Tender-Offer Solicitation/Recommendation Statement — Schedule 14D-9
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SC 14D9 Tender-Offer Solicitation/Recommendation Statement 18 103K
2: EX-1 Offer to Purchase 38 223K
3: EX-2 Letter of Transmittal 13 61K
4: EX-3 Agreement & Plan of Merger 45 204K
5: EX-4 Page 11 of the Proxy Statement 1 6K
6: EX-5 Letter to Stockholders 2± 10K
7: EX-6 Press Release 2 14K
8: EX-7 Opinion of Lazard Freres 2 14K
9: EX-8 Stockholder Agreement 12 45K
10: EX-9 Stockholder Agreement 12 45K
11: EX-10 Stockholder Agreement 12 44K
12: EX-11 Confidentiality Agreement 3 14K
13: EX-12 Supplement to Merger Agreement 2 12K
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- Alternative Formats (Word, et al.)
- ANNEX A Certain Conditions of the Offer
- Article Ii the Merger
- Article I the Offer
- Article Iv Representations and Warranties of Shelby Williams
- Article Ix Miscellaneous
- Article Vi Covenants and Agreements
- Article Vii Conditions to the Merger
- Article Viii Termination, Waiver, Amendment and Closing
- Article V Representations and Warranties of Falcon and Sub
- Section 1.1 The Offer
- Section 1.2 Shelby Williams Actions
- Section 1.3 Directors
- Section 2.1 The Merger
- Section 2.2 Closing
- Section 2.3 Effective Time
- Section 2.4 Effects of the Merger
- Section 2.5 Certificate of Incorporation; Bylaws
- Section 2.6 Directors and Officers
- Section 3.2 Stockholders Meeting
- Section 3.3 Payment for Shares in the Merger
- Section 3.4 Transfer of Shares After the Effective Time
- Section 3.5 Stock Options and Associate Purchase Plan
- Section 3.6 Dissenting Shares
- Section 4.10 Investigations; Litigation
- Section 4.12 Y2K Compliance
- Section 4.13 Takeover Laws
- Section 4.14 Tax Matters
- Section 4.15 Opinion of Financial Advisor
- Section 4.16 Required Vote of Shelby Williams Stockholders
- Section 4.17 Labor Matters
- Section 4.18 Certain Agreements
- Section 4.19 Title to Assets; Liens
- Section 4.1 Organization, Qualification, Etc
- Section 4.20 Insurance
- Section 4.21 Intellectual Property
- Section 4.2 Capital Stock
- Section 4.4 Reports and Financial Statements; Corporate Records
- Section 4.5 No Undisclosed Liabilities
- Section 4.6 No Violation of Law
- Section 4.7 Environmental Laws and Regulations
- Section 4.8 Employee Matters; ERISA
- Section 4.9 Absence of Certain Changes or Events
- Section 5.1 Organization, Qualification, Etc
- Section 5.3 Financing
- Section 5.4 Offer Documents; Schedule 14D-9; Proxy Statement
- Section 5.5 Lack of Ownership of Shares
- Section 5.6 Solvency
- Section 6.10 Indemnification and Insurance
- Section 6.11 Additional Reports
- Section 6.12 Notifications
- Section 6.13 Employment Agreements
- Section 6.14 Termination of ESOP
- Section 6.1 Conduct of Business by Shelby Williams
- Section 6.2 Investigation
- Section 6.3 Obligations of Falcon and Sub
- Section 6.4 [Intentionally Omitted]
- Section 6.5 Employee Benefit Plans
- Section 6.6 Filings; Other Action
- Section 6.7 Further Assurances
- Section 6.8 No Solicitation
- Section 6.9 Public Announcements
- Section 7.1 Conditions to Each Party's Obligation to Effect the Merger
- Section 8.1 Termination or Abandonment
- Section 8.2 Effect of Termination
- Section 8.3 Amendment or Supplement
- Section 8.4 Extension of Time, Waiver, Etc
- Section 9.10 Headings
- Section 9.11 Certain Defined Terms
- Section 9.12 Finders or Brokers
- Section 9.1 No Survival of Representations and Warranties
- Section 9.2 Expenses
- Section 9.3 Counterparts; Effectiveness
- Section 9.4 Governing Law
- Section 9.5 Notices
- Section 9.6 Assignment; Binding Effect
- Section 9.7 Severability
- Section 9.8 Enforcement of Agreement
- Section 9.9 Miscellaneous
- Shelby Williams Industries, Inc
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| 1 | 1st Page - Filing Submission
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| " | Shelby Williams Industries, Inc
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| 5 | Article I the Offer
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| " | Section 1.1 The Offer
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| 7 | Section 1.2 Shelby Williams Actions
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| 8 | Section 1.3 Directors
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| 9 | Article Ii the Merger
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| " | Section 2.1 The Merger
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| " | Section 2.2 Closing
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| " | Section 2.3 Effective Time
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| 10 | Section 2.4 Effects of the Merger
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| " | Section 2.5 Certificate of Incorporation; Bylaws
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| " | Section 2.6 Directors and Officers
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| 11 | Section 3.2 Stockholders Meeting
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| 12 | Section 3.3 Payment for Shares in the Merger
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| 13 | Section 3.4 Transfer of Shares After the Effective Time
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| " | Section 3.5 Stock Options and Associate Purchase Plan
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| " | Section 3.6 Dissenting Shares
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| 14 | Article Iv Representations and Warranties of Shelby Williams
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| " | Section 4.1 Organization, Qualification, Etc
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| 15 | Section 4.2 Capital Stock
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| 16 | Section 4.4 Reports and Financial Statements; Corporate Records
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| 17 | Section 4.5 No Undisclosed Liabilities
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| " | Section 4.6 No Violation of Law
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| " | Section 4.7 Environmental Laws and Regulations
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| " | Section 4.8 Employee Matters; ERISA
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| 19 | Section 4.9 Absence of Certain Changes or Events
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| " | Section 4.10 Investigations; Litigation
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| 20 | Section 4.12 Y2K Compliance
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| " | Section 4.13 Takeover Laws
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| 21 | Section 4.14 Tax Matters
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| 22 | Section 4.15 Opinion of Financial Advisor
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| " | Section 4.16 Required Vote of Shelby Williams Stockholders
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| " | Section 4.17 Labor Matters
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| 23 | Section 4.18 Certain Agreements
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| " | Section 4.19 Title to Assets; Liens
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| 24 | Section 4.20 Insurance
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| " | Section 4.21 Intellectual Property
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| 25 | Article V Representations and Warranties of Falcon and Sub
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| " | Section 5.1 Organization, Qualification, Etc
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| 26 | Section 5.3 Financing
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| 27 | Section 5.4 Offer Documents; Schedule 14D-9; Proxy Statement
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| " | Section 5.5 Lack of Ownership of Shares
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| " | Section 5.6 Solvency
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| " | Article Vi Covenants and Agreements
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| " | Section 6.1 Conduct of Business by Shelby Williams
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| 30 | Section 6.2 Investigation
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| " | Section 6.3 Obligations of Falcon and Sub
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| 31 | Section 6.4 [Intentionally Omitted]
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| " | Section 6.5 Employee Benefit Plans
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| " | Section 6.6 Filings; Other Action
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| 32 | Section 6.7 Further Assurances
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| " | Section 6.8 No Solicitation
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| 34 | Section 6.9 Public Announcements
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| " | Section 6.10 Indemnification and Insurance
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| 35 | Section 6.11 Additional Reports
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| " | Section 6.12 Notifications
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| " | Section 6.13 Employment Agreements
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| 36 | Section 6.14 Termination of ESOP
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| " | Article Vii Conditions to the Merger
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| " | Section 7.1 Conditions to Each Party's Obligation to Effect the Merger
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| " | Article Viii Termination, Waiver, Amendment and Closing
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| " | Section 8.1 Termination or Abandonment
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| 38 | Section 8.2 Effect of Termination
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| 39 | Section 8.3 Amendment or Supplement
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| " | Section 8.4 Extension of Time, Waiver, Etc
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| " | Article Ix Miscellaneous
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| " | Section 9.1 No Survival of Representations and Warranties
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| " | Section 9.2 Expenses
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| 40 | Section 9.3 Counterparts; Effectiveness
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| " | Section 9.4 Governing Law
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| " | Section 9.5 Notices
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| 41 | Section 9.6 Assignment; Binding Effect
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| " | Section 9.7 Severability
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| " | Section 9.8 Enforcement of Agreement
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| " | Section 9.9 Miscellaneous
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| " | Section 9.10 Headings
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| 42 | Section 9.11 Certain Defined Terms
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| " | Section 9.12 Finders or Brokers
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| 44 | ANNEX A Certain Conditions of the Offer
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Exhibit 3
AGREEMENT AND PLAN OF MERGER
AMONG
FALCON PRODUCTS, INC.
SY ACQUISITION, INC.
AND
SHELBY WILLIAMS INDUSTRIES, INC.
Dated as of May 5, 1999
TABLE OF CONTENTS
AGREEMENT AND PLAN OF MERGER
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Page
ARTICLE I THE OFFER.................................................................................. 1
Section 1.1 The Offer.................................................................................. 1
Section 1.2 Shelby Williams Actions.................................................................... 3
Section 1.3 Directors.................................................................................. 4
ARTICLE II THE MERGER................................................................................. 5
Section 2.1 The Merger................................................................................. 5
Section 2.2 Closing.................................................................................... 5
Section 2.3 Effective Time............................................................................. 5
Section 2.4 Effects of the Merger...................................................................... 6
Section 2.5 Certificate of Incorporation; Bylaws....................................................... 6
Section 2.6 Directors and Officers..................................................................... 6
ARTICLE III MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF SHARES IN THE MERGER; DISSENTING SHARES 6
Section 3.1 Consideration for the Merger; Conversion or Cancellation of Shares in the Merger........... 6
Section 3.2 Stockholders Meeting....................................................................... 7
Section 3.3 Payment for Shares in the Merger........................................................... 8
Section 3.4 Transfer of Shares After the Effective Time................................................ 9
Section 3.5 Stock Options and Associate Purchase Plan.................................................. 9
Section 3.6 Dissenting Shares.......................................................................... 9
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SHELBY WILLIAMS.......................................... 10
Section 4.1 Organization, Qualification, Etc........................................................... 10
Section 4.2 Capital Stock.............................................................................. 11
Section 4.3 Corporate Authority Relative to this Agreement; No Violation; No Conflict.................. 11
Section 4.4 Reports and Financial Statements; Corporate Records........................................ 12
Section 4.5 No Undisclosed Liabilities................................................................. 13
Section 4.6 No Violation of Law........................................................................ 13
Section 4.7 Environmental Laws and Regulations......................................................... 13
Section 4.8 Employee Matters; ERISA.................................................................... 13
Section 4.9 Absence of Certain Changes or Events....................................................... 15
Section 4.10 Investigations; Litigation................................................................. 15
Section 4.11 Proxy Statement; Offer Documents; Schedule 14D-9; Proxy Statement.......................... 16
Section 4.12 Y2K Compliance............................................................................. 16
Section 4.13 Takeover Laws.............................................................................. 16
Section 4.14 Tax Matters................................................................................ 17
(i)
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Section 4.15 Opinion of Financial Advisor............................................................... 18
Section 4.16 Required Vote of Shelby Williams Stockholders.............................................. 18
Section 4.17 Labor Matters.............................................................................. 18
Section 4.18 Certain Agreements......................................................................... 19
Section 4.19 Title to Assets; Liens..................................................................... 19
Section 4.20 Insurance.................................................................................. 20
Section 4.21 Intellectual Property...................................................................... 20
ARTICLE V REPRESENTATIONS AND WARRANTIES OF FALCON AND SUB........................................... 21
Section 5.1 Organization, Qualification, Etc........................................................... 21
Section 5.2 Corporate Authority Relative to this Agreement; No Violation; No Conflict.................. 22
Section 5.3 Financing.................................................................................. 22
Section 5.4 Offer Documents; Schedule 14D-9; Proxy Statement........................................... 23
Section 5.5 Lack of Ownership of Shares................................................................ 23
Section 5.6 Solvency................................................................................... 23
ARTICLE VI COVENANTS AND AGREEMENTS................................................................... 23
Section 6.1 Conduct of Business by Shelby Williams..................................................... 23
Section 6.2 Investigation.............................................................................. 26
Section 6.3 Obligations of Falcon and Sub.............................................................. 26
Section 6.4 [Intentionally Omitted].................................................................... 27
Section 6.5 Employee Benefit Plans..................................................................... 27
Section 6.6 Filings; Other Action...................................................................... 27
Section 6.7 Further Assurances......................................................................... 28
Section 6.8 No Solicitation............................................................................ 28
Section 6.9 Public Announcements....................................................................... 30
Section 6.10 Indemnification and Insurance.............................................................. 30
Section 6.11 Additional Reports......................................................................... 31
Section 6.12 Notifications.............................................................................. 31
Section 6.13 Employment Agreements...................................................................... 31
Section 6.14 Termination of ESOP........................................................................ 32
ARTICLE VII CONDITIONS TO THE MERGER................................................................... 32
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger................................. 32
ARTICLE VIII TERMINATION, WAIVER, AMENDMENT AND CLOSING................................................. 32
Section 8.1 Termination or Abandonment................................................................. 32
Section 8.2 Effect of Termination...................................................................... 34
Section 8.3 Amendment or Supplement.................................................................... 35
Section 8.4 Extension of Time, Waiver, Etc............................................................. 35
ARTICLE IX MISCELLANEOUS.............................................................................. 35
Section 9.1 No Survival of Representations and Warranties.............................................. 35
Section 9.2 Expenses................................................................................... 35
Section 9.3 Counterparts; Effectiveness................................................................ 36
(ii)
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Section 9.4 Governing Law.............................................................................. 36
Section 9.5 Notices.................................................................................... 36
Section 9.6 Assignment; Binding Effect................................................................. 37
Section 9.7 Severability............................................................................... 37
Section 9.8 Enforcement of Agreement................................................................... 37
Section 9.9 Miscellaneous.............................................................................. 37
Section 9.10 Headings................................................................................... 37
Section 9.11 Certain Defined Terms...................................................................... 38
Section 9.12 Finders or Brokers......................................................................... 38
ANNEX A Certain Conditions of the Offer....................................................................... 1
(iii)
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of May 5, 1999 (this
"Agreement"), is among FALCON PRODUCTS, INC., a Delaware corporation ("Falcon"),
SY ACQUISITION, INC., a Delaware corporation and a wholly-owned subsidiary of
Falcon ("Sub"), and SHELBY WILLIAMS INDUSTRIES, INC., a Delaware corporation
("Shelby Williams").
WHEREAS, the Board of Directors of each of Falcon, Sub, and Shelby
Williams, has, subject to the conditions set forth in this Agreement,
unanimously determined that it is in the best interests of its stockholders for
Sub to acquire Shelby Williams on the terms and subject to the conditions set
forth herein; and
WHEREAS, in furtherance thereof, it is proposed that Sub shall make a cash
tender offer (the "Offer") to acquire all of the outstanding shares (the
"Shares") of Common Stock, par value $ .05 per share (the "Shelby Williams
Common Stock"), of Shelby Williams, at a price of $16.50 per share (such amount,
or any greater amount per share paid pursuant to the Offer, being hereinafter
referred to as the "Per Share Amount"), net to the seller in cash, in accordance
with the terms and subject to the conditions of this Agreement; and
WHEREAS, concurrently with the execution and delivery of this Agreement,
and as a condition to Falcon's and Sub's willingness to enter into this
Agreement, Falcon and Sub have entered into separate Stockholder Agreements,
dated as of the date hereof (the "Stockholder Agreements"), with each of the
Principal Stockholders (as hereinafter defined), pursuant to which each
Principal Stockholder has agreed, among other things, to tender all Shares owned
by such Principal Stockholder pursuant to the Offer and to vote such Shares in
favor of the Merger; and
WHEREAS, the parties desire to make certain representations, warranties,
covenants and agreements in connection with the Offer and the Merger (as
hereinafter defined) and also to prescribe various conditions to the Offer and
the Merger.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
THE OFFER
SECTION 1.1 THE OFFER.
----------------------
(a) Unless this Agreement has been terminated in accordance with Section
8.1, Sub shall commence, within the meaning of Rule 14d-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Offer as promptly as
practicable (but in no event later than the fifth business day from and
including the date of initial public announcement of this Agreement). Sub shall
accept for payment Shares which have been validly tendered and not withdrawn
pursuant to the Offer following expiration of the Offer promptly following the
time that all conditions to the Offer shall have been satisfied or waived by
Sub, except that the
Minimum Condition (as hereinafter defined) may not be waived. The obligation of
Sub to accept for payment, purchase and pay for Shares tendered pursuant to the
Offer shall be subject only to the conditions set forth in Annex A and to the
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further condition that a number of Shares which, together with any Shares
beneficially owned by Falcon or Sub, represent not less than a majority of the
Shares then outstanding on a Fully Diluted Basis (as hereinafter defined) shall
have been validly tendered and not withdrawn prior to the final expiration date
of the Offer (the "Minimum Condition"). "Fully Diluted Basis" means, as of any
time, all of the Shares plus all shares of Shelby Williams Common Stock required
to be issued or issuable pursuant to options, warrants, securities or
obligations of any kind under employee stock or similar benefit plans or
otherwise, whether or not vested or exercisable. Unless previously approved by
Shelby Williams in writing, no change in the Offer may be made (i) which
decreases the price per Share payable in the Offer, (ii) which changes the form
of consideration to be paid in the Offer, (iii) which reduces the maximum number
of Shares to be purchased in the Offer or the Minimum Condition, (iv) which
imposes conditions to the Offer in addition to those set forth in Annex A hereto
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or which modifies the conditions set forth in Annex A in a manner adverse to the
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holders of Shares, (v) which amends any other term of the Offer in a manner
adverse to the holders of the Shares, or (vi) extends the expiration of the
Offer beyond the scheduled expiration date (the initial scheduled expiration
date being 20 business days following commencement of the Offer); provided,
however, that notwithstanding the foregoing, subject to Section 8.1, if the
conditions set forth in Annex A are not satisfied or, to the extent permitted by
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this Agreement, waived by Falcon, Falcon will extend the Offer from time to time
for the shortest time periods permitted by law and which it reasonably believes
are necessary until the consummation of the Offer; and provided further, that
Falcon and Sub shall have the right to extend the Offer for up to ten business
days after the initial scheduled expiration date notwithstanding the prior
satisfaction of the conditions set forth in Annex A. Subject to the terms and
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conditions of the Offer and this Agreement, Sub shall, and Falcon shall cause
Sub to, pay for all Shares validly tendered and not withdrawn pursuant to the
Offer that Sub becomes obligated to purchase pursuant to the Offer as soon as
practicable after the expiration of the Offer.
(b) As soon as practicable on the date of commencement of the Offer,
Falcon and Sub shall file with the Securities and Exchange Commission (the
"SEC") a Tender Offer Statement on Schedule 14D-1 with respect to the Offer
(together with any supplement or amendments thereto, the "Schedule 14D-1"). The
Schedule 14D-1 will include, as exhibits, the Offer to Purchase, form of letter
of transmittal and summary advertisement (collectively, together with any
amendments and supplements thereto, the "Offer Documents"). The Offer Documents
will comply in all material respects as to form with the requirements of
applicable federal securities laws. Falcon, Sub and Shelby Williams each agree
promptly to correct any information provided by them for use in the Offer
Documents if and to the extent that it shall have become false or misleading in
any material respect and Falcon and Sub agree to take all steps necessary to
cause the Offer Documents and any amendments or supplements thereto to be filed
with the SEC and to be disseminated to holders of Shares, in each case as and to
the extent required by applicable federal securities laws. Shelby Williams and
its counsel shall be given a reasonable opportunity to review and comment upon
the Offer Documents and any amendments thereto in each case prior to the filing
thereof with the SEC. Falcon and Sub agree to provide Shelby Williams and its
counsel a written copy of any comments or other communications (whether written
or oral) that Falcon, Sub or their counsel may receive from time to time from
the SEC or its Staff with respect to the Offer Documents as soon as practicable
after receipt thereof.
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SECTION 1.2 SHELBY WILLIAMS ACTIONS.
------------------------------------
(a) Shelby Williams hereby approves of and consents to the Offer and
represents that its Board of Directors, including all of the disinterested
directors, at a meeting duly called and held, has, subject to the terms and
conditions set forth herein, (i) approved this Agreement and the transactions
contemplated hereby (including, without limitation, the Offer, the Merger, the
Stockholder Agreements, and the transactions contemplated thereby), and such
approval constitutes approval of this Agreement and the transactions
contemplated hereby (including, without limitation, the Offer, the Merger, the
Stockholder Agreements, and the transactions contemplated thereby), for purposes
of Section 203 of the Delaware General Corporation Law, as amended (the "DGCL"),
such that it will not apply to the transactions contemplated by this Agreement
(including, without limitation, the Offer, the Merger, the Stockholder
Agreements, and the transactions contemplated thereby); (ii) unanimously
determined that each of the Offer and the Merger are fair to and in the best
interests of Shelby Williams and Shelby Williams's stockholders; and (iii)
resolved to recommend that the stockholders of Shelby Williams accept the Offer,
tender their Shares thereunder to Sub and approve and adopt this Agreement and
the Merger; provided, that such recommendation may be withdrawn, modified or
amended if the Board of Directors of Shelby Williams determines in good faith,
based on advice of its outside counsel, that such action is necessary in order
for the Board to comply with its obligations or duties to Shelby Williams or its
stockholders under applicable law. Shelby Williams consents to the inclusion of
such recommendation and approval in the Offer Documents, subject to Shelby
Williams's right to withdraw, modify or amend its recommendation.
(b) Shelby Williams hereby agrees to file with the SEC, on the date the
Schedule 14D-1 is filed with the SEC, a Solicitation/Recommendation Statement on
Schedule 14D-9 (together with any amendments or supplements thereto, the
"Schedule 14D-9") containing the recommendation described in Section 1.2(a). The
Schedule 14D-9 will comply in all material respects as to form with the
requirements of applicable federal securities laws. Shelby Williams, Falcon, and
Sub each agree promptly to correct any information provided by them for use in
the Schedule 14D-9 if and to the extent that it shall have become false or
misleading in any material respect and Shelby Williams further agrees to take
all steps necessary to cause the Schedule 14D-9 and any amendments or
supplements thereto to be filed with the SEC and disseminated to holders of
Shares, in each case as and to the extent required by applicable federal
securities laws. Notwithstanding anything to the contrary in this Agreement, the
Board of Directors may withdraw, modify or amend its recommendation if the Board
of Directors of Shelby Williams reasonably determines in good faith, based on
advice of its outside counsel, that such action is necessary in order for the
Board to comply with its obligations or duties to Shelby Williams or its
stockholders under applicable law. Falcon and its counsel shall be given a
reasonable opportunity to review and comment upon the Schedule 14D-9 and any
amendments thereto in each case prior to the filing thereof with the SEC. Shelby
Williams agrees to provide Falcon and Sub and their counsel a written copy of
any comments or other communications (whether written or oral) that Shelby
Williams or its counsel may receive from time to time from the SEC or its Staff
with respect to the Schedule 14D-9 as soon as practicable after receipt thereof.
(c) In connection with the Offer, Shelby Williams will cause its transfer
agent promptly to furnish Falcon and Sub with mailing labels, security position
listings and any available listing or computer files containing the names and
addresses of the record holders of
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the Shares as of a recent date and shall furnish Sub with such additional
information and assistance (including, without limitation, updated lists of
stockholders, mailing labels and lists of securities positions) as Sub or its
agents may reasonably request in communicating, and advocating acceptance of the
Offer to the record and beneficial holders of Shares. Subject to the
requirements of applicable law, and except for such steps as are necessary to
disseminate the Offer Documents, Falcon and Sub shall hold such listings and
other information in confidence and in accordance with the terms of the Shelby
Williams Confidentiality Agreement (as hereinafter defined), and shall use the
information contained in any such labels, listings and files only in connection
with the Offer and the Merger, and, if this Agreement is terminated, will
deliver to Shelby Williams all copies of such information (and extracts and
summaries thereof) then in their or their agent's or advisor's possession in
accordance with the terms of the Shelby Williams Confidentiality Agreement.
SECTION 1.3 DIRECTORS.
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(a) Promptly upon the purchase of and payment for any Shares by Falcon or
any of its Subsidiaries which represent at least a majority of the outstanding
Shares on a fully diluted basis, Falcon shall be entitled to designate such
number of directors, rounded up to the next whole number, on the Board of
Directors of Shelby Williams as is equal to the product of the total number of
directors on such Board (giving effect to the directors designated by Falcon
pursuant to this sentence) multiplied by the percentage that the number of
Shares so purchased bears to the total number of Shares then outstanding on a
Fully Diluted Basis. In furtherance thereof, Shelby Williams shall, upon request
of Sub, use its best efforts promptly either (at Shelby Williams's election) to
increase the size of its Board of Directors or secure the resignations of such
number of its incumbent directors, or both, as is necessary to enable Falcon's
designees to be so elected to Shelby Williams's Board, and shall take all
actions available to Shelby Williams to cause Falcon's designees to be so
elected. At such time, Shelby Williams shall, if requested by Falcon, also cause
persons designated by Falcon to constitute at least the same percentage (rounded
up to the next whole number) as is on Shelby Williams's Board of Directors of
(i) each committee of Shelby Williams's Board of Directors, (ii) each board of
directors (or similar body) of each Subsidiary (as defined in Section 9.11) of
Shelby Williams and (iii) each committee (or similar body) of each such board.
(b) Shelby Williams's obligations to appoint designees to the Board of
Directors of Shelby Williams shall be subject to Section 14(f) of the Exchange
Act. At the request and expense of Falcon, Shelby Williams shall promptly take
all actions required pursuant to Section 14(f) of the Exchange Act and Rule 14f-
1 promulgated thereunder in order to fulfill its obligations under Section
1.3(a), including mailing to stockholders the information required by such
Section 14(f) and Rule 14f-1 as is necessary to enable Falcon's designees to be
elected to Shelby Williams's Board of Directors. Falcon will provide to Shelby
Williams in writing and be solely responsible for all information required by
such Section 14(f) and Rule 14f-1 with respect to its nominees, officers,
directors and affiliates.
(c) If Falcon's designees are elected or appointed to Shelby Williams's
Board of Directors, until the Effective Time (as defined in Section 2.3), Shelby
Williams's Board shall include at least two directors who are directors on the
date hereof (the "Independent Directors"), provided that, in such event, if the
number of Independent Directors shall be reduced below two
4
for any reason whatsoever, any remaining Independent Directors (or Independent
Director, if there shall be only one remaining) shall be entitled to designate
persons to fill such vacancies who shall be deemed to be Independent Directors
for purposes of this Agreement or, if no Independent Director then remains, the
other directors shall designate two persons to fill such vacancies who shall not
be stockholders, affiliates or associates of Falcon or Sub and such persons
shall be deemed to be Independent Directors for purposes of this Agreement.
Notwithstanding anything in this Agreement to the contrary, if Falcon's
designees are elected to Shelby Williams's Board, after the acceptance for
payment of Shares pursuant to the Offer and prior to the Effective Time, the
affirmative vote of a majority of the Independent Directors shall be required
and shall be sufficient to authorize any termination of this Agreement by Shelby
Williams, any amendment of this Agreement requiring action by the Board of
Directors of Shelby Williams, any extension of time for the performance of any
of the obligations or other acts of Falcon or Sub under this Agreement, any
waiver of compliance with any of the agreements or conditions under this
Agreement for the benefit of Shelby Williams, any action to seek to enforce any
obligation of Falcon or Sub under this Agreement and any other action by Shelby
Williams's Board of Directors under or in connection with this Agreement. The
Independent Directors shall be appointed as a Special Committee of the Shelby
Williams Board of Directors and shall have full power solely with respect to the
matters set forth in the previous sentence to be approved by the Independent
Directors. In connection herewith, the Independent Directors (in their capacity
as the Special Committee) shall be authorized, on behalf of and at the expense
of Shelby Williams, to retain legal advisors.
ARTICLE II
THE MERGER
SECTION 2.1 THE MERGER. Upon the terms and subject to the conditions set
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forth in this Agreement, and in accordance with the DGCL, Sub shall be merged
with and into Shelby Williams (the "Merger") at the Effective Time. As of the
Effective Time, the separate corporate existence of Sub shall cease and Shelby
Williams shall be the surviving corporation (the "Surviving Corporation") and
shall succeed to and assume all the rights and obligations of Sub in accordance
with the DGCL.
SECTION 2.2 CLOSING. The closing of the Merger (the "Closing") will take
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place at a location mutually acceptable to the parties hereto at 10:00 a.m. on a
date to be specified by the parties (the "Closing Date"), which shall be no
later than the first business day after satisfaction or waiver of the conditions
set forth in Article VII, unless another time or date is agreed to by the
parties hereto.
SECTION 2.3 EFFECTIVE TIME. Subject to the provisions of this Agreement,
----------------------------
as soon as practicable on or after the Closing Date, the parties shall file a
certificate of merger or other appropriate documents (in any such case, the
"Certificate of Merger") executed in accordance with the relevant provisions of
the DGCL and shall make all other filings or recordings required under the DGCL.
The Merger shall become effective at such time as the Delaware Secretary of
State accepts the Certificate of Merger for record, or at such subsequent date
or time as Falcon and Shelby Williams shall agree and specify in the Certificate
of Merger (the time the Merger becomes effective being hereinafter referred to
as the "Effective Time").
5
SECTION 2.4 EFFECTS OF THE MERGER. The Merger shall have the effects set
-----------------------------------
forth in the applicable provisions of the DGCL. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time, all property of
Shelby Williams and Sub shall vest in the Surviving Corporation, and all
liabilities and obligations of Shelby Williams and Sub shall become liabilities
and obligations of the Surviving Corporation.
SECTION 2.5 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of
--------------------------------------------------
Incorporation of Sub, as in effect immediately prior to the execution of this
Agreement, shall be the Certificate of Incorporation of the Surviving
Corporation except that Article FIRST thereof shall read as follows: "FIRST: The
name of the corporation is "Shelby Williams Industries, Inc." and, as so
amended, shall be the certificate of incorporation of the Surviving Corporation
until thereafter amended as provided by law and such Certificate of
Incorporation. The bylaws of Sub, as in effect immediately prior to the
execution of this Agreement, shall be the bylaws of the Surviving Corporation
until thereafter changed or amended as provided therein or by applicable law.
SECTION 2.6 DIRECTORS AND OFFICERS. The directors of Sub at the Effective
------------------------------------
Time shall be the directors of the Surviving Corporation and the officers of Sub
at the Effective Time shall be the officers of the Surviving Corporation, in
each case until their respective successors are duly elected and qualified.
ARTICLE III
MERGER CONSIDERATION; CONVERSION OR
CANCELLATION OF SHARES IN THE MERGER;
DISSENTING SHARES
SECTION 3.1 CONSIDERATION FOR THE MERGER; CONVERSION OR CANCELLATION OF
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SHARES IN THE MERGER. At the Effective Time, by virtue of the Merger and
---------------------
without any action on the part of the holders of any Shares or capital stock of
Sub:
(a) Each Share that is issued and outstanding immediately prior to the
Effective Time other than Dissenting Shares (as defined in Section 3.6) and
Shares owned by Falcon, Sub or any direct or indirect wholly-owned subsidiary of
Falcon (collectively, "Falcon Companies") or any of Shelby Williams's direct or
indirect wholly-owned subsidiaries or shares held in the treasury of Shelby
Williams shall, by virtue of the Merger and without any action on the part of
Sub, Shelby Williams or the holder thereof, be cancelled and extinguished and
converted into the right to receive the Per Share Amount in cash (the "Merger
Consideration"), payable to the holder thereof, without interest thereon, less
any applicable withholding of taxes, upon the surrender of the certificate
formerly representing such Share in the manner provided in Section 3.3.
(b) Each Share issued and outstanding and owned by any of the Falcon
Companies other than Sub or any of Shelby Williams's direct or indirect wholly
owned subsidiaries or authorized but unissued shares held by Shelby Williams
immediately prior to the Effective Time shall cease to be outstanding, be
cancelled and retired without payment of any consideration therefor and cease to
exist.
6
(c) Each share of common stock of Sub issued and outstanding immediately
prior to the Effective Time shall be converted into one validly issued, fully
paid and non-assessable share of common stock of the Surviving Corporation.
SECTION 3.2 STOCKHOLDERS MEETING. Shelby Williams, acting through its
----------------------------------
Board of Directors, shall, if required by applicable law in order to consummate
the Merger:
(i) duly call, give notice of, convene and hold a special meeting of
its stockholders (the "Stockholders Meeting"), to be held as soon as
practicable after Sub shall have purchased Shares pursuant to the Offer,
for the purpose of considering and taking action upon this Agreement;
(ii) prepare and file with the SEC a preliminary proxy or information
statement relating to the Merger and this Agreement and include in any
preliminary or definitive proxy statement or information statement with
respect to the Stockholders' Meeting (the "Proxy Statement"), the
recommendation of the Board of Directors that stockholders of Shelby
Williams vote in favor of the approval of this Agreement and the
transactions contemplated hereby unless the Board of Directors of Shelby
Williams determines in good faith, based on advice of its outside counsel,
that not taking any such action is necessary in order for the Board of
Directors of Shelby Williams to comply with its obligations or duties to
Shelby Williams or its stockholders under applicable law; and
(iii) use all reasonable efforts to obtain and furnish the information
required to be included by it in the Proxy Statement and, after
consultation with Falcon and Sub, respond promptly to any comments made by
the SEC with respect to the Proxy Statement and any preliminary version
thereof and cause the Proxy Statement to be mailed to its stockholders at
the earliest practicable time following the expiration or termination of
the Offer and obtain the necessary approvals by its stockholders of this
Agreement and the transactions contemplated hereby unless the Board of
Directors of Shelby Williams determines in good faith, based on advice of
its outside counsel, that not taking any such action is necessary in order
for the Board of Directors of Shelby Williams to comply with its
obligations or duties to Shelby Williams or its stockholders under
applicable law.
(a) Falcon agrees that it will provide Shelby Williams with the
information concerning Falcon and Sub required by applicable law to be included
in the Proxy Statement.
Shelby Williams and Falcon agree to use commercially reasonable efforts to
cause the Special Meeting to occur within 90 days after the purchase of Shares
pursuant to the Offer. At the Stockholders' Meeting, Falcon, Sub, and their
affiliates will vote all Shares owned by them in favor of approval of this
Agreement and the transactions contemplated hereby.
(b) Notwithstanding the foregoing, if Falcon, Sub, and any of their
Subsidiaries shall acquire at least 90% of the then outstanding Shares, the
parties hereto agree, subject to Article VII, to take all necessary and
appropriate action to cause the Merger to become effective in accordance with
Section 253 of the DGCL as soon as practicable after such acquisition, without a
meeting of the stockholders of Shelby Williams.
7
SECTION 3.3 PAYMENT FOR SHARES IN THE MERGER. The manner of making payment
----------------------------------------------
for Shares in the Merger shall be as follows:
(a) At or prior to the Effective Time, Falcon shall deposit with or for
the account of a bank or trust company having net capital of not less than
$100,000,000 and designated by Falcon (the "Payment Agent"), for the benefit of
the holders of Shares, the funds necessary to make the payments contemplated by
Section 3.1 (the "Payment Fund"). The Payment Agent shall, pursuant to
irrevocable instructions, deliver the Merger Consideration out of the Payment
Fund.
(b) As soon as practicable after the Effective Time, but in any event no
later than five (5) business days thereafter, the Payment Agent shall mail to
each holder of record (other than holders of certificates representing Shares
referred to in Section 3.1(b)) of a certificate or certificates which
immediately prior to the Effective Time represented outstanding Shares (the
"Certificates") a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificates to the Payment Agent and shall be in
such form and have such other customary provisions as Falcon shall specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for payment of the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Payment Agent, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Payment Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor the Merger Consideration without any interest
thereon, less any applicable withholding of taxes, and the Certificate so
surrendered shall forthwith be canceled. The Merger Consideration with respect
to the Shares represented thereby may be paid to a person other than the person
in whose name the Certificate so surrendered is registered if such Certificate
shall be properly endorsed or otherwise be in proper form for transfer and the
person requesting such issuance shall pay any transfer or other nonincome taxes
required by reason of the payment of the Merger Consideration to a person other
than the registered holder or establish to the satisfaction of the Payment Agent
that such tax has been paid or is not applicable. Until surrendered as
contemplated by this Section 3.3, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive, upon such
surrender thereof, the Merger Consideration with respect to each of the Shares
represented thereby, without interest.
(c) Any portion of the Payment Fund which remains undistributed to the
holders of the Certificates as of the date which is one year after the Effective
Time shall be delivered to Falcon, upon demand, and any holders of the
Certificates who have not theretofore complied with this Article III shall
thereafter look only to Falcon or the Surviving Corporation for payment of their
claim for Merger Consideration.
(d) None of Falcon, Shelby Williams, Sub or the Payment Agent shall be
liable to any person in respect of any cash from the Payment Fund delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificate shall not have been surrendered prior to seven
years after the Effective Time (or immediately prior to such earlier date on
which any Merger Consideration would otherwise escheat to or become the property
of any governmental body or authority), any such Merger Consideration, to the
extent permitted by applicable law, shall become the property of the Surviving
Corporation, free and clear of all claims and interest of any person previously
entitled thereto.
8
(e) The Payment Agent shall invest any cash included in the Payment Fund
on a daily basis as directed by Falcon. Any interest and other income resulting
from such investments shall be paid to Falcon.
(f) If any Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such Certificate to
be lost, stolen or destroyed and, if required by the Surviving Corporation, the
posting by such person of a bond in such amount as the Surviving Corporation may
direct as indemnity against any claim that may be made against it with respect
to such Certificate, the Payment Agent will issue in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration.
SECTION 3.4 TRANSFER OF SHARES AFTER THE EFFECTIVE TIME. At the Effective
--------------------------------------------------------
Time, the stock transfer books of Shelby Williams shall be closed, and there
shall be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the Shares that were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation or the Payment Agent for any reason, they shall be
canceled and exchanged as provided in this Article III.
SECTION 3.5 STOCK OPTIONS AND ASSOCIATE PURCHASE PLAN.
------------------------------------------------------
(a) Each option granted to a Shelby Williams employee, consultant or
director to acquire shares of Shelby Williams Common Stock ("Option") that is
outstanding immediately prior to the purchase of Shares pursuant to the Offer
(irrespective of whether such Options are then exercisable) shall, on the fifth
business day after the purchase by Sub of Shares pursuant to the Offer, be
cancelled in exchange for a single lump sum cash payment equal to the product of
(i) the number of shares of Shelby Williams Common Stock subject to such Option
and (ii) the excess of the Per Share Amount over the exercise price per share of
such Option.
(b) Except as set forth in Section 3.5(a), each Option that is outstanding
immediately prior to the Effective Time, whether or not then vested or
exercisable, shall, effective as of the Effective Time, be cancelled and no
payments shall be made with respect thereto.
(c) Not later than the twentieth business day following the commencement
of the Offer, Shelby Williams shall have taken all required actions so that
following the purchase of Shares pursuant to the Offer, no holder of stock
options will have any right to receive shares of Shelby Williams Common Stock
upon exercise of a stock option.
SECTION 3.6 DISSENTING SHARES. Notwithstanding anything in this Agreement
------------------------------
to the contrary, any Shares which are held by stockholders who did not vote in
favor of the Merger and who comply with all of the relevant provisions of
Section 262 of the DGCL (the "Dissenting Shares") shall not be converted into or
be exchanged for the right to receive the Merger Consideration, but instead
shall be converted into the right to receive payment from the Surviving
Corporation with respect to such Dissenting Shares in accordance with the DGCL,
unless and until such holders shall have failed to perfect or shall have
effectively withdrawn or lost their rights to appraisal under the DGCL. If any
such holder shall have failed to perfect or shall have effectively withdrawn or
lost such right, such holder's Shares shall be entitled to the Merger
Consideration in accordance with Section 3.3. Shelby Williams shall give prompt
notice
9
to Sub and Falcon of any demands received by Shelby Williams for appraisal of
Shares, and Sub and Falcon shall have the right to participate in and direct all
negotiations and proceedings with respect to such demands. Shelby Williams shall
not, except with the prior written consent of Sub and Falcon, make any payments
with respect to, or settle or offer to settle, any such demands.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SHELBY WILLIAMS
Shelby Williams represents and warrants to Falcon and Sub that, except as
set forth in the Disclosure Schedule attached to and made a part of this
Agreement, all of the statements contained in this Article IV are true and
correct as of the date of this Agreement (or, if made as of a specified date, as
of such date). Each exception set forth in the Disclosure Schedule and each
other response to this Agreement set forth in the Disclosure Schedule is
identified by reference to, or has been grouped under a heading referring to,
one or more specific sections of this Agreement. Each such exception or
response may be deemed to be an exception or response to one or more other
sections only if the level of particularity or manner of disclosure of the fact
or item expressly disclosed would permit a reasonable person to find such
disclosure relevant to another section.
SECTION 4.1 ORGANIZATION, QUALIFICATION, ETC. Shelby Williams is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power and authority to own its
properties and assets and to carry on its business as it is now being conducted
and is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its properties or the conduct of its
business requires such qualification, except for jurisdictions in which such
failure to be so qualified or to be in good standing would not, individually or
in the aggregate, have a Material Adverse Effect (as hereinafter defined) on
Shelby Williams. As used in this Agreement, any reference to any state of facts,
event, change or effect having a "Material Adverse Effect" on or with respect to
Shelby Williams or Falcon, as the case may be, means a Material Adverse Effect
on the assets, business, results of operations or financial condition of Shelby
Williams and its Subsidiaries (as defined in Section 9.11), taken as a whole or
Falcon and its Subsidiaries, taken as a whole, as the case may be. Shelby
Williams has heretofore furnished, or otherwise made available, to Falcon a
complete and correct copy, as applicable, of the Certificate or Articles of
Incorporation and the Bylaws, each as amended to, and in full force and effect
as of, the date hereof, of Shelby Williams and each of its Subsidiaries. Neither
Shelby Williams nor any of its Subsidiaries is in violation of any of the
provisions of its Certificate or Articles of Incorporation or By-laws.
(a) Shelby Williams does not own, directly or indirectly, any equity or
other ownership interest in any corporation, partnership, joint venture, or
other entity or enterprise, except for the Subsidiaries. Shelby Williams is not
subject to any corporate or contractual obligation or requirement to make any
investment, loan or capital contribution to any corporation, partnership, joint
venture or other entity or enterprise, other than its Subsidiaries. Each of
Shelby Williams's Subsidiaries is duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has the corporate power and authority to own its properties and to carry on its
business as it is now being conducted, and is duly qualified to do business and
is in good standing in each jurisdiction in which the ownership of its property
or the conduct of its business requires such qualification, except for
jurisdictions
10
in which such failure to be so qualified or to be in good standing would not,
individually or in the aggregate, have a Material Adverse Effect on Shelby
Williams. All the outstanding shares of capital stock of, or other ownership
interests in, Shelby Williams's Subsidiaries are validly issued, fully paid and
non-assessable and are owned by Shelby Williams, directly or indirectly, free
and clear of all liens, claims, charges or encumbrances. There are no existing
subscriptions, options, warrants, rights of first refusal, preemptive rights,
calls, commitments, agreements or conversion rights of any character relating to
the issued or unissued capital stock or other securities of, or other ownership
interests in, any Subsidiary of Shelby Williams.
SECTION 4.2 CAPITAL STOCK.
--------------------------
(a) The authorized stock of Shelby Williams consists of 30,000,000 shares
of common stock, par value $.05 per share ("Shelby Williams Common Stock"). As
of March 10, 1999, there were 8,761,417 shares of Shelby Williams Common Stock
issued and outstanding. All the outstanding shares of Shelby Williams Common
Stock have been validly issued and are fully paid and non-assessable and have
not been issued in violation of any preemptive or similar rights. As of the date
of this Agreement, there were no outstanding subscriptions, options, warrants,
rights or other arrangements (including, without limitation, any stockholders'
rights plan) or commitments obligating Shelby Williams to issue any shares of
its capital stock nor are there outstanding any securities which are convertible
into or exchangeable for any shares of capital stock of Shelby Williams, and
Shelby Williams has no obligations of any kind to issue any additional
securities other than options and other rights to receive or acquire not in
excess of 227,801 shares of Shelby Williams Common Stock granted on or prior to
December 31, 1998, pursuant to employee incentive or benefit plans, programs and
arrangements and non-employee director plans.
(b) Except for the issuance of shares of Shelby Williams Common Stock
pursuant to the options referred to in the last sentence of Section 4.2(a) and
except as permitted in Section 6.1(i), since March 10, 1999, no shares of Shelby
Williams Common Stock have been issued.
(c) The issuance and sale of all of the outstanding shares of capital
stock described in this Section 4.2 have been in compliance with federal and
state securities laws. There are no outstanding obligations of Shelby Williams
to repurchase, redeem or otherwise acquire any shares of capital stock of Shelby
Williams and no person has any right to cause Shelby Williams to repurchase,
redeem or otherwise acquire any shares of capital stock of Shelby Williams.
SECTION 4.3 CORPORATE AUTHORITY RELATIVE TO THIS AGREEMENT; NO VIOLATION;
-------------------------------------------------------------------------
NO CONFLICT. Shelby Williams has the corporate power and authority necessary to
-----------
enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Shelby Williams and, except, with respect to the Merger,
for the approval of its stockholders, no other corporate proceedings on the part
of Shelby Williams are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Shelby Williams and, assuming this Agreement
constitutes a valid and binding Agreement of the other parties hereto, this
Agreement constitutes a valid and binding agreement of Shelby Williams,
enforceable against Shelby Williams in accordance with its terms. Other than in
connection with or in
11
compliance with the provisions of the DGCL (including the approval of the Merger
by the stockholders of Shelby Williams), the Exchange Act, and the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
(collectively, the "Shelby Williams Required Approvals"), no authorization,
consent or approval of, or filing by Shelby Williams with, any governmental body
or authority or other person is necessary for the execution and delivery of this
Agreement or for the consummation by Shelby Williams of the transactions
contemplated by this Agreement. Neither the execution and delivery of this
Agreement by Shelby Williams nor the consummation by Shelby Williams of the
transactions contemplated by this Agreement will (a) result in a breach or
violation of the organizational documents of Shelby Williams or of any of Shelby
Williams's Subsidiaries; (b) result in a breach or violation of any provision
of, or constitute a default (or an event which, with the giving of notice, the
passage of time or otherwise, would constitute a default) under, or entitle any
party (with the giving of notice, the passage of time or otherwise) to
terminate, accelerate or modify, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of Shelby
Williams or any of Shelby Williams's Subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
contract, agreement, lease or other instrument or obligation to which Shelby
Williams or any of its Subsidiaries is a party; (c) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Shelby Williams or
any of its Subsidiaries or any of the properties or assets of any of them; or
(d) give any governmental body or authority the right to revoke, withdraw,
suspend, cancel, terminate or modify any governmental authorization held by
Shelby Williams or any of its Subsidiaries.
SECTION 4.4 REPORTS AND FINANCIAL STATEMENTS; CORPORATE RECORDS. Shelby
----------------------------------------------------------------
Williams has previously made available to Falcon true and complete copies of:
(i) Shelby Williams's Annual Reports on Form 10-K filed with the SEC for each of
the years ended December 31, 1996 through 1998 (the "Annual Reports"); (ii) each
definitive proxy statement filed by Shelby Williams with the SEC from December
31, 1995 until the date of this Agreement (the "Proxy Statements"); (iii) each
final prospectus filed by Shelby Williams with the SEC from December 31, 1996
until the date of this Agreement ("Prospectuses"); and (iv) all Current Reports
on Form 8-K filed by Shelby Williams with the SEC since the end of its last
fiscal year until the date of this Agreement ("Current Reports").
(a) All of the Shelby Williams Annual Reports, Proxy Statements,
Prospectuses, and Current Reports (collectively, the "Shelby Williams SEC
Reports") at the time filed (and in the case of registration statements and
proxy statements, on the dates of their effectiveness and the dates of mailing,
respectively) (i) complied in all material respects with the applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
the Exchange Act and the rules and regulations promulgated thereunder, and (ii)
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements and unaudited
consolidated interim financial statements included in the Shelby Williams SEC
Reports (including any related notes and schedules) fairly present the financial
position of Shelby Williams and its consolidated Subsidiaries as of the dates
thereof and the results of operations and cash flows for the periods then ended
(subject, where appropriate, to normal year-end adjustments), in each case in
accordance with past practice and generally accepted accounting principles in
the United States ("GAAP") consistently applied during the periods involved
(except as otherwise disclosed in the
12
notes thereto or in the case of unaudited statements, as permitted by the rules
of the SEC or Form 10-Q). Since December 31, 1995, Shelby Williams has timely
filed all reports, registration statements and other filings required to be
filed by it with the SEC under the Exchange Act, the Securities Act and the
rules and regulations of the SEC.
(b) The minute books of Shelby Williams and each of Shelby Williams's
corporate Subsidiaries contain accurate records of all meetings held of, and
corporate action taken by, the stockholders and the Board of Directors of such
companies, and no meeting of any such stockholders or Board of Directors has
been held for which minutes have not been prepared and are not contained in such
minute books.
SECTION 4.5 NO UNDISCLOSED LIABILITIES. As of the date hereof, neither
---------------------------------------
Shelby Williams nor any of its Subsidiaries has any liabilities or obligations
of any nature, whether or not accrued, contingent or otherwise, that would be
required by GAAP to be reflected on a consolidated balance sheet of Shelby
Williams, except liabilities or obligations (a) reflected in any of the Shelby
Williams SEC Reports filed prior to the date of this Agreement, or (b) incurred
in the ordinary course of business since December 31, 1998.
SECTION 4.6 NO VIOLATION OF LAW. The businesses of Shelby Williams and its
--------------------------------
Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any governmental body or authority or any judgment, decision or
order entered by any governmental authority.
SECTION 4.7 ENVIRONMENTAL LAWS AND REGULATIONS. As of the date hereof (a)
-----------------------------------------------
Shelby Williams and each of its Subsidiaries is in compliance with all
applicable federal, state, local and foreign laws and regulations relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata) (collectively, "Environmental Laws"), which compliance includes, but is
not limited to, the possession by Shelby Williams and its Subsidiaries of all
material permits and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof; (b)
neither Shelby Williams nor any of its Subsidiaries has received written notice
of, or, to the knowledge of Shelby Williams, is the subject of, any actions,
causes of action, claims, investigations, demands or notices by any person
alleging liability under or non-compliance with any Environmental Law
("Environmental Claims"); and (c) to the knowledge of Shelby Williams, there are
no circumstances that are reasonably likely to prevent or interfere with such
compliance in the future. There are no past or present actions or activities,
including, without limitation, the release, emission, discharge or disposal of
any Hazardous Material at any site presently owned by Shelby Williams or its
Subsidiaries or used in the conduct of their business, that could form the basis
of any claim against Shelby Williams or its Subsidiaries under Environmental
Laws. For purposes of this Section 4.7, "Hazardous Material" means chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products and any other substance or material regulated as
toxic or hazardous pursuant to any Environmental Law.
SECTION 4.8 EMPLOYEE MATTERS; ERISA. Set forth in Shelby Williams's
------------------------------------
Disclosure Schedule is a true and complete list of all material employee benefit
plans maintained or contributed to as of the date hereof by Shelby Williams or
any of its Subsidiaries covering their
13
present and former employees or directors or their beneficiaries, or providing
benefits to such persons in respect of services provided to any such entity,
including, but not limited to, any employee benefit plan within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), any deferred compensation, bonus, stock option, restricted stock,
incentive compensation, severance or change in control agreement or plan, and
any other material benefit arrangement or payroll practice (collectively, the
"Shelby Williams Benefit Plans").
(a) All contributions and other payments required to be made by Shelby
Williams to any person pursuant to the terms thereof) have been made or the
amount of such payment or contribution obligation has been reflected in the
Shelby Williams SEC Reports.
(b) Each of the Shelby Williams Benefit Plans intended to be "qualified"
within the meaning of Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code") has received a favorable determination letter from the
Internal Revenue Service (the "IRS") as to such qualified status.
(c) All Shelby Williams Benefit Plans are in compliance with all
applicable provisions of ERISA and the Code, and Shelby Williams and its
Subsidiaries do not have any liabilities or obligations with respect to any
Shelby Williams Benefit Plan, whether or not accrued, contingent or otherwise.
(d) With respect to Shelby Williams Benefit Plans, individually and in the
aggregate, no event has occurred and, to Shelby Williams's knowledge, there does
not now exist any condition or set of circumstances that could subject Shelby
Williams or any of its Subsidiaries to any material liability arising under
ERISA or the Code (including, without limitation, any liability to any such plan
or the Pension Benefit Guaranty Corporation (the "PBGC")), or under any
indemnity agreement to which Shelby Williams or any of its Subsidiaries is a
party, except liability for benefit claims and funding obligations payable in
the ordinary course.
(e) None of the Shelby Williams Benefit Plans that are "welfare plans"
within the meaning of Section 3(1) of ERISA provides for any retiree benefits
other than continuation coverage required to be provided under Section 4980B of
the Code or Part 6 of Title I of ERISA.
(f) Except as provided in the termination benefit agreements listed and
identified as such in Shelby Williams's Disclosure Schedule which are in effect
on the date hereof (the "Change of Control Employment Agreements"), the
consummation or announcement of any transaction contemplated by this Agreement
will not (whether alone or upon the occurrence of any additional or further acts
or events) result in any (A) payment (whether of severance pay or otherwise)
becoming due from Shelby Williams or any of its Subsidiaries to any officer,
employee, former employee or director thereof or to the trustee under any "rabbi
trust" or similar arrangement, or (B) benefit under any Shelby Williams Benefit
Plan being established or becoming accelerated, vested or payable. Neither
Shelby Williams nor any of its Subsidiaries is a party to (A) any management,
employment, deferred compensation, severance (including any payment, right or
benefit resulting from a change in control), bonus or other contract for
personal services with any current or former officer, director or employee
(whether or not characterized as
14
a plan for purposes of ERISA), (B) any material consulting contract with any
person who prior to entering into such contract was a director or officer of
Shelby Williams or any of its Subsidiaries, or (C) any plan, agreement,
arrangement or understanding similar to any of the items described in clause (A)
or (B) of this sentence.
(g) The consummation or announcement of any transaction contemplated by
this Agreement will not (either alone or upon the occurrence of any additional
or further acts or events) result in the disqualification of any of the Shelby
Williams Benefit Plans intended to be qualified under, result in a prohibited
transaction or breach of fiduciary duty under, or otherwise violate, ERISA or
the Code.
(h) Neither Shelby Williams nor any of its Subsidiaries nor any of their
directors, officers, employees or agents, nor any "party in interest" or
"disqualified person," as such terms are defined in Section 3 of ERISA and
Section 4975 of the Code has, with respect to any Shelby Williams Benefit Plan,
engaged in or been a party to any "prohibited transaction," as such term is
defined in Section 4975 of the Code or Section 406 of ERISA which is not
otherwise exempt, which could result in the imposition of either a penalty
assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of
the Code or which could constitute a breach of fiduciary duty, in each case
applicable to Shelby Williams.
(i) No Shelby Williams Benefit Plan subject to Section 412 of the Code has
incurred any now existing "accumulated funding deficiency" (as defined in
ERISA), whether or not waived. Neither Shelby Williams nor any of its
Subsidiaries has incurred, and none of such entities reasonably expects to
incur, any material liability to the PBGC with respect to any Shelby Williams
Benefit Plan. Neither Shelby Williams nor any of its Subsidiaries is a party to,
and neither has incurred or reasonably expects to incur, any withdrawal
liability with respect to any "multiemployer plan" (as defined in Section 3(37)
of ERISA) for which there is any outstanding liability.
(j) None of the assets of any of Shelby Williams Benefit Plans which hold
assets are invested in securities of Shelby Williams.
(k) Shelby Williams is in compliance with the notice provisions and all
other provisions of COBRA and the Health Insurance Portability and
Accountability Act of 1996.
(l) Since December 31, 1998, no change has occurred in the base salary of
any person who is a party to a Change of Control Employment Agreement.
SECTION 4.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. From December 31, 1998
-------------------------------------------------
to the date of this Agreement, the businesses of Shelby Williams and its
Subsidiaries have been conducted in all material respects in the ordinary course
and there has not been any event, occurrence, development or state of
circumstances or facts that has had or is reasonably likely to have a Material
Adverse Effect on Shelby Williams. Since December 31, 1998, neither Shelby
Williams nor any of its Subsidiaries has engaged in any transaction which, if
done after the execution of this Agreement, would violate Sections 6.1(e)
through (k), 6.1(n) through (q), or 6.1(s) through (u) hereof.
SECTION 4.10 INVESTIGATIONS; LITIGATION. As of the date of this Agreement:
---------------------------------------
15
(a) no investigation or review by any governmental body or authority with
respect to Shelby Williams or any of its Subsidiaries is pending nor has any
governmental body or authority notified Shelby Williams of an intention to
conduct the same and, to the knowledge of Shelby Williams, no such investigation
or review has been threatened; and
(b) there are no actions, suits or proceedings pending (or, to Shelby
Williams's knowledge, threatened) against or affecting Shelby Williams, its
Subsidiaries, or any of the properties of any of them, at law or in equity,
before any federal, state, local or foreign governmental body or authority.
SECTION 4.11 PROXY STATEMENT; OFFER DOCUMENTS; SCHEDULE 14D-9; PROXY
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STATEMENT. None of the Schedule 14D-9, any information supplied in writing by
---------
Shelby Williams specifically for inclusion in the Offer Documents, and the
information to be filed by Shelby Williams in connection with the Offer pursuant
to Rule 14f-1 promulgated under the Exchange Act (the "Information Statement"),
shall at the each of the times the Schedule 14D-9, the Offer Documents, the
Information Statement, and any amendments or supplements thereto are filed with
the SEC and are first published, sent or given to stockholders of Shelby
Williams, as the case may be, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they are made, not misleading. The Proxy Statement and the
Information Statement shall not, at each of the dates any such document (or any
amendment or supplement thereto) is first mailed to stockholders of Shelby
Williams, with respect to the Information Statement at the time Shares are
accepted for payment in the Offer, and with respect to the Proxy Statement at
the time of the Stockholders' Meeting, be false or misleading with respect to
any material fact, or omit to state any material fact required to be stated
therein or necessary in order to make the statements made therein, in the light
of the circumstances under which they are made, not misleading. The Schedule
14D-9, the Information Statement and the Proxy Statement shall comply in all
material respects as to form with the applicable requirements of the Exchange
Act and the applicable rules and regulations thereunder. Notwithstanding the
foregoing, Shelby Williams makes no representation or warranty with respect to
statements made in any of the foregoing documents based on information supplied
in writing by Falcon or Sub or any of their representatives specifically for
inclusion therein.
SECTION 4.12 Y2K COMPLIANCE. None of the computer software, computer
----------------------------
firmware, computer hardware (whether general or special purpose) or other
similar or related items of automated, computerized or software systems that are
used or relied on by Shelby Williams or by any of its Subsidiaries in the
conduct of the businesses of any or all of them will malfunction, cease to
function, generate incorrect data, or produce incorrect results when processing,
providing or receiving (i) date-related data from, into and between the
twentieth and twenty-first centuries or (ii) date-related data in connection
with any date in the twentieth and twenty-first centuries, except where such
malfunctions would not have a Material Adverse Effect on Shelby Williams.
SECTION 4.13 TAKEOVER LAWS. Prior to the date hereof, the Board of
---------------------------
Directors of Shelby Williams has taken all necessary action so that the
execution of this Agreement and the consummation of the transactions
contemplated hereby, including the Offer, the Merger, and the Stockholder
Agreements, shall be exempt under or not subject to Section 203 of the DGCL and
16
any other state law that purports to limit or restrict business combinations or
the ability to acquire shares of capital stock.
SECTION 4.14 TAX MATTERS.
-------------------------
(a) (i) All Tax Returns that are required to be filed on or before the
Closing Date by or with respect to Shelby Williams or any of its Subsidiaries
have been or will be duly and timely filed and reflect all tax liabilities of
Shelby Williams and its Subsidiaries required to be shown thereon; (ii) all
Taxes which are shown to be due on any Shelby Williams Tax Returns have been or
will be timely paid in full; (iii) all withholding tax requirements imposed on
or with respect to Shelby Williams or any of its Subsidiaries have been
satisfied in full in all respects; (iv) no action, suit, proceeding, audit,
claim assessment, deficiency or adjustment has been asserted, assessed or is
pending with respect to any Shelby Williams Tax Return or any of its
Subsidiaries; (v) neither Shelby Williams nor any of its Subsidiaries has any
liability for any Taxes in excess of amounts paid or reserves established
therefor; and (vi) there is not in force any extension of time with respect to
the due date for the filing of any Shelby Williams Tax Return or any waiver or
agreement for any extension of time for the assessment or payment of any tax due
with respect to the period covered by any Shelby Williams Tax Return and no
requests for such waivers or agreements are pending. Neither Shelby Williams nor
any of its Subsidiaries is the subject of any currently ongoing tax audit which
is reasonably likely to have a Material Adverse Effect on Shelby Williams. With
respect to any taxable period ended prior to December 31, 1995, all federal
income Shelby Williams Tax Returns have been audited by the IRS or are closed by
the applicable statute of limitations.
(b) There are no material liens with respect to Taxes upon any of the
properties or assets, real or personal, tangible or intangible of Shelby
Williams or any of its Subsidiaries (other than liens with respect to Taxes not
yet due). No material claim by an authority in a jurisdiction where none of
Shelby Williams or its Subsidiaries files tax returns that Shelby Williams or
any of its Subsidiaries is or may be subject to taxation by that jurisdiction is
currently pending or, to the knowledge of Shelby Williams, likely to be
asserted. Shelby Williams has not filed an election under Section 341(f) of the
Code to be treated as a consenting corporation. Neither Shelby Williams nor any
of its Subsidiaries is obligated by any contract, agreement or other arrangement
to indemnify any other person with respect to any material Taxes.
(c) None of Shelby Williams or any of its Subsidiaries is a party to any
agreement, contract, arrangement or plan that has resulted or could result,
separately or in the aggregate, in the payment of (x) any "excess parachute
payments" within the meaning of Section 280G of the Code (without regard to the
exceptions set forth in Section 280G(b)(4) and 280G(b)(5) of the Code) or (y)
any amount for which a deduction would be disallowed under Section 162 of the
Code; since January 1, 1995, none of Shelby Williams or any of its Subsidiaries
has been a member of a group filing a consolidated federal income Tax Return
(other than a group the common parent of which was Shelby Williams); no
liability has been asserted with respect to Shelby Williams or any of its
Subsidiaries for the Taxes of any Person (other than any of Shelby Williams or
its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any
corresponding provision of state, local or foreign Tax law), as a transferee or
successor, by contract, or otherwise; and none of Shelby Williams or any of its
Subsidiaries has net operating losses or other tax attributes presently subject
(without regard to the transactions contemplated by this
17
Agreement) to limitation under Sections 382, 383, or 384 of the Code, or
the federal consolidated return regulations.
(d) Neither Shelby Williams nor any of its Subsidiaries is a party to, or
is bound by or has any obligation under any tax sharing agreement or similar
agreement or arrangement.
(e) Neither Shelby Williams nor any of its Subsidiaries has agreed to
make, or is required to make, any material adjustment under Section 481(a) of
the Code by reason of a change in accounting method or otherwise and the IRS has
not proposed any such adjustment or change in accounting method.
(f) Neither Shelby Williams nor any of its Subsidiaries is, or has been, a
United States Real Property Holding Corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
(g) For purposes of this Agreement: (i) "Taxes" means any and all federal,
state, local, foreign or other taxes of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any taxing authority, including, without limitation,
taxes or other charges on or with respect to income, franchises, windfall or
other profits, gross receipts, property, sales, use, occupation, transfers,
premiums, leases, services, capital stock, payroll, employment, social security,
workers' compensation, unemployment compensation, or net worth, environmental
taxes and taxes or other charges in the nature of excise, withholding, customs
duties, ad valorem or value added, and (ii) "Tax Return" means any return,
report or similar statement (including the schedules attached to it) filed or
required to be filed with respect to any Tax, including, without limitation, any
information return, claim for refund or declaration of estimated Tax (or any
amendments to any of the foregoing).
SECTION 4.15 OPINION OF FINANCIAL ADVISOR. The Board of Directors of
-------------------------------------------
Shelby Williams has received the opinion of Lazard Freres & Co. LLC ("Lazard
Freres"), dated the date of this Agreement, to the effect that as of such date
the cash consideration to be received by Shelby Williams's stockholders pursuant
to the Offer and the Merger is fair to such stockholders from a financial point
of view. A copy of the written opinion of Lazard Freres has been delivered to
Falcon.
SECTION 4.16 REQUIRED VOTE OF SHELBY WILLIAMS STOCKHOLDERS. The
------------------------------------------------------------
affirmative vote of the holders of a majority of the outstanding shares of
Shelby Williams Common Stock is required to approve the Merger. No other vote of
the stockholders of Shelby Williams is required by law, the Certificate or
Incorporation or the bylaws of Shelby Williams, or otherwise to approve this
Agreement and the transactions contemplated hereby.
SECTION 4.17 LABOR MATTERS. None of Shelby Williams or any of its
----------------------------
Subsidiaries is a party to or bound by any collective bargaining or similar
agreement with any labor organization, and there are no employment, labor, or
collective bargaining agreements which pertain to employees of Shelby Williams
or any of its Subsidiaries. No employees of Shelby Williams or any of its
Subsidiaries are represented by any labor organization. No labor organization or
group of employees of Shelby Williams or any of its Subsidiaries has made a
pending demand for
18
recognition or certification. There are no representation or certification
proceedings or petitions seeking a representation proceeding presently pending
or, to the knowledge of Shelby Williams, threatened to be brought or filed, with
the National Labor Relations Board or any other labor relations tribunal or
authority. There are no unfair labor practice charges, grievances, complaints,
strikes, work stoppages, lockouts, material arbitrations or material grievances,
or other material labor disputes pending, or, to the knowledge of Shelby
Williams, threatened against or involving Shelby Williams or any of its
Subsidiaries.
SECTION 4.18 CERTAIN AGREEMENTS. Neither Shelby Williams nor any of its
---------------------------------
Subsidiaries is a party or subject to any oral or written agreement, contract,
policy, license, document, instrument, arrangement or commitment relating to or
constituting (i) Indebtedness (as hereinafter defined) in an amount exceeding
$500,000; (ii) leases for real or personal property in which the amounts of
payments which Shelby Williams or any Subsidiary is required to make on an
annual basis exceeds $250,000; (iii) agreement, contract, policy, license
document, instrument, arrangement or commitment that limits in any material
respect the freedom of Shelby Williams or any Subsidiary of Shelby Williams to
compete in any line of business or with any person or in any geographical area
or which would so limit the freedom of Shelby Williams or any Subsidiary of
Shelby Williams after the Effective Time; (iv) agreement or contract outside of
the ordinary course of business of Shelby Williams or any of Shelby Williams's
Subsidiaries that involves performance of services or delivery of goods or
materials by or to Shelby Williams or any of Shelby Williams's Subsidiaries of
an amount or value in excess of $250,000; (v) joint venture or partnership
agreements involving a sharing of profits, losses, costs, or liabilities by
Shelby Williams or any of Shelby Williams's Subsidiaries with any person other
than Shelby Williams and its Subsidiaries; (vi) power of attorney granted by
Shelby Williams or any of Shelby Williams's Subsidiaries that is currently
effective and outstanding; (vii) agreement or contract entered into other than
in the ordinary course of business that contains or provides for an express
undertaking by Shelby Williams or any of Shelby Williams's Subsidiaries to be
responsible for consequential damages; (viii) agreement or contract for capital
expenditures in excess of $200,000; (ix) written warranty, guaranty, and/or
other similar undertaking with respect to contractual performance extended by
Shelby Williams or any of Shelby Williams's Subsidiaries other than in the
ordinary course of business; or (x) other document or undertaking which, after
giving effect to the transactions contemplated by this Agreement, purports to
restrict or bind Falcon or any of its Subsidiaries other than the Surviving
Corporation and its Subsidiaries in any respect. "Indebtedness" means any
liability in respect of (A) borrowed money, (B) capitalized lease obligations,
(C) the deferred purchase price of property or services (other than trade
payables in the ordinary course of business) and (D) guarantees of any of the
foregoing. Neither Shelby Williams nor any of its Subsidiaries is in default (or
would be in default with notice or lapse of time, or both) under any indenture,
note, credit agreement, loan document, lease, contract, policy, license,
document, instrument, arrangement or commitment, whether or not such default has
been waived, which default, alone or in the aggregate with other such defaults,
is reasonably likely to have a Material Adverse Effect on Shelby Williams.
SECTION 4.19 TITLE TO ASSETS; LIENS. Shelby Williams owns, holds through
-------------------------------------
valid leases, or otherwise has the common law or contractual right to use,
directly or through its Subsidiaries, all of its inventory, accounts receivable,
property, equipment and other assets, and such assets are free and clear of any
mortgages, liens, charges, encumbrances, or title defects of any nature
19
whatsoever, except for such mortgages, liens, charges, encumbrances or title
defects which are not reasonably likely to adversely affect the value of such
property as carried on Shelby Williams's financial statements contained in
Shelby Williams's SEC Reports filed prior to the date of this Agreement and
would not have a Material Adverse Effect on Shelby Williams. Shelby Williams and
its Subsidiaries have valid and enforceable leases for the premises and the
equipment, furniture and fixtures purported to be leased by them, except for
leases, the failure of which to have or be enforceable, are not reasonably
likely to have a Material Adverse Effect on Shelby Williams. Set forth in the
Disclosure Schedule is a complete list of all items of personal property located
on the Shelby Williams premises that are owned by Mr. Manfred Steinfeld and are
not included among the assets of ShelbyWilliams.
SECTION 4.20 INSURANCE. Shelby Williams and each of its Subsidiaries are
------------------------
insured, and during each of the past five calendar years have been insured, with
insurers whose current rating by A M Best is at least B+6 against such risks and
in such amounts as companies engaged in a similar business would, in accordance
with good business practice, customarily be insured. The policies of fire,
theft, liability and other insurance maintained with respect to the assets or
businesses of Shelby Williams and its Subsidiaries (copies of which have been
made available to Falcon) (i) provide coverage which Shelby Williams deems to be
adequate coverage against loss, (ii) are sufficient for Shelby Williams and its
Subsidiaries to be in compliance with all legal requirements applicable to
Shelby Williams or any of its Subsidiaries and all agreements and contracts to
which Shelby Williams or any of its Subsidiaries is a party or by which any of
them are bound, (iii) will continue (absent affirmative action by Falcon to
cancel such policies) in full force and effect following consummation of the
Merger and (iv) do not provide for any retrospective premium adjustment or other
experienced-based liability on the part of Shelby Williams or any of Shelby
Williams's Subsidiaries. Neither Shelby Williams nor any of its Subsidiaries has
received written notice of cancellation, termination, or current or prospective
nonrenewal with respect to any material insurance policy of Shelby Williams or
its Subsidiaries or notice that the issuer of any material insurance policy is
not willing or able to perform its obligations thereunder. The insurance
policies of Shelby Williams and its Subsidiaries are valid and enforceable
policies. Each of Shelby Williams and each of its Subsidiaries has paid all
premiums due, has otherwise performed all of its respective material obligation
under, and has given notice to all appropriate insurers of all material claims
that may be insured by any material insurance policy.
SECTION 4.21 INTELLECTUAL PROPERTY.
------------------------------------
(a) The Disclosure Schedule sets forth a true, correct and complete list
(including, to the extent applicable, registration, application or file numbers)
of all patents, trademarks, trade names, service marks, domain names and
registered copyrights and material non-registered copyrights used by Shelby
Williams or any of its Subsidiaries which are material to the conduct of their
business, and all registrations of or application for registration of any of the
foregoing, including any additions thereto or extensions, continuations,
renewals of divisions thereof (setting forth the registration, issue or serial
number and a description of the same) (collectively, together with all trade
dress, trade secrets, processes, formulae, designs, know-how and other
intellectual property rights that are so used, the "Intellectual Property").
Falcon has heretofore been furnished with true, correct and complete copies of
each registration or application for
20
registration covering any of the Intellectual Property which is registered with,
or in respect of which any application for registration has been filed with, any
governmental body or authority.
(b) The Intellectual Property includes all of the material intellectual
property rights owned or licensed by Shelby Williams and its Subsidiaries that
are reasonably necessary to conduct their business as it is now conducted or is
expected to be conducted. Shelby Williams, directly or through its Subsidiaries,
has good, marketable and exclusive title to, and the valid and enforceable power
and unqualified right to use, the Intellectual Property free and clear of all
liens or other encumbrances and (B) no person or entity other than Shelby
Williams and its Subsidiaries has any right or interest of any kind or nature in
or with respect to the Intellectual Property or any portion thereof or any
rights to use, market or exploit the Intellectual Property or any portion
thereof.
(c) Neither the existence nor the sale, license, lease, transfer, use,
reproduction, distribution, modification or other exploitation by Shelby
Williams or any of its Subsidiaries of any of the Intellectual Property does,
did or will (i) infringe on any patent, trademark, copyright or other right of
any other person, (ii) constitute a misuse or misappropriation of any trade
secret, know-how, process, proprietary information or other right of any other
person, or (iii) entitle any other person to any interest therein, or right to
compensation from Shelby Williams or any of its Subsidiaries or any of their
respective successors or assigns (it being understood and agreed that, insofar
as the foregoing representation and warranty relates to Intellectual Property
that is licensed to Shelby Williams or any of its Subsidiaries by any third
party, such representation and warranty is made only to the knowledge of Shelby
Williams. Neither Shelby Williams nor any of its Subsidiaries has received any
complaint, assertion, threat or allegation or otherwise has notice of any
lawsuit, claim, demand, proceeding or investigation involving matters of the
type contemplated by the immediately preceding sentence or is aware of any facts
or circumstances that could reasonably be expected to give rise to any such
lawsuit, claim, demand, proceeding or investigation. There are no restrictions
on the ability of Shelby Williams, any of its Subsidiaries, or any of the
successors or assigns to sell, license, lease, transfer, use, reproduce,
distribute, modify or otherwise exploit any Intellectual Property.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF FALCON AND SUB
Falcon and Sub jointly and severally represent and warrant to Shelby
Williams that all of the statements contained in this Article V are true and
correct as of the date of this Agreement (or if made as of a specified date, as
of such date).
SECTION 5.1 ORGANIZATION, QUALIFICATION, ETC. Each of Falcon and Sub is a
----------------------------------------------
corporation duly organized, validly existing and of active status or in good
standing under the laws of its jurisdiction of organization and has the
corporate power and authority to own its properties and assets and to carry on
its business as it is now being conducted and is duly qualified to do business
and is of active status or in good standing in each jurisdiction in which the
ownership of its properties or the conduct of its business requires such
qualification, except for jurisdictions in which such failure to be so qualified
or to be in good standing would not, individually or in the aggregate, have a
Material Adverse Effect on Falcon. The copies of Falcon's and Sub's Certificate
of Incorporation and bylaws which have been made available to
21
Shelby Williams are complete and correct and in full force and effect on the
date hereof. Neither Falcon nor Sub is in violation of any of the provisions of
its Certificate of Incorporation or By-laws.
SECTION 5.2 CORPORATE AUTHORITY RELATIVE TO THIS AGREEMENT; NO VIOLATION; NO
-----------------------------------------------------------------------------
CONFLICT. Each of Falcon and Sub has the corporate power and authority
---------
necessary to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
the Boards of Directors of Falcon and Sub and no other corporate proceedings on
the part of Falcon or Sub are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Falcon and Sub and, assuming this Agreement
constitutes a valid and binding Agreement of the other parties hereto, this
Agreement constitutes a valid and binding agreement of Falcon and Sub,
enforceable against each of them in accordance with its terms (except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally,
or by principles governing the availability of equitable remedies). Other than
in connection with or in compliance with the provisions of the DGCL, the
Exchange Act, and the HSR Act (collectively, the "Falcon Required Approvals"),
no authorization, consent or approval of, or filing by Falcon or Sub with, any
governmental body or authority or other person is necessary for the execution
and delivery of this Agreement or the consummation by Falcon or Sub of the
transactions contemplated hereby except where the failure to obtain such
authorizations, consents or approvals or make such filing is not reasonably
likely to have a Material Adverse Effect on Falcon. Neither the execution and
delivery of this Agreement by Falcon and Sub nor the consummation by Falcon and
Sub of the transactions contemplated by this Agreement will (a) result in a
breach or violation of the organizational documents of Falcon or Sub or of any
of Falcon's Subsidiaries; (b) result in a breach or violation of any provision
of, or constitute a default (or an event which, with the giving of notice, the
passage of time or otherwise, would constitute a default) under, or entitle any
party (with the giving of notice, the passage of time or otherwise) to
terminate, accelerate or modify, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of Falcon
or Sub or any of Falcon's Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, contract,
agreement, lease or other instrument or obligation to which Falcon or Sub or any
of its Falcon's Subsidiaries is a party; (c) subject to the matters set forth in
the preceding sentence, violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Falcon or Sub or any of Falcon's Subsidiaries
or any of the properties or assets of any of them; or (d) give any governmental
body or authority the right to revoke, withdraw, suspend, cancel, terminate or
modify any governmental authorization held by Falcon or any of its Subsidiaries,
except as would not, individually or in the aggregate, have a Material Adverse
Effect on Falcon.
SECTION 5.3 FINANCING. Falcon has obtained a commitment letter (the
-----------------------
"Commitment Letter") from financially responsible third parties providing for
sufficient funds to (a) pay the Per Share Amount pursuant to the Offer, (b) pay
the Merger Consideration pursuant to the Merger, and (c) pay all fees and
expenses in connection with this Agreement and the transactions contemplated
hereby.
22
SECTION 5.4 OFFER DOCUMENTS; SCHEDULE 14D-9; PROXY STATEMENT. None of the
--------------------------------------------------------------
Offer Documents nor any of the information supplied by Falcon or any of its
Subsidiaries in writing specifically for inclusion in the Schedule 14D-9 shall,
at each of the times the Offer Documents, the Schedule 14D-9, and any amendments
or supplements thereto are filed with the SEC and are first published, sent or
given to stockholders of Shelby Williams, as the case may be, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they are made, not misleading. The
information supplied in writing by Falcon specifically for inclusion in the
Proxy Statement or Information Statement shall not, at each of the dates any
such document (or any amendment or supplement thereto) is first mailed to
stockholders of Shelby Williams, with respect to the Information Statement at
the time Shares are accepted for payment in the Offer, and with respect to the
Proxy Statement at the time of the Stockholders' Meeting, be false or misleading
with respect to any material fact, or omit to state any material fact required
to be stated therein or necessary in order to make the statements made therein,
in the light of the circumstances under which they are made, not misleading.
Notwithstanding the foregoing, Falcon and Sub make no representation or warranty
with respect to any of the foregoing documents based on information supplied by
Shelby Williams or any of its representatives. The Offer Documents shall comply
in all material respects as to form with the applicable requirements of the
Exchange Act and the applicable rules and regulations thereunder.
SECTION 5.5 LACK OF OWNERSHIP OF SHARES. Neither Falcon nor any of its
-----------------------------------------
Subsidiaries owns any Shares or other securities convertible into Shares.
SECTION 5.6 SOLVENCY. Immediately after the Effective Time and after
----------------------
giving effect to the changes in the Surviving Corporation's assets and
liabilities as a result of the Merger, neither Falcon nor the Surviving
Corporation shall be insolvent, have unreasonably small capital with which to
engage in its business, or have incurred debts beyond its ability to pay AS
they become due.
ARTICLE VI
COVENANTS AND AGREEMENTS
It is further agreed as follows:
SECTION 6.1 CONDUCT OF BUSINESS BY SHELBY WILLIAMS. From the date hereof
----------------------------------------------------
and prior to the time the directors of Falcon have been elected to, and shall
constitute a majority of, the Board of Directors of Shelby Williams pursuant to
Section 1.3(a) or the date, if any, on which this Agreement is earlier
terminated pursuant to Section 8.1 (the "Termination Date"), and except as
specifically set forth in Shelby Williams's Disclosure Schedule or as may be
agreed to in writing by Falcon hereto or as may be permitted pursuant to this
Agreement, Shelby Williams shall, and shall cause each of its Subsidiaries to:
(a) conduct its operations in all material respects according to their
ordinary and usual course of business in substantially the same manner as
heretofore conducted;
23
(b) use reasonable best efforts to preserve intact its business
organization in all material respects, keep available the services of its
executive officers and key employees as a group, subject to changes in the
ordinary course, and maintain satisfactory relationships with suppliers,
distributors, customers and others having business relationships with them;
(c) confer at such times as Falcon may reasonably request with one or more
representatives of Falcon to report material operational matters and the general
status of ongoing operations (in each case to the extent Falcon reasonably
requires such information) and consult with Falcon regarding material
operational decisions;
(d) promptly notify Falcon of any emergency or other change in the normal
course of its businesses or in the operation of its properties and of any
complaints, investigations or hearings (or communications indicating that the
same may be contemplated) of any governmental body or authority;
(e) not authorize or pay any dividends on or make any distribution with
respect to its outstanding shares of stock;
(f) not, except as contemplated by Section 6.5 hereof or as may be
required by applicable law, enter into or amend any employment, severance or
similar agreements or arrangements with any of their directors or executive
officers;
(g) not (subject to the provisions of Section 6.8) authorize, announce an
intention to authorize, or enter into an agreement with respect to, any merger,
consolidation or business combination (other than this Agreement and the
transactions contemplated hereby), any acquisition of a material amount of
assets or securities, any disposition of a material amount of assets or
securities, or any release or relinquishment of any material contract rights, in
each case, not in the ordinary course of business;
(h) except pursuant to the Merger as provided for in Section 2.5, not
propose or adopt a ny amendments to its corporate charter or by-laws;
(i) not issue any shares of capital stock, except upon exercise of options
heretofore issued pursuant to existing employee plans, programs or arrangements
and non-employee director plans;
(j) not grant, confer or award any options, warrants, conversion rights or
other rights not existing on the date hereof to acquire any shares of its
capital stock;
(k) not purchase, redeem, or offer to purchase or redeem any shares of its
stock or any securities convertible into or exchangeable for shares of stock,
except for the deemed repurchase of options in accordance with Section 3.5 of
this Agreement, or purchases, redemptions and offers to purchase in the ordinary
course of business in connection with employee incentive and benefit plans,
programs or arrangements in existence on the date hereof;
(l) not, except as contemplated by this Agreement or as may be required by
applicable law, amend in any material respect the terms of its employee benefit
plans, programs or arrangements or any severance or similar agreements or
arrangements in existence on the date
24
hereof, enter into or amend any employment or consulting agreement, adopt or
enter into any new employee benefit plans, programs or arrangements or any
severance or similar agreements or arrangements or increase the base salary of
any person who is a party to a Change of Control Employment Agreement or make
any payments under any Shelby Williams Benefit Plan to any director, employee,
independent contractor or consultant (except in the ordinary course of business
and in amounts and in a manner consistent with past practice or as other wise
required by law or the provisions of such Shelby Williams Benefit Plan);
(m) not (i) enter into any material loan agreement or incur any
indebtedness in excess of an aggregate of $100,000 or amend any Shelby Williams
credit facility to increase the amount that may be borrowed thereunder, (ii)
make or enter into any agreement or contract for capital expenditures in excess
of $50,000, (iii) enter into any lease for any real property in excess of
$50,000 or any lease for personal property in excess of $20,000 or (iv) enter
into any agreement or contract outside of the ordinary course of business that
involves performance of services or delivery of goods or materials of an amount
or value in excess of $50,000;
(n) not make or change any material Tax election, file any amendment to
any federal income Tax Return unless required by law, enter into any closing
agreement, or settle or compromise any material Tax liability;
(o) not adjust, split, combine or reclassify its capital stock;
(p) not enter into any agreement, understanding or arrangement with
respect to the sale or voting of its capital stock;
(q) not create any new subsidiaries;
(r) except as required by this Agreement, not take any action which could
reasonably be expected to adversely affect or delay the ability of any of the
parties hereto to obtain any approval of any governmental or regulatory body
required to consummate the transactions contemplated hereby;
(s) not directly or indirectly sell, transfer, lease, pledge, mortgage,
encumber or otherwise dispose of any material property or assets other than in
the ordinary course of business;
(t) not enter into any financial derivative contracts;
(u) not change in any material respect its accounting policies, methods or
procedures except as required by GAAP;
(v) except as may be required by this Agreement or applicable law, not do
any act or omit to do any act which would cause a breach of any contract,
commitment or obligation by which it is bound;
(w) except as otherwise permitted by Section 6.8, not take any action
which could cause the conditions to the Offer set forth on Annex A hereto to not
be satisfied;
25
(x) not, other than pursuant to this Agreement, take any action to cause
the shares of Shelby Williams Common Stock to cease to be quoted on any of the
stock exchanges on which such shares are now quoted;
(y) continue to provide training for employees of Shelby Williams and its
Subsidiaries commensurate with the training provided by Shelby Williams and its
Subsidiaries over the past twelve months;
(z) subject to the limitations contained in this Agreement, continue the
level of recruiting activity and process employed over the past twelve months;
(aa) not agree, in writing or otherwise, to take any of the foregoing
actions or take any action which would make any representation or warranty
contained in Article IV hereof (except for representations and warranties made
as of a specified date) untrue and incorrect in any material respect as of the
Effective Time;
(bb) not pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction, in the ordinary course of business and
consistent with past practice, of liabilities reflected or reserved against in
the March 31, 1999 balance sheet or subsequently incurred in the ordinary course
of business and consistent with past practice; and
(cc) not settle or compromise any pending or threatened suit, action or
claim not covered by insurance (without giving effect to deductibles in
determining whether coverage exists) that is material or which relates to the
Agreement or any of the transactions contemplated thereby, including the Offer
and the Merger.
SECTION 6.2 INVESTIGATION. Shelby Williams shall afford to Falcon and to
---------------------------
Falcon's officers, employees, accountants, counsel and other authorized
representatives full and complete access during normal business hours,
throughout the period prior to the earlier of the Effective Time or the
Termination Date, to its and its Subsidiaries' facilities, properties,
contracts, commitments, books, and records (including but not limited to tax
returns) and any report, schedule or other document filed or received by it
pursuant to the requirements of federal or state securities laws and shall use
its reasonable best efforts to cause its representatives to furnish promptly
such additional financial and operating data and other information as to the
businesses and properties of each of Shelby Williams and each of its
Subsidiaries as may from time to time be reasonably requested; provided, that
nothing herein shall require Shelby Williams or any of its Subsidiaries to
disclose any information to the other that would cause a violation of any
contractual confidentiality obligation. The parties hereby agree that each of
them will treat any such information in accordance with the Confidentiality
Agreement dated as of April 22, 1999, between Shelby Williams and Falcon (the
"Shelby Williams Confidentiality Agreement"). Notwithstanding any provision of
this Agreement to the contrary, no party shall be obligated to make any
disclosure in violation of applicable laws or regulations.
SECTION 6.3 OBLIGATIONS OF FALCON AND SUB. Neither Falcon nor Sub or any
-------------------------------------------
of their Subsidiaries shall take any action which would make any representation
or warranty contained in Article V hereof (except for representations and
warranties made as of a specific date) untrue or
26
incorrect in any material respect or cause any of the conditions to the Offer
set forth in Annex A or the conditions to the Merger set forth in Article VII
not to be satisfied.
SECTION 6.4 [INTENTIONALLY OMITTED]
------------------------------------
SECTION 6.5 EMPLOYEE BENEFIT PLANS. Simultaneously with the consummation
------------------------------------
of the Offer, Falcon shall take all actions necessary or appropriate with
respect to employees employed by Shelby Williams or any of its Subsidiaries from
and after the purchase of any Shares pursuant to the Offer ("Shelby Williams
Employees") to accomplish the following:
(i) with respect to the Shelby Williams Industries, Inc. Employees' Pension
Plan, the Shelby Williams Industries, Inc. Salaried Employees' Pension
Plan, and the Sellers & Josephson, Inc. Employees' Pension Plan, each as
amended and restated as of January 1, 1994, to allow Shelby Williams
Employees participating in any of such plans as of the Closing Date to
continue to participate in such plan (without amendment thereto, except as
may be required by applicable law) from and after the Closing Date for a
period of not less than three years thereafter; and
(ii) with respect to the employee benefit plans and programs maintained by
Shelby Williams immediately prior to the Closing Date other than the plans
identified in clause (i) and the Employee Stock Ownership Plan, either, at
the sole election of Falcon, to (A) allow Shelby Williams Employees
continue to participate from and after the Closing Date in such plans or
(B) permit Shelby Williams Employees to immediately thereafter participate
in the employee benefit plans or programs maintained by Falcon or any of
its Subsidiaries for their employees generally (the "Falcon Plans") other
than Falcon's stock option plans or any employee stock purchase plan
meeting the requirements of Section 423 of the Code; provided, however,
that, if Shelby Williams's group health plan is terminated or discontinued,
Falcon shall permit each Shelby Williams Employee and his or her eligible
dependents (including, without limitation, all such Shelby Williams
Employee's dependents covered by Shelby Williams's group health plan as of
the time such coverage ceases) to be covered under a Falcon Plan that (x)
provides medical and dental benefits to the Shelby Williams Employee and
such eligible dependents effective immediately upon the cessation of
coverage of such individuals under Shelby Williams's group health plan, (y)
credits such Shelby Williams Employee, for the year during which such
coverage under such Falcon Plan begins, with any deductibles and co-payment
already incurred during such year under Shelby Williams's group health
plan, and (z) waives any preexisting condition restrictions to the extent
necessary to provide immediate coverage. Each of Falcon, the Surviving
Corporation, the Subsidiaries of each of them, and the Falcon Plans shall
recognize each Shelby Williams Employee's years of service and level of
seniority with Shelby Williams and its Subsidiaries for purposes of terms
of employment and eligibility, vesting and benefit determination under the
Falcon Plans. The provisions of this Section 6.5 shall be applicable only
during an employee's employment with Shelby Williams, Falcon or a
Subsidiary of either of them and shall not constitute an agreement to
employ or continue the employment of any person.
SECTION 6.6 FILINGS; OTHER ACTION. Subject to the terms and conditions
-----------------------------------
herein provided, each of Shelby Williams and Falcon shall (a) as soon as
practicable, make the filings
27
and thereafter make any other required submissions under the HSR Act; (b) use
reasonable efforts to cooperate with one another in (i) determining whether any
filings are required to be made with, or consents, permits, authorizations or
approvals are required to be obtained from any third party, governmental or
regulatory bodies or authorities of federal, state and local jurisdictions in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and thereby, and (ii)
timely making all such filings and timely seeking all such consents, permits,
authorizations or approvals; and (c) use reasonable efforts to take, or cause to
be taken, all other actions and do, or cause to be done, all other things
necessary, proper or advisable to consummate and make effective the transactions
contemplated hereby, including, without limitation, taking all such further
action as reasonably may be necessary to resolve such objections, if any, as the
Federal Trade Commission, the Antitrust Division of the Department of Justice,
state antitrust enforcement authorities, or any other person may assert under
relevant antitrust or competition laws with respect to the transactions
contemplated hereby.
SECTION 6.7 FURTHER ASSURANCES. Each of the Parties shall use its
--------------------------------
reasonable best efforts to take all action and to do all things necessary,
proper or advisable to consummate the transactions contemplated by this
Agreement (including, without limitation, using its reasonable efforts to cause
the conditions to the consummation of the Offer set forth in Annex A hereto and
the conditions to the Merger set forth in Article VII for which they are
responsible to be satisfied as soon as reasonably practicable and to prepare,
execute and deliver such further instruments and take or cause to be taken such
other and further action as any other party hereto shall reasonably request).
Without limiting the generality of the foregoing, Shelby Williams shall provide,
and shall cause its employees and advisers to provide, all necessary cooperation
in connection with the arrangement of any financing to be consummated
contemporaneously with or at or after the consummation of the transactions
contemplated by this Agreement, including without limitation the preparation of
offering memoranda, private placement memoranda, prospectuses and similar
documents and the execution and delivery of those certificates or documents
required in connection therewith, such as any certificate of the chief financial
officer of Shelby Williams with respect to solvency matters, comfort letters of
accountants, and legal opinions as may be requested by Falcon. All fees, costs
and expenses incurred in connection therewith shall be the responsibility of
Falcon.
SECTION 6.8 NO SOLICITATION.
-----------------------------
(a) From the date hereof until the termination of this Agreement, Shelby
Williams will not, and shall not authorize or permit, any of its officers,
directors, employees, attorneys, financial advisors, agents or other
representatives or those of any of its Subsidiaries ("Shelby Williams's
Representatives") to, directly or indirectly, (a) solicit or initiate any
Takeover Proposal (as hereinafter defined), including without limitation by
disclosure of non-public information, or (b) engage in discussions or
negotiations relating to or accept any Takeover Proposal; provided, however,
that nothing contained in this Section 6.8 shall prohibit Shelby Williams and
its Board of Directors from (i) taking and disclosing a position with respect to
a tender offer by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated
by the SEC under the Exchange Act, or (ii) at any time prior to the purchase of
Shares pursuant to the Offer, engaging in discussions or negotiations with, and
furnishing information (including non-public information) concerning Shelby
Williams and its Subsidiaries, and their respective businesses,
28
properties or assets to, any third party which makes a Takeover Proposal
(without any solicitation or initiation, directly or indirectly, by Shelby
Williams or any of Shelby Williams's Representatives after the date of this
Agreement) if the Board of Directors of Shelby Williams determines in good
faith, based on advice of its outside counsel (who may be its regularly engaged
outside counsel), that the failure to take such action will violate its
obligations or duties to Shelby Williams or its stockholders under applicable
law, or (iii) provided this Agreement is terminated pursuant to Section 8.1(d),
accepting a Superior Proposal. Prior to furnishing information to or entering
into discussions or negotiations with any person, Shelby Williams shall receive
from such person or entity an executed confidentiality agreement in reasonably
customary form on terms not in the aggregate materially more favorable to such
person or entity than the terms contained in Shelby Williams Confidentiality
Agreement (as defined in Section 6.2 hereof). Shelby Williams shall immediately
cease and cause to be terminated any existing solicitation, initiation,
encouragement, activity, discussion or negotiation with any person conducted
heretofore by Shelby Williams or any Shelby Williams Representative with respect
to any Takeover Proposal existing on the date hereof. Shelby Williams agrees not
to release any third party from, or waive any provision of, any standstill
agreement to which it is a party or any confidentiality agreement between it and
another person who has made, or who may reasonably be considered likely to make,
or who was given access in order to consider making, a Takeover Proposal, unless
its Board of Directors determines in good faith, based on advice of its outside
counsel (who may be its regularly engaged outside counsel), that failure to take
such action will violate its obligations or duties to Shelby Williams or its
stockholders under applicable law. Shelby Williams shall notify Falcon orally
and in writing of any such Takeover Proposal received (including, without
limitation, the terms and conditions of any such proposal and the identity of
the person making it), within 24 hours of the receipt thereof, and shall keep
Falcon informed of the general status and any material changes in the terms and
conditions of such Takeover Proposal. Shelby Williams agrees to promptly provide
to Falcon any information concerning Shelby Williams, its Subsidiaries,
business, properties or assets furnished to any third party which makes a
Takeover Proposal and which has not previously been provided to Falcon.
(b) Except as set forth in this Section 6.8, neither the Board of
Directors of Shelby Williams nor any committee thereof shall (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Falcon, the
approval or recommendation by the Board of Directors of Shelby Williams of the
Offer, this Agreement or the Merger, (ii) approve or recommend, or propose to
approve or recommend, any Takeover Proposal or (iii) enter into any agreement
with respect to any Takeover Proposal. Subject to compliance with all of the
applicable provisions of this Section 6.8, prior to the time of acceptance for
payment of Shares pursuant to the Offer, Shelby Williams' Board of Directors may
withdraw or modify its approval or recommendation of the Offer, this Agreement
or the Merger, approve or recommend a Superior Proposal, or enter into an
agreement with respect to a Superior Proposal, in each case at any time after
the third business day following Falcon's receipt of written notice (including
by facsimile) from Shelby Williams advising Falcon that the Board of Directors
of Shelby Williams has received a Superior Proposal which it intends to accept,
specifying the material terms and conditions of such Superior Proposal and
identifying the person making such Superior Proposal, but only if Shelby
Williams shall have caused its financial and legal advisors to negotiate with
Falcon to make such adjustments to the terms and conditions of this Agreement as
would enable Shelby Williams to proceed with the transactions contemplated
hereby on such adjusted terms.
29
(c) For purposes of this Agreement, "Takeover Proposal" means any bona
fide offer, proposal or other indication of interest regarding any of the
following (other than the transactions provided for in this Agreement): (i) any
merger, consolidation, share exchange, recapitalization, business combination or
other similar transaction involving Shelby Williams or any of its Subsidiaries;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition
of a significant portion of the assets of Shelby Williams and its Subsidiaries,
taken as a whole, in a single transaction or series of related transactions
(other than sales of inventory or used equipment in the ordinary course of
business); (iii) any purchase of, or tender offer or exchange offer for, 20
percent or more of the outstanding shares of capital stock of Shelby Williams by
any person or the filing of a registration statement under the Securities Act in
connection therewith; or (iv) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing. For purposes of this Agreement, "Superior Proposal" means an
unsolicited Takeover Proposal on terms which the Board of Directors of Shelby
Williams determines in good faith to be more favorable to Shelby Williams'
stockholders than the Offer and the Merger (based on advice of Shelby Williams's
independent financial advisor that the value of the consideration provided for
in such proposal is superior to the value of the consideration provided for in
the Offer and the Merger) for which financing, to the extent required, is then
committed or which, in the good faith reasonable judgment of the Board of
Directors of Shelby Williams (based on advice from Shelby Williams' independent
financial advisor) is reasonably capable of being financed by such third party
provided that the Board of Directors of Shelby Williams has also, among other
things, duly considered the timing of such Takeover Proposal and the likelihood
that such Takeover Proposal will be consummated.
SECTION 6.9 PUBLIC ANNOUNCEMENTS. Shelby Williams and Falcon will consult
----------------------------------
with each other before issuing any press release relating to this Agreement or
the transactions contemplated herein and shall not issue any such press release
prior to such consultation except as may be required by law or by obligations
pursuant to any listing agreement with any national securities exchange.
SECTION 6.10 INDEMNIFICATION AND INSURANCE.
--------------------------------------------
(a) Falcon and Sub agree that all rights to exculpation and
indemnification for acts or omissions occurring prior to the Effective Time now
existing in favor of the current or former directors or officers (the
"Indemnified Parties") of Shelby Williams as provided in its Certificate of
Incorporation or By-laws or in any agreement, in each case as in effect as of
the date hereof, shall survive the Merger and shall continue in full force and
effect in accordance with their terms without amendment thereof. For three years
from the Effective Time, Falcon shall indemnify the Indemnified Parties to the
same extent as such Indemnified Parties are entitled to indemnification pursuant
to the preceding sentence.
(b) For three years from the Effective Time, Falcon shall maintain in
effect Shelby Williams's current directors' and officers' liability insurance
covering those persons who are currently covered by Shelby Williams's directors'
and officers' liability insurance policies and shall purchase such policy on or
prior to the Closing Date; provided, however, that in no event shall Falcon be
required to expend in the aggregate an amount in excess of 150% of the annual
premiums currently paid by Shelby Williams for such insurance, and, provided,
further, that if the aggregate premiums of such insurance coverage exceed such
amount, Falcon shall be
30
obligated to obtain a policy with the greatest coverage available for a cost not
exceeding such amount.
(c) Falcon shall use reasonable efforts to cause any person or entity that
purchases all or substantially all of the assets of Shelby Williams within three
years after the Effective Time to become bound by the covenants contained in
this Section.
SECTION 6.11 ADDITIONAL REPORTS. Shelby Williams shall furnish to Falcon
-------------------------------
copies of any reports of the type referred to in Section 4.4 which it files with
the SEC on or after the date hereof, and Shelby Williams represents and warrants
that as of the dates of each of such reports, such reports will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statement therein, in light of the
circumstances under which they were made, not misleading. Any unaudited
consolidated interim financial statements included in such reports (including
any related notes and schedules) will fairly present the financial position of
Shelby Williams and its consolidated Subsidiaries as of the dates thereof and
the results of operations and changes in financial position or other information
included therein for the periods or as of the date then ended (subject, where
appropriate, to normal year-end adjustments), in each case in accordance with
past practice and GAAP consistently applied during the periods involved (except
as otherwise disclosed in the notes thereto).
SECTION 6.12 NOTIFICATIONS
---------------------------
(a) Between the date of this Agreement and the Closing Date, Shelby
Williams will promptly notify Falcon in writing if Shelby Williams becomes aware
that any of Shelby Williams's representations and warranties were materially
untrue as of the date of this Agreement or if Shelby Williams becomes aware of
any fact or condition that causes any of Shelby Williams's representations or
warranties to be materially untrue as of such date as if made on and as of such
date (except for representations and warranties made as of a specified date,
which need be true only as of such specified date). During the same period,
Shelby Williams will promptly notify Falcon of the occurrence of any material
breach of any covenant of Shelby Williams in this Article VI or of the
occurrence of any event that may make the satisfaction of the conditions in
Annex A hereto or Article VII impossible or unlikely.
(b) Between the date of this Agreement and the Closing Date, Falcon will
promptly notify Shelby Williams in writing if Falcon becomes aware that any of
Falcon's representations and warranties were materially untrue as of the date of
this Agreement or if Falcon becomes aware of any fact or condition that causes
any of Falcon's representations or warranties to be materially untrue as of such
date as if made on and as of such date (except for representations and
warranties made as of a specified date, which need be true only as of such
specified date). During the same period, Falcon will promptly notify Shelby
Williams of the occurrence of any material breach of any covenant of Falcon in
this Article VI or of the occurrence of any event that may make the satisfaction
of the conditions in Annex A hereto or Article VII impossible or unlikely.
SECTION 6.13 EMPLOYMENT AGREEMENTS. Simultaneously with the consummation of
----------------------------------
the Offer, Falcon shall offer to each of Messrs. Peter W. Barile, Robert P.
Coulter, Sam Ferrell,
31
Dennis E. Gurley, John McCalla, and Jeff O'Hara employment agreements in the
form set forth in Schedule 6.13 of the attached Disclosure Schedule.
SECTION 6.14 TERMINATION OF ESOP. Prior to the Effective time, Shelby
--------------------------------
Williams shall take all actions necessary or appropriate to terminate the Shelby
Williams Employee Stock Ownership Plan subject to and effective upon the
occurrence of the Effective Time.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
----------- -----------------------------------------------------------
The obligations of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions:
(a) Falcon shall have accepted for payment and paid for all Shares validly
tendered in the Offer and not withdrawn; provided, however, that neither Falcon
nor Sub may invoke this condition if Sub shall have failed to purchase Shares so
tendered and not withdrawn in violation of the terms of this Agreement or the
Offer.
(b) The holders of issued and outstanding shares of Shelby Williams Common
Stock shall have duly approved the Merger in the manner, if any, required by
applicable law; provided that Falcon and Sub shall vote all of their Shares in
favor of the Merger.
(c) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
court or other tribunal or governmental body or authority which prohibits the
consummation of the transactions contemplated herein substantially on the terms
contemplated hereby. If any order, decree or injunction is issued, each party
shall use its reasonable efforts to remove any such order, decree or injunction.
(d) Any waiting periods applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated and all consents and
authorizations shall have been obtained the failure to have obtained which would
violate any applicable law, rule, or regulation or have a Material Adverse
Effect.
(e) Sub shall have purchased Shares pursuant to the Offer.
ARTICLE VIII
TERMINATION, WAIVER, AMENDMENT AND CLOSING
SECTION 8.1 TERMINATION OR ABANDONMENT. Notwithstanding anything contained
--------------------------------------
in this Agreement to the contrary, this Agreement may be terminated and
abandoned at any time prior to the Effective Time, whether before or after any
approval of the matters presented in connection with the Merger by the
stockholders of Shelby Williams:
(a) by the mutual written consent of Shelby Williams and Falcon;
32
(b) (i) by either Shelby Williams or Falcon if Shares shall not have been
purchased pursuant to the Offer on or before July 15, 1999 and (ii) by Shelby
Williams if after 90 days following the commencement of the Offer, the
conditions to the Offer have not been satisfied or waived and Sub shall not have
elected to extend the Offer; provided, that the party seeking to terminate this
Agreement pursuant to this Section 8.1(b) shall not have breached in any
material respect its obligations under this Agreement in any manner that shall
have proximately contributed to the failure to purchase Shares pursuant to the
Offer on or before such date;
(c) by either Shelby Williams or Falcon if (i) a statute, rule, regulation
or executive order shall have been enacted, entered or promulgated prohibiting
the purchase of Shares pursuant to the Offer or the consummation of the Merger
substantially on the terms contemplated hereby or (ii) an order, decree, ruling
or injunction shall have been entered permanently restraining, enjoining or
otherwise prohibiting the purchase of Shares pursuant to the Offer or
consummation of the Merger substantially on the terms contemplated hereby and
such order, decree, ruling or injunction shall have become final and non-
appealable; provided, that the party seeking to terminate this Agreement
pursuant to this Section 8.1(c)(ii) shall have used its reasonable best efforts
to remove such injunction, order or decree;
(d) by Shelby Williams prior to the purchase of Shares pursuant to the
Offer if the Board of Directors of Shelby Williams determines in good faith
(based upon advice of its independent financial advisor and outside counsel, as
appropriate) that (i) a Takeover Proposal constitutes a Superior Proposal and
(ii) the failure to accept such Superior Proposal will violate its obligations
or duties to Shelby Williams or its stockholders under applicable law, provided,
that this Agreement shall not terminate pursuant to this Section 8.1(d) unless
(A) Shelby Williams has provided Falcon with two business days' prior written
notice of its intention to accept such Superior Proposal, together with a
detailed description of the terms and conditions of such Superior Proposal and
(B) simultaneously with such termination Shelby Williams enters into a
definitive acquisition, merger or similar agreement to effect such Superior
Proposal and pays the Termination Fee (as defined in Section 8.2(b)) required
pursuant to Section 8.2(b);
(e) by either Shelby Williams or Falcon prior to the purchase of any Shares
pursuant to the Offer if the other shall have breached, or failed to comply
with, in any material respect any of its obligations under this Agreement or any
representation or warranty made by such other party shall have been untrue when
made or as of the time of such termination as if made on and as of such time
(except for representations and warranties made as of a specified date, which
need be true only as of the specified date), provided such breach, failure or
misrepresentation is not cured prior to the earlier of ten (10) days after
notice thereof from the other party or two (2) business days prior to the date
upon which the Offer expires, and with respect to any covenant or agreement or
any representation or warranty not qualified by "Material Adverse Effect," such
breaches, failures or misrepresentations, individually or in the aggregate,
results or is reasonably likely to result in a Material Adverse Effect on Shelby
Williams or Falcon, as the case may be;
(f) by Falcon (i) if the Board of Directors of Shelby Williams or any
committee of the Board of Directors of Shelby Williams (A) shall withdraw,
modify or change in any adverse manner (including by amendment of the Schedule
14D-9) to Falcon or Sub, or fail to reconfirm upon the request of Falcon, its
approval or recommendation of this Agreement, the Offer or the Merger, (B) shall
approve or recommend any Takeover Proposal, in each case, other than by
33
Falcon or an affiliate of Falcon, or (C) shall resolve to take any of the
actions specified in clauses (A) or (B) above;
(g) by Shelby Williams if Sub fails to commence the Offer on or prior to
five business days following the date of initial public announcement of the
Offer, provided that Shelby Williams may not terminate this Agreement pursuant
to this Section 8.1(g) if Shelby Williams is at such time in breach in any
material respect of its obligations under this Agreement; or
(h) by either of Shelby Williams or Falcon if the Offer shall have been
terminated, or the Offer has expired without any Shares being purchased therein;
provided, however that the right to terminate this Agreement under this Section
8.1(h) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
termination of the Offer or the failure of Falcon or Sub, as the case may be, to
purchase Shares pursuant to the Offer on or prior to such date; and provided,
further, that no termination by Shelby Williams shall be effective pursuant to
Section 8.1(d) under circumstances in which a Termination Fee would be payable
by Shelby Williams under Section 8.2 unless concurrently with such termination,
such Termination Fee is paid in full by Shelby Williams in accordance with the
provisions of Section 8.2.
SECTION 8.2 EFFECT OF TERMINATION. If this Agreement is terminated as
---------------------------------
provided in Section 8.1, and subject to the provisions of Section 9.1, this
Agreement (except for the Shelby Williams Confidentiality Agreement referred to
in Section 6.2) shall forthwith become void and there shall be no liability on
the part of any of the Parties, except (i) as set forth in this Section 8.2 and
in Section 4.11, Section 5.4, Section 9.2, and Section 9.12 hereof, and (ii)
nothing herein shall relieve any party from liability for any willful breach
hereof.
(a) If (i) prior to the termination of this Agreement, any person shall
have commenced, publicly proposed or communicated to Shelby Williams a Takeover
Proposal and (X) the Minimum Condition shall not have been satisfied, (Y) this
Agreement shall have been terminated pursuant to Section 8.1(b)(c)(e) or (g),
and (Z) prior to the first anniversary of such termination Shelby Williams shall
consummate with any third party any transaction described in clauses (i), (ii),
and (iii) of the definition of "Takeover Proposal" contained in Section 6.8(c);
or if (ii) this Agreement is terminated by Shelby Williams or Falcon pursuant to
Section 8.1(d) or Section 8.1(f), respectively; then, in any such event, Shelby
Williams shall pay to Falcon a termination fee of $4,750,000 (the "Termination
Fee"), which amount shall be paid by wire transfer of immediately available
funds to an account designated by Falcon.
(b) (i) The Termination Fee payable to Falcon under Section 8.2(a)(i) shall
be paid promptly but in no event later than one business day after the last of
the specified events shall have occurred; and (ii) the Termination Fee payable
to Falcon under Section 8.2(a)(ii) shall be paid (A) in the case of a
termination by Falcon pursuant to Section 8.1(f), within three business days
after notice of termination, and (B) in the case of a termination by Shelby
Williams pursuant to Section 8.1(d), concurrently with such termination.
(c) Shelby Williams and Falcon agree that the agreements contained in
Section 8.2(b) above are an integral part of the transactions contemplated by
this Agreement. If Shelby
34
Williams fails to promptly pay to Falcon or Sub any fee due under such Section
8.2(b), Shelby Williams shall pay the costs and expenses (including legal fees
and expenses) in connection with any action, including the filing of any lawsuit
or other legal action, taken to collect payment, together with interest on the
amount of any unpaid fee at the publicly announced prime rate of [NAME OF BANK]
from the date such fee was required to be paid. If Falcon receives any fee
pursuant to Section 8.2(b), Falcon shall not assert or pursue in any manner,
directly or indirectly, any claim or cause of action against Shelby Williams or
any of its affiliates, officers or directors based in whole or in part upon a
breach of this Agreement by them or their receipt, consideration, negotiation,
recommendation, or approval of a Takeover Proposal or the exercise by Shelby
Williams of its right of termination under Section 8.1(d).
SECTION 8.3 AMENDMENT OR SUPPLEMENT. Subject to applicable law, at any time
-----------------------------------
before or after approval of the matters presented in connection with the Merger
by the stockholders of Shelby Williams and prior to the Effective Time, this
Agreement may be amended or supplemented in writing by Shelby Williams and
Falcon with respect to any of the terms contained in this Agreement, except that
following approval by the stockholders of Shelby Williams, no such amendment or
supplement shall reduce the amount or change the form of the Merger
Consideration, without further approval by the stockholders of Shelby Williams.
SECTION 8.4 EXTENSION OF TIME, WAIVER, ETC. At any time prior to the
------------------------------------------
Effective Time, Shelby Williams and Falcon may to the extent legally allowed:
(a) extend the time for the performance of any of the obligations or acts of the
other party; (b) waive any inaccuracies in the representations and warranties of
the other party contained herein or in any document delivered pursuant hereto;
or (c) waive compliance with any of the agreements or conditions of the other
party contained herein. Notwithstanding the foregoing, no failure or delay by
Shelby Williams or Falcon in exercising any right hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right hereunder.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed each of the
parties.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
---------------------------------------------------------
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Merger, except
for the agreements set forth in Article I and Article II, the provisions of
Section 6.5, Section 6.7, and Section 6.10 and this Article IX.
SECTION 9.2 EXPENSES. Whether or not the Merger is consummated, all costs
--------------------
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby and thereby shall be paid by the party incurring such
expenses, and the filing fee required in connection with the premerger
notification under the HSR Act shall be paid by Falcon; provided, that if Falcon
terminates this Agreement other than as permitted under Section 8.1, Falcon
shall pay all reasonable and customary expenses actually incurred by Shelby
Williams and its Subsidiaries in connection with the Offer, it being understood
and agreed that such payment shall
35
not be in lieu of any other remedy otherwise available to the Company as a
result of such termination by Falcon.
SECTION 9.3 COUNTERPARTS; EFFECTIVENESS. This Agreement may be executed in
---------------------------------------
two or more counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument,
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered (by telecopy or otherwise) to the other
parties.
SECTION 9.4 GOVERNING LAW. This Agreement shall be governed by and
-------------------------
construed in accordance with the laws of the State of Delaware, without regard
to the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
SECTION 9.5 NOTICES. All notices and other communications which are
-------------------
required or may be given under this Agreement shall be in writing and shall be
deemed to have been duly given when received if personally delivered; when
transmitted and the appropriate telecopy confirmation is received if transmitted
by telecopy or similar electronic transmission method; one working day after it
is sent, if sent by recognized expedited delivery service; and five days after
it is sent, if mailed, first class mail, certified mail, return receipt
requested, with postage prepaid. In each case notice shall be sent to:
To Shelby Williams:
Shelby Williams Industries, Inc.
11-111 Merchandise Mart
Chicago, Illinois 60654
Attention: Paul N. Steinfeld
Chairman of the Board and Chief Executive Officer
Telecopy: (312) 527-3597
With a copy to:
D'Ancona & Pflaum LLC
111 East Wacker Drive, Suite 2800
Chicago, Illinois 60601-4205
Attention: Walter Roth, Esq.
Telecopy: (312) 602-3000
To Falcon:
Falcon Products, Inc.
9387 Dielman Industrial Drive
St. Louis, Missouri 63132
Attention: Franklin A. Jacobs
Chairman and Chief Executive Officer
Telecopy: (314) 991-9295
36
With a copy to:
Gallop, Johnson & Neuman, L.C.
101 S. Hanley, Suite 1600
St. Louis, Missouri 63105
Attention: Robert H. Wexler, Esq.
Telecopy: (314) 862-1219
or to such other address as either party may have specified in writing to the
other using the procedures specified above in this Section 9.5.
SECTION 9.6 ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of
--------------------------------------
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.
SECTION 9.7 SEVERABILITY. Any term or provision of this Agreement which is
------------------------
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, such provision shall be interpreted to be only so
broad as is enforceable.
SECTION 9.8 ENFORCEMENT OF AGREEMENT. The parties hereto agree that money
------------------------------------
damages or other remedy at law would not be sufficient or adequate remedy for
any breach or violation of, or a default under, this Agreement by them and that
in addition to all other remedies available to them, each of them shall be
entitled to the fullest extent permitted by law to an injunction restraining
such breach, violation or default or threatened breach, violation or default and
to any other equitable relief, including, without limitation, specific
performance, without bond or other security being required.
SECTION 9.9 MISCELLANEOUS. This Agreement:
-------------------------
(a) along with the Shelby Williams Confidentiality Agreement and
Stockholder's Agreements constitutes the entire agreement, and supersedes all
other prior agreements and understandings, both written and oral, between the
parties, or any of them, with respect to the subject matter hereof and thereof;
and
(b) except for the provisions of Section 6.5, Section 6.10, and Section
6.13 hereof, which shall be enforceable by the persons who are to benefit
thereunder, is not intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder.
SECTION 9.10 HEADINGS. Headings of the Articles and Sections of this
---------------------
Agreement are for convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
37
SECTION 9.11 CERTAIN DEFINED TERMS. References in this Agreement to
----------------------------------
"Subsidiaries" of Shelby Williams or Falcon shall mean any corporation or other
form of legal entity of which more than 50% of the outstanding voting securities
or ownership are on the date hereof directly or indirectly owned by Shelby
Williams or Falcon, as the case may be. Shelby Williams's Disclosure Schedule
contains a full and complete list of Shelby Williams's Subsidiaries as of the
date hereof. References in this Agreement (except as specifically otherwise
defined) to "affiliates" shall mean, as to any person, any other person which,
directly or indirectly, controls, or is controlled by, or is under common
control with, such person. As used in this definition, "control" (including,
with its correlative meanings, "controlled by" and "under common control with")
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of management or policies of a person, whether through the
ownership of securities or partnership of other ownership interests, by contract
or otherwise. References in the Agreement to "person" shall mean an individual,
a corporation, a partnership, an association, a trust or any other entity or
organization, including, without limitation, a governmental body or authority.
References to "Principal Stockholders" means each of Manfred Steinfeld and Paul
N. Steinfeld. References in this Agreement to "knowledge" mean the actual
knowledge of any of Messrs. Manfred Steinfeld, Paul N. Steinfeld, Peter W.
Barile, Robert P. Coulter, Sam Ferrell, Dennis E. Gurley, John McCalla, and Jeff
O'Hara, in each case after due investigation.
SECTION 9.12 FINDERS OR BROKERS. Except for Lazard Freres with respect to
-------------------------------
Shelby Williams and Donaldson Lufkin & Jenrette Securities Corporation with
respect to Falcon, neither Shelby Williams nor Falcon nor any Subsidiary of
either of them has employed any investment banker, broker, finder or
intermediary in connection with the transactions contemplated hereby who might
be entitled to any fee or any commission in connection with or upon consummation
of the Merger.
38
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first above written.
SHELBY WILLIAMS INDUSTRIES, INC.
By: /s/ Paul N. Steinfeld
----------------------------------
Name: Paul N. Steinfeld
Title: Chairman of the Board and
Chief Executive Officer
FALCON PRODUCTS, INC.
By: /s/ Franklin A. Jacobs
----------------------------------
Name: Franklin A. Jacobs
Title: Chairman and CEO
SY ACQUISITION, INC.
By: /s/ Franklin A. Jacobs
----------------------------------
Name: Franklin A. Jacobs
Title: President
39
ANNEX A
CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the Offer, and in addition to (and
not in limitation of) Sub's rights to extend the Offer (subject to the
provisions of the Merger Agreement), Sub shall not be required to accept for
payment or, subject to any applicable rules and regulations of the SEC,
including Rule 14e-1(c) under the Exchange Act (relating to the Sub's obligation
to pay for or return tendered Shares promptly after termination or withdrawal of
the Offer), pay for, and may delay the acceptance for payment of or, subject to
other restrictions referred to above, the payment for, any tendered Shares, and
may terminate the Offer and not accept for payment any Shares, if (i) any
applicable waiting period under the HSR Act has not expired or terminated prior
to the expirations of the Offer, (ii) the Minimum Condition has not been
satisfied, or (iii) at any time on or after the date of the Merger Agreement and
before the time of acceptance of Shares for payment pursuant to the Offer, any
of the follo wing events shall have occurred.
(a) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated, or deemed applicable,
pursuant to an authoritative interpretation by or on behalf of a Governmental
Entity, to the Offer or the Merger that (i) prohibits or imposes any limitations
on Falcon's or Sub's ownership or operation (or that of any of their respective
Subsidiaries or affiliates) of all or a portion of their or Shelby Williams's
businesses or assets, or to compel Falcon or Sub or their respective
Subsidiaries and affiliates to dispose of or hold separate any portion of the
business or assets of Shelby Williams or Falcon and their respective
subsidiaries, which prohibition, limitation, disposition or hold separate
obligation could reasonably be expected to have a Material Adverse Effect on
Falcon and its Subsidiaries, (ii) restrains or prohibits the making or
consummation of the Offer or the Merger or the performance of any of the other
transactions contemplated by the Agreement, (iii) imposes material limitations
on the ability of Sub, or renders Sub unable, to accept for payment, pay for or
purchase some or all of the Shares pursuant to the Offer and the Merger or (iv)
imposes material limitations on the ability of Sub or Falcon effectively to
exercise full rights of ownership of the Shares, including, without limitation,
the right to vote the Shares purchased by it on all matters properly presented
to Shelby Williams's stockholders;
(b) (i) the Board of Directors of Shelby Williams (or any committee
thereof) shall have withdrawn, modified or changed in any adverse manner to
Falcon and Sub, or failed to reconfirm upon the request of Falcon, its approval
or recommendation of the Offer, the Merger, or the Agreement, or shall have
endorsed, approved or recommended any other Takeover Proposal or (ii) Shelby
Williams shall have entered into any agreement with respect to any Superior
Proposal in accordance with Section 8.1(d) of the Agreement;
(c) the representations and warranties of Shelby Williams set forth in the
Agreement shall not be true and correct, in each case (i) as of the date
referred to in any representation or warranty which addresses matters as of a
particular date, or (ii) as to all other representations and warranties, as of
the date of the Agreement and as of the scheduled expiration of the Offer, and
with respect to any representations or warranties not qualified by "Material
Adverse Effect," unless the inaccuracies under such representations and
warranties, taking all the inaccuracies under all such representations and
warranties together in their entirety, could not, individually or
in the aggregate, reasonably be expected to result in a Material Adverse Effect
on Shelby Williams;
(d)Shelby Williams shall have failed to perform any obligation or to comply
with any agreement or covenant to be performed or complied with by it under the
Agreement other than any failure which would not have, either individually or in
the aggregate, a Material Adverse Effect on Shelby Williams;
(e)the Agreement shall have been terminated by Shelby Williams or Falcon or
Sub in accordance with its terms or Falcon or Sub shall have reached an
agreement or understanding in writing with Shelby Williams providing for
termination or amendment of the Offer or delay in payment for the Shares, which,
in the reasonable judgment of Falcon and Sub, in any such case, and regardless
of the circumstances giving rise to any such conditions, makes it inadvisable to
proceed with the Offer and/or with such acceptance for payment of or payment for
Shares;
(f) there shall have been an event, occurrence, development, or state of
circumstances or facts that is reasonably likely to have a Material Adverse
Effect on Shelby Williams; or
(g) any Person or "group" (as defined in Section 13(d)(3) of the Exchange
Act), other than Falcon, Sub, any affiliate of either of them, or any group of
which any of them is a member, shall have acquired or commenced a tender or
exchange offer to acquire beneficial ownership (as determined pursuant to Rule
13d-3 promulgated under the Exchange Act) of 20% or more of the Shares; or
(h) there shall have occurred and be continuing (1) any general suspension
of trading in, or limitation on prices for, securities on the New York Stock
Exchange, Inc., or any material disruption or material adverse change in the
financial or capital markets generally or for syndicated bank credits or high
yield securities similar to those of the Senior Facilities or Bridge Notes
referred to in the Commitment Letter, (2) the declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory), (3) the commencement of a war, armed
hostilities or other international or national calamity directly or indirectly
involving the United States and having had or being reasonably likely to have a
Material Adverse Effect or would restrain, prohibit or delay beyond the Final
Termination Date the consummation of the Offer, or (4) in the case of any of the
situations described in clauses (1) through (3) inclusive existing at the date
of this Agreement, a material acceleration, escalation or worsening thereof.
The foregoing conditions (other than the Minimum Condition) are for the
sole benefit of Falcon and Sub and, subject to the Merger Agreement, may be
asserted by Falcon or Sub regardless of the circumstances giving rise to such
condition or may be waived by Falcon or Sub in whole or in part at any time and
from time to time in its sole discretion. The failure by Falcon or Sub at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right, and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
2
Dates Referenced Herein and Documents Incorporated by Reference
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