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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
Solicitation/Recommendation Statement Pursuant to
Section 14(d)(4) of the Securities Exchange Act of 1934
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SHELBY WILLIAMS INDUSTRIES, INC.
(Name of Subject Company)
SHELBY WILLIAMS INDUSTRIES, INC.
(Name of Person Filing Statement)
COMMON STOCK, $0.05 PAR VALUE PER SHARE
(Title of Class of Securities)
822135 10 9
(CUSIP Number of Class of Securities)
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Paul N. Steinfeld
Chairman and Chief Executive Officer
Shelby Williams Industries, Inc.
150 Shelby Williams Drive
Morristown, Tennessee 37813
(423) 586-7000
(423) 586-2260 (Fax)
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of the Person Filing Statement)
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with a copy to
Walter Roth, Esq.
D'Ancona & Pflaum LLC
111 East Wacker Drive, Suite 2800
Chicago, Illinois 60601
(312) 602-2020
(312) 602-3000 (Fax)
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Item 1. Security and Subject Company
The name of the subject company is Shelby Williams Industries, Inc., a
Delaware corporation (the "Company"). The address of the principal executive
offices of the Company is 11-111 Merchandise Mart, Chicago, Illinois 60654.
The title of the class of equity securities to which this Schedule
14D-9 relates is the shares of common stock, par value $0.05 per share, of the
Company (the "Shares").
Item 2. Tender Offer of the Bidder
This Schedule 14D-9 relates to a tender offer by SY Acquisition Inc., a
Delaware corporation ("Purchaser" or "Offeror") and a wholly owned subsidiary
of Falcon Products, Inc., a Delaware corporation ("Parent" or "Falcon").
Purchaser disclosed in a Tender Offer Statement on Schedule 14D-1 (the
"Schedule 14D-1") dated May 12, 1999 its intention to purchase all outstanding
Shares at a price of $16.50 per Share, net to the seller in cash, without
interest thereon upon the terms and subject to the conditions set forth in the
Offer to Purchase dated May 12, 1999 (the "Offer to Purchase") and the related
Letter of Transmittal (which, together with the Offer to Purchase and any
amendments or supplements thereto, constitute the "Offer"). The Offer to
Purchase and the Letter of Transmittal are filed as Exhibits 1 and 2,
respectively, to this Schedule 14D-9 and are incorporated herein by reference.
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of May 5, 1999 among Falcon, Purchaser and the Company (the "Merger
Agreement"). The Merger Agreement provides that, among other things, as soon
as practicable after the consummation of the Offer and satisfaction or, if
permissible, waiver of the conditions contained in the Merger Agreement,
Purchaser shall be merged with and into the Company (the "Merger") in
accordance with the Delaware General Corporation Law ("DGCL"), the separate
corporate existence of Purchaser shall cease, and the Company shall continue
as the surviving corporation (the "Surviving Corporation"). A copy of the
Merger Agreement is filed as Exhibit 3 to this Schedule 14D-9 and is
incorporated herein by reference.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES WHICH, TOGETHER WITH ANY SHARES BENEFICIALLY OWNED BY PARENT OR
PURCHASER, REPRESENT AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY
DILUTED BASIS (THE "MINIMUM CONDITION").
"Fully Diluted Basis" means, as of any time, all of the Shares plus all
Shares required to be issued or issuable pursuant to options, warrants,
securities or obligations of any kind under employee stock or similar benefit
plans or otherwise, whether or not vested or exercisable.
According to the Offer to Purchase, the principal executive offices of
Falcon and Purchaser are located at 9387 Dielman Industrial Drive, St. Louis,
Missouri 63132.
Item 3. Identity and Background
(a) The name and address of the Company, which is the person filing this
Schedule 14D-9, are set forth in Item 1 above and are incorporated herein by
reference.
(b) Certain contracts, agreements, arrangements and understandings between
the Company and its executive officers, directors and affiliates are described
on page 11 of the Company's Proxy Statement dated March 24, 1999 for its 1999
Annual Meeting of Stockholders (the "1999 Proxy Statement"). Page 11 of the
1999 Proxy Statement is filed as Exhibit 4 to this Schedule 14D-9 and is
incorporated herein by reference.
Except as described below or incorporated herein by reference, to the
knowledge of the Company, as of the date hereof, there exists no material
contract, agreement, arrangement or understanding and no actual or potential
conflict of interest between the Company or its affiliates and (i) its
executive officers, directors or affiliates or (ii) Purchaser, Falcon or their
executive officers, directors or affiliates.
The following summary of certain provisions of the Merger Agreement,
stockholder agreements dated May 5, 1999 among Parent, Offeror and certain
stockholders of the Company (the "Stockholder Agreements") and certain
collateral agreements relating to the Offer and the Merger, copies of which
agreements are filed as exhibits to this Schedule 14D-9, is qualified in its
entirety by reference to the text of such agreements.
Terms of the Offer. Upon the terms and subject to the conditions of the
Offer (including, if the Offer is extended or amended, the terms and
conditions of any such extension or amendment), Purchaser will accept for
payment and pay for all Shares validly tendered prior to the Expiration Date
and not properly withdrawn in accordance with the Offer to Purchase. The term
"Expiration Date" means 12:00 Midnight, New York City time, on June 9, 1999,
unless and until Purchaser shall have extended the period of time during which
the Offer is open, subject to the terms of the Merger Agreement, in which
event the term "Expiration Date" shall mean the latest time and date at which
the Offer, as so extended by Purchaser, shall expire. Purchaser will extend
the Offer from time to time for the shortest time periods permitted by law and
which it reasonably believes are necessary until the consummation of the
Offer, but not later than July 15, 1999, if on the scheduled Expiration Date
any of the conditions to Purchaser's obligation to accept for payment and pay
for the Shares have not been satisfied or waived. Parent and Purchaser have
the right to extend the Offer for up to ten business days notwithstanding the
prior satisfaction of all conditions to the Offer.
Consummation of the Offer is conditioned upon satisfaction of the Minimum
Condition, the expiration or termination of all waiting periods imposed by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
regulations thereunder (the "HSR Act"), and the other conditions described in
the Offer to Purchase. If such conditions are not satisfied, Purchaser,
subject to the terms of the Merger Agreement and subject to complying with
applicable rules and regulations of the Securities and Exchange Commission
(the "Commission"), shall not be required to purchase any of the Shares
tendered, and may delay the acceptance for payment of any Shares or terminate
or amend the Offer. Subject to the terms and conditions contained in the
Merger Agreement, Purchaser may (but shall not be obligated to) waive in whole
or in part, at any time and from time to time, any or all of such conditions,
provided that the Minimum Condition cannot be waived by Purchaser without the
written consent of the Company.
Pursuant to the Merger Agreement, Purchaser may not, without the written
consent of the Company, (i) decrease the price per Share payable in the Offer,
(ii) change the form of consideration to be paid in the Offer, (iii) reduce
the maximum number of Shares to be purchased in the Offer or the Minimum
Condition, (iv) impose additional conditions to the Offer or modify the
conditions in a manner adverse to the holders of Shares, (v) amend any other
term of the Offer in a manner adverse to the holders of the Shares or (vi)
extend the expiration of the Offer beyond July 15, 1999. Subject to the terms
and conditions of the Offer and the Merger Agreement, Purchaser shall, and
Parent shall cause Purchaser to, pay for all Shares validly tendered and not
withdrawn pursuant to the Offer that Purchaser becomes obligated to purchase
pursuant to the Offer as soon as practicable after the expiration of the
Offer.
There can be no assurance that Purchaser will exercise its rights to extend
the Offer (other than as required by the Merger Agreement or applicable law).
Any extension, amendment or termination of the Offer, or any waiver of any
condition of the Offer, will be followed as promptly as practicable by a
public announcement. In the case of an extension, Rule 14e-1(d) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires
that the announcement be issued no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled Expiration Date in
accordance with the public announcement requirements of Rule 14d-4(c) under
the Exchange Act. As used in this Offer to Purchase, "business day" has the
meaning set forth in Rule 14d-1 under the Exchange Act. Subject to applicable
law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which
require that any material change in the information published, sent or given
to stockholders in connection with the Offer be promptly disseminated to
stockholders in a manner reasonably designed to inform stockholders of such
change), and without limiting the manner in which Purchaser may choose to make
any public announcement, Purchaser will not have any obligation to publish,
advertise or otherwise communicate any such public announcement other than by
making a release to the Dow Jones News Service. During any extension of the
Offer, all Shares previously tendered and not properly withdrawn will
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remain subject to the Offer, subject to the rights of a tendering stockholder
to withdraw its Shares in accordance with the procedures set forth in the
Offer to Purchase. PURCHASER SHALL NOT HAVE ANY OBLIGATION TO PAY INTEREST ON
THE PURCHASE PRICE FOR TENDERED SHARES, REGARDLESS OF ANY DELAY IN SUCH
PAYMENT AND WHETHER OR NOT PURCHASER EXERCISES ITS RIGHT TO EXTEND THE OFFER.
If Purchaser extends the Offer or if Purchaser is delayed in its acceptance
for payment of or payment for Shares (whether before or after its acceptance
for payment of Shares) or it is unable to pay for Shares pursuant to the Offer
for any reason, then, without prejudice to Purchaser's rights under the Offer,
the Depositary may retain tendered Shares on behalf of Purchaser, and such
Shares may not be withdrawn except to the extent tendering stockholders are
entitled to withdrawal rights as described in the Offer to Purchase. However,
the ability of Purchaser to delay the payment for Shares that Purchaser has
accepted for payment is limited by Rule 14e-1(c) under the Exchange Act, which
requires that a bidder pay the consideration offered or return the securities
deposited by or on behalf of holders of securities promptly after the
termination or withdrawal of such bidder's offer.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer
(including, subject to the Merger Agreement, the Minimum Condition), Purchaser
will disseminate additional tender offer materials and extend the Offer to the
extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act.
The minimum period during which an offer must remain open following a material
change in the terms of the offer or information concerning the offer, other
than a change in price or a change in the percentage of securities sought,
will depend upon the facts and circumstances then existing, including the
relative materiality of the changed terms or information. In a public release,
the Commission has stated that in its view an offer must remain open for a
minimum period of time following a material change in the terms of the offer
and that waiver of a material condition, such as the Minimum Condition, is a
material change in the terms of the offer. The release states that an offer
should remain open for a minimum of five business days from the date a
material change is first published, sent or given to security holders and
that, if material changes are made with respect to information not materially
less significant than the offer price and the number of shares being sought, a
minimum of ten business days may be required to allow adequate dissemination
and investor response. The requirement to extend the Offer will not apply to
the extent that the number of business days remaining between the occurrence
of the change and the then-scheduled Expiration Date equals or exceeds the
minimum extension period that would be required because of such amendment. If,
prior to the Expiration Date, Purchaser increases the consideration offered to
holders of Shares pursuant to the Offer, such increased consideration will be
paid to all holders whose Shares are purchased in the Offer whether or not
such Shares were tendered prior to such increase in consideration. Except as
otherwise provided herein, any extension of the Offer will not constitute a
waiver by Purchaser of any of the conditions described in the Offer to
Purchase.
The Merger. Following the consummation of the Offer, the Merger Agreement
provides that, subject to the terms and conditions thereof, and in accordance
with the DGCL, as soon as practicable, Purchaser will be merged with and into
the Company. As a result of the Merger, the separate corporate existence of
Purchaser will cease and the Company will continue as the Surviving
Corporation.
The obligations of each of Parent and Purchaser, on the one hand, and the
Company, on the other hand, to effect the Merger are subject to the
satisfaction on or prior to the Closing Date (as defined in the Merger
Agreement) of each of the following conditions: (i) Purchaser shall have
purchased all Shares validly tendered and not withdrawn pursuant to the Offer;
(ii) if required by applicable law, the Merger shall have been approved and
adopted by the requisite vote of the holders of Shares; (iii) no statute,
rule, regulation, executive order, decree, ruling or injunction shall have
been enacted, entered, promulgated or enforced by any court or other tribunal
or governmental body or authority which prohibits the consummation of the
transactions contemplated by the Merger Agreement substantially on the terms
contemplated thereby; and (iv) any waiting periods applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
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At the Effective Time of the Merger (i) each issued and outstanding Share
(other than Dissenting Shares, any Shares that are owned by the Company or any
wholly owned subsidiary of the Company, and any Shares owned by Parent or any
wholly owned subsidiary of Parent) will be converted into the right to receive
$16.50 per Share, net to the seller in cash (the "Merger Consideration"), and
(ii) each issued and outstanding share of capital stock of Purchaser will be
converted into one share of common stock of the Surviving Corporation.
The Board. The Merger Agreement provides that upon the purchase and payment
by Parent or Purchaser of Shares representing at least a majority of the
outstanding Shares on a Fully Diluted Basis, Parent shall be entitled to
designate such number of directors (rounded up to the next whole number) on
the Board so that the percentage of directors that are Parent's nominees
equals the percentage of outstanding Shares beneficially owned by Parent and
its affiliates; and that the Company shall, at such time, upon the request of
Purchaser, promptly use its best efforts to take all action necessary to cause
such persons designated by Parent to be elected to the Board, either by
increasing the size of the Board or securing resignations of incumbent
directors, or both. At such time, the Company shall also cause persons
designated by Parent to constitute at least the same percentage (rounded up to
the next whole number) as is on the Board of (i) each committee of the Board,
(ii) each board of directors (or similar body) of each subsidiary of the
Company and (iii) each committee (or similar body) of each such subsidiary
board of directors.
The Merger Agreement further provides that, notwithstanding the provisions
of the foregoing paragraph, until the Effective Time of the Merger, the Board
shall include at least two directors who were directors on the date of the
Merger Agreement (the "Independent Directors"); that from and after the time,
if any, that Parent's designees constitute a majority of the Board, the
affirmative vote of a majority of Independent Directors shall be required and
shall be sufficient to authorize any termination of the Merger Agreement by
the Company, any amendment of the Merger Agreement requiring action by the
Board, any extension of time for the performance of any of the obligations or
other acts of Parent or Purchaser under the Merger Agreement, any waiver of
compliance with any of the agreements or conditions under the Merger Agreement
for the benefit of the Company, any action to seek to enforce any obligation
of Parent or Purchaser under the Merger Agreement and any other action by the
Board under or in connection with the Merger Agreement; and that the
Independent Directors shall be appointed as a Special Committee of the Board
and have full power and authority solely with respect to the matters set forth
in the previous sentence.
Stockholders' Meeting. Pursuant to the Merger Agreement, the Company will,
if required by applicable law in order to consummate the Merger: (i) duly
call, give notice of, convene and hold a special meeting of its stockholders
(the "Special Meeting") as soon as practicable following the purchase of
Shares by Purchaser pursuant to the Offer for the purpose of considering and
taking action upon the Merger and the adoption of the Merger Agreement; (ii)
prepare and file with the Commission a preliminary proxy or information
statement relating to the Merger and the Merger Agreement and include in any
preliminary or definitive proxy statement or information statement with
respect to the Special Meeting (the "Proxy Statement") the recommendation of
the Board that stockholders of the Company vote in favor of the approval of
the Merger Agreement and the transactions contemplated thereby unless the
Board determines in good faith, based on advice of its outside counsel, that
not taking any such action is necessary in order for the Board to comply with
its obligations or duties to the Company or its stockholders under applicable
law; and (iii) use all reasonable efforts (A) to obtain and furnish the
information required to be included by it in the Proxy Statement and, after
consultation with the Parent and Purchaser, respond promptly to any comments
made by the Commission with respect to the Proxy Statement and any preliminary
version thereof and cause the Proxy Statement to be mailed to its stockholders
at the earliest practicable time following the expiration or termination of
the Offer and (B) obtain the necessary approvals by its stockholders of the
Merger Agreement and the transactions contemplated thereby unless the Board
determines in good faith, based on advice of its outside counsel, that not
taking any such action is necessary in order for the Board to comply with its
obligations or duties to the Company or its stockholders under applicable law.
Purchaser and Parent have agreed to use commercially reasonable efforts to
cause the Special Meeting to occur within 90 days after the purchase of Shares
pursuant to the Offer and Parent has agreed that it will vote, or cause to be
voted, all of the Shares then owned by it, Purchaser or any of its other
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subsidiaries and affiliates in favor of the approval of the Merger and the
adoption of the Merger Agreement. If Purchaser acquires, through the Offer or
otherwise, at least a majority of the outstanding Shares, Purchaser will have
sufficient voting power to approve the Merger, even if no other stockholders
vote in favor of the Merger.
The Merger Agreement provides that if Purchaser acquires at least 90% of
the then outstanding Shares, the parties agree to take all necessary and
appropriate action to cause the Merger to become effective, in accordance with
Section 253 of the DGCL, as soon as practicable after such acquisition,
without a meeting of the stockholders of the Company.
Options. Pursuant to the Merger Agreement, each Option (as defined in the
Merger Agreement) granted to the Company's employees, consultants or directors
that is outstanding immediately prior to the purchase of Shares pursuant to
the Offer (irrespective of whether such Option is then exercisable) shall, on
the fifth business day after the purchase by Purchaser of Shares pursuant to
the Offer, be cancelled in exchange for a single lump sum cash payment equal
to the product of (i) the number of Shares subject to such Option and (ii) the
excess of $16.50 per Share over the exercise price per Share of such Option.
Subject to the previous sentence, each Option that is outstanding immediately
prior to the Effective Time, whether or not then vested or exercisable, shall,
effective as of the Effective Time, be cancelled and no payments shall be made
with respect thereto.
Interim Operations. Pursuant to the Merger Agreement, the Company has
agreed that, except as expressly contemplated by the Merger Agreement or
agreed to in writing by Parent, prior to the time the directors of the Parent
constitute a majority of the Company Board, the Company shall, and shall cause
each of its Subsidiaries to, (a) conduct its operations in all material
respects according to their ordinary and usual course of business in
substantially the same manner as conducted prior to the date of the Merger
Agreement; (b) use reasonable best efforts to preserve intact its business
organization in all material respects, keep available the services of its
executive officers and key employees as a group, subject to changes in the
ordinary course, and maintain satisfactory relationships with suppliers,
distributors, customers and others having business relationships with them;
(c) confer at such times as Parent may reasonably request with one or more
representatives of Parent to report material operational matters and the
general status of ongoing operations (in each case to the extent Parent
reasonably requires such information) and consult with Parent regarding
material operational decisions; (d) promptly notify Parent of any emergency or
other change in the normal course of its businesses or in the operation of its
properties and of any complaints, investigations or hearings (or
communications indicating that the same may be contemplated) of any
governmental body or authority; (e) not authorize or pay any dividends on or
make any distribution with respect to its outstanding shares of stock; (f)
not, except as otherwise contemplated by the Merger Agreement or as may be
required by applicable law, enter into or amend any employment, severance or
similar agreements or arrangements with any of their directors or executive
officers; (g) not, subject to the provisions described below under the heading
"No Solicitation," authorize, announce an intention to authorize, or enter
into an agreement with respect to, any merger, consolidation or business
combination other than the Merger, any acquisition of a material amount of
assets or securities, any disposition of a material amount of assets or
securities or any release or relinquishment of any material contract rights,
in each case, not in the ordinary course of business; (h) not propose or adopt
any amendments to its corporate charter or by-laws, except pursuant to the
Merger as provided in the Merger Agreement; (i) not issue any shares of
capital stock, except upon exercise of options previously issued pursuant to
existing employee plans, programs or arrangements and non-employee director
plans; (j) not grant, confer or award any options, warrants, conversion rights
or other rights not existing on the date of the Merger Agreement, to acquire
any shares of its capital stock; (k) not purchase, redeem, or offer to
purchase or redeem any shares of its stock or any securities convertible into
or exchangeable for shares of stock, except for the deemed repurchase of
options in accordance with the terms of the Merger Agreement, or purchases,
redemptions and offers to purchase in the ordinary course of business in
connection with employee incentive and benefit plans, programs or arrangements
in existence on the date of the Merger Agreement; (l) not, except as
contemplated by the Merger Agreement or as may be required by applicable law,
amend in any material respect the terms of its employee benefit plans,
programs or arrangements or any severance or similar agreements or
arrangements in existence on the date of the Merger Agreement, enter into or
amend any employment or consulting agreement, adopt or enter into any new
employee
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benefit plans, programs or arrangements or any severance or similar agreements
or arrangements or increase the base salary of any person who is a party to a
Change of Control Employment Agreement (as defined in the Offer to Purchase)
or make any payments under any benefit plan to any director, employee,
independent contractor or consultant (except in the ordinary course of
business and in amounts and in a manner consistent with past practice or as
otherwise required by law or the provisions of such benefit plan); (m) not (i)
enter into any material loan agreement or incur any indebtedness in excess of
an aggregate of $100,000 or amend any Company credit facility to increase the
amount that may be borrowed thereunder, (ii) make or enter into any agreement
or contract for capital expenditures in excess of $50,000, (iii) enter into
any lease for real property in excess of $50,000 or any lease for personal
property in excess of $20,000, or (iv) enter into any agreement or contract
outside of the ordinary course of business of the Company or any of the
Company's subsidiaries that involves performance of services or delivery of
goods or materials by or to the Company or any of the Company's subsidiaries
of an amount or value in excess of $50,000; (n) not make or change any
material Tax election, file any amendment to any federal income Tax Return
unless required by law, enter into any closing agreement, or settle or
compromise any material Tax liability; (o) not adjust, split, combine or
reclassify its capital stock; (p) not enter into any agreement, understanding
or arrangement with respect to the sale or voting of its capital stock; (q)
not create any new subsidiaries; (r) except as required by the Merger
Agreement, not take any action which could reasonably be expected to adversely
affect or delay the ability of any of the parties to obtain any approval of
any governmental or regulatory body required to consummate the transactions
contemplated thereby; (s) not directly or indirectly sell, transfer, lease,
pledge, mortgage, encumber or otherwise dispose of any material property or
assets other than in the ordinary course of business; (t) not enter into any
financial derivative contracts; (u) not change in any material respect its
accounting policies, methods or procedures except as required by GAAP; (v)
except as may be required by the Merger Agreement or applicable law, not do
any act or omit to do any act which would cause a breach of any contract,
commitment or obligation; (w) except as otherwise permitted by the Merger
Agreement, not take any action with the intent of causing the conditions to
the Offer set forth in the Merger Agreement to not be satisfied; (x) not,
other than pursuant to the Merger Agreement, take any action to cause the
Shares to cease to be quoted on any of the stock exchanges on which the Shares
are now quoted; (y) continue to provide training for employees of the Company
and its subsidiaries commensurate with the training provided by the Company
and its subsidiaries over the past twelve months; (z) subject to the
limitations contained in the Merger Agreement, continue the level of
recruiting activity and process employed by the Company and its subsidiaries
over the past twelve months; (aa) not agree, in writing or otherwise, to take
any of the foregoing actions or take any action which would make any
representation or warranty contained in the Merger Agreement (except for
representations and warranties made as of a specified date) untrue and
incorrect in any material respect as of the Effective Time; (bb) not pay,
discharge or satisfy any claim, liability or obligation (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction, in the ordinary course of business and consistent
with past practice, of liabilities reflected or reserved against in the March
31, 1999 balance sheet or subsequently incurred in the ordinary course of
business and consistent with past practice; and (cc) not settle or compromise
any pending or threatened suit, action or claim not covered by insurance
(without giving effect to deductibles in determining whether coverage exists)
that is material or which relates to the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger.
No Solicitation. Pursuant to the Merger Agreement: The Company shall not,
and shall not authorize or permit, any of its officers, directors, employees,
attorneys, financial advisors, agents or other representatives or those of any
of its Subsidiaries to, directly or indirectly, (a) solicit, initiate or
knowingly encourage any Takeover Proposal (as defined in the Offer to
Purchase), including without limitation by disclosure of non-public
information, or (b) engage in discussions or negotiations relating to or
accept any Takeover Proposal; provided, however, that nothing shall prohibit
the Company and its Board from (i) taking and disclosing a position with
respect to a tender offer by a third party pursuant to Rules 14d-9 and 14e-
2(a) promulgated by the Commission under the Exchange Act, or (ii) at any time
prior to the purchase of Shares pursuant to the Offer, engaging in discussions
or negotiations with, and furnishing information (including non-public
information) concerning the Company and its Subsidiaries, businesses,
properties or assets to, any third party which makes a Takeover Proposal
(without any solicitation or initiation, directly or indirectly, by the
Company or any of its
6
representatives after the date of the Merger Agreement) if the Board
determines in good faith, based on advice of its outside counsel (who may be
its regularly engaged outside counsel), that the failure to take such action
will violate its obligations or duties to the Company or its stockholders
under applicable law, or (iii) provided the Merger Agreement is terminated as
described below in clause (iv) under the heading "Termination; Fees,"
accepting a Superior Proposal (as defined in the Offer to Purchase). Prior to
furnishing information to or entering into discussions or negotiations with
any person, the Company shall receive from such person or entity an executed
confidentiality agreement in reasonably customary form on terms not in the
aggregate materially more favorable to such person or entity than the terms
contained in the Confidentiality Agreement (as defined below). The Company
shall immediately cease and cause to be terminated any existing solicitation,
initiation, encouragement, activity, discussion or negotiation with any person
conducted prior to the date of the Merger Agreement by the Company or any of
its representatives with respect to any Takeover Proposal existing on the date
of the Merger Agreement. The Company agrees not to release any third party
from, or waive any provision of, any standstill agreement to which it is a
party or any confidentiality agreement between it and another person who has
made, or who may reasonably be considered likely to make, or who was given
access in order to consider making, a Takeover Proposal, unless the Board
determines in good faith, based on advice of its outside counsel (who may be
its regularly engaged outside counsel), that failure to take such action will
violate its obligations or duties to the Company or its stockholders under
applicable law. The Company shall notify Parent orally and in writing of any
such Takeover Proposal received (including, without limitation, the terms and
conditions of any such proposal and the identity of the person making it),
within 24 hours of the receipt thereof, and shall keep Parent informed of the
general status and any material changes in the terms and conditions of such
Takeover Proposal. The Company agrees to promptly provide to Parent any
information concerning the Company, its subsidiaries, business, properties or
assets furnished to any third party which makes a Takeover Proposal and which
has not previously been provided to Parent. Except as set forth in the Merger
Agreement, neither the Board nor any committee thereof shall (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Parent, the
approval or recommendation by the Board of the Offer, the Merger Agreement or
the Merger, (ii) approve or recommend, or propose to approve or recommend, any
Takeover Proposal or (iii) enter into any agreement with respect to any
Takeover Proposal. Subject to compliance with all of the applicable provisions
of the Merger Agreement, prior to the time of acceptance for payment of Shares
pursuant to the Offer, the Board may withdraw or modify its approval or
recommendation of the Offer, the Merger Agreement or the Merger, approve or
recommend a Superior Proposal, or enter into an agreement with respect to a
Superior Proposal, in each case at any time after the third business day
following Parent's receipt of written notice (including by facsimile) from the
Company advising Parent that the Board has received a Superior Proposal which
it intends to accept, specifying the material terms and conditions of such
Superior Proposal and identifying the person making such Superior Proposal,
but only if the Company shall have caused its financial and legal advisors to
negotiate with Parent to make such adjustments to the terms and conditions of
this Agreement as would enable the Company to proceed with the transactions
contemplated hereby on such adjusted terms.
Termination; Fees. The Merger Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time, whether before or after
approval of the stockholders of the Company, (i) by mutual written consent of
Parent and the Company; (ii) by (a) either the Company or Parent if Shares
have not been purchased pursuant to the Offer on or before July 15, 1999 and
(b) the Company if after 90 days following the commencement of the Offer the
conditions to the Offer have not been satisfied or waived and Purchaser shall
not have elected to extend the Offer; provided, that such right to terminate
pursuant to clause (ii) will not be available to any party whose failure in
any material respect to fulfill its obligations under the Merger Agreement
proximately contributed to, or resulted in, the failure of Parent or Purchaser
to purchase the Shares pursuant to the Offer on or before such date; (iii) by
either the Company or Parent if (a) a statute, rule, regulation or executive
order shall have been enacted, entered or promulgated prohibiting the purchase
of Shares pursuant to the Offer or the consummation of the Merger
substantially on the terms contemplated by the Merger Agreement or (b) an
order, decree, ruling or injunction shall have been entered permanently
restraining, enjoining or otherwise prohibiting the purchase of Shares
pursuant to the Offer or the consummation of the Merger substantially on the
terms contemplated by the Merger Agreement and such order, decree, ruling or
injunction shall have become final and non-appealable; provided, that the
party seeking to terminate the Merger Agreement
7
shall have used its reasonable best efforts to remove such injunction, order or
decree; (iv) by the Company prior to the purchase of Shares pursuant to the
Offer if the Board determines in good faith based upon advice of its outside
counsel that (a) a Takeover Proposal constitutes a Superior Proposal and (b)
failure to accept such Superior Proposal will violate its obligations or duties
to the Company or the Company's stockholders under applicable law, provided,
that the Merger Agreement shall not terminate unless (Y) the Company has
provided Parent with two business days' prior written notice of its intention
to accept such Superior Proposal, together with a detailed description of the
terms and conditions of such Superior Proposal and (Z) simultaneously with such
termination the Company enters into a definitive acquisition, merger or similar
agreement to effect such Superior Proposal and pays the Termination Fee; (v) by
either the Company or Parent prior to the purchase of any Shares pursuant to
the Offer if the other party shall have breached, or failed to comply with, in
any material respect any of its obligations under the Merger Agreement or any
representation or warranty made by such other party shall have been untrue when
made or as of the time of such termination as if made on and as of such time
(except for representations and warranties made as of a specified date, which
need be true only as of the specified date), provided such breach, failure or
misrepresentation is not cured within ten days after notice thereof from the
other party or two business days prior to the date on which the Offer expires,
and with respect to any representation or warranty not qualified by "Material
Adverse Effect," such breaches, failures or misrepresentations, individually or
in the aggregate, result or are reasonably likely to result in a Material
Adverse Effect on the Company or Parent, as the case may be; (vi) by Parent if
the Board or any committee of the Board, (a) shall withdraw, modify or change
in any adverse manner (including by amendment of this Schedule 14D-9) or fail
to reconfirm upon the request of Parent its approval or recommendation of the
Merger Agreement, the Offer or the Merger, (b) shall approve or recommend any
Takeover Proposal, other than by Parent or an affiliate of Parent, or (c) shall
resolve to take any of the actions specified in clause (a) or (b); (vii) by the
Company if Purchaser fails to commence the Offer on or prior to five business
days following the date of initial public announcement of the Offer, provided
that the Company may not terminate the Merger Agreement pursuant to this
provision if the Company is at such time in breach in any material respect of
its obligations under the Merger Agreement; or (viii) by either of the Company
or Parent if the Offer shall have been terminated, or the Offer has expired
without any Shares being purchased therein; provided, however, that the right
to terminate the Merger Agreement pursuant to this provision shall not be
available to any party whose failure to fulfill any obligation under the Merger
Agreement has been the cause of, or resulted in, the termination of the Offer
or the failure of Parent or Purchaser, as the case may be, to purchase Shares
pursuant to the Offer on or prior to such date. Notwithstanding the foregoing,
no termination by the Company shall be effective pursuant to clause (iv) above
under circumstances in which a Termination Fee would be payable by the Company
unless concurrently with such termination, such Termination Fee is paid in full
by the Company in accordance with the provisions of the Merger Agreement.
Pursuant to the Merger Agreement, if (i) prior to the termination of the
Merger Agreement any person shall have commenced, publicly proposed or
communicated to the Company a Takeover Proposal and (a) the Minimum Condition
shall not have been satisfied, (b) the Merger Agreement shall have been
terminated pursuant to the provisions described in clause (ii), (iii), (v) or
(vii) of the preceding paragraph and (c) prior to the first anniversary of such
termination, the Company shall consummate with any third party any transaction
of the type described in the definition of the term "Takeover Proposal"; or
(ii) the Merger Agreement is terminated by the Company or Parent pursuant to
clause (iv) or (vi), respectively, of the preceding paragraph, then in such
event the Company shall pay Parent a termination fee of $4.75 million (the
"Termination Fee"), which amount shall be paid by wire transfer of immediately
available funds to an account designated by Parent.
Indemnification. Pursuant to the Merger Agreement, for three years after the
Effective Time, the Parent and the Surviving Corporation (or any successor to
the Surviving Corporation) will indemnify the present and former officers and
directors of the Company and its subsidiaries with respect to matters occurring
at or prior to the Effective Time to the full extent permitted under the DGCL
and the terms of the Company's charter, by-laws and indemnification agreements,
each as in effect as of the date of the Merger Agreement; and for three years
from the Effective Time, Parent shall maintain in effect the Company's
directors' and officers' liability insurance policies and shall purchase such
policy at or prior to the Closing Date.
8
Representations and Warranties. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to Parent and
Purchaser with respect to, among other things, its organization,
capitalization, authority, financial statements, need for consents or
approvals, public filings, conduct of business, employee benefit plans,
intellectual property, employment matters, compliance with laws, tax matters,
insurance, litigation, title to properties, environmental matters, vote
required to approve the Merger Agreement, undisclosed liabilities, information
to be contained in the Proxy Statement, the opinion of its financial advisor
and significant vendor arrangements.
Pursuant to the Merger Agreement, Parent and Purchaser have made
substantially similar representations and warranties as to their organization,
authority, need for consents or approvals and information to be contained in
the Proxy Statement.
Confidentiality Agreement. Pursuant to the Confidentiality Agreement
entered into on April 22, 1999 by Parent and the Company (the "Confidentiality
Agreement"), the Company and Parent agreed to provide, among other things, for
the confidential treatment of their discussions regarding the Offer and the
Merger and the exchange of certain confidential information concerning the
Company. The Confidentiality Agreement is incorporated herein by reference and
a copy of it has been filed as Exhibit 11 to this Schedule 14D-9.
Stockholder Agreements. The following is a summary of certain provisions of
the Stockholder Agreements. This summary is not a complete description of the
terms and conditions of the Stockholder Agreements and is qualified in its
entirety by reference to the full text of the Stockholder Agreements, copies
of which have been filed with the Commission as exhibits to this Schedule 14D-
9 and incorporated herein by reference. Capitalized terms not otherwise
defined below shall have the same meaning set forth in the Merger Agreement or
the Stockholder Agreements, as the context may require.
As a condition and inducement to Parent's and Purchaser's entering into the
Merger Agreement and incurring the liabilities therein, Manfred Steinfeld and
Paul Steinfeld (the "Principal Stockholders"), who collectively have voting
power and dispositive power with respect to an aggregate of 1,610,500 Shares
and hold options to acquire 9,998 Shares, representing approximately 18% of
the outstanding Shares on a Fully Diluted Basis, concurrently with the
execution and delivery of the Merger Agreement entered into the Stockholder
Agreements with Parent and Purchaser. Pursuant to the Stockholder Agreements,
the Principal Stockholders have agreed, among other things, to grant Parent an
irrevocable proxy for the term of the Stockholder Agreements with respect to
the voting of their Shares in favor of the Merger and against any other
Takeover Proposal with respect to such Shares upon the terms and subject to
the conditions set forth therein. The Principal Stockholders have also agreed
to tender their Shares upon the direction of Purchaser and not to withdraw
their Shares so long as the Stockholder Agreements remain in effect. The
Stockholders Agreements will terminate on the earlier of (i) the Effective
Time and (ii) the termination of the Merger Agreement.
During the period ("Restricted Period") from May 5, 1999 through and
including the earlier of (i) the Effective Time, and (ii) the termination of
the Stockholder Agreements, each Principal Stockholder has agreed not to: (A)
except pursuant to the terms of the Stockholder Agreements and except for the
tender of Shares in the Offer, offer for sale, sell, transfer, tender, pledge,
encumber, assign or otherwise dispose of, or enter into any contract, option
or other arrangement to do so; (B) except pursuant to the terms of the
Stockholder Agreements, grant any proxies (other than proxies relating to the
election of management's slate of directors at an annual meeting of the
Company's stockholders, and other routine matters which would not require the
filing of a preliminary proxy statement under Rule 14a-6(a) of the Exchange
Act), or powers of attorney, deposit any of his Shares in a voting trust or
enter into a voting agreement with respect to any of their Shares; or (C) take
any action that would make any representation or warranty contained in the
Stockholder Agreements untrue or incorrect or have the effect of impairing the
ability of the Principal Stockholder to perform his obligations under the
applicable Stockholder Agreement or preventing or delaying the consummation of
any of the transactions contemplated by the applicable Stockholder Agreement
and the Merger Agreement.
9
Each Principal Stockholder has agreed to unconditionally release, as of the
Effective Time, any and all claims and causes of action that he may have
against the Company or any of its Subsidiaries or any present or former
director, officer, employee or agent of the Company or any of its Subsidiaries
resulting from any act, omission or occurrence prior to the Effective Time;
provided, however, that such release not shall apply to any claim or cause of
action insofar as it relates to any entitlement to indemnification or to
compensation or benefits earned or accrued by or for the benefit of such
Principal Stockholder prior to the Effective Time in respect of services
performed by such Principal Stockholder to the Company as a director, officer,
consultant or employee of the Company.
Each Principal Stockholder has agreed that, in his capacity as a
stockholder, he will not respond to any inquiries or the making of any proposal
by any person or entity (other than Parent or any affiliate of Parent)
concerning any business combination, merger, tender offer, exchange offer, sale
of assets, sale of shares of capital stock or debt securities or similar
transactions involving the Company or any Subsidiary, division or operating or
principal business unit of the Company. If such Principal Stockholder, in the
capacity as a stockholder, receives any such inquiry or proposal, then the
Principal Stockholder has agreed to promptly inform Parent of the existence
thereof. Each Principal Stockholder, in the capacity as a stockholder, has
agreed to immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties previously conducted with respect
to any of the foregoing.
Certain Other Agreements. Parent has agreed to cause the Company to continue
to employ Paul N. Steinfeld for the remainder of calendar year 1999 at his
current annual base salary and benefits, including participation in the
Company's 1999 Senior Management Incentive Plan, pursuant to an employment
agreement to be executed as of the Effective Time. The agreement will also
contain a covenant that Mr. Steinfeld will not compete with the Company for a
period of one year after the termination of his employment. Certain other
officers and key management employees of the Company, including its Chief
Operating Officer and Chief Financial Officer, will be offered employment
agreements for a period of two years at the salary, with respect to each of
them, equal to such employee's salary in effect at the Effective Date.
Mr. Manfred Steinfeld has an understanding with the Company, which has been
approved by the Parent, that he will provide consulting services to the Company
for the remainder of calendar year 1999 in exchange for a consulting fee of
$12,000 per month.
Item 4. The Solicitation or Recommendation
At a special meeting held on May 5, 1999, the Board of Directors of the
Company (the "Board") unanimously approved the Merger Agreement and the
Stockholder Agreements and the transactions contemplated thereby and determined
that the Merger and the Offer, are fair to, and in the best interests of, the
Company and its stockholders, as further described below. THE BOARD UNANIMOUSLY
RECOMMENDS THAT HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER. Copies of a letter to the Company's stockholders and a
press release communicating such approval and recommendation are filed as
Exhibits 5 and 6, respectively, to this Schedule 14D-9 and are incorporated
herein by reference.
Background of the Merger and the Offer.
From time to time, the Company has discussed potential business combinations
with various third parties. Prior to the commencement of the negotiations
leading to the execution of the Merger Agreement, the Company's senior
management had discussed with Lazard Freres & Co. llc ("Lazard Freres"), which
had been the Company's underwriter in a secondary offering and was known to the
Company in other contexts, the possibility of a business combination involving
the Company. Pursuant to these discussions, Lazard Freres contacted a furniture
company in November 1998 and inquired about such a business combination.
However, the furniture company responded that it was not interested because the
Company's business would not be a good fit with the furniture company's
business.
10
In December 1998, Franklin A. Jacobs, Chairman of the Board and Chief
Executive Officer of Falcon, contacted both Paul Steinfeld, Chairman of the
Board and Chief Executive Officer of the Company, and Manfred Steinfeld,
Chairman of the Executive Committee of the Board of the Company, for the
purpose of exploring a strategic alliance between the companies. During these
conversations, Mr. Jacobs indicated that Falcon might have an interest in
acquiring the Company.
In January 1999, representatives of a furniture company (the "Second
Interested Party") asked Manfred Steinfeld and Paul Steinfeld whether they
would be interested in a sale of the Company. That inquiry was repeated in
February 1999.
In February 1999, Mr. Jacobs contacted Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ") to express his interest in pursuing a possible
transaction with the Company. Also in February 1999, an entity (the "Third
Interested Party") expressed an interest in acquiring the Company for a price
in the range of $14.25 to $15.25 per Share. Lazard Freres responded on behalf
of the Company that the Company was not for sale at that time. However, the
Company and Lazard Freres conducted further meetings with the Third Interested
Party in March 1999, after which the Third Interested Party indicated that it
would be prepared to pay $16.00 per Share to acquire the Company if it could
obtain the financing to do so. The Third Interested Party then began a due
diligence investigation of the Company and attempted to obtain financing for a
proposed transaction. The Company and the Third Interested Party began
discussing the terms of a merger agreement. However, in April 1999, the Third
Interested Party indicated that it would need additional time.
On March 10, 1999, the Company formally retained Lazard Freres as its
investment banker with respect to a potential transaction involving the sale
of the Company or a significant amount of its securities or assets. In March
1999, Lazard Freres contacted the majority owner of a furniture company to
inquire about a business combination with the Company. The majority owner was
not interested in such a business combination. (Both the majority owner and
the furniture company were different than the furniture company contacted by
Lazard Freres in November 1998, Falcon, the Second Interested Party and the
Third Interested Party.)
On March 11, 1999, representatives of DLJ met with Falcon's senior managers
in St. Louis to discuss the financial impact of a potential acquisition of the
Company by Falcon.
Following this meeting, Mr. Jacobs called Manfred Steinfeld to indicate to
Mr. Steinfeld Falcon's interest in a potential transaction with the Company
and to arrange a meeting to discuss such a transaction. On March 16, 1999, Mr.
Jacobs met with Manfred Steinfeld in Chicago to discuss the possibility of a
negotiated transaction. On March 22, 1999, Manfred Steinfeld called Mr. Jacobs
to indicate to Mr. Jacobs that the Company would not be interested in
exploring a possible transaction with Falcon at that time. Shortly thereafter,
Falcon, with the assistance of DLJ, prepared a preliminary term sheet,
contemplating the purchase by Falcon of all of the Company's outstanding
shares for cash at a price of $14.00 to $15.00 per Share. On March 30, 1999,
DLJ submitted the preliminary term sheet to the Company and Lazard Freres.
On or about April 1, 1999, after consultation with the Company, Lazard
Freres informed DLJ that the Company was not for sale at that time and that in
any event the price range indicated in the term sheet was not sufficient to
warrant additional discussions. Lazard Freres indicated that a price of $17.00
per Share might be considered, and further indicated that the Company had
other options which it was then pursuing.
On April 14, 1999, DLJ contacted Lazard Freres to indicate that Falcon had
begun to take steps necessary to secure the financing for a purchase of the
Company. DLJ also indicated that Falcon was prepared to offer a price per
Share slightly higher than $15.00 per Share, subject to (i) the satisfactory
completion of business, legal and accounting due diligence of the Company and
(ii) the negotiation of a mutually satisfactory definitive merger agreement
with the Company. The following day, Manfred Steinfeld and Mr. Jacobs spoke in
a telephone conversation in which Mr. Steinfeld indicated that, although the
Company had participated in discussions with third parties with respect to a
potential sale of the Company, the Board had not made any decision to put the
Company up for sale.
11
On April 20, 1999, DLJ contacted Lazard Freres, indicating that Falcon would
be willing to offer the Company's shareholders cash consideration of $16.00 per
Share to acquire the Company. After consulting with the Company, Lazard Freres
indicated to DLJ the Company's willingness to meet to discuss a potential
transaction.
On April 21, 1999, Manfred Steinfeld called Mr. Jacobs and urged Falcon to
increase its offer. A meeting was arranged between Mr. Jacobs and Manfred
Steinfeld to discuss a potential transaction.
Also on April 21, 1999, representatives of Lazard Freres and DLJ met in
Chicago, Illinois to provide DLJ an opportunity to explain Falcon's interest in
acquiring the Company. At this meeting, Lazard Freres indicated to DLJ that the
Company's management believed Falcon's valuation of the Company was too low.
The following day, April 22, 1999, Manfred Steinfeld, Paul Steinfeld and
representatives of Lazard Freres met with Mr. Jacobs and representatives of DLJ
to discuss further a potential acquisition of the Company. At this time, Mr.
Jacobs indicated that no financing condition was necessary in order to
consummate such a transaction, and that Falcon was prepared to offer $16.50 per
Share in cash for the Company. The Company and Falcon executed a
confidentiality agreement for the purpose of furthering discussions, and agreed
that Falcon would conduct its due diligence investigation of the Company
commencing on April 26, 1999. In addition, the parties agreed to direct their
efforts to the preparation of a mutually satisfactory merger agreement.
On April 22, 1999, the chief executive officer of the Second Interested
Party called Manfred Steinfeld to propose an acquisition of the Company. On
April 23, 1999, a representative of the Second Interested Party made the same
proposal to Lazard Freres. On April 26, 1999, representatives of the Second
Interested Party orally proposed, contingent on a due diligence investigation
that they stated would take at least three weeks to complete, an acquisition of
the Company at a price of $16.00 to $17.00 per Share, to be paid partly in
stock of the Second Interested Party and partly ($50 million in the aggregate)
in cash.
Throughout the week of April 26, 1999, Falcon and its legal and business
advisors conducted an extensive business and legal due diligence review of the
Company, which included reviewing certain non-public information. Such
investigation continued until May 3, 1999.
On April 26, 1999, Falcon's legal advisors, Gallop, Johnson and Neuman L.C.,
forwarded a draft merger agreement and a draft stockholder agreement to the
Company. The Company's legal advisors, D'Ancona & Pflaum LLC, and
representatives of Lazard Freres met on April 27, 1999 to discuss the Merger
Agreement. On April 29, 1999, the legal advisors of Falcon and the Company met
at the offices of D'Ancona & Pflaum LLC in Chicago, Illinois to discuss various
issues involving the Merger Agreement and related documents.
On April 29, 1999, the Company received a proposal letter from the Second
Interested Party relating to a purchase of the Company. The letter set forth
the Second Interested Party's proposal to acquire the Company for a purchase
price of $17.00 per Share, comprised of $7.00 per Share in cash and the
remainder in shares of common stock of the Second Interested Party. The
proposal was contingent on the completion of a due diligence investigation
which the Second Interested Party stated could not be completed until after May
20, 1999.
Lazard Freres contacted DLJ on April 29, 1999 to request that Falcon offer a
higher price per Share. On April 30, 1999, DLJ stated to Lazard Freres that
Falcon was unwilling to offer a higher price.
Between April 29, 1999 and May 3, 1999, Lazard Freres contacted the Second
Interested Party and the Third Interested Party and asked them to improve their
proposals. Neither the Second Interested Party nor the Third Interested Party
improved its proposal.
Negotiations between Falcon and the Company continued until May 4, 1999, the
date of the Company's regularly scheduled annual meeting of stockholders and
directors held at the Company's manufacturing plant in Morristown, Tennessee.
At the meeting of the Board, Paul Steinfeld and Manfred Steinfeld described
their conversations with representatives of Falcon and informed the Board that
Falcon was willing to pay $16.50 per
12
Share for each of the Company's outstanding Shares. This meeting was also
attended by representatives of Lazard Freres, its legal advisors and the legal
advisors for the Company. At this meeting, Lazard Freres and the Company's
legal advisors reviewed key provisions of the Merger Agreement and the
Stockholder Agreements and Lazard Freres presented a valuation analysis of the
Company.
On the afternoon of May 5, 1999, after completion of the negotiations over
the proposed Merger Agreement and related documentation, the Board reconvened
the previous days' meeting, with four directors present in person and three
directors participating telephonically. The Board reviewed, with the advice and
assistance of the Company's investment banker and legal advisor, the proposed
Merger Agreement and the transactions contemplated thereby, including the Offer
and the Merger, and the terms of the Stockholder Agreements. At the meeting,
Paul Steinfeld described to the Board the outcome of the negotiations with
Falcon with respect to the substantive terms of the proposed Merger Agreement
and Stockholder Agreements. Lazard Freres delivered its opinion to the Board to
the effect that, as of such date and based upon and subject to certain matters
stated in such opinion, the cash consideration of $16.50 per Share to be
received by holders of Shares in the Offer and the Merger was fair, from a
financial point of view, to such holders. Following a number of questions from,
and discussions among, the directors, the Board (i) approved the Merger
Agreement and the Stockholder Agreements and the transactions contemplated
thereby and authorized the execution and delivery thereof, (ii) determined that
the Offer and the Merger are advisable, fair to, and in the best interests of,
the Company and its stockholders, and (iii) recommended that the Company's
stockholders accept the Offer and tender their Shares to Purchaser. On the same
date, the board of directors of Falcon and of the Offeror also approved the
Merger Agreement, the Offer and the transactions contemplated thereby.
At the conclusion of the May 5, 1999 Board meeting, Falcon, Purchaser, the
Company and certain stockholders and employees of the Company, as applicable,
executed the Merger Agreement, the Stockholder Agreements, and certain
collateral agreements. On May 6, 1999, prior to the opening of trading on the
New York Stock Exchange, Falcon and the Company issued a joint press release
announcing the execution of the Merger Agreement. A copy of the press release
is filed as Exhibit 6 to this Schedule 14D-9 and is incorporated herein by
reference. On May 12, 1999, pursuant to the terms of the Merger Agreement,
Falcon and Purchaser commenced the Offer.
Reasons for the Recommendation of the Company's Board of Directors
In light of the Board's review of the Company's competitive and financial
position, recent operating results and prospects, the Board determined that the
Offer and the Merger are fair to, and in the best interests of, the Company and
its stockholders. In making such recommendation and in approving the Merger
Agreement and the transactions contemplated thereby, the Board considered a
number of factors, including, but not limited to, the following:
(i) the terms and conditions of the Merger Agreement;
(ii) an assessment of the Company's strategic alternatives, which
include remaining a publicly owned company. In this regard, the Board
concluded, following analysis and discussion with its investment banker and
legal advisor and among the directors, that the terms of the Merger
Agreement provide the best means for holders of Shares to maximize the
value of their holdings at this time;
(iii) the familiarity of the Board with the Company's business,
financial condition, results of operations, properties and prospects as an
independent entity, and the nature of the industry in which it operates;
(iv) the recent trading price of the Shares and that the $16.50 per
Share to be paid in the Offer and as consideration in the Merger represents
a premium of approximately 20% over the $13.75 closing sale price for the
Shares on the New York Stock Exchange on May 5, 1999, the last trading day
prior to the public announcement of the execution of the Merger Agreement,
and a premium of approximately 46.7% to the most recent 30-day trading
average of $11.25 for the Shares on the New York Stock Exchange;
(v) the Board's conclusion that the proposal of the Second Interested
Party for a purchase price of $17.00 per Share (comprised of $7.00 per
Share in cash and the remainder in shares of common stock of
13
the Second Interested Party) carried risks associated with the stock
portion not present with cash, was less certain because the proposal was
subject to the completion of due diligence, was not as favorable as the
proposal of Falcon because the Company's stockholders would receive
Falcon's cash consideration at an earlier date, and, therefore, was not,
taken as a whole, as favorable as the proposal of Falcon embodied in the
Merger Agreement;
(vi) the Board's conclusion that the expression of interest of the Third
Interested Party, which was at a price less than the price proposed by
Falcon and was subject to a number of contingencies, was not, taken as a
whole, as favorable as the proposal of Falcon embodied in the Merger
Agreement;
(vii) the financial presentation of Lazard Freres at the May 4, 1999
Board meeting and the opinion of Lazard Freres delivered to the Board at
the May 5, 1999 Board meeting to the effect that, as of such date and based
upon and subject to certain matters stated in such opinion, the cash
consideration of $16.50 per Share to be received by holders of Shares in
the Offer and the Merger was fair, from a financial point of view, to such
holders. The full text of the opinion of Lazard Freres, which sets forth
the assumptions made, the matters considered and the limitations on the
review undertaken by Lazard Freres, is attached hereto as Annex I to this
Schedule 14D-9 and is incorporated herein by reference. Stockholders are
urged to read the opinion of Lazard Freres carefully and in its entirety;
(viii) that the Merger Agreement, subject to certain conditions and
limitations set forth therein, permits the Board, in the exercise of its
fiduciary duties, to furnish nonpublic information and data, enter into
discussions and negotiations, in connection with an unsolicited acquisition
proposal, and recommend an unsolicited acquisition proposal to the
Company's stockholders;
(ix) that the Merger Agreement permits the Board, in the exercise of its
duties under applicable law, to terminate the Merger Agreement in favor of
an alternative acquisition proposal which the Board determines is superior
to the Offer; however, upon such termination, the Company is required to
pay Falcon a fee of $4,750,000. The Board did not view this payment
obligation as unreasonably precluding any third party from proposing an
alternative transaction and concluded that entering into the Merger
Agreement given the available strategic alternatives, was in the best
interests of the Company;
(x) that the Stockholder Agreements are terminable upon the termination
of the Merger Agreement and therefore would not impede a third party from
making a superior proposal to acquire the Company; and
(xi) that the transactions contemplated by the Merger Agreement provided
for an all cash payment to stockholders, with no financing condition.
The Board did not assign relative weights to the above factors or determine
that any factor was of particular importance. Rather, the Board viewed its
position and recommendations as being based on the totality of the information
presented to and considered by it.
The Board recognized that, while the consummation of the Offer gives the
Company's stockholders the opportunity to realize a significant premium over
the price at which the Shares were traded prior to the public announcement of
the Offer, tendering in the Offer would eliminate the opportunity for such
stockholders to participate in the future growth and profits of the Company.
The Board also recognized that there could be no assurance as to the level of
growth or profits to be attained by the Surviving Corporation in the future.
It is expected that, if the Shares are not purchased by Falcon in
accordance with the terms of the Offer or if the Merger is not consummated,
the Company's current management, under the general direction of the Board,
will continue to manage the Company as an on-going business.
Item 5. Persons Retained, Employed or to be Compensated
The Company retained Lazard Freres as its investment banker in connection
with the possible sale of the Company or a significant amount of its
securities or assets. Pursuant to its agreement with the Company, dated March
10, 1999, Lazard Freres (i) became entitled to receive $250,000 upon execution
of the Merger Agreement, and (ii) will be entitled to receive, upon the
earlier of the acquisition by the Purchaser of a beneficial interest in a
14
majority of the Company's voting securities and the consummation of the Offer,
an amount equal to (x) 1.0% of the aggregate consideration to be paid by the
Purchaser less (y) the $250,000 to be paid pursuant to clause (i). In
addition, whether or not the Offer and the Merger is completed, the Company
has agreed to reimburse Lazard Freres for all its expenses, including the fees
of outside counsel and other professional advisors, incurred in connection
with this engagement; provided, however, that such expenses shall not exceed
$100,000 without the Company's prior approval. Under a separate letter
agreement dated March 10, 1999, the Company agreed to indemnify Lazard Freres
and its members, employees, agents, affiliates or controlling persons against
certain liabilities relating to or arising out of its engagement, including
liabilities under Federal securities laws.
In the ordinary course of business, Lazard Freres and its respective
affiliates may actively trade or hold the securities of the Company for its
own account or for the account of customers and, accordingly, may at any time
hold a long or short position in such securities.
Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any person to
make solicitations or recommendations to the stockholders of the Company on
its behalf with respect to the Offer and the Merger.
Item 6. Recent Transactions and Intent with Respect to Securities
(a) Except as otherwise disclosed in this Schedule 14D-9, during the past
60 days, no transaction in the Shares has been effected by the Company or, to
its knowledge, by any of its directors, executive officers, affiliates or
subsidiaries.
(b) To the best of the Company's knowledge, pursuant to the Offer, all
directors and executive officers of the Company presently intend to tender all
Shares owned by them except for those Shares, if any, (i) held by such persons
which, if tendered, could cause such persons to incur liability under Section
16(b) of the Securities Exchange Act of 1934, as amended, or (ii) with respect
to which any such person acts in a fiduciary or representative capacity or is
subject to the instructions of a third party.
Item 7. Certain Negotiations and Transactions by the Subject Company
(a) Except as otherwise disclosed in this Schedule 14D-9, the Company is
not engaged in any negotiation in response to the Offer which relates to or
would result in: (i) an extraordinary transaction, such as a merger or
reorganization, involving the Company; (ii) a purchase, sale or transfer of
material amount of assets by the Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company; or (iv) any material change in the present capitalization or dividend
policy of the Company.
(b) Except as described in Items 3 and 4 above, there are no transactions,
Board resolutions, agreements in principle or signed contracts in response to
the Offer, other than those agreements described (or whose description is
incorporated by reference in Item 3 above), that relate to or would result in
one or more of the events referred to in Item 7(a) above.
Item 8. Additional Information to be Furnished
None.
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Item 9. Material to be Filed as Exhibits
Exhibit
No.
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Exhibit 1 Offer to Purchase, dated May 12, 1999.*
Exhibit 2 Letter of Transmittal.*
Exhibit 3 Agreement and Plan of Merger, dated May 5, 1999, among Falcon,
Purchaser and the Company.
Exhibit 4 Page 11 of the Company's Proxy Statement, dated March 24, 1999,
relating to the Company's Annual Meeting of Stockholders.
Exhibit 5 Letter to stockholders of the Company, dated May 12, 1999.*
Exhibit 6 Press release issued by the Company and Falcon, dated May 6,
1999.
Exhibit 7 Opinion of Lazard Freres & Co. llc, dated May 5, 1999 (included
as Annex I to this Schedule 14D-9).*
Exhibit 8 Stockholder Agreement, dated May 5, 1999, among The Manfred
Steinfeld Irrevocable Trust UTA 9/5/97, Manfred Steinfeld, Falcon
and Purchaser.
Exhibit 9 Stockholder Agreement, dated May 5, 1999, among The Fern and
Manfred Steinfeld Charitable Remainder Trust UTA 10/17/95,
Manfred Steinfeld, Falcon and Purchaser.
Exhibit 10 Stockholder Agreement, dated May 5, 1999, among Paul Steinfeld,
Falcon and Purchaser.
Exhibit 11 Confidentiality Agreement, dated April 22, 1999, between Falcon
and the Company.
Exhibit 12 Supplement to Merger Agreement, dated May 5, 1999.
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* Included in copies mailed to the stockholders of the Company.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Shelby Williams Industries, Inc.
/s/ Walter Roth
By: _________________________________
Name: Walter Roth
Its: Secretary
Dated: May 12, 1999
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