
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES EXCHANGE
ACT OF 1934 AND RULE 14f-1 THEREUNDER
This Information Statement is being mailed on or about May 12, 1999 to
holders of shares of Common Stock, $0.05 par value (the "Common Stock"), of
Shelby Williams Industries, Inc., a Delaware corporation (the "Company"), in
connection with the anticipated designation of persons (the "Designated
Directors") to the Board of Directors of the Company (the "Board of
Directors"). Such designation is to be made pursuant to the Agreement and Plan
of Merger (the "Merger Agreement"), dated as of May 5, 1999 among the Company,
Falcon Products, Inc., a Delaware corporation ("Falcon"), and SY Acquisition,
Inc., a Delaware corporation and a wholly owned subsidiary of Falcon (the
"Offeror"). On May 12, 1999, the Offeror commenced a tender offer (the
"Offer") to purchase all outstanding shares (the "Shares") of the Common Stock
for $16.50 per share in cash (the "Offer Price").
NO ACTION IS REQUIRED BY THE STOCKHOLDERS OF THE COMPANY IN CONNECTION WITH
THE APPOINTMENT OF THE DESIGNATED DIRECTORS. However, Section 14(f) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule
14f-1 promulgated thereunder require the mailing to the Company's stockholders
of the information set forth in this Information Statement prior to a change
in a majority of the Company's directors other than at a meeting of the
Company's stockholders.
The Merger Agreement provides that, promptly after the Offeror acquires a
majority of the outstanding Shares pursuant to the Offer, the Offeror will be
entitled to designate up to that number of directors as will make the
percentage of the Designated Directors equal to the aggregate voting power of
the Shares held by Falcon or any of its subsidiaries. In the event that the
Designated Directors are elected to the Board of Directors, until the
effective time of the Merger (the "Effective Time"), the Board of Directors
will have at least two directors who are directors as of the date of the
Merger Agreement and who are not officers of the Company. The Company has
agreed, at the option of Falcon, either to increase the size of the Company's
Board of Directors and/or obtain the resignation of such number of its current
directors as is necessary to enable the Designated Directors to be elected or
appointed to the Board of Directors.
The terms of the Merger Agreement, a summary of the events leading up to
the Offer and the execution of the Merger Agreement and certain other
information concerning the Offer and the Merger are contained in the Offer to
Purchase and in the Solicitation/Recommendation Statement on Schedule 14D-9 of
the Company (the "Schedule 14D-9") with respect to the Offer, copies of which
have been delivered to stockholders of the Company. Certain other documents
(including the Merger Agreement) were filed with the Securities and Exchange
Commission (the "Commission") as exhibits to the Schedule 14D-9 and as
exhibits to the Tender Offer Statement on Schedule 14D-1 of the Offeror and
Falcon (the "Schedule 14D-1"). The exhibits to the Schedule 14D-9 and the
Schedule 14D-1 may be examined at, and copies thereof may be obtained from,
the regional offices of and public reference facilities maintained by the
Commission (except that the exhibits thereto cannot be obtained from the
regional offices of the Commission) in the manner set forth in Section 8 of
the Offer to Purchase, as well as on the World Wide Web site maintained by the
Commission on the Internet at http://www.sec.gov.
The information contained in this Information Statement concerning Falcon,
the Offeror and the Designated Directors has been furnished to the Company by
Falcon. The Company assumes no responsibility for the accuracy or completeness
of such information.
At the close of business on May 5, 1999, there were 8,761,417 Shares issued
and outstanding, excluding options to purchase 227,801 shares.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of Common Stock as of March 1, 1999 by (i) each director of the
Company, (ii) each executive officer of the Company, (iii) all executive
officers and directors as a group of the Company and (iv) holders of more than
5% of the Company's outstanding shares of Common Stock. Other than as set
forth below, there are no persons known by the Company to own beneficially
more than 5% of the outstanding Common Stock.
The following information is furnished as of March 1, 1999 (unless
otherwise indicated) to indicate beneficial ownership of the Company's Common
Stock by each director and nominee, by certain executive officers of the
Company, and by all directors and executive officers as a group. Such
information has been furnished to the Company by the indicated owners. Unless
otherwise indicated, beneficial ownership is direct.
<TABLE>
<CAPTION>
Amount
Beneficially
Name and Beneficial Owner Owned Percent
------------------------- ------------ -------
<S> <C> <C>
Directors and Executive Officers:
Robert P. Coulter.................................. 85,007(B) (A)
William B. Kaplan.................................. 14,000(C) (A)
Robert E. Lowe..................................... 1,000 (A)
Douglas A. Parker.................................. 5,000(D) (A)
Manfred Steinfeld.................................. 1,043,053(E) 11.9%
Paul N. Steinfeld.................................. 634,998(F) 7.2%
Trisha Wilson...................................... 13,500(C) (A)
Peter W. Barile.................................... 78,007(G) (A)
Sam Ferrell........................................ 24,265(H) (A)
All directors and executive officers as a group.... 1,898,830(I) 21.7%
Other 5% Holders
David L. Babson and Company.......................... 883,900(J) 10.1%
Brinson Partners, Inc................................ 551,300(K) 6.3%
FMR Corp............................................. 428,900(L) 4.9%
</TABLE>
- --------
(A) Less than 1%.
(B) Includes 45,503 shares owned by Mr. Coulter's wife, as to which he
disclaims beneficial ownership. Also includes 5,999 stock options deemed
exercised solely for the purpose of showing total shares owned by Mr.
Coulter.
(C) Includes 12,000 stock options deemed exercised solely for the purpose of
showing total shares owned by such person.
(D) Includes 4,000 stock options deemed exercised solely for the purpose of
showing total shares owned by Mr. Parker.
(E) Includes 488 shares owned by The Steinfeld Foundation, an Illinois not-
for-profit corporation of which Mr. Steinfeld is an officer and Mr.
Steinfeld and his wife are two of three directors; Mr. Steinfeld disclaims
beneficial ownership of such shares. Also includes 57,065 shares held by
Manfred Steinfeld, Paul N. Steinfeld, Robert P. Coulter and Sam Ferrell as
trustees of the Company's Employee Stock Ownership Plan; Mr. Steinfeld
disclaims beneficial ownership of such shares. (The shares held by the
trustees of said plan are not included in share figures for Paul N.
Steinfeld, Robert P. Coulter or Sam Ferrell in order to avoid
duplication.) Also includes (i) 300,000 shares owned by The Fern and
Manfred Steinfeld Charitable Remainder Trust UTA 10/17/95 (the "CRT"), of
which Mr. Steinfeld is settlor and a trustee with sole power as trustee to
vote and dispose of said shares (Mr. Steinfeld's wife is the other trustee
of the CRT); and (ii) 685,500 shares owned by the Manfred Steinfeld
Irrevocable Trust UTA 9/5/97 (the "Living Trust"). Paul N. Steinfeld is
trustee of the Living Trust but does not possess voting or investment
power
2
<PAGE>
with respect to shares of the Company's Common Stock held by the Living
Trust; Manfred Steinfeld is settlor of the Living Trust, and the Living
Trust provides that, individually (and not in a fiduciary capacity),
Manfred Steinfeld shall have the sole power with respect to any action or
inaction concerning such shares, including but not limited to voting powers
with respect to such shares and investment power, including the power to
retain or dispose or direct the disposition of such shares.
(F) Includes 9,998 stock options deemed exercised solely for the purpose of
showing total shares owned by Paul N. Steinfeld. Excludes shares held by
The Steinfeld Foundation, of which Paul N. Steinfeld is one of three
directors and disclaims beneficial ownership. See Note (E).
(G) Includes 3,856 shares held by Mr. Barile as custodian for his child, as to
which he disclaims beneficial ownership. Also includes 7,666 stock options
deemed exercised solely for the purpose of showing total shares owned by
Mr. Barile.
(H) Includes 4,666 stock options deemed exercised solely for the purpose of
showing total shares owned by Mr. Ferrell.
(I) See matters covered by the foregoing notes.
(J) Schedule 13G dated February 1, 1999 states that Babson in its capacity as
investment advisor may be deemed the beneficial owner of these shares
which are owned by numerous investment counseling clients.
(K) Schedule 13G dated February 3, 1999 states that BPI has shares voting and
dispositive power with Brinson Holdings, Inc. ("BHI"), SBC Holding (USA),
Inc. ("SBCUSA"), Swiss Bank Corporation ("SBC"). The address of BHI is the
same as BPI. The address of SBCUSA is 222 Broadway, New York, NY 10038;
and the address of SNC is Aeschenplatz 6 CH-4002, Basel, Switzerland.
(J) Schedule 13G dated February 11, 1999 states that FMR has no voting power
and sole dispositive power of 428,900 shares at December 31, 1998;
Fidelity Low-Priced Stock Fund has an interest in said shares; and that
Fidelity Management & Research Company, a wholly-owned subsidiary of FMR,
is the beneficial owner of said shares as a result of acting as investment
advisor to various investment companies.
3
<PAGE>
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors presently consists of seven members. Pursuant to the
Company's By-laws, the Board of Directors may consist of no more than eight
members. It is expected that the Designated Directors will assume office
promptly following the purchase of Shares by the Offeror. This step will be
accomplished at a meeting or by written consent of the Board of Directors
providing that the size of the Board of Directors will be increased and
sufficient numbers of current directors will resign such that, immediately
following such action, the number of vacancies to be filled by the Designated
Directors will be available. It is currently not known which of the current
directors of the Company will resign.
Falcon and the Offeror have informed the Company that they will choose the
Designated Directors from the persons listed below, each of whom has consented
to act as a director of the Company. The Designated Directors will constitute
a majority of the Board after they are appointed.
Designated Directors
<TABLE>
<CAPTION>
Name Age* Background Information
- ---- ---- ----------------------
<S> <C> <C>
*Franklin A. Jacobs.......... 66 Chairman of the Board and Chief Executive
Officer of Falcon for more than the last five
years and President of Falcon until December
1995; Director of Top Air Manufacturing, Inc.
*Darryl C. Rosser............ 47 President and Chief Operating Officer of
Falcon 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........... 36 Vice President-Finance and Chief Financial
Officer, Secretary and Treasurer of Falcon
since January 1996; prior thereto, Vice
President and Chief Financial Officer of JDI
Group, Inc., a distributor of residential
furniture, for more than the last five years.
Stephen E. Cohen............. 30 Vice President-Sales and Marketing of Falcon
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........... 43 Vice President-Operations of Falcon since
November 1998; prior thereto, Director of
West Michigan Manufacturing Operations-Herman
Miller, Inc., a manufacturer of office
furniture.
Michael J. Kula.............. 49 Vice President-Corporate Technology &
Development of Falcon 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............... 54 Senior Vice President-International Sales/New
Chain Development of Falcon since August
1998; Senior Vice President-Sales since
December 1993; Vice President-Sales since
November 1986.
</TABLE>
- --------
*Age at February 5, 1999
4
<PAGE>
Current Directors and Executive Officers
The following is certain biographical information with respect to the
current members of the Board of Directors and Executive Officers of the
Company.
<TABLE>
<CAPTION>
Name Age* Background Information
- ---- ---- ----------------------
<S> <C> <C>
Robert P. Coulter............ 56 President and Chief Operating Officer of the
Company since May 1990; prior thereto
President and Treasurer.
William B. Kaplan............ 58 Chairman and CEO of Senior Lifestyle
corporation (development and management of
housing for the elderly).
Robert E. Lowe............... 44 Vice President, Marketing and Strategic
Planning, Beverage Division of Kraft Foods,
Inc. (food manufacturer) from December 1998
to date; prior thereto Vice President,
Corporate Development, Kraft Foods, Inc. from
December 1996 to December 1998; Category
Business Director for Kraft's Jello trademark
from December 1994 to December 1996; and
Director of New Business for Kraft's Post
Cereals from 1991 to December 1994.
Douglas A. Parker............ 42 President of Hospitality Worldwide Services,
Inc. (serves the interior requirements for
the hospitality industry) since January 1997,
and President and CEO during the past five
years of Leonard Parker Company, Inc.
(contract purchasing agents for the
hospitality industry), which became a
subsidiary of Hospitality Worldwide Services,
Inc. in January 1997.
Manfred Steinfeld............ 74 Chairman of Executive Committee since January
1996; Chairman of the Board prior to January
1996; Chief Executive Officer of the Company
prior to May 1991.
Paul N. Steinfeld............ 44 Chief Executive Officer of the Company since
May 1991; Chairman of the Board since January
1996; prior thereto Vice Chairman of the
Board; Chief Administrative Officer of the
Company prior to May 1991.
Trisha Wilson................ 51 President of Wilson & Associates, Inc.
(interior architectural hospitality design).
Peter W. Barile.............. 56 Executive Vice President since May 1990.
Sam Ferrell.................. 57 Vice President of Finance, Chief Financial
Officer and Assistant Secretary since May
1990.
</TABLE>
- --------
*Age at February 1, 1999
Manfred Steinfeld is also a director of Amalgamated Trust & Savings Bank.
Douglas A. Parker is also a director of Hospitality Worldwide Services, Inc.
Manfred Steinfeld is the father of Paul N. Steinfeld; there is no other family
relationship between any director or executive officer of the Company. Herbert
L. Roth, who served as a director of the Company until May 5, 1998, is the
brother of Walter Roth, who is Secretary of the Company and a partner of the
law firm of D'Ancona & Pflaum LLC. The Company retained said firm as legal
counsel during the last fiscal year and such retainer is continuing during the
current fiscal year.
5
<PAGE>
To the best of Falcon's knowledge, none of Falcon's designees beneficially
own any equity securities, or rights to acquire any equity securities of the
Company, or has been involved in any transactions with the Company or any of
its directors, executive officers or affiliates which are required to be
disclosed pursuant to the rules of the Commission.
BOARD AND COMMITTEE MEETINGS
The Board of Directors has four standing committees: the executive
committee, the audit committee, the executive compensation committee and the
stock option committee. The executive committee is composed of Manfred
Steinfeld (chairman), Paul N. Steinfeld and Robert P. Coulter. The audit
committee is composed of William Kaplan (chairman), Robert Lowe and Douglas A.
Parker. The members of the executive compensation and stock option committees
are shown above at the end of their report.
The function of the executive committee is to exercise the power and
authority of the Board of Directors as may be necessary during intervals
between meetings of the Board of Directors, subject to such limitations as are
provided by law, the Company's By-laws or resolutions of the Board of
Directors. The function of the audit committee is to review with the
independent auditors of the Company the scope and adequacy of the audit of the
Company's accounts to be made by such auditors and the accounting practices,
procedures and policies of the Company. The function of the executive
compensation committee is to examine and make recommendations to the Board as
to the compensation to be paid to the executives of the Company. The function
of the stock option committee is to grant options under and administer the
Company's stock option plans and to have responsibility with respect to the
determination and amount of any contribution to the Company's ESOP. The
Company does not have a nominating committee.
The Board of Directors met four times and the audit committee, the stock
option committee and the executive compensation committee each met once during
1998. The executive committee did not meet formally in 1998. All directors
attended at least 75% of the aggregate of such Board and committee meetings of
which they were members.
6
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following Summary Compensation Table sets forth, for the periods
indicated, the cash compensation and certain other components of compensation
of those persons who were, at December 31, 1998, the Chief Executive Officer
of the Company and the other four most highly compensated executive officers
of the Company.
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
------------
Annual Compensation(1) Securities All Other
Name and Principal -------------------------- Underlying Compen-
Position Year Salary($) Bonus($)(2) Options(#) sation($)(3)
- ------------------ ---- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Paul N. Steinfeld......... 1998 280,000 126,000 5,000 1,075
Chairman of the Board; 1997 280,000 107,500 5,000 975
Chief Executive Officer 1996 250,000 71,250 4,000 820
Robert P. Coulter......... 1998 270,000 121,500 5,000 1,075
President; Chief 1997 270,000 105,000 5,000 975
Operating Officer 1996 250,000 71,250 4,000 820
Manfred Steinfeld......... 1998 275,000 123,750 -0- -0-
Chairman of the Executive
Committee 1997 275,000 106,250 -0- -0-
1996 250,000 85,000 -0- -0-
Peter W. Barile........... 1998 130,000 58,500 4,000 1,075
Executive Vice President 1997 130,000 51,250 4,000 975
1996 125,000 37,200 3,000 780
Sam Ferrell .............. 1998 130,000 58,500 4,000 1,075
Vice President of
Finance; 1997 130,000 51,250 4,000 960
Chief Financial Officer 1996 125,000 36,750 3,000 780
</TABLE>
- --------
(1) The aggregate amount of any perquisites or other personal benefits was
less than 10% of the total of annual salary and bonus and is not included
in the above table. The amount of pension payments to Manfred Steinfeld
(see below) is also not included in the above table.
(2) The above table includes one-half of the bonuses for 1998. The remaining
one-half will be paid in January, 2000, subject to forfeiture (and
reallocation to other participants) in the event of certain terminations
of employment. At December 31, 1998, an aggregate of $217,000 was accrued
for such payments to the persons in the above table.
(3) Dollar amounts shown are allocations under the Company's ESOP described
below. The ESOP purchases were allocated to Company stock as follows for
the years 1998, 1997 and 1996: Paul N. Steinfeld, 65 shares, 71 shares and
62 shares; Mr. Coulter, 65 shares, 71 shares and 65 shares; Mr. Barile, 65
shares, 71 shares and 62 shares; and Mr. Ferrell, 65 shares, 70 shares and
62 shares. Under mandatory requirements based on age, Manfred Steinfeld's
interest in the ESOP was distributed to him in 1995.
All of the Company's executive officers are eligible to participate in a
Senior Management Incentive Plan. The plan each year is based on achieving
certain earnings per share objectives for the year, subject to adjustments for
certain factors. Certain percentage bonuses are paid depending on the extent
to which plan objectives are achieved. If such objectives are fully achieved
for 1999, bonuses of 50% of base salary would be paid to participants, of
which one-half would be deferred for one year subject to forfeiture (and
reallocation to other participants) in the event of certain terminations of
employment.
Stock Option Grants
The Company has a stock option plan under which stock options are granted
to key employees. All options are incentive stock options and are granted at
100% of the fair market value at the time of grant, except that
7
<PAGE>
options to Paul N. Steinfeld are granted at 110% of the fair market value at
the time of grant. A person is not eligible to be granted an option at any
time when he owns directly (and not by attribution) stock possessing more than
10% of the total combined voting power of the Common Stock of the Company.
Thus Manfred Steinfeld is not eligible to receive options under the stock
option plan.
Shown below is information with respect to individual grants of stock
options made during the last completed fiscal year to each of the executive
officers named in the summary compensation table.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------- Potential Realizable
Number of Value at Assumed
Securities % of Total Annual Rates
Underlying Options Granted Exercise Price of Stock Price
Options to Employees in Per Share Expiration Appreciation For
Name Granted(#) Fiscal Year ($/Sh.) Date(1) Option Term
- ---- ---------- --------------- -------------- ---------- ---------------------
5%($) 10%($)
---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Paul N. Steinfeld....... 5,000 11.6 18.15 1/21/03 14,543 42,117
Robert P. Coulter....... 5,000 11.6 16.50 1/21/03 22,793 50,367
Manfred Steinfeld....... -0- N/A N/A N/A N/A N/A
Peter W. Barile......... 4,000 9.3 16.50 1/21/03 18,234 40,293
Sam Ferrell............. 4,000 9.3 16.50 1/21/03 18,234 40,293
</TABLE>
- --------
(1) All options become exercisable in one-third increments 15 months, 30
months and 45 months after date of grant.
Shown below is information with respect to exercises of stock options
during the last completed fiscal year by each of the executive officers named
in the summary compensation table and the fiscal year-end value of unexercised
options.
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Underlying Unexercised
Unexercised In-the-Money
Shares Options at Options at
Acquired on FY-End(#) FY-End($)
Exercise Value Exercisable/ Exercisable/
Name (#) Realized($) Unexercisable Unexercisable
- ---- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Paul N. Steinfeld........... -0- -0- 8,332/9,668 13,076/-0-
Robert P. Coulter........... 3,999 29,158 4,333/9,668 5,419/-0-
Manfred Steinfeld........... -0- -0- -0- -0-
Peter W. Barile............. -0- -0- 6,333/7,667 12,186/-0-
Sam Ferrell................. 3,000 19,624 3,333/7,667 4,062/-0-
</TABLE>
Stock Compensation Plans
The Company maintains an Employee Stock Ownership Plan ("ESOP"). Salaried
and commissioned employees who are at least 21 years old and who completed at
least 1,000 hours of service during a relevant 12 month period are eligible to
participate in the ESOP. The Company is entitled to make contributions to the
ESOP either in Company stock or in cash, for the purpose of purchasing Company
stock. The amount of the Company's annual contribution is discretionary. For
calendar year 1998, the Company contributed $83,000 to the ESOP.
8
<PAGE>
The amount that the Company contributes to the ESOP is allocated among the
accounts of participants who are employed by the Company on the last day of
the year in proportion to their relative compensation. A separate account is
maintained on behalf of each participant to reflect the shares of Company
stock that have been allocated to him or her. Upon termination of employment,
participants are eligible to receive a distribution of the Company stock held
in their accounts, if termination of employment occurs after the particular
participant has been credited with five years of service or on account of
death, disability or attainment of age 65.
Pension Plan
The Company maintains a pension plan covering all salaried and commissioned
employees of the Company and those subsidiaries expressly included under the
terms of the plan. The Company intends to accrue and fund amounts sufficient
to cover normal costs. Each employee who is at least age 21 becomes a
participant in the plan after completing 1,000 hours of service during a
relevant 12 month period. A participant's benefits are fully vested after five
years of service. Benefits are equal to the sum of (i) 2.0% for each pension
service year prior to January 1, 1996, times final average annual
compensation; plus (ii) 1.5% for each pension service year after December 31,
1995, times final average annual compensation; plus (iii) 1.25% for each
pension service year, times final excess compensation (based on social
security taxable wage base). Plan benefits are not subject to off-set for
social security or other non-plan benefits. No benefits are payable until
after five years of participation in the plan. At January 1, 1999 each of the
persons named in the summary compensation table above, except Manfred
Steinfeld, had been credited with twelve and one-half years of pension
service. Under mandatory requirements based on age, Manfred Steinfeld began,
in 1995, receiving his annual pension of $88,560.
The following table indicates examples of annual pension benefits to be
paid in an annuity of equal monthly installments upon normal retirement at age
65 (after five years of pension service). Reduced benefits are paid at early
retirement after age 55.
<TABLE>
<CAPTION>
Years of Pension Service*
---------------------------------------
Remuneration 5 10 15 20 25**
- ------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$100,000................................ $ 9,925 $19,850 $29,775 $39,700 $49,625
110,000................................ 11,300 22,600 33,900 45,200 56,500
120,000................................ 12,675 25,350 38,025 50,700 63,375
130,000................................ 14,050 28,100 42,150 56,200 70,250
140,000................................ 15,425 30,850 46,275 61,700 77,125
150,000................................ 16,800 33,600 50,400 67,200 84,000
160,000**.............................. 18,175 36,350 54,525 72,700 90,875
</TABLE>
- --------
*As of December 31, 1998, the annual accrued benefit under the plan for each
of the executive officers named in the summary compensation table was as
follows: Paul N. Steinfeld, $50,300; Robert P. Coulter, $55,200; Manfred
Steinfeld, $88,560; Peter W. Barile, $34,850; and Sam Ferrell, $32,950.
**Maximum under the plan.
Report of the Executive Compensation and Stock Option Committees
The Company applies a consistent philosophy to compensation for all
employees, including senior management. This philosophy incorporates the
following themes: (i) Compensation should relate to the value created for
stockholders; (ii) Compensation programs should support the short and long-
term strategic goals and objectives of the Company (iii) Compensation programs
should reflect and promote the Company's values, and reward individuals for
outstanding contributions to the Company's success; (iv) Short and long-term
compensation is critical in attracting and retaining well qualified executives
and other employees; (v) Compensation should be based on individual
contribution; however, amounts earned by executives in variable compensation
programs should be dictated by how the Company performs; and (vi) Compensation
should be competitive without being at either the low or high ends of the
ranges enumerated for similar positions elsewhere.
9
<PAGE>
The Company has a simple compensation program that consists of cash and
equity based compensation. This program allows the Company to successfully
attract and retain key employees, permits it to provide useful products and
services to customers, enhance stockholder value, motivate innovation, foster
teamwork, and adequately reward employees.
Cash-Based Compensation
Salary
The Company sets base salary for employees based upon the philosophy
indicated above. Using these elements, the Executive Compensation Committee
compares corresponding amounts paid by other companies selected because of the
similarity of their businesses to that of the Company and/or to provide local
market comparisons. These companies are not necessarily within the S&P
Lodging-Hotels Index which has been used for purposes of comparison in the
"Performance Graph." However, the committee believes these companies more
accurately reflect the market in which the Company competes for executive
talent.
Senior Management Incentive Plan
The Company sets certain earnings per share objectives, subject to
adjustments for certain factors. Bonuses are paid depending on the extent to
which plan objectives are achieved. If such objectives are fully achieved for
1999, bonuses of 50% of base salary would be paid to participants, of which
one-half would be deferred for one year subject to forfeiture (and
reallocation to other participants) in the event of certain terminations of
employment.
Equity-Based Compensation
Stock Option Plan
This plan provides additional incentives to maximize stockholder value. The
plan also utilizes vesting periods to encourage key employees to continue in
the employ of the Company. All options become exercisable in one-third
increments 15 months, 30 months and 45 months after the date of grant. The
Company grants stock options to a broad-based population of senior and middle
management employees. In determining the size of incentive awards to
individual key employees, the Stock Option Committee considers a number of
factors, including: (i) Level of job responsibilities; (ii) Past performance;
(iii) Size and frequency of grants by comparable companies; (iv) Salary level;
(v) Corporate performance, as measured by various tests of profitability such
as operating income, net income and earnings per share; and (vi) Size of any
prior grants.
<TABLE>
<CAPTION>
Executive Compensation
Committee Stock Option Committee
---------------------- -----------------------
<S> <C>
Manfred Steinfeld, Chairman Trisha Wilson, Chairman
Douglas A. Parker Robert E. Lowe
Trisha Wilson
</TABLE>
10
<PAGE>
PERFORMANCE GRAPH
The performance graph below shall not be deemed incorporated by reference by
any general statement incorporating this Proxy Statement by reference into any
filing under the Acts, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
The graph below compares cumulative total return (assuming reinvestment of
dividends) on the Company's Common Stock, for the five-year period shown,
compared with the Standard & Poor's 500 Index and the Standard & Poor's
Lodging-Hotels Index (fiscal years ending December 31), assuming $100 invested
on January 1, 1994 in the Company's Common Stock and in each index.
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Shelby Williams Industries, Inc............. 100.0 60.7 87.3 93.2 128.0 95.9
S&P 500..................................... 100.0 101.3 139.4 171.4 228.6 293.9
S&P Lodging-Hotel........................... 100.0 88.9 105.1 125.2 175.3 142.7
</TABLE>
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.
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<PAGE>
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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
officers, and persons who own more than 10% of a registered class of the
Company's equity securities, to file with the Commission reports of ownership
and changes in ownership of Common Stock and other equity securities of the
Company. Officer, directors and greater-than-10% stockholders are required by
the Commission regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on review of the copies of such reports furnished to the
Company or written representations that not other reports were required, the
Company believes that, during the 1998 fiscal year, all filing requirements
applicable to its officers, directors and greater-than-10% beneficial owners
were complied with.
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