<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 6, 2000
PRELIMINARY COPY
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14A
INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 2)
------------------------
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
SHAW INDUSTRIES, INC.
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(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, no par value per share, of Shaw.
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
(a) 123,983,208 shares of Shaw common stock plus (b) 8,369,173 shares
underlying outstanding options to purchase shares of Shaw common
stock.
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
The filing fee was determined based upon the sum of (a) the product of
123,983,208 shares of Shaw common stock and the merger consideration
of $19.00 per share in cash and (b) the product of 8,369,173 shares of
Shaw common stock subject to outstanding options to purchase Shaw
common stock and the difference between $19.00 per share and the
exercise price per share of each of such options. In accordance with
Rule 0-11 under the Securities Exchange Act of 1934, as amended, the
filing fee was determined by multiplying the amount calculated
pursuant to the preceding sentence by 1/50 of one percent.
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$2,399,569,154
----------------------------------------------------------------------
(5) Total fee paid:
$479,914
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[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
[LOGO TO COME]
SHAW INDUSTRIES, INC.
, 2000
Dear Shaw Industries, Inc. Shareholder:
We invite you to attend a special meeting of shareholders of Shaw
Industries, Inc. to be held at 11:00 a.m., Eastern Standard Time, on January ,
2001, at our administrative offices located at 616 East Walnut Avenue, Dalton,
Georgia.
At the special meeting, we will ask you to approve the merger of SII
Acquisition, Inc., a Georgia corporation, with Shaw. SII Acquisition was formed
by Berkshire Hathaway Inc. solely for the purpose of engaging in the merger and
related transactions. SII Acquisition has entered into an agreement with an
investor group including Berkshire Hathaway, Robert E. Shaw, a director of Shaw
and our Chairman and Chief Executive Officer, certain of Mr. Shaw's family
members and related family interests, Julian D. Saul, a director of Shaw and our
President, through certain of Mr. Saul's family interests, William C. Lusk, Jr.
and W. Norris Little, each a director of Shaw, and eight other members of our
management. Under this agreement, members of the investor group will contribute
cash and/or shares of our common stock to SII Acquisition in exchange for shares
of SII Acquisition. We expect that Berkshire Hathaway will own 87.3% of SII
Acquisition and the other members of the investor group will own the remaining
12.7% of SII Acquisition upon consummation of this agreement immediately prior
to completion of the merger.
We will accomplish the merger pursuant to a merger agreement among Shaw,
SII Acquisition and Berkshire Hathaway that we entered into on October 19, 2000.
If we complete the merger, Shaw shareholders will receive $19.00 in cash for
each share of Shaw common stock they own and Shaw will become 100% owned by
Berkshire Hathaway and the other members of the investor group. The $19.00 per
share being paid in the merger represents a premium of approximately 55.9% over
the $12.19 closing price of our common stock on September 5, 2000, the last
trading day before we announced the receipt of the offer which led to the
signing of the merger agreement.
We cannot complete the merger unless the conditions to closing are
satisfied, including obtaining the approval of holders of a majority of the
outstanding shares of Shaw common stock and satisfying various regulatory
requirements. We currently expect that the regulatory approvals will be
obtained, and that the closing of the merger will occur, early in the first
quarter of 2001.
A special committee consisting of four independent members of our Board of
Directors carefully reviewed and considered the terms and conditions of the
proposed merger and negotiated certain of its terms. Based on its review, the
special committee has unanimously determined that the terms of the merger
agreement and the merger are fair to and in the best interests of our
shareholders (other than the members of the investor group). In making this
determination, the special committee considered, among other things, an opinion
received from Merrill Lynch & Co., the special committee's independent financial
advisor, as to the fairness of the $19.00 per share to be received by our
shareholders (other than SII Acquisition, Shaw or any subsidiary of Shaw to the
extent they hold shares of our common stock and other than holders that perfect
dissenters' rights with respect to their shares or contribute their shares to
SII Acquisition under the contribution agreement) from a financial point of
view.
OUR BOARD OF DIRECTORS, TAKING INTO ACCOUNT THE UNANIMOUS RECOMMENDATION OF
THE SPECIAL COMMITTEE, HAS UNANIMOUSLY (WITH FOUR DIRECTORS AFFILIATED WITH THE
INVESTOR GROUP ABSTAINING) (i) DETERMINED THAT THE MERGER AND THE MERGER
AGREEMENT ARE FAIR TO AND IN THE BEST INTERESTS OF SHAW AND ITS SHAREHOLDERS
(OTHER THAN THE MEMBERS OF THE INVESTOR GROUP), (ii) ADOPTED THE MERGER
AGREEMENT, AND (iii) APPROVED THE MERGER AND THE MERGER AGREEMENT. ACCORDINGLY,
THE BOARD RECOMMENDS THE MERGER AND RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF
THE MERGER AND THE MERGER AGREEMENT.
<PAGE> 3
The attached notice of special meeting and proxy statement explain the
proposed merger and provide specific information concerning the special meeting.
Please read these materials (including the appendices) carefully.
Your vote is important. Whether or not you plan to attend the special
meeting, you should complete, sign, date and promptly return the enclosed proxy
card to ensure that your shares will be represented at the meeting. If you
attend the special meeting and wish to vote in person, you may withdraw your
proxy and do so.
If you have any questions regarding the proposed transaction, please call
Corporate Investor Communications, Inc., our proxy solicitors, toll-free at
1-877-535-1154.
Very truly yours,
Robert E. Shaw
Chairman and Chief Executive Officer
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
THIS TRANSACTION OR THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN
THIS PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
This proxy statement is dated , 2000 and was first mailed to
Shaw shareholders on , 2000.
2
<PAGE> 4
SHAW INDUSTRIES, INC.
616 EAST WALNUT AVENUE
DALTON, GEORGIA 30722
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY , 2001
---------------------
To the Shareholders of Shaw Industries, Inc.:
A special meeting of shareholders of Shaw Industries, Inc. will be held at
11:00 a.m., Eastern Standard Time, on January , 2001, at our administrative
offices located at 616 East Walnut Avenue, Dalton, Georgia, for the following
purposes:
1. To consider and vote upon a proposal to approve an Agreement and
Plan of Merger, dated as of October 19, 2000, among SII Acquisition, Inc.,
Shaw Industries, Inc., and Berkshire Hathaway Inc. and the merger of SII
Acquisition with and into Shaw. In the merger, each issued and outstanding
share of Shaw common stock (other than shares held by Shaw, SII Acquisition
and their respective subsidiaries and other than shares held by
shareholders who perfect dissenters' rights under Georgia law) will be
converted into the right to receive $19.00 per share in cash. We refer to
this proposal in the proxy statement as the "merger proposal;" and
2. To transact any other business that may properly come before the
meeting or any adjournment or postponement of the meeting.
Our Board of Directors has fixed the close of business on November 10, 2000
as the record date for determining shareholders entitled to notice of, and to
vote at, the special meeting and any adjournment or postponement of the meeting.
A list of shareholders entitled to vote at the special meeting will be available
for examination at our administrative offices at the time and place of the
meeting.
You have the right to dissent from the proposed merger and, upon compliance
with the procedural requirements of the Georgia Business Corporation Code, to
receive the "fair value" of your shares if the merger is completed. See "Special
Factors -- Dissenters' Rights of Shareholders" in the attached proxy statement.
A copy of the relevant sections of the Georgia Business Corporation Code
regarding dissenters' rights is attached to the proxy statement as Appendix F.
You should not send any certificates representing common stock with your
proxy card.
Whether or not you plan to attend the special meeting, you should complete,
sign, date and promptly return the enclosed proxy card to ensure that your
shares will be represented at the meeting. If you attend the special meeting and
wish to vote in person, you may withdraw your proxy and vote in person.
By Order of the Board of Directors,
Bennie M. Laughter
General Counsel and Secretary
Dated: , 2000
<PAGE> 5
TABLE OF CONTENTS
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PAGE
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<S> <C>
Questions and Answers about the Merger...................... 1
Summary..................................................... 4
The Parties............................................... 4
The Special Meeting....................................... 5
The Merger................................................ 6
Selected Historical Financial Data of Shaw.................. 12
Information Concerning the Special Meeting.................. 13
Date, Time and Place of the Special Meeting............... 13
Purpose of the Special Meeting............................ 13
Record Date; Quorum; Outstanding Common Stock Entitled to
Vote................................................... 13
Voting Rights............................................. 13
Voting and Revocation of Proxies.......................... 14
Solicitation of Proxies................................... 14
Other Matters............................................. 14
Special Factors............................................. 15
Background of the Merger.................................. 15
Purpose of the Merger; Certain Effects of the Merger...... 20
Recommendations of the Special Committee and the Board of
Directors; Reasons for the Merger...................... 22
Fairness Opinion of Merrill Lynch......................... 26
Position of the Investor Group as to the Fairness of the
Merger................................................. 31
Certain Projections Provided to Financial Advisors........ 32
Interests in the Merger that Differ from Your Interests... 34
Plans for Shaw Following the Merger....................... 36
Merger Financing; Source of Funds......................... 36
Certain Federal Income Tax Consequences................... 37
Accounting Treatment...................................... 37
Dissenters' Rights of Shareholders........................ 37
The Merger Agreement........................................ 39
The Merger................................................ 39
Representations and Warranties............................ 40
Certain Covenants......................................... 41
Other Agreements.......................................... 42
No Solicitation of Transactions........................... 43
Employee Benefit Plans.................................... 44
Conditions to the Merger.................................. 44
Termination of the Merger Agreement....................... 45
Expenses.................................................. 46
Amendment; Waiver......................................... 46
The Contribution And Participation Agreement................ 46
The Parties............................................... 46
Contributions............................................. 46
Failure to Contribute Shares; Right to Terminate.......... 47
Consent of Continuing Holders to Certain Business
Combinations........................................... 48
Puts and Call............................................. 48
Sales By Berkshire Hathaway............................... 49
Conditions to Completion of the Closing under the
Contribution Agreement................................. 50
The Voting Agreement and the Investor Voting Agreement...... 50
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Regulatory Matters.......................................... 52
Antitrust Considerations.................................. 52
Other Regulatory Matters.................................. 52
Parties to the Merger....................................... 52
Shaw...................................................... 52
SII Acquisition........................................... 53
The Investor Group........................................ 53
Security Ownership of Certain Beneficial Owners and
Management and Recent Transactions in Common Stock........ 55
Certain Relationships....................................... 55
Price Range of Common Stock and Dividends................... 55
Cautionary Statement Regarding Forward-Looking Statements... 56
Other Information........................................... 57
Proposals by Shareholders of Shaw......................... 57
Independent Auditors...................................... 57
Where You Can Find More Information....................... 57
Incorporation by Reference................................ 57
Appendices:
Merger Agreement.................................. A-1
Amended and Restated Contribution Agreement....... B-1
Amended and Restated Voting Agreement............. C-1
Investor Voting Agreement......................... D-1
Merrill Lynch Opinion............................. E-1
Georgia Business Corporation Code Sections
Regarding Dissenters' Rights.................... F-1
Information Relating to Shaw Industries, Inc., SII
Acquisition, Inc., Berkshire Hathaway Inc., etc.. G-1
Security Ownership of Certain Beneficial Owners
and Management and Recent Transactions in Common
Stock............................................ H-1
</TABLE>
ii
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QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT EFFECT WILL THE MERGER HAVE ON SHAW?
A: We will be merged with SII Acquisition, Inc., a corporation formed by
Berkshire Hathaway Inc. solely for the purpose of engaging in the merger
and related transactions. SII Acquisition has entered into an amended and
restated contribution and participation agreement with an investor group
that includes Berkshire Hathaway, Robert E. Shaw, a director and our
Chairman and Chief Executive Officer, certain of Mr. Shaw's family members
and related family interests, Julian D. Saul, a director and our President,
through certain of Mr. Saul's family interests, William C. Lusk, Jr. and W.
Norris Little, each a director, and eight other members of our management.
SII Acquisition will be merged into Shaw, and we will be the surviving
company in the merger. After the merger has been completed, our common
stock will be 100% owned by members of the investor group and will no
longer be publicly traded. It is expected that Berkshire Hathaway will own
87.3% and the other members of the investor group will own the remainder of
the outstanding common stock of Shaw following the merger.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: If the merger is completed, you will receive $19.00 in cash in exchange for
each share of Shaw common stock that you own at the time of the merger. The
$19.00 per share to be paid in the merger represents a premium of
approximately 55.9% over the $12.19 closing price of our common stock on
September 5, 2000, the last trading day before we announced the receipt of
the offer which led to signing of the merger agreement.
Q: WHAT IS THE BOARD'S RECOMMENDATION?
A: The Board has unanimously (with the four directors affiliated with the
investor group abstaining):
- Determined that the merger and the merger agreement are fair to you and
in the best interests of you and Shaw,
- Recommends the merger proposal, and
- Recommends that you vote "FOR" approval of the merger proposal.
In making this determination, the Board took into account the
recommendation of a special committee, consisting of four independent
members of the Board, which reviewed and evaluated the terms and conditions
of the merger. The special committee and the Board considered the opinion
of the special committee's financial advisor, Merrill Lynch & Co., as to
the fairness of the $19.00 per share being offered to you from a financial
point of view.
Q. WHAT VOTE OF SHAREHOLDERS IS REQUIRED TO APPROVE THE MERGER PROPOSAL?
A: The merger proposal must be approved by the affirmative vote of the holders
of a majority of the outstanding shares of our common stock. Certain of our
shareholders who collectively own an aggregate of 35,200,790 shares of our
common stock, or 28.3% of the shares outstanding as of November 10, 2000,
have entered into an amended and restated voting agreement with Berkshire
Hathaway and SII Acquisition. Under the voting agreement and a related
investor voting agreement between Berkshire Hathaway and Shaw, 21,767,529
of these shares will be voted at the special meeting for approval of the
merger and the merger agreement and 13,433,261 of these shares will be
voted in the same proportion as all of our other shares of common stock
voting on the merger and the merger agreement (including the 21,767,529
shares) are voted.
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Q. WHAT DO I NEED TO DO NOW?
A: You should complete, date and sign your proxy card and mail it in the
enclosed return envelope as soon as possible so that your shares may be
represented at the special meeting, even if you plan to attend the meeting
in person.
Q. MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You may change your vote by sending in a later dated, signed proxy
card or a written revocation before the special meeting or by attending the
special meeting and voting in person. Your attendance at the meeting will
not, by itself, revoke your proxy. You must also vote your shares in person
at the meeting. If you have instructed a broker to vote your shares, you
must follow the directions received from your broker to change those
instructions.
Q: SHOULD I SEND MY STOCK CERTIFICATES NOW?
A: No. If the merger is completed, we will send you written instructions for
exchanging your stock certificates for the merger consideration.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions on how
to vote. You should follow the procedures provided by your broker as to how
to vote your shares.
Q: WHAT HAPPENS IF I DO NOT SEND IN MY PROXY OR IF I ABSTAIN FROM VOTING?
A: If you do not send in your proxy or do not instruct your broker to vote
your shares or if you abstain from voting, it will have the same effect as
a vote AGAINST the merger proposal.
Q: WHAT REGULATORY APPROVALS AND FILINGS ARE NEEDED TO COMPLETE THE MERGER?
A: We are required to await the expiration or termination of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
which has occurred. Before we complete the merger, we must file a
notification with the Mexican Federal Competition Commission.
Q: WHEN DO YOU EXPECT TO MAKE THE REQUIRED REGULATORY FILINGS AND OBTAIN THE
REQUIRED REGULATORY APPROVALS?
A: Early termination of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act was granted by the Federal Trade Commission on
November 17, 2000. It is anticipated that a notification will be filed with
the Mexican Federal Competition Commission as soon as practicable, and the
merger may be consummated once the notification is filed.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER?
A: The merger will be a taxable transaction to you for federal income tax
purposes. A brief summary of the possible tax consequences to you appears
under the heading "Special Factors -- Certain Federal Income Tax
Consequences" of this proxy statement. You should consult your tax advisor
as to the tax effect of your particular circumstances.
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<PAGE> 9
Q: WHAT RIGHTS DO I HAVE TO DISSENT FROM THE MERGER?
A: If you wish, you may dissent from the merger and obtain payment of the fair
value of your shares, but only if you comply with all requirements of
Georgia law which are summarized under the heading "Special
Factors -- Dissenters' Rights of Shareholders" of this proxy statement. A
complete copy of the relevant sections of the Georgia code regarding
dissenters' rights is included in this proxy statement as Appendix F. The
fair value of your shares may be more or less than the merger consideration
to be paid in the merger.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have additional questions about the merger or would like additional
copies of this proxy statement, you should call Corporate Investor
Communications, Inc., our proxy solicitors, toll-free at 1-877-535-1154.
3
<PAGE> 10
SUMMARY
This summary highlights selected information from this proxy statement and
may not contain all of the information that is important to you. For additional
information concerning the merger proposal and the terms and conditions of the
merger agreement, you should read this entire proxy statement, including the
appendices, and the other documents referred to or incorporated by reference
into this proxy statement. Copies of the merger agreement, amended and restated
contribution and participation agreement, amended and restated voting agreement
and investor voting agreement are included in this proxy statement as Appendices
A, B, C and D, respectively.
THE PARTIES
SHAW (PAGES 50-51)
We are based in Dalton, Georgia and have approximately 30,000 employees. We
are the world's largest carpet manufacturer based on both revenue and volume of
production. We design and manufacture approximately 1,800 styles of tufted and
woven carpet for residential and commercial use under the PHILADELPHIA,
TRUSTMARK, CABIN CRAFTS, SHAW COMMERCIAL CARPETS, STRATTON, NETWORX, SHAWMARK,
EVANS BLACK, SALEM, SUTTON, PATCRAFT, CUMBERLAND, DESIGNWEAVE, QUEEN CARPET,
QUEEN COMMERCIAL and TUFTEX trade names and under certain private labels. Our
manufacturing operations are fully integrated from the processing of yarns
through the finishing of carpet. Our carpet is sold in a broad range of prices,
patterns, colors and textures, with the majority of our sales in the medium to
high retail price range. We sell our wholesale products to retailers,
distributors and commercial users throughout the United States, Canada and
Mexico; through our own residential and commercial contract distribution
channels to various residential and commercial end-users in the United States;
and to a lesser degree, export our products to overseas markets. We also provide
installation services and sell laminate flooring, ceramic tile and hardwood
flooring. Our common stock is traded on the New York Stock Exchange under the
symbol "SHX." Information about us is available on the Internet at
http://www.shawinc.com.
SII ACQUISITION (PAGE 51)
Berkshire Hathaway formed SII Acquisition solely for the purpose of
engaging in the merger and related transactions. SII Acquisition has entered
into a contribution and participation agreement with an investor group that
includes:
- Berkshire Hathaway,
- Robert E. Shaw, a director and our Chairman and Chief Executive Officer,
- Certain of Mr. Shaw's family members and related family interests,
- Julian D. Saul, a director and our President, through certain of Mr.
Saul's family interests,
- W. Norris Little (through a family limited partnership) and William C.
Lusk, Jr., each a director, and
- Eight other members of our management.
Under the contribution agreement, the members of the investor group have agreed
to contribute to SII Acquisition, immediately prior to completion of the merger,
shares of our common stock in exchange for shares of SII Acquisition common
stock. In addition, Berkshire Hathaway has agreed to contribute cash to SII
Acquisition in an amount necessary to complete the merger in exchange for shares
of SII Acquisition common stock if all of the conditions to the merger are
satisfied and a minimum contribution of 6,485,604 shares of our common stock is
made to SII Acquisition by each of Messrs. Shaw and Saul together with certain
of their family members and related family interests. We expect that Berkshire
Hathaway will own 87.3% of SII Acquisition and the other members of the investor
group will own the remaining 12.7% of SII Acquisition.
4
<PAGE> 11
THE INVESTOR GROUP (PAGES 52-53)
Berkshire Hathaway. We expect that Berkshire Hathaway will own 87.3% of
SII Acquisition immediately prior to completion of the merger and 87.3% of Shaw
following completion of the merger. Berkshire Hathaway is a holding company
owning subsidiaries engaged in a number of diverse business activities, the most
significant of which is the property and casualty insurance and reinsurance
business. Warren E. Buffett is Chairman of the Board and Chief Executive Officer
of Berkshire Hathaway. Berkshire Hathaway is traded on the New York Stock
Exchange under the symbols "BRKA" for its Class A Common Stock and "BRKB" for
its Class B Common Stock.
Management Shareholders and Family Group Shareholders. The members of the
investor group other than Berkshire Hathaway include certain of our directors
and members of our management. The ownership interests of certain of these
members in SII Acquisition will include interests held by their family members
and related family interests. We expect that these members of the investor group
will own in the aggregate 12.7% of SII Acquisition immediately prior to
completion of the merger and 12.7% of Shaw following completion of the merger.
Following is a list of these members of the investor group and their respective
titles at Shaw:
- Robert E. Shaw -- Director, Chairman and Chief Executive Officer
- W. Norris Little -- Director and Vice Chairman
- Julian D. Saul -- Director and President
- William C. Lusk, Jr. -- Director
- Vance D. Bell -- Executive Vice President, Operations
- Kenneth G. Jackson -- Executive Vice President and Chief Financial
Officer
- Gerald R. Embry -- Controller
- Spright D. Holland -- Vice President, Logistics
- Jeffrey Todd Meadows -- Vice President, Shaw Rugs
- Percy D. Merritt -- Vice President, Sales and Marketing, Residential
Division
- Henry H. Long -- Vice President, Contract Division
- Julius C. Shaw, Jr. -- Executive Vice President, Investor Relations
THE SPECIAL MEETING
DATE, TIME, PLACE AND MATTERS TO BE CONSIDERED (PAGE 13)
The special meeting will be held at 11:00 a.m., Eastern Standard time, on
January , 2001, at our administrative offices located at 616 East Walnut
Avenue, Dalton, Georgia. At the special meeting, you will be asked to consider
and vote upon the merger proposal.
VOTE REQUIRED (PAGES 13-14)
The merger proposal must be approved by the affirmative vote of the holders
of a majority of the outstanding shares of our common stock. Certain of our
shareholders (including Mr. Shaw and certain of his family members and related
family interests and Mr. Saul, through a family trust) who collectively own an
aggregate of 35,200,790 shares of our common stock, or 28.3% of the shares
outstanding as of November 10, 2000, have entered into an amended and restated
voting agreement with Berkshire Hathaway and SII
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<PAGE> 12
Acquisition. Under the voting agreement and a related investor voting agreement
between Berkshire Hathaway and Shaw:
- An aggregate of 21,767,529 shares of our common stock will be voted at
the special meeting pursuant to proxies granted under the voting
agreement for approval of the merger and the merger agreement; and
- An aggregate of 13,433,261 shares of our common stock will be voted at
the special meeting pursuant to proxies granted under the voting
agreement in the same proportion as all of our other shares of common
stock voting on the merger and the merger agreement (including the
21,767,529 shares referenced above) are voted.
RECORD DATE FOR VOTING (PAGE 13)
The close of business on November 10, 2000 is the record date for
determining holders of shares of our common stock entitled to vote at the
special meeting. Each share of common stock will be entitled to one vote. On the
record date, there were 124,208,907 shares entitled to vote at the special
meeting.
REVOCATION OF PROXIES (PAGE 14)
You may revoke your proxy at any time before the special meeting by
delivering a written notice of revocation to our Secretary, by executing and
delivering a later-dated proxy or by attending the meeting and giving oral
notice of your intention to vote in person. Your attendance at the meeting will
not by itself constitute a revocation of your proxy. You must also vote your
shares in person at the meeting. If you have instructed a broker to vote your
shares, you must follow the directions received from your broker to change those
instructions.
Unless contrary instructions are indicated on your proxy, all of your
shares represented by valid proxies will be voted FOR the approval of the merger
proposal.
THE MERGER
WHAT YOU WILL RECEIVE IN THE MERGER (PAGES 38-45)
You will receive $19.00 per share in cash in exchange for each share of our
common stock that you own. The merger price represents a premium of
approximately 55.9% over the $12.19 per share closing price of our common stock
on September 5, 2000, the last trading day before we announced the receipt of
the offer which led to the signing of the merger agreement.
BACKGROUND OF THE MERGER; REASONS FOR THE MERGER (PAGES 15-26)
For a description of the events leading to the approval of the merger by
the Board, you should refer to "Special Factors -- Background of the Merger" and
"-- Recommendations of the Special Committee and the Board of Directors; Reasons
for the Merger."
PURPOSE OF THE MERGER; CERTAIN EFFECTS OF THE MERGER (PAGES 20-22)
The principal purpose of the merger is to enable Berkshire Hathaway and the
other members of the investor group to own all of the equity interests in Shaw
and to provide you with the opportunity to receive a cash price for your shares
at a premium over the market prices at which our common stock traded before
announcement of the receipt of the offer which led to signing of the merger
agreement.
The merger will terminate all common equity interests in Shaw held by
shareholders other than the members of the investor group. The members of the
investor group will be the sole beneficiaries of any earnings and growth of Shaw
following the merger, and will bear all of the risk of any decrease in the value
of Shaw following the merger. We expect that Berkshire Hathaway will own 87.3%
of Shaw following the completion of the merger and the other members of the
investor group will own the remaining 12.7% of Shaw.
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<PAGE> 13
Upon completion of the merger, our common stock will be delisted from the
New York Stock Exchange and will no longer be publicly traded.
RECOMMENDATIONS OF THE SPECIAL COMMITTEE AND THE BOARD (PAGES 22-26)
A special committee of the Board has unanimously determined that the terms
of the merger as contemplated by the merger agreement are fair to and in the
best interests of our shareholders (other than the members of the investor
group) and has recommended that the Board approve and declare advisable the
merger agreement and submit the merger agreement to our shareholders and
recommend that our shareholders adopt the merger agreement. The special
committee consists solely of directors who are not officers or employees of Shaw
and who will not retain an interest in Shaw following the merger. The Board,
taking into account the analysis and recommendation of the special committee and
the opinion of Merrill Lynch, the special committee's independent financial
advisor, has unanimously determined (with four directors affiliated with the
investor group abstaining) that the merger is fair to, and in the best interests
of, Shaw and our shareholders (other than the members of the investor group),
recommends the merger proposal and recommends that you vote FOR approval of the
merger proposal.
OPINION OF MERRILL LYNCH (PAGES 26-31)
Merrill Lynch delivered an opinion to the special committee on October 19,
2000, to the effect that, as of the date of its opinion, the price per share to
be received by our shareholders (other than SII Acquisition, Shaw or any
subsidiary of Shaw to the extent they hold shares of our common stock and other
than holders that perfect dissenters' rights with respect to their shares or
contribute their shares to SII Acquisition under the contribution agreement) in
the merger was fair from a financial point of view. We have included a copy of
this opinion as Appendix E in this proxy statement. The opinion of Merrill Lynch
is addressed to the special committee and does not constitute a recommendation
as to how you should vote at the special meeting. We urge you to read the
opinion of Merrill Lynch in its entirety for a description of the procedures
followed, assumptions made, matters considered and limitations on the review
undertaken by Merrill Lynch.
INTERESTS IN THE MERGER THAT DIFFER FROM YOUR INTERESTS (PAGES 33-35)
In considering the Board's recommendation that you vote in favor of the
merger proposal, you should be aware that some of our directors and officers
have interests in the merger that are different from your interests as a
shareholder, including the following:
- Robert E. Shaw, a director and our Chairman and Chief Executive Officer,
Julian D. Saul, a director and our President, William C. Lusk, Jr. and W.
Norris Little, each a director, and eight other members of our management
are members of the investor group. In connection therewith, they have
entered into the contribution agreement under which they will contribute
certain of their existing shares of our common stock to SII Acquisition
immediately prior to completion of the merger in exchange for an
equivalent number of shares of common stock in SII Acquisition. The
exchange of our common stock for common stock in SII Acquisition is
expected to be accomplished on a tax-free basis. Upon completion of the
merger, SII Acquisition will be merged into Shaw and the common stock of
SII Acquisition will be converted, by virtue of the merger, into common
stock of Shaw, as the surviving company. As a result, all common equity
interests in Shaw following the merger will be owned by the investor
group. It is expected that Mr. Shaw, together with certain of his family
members and related family interests, will own approximately 6.4% of the
equity and voting interests in Shaw following the merger, Mr. Saul,
through certain of his family interests, will own approximately 5.2% of
the equity and voting interests in Shaw following the merger and the
other directors and management members included in the investor group
will own in the aggregate approximately 1.1% of the equity and voting
interests in Shaw following the merger.
- Our directors and executive officers as a group hold options to purchase
a total of 551,800 shares of our common stock, 233,500 of which are not
currently vested. Immediately prior to the effective time of the merger,
the unvested stock options will vest and become immediately exercisable.
Each stock option which is outstanding at the time of the merger will be
cancelled and, in consideration of the
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<PAGE> 14
cancellation, the holder of the option will receive the difference
between the $19.00 per share merger price and the exercise price of the
option.
- Included in our outstanding stock options are options to purchase 795,800
shares of our common stock which are held by certain of the members of
our management included in the investor group. We have agreed to allow
these individuals, in connection with their exercise of options to
purchase 546,300 shares, to direct that certain shares of our common
stock which would otherwise be issuable upon such exercise be withheld by
us as payment of the exercise price applicable to the options, with the
withheld shares being valued at the $19.00 per share merger price. We
have also agreed to pay, subject to certain limitations, to each of these
individuals who exercises any of these stock options and contributes the
shares received as a result of such exercise to SII Acquisition under the
contribution agreement a bonus to cover all federal and state taxes
incurred by such individual (including a gross-up to pay taxes imposed as
a result of such bonus payment) in connection with the exercise of the
stock options to purchase 546,300 shares.
- Under the contribution agreement, the members of the investor group
(other than Berkshire Hathaway) are given certain rights to require
Berkshire Hathaway to purchase their common stock in Shaw following the
completion of the merger.
- It is expected that all of our executive officers will continue to serve
in their current capacities with Shaw following the merger.
- In the merger agreement, we, as the surviving corporation in the merger,
are required to indemnify our directors and officers following the
merger.
MERGER FINANCING; SOURCE OF FUNDS (PAGE 35)
The maximum total amount of funds required to complete the merger,
including related costs and expenses, is expected to be approximately $2.0
billion. This amount assumes that no shareholders perfect their dissenters'
rights under Georgia law, but excludes approximately $342 million of our shares
(valued at the merger price) which are expected to be contributed to SII
Acquisition by Berkshire Hathaway and the other members of the investor group.
Berkshire Hathaway has agreed in the contribution agreement to provide cash in
the amount of $2,016,686,315 to complete the merger, which amount Berkshire
Hathaway will provide from cash on hand and proceeds from the sale of marketable
securities. Funds to pay additional costs and expenses will be provided by Shaw
as the surviving corporation.
CONDITIONS TO THE MERGER (PAGE 43-44)
Each party's obligation to complete the merger is subject to a number of
conditions, including the following:
- Approval by our shareholders of the merger proposal;
- The expiration or termination of the waiting period under the
Hart-Scott-Rodino Act (which has occurred);
- The absence of any order or injunction prohibiting the merger; and
- The receipt of all required consents or approvals of any governmental
authorities in foreign jurisdictions.
Our obligation to complete the merger is subject to the following
additional conditions:
- The material accuracy of the representations and warranties of SII
Acquisition and Berkshire Hathaway and the performance in all material
respects of their respective obligations under the merger agreement; and
- Our receipt of customary closing certificates and legal opinions.
8
<PAGE> 15
The obligations of SII Acquisition to complete the merger are subject to
the following additional conditions:
- The material accuracy of our representations and warranties and the
performance in all material respects of our obligations under the merger
agreement;
- The receipt of all material third party consents to the merger;
- The holders of less than 10% of our outstanding shares of common stock
perfecting dissenters' rights under Georgia law;
- The receipt by SII Acquisition and Berkshire Hathaway of customary
closing certificates and legal opinions; and
- The closing of the transactions under the contribution agreement.
The obligations of SII Acquisition to complete the merger are not subject
to a financing condition.
REGULATORY FILINGS AND APPROVALS (PAGE 51)
We must make filings with and receive approvals of various federal, state
and foreign regulatory agencies before the merger can be completed. At the
federal level, these approvals include the expiration or termination of the
waiting period under the Hart-Scott-Rodino Act. Early termination of the waiting
period was granted on November 17, 2000. We also must file a notification with
the Mexican Federal Competition Commission.
TERMINATION OF THE MERGER AGREEMENT (PAGES 44-45)
The parties to the merger agreement can mutually agree to terminate the
merger agreement at any time, whether before or after receiving shareholder
approval, without completing the merger. The merger agreement may also be
terminated:
- By us or Berkshire Hathaway if:
-- a law or court order permanently prohibits the merger;
-- the merger is not completed on or before March 31, 2001; or
-- our shareholders do not approve the merger proposal.
- By Berkshire Hathaway if:
-- our board withdraws, modifies or amends, or proposes publicly to
withdraw, modify or amend, in a manner adverse to SII Acquisition or
Berkshire Hathaway, its approval or recommendation of the merger or
the merger agreement, or fails to reconfirm its recommendation within
five business days after a written request to do so;
-- our board fails to include its recommendation in this proxy
statement;
-- our board approves or recommends, or proposes publicly to approve or
recommend, any takeover proposal with respect to us or our
significant subsidiaries by any third party;
-- the special committee withdraws, or publicly proposes to withdraw, in
a manner adverse to SII Acquisition or Berkshire Hathaway, its
approval of the merger or the merger agreement;
-- a takeover proposal with respect to us or our significant
subsidiaries by a third party which contains a proposal as to price
is commenced, is publicly proposed or communicated to us and we fail
to reject the proposal within 10 business days of our receipt of the
proposal or, if sooner, the date the proposal first becomes publicly
disclosed; or
-- any of the conditions to its obligations or the obligations of SII
Acquisition to complete the merger are not satisfied by March 31,
2001.
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<PAGE> 16
- By us if:
-- prior to the shareholder vote, we enter into a definitive agreement
concurrently with the termination of the merger agreement which
provides for a superior proposal that was made (and not solicited)
after the date of the merger agreement and under circumstances not
otherwise involving a breach of the merger agreement, if our Board
determines, after consultation with outside legal counsel, that the
failure to enter into the definitive agreement would constitute a
breach of its fiduciary duties to our shareholders; or
-- any of the conditions to our obligations to complete the merger are
not satisfied by March 31, 2001.
NO TERMINATION FEES
The merger agreement does not provide for the payment of a termination fee
in the event the merger agreement is terminated by any party.
DISSENTERS' RIGHTS (PAGES 36-38)
You are entitled to exercise dissenters' rights in connection with the
merger. If you elect to exercise dissenters' rights, you must deliver to us,
before the shareholder vote to approve the merger proposal is taken, written
notice of your intent to demand payment of the "fair value" of your shares if
the merger is completed, and you must not vote to approve the merger proposal. A
copy of the relevant sections of the Georgia Business Corporation Code regarding
dissenters' rights is included in this proxy statement as Appendix F.
FEDERAL INCOME TAX CONSEQUENCES (PAGE 36)
You will be taxed on the cash you receive in the merger to the extent that
the cash exceeds your tax basis in your shares or, conversely, you will
recognize loss to the extent that your tax basis exceeds the cash you receive.
You should consult your tax advisor regarding the U.S. Federal income tax
consequences of the merger, as well as any tax consequences under state, local
or foreign laws.
CONTRIBUTION AND PARTICIPATION AGREEMENT (PAGES 45-49)
SII Acquisition, Berkshire Hathaway, Mr. Shaw and certain of his family
members and related family interests, Mr. Saul and Mr. Little, through certain
of their family interests, Mr. Lusk, and the eight other members of our
management who are part of the investor group have entered into an amended and
restated contribution and participation agreement. A copy of the contribution
agreement is included with this proxy statement as Appendix B.
Under the contribution agreement, Berkshire Hathaway has agreed to
contribute 2,194,200 shares of our common stock and $2,016,686,315 in cash to
SII Acquisition in exchange for 108,335,585 shares of common stock in SII
Acquisition.
In addition, under the contribution agreement:
- Mr. Shaw and certain of his family members and related family interests
have agreed to contribute in the aggregate 7,999,000 shares of our common
stock to SII Acquisition in exchange for the same number of shares of
common stock of SII Acquisition;
- Mr. Saul, through certain of his family interests, has agreed to
contribute in the aggregate 6,485,604 shares of our common stock to SII
Acquisition in exchange for the same number of shares of common stock of
SII Acquisition; and
- Mr. Little, through a family limited partnership, Mr. Lusk, and eight
other members of our management have agreed to contribute in the
aggregate 1,318,034 shares of our common stock to SII Acquisition in
exchange for the same number of shares of common stock of SII
Acquisition.
If either the Shaw or the Saul shareholder group referred to above fails to
contribute a minimum of 6,485,604 shares of our common stock, SII Acquisition
and Berkshire Hathaway will have the option to
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<PAGE> 17
terminate the contribution agreement. The closing of the transactions under the
contribution agreement is a condition to the completion of the merger and,
therefore, a termination of the contribution agreement would effectively
terminate the merger agreement.
Upon completion of the merger, SII Acquisition will be merged into Shaw and
the common stock of SII Acquisition will be converted, by virtue of the merger,
into common stock of Shaw, as the surviving company. After completion of the
merger, Messrs. Shaw and Saul and their respective family members and related
family interests who are parties to the contribution agreement, Mr. Little's
family limited partnership, Mr. Lusk and the eight other members of management
who are parties to the contribution agreement will have certain rights under the
contribution agreement to require Berkshire Hathaway to purchase their common
stock. In addition, under the contribution agreement, after the merger and until
Berkshire Hathaway owns more than 95% of the common stock of Shaw, the
contribution agreement prohibits Shaw from merging or consolidating with, or
acquiring, any other company that is not engaged in the manufacture,
distribution and/or sale of floor coverings without the prior consent of certain
of the holders of the Shaw common stock other than Berkshire Hathaway.
VOTING AGREEMENT AND INVESTOR VOTING AGREEMENT (PAGES 49-51)
Berkshire Hathaway, SII Acquisition, and certain of our shareholders
(including Mr. Shaw and certain of his family members and related family
interests and Mr. Saul, through certain of his family interests) who in the
aggregate own 35,200,790 shares of our common stock, or 28.3% of the shares
outstanding as of November 10, 2000, have entered into an amended and restated
voting agreement. A copy of the voting agreement is included in this proxy
statement as Appendix C. Under the voting agreement, these shareholders have
agreed, among other things, to vote their shares of our common stock in favor of
the merger proposal and against any third party proposal and, for that purpose,
have given Berkshire Hathaway their irrevocable proxy to vote their shares of
our common stock at the special meeting and any other meeting of our
shareholders at which the merger proposal is considered. In addition, these
shareholders have agreed:
- Not to dispose of any of their shares during the term of the voting
agreement;
- Not to encourage or facilitate any proposal from any third party relating
to the acquisition of shares of our common stock or any transaction that
would constitute a takeover proposal under the terms of the merger
agreement;
- Not to participate in any discussions or negotiations or furnish any
information or otherwise cooperate in any way in any transaction that
might constitute a takeover proposal under the merger agreement involving
any third party; and
- To immediately cease and terminate all existing discussions or
negotiations with respect to any of the foregoing with any third party.
The foregoing provisions do not prohibit Messrs. Shaw, Saul, Lusk and
Little, in their capacities as members of our Board, from taking actions in such
capacity with respect to "superior proposals" that are permitted under the
merger agreement as described herein under "The Merger Agreement -- No
Solicitation of Transactions."
In connection with the proxy given to Berkshire Hathaway under the voting
agreement, Berkshire Hathaway has entered into the investor voting agreement
with us under which Berkshire Hathaway has agreed to vote an aggregate of
13,433,261 shares of our common stock which are subject to the voting agreement
and are also subject to the contribution agreement in the same proportion as the
other shares of our common stock voting on the approval of the merger and the
merger agreement are voted on such matters. The remaining 21,767,529 shares of
our common stock which are subject to the voting agreement will be voted for the
approval of the merger and the merger agreement and will be counted in
determining how the 13,433,261 shares subject to the investor voting agreement
are voted. A copy of the investor voting agreement is included in this proxy
statement as Appendix D.
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<PAGE> 18
SELECTED HISTORICAL FINANCIAL DATA OF SHAW
The following selected historical financial data for the fiscal years ended
January 1, 2000 and January 2, 1999 have been derived from our audited
consolidated financial statements incorporated by reference into this proxy
statement. The selected historical financial data for each of the nine-month
periods ended September 30, 2000 and October 2, 1999 have been derived from our
unaudited consolidated financial statements incorporated by reference into this
proxy statement. This information is only a summary, and you should read it
together with the historical financial statements and related notes contained in
the annual reports and other information that we have filed with the SEC and
incorporated by reference. See "Where You Can Find More Information."
<TABLE>
<CAPTION>
NINE MONTHS ENDED FISCAL YEAR ENDED
---------------------------- ---------------------------
SEPTEMBER 30, OCTOBER 2, JANUARY 1, JANUARY 2,
2000 1999 2000 1999
------------- ------------ ------------ ------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Sales............................... $ 3,091,777 $ 3,103,852 $ 4,107,736 $ 3,542,202
Costs and Expenses:
Cost of sales......................... 2,322,354 2,284,455 3,028,248 2,642,453
Selling, general and administrative... 484,920 469,435 627,075 620,878
Charges to record loss on sale of
residential retail operations,
store closing costs and write-down
of certain assets.................. 46,574 -- 4,061 132,303
Charge to record pending settlement of
class action antitrust
litigation......................... 27,500 -- -- --
Restructuring charge.................. 6,600 -- -- --
Charge to record plant closing
costs.............................. -- -- 1,834 --
Interest, net......................... 55,907 46,572 62,812 62,553
Loss on sale of equity securities..... -- -- -- 22,247
Other expense, net.................... 3,643 2,898 1,319 4,676
------------ ------------ ------------ ------------
Income Before Income Taxes.............. 144,279 300,492 382,387 57,092
Provision for Income Taxes.............. 61,610 123,345 157,361 38,407
------------ ------------ ------------ ------------
Income Before Equity in Income of Joint
Ventures.............................. 82,669 177,147 225,026 18,685
Equity in Income of Joint Ventures...... 857 2,959 2,925 1,947
------------ ------------ ------------ ------------
Net Income.............................. $ 83,526 $ 180,106 $ 227,951 $ 20,632
============ ============ ============ ============
Earnings Per Common Share:
Basic................................. $ 0.65 $ 1.29 $ 1.64 $ 0.16
Diluted............................... 0.65 1.27 1.62 0.16
Cash Dividends Per Share................ 0.15 0.05 0.10 0.075
Weighted Average Shares Outstanding:
Basic................................. 128,073,069 139,820,506 138,591,266 128,031,290
Diluted............................... 128,673,206 142,176,072 140,680,923 129,915,178
Ratio of Earnings to Fixed Charges(1)... 3.58x 7.45x 7.09x 1.91x
BALANCE SHEET DATA (AS OF END OF
INDICATED PERIOD):
Working Capital......................... $ 587,680 $ 555,948 $ 581,957 $ 627,560
Property, Plant & Equipment, net........ 776,515 742,115 753,805 716,428
Total Assets............................ 2,384,172 2,352,148 2,291,719 2,261,447
Total Long-Term Debt.................... 891,395 768,939 823,821 927,434
Shareholders' Investment................ 802,288 904,017 868,585 797,368
Shareholders' Investment Per Common
Share(2).............................. 6.47 6.56 6.55 5.66
</TABLE>
---------------
(1) The ratio of earnings to fixed charges has been calculated by dividing
income before income taxes, non-distributed equity in income of joint
ventures and fixed charges, by the fixed charges. The fixed charges consist
of interest expense.
(2) Shareholders' investment per common share has been calculated by dividing
shareholders' investment by the number of common shares outstanding at the
end of each of the periods presented.
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<PAGE> 19
INFORMATION CONCERNING THE SPECIAL MEETING
DATE, TIME AND PLACE OF THE SPECIAL MEETING
This proxy statement is furnished to you in connection with the
solicitation of proxies by our Board of Directors for the special meeting of
shareholders to be held at 11:00 a.m., Eastern Standard time, on January ,
2001, at our administrative offices located at 616 East Walnut Avenue, Dalton,
Georgia, or any postponement or adjournment of the meeting. This proxy
statement, the notice of special meeting and the accompanying form of proxy card
are first being mailed to shareholders on or about , 2000.
PURPOSE OF THE SPECIAL MEETING
At the special meeting, you will be asked:
- To consider and vote upon a proposal to approve the merger agreement
among SII Acquisition, Shaw and Berkshire Hathaway and the merger of SII
Acquisition with and into Shaw. In the merger, each issued and
outstanding share of our common stock (other than shares held by Shaw,
SII Acquisition and their respective subsidiaries and other than shares
held by shareholders who perfect dissenters' rights under Georgia law)
will be converted into the right to receive $19.00 per share in cash; and
- To transact any other business that may properly come before the special
meeting or any adjournment or postponement of the meeting.
RECORD DATE; QUORUM; OUTSTANDING COMMON STOCK ENTITLED TO VOTE
All record holders of shares of our common stock at the close of business
on November 10, 2000 are entitled to notice of, and to vote at, the special
meeting. The presence, in person or by proxy, of holders of a majority of the
outstanding shares of common stock is required to constitute a quorum for the
transaction of business. A list of record holders will be available for
examination at our administrative offices at the time and place of the special
meeting. At the close of business on November 10, 2000, there were 124,208,907
shares of our common stock outstanding.
VOTING RIGHTS
You are entitled to one vote for each share of common stock that you held
as of the close of business on the record date. The affirmative vote of the
holders of a majority of the outstanding shares of our common stock is required
to approve the merger and the merger agreement. Under Georgia law, in
determining whether approval of the merger and the merger agreement has received
the requisite number of affirmative votes, abstentions and broker non-votes will
have the same effect as a vote against approval of the merger and the merger
agreement. Certain of our shareholders (including Mr. Shaw and certain of his
family members and related family interests and Mr. Saul, through a family
trust), who collectively own an aggregate of 35,200,790 shares of our common
stock, or 28.3% of the shares outstanding as of November 10, 2000, have entered
into an amended and restated voting agreement with Berkshire Hathaway and SII
Acquisition. Under the voting agreement, these shareholders have agreed, among
other things, to vote their shares in favor of the merger and the merger
agreement and against any third party takeover proposal and, for that purpose,
have given Berkshire Hathaway their irrevocable proxy to vote their shares at
the special meeting and at any other meeting of our shareholders at which the
merger or the merger agreement are considered.
Included in the shares which are subject to the voting agreement are
13,433,261 shares which are required to be contributed to SII Acquisition under
the contribution agreement. In connection with the proxy granted to Berkshire
Hathaway under the voting agreement, Berkshire Hathaway has entered into an
investor voting agreement with Shaw under which Berkshire Hathaway has agreed to
vote those shares subject to the voting agreement which are also subject to the
contribution agreement in the same proportion as all of the other shares of our
common stock voting on the approval of the merger and the merger agreement are
voted on such matters. As a result of the voting agreement and the investor
voting agreement, an aggregate of 21,767,529 shares of our common stock will be
voted at the special meeting pursuant to proxies granted under
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<PAGE> 20
the voting agreement for the merger and the merger agreement and an aggregate of
13,433,261 shares of our common stock will be voted at the special meeting
pursuant to proxies granted under the voting agreement in the same proportion as
all of the other shares of our common stock voting on the approval of the merger
and merger agreement (including the 21,767,529 shares subject only to the voting
agreement) are voted on such matters.
VOTING AND REVOCATION OF PROXIES
A form of proxy card for your use at the special meeting accompanies this
proxy statement. All properly executed proxies that are received prior to or at
the special meeting and not revoked will be voted at the special meeting in the
manner specified. If you execute and return a proxy and do not specify
otherwise, the shares represented by your proxy will be voted "FOR" approval of
the merger proposal and the merger agreement in accordance with the
recommendation of the Board. In that event, you will not have the right to
dissent from the merger and seek payment of the fair value of your shares.
If you have given a proxy pursuant to this solicitation, you may
nonetheless revoke it by attending the special meeting, giving oral notice of
your intention to vote in person and voting your shares in person. In addition,
you may revoke any proxy you give at any time before the special meeting by
delivering to our Secretary a written statement revoking it or by delivering a
duly executed proxy bearing a later date. If you have executed and delivered a
proxy to us, your attendance at the special meeting will not in and of itself
constitute a revocation of your proxy. You must also vote your shares in person.
If you vote in favor of the merger proposal, you will not have the right to
dissent and seek payment of the fair value of your shares. If you do not send in
your proxy or do not instruct your broker to vote your shares or if you abstain
from voting, it will have the same effect as a vote AGAINST the merger proposal.
SOLICITATION OF PROXIES
We will bear the cost of the solicitation of proxies. We will solicit
proxies initially by mail. Further solicitation may be made by our directors,
officers and employees personally, by telephone or otherwise, but they will not
be specifically compensated for these services. Upon request, we will reimburse
brokers, dealers, banks or similar entities acting as nominees for their
reasonable expenses incurred in forwarding copies of the proxy materials to the
beneficial owners of the shares of common stock they hold of record. We have
engaged Corporate Investor Communications Inc. as our proxy solicitor to assist
in the dissemination of proxy materials and in obtaining proxies and to answer
your questions. We will pay them a fee of $10,000 and reimburse them for their
expenses.
OTHER MATTERS
We do not know of any matters other than those described in this proxy
statement which may come before the special meeting. If any other matters are
properly presented to the special meeting for action, we intend that the persons
named in the enclosed form of proxy card will vote in accordance with their best
judgment. These matters may include an adjournment or postponement of the
special meeting from time to time if our Board so determines. If any adjournment
or postponement is made, we may solicit additional proxies during the
adjournment period.
Your vote is important. Please return your marked proxy card promptly so
your shares can be represented, even if you plan to attend the meeting in
person.
You should not send any certificates representing common stock with your
proxy card. If we complete the merger, the procedure for the exchange of
certificates representing common stock will be as described under the heading
"The Merger Agreement -- The Merger -- Exchange of Common Stock Certificates" of
this proxy statement.
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<PAGE> 21
SPECIAL FACTORS
BACKGROUND OF THE MERGER
On June 6, 2000, Robert E. Shaw, Julian D. Saul, Warren E. Buffett and a
third party representative met at the offices of Berkshire Hathaway in Omaha,
Nebraska concerning a possible transaction between us and a third party in which
a subsidiary of Berkshire Hathaway would be an insurer of certain liabilities in
that transaction. At the conclusion of that meeting, Mr. Buffett indicated that
the Berkshire Hathaway subsidiary would not be interested in pursuing that
transaction, which was wholly unrelated to the merger.
In a parting conversation, Mr. Shaw inquired of Mr. Buffett regarding Mr.
Buffett's interest in making a direct investment in Shaw. Mr. Shaw's purpose in
inquiring about Mr. Buffett's interest in purchasing our common stock was to
increase the ownership of our common stock by institutional investors who are
regarded as long term investors and, in particular, by investors of the
reputation of Berkshire Hathaway and Mr. Buffett. Mr. Buffett's response was
non-committal. Mr. Shaw's office subsequently sent publicly available financial
information about Shaw to Berkshire Hathaway.
On June 13, 2000, Mr. Shaw, Mr. Saul, W. Norris Little and Mr. Buffett met
at the offices of Berkshire Hathaway to discuss the possibility of a direct
investment by Berkshire Hathaway in Shaw. Mr. Buffett indicated that a direct
investment by Berkshire Hathaway in Shaw was unlikely but inquired whether Shaw
had any objection to Berkshire Hathaway purchasing shares of Shaw in the open
market. The Shaw representatives responded that they had no objection. Mr.
Buffett indicated that he would give the possibility of direct investment
further consideration and would discuss this further with the Shaw
representatives on June 19. On June 13, Berkshire Hathaway began purchasing
shares of our common stock in the open market. At the time Berkshire Hathaway
commenced purchasing shares of our common stock, there had been no discussion
concerning the possibility of an acquisition of Shaw by Berkshire Hathaway.
Berkshire Hathaway has informed us that the shares which it purchased between
June 13 and August 16 (the last day on which Berkshire Hathaway purchased our
shares) were for investment for its own account.
On June 16, 2000, Mr. Shaw's office sent Mr. Buffett a press release issued
by Shaw concerning the bankruptcy of Flooring America, Shaw's single largest
customer. On June 19, Mr. Shaw and Mr. Buffett spoke by telephone and agreed
that any further discussion regarding a direct investment in Shaw by Berkshire
Hathaway would be put on hold at that time. Brief telephone conversations
occurred on July 11, 12 and 24 between Mr. Shaw and Mr. Buffett, with Mr. Shaw
extending an invitation to Mr. Buffett to visit our headquarters in Dalton and
view our operations. These telephone conversations, which were initiated by Mr.
Shaw, were for the purpose of continuing a dialogue with Berkshire Hathaway, a
potentially large investor in Shaw. Topics discussed included information about
the condition of the carpet industry generally, certain publicly available
information about Shaw and conversations of a social nature unrelated to a
transaction between Berkshire Hathaway and Shaw.
On August 10, 2000, Mr. Shaw and Mr. Buffett spoke twice by telephone. In
the first conversation, Mr. Shaw advised Mr. Buffett that Shaw had determined
not to pursue the possible transaction discussed on June 6, 2000. In the second
conversation Mr. Shaw mentioned that he had been considering a "going private"
transaction involving Shaw. Mr. Buffett made no response to this comment. Mr.
Shaw subsequently determined not to pursue a "going private" transaction because
he was not comfortable with the amount of debt Shaw would have to incur to
finance such a transaction.
On August 16, 2000, Mr. Shaw and Mr. Buffett had a lengthy telephone
conversation during which they discussed for the first time the possibility of
an acquisition of Shaw by Berkshire Hathaway. Berkshire Hathaway ceased
purchasing shares of our common stock on the open market on this date. Brief
telephone conversations between Mr. Shaw and Mr. Buffett followed on August 21
and 23, with the latter telephone conversation including plans for a meeting in
person between them to be held on August 25.
Mr. Shaw's reasons for pursuing a possible transaction with Berkshire
Hathaway included the fact that, in his opinion, the market prices afforded many
traditional manufacturing companies recently, and Shaw in
15
<PAGE> 22
particular, did not reflect a fair value for such companies. Mr. Shaw also
believed that the decline in Shaw's price-to-earnings ratio over the past 18 to
24 months from approximately 15 to 7 brought into question whether Shaw should
continue as a publicly-owned company. Shaw's price-to-earnings ratio also made
Mr. Shaw unwilling to use Shaw's common stock as a currency for acquisitions,
financing purposes and otherwise. Mr. Shaw was also motivated by Berkshire
Hathaway's reputation and long term approach to investments, particularly in the
context of acquired companies. Mr. Shaw believed that Berkshire Hathaway's
financial position made it reasonable to expect Berkshire Hathaway to provide
financial support to Shaw after the merger should Shaw require additional
working capital or financing for expansion, by acquisitions or otherwise.
On August 25, 2000, Mr. Shaw, Mr. Little, Mr. Buffett and Charles Munger,
Berkshire Hathaway's Vice Chairman, met at the offices of Berkshire Hathaway.
This was Mr. Munger's first contact with any representatives of Shaw. The
parties discussed the terms of a possible acquisition of Shaw by Berkshire
Hathaway and a tentative agreement was reached between them providing for a
price to be paid by Berkshire Hathaway of $19.00 per share of our common stock
for a minimum 80.1% ownership of Shaw by Berkshire Hathaway. On August 28, a
lengthy telephone conversation occurred between Mr. Shaw and Mr. Buffett
regarding the possible acquisition of Shaw by Berkshire Hathaway, under the
proposed terms later contained in Mr. Buffett's letter to Mr. Shaw dated August
29, along with a discussion of the conditions that might apply to minority
shares in any new company. On August 28, Mr. Shaw advised certain members of our
senior management of a possible transaction with Berkshire Hathaway.
On August 29, 2000, Mr. Buffett's office sent by telecopy to Mr. Shaw's
office a letter on behalf of Berkshire Hathaway offering, subject to approval of
our Board of Directors, to purchase between 80.1% and 82% of our common stock
for a purchase price of $19.00 in cash per share. The offer was not subject to
any financing contingencies. The offer stated that Mr. Shaw and Mr. Saul would
each respectively be required to retain at least a 5% interest following the
acquisition and anticipated that other members of management and members of the
family of Mr. Shaw would retain enough shares (including outstanding options) to
own the 18% to 19.9% that would not be owned by Berkshire Hathaway. The offer
stated that Berkshire Hathaway anticipated that not more than 40 shareholders
would participate in the ownership of Shaw following the acquisition and that
current management would continue to manage Shaw. The letter offered to provide
an arrangement for disposition of shares owned after the acquisition pursuant to
a formula plan facilitating full disposition of shares at death and gradual
disposition during the lifetime of employees who participated in Shaw ownership
following the acquisition.
On August 29, 2000, Mr. Shaw and Mr. Buffett spoke on two occasions
concerning possible revisions to Berkshire Hathaway's letter. These possible
revisions included:
- a change in the minimum number of shares required to be owned by Mr.
Shaw, Mr. Saul and other members of management and their immediate
families from the originally proposed 18% to a range of 14% to 19.9%,
- more specifically describing the times and conditions upon which the puts
and calls provided for in the contribution agreement could be exercised,
and
- establishing the specifics of the pricing formula for such puts and
calls.
Shaw advised its outside counsel on August 29 of the possibility of a
transaction between Berkshire Hathaway and Shaw.
On August 30, 2000, Mr. Buffett's office sent by telecopy to Mr. Shaw's
office a revised letter amplifying and amending Berkshire Hathaway's letter of
August 29 in accordance with their telephone conversations on August 29.
The August 30 letter from Berkshire Hathaway to Mr. Shaw stated that, with
the approval of our Board of Directors, Berkshire Hathaway, through a newly
formed subsidiary, would offer to purchase between 80.1% and 86% of our common
stock for $19.00 per share in cash. The offer was not subject to any financing
16
<PAGE> 23
contingencies but was subject to developing and agreeing upon appropriate
documentation. Berkshire Hathaway indicated that if the Board should approve the
offer, it was prepared to move promptly.
The August 30 letter further stated that each of Mr. Shaw and Mr. Saul
would be required to retain at least a 5% interest in the new company, which
could include shares owned by them personally as well as shares owned by members
of their immediate families. The letter indicated that Berkshire Hathaway
anticipated that other members of management and members of the Shaw and Saul
families would retain enough shares (including outstanding options) to fulfill
the 14% to 19.9% that would not be owned by Berkshire Hathaway. Berkshire
Hathaway again stated that it anticipated that the new company would not have
more than 40 shareholders and our current management would continue to manage
Shaw after the transaction.
The August 30 letter further stated that as to shares of the new company
included in the minimum ownership requirement imposed upon Messrs. Shaw and Saul
and their immediate families, at the option of those shareholders, on March 31
of each year beginning March 31, 2002, the new company would purchase for cash
up to 10% of those shares on a cumulative basis at a price equal to $19.00 per
share plus the increase in book value per share at the prior year end over the
book value per share as of December 31, 2000. As to shares in the new company
not included within the minimum ownership requirement, at the option of the
owner, the new company would purchase one-third of such shares on a cumulative
basis for cash at the same formula price commencing March 31, 2002. In the event
of the death of any family group shareholder or the death or termination of
employment of any management shareholder, the new company would purchase all of
the shares of such shareholder for cash at the same formula price.
On August 30, 2000, after receipt of the revised letter from Berkshire
Hathaway, Mr. Shaw contacted each member of our Board of Directors in order to
call a special meeting of the Board of Directors. Due to the intervening Labor
Day holiday, the meeting was set for September 6. Mr. Shaw advised each Board
member that the subject of the meeting was to review a proposal to effect a
going private transaction involving Shaw. He did not advise them at that time
that Berkshire Hathaway was to be a participant in this transaction.
On August 31, 2000, a lengthy telephone conversation occurred between Mr.
Shaw and Mr. Buffett regarding the possible transaction and plans being made to
call a meeting of our Board on September 6.
On September 5, 2000, Mr. Shaw and Mr. Buffett spoke twice by telephone
concerning the possible transaction with particular reference to the anticipated
process by which the transaction would move forward. On the same day, other
members of our management were notified of the possible transaction and that a
special meeting of our Board of Directors had been called to consider the offer
made by Berkshire Hathaway.
On September 6, 2000, the New York Stock Exchange delayed the opening of
trading in our common stock at our request. Two brief telephone conversations
occurred between Mr. Shaw and Mr. Buffett prior to the meeting of our Board of
Directors on September 6. At this meeting, the Board reviewed the letter of
August 30 from Berkshire Hathaway to Mr. Shaw and Mr. Shaw advised the members
of the Board of the background which led to receipt of this letter and his and
Mr. Saul's reasons for supporting the proposed transaction. Outside counsel for
Shaw discussed legal requirements relative to the proposed transaction,
including fiduciary obligations of members of the Board and the desirability of
referring the consideration of the matter to a special committee of the Board.
After discussion, the Board appointed a special committee of independent members
of the Board consisting of directors Thomas G. Cousins, Roberto Garza Delgado,
J. Hicks Lanier and Robert J. Lunn to consider the offer by Berkshire Hathaway
and negotiate the purchase price and other material financial terms of the
transaction. The Board authorized the special committee to engage its own
counsel and financial advisor in connection with such task. The Board confirmed
that we would indemnify the members of the special committee with respect to
their service on the committee as permitted under Georgia law and our articles
of incorporation and bylaws.
At the conclusion of the Board meeting, the New York Stock Exchange was
advised of the press release proposed to be issued by Shaw. We then issued a
press release announcing receipt of the offer by Berkshire Hathaway, including a
summary of the terms thereof, and the appointment by our Board of Directors of
the special committee. Subsequently, trading on the New York Stock Exchange in
our common stock resumed.
17
<PAGE> 24
Following the September 6 Board meeting, the special committee designated
Mr. Lanier as its chairman. Over the next several days, Mr. Lanier held
discussions with and received proposals from nationally recognized investment
banking and law firms with respect to acting as advisors to the special
committee. The special committee then retained Merrill Lynch as its financial
advisor pursuant to a letter agreement dated September 14, 2000 and retained
Winston & Strawn as its counsel.
On September 9, 2000, counsel for Berkshire Hathaway and counsel for Shaw
began preparing and negotiating the merger agreement, the voting agreement and
the contribution agreement.
On September 14, 2000, the special committee held a telephonic meeting with
its financial and legal advisors. Representatives of Winston & Strawn reviewed
with the special committee its legal duties and responsibilities in evaluating
the Berkshire Hathaway proposal and other alternatives. Representatives of
Merrill Lynch discussed with the special committee a process to evaluate the
Berkshire Hathaway proposal and strategic alternatives. Merrill Lynch also
presented a preliminary public market overview of companies in the carpet
manufacturing industry and a profile of previously announced Berkshire Hathaway
investment transactions. The special committee instructed Merrill Lynch to
conduct a due diligence review of Shaw and to develop in consultation with the
special committee a process to evaluate the Berkshire Hathaway proposal, and
other strategic alternatives available to us, including a sale to other
interested third parties.
Beginning the week of September 18, 2000, Merrill Lynch conducted a due
diligence review of Shaw.
On September 21, 2000, Mr. Buffett, Berkshire Hathaway's counsel, Mr. Shaw,
Robert R. Harlin, consultant to Shaw, and outside counsel for Shaw spoke by
telephone concerning the terms of the contribution agreement.
On September 28, 2000, the special committee held a meeting in Atlanta,
Georgia at which representatives of Winston & Strawn again reviewed with the
special committee its legal duties and responsibilities in evaluating the
Berkshire Hathaway proposal and other alternatives. Representatives of Merrill
Lynch then made a presentation to the special committee that included an
overview of the carpet manufacturing industry, our financial performance and
trading history, preliminary valuation ranges for Shaw and an evaluation of the
Berkshire Hathaway proposal. The preliminary analysis presented by Merrill Lynch
made no recommendations and did not express Merrill Lynch's position as to the
fairness of the Berkshire Hathaway proposal from a financial point of view.
Instead, the preliminary analysis outlined the types of analyses and valuation
methodologies that Merrill Lynch would present to the special committee and use
in connection with rendering its fairness determination on any business
combination transaction.
At the September 28, 2000 meeting, Merrill Lynch presented a proposed list
of parties to be contacted regarding an alternative transaction. After a
discussion of the proposed list, the special committee authorized and directed
Merrill Lynch to contact a broad group of third parties in order to assess their
interest in pursuing a transaction with Shaw. The special committee determined
that the third parties to be contacted should include companies in the same
industry as Shaw, companies in other industries that may have a strategic
interest in a transaction with Shaw and financial sponsors of leveraged and
management buyouts. The special committee did not restrict Merrill Lynch's
search for alternative proposals by requiring management participation in the
proposals.
Following the September 28 meeting, at the instruction of the special
committee, Merrill Lynch contacted twenty-three parties to assess their interest
in a merger with, or acquisition of, Shaw. On October 6, 2000, the special
committee held a telephonic meeting with its financial and legal advisors at
which Merrill Lynch presented a preliminary report of the results of its
discussions with third parties. Of the 23 parties contacted, 19 had declined to
express interest in an alternative transaction, and four parties had not yet
responded. The special committee directed Merrill Lynch to continue its
discussions with the remaining parties.
On October 10, 2000, the special committee held a telephonic meeting with
its financial and legal advisors at which Merrill Lynch presented an updated
report of the results of its discussions with third parties. Of the four
remaining parties contacted, three had declined to express interest in an
alternative transaction, and one party had not yet responded. Merrill Lynch
reviewed with the special committee the presentation
18
<PAGE> 25
given by Merrill Lynch on September 28, 2000, as no meaningful market changes
had occurred during the interim. Representatives of Winston & Strawn then
briefed the committee on the terms of the Berkshire Hathaway proposal and the
material provisions of the draft definitive agreements that had been provided to
Winston & Strawn by outside counsel to Shaw. After a discussion, the special
committee authorized and directed Merrill Lynch to negotiate with Berkshire
Hathaway to attempt to improve the financial terms of the proposed transaction.
The special committee also authorized and directed Winston & Strawn to negotiate
the legal terms of a potential transaction with counsel to Berkshire Hathaway.
The presentations from Merrill Lynch to the special committee on September
28 and October 10, 2000 were substantially similar to Merrill Lynch's
presentation to the special committee on October 19, 2000 which is referred to
below and which is filed in its entirety as Exhibit C-2 to the Schedule 13E-3
filed by Shaw on November 2, 2000. The only notable difference in the October
19, 2000 presentation consisted of Merrill Lynch updating its analysis to
reflect the most current market conditions, which changes did not have a
material impact on Merrill Lynch's analysis. Specifically, Merrill Lynch's
update for current market conditions did not have an impact on any of the
reference ranges determined by Merrill Lynch with respect to the valuation
analyses described under "Fairness Opinion of Merrill Lynch -- Valuation of the
Company" beginning on page 27. The only impact to the description of Merrill
Lynch's analyses was to update the range of stock price as a multiple of
estimated 2001 earnings per share of the comparable companies described under
"Fairness Opinion of Merrill Lynch -- Valuation of the Company -- Selected
Comparable Publicly Traded Companies Analysis" on page 28 from a range of 3.6x
to 8.8x as of September 27, 2000 to a range of 3.8x to 9.1x as of October 17,
2000. Merrill Lynch noted that updating this range for current market conditions
did not change the mean multiple of 6.2x for the comparable companies.
On October 11, 2000, representatives of Merrill Lynch contacted Mr. Buffett
to discuss the financial terms of the proposed transaction. Mr. Buffett informed
them that the $19.00 per share offer represented the highest price at which
Berkshire Hathaway was willing to proceed with the proposed transaction.
On October 13, 2000, the special committee held a telephonic meeting with
its financial and legal advisors at which the Merrill Lynch representatives
reported on their negotiations with Berkshire Hathaway, and the Winston & Strawn
representatives reported on their negotiations with counsel to Berkshire
Hathaway. Merrill Lynch also reported that the third party who had not
previously responded in regards to a potential transaction with Shaw had
declined to express interest. The special committee directed Winston & Strawn to
continue negotiations with Berkshire Hathaway's counsel on remaining legal
issues.
Between September 6 and October 19, 2000, the identity of participants in
the contribution agreement (other than Berkshire Hathaway, Mr. Shaw and Mr.
Saul) was determined by Mr. Shaw, Mr. Saul and their families, and the number of
shares of our common stock to be contributed by each participant under the
contribution agreement was also determined. Berkshire Hathaway approved the
identity of the participants and the number of shares of our common stock to be
so contributed, which would entitle the participants in the aggregate to 12.7%
of the equity interests in Shaw, as the surviving corporation.
On October 19, 2000, the special committee held a meeting in Dalton,
Georgia with its financial and legal advisors. At the meeting, representatives
of Winston & Strawn reviewed with the special committee the legal terms of the
proposed Berkshire Hathaway transaction and the fiduciary duties of the special
committee under the circumstances. Representatives of Merrill Lynch then made a
presentation to the special committee that included updated overviews of the
carpet manufacturing industry, our financial performance and trading history,
valuation ranges for Shaw and an evaluation of the Berkshire Hathaway proposal.
Merrill Lynch then delivered its opinion to the special committee that, as of
October 19, 2000, based on the assumptions and qualifications set forth in its
analysis, the consideration to be received in the merger by holders of our
common stock outstanding at the time of the merger (other than SII Acquisition,
Shaw or any subsidiary of Shaw to the extent they hold shares of our common
stock and other than holders that perfect dissenters' rights with respect to
their shares or contribute their shares to SII Acquisition under the
contribution agreement) was fair to such shareholders from a financial point of
view. In connection with the presentation from Merrill Lynch, the special
committee reviewed the basis of and assumptions underlying the financial
analysis included in the
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<PAGE> 26
materials distributed to the special committee and summarized under the caption
"Special Factors -- Fairness Opinion of Merrill Lynch."
Following further discussion, the special committee unanimously (by means
of a vote of the three special committee members then present and by a unanimous
written consent of all four special committee members) determined that the
merger agreement, and the transactions contemplated thereby, are fair to and in
the best interests of Shaw and our shareholders (other than the members of the
investor group) and recommended that our Board approve and declare advisable the
merger agreement and the transactions contemplated thereby and submit to our
shareholders, with the recommendation that they adopt, the merger agreement and
the transactions contemplated thereby.
Following receipt of the special committee's recommendation, our Board met
on October 19, 2000. All of the members of our Board, other than Roberto Garza
Delgado, were present at the meeting. A representative of outside counsel for
Shaw reviewed with the directors the legal terms of the proposed merger
transaction. Following a discussion, the members of the Board present at the
meeting unanimously (with four directors affiliated with the investor group
abstaining) determined that the terms of the merger are fair to and in the best
interests of Shaw and our shareholders (other than the members of the investor
group) and adopted the merger and approved the merger and the merger agreement.
Our Board further directed that the merger agreement and the transactions
contemplated thereby be submitted to our shareholders for approval and set a
record date for the special meeting of November 10, 2000.
On October 19, 2000, following the meeting of our Board, and after a
conversation between Mr. Shaw and Marc Hamburg, the Chief Financial Officer of
Berkshire Hathaway, regarding our preliminary third quarter results, the merger
agreement was executed by us and by SII Acquisition and Berkshire Hathaway and
the original contribution agreement, the original voting agreement and the
investor voting agreement were executed by the parties to those agreements.
On October 20, 2000, we issued a press release announcing that the Board
had approved the proposed merger and that we had entered into the merger
agreement.
On October 30, 2000, the amended and restated voting agreement, which
corrected the number of shares subject to that agreement, was executed by the
parties to that agreement.
Subsequent to October 30, 2000, certain parties to the voting agreement and
the contribution agreement determined to effect certain transfers of shares
subject to either or both of those agreements for estate planning and other
family purposes. With the consent of Berkshire Hathaway, these transfers have
been effected. As a result of these transfers, an amended and restated
contribution agreement was entered into by the parties to that agreement as of
December 1, 2000. The contribution agreement attached hereto as Appendix B
reflects such amendment. No further amendment was required to the voting
agreement as a result of such transfers.
PURPOSE OF THE MERGER; CERTAIN EFFECTS OF THE MERGER
The principal purpose of the merger is to enable Berkshire Hathaway and the
other members of the investor group to own all of our outstanding common stock
and afford our other shareholders the opportunity to receive a cash price for
their shares that represents a premium over the market price at which the shares
traded prior to the announcement of the receipt of the offer which led to
signing of the merger agreement. This will be accomplished by a merger of SII
Acquisition, a corporation formed by Berkshire Hathaway and to be owned by the
investor group immediately prior to the merger, with and into Shaw, with Shaw as
the surviving company. In the merger, all of the shares of our common stock held
by our shareholders (other than SII Acquisition, Shaw or any subsidiary of Shaw
to the extent they hold shares of our common stock and other than holders that
perfect dissenters' rights with respect to their shares or contribute their
shares to SII Acquisition under the contribution agreement) will be converted
into the right to receive the merger consideration of $19.00 per share.
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<PAGE> 27
Berkshire Hathaway's purpose in participating in this transaction is to
acquire ownership, initially, of 87.3% of the equity interests in Shaw, as the
surviving corporation. Berkshire Hathaway is making this investment because it
believes that Shaw will be a good long term investment, providing the
possibility of current cash distributions and long term appreciation in the
value of the shares owned. Ultimately, through operation of the contribution
agreement, Berkshire Hathaway will acquire or will have the option to acquire
ownership of the remaining 12.7% of the equity interests in Shaw.
Mr. Shaw and Mr. Saul are participating (individually or through family
interests) in the transaction because they are required to participate to the
extent of certain of their shares under the terms of the offer by Berkshire
Hathaway and the provisions of the contribution agreement, but also because they
will continue to participate in management of Shaw following the merger and will
have opportunities possibly to receive current cash distributions following the
merger and to have their shares of Shaw purchased by Berkshire Hathaway in the
future at prices higher than the $19 per share merger consideration if the
performance of Shaw following the merger results in an increase in the future
book value per share of Shaw common stock. Family members and other family
interests of Mr. Shaw and Mr. Saul are participating at the requests of Mr. Shaw
and Mr. Saul, respectively, and because they will have opportunities possibly to
receive current cash distributions following the merger and to have their shares
of Shaw purchased by Berkshire Hathaway in the future at prices higher than the
$19 per share merger consideration, depending upon the future performance of
Shaw. See "The Contribution and Participation Agreement -- Puts and Call."
Other participants in the contribution agreement who are members of our
management are participating because they will continue to participate in the
management of Shaw following the merger and were given the opportunity to
participate in the ownership of Shaw following the merger and also because they
will have opportunities possibly to receive current cash distributions following
the merger and to have their shares of Shaw purchased by Berkshire Hathaway in
the future at prices higher than the $19 per share merger consideration if the
performance of Shaw following the merger results in an increase in the future
book value per share of Shaw common stock. See "The Contribution and
Participation Agreement -- Puts and Call."
The following table shows the effect of the merger on the beneficial equity
ownership in Shaw by each participant in the contribution agreement:
<TABLE>
<CAPTION>
PERCENTAGE BENEFICIAL OWNERSHIP
-------------------------------
NAME PRIOR TO MERGER AFTER MERGER
---- --------------- ------------
<S> <C> <C>
Berkshire Hathaway.......................................... 1.8%(1) 87.3%
Shaw Family Shareholders:
Robert E. Shaw............................................ 6.0 5.3
Anna Sue Shaw............................................. .5 *
Robert E. Shaw, Jr........................................ .3 .2
Susan S. Young............................................ .4 .3
Thomas Trip Shaw.......................................... .3 .2
Lewis Clayton Shaw........................................ .5 .4
Robert E. Shaw, L.P....................................... * *
Saul Family Shareholders:
Julian D. Saul Family Trust............................... 5.0 5.0
Anita Saul Family Trust................................... .2 .2
Anita Saul................................................ * *
</TABLE>
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<PAGE> 28
<TABLE>
<CAPTION>
PERCENTAGE BENEFICIAL OWNERSHIP
-------------------------------
NAME PRIOR TO MERGER AFTER MERGER
---- --------------- ------------
<S> <C> <C>
Management Shareholders:
William C. Lusk, Jr....................................... .5 .2
W. Norris Little (including Little Family Limited
Partnership)........................................... .3 *
Vance D. Bell............................................. .1 *
Gerald R. Embry........................................... .3 *
Spright D. Holland........................................ * *
Kenneth G. Jackson........................................ * *
Jeffrey Todd Meadows...................................... * *
Percy D. Merritt.......................................... * *
Henry H. Long............................................. * *
Julius C. Shaw, Jr........................................ .5 .4
</TABLE>
---------------
(1) Includes only shares owned by Berkshire Hathaway. Does not include shares
which may be deemed to be beneficially owned by Berkshire Hathaway pursuant to
the voting agreement.
* Less than .1%
The merger will terminate all common equity interests in Shaw held by our
shareholders. Shaw will become wholly-owned by Berkshire Hathaway and the other
members of the investor group. The members of the investor group will be the
sole beneficiaries of any earnings and growth of Shaw following the merger.
Accordingly, our shareholders whose shares will be converted into cash in the
merger will no longer benefit from any increase in the value of Shaw, nor will
they bear any risk of a decrease in the value of Shaw following the merger.
Our common stock is currently registered under the Securities Exchange Act
of 1934 and is listed for trading on the New York Stock Exchange under the
symbol "SHX." Upon the completion of the merger, our common stock will be
delisted from this exchange and registration of our common stock under the
Exchange Act will be terminated. Because our common stock will be privately
held, we will enjoy certain efficiencies, such as the elimination of the time
devoted by management and certain other employees to comply with the reporting
obligations of the Exchange Act. In addition, we will be relieved of certain
listing and reporting requirements under the rules of the stock exchange on
which our common stock is listed. We will be able to reduce certain costs,
including the costs of preparing, printing and mailing annual reports and proxy
statements, the expenses of a transfer agent and registrar, the costs associated
with having a Board consisting of 11 members and the costs of certain investor
relations activities.
The merger is structured as a one-step transaction. If the merger proposal
is approved by shareholders and all other conditions to the merger are
satisfied, SII Acquisition will merge with and into Shaw. Approval of the merger
proposal requires the affirmative vote of the holders of a majority of the
outstanding shares of our common stock. Under the terms of the investor voting
agreement, Berkshire Hathaway has agreed to vote 13,433,261 shares of common
stock for which it holds a proxy under the terms of the voting agreement, and
which are also subject to the contribution agreement, in the same proportion as
all other shares voting on the approval of the merger and the merger agreement
(including all other shares voted by Berkshire Hathaway pursuant to the voting
agreement) are voted on such matters. Berkshire Hathaway will vote the remaining
21,767,529 shares of our common stock for which it holds a proxy under the terms
of the voting agreement for approval of the merger and the merger agreement.
RECOMMENDATIONS OF THE SPECIAL COMMITTEE AND THE BOARD OF DIRECTORS; REASONS FOR
THE MERGER
Recommendations of the Special Committee and the Board of Directors
On October 19, 2000, the special committee unanimously determined that the
merger and the merger agreement are fair to and in the best interests of the
Shaw shareholders (other than the members of the investor group) and unanimously
voted to recommend that our Board approve the merger and the merger
22
<PAGE> 29
agreement and recommend to our shareholders that they vote to approve the merger
and the merger agreement.
At a meeting of the Board held immediately after the special committee
meeting on October 19, 2000, the members of the Board present at the meeting
unanimously determined (with Messrs. Shaw, Saul, Lusk and Little abstaining)
that the terms of the merger are fair to and in the best interests of Shaw and
our shareholders (other than the members of the investor group) and adopted the
plan of merger and approved the merger and the merger agreement. ACCORDINGLY,
OUR BOARD UNANIMOUSLY (WITH THE FOUR DIRECTORS AFFILIATED WITH THE INVESTOR
GROUP ABSTAINING) RECOMMENDS THAT OUR SHAREHOLDERS VOTE "FOR" THE APPROVAL OF
THE MERGER AND THE MERGER AGREEMENT.
Reasons for the Merger
The Special Committee. In reaching its determination that the merger
agreement and the merger are fair to, and in the best interests of, our
shareholders (other than the members of the investor group), and in recommending
that the Board approve the merger and the merger agreement and recommend to our
shareholders that they vote to approve the merger and the merger agreement, the
special committee consulted with certain of our executive officers (other than
Mr. Shaw and Mr. Saul) and its financial and legal advisors and considered the
following factors:
- The evaluation by the special committee of the following strategic
alternatives: (i) continuing to follow Shaw's business plan as a
standalone public company, (ii) a sale to a strategic buyer, such as a
competitor or major supplier; and (iii) a sale to a financial buyer. The
following four paragraphs describe factors evaluated by the special
committee with respect to each of these alternatives and the reasons for
the special committee's rejection of these alternatives:
-- The historical results of operations, financial condition, assets,
liabilities, business strategy and prospects of Shaw and the
nature of the industry in which we compete. Based on this
knowledge and the other factors considered by the special
committee, the special committee concluded that, from the
perspective of the holders of our common stock (other than the
members of the investor group), it was preferable to our
shareholders that Shaw enter into the merger agreement providing
for a price of $19.00 per share in cash, rather than our
shareholders continuing to own our common stock, the value of
which would be subject to the risks of future performance and the
market's reaction to that performance;
-- An extensive market checking process pursuant to which
twenty-three potential acquirors, including our competitors, major
suppliers and equity sponsors of leveraged buyouts, were contacted
by Merrill Lynch to determine their interest in acquiring Shaw;
-- The fact that the market checking process did not result in
preliminary indications of interest from any potentially
interested party;
-- The fact that, since the announcement of the offer on September 6,
2000, no third party has come forward with an alternative
transaction proposal;
- The opinion of Merrill Lynch, dated October 19, 2000, as to the fairness
of the consideration to be received in the merger by our shareholders
(other than SII Acquisition, Shaw or any subsidiary of Shaw to the extent
they hold shares of our common stock and other than holders that perfect
dissenters' rights with respect to their shares or contribute their
shares to SII Acquisition under the contribution agreement) from a
financial point of view. The special committee also considered Merrill
Lynch's presentation to the special committee. In its review of the
analyses performed by Merrill Lynch, the special committee did not weigh
each analysis prepared by Merrill Lynch separately, but rather considered
all of them taken as a whole;
- The relationship of the $19.00 per share cash consideration offered in
the merger to the pre-announcement market price and the market prices for
our common stock during the previous five years. The special committee
considered the fact that our common stock had closing prices as high as
$24.31 per share and as low as $10.38 per share during the five-year
period prior to the public
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announcement of the Berkshire Hathaway proposal and the fact that the
highest closing price during such period ($24.31) occurred on March 5,
1999 and March 8, 1999. Based upon its consideration of Shaw's operations
and prospects, the nature of the industry and trading characteristics of
companies with capitalizations similar in size to Shaw, the special
committee concluded that it might take a considerable period of time
before the trading price of Shaw's shares would equal either the $19.00
per share merger consideration or the $24.31 per share trading high, if
ever. The special committee considered, but did not view as material,
both when this trading high occurred and the fact that the $19.00 per
share merger consideration represents a 9% discount to this trading high.
The special committee based this consideration on the Merrill Lynch
valuation analyses and the special committee's knowledge of Shaw's
operations and prospects. The special committee also considered, but for
the same reasons did not view as material, the fact that the $19.00 per
share amount is less than the per share price of some of Shaw's common
stock repurchases during the quarters ended June 1999 and September 1999.
The special committee also considered the fact that the $19.00 per share
cash consideration offered in the merger represents a premium of
approximately 55.9% over the $12.19 per share closing price of our shares
on September 5, 2000, the last trading day prior to the public
announcement of the merger proposal;
- The terms and conditions of the merger agreement. The special committee
considered in particular the termination provisions of the merger
agreement, the "no solicitation" provisions of the merger agreement and
the absence of any termination fee. As discussed below, the merger
agreement contains provisions that would allow the special committee to
consider and, under certain circumstances, pursue an unsolicited
alternative proposal from a third party. While the merger agreement
prohibits us from soliciting alternative proposals, it does not prohibit
us from considering unsolicited proposals, negotiating with the parties
submitting such proposals or furnishing such third parties with
information about us. Also, the merger agreement permits us, subject to
certain conditions, to terminate the merger agreement if a superior
proposal is received from a third party and not matched by SII
Acquisition;
- The fact that approval of the merger agreement requires the affirmative
vote of a majority of our outstanding shares entitled to vote thereon and
that, under Georgia law, our shareholders have the right to exercise
their dissenters' rights to receive the "fair value" of their shares if
they dissent from the merger;
- The business reputation, financial resources and high rate of success of
Berkshire Hathaway in structuring and completing transactions similar to
the merger and the belief that the investor group has the ability to
complete the merger in a timely manner;
- The investor group's financial ability to complete the merger, including
the investor group's representation that it has sufficient cash on hand
to pay the merger consideration, and the absence of any financing
condition to the merger;
- The nature of the SII Acquisition funding commitments from the investor
group under the contribution agreement and the special committee's belief
as to the strength of such commitments;
- The fact that the per share price to be received in the merger is payable
in cash, eliminating any uncertainties in valuing the merger
consideration to be received by our shareholders;
- The arm's-length negotiations between the special committee and its
advisors, on the one hand, and Berkshire Hathaway and its counsel, on the
other hand, including that the negotiations resulted in:
-- Berkshire Hathaway's direct covenant with us to perform Berkshire
Hathaway's funding obligations under the contribution agreement,
subject only to the conditions in the contribution agreement;
-- making us a third-party beneficiary of the contribution agreement;
and
-- the agreement that certain of the investor group's shares will be
voted proportionately with all other shares on all matters relating
to the merger.
The special committee believes that these provisions strengthen Shaw's
ability to enforce the terms of the contribution agreement and increase
the voting power of shareholders who are unaffiliated with the investor
group.
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In addition, the special committee believes that sufficient procedural
safeguards were and are present to ensure the fairness of the merger and to
permit the special committee to represent effectively the interests of the
shareholders (other than the members of the investor group) including:
- The composition of the special committee, consisting solely of directors
who are not officers or employees of Shaw, and who have no financial
interest in the proposed merger different from our shareholders
generally, permitted it to represent effectively the interests of our
shareholders (other than the members of the investor group);
- The manner in which the strategic transaction process was conducted and
the fact that the special committee was delegated exclusive authority for
conducting all aspects of the strategic transaction process;
- That the special committee retained and received advice from its
independent legal counsel, Winston & Strawn; and
- That the special committee was advised by and received the opinion of
Merrill Lynch as its investment banker.
The special committee also considered a variety of risks and other
potentially negative factors concerning the merger. These factors included the
following:
- The actual or potential conflicts of interest that some of our executive
officers and directors have in connection with the merger, including the
arrangements among the members of the investor group described under
"-- Interests in the Merger that Differ from Your Interests." The special
committee believed that these conflicts of interest were mitigated by the
establishment of the special committee to negotiate the terms of the
merger agreement and to evaluate the fairness of the merger;
- The cash consideration to be received by our shareholders will be taxable
to them; and
- Following the merger, our shareholders (other than the investor group)
will cease to participate in any future earnings growth of Shaw or
benefit from any increase in the value of Shaw.
The foregoing discussion includes all of the material factors considered by
the special committee in reaching its conclusions and recommendations but is not
meant to be exhaustive. In view of the variety of factors considered in reaching
its determination, the special committee did not find it practicable to, and did
not, quantify or otherwise assign relative weights to the specific factors
considered in reaching its conclusions and recommendations. In addition,
individual members of the special committee may have given different weights to
different factors.
The Board of Directors. Our Board consists of twelve members, four of whom
served on the special committee. At the October 19, 2000 meeting of our Board,
the special committee, with representatives of Winston & Strawn participating,
reported to our entire Board on its review of the merger agreement and the
related contribution agreement and voting agreements. Our Board considered the
analysis performed by and the conclusions and recommendations of the special
committee and believes that these factors supported the determination of
fairness by our Board. Furthermore, our Board considered the fact that certain
terms and conditions of the merger agreement were the result of arm's-length
negotiations among the special committee, on the one hand, and Berkshire
Hathaway, on the other hand, and their respective advisors, and the fact that
the special committee received a fairness opinion from Merrill Lynch. Our Board
believes that these factors support its fairness determination.
In determining to adopt the plan of merger, approve the merger and the
merger agreement and recommend the merger and the merger agreement to our
shareholders, and in reaching its determination that the merger and the merger
agreement are fair to, and in the best interests of, Shaw and our shareholders
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(other than the members of the investor group), our Board consulted with our
executive officers (other than Mr. Shaw and Mr. Saul) and our legal advisors,
and considered the following factors:
- The determination and recommendation of the special committee. In
considering the special committee's recommendation, our Board noted that:
-- the special committee, which consisted solely of independent
directors of our Board, represented the interests of Shaw and our
shareholders;
-- the members of the special committee were experienced and
sophisticated in business and financial matters and were well
informed about our business and operations;
-- the special committee retained and was advised by independent legal
counsel experienced in advising on transactions similar to the
merger;
-- the special committee retained and was advised by Merrill Lynch in
its evaluation of the proposed merger; and
-- the special committee met on a number of occasions and engaged in
extensive deliberations to evaluate the merger and potential
alternatives to the merger; and
- Each of the factors referred to above under "-- The Special Committee"
which were taken into account by the special committee in its
deliberations.
In connection with its consideration of the determination by the special
committee, and as part of its determination with respect to the fairness of the
consideration to be received by our shareholders (other than SII Acquisition,
Shaw or any subsidiary of Shaw to the extent they hold shares of our common
stock and other than holders that perfect dissenters' rights with respect to
their shares or contribute their shares to SII Acquisition under the
contribution agreement) in the merger, our Board adopted the conclusion and
underlying analysis of the special committee, based upon the view of our Board
as to the reasonableness of such analysis.
In considering the fairness of the merger, the special committee and the
Board did not consider our net book value or liquidation value because they
believed those values were not material indicators of our value as a going
concern. Our book value per outstanding share as of September 30, 2000 was $6.47
per share, substantially below the $19.00 per share consideration to be paid in
the merger.
All of the factors described above which were considered by the special
committee and our Board supported their conclusions that the merger is fair to
and in the best interests of our shareholders (other than the members of the
investor group).
The above discussion concerning the information and factors considered by
our Board is not intended to be exhaustive, but includes all of the material
factors considered by our Board in making its determination. In view of the
variety of factors considered in connection with its evaluation of the merger
agreement and the proposed merger, our Board did not quantify or otherwise
attempt to assign relative weights to the specific factors it considered in
reaching its determination. In addition, individual members of our Board may
have given different weight to different factors and therefore may have viewed
certain factors more positively or negatively than others.
FAIRNESS OPINION OF MERRILL LYNCH
On September 14, 2000, the special committee retained Merrill Lynch to act
as its exclusive financial advisor in connection with assisting the special
committee in respect to a possible sale, including the possibility of effecting
the merger. The special committee retained Merrill Lynch to act as its exclusive
financial advisor in connection with the merger because Merrill Lynch is a
leading investment banking and financial advisory firm with experience in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwriting, secondary distributions of securities,
private placements and valuations for corporate purposes. Merrill Lynch has in
the past performed investment advisory and/or corporate finance services for us.
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On October 19, 2000, Merrill Lynch delivered its oral opinion to the
special committee, subsequently confirmed in writing, that as of such date and
based upon the assumptions made, matters considered and limitations on the
review described in the opinion, the proposed merger consideration is fair from
a financial point of view to the holders of our common stock outstanding at the
time of the merger, other than SII Acquisition, Shaw or any subsidiary of Shaw
to the extent they hold shares of our common stock and other than holders that
perfect dissenters' rights with respect to their shares or contribute their
shares to SII Acquisition under the contribution agreement.
THE FULL TEXT OF MERRILL LYNCH'S OPINION, WHICH SETS FORTH THE ASSUMPTIONS
MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED
AS APPENDIX E TO THIS PROXY STATEMENT AND IS INCORPORATED INTO THIS DOCUMENT BY
REFERENCE. THE DESCRIPTION OF MERRILL LYNCH'S OPINION BELOW SETS FORTH THE
MATERIAL TERMS OF THE OPINION. HOLDERS OF SHARES ARE URGED TO AND SHOULD READ
CAREFULLY THE OPINION IN ITS ENTIRETY. THE FOLLOWING SUMMARY OF MERRILL LYNCH'S
OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE
OPINION.
Merrill Lynch's opinion is addressed to the special committee and addresses
only the fairness from a financial point of view of the consideration to be
received in the merger by the holders of our common stock outstanding at the
time of the merger, other than SII Acquisition, Shaw or any subsidiary of Shaw
to the extent they hold shares of our common stock and other than holders that
perfect dissenters' rights with respect to their shares or contribute their
shares to SII Acquisition under the contribution agreement. The opinion does not
address the merits of our underlying decision to engage in the merger, and does
not constitute, nor should it be construed as, a recommendation to any
shareholder as to how he or she should vote with respect to the merger.
In connection with the preparation of the opinion, Merrill Lynch, among
other things:
- Reviewed certain publicly available business and financial information
relating to Shaw and Berkshire Hathaway that it deemed to be relevant;
- Reviewed certain business and financial information, including financial
forecasts, relating to our business, earnings, cash flow, assets,
liabilities and prospects furnished to it by us;
- Reviewed our management's internal financial projections for the years
ending through December 31, 2002 furnished to it by us and extrapolated
such figures, based on guidance from our management, for the years ending
through December 31, 2005;
- Conducted discussions with members of our senior management and our
representatives concerning our business and prospects, as well as the
matters described above;
- Reviewed the market prices and valuation multiples for our common stock
and compared them with those of certain publicly traded companies that it
deemed to be relevant;
- Reviewed the results of our operations, as furnished to it by us or
publicly available, and compared them with those of certain publicly
traded companies that it deemed to be relevant;
- Compared the proposed financial terms of the merger with the financial
terms of certain other transactions that it deemed to be relevant;
- Participated in discussions and negotiations among our representatives
and Berkshire Hathaway and its and our legal advisors;
- Reviewed final versions, dated October 19, 2000, of (i) the merger
agreement; (ii) the original voting agreement; (iii) the investor voting
agreement and (iv) the contribution agreement;
- Conducted a "market test" regarding the sale of Shaw to other potential
acquirors, including strategic manufacturers, raw material producers and
financial buyers; and
- Reviewed other financial studies and analyses and took into account other
matters that they deemed necessary, including its assessment of general
economic, market and monetary conditions.
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In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to
Merrill Lynch, discussed with or reviewed by Merrill Lynch, or publicly
available, and Merrill Lynch did not assume any responsibility for independently
verifying any of this information or undertaking an independent evaluation or
appraisal of the assets or liabilities of Shaw, nor was Merrill Lynch furnished
with such an independent evaluation or appraisal. In addition, Merrill Lynch did
not assume any obligation to conduct, nor did it conduct, any physical
inspection of our properties or facilities. With respect to the financial
forecast information furnished to or discussed with Merrill Lynch by us, Merrill
Lynch has assumed that it has been reasonably prepared and that such information
reflects the best currently available estimates and judgment of our management
as to our expected future financial performance. Merrill Lynch expresses no
opinion as to the financial forecast information or the assumptions on which
they were based.
Merrill Lynch's opinion is necessarily based upon market, economic and
other conditions as they exist and can be evaluated on, and upon the information
made available to Merrill Lynch as of, the date of the opinion. Merrill Lynch
assumed that in the course of obtaining the necessary regulatory or other
consents or approvals (contractual or otherwise) for the merger, no
restrictions, including any divestiture requirements or amendments or
modifications, would be imposed that would have a material adverse effect on the
contemplated benefits of the merger.
In accordance with customary investment banking practice, Merrill Lynch
employed generally accepted valuation methods in reaching its opinion. The
following is a summary of the material analyses utilized by Merrill Lynch in
connection with providing its opinion.
Valuation of the Company
Unsolicited and Solicited Third Party Interest. Although the offer to
acquire Shaw and the special committee's engagement of Merrill Lynch were
publicly announced, Merrill Lynch did not receive any unsolicited indications of
interest from third parties with regard to acquiring Shaw. In addition, in
connection with the preparation of its opinion, Merrill Lynch was authorized by
the special committee to solicit, and did actively solicit, third-party
indications of interest for the acquisition of Shaw. Specifically, Merrill Lynch
contacted six strategic manufacturers, five raw material producers and twelve
financial buyers concerning a potential acquisition of Shaw, all of whom
expressed no interest due to strategic, valuation or financing issues.
Historical Trading Performance. Merrill Lynch reviewed the historical
trading averages for our common stock during the five-year period preceding the
public announcement of the offer which led to the signing of the merger
agreement. The offer represents:
- a premium of 55.9% to the closing price of our common stock on the day
immediately preceding the public announcement;
- a premium of 40.7% to the trading high, a premium of 64.3% to the trading
low and a premium of 50.2% to the average closing price of our common
stock for the one-month period preceding the announcement;
- a premium of 9.7% to the trading high, a premium of 73.7% to the trading
low and a premium of 38.1% to the average closing price of our common
stock for the six months preceding the announcement;
- a discount of 9.0% to the trading high, a premium of 73.7% to the trading
low and a premium of 31.5% to the average closing price of our common
stock for the twelve months preceding the announcement; and
- a discount of 21.9% to the trading high, a premium of 83.1% to the
trading low and a premium of 28.7% to the average closing price of our
common stock for the five-year period preceding the announcement.
Merrill Lynch also reviewed the trading volume of our common stock for the
three-year period preceding the public announcement of the offer which led to
the signing of the merger agreement. During the one-year period preceding the
announcement, 99.3% of the volume of our common stock traded below $19.00 per
share.
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During the three-year period preceding the announcement, 79.4% of the volume of
our common stock traded below $19.00 per share.
Selected Comparable Publicly Traded Companies Analysis. Merrill Lynch
compared certain financial and operating ratios for Shaw with the corresponding
financial and operating ratios for a group of publicly traded companies engaged
primarily in the carpet industry that Merrill Lynch deemed to be comparable to
Shaw. For the purpose of its analyses, the following companies in the carpet
industry were used as companies comparable to Shaw: The Dixie Group, Inc.,
Interface, Inc. and Mohawk Industries, Inc.
For each of the comparable companies, Merrill Lynch calculated stock price
as a multiple of estimated earnings per share for the calendar year ended 2001.
This analysis resulted in the following relevant ranges for the comparable
companies as of October 17, 2000: a range of stock price as a multiple of
estimated 2001 earnings per share of 3.8x to 9.1x with a mean of 6.2x (as
compared to the offer of 10.1x and 11.8x based upon publicly available research
estimates and our management's estimates, respectively). Based on the foregoing,
Merrill Lynch determined a reference range for an implied value per share of
$9.50 to $12.75 based on our management's estimates and $11.25 to $15.00 based
on publicly available research estimates.
To calculate the trading multiples utilized in the analysis of selected
comparable publicly traded companies, Merrill Lynch used publicly available
information concerning the historical and projected financial performance of the
comparable companies, including public historical financial information and
consensus analysts' earnings estimates.
None of the comparable companies is, of course, identical to Shaw.
Accordingly, a complete analysis of the results of the foregoing calculations
cannot be limited to a quantitative review of such results and involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the comparable companies and other factors that could affect
the public trading volume of the comparable companies, as well as that of Shaw.
In addition, the multiples of stock price to estimated 2001 earnings multiples
for the comparable companies is based on projections prepared by research
analysts using only publicly available information. Accordingly, such estimates
may or may not prove to be accurate.
Selected Comparable Transactions Analysis. Using publicly available
information, Merrill Lynch considered selected transactions in the textile and
home furnishing industry that Merrill Lynch deemed to be relevant. Specifically,
Merrill Lynch reviewed the following transactions which it deemed to be
comparable:
- Fabrica International, Inc.'s merger with The Dixie Group, Inc.,
- Synthetic Industries, Inc.'s merger with Investcorp SA,
- Consoltex Group Inc.'s merger with American Industrial Partners,
- Conso International Corp.'s merger with Citicorp Venture Capital Ltd.,
- Jerry Zucker's acquisition of Johnston Industries Inc.,
- Monterey Carpets Inc.'s merger with Collins & Aikman Floorcoverings Inc.,
- Knoll, Inc.'s merger with Warburg, Pincus, Ventures, LP,
- O'Sullivan Industries Inc.'s merger with Bruckman, Rosser, Sherrill & Co.
II LP,
- Durkan Patterned Carpets, Inc.'s merger with Mohawk Industries, Inc.,
- Multitex Corporation of America's merger with The Dixie Group, Inc.,
- Mohawk Industries, Inc.'s acquisition of Image Industries, Inc. from The
Maxim Group, Inc.,
- World Carpets Inc.'s merger with Mohawk Industries, Inc.,
- Queen Carpets Corporation's merger with Shaw,
- General Felt Industries Inc./Foamex L.P.'s merger with Breitlin, Inc.,
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- Collins & Aikman Floorcoverings Inc.'s merger with Quad-C Inc. and
- Foamex-JPS Automotive, L.P.'s merger with Collins & Aikman Products, Co.
Using publicly available information concerning historical financial
performance, Merrill Lynch calculated the transaction values for the target
companies as a multiple of the latest twelve months earnings before interest,
taxes, depreciation and amortization, commonly referred to as EBITDA, for the
comparable transactions for the latest twelve months immediately preceding the
announcement of each of the respective transactions. This analysis resulted in
the following relevant ranges for the comparable transactions: a range of
enterprise value as a multiple of latest twelve months EBITDA of 4.9x to 9.8x
with a mean of 6.8x (as compared to the offer of 7.0x). Based on the foregoing,
Merrill Lynch determined a reference multiple range of estimated latest twelve
months EBITDA for the calendar year ending 2000 for Shaw of 6.0x to 8.0x,
resulting in a reference range for an implied value per share of $14.25 to
$21.75 based on our management's estimates and $15.25 to $22.75 based on
publicly available research estimates.
No company utilized in the selected comparable transaction analysis is
identical to Shaw nor is any transaction identical to the contemplated
transaction between Shaw and Berkshire Hathaway. An analysis of the results
therefore requires complex considerations and judgments regarding the financial
and operating characteristics of Shaw and the companies involved in the
comparable transactions, as well as other facts that could affect their
publicly-traded and/or transaction values. Recognizing that (i) the high end of
the above ranges resulted in an implied value in excess of $19.00 per share of
our common stock and (ii) that the $19.00 per share price was nonetheless firmly
within this range, Merrill Lynch, in applying its judgment, considered that
(a) Berkshire Hathaway's offer was publically announced in the media,
(b) Merrill Lynch contacted 23 parties, including strategic manufacturers, raw
material producers and financial buyers, to assess their interest in a
transaction with Shaw and (c) no party offered to enter into a transaction that
would value our common stock above $19.00 per share. The numerical results of
the selected comparable transactions analysis are not in themselves meaningful
in analyzing the contemplated transaction as compared to comparable
transactions.
Discounted Cash Flow Analysis. Merrill Lynch performed a discounted cash
flow analysis (i.e., analysis of the present value of the projected unlevered
after-tax cash flows) for Shaw for the fiscal years ended 2001 through 2005,
inclusive, using discount rates (determined through the use of the capital asset
pricing model) ranging from 8.5% to 10.5% and terminal value multiples of year
2005 EBITDA ranging from 5.0x to 6.0x, based on the comparable companies and
pre-announcement trading levels of Shaw. Based upon the foregoing, Merrill Lynch
determined a reference range for an implied value per share of $13.50 to $18.50
from our management's estimates and $15.50 to $20.75 from projections based upon
publicly available research estimates and growth rates provided by First Call
Corp.
Implied Share Price Based on Projected Earnings Per Share
Analysis. Merrill Lynch used projections provided by our management and
projections based upon publicly available research estimates and First Call
growth rates for the years 2001 through 2005, inclusive, and additionally
assumed that excess cash flow during the projection period would be used to
repurchase some of the outstanding shares to calculate pro forma earnings per
share for 2001 to 2005. Merrill Lynch applied a forward price to the earnings
per share multiple range of 7.0x to 9.0x (based on historical trading ranges for
Shaw) to the pro forma earnings per share to calculate the projected share price
for Shaw. Using discount rates reflecting an equity cost of capital of 12.5%,
Merrill Lynch determined a reference range for an implied value per share of
$10.00 to $13.50 from our management's estimates and $11.25 to $15.50 from
projections based upon publicly available research estimates and First Call
growth rates.
Financial Sponsor Internal Rate of Return Analysis. Using financial
projections provided by our management and financial projections based upon
publicly available research estimates and First Call growth rates, Merrill Lynch
performed a financial sponsor internal rate of return valuation for Shaw. To
determine the financial sponsor internal rate of return, Merrill Lynch
calculated the rate of return on an equity investment made on January 1, 2001
compared to the equity value of Shaw on December 31, 2005. Acquisition prices
were calculated to yield an investment return to the financial sponsor of
approximately 25.0% to 30.0%. Based upon the foregoing analysis, Merrill Lynch
determined an implied value per share of $11.75 to $16.00 from our
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management's projections and $13.50 to $17.50 from projections based upon
publicly available research estimates and First Call growth rates.
The summary set forth above does not purport to be a complete description
of the analyses presented by Merrill Lynch. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description. Merrill Lynch believes that selecting any
portion of its analyses or of the summary set forth above, without considering
the analyses as a whole, would create an incomplete view of the process
underlying Merrill Lynch's opinion. In arriving at its opinion, Merrill Lynch
considered the results of all its analyses. The analyses performed by Merrill
Lynch are not necessarily indicative of actual values or actual future results,
which may be significantly more or less favorable than those suggested by
Merrill Lynch's analyses. The analyses do not purport to be appraisals or to
reflect the prices at which Shaw might actually be sold or the prices at which
our common stock may trade at any time in the future. The analyses were prepared
solely for the purposes of Merrill Lynch providing its opinion to the special
committee. Analyses based upon forecasts or future results are not necessarily
indicative of actual values or future results, which may be significantly more
or less favorable than suggested by Merrill Lynch's analyses. Because the
analyses are inherently subject to uncertainty, being based upon numerous
factors and events, including, without limitation, factors related to general
economic and competitive conditions beyond the control of the parties or their
respective advisors, none of Merrill Lynch, Shaw, Berkshire Hathaway or any
other person assumes responsibility if future results or actual values are
materially different from those forecast. The foregoing summary does not purport
to be a complete description of the analyses performed by Merrill Lynch and is
qualified by reference to the written opinion dated as of October 19, 2000 of
Merrill Lynch, which is included in this proxy statement as Appendix E.
Under the terms of an engagement letter dated September 14, 2000, Shaw will
pay a fee of $1,000,000 to Merrill Lynch for its services and for rendering its
opinion to the special committee. The payment of this fee is conditioned on the
merger becoming effective. In addition to any fees payable to Merrill Lynch
under the engagement letter, Shaw has agreed to reimburse Merrill Lynch for its
reasonable out-of-pocket expenses incurred in connection with providing its
services and rendering its opinion, including the reasonable fees of its legal
counsel (which may not exceed $50,000 without the consent of the special
committee, which consent will not be unreasonably withheld). Shaw has also
agreed to indemnify Merrill Lynch, its affiliates and each of their respective
directors, officers, agents, employees and controlling persons against various
liabilities, including liabilities arising under U.S. federal securities laws or
related to or arising out of the merger or the engagement of Merrill Lynch.
Merrill Lynch has, in the past, provided financial advisory and/or
financing services to Shaw and entities in which Berkshire Hathaway may hold a
substantial interest, including entities that may be deemed "affiliates" of
Berkshire Hathaway, and may continue to do so, and has received, and may
receive, fees for rendering these services. In addition, in the ordinary course
of its business, Merrill Lynch may actively trade securities of Shaw and
Berkshire Hathaway for Merrill Lynch's own account and for the accounts of its
customers and, accordingly, Merrill Lynch may at any time hold a long or short
position in their securities.
POSITION OF THE INVESTOR GROUP AS TO THE FAIRNESS OF THE MERGER
The investor group has concluded that the merger and the terms of the
merger agreement, including the merger consideration of $19.00 per share, are
fair to Shaw and our shareholders (other than the members of the investor group)
based on the following factors:
- The appointment of the special committee, which consisted solely of
independent members of the Board;
- The unanimous approval and recommendation of the merger and the merger
agreement by the special committee and the members of our Board present
at the meeting at which the merger agreement was approved (other than
Messrs. Shaw, Saul, Lusk and Little who abstained),
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- The independent factors referred to above as having been taken into
account by the special committee and the Board; and
- The fact that the price per share to be paid in the merger represents a
premium of approximately 55.9% to the $12.19 closing price of our common
stock on the trading day prior to the announcement of the receipt of the
offer which led to signing of the merger agreement.
In connection with its consideration of the fairness of the consideration
to be received by our shareholders under the merger agreement, the investor
group has adopted the conclusions as to fairness set forth under
"-- Recommendations of the Special Committee and the Board of Directors; Reasons
for the Merger," and the analyses underlying such conclusions, of the special
committee and the Board, based upon the views of the members of the investor
group as to the reasonableness of such analyses. The investor group has not
assigned any relative or specific weights to the foregoing factors. However, the
investor group believes that each of the factors is material to its
determination that the transaction is fair, and has characterized as positive
each of the factors characterized as positive by the special committee.
Individual members of the investor group may have given differing weights to
different factors and may have viewed certain factors more positively or
negatively than others.
CERTAIN PROJECTIONS PROVIDED TO FINANCIAL ADVISORS
In the normal course of business, our management prepares internal budgets,
plans, estimates, forecasts or projections as to future revenues, earnings or
other financial information in order to be able to anticipate our financial
performance. We do not, as a matter of course, publicly disclose these internal
documents.
We provided Merrill Lynch, in its capacity as financial advisor to the
special committee, with certain financial projections which reflected our
management's best estimates and good faith judgments as to our future
performance.
The financial projections were subject to and prepared on the basis of
estimates, limitations, qualifications and assumptions, and involved judgments
with respect to, among other things, future economic, competitive, regulatory
and financial and market conditions and future business decisions which may not
be realized and are inherently subject to significant business, economic and
competitive uncertainties, all of which are difficult to predict and many of
which are beyond our control. These uncertainties are described under
"Cautionary Statement Regarding Forward-Looking Statements."
While we believe these estimates and assumptions to have been reasonable,
there can be no assurance that the projections will be accurate, and actual
results may vary materially from those shown. In light of the uncertainties
inherent in forward-looking information of any kind, the inclusion of these
projections should not be regarded as a representation by us, the investor group
or any other entity or person that the anticipated results will be achieved, and
you are cautioned not to place undue reliance on such information.
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<PAGE> 39
The financial projections provided to Merrill Lynch in its capacity as
financial advisor to the special committee included the following items which
may be material:
PROJECTED NORMALIZED(1) CONSOLIDATED OPERATING STATEMENTS
<TABLE>
<CAPTION>
FISCAL YEAR
--------------------------
2000 2001 2002
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Net Sales................................................... $4,100 $4,100 $4,284
Cost of Sales............................................... $3,079 $3,079 $3,196
------ ------ ------
Total Gross Margin................................ $1,021 $1,021 $1,088
Gross Margin %.................................. 24.9% 24.9% 25.4%
Selling, General and Administrative Expense................. $ 617 $ 605 $ 632
Selling, General and Administrative %..................... 15.1% 14.8% 14.8%
------ ------ ------
Operating Income............................................ $ 404 $ 416 $ 456
Operating Income %........................................ 9.9% 10.2% 10.7%
Interest and Other Expenses................................. $ 80 $ 80 $ 75
------ ------ ------
Income Before Income Taxes.................................. $ 324 $ 336 $ 381
Pretax Margin %........................................... 7.9% 8.2% 8.9%
Provision for Income Taxes.................................. $ 135 $ 138 $ 156
Effective Tax Rate........................................ 41.5% 41.0% 41.0%
Equity in Income of Joint Ventures.......................... $ 1 $ 2 $ 2
------ ------ ------
Net Income.................................................. $ 190 $ 200 $ 227
Net Income Margin %....................................... 4.7% 4.9% 5.3%
EBITDA...................................................... $ 497 $ 510 $ 550
Cash Flow:
Net Income................................................ $ 190 $ 200 $ 227
Working Capital Requirements.............................. 13 -- (37)
Depreciation/Amortization................................. 92 92 92
------ ------ ------
Cash Flow.............................................. $ 295 $ 292 $ 282
Capital Expenditures...................................... $ 135 $ 90 $ 90
------ ------ ------
Free Cash Flow......................................... $ 160 $ 202 $ 192
</TABLE>
---------------------
(1) Excludes operating results from all divested operations and all nonrecurring
charges. Nonrecurring charges in 2000 include Flooring America writeoffs of
$16 million, net of tax, and a sales force restructuring charge of $4
million, net of tax. Nonrecurring charges may be recorded during 2000 or
2001 and could include an antitrust settlement of $17 million, net of tax,
as well as a nonrecurring charge to reflect payments which may be required
under guarantees of Flooring America leases.
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<PAGE> 40
PROJECTED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF
------------------------------
DECEMBER 30, DECEMBER 31,
2000 2001
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents.............................. $ 10,000 $ 10,000
Accounts receivable, less allowances................... 228,318 228,318
Inventories............................................ 692,682 692,774
Other.................................................. 150,000 150,000
---------- ----------
Total Current Assets.............................. 1,081,000 1,081,092
---------- ----------
Property, Plant & Equipment, at cost:
Land & land improvements............................... 27,724 27,724
Buildings & leasehold improvements..................... 363,260 389,732
Machinery & equipment.................................. 1,197,578 1,276,995
Construction in progress............................... 60,889 45,000
Less: Accumulated depreciation & amortization.......... (875,578) (954,578)
---------- ----------
773,873 784,873
---------- ----------
Goodwill, net of amortization............................. 391,752 379,752
---------- ----------
Other Assets.............................................. 43,000 43,000
---------- ----------
Total Assets...................................... $2,289,625 $2,288,717
========== ==========
Liabilities & Shareholders' Investment
Current Liabilities:
Current maturities of long-term debt................... $ -- $ --
Accounts payable....................................... 242,439 242,471
Accrued liabilities.................................... 270,000 270,000
---------- ----------
Total Current Liabilities......................... 512,439 512,471
---------- ----------
Long-Term Debt, less current maturities................... 778,186 593,246
---------- ----------
Deferred Income Taxes..................................... 75,000 75,000
---------- ----------
Other Liabilities......................................... 32,000 33,000
---------- ----------
Shareholders' Investment.................................. 892,000 1,075,000
---------- ----------
Total Liabilities & Shareholders' Investment...... $2,289,625 $2,288,717
========== ==========
</TABLE>
These financial projections were not furnished to Berkshire Hathaway.
We do not intend to update or otherwise revise the financial projections to
reflect circumstances existing after the date the projections were prepared or
to reflect the occurrence of unanticipated events. The financial projections
should be read together with the summary of the opinion of Merrill Lynch under
"Special Factors -- Fairness Opinion of Merrill Lynch" and its opinion attached
to this proxy statement as Appendix E.
INTERESTS IN THE MERGER THAT DIFFER FROM YOUR INTERESTS
In considering the recommendations of the special committee and the Board
with respect to the merger, you should be aware that some of our directors and
officers have interests in the merger that are different from your interests as
a shareholder. The special committee and the Board were aware of and considered
these actual and potential conflicts of interest.
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<PAGE> 41
Members of the Investor Group; Contribution Agreement. Robert E. Shaw, a
director and our Chairman and Chief Executive Officer, and Julian D. Saul, a
director and our President, are members of the investor group. In connection
therewith, Mr. Shaw, together with certain of Mr. Shaw's family members and
related family interests and Mr. Saul, through certain of his family interests,
will contribute under the terms of the contribution agreement 14,484,604 shares
of our common stock to SII Acquisition immediately prior to completion of the
merger in exchange for the same number of shares of common stock of SII
Acquisition. It is expected that Mr. Shaw, together with certain of his family
members and related family interests, will own approximately 6.4% of the equity
interests and voting interests in Shaw following the merger and that Mr. Saul,
through certain of his family interests, will own approximately 5.2% of the
equity interests and voting interests in Shaw following the merger.
W. Norris Little (through a family limited partnership) and William C.
Lusk, Jr., each a director of Shaw, and eight other members of our management
are included in the investor group and, in connection therewith, will contribute
under the terms of the contribution agreement 1,318,034 shares of Shaw common
stock to SII Acquisition immediately prior to completion of the merger in
exchange for the same number of shares of common stock of SII Acquisition. It is
expected that these members of the investor group will own approximately 1.1% of
the equity interests and voting interests in Shaw following the merger.
The common stock of SII Acquisition will be converted into common stock of
Shaw at the time of completion of the merger. The exchange of our common stock
for common stock of SII Acquisition, and the subsequent conversion of such
shares into shares of common stock of Shaw, is expected to be accomplished on a
tax-free basis. As a result of their participation in the investor group, these
shareholders will continue to have the opportunity to participate in any future
earnings growth of Shaw following the merger and to benefit from any increase in
the value of Shaw.
Directors' and Executive Officers' Shares and Stock Options. Our directors
and executive officers as a group owned, as of October 30, 2000, an aggregate of
32,729,807 shares of our common stock and options to purchase 551,800 shares of
our common stock, including 233,500 unvested options which will become fully
exercisable and vested as a result of the merger. In accordance with the terms
of the merger agreement, each stock option which is outstanding at the time of
the merger will be cancelled and in consideration of the cancellation the holder
of the option will receive the difference between the $19.00 per share merger
consideration and the exercise price of the option.
Stock Options held by Certain Members of Management; Bonuses. Included in
our outstanding stock options are options to purchase 795,800 shares of our
common stock which are held by the following members of our management, each of
whom is included in the investor group: Vance D. Bell, Kenneth G. Jackson,
Gerald R. Embry, Spright D. Holland, Jeffrey Todd Meadows, Percy D. Merritt,
Henry H. Long and Julius C. Shaw, Jr. We have agreed to allow these individuals,
in connection with their exercise of options to purchase 546,300 shares, to
direct that certain shares of our common stock which would otherwise be issuable
upon such exercise be withheld by us as payment of the exercise price applicable
to the options, with the withheld shares being valued at the $19.00 per share
merger price. We have also agreed to pay to each of these individuals who
exercises any of these stock options and contributes the shares received as a
result of such exercise to SII Acquisition under the contribution agreement a
bonus to cover all federal and state taxes incurred by such individual
(including a gross-up to pay taxes imposed as a result of such bonus payment) in
connection with the exercise of the stock options to purchase 546,300 shares.
The aggregate amount of the bonuses is limited to $2,276,849. If all of these
options are exercised, 391,284 shares of our common stock resulting from the
exercise will be withheld as payment of the exercise price and 155,015 shares
will be issued to the option holders.
Repurchase Rights Under the Contribution Agreement. After completion of
the merger, the members of the investor group other than Berkshire Hathaway will
have certain rights under the contribution agreement to require Berkshire
Hathaway to purchase their Shaw common stock. See "The Contribution and
Participation Agreement -- Puts and Calls."
Executive Officers to Remain After Merger. It is expected that all of our
executive officers will continue to serve in their current capacities following
the merger.
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<PAGE> 42
Indemnification of Directors and Officers. We have agreed in the merger
agreement to indemnify and hold harmless, to the fullest extent permitted by
applicable law, each of our present and former directors and officers and those
of any of our subsidiaries against any losses or expenses, claims, damages or
amounts paid in settlement (if the settlement is consented to by us) arising out
of actions or omissions occurring at or prior to the effective time that:
- are wholly or partly based on the fact that the person is or was our
director or officer or a director or officer of any of our subsidiaries,
or
- arise out of or pertain to the transactions contemplated by the merger
agreement.
Berkshire Hathaway has (subject to certain limitations) agreed to provide this
indemnity to the extent that we are unable to satisfy this obligation or
applicable law prevents us from providing it.
PLANS FOR SHAW FOLLOWING THE MERGER
It is expected that, following the completion of the merger, the operations
and business of Shaw will be conducted substantially as they are currently
conducted. Neither Shaw, Berkshire Hathaway nor any other member of the investor
group has any present plans or proposals that relate to or would result in an
extraordinary corporate transaction involving our corporate structure, business
or management, such as a merger, reorganization, liquidation, relocation of any
operations or sale or transfer of a material amount of assets. However, Shaw,
Berkshire Hathaway and the other members of the investor group will continue to
evaluate our business and operations after the merger from time to time, and may
in the future propose or develop new plans and proposals which they consider to
be in the best interests of Shaw and its shareholders at such time.
MERGER FINANCING; SOURCE OF FUNDS
The maximum total amount of funds required to complete the merger,
including related costs and expenses, is expected to be approximately $2.0
billion. This amount assumes that no shareholders perfect their dissenters'
rights under Georgia law, but excludes approximately $342 million of shares of
our common stock (valued at the merger price) which are expected to be
contributed to SII Acquisition by the members of the investor group. We expect
to incur approximately $ million in costs and expenses in connection with the
merger and the related transactions, as set forth in the table below.
<TABLE>
<CAPTION>
EXPENSES ESTIMATED AMOUNT
-------- ----------------
(IN THOUSANDS)
<S> <C>
Financial advisory fees..................................... $
Legal fees..................................................
Accounting fees.............................................
Printing and mailing fees...................................
Solicitation expenses.......................................
SEC filing fees............................................. 479,914
Hart-Scott-Rodino filing fees...............................
Miscellaneous...............................................
-------
Total............................................. $
=======
</TABLE>
Berkshire Hathaway has agreed in the contribution agreement to provide cash
in the amount of $2,016,686,315 to complete the merger, which amount Berkshire
Hathaway will provide from cash on hand and proceeds from the sale of marketable
securities. Funds to pay additional costs and expenses will be provided by Shaw
as the surviving corporation.
36
<PAGE> 43
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain U.S. Federal income tax consequences
of the merger to you and our other shareholders receiving the cash merger
consideration.
The receipt of cash in exchange for our common stock in the merger will be
a taxable transaction for federal income tax purposes and may also be a taxable
transaction under applicable state, local and foreign tax laws. You and our
other shareholders receiving the cash merger consideration will generally
recognize gain or loss for Federal income tax purposes in an amount equal to the
difference between the adjusted tax basis in your common stock and the amount of
the cash received in exchange for your common stock. Your gain or loss will
generally be a capital gain or loss if you hold our common stock as a capital
asset, and will be a long-term capital gain or loss if, at the effective time of
the merger, you have held your common stock for more than one year. Net
long-term capital gain is currently taxed, in the case of an individual, at a
maximum rate of 20% for Federal income tax purposes. Capital loss generally can
be used only to reduce capital gain income and, in the case of an individual, up
to $3,000 of capital loss (in excess of capital gain) can be used to reduce
other ordinary income, for Federal income tax purposes.
This discussion may not apply to the following shareholders:
- Those who acquired their Shaw common stock by exercising employee stock
options or through other compensation arrangements with us;
- Those who are not citizens or residents of the United States; and
- Those who dissent and receive the appraised fair value of their shares or
who are otherwise subject to special tax treatment.
You may be subject to "backup withholding" at a rate of 31% on payments
received in connection with the merger unless you:
- Provide a correct taxpayer identification number (which, if you are an
individual, is your social security number) and any other required
information to the paying agent, or
- Are a corporation or come within certain exempt categories and, when
required, demonstrate this fact, and otherwise comply with applicable
requirements of the backup withholding rules.
If you do not provide a correct taxpayer identification number, you may be
subject to penalties imposed by the IRS. Any amount paid as backup withholding
does not constitute an additional tax and will be creditable against your
federal income tax liability. You should consult with your own tax advisor as to
your qualification for exemption from backup withholding and the procedure for
obtaining such exemption. You may prevent backup withholding by completing a
Substitute Form W-9 and submitting it to the paying agent for the merger when
you submit your stock certificate(s) following the effective time of the merger.
You are urged to consult your tax advisor with respect to the tax
consequences of the merger, including the effects of applicable state, local,
foreign or other tax laws.
ACCOUNTING TREATMENT
The merger will be accounted for using the purchase method of accounting.
Under this method of accounting, the purchase price will be allocated to the
fair value of the net assets acquired. The excess purchase price over the fair
value of the assets acquired will be allocated to goodwill.
DISSENTERS' RIGHTS OF SHAREHOLDERS
Georgia law provides that you are entitled to dissent from the merger, and
obtain payment of the fair value of your shares, if you comply with the
applicable requirements.
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<PAGE> 44
If you wish to assert your dissenters' rights, you must:
- Deliver to us before the vote is taken written notice of your intent to
demand payment for your shares if the merger is effectuated; and
- Not vote your shares in favor of the merger.
If you do not satisfy the above requirements, you will not be entitled to
payment of "fair value" for your shares under Georgia law. If the merger is
approved, we will be required to deliver a written dissenters' notice to all
holders of common stock who satisfied the above requirements. We will be
required to send this notice no later than 10 days after the merger is approved
and will have to:
- State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
- Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
- Set a date by which we must receive the payment demand, which cannot be
fewer than 30 nor more than 60 days after the date our written
dissenters' notice is delivered; and
- Send a copy of Article 13 of the GBCC on dissenters' rights along with
the notice.
If you properly assert your dissenters' rights and we send you a
dissenters' notice, you will have to demand payment and deposit your
certificates in accordance with the terms of the notice. If you do not demand
payment or deposit your share certificates where required, each by the date set
in the dissenters' notice, you will not be entitled to payment for your shares.
Within 10 days of the later of the date the merger is effectuated or
receipt of a payment demand, we, by notice to each dissenter who complied with
the terms of the dissenters' notice, will be required to offer to pay to such
dissenter the amount which we estimate to be the fair value of the dissenter's
shares, plus accrued interest. The offer of payment will have to be accompanied
by:
- Our balance sheet as of the end of a fiscal year ending not more than 16
months before the date of payment, an income statement for that year, a
statement of changes in shareholders' equity for that year, and the
latest available interim financial statements, if any;
- A statement of our estimate of the fair value of the shares;
- An explanation of how the interest was calculated;
- A statement of the dissenter's right to demand payment under Code Section
14-2-1327 of the GBCC; and
- A copy of Article 13 of the GBCC on dissenters' rights.
If you are a dissenting shareholder who accepts our offer by written notice
to us within 30 days after our offer or are deemed to have accepted such offer
by failure to respond within those 30 days, payment for your shares will be made
within 60 days after the making of the offer or effectuating the merger,
whichever is later. If we do not effectuate the merger within 60 days after the
date set for demanding payment and depositing share certificates, we will have
to return the deposited certificates and release the transfer restrictions
imposed on uncertificated shares. If, after returning deposited certificates and
releasing transfer restrictions, we then effectuate the merger, we would be
required to send a new dissenters' notice and repeat the payment demand
procedure.
A dissenter could notify us in writing of such shareholder's own estimate
of the fair value of the shares and amount of interest due, and demand payment
thereof, if:
- The dissenter believed that the amount offered by us is less than the
fair value of the shares or that the interest due is incorrectly
calculated; or
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<PAGE> 45
- We, having failed to effectuate the merger, did not return the deposited
certificates or release the transfer restrictions imposed on
uncertificated shares within 60 days after the date set for demanding
payment.
A dissenter would waive the right to demand payment and would be deemed to
have accepted our offer unless the dissenter were to notify us of his, her or
its demand in writing in the manner described above within 30 days after we
offered payment for such shareholder's shares.
If we were not to offer payment within the specified time:
- The dissenting shareholder could demand our balance sheet as of the end
of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of changes in
shareholders' equity for that year, and the latest available interim
financial statements, if any, and we would be required to provide the
information to the shareholder within ten days after receipt of a written
demand for the information; and
- The shareholder, at any time, within a three year period following the
merger, could notify us of such shareholder's own estimate of the fair
value of the shares and the amount of interest due and demand payment of
his estimate of the fair value of such shareholder's shares and interest
due.
If a demand for payment remains unsettled, we will be required to commence
a proceeding within 60 days after receiving the payment demand and petition a
state court in Georgia to determine the fair value of the shares and accrued
interest. If we fail to commence the proceeding within the 60 day period, we
will be required to pay each dissenter whose demand remained unsettled the
amount demanded.
A copy of the relevant sections of the GBCC regarding dissenters' rights is
attached hereto as Appendix F.
THE MERGER AGREEMENT
The following is a brief summary of the material provisions of the merger
agreement. The following summary is qualified in its entirety by reference to
the merger agreement, which we have attached as Appendix A to this proxy
statement and which we incorporate by reference into this document. We encourage
you to read the merger agreement in its entirety.
THE MERGER
The merger agreement provides that, following the approval of the merger
agreement by our shareholders and the satisfaction or waiver of the other
conditions to the merger, including obtaining the requisite regulatory
approvals, SII Acquisition will be merged with and into Shaw, and Shaw will be
the surviving company. The merger will become effective upon the filing of
articles of merger with the Secretary of State of the State of Georgia or at
such later time agreed to by the parties and specified in the articles of
merger.
When the merger becomes effective, the Amended and Restated Articles of
Incorporation of Shaw will be the Articles of Incorporation of the surviving
company, but these articles will be amended immediately thereafter to conform to
the Articles of Incorporation of SII Acquisition.
Conversion of Capital Stock. At the effective time of the merger, pursuant
to the merger agreement and the GBCC, each issued and outstanding share of our
common stock, other than any shares:
- owned by us, SII Acquisition, or any of our or their respective
subsidiaries, all of which will be canceled without consideration, or
- held by a dissenting shareholder exercising and perfecting dissenters'
rights,
will be converted into the right to receive the merger consideration of $19.00
per share in cash, without interest.
39
<PAGE> 46
Exchange of Common Stock Certificates. At the effective time, each
certificate representing shares of our common stock then outstanding, other than
any shares owned by us, SII Acquisition, or any of our or their respective
subsidiaries or held by a dissenting shareholder perfecting dissenters' rights,
will represent the right to receive the cash into which such issued and
outstanding shares may be converted. At the effective time, all such shares of
our common stock will be canceled and cease to exist, and each holder of a
certificate representing any such shares will cease to have any voting or other
rights with respect to such shares, except the right to receive upon the
surrender of such certificate the cash consideration payable under the merger
agreement, without interest.
SII Acquisition will designate a bank or trust company to act as exchange
agent and, as soon as possible after the effective time of the merger, mail a
letter of transmittal to you. The letter of transmittal will tell you how to
surrender your common stock certificates in exchange for the $19.00 per share
merger consideration. You should not send in your common stock certificates
until you receive a letter of transmittal. You should send them only pursuant to
instructions set forth in the letter of transmittal. In all cases, the merger
consideration will be provided only in accordance with the procedures set forth
in the merger agreement and such letters of transmittal.
We strongly recommend that certificates for common stock and letters of
transmittal be transmitted only by registered United States mail, return receipt
requested, appropriately insured. Holders of common stock whose certificates are
lost will be required to make an affidavit identifying such certificate or
certificates as lost, stolen or destroyed and may be required to post a bond in
such amount as we may reasonably require to indemnify against any claim that may
be made against us with respect to such certificate.
Any merger consideration not validly claimed by our shareholders for 12
months after the effective time and any interest and other income received by
the exchange agent will be delivered to us upon demand and any holders of shares
of common stock who have not complied with the terms and conditions for the
exchange of certificates set forth in the merger agreement will thereafter look
only to Shaw, and only as general creditors, for the payment of their claim to
the merger consideration.
Stock Options. We have agreed to take all actions necessary so that,
immediately prior to the completion of the merger, all options to acquire shares
of our common stock granted under any of our option plans become fully vested
and exercisable. At the effective time of the merger, all outstanding options
will be canceled and in consideration of the cancellation of each option, the
holder of the option will receive a cash payment from us equal to the $19.00 per
share merger consideration minus the exercise price of the option, multiplied by
the number of shares subject to the option (less any applicable income or
employment tax withholding). For a discussion of the treatment of certain
options held by certain members of our management who are part of the investor
group, see "Special Factors -- Interests in the Merger that Differ from Your
Interests -- Stock Options Held by Certain Members of Management; Bonuses."
REPRESENTATIONS AND WARRANTIES
The merger agreement contains customary representations and warranties by
us relating to, among other things:
- Our and our subsidiaries' organization, qualification, capital structure
and similar corporate matters;
- Our authorization, execution and delivery of the merger agreement and its
binding effect on us;
- The absence of violation of organizational documents, law or contracts;
- The required regulatory and statutory filings and approvals;
- The accuracy of the information contained in the reports and financial
statements that we file with the SEC and other governmental authorities;
- The absence of undisclosed broker's fees;
- The absence of material adverse changes, undisclosed liabilities and
litigation;
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<PAGE> 47
- Our compliance with applicable laws, permits and agreements;
- The accuracy of information supplied by us for use in this proxy
statement;
- The receipt by the special committee of our Board of a fairness opinion
from Merrill Lynch;
- Certain tax, employee benefits, environmental, intellectual property and
real property matters;
- The non-applicability of the fair price and business combination
provisions of the GBCC and our shareholder rights agreement to the
merger;
- The special committee's determination that the merger proposal is fair to
and in the best interests of our shareholders (other than the members of
the investor group) and its approval of the merger and merger agreement;
- The Board's approval of the merger agreement and its recommendation to
shareholders to approve the merger proposal; and
- The shareholder vote required to approve the merger proposal.
The merger agreement contains customary representations and warranties by
SII Acquisition and Berkshire Hathaway relating to, among other things:
- Their organization, operation and similar corporate matters;
- Their authorization, execution and delivery of the merger agreement and
its binding effect on them;
- The required regulatory and statutory filings and approvals;
- The absence of violation of organizational documents, law or contracts;
- The absence of undisclosed broker's fees;
- The fact that SII Acquisition was formed solely for the purpose of
engaging in the transactions contemplated by the merger agreement and has
not engaged in any business activities or conducted any operations other
than in connection with such transactions;
- The accuracy of information provided by them for inclusion in this proxy
statement;
- Their financing arrangements for the merger; and
- The capitalization of SII Acquisition.
The foregoing representations and warranties are subject, in some cases, to
specified exceptions and qualifications. The representations and warranties of
each of the parties will expire upon completion of the merger.
CERTAIN COVENANTS
We have agreed under the merger agreement that, from the date of the merger
agreement until the effective time of the merger or its earlier termination, we
will conduct our business only in the ordinary course of business consistent
with past practice. We will use all reasonable efforts to preserve our business
organization, business goodwill and to maintain third party relationships as
well as the services of our key officers and employees. In addition, we have
agreed that we will not take any of the following actions without Berkshire
Hathaway's prior written consent, subject to certain exceptions:
- Authorize, issue, sell or encumber any shares of our capital stock or
convertible securities, other than issuances pursuant to outstanding
stock options;
- Split, combine, reclassify, redeem or repurchase our capital stock, or
issue, propose to issue, or authorize the issuance of any securities in
respect of our capital stock;
- Declare or pay dividends or make distributions in respect of our capital
stock except for quarterly cash dividends in the amount of $0.05 per
share, consistent with past practice;
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<PAGE> 48
- Incur or guarantee indebtedness or make any loans, advances or capital
contributions to, or investments in, any other person or entity (other
than one of our subsidiaries) except in the ordinary course of business
consistent with past practice;
- Sell, transfer or otherwise dispose of any properties or assets that are
material, individually or in the aggregate, to us and our subsidiaries,
taken as a whole, or cancel any material indebtedness to us or release
any material claim, except in the ordinary course of business consistent
with past practice, or pursuant to intercompany arrangements, or pursuant
to agreements existing on the date of the merger agreement;
- Make any material acquisition or investment in a business or make
purchases of property, assets, equipment, materials, supplies or services
of any person or entity, other than our wholly owned subsidiaries, for an
amount that is material to us and our subsidiaries taken as a whole;
- Enter into or amend employment agreements and employee benefit plans or
increase the amounts payable to our directors, officers or employees
other than pursuant to agreements existing on the date of the merger
agreement and other than normal increases in salaries, wages and benefits
of employees who are not directors or officers made in the ordinary
course of business consistent with past practice;
- Amend our governing documents or materially change any of our accounting
principles other than those implemented following the date of the merger
agreement pursuant to generally accepted accounting principles or rules
and regulations of the SEC promulgated after the date of the merger
agreement;
- Make any tax election or settle or compromise any income tax liability
except in the ordinary course of business and consistent with past
practice; and
- Waive or fail to enforce any provision of any confidentiality agreement
or standstill agreement to which we are a party.
OTHER AGREEMENTS
The merger agreement also includes the following agreements made by us, SII
Acquisition and/or Berkshire Hathaway:
- We have agreed to indemnify our officers and directors against all losses
and expenses incurred as a result of their duties as officers and
directors or arising out of or pertaining to the merger or the merger
agreement, to the fullest extent allowed by law, and to the extent we are
unable to satisfy this obligation to indemnify our officers and
directors, or to the extent applicable law prevents us from doing so,
Berkshire Hathaway has (subject to certain limitations) agreed to provide
such indemnity;
- SII Acquisition and Berkshire Hathaway have agreed not to amend or waive
any provision of the contribution agreement without our consent, if the
amendment or waiver would:
-- reduce the value of the consideration (cash and shares of our common
stock with the shares valued at $19.00 per share committed under the
contribution agreement);
-- add conditions to the transactions contemplated by the contribution
agreement; or
-- have a material adverse effect on the completion of the merger;
- SII Acquisition and Berkshire Hathaway have also agreed:
-- to enforce the provisions of the contribution agreement;
-- to use reasonable efforts to fulfill their obligations under the
contribution agreement and to satisfy the conditions to funding under
the contribution agreement as soon as reasonably practicable; and
-- to give us prompt notice of any material breach, termination, or
threatened termination of the contribution agreement;
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- We have agreed to furnish to SII Acquisition and Berkshire Hathaway any
information concerning us and our subsidiaries as they may reasonably
request in connection with any filings or approvals contemplated by the
merger agreement to SII Acquisition;
- We have agreed, along with SII Acquisition and Berkshire Hathaway, to
cooperate, and use reasonable efforts to obtain the permits, consents and
approvals of all regulatory authorities and other persons necessary or
advisable to complete the merger; and
- We have agreed, along with SII Acquisition and Berkshire Hathaway, that
if a "fair price," "moratorium," or "control share acquisition"
provision, or other form of anti-takeover regulation becomes applicable
to the merger proposal, to take actions that are reasonably necessary to
allow the transactions contemplated by the merger agreement to be
completed.
NO SOLICITATION OF TRANSACTIONS
We have agreed not to directly or indirectly initiate, solicit, or
encourage any proposal or offer from any person (other than SII Acquisition and
Berkshire Hathaway) relating to any of the following (which we refer to as a
"takeover proposal" in this proxy statement):
- Any direct or indirect acquisition of 15% or more of our or our
subsidiaries' assets or 15% or more of any class of our equity securities
or the equity securities of any of our significant subsidiaries;
- Any tender offer or exchange offer that if completed would result in any
person owning 15% or more of any class of our equity securities or the
equity securities of any of our significant subsidiaries; or
- Any merger, consolidation, share exchange, business combination or
recapitalization involving us or any of our significant subsidiaries.
We have also agreed to immediately cease any discussions or negotiations with
any person (other than SII Acquisition and Berkshire Hathaway) concerning any
takeover proposal.
We may, however, make disclosures that are required under applicable law.
Additionally, if before our shareholders approve the merger, we receive a
superior proposal (as hereinafter defined), or a proposal which is reasonably
expected to lead to a superior proposal, that was made (and not solicited) after
the date of the merger agreement under circumstances not otherwise involving a
breach of the merger agreement, and our Board in good faith determines, after
consultation with outside counsel, that a failure to do so would constitute a
breach of its fiduciary duties to our shareholders, then our Board may:
- Negotiate and furnish information to the other party pursuant to a
confidentiality agreement that:
-- prohibits solicitation of our key employees;
-- continues for at least one year;
-- does not include an exclusive right to negotiate with us;
- Withdraw or modify its approval of the merger agreement; and
- Approve or recommend the superior proposal after the second business day
following receipt by Berkshire Hathaway from us of notice of the superior
proposal.
A "superior proposal" means any of the following:
- A bona fide written offer from any person (other than Berkshire Hathaway
and its subsidiaries, affiliates and representatives) for a direct or
indirect acquisition of 50% or more of our assets or the assets of any of
our significant subsidiaries or 50% or more of any class of our equity
securities or the equity securities of any of our significant
subsidiaries;
- Any tender offer or exchange offer that if consummated would result in
any person (other than Berkshire Hathaway and its subsidiaries,
affiliates and representatives) owning 50% or more of any class of our
equity securities or the equity securities of any of our significant
subsidiaries; and
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- Any merger, consolidation, share exchange, business combination,
recapitalization or similar transaction involving us or any of our
significant subsidiaries, other than the transactions contemplated by the
merger agreement;
provided that our Board determines in its good faith judgment, based upon the
advice of independent financial advisors and legal counsel that:
- The consideration to be paid in the contemplated transaction has a value
on a per share basis (taking into account, among other things, the
likelihood the transaction will be completed) which exceeds $19.00;
- Considering all of the relevant factors, the acquisition is more
favorable to us and our shareholders than the merger proposal; and
- The party making the proposal has demonstrated that financing for the
proposed transaction is likely to be obtained.
We also have agreed to advise SII Acquisition in writing of any request for
confidential information or any takeover proposal, the material terms of such
request or proposal, the status and details of the request or proposal and the
identity of the person making such request.
EMPLOYEE BENEFIT PLANS
The merger agreement provides that, for at least two years following the
effective time of the merger, the employees of the surviving corporation will
continue to be provided with employee benefit plans (other than stock options or
other plans involving the potential issuance of securities of the surviving
corporation) which in the aggregate are substantially comparable to those which
we currently provide to our employees.
CONDITIONS TO THE MERGER
The parties' respective obligations to complete the merger are each subject
to the following conditions:
- Approval by our shareholders of the merger proposal;
- The expiration or termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act (which has occurred);
- The absence of any order or injunction prohibiting the merger; and
- The receipt of all required consents or approvals of any governmental
authorities in foreign jurisdictions.
Additionally, our obligation to complete the merger is subject to the
following conditions:
- The material accuracy of the representations and warranties of SII
Acquisition and Berkshire Hathaway and the performance in all material
respects of their respective obligations under the merger agreement; and
- Our receipt of customary closing certificates and legal opinions.
The obligations of SII Acquisition to complete the merger are subject to
the following additional conditions:
- The material accuracy of our representations and warranties and the
performance in all material respects of our obligations under the merger
agreement;
- The receipt of all material third party consents to the merger;
- The holders of less than 10% of our outstanding shares of common stock
perfecting dissenters' rights under Georgia law;
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<PAGE> 51
- The receipt by SII Acquisition and Berkshire Hathaway of customary
closing certificates and legal opinions;
- The closing of the transactions under the contribution agreement.
The obligations of SII Acquisition to complete the merger are not subject
to a financing condition.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated at any time before the effective
time of the merger under the following circumstances:
- Written Mutual Consent -- by written mutual consent of Berkshire Hathaway
and us;
- Legal Impediments -- by us or Berkshire Hathaway if any governmental
entity issues an order or takes any other action permanently enjoining or
otherwise prohibiting the merger and the order or other action is final
and not appealable;
- Delay -- by us or Berkshire Hathaway if the merger is not completed on or
before March 31, 2001, except that the reason for the delay must not have
been the failure of the terminating party to take any of the actions it
was required to take under the merger agreement;
- Failure to Obtain Shareholder Approval -- by us or Berkshire Hathaway if
our shareholders do not approve the merger proposal;
- Board Recommendation -- by Berkshire Hathaway if our Board:
-- withdraws, modifies or amends, or proposes publicly to withdraw,
modify or amend, in a manner adverse to SII Acquisition or Berkshire
Hathaway its approval or recommendation of the merger or the merger
agreement, or fails to reconfirm its recommendation within five
business days after a written request to do so;
-- fails to include its recommendation in this proxy statement; or
-- approves or recommends, or proposes publicly to approve or recommend,
any takeover proposal with respect to us or our significant
subsidiaries by any third party;
- Special Committee Recommendation -- by Berkshire Hathaway if the special
committee withdraws, or publicly proposes to withdraw, in a manner
adverse to SII Acquisition or Berkshire Hathaway, its approval of the
merger or the merger agreement;
- Failure to Reject Takeover Proposal -- by Berkshire Hathaway if a
takeover proposal with respect to us or our significant subsidiaries by a
third party which contains a proposal as to price is commenced, is
publicly proposed or is communicated to us, and we fail to reject the
proposal within 10 business days of our receipt of the proposal or, if
sooner, the date the proposal first becomes publicly disclosed;
- Fiduciary Termination in Connection With Superior Proposal -- by us,
prior to the shareholder vote, if we enter into a definitive agreement
concurrently with the termination of the merger agreement providing for a
superior proposal that was made (and not solicited) after the date of the
merger agreement in circumstances not otherwise involving a breach of the
merger agreement if our Board determines, after consultation with outside
legal counsel, that the failure to enter into the agreement would
constitute a breach of its fiduciary duties to our shareholders. We may
not take any action in connection with the superior proposal until after
the second business day following receipt by Berkshire Hathaway from us
of written notice advising Berkshire Hathaway that our Board has received
the superior proposal, specifying the material terms and conditions of
the superior proposal, identifying the person making the superior
proposal and providing notice of the determination of the Board
concerning the actions we intend to take in connection with the superior
proposal;
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- Breach of Merger Agreement
-- by Berkshire Hathaway if we have materially breached any of our
representations, warranties or covenants and have failed to cure the
breach by March 31, 2001; or
-- by us if SII Acquisition or Berkshire Hathaway has materially
breached any of its representations, warranties or covenants and has
failed to cure the breach by March 31, 2001.
If the merger agreement is terminated under any of the circumstances
described above, none of us, SII Acquisition or Berkshire Hathaway or any of our
or their officers, members or directors will have any liability other than for
expenses we or they incur.
EXPENSES
All fees and expenses in connection with the merger will be paid by the
party incurring such expense.
AMENDMENT; WAIVER
The merger agreement may be amended by mutual agreement of the parties.
However, after shareholder approval of the merger agreement, the parties may not
change the amount of consideration that shareholders are to receive or alter the
terms or conditions of the merger agreement if the changes would materially
adversely affect the rights of our shareholders. Any party may extend the time
for the other party to perform its obligations, waive any inaccuracy in the
other party's representations and warranties or waive the other party's
obligation to comply with any agreement or condition.
THE CONTRIBUTION AND PARTICIPATION AGREEMENT
The following is a brief summary of the material provisions of the amended
and restated contribution agreement. The following summary is qualified in its
entirety by reference to the contribution agreement, which we have included as
Appendix B to this proxy statement and which we incorporate by reference into
this document. We encourage you to read the contribution agreement in its
entirety.
THE PARTIES
SII Acquisition, Berkshire Hathaway, the Shaw Family Shareholders, the Saul
Family Shareholders and the Management Shareholders are parties to the
contribution agreement.
Shaw Family Shareholders. The Shaw Family Shareholders are Robert E. Shaw,
a director and our Chairman and Chief Executive Officer, Anna Sue Shaw, Robert
E. Shaw, Jr., Susan S. Young, Thomas Tripp Shaw, and Lewis Clayton Shaw, each of
whom is a family member of Robert E. Shaw, and the Robert E. Shaw, L.P., a
limited partnership controlled by Robert E. Shaw.
Saul Family Shareholders. The Saul Family Shareholders are the Julian D.
Saul Family Trust, a trust controlled by Mr. Saul, and the Anita Saul Family
Trust, a trust controlled by Anita Saul, who is Mr. Saul's wife. Mr. Saul is a
director and our President.
Family Group Shareholders. The Shaw Family Shareholders and the Saul
Family Shareholders.
Management Shareholders. The Management Shareholders are William C. Lusk,
Jr., Vance D. Bell, Gerald R. Embry, Spright D. Holland, Kenneth G. Jackson,
Jeffrey Todd Meadows, Percy D. Merritt, Henry H. Long, Julius C. Shaw, Jr. and
the Little Family Limited Partnership, a limited partnership controlled by W.
Norris Little.
Continuing Holders. The Shaw Family Shareholders, the Saul Family
Shareholders and the Management Shareholders.
CONTRIBUTIONS
Berkshire Hathaway has agreed to contribute to SII Acquisition 2,194,200
shares of our common stock and approximately $2.0 billion in cash in exchange
for 108,335,585 shares of SII Acquisition common stock.
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The Shaw Family Shareholders and the Saul Family Shareholders are each, as
a group, required to make an aggregate minimum contribution of 6,485,604 shares
of our common stock to SII Acquisition. The Shaw Family Shareholders are
required to make an additional aggregate contribution of 1,513,396 shares of our
common stock to SII Acquisition. For each share of our common stock contributed
to SII Acquisition, the contributing shareholder will receive one share of SII
Acquisition common stock which will, by virtue of the merger, convert to one
share of common stock of the surviving company. The shares of stock received by
the Family Group Shareholders in exchange for their minimum contribution are
referred to as the "Family Group Shares." The shares of stock received by the
Shaw Family Shareholders in exchange for their additional contribution are
referred to as the "Additional Shares."
The number of shares of our common stock required to be contributed by each
of the Shaw Family Shareholders and the Saul Family Shareholders are set forth
below:
<TABLE>
<CAPTION>
MINIMUM ADDITIONAL
NAME CONTRIBUTION SHARES CONTRIBUTION SHARES
---- ------------------- -------------------
<S> <C> <C>
Shaw Family Shareholders:
Robert E. Shaw.................................... 6,485,604 148,744
Anna Sue Shaw..................................... 64,652
Robert E. Shaw, Jr................................ 200,000
Susan S. Young.................................... 350,000
Thomas Tripp Shaw................................. 200,000
Lewis Clayton Shaw................................ 450,000
Robert E. Shaw, L.P............................... 100,000
Anita Saul........................................ 22,510
Saul Family Shareholders:
Julian D. Saul Family Trust....................... 6,267,883
Anita Saul Family Trust........................... 195,211
</TABLE>
The Management Shareholders have agreed to contribute to SII Acquisition an
aggregate of 1,318,034 shares of our common stock in exchange for an equal
number of shares of SII Acquisition common stock (which will upon the merger be
converted into shares of common stock of the surviving company) and which are
referred to as the "Management Shares."
The number of shares of our common stock required to be contributed by each
of the Management Shareholders is as follows:
<TABLE>
<CAPTION>
NAME CONTRIBUTION SHARES
---- -------------------
<S> <C>
William C. Lusk, Jr......................................... 300,000
Little Family Limited Partnership (W. Norris Little)........ 112,332
Vance D. Bell............................................... 112,332
Gerald R. Embry............................................. 80,830
Spright D. Holland.......................................... 23,535
Kenneth G. Jackson.......................................... 49,748
Jeffrey Todd Meadows........................................ 14,651
Percy D. Merritt............................................ 51,532
Henry H. Long............................................... 30,029
Julius C. Shaw, Jr.......................................... 543,045
</TABLE>
FAILURE TO CONTRIBUTE SHARES; RIGHT TO TERMINATE
If any of the Continuing Holders fails to deliver the shares of our common
stock required to be delivered under the contribution agreement:
- And if the failure to deliver results in receipt by SII Acquisition of
less than 6,485,604 shares from either the Shaw Family Shareholders or
the Saul Family Shareholders, then SII Acquisition and Berkshire Hathaway
will each have an option to either complete the transactions contemplated
by the
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contribution agreement with the other Continuing Holders or refuse,
without liability, to complete the transactions and terminate all of its
obligations under the contribution agreement, which would also
effectively terminate the obligations of Berkshire Hathaway and SII
Acquisition under the merger agreement (See "The Merger
Agreement -- Conditions to the Merger");
- And if neither SII Acquisition nor Berkshire Hathaway elects (to the
extent permitted) to terminate its obligations under the contribution
agreement, then SII Acquisition is required to issue the number of shares
of SII Acquisition common stock which the defaulting Continuing Holder
would have received in exchange for the shares of our common stock which
were not delivered and Berkshire Hathaway is required to purchase these
shares of SII Acquisition common stock for a purchase price equal to the
additional consideration required to be paid under the merger agreement
for the shares of our common stock which the defaulting Continuing Holder
fails to deliver.
CONSENT OF CONTINUING HOLDERS TO CERTAIN BUSINESS COMBINATIONS
After completion of the merger and until Berkshire Hathaway owns more than
95% of our common stock, we are not permitted to merge or consolidate with, or
to acquire all or substantially all of the assets or 50% or more of the
outstanding securities of, any company which is not engaged in the manufacture,
distribution and/or sale of floor coverings without first obtaining the written
consent of Continuing Holders owning more than 50% of the total number of shares
of common stock then held by Continuing Holders.
PUTS AND CALL
Family Group Shareholders' Annual Put. On March 31, 2002 and on each
anniversary thereof (each, an "Exercise Date"), each Shaw Family Shareholder and
each Saul Family Shareholder has the right to require Berkshire Hathaway to
purchase:
- Up to 10% of such shareholder's Family Group Shares,
- Up to 33% of such shareholder's Additional Shares, and
- Any additional Family Group Shares or Additional Shares owned by such
shareholder which such shareholder had the right on any prior Exercise
Date to, but did not, put to Berkshire Hathaway.
Management Shareholders' Annual Put. On each Exercise Date, each
Management Shareholder has the right to require Berkshire Hathaway to purchase:
- Up to 33 1/3% of his Management Shares, and
- Any additional Management Shares which he had the right on any prior
Exercise Date to, but did not, put to Berkshire Hathaway.
Triggered Put. At any time after a Triggering Event, the affected
shareholder will have the right to require Berkshire Hathaway to purchase all,
but not less than all, of the shares of our common stock owned by such
shareholder at the Purchase Price (as defined below).
A "Triggering Event" means any of the following:
- The death of a Continuing Holder or, with respect to a Family Group
Shareholder which is a partnership or a trust, an individual designated
at the time of the execution of the contribution agreement by such
entity,
- The involuntary termination of employment of a Family Group Shareholder
who is employed by us for any reason or the voluntary termination of such
employment as a result of disability, or
- The voluntary or involuntary termination of a Management Shareholder's
employment for any reason.
Triggered Call. At any time after the occurrence of a Triggering Event,
Berkshire Hathaway will also have the right to purchase from the affected
shareholder all, but not less than all, of the shares of our common stock owned
by such shareholder at the Purchase Price.
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Purchase Price. The Purchase Price for shares of our common stock subject
to an annual put, triggered put or triggered call is equal to the product of:
- The number of shares of our common stock subject to such event, and
- The purchase price per share.
The purchase price per share is $19.00:
- Plus the amount, if any, by which the applicable Year End Book Value (as
hereinafter defined) exceeds the Base Book Value (as hereinafter
defined), or
- If the Year End Book Value is less than the Base Book Value, minus the
lesser of:
-- the amount by which the Base Book Value exceeds the applicable Year
End Book Value, and
-- the sum, calculated on a per share basis, of all cash dividends and
other distributions paid by Shaw to its shareholders since the
merger.
The applicable Year End Book Value is:
- With respect to an annual put, the Year End Book Value for the year
immediately preceding the applicable annual put Exercise Date,
- With respect to a triggered put, at the election of the affected
shareholder, either
-- the Year End Book Value for the year immediately preceding the date
that notice of exercise of the triggered put is delivered, or
-- the Year End Book Value (upon determination thereof) for the year
during which the notice of exercise is delivered, and
- With respect to a triggered call, the Year End Book Value (upon
determination thereof) for the year during which the notice of exercise
is delivered, unless the affected shareholder elects by timely notice to
have the Year End Book Value for the immediate prior year apply, in which
case such prior Year End Book Value will apply.
The term "Book Value" means our total net equity as of a particular date,
divided by the total number of shares of our common stock which were outstanding
as of that date or which are issuable upon exercise of outstanding stock
options. Total net equity is to be calculated in accordance with generally
accepted accounting principles but without taking into account any
merger-related adjustments thereto, with the result, among others, that amount
of goodwill reflected in total net equity will be limited to the amount of
goodwill that would have been so included had the merger not occurred.
The term "Base Book Value" means the Book Value as of December 31, 2000.
The term "Year End Book Value" means the Book Value as of December 31st of
any year, beginning December 31, 2001, which will be:
- Calculated after adding back any costs of the merger not accrued as of
December 31, 2000, and
- Appropriately adjusted to reflect our capitalization as of December 31,
2000, and any subsequent changes thereto.
SALES BY BERKSHIRE HATHAWAY
After completion of the merger, if Berkshire Hathaway proposes to enter
into a transaction with any unaffiliated third party for the sale of more than
50% of the total amount of shares of our common stock outstanding at such time,
Berkshire Hathaway is required to assure that each Continuing Holder will have
the right to elect to either:
- Sell all of his, her or its shares of Shaw common stock to the third
party on the same terms and at the same purchase price per share
applicable to Berkshire Hathaway; or
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<PAGE> 56
- Require Berkshire Hathaway to purchase all of his, her or its shares of
our common stock at a purchase price computed as described under
"-- Purchase Price" above calculated by applying the Year End Book Value
for the year prior to the third party offer.
CONDITIONS TO COMPLETION OF THE CLOSING UNDER THE CONTRIBUTION AGREEMENT
The parties' respective obligations to complete the transactions under the
contribution agreement are each subject to the following conditions:
- The expiration or termination of the applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act and the receipt of any
necessary consents from foreign jurisdictions;
- Receipt of the approval by our shareholders of the merger proposal; and
- The absence of any preliminary or permanent injunction in effect or other
order which prohibits the completion of the transactions contemplated by
the contribution agreement or the merger agreement.
Additionally, the obligations of each Continuing Holder to complete the
transactions completed by the contribution agreement are subject to the
following conditions:
- The material accuracy of the representations and warranties of Berkshire
Hathaway and the performance in all material respects of its obligations
under the contribution agreement and the merger agreement; and
- The material accuracy of the representations and warranties of SII
Acquisition and the performance by SII Acquisition in all material
respects of its obligations under the contribution agreement and the
merger agreement.
The obligations of Berkshire Hathaway and SII Acquisition to complete the
transactions under the contribution agreement are subject to the following
additional conditions:
- The material accuracy of the representations and warranties of the
Continuing Holders and the performance in all material respects by the
Continuing Holders of their respective obligations under the contribution
agreement;
- The material accuracy of our representations and warranties and the
performance in all material respects of our obligations under the merger
agreement; and
- The satisfaction of all of the conditions to SII Acquisition's
obligations to completion of the merger on or prior to the effective time
of the merger.
THE VOTING AGREEMENT AND INVESTOR VOTING AGREEMENT
The following is a brief summary of the material provisions of the amended
and restated voting agreement and the investor voting agreement. The following
summary is qualified in its entirety by reference to the voting agreement and
the investor voting agreement, which we have included as Appendix C and Appendix
D, respectively, to this proxy statement and which we incorporate by reference
into this document. We encourage you to read the voting agreement and the
investor voting agreement in their entirety.
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Berkshire Hathaway, SII Acquisition and the following named shareholders,
who own the number of shares of our common stock indicated opposite their names,
have entered into the voting agreement:
<TABLE>
<S> <C>
Robert E. Shaw.............................................. 6,635,348
Julian D. Saul Family Trust................................. 11,160,724
J.C. Shaw................................................... 5,370,815
Shaw Family Holdings, LLC................................... 1,054,603
Linda Saul Schejola Family Trust............................ 7,699,808
Julius C. Shaw, Jr.......................................... 543,384
R. Julian McCamy............................................ 1,572,939
Eleanor Shaw McCamy......................................... 1,163,169
</TABLE>
Under the voting agreement, these shareholders have agreed, among other
things, to vote their shares of our common stock in favor of the merger proposal
and against any third party proposal that would result in a breach of the merger
agreement and, for that purpose, have given Berkshire Hathaway an irrevocable
proxy to vote their shares of our common stock at the special meeting and any
other meeting of our shareholders at which the merger proposal is considered. In
addition, these shareholders have agreed:
- To revoke all prior proxies or powers of attorney with respect to their
shares;
- Not to dispose of any of their shares, without Berkshire Hathaway's
consent during the term of the voting agreement;
- Not to encourage or facilitate any proposal from any third party relating
to the acquisition of shares of our common stock or any transaction that
would constitute a takeover proposal under the terms of the merger
agreement;
- Not to participate in any discussions or negotiations or furnish any
information or otherwise cooperate in any way in any transaction that
might constitute a takeover proposal under the merger agreement involving
any third party; and
- To immediately cease and terminate all existing discussions or
negotiations with respect to any of the foregoing with any third party.
The foregoing provisions will not prohibit Mr. Shaw and Mr. Saul, in their
capacities as members of our Board, from taking actions in such capacity with
respect to "superior proposals" that are permitted under the merger agreement as
described in "The Merger Agreement -- No Solicitation of Transactions."
The voting agreement will terminate upon the occurrence of any of the
following events:
- The written mutual consent of the parties thereto, or
- Upon the earlier to occur of the effective time of the merger or the
termination of the merger agreement.
Berkshire Hathaway has consented to the transfer of certain of the shares
held by certain parties to the voting agreement effective as of December 1,
2000. The transferred shares continue to be subject to the proxy granted
pursuant to the voting agreement. In addition, all of the transferees, except
for transferees of 10,661 shares, have agreed to be bound by all of the terms of
the voting agreement.
In connection with the proxy given Berkshire Hathaway under the voting
agreement, Berkshire Hathaway has entered into the investor voting agreement
with Shaw under which Berkshire Hathaway has agreed to vote an aggregate of
13,433,261 shares of our common stock which are subject to the voting agreement
and are also subject to the contribution agreement in the same proportion as the
other shares of our common stock voting on the approval of the merger and the
merger agreement (including all other shares voted by Berkshire Hathaway
pursuant to the voting agreement) are voted on such matters. The remaining
21,767,529 shares of
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our common stock which are subject to the voting agreement will be voted for
approval of the merger and the merger agreement.
REGULATORY MATTERS
Set forth below is a summary of the regulatory requirements affecting
completion of the merger.
ANTITRUST CONSIDERATIONS
The Hart-Scott-Rodino Act provides that transactions such as the merger may
not be completed until certain information has been submitted to the Antitrust
Division of the Department of Justice and the Federal Trade Commission and
specified waiting period requirements have been satisfied. We and the investor
group made our respective pre-merger notification filings pursuant to the
Hart-Scott-Rodino Act on November 2, 2000, and early termination of the waiting
period was granted on November 17, 2000.
The expiration or earlier termination of the Hart-Scott-Rodino Act waiting
period does not preclude the Antitrust Division or the FTC from challenging the
merger on antitrust grounds. We and the investor group believe that the merger
will not violate federal antitrust laws.
We conduct certain operations in Mexico through a joint venture in which we
have a 49.9% interest. The merger would therefore be subject to the Federal Law
of Economic Competition (Ley Federal de Competencia Economica) (the "FLEC") and
the Merger constitutes a "concentration" (i.e., merger) subject to review by the
Mexican Federal Competition Commission (Comision Federal de Competencia) (the
"MFCC"). A notification must be filed with the MFCC in connection with the
merger before consummation of the merger. We and Berkshire Hathaway intend to
make the necessary notification under the FLEC as soon as practicable. The
merger may be consummated after filing the necessary notification; however, the
MFCC must ultimately issue a favorable final ruling which could possibly contain
certain conditions relating to our Mexican operations. The imposition of
conditions by the MFCC would, however, be unlikely because we do not expect that
the merger will create any anticompetitive conditions regulated by the FLEC.
Under the FLEC, the substantive test for a non-challenging or conditioning
resolution is whether the notified merger diminishes, damages, or impedes the
competition process by granting power to the acquiror to, inter alia,
unilaterally fix prices or to substantially restrict output in the relevant
market, by displacing other economic agents out of the market or impeding access
to the relevant market, and by substantially allowing parties to incur in
monopolistic practices. Once the notification is filed, the MFCC has an initial
maximum term of 45 calendar days from the date the notification is filed or the
date on which additional information requested by the MFCC is filed, to issue a
final ruling on the matter. In extraordinary circumstances, this period may be
extended by the Chairman of the MFCC for an additional 60 calendar days if the
transaction in question requires additional analysis or review by the MFCC.
OTHER REGULATORY MATTERS
We are not aware of any material governmental or regulatory approvals or
actions that may be required for completion of the merger other than as
described above. If any other governmental or regulatory approval or action is
or becomes required, we currently contemplate that we would seek that additional
approval or action.
PARTIES TO THE MERGER
SHAW
We are headquartered in Dalton, Georgia and have approximately 30,000
employees. We are the world's largest carpet manufacturer based on both revenue
and volume of production. We design and manufacture approximately 1,800 styles
of tufted and woven carpet for residential and commercial use under the
PHILADELPHIA, TRUSTMARK, CABIN CRAFTS, SHAW COMMERCIAL CARPETS, STRATTON,
NETWORX, SHAWMARK, EVANS BLACK, SALEM, SUTTON, PATCRAFT, CUMBER-
52
<PAGE> 59
LAND, DESIGNWEAVE, QUEEN CARPET, QUEEN COMMERCIAL and TUFTEX trade names and
under certain private labels. Our manufacturing operations are fully integrated
from the processing of yarns through the finishing of carpet. Our carpet is sold
in a broad range of prices, patterns, colors and textures, with the majority of
its sales in the medium to high retail price range. We sell our wholesale
products to retailers, distributors and commercial users throughout the United
States, Canada and Mexico; through our own residential and commercial contract
distribution channels to various residential and commercial end-users in the
United States; and to a lesser degree, export our products to additional
overseas markets. We also provide installation services and sell laminate
flooring, ceramic tile and hardwood flooring. Our common stock is traded on the
New York Stock Exchange under the symbol "SHX." Information about us is
available on the Internet at http://www.shawinc.com. Our principal address is
616 East Walnut Avenue, Dalton, Georgia 30720 and our telephone number is (706)
278-3812.
SII ACQUISITION
Berkshire Hathaway formed SII Acquisition solely for the purpose of
engaging in the merger and related transactions. SII Acquisition has entered
into a contribution and participation agreement with an investor group that
includes Berkshire Hathaway, Robert E. Shaw, a director and our Chairman and
Chief Executive Officer, certain of Mr. Shaw's family members and related family
interests, Julian D. Saul, a director and our President, through certain of Mr.
Saul's family interests, W. Norris Little (through a family limited partnership)
and William C. Lusk, Jr., each a director, and certain other members of our
management. Under the contribution agreement the members of the investor group
have agreed to contribute to SII Acquisition immediately prior to completion of
the merger shares of our common stock in exchange for shares of SII Acquisition
common stock. In addition, Berkshire Hathaway has agreed to contribute cash to
SII Acquisition in an amount necessary to complete the merger in exchange for
shares of SII Acquisition common stock if all of the conditions to the merger
are satisfied and a minimum contribution of 6,485,604 shares of our common stock
is made to SII Acquisition by each of Messrs. Shaw and Saul together with
certain of their family members and related family interests. We expect that
Berkshire Hathaway will own 87.3% of SII Acquisition and the other members of
the investor group will own the remaining 12.7% of SII Acquisition.
THE INVESTOR GROUP
Berkshire Hathaway. Berkshire Hathaway is a holding company which owns
subsidiaries engaged in a number of diverse businesses. Its most important
business is the property and casualty insurance business, which is conducted on
both a direct and reinsurance basis through a number of subsidiaries. Included
in this group of subsidiaries is GEICO Corporation, the sixth largest auto
insurer in the United States, and General Re Corporation, one of the four
largest reinsurers in the world.
Berkshire Hathaway's non-insurance subsidiaries conduct a variety of other
business activities, including the publication of a daily and Sunday newspaper
in Western New York, the manufacture and sale of boxed chocolates and other
confectionery products, diversified manufacturing and distribution, the retail
sale of home furnishings, the manufacture, import and distribution of footwear,
the retail sale of fine jewelry, the providing of training to operators of
aircraft and ships throughout the world, the providing of fractional ownership
programs for general aviation aircraft, the licensing and servicing of almost
6,000 Dairy Queen Stores, the rental of furniture and accessories, and the
manufacturing and production of face brick and concrete masonry products.
Operating decisions are made by the managers of the various businesses.
Investment decisions and all other capital allocation decisions are made by
Warren E. Buffett, in consultation with Charles T. Munger. Mr. Buffett is
Chairman and Mr. Munger is Vice Chairman of Berkshire Hathaway's board of
directors.
The New York Stock Exchange lists Berkshire Hathaway's Class A Common
Stock, which trades under the symbol "BRKA", and its Class B Common Stock, which
trades under the symbol "BRKB".
Berkshire Hathaway's executive offices are located at 1440 Kiewit Plaza,
Omaha, Nebraska 68131, and its telephone number is (402) 346-1400.
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For information concerning the amount of cash and the number of shares of
our common stock which are required to be contributed to SII Acquisition by
Berkshire Hathaway see "The Contribution and Participation
Agreement -- Contributions."
Family Group Shareholders
Shaw Family Shareholders. Robert E. Shaw is a director of Shaw and has
been its Chairman and Chief Executive Officer since April 27, 1995. Mr. Shaw
served as President and Chief Executive Officer of Shaw for more than five years
prior to such date. He is also a director of Oxford Industries, Inc., an apparel
manufacturer. Anna Sue Shaw, Robert E. Shaw, Jr., Susan S. Young, Thomas Tripp
Shaw and Lewis Clayton Shaw, each of whom is a family member of Robert E. Shaw,
and the Robert E. Shaw, L.P., a limited partnership controlled by Robert E.
Shaw, are also included in the Shaw Family Shareholders. For information
concerning the number of shares of our common stock which is required to be
contributed to SII Acquisition by each of the Shaw Family Shareholders see "The
Contribution and Participation Agreement -- Contributions."
Saul Family Shareholders. Julian D. Saul joined Shaw in October 1998, and
on January 24, 1999, he was elected to the office of President. Mr. Saul is also
a director of Shaw. Prior to October 3, 1998, Mr. Saul was the Chief Executive
Officer and Chairman of the Board of Queen Carpet Corporation. Mr. Saul will not
be a direct party to the contribution agreement but will participate through the
Julian D. Saul Family Trust, a trust controlled by Mr. Saul, and the Anita Saul
Family Trust, a trust controlled by Anita Saul, who is Mr. Saul's wife. For
information on the number of shares of our common stock which is required to be
contributed to SII Acquisition by the Saul Family Shareholders. See "The
Contribution and Participation Agreement -- Contributions."
Management Shareholders. The other members of the investor group are the
following directors and/or members of our management:
- W. Norris Little (through a family limited partnership) -- Director and
Vice Chairman
- William C. Lusk, Jr. -- Director
- Vance D. Bell -- Executive Vice President, Operations
- Kenneth G. Jackson -- Executive Vice President and Chief Financial
Officer
- Gerald R. Embry -- Controller
- Spright D. Holland -- Vice President, Logistics
- Jeffrey Todd Meadows -- Vice President, Shaw Rugs
- Percy D. Merritt -- Vice President, Sales and Marketing, Residential
Division
- Henry H. Long -- Vice President, Contract Division
- Julius C. Shaw, Jr. -- Executive Vice President, Investor Relations
For information concerning the number of shares of our common stock which
is required to be contributed to SII Acquisition by the Management Shareholders
see "The Contribution and Participation Agreement -- Contributions."
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RECENT TRANSACTIONS IN COMMON STOCK
See Appendix H for certain information regarding the beneficial ownership
of our common stock as of October 30, 2000, by (1) each person or group known by
us to own beneficially more than 5% of our outstanding common stock, (2) each of
our directors and executive officers, (3) each of our "named executive officers"
(as defined in Item 402(a)(3) of Regulation S-K) for our last full fiscal year,
(4) all of our directors and executive officers as a group (18 persons), and (5)
affiliates and associates of certain of the foregoing.
Appendix H also sets forth the following information:
- Transactions in the shares of common stock that were effected during the
past 60 days by Shaw, Berkshire Hathaway, SII Acquisition or any of their
respective subsidiaries, directors, executive officers or controlling
persons or by any other member of the investor group, its general
partners or controlling persons;
- Purchases of common stock by Shaw during the past two years;
- Stock purchases during the past two years by certain members of the
investor group who are also directors and/or executive officers of Shaw.
- Purchases of common stock of Shaw by Berkshire Hathaway during the past
two years.
CERTAIN RELATIONSHIPS
Messrs. J. C. Shaw and Robert E. Shaw are brothers. Messrs. McCamy and
Grigg are brothers-in-law of Messrs. J. C. Shaw and Robert E. Shaw.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Our common stock is listed on the New York Stock Exchange under the symbol
"SHX." The following table sets forth, for the fiscal quarters indicated, the
high and low closing prices per share of Shaw common stock as quoted on the New
York Stock Exchange composite tape and cash dividends paid per share.
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
---- --- ---------
<S> <C> <C> <C>
1998:
First Quarter............................................. $15 3/4 $10 15/16 $.075
Second Quarter............................................ 18 3/16 14 7/16 --
Third Quarter............................................. 19 15/16 15 1/8 --
Fourth Quarter............................................ 24 1/4 12 1/16 --
1999:
First Quarter............................................. $24 1/4 $18 7/16 $ --
Second Quarter............................................ 20 3/8 16 7/8 --
Third Quarter............................................. 21 11/16 15 7/8 .050
Fourth Quarter............................................ 17 15/16 13 1/2 .050
2000:
First Quarter............................................. $15 3/16 $11 3/16 $.050
Second Quarter............................................ 17 1/16 12 3/8 .050
Third Quarter............................................. 18 5/8 11 5/8 .050
Fourth Quarter through December , 2000.................. .050
</TABLE>
On September 5, 2000, the last full trading day prior to the public
announcement of the receipt of the offer which lead to signing of the merger
agreement, the closing sale price of our common stock reported on the New York
Stock Exchange was $12 3/16 per share and the high and low trading prices per
share of our common stock as quoted on the New York Stock Exchange Composite
tape were $12 11/16 and $12 1/8, respectively. On , 2000, the most
recent practicable date prior to the date of this proxy statement,
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the closing price of our common stock reported on the New York Stock Exchange
was $ . You are urged to obtain current market quotations for our
common stock prior to making any decision with respect to the proposed merger.
As of November 10, 2000, there were approximately 2,000 holders of record
of our common stock, as shown on the records of our transfer agent.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The following statements are or may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995:
- Certain statements, including possible or assumed future results of
operations of Shaw, contained in "Special Factors -- Background of the
Merger;" "-- Recommendation of the Special Committee and the Board of
Directors; Reasons for the Merger," "-- Opinions of Financial Advisors"
and "-- Certain Projections Provided to Financial Advisors," including
any forecasts, projections and descriptions of anticipated cost savings
referred to therein, and certain statements incorporated by reference
from documents filed by us with the SEC and any statements made herein or
therein regarding the outcome of current and future rate/regulatory
proceedings, the continued application of regulatory accounting
principles, future cash flows, the potential recovery of stranded costs,
future business prospects, revenues, working capital, liquidity, capital
needs, interest costs, income or the effects of the merger;
- Any statements preceded by, followed by or that include the words
"believes," "expects," "anticipates," "intends," "estimates," "projects"
or similar expressions; and
- Other statements contained or incorporated by reference into this proxy
statement regarding matters that are not historical facts.
Because such statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by such
forward-looking statements. You are cautioned not to place undue reliance on
such statements, which speak only as of the date of this proxy statement.
Among the factors that could cause actual results to differ materially are:
- Changes in economic conditions generally;
- Changes in consumer spending for durable goods;
- Interest rates in new single- and multi-family construction;
- Competition from other carpet, rug and floor covering manufacturers;
- Changes in raw material prices; and
- Other risks detailed from time to time in our reports filed with the SEC.
The cautionary statements contained or referred to in this proxy statement
should be considered in connection with any subsequent written or oral
forward-looking statements that may be issued by us or persons acting on our
behalf. Except for our ongoing obligations to disclose material information as
required by the federal securities laws, we undertake no obligation to release
publicly any revisions to any forward-looking statements to reflect events or
circumstances after the date of this proxy statement or to reflect the
occurrence of unanticipated events. Please refer to our SEC filings incorporated
into this proxy statement by reference for a description of such factors.
The protection afforded to forward-looking statements by the Private
Securities Litigation Reform Act of 1995 does not extend to statements made in
connection with a going-private transaction.
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OTHER INFORMATION
PROPOSALS BY SHAREHOLDERS OF SHAW
If we complete the merger, we will no longer have public shareholders or
any public participation in our shareholder meetings. If we do not complete the
merger, we intend to hold our next annual shareholder meeting on April 26, 2001.
In that case, you would continue to be entitled to attend and participate in our
shareholder meetings.
If the merger is not completed, any shareholder proposal that is submitted
to us for inclusion in our proxy statement for our annual meeting in 2001
pursuant to Rule 14a-8 under the Exchange Act must be received by us at our
principal executive offices, Mail Drop Dbl-18, P.O. Drawer 2128, Dalton, Georgia
30722-2128 before the close of business on December 10, 2000.
The proxy or proxies designated by us will have discretionary authority to
vote on any matter properly presented by a shareholder for consideration at the
2001 annual meeting of shareholders but not submitted for inclusion in the proxy
statement for that meeting unless notice of the matter is received by us at our
principal executive office not later than February 15, 2001 and certain other
conditions of the applicable SEC rules are satisfied.
SEC rules establish standards as to which shareholder proposals are
required to be included in a proxy statement for an annual meeting. We will only
consider proposals meeting the requirements of applicable SEC rules.
INDEPENDENT AUDITORS
The consolidated financial statements incorporated in this proxy statement
by reference from our Annual Report on Form 10-K for the year ended January 1,
2000, to the extent and for the periods indicated in their reports, have been
audited by Arthur Andersen LLP, independent accountants, and are included herein
in reliance upon the authority of said firm as experts in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
As required by law, we file reports, proxy statements and other information
with the SEC. Because the proposed merger is a "going private" transaction, we,
SII Acquisition and the members of the investor group have filed a Rule 13e-3
Transaction Statement on Schedule 13E-3 with respect to the proposed merger. The
Schedule 13E-3 and the reports, proxy statements and other information that we
file with the SEC contain additional information about us. You may read and copy
this information at the following offices of the SEC:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center 500 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, DC 20549 New York, NY 10048 Chicago, IL 60661
</TABLE>
For further information concerning the SEC's public reference rooms, you
may call the SEC at 1-800-SEC-0330. You may obtain copies of this information by
mail from the public reference section of the SEC, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, at prescribed rates. You may also access some of
this information via the World Wide Web through the SEC's Internet address at
http://www.sec.gov. Our common stock is listed on the New York Stock Exchange,
and materials may be inspected at the New York Stock Exchange's offices at 20
Broad Street, New York, New York 10005.
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" information into this proxy
statement. This means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is considered to be part of this proxy statement, and
later information filed with the SEC will update and supercede the information
in this proxy statement.
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We incorporate by reference each document we file pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy
statement and prior to the special meeting. We also incorporate by reference
into this proxy statement the following documents that we filed with the SEC
(File No. 1-11505) under the Exchange Act:
- Our Annual Report on Form 10-K for the year ended January 1, 2000, as
amended;
- Our Quarterly Reports on Form 10-Q for the quarters ended April 1, 2000,
July 1, 2000 and September 30, 2000;
- Our Current Report on Form 8-K, filed on September 6, 2000; and
- Our Current Report on Form 8-K, filed on October 24, 2000, as amended by
Form 8-K/A, filed on November 2, 2000.
All subsequent documents filed by us with the SEC pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy
statement and prior to the date of the special meeting will be deemed to be
incorporated by reference into this proxy statement and to be a part of the
proxy statement from the date of filing of those documents.
You should rely only on the information contained in (or incorporated by
reference into) this proxy statement. We have not authorized anyone to give any
information different from the information contained in (or incorporated by
reference into) this proxy statement. This proxy statement is dated
, 2000. You should not assume that the information contained in this proxy
statement is accurate as of any later date, and the mailing of this proxy
statement to you shall not create any implication to the contrary.
Documents incorporated by reference are available from us without charge,
excluding all exhibits (unless we have specifically incorporated by reference an
exhibit into this proxy statement). You may obtain documents incorporated by
reference by requesting them in writing or by telephone as follows:
Shaw Industries, Inc.
616 East Walnut Avenue
Dalton, Georgia 30722
Attention: Corporate Secretary
Telephone: (706) 278-3812
If you would like to request documents from us, please do so by
, 2000 in order to ensure timely receipt before the special meeting.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF OCTOBER 19, 2000
BY AND AMONG
SII ACQUISITION, INC.,
SHAW INDUSTRIES, INC.
AND
BERKSHIRE HATHAWAY INC.
A-1
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 THE MERGER; CLOSING.............................. A-6
1.1 The Merger........................................... A-6
1.2 Closing.............................................. A-6
ARTICLE 2 EFFECTS OF THE MERGER............................ A-6
2.1 Effects of the Merger................................ A-6
2.2 Articles of Incorporation; Bylaws.................... A-6
2.3 Directors............................................ A-6
2.4 Officers............................................. A-6
ARTICLE 3 EFFECT OF THE MERGER ON SECURITIES OF THE COMPANY
AND MERGER SUB............................................ A-7
3.1 Merger Sub Stock..................................... A-7
3.2 Effect on the Common Stock........................... A-7
(a) Cancellation of Treasury Stock and Merger Sub-Owned
Common Stock.......................................... A-7
(b) Conversion of the Common Stock..................... A-7
(c) Cancellation and Retirement of the Common Stock.... A-7
(d) Stock Option Plans................................. A-7
3.3 Exchange of Certificates............................. A-7
(a) Exchange Agent..................................... A-7
(b) Exchange Procedures................................ A-8
(c) No Further Ownership Rights in Common Stock........ A-8
(d) Termination of Exchange Fund....................... A-8
(e) No Liability....................................... A-8
(f) Investment of Exchange Fund........................ A-9
(g) Lost Certificates.................................. A-9
3.4 Dissenting Shares.................................... A-9
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..... A-9
4.1 Corporate Organization............................... A-9
4.2 Capitalization....................................... A-10
4.3 Authority............................................ A-10
4.4 Consents and Approvals; No Violations................ A-11
4.5 SEC Documents; Undisclosed Liabilities............... A-11
4.6 Broker's Fees........................................ A-12
4.7 Absence of Certain Changes or Events................. A-12
4.8 Legal Proceedings.................................... A-12
4.9 Compliance with Applicable Law....................... A-12
4.10 Company Information.................................. A-13
4.11 Opinion of Financial Advisor......................... A-13
4.12 Employee Matters..................................... A-13
4.13 Environmental Matters................................ A-13
4.14 Takeover Statutes.................................... A-14
4.15 Rights Agreement..................................... A-14
4.16 Properties........................................... A-14
4.17 Tax Returns and Tax Payments......................... A-15
4.18 Intellectual Property................................ A-15
4.19 Board and Special Committee Recommendations.......... A-15
4.20 Required Vote........................................ A-16
</TABLE>
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF MERGER SUB AND
INVESTOR.................................................. A-16
5.1 Corporate Organization............................... A-16
5.2 Authority............................................ A-16
5.3 Consents and Approvals; No Violation................. A-16
5.4 Broker's Fees........................................ A-17
5.5 Merger Sub's Operation............................... A-17
5.6 Merger Sub and Investor Information.................. A-17
5.7 Financing............................................ A-17
5.8 Capitalization of Merger Sub......................... A-17
5.9 Stock Ownership...................................... A-17
ARTICLE 6 COVENANTS........................................ A-17
6.1 Conduct of Businesses Prior to the Effective Time.... A-17
ARTICLE 7 ADDITIONAL AGREEMENTS............................ A-19
7.1 Preparation of the Proxy Statement; Stockholder
Meeting................................................ A-19
7.2 Indemnification...................................... A-19
7.3 Expenses............................................. A-21
7.4 No Solicitation...................................... A-21
7.5 Publicity............................................ A-23
7.6 Notification of Certain Matters...................... A-23
7.7 Contribution Agreement............................... A-23
7.8 Access to Information................................ A-23
7.9 Further Assurances................................... A-24
7.10 Additional Agreements................................ A-24
7.11 Takeover Statutes.................................... A-24
7.12 Employee Benefits.................................... A-24
ARTICLE 8 CONDITIONS PRECEDENT............................. A-25
8.1 Conditions to Each Party's Obligation To Effect the
Merger................................................. A-25
(a) Company Stockholder Approval....................... A-25
(b) HSR Act............................................ A-25
(c) No Injunctions or Restraints....................... A-25
(d) Foreign Government Consents........................ A-25
8.2 Conditions to Obligation of Merger Sub............... A-25
(a) Representations and Warranties..................... A-25
(b) Performance of Obligations of the Company.......... A-25
(c) Consents, etc. .................................... A-25
(d) Dissenters' Rights................................. A-25
(e) Legal Opinion...................................... A-25
(f) Contribution Agreement............................. A-25
8.3 Conditions to Obligation of the Company.............. A-26
(a) Representations and Warranties..................... A-26
(b) Performance of Obligations of Merger Sub and
Investor.............................................. A-26
(c) Legal Opinion...................................... A-26
ARTICLE 9 TERMINATION, AMENDMENT AND WAIVER................ A-26
9.1 Termination.......................................... A-26
9.2 Effect of Termination................................ A-27
9.3 Amendment............................................ A-27
9.4 Extension; Waiver.................................... A-27
</TABLE>
A-3
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 10 GENERAL PROVISIONS.............................. A-27
10.1 Nonsurvival of Representations and Warranties....... A-27
10.2 Notices............................................. A-27
10.3 Definitions......................................... A-29
10.4 Interpretation...................................... A-29
10.5 Counterparts........................................ A-29
10.6 Entire Agreement; No Third-Party Beneficiaries...... A-29
10.7 Governing Law....................................... A-29
10.8 Assignment.......................................... A-29
10.9 Enforcement......................................... A-29
10.10 Severability........................................ A-29
</TABLE>
A-4
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is entered into as of
October 19, 2000 by and between Berkshire Hathaway Inc., a Delaware corporation
("Investor"), SII Acquisition, Inc., a Georgia corporation and, at the time of
execution of this Agreement, a wholly owned direct subsidiary of Investor
("Merger Sub") and Shaw Industries, Inc., a Georgia corporation (the "Company").
RECITALS
WHEREAS, each of the Board of Directors of the Company and the Special
Committee (as defined in Section 4.19) has determined that it is in the best
interests of the Company and its stockholders for the Company to merge with
Merger Sub pursuant to the terms and conditions set forth herein;
WHEREAS, the Board of Directors of the Company has heretofore taken the
actions referred to in Section 4.14 relating to the Takeover Statutes (as
defined in Section 4.14) and the actions referred to in Section 4.15 relating to
the Company Rights Agreement (as defined in Section 4.15);
WHEREAS, the Board of Directors of each of Merger Sub and the Company has
approved, and deems it advisable, that Merger Sub merge with and into the
Company, with the result that each holder of a share of Common Stock, no par
value per share, of the Company (the "Common Stock"), together with the
associated rights (the "Rights") under the Company Rights Agreement (as defined
in Section 4.15) (throughout this Agreement, each reference to a share of Common
Stock referring to such share of Common Stock together with the associated
Rights), issued and outstanding immediately prior to the Effective Time (as
defined in Section 1.1(b)) will be entitled to receive a cash payment in
exchange for such share, upon the terms and subject to the conditions set forth
herein (except for shares of Common Stock owned by the Company or any subsidiary
of the Company or by Merger Sub, which, as provided in Section 3.2(a), shall be
cancelled without any such payment);
WHEREAS, the Merger and this Agreement require the approval thereof by a
majority of the votes entitled to be cast thereon by holders of the outstanding
shares of Common Stock entitled to vote thereon, voting together as a single
class (the "Company Stockholder Approval");
WHEREAS, the Board of Directors of the Company recommends approval and
adoption of the Merger and this Agreement by the holders of the outstanding
shares of Common Stock entitled to vote thereon;
WHEREAS, in order to induce Merger Sub and Investor to enter into this
Agreement, as a condition to, and concurrently with the execution of, this
Agreement, certain beneficial owners of Common Stock are entering into a voting
agreement with Merger Sub and Investor (the "Voting Agreement") in the form
attached hereto as Exhibit A;
WHEREAS, in order to induce Investor to enter into this Agreement, as a
condition to, and concurrently with the execution of, this Agreement, certain
beneficial owners of Common Stock and certain holders of Company Stock Options
(as defined in Section 3.2(d)) are entering into a Contribution and
Participation Agreement (the "Contribution Agreement") with Investor, in the
form attached hereto as Exhibit B; and
WHEREAS, concurrently with the execution of this Agreement, the Voting
Agreement and the Contribution Agreement, Investor is entering into a voting
agreement with the Company (the "Investor Voting Agreement"), in the form
attached hereto as Exhibit C, with respect to certain shares of Common Stock
which are subject to the Contribution Agreement and for which Investor is being
granted a proxy pursuant to the Voting Agreement;
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NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE 1
THE MERGER; CLOSING
1.1 The Merger.
(a) Upon the terms and subject to the conditions set forth in this
Agreement and in accordance with the Georgia Business Corporation Code (the
"GBCC"), at the Effective Time, Merger Sub shall be merged with and into
the Company (the "Merger") and the Company shall be the surviving
corporation in the Merger (sometimes hereinafter referred to as the
"Surviving Corporation") and shall continue its corporate existence under
the laws of the State of Georgia.
(b) Upon the terms and subject to the conditions of this Agreement, on
the Closing Date (as defined below), the Company and Merger Sub shall cause
a certificate of merger (the "Certificate of Merger") to be executed and
filed with the Secretary of State of the State of Georgia in accordance
with the GBCC. The Merger shall become effective at such time as the
Certificate of Merger is filed with the Secretary of State of the State of
Georgia in accordance with the GBCC, or at such later time as may be agreed
to by Merger Sub and the Company and specified in the Certificate of Merger
in accordance with applicable law. The date and time when the Merger shall
become effective is referred to herein as the "Effective Time."
1.2 Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
9.1, and subject to the satisfaction or waiver of the conditions set forth in
Article 8, the closing (the "Closing") of the Merger will take place at 10:00
a.m. local time on the second business day immediately following the date on
which the last of the conditions set forth in Article 8 hereof is satisfied or
waived (the "Closing Date"), at the offices of Powell, Goldstein, Frazer &
Murphy LLP, Sixteenth Floor, 191 Peachtree, N.E., Atlanta, Georgia 30303, unless
another date, time or place is agreed to in writing by the parties hereto.
ARTICLE 2
EFFECTS OF THE MERGER
2.1 Effects of the Merger. The Merger shall have the effects set forth in
the GBCC.
2.2 Articles of Incorporation; Bylaws. The Articles of Incorporation of
the Company as in effect at the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation but shall be amended, immediately
after the filing of the Certificate of Merger, to conform to the Articles of
Incorporation of Merger Sub, and shall be the Articles of Incorporation of the
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable law. The Bylaws of Merger Sub as in effect at the Effective Time
shall be the Bylaws of the Surviving Corporation until thereafter changed or
amended as provided therein or in the Articles of Incorporation or by applicable
law.
2.3 Directors. The directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation as of the
Effective Time until the earlier of their resignation or removal or until their
respective successors are duly appointed or elected in accordance with
applicable law.
2.4 Officers. The officers of the Company immediately prior to the
Effective Time shall be the officers of the Surviving Corporation as of the
Effective Time until the earlier of their resignation or removal or until their
respective successors are duly appointed or elected in accordance with
applicable law.
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ARTICLE 3
EFFECT OF THE MERGER ON SECURITIES OF THE COMPANY AND MERGER SUB
3.1 Merger Sub Stock. At the Effective Time, by virtue of the Merger, each
share of the common stock of Merger Sub outstanding immediately prior to the
Effective Time shall be converted into and shall become one share of common
stock of the Surviving Corporation.
3.2 Effect on the Common Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of the
Common Stock:
(a) Cancellation of Treasury Stock and Merger Sub-Owned Common
Stock. Each share of Common Stock that is owned by the Company or any
subsidiary of the Company and each share of Common Stock that is owned by
Merger Sub shall automatically be canceled and retired and shall cease to
exist, and no cash or other consideration shall be delivered or deliverable
in exchange therefor.
(b) Conversion of the Common Stock. Except as otherwise provided
herein and subject to Sections 3.3 and 3.4, at the Effective Time each
issued and outstanding share of Common Stock shall be converted into and
represent the right to receive cash in the amount of $19.00 (the "Per Share
Amount") payable to the holder thereof, without interest.
(c) Cancellation and Retirement of the Common Stock. All shares of
the Common Stock issued and outstanding immediately prior to the Effective
Time shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of a certificate
representing any such shares of Common Stock shall cease to have any rights
with respect thereto, except, other than for shares referred to in Section
3.2(a) and Section 3.4, the right to receive cash in accordance with
Section 3.2(b) to be paid in consideration therefor upon surrender of such
certificate in accordance with Section 3.3.
(d) Stock Option Plans.
(i) The Company shall take all actions necessary to provide that,
immediately prior to the Effective Time, (x) each outstanding option to
acquire shares of Common Stock (the "Company Stock Options") granted
under any of the Company's 1987 Incentive Stock Option Plan, 1992
Incentive Stock Option Plan, 1997 Stock Incentive Plan, or 2000 Stock
Incentive Plan (collectively, the "Option Plans"), whether or not then
exercisable or vested, shall become fully exercisable and vested, (y)
each Company Stock Option which is then outstanding shall be canceled
and (z) in consideration of such cancellation, and except to the extent
that Merger Sub and the holder of any Company Stock Option otherwise
agree in writing, the Company (or, at Merger Sub's election, the
Surviving Corporation) shall pay in cash to each holder of Company Stock
Options an amount in respect thereof equal to the product of (A) the
excess, if any, for each Company Stock Option, of the Per Share Amount
over the per share exercise price thereof and (B) the number of shares
of Common Stock subject thereto (such payment to be net of applicable
withholding taxes).
(ii) (A) The Option Plans, the Company Stock Options and any other
plan, program, agreement or arrangement providing for the issuance or
grant of any interest in respect of the capital stock of the Company or
any subsidiary (collectively, the "Stock Plans") shall terminate as of
the Effective Time, and (B) the Company shall ensure that following the
Effective Time no holder of a Company Stock Option nor any party to or
participant in any of the Stock Plans shall have any right thereunder to
acquire equity securities of the Company, the Surviving Corporation or
any of their respective subsidiaries.
3.3 Exchange of Certificates.
(a) Exchange Agent. Prior to the mailing of the Proxy Statement (as
defined in Section 7.1(a)) to the Company's stockholders, Merger Sub shall
designate and appoint a bank or trust company reasonably satisfactory to
the Company to act as exchange agent (the "Exchange Agent") to receive the
funds necessary to make the payments contemplated by Section 3.2(b).
Immediately following the
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Effective Time, the Surviving Corporation shall cause the aggregate
consideration to which the holders of shares of Common Stock are entitled
pursuant to Section 3.2(b) to be deposited (the "Exchange Fund") with the
Exchange Agent for the benefit of such holders, for exchange in accordance
with this Article 3. The Exchange Agent shall, pursuant to irrevocable
instructions, deliver such consideration out of the Exchange Fund to
holders of shares of Common Stock in accordance with this Article 3.
(b) Exchange Procedures. As soon as practicable but no later than
three (3) business days after the Effective Time, the Surviving Corporation
shall cause the Exchange Agent to mail to each holder of an outstanding
certificate or certificates which prior thereto represented shares of
Common Stock (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to such certificate shall
pass, only upon delivery of such certificates to such Exchange Agent), and
(ii) instructions for use in effecting the surrender of the certificates
for the aggregate Per Share Amount relating thereto. Upon proper surrender
to the Exchange Agent of such certificates for cancellation, the holder of
such certificates shall after the Effective Time be entitled only to
payment in cash of the aggregate Per Share Amount relating thereto. The
Exchange Agent shall accept such certificates upon compliance with such
reasonable terms and conditions as the Exchange Agent may impose to effect
an orderly exchange thereof in accordance with normal exchange practices.
After the Effective Time, there shall be no further transfer on the records
of the Company or its transfer agent of certificates representing shares of
Common Stock and if such certificates are presented to the Company for
transfer, they shall be canceled against delivery of cash as provided in
Section 3.2(b) and this Section 3.3(b). If a payment of cash pursuant
hereto is to be remitted to a name other than that in which the certificate
for Common Stock surrendered for exchange is registered, it shall be a
condition of such exchange that the certificate so surrendered shall be
properly endorsed, with signature guaranteed, or otherwise in proper form
for transfer and that the person requesting such exchange shall pay to the
Surviving Corporation or its transfer agent any transfer or other taxes
required by reason of the remittance of cash in a name other than that of
the registered holder of the certificate surrendered, or establish to the
satisfaction of the Surviving Corporation or its transfer agent that such
tax has been paid or is not applicable. Until surrendered as contemplated
by this Section 3.3(b), except as provided in Section 3.4 hereof, each
certificate for shares of Common Stock shall be deemed at any time after
the Effective Time to represent only the right to receive upon such
surrender the aggregate Per Share Amount relating thereto. No interest will
be paid or will accrue on the aggregate Per Share Amount payable pursuant
to this Agreement.
(c) No Further Ownership Rights in Common Stock. All cash paid
pursuant to Section 3.3(b) upon the surrender for exchange of certificates
representing shares of Common Stock in accordance with the terms of this
Article 3 shall be deemed to have been paid in full satisfaction of all
rights pertaining to the shares of Common Stock theretofore represented by
such certificates.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of the certificates representing
shares of the Common Stock for twelve months after the Effective Time shall
be delivered to the Surviving Corporation, upon demand, and any holders of
shares of Common Stock who have not theretofore complied with this Article
3 shall thereafter look only to the Surviving Corporation and only as
general creditors thereof for payment of their claim for the applicable Per
Share Amount.
(e) No Liability. None of Merger Sub, the Company or the Exchange
Agent shall be liable to any person in respect of any cash from the
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any certificates
representing shares of Common Stock shall not have been surrendered prior
to five years after the Effective Time (or immediately prior to such
earlier date on which any cash payable pursuant to Section 3.2(b) would
otherwise escheat to or become the property of any Governmental Entity (as
defined in Section 4.4(a)), any such cash in respect of such certificate
shall, to the extent permitted by applicable law, become the property of
the Surviving Corporation, free and clear of all claims or interest of any
person previously entitled thereto.
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(f) Investment of Exchange Fund. The Exchange Agent shall invest the
cash included in the Exchange Fund as directed by the Surviving Corporation
on a daily basis. Any interest and other income resulting from such
investments shall be paid to the Surviving Corporation.
(g) Lost Certificates. If any certificate that prior to the Effective
Time represented shares of Common Stock 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
reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such
certificate, the Exchange Agent will deliver in exchange for such lost,
stolen or destroyed certificate the applicable Per Share Amount payable
pursuant to this Agreement with respect to the shares of Common Stock
formerly represented by such certificate.
3.4 Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, shares of Common Stock which are issued and outstanding immediately
prior to the Effective Time and which are held by holders of such shares of
Common Stock who have properly exercised dissenter's rights with respect thereto
("Dissenting Common Stock") in accordance with Sections 14-2-1321 and 14-2-1323
of the GBCC, shall not be exchangeable for the right to receive cash pursuant to
Section 3.2(b), and holders of such shares of Dissenting Common Stock shall be
entitled to receive payment of the fair value of such shares of Dissenting
Common Stock in accordance with the provisions of Article 13 of the GBCC unless
and until such holders fail to perfect or effectively withdraw or otherwise lose
their rights to demand payment under the GBCC. If, after the Effective Time, any
such holder fails to perfect or effectively withdraws or loses such right, such
shares of Dissenting Common Stock shall thereupon be treated as if they had been
converted into and have become exchangeable for, at the Effective Time, the
right to receive the aggregate Per Share Amount relating thereto, without any
interest thereon. Notwithstanding anything to the contrary contained in this
Section 3.4, if the Merger is rescinded or abandoned, then the right of any
stockholder to be paid the fair value of such stockholder's Dissenting Common
Stock pursuant to Article 13 of the GBCC shall cease. The Company shall give
Investor prompt notice of any demands received by the Company for payment for
shares of Dissenting Common Stock. The Company shall not, except with the prior
written consent of Investor, make any payment with respect to any demands for
appraisals or offer to settle or settle any such demands.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Merger Sub and Investor as follows:
4.1 Corporate Organization. Each of the Company and its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization and has the requisite corporate power
and authority to own or lease all of its properties and assets and to carry on
its business as it is now being conducted. Each of the Company and its
Significant Subsidiaries (as defined below) is duly licensed or qualified to do
business in each jurisdiction in which the nature of the business conducted by
it or the character or location of the properties and assets owned or leased by
it makes such licensing or qualification necessary, except where the failure to
be so licensed or qualified would not reasonably be expected to have, when
aggregated with all other such failures, a Material Adverse Effect (as defined
below) on the Company ("Company Material Adverse Effect"). As used in this
Agreement, the term "Material Adverse Effect" means, a material adverse effect
on the business, operations or financial condition of such party and its
subsidiaries taken as a whole or a material adverse effect on the party's
ability to consummate the transactions contemplated hereby; provided, however,
that a "Material Adverse Effect" shall not include any of the following or any
combination of the following: any change or effect resulting from or
attributable to (A) general national, international or regional economic or
financial conditions, (B) other developments which are not unique to such party
and its subsidiaries, but also affect other persons who engage in the lines of
business in which such party or its subsidiaries are engaged, or (C) the
announcement or pendency of this Agreement or the transactions contemplated
hereby (including, if resulting therefrom, employee attrition and delay,
reduction or cancellation or change in the terms of orders or purchases from or
other transactions with
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the Company or its subsidiaries). As used in this Agreement, (i) the word
"subsidiary" when used with respect to any party means any corporation,
partnership or other organization, whether incorporated or unincorporated, of
which at least a majority of the securities or other interests having by their
terms voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly beneficially owned or controlled by such
party or by any one or more of its subsidiaries, or by such party and one or
more of its subsidiaries, and (ii) "Significant Subsidiary" has the meaning
given such term in Rule 405 of the Securities Act of 1933, as amended (the
"Securities Act"). The copies of the Articles of Incorporation and Bylaws of the
Company (the "Company Articles" and "Company Bylaws"), as most recently filed
with the Company's SEC Documents (as hereinafter defined), are true, complete
and correct copies of such documents as in effect as of the date of this
Agreement.
4.2 Capitalization.
(a) The authorized capital stock of the Company consists of
500,000,000 shares of Common Stock and 250,000 shares of preferred stock,
no par value per share ("Preferred Stock"), of which 200,000 shares are
designated Series A Participating Preferred Stock. At the close of business
on September 30, 2000, there were 123,983,208 shares of Common Stock issued
and outstanding, no shares of Preferred Stock issued and outstanding, and
5,728,866 shares of Company Common Stock issuable upon the exercise of
outstanding Company Stock Options pursuant to the Option Plans. Except as
set forth in Section 4.2(a) of the disclosure schedule of the Company
delivered to Merger Sub concurrently herewith (the "Company Disclosure
Schedule"), all of the issued and outstanding shares of Common Stock have
been duly authorized and validly issued and are fully paid, nonassessable
and free of preemptive rights. Except as set forth in Section 4.2(a) of the
Company Disclosure Schedule or pursuant to the Company's Outside Directors
Stock Plan, since December 31, 1999, the Company has not issued any shares
of its capital stock or any securities convertible into or exercisable for
any shares of its capital stock, other than pursuant to the exercise of
Company Stock Options pursuant to the Option Plans. Except as set forth
above or in Section 4.2(a) of the Company Disclosure Schedule, as of the
date of this Agreement there are not and, as of the Effective Time there
will not be, any shares of capital stock issued and outstanding or any
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any securities of the
Company, including any securities representing the right to purchase or
otherwise receive any Common Stock (other than the Rights).
(b) Except as set forth in Section 4.2(b) of the Company Disclosure
Schedule, the Company owns, directly or indirectly, all of the issued and
outstanding shares of capital stock of each of its Significant
Subsidiaries, free and clear of any liens, charges, encumbrances, adverse
rights or claims and security interests whatsoever ("Liens") which would
reasonably be expected to have, in the aggregate, a Company Material
Adverse Effect, and all of such shares are duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive rights.
None of the Company's Significant Subsidiaries has or is bound by any
outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any
security of such Significant Subsidiary, including any securities
representing the right to purchase or otherwise receive any shares of
capital stock or any other equity security of such Significant Subsidiary.
4.3 Authority.
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement and, subject to the Company Stockholder
Approval with respect to consummation of the Merger, to consummate the
transactions contemplated hereby. The execution, delivery and performance
by the Company of this Agreement, and the consummation by it of the
transactions contemplated hereby, have been duly authorized by its Board of
Directors and the Special Committee and, except for obtaining the Company
Stockholder Approval with respect to the consummation of the Merger, no
other corporate action on the part of the Company is necessary to authorize
the execution and delivery by the Company of this Agreement and the
consummation by it of the transactions contemplated hereby. This Agreement
has been duly executed and delivered by the Company and, assuming due and
valid authorization,
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execution and delivery hereof by the other parties thereto, constitutes a
valid and binding obligation of the Company enforceable against the Company
in accordance with its terms, except that such enforceability (i) may be
limited by bankruptcy, insolvency, moratorium or other similar laws
affecting or relating to the enforcement of creditors' rights generally and
(ii) is subject to general principles of equity.
(b) Each of the Board of Directors of the Company and the Special
Committee has approved and taken all corporate action required to be taken
by the Board of Directors or the Special Committee for the consummation by
the Company of the transactions contemplated by this Agreement.
4.4 Consents and Approvals; No Violations.
(a) Except for (i) the consents and approvals set forth in Section
4.4(a) of the Company Disclosure Schedule, (ii) the filing with the
Securities and Exchange Commission (the "SEC") of the Proxy Statement,
(iii) the filing of the Certificate of Merger with the Secretary of State
of the State of Georgia pursuant to the GBCC, and (iv) filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), and any similar requirements of
foreign jurisdictions, no consents or approvals of, or filings,
declarations or registrations with, any federal, state or local court,
administrative or regulatory agency or commission or other governmental
authority or instrumentality, domestic or foreign (each a "Governmental
Entity"), are necessary for the consummation by the Company of the
transactions contemplated hereby, other than such other consents,
approvals, filings, declarations or registrations that, if not obtained,
made or given, would not reasonably be expected to have, in the aggregate,
a Company Material Adverse Effect.
(b) Except as set forth in Section 4.4(b) of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement by the
Company nor the consummation by the Company of the transactions
contemplated hereby, nor compliance by the Company with any of the terms or
provisions hereof, will (i) conflict with or violate any provision of the
Company Articles or Company Bylaws or any of the organizational documents
of any of its Significant Subsidiaries or (ii) assuming that the
authorizations, consents and approvals referred to in Section 4.4(a) and
the Company Stockholder Approval are duly obtained in accordance with the
GBCC, (x) violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to the Company or any of its
subsidiaries or any of their respective properties or assets, or (y)
violate, conflict with, result in the loss of any material benefit under,
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a
right of termination or cancellation under, accelerate the performance
required by, or result in the creation of any Lien upon any of the
respective properties or assets of the Company or any of its subsidiaries
under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which the Company or any of its subsidiaries is
a party, or by which they or any of their respective properties or assets
may be bound or affected, except, in the case of clause (ii) above, for
such violations, conflicts, breaches, defaults, losses, terminations of
rights thereof, accelerations or Lien creations which, in the aggregate,
would not reasonably be expected to have a Company Material Adverse Effect.
4.5 SEC Documents; Undisclosed Liabilities. The Company has filed all
required reports, schedules, forms and registration statements with the SEC
since January 1, 1998 (collectively, and in each case including all exhibits and
schedules thereto and documents incorporated by reference therein, the "SEC
Documents"). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such SEC Documents, and none of the SEC Documents
(including any and all financial statements included therein) as of such dates
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of the Company included in the
SEC Documents comply as to form in all
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material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles (except, in the case of
unaudited consolidated quarterly statements, as permitted by Form 10-Q of the
SEC) applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present in all material respects the
consolidated financial position of the Company and its consolidated subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
quarterly statements, to normal year-end audit adjustments). Except as set forth
on Section 4.5 of the Company Disclosure Schedule, since December 31, 1999,
neither the Company nor any of its subsidiaries, has incurred any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required, if known, to be reflected or reserved against on a consolidated
balance sheet of the Company prepared in accordance with GAAP except (i) as and
to the extent set forth or reflected on the audited balance sheet of the Company
and its subsidiaries as of December 31, 1999 (including the notes thereto), (ii)
as incurred in connection with the transactions contemplated by this Agreement,
(iii) as incurred after December 31, 1999 in the ordinary course of business and
consistent with past practice, (iv) as described in the SEC Documents filed
since December 31, 1999 (the "Recent SEC Documents"), or (v) as would not,
individually or in the aggregate, have a Company Material Adverse Effect.
4.6 Broker's Fees. Neither the Company nor any subsidiary of the Company
nor any of their respective officers or directors on behalf of the Company or
such subsidiaries, including the Special Committee, has employed any financial
advisor, broker or finder or incurred any liability for any broker's fees,
commissions or finder's fees in connection with any of the transactions
contemplated hereby, other than Merrill Lynch & Co., the fees and expenses of
which will be paid by the Company (pursuant to an engagement letter, a copy of
which has been furnished to Merger Sub and Investor).
4.7 Absence of Certain Changes or Events. Except as disclosed in the SEC
Documents filed prior to the date hereof or as set forth in Section 4.7 of the
Company Disclosure Schedule, since December 31, 1999, (a) no events have
occurred which would reasonably be expected to have, in the aggregate, a Company
Material Adverse Effect and (b) the Company and its subsidiaries have carried on
and operated their respective businesses in all material respects in the
ordinary course of business consistent with past practice, except for such
deviations of the Company's business from the ordinary course of business which
would not reasonably be expected to have, in the aggregate, a Company Material
Adverse Effect.
4.8 Legal Proceedings.
(a) Except as disclosed in the SEC Documents or in Section 4.8 of the
Company Disclosure Schedule, neither the Company nor any of its
subsidiaries is a party to any, and there are no pending legal,
administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against the Company
or any of its subsidiaries or challenging the validity or propriety of the
transactions contemplated hereby, which proceedings, claims, actions, or
investigations, in the aggregate, would reasonably be expected to have a
Company Material Adverse Effect.
(b) Except as set forth in the SEC Documents or in Section 4.8 of the
Company Disclosure Schedule, there is no injunction, order, judgment,
decree or regulatory restriction imposed upon the Company, any of its
subsidiaries or the assets of the Company or any of its subsidiaries which,
when aggregated with all other such injunctions, orders, judgments, decrees
and restrictions, would reasonably be expected to have a Company Material
Adverse Effect.
4.9 Compliance with Applicable Law. Except as disclosed in Section 4.9 of
the Company Disclosure Schedule, the Company and each of its subsidiaries hold
all material licenses, franchises, permits and authorizations necessary for the
lawful conduct of their respective businesses as presently conducted and are in
compliance with the terms thereof, except where the failure to hold such
license, franchise, permit or authorization or such noncompliance would not,
when aggregated with all other such failures or noncompliance, reasonably be
expected to have a Company Material Adverse Effect, and neither the Company nor
any of its subsidiaries knows of, or has received notice of, any material
violations of any applicable law, statute, order, rule, regulation, policy
and/or guideline of any Governmental Entity relating to the Company or any of
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its subsidiaries, which, in the aggregate, would reasonably be expected to have
a Company Material Adverse Effect.
4.10 Company Information. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in the Proxy
Statement or in any other document filed with any other Governmental Entity in
connection herewith at the respective times filed with the SEC or such other
Governmental Entity and first published, sent or given to stockholders of the
Company and, in addition, in the case of the Proxy Statement, at the date it or
any amendment or supplement is mailed to holders of the shares of Common Stock,
and at the time of the Company Stockholders Meeting (as defined in Section
7.1(d) hereof), will contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading. No representation is made
by the Company with respect to statements made or incorporated by reference
therein based on information supplied in writing by Merger Sub or Investor for
inclusion or incorporation by reference in the Proxy Statement. The Proxy
Statement will comply as to form in all material respects with the provisions of
applicable federal securities law.
4.11 Opinion of Financial Advisor. The Special Committee has obtained the
opinion of Merrill Lynch & Co., dated as of the date of this Agreement and a
copy of which has been provided to Merger Sub and Investor, to the effect that,
as of the date hereof, the Per Share Amount to be paid to holders of Common
Stock (other than holders who are a party to the Contribution Agreement)
pursuant to this Agreement is fair from a financial point of view to such
holders.
4.12 Employee Matters. The Company has delivered or made available to
Merger Sub full and complete copies or descriptions of each material employment,
severance, bonus, change-in-control, profit sharing, compensation, termination,
stock option, stock appreciation right, restricted stock, phantom stock,
performance unit, pension, retirement, deferred compensation, welfare or other
employee benefit agreement, trust fund or other arrangement and any union, guild
or collective bargaining agreement maintained or contributed to or required to
be contributed to by the Company or any of its ERISA Affiliates (as defined
below), for the benefit or welfare of any director, officer, employee or former
employee of the Company or any of its ERISA Affiliates (such plans and
arrangements being collectively the "Company Benefit Plans"). Each of the
Company Benefit Plans is in material compliance with all applicable laws
including ERISA and the Code except where such noncompliance would not
reasonably be expected to have a Company Material Adverse Effect. The Internal
Revenue Service has determined that each Company Benefit Plan that is intended
to be a qualified plan under Section 401(a) of the Code is so qualified and the
Company is aware of no event occurring after the date of such determination that
would adversely affect such determination. The liabilities accrued under each
such plan are reflected on the latest balance sheet of the Company included in
the Recent SEC Documents in accordance with generally accepted accounting
principles applied on a consistent basis. No condition exists that is reasonably
likely to subject the Company or any of its subsidiaries to any direct or
indirect liability under Title IV of ERISA or to a civil penalty under Section
502(j) of ERISA or liability under Section 4069 of ERISA or 4975, 4976, or 4980B
of the Code or the loss of a federal tax deduction under Section 280G of the
Code or other liability with respect to the Company Benefit Plans that would
have a Company Material Adverse Effect and that is not reflected on such balance
sheet. There are no pending or to the Company's knowledge, threatened, claims
(other than routine claims for benefits or immaterial claims) by, on behalf of
or against any of the Company Benefit Plans or any trusts related thereto except
where such claims would not reasonably be expected to have a Company Material
Adverse Effect. "ERISA Affiliate" means, with respect to any person, any trade
or business, whether or not incorporated, that together with such person would
be deemed a "single employer" within the meaning of Section 4001(a)(15) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
4.13 Environmental Matters. Except as set forth on Section 4.13 of the
Company Disclosure Schedule, to the knowledge of the Company (a) there are no
legal, administrative, arbitral or other proceedings, claims, actions, causes of
action, required environmental remediation activities, governmental
investigations of any nature seeking to impose, or that reasonably could be
expected to result in the imposition, on the Company or any of its subsidiaries
of any liability or obligations arising under common law standards relating to
environmental protection, human health or safety, or under any local, state,
provincial, federal or national
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environmental statute, regulation or ordinance, including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, and Mexico's Ley General del Equilibrium Ecologico y la
Proteccion al Ambiente (General Law of Ecological Equilibrium and Environmental
Protection) (collectively, "Environmental Laws"), pending or threatened, against
the Company or any of its subsidiaries, which liability or obligation would have
or would reasonably be expected to have a Company Material Adverse Effect; (b)
during or prior to the period of (i) its or any of its subsidiaries' ownership
or operation of any of their respective current properties, (ii) its or any of
its subsidiaries' participation in the management of any property, or (iii) its
or any of its subsidiaries' holding of a security interest or other interest in
any property, there was no release or threatened release of hazardous, toxic,
radioactive or dangerous materials or other materials regulated under
Environmental Laws in, on, under or affecting any such property which would
reasonably be expected to have a Company Material Adverse Effect; and (c)
neither the Company nor any of its subsidiaries is subject to any agreement,
order, judgment, decree, letter or memorandum by or with any court, governmental
authority, regulatory agency or third party imposing any material liability or
obligations pursuant to or under any Environmental Law that would have or would
reasonably be expected to have a Company Material Adverse Effect.
4.14 Takeover Statutes. The Company has taken all actions necessary such
that no restrictive provision of any "fair price," "moratorium," "control share
acquisition," "interested shareholder" or other similar anti-takeover statute or
regulation known to the Company (after consultation with legal counsel) to apply
to the Merger or any other transaction contemplated by this Agreement
(including, without limitation, Section 14-2-1111 and Section 14-2-1132 of the
GBCC) (collectively, "Takeover Statutes") or restrictive provision of any
applicable anti-takeover provision in the governing documents of the Company is,
or at the Effective Time will be, applicable to the Company, Merger Sub,
Investor, the shares of Common Stock, the Merger or any other transaction
contemplated by this Agreement.
4.15 Rights Agreement. The Company has taken all action required so that
the entering into of this Agreement, the Voting Agreement, the Contribution
Agreement, the Investor Voting Agreement, and the consummation of the
transactions contemplated hereby and thereby do not and will not enable or
require the Rights to be separated from the shares of Common Stock with which
the Rights are associated, or to be distributed, exercisable, exercised, or
nonredeemable or result in the Rights associated with any Common Stock
beneficially owned by Investor or Merger Sub or any of their respective
affiliates or associates (as defined in that certain Amended and Restated Rights
Agreement, dated as of April 10, 1999, as amended, between the Company and
EquiServ Trust Company, N.A. (the "Company Rights Agreement")) to be void or
voidable. The Company has delivered to Merger Sub a true and correct copy of the
Company Rights Agreement, as amended in accordance with its terms as necessary
to render it inapplicable to this Agreement, the Voting Agreement, the
Contribution Agreement, the Investor Voting Agreement, the Merger and the other
transactions contemplated by this Agreement, the Voting Agreement, the
Contribution Agreement and the Investor Voting Agreement.
4.16 Properties. Except as set forth in Section 4.16 of the Company
Disclosure Schedule or disclosed in the Recent SEC Documents and for such
matters which would not have a Company Material Adverse Effect, each of the
Company and its subsidiaries (i) has good and indefeasible title to all the
properties and assets reflected on the latest audited balance sheet included in
such Recent SEC Documents as being owned by the Company or one of its
subsidiaries or acquired after the date thereof which are, individually or in
the aggregate, material to the Company's business on a consolidated basis
(except properties sold or otherwise disposed of since the date thereof in the
ordinary course of business), free and clear of (A) all Liens except (1)
statutory liens securing payments not yet due and (2) such imperfections or
irregularities of title or other Liens (other than real property mortgages or
deeds of trust) as do not materially affect the use of the properties or assets
subject thereto or affected thereby or otherwise materially impair business
operations at such properties, and (B) all real property mortgages and deeds of
trust except such secured indebtedness as is properly reflected in the latest
audited balance sheet included in such Recent SEC Documents, and (ii) is the
lessee of all leasehold estates reflected in the latest audited financial
statements included in such Recent SEC Documents or acquired after the date
thereof which are material to its business on a consolidated basis and is
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in possession of the properties purported to be leased thereunder, and each such
lease is valid without material default thereunder by the lessee or, to the
Company's knowledge, the lessor.
4.17 Tax Returns and Tax Payments. The Company and its subsidiaries have
timely filed (or, as to subsidiaries, the Company has filed on behalf of such
subsidiaries) all material Tax Returns (as defined below) required to be filed
by it, except for such failure that would not result in a Company Material
Adverse Effect. The Company and its subsidiaries have paid (or, as to
subsidiaries, the Company has paid on behalf of such subsidiaries) all Taxes (as
defined below) shown to be due on such Tax Returns and has provided (or, as to
Subsidiaries, the Company has made provision on behalf of such Subsidiaries)
reserves in its financial statements for any Taxes that have not been paid,
whether or not shown as being due on any Tax Returns, except for such Taxes
which, if unpaid or unreserved, would not result in a Company Material Adverse
Effect. Except as set forth in Section 4.17 of the Company Disclosure Schedule,
neither the Company nor any of its subsidiaries has granted any request that
remains in effect for waivers of the time to assess any Taxes. Except as
disclosed in Section 4.17 of the Company Disclosure Schedule, no claim for
unpaid Taxes has been asserted against the Company or any of its Subsidiaries in
writing by a Tax authority which, if resolved in a manner unfavorable to the
Company or any of its Subsidiaries, as the case may be, would result,
individually or in the aggregate, in a Company Material Adverse Effect. There
are no Liens for Taxes upon the assets of the Company or any Subsidiary, except
for Liens for Taxes not yet due and payable or for Taxes that are being disputed
in good faith by appropriate proceedings and with respect to which adequate
reserves have been taken, that could result in a Company Material Adverse
Effect. Except as discussed in Section 4.17 of the Company Disclosure Schedule,
no audit of any material Tax Return of the Company or any of its subsidiaries is
being conducted by a Tax authority. None of the Company or any of its
subsidiaries has made an election under Section 341(f) of the Code. Except as
disclosed in Section 4.17 of the Company Disclosure Schedule, neither the
Company nor any of its subsidiaries has any liability for Taxes of any person
(other than the Company and its subsidiaries) under Treasury Regulation Section
1.1502-6 (or any comparable provision of state, local or foreign law), by
contract or otherwise. As used herein, "Taxes" shall mean all taxes of any kind,
including, without limitation, those on or measured by or referred to as income,
gross receipts, sales, use, ad valorem, franchise, profits, license, employment,
withholding, value added, property or windfall profits taxes, customs, duties or
similar fees, assessments or charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts imposed by
any governmental authority, domestic or foreign. As used herein, "Tax Return"
shall mean any return, report or statement required to be filed with any
governmental authority with respect to Taxes. As used herein, "Code" shall mean
the Code and the Treasury Regulations promulgated thereunder.
4.18 Intellectual Property. Except as set forth in Section 4.18 of the
Company Disclosure Schedule, the Company or its subsidiaries own, or are
licensed or otherwise possess legally enforceable rights to use all patents,
trademarks, trade names, service marks, copyrights and any applications
therefor, technology, know-how, trade secrets, computer software programs or
applications, domain names and tangible or intangible proprietary information or
materials that are used in the respective businesses of the Company and its
subsidiaries as currently conducted, except for any such failures to own, be
licensed or possess that, individually or in the aggregate, have not had and are
not reasonably likely in the future to have a Company Material Adverse Effect.
All patents, registered trademarks and service marks and registered copyrights
held by the Company or its subsidiaries are subsisting and in force except where
failure to be subsisting and in force would not likely cause a Company Material
Adverse Effect.
4.19 Board and Special Committee Recommendations. The Board of Directors
of the Company, at a meeting duly called and held, has by unanimous vote of
those directors present (who constituted all of the directors then in office),
(i) determined that this Agreement and the transactions contemplated hereby,
including the Merger, are advisable and are fair to and in the best interests of
the stockholders of the Company, and (ii) resolved to recommend that the holders
of the Common Stock approve this Agreement and the transactions contemplated
herein, including the Merger. The special committee of independent directors of
the Board of Directors of the Company (the "Special Committee") has, by
unanimous vote, determined that this Agreement and the transactions contemplated
hereby, including the Merger, are
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advisable and are fair to and in the best interests of the stockholders and
approved this Agreement and the transactions contemplated hereby, including the
Merger.
4.20 Required Vote. The Company Stockholder Approval, being the
affirmative vote of a majority of the votes entitled to be cast by holders of
the outstanding shares of Common Stock, is the only vote of the holders of any
class or series of the Company's securities necessary to approve this Agreement
and the Merger and the other transactions contemplated hereby.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF
MERGER SUB AND INVESTOR
Merger Sub and Investor jointly and severally represent and warrant to the
Company as follows:
5.1 Corporate Organization. Each of Merger Sub and Investor is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization and has the requisite corporate power
and authority to own or lease all of its properties and assets and to carry on
its business as it is now being conducted. Each of Merger Sub and Investor is
duly licensed or qualified to do business in each jurisdiction in which the
nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or qualified
would not reasonably be expected to have, when aggregated with all other such
failures, a Material Adverse Effect on Merger Sub or Investor, as applicable.
5.2 Authority. Each of Merger Sub and Investor has all necessary corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
Merger Sub and Investor of this Agreement, and the consummation of the
transactions contemplated hereby, have been duly authorized and approved by
their Boards of Directors and by Investor as the sole stockholder of Merger Sub
and no other corporate action on the part of Merger Sub or Investor is necessary
to authorize the execution and delivery by Merger Sub and Investor of this
Agreement and the consummation by them of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Merger Sub and Investor,
and, assuming due and valid authorization, execution and delivery hereof by the
Company, is a valid and binding obligation of each of Merger Sub and Investor,
enforceable against each of them in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity.
5.3 Consents and Approvals; No Violation.
(a) Except for (i) the filing with the SEC of the Proxy Statement, (ii)
the filing of the Certificate of Merger with the Secretary of State of the
State of Georgia pursuant to the GBCC, and (iii) filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Exchange Act, the HSR Act and any similar
requirements of foreign jurisdictions, and the Securities Act, no consents
or approvals of, or filings, declarations or registrations with, any
Governmental Entity are necessary for the consummation by each of Merger
Sub and Investor of the transactions contemplated hereby, other than such
other consents, approvals, filings, declarations or registrations that, if
not obtained, made or given, would not reasonably be expected to have, in
the aggregate, a Material Adverse Effect on Merger Sub or Investor,
respectively.
(b) Neither the execution and delivery of this Agreement by Merger Sub
or Investor, nor the consummation by Merger Sub or Investor of the
transactions contemplated hereby, nor compliance by Merger Sub or Investor
with any of the terms or provisions hereof, will (i) conflict with or
violate any provision of the Articles of Incorporation or Bylaws of Merger
Sub or Investor, or (ii) assuming that the authorizations, consents and
approvals referred to in Section 5.3(a) are obtained, (x) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree
or injunction applicable to Merger Sub or Investor or any of their
respective subsidiaries, properties or assets, or (y) violate, conflict
with, result in
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the loss of any material benefit under, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default)
under, result in the termination of or a right of termination or
cancellation under, accelerate the performance required by, or result in
the creation of any Lien upon any of the respective properties or assets of
Merger Sub or Investor or any of their respective subsidiaries under, any
of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which Merger Sub or Investor or any of their respective
subsidiaries is a party, or by which Merger Sub or Investor or any of their
respective properties or assets may be bound or affected, except, in the
case of clause (ii) above, for such violations, conflicts, breaches,
defaults, losses, terminations of rights thereof, accelerations or Lien
creations which, in the aggregate, would not reasonably be expected to have
a Material Adverse Effect on Merger Sub or Investor, respectively.
5.4 Broker's Fees. Neither Investor nor any subsidiary of Investor nor any
of their respective officers or directors on behalf of Investor or such
subsidiaries has employed any financial advisor, broker or finder in a manner
that would result in any liability of the Company for any broker's fees,
commissions or finder's fees in connection with any of the transactions
contemplated hereby.
5.5 Merger Sub's Operation. Merger Sub was formed solely for the purpose
of engaging in the transactions contemplated hereby and has not engaged in any
business activities or conducted any operations other than in connection with
the transactions contemplated hereby.
5.6 Merger Sub and Investor Information. None of the information supplied
or to be supplied by Merger Sub or Investor for inclusion or incorporation by
reference in the Proxy Statement or in any other document filed with any other
Governmental Entity in connection herewith, at the respective time filed with
the SEC or such other Governmental Entity and, in addition, in the case of the
Proxy Statement, at the date it or any amendment or supplement is mailed to
holders of the Common Stock and at the time of the Company Stockholders Meeting,
will contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances in
which they are made, not misleading.
5.7 Financing. Merger Sub and Investor have each entered into the
Contribution Agreement with the other investors named therein, dated as of the
date of this Agreement, pursuant to which the Investor and such other investors
have agreed, on the terms and subject to the conditions contained therein, to
provide consideration sufficient to pay pursuant to the Merger for all
outstanding shares of Common Stock other than shares of Common Stock to be
cancelled pursuant to Section 3.2(a). A true and correct copy of the
Contribution Agreement has been provided to the Company. Investor has sufficient
funds to enable it to perform its obligations under the Contribution Agreement.
5.8 Capitalization of Merger Sub. As of the date of this Agreement, the
authorized capital stock of Merger Sub consists of 100 shares of common stock,
$0.01 par value per share, of which 100 shares are issued and outstanding and
owned beneficially and of record by Investor free and clear of any liens. All of
the issued and outstanding shares of capital stock of Merger Sub have been duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights.
5.9 Stock Ownership. As of the date of this Agreement, except (i) for
shares of Common Stock that Merger Sub may be deemed to own pursuant to the
Contribution Agreement and (ii) as set forth in Section 5.9 of the disclosure
schedule of Merger Sub and Investor delivered to the Company concurrently
herewith, neither Merger Sub nor Investor beneficially owns any shares of Common
Stock.
ARTICLE 6
COVENANTS
6.1 Conduct of Businesses Prior to the Effective Time. Except as set forth
in Section 6.1 of the Company Disclosure Schedule, as expressly contemplated or
permitted by this Agreement, or as required by applicable law, rule or
regulation, during the period from the date of this Agreement to the Effective
Time,
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unless Investor otherwise agrees in writing, the Company shall, and shall cause
its subsidiaries to, in all material respects, (i) conduct its business in the
usual, regular and ordinary course consistent with past practice and (ii) use
all reasonable efforts to maintain and preserve intact its business organization
and the good will of those having business relationships with it and retain the
services of its present officers and key employees. Without limiting the
generality of the foregoing, and except as set forth in Section 6.1 of the
Company Disclosure Schedule, as expressly contemplated or permitted by this
Agreement, or as required by applicable law, rule or regulation, during the
period from the date of this Agreement to the Effective Time, the Company shall
not, and shall not permit any of its subsidiaries to, without the prior written
consent of Investor:
(a) (i) issue, sell, grant, dispose of, pledge or otherwise encumber,
or authorize or propose the issuance, sale, disposition or pledge or other
encumbrance of (A) any additional shares of its capital stock or any
securities or rights convertible into, exchangeable for, or evidencing the
right to subscribe for any shares of its capital stock, or any rights,
warrants, option, calls, commitments or any other agreements of any
character to purchase or acquire any shares of its capital stock or any
securities or rights convertible into, exchangeable for, or evidencing the
right to subscribe for, any shares of its capital stock or (B) any other
securities in respect of, in lieu of, or in substitution for, any shares of
its capital stock outstanding on the date hereof, other than pursuant to
the exercise of Company Stock Options outstanding as of the date hereof;
(ii) redeem, purchase or otherwise acquire, or propose to redeem, purchase
or otherwise acquire, any of its outstanding shares of capital stock; or
(iii) split, combine, subdivide or reclassify any shares of its capital
stock or declare, except for quarterly cash dividends in the amount of
$0.05 per share, consistent with past practice, set aside for payment or
pay any dividend, or make any other actual, constructive or deemed
distribution, in respect of any shares of its capital stock or otherwise
make any payments to its stockholders in their capacity as such;
(b) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money or guarantee any such
indebtedness or make any loans, advances or capital contributions to, or
investments in, any other person other than the Company or its
subsidiaries;
(c) sell, transfer, mortgage, encumber or otherwise dispose of any of
its properties or assets that are material, individually or in the
aggregate, to the Company and its subsidiaries, taken as a whole, to any
individual, corporation or other entity other than a direct or indirect
wholly owned subsidiary, or cancel, release or assign any indebtedness to
any such person or any claims held by any such person that is material to
the Company and its subsidiaries, taken as a whole, except in each case (i)
in the ordinary course of business consistent with past practice, or (ii)
pursuant to contracts or agreements in force at the date of this Agreement;
(d) make any material acquisition or investment in a business either
by purchase of stock or securities, merger or consolidation, contributions
to capital, property transfers, or purchases of any property or assets of
any other individual, corporation or other entity other than a wholly owned
subsidiary thereof, or, other than in the ordinary course of business
consistent with past practice, purchase or enter into any agreement to
purchase equipment, materials, supplies, or services for an amount that is
material to the Company and its subsidiaries, taken as a whole;
(e) increase in any manner the compensation of any of its directors,
officers or employees or enter into, establish, amend or terminate any
employment, consulting, retention, change in control, collective
bargaining, bonus or other incentive compensation, profit sharing, health
or other welfare, stock option or other equity, pension, retirement,
vacation, severance, deferred compensation or other compensation or benefit
plan, policy, agreement, trust, fund or arrangement with, for or in respect
of, any stockholder, officer, director, other employee, agent, consultant
or affiliate other than (i) as required pursuant to the terms of agreements
in effect on the date of this Agreement, and (ii) increases in salaries,
wages and benefits of employees who are not directors or officers of the
Company made in the ordinary course of business and in a manner consistent
with past practice;
(f) amend the Company Articles or the Company Bylaws or similar
governing documents;
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(g) change any material accounting principle used by it, except for
such changes as may be required to be implemented following the date of
this Agreement pursuant to generally accepted accounting principles or
rules or regulations of the SEC promulgated following the date hereof;
(h) take any action that would, or is reasonably likely to, result in
any of its representations and warranties in this Agreement becoming
untrue, or in any of the conditions to the Merger set forth in Article 8
not being satisfied;
(i) except in the ordinary course of business and consistent with past
practice, make any tax election or settle or compromise any federal, state,
local or foreign income tax liability;
(j) waive or fail to enforce any provision of any confidentiality or
standstill agreement to which it is a party; or
(k) make any commitment to take any of the actions prohibited by this
Section 6.1.
ARTICLE 7
ADDITIONAL AGREEMENTS
7.1 Preparation of the Proxy Statement; Stockholder Meeting.
(a) Promptly following the date of this Agreement, the Company shall
prepare, in consultation with Investor, and file with the SEC a Proxy
Statement on Schedule 14A (the "Proxy Statement"). The Company shall use
all reasonable efforts to respond to comments from the SEC and to cause the
Proxy Statement to be mailed to the Company's stockholders at the earliest
practicable time. The Company shall not mail, amend, or supplement the
Proxy Statement unless the Proxy Statement or any amendment or supplement
thereof is satisfactory in content to Investor in the exercise of its
reasonable judgment. The Proxy Statement shall comply with Rule 13e-3 of
the Exchange Act.
(b) Promptly following the date of this Agreement, Investor and the
Company shall file with the SEC, and shall use all reasonable efforts to
cause any of their respective affiliates engaging in this transaction to
file with the SEC, a Rule 13e-3 Transaction Statement on Schedule 13E-3
(the "Schedule 13E-3 Transaction Statement") with respect to the Merger.
Each of the parties hereto agrees to use all reasonable efforts to
cooperate and to provide each other with such information as any of such
parties may reasonably request in connection with the preparation of the
Proxy Statement and the Schedule 13E-3 Transaction Statement. The Schedule
13E-3 Transaction Statement shall be filed with the SEC concurrently with
the filing of the Proxy Statement.
(c) Each party hereto agrees promptly to supplement, update and
correct any information provided by it for use in the Proxy Statement or
the Schedule 13E-3 Transaction Statement if and to the extent that such
information is or shall have become incomplete, false or misleading.
(d) The Company will, as promptly as practicable following the date of
this Agreement, duly call, give notice of, convene and hold a meeting of
its stockholders (the "Company Stockholders Meeting") for the purpose of
approving this Agreement and the transactions contemplated by this
Agreement. The Company will, through its Board of Directors and the Special
Committee, recommend to its stockholders approval of the foregoing matters,
as set forth in Section 4.19. Such recommendation, together with a copy of
the opinion referred to in Section 4.11, shall be included in the Proxy
Statement. The Company will use reasonable efforts to hold such meeting as
soon as practicable after the date hereof.
(e) The Company will cause its transfer agent to make stock transfer
records relating to the Company available to Investor, Merger Sub and the
Exchange Agent to the extent reasonably necessary to effectuate the intent
of this Agreement.
7.2 Indemnification.
(a) The Surviving Corporation shall indemnify, defend, protect and
hold harmless each person who is now, or has been at any time prior to the
date of this Agreement or who becomes such prior to the
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Effective Time, an officer or director of the Company or any of its
subsidiaries (the "Indemnified Parties") against (i) all losses, claims,
damages, costs, expenses, liabilities or judgments or amounts that are paid
in settlement with the approval of the indemnifying party (which approval
shall not be unreasonably withheld) of or in connection with any claim,
action, suit, proceeding or investigation based in whole or in part on or
arising in whole or in part out of the fact that such person is or was a
director or officer of the Company or any of its subsidiaries, whether
pertaining to any matter existing or occurring at or prior to the Effective
Time and whether asserted or claimed prior to, or at or after, the
Effective Time ("Indemnified Liabilities"), and (ii) all Indemnified
Liabilities based in whole or in part on, or arising in whole or in part
out of, or pertaining to this Agreement or the transactions contemplated
hereby; provided, however, that such indemnification shall only be to the
fullest extent a corporation is permitted under the GBCC to indemnify its
own directors and officers. To the extent the Surviving Corporation is
unable to satisfy such obligation to indemnify the Indemnified Parties or
is restricted from indemnifying the Indemnified Parties pursuant to the
foregoing proviso, Investor shall indemnify, defend, protect and hold
harmless each of the Indemnified Parties against all Indemnified
Liabilities on the same basis set forth in the foregoing clauses (i) and
(ii), provided, however, that such indemnification shall not be applicable
to any claims made against the Indemnified Parties (A) arising out of,
based upon or attributable to the gaining in fact of any personal profit or
advantage to which they were not legally entitled or (B) arising out of,
based upon or attributable to the committing in fact of any criminal or
deliberate fraudulent act.
(b) Without limiting the foregoing, in the event any such claim,
action, suit, proceeding or investigation is brought against any
Indemnified Party (whether arising before or after the Effective Time), (i)
the Indemnified Parties may retain counsel satisfactory to them and the
Surviving Corporation and Investor, (ii) the Surviving Corporation (and, if
applicable, Investor) shall pay all reasonable fees and expenses of such
counsel for the Indemnified Parties promptly as such statements therefor
are received; and (iii) the Surviving Corporation (and, if applicable,
Investor) will use all reasonable efforts to assist in the vigorous defense
of any such matter, provided that the Surviving Corporation (and, if
applicable, Investor) shall not be liable for any settlement of any claim
effected without its written consent, which consent, however, shall not be
unreasonably withheld or delayed. Any Indemnified Party wishing to claim
indemnification under this Section 7.2, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify the Surviving
Corporation and Investor (but the failure so to notify an indemnifying
party shall not relieve it from any liability which it may have under this
Section 7.2 except to the extent such failure materially prejudices such
party), and shall deliver to the Surviving Corporation and Investor the
undertaking contemplated by Section 14-2-853(a)(2) of the GBCC. The
Indemnified Parties as a group may retain only one law firm to represent
them with respect to each such matter unless there is, under applicable
standards of professional conduct, a conflict on any significant issue
between the positions of any two or more Indemnified Parties.
(c) Subject to applicable law, the Company Articles and Company Bylaws
shall not be amended, including by operation of Section 2.2, in a manner
which adversely affects the rights of the Indemnified Parties under any
provisions regarding indemnification or exculpation from liability set
forth therein or in this Section 7.2. All rights to indemnification and/or
advancement of expenses contained in any agreement with any Indemnified
Parties as in effect on the date hereof with respect to matters occurring
at or prior to the Effective Time (including the transactions contemplated
by this Agreement) shall survive the Merger and continue in full force and
effect.
(d) If the Surviving Corporation or any of its successors or assigns
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its
properties and assets to any person, then, and in each such case, to the
extent necessary, proper provision shall be made so that the successors and
assigns of the Surviving Corporation shall assume the obligations set forth
in this Section 7.2.
(e) The provisions of this Section 7.2 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and representatives.
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7.3 Expenses. Except as specifically contemplated herein, whether or not
the Merger is consummated, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses.
7.4 No Solicitation.
(a) The Company shall immediately cease any discussions or
negotiations with any parties that may be ongoing with respect to a
Takeover Proposal (as hereinafter defined) and shall seek to have returned
to the Company any confidential information that has been provided in any
such discussions or negotiations. From the date hereof, the Company shall
not, nor shall it permit any of its subsidiaries to, nor shall it authorize
or permit any of its officers, directors or employees or any affiliate,
investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries to, directly or
indirectly, (i) solicit, initiate or knowingly encourage (including by way
of furnishing information which has not been previously publicly
disseminated), or take any other action designed to facilitate, any
inquiries or the making of any proposal which constitutes, or may
reasonably be expected to lead to, any Takeover Proposal or (ii)
participate in any discussions or negotiations regarding any Takeover
Proposal; provided, however, that if, prior to obtaining the Company
Stockholder Approval and following the receipt of a Superior Proposal (as
hereinafter defined), or a proposal which is reasonably expected to lead to
a Superior Proposal, that was made (and not solicited) after the date
hereof in circumstances not otherwise involving a breach of this Agreement,
the Board of Directors of the Company (or any special committee thereof to
which such responsibility shall have been properly delegated in accordance
with the requirements of applicable law) determines in good faith, after
considering applicable provisions of state law and after consultation with
outside counsel, that a failure to do so would constitute a breach of its
fiduciary duties to the Company's stockholders under applicable law, the
Company may, in response to such Takeover Proposal and subject to
compliance with Section 7.4(c), (x) furnish information with respect to the
Company to the party making such Takeover Proposal pursuant to a customary
confidentiality agreement, provided that (i) such confidentiality agreement
must include a provision prohibiting solicitation of key employees of the
Company or its subsidiaries, such provision lasting at least one year, and
may not include any provision calling for an exclusive right to negotiate
with the Company and (ii) the Company advises Investor of all such
nonpublic information delivered to such person concurrently with its
delivery to the requesting party, and (y) participate in negotiations with
such party regarding such Takeover Proposal. It is agreed that any
violation of the restrictions set forth in the preceding sentence by any
executive officer of the Company or any of its subsidiaries or any
affiliate, director or investment banker, attorney or other advisor or
representative of the Company or any of its subsidiaries shall be deemed to
be a breach of this Section 7.4(a) by the Company.
(b) Except as expressly permitted in this Section 7.4, neither the
Board of Directors of the Company nor any committee thereof shall (i)
withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to Merger Sub and/or Investor, the approval, determination of
advisability, or recommendation by such Board of Directors or such
committee of this Agreement and the transactions contemplated hereby,
including the Merger, (ii) approve, determine to be advisable, or
recommend, or propose publicly to approve, determine to be advisable, or
recommend, any Takeover Proposal or (iii) cause the Company to enter into
any letter of intent, agreement in principle, acquisition agreement or
other similar agreement related to any Takeover Proposal. Notwithstanding
the foregoing, in the event that prior to obtaining the Company Stockholder
Approval the Board of Directors of the Company (or any special committee
thereof to which such responsibility shall have been properly delegated in
accordance with the requirements of applicable law) determines in good
faith, in response to a Superior Proposal that was made (and not solicited)
after the date hereof in circumstances not otherwise involving a breach of
this Agreement, after considering applicable provisions of state law and
after consultation with outside counsel, that the failure to do so would
constitute a breach of its fiduciary duties to the Company's stockholders
under applicable law, the Board of Directors of the Company and the Special
Committee may (subject to this and the following sentences and to
compliance with Section 7.4(a)) (x) withdraw or modify its approval,
determination, or recommendation of this Agreement and the
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transactions contemplated hereby, including the Merger, or (y) approve,
determine to be advisable, or recommend a Superior Proposal, provided,
however, that any actions described in clause (y) may be taken only at a
time that is after the second business day following Investor's receipt of
written notice from the Company advising Investor that the Board of
Directors of the Company has received a Superior Proposal, specifying the
material terms and conditions of such Superior Proposal, identifying the
person making such Superior Proposal and providing notice of the
determination of the Board of Directors of the Company (or special
committee thereof, if applicable) of what action referred to in clause (y)
the Board of Directors of the Company (or special committee thereof, if
applicable) has determined to take.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 7.4, the Company shall promptly
advise Investor orally and in writing of any request for confidential
information or of any Takeover Proposal, the material terms and conditions
of such request or the Takeover Proposal and the identity of the person
making such request or Takeover Proposal and shall keep Investor reasonably
informed of the status and details of any such request or Takeover
Proposal.
(d) Nothing contained in this Section 7.4 shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by
Rule 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to the Company's stockholders; provided, however, neither the
Company nor its Board of Directors nor any committee thereof shall, except
as in accordance with Section 7.4(b), withdraw or modify, or propose
publicly to withdraw or modify, its approval, determination or
recommendation with respect to the Merger and the other transactions
contemplated by this Agreement or approve, determine to be advisable, or
recommend, or propose publicly to approve, determine to be advisable, or
recommend, a Takeover Proposal.
(e) For purposes of this Agreement:
(i) "Takeover Proposal" means any inquiry, proposal or offer from
any person (other than Investor and its subsidiaries, affiliates, and
representatives) relating to any direct or indirect acquisition or
purchase of 15% or more of the assets of the Company and its
subsidiaries or 15% or more of any class of equity securities of the
Company or any of its Significant Subsidiaries, any tender offer or
exchange offer that if consummated would result in any person
beneficially owning 15% or more of any class of equity securities of the
Company or any of its Significant Subsidiaries, or any merger,
consolidation, share exchange, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company or
any of its Significant Subsidiaries, other than the transactions
contemplated by this Agreement.
(ii) For purposes of this Agreement, a "Superior Proposal" means a
bona fide written offer from any person (other than Investor and its
subsidiaries, affiliates and representatives) for a direct or indirect
acquisition or purchase of 50% or more of the assets of the Company or
any of its Significant Subsidiaries or 50% or more of any class of
equity securities of the Company or any of its Significant Subsidiaries,
any tender offer or exchange offer that if consummated would result in
any person (other than Investor and its subsidiaries, affiliates and
representatives) beneficially owning 50% or more of any class of equity
securities of the Company or any of its Significant Subsidiaries, or any
merger, consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its Significant Subsidiaries, other than
the transactions contemplated by this Agreement, (A) which provides for
consideration on a per share basis to the stockholders of the Company
with a value (taking into account, among other things, the likelihood of
such offer resulting in a consummated transaction) exceeding the Per
Share Amount, (B) which, considering all relevant factors, is more
favorable to the Company and its stockholders than the Merger, and (C)
for which the third party has demonstrated that financing is likely to
be obtained, in each case as determined by the Board of Directors in its
good faith judgment (based on the advice of independent financial
advisors and outside counsel). Any Superior Proposal is a Takeover
Proposal.
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7.5 Publicity. The initial press release with respect to the execution of
this Agreement shall be a joint press release reasonably acceptable to Investor
and the Company. Thereafter, so long as this Agreement is in effect, none of the
Company, Investor or Merger Sub nor any of their respective affiliates shall
issue or cause the publication of any press release or other announcement with
respect to the Merger, this Agreement or the other transactions contemplated
hereby without the prior consultation of the other party, except as may be
required by law or by any listing agreement with a national securities exchange
as determined in the good faith judgment of the party wanting to make such
release.
7.6 Notification of Certain Matters. The Company shall give prompt notice
to Investor, and Investor shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event the occurrence or non-occurrence of
which would cause any representation or warranty contained in this Agreement to
be untrue or inaccurate in any material respect at or prior to the Effective
Time and (ii) any material failure of the Company, on the one hand, or Merger
Sub or Investor, on the other hand, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section 7.6
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
7.7 Contribution Agreement. Merger Sub and Investor agree that they will
not, without the prior consent of the Company, enter into any amendment to, or
modification or waiver of, the Contribution Agreement if such amendment,
modification or waiver would (i) reduce the value of the consideration (cash and
shares of Common Stock with such shares valued for this purpose at $19.00 per
share) committed under the Contribution Agreement, (ii) add additional
conditions to the consummation of the transactions contemplated by the
Contribution Agreement or (iii) have a material adverse effect on the
consummation of the Merger. Merger Sub and Investor shall enforce to the fullest
extent permitted under applicable law, the provisions of the Contribution
Agreement, including but not limited to obtaining injunctions to enforce
specifically the terms and provisions thereof in any court having jurisdiction.
Merger Sub and Investor shall use all reasonable efforts to fulfill all of their
obligations under the Contribution Agreement and to cause all conditions to
funding under the Contribution Agreement (other than conditions to funding that
are conditions to consummation of the Merger under this Agreement) to be
fulfilled as promptly as reasonably practicable. Merger Sub and Investor shall
give the Company prompt written notice of (i) any material breach or threatened
material breach by any party of the terms or provisions of the Contribution
Agreement, or (ii) any termination or threatened termination of the Contribution
Agreement. Investor agrees that, subject to the fulfillment of the conditions
set forth in Sections 8.1 and 8.3 of the Contribution Agreement (including,
without limitation, the satisfaction of the Minimum Contribution Requirement, as
such term is defined in the Contribution Agreement), Investor shall contribute
to Merger Sub the amount of cash and shares of Common Stock specified on
Schedule A to the Contribution Agreement.
7.8 Access to Information.
(a) Upon reasonable notice and subject to applicable laws relating to
the exchange of information, the Company shall, and shall cause each of its
subsidiaries to, afford to the officers, employees, accountants, counsel
and other representatives of Merger Sub and Investor, during normal
business hours during the period prior to the Effective Time, reasonable
access to all its properties, books, contracts, commitments and records,
and to its officers, employees, accountants, counsel and other
representatives and, during such period, the Company shall, and shall cause
its subsidiaries to, make available to Merger Sub and Investor (i) a copy
of each report, schedule, registration statement and other document filed
or received by it during such period pursuant to the requirements of
federal securities laws and (ii) all other information concerning its
business, properties and personnel as such other party may reasonably
request.
(b) No investigation by any of the parties or their respective
representatives shall affect the representations, warranties, covenants or
agreements of the other set forth herein.
(c) The information provided pursuant to Section 7.8(a) will be used
solely for the purpose of the transactions contemplated hereby, and unless
and until the Merger is consummated, such information will be kept secret
and confidential by Merger Sub and Investor, except that the information
provided pursuant to Section 7.8(a) or portions thereof may be disclosed to
those of Merger Sub's and Investor's
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or their affiliates' directors, officers, employees, agents and advisors
(collectively, the "Representatives") who (a) need to know such information
for the purpose of the transactions contemplated hereby, (b) shall be
advised by Merger Sub or Investor, as the case may be, of this provision,
(c) agree to hold the information provided pursuant to Section 7.8(a) as
secret and confidential and (d) agree with Merger Sub and Investor to be
bound by the provisions hereof. Merger Sub and Investor jointly agree to be
responsible for any breach of this section by any of their Representatives.
If this Agreement is terminated, Investor shall, and shall cause Merger Sub
and each of their Representatives to, return or destroy (and certify
destruction of) all information provided pursuant to Section 7.8(a).
7.9 Further Assurances.
(a) Subject to the terms and conditions of this Agreement, each of
Investor and the Company shall, and shall cause its subsidiaries to, use
all reasonable efforts (i) to take, or cause to be taken, all actions
necessary, proper or advisable to comply promptly with all legal
requirements which may be imposed on such party or its subsidiaries with
respect to the Merger and, subject to the conditions set forth in Article 8
hereof, to consummate the transactions contemplated by this Agreement,
including, without limitation, the Merger, as promptly as practicable and
(ii) to obtain (and to cooperate with the other party to obtain) any
consent, authorization, order or approval of, or any exemption by, any
Governmental Entity and any other third party which is required to be
obtained by the Company or Investor or any of their respective subsidiaries
in connection with the Merger and the other transactions contemplated by
this Agreement, and to comply with the terms and conditions of any such
consent, authorization, order or approval.
(b) Subject to the terms and conditions of this Agreement, each of
Investor and the Company shall use all reasonable efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective, as soon as
practicable after the date of this Agreement, the transactions contemplated
hereby, including, without limitation, using all reasonable efforts to lift
or rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions
contemplated hereby and using all reasonable efforts to defend any
litigation seeking to enjoin, prevent or delay the consummation of the
transactions contemplated hereby or seeking material damages.
7.10 Additional Agreements. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of any of the
parties to the Merger, the proper officers and directors of each party to this
Agreement and their respective subsidiaries shall take all such necessary action
as may be reasonably requested by, and at the sole expense of, the Surviving
Corporation.
7.11 Takeover Statutes. If any "fair price," "moratorium," "control share
acquisition" or other form of antitakeover statute or regulation shall become
applicable to the transactions contemplated hereby, the parties hereto and the
members of their respective Boards of Directors shall grant such approvals and
take such actions as are reasonably necessary so that the transactions
contemplated hereby may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate or minimize the effects of
such statute or regulation on the transactions contemplated hereby.
7.12 Employee Benefits. Merger Sub agrees that, for a minimum period of
two (2) years following the Effective Time, the employees of the Surviving
Corporation will continue to be provided with employee benefit plans (other than
stock option or other plans involving the potential issuance of securities of
the Surviving Corporation) which in the aggregate are substantially comparable
to those currently provided by the Company to such employees.
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ARTICLE 8
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation To Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Company Stockholder Approval. The Company Stockholder Approval
shall have been obtained.
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or
shall have expired.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger shall be in effect; provided, however, that
the parties hereto shall use their best efforts to have any such
injunction, order, restraint or prohibition vacated.
(d) Foreign Government Consents. If required to be obtained under
applicable law prior to the consummation of the Merger, the consent or
approval of any Government Entity in any foreign jurisdiction shall have
been received.
8.2 Conditions to Obligation of Merger Sub. The obligation of Merger Sub
to effect the Merger is further subject to the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and
correct, unless the failure of such representations and warranties to be so
true and correct, in the aggregate, has not had and would not reasonably be
expected to have a Company Material Adverse Effect (ignoring, for purposes
of this Section 8.2(a), any materiality standard expressly included in such
representations or warranties) as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date. Investor and
Merger Sub shall have received a certificate signed on behalf of the
Company by the chief executive officer and the chief financial officer of
the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects the obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Merger Sub
and Investor shall have received a certificate signed on behalf of the
Company by the chief executive officer and the chief financial officer of
the Company to such effect.
(c) Consents, etc. Investor and Merger Sub shall have received
evidence, in form and substance reasonably satisfactory to them, that such
licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and other third parties as are necessary
in connection with the transactions contemplated hereby have been obtained,
other than where the failure to so obtain any such licenses, permits,
consents, approvals, authorizations, qualifications or orders would not
reasonably be expected to have, in the aggregate, a Company Material
Adverse Effect.
(d) Dissenters' Rights. The aggregate number of shares of Dissenting
Common Stock at the Effective Time of the Merger shall not equal 10% or
more of the shares of Common Stock outstanding as of the record date for
the meeting of stockholders of the Company to vote on the Merger.
(e) Legal Opinion. Investor and Merger Sub shall have received the
opinion of Powell, Goldstein, Frazer & Murphy LLP, counsel to the Company,
in form and substance customary for transactions of this type and
reasonably satisfactory to Investor and Merger Sub, dated as of the Closing
Date, as to the authorization, validity and enforceability of this
Agreement with respect to the Company.
(f) Contribution Agreement. The closing of the transactions under the
Contribution Agreement shall have occurred.
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8.3 Conditions to Obligation of the Company. The obligation of the Company
to effect the Merger is further subject to the following conditions:
(a) Representations and Warranties. The representations and
warranties of each of Merger Sub and Investor set forth in this Agreement
shall be true and correct, unless the failure of such representations and
warranties to be so true and correct, in the aggregate, has not had and
would not reasonably be expected to have a Material Adverse Effect on
Merger Sub or Investor, respectively (ignoring, for purposes of this
Section 8.3(a), any materiality standard expressly included in such
representations or warranties), as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date (except for
such representations and warranties which are made as of a particular date,
which shall be true and correct (subject to the above qualification) as of
such date). The Company shall have received a certificates signed on behalf
of each of Merger Sub and Investor by the chief executive officer and the
chief financial officer of each of Merger Sub and Investor to such effect.
(b) Performance of Obligations of Merger Sub and Investor. Each of
Merger Sub and Investor shall have performed in all material respects the
obligations required to be performed by it under this Agreement at or prior
to the Closing Date, and the Company shall have received certificates
signed on behalf of each of Merger Sub and Investor by the chief executive
officer and the chief financial officer of each of Merger Sub and Investor
to such effect.
(c) Legal Opinion. The Company shall have received the opinion of
Munger Tolles & Olson LLP, counsel to Merger Sub and Investor, in form and
substance customary for transactions of this type and reasonably
satisfactory to the Company, dated as of the Closing Date, as to the
authorization, validity and enforceability of this Agreement with respect
to Merger Sub and Investor.
ARTICLE 9
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated and abandoned at any
time prior to the Effective Time, whether before or after obtaining the Company
Stockholder Approval:
(a) by mutual written consent of Investor and the Company; or
(b) by either Investor or the Company if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the Merger and
such order, decree, ruling or other action shall have become final and
nonappealable; or
(c) by either Investor or the Company if the Merger shall not have
been consummated on or before March 31, 2001 (other than due to the failure
of the party seeking to terminate this Agreement to perform its obligations
under this Agreement required to be performed at or prior to the Effective
Time); or
(d) by either Investor or the Company, if the Company Stockholder
Approval shall not have been obtained by reason of the failure to obtain
the required vote upon a vote held at a duly held meeting of stockholders
or at any adjournment thereof; or
(e) by Investor, if (i) the Board of Directors of the Company shall
have (A) withdrawn, modified or amended, or proposed publicly to withdraw,
modify or amend, in a manner adverse to Investor or Merger Sub, its
approval or recommendation of this Agreement or the Merger, or failed to
reconfirm its recommendation within five (5) business days after a written
request to do so, (B) failed to include in the Proxy Statement such
recommendation, or (C) approved or recommended, or proposed publicly to
approve or recommend, any Takeover Proposal from a person other than Merger
Sub or Investor, (ii) the Company shall have failed as soon as practicable
(after receipt of all necessary information from Merger Sub and Investor)
to mail the Proxy Statement, containing the recommendation by the Board of
Directors of the Company of this Agreement and the Merger, to its
stockholders, (iii) the Special
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Committee shall have withdrawn, or proposed publicly to withdraw, in a
manner adverse to Merger Sub or Investor, its approval of this Agreement or
the Merger; or (iv) (x) a Takeover Proposal that is publicly disclosed
shall have been commenced, publicly proposed or communicated to the Company
which contains a proposal as to price (without regard to whether such
proposal specifies a specific price or a range of potential prices) and (y)
the Company shall not have rejected such proposal within 10 business days
of the earlier of its receipt or the date its existence first becomes
publicly disclosed; or
(f) by the Company, if it concurrently enters into a definitive
agreement providing for a Superior Proposal entered into in accordance with
Section 7.4(b); or
(g) by Investor, if any of the conditions set forth in Section 8.2
shall fail to be met and any such failure that is reasonably capable of
being cured has not been cured by the date specified in Section 9.1(c); or
(h) by the Company, if any of the conditions set forth in Section 8.3
shall fail to be met and any such failure that is reasonably capable of
being cured has not been cured by the date specified in Section 9.1(c).
9.2 Effect of Termination. In the event of termination of this Agreement
by either the Company or Investor as provided in Section 9.1, this Agreement
shall forthwith become void and have no effect, without any liability or
obligation on the part of Investor, Merger Sub or the Company, other than
pursuant to the provisions of Section 7.3. Nothing contained in this Section
shall, however, relieve any party of liability for any breach of the
representations, warranties, covenants or agreements set forth in this Agreement
prior to any such termination.
9.3 Amendment. This Agreement may be amended by the parties at any time
before or after the Company Stockholder Approval; provided, however, that after
such approval, there shall be made no amendment that by law requires further
approval by such stockholders without the further approval of such stockholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties.
9.4 Extension; Waiver. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to the proviso of Section
9.3, waive compliance with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such extension or waiver
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.
ARTICLE 10
GENERAL PROVISIONS
10.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 10.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
10.2 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given when received if delivered personally, on the next business day if sent by
overnight courier for next business day delivery (providing proof of delivery),
when confirmation is received, if sent by facsimile or in 5 business days if
sent by U.S. registered or certified mail, postage prepaid
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(return receipt requested) to the other parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to Investor or Merger Sub, to:
Berkshire Hathaway Inc.
1440 Kiewit Plaza
Omaha, Nebraska 68131
Attn: Warren E. Buffett
Facsimile No. (402) 346-3375
with a copy to:
Munger, Tolles & Olson LLP
355 South Grand Avenue
Los Angeles, California 90071
Attn: Robert E. Denham
Facsimile No. (213) 687-3702
(b) if to the Company, to:
Shaw Industries, Inc.
616 East Walnut Avenue
Dalton, Georgia 30722
Attn: Robert E. Shaw
Facsimile No. (706) 275-1985
and
Special Committee of the Board of Directors
c/o Shaw Industries, Inc.
616 East Walnut Avenue
Dalton, Georgia 30722
Facsimile No. (706) 275-1985
with copies to:
Shaw Industries, Inc.
616 East Walnut Avenue
Dalton, Georgia 30722
Attn: General Counsel
Facsimile No. (706) 275-1985
Powell, Goldstein, Frazer & Murphy LLP
Sixteenth Floor
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: G. William Speer
Facsimile No. (404) 572-6999
and
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attn: Terrence R. Brady
Facsimile No. (312) 558-5626
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10.3 Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person; and
(b) "person" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
10.4 Interpretation. A reference made in this Agreement to an Article,
Section, Exhibit or Schedule, shall be to an Article or Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this Agreement.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation."
10.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
10.6 Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) constitutes the
entire agreement between the parties, and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof. Except as provided in Section 7.2, this Agreement is not
intended to confer upon any person other than the parties hereto any rights or
remedies.
10.7 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Georgia regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
10.8 Assignment. Neither this Agreement nor any of the rights, interests
or obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise, by any of the parties without the prior written
consent of the other parties. Any assignment in violation of the preceding
sentence shall be void. Subject to the preceding two sentences, this Agreement
will be binding upon, inure to the benefit of, and be enforceable by, the
parties and their respective successors and assigns.
10.9 Enforcement. The parties agree that 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. It is
accordingly agreed that 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 any court of the State of Georgia
or of the United States located in the State of Georgia in the event any dispute
arises out of this Agreement or any of the transactions contemplated by this
Agreement, and each party agrees (a) it will not attempt to deny or defeat
personal jurisdiction or venue in any such court by motion or other request for
leave from any such court and (b) it will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in any court
other than any such court.
10.10 Severability. Whenever possible, each provision or portion of any
provision of this Agreement will 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 will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will 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, so long as the economic and legal substance of the
transactions contemplated hereby are not affected in a manner materially adverse
to any party hereto.
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IN WITNESS WHEREOF, Merger Sub, the Company, and Investor have caused this
Agreement to be signed by their respective officers hereunto duly authorized,
all as of the date first written above.
SII ACQUISITION, INC.
By: /s/ MARC D. HAMBURG
--------------------------------------
Its: Vice President
--------------------------------------
SHAW INDUSTRIES, INC.
By: /s/ ROBERT E. SHAW
--------------------------------------
Its: Chairman and CEO
--------------------------------------
BERKSHIRE HATHAWAY INC.
By: /s/ MARC D. HAMBURG
--------------------------------------
Its: Vice President
--------------------------------------
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APPENDIX B
CONTRIBUTION AND PARTICIPATION AGREEMENT
DATED AS OF
OCTOBER 19, 2000
AMONG
SII ACQUISITION, INC.,
THE INVESTOR STOCKHOLDER LISTED HEREIN
AND
THE CONTINUING HOLDERS LISTED HEREIN
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I DEFINITIONS...................................... B-3
Section 1.1 Definitions.................................. B-3
ARTICLE II EXCHANGE OF PROPERTY FOR CAPITAL STOCK.......... B-6
Section 2.1 Issuance To Investor Stockholder............. B-6
Section 2.2 Exchange With Continuing Holders............. B-7
Section 2.3 Closing...................................... B-7
Section 2.4 Failure By Continuing Holder................. B-7
ARTICLE III COVENANTS AND AGREEMENTS OF SII AND INVESTOR
STOCKHOLDER............................................... B-7
Section 3.1 Best Efforts................................. B-7
Section 3.2 Consent to Certain Business Combinations..... B-8
Section 3.3 Participation in Certain Transactions........ B-8
ARTICLE IV COVENANTS OF THE CONTINUING HOLDERS............. B-8
Section 4.1 Best Efforts................................. B-8
Section 4.2 No Sale, Etc................................. B-9
Section 4.3 Custodial Arrangements....................... B-9
ARTICLE V PUTS AND CALLS................................... B-10
Section 5.1 Puts and Calls............................... B-10
Section 5.2 Wills........................................ B-13
ARTICLE VI RESTRICTIONS ON CONTINUING HOLDER TRANSFERS..... B-13
Section 6.1 General Restriction on Transfers by
Continuing Holders..................................... B-13
Section 6.2 Permitted Transfers By Continuing Holders.... B-13
ARTICLE VII REPRESENTATIONS AND WARRANTIES................. B-14
Section 7.1 Representations and Warranties by SII........ B-14
Section 7.2 Representations and Warranties by All
Stockholders........................................... B-15
Section 7.3 Additional Representations and Warranties by
Continuing Holders..................................... B-16
ARTICLE VIII CONDITIONS TO CLOSING......................... B-16
Section 8.1 Conditions to Obligations of All Parties..... B-16
Section 8.2 Additional Conditions to Obligations of
Continuing Holders..................................... B-17
Section 8.3 Additional Conditions to Obligations of
Investor Stockholder and SII........................... B-17
ARTICLE IX GENERAL PROVISIONS.............................. B-17
Section 9.1 Termination.................................. B-17
Section 9.2 Restrictive Legends.......................... B-18
Section 9.3 Notices...................................... B-18
Section 9.4 Additional Parties........................... B-18
Section 9.5 Expenses..................................... B-19
Section 9.6 Amendments and Waivers....................... B-19
Section 9.7 Successors and Assigns....................... B-19
Section 9.8 Georgia Law.................................. B-19
Section 9.9 Counterparts; Effectiveness.................. B-19
Section 9.10 Captions..................................... B-19
Section 9.11 No Rights As Employee........................ B-19
Section 9.12 Genders and Plurals.......................... B-19
Section 9.13 Severability................................. B-19
Section 9.14 Third Party Beneficiary...................... B-19
SCHEDULE A -- INVESTOR STOCKHOLDER.......................... B-22
SCHEDULE B -- CONTINUING HOLDERS............................ B-23
</TABLE>
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<PAGE> 97
AMENDED AND RESTATED CONTRIBUTION
AND PARTICIPATION AGREEMENT
THIS AMENDED AND RESTATED CONTRIBUTION AND PARTICIPATION AGREEMENT
("Agreement") is entered into as of December 1, 2000 among SII ACQUISITION,
INC., a Georgia corporation ("SII"), the INVESTOR STOCKHOLDER listed on Schedule
A hereto and the CONTINUING HOLDERS listed on Schedule B hereto.
WITNESSETH:
WHEREAS, SII has entered into an Agreement and Plan of Merger with Shaw
Industries, Inc. (the "Company") dated as of October 19, 2000 (the "Merger
Agreement") pursuant to which SII will be merged with and into the Company (the
"Merger") with the Company as the surviving corporation in the Merger (the
"Surviving Corporation") and, among other things, each share of common stock,
$.01 par value per share, of SII ("SII Common Stock") will, by virtue of the
Merger, be converted into and become one share of common stock of the Surviving
Corporation ("Surviving Corporation Common Stock");
WHEREAS, in connection with the Merger Agreement, SII, the Investor
Stockholder and certain of the Continuing Holders heretofore entered into the
Contribution and Participation Agreement dated as of October 19, 2000 (the
"Original Agreement") pursuant to which (i) the Investor Stockholder agreed to
contribute shares of common stock, no par value per share, of the Company
("Company Common Stock") owned by it and cash in an amount necessary to
consummate the Merger to SII in exchange for shares of SII Common Stock as
indicated on Schedule A to the Original Agreement and (ii) each Continuing
Holder who was a party to the Original Agreement (collectively, the "Original
Continuing Holders") agreed to contribute the number of shares of Company Common
Stock indicated on Schedule B to the Original Agreement to SII in exchange for
shares of SII Common Stock;
WHEREAS, certain of the Original Continuing Holders transferred a portion
of their Company Common Stock and the parties hereto have agreed to such
transfers and the transferees agree to be bound by the terms of the Agreement;
WHEREAS, the parties hereto have agreed to enter into this Agreement to add
such transferees of Company Common Stock as Continuing Holders and to make
certain other changes to the Original Agreement as agreed to by the parties to
this Agreement;
WHEREAS, the parties hereto intend that the aforementioned contributions
and exchanges by the Investor Stockholder and the Continuing Holders
contemplated by this Agreement will be treated for income tax purposes as
transfers pursuant to Section 351 of the Code and any corresponding provisions
of applicable state income tax statutes;
WHEREAS, SII, the Investor Stockholder and the Continuing Holders desire to
provide herein for certain matters relating to the authorization and issuance of
such shares of SII Common Stock and certain restrictions on the transfer of
shares of SII Common Stock and Surviving Corporation Common Stock;
NOW THEREFORE, in consideration of the foregoing and the covenants set
forth herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. The following terms, as used herein, shall have
the following meanings:
"Additional Contribution Shares" means (i) the shares of SII Common
Stock (which shall be converted into shares of Surviving Corporation Common
Stock upon the Merger) to be issued to the Family Group Stockholders
pursuant to Section 2.2 and designated as "Additional Contribution Shares"
on Schedule B hereto, (ii) any shares of Capital Stock of the Surviving
Corporation issued to the Family
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Group Stockholders with respect to such shares pursuant to any exchange or
right to purchase Capital Stock or as a result of a stock dividend or stock
split or in connection with a combination of shares, recapitalization,
merger, consolidation or similar transaction, and (iii) any other shares of
Capital Stock otherwise acquired by a Family Group Stockholder.
"Annual Put" has the meaning set forth in Section 5.1(a)(iii).
"Annual Put Exercise Date" has the meaning set forth in Section
5.1(a)(i).
"Attorneys" has the meaning set forth in Section 4.3.
"Base Book Value" means the Book Value as of December 31, 2000.
"Book Value" means the total net equity of the Company or the
Surviving Corporation, as applicable, as of a particular date, divided by
the total number of shares of Company Common Stock or Surviving Corporation
Common Stock, as applicable, which are outstanding as of such date or which
are issuable upon exercise of any then-outstanding Company Stock Options.
Total net equity shall be calculated in accordance with generally accepted
accounting principles but without taking into account any Merger-related
adjustments thereto, with the result, among others, that the amount of
goodwill reflected in total net equity shall be limited to the amount of
goodwill that would have been so included had the Merger not occurred.
"Call Recipient" has the meaning set forth in Section 5.1(b)(ii).
"Capital Stock" means authorized and issued capital stock of the
Surviving Corporation.
"Closing" means the contribution of cash and shares of Company Common
Stock to SII contemplated hereby and the issuance of SII Common Stock in
exchange therefor.
"Closing Date" means the date of the Closing.
"Commission" means the Securities and Exchange Commission.
"Company" has the meaning set forth in the recitals to this Agreement.
"Company Common Stock" means common stock, no par value per share, of
the Company to be exchanged by a Stockholder hereunder for shares of SII
Common Stock.
"Company Stock Options" means options to acquire shares of Company
Common Stock which were issued by the Company pursuant to any of the Option
Plans.
"Company Joinder Agreement" means a form of joinder agreement
reasonably acceptable to the Surviving Corporation pursuant to which a
transferee of a Continuing Holder agrees to be bound by the terms hereof.
"Company Stockholder Approval" has the meaning given to such term in
the Merger Agreement.
"Continuing Holder" means each Family Group Stockholder and each
Management Holder, provided, however, that, at any time, the term
"Continuing Holder" does not include any Person who, following the Merger,
holds no shares of Capital Stock at such time.
"Custodian" has the meaning set forth in Section 2.2.
"Custody Agreement" means the Custody Agreement among SII, each of the
Continuing Holders and the Custodian to be mutually agreed upon by the
parties hereto and the Custodian and entered into pursuant to Section 4.3.
"Designated Individual" means, with respect to a particular Family
Group Entity or Management Holder Entity, the individual whose name is
referenced as such next to the name of such Family Group Entity or
Management Holder Entity on Schedule B hereto.
"Effective Time" means the Effective Time specified in the Merger
Agreement.
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<PAGE> 99
"Elected Year End Book Value" has the meaning set forth in Section
5.1(c).
"Employed Family Group Stockholder" means each of Robert E. Shaw and
Julian Saul.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Family Group Stockholder" means each of the individuals and each
Family Group Entity listed under the heading "Family Group Stockholders" on
Schedule B hereto, provided, however, that, at any time, the term "Family
Group Stockholder" does not include any Person who, following the Merger,
holds no shares of Capital Stock at such time.
"Family Group Entity" means each trust or partnership which is listed
under the subheading "Family Group Entities" under the heading "Family
Group Stockholders" on Schedule B hereto.
"Government Entity" has the meaning given to such term in the Merger
Agreement.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended to the date hereof.
"Immediate Family Members" of a Person means the spouse, children and
grandchildren (including legally adopted children and grandchildren) of
such Person.
"Initial Exercise Date" has the meaning set forth in Section
5.1(a)(i).
"Investor Stockholder Joinder Agreement" means a form of joinder
agreement reasonably acceptable to SII pursuant to which a transferee of
the Investor Stockholder agrees to be bound by the terms hereof.
"Investor Stockholder" means (i) the Investor Stockholder listed on
Schedule A hereto and its successors, and (ii) upon execution of an
Investor Stockholder Joinder Agreement, any transferee of an Investor
Stockholder acquiring shares of Surviving Corporation Common Stock;
provided, however, that, at any time, the term "Investor Stockholder" does
not include any Person who, following the Merger, holds no shares of
Capital Stock at such time.
"Management Contribution Shares" means (i) the shares of SII Common
Stock (which shall be converted into shares of Surviving Corporation Common
Stock upon the Merger) to be issued to the Management Holders pursuant to
Section 2.2, (ii) any shares of Capital Stock of the Surviving Corporation
issued to the Management Holders with respect to such shares pursuant to
any exchange or right to purchase capital stock or as a result of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or similar transaction, and (iii)
any other shares of Capital Stock otherwise acquired by a Management
Holder.
"Management Holder" means each of the individuals and each Management
Holder Entity listed under the heading "Management Holders" on Schedule B
hereto, provided, however, that, at any time, the term "Management Holder"
does not include any Person who, following the Merger, holds no shares of
Capital Stock at such time.
"Management Holder Entity" means each trust or partnership which is
listed under the subheading "Management Holder Entities" under the heading
"Management Holders" on Schedule B hereto.
"Merger" means the merger of SII with and into the Company as
contemplated by the Merger Agreement.
"Merger Agreement" means the Agreement and Plan of Merger, dated as of
October 19, 2000, among the Company, SII and the Investor Stockholder.
"Minimum Contribution Requirement" means (i) the contribution by
Robert E. Shaw, his Immediate Family Members and any entities listed on
Schedule B which are controlled by or established for the benefit of Robert
E. Shaw, or his Immediate Family Members, of a minimum of 6,485,604 shares
of Company Common Stock in exchange for shares of SII Common Stock, and
(ii) the contribution by Julian D. Saul, his Immediate Family Members and
any entities listed on Schedule B which are
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<PAGE> 100
controlled by or established for the benefit of Julian D. Saul or his
Immediate Family Members, of a minimum of 6,485,604 shares of Company
Common Stock in exchange for shares of SII Common Stock, in each case
pursuant to the provisions of this Agreement.
"Minimum Contribution Shares" means (i) the shares of SII Common Stock
(which shall become shares of Surviving Corporation Common Stock upon the
Merger) to be issued hereunder to the Family Group Stockholders and
designated as "Minimum Contribution Shares" on Schedule B hereto, as well
as (ii) any shares of Capital Stock of SII issued to the Family Group
Stockholders with respect to such shares pursuant to any exchange or right
to purchase capital stock or as a result of a stock dividend or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation or similar transaction.
"Option Plans" has the meaning given to such term in the Merger
Agreement.
"Per Share Amount" means $19.00, as such amount may be appropriately
adjusted to reflect any changes to the Surviving Corporation's
capitalization following the Effective Time.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency
or instrumentality thereof.
"Power of Attorney" has the meaning set forth in Section 4.3.
"Purchase Price" has the meaning set forth in Section 5.1(c).
"Securities Act" means the Securities Act of 1933, as amended.
"SII" has the meaning set forth in the preamble to this Agreement.
"SII Common Stock" has the meaning set forth in the recitals to this
Agreement.
"Stockholders" means the Investor Stockholder and the Continuing
Holders.
"Surviving Corporation" has the meaning set forth in the recitals to
this Agreement.
"Surviving Corporation Common Stock" has the meaning set forth in the
recitals to this Agreement.
"Triggered Call" has the meaning set forth in Section 5.1(b)(ii).
"Triggered Put" has the meaning set forth in Section 5.1(b)(i).
"Triggering Continuing Holder" has the meaning set forth in Section
5.1(b)(i).
"Triggering Event" has the meaning set forth in Section 5.1(b)(i).
"Year End Book Value" means the Book Value as of December 31st of any
year, beginning December 31, 2001, which shall be (a) calculated after
adding back any costs of the Merger not accrued as of December 31, 2000,
and (b) appropriately adjusted to reflect the Company's (or the Surviving
Corporation's) capitalization as of December 31, 2000 and any subsequent
changes thereto.
ARTICLE II
EXCHANGE OF PROPERTY FOR CAPITAL STOCK
Section 2.1 Issuance to Investor Stockholder. Subject to the terms of
this Agreement, and on the basis of the representations, warranties and
covenants contained herein, at the Closing and concurrently with the exchange
contemplated by Section 2.2 below, (i) SII will issue to the Investor
Stockholder the number of shares of SII Common Stock set forth opposite such
Investor Stockholder's name under the column labeled "Number of Shares of SII
Common Stock" on Schedule A hereto, and (ii) the Investor Stockholder, in
exchange therefor, will contribute to SII (a) by wire transfer of funds, the
amount of cash set forth opposite the Investor Stockholder's name under the
column labeled "Cash Contribution" on Schedule A hereto and (b) such number of
shares of Company Common Stock held of record and beneficially by the Investor
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Stockholder as is set forth opposite the Investor Stockholder's name under the
column labeled "Company Shares" on Schedule A hereto, together with appropriate
powers to transfer such shares of Company Common Stock to SII and irrevocable
powers coupled with an interest with respect to such shares of Company Common
Stock, provided, however, that the amount of cash to be contributed by the
Investor Stockholder pursuant to this Section 2.1 is subject to increase by up
to $98,468,754, and the number of shares of SII Common Stock to be issued to the
Investor Stockholder in exchange for such contribution pursuant to this Section
2.1 is subject to increase by up to 5,182,566 shares (at a rate of one share of
SII Common Stock for each additional $19.00 to be so contributed), to the extent
that additional shares of Company Common Stock are issued after the date of this
Agreement and prior to the Closing pursuant to the exercise of any Company Stock
Options held by any individuals other than the Continuing Holders.
Section 2.2 Exchange with Continuing Holders. Subject to the terms of
this Agreement, and on the basis of the representations, warranties and
covenants contained herein, at the Closing and concurrently with the
contribution contemplated by Section 2.1 above, (i) each Continuing Holder,
severally and not jointly, will contribute, convey, transfer, assign and deliver
to SII, through a custodian to be mutually agreed upon by the parties hereto
(the "Custodian") and pursuant to the Custody Agreement, a certificate or
certificates representing such number of shares of Company Common Stock held of
record and beneficially by the Continuing Holder as is set forth opposite the
Continuing Holder's name under the column labeled "Company Shares" on Schedule B
hereto, together with appropriate powers to transfer such shares of Company
Common Stock to SII and irrevocable powers coupled with an interest with respect
to such shares of Company Common Stock, and (ii) in exchange therefor, SII shall
issue to the Continuing Holder the number of shares of SII Common Stock set
forth opposite such Continuing Holder's name under the column labeled "Number of
Shares of SII Common Stock" (which, with respect to Family Group Stockholders,
shall be designated on Schedule B as either "Minimum Contribution Shares" or
"Additional Contribution Shares") on Schedule B hereto, which shares shall be
delivered to the Custodian on behalf of such Continuing Holder and held by the
Custodian pursuant to the Custody Agreement.
Section 2.3 Closing. The Closing shall occur at the offices of Powell,
Goldstein, Frazer & Murphy LLP, Sixteenth Floor, 191 Peachtree Street, N.E.,
Atlanta, Georgia 30303, at such time and date determined by SII that is within
two (2) business days following satisfaction of the conditions to Closing set
forth in Article VIII, provided that the Closing shall occur prior to
consummation of the Merger.
Section 2.4 Failure by Continuing Holder. If any Continuing Holder shall
default in the performance of any of his or its obligations hereunder, including
without limitation such Continuing Holder's failure or refusal to deliver or
cause to be delivered to SII any of the Continuing Holder's shares of Company
Common Stock required to be delivered to SII hereunder, or otherwise fail to
meet any of SII's conditions to Closing set forth herein, or if this Agreement
shall be terminated with respect to such Continuing Holder in accordance with
the terms hereof, then such default or failure of condition or termination shall
not relieve any of the other Continuing Holders of any obligation hereunder,
and, to the extent such failure or refusal by a Continuing Holder results in a
failure by the Continuing Holders to satisfy the Minimum Contribution
Requirement, each of SII and the Investor Stockholder, at its sole option, and
without prejudice to any rights against any such Continuing Holder with whom it
does not complete the transactions contemplated hereby, may either complete the
transactions contemplated hereby with the other Continuing Holders on the terms
provided herein, or refuse, without liability, to consummate such transactions
and thereby terminate all of its obligations hereunder; provided that if any
Continuing Holder fails or refuses to comply with its obligations hereunder, or
if this Agreement is otherwise terminated with respect to a Continuing Holder in
accordance with its terms, but neither SII nor the Investor Stockholder elects
(to the extent permitted by this Section 2.4) to terminate its obligations
hereunder, then SII shall, in exchange for the purchase price therefor (which
shall be equal to the additional consideration which is required to be paid
pursuant to the Merger for the outstanding shares of Company Common Stock held
by such Continuing Holder with whom SII does not complete the transactions
contemplated hereby), issue to the Investor Stockholder at the Closing an
additional number of shares of SII Common Stock as is equal to the number of
shares of SII Common Stock that would have otherwise been issued to such
Continuing Holder, and the Investor Stockholder shall purchase such additional
shares of SII Common Stock for such purchase price at the Closing.
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ARTICLE III
COVENANTS AND AGREEMENTS OF SII AND INVESTOR STOCKHOLDER
Section 3.1 Best Efforts. SII and the Investor Stockholder, severally and
not jointly, agree with each Continuing Holder that SII and the Investor
Stockholder will, (i) throughout the period prior to the Effective Time,
exercise its reasonable best efforts to consummate the Merger, including without
limitation voting shares of Company Common Stock which it owns, if any, and
shares of Company Common Stock for which it has a proxy, if any, in favor of the
Merger, or executing a written consent with respect thereto, and causing the
conditions to the Company's obligation to consummate the Merger set forth in
Section 8.3 of the Merger Agreement to be met and satisfied as quickly as
reasonably possible, and (ii) throughout the period prior to the Closing,
exercise its reasonable best efforts to cause the conditions to the Continuing
Holders' obligations under this Agreement set forth in Section 8.2 hereof to be
met and satisfied as quickly as reasonably possible; provided, however, that the
provisions of this Section 3.1 shall not require SII or the Investor Stockholder
to waive any closing conditions set forth in any agreements to which such Person
is a party.
Section 3.2 Consent to Certain Business Combinations. Until such time as
the Investor Stockholder, together with its direct and indirect wholly owned
subsidiaries, owns more than 95% of the outstanding shares of Surviving
Corporation Common Stock, the Company shall not merge or consolidate with or
into any other company which is not engaged in the manufacture, distribution
and/or sale of floor coverings (meaning that such company does not derive at
least 90% of its revenues from Standard Industrial Classification 2273), or
acquire all or substantially all of the assets or 50% or more of the outstanding
securities of any such company, without obtaining the prior written consent of
Continuing Holders owning more than 50% of the total number of shares of
Surviving Corporation Common Stock which are held by the Continuing Holders at
the time of such proposed transaction.
Section 3.3 Participation in Certain Transactions. If the Investor
Stockholder and/or any of its wholly owned subsidiaries which own shares of
Surviving Corporation Common Stock propose to enter into a transaction with any
unaffiliated third party pursuant to which more than 50% of the total amount of
outstanding shares of Surviving Corporation Common Stock will be sold or
otherwise transferred by the Investor Stockholder and/or any of its wholly owned
subsidiaries to such third party, the Investor Stockholder shall cause such
third party to deliver a written offer to each Continuing Holder providing for
the purchase of all shares of Surviving Corporation Common Stock owned by such
Continuing Holder for the same per share price and on the other terms which
apply to the transaction between such third party and the Investor Stockholder
or its subsidiary. Upon receipt of any such written offer, each Continuing
Holder shall have the right to elect (which election must be set forth in
writing and delivered to the Investor Stockholder within ten (10) business days
of receipt of such written offer), to either (a) participate in such transaction
at the per share price and on the other terms applicable to such transaction, or
(b) require the Investor Stockholder (or, at the election of the Investor
Stockholder, any of its direct or indirect wholly owned subsidiaries) to
purchase all (but not less than all) of his or its shares of Surviving
Corporation Common Stock, at the Purchase Price, which shall be calculated
applying the Year End Book Value for the year immediately preceding the date of
delivery of such third party written offer and as otherwise provided in Section
5.1(e), as if such transaction were a Triggered Put. Any such election shall be
binding on the applicable Continuing Holder. If the Continuing Holder elects to
participate in such third party transaction, the closing of such transaction
will be governed by the terms of such transaction. If the Continuing Holder
instead elects to require the Investor Stockholder (or its subsidiary) to
purchase his or its shares of Surviving Corporation Common Stock pursuant to
clause (b) above, the closing of the purchase by the Investor Stockholder (or,
at its election, its subsidiary) of such Continuing Holder's shares of Surviving
Corporation Common Stock shall take place on the later of (x) the date of the
closing of the Investor Stockholder's (and/or its subsidiary's) sale of its
shares of Surviving Corporation Common Stock to the third party purchaser, and
(y) the date which is five (5) business days after the date on which the
applicable Year End Book Value can first be calculated (which closing date shall
be no later than ninety (90) days after the end of the year which is used to
calculate such Year End Book Value), and the provisions of Section 5.1(b)(iv)
shall otherwise apply to such closing as if such transaction were a Triggered
Put.
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ARTICLE IV
COVENANTS OF THE CONTINUING HOLDERS
Section 4.1 Best Efforts. Each Continuing Holder, severally and not
jointly, agrees with SII and the Investor Stockholder that he or it will, (a)
subject to applicable fiduciary duties of such Continuing Holder, if any,
throughout the period prior to the Effective Time, cooperate fully with the
Company and exercise his or its reasonable best efforts to (i) consummate the
Merger, (ii) cause the Company to perform its obligations under the Merger
Agreement, and (iii) cause the Company to meet and satisfy the conditions of SII
set forth in Sections 8.1 and 8.2 of the Merger Agreement as quickly as
reasonably possible, and (b) throughout the period prior to the Closing,
exercise his or its reasonable best efforts to cause the conditions of SII and
the Investor Stockholder set forth in Sections 8.1 and 8.3 hereof to be met and
satisfied as quickly as reasonably possible; provided, however, that the
provisions of this Section 4.1 shall not prevent any Continuing Holder who is a
member of the Board of Directors of the Company, in his capacity as such a
director, from taking such actions, if any, as are permitted by Section 7.4 of
the Merger Agreement.
Section 4.2 No Sale, Etc. Each Continuing Holder hereby covenants and
agrees with SII and the Investor Stockholder that, other than as expressly
permitted hereby or pursuant to a Voting Agreement of even date herewith between
such Continuing Holder, SII and the Investor Stockholder, pending the Closing,
such Continuing Holder will not (a) sell, transfer, assign, pledge, hypothecate
or otherwise encumber or dispose of any of the Continuing Holder's shares of
Company Common Stock or Company Stock Options, other than, with respect to any
such Company Stock Options, to the extent such Company Stock Options are
transferred to the Company upon the exercise thereof and with respect to shares
of Company Common Stock, as payment or withholding on account of the exercise
price of Company Stock Options, (b) give a proxy with respect thereto, (c) limit
the right to vote any of such shares in any manner, or (d) agree to do any of
the foregoing.
Section 4.3 Custodial Arrangements. Within ten (10) calendar days
following the date hereof, the Continuing Holders will duly execute and deliver
a power of attorney in a form reasonably acceptable to SII ("Power of Attorney")
appointing and constituting the Persons designated therein, and each of them,
with full power of substitution, as the lawful agents and attorneys-in-fact of
each Continuing Holder (the "Attorneys") for the purpose of delivering and
assigning hereunder the shares of Company Common Stock to be contributed by such
Continuing Holder to SII in accordance with the terms hereof. Certificates in
negotiable form for such shares of Company Common Stock of such Continuing
Holder shall be placed in custody by such date, for the purpose of making
delivery of the shares of Company Common Stock under this Agreement, pursuant to
the terms of the Custody Agreement which shall be duly executed by such
Continuing Holder by such date (other than such shares of Company Common Stock
as will be acquired by the Continuing Holders upon the exercise of Company Stock
Options, which shall be delivered to the Custodian upon the issuance thereof).
In addition, each Continuing Holder's shares of SII Common Stock and, following
the Merger, Surviving Corporation Common Stock shall be delivered upon issuance
to, and held by, the Custodian pursuant to the Custody Agreement. Each
Continuing Holder severally agrees that the shares of Company Common Stock and
SII Common Stock (and, following the Merger, Surviving Corporation Common Stock)
represented by the certificates to be held in custody for him or it under the
Custody Agreement will be held for the benefit of and coupled with and subject
to the interest of SII (and, following the Merger, the Surviving Corporation)
hereunder, that the arrangements made by such Continuing Holder for such custody
and the appointment of the Attorneys by such Continuing Holder will be
irrevocable, and that the obligations of such Continuing Holder hereunder and
under the Custody Agreement shall not be terminated by operation of law, whether
by the death or incapacity of the Continuing Holder or the occurrence of any
other event. If the Continuing Holder should die or become incapacitated or if
any other such event should occur before the delivery of the shares of Company
Common Stock hereunder, certificates for such securities shall be delivered by
the Attorneys in accordance with the terms and conditions of this Agreement and
the Custody Agreement and actions taken by the Attorneys pursuant to the Power
of Attorney or the Custody Agreement shall be as valid as if such death,
incapacity or other event had not occurred, regardless of whether or not the
Attorneys, or any of them, shall have received notice thereof.
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ARTICLE V
PUTS AND CALLS
Section 5.1 Puts and Calls.
(a) Annual Put.
(i) Family Group Stockholder Annual Put. On March 31, 2002 (the
"Initial Exercise Date"), each Family Group Stockholder shall have the
right to require the Investor Stockholder to purchase, and the Investor
Stockholder, following the exercise of any such put, shall be obligated
to purchase (or cause any of its direct or indirect wholly owned
subsidiaries to purchase) from such Family Group Stockholder, upon the
terms and subject to the conditions of this Agreement, (1) up to ten
percent (10%) of such Family Group Stockholder's Minimum Contribution
Shares, and (2) up to thirty-three and one-third percent (33 1/3%) of
such Family Group Stockholder's Additional Contribution Shares, if any,
at the Purchase Price. On each anniversary of the Initial Exercise Date
(each such date, along with the Initial Exercise Date, referred to
herein as an "Annual Put Exercise Date"), each Family Group Stockholder
shall have the right to require the Investor Stockholder to purchase,
and the Investor Stockholder, following the exercise of any such put,
shall be obligated to purchase (or cause any of its direct or indirect
wholly owned subsidiaries to purchase) from such Family Group
Stockholder, upon the terms and subject to the conditions of this
Agreement, (1) up to ten percent (10%) of such Family Group
Stockholder's Minimum Contribution Shares, (2) up to thirty-three and
one-third percent (33 1/3%) of such Family Group Stockholder's
Additional Contribution Shares, if any, and (3) any additional Minimum
Contribution Shares or Additional Contribution Shares owned by such
Family Group Stockholder which such Family Group Stockholder had the
right on any prior Annual Put Exercise Date to, but did not, put to the
Investor Stockholder pursuant to this Section 5.1(a)(i), at the Purchase
Price, provided that (1) in no event shall any Family Group Stockholder
at any time have a right to put more than one hundred percent (100%) of
such Family Group Stockholder's Minimum Contribution Shares and
Additional Contribution Shares to the Investor Stockholder pursuant
hereto, and (2) upon a Triggering Event, the shares of Surviving
Corporation Common Stock owned by the Triggering Holder shall no longer
be subject to this Section 5.1(a)(i) and may only be put to the Investor
Stockholder pursuant to Section 5.1(b)(i).
(ii) Management Holder Annual Put. On the Initial Exercise Date,
each Management Holder shall have the right to require the Investor
Stockholder to purchase, and the Investor Stockholder, following the
exercise of any such put, shall be obligated to purchase (or cause any
of its direct or indirect wholly owned subsidiaries to purchase) from
such Management Holder, upon the terms and subject to the conditions of
this Agreement, at the Purchase Price, up to thirty-three and one-third
percent (33 1/3%) of such Management Holder's Management Contribution
Shares. On each subsequent Put Exercise Date, each Management Holder
shall have the right to require the Investor Stockholder to purchase,
and the Investor Stockholder, following the exercise of any such put,
shall be obligated to purchase (or cause any of its direct or indirect
wholly owned subsidiaries to purchase) from such Management Holder, upon
the terms and subject to the conditions of this Agreement, (1) up to
thirty-three and one third percent (33 1/3%) of such Management Holder's
Management Contribution Shares, and (2) any additional Management
Contribution Shares which such Management Holder had the right on any
prior Put Exercise Date to, but did not, put to the Investor Stockholder
pursuant to this Section 5.1(a)(ii), at the Purchase Price, provided
that (1) in no event shall any Management Holder at any time have a
right to put more than one hundred percent (100%) of such Management
Holder's Management Contribution Shares to the Investor Stockholder
pursuant hereto, and (2) upon a Triggering Event, the shares of
Surviving Corporation Common Stock owned by the Triggering Holder shall
no longer be subject to this Section 5.1(a)(ii) and may only be put to
the Investor Stockholder pursuant to Section 5.1(b)(i).
(iii) Notice of Exercise of Annual Put. If a Family Group
Stockholder or Management Holder wishes to exercise a put right pursuant
to Section 5.1(a)(i) or (ii), as applicable (any such
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put, an "Annual Put"), such Stockholder shall provide written notice to
such effect to the Investor Stockholder (which notice must be received
by the Investor Stockholder by no later than the applicable Annual Put
Exercise Date) and specifying the number of shares of Surviving
Corporation Common Stock to be put to the Investor Stockholder.
(iv) Closing of Purchase Pursuant to Annual Put. The closing of
the purchase of a Continuing Holder's shares of Surviving Corporation
Common Stock by the Investor Stockholder or its wholly owned subsidiary
pursuant to Section 5.1(a)(i) or (ii) shall take place on the later of
(1) the applicable Annual Put Exercise Date, and (2) the date which is
twenty (20) business days after the receipt by the Investor Stockholder
of the required notice of exercise of such Annual Put. Such closing
shall take place at 11:00 a.m. Eastern Time at the principal offices of
the Company, or at such other time or place as the parties to such
transaction may agree upon. At such closing, (A) the Continuing Holder
shall sell to the Investor Stockholder or its designated subsidiary full
right, title and interest in and to the shares of Surviving Corporation
Common Stock so purchased, free and clear of all liens, security
interests or adverse claims of any kind and nature, and shall deliver to
the Investor Stockholder or such subsidiary appropriate stock transfer
powers duly endorsed, (B) the Custodian, on such Continuing Holder's
behalf, shall deliver to the Investor Stockholder or such subsidiary a
certificate or certificates representing the shares of Surviving
Corporation Common Stock sold, with all necessary transfer tax stamps
affixed thereto at the expense of the Continuing Holder, and (C) the
Investor Stockholder or such subsidiary shall wire transfer cash to an
account designated in writing by the Continuing Holder in an amount
equal to the Purchase Price applicable to the shares of Surviving
Corporation Common Stock so purchased.
(b) Triggered Put and Call.
(i) Triggered Put. At any time after (1) the death of a Continuing
Holder or, with respect to a Family Group Entity or Management Holder
Entity, its Designated Individual, (2) the termination of employment of
an Employed Family Group Stockholder by the Surviving Corporation (or,
if he or she is employed by a subsidiary of the Surviving Corporation,
by such subsidiary) for any reason (including as a result of such
Employed Family Group Stockholder's disability, but not including a
voluntary termination of employment (other than as a result of his or
her disability) by such Employed Family Group Stockholder), or (3) the
termination of a Management Holder's employment by the Surviving
Corporation (or, if he or she is employed by a subsidiary of the
Surviving Corporation, by such subsidiary) for any reason (whether
voluntary or involuntary, and including as a result of such Management
Holder's disability) (any such event under clauses (1), (2) or (3), a
"Triggering Event"), the estate of such Continuing Holder, the trustee
or other duly authorized person on behalf of such Family Group Entity or
Management Holder Entity, the terminated Family Group Stockholder or the
terminated Management Holder, as applicable (such estate, trustee or
other authorized person, Employed Family Group Stockholder or Management
Holder, the "Triggering Continuing Holder"), shall have the right to
require the Investor Stockholder to purchase, and the Investor
Stockholder, following the exercise of any such put, shall be obligated
to purchase (or cause any of its wholly owned subsidiaries to purchase)
from such Triggering Continuing Holder, upon the terms and subject to
the conditions of this Agreement, all, but not less than all, of the
shares of Surviving Corporation Common Stock owned by such Triggering
Continuing Holder at the Purchase Price. Any such put of shares of
Surviving Corporation Common Stock to the Investor Stockholder pursuant
to this Section 5.1(b)(i) is referred to herein as a "Triggered Put."
(ii) Triggered Call. At any time after the occurrence of a
Triggering Event, the Investor Stockholder shall have the right to
purchase from the estate of the Continuing Holder, the trustee or other
authorized individual on behalf of the applicable Family Group Entity or
Management Holder Entity, the terminated Family Group Stockholder or the
terminated Management Holder, as applicable, and such estate, trustee,
Employed Family Group Stockholder or Management Holder, as applicable
(the recipient of any such call, a "Call Recipient"), shall be obligated
to sell to the Investor Stockholder (or any of its wholly owned
subsidiaries), upon the terms and subject to the
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conditions of this Agreement, all, but not less than all, of the shares
of Surviving Corporation Common Stock owned by such Call Recipient, at
the Purchase Price (a "Triggered Call").
(iii) Notice of Exercise. A Triggered Put or Triggered Call may be
exercised by (1) in the case of a Triggered Put, delivery by the
Triggering Continuing Holder to the Investor Stockholder of written
notice to such effect, and (2) in the case of a Triggered Call, delivery
by the Investor Stockholder to the Call Recipient of written notice to
such effect. Any notice of exercise of a Triggered Put must specify
which Elected Year End Book Value shall apply to the calculation of the
applicable Purchase Price, provided, however, that (A) if a notice of
exercise of a Triggered Put, so specifying which Elected Year End Book
Value shall apply to the Purchase Price calculation, is not delivered
within thirty (30) days of the applicable Triggering Event, the Elected
Year End Book Value shall be the Year End Book Value for the year during
which such notice is delivered, and (B) notwithstanding the provisions
of Section 5.1(c), if the Investor Stockholder delivers a notice of a
Triggered Call to the applicable Call Recipient within the first thirty
(30) days immediately following the applicable Triggering Event, such
Call Recipient may, within ten (10) days of receipt of such notice,
deliver a written notice to the Investor Stockholder specifying which
Elected Year End Book Value shall apply to the calculation of the
applicable Purchase Price, which Elected Year End Book Value shall then
be binding for purposes of such calculation.
(iv) Closing of Purchase Pursuant to Triggered Put or Triggered
Call. The closing of the purchase of a Continuing Holder's shares of
Surviving Corporation Common Stock by the Investor Stockholder or its
wholly owned subsidiary pursuant to Section 5.1(b)(i) or (ii) shall take
place on the later of (1) the date which is twenty (20) business days
after the delivery of a notice of exercise to the Investor Stockholder
or the Call Recipient, as applicable, pursuant to Section 5.1(b)(iii),
and (2) the date which is five (5) business days after the date on which
the applicable Elected Year End Book Value can first be calculated
(which closing date shall be no later than ninety (90) days after the
end of the year which is used to calculate such Elected Year End Book
Value). Such closing shall take place at 11:00 a.m. Eastern Time at the
principal offices of the Company, or at such other time or place as the
parties to such transaction may agree upon. At such closing, (A) the
Triggering Continuing Holder shall sell to the Investor Stockholder or
its designated subsidiary full right, title and interest in and to the
shares of Surviving Corporation Common Stock so purchased, free and
clear of all liens, security interests or adverse claims of any kind and
nature, and shall deliver to the Investor Stockholder or such subsidiary
appropriate stock transfer powers duly endorsed, (B) the Custodian, on
such Triggering Continuing Holder's behalf, shall deliver to the
Investor Stockholder or such subsidiary a certificate or certificates
representing the shares of Surviving Corporation Common Stock sold, with
all necessary transfer tax stamps affixed thereto at the expense of the
Triggering Continuing Holder, and (C) the Investor Stockholder or such
subsidiary shall wire transfer cash to an account designated in writing
by the Triggering Continuing Holder in an amount equal to the Purchase
Price applicable to the shares of Surviving Corporation Common Stock so
purchased.
(c) Purchase Price. With respect to any shares of Surviving
Corporation Common Stock subject to an Annual Put, Triggered Put or
Triggered Call, the purchase price shall equal the product of (i) the
number of shares of Surviving Corporation Common Stock subject thereto, and
(ii) the purchase price per share, which shall equal the Per Share Amount,
plus the amount, if any, by which the applicable Year End Book Value
exceeds the Base Book Value, provided that, if the Year End Book Value is
less than the Base Book Value, the purchase price per share shall equal the
Per Share Amount minus the lesser of (1) the amount by which the Base Book
Value exceeds the applicable Year End Book Value, and (2) the sum,
calculated on a per share basis, of all cash dividends and other
distributions paid by the Surviving Corporation to the Stockholders since
the Merger. The applicable Year End Book Value shall be (x) with respect to
the exercise of an Annual Put, the Year End Book Value for the year
immediately preceding the applicable Annual Put Exercise Date, (y) with
respect to the exercise of a Triggered Put (and subject to the provisions
of Section 5.1(b)(iii)), at the election of the Triggering Continuing
Holder, either (1) the Year End Book Value for the year immediately
preceding the date the notice of
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exercise of such Triggered Put is delivered to the Investor Stockholder
pursuant to Section 5.1(b)(iii), or (2) the Year End Book Value (upon
determination thereof) for the year during which such notice of exercise is
so delivered, and (z) with respect to the exercise of a Triggered Call (and
subject to the provisions of Section 5.1(b)(iii)), the Year End Book Value
(upon determination thereof) for the year during which such notice of
exercise is so delivered (whichever Year End Book Value is to be applied to
the calculation of the purchase price pursuant to clauses (y) or (z), as
applicable, the "Elected Year End Book Value"). The applicable purchase
price as determined pursuant to this Section 5.1(c) is referred to herein
as the "Purchase Price."
(d) Any percentage calculated pursuant to this Section 5.1 shall be
based on the total number of Minimum Contribution Shares, Additional
Contribution Shares or Management Contribution Shares, as applicable, which
were issued to the applicable Stockholder at the Closing.
Section 5.2 Wills. Each Continuing Holder which is a natural person
agrees to keep in place a valid will and to include in such will a direction and
authorization to his executor to comply with the provisions of this Agreement
and to sell his shares of Surviving Corporation Common Stock in accordance with
this Agreement. Each Continuing Holder which is a Family Group Entity or
Management Holder Entity agrees to amend its trust agreement or other governing
agreement as necessary (and to keep such amended agreement in place) to permit
the provisions of this Agreement to be binding on and enforceable against such
Family Group Entity or Management Holder Entity.
ARTICLE VI
RESTRICTIONS ON CONTINUING HOLDER TRANSFERS
Section 6.1 General Restriction on Transfers by Continuing
Holders. Except (a) as expressly permitted in Section 6.2 or (b) for transfers
to the estate of such Continuing Holder upon his death (which transfer shall be
subject to a Triggered Call as set forth in Section 5.1(b)(ii)), no Continuing
Holder shall sell, assign, pledge, encumber, transfer, devise or otherwise
dispose of any shares of SII Common Stock or Surviving Corporation Common Stock
or Company Stock Options which he or it may now or hereafter own or any
pecuniary interest in any such shares, grant any option or right to purchase
such shares or any beneficial interest therein or engage in any swap, hedge,
derivative or other transaction to reduce the risk of ownership thereof. Any
such purported transfer, disposition, grant or transaction, except in compliance
with this Agreement, shall be null and void.
Section 6.2 Permitted Transfers By Continuing Holders. Each Continuing
Holder, at any time, may transfer any shares of SII Common Stock or Surviving
Corporation Common Stock which he may now or hereafter own (a) to any third
Person with the prior written consent of the Investor Stockholder, which consent
may be withheld in the Investor Stockholder's absolute discretion but, if given,
shall specify the identity of the Person to whom such transfer may be made, the
price and terms of such proposed transfer and any conditions which the Investor
Stockholder, in its discretion, chooses to impose on such transfer or on the
proposed transferee, or (b) to the Investor Stockholder or its designated
subsidiary in accordance with Article V; provided, with respect to clause (a),
that (x) the transferee of any such shares of SII Common Stock or Surviving
Corporation Common Stock shall have executed a Company Joinder Agreement and (y)
the Company shall have received an opinion of counsel reasonably satisfactory to
it to the effect that registration of such shares with the Commission under the
Securities Act is not required.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Section 7.1 Representations and Warranties by SII. SII hereby represents
and warrants to each of the Stockholders as follows:
(a) SII is a corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia, and it has the requisite
corporate power to carry on its business as it is now being conducted.
(b) SII has all requisite corporate power and authority to enter into
the Merger Agreement and this Agreement and to perform its obligations
hereunder and thereunder, including the offer, issuance, sale and delivery
by it of shares of SII Common Stock pursuant to this Agreement.
(c) The execution, delivery and performance by SII of the Merger
Agreement and this Agreement, including the offer, issuance, sale and
delivery by SII of shares of SII Common Stock pursuant to this Agreement,
are within SII's corporate power, and have been duly authorized by all
necessary corporate action by SII.
(d) Subject to SII's compliance with the requirements of the Exchange
Act, and except for compliance with the HSR Act and any similar
requirements of foreign jurisdictions, (i) the execution and delivery of
the Merger Agreement by SII, (ii) the execution and delivery of this
Agreement by SII, (iii) the consummation by SII of the transactions
contemplated hereby and thereby, and (iv) the compliance by SII with the
terms and provisions of the Merger Agreement and this Agreement, will not
conflict with or result in a default under, any law or regulation
applicable to SII, the certificate of incorporation or bylaws of SII, or
any agreement, judgment, injunction, order, decree or other instrument
binding upon SII.
(e) This Agreement has been duly and validly executed and delivered by
SII and constitutes the valid and binding agreement of SII, enforceable
against SII in accordance with its terms, except to the extent limited by
bankruptcy, insolvency or other laws of general application relating to or
affecting the enforcement of creditors' rights. The Merger Agreement, when
it is executed and delivered by SII, will have been duly and validly
executed and delivered by it and will constitute its valid and binding
agreement, enforceable against SII in accordance with its terms, except to
the extent limited by bankruptcy, insolvency or other laws of general
application relating to or affecting the enforcement of creditors' rights.
(f) All shares of SII Common Stock, when issued and delivered against
payment therefor in accordance with this Agreement, will have been duly
authorized, validly issued and fully paid and will be nonassessable and
free and clear of any lien, option or preemptive or other right or claim of
SII except as set forth in this Agreement.
(g) SII is not in violation of or in default under any term or
provision of any charter, by-law, mortgage, indenture, agreement,
instrument, statute, rule, regulation, judgment, decree, order, writ or
injunction applicable to it, such that such violations or defaults in the
aggregate might materially and adversely affect the ability of SII to
perform its obligations under this Agreement or the Merger Agreement.
(h) SII acknowledges that the shares of Company Common Stock to be
contributed to SII pursuant hereto may be "restricted securities" within
the meaning of Rule 144 of the Commission, that the disposition of the
shares of Company Common Stock to be contributed to SII pursuant hereto is
subject to compliance with the Securities Act and the regulations
thereunder, and that the shares of Company Common Stock to be contributed
to SII may be legended accordingly, and SII agrees to acquire such shares
of Company Common Stock for investment and not with the intention of
engaging in a distribution of such shares within the meaning of the
Securities Act.
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Section 7.2 Representations and Warranties by All Stockholders.
(a) Each Stockholder which is not an individual, by execution of this
Agreement, hereby severally and not jointly represents and warrants to the
other Stockholders and to SII as follows:
(i) The execution, delivery and performance of this Agreement by
such Stockholder have been duly authorized by all requisite corporate or
other appropriate action. This Agreement has been duly executed and
delivered by such Stockholder and constitutes the valid and binding
obligation of such Stockholder enforceable in accordance with its terms,
except to the extent limited by bankruptcy, insolvency or other laws of
general application relating to or affecting the enforcement of
creditors' rights;
(ii) Subject to compliance with the HSR Act and any similar
requirements of foreign jurisdictions, neither the execution nor
delivery of this Agreement nor the consummation of the transactions
contemplated hereby, nor compliance with the terms and provisions
hereof, will conflict with, or result in a breach of, the terms,
conditions or provisions of, or constitute a default under, the charter
or by-laws or agreement or certificate of partnership or limited
partnership of such Stockholder, or of any applicable law, or of any
order, writ, injunction or decree of any court, administrator or
arbitrator, or of any trust agreement or other agreement or instrument
which is applicable to such Stockholder under which such Stockholder is
obligated or by which any of such Stockholder's property is bound; and
(iii) Such Stockholder is acquiring the shares of SII Common Stock
acquired hereunder (and the shares of Surviving Corporation Common Stock
into which such shares of SII Common Stock will be converted) for its
own account, and not with a view to any resale or distribution thereof.
Such Stockholder understands that such shares are "restricted
securities" within the meaning of Rule 144 of the Commission and that if
such Stockholder in the future should decide to dispose of such shares,
it may do so only in compliance with the Securities Act and any
applicable state blue sky or securities laws and that such shares may be
legended accordingly. Such Stockholder further understands that the
transferability of such shares is further restricted by the terms of
this Agreement.
(b) Each Stockholder who is an individual, by execution of this
Agreement, hereby severally and not jointly represents and warrants to the
other Stockholders and to SII as follows:
(i) This Agreement has been duly executed and delivered by such
Stockholder and constitutes the valid and binding obligation of such
Stockholder enforceable in accordance with its terms, except to the
extent limited by bankruptcy, insolvency or other laws of general
application relating to or affecting the enforcement of creditors'
rights.
(ii) Subject to compliance with the HSR Act and any similar
requirements of foreign jurisdictions, neither the execution nor
delivery of this Agreement nor the consummation of the transactions
contemplated hereby, nor compliance with the terms and provisions
hereof, will conflict with or result in a breach of, the terms,
conditions or provisions of, or constitute a default under, any
applicable law, or of any order, writ, injunction or decree of any
court, administrator or arbitrator or of any agreement or instrument
which is applicable to such Stockholder, under which such Stockholder is
obligated or by which any of such Stockholder's property is bound.
(iii) Such Stockholder is acquiring the shares of SII Common Stock
acquired hereunder (and the shares of Surviving Corporation Common Stock
into which such shares of SII Common Stock will be converted) for its
own account, and not with a view to any resale or distribution thereof.
Such Stockholder understands that such shares are "restricted
securities" within the meaning of Rule 144 of the Commission and that if
such Stockholder in the future should decide to dispose of such shares
to a third party, it may do so only in compliance with the Securities
Act and any applicable state blue sky or securities laws and that such
shares may be legended accordingly. Such Stockholder further understands
that the transferability of such shares is further restricted by the
terms of this Agreement.
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(c) Each Stockholder, by execution of this Agreement, hereby severally
and not jointly represents and warrants to the other Stockholders and to
SII as follows:
(i) Such Stockholder acknowledges that the offering and sale of the
shares of SII Common Stock (and the shares of Surviving Corporation
Common Stock into which such shares of SII Common Stock will be
converted) pursuant to this Agreement is intended to be exempt from
registration under the Securities Act. In furtherance thereof, the
Stockholder represents and warrants that:
(A) Such Stockholder is an "accredited investor" within the
meaning of Rule 501(a) under the Securities Act or has such knowledge
and experience in financial and business matters that such
Stockholder is capable of evaluating the merits and risks of, and
such Stockholder is able to bear the economic risk of, his
acquisition of the shares of SII Common Stock (and the shares of
Surviving Corporation Common Stock into which such shares of SII
Common Stock will be converted).
(B) Such Stockholder has been given the opportunity to ask
questions of, and receive answers from, SII concerning the terms and
conditions of the offering of such shares and other matters
pertaining to an investment therein, and has been given the
opportunity to obtain such additional information necessary in order
for such Stockholder to evaluate the merits and risks of an
investment in such shares to the extent SII possesses such
information or can acquire it without unreasonable effort or expense.
(ii) Such Stockholder acknowledges that SII is entering into this
Agreement in reliance upon such Stockholder's representations and
warranties in this Agreement.
Section 7.3 Additional Representations and Warranties by Continuing
Holders. Each Continuing Holder, by execution of this Agreement, hereby
severally and not jointly represents and warrants to the other Stockholders and
to SII as follows:
(a) Such Continuing Holder now has or upon the exercise of Company
Stock Options owned by such Continuing Holder will have, and at the Closing
will have, good and marketable title to the shares of Company Common Stock
shown on Schedule B as being contributed by such Continuing Holder, free
and clear of all liens, pledges, encumbrances, equities and claims
whatsoever, except those contemplated under this Agreement. Upon the
delivery of such shares of Company Common Stock and the exchange of SII
Common Stock therefor in accordance with the terms hereof and the Custody
Agreement, SII will receive good and marketable title to such shares of
Company Common Stock, free and clear of all liens, encumbrances, equities
and claims whatsoever, other than such liens, encumbrances, equities and
claims created by SII.
(b) On the Closing Date, all transfer taxes which are required to be
paid by such Continuing Holder in connection with his transfer and
contribution of his shares of Company Common Stock to SII will have been
fully paid or provided for by him.
ARTICLE VIII
CONDITIONS TO CLOSING
Section 8.1 Conditions to Obligations of All Parties. The respective
obligations of each of the parties under this Agreement shall be subject to the
fulfillment, at or prior to the Closing, of the following conditions, none of
which may be waived:
(a) The applicable waiting period under the HSR Act shall have expired
and, if required to be obtained under applicable law prior to the
consummation of the Merger, the consent or approval of any Government
Entity in any foreign jurisdiction shall have been received;
(b) The Company Stockholder Approval shall have been obtained; and
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(c) There shall not be any preliminary or permanent injunction in
effect or other order by any federal or state court which prohibits the
consummation of the transactions contemplated by this Agreement or the
Merger Agreement.
Section 8.2 Additional Conditions to Obligations of Continuing
Holders. The obligations of each Continuing Holder to consummate the
transactions contemplated to occur at the Closing shall be subject to the
fulfillment, at or prior to the Closing, of the following conditions unless
waived by such Continuing Holder:
(a) Each of the Investor Stockholder and SII shall have performed in
all material respects its agreements contained in this Agreement required
to be performed on or prior to the Closing, and each of the Investor
Stockholder and SII shall have performed in all material respects its
agreements contained in the Merger Agreement required to be performed on or
prior to the Effective Time (except for those agreements which are not
capable of being performed until after the Closing).
(b) The representations and warranties of SII and the Investor
Stockholder set forth in this Agreement shall be true in all material
respects as of the date of this Agreement and as of the Closing as if made
as of such time, and the representations and warranties of the Investor
Stockholder and SII set forth in the Merger Agreement shall be true in all
material respects as of the date of the Merger Agreement and as of the
Closing as if made as of such time.
Section 8.3 Additional Conditions to Obligations of Investor Stockholder
and SII. The obligations of the Investor Stockholder and SII to consummate the
transactions contemplated to occur at the Closing shall be subject to the
fulfillment, at or prior to the Closing, of the following conditions unless
waived by the Investor Stockholder and SII:
(a) The Continuing Holders shall have performed in all material
respects their respective agreements contained in this Agreement required
to be performed on or prior to the Closing, and the Company shall have
performed in all material respects its agreements contained in the Merger
Agreement required to be performed on or prior to the Effective Time
(except for those agreements which are not capable of being performed until
after the Closing).
(b) The representations and warranties of the Continuing Holders set
forth in this Agreement shall be true in all material respects as of the
date of this Agreement and as of the Closing as if made as of such time,
and the representations and warranties of the Company set forth in the
Merger Agreement shall be true in all material respects as of the date of
the Merger Agreement and as of the Closing as if made as of such time.
(c) All conditions of SII to the consummation of the Merger at the
Effective Time (except for those conditions, if any, which would not be
capable of being fulfilled until after the Closing) shall have been
fulfilled or waived in writing.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Termination. In addition to the rights of SII and Investor
Stockholder set forth in Section 2.4, the obligations of the parties to
consummate the transactions contemplated to occur at the Closing may be
terminated at any time prior to the Closing:
(a) By the mutual consent of SII and the Investor Stockholder, on the
one hand, and, with respect to any Continuing Holder, by such Continuing
Holder, on the other hand, it being agreed that (1) the mutual termination
respecting a Continuing Holder shall not, subject to the provisions of
Section 2.4, affect the rights of any other Continuing Holder unless so
consented to by such other Continuing Holder and (2) SII and the Investor
Stockholder shall not consent to any termination respecting a Continuing
Holder pursuant to this Section 9.1(a) if such termination would result in
a failure of the Continuing Holders to meet the Minimum Contribution
Requirement;
B-17
<PAGE> 112
(b) By any Continuing Holder with respect to such Continuing Holder
(subject to the provisions of Section 2.4) or by SII or the Investor
Stockholder if the Closing shall not have occurred on or before the outside
termination date set forth in the Merger Agreement for consummation of the
Merger.
In the event of any termination under this Section 9.1, this Agreement, as
between the terminating parties, shall forthwith become void and there shall be
no liability under this Agreement on the part of any of such terminating parties
for such termination. Nothing contained herein shall relieve any party from any
liability resulting from a breach of this Agreement.
Section 9.2 Restrictive Legends.
(a) Each certificate evidencing shares of SII Common Stock to be
issued to the Continuing Holders (and the shares of Surviving Corporation
Common Stock into which such shares of SII Common Stock will be converted)
shall contain the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES
AND REGULATIONS THEREUNDER (THE "ACT"), OR UNDER THE SECURITIES LAWS OF
ANY STATE; AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE ACT, AND, IF
APPLICABLE, THE SECURITIES LAWS OF ANY STATE OR AN EXEMPTION THEREFROM."
"BY ITS ACCEPTANCE HEREOF, THE HOLDER OF THIS CERTIFICATE
REPRESENTS THAT IT IS ACQUIRING THE SHARES REPRESENTED BY THIS
CERTIFICATE FOR ITS OWN ACCOUNT AND AGREES TO COMPLY IN ALL RESPECTS
WITH APPLICABLE SECURITIES LAWS AND THE PROVISIONS OF THE AMENDED AND
RESTATED CONTRIBUTION AND PARTICIPATION AGREEMENT DATED AS OF DECEMBER
1, 2000 (THE "CONTRIBUTION AGREEMENT"), A COPY OF WHICH IS ON FILE AT
THE PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY."
"THE SALE, ASSIGNMENT, TRANSFER, PLEDGE, ENCUMBRANCE, OR OTHER
DISPOSITION OF THE SHARES EVIDENCED BY THIS CERTIFICATE, OR ANY INTEREST
IN SAID SHARES, IS PROHIBITED EXCEPT AS PERMITTED BY THE TERMS OF THE
CONTRIBUTION AGREEMENT. NO SUCH SALE, ASSIGNMENT, TRANSFER, PLEDGE,
ENCUMBRANCE OR OTHER DISPOSITION SHALL BE EFFECTIVE UNLESS MADE IN
ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE CONTRIBUTION AGREEMENT."
Section 9.3 Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including wire, telecopy, or similar
writing) and shall be given to such party at its address or telecopy number set
forth on the signature pages hereof or such other address or telecopy number as
such party may hereafter specify for this purpose by notice to the Secretary of
SII. Each such notice, request or other communication shall be effective (i) if
given by telecopy, when such telecopy is transmitted to the telecopy number
specified in this Section and the appropriate confirmation is received, (ii) if
given by mail, three business days after such communication is deposited in the
mails registered or certified, return receipt requested, with postage prepaid,
addressed as aforesaid, or (iii) if given by any other means, when delivered at
the address specified in this Section.
Section 9.4 Additional Parties. Any person who executes a Company Joinder
Agreement shall be deemed to be a Management Holder and shall be bound by all
obligations and, except to the extent limited in said joinder agreement,
entitled to all rights and privileges of a Management Holder as if he, she or it
had been an original signatory to this Agreement. Any person who executes an
Investor Joinder Agreement shall be deemed to be an Investor Stockholder and
shall be bound by all obligations and, except to the extent limited in said
joinder agreement, entitled to all rights and privileges of an Investor
Stockholder as if he, she or it had been an original signatory to this
Agreement.
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<PAGE> 113
Section 9.5 Expenses. Whether or not the transactions contemplated to
occur at the Closing are consummated, all costs and expenses incurred in
connection with this Agreement shall be paid by the party incurring such
expenses (it being understood that the costs and expenses of the Continuing
Holders in negotiating this Agreement are to be paid by the Company).
Section 9.6 Amendments and Waivers. Any provision of this Agreement may
be amended if, but only if, such amendment is in writing and is signed by SII,
the Investor Stockholder and any Continuing Holder whose rights or duties are
affected thereby. Any provision of this Agreement may be waived if, but only if,
such waiver is in writing and is signed by SII, the Investor Stockholder and
each Continuing Holder whose rights or duties are affected by such waiver.
Section 9.7 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns (including any person who acquires any shares
of Surviving Corporation Common Stock and agrees to be bound by the provisions
hereof as if originally the party hereto who purchased or originally acquired
such shares of Surviving Corporation Common Stock).
Section 9.8 Georgia Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Georgia.
Section 9.9 Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto were upon the same instrument.
Section 9.10 Captions. The captions in this Agreement are included for
convenience of reference only, do not constitute a part hereof and shall be
disregarded in the construction hereof.
Section 9.11 No Rights As Employee. Nothing in this Agreement shall
affect in any manner whatsoever any rights of SII, the Surviving Corporation or
their affiliates to terminate a Continuing Holder's employment for any reason,
with or without cause, subject to any written employment agreement to which a
Continuing Holder may be a party.
Section 9.12 Genders and Plurals. Where the context so indicates, the
masculine pronoun shall include the feminine pronoun and the singular shall
include the plural.
Section 9.13 Severability. In case any one or more of the provisions or
parts of a provision contained herein shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
or part of a provision or any other jurisdiction, but this Agreement shall be
reformed and construed in any such jurisdiction as if such invalid or illegal or
unenforceable provision or part of a provision had never been contained herein
and such provision or part shall be reformed so that it would be valid, legal
and enforceable to the maximum extent permitted in such jurisdiction.
Section 9.14 Third Party Beneficiary. The parties hereto agree that the
Company shall be a third party beneficiary of this Agreement, entitled to
enforce its provisions in accordance with its terms.
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<PAGE> 114
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
SII Acquisition, Inc.
By: /s/ MARC D. HAMBURG
--------------------------------------
Its: Vice President
--------------------------------------
Berkshire Hathaway Inc.
By: /s/ MARC D. HAMBURG
--------------------------------------
Its: Vice President
--------------------------------------
/s/ ROBERT E. SHAW
--------------------------------------
Robert E. Shaw
Robert E. Shaw, L.P.
By: /s/ ROBERT E. SHAW
--------------------------------------
Its: General Partner
--------------------------------------
/s/ ANNA SUE SHAW
--------------------------------------
Anna Sue Shaw
/s/ ROBERT E. SHAW, JR.
--------------------------------------
Robert E. Shaw, Jr.
/s/ SUSAN S. YOUNG
--------------------------------------
Susan S. Young
/s/ THOMAS TRIPP SHAW
--------------------------------------
Thomas Tripp Shaw
/s/ LEWIS CLAYTON SHAW
--------------------------------------
Lewis Clayton Shaw
Julian D. Saul Trust
By: /s/ JULIAN D. SAUL
--------------------------------------
Its: Trustee
--------------------------------------
Anita Saul Trust
By: /s/ ANITA SAUL
--------------------------------------
Its: Trustee
--------------------------------------
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<PAGE> 115
Little Family Limited Partnership
By: /s/ NORRIS LITTLE
--------------------------------------
Its: General Partner
--------------------------------------
/s/ WILLIAM C. LUSK
--------------------------------------
William C. Lusk
/s/ VANCE D. BELL
--------------------------------------
Vance D. Bell
/s/ GERALD EMBRY
--------------------------------------
Gerald Embry
/s/ SPRIGHT D. HOLLAND
--------------------------------------
Spright D. Holland
/s/ KENNETH G. JACKSON
--------------------------------------
Kenneth G. Jackson
/s/ JEFFREY TODD MEADOWS
--------------------------------------
Jeffrey Todd Meadows
/s/ PERCY D. MERRITT
--------------------------------------
Percy D. Merritt
/s/ HENRY H. LONG
--------------------------------------
Henry H. Long
/s/ JULIUS C. SHAW, JR.
--------------------------------------
Julius C. Shaw, Jr.
/s/ ANITA SAUL
--------------------------------------
Anita Saul
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<PAGE> 116
SCHEDULE A
INVESTOR STOCKHOLDER
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
NAME CASH CONTRIBUTION COMPANY SHARES SII COMMON STOCK
---- ----------------- -------------- -------------------
<S> <C> <C> <C>
Berkshire Hathaway Inc................... $2,016,686,315 2,194,200 108,335,585
</TABLE>
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<PAGE> 117
SCHEDULE B
CONTINUING HOLDERS
FAMILY GROUP STOCKHOLDERS
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
SII COMMON STOCK
---------------------------
MINIMUM ADDITIONAL
COMPANY CONTRIBUTION CONTRIBUTION
NAME SHARES SHARES SHARES
---- --------- ------------ ------------
<S> <C> <C> <C>
Robert E. Shaw.............................................. 6,634,348 6,485,604 148,744
Anna Sue Shaw............................................... 64,652 -- 64,652
Robert E. Shaw, Jr.......................................... 200,000 -- 200,000
Susan S. Young.............................................. 350,000 -- 350,000
Thomas Tripp Shaw........................................... 200,000 -- 200,000
Lewis Clayton Shaw.......................................... 450,000 -- 450,000
Anita Saul.................................................. 22,510 22,510 --
</TABLE>
FAMILY GROUP ENTITIES
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
SII COMMON STOCK
---------------------------
MINIMUM ADDITIONAL
COMPANY CONTRIBUTION CONTRIBUTION
NAME DESIGNATED INDIVIDUAL SHARES SHARES SHARES
---- --------------------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Robert E. Shaw, L.P........................ Robert E. Shaw 100,000 -- 100,000
Julian D. Saul Family Trust................ Julian D. Saul 6,267,883 6,267,883 --
Anita Saul Family Trust.................... Julian D. Saul 195,211 195,211 --
</TABLE>
MANAGEMENT HOLDERS
<TABLE>
<CAPTION>
NUMBER OF SHARES
COMPANY OF
NAME SHARES SII COMMON STOCK
---- ------- ----------------
<S> <C> <C>
William C. Lusk............................................. 300,000 300,000
Vance D. Bell............................................... 112,332 112,332
Gerald Embry................................................ 80,830 80,830
Spright D. Holland.......................................... 23,535 23,535
Kenneth G. Jackson.......................................... 49,748 49,748
Jeffrey Todd Meadows........................................ 14,651 14,651
Percy D. Merritt............................................ 51,532 51,532
Henry H. Long............................................... 30,029 30,029
Julius C. Shaw, Jr. ........................................ 543,045 543,045
</TABLE>
MANAGEMENT HOLDER ENTITIES:
<TABLE>
<CAPTION>
NUMBER OF SHARES
COMPANY OF
NAME DESIGNATED INDIVIDUAL SHARES SII COMMON STOCK
---- --------------------- ------- ----------------
<S> <C> <C> <C>
Little Family Limited Partnership.................. Norris Little 112,332 112,332
</TABLE>
B-23
<PAGE> 118
APPENDIX C
AMENDED AND RESTATED VOTING AGREEMENT
This AMENDED AND RESTATED VOTING AGREEMENT (this "Agreement"), dated as of
October 30, 2000, is made and entered into among Berkshire Hathaway Inc., a
Delaware corporation ("Investor"), SII Acquisition, Inc., a Georgia corporation
("Merger Sub") and each party listed under the heading "Stockholders" on the
signature page hereof (each a "Stockholder" and collectively, the
"Stockholders");
WITNESSETH:
WHEREAS, Investor, Merger Sub and the Stockholders have previously entered
into that certain Voting Agreement, dated as of October 19, 2000 (the "Original
Voting Agreement");
WHEREAS, the Investor, Merger Sub and the Stockholders desire to amend and
restate the Original Voting Agreement to reflect that certain additional shares
of common stock, no par value per share ("Common Stock"), of Shaw Industries,
Inc., a Georgia corporation (the "Company") are owned by the Stockholders which
were not included on Exhibit A to the Original Voting Agreement;
WHEREAS, as of the date of the Original Voting Agreement and as of the date
hereof, each Stockholder owns the number of shares of Common Stock, set forth
opposite the Stockholder's name on Exhibit A hereto (the total number of shares
of Common Stock owned by the Stockholders, and any other capital stock of the
Company or any stock option for shares of capital stock of the Company that the
Stockholders acquire, whether by means of purchase (including through the
exercise of any stock option), dividend, distribution, or otherwise, prior to
the termination of this Agreement, being collectively referred to as the
"Shares");
WHEREAS, concurrently with the execution and delivery of the Original
Voting Agreement, the Company, Investor and Merger Sub entered into an Agreement
and Plan of Merger (the "Merger Agreement") of even date therewith, which (upon
the terms and subject to the conditions set forth therein) provides for, among
other things, the merger of Merger Sub with and into the Company (the "Merger");
WHEREAS, concurrently with the execution and delivery of the Original
Voting Agreement, Investor and Merger Sub and certain other parties entered into
a Contribution and Participation Agreement (the "Contribution Agreement"), of
even date therewith, which (upon the terms and subject to the conditions set
forth therein) provides for, among other things, the investment in Merger Sub by
Investor and the holders of shares of Common Stock named therein of cash and
shares of Common Stock in exchange for an equity interest therein;
WHEREAS, as a condition to Investor's and Merger Sub's willingness to enter
into the Merger Agreement and the Contribution Agreement, Investor and Merger
Sub requested the Stockholders to agree, and in order to induce Investor and
Merger Sub to enter into the Merger Agreement and the Contribution Agreement,
the Stockholders agreed, to enter into the Original Voting Agreement; and
WHEREAS, concurrently with the execution and delivery of the Original
Voting Agreement, Investor entered into a voting agreement with the Company (the
"Investor Voting Agreement"), pursuant to which Investor agreed to vote certain
shares of Common Stock which were subject to both the Original Voting Agreement
and the Contribution Agreement (and are subject to this Agreement) in the same
proportion as the holders of all other shares of Common Stock voting on the
approval of the Merger vote their shares of Common Stock on such matter.
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<PAGE> 119
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants, and agreements hereinafter set forth, the parties hereto
hereby agree as follows:
ARTICLE I
STOCKHOLDERS' REPRESENTATIONS AND WARRANTIES
Each Stockholder hereby represents and warrants to Merger Sub and Investor
as follows:
1.1 Due Organization and Authorization. Stockholder, if it is not a
natural person, is duly organized and validly existing under the laws of the
jurisdiction in which it was formed. Stockholder possesses the requisite power
and authority to execute, deliver, and perform this Agreement, to appoint Warren
E. Buffett and Marc D. Hamburg (or any other designee of Investor), and each of
them, as its Proxy (as defined below), and to consummate the transactions
contemplated hereby. The execution, delivery, and performance of this Agreement,
the appointment of Warren E. Buffett and Marc D. Hamburg (or any other designee
of Investor), and each of them, as Stockholder's Proxy, and the consummation of
the transactions contemplated hereby have been duly authorized by all requisite
action of Stockholder. This Agreement has been duly executed and delivered by or
on behalf of Stockholder and constitutes a legal, valid, and binding obligation
of Stockholder, enforceable against Stockholder in accordance with its terms.
There is no beneficial owner of any of the Shares or other beneficiary or holder
of any other interest in any of the Shares whose consent is required for the
execution and delivery of this Agreement by Stockholder or for the consummation
by Stockholder of the transactions contemplated hereby.
1.2 No Conflicts; Required Filings and Consents. (a) The execution and
delivery of this Agreement by Stockholder do not, and the performance of this
Agreement by Stockholder will not, (i) conflict with or violate the trust
agreement or other governing instrument of Stockholder if it is not a natural
person, (ii) conflict with or violate any law applicable to Stockholder or by
which Stockholder or any of Stockholder's assets is bound or affected, or (iii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, acceleration, or cancellation of, or result in the
creation of a lien or encumbrance on any assets of Stockholder, including,
without limitation, the Shares, pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise, or other
instrument or obligation to which Stockholder is a party or by which Stockholder
or any of Stockholder's assets is bound or affected.
(b) The execution and delivery of this Agreement by Stockholder does
not, and the performance of this Agreement by Stockholder will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or
foreign, other than (i) filings under the HSR Act and any similar foreign
requirements, and (ii) any necessary filing under the Securities Exchange
Act of 1934, as amended.
1.3 Title to Shares. Except as set forth on Schedule 1.3 hereto,
Stockholder is the sole owner of the shares of Common Stock set forth opposite
Stockholder's name on Exhibit A hereto, free and clear of any pledge, lien,
security interest, mortgage, claim, proxy, voting restriction or other voting
trust, agreement, understanding, or arrangement of any kind, right of first
refusal or other limitation on disposition, adverse claim of ownership, or other
encumbrance of any kind, other than restrictions imposed by securities laws or
pursuant to this Agreement, the Merger Agreement or, if Stockholder is a party
thereto, the Contribution Agreement and the Custody Agreement (as such term is
defined in the Contribution Agreement).
1.4 Information for Proxy Statement. None of the information relating to
Stockholder and its affiliates supplied or to be supplied by or on behalf of
Stockholder or its affiliates for inclusion or incorporation by reference in the
Proxy Statement or in any other document filed with any other Governmental
Entity in connection with the transactions contemplated by this Agreement or the
Merger Agreement at the respective times filed with the SEC or such other
Governmental Entity and first published, sent or given to stockholders of the
Company and, in addition, in the case of the Proxy Statement, at the date it or
any amendment or supplement is mailed to the Company's stockholders and at the
time of the Company Stockholders Meeting,
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<PAGE> 120
will contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they are made, not misleading.
ARTICLE II
STOCKHOLDERS' COVENANTS
Each Stockholder hereby covenants to Merger Sub and Investor as follows:
2.1 Voting of Shares. Stockholder hereby agrees that from the date of the
Original Voting Agreement until the termination of the Agreement pursuant to
Section 3.2 (the "Term"), at any meeting of the stockholders of the Company
however called and in any action by written consent of the stockholders of the
Company, Stockholder shall vote its Shares (i) in favor of the Merger and the
Merger Agreement, as it may be amended from time to time, (ii) against any
Takeover Proposal and against any proposal for action or agreement that would
result in a breach of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement or which is
reasonably likely to result in any of the Company's obligations under the Merger
Agreement not being fulfilled, any change in the directors of the Company
(except as contemplated by the Merger Agreement), any change in the present
capitalization of the Company or any amendment to the Company's corporate
structure or business, or any other action which could reasonably be expected to
impede, interfere with, delay, postpone or adversely affect the transactions
contemplated by this Agreement or the Merger Agreement or the likelihood of such
transactions being consummated and (iii) in favor of any other matter necessary
for consummation of the transactions contemplated by the Merger Agreement which
is considered at any such meeting of shareholders or in such consent, and in
connection therewith to execute any documents which are necessary or appropriate
in order to effectuate the foregoing, including the ability for Investor or its
nominee(s) to vote the Shares directly.
2.2 Proxy. Stockholder hereby revokes all prior proxies or powers of
attorney with respect to any of its Shares. Stockholder hereby constitutes and
appoints Warren E. Buffett, Chairman and Chief Executive Officer of Investor,
and Marc D. Hamburg, Chief Financial Officer of Investor, in their respective
capacities as officers of Investor, and any individual who shall succeed to any
such office of Investor, and any other designee of Investor, and each of them,
with full power of substitution and resubstitution at any time during the Term,
as its true and lawful attorney and proxy ("Proxy"), for and in its name, place,
and stead, to demand that the Secretary of the Company call a special meeting of
the stockholders of the Company for the purpose of considering any matter
referred to in Section 2.1 and to vote each Share held by Stockholder as its
Proxy in respect of any such matter, at every annual, special, adjourned, or
postponed meeting of the stockholders of the Company, including the right to
sign its name (as stockholder) to any consent, certificate, or other document
relating to the Company that the law of the State of Georgia might permit or
require. THE FOREGOING PROXY AND POWER OF ATTORNEY ARE IRREVOCABLE AND COUPLED
WITH AN INTEREST THROUGHOUT THE TERM. Stockholder will take such further action
and execute such other documents as may be necessary to effectuate the intent of
this Section 2.2
2.3 Restrictions on Transfer, Proxies and Non-Interference. Stockholder
hereby agrees, during the Term, and except as contemplated hereby (including
pursuant to the Contribution Agreement and the Custody Agreement, if Stockholder
is a party thereto), not to (i) without Investor's prior written consent, sell,
transfer, pledge, encumber, assign or otherwise dispose of, or enter into any
contract, option or other arrangement or understanding with respect to the sale,
transfer, pledge, encumbrance, assignment or other disposition of, any of the
Shares, (ii) grant any proxies, deposit any Shares into a voting trust or enter
into a voting agreement with respect to any Shares, or (iii) take any action
that would make any representation or warranty of Stockholder contained herein
untrue or incorrect or have the effect of preventing or disabling Stockholder
from performing Stockholder's obligations under this Agreement. Stockholder
further agrees that it (a) will tender to the Company, within ten business days
of the date of this Agreement, all certificates representing such Stockholder's
Shares (other than any certificates which have been delivered to, and held by,
the custodian pursuant to the Custody Agreement) for the Company to inscribe
thereupon the following legend: "The shares of Common Stock, no par value per
share, of Shaw Industries, Inc. (the "Company") represented by this certificate
are subject to a Voting Agreement, and may not be sold or otherwise
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transferred, except in accordance therewith. A copy of such Voting Agreement is
available for inspection at the principal executive office of the Company", and
(b) will, within ten business days of the date of this Agreement, no longer hold
any Shares, whether certificated or uncertificated, in "street name" or in the
name of any nominee.
2.4 Disclosure. Stockholder hereby authorizes the Company and Merger Sub
to publish and disclose in the Proxy Statement (including all documents and
schedules filed with the SEC), its identity, its ownership of Common Stock, and
the nature of its commitments, arrangements, and understandings under this
Agreement.
2.5 No Solicitation. Stockholder covenants and agrees that, during the
Term, it shall not, nor shall it authorize or permit any of its representatives
or agents to, directly or indirectly, solicit, initiate, knowingly encourage, or
take any other action designed to facilitate, any inquiries or the making of any
proposal from any person (other than from Merger Sub or Investor) relating to
(i) any acquisition of any Shares or (ii) any transaction that constitutes a
Takeover Proposal. Stockholder further covenants and agrees that, during the
Term, it shall not (and shall not permit its representatives or agents to)
participate in any discussions or negotiations (except with Merger Sub or
Investor) regarding, or furnish to any person (other than Merger Sub or
Investor) any information with respect to, or otherwise cooperate in any way
with, or assist or participate in or facilitate or encourage, any effort or
attempt by any person (other than Merger Sub or Investor) to make, any
transaction that may constitute a Takeover Proposal. Stockholder immediately
shall cease and cause to be terminated all existing discussions or negotiations
of Stockholder and its representatives or agents with any person (other than
Merger Sub or Investor) with respect to any of the foregoing. Stockholder shall
notify Merger Sub and Investor promptly of any such proposal or offer, or any
inquiry or contact with any person with respect thereto, of which it becomes
aware and shall, in any such notice to Merger Sub and Investor, indicate in
reasonable detail the identity of the person making such proposal, offer,
inquiry, or contact and the material terms and conditions of such proposal,
offer, inquiry, or contact. Notwithstanding any provision of this Section to the
contrary, if Stockholder is a member of the Board of Directors of the Company,
Stockholder may, and if any agent or representative of Stockholder is a member
of the Board of Directors of the Company, such member of the Board of Directors
of the Company may, in his or her capacity as such a director, take such
actions, if any, as are permitted by Section 7.4 of the Merger Agreement.
ARTICLE III
MISCELLANEOUS
3.1 Definitions. Terms used but not otherwise defined in this Agreement,
have the meanings assigned to such terms in the Merger Agreement.
3.2 Termination. This Agreement shall terminate and be of no further force
and effect (i) by the written mutual consent of the parties hereto or (ii)
automatically and without any required action of the parties hereto upon the
earlier to occur of (A) the Effective Time or (B) the termination of the Merger
Agreement in accordance with Article 8 thereof. The termination of this
Agreement shall not relieve any party hereto from any liability for any breach
of this Agreement prior to termination.
3.3 Expenses. All costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such costs and expenses.
3.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given (i) upon hand delivery, (ii)
upon confirmation of receipt of facsimile transmission, (iii) upon confirmed
delivery by a standard overnight courier, or (iv) after five (5) business days
if sent by
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registered or certified mail, postage prepaid, return receipt requested, to the
following address or to such other address that a party hereto might later
specify by like notice:
(a) If to Merger Sub or Investor, to:
Berkshire Hathaway Inc.
1440 Kiewit Plaza
Omaha, Nebraska 68131
Attn: Warren E. Buffett
Facsimile No.: (402) 346-3375
with copies to:
Munger, Tolles & Olson LLP
355 South Grand Avenue
Los Angeles, California 90071
Attn: Robert E. Denham
Facsimile No.: (213) 687-3702
(b) If to the Stockholders, to:
Shaw Industries, Inc.
616 East Walnut Avenue
Dalton, Georgia 30720
Attn: Robert E. Shaw
Facsimile No.: (706) 275-1985
with copies to:
Powell, Goldstein, Frazer & Murphy LLP
Sixteenth Floor
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: G. William Speer
Facsimile No.: (404) 572-6999
3.5 Severability. In the event that any provision in this Agreement is
held invalid, illegal, or unenforceable in a jurisdiction, such provision shall
be modified or deleted as to the jurisdiction involved but only to the extent
necessary to render the same valid, legal, and enforceable. The validity,
legality, and enforceability of the remaining provisions hereof shall not in any
way be affected or impaired thereby nor shall the validity, legality, or
enforceability of such provision be affected thereby in any other jurisdiction.
3.6 Entire Agreement. This Agreement (along with all Exhibits and
Schedules hereto), the Merger Agreement, the Investor Voting Agreement and, if a
Stockholder is a party thereto, the Contribution Agreement and the Custody
Agreement, as each of the Merger Agreement, the Investor Voting Agreement and,
if applicable, the Contribution Agreement and the Custody Agreement, may be
amended from time to time, constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties, or any
of them, with respect thereto.
3.7 Assignment. No party may assign or delegate this Agreement or any
right, interest, or obligation hereunder, provided that Merger Sub or Investor,
in its sole discretion, may assign or delegate its rights and obligations
hereunder to any direct or indirect wholly-owned subsidiary of such entity.
3.8 No Third-Party Beneficiaries. This Agreement shall be binding upon,
inure solely to the benefit of, and be enforceable by only the parties hereto,
their respective successors, and permitted assigns, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any person,
other than the parties hereto, their respective successors, and permitted
assigns, any rights, remedies, obligations, or liabilities of any nature
whatsoever.
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3.9 Waiver of Appraisal Rights. Each Stockholder hereby waives any rights
of appraisal or rights to dissent from the Merger.
3.10 Further Assurance. Each party hereto shall execute and deliver such
additional documents and take all such further action as may be necessary or
desirable to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement.
3.11 Certain Events. Each Stockholder agrees that this Agreement and the
obligations hereunder shall attach to such Stockholder's Shares and shall be
binding upon any person or entity to which legal or beneficial ownership of such
Shares shall pass, whether by operation of law or otherwise. Notwithstanding any
transfer of Shares, the transferor shall remain liable for the performance of
all obligations under this Agreement.
3.12 No Waiver. The failure of any party hereto to exercise any right,
power, or remedy provided under this Agreement or otherwise available at law or
in equity, the failure of any party hereto to insist upon compliance by any
other party hereto with its obligations hereunder, or the existence of any
custom or practice of the parties at variance with the terms hereof shall not
constitute a waiver by such party of its right to exercise any such or other
right, power, or remedy or to demand such compliance.
3.13 Specific Performance. The parties hereto acknowledge that 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 otherwise
breached. Accordingly, the parties agree that an aggrieved party shall be
entitled to injunctive relief to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court having
jurisdiction, this being in addition to any other right or remedy to which such
party may be entitled under this Agreement, at law, or in equity.
3.14 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Georgia, without effect to provisions
thereof relating to conflicts of law.
3.15 Headings. The descriptive headings in this Agreement were included
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
3.16 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to
be executed in a manner sufficient to bind them as of the date first written
above.
Berkshire Hathaway Inc.
By: /s/ MARC D. HAMBURG
------------------------------------
Its: Vice President
------------------------------------
SII Acquisition, Inc.
By: /s/ MARC D. HAMBURG
------------------------------------
Its: Vice President
------------------------------------
Stockholders
By: /s/ ROBERT E. SHAW
------------------------------------
Robert E. Shaw
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Julian D. Saul Family Irrevocable
Trust
By: /s/ JULIAN D. SAUL
------------------------------------
Its: Trustee
------------------------------------
By: /s/ J. C. SHAW
------------------------------------
J. C. Shaw
Shaw Family Holdings, LLC
By: /s/ J.C. SHAW
------------------------------------
Its: Manager
------------------------------------
Linda Saul Schejola Family Trust
By: /s/ LINDA SAUL SCHEJOLA
------------------------------------
Its: Trustee
------------------------------------
By: /s/ JULIUS C. SHAW, JR.
------------------------------------
Julius C. Shaw, Jr.
By: /s/ R. JULIAN MCCAMY
------------------------------------
R. Julian McCamy
By: /s/ ELEANOR SHAW MCCAMY
------------------------------------
Eleanor Shaw McCamy
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EXHIBIT A
<TABLE>
<CAPTION>
STOCKHOLDERS NUMBER OF SHARES OF COMMON STOCK
------------ --------------------------------
<S> <C>
Robert E. Shaw.............................................. 6,635,348
Julian D. Saul Family Trust................................. 11,160,724
J.C. Shaw................................................... 5,370,815
Shaw Family Holdings LLC.................................... 1,054,603
Linda Saul Schejola Family Trust............................ 7,699,808
Julius C. Shaw, Jr.......................................... 543,384
R. Julian McCamy............................................ 1,572,939
Eleanor Shaw McCamy......................................... 1,163,169
</TABLE>
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APPENDIX D
INVESTOR VOTING AGREEMENT
October 19, 2000
Shaw Industries, Inc.
616 East Walnut Avenue
Dalton, Georgia 30722
This letter memorializes an agreement of the undersigned ("Investor") with
Shaw Industries, Inc. (the "Company").
1. The Subject Shares. Pursuant to that certain Voting Agreement,
dated as of the date hereof (the "Voting Agreement"), between Investor and
certain holders (the "Holders") of shares of common stock, no par value per
share, of the Company ("Common Stock"), each of Warren E. Buffett, Chairman
and Chief Executive Officer of Investor, and Marc D. Hamburg, Chief
Financial Officer of Investor (the "Designated Officers"), in their
respective capacities as such, have been given a proxy to, among other
things, vote the shares of Common Stock owned by the Holders at any meeting
of the stockholders of the Company called to consider the approval of the
Merger and the Merger Agreement (as such terms are defined in the Voting
Agreement). Of the shares of Common Stock which are subject to the Voting
Agreement, 13,433,261 of such shares (the "Subject Shares") are also
subject to that certain Contribution and Participation Agreement, dated as
of the date hereof, between Investor, certain of the Holders and SII
Acquisition, Inc.
2. Agreement to Vote. Each of the Designated Officers and Investor,
through the Designated Officers, agree to vote the Subject Shares in the
same proportion as the holders of all other shares of Common Stock or of
proxies with respect thereto (including, without limitation, Investor, with
respect to shares of Common Stock otherwise subject to the Voting Agreement
or which are owned by Investor) voting on the approval of the Merger and
the Merger Agreement vote their shares of Common Stock on such matters. For
purposes of computing this proportion, shares of Common Stock shall only be
counted if such shares are voted for or against the approval of the Merger
and the Merger Agreement; shares of Common Stock which abstain or do not
vote shall be ignored.
3. Termination. This agreement will terminate automatically upon the
termination of the Voting Agreement.
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4. Miscellaneous. This agreement, along with the Voting Agreement,
constitutes the entire agreement among the parties with respect to this
subject, is not intended to confer any rights or remedies upon any person
other than the parties hereto, and shall be governed and construed in
accordance with Georgia law without regard to any applicable conflicts of
law principles.
Very truly yours,
Berkshire Hathaway Inc.
/s/ WARREN E. BUFFETT
--------------------------------------
Warren E. Buffett
Chairman and Chief Executive Officer
/s/ MARC D. HAMBURG
--------------------------------------
Marc D. Hamburg
Chief Financial Officer
Accepted and agreed this 19th day of October, 2000
Shaw Industries, Inc.
/s/ ROBERT E. SHAW
---------------------------------------------------------
Robert E. Shaw
Chairman and Chief Executive Officer
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APPENDIX E
October 19, 2000
Committee of Special Directors
Board of Directors
Shaw Industries, Inc.
616 E. Walnut Avenue
Dalton, GA 30720
Gentlemen:
Shaw Industries, Inc., (the "Company"), Berkshire Hathaway, Inc. (the
"Acquiror"), and SII Acquisition Corp., a wholly owned direct subsidiary of the
Acquiror (the "Acquisition Sub"), propose to enter into an Agreement and Plan of
Merger (the "Agreement") pursuant to which Acquisition Sub would be merged with
and into the Company in a merger (the "Merger"), in which each share of the
Company's common stock, no par value per share, outstanding immediately prior to
the Merger, but following the contribution made under the Contribution Agreement
(as hereinafter defined), that neither (i) is owned by Acquisition Sub, the
Company or any subsidiary of the Company nor (ii) is owned by a holder
exercising dissenter's rights with respect to such share (such shares, the
"Company Shares") would be converted into the right to receive $19.00 per share
in cash (the "Consideration"). Shares of the Company's stock contributed to
Acquisition Sub pursuant to the Contribution Agreement would be converted into
shares of Acquisition Sub and, effective upon consummation of the merger, would
then be converted into shares of the corporation surviving the Merger. The terms
and conditions of the Merger are more fully set forth in the Agreement and the
Contribution Agreement.
You have asked us whether, in our opinion, the Consideration to be received
by the holders of the Company Shares pursuant to the Merger is fair from a
financial point of view to such holders.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial
information relating to the Company and the Acquiror that we deemed to be
relevant;
(2) Reviewed certain business and financial information, including
financial forecasts, relating to the business, earnings, cash flow, assets,
liabilities and prospects of the Company furnished to us by the Company;
(3) Reviewed the Company's management's internal financial projections
for the years ending through December 31, 2002 furnished to us by the
Company and extrapolated such figures, based on guidance from the Company's
management, for the years ending through December 31, 2005;
(4) Conducted discussions with members of senior management and
representatives of the Company concerning its business and prospects, as
well as the matters described in clauses 1, 2 and 3 above;
(5) Reviewed the market prices and valuation multiples for the Company
Shares and compared them with those of certain publicly traded companies
that we deemed to be relevant;
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Committee of Special Directors
Board of Directors
Shaw Industries, Inc.
October 19, 2000
Page 2
(6) Reviewed the results of operations of the Company, as furnished to
us by the Company or publicly available, and compared them with those of
certain publicly traded companies that we deemed to be relevant;
(7) Compared the proposed financial terms of the Merger with the
financial terms of certain other transactions which we deemed to be
relevant;
(8) Participated in discussions and negotiations among representatives
of the Company and the Acquiror and their financial and legal advisors;
(9) Reviewed final versions, dated October 19, 2000, of (i) the
Agreement; (ii) the Voting Agreement among the Acquiror, Acquisition Sub
and the stockholder parties listed therein; (iii) the Investor Voting
Agreement between the Acquiror and the Company and (iv) the Contribution
and Participation Agreement among Acquisition Sub and the stockholder and
continuing holder parties listed therein (the "Contribution Agreement");
(10) Conducted a "market test" regarding the sale of the Company to
other potential acquirors, including strategic manufacturers, raw material
producers and financial buyers; and
(11) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our assessment
of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company or been furnished with any such evaluation or
appraisal. In addition, we have not assumed any obligation to conduct, nor have
we conducted, any physical inspection of the properties or facilities of the
Company. With respect to the financial forecast information furnished to or
discussed with us by the Company, we have assumed that they have been reasonably
prepared and reflect the best currently available estimates and judgment of the
Company's management as to the expected future financial performance of the
Company.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and upon the information made available
to us as of, the date hereof. We have assumed that in the course of obtaining
the necessary regulatory or other consents or approvals (contractual or
otherwise) for the Merger, no restrictions, including any divestiture
requirements or amendments or modifications, will be imposed that will have a
material adverse effect on the contemplated benefits of the Merger.
We are acting as financial advisor to the Committee of Special Directors of
the Board of Directors of the Company in connection with the Merger and will
receive a fee from the Company for our services, all of which is contingent upon
the consummation of the Merger. In addition, the Company has agreed to indemnify
us for certain liabilities arising out of our engagement. We have, in the past,
provided financial advisory and/or financing services to the Company and
entities in which the Acquiror may hold a substantial interest, including
entities that may be deemed "affiliates" of the Acquiror, and may continue to do
so, and have received, and may receive, fees for the rendering of such services.
In addition, in the ordinary course of our business, we may actively trade
securities of the Company and the Acquiror for our own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
This opinion is solely for the use and benefit of the Committee of Special
Directors of the Board of Directors of the Company in its evaluation of the
Merger and shall not be used for any other purpose without
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Committee of Special Directors
Board of Directors
Shaw Industries, Inc.
October 19, 2000
Page 3
our prior written consent. Our opinion does not address the merits of the
underlying decision by the Company to engage in the Merger and does not
constitute a recommendation to any shareholder as to how such shareholder should
vote on the proposed Merger. This opinion is not intended to be relied upon or
confer any rights or remedies upon any employee, creditor, shareholder or other
equity holder of the Company, or any other party. This opinion shall not be
reproduced, disseminated, quoted, summarized or referred to at any time, in any
manner or for any purpose, nor shall any public references to Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") or any of its affiliates
be made by the Company or any of its affiliates, without the prior written
consent of Merrill Lynch.
On the basis of and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Consideration to be received by the holders of the
Company Shares pursuant to the Merger is fair from a financial point of view to
the holders of such shares.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
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APPENDIX F
CODE OF GEORGIA
TITLE 14. CORPORATIONS, PARTNERSHIPS, AND ASSOCIATIONS
CHAPTER 2. BUSINESS CORPORATIONS
ARTICLE 13. DISSENTERS' RIGHTS
14-2-1301 DEFINITIONS
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the record
shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right
when and in the manner required by Code Sections 14-2-1320 through
14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable
under all the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302 RIGHT TO DISSENT
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or 14-2-1104 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
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(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's rights.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303 DISSENT BY NOMINEES AND BENEFICIAL OWNERS
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
14-2-1320 NOTICE OF DISSENTERS' RIGHTS
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that
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the action was taken and send them the dissenters' notice described in Code
Section 14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321 NOTICE OF INTENT TO DEMAND PAYMENT
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322 DISSENTERS' NOTICE
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323 DUTY TO DEMAND PAYMENT
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
14-2-1324 SHARE RESTRICTIONS
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
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14-2-1325 OFFER OF PAYMENT
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326 FAILURE TO TAKE ACTION
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing under subsection (a) of
this Code section within 30 days after the corporation offered payment for his
or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
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(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
14-2-1330 COURT ACTION
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or statutory
overnight delivery or by publication, or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331 COURT COSTS AND COUNSEL FEES
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
F-5
<PAGE> 136
14-2-1332 LIMITATION OF ACTIONS
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
F-6
<PAGE> 137
APPENDIX G
INFORMATION RELATING TO SHAW INDUSTRIES, INC., BERKSHIRE HATHAWAY INC., SII
ACQUISITION, INC., AND THEIR EXECUTIVE OFFICERS AND DIRECTORS, AND ROBERT E.
SHAW, JULIAN D. SAUL, WILLIAM C. LUSK, JR., W. NORRIS LITTLE, VANCE D. BELL,
KENNETH G. JACKSON, GERALD R. EMBRY AND JULIUS C. SHAW, JR.
I. SHAW INDUSTRIES, INC.
A. The name, principal business and address of the principal executive
offices of Shaw Industries, Inc. are set forth below.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF PRINCIPAL EXECUTIVE OFFICES PRINCIPAL BUSINESS
----------------------------------------------- ------------------
<S> <C>
Shaw Industries, Inc.......................... World's largest carpet manufacturer based
616 East Walnut Avenue on both revenue and volume of production.
Dalton, Georgia 30720
(706) 278-3812
</TABLE>
B. The name, present principal occupation or employment and five-year
employment history of each director and executive officer of Shaw Industry, Inc.
are set forth below. Unless otherwise indicated, (i) each such person is a
citizen of the United States of America and (ii) the business address of each
such person is Shaw Industries, Inc., 616 East Walnut Avenue, Dalton, Georgia
30720.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION AND FIVE YEAR
NAME OF DIRECTOR EMPLOYMENT HISTORY
---------------- ------------------------------------------
<S> <C>
Robert E. Shaw............................... Mr. Shaw has been Chairman of the Board and
Chief Executive Officer of Shaw since April
27, 1995, and served as President and Chief
Executive Officer of Shaw for more than five
years prior thereto. He is also a director of
Oxford Industries, Inc., an apparel
manufacturer.
J.C. Shaw.................................... Mr. Shaw has been Chairman Emeritus of the
Board of Shaw since April 27, 1995, and
served as Chairman of the Board of the
Company for more than five years prior
thereto.
Julian D. Saul............................... Mr. Saul joined Shaw in October, 1998. On
January 24, 1999, he was elected to the
office of President. Prior to October 3,
1998, Mr. Saul was the Chief Executive
Officer and Chairman of the Board of Queen
Carpet Corporation.
J. Hicks Lanier.............................. Mr. Lanier is Chairman of the Board,
President and Chief Executive Officer of
Oxford Industries, Inc., an apparel
manufacturer. Mr. Lanier also serves as a
director of SunTrust Banks of Georgia, Inc.,
Genuine Parts Company and Crawford & Company.
Mr. Lanier's business address is Oxford
Industries, Inc., 222 Piedmont Avenue, N.E.,
Atlanta, GA 30308
R. Julian McCamy............................. Mr. McCamy is President of McCamy Properties,
Inc., a real estate development company. Mr.
McCamy's business address is McCamy
Properties, 3469 Knollwood Drive N.W.,
Atlanta, GA 30305
</TABLE>
G-1
<PAGE> 138
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION AND FIVE YEAR
NAME OF DIRECTOR EMPLOYMENT HISTORY
---------------- ------------------------------------------
<S> <C>
Thomas G. Cousins............................ Mr. Cousins is Chairman of the Board and
Chief Executive Officer of Cousins Properties
Incorporated, a real estate development
company. Mr. Cousins' business address is
Cousins Properties Incorporated, 2500 Wendy
Ridge Parkway, Suite 1600, Atlanta, GA 30339
William C. Lusk, Jr.......................... Mr. Lusk is the retired Senior Vice President
and Treasurer of the Company.
W. Norris Little............................. Mr. Little has been Vice Chairman of Shaw
since January 24, 1999, and served as Senior
Vice President, Operations and then as
President of Shaw for more than five years
prior thereto.
Robert R. Harlin............................. Mr. Harlin has been a consultant for Shaw
since June 1, 2000. For more than five years
prior to June 1, 2000, Mr. Harlin was a
member of the law firm of Powell, Goldstein,
Frazer & Murphy LLP.
Roberto Garza Delgado........................ Mr. Garza is the President and Chief
Executive Officer of Edificio Alestra of
Monterrey, Mexico. Until 1999, he had served
as President and Chief Executive Officer of
Versax Group, a subsidiary of Grupo
Industrial Alfa S.A. de C.V., of Monterrey,
Mexico, since January, 1993. Mr. Garza is a
citizen of Mexico. Mr. Garza's business
address is Edificio Alestra, 40., Piso
(Onexa), Ave. Lazaro Cardenas 2321, Ote Col.
Residencial San Augustin Garza Carcia, NL
Mexico 66260
Robert J. Lunn............................... Mr. Lunn is Managing Director of Lunn
Partners, LLC, in Chicago, Illinois.
Previously, he had been a Managing Director
of Lehman Brothers from 1994 to 1996 and a
Managing Director with Morgan Stanley for
more than five years previous to that. Mr.
Lunn's business address is Lunn Partners,
One, North Franklin Street, Suite 750,
Chicago, IL 60606.
</TABLE>
G-2
<PAGE> 139
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME OF EXECUTIVE OFFICER AND FIVE YEAR EMPLOYMENT HISTORY
------------------------- --------------------------------
<S> <C>
Robert E. Shaw............................... See above.
W. Norris Little............................. See above.
Julian D. Saul............................... See above.
Vance D. Bell................................ Executive officer of Shaw for more than five
years.
Kenneth G. Jackson........................... Mr. Jackson joined Shaw in February 1996.
Prior to February 1996, Mr. Jackson had been
a partner with Arthur Andersen LLP in
Atlanta, Georgia.
Julius C. Shaw, Jr........................... Mr. Julius C. Shaw, Jr. became an executive
officer of Shaw in 1999. Prior to 1999, Mr.
Shaw held several positions in marketing and
investor relations with Shaw.
Carl P. Rollins.............................. Executive officer of Shaw for more than five
years.
Bennie M. Laughter........................... Executive officer of Shaw for more than five
years.
Gerald R. Embry.............................. Mr. Embry joined Shaw in October 1998 and was
elected Controller of Shaw in 2000. Prior to
October 1998, Mr. Embry was Chief Financial
Officer of Queen Carpet Corporation.
</TABLE>
II. BERKSHIRE HATHAWAY INC.
A. The name, principal business and address of the principal executive
offices of Berkshire Hathaway Inc. are set forth below.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF PRINCIPAL EXECUTIVE OFFICES PRINCIPAL BUSINESS
----------------------------------------------- ------------------
<S> <C>
Berkshire Hathaway Inc........................ Berkshire Hathaway is a holding company
1440 Kiewit Plaza owning subsidiaries engaged in a number of
Omaha, Nebraska 68131 diverse business activities, the most
(402) 346-1400 important of which is the property and
casualty insurance and reinsurance business.
Other business activities conducted by
Berkshire Hathaway's subsidiaries include
publication of a daily and Sunday newspaper
in Buffalo, New York; training services to
operators of aircraft and ships; providing
fractional ownership programs for general
aviation aircraft; manufacturing and
marketing of home cleaning systems and
related accessories; manufacture and sale of
boxed chocolates and other confectionery
products; licensing and servicing of
approximately 5,800 Dairy Queen stores, which
feature hamburgers, hot dogs, various dairy
desserts and beverages; retailing of home
furnishings; retailing of fine jewelry; and
manufacture, import and distribution of
footwear.
Berkshire Hathaway has been engaged in
various business activities during the past
five years. Warren E. Buffett is Berkshire's
Chairman and Chief Executive Officer and has
served in such capacity for the past five
years.
</TABLE>
G-3
<PAGE> 140
B. The name, business address, present principal occupation or employment
and five-year employment history of the Warren E. Buffett, the person who
controls Berkshire Hathaway Inc., a United States citizen, are set forth below.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
NAME AND BUSINESS ADDRESS AND FIVE YEAR EMPLOYMENT HISTORY
------------------------- ---------------------------------------------
<S> <C>
Warren E. Buffett............................ Warren E. Buffett has been a director of
Berkshire Hathaway Inc. Berkshire Hathaway Inc. since 1965 and has been its
1440 Kiewit Plaza chairman and Chief Executive Officer since
Omaha, Nebraska 68131 1970. Mr. Buffett is a controlling person of
(402) 346-1400 Berkshire Hathaway. He is also a director of
The Coca-Cola Company, The Gillette Company
and The Washington Post Company.
</TABLE>
C. The name, business address, present principal occupation or employment,
five-year employment history and citizenship of the executive officers and
directors of Berkshire Hathaway Inc. are set forth below. Unless otherwise
indicated, each such person is a citizen of the United States.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
NAME AND BUSINESS ADDRESS AND FIVE YEAR EMPLOYMENT HISTORY
------------------------- ---------------------------------------------
<S> <C>
Warren E. Buffett............................ See II. B. of this Appendix G.
Howard G. Buffett............................ Mr. Buffett has been a director of Berkshire
1004 East Illinois Street Hathaway since 1993. Mr. Buffet is Chairman
Assumption, Illinois 62510 of Directors of The GSI Group, a company
primarily engaged in the manufacture of
agricultural equipment. From 1992 until June
5, 1995, Mr. Buffett had been Vice President,
Assistant to the Chairman and a Director of
Archer Daniels Midland Company, a company
engaged principally in the business of
processing and merchandising agricultural
commodities. He is also a director of
Coca-Cola Enterprises, Inc., Lindsay
Manufacturing Co. and Mond Industries Inc.
Susan T. Buffet.............................. Mrs. Buffett has been a director of Berkshire
1440 Kiewit Plaza Hathaway since 1991. Mrs. Buffett has not
Omaha Nebraska 68131 been employed in the past five years.
Malcolm G. Chace............................. Mr. Chace has been a director of Berkshire
One Providence Washington Plaza Hathaway since 1992. In 1996, Mr. Chace was
Providence, Rhode Island 02903 named Chairman of the Board of Malcolm G.
Chace Directors of Bank RI, a community bank
located in the state of Rhode Island. Prior
to 1996, Mr. Chace had been a private
investor.
Charles T. Munger............................ Mr. Munger has been a director and Vice
355 South Grand Avenue Chairman of Berkshire Hathaway's Board of
Los Angeles, California 90071 Directors since 1978. He is Chairman of the
Board of Directors and Chief Executive
Officer of Wesco Financial Corporation,
approximately 80% -- owned by Berkshire
Hathaway. Mr. Munger is also Chairman of the
Board of Directors of Daily Journal
Corporation and a director of Costco
Companies, Inc.
</TABLE>
G-4
<PAGE> 141
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
NAME AND BUSINESS ADDRESS AND FIVE YEAR EMPLOYMENT HISTORY
------------------------- ---------------------------------------------
<S> <C>
Ronald L. Olson.............................. Mr. Olson was elected a director in 1997. For
355 South Grand Avenue more than the past five years, he has been a
Los Angeles, California 90071 partner in the law firm of Munger, Tolles &
Olson LLP. He is also a director of Edison
International, Western Asset Trust, Inc. and
Pacific American Income Shares, Inc.
Walter Scott, Jr............................. Mr. Scott is the Chairman of the Board of
Level 3 Communications, Inc., a
communications and information services
company that is building the first
international network optimized for internet
protocol technology, a position he has held
since September 1979. Level 3 Communications
was formerly known as Peter Kiewit Sons',
Inc., for which, until the spin-off of its
construction operations in March 1998, Mr.
Scott also served as Chief Executive Officer.
Mr. Scott is a director of Berkshire
Hathaway, Burlington Resources, Inc.,
ConAgra, Inc., Valmont Industries, Inc.,
Commonwealth Telephone Enterprises, Inc. and
RCN Corporation, a publicly traded company in
which Level 3 Communications holds a majority
ownership interest.
Marc D. Hamburg.............................. Mr. Hamburg has been the Chief Financial
1440 Kiewit Plaza Officer and Vice President of Berkshire Hathaway for
Omaha, Nebraska 68131 more than the past five years.
</TABLE>
III. SII ACQUISITION, INC.
A. The name, principal business and address of the principal executive
offices of SII Acquisition, Inc. are set forth below.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF PRINCIPAL EXECUTIVE OFFICES PRINCIPAL BUSINESS
----------------------------------------------- ------------------
<S> <C>
SII Acquisition, Inc.......................... SII Acquisition, Inc. was formed as a Georgia
c/o Berkshire Hathaway Inc. corporation on September 15, 2000 for the
1440 Kiewit Plaza purpose of entering into the merger
Omaha, NE 68131 agreement. SII Acquisition is a wholly owned
subsidiary of Berkshire Hathaway. SII
Acquisition has not engaged in any business
activity other than in connection with the
merger and the related transactions.
Substantially all of the assets of SII
Acquisition consist of the contribution and
participation agreement with each member of
the investor group to provide a portion of
the financing required to complete the
merger.
</TABLE>
B. The name, business address, present principal occupation or employment
and five year employment history of each director and executive officer of SII
Acquisition, Inc. are set forth below. Unless otherwise indicated, each such
person is a citizen of the United States.
G-5
<PAGE> 142
<TABLE>
<CAPTION>
NAME AND ADDRESS OF EACH DIRECTOR AND PRESENT PRINCIPAL OCCUPATION AND FIVE
EXECUTIVE OFFICER YEAR EMPLOYMENT HISTORY
------------------------------------- -------------------------------------
<S> <C>
Warren E. Buffett............................ Warren E. Buffett has been a director of
Berkshire Hathaway Inc. since 1965 and has
been its chairman and Chief Executive Officer
since 1970. Mr. Buffett is a controlling
person of Berkshire Hathaway. He is also a
director of The Coca-Cola Company, The
Gillette Company and The Washington Post
Company. Position at SII Acquisition, Inc.:
Chief Executive Officer
Marc D. Hamburg.............................. See II. C. of this Appendix G. Position at
SII Acquisition, Inc.: Director, Vice
President, Chief Executive Officer and
Secretary
</TABLE>
IV. ROBERT E. SHAW, JULIAN D. SAUL, WILLIAM C. LUSK, JR., W. NORRIS LITTLE,
VANCE D. BELL, KENNETH G. JACKSON, GERALD R. EMBRY AND JULIUS C. SHAW, JR.
For information concerning the persons named above, see I.A. and I. B. of
this Appendix G.
G-6
<PAGE> 143
APPENDIX H
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RECENT TRANSACTIONS IN COMMON STOCK
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of , 2000, by (1) each person or
group known by us to own beneficially more than 5% of our outstanding common
stock, (2) each of our directors and executive officers, (3) each of our "named
executive officers" (as defined in Item 402(a)(3) of Regulation S-K) for our
last full fiscal year, (4) associates of certain of the foregoing and (5) all of
our directors and executive officers as a group (18 persons). Except as set
forth in the table, the business address of each person is c/o Shaw Industries,
Inc., 616 East Walnut Avenue, Dalton, Georgia 30722.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK PERCENTAGE OF
BENEFICIAL OWNER BENEFICIALLY OWNED(1) CLASS(1)
---------------- --------------------- -------------
<S> <C> <C>
Berkshire Hathaway Inc.(2).................................. 37,394,990(3) 30.1%
Robert E. Shaw(4)........................................... 7,400,583(5) 6.0
Robert E. Shaw, L.P......................................... 100,000 *
Anna Sue Shaw............................................... 567,840 *
J.C. Shaw(6)................................................ 6,379,514(7) 5.2
Legacy Strata, LLC.......................................... 6,309,656 5.1
Julian D. Saul(8)........................................... 11,666,667(9) 9.4
Julian D. Saul Family Trust................................. 6,267,883 5.0
Saul Family Holdings, LLC................................... 5,181,063 4.2
Anita Saul.................................................. 22,510 *
Anita Saul Family Trust..................................... 195,211 *
Linda Saul Schejola(10)..................................... 7,777,777(11) 6.3
J. Hicks Lanier............................................. 12,275 *
R. Julian McCamy............................................ 3,163,344(12) 2.6
McCamy Investments, L.P..................................... 913,503 *
McCamy Capital, LLC......................................... 1,838,771 1.5
Eleanor Shaw McCamy......................................... 0 0
Thomas G. Cousins........................................... 61,275 *
S. Tucker Grigg............................................. 1,801,827(13) 1.5
William C. Lusk, Jr......................................... 634,257(14) *
W. Norris Little............................................ 428,850(15) *
Robert R. Harlin............................................ 508 *
Roberto Garza Delgado....................................... 1,550 *
Robert J. Lunn.............................................. 3,275 *
Vance D. Bell............................................... 172,250 *
Kenneth G. Jackson.......................................... 74,812 *
Julius C. Shaw, Jr.......................................... 591,212 *
Carl P. Rollins............................................. 14,773 *
Bennie M. Laughter.......................................... 34,714 *
Gerald R. Embry............................................. 347,526 *
All directors and executive officers of Shaw as a group (18
persons).................................................. 32,963,307(16) 26.5
</TABLE>
---------------
* Less than 1%
(1) Except as otherwise indicated, the persons in this table have sole voting
and investment power with respect to all shares of common stock shown as
beneficially owned by them, subject to (a) where applicable, the proxies
granted pursuant to the voting agreement described in the "The Voting
Agreement and Investor Voting Agreement" section of this proxy statement,
(b) community property laws where applicable and (c) the information
contained in the footnotes to this table. Percentages are calculated
pursuant to Rule 13d-3 under the Exchange Act. Percentage calculations
assume, for each person and group, that all shares which may be acquired by
such person or group pursuant to options
H-1
<PAGE> 144
currently exercisable, or which become exercisable within 60 days following
, 2000, are outstanding for the purpose of computing the
percentage of common stock owned by such person or group. However, the
unissued shares of common stock described above are not deemed to be
outstanding for calculating the percentage of common stock owned by any
other person. As of September 30, 2000, there were 123,983,208 shares of
common stock outstanding.
(2) Berkshire Hathaway's address is 1440 Kiewit Plaza, Omaha, Nebraska 68131.
(3) Includes 35,200,790 shares owned by Shaw shareholders who are parties to
the voting agreement described in "The Voting Agreement and the Investor
Voting Agreement" section of this proxy statement and 2,194,200 shares
owned by Berkshire Hathaway. Berkshire Hathaway and the other parties to
the contribution agreement and the voting agreement may be deemed to have
formed a "group" under Rule 13d-5 of the Exchange Act and the group may be
deemed to have acquired beneficial ownership with respect to the 43,072,186
shares beneficially owned by all of the members combined, representing
34.6% of the issued and outstanding common stock of Shaw.
(4) Mr. Shaw's address is 107 South Wildberry Road, Rocky Face, Georgia 30740.
(5) Includes 100,000 shares owned by Robert E. Shaw, L.P., a limited
partnership whose address is c/o Shaw Industries, Inc., of which Robert E.
Shaw is general partner, and includes 567,840 shares owned by his wife,
Anna Sue Shaw, as to which Mr. Shaw shares voting and investment power.
Mrs. Shaw shares her husband's address.
(6) Mr. Shaw's address is 721 West Avenue, Cartersville, Georgia 30120.
(7) Includes 64,622 shares owned by Mr. Shaw's spouse, as to which Mr. Shaw
shares voting and investment powers, and includes 6,309,656 shares owned by
Legacy Strata, LLC, a limited liability company whose address is
, of which J.C. Shaw is manager.
(8) Mr. Saul's address is 702 Mt. Sinai Street, Dalton, Georgia 30720.
(9) Includes 6,267,883 shares owned by the Julian D. Saul Family Trust whose
address is , of which Julian D. Saul is trustee, includes
5,181,063 owned by Saul Family Holdings, LLC, whose address is ,
of which Mr. Saul is manager, and includes 217,721 shares owned by his
wife, Anita Saul, and a trust controlled by her. Anita Saul shares her
husband's address.
(10) Ms. Schejola's address is 1106 West Lakeshore Drive, Dalton, Georgia 30720.
(11) Includes 7,699,808 shares held in the Linda Saul Schejola Family Trust.
(12) Includes 913,503 shares owned by McCamy Investments, L.P., a limited
partnership whose address is , of which R. Julian McCamy is
general partner, 1,838,771 shares held by McCamy Capital, LLC, a limited
liability company whose address is , of which Mr. McCamy is
manager and 405,720 shares held in trust for Mr. McCamy's children. Mr.
McCamy disclaims beneficial ownership of the shares held in trust for his
children.
(13) Includes 1,148,480 shares owned by the estate of Mr. Grigg's deceased
spouse and 58,520 shares held in trust for his children. Mr. Grigg
disclaims beneficial ownership of the shares held by the estate of his
spouse and in trust for his children.
(14) Includes 8,528 shares owned by Mr. Lusk's spouse, as to which Mr. Lusk
shares voting and investment powers, and 17,400 shares held for Mr. Lusk's
grandchildren.
(15) Includes 110,210 shares owned by the Little Family Limited Partnership, a
limited partnership whose address is , of which Norris Little is
general partner, and shares owned by his wife , who
shares her husband's address.
(16) Includes 233,500 shares that are subject to options that are currently
exercisable, including 55,800 shares for Mr. Bell and 58,600 shares for Mr.
Jackson.
There were no transactions in the shares of common stock that were effected
since September 1, 2000 by Shaw, Berkshire Hathaway, SII Acquisition or any of
their respective subsidiaries, directors, executive officers or controlling
persons or any general partner or controlling person of such persons, if
applicable.
H-2
<PAGE> 145
The following table sets forth information regarding transactions by Shaw's
retirement savings (401(k)) plan since September 1, 2000, all of which were
effected in open market transactions.
<TABLE>
<CAPTION>
<C> <C> <C> <S>
<CAPTION>
NUMBER OF
SHARES OF
COMMON
DATE OF STOCK PRICE PER NATURE OF
TRANSACTION INVOLVED SHARE TRANSACTION
----------- --------- --------- -----------
<C> <C> <C> <S>
9/05/00 8,709 12.5625 Purchase
9/08/00 71,643 18.5625 Purchase
9/15/00 59,980 18.5 Sale
9/19/00 43 12.44 Sale
9/22/00 482 18.5 Purchase
9/29/00 5,737 18.5625 Purchase
10/03/00 89,051 18.375 Sale
10/04/00 5,820 18.375 Sale
10/06/00 2,366 18.5625 Purchase
10/16/00 20,000 18.0625 Sale
10/17/00 30 18.5 Sale
10/17/00 15,000 17.93833 Sale
10/18/00 20,000 17.90630 Sale
10/19/00 20,000 18.18160 Sale
10/20/00 20,000 18.53130 Sale
10/24/00 40,000 18.59380 Sale
10/25/00 20,000 18.59380 Sale
10/26/00 20,000 18.68750 Sale
10/27/00 20,000 18.65625 Sale
10/30/00 20,000 18.53130 Sale
10/31/00 20,000 18.59375 Sale
11/1/00 20,000 18.563 Sale
11/2/00 20,000 18.563 Sale
11/3/00 20,000 18.594 Sale
11/6/00 20,000 18.563 Sale
11/7/00 20,000 18.625 Sale
11/8/00 20,000 18.625 Sale
11/10/00 40,000 18.563 Sale
11/13/00 20,000 18.625 Sale
11/14/00 20,000 18.625 Sale
11/15/00 20,000 18.625 Sale
11/16/00 20,000 18.625 Sale
11/17/00 20,000 18.688 Sale
11/20/00 20,000 18.688 Sale
11/21/00 20,000 18.750 Sale
11/22/00 20,000 18.750 Sale
11/24/00 20,000 18.750 Sale
11/27/00 20,000 18.750 Sale
11/28/00 20,000 18.812 Sale
11/29/00 20,000 18.750 Sale
</TABLE>
---------------
H-3
<PAGE> 146
The following table sets forth information regarding purchases of common
stock by Shaw during the past two years.
<TABLE>
<CAPTION>
PER SHARE RANGE
NUMBER OF COST OF -------------------------
QUARTER ENDED SHARES ACQUIRED SHARES ACQUIRED HIGH LOW AVERAGE
------------- --------------- --------------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
December 1998.............................. 5,000 $ 86,875 $17.38 $17.38 $17.38
March 1999................................. 0 0 0 0 0
June 1999.................................. 3,140,000 57,812,572 19.38 17.13 18.41
September 1999............................. 1,076,000 21,699,436 22.00 18.13 20.15
December 1999.............................. 5,114,400 79,947,734 16.78 13.44 15.63
March 2000................................. 0 0 0 0 0
June 2000.................................. 9,364,647 135,332,538 15.75 13.00 14.45
September 2000............................. 0 0 0 0 0
</TABLE>
The following table sets forth information concerning stock purchases
during the past two years by certain members of the investor group who are also
directors and/or executive officers of Shaw.
<TABLE>
<CAPTION>
PER SHARE RANGE
NUMBER OF COST OF ------------------------------
PURCHASER SHARES ACQUIRED SHARES ACQUIRED HIGH LOW AVERAGE
--------- --------------- --------------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Vance D. Bell 7,539 $131,253.99 $ 17.41 $ 17.41 $ 17.41
Vance D. Bell 23,114 453,958.96 19.64 19.64 19.64
Vance D. Bell 7,331 87,330.00 11.9125 11.9125 11.9125
Kenneth G. Jackson 3,200 34,000.00 10.625 10.625 10.625
Kenneth G. Jackson 2,701 53,047.64 19.64 19.64 19.64
Kenneth G. Jackson 6,598 78,598.68 11.9125 11.9125 11.9125
Julius C. Shaw, Jr. 2,854 33,998.28 11.9125 11.9125 11.9125
</TABLE>
The following table sets forth information provided to us by Berkshire
Hathaway with respect to purchases of common stock of Shaw by Berkshire Hathaway
during the past two years.
<TABLE>
<CAPTION>
PER SHARE RANGE
NUMBER OF COST OF -------------------------
QUARTER ENDED SHARES ACQUIRED SHARES ACQUIRED HIGH LOW AVERAGE
------------- --------------- --------------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
June 2000.................................. 1,650,100 $20,646,216 $12.38 $13.08 $12.51
September 2000............................. 544,100 7,033,798 12.53 13.03 12.93
</TABLE>
H-4
<PAGE> 147
SHAW INDUSTRIES, INC.
616 EAST WALNUT AVENUE
DALTON, GEORGIA 30720
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY , 2001
The undersigned shareholder of Shaw Industries, Inc. ("Shaw"), revoking all
previous proxies, hereby constitutes and appoints Robert R. Harlin and Kenneth
G. Jackson, and each of them, as proxies with full power of substitution to
attend the special meeting of shareholders of Shaw at 11:00 a.m., Eastern time,
on January , 2001 at Shaw's administrative offices located at 616 East Walnut
Avenue, Dalton, Georgia, and at any adjournment or postponement thereof (the
"Special Meeting"), and to vote the number of shares of common stock of Shaw the
undersigned would be entitled to vote if personally present at the Special
Meeting on the matters set forth herein. The undersigned hereby acknowledges
receipt of the Notice of Special Meeting and proxy statement relating to the
Special Meeting and hereby instructs said proxies to vote or refrain from voting
such shares of Shaw common stock as marked on the reverse side of this proxy
card upon the matters listed thereon.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDERS. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR THE APPROVAL OF THE AGREEMENT AND PLAN OF MERGER AND THE
MERGER IN ACCORDANCE WITH THE RECOMMENDATION OF THE BOARD OF DIRECTORS OF SHAW.
THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
(Continued, and to be signed and dated, on reverse side)
[X] Please mark your vote as in this example.
THE BOARD OF DIRECTORS OF SHAW RECOMMENDS A VOTE FOR PROPOSAL 1.
1. To approve the Agreement and Plan of Merger, dated as of October 19,
2000, among Shaw, Berkshire Hathaway Inc., and SII Acquisition, Inc., and
the merger of SII Acquisition, Inc. with and into Shaw, as described in
the accompanying proxy statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
Please sign and date this proxy and return it in the enclosed return
envelope, whether or not you expect to attend the Special Meeting. You may also
vote in person if you do attend.
Date: ----------------------------
----------------------------------
----------------------------------
Signature(s)
Note: Please sign this proxy exactly as name appears hereon. If shares are held
as joint tenants, both joint tenants should sign. Attorneys-in-fact, executors,
administrators, trustees, guardians, corporate officers or other signing in a
representative capacity should indicate the capacity in which they are signing.